Strategic Mgmt – Exams 1 & 2

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It is normal for a company’s strategy top end up being
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a blend of deliberate planned actions to improve the company’s competitiveness and financial performance and as-needed unplanned reactions to unanticipated developments and fresh market conditions.
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A well-conceived strategy is value creating producing excellence in company performance and is best when the gains are achieved
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* In developing a desirable competitive edge * in developing distinctive competencies and sustainability * in profitability and financial strength * in competitive strength and market standing
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A company’s realized strategy is
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typically a blend of deliberate/planned initiatives and emergent/unplanned reactive strategy elements.
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A company needs financial objectives
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because without adequate profitability and financial strength, the company’s ultimate survival is jeopardized.
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A balanced scorecard that includes both strategic and financial performance targets is a conceptually strong approach for judging a company’s overall performance because
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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.
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Thinking strategically about industry and competitive conditions in a given industry involves evaluating such considerations as
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how often sellers alter their prices, how sensitive buyers are to price differences among sellers, whether the item being purchased is a good or a service, and whether buyers buy frequently or infrequently.
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Whether buyer bargaining power poses a strong or weak source of competitive pressure on industry members depends in part on
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whether buyer demand is strong or declining.
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The bargaining leverage of suppliers is greater when
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only a small number of suppliers exist and when it is difficult for industry members to switch to attractive substitutes.
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Artificial sweetener as a substitute for sugar is a good example of a substitute product that triggers stronger competitive pressures? True/False
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True
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Digital cameras as substitutes for film cameras is a good example of a substitute product that triggers stronger competitive pressures? True/False
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True
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Wireless phone service as a substitute for a landline telephone is a good example of a substitute product that triggers stronger competitive pressures? True/False
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True
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Video-on-demand services as a substitute for renting movies from a movie rental store is a good example of a substitute product that triggers stronger competitive pressures? True/False
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True
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Coca-Cola as a substitute for Pepsi is a good example of a substitute product that triggers stronger competitive pressures? True/False
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False
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The rivalry among competing sellers tends to be less intense when
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industry rivals are not particularly aggressive in drawing sales and market share away from rivals.
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What factors should a company consider when determining if an industry offers good prospects for attractive profits?
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The industry’s growth potential, whether competition appears destined to become stronger or weaker, how the industry’s driving forces might affect overall industry profitability, the company’s competitive position relative to rivals, and the company’s proficiency in performing industry key success factors
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Every organization has many resources, capabilities and routines however those few things the company does really well and are performed with a very high proficiency are termed
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Distinct capabilities.
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One of the most telling signs of whether a company’s market position is strong or precarious is
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whether its prices and costs are competitive with those of key rivals.
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A company that is at a disadvantage in the marketplace because it lacks competitively valuable resources possessed by rivals
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may be able to develop substitute resources that accomplish the same objective as the competitively valuable resource possessed by rivals.
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Sizing up a company’s overall resource strengths and weaknesses
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essentially involves constructing a \”strategic balance sheet\” where the company’s resource strengths represent competitive assets and its resource weaknesses represent competitive liabilities.
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Identifying the primary and secondary activities that comprise a company’s value chain
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is the first step in understanding a company’s cost structure (since each activity in the value chain gives rise to costs).
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One important indicator of how well a company’s present strategy is working is whether
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the company is achieving gains in financial strength.
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A broad differentiation strategy generally produces the best results in situations where
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few rivals are following a similar differentiation approach.
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Broad differentiation strategies generally work best in market circumstances where
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buyer needs and preferences are too diverse to be fully satisfied by a standardized product.
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While there are many routes to competitive advantage, they all involve
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delivering superior value to buyers in ways rivals cannot readily match.
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A company’s competitive strategy should
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be well matched to its internal situation and predicated on leveraging its collection of competitively valuable resources and competencies.
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Mergers and acquisitions are often driven by such strategic objectives as to
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expand a company’s geographic coverage, extend its business into new product categories, or gain quick access to new technologies or other resources and capabilities.
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Leapfrogging competitors by being the first adopter of next-generation technologies or being first to market with next-generation products is among the principal offensive strategy options that a company can employ? True/False
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True
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Capturing unoccupied or less contested territory by maneuvering around is among the principal offensive strategy options that a company can employ? True/False
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True
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Offering an equally good or better product at a lower price is among the principal offensive strategy options that a company can employ? True/False
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True
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Attacking the competitive weakness of rivals is among the principal offensive strategy options that a company can employ? True/False
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True
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Blocking the avenues open to challengers is among the principal offensive strategy options that a company can employ? True/False
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False
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For backward vertical integration into the business of suppliers to be a viable and profitable strategy, a company must
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be able to achieve the same scale economies as outside suppliers and also match or beat suppliers’ production efficiency with no drop in quality.
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Gaining better access to end users and better market visibility is typically the strategic impetus for forward vertical integration? True/False
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True
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The big risk of employing an outsourcing strategy is
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hollowing out a firm’s own capabilities and losing touch with activities and expertise that contribute fundamentally to the firm’s competitiveness and market success.
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The two best reasons for investing company resources in vertical integration (either forward or backward) are to
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strengthen the company’s competitive position and/or boost its profitability.
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Pursuing continuous product innovation to draw sales and market share away from less innovative rivals is an example of
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offensive strategy.
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Experience indicates that strategic alliances
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stand a reasonable chance of helping a company reduce competitive disadvantage, but very rarely form the basis of a durable competitive advantage over rivals.
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A country’s business climate is not a function of the political and economic risk factors, such as:
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host-government hostility toward allowing foreign businesses market entry, often requiring local produced parts and components to be included in manufacturing, allowing for ease of funds transfers from the host country, and often requiring local ownership.
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The advantages of using an export strategy to build a customer base in foreign markets include
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minimizing capital requirements and involvement in foreign markets.
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Two drawbacks of a \”think local, act local\” multidomestic strategy are
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hindering a company’s transfer of competencies and resources across country boundaries (since somewhat different competencies and capabilities are likely to be employed in different host countries) and not promoting the building of a single, unified competitive advantage in all country markets where a company competes.
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A \”think local, act local\” multidomestic type of strategy
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is more appealing the bigger the country-to-country differences in buyer tastes, cultural traditions, and marketing methods.
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A joint venture is an attractive way for a company to enter a new industry when
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a firm is missing some essential skills or capabilities or resources and needs a partner to supply the missing expertise and competencies or fill the resource gaps.
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Diversification merits strong consideration whenever a single-business company
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is faced with diminishing market opportunities and stagnating sales in its principal business.
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The value of determining the relative competitive strength of each business a company has diversified into is
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to have a quantitative basis for rating them from strongest to weakest in contending for market leadership in their respective industries.
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The businesses in a diversified company’s lineup exhibit good resource fit when
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individual businesses add to a company’s resource strengths and when a company has the resources to adequately support the requirements of its businesses as a group without spreading itself too thin.
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The two biggest drawbacks or disadvantages of unrelated diversification are
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the difficulties of competently managing a set of fundamentally different businesses and having a very limited competitive advantage potential that cross-business strategic fit provides.
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A diversified company’s business units exhibit good resource fit when
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a company has the resources to adequately support the requirements of its businesses as a group without spreading itself too thin and when individual businesses add to a company’s overall resource strengths.
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Checking a diversified firm’s business portfolio for the competitive advantage potential of cross-business strategic fits entails consideration of
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the extent to which there are competitively valuable relationships between the value chains of sister business units and what opportunities they present to reduce costs, share use of a potent brand name, or transfer skills or technology or intellectual capital from one business to another.
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What makes related diversification an attractive strategy is
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the opportunity to convert the competitive advantage potential into 1 + 1 = 3 gains in shareholder value.
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To create value for shareholders via diversification, a company must
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diversify into businesses that can perform better under a single corporate umbrella than they could perform operating as independent, stand-alone businesses.
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Dominant business enterprise
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is a diversified business with one major \”core\” business and a collection of small related or unrelated businesses.
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Cross-business strategic fits can be found
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anywhere along the respective value chains of related businesses.
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The major drivers of unethical business behavior include
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corporate cultures that put the bottom line ahead of ethics, heavy pressures on company managers to meet or beat performance targets, and overzealous or obsessive pursuit of wealth accumulation, power, status, and other selfish interests.
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Some of the most important nonmonetary approaches to enhancing motivation and helping drive successful strategy execution include
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* adopting promotion from within policies and acting on suggestions from employees. * using frequent words of praise to recognize employees for commendable performance. * providing attractive perks and fringe benefits. * creating a work atmosphere in which there is genuine sincerity, caring, and mutual respect among employees and management.
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Total quality management (TQM) programs
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achieve the biggest success when extended to employee efforts in all departments—human resources, R&D, accounting and records, information systems, and so forth.
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The guidelines for designing an incentive compensation system that will help drive successful strategy execution include
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making the payoff for meeting or beating performance targets a major, not minor, piece of the total compensation package.
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The statistical thinking underlying Six Sigma is based on the following three principles:
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All work is a process, all processes have variability, and all processes create data that explains variability.
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The two factors that most distinguish one competitive strategy from another boil down to __________________
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(1) whether a company’s market target is broad or narrow, and (2) whether the company is pursuing a competitive advantage based on differentiation or costs.
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Five generic types of competitive strategy are
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A low-cost provider strategy, a focused low-low cost strategy, a focused differentiation strategy, a broad differentiation strategy, and a best-cost provider strategy.
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A company achieves low-cost leadership when ________________
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it becomes the industry’s low-cost provider rather than just being one of perhaps several competitors with comparatively low costs.
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What are the two ways a company can translate its low-cost advantage over rivals into attractive profit performance?
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Either using its low-cost edge to underprice competitors and attract price-sensitive buyers in large enough numbers to increase total profits or refraining from price cutting and using the low-cost advantage to earn a bigger profit margin on each unit sold.
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Which strategic approach tends to work best when price competition among rival sellers is vigorous, buyers are large, and there are few ways to achieve product differentiation?
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A low-cost provider strategy
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Avenues for performing value chain activities at a lower cost than rivals include all of the following except ______________
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avoiding outsourcing and vertical integration.
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Cost drivers __________
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are factors having a strong effect on the cost of a company’s value chain activities and cost structure.
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Successful differentiation allows a firm to __________
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command a premium price for its product, and/or increase unit sales, and/or gain buyer loyalty to its brand.
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When choosing a differentiation strategy which of the following actions can a company select to deliver superior value to the customers?
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* Including product attributes and user features that lower the buyer’s costs. * Reducing a buyer’s inventory requirements. * Incorporating tangible features that improve product performance. * Incorporate intangible features that enhance buyer satisfaction in noneconomic ways.
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Which strategy tends to work best when buyer needs and uses of the product are diverse?
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A differentiation strategy
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A differentiation strategy works best in which of the following market circumstances?
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When there are many ways to differentiate the product or service that have value to buyers.
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Activities that managers can pursue to enhance differentiation through the systematic management of uniqueness drivers include the following:
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* Pursuing continuous quality improvement * Investing in production-related R&D activities * Striving for innovation and technological advances * Increasing emphasis on marketing and brand-building activities
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A focused low-cost strategy aims at __________
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securing a competitive advantage by serving buyers in the target market niche at lower cost than those of rival competitors.
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Successful use of a focused differentiation strategy depends on _________
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the existence of a buyer segment that is looking for special product attributes or seller capabilities.
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Which strategic approaches becomes most appealing when a market is not important to industry leaders?
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A focused strategy
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Best-cost provider strategies work best when _____________
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product differentiation is the norm and there is an attractively large number of value-conscious buyers.
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A best-cost provider’s resources and capabilities must allow ____________
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the incorporation of upscale attributes into its product offering at a lower cost than rivals.
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The marketing emphasis of a company pursuing a focused differentiation strategy usually is to ______________
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highlight carefully designed products or services appealing to the unique preferences and needs of a narrow, well-defined group of buyers.
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The strategic target of a best-cost provider is ____________
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the value-conscious buyer.
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A company’s competitive strategy is unlikely to succeed unless ____________
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it is predicated on leveraging a competitively valuable collection of resources and capabilities that match the strategy.
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A Firm’s Ethical Duties to Its Stakeholders
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* To always act in a legal, ethical and moral manner in its relations with all stakeholders * To demonstrate socially responsible behavior by being a committed corporate citizen * To adopt business practices that conserve natural resources and protect the interest of future generations
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Business Ethics
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Is the application of ethical principles and standards to the actions and decisions of business organizations and the conduct of their personnel.
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How do ethics and business ethics differ?
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Ethical principles in business are not different materially different from ethical principles in general.
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Business actions
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* Are judged by general ethical standards of society. * Are not subject to more permissive standards.
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Reasons for unethical behaviors
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* The view that \”the business of business is business, not ethics\” * Heavy pressures on managers to meet performance targets * A company culture that fosters illegal and unethical conduct * Overzealous pursuit of wealth and other selfish interests
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The Sarbanes-Oxley Act (2002)
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Requires that publicly-traded firms have a code of ethics or else explain in writing to the Securities and Exchange Commission why they do not.
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Applying ethical standards across countries and cultures
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* The School of Ethical Universalism * The School of Ethical Relativism * Integrative Social Contracts Theory
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According to the school of ethical universalism
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* Some concepts of what is right and what is wrong are universal and transcend most all cultures, societies, and religions. * All societies, companies, and individuals are accountable to a set of universal ethical standards. * Where basic moral standards really do not vary significantly according to local cultural beliefs, traditions, or religious convictions, a multinational company can develop a code of ethics that it applies more or less evenly across its worldwide operations.
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According to the school of ethical relativism
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* What is to be deemed ethical or unethical behavior must be judged by local social and moral standards. * It is appropriate for local moral standards to take precedence over ethical standards in a company’s home market.
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Risks of ethical relativism
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* The assumption that local morality is an adequate guide for ethical behavior. * Loss of the moral basis for enforcing company-wide ethical standards across the differing markets of a multinational firm.
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Integrative Social Contracts Theory – The ethical standards a firm should uphold are governed by:
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* A limited number of universal ethical principles that are widely recognized as putting legitimate ethical boundaries on actions and behavior in all situations. * The circumstances of local cultures, traditions, and values that further prescribe what constitutes ethically permissible behavior and what does not.
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Integrative social contracts theory provides
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That \”first order\” universal ethical norms always take precedence over \”second order\” local ethical norms when local norms are more permissive.
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Ethical \”gray areas\”
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There are many instances where cross-country differences in ethical norms create situations where it is tough to draw a line in the sand between right and wrong decisions, actions, and business practices.
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Engaging in corporate social responsibility involves the firm’s assumption of a series of responsibilities:
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* Economic responsibility to shareholders * Legal responsibility to comply with the laws of the countries where it operates * Ethical responsibility to abide by society’s norms * Discretionary philanthropic responsibility to meet the unmet needs of society
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Corporate Social Responsibility
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A balance of: People, planet, profit AND Triple bottom line performance
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Crafting Strategy
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*Market-and resource-driven activities * Success depends on – Attracting and pleasing customers – Outcompeting rivals – The firm’s collection of resources and capabilities
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Implementing Strategy
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* Execution of operations-driven activities * Successful depends on management’s ability to – Direct change – Allocate resources – Build capabilities – Build strategy-supportive policies and culture – Deliver good results
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Organization building actions
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* Staffing the organization’s workforce * Acquiring, developing, and strengthening strategy-supportive resources and capabilities * Structuring the organization and work effort
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Assembling a capable management team is a cornerstone organization-building task:
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* Put people with strong strategy implementation skills and a results orientation in key managerial posts. * Replace weak executives, strengthening the skills of those who remain, and bringing in fresh outsiders.
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Good strategy execution requires:
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* Putting key resources and capabilities into place. * Refreshing and strengthening them as needed. * Modifying them as market conditions evolve.

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