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BUS 195 EXAM 1 SHORT ANSWERS
Terms in this set (19)
Discuss some of the forces that influence the formality of the strategic-management process
Application of the strategic-management process is typically more formal in larger and well-established organizations. Formality refers to the extent that participants, responsibilities, authority, duties, and approach are specified. Smaller businesses tend to be less formal. Firms that compete in complex, rapidly changing environments, such as technology companies, tend to be more formal in strategic planning. Firms that have many divisions, products, markets and technologies also tend to be more formal in applying strategic-management concepts. Greater formality in applying the strategic-management process is usually positively associated with organizational success
Discuss the differences between vision and mission statements.
Answer: Many organizations today develop a vision statement tat answers the question "What do we want to become?". Developing a mission statement is often considered the first step in strategic planning, preceding even development of a mission statement .Many vision statements are a single sentence. For example, the vision statement of Stokes Eye Clinic in Florence, South Carolina, is "Our vision is to take care of your vision." Mission statements are "enduring statements of purpose that distinguish one business from other similar firms. A mission statement identifies the scope of a firm's operations in product and market terms." It addresses the basic question that faces all strategists: "What is our business?" A clear mission statement describes the values and priorities of an organization. Developing a mission statement compels strategists to think about the nature and scope of present operations and to assess the potential attractiveness of future markets and activities. A mission statement broadly charts the future direction of an organization and serves as a constant reminder to employees of why the organization exists and what its founders envision.
Explain the relationship between strategic management and competitive advantage. How can a firm achieve sustained competitive advantage?
Strategic management is about gaining and maintaining competitive advantage. Competitive advantage is anything a firm does especially well compared to rival firms. When a firm can do something that rival firms cannot do, or owns something that rival firms desire, that represent a competitive advantage. Getting and keeping competitive advantage is essential for long-term success of an organization. A firm must strive to achieve sustained competitive advantage by 1.) continually adapting to changes in external trends and events and internal capabilities, competencies and resources, and by 2.) effectively formulating, implementing, and evaluating strategies that capitalize upon those factors
List any five of the reasons for why some firms do no strategic planning
Ten reasons are stated. List five of the following:
1.) No formal training in strategic management
2.) No understanding of or appreciation for the benefits of planning
3.) No monetary rewards for doing planning
4.) No punishment for not planning
5.) Too busy "firefighting" (resolving internal crises)
6.) To view planning as a waste of time, since no product/service is made
7.) Laziness; effective planning takes time and effort; time is money
8.) Content with current success; failure to realize that success today is not a guarantee for success tomorrow
10.) Prior bad experience with strategic planning done sometime / elsewhere
Explain the process of developing a mission statement
1.) select several articles about mission statements and then ask all managers to read these as background information
2.) Managers are asked to prepare a mission statement for the organization
3.) a facilitator or committee of top managers should then merge these statements into a single document and distribute this draft mission statement to all managers
4.) a request for modifications, additions, and deletions is needed next
5.) To the extent that all managers have input into and support the final mission statement document, organizations can more easily obtain managers' support for other strategy formulation, implementation and evaluation activities
A good mission statement effectively reflects the anticipation of customers and reveals the utility that various products or services offer customers. Give 3 examples of this.
1.) AT&T's mission statement focuses on communication rather than on telephones
2.) Exxon's mission statement focuses on energy rather than on oil and gas
3.) Union Pacific's mission statement focuses on transportation rather than on railroads
4.) Universal Studios' mission statement focuses on entertainment rather than on movies
Define and give an example of the phrasing of the self-concept (distinctive competence) component in a mission statement
The self-concept component of a mission statement asks the question "What is the firm's major competitive advantage?" Examples of the self-concept component are: "We are committed to leapfrogging ongoing competition within 1,000 days by unleashing the constructive and creative abilities and energies of each of its employees".
Discuss the process of performing an external audit.
To perform an external audit, a company first must gather competitive intelligence and information about economic, social, cultural, demographic, environmental, political, governmental, legal, and technological trends. Once information is gathered, it should be assimilated and evaluated. A meeting or series of meetings of managers is needed to collectively identify the most important opportunities and threats facing the firm. A prioritized list of these factors must be obtained. All managers could individually rank the factors identified, from 1 to 20 or managers could simply place a check mark by their most important "top 10 factors". Then, by summing the rankings, or the number of check marks, a prioritized list of factors is revealed.
Discuss the Industrial Organization (I/O) approach in relation to competitive advantage.
The I/O approach to competitive advantage advocates that external factors are more important than internal factors in a firm achieving competitive advantage. Proponents of the I/O view contend that organizational performance will be primarily determined by industry forces that no single firm can control. I/O theorists contend that external factors -- such as economies of scale, barriers to market entry, product differentiation, the economy, and level of competitiveness -- are most important that internal resources, capabilities, structure, and operations. Competitive advantage is determined largely by competitive positioning within an industry, according to I/O advocates. The authors contend that effective integration of both external and internal factors is the key to securing and keeping a competitive advantage.
According to Michael Porter, what are the forces that together define the nature of competitiveness in a given industry. Discuss the one force that is usually the most powerful.
1.) Rivalry among competing firms
2.) Potential entry of new competitors
3.) Potential development of substitute products
4.) Bargaining power of suppliers
5.) Bargaining power of consumers
Rivalry among competing firms is usually the most powerful of the five competitive forces. The strategies pursued by one firm can be successful only to the extent that they provide competitive advantage over the strategies pursued by rival firms. Changes in strategy by one firm may be met with retaliatory counter moves, such as lowering prices, enhancing quality, adding features, providing services, extending warranties, and creasing advertising. As rivalry among among competing firms intensifies, industry profits decline, in some cases to the points where an industry becomes inherently unattractive.
Describe the Competitive Profile Matrix (CPM) noting similarities to, and differences from, the External Factor Evaluation (EFE)Matrix.
The Competitive Profile Matrix (CPM) identifies a firm's major competitors and its particular strengths and weaknesses in relation to a sample firm's strategic position. The weights and total weighted scores in both a CPM and an EFE have the same meaning. However, critical success factors in a CPM include both internal and external issues; therefore, the ratings refer to strengths and weaknesses, where 4 = major strength, 3 = minor strength, 2 = minor weakness, and 1 = major weakness. The critical success factors in a CPM, the ratings and total weighted scores for rival firms can be compared to the sample firm.
Identify the five basic functions of management and describe each function.
1.) Planning: activities related to preparing for the future, forecasting, establishing objectives, devising strategies, and developing policies
2.) Organizing: structure of task and authority relationships, organizational design, job specialization, job descriptions, span of control, coordination, job design, and job analysis.
3.) Motivating: efforts directing toward shaping human behavior, leadership, communication, work groups, behavior modification, delegation of authority, job enrichment, job satisfaction, need fulfillment, organizational change, employee morale, and managerial morale
4.) Staffing: HR activities, wage and salary administration, employee benefits, interviewing, hiring, firing, training, management development, employee safety, equal employment opportunity, and union relations
5.) Controlling: ensuring that actual results are consistent with planned results; quality control, financial control, sales control, inventory control, expense control, analysis of variance, rewards, and sanction
Discuss the limitations of financial ratio anaylsis
There are some limitations of financial ratio analysis. The first is that financial ratios are based on accounting data, and firms differ in their treatment of such items as depreciation, inventory valuation, R&D expenditures, pension plan costs, mergers, and taxes.
2.) seasonal factors can influence comparative ratios
3.) departures from industry averages do not always indicate a firm is doing especially well or badly
Four basic approaches that exist to determine R&D budget allocations
1.) financing as many project proposals as possible
2.) using a percentage-of-sales method
3.) budgeting about the same amount competitors spend for R&D
4.) deciding how many successful new products are needed and working backward to estimate the required R&D investment
Discuss the five steps involve din performing an Internal Factor Evaluation (IFE) Matrix
1.) List 20 internal factors, including strengths and weaknesses, using percentages, rations and comparative numbers
2.) Assign a weight that ranges from 0 (not important) to 1.0 (all important) to each factor based on its relative importance to being successful in the firm's industry
3.) Assign a rating 1-4 to each factor to indivate whether that factor represents a major weakness, a minor weakness, a minor strength, or a major strength.
4.) Multiply each factor's weight by its rating to determine a weighted a weighted score for each variable
5.) Sum the weighted scores for each variable to determine the total weighted score for the organization
List 3 guidelines for when forward integration would be a particularly good strategy to pursue
1.) when an organization competes in an industry that is growing and its expected to continue to grow markedly
2.) when the advantages of stable production are particularly high
3.) when present distributors have high profit margins
List 3 guidelines for when market development would be a particular good strategy to pursue
1.) when new channels of distribution are available that are reliable, inexpensive, and of good quality
2.) when an organization is successful at what it does
3.) when new untapped or unsaturated markets exist
List 3 guidelines for when related diversification would be a particularly good strategy to pursue
1.) when adding new, but related products would significant enhance the sales of current products
2.) when an organization and its products are currently in the declining stage of the product's life cycle
3.) when an organization has a strong management team
Explain each of the 5 types of bankruptcy: CH 7, 9, 11, 12, and 13
CH. 7: liquidation procedure used only when a corporation sees no hope of being able to operate successfully or obtain the necessary creditor agreement
CH. 9: applies to municipalities
CH. 11: allowed organizations to reorganize and come back after filing a petition for protection
CH. 12: provides special relief to family farmers with debt equal to or less than $1.5 million
CH. 13: reorganization plan similar to CH. 11, but it is available only to small businesses owned by individuals with unsecured debts of less than $100,000 and secured debts of less than $350,000.
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