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Chapter 1
The Concept of Strategy
- Strategy today is essentially a detailed plan which every member of the organization must follow to ensure success.
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- T
*b. F
- Strategy is in essence a long-term plan for an organisation to achieve its long-term objectives.
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*a. T
- F
- For most firms, although good luck may play a part, success is more likely to be a result of a soundly grounded and well executed strategy.
@Pages and References: Pages 10-12
*a. T
- F
- Sound strategy and implementation largely determine the probability and extent of the success of a firm.
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*a. T
- F
- A sound strategy relies on four factors: simple and consistent goals; sound understanding of the competitive environment; objective appraisal of resources; and effective implementation of strategic decisions.
@Pages and References: Pages 10-12
- T
*b. F
- Usually, business success has been proved to rely in the end on superior resources.
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- T
*b. F
- From the military arena, tactics are about actions and techniques for winning battles, whereas strategy is about winning the war.
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*a. T
- F
- Strategic decisions are likely to significantly affect the organisation as a whole and involve major resource commitment.
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*a. T
- F
- Business strategy has largely evolved from the theories put forward by academics.
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- T
*b. F
- Strategy in the 1950’s and 1960’s was dominated by top-down corporate planning and so-called scientific management.
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*a. T
- F
- In the 1970’s and 1980’s, strategy evolved to be viewed more in terms of competition, competitive advantage, market share and profit.
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*a. T
- F
- Strategy today has been forced to evolve to cope with an increasingly fast-paced and volatile environment, making inflexible long-term plans redundant.
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*a. T
- F
- In summary, strategy has evolved from “strategy as a detailed plan” to become “strategy as direction” in the early 21st century.
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*a. T
- F
- Corporate strategy is also called business strategy, or competitive strategy.
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- T
*b. F
- To determine a large firm’s strategy, it’s sufficient to read the annual corporate report.
@Pages and References: Pages 17-19
- T
*b. F
- Much can be learned about a firm’s actual strategy by looking at where it invests most money, and what products, services and technologies it is working on.
@Pages and References: Pages 17-19
*a. T
- F
- Some observers have noticed that there’s only a weak link between a firm’s intended or stated strategy, and its actual or realised strategy.
@Pages and References: Pages 22-24
*a. T
- F
- The essential purpose of a commercial firm can be seen as creating value for customers – and then to appropriate a portion of this value for the firm.
@Pages and References: Pages 26-28
*a. T
- F
- Company law throughout the developed, industrialised world obliges firms to primarily focus on profit for shareholders.
@Pages and References: Pages 26-28
- T
*b. F
- Paradoxically, the most consistently profitable companies are those whose primary goals are not stated in terms of profits.
@Pages and References: Pages 31-33
*a. T
- F
- Strategy is fundamentally about:
@Pages and References: Page 2
- Being better than rivals
*b. Success in achieving long-term goals
- Satisfying all stakeholders
- Being an excellent “corporate citizen”
- Success is fundamentally linked to:
@Pages and References: Pages 10-12
- A soundly formulated strategy and luck
- An effectively formulated strategy and a strong awareness of the rivals’ strengths
- A clear understanding of the environment and strong political skills
*d. A soundly formulated and effectively implemented strategy
- From the three stories describing key attributes of strategy at the beginning of the chapter, four factors stand out:
@Pages and References: Pages 10-12
- Goals, environment, appraisal of resources, and social and cultural implications
- Goals, internal and external analysis of the environment, effective implementation, and awareness of rivals’ strengths
*c. Consistent goals, understanding the environment, objective appraisal of resources, and effective implementation
- Goals, environment, irreversibility of decision, and effective implementation
- Strategic goals should be:
@Pages and References: Pages 10-12
- Simple
- Consistent
- Long term
*d. All of the above
- Appraising a firm’s resources consists of:
@Pages and References: Pages 10-12
- Protecting the firm from its weaknesses and trying to reduce or eliminate them
- Leveraging the firm’s strengths to increase market share and profit
*c. Being very realistic yet creative about what can be achieved with what you’ve got
- Completing 360-degree analytical evaluations of top managers’ strengths and weaknesses
- The success of an organization in general, depends on the following:
@Pages and References: Pages 10-12
- Being consistently focused on an achievable goal
- Having a strong and in-depth knowledge of the competitive environment
- Realistic appraisal of its own strengths and weaknesses
*d. All of the above plus the ability to implement strategy with commitment, consistency and determination
- The textbook limits attention to:
@Pages and References: Pages 34-35
- The global business environment
*b. Profit-making companies in market economies
- Both public and private sector firms in English-speaking countries
- Profit making companies above a certain size
- The approach taken in the textbook primarily assumes that:
@Pages and References: Pages 34-35
- CSR is taking over from generating profits as the primary corporate goal
- Top managers determine the success of a firm by concentrating on short-term profits
- The “Anglo-Saxon” model of shareholder capitalism is the right one
*d. Profit making firms are seeking to maximise profits for the owners over the long term
- The fundamental role of strategy is to:
@Pages and References: Pages 35-36
- Determine how the firm will make a profit in its industry environment:
- Determine how the firm will deploy its resources to satisfy its short-term financial goals
*c. Determine how the firm will deploy its resources to satisfy its long-term goals, given the conditions in the competitive environment
- Determine how the firm can organize its own activities and achieve dominance
- If a firm’s strategy ensures it is consistent with both its internal and external environment, it achieves:
@Pages and References: Pages 35-36
*a. Strategic fit
- Strategic adjustment
- Environment consistency
- Political and social fit
- The notion of “strategic fit”:
@Pages and References: Pages 35-36
- Does not mean much, and is a common statement made in strategic literature
- Implies coherence between resources, capabilities, structure and systems
- Expresses how well a firm’s strategy fits its internal and external environment
*d. Answers b and c
- Modern strategy applied to the business world shares with military strategy:
@Pages and References: Pages 13-16
- Only linguistic roots
- Some authors such as Sun Tzu and his “Art of War”
- The existence of resources, conflict, and battle between players
*d. Decisions of significance to overall success, and major resource commitment
- Strategy and tactics:
@Pages and References: Pages 13-16
- Are interchangeable terms
*b. Relate to achievement of overall long-term objectives, and multiple short-term objectives, respectively
- Can be seen as what top managers do and what lower level employees do, respectively
- None of the above
- Modern business strategy has evolved across time due to:
@Pages and References: Pages 13-16
- Are interchangeable terms
- Relate to achievement of overall long-term objectives, and multiple short-term objectives, respectively
*c. Can be seen as what top managers do and what lower level employees do, respectively
- None of the above
- Modern business strategy has evolved across time due to:
@Pages and References: Pages 13-16
*a. Business school academics developing new theories, which are taught to new graduates
- Earlier methods have simply been seen as old-fashioned
- Earlier thinking was repeatedly demonstrated to be inadequate in coping with the evolving more turbulent environment
- Computerisation and the internet age meaning that we know more about what’s really going on nowadays
- By the 1980s, thinking on strategy had shifted to:
@Pages and References: Pages 13-16
- An emphasis on competition, market share and industry profitability
- The development of the “PIMS” at the Strategic Planning Institute
*c. Research on the resource and capability approach
- The management of political, economic and technological influences
- The shift from Corporate Planning to Strategy-Making implies:
@Pages and References: Pages 13-16
- From the sources of profit outside the firm to the sources of profit within the firm
- To the Resource-based view of the firm
*c. Both a and b
- From the structure-based approach to the value-added perspective
- In the military field, we generally make the following distinction between strategy and tactics:
@Pages and References: Pages 13-16
- Tactics are the overall plan whereas strategy focuses on specific actions
*b. Tactics are a scheme of specific everyday actions, practices and techniques whereas strategy relates to the top-level plan
- Tactics encompass specific political actions within the firm whereas strategy is the overall plan for deploying resources to establish a favorable position
- Tactics are the overall plan whereas strategy is concerned with the maneuvers to win battles
- A contemporary phenomenon is known as “winner-take-all markets”. This concept is exemplified by:
@Pages and References: Pages 13-16
- Enron and WorldCom
- E-Trade and WebVan
*c. Microsoft (PC software) and Intel (PC core processors)
- Peapod in grocery retailing
- The simplest useful definition of business strategy would be:
@Pages and References: Pages 17
- A sort of plan
- A conceptual construct relating to the juxtaposition of corporate richness versus the snakes and ladders of a kaleidoscopic environment
- How to win the corporate wars; price wars, technology races, develop killer applications
*d. The means by which organisations achieve their long-term objectives
- Corporate and Business strategy differ mainly in that:
@Pages and References: Pages 17
- Corporate Strategy has a broader scope, including decisions about which industries to operate in
- Business strategy is subordinate to corporate strategy
*c. Both a and b
- There is no real difference; they are the same thing
- Business strategy can be summarized as:
@Pages and References: Pages 17
*a. The means by which organisations achieve their long-term objectives
- The means by which individuals achieve their objectives
- The formal detailed plans used by organizations to guide their actions
- The will of top managers to change their organization
- A good starting-point to identify a large firm’s strategy is:
@Pages and References: Pages 17
*a. To read the annual corporate report
- To call the CEO and ask him/her what the strategy is
- To look on the company’s website
- To search the internet to find out if someone else has already done the work
- In addition to just reading published information, to identify a firm’s strategy you could
@Pages and References: Pages 17
- Identify where the company is making most of its investments
- Identify where the company is doing most of its business
- Find out what new products and services the company is putting most effort into
*d. All of the above
- The 1950’s/60’s style of Corporate Planning assumed that:
@Pages and References: Pages 17
- There would be almost no difference between the intended strategy and the realised strategy
- The business world is essentially a predictable environment
- There was unlikely to be anything unexpected to occur of sufficient importance to disrupt the strategic plan
*d. All of the above
- The shift in strategy from a plan to a direction leads [email protected]
@Pages and References: Pages 17
- A downgrade its role in management
*b. An overt reliance on flexibility and responsiveness
- A need for top managers’ training
- Less work for top managers
- As the environment becomes more turbulent, or unpredictable:
@Pages and References: Pages 17
- Strategy appears to not be very useful
*b. Strategy remains just as vital a tool to navigate the firm through “stormy seas”
- Strategy is put into the hands of external consultants
- Strategy becomes an “impossible exercise”
- The difference between intended and realised strategy is:
@Pages and References: Pages 17
*a. So great that arguably only 30% of intended strategy becomes realised
- Greater in unsuccessful companies
- Unimportant, because no-one ever expects the intended strategy to seriously be implemented
- Only a very small difference, in general
- Two basic questions concern corporate and business strategy:
@Pages and References: Pages 17
*a. Where and how to compete?
- How and when to compete?
- What are the best arenas and structures to compete?
- When and where to compete?
- If a firm has no formal, intended strategy:
@Pages and References: Pages 17
- The firm will soon go out of business
*b. A strategy of sorts will exist; an emergent strategy
- It cannot be a large company, or there would be a corporate report detailing the intended strategy
- There are no such companies
- The role of strategy today is claimed to be:
@Pages and References: Pages 17
- A unifying role underpinning all consequent decisions
- A means by which top management can communicate and gain commitment to a sense of direction
- A means by which top management can inspire and motivate the workforce
*d. All of the above
- Business strategy defines:
@Pages and References: Pages 17
- The way a firm competes in a particular industry or market]
- How a firm gains a competitive advantage over its rivals within a specific industry or market
*c. Both a and b
- Neither a nor b
- Profit-making firms are about creating value:
@Pages and References: Pages 17
- This value is simply the profit generated at the end of the year
- They must create value for several stakeholder groups if this is to result in sustainable long-term profit generation
- Value to some stakeholders eg customers, may be difficult to quantify in money terms
*d. Both c and b
- Maximising shareholder value:
@Pages and References: Pages 17
- Is the sole objective of all profit-making companies in every country
- Is the primary legal obligation only in the English-speaking countries
- Is not the only legal obligation in central & southern Europe, and in Asia. Firms here are legally obliged to take account of a broad range of stakeholder interests
*d. Both b and c
- A strategy can be described as:
@Pages and References: Pages 17
*a. Intended, emergent, or realized
- Intended, emergent, or sustained
- Emergent, critical, or sustained
- Realized, emergent, failed
- In practice, strategy making is:
@Pages and References: Pages 17
*a. A combination of centrally-driven rational design and decentralized adaptation
- A combination of luck, organizational politics, and centrally-driven planning
- The expression of political games among top managers
- None of the above
- In regard to strategy making, most firms are likely to exhibit:
@Pages and References: Pages 17
- A combination of design and emergence
- A process labeled as “planned emergence”
- An interaction between strategic design, through formal top-level processes, and strategic enactment through decisions made by all management levels of the organization
*d. All of the above
- The balance between designed strategy and emergent strategy depends mostly on:
@Pages and References: Pages 17
- The type of organizational structure
*b. The stability and predictability of a firm’s environment
- Top managers’ personalities
- Middle managers’ autonomy
- Corporate Social Responsibility:
@Pages and References: Pages 17
- Fits more readily with the central/southern Europe and Asian legal framework of broader stakeholder obligations
- Is not seen as an imperative requirement by all influential thinkers
- Is becoming more important for all firms to take account of due to the threat of adverse publicity
*d. All of the above
- The underlying purpose of studying strategy is:
@Pages and References: Pages 36-37
- To reach quick-fix decisions
- To better understand the issues facing top managers
- To work out how to best create value in the future
*d. Both b and c
Chapter 5
Business Strategies in Different Industry and Cultural Contexts
- Change in industries is driven chiefly by the forces of technology, market demand and economics.
@Pages and References: Page 210
*a. T
- F
- Massive and unpredictable changes occur in some industries, but less so in others.
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*a. T
- F
- Firms are continually trying to erode the competitive advantage of rivals, and to build and maintain their own competitive advantage.
@Pages and References: Page 210
*a. T
- F
- The industry life cycle comprises 4 stages: introduction, growth, maturity, decline – so is indistinguishable from the product life cycle.
@Pages and References: Pages 214-221
- T
*b. F
- Two main factors drive industry evolution: demand growth and the production and diffusion of knowledge.
@Pages and References: Pages 214-221
*a. T
- F
- The introduction to maturity phases of the industry life cycle curve are characteristically S-shaped.
@Pages and References: Page 215
*a. T
- F
- The industry life cycle consists of four stages: 1) Introductory, 2) Growth, 3) Plateau, and 4) Rejuvenation.
@Pages and References: Pages 214-221
- T
*b. F
- Knowledge influences the characteristics of an industry in different ways depending on the stage of the industry life cycle.
@Pages and References: Pages 215-216
*a. T
- F
- The duration of the industry life cycle varies greatly from one industry to another.
@Pages and References: Pages 214-220
*a. T
- F
- Over time, industry life cycles become longer and longer.
@Pages and References: Pages 214-220
- T
*b. F
- A shift from radical to incremental innovation takes place when an industry coalesces around a leading technology and design.
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*a. T
- F
- A dominant design is one which is the most noticeable, or receives the most publicity.
@Pages and References: Pages 216-220
- T
*b. F
- Technical standards have the most dramatic effect in markets exhibiting network effects – that is users not adopting the standard risk isolation.
@Pages and References: Pages 216-220
*a. T
- F
- Emphasis often shifts from product innovation to process innovation, once a dominant design emerges.
@Pages and References: Pages 216-220
*a. T
- F
- It’s a good idea to reduce product innovation as soon as possible so as to precipitate a shift to the growth phase.
@Pages and References: Pages 221-228
- T
*b. F
- The terms “public sector” and “not-for-profit” sector are different terms for the same thing.
@Pages and References: Pages 228-236
- T
*b. F
- A not-for-profit organisation is legally obliged not to make any profit.
@Pages and References: Pages 228-236
- T
*b. F
- Some public sector organisations provide services which the private sector could not possibly provide.
@Pages and References: Pages 228-236
*a. T
- F
- Public sector organisations are not driven by the need to return a profit for shareholders, and are therefore less accountable than private sector firms.
@Pages and References: Pages 228-236
- T
*b. F
- In scenario planning, the scenarios constructed are often somewhat unrealistic.
@Pages and References: Pages 238-241
- T
*b. F
- Change in the industry environment faced by a firm is:
@Pages and References: Page 210
- Massive and unpredictable
- Gradual and predictable
*c. Could be either answer a or b, depending on the industry and the prevailing conditions
- Easier for large firms to cope with
- Change in an industry is the result of:
@Pages and References: Page 210
- The forces of technology, consumer preferences, and economic growth
*b. Both external forces and the incumbents’ competitive strategies
- The effect of the “5 forces” model of competition
- Economic and psychological factors
- Regarding change, a firm really needs to:
@Pages and References: Page 210
- Understand and predict change
- Understand, predict, and manage change
*c. Understand, predict, manage change, and adapt its strategy to it
- Predict and manage change
- The industry life cycle:
@Pages and References: Pages 214-220
- Is an extension of the concept of the product life cycle
- Uses the same stages as the product life cycle
- Nearly always lasts much longer than a typical product life cycle in that industry
*d. All of the above
- The text claims that two factors are fundamental to the industry life cycle. One of these is:
@Pages and References: Pages 214-220
*a. The production and diffusion of knowledge
- Industrial production and the diffusion of knowledge
- Demand during the growth phase
- Demand for growth in the diffusion of knowledge
- The decline phase of the industry life cycle is caused by:
@Pages and References: Pages 214-220
*a. The emergence of a radically better substitute product, representing a new industry
- Tired old firms running out of new ideas
- Existing firms leaving the industry to move to a more profitable one
- Excessive market saturation
- A new industry life cycle begins when:
@Pages and References: Pages 214-220
- A very large gap in the market emerges
- Another industry dies
*c. New knowledge manifests itself in the guise of a sufficiently radical product innovation
- There are sufficient entrepreneurs
- A dominant design is:
@Pages and References: Pages 214-220
- One which has won the most industrial design awards
*b. An emergent de facto industry standard broad product format
- The one advertised most strongly by the market leader
- The latest new product which gains the most media attention
- A technical standard:
@Pages and References: Pages 214-220
- Only occurs in computing when there is a network effect
- Emerges when there are interconnectivity and interface compatibility issues
- Can emerge for safety and other reasons from standards bodies eg ISO
*d. Answers b and c
- The different stages of the industry life cycles are characterised by:
@Pages and References: Pages 214-220
*a. The evolution of the industry growth rate over time
- The evolution of the competition in the industry
- The evolution of a firm’s market share
- None of the above
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