Chapter 1 - Introduction to Strategic Management

Chapter 1 - Introduction to Strategic Management Strategic Leadership - CORRECT ANSWER-Creating competitive advantage through effective management of the strategy-making process Strategy Formulation - CORRECT ANSWER-Selecting strategies based on analysis of an organization's external and internal environment Strategic Implementation - CORRECT ANSWER-Putting strategies into action - the most difficult step in the strategic management process Risk Capital - CORRECT ANSWER-Equity capital for which there is no guarantee that stockholders will ever recoup their investment or earn a decent return Shareholder Value - CORRECT ANSWER-Returns that shareholders earn from purchasing shares in a company - coming from two sources: dividends and capital appreciation Profitability - CORRECT ANSWER-The return a company makes on the capital invested in the enterprise Profit Growth - CORRECT ANSWER-The increase in net profit over time Competitive Advantage - CORRECT ANSWER-the achieved advantage over rivals when a company's profitability is a greater than the average profitability of firms in its industry Sustained Competitive Advantage - CORRECT ANSWER-A company's strategies enable it to maintain above-average profitability for a number of years Business Model - CORRECT ANSWER-The concentration of how strategies should work together as a whole to enable the company to achieve competitive advantage - Example: CVS not selling cigarettes General Managers - CORRECT ANSWER-Managers who bear responsibility for overall performance of the company or for one of its major self-contained subunits or divisions Functional Managers - CORRECT ANSWER-Managers responsible for supervising a particular function, that is, a task, activity, or operation, such as accounting, marketing, research and development (R&D), information technology, or logistics Multidivisional Company - CORRECT ANSWER-A company that competes in several different businesses and has created a separate self-contained division to manage each Business Unit - CORRECT ANSWER-A self-contained division that provides a product or service for a particular market Mission - CORRECT ANSWER-The purpose of the company, or a statement of what the company strives to do Vision - CORRECT ANSWER-The articulation of a company's desired achievements or future state Values - CORRECT ANSWER-A statement of how employees should conduct themselves and their business to help achieve the company mission SWOT Analysis - CORRECT ANSWER-the comparison of strengths, weaknesses, opportunities, and threats Scenario Planning - CORRECT ANSWER-Formulating plans that are based upon "what-if" scenarios about the future Cognitive Basis - CORRECT ANSWER-Systematic errors in human decision making that arise from the way people process information Prior Hypothesis Bias - CORRECT ANSWER-A cognitive bias that occurs when decision makers who have strong prior beliefs tend to make decisions on the basis of these beliefs, even when presented with evidence that their beliefs are wrong Escalating commitment - CORRECT ANSWER-A cognitive bias that occurs when decision makers, having already committed significant resources to a project, commit even more resources after receiving feedback that the project if failing - throwing good money after bad Reasoning by Analogy - CORRECT ANSWER-Use of simple analogies to make sense out of complex problems Representativeness - CORRECT ANSWER-A bias rooted in the tendency to generalize from a small sample or even a single vivid anecdote Illusion of Control - CORRECT ANSWER-A cognitive bias rooted in the tendency to overestimate one's ability to control events Availability Error - CORRECT ANSWER-A bias that arises from our predisposition to estimate the probability of an outcome based on how easy the outcome is to imagine Devil's Advocacy - CORRECT ANSWER-A technique in which one member of a decision-m