Chapter 6 Organizational Strategy

Question 1

what are the four components of a sustainable competitive advantage?

Answer 1

valuable, rare, imperfectly imitable, and non-substitutable (VRIN)

Question 2

resources

Answer 2

the assets, capabilities, processes, employee time, information, and knowledge that an organization uses to improve its effectiveness and efficiency and create and sustain competitive advantage

Question 3

competitive advantage

Answer 3

providing greater value for customers than competitors can

Question 4

sustainable competitive advantage

Answer 4

competitive advantage that other companies have tried unsuccessfully to duplicate and have, for the moment, stopped trying to duplicate

Question 5

valuable resource

Answer 5

a resource that allows companies to improve efficiency and effectiveness

Question 6

rare resource

Answer 6

a resource that is not controlled or possessed by many competing firms

Question 7

imperfectly imitable resource

Answer 7

a resource that is impossible or extremely costly or difficult for other firms to duplicate

Question 8

nonsubstitutable resource

Answer 8

a resource that produces value or competitive advantage and has no equivalent substitutes or replacements

Question 9

what are the steps in a strategy-making process?

Answer 9

assess the need for strategic change, conduct a situational analysis, and choose strategic alternatives

Question 10

competitive inertia

Answer 10

a reluctance to change strategies or competitive practices that have been successful in the past

Question 11

strategic dissonance

Answer 11

a discrepancy between a company’s intended strategy and the strategic actions managers take when implementing that strategy

Question 12

situational analysis (SWOT)

Answer 12

an assessment of the strengths and weaknesses in an organization’s internal environment and the opportunities and threats in its external environment

Question 13

shadow-strategy task force

Answer 13

a committee within a company that analyzes the company’s own weaknesses to determine how competitors could exploit them for competitive advantage

Question 14

distinctive competence

Answer 14

what a company can make, do, or perform better than its competitors

Question 15

core capabilities

Answer 15

the internal decision-making routines, problem-solving processes, and organizational cultures that determine how efficiently inputs can be turned into outputs

Question 16

strategic group

Answer 16

a group of companies within an industry against which top managers compare, evaluate, and benchmark strategic threats and opportunities

Question 17

core firms

Answer 17

the central companies in a strategic group

Question 18

secondary firms

Answer 18

the firms in a strategic group that follow strategies related to but somewhat different from those of core firms

Question 19

strategic reference points

Answer 19

the strategic targets managers use to measure whether a firm has developed the core competencies it needs to achieve a sustainable competitive advantage

Question 20

what are the two types of corporate-level strategies?

Answer 20

portfolio strategy and grand strategy

Question 21

corporate-level strategy

Answer 21

the overall organizational strategy that addresses the questions: “what business or businesses are we in or should we be in it?”

Question 22

diversification

Answer 22

a strategy for reducing risk by buying a variety of items (stocks or businesses) so that failure of one stock or business does not doom the entire portfolio

Question 23

portfolio strategy

Answer 23

a corporate-level strategy that minimizes risk by diversifying investment among various businesses or product lines

Question 24

acquisition

Answer 24

the purchase of a company by another company

Question 25

unrelated diversification

Answer 25

creating or acquiring companies in completely unrelated businesses

Question 26

BCG (Boston Consulting Group) matrix

Answer 26

a portfolio strategy that categorizes a corporation's businesses by growth rate and relative market share and helps managers decide how to invest corporate funds

Question 27

star

Answer 27

a company with a large share of a fast-growing market

Question 28

question mark

Answer 28

a company with a small share of a fast-growing market

Question 29

cash cow

Answer 29

a company with a large share of a slow-growing market

Question 30

dog

Answer 30

a company with a small share of a slow-growing market

Question 31

related diversification

Answer 31

creating or acquiring companies that share similar products, manufacturing, marketing, technology, or cultures

Question 32

grand strategy

Answer 32

a broad corporate-level strategic plan used to achieve strategic goals and guide strategic alternatives that managers of individual businesses or subunits may use

Question 33

growth strategy

Answer 33

a strategy that focuses on increasing profits, revenues, market share, or the number of places in which the company does business

Question 34

stability strategy

Answer 34

a strategy that focuses on improving the way in which the company sells the same products or services to the same customers

Question 35

retrenchment strategy

Answer 35

a strategy that focuses on turning around very poor company performance by shrinking the size or scope of the business

Question 36

recovery

Answer 36

the strategic actions taken after retrenchment to return to a growth strategy

Question 37

industry-level strategy

Answer 37

a corporate strategy that addresses the question, "how should we compete in this industry?"

Question 38

character of the rivalry

Answer 38

a measure of the intensity of competitive behavior between companies in an industry

Question 39

threat of new entrants

Answer 39

a measure of the degree to which barriers to entry make it easy or difficult for new companies to get started in an industry

Question 40

threat of substitute products or services

Answer 40

a measure of ease with which customers can find substitutes for an industry's products or services

Question 41

bargaining power of suppliers

Answer 41

a measure of the influence that suppliers of parts, materials, and services to firms in an industry have on the prices of these inputs

Question 42

bargaining power of buyers

Answer 42

a measure of the influence that customers have on a firm's prices

Question 43

cost leadership

Answer 43

the positioning strategy of producing a product or service of acceptable quality at consistently lower production costs than competitors can, so that the firm can offer the product at the lowest price in the industry

Question 44

differentiation

Answer 44

the positioning strategy of providing a product or service that is sufficiently different from competitors' offerings that customers are willing to pay a premium price for it

Question 45

focus strategy

Answer 45

the positioning strategy of using cost leadership or differentiation to produce a specialized product or service for a limited, specially targeted group of customers in a particular geographic region or market segment

Question 46

attack

Answer 46

a competitive move designed to reduce a rival's market share or profits

Question 47

response

Answer 47

a competitive countermove, prompted by a rival's attack, to defend or improve a company's market share or profit