BUS 498 Final Exam with Complete
Solutions| Latest Update
What is shareholder capitalism? Shareholders—the providers of the necessary risk capital
and the legal owners of public companies—have the most legitimate claim on profits.
What is shared value? A concept that involves creating economic value for shareholders
and social value by addressing society's needs and challenges
What is the shared value creation framework? a model proposing that managers have a
dual focus on shareholder value creation and value creation for society
Three things to focus on within the shared value creation framework 1. Expand the
customer base to bring in non consumers
2. Expand traditional internal firm value chains to include more nontraditional partners
3. Focus on creating new regional clusters
What is corporate governance? a system of mechanisms to direct and control an
enterprise in order to ensure that it pursues its strategic goals successfully and legally
What is agency theory? a theory that views the firm as a nexus of legal contracts
What is adverse selection? a situation that occurs when information asymmetry
increases the likelihood of selecting inferior alternatives
What is moral hazard? a situation in which information asymmetry increases the
incentive of one party to take undue risks or shirk other responsibilities because the costs incur
to the other party
,board of directors the centerpiece of corporate governance, composed of inside and
outside directors who are elected by the shareholders
inside directors Board members who are generally part of the company's senior
management team; appointed by shareholders to provide the board with necessary information
pertaining to the company's internal workings and performance.
outside directors board members who are not employees of the firm, but who are
frequently senior executives from other firms or full-time professionals
Other corporate mechanisms for aligning incentives for principles and agents 1. Executive
compensation
2. The market for corporate control
3. Financial statement auditors, government regulators, and industry analysts
business ethics An agreed-upon code of conduct in business, based on societal norms.
What is strategic management? It's the combined effort of analysis, formulation, and
implementation to try to achieve a competitive advantage.
What is a strategy? It is a set of specific steps a company takes to perform at and above
level compared to the competition.
What are the three key elements for a good strategy? 1. A diagnosis of the challenge aka
analysis
2. A guiding policy to address the challenge aka formulation
3. A set of coherent actions to implement the firm's policy aka implementation
How do you know you have the competitive advantage? When your firm performs
relatively better than your competitors or the industry average.
, What is sustainable competitive advantage? It's when your firm is able to outperform the
competition or industry average for a prolonged time period.
When do you suffer from competitive disadvantage? When your firm underperforms
compared to the competition or industry average.
When is there competitive parity? When two or more firms perform at the same level.
How do you gain competitive advantage? Provide goods or services consumers value
more highly than those of its competitors, or Provide goods or services similar to the
competitors' at a lower price.
What is strategic positioning? Choosing a position in an industry that allows you to
provide value while controlling cost but it does require trade-offs.
What strengthens a unique strategic position? Operational effectiveness, marketing skills,
and other functional expertise.
What is a strategy not? -Grandiose statements
-Failure to face a competitive challenge
-Operational effectiveness, competitive benchmarking or other tactical tools
When does value creation occur? When companies with a good strategy are able to
provide products or services to consumers at a price point that they can afford while checking
their costs.
What is stakeholder strategy? It's an integrative approach to managing a diverse set of
stakeholders effectively in order to gain and sustain competitive advantage.
Solutions| Latest Update
What is shareholder capitalism? Shareholders—the providers of the necessary risk capital
and the legal owners of public companies—have the most legitimate claim on profits.
What is shared value? A concept that involves creating economic value for shareholders
and social value by addressing society's needs and challenges
What is the shared value creation framework? a model proposing that managers have a
dual focus on shareholder value creation and value creation for society
Three things to focus on within the shared value creation framework 1. Expand the
customer base to bring in non consumers
2. Expand traditional internal firm value chains to include more nontraditional partners
3. Focus on creating new regional clusters
What is corporate governance? a system of mechanisms to direct and control an
enterprise in order to ensure that it pursues its strategic goals successfully and legally
What is agency theory? a theory that views the firm as a nexus of legal contracts
What is adverse selection? a situation that occurs when information asymmetry
increases the likelihood of selecting inferior alternatives
What is moral hazard? a situation in which information asymmetry increases the
incentive of one party to take undue risks or shirk other responsibilities because the costs incur
to the other party
,board of directors the centerpiece of corporate governance, composed of inside and
outside directors who are elected by the shareholders
inside directors Board members who are generally part of the company's senior
management team; appointed by shareholders to provide the board with necessary information
pertaining to the company's internal workings and performance.
outside directors board members who are not employees of the firm, but who are
frequently senior executives from other firms or full-time professionals
Other corporate mechanisms for aligning incentives for principles and agents 1. Executive
compensation
2. The market for corporate control
3. Financial statement auditors, government regulators, and industry analysts
business ethics An agreed-upon code of conduct in business, based on societal norms.
What is strategic management? It's the combined effort of analysis, formulation, and
implementation to try to achieve a competitive advantage.
What is a strategy? It is a set of specific steps a company takes to perform at and above
level compared to the competition.
What are the three key elements for a good strategy? 1. A diagnosis of the challenge aka
analysis
2. A guiding policy to address the challenge aka formulation
3. A set of coherent actions to implement the firm's policy aka implementation
How do you know you have the competitive advantage? When your firm performs
relatively better than your competitors or the industry average.
, What is sustainable competitive advantage? It's when your firm is able to outperform the
competition or industry average for a prolonged time period.
When do you suffer from competitive disadvantage? When your firm underperforms
compared to the competition or industry average.
When is there competitive parity? When two or more firms perform at the same level.
How do you gain competitive advantage? Provide goods or services consumers value
more highly than those of its competitors, or Provide goods or services similar to the
competitors' at a lower price.
What is strategic positioning? Choosing a position in an industry that allows you to
provide value while controlling cost but it does require trade-offs.
What strengthens a unique strategic position? Operational effectiveness, marketing skills,
and other functional expertise.
What is a strategy not? -Grandiose statements
-Failure to face a competitive challenge
-Operational effectiveness, competitive benchmarking or other tactical tools
When does value creation occur? When companies with a good strategy are able to
provide products or services to consumers at a price point that they can afford while checking
their costs.
What is stakeholder strategy? It's an integrative approach to managing a diverse set of
stakeholders effectively in order to gain and sustain competitive advantage.
