MGMT 4513 MIDTERM QUESTIONS & VERIFIED
ANSWERS
Strategic Management definition - Answers - the study of why some firms outperform
others
Mission - Answers - Statement Explaining why company exists
•Provides context for all decisions
within the organization
•Describes and enduring reality
•Is capable of infinite fulfillment
(no time frame)
•Useful for both internal and
external audiences
Vision - Answers - Crystallization of what leaders
want firm to be
•Guides development of strategy
and organization
•Describes an inspiring new
reality
•Is achievable within a specific
time period
•Primarily useful internally
(slogans can be used externally)
Strategy - Answers - How to beat present and
potential competitors
•Lists set of actions to provide
products or services that create
more value than their cost
•Describes the "value proposition"
chosen by the company
•Constantly changes in response to
analysis, trial and error
•For internal use
The economic value model - Answers - strategy objective is to maximize shareholder
wealth
Objectives other than wealth creation - Answers - objectives that are used as surrogates
for eventual wealth or the fulfillment of a mission
, Stakeholder surplus model - Answers - Defines beneficiary group and maximizes wealth
for total group
To replace assets a firm must __________________ - Answers - earn return on capital
in excess of cost of capital
To survive acquisition, firm must _________________ - Answers - achieve stock
market value in excess of break-up value
Objectives other than Wealth Maximization - Answers - •Risk aversion / tolerance
•Satisfying
•Nonwealth-based
•Mission-based
Two approaches for evaluating firm performance - Answers - 1. Financial ratio analysis
2. Stakeholder perspective
Financial Ratio Analysis - Answers - Balance Sheet
Income Statement
Stakeholder perspective - Answers - employees
customers
owners
Stakeholders - Answers - •Individuals and groups who can affect, and are affected by,
the
strategic outcomes achieved and who have enforceable claims on a
firm's performance
•Claims are enforced by the stakeholder's ability to withhold essential
participation
Capital Market Stakeholders - Answers - •Shareholders and lenders expect the firm to
preserve and enhance
the wealth they have entrusted to it
•Returns should be commensurate with the degree of risk to the
shareholder
Product Market Stakeholders - Answers - primary customers, suppliers, host
communities, unions
Organizational Stakeholders - Answers - employees, managers, non-managers
Two issues affect the extent of stakeholder involvement in the firm - Answers - •How to
divide returns
to keep stakeholders
ANSWERS
Strategic Management definition - Answers - the study of why some firms outperform
others
Mission - Answers - Statement Explaining why company exists
•Provides context for all decisions
within the organization
•Describes and enduring reality
•Is capable of infinite fulfillment
(no time frame)
•Useful for both internal and
external audiences
Vision - Answers - Crystallization of what leaders
want firm to be
•Guides development of strategy
and organization
•Describes an inspiring new
reality
•Is achievable within a specific
time period
•Primarily useful internally
(slogans can be used externally)
Strategy - Answers - How to beat present and
potential competitors
•Lists set of actions to provide
products or services that create
more value than their cost
•Describes the "value proposition"
chosen by the company
•Constantly changes in response to
analysis, trial and error
•For internal use
The economic value model - Answers - strategy objective is to maximize shareholder
wealth
Objectives other than wealth creation - Answers - objectives that are used as surrogates
for eventual wealth or the fulfillment of a mission
, Stakeholder surplus model - Answers - Defines beneficiary group and maximizes wealth
for total group
To replace assets a firm must __________________ - Answers - earn return on capital
in excess of cost of capital
To survive acquisition, firm must _________________ - Answers - achieve stock
market value in excess of break-up value
Objectives other than Wealth Maximization - Answers - •Risk aversion / tolerance
•Satisfying
•Nonwealth-based
•Mission-based
Two approaches for evaluating firm performance - Answers - 1. Financial ratio analysis
2. Stakeholder perspective
Financial Ratio Analysis - Answers - Balance Sheet
Income Statement
Stakeholder perspective - Answers - employees
customers
owners
Stakeholders - Answers - •Individuals and groups who can affect, and are affected by,
the
strategic outcomes achieved and who have enforceable claims on a
firm's performance
•Claims are enforced by the stakeholder's ability to withhold essential
participation
Capital Market Stakeholders - Answers - •Shareholders and lenders expect the firm to
preserve and enhance
the wealth they have entrusted to it
•Returns should be commensurate with the degree of risk to the
shareholder
Product Market Stakeholders - Answers - primary customers, suppliers, host
communities, unions
Organizational Stakeholders - Answers - employees, managers, non-managers
Two issues affect the extent of stakeholder involvement in the firm - Answers - •How to
divide returns
to keep stakeholders
