Chapter1ISSUES FOR REVIEW AND DISCUSSION 1.Explain why Strategic Management often is called a ³capstonecourse.´ Answer: Bu...
today is no guarantee for success tomorrow. The business world is becoming global in scope; technologyis changing the natu...
involved?A small working group? Or all the people affected by the code? How will you distill the needsof your organization...
Answer: Strategic management takes place at multiple levels within an organization. Although moststudents may never become...
30 |P a g e improved understanding of competitors¶ strategies, increased employee productivity,reduced resistance to chang...
38 |P a g e high performance.As described in the chapter, a comprehensive mission statement providesnumerous benefits that...
stakeholder groups. Social policies ultimately affect the environment directly and indirectly. The beliefsof the primary s...
Technological²Use of the Internet is doubling every 100 days. 3. Discuss the following statement: Majoropportunities and t...
factor a weight from .0 (not important) to 1.0 (very important). These weights show the relativeimportance. The total of a...
organization evaluate the relative importance of each factor by assigning a 1 = not important, 2 =somewhat important, and ...
the weight allows more important factors to receive more consideration while the rating evaluates howwell the firm handles...
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Chapter1

  1. 1. Chapter1ISSUES FOR REVIEW AND DISCUSSION 1.Explain why Strategic Management often is called a ³capstonecourse.´ Answer: Business policy is commonly called a capstone course because students¶ majorresponsibility in this class is to use all knowledge gained in prior courses to chart the future direction ofdifferent organizations. 2. What aspect of strategy formulation do you think requires the most time?Why? Answer: Important aspects of strategy formulation include developing a business mission,performing an external audit, conducting an internal audit, generating alternative strategies, andchoosing among alternative strategies. Performing an external audit generally takes the most time. Forexample, identifying competitors¶ strengths and weaknesses is an essential aspect of the external audit.Effective use of the Internet can reduce the time required for performing an external audit.3. Why is strategy implementation often considered the most difficult stage in the strategic-management process? Answer: Strategy implementation is often considered to be the most difficultstage in strategic management because it requires discipline, sacrifice, commitment, and hard workfrom all employees and managers. It is always more difficult to do something than to say you¶re goingto do it.25 |P a g e 4. Why is it so important to integrate intuition and analysis in strategic management?Answer: Neither intuition nor analysis alone is sufficient for making good strategic decisions. Intuition,based on one¶s past experiences, judgment, and ³gut´ feelings, does not include the use of analyticalstrategic-management concepts that have been developed and successfully tested in the businessworld. To ignore these techniques that are based on historical learning is like trying to reinvent thewheel. However, no analytical tools can capture all aspects of a given organization¶s culture andsituation. Nor can analytical tools assimilate all the subjective information that must be considered instrategic management, such as personalities, emotions, values, beliefs, customs, and ethical factors.Thus, it is very important to integrate intuition and analysis in strategic management.5. Explain the importance of a vision and mission statement. Answer: Reaching agreement on formalvision and mission statements can greatly facilitate the process of reaching agreement on anorganization¶s strategies, objectives, and policies. Organizational success depends on reasonableagreement on these issues, so a clear mission statement is a most important strategic-managementtool.6. Discuss relationships among objectives, strategies, and policies. Answer: Long-term objectives andstrategies are products of strategy formulation. Short-term (annual) objectives and policies are productsof strategy implementation. Firms should translate long-term objectives into annual objectives.Similarly, strategies should be supported with clear policies.7. Why do you think some chief executive officers fail to use a strategic-management approach todecision making? Answer: Some chief executive officers, strategists, and organizations have beensuccessful, to date, without using strategic-management concepts and techniques. However, success
  2. 2. today is no guarantee for success tomorrow. The business world is becoming global in scope; technologyis changing the nature of competition in all industries. Strategic management enables organizations torecognize and adapt to change more readily; successfully adapting to change is the key to survival andprosperity. There is no good alternative approach to strategic management.8. Discuss the importance of feedback in the strategic-management model. Answer: Note in thestrategic-management model that feedback is critically important. Changes can occur that impact allstrategic-management activities. Feedback allows these changes to be identified and adjustments to bemade. Feedback in the strategic-management process promotes the creation of a climate for two-waycommunication and, thus, allows esprit de corps to be achieved in an organization.9. How can strategists best ensure that strategies will be effectively implemented? 26 |P a g e Answer:Strategists can best assure that strategies formulated will be effectively implemented by involving asmany managers as possible in the strategy formulation process.Also, it is important to communicateeffectively why changes are needed. 10. Give an example of a recent political development that changedthe overall strategy of an organization. Answer: Students¶ answers will vary. Some possible examplesmight include 1) the recent tariffs placed on steel imported into the US and how that has changedstrategy for steel companies both at home and abroad, 2) the change in guidelines and requirements forairport safety and subsequent changes in the strategies of airlines, or 3) the political investigations intothe Enron case and potential changes that may result in major accounting/consulting firms.11. Who are the major competitors of your college or university? What are their strengths andweaknesses? How successful are these institutions compared to your college? Answer: Answers to thisquestion will vary by institution. 12. If you owned a small business, would you develop a code ofbusiness conduct? If yes, what variables would you include? If no, how would you ensure that youremployees were following ethical business standards?Answer: It is advisable for all businesses, large and small, to have a clear code of business ethics. Suchcodes provide a guideline for appropriate behavior and aid in decision making. Chris MacDonald statesthese guidelines (available at www.ethicsweb.ca) for developing a code of ethics:j What will be thepurpose of your new code? Is it to regulate behavior? To inspire?j Different kinds ofdocuments serve different purposes. Is your new document intended to guide people or to set outrequirements? Is it really a Code of Ethics that you need? You might consider creating a Statement ofValues, a Policy, a Mission Statement, and a Code of Conduct. jA code of ethics should be tailored to theneeds and values of your organization. jMany ethics codes have two components. First, anaspirationalsection, often in the preamble, that outlines what the organization aspires to, or the ideals it hopes tolive up to. Second, an ethics code will typically list some rules or principles, which members of theorganization will be expected to adhere to.j Will your new ethics document include some sort of enforcement? If so, what kind? jOften theprinciples or values listed in an ethics document will be listed in rough order of importance to theorganization. The ordering need not be strict, but generally the value or principle listed first will have anatural prominence. j Think carefully about theprocess by which you create your new code. Who will be
  3. 3. involved?A small working group? Or all the people affected by the code? How will you distill the needsof your organization and the beliefs of your members into a document? The process may matter asmuch as the final product. 27 |P a g e j How will your new code be implemented? How will it bepublicized, both inside and outsideof your organization? What steps, if any, will be taken to ensure that the values embodied in your codeget implemented in organizational policies and practices? jHow/when will your code bereviewed/revised? 13. Would strategic-management concepts and techniques benefit foreignbusinesses as much as domestic firms? Justify your answer. Answer: The answer to this question is yes.Many foreign businesses are using strategic- management concepts and techniques effectively. Studentscould look in the England-based journalLong Range Planning to read about foreign firms also benefitingfrom strategic- management ideas.Another good foreign-based business journal that carries strategic-management articles is the Journal of Management Studies.14. What do you believe are some potential pitfalls or risks in using a strategic-management approach todecision making? Answer: There is a risk of too little top management support for the process. There is arisk of too little involvement by line managers and employees. There is a risk that top managers willunderestimate the importance of understanding and commitment. 15. In your opinion, what is thesingle major benefit of using a strategic-management approach to decision making? Justify your answer.Answer: The single major benefit is the potential for improved understanding of the business andindustry on the part of all managers and employees. Understanding generally leads to increasedcommitment, which, in turn, leads to creativity, innovativeness, and overall cooperativeness. Theprocess is more important than the plan.Also, the strategic- management process allows an organizationto initiate and influence, rather than just respond and react to its environment. That is, it allows anorganization to be proactive, rather than reactive, in controlling its own destiny. Strategic-managementconcepts provide an objective basis for allocating resources and for reducing internal conflicts that canarise when subjectivity alone is the basis for major decisions.16. Compare business strategy and military strategy. 28 |P a g e Answer: As discussed in the latter part of this chapter, business and military strategy aresimilar in many respects. Many of the ideas developed in business strategy were first formulated asmilitary strategy. Both military and business organizations have competitors. Afundamental differencebetween military and business strategy is that business strategy is formulated, implemented, andevaluated with the assumption of competition, while military strategy is based on an assumption ofconflict. 17. What do you feel is the relationship between personal ethics and business ethics? Are they,or should they be, the same? Answer: Personal ethics is the foundation of business ethics. Businessethics encompass more situations than personal ethics, but a personal ethics doctrine still provides abasis for all business ethics decisions. 18. Why is it important for all business majors to study strategicmanagement, as most students will never become a chief executive officer or even a top manager in alarge company?
  4. 4. Answer: Strategic management takes place at multiple levels within an organization. Although moststudents may never become the CEO of a corporation, they may become the ³branch manager´ ordepartment head of a larger firm. In these roles, they may be asked to complete a strategic plan fortheir branch or department. In addition, employees at all levels are frequently asked to contribute to thedevelopment of their firm¶s strategic plan.As a result, an understanding of the strategic-managementprocess is important.19. Explain why consumption patterns are becoming similar worldwide. What are the strategicimplications of this trend? Answer: As a result of improvements in global communications, consumersacross the world are increasingly being exposed to the same advertising, the same cultural events, thesame news, and the same forms of entertainment.As a result, the tastes of consumers across the worldare converging. This development helps to explain why consumption patterns are becoming similarworldwide.29 |P a g e 20. What are the advantages and disadvantages of beginning export operations in a foreigncountry? Answer: The following are the primary advantages and disadvantages of initiating exportoperations in a foreign country. Advantages: yExport operations can absorb excess capacity, reduce unitcosts, and spread economic risks over a wider number of markets. y Firms can gain new customers fortheir products and services, thus increasing revenues. y Competitors in foreign markets may not exist, orcompetition may be less intense than in domestic markets. Disadvantages: y Firms confront differentand often little understood social, cultural, demographic, and competitive forces when doing businessoverseas. yWeaknesses of competitors in foreign lands are often overestimated, and strengths are oftenunderestimated. yLanguage, cultural, and value systems differ among countries, and this can createbarriers of communication and other problems. 21. Describe the content available on the SMCO(www.strategyclub.com) website. Answer: The SMCO website provides links to websites withinformation useful for case analysis such as corporate websites, business analysis services, news sites,magazines, governmental sites, and financial ratio analyses. It also provides links to job search websites,graduate school websites, and websites related to strategic planning. Several software packages areavailable for purchase on the site including a template for generating the matrices required for caseanalyses.22. List four financial and four nonfinancial benefits of a firm engaging in strategic planning. Answer:Businesses engaging in strategic planning experience the following financial benefits. They showsignificant improvement in sales, profitability, and productivity compared to firms without strategicplanning activities. Firms using strategic planning generally exhibit superior long-term financialperformance relative to their industry and seem to make more informed decisions with goodanticipation of both short and long- term consequences. They are also prepared for fluctuations in theirexternal and internal environments.In addition to the financial benefits, firms using strategic planning also experience nonfinancial benefits.These include an enhanced awareness of external threats, an
  5. 5. 30 |P a g e improved understanding of competitors¶ strategies, increased employee productivity,reduced resistance to change, and a clearer understanding of performance-reward relationships.23. Why is it that a firm can sustain a competitive advantage normally for only a limited period of time?Answer: A firm can sustain a competitive advantage for only a certain period of time due to rival firms.These competing firms will attempt to imitate the competitive advantage in order to undermine theleader. 24. Why is it not adequate to simply obtain a competitive advantage? Answer: Because otherfirms will constantly attempt to undermine firms with competitive advantages and imitate thoseadvantages, organizations must constantly strive to achieve a sustained competitive advantage. 25. Howcan a firm best achieve a sustained competitive advantage? Answer: A sustained competitive advantagecan best be achieved by 1) continually adapting to changes in external trends and events and internalcapabilities, competencies, and resources, and by 2) effectively formulating, implementing, andevaluating strategies that capitalize upon those factors.26. Compare and contrast ISO 14000 and 14001. Answer: ISO 14000 focuses on operating in anenvironmentally-friendly manner. The standards were created by the International Organization forStandardization and provide universal guidelines for standardization. ISO 14000 is a series of standardsin the environmental field. ISO 14001 is part of the 14000 family of standards. 14001 standards offer auniversal technical standard for environmental compliance in fields such as environmental auditing,environmental performance evaluation, environmental labeling, and life-cycle assessmentChapter 2ISSUES FOR REVIEW AND DISCUSSION 1. Compare and contrast vision statements with mission statements in terms of composition andimportance. Answer: Many organizations develop both a mission statement and a vision statement.Whereas the mission statement answers the question, ³What is our business?´ the vision statementanswers the question, ³What do we want to become?´ Both statements are essential for firm success.2. Do local service stations need to have written vision and mission statements? Why or why not?Answer: Less formality and detail characterize strategic management in small businesses such as a localservice station. However, local service stations are not immune to competitive pressures, changes intechnology, changes in demographic factors, and resistance to change. Therefore, it is recommendedthat even the smallest organization develop a written mission statement. Such a formal statementindicates vision and good management, which could enhance a small businesss efforts to secure bankfinancing and to develop good supplier, customer, and employee relationships.3. Why do you think organizations that have a comprehensive mission statement tend to be highperformers? Does having a comprehensive mission cause high performance? Answer: Having acomprehensive mission statement does not guarantee or cause high performance. However, acomprehensive mission statement can contribute significantly to
  6. 6. 38 |P a g e high performance.As described in the chapter, a comprehensive mission statement providesnumerous benefits that usually translate into high performance. 4. Explain why a mission statementshould not include strategies and objectives. Answer: A mission statement should not include strategiesand objectives because the statement needs to be broad in scope to effectively provide a basis forperforming an external and internal audit and for generating and selecting among alternative strategies.Including specific strategies and objectives in a mission statement could reduce the level of innovativeand creative thinking in an organization.Also, including specific strategies and objectives in a missionstatement jeopardizes the potential for the statement to be widely accepted by all managers andemployees of the organization.Acceptance of a clear mission is a prerequisite for gaining acceptance forstrategies and objectives of the organization.5. What is your college or university¶s self-concept? How would you state that in a mission statement?Answer: These answers will vary by institution. See the examples in the chapter. 6. Explain the principalvalue of a vision and mission statement. Answer: Many organizations develop both a mission statementand a vision statement. Whereas the mission statement answers the question, ³What is our business?´the vision statement answers the question, ³What do we want to become?´ Both the vision statementand the mission statement ensure unanimity of purpose within the organization and make importantstatements about ³who the firm is´ and ³what it wants to become´ to outside stakeholders.7. Why is it important for a mission statement to be reconciliatory? Answer: A mission statement needsto be reconciliatory because the claims of a firms various stakeholders often conflict.An effectivemission statement reconciles major differences among key stakeholders. 8. In your opinion, what arethe three most important components to include in writing a mission statement? Why? Answer: All ofthe evaluative criteria described in Chapter 2 are important, but three are particularly important:customers, products or services, and markets. 9. How would the mission statement of a for-profit and anonprofit organization differ? 39 |P a g e Answer: The mission statements of profit versus nonprofitorganizations would not differ in format, except for the survival, growth, and profitability component.10. Write a vision and mission statement for an organization of your choice. Answer: This is aworthwhile classroom activity. 11. Conduct an Internet search with the keywords ³vision statement´ and³mission statement.´ Find company vision and mission statements and evaluate the documents. Write aone-page report on your findings.Answer: This is a worthwhile activity for students to perform as a homework assignment followed byclass discussion of the assortment of statements identified. 12. Who are the major stakeholders of thebank that you do business with locally? What are the major claims of those stakeholders? Answer: Themajor stakeholders of a bank include commercial customers, consumer customers, shareholders,communities, managers, and employees. Each stakeholder group relies upon the organization.Customers expect the bank to perform in a manner that protects them financially. Shareholders expectthe firm to be profitable. Local communities rely upon the bank to provide jobs and pay taxes.Employees rely upon the bank for their income.13. How could a strategist¶s attitude toward social responsibility affect a firm¶s strategy? What is yourattitude toward social responsibility? Answer: Firms must seek to address the concerns of many
  7. 7. stakeholder groups. Social policies ultimately affect the environment directly and indirectly. The beliefsof the primary strategists in the organization will absolutely affect how social policy is addressed in theorganization¶s mission statement and strategies. Some strategists believe that organizations havetremendous social obligations. Others believe that organizations have no obligation to do any more forsociety than is legally required. Most strategists agree that the first social responsibility of any businessmust be to make enough profit to cover the costs of the future, because if this is not achieved, no othersocial responsibility can be met. Strategists should examine social problems in terms of potential costsand benefits to the firm, and they should address social issues that could benefit the firm most.14. List the seven characteristics of a mission statement. Answer: A mission statement has the followingcharacteristics: 1) it is broad enough to allow for the generation and consideration of a range of feasiblealternative objectives and 40 |P a g e strategies without stifling management; 2) it can reconciledifferences among and appeal to an organization¶s diverse stakeholders; 3) it is less than 250 words; 4)it arouses positive feelings and emotions about the organization; 5) it should be enduring; 6) itgenerates a favorable impression of the firm, and 7) it is useful for judging opportunities and strategies.15. List the benefits of having a clear mission statement. Answer: Mission statements provide thefollowing benefits: 1) agreement on the purpose of the organization, 2) standard for allocation ofresources, 3) basis for organizational climate, 4) focal point for individuals to identify with theorganization¶s purpose and direction, 5) facilitation of the translation of objectives into a workstructure, and 6) specification of organizational purposes into objectives. Mission statements areessential in guiding strategic planning.16. How often do you feel a firm¶s vision and mission statement should be changed? Answer: Thisdepends on the individual firm. Vision and mission statements should be evaluated on a regular basis todetermine if they are still appropriate. Firms may wish to change the statements in times of crisis and intimes of success. Ultimately the vision and mission should be in tune with the company and itsenvironment.Chapter 353 |P a g e ISSUES FOR REVIEW AND DISCUSSION 1. Explain how to conduct an external strategic-management audit. Answer: An effective approach for conducting an external strategic-managementaudit consists of four basic steps: (1) select key variables, (2) select key sources of information, (3) useforecasting tools and techniques, and (4) construct an EFE Matrix. 2. Identify a recent economic, social,political, or technological trend that significantly affects financial institutions. Answer: Economic²Interestrates remain low.Social²Many states are passing no smoking ordinances.Political²Eastern European countries are experiencing political instability.
  8. 8. Technological²Use of the Internet is doubling every 100 days. 3. Discuss the following statement: Majoropportunities and threats usually result from an interaction among key environmental trends ratherthan from a single external event or factor.Answer: This statement is accurate. It reveals how complex the external audit part of strategyformulation can be. There are an infinite number of interactions among key external factors. 4. Identifytwo industries experiencing rapid technological changes and three industries that are experiencing littletechnological change. How does the need for technological forecasting differ in these industries? Why?Answer: The computer industry, communications industry, and aerospace industry are experiencingrapid technological change. Three industries that are experiencing little technological change are theforest products industry, the shipping industry, and the dairy industry. 5. Use Porter¶sfive-forces modelto evaluate competitiveness within the U.S. banking industry. Answer: Porter identifies five competitiveforces that determine the intensity of competition in an industry and the total value of profits created ina particular industry. The five forces are 1) new entrants, 2) substitute products or services, 3)bargaining power of suppliers, 4) bargaining power of buyers, and 5) rivalry among existing firms.A keyto selecting appropriate generic strategies is to analyze these competitive forces in terms of trends,opportunities, and threats facing the firm.Ask your students to apply an analysis of these forces to the banking industry.54 |P a g e 6. What major forecasting techniques would you use to identify (1) economic opportunitiesand threats and (2) demographic opportunities and threats? Why are these techniques mostappropriate?Answer: With the advent of sophisticated computers, simultaneous systems of regression equationshave become the most widely used approach for forecasting economic variables. Scenario developmentis the most popular of all techniques for social and demographic forecasting, although surveys andmarket research are also widely used.7. How does the external audit affect other components of the strategic-management process? Answer:In countless ways, external audit results can and often do affect all other components of the strategic-management model. 8. As the owner of a small business, explain how you would organize a strategic-information scanning system. How would you organize such a system in a large organization? Answer: Inboth small and large organizations, strategists could assign specific publications to particular individualswho could then monitor their assigned source and regularly report strategic information to acoordinator.Also, both small businesspeople and chief executive officers of large businesses couldeffectively use on-line databases.9. Construct an EFE Matrix for an organization of your choice. Answer: An EFE Matrix allows strategiststo summarize and evaluate economic, social, cultural, demographic, environmental, political,governmental, legal, technological, and competitive information. There are five steps in developing anEFE Matrix as illustrated in Table 3-9.  List key external factors as identified in the external-auditprocess. Include a total of 10-20 factors from both the opportunities and threats.  Assign to each
  9. 9. factor a weight from .0 (not important) to 1.0 (very important). These weights show the relativeimportance. The total of all the weights should equal 1.0.  Assign a 1-4 rating to each factor to indicatehow effectively the firm¶s current response strategy: 1= the response is poor, 2 = the response isaverage, 3 = the response is above average, and 4 = the response is superior.  Multiply each factor¶sweight by its rating to get a weighted score.  Sum the weighted scores for each variable to determinethe total weighted score for the organization. While each answer will vary for this question, studentsshould follow these guidelines.55 |P a g e 10. Make an appointment with a librarian at your university to learn how to use on-linedatabases. Report your findings in class. Answer: This is an interesting and beneficial library exercise.Many libraries have a business liaison who will come to your class to illustrate the use of thesedatabases. 11. Give some advantages and disadvantages of cooperative versus competitive strategies.Answer: Cooperative strategies are generally less costly than competitive strategies. Cooperativestrategies between domestic and foreign companies can facilitate entry into world markets. However,competitive strategies recognize that survival of the fittest is an underlying philosophy of business notonly in the United States, but also in most of the world. Identifying competitors¶ strengths andweaknesses is, thus, an integral and vital part of the external audit.12. As strategist for a local bank, explain when you would use qualitative versus quantitative forecasts.Answer: Qualitative forecasts are most appropriate when historical data are not available and whenrelationships among key variables are expected to vary greatly in the future. In addition, whenconditions are exploratory in nature, qualitative data can be very useful. Quantitative forecasts requireaccess to quantitative data.13. What is your forecast for interest rates and the stock market in the next several months? As thestock market moves up, do interest rates always move down? Why? What are the strategic implicationsof these trends?Answer: As the stock market goes up, interest rates usually go down. An underlying reason for this trendis that investors find stocks more attractive than certificates of deposit as investment opportunitieswhen stock prices rise. The primary strategic implications of these trends concern the relativeattractiveness of stock versus debt as a source of capital to finance strategy implementation.As stockprices move up and interest rates move down, debt becomes more attractive as a source of capital.14. Explain how information technology affects strategies of the organization where you have workedmost recently. Answer: Answers will vary for each student. If asking this question as a class exercise,encourage students to think about how information technology might have represented a strength orweakness for that organization. In addition, mention that rapidly changing information technology canrepresent a threat or opportunity for a firm.56 |P a g e 15.Let¶s say your boss develops an EFE Matrix that includes 62 factors. How would yousuggest reducing the number of factors to20? Answer: Let a group of knowledgeable individuals in the
  10. 10. organization evaluate the relative importance of each factor by assigning a 1 = not important, 2 =somewhat important, and 3 = very important. Then add the ratings each factor receives. The 20 factorswith the highest sum score should be included in the EFE Matrix.16. Discuss the ethics of gathering competitive intelligence. Answer: Gathering competitive intelligenceinformation is not corporate espionage because all the information needed is available by ethicalmeans, mostly accessible through the Internet. Firms owe it to all their stakeholders to gathercompetitive intelligence and to perform this activity systematically and ethically.17. Discuss the ethics of cooperating with rival firms. Answer: The norms of personal ethics serve as afoundation for business ethics and provide a basis for cooperating with rival firms. Engaging in unethicalpractices, even with rival firms, will jeopardize a firm¶s credibility and respect in the industry. 18. Visitthe SEC website at www.sec.gov and discuss the benefits of using information provided here. Answer:This is a good Internet exercise for students. The SEC website contains a plethora of informationincluding SEC forms and filings, information for investors, accountants, mutual fund managers, etc.While the information can be useful for conducting company business and planning, it is also a goodsource of environmental information particularly related to regulations and the financial environment.19. What are the major differences between U.S. and multinational operations that affect strategicmanagement? Answer: The external environment is much broader for a firm that conducts multinationaloperations than for a firm that only sells domestically.As a result, a firm that conducts multinationaloperations must consider a broader range of information in its external analysis, which may affect howits strategies are structured and implemented.57 |P a g e 20. Why is globalization of industries a common factor today? Answer: The following aretrends that are contributing to the globalization of industries around the world: y Corporations in everycorner of the globe are taking advantage of the opportunity to share in the benefits of worldwideeconomic development. y Markets are shifting rapidly and in many cases are converging in terms oftastes, trends, and prices. y Innovative transport systems are accelerating the transfer of technology,and shifts in the nature and location of production systems are reducing the response time to changingmarket conditions. y More and more countries around the world are welcoming foreign investment andcapital. y E-commerce and the instant transmission of money and information across continents. 21. Doyou agree with I/O theorists that external factors are more important than internal factors in a firmachieving competitive advantage? Explain both your and their position. Answer: While I/O theoristsclaim that industry factors are more important than internal factors, research findings suggest that only20% of a firm¶s profitability can be explained by industry factors and 36% explained by internal factors.Regardless, it is not a question of whether external or internal factors are more important. Rather,effective integration and understanding of both external and internal factors is the key to securing andkeeping a competitive advantage.22. Define, compare, and contrast the Weights vs Ratings in an EFEM vs IFEM. Answer: The weight in anEFE Matrix indicates the relative importance of that factor to being successful in the firm¶s industry. Therating indicates how effectively the firm¶s current strategies respond to each key external factor. Thus,
  11. 11. the weight allows more important factors to receive more consideration while the rating evaluates howwell the firm handles each factor. Weights are industry-based but ratings are company-based.The weight in an IFE also indicates the relative importance of the factor to the firm¶s successfulness inthe industry. However, in the IFE the factors under consideration are internal factors rather thanexternal factors. Ratings in the IFE indicate whether the factor is a major or minor weakness or strength.Like in the EFE, weights industry-based while ratings are company- based. The IFE is presented inChapter 4.23. Develop a Competitive Profile Matrix for your university. Include 6 factors. Answer:  List criticalsuccess factors identified in the internal and external analysis.  Assign to each factor a weight from .0(not important) to 1.0 (very important). These weights show the relative importance. The total of all theweights should equal 1.0.  Assign a 1-4 rating to each factor to describe the factor: 1= majorweakness, 2 = minor weakness, 3 = minor strength, and 4 = major strength.  Multiply each factor¶sweight by its rating to get a weighted score.  Sum the weighted scores for each variable to determinethe total weighted score for the organization.  Do the same for one or more competing organizationsusing the same critical success factors and weights. While each answer will vary for this question,students should follow these guidelines. A template is provided below. University 1: University 2: CriticalSuccess Factors Weight Rating Score Rating Score Tuition costs Quality of faculty Academic reputationAverage class size Campus landscaping Athletic programs Quality of studentsGraduate programsLocation of campusCampus culture Totals 1.0 24. List the 10 external areas that give rise to opportunities and threats.Answer: The ten external areas are economic, social, cultural, demographic, environmental, political,government, legal, and technological.

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