MAN 4720 EXAM 2 WITH CORRECT
SOLUTIONS
Chapter 4 - ANSWER-Chapter 4
Three indicators of how well a company's strategy is working: - ANSWER-1. whether it
is achieving its stated financial and strategic objectives
2. whether its financial performance is above industry average
3. whether its gaining customers and gaining market share
Specific Indicators of Strategic Success - ANSWER-- sales and earnings growth trends
- stock price trends
- company's overall financial strength
- customer retention rate
- rate of new customers acquired
- evidence of improvement in internal processes
DuPont Formula (ROE) - ANSWER-profit margin (ROS) x asset turnover x leverage
less 5% =bad; 5-10%=fair; 10-15%=good; greater than 15%=excellent
Return on Sales (Profit Margin) - ANSWER-Net Income/Sales(Revenue)
compare against industry average.(higher=better)
Asset Turnover - ANSWER-Sales/Total Assets
should be at least 1 (higher=better; more efficient)
Return on Assets (ROA) - ANSWER-ROS x Asset Turnover (efficient use of assets)
8% and up is usually good
Leverage - ANSWER-Assets/Equity
1.5-2.5 is acceptable (higher=bad; high debt)
Compound Annual Growth Rate (CAGR) - ANSWER-the average annual growth rate
over a specified period of time. [ (Ending Sales/Starting Sales)^1/# of years -1 ]
15% is exceptionally good
,SWOT analysis - ANSWER-identifying internal strengths (S) and internal weaknesses
(W) and also examining market opportunities (O) and external threats (T)
Internal Strength - ANSWER-something a company is good at doing or an attribute that
enhances its competitiveness in the marketplace
core competencies - ANSWER-is activity that a firm performs well and that is also
central to its strategy and competitive success
distinctive competence - ANSWER-what a company can make, do, or perform better
than its competitors
Internal Weakness - ANSWER-something a firm lacks or does poorly or a condition that
outs it at a competitive disadvantage in the marketplace
Identifying Market Opportunities - ANSWER-Examine the marketplace
Observe demand trends and competition in various market segments
Identifying External Threats - ANSWER-types (normal course-of-business & sudden-
death)
What do SWOT listings reveal? - ANSWER-new strategy
Competitive Assets - ANSWER-are the firm's resources and capabilities and are the
determinants of its competitiveness and ability to succeed in the marketplace.
resource - ANSWER-a productive input or competitive asset that is owned or controlled
by the firm
Tangible Resources - ANSWER-physical resources, financial resources, technological
assets, organizational resources
intangible resources - ANSWER-human & intellectual, brands, image, reputation,
relationships, and company culture & incentive systems
capability - ANSWER-the capacity of a firm to perform some internal activity proficiently
organizational capability - ANSWER--Is the intangible but observable capacity of a firm
to perform a critical activity proficiently using a related combination of its resources.
-Is knowledge-based, residing in people and in a firm's intellectual capital or in its
organizational processes and functional systems, which embody tacit knowledge.
VIRN Test - ANSWER-for sustainable competitive advantage ask if a resource or
capability is Valuable, Rare, Inimitable, and Non-substitutable
, Social Complexity - ANSWER-refers to factors in a firm's culture, the interpersonal
relationships, its trust-based relations with customers or suppliers that contribute to its
competitive advantage
Casual Ambiguity - ANSWER-about the how the firm uses its resources and
relationships puts competitors at a loss in understanding how to imitate these complex
resources.
Path Dependence - ANSWER-refers to a firm's resources that must be built over time
rather than bought or are a function of being in the right place at the right time.
Threats to Resources and Capabilities - ANSWER--Rivals providing better substitutes
over time
-Capabilities decaying from benign neglect
-Disruptive competitive environment change
Signs of A Firm's Competitive Strength: - ANSWER-- Its prices and costs are in-line with
rivals
- Its customer-value proposition is competitive
and cost effective
- Its bundled capabilities are yielding
a sustainable competitive advantage
The Company's Value Chain - ANSWER-identifies the primary activities and related
support activities that create customer value
value chain analysis - ANSWER-Facilitates a comparison, activity-by-activity, of how
effectively and efficiently a firm delivers value to its customers, relative to its competitors
the value chain analysis process - ANSWER-segregate the firm's operations into
different types of primary and secondary activities to identify the major components of
its internal cost structure
industry value chain includes - ANSWER-•Internal value chain
•Value chains of upstream industry suppliers
•Value chains of forward channel intermediaries
Benchmarking - ANSWER-involves improving internal activities based on learning from
other companies "best practices"
Improving Internally Performed Value Chain Analysis - ANSWER--implementing best
practices
-redesign product, components and activities
-reallocate high-cost activities and resources
SOLUTIONS
Chapter 4 - ANSWER-Chapter 4
Three indicators of how well a company's strategy is working: - ANSWER-1. whether it
is achieving its stated financial and strategic objectives
2. whether its financial performance is above industry average
3. whether its gaining customers and gaining market share
Specific Indicators of Strategic Success - ANSWER-- sales and earnings growth trends
- stock price trends
- company's overall financial strength
- customer retention rate
- rate of new customers acquired
- evidence of improvement in internal processes
DuPont Formula (ROE) - ANSWER-profit margin (ROS) x asset turnover x leverage
less 5% =bad; 5-10%=fair; 10-15%=good; greater than 15%=excellent
Return on Sales (Profit Margin) - ANSWER-Net Income/Sales(Revenue)
compare against industry average.(higher=better)
Asset Turnover - ANSWER-Sales/Total Assets
should be at least 1 (higher=better; more efficient)
Return on Assets (ROA) - ANSWER-ROS x Asset Turnover (efficient use of assets)
8% and up is usually good
Leverage - ANSWER-Assets/Equity
1.5-2.5 is acceptable (higher=bad; high debt)
Compound Annual Growth Rate (CAGR) - ANSWER-the average annual growth rate
over a specified period of time. [ (Ending Sales/Starting Sales)^1/# of years -1 ]
15% is exceptionally good
,SWOT analysis - ANSWER-identifying internal strengths (S) and internal weaknesses
(W) and also examining market opportunities (O) and external threats (T)
Internal Strength - ANSWER-something a company is good at doing or an attribute that
enhances its competitiveness in the marketplace
core competencies - ANSWER-is activity that a firm performs well and that is also
central to its strategy and competitive success
distinctive competence - ANSWER-what a company can make, do, or perform better
than its competitors
Internal Weakness - ANSWER-something a firm lacks or does poorly or a condition that
outs it at a competitive disadvantage in the marketplace
Identifying Market Opportunities - ANSWER-Examine the marketplace
Observe demand trends and competition in various market segments
Identifying External Threats - ANSWER-types (normal course-of-business & sudden-
death)
What do SWOT listings reveal? - ANSWER-new strategy
Competitive Assets - ANSWER-are the firm's resources and capabilities and are the
determinants of its competitiveness and ability to succeed in the marketplace.
resource - ANSWER-a productive input or competitive asset that is owned or controlled
by the firm
Tangible Resources - ANSWER-physical resources, financial resources, technological
assets, organizational resources
intangible resources - ANSWER-human & intellectual, brands, image, reputation,
relationships, and company culture & incentive systems
capability - ANSWER-the capacity of a firm to perform some internal activity proficiently
organizational capability - ANSWER--Is the intangible but observable capacity of a firm
to perform a critical activity proficiently using a related combination of its resources.
-Is knowledge-based, residing in people and in a firm's intellectual capital or in its
organizational processes and functional systems, which embody tacit knowledge.
VIRN Test - ANSWER-for sustainable competitive advantage ask if a resource or
capability is Valuable, Rare, Inimitable, and Non-substitutable
, Social Complexity - ANSWER-refers to factors in a firm's culture, the interpersonal
relationships, its trust-based relations with customers or suppliers that contribute to its
competitive advantage
Casual Ambiguity - ANSWER-about the how the firm uses its resources and
relationships puts competitors at a loss in understanding how to imitate these complex
resources.
Path Dependence - ANSWER-refers to a firm's resources that must be built over time
rather than bought or are a function of being in the right place at the right time.
Threats to Resources and Capabilities - ANSWER--Rivals providing better substitutes
over time
-Capabilities decaying from benign neglect
-Disruptive competitive environment change
Signs of A Firm's Competitive Strength: - ANSWER-- Its prices and costs are in-line with
rivals
- Its customer-value proposition is competitive
and cost effective
- Its bundled capabilities are yielding
a sustainable competitive advantage
The Company's Value Chain - ANSWER-identifies the primary activities and related
support activities that create customer value
value chain analysis - ANSWER-Facilitates a comparison, activity-by-activity, of how
effectively and efficiently a firm delivers value to its customers, relative to its competitors
the value chain analysis process - ANSWER-segregate the firm's operations into
different types of primary and secondary activities to identify the major components of
its internal cost structure
industry value chain includes - ANSWER-•Internal value chain
•Value chains of upstream industry suppliers
•Value chains of forward channel intermediaries
Benchmarking - ANSWER-involves improving internal activities based on learning from
other companies "best practices"
Improving Internally Performed Value Chain Analysis - ANSWER--implementing best
practices
-redesign product, components and activities
-reallocate high-cost activities and resources
