978-1259912191 Chapter 5 Solutions Manual Part 1

Chapter Five: Business Mission and Strategy

Key Terms

Capabilities: Resources that combine to allow a firm to do the things better than its

competitors. (LO 5-1)

Economic rents: Financial gains garnered from an asset or capability that are in

excess of the ordinary returns in that particular industry. (LO 5-5)

First-mover advantage: The benefit of gaining customer loyalty by being the first firm

to market. (LO 5-.4)

Followers: Firms that enter a market after the first mover. (LO 5-4)

Intangible assets: Things that are not physical but are just as critical to success, such

as a relationship with a key supplier. (LO 5-3)

Metric: A measure to evaluate whether a person or firm is meeting stated goals. (LO

5-1)

Mission statement: A brief statement that summarizes how and where a firm will

compete. (LO 5-1)

Strategy: The broad approaches a small business will use to accomplish its mission.

(LO 5-6)

Sustainable competitive advantage: An advantage that others cannot immediately

copy. (LO 5-2)

Tangible assets: Hard assets such as equipment or location. (LO 5-3)

Suggested Text Responses

Opening Vignette – “Victoria Tsai-Tatcha” – p.81

Student responses will vary.

Exercise 1 – p.85

Student responses will vary.

Exercise 2 – p.91

IM 5-1

written consent of McGraw-Hill Education.

Chapter Five: Business Mission and Strategy

Student responses will vary.

Ethical Challenge – p.92

Student responses will vary.

Exercise 3 – p.96

Student responses will vary.

Review Questions – p.98

1. What is the value of a mission statement for a new organization? A firm’s

2. How should a mission statement guide the actions of employees? The mission

3. What makes a good mission statement? A good mission statement should be

4. What is the difference between a tangible and an intangible asset? A tangible

5. Why do resources or capabilities have to meet all four requirements of the

resource-based analysis to provide the company with a competitive advantage? A

6. Why is it important to identify the standard elements of a new business? In

Class Activities and Sample Assignments

IM 5-2

written consent of McGraw-Hill Education.

Chapter Five: Business Mission and Strategy

1. Ask students to discuss how a firm develops a strategy when the firm has a first

mover advantage. Next, ask them how a firm develops a strategy by being a follower

in the industry. (LO 5-4)

2. In groups, ask students to discuss how the mission statement of a new small

business impacts its organizational decisions. Students are expected to discuss how

the company will compete in the market. As a group, discuss the outcome and list

the answers on a flip chart or blackboard. (LO 5-1)

3. Ask the students to discuss the differences between tangible assets and intangible

assets. Next, ask them why new small business owners need to differentiate

between these two assets. Discuss the types of intangible assets made up of the

capabilities and skills of everyone in the business. Discuss how these are beneficial

to a new small business owner. (LO 5-3)

4. In groups, ask students to brainstorm a list of all possible business assets

associated with a new small business and write them on board or flip chart. Discuss

each as a class. (LO 5.4)

5. .In groups, ask students to discuss Michael Porter’s argument about the means to

view a business strategy. Discuss the low cost and differentiation strategies. Next,

discuss why these strategies are different and how they can be narrowed down to

focus on the smaller niches within broad markets. (LO 5-6)

6. Divide the students into groups of three. Ask the students to create a business,

develop a mission, and discuss how they will apply the four steps to develop the

firm’s strategy. Students can present their findings or list the details on a flip chart or

blackboard. (LO 5-6)

7. As a group, discuss why it is important for a new small business owner to have a

competitive advantage in the market. Discuss what is a sustainable competitive

advantage and list the three steps that are required to identify a sustainable

competitive advantage. (LO 5-2, 5-3, 5-4, 5-5)

IM 5-3

written consent of McGraw-Hill Education.

Chapter Five: Business Mission and Strategy

Discussion Questions for Online/Hybrid classes

1. What is a sustainable competitive advantage? Why is it important for a new small

business owner to gain it? Be specific. (LO 5-2)

2. What is a tangible asset? Provide an example of a tangible asset. How do tangible

assets differ from intangible assets? Be specific. (LO 5-3)

3. What is a first mover advantage? What are some advantages to an entrepreneur

who has a first mover advantage? (LO 5-4)

4. What are economic rents? What do they imply? (LO 5-5)

5. What is a mission statement? When should it be developed? How does it compare

to the strategy of the new small business? (LO 5-1)

6. Discuss how the firm’s mission helps the new business venture. What does it

target? Why? (LO 5-1)

7. What is a firm’s strategy? What is the foundation on which the firm’s strategy is

built? Why is an effective strategy important for the new small business? (LO 5-6)

8. Who is Michael Porter? What is his argument as it relates to business strategy?

(LO 5-6)

9. Summarize the key characteristics that drive the new business founder to design an

effective mission statement? (LO 5-1)

10.Discuss how a mission statement can impact the decision process in an

organization. Provide specific examples. (LO 5-1)

Discussion Questions for Online/Hybrid classes- Responses

1. What is a sustainable competitive advantage? Why is it important for a new

entrepreneurial business owner to gain it? Be specific. (LO 5-2) A

2. What is a tangible asset? Provide an example of a tangible asset. How do

tangible assets differ from intangible assets? Be specific. (LO 5-3) A

IM 5-4

written consent of McGraw-Hill Education.

Chapter Five: Business Mission and Strategy

3. What is a first mover advantage? What are some advantages to an

entrepreneur who has a first mover advantage? (LO 5-4) First mover

4. What are economic rents? What do they imply? (LO 5-5) Economic rents

5. What is a mission statement? When should it be developed? How does it

compare to the strategy of the new small business? (LO 5-1) A mission

6. Discuss how the firm’s mission helps the new business venture. What

does it target? Why? (LO 5-1) The mission statement provides a clear vision

7. What is a firm’s strategy? What is the foundation on which the firm’s

strategy is built? Why is an effective strategy important for the new small

8. Who is Michael Porter? What is his argument as it relates to business

9. Summarize the key characteristics that drive the new business founder to

design an effective mission statement? (LO 5-1) The key characteristics are

10.Discuss how a mission statement can impact the decision process in an

organization. Provide specific examples. (LO 5-1) Student responses will

IM 5-5

written consent of McGraw-Hill Education.

Chapter Five: Business Mission and Strategy

Lecture Links

Lecture Link 5.1: Government Promotes Small Business Initiatives

(LO 5-6)

The new small business owner learns how to develop a mission statement, establish

organizational strategies, and gain a competitive advantage. An important concept to

learn is that business is regulated by the government. A new small business requires

assistance as it develops its journey to entrepreneurship. Visit the website

http://www.Business.usa.gov , the Official Business Link to the U.S. Government (The

Official Link to the U.S. Government, 2017)i.

Review the website to determine how the government might help you achieve your new

small business goals and objectives

Lecture Link 5.1: Government Promotes Small Business Initiatives

(LO 5-6) – Notes

Student responses will vary. The home page of this site notes that BusinessUSA was

created to make it easier for businesses to access all the services that the government

provides. The site provides direct links to the SBA and Department of Commerce.

IM 5-6

written consent of McGraw-Hill Education.

Chapter Five: Business Mission and Strategy

Lecture Link 5.2: U.S. Current Population Survey

The new small business owner is aware of the population statistics when implementing

a small business plan. This information is convenient data for analysis prior to

establishing the business. View the Current Population Survey at the U.S. Bureau of

Labor Statistics BLS (Government, 2009)ii at

http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?

data_tool=latest_numbers&series_id=LNS14000000. Review the links at the bottom of

the website to reveal how this data might assist a new small business owner’s plans to

establish the new small business.

Lecture Link 5.2: U.S. Current Population Survey

This site, provided by the Bureau of Labor Statistics, has resources that the new small

business can access to help in the planning of the new business. The site provides

demographic information, labor information and an extensive list of resources available

to the general public.

Lecture Link 5.3: State and Local Governments on the Net (Government, State and

Local Government on the Net: A Directory of Official State, 2009)iii

(LO 5-3)

When a new small business owner identifies the assets and capabilities of the business,

the physical assets relevant to equipment and location are considered in the tangible

asset analysis. It is pertinent that a new small business owner understands the

resources that are available in its state, county, and city governments. Review the State

and Local Governments on the Net at http://www.statelocalgov.net and discuss how a

new small business owner can utilize those resources.

Lecture Link 5.3: State and Local Governments on the Net (Government, State and

Local Government on the Net: A Directory of Official State, 2009)iv

(LO 5-3) – Notes

This site provides a state and local government directory listing thousands of agencies

at the state and local government level. A new business owner can click on the

intended state and then the government entity within that state. The site will take the

owner to the website of that entity which usually lists current laws, regulations, zoning,

etc.

IM 5-7

written consent of McGraw-Hill Education.

Chapter Five: Business Mission and Strategy

Bonus Internet Exercises

Bonus Internet Exercise 5.1: Exploring the Mission Statement

(LO 5-1, 5-2, 5-3, 5-4, 5-5, 5-6)

The authors in the text discussed that the mission directs the firm to achieve

organizational goals and objectives. An effective mission statement dissipates the

strategic intent of the business and it provides direction for everyone involved in the

business. One important outcome of the mission statement is that it ensures that

individuals have an ongoing focus to align the business’s goals with specific actions of

the employees. Finally, the employees work to achieve the goals revealed by the

directive of its company mission statement.

Consider how mission and strategy are critical to a business because they reveal the

objectives of the firm and guide the business to achieve its goals and objectives. How

does a new small business owner develop a mission statement that reveals the

strategic goals of the organization?

Choose a popular business that you are familiar with and conduct a search on the

internet using your favorite search engine to compile information about that business.

Review the data provided on this site that describes the company’s products, services,

and goals. Next, review the company’s mission statement and complete the discussion

questions listed below.

Discussion Questions:

1. What company did you research? Describe the products/services that it offers to

its clients.

2. What is its mission statement?

3. Does the mission statement make sense for the industry and for the

products/services that the company offers its consumers?

4. Does the company have a competitive advantage in the industry? Discuss how

the company’s mission statement adds value to the company’s goals and

objectives. Be specific.

Bonus Internet Exercise 5.2: Assessing the Broad Strategies

(LO 5-6)

IM 5-8

written consent of McGraw-Hill Education.

Chapter Five: Business Mission and Strategy

In this chapter the authors discussed two ways that Michael Porter viewed a company’s

broad strategy. The first view was the low-cost strategy. A low-cost strategy occurs when

a business differentiates its business from its competitors because the company offers

products to its consumers at the lowest price in the market. The second view was the

differentiation approach. A differentiation approach strategy occurs when a business

differentiates its business from its competitors because it offers an unusual position in

its industry through its product, service, or location.

Narrow these approaches and choose a business that focuses on a niche product or

service in a particular industry. Conduct research on the internet using your favorite

search engine to discover a company that has a niche product or service in that

industry. Next, discuss the following:

1. What search engine did you utilize to conduct your research? What company did

you research?

2. Discuss how a company’s concentration on a small niche product is a low-cost

focus or differentiation focus.

3. Evaluate how the company maintains its competitive advantage in the industry.

Do you believe that this is an effective measure of strategy? Why or why not?

4. Summarize how you might utilize this strategy when you develop the strategy for

your new small business. Be specific.

5. Discuss how a direct competitor might utilize that strategy to gain a competitive

market share in a specific industry.

Bonus Internet Exercise 5.3: Sustainable Competitive Advantage

(LO 5-2)

A new small business has a sustainable competitive advantage when it achieves an

advantage that is considered unique or rare in its industry. Conduct an internet search

using your favorite search engine to discover a business that you believe has a

sustainable competitive advantage in a specific industry.

1. What company did you conduct your research? Describe the industry where this

business competes.

IM 5-9

written consent of McGraw-Hill Education.

Chapter Five: Business Mission and Strategy

2. Why does this business have a sustainable competitive advantage? List the

reasons why you believe that this business has an advantage over other

businesses in the industry.

3. Discuss whether or not there are substitutes for the products or services that the

company offers. Can they be duplicated? Why or why not?

4. Consider that you are a competitor in the industry that you researched. What

steps could you take to gain a sustainable competitive advantage in this

industry? Be specific.

IM 5-10

written consent of McGraw-Hill Education.

i Business.Gov. The o.cial business link to the U.S. government. (2009).

http://www.business.gov. Retrieved on October 22, 2009.

ii U.S. Bureau of Labor Statistics. United States Department of Labor. Current Population Survey.

(2009). http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?

data_tool=latest_numbers&series_id=LNS14000000. Retrieved on October 23, 2009.

iiiState and Local Government on the Net. (2009). State Government Offices, Local US Government, City

Government and Federal Government. http://www.statelocalgov.net/. Retrieved on October 23, 2009.

ivState and Local Government on the Net. (2009). State Government Offices, Local US Government, City

Government and Federal Government. http://www.statelocalgov.net/. Retrieved on October 23, 2009.