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Essentials of Strategic Management The Quest for Competitive Advantage John Gamble 6th Edition-Testt Bank
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Chapter 2 Strategy Formulation, Execution, and Governance
1) Which one of the following is not one of the five stages of an ongoing, continuous strategic management process?
- A) Developing a strategic vision of what the company’s future direction and focus needs to be
- B) Developing a sustainable business model
- C) Crafting a strategy to advance the company along the path that management has charted and achieve its performance objectives
- D) Setting objectives to measure progress toward achieving the strategic vision
- E) Executing the chosen strategy efficiently and effectively
Answer: B
Explanation: As shown in Figure 2.1, the process of crafting and executing a company’s strategy is an ongoing, continuous process consisting of five interrelated stages: (1) developing a strategic vision that charts the company’s long-term direction; (2) setting objectives for measuring the company’s performance and tracking its progress in moving in the intended long-term direction; (3) crafting a strategy for advancing the company along the path management has charted and achieving its performance objectives; (4) executing the chosen strategy efficiently and effectively; and (5) monitoring developments, evaluating performance, and initiating corrective adjustments in the company’s vision and mission statement, objectives, strategy, or approach to strategy execution in light of actual experience, changing conditions, new ideas, and new opportunities.
Difficulty: 1 Easy
Topic: Strategy and the Strategic Management Process
Learning Objective: 02-01 Understand why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
2) Which of the following is an integral part of the managerial process of crafting and executing strategy?
- A) Developing a proven business model
- B) Setting objectives and using them as yardsticks for measuring the company’s performance and progress
- C) Deciding how much of the company’s resources to employ in the pursuit of sustainable competitive advantage
- D) Communicating the company’s mission and purpose to all employees
- E) Deciding on the composition of the company’s board of directors
Answer: B
Explanation: Figure 2.1 displays the five-stage process: (1) developing a strategic vision, (2) setting objectives, (3) crafting strategy, (4) implementing and executing the chosen strategy, and (5) evaluating and analyzing the external environment and the company’s internal situation and performance.
Difficulty: 2 Medium
Topic: Strategy and the Strategic Management Process
Learning Objective: 02-01 Understand why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
3) Which of the following are integral parts of the managerial process of crafting and executing strategy?
- A) Deciding on the company’s strategic intent, setting financial objectives, crafting a strategy, and choosing what business approaches and operating practices to employ
- B) Developing a proven business model, deciding on the company’s strategic intent, and crafting a strategy
- C) Setting objectives, crafting a strategy, implementing and executing the chosen strategy, and deciding how much of the company’s resources to employ in the pursuit of a sustainable competitive advantage
- D) Coming up with a statement of the company’s mission and purpose, setting objectives, choosing what business approaches to employ, selecting a business model, and monitoring developments
- E) Developing a strategic vision, setting objectives, crafting a strategy, and initiating corrective adjustments
Answer: E
Explanation: The process of crafting and executing a company’s strategy, as depicted in Figure 2.1, is an ongoing, continuous process consisting of five interrelated stages: (1) developing a strategic vision that charts the company’s long-term direction; (2) setting objectives for measuring the company’s performance and tracking its progress in moving in the intended long-term direction; (3) crafting a strategy for advancing the company along the path management has charted and achieving its performance objectives; (4) executing the chosen strategy efficiently and effectively; and (5) monitoring developments, evaluating performance, and initiating corrective adjustments in the company’s vision and mission statement, objectives, strategy, or approach to strategy execution in light of actual experience, changing conditions, new ideas, and new opportunities.
Difficulty: 2 Medium
Topic: Strategy and the Strategic Management Process
Learning Objective: 02-01 Understand why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
4) When companies adopt the strategy formulation, strategy execution process, the first step is to
- A) monitor internal and external developments and initiate corrective adjustments to the business model when necessary.
- B) adopt a proven business model, decide on the company’s top management team, and craft a strategy.
- C) execute the company’s chosen strategy efficiently and effectively.
- D) set objectives and develop a profitable business model to meet those objectives.
- E) develop a strategic vision, mission, and values.
Answer: E
Explanation: Figure 2.1 displays the five-stage process. The first step is developing a strategic vision, mission, and values.
Difficulty: 2 Medium
Topic: Strategy and the Strategic Management Process
Learning Objective: 02-01 Understand why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
5) The strategic management process is shaped by
- A) management’s strategic vision, strategic and financial objectives, and strategy.
- B) the decisions made by the compensation and audit committees of the board of directors.
- C) external factors such as the industry’s economic and competitive conditions and internal factors such as the company’s collection of resources and capabilities.
- D) a company’s customer value proposition and profit formula.
- E) actions to strengthen competitive capabilities and correct weaknesses, actions to strengthen market standing and competitiveness by acquiring or merging with other companies, and actions to enter new geographic or product markets.
Answer: C
Explanation: Figure 2.1 displays the five-stage process and Table 2.1 describes one in detail. Management’s decisions that are made in the strategic management process are shaped by the prevailing economic conditions and competitive environment and the company’s own internal resources and competitive capabilities.
Difficulty: 2 Medium
Topic: Strategy and the Strategic Management Process
Learning Objective: 02-01 Understand why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
6) Which of the following questions is not pertinent to company managers in thinking strategically about what directional path should be taken by the company and about developing a strategic vision?
- A) What business approaches and operating practices should we consider in trying to implement and execute our business model?
- B) Is the outlook for the company promising if it continues with its present product offerings?
- C) What strategic course offers attractive opportunity for growth and profitability?
- D) What, if any, new customer groups and/or geographic markets should the company get in position to serve?
- E) Are changing market and competitive conditions acting to enhance or weaken the company’s prospects?
Answer: A
Explanation: The real purpose of a vision statement is to serve as a management tool for giving the organization a sense of direction. A strategic vision delineates management’s aspirations for the business, providing a 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, charts a strategic path for it to follow, builds commitment to the future course of action, and molds organizational identity. A clearly articulated strategic vision communicates management’s aspirations to stakeholders (customers, employees, stockholders, suppliers, etc.) and helps steer the energies of company personnel in a common direction.
Difficulty: 2 Medium
Topic: The Strategic Role of Managers in Strategy Formulation and Implementation
Learning Objective: 02-01 Understand why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
7) The strategic management process is shaped by
- A) management’s strategic vision, strategic and financial objectives, and strategy.
- B) the decisions made by the compensation and audit committees of the board of directors.
- C) external factors such as the industry’s economic and competitive conditions and internal factors such as the company’s collection of resources and capabilities.
- D) a company’s customer value proposition and profit formula.
- E) actions to strengthen competitive capabilities and correct weaknesses, actions to strengthen market standing and competitiveness by acquiring or merging with other companies, and actions to enter new geographic or product markets.
Answer: C
Explanation: Management’s decisions that are made in the strategic management process are shaped by the prevailing economic conditions and competitive environment and the company’s own internal resources and competitive capabilities as shown in Figure 2.1, The Strategy and Formulation, Strategy Execution Process, and described in detail in Table 2.1, Factors Shaping Decisions in the Strategy Formulation, Strategy Execution Process.
Difficulty: 2 Medium
Topic: Strategy and the Strategic Management Process
Learning Objective: 02-01 Understand why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
8) When a company is confronted with significant industry change that mandates radical revision of its strategic course, the company is said to have encountered a(n)
- A) learning and growth perspective.
- B) strategic inflection point.
- C) strategic roadblock.
- D) new strategic opportunity.
- E) opportunity for corporate entrepreneurship.
Answer: B
Explanation: The evaluation stage of the strategic management process (as shown in Figure 2.1) also allows for a change in the company’s vision, but this should be necessary only when it becomes evident to management that the industry has changed in a significant way that renders its vision obsolete. Such occasions can be referred to as strategic inflection points. When a company reaches a strategic inflection point, management has tough decisions to make about the company’s direction because abandoning an established course carries considerable risk.
Difficulty: 2 Medium
Topic: Strategy and the Strategic Management Process
Learning Objective: 02-01 Understand why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.
Bloom’s: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
9) A company’s strategic plan consists of
- A) its balanced scorecard and its business model.
- B) a vision of where it is headed, a set of performance targets, and a strategy to achieve them.
- C) its strategy and management’s specific, detailed plans for implementing it.
- D) a company’s plans for improving value-creating internal processes.
- E) a strategic vision, a strategy, and a business model.
Answer: B
Explanation: The first three stages of the strategic management process—developing a strategic vision, setting objectives, and crafting strategy—comprise a strategic plan. A strategic plan maps out where a company is headed, establishes strategic and financial targets, and outlines the competitive moves and approaches to be used in achieving the desired business results.
Difficulty: 1 Easy
Topic: Strategy and the Strategic Management Process
Learning Objective: 02-01 Understand why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.
Bloom’s: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
10) The strategy formulation, strategy execution process
- A) is usually delegated to members of a company’s board of directors so as not to infringe on the time of busy executives.
- B) includes establishing a company’s mission, developing a business model aimed at making the company an industry leader, and crafting a strategy to implement and execute the business model.
- C) embraces the tasks of developing a strategic vision, setting objectives, crafting a strategy, implementing and executing the strategy, and then monitoring developments and initiating corrective adjustments in light of experience, changing conditions, and new opportunities.
- D) is principally concerned with sizing up an organization’s internal and external situation, so as to be prepared for the challenge of developing a sound business model.
- E) is primarily the responsibility of top executives and the board of directors; very few managers below this level are involved.
Answer: C
Explanation: The process consists of the five steps outlined in Figure 2.1. Management’s decisions that are made in the strategic management process are shaped by the prevailing economic conditions and competitive environment and the company’s own internal resources and competitive capabilities, also shown in Figure 2.1 and described in detail in Table 2.1.
Difficulty: 2 Medium
Topic: Strategy and the Strategic Management Process
Learning Objective: 02-01 Understand why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
11) A company’s strategic vision concerns
- A) a company’s directional path and future product-customer-market-technology focus.
- B) why the company does certain things in trying to please its customers.
- C) management’s story line of how it intends to make a profit with the chosen strategy.
- D) “who we are and what we do.”
- E) what future actions the enterprise will likely undertake to outmaneuver rivals and achieve a sustainable competitive advantage.
Answer: A
Explanation: Top management’s views about the company’s direction and future product-customer-market-technology focus constitute a strategic vision for the company. A clearly articulated strategic vision communicates management’s aspirations to stakeholders about “where we are going” and helps steer the energies of company personnel in a common direction.
Difficulty: 1 Easy
Topic: The Roles of Vision, Mission, and Values in the Strategic Management Process
Learning Objective: 02-01 Understand why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.
Bloom’s: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
12) Management’s strategic vision for an organization
- A) charts a strategic course for the organization (“where we are going”) and outlines the company’s future product-customer-market-technology focus.
- B) describes in fairly specific terms the organization’s business model, strategic objectives, and strategy.
- C) spells out how the company will become a big moneymaker and boost shareholder value.
- D) addresses the critical issue of “why our business model needs to change and how we plan to change it.”
- E) spells out the organization’s strategic moves that will be undertaken to achieve competitive advantage.
Answer: A
Explanation: Top management’s views about the company’s direction and future product-customer-market-technology focus constitute a strategic vision for the company. A clearly articulated strategic vision communicates management’s aspirations to stakeholders about “where we are going” and helps steer the energies of company personnel in a common direction.
Difficulty: 1 Easy
Topic: The Roles of Vision, Mission, and Values in the Strategic Management Process
Learning Objective: 02-01 Understand why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.
Bloom’s: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
13) Top management’s views about where the company is headed and what its future product-customer-market-technology will be
- A) indicates what kind of business model the company is going to have in the future.
- B) constitutes the strategic vision for the company.
- C) signals what the firm’s strategy will be.
- D) serves to define the company’s mission.
- E) indicates what the company’s long-term strategic plan is.
Answer: B
Explanation: Top management’s views about the company’s direction and future product-customer-market-technology focus constitute a strategic vision for the company. A clearly articulated strategic vision communicates management’s aspirations to stakeholders about “where we are going” and helps steer the energies of company personnel in a common direction.
Difficulty: 1 Easy
Topic: The Roles of Vision, Mission, and Values in the Strategic Management Process
Learning Objective: 02-01 Understand why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
14) Which one of the following is notan accurate attribute of an organization’s strategic vision?
- A) Providing a clearly articulated view of “where we are going”
- B) Describing the company’s future product-customer-market-technology focus
- C) Pointing an organization in a particular direction and charting a strategic path for it to follow
- D) Providing managers with a reference point for making strategic decisions
- E) Specifying how the company intends to implement and execute its business model
Answer: E
Explanation: Top management’s views about the company’s direction and future product-customer-market-technology focus constitute a strategic vision for the company. A clearly articulated strategic vision communicates management’s aspirations to stakeholders about “where we are going” and helps steer the energies of company personnel in a common direction.
Difficulty: 2 Medium
Topic: The Roles of Vision, Mission, and Values in the Strategic Management Process
Learning Objective: 02-01 Understand why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
15) Well-conceived visions are
- A) vague and indefinite, to allow room for a company to change its direction.
- B) generic to many organizations.
- C) primarily consists of feel-good statements about the company’s past history.
- D) innocuous one-sentence statements.
- E) a reference point for managers in making strategic decisions.
Answer: E
Explanation: As shown in Table 2.2, for a strategic vision to function as a valuable managerial tool, it must provide understanding of what management wants its business to look like and provide managers with a reference point in making strategic decisions. It must say something definitive and specific about how the company’s leaders intend to position the company beyond where it is today.
Difficulty: 2 Medium
Topic: The Roles of Vision, Mission, and Values in the Strategic Management Process
Learning Objective: 02-01 Understand why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.
Bloom’s: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
16) Which of the following are characteristics of an effectively worded strategic vision statement?
- A) Graphic, directional, and focused
- B) Challenging, competitive, and set in concrete
- C) Balanced, responsible, and rational
- D) Realistic, customer-focused, and market-driven
- E) Achievable, profitable, and ethical
Answer: A
Explanation: From Table 2.2, it is evident that an effectively worded vision statement is graphic, directional, focused, flexible, feasible, desirable, and easy to communicate. A surprising number of the vision statements found on company websites and in annual reports are vague and unrevealing, saying very little about the company’s future product-market-customer-technology focus.
Difficulty: 3 Hard
Topic: The Roles of Vision, Mission, and Values in the Strategic Management Process
Learning Objective: 02-01 Understand why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
17) Which one of the following is not a characteristic of an effectively worded strategic vision statement?
- A) Directional (is forward-looking, describes the strategic course that management has charted and the kinds of product-market-customer-technology changes that will help the company prepare for the future)
- B) Easy to communicate (is explainable in 10 to 15 minutes, can be reduced to a memorable slogan)
- C) Graphic (paints a picture of the kind of company management is trying to create and the market position or positions the company is striving to stake out)
- D) Consensus-driven (commits the company to a “mainstream” directional path that most stakeholders will enthusiastically support)
- E) Focused (is specific enough to provide guidance to managers in making decisions and allocating resources)
Answer: D
Explanation: From Table 2.2, it is evident that an effectively worded vision statement is graphic, directional, focused, flexible, feasible, desirable, and easy to communicate. While consensus among stakeholders is helpful to adopting a vision statement, crafting that statement is within the purview of top managers.
Difficulty: 3 Hard
Topic: The Roles of Vision, Mission, and Values in the Strategic Management Process
Learning Objective: 02-01 Understand why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
18) Which of the following is not a common shortcoming of company vision statements?
- A) Vague or incomplete—short on specifics
- B) Focused and narrow—exclusive to a specific direction
- C) Bland or uninspiring
- D) Not distinctive—could apply to almost any company (or at least several others in the same industry)
- E) Too reliant on superlatives (best, most successful, recognized leader, global or worldwide leader, first choice of customers)
Answer: B
Explanation: From Table 2.3, it is evident that an ineffectively worded vision statement is not forward-looking, too broad, bland or uninspiring, not distinctive, and overly reliant on superlatives.
Difficulty: 3 Hard
Topic: The Roles of Vision, Mission, and Values in the Strategic Management Process
Learning Objective: 02-01 Understand why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
19) Which of the following are common shortcomings of company vision statements?
- A) Too broad, vague or incomplete, bland/uninspiring, not distinctive, and too reliant on superlatives
- B) Unrealistic, unconventional, and unprofessional
- C) Too specific, too inflexible, and cannot be achieved in five years
- D) Too broad, too narrow, and too risky
- E) Not customer-driven, out-of-step with emerging technological trends, and too ambitious
Answer: A
Explanation: From Table 2.3, it is evident that an ineffectively worded vision statement is not forward-looking, too broad, bland or uninspiring, not distinctive, and overly reliant on superlatives.
Difficulty: 3 Hard
Topic: The Roles of Vision, Mission, and Values in the Strategic Management Process
Learning Objective: 02-01 Understand why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
20) Effectively communicating the strategic vision down the line to lower-level managers and employees has the value of
- A) not only explaining “where we are going and why” but, more importantly, also inspiring and energizing company personnel to unite to get the company moving in the intended direction.
- B) helping company personnel understand why making a profit is so important.
- C) making it easier for top executives to set strategic objectives.
- D) helping lower-level managers and employees better understand the company’s business model.
- E) All of these choices are correct.
Answer: A
Explanation: The defining characteristic of a well-conceived strategic vision is what it says about the company’s future strategic course—”where we are headed and what our future product-customer-market-technology focus will be.” Vision statements galvanize action among company personnel. Alternatively, mission statements of most companies say much more about the enterprise’s present business scope and purpose—”why we exist.”
Difficulty: 3 Hard
Topic: The Roles of Vision, Mission, and Values in the Strategic Management Process
Learning Objective: 02-01 Understand why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
21) A benefit of a vivid, engaging, and convincing strategic vision is
- A) avoiding the need for consensus in support of top management’s own view about the company’s long-term direction.
- B) increasing risk of rudderless decision making by managers at all levels of the organization.
- C) creating debate among company personnel behind managerial efforts to get the company moving in the intended direction.
- D) helping an organization prepare for to make short-term moves in the marketplace.
- E) providing a beacon for lower-level managers in forming departmental missions.
Answer: E
Explanation: A well-thought-out, forcefully communicated strategic vision pays off in several respects: (1) It crystallizes senior executives’ own views about the firm’s long-term direction; (2) It reduces the risk of rudderless decision-making by management at all levels; (3) It is a tool for winning the support of employees to help make the vision a reality; (4) It provides a beacon for lower-level managers in forming departmental missions; and (5) It helps an organization prepare for the future.
Difficulty: 3 Hard
Topic: The Roles of Vision, Mission, and Values in the Strategic Management Process
Learning Objective: 02-01 Understand why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
22) A company’s mission statement typically addresses which of the following questions?
- A) Who are we, what do we do, and why are we here?
- B) What objectives and level of performance do we want to achieve?
- C) Where are we going, and what should our strategy be?
- D) What approach should we take to achieve sustainable competitive advantage?
- E) Why have we chosen a particular business model to achieve our objectives and our vision?
Answer: A
Explanation: Mission statements of most companies say much more about the enterprise’s present business scope and purpose—”why we exist.”
Difficulty: 1 Easy
Topic: The Roles of Vision, Mission, and Values in the Strategic Management Process
Learning Objective: 02-01 Understand why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.
Bloom’s: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
23) Ideally, a company’s mission statement should be sufficiently descriptive and
- A) provide scant indication of a company’s services and products that give the company its own identity.
- B) identify the pressing agenda items for members of its board of directors.
- C) specify the allocation of resources that underlie the basis of its competitive advantage.
- D) relate to the future state of the organization that managers seek to attain.
- E) identify the specific customer or market that the company intends to serve.
Answer: E
Explanation: Mission statements of most companies say much more about the enterprise’s present business scope and purpose—”why we exist.” A well-conceived mission statement should employ language specific enough to give the company its own identity. A mission statement that provides scant indication of “who we are and what we do” has no apparent value.
Difficulty: 2 Medium
Topic: The Roles of Vision, Mission, and Values in the Strategic Management Process
Learning Objective: 02-01 Understand why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
24) The difference between the concept of a company mission statement and the concept of a strategic vision is that
- A) a mission statement typically concerns a company’s present business scope (“who we are and what we do”), whereas the principal concern of a strategic vision is with the company’s future business scope (long-term direction and future product-customer-market-technology focus).
- B) the mission is to make a profit, whereas a strategic vision concerns how to attract customers.
- C) a mission statement deals with what to accomplish on behalf of shareholders and a strategic vision concerns what to accomplish on behalf of customers.
- D) a mission statement concerns what to do to achieve short-run objectives and a strategic vision concerns what to do to achieve long-run performance targets.
- E) a mission statement deals with “where we are headed,” whereas a strategic vision provides the critical answer to “how will we get there.”
Answer: A
Explanation: The defining characteristic of a well-conceived strategic vision is what it says about the company’s future strategic course—”where we are headed and what our future product-customer-market-technology focus will be.” Vision statements galvanize action among company personnel. Alternatively, mission statements of most companies say much more about the enterprise’s present business scope and purpose—”why we exist.”
Difficulty: 3 Hard
Topic: The Roles of Vision, Mission, and Values in the Strategic Management Process
Learning Objective: 02-01 Understand why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
25) A company’s values concern
- A) whether and to what extent it intends to operate in an ethical and socially responsible manner.
- B) how aggressively it will seek to maximize profits and enforce high ethical standards.
- C) the beliefs and operating principles built into the company’s “balanced scorecard” for measuring performance.
- D) the beliefs, traits, and behavioral norms that company personnel are expected to display in conducting the company’s business and pursuing its strategic vision and mission.
- E) the beliefs, principles, and ethical standards that are incorporated into the company’s strategic intent and business model.
Answer: D
Explanation: A company’s values are the beliefs, traits, and behavioral norms that company personnel are expected to display in conducting the company’s business and pursuing its strategic vision and mission.
Difficulty: 1 Easy
Topic: The Roles of Vision, Mission, and Values in the Strategic Management Process
Learning Objective: 02-01 Understand why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.
Bloom’s: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
26) A company’s values relate to such things as
- A) how it will balance its pursuit of financial objectives against the pursuit of its strategic objectives.
- B) how it will balance the pursuit of its business purpose/mission against the pursuit of its strategic vision.
- C) fair treatment, integrity, ethical behavior, innovativeness, teamwork, top-notch quality, superior customer service, social responsibility, and community citizenship.
- D) whether it will emphasize stock price appreciation or higher dividend payments to shareholders, and whether it will put more emphasis on the achievement of short-term performance targets or long-range performance targets.
- E) All of these choices are correct.
Answer: C
Explanation: Many companies have developed a statement of values (sometimes called core values) to guide the actions and behavior of company personnel in conducting the company’s business and pursuing its strategic vision and mission. These values are the designated beliefs and desired ways of doing things at the company, and frequently relate to such things as fair treatment, honor and integrity, ethical behavior, innovativeness, teamwork, a passion for excellence, social responsibility, and community citizenship.
Difficulty: 2 Medium
Topic: The Roles of Vision, Mission, and Values in the Strategic Management Process
Learning Objective: 02-01 Understand why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.
Bloom’s: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
27) A company’s core values typically do not include such things as
- A) entrepreneurial spirit, excellent customer service, and building shareholder value.
- B) giving back to the community, doing the right thing, and entrepreneurial spirit.
- C) fair treatment, integrity, ethical behavior, innovativeness, and teamwork.
- D) top-notch quality, superior customer service, social responsibility, and community citizenship.
- E) minimizing innovation, rewarding individuality, and setting financial performance targets.
Answer: E
Explanation: Many companies (i.e., Home Depot, Patagonia, and Samsung which are cited in the chapter) have developed a statement of values (sometimes called core values) to guide the actions and behavior of company personnel in conducting the company’s business and pursuing its strategic vision and mission. These values are the designated beliefs and desired ways of doing things at the company, and frequently relate to such things as fair treatment, entrepreneurial spirit, top-notch quality, honor and integrity, ethical behavior, innovativeness, teamwork, a passion for excellence, social responsibility, and community citizenship.
Difficulty: 3 Hard
Topic: The Roles of Vision, Mission, and Values in the Strategic Management Process
Learning Objective: 02-01 Understand why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
28) The primary managerial purpose of setting objectives is to
- A) ensure that deliberately vague language such as “reducing costs” and “becoming more efficient” is used to provide managers with more latitude in setting stretch objectives for the company.
- B) designate strategic outcomes as lagging indicators.
- C) balance the scorecard of financial and strategic objectives.
- D) designate financial outcomes as leading indicators.
- E) convert the strategic vision into specific performance targets.
Answer: E
Explanation: The managerial purpose for setting financial and strategic objectives such as those listed in Table 2.4 is to convert the strategic vision into specific performance targets. Well-stated objectives are quantifiable, or measurable, and contain a deadline for achievement.
Difficulty: 2 Medium
Topic: Measures of Analyzing Competitive Advantage
Learning Objective: 02-02 Explain the importance of setting both strategic and financial objectives.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
29) A company needs financial objectives
- A) to overtake key competitors on such important measures as net profit margins and return on investment.
- B) because without adequate profitability and financial strength, the company’s ultimate survival is jeopardized.
- C) to indicate to employees that financial objectives always take precedence over strategic objectives.
- D) to convince shareholders that top management is acting in their interests.
- E) to translate the company’s business model into action items.
Answer: B
Explanation: The importance of attaining financial objectives is intuitive. Without adequate profitability and financial strength, a company’s long-term health and ultimate survival is jeopardized. Furthermore, subpar earnings and a weak balance sheet alarm shareholders and creditors and put the jobs of senior executives at risk.
Difficulty: 2 Medium
Topic: Measures of Analyzing Competitive Advantage
Learning Objective: 02-02 Explain the importance of setting both strategic and financial objectives.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
30) Strategic objectives
- A) are more essential in achieving a company’s strategic vision than are financial objectives.
- B) are generally less important than financial objectives.
- C) are more difficult to achieve and harder to measure than financial objectives.
- D) relate to strengthening a company’s overall market standing and competitive vitality.
- E) help managers track an organization’s true progress better than do financial objectives.
Answer: D
Explanation: Without adequate profitability and financial strength, a company’s long-term health and ultimate survival is jeopardized. Furthermore, subpar earnings and a weak balance sheet alarm shareholders and creditors and put the jobs of senior executives at risk.
Difficulty: 1 Easy
Topic: Measures of Analyzing Competitive Advantage
Learning Objective: 02-02 Explain the importance of setting both strategic and financial objectives.
Bloom’s: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
31) A balanced scorecard for measuring company performance
- A) entails putting equal emphasis on financial and strategic objectives.
- B) entails striking a balance between financial objectives and strategic objectives.
- C) balances the drive for profits with social responsibility obligations.
- D) prevents the drive for achieving strategic objectives from overwhelming the pursuit of financial objectives.
- E) entails creating a set of financial objectives balanced among profitability measures and liquidity measures.
Answer: B
Explanation: The balanced scorecard approach is a widely used method for balancing both strategic and financial objectives, tracking their achievement, and giving management a more complete and balanced view of how well an organization is performing.
Difficulty: 2 Medium
Topic: Measures of Analyzing Competitive Advantage
Learning Objective: 02-02 Explain the importance of setting both strategic and financial objectives.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
32) A balanced scorecard that includes both strategic and financial performance targets is a conceptually strong approach for judging a company’s overall performance because
- A) financial performance measures are lagging indicators that reflect the results of past decisions and organizational activities, whereas strategic performance measures are leading indicators of a company’s future financial performance.
- B) it entails putting equal emphasis on good strategy execution and good business model execution.
- C) a balanced scorecard approach pushes managers to avoid setting objectives that reflect the results of past decisions and organizational activities, and, instead, to set objectives that will serve as leading indicators of a company’s future financial performance.
- D) it assists managers in putting roughly equal emphasis on short-term and long-term performance targets.
- E) it more or less forces managers to put equal emphasis on financial and strategic objectives.
Answer: A
Explanation: In contrast to strategic objectives, which are leading indicators of a company’s market standing and competitive vitality, a company’s financial objectives are really lagging indicators that reflect the results of past decisions and organizational activities.
Difficulty: 2 Medium
Topic: Measures of Analyzing Competitive Advantage
Learning Objective: 02-02 Explain the importance of setting both strategic and financial objectives.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
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