The_Strategic_Management_of_Health_Care_Organizations_8th_Edition_by_Ginter_Jack_Linda _TEST_BANK

TEST BANK The Strategic Management of Health Care Organizations 8th ed. Edition

by Peter M Ginter, W Jack Duncan, Linda E Swayne

TABLE OF CONTENTS Chapter 1 The Nature of Strategic Management Chapter 2 External Analysis Chapter 3 Service Area Competitor Analysis Chapter 4 Internal Analysis and Competitive Advantage Chapter 5 Directional Strategies Chapter 6 Identifying Strategic Alternatives Chapter 7 Evaluation of Alternatives and Strategic Choice Chapter 8 Value-Adding Service Delivery Strategies Chapter 9 Value-Adding Support Strategies Chapter 10 Communicating Strategy and Developing Action Plans

Questions Chapter 1 The Nature of Strategic Management

True/False Questions Question title

Question stem

Choice

Reference

TF01.01

The implementation of Medicare’s prospective payment system in 1983 initiated dramatic changes in the health care industry.

T

Strategic Management in the Health Care Industry

TF01.02

Management rather than leadership is required to deal with rapid, complex, and discontinuous change.

F

Central to Leadership

TF01.03

The objective of long-range planning is to predict for some specified time in the future the size of demand for an organization’s products and services and to determine where demand will occur.

T

Long-Range Planning to Strategic Planning

TF01.04

Strategies are long range in nature and thus, the time span is the principal focus of strategic planning.

F

Long-Range Planning to Strategic Planning

TF01.05

Many of the management methods adopted by health care organizations originated in the business sector.

T

Strategic Management in the Health Care Industry

TF01.06

Major goals of strategic management are responsiveness to change and staying relevant.

T

Managing in a Dynamic Industry

TF01.07

In order to effectively deal with a complex situation, the leader must redouble efforts to become involved with every detail of the situation.

F

Central to Leadership

TF01.08

Strategic thinking is an individual intellectual process, a mindset, or method of intellectual analysis that asks people to position themselves as leaders and see the “big picture.”

T

Strategic Thinking

TF01.09

Strategic thinkers examine assumptions, understand systems and their interrelationships, and develop alternative scenarios of the future.

T

Combining the Analytical and Emergent Views

TF01.10

Strategic planning is the periodic process of developing a set of steps for an organization to accomplish its mission and vision using strategic thinking.

T

Combining the Analytical and Emergent Views

Question title

Question stem

Choice

Reference

TF01.11

As a decision-making activity, strategic planning is based solely on quantitative data.

F

Strategic Planning

TF01.12

Many of the modern strategic management concepts originated in the military setting, were extended to business, and eventually to health care.

T

TF01.13

Strategy is driven by a common mission, vision, and set of organizational values and goals – the directional strategies.

T

Foundations of Strategic Management Strategic Planning

TF01.14

Developing implementation plans is not an essential part of strategic planning.

F

Strategic Planning

TF01.15

Decision making is expedited and consensus more easily reached when everyone in the organization is involved in the strategic planning process.

F

Strategic Planning

TF01.16

Strategic momentum concerns the day-to-day activities of managing the strategy to achieve the strategic goals of the organization.

T

Strategic Momentum

TF01.17

Strategic momentum is how an organization constructively manages change, evaluates strategy, and reinvents or renews the organization.

T

Strategic Momentum

TF01.18

Much of the legitimate work in an organization does not contribute to the accomplishment of the strategic plan.

F

Strategic Momentum

TF01.19

Strategic management is a unique perspective that requires everyone in the organization to cease thinking solely in terms of internal operations and their own operational responsibilities. It insists that everyone adopt what may be a fundamentally new attitude – an external orientation and a concern for the big picture.

T

The Benefits of Strategic Management

TF01.20

Strategic management is a technique that will provide a “quick fix” for an organization that has fundamental problems.

F

What Strategic Management is Not

TF01.21

Strategic management is demonstrated in an organization if it has evolved into a process of filling in endless forms, meeting deadlines, drawing milestone charts, or changing the dates of last year’s goals and plans.

F

What Strategic Management is Not

Question title

Question stem

Choice

Reference

TF01.22

The use of the systems perspective requires strategic managers to define the organization in broad terms and to identify the important variables and interrelationships that will affect decisions.

T

A Systems Perspective

TF01.23

Unit operational strategies may be developed within departments of an organization such as clinical operations, marketing, finance, information systems, human resources, and so on.

T

Unit-Level Strategy

TF01.24

Corporate-level strategies address the question: “What business(es) should we be in?”

Such strategies consider multiple, sometimes unrelated, markets and typically are based on return on investment, market share or potential market share, and system integration.

T

Corporate-Level Strategy

TF01.25

Strategy development has never been primarily a staff activity.

F

Leadership Roles throughout the Organization

TF01.26

Strategic management allows the decision maker to confidently maintain their customary way of thinking and apply it to organizational problems.

F

The Dimensions of Strategic Management

TF01.27

The compass is a metaphor for the application of rational linear thinking to new and unique organizational problems.

F

The Dimensions of Strategic Management

TF01.28

Complex adaptive systems are parts of organizations that evolve in response to change.

T

A Systems Perspective

TF01.29

Corporate level strategies relate to individual units and divisions in an organization.

F

The Level and Orientation of the Strategy

TF01.30

Emergent approaches to strategy rely on leadership and learning with regard to external changes.

T

Learning as the Strategy Unfolds

TF01.31

Health policies are made by the leadership team in health care organizations and are designed to aid in adapting to external regulations.

F

Strategic Management Versus Health Policy

TF01.32

Situational analysis is a process of understanding and documenting an organization’s external analysis, internal analysis, and the development or refinement of directional strategies.

Decision making maps are formulated through rational step-by-step thinking.

T

Strategic Planning

F

The Dimensions of Strategic Management

TF01.33

Question title

Question stem

Choice

Reference

TF01.34

A strategic business unit is an autonomous unit-level entity within the larger organization.

F

Division-Level Strategy

TF01.35

One of the most important technological changes facing health care in recent years has been the adoption of the electronic health record.

T

The Nature of Health Care Change

TF01.36

Strategic thinking is directed toward positioning the organization most effectively within its changing external environment.

T

Strategic Thinking

TF01.37

Increasing automation of basic business processes, clinical information interfaces, data analysis, and telehealth are NOT examples of technological changes.

F

Legislative/Political Changes

TF01.38

Cost pressures and intensified competition will NOT lead to further consolidation within the health care industry.

F

The Nature of Health Care Change

TF01.39

An integral part of long-range planning in health care is a systematic analysis of the assumptions underlying the planning process.

F

Long-Range Planning to Strategic Planning

TF01.40

Health planning is initiated by state or local governments and results in health policies that are implemented through legislation.

T

Strategic Management Versus Health Policy

Multiple Choice Questions Question title

Question stem

Selections

Choice

Reference

MC01.01

Strategic thinking is:

abcd-

An organizational-level activity.

An individual intellectual process.

An element of long-range planning.

Not needed to capitalize on change.

b

Strategic Thinking

MC01.02

The result of the strategic planning process is:

abcd-

More luck than the result of a thoughtful process.

Strategic thinking.

A formal document of at least 10 pages.

A plan or strategy.

d

Combining the Analytical and Emergent Views

MC01.03

Health policy:

a- Is a very broad strategy. b- Is the result of strategic thinking, strategic planning, and strategic management. c- Determines the rules of the game that apply to all consumers and providers in the field. d- Does not involve governmental activity.

c

Strategic Management versus Health Policy

MC01.04

Strategic planning for organizations is typically:

d

Leadership Roles throughout the Organization

MC01.05

The three stages of strategic management are:

a- The sole province of the chief executive officer (CEO). b- The work of the strategic planning department. c- Something that requires consultants to be successful. d- A group process. a- Plan, implement, and revise the plan. b- Leadership, professionalism, and management. c- Strategic thinking, strategic planning, and strategic momentum. d- Thinking, planning, and doing.

c

The Level and Orientation of the Strategy

MC01.06

Strategic management is NOT:

a- A “quick fix” for organizations with fundamental problems. b- A process of completing paperwork. c- A process of extending the organization’s current activities into the future. d- All of the above.

d

What Strategic Management Is Not

Question title

Question stem

Selections

Choice

Reference

MC01.07

Which of the following is not a state of strategic thinking:

abcd-

Synthesis Interpretation Reflection None of the above

d

Strategic Thinking

MC01.08

Health care organizations DO NOT have to cope with change in which of the following areas:

abcd-

Competitive.

Weather.

Technological.

Regulatory/Political.

b

The Nature of Health Care Change

MC01.09.

Which of the following is an example of a societal change that may affect the success or failure of health care organizations?

abcd-

Changes in consumer attitudes and expectations.

Health care reform.

Increasing use of electronic medical records.

Patent expirations on brand name drugs.

a

The Nature of Health Care Change

MC01.10

Which of the following is not an important health policy question?

abcd-

Is health care a right or individual responsibility?

Who pays for employer offered health insurance?

Can the human costs of poor health be quantified?

None of the above.

d

What Is Health Policy

Question title

Question stem

MC01.11

The use of the systems perspective requires strategic managers to:

MC01.12

A clear specification of organizational level and orientation determines:

MC01.13

Selections

Choice

Reference

a- Focus on short-term results. b- Define the organization in broad terms and identify the important variables and interrelationships that will affect decisions. c- Become leaders. d- View the organization as a set of mutually exclusive sets of work units with separate goals and objectives. a- The type and range of decision to be made in strategic planning. b- The quality of strategic thinking. c- Organizational success. d- The individual or organizational unit that is responsible for developing organizational strategy.

b

A Systems Perspective

a

The Level and Orientation of the Strategy

The dissolution of formal planning staffs is associated with:

a - The management theory termed “Theory Z.” b- Systems thinking. c- The general decline in economic activity in the USA and Europe. d- Organizational learning that strategy development cannot take place in relative isolation.

d

Leadership Roles throughout the Organization

MC01.14

An organization may create a new, unintended strategy by:

a- Applying effective leadership. b- Rethinking the relationships among systems in the organization. c- Implementing the strategy created by its strategic planning process. d- Applying portfolio theory.

c

Lessons for Health Care Strategic Thinkers

MC01.15

A realized strategy is on that:

a-

c

Learning as the Strategy Unfolds

Emerges after an unsuccessful implementation of a planned action. b- Is realized by the decision maker after considering multiple alternatives. c- Works out as planned. d- None of the above.

Question title

Question stem

Selections

Choice

Reference

MC01.16

Which of the following is not an aspect of strategic control:

a- Regulates the implementation of the strategic plan. b- Measures performance against the plan. c- Establishes clear and concise goals. d- Incorporates thinking and learning as the strategy unfolds.

c

Combining the Analytical and Emergent Views

MC01.17

A system possesses all but which of the following:

abcd-

Parts hang together.

Elements pursuing a common goal.

Action in one part of a system affects all other parts Elements that are self-contained and not affected by forces outside the system.

d

Systems Perspective

MC01.18

Thinking that focuses on introducing new, better, or different breakthroughs is:

abcd-

Critical thinking.

Innovative thinking.

Visionary thinking.

Divergent thinking.

b

Central to Leadership

MC01.19

Transformative Thinking:

abcd-

Challenges accepted beliefs and assumption.

Is rational, logical and based on facts.

Looks for unique imaginative solutions to issues.

None of the above.

a

Central to Leadership

MC01.20

Strategic thinkers which of the following:

abcd-

What are we doing that we should do differently?

What are we not doing that we should be doing?

What are we doing that we should stop doing?

All the above.

d

Central to Leadership

Short Essay Questions Question title

Question stem

Rationale

Reference

SE01.01

Describe strategic management in the health care industry.

Strategic management concepts have been employed within health care organizations since the adoption of prospective payment in 1983. Prior to that time, individual health care organizations had few incentives to employ strategic management because typically they were independent, freestanding, not-forprofit institutions, and health services reimbursement was on a cost-plus basis. In many respects health care has become a complex business using many of the same processes and much of the same language as the most sophisticated business corporations.

Certainly, in the late 1980s and 1990s many health care organizations had much to learn from strategically managed businesses. As a result, many of the management methods adopted by health care organizations, both public and private, initially were developed in the business sector.

Strategic Management in the Health Care Industry

SE01.02

Define the major activities of strategic management.

The major activities of strategic management are: (1) strategic thinking, (2) strategic planning, and (3) strategic momentum.

Strategic thinking is an individual intellectual process, a mindset, or method of intellectual analysis that asks people to position themselves as leaders and see the “big picture.” Strategic planning is the periodic process of developing a set of steps for an organization to accomplish its mission and vision using strategic thinking. Strategic momentum is the actual work to accomplish specific objectives.

The Dimensions of Strategic Management

SE01.03

Why is managing strategic momentum important?

Strategic momentum: is the actual work to accomplish specific objectives, concerns decision-making processes and their consequences, provides the style and culture, evaluates strategy performance, is a learning process, and relies on and initiates new strategic thinking and new periodic strategic planning.

Strategic Momentum

Question title

Question stem

Rationale

Reference

SE01.04

Explain the role of leadership in strategy development.

Strategic decision making for health care organizations is the responsibility of top management. The CEO is a strategic manager with the pre-eminent responsibility for positioning the organization for the future. The leader must be able to inspire, organize, and implement effective pursuit of a vision and maintain it even when sacrifices are required. As a result, the leader must have an ability to identify what needs to be done today and what can wait. They prioritize constantly; aware that wars are lost by fighting on too many fronts. They know the key messages to communicate from day to day, from audience to audience. If the CEO does not fully understand or faithfully support strategic management, it will not happen.

The Importance of Leadership

SE01.05

List the components of an effective situation analysis.

A successful situation analysis requires an external analysis to determine what we should be doing, an internal analysis to determine what we can do and the formulation of directional strategies (mission, vision and values) to specify what we want to do.

Combining the Analytical and Emergent Views

SE01.06

What is an unrealized strategy?

An unrealized strategy is a course of action or strategic plan that does not work out as planned.

Learning as the Strategy Unfolds

SE01.07

Why is strategic management important to an organization?

Health care organizations are part of one of the most rapidly changing industries. Strategic management is about change and how to deal with it. In this sense, strategic management is leadership which involves responding to change, setting direction, and focusing the organization’s momentum. Heath care leaders embrace strategic management because it helps them cope with change.

Why the Nature of Strategic Management Is Important

SE01.08

What are some of the important economic changes facing health care managers?

Health care managers are dealing with a number of economic changes. A few of the more important include the continued growth of the industries and the increases in total spending. Challenges are also presented as more employers are unwilling to contribute to the coverage of increasing health care costs.

Nature of Health Care Change

Rationale

Reference

Question title

Question stem

SE01.09

Why is it important that everyone on an organization think strategically?

Most people think of strategic thinking as the job of the chief executive officer and her/his immediate staff. However, since strategic thinking has much to do with external changes the CEO and the executive staff are often the last to know about important economic, demographic, technological, and related changes. The people most likely to detect changes are those closest to the work – the doctors, nurses, receptionists, and so on. All individuals should be encouraged to and rewarded for strategic thinking.

Everyone A Strategic Thinker

SE01.10.

What do we really mean by strategic momentum?

Strategic momentum guides the actual work toward goals accomplishment, concerns decision making and its consequences, shapes the culture, evaluates strategy performance, controls strategy implementation, relies on and initiates new strategic thinking, and is a learning process.

Strategic Momentum

Questions Chapter 2 External Analysis

True/False Questions Question title

Question stem

Choice

Reference

TF02.01

In the current health care industry environment, a multitude of interests are directly or indirectly involved in the delivery of health care.

T

The Health Care System

TF02.02

Strategic thinking is directed toward positioning the organization most effectively within its changing external environment.

T

The Goals of External Analysis

TF02.03

In order to be successful, health care organization leaders do not have to develop an understanding of the external environment in which they operate.

F

The Goals of External Analysis

TF02.04

Institutions that anticipate and recognize significant external forces and modify their strategies and operations accordingly are more likely to prosper.

T

The Goals of External Analysis

TF02.05

Regulations about the privacy of medical records are examples of legislative/political external issues.

T

What Is Big Data Analytics?

TF02.06

The macro-environmental changes initiated by organizations and individuals in the general environment have little or no effect on societal changes.

F

The General Environment

TF02.07

The service area of a doctor’s practice is defined by patient preferences and the available medical providers.

T

Defining the Service Categories

TF02.08

The service area is the geographic region surrounding a health care provider from which it draws the majority of its patients.

T

The Service Area

Question title

Question stem

Choice

Reference

TF02.09

External analysis is largely strategic thinking and strategic planning and consists of understanding the issues in the external environment to determine the implications of those issues for the organization.

T

The Process of External Analysis

TF02.10

Effective external analysis occurs through strategic thinking.

T

Organize the External Analysis Process

TF02.11

External analysis does not inform the analysis of the internal environment.

F

The Goals of External Analysis

TF02.12

Strategic thinking and external analysis enable the decision maker to generate realistic assumptions about the future.

T

Why External Analysis is Important

TF02.13

One of the specific goals of external analysis is to detect and analyze early or weak signals of emerging issues and changes that will affect the organization.

T

The Goals of E x t e r n a l Analysis

TF02.14

External analysis can accurately foretell the future.

F

The Limitations of External Analysis

TF02.15

Comprehensive and well-organized external analysis processes will detect all of the changes taking place in the external environment.

F

The Limitations of External Analysis

TF02.16

The organization itself may be affected directly by the legislative/political, economic, social/demographic, technological, and competitive change initiated and fostered by organizations in the general environment.

T

Scan the General Environment, Health Care System, and Service Area

Question title

TF02.17

Question stem

Choice

Reference

Organizations and individuals within the health care system develop and employ new technologies, deal with changing social and demographic issues, address legislative and political change, compete with other health care organizations, and participate in the health care economy.

Strategic issues are trends, developments, dilemmas, and possible events that affect an organization and its position within its environment.

T

The Health Care System

T

Why External Analysis is Important

TF02.19

Environmental scanning is perhaps the least important part of external analysis.

F

The Process of External Analysis

TF02.20

The monitoring function is the tracking of issues identified in the scanning process.

T

The Process of External Analysis

TF02.21

Forecasting environmental change is a process of extending the trends, developments, dilemmas, and events that the organization is monitoring.

T

The Process of External Analysis

TF02.22

Strategic thinkers who conduct external analyses can be confident that there will be no surprises that will materially affect their strategies.

F

The Limitations of External Analysis

TF02.23

Religious organizations are important components of the general environment.

T

The General Environment

TF02.24

Sometimes it is difficult to understand the exact geographic boundaries of a service area.

T

Multiple Service Areas

TF02.25

A community is a group of people living together in a defined space who share some important feature such as a religion or a profession.

T

What Is a Community

TF02.26

An issue map is a matrix of issues that combines the components of the general environment, the health care system and the service area.

T

External Information Categories

TF02.18

Question title

Question stem

Choice

Reference

TF02.27

Strategic issues are inherently internally generated forces that impose important strategic challenges on decision makers.

F

Organizational and Individual Focus

TF02.28

Sensemaking requires the capacity to suspend beliefs, preconceptions, and judgments that may inhibit connections among unclear or disparate data.

T

Assess External Issues

TF02.29

Issue impact and probability prioritization attempts to classify external issues based an assessment of the importance of the issue and the likelihood of its occurrence.

T

Issue Impact and Probability Prioritization

TF02.30

The solicitation of expert opinion is too subjective and prone to bias and can rarely be useful in assessing the impact and likelihood of external issues.

F

Solicitation of Expert Opinion

Multiple Choice Questions Question title

Question stem

Selections

Choice

Reference

MC02.01

Expert opinion can be solicited with which of the following methods:

abcd-

Nominal group technique.

Brainstorming.

Delphi method.

All of the above.

d

Solicitation of Expert Opinion

MC02.02

The fundamental nature of strategic management requires the awareness and understanding of outside forces and encourages strategic managers to:

abcd-

Adopt new ideas.

Maintain receptivity to new ways of doing things.

Expose themselves to a broad view.

All of the above.

d

The External Nature of Strategic Management

MC02.03

A successful health care organization must:

a - Wait until a crisis arises to react. b- Ignore the external environment. c- Anticipate and respond to the significant shifts taking place within the environment. d- Focus on crisis management.

c

Why External Analysis Is Important

MC02.04

Organizations will find themselves out of touch with the needs of the market when they:

abcd-

Fail to anticipate change.

Ignore external forces.

Resist change.

All of the above.

d

The Goals of External Analysis

MC02.05

Which of the following is not a step in external analysis:

abcd-

Forecasting future direction of issues.

Scanning for signals of external change.

Sealing off the organization to disruptions.

Assessing implications of external issues.

c

The Process of External Analysis

Question title

Question stem

Selections

Choice

Reference

MC02.06

Which of the following are part of the manager’s external scanning activities:

a- Viewing of external data. b- Organizing external information into categories. c- Identification of issues within each category. d- All the above.

d

Organizational and Individual Focus

MC02.07

One of the specific goals of external analysis is:

d

The Goals of External Analysis

MC02.08

Which of the following is an example of a societal change that may affect the success or failure of health care organizations?

a

The General Environment

MC02.09

The four fundamental processes of external analysis are:

a- To measure organizational efficiency. b- To develop a list of “one-word” descriptions of the external environment. c- To ignore minor competitors. d- To provide organized information for the development of the organization’s internal analysis, mission, vision, values, goals, and strategy. a- Changes in consumer attitudes and expectations about health care. b- Health care reform. c- Increasing use of electronic medical records (EMR). d- Patent expirations of brand-name drugs. a - Asserting, seeing, seeking, and meeting. b- Thinking, planning, checking, and doing. c- Scanning, monitoring, forecasting, and assessing. d- Detecting, guessing, checking and measuring.

c

The Process of External Analysis

MC02.10

Which of the following is NOT a goal of external analysis:

c

The Goals of External Analysis

MC02.11

Which of the following are limitations of external analysis:

a- Classify and order issues generated outside the organization. b- Detection of weak signals of emerging issues outside the organization. c- Determining organizational strengths and weaknesses. d- Identifying current issues and changes that will affect the organization. a- Pertinent and timely information is difficult to obtain. b- External analysis cannot tell the future. c- Managers’ strongly held beliefs may inhibit them from seeing and accurately interpreting issues. d- All the above.

d

The Limitations of External Analysis

Question title

Question stem

Selections

Choice

Reference

MC02.12

Which of the following is NOT a component of the health care system:

abcd-

Primary providers.

Educational institutions.

Provider associations.

Individual patients.

b

The Health Care System

MC02.13

Consumer determinants of a service area include all but which of the following:

abcd-

Usage rate.

Social values.

Hours of operation.

Past experiences.

C

Service Area Determinants

MC02.14

Monitoring or tracking of external issues accomplishes all but which of the following functions:

d

Monitor and Confirm External Issues

MC02.15

Which of the following is NOT a weakness of focus groups:

a- Adding to the external issue database. b- Identification of additional information sources of specific issues. c- Determination of rate of changes in issues. d- Projections of future directions of external issues. a- Multiple focus groups are needed. b- There is no specific structure for reaching conclusions. c- A sufficient number of qualified experts or participants cannot rarely be found in a timely manner. d- Qualified facilitators are not available.

d

Nominal Group Technique, Brainstorming, and Focus Groups

MC02.16

What are the important questions for validating strategic assumptions?

a- Is the strategy acceptable to major stakeholders? b- Is the strategy in conformance with morals and ethical codes of conduct? c- Have new opportunities emerged as result of new external trends and events? d- All the above.

d

Strategic Thinking Questions for Validation of Strategic Assumptions

Short Essay Questions Question title

Question stem

Rationale

Reference

SE02.01

What are some of the practical limitations of external analysis?

The limitations of external analysis include: external analysis cannot foretell the future, managers cannot see everything, sometimes pertinent and timely information is difficult or impossible to obtain, there may be delays between the occurrence of external events and management’s ability to interpret them, there is a general inability on the part of the organization to respond quickly enough to take advantage of the issue detected, and managers’ strongly held beliefs sometimes inhibit them from detecting issues or interpreting them rationally.

SE02.02

Provide at least two examples of changes in the general environment affecting multiple industry environments (sectors of the economy).

Passage of the prescription drug bill during the George W. Bush presidency affected a variety of organizations as well as individuals including insurance companies, organizations representing the elderly, and retirees. Similarly, the early health care reform initiatives of the Clinton administration to create a national health care system would have affected virtually all institutions in the general environment, not just health care organizations.

The General Environment

SE02.03

Identify and provide an example of the five segments of the health care system.

The health care system may generally be grouped into five segments: (1) organizations that regulate primary and secondary providers; example – US Department of Health and Human Services (HHS); (2) organizations that provide health services (primary providers); example – state departments of health; (3) organizations that provide resources for the health care system (secondary providers); example – educational institutions; (4) organizations that represent the primary and secondary providers; example – the American Medical Association (AMA); and (5) individuals involved in health care and patients (consumers of health care services); example – nurses.

The Health Care System

The Limitations of External Analysis

Question title

Question stem

Rationale

Reference

SE02.04

Discuss the process of assessing external change.

Assessing external change is a process that is largely nonquantifiable and therefore judgmental. The assessment process includes evaluation of the significance of the extended (forecasted) issue on the organization; identification of the issues that must be considered in the internal analysis; development of the vision and mission; and formulation of the strategic plan.

However, even when exposed to identical issues, different managers may interpret their meaning quite differently.

Interpretations are a result of a variety of factors including perceptions, values, past experiences, and context.

Assess External Issues

SE02.05

Outline the process for external analysis.

The first step is to organize the external process and create an issue map template. Next, the general environment, health care system and service area should be scanned for potentially important issues. Identified issues should be monitored to assure the appropriate external issues are confirmed. The future direction of the important issues should be forecasted, assessed and a complete issue map developed.

Process for External Analysis

SE02.06

If we are interested in health care strategy, why is it important to understand the general environment?

Organizations and individuals in the general environment initiate and foster the macro-environmental changes in society that affect many industries including health care. External organizations engaging in their own processes and pursuing their own missions impose significant influences on the health care system.

The General Environment

SE02.07.

What are some of the important segments of individuals and organizations that influence health care organizations?

The Health Care System

SE02.08.

Why is sensemaking ability so important to strategic thinkers in health care?

Although the variety of health care organizations makes categorization difficult, the health care system can be grouped into five major segments. These are: planning/regulatory organizations, primary providers of health services (doctors, nurses), secondary providers of health resources (suppliers, educational institutions), organizations that represent primary and secondary providers (professional associations), and consumers of health care.

Strategic decisions are made within a context of changing financial, social, political and technological forces. Strategic thinkers must understand this context and know how to quickly capture the complex decision-making environment they face and explain them in simple terms that others can understand.

Assess External Issues

Question title

Question stem

Rationale

Reference

SE02.09.

Why has scenario writing and future studies been so popular among strategic planners?

The widespread use of scenario analysis is the result of the inability of other, more quantitative forecasting methods, to predict and incorporate major external shifts and provide a context for strategic thinking. Scenarios avoid the need for single-point forecasts and allow users to explore alternative futures.

Scenario Writing and Future Studies

SE02.10

What are some practical lessons for health care strategic thinkers from an understanding of external analysis?

External analysis provides a context for strategic thinking.

External analysis is an ongoing process that requires an understanding and appreciation of a systems perspective. The tools utilized in external analysis do not provide answers in themselves but help managers identify and think through issues and make decisions.

Practical Lessons for Health Care Strategic Thinkers

Questions Chapter 3 Service Area Competitor Analysis

True/False Questions Question title

Question stem

Choice

Reference

TF03.01

Organizations that compete in several different markets will find that their competitors in one of their markets will be the same as in all markets.

F

Why Service Area Competitor Analysis is Important

TF03.02

Once a market is identified where the competition is either genteel or fierce, the key to success is to compete in a fundamentally different manner from the other competitors.

F

Why Service Area Competitor Analysis is Important

TF03.03

Efficiency and low cost are NOT possible bases for achieving competitive advantage.

F

Analyze Critical Success Factors

TF03.04

It is well established that all health care executives perform effective competitor analysis.

F

Obstacles to Effective Service Area Competitor Analysis

TF03.05

Misjudging how the industry, industry segments, or service area is defined will lead to poor competitor analysis.

T

Obstacles to Effective Service Area Competitor Analysis

TF03.06

One problem in performing competitor analysis is the tendency to be concerned only with the visible activities of competitors.

T

Obstacles to Effective Service Area Competitor Analysis

TF03.07

Service area competitor analysis begins with assessing service area competitive dynamics.

F

A Process for Service Area Competitor Analysis

Question title

Question stem

Choice

Reference

TF03.08

Customer perceptions of the organization’s service category are NOT an important determination for a beneficial service area competitor analysis.

F

A Process for Service Area Competitor Analysis

TF03.09

The service area is considered to be the geographic area surrounding the health care provider, from which it pulls the majority of its customers/patients.

T

TF03.10

The service area is NOT defined by customers’ preferences and the health care providers that are available.

F

TF03.11

For a health care organization that offers several service categories, it is necessary to conduct service area analyses only in the most important service category.

F

TF03.12

The service area profile includes key competitively relevant economic, demographic, psychographic (lifestyle), and community health status indicators. Relevant economic indicators may include income distribution, major industries and employers, types of businesses and institutions, economic growth rate, seasonality of businesses, unemployment statistics, and so on.

T

Obstacles to Effective Service Area Competitor Analysis Obstacles to Effective Service Area Competitor Analysis Obstacles to Effective Service Area Competitor Analysis Further Focus within External Analysis

TF03.13

Demographic indicators are often better predictors of consumer behavior than psychographic indicators.

F

Further Focus within External Analysis

TF03.14

Service area structural analysis provides considerable insight into the attractiveness of an industry and provides a framework for understanding the competitive dynamics (the future viability of an industry).

T

Conduct Service Area Structural Analysis

TF03.15

Achieving economies of scale is the only means by which to build a cost advantage barrier to new entrants.

F

Threat of New Entrants

Question title

Question stem

Choice

TF03.16

The more diverse the industry, the more likely there will be substitute products and services.

T

Threat of Substitute Products and Services

TF03.17

Perhaps the greatest change in the nature of the health care industry in the past decade has been the growing power of the buyers.

T

Bargaining Power of Customers

TF03.18

If an industry has a large number of suppliers, these suppliers tend to be powerful.

F

Bargaining Power of Suppliers

TF03.19

The evaluation of competitors’ strengths and weaknesses provides clues as to their future strategies and to areas where competitive advantage might be achieved.

T

Competitor Strengths and Weaknesses

TF03.20

Critical success factor analysis involves the identification of all activities for a service category within a service area for which the organization must achieve a high level of performance if it is to be successful.

F

Analyze Critical Success Factors

TF03.21

Cost position is the extent to which an organization seeks the low-cost position through efficiency programs and cost-minimizing facilities and equipment.

T

Analyze Critical Success Factors

TF03.22

Members of a strategic group primarily compete with each other and do not compete with organizations outside their strategic group – even though there are other competitors outside the group that may offer similar products or services.

T

Map Strategic Groups

Reference

Question title

Question stem

Choice

Reference

TF03.23

The grouping of organizations according to strategic similarities and differences among competitors can aid in understanding the nature of competition and facilitate strategic decision making.

T

Map Strategic Groups

TF03.24

Strategic response does NOT include the likely strategic objectives and next strategic moves of competitors.

F

Assess Likely Competitor Actions or Responses

TF03.25

Service area competitor analysis is the process of assessing service category/service area issues, identifying competitors, determining the strengths and weaknesses of rivals, and anticipating their moves.

T

Lessons for Health Care Strategic Thinkers

TF03.26

Diverse competitors may all do well in a single market by focusing on different market dimensions.

T

Why Service Area Analysis is Important

TF03.27

The results of the general environment, health care system, and service area analysis serves as the foundation for service area competitor analysis.

T

TF03.28

The goal of service area structural analysis is to identify the number and names of competitors in a geographical area.

F

A Process for Service Area Competitor Analysis Conduct Service Area Structural Analysis

TF03.28

Switching costs are not considered a barrier to entry.

F

Threat of New Entrants

TF03.29

Certificates of need (CONs) are an important basis for the power of suppliers but are rarely an important barrier to entry.

F

Threat of New Entrants

TF03.30

Rivalry is the intensity of competition for a product or service category in a service area.

T

Intensity of Rivalry among Existing Organizations

Multiple Choice Questions Question title

Question stem

Selections

Choice

MC03.01

An organized competitor intelligence system:

a- Monitors consumer and competitor activity. b- Filters the raw information picked up by external and internal sources. c- Efficiently communicates actionable intelligence to those who need it. d- All of the above.

d

Further Focus within External Analysis

MC03.02

Which of the following is NOT an obstacle to competitor analysis:

a - Faulty assumptions about the competition. b- Overemphasis on competitors’ visible competence. c- Effectively evaluating industry and service boundaries. d- Overemphasis on where, rather than how, to compete.

c

Obstacles to Effective Service Area Competitor Analysis

MC03.03

General and health care trends and issues, along with service area competitor analysis must be synthesized into which of the following: In addition to defining its service area, a health care organization must analyze in detail relevant and important aspects of the service area including:

abcd-

Strategic issues facing the organization.

Price sensitivity and trend analysis.

Categories of competitive analysis.

Periodic, comprehensive, and reliable mission statements.

a

A Process for Service Area Competitor Analysis

a- Competitor service categories, prices, and strategic initiatives. b- Economic, demographic, psychographic (lifestyle), and disease pattern characteristics. c- Politically active groups, faith preferences of the service area, and emerging health issues. d- Product types, service delivery techniques, transportation networks, and critical infrastructure.

b

Obstacles to Effective Service Area Competitor Analysis

MC03.04

Reference

Question title

Question stem

Selections

Choice

MC03.05

Reference

Which of the following is a TRUE statement about service areas:

a- Service areas will be the same for different organizations. b- Hospitals in rural areas have ill-defined service areas for their particular services. c- The service areas for public health departments are homogenous within a state, without regard to whether they are metropolitan or rural. d- Determining the geographic boundaries of the service area may be highly subjective and is usually based on patient histories, the reputation of the organization, and available technology.

d

Chapter Summary

MC03.06

The forces driving service area completion (the five forces model of service area structural analysis) are:

a

Conduct Service Area Structural Analysis

MC03.07

Which of the following is an example of the threat of substitute products and services?

a- Threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products or services, and rivalry among existing firms. b- Market share, bargaining power of employee groups, threat of regulation, quality of products or services, and similarities among existing firms. c- Threats of internal weaknesses, weakness of suppliers, customer satisfaction, quantity of products or services, and diversity of existing firms. d- Internal strengths, quality of the management team, bargaining power of customers, earnings per share, and cooperation among existing firms. a- Self-administered dental examinations for dentist examinations. b- Outpatient surgery for inpatient surgery. c- Adults being treated in pediatric specialty hospitals. d- Massage therapy substituted for acupuncture.

b

Threat of Substitute Products and Services

Question title

Question stem

Selections

Choice

Reference

c

Bargaining Power of Customers

a- The level of emphasis on the quality of its offering to the marketplace. b- The degree to which it provides ancillary services in addition to its main services. c- The extent of value added as reflected in the level of forward and backward integration. d- The degree to which the organization focuses its efforts in terms of the number of product categories, the target market, and the size of its service area.

d

Analyze Critical Success Factors

Which of the following is NOT a determinant of intensity of rivalry in a given service area:

abcd-

Government or legal constraints.

High exit barriers.

High fixed costs.

Number or balance of competitors.

a

Intensity of Rivalry among Existing Organizations

MC03.11

Which of the following are aspects of why a decision maker conducts a service area competitor analysis:

abcd-

Evaluating competitors.

Identifying critical success factors.

Anticipating competitors’ moves.

All the above.

d

Further Focus within External Analysis

MC03.12

Which of the following is NOT a step in service area competitor analysis:

d

A Process for Service Area Competitor Analysis

MC03.13

Which of the following would be a substitute product for traditional inpatient hospital services:

a- Analysis of critical success factors. b- Conduct a service area structure analysis. c- Map strategic groups. d- None of the above. a- Outpatient services. b- Medical tourism. c- Specialized service units for hospital patients. d- All the above.

a

Threat of Substitute Products and Services

MC03.08

Which of the following is NOT an indicator of the bargaining power of customer or buyer groups?

abcd-

MC03.09

Which of the following defines the strategic dimension of specialization?

MC03.10

Concentrates purchases in an industry.

Poses a threat of backward integration.

Earns high profits.

Has low switching costs.

Question title

Question stem

MC03.14

Bargaining power of customers is increased when:

MC03.15

Which of the following are ways an organization may compete in a given service area:

MC03.16

A strategic group is:

MC03.17

Which of the following is NOT a major implication of the strategic group concept:

MC03.18

Which of the following are potential competitor strengths:

Selections

a- There are few suppliers. b- There are few substitutes. c- Services are purchased in large quantities. d- Services supplied are important to the organization’s business. a- By increasing specialization in terms of number of product categories, target markets, size of service area, etc. b- Focusing attention of reputation and value of the brand. c- Establishing a low-cost position in the market. d- All the above. a- Individuals in an organization that meet regularly to discuss alternative strategies. b- Groups that have an interest in the success or failure of the organization. c- Organizations in a service area that are similar and compete with one another. d- All the above. a- Strategic group analysis may be useful in exposing important market niches other competitors do not recognize. b- Organizations in a strategic group are competitors but fundamentally different from one another. c- Organizations in a strategic group are each other’s primary or direct competitors. d- Organizations pursue different strategies with service categories and service areas. a- Proven management and leadership. b- Positive image and reputation. c- Cost advantage. d- All are potential strengths.

Choice

Reference

c

Bargaining Power of Customers

d

Analyze Critical Success Factors

c

Map Strategic Groups

c

Map Strategic Groups

d

Conduct Competitor Analysis

Question title

Question stem

Selections

MC03.19

Which of the following are potential competitor weaknesses:

abcd-

MC03.20

Which of the following is NOT a function of the competitor intelligence system:

a- Constant monitoring of consumer and competitor activity. b- Obtaining unprotected proprietary information on competitors. c- Filtering raw information picked up by external and internal sources. d- Processing competitor information for strategic significance.

Distinctive competencies.

Exceptional financial resources.

Proprietary technology.

None of the above.

Choice

Reference

d

Conduct Competitor Analysis

b

Further Focus within External Analysis

Short Essay Questions Question title

Question stem

SE03.01

What is the strategic significance of service area competitor analysis?

SE03.02

Describe the steps in a rational process for service area competitor analysis.

SE03.03

What was the rationale for Porter suggesting that the level of competitive intensity within an industry is a critical factor in an organization’s environment?

Rationale

Within the health care community there is an understanding that health care organizations must be positioned effectively vis-à-vis their competitors. Competitor information is essential for selecting viable strategies that position the organization strongly within the market. Many health care managers agree that an organized competitor intelligence system is necessary for survival. The system acts like a radar grid – constantly monitoring consumer and competitor activity, filtering the raw information picked up by external and internal sources, processing it for strategic significance, and efficiently communicating actionable intelligence to those who need it.

A reasonable process for service area competitor analysis includes these steps: (1) develop an understanding of services or service categories the organization provides to its customers; (2) establish the service categories of the service area; (3) assess the competitive dynamics of the service area; (4) assess the strategic position of competitors against the important dimensions of the market, competitors providing services in the market, and the likely strategic moves of these competitors; and (5) synthesize the results of the analysis and define the implications.

In Porter’s model, intensity is a function of the threat of new entrants to the market, the level of rivalry among existing organizations, the threat of substitute products and services, the bargaining power of buyers (customers), and the bargaining power of suppliers. The strength and impact of these five forces must be carefully monitored and assessed to determine the viability of the service category today and may be used to assess the changes likely to occur in the future.

Reference

Why Service Area Competitor Analysis Is Important

A Process for Service Area Competitor Analysis

Intensity of Rivalry among Existing Organizations

Question title

Question stem

SE03.04

Why is service area competitor analysis an important aspect of external analysis?

SE03.05

What do you think the most important factor is among Porter’s five forces in terms of defining the attractiveness of a particular market?

SE03.06

Why is it important to carefully identify a few critical success factors in a health care market?

SE03.07

Why is it important for strategists to understand what competitors constitute strategic groups?

SE03.08.

What is strategic response?

Rationale

Reference

Service area competitor analysis is an increasingly important aspect of external analysis because of the changes that have taken place in the health care industry throughout the past decade. Specifically, service area competitor analysis is the process of assessing service category/service area issues, identifying competitors, determining the strengths and weaknesses of rivals, and anticipating their moves. It provides a foundation for determining competitive advantage and subsequent strategy formulation.

All the forces in the Porter model are important. In any particular market, threat of new entrants, the power of suppliers or some other factor may dominate, but in terms of the general model all the forces can be and usually are important.

Lessons for Health Care Strategic Thinkers

There are two basic reasons why critical success factors are important strategically. First, it is true that most industries, health care included, have only a relatively few factors that are genuinely “critical” to the success or failure of the business.

Decision makers have a much greater likelihood of success if they focus on these relatively few factors. Second, decision makers cannot deal with a large number of factors. If they try, they will lose their focus on genuinely important factors and pay too much attention to the “trivial many.”

In some way understanding a strategic group is similar to understanding critical success factors. Not all organizations are actual competitors. It is important that decision makers identify and understand the other competitors in their strategic group.

Numerous other firms, like the trivial many success factors are simply not competitively relevant.

Analyze Critical Success Factors

Strategic response includes the likely strategic objectives and the next strategic moves of competitors. These may be anticipated by identifying strengths and weaknesses, studying past strategies, or strategic group membership. Understanding these factors may be instrumental in anticipating likely strategic response.

Assess Likely Competitor Actions or Responses

Conduct Service Area Structural Analysis

Map Strategic Groups

Question title

SEC03.09

Question stem

List five important obstacles to effective service area competitor analysis.

SEC03.10. Why is it important to validate strategic assumptions?

Rationale

Reference

Some of the important obstacles to effective service area competitor analysis are misjudging industry and service area boundaries, poor identification of competitors, overemphasis on competitors’ visible competencies, overemphasis on where, rather than how to compete, and paralysis by analysis.

Obstacles to Effective Service Area Competitor Analysis

If one does not understand the strategic assumptions underlying their strategies it is impossible to make consistent mission focused strategic decisions.

Strategic MomentumValidating the Strategic Assumptions

Questions Chapter 4 Internal Environmental Analysis and Competitive Advantage

True/False Questions Question title

Question stem

Choice

Reference

TF04.01

Competitive advantage requires an organization to develop a distinctiveness that has value to consumer is rare among competitors, is hard to imitate and can be sustained.

T

The Process for Internal Analysis and the Search for Competitive Advantage

TF04.02

The identification of distinctiveness through a focus on the internal environment is intended to answer the strategic question “What should the organization do?”

F

Review Results of External Analysis and Service Area Competitor Analysis

TF04.03

Evaluating the strengths and weaknesses of the functional elements of a health care organization is as effective as evaluating the organization’s value chain.

F

Organize the Internal Analysis Process – Using the Value Chain

TF04.04

An organization’s value chain is the various ways that it creates value for present and prospective customers.

T

Organizational Value Chain

TF04.05

The three elements of service delivery (pre-service, point-of-service, and after-service) incorporate the production or creation of the service (product) of health care and include primarily operational processes and marketing activities.

T

Organizational Value Chain

TF04.06

The organizational structure increases patient satisfaction by effectively and efficiently facilitating the service delivery.

T

Support Activities

Question title

Question stem

Choice

Reference

TF04.07

Competitive advantage is created within the organization in the form of strengths that are important in the internal environment.

F

The Process for Internal Analysis and the Search for Competitive Advantage

TF04.08

The continuous evaluation of an organization’s strengths and weaknesses is NOT a critical part of strategic momentum.

F

Identify Organizational Strengths and Weaknesses

TF04.09

In the resource-based view of strategy, valuable, expensive, difficult-to-copy resources contribute to sustainable competitive advantage.

T

What Is the Resource Based Theory of Competitive Advantage

TF04.10

Resources are the stocks of non-human factors that are available for use in producing goods and services.

T

Resources

TF04.11

Competency is an infrastructure-based component of sustainable competitive advantage.

F

Competencies

TF04.12

Capability is the ability of an organization to deploy resources and competencies.

T

Capabilities

Question title

Question stem

Choice

Reference

TF04.13

Organizational strengths must have value, be rare, difficult to imitate, and sustainable in order to create competitive advantage.

T

Competitively Relevant Strengths

TF04.14

The competitive relevance of an organizational strength is solely dependent on its difficulty to imitate.

F

Competitively Relevant Strengths

TF04.15

An organizational strength does not need to have value in order to be competitively relevant.

F

Competitively Relevant Strengths

TF04.16

A true competitive advantage, one attained, assures organizational success.

F

Review Results of External Analysis and Service Area Competitor Analysis

Question title

Question stem

Choice

Reference

TF04.17

An organizational strength that is of low value, rare, easy to imitate, and difficult to sustain offers short-term competitive advantage.

F

TF04.18

An organizational strength that is of high value, rare, difficult to imitate, and difficult to sustain offers short-term competitive advantage but not a strength that can be sustained over the long run.

T

TF04.19

To be competitively relevant an organizational weakness must be of high value to stakeholders, not possessed by competitors, not easily eliminated, and such that competitors can sustain their strengths.

T

Competitively Relevant Weaknesses

TF04.20

An organizational weakness that is of high value to stakeholders, possessed by competitors, easily corrected, and such that competitors can sustain their advantage presents a competitive disadvantage.

F

Competitively Relevant Weaknesses

Identify Organizational Strengths and Weaknesses Identify Organizational Strengths and Weaknesses

Question Title

Question stem

Choice

TF04.21

Competitive advantage of an organization may be based on having rare or abundant resources, special competencies or skills, or superior management or logistical capabilities.

T

TF04.22

Stretch is accomplished through resource leveraging or systematically achieving the most possible from the available resources.

T

Identify Organizational Strengths and Weaknesses A Final Challenge

TF04.23

Only financial resources may be leveraged by an organization.

F

A Final Challenge

TF04.24

Synergy is created by combining complementary resources, competencies, and capabilities.

T

A Final Challenge

Reference

Question title

Question stem

Choice

Reference

TF04.25

The more often that a particular resource, competency, or capability is used, the greater is the potential for leveraging.

T

A Final Challenge

TF04.26

In evaluating the competitive relevancy of a strength, if the resource, competency or capability does not have value to relevant stakeholders there is no reason to ask the questions relating to rarity, ease of imitation and sustainability.

T

Competitively Relevant Strengths

TF04.26

Organizational strengths are typically directed toward obtaining a cost advantage but rarely do they contribute to differentiating the organization from competitors.

F

The Process for Internal Analysis and the Search for Competitive Advantage

TF04.27

Whereas external analysis focuses on the question of “What should we do,” internal analysis requires introspection and an answer to the question “what can we do?

T

Review Results of External Analysis and Service Area Competitor Analysis

TF04.28

Any organization that develops a better product, delivers a better service, or establishes a substantial cost advantage will have a competitive advantage.

F

Review Results of External Analysis and Service Area Competitor Analysis

TF04.29

The organizational value chain is built on a system perspective and demonstrates that value can be developed in the service delivery subsystem (pre-service, point-of-service, or after-service) or in the support subsystem.

T

Organizational Value Chain

TF04.30

Value can be created in the service delivery or support subsystems but it can never be lost in support subsystem once it is created.

F

Support Activities

TF04.31

In order to successfully enter a particular market or deliver specific services an organization must possess the threshold conditions or the minimally required resources, competencies and capabilities necessary to compete in the market.

T

Competencies

TF04.32

The ability to effectively and efficiently coordinate resources and competencies to achieve integrative synergies through leadership and management is a strategic resource.

F

Capabilities

TF04.33

A dynamic capability is the ability to make ongoing improvements to the organization’s activities through learning, renewal, and change over time.

T

Capabilities

Question title

Question stem

Choice

Reference

TF04.34

An organization’s ability to develop strategic insights, recognize and/or rearrange resources and competencies and develop novel strategies before of better than competitors is a disruptive capability.

T

Capabilities

TF04.35

Stretch enables smaller health care organizations that are less rich in terms of resources, competencies and capabilities to compete with large, powerful, national and regional networks and management care organizations.

T

A Final Challenge

Multiple Choice Questions Question title

Question stem

Selections

Choice

Reference

MC04.01

The three elements of service delivery are:

abcd-

Pricing, quality, and marketing.

Target market, clinical operations, and billing.

Pre-service, point-of-service, and after-service.

Branding, process innovation, and clinical.

c

Organizational Value Chain

MC04.02

The three subsystems that support service delivery by ensuring an inviting and supportive atmosphere, an effective organization, and sufficient resources such as finances, highly qualified staff, information systems, and appropriate facilities and equipment are:

a- Pricing, quality, and marketing. b- Organizational culture, organizational structure, and strategic resources. c- Pre-service, point-of-service, and after-service. d- Branding, process innovation, and clinical.

b

Organizational Value Chain

MC04.03

The two categories into which capabilities may be classified are:

a- The ability to make dynamic improvements to the organization’s activities through learning, renewal, and change over time. b- The ability to develop strategic insights and recognize and arrange resources and competencies to develop novel strategies before or better than competitors. c- Both a and b. d- Neither a nor b.

c

Capabilities

Question title

Question stem

Selections

Choice

Reference

MC04.04

Sustained competitive advantage is the result of:

a- An enduring value differential between the services of one organization and that of its competitors in the minds of patients, physicians, and so on. b- Having superior resources and competencies. c- A long list of intangible assets, large bank balances, and a strong board of directors. d. Location, price, key personnel, and organizational structure.

a

What Is the Resource Based Theory of Competitive Advantage?

MC04.05

Organizational strengths represent competitive advantages when they:

a- Are present in the organization. b- Are more intense than the same strength in a competitor. c- Are marshaled in a way that allows them to become genuine strategic assets. d- Are arranged into a matrix of resources and the manner in which they are allocated.

c

Identify Organizational Strengths and Weaknesses

MC04.06

The process of internal analysis attempts to answer which of the following questions:

abcd-

b

Review Results of External Analysis and Service Area Competitor Analysis

What can we do?

What should we do?

What do we want to do?

All of the above.

Question title

Question stem

Selections

Choice

Reference

MC04.07

Which of the following is the proper interpretation of a strategic thinking map of competitive advantages with the judgments of Value (High); Rareness (No); Imitability (Difficult); and Sustainable (Yes):

a- No competitive advantage. Most competitors have the strength and those that do not can develop it easily and sustain it. Because the strength is widely possessed and can be sustained, it is likely that it already has become a minimum condition for longterm success. b- Long-term competitive advantage. This strength is rare in the service area, difficult to imitate by competitors, and can be sustained by the organization. If the value is very high, it may be worth “betting the organization” on this strength. c- Short-term competitive advantage. Because the strength is valuable and rare, competitors will do what is necessary to develop this easy-to-imitate strength. The organization should exploit this shortterm advantage but should not base long- term strategies on this type of strength. Over time, this strength may become a minimum condition for longterm success. d- No competitive advantage. Many competitors possess the strength but it is difficult to develop, so care should be taken to maintain this strength.

Because the strength is widely possessed and can be sustained, it is likely that it already has become a minimum condition for long-term success.

d

Competitively Relevant Strengths

MC04.08

Organizational weaknesses represent competitive disadvantages when they:

a- Are present in the organization. b- Are more prevalent than the weaknesses in a competitor. c- Are arranged into a matrix and sorted by relevance. d- Are of high value to stakeholders, not possessed by competitors, not easily eliminated, and such that competitors can sustain their strengths.

d

Competitively Relevant Weaknesses

Question title

Question stem

Selections

Choice

Reference

a

Competitively Relevant Weaknesses

a- It would have no strategic relevance because legal claims are a matter of insurance coverage. b- It demonstrates an absence of competence among the organization’s executives. c- Settlements against the company could result in serious financial consequences. d- An appropriate strategic response is to move operations generating the legal claims to an offshore location.

c

Competitively Relevant Weaknesses

Stretch is accomplished through:

a- Effectively assessing organizational strengths and weaknesses. b- Resource leveraging or systematically achieving the most possible from the available resources. c- Focusing only on high-value, rare strengths. d- Eliminating all competitively relevant weaknesses.

b

A Final Challenge

MC04.12

Value is the perceived relationship between:

abcd-

c

Organizational Value Chain

MC04.13

The organizational value chain is useful in determining:

a- Where and how value is created in an organization. b- Why competitors do not compete in certain markets. c- Why employees are dissatisfied with their jobs. d- Where the organization should locate new facilities.

a

Organizational Value Chain

MC04.09

Which of the following is the proper interpretation of competitive disadvantages for an organizational weakness that exhibits high value, is not rare, is easy to correct, and such that competitors can sustain their advantage:

abcd-

MC04.10

What are the strategic implications of a competitively relevant weakness of ongoing legal claims that could prove a threat to financial viability:

MC04.11

Short-term competitive disadvantage.

No competitive disadvantage.

Long-term competitive disadvantage.

Neither a competitive advantage nor disadvantage.

Efficiency and effectiveness.

Length of stay and patient satisfaction.

Satisfaction and price.

Price and length of stay.

Question title

Question stem

Selections

Choice

Reference

MC04.14

Which of the following is an example of pre-service value creation:

a- A doctor who is especially nice in discussing a treatment plan. b- A nurse who makes a patient feel relaxed when taking a blood pressure. c- A receptionist who is courteous and helpful. d- All of the above.

c

Service Delivery Activities

MC04.15

An organizational strength is:

a- A visible resource that distinguishes one organization from another. b- An attribute (tangible or intangible) that one organization possesses and uses successfully. c- A perception held by the CEO even if not shared throughout the organization. d- The sum of all positive attitudes held by the executive team.

b

Identify Organizational Strengths and Weaknesses

MC04.16

Organizational strengths and weaknesses are said to be subjective in some cases because:

a- They represent opinions of evaluators. b- They are the subject of debate and discussions in organizations. c- There are no uniform evaluation techniques. d- None of the above.

a

Identify Organizational Strengths and Weaknesses

MC04.17

Organizations that possess threshold conditions have which of the following:

abcd-

Minimally required resources.

Essential but not exclusive competencies.

Ordinary capabilities.

All the above.

d

Competencies

MC04.18

Organizations that are able to make ongoing improvements to organizational activities through learning, renewal, and change over time possess: Organizations that have the ability to develop strategic insights, recognize and arrange or rearrange resources and competencies to develop novel strategies before or better than competitors possess:

abcd-

Threshold competencies.

Distributive capability.

Dynamic capability.

Disruptive capability.

c

Capabilities

abcd-

Dynamic capability.

Dynamic strategic insights.

Objective competencies.

Disruptive capability.

d

Capabilities

MC04.19

Question title

Question stem

Selections

Choice

Reference

MC04.20

Sustained competitive advantage is:

a- An enduring value difference between the services of one organization and its competitors in the minds of patients. b- A perception that one organization’s services are equal to all the competitors. c- An overwhelming resource difference in the short run that has the possibility of being sustainable. d- A perception among suppliers that their products will be promptly reimbursed.

a

Determine Competitive Advantages and Disadvantages

MC04.21

Which of the following is NOT an important question when determining the competitive relevance of a strength:

a- Is the organization the only one that possesses the resource, competency or capability? b- Is the organization the one that has possessed the resource, competency or capability the longest period of time? c- Is the resource, competency or capability of value to customers? d- Is it difficult to duplicate the resource, competency or capability?

b

Competitively Relevant Strengths

MC04.22

What would be the appropriate interpretation if an organization possessed a resource, competency or capability that was of value to customers, was rare, and could be sustained but was relatively easy to duplicate:

abcd-

No competitive advantage.

Long-term competitive advantage.

Short-term competitive advantage.

Threshold condition.

c

Competitively Relevant Strengths

MC04.23

What would be the appropriate interpretation if an organization possessed a weakness that was of value to customers, was rare among competitors, is difficult for you to correct and your competitor can sustain the advantage:

abcd-

No competitive disadvantage.

Short-term competitive disadvantage.

Intermediate term competitive disadvantage.

Serious competitive disadvantage.

d

Competitively Relevant Weaknesses

Question title

Question stem

Selections

MC04.24

Which of the following is a way an organization can leverage important resources:

abcd-

MC04.25

Expediting success can be accomplished by:

a- Complementing resources that are widely available among competitors. b- Increasing the resource multiplier by reducing the time between resource expenditure and revenue generation. c- Decreasing the among of total revenue move to the bottom line. d- None of the above.

Concentrating resources.

Accumulating resources.

Conserving resources.

Harvesting resources.

Choice

Reference

d

A Final Challenge

b

A Final Challenge

Short Essay Questions Question title

Question stem

Rationale

Reference

SE04.01

How does an organization achieve a competitive advantage?

The task of establishing competitive advantage is sometimes perplexing, and not always successful. Developing a better product, charging a lower price, or delivering a better service does not guarantee success. Competitive advantage requires an organization to develop a distinctiveness that competitors do not have and cannot easily imitate. Identifying this distinctiveness requires a shift in focus to the internal environment and an introspective view that allows the organization to answer the second strategically relevant question of situational analysis – “What can the organization do?”

The Process for Internal Analysis and the Search for Competitive Advantage

SE04.02

How many organizations develop sustainable competitive advantages by being extraordinarily competent at converting ordinary resources and skills into genuine strategic assets?

The development of sustainable competitive advantages by being very good at converting ordinary resources and skills into strategic assets by applying these interrelated principles: The building blocks of strategy may be processes as well as people, products, services, and markets.

Competitive success depends on transforming an organization’s key processes into services that consistently provide superior value to customers.

Organizations create these capabilities by making strategic investments in a support infrastructure that links together and transcends traditional functions and any single component of the value chain.

Because capabilities necessarily cross functions and value chain components, the champion of capabilities-based strategy must be the chief executive.

Capabilities

Question title

Question stem

Rationale

Reference

SE04.03

Explain the value of stretch to an organization.

Stretch enables smaller health care organizations that are less rich in resources, competencies, and capabilities to compete against large, powerful, national and regional health networks and managed care organizations. Leveraging is usually thought of in terms of financial leveraging through the use of debt; however, other resources may be leveraged as well.

A Final Challenge

SE04.04

Under what circumstances are organizational weaknesses competitively relevant?

Competitively relevant weaknesses relate to areas that are valued in the marketplace, are not common weaknesses attributed to competitors, are difficult for the organization to correct, and offer advantages that can be sustained by others.

Competitively Relevant Weaknesses

SE04.05

How can a health care organization effectively leverage its resources?

Resources in health care organizations can be leveraged as in any other organization by concentrating, accumulating, complementing, conserving, and recovering resources. Resource leveraging is often accomplished most effectively by identifying a relatively few important factors for success and focusing executive energy on this short list of truly important things.

A Final Challenge

SE04.06

Of all the questions for determining competitive relevance which is the most important?

Competitively Relevant Strengths

SE04.07

Why do we refer to some capabilities as disruptive?

All questions are important – is the resource, competency or capability of value to customers, are they rare and you possess them, are they difficult to duplicate and can you sustain them?

However, the most important question by far is the question of value. If the resource, competency or capability is not valuable to customers the other questions do not matter.

Disruptive capabilities are called “disruptive” because through the development of strategic insights, recognizing and rearranging resources and competencies novel strategies are developed before and sometimes strategies that are better than those of competitors.

SE04.08

What is the threshold condition relative to competition?

The threshold condition relative to organizational competencies is the minimally required resources, competencies, or capabilities necessary to compete in a particular market. Unless an organization possesses this minimum condition, there is no chance of success in a competitive environment.

Competencies

Capabilities

Question title

Question stem

Rationale

Reference

SE04.09

What is an example of an intangible resource.

A good example of an intangible resource is an organization’s reputation or the goodwill it develops through effectively competing in a market sometimes over a long time. Intangible resources are important because they are difficult to imitate.

Resources

SE04.10

What is the resource-based theory of competitive advantage?

The resource-based theory argues that sustained competitive advantage is a function of an organization’s base of tangible and intangible resources. It argues that organizations with marginal resources may break even, those with inferior resources will likely fail, and those with superior resources will generate profits and likely succeed.

Resources

Questions Chapter 5 Directional Strategies

True/False Questions Question title

Question stem

Choice

Reference

TF05.01

The mission attempts to capture the organization’s distinctive purpose.

T

Directional Strategies

TF05.02

The vision consists of the principles that are held dear by members of the organization.

The vision creates a mental image of what leaders want the organization to achieve when it is accomplishing its purpose or mission.

F

Directional Strategies

T

Directional Strategies

TF05.04

Strategic goals are those overarching end results that the organization pursues to accomplish its mission and achieve its vision.

T

Directional Strategies

TF05.05

A complex environment makes it difficult to establish a clear purpose for an organization.

F

Develop A Statement of Mission

TF05.06

An organizational mission is a broadly defined and enduring statement of purpose that distinguishes a health care organization from other organizations of its type and identifies the scope of its operations in product, service, and competitive terms.

T

Mission: A Statement of Distinctiveness

TF05.07

Mission statements do not reference the principal services delivered or products provided by the organization.

F

Components of Mission Statements

TF05.08

A mission statement helps all employees focus their efforts on the most important priorities.

T

Building a Mission Statement

TF05.09

In organizations with a planning staff, the development of a mission statement is a task that should be assigned to the planning staff.

F

TF05.10

The mission statement is relevant only to the present and is not relevant to the future.

F

TF05.11

An organizational vision is a description of the organization when it is fulfilling its purpose.

T

Top-Level Leadership: A Must for Mission Development Top-Level Leadership: A Must for Mission Development Develop a Statement of Vision

TF05.12

Directional strategies are designed primarily to tell organizational members what they must do to be successful in a complex environment.

F

Review Results of Situational Analysis

TF05.13

When the purpose or mission of an organization is understood the complexity of the environment can be reduced because decision makers can focus on fewer things.

T

Develop A Statement of Mission

TF05.03

Question title

Question stem

Choice

Reference

TF05.14

The history of an organization is its vision.

F

History and Vision

TF05.15

How a leader views the organizational environment is an important determinant of vision.

T

Vision and t h e Environment

TF05.16

Creative tension is the means of reconciling an organization’s vision with its strengths and weaknesses.

T

Vision and Internal Capacity

TF05.17

Pathfinding is the job of building a vision for an organization.

T

Health Care Strategists as Pathfinders

TF05.18

A vision-led organization is guided by a philosophy that is obvious in the daily life of the organization.

F

Health Care Strategists as Pathfinders

TF05.19

Strategic leadership has traditionally focused on mid-level management positions in an organization.

F

Health Care Strategists as Pathfinders

TF05.20

A vision is coherent when it “fits” with other statements, including the mission and values.

T

Characteristics of Effective Vision

TF05.21

An effective vision clarifies the picture of the future by stabilizing the strategic capabilities of the organization.

F

Characteristics of Effective Vision

TF05.22

Values are the fundamental principles of organizations and people.

T

Develop a Statement of Values as Guiding Principles

TF05.23

It is important that managers, employees, and key stakeholders understand the values that are expected in an organization.

T

Develop a Statement of Values as Guiding Principles

Question title

Question stem

Choice

Reference

TF05.24

Critical success factors are those things that organizations must do in order for the organization to achieve high performance.

T

Critical Success Factors for the Service Category

TF05.25

A board process that involves both constructive and destructive debate will likely lead to a successful board.

F

Board Process: Missing Link?

TF05.26

As part of managing strategic momentum, managers assess the performance of the organization and try to determine whether the mission, vision, values, and goals are appropriate.

T

Managing Strategic Momentum – Evaluating Directional Strategies

TF05.27

The board of directors should not be involved in the development of an organization’s mission, vision, and value statements.

F

TF05.28

An organization mission statement is an attempt to capture an organization’s purpose and commit it to writing.

T

Practical Lessons for Health Care Strategic Thinkers Mission: A Statement of Distinctiveness

TF05.29

A mission statement is in effect “carved in stone” and must never be changed or it will cause needless confusion among the leadership as well as employees.

F

Mission: A Statement of Distinctiveness

TF05.30

Mission statements may be accurately looked upon as superordinate goals that stand the test of time and help top management navigate the through turbulent times of change.

T

Mission: A Statement of Distinctiveness

TF0531

Mission drift occurs when the mission of an organization is altered and the organization fades into areas it should not pursue.

T

Mission: A Statement of Distinctiveness

TF05.32

Mission creep takes place when a health care organization takes on more and more activities to the point where the diversity of the activities becomes unmanageable.

T

Mission: A Statement of Distinctiveness

TF05.33

Identifying the scope of operations in terms of services and markets is not an important characteristic of mission statements.

F

Characteristics of Mission Statements

TF05.34

When an organization includes in a mission statement its commitment to high quality, professional and compassionate care it is stating what it considers to be its desired public image.

T

Components of Mission Statements

Question title

Question stem

Choice

Reference

TF05.35

A vision-led approach is a philosophy where leaders are committed to high levels of performance that can be achieved because this level has been achieved in the past.

F

Health Care Strategists as Pathfinders

TF05.36

The keeper of the vision is ordinarily an executive who is a champion that communicates and models the vision for others in the organization.

T

Health Care Strategists as Pathfinders

TF05.37

A vision communicates when it is shared and people believe in the importance of cooperation in creating the future that managers, employees, and other stakeholders desire.

T

Characteristics of Effective Vision

TF05.38

It is important that visions empower patients first because there is time to empower employees later after the patients become fully aware and supportive of the vision.

F

Characteristics of Effective Vision

TF05.39

Critical success factors are the benchmarks that organizations must accomplish if they are to be successful in a particular industry.

T

Critical Success Factors for the Service Category

TF05.40

There is no reason for strategic goals to relate to critical success factors since they are anchored in the directional strategies.

F

Develop Strategic Goals

Multiple Choice Questions Question title

Question stem

Selections

Choice

Reference

MC05.01 Which of the following are directional strategies:

a- External environment, internal environment, strengths, and weaknesses. b- Mission, vision, values, and strategic goals. c- Service and structure analysis, competitive analysis, service areas, and service categories. d- Leadership, systems thinking, and strategic mapping.

b

Directional Strategies

MC05.02 Which of the following are common purposes or missions for organizations:

a- To make money. b- To deliver health services in as convenient a way as possible. c- To provide health care to indigent patients. d- All of the above.

d

Characteristics of Mission Statements

MC05.03 Which of the following is NOT a characteristic of an organizational mission statement:

a- Defines similarities with other health care organizations of its type. b- Identifies the scope of operations. c- An enduring statement of purpose. d- Identifies the scope of products and services.

a

Characteristics of Mission Statements

MC05.04 Visions are about:

a- Competitive analysis and the external environment. b- Stakeholder needs. c- Ideals, standards, and desired future states. d- Executive management and leadership.

c

Develop AStatement of Vision

MC05.05 Health care leaders acquire vision from:

a - An appreciation of the history of the organization. b- A perception of the opportunities present in the environment. c- An understanding of the strategic capacity of the organization to take advantage of these opportunities. d- All of the above.

d

Origins of Vision

Question title

Question stem

Selections

Choice

Reference

MC05.06

The term “pathfinding” is:

a- The means of identifying an organization’s mission. b- The job of building a vision for an organization. c- External analysis. d- A directional strategy.

b

Health Care Strategists as Pathfinders

MC05.07

Which of the following is NOT a role of middle management in determining the strategic direction of an organization:

a- Keeping the role of quality as a strategic goal before all employees. b- Selecting the CEO. c- Being involved in the redefinition of organizational vision. d- Appealing to the economic motives important to health care employees.

b

Health Care Strategists as Pathfinders

MC05.08

Which of the following IS a characteristic of an effective vision:

a- Visions are permanent and do not need to be challenged or changed. b- Visions come alive through broad generalities. c- Visions must make sense in the relevant community, be flexible, and stand the test of time. If the vision is pragmatically irrelevant, it will not inspire high performance. d- Visions are critical parts of control systems and determine the quality of products, services, and management practices of an organization.

c

Characteristics of Effective Vision

MC05.09

Values and beliefs are directional strategies that provide the focus and parameters for:

abcd-

d

Develop A Statement of Values as Guiding Principles

MC05.10

Which of the following questions would NOT be asked when evaluating directional strategies:

a- Do our mission, vision, and values fit the needs of our stakeholders? b- Do our products and services meet the highest quality standards? c- Are we doing some things now that we should not be doing? d- Is the image of the organization what it should be?

b

Managing Strategic Momentum – Evaluating Directional Strategies

External analysis.

Defining internal strengths and weaknesses.

Product and service quality.

Strategic goals.

Question title

Question stem

Selections

Choice

Reference

MC05.11

Which of the following is NOT a reason for the importance of directional strategies.

abcd-

They initially set all other activities in motion.

They create the first signs of momentum.

They provide a sense of direction in decision making.

None of the above.

d

Why Directional Strategies Are Important

MC05.12

The primary function of an effective mission statement is to:

abcd-

Capture the organization’s distinctiveness.

Provide a sense of hope for the future.

Make explicit the organization’s operating assumptions.

Elaborate the expected behavioral norms.

a

Mission: A Statement of Distinctiveness

MC05.13

Mission statements remind health care strategists to ask which of the following questions about themselves and others:

a- What are we doing that we should continue to do but do in a different way? b- What are we doing that we should continue to do? c- What are we doing that we should stop doing? d- All the above.

d

Mission: A Statement of Distinctiveness

MC05.14

Which of the following are best prepared to develop an effective mission statement:

abcd-

A public relations firm.

Organizational consultants.

Well informed organizational members.

Representatives from all areas of the organization.

c

Top-Level Leadership: A Must for Mission Development

MC05.15

Which of the following are about ideals, hope, standards and desirable future states:

abcd-

Mission.

Vision.

Values.

Strategic Goals.

b

Develop A Statement of Vision

MC05.16

Which of the following is NOT a source of vision development by health care leaders:

a- History of the organization. b- Perception of the opportunities present in the environment. c- Strategic capacity of the organization to take advantage of opportunities. d- All of the above can be a source of vision development.

d

Origins of Vision

MC05.17

Which of the following statements is true about effective vision statements:

a- Vision statements should be strictly factual and not appeal to emotions. b- Vision statements should always state the hope in quantitative terms. c- Vision statements must be structured and rarely changed. d- Vision statements should be clear and about excellence.

d

Characteristics of Effective Vision

Question title

Question stem

Selections

Choice

Reference

MC05.18

Which of the following is NOT related to the liability of newness:

abcd-

Risk involved in early entry to a market.

Established reputations of pioneering organizations.

Steep learning curve in new markets.

Variable demand and limited financial outlays.

b

A Cautionary Note: The Problem of Newness

MC05.19

Which of the following is NOT true regarding critical success factors:

a- Critical success factors are the same for each service category. b- Critical success factors are similar for all members of a strategic group. c- Critical success factors do not vary from one service category to another. d- All the above statements are true regarding critical success factors.

c

Critical Success Factors for the Service Category

MC05.20

Strategic goals should:

a- Be formulated by leaders but stated in terms that can be understood by all employees. b- Be limited in number. c- Be a link between critical success factors and unit objectives. d- Strategic goals should bell of the above.

d

Develop Strategic Goals

MC05.21

Which of the following are accepted modes of board of director governance:

a- Fiduciary responsibility mode – stewardship of assets. b- Strategic mode – collaborating with leaders to develop visions of the future. c- Generative mode – engaging in shared decision making. d- All the above are accepted modes of board governance.

d

Roles and Responsibilities of Boards of Directors (or Trustees) in Strategic Management

MC05.22

What is meant by CEO duality?

a- CEO functions as chief executive officer and chief operation officer. b- CEO holds board membership on two outside boards of directors. c- CEO functions as chief executive officer and chairman of the board of directors. d- CEO has worked her/his way up the organization and understands the dual perspective of leaders and followers.

c

Health Care Performance and the Usual Suspects

Question title

Question stem

Selections

Choice

Reference

b

Health Care Performance and the Usual Suspects

a- Engaging in constructive conflicts, especially with the CEO. b- Understanding the appropriate level of board of director involvement in decision making. c- Addressing problems and decisions comprehensively. d- All the above.

d

Board Process: Missing Link?

a- Do our directional strategies allow enough flexibility to allow for innovation? b- Do our directional strategies relate to our critical success factors? c- Do our directional strategies reflect our desired public image? d- All the above are appropriate.

d

Managing Strategic Momentum – Evaluating Directional Strategies

MC05.23

When boards of directors are formed primarily to provide representation of diverse stakeholders, and fund raising is one of their primary duties, in fund raising they are referred to as:

abcd-

MC05.24

Behaviors that lead to effective board of director performance are:

MC05.25

Which of the following are appropriate questions to ask regarding directional strategies?

Representative governing boards.

Philanthropic governing boards.

Corporate governing boards.

Interlocked boards.

Short Essay Questions Question title

Question stem

SE05.01

Why are mission, vision, values, and strategic goals termed “directional strategies”?

SE05.02

What are the differences between a mission statement and a vision statement?

SE05.03

Why are values important to an organization?

Rationale

The mission attempts to capture the organization’s distinctive purpose or reason for being. The vision creates a mental image of what leaders want the organization to achieve when it is accomplishing its purpose or mission. It is the organization’s hope for the future. Values are the principles that are held dear by members of the organization. These are guiding principles the managers and employees will not compromise while they are in the process of achieving the mission and pursuing the vision and strategic goals. Strategic goals are those overarching end results that the organization pursues to accomplish its mission and achieve its vision.

The mission is developed from the needs of all the stakeholders – groups who have a vested interest in the success and survival of the organization. Vision, on the other hand, is an expression of hope. It is a description of the organization when it is fulfilling its purpose. Vision involves creating compelling images of the future and produces a map of what could be and, more important, what a leader wants the future to be.

Values are the fundamental principles that organizations and people stand for – along with the mission and vision, they make an organization unique. Most often, discussions of organizational values relate to ethical behavior and socially responsible decision making. Ethical and social responsibility values are extremely important, not just to a single hospital, HMO, or long-term care facility, but to all citizens. There are, however, other values that may be specific to an organization and characterize its members’ behavior in the past or the behavior to which members collectively aspire.

Reference

Directional Strategies

Mission: A Statement of Distinctiveness and Develop AStatement of Vision

Develop a Statement of Values as Guiding Principles

Question title

Question stem

SE05.04

How do strategic goals relate to critical success factors?

SE05.05

Why is it important for an organization to develop a list of its critical success factors?

SE05.06

What is meant by the liability of newness?

Rationale

Reference

Strategic goals should relate to critical success factor activities, providing more specific direction in accomplishing the mission and vision. At the same time, strategic goals should be broad enough to allow considerable discretion for managers to formulate their objectives for individual units. The most appropriate strategic goals possess the following characteristics: 1. Strategic goals should relate specifically to activities that are critical to accomplish the mission. Strategic goals that focus on activities which are not mission critical have the potential to divert leadership attention and employee energy.

2. Strategic goals should be the link between critical success factors and strategic momentum (carrying out unit objectives).

3. Strategic goals should be limited in number. When too many goals are pursued, the “trivial many” rather than the “critical few” activities are accomplished.

4. Strategic goals should be formulated by leaders but should be stated in terms that can easily be understood and appreciated by everyone in the organization.

There is a tendency for decision makers to attempt to do too many things at one time. In many cases if decision makers do not carefully manage their time they will be distracted by the hundreds of tasks that seem critical to success (e.g. checking e-mail, reading routine reports, talking on the phone, etc.) but in reality, are not very consequential in terms of the success of the organization. It is important for decision makers to think about and identify those relatively few things in their service category that genuinely make a difference in the success and failure of the organization. This is where critical success factors come in.

Great care should be taken in identifying and keeping an eye on the success factors.

Health care strategists rightly place a great deal of emphasis on being innovative with regard to the services offered and the ability to offer existing services in new and creative ways. The rush to enter new markets is certainly a key to innovation in health care as well as other industries. However, being the first in a service category is not without its dangers. Pioneering organizations face increased uncertainty and risk, must be committed to a relatively longer learning curve, and often required larger financial outlays than originally expected.

Develop Strategic Goals

Critical Success Factors for the Service Category

A Cautionary Note: The Problem of Newness

Question title

Question stem

SE05.07

What are some of the important factors that influence the formulation of an effective vision statement?

SE05.08

Why are values sometimes referred to as guiding principles?

SE05.09

How are strategic goals related to mission, vision, and values?

Rationale

An effective vision statement must consider a number of things. First, it must take into account the history of the organization. This history may include a number of things that can affect the organization’s hope for the future – the philosophy of the founder, the good and bad times of the organization and numerous other things. The environment the organization faces will also influence the formulation of the vision. If the environment seems uncertain and dismal the aspiration level in the vision may be reduced. The internal capacity of the organization will also affect the vision. If resources are scarce the vision may reflect lower hope for the future whereas if the resources are great the organization may aspire to even greater levels of attainment.

Values are the fundamental principles that organizations and people stand for – along with the mission and vision, they shape organizational culture. Most often, discussions of organizational values relate to ethical behavior and socially responsible decision making. Ethical and social responsibility values are important to all organizations and stakeholders.

Values are the behavioral norms that determine if managerial behavior is right or wrong, proper or improper, and so on. For this reason, values are frequently referred to as guiding principles because they guide the behavior of organizational members. Values should be more than slick public relations statements. “Talking the talk” is insufficient; “walking the walk” is what matters when it comes to values.

Once strategic leaders are confident that the mission, vision, and values are well formulated, understood, communicated, and expressed in writing, they are able to focus on the activities that will make the most progress toward accomplishing the mission and moving the organization toward a realization of its vision – its strategic goals. Well-written mission statements are the beginning point for strategic goal setting. Goal setting should be focused on those areas that are critical to mission accomplishment.

Reference

Origins of Vision

Develop a Statement of Values as Guiding Principles

Develop Strategic Goals

Question title

SE05.10

Question stem

What are the four modes of governance as applied to boards of directors?

Rationale

Four modes of governance have been applied to boards of directors.

First is the fiduciary responsibility mode or stewardship of assets; the second is the strategic mode which involves collaborating with management to develop a vision for the future; the third is the generative mode where the board engages in shared creative thinking to make sense of data available to decision makers, and the fourth is the idea of the progressive board that focuses on contributions of individual members and is cohesive and comprehensive. In the strategic mode, boards of directors or boards of trustees are responsible for making policies – providing general guidelines under which the organization will operate. Therefore, boards are important in formulating the mission, vision, and value statements of the organization and, depending on the nature of the membership boards can represent very complex issues in organizational governance.

Reference

Roles and Responsibilities of Board of Directors (or Trustees) in Strategic Management

Questions Chapter 6 Developing Strategic Alternatives

True/False Questions Question title

Question stem

Choice

Reference

TF06.01

External analysis is an integral part of strategy formulation.

T

Understand the Decision Logic of Strategy Development

TF06.02

Strategic planning is essentially decision making, deciding which strategy from among the many available alternatives the organization will pursue.

T

TF06.03

Strategy formulation includes development of strategic alternatives, evaluation of alternatives, and strategic choice.

T

TF06.04

The strategies selected by the organization should address external issues, draw on competitive advantages or fix competitive disadvantages, keep the organization within the parameters of the mission and values, move the organization toward the vision, and make progress toward achieving one or more of the organization’s strategic goals.

T

Understand the Decision Logic of Strategy Development Understand the Decision Logic of Strategy Development Linking Strategy with Situational Analysis

TF06.05

In making decisions concerning the five categories of strategies (directional strategies, adaptive strategies, market entry/exit strategies, competitive strategies, and implementation strategies), the order in which the strategies are addressed is inconsequential since the strategies are mutually exclusive.

F

Understand the Decision Logic of Strategy Development

TF06.06

Market entry/exit strategies are the means for accomplishing the ends of adaptive strategies.

T

TF06.07

Implementation strategies are developed to activate competitive strategies but do not serve this purpose for adaptive and market entry/exit strategies.

F

Understand the Decision Logic of Strategy Development Understand the Decision Logic of Strategy Development

TF06.08

Competitive strategies are of two types: one that determines an organization’s strategic posture and one that positions the organization vis- à-vis other organizations within the market.

T

Understand the Decision Logic of Strategy Development

Question title

Question stem

Choice

Reference

TF06.09

Market entry strategies are used for reduction of scope of an organization.

F

Understand the Decision Logic of Strategy Development

TF06.10

The choice of a strategic alternative creates additional direction for an organization but has little to do with shaping its internal systems.

F

Understand the Decision Logic of Strategy Development

TF06.11

Adaptive strategies involve decisions about whether an organization should expand, reduce, or maintain its scope.

T

Understand the Decision Logic of Strategy Development

TF06.12

Market development is a directional strategy that an organizational unit or division can use to enter new markets with present products or services.

F

Expansion of Scope Strategies

TF06.13

Divestiture is a reduction strategy in which an operating strategic service unit is sold off as a result of a decision to permanently and completely leave the market despite its current viability.

T

TF06.14

The three major methods of market entry are: purchase (e.g., acquisition), cooperation (e.g., joint venture), and market segmentation (e.g., cost leadership).

F

TF06.15

Purchase market entry strategies allow an organization to use its financial resources to enter a market quickly, thereby initiating the adaptive strategy.

T

Reduction of Scope Strategies – Divestiture Understand Market Entry/Exit Strategy Linkage Purchase Strategies

TF06.16

In general, venture capital investments are used to become involved in the growth and development of a small organization that has the potential to develop a new or innovative technology.

T

Venture Capital Investment

TF06.17

Strategic alliances are special variants of venture capital investments in which several venture capital firms pool an investment in a single entity.

F

Alliances

TF06.18

An organization that uses internal resources for entering a new market is deploying a development strategy.

T

Internal Ventures

TF06.19

Strategic posture is the way organizations behave within their market segments or industry.

T

Strategic Posture

Question title

Question stem

Choice

Reference

TF06.20

Cost leadership is an adaptive strategy for the expansion of an organization’s scope.

F

Positioning Strategies Marketwide or Focus

TF06.21

Differentiation is a strategy to make the product or service different (or appear so in the mind of the buyer) from competitors’ products or services.

T

A major disadvantage of the positioning strategy of cost leadership is that prices will probably be higher than that of the competition.

F

TF06.23

A major advantage of the differentiation positioning strategy is that it gives the organization greater control over pricing.

T

TF06.24

Marketwide positioning strategies can be based on differentiation or cost leadership.

T

Positioning Strategies Marketwide or Focus Positioning Strategies Marketwide or Focus Positioning Strategies Marketwide or Focus Positioning Strategies – Marketwide or Focus

TF06.25

Combination strategies are often used, especially in larger complex organizations, because no single strategy alone may be sufficient.

T

TF06.26

Competitive strategies are corporate-level decisions that specify the organization’s scope and focus.

F

TF06.27

Implementation strategies are the most specific class of strategies and are directed toward value-added service delivery and value-added support activities.

T

Understand the Decision Logic of Strategy Development

TF06.28

Diversification strategies are directed toward providing services of equal or better quality at a lower cost than competitors.

F

Diversification

TF06.29

Vertical integration strategies involve decisions to grow along the channel of distribution or stages in the continuum of care.

T

Vertical Integration

TF06.22

Understand Combination Strategies Understand the Decision Logic of Strategy Development

Question title

Question stem

Choice

Reference

TF06.30

Market development is a strategy aimed at developing new products and/or services and marketing them to established customers.

F

Market Development

TF06.31

Strategic decisions are relatively easy to understand because they provide a clear set of independent choices and only rarely represent a relational hierarchy.

F

Why Identifying Strategic Alternatives Is Important

TF06.32

Although there are many strategies available to health care organizations it is critically important that they focus on a single strategy and not pursue more than one strategy simultaneously.

F

The Process for Identifying Strategy Alternatives

TF06.33

Strategy formulation involves managing dilemmas, dealing with paradoxes, tolerating ambiguity and coping with contradictions.

T

Understand the Decision Logic of Strategy Development

TF06.34

Diversification is removing a new related or unrelated product or service which is outside the organization’s core business.

F

Diversification

TF06.35

Diversification is generally thought of as a risky strategy because it involves entering relatively unfamiliar markets or businesses.

T

Diversification

TF06.36

When a health care organization grows along its channel of distribution toward the patient it is called backward vertical integration.

F

Vertical Integration

TF06.37

The purpose of vertical integration is to increase the continuity of care while simultaneously controlling the channel of demand for health services.

T

Vertical Integration

TF06.38

An example of market development would be a chain of urgent care organizations opening a surgical rehab unit next door.

F

Market Development

TF06.39

An attempt to serve customers in a new geographical area with our existing services is an example of a penetration strategy.

F

Penetration

TF06.40

When a health care organization decides to “ride the decline” and allow the service to generate as much revenue as possible without additional investment it is an example of harvesting.

T

Harvesting

Multiple Choice Questions Question title

Question stem

Selections

MC06.01

Which of the following is NOT part of strategy formulation:

abcd-

MC06.02

Strategies selected by the organization should address external issues, draw on competitive advantages, and:

MC06.03

MC06.04

External analysis.

Development of strategic alternatives.

Evaluation of alternatives.

Strategic choice.

Choice

Reference

a

Understand the Decision Logic of Strategy Development

a- Keep the organization within the parameters of the mission and values. b- Move the organization toward the vision. c- Make progress toward achieving one or more of the organization’s strategic goals. d- All of the above.

d

The Process for Identifying Strategy Alternatives

Decisions concerning five categories of strategies – directional strategies, adaptive strategies, market entry/exit strategies, competitive strategies, and implementation strategies – should be addressed how:

a- In any order and without regard to specificity. b- Sequentially with each subsequent decision more specifically defining the activities of the organization. c- Simultaneously with each decision being made independently of other decisions. d- In the order of market entry/exit strategies, competitive strategies, directional strategies, and implementation strategies with each subsequent decision more specifically defining the activities of the organization.

b

Understand the Decision Logic of Strategy Development

Implementation strategies include objectives and plans for:

a - Directional and adaptive strategies. b- Competitive strategies. c- The organizational units to accomplish the strategies (managing strategic momentum). d- Entering markets and exploiting brand preferences among customers.

c

Understand the Decision Logic of Strategy Development

Question title

Question stem

Selections

MC06.05

Considering the ends/means chain, the ends refer to:

a- The nature of the competitive environment. b- The scope of operations and specifically how the organization will expand, reduce, or maintain operations. c- Service delivery strategies, value adding support strategies, and action plans. d- Mission, vision, values, and strategic goals.

d

Understand the Decision Logic of Strategy Development

MC06.06

Which of the following is NOT an expansion of scope strategy?

abcd-

b

Understand the Decision Logic of Strategy Development

MC06.07

In a focused factory strategy, an organization:

a- Performs only one function in order to likely perform it better. b- Concentrates on building competitive advantage by operating only one facility. c- Diversifies its products and services. d- None of the above.

a

Market Development

MC06.08

By pursuing maintenance of scope strategies, management believes which of the following:

a- Investments in maintaining infrastructure will provide a competitive advantage in a stable industry. b- Short-term gains in profitability and market share can be achieved by selectively eliminating product and service lines. c- The past strategy has been appropriate and few changes are required in the target markets or the organization’s products/services. d- Maintaining a stable organizational structure will amplify the organization’s ability to recognize emerging market opportunities.

c

Maintenance of Scope Strategies

Diversification.

Horizontal integration.

Vertical integration.

Market development.

Choice

Reference

Question title

Question stem

Selections

Choice

Reference

MC06.09

Which of the following is a disadvantage of merger as market entry strategy:

abcd-

New management team may be required.

Limits potential.

Initially must focus on a niche rather than entire market.

Takes a long time to merge cultures.

d

Strategic Posture

MC06.10

Which of the following are positioning strategies:

abcd-

Mergers and acquisitions.

Cost leadership and differentiation.

Defender, prospector, analyzer, and reactor.

Internal development, internal ventures, and reconfiguration of the value chain.

b

Positioning Strategies – Marketwide or Focus

MC06.11

Which of the following is NOT true regarding a retrenchment strategy:

abcd-

The market is no longer considered viable.

Costs are increasing as percent of revenue.

Profitability is declining.

Organization’s services have wide acceptance.

a

Retrenchment

MC06.12

Which of the following is NOT a market entry strategy:

abcd-

Purchase.

Cooperation with other organizations.

Make internal investments.

None of the above are market entry strategies.

d

MC06.13

Which of the following is NOT an underlying reason why organizations use a merger strategy:

abcd-

Enhance the financial position.

Block access to a broader market.

Improve efficiency and effectiveness.

Overcome concerns about survival.

b

Understand Market Entry/Exit Strategy Alternatives Mergers

MC06.14

Strategic alliances include which of the following configurations:

abcd-

Networks.

Consortiums.

Federations.

All the above.

d

Alliances

MC06.15

Which of the following is not a market exit strategy:

abcd-

Divestiture.

Liquidation.

Status Quo. Harvesting.

c

Market Exit Strategies

MC06.16

Which of the following is NOT true regarding defenders:

a- Defenders engage in limited search for opportunities. b- Defenders primary attention is on efficiency of existing operations. c- Defenders are not concerned about cost efficiency. d- Defenders seldom make adjustments in efficiency.

c

Defender Strategic Posture

Question title

Question stem

Selections

Choice

Reference

MC06.17

Which of the following are reasons why organizations adopt a reactor posture:

a- Top management has not clearly articulated the organization’s strategy. b- Management does not shape the organization’s structure and processes to fit the strategy. c- Management tends to maintain its current strategystructure relationship despite environmental changes. d- All the above.

d

Reactor Strategic Posture

MC06.18

Which of the following is an expansion of scope strategy:

abcd-

Retrenchment.

Status quo.

Vertical development.

None of the above.

c

Expansion of Scope Strategies

MC06.19

Which of the following is a reduction of scope strategy:

abcd-

Harvesting.

Market development.

Penetration.

Merger

a

Reduction of Scope Strategies

MC06.20

Which of the following is the underlying assumption when selecting the liquidation strategy:

a- The organization has a market but is less than formerly. b- Joining with another organization will improve operations and earnings. c- Internal resources are available for investment at an opportune time. d- The organization cannot be sold as a viable on-going operation.

d

Liquidation

Short Essay Questions Question title

Question stem

Rationale

Reference

SE06.01

What is the linkage between directional, adaptive, market entry/exit, competitive and implementation strategies.

Decisions concerning five categories of strategies – directional, adaptive, market entry/exit, competitive, and implementation – should generally be addressed sequentially with each decision more specifically defining the activities of the organization. The organization must first establish or reaffirm consensus on its mission, vision, values, and strategic goals (directional strategies). Next, the adaptive strategies must be agreed on and developed to accomplish the goals set forth by the directional strategies. Adaptive strategies are corporate-level decisions that specify the organization’s scope and focus on expanding, reducing, or maintaining operations. Then strategists should discuss market entry/exit strategies as they are the means to accomplish the adaptive strategies through purchase, cooperation, internal development or market exit. Competitive strategies are generally independent of the adaptive and market entry/exit strategies and are market or service area specific. Competitive strategies determine the organization’s strategic posture and position vis-à-vis other organizations within the market.

Finally, implementation strategies are directed toward value-adding service delivery strategies, value-adding support strategies, and unit action plans and must be developed to carry out competitive and market entry strategies.

Understand the Decision Logic of Strategy Development

SE06.02

What are the alternative strategies available to an organization included in the class of strategies known as adaptive strategies – expand, reduce, or maintain scope?

Expansion of scope strategies include diversification, vertical integration, market development, product development, and penetration. Reduction of scope strategies decrease the size and scope of operations. Reduction of scope strategies include divestiture, liquidation, harvesting, and retrenchment.

The two maintenance of scope strategies are enhancement and status quo.

Understand Adaptive Strategy Alternatives

Question title

SE06.03

Question stem

What are the differences between the market entry strategies of acquisition, merger, and internal development?

Rationale

Acquisitions are entry strategies for expansion through the purchase of an existing organization, a unit of an organization, or a product/service. Thus, acquisition strategies may be used to carry out both corporate and divisional strategies such as diversification, vertical integration, market development, or product development. There are many reasons to purchase another organization, such as to obtain real estate or other facilities, to acquire brands, trademarks, or technology, and even to access employees. However, the most common reason is to acquire customers. Mergers are similar to acquisitions.

In mergers, however, the two organizations combine through mutual agreement to form a single new organization, often with a new name. Mergers have been used most often in the health care segment to combine two similar organizations (horizontal integration) in an effort to gain greater efficiency in the delivery of health care services, reduction in duplication of services, improved geographic dispersion, increased service scope, restraint in pricing increases, and improved financial performance. Internal development uses the existing organizational structure, personnel, and capital to generate new products/services or distribution strategies. Internal development may be most appropriate for products or services that are closely related to existing products or services. Internal development is common for growing organizations, particularly when they can exploit existing resources, competencies, and capabilities (leveraging existing resources and other assets).

Reference

Understand Market Entry/Exit Strategy Alternatives

Question title

SE06.04

Question stem

Why is it unlikely that a single strategy will be sufficient for an organization?

Rationale

Several strategic alternatives may have to be adopted and used in combination. For instance, one service category may require market development whereas a different service category may require harvesting.

One division may be a defender positioned as a cost leader and another may be a prospector pursuing differentiation. Furthermore, several strategic alternatives may be seen as phases or sequences in a broader strategic shift.

There are several types of strategies, and within each type several strategic alternatives are available to health care organizations. In addition, there is a general sequential decision logic in the strategy formulation process.

First, directional strategies must be articulated through the organization’s mission, vision, values, and goals. Second, adaptive strategies are identified, evaluated, and selected. The adaptive strategies are central to strategy formulation and delineate how the organization will expand, reduce, or maintain the scope of operations. Expansion strategies include diversification, vertical integration, market development, product development, and penetration. Reduction strategies include divestiture, liquidation, harvesting, and retrenchment. Finally, maintenance of scope strategies includes enhancement and status quo. The third type of strategic decision concerns the market entry strategies. Expansion and maintenance of scope strategies call for a method to carry out the strategy in the marketplace. Therefore, some method for entering or gaining access to that market is required. Market entry strategies include acquisitions and mergers, internal development, internal ventures, reconfiguring the value chain, alliances and joint ventures, licensing, and venture capital investments. Any of the market entry strategies may be used to carry out an expansion or maintenance of scope adaptive strategy.

The fourth category of strategy includes the competitive strategies.

Competitive strategies specify the strategic posture of the organization and position the products and services vis-à-vis competitors. The strategic posture

Reference

Lessons for Health Care Strategic Thinkers

Question title

Question stem

Rationale

Reference

should be well thought through by strategic leadership. Strategic posture specifies the organization/market relationship and provides decision and culture guidelines for management. Strategic postures that may be adopted by an organization include defender, analyzer, prospector, or reactor (although the latter usually indicates the lack of a strategy). In addition, there are the positioning strategies (often called generic strategies). These include cost leadership and differentiation, both of which can be applied as marketwide strategies or focus strategies (a market segment strategy). Each of the generic strategies places different demands on the organization and requires unique resources, competencies, and capabilities.

SE06.05

Why are both the analytical and emergent approaches important to the development of strategic alternatives?

Logical maps of the strategic decision alternatives are needed to start the strategic planning process (analytical approach). As the strategy unfolds, learning is needed to guide alternative decision making (emergent approach).

This is why both the map and the compass are important aspects of strategic thinking – the map is needed to get the journey started and the compass is needed when the map no longer accurately describes the terrain.

Why Identifying Strategic Alternatives Is Important

SE06.06

Since related and unrelated diversification are considered risky strategies, why do health care organizations engage in such strategies?

Diversification strategies, in many cases, are selected because markets have Expansion of Scope been identified outside the organization’s core business that offer potential for Strategies substantial growth. Often it is thought that if the organization can successfully engage in operations outside its core businesses new markets and new opportunities will emerge.

SE06.07

Vertical integration has been a particularly popular strategy in health care. Why has it been popular in this industry?

A vertically integrated health care system offers a range of patient care and Vertical Integration support services operated in a functionally unified manner. The expansion of services may be arranged around an acute care hospital and include pre-acute, acute, and post-acute services or be organized around specialized services related solely to long-term care, mental health care, or some other specialized area. The purpose of vertical integration is to increase the comprehensiveness and continuity (or continuum) of care, while simultaneously controlling the channel of demand for health care services. One of the more familiar examples of vertical integration in health care has been the strategy of hospitals to acquire physician practices in a move to more effectively control the “patient flow.”

Question title

Question stem

Rationale

Reference

SE06.08

What is venture capital investment and what is accomplished with this strategy?

Venture capital investment is a purchase strategy that provides capital to an organization with a developing technology, product, or market and offers an opportunity to participate (have a share) in its growth (profitability). Typically, venture capital investments are used to become involved in the growth and development of a small organization that has the potential to develop a new or innovative technology. In addition, venture capital investments are a way for new health care organizations to grow.

Venture Capital Investment

SE06.09

How are alliances in health care sometimes thought of in a way that is different from strategic alliances based on an expansion/cooperation strategy?

Strategic alliances are loosely coupled agreements between two or more organizations that are designed to achieve some long-term strategic purpose that is not possible by a single organization operating alone. In health care the term “alliance” is sometimes used to refer to the voluntary organizations that hospitals join primarily to achieve economies of scale in purchasing. For some, this type of alliance provides the benefit of allowing smaller organizations being part of a large system, yet allows them to exist as free-standing, self-governing institutions. An example of a major hospital alliances is Voluntary Hospitals of America (VHA). Note that purchasing alliances are a different type from those based on an expansion/cooperation strategy.

Alliances

SE06.10

What is the relationship between competitive strategies and strategic posturing decisions?

Competitive strategies are largely independent of the adaptive and market entry/exit strategies as they concern the basis for competing in a market or service area. Managers must decide the strategic posture of the organization and how the products and services will be positioned vis-à-vis those of competitors. Therefore, the results of competitor analysis and internal analysis play an important role in the selection of an organization’s competitive strategies. Strategic posture concerns the organization’s fundamental behavior within the market – defending market position, prospecting for new products and markets, or balancing market defense with careful entry into selected new product areas and markets. In addition, an organization must consciously position its products and services within a market through one of the market wide or market segment positioning strategies (generic strategies).

Understand Competitive Strategy Alternatives and Strategic Posture

Questions Chapter 7 Evaluation of Alternatives and Strategic Choice

True/False Questions Question title

Question stem

Choice

Topic

TF07.01

A canon of strategic management is the need to change strategies over time.

T

A Process for the Evaluation of the Alternatives

TF07.01

SWOT is a systematic investigation that considers the organization’s internal strengths and weaknesses and external issues and displays them in a matrix.

T

SWOT – Strengths, Weaknesses, Opportunities, and Threats

TF07.03

Strategies developed by matching the long-term competitive advantages with issues from the three external environments – general, health care, and service area – represents the primary adaptive strategies of an organization.

T

Evaluate and Select Adaptive Strategies

TF07.04

Short-term competitive advantages are not easily duplicated by competitors, especially in the service areas.

F

Link Strategy with Situational Analysis

TF07.05

Product life cycle (PLC) analysis can be useful in selecting strategic alternatives based on the principle that all products and services go through several distinct stages.

T

Product Life Cycle Analysis

TF07.06

During the growth stage of the product life cycle, prices increase in order to solidify the market position of specific brands.

F

Product Life Cycle Analysis

TF07.07

The decomposition and critical review of market characteristics in conjunction with the PLC can serve as a guideline for strategy development.

T

Product Life Cycle Analysis

TF07.08

Boston Consulting Group (BCG) portfolio analysis graphically portrays differences among the various products/services (stars, cash cows, problem children, and dogs) in terms of relative market share and market growth rate.

T

TF07.09

In Boston Consulting Group (BCG) portfolio analysis, problem children exhibit low market growth (probably in maturity and decline stages of the PLC) but the organization has a high relative market share.

F

Portfolio Analysis

Portfolio Analysis

Question title

Question stem

Choice

Topic

TF07.10

The evaluation of products and services in portfolio analysis is a static process best suited for short- and medium-term planning of service and product life cycles.

F

Portfolio Analysis, Product Life Cycle Analysis

TF07.11

Extended portfolio matrix analysis includes a sustainability dimension to the market share and market growth dimensions of the Boston Consulting Group (BCG) portfolio analysis.

F

Extended Portfolio Matrix Analysis

TF07.12

In extended portfolio matrix analysis, problem children are characterized by high growth and a high market share but low profitability.

F

Extended Portfolio Matrix Analysis

TF07.13

Strategic position and action evaluation (SPACE) analysis suggests the appropriateness of strategic alternatives based on factors relating to four dimensions: service category strength, environmental stability, the organization’s relative competitive advantage, and the organization’s financial strength.

T

Strategic Position and Action Evaluation

TF07.14

Program evaluation is especially useful in organizations where market share, service category strength, and competitive advantage are not particularly important or not relevant.

T

Program Evaluation

TF07.15

The adaptive strategy of a not-for-profit organization is independent of and not related to the programs maintained and emphasized by the organization.

F

Program Evaluation

TF07.16

Needs/capacity assessment and program priority setting are two program evaluation methods.

T

Program Priority Setting

Question title

Question stem

Choice

Topic

TF07.17

Community need is a function of (1) clear community requirements (environmental, sanitation, disease control, and so on) and personal health care (primary care) gaps, (2) the degree to which other institutions (private and public) fill the identified health care gaps, and (3) public/community health objectives.

T

Program Evaluation

TF07.18

Organizational capacity is the organization’s ability to initiate, maintain, and enhance its set of adaptive strategy programs.

T

Program Evaluation

TF07.19

Program priority setting is significant because community needs (both the need itself and the severity of the need) are constantly changing and organizational resources, in terms of funding and organization capacity, are almost always limited.

T

Program Priority Setting

TF07.20

Q-sort is a formal method of differentiating the importance of programs through a ranking procedure that forces choices along a continuum in situations where the difference between the choices may be quite small.

T

Program Priority Setting

TF07.21

The purpose of market entry strategies is to break into or capture more of a market.

T

Evaluate and Select Market Entry/Exit Strategies

TF07.22

Of the adaptive strategies (expansion, reduction, and maintenance of scope), only expansion of scope requires explicit strategic posture and positioning strategies.

F

Managing Strategic Momentum – Adaptive Strategies

TF07.23

Positioning strategies must be selected based on resources, competencies, and capabilities (competitive relevant strengths), as well as environmental risks.

T

Positioning Strategies

TF07.24

Following the completion of strategy formulation decision, program evaluation is used to measure the logic and fit of the strategies.

F

Program Evaluation

Question title

Question stem

Choice

Topic

TF07.25

Managing strategic momentum associated with adaptive, market entry, and competitive strategies is simply a matter of keeping the organization on track.

F

Strategic Momentum – Adaptive, Market Entry/Exit and Competitive Strategies

TF07.26

Interpretations of “facts” mean different things to different people because they are colored by beliefs, values, and biases.

T

Why Evaluation of Alternatives and Strategic Choice Are Important

TF07.27

Analytical strategic thinking maps are primarily used to obtain answers because by following them the correct strategic choice is made correctly.

F

A Process for the Evaluation of the Alternatives

TF07.28

Product life cycle analysis is useful in developing strategy alternatives by carefully using the interaction of opportunities and threats in the external environment.

F

Product Life Cycle Analysis

TF07.29

In the maturing stage of the product life cycle rapid growth accelerates and organizations begin spinning off unprofitable units.

F

Product Life Cycle Analysis

TF07.30

The most important function of a cash cow in the organizational portfolio is to provide the funds needed to invest in the rising stars in the portfolio.

T

Portfolio Analysis

TF07.31

One of the reasons not-for-profit organizations use program evaluation is because it is relatively easy to consider the relationship between revenue and market share in the notfor-profit setting.

F

Program Evaluation

TF07.32

When using needs/capacity analysis the only major consideration for the value of a program is the needs of the community.

F

Needs/Capacity Assessment

TF07.33

In program priority setting the graphics are useful to differentiate between those programs that are important and those that are not important.

F

Program Priority Setting

TF07.34

Evaluation and understanding of the external environment are necessary to successfully implement a market entry strategy.

T

External Conditions

TF07.35

One of the important things about market entry strategies is that regardless of the strategy selected they all require the same resources, competencies, and capabilities.

F

Resources, Competencies, and Capabilities

Question title

Question stem

Choice

Topic

TF07.36

Strategic posture concerns the relationship between the organization and the market and describes the pattern of strategic behavior.

T

Strategic Posture

TF07.37

Prospectors remain essentially in their own competitive space and resist efforts to move into and out of new services and markets.

F

Internal Resources, Competencies, Capabilities

TF07.38

SWOT analysis has no provision for prioritizing or evaluating the internal strengths or weaknesses as being competitive relevant – competitive advantages or competitive disadvantages.

T

SWOT – Strengths, Weaknesses, Opportunities, and Threats

TF07.39

The development of an effective strategy requires that care and attention has been given to what strategic leaders want to do – expand, reduce, or maintain the scope of the organizations operations.

T

Evaluate and Select Adaptive Strategies

TF07.40

In portfolio analysis, black holes have high market growth, a low market share, and low profitability.

F

Extended Portfolio Matrix Analysis

Multiple Choice Questions Question title

Question stem

Selections

Choice

Topic

MC07.01

Which of the following weaknesses of SWOT analysis and the TOWS matrix give rise to the strategic thinking map for matching external issues and internal competitive advantages and disadvantages:

a- The designation of external issues as opportunities or threats is often arbitrary. b- Opportunities are often presented as strategic alternatives rather than independent external issues affecting the organization. c- Many external issues may be both opportunities and threats. d- All of the above.

d

SWOT – Strengths, Weaknesses, Opportunities, and Threats

MC07.02

Product life cycle (PLC) analysis can be useful in:

a - Developing an external/internal strategy matrix. b- Identifying long-term competitive disadvantages. c- Selecting strategic alternatives based on the principle that all products and services go through several distinct stages. d- Identifying threats posed by competitors supplying or producing identical products.

c

Product Life Cycle Analysis

MC07.03

Which of the following questions would NOT be helpful in monitoring signals that the basic strategy for the organization needs to be changed:

a- What is the relative market share? b- Has the strategy been tested with appropriate strategic thinking tools? c- Have the major stakeholders, inside and outside the organization that will be most influential in ensuring the success of the strategy been identified and evaluated? d- If the adaptive strategy is to fill a currently unfilled niche in the market, has the organization investigated whether the niche will remain open long enough to return the capital investment?

a

Link Strategy with Situational Analysis

Question title

Question stem

Selections

Choice

Topic

MC07.04

Within the context of BCG portfolio analysis, how are cash cows identified:

a- Products and services that appear in the high market growth and high market share quadrant. b- Products and services that appear in the low market growth and high market share quadrant. c- Products and services that appear in the low market growth and low market share quadrant. d- Products and services that appear in the high market growth and low market share quadrant.

b

MC07.05

What is the characteristic of health care organizations that suggests using extended portfolio matrix analysis rather than BCG portfolio analysis:

a- Health care organizations operate in a highly regulated environment. b- Health care organizations employ the same strategies. c- Health care organizations have larger pools of stakeholders than other organizations. d- An underlying assumption of BCG portfolio analysis is that high market share means high profitability; however, for health care organizations it is quite possible to have a high market share and no profit.

d

Extended Portfolio Matrix Analysis

MC07.06

Strategic position and action evaluation (SPACE) analysis evaluates strategic alternatives based on factors relating to four dimensions:

a- Aggressive, competitive, conservative, and defensive. b- Numerical, qualitative, speculative, and geographical. c- Service category strength, environmental stability, relative competitive advantage, and financial strength. d- Elements of the external environment, internal strengths, competitive opportunities, and ability of the organization to attract venture capital.

c

Strategic Position and Action Evaluation

Portfolio Analysis

Question title

Question stem

Selections

Choice

Topic

MC07.07

Program evaluation is appropriate for organizations with which of the following sets of characteristics:

a- Organizations where market share, service category strength, and competitive advantage are not particularly important or not relevant. b- Organizations exhibiting low market share, high growth, and low-profitability products and services. c- Organizations that are highly regulated and well capitalized. d- Organizations with the dominant market share, low or stagnant growth, and low profitability.

a

Program Evaluation

MC07.08

The Q-sort method is one of the methodologies used in what process:

abcd-

d

Program Priority Setting

MC07.09

The appropriateness of a specific market entry strategy is dependent upon which of the following:

a- The strategy having been tested with appropriate strategic thinking tools. b- The major stakeholders, inside and outside the organization that will be most influential in ensuring the success of the strategy having been identified and evaluated. c- The external conditions, the pertinent internal strengths and weaknesses based on the organization’s resources, competencies, and capabilities, and the goals of the organization. Each of these three areas should be scrupulously evaluated. d- The strategy fills an unfilled niche in the market and the organization investigated whether the niche will remain open long enough to return the capital investment.

c

Evaluate and Select Market Entry/Exit Strategies

Measuring internal strengths and weaknesses.

Measuring profitability.

Measuring market and environmental stability.

Program priority setting.

Question title

Question stem

Selections

Choice

Topic

MC07.10

What are the generic competitive strategies:

a- Acquisition, licensing, venture capital investment, merger, and alliance. b- Internal development, internal venture, and reconfiguring the value chain. c- Cost leadership, differentiation, and focus. d- Re-engineering, restructuring, and quality improvement.

c

Evaluate and Select Competitive Strategies

MC07.11

Which of the following is NOT an important question when attempting to link strategic alternatives and situational analysis:

a- Does the proposed alternative fit with the organizations mission? b- Does the proposed alternative move the organization toward the accomplishment of its vision? c- Does the proposed alternative address an external issue? d- None of the above.

d

Link Strategy with Situational Analysis

MC07.12

Which of the following is NOT a method for evaluating adaptive strategies:

a- Strengths, Weaknesses, Opportunity, and Threat analysis. b- Value chain analysis. c- BCG portfolio analysis. d- SPACE.

b

Evaluate and Select Adaptive Strategies

MC07.13

Which of the following are stages in product life cycle analysis:

abcd-

Decline.

Maturity.

Growth.

All the above.

c

Product Life Cycle Analysis

MC07.14

Which of the following is NOT a quadrant in the BCG Portfolio:

abcd-

Cash cow.

Problem child.

Dog. Black hole.

d

Portfolio Analysis

MC07.15

Which of the following methods provides guidance to selecting an aggressive profile, a competitive profile, a conservative profile and a defensive profile:

abcd-

Product life cycle analysis.

Strategic position and Action Evaluation technique.

Extended portfolio analysis.

Needs/Capacity assessment.

b

Strategic Position and Action Evaluation

Question title

Question stem

Selections

Choice

Topic

MC07.16

Which of the following are important components of organizational capacity:

a- The programs fit with regard to the mission and vision of the organization. b- Funds necessary to support the program. c- All relevant resources and skills. d- All the above.

d

Needs/Capacity Assessment

MC07.17

Which of the following is NOT a factor in determining community need:

abcd-

Number of regulatory agencies.

Public and private health care gaps.

Community health objectives.

Community resources.

a

Needs/Capacity Assessment

MC07.18

Which of the following would favor a defender posture:

abcd-

Relatively long product life cycle.

Turbulent environment.

Low intensity of competitive rivalry.

Numerous market and service opportunities.

a

Strategic Posture

MC07.19

Which of the following is NOT a generic strategy:

abcd-

Cost leadership.

Focus.

Vertical integration.

Differentiation.

c

Synthesize and Identify Implications of Strategy Choices – Strategy Mapping

MC07.20

In SPACE analysis, which of the following would not be considered a competitive strategy:

abcd-

Penetration.

Harvesting.

Product development.

Enhancement.

b

Strategic Position and Action Evaluation

Short Essay Questions Question title

Question stem

Rationale

Topic

SE07.01

Identify the principal weakness of SWOT (strengths, weaknesses, opportunities and threats) analysis and explain how the TOWS (threats, opportunities, weaknesses, strengths) matrix overcomes the weakness of SWOT.

SWOT analysis involves listing the organization’s strengths and weaknesses as well as perceived external opportunities and threats. SWOT, however, does not provide much insight into what strategy decisions might result from the list of strengths and weaknesses and opportunities and threats. As Weilhrich explains, the TOWS (threats, opportunities, weaknesses, strengths) matrix was developed to provide a better way to develop and evaluate specific adaptive strategic alternatives.

In the TOWS approach, internal strengths and weaknesses are matched against external environmental opportunities and threats to foster strategic thinking concerning adaptive strategy alternatives. However, both SWOT analysis and the TOWS matrix approach require strategic managers to classify external issues as opportunities or threats.

SWOT Analysis

SE07.02

Describe the four strategic postures associated with strategic position and action evaluation (SPACE).

Aggressive posture – This posture is typical in an attractive service category with little environmental turbulence. The organization enjoys a definite competitive advantage, which it can protect with financial strength. The critical factor is the entry of new competitors.

Competitive posture – This posture is typical in an attractive service category. The organization enjoys a competitive advantage in a relatively unstable environment. The critical factor is financial strength.

Conservative posture – This posture is typical in a stable market with low growth. Here, the organization focuses on financial stability. The critical factor is product competitiveness. Defensive posture – This posture is typical of an unattractive service category in which the organization lacks a competitive product and financial strength. The critical factor is competitiveness.

Strategic Position and Action Evaluation

Question title

Question stem

Rationale

Topic

SE07.03

Describe the Q-sort procedure.

In the Q-sort procedure, each member of the management team is asked to sort the organization’s programs into categories based on their perceived importance to the organization’s mission and vision. To facilitate the task, the programs are printed on small cards that may be arranged (sorted) on a table.

To force ranking of programs, managers are asked to arrange the programs in piles from most important to least important.

The number of categories should be limited to nine and the number of programs to be assigned to each category is determined in such a manner as to ensure a normal distribution – 5 percent of the programs are placed in the first pile or group, 7.5 percent in the second group, 12.5 percent in the third group, and so on. In this case, there are two programs in the first group, four programs in the second group, six in the third group, and so on. Each program is assigned a score ranging from 1 to 9, where 1 is for the lowest and 9 is for the highest ranked program as a function of the “pile” into which it has been sorted. The score indicates an individual’s perception of that program’s importance to the mission and vision of the organization. A program profile is developed by averaging individual members’ scores for each program.

Program Priority Setting

SE07.04

Any strategic choice made by leaders needs to be consistent with other components of the strategic management process. What factors need to be linked when formulating strategy?

An important test for strategic choices is that the strategies selected by an organization address external issues, draw on competitive advantages or fix competitive disadvantages, keep the organization within the parameters of the mission and values, move the organization toward the vision, and make progress toward achieving one or more of its strategic goals. Ensuring these important linkages is a significant part of the strategic thinking process and helps to assure consistency of analysis and action.

Link Strategy with Situational Analysis

Question title

SE07.05

Question stem

Summarize the evaluation of adaptive strategy alternatives.

Rationale

There are several methods for deciding which of the adaptive strategic alternatives is most appropriate for an organization including the external/internal strategy matrix, product life cycle (PLC) analysis, portfolio analyses (BCG and extended), strategic position and action evaluation (SPACE) analysis, and program evaluation. Using these methods, managers can classify internal and external factors to gain perspective on which adaptive strategic alternative or combination of alternatives is most appropriate. Once the most appropriate adaptive strategy (or combination of adaptive strategies) has been determined, a market entry strategy must be selected.

Expansion and maintenance of scope strategies are initiated through one or more of the market entry strategies. Entry strategies include acquisition, licensing, venture capital investment, merger, alliance, joint venture, internal development, internal venture, and reconfiguration of the value chain. The organization’s internal resources, competencies, and capabilities (competitively relevant strengths), the external conditions, and the organization’s objectives will determine which of these strategies is most appropriate. After the market entry strategy has been selected, competitive strategies, which include strategic posture and positioning strategies, should be evaluated and selected. Strategic postures include defender, prospector, and analyzer strategies. Positioning strategies include market-wide or focus strategies of cost leadership or differentiation. The external conditions and internal resources, capabilities, and competencies influence strategic posture and positioning strategies. Therefore, the most appropriate strategic posture and positioning strategy may be selected through an evaluation of the internal skills and resources of the organization and the external conditions.

Topic

Evaluate and Select Adaptive Strategies

Question title

Question stem

Rationale

Topic

SE07.06

What is an External/Internal Strategy Matrix and how is it used in arriving at strategic choices?

An external/internal strategy matrix presents an illustration of external issues with internal competitive advantages and disadvantages. The resulting strategic thinking map is useful for matching external issues with internal competitive advantages and disadvantages. This approach, utilizing the complete results of a comprehensive external and internal analysis, better fosters strategic thinking concerning adaptive strategy alternatives than the customary SWOT analysis. In the external/internal strategy matrix, adaptive strategic alternatives are suggested by the interactions of the seven sets of variables (long- and short-term competitive advantages, long- and short-term competitive disadvantages, and general, health care, and competitive issues).

The primary focus is the adaptive strategic alternatives, but this analysis could also be applied to the development of any type of strategy. In practice, particularly in open discussion sessions, some of the alternatives developed through the strategy matrix may be adaptive, market entry/exit, competitive, or value-adding service delivery and support strategies.

External/Internal Strategy Matrix

SE07.07

How can the product life cycle analysis be helpful to the decision maker when thinking about what might be the best market entry/exit strategy?

Quite often health care organizations develop the services they already offer.

However, this development makes sense only in relation to the services stage in the product life cycle. This development is most desirable if the service is in the introductory stage. If the service is in a mature stage it is usually better to develop a joint-venture with an experienced partner. Introducing new service variations during late maturity or decline carries greater risk unless the variation in the service is sufficiently different to result in the creation of an entirely new service life cycle.

Product Life Cycle Analysis

SE07.08

Why is it important for notfor-profit and public-sector organizations to set program priorities and reevaluate these priorities on a regular basis?

Program priority setting is important because community needs (both the need itself and the severity of the need) are constantly changing and organizational resources, in terms of funding and organization capacity, are almost always limited. Invariably, more programs have a higher community need than resources are available. Therefore, the most important programs may be expanded or maintained. The organization must have an understanding of which programs are the most important, which should be provided incremental funding, and which should be the first to be scaled back if funding is reduced or eliminated.

Program Priority Setting

Question title

SE07.09

Question stem

Under what types of external conditions are the various strategic postures likely to be most successful?

Rationale

External conditions are very important in the selection of strategic posture.

Defender strategies tend to be successful when the external environment is relatively stable (change is slow and reasonably predictable). In such situations, competitive rivalry is low and the barriers to entering the market are high.

Because defender organizations focus on a narrow product line, the strategy works best when relatively long product life cycles are expected. Defender strategies are most effective in the mature stage of the product life cycle. The risks associated with the defender posture are that the PLC will be dramatically shortened by external change (new technology, for instance) or that a competitor can somehow unexpectedly take away market share.

Prospectors operate well in rapidly changing, turbulent environments. In these situations, change is coming so rapidly that there are few rewards for efficiency.

In addition, prospectors are successful by utilizing a technology across several markets (prospecting in new high-growth markets). Products are usually in the introductory and early growth stages of the PLC and the cycle tends to be relatively short. As a result, entry barriers may be low and the intensity of rivalry typically is low (there is room for everybody). As products or services mature, prospector organizations move on to new products and services, typically in introductory stages of the PLC. Analyzers operate well in conditions where there is moderate external change with some product categories that are quite stable and some that are changing.

Competitive rivalry tends to be relatively high and these organizations cannot afford to ignore new product developments, markets, or product categories.

PLCs for their stable products are moderately long but there are periodic innovations and disruptions. Analyzers attempt to maintain balance with both mature- and growth-stage products or services and markets.

Reactors tend to exit in protected or monopolistic markets or are legislatively restricted from moving into new markets or offering new products. Like defenders, reactors often focus on efficiency rather than external changes. In addition, for products and markets in the decline stage of the product life cycle, a reactor strategy may be part of a harvesting strategy or prelude to divestiture or liquidation.

Topic

Strategic Posture

Question title

SE07.10

Question stem

How are market entry/exit strategies related to the adaptive strategies of expansion of scope and maintenance of scope through enhancement?

Rationale

Once expansion of scope or maintenance of scope through enhancement adaptive strategies are selected market entry strategies must be used to break into or capture more of the market. All of the expansion adaptive strategies require some activity to reach more patients with services. Similarly, enhancement strategies indicate that the organization must improve what it is already doing, which requires market entry analysis. Reduction of scope strategies are methods to either rapidly or slowly, partially or completely leave markets and require little further analysis beyond identifying buyers or internal cost cutting issues. The specific market entry/exit strategy considered to be appropriate depends on (1) the external conditions; (2) the pertinent internal strengths and weaknesses based on the organization’s resources, competencies, and capabilities; and (3) the goals of the organization.

Topic

Evaluate and Select Market Entry/Exit Strategies

Questions Chapter 8 Value-Adding Service Delivery Strategies

True/False Questions Question title

Question stem

Choice

Reference

TF08.01

An organization’s culture, structure, and strategic resources are value-adding support activities.

T

Strategies Based on the Value Chain

TF08.02

Service delivery strategies and support strategies are not separate but, rather, interact and complement each other.

T

Strategies Based on the Value Chain

TF08.03

Specifying point-of-service configurations and processes is NOT one of the activities specified by service delivery strategies.

F

Decision Logic for the Value-Adding Service Delivery Strategies

TF08.04

Value-adding strategies must accomplish the directional, adaptive, market entry/exit, and competitive strategies and the action plans must accomplish the value-adding strategies.

T

Identify the Service Delivery Requirements of the Strategy and Service Delivery Strategies Potential

TF08.05

An organization’s action plans link its individual organizational units to the overall strategy of the organization.

T

Decision Logic for the Value-Adding Service Delivery Strategies

Question title

Question stem

Choice

Reference

TF08.06

The human resources unit of a health care organization is generally considered to be engaged in value-adding service activities.

F

Decision Logic for the Value-Adding Service Delivery Strategies

TF08.07

Based on the results of the comparison of the current situation and what strategic managers want the organization to be, value chain components may need to be maintained or changed to carry out the strategy.

T

Strategies Based on the Value Chain

TF08.08

Marketing research is NOT a pre-service activity.

F

Pre-Service Delivery Strategies

TF08.09

Pre-service entails the planning and activities that enable the organization to determine its customers and the services that will be offered to them as they enter the system.

T

Pre-Service Delivery Strategies

TF08.10

Market research provides information only about potential customers.

F

Market and Marketing Research

TF08.11

Pre-service strategies attempt to identify the specific target market and define the services to be offered.

T

Market and Marketing Research

TF08.12

Health care marketing is simplified by the need to focus on a single class of customer – health care consumers (patients).

F

Identifying the Health Care Customer – Target Market

TF08.13

Segmentation is the process of identifying recognizable groups that make up the market and then selecting a group as the target market.

T

Identifying the Health Care Customer – Target Market

TF08.14

Physicians are a minor target for marketing efforts because they recommend other health care providers for their patients.

F

Physicians, Patients, and Third-Party Payers as Customers

Question title

Question stem

Choice

Reference

TF08.15

A brand represents three things: what an organization offers to the market, what an organization does, and what an organization is.

T

To Brand or Not to Brand Services

TF08.16

Insignificant branding activity in health care has focused on the abstract concepts of promoting and creating identities for health care organizations.

F

To Brand or Not to Brand Services

TF08.17

Pre-service pricing decisions concentrate on the services offered, the ability of the consumer to pay, and the cost to deliver the service.

T

Pre-Service Pricing Decisions

TF08.18

An attractive location for a health care provider offers convenient proximity to patients’ homes and work.

T

Pre-Service Distribution/Logistics

TF08.19

Promotion includes: advertising; public relations events (baby birthday parties, health fairs, cancer survivor celebrations, and so on); personal selling; sales promotion (contests, participation in trade shows, and so on); and customer information gathering (surveys, data mining, and so on).

T

Pre-Service Promotion

TF08.20

Personal selling has been used more extensively in health care as various organizations compete to be the provider of choice in managed care plans.

T

Pre-Service Promotion

TF08.21

When the requirements of the strategy match the current pre-service strengths, and needs of the customers, then strategic managers should focus on maintaining those strengths, giving particular attention to those areas that have created competitive advantage.

T

Maintain Pre-Service Activities

TF08.22

Point-of-service is a transformational process that incorporates an organization’s resources – human and non-human, competencies, and capabilities and its assets – into value-added service delivery.

T

Decide to Maintain or Change Point-ofService

TF08.23

Central to point-of-service delivery are issues such as quality, efficiency/speed, innovation, and flexibility (mass customization) of the service.

T

Decide to Maintain or Change Point-ofService

TF08.24

After-service includes follow-up (both clinical and marketing), billing, and follow-on activities.

T

After-Service Strategies

Question title

Question stem

Choice

Reference

TF08.25

The value chain consists of value-adding service delivery strategies that are primarily operations (clinical) and marketing oriented as well as value-adding support strategies that include organizational culture, organizational structure, and strategic resources.

T

Strategic Momentum – Service Delivery Strategies

TF08.26

Once leaders announce a strategy it is likely to be successful even if it is not in line with resources allocation decisions made at various levels of the organization.

F

Implementation Strategies

TF08.27

Value-adding support strategies are instrumental in creating and shaping the work environment and behavioral norms necessary for getting the work done in health care organizations.

T

Decision Logic for the Value-Adding Service Delivery Strategies

TF08.28

Strategic managers are not responsible for ensuring that the pre-service, point-of-service and after-service strategies are compatible – that is the work of functional level managers.

F

TF08.29

Because the customer is difficult to define and target in health care, market research is of little value in formulating value-adding service delivery strategies.

F

Identify the Service Delivery Requirements of the Strategy and Service Delivery Strategies Potential Market and Marketing Research

TF08.30

In health care, patients often do not participate as customers in the truest sense because they abdicate the purchasing decision to their doctors.

T

Identifying the Health Care Customer – Target Market

TF08.31

Segmentation is the process of identifying various groups within a market and determining the distinct characteristics of the various groups to select one or more as the target market.

T

Identifying the Health Care Customer – Target Market

TF08.32

Third-party payers can do little to influence the efficiency with which patients are treated because they have limited financial power.

F

Identifying the Health Care Customer –Target Market

TF08.33

A brand is a tangible asset that provides explicit guarantees of quality and consistency.

F

To Brand or Not to Brand Services

TF08.34

Health care providers have a great deal of difficulty determining their costs and then deciding on a price given the variability of the human condition.

T

Pre-Service Pricing Decisions

Question title

Question stem

Choice

Reference

TF08.35

Physical location of health care organizations is becoming less of a competitive advantage because of advancing technologies such as telemedicine, satellite clinics, and similar measures.

T

Pre-Service Distribution/Logistics

TF08.36

Personal selling has had little effect in the health care industry because individuals consider marketing of professional services to be less dignified and unprofessional.

F

Pre-Service Promotion

TF08.37

Specialization and cost pressures have taken health care from being totally customized for the individual patient in his or her home to an attempt to treat patients more similarly so as to develop economies of scale.

T

Point-of-Service Delivery Strategies

TF08.38

Clinical pathways are developed in order to customize the best known way to treat a given condition or patient.

T

Mass Customization

TF08.39

Patient Satisfaction Strategy Maps are useful for measuring patient satisfaction in large hospitals but cannot be used to accurately measure satisfaction in primary care clinics.

F

Follow-Up Activities

Tf08.40

In health care quality is extremely important – if high quality is not perceived the remainder of service delivery factors are less important.

T

Practical Lessons for Health Care Strategic Thinkers

Multiple Choice Questions Question title

Question stem

Selections

Choice

Reference

MC08.01

What are the value-adding service delivery strategies:

a- Organizational structure, organizational culture, and strategic resources. b- Pre-service, point-of-service, and after-service. c- Cost leadership, differentiation, and focus. d- Merger, acquisition, and internal investment.

b

Decision Logic for the Value-Adding Service Delivery Strategies

MC08.02

Planning implementation includes which of the following:

abcd-

d

Implementation Strategies

MC08.03

The process of developing value-adding strategies involves which of these comparisons:

a- Compare strategy requirements with internal analysis. b- Comparison of directional strategies with competitive strategies. c- Comparison of organizational culture with organizational structure. d- Comparison of adaptive strategies with market entry/exit strategies.

a

Process for Developing Service Delivery Strategies

MC08.04

Which of the following statements is TRUE of change in value-adding strategies:

a- Change in value-adding strategies is the easiest element of strategy implementation. b- The pace of change in an organization cannot be influenced by management and leadership. c- Successful change in the value-adding strategies requires leaders to establish a sense of urgency for change and to clearly articulate the connections between the new ways of doing things and success of the selected strategies. d- Change in value-adding strategies is independent of value-adding support strategies.

c

Process for Developing Service Delivery Strategies

MC08.05

Satisfied patients may become loyal customers and in doing so they do all but which one of the following:

a- Return to and recommend the clinic to others. b- Switch from one provider to another that are associated with high quality services. c- Consume more services. d- None of the above.

b

Follow-up Activities

Setting organizational unit objectives.

Developing plans.

Assigning responsibilities.

All the above.

Question title

Question stem

Selections

Choice

Reference

MC08.06

Which of the following is central to developing preservice strategies:

abcd-

Leadership.

Finance.

Marketing.

Capital structure.

c

Pre-Service Delivery Strategies

MC08.07

Which of the following terms is defined as “the process of identifying recognizable groups that make up the market and then selecting a group as the target market:

abcd-

Market segregation.

Market aggregation.

Market research.

Segmentation.

d

Identifying the Health Care Customer – Target Market

MC08.08

Which of the f o l l o w i n g is NOT what a brand represents:

abcd-

How an organization is structured.

What an organization offers to the market.

What an organization does.

What an organization is.

a

To Brand or Not to Brand Services

MC08.09

What is the basis for determining price by health care organizations:

a- The best formulas for determining price involve setting price on the highest possible margin above cost. b- The novelty of the product or service is the best basis for establishing price. c- A health care organization determines a price based on the services offered, the ability of the consumer to pay, and the cost to deliver the service. d- Cost leadership that generates low prices relative to competitors is always the best basis for pricing in health care.

c

Pre-Service Pricing Decisions

Question title

Question stem

Selections

Choice

Reference

MC08.10

How does clinical process improvement (CPI) differ from continuous quality improvement (CQI):

a- CPI and CQI do not differ, they are identical concepts. b- CQI focuses on improving existing clinical processes for performance improvement while CPI is a contextual and critical appraisal of current clinical processes to identify opportunities for more effectively providing care. c- CQI focuses on operational efficiency and achieving the lowest possible cost while CPI does not consider cost. d- CPI focuses on the innovation of ideas, tools, and systems; CQI is a based solely on statistical analysis.

b

Clinical Process Innovation

MC08.11

Which of the following are after-service activities:

abcd-

d

Maintain After-Service Activities

MC08.12

Which of the following things must happen to have effective service delivery:

a- Service delivery managers must translate broader organization-wide strategies into implementation plans. b- Service delivery strategies must be developed and managed. c- Organizations must demonstrate an ability to learn. d- All the above.

d

Why Value-Adding Service Delivery Strategies Are Important

MC08.13

Which of the following is NOT part of the organization’s valueadding service activities:

abcd-

a

Strategies Based on the Value Chain

Clinical and marketing follow-up.

Billing.

Follow-on activities.

All of the above.

Point-of-service activities.

Organization culture.

Structure of the organization.

Information technology.

Question title

Question stem

Selections

Choice

Reference

MC08.14

Which of the following are steps in the development of service delivery strategies:

a- Decide to maintain or change pre-service activities. b- Decide to maintain or change point-of-service. c- Compare strategy requirements with the results of the service delivery internal analysis. d- All the above.

d

Process for Developing Service Delivery Strategies

MC08.15

Awareness, anticipation, analysis, interpretation, synthesis and reflection are part of which of the following:

abcd-

Strategic implementation.

Strategic thinking.

Value chain analysis.

Strategy formulation.

b

MC08.16

Which of the following is NOT a pre-service activity?

abcd-

Formalized billing system.

Pricing.

Distribution/logistics.

Target marketing.

a

Identify the Service Delivery Requirements of the Strategy Delivery Strategies Potential Pre-Service Delivery Strategies

MC08.17

Which of the following are accurately considered to be health care customers:

abcd-

Physicians.

Patients.

Insurance companies.

All the above.

d

Identifying the Health Care Customer – Target Market

MC08.18

Brand equity is most accurately defined as:

a- Knowledge the consumer possesses about a product or service. b- Loyalty the consumer possesses with regard to a particular product or service. c- A perceptual predisposition of a consumer to support a product or service based on stored knowledge. d- All of the above.

c

To Brand or Not to Brand Services

MC08.19

Which of the following provides tangible evidence of a health care organization’s patient and family-oriented care:

a- Patients and families are represented on the organization’s board of advisors. b- Health care organization policies and programs are consistent with family and patient friendliness. c- Systems are in pace to provide patients and families with better information to make medical decisions. d- All the above.

d

Key Questions for Determining Patient- and Family-Oriented Care

Question title

Question stem

Selections

Choice

MC08.20

Disruptive innovations:

a- Displace market leaders by creating new markets and value networks. b- Provide an evolutionary pathway for new idea implementation. c- Challenge decision makers to make steady improvements in processes and policies. d- None of the above.

a

Reference

Clinical Process Innovation

Short Essay Questions Question title

SE08.01

Question stem

Rationale Reference

Describe what a brand represents for an organization and why branding is important to service organizations.

A brand represents three things: what an organization offers to the market, what an organization does, and what an organization is. All three are critically important for health care organizations because the brand is intangible – it is simply a set of promises. It implies trust, consistency, and a defined set of expectations. The strongest brands have a unique position in the mind of buyers and can usually be articulated. Mayo Clinic and Johns Hopkins are examples of brands that have value for customers. Every person who has contact with a patient at these clinics represents that brand. If housekeeping were to be poorly performed, it hurts the brand; if admitting is poorly done, it hurts the brand; if clinical care is done less well than customers expect, it hurts the brand. Thus, it is critical that every member of the organization realizes that the brand is owned and should be managed by every employee. Another way to define brand is that it is every touch point the organization has with its ultimate customer. A brand is everything a service organization stands for but it does not have any merit if customers do not value it. Customers evaluate every service experience by dividing quality by price to arrive at a sense of value. It may not be a perfect method, or very accurate, but it is real as far as that consumer is concerned. For services the brand is more important than for tangible products, especially because if performance falls short, the service brand’s image and positioning deteriorate rapidly.

To Brand or Not to Brand Services

Question title

Question stem

Rationale

SE08.02

Discuss the difficulty in pricing health care.

Pricing health care is extremely difficult because it is a service that consumers would rather not have to purchase. Consumer perceptions of “high price equals high quality and low price means low quality” and “you get what you pay for” operate in health care, yet most consumers do not have the ability to judge quality. In addition, consumers rarely get upfront pricing and actual outcomes are as of yet unknown, therefore price and quality comparisons are difficult. Further, in many instances third-party payers separate consumers from the actual costs of care.

Finally, health care providers often have a great deal of difficulty determining their costs and then deciding on a price. Competitive negotiations with third-party payers looking for lower prices have led some health care providers to prices that are too low, thereby threatening the provider’s long-term viability. Government reductions for Medicare and Medicaid patients have resulted in reimbursements that are frequently below the cost of providing care. Thus, some providers have opted not to serve Medicare or Medicaid patients.

Pre-Service Pricing Decisions

SE08.03

Discuss the importance of point-of-service activities as an element of value-adding strategies.

Point-of-service is a transformational process that incorporates an organization’s resources – human and non-human, competencies, and capabilities and its assets – into value-added service delivery. Health care was a cottage industry for centuries. Specialization, cost pressures, and the actual work being done have taken health care from being totally customized for the individual patient in his or her home to an attempt to treat patients more similarly so as to develop economies of scale. Placing people in hospitals, outcomes measures, formularies, and so on, focus on treating patients more alike – the industrialization of health care. Most Americans and their physicians do not like it. The best services delivery differs for each organization depending on the strategies determined during strategy formulation.

Decide to Maintain or Change Point-ofService

Reference

Question title

Question stem

Rationale

SE08.04

Discuss the translational qualities of value-adding strategies.

Value-adding service delivery strategies translate the directional, adaptive, market entry/exit, and competitive strategies into action. As a critical component of the value chain, value-adding service delivery strategies coupled with the value-adding support strategies set the stage for maintaining strategic momentum through the action plans and control of the strategies. No position of leadership lasts forever. Every health care organization that succeeds at differentiation serves as a model for new competitors. The dynamic health care market and everchanging technology mean that no competitive advantage can be sustained in the long run without a great deal of thought and effort.

Strategic Thinking Map for Value-Adding Service Delivery Strategies

SE08.05

What are some examples of follow-up activities?

Follow-up is a process of checking with the consumer/patient concerning the quality, effectiveness, and satisfaction with the point-of-service encounter. For example, follow-up might be calling to inquire after the health of a child who was seen in the ER; such nurturing attention would spotlight a pediatrician as “caring and concerned” and endear him or her to any parent. Marketing follow-up activities include patient satisfaction studies to determine from a patient’s perspective how he or she was treated. All health care providers should be doing follow-up surveys with their customers. The feedback gathered offers greater insight if responses are conducted several days after the health care encounter as bias may occur with on-site collection of data.

Follow-Up Activities

SEC08.06

What are the differences between value-adding service delivery and valueadding support activities?

Value-adding service delivery strategies involve the actual delivery of services to patients. These strategies specify the pre-service activities, point-of-service configurations and processes, and after-service activities required by the strategies developed during strategy formulation. These strategies must be coordinated and consistent. Value-adding support strategies create and shape the working environment and behavioral norms, reporting relationships and structure, as well as information flows, financial needs, and human resource requirements for carrying out the selected strategies. Organizations that do not have the appropriate culture, structure, or strategic resources cannot implement effective plans. The value-adding service delivery strategies must be developed first, followed by the support strategies and unit action plans. The valueadding service delivery strategies are planned first because service delivery is the central activity of the organization and is the principal way of delivering value to the customer. The support strategies and action plans must facilitate the accomplishment of the service delivery strategies.

Decision Logic for the Value-Adding Service Delivery Strategies

Reference

Question title

Question stem

Rationale

SE08.07

What is market research and why is marketing a valuable pre-service activity for health care organizations?

Market research is data gathering about the market place (potential customers) including demographics, geographics, psychographics, and benefits sought, that is combined with segmentation to identify the organization’s best customer. Market research aids in identifying the target market (the market or market segment believed to be an organization’s best customers and around which all marketing activities focus) and must be done in conjunction with identifying the services the organization will deliver. Beyond information concerning potential customers, marketing research provides information about the effectiveness of the various decisions made about the product or service offered, appropriateness of the price, the most convenient place to obtain the product or service, and type of promotional activity to best inform potential customers, and determining whether the promotional activities are reaching the target market and persuading them to purchase.

SE08.08

What is meant by market segmentation in health care?

Segmentation is the process of identifying various groups within a market Identifying the Health and determining the distinct characteristics of the various groups to select Care Customer – Target one or more as the target market – that segment of the population that the Market organization will focus its efforts to satisfy. Several groups may be targeted, but each one requires different marketing activities to achieve customer satisfaction. Specialization of the hospital, nursing home, or physician’s practice could be a first step in the segmentation process, but other demographic, psychographic, and geographic factors must be considered as well.

SE08.09

Some say location is no longer the basis for competitive advantage in health care because of technology. However, does location remain an important consideration in health care strategy?

The location of the health care provider will impact the number of people who seek its services. A location that is attractive because of its proximity to patients’ homes and work is a valuable asset, especially if other health care providers cannot duplicate the location. Because people do not want to travel great distances for most health care, demographic studies of population are an important part of choosing a location for a facility.

Satellite offices and hospital branches have become increasingly important as busy patients value convenience. Although satellite offices/hospitals do not typically cut costs for the organization, they do cut costs for the patient, which can lead to an increased market share and improved efficiency for the health care provider.

Reference

Market and Marketing Research

Pre-Service Distribution/ Logistics

Question title

Question stem

SE08.10

How is personal selling used in health care organizations?

Rationale

Personal selling has been used more extensively in health care as various organizations compete to be the provider of choice in managed care plans and physicians are recruited to hospital systems. Direct marketing through social media provides another touch point for consumers to interact with a health care provider and each other to share experiences – good and bad. Many potential consumers will check for “reviews” and find them a credible tool for information, especially millennials who have surpassed baby-boomers in numbers.

Having a baby is often the first time a woman has chosen her own physician and hospital; experiences are shared with family and friends, often on social media. Probably no development has been more important to the popularity of personal selling than the rise of social media.

Reference

Pre-Service Promotion

Questions Chapter 9 Value-Adding Support Strategies

True/False Questions Question title

Question stem

Choice

Reference

TF09.01

Support strategies concern areas such as the behavioral norms, organization structure and flexibility, human resources, finance, information systems, and technology, and will play a major role in the implementation of the organization’s overall strategy.

T

Why Value-Adding Support Strategies Are Important

TF09.02

Normative behaviors are NOT part of organizational culture.

F

Organizational Culture Strategies

TF09.03

Shared values represent the understanding of “the way we do things” and may or may not reflect the organization’s “stated” values – it is the actual members’ values that create the organization’s culture.

T

Organizational Culture Strategies

TF09.04

Organizational culture has limited effects on recruiting, efficiency, and innovation.

F

Organizational Culture Strategies

TF09.05

One activity that a strategic manager who wants to create culture change should focus on is to live by the organization’s values from the very beginning.

T

Organizaitonal Culture Strategies

TF09.06

Although it is an often debated topic as to which come first, there is little doubt that in reality a strategy must follow the organizational strategy.

F

Why Value-Adding Support Strategies Are Important

TF09.07

Value-adding support strategies are implementation strategies directed toward the accomplishment of all other strategies.

T

Implementing Support Strategies

TF09.08

A primary responsibility of health care leaders is to shape the organizational culture in a way that encourages and rewards high performance.

T

Organizational Culture Strategies

TF09.09

Cognitive culture includes the organization’s stated intellectual values, norms, artifacts, and assumptions and serves as a guide for behavior.

T

Organizational Culture Strategies

TF09.10

Cognitive culture consists of intellectual values but does not usually result in behaviors relating to factors such as customer focus, teamwork and quality.

F

Organizational Culture Strategies

Question title

Question stem

Choice

Reference

TF09.11

Strategic leaders must focus on both the cognitive and emotional cultures to successfully shape and create an adaptive organizational culture.

T

Organizational Culture Strategies

TF09.12

In general, major culture change in an organization can be accomplished in a matter of months because people in the organization will naturally pursue cultural changes.

F

Organizational Culture Strategies

TF09.13

An effective strategic manager will always view the organizational structure as an impediment to strategy implementation.

F

Organizational Structure Strategies

TF09.14

Matrix structure is an organizational hierarchical design that forms the basic building blocks for organizations.

T

Organizational Structure Building Blocks

TF09.15

Functional structures organize activities around the mission-critical activities or processes of the organization and are the most prevalent structures for single product/service and narrowly focused organizations.

T

Functional Structure

TF09.16

A matrix structure is a whimsical organizational structure that permits strategic managers to demonstrate creative alignments of authority and responsibility in an organization.

F

Organizational Structure Building Blocks

TF09.17

Configuration theory argues that in a given industry such as health care, there is one and only one organizational structure that will be successful in accomplishing the organization’s mission.

F

Organizational Structure Strategies

TF09.18

The functional structure builds a high degree of specialization in a given function and is particularly useful when the tasks to be performed are variable and rapidly changing.

F

Functional Structure

TF09.19

A particular danger of functional structures is that they may encourage the development of “silos.”

T

Functional Structure

TF09.20

Divisional structures are successful in breaking a complex organization into manageable or focused parts that frequently form semi-autonomous strategic service units.

T

Divisional Structure

TF09.21

Divisional structures sometimes create intentional or unintentional competition for resources among the divisions.

T

Divisional Structure

Question title

Question stem

Choice

Reference

TF09.22

Divisional structures are common in organizations that have grown through diversification, vertical integration, and aggressive market or product development.

T

Organizational Structure Building Blocks

TF09.23

A matrix structure may be most appropriate when organizations have numerous products or projects that draw on common functional expertise.

T

Organizational Structure Building Blocks

TF09.24

A problem with divisional structures is that they may create competition for resources among the divisions.

T

Organizational Structure Building Blocks

TF09.25

Most health care organizations are rarely organized using just a single structural building block design.

T

Organizational Structure Building Blocks

TF09.26

Project and product teams are created to undertake well-focused projects (typically short term) or to develop new products.

T

Organizational Structure Building Blocks

TF09.27

The basic logic behind the development of matrix structures is to organize around the functions in order to resolve recurring issues and problems.

F

Matrix Structures

TF09.28

Matrix structures require a clearly defined chain of command whereby individuals report to a single individual and focus their attention exclusively on the unit’s roles and responsibilities.

F

Matrix Structures

TF09.29

Organization structures are “tools” for accomplishing the strategy and leaders should feel free to use one or more are a combination of structures when the strategy justifies different approaches to organizing.

T

Combination Structures and Teams

TF09.30

Often organizations, when they modify their structure, require some form of a collateral organization (teams task forces, committees, and so on) to supplement the basic structure and bring diverse ideas to the decision-making process.

T

Combination Structures and Teams

TF09.31

Even in situations where there is a good match between the characteristics of the current organizational structure and the requirements of the strategy, the present basic structure should not be maintained.

F

Organizational Structure Building Blocks

TF09.32

Only a few organizational strategies have financial implications and most likely will require an assessment of needed capital and a method to access capital.

F

Strategic Resources Strategies

TF09.33

Human resources requirements of the selected strategies will vary considerably depending on whether the organization is expanding, contracting, or maintaining scope.

T

Strategic Resources Strategies

Question title

Question stem

Choice

Reference

TF09.34

Executive committees are created to provide members of the board of directors an active role in strategy formulation and implementation.

F

Combination Structures and Teams

TF09.35

Venture teams are created outside the normal organizational structure; they are not bound by the normal “rules” of the organization.

T

Combination Structures and Teams

TF09.36

Information systems (ISs) are an essential competitive resource for health care organizations and are critical in supporting strategic decision making, administrative operations, and patient care in an increasingly information-intensive industry.

T

Information Resources

TF09.37

Sophisticated equipment, especially information technology, is the focus of managing strategic technologies.

F

Equipment

TF09.38

Strategic facilities is the broad term used to delineate the physical environment of the health care organization. It is the “shell” in which health care is delivered.

T

Facilities

TF09.39

Strategic managers must decide if the organization’s culture will contribute to the accomplishment of the strategy or must change over time.

T

Practical Lessons for Health Care Strategic Thinkers

TF09.40

Many, perhaps most, organizational strategies have little to do with finances but rather simply depend on the dedication and passions of persistent leaders to be successful.

F

Financial Resources

Multiple Choice Questions Question title

Question stem

Selections

Choice

Reference

MC09.01

What are the value-adding strategies:

a- Organizational structure, organizational culture, and strategic resources. b- Pre-service, point-of-service, and after-service. c- Cost leadership, differentiation, and focus. d- Merger, acquisition, and internal investment.

a

Why Value-Adding Support Strategies Are Important

MC09.02

The process of developing value-adding support strategies involves which of these comparisons:

a

Decision Logic for the Value-Adding Support Strategies

MC09.03

Organizational culture does NOT include the following component:

c

Organizational Culture Strategies

MC09.04

In terms of matching organizational culture and strategy, an organization with culture viewed as a strength and an internal environmental analysis of culture result of HNEY (high value, not rare, easy to develop, and sustainable) should do which of the following:

a- Comparison of strategy requirements with internal analysis. b- Comparison of directional strategies with competitive strategies. c- Comparison of organizational culture with organizational structure. d- Comparison of adaptive strategies with market entry/exit strategies. a - Shared assumptions. b- Behavioral norms. c - Competitive posture. d- Shared values. a - Change the organizational culture. b- Maintain the organizational culture. c- Either change or maintain the organizational culture is the correct action. d- Re-evaluate the internal environmental analysis of culture.

b

Organizational Culture Strategies

Question title

MC09.05

Question stem

MC09.07

The organizational structure decision is one of prioritizing which characteristics:

abcd-

Functional structure.

Divisional structure.

Matrix structure.

Circular structure.

Organizations with numerous products or projects that draw on common functional expertise.

Organizations that have grown through diversification, vertical integration, and aggressive market or product development.

Organizations with single product/service and narrowly focused organizations.

Multinational organizations and nongovernmental agencies (NGAs).

Competitive advantage and market reach.

Internal strengths and external opportunities.

Standardization and flexibility.

Functional structure and organic structure.

MC09.08

Strategic resources do NOT include which of the following:

abcd-

Financial resources.

Natural resources.

Human resources.

Technological resources.

MC09.06

Which of the following is NOT one of the fundamental organizational hierarchical designs: The matrix structure is most appropriate for organizations exhibiting which of the following characteristics:

Selections

abcdabcd-

Choice

Reference

d

Organizational Structure Building Blocks

a

Organizational Structure Strategies

c

Organizational Structure Strategies

b

Strategic Resources Strategies

Question title

Question stem

MC09.09

Which of the following is TRUE of changing strategic resources:

MC09.10

Which of the following is NOT an appropriate question for evaluating support strategies:

Selections

Choice

Reference

a- Change in strategic resources is a rare requirement of developing value-adding support strategies. b- Change in strategic resources is generally accomplished through acquisitions and mergers. c- Change in strategic resources is usually restricted to changes in information systems. d- Changing the type or nature of the financial and human resources, information systems, or facilities and equipment can be a difficult and long-term project. a- Is the organization’s culture appropriate for the overall strategy? b- Is the competitor’s organizational structure more appropriate for the market environment? c- Is the organization’s culture appropriate for the overall strategy? d- Are the facilities and equipment up-to-date and appropriate to carry out the overall strategy?

d

Strategic Resources Strategies

b

V a l u e - A d d i n g Support Strategies Potential

Question title

Question stem

Selections

Choice

Reference

MC09.11

Which of the following are part of the cognitive assumptions of an organization:

a- Who we are as a health care organization? b- What we are trying to do as a health care organization? c- What do we collectively believe in as a health care organization? d- All of the above.

d

Organizational Culture Strategies

MC09.12

Which of the following is NOT a fundamental hierarchical design for an organization: Which of the following are potential disadvantages of functional structures:

abcdabcdabcd-

a

Organizational Structure Building Blocks

d

Functional Structure

b

Divisional Structure

a

Chapter Summary

d

Maintain Organizational Culture

MC09.12

MC09.13

Which of the following organization structures facilitates the development of strategic service units:

MC09.14

Which of the following is likely to favor the use of the matrix structure:

MC09.15

Which of the following should strategic managers do if they wish to maintain a productive culture:

Inversion structure.

Matrix structure.

Functional structure.

Divisional structure.

Encourages silo thinking.

Slows down decision-making.

Makes horizontal communication difficult.

All the above.

Functional structure.

Divisional structure.

Matrix structure.

Combination structure.

a- Focus is on problem to be solved. b- A high level of specialization is needed. c- A centralized command and control structure is needed. d- All of the above. a- Review and discuss values and behavioral norms periodically. b- Regularly communicate the mission, vision and values. c- Reward and promote behaviors that reinforce the directional strategies. d- All the above.

Question title

Question stem

Selections

Choice

Reference

MC09.16

Which of the following is NOT part of the culture of an organization:

a- Assumptions shared by organization members. b- Behavioral norms demonstrated by organizational members. c- Organizational policies and procedures. d- None of the above.

c

Compare the Strategy Requirements with the Results of the Support Internal Analysis

MC09.17

Self-managed teams attempt to eliminate which of the following:

a

Combination Structures and Teams

MC09.18

Which of the following is an advantage of matrix structures:

d

Matrix Structures

MC09.19

Which of the following is an advantage of the functional structure:

d

Functional Structure

MC09.20

Value-adding support strategies are what type of the following strategies:

abcdabcdabcdabcd-

c

Implementing Support Strategies

Hierarchy.

A sense of direction.

Leadership.

Coordination.

Consolidation of expertise.

Focus on the problem to be solved.

Rapid product or service development.

All the above.

Fosters efficiency.

Allows a high degree of specialization.

Centralizes control and decision-making.

All the above.

Directional strategies.

Market entry/exit strategies.

Implementation strategies.

Adaptive strategies.

Short Essay Questions Question title

Question stem

Rationale

Reference

SE09.01

Explain how organizational culture can impact an organization’s financial performance.

Some organizational cultures have the potential to inspire aggressive and calculated managerial action, whereas other cultures do little more than encourage managers to be mere caretakers. Cultures build group cohesiveness and when members of the group insist on high levels of performance, each individual is encouraged to do his or her best.

Unfortunately, cohesive cultures can discourage change. When organizations become too committed to “how we do things around here” and “what we believe in,” it may be difficult, at least in the short run, to change the culture. Opportunities can be missed and competitive advantages can be lost simply because the culture is so strong that it will not tolerate new ideas and directions.

However, organizational cultures, when they encourage missioncritical factors such as patient-centered care, can be positive contributors to the overall success of an organization. Pay for performance initiatives may be a powerful force in helping to shape health care organizational cultures over the next several years.

Organizational Culture Strategies

SE09.02

Discuss the simplicity principle as it applies to matching organizational structure and strategy.

Strategic managers should strive to keep their structures as simple as possible and trim every vestige of unnecessary bureaucracy. Fundamentally, the structural decision is one of prioritizing standardization versus flexibility and selecting the basic structure that best achieves the required priority.

Therefore, strategic managers must evaluate the advantages and disadvantages of each of the structural building blocks and match them with the requirements of the strategy. For example, a different structure may be required to carry out a defender/cost leadership competitive strategy than that for a prospector/differentiation strategy. Defender strategies require a high degree of structural standardization to create cost efficiencies while prospector strategies require a great deal of structural flexibility to develop new technologies and innovative products and services.

Organizational Structure Strategies

Question title

SE09.03

Question stem

Discuss the financial resource implications of expansion, contraction, and maintenance of scope adaptive strategies.

Rationale

Expansion and maintenance of scope strategies frequently make it necessary for health care organizations to enter the capital market or make arrangements to borrow money from one or more financial institutions. Expansion of scope, such as market development, may be realized through acquisition of a competitor and involve large amounts of money. Expansion carried out through cooperation strategies similarly may require additional financial resources. For example, joint ventures are often financed by attracting other individuals, such as physicians, to invest in promising ideas or equipment along with the hospital. Organizations with sufficient financial resources may even act as venture capitalists for new ideas. Similarly, maintenance of scope strategies directed toward enhancement of facilities, equipment, quality of services, and so on will often require new capital and operating funds. For example, an organization may have to acquire new property and relocate in its efforts to change the image held by physicians who might join its staff and the patients who might use its facilities. New technology may be demanded as well for this change in image or for significant improvement of services. Reduction of scope strategies require equally challenging financial decision making. Divestiture, liquidation, harvesting, and, in some cases, retrenchment all convert financial resources, at least temporarily, into cash or near-cash assets. An inflow of cash forces strategic managers to consider alternatives for the funds to ensure that they are appropriately invested until they are needed for other uses. Reduction requires careful re-evaluation and possible redirection of the use of financial resources. For example, a hospital experiencing financial distress, after careful analysis, might decide that its emergency room is too expensive to continue to operate in view of limited demand by the community. The high level of specialized staffing for around-theclock operations is a financial burden that cannot be justified economically. The decision to close the emergency room would temporarily free financial resources that could be allocated to more profitable areas and relieve some of the cost pressure on the hospital.

Reference

Financial Resources

Question title

SE09.04

Question stem

Discuss the management of support strategies and the essential elements of a strategic thinking map for evaluating support strategies.

Rationale

The management of the support strategies includes the managerial processes, procedures, style, and technologies of the organization and is an inherent part of the organization and the way it operates. Strategic thinking and strategy evaluation should be regarded as a normal and necessary part of what organizations and managers do. Through the setting of objectives, the performance appraisal process, the compensation program, and so on, managers’ actions are coordinated toward agreed-upon organizational objectives. Strategic thinking and strategic evaluation become part of the operating procedures and culture of the organization.

Evaluating the appropriateness of support strategies is assisted by asking and answering the following set of questions: (1) Is the organization’s culture appropriate for the overall strategy? (2) Are the organization’s values reflected in the service delivery? (3) Are the behavioral norms appropriate for the strategy? (4) Are the management processes (the way we do things) appropriate for the strategy? (5) Does the organizational structure help facilitate the overall strategy? (6) Is there a balance between standardization and flexibility? (7) Are additional coordinating or collateral structures required? (8) Does the organization have the financial resources to carry out the strategy? (9) Does the organization have the appropriate human resources, skills, policies, and procedures for the strategy? (10) Is the management talent appropriate? (11) Do the information systems help facilitate the strategy? (12) Are the facilities and equipment up-to-date and appropriate to carry out the overall strategy?

Reference

Strategic Momentum – Support Strategies

Question title

Question stem

SE09.05

Why is it important to be willing to change the organization structure when it is not facilitating the accomplishment of the strategy but also a decision that must be carefully considered?

SE09.06

Why is it important to ensure that the most up-todate equipment is available in health care organizations?

Rationale

If the comparison of the present structure and requirements of the strategy suggest a need to change the basic organizational structure, then management must develop a plan and move very carefully. Ineffective or inappropriate organizational structure can debilitate the organization’s strategy – such as might be the case with too many organizational layers, thus delaying decision making – but by itself structure is not generally seen as a significant longterm competitive disadvantage. However, where the organizational structure is viewed as a competitive disadvantage, action must be taken. Reorganization represents a significant change for employees and is often viewed as threatening. Reorganizations can cause greater stress and anxiety over possible layoffs that may decrease productivity. It is also important to recognize that often reorganizations can cause a lot of resistance to change on the part of employees – especially those who perceive that the old organization structure worked to their advantage. It is not uncommon for employees to “get used” to their manager and reorganizations often require that employees report to different managers. Although reorganizations should not be avoided when they are needed, care must be taken in ensuring that the organization structure is the real issue before changing it.

The choice of the type and sophistication of equipment and effective management of technology is extremely important in health care organizations. Equipment is an integral part of strategic management and should be approached in a systematic way. Because health care technology changes rapidly, is costly, and often requires changes in the facility, it must be assessed and planned for carefully to reach its greatest potential. Physicians generally want the latest technology – using the “latest” equipment or newest procedure earns prestige with colleagues and patients and may save more lives or prevent discomfort. The decision concerning the use of the latest technology must fit with the strategy (differentiation based on high-technology image). It should also be recognized that physicians are not the only stakeholder that desire the latest equipment. This is also important to patients.

If a health care organization does not have the most up-to-date equipment patients are likely to perceive that there are better places to receive their health care services. If someone hears there is a faster MRI machine in a competitor’s facility they may be tempted to change providers to access the newest equipment.

Reference

Change the Structure

Equipment

Question title

Question stem

SE09.07

What are strategic information systems and why are they important in health care organizations?

SE09.08

From the perspective of human resources, why are unrelated diversification and vertical integration considered risky strategic choices?

Rationale

A strategic information system (SIS) is sometimes referred to as a decision support system because it takes vast quantities of unorganized data and converts them into useful information to enable managers to make better decisions. Such information systems involve organizing the data, selecting the models that will be used to analyze the data, and interpreting the output; nevertheless, it is not sufficient simply to provide the reports to the strategist. Sometimes there is a need to interpret and clarify the data relative to the assumptions that were used. Because decision support systems attempt to investigate future activities, the assumptions are critical. The organization that can design a strategic IS that is pertinent, relatively accurate, and timely will have developed a competitive advantage. It is a common complaint of decision makers that they have so much information they can barely consider it in making strategic choices. Information systems that can organize date into meaningful reports for decision makers can be a very valuable strategic resource.

Expansion strategies, such as related diversification, will make it necessary to recruit new personnel with skills and talents similar to those already in the organization. On the other hand, unrelated diversification or backward/ forward vertical integration will create the need for human resources with skills and talents quite different from those presently employed. The necessity of recruiting, hiring, and leading individuals with different skills and talents is a major reason that these strategies are “riskier” than related diversification. Any one of these strategies requires the merger of organizational cultures, presenting yet another human resource challenge. Human resource management plays an important role as a value-added support strategy. When choices like unrelated diversification and vertical integration are made, it places a tremendous challenge before human resource departments to understand and appreciate that new types of skills and talents are required.

Reference

Information Resources

Human Resources

Question title

Question stem

Rationale

Reference

SE09.09

What is meant by the term collateral organizations?

Although the organizational structure building blocks set the basic design of the organization, seldom are they adequate for carrying out the strategy and work of the organization. Therefore, most organizations modify their basic structure with some type of coordinating structures. These coordinating structures are sometimes referred to as the collateral organization – a system of teams, task forces, committees, and ad hoc groups that supplement the basic organization structure and are used to bring different perspectives to the table for discussion and resolution. No organization can function without effective coordination of the various parts. Some of the most common forms of collateral organizations include project teams, cross-functional task forces, venture teams, and executive committees.

Combination Structures and Teams

SE09.10

What are matrix organizations and what are the advantages they provide and the challenges they present?

A matrix organization is an organization structure formatted around the organization’s projects or programs where centralized functional specialists interact with and provide services to project or program teams. A matrix structure may be most appropriate when organizations have numerous products or projects that draw on common functional expertise. The fundamental rationale underlying a matrix structure is to organize around problems to be solved rather than functions or products or geography. Matrix organizations develop expertise and allow product areas or projects to use that expertise as needed. Therefore, in this structure, functional specialists may work on a number of different projects and with a number of project managers over time. Matrix structures foster creativity and innovation in the organization, therefore, the structure is particularly effective for rapid product development and can accommodate a wide variety of product or project activities. Matrix structures are difficult to manage. The structure violates the “unity of command” (a person reports to only one boss) principle and, as a result, employees are often confused on priorities and “who is the boss.” Therefore, this type of structure requires a great deal of coordination and communication plus some degree of negotiation and shared responsibility between project managers and functional managers.

Matrix Structures

Questions Chapter 10 Communicating Strategy and Developing Action Plans

True/False Questions Question title

Question stem

Choice

Reference

TF10.01

The difference between the term “business plan” and “action plan” as descriptors of implementation strategies is that business plan is strategic and action plan is tactical.

F

Implementation through Action Plans

TF10.02

An effective action plan, regardless of level, consists of objectives that specify how the unit (division, hospital, pharmacy) is going to contribute to the strategy, what actions will be required to achieve the objectives and within what time period, who is responsible for the actions, the resources required to achieve the objectives, and how results will be measured.

T

The Level and Orientation of the Strategy

TF10.03

Identifying objectives, determining who is responsible to accomplish them, the resources required, and how results will be measured is an approach that keeps the strategic plan straightforward and comprehensible.

T

The Level and Orientation of the Strategy

TF10.04

One of the organizational imperatives of strategic planning is that everyone in an organization can be involved in the planning process.

F

Action Plan Development Responsibilities

TF10.05

The initial strategic plan for an organization is usually the product of a relatively small number of strategic thinkers.

T

The Level and Orientation of the Strategy

TF10.06

Because of their involvement in the development of the strategic plan, every employee within the organization knows the underlying issues and assumptions that were used to develop the strategy and the associated goals for the strategic plan.

F

Communicating Strategy to Initiate Action Planning

Question title

Question stem

Choice

Reference

TF10.07

Because everyone cannot be directly involved in developing a strategic plan, successive layers of management must communicate the overall strategy and provide guidance for the various units that will need to be engaged if the strategy is to be achieved.

T

Communicating Strategy to Initiate Action Planning

TF10.08

All communication within the organization concerning strategies and strategic implementation should be “top down.”

F

Communicating Strategy to Initiate Action Planning

TF10.09

It is important to have specific milestones in the strategic planning process to provide updates for all employees, telling them that the process is ongoing and explaining expected timelines for the strategy to be handed over to those who will be responsible for carrying it out.

T

Communicating Strategy to Initiate Action Planning

TF10.10

The engagement of employees is not essential to implementing strategies.

F

Communicating Strategy to Initiate Action Planning

TF10.11

Action plans concern translating directional, adaptive, market entry/exit, and competitive strategies into tasks, work assignments, and deadlines.

T

The Process of Developing Action Plans

Question title

Question stem

Choice

Reference

TF10.12

The establishment of measurements for results is not an element of developing an action plan.

F

Set Unit Objectives

TF10.13

An action plan identifies actions required to accomplish objectives and the sequence in which the actions should be undertaken.

T

Set Unit Objectives

TF10.14

A critically important responsibility of the health care organization’s leadership is to carefully articulate its strategy to the unit managers.

T

Review the Broader Strategic Decisions

TF10.15

Unit manager action plans in aggregate represent the implementation plan for the organization.

T

Set Unit Objectives

TF10.16

Concerning objectives, attainability as a characteristic is not necessary as long as the objectives support strategic goals and are measurable.

F

Set Unit Objectives

TF10.17

Objectives should easily be accomplished.

F

Set Unit Objectives

TF10.18

Objectives should be formulated with the assistance of the individuals who will be responsible for accomplishing the work.

T

Set Unit Objectives

TF10.19

For health care organizations, revenue expectations from plan implementation are more important than cost estimates since the revenues will offset the costs.

F

Determine Resource Requirements

TF10.20

The Balanced Scorecard approach to strategy implementation is compatible with, and complementary to, the value chain concept.

T

Focusing on Strategy through Implementation – A Balanced Score Card Approach

Question title

Question stem

Choice

Reference

TF10.21

The primary value of the Balanced Scorecard approach is to focus the health care organization on those aspects of its operations that most directly impact the accomplishment of its strategies.

T

TF10.22

Once developed and implemented, action plans operate on “autopilot,” without the need for managerial monitoring, evaluation, and adjustment.

F

Focusing on Strategy Through Strategy Implementation – A Balanced Score Card Approach Implementation Challenges

TF10.23

Effective strategy implementation requires the same determination and effort as situation analysis and strategy formulation.

T

Implementation Challenges

TF10.24

A primary reason why strategies are not implemented is because, in many health care organizations, effective or ineffective implementation makes little or no difference in resource allocation and reward distribution.

T

Implementation Challenges

TF10.25

Contingency planning may be incorporated into the normal strategic management process at any level and is a part of managing the strategic momentum.

T

Contingency Planning

TF10.26

With well-defined directional strategies, there is little need to translate the strategic plans into specific actions because the directional strategies will make the implementation clear.

F

Why Communicating the Strategy and Developing Action Plans Are Important

TF10.27

Regardless of the level at which the strategic plan is developed, all action plans are required only at the unit level.

F

The Level and Orientation of the Strategy

TF10.28

The development of the initial strategic plan is usually the product of a relatively few informed and engaged strategic thinkers that can focus on the big picture.

T

Action Plan Development Responsibilities

TF10.29

Strategic leaders shape the strategic plan less by framing the context than they do by deciding on the content of the plan.

F

Action Plan Development Responsibilities

TF10.30

Communication from the top down and the bottom up as well as across the organization is required if everyone is to be engaged in the process.

T

Communicating Strategy to Initiate Action Planning

TF10.31

Stretch moves the organization toward its goals by leveraging resources or systematically achieving more than is normally expected.

T

Set Unit Objectives

Question title

Question stem

Choice

Reference

TF10.32

In action planning it is important to identify all the activities needed to accomplish and objective but the actual sequencing of the activities is not important as long as one focuses on the objective.

F

Identify Actions Required to Accomplish Unit Objectives

TF10.33

A process is a collection of activities that takes one or more kinds of inputs and creates and output that is valuable to an organizational stakeholder.

T

Set Timelines

TF10.34

Strategic control is the process of determining if the strategy is successful and, where appropriate, taking corrective action.

T

Determine How Results Will Be Measured

TF10.35

One of the valid criticisms of the Balanced Scorecard is that it evaluates strategy exclusively on financial criteria and neglects some of the “softer” aspects of strategic success.

F

Focusing on Strategy through Implementation – A Balanced Score Card Approach

TF10.36

Successful strategy requires a willingness to seek the good of the entire organization over any individual division or unit.

T

Implementation Challenges

TF10.37

Contingency planning is successful when it provides only one clear focus for the health care managers because it avoids confusion with alternative paths to goal accomplishment.

F

Contingency Planning

TF10.38

Strategic plans are based on assumptions that are considered less likely because in this way plans may always allow the health care leader to make less risky strategic decisions.

F

Contingency Planning

TF10.39

Continuity of operations planning is not an example of contingency planning.

F

What Is Continuity of Operations Planning?

TF10.40

If the managers do not have a map it is difficult to start the journey.

T

The Map and the Compass

Multiple Choice Questions Question title

Question stem

Selections

MC10.01

Which of the following terms does NOT refer to implementation strategies?

abcd-

MC10.02

An effective action plan consists of which of the following elements?

MC10.03

Choice

Reference

c

Implementation through Action Plans

a- Objectives that specify how the organizational unit will contribute to the strategy and actions required to achieve the objectives. b- Time period over which the actions will be taken and who is responsible for the actions. c- The resources required to achieve the objectives and how results will be measured. d- All of the above.

d

The Level and Orientation of the Strategy

Within an organization, what is the best choice for developing action plans?

abcd-

The strategic planning team.

The organizational unit.

The chief executive officer.

The board of directors.

b

Action Plan Development Responsibilities

MC10.04

Successive layers of management must communicate the overall strategy by doing which of the following?

abcd-

Provide “maintain or change” guidance.

Provide specific objectives and timelines.

Provide detailed action plans.

Provide guidance only when a “change order” has been issued.

a

Communicating Strategy to Initiate Action Planning

MC10.05

Specific milestones in the strategic planning process should be communicated to which of the following groups?

abcd-

The strategic planning team.

All employees.

The organizational unit.

The consultants involved in developing the strategic plan.

b

Communicating Strategy to Initiate Action Planning

Business plans.

Action plans.

Sequential plans.

Tactical plans.

Question title

Question stem

Selections

Choice

Reference

MC10.06

Which of the following is TRUE of unit manager action plans?

a- Unit manager action plans are dictated by the strategic planning team. b- Unit managers do not develop action plans, they implement action plans developed by their superiors. c- Unit manager action plans only matter in situations where “maintain” directions have been issued. d- Unit manager action plans in aggregate represent the implementation plan for the organization.

d

Communicating Strategy to Initiate Action Planning

MC10.07

Which of the following is NOT a characteristic that should be demonstrated by unit objectives?

a- Objectives should reinforce organizational strategic goals. Strategic goals relate to mission-critical activities.

Reinforcing objectives ensures that the various units contribute to the accomplishment of the organization’s mission. b- Objectives should be challenging but attainable.

Objectives that are easy to accomplish do not require stretch. Objectives that are impossible to attain are not motivational. c- Objectives should acknowledge the weaknesses of the organization and the strengths of the action plan to be implemented. d- Objectives should identify the time frame for accomplishment.

c

Set U n i t Objectives

MC10.08

Budget requests associated with unit objectives should include which of the following?

a - Expected revenues. b- Costs of personnel. c- Costs of all resources associated with implementing each activity. d- All of the above.

d

Determine Resource Requirements

Question title

Question stem

Selections

Choice

Reference

MC10.09

The primary value of the Balanced Scorecard approach is:

a- To focus the health care organization on those aspects of its operations that most directly impact the accomplishment of its strategies. b- To provide direction to unit managers in the development of unit action plans. c- To measure the success of senior management in communicating the overall organizational strategy. d- To inform lower-level employees of the need to pay close attention to the detailed action plans being implemented by their supervisors.

a

Focusing on Strategy Through Strategy Implementation – A Balanced Scorecard Approach

MC10.10

Contingency plans are:

a- Specific time- and resource-oriented action plans to achieve alternate sets of strategic goals. b- Generic alternative plans. c- Alternative plans that are put into effect if the strategic assumptions change quickly or dramatically, or if organizational performance is lagging. d- “Gotcha” plans used to find unit managers who have not been effective in implementing the organizational strategy.

c

Contingency Planning

MC10.11

Which of the following are components of action plans:

abcd-

Budgets, control systems and decision support units.

Strategic information systems and culture templates.

Objectives, activities, timetables, and responsibilities.

Tactics, policies and operating instructions.

c

Logic for Developing Action Plans

MC10.12

The strategic planning team should determine the broad strokes and shape the organization by:

a- Developing strategy through service delivery and support strategies. b- Review the directional strategies. c- Provide guidance on what should be accomplished. d- All the above.

d

Action Plan Development Responsibilities

Question title

Question stem

Selections

Choice

Reference

MC10.13

Which of the following is NOT a step in the development of action plans:

a- Assigning responsibility for accomplishing individual actions. b- Scanning the environment to ensure changing conditions have been incorporated into the action plan. c- Determination of resource requirements for accomplishing each action. d- Determination of how results will be measured.

b

The Process of Developing Action Plans

MC10.14

Which of the following is NOT one of the areas of short-term activity not specifically linked by the overall strategy as measured by the Balanced Score Card:

abcd-

Customer perspective.

Learning/growth perspective.

Financial perspective.

Cultural perspective.

d

Focusing on Strategy through Implementation – A Balanced Score Card Approach

MC10.15

If strategy is to be successful it must be integrated into which of the following systems:

abcd-

Performance evaluation system.

Resource allocation system (budgeting).

Action planning systems.

All the above.

d

MC10.16

Which of the following is the primary responsibility of the strategic planning team:

abcd-

Details of the individual action plans.

Broad strokes of the strategy.

Individual linkages among strategic and tactical plans.

None of the above.

b

Action Plan Development Responsibilities

MC10.17

Which of the following should be included in employee updates when milestones are reached in the strategic planning process:

a- Celebration of accomplishment of individual milestones. b- Discussions regarding how the process is progressing. c- Expected timelines for transferring the planning to the implementation process. d- All the above.

d

Communicating Strategy to Initiate Action Planning

MC10.18

Strategic goals should:

a- Be numerous since organizations are complex and a number of areas must be addressed simultaneously. b- Be very general in nature with little concern for attainability since the main purpose of the goals is to simply provide direction. c- Related specifically to mission-critical activities. d- Be impossible to obtain in order to be motivational.

c

Set Unit Objectives

Implementation Challenges

Question title

Question stem

Selections

Choice

MC10.19

Strategic control is the process of:

a- Establishing the goals and objectives for the organization. b- Determining the activities required to accomplish goals and organizing them under similar categories. c- Determining whether the strategies are successful and taking corrective action. d- Matching the assumptions underlying strategic decisions with the decision-making process.

c

Determine How Results Will be Measured

MC10.20

A Balanced Scorecard is an effective tool for:

abcd-

d

Focusing on Strategy through Implementation – A Balanced Score Card Approach

Defining what is important to the organization.

Developing ways to measure strategic goals.

Focusing the organization on its strategic direction.

All the above.

Reference

Short Essay Questions Question title

Question stem

Rationale

Reference

SE10.01

Discuss the “broad strokes” of strategy and action plans.

The development of the initial plan is usually the product of a relatively small number of strategic thinkers – the strategic planning team.

Because of its involvement in developing strategy, the strategic planning team determines the “broad strokes” of strategy. The team shapes the organization through: a review or revision of the organization’s mission, vision, values, and goals; development of strategy through service delivery and support strategies; and providing guidance for what needs to be accomplished. The implementation strategies or action plans, however, should be left to the organizational units. Senior managers shape strategic direction less by deciding the specific strategic content than by framing the context – creating a sense of purpose that not only provides an integrating framework for bottom-up strategic initiatives but also injects meaning into individual effort. Others in the organization should use their ingenuity to develop action plans and carry out the strategy.

Action Plan Development Responsibilities

SE10.02

Discuss the importance of communication in strategy implementation.

Because everyone cannot be directly involved, many employees within the organization do not know the underlying issues and assumptions that were used to develop the strategy; nor do they know the goals for which they will develop objectives. Therefore, successive layers of management must communicate the overall strategy and provide “maintain or change” guidance for the various units that will need to be engaged if the strategy is to be achieved. For example, if management has determined that an expansion strategy is required, guidance is needed as to which parts of the organization have been identified for the expansion. Managers in the identified part or parts then determine the objectives to accomplish the expansion in that area. When different units have overlapping or integrated activities, multiple groups have to coordinate planning. Communication from the top down and the bottom up – as well as across – is required to engage everyone to do his or her part.

Communicating Strategy to Initiate Action Planning

Question title

SE10.03

Question stem

Discuss the need for and the methods used to manage action plans.

Rationale

Managing action plans involves agreeing upon objectives, measuring performance, evaluating performance against the objectives, and taking corrective action, if necessary. All of the units act in concert to ensure that the level of actual performance comes as close as possible to a set of desired performance specifications. Managing the strategy provides strategic managers a means of determining whether the organization is performing satisfactorily; it is an explicit process for refining or completely altering the strategy. Therefore, strategic managers must monitor, evaluate, and adjust the action plans. Strategic thinking to evaluate action plans involves asking and answering a set of seven questions: (1) Has the organization’s overall strategy been well communicated to all members of the organizational units? (2) Do the organizational units have the resources required for successful implementation of the strategy? (3) Is there a high level of commitment to the strategy within the organizational unit? (4) Has the organizational unit developed action plans, including realistic objectives, timelines, responsibilities, and budgets? (5) Are the unit objectives consistent and compatible with the strategy? (6) Do the organizational units have the managerial and employee capabilities required for successfully implementing the organization’s strategy? (7) Do the combined action plans accomplish the overall strategies of the organization?

Reference

Implementation through Action Plans

Question title

SE10.04

Question stem

Discuss what is required for successful implementation of a strategic plan.

Rationale

Successful implementation relies on communicating the strategic plan and developing action plans – the translation of organizational strategies into action plans. Otherwise, strategy remains little more than wishful thinking. Action plans make strategy happen, yet strategy cannot happen if people do not understand their roles in accomplishing the strategies of the organization. It is important that the interrelationships among situational analysis, strategy formulation, and action plans are understood by managers and employees. Such understanding is critical because, unless it is achieved, action plans are unlikely to reflect organizational priorities. Action plans should contain clear objectives that, when accomplished, will achieve the strategies of the organization. These objectives should be measurable, easy to understand, contain timeframes, and involve the individuals responsible for accomplishing them in their formulation. If they are to be effective guides to behavior, unit objectives – whether the unit is a division, a single entity, or a department – must be understood and agreed on by the members of that unit who are responsible for accomplishing the tasks necessary to achieve the objectives. Action plans are important aids to accomplish the strategies of health care organizations. They outline the activities required for the accomplishment of each unit objective along with an estimate of resources generated and expended in the accomplishment of each unit objective. In addition, action plans specify the time requirements for the accomplishment of each action and the individual or group responsible for ensuring the action is accomplished. Action planning is an effective aid in the formulation of unit budget requests and when rewards are based on action plan accomplishments, everyone recognizes their importance.

Reference

Chapter Summary

Question title

Question stem

Rationale

Reference

SE10.05

How are action plans important in maintaining strategic momentum?

A critical factor in maintaining strategic momentum is strategy evaluation and control. Through strategy evaluation and control managers regulate, guide, and direct the strategy and, within the process, emergent learning takes place and informs later strategy formulation. Another important factor is effective communication of the strategic plan. This is critically true when related to those individuals who will be tasked with actually implementing the plan.

Practical Lessons for Health Care Strategic Thinkers

SE10.06

What are some of the primary reasons why strategies are not implemented?

Although many organizational resources are devoted to strategy formulation, strategies are often not implemented for a variety of reasons including a lack of understanding of the strategy, a diversion to more urgent demands for action, or a lack of appreciation for the difficulty of actually making strategy happen. Understanding the many likely conflicting attributes, ironies, or contradictions that occur in attempting to manage the future is a good start toward better comprehending strategy and implementation difficulties. Typically, more attention has been given to strategy formulation and its link to organizational performance than to the intervening process of strategy implementation. In addition, the organization’s culture and hierarchical structure may have been ignored and those responsible for implementation may know little about the thinking that provided the basis for the strategy.

Implementation Challenges

SE10.07

It is agreed that strategic managers must monitor, evaluate, and adjust action plans – in other words, they have to manage the strategy. How do they do this?

Managing the strategy provides strategic managers with a means of determining whether the organization is performing satisfactorily; it is an explicit process for controlling – refining or completely altering – the strategy. They do this by asking questions like the following: (1) has the organization’s overall strategy been well communicated to all members in the organizational units? (2) do the organizational units have the financial resources required for successful implementation of the strategy? (3) is there a high-level commitment to the strategy in the organizational units? (4) have the organizational units developed action plans, including realistic objectives, timelines, responsibilities, and budgets? (5) are the unit objectives consistent and compatible with the strategy? (6) do the organizational units have the managerial and employee capabilities required for successfully implementing the organizational strategy? and (7) do the combined action plans accomplish the overall strategies of the organization?

Strategic Thinking Map for Evaluating the Action Plans

Question title

Question stem

Rationale

Reference

SE10.08

Why is it important to assign responsibilities for accomplishing the activities contained in action plans?

A specific individual or group of individuals should be assigned the responsibility for ensuring that each activity is accomplished. Assigning responsibility for the accomplishment of each activity in the proper sequence helps to build ownership. The assignment of responsibility also provides another important function – in the periodic updates of progress on the action plans, there is an identified spokesperson who can provide precise updates on each activity. In addition, if individuals know they will be called on to report at the update meetings, they are incentivized to stay on schedule.

Action Plan Development Responsibilities

SE10.09

Why is careful articulation of the organization’s strategy so important to strategy implementation?

A critically important responsibility of the health care organization’s leadership is to carefully articulate its strategy to the unit managers by providing guidance or strategy statements regarding their responsibility to change or maintain the scope of their respective areas. These managers, in turn, are obligated to continue the communication by articulating the manner in which each unit is expected to contribute to service delivery or support services as well as adaptive, market entry/exit, and competitive strategies. Unit manager action plans, in aggregate, represent the implementation plan for the organization.

Review the Broader Strategic Decisions

SE10.10

What is contingency planning and why is it particularly important in dynamic, rapidly changing organizational environments?

Contingency planning is the development of alternative plans that may be put into effect if strategic assumptions change quickly or dramatically, or if organizational performance is lagging. This type of planning may be incorporated into the normal strategic management process at any level and is a part of managing the strategic momentum. Contingency planning is really about resourcefulness. The more turbulent, discontinuous, and unpredictable the external conditions, the more likely it is that unexpected or dramatic shifts will occur and the greater the need for contingency planning. Incorporating contingency planning requires top management to have some very specific contingency plan triggers that are understood by everyone and significant enough to require a change. Strategic plans are based on the events and trends that management views to be the most likely (the strategic assumptions). However, these events may not occur, or trends may weaken, or accelerate far faster than strategic managers anticipated. Therefore, contingency plans are normally tied to key issues or events occurring or not occurring.

Contingency Planning

This Page is Intentionally Left Blank

This Page is Intentionally Left Blank