Business Approaches a Company's Management (Answer Key)

CHAPTER 1 The correct answer for each question is indicated by a 1 INCORRECT The competitive moves and business approaches a company's management are using grow the business, attract and please customers, compete successfully, conduct operations, and achieve the targeted levels of organizational performance is referred to as its: A) B) C) D) E) 2 INCORRECT . strategic offensive for becoming a market leader. business model. long-term strategic direction. mission statement. strategy. Which one of the following is not related to actions and approaches that comprise a company's strategy? A) How management intends to grow the business. How to prove to shareholders that the company's business model is B) viable. C) D) How to build a loyal clientele and out compete rivals. How to boost the company's performance. How each functional piece of the business (R&D, supply chain activities, E) production, sales and marketing, distribution, finance, and human resources) will be operated. 3 INCORRECT In committing to a particular strategy, a company's managers are in effect saying: "This is where we are headed and we have a plan for getting where we A) want to go.'' "We have a plan for being a winner in the marketplace and our extensive B) analysis of the company's situation indicates it will work." C) "This is who we are, what we do, and where we are headed." "Among all the many different business approaches and ways of D) competing we could have chosen, we have decided to employ this particular combination of competitive and operating approaches in moving the company in the intended direction, strengthening its market position and competitiveness, and boosting performance." "This is our current business model, but it will probably have to be E) modified as market conditions change." 4 INCORRECT The heart and soul of any strategy is: to identify actions and operating approaches that will validate the A) company's business model work. to identify business approaches that will produce good bottom-line B) results. the actions and moves in the marketplace that managers are taking to C) improve the company's financial performance, strengthen its long-term competitive position, and gain a competitive edge over rivals. the actions a company takes to steal substantial sales and market share D) away from rivals. pursuing competitive maneuvers that will make the company a market E) leader. 5 CORRECT Which of the following is not one of the most frequently used strategic approaches to building competitive advantage? A) Striving for a competitive edge based on bigger profit margins. Developing expertise and resource strengths that give the company B) competitive capabilities that rivals can't easily imitate or trump with capabilities of their own. Striving to be the industry's low-cost provider, thereby aiming for a costC) based competitive advantage over rivals. Focusing on a narrow market niche and winning a competitive edge by D) doing a better job than rivals of serving the special needs and tastes of buyers comprising the niche. E) 6 INCORRECT Outcompeting rivals based on differentiating features. A company's strategy and its quest for competitive advantage are tightly related because: a company's strategy determines whether it will have lower or higher A) costs than rivals and thus be at a competitive advantage or disadvantage. B) competitive advantage is essential to having a profitable business model. choosing a competitive advantage to pursue also helps a company choose C) which business model is most appropriate. competitive advantage enables a company to achieve its strategic D) objectives. a company is almost certain to have better profits and financial E) performance when its strategy produces a competitive advantage over rivals as opposed to when the strategy results in a competitive disadvantage--in short, a strategy that leads to sustainable competitive advantage is a company's most reliable means of achieving aboveaverage profitability and financial performance. 7 INCORRECT Which one of the following is not something to look for in identifying a company's strategy? Its actions to enter new geographic or product markets or exit existing A) ones and its actions to form strategic alliances and collaborative partnerships. Its actions to merge with or acquire another company in order to B) strengthen the company's business position. Its actions to capture emerging market opportunities and defend against C) external threats to the company's business prospects. D) The company's actions to validate and improve upon its business model. The actions and approaches that define how a company manages such E) functions as R&D, production, sales and marketing, and finance. 8 INCORRECT What separates a powerful strategy from a run-of-the-mill or ineffective one is: whether the strategy allows the company's business model to work as A) planned. B) whether the strategy produces good bottom-line results. management's ability to forge a series of moves, both in the marketplace C) and internally, that sets the company apart from rivals, tilts the playing field in the company's favor by giving buyers a reason to prefer its products or services, and produces a sustainable competitive advantage over rivals. the extent to which the strategy enables a company to boost its sales and D) market share. whether the strategy ends up being a substantial contributor to achieving E) the company's strategic vision. 9 INCORRECT 10 INCORRECT 11 INCORRECT Company strategies evolve because: it is a bad idea to do too much strategizing until a company has been in A) business long enough to know what strategies will work best. most managers like to develop the strategy in bits and pieces rather than B) all at once. of the ongoing need to respond to changing market conditions, advancing C) technology, the fresh moves of competitors, shifting buyer needs and preferences, emerging market opportunities, new ideas for improving the strategy, and any evidence that indicates the strategy is not working well. many managers are conservative, preferring to carefully contemplate the D) best responses to new developments and avoiding the risks associated with developing a complete strategy too quickly. a strategy does not really transition to a well-crafted stage until a E) company has been trying to execute it for a number of years and has learned what works and what doesn't. It is normal for a company's strategy to end up being: little different from management's original planned set of actions and A) business approaches since making on-the-spot changes is too risky. a combination of defensive moves to protect the company's market share B) and offensive initiatives to set the company's product offering apart from rivals. pretty much like the strategies of other industry members since all C) companies are confronting much the same market conditions and competitive pressures. a blend of proactive actions to improve the company's competitiveness D) and financial performance and as-needed reactions to unanticipated developments and fresh market conditions. a mirror image of its business model, so as to avoid impairing company E) profitability. A company's strategy can be considered "ethical": if all of its different actions and elements are legal and in compliance A) with governmental rules and regulations. so long as its actions and behaviors can pass the test of "moral scrutiny" B) and are aboveboard in the sense of not being shady or unconscionable, injurious to others, or unnecessarily harmful to the environment. only if all elements of the strategy are in accord with what is generally C) considered as being in the overall best interests of society at large. so long as religious authorities and noted ethics experts find nothing D) "wrong" in the company's actions. if it in compliance with the company's code of ethics and has been E) approved by the company's chief ethics officer. 12 INCORRECT A company's business model: A) determines whether its strategy will be ethical or not. is management's storyline for how the strategy will result in achieving B) sustainable competitive advantage. is management's storyline or rationale for how the strategy will be a C) moneymaker--absent the ability to deliver good profitability, the strategy is not viable and the survival of the business is in doubt. identifies how the company plans to outmaneuver and outcompete key D) rivals and become a market leader. sets forth the actions and approaches that it will rely on to earn the best E) profit margins in the industry. 13 CORRECT 14 INCORRECT Which of the following statements about a company's strategy is false? Normally, companies have a narrow window of strategic freedom in A) choosing the hows of strategy because all competitors are facing the same market conditions and competitive pressures and, therefore, have to cope with them using very similar strategies. A company's strategy results in achieving sustainable competitive B) advantage when an attractive number of buyers prefer its products or services over the offerings of competitors and when the basis for this preference is durable. A company's strategy is based partly on trial-and-error organizational C) learning about what has worked well and what hasn't. A company's strategy and strategic moves are only partly the result of D) proactive plotting and management design. A company's strategy is a work in progress, not a one-time management E) exercise. Comcast's strategy (as described in Illustration Capsule 1.1) does not include which one of the following? Continue to roll out high-speed Internet or broadband service to A) customers via cable modems Promote a video-on-demand service whereby digital customers with a B) set-top box could order and watch pay-per-view movies using a menu on their remote Use "voice-over-Internet-protocol" (VoIP) technology to offer C) subscribers Internet-based phone service at a fraction of the cost charged by other providers Partner with Sony, MGM and others to expand Comcast's library of D) movie offerings Seek to combat mounting competition from direct-to-home satellite TV E) providers by starting up Comcast's own satellite TV service 15 INCORRECT 16 INCORRECT Which of the following statements concerning Microsoft's business model and Red Hat's business model (as discussed in Illustration Capsule 1.2) is false? Microsoft has a proven business model while Red Hat's business model A) is unproven. Microsoft's business model involves employing a cadre of highly skilled B) programmers to develop proprietary code; keeping the source code hidden from customers/users, and locking them in to using Microsoft's proprietary software. Most of Microsoft's costs arise on the front end in developing the C) software and are thus "fixed"; the variable costs of producing and packaging the CDs provided to users are only a couple of dollars per copy—once the breakeven volume is reached, Microsoft's revenues from additional sales are almost pure profit. Red Hat relies on the collaborative efforts of volunteer programmers D) from all over the world who contribute bits and pieces of code to improve and polish the Linux system. Red Hat's business model is predicated on closely guarding its source E) code while Microsoft is a strong advocate of open or free source code. Which of the following statements about a company's strategy is true? A) Crafting an excellent strategy is more important than executing it well. Managers at all companies face three central questions in thinking B) strategically about their company's present circumstances and prospects: What's the company's present situation? Where does the company need to go from here? How should it get there? A company's strategy deals with whether the revenue-cost-profit C) economics of its business model demonstrate the viability of the business enterprise as a whole. Masterful strategies come partly (maybe mostly) by doing things in much D) the same way as the industry leader but then being better than the leader in one particular area that counts heavily with buyers. Whether a company's strategy is ethical or not does not matter a lot E) because most customers and most suppliers are relatively unconcerned whether a company they do business with engages in sleazy practices or turns a blind eye to below-board behavior on the part of its employees. 17 INCORRECT A company's strategy: is shaped partly by management analysis and choice and partly by the A) necessity of adapting and learning by doing. is fluid, representing the temporary outcome of an ongoing process that, B) on the one hand, involves reasoned and creative management efforts to craft an effective strategy and, on the other hand, involves ongoing responses to market change and constant experimentation and tinkering. stands a better chance of succeeding when it is predicated on actions, C) business approaches, and competitive moves aimed at appealing to buyers in ways that set a company apart from rivals and carving out its own market position. is revealed in part by its actions to gain sales and market share via lower D) prices, more performance features, more appealing design, better quality or customer service, wider product selection, and other competitive tactics. E) 18 INCORRECT All of the above. A winning strategy is one that: makes the company a market leader, is ethically and socially responsible, A) and maximizes profits. B) is highly profitable and boosts the company's market share. passes the profitability test, the ethics and social responsibility test, the C) customer satisfaction test, and the shareholder wealth test. fits the company's internal and external situation, builds sustainable D) competitive advantage, and boosts company performance. passes the ethical standards test, the competitive advantage test, and the E) profitability test. 19 INCORRECT 20 Crafting and executing strategy are top-priority managerial tasks because: how managers go about the tasks of crafting and executing strategy sends A) a message to shareholders and the entire investment community regarding "what it is we are trying to do and how we plan to achieve our objectives." The company is unlikely to be profitable unless senior executives have a B) clear answer to "where are we headed, how do we plan to get there, and when do we expect to arrive?" there is a compelling need for managers to proactively shape how the C) company's business will be conducted and because a strategy-focused organization is more likely to be a strong bottom-line performer. without clear guidance as to what the company's business model and D) strategy are, managerial decision-making is likely to be haphazard and inconsistent. a company cannot hope to be a market leader if all it does is respond to E) changing market conditions, new technologies, new opportunities, and threatening moves on the part of competitors. INCORRECT The most trustworthy signs of a well-managed company are: A) a strong emphasis on offensive strategies rather than defensive strategies. a strategy matched to fast-evolving market conditions and bigger profit B) margins than rivals and a steady upward trend in net income. C) D) attractive bottom-line performance and a proven business model. good strategy and good strategy execution. having a profitable business model, a willingness to change the E) company's business model whenever circumstances warrant, and having a sustainable competitive advantage. CHAPTER 2 The correct answer for each question is indicated by a 1 INCORRECT . Which one of the following is not an integral part of the managerial process of crafting and executing strategy? A) B) C) Developing a strategic vision Choosing a strategic intent Setting objectives and crafting a strategy to achieve them Evaluating performance and initiating corrective adjustments in the D) company's long-term direction, objectives, strategy, or execution in light of actual experience, changing conditions, new ideas, and new opportunities Implementing and executing the chosen strategy efficiently and E) effectively 2 INCORRECT A strategic vision for a company: involves how fast to pursue the chosen strategy and reach the targeted A) levels of performance. consists of thinking through what it will take to make the chosen strategy B) work as planned. delineates management's aspirations for the business, providing a C) panoramic view of "where we are going" and a convincing rationale for why this makes good business sense for the company--a strategic vision thus points an organization in a particular direction and charts a strategic path for it to follow in preparing for the future. spells out how the company is going to get from where it is now to where D) it want to go and when it is expected to arrive. concerns management's view of how to transition the company's business E) model from where it is now to where it needs to be. 3 INCORRECT 4 INCORRECT 5 INCORRECT Which of the following is not an important consideration in deciding to commit to one directional path versus another? Are changes underway in the market and competitive landscape acting to A) enhance or weaken the company's prospects? Where should we head in order to prove that our business model is viable B) and that our strategy is working? Will the company's present business generate sufficient growth and C) profitability in the years ahead to please shareholders? What, if any, new geographic markets and/or customer groups should the D) company get in position to serve? What are our ambitions for the company--what industry standing do we E) want the company to have? The difference between a company's mission statement and the concept of a strategic vision is that: the mission statement lays out the desire to make a profit, whereas the A) strategic vision addresses what strategy the company will employ in trying to make a profit. a mission statement deals with "where we are headed " whereas a B) strategic vision provides the critical answer to "how will we get there?" a mission deals with what a company is trying to do and a vision C) concerns what a company ought to do. a mission statement typically concerns an enterprise's present business D) scope and purpose--"who we are, what we do, and why we are here"-whereas the focus of a strategic vision is on the direction the company is headed and what its future product-customer-market-technology focus will be. a mission is about what to accomplish for shareholders whereas a E) strategic vision concerns what to accomplish for customers. Which one of the following is not a characteristic of an effectively-worded strategic vision statement (see Table 2.2, as well as the discussion on page 21)? Directional (is forward-looking;describes the strategic course that A) management has charted and the kinds of product-market-customertechnology changes that will help the company prepare for the future) Concrete and unambiguous (leaves no doubt as to what the company is B) trying to accomplish for shareholders) C) D) Graphic (paints a clear picture) Easy to communicate (ideally, explainable in 10 minutes) Focused and flexible (specific enough to provide managers with E) guidance in making decisions and allocating resources but stops short of a once-and-for-all-time statement because the strategic path may need to be changed as as market-customer-technology circumstances change) 6 INCORRECT According to both the text discussion and the summary in Table 2.3, which of the following is not a common shortcoming of company vision statements? A) Incomplete or vague—short on specifics Too reliant on superlatives (best, most successful, recognized leader, B) global or worldwide leader, first choice of buyers) Too broad—so umbrella-like and all-inclusive that the company could C) head in most any direction, pursue most any opportunity, or enter most any business Lacking in analysis—based more on managerial emotion and excessive D) ambition than on what is realistically achievable Not distinctive—provides no unique company identity; could apply to E) companies in any of several industries (or at least several rivals operating in the same industry or market arena) 7 INCORRECT Which of the following statements about a company's values is false? A company's values are the beliefs, traits, and behavioral norms that A) company personnel are expected to display in conducting the company's business and pursuing its strategic vision and strategy. In companies with long-standing values that are deeply entrenched in the B) corporate culture, senior managers are careful to craft a vision, mission, and strategy that match established values, and they reiterate how the value-based behavioral norms contribute to the company's business success. If the company changes to a different vision or strategy, executives take care to explain how and why the core values continue to be relevant. A company's core values can relate to such things as fair treatment, C) integrity, ethical behavior, the emphasis the company will place on innovativeness or top-notch quality or superior customer service, and the company's beliefs in high ethical standards, socially responsible behavior, and giving back to the community.