Chapter 06 Strategic Management: How Exceptional Managers Realize
a Grand Design Answer Key
True / False Questions
1.
A 2013 survey found that the use of mission and vision statements is popular among
managers.
2.
Developing a program focused on individual aspects of an organization for short–term success
is the focus of strategic planning.
3.
Writer Geoffrey Colvin stated that successful managers need to be able to make large, painful
decisions and radically alter their business design, such as “exiting businesses, firing people,
admitting you were wrong (or at least not omniscient).”
Learning Objective: 06-01 What is strategic positioning, and what are the three principles that underlie it?
Topic: Strategic planning
4.
To provide direction and momentum, encourage new ideas, and develop a sustainable
competitive advantage are reasons why an organization should adopt strategic management
and strategic planning.
5.
Sustainable competitive advantage occurs when an organization is able to get and stay ahead
in being responsive to customers, in innovating, in quality, and in effectiveness.
6.
The Strategic Management Society voted Michael Porter, a Harvard Business School
professor, the most influential living economist.
7.
According to Harvard Business School professor Michael Porter, strategic positioning “means
performing different activities from rivals, or performing similar activities in different ways” to
achieve sustainable competitive advantage.
8.
Donna’s Restaurant is a popular café that specializes in home-cooked meals, friendly service,
and a menu that contains vegan and vegetarian dishes, something no other restaurant in the
area does. Donna’s is engaging in strategic positioning by offering the unique menu items of
vegan and vegetarian dishes.
9.
Jiffy Lube provides only lubricants, but it provides them to all kinds of people with all kinds of
motor vehicles. This is an example of how a strategic position can result from serving the few
needs of many customers.
10.
ABC Bowling Centers has a policy of opening locations only in small cities, where there are
broad needs and many customers. This is one source of strategic positioning.
11.
Most strategies are compatible. Therefore, organizations need only to choose what strategies
to follow.
12.
An analysis of several studies found that strategic planning was appropriate only for large
firms and companies with more than 500 employees, where the improvement in financial
performance was also quite large.
13.
A and B Supply, a small family-owned company, sells high-priced pens, some as expensive as
$2,500, to executives in its area. Very few companies have chosen to market this product, and
A and B has enjoyed record profits over the last 25 years. A and B Office Supply is an
example of a company that would typically not choose not to utilize strategic planning.
14.
Research has shown that companies seldom start utilizing strategic management after a
crisis, but rather when profits are high and their industries become less competitive.
15.
Lily, the CEO of Beautiful Flowers, is interested in using strategic management in her florist
shops nationwide. When she attended the workshop on strategic management, the speaker
suggested to first establish the mission and the vision, second to assess the current reality,
and third to formulate the grand strategy as the first three steps in the strategic-management
process.
16.
The five steps of (1) establishing the mission and the vision, (2) assessing the current reality,
(3) formulating the grand strategy, (4) implementing the strategy, and (5) maintaining strategic
control and the feedback loop make up the organizational-management process.
17.
Frank is interested in rewriting the vision for his antique shops, and he wants his employees
and his business to grow. So the vision for Frank’s stores should be positive and inspiring, and
it should stretch the company and his employees to achieve objectives that they believe are
not possible.
18.
When Pablo and his partner wrote the mission for their fitness center, like any good mission
statement it did not include descriptions of their customers or the products and services they
offer.
19.
According to Burt Nanus, “powerful mission and vision statements challenge and inspire
people in the organization and help to align their energies in multiple directions.”
20.
The vision is an organization’s purpose or reason for being, and a company’s mission
statement is its long-term goal of what it wants to become.
21.
An organization’s vision is its short-term goals.
22.
To develop a grand strategy, you need to gather data and make projections, using the tools of
competitive intelligence, SWOT analysis, forecasting, benchmarking, and Porter’s five
competitive forces.
23.
A defensive strategy is a grand strategy that involves reduction in the organization’s efforts.
24.
A growth strategy involves the increase in employee knowledge.
25.
A stability strategy involves little or no significant change.
26.
At a time when many retailers are offering men’s suits at cheap prices and reducing their
quality to compete, Suave Clothing has continued to live by the tagline “Quality never goes out
of style,” believing that offering a quality product to the customer always will mean success. It
has also aggressively focused on ways to reduce costs. Suave clothing is utilizing a stability
strategy.
27.
Competitive intelligence, SWOT analysis, forecasting, benchmarking, and Porter’s five
competitive forces are all tools that can be used to gather data and make projections to
develop a grand strategy.
28.
Sandra and her partner are involved in the time-consuming, yet vital process of choosing
among different strategies and altering them to best fit the long-term goals of their preschool
for the next three years. This process is known as goals formulation.
29.
The top management of Finest Papers has set a strategic goal of cutting costs over the next
three years. Upper management is researching possible roadblocks within the company’s
structure and culture and if the right people and control systems are available to execute their
strategic plans to accomplish this goal. This is an example of strategy implementation.
30.
Often strategy implementation means overcoming resistance by people who feel the plans
threaten their influence or livelihood.
31.
Recently Paul, the CEO of Stage Productions, felt the company’s strategic plan is getting off
track. Immediately he discussed this situation with the other members of the top management
team and adjustments were made to correct the situation. To steer a strategic plan back on
track, organizations should engage as few employees as possible and make the plan very
specific, covering only the needed scenarios for the future.
32.
Competitive intelligence means gaining information about one’s competitors’ activities so that
you can anticipate their moves and react appropriately.
33.
The managers of a small bakery decided to do a SWOT analysis to study the strengths and
weaknesses within the organization and the external environment so they can better formulate
strategies in pursuit of the firm’s mission. This defines the benefits of a SWOT analysis.
34.
The upper-level managers of Brooms International, a 120-year-old broom and mop
manufacturing company, realize that their production facility is outdated. Therefore, they know
their competitors, with newer production plants, have gained a competitive advantage over
their organization. This is an example of an external weakness.
35.
Instructor Services, a technology training company, realizes that with the closing of factories in
the area, there will be a large increase in the number of individuals needing computer training
to prepare for the workplace. This is an opportunity for Instructor Services.
36.
Organizational threats are an environmental factor that can hinder an organization’s ability to
achieve a competitive advantage.
37.
Once Instructor Services, an IT company, analyzes the company’s strengths, weaknesses,
opportunities, and threats, managers will be able to do forecasting to develop a long-term
strategy.
38.
A forecast is a vision or projection of the future.
39.
Organizations use the three types of forecasting to make decisions regarding the future: trend
analysis, scenario development, and contingency planning.
40.
Mona, the CEO of an auto dealership, told her managers that “based on the high sales for this
year, the forecast for next year looks very good.” So after completing their budget for the
upcoming year, based on the forecast that predicts continued strong sales, Mona and her
managers are developing a plan in case sales drop unexpectedly. This type of planning is
known as contingency planning.
41.
Contingency planning is also known as time management and compartmentalization.
42.
The basic assumption with a trend analysis is that the picture of the present can be projected
into the future. This is a bad assumption, because even if you have enough historical data, it is
unproductive to assume.
43.
A trend analysis is a hypothetical extension of a past series of events into the future.
44.
Contingency planning is a process by which a company compares its performance with that of
high-performing organizations.
45.
In the retail industry, time-series forecasts, a type of trend analysis, are used to predict long–
term trends such as seasonal variations, as in Christmas sales versus summer sales.
46.
In the Porter’s model for industry analysis, business-level strategies originate in the three
primary competitive forces of the firm’s environment: threats of new entrants, bargaining power
of suppliers, and threats of substitute products.
47.
Humberto, the owner of a small floral shop, is worried because he recently heard that a
popular local grocery store, just two blocks away, is adding a floral department soon.
Humberto is concerned because new competitors can take away customers from existing
organizations.
48.
Nick, the R&D department manager of Precise, a manufacturer of high-quality watches for
over 125 years, was told in a management meeting that the company’s biggest competitor,
Accurate Watches, is introducing a low-cost, yet attractive line of watches that will be sold in
Walmart stores. As a result, the top management of Precise is pressuring Nick to lower the
production costs on existing products and also to develop a line of watches that can be
manufactured inexpensively to be marketed to a wider variety of customers at a much lower
price. This is an example of a quality-leadership strategy.
49.
Brilliante Pens, a 125-year-old pen manufacturer, has continued to market very high–quality
pens, many over $1,000, to executives globally, always maintaining its reputation of superior
value. Brilliante is an example of an organization utilizing a cost–focus strategy.
50.
For over 20 years, ABC Manufacturing produced only one product, a car part for Moraine
Assembly, the Moraine, Ohio, General Motors truck factory. So when GM closed the Moraine
Assembly facility, ABC was an example of a vulnerable company.
51.
Maria’s Mart is a small store located along a major interstate highway that sells gas and diesel,
food, souvenirs, DVD movies, and a wide variety of other items. There is even a café inside
the store. Maria’s Mart is an example of a diversification strategy.
52.
In a single-product strategy, a company makes and sells only one product within its market,
such as a farmer who grows and sells only corn.
53.
The Johnsons have owned a farm, Johnson Family Holdings Incorporated, for over 150 years.
Al Johnson, president of Johnson Family Holdings, purchased a trucking company, shipping
products for other farmers and businesses in their area. Later he opened a small store that
carries a variety of products, and he even operates a small used auto dealership near the
farm. This is an example of unrelated diversification.
54.
Sandra displays and sells paintings and local art in her gallery, and in the evenings she
teaches art classes in the back of her studio, a business named Sandra’s Art School. This is
an example of related diversification.
55.
The concept that the economic value of separate, related businesses under one ownership
and management is greater together than the businesses are worth separately is known as
reduced risk.
56.
In general, the BCG matrix suggests that an organization will do better in fast-growing markets
in which it has a high market share rather in slow-growing markets in which it has a low market
share.
57.
According to the BCG matrix, organizations that have high growth and high market share are
stars and should be kept.
58.
Execution consists of questioning and putting issues on the back burner for a period of time to
achieve results promised.
59.
Because all work ultimately entails some human interaction, effort, or involvement, Bossidy
and Charan stated that focusing on organization synergy is the most important process in
strategy execution.
60.
Bossidy and Charan suggested that making realism a priority begins with leaders first being
cautious and then being realistic only if the situation allows this.
61.
Bossidy and Charan stated that leaders who execute focus on many priorities and goals.
Multiple Choice Questions
62.
Developing a comprehensive program for long-term success is the focus of ____.