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A business model is a
company’s method for making money in the current business environment.

A captive company strategy
involves giving up management of the firm to the courts in return for some
settlement of the corporation’s obligations.

A cellular organization
is composed of cells which can operate alone but which can interact with
other cells to produce a more potent and competent business mechanism.

A company’s capability in
product R & D can be measured by consistent reductions in unit
manufacturing costs and by the number of product defects

A company’s center of
gravity is the part of the value chain that is most important to the company
and the point where its greatest expertise and core competencies lie.

A company’s center of
gravity is usually the point at which the company started.

A core competency can be
easily imitated to the extent that it is transparent, transferable, and

A current trend in
corporate information systems is the increasing use of the Internet for
marketing, intranets for internal communication, and extranets for logistics
and distribution.

A divisional structure
has no functional or product categories and is appropriate for a small,
entrepreneur-dominated company with one or two product lines that operates in
a reasonably small, easily identifiable market niche

A functional structure is
appropriate for a medium sized firm with several product lines in one

A good rule of thumb for
R & D spending is that a corporation should spend at a “normal”
rate for that particular industry unless its strategic plan calls for unusual

A horizontal strategy is
a corporate strategy that cuts across business unit boundaries to build
synergy across business units and to improve the competitive position of one
or more business units.

A job redesign technique
in which workers are moved through several jobs to increase variety is called
job enlargement.

A lead director is a
position enacted when the chairman and CEO positions are combined.

A lead user team will
spend 12 to 15 hours per week on a project for its duration.

A licensing arrangement
is a strong and close alliance in which one company or unit forms a long-term
arrangement with a key supplier or distributor for mutual advantage

A merger is the purchase
of a company that is completely absorbed as an operating subsidiary or
division of the acquiring corporation.

A multidomestic MNC
should use loose controls on its foreign units.

A multinational
corporation (MNC) is a company with significant assets and activities in
multiple countries.

A mutual service
consortium is a partnership of similar companies in similar industries who
pool their resources to gain a benefit that is too expensive to develop

A new business with
uncertain strategic importance that is only partly related to present
corporate operations belongs in a special business unit.

A niche is a need in the
marketplace that is currently unsatisfied.

A no change strategy is
an opportunity to rest before continuing a growth or retrenchment

A performance appraisal
system is used for evaluating a person’s suitability for an advanced

A period of strategic
drift may simply result from inertia on the part of the organization or may
simply reflect management’s belief that the current strategy is still
inappropriate and needs only some “fine-tuning.”

A political strategy
addresses the issue of whether a company or business unit should hire a large
number of low-skilled employees who receive low pay, perform repetitive jobs,
and most likely quit after a short time.

A possible entry barrier
is the presence of homogenous products.

A private university
(organization C) is more heavily dependent on outside sponsors such as a
state legislature for revenue funding

A problem to evaluation
and control is that rewards and penalties have little or no relation to

A product champion is
usually a department manager who recognizes the value of the idea, helps
obtain funding to develop the innovation, and facilitates its

A strategic audit
provides a checklist of questions, by area or issue, that enables a
systematic analysis to be made of various corporate functions and activities.

A tactic is a specific
operating plan detailing how a strategy is to be implemented in terms of when
and where it is to be put into action.

A tracking stock is a
type of common stock tied to one portion of a corporation’s business.

A typical financial analysis
of a firm would include a study of the operating statements for five years or

A value chain is a linked
set of value-creating activities

About 40 percent of
existing small family-owned businesses do not have a written strategic plan.

According to Friedman,
social responsibility includes both ethical and discretionary, but not
economic and legal responsibilities.

According to Hofer and
Sandberg, the key to success for most new ventures is to modify an existing
product and to focus on existing markets.

According to Kant’s
categorical imperatives, a person’s action is ethical only if that person is
willing for that same action to be taken by everyone who is in a similar

According to Kohlberg,
most people are placed in the preconventional level characterized by a
concern for self.

According to Kuczmarski
& Associates, only 25 percent of all newly introduced products are still
being sold five years later.

According to Newman and
Wallender’s constraints on strategic management, service is often intangible
and hard to measure.

According to Porter, a
manufacturing firm’s support activities usually begin with inbound logistics,
go through an operations process in which a product is manufactured, and
continue on to outbound logistics and finally to service.

According to the board
of directors continuum, the lowest degree of involvement in the strategic
management process is the phantom level.

According to the five
substages of small business development, the key problems in the take-off
stage are how to grow rapidly and how to finance that growth.

According to the U.S.
Small Business Administration, 50 percent of businesses founded in any one
year are not in business seven years later.

According to the
Yankelovich Partners survey firm, eight out of 10 portfolio managers and 75
percent of security analysts use annual report when making decisions.

Adherents of moral
relativism may believe that all moral decisions are deeply personal and that
individuals have the right to run their own lives.

An action plan states
what actions are going to be taken, by whom, during what timeframe, and with
what expected results.

An advisory board is a
group of external business people who voluntarily meet periodically with the
owner/managers of the firm to discuss strategic and other issues

An example of a cluster
in the US is found in the Silicon Valley.

An example of an
intermittent manufacturing system is an auto body repair shop.

An indirect
interlocking directorate occurs when two firms share a director or when an
executive of one firm sits on the board of a second firm.

An intranet is an
information network within an organization that also has access to the
external worldwide Internet.

An investment center’s
performance is judged in terms of effectiveness rather than efficiency.

An objective is an
open-ended statement of what one wants to accomplish with no quantification
of what is to be achieved and no time criteria for completion

An opportunity is a
concept for a product or service that currently does not exist or is not
currently available in a market niche.

Approximately 50 percent
of patented innovations are generally imitated within four years at 55
percent of the cost of innovation.

Approximately half the
profits of all U.S. companies come from products launched in the previous 10

Assimilation involves the
disintegration of one company’s culture resulting from unwanted and extreme
pressure from the other to impose its culture and practices.

At the maturity stage of
the industry life cycle, products tend to become more like commodities, and
this is now a fragmented industry.

Basic R&D is
concerned with engineering and the development of design specifications and
improved production equipment.

Between 33 and 60 percent
of all new products that reach the market fail to make a profit

Bottled water is a
substitute product for soda.

Capabilities refer to a
corporation’s ability to exploit its resources.

Carroll proposes that
ethical problems can be solved by applying an act or decision to a set of
ethical norms.

Codetermination is the
inclusion of a corporation’s workers on its board.

Collusion is the active
cooperation of firms within an industry to reduce output and raise prices in
order to get around the normal economic law of supply and demand

Communication is key to
the effective management of change.

Competitive analysis is
the calculation of ratios from data in financial statements

Competitive intelligence
is a formal program of gathering information on a company’s competitors.

Conglomerate structure is
appropriate for a large corporation with many product lines in several
unrelated industries

Consolidated industries
are typical for products in the early stages of their life cycle.

Core competencies may
mature and become core deficiencies

Corporate scenarios are
pro forma balance sheets and income statements that forecast the effect each
alternative strategy and its various programs will likely have on division
and corporate return on investment.

Cultural integration is
the degree to which members of a unit accept the norms, values, or other
culture content associated with the unit.

Cultural intensity is the
extent to which units throughout an organization share a common

Demographic trends are
part of the political-legal aspect of the societal environment

Durability is the rate at
which a firm’s underlying resources and capabilities (core competencies) can
be duplicated by others

Durability is the rate at
which a firm’s underlying resources and capabilities can be duplicated by

eBay and have
successfully used the efficiency model by acting as an intermediary to
connect multiple sellers to multiple buyers.

Electronic commerce
refers to the use of the Internet to conduct business transactions

Encirclement is
characterized by the use of small, intermittent assaults on different market
segments held by the competitor.

Enterprise Risk
Management unites all of a company’s major business activities within a
single family of software modules.

Environmental scanning is
the monitoring, evaluation, and disseminating of information from the
external and internal environments to key people within the corporation

responsibilities are the purely voluntary obligations a corporation assumes

Executive succession is
the process of replacing a key top manager.

Exporting involves buying
products made or grown abroad and selling them domestically in the U.S.

Exporting involves buying
products made or grown abroad and selling them domestically in the U.S.

Financial leverage is the
impact of a specific change in sales volume on net operating income.

Firms that are unable to
finance alone the huge costs of developing a new technology may coordinate
their R & D with other firms through technology sourcing.

Flexible manufacturing
permits the low-volume output of custom-tailored products at relatively low
unit costs through economies of scope.

Functional strategy is the
approach a functional area takes to achieve corporate and business unit
objectives and strategies by maximizing resource productivity.

General Electric is well
known for its distinctive competency in management development.

Historically, competitive
leadership in a market changes hands as one technology nears the end of its

Hypercompetition views
competition as a distinct series of ocean waves on what used to be a fairly
calm stretch of water.

If a company does not want
to purchase another company’s problems along with its assets, it may choose
green-field development.

If a company does not
want to purchase another company’s problems along with its assets, it may
choose green-field development.

Implementation involves
leading through coaching people to use their abilities and skills most
effectively and efficiently to achieve organizational objectives.

In a divisional
structure, the use of SBUs may result in a pressure-cooker crisis in which
the corporation has grown too large and complex to be managed through formal

In dialectic inquiry, an
individual or group is assigned to identify potential pitfalls and problems
with a proposed alternative strategy in a formal presentation.

In most large,
multi-industry corporations, only top management implements strategy.

In outsourcing, a company
purchases resources from outsiders through long-term contracts instead of
being made in-house.

In outsourcing, a company
purchases resources from outsiders through long-term contracts instead of
being made in-house.

In the U.S., family
businesses account for approximately 50 percent of the total 15 million

Intense rivalry can
result from a firm’s capacity.

manufacturing systems reap benefits from economies of scale

It is generally accepted
that product R & D normally dominates the early stages of a product’s
life cycle, whereas process R & D becomes especially important in the
later the later stages.

Leading focuses on the
selection and use of employees.

Lean Six Sigma is an
analytical method for achieving near-perfect results on a production line.

Learning organizations
are skilled at experimenting with new approaches.

Licensing technology to
other companies may be an excellent R&D strategy.

Logical incrementalism
involves the systematic gathering of appropriate information for situation
analysis, the generation of feasible alternative strategies, and the rational
selection of the most appropriate strategy.

Marketing strategy deals
with pricing, selling, and distributing a product.

Modular manufacturing
requires that people, processes, units, and technology reconfigure themselves
to give customers exactly what they want, when they want it.

Morality is defined as
the consensually accepted standards of behavior for an occupation, trade, or

corporations must pay attention to the many differences in cultural
dimensions around the world and adjust their management practices

New product development
would be a core competency if it goes beyond one division

organizations include private nonprofit corporations and public governmental
units or agencies.

One benefit of
strategic management is a sharper focus on what is strategically important.

One complication to
strategy formulation is that rigid operating objectives create opportunities
for internal politics and goal displacement.

One complication to
strategy implementation is that linking pins for external-internal
integration become important

One of the variables in
the index of sustainable growth formula is net profit before tax.

One step in handling
financial statements is to determine the financial changes as a decimal

One way to adjust for
inflation in the U.S. is to use the Consumer Price Index

Output controls focus on
resources, such as knowledge, skills, abilities, values, and motives of

Power distance is the
extent to which society is oriented toward the long versus the short

Preferred tax status to
nonstock corporations is given in section 501(p) of the U.S. Internal Revenue
code in the form of exemptions from corporate income taxes.

R&D strategy
determines how and where a product or service is to be manufactured.

Reactors are companies
with a limited product line that focus on improving the efficiency of their
existing operations.

Reengineering is the
radical redesign of business processes to achieve major gains in cost,
service or time.

Research indicates that
greater financial leverage has a positive impact on performance for firms in
dynamic environments.

Research reveals a
positive relationship between corporate reputation and financial performance.

Research shows that
chances for success are greater for entrepreneurial ventures that enter
stable industries than for those that enter rapidly changing

Resources are the
organization’s assets and are the basic building blocks of the organization.

Retired directors are
usually descendants of the founder and own significant blocks of stock.

Risk is composed not only
of the probability that the strategy will be effective, but also of the
amount of assets the corporation must allocate to that strategy and the
length of time the assets will be unavailable for other uses.

Shareholder value can be
defined as the present value of the anticipated future stream of cash flows
from the business plus the value of the company if liquidated.

Since competitors were
not able to understand how Gillette’s Mach 3 razor was produced, it was
considered transparent.

Standard Operating
Procedures (SOP) is shorthand for procedures.

Strategic choice is the
evaluation of alternative strategies and selection of the best alternative.

Strategic management is
difficult to apply when the organization’s output is difficult to measure

Strategic piggybacking
involves developing cooperative ties with other organizations.

Suboptimization refers to
a phenomenon when people substitute activities that do not lead to goal
accomplishment for activities that do lead to goal accomplishment because the
wrong activities are being rewarded.

Successful entrepreneurs
focus on opportunities-not on problems-and try to learn from failure.

SWOT is an acronym used
to describe Strengths, Weaknesses, Opportunities, and Technologies

Synergy is the concept
that two businesses will generate more profits together than they could

Synergy is the concept
that two businesses will generate more profits together than they could separately.

Tacit knowledge is
knowledge that can be easily articulated and communicated.

Tacit knowledge is
knowledge that can be easily communicated or articulated and as result can be
easily imitated

The amount of money
generated by a company before the cost of financing and taxes is called
return on investment.

The concept of social
capital proposes that a private corporation has responsibilities to society
that extend beyond making a profit.

The COO articulates a
strategic vision for the corporation

The corporate culture
generally reflects the values of the founder(s) and the mission of the firm.

The critical strengths
and weaknesses that are likely to determine if the firm will be able to take
advantage of opportunities while avoiding threats are called internal
strategic factors.

The EFAS Table is one way
to organize the internal factors into generally accepted categories of
strengths and weaknesses as well as to analyze how well a particular company’s
management is responding to these specific factors in light of the perceived
importance of these factors to the company.

The entrepreneurial
venture is independently owned and operated, not dominate in its field, and
does not engage in innovative practices.

The evaluation and
control process is the end result of activity.

The first phase of the
strategic management process is forecast-based planning

The first step in
stakeholder analysis is to identify primary stakeholders.

The house of quality is a
tool to help project teams make important design decisions by getting them to
think about what users want and how to get it to them most effectively.

The ISO 9000 Series is a
way of objectively documenting a company’s high level of quality

The marketing mix refers
to the particular combination of key variables under the corporation’s
control that can be used to affect demand and to gain competitive advantage.

The most important
financial ratios are liquidity ratios, profitability ratios, activity
rations, and bankruptcy ratios.

The not-for-profit
organization depends heavily on dues, assessments, or donations from its
membership or on funding from a sponsoring agency to pay for much of its
costs and expenses.

The organizational life
cycle is the equivalent of the product life cycle in marketing.

The particular
combination of key variables under the corporation’s control that can be used
to affect demand and to gain competitive advantage is called the marketing

The product life cycle
enables a marketing manager to examine the marketing mix of a particular
product or group of products in terms of its position in its life cycle.

The product-group
structure enables the corporation to centralize decision making along product
lines and to reduce costs.

The proposition that
structure follows strategy implies that changes in corporate strategy lead to
changes in organizational structure

The purpose of a program
is to achieve synergy between and among functions and business units.

The P-value formula
combines five ratios by weighting them according to their importance to a
corporation’s financial strength.

The quick ratio is how
much of current assets are available to cover each dollar of current

The resources of an
organization include tangible assets, human assets, and intangible assets.

The Sarbanes-Oxley Act
of 2002 was passed in response to the many corporate and accounting scandals
involving a number of prominent U.S. firms.

The stewardship theory
states that problems arise in corporations because the agents are not willing
to bear responsibility for their decisions unless they own a substantial
amount of stock in the corporation.

The strategic-funds
method compensates managers for achieving objectives set over a multiyear

The term corporate
governance refers to the relationship among the board of directors, top
management, and the federal government.

The TOWS Matrix
illustrates how the external opportunities and threats facing a particular
corporation can be matched with that company’s internal strengths and
weaknesses to result in four sets of possible strategic alternatives.

The utilitarian
approach proposes that actions and plans should be judged by their

The willingness to reject
unfamiliar as well as negative information is called strategic myopia

There is only one best
way to analyze or present a case report

To increase flexibility,
avoid layoffs, and reduce labor costs, corporations are using more contingent

Top management
responsibilities involve getting things accomplished through and with others
in order to meet the corporate objectives.

Training is especially
important for a differentiation strategy emphasizing quality or customer

Transferability is the
ability of competitors to use duplicated resources and capabilities to
imitate the other firm’s success.

Two characteristics that
determine the sustainability of a firm’s distinctive competency are
durability and transparency

Under the BCG
Growth-Share Matrix, stars typically bring in far more money than is needed
to maintain their market share

Under the BCG
Growth-Share Matrix, stars typically bring in far more money than is needed
to maintain their market share.

Using concurrent
engineering, Chrysler Corporation was able to reduce its product development
cycle from 60 to 36 months

When a company uses the
same marketing channel for two separate products, this is an example of an
economy of scope

When competitive
strategies are focused on a market niche, they are simply called cost
leadership and differentiation.

When employees across the
organization hold the same cultural values and norms, this demonstrates a
high level of cultural integration.

With quasi-integration, a
firm internally produces less than half of its own requirements and buys the
rest from outside suppliers.

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