MGMT 4513- AIME FINAL QUESTIONS & ANSWERS
Strategic Management - Answer -the study of why some firms outperform others
Mission - Answer -statement explaining why a company exists. both internal and
external. No time frame.
Vision - Answer -Crystallization of what leaders want firm to be. Guides development of
strategy and organization. achievable within a time period. Internal except for slogans.
Goals/ Strat. Plan - Answer -How to beat present and potential competitors. Set of
actions to provide products or services that create more value than their cost.
Constantly changing. Internal use.
Strat Mgmt- Firm Perspective - Answer -Goals and values, resources and capabilities,
structure and systems.
Strat Mgmt- The industry Environment - Answer -competitors, customers, suppliers
Alt. views of "outperform others" - Answer -economic value model: max shareholder
wealth
Objectives other than wealth creation
Stakeholder surplus model: defines benificiary group and max wealth for total group
How do we know if a company is performing well? - Answer --to replace assets a firm
must earn return on capital in excess of cost of capital
-to survive acquisition, firm must achieve stock market value in excess of break-up
value
Value Metrics Framework - Answer -shareholder value: market value of the firm, MVA,
return to shareholders.
Intrinsic Value: discounted CFs, real option values
Financial Indicators: Return on Capital, Growth, EVA
Value Drivers: Market Share, Scale Economies, Innovation, Brands
2 Approaches for eval. firm performance - Answer -1. financial Ratio analysis: balance
sheet, income stmt
2. Stakeholder Perspective: employees, owners, customers
Stakeholders - Answer -individuals and groups who can affect the strategic outcomes
achieved & have enforceable claims on a firms performance
Capital Market, Product Market and Organizational Stakeholders.
Strategic Competitiveness - Answer -When a firm successfully formulates and
implements a value-creating strategy
, Sustainable Competitive Advantage - Answer -When competitors are unable to
duplicate a companys value-creating strategy
Strategic Management Process - Answer -full set of commitments, decisions, and
actions required for a firm to achieve strategic competitiveness and earn above-average
returns
Risk - Answer -an investor's uncertainty about the economic gains or losses that will
result from a particular investment
Avg. Returns - Answer -Returns equal to those an investor expects to earn from other
investments w/ a similar amount of risk
Above avg. returns - Answer -returns in excess of what an investor expects to earn
from other investments w/ a similar amount of risk
Corporate Governance - Answer -the relationship among various participants in
determining the direction and performance of corporations
External Environments - Answer -General, Industry, Competitor
General Environment - Answer -focused on the future. Little ability to predict trends and
events, less ability to control them, can vary across industries.
Industry environment - Answer -focused on factors and conditions influencing a firm's
profitability w/in an industry. firms that influence one another and produce close
substitutes.
competitor environment - Answer -focused on predicting the dynamics of competitors
actions, responses and intentions. sometimes called task or industry environment
Switching Price - Answer -price at which product value equals value of next best alt. for
that customer or segment
How to capture consumer surplus - Answer -product differentiation, tailor pricing to
segments
Porter's Five Forces Model1 - Answer -Potential Entrants- threat of new entrants,
Buyers- bargaining power of buyers, Substitutes- threat of substitute products and
services, Suppliers- bargaining power of suppliers, Industry Competitors- rivalry among
firms
Threat of Substitutes - Answer -Increases when buyers face few switching costs, subs
product's price is lower, sub product's quality and performance are equal to or greater
than existing product.
Strategic Management - Answer -the study of why some firms outperform others
Mission - Answer -statement explaining why a company exists. both internal and
external. No time frame.
Vision - Answer -Crystallization of what leaders want firm to be. Guides development of
strategy and organization. achievable within a time period. Internal except for slogans.
Goals/ Strat. Plan - Answer -How to beat present and potential competitors. Set of
actions to provide products or services that create more value than their cost.
Constantly changing. Internal use.
Strat Mgmt- Firm Perspective - Answer -Goals and values, resources and capabilities,
structure and systems.
Strat Mgmt- The industry Environment - Answer -competitors, customers, suppliers
Alt. views of "outperform others" - Answer -economic value model: max shareholder
wealth
Objectives other than wealth creation
Stakeholder surplus model: defines benificiary group and max wealth for total group
How do we know if a company is performing well? - Answer --to replace assets a firm
must earn return on capital in excess of cost of capital
-to survive acquisition, firm must achieve stock market value in excess of break-up
value
Value Metrics Framework - Answer -shareholder value: market value of the firm, MVA,
return to shareholders.
Intrinsic Value: discounted CFs, real option values
Financial Indicators: Return on Capital, Growth, EVA
Value Drivers: Market Share, Scale Economies, Innovation, Brands
2 Approaches for eval. firm performance - Answer -1. financial Ratio analysis: balance
sheet, income stmt
2. Stakeholder Perspective: employees, owners, customers
Stakeholders - Answer -individuals and groups who can affect the strategic outcomes
achieved & have enforceable claims on a firms performance
Capital Market, Product Market and Organizational Stakeholders.
Strategic Competitiveness - Answer -When a firm successfully formulates and
implements a value-creating strategy
, Sustainable Competitive Advantage - Answer -When competitors are unable to
duplicate a companys value-creating strategy
Strategic Management Process - Answer -full set of commitments, decisions, and
actions required for a firm to achieve strategic competitiveness and earn above-average
returns
Risk - Answer -an investor's uncertainty about the economic gains or losses that will
result from a particular investment
Avg. Returns - Answer -Returns equal to those an investor expects to earn from other
investments w/ a similar amount of risk
Above avg. returns - Answer -returns in excess of what an investor expects to earn
from other investments w/ a similar amount of risk
Corporate Governance - Answer -the relationship among various participants in
determining the direction and performance of corporations
External Environments - Answer -General, Industry, Competitor
General Environment - Answer -focused on the future. Little ability to predict trends and
events, less ability to control them, can vary across industries.
Industry environment - Answer -focused on factors and conditions influencing a firm's
profitability w/in an industry. firms that influence one another and produce close
substitutes.
competitor environment - Answer -focused on predicting the dynamics of competitors
actions, responses and intentions. sometimes called task or industry environment
Switching Price - Answer -price at which product value equals value of next best alt. for
that customer or segment
How to capture consumer surplus - Answer -product differentiation, tailor pricing to
segments
Porter's Five Forces Model1 - Answer -Potential Entrants- threat of new entrants,
Buyers- bargaining power of buyers, Substitutes- threat of substitute products and
services, Suppliers- bargaining power of suppliers, Industry Competitors- rivalry among
firms
Threat of Substitutes - Answer -Increases when buyers face few switching costs, subs
product's price is lower, sub product's quality and performance are equal to or greater
than existing product.
