BSAD 490
STUDY GUIDE, TEST #1
(If you have concerns about the accuracy of your answers, you can bring them to me
for review.)
1. List & briefly discuss the 5 business-level strategies identified in Ch 4.





Cost leadership (Broad target)
An integrated set of actions designed to produce or deliver goods or services with
features that are acceptable to customers at the lowest cost, relative to that of
competitors
Differentiation (Broad target)
An integrated set of actions designed by a firm to produce or deliver goods or
services (at an acceptable cost that customers perceive as being different in ways
that are important to them
Focused on cost leadership (narrow target)
Needs of a particular industry segment or niche
Low cost is always in focus
Focused on differentiation (narrow target)
Needs of a particular industry segment or niche
Target on Generation X
Integrated cost leadership/differentiation (broad and narrow target)
① Adapt quickly to environmental changes
② Learn new skills and technologies more quickly
③ Effectively leverage its core competencies while competing against its rivals
2. Compare & contrast corporate- vs. business-level strategy.
 Corporate-level strategy
Specifics actions taken by the firm to gain a competitive advantage by selecting
and managing a group of different businesses competing in several industries and
product markets
 Business-level strategy
An integrated and coordinated set of commitments and actions the firm uses to
gain a competitive advantage by exploiting core competencies in specific product
markets
3. Define & briefly discuss the importance of a sustainable competitive advantage.
 Sustainable competitive advantage
It occurs when a firm implements a value-creating strategy and other companies
are unable to duplicate it or find it too costly to imitate
An organization is assured of a competitive advantage only after others’ efforts to
duplicate its strategy have ceased or failed. In addition, when a firm achieves a
competitive advantage, it normally can sustain it only for a certain period.
1
4. Define & discuss the strategic management process (in terms of str’c inputs,
actions, outcomes, etc). see p. 7
 Strategic management process
The full set of commitments, decisions, and actions required for a firm to achieve
strategic competitiveness and earn above-average returns
Relevant strategic inputs derived from analyses of the internal and external
environments are necessary for effective strategy formulation and implementation. In
turn, effective strategic actions are a prerequisite to achieving the desired outcomes
of strategic competitiveness and above-average returns
5. What do we mean by “success/failure is impermanent?”
 There are no guarantees of success
 Success won’t continue
6. List & briefly discuss 3 ways in which the ever increasing role of a “global
economy” has impacted firms, management, &/or customers.
 Global economy
One in which goods, services, people, skills, and ideas move freely across
geographic borders
① Quality increase
② More competition
③ More choice for customers
7. Define stakeholders & list the 3 types (w/ examples).
 stakeholders
The individuals and groups who can affect, and are affected by, the strategic
outcomes achieved and who have enforceable claims on a firm’s performance
① Capital market stakeholders
 Shareholders
 Major suppliers of capital (e.g. banks)
② Product market stakeholders
 Primary customers
 Suppliers host communities
 Unions
③ Organizational stakeholders
 Employees
 Managers
 Non-managers
8. Define general environment & list the 6 segments identified in the text.
2
 General environment
Composed of dimensions in the broader society that influence an industry and the
firms within it
①
②
③
④
⑤
⑥
Economic
Socio-cultural
Global
Technological
Political/legal
Demographic
9. Define industry environment (definition must include the 5 forces).
 Industry environment
The set of factors that directly influences a firm and its competitive actions and
competitive responses (the 5 forces of competition model):
① The threat of new entrants
② Bargaining power of suppliers
③ Bargaining power of buyers
④ Threat of substitute products
⑤ Rivalry among competing firms
10. Briefly discuss how 2 of the 5 forces of competition influence the attractiveness of
the industry.
 If the suppliers have the power, the industry has to obey at the price the
suppliers want to sell.
 If the buyers have the power, the industry has to obey at the price the buyers
want to buy
11. List the 4 components (STEPS) of the external analysis.
① Scanning
② Monitoring
③ Forecasting
④ Assessing
12. Define a strategic group & briefly discuss why is it especially important for firms to
identify, analyze & track firms within their strategic group?
 Strategic group
A set of firms emphasizing similar strategic dimensions to use a similar strategy

The notion of strategic groups can be useful for analyzing an industry’s
competitive structure. Such analyses can be helpful in diagnosing competition,
positioning, and the profitability of firms within an industry. Also, it help the
firm to find direct competitors.
13. Why has the importance of the internal analysis increased?
 Experimentation and learning are expected and promoted
3

Determine what they can do
14. What are resources? What is the difference between tangible & intangible
resources? Which type is USUALLY the best source of competitive advantage &
Why?
 Resources
The source of a firm’s capabilities
 Tangible resources
Assets that can be seen and quantified
 Financial resources
 Organizational resources
 Physical resources
 Technological resources

Intangible resources
Assets that typically are rooted deeply in the firm’s history and have accumulated
over time
 Human resources
 Innovation resources
 Reputational resources

Intangible resources are more important because it’s non-substitutable and
difficult to duplicate
15. List & briefly define the 4 criteria for a capability to create a sustainable
competitive advantage.
 Valuable capabilities
Allow the firm to exploit opportunities or neutralize threats in its external
environment
 Rare capabilities
Possessed by a few, if any, current or potential competitors
 Costly-to-imitate capabilities
Capabilities that other firm cannot easily develop
 Non-substitutable capabilities
Capabilities that do not have strategic equivalents
16. Define outsourcing & list 3 reasons why a firm may AND why a firm may not
outsource (6 TOTAL).
4
 Outsourcing
The purchase of a value-creating activity from an external supplier
May
① Efficient
② Best
③ Increase flexibility
May not
① Lost control
② Giving up company secret
③ Excess capacity
***(over) ***
17. What is a SWOT analysis? What are the goals?
can do
Res model—int
 Strength
 Weakness
 Opportunity
can do
I/O model—ext
 Threat
The analysis of strengths and weaknesses focuses on internal factors that give an
organization certain advantages and disadvantages in meeting the needs of its target
market
When an organization matches internal strengths to external opportunities, it creates
competitive advantages in meeting the needs of its customers. In addition, an
organization should act to convert internal weaknesses into strengths and external threats
into opportunities.
18. List 4 methods of identifying/classifying consumer markets/segments.
① Demographic factors (age, income, sex, etc.)
② Socioeconomic factors (social class, stage in the family life cycle)
③ Geographic factors (cultural, regional, and national differences)
④ Psychological factors (lifestyle, personality traits)
⑤ Consumption patterns (heavy, moderate, and light users)
⑥ Perceptual factors (benefit segmentation, perceptual mapping)
19. List the 5 types of diversification identified in Ch. 6.
 Low levels of diversification
5


① Single business
② Dominant business
Moderate to high levels of diversification
③ Related constrained
④ Related linked
Very high levels of diversification
⑤ Unrelated
20. List & briefly discuss the 3 main motives behind diversification strategies designed
to enhance strategic competitiveness.
① The sharing of activities
Sharing plant, equipment, technology, distribution system, sales force, and so on
However, risk is associated
② The transfers of know-how
Between separate activities, such as marketing expertise, management,
competencies, and so on
③ Market power
Exits when a firm is able to sell its products above the existing competitive level
or to reduce the cost of its primary or support activity below the competitive level,
or both
21. List 3 incentives and/or resources for diversification with neutral effect
① Antitrust regulation
② Tax laws
③ Uncertain future cash flows
22. Define synergy & briefly discuss how it may increase the risk of firm failure.
 Synergy
It exists when the value created by business units working together exceeds the value
those same units create working independently
Because synergy produces joint interdependence between business units and the
firm’s flexibility to respond is constrained, it increases it risk of corporate failure
DON’T FORGET TO BE AWARE OF THE REST OF THE NOTES, ESP. THOSE
ASPECTS WHICH WE HAVE SPENT MORE TIME DISCUSSING &/OR HAVE
DISCUSSED ON SEVERAL OCCASIONS (E.G. ULTIMATE GOALS OF STR’C
MGT PROCESS  ABOVE-AVG. RETURNS)
6