Ch. 12

Question 1

Balanced Scorecard

Answer 1

An approach to measuring performance based on an array of quantitative and qualitative factors, such as ROA, market share, customer loyalty and satisfaction, speed, and innovation.

Question 2

Business Process Reengineering

Answer 2

The application of technology and creativity in an effort to eliminate unnecessary operations or drastically improve those that are not performing well.

Question 3

Competitive Benchmarking

Answer 3

The process of measuring a firm’s performance against that of the top performers— usually in the same industry.

Question 4

Crisis

Answer 4

Any substantial disruption in operations that physically affects an organization, its basic assumptions, or its core activities

Question 5

Crisis Management

Answer 5

The process of planning for and implementing the response to a wide range of negative events that could severely affect an organization

Question 6

Crisis Management Team

Answer 6

A cross-functional group of individuals within the organization who have been designated to develop and plan for worst-case scenarios and define standard operating procedures that should be implemented prior to any crisis event

Question 7

Formal Organization

Answer 7

The official structure of relationships and procedures used to manage organizational activity.

Question 8

Informal Organization

Answer 8

Interpersonal norms, behaviors, and expectations that evolve when individuals and groups come into contact with one another.

Question 9

PIMS (Profit Impact of Market Strategy) Program

Answer 9

A database that contains quantitative and qualitative information on the performance of more than 5,000 business units.

Question 10

Strategic Control

Answer 10

The process of determining the extent to which an organization’s strategies are successful in attaining its goals and objectives.

Strategic control addresses the gaps between the intended and realized strategies

Question 11

Why Strategic Control?

Answer 11

Without strategic control, there are no clear benchmarks and ultimately no reliable measurements of how the company is doing.
Strategic control enables executives to account for last-minute changes during the implementation process.

Question 12

Strategic Control Process

Answer 12

1. Determine focus of control.
2. Identify standards or benchmarks.
3. Measure performance.
4. Compare standards to performance.
5. Institute changes as needed.

Question 13

Strategic Control Standards (Benchmarks)

Answer 13

Set standards for internal factors identified in the previous step.

If possible, standards should be based on competitive benchmarks, best practices, or other targets.

Standards should be as specific as feasible.

Question 14

Fortune

Answer 14

Fortune magazine annually publishes the most- and least-admired U.S. corporations with annual sales of at least $500 million in such industries as electronics, pharmaceuticals, retailing, transportation, banking, insurance, metals, food, motor vehicles, and utilities.

Question 15

Other Pubs

Answer 15

Publications such as Forbes, Industry Week, Business Week, and the Industry Standard also provide performance scorecards based on similar criteria

Question 16

Product/Service Quality

Answer 16

There has been a positive relationship between product/service quality—including both the conformance of a product or service to internal standards and the ultimate consumer’s perception of quality—and the financial performance of those firms.

Question 17

Innovation

Answer 17

Innovation is a complex process and is conceptualized, measured, and controlled through a variety of means.
Expenditures on developing new or improved products and processes also tend to increase the level of innovation.

Question 18

Market Share

Answer 18

Market share is a common measure of performance. As market share increases, control over the external environment, economies of scale, and profitability are all likely to be enhanced.

Relative market share (introduced in chapter 2) can be used as key measure as well. relative market share—a firm’s share of industry sales when only the firm and its key competitors are considered—can serve as a practical substitute

Question 19

Exerting Strategic Control

Answer 19

Establish performance targets or benchmarks throughout the organization.
Corrective action should be taken at all levels if actual performance is less than the standard that has been established unless extraordinary causes of the discrepancy can be identified.

Question 20

Balanced Scorecard

Answer 20

Performance measurement is not based on a single quantitative factor such as profits or stock price, but on an array of quantitative and qualitative factors that includes factors such as as return on assets, market share, customer loyalty and satisfaction, speed, and innovation.

Question 21

Famous Crises

Answer 21

J&J and Tylenol (1982)
Union Carbide in Bhopal (1984)
Exxon Valdez tanker spill (1989) 
New York terrorist attacks (2001)
Japanese earthquake & tsunami (2011)

Question 22

Issues in Crisis Management

Answer 22

Examples of crises include terrorism, natural disasters, boycotts, counterfeiting, and political unrest.
Crises in organizations occur much more frequently than widely reported, however.
Many firms do not actively engage in crisis planning.

Question 23

Crisis Management Framework

Answer 23

Before the Crisis, organizations should develop a crisis management team to develop and plan for worst-case scenarios and define standard operating procedures that should be implemented prior to any crisis event.

During the Crisis, an organizational spokesperson should communicate effectively with the public to minimize the effect of the crisis.

After the Crisis, communication with the public should continue as needed and the cause of the crisis should be uncovered.

Question 24

Strategic Control

Answer 24

Apply the strategic control model based on the recommended alternatives.

Set standards in step 2 and identify the source of the standards.

Be specific.

Question 25

Trends in Strategic Management

Answer 25

Globalization

Growing influence of the Internet

Sustainability

Erosion of the low cost-differentiation dichotomy

Effective crisis management

Question 26

Future Prospects

Answer 26

Outline the future prospects for the firm if the recommendations are adopted.

What do you expect to happen if the recommendations are not adopted?