Textbook Chapter 1

Question 1

What does every organization need to know to be successful?

Answer 1

They need to know themselves and they need to know their “enemy:” the external environment, threats, opportunities, and challenges

Question 2

What can happen if a company does not maintain an appropriate level of financial performance?

Answer 2

It will be less competitive than its rivals and be eventually be forced to close its doors and cease operations

Question 3

What will happen if you focus on one critical success factor and ignore others?

Answer 3

It will limit the firm’s long run performance and perhaps threaten its survival

Question 4

Define achieving financial performance

Answer 4

The achievement of positive cash flow and profitability (but also depends on the life stage and the industry of an organization)

Question 5

Why is financial performance important?

Answer 5

The organization needs financial resources to pay for its day-to-day operations and current projects, and expand its operations in order to grow

Question 6

How is financial performance connected to all of the other factors?

Answer 6

It impacts the efficiency and effectiveness of how the organization functions and therefore its ability to generate revenues or keep expenses low

Question 7

Define customers

Answer 7

Current and potential buyers of your products or services

Question 8

Why are customers important?

Answer 8

Their purchases are the main source of revenue for most organizations. Revenue is a crucial factor in achieving financial performance

Question 9

What does meeting customer needs involve?

Answer 9

1. Understanding what customers want in the current products and services you offer
2. Anticipating future needs and wants

Question 10

What happens if a company does not satisfy its customer needs?

Answer 10

Customers will choose to purchase the goods and services of competitors and your sales revenues will decline. You will also have difficulty attracting new customers if their believe you cannot meet their needs. Your financial performance will be weakened and the financial performance of your competitors will be strengthened

Question 11

Define producing quality products and services

Answer 11

Producing at a level of quality that customers view as appropriate for the price paid, as well as providing a consistent and reliable level of quality

Question 12

How is producing quality products and services connected to financial performance?

Answer 12

Through its effects on revenue and expenses. Produced quality products and services affects revenues through its effects on meeting customer needs. It also affects expenses because consistent quality can only be achieved through processes that are continuously improved and standardized (the number of defective products is reduced and the efficiency of production increases)

Question 13

Define innovation and creativity

Answer 13

The ability to identify and implement new and improved ways to execute any of the organization’s activities

Question 14

Why are innovation and creativity important?

Answer 14

They lead to improvements. They increase the chances of identifying and even creating opportunities. Also, the environment and your competition are always changing. If you do not change, your activities will fall out of alignment with the business environment and you will fall behind your competitors

Question 15

How is innovation and creativity linked to customer needs?

Answer 15

It can lead to identifying new needs to new ways to meet those needs

Question 16

How is innovation and creativity linked to quality products and services?

Answer 16

New ways of producing can be identified that can lead to improved quality in products and/or improved efficiency and effectiveness in production processes

Question 17

How is innovation and creativity linked to financial performance?

Answer 17

They connect indirectly through their effects on other success factors, but also directly when the firm identifies new markets or new activities or strategies that can generate revenues

Question 18

Why are employees important?

Answer 18

Without well-trained, knowledge-able employees any organization will have difficulty surviving over the long-run. They are an organization’s key resource

Question 19

How is employee commitment fostered?

Answer 19

Through the creation of a positive working environment where employees feel respected and valued, and they can meet their personal goals as they meet company goals

Question 20

What will happen when employees are emotionally/psychologically committed to the organization?

Answer 20

They will be motivated and energized to do a good job, and will often go above and beyond what is required because they take pride in what they do and how the company performs

Question 21

How is employee commitment connected to the other factors?

Answer 21

Committed employees take greater care in their work and will do their best to ensure that goods and services being produced are free of defects and of the best quality possible. They are more likely to meet customer needs because they will treat customers the way they would want to be treated and take personal pride in customer satisfaction. An employee who is dedicated to the company will also seek and share innovations that are likely to result in improvements or new, beneficial activities and actions. An unhappy or uncommitted employee is unlikely to care to be willing to put in the effort to take any of these actions

Question 22

What are characteristics of a committed employee?

Answer 22

More likely to work longer and harder

Question 23

How does a lack of employee commitment affect financial performance?

Answer 23

Lack of effort and turnover directly affect financial performance because they reduce productivity and efficiency, and increase expenses

Question 24

Define creating a distinct competitive advantage

Answer 24

The organization is able to do something significant in a way that is unique and valuable in comparison to other organizations. Either their products are different or they perform some aspect of their activities in a way that is superior in comparison to competitors

Question 25

Why is building a distinct competitive advantage important?

Answer 25

Above normal profits are generated by organizations that are able to distinguish themselves in a valuable way from competitors

Question 26

How does building a distinct competitive advantage relate directly to financial performance?

Answer 26

It can affect the prices that the organization can charge for its goods and services. When consumers believe that company’s products are different from all others in a way that they value, they are willing to pay a higher price for them

Question 27

How is distinct competitive advantage linked to all other factors? Give at least one example

Answer 27

It can be the result of a strength in one of the factors. For example, Apple’s distinctive competition advantage is its perceived ability to be more innovative and creative in its products in comparison to many other competitors. Another example is Walmart’s distinctive advantage to meet customer needs by offering a wide range of goods in one location at a low price. A universities ability to attract and retain top scholar and foster employee commitment could be considered its competitive advantage. Finally, firm’s ability to produce reliable, high quality goods or services can allow it to stand apart form the competition, and increase its performance either through production efficiencies or through increased revenues

Question 28

What does Porter’s Five Forces help you to understand?

Answer 28

It helps you understand the industry environment, its degree of competitiveness, and the forces that affect industry profitability. It also can assist you in answering the question of which industries are worthwhile entering, or identify competitive forces that affect industry profitability so that you can develop strategies to mitigate them

Question 29

How does environment affect strategy?

Answer 29

It is external to the organization and largely beyond its influence. The organization must take the environment as given and develop strategies accordingly

Question 30

How does strategy affect strategy?

Answer 30

When a firm executes its strategy, it becomes part of and influences the environment as well

Question 31

How does management preferences affect strategy?

Answer 31

Managerial preferences affect how management interprets the environment, and what it perceives as an opportunity versus a threat. These preferences affect the choices that management makes, and the strategies that it is willing or unwilling to implement

Question 32

How does strategy affect management preferences?

Answer 32

Successes and failures that are experienced influence future managerial choices, and existing strategies bias management toward or away from those strategies in future

Question 33

How does management preferences affect resources?

Answer 33

It influences what is pursued in each of those factors. For example, management preferences will determine which resources are perceived as more valuable and therefore acquired more aggressively than others

Question 34

How does management preferences affect organization?

Answer 34

Preferences influence the culture, structure, and leadership style of the organization, and determine the capabilities that are built

Question 35

How does resources affect strategy?

Answer 35

They determine what strategies the organization has the resources to pursue and are therefore feasible

Question 36

How does strategy affect resources?

Answer 36

Strategy determines what resources are needed and must be acquired to properly execute it

Question 37

How does resources affect management preferences and organization?

Answer 37

Resources will bias management toward using resources which are held in abundance

Question 38

How does resources affect organization?

Answer 38

Resources influence what capabilities the organization can build

Question 39

How does organization affect resources?

Answer 39

The resources that the organization’s capabilities allow to generate and stockpile will be used more

Question 40

How does organization affect strategy?

Answer 40

Capabilities determine what strategies are feasible. The organization must have the ability to execute all of the activities required for the strategy. Its structure must support the efficient execution of the strategy. Organization structure and culture also influence how a strategy can or will be pursued

Question 41

How does strategy affect organization?

Answer 41

The experience it creates enhances existing capabilities and influences which new ones are developed. Strategy also determines the organization structure required for effective implementation

Question 42

Define strategy

Answer 42

The plan the organization has put in place to pursue opportunities or avoid threats it has identified in the environment

Question 43

Why must the strategy be consistent with the demands and opportunities of the environment?

Answer 43

If the strategy is not consistent with the environment, it will not create success for the organization. It’s like planting a tree seed in concrete: no matter how much you nurture it, it will not grow

Question 44

Why must the strategy be consistent with the internal characteristics?

Answer 44

If the strategy is not consistent with the internal characteristics the organization will not be able to effectively execute the strategy

Question 45

Why is the Diamond-E a useful tool for strategic and case analysis?

Answer 45

It reminds you of the elements that must be considered and the relationships between them. It is also valuable for determining the appropriateness of the firm’s current or proposed strategy given the environment and its internal characteristics