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Strategic Management Seminar > Chapter 1- Strategic Leadership... > Flashcards

Chapter 1- Strategic Leadership... Flashcards

1
Q

Strategy

A

A set of related actions that managers take to increase their company’s performance.

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2
Q

Strategic Leadership

A

Creating competitive advantage through effective management of the strategy-making process.

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3
Q

Strategy Formulation

A

Selecting strategies based on analysis of an organization’s external and internal environment.

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4
Q

Strategy Implementation

A

Putting strategies into action.

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5
Q

Risk Capital

A

Equity capital invested with no guarantee that stockholders will recoup their cash or earn a decent return.

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6
Q

Strategy-Making Process

A

The process by which managers select and then implement a set of strategies that aim to achieve a competitive advantage.

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7
Q

Why is maximizing shareholder value the ultimate goal of profit-making companies?

A

This is the ultimate goal of profit-making companies because:

1) Shareholders provide a company with the risk capital that enables managers to buy the resources needed to produce and sell goods and services. Shareholders will not provide risk capital unless they believe that managers are committed to pursuing strategies that provide a good return on their capital investment.

2) Shareholders are the legal owners of a corporation, and their shares therefore represent a claim on the profits generated by a company. Thus, managers have an obligation to invest those profits in ways that maximize shareholder value.

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8
Q

What are the two sources of shareholder value?

A

1) Capital appreciation in the value of a company’s shares and
2) Dividend payments.

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9
Q

Shareholder Value

A

Returns that shareholders earn from purchasing shares in a company.

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10
Q

Profitability

A

The return a company makes on the capital invested in the enterprise. Or, the result of how efficiently and effectively managers use the capital at their disposal to produce goods and services that satisfy customer needs.

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11
Q

Competitive Advantage

A

The achieved advantage over rivals when a company’s profitability is greater than the average profitability of firms in its industry.

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12
Q

Sustained Competitive Advantage

A

A company’s strategies enable it to maintain above-average profitability for a number of years.

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13
Q

Business Model

A

The conception of how strategies should work together as a whole to enable the company to achieve competitive advantage.

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14
Q

When is a company said to have a competitive advantage?

A

A company is said to have this when their strategies result in superior performance.

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15
Q

Strategy-Making Process

A

The process by which managers select and then implement a set of strategies that aim to achieve a competitive advantage. (Incapsulates strategy formulation and implementation).

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16
Q

What do we mean when we say ‘putting strategies into action’?

A

We are referring to actions such as designing, delivering, and supporting products; improving the efficiency and effectiveness of operations; and designing a company’s organizational structure, control systems, and culture.

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17
Q

Return on Invested Capital (ROIC)

A

Net Profit/Capital Invested

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18
Q

Net Profit

A

Refers to net income after tax.

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19
Q

Capital

A

The sum of money invested in the company: that is, stockholders’ equity plus debt owed to creditors.

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20
Q

Profit Growth

A

The increase in net profit over time.

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21
Q

How can a company grow its profits?

A

A company can do this by selling products in rapidly growing markets, gaining market share from rivals, increasing sales to existing customers, expanding overseas, or diversifying profitability into new lines of business.

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22
Q

Profitable Growth

A

This is what shareholders want to see in a company. Refers to high profitability and sustainable profit growth.

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23
Q

What two factors determine profitability and profit growth for a company?

A

This is determined by 1) A company’s relative success in its industry and 2) the overall performance of its industry relative to other industries.

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24
Q

General Managers

A

Managers who bear the responsibility for the overall performance of the company or for one of its major self-contained subunits or divisions.

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25
Q

Functional Managers

A

Managers responsible for supervising a particular function, that is, a task, activity, or operation, such as accounting, marketing, research and development (R&D), information technology, or logistics.

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26
Q

Multidivisional Company

A

A company that competes in several different businesses and has created a separate, self-contained division to manage each.

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27
Q

What are the three main levels of management?

A

1) Corporate-Level
2) Business-Level
3) Functional-Level

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28
Q

Who does the corporate level of management consist of?

A

This level of management consists of individuals such as the Chief Executive Officer (CEO), other senior executives, and corporate staff. These individuals occupy the apex of decision making within the organization.

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29
Q

What is the role of corporate-level managers?

A

Their role is to oversee the development of strategies for the whole organization, including defining the goals of the organization, determining what businesses it should be in, allocating resources among the different businesses, formulating and implementing strategies that span individual businesses, and providing leadership for the entire organization.

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30
Q

Business Unit

A

A self-contained division (with its own functions- for example, finance, purchasing, production, and marketing departments) that provides a product or service for a particular market.

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31
Q

What is the strategic role of business-level managers?

A

Their role is to translate the general statements of direction and intent form the corporate level into concrete strategies for individual businesses.

32
Q

What is the role of a functional-level manager?

A

These managers are responsible for the specific business functions or operations (human resources, purchasing, product development, logistics, production, customer service, and so on) found within a company or one of its divisions. Sphere of responsibility is generally confined to one organizational activity.

33
Q

What are the five steps of the formal strategic planning process?

A

1) Select the corporate mission and major corporate goals.
2) Analyze the organization’s external competitive environment to identify opportunities and threats.
3) Analyze the organization’s internal operating environment to identify the organization’s strengths and weaknesses.
4) Select strategies that build on the organization’s strengths and correct its weaknesses in order to take advantage of external opportunities and counter external threats. These strategies should be consistent with the mission and major goals of the organization. They should be congruent and constitute a viable business model.
5) Implement the strategies.

34
Q

Explain the strategy-making process.

A

At step 1, each round, or cycle, of the planning process begins with a statement of the corporate mission and major corporate goals. The mission statement is followed by the foundation of strategic thinking: external analysis, internal analysis, and strategic choice. The strategy-making process ends with the design of the organizational structure and the culture and control systems necessary to implement the organization’s chosen strategy.

35
Q

What are the four main components of a mission statement?

A

1) A statement of the organization’s reason for existence.
2) A statement of some desired future state- usually referred to as the vision.
3) A statement of the key values to which the organization is committed.
4) A statement of major goals.

36
Q

Mission

A

The purpose of the company, or a statement of what the company strives to do.

37
Q

What are the three dimensions by which a company should define its business?

A

1) Who is being satisfied (what customer groups)?
2) What is being satisfied (what customer needs)?
3) How are customers’ needs been satisfied (by what skills, knowledge, or distinctive competencies)?

38
Q

Product-Oriented Business Definition

A

Focuses on the characteristics of the products sold and the markets served, not on the customer needs and products satisfy.

39
Q

Vision

A

The articulation of a company’s desired achievements or future state.

40
Q

Values

A

A statement of how employees should conduct themselves and their business to help achieve the company mission. Often seen as the bedrock of the company’s organizational culture.

41
Q

Organizational Culture

A

The set of values, norms, and standards that control how employees work to achieve an organization’s mission and goals.

42
Q

Goal

A

A precise, measurable, desired future state that a company attempts to realize.

43
Q

What is the purpose of a goal?

A

The purpose is to specify, with precision, what must be done if the company is to attain its mission or vision.

44
Q

What are the four characteristics of well-constructed goals?

A

1) They are precise and measurable.
2) They address crucial issues.
3) They are challenging but realistic.
4) They specify a time period in which the goals should be achieved, when that is appropriate.

45
Q

What are the three interrelated environments that should be examined when undertaking an external analysis?

A

1) The industry environment in which the company operates.
2) The country or national environment.
3) The wide socioeconomic or macroenvironment.

46
Q

What does internal analysis focus on?

A

Internal analysis focuses on reviewing the resources, capabilities, and competencies of a company in order to identify its strengths and weaknesses.

47
Q

SWOT Analysis

A

The comparison of strengths, weaknesses, opportunities, and threats.

48
Q

Functional-Level Strategies

A

Directed at improving the efficiency and effectiveness of operations within a company, such as manufacturing, marketing, materials management, production development, and customer service.

49
Q

Business-Level Strategies

A

Encompass the business’s overall competitive theme, the way it positions itself in the marketplace to gain a competitive advantage, and the different positioning strategies that can be used in different industry settings- for example, cost leadership, differentiation, focusing on a particular niche or segment of the industry, or a combination of these.

50
Q

Global Strategies

A

Address how to expand operations outside the home country in order to grow and prosper in a world where competitive advantage is determined at a global level.

51
Q

Corporate-Level Strategies

A

Answer the primary questions: What business or businesses should we be in to maximize the long-run profitability and profit growth of the organization, and how should we enter and increase our presence in these businesses to gain a competitive advantage?

52
Q

What are the three main reasons scholars have criticized the formal planning model?

A

1) The unpredictability of the real world.
2) The role that lower-level managers can play in the strategic management process, and
3) The fact that many successful strategies are often the result of serendipity, not rational strategizing.

53
Q

Intended and Emergent Strategies

A

According to Henry Mintzberg’s model of strategy development, a company’s realized strategy is the product of whatever planned strategies are actually put into action (the company’s deliberate strategies) and any unplanned, or emergent, strategies.

54
Q

Emergent Strategies

A

The unplanned response to unforeseen circumstances. They arise from autonomous action by individual managers deep within the organization, from serendipitous discoveries or events, or from an unplanned strategic shift by top-level managers in response to change circumstances. They are not the product of formal, top-down planning mechanisms.

55
Q

Scenario Planning

A

Formulating plans that are based upon “what-if” scenarios about the future.

56
Q

The problem with the “ivory tower” approach to strategic planning:

A

1) Managers may be disconnected from current operating realities.
2) Can lead to tensions between corporate-, business- and functional-level managers.
3) It ignores both the important, strategic role of autonomous action by lower-level managers and the role of serendipity.

57
Q

How can you correct an “ivory tower” approach?

A

Correcting this requires recognizing that successful strategic planning encompasses managers at all levels of the corporation. Much of the best planning can and should be done by business and functional managers who are closest to the facts; in other words, planning should be decentralized.

58
Q

Systematic Errors

A

Errors that appear time and time again.

59
Q

Cognitive Bias

A

Systematic errors in decision making that arise from the way people process information.

60
Q

Prior Hypothesis Bias

A

A cognitive bias that occurs when decision makers who have strong prior beliefs tend to make decisions on the basis of these beliefs, even when presented with evidence that their beliefs are wrong.

61
Q

Escalating Commitment

A

A cognitive bias that occurs when decision makers, having already committed significant resources to a project, commit even more resources after receiving feedback that the project is failing.

62
Q

Reasoning by Analogy

A

Use of simple analogies to make sense out of complex problems.

63
Q

Representativenss

A

A bias rooted in the tendency to generalize form a small sample or even a single, vivid anecdote.

64
Q

Illusion of Control

A

A cognitive bias rooted in the tendency to overestimate one’s ability to control events.

65
Q

Availability Error

A

A bias that arises from our predisposition to estimate the probability of an outcome based on how easy the outcome is to imagine.

66
Q

Devil’s Advocacy

A

A technique in which one member of a decision-making team identifies all the considerations that might make a proposal unacceptable.

67
Q

Dialect Inquiry

A

The generation of a plan (a thesis) and a counterplan (an antithesis) that reflect plausible but conflicting courses of action.

68
Q

Outside View

A

Identification of past successful or failed strategic initiatives to determine whether those initiatives will work for a project at hand.

69
Q

What are two techniques known to enhance strategic thinking and counteract cognitive bias?

A

Devil’s Advocacy and Dialect Inquiry.

70
Q

What are key characteristics of strategic leaders that lead to high performance?

A

1) Vision, eloquence, and consistency.
2) Articulation of a business model.
3) Commitment
4) Being well informed.
5) Willingness to delegate and empower.
6)Astute use of power.
7) Emotional intelligence.

71
Q

In Jeffery Pfeffer’s point of view, where does power come from?

A

It comes from control over resources that are important to the organization: budgets, capital, positions, information, and knowledge.

72
Q

Emotional Intelligence

A

Describes a bundle of psychological attributes that many strong, effective leaders exhibit. Includes:
1) Self-awareness.
2) Self-regulation.
3) Motivation
4) Empathy
5) Social Skills

73
Q

Self-Awareness

A

The ability to understand one’s own moods, emotions, and drives, as well as their effect on others.

74
Q

Self-Regulation

A

The ability to control or redirect disruptive impulses or moods; that is, to think before acting.

75
Q

Motivation

A

A passion for work that goes beyond money or status and a propensity to pursue goals with energy and persistence.

76
Q

Empathy

A

The ability to understand the feelings and viewpoints of subordinates and to take those into account when making decisions.

77
Q

Social Skills

A

Friendliness with a purpose.

Strategic Management Seminar (5 decks)

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