Strategic Management

Chapter 7
MCQ
1) Which kind of corporate strategy deals with the manner in which the firm
coordinates activities and builds corporate synergies through resource sharing and
development?1) _______
A) parenting strategy
B) functional strategy
C) portfolio strategy
D) cooperative strategy
E) directional strategy

2) Adding a related or complementary product to a corporation's business units is

called2) _______
A) concentration.
B) horizontal growth.
C) concentric diversification.
D) vertical growth.
E) conglomerate diversification.

3) According to the BCG Growth Share Matrix, products that typically bring in far
more money than is needed for maintenance of their market share are called3)
_______
A) cash cows.
B) lost leaders.
C) dogs.
D) question marks.
E) stars.

4) Which strategy is most appropriate as a temporary strategy to enable a

corporation to consolidate its resources after prolonged rapid growth in an industry
now facing an uncertain future?4) _______
A) profit strategy
B) horizontal integration strategy
C) pause/proceed with caution strategy
D) retrenchment strategy
E) no change strategy

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5) When P&G, Kimberly-Clark, and Scott Paper compete with each other in
varying combinations of consumer paper products, they are said to be engaging
in5) _______
A) laissez-faire competition.
B) multipoint competition.
C) horizontal competition.
D) oligopolistic competition.
E) strategic competition.

6) The purpose of vertical growth is to6) _______

A) expand to countries with strong trade alliances.
B) take over a function previously supplied by a former employer.
C) take over a function previously provided by a supplier or by a distributor.
D) acquire a company of similar objective.
E) sell a company encumbered with debt.

7) Which strategy might be the most likely when management realizes that the
current industry is unattractive and that the firm lacks outstanding skills that it
could easily transfer to related products or services in other industries?7) _______
A) concentration
B) horizontal growth
C) concentric diversification
D) vertical growth
E) conglomerate diversification

8) An MNC uses which international strategy for entering a foreign market by

simply shipping goods produced in the company's home country to other countries
for marketing to minimize risk and to experiment with a specific product?8)
_______
A) production sharing
B) acquisitions
C) licensing
D) exporting
E) joint ventures

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9) Which external growth strategy was demonstrated when Procter & Gamble
completely absorbed Gillette?9) _______
A) acquisitions
B) mergers
C) strategic alliances
D) concentration
E) diversification

10) The most logical growth strategy for a corporation with current product lines
with real growth potential in a growing industry is10) ______
A) concentric diversification.
B) concentration.
C) stability.
D) retrenchment.
E) conglomerate integration.

11) An attempt to explain that vertical integration is more efficient than contracting
for goods and services in the marketplace when the transaction costs of buying
goods on the open market becomes too great has been proposed by11) ______
A) transaction growth theory.
B) freakonomics.
C) transaction cost economics.
D) population theory.
E) institution theory.

12) The stability strategy is appropriate for all of the following circumstances
EXCEPT 12) ______
A) appropriate when the industry is in decline.
B) when a firm is continuing its current activities without a significant change in
direction.
C) useful in the short-run but can be dangerous if followed too long.
D) popular with small business owners who have found a niche and are happy with
their success.
E) most appropriate for reasonably successful corporations in a reasonably
predictable environment.

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Essay Questions:

1) Distinguish between the three Corporate Directional Strategies giving examples

of strategies in each direction.

Growth strategies: expand the company’s activities

Stability strategies: make no change to the company’s current activities
Retrenchment strategies: reduce the company’s level of activities

2) Which factors increase the likelihood of a company to use vertical integration

strategies? distinguish between the different levels of vertical integration (Full,
Taper, Quasi, and long term contracts) with example of each.

a- Full integration
a firm internally makes 100% of its key supplies and completely controls its
distributors:
An example of vertical integration is a store, like Target, which has its own store
brands. It owns the manufacturing, controls the distribution, and is the retailer.
(shoes, accessories, cloth, ….)
b- Taper integration
a firm internally produces less than half of its own requirements and buys the rest
from outside suppliers: (1) Coca-Cola and Pepsi both having integrated bottling
subsidiaries while also relying on independent bottlers for production and
distribution in some markets, or (2) BMW which uses both in-house market
research from its Corporate Center Development and external market research
from independent, specialized firms

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 c- Quasi-integration
a company does not make any of its key supplies but purchases most of its
requirements from outside suppliers that are under its partial control: Electronic
integration stands for a form of vertical quasi -integration achieved through the
deployment of a proprietary inter-organizational system , which is considered as a
cheaper way to gain integration advantage than conventional vertical integration:
Apple

d- Long-term contracts
Agreements between two firms to provide agreed-upon goods and services to each
other for a specific period of time: construction companies using forklifts, cranes,
heavy equip,..

3) Write a short note on concentric diversification and conglomerate

diversification.

Concentric (Related) diversification

Growth into a related industry when a firm has a strong competitive position but
attractiveness is low. (Consumer Products, Pharma, Medical Devices)

Conglomerate (Unrelated) diversification

• Diversifying into an industry unrelated to its current one. Example GE
• Management realizes that the current industry is unattractive.
• Firm lacks outstanding abilities or skills that it could easily transfer to
related products or services in other industries.

4) Discuss main reasons why 60% -80% of mergers or acquisitions fail.

(Answer from the internet)
https://www.investopedia.com/university/mergers/mergers5.asp

• Flawed Intentions: A booming stock market encourages mergers, which can

spell trouble. Deals done with highly rated stock as currency are easy and
cheap, but the strategic thinking behind them may be easy and cheap too. A
merger may often have more to do with glory-seeking than business
strategy.
• Poor Communications: All too often, there is too much emphasis on getting the deal
done and too little on proper communication between the two companies, especially with
the rank and file in both companies. It is natural for employees to feel threatened by the
business combination, especially if it is an acquisition and they work for the target
company.

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 • The External Landscape: Mergers and acquisitions are not done in a business
vacuum. There are competitors, customers and vendors/strategic partners to
consider. It’s important to manage all of these relationships.

5) What is meant by the term “Multipoint competition”, give example?

Large multi-business corporations compete against other large multi-business firms

in a number of markets. Examples: Michelin Canada Vs. Goodyear in Europe,
Microsoft’s Xbox Vs. Sony PS2, The Walt Disney Company and AOL–Time
Warner in the early 1990s.
Example: In July 1969, Michelin announced plans to establish a plant in Canada
which would give a foothold in the North American market, attacking market
leader Goodyear. As a countermove, Goodyear entered the European market.
Michelin continued to increase its market share in North America and attacked
Goodyear in Brazil.

6) Developing and implementing a portfolio strategy for each business unit and a
corporate policy for managing all the alliances of the entire company are crucial to
the success or failure of the company. Comment on this statement to explain the
tasks necessary for Managing a Strategic Alliance Portfolio

1. Developing and implementing a portfolio strategy for each business unit and a
corporate policy for managing all the alliances of the entire company
2. Monitoring the alliance portfolio in terms of implementing business units’
strategies and corporate strategy and policies
3. Coordinating the portfolio to obtain synergies and avoid conflicts among
alliances
4. Establishing an alliance management system to support other tasks of multi-
alliance management

7) Discuss the differences between a merger, acquisition and hostile takeover.

Merger
A transaction involving two or more corporations in which stock is exchanged but
in which only one corporation survives
Acquisition
100% purchase of another company
Hostile Takeover (From the Internet)

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A hostile takeover is the acquisition of one company (called the target company)
by another (called the acquirer) that is accomplished by going directly to the
company's shareholders or fighting to replace management to get the acquisition
approved.

8) Discuss what is meant by corporate parenting, what are the required steps for a
company to develop a corporate parenting strategy?

Corporate parenting
• Views a corporation in terms of resources and capabilities that can be used
to build business unit value as well as generate synergies across business
units
• Generates corporate strategy by focusing on the core competencies of the
parent corporation and the value created from the relationshipbetween the
parent and its businesses

Steps for a company to develop a corporate parenting strategy

1. Examine each business unit in terms of its strategic factors
2. Examine each business unit in terms of areas in which performance can be
improved
3. Analyze how well the parent corporation fits with the business unit

9) The BCG (Growth-Share) Matrix is old but has stood the test of time. How
significant and practicably usable is it today, explain the limitation of using this
technique.

• Use of highs and lows to form categories is too simplistic.

• Link between market share and profitability is questionable.
• Growth rate is only one aspect of industry attractiveness.
• Product lines or business units are considered only in relation to one
competitor.
• Market share is only one aspect of overall competitive position.

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 Chapter 8

10) Financial strategies should be carefully planned, distinguish between Leveraged

buyout and Reverse stock split.

Leveraged buyout
company is acquired in a transaction financed largely by debt usually obtained from
a third party such as an insurance company or an investment banker. Private equity
companies often use LBOs to buy and later sell a company at a profit. The most
successful examples of LBOs are Wesray Capital acquired Gibson Greeting Cards,
Blackstone Group purchased Hilton Hotels.
Reverse stock split
A reverse stock split is a corporate action in which a company reduces the number
of shares it has outstanding by a set multiple. This is the opposite of a stock split, in
which a company increases its outstanding shares by a set multiple. Opposite to
(Apple 2014 case 7 for1)

11) There are many choices for a company to deal with R&D strategy; it can be
either a technological leader, or a technological follower, or an open innovation
company. Comment on this statement to enumerate the difference between each
approach.

Technological leader
Pioneering an innovation
Technological follower
Imitating the products of competitors
Open innovation
Firm uses alliances and connections with corporate, government, academic labs and
consumers to develop new products and processes

12) What is the difference between outsourcing and offshoring?

Outsourcing
Purchasing from someone else a product or service that had been previously
provided internally (the reverse of vertical integration)
Offshoring
Offshoring is the practice of relocating business activities, including jobs, to a
location outside the home country of operation

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13) What is the difference between Multiple sourcing, Sole sourcing, and Parallel
sourcing?

Multiple sourcing
The purchasing company orders a particular part from several vendors
Sole sourcing
Relies on only one supplier for a particular part
Parallel sourcing
Two suppliers are the sole suppliers of two different parts, but they are also backup
suppliers for each other’s parts

14) Enumerate the Errors & Disadvantages of Outsourcing?

• Outsourcing the wrong activities

• Selecting the wrong vendor
• Writing a poor contracts
• Overlooking personnel issues
• Lack of control
• Overlooking hidden costs
• Lack of an exit strategy

15) Several strategies that could be considered corporate, business or functional are
very dangerous. Managers who have made poor analyses or lack creativity may be
trapped into considering some of the strategies to avoid. Comment on this statement.

Failure almost always stems from the actions of the decision maker, not from bad
luck or situational limitations.

16) If there is little fit between corporate strategy and corporate culture, what are the
critical decisions the management must investigate?

• Take a chance on ignoring the culture.

• Manage around the culture and change the implementation plan.
• Try to change the culture to fit the strategy.
• Change the strategy to fit the culture.

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17) A common misbelief is that downsizing action is a response of a failing
organization, downsizing is associated with the idea of business process
reengineering and can be used to sustain competitive advantage? Comment on this
statement.

Strategic choice (not sure of the answer)

The evaluation of alternative strategies and selection of the best alternative.

Downsizing (From Chapter 10)

the planned elimination of positions or jobs
also called “rightsizing” or “resizing”

Downsizing (right-sizing?)
•Eliminate unnecessary work
Not across the board cuts
•Contract out work for cost savings but…

Focus on the future

•Plan for long-run efficiencies
•Communicate reasons for action
•Invest in remaining employees
•Develop value-added jobs for redeployment

Chapter 9

MCQ

1) Which statement below is NOT true of strategy implementation?1) _______

A) Strategy implementation should be kept separate and distinct from that of

strategic management.
B) It is the process by which strategies and policies are put into action through the
development of programs/tactics, budgets, and procedures.
C) Strategy formulation and strategy implementation are two sides of the same coin.
D) Strategy implementation is the sum total of the activities and choices required for
the execution of a strategic plan.
E) Implementation is often considered after strategy has been formulated.

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2) It is advisable to have management from all levels participate in the strategy
formulation process2) _______

A) because it is part of their job responsibilities to provide input regarding their

respective area of expertise.
B) to gain an insight as to what work needs to be done and to gain cooperation in the
implementation of the strategy.
C) because it is a legal requirement.
D) because collective bargaining agreements often mandate worker participation.
E) because it helps boost the self-image and ego of all managers to be asked for
advice.

3) The term used in strategic implementation that describes a statement of activities

or steps needed to accomplish a single-use plan and whose use is to make the strategy
action-oriented is3) _______

A) course of action.
B) program.
C) guidelines.
D) procedures.
E) budgets.

4) Which form of synergy was demonstrated when P&G purchased Gillette to

combine P&G's knowledge of the female consumer with Gillette's knowledge of the
male consumer?4) _______

A) coordinated strategies
B) shared know-how
C) new business creation
D) economies of scale
E) shared tangible resources

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5) According to Gooldand Campbell, when companies coordinate the flow of
products or services of one unit with that of another unit to reduce inventory and
increase production efficiency, the synergistic effect is known as5) _______

A) economies of scale or scope.

B) shared know-how.
C) coordinated strategies.
D) new business creation.
E) pooled negotiating power.

6) The radical redesign of business processes to achieve major gains in cost, service,
or time is called6) _______

A) action planning.
B) management by objectives.
C) statistical process control.
D) total quality management.
E) Business Process reengineering.

7) The program which incorporates the statistical approach of Six Sigma with the
lean manufacturing program originally developed by Toyota is known as7) _______

A) flexible manufacturing.
B) Lean Six Sigma.
C) job enlargement.
D) reengineering.
E) just-in-time.

8) What term refers to the study of individual tasks in an attempt to make them more
relevant to the company and to the employee(s)?8) _______

A) position matching
B) responsibility shift
C) job design
D) task conversion
E) functional duties

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9) The combining of tasks to give a worker more of the same type of duties to
perform is known as9) _______

A) job rotation.
B) job motivation.
C) job combination.
D) job enlargement.
E) job enrichment.

10) How does job rotation combat the adverse consequences of task
specialization?10) ______

A) by forming natural work units to provide the worker with more responsibility
B) by combining different tasks, thereby giving them more responsibilities
C) by giving the worker more autonomy through alterations in the job
D) by altering the work to provide the worker with more control over activities
E) by moving workers through several jobs, thereby exposing them to increased task
variety

11) Which of the following is true of defensive tactics?11) ______

A) Defensive tactics aim to lower the probability of attack.

B) Defensive tactics reduce short-term profitability to ensure long-term profitability.
C) Defensive tactics divert attacks to less threatening avenues.
D) Defensive tactics lessen the intensity of an attack.
E) all of the above

12) Which of the following is NOT an offensive tactic?12) ______

A) raising structural barriers

B) flanking maneuver
C) guerilla warfare
D) frontal assault
E) encirclement

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13) A highly developed international company with a deep involvement throughout
the world, plus a worldwide perspective in its management and decision making is
called a(n)13) ______

A) multidomesticcorporation.
B) Stage IV corporation.
C) global corporation.
D) international corporation.
E) multinational corporation.

Essay Questions

18) What are the Common Strategy Implementation Problems?

Took longer than planned (Problem or result?)

Unanticipated major problems
Uncontrollable external factors (It’s Not My Fault!)
Employees not capable (Duh!)
Lack of training
Ineffective coordination
Inadequate leadership
Tasks/activities poorly defined (Those incompetent middle managers…)
Inadequate information systems (Those incompetent IT Guys…)

19) Tactics are Specific operating plans detailing how a strategy is to be

implemented in terms of when and where it is to be put into action. What are the
different timing and market location tactics?

a) Timing tactic
deals with when a company implements a strategy
*First mover
first company to manufacture and sell a new product or service
*Late movers
may be able to imitate the technological advances of others, keep risks down by
waiting until a new technological standard or market is established and take
advantage of the first mover’s natural inclination to ignore market segments

b) Market location tactic

deals with where a company implements a strategy.
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*Offensive tactic
usually takes place in an established competitor’s market location
*Defensive tactic
usually takes place in the firm’s own current market position as a defense against
possible attack by a rival

20) What are the different offensive tactics a company can use to attack a
competitor’s position?

•Frontal assault: the challenger firm and is intended to have a head on attack on the
competitor by matching him in all the aspects Viz, product, price, place, promotion.
•Flanking maneuver: the challenger firm is intended to attack the weak points or
blind spots of the competitor
•Bypass attack:the most indirect marketing strategy adopted by the challenging
firm with a view to surpassing the competitor by attacking itseasier markets.
•Encirclement: The Encirclement Attack is a war strategy adopted by the challenger
firm intended to attack the competitor on all the major fronts using wide product
range or market location range.
•Guerilla warfare: is an attack strategy concept designed for businesses to promote
their products or services in an unconventional way with little budget to spend

21) According to Goold and Campbell, synergy can take place in one of six forms.
Explain

• Shared know-how
• Coordinated strategies
• Shared tangible resources
• Economies of scale or scope
• Pooled negotiating power
• New business creation

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22) In a classic study of large U.S. corporations such as DuPont, General Motors,
Sears and Standard Oil, Alfred Chandler concluded that structure follows
strategy—that is, changes in corporate strategy lead to changes in organizational
structure. In light of this statement enumerate What is the particular sequence
proposed by Chandler of what occurs?

Structure Follows Strategy

Changes in corporate strategy lead to changes in organizational structure:
1. New strategy is created
2. New administrative problems emerge
3. Economic performance declines
4. New appropriate structure is invented
5. Profit returns to its previous level
23) Successful, large conglomerate organizations have tended to follow a pattern
of structural development as they grow and expand. What are the different patterns
of the development of corporate structure? What are the external and internal
challenges that may block this development?

The different patterns of the development of corporate structure

I. Simple Structure
= Flexible and dynamic
II. Functional Structure
= Entrepreneur is replaced by a team of managers
III. Divisional Structure
= Management of diverse product lines in numerous industries
= Decentralized decision making
IV. Beyond SBU’s
= Matrix
= Network

The external and internal challenges that may block this development
Internal
Lack of resources
Lack of ability
Refusal of top management to delegate
External
Economic conditions
Labor shortages
Lack of market growth

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24) Entrepreneurs who start businesses generally have four tendencies that work
very well for small new ventures but become Achilles’ heels for these same
individuals when they try to manage a larger firm with diverse needs, departments,
priorities and constituencies. Comment on this statement

Blocks to Changing Stages in Small ventures(Entrepreneurs)

Loyalty to comrades
Task oriented
Single-mindedness
Working in isolation

25) What is meant by the term “Business Process Re-Engineering”, and what are
the principles that support this process?

Business Process Reengineering

• the radical redesign of business processes to achieve major gains in cost,
service or time
• effective program to implement a turnaround strategy

Business Process Reengineering (BPR) Principles

Organize around outcomes
Those that use the output perform the process
Integrate information processing into real work
Treat geographically dispersed resources as centralized
Link parallel activities
Put decision point where work is performed
Capture information once at it’s source

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26) What is synergy? According to Goold and Campbell, what are the six forms it
can take?

Synergy
Exists for a divisional corporation if the return on investment is greater than what
the return would be if each division were an independent business

The Six forms of synergy

• Shared know-how
• Coordinated strategies
• Shared tangible resources
• Economies of scale or scope
• Pooled negotiating power
• New business creation

Chapter 10

MCQ
1) According to a study of downsizing in the automobile-related industry, all of the
following are problems associated with inappropriate downsizing EXCEPT1)
_______

A) Blanket offers for early retirement prompted even valuable employees to leave.
B) Surviving employees had to do extra work in addition to their own.
C) Outsourcing was eliminated.
D) Surviving employees experienced decreased morale.
E) The wrong jobs were eliminated.

2) Research suggests that boards of directors tend to look outside the firm for the
next CEO under which following circumstance?2) _______

A) When the company needs to expand in order to continue growing

B) When the company is prosperous
C) When the company needs to follow a stability strategy
D) When the company is in trouble
E) When the company is having temporary difficulty

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3) Which one of the following is NOT part of the process of MBO?3) _______

A) Establishing and communicating organizational objectives

B) Setting individual objectives that help implement organizational ones
C) Periodically reviewing performance as it relates to the objectives
D) Reinforcing rules and regulations
E) Developing an action plan of activities needed to achieve the objectives

4) According to Hofstede, which cultural dimension describes the extent to which

society is oriented toward money and things or towards people?4) _______

A) Uncertainty avoidance
B) masculinity-femininity
C) individualism-collectivism
D) Power distance
E) Long-term orientation

5) Which method of managing disparate cultures involves a relatively balanced

give-and-take of cultural and managerial practices between the merger partners,
and no strong imposition of cultural change on either company?5) _______

A) Deculturation
B) Assimilation
C) Separation
D) Integration
E) Segmentation

6) Which of the following is NOT a guideline proposed for successful

downsizing?6) _______

A) Communicate the reasons for actions.

B) Make across-the-board cuts.
C) Invest in the remaining employees.
D) Contract out work that others can do cheaper.
E) Plan for long-run efficiencies.

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7) According to Hofstede, which cultural dimension describes the extent to which a
society values individual freedom and independence of action compared with a
tight social framework and loyalty to the group?7) _______

A) Uncertainty avoidance
B) masculinity-femininity
C) individualism-collectivism
D) Power distance
E) Long-term orientation

8) According to the text, the process of replacing a key top manager is called8)
_______

A) Executive strategy.
B) Executive placement.
C) Executive outside succession.
D) Executive succession.
E) Executive search.

9) Downsizing is often used to implement a(n) ________ strategy.9) _______

A) Stability
B) Integration
C) Growth
D) Retrenchment
E) Hold

10) Which type of chief executive officer with a great deal of experience in that
particular industry would be appropriate for a corporation following a
concentration strategy emphasizing vertical or horizontal growth?10) ______

A) Professional liquidator
B) Dynamic industry expert
C) Turnaround specialist
D) Analytical portfolio manager
E) Cautious profit planner
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11) One research study of TQM successes and failures concluded that a key
ingredient in TQM programs is11) ______

A) Effective communication in all levels of management.

B) Excellent customer satisfaction.
C) Formidable manufacturing practices.
D) Respected lower level employees.
E) Top management.

12) To ensure employees are gaining the appropriate mix of experience to prepare
employees for future responsibilities, many corporations move people from one job
to another utilizing the technique of12) ______

A) Job rotation.
B) Job enrichment.
C) Job specialization.
D) Job enlargement.
E) Job design.

13) One of the big common mistakes by corporations sending executives on global
assignments is NOT13) ______

A) Educating executives about customs and values in other countries.

B) Raising their salaries.
C) Giving executives the opportunity to visit home.
D) Providing training for the regulatory environment.
E) Providing excellent health care.

14) According to the text, what is the "key" to effective management of change in
culture?14) ______

A) Operationalization
B) Planning
C) Evaluation
D) Staffing
E) Communication
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Essay Questions
27) What are Hofstede's dimensions of national culture?

1. Individualism/Collectivism Describes the strength of the relation between an

2. Power Distance
3. Uncertainty Avoidance
4. Masculinity/Femininity
5. Long-term/Short-term Orientation Suggests whether the focus of cultural values is on
individual and other individuals in the society.
Concerns the way the culture deals with unequal
distribution of power and defines the amount of
inequality that is normal.
Describes how cultures handle the fact that the future
is unpredictable.
The emphasis a culture places on practices or
qualities that have traditionally been considered
masculine or feminine.
the future (long term) or the past and present (short
term).

28) Executives with a particular mix of skills and experiences may be classified as
an executive type and paired with a specific corporate strategy. What are the
different executive types that might change with the development stage of the
company?

Executive type
• Dynamic industry expert –growth
• Analytical portfolio manager –diversification
• Cautions profit planner –stability
• Turnaround specialist –weak company/active market
• Professional liquidator –company can’t be saved

29) What are some of the approaches a company can take to identify and prepare
its people for important positions?

• Performance appraisal systems identify good performers with promotion

potential.
• Assessment centers evaluate a person’s suitability for an advanced position.
• Job rotation ensures employees are gaining a mix of experience to prepare
them for future responsibilities.

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33) What is executive succession? Discuss the hiring of insiders versus outsiders

Executive Succession: process of replacing a key top manager

Insiders versus Outsiders?
• Average tenure of CEO is just over 7 years
• 2/3 of companies replace CEO’s every 5 years
• Outsiders perform better in the short term
• Insiders in the long term
• Companies in trouble hire outsiders

Chapter 11

30) Distinguish between behavior and output controls. Provide examples of each

Output controls
Specify what is to be accomplished by focusing on the end result through the use
of objectives
Behavior controls
Specify how something is done through policies, rules, standard operating
procedures and orders from supervisors
Input controls (Extra)
Emphasize resources

31) List the five-step feedback model of the evaluation and control process

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32) What is the most commonly used measure of corporate performance (in terms
of profits)? Discuss the limitations of using this measure.

Return on investment (ROI)

result of dividing net income before taxes by the total amount invested in the
company (typically measured by total assets)

34) What is ERP? What are the three reasons why ERP could fail?

Enterprise Resource Planning (ERP)

Unites all of a company’s major business activities within a single family of
software modules providing instant access throughout the organization

35) What is the balanced scorecard? What are the four areas to be addressed?

Balanced scorecard
Combines financial measures that tell the results of actions already taken with
operational measures on customer satisfaction, internal processes and the
corporation’s innovation and improvement activities—the drivers of future
financial performance

The four areas to be addressed

• Financial: How do we appear to shareholders?
• Customer: How do customers view us?
• Internal business perspective: What must we excel at?
• Innovation and learning: Can we continue to improve and create value?

36) Discuss the guidelines for proper control.

1. Controls should involve only the minimum amount of information needed to

give a reliable picture of events.
2. Controls should monitor only meaningful activities and results, regardless of
measurement difficulty.
3. Controls should be timely so that corrective action can be taken before it is too
late.
4. Long-term and short-term goals should be used.
5. Controls should aim at pinpointing exceptions.

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6. Emphasize the reward of meeting or exceeding standards rather than punishment
for failing to meet standards.

37) What is the difference between EVA and MVA?

Economic value added (EVA)

• Measures the difference between the pre-strategy and post-strategy values
for the business
• After-tax operating income minus the total annual cost of capital

Market value added (MVA)

measures the difference between the market value of a corporation and the capital
contributed by shareholders and lenders

38) Discuss the steps of benchmarking process.

1. Identify the area or process to be examined

2. Find behavioral and output measures
3. Select an accessible set of competitors of best practices
4. Calculate the differences among the company’s performance measurements and
those of the competitors and determine why the differences exist
5. Develop tactical programs for closing performance gaps
6. Implement the programs and compare the results

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