Chapter 1 Key Terms

Question 1

Blockholders

Answer 1

Large shareholders who monitor firm strategies to ensure effective
management.

Question 2

Business Model

Answer 2

The economic mechanism by which a business hopes to sell its goods or services and generate a profit.

PPT Definition: Explains how the organization seeks to earn a profit by selling its goods

Question 3

CEO Duality

Answer 3

A situation where the CEO is also the Chairman of the Board

Question 4

Comparative Advantage

Answer 4

The idea that certain products may be produced more cheaply or at a higher quality in particular countries due to advantages in labor costs or technology

Question 5

Competitive Advantage

Answer 5

A state whereby a business unit’s successful strategies cannot be easily duplicated by its competitors

Question 6

Contingency Theory

Answer 6

A view that states the most profitable firms are likely to be the ones that develop the best fit with their environment.

Question 7

Corporate Governance

Answer 7

The board of directors, institutional investors, and blockholders who monitor firm strategies to ensure managerial responsiveness.

Question 8

Distinctive Competence

Answer 8

Unique resources, skills, and capabilities that enable a firm to distinguish itself from its competitors and create competitive advantage.

Related to the Resource-Based Model

Question 9

Hedge Fund

Answer 9

An investment fund open to only a small number of investors but permitted by regulators to undertake riskier and more speculative investments.

Question 10

Industrial Organization (IO)

Answer 10

A view based in microeconomic theory that states firm

profitability is most closely associated with industry structure

Question 11

Intended Strategy

Answer 11

The original strategy top management plans and intends to implement.

Question 12

Mission

Answer 12

The reason for an organization’s existence. The mission statement is a broadly
defined but enduring statement of purpose that identifies the scope of an organization’s
operations and its offerings to affected groups (i.e., stakeholders, as defined later in the
book).

Question 13

Realized Strategy

Answer 13

The strategy top management actually implements.

Question 14

Resource-Based Theory

Answer 14

The perspective that views performance primarily as a function of a firm’s ability to utilize its resources.

Question 15

Sarbanes-Oxley Act (2002)

Answer 15

Legislation passed in 2002 that created more detailed reporting requirements for boards and executives in public U.S. companies and accounting firms

Question 16

Strategic Management

Answer 16

The continuous process of determining the mission and goals of an organization within the context of its external environment and its internal strengths
and weaknesses, formulating and implementing strategies, and exerting strategic control
to ensure that the organization’s strategies are successful in attaining its goals.

Question 17

Strategy

Answer 17

Top management’s plans to attain outcomes consistent with the organization’s
mission and goals.

Question 18

Sustained Competitive Advantage

Answer 18

A firm’s ability to enjoy strategic benefits over an

extended period of time.

Question 19

Top Management Team

Answer 19

A team of top-level executives—headed by the CEO—all of whom play instrumental roles in the strategic management process