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Questions and Answers

What is the primary responsibility of functional-level managers?

To develop corporate-level strategies.

To develop functional strategies that align with objectives. (correct)

To oversee financial audits.

To manage external stakeholder relationships.

Which of the following is a step in the strategic planning process?

Establishing a new market entry plan.

Implementing a financial analysis plan.

Creating a product innovation strategy.

Analyzing the organization’s external competitive environment. (correct)

What does a mission statement typically describe?

The financial targets expected over the next year.

The purpose of the company and what it strives to achieve. (correct)

The desired market position of the company.

The long-term goals of the organization.

In the strategic planning process, what is the aim of analyzing the internal operating environment?

To identify strengths and weaknesses. Signup and view all the answers

What is the purpose of selecting organizational strategies in the strategic planning process?

To build on strengths and correct weaknesses. Signup and view all the answers

Which of the following components is NOT part of a mission statement?

Financial projections. Signup and view all the answers

What is meant by 'building on strengths' in the context of strategic planning?

Leveraging existing capabilities to improve performance. Signup and view all the answers

What does a company's vision typically articulate?

The desired future state or achievements of the company. Signup and view all the answers

What is the definition of strategy in a management context?

A set of related actions that managers take to increase their company's performance. Signup and view all the answers

What is the primary function of dialectic inquiry in strategic management?

To generate a thesis and an antithesis that explore conflicting actions. Signup and view all the answers

What does competitive advantage mean?

A unique advantage that allows a company to outperform its competitors. Signup and view all the answers

The company's manager insisting on continuing the problematic project best exemplifies which cognitive bias?

Escalating commitment Signup and view all the answers

Which of the following is NOT considered a characteristic of strategic leaders?

Rigidity in decision-making. Signup and view all the answers

Which characteristic is NOT typically associated with strong strategic leaders?

Narrow focus on a single task Signup and view all the answers

Which step is part of the strategic planning process?

Conducting SWOT analysis. Signup and view all the answers

What do strong strategic leaders exhibit in terms of emotional intelligence?

Self-awareness, self-regulation, and empathy Signup and view all the answers

What is one major criticism of strategic planning?

It assumes a predictable environment. Signup and view all the answers

How can cognitive biases impact strategic decision making?

They can lead to poor strategic decisions. Signup and view all the answers

In the context of strategic management, what does the 'outside view' rely on?

The consideration of past strategic successes or failures. Signup and view all the answers

Which factor is primarily associated with effective leadership and superior performance?

Emphasizing collaboration and motivation among team members. Signup and view all the answers

Which of the following is a key benefit of articulation of a business model for strategic leaders?

It provides a clear framework for achieving organizational goals. Signup and view all the answers

Which of the following traits is essential for a manager to empower others effectively?

Willingness to delegate tasks and responsibilities. Signup and view all the answers

Which role do managers at different levels play in strategic leadership?

All levels of management contribute to strategy formulation and implementation. Signup and view all the answers

Which characteristic of strategic leaders is directly related to understanding and managing their own emotions?

Emotional intelligence Signup and view all the answers

What does confirmation bias refer to in decision making?

The tendency to seek information that supports a previous belief. Signup and view all the answers

What is escalating commitment in the context of strategic decision making?

The act of increasing resource investment in a project despite failure. Signup and view all the answers

Which cognitive bias is characterized by the tendency to overestimate one's ability to manage situations?

Illusion of control Signup and view all the answers

What does the availability error suggest about decision making?

Outcomes are often judged by how easily they come to mind. Signup and view all the answers

What role does 'devil's advocacy' play in improving decision making?

It involves identifying potential flaws in proposals. Signup and view all the answers

Which cognitive bias involves generalizing from a single vivid experience?

Representativeness Signup and view all the answers

Which of the following best defines reasoning by analogy?

Making sense of complex problems using simple comparisons. Signup and view all the answers

Which cognitive bias is NOT mentioned in the context of strategic decision making?

Cognitive dissonance Signup and view all the answers

What is the primary focus of strategic leadership?

Creating competitive advantage through effective management of the strategy-making process Signup and view all the answers

Which aspect is NOT a part of strategy formulation?

Implementing selected strategies Signup and view all the answers

What does shareholder value primarily include?

Capital appreciation and dividend payments Signup and view all the answers

Which statement best describes risk capital?

Equity capital with uncertain returns for investors Signup and view all the answers

What is the main goal of strategy implementation?

Ensuring strategies are put into action Signup and view all the answers

Which of the following is NOT an indication of superior performance?

High employee turnover Signup and view all the answers

How does strategic leadership contribute to an organization?

By enabling the coordination of strategy formulation and implementation Signup and view all the answers

What is a key component of strategy formulation?

Analyzing competitors Signup and view all the answers

What is the primary focus of business-level strategies?

Gaining competitive advantage in the marketplace Signup and view all the answers

What do global strategies primarily focus on?

Expanding operations outside the home country Signup and view all the answers

Which of the following defines strategy implementation?

Taking action to execute a strategic plan Signup and view all the answers

What does the feedback loop in strategy implementation provide?

Data on the achievement of strategic goals Signup and view all the answers

Which of the following best captures a criticism of the formal planning model?

It emphasizes unpredictability over strategic outcomes. Signup and view all the answers

Which aspect is part of strategic planning?

Identifying organizational goals and methods to achieve them Signup and view all the answers

What do corporate-level strategies focus on?

Choosing which businesses to operate in for maximum profitability Signup and view all the answers

Which is an essential component of designing strategy implementation?

Creating an appropriate organizational structure and culture Signup and view all the answers

Study Notes

Chapter 1: Strategic Leadership

Strategic leadership is about creating a competitive advantage by effectively managing the strategy-making process.
A strategy involves related actions that managers take to improve company performance.
Strategic leadership involves developing and implementing strategies to gain a competitive edge.
Strategy formulation involves analyzing internal and external environments and selecting suitable strategies.
Strategy implementation involves putting selected strategies into action.

Icebreaker

Consider who you view as a good leader/manager and their qualities.

Learning Objectives

Define strategic leadership.
Discuss leadership's role in achieving superior performance.
Explain the concept of "competitive advantage."
Examine the strategic roles of managers at various organizational levels.
Identify the main steps in the strategic planning process.
Examine the criticisms of strategic planning.
Explain strategic decision-making, including common cognitive biases.
Discuss the essential characteristics of strategic leaders.

1-1: Strategy and Strategic Leadership

Strategy is a course of action to increase company performance.
Strategic leadership is creating competitive advantage through sound strategy-making.

Strategy

Strategy is a set of related actions that managers take to increase their company's performance.
Strategic leadership is creating competitive advantage through effective management of the strategy-making process.
Strategy formulation involves selecting strategies that are based on analysis of an organization's external and internal environment.
Strategy implementation is putting strategies into action.

Knowledge Check 1.1

The best explanation of strategy is the actions an organization takes to achieve superior performance.

1-2: Strategic Leadership and Superior Performance

Shareholder value: Returns that shareholders earn from purchasing company shares (includes capital appreciation and dividends)
Risk capital: Equity capital invested with no guarantee of return.
Profitability: Return on the capital invested in the enterprise (ROIC = net profit / capital invested).

1-3: Competitive Advantage and a Company's Business Model

Competitive advantage: Maintaining greater profitability than average industry rivals.
Sustained competitive advantage: Achieving above-average profitability for an extended period.
Business model: How a company's strategies work together to give it a competitive advantage.

Industry Differences and Nonprofits

Company profitability is dependent on factors like its relative industry success and industry overall performance compared to other industries.
Strategic thinking applies to both profit and nonprofit organizations to use resources effectively.
Nonprofits, like businesses, compete for resources.

Discussion Activity 1

Profitability and competitive advantage are different. Profitability is the return on investment, while competitive advantage is a superior level of profitability over industry rivals.

Discussion Activity 1 Debrief

A company's profitability is equal to the return on investment.
Competitive advantage is indicated by higher profitability and growth than competitors in the industry, accomplished through effective actions and strategies.

1-4: Strategic Managers

General managers have overall responsibility for the company or a subunit.
Functional managers supervise a specific business function (e.g., accounting, marketing).
Multidivisional company: A company that has multiple self-contained divisions to manage various businesses.

1-5: The Strategic Planning Process

The process starts with selecting the company's mission and goals, evaluating external and internal competitive environments (opportunities and threats, strengths and weaknesses), making decisions on strategies to fit those conditions, and finally implementing those decisions.

A Model of the Strategic Planning Process

Five steps in the strategic planning process.
1. Select the corporate mission and goals.
2. Analyze the organization's external competitive environment by identifying opportunities and threats.
3. Analyze the internal operating environment by identifying strengths and weaknesses.
4. Select organizational strategies that build on strengths, correct weaknesses, are consistent with goals, and form a cohesive business model.
5. Implement the strategies.

1-6: Strategy as an Emergent Process

Formal planning is sometimes criticized because the business world is unpredictable.
Lower-level managers can have insights into real-world situations and needs.
Successful strategies can sometimes be due to factors like luck or serendipity.

Criticisms of Formal Planning Model

The real world is unpredictable.
Excessive emphasis on top management.
Successful strategies sometimes rely on serendipity.

1-7: Strategic Planning in Practice

Scenario planning involves thinking about what-if scenarios (what if factors change or conditions are different in the future).
The process guides managers in anticipating potential challenges and creating flexible strategies.

Scenario Planning

Planning using "what-if" scenarios for the future.
Encourages managers to be flexible and anticipate probable scenarios.
Often utilizes various scenarios and considers a range of options.

1-8: Strategic Decision Making

Cognitive biases can affect decision-making.
Confirmation bias: favouring data supporting pre-existing beliefs.
Escalating commitment: Continuing projects despite negative feedback.
Reasoning by analogy: Drawing conclusions based on similar situations.

Cognitive Biases and Strategic Decision Making

Systematic decision-making errors from how people process information.
Confirmation bias: Decision-makers favour data supporting existing beliefs.
Escalating commitment: Continuing investment in projects despite failing results.
Reasoning by analogy:Using simple analogies to understand complex issues.
Representativeness: Generalizing from a small sample or anecdotal evidence.
Illusion of control: Overestimating one's influence on events.
Availability error: Overestimating the probability of events that are easy to imagine.

Techniques for Improving Decision Making

Devil's advocacy: A technique that helps identify potential problems in a proposed plan.
Dialectic inquiry: Generating plans and counterplans.
Outside view: Examining past projects to learn from success and failure.

Knowledge Check 1.2

Escalating commitment is the cognitive bias demonstrated when a manager continues to invest in a project despite negative feedback.

1-9: Strategic Leadership

Key characteristics for strong strategic leaders.
Vision, eloquence, and consistency
Articulation of a business model
Commitment
Being well informed
Willingness to delegate and empower
Astute use of power
Emotional intelligence (self-awareness, self-regulation, and motivation)

Self-Assessment

Reflect on company attributes that promote success.
Evaluate personal strengths against the characteristics of effective strategic leaders.

Summary

Review chapter objectives.

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