BUS-421 MIDTERM STUDY GUIDE UPDATED ACTUAL
QUESTIONS AND CORRECT ANSWERS
Question:
1. Identifying strategies to improve sales performance [ch 1]
Answer:
A strategy defines what actions a company should take...
• To improve its financial performance
• To strengthen its competitive position
• To gain a sustainable competitive advantage over its rivals
Mimicking the strategies of successful industry rivals-with either copycat product
offerings or maneuvers to stake out the same market position-rarely works.
Rather, every company's strategy needs to have some distinctive element that
draws in customers and provides a competitive edge. Strategy, at its essence, is
about competing differently-doing what rival firms don't do (or do it better) or
doing what rival firms can't do.
A creative, distinct strategy will...
• Help produce above-average profits
• Increase competitive pressure on rivals
The five basic strategic approaches to winning a competitive advantage (also
known as the five generic competitive strategies) include:
1. A low-cost provider strategy. Sustainable while rivals cannot match the pricing.
2. A broad differentiation strategy. Appeals to a broader spectrum of buyers.
Sustainable while innovative enough to thwart rivals from imitation.
3. A focused low-cost strategy. Focused on low-costs in a niche market. Such as
offering generic/unbranded products for cheaper than the big brands or private-
label manufacturers.
4. A focused differentiation strategy. Boutique products to meet specialized,
unique, or custom needs, typically at a premium price.
5. A best-cost provider strategy. Blends low-cost with differentiation. Provides
some limited availability or unique products while also offering lower prices.
,Question:
2. Define deliberate strategies [ch 1]
Answer:
The biggest portion of a company's current strategy flows from previously
initiated actions that have proven themselves in the marketplace and newly
launched initiatives aimed at edging out rivals and boosting financial
performance. This part of management's action plan for running the company is its
deliberate strategy, consisting of proactive strategy elements that are both
planned and realized as planned (while other planned strategy elements may not
work out and are abandoned in consequence)
A company's deliberate strategy consists of proactive strategy elements that are
planned; its emergent strategy consists of reactive strategy elements that emerge
as changing conditions warrant.
Question:
3. Explain reactive/emergent strategies [ch 1]
Answer:
Managers must always be willing to supplement or modify the proactive
(deliberate) strategy elements with as-needed reactions to unanticipated
conditions. Inevitably, there will be occasions when market and competitive
conditions take an unexpected turn that calls for some kind of strategic reaction.
Hence, a portion of a company's strategy is always developed on the fly, coming
as a response to fresh strategic maneuvers on the part of rival firms, unexpected
shifts in customer requirements, fast-changing technological developments, newly
appearing market opportunities, a changing political or economic climate, or
other unanticipated happenings in the surrounding environment. These adaptive
strategy adjustments make up the firm's emergent strategy.
A company's strategy in toto (its realized strategy) thus tends to be a combination
of proactive and reactive elements, with certain strategy elements being
abandoned because they have become obsolete or ineffective. A company's
realized strategy can be observed in the pattern of its actions over time, which is a
far better indicator than any of its strategic plans on paper or any public
pronouncements about its strategy.
, Question:
4. How to evaluate a standout vs. low-performing
company's strategy (E) [ch 1, pp. 12-13]
Answer:
Three tests can be applied to determine whether a strategy is a winning strategy:
1. The Fit Test: Does the strategy exhibit fit with the external (with respect to
current market conditions), internal (the company has the resources and
capabilities to execute), and dynamic (it must be adaptable and remain in
alignment with changing company goals and internal & external conditions)
dimensions of a company's situation?
2. The Competitive Advantage Test: Does it help the company achieve a
sustainable competitive advantage?
3. The Performance Test: Will it produce superior results in profitability,
financial/competitive strength, and market share?
---
1. The Fit Test (external and internal): How well does the strategy fit the company's
situation? To qualify as a winner, a strategy has to be well matched to industry and
competitive conditions, a company's best market opportunities, and other
pertinent aspects of the business environment in which the company operates. No
strategy can work well unless it exhibits good external fit with respect to
prevailing market conditions. At the same time, a winning strategy must be tailored
to the company's resources and competitive capabilities and be supported by a
complementary set of functional activities (i.e., activities in the realms of supply
chain management, operations, sales and marketing, and so on). That is, it must
also exhibit an internal fit and be compatible with a company's ability to execute
the strategy in a competent manner. Unless a strategy exhibits good fit with both
the external and internal aspects of a company's overall situation, it is likely to be
an underperformer and will fall short of producing winning results. Winning
strategies also exhibit dynamic fit in the sense that they evolve over time in a
manner that maintains close and effective alignment with the company's situation
even as external and internal conditions change.
2. The Competitive Advantage Test: Is the strategy helping the company achieve a
sustainable competitive advantage? Strategies that fail to achieve a persistent
competitive advantage over rivals are unlikely to produce superior performance
for more than a brief period of time. Winning strategies enable a company to
achieve a competitive advantage over key rivals that is long-lasting. The bigger
and more durable the competitive advantage, the more powerful it is.
3. The Performance Test: Is the strategy producing superior company
performance? The mark of a winning strategy is strong company performance.
Two kinds of performance indicators tell the most about the caliber of a
company's strategy: (1) competitive strength and market standing and (2)
profitability and financial strength. Above-average financial performance or gains
in market share, competitive position, or profitability are signs of a winning
strategy.
Strategies-either existing or proposed-that come up short on one or more of
the preceding tests are plainly less appealing than strategies passing all three
tests with flying colors. New initiatives that don't seem to match the company's
QUESTIONS AND CORRECT ANSWERS
Question:
1. Identifying strategies to improve sales performance [ch 1]
Answer:
A strategy defines what actions a company should take...
• To improve its financial performance
• To strengthen its competitive position
• To gain a sustainable competitive advantage over its rivals
Mimicking the strategies of successful industry rivals-with either copycat product
offerings or maneuvers to stake out the same market position-rarely works.
Rather, every company's strategy needs to have some distinctive element that
draws in customers and provides a competitive edge. Strategy, at its essence, is
about competing differently-doing what rival firms don't do (or do it better) or
doing what rival firms can't do.
A creative, distinct strategy will...
• Help produce above-average profits
• Increase competitive pressure on rivals
The five basic strategic approaches to winning a competitive advantage (also
known as the five generic competitive strategies) include:
1. A low-cost provider strategy. Sustainable while rivals cannot match the pricing.
2. A broad differentiation strategy. Appeals to a broader spectrum of buyers.
Sustainable while innovative enough to thwart rivals from imitation.
3. A focused low-cost strategy. Focused on low-costs in a niche market. Such as
offering generic/unbranded products for cheaper than the big brands or private-
label manufacturers.
4. A focused differentiation strategy. Boutique products to meet specialized,
unique, or custom needs, typically at a premium price.
5. A best-cost provider strategy. Blends low-cost with differentiation. Provides
some limited availability or unique products while also offering lower prices.
,Question:
2. Define deliberate strategies [ch 1]
Answer:
The biggest portion of a company's current strategy flows from previously
initiated actions that have proven themselves in the marketplace and newly
launched initiatives aimed at edging out rivals and boosting financial
performance. This part of management's action plan for running the company is its
deliberate strategy, consisting of proactive strategy elements that are both
planned and realized as planned (while other planned strategy elements may not
work out and are abandoned in consequence)
A company's deliberate strategy consists of proactive strategy elements that are
planned; its emergent strategy consists of reactive strategy elements that emerge
as changing conditions warrant.
Question:
3. Explain reactive/emergent strategies [ch 1]
Answer:
Managers must always be willing to supplement or modify the proactive
(deliberate) strategy elements with as-needed reactions to unanticipated
conditions. Inevitably, there will be occasions when market and competitive
conditions take an unexpected turn that calls for some kind of strategic reaction.
Hence, a portion of a company's strategy is always developed on the fly, coming
as a response to fresh strategic maneuvers on the part of rival firms, unexpected
shifts in customer requirements, fast-changing technological developments, newly
appearing market opportunities, a changing political or economic climate, or
other unanticipated happenings in the surrounding environment. These adaptive
strategy adjustments make up the firm's emergent strategy.
A company's strategy in toto (its realized strategy) thus tends to be a combination
of proactive and reactive elements, with certain strategy elements being
abandoned because they have become obsolete or ineffective. A company's
realized strategy can be observed in the pattern of its actions over time, which is a
far better indicator than any of its strategic plans on paper or any public
pronouncements about its strategy.
, Question:
4. How to evaluate a standout vs. low-performing
company's strategy (E) [ch 1, pp. 12-13]
Answer:
Three tests can be applied to determine whether a strategy is a winning strategy:
1. The Fit Test: Does the strategy exhibit fit with the external (with respect to
current market conditions), internal (the company has the resources and
capabilities to execute), and dynamic (it must be adaptable and remain in
alignment with changing company goals and internal & external conditions)
dimensions of a company's situation?
2. The Competitive Advantage Test: Does it help the company achieve a
sustainable competitive advantage?
3. The Performance Test: Will it produce superior results in profitability,
financial/competitive strength, and market share?
---
1. The Fit Test (external and internal): How well does the strategy fit the company's
situation? To qualify as a winner, a strategy has to be well matched to industry and
competitive conditions, a company's best market opportunities, and other
pertinent aspects of the business environment in which the company operates. No
strategy can work well unless it exhibits good external fit with respect to
prevailing market conditions. At the same time, a winning strategy must be tailored
to the company's resources and competitive capabilities and be supported by a
complementary set of functional activities (i.e., activities in the realms of supply
chain management, operations, sales and marketing, and so on). That is, it must
also exhibit an internal fit and be compatible with a company's ability to execute
the strategy in a competent manner. Unless a strategy exhibits good fit with both
the external and internal aspects of a company's overall situation, it is likely to be
an underperformer and will fall short of producing winning results. Winning
strategies also exhibit dynamic fit in the sense that they evolve over time in a
manner that maintains close and effective alignment with the company's situation
even as external and internal conditions change.
2. The Competitive Advantage Test: Is the strategy helping the company achieve a
sustainable competitive advantage? Strategies that fail to achieve a persistent
competitive advantage over rivals are unlikely to produce superior performance
for more than a brief period of time. Winning strategies enable a company to
achieve a competitive advantage over key rivals that is long-lasting. The bigger
and more durable the competitive advantage, the more powerful it is.
3. The Performance Test: Is the strategy producing superior company
performance? The mark of a winning strategy is strong company performance.
Two kinds of performance indicators tell the most about the caliber of a
company's strategy: (1) competitive strength and market standing and (2)
profitability and financial strength. Above-average financial performance or gains
in market share, competitive position, or profitability are signs of a winning
strategy.
Strategies-either existing or proposed-that come up short on one or more of
the preceding tests are plainly less appealing than strategies passing all three
tests with flying colors. New initiatives that don't seem to match the company's
