Strategic Management Quiz

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Questions and Answers

According to Henry Mintzberg's 5 P's, which of the following represent ways of thinking about strategy?

Pattern (correct)

Performance

Profit

Plan (correct)

What is the main purpose of an organization's mission statement?

Capture the organization's identity and answer 'Who are we?'

SMART goals stand for Simple, Meaningful, Achievable, Relevant, and Timely.

False

In the context of strategic management, SMART goals should be: Specific, Measurable, Achievable, ____, and Time-bound.

Realistic Signup and view all the answers

What is the term used to describe a set of activities that an organization performs exceptionally well?

Distinctive competence Signup and view all the answers

What are the four main types of intellectual property?

Patents Signup and view all the answers

What is the term used for resources that are valuable, rare, difficult to imitate, and non-substitutable? ________ resource.

Strategic Signup and view all the answers

Intellectual property can be considered a strategic resource if it is valuable, rare, and non-substitutable.

True Signup and view all the answers

What is the main purpose of assessing organizational performance?

To help organizations achieve their vision, mission, and goals Signup and view all the answers

What are the four dimensions of the Balanced Scorecard?

Financial Focus, Customer Focus, Internal Business Process Focus, Learning and Growth Focus Signup and view all the answers

The Triple Bottom Line emphasizes People, Policies, and Profits.

False Signup and view all the answers

__________ refers to an organization's processes, practices, and decision-making styles that reflect entrepreneurial behavior.

Entrepreneurial Orientation Signup and view all the answers

Match the following segments of PESTEL analysis with their descriptions:

Political = Role of government in shaping business Economic = Economic conditions such as interest rates and GDP Social = Trends in demographics and cultural trends Technological = Improvements in products and services provided by science Environmental = Physical conditions like natural disasters and pollution Legal = How the courts influence business activity Signup and view all the answers

What does SWOT analysis consider?

Strengths, weaknesses, opportunities, threats Signup and view all the answers

According to Michael Porter, what are the two key competitive dimensions in business-level strategy?

Source of competitive advantage and scope of operations Signup and view all the answers

A firm following a cost leadership strategy emphasizes efficiency at every step of the value chain.

True Signup and view all the answers

Focused _ strategy requires competing based on price to target a narrow market.

cost Signup and view all the answers

Match the layers of organizational culture with their descriptions:

Artifacts and Behaviors = Visible symbols, rituals, physical settings, and behaviors observed by outsiders Espoused Values = Stated beliefs, philosophies, norms, and values officially promoted by the organization Basic Assumptions = Unconscious beliefs, perceptions, and feelings deeply embedded within the organization Signup and view all the answers

Study Notes

Defining Strategic Management

Strategy is about making choices, such as what products or services to sell, the right balance of labor and capital, and where to locate.
Studying strategic management involves learning about various models and case studies on how companies made strategic choices.

Henry Mintzberg's 5 P's of Strategy

Strategy as a Plan: a carefully crafted set of steps to be successful.
Strategy as a Ploy: a specific move to outwit or trick competitors.
Strategy as a Pattern: the degree of consistency in a firm's strategic actions.
Strategy as a Position: a firm's place in the industry relative to its competitors.
Strategy as a Perspective: how executives interpret the landscape around them.

Types of Strategies

Intended Strategy: the strategy an organization hopes to execute.
Deliberate Strategy: the part of the intended strategy that the firm continues to pursue over time.
Emergent Strategy: an unplanned strategy that arises in response to unexpected opportunities and challenges.
Realized Strategy: the strategy that an organization actually follows, which is a product of intended, deliberate, and emergent strategies.

The History of Strategic Management

The Old Testament of the Bible discusses strategy, with Moses delegating authority to other leaders.
Sun Tzu's idea of winning a battle without fighting is the best way to win.
The Trojan horse is a famous example of strategy in ancient times.
King Arthur and the Round Table's mission to search for the Holy Grail is an example of strategic management.
Two wars fought on American soil, the American Revolution and the American Civil War, provide important lessons about strategic management.

Strategic Management as a Field of Study

The field of strategic management developed over the past century.
Frederick W. Taylor's "The Principles of Scientific Management" (1911) emphasized maximizing organizational performance.
Henry Ford's assembly lines for creating automobiles lowered costs dramatically.
Harvard University's business policy course (1912) aimed to identify the one best response to any given problem.
The Ford Foundation report (1959) recommended that all business schools offer a "capstone" course.

The New Business of Paradigms

Paradigms are problem-solving systems that influence how we see the world.
Paradigm shift: switching from one set of rules to another.
Paradigm effect: a filtering phenomenon that can stop us from finding breakthrough solutions.
Paradigm paralysis: the belief that things can only be done one way, which can hinder innovation and adaptation.
Six observations from Joel Barker's "The New Business of Paradigms - Second Edition" include:
- Paradigms are common and useful, but can also be limiting.
- Outsiders bring new paradigms.
- Shifting paradigms takes courage.
- You can choose to change your paradigm.

Leading Strategically

Vision: a key tool available to executives to inspire people, which describes what the organization hopes to become in the future.
Mission: captures an organization's identity and provides answers to the fundamental question "Who are we?"
SMART Goals: Specific, Measurable, Achievable, Realistic, and Time-bound goals guide daily actions.

Assessing Organizational Performance

Organizational Performance: measures how well an organization achieves its vision, mission, and goals.
Performance Measures: metrics like profits, stock price, and sales gauge organizational success.
Performance Referents: benchmarks used to contextualize performance measures.
The Balanced Scorecard: a tool that helps managers balance financial measures with other performance indicators.
The Triple Bottom Line: emphasizes three Ps: People, Planet, and Profits.

Entrepreneurial Orientation

Entrepreneurial Orientation (EO): an organization's processes, practices, and decision-making styles that reflect entrepreneurial behavior.
Five Dimensions of EO: Autonomy, Competitive Aggressiveness, Innovativeness, Proactiveness, and Risk Taking.
Value of EO: helps organizations adapt to rapid changes and seize new opportunities.
Building EO: designing systems and policies that encourage EO, and aligning attitudes and behaviors with EO dimensions.

Evaluating the External Environment

The Environment: the set of external conditions and forces that an organization operates in.
General Environment: includes overall societal trends such as social trends, technological trends, demographics, and economic conditions.
Competitive Environment: consists of multiple organizations that collectively compete with one another.
Why is it important?: companies need to consider their environment when making decisions because every action creates some degree of change.
Three reasons why understanding the environment matters: it provides resources, is a source of opportunities and threats, and shapes executive decisions.

Evaluating the General Environment

PESTEL Analysis: a tool used to organize factors within the general environment and identify how they influence industries and firms.
The 6 segments of the general environment: Political, Economic, Social, Technological, Environmental, and Legal.

Evaluating the Industry

Michael Porter's 5 Forces: used to identify how much profit potential exists in an industry.
The 5 forces: Rivalry among competitors, Potential new entrants, Substitutes for the industry's offerings, Suppliers to the industry, and The industry's buyers.
Horizontal Integration: a strategy to increase market share by acquiring or merging with other companies in the same industry.
Vertical Integration: a strategy to increase efficiency by acquiring or merging with suppliers or distributors.### Industry Analysis
High levels of rivalry reduce the profit potential of an industry
- Characteristics that affect rivalry:
  - Numerous or equal-sized competitors
  - Slow industry growth
  - Undifferentiated products
  - High fixed costs
  - Exit barriers
  - Large incremental capacity additions for efficiency
  - Perishable products

Threat of Potential New Entrants

Barriers to entry:
- Economies of scale
- Capital requirements
- Access to distribution channels
- Government policy
- Differentiation
- Switching costs
- Expected retaliation
- Cost advantages independent of size

Threat of Substitutes

Substitutes are offerings that differ from industry goods and services but fill similar needs
Example: Cooking at home can be a substitute for eating at restaurants

Power of Suppliers

Suppliers provide essential inputs to firms in the industry
Examples of suppliers: Sysco (food), restaurant supply stores (equipment), employees (labor)
Forward vertical integration strategy: a supplier entering the industry to which it supplies products

Power of Buyers

Buyers purchase goods and services from industry firms
Characteristics that impact buyer power:
- Few buyers compared to firms
- Standardized or undifferentiated products
- Low switching costs
- High percentage of buyer's costs
- Credible threat to integrate backward
- Limited importance of the product to the buyer

Mapping Strategic Groups

A strategic group consists of industry competitors with similar characteristics
Importance of understanding strategic groups:
- Identifying closest rivals
- Highlighting alternative paths to success
- Revealing untapped opportunities

Resource-Based Theory

Possession of strategic resources provides a competitive advantage
Types of resources:
- Tangible resources (e.g., property, equipment, cash)
- Intangible resources (e.g., skills, reputation, culture)
Dynamic capabilities: continually updating capabilities to keep pace with environmental changes
Distinctive competence: a set of activities an organization performs especially well

Intellectual Property

Legal rights resulting from intellectual activity
Types of intellectual property:
- Patents
- Trademarks
- Copyrights
- Trade secrets
If valuable, rare, and non-substitutable, intellectual property can be a strategic resource

Value Chain

A value chain charts the path of product creation and sale
Primary activities: directly involved in creating and distributing goods and services
Secondary activities: support primary activities
Supply chain: a broader concept than a value chain; includes all activities involved in creating and distributing a product

WOT Analysis

Strengths: internal, positive factors
Weaknesses: internal, negative factors
Opportunities: external, positive factors
Threats: external, negative factors

Business-Level Strategies

Generic strategies:
- Cost leadership
- Differentiation
- Focused cost leadership
- Focused differentiation
- Best-cost strategy
- Stuck in the middle### Business-Level Strategies
Cost leadership is a business-level strategy that involves achieving efficiency to offer low prices and satisfactory quality to attract customers.
Cost leaders rely on economies of scale to achieve efficiency and often spend little on advertising, market research, or research and development.
The emphasis on efficiency makes cost leaders well-positioned to withstand price competition from rivals.
The presence of a cost leader in an industry tends to discourage new firms from entering the business because they would struggle to attract customers by matching or undercutting the cost leader's prices.

Differentiation

Differentiation is a business-level strategy that involves offering unique features to convince customers to pay a premium price.
A firm using a differentiation strategy competes based on uniqueness rather than price while seeking to attract a broad market.
Effective differentiation creates an ability to obtain premium prices from customers, enabling a firm to enjoy stronger profit margins.
Differentiation also creates barriers to entry that protect the firm and its industry from new competition.

Focused Strategies

A focused cost leadership strategy involves competing based on price to target a narrow market.
A firm using a focused cost leadership strategy charges low prices relative to other firms that compete within the target market.
A focused differentiation strategy involves offering unique features that fulfill the demands of a narrow market.
Focused strategies enable firms to develop tremendous expertise about the goods and services they offer.

Organizational Culture

Organizational culture is the beliefs, values, and behavioral norms shared by organizational members that influence the way they do their work.
An organization's culture reflects the beliefs, values, and vision of the founder(s).
Culture influences what organizational members do when confronted with a problem because of the "way things are done around here."

Organizational Culture Leadership

Leaders are instrumental in creating and changing an organization's culture through their day-to-day actions.
Leaders create and change culture through direct correspondence between their style and the organization's culture.
Role modeling is a way leaders signal acceptable and unacceptable actions.

Schein's Model of Organizational Culture

The three layers of organizational culture are:
- Artifacts and Behaviors (visible symbols, rituals, physical settings, and behaviors)
- Espoused Values (stated beliefs, philosophies, norms, and values)
- Basic Assumptions (unconscious beliefs, perceptions, and feelings deeply embedded within the organization)

Importance of Understanding Culture

Understanding culture indicates what people in the organization think is important.
Culture can be a source of competitive advantage.
Culture serves as a powerful guide for decisions and actions.

Achieving a Healthy Culture

Change starts at the top.
Consider culture when hiring.
Two-way communication is important.
Authenticity is crucial; do not fake beliefs.

Examples of Organizational Culture Statements

"We embrace change as a healthy part of growth."
"The better we treat our employees, the happier our customers."
"We believe everyone should have a life outside the office."
"Never hesitate to suggest a better way of doing things."
Disney: "Each of our companies has a unique ability to harness the imagination in a way that inspires others, improves lives across the world and brings hope, laughter and smiles to those who need it most."

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Description

Test your knowledge of strategic management concepts, including Henry Mintzberg's 5 P's, mission statements, SMART goals, and organizational strengths.