Page | 1
STRATEGIC MANAGEMENT EXAM 1 -
TEXT QUESTIONS WITH DETAILED
VERIFIED ANSWERS
Strategy Ans: A company's action plan for outperforming its
competitors and achieving superior profitability
What strategy is about Ans: Competing differently from rivals -doing
what competitors don't do, or, even better, doing what they can't do
What every strategy needs Ans: Every strategy needs a distinctive
element that attracts customers and produces a competitive edge
When a strategy stands a chance of succeeding Ans: A strategy only
stands a chance of succeeding when it is predicted on actions, business
approaches, and competitive moves aimed at appealing to buyers in ways
that set a company apart from rivals
Characteristics of routes to competitive advantage Ans: There are many
routes to competitive advantage, but they all involve either giving buyers
what they perceive as superior value compared to the offerings of rival
sellers or giving buyers the same value as others at a lower cost to the
firm
Competitive Advantage Ans: A company achieves a competitive
advantage when it provides buyers with superior value compared to rival
sellers or offers the same value at a lower cost to the firm
Sustainable Competitive Advantage Ans: An advantage is sustainable if
it persists despite the best efforts of competitors to match or surpass this
advantage
Delivering superior value or delivering value more efficiently Ans: Nearly
always requires performing value chain activities differently than rivals
and building competencies and resource capabilities that are not readily
matched
, Page | 2
Distinctiveness Ans: If a strategy is not distinctive, then there can be no
competitive advantage, since no firm would be meeting customer needs
better or operating more efficiently than any other
What makes a competitive advantage sustainable Ans: Elements of the
strategy that give buyers lasting reasons to prefer a company's products
or services over those of competitors -reasons that competitors are
unable to nullify or overcome despite their best efforts
Four most frequently used and dependable strategic and dependable
approaches Ans: 1. Striving to be the industry's low-cost provider,
thereby aiming for a cost-based competitive advantage over rivals
2. Outcompeting rivals on the basis of differentiating features, such as
higher quality, wider product selection, added performance, value-added
services, more attractive styling, and technological superiority
3. Developing an advantage based on offering more value for the money
(best-cost provider strategy)
4. Focusing on a narrow market niche within an industry
Strategy is a work in progress Ans: Changing circumstances and
ongoing management efforts to improve the strategy cause a company's
strategy to evolve over time -a condition that makes the task of crafting
strategy a work in progress, not a one-time event
How strategy is shaped Ans: A company's strategy is shaped partly by
management analysis and choice and partly by the necessity of adapting
and learning by doing
Managers must be willing to modify strategy Ans: Managers of every
company must be willing and ready to modify the strategy in response to
changing market conditions, advancing technology, unexpected moves by
competitors, shifting buyer needs, emerging market opportunities, and
mounting evidence that the strategy is not working well
Industry environments characterized by high-velocity change Ans:
Require companies to repeatedly adapt their strategies
, Page | 3
Evolving strategy Ans: Adapting to new conditions and constantly
evaluating what is working well enough to continue and what needs to be
improved are normal parts of the strategy-making process, resulting in
an evolving strategy
A typical strategy is a blend of: Ans: 1. Proactive: planned initiatives to
improve the company's financial performance and secure a competitive
edge
2. Reactive: responses to unanticipated developments and fresh market
conditions
Deliberate Strategy Ans: Consists of proactive strategy elements that
are both planned and realized as planned
Emergent Strategy Ans: Consists of reactive strategy elements that
emerge as changing conditions warrant
Realized Strategy (Strategy In Toto) Ans: Tends to be a combination of
proactive and reactive elements, with certain strategy elements being
abandoned because they have become obsolete or ineffective
Business Model Ans: sets forth the logic for how its strategy will create
value for customers, while at the same time generate revenues sufficient
to cover costs and realize a profit
The two elements of a company's business model Ans: 1. Its customer
value proposition
2. Its profit formula
Customer value proposition Ans: Lays out the company's approach to
satisfying buyers wants and needs at a price customers will consider a
good value. Customers want the best value for the cost (C), (Value-
Price).
Profit formula Ans: The profit formula describes the company's approach
to determining a cost structure that will allow for acceptable profit, given
the pricing tied to its customer value proposition. The profit formula
, Page | 4
reveals how efficiently a company can meet customer wants and needs
and deliver on the value proposition
The Fit Test Ans: How well does the strategy fit the company's
situation?
External Fit Ans: 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
Internal Fit Ans: A strategy must be tailored to the company's resources
and competitive capabilities and be supported by a complementary set of
functional activities
Dynamic Fit Ans: 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 internal conditions
change
Competitive Advantage Test Ans: Can the strategy help the company
achieve a sustainable competitive advantage?
The Performance Test Ans: Is the strategy producing good company
performance?
Two kinds of performance indicators tell the most about the caliber of a
competitive strategy: Ans: 1. Competitive strength and market standing
2. Profitability and financial strength
Good Management = Ans: Good Strategy + Good Strategy Execution
A Winning Strategy must pass three tests: Ans: 1. The Fit Test
2. The Competitive Advantage Test
3. The Performance Test
STRATEGIC MANAGEMENT EXAM 1 -
TEXT QUESTIONS WITH DETAILED
VERIFIED ANSWERS
Strategy Ans: A company's action plan for outperforming its
competitors and achieving superior profitability
What strategy is about Ans: Competing differently from rivals -doing
what competitors don't do, or, even better, doing what they can't do
What every strategy needs Ans: Every strategy needs a distinctive
element that attracts customers and produces a competitive edge
When a strategy stands a chance of succeeding Ans: A strategy only
stands a chance of succeeding when it is predicted on actions, business
approaches, and competitive moves aimed at appealing to buyers in ways
that set a company apart from rivals
Characteristics of routes to competitive advantage Ans: There are many
routes to competitive advantage, but they all involve either giving buyers
what they perceive as superior value compared to the offerings of rival
sellers or giving buyers the same value as others at a lower cost to the
firm
Competitive Advantage Ans: A company achieves a competitive
advantage when it provides buyers with superior value compared to rival
sellers or offers the same value at a lower cost to the firm
Sustainable Competitive Advantage Ans: An advantage is sustainable if
it persists despite the best efforts of competitors to match or surpass this
advantage
Delivering superior value or delivering value more efficiently Ans: Nearly
always requires performing value chain activities differently than rivals
and building competencies and resource capabilities that are not readily
matched
, Page | 2
Distinctiveness Ans: If a strategy is not distinctive, then there can be no
competitive advantage, since no firm would be meeting customer needs
better or operating more efficiently than any other
What makes a competitive advantage sustainable Ans: Elements of the
strategy that give buyers lasting reasons to prefer a company's products
or services over those of competitors -reasons that competitors are
unable to nullify or overcome despite their best efforts
Four most frequently used and dependable strategic and dependable
approaches Ans: 1. Striving to be the industry's low-cost provider,
thereby aiming for a cost-based competitive advantage over rivals
2. Outcompeting rivals on the basis of differentiating features, such as
higher quality, wider product selection, added performance, value-added
services, more attractive styling, and technological superiority
3. Developing an advantage based on offering more value for the money
(best-cost provider strategy)
4. Focusing on a narrow market niche within an industry
Strategy is a work in progress Ans: Changing circumstances and
ongoing management efforts to improve the strategy cause a company's
strategy to evolve over time -a condition that makes the task of crafting
strategy a work in progress, not a one-time event
How strategy is shaped Ans: A company's strategy is shaped partly by
management analysis and choice and partly by the necessity of adapting
and learning by doing
Managers must be willing to modify strategy Ans: Managers of every
company must be willing and ready to modify the strategy in response to
changing market conditions, advancing technology, unexpected moves by
competitors, shifting buyer needs, emerging market opportunities, and
mounting evidence that the strategy is not working well
Industry environments characterized by high-velocity change Ans:
Require companies to repeatedly adapt their strategies
, Page | 3
Evolving strategy Ans: Adapting to new conditions and constantly
evaluating what is working well enough to continue and what needs to be
improved are normal parts of the strategy-making process, resulting in
an evolving strategy
A typical strategy is a blend of: Ans: 1. Proactive: planned initiatives to
improve the company's financial performance and secure a competitive
edge
2. Reactive: responses to unanticipated developments and fresh market
conditions
Deliberate Strategy Ans: Consists of proactive strategy elements that
are both planned and realized as planned
Emergent Strategy Ans: Consists of reactive strategy elements that
emerge as changing conditions warrant
Realized Strategy (Strategy In Toto) Ans: Tends to be a combination of
proactive and reactive elements, with certain strategy elements being
abandoned because they have become obsolete or ineffective
Business Model Ans: sets forth the logic for how its strategy will create
value for customers, while at the same time generate revenues sufficient
to cover costs and realize a profit
The two elements of a company's business model Ans: 1. Its customer
value proposition
2. Its profit formula
Customer value proposition Ans: Lays out the company's approach to
satisfying buyers wants and needs at a price customers will consider a
good value. Customers want the best value for the cost (C), (Value-
Price).
Profit formula Ans: The profit formula describes the company's approach
to determining a cost structure that will allow for acceptable profit, given
the pricing tied to its customer value proposition. The profit formula
, Page | 4
reveals how efficiently a company can meet customer wants and needs
and deliver on the value proposition
The Fit Test Ans: How well does the strategy fit the company's
situation?
External Fit Ans: 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
Internal Fit Ans: A strategy must be tailored to the company's resources
and competitive capabilities and be supported by a complementary set of
functional activities
Dynamic Fit Ans: 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 internal conditions
change
Competitive Advantage Test Ans: Can the strategy help the company
achieve a sustainable competitive advantage?
The Performance Test Ans: Is the strategy producing good company
performance?
Two kinds of performance indicators tell the most about the caliber of a
competitive strategy: Ans: 1. Competitive strength and market standing
2. Profitability and financial strength
Good Management = Ans: Good Strategy + Good Strategy Execution
A Winning Strategy must pass three tests: Ans: 1. The Fit Test
2. The Competitive Advantage Test
3. The Performance Test
