OM Strategic Planning & Decision Making 3

Question 1

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

Accepted Answer

An ambitious objective requiring significant capability development

Answer

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

Question 2

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

Accepted Answer

Transaction cost economics

Answer

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

Question 3

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

Accepted Answer

Later entrants free-ride on pioneer investments and avoid mistakes

Answer

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

Question 4

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

Accepted Answer

Two to four distinct plausible futures

Answer

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

Question 5

The concept of 'strategic drift' refers to:

Accepted Answer

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

Answer

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

(OM) Organizational Management Specialty Certification Practice Test