Chapter 2: The Process of Strategic Leadership...60) The most effective strategic leadership uses a...

Copyright © 2012 Pearson Canada Inc. 1

Chapter 2: The Process of Strategic Leadership

1) The Xerox near monopoly was first challenged by Microsoft.

A) True

B) False

Answer: False

Diff: 1 Type: TF Skill: Recall

2) The single most important component of Xerox’s turnaround strategy was

communication.

A) True

B) False

Answer: True


3) Xerox management reduced costs by $600 million largely by reducing research and

development costs.

A) True

B) False

Answer: False


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


5) The decisions about strategic leadership are made at the very top of the organization.

A) True

B) False

Answer: True


6) Strategic leadership is exercised more by top individuals than teams of top executives.

A) True

B) False

Answer: False



7) The concept of fit has also been called coherence.

A) True

B) False

Answer: True


8) When decisions are made that do not line up with the initial decisions, this is called

“stretching the organization.”

A) True

B) False

Answer: False


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: 3 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


11) A misfit is a resource decision that does not fit with the organization’s strategy.

A) True

B) False

Answer: True


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



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


14) The planned process implies low certainty about what needs to be done.

A) True

B) False

Answer: False


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


16) The appeal of the planned process is that it can be applied at all levels of strategy.

A) True

B) False

Answer: True


17) The planned process can use both quantitative and qualitative analysis.

A) True

B) False

Answer: True


18) The compatibility between relationships within strategy, resources and capabilities,

and the environment is known as fit.

A) True

B) False

Answer: True



19) The first step in any strategic analysis is always to describe the current strategy.

A) True

B) False

Answer: False


20) A mission is a description of what the business is doing.

A) True

B) False

Answer: True


21) The planned process is adept at dealing with uncertainty and complexity.

A) True

B) False

Answer: False


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


23) Alternatives should not be mutually exclusive.

A) True

B) False

Answer: False


24) The implementation of a planned strategic solution has lower risk due to certainty.

A) True

B) False

Answer: False


25) A contingency plan helps to minimize risk by being an alternative if the plan is not

being achieved.

A) True


B) False

Answer: True


26) The resources needed for implementation are analyzed before providing alternative

strategic solutions.

A) True

B) False

Answer: False


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


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


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


30) Vision is a simple statement or understanding of what the firm will be in the future.

A) True

B) False

Answer: True


31) Vision statements inform managers and employees of the firm's direction.


A) True

B) False

Answer: True


32) Vision statements have little effect unless stakeholders are willing to participate in

pursuing them.

A) True

B) False

Answer: True


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


34) Clearly articulated vision statements may be used as substitutes for strategy.

A) True

B) False

Answer: False


35) The visioning process is less important than the vision statement.

A) True

B) False

Answer: False


36) Better vision statements are usually simple and brief.

A) True

B) False

Answer: True


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.


A) True

B) False

Answer: False


38) Because they are general and ambiguous, vision statements serve little strategic

purpose.

A) True

B) False

Answer: False


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


40) A visioning exercise cannot begin without all six pre-conditions being established.

A) True

B) False

Answer: True


41) Most often the vision is initiated by one person.

A) True

B) False

Answer: True


42) To behave in ways consistent with the vision is to sell the vision.

A) True

B) False

Answer: False


43) The ability to translate a vision into behaviours for workers at all levels is the biggest

strength of the visioned process.

A) True


B) False

Answer: False


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


45) The discovered process includes people throughout the company generating strategy.

A) True

B) False

Answer: True


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


47) Strategic innovation is a key feature of the discovered process.

A) True

B) False

Answer: True


48) The discovered process focuses on the decision making as opposed to the results of

the decisions.

A) True

B) False

Answer: False


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


B) False

Answer: True


50) A business strategy that evolves over time benefits those with the best information

about the market opportunities.

A) True

B) False

Answer: True


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


52) Continuous innovation requires structure and few mistakes.

A) True

B) False

Answer: False


53) Cross-fertilization is putting employees together with customers.

A) True

B) False

Answer: False


54) In a fragmented industry, conditions are less dynamic and require more of a planned

approach.

A) True

B) False

Answer: False


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


B) False

Answer: False


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


57) Innovation requires justifying mistakes.

A) True

B) False

Answer: False


58) Using the planned, visioned, and discovered processes at the same time is feasible.

A) True

B) False

Answer: True


59) The great catalyst within Dofasco to reinvent the company was technology.

A) True

B) False

Answer: False


60) The most effective strategic leadership uses a singular process to lead.

A) True

B) False

Answer: False


61) Human factors influence strategic leadership processes primarily at the start of the

process.

A) True

B) False


Answer: False


62) Cognition is a bias that impacts how humans reach decisions.

A) True

B) False

Answer: False


63) Cognition is the process of thought, including perception and reason but not memory.

A) True

B) False

Answer: False


64) Prior hypothesis bias allows decision makers to use information that is inconsistent

with their beliefs.

A) True

B) False

Answer: False


65) Traditional music companies using enforcement of their copyrights to bring

customers back to them is an example of escalating commitment.

A) True

B) False

Answer: False


66) If an executive assumes that the decision variables for diversifying into a new market

will be the same as with previous successful diversifications, this is an example of

prior hypothesis bias.

A) True

B) False

Answer: True


67) Escalation of commitment is a person's belief that he or she is in greater control of a

situation than rational analysis would support.

A) True


B) False

Answer: False


68) The phrase escalation of commitment indicates that committing more resources to a

failing strategy is an irrational decision.

A) True

B) False

Answer: True


69) Escalating commitment is based more on a rational commitment of resources than the

feeling of personal responsibility for the strategy.

A) True

B) False

Answer: False


70) When a decision maker thinks back to a previous decision to transfer lessons to the

present situation, he or she is using the prior hypothesis bias.

A) True

B) False

Answer: False


71) Reasoning by analogy is weakest when the two situations are similar in superficial

ways.

A) True

B) False

Answer: True


72) The supermarket is an example of a retail format that was used as an analogy by

future retailers.

A) True

B) False

Answer: True


73) The dot-com crash in 2000 was due in a large part to the illusion of control.


A) True

B) False

Answer: False


74) The tendency of the decision maker to overestimate their ability to control events

based on a strong prior belief about the relationship between the two decision

variables is an example of the illusion of control.

A) True

B) False

Answer: False


75) “Using power” and “playing politics” have no place in managing an organization.

A) True

B) False

Answer: False


76) If centralized decision making seems to be orderly and rational, politics must not be

in play.

A) True

B) False

Answer: False


77) An effective tactic is more morally correct than an ineffective tactic.

A) True

B) False

Answer: False


78) Escalation of commitment could be due to groupthink.

A) True

B) False

Answer: True


79) A Board of Directors may have a mandate top pursue newer technologies. This

mandate is a form of organizational power and politics.


A) True

B) False

Answer: True


80) The best strategic decisions are based in part on values.

A) True

B) False

Answer: True


81) A leader’s values will impact the choice of arenas or vehicles he or she tends to

utilize in strategic decision making.

A) True

B) False

Answer: True


82) If values are used as a benchmark for employee behaviour and company

performance, they give management indirect control over people’s behaviour.

A) True

B) False

Answer: True


83) The level of ethical behaviour in an organization is set by ethical codes and not the

business leaders.

A) True

B) False

Answer: False


84) The issue of what is “right” is becoming easier as businesses become global and

populations more diverse.

A) True

B) False

Answer: False



85) The challenge with ethics is not determining which set of values is “right,” but which

corporations should develop codes of ethical behaviour.

A) True

B) False

Answer: False


86) The Xerox turnaround plan featured all of the following actions except?

A) aggressively reducing costs

B) outsourcing research and development

C) improving productivity in operations

D) reducing the amount of risk faced

Answer: B

Diff: 1 Type: MC Skill: Recall

87) According to the text, Xerox mixed together which of the following three approaches

to strategic leadership?

A) discovered, visioned, and planned

B) intended, discovered, and visioned

C) realized, visioned, and planned

D) realized, intended, and visioned

Answer: A


88) Strategic leadership is managing an overall enterprise and influencing key ________.

A) organizational outcomes

B) stakeholders

C) managers

D) strategic initiatives

Answer: A


89) Strategic leadership is concerned with the following except:

A) innovation

B) certainty

C) strategic change

D) performance

Answer: B


90) “Fit” has also been called ______________.


A) coherence

B) intertwining

C) efficiency

D) effectiveness

Answer: A


91) Matsushita’s plan was to adapt to the business environment’s changing requirements

in all of these areas except:

A) marketing

B) R&D

C) asset acquisition

D) IT

Answer: C


92) Matsushita planned to become a super manufacturing company by doing all of the

following except:

A) expansion of R&D and IT

B) becoming interactive with customers

C) providing solutions instead of goods

D) moving from a flat organization to a pyramid

Answer: D


93) The planned process is also known as the ____________ approach.

A) integrated

B) emergent

C) stakeholder

D) designed

Answer: D


94) The planned approach implies relatively _____ certainty about what needs to be done

and works well in ______ situations.

A) high, dynamic

B) high, stable

C) low, dynamic

D) low, stable

Answer: B



95) Strategic leadership is typically overseen by the board of directors, and usually

involves which of the following company employees?

A) manufacturing

B) former CEOs

C) top management

D) retail

Answer: C


96) The planned process involves analyzing the external environment, which is subject to

driving forces. Which of the following is not a driving force of evolution?

A) economy

B) society

C) technology

D) capabilities

Answer: D


97) Implementing a strategic solution requires identifying the necessary ______ changes

to all of the following except:

A) resource

B) incremental

C) organizational

D) strategic

Answer: B


98) As a part of implementation, _________________ are developed to overcome the

riskiest aspects of the choice.

A) contingency plans

B) resource inputs

C) strategic levers

D) alternatives

Answer: A

Diff: 2 Type: MC Skill: Application

99) The weakness of the planned process is that the necessary ______ are not always

available to do complete analysis.

A) tools

B) employees

C) concepts

D) information


Answer: B


100) Which of the following is not a question that Informix CEO Robert Finocchio could

ask of his company to determine whether it was acting ethically?

A) Are our reward structures appropriate?

B) Do we face new technological challenges?

C) How will we measure our performance?

D) Do we face new legal requirements?

Answer: B


101) Loblaw International Merchants intended to license its President’s Choice

merchandising program in the U.S. Which of the following was not a factor of

economic logic for E.D. Smith to consider an alliance with Loblaw’s?

A) E.D. Smith’s national licenses for half of the sauces it sold

B) E.D. Smith’s declining volume in national brands

C) E.D. Smith’s national brand losing market position against larger US

competitors

D) E.D. Smith’s reliance on Loblaw’s for controlled labels

Answer: A


102) The U.S. market was most attractive to E.D. Smith and Loblaw’s due to which of

the following factors?

A) U.S. food retailers were regional companies

B) U.S. customers were not familiar with the E.D. Smith brand

C) the large U.S.-based competitors were driving down prices and profitability

D) the U.S. market was 10 times larger

Answer: D


103) The three main alternatives the E.D. Smith had concerning a potential U.S. venture

with Loblaw’s did not include:

A) declining the offer and continue growing the controlled label business in

Canada

B) building a new plant in China

C) building a new plant in the U.S.

D) buying an existing plan in the U.S.

Answer: B



104) Management’s intent is provided through a(n) __________________.

A) policy and procedures manual

B) statement of values

C) annual report

D) vision statement

Answer: D


105) Longer vision statements are meant to be more ___________________.

A) clearly understood

B) directive

C) remembered

D) communicated

Answer: B


106) The ultimate importance of the visioned process is the ___________________.

A) end result

B) process itself

C) mission statement

D) vision statement

Answer: B


107) Which of the following provides a common superior goal?

A) principles

B) values

C) mission

D) vision

Answer: D


108) Without a vision of where the business is trying to go, a company loses

______________.

A) efficiency

B) conflict resolution

C) competitive advantage

D) resource commitments

Answer: C



109) Which of the following is not a step in the visioned process?

A) sell the vision

B) create the vision

C) alter the vision

D) establish pre-conditions

Answer: C


110) Which of the following is the best description of a vision statement?

A) a statement of the firm's values and purposes

B) a declaration of what the firm stands for

C) a statement of the firm's measurable outcomes

D) a statement of what the firm will be in the future

Answer: D


111) The concept of “pre-conditions” can best be described by which of the following?

A) the analysis of conditions which are present in successful competitors

B) the changing of current conditions to allow for the enacting of the vision

C) the establishment of conditions to allow a visioning exercise to take place

D) the development of conditions which help a company exploit its competitive

advantage

Answer: C


112) An effective vision answers which of the following questions?

A) Who are our stakeholders?

B) How do we get to the other side?

C) Where will we be in 10 years?

D) What is our competitive advantage?

Answer: C


113) Which of the following is not one of the conditions that need to be achieved before

visioning can be conducted successfully?

A) an effective social network

B) open and clear communication

C) openness to change

D) identification of key stakeholders to consider

Answer: A



114) Which of the following is one of the conditions that need to be achieved before

visioning can be conducted successfully?

A) management providing top-down communication

B) an understanding of why the vision is being created

C) a pool of reserve funds designated to support the vision

D) temporary inactivity from competitors

Answer: B


115) The process of managing a well-planned and well-executed transition from one

CEO to another is called ________.

A) succession planning

B) leadership planning

C) managerial development

D) human resource planning

Answer: A


116) Effective strategic leaders craft vision statements because ________.

A) they are the basis for a balanced scorecard

B) they provide measurable outcomes

C) they provide a rigid framework for strategic management

D) they influence strategy formulation and implementation

Answer: D


117) Once the vision has been created, the business’s present situation needs to be

examined to ensure that the vision can be achieved given the company’s

______________.

A) suppliers

B) CEO

C) history

D) resources

Answer: D


118) Which of the following is not an important part of selling the vision?

A) employees understanding where the company is heading

B) open communication with employees

C) ensuring the vision is abstract enough

D) commitment from top management


Answer: C


119) Which of the following is not a weakness of the visioned process?

A) translating it into action is hard work

B) the vision may not be concrete enough to be useful by itself

C) the vision is initiated by one person and negotiated through with others

D) the vision encourages behaviours that are demotivating

Answer: C


120) The discovered process can be best 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 ideas and people throughout the company

selecting some to further

D) people throughout the company generating strategic ideas from which

management has selected some to further

Answer: D


121) According to the text, the discovered process assumes that the environment is

________.

A) stable

B) predictable

C) changing slowly

D) complex

Answer: D


122) With the discovered process, decisions that help craft strategy may be all of the

following except:

A) planned

B) urgent

C) piecemeal

D) interim

Answer: A


123) Anne Mulcahy of Xerox used the discovered process when she:

A) engaged top management in planning

B) empowered people to find new things to do


C) provided a vision

D) selected a strategic solution after careful analysis

Answer: B


124) All of the following are part of innovation in the discovered process except

________.

A) service innovation

B) process revolution

C) continuous process improvement

D) long-term action horizons

Answer: D


125) Which of the following is a key characteristic of the discovered process?

A) envisionment of a desired future

B) no distinguishing between formulation and implementation

C) internal and external analysis

D) focus on the decision making itself

Answer: B


126) The discovered process produces a business strategy that evolves over time as the

business adapts to changes in all of the following except:

A) organizational culture

B) society

C) technology

D) politics

Answer: A


127) In the discovered process, innovation comes from which of the following sources?

A) top management

B) employees

C) customers

D) shareholders

Answer: B


128) For the discovered process to work, management has to create a culture with all of

the following except:


A) inquisitiveness

B) nonconformity

C) perfectionism

D) open-mindedness

Answer: C


129) The ability of individuals to generate ideas can be enhanced through various

techniques except which of the following:

A) customer interviewing

B) mining proprietary technology

C) cross-fertilization

D) groupthink

Answer: D


130) The best “pruning” of innovations occurs when management imposes some

rationale on the innovations the business accepts and builds. This is due to which of

the following factors?

A) clarity over growth projections

B) breadth of compatible innovations

C) insufficient resources to support all innovations

D) depth of analysis of the external environment

Answer: C


131) What is the main challenge that management faces when pruning/fertilizing ideas?

A) quashing compatible ideas

B) quashing potentially beneficial ideas

C) nurturing less desirable ideas

D) nurturing potentially beneficial ideas

Answer: D


132) Management can select innovations using all of the following processes except:

A) treating newly formed solutions as technically rational in conditions of

uncertainty

B) treating newly formed solutions as tentative until proven

C) sort innovations based on the impact of the solution

D) sort innovations based on the effort needed to install the solution

Answer: A



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


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


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


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


137) Which of the following is not included as part of the process of thought known as

cognition?

A) perception

B) intellect

C) reason


D) memory

Answer: B


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


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

Answer: A


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


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



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 dot-

com 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?



C) how representive

D) prior hypothesis

Answer: C


143) Mental maps are used to produce more complex thought structures. This is an

attempt to overcome the weaknesses of which cognitive bias?



C) how representive

D) prior hypothesis

Answer: A


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


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



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


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


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


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


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



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


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


153) Ethics do 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


154) What are the three approaches for strategic leadership?

Answer:

The three basic leadership processes are planned, visioned, and discovered.

Diff: 1 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: 2 Type: SA Skill: Application


156) What is “fit”?

Answer:

A condition in which all decisions made by management may support each other

but at a minimum do 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.


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 do 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.


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.


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 do 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.


160) What is the value of the visioned process to an organization?


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.


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 long-

term status. The vision statement clarifies what a firm will be in the future and

provides direction in making strategic decisions.


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.



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: 1. Establish preconditions, 2. Find ideas, 3. Develop ideas,

and 4. Prune/fertilize innovations.

Diff: 2 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.


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.


168) What are four techniques that can be used to enable individuals to generate ideas?

Answer:


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.


169) What is the role of the champion in the develop ideas step of the discovered

process?

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.

Diff: 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.


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.


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

do not fit with their own views. Second, a strong organizational culture that

prefers stability can limit innovation by challenging new ideas and demeaning


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.


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.


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.


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.


177) How can firms use corporate values or principles to motivate employee behaviour?

Answer:


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 do things and expect people “to do

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.


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 do 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 do 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: 3 Type: ES Skill: Application

179) Explain the eight steps of the planned process.

Answer:

1. 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.


2. 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.

3. 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.

4. 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.

5. 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.

6. 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.

7. 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.

8. 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.



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:

1. Is our purpose sufficiently well articulated?

2. Do we face new legal requirements?

3. Do we have new constituents?

4. If we acquire another organization, how will it be ethically assimilated?

5. Are our reward structures appropriate?

6. Is there any need to change the mechanics?

7. How will we measure our performance?

8. Do we have new goals/objectives in the ethical domain?

The second part is dependent on student answer.


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.


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:

1. Prior hypothesis bias: 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 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.

2. 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.

3. 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?”


Since then, other retailers known as “category-killers” have used Toys “R” Us as

their own analogy: Staples, Office Max, Home Depot, and Lowes.

4. 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.

5. 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.


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