Chapter 6

Question 1

a large-scale action plan that sets the direction for an organization

Answer 1

strategy

Question 2

a process that involves managers from all parts of the organization in the formulation and implementation of strategies and strategic goals; involves middle managers

Answer 2

strategic management

Question 3

“building blocks” of competitive advantage

Answer 3

1. responsiveness to customers
2. innovation
3. quality
4. efficiency

Question 4

the world’s leading expert on competitive strategy; emphasized the importance of not confusing tactics with strategy

Answer 4

Michael Porter

Question 5

when a company attempts to achieve competitive advantage by preserving what is distinctive about it

Answer 5

strategic positioning

ex: Walmart & Target

Question 6

when a firm is engaged in _______ positioning, it produces a subset of an industry’s products or services

Answer 6

variety-based positioning

ex: Southwest Airlines focuses on point-to-point

Question 7

when a firm attempts to serve most or all of the needs of a particular group of customers

Answer 7

needs-based positioning

Question 8

serving the broad needs of a few customers
ex: Bessemer only caters to a handful of wealthy customers

serving the differing needs of similar customers
ex: IKEA

Answer 8

two approaches to needs-based positioning

Question 9

when a firm segments customers who are accessible in different ways, rather than on actual differences between them

ex: Carmike Cinemas serves customers in small markets of fewer than 200,000

Answer 9

access-based positioning

Question 10

few needs, many customers

Answer 10

variety-based

Question 11

broad needs, few customers

Answer 11

needs-based

Question 12

broad needs, many customers

Answer 12

access-based

Question 13

when a strategy aligns with an organization’s activities to reinforce one another in a strategic fit

Answer 13

virtuous circle

ex: SW Airlines

Question 14

difference between operational efficiency and strategy

Answer 14

operational efficiency is performing tasks better than your competitors

strategy is a plan for competing in the market

Question 15

the strategic management process

Answer 15

1. determine a mission and vision
2. determine the grand strategy
3. generate strategic plans
4. execute the strategic plan
5. maintain control over the strategy

Question 16

explains how an organization will accomplish its mission

Answer 16

grand strategy

Question 17

a grand strategy that involves expansion - as in sales revenues, market share, number of employees, etc.

Answer 17

growth strategy

Question 18

a grand strategy that involves little or no significant change

Answer 18

stability strategy

Question 19

a grand strategy that involves the reduction of an organization’s efforts

Answer 19

defensive strategy

Question 20

a strategic planning tool that involves the search for strengths, weaknesses, opportunities, and threats affecting the organization

Answer 20

SWOT analysis

Question 21

refers to internal skills and capabilities that give the organization special competencies and competitive advantages in executing strategies in pursuit of its mission

Answer 21

organizational strengths

Question 22

refers to the internal drawbacks that hinder an organization in executing strategies in pursuit of its mission

Answer 22

organizational weaknesses

Question 23

refers to the environmental factors that the organization may exploit for competitive advantage

Answer 23

organizational opportunities

Question 24

refers to the environmental factors that hinder an organization’s achievement of competitive advantage

Answer 24

organizational threats

Question 25

a vision or projection of the future, used by managers to determine strategies going forward

Answer 25

forecast

Question 26

a hypothetical extension of a past series of events into the future

Answer 26

trend analysis

Question 27

the creation of alternative hypothetical, but equally likely, future conditions

Answer 27

contingency planning (or scenario planning/analysis)

Question 28

Porter's Model for Industry Analysis

Answer 28

1. threat of new entry: new competitors take customers away from existing organizations 2. suppliers' bargaining power: the more concentrated the industry, the greater the bargaining power of suppliers 3. buyers' bargaining power: buyers have more power when there is a relatively small numbers of buyers in the market 4. threats of substitute products: a firm faces more competition when there are more available substitutes for its products and services 5. competitive rivalry: firms in industries with more competitors tend to be less profitable

Question 29

Porter's 4 Competitive Strategies

Answer 29

1. cost-leadership strategy (wide) 2. differentiation strategy (wide) 3. cost-focus strategy (narrow) 4. focused-differentiation strategy (narrow)

Question 30

strategy that is used to keep costs, and hence prices, of a product or service below those of competitors and to target a wide market ex: Walmart

Answer 30

cost-leadership strategy

Question 31

strategy that is used to offer products or different services that are of unique and superior value compared to those of competitors and to a wide market ex: Apple, Target, Coca-Cola

Answer 31

differentiation strategy

Question 32

strategy that is used to keep the costs, and hence prices, of a product or service below those of competitors and to target a narrow market ex: store that produces low-end products

Answer 32

cost-focus strategy

Question 33

strategy that is used to offer products or services that are of unique and superior value compared to those of competitors and to target a narrow market ex: IKEA

Answer 33

focused-differentiation strategy

Question 34

when a company makes and sells only one product within its market (advantage is focus, increased competition is risk)

Answer 34

single-product strategy

Question 35

when a company operates several businesses to spread out the risk

Answer 35

diversification strategy

Question 36

occurs when an organization, under one ownership, operates several unrelated businesses ex: GE, Virgin

Answer 36

unrelated diversification

Question 37

occurs when an organization operates, under one ownership, several separate businesses that are related to one another ex: Pepsi; beverages and snacks

Answer 37

related diversification

Question 38

making products that involve the same type of management, capital investment, production, or have similar sources of risk

Answer 38

resource allocation

Question 39

making products that have similar key success factors, are in similar stages of the industry life cycle, or occupy similar competitive positions

Answer 39

strategy formulation

Question 40

making products that have targets defined in similar performance variables

Answer 40

performance management

Question 41

allocation, strategy formation, and performance management

Answer 41

factors that may influence a decision to use related diversification

Question 42

a means of evaluating business units based on growth rate and market share

Answer 42

The BCG Matrix

Question 43

____ are in a high growth industry and have high market share

Answer 43

stars; eventually become cash cows

Question 44

____ have low growth but high market share

Answer 44

cows; finance stars and question marks

Question 45

____ are new ventures with a high market growth but low market share

Answer 45

question marks; may grow into stars or diminish like dogs

Question 46

____ have a low growth and low market share

Answer 46

dogs; companies should divest from these markets

Question 47

refers to putting strategic plans into effect

Answer 47

strategy implementation

Question 48

consists of using questioning, analysis, and follow-through to mesh strategy with reality, align people with goals, and achieve promised results

Answer 48

execution

Question 49

tool effective leaders use to get their followers to adopt behaviors that lead to successful strategy execution; displayed through motivating people, modeling desired behaviors, and shaping culture and values

Answer 49

visible leadership

Question 50

tool used by managers to clearly define roles, delegate authority, and hold individuals accountable for strategy execution

Answer 50

clear roles and accountability

Question 51

tool used by managers to create a culture of honesty and openness, and they must listen to and encourage debate amongst subordinate

Answer 51

candid communication

Question 52

tool used by managers to ensure that the organization's recruiting, selection, training, compensation, promotion, transfers, and layoffs fit well within the strategy

Answer 52

appropriate human responsibility practices

Question 53

three core processes of business

Answer 53

1. people 2. strategy 3. operations

Question 54

consists of monitoring the execution of strategy and making adjustments if necessary

Answer 54

strategic control