Harrison TB6-6e - Lecture notes, mandatory reading PDF

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Chapter 4 Strategic Leadership and Strategic Direction TRUE/FALSE QUESTIONS 1.

The traditional view of leaders in organizations is that they set direction, make the important decisions, and rally the followers. Answer: T

2.

One important responsibility of boards of directors is to monitor and prevent the potential for agency problems. Answer: T

3.

Agency problems occur when an agent sacrifices his or her own interests for the benefit of the organization. Answer: F

4.

Government regulation can influence corporate governance practices. Answer: T

5.

Inertia facilitates change in organizations. Answer: F

6.

Broad environmental forces influence strategic direction. Answer: T

7.

The labels a firm uses for its written statements of strategic direction are just as important as the elements they contain. Answer: F

8.

It has been suggested that the business definition question should include not only “What is our business?” but also “What was our business?” Answer: F

9.

A mission statement may contain a statement of vision. Answer: T

10.

The scope of an organization is the breadth of its activities across markets, functions, resource conversion processes, and products. Answer: T

11.

Sustainable development is defined as growth that is sustainable because there are so many available resources that they will virtually never run out. Answer: F

MULTIPLE CHOICE QUESTIONS

12.

The traditional view of leaders in organizations is that they: A. Are dictators to be followed without question B. Set direction, make the important decisions, and rally the followers C. Rise to the top of an organization just like cream on milk D. Are ineffective E. Delegate all important decisions to other managers Answer: B

13.

The primary responsibilities of CEOs include all of the following except: A. They make all the low-level operating decisions B. They design the organization’s purpose, vision, and core values C. They oversee the creation of policies, strategies, and structure D. They serve as stewards for their organizations E. They serve as a coach, teacher, and facilitator in order to facilitate organizational learning Answer: A

14.

In Collin’s (Good to Great) leadership skills hierarchy, the skill that comes right after becoming a capable individual is: A. Becoming an organizer B. Becoming an effective leader C. Becoming a team player D. Becoming a transformational leader E. Becoming a super star Answer: C

15.

A heterogeneous top management team: A. Is ineffective in most competitive settings B. Can lead to improved organizational decisions C. Makes implementing a strategy easier D. Is made up of managers with a wide variety of backgrounds, education, and experience. E. Both B and D are true. Answer: E

16.

Which of the following is the best example of an agency problem? A. A CEO makes a decision that maximizes his or her own self-interest at the expense of shareholders B. The CEO of one organization sits on the board of directors of another organization C. Both shareholders and managers express an interest in maximizing organizational profits D. A CEO decides to take a pay cut because the corporation is struggling E. A female CEO receives less salary than she should just because she is a woman Answer: A

17.

All of the following are ways to encourage top managers to act in the best interests of

the shareholders except: A. Board independence might encourage it, although the evidence is inconclusive B. Including close personal friends of the CEO on the board of directors C. Incentive compensation D. Government regulation E. Threat of a hostile takeover Answer:

B

18.

The Sarbanes-Oxley Act of 2002: A. Provides requirements regarding independence of corporate auditors B. Requires that financial records be kept for at least five years C. Requires the CEO to personally certify the corporation’s financial reports D. Was partially a response to large corporate scandals E. All of the above Answer: E

19.

Strategic direction is reflected by: A. The organization’s purpose B. A definition of the organization’s business or businesses C. The organization’s vision D. The organizational mission E. All of the above Answer: E

20.

Factors that influence strategic direction include all of the following except: A. The firm’s history B. Social trends C. Economic influences D. Competitors E. All of these factors influence strategic direction; there is no exception. Answer: E

21.

The forces in a firm that work to maintain the status quo are called: A. Strategic direction B. Value impediments C. Strategic inertia D. Social responsibility E. None of the above Answer: C

22.

Strategic inertia is stronger: A. In a firm that has been successful over a long period of time B. In a firm with flexible systems and processes C. In a firm with a weak culture D. In a firm that has had low performance over a long period of time E. When the economy is weak

Answer:

A

23.

A mission statement often contains: A. An organization’s vision B. An organization’s strengths and weaknesses C. An organization’s functional-level strategies D. An organization’s top management team membership E. All of the above Answer: A

24.

The view of top management concerning what an organization can become is the organization’s: A. Business definition B. Mission C. Vision D. Ethical dilemma E. Enterprise strategy Answer: C

25.

A business definition should contain answers to all of the following questions except: A. When should customer needs be satisfied? B. What is being satisfied? C. How are customer needs satisfied? D. Who is being satisfied? E. What are our products and services? Answer: A

26.

Values statements: A. Are sometimes incorporated into a mission statement B. Help the firm define what it stands for C. Help guide the behavior of employees D. Define what matters when making decisions E. All of the above Answer: E

27.

Ethical dilemmas: A. Are, by definition, completely unrelated to legal issues B. Only occur in companies that lack codes of ethics C. Occur when the values of different stakeholder of the organization are in conflict over a particular issue D. Are rare E. None of the above Answer: C

28.

Organizations can encourage ethical behavior by: A. Establishing systems and programs to ensure ethical compliance B. Having a CEO that reinforces ethical behavior C. Creating an “integrity program” to communicate and reinforce values

D. All of these are correct E. A and B are correct Answer: D 29.

Which of the following is not a major component of social responsibility? A. Economic responsibilities B. Legal responsibilities C. Political obligations D. Moral obligations E. Discretionary responsibilities Answer: C

30.

Sustainable development can be defined in terms of an organization’s practices with regard to all of the following except: A. Financial management B. Technology advancement C. Environmental protection D. Community development E. Advancement of society Answer: A

ESSAY QUESTIONS 31.

What are the four primary leadership responsibilities of the CEO?

Answer: First, he or she must create or design the organization’s purpose, vision, and core values. Second, he or she must oversee the creation of policies, strategies, and structure that translate purpose, vision, and core values into business decisions. Third, the CEO should create an environment for organizational learning by serving as a coach, teacher, and facilitator. Finally, CEOs and other managers must serve as stewards for their organizations in the sense that they care about the organization and the society in which it operates. 32. Daniel Goleman concluded that successful leaders exhibit five types of emotional intelligence. What are they? Can they be learned? Answer: Self-awareness is defined as the ability of a leader to understand his or her own moods and emotions as well as their impact on others. Self-regulation is the ability to regulate impulses and think before acting. Motivation describes the personal drive to achieve, optimism, and passion. Empathy is the ability to understand the emotional make-up of other people. Finally, social skill pertains to the ability to manage relationships for particular purposes. Yes, they can be learned. 33.

What is corporate governance? What are the functions of a board of directors?

Answer: Corporate governance is concerned with holding the balance between economic and social goals and between individual and firm goals. It examines the relationships among boards of directors, top managers, and various stakeholder groups, with an emphasis on the stockholders of the corporation. Of particular interest are the

responsibilities of each of these groups to each other and how those responsibilities influence behavior. The board of directors is responsible for hiring, firing, supervising, advising, and compensating top managers within the firm. Boards also typically reserve the right to approve or reject major strategic decisions such as the development of a new line of business, mergers, acquisitions, or entrance into foreign markets. The board can also provide important links to other firms through board interlocks and other types of associations 34. What are the four areas of a business definition? Why is it important to periodically review a firm’s business definition? Answer: A business definition answers the question, “What is our business?” It is answered by identifying the markets that the organization serves, that is, who is being satisfied? The firm also identifies the specific functions provided to the customers identified by the markets being served. This analysis determines what is being satisfied. The firm also identifies the resource conversion processes used to provide the functions being served to determine how customer needs are satisfied. A fourth area that may be addressed in a business definition is the identification of specific products or services provided by the organization. Many organizations begin with a very narrow business definition. Reviewing a firm’s business definition allows managers to determine the nature of the distinctive competencies the firm has developed and to make changes, if necessary, to exploit new market, resource process, or function opportunities. 35. Discuss the components of social responsibility. Why would you expect a trustworthy firm to have higher profits over the long term? Answer: Social responsibility involves economic responsibilities, legal responsibilities, moral obligations, and discretionary responsibilities. A firm that is socially responsible will be productive, profitable, and meet some of the needs of society. In doing so, the firm will act within the confines of written law. The unwritten codes, norms, and values implicit within society will also influence the firm’s actions, and the firm may assume voluntary or philanthropic responsibilities. If a firm is trustworthy, which is related to being socially responsible, it is more likely to enjoy a good reputation, a more committed effort by internal and external stakeholders. The organization can also avoid negative stakeholder outcomes such as boycotts and walkouts. These factors should lead to higher profitability in the long run.

Chapter 5 Business-Level Strategies TRUE/FALSE QUESTIONS 1.

A business-level strategy consists of the competitive approach of a single line-ofbusiness instead of the entire corporation. Answer: T

2.

Competitive tactics are concerned with how the firm intends to position itself to create value for its customers. Answer: F

3.

In general, firms create competitive advantage by offering a basic product at a premium price and/or a preferred product at a low price. Answer: F

4.

Only one firm at a time can pursue a particular business-level strategy. Answer: F

5.

Economies of scale can contribute to reduced costs per unit. Answer: T

6.

In differentiation strategies, the emphasis is on creating value through uniqueness. Answer: T

7.

A best cost strategy combines the elements of low-cost leadership and differentiation. Answer: T

8.

The industry life cycle portrays how sales volume for a class of products changes over its lifetime. Answer: T

9.

A competitive shakeout usually occurs at the beginning of the growth stage of the product life cycle. Answer: F

10.

At the maturity stage of the life cycle, revenue growth accelerates rapidly. Answer: F

11.

Exporting, licensing, and franchising are international expansion tactics. Answer: T

MULTIPLE CHOICE QUESTIONS 12.

Strategy formulation responsibilities at the business level include all of the following except: A. Establishment and communication of goals B. Identification of strengths and weaknesses C. Identification of opportunities and threats D. Management of the corporate portfolio E. Establishment of a strategic posture Answer: D

13.

Generic strategies are concerned with: A. The competitive tactics firms use to protect their competitive positions

B. How the firm intends to position itself to create value for its customers C. Selection of the business areas in which the firm will compete D. Functional strategies the firm will pursue E. None of the above Answer: B 14.

For a differentiation strategy to be considered successful: A. The organization that is pursuing the differentiation must be highly innovative B. Customers must be willing to pay more for the uniqueness of a product or service than the firm paid to create that uniqueness C. Loss of sales cannot reduce the benefits from economies of scale D. The organization must invest heavily in differentiating its products E. The organization that is pursuing differentiation must charge approximately the same price as its competitors but make a higher profit Answer: B

15.

A firm that pursues a cost leadership strategy: A. Seeks cost efficiency in a broad market setting B. Is too interested in lowering costs to bother with technological advances C. Rarely learns from experience D. Always has the lowest price E. Uses differentiation to attract customers Answer: A

16.

A strategy that is a combination of low cost leadership and differentiation is: A. Unlikely to be successful because of limited resources B. Very rare in today’s business climate C. Best cost D. Cost focus E. None of the above Answer: C

17.

Which of the following is an accurate statement about economies of scale? A. Production costs per unit are less in a large facility than in a small facility B. The more product a company makes, the lower its variable production costs C. Economies of scale are identical to throughput D. Doubling factory size typically doubles fixed costs E. Companies with economies of scale have high capacity utilization Answer: A

18.

Experience effects mean: A. An employee can easily learn to do several different jobs within a firm B. Employees learn to do jobs more efficiently with repetition C. Employees who are slow to learn new tasks will require additional training time D. The time required to complete a task will decrease as a predictable function of the number of times the task is repeated E. Both B and D are correct

Answer:

E

19.

Which of the following is an advantage of pursuing cost leadership? A. Sales always increase with increasing amounts of output B. Loss of sales does not reduce scale benefits C. The strategy easily accommodates changes in the market D. Firms invest heavily in differentiating their products E. A firm may charge the same price as its competitors but make a higher profit Answer: E

20.

All of the following are ways that firms pursue a cost leadership strategy except: A. Giving their product the most desirable and highest quality features B. Using technology to cut costs C. Fully utilizing firm production capacity D. Experience effects E. Economies of scale Answer: A

21.

The risks associated with pursuing a cost leadership strategy include all of the following except: A. Preoccupation with costs may lead a firm not to detect required product changes B. The firm’s products are likely to become targets for imitators C. Efforts to cut costs could lead to unsafe products D. Cost cutting could lead to products of very poor quality E. Large investments could cause reluctance to change Answer: B

22.

A best cost strategy is most like which of the other generic business strategies? A. Differentiation B. Differentiation focus C. Cost leadership D. Cost focus E. Differentiation combined with cost leadership Answer: E

23.

A firm that caters to a very specific segment of its market is pursuing which generic strategy? A. Differentiation B. Focus C. Cost leadership D. Best cost E. None of the above Answer: B

24.

The most important elements in a business model include all of the following except: A. Selecting a growth strategy B. Verifying that sufficient demand exists for a given product at a given

price in a particular market C. Selecting unique features and technologies to be imbedded into the products or services D. Determining how to capture a portion of the value created in terms of revenues and profits E. Identifying market segments to be targeted Answer: A 25.

Market penetration entails: A. Vertical integration combined with horizontal integration B. Modification of existing products to create new market segments C. Acquisition of an organization in the same line of business D. Forming a strategic alliance with a firm in a new business E. Increasing market share in the current business through advertising, promotions, or a stepped-up sales effort Answer: E

26.

Market development entails: A. Seeking new market segments or new applications for existing products B. Modification of existing products to create new market segments C. Acquisition of an organization in the same line of business D. Forming a strategic alliance with a firm in a new business E. Investments in resources that may increase market share in the current business Answer: A

27.

Offensive competitive tactics include: A. Threat of retaliation B. Creating barriers to imitation C. Seeking first-mover advantages D. Collaborative tactics E. Avoiding direct competition Answer: C

28.

A firm pursuing a “blue ocean” strategy: A. Will collaborate with competitors to create a stronger market position B. Will utilize a best cost generic strategy, but in a completely unique way C. Will threaten to retaliate against competitive actions D. Will erect huge barriers to competition E. Will pursue political lobbying Answer: B

29.

An organization would like to expand overseas. Its managers have considered pursing the expansion through a joint venture, but they are concerned that using a joint venture would limit the amount of profits they can make and also limit their control of the venture. Which of the following global expansion tactics should you suggest to these managers? A. Exporting

B. Transnational symbiotic venturing...