BU 111 Midterm: Exam questions with solutions MIDTERM
SchoolUniversity of Waterloo
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Sample Final: Week 1- Week 2
1. What are the six critical success factors?
(1) Achieving financial performance; (2) meeting customer needs; (3) building quality products and services; (4)
encouraging innovation and creativity; (5) gaining employee commitment; (6) creating a distinct competitive
2. What is the definition of achieving financial performance?
Achieving financial performance is the achievement of positive cash flow and profitability.
3. Why is achieving financial performance important?
Because financial performance is the same as profit. Financial performance is the base of other criteria and it is the basic
purpose for a business. When revenue is greater than expenses, cash flow is generated. This is as a result of all other
critical success factors being achieved.
4. What is the definition of meeting customer needs?
Meeting customer needs is understanding what customers want.
5. Why is meeting customer needs important?
Because if we meet customer needs, the volume of the revenue will increase, therefore the revenue will increase.
Customers are your source of revenue, thus by anticipating and meeting customer needs, you can sell products and
6. What is the definition of building quality products and services?
Building quality products and services is consistency and reliability. Business understands their customers’ needs and
being ready to meet what they are ready to pay for.
7. Why is building quality products & services important?
Because it makes customers think that “you pay what you pay for”, and it has effects on revenues and expenses, it builds
loyalty, goodwill, reputation that meets customer needs.
8. What is the definition of encouraging innovation and creativity?
Encouraging innovation and creativity is create environment where taking risks is a comfortable action. It includes
identifying new needs and ways to meet them, new ways of producing.
9. Why is encouraging innovation & creativity important?
Because with new ideas which other competitors do not hold, the firm can choose the price point for what you created
in direct effect through effects on other critical factors. With identifying new ways of producing, it can lead to improved
quality. It is the only way to generate revenue in the long run, since a successful company means continuous change.
10. What is the definition of gaining employee commitment?
Gaining employee commitment is that there are energized employees who believe in the firm’s mission and understand
and are willing to achieve it.
11. Why is gaining employee commitment important?
Because employees work harder if they like the company. Your employees are able to meet their personal goals while
achieving the business goals. When you have people in this midset, you will see the connections. When employees can
reach their goals and have a good support system at work then they can be creative. If you have commitment, employees
will take pride in the product. Employees must be in a positive atmosphere to have a good attitude, and if this is done,
they will be committed. Once they are committed, they will take better care of their financial decisions, and to an extent,
they will feel an ownership over the business. People carry out the success factors
12. What is the definition of creating a distinct competitive advantage?
Creating a distinct competitive advantage is what sets you apart from the competition.
13. Why is creating a distinct competitive advantage important?
Because its effects and different ways include: increasing productivity, we sell more; treating customers the way they
want to be treated; will try to make best quality possible; employee commitment could be source of advantage; more
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innovative if they want to see the company succeed; effect on price; being distinctly different, offer exact what customer
wants; consistent with price; encourage innovation to create advantage.
14. How are the 6 critical success factors connected? What is the interrelationship between them?
Achieving financial performance is the base of all other criteria; if we meet customers’ needs, we will achieve financial
performance, because customers would like to buy our products; and if we build quality products and services and we
encourage innovation and creativity, we would be likely to meet customers’ needs. If we gain employee commitment,
we are able to encourage innovation and creativity. If we create distinct competitive advantages, we will possibly obtain
a positive financial performance.
Each critical factor build to one another, thus each critical success factor must be completed for the other one to be
successful. Their success depends on the success of the previous factors. For example, financial performance is achieved
as a result of the completion of meeting customer needs, which is achieved through the building of quality products by
15. Why must you pursue all of them?
Because they are all needed for a business to succeed, and they are all interrelated.
16. What is the course model? Why is it important?
The course model is an overview of both external and internal environments and how they interact.
17. What does vision do? How it should be?
Vision communicates purpose and values. It should be memorable and engaging; aligned with Organizational Values &
18. Why is vision important?
Because it guides strategy by keeping focus on desired future. It is future-oriented and it tells us where we aim to be.
19. What does Mission talk about? What questions does mission answer?
Mission talks about how you will achieve vision from present to future. Mission answers: (1) What does the company
do? Who does the company do it for? What make the company different? / What is the benefit?
20. Why is mission important?
Because it guides strategy by listing broad goals and acceptable approaches; it keeps us on track.
21. What does Diamond-E Model do?
It identifies key variables to be considered in strategic analysis.
22. Why do we use Diamond-E framework?
(1) It helps to assess current strategy. (2) It helps to generate strategic proposals. (3) It helps to evaluate strategic
23. What is strategy?
Strategy is the plan the business uses to pursue opportunities and achieve the critical success factors. Strategy is what
opportunities the business is pursuing.
24. What are the characteristic features of strategy? What does it do (purpose)?
(1) It determines and is determined by internal qualities; (2) Any variable can either drive or constrain the strategy.
It determines and dictates the needed resources, organizational capabilities and management preferences to complete
the plan. Strategy connects the inside plan of the organization to the outside environment. (The factors in Diamond-E
Model affect one another both ways.) The purpose of a strategy in a firm is to reach the environment, so by affecting
the strategy the other three variables are implemented.
25. Why is strategy important?
Because it is the critical linking variable in the model.
26. How do we deal with Strategy-Environment Linkage? In which steps?
(1) Assess forces at work and their implications; (2) Adjust internal capabilities or adjust strategy.
27. What is the impact of management preferences on strategy?
The more aligned the management is, the more successful the strategy will be due to the level of organization and task
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completion. Managers decides what our human resource policies are, what projects run, where our financial goes, thus
they dictate the effectiveness of the strategy follow-through. They are the bias of the company, so their preference has
to suit the strategy.
28. What is the impact of organization on strategy?
The organization refers to the corporate structure, culture, the leadership and capabilities of the people. With the right
leadership culture, the appropriate/ specific strategy can be fulfilled.
29. What is the impact of resources on strategy?
Capital and resources can either support or constrain a company and a strategy can only be fulfilled with the resources
to complete it.
30. What is the principle logic when dealing with Diamond-E? (An example of inconsistency and an example of
The principle logic is (1) Consistency: consistency internally leads to performance- Each variable impacts and is impacted
by the rest; (2) Alignment: alignment externally ensures that the strategy is right for the given environment.
An example of inconsistency: P&G Strategy in 2002. A new CEO that had an aggressive management preference was
hired. He believed that P&G should put new products and new brands into the market because he believed that low
economy was an opportunity. P&G had deep products, however the company’s new strategy stretched the resources
too thin. Brand failures and the product launch failure numbers were increasing. This strategy put a huge strain on the
resources and the products were not being used up by the customers as expected by the CEO. CEO was let go and new
manager was brought in a new strategy to pull back and was able to get the company back in station position. Analysis:
The strategy was inconsistent because the new management has an irrational approach.
An example of consistency: IKEA Strategy. IKEA remains constant with its method to use resources in a proper manner
that gave the companies constant capabilities to provide decently built affordable products to its customers. Analysis:
For the entire time, IKEA was consistent with everything, thus no rapid changes in any factor.
31. What is the warning (note) when we use Diamond-E? What must be consistently checked?
Environment is always changing. Note that absolute alignment is not realistic. If strategy is in alignment with the
environment and if strategy is consistent with internal variables have to be consistently checked. (In reality in order for
a company to succeed over time (CSF), they need to be innovative and change with the changing environment, thus
strategy must change over time.)
32. What is an external analysis?
External analysis is the process of scanning and evaluating the external environment. It tells how manager determine
opportunities (positive external trends or changes) and threats (negative external trends or changes).
33. How to do an external analysis?
The firm should analyze multiple environment: (1) to analyze General Environment, the firm should use PEST Model and
identify general trends and changes; (2) to analyze Specific Environment, the firm should apply Porter’s Five Forces,
analyze competitive pressure and predict industry profitability. Implementation: they should look for data, statistics,
trends, forecasts, expert opinions, etc.
You conduct an external analysis by assessing the factors affecting your business, in the general environment and specific
34. What is the relationship between the firm and it External Environment?
Using Diamond-E Model we can know that, competitive strategy bridges the gap between where a company is and
where it wants to go. It is the link between the internal factors and external environment. The firm and the external
environment affect each other mutually.
35. What are the benefits and challenges of doing External Analysis?
Benefits of doing External Analysis: (1) It makes managers proactive (and productive); (2) It provides information used
in planning; (3) It helps the organization get the needed resources; (4) It helps organization cope with uncertainty; (5) It
improves consistency and performance.
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