Chapter 2: Charting a Company's Direction

Question 1

What are the 5 interrelated stages that make up the process of crafting and executing a strategy?

Answer 1

1. Developing a strategic vision
2. Setting objectives
3. Crafting a strategy
4. Executing the chosen strategy
5. Monitoring developments, evaluating performance, and initiating corrective adjustments

Question 2

What do a company’s core values do?

Answer 2

Guide the pursuit of the vision and mission

Question 3

What is a strategic vision?

Answer 3

Describes management’s aspirations for the company’s future and the course and direction charted to achieve them.

Question 4

What does a strategic vision do?

Answer 4

Delineates management’s aspirations for the company’s future, providing a panoramic view of “where we are going” and a convincing rationale for why this makes good business sense.

Question 5

What must a strategic vision do for it to function as a valuable management tool?

Answer 5

Must convey what top execs want the business to look like and provide managers at all organizational levels with a reference point in making strategic decisions and preparing for the company’s future.

Question 6

What are the “dos” of wording a vision statement?

Answer 6

• Be graphic
• Be forward-looking and directional
• Keep it focused
• Have some wiggle room
• Be sure the journey is feasible
• Indicate why the directional path makes good business sense
• Make it memorable

Question 7

What are the “dont’s” of wording a vision statement?

Answer 7

• Don’t be vague or incomplete
• Don’t dwell on the past
• Don’t use overly broad language
• Don’t state the vision in blank or uninspiring terms
• Don’t be generic
• Don’t rely on superlatives
• Don’t run on and on

Question 8

How does a strategic vision differ from a mission statement?

Answer 8

A strategic vision portrays a company’s aspirations for its future, whereas a company’s mission statement describes the scope and purpose of its present business.

Question 9

What are 3 things that the ideal mission statement does?

Answer 9

1. Identifies the company’s products/services
2. Specifies the buyer needs that the company seeks to satisfy and the customer groups or markets that it serves
3. Gives the company its own identity

ie. Who we are, what we do, why we are here.

Question 10

What are values?

Answer 10

Designated beliefs, traits, and behavioural norms that management has determined should guide the pursuit of its vision and mission.

Question 11

What is the managerial purpose of setting objectives?

Answer 11

To convert the vision and mission into specific performance targets.

Question 12

Why are concrete, measurable objectives managerially valuable?

Answer 12

1. They focus on organizational attention and align actions through the organization
2. They serve as yardsticks for tracking company’s progress and performance
3. They motivate employees

Question 13

What are objectives?

Answer 13

Organization’s performance targets - the specific results management wants to achieve

Question 14

What are stretch objectives?

Answer 14

Set performance targets high enough to stretch an organization to perform at its full potential and deliver the best possible results.

Question 15

Why are extreme stretch goals only warranted under certain conditions?

Answer 15

They fail more often than not and failure can kill motivation, erode confidence, and damage both worker and company performance.

Question 16

What 2 conditions must be met for extreme stretch goals to work?

Answer 16

The company must have ample resources available.

Its recent performance must be strong.

Question 17

Which two distinct types of performance targets are required?

Answer 17

Financial objectives

Strategic objectives

Question 18

What are strategic objectives?

Answer 18

Goals concerning a company’s marketing standing and competitive advantage.

Question 19

What are short-term objectives and what do they do?

Answer 19

Quarterly or annual.
Focus attention on delivering performance improvements in the current period and satisfy shareholder expectations for near-term progress.

Question 20

What is the purpose of longer-term objectives?

Answer 20

Targets 3-5 years off force managers to consider what to do now to put the company in position to perform better later.

Question 21

Which objectives should take precedence when trade-offs have to be made between achieving short- and long-term objectives?

Answer 21

Long-term objectives.

Question 22

What type of indicators are financial performance measures?

Answer 22

Lagging indicators. A company’s past or current financial performance is not a reliable indicator of its future prospects.

Question 23

What does the accomplishment of strategic objectives indicate?

Answer 23

Signals that a company is well positioned to sustain or improve its performance.

Question 24

What is the Balanced Scorecard?

Answer 24

Method for combining the use of both strategic and financial objectives, tracking their achievement, and giving management a more complete and balanced view of how well an organization is performing.

Question 25

What are the 4 dimensions of a balanced scorecard?

Answer 25

1. Financial
2. Customer
3. Internal process
4. Organizational

Question 26

What kind of process is objective setting?

Answer 26

A top-down process

Question 27

How should company objectives be broken down?

Answer 27

Into performance targets for each of the organization’s separate businesses, product lines, functional departments, individual work units.

Question 28

Who has ultimate responsibility for leading the strategy-making, strategy-executing process?

Answer 28

The CEO is always fully accountable for the results the strategy produces.

Question 29

What is corporate straetgy?

Answer 29

Executed by the CEO and senior execs. Establishes an overall strategy for managing a set of businesses in a diversified, multibusiness company. It establishes an overall game plan for managing a set of businesses.

Question 30

What is business strategy?

Answer 30

Primarily concerned with strengthening the company’s market position and building competitive advantage in a single-business company or in a single business unit of a diversified multibusiness corporation.

Question 31

What are two other roles of business strategy heads?

Answer 31

1. Seeing that lower-level strategies are well conceived, consistent, and adequately matched to the overall business strategy.
2. Keeping corporate level officers informed of emerging strategic issues.

Question 32

What are functional area strategies?

Answer 32

Concern the approaches employed in managing particular functions within a business such as R&D, production, etc.

Question 33

Why would the general business manager exert strong influence on the content of functional strategies?

Answer 33

Since the different functional-level strategies must be compatible with the overall business strategy and with one another.

Question 34

What are operating strategies?

Answer 34

Concern the relatively narrow approaches for managing key operating units and specific operating activities with strategic significance.

Question 35

What types of strategies (3) does a single-business company have? Which type does it not have.

Answer 35

Business strategy, functional-area strategies, operating strategies. No corporate strategy since the business strategy is the uppermost level for a single-business company.

Question 36

What are the basic direction-setting tasks and what do they constitute?

Answer 36

Developing a strategic vision + mission, objectives, and crafting a strategy. They constitute a strategic plan for coping with industry conditions, competing with rivals, meeting objectives, etc..

Question 37

What does a strategic plan do?

Answer 37

Lays out a company’s direction, business model, competitive strategy, and performance targets for a specified period of time.

Question 38

What is the trigger point for deciding whether to continue or change a company’s vision and mission, objectives, strategy etc.?

Answer 38

The fifth stage in the strategy management process - monitoring new external developments, evaluating the company’s progress, and making corrective adjustments.

Question 39

When might a company decide to stay the course when evaluating their performance?

Answer 39

As long as the company’s strategy continues to pass the 3 test of a winning strategy; fit test, competitive advantage test, strong performance test.

Question 40

What are the 4 obligations of the board of directors?

Answer 40

1. Oversee the company’s financial accounting and reporting practices
2. Critically appraise the company’s direction, strategy, and business approaches
3. Evaluate the caliber of senior executive’s strategic leadership skills
4. Institute a compensation plan for top execs that rewards them for actions and results that serve stakeholder interests

Question 41

Who do board members have a legal obligation to protect?

Answer 41

Shareholders