Chapter 2: The Process of Strategic Leadership 1) The Xerox near monopoly was first challenged by Microsoft A) True B) False Answer: False Diff: Type: TF Skill: Recall 2) The single most important component of Xerox’s turnaround strategy was communication A) True B) False Answer: True Diff: Type: TF Skill: Recall 3) Xerox management reduced costs by $600 million largely by reducing research and development costs A) True B) False Answer: False Diff: Type: TF Skill: Recall 4) Because organizations are complex, management must rely on only one of the planned, visioned, and discovered approaches to strategic leadership A) True B) False Answer: False Diff: Type: TF Skill: Recall 5) The decisions about strategic leadership are made at the very top of the organization A) True B) False Answer: True Diff: Type: TF Skill: Recall 6) Strategic leadership is exercised more by top individuals than teams of top executives A) True B) False Answer: False Diff: Type: TF Skill: Recall Copyright © 2012 Pearson Canada Inc 7) The concept of fit has also been called coherence A) True B) False Answer: True Diff: Type: TF Skill: Recall 8) When decisions are made that not line up with the initial decisions, this is called “stretching the organization.” A) True B) False Answer: False Diff: Type: TF Skill: Recall 9) Matsushita is making changes in role, investment, and organization These changes will “fit together” if the organization performs better A) True B) False Answer: True Diff: Type: TF Skill: Application 10) Misfits, as long as they are strategically important, will not cause poor performance now or in the future A) True B) False Answer: False Diff: Type: TF Skill: Recall 11) A misfit is a resource decision that does not fit with the organization’s strategy A) True B) False Answer: True Diff: Type: TF Skill: Recall 12) If a company invests money to move into a new market but does nothing to differentiate itself from competitors, this is a misfit A) True B) False Answer: True Diff: Type: TF Skill: Application Copyright © 2012 Pearson Canada Inc 13) According to the planned process, lower managers put a strategy in place to move the business where it needs to be A) True B) False Answer: False Diff: Type: TF Skill: Recall 14) The planned process implies low certainty about what needs to be done A) True B) False Answer: False Diff: Type: TF Skill: Recall 15) The drawback of the planned process is that it cannot be applied at the functional and product levels A) True B) False Answer: False Diff: Type: TF Skill: Recall 16) The appeal of the planned process is that it can be applied at all levels of strategy A) True B) False Answer: True Diff: Type: TF Skill: Recall 17) The planned process can use both quantitative and qualitative analysis A) True B) False Answer: True Diff: Type: TF Skill: Recall 18) The compatibility between relationships within strategy, resources and capabilities, and the environment is known as fit A) True B) False Answer: True Diff: Type: TF Skill: Recall Copyright © 2012 Pearson Canada Inc 19) The first step in any strategic analysis is always to describe the current strategy A) True B) False Answer: False Diff: Type: TF Skill: Recall 20) A mission is a description of what the business is doing A) True B) False Answer: True Diff: Type: TF Skill: Recall 21) The planned process is adept at dealing with uncertainty and complexity A) True B) False Answer: False Diff: Type: TF Skill: Recall 22) The planned process is attractive because it allows management to consider how to make the business both efficient and effective A) True B) False Answer: True Diff: Type: TF Skill: Recall 23) Alternatives should not be mutually exclusive A) True B) False Answer: False Diff: Type: TF Skill: Recall 24) The implementation of a planned strategic solution has lower risk due to certainty A) True B) False Answer: False Diff: Type: TF Skill: Recall 25) A contingency plan helps to minimize risk by being an alternative if the plan is not being achieved A) True Copyright © 2012 Pearson Canada Inc B) False Answer: True Diff: Type: TF Skill: Recall 26) The resources needed for implementation are analyzed before providing alternative strategic solutions A) True B) False Answer: False Diff: Type: TF Skill: Recall 27) E.D Smith and Sons Ltd decided to buy a plant in the U.S so that they could quickly manufacture products for Loblaw International Merchants A) True B) False Answer: True Diff: Type: TF Skill: Recall 28) Thanks in part to E.D Smith, the President’s Choice merchandising program was a success in the U.S A) True B) False Answer: False Diff: Type: TF Skill: Recall 29) The expansion of Loblaw International Merchants into the U.S gave E.D Smith an alliance opportunity that allowed for easier access into the American market A) True B) False Answer: True Diff: Type: TF Skill: Recall 30) Vision is a simple statement or understanding of what the firm will be in the future A) True B) False Answer: True Diff: Type: TF Skill: Recall 31) Vision statements inform managers and employees of the firm's direction Copyright © 2012 Pearson Canada Inc A) True B) False Answer: True Diff: Type: TF Skill: Recall 32) Vision statements have little effect unless stakeholders are willing to participate in pursuing them A) True B) False Answer: True Diff: Type: TF Skill: Recall 33) Vision statements enable organizations the flexibility to change strategy or implementation tactics since it does not impose conditions on how the business gets there A) True B) False Answer: True Diff: Type: TF Skill: Recall 34) Clearly articulated vision statements may be used as substitutes for strategy A) True B) False Answer: False Diff: Type: TF Skill: Recall 35) The visioning process is less important than the vision statement A) True B) False Answer: False Diff: Type: TF Skill: Recall 36) Better vision statements are usually simple and brief A) True B) False Answer: True Diff: Type: TF Skill: Recall 37) The key steps of the visioning process are to establish the pre-conditions needed for visioning to be successful, create the vision, sell the vision and express the vision Copyright © 2012 Pearson Canada Inc A) True B) False Answer: False Diff: Type: TF Skill: Recall 38) Because they are general and ambiguous, vision statements serve little strategic purpose A) True B) False Answer: False Diff: Type: TF Skill: Application 39) Anne Mulcahy provided Xerox employees with a fictitious description of what the company had become in the future This is an example of a vision A) True B) False Answer: True Diff: Type: TF Skill: Application 40) A visioning exercise cannot begin without all six pre-conditions being established A) True B) False Answer: True Diff: Type: TF Skill: Recall 41) Most often the vision is initiated by one person A) True B) False Answer: True Diff: Type: TF Skill: Recall 42) To behave in ways consistent with the vision is to sell the vision A) True B) False Answer: False Diff: Type: TF Skill: Recall 43) The ability to translate a vision into behaviours for workers at all levels is the biggest strength of the visioned process A) True Copyright © 2012 Pearson Canada Inc B) False Answer: False Diff: Type: TF Skill: Application 44) Tunnel vision trap occurs when the vision drives the actions of management even though it is no longer achievable A) True B) False Answer: True Diff: Type: TF Skill: Recall 45) The discovered process includes people throughout the company generating strategy A) True B) False Answer: True Diff: Type: TF Skill: Recall 46) Strategic decision-makers may not appreciate the full implications of their decisions within the discovered process of strategic leadership A) True B) False Answer: True Diff: Type: TF Skill: Recall 47) Strategic innovation is a key feature of the discovered process A) True B) False Answer: True Diff: Type: TF Skill: Application 48) The discovered process focuses on the decision making as opposed to the results of the decisions A) True B) False Answer: False Diff: Type: TF Skill: Recall 49) Honda’s decision to compete in smaller motorcycles in the U.S market based on the initial reactions of consumers was a form of organizational learning A) True Copyright © 2012 Pearson Canada Inc B) False Answer: True Diff: Type: TF Skill: Recall 50) A business strategy that evolves over time benefits those with the best information about the market opportunities A) True B) False Answer: True Diff: Type: TF Skill: Application 51) With innovation often coming from employees in the discovered process, top management plays little role in orchestrating the process A) True B) False Answer: False Diff: Type: TF Skill: Recall 52) Continuous innovation requires structure and few mistakes A) True B) False Answer: False Diff: Type: TF Skill: Recall 53) Cross-fertilization is putting employees together with customers A) True B) False Answer: False Diff: Type: TF Skill: Recall 54) In a fragmented industry, conditions are less dynamic and require more of a planned approach A) True B) False Answer: False Diff: Type: TF Skill: Recall 55) When management fails to impose rationale on the innovations the business accepts and builds, it is known as “fail early, fail often.” A) True Copyright © 2012 Pearson Canada Inc B) False Answer: False Diff: Type: TF Skill: Recall 56) Management can treat innovative solutions as tentative until they prove themselves This will generate more ideas than sorting solutions based on the effort needed to install the solution A) True B) False Answer: False Diff: Type: TF Skill: Recall 57) Innovation requires justifying mistakes A) True B) False Answer: False Diff: Type: TF Skill: Recall 58) Using the planned, visioned, and discovered processes at the same time is feasible A) True B) False Answer: True Diff: Type: TF Skill: Recall 59) The great catalyst within Dofasco to reinvent the company was technology A) True B) False Answer: False Diff: Type: TF Skill: Recall 60) The most effective strategic leadership uses a singular process to lead A) True B) False Answer: False Diff: Type: TF Skill: Recall 61) Human factors influence strategic leadership processes primarily at the start of the process A) True B) False Copyright © 2012 Pearson Canada Inc 10 Diff: Type: MC Skill: Application 133) Innovations quickly installed are those that require little effort, have a big impact and are easily reversed if they prove wrong This approach has been called: A) fail early and fail often B) succeed early and fail later C) fail early and succeed later D) succeed early and fail often Answer: A Diff: Type: MC Skill: Application 134) Innovation can be stymied in all of the following ways except: A) a bureaucratic control system B) an organizational culture favouring stability C) inspiring others to support new ideas D) employees unwilling to make mistakes Answer: C Diff: Type: MC Skill: Application 135) The total approach to strategic leadership is successful for which of the following reasons? A) each process must work independently B) intended strategy is based on all three approaches C) a blended approach improves the quality of strategic decisions D) a company is unable to take the best advantage of the overall situation Answer: C Diff: Type: MC Skill: Application 136) The three main aspects of human behaviour affecting the strategic leadership processes are: A) cognition, power and politics, values and ethics B) power and politics, values and ethics, collaboration C) cognition, power and politics, collaboration D) cognition, values and ethics, collaboration Answer: A Diff: Type: MC Skill: Application 137) Which of the following is not included as part of the process of thought known as cognition? A) perception B) intellect C) reason Copyright © 2012 Pearson Canada Inc 25 D) memory Answer: B Diff: Type: MC Skill: Recall 138) Robert Campeau, a highly successful builder in Canada, had his decision making affected by cognitive biases, which led to his failed mergers Which of the following is not an example of a cognitive bias that impacted Campeau? A) He assumed his success in Canada would transfer to the U.S B) He discovered information that confirmed his expectations about the success of the mergers C) He paid careful attention to any information that indicated he was overestimating the potential of the mergers D) He drew on his Wall Street experience to dominated negotiations Answer: C Diff: Type: MC Skill: Application 139) Which of the following is not one of the five cognitive biases? A) recency effect B) prior hypothesis C) escalating commitment D) illusion of control Diff: Answer: A Type: MC Skill: Recall 140) Decision-making bias under which people are willing to commit additional resources to a failing course of action is called A) illusion of control B) illusion of optimism C) escalation of commitment D) self-serving fairness bias Answer: C Diff: Type: MC Skill: Application 141) A decision maker with a strong prior belief about the relationship between two variables makes decisions based on that belief even though evidence has been presented that is wrong This is an example of which cognitive bias? A) reasoning by analogy B) illusion of control C) how representive D) prior hypothesis Answer: D Copyright © 2012 Pearson Canada Inc 26 Diff: Type: MC Skill: Application 142) During the dot-com boom of the late 1990s many young people and investors looked at the success of Amazon and Yahoo! and assumed they could achieve the same level of success This produced a massive wave of start-ups working with the internet as individuals sought to capitalize on the perceived opportunities The dotcom crash in 2000 showed that the market was able to sustain far fewer companies than founders and investors thought This is an example of which cognitive bias? A) reasoning by analogy B) illusion of control C) how representive D) prior hypothesis Answer: C Diff: Type: MC Skill: Application 143) Mental maps are used to produce more complex thought structures This is an attempt to overcome the weaknesses of which cognitive bias? A) reasoning by analogy B) illusion of control C) how representive D) prior hypothesis Diff: Answer: A Type: MC Skill: Application 144) The trait that can lead people to give themselves more credit for their successes and take less responsibility for their failures is A) compassion B) passiveness C) aggressiveness D) confidence Answer: D Diff: Type: MC Skill: Application 145) The desires and interests of the individuals involved in strategic leadership falls under which human influence? A) economic power B) values and ethics C) cognitive biases D) power and politics Answer: D Diff: Type: MC Skill: Application Copyright © 2012 Pearson Canada Inc 27 146) Which of the following is not a tactic used in playing politics? A) driving a personal agenda B) taking personal credit for work done by others C) withholding information D) overemphasizing work done by others Answer: D Diff: Type: MC Skill: Application 147) Failures committed under groupthink include all of the following except: A) developing after-the-fact rationalizations B) focusing only on objective analysis C) filtering out information D) not questioning underlying assumptions Answer: B Diff: Type: MC Skill: Application 148) If the Board of Directors hires a new CEO on the basis that he or she will produce specific results, this is an example of A) politics B) groupthink C) mandates D) strategy Answer: C Diff: Type: MC Skill: Application 149) Decisions are affected by the judgments we all make about what is desirable and undesirable in a given situation These judgments are based on _ A) perception B) stereotyping C) memory D) values Answer: D Diff: Type: MC Skill: Recall 150) A leader whose values tend toward being market-driven will focus their actions on which of the following strategies? A) serving customers in the selected arena B) growing the business through alliances C) choosing conservative strategies that minimize downside risk D) looking for ways for the business to be on the leading edge of technology Answer: A Copyright © 2012 Pearson Canada Inc 28 Diff: Type: MC Skill: Application 151) The values of an individual can contradict the conclusions of logical analysis, producing what seems to be _ A) irrational behaviour B) centralized decision-making C) management by objectives D) playing politics Answer: A Diff: Type: MC Skill: Application 152) Leaders of most businesses have created statements of values that are called all of the following except: A) corporate credo B) corporate objectives C) corporate values D) corporate principles Answer: B Diff: Type: MC Skill: Application 153) Ethics which of the following? A) drive decisions by what they say is right B) shape the values of shareholders C) constrain decisions by what they say is wrong D) shape the values of those working in the business Answer: B Diff: Type: MC Skill: Application 154) What are the three approaches for strategic leadership? Answer: The three basic leadership processes are planned, visioned, and discovered Diff: Type: SA Skill: Recall 155) What is the difference between leaders and strategic leaders? Answer: While leaders influence other people’s pursuit of goals, strategic leaders influence others so that they produce organizational outcomes such as company-wide performance, competitive superiority, innovation, strategic change, and survival Diff: Type: SA Skill: Application Copyright © 2012 Pearson Canada Inc 29 156) What is “fit”? Answer: A condition in which all decisions made by management may support each other but at a minimum not contradict each other An implicit assumption of top management is that when various decisions “fit together,” the organization will perform better The idea of fit has also been called alignment and coherence Without fit, decisions contradict each other, causing confusion, ineffectiveness, and inefficiency Diff: Type: SA Skill: Application 157) How can a strategy that is clearly defined in terms of the arena, differentiators, economic logic, staging, and vehicles be a misfit? Answer: The strategy might not be a good one because it does not fit with the environment or because decisions about the resources and organization of the business not fit with the strategy Misfits that are strategically important will either cause poor performance of the business now or in future For example, management may be making investments that move the business into new markets, although the business has nothing that differentiates it from the competitors in those markets As a consequence, the return on investment made is likely small and will lower performance for the business Diff: Type: SA Skill: Application 158) Give three examples of interrelationships among various decisions that are tested to determine fit, or whether they are mutually supporting Answer: This testing includes relationships within strategy, resources and capabilities, and the environment Diff: Type: SA Skill: Application 159) What is the weakness of the planned process? Answer: The planned/designed process assumes that the information needed is available for analysis and can be used to produce a rational decision But the necessary tools, concepts, and information are not always available to complete analysis And it gets worse when one recognizes that uncertainty, complexity, and ambiguity are common when dealing with strategic situations Still, the design/planning process is attractive because it allows management to consider how it might make the business both effective and efficient Diff: Type: SA Skill: Application 160) What is the value of the visioned process to an organization? Copyright © 2012 Pearson Canada Inc 30 Answer: The visioned process provides a strategic intent that calls for managers to set ambitious goals and then to develop the resources and capabilities needed to achieve those goals The tension between where it wants to be and where the business is both energizes people and encourages their creativity Having a vision also helps simplify conflict resolution because it provides a common superior goal Without a vision of where the business is trying to go, managers are more concerned with today’s problems while focused competitors are building new resources and capabilities to pursue future opportunities The result is that the company loses its competitive advantage to these competitors Diff: Type: SA Skill: Application 161) What are three conditions that need to be achieved before visioning can be conducted successfully? Answer: Six conditions need to be achieved before visioning can be conducted successfully First, the organization has to have top managers who feel responsible for the direction of the company Second, those members engaged in visioning need the relevant information to construct the vision Third, members need to understand why the vision is being created Fourth, open and clear communication is needed so that creative ideas and individual differences can be discussed Fifth, the key stakeholders in the business need to be identified so that their interests are considered when setting the vision Sixth and finally, all members need to understand that the vision is a prediction and that conditions may require changes to the vision Once these conditions have been established, it is possible to conduct a visioning exercise Diff:1 Type: SA Skill: Application 162) What is the purpose of the vision statement? Answer: A statement of vision is forward looking and identifies the firm's desired longterm status The vision statement clarifies what a firm will be in the future and provides direction in making strategic decisions Diff: Type: SA Skill: Application 163) Why are vision statements not a substitute for strategy? Answer: Vision statements are powerful tools, but because they are general and ambiguous by design, they must be realized through carefully crafted and executed strategies Diff: Type: SA Skill: Application Copyright © 2012 Pearson Canada Inc 31 164) What are the two key differences between the planned process and the discovered process? Answer: The discovered process does not distinguish between formulation and implementation, unlike the planned process, which emphasizes the importance of formulation and sees implementation decisions that follow as instrumental because they “put” strategy in place The discovered process also focuses on the results of innovative decisions rather than on decision making itself Diff:3 Type: SA Skill: Application 165) What are the four steps of the discovered process? Answer: The fours steps are: Establish preconditions, Find ideas, Develop ideas, and Prune/fertilize innovations Diff: Type: SA Skill: Recall 166) The discovered process produces a business strategy that evolves over time What are the two key advantages of the discovered process? Answer: The business that adapts quickly to changes in society, technology, and politics is able to “beat” other businesses to opportunities as they appear Another advantage is that the discovered process allows those with the best information about the opportunities to make the decisions that are fundamental to the success of the business Diff: Type: SA Skill: Application 167) What culture needs to exist for the discovered process to work? Answer: Top management needs to establish a culture that supports innovation In such a culture, employees have to be open-minded to the irrational and offbeat, be nonconformist and flexible, be inquisitive and enterprising, be willing to think the unthinkable, be willing to take a chance on being wrong and failing, and shun perfectionism Another responsibility of management is to support employees as they create and exercise options This involves giving them the resources and freedom they need for continuous innovation and reality testing Sometimes employees will make mistakes Management has to accept these so that it does not stifle creativity and learning Diff: Type: SA Skill: Application 168) What are four techniques that can be used to enable individuals to generate ideas? Answer: Copyright © 2012 Pearson Canada Inc 32 There are five techniques in total: brainstorming, cross-fertilization (putting employees with very different perspectives together), encouraging the pursuit of curiosity, customer interviewing, and mining proprietary technology Diff: Type: SA Skill: Application 169) What is the role of the champion in the develop ideas step of the discovered process? Diff: Answer: The lack of consensus over which ideas will be beneficial means that an idea will only survive if it has a champion The champion supports the development of an idea and its installation as an innovation The character of champions is that they identify with the idea as their own, and with its promotion as a cause, to a degree that goes far beyond the requirements of their job They inspire others with their enthusiasm and persist in promoting their idea despite strong opposition Type: SA Skill: Application 170) What are the two processes that management can use to prune and/or fertilize ideas? Answer: Management can select innovations using one of two different processes It can treat newly formed solutions as tentative until they prove themselves As they are developed, intentions are gradually made concrete and tied to particular details Alternatively, it can sort solutions based on effort needed to install the solution, the impact of the solution, and the ease of undoing the solution Diff: Type: SA Skill: Application 171) How was Anne Mulcahy of Xerox able to blend all three processes for leading? Provide examples to support your answer Answer: She engaged the company in planning when the top management explored what was happening to the company and what needed to be done to turn it around She provided the company with a vision that had a lasting impact And she called on the people throughout the company to find innovative solutions to help improve performance of the business Diff: Type: SA Skill: Application 172) What are the four ways that innovation can be stymied in an organization? Answer: First, a strong hierarchy working with an elaborate and bureaucratic (top-down) control system gives managers greater ability to block ideas and innovations that not fit with their own views Second, a strong organizational culture that prefers stability can limit innovation by challenging new ideas and demeaning Copyright © 2012 Pearson Canada Inc 33 them based on previous experience Third, individuals in the organization may not have the necessary mindset for innovation Fourth, championing an idea requires individuals with certain talents They have to overcome cultural inertia and political barriers by inspiring others to support their new ideas Diff: Type: SA Skill: Application 173) The total approach involves using all processes at the same time How does that view of strategic leadership explain why intended strategy is not the same as realized strategy? Answer: While an intended strategy can be planned, a dynamic environment in which conditions are forever changing means that pursuing the plan can produce disappointing performance Better to deal with the dynamics by allowing people the flexibility to adjust actions according to the vision and even discover new actions so that the company takes the best advantage of the overall situation Diff: Type: SA Skill: Application er 174) What are four of the five cognitive biases? Answer: The five cognitive biases are: prior hypothesis, escalating commitment, reasoning by analogy, how representative, and illusion of control Diff: Type: SA Skill: Application 175) How can firms fall into the trap of escalating commitment? Answer: Firm decision makers, having already committed significant resources to a strategy, will commit more resources to the project even after receiving feedback that it is failing The feeling of personal responsibility for the strategy apparently induces the firm to continue with the strategy even when stopping it would improve performance Diff: Type: SA Skill: Application 176) What are three tactics that are used in playing politics? Answer: These tactics include withholding information, providing erroneous information, taking personal credit for work done by others, and driving a personal agenda at the expense of the business Diff: Type: SA Skill: Application 177) How can firms use corporate values or principles to motivate employee behaviour? Answer: Copyright © 2012 Pearson Canada Inc 34 These serve as a framework that guides the conduct of all those in the business They tell all employed there is a right way to things and expect people “to things right.” They are used as a benchmark for judging individual behaviour and company performance In doing so, they give management indirect control over people’s behaviour The individual can judge personal performance against the criteria provided by the statement This comparison influences the individual’s self-esteem and motivation When individuals identify with the organization’s values, they are induced to identify with the organization’s objectives These objectives become part of their personal goals, and their behaviour is aimed at accomplishing them Diff: Type: SA Skill: Application 178) Explain the concept of “stretching the organization” and how it relates to fit Answer: Sometimes, initial decisions relating to strategy may not seem to fit but so as further decisions are made that line up with the initial decisions This is said to be “stretching the organization.” An example of stretch appears in Exhibit 2.1, which shows Matsushita Electric, the Japanese parent company of Panasonic, stretching the company to become a “Super Manufacturing Company.” Such a company, explains Matsushita CEO Kunio Nakamura, “must in essence be ‘light and speedy’ Now when the nature of business is changing, emphasis will be placed on the maintenance, broadening and strengthening of IT, on R&D, and marketing Moreover, Matsushita at present is like a heavy lead ball loaded with assets In the future we need to cast off superfluous assets and become a company that can move lightly like a soccer ball.” Fit is the condition in which all decisions made by management may support each other but at a minimum not contradict each other An implicit assumption of top management is that when various decisions “fit together,” the organization will perform better The idea of fit has also been called alignment and coherence Without fit, decisions contradict each other, causing confusion, ineffectiveness, and inefficiency Diff: Type: ES Skill: Application 179) Explain the eight steps of the planned process Answer: Assess Performance The first step in any strategic analysis is always to determine how well the business has been performing If performance is satisfactory, then the strategic challenges the business faces are likely in the future and the business has time to adjust to them If performance is unsatisfactory, then the business has a serious strategic problem that must be addressed in the near future When performance is so weak that the survival of the business is in question, the strategic problem has to be addressed immediately Copyright © 2012 Pearson Canada Inc 35 Describe the Current Strategy The essential decisions about strategy are described in terms of the business strategy diamond presented in Chapter 1: arenas, vehicles, differentiators, staging and pacing, and economic logic A description of what the business is doing is frequently called the business’s mission Analyze the Internal Environment Its resources and capabilities are what the business has to work with These are combined in the functional activities of the value chain The resources and capabilities are assessed to see whether they create a value curve of differentiators that provides a sustainable competitive advantage Analyze the External Environment The business operates in an evolving industry that is subject to competitive forces The driving forces of evolution include politics, the economy, society, and technology Knowing where the industry is in its evolution and the dynamism of that evolution has implications for the nature of competition and the available opportunities Assess Fit In this step, the interrelationships among all the decisions management has made to satisfy a business strategy are tested to determine whether they are mutually supporting This testing includes relationships within strategy, resources and capabilities, and the environment When they are compatible, they are said to fit, and when they are not, they are said to misfit Performance is usually inadequate when there are serious misfits The fits and misfits are catalogued to provide input to the next step Provide Alternative Strategic Solutions When creating alternatives, each needs to be mutually exclusive so that the choice is either one alternative or another If management chooses to accept all alternatives, the alternatives are not mutually exclusive Rather they form the steps in a plan of action The viability of each alternative is tested to ensure that it is feasible (that is, it can be accomplished or implemented) and that it is acceptable to those making the selection Select a Strategic Solution From an analytical perspective, the right answer is based on the strength of the argument given the underlying facts and analysis From a real-world perspective, the alternative chosen must also have people within the company ready to support and execute it Whatever the choice, risk is associated with it because the future is uncertain Implement the Strategic Solution The final step is putting the solution in place, which starts with the preparation of a plan of action In this plan, the necessary strategic, organizational, and resource changes are identified Individuals with the appropriate level of authority are assigned responsibility for putting the changes in place, given a time frame for accomplishing their responsibilities, and given the resources needed to perform their responsibilities Copyright © 2012 Pearson Canada Inc 36 Diff: Type: ES Skill: Application 180) The CEO of Informix recommends using an ethics checklist when doing planning What are five of the questions from that checklist? How will this list prevent unethical behaviour? Answer: Some of the questions include: Is our purpose sufficiently well articulated? Do we face new legal requirements? Do we have new constituents? If we acquire another organization, how will it be ethically assimilated? Are our reward structures appropriate? Is there any need to change the mechanics? How will we measure our performance? Do we have new goals/objectives in the ethical domain? The second part is dependent on student answer Diff: Type: ES Skill: Application 181) What should vision statements encompass and why should management use them? Answer: The vision statement is a description of the desired future state of the company It is the answer to the question, “What will this business be in 10 or 20 years?” The vision statement in practice ranges from a word, to a statement three pages long, or even a picture Better statements are usually simple and brief, thus easily understood and remembered Longer statements are more of a plan that, while rich in strategic content, is more directive and less likely to resonate with people and motivate their contributions Grove said that the statement has to be clear enough for people to visualize but also crisp enough that it can be communicated simply to tired, demoralized, and confused staff While the statement is the immediately visible result of the visioning process, the process is more important than the statement itself By using a vision statement, management allows flexibility since it does not impose conditions on how the business gets there Diff: Type: ES Skill: Application 182) Because people are involved in the strategic leadership process, their behaviour influences how the processes operate What are three of the cognitive biases that lead to poor strategic decisions? Answer: Prior hypothesis bias: A decision maker with a strong prior belief about the relationship between two variables makes decisions based on that belief even Copyright © 2012 Pearson Canada Inc 37 though evidence has been presented that it is wrong Moreover, the decision maker tends to seek and use information that is consistent with prior beliefs while ignoring information that contradicts those beliefs This can lead one to believe in a strategy even though others see it as inappropriate Presently, executives in the music industry are working hard to keep this industry operating largely according to the rules of the past: They will develop artists and then distribute the product of these artists This worked well when technology was expensive and new music was promoted over the radio and sold on records and compact discs through retail stores Musicians now have many alternative venues because of digital technology and the internet They can sell their music directly to the public and provide private concerts over the internet Yet the traditional music companies are stridently seeking enforcement of their copyrights with the apparent assumption that this will bring the customers back to them and their traditional way of doing business Escalating commitment: A decision maker, having already committed significant resources to a strategy, will commit more resources to the project even after receiving feedback that it is failing The feeling of personal responsibility for the strategy apparently induces the decision maker to continue with the strategy even when stopping it would improve performance Executives at Motorola fell into this trap Motorola offered the first commercial cellular phone system based on analog technology By 1994, Motorola had 60 percent of the U.S cellular market At that time telephone carriers told Motorola that they wanted to shift to digital technology because it was superior The first wave of digital systems was commercialized in 1996 Ironically, Motorola had clear evidence of the increasing popularity of digital because it had licensed out its patents for digital technology to competitors, including Nokia and Ericsson Yet, even with customer requests and clear data on market trends, Motorola’s divisional managers of cell phones believed that customers really wanted better, sleeker analog phones and so presented a Star-TAC phone to the market—it was small but still an analog phone Motorola finally launched its first digital phone in 1997 after competition was far ahead Reasoning by analogy: When faced with a complex or novel situation, the decision maker thinks back to a similar situation and then transfers the lessons from that situation to the present one Analogies are beneficial when the situations are similar and can spark creative thinking A weakness of analogies is that the two situations may be similar in only superficial ways but different in causal traits Hence, the analogy will misguide decision making Mental maps are an attempt to deal with this by producing more complex thought structures behind an analogy The supermarket, a retail format pioneered during the 1930s, has served as an analogy many times Charles Lazarus was inspired by the supermarket when he founded Toys “R” Us in the 1950s Thomas Stemberg, the founder of Staples and a former supermarket executive, reports in his autobiography that Staples began with an analogical question: “Could we be the Toys “R” Us of office supplies?” Copyright © 2012 Pearson Canada Inc 38 Since then, other retailers known as “category-killers” have used Toys “R” Us as their own analogy: Staples, Office Max, Home Depot, and Lowes How representive: The decision maker may generalize from a vivid example that a single number or a small sample is inappropriate The statistical law of large numbers states that with repeated trials the sample mean will tend to approach the expected mean In terms of business, what you might expect to happen is only clear when you have seen something happen many times During the dot-com boom of the late 1990s many young people and investors looked at the success of Amazon and Yahoo! and assumed they could achieve the same level of success This produced a massive wave of start-ups working with the internet as individuals sought to capitalize on the perceived opportunities The dot-com crash in 2000 showed that the market was able to sustain far fewer companies than founders and investors thought Illusion of control: This is the tendency of the decision makers to overestimate their ability to control events People tend to attribute their success to good decision making and their failures to bad luck or what others have done to them Continued success can lead to hubris—arrogance or overbearing pride Top managers seem particularly prone to such overconfidence because they have been successful many times; otherwise they would not be at the top of the organization In mergers and acquisitions, overconfidence leads to paying too much for an acquisition, as we saw with Campeau Given that only one-third of mergers are successful according to movements in prices of shares, this appears to be a common problem At Motorola, CEO Robert Galvin blamed the company’s failure to shift to digital technology on arrogance Management thought it had the answer and the customer was wrong Diff: Type: ES Skill: Application Copyright © 2012 Pearson Canada Inc 39 ... effort, have a big impact and are easily reversed if they prove wrong This approach has been called: A) fail early and fail often B) succeed early and fail later C) fail early and succeed later D)... process assumes that the information needed is available for analysis and can be used to produce a rational decision But the necessary tools, concepts, and information are not always available to... described as: A) top management generating strategic ideas and selecting some to further B) people throughout the company generating strategic and executing ideas C) top management generating strategic