Deck 1: The Strategy-Making Process

Question 1

The task of analyzing the organization's external and internal environment and then selecting appropriate strategies is known as strategy implementation.

Answer 1

False

Question 2

The CEO is a company's principal general manager.

Answer 2

True

Question 3

Corporate-level managers, and particularly the CEO, can be viewed as the agents of the shareholders.

Answer 3

True

Question 4

Superior performance is typically thought of in terms of one company's profitability relative to that of other companies in the same or a similar kind of business or industry.

Question 5

Functional managers bear responsibility for the overall performance of the company or one of its major self-contained subunits or divisions.

Question 6

A business unit is a self-contained division (with its own functions - for example, finance, purchasing, production, and marketing departments) that provides a product or service for a particular market.

Question 7

General managers bear responsibility for specific departments within the company.

Question 8

If a company's strategy does result in superior performance, it is said to have a competitive advantage.

Question 9

A company is said to have a sustained competitive advantage when it is able to maintain above-average profitability for at least two quarters.

Question 10

Strategy formulation involves putting the strategies (or plan) into action.

Question 11

Corporate-level managers provide a link between the people who oversee the strategic development of a firm and those who own it (the shareholders).

Question 12

Capital means the sum of money invested in the company, that is, stockholders' equity plus debt owed to creditors.

Question 13

The formal strategic planning process has four main steps.

Question 14

The more efficient a company is, the higher are its profitability and return on invested capital.

Question 15

A multi-divisional company is a company that competes in several different businesses and has created a separate, self-contained division to manage each of them.

Question 16

A company is said to have a competitive advantage over its rivals when its profitability is greater than the average profitability for all firms in its industry.

Question 17

The first component of the strategic management process is crafting the organization's mission statement, which provides the framework or context within which strategies are formulated.

Question 18

Managers are the lynch pin in the strategy-making process.

Question 19

The corporate-level of management consists of the chief executive officer (CEO), other senior executives, the board of directors, and corporate staff.

Question 20

A strategy can be defined as a set of related actions that managers take to increase their company's performance relative to rivals.

Question 21

According to Mintzberg's model, a realized strategy is the product of whatever planned strategies are actually put into action (the company's deliberate strategies) and of any unplanned, or emergent strategies.

Question 22

The third component of the strategic management planning process, serves to pinpoint the strengths and weaknesses of the organization.

Question 23

Managers compare and contrast the various alternative possible strategies against each other with respect to their ability to achieve a competitive advantage.

Question 24

Action taken by lower-level managers who, on their own initiative, formulate new strategies and work to persuade top-level managers to alter the strategic priorities of a company is considered a business-level strategy.

Question 25

Critics of formal planning systems argue that we live in a world in which uncertainty, complexity, and ambiguity dominate, and in which small chance events can have a large and unpredictable impact on outcomes.

Question 26

A global strategy addresses how to expand operations outside the home country to grow and prosper in a world where competitive advantage is determined at a global level.

Question 27

Analyzing the industry environment requires an assessment of the competitive structure of the company's industry, including the competitive position of the company and its major rivals.

Question 28

A mission statement has five main components.

Question 29

The comparison of strategy, weaknesses, operations, and threats is normally referred to as a SWOT analysis.

Question 30

A criticism of the rational planning process model of strategy is that too much importance is attached to the role of top management, and particularly the CEO.

Question 31

The central purpose of a SWOT analysis is to identify strategies which create a company-specific business model that best aligns or matches the company's resources and capabilities to its environment.

Question 32

Some organizations use an annual strategic planning process as input into the budgetary process for the coming year.

Question 33

Scenario planning involves formulating plans that are based upon "what if" scenarios about the future.

Question 34

The essential purpose of the external analysis is to identify strategic opportunities and threats in the organization's operating environment that will affect how it pursues its mission.

Question 35

Strategy implementation involves taking actions at the functional, business and corporate level to execute a strategic plan.

Question 36

The Internet has been around since the 1970s, but prior to the early 1990s, was a drab place, lacking the color, content, and richness of today's environment.

Question 37

Mark Andreesen developed the first browser, known as Mosaic.

Question 38

The feedback loop suggests that strategic planning is ongoing; it never ends.

Question 39

Devil's advocacy is a technique in which three members of a decision-making group acts as the devil's advocate, bringing out all the considerations that might make the proposal unacceptable.

Question 40

An emergent strategy is formulated through a top-down approach.

Question 41

__________ occurs when strategic plans are formulated in a vacuum by top managers who have little understanding or appreciation of current operating realities.

A) Reasoning by analogy
B) Strategic fit
C) Planning under uncertainty
D) Ivory tower planning
E) Cognitive bias

Question 42

Scenario-based planning is a technique for coping with the problem of

A) strategic fit
B) planning equilibrium.
C) bottom-up planning.
D) uncertainty.
E) cognitive bias.

Question 43

Betsy Holden is the head of Kraft Foods, a division of the Philip Morris Company. Which of the following is not likely to be one of Ms. Holden's responsibilities?

A) Turning corporate-level strategy into action
B) Supervising functional-level managers
C) Deciding how to compete in the foods industry
D) Defining Philip Morris' mission
E) Developing a business-level strategy

Question 44

Emergent strategies

A) are often a result of unplanned action taken in response to unforeseen circumstances.
B) are the result of rational planning.
C) are the product of intended strategies
D) always begin at the top level of an organization.
E) lead to deliberate strategies.

Question 45

When considering emergent strategies, it is important for a firm's managers to

A) ensure that the chosen strategies are the result of deliberate plans.
B) ignore strategies that are not the result of a formal planning process.
C) develop the emergent strategies themselves.
D) substitute emergent strategies for formal plans whenever possible.
E) assess whether the emergent strategy fits the company's needs and capabilities.

Question 46

The first component of the strategic management process is

A) deciding on a fit between the organization's strengths and weaknesses, and the environments opportunities and threats.
B) analyzing the macro-environment.
C) analyzing the industry environment.
D) determining the firm's strengths and weaknesses.
E) crafting the organization's mission statement, which provides the framework or context within which strategies are formulated.

Question 47

A mission statement has ____________ main components

A) three
B) five
C) two
D) four
E) six

Question 48

Aaron planned to cut prices at his bicycle shop, but when a competing shop began to offer free repairs, Aaron decided to copy them. Aaron's new strategy (offer free repairs) is an example of a(n)

A) mistake.
B) intended strategy
C) deliberate strategy.
D) emergent strategy
E) unrealized strategy.

Question 49

Vice President James E. Small is responsible for executing decisions about human resources. Mr. Small is

A) a functional manager
B) both a corporate- and business-level general manager.
C) a business-level general manager.
D) a corporate-level general manager
E) a corporate-level, business-level, and functional manager.

Question 50

Strategy formulation refers to the

A) task of analyzing the organization's external and internal environment and then selecting an appropriate strategy.
B) process by which strategies are put into action.
C) top-down planning process that gives rise to the implementation of emergent strategies.
D) task of analyzing an organization's external and internal environment and then selecting an appropriate strategy.
E) process of choosing a realized strategy.

Question 51

Which of the following is the organization's principal general manager?

A) Board of Directors
B) Division head
C) CEO
D) CFO
E) Controller

Question 52

The comparison of strengths, weaknesses, opportunities, and threats is normally referred to as a/an

A) business-level strategy
B) global strategy
C) SWOT analysis.
D) emergent strategy
E) autonomous action

Question 53

The second component of the strategic management process is

A) an analysis of the organizations internal environment
B) development of the mission statement
C) a statement of the vision for the organization
D) an analysis of the organization's external environment
E) a statement of the key values of the organization

Question 54

Within a diversified company, the responsibilities of corporate-level strategic managers include

A) translating the corporate mission statement into concrete strategies for individual business units.
B) closely supervising the formulation of strategies at the functional level that support the company's business- and corporate-level strategies.
C) allocating resources to functions within business units.
D) identifying and establishing relationships with supplier firms.
E) overseeing the development of strategies for the total organization and allocating resources among its different businesses.

Question 55

The scenario approach to strategic planning involves

A) using computers to build virtual worlds for top-level managers.
B) honing in on a single prediction of future demand conditions using an iterative planning process.
C) functional managers setting key corporate objectives.
D) formulating plans that are based upon "what if" scenarios about the future.
E) making planning the exclusive domain of top-level managers.

Question 56

_________ enables a firm to evaluate the effectiveness of its strategic choices.

A) Strategic intent
B) The feedback loop
C) Internal analysis
D) External analysis
E) SWOT

Question 57

According to Mintzberg, emergent strategies are

A) most useful when the future is certain.
B) less likely to be successful than other types of strategies.
C) usually developed by the firm's CEO and top managers.
D) exactly the same as deliberate strategies.
E) often successful and may be more appropriate than intended strategies.

Question 58

A competitive advantage is considered to be a sustained competitive advantage when

A) the firm is able to spread the advantage to all of its business units.
B) it is able to maintain above-average profitability for a number of years
C) the advantage is very large.
D) the advantage was gained at a low cost.
E) the managers who developed the advantage are still employed at the firm.

Question 59

Which of the following is not considered a part of corporate-level management?

A) Head of R&D
B) The Board of Directors
C) Senior executives
D) The CEO
E) All of these are considered part of corporate-level management.

Question 60

Functional managers

A) have no strategic role in the organization.
B) look at the overall picture of a corporation.
C) are responsible for the specific business functions or operations that constitute a company or one of its divisions
D) formulate generic strategies.
E) execute business-level decisions.

Question 61

Identify the levels of strategic managers and discuss their role in the strategic management process.

Question 62

The ___________ of a company refers to some desired future state.

A) vision
B) values
C) goals
D) mission statement
E) stakeholders

Question 63

Jeffrey Pfeffer believes that a manager's political power comes from his or her control over

A) employee's paychecks.
B) the firm's strategic vision.
C) the company's website.
D) internal communication channels.
E) organizational resources.

Question 64

Effective _________________ develop a network of formal and informal sources who keep them well informed about what is going on within their company

A) functional managers
B) divisional managers
C) strategic leaders
D) business-level managers
E) none of the above

Question 65

Discuss the elements of the external operating environment, including the industry environment, the national environment, and macro-environment.

Question 66

Feelings of personal responsibility for a project are most likely to lead to

A) prior hypothesis biases.
B) group-think
C) reasoning by analogy.
D) representativeness.
E) escalating commitment

Question 67

Which of the following cognitive biases occurs when decision makers commit even more resources if they receive feedback that the project is failing?

A) Prior hypothesis bias
B) Escalating commitment
C) Illusion of control
D) Reasoning by analogy
E) Representativeness

Question 68

Strong and effective leaders

A) stay well informed by using formal information channels.
B) do not get involved in strategy formulation.
C) maintain control over most decisions.
D) understand the feelings and viewpoints of subordinates and take those into account when making decisions.
E) delegate key decisions.

Question 69

Edward Wrapp's ideas about the astuteness of political power suggest that successful strategic managers

A) publicly commit themselves to bold strategic agendas.
B) are unwilling to "live with" less than total acceptance of their programs.
C) maintain tight control over as many decisions as possible.
D) often play the power game with skill and attempt to build consensus for their ideas rather than use their authority to force ideas through; they act as members or democratic leaders of a coalition rather than as dictators.
E) recognize the futility of pursuing intended strategies.

Question 70

Which of the following is not true with regard to individuals with emotional intelligence?

A) They are aware of their own limitations.
B) They make decisions by relying on their emotions.
C) They think before acting.
D) They get along well with others.
E) They are passionate in pursuing their goals.

Question 71

Devil's advocacy

A) involves one group member being responsible for questioning the assumptions of a plan.
B) is vulnerable to the group-think phenomenon.
C) results in unproductive conflict.
D) is simpler than the expert approach.
E) results in a final plan that is a combination of a plan and a counterplan.

Question 72

Which of the following cognitive biases refers to the fact that decision makers who have strong prior beliefs about the relationship between two variables tend to make decisions on the basis of these beliefs, even when presented with evidence that their beliefs are wrong?

A) Escalating commitment
B) Reasoning by analogy
C) Illusion of control
D) Prior hypotheses bias
E) Representativeness

Question 73

Which of the following is not a cognitive bias?

A) Ivory tower thinking
B) Reasoning by analogy
C) Escalating commitment
D) Representativeness
E) Illusion of control

Question 74

One important way in which managers can make better use of their knowledge and information is to understand and manage their _____________ during the course of decision-making

A) dialectic inquiry
B) illusion of control
C) commitment
D) emotions
E) use of power

Question 75

Explain the formal strategic planning process, naming each step in the process, and describing the specific activities included in each step and the relationship between the steps.

Question 76

Describe at least three of the cognitive biases that individual decision makers experience. Then, describe a real or hypothetical situation for each of the three biases, explaining how the bias was evident in the situation.

Question 77

_________________ is rooted in the tendency to generalize from a small sample or even a single vivid anecdote

A) Prior Hypothesis Bias
B) Reasoning by Analogy
C) Illusion of Control
D) Representativeness
E) Devil's Advocacy

Question 78

Devil's advocacy, dialectic inquiry, and the outside view are techniques for enhancing the effectiveness of ______________________.

A) the willingness to delegate responsibilities.
B) emotional intelligence.
C) strategic decision-making.
D) the strategic direction of the organization.
E) none of the above.

Question 79

Successful strategic planning

A) encompasses managers at all levels.
B) should be done by business and functional managers.
C) should be decentralized.
D) should use corporate-level planners as facilitators.
E) requires all of the above.

Question 80

Describe at least three characteristics of strong strategic leaders. Explain how each of the three characteristics would help motivate and lead an organization's personnel.