01Summary of Chapter

20. A strategy is an action that a company takes to attain one or more of its goals. 30. The major goal of companies is to maximize the returns that shareholders get from holding shares in the company. To maximize shareholder value, managers must pursue strategies that result in high and sustained profita ility and also in profit gro!th. "0. The profita ility of a company can e measured y the return that it makes on the capital invested in the enterprise. The profit gro!th of a company can e measured y the gro!th in earnings per share. #rofita ility and profit gro!th are determined y the strategies managers adopt. $0. A company has a competitive advantage over its rivals !hen it is more profita le than the average for all firms in its industry. %t has a sustained competitive advantage !hen it is a le to maintain a ove&average profita ility over a num er of years. %n general, a company !ith a competitive advantage !ill gro! its profits more rapidly than rivals. '0. (eneral managers are responsi le for the overall performance of the organization or for one of its major self&contained divisions. Their overriding strategic concern is for the health of the total organization under their direction. )0. *unctional managers are responsi le for a particular usiness function or operation. Although they lack general management responsi ilities, they play a very important strategic role. +0. *ormal strategic planning models stress that an organization,s strategy is the outcome of a rational planning process. -0. The major components of the strategic management process are defining the mission, vision, and major goals of the organization. analyzing the external and internal

environments of the organization. choosing a usiness model and strategies that align an organization,s strengths and !eaknesses !ith external environmental opportunities and threats. and adopting organizational structures and control systems to implement the organization,s chosen strategies. /00. 0trategy can emerge from deep !ithin an organization in the a sence of formal plans as lo!er&level managers respond to unpredicted situations. //0. 0trategic planning often fails ecause executives do not plan for uncertainty and ecause ivory to!er planners lose touch !ith operating realities. /20. The fit approach to strategic planning has een criticized for focusing too much on the degree of fit et!een existing resources and current opportunities, and not enough on uilding ne! resources and capa ilities to create and exploit future opportunities. /30. 0trategic intent refers to an o session !ith achieving an o jective that stretches the company and re1uires it to uild ne! resources and capa ilities. /"0. %n spite of systematic planning, companies may adopt poor strategies if their decision& making processes are vulnera le to groupthink and if individual cognitive iases are allo!ed to intrude into the decision&making process.0 /$0. 2evil,s advocacy, dialectic in1uiry, and the outside vie! are techni1ues for enhancing the effectiveness of strategic decision making. /'0. (ood leaders of the strategy&making process have a num er of key attri utes3 vision, elo1uence, and consistency. a ility to craft a usiness model. commitment. eing !ell informed. a !illingness to delegate and empo!er. political astuteness. and emotional intelligence.