Chapter 5

Questions and Answers

What led Zuckerberg to leave Harvard to focus on TheFacebook?

The company's stellar early growth (correct)

Lack of funding opportunities

The pressure of academic obligations

A decline in user engagement

Which factor was crucial for Zuckerberg in the early development of TheFacebook?

User feedback mechanisms

Advertising partnerships

Strong networking connections (correct)

A large team of developers

Where did Zuckerberg initially move TheFacebook's headquarters?

New York City

Silicon Valley (correct)

Austin, Texas

Harvard University campus

How much initial funding did Zuckerberg secure for TheFacebook?

$500,000 Signup and view all the answers

Which notable figure was involved in the early investment of TheFacebook?

Peter Thiel Signup and view all the answers

What was a major criticism about Facebook's Beacon feature?

It tracked users' behavior on third-party websites. Signup and view all the answers

How did Facebook initially attract advertisers?

With direct customer contact not available in traditional marketing. Signup and view all the answers

Which feature introduced in 2007 allowed businesses more opportunities on Facebook?

Groups Signup and view all the answers

What demographic shift did Facebook experience with its acquisitions?

Appealed more to older users. Signup and view all the answers

Which sign indicates that Facebook may have reached a stage of market maturity?

Running out of ad space in Newsfeed. Signup and view all the answers

What concept does Horizon 3 primarily involve?

The Metaverse with AR and VR. Signup and view all the answers

What potential impact did the acquisition of Oculus have on Facebook?

It suggested an early interest in the Metaverse. Signup and view all the answers

What remains uncertain about the Metaverse for Facebook?

Its potential financial success. Signup and view all the answers

What is primarily summarized in Chapter 5?

Traditional models of strategic management Signup and view all the answers

Which of the following questions addresses the purpose of strategy?

Why do we need strategy in business? Signup and view all the answers

What are the two simplified choices that strategy ultimately revolves around?

Where to play and how to win Signup and view all the answers

Which level of strategy is distinct from corporate strategy?

Functional strategy Signup and view all the answers

What critical stage of the strategy process is introduced in the chapter?

Organizational ideology Signup and view all the answers

What term is used to describe transformational objectives as outlined by Collins & Porras?

BHAGS Signup and view all the answers

How does the chapter describe the relationship between leadership and strategy?

They often intersect but are not synonymous. Signup and view all the answers

What aspect of organizational strategy is emphasized in today's digital age?

Digital strategy is separate from organizational strategy. Signup and view all the answers

What role do non-executive boards typically play in the strategy process?

They merely approve strategic plans without involvement. Signup and view all the answers

What significant feature was introduced to Facebook between 2003 and 2006?

The Like button Signup and view all the answers

What was Mark Zuckerberg's initial motivation for creating Facebook?

To help connect people at colleges Signup and view all the answers

Which demographic did Facebook initially target for user growth?

High school students and non-US universities Signup and view all the answers

What was a major challenge in building Facebook's user base during its early years?

Creating features that were attractive yet not controversial Signup and view all the answers

What significant change occurred in Facebook's user base by the end of 2004?

They reached over 1 million users Signup and view all the answers

How did Facebook's growth trend change by 2006?

They surpassed Myspace in users Signup and view all the answers

What was a key to Facebook’s future success mentioned in the content?

Mobile version of Facebook Signup and view all the answers

What was the first major growth phase for Facebook focused on?

Building user connections Signup and view all the answers

What did Zuckerberg believe was the most important feature of Facebook?

Connecting with people that cared about you Signup and view all the answers

What major competitor did Facebook lag behind before overtaking it in 2008?

Myspace Signup and view all the answers

What was the primary focus of TheFacebook when it was initially launched?

To serve only the Harvard student community Signup and view all the answers

Which feature distinguished TheFacebook from Myspace?

Its exclusive focus on students and campuses Signup and view all the answers

What significant milestone did TheFacebook achieve within 24 hours of its launch at Harvard?

1,200 students signed up Signup and view all the answers

What prompted the closure of the Facemash application?

Poor taste and hacking of photographs Signup and view all the answers

Who collaborated with Mark Zuckerberg to develop TheFacebook?

Dustin Moskovitz and Chris Hughes Signup and view all the answers

What event indicated the taste for social applications among students?

The closing of Facemash Signup and view all the answers

What notable issue has been associated with Zuckerberg and Facebook's operations over time?

Privacy and digital ethics concerns Signup and view all the answers

What was the original purpose of Facemash before it was shut down?

Rate the attractiveness of peers Signup and view all the answers

What is the primary purpose of organizational strategy?

To achieve the organization's vision Signup and view all the answers

According to Milton Friedman, what is the sole purpose of a company?

To maximize its profits Signup and view all the answers

How does strategy provide focus within an organization?

By outlining decision-making boundaries Signup and view all the answers

What is a common misconception about the term 'strategy' in organizational contexts?

It is merely about planning company events Signup and view all the answers

What aspect of strategy does the passage highlight as essential?

Understanding the 'why', 'what', and 'how' Signup and view all the answers

What is implied about the balance of opinion regarding profit focus in organizations?

Long-term profits dominate discussions Signup and view all the answers

In the context of organizational strategy, how is 'direction' defined?

Establishing a vision to follow Signup and view all the answers

What do the terms 'why', 'what', and 'how' represent in strategic planning?

The key components of strategy Signup and view all the answers

What best describes the 'shareholder view' of the purpose of a firm?

Maximizing profits and returning rewards to shareholders Signup and view all the answers

Which concept is largely absent from the shareholder view of the firm's purpose?

Social responsibility Signup and view all the answers

What is a primary characteristic of organizational strategy as a field of study?

It is constantly evolving and adapting. Signup and view all the answers

Which of the following enhances the necessity for strategy in organizations?

Rivals such as customer expectations and mediocre services. Signup and view all the answers

How has the perception of strategy's primary purpose changed over time?

The focus has shifted from competition to collaboration. Signup and view all the answers

In what context is the necessity of strategy questioned?

In the absence of a clearly defined rival. Signup and view all the answers

Which of the following statements about organizational rivals is true?

Rivals can include concepts of excellence and resource competition. Signup and view all the answers

What foundational assumption about strategy is being challenged?

That strategy's purpose is solely to create competitive advantages. Signup and view all the answers

What was the primary focus of early management science in the early 1900s?

Enhancing worker productivity through optimization Signup and view all the answers

Which book introduced the concept of corporate strategy in 1965?

Corporate Strategy Signup and view all the answers

What significant strategy tool was introduced by Henderson in 1968?

Growth-share matrix Signup and view all the answers

What was a major intellectual contribution to the understanding of strategy in the late 1950s?

Resource-based view Signup and view all the answers

Which concept is NOT associated with the evolution of strategy in the 1960s?

Total quality management Signup and view all the answers

What characterized the 'strategy heyday' of the late 1960s?

A surge in publications on business strategy Signup and view all the answers

Which two historical works are roots of modern business strategy?

On War and The Art of War Signup and view all the answers

During the 2000 to 2010 period, what issue arose regarding contributions to strategy?

Overproduction of books and articles, many of dubious value Signup and view all the answers

Which work is considered one of the earliest formal texts on strategy?

The Art of War Signup and view all the answers

What does the Greek term 'strategos' refer to?

The art of war Signup and view all the answers

What major evolution in the understanding of strategy was introduced by Count Guibert?

Strategy includes political ends beyond military action. Signup and view all the answers

Who wrote the influential treatise 'On War'?

Carl von Clausewitz Signup and view all the answers

What does the term 'strategemata' reflect in its origin?

Military tactics and stratagems Signup and view all the answers

Which philosopher is credited with a pivotal ancient work on managing conflicts and winning battles?

Sun Tzu Signup and view all the answers

What was the primary focus of early strategy as discussed by the Greeks and Romans?

Military application Signup and view all the answers

What aspect of strategy did the Greeks and Romans primarily emphasize?

Military tactics Signup and view all the answers

How did Sun Tzu contribute to the understanding of strategy beyond military tactics?

By creating a comprehensive political strategy framework. Signup and view all the answers

What did the economic theory of business fail to incorporate during the time strategies were being developed?

Military principles Signup and view all the answers

What is one of the four main responsibilities of corporations according to the stakeholder view?

To generate shareholder wealth and reward investment risks Signup and view all the answers

Which theory assumes that managers may prioritize the interests of the organization over their self-interest?

Stewardship Theory Signup and view all the answers

How does Social Capital Theory view the role of trust in organizations?

Trust plays a critical role in enhancing a firm’s performance. Signup and view all the answers

What is a key criticism of the shareholder model as highlighted by Social Capital Theory?

It leads to a cycle of distrust among employees. Signup and view all the answers

What type of obligation involves a firm's choice to engage in philanthropy?

Discretionary obligation Signup and view all the answers

Which view is considered a progressive alternative to the shareholder view?

Stakeholder view Signup and view all the answers

What does stewardship theory promote in an organizational context?

Collectivism and trustworthiness Signup and view all the answers

In which contexts is the stakeholder view particularly accepted?

Socialist traditions and emerging markets Signup and view all the answers

Which of the following is NOT one of the responsibilities outlined by Carroll in the stakeholder view?

Environmental obligation Signup and view all the answers

What does the term 'shared value' relate to in stewardship theory?

Balancing social and environmental responsibilities with business interests Signup and view all the answers

Study Notes

Overview of Chapter 5: Core Concepts of Organizational Strategy

The chapter summarizes traditional models of strategic management while addressing their evolution in the context of the Fourth Industrial Revolution (4IR).
It reviews the history of strategy, including corporate strategy, disruptive innovation, and the concept of the "end of strategy."
Key questions include the necessity and purposes of organizational strategy, as well as what characterizes effective and ineffective strategies.

Evolution and Purpose of Strategy

Strategy is defined as choices of "where to play" and "how to win."
Successful strategy creation involves multiple levels within an organization: corporate, business unit, and functional strategies.
Organizational strategy must integrate digital awareness but is not synonymous with digital strategy alone.
The foundational stage of the strategy process involves organizational ideology encompassing purpose, vision, mission, and transformational objectives (BHAGS).

Facebook: Challenges and Commercial Evolution

Facebook faced initial criticism for features such as Newsfeed and Beacon, raising privacy concerns.
Despite challenges, Facebook's growth was fueled by its adaptability and responsiveness to user feedback, attracting advertisers through direct customer engagement.
The introduction of Groups in 2007 created new commercialization opportunities, leading to substantial annual revenue growth.

Strategic Acquisitions and User Demographics

Strategic acquisitions of Instagram and WhatsApp in the 2010s helped diversify Facebook's user base and shifted demographics towards older users.
There are signs of maturity within the platform, signaled by a plateau in user growth and a decline in year-on-year revenue.

Future Ventures: Horizon 3 and the Metaverse

Facebook is exploring the Metaverse, emphasizing augmented and virtual reality, financial technologies, and integrated record-keeping.
The company acquired Oculus in 2014, indicating early efforts towards the Metaverse, leading to a rebranding as Meta.
The success of the Metaverse remains uncertain and difficult to predict.

Historical Foundations of Business Strategy

The concept of strategy has military origins, notably in Sun Tzu's The Art of War, viewed by modern business strategists as foundational.
The Greeks introduced the term "strategy," relating to leadership and military planning, while Romans expanded the concept to include tactics for success in warfare.
French military theorists in the late 18th century broadened the definition of strategy to encompass political objectives, not solely military actions.

Significance of Early 20th Century Management

The early 1900s focused on efficiency and optimizing production systems and operations in industrial contexts, laying groundwork for management science.
Variations in strategic approaches illustrate the transition from purely military applications of strategy to its relevance in business.### Historical Foundations of Strategy
Taylor's 1911 book "The Principles of Scientific Management" emphasized efficiency as key to increasing productivity.
Alfred Sloan at General Motors prioritized metrics and efficiencies over strategic discussions, which were not common in the first half of the 1900s.

Emergence of Modern Strategy Concepts

Research from the late 1950s laid groundwork for contemporary business strategy, introducing key concepts such as:
- Resource-based view (Newman, 1951; Penrose, 1959).
- Emergent strategy (Lindblom, 1959).
- Positional strategy (Yelle, 1979).
Chandler (1962) explored the growth of multi-divisional firms post-WWII, analyzing diversification and strategic decision-making.
Igor Ansoff's 1965 book "Corporate Strategy" was pivotal, introducing the Ansoff matrix and popularizing corporate strategy terminology.

Development of Business Strategy

Henderson's contributions at the Boston Consulting Group (1960s-70s) significantly shaped business strategy.
He introduced the experience curve concept in 1966 and the growth-share matrix (BCG matrix) in 1968, categorizing products into "cash cows," "dogs," "stars," and "question marks."
These innovations marked the transition to a scientific approach in strategy formulation.

Evolution of Strategy Over Time

Strategy has evolved from military origins (e.g., Sun Tzu, Clausewitz) to a field heavily influenced by business needs.
The late 1960s saw a surge in strategic publications; however, the 2000s-2010s experienced a flood of mediocre works on strategy.
Notable contributions include Harvard Business Review's top reads on leadership and methodologies like Lean Six Sigma and Blue Ocean Strategy.

Core Concepts of Organizational Strategy

Organizational strategy is an emerging field, evolving rapidly alongside technological advancements.
Existing perspectives largely focus on competitive interactions; however, strategy is also relevant for non-profits and government entities facing different kinds of challenges.
Modern organizations increasingly value collaboration over confrontation, expanding strategy's purpose beyond mere competitive advantage.

Stakeholder Theory

The late 20th century saw the rise of stakeholder theory opposing the classic focus on shareholders.
Scholars like Carroll and Freeman argued that addressing the needs of all stakeholders enhances firm performance.
Carroll’s four corporate responsibilities:
- Economic: generating profit and shareholder returns.
- Legal: complying with laws and regulations.
- Ethical: considering community impact beyond profits.
- Discretionary: engaging in philanthropy and social responsibility.

Stewardship theory posits that individuals may prioritize collective interests over self-interest, promoting responsible management.
This theory highlights cooperation and community responsibilities within firms.
Social Capital Theory, advanced by Sumantra Ghoshal, critiques traditional views of self-interested behavior, positing that trust and goodwill can enhance performance and mitigate opportunism in organizations.

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Test your knowledge about Mark Zuckerberg and the early development of TheFacebook. Learn about the crucial factors that led to its success.