Strategic Planning & Decision Making Flashcards

In strategic management, a 'stretch goal' is best described as:

Answer: An ambitious objective requiring significant capability development

Stretch goals are ambitious targets that push organizations beyond current capabilities, driving innovation and performance improvement.

Which framework helps managers evaluate whether to make or buy a product by analyzing transaction costs?

Answer: Transaction cost economics

Transaction cost economics (Williamson) examines the costs of conducting transactions in-house versus through markets to guide make-or-buy decisions.

A 'first-mover advantage' can be eroded when:

Answer: Later entrants free-ride on pioneer investments and avoid mistakes

Late movers can benefit from free-rider effects, learning from the pioneer's mistakes and avoiding their market development costs.

When applying scenario planning, how many scenarios should typically be developed for effective strategic decision making?

Answer: Two to four distinct plausible futures

Best practice in scenario planning uses two to four distinct scenarios — enough to challenge assumptions without overwhelming decision makers.

The concept of 'strategic drift' refers to:

Answer: A gap between the pace of environmental change and organizational strategic response

Strategic drift occurs when an organization's strategy gradually falls out of alignment with its changing environment, creating a performance gap.

In a BCG matrix, a 'cash cow' business unit should primarily be managed to:

Answer: Generate cash to fund other units with higher growth potential

Cash cows are high-share, low-growth units that generate surplus cash, which should be harvested to fund stars and question marks.

Which decision-making bias causes managers to overweight information that confirms their existing beliefs?

Answer: Confirmation bias

Confirmation bias leads decision makers to seek and favor information that supports their preexisting beliefs, ignoring contradictory evidence.