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MADM 760-Organizational Strategy and Policies > CH 8 - 9 > Flashcards

CH 8 - 9 Flashcards

1
Q

Capital-Labor Substitution

A

An organization’s ability to substitute labor for capital or vice versa as production increases.

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2
Q

Experience Curve

A

The reduction in per-unit costs that occur as an organization gains experience producing a product or service.

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3
Q

Functional Strategies

A

The strategies pursued by each functional area of a business unit, such as marketing, finance, or production.

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4
Q

Human Capital

A

The sum of the capabilities of individuals in an organization.

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5
Q

Just-In-Time (JIT) Inventory System

A

An inventory system, popularized by the Japanese, in which suppliers deliver parts just at the time they are needed by the buying organization to use in its production process.

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6
Q

Knowledge Management

A

People and their skills and abilities (i.e., knowledge capital) represent the only resource that cannot readily be reproduced by a firm’s competitors. Knowledge capital must be effectively leveraged if high-performing firms are to remain as such over the long term.

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7
Q

Learning

A

The increased efficiency that occurs when an employee performs a task repeatedly.

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8
Q

Process R & D

A

R & D activities that seek to reduce the costs of operations and make them more efficient.

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9
Q

Product/Service R & D

A

R & D activities directed toward improvements or innovations in the quality or uniqueness of a company’s outputs.

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10
Q

Total Quality Management (TQM)

A

A broad-based program designed to improve product and service quality and to increase customer satisfaction by incorporating a holistic commitment to quality as seen through the eyes of the customer.

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11
Q

Functional Strategies characteristics

A

(AKA Tactical strategies-shorter time span than business strategies & more specific - focus on strategy EXECUTION.

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12
Q

Marketing Strategy

A

(1) price, (2) promotion, (3) product/service, and (4) place (i.e., channels of distribution)

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13
Q

Most critical functional strategy

A

Marketing

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14
Q

Current Ratio (Liquidity)

A

CurrentAssets/CurrentLiabilities

Indicates how much of the current liabilities the current assets can cover; ordinarily 2:1 or better is desirable

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15
Q

Quick Ratio or Acid Test or Liquidity Test (liquidity)

A

CurrentAssets-Inventory/CurrentLiabilities

Indicates how rapidly a business can come up with cash on short notice. Not relevant for firms where inventory is almost immediately convertible to cash (e.g., McDonald’s)

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16
Q

Asset Turnover (Activity)

A

TotalRevenues(i.e.,Sales)/TotalAssetsduringPeriod

Measures how efficiently the company’s total assets are being used to generate sales

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17
Q

Inventory Turnover (Activity)

A

COGS/AverageInventoryforPeriod

Indicates how many times inventory of finished goods is sold per year

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18
Q

Sales-to-Working Capital (Activity)

A

NetSalesNet/WorkingCapital

Measures how efficiently net working capital (current assets - current liabilities) is used to generate sales

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19
Q

Debt-to-Asset (Leverage)

A

TotalDebt/Stockholders’Equity

Indicates the percentage that borrowed funds are utilized to finance the assets of the firm

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20
Q

Debt-to-Equity (Leverage)

A

Long-TermDebt/Stockholders’Equity

Indicates the percentage of funds provided by creditors as compared with owners

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21
Q

Long-Term Debt-to-Equity (Leverage)

A

Long-TermDebt/Stockholders’Equity

Indicates the percentage of funds provided by long-term creditors as compared with owners

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22
Q

Gross Profit Margin (Performance)

A

GrossProfit/TotalRevenue(i.e,Sales)

Measures company’s efficiency during the production process. Substantial variations over time could suggest financial difficulties or possibly fraud.

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23
Q

Return on Assets (ROA) (Performance)

A

NetIncomebeforeTaxes/TotalAssets

Measures the return on total assets employed

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24
Q

Return on Equity (ROE) (Performance)

A

NetProfitafterTaxes/Stockholders’Equity

Measures a firm’s profitability in comparison to the total amount of shareholder equity

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25
Q

Return on Sales (Performance)

A

NetOperatingProfitBeforeTaxes/NetSales

Indicates ratio of return on net sales

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26
Q

Production - Differentiated Businesses

A

Develop systems emphasizing product/service quality & distinctiveness, even if production costs rise.

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27
Q

When production output doubles

A

Production costs decline by a %, depends on industry.

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28
Q

Experience curve

A

Based on (1) learning (2) economies of scale (3) capital-labor substitution possibilities

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29
Q

Who does experience curve benefit most?

A

Low cost business w/ large market share

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30
Q

Is exploiting experience curve risky?

A

Yes

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31
Q

Six Sigma

A

Uses information & statistical tools to improve quality.

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32
Q

Who spends more typically on R&D

A

Differentiated businesses

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33
Q

Process R&D

A

Low cost businesses

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34
Q

Purchasing - Low Cost businesses

A

Basic quality @ lowest price

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35
Q

Executing a knowledge-based strategy

A

is about nurturing people with knowledge, not managing knowledge per se

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36
Q

Organizations leverage knowledge

A

through networks of people who collaborate, not networks of technology that interconnect

37
Q

focal point of the IS strategy

A

the application of Internet technology to serve customers and support suppliers

38
Q

Blue Ocean Strategy

A

A growth strategy contingent on inventing or discovering a new industry or industry segment that creates new demand.

39
Q

Capabilities

A

A firm’s skills at coordinating and leveraging resources to create value (often called strategic capabilities or dynamic capabilities).

40
Q

Gap Analysis

A

Identifying the distance between a firm’s current position and its desired position with regard to an internal weakness. All things equal, it is desirable to take action to close the gap, especially when the gap leaves a firm vulnerable to external threats in its environment.

41
Q

Human Resources (HR)

A

The experience, capabilities, knowledge, skills, and judgment of the firm’s employees.

42
Q

Organizational Resources

A

The firm’s systems and processes, including its strategies at various levels, structure, and culture.

43
Q

Physical Resources

A

An organization’s plant and equipment, geographic locations, access to raw materials, distribution network, and technology.

44
Q

Strategy Level-Strategy Complexity (SLSC) Matrix

A

tool for evaluating strategic alternatives that considers the organizational level of the alternative and the degree of strategic complexity

45
Q

SWOT (Strengths, Weaknesses, Opportunities, and Threats) Analysis

A

An analysis intended to match the firm’s strengths and weaknesses (the S and W in the acronym) with the opportunities and threats (the O and T) posed by the environment.

46
Q

SW/OT Matrix

A

A tool for generating alternative courses of action by identifying relevant combinations of internal characteristics (i.e., strengths and weaknesses) and external forces (i.e., opportunities and threats).

47
Q

Value Chain

A

A useful tool for analyzing a firm’s strengths and weaknesses and understanding how they might translate into competitive advantage or disadvantage. The value chain describes the activities that comprise the economic performance and capabilities of the firm.

48
Q

VRIO (Valuable, Rare, Inimitable, and Organization) Framework

A

A tool for assessing the competitive quality of a firm’s resources by examining value, rarity, imitability, and organization.

49
Q

Board of Directors

A

prospective contributions, tenure/experience, connection to the firm

50
Q

Top Management

A

Backgrounds/capabilities, Tenure, Strengths & weaknesses

51
Q

Mid Mgt & Employees

A

Existence of an HRM system, Strategic knowledge or expertise, training & dev. emphasis, Turnover, Emphasis on performance appraisal.

52
Q

Alignment of org resources

A 
Consistency is key:
among strategies, 
between strategies & goals
between strategies and culture
between strategies and structure
position in industry
prod/service quality
reputation of firm or brand
53
Q

Physical resources

A 
Currency of technology
Quality of distribution network
production capacity
reliable access to supplies
favorable locations
54
Q

VRIO

A

Valuable-can be used to exploit/neutralize external threats
Rare-control by a few firms
Imitable-easy to copy?
Organization-Firm posied to exploit the resource?

55
Q

Opportunities and Threats

A

Internal

56
Q

Strengths & Weaknesses

A

External

57
Q

Opportunities vs Alternatives

A

Opportunities represent the application of forces in the external environment to a specific organization.

Alternatives emanate from the SW/OT matrix (discussed later) and represent specific courses of action that the organization may choose to pursue.

58
Q

SW/OT Matrix Alernatives

A

Strength/Opportunity-OFFENSIVE-Address opportunity w/ strength
Weakness/Threat-DEFENSIVE-Elim a weakness
Strength/ Threat-Use strength toward a threat
Weakness/Opportunity-Shore up a weakness

59
Q

Because functional strategies should be designed to support corporate and business strategies, they should not be considered until corporate and business strategies have been formulated.

A

FALSE

Although functional strategies are formulated after the corporate and business strategies have already been established, one still needs to consider the capabilities of the various functional areas when considering various corporate and business strategic options.

60
Q

The most appropriate means of securing funds likely depends on the corporate and business strategies being pursued.

A

TRUE

Some forms of raising capital tend to be more effective than others, depending on the strategy.

61
Q

The reduction in per-unit costs that occurs as an organization gains experience producing a product or service is known as economies of scale. Economies of scale is one of the contributing factors to the experience curve.

A

FALSE

The reduction in per-unit costs that occurs as an organization gains experience producing a product or service is known as the experience curve.

62
Q

The purchasing department in a low-cost business should always purchase raw materials at the lowest possible cost.

A

False

Purchasing departments in low-cost businesses should seek the “best cost”—the lowest cost within an acceptable range of quality standards.

63
Q

The HR department in a low-cost business should always attempt to hire managers and workers at pay rates below those of their competitors.

A

False
Although higher than average pay rates are generally not consistent with the low-cost strategy, businesses seeking to minimize costs may need to pay market rates to maintain a competitive workforce.

64
Q

A key characteristic of an effective IS is its ability to serve and help integrate the other functional areas of the business.

A

True

The IS can provide data to support all of the other functional areas of the business.

65
Q 
Functional strategies should \_\_\_\_\_\_\_\_\_\_.
A. be integrated across the business unit
B. support the business strategy
C. support the corporate strategy
D. all of the above
A

D

Functional strategies should be integrated to support the business and corporate strategies

66
Q 
Which of the following is not part of the marketing strategy?
A. pricing
B. distribution
C. promotion
D. none of the above
A

D

The marketing strategy includes price, product, place (distribution), and promotion.

67
Q

The experience curve is based on which of the following?
A. potential for capital-labor substitutions
B. economies of scale
C. organizational learning
D. all of the above

A

D
The experience curve is based on three underlying concepts: (1) learning, (2) economies of scale, and (3) capital-labor substitutions.

68
Q 
Efforts directed toward improvements or innovations in the quality or uniqueness of a company’s outputs is known as \_\_\_\_\_\_\_\_\_\_.
A. product R & D
B. process R & D
C. product innovation
D. structural reorganization
A

A

Innovation designed to improve quality or uniqueness is known as product R & D.

69
Q 
Reducing operational costs by making the production process more efficient is known as \_\_\_\_\_\_\_\_\_\_.
A. TQM
B. process R & D
C. product innovation
D. structural innovation
A

B.

Process R & D seeks to reduce operational costs and make them more efficient.

70
Q

Which of the following is not a characteristic of the JIT approach to inventory?
A. JIT is difficult on suppliers.
B. JIT reduces inventory costs.
C. JIT is less risky than traditional inventory approaches.
D. JIT is popular in Japan.

A

A

JIT system also makes a company highly vulnerable to labor strikes and ecological disasters.

71
Q

The first step in crafting a strategy is the SWOT analysis.

A

TRUE
The first step in crafting a strategy, a SWOT analysis, can enable the firm to position itself to take advantage of particular opportunities in the environment while avoiding or minimizing environmental threats.

72
Q

The value chain is an analytical technique for identifying organizational opportunities and threats.

A

False
The value chain is a useful tool for analyzing a firm’s strengths and weaknesses and understanding how they might translate into competitive advantage or disadvantage.

73
Q

Opportunities and threats should emanate from the analysis of macroenvironmental and industry forces.

A

True

Opportunities and threats are developed from the analysis previously performed on the macroenvironment and the industry.

74
Q

A factor can be both an opportunity and a strength.

A

False
Only external factors can be opportunities and/or threats whereas only internal factors can be strengths and/or weaknesses.

75
Q

Another name for an opportunity is an alternative.

A

False
Opportunities represent the application of macroenvironmental forces to a specific organization whereas alternatives emanate from the SW/OT matrix and represent specific courses of action that the organization may choose to pursue.

76
Q

Choosing the “no change” strategy and thereby recommending that the current strategy be continued is the least risky option.

A

False
Choosing not to institute any strategic changes can be more risky than recommending major changes in the strategy, depending on the situation.

77
Q

The tool that enables executives to position an organization to take advantage of particular opportunities in the environment while avoiding or minimizing environmental threats is called __________.
A. PEST analysis
B. SWOT analysis
C. total quality management (TQM) analysis
D. none of the above

A

B
The SWOT analysis enables executives to position a firm to take advantage of particular opportunities in the environment while avoiding or minimizing environmental threats.

78
Q 
The description of activities that comprise the economic performance and capabilities of the firm is known as \_\_\_\_\_\_\_\_\_\_.
A. the value chain
B. process innovation
C. quality assessment
D. none of the above
A

A

The value chain describes activities that comprise the economic performance and capabilities of the firm.

79
Q

To sustain competitive advantage, firms must acquire or develop resources that are __________.
A. difficult for competitors to imitate
B. long lasting
C. difficult for competitors to acquire on the market
D. all of the above

A

D
A firm must utilize resources that are long lasting and not easily acquired by rivals through imitation, transfer, or replication if the firm is to sustain competitive advantage.

80
Q 
Physical resources include \_\_\_\_\_\_\_\_\_\_.
A. production facilities
B. plant locations
C. production capacity
D. all of the above
A

D
Physical resources include currency of technology, quality, and sophistication of the distribution network, production capacity, access to suppliers, and favorable locations.

81
Q 
Which of the following could not be an example of a weakness?
A. product quality
B. fierce competition
C. human resources
D. all of the above
A

B

Fierce competition comes from outside of the organization and would be a threat, not a weakness.

82
Q 
Which type of alternative is always defensive in nature?
A. strength-opportunity
B. strength-threat
C. weakness-opportunity
D. weakness-threat
A

D
Weakness-threat alternatives are always defensive in nature. Strength-opportunity alternatives are always offensive. Other alternatives can be either offensive or defensive.

83
Q

Opportunities & Threats

A

Don’t confuse external opportunities with internal strengths and weaknesses.

84
Q

Opportunities & Threats

A

Distinguish between opportunities and alternatives.

85
Q

Issues in strategy formulation

A
  1. Strategic change: Do the benefits outweigh the costs?
  2. Social responsibility and ethics: Is the strategy compatible?
  3. What effect does the change in strategy have on existing resources?
  4. How will competitors respond when the change is implemented?
86
Q

Blue Ocean Strategy

A

A growth strategy contingent on inventing or discovering a new industry or industry segment that creates new demand.
Examples include Starbucks, eBay, and Cirque Du Soleil in the coffee house, auction, and circus industries.
Success is not highly dependent on competitive responses, but effective blue ocean strategies require research, creativity, and a lot of savvy.

87
Q

Strategic Alternatives

A

Use the SW/OT matrix to develop alternatives

Use the SLSC matrix to evaluate the alternatives

Evaluate the pros and cons of each alternative.

Select one or more alternatives to implement and explain the rationale in detail, including why others were rejected.

88
Q

Functional Strategies & Industry Life Cycle

A

Introduction stage- emphasis on R&D
Growth stage- emphasis on marketing
Maturity stage- emphasis on production
Decline stage- emphasis on finance

MADM 760-Organizational Strategy and Policies (3 decks)

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