BUS5480 Strategic Management Term: Summer 2 2011 | Student Access: 7 .4 .2011 12:00 AM EDT - 8 .28.2011 11:59 PM EDT | Section : 2 Test Review - LUTHER SETZER Your test grade is 100%

QUESTION 1 [QUESTION BANK ID: 33612] TYPE: ESSAY Is a strategy ethical if all of its elements are legal? Why or why not? << HIDE ANSWERS No, a strategy is not always ethical simply because it complies with applicable laws. Laws vary across the world and so do local ethical standards. Although I personally advocate the universal code of ethics called Objectivism that Ayn Rand articulated in her great novel ATLAS SHRUGGED, I know enough about how the world works to understand that not everyone does. Moreover , I also subscribe to a universal legal theory that holds all valid laws must focus solely on the prevention of force and fraud, not the hodgepodge of regulations seen today. With those caveats established, let me tell a story to exemplify why I said that a "legal" strategy does not always equal an "ethical" strategy. The Objectivist ethical code I mentioned earlier actually played a role in the recent financial crisis. A large bank called BB&T adopted those ethics quite a few years Sec. The values of that code install reality and reason as their foundations and call for treating clients justly. This means not knowingly placing any client in danger due to the client's own ignorance. So BB&T refused to jump on the "easy credit" bandwagon that so many banks did profitably for a number of years. When the bubble burst and the banks sank, BB&T remained afloat because of the firm's chosen ethics. Notice that all of the banks in question acted within "the bounds of the law" but only BB&T acted ethically. Sadly, BB&T found itself strongarmed by regulators into accepting "bailout" money it did not need so that the politicians could make the "whole industry" appear weakened rather than specific banks. The company paid back the loan as soon as the law allowed. Stories such as this one show not only why some "legal" strategies are not moral, but also why some "laws" themselves are even more immoral !

QUESTION 2 [QUESTION BANK ID: 62458] TYPE: ESSAY What is the meaning of the term "balanced scorecard"? What are the merits of using a balanced scorecard in judging a company's performance? << HIDE ANSWERS As discussed in the previous question, a company cannot prosper long-term without hewing to reality through reason. Following reason requires integrated thinking that accounts for all relevant facts rather than single facts (such as quarterly profits ) divorced from context (such as strategic objectives). Creating a balanced scorecard that assigns a weight to each well-reasoned metric of choice can allow management to put its fingertips on the pulse of the firm. Profits without strategies will prove short -lived. So will strategies without profits . Firms need both in order to survive and prosper. As our textbook says, "The surest path to boosting company profitability quarter after quarter and year after year is to relentlessly pursue strategic outcomes that strengthen the company's market position and produce a growing competitive advantage over rivals."

QUESTION 3 [QUESTION BANK ID: 20337] TYPE: ESSAY Explain how the strategic target of a low-cost provider differs from the strategic target of a best-cost provider. << HIDE ANSWERS Per Table 5 .1 of our text, a low-cost provider strategically targets "a broad cross section of the market" whereas a best-cost provider strategically targets "value-conscious buyers." This distinction almost explains itself . The former tries to capture a larger segment of the market whereas the latter focuses on a narrower segment. The former may not have the best total value per dollar of cost whereas the latter will. Table 5.1 continues with other contrasts that elucidate this distinction such as the fact that the former will offer "a good basic product with few frills" whereas the latter will offer "items with appealing upscale features."

QUESTION 4 [QUESTION BANK ID: 118805] TYPE: ESSAY Identify and briefly explain any four of the factors that influence the strength or intensity of competitive rivalry among an industry's member firms. << HIDE ANSWERS Per Chapter 3 of our textbook, rivalry increases in an industry when: 1. "Competing sellers are active in making fresh moves to improve their market standing and business performance." These fresh moves introduce uncertainty and require other firms to expend more resources to ascertain merits the of competitors' strategies. This creates more overall rivalry in the industry. 2. "Buyer demand is growing slowly and weaker when buyer demand is growing rapidly." As demand slows, firms have to work harder to gain market share which increases rivalry. As demand grows, firms have to work less hard to gain market share which decreases rivalry. 3. "Buyer demand falls off and sellers find themselves with excess capacity and/or inventory." As with (2), the slowing demand increases rivalry. This rivalry becomes exacerbated when firms have "dead assets" such as excess capacity or inventory and need to compete harder either to carry the dead weight or to unload it. 4. "The number of rivals increases and competitors are equal in size and capability." More rivals equal more rivalry.

QUESTION 5 [QUESTION BANK ID: 123647] TYPE: ESSAY Identify at least three benefits of constructing a strategic group map. << HIDE ANSWERS Per Chapter 3 of our textbook, a strategic group map shows the following: 1. Which competitors are similarly positioned as close rivals and which are dissimilarly positioned as distant rivals. 2. Which part of the strategic map offers the greatest advantages or disadvantages based on prevailing competitive pressures and industry driving forces. 3. Which part of the strategic map offers the greatest or least profit potential based on the strengths and weaknesses in each group's market position.

QUESTION 6 [QUESTION BANK ID: 18461] TYPE: ESSAY Why does an organization need both financial and strategic objectives? << HIDE ANSWERS As discussed in the Question 2: << A company cannot prosper long-term without hewing to reality through reason. Following reason requires integrated thinking that accounts for all relevant facts rather than single facts (such as quarterly profits ) divorced from context (such as strategic objectives). Creating a balanced scorecard that assigns a weight to each well-reasoned metric of choice can allow management to put its fingertips on the pulse of the firm. Profits without strategies will prove short-lived . So will strategies without profits . Firms need both in order to survive and prosper. As our textbook says, "The surest path to boosting company profitability quarter after quarter and year after year is to relentlessly pursue strategic outcomes that strengthen the company's market position and produce a growing competitive advantage over rivals." >> For all of these reasons, an organization needs both financial and strategic objectives.

QUESTION 7 TYPE: ESSAY [QUESTION BANK ID: 39831] Explain the difference between a company's business model and a company's strategy. << HIDE ANSWERS Per Chapter 1 of our textbook, "A company's strategy is management's action plan for running the business and conducting operations." By contrast, "A company's business model explains the rationale for why its business approach and strategy will be a moneymaker." The text further explains, "Absent the ability to deliver good profitability, the strategy is not viable and the survival of the business is in doubt." This distinction bears some resemblance to the balanced scorecard concept discussed earlier in this test. The balanced scorecard essentially measures how well the company has performed in terms of both the company's strategy and its business model. If the metrics fall short of expectations, management needs to look either at strategy or model (or both) or at the execution of either (or both) for reasons why.

QUESTION 8 TYPE: ESSAY [QUESTION BANK ID: 89540] Explain why a company's strategy cannot be completely planned out in advance, and why crafting a company's strategy cannot be a one-time, once-and-for-all managerial exercise. Identify at least three factors that account for why company strategies evolve. << HIDE ANSWERS Per Chapter 1 of our textbook, "the typical company strategy is a blend of (1) proactive decisions to improve the company's financial performance and secure a competitive edge, and (2 ) as -needed reactions to unanticipated developments and fresh market conditions." In other words, because no human being has omniscience, strategy crafting must always amount to a "best assessment" of what to do with margin allowed for change as new information arrives. In short, strategies evolve due to these causes: 1. Changing market conditions. 2. Advancing technology. 3. Fresh moves of competitors. 4. Shifting buyer needs and preferences. 5. Emerging market opportunities. 6. New ideas. 7. Mounting evidence that the strategy is not working well. Return