Strategic Management Chapter 1

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Questions and Answers

What does the economic factor in PESTEL analysis primarily concern?

Government stability and policies

Environmental regulations and sustainability

Consumer purchasing power and economic trends (correct)

Technological advancements and disruptions

Which aspect is NOT part of the Five Forces Analysis?

Threat of New Entry

Rivalry Within the Industry

Supplier Bargaining Power

Political Stability (correct)

In strategic group mapping, what is the purpose of position analysis?

To analyze consumer behavior and trends

To determine market entry strategies

To evaluate strengths and weaknesses of rivals (correct)

To assess the power of suppliers

What can affect the threat of substitute products in an industry?

Technological advancements in similar sectors Signup and view all the answers

What does the buyer power factor influence in an industry?

Pricing and product quality Signup and view all the answers

Which factor influences demand for products and services according to social factors in PESTEL analysis?

Cultural attitudes and demographic changes Signup and view all the answers

Which of the following is considered a barrier to entry in an industry?

Established brand loyalty among consumers Signup and view all the answers

What does the term 'mobility barriers' refer to in strategic group mapping?

Factors that prevent firms from changing their strategic groups Signup and view all the answers

What drives managers to pursue diversification initiatives?

Personal status or ambitions Signup and view all the answers

At which stage does an idea become a tangible product, process, or technology?

Invention Signup and view all the answers

What is required for innovation to occur after the invention stage?

Commercialization of the invention Signup and view all the answers

Why might managers resist takeover attempts?

Desire to maintain underperforming businesses Signup and view all the answers

Which of the following best describes 'imitation' in the context of innovation?

Replicating a successful innovation Signup and view all the answers

What ties together entrepreneurship and strategic management concepts?

Strategic entrepreneurship Signup and view all the answers

What often propels industry progress following successful innovation?

Further improvement and refinement Signup and view all the answers

Which phase of the four-step innovation process involves the observation and generation of ideas?

Idea Signup and view all the answers

What is a potential advantage of unrelated diversification for companies?

It balances risk by spreading investments across various industries. Signup and view all the answers

Which benefit is associated with acquisitions in a corporate strategy?

It consolidates industry rivals and enhances product offerings. Signup and view all the answers

What characterizes a joint venture?

A distinct legal entity created by two or more firms. Signup and view all the answers

What is a key drawback of pursuing diversification merely for growth?

It can result in the dilution of a company’s core business. Signup and view all the answers

What distinguishes strategic alliances from joint ventures?

Strategic alliances involve a partnership to achieve specific goals without shared ownership. Signup and view all the answers

Which of the following is an example of internal development in corporate strategy?

Building new facilities to produce products internally. Signup and view all the answers

What is a key managerial behavior that can hinder value creation in diversification?

Pursuing diversification purely for the sake of company size. Signup and view all the answers

What role does portfolio analysis play in corporate strategy?

It helps assess and allocate resources to maximize value and mitigate risks. Signup and view all the answers

What is the primary purpose of conducting a SWOT analysis?

To identify internal and external factors that can impact success Signup and view all the answers

Which element of the VRIN framework assesses whether resources provide competitive value?

Valuable Signup and view all the answers

What are Key Success Factors (KSFs) intended to identify?

The essential elements required for success in the industry Signup and view all the answers

How does value chain analysis contribute to a company's strategy?

By identifying performance gaps and alignment with competitive goals Signup and view all the answers

What does the 'Overall Attractiveness' assessment involve?

Summarizing findings from various frameworks like PESTEL and Five Forces Signup and view all the answers

What does monitoring key success indicators help a company evaluate?

The effectiveness of its strategy Signup and view all the answers

Why are a company's resources and capabilities essential for competitive advantage?

They provide a foundation for differentiating products and services Signup and view all the answers

Which factors are primarily assessed when conducting a competitive analysis using the Five Forces framework?

The bargaining power of suppliers and buyers, the threat of substitutes, and industry rivalry Signup and view all the answers

What is a primary benefit of using real-time feedback in platforms?

It helps improve products and services continuously. Signup and view all the answers

Which characteristic best describes traditional control systems?

They emphasize a fixed and sequential approach. Signup and view all the answers

How do contemporary control systems differ from traditional ones?

Contemporary systems allow for real-time adjustments. Signup and view all the answers

What role does community feedback play in platform businesses?

It provides valuable insights for improving offerings. Signup and view all the answers

What is a key advantage of disintermediation in platform businesses?

It can reduce costs and increase efficiency. Signup and view all the answers

What is the purpose of a strategic control system?

To monitor and adapt strategies as needed. Signup and view all the answers

Which of the following best describes the role of performance measurement in strategic control systems?

It helps assess whether strategic objectives are being met. Signup and view all the answers

In what type of environment are contemporary control systems most necessary?

Highly unpredictable or volatile environments. Signup and view all the answers

What are visible costs associated with ethical failures?

Fines and penalties imposed on the company. Signup and view all the answers

What is included in internal administrative costs?

Legal fees and corrective actions. Signup and view all the answers

Which of the following best defines Corporate Social Responsibility (CSR)?

Contributing to societal goals beyond profit generation. Signup and view all the answers

What does the Triple Bottom Line (TBL) assess in a company’s performance?

Economic, social, and environmental dimensions. Signup and view all the answers

What type of costs are considered intangible?

Damage to reputation and decline in employee morale. Signup and view all the answers

Which component is NOT typically part of a CSR strategy?

Maximizing quarterly profits. Signup and view all the answers

Which of the following best describes sustainability in business?

Practices that meet current needs without hindering future generations' ability to meet their own needs. Signup and view all the answers

Which of these elements would NOT typically fall under a company's CSR initiatives?

Reducing operational expenses. Signup and view all the answers

Study Notes

Chapter 1

Strategic management is the analysis, decisions, and actions taken by an organization to create and maintain a competitive advantage.
Four key attributes of strategic management: directed at overall organizational goals, involves multiple stakeholders, includes short- and long-term perspectives, incorporates trade-offs between efficiency and effectiveness.
Three principal activities in strategic management: strategy analysis, strategy formulation, and strategy implementation.
Corporate governance is the relationship among various participants in determining the direction and performance of corporations.
Internal governance mechanisms: shareholders, management, and the board of directors.
External control: auditors, banks, analysts, business press, and threat of takeovers.
Five key stakeholder groups: owners, customers, suppliers, employees, and society at large.
Social responsibility recognizes that businesses must respond to society's expectations regarding their obligations to society.

Chapter 2

Many firms are becoming more innovative by incorporating socially responsible behavior and environmental sustainability.
A triple bottom line approach evaluates a firm's performance through financial, social, and environmental considerations.
PESTEL analysis: considers political, economic, social, technological, environmental, and legal factors that affect a firm.
Five forces analysis: assesses the intensity of competition within an industry considering rivalry within the industry, threat of new entry, threat of substitutes, supplier bargaining power, and buyer power.

Chapter 3

Assess how well a company's strategy is working by evaluating financial performance and market position.
Monitor key success indicators to measure effectiveness.
Conduct a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) in order to evaluate internal advantages, vulnerabilities, and external factors and challenges.
Explain how a company's resources and capabilities create a competitive advantage.
Apply VRIN tests to identify tangible and intangible resources and functional capabilities.

Chapter 4

Recognize major avenues for achieving a competitive advantage based on cost, differentiation, and best-cost strategies.
Cost-effective value chain management: minimizing costs
Innovative cost reduction: identifying and eliminating unnecessary costs.
Use key drivers to reduce costs like supply chain management.
Market conditions favorable for low-cost strategies like price competition, identical products from rivals, low buyer switching costs, and price-sensitive customers.
Understand which strategies distinguish each of the five generic strategies.

Chapter 5

Identify reasons for diversification efforts failure, including paying an excessive premium for acquired businesses and a failure to integrate acquired businesses.
Explain how managers can create value through diversification initiatives. Strategies: leveraging core competencies, sharing activities, achieving economies of scope, market power.
Related diversification occurs when a company enters into businesses that have strategic similarities with its existing operations.
Unrelated diversification refers to entering businesses that have no significant operational connection to the company's existing businesses.

Chapter 6

The four-step innovation process: idea, invention, innovation, and imitation.
Summarize how entrepreneurship and innovation work closely with strategic management concepts
Differentiate between incremental and radical innovations based on market and technology.
Categorize how innovations are performed in the markets and technology framework via incremental, radical, architectural, and disruptive innovations.

Chapter 7

Strategic control systems are essential for ensuring strategies are effectively implemented and adjusted.
These systems help coordinate actions, respond to environmental changes, and provide feedback mechanisms.
Contemporary control systems are more dynamic and interactive compared to traditional sequential systems, which are better suited for stable environments.
Unpredictable competitive environments, need for adaptability are reasons why contemporary control systems are crucial.

Chapter 8

Corporate governance mechanisms ensure that management aligns with the best interests of shareholders.
Agency problem: separation of ownership (shareholders) and control (management).
Mechanisms to align interests: board oversight, shareholder activism, and managerial incentives.
Governance challenges in different countries considering principal-principal conflicts, concentrated family ownership, weak legal protection for minority shareholders.
Ethics in business is no different from ethics in general and concerns right and wrong, honesty, fairness, and respect for others.

Chapter 9

Ethical considerations can arise from faulty oversight, pressure to meet short-term targets, profit-driven culture, and role of culture.
Costs of failures can include visible costs (fines, penalties, and lost stock valuation) and intangible costs (damage to reputation, loss of customer loyalty).
Corporate social responsibility (CSR) refers to a company's duty to operate ethically and contribute to societal goals beyond profit.
Key components of CSR include providing good working conditions, promoting diversity, being an ethical steward, and supporting philanthropy.
TBL (Triple Bottom Line) evaluation of companies assesses economic, social, and environmental performance.

Chapter 10

Sustainability in business refers to practices that meet current needs without compromising the potential for future generations to meet their needs.
Balancing corporate social responsibility (CSR) and environmental sustainability with economic responsibilities for shareholders as they can be competitive advantages.

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Description

Explore the foundations of strategic management in this quiz. Understand the key attributes, principal activities, and stakeholders involved in creating a competitive advantage. Test your knowledge on corporate governance and the role of social responsibility in business.