Strategic Management Final
Terms in this set (69)
Once a company decides to expand beyond its borders it has which of the following strategic options?
All of the above. To maintain a domestic production base and export goods to foreign markets and To rely on strategic alliances or joint ventures to partner with foreign companies and To license foreign firms to produce and distribute its products or use the company's technology and Employ a franchising strategy.
Companies opt to expand into foreign markets for such reasons as to
gain access to new customers, achieve lower costs and enhance the company's competitiveness, capitalize on core competencies, and spread business risk across a wider market base
Which one of the following is not a factor that a company must contend with in competing in the markets of foreign countries?
A need to convince shippers to keep cross-country transportation costs low
Which one of the following statements concerning the effects of fluctuating exchange rates on companies competing in foreign markets is true?
Domestic companies under pressure from lower-cost imports are benefited when their government's currency grows weaker in relation to the currencies of the countries where the imported goods are being made
One of the biggest strategy issues confronting a company competing in the international arena is
whether to offer a mostly standardized product worldwide or whether to customize the company's offerings in each different country market to match the preferences and requirements of local buyers.
The essential difference between multidomestic competition and global competition is that
in multidomestic competition the markets of different countries are not closely linked and rivals battle for "national market championships" whereas in global competition the markets of different countries are closely linked and form a world market, thus pitting rivals in a battle for the "world market championship.
Which of the following is/are not "valid" strategy options for entering and/or competing in foreign markets?
An import strategy, a strategic alliance strategy, a profit sanctuary strategy, and a cross-market subsidization strategy
What are profit sanctuaries?
Country markets in which a company derives substantial profits because of its protected market position or unassailable competitive advantage.
Which of the following is not a typical option that companies have to consider to tailor their strategy to fit the circumstances of emerging country markets?
To develop new sets of core competencies that allow a company to offer value to consumers of emerging markets in ways unmatched by rivals.
The strategy options for local companies in competing against global challengers include:
Develop business models that exploit the shortcomings of local distribution networks and infrastructure, utilize keen understanding of local customer needs and preferences, and transferring company expertise to cross-border markets.
A company becomes a prime candidate for diversifying under the following circumstances:
All of these. When it spots opportunities for expanding into industries whose technologies and products complement its present business. and When it has a powerful and well-known brand name that can be transferred to the products of other businesses and thereby used as a lever for driving up the sales and profits of such business. and When diversifying into additional businesses opens new avenues for reducing costs via cross-business sharing or transfer of competitively valuable resources and capabilities. and When can leverage its collection of resources and capabilities by expanding into businesses where these resources and capabilities are valuable assets.
To judge whether a particular diversification move has good potential for building added shareholder value, the move should pass the following tests:
The attractiveness test, the cost-of-entry test, and the better-off test
The better-off test for evaluating whether a particular diversification move is likely to generate added value for shareholders involves:
Evaluating whether the diversification move will produce a 1 + 1 = 3 outcome such that the company's different businesses perform better together than apart and the whole ends up being greater than the sum of the parts.
Which of the following is not accurate as concerns entering a new business via acquisition, internal start-up, or a joint venture?
Acquisition is generally the most profitable way to enter a new industry, tends to be more suitable for an unrelated diversification strategy than a related diversification strategy, and usually requires less capital than entering an industry via internal start-up.
The strategic appeal of related diversification is that:
It allows a firm to reap the competitive advantage benefits of skills transfer, lower costs (due to economies of scope), cross-business use of a powerful brand name, and/or cross-business collaboration in creating stronger competitive capabilities.
Economies of scope:
Stem from cost-saving strategic fits along the value chains of related multiple businesses.
The defining characteristic of unrelated diversification (as opposed to related diversification) is:
That the value chains of different businesses are so dissimilar that no competitively valuable cross-business relationships are present (in other words, the value chains of a company's businesses offer no opportunities to benefit from skills or technology transfer across businesses, economies of scope, cross-business use of a powerful brand name, and/or cross-business collaboration in creating stronger competitive capabilities).
Calculating quantitative attractiveness ratings for the industries a company has diversified into involves:
Selecting a set of industry attractiveness measures, weighting the importance of each measure (with the sum of the weights adding to 1.0), rating each industry on each attractiveness measure, multiplying the industry ratings by the assigned weight to obtain a weighted rating, adding the weighted ratings for each industry to obtain an overall industry attractiveness score, and using the overall industry attractiveness scores to evaluate the attractiveness of all the industries, both individually and as a group.
The 9-cell industry attractiveness-competitive strength matrix:
Uses quantitative measures of industry attractiveness and competitive strength to plot each business's location on the matrix—the thesis underlying the matrix is that there are good reasons to concentrate the company's resources on those businesses having relatively strong competitive positions in industries with relatively high attractiveness and to invest minimally or even divest those businesses with relatively weak competitive positions in industries with relatively low attractiveness.
Once a firm has diversified and established itself in several different businesses, then its main strategic alternatives include all but which one of the following?
Shifting from a multi-country to a global strategy.
Quicker than internal development, effective way to hurdle entry barriers, and a good way to acquire resources that cannot be developed internally. BUT very expensive and many fail to deliver on their promise.
AKA corporate venturing. Good when company already has most of resources needed in-house, there is ample time, internal cost of entry is lower than acquisition cost, industry is mostly populated with small firms, and when incumbent firms would be slow to react to new entrant
Joint Venture/Strategic Alliance
1) When opportunity is too complex or uneconomical to pursue alone. 2) New industry requires broader range of know-how than company has. 3) When diversifying into foreign country
Ethical principles in business:
Are not materially different from ethical principles in general and have to be judged in the context of society's standards of right and wrong, not by a special set of rules that business people decide to apply to their own conduct.
According to the school of ethical universalism:
The most important concepts what is right and what is wrong are universal and transcend culture, society, and religion.
If one adopts the thinking of the school of ethical relativism, then:
There are multiple sets of ethical standards because what is ethical or unethical depends on local customs and social mores and can vary from one culture or nation to another.
Paying bribes and kickbacks to expedite winning orders from customers or to facilitate business transactions...
Is a thorny ethical issue for multinational companies, because in some countries such payments are considered unethical whereas in other countries the payment of bribes and kickbacks is very much in accord with local customs and social mores.
According to integrated social contracts theory...
Universal ethical principles based on the collective views of multiple societies form a social contract that all individuals and organizations have a duty to observe in all situations.
Unethical managerial behavior tends to be driven by such factors as:
1) Overzealous pursuit of personal gain, wealth, and other selfish interests. 2) Company culture that puts the profitability and good business performance ahead of ethical behavior. 3) Heavy pressures on company managers to meet or beat performance targets.
What does the business case for an ethical strategy emphasize?
That pursuing unethical strategies not only damages a company's reputation but can also have costly consequences that are wide ranging.
Which one of the following is not a key trait of the ethical culture approach to managing ethical conduct?
The ethical culture approach is favored at companies where top managers are very concerned about gaining employee buy-in to the company's ethical standards, business principles, and corporate values and see the company's code of ethics and/or its statement of corporate values as integral to the company's identity and ways of operating.
The notion of social responsibility as it applies to businesses concerns refers to what?
A company's duty to operate in an honorable manner, provide good working conditions for employees, be a good steward of the environment, and actively work to better the quality of life in the local communities where it operates and in society at large.
An environmental sustainability strategy consists of a company's deliberate actions to:
Meet the current needs of customers, suppliers, shareholders, employees and other stakeholders in a manner that protects the environment, provides for the longevity of natural resources, maintains ecological support systems for future generations, and guards against ultimate endangerment of the planet.
Path to Greater Shareholder Value through Unrelated Diversification:
1) Only diversify into businesses that offer consistent good earnings and Return on Investment.
2) Do excellent job of negotiating favorable acquisition prices.
3) Superior corporate parenting via high level managerial oversight and resource allocation
When is a Capability - motivated acquisition essential?
1) When a market opportunity can slip by faster than the capability can be created internally.
2) When industry conditions, technology, or competitors are moving at such a fast clip and time is of the essence.
Characterized by Limited task specialization, few rules, informal relationships, little planning, minimal training, and lack of sophisticated support systems.
Best when company is in one particular business. As a business diversifies, centralized management becomes a liability.
Best for diversified and global companies.
Middle managers can be reporting to two bosses, promotes sharing a resources yielding economies of scope, and is common in companies with projects of short duration.
Management's handling of the strategy implementation/execution process can be considered successful:
If and when the company meets or beats its performance targets and shows good progress in achieving its strategic vision for the company.
Which of the following is not one of the principal managerial components associated with implementing and executing strategy?
Reducing the layers of management to a bare minimum and making sure employees are empowered.
The three organization-building actions paramount in the task of trying to execute a company's strategy are:
staffing the organization, building and strengthening core competitive and competitive capabilities, and structuring the organization and work effort.
The overriding aim in building a management team should be to:
assemble a critical mass of talented managers who can function as agents of change, work well together as a team, and produce organizational results that are dramatically better than what a few star managers acting individually can achieve.
Employee training and retraining...
merit high-priority on management's strategy-implementing agenda when a firm revises its strategy in ways that call for new skills or different know-how, operating methods, and competitive capabilities and also become a key activity in businesses where technical know-how is changing so rapidly that a company loses its ability to compete unless its skilled people have cutting-edge knowledge and expertise.
Which one of the following is not part of organizing the work effort in ways that promote successful strategy execution?
Forming a special department or work unit to lead the company's effort to capture strategic and resource fits
Which of the following statements are right about matching the type of organizational structure to strategy execution requirements?
All of these.
Which one of the following falsely describes a centralized approach to decision-making?
Hierarchical command-and-control structures speed an organization's responses to changing conditions because top-level managers are in a position to quickly review the situation and make a final decision.
The basic tenets of a decentralized organizational structure include the thesis that:
a company that draws on the combined intellectual capital of all its people can outperform a command-and-control company and decision-making authority should be put in the hands of the people closest to and most familiar with the situation, and these people should be trained to exercise good judgment.
One of the big challenges of organizing and managing a work environment where employees are empowered to make decisions in their area of responsibility is what?
how to exercise control over the actions and decisions of empowered employees so that the business is not put at risk while trying to capture the benefits of employee empowerment.
From a strategy-implementing/strategy-executing perspective, a company's operating budget should do what?
Strategy-driven and based primarily on how much each organizational unit needs to carry out its piece of the strategic plan efficiently and effectively.
Prescribing policies and operating procedures aid the task of implementing strategy by:
by providing top-down guidance about how certain things need to be done, helping ensure consistency in how strategy-critical activities are performed, and by promoting the creation of a work climate that facilitates good strategy execution.
A "best practice"
is a method of performing an activity that has been shown consistently deliver superior results compared to other methods.
Using benchmarking and best practices as a means of achieving operating excellence
Is a four-step process that entails (1) benchmarking how well a company performs specific tasks and activities against best-in-industry or best-in-world performers, (2) adapting the various best practices to fit the company's situation and then implementing them, (3) continuing to benchmark company performance of activities against best-in-industry or best-in-world performers, and (4) continuing to improve and refine the company's performance of its activities and thereby move closer to operating excellence.
Business process re-engineering is a tool for:
Pulling the pieces of strategy-critical activities out of different departments and unifying their performance in a single department or cross-functional work group that has charge over the whole process and can be held accountable for performing the activity in a better, cheaper, and/or more strategy-supportive fashion.
Total quality management (TQM):
is a philosophy that entails creating a total quality culture bent on continuously improving the performance of every task and value chain activity.
Six Sigma quality program:
Utilizes advanced statistical methods to improve quality by reducing defects and variability in the performance of business process.
The use of state-of-the-art information and operating systems:
not only enable better strategy execution but also strengthen organizational capabilities (perhaps enough to provide a competitive edge over rivals).
What is management's most powerful tool for mobilizing employee commitment to competent strategy execution and operating excellence?
a properly designed reward structure.
Which of the following is not characteristic of a compensation and reward system designed to help drive successful strategy execution?
Keeping performance incentives and bonuses to less than 15% of total compensation
Which one of the following is not something that shapes and helps define a company's culture?
The strategy and business model that the company has adopted
Which one of the following is not something to look for in identifying a company's culture?
The company's track record in meeting or beating its financial and strategic performance targets
Which of the following statements about a strong-culture company is false?
Decisive leadership on the part of top executives, an industry-leading market share, and strict enforcement of long-standing company policies are all important traits of a strong culture company.
The characteristics of a weak company culture include:
a lack of values and principles that are consistently preached or widely shared, little co-worker peer pressure to do things in particular ways, and no strong employee allegiance to what the company stands for or to operating the business in well-defined ways.
Which of the following is not one of the four types of unhealthy company cultures?
Companies with insular, inwardly-focused cultures
tend to resist recruiting people who can offer fresh thinking and outside perspectives and typically refrain from looking outside the company for best practices, new managerial approaches, and innovative ideas.
The hallmarks of a high performance corporate culture include
a "can-do" spirit, pride in doing things right, no-excuses accountability, and a pervasive results-oriented work climate where people go the extra mile to meet or beat stretch objectives.
Adaptive cultures are characterized by such traits as
1 A willingness on the part of organizational members to accept change and take on the challenge of introducing and executing new strategies—company personnel share a feeling of confidence that the organization can deal with whatever threats and opportunities come down the pike; they are receptive to risk taking, experimentation, innovation, and changing strategies and practices.
2) Orchestrating organizational changes in a manner that (1) demonstrates genuine care for the well-being of all key constituencies (customers, employees, share-owners, suppliers, and the communities where the company operates) and (2) tries to satisfy all their legitimate interests simultaneously.
3) A proactive approach to identifying issues, evaluating the implications and options, and quickly moving ahead with workable solutions.
4) A willingness to change operating practices and behaviors to adapt to new market and competitive conditions so long as the changes do not compromise core values and long-standing business principles.
Which of the following is not one of the leadership roles that senior managers have to play in pushing for good strategy execution and operating excellence?
Weeding out managers who are consistently in the ranks of the lowest performers (the bottom 10%) and who are not enthusiastic about the strategy or how it is being executed
The task of top executives in making corrective adjustments includes
Deciding when adjustments are needed and what adjustments to make.
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