Strategic Choice: Selecting the Best Strategy

Question 1

Pro forma balance sheets and income statements
that forecast the effect that each alternative
strategy will likely have on return on
investment.

Answer 1

CONSTRUCTING CORPORATE SCENARIOS

Question 2

An international entry
option to build a company’s manufacturing plant
and distribution system in another country

Answer 2

Greenfield development:

Question 3

Using three sets of estimated sales figures

Answer 3

Optimistic
- Pessimistic
- Most-likely

Question 4

can be generated with spreadsheet software,
such as Excel, on a personal computer. Pro
forma statements are based on financial and
economic scenarios.

Answer 4

Pro forma balance sheets and income statements

Question 5

A measure of the probability that one
strategy will be effective, the amount of assets
the corporation must allocate to that strategy,
and the length of time the assets will be
unavailable.

Answer 5

Risk

Question 6

An approach to new
project investment when the future is highly
uncertain.

Answer 6

Real options approach

Question 7

(NPV)

Answer 7

Net present value

Question 8

A calculation of the
value of a project that is made by predicting the
project’s payouts, adjusting them for risk, and
subtracting the amount invested.

Answer 8

Net present value (NPV):

Question 9

Pressures from Stakeholders

Answer 9

Stakeholders can be categorized in terms of
their:
1. Interest in the corporation’s activities
and,
2. Relative power to influence the
corporation’s activities.

Question 10

The stakeholder group can be shown
graphically based on:

Answer 10

• Level of interest (from low to high) in a
  corporation’s activities and
• Relative power (from low to high) to
  influence a corporation’s activities.

Question 11

A strategy to influence a
corporation’s stakeholders.

Answer 11

Political strategy:

Question 12

*If a strategy is incompatible with a company’s
corporate culture, the likelihood of its success is
very low.

Answer 12

Pressures from the Corporate Culture

Question 13

If there is little fit, management must decide
if it should:

Answer 13

● Take a chance on ignoring the culture
● Manage around the culture and change
the implementation plan
● Try to change the culture to fit the
strategy
● Change the strategy to fit the culture

Question 14

Needs and Desires of Key Managers

Answer 14

• Personal characteristics and experience
  affect a person’s assessment of an
  alternative’s attractiveness.
• Industry and cultural backgrounds affect
  strategic choice.
• Country of origin often affects
  preferences.
• Some executives show a self-serving
  tendency to attribute the firm’s problems
  not to their own poor decisions but to
  environmental events out of their
  control, such as government policies or
  a poor economic climate