Midterm 1 Study Guide! Capstone 1

Functional managers are responsible for the specific business functions or operations that constitute a company or one of its divisions. They focus on managing and overseeing the day-to-day activities within their functional area, such as finance, marketing, operations, or human resources. They are not involved in formulating generic strategies or making strategic decisions for the overall corporation. Instead, their role is to execute business-level decisions and ensure that their functional area is operating efficiently and effectively.

The correct answer is that the strategies that a company's managers pursue have a major impact on the company's performance relative to its competitors. This means that the decisions and actions taken by managers can significantly influence how well a company performs compared to other companies in the same industry. The strategies can include various aspects such as pricing, marketing, product development, and operational efficiency. By making effective strategic choices, managers can gain a competitive advantage and improve the company's overall performance.

Strategic leadership involves effectively managing a company's strategy and creating a competitive advantage. This means that strategic leaders are responsible for developing and implementing strategies that will help the company succeed in the marketplace. They must understand how to analyze the business environment, identify opportunities and threats, and make decisions that will position the company for success. By effectively managing the company's strategy, strategic leaders can create a competitive advantage that sets the company apart from its competitors and allows it to achieve long-term success.

The industry life cycle model includes all of the mentioned stages: growth, shakeout, maturity, and decline. This model describes the different stages that an industry goes through from its inception to its eventual decline. During the growth stage, the industry experiences rapid expansion and increasing demand. The shakeout stage is characterized by intense competition and consolidation, leading to the exit of weaker players. The maturity stage is when the industry reaches its peak and growth stabilizes. Finally, the decline stage occurs when the industry starts to decline due to changing market conditions or technological advancements.

A sustained competitive advantage refers to a long-term advantage that a company has over its competitors, allowing it to consistently outperform and maintain above-average profits or projects for an extended period of time. This implies that the advantage is not temporary and can be sustained for more than three years. It also suggests that the advantage is not solely reliant on unforeseen economic events, as mentioned in option D. Therefore, the correct answer is that a sustained competitive advantage enables a company to maintain above-average projects for a number of years.

Competition from industry to industry is characterized by different competitive conditions in different industries. This means that the level of competition and the factors that affect competition can vary across different industries. Some industries may have high levels of competition due to factors such as a large number of competitors, low barriers to entry, or high customer demand. On the other hand, other industries may have lower levels of competition due to factors such as limited competition, high barriers to entry, or niche markets. Therefore, it is important to understand the specific competitive conditions of each industry when analyzing competition.

The correct answer is skills at coordinating resources and putting them to productive use. This answer is supported by the fact that capabilities refer to a company's ability to effectively and efficiently utilize its resources, such as physical plant and equipment, technological know-how, and reputation, in order to achieve productive outcomes. It implies that the company possesses the necessary skills to coordinate these resources and maximize their potential for generating value and achieving success.

The ultimate goal of profit-making companies is to maximize shareholder value. This means that the company aims to generate the highest possible returns for its shareholders, who have invested their capital in the company. By maximizing shareholder value, the company can attract more investors and raise additional capital, which can be used to fund growth and expansion. Additionally, maximizing shareholder value often involves implementing cost reduction programs and improving operational efficiency, which can lead to increased profitability and financial success for the company.

Scenario-based planning is a technique that helps organizations deal with the challenge of uncertainty. By creating and analyzing different scenarios, organizations can anticipate potential future events and develop strategies to effectively respond to them. This approach acknowledges that the future is uncertain and allows organizations to be better prepared for various possibilities. It is a proactive and flexible planning method that helps mitigate the risks associated with uncertainty.

The CEO, or Chief Executive Officer, is the highest-ranking executive in an organization and is responsible for making major corporate decisions, managing the overall operations and resources of the company, and acting as the main point of communication between the board of directors and the employees. They are the principal general manager who oversees the entire organization and sets the strategic direction for the company.

An industry can be defined as a group of companies offering products or services that are close substitutes for each other. This means that the companies within an industry are competing with each other to attract the same customers by providing similar products or services. They may have slight differences, but overall they serve the same purpose and cater to the same target market. This definition helps to differentiate industries from each other based on the similarity of the products or services offered by the companies within them.

The correct answer is to answer the question, "What is our business?" This is an important first step in formulating a company's mission because it helps define the core purpose and focus of the company. By answering this question, the company can clarify its main activities, products, and services, and align its goals and strategies accordingly. This step sets the direction for the company and guides decision-making processes in the future.

In a typical scenario planning exercise, it is common to consider a range of scenarios that include both optimistic and pessimistic outcomes. This approach allows for a more comprehensive analysis of potential future situations, taking into account both positive and negative possibilities. By considering a variety of scenarios, decision-makers can better prepare for different eventualities and make more informed decisions.

A competitive advantage is considered to be a sustained competitive advantage when it endures for a long time. This means that the advantage is not temporary or easily replicated by competitors. It implies that the firm has a unique set of resources, capabilities, or strategies that allow it to consistently outperform its competitors over an extended period. This sustained advantage gives the firm a stable and long-term position in the market, which can lead to higher profitability and market share.

Brand loyalty can be created through continuous advertising, as it helps to keep the brand in the minds of consumers and reinforces its value. Patent protection of products can also contribute to brand loyalty, as it prevents competitors from copying the brand's unique features, giving it a competitive advantage. Product innovation achieved through company research and development can attract and retain customers by offering new and improved products. Finally, emphasizing high product quality can build trust and loyalty among consumers who value reliability and consistency. Therefore, all of these factors can contribute to the creation of brand loyalty.

The scenario approach to strategic planning involves devising strategies for coping with a number of different possible future states of the world. This means that instead of relying on a single prediction of future demand conditions, the organization considers multiple scenarios and develops strategies to address each one. This approach allows for flexibility and adaptability in the face of uncertainty, as the organization is prepared to handle various potential outcomes. It also encourages strategic thinking and proactive decision-making.

An effective business model involves how a company selects its customers, as this determines the target market and the strategies used to attract and retain customers. It also creates value for its customers by offering products or services that meet their needs and provide benefits. Additionally, a successful business model achieves and sustains a high level of profitability by generating revenue that exceeds costs. Finally, a business model involves producing goods and services, as this is the core activity of any business. Therefore, all of the given options are correct and contribute to an effective business model.

Donna's profit margin can be calculated by subtracting the cost of making the chair from the selling price of the chair. In this case, the cost of making the chair is $100 and the selling price is $150. Therefore, Donna's profit margin is $150 - $100 = $50.

In this scenario, Sam Walton's actions of driving his own car and furnishing his office with plain, steel desks demonstrate his commitment to keeping costs low. This shows that he is dedicated to the goal of maintaining low expenses for Wal-Mart. It reflects his determination and loyalty to the company's mission and objectives.

Resources can be tangible or intangible. Tangible resources are physical assets that can be seen and touched, such as buildings, equipment, and inventory. On the other hand, intangible resources are non-physical assets that cannot be seen or touched, such as patents, trademarks, and brand reputation. Both types of resources are important for a company as they contribute to its overall value and competitive advantage. Tangible resources provide a foundation for operations, while intangible resources often differentiate a company from its competitors and can be a source of sustainable competitive advantage.

Ford Motors conducted the extensive study of customer preferences in order to develop the Explorer sports utility vehicle. This indicates that they were involved in the research and development activity of the value chain. Research and development involves activities such as market research, product design, and testing, which aligns with Ford's efforts to understand customer preferences and develop a successful product like the Explorer.

Devil's advocacy involves one group member being responsible for questioning the assumptions of a plan. This approach is commonly used in group decision-making processes to ensure that all aspects of a plan are carefully considered and potential flaws or weaknesses are identified. By assigning one person the role of the devil's advocate, the group can benefit from a critical examination of the plan, leading to improved decision-making and potentially avoiding costly mistakes. This approach encourages constructive debate and helps to uncover potential blind spots or biases that may exist within the group.

A fragmented industry is characterized by a large number of small and medium-sized companies, none of which have enough market power to influence industry prices. In such an industry structure, competition is high, and no single company has the ability to dominate the market or set prices. This means that companies in a fragmented industry must compete based on factors such as product differentiation, quality, or cost in order to gain a competitive advantage.

The term value chain refers to a chain of activities that a company engages in to transform inputs into outputs that are valuable to customers. This concept emphasizes the idea that a company's activities are interconnected and that each activity adds value to the final product or service. It recognizes that a company's success is not just dependent on its own operations, but also on the activities of other companies in the industry segment. Therefore, the correct answer is that the term value chain represents a chain of activities for transforming inputs into outputs that customers value.

An emergent strategy refers to a strategy that emerges spontaneously in response to unforeseen circumstances or events. It is not the result of a planned strategy or careful top-down planning mechanisms. It is also not the same as a realized strategy, which implies that the strategy was intentionally implemented and achieved its intended goals. Instead, an emergent strategy is a group response to a problem area, where individuals or teams come together to address the unexpected situation and develop a strategy on the spot.

In the decline stage of an industry, growth becomes negative because the market demand starts to decrease. This decline is usually caused by various factors such as changes in consumer preferences, technological advancements, or the emergence of new competitors. As a result, companies in the industry face challenges in maintaining their market share and profitability. The negative growth indicates a shrinking market and the need for companies to adapt and find new strategies to survive in this stage.

Research and development activities encompass a wide range of areas including product design, production processes, service activities, and manufacturing activities. These activities are not limited to tangible products but also include intangible products. Therefore, the correct answer is "all of the above" as research and development activities are concerned with all these aspects.

The first step in the strategic management process is to select the corporate mission and major corporate goals. This is because before analyzing the competitive environment, examining the organizational structure, or analyzing internal strengths and weaknesses, a company needs to have a clear understanding of its purpose and objectives. By selecting the corporate mission and major goals, the company sets the direction for its strategic planning and decision-making processes. This step helps align the organization's efforts towards achieving its desired outcomes and ensures that all subsequent strategic actions are in line with the company's overarching mission and goals.

Good strategic leaders possess a willingness to delegate and empower subordinates. This means that they trust their team members to take on responsibilities and make decisions, allowing them to grow and excel in their roles. By delegating tasks and empowering subordinates, leaders can focus on higher-level strategic thinking and decision making. This approach also fosters a sense of ownership and accountability among team members, leading to increased motivation and productivity. Additionally, it promotes a collaborative and inclusive work environment, where diverse perspectives and ideas are valued.

The correct answer is that a new entrant's major risk is its inability to produce in sufficient volume to match the cost advantages of established producers. This is because economies of scale can give established producers a significant cost advantage due to their ability to produce goods in large quantities, which allows them to spread fixed costs over a larger number of units and achieve lower average costs. As a result, new entrants may struggle to compete on price and profitability if they cannot achieve similar levels of production volume.

This represents social forces because consumers' preference for healthy drinks is a social trend or influence that is impacting the beverage industry. Social forces refer to the cultural, societal, and lifestyle factors that shape consumer behavior and preferences. In this case, the increasing sales of water can be attributed to the growing awareness and emphasis on health and wellness among consumers.

Return on invested capital is considered one of the most widely used measures of financial performance because it provides insight into how effectively a company is utilizing its capital to generate profits. It measures the return generated by the company's investments in both debt and equity, indicating the efficiency and profitability of its operations. This metric is important for investors and stakeholders as it helps them assess the company's ability to generate returns on the capital invested in it.

The correct answer is "designing the best organization structure, culture, and control systems to put a strategy into action." This is because strategy implementation involves determining how to organize the company in order to effectively execute the strategy. This includes designing the appropriate structure, culture, and control systems that align with the strategic goals and objectives. By doing so, the organization can ensure that the strategy is successfully implemented and that the desired outcomes are achieved.

Corporate-level managers are responsible for overseeing the development of strategies for the entire organization. This means that they are involved in setting the overall direction and goals of the company, as well as ensuring that the strategies implemented by different departments and functional areas align with the overall organizational strategy. They have a broad perspective and are involved in decision-making that affects the entire organization, rather than focusing on specific operational or functional-level strategies.

Regulation is not one of the factors in the economic forces of the macroenvironment because it refers to the rules and guidelines set by the government or regulatory bodies to control and govern various aspects of the economy. While regulation does have an impact on the economy, it is not considered a direct economic force like interest rates, inflation, currency exchange rates, and economic growth rate, which directly influence the overall economic conditions and performance.

When switching costs are high, it means that it is difficult and costly for firms in the industry to switch suppliers. This gives the suppliers more bargaining power as they have less competition and can demand higher prices or more favorable terms. High switching costs make it less likely for firms to seek alternative suppliers, making the suppliers more influential in the industry.

A market segment refers to a group of customers within a larger market who share similar characteristics and preferences. These characteristics can include distinct attributes and specific demands, which differentiate them from other segments within the market. This answer accurately describes the concept of market segmentation and highlights the idea that customers within a segment can be different from each other based on their unique attributes and demands. The other options do not fully capture the essence of market segmentation and its focus on customer differences.

Cosmetics makers focus on the unique needs of customers of different ages, indicating that they recognize the importance of targeting specific groups within the overall market. By catering to different market segments, cosmetics makers can tailor their products and marketing strategies to meet the preferences and requirements of each age group, thereby increasing their chances of success in the competitive cosmetics industry.

Rates of social change are not considered a force within the macroenvironment because they do not directly impact the economic factors of a business. The macroenvironment refers to the external factors that can influence a business, such as economic, political, social, and technological factors. While rates of social change can indirectly affect businesses, they are not typically considered a force within the macroenvironment as they do not directly impact economic conditions or business operations.

The correct answer is "industry." This is because United Airlines, Amtrak, and Greyhound are all companies that operate within the transportation industry. They provide transportation services to individuals and businesses, whether it be through air travel, train travel, or bus travel. Therefore, they all fall under the umbrella of the transportation industry.

Rollie is using benchmarking to improve her car wash. Benchmarking involves studying and adopting the best practices of industry leaders or competitors to improve one's own business. In this case, Rollie is reading publications for car wash owners to learn the best practices in the industry and then implementing them in her own car wash. This helps her stay competitive and improve her business by incorporating proven strategies and techniques used by successful car wash owners.

The primary goal of a SWOT analysis is to create, affirm, or fine-tune a company-specific business model. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats, and the analysis helps a company identify and evaluate these factors. By doing so, the company can develop a better understanding of its internal and external environment, and make informed decisions about its business model. This process allows the company to identify areas of improvement, capitalize on opportunities, and minimize threats, ultimately leading to the creation or refinement of a business model that aligns with the company's goals and objectives.

The correct answer is taking actions at the functional, business, and corporate levels. Strategic implementation refers to the process of putting a chosen strategy into action. It involves taking actions and making decisions at different levels of the organization, including functional (departmental), business unit, and corporate levels. This ensures that the strategy is effectively executed throughout the organization and aligns with the overall goals and objectives. This comprehensive approach allows for a coordinated and integrated implementation of the strategy across different levels and functions.

In an industry characterized by falling demand, high exit barriers, and excess productive capacity, there is a higher likelihood of a price war occurring. Falling demand means that there is less demand for the products or services offered by the industry, leading to increased competition among companies to attract customers. High exit barriers make it difficult for companies to leave the industry, forcing them to continue operating even in unfavorable conditions. Excess productive capacity means that there is more supply than demand, creating pressure for companies to lower prices to sell their products or services. All of these factors create a perfect storm for a price war to occur.

As the head of Kraft Foods, Betsy Holden is responsible for the division's operations and strategies. However, defining the mission of the entire Philip Morris Company would be the responsibility of the company's top executives, such as the CEO or the board of directors. Therefore, it is not likely to be one of Ms. Holden's responsibilities.

In the maturity stage of the industry life cycle, demand reaches total saturation. This means that the market has reached its peak and there is no further room for growth or expansion. At this stage, most potential customers have already been reached and the market is saturated with competitors offering similar products or services. As a result, demand levels off and remains stable, with little to no growth expected. This stage is characterized by intense competition and companies focusing on maintaining their market share rather than expanding it.

Mike works as a corporate trainer, teaching new employees how to perform manufacturing tasks. This indicates that Mike is involved in the training and development of the workforce, which falls under the human resources activity in the value chain. Human resources activities involve recruiting, training, and managing the employees of an organization to ensure they have the necessary skills and knowledge to perform their tasks effectively.

Julian should examine the aging of the population as part of the demographic environment facing his employer, a clothing manufacturer. This is important because the age distribution of the population can impact the demand for different types of clothing. As the population ages, there may be a greater demand for clothing that caters to older individuals, such as comfortable and easy-to-wear designs. Understanding the demographic trend of an aging population can help Julian's employer make informed decisions about their product offerings and marketing strategies.

When companies struggle to adapt their strategies and structures to match the changing competitive landscape, they face inertia. Inertia refers to the resistance to change or the inability to take action, which can hinder a company's ability to respond effectively to new market conditions. It implies that the company is stuck in its current ways and is unable to make the necessary adjustments to remain competitive.

The concept of the outside view suggests that Holly is considering the experiences of similar firms that have already added outdoor water features before making her decision. By looking at the experiences of others, she is taking an external perspective and using that information to inform her own decision-making process. This approach allows her to gain insights and learn from the successes and failures of others in order to make a more informed decision about expanding her services.