BUSN 481 Strategic Management Final Questions
Which of the following statements accurately describes a firm's resource stock?
Resource stocks are a firm's current level of intangible resources.
What is the result of managers' pursuit of strategies that define value creation too narrowly in public stock companies?
It reduces the trust of shareholders in the organization as a vehicle for value creation.
Which of the following statements is true of strategy in an organization?
It relies on a relatively flat organizational structure.
Buyers are highly price sensitive when
they earn low profits or are strapped for cash.
A firm experiences diseconomies of scale when it
produces at an output level beyond the minimum efficient scale.
Which of the following best illustrates physical-asset specificity?
A machine solely designed to give a candy its trademarked shape
Which of the following resources is a firm's resource stock?
Reputation for quality
Which of the following is true of acquisitions?
Acquisitions can be friendly or hostile.
Which of the following fundamental insights was provided by Porter's five forces framework from the completion of the Alta Velocidad Española (AVE) in 2008?
Any of the five forces on its own, if sufficiently strong, can extract industry profitability.
A resource-based view of a firm provides a model that systematically aids in identifying
core competencies.
According to the upper-echelons theory, the organizational outcomes of a company primarily reflect the values of the
CEO of the company
Which of the following is an observable feature in the Globalization 3.0 stage?
Based on an optimal mix of costs, skills, and PESTEL factors, companies now freely locate business functions anywhere in the world.
How has Apple been able to sustain its competitive advantage in the smartphone industry?
By regularly introducing incremental improvements in its products
Which of the following statements is not true of competitive advantage?
Competitive advantage is an absolute measure.
_____ are best described as unique strengths, embedded deep within a firm, that allow a firm to differentiate its products and services from those of its rivals, creating higher value for the customer or offering products and services of comparable value at lower cost.
Core competencies
Which of the following summarizes the difference between corporate strategy and business strategy?
Corporate strategy deals with where to compete; business strategy deals with how to compete.
How is differentiation parity different from cost parity?
Differentiation parity deals with value not pricing.
_____ describes a firm's ability to create, deploy, modify, reconfigure, upgrade, or leverage its resources over time in its quest for competitive advantage.
Dynamic capability
Which of the following is an accurate statement about the relationship between firm effects and industry effects?
Firm effects deal with a manager's actions; industry effects deal with external circumstances.
McDonald's uses detailed standard operating procedures throughout the world to ensure product quality. This implies that McDonald's has a high degree of
Formalization
Which of the following statements is true of top-down strategic planning?
In this process, the formulation of strategy is separate from implementation.
Which of the following statements is true of internal transaction costs?
Internal transaction costs tend to increase with organizational size andcomplexity.
Which of the following is a primary feature of the five forces model?
It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.
Which of the following statements is true of learning curves?
Learning curves can be observed in manufacturing processes and professional services.
Which of the following statements about strategy is not true?
Operational effectiveness and competitive benchmarking should be treated as strategy.
Which of the following is an unintended side effect of a high degree of specialization in an organization?
Reduced employee satisfaction due to repetition of tasks
A firm that engages in strategic outsourcing typically
Reduces its level of vertical integration
Which of the following stages of the strategic management process involves an evaluation of a firm's external and internal environments?
Strategy analysis
Why does strategy implementation often require changes within an organization?
Strategy implementation transforms strategy into actions and business models.
A company wants to determine how industry effects have affected its profitability. Which of the following elements should the company focus on?
The barriers to entry and exit within the industry
Which of the following is an example of an external transaction cost?
The cost of searching for a contract manufacturer
In public stock companies, which of the following expectations of principals is most likely to lead to principal-agent problems?
The expectation that the agent will act in the principal's best interest
Which of the following is not a limitation of the economic value creation framework?
The framework fails to provide the foundation that will help firms decide between cost-leadership or differentiation strategies.
The conflict in a principal-agent relationship arises when
The goals of the principals and agents are not aligned with each other
Which of the following is most likely an accurate statement?
The multinational enterprise Starship benefited from advances in communications technology.
Which of the following summarizes the difference between a firm's vision and mission?
Which of the following summarizes the difference between a firm's vision and mission?
Which of the following statements accurately brings out the difference between economies of scale and learning effects?
While there are no diseconomies to learning, there are diseconomies to scale.
Which of the following is the best definition of a complementary asset?
an asset a firm needs to complete the value chain from upstream innovation to downstream commercialization
How does a firm capture its producer surplus for a good or service?
as profit per unit sold
Which of the following is an example of a firm's resources?
assets such as land and buildings owned by a firm
In an industry, the threat of entry is high when
capital requirements are low.
In an economic context, strategy for producers is primarily about
capturing as much of the economic value created as possible.
Customer-oriented visions do not
define how a customer need will be met.
To support the rise of emergent strategies, an organization should
empower lower-level employees to take up autonomous actions.
In a strategic alliance, the firm that learns faster
has the incentive to reduce its knowledge sharing.
Which of the following statements is not true about innovation?
innovation has to be high-tech in order to be a potent competitive weapon
The informational advantage that agents possess over principals is often based on the fact that
insiders are the first to learn about important developments before the information is released to the public.
Combining economies of learning with the existing production technology allows a firm to
move down a given learning curve.
The most efficient way to overcome the principal-agent problem in a firm is to
provide stock options to managers.
Incumbent firms favor incremental innovation over radical innovation because
radical innovation will disturb the existing power distribution within the firms.
According to the perspective of shareholder capitalism,
shareholders in public stock companies have the most legitimate claim on profits
Dynamic capabilities are especially relevant for surviving and competing in markets that
shift quickly.
If a company wants to gain a competitive advantage in a highly competitive industry, it should ideally
stake out a unique position within the industry
A traditional top-down strategic planning process typically begins with
strategic leaders adjusting a company's vision and mission based on environmental analysis.
The relative bargaining power of suppliers is high when
suppliers provide products that are differentiated.
Which of the following forces tends to be more important in determining a firm's performance?
the actions of managers within the firm
A firm's strategic position is likely to be strong when
the gap between the value the firm's product generates and the cost to produce it is large.
During the process of formulating an effective business model, a firm's managers should first
transform their strategy of how to compete into a blueprint of actions and initiatives.
Product features, customer service, and complements are all examples of important
value drivers.
As a result of globalization, the
world's market economies are becoming more integrated.
Which of the following accurately summarizes the difference between the resources and capabilities of a firm?
Resources are tangible and intangible; capabilities are intangible.
A firm is said to be pursuing a polycentric innovation strategy when
it draws from multiple, equally important research facilities located throughout the world.
A trend observed during the Globalization 3.0 stage involves
multinational companies organizing as global-collaboration networks.
Which of the following is a characteristic of a public stock company?
Legal personality allows a firm's continuation beyond the founder or the founder's family
What does "limited liability for investors" imply in a public stock company?
Shareholders who provide the risk capital are liable only to the capital specifically invested
Which of the following statements accurately explains the primary reason behind Walmart's failure in Germany?
Significant differences between its U.S. personnel policies and Germany's culture
A high degree of formalization in an organization is most likely to
Slow down decision-making
Which of the following is the most likely advantage of using foreign acquisitions or greenfield plants as a foreign entry mode?
They reduce a firm's exposure to loss of reputation
The primary objective of Porter's five forces model is to
understand the profit potential of different industries.
Which of the following statements is true of corporate strategy?
A corporate strategy must be able to create synergies across business units that are quite different.
Which of the following accurately describes a common difference between a merger and an acquisition?
A merger tends to be friendly; an acquisition can be friendly or unfriendly
Which of the following will most likely harm a MNE's reputation?
A sweatshop owned by an MNE has an explosion that kills hundreds of workers.
How is an equity alliance different from a joint venture?
An equity alliance involves taking ownership in a partner; a joint venture involves taking ownership by buying stock.
Which of the following is an advantage of applying the economic value creation perspective to assess a firm's performance?
In economic value perspective, analysts not only consider historical costs, but also opportunity costs.
Which of the following statements accurately brings out the difference between monopolistic competition and an oligopoly?
In monopolistic competition, many firms compete against each other; in an oligopoly, there are few large firms competing against each other.
How does taking a real-options perspective by entering strategic alliances help incumbent firms?
It allows the incumbent firms to buy time and wait for the uncertainty surrounding the market and technology to fade.
Which of the following statements is true of a disruptive innovation?
It invades the market from the bottom up, by first capturing the low end.
Which of the following is a disadvantage of measuring firm performance through total return to shareholders and firm market capitalization?
Market volatility makes it difficult to assess firm performance through these measures, particularly in the short-term.
How are the two approaches, strategic planning and scenario planning, different from the strategy-as-planned-emergence approach?
Relative to strategic planning and scenario planning, strategy as a planned emergence model is a less formal and less stylized approach to the development of strategy.
Which of the following statements best supports the separation of ownership and control in publicly traded companies?
Shareholders own stocks but do not run the company.
Which of the following is most likely an implication of new firms entering an industry?
The incumbent firms will spend more to satisfy their existing customers.
What does the relational view of competitive advantage propose?
The locus of competitive advantage is often not found within the individual firm but within a strategic partnership.
A firm always has a competitive disadvantage when its return on invested capital is
below the industry average
When entering a foreign market, it is advisable for a new venture that has a core competency only in R&D to form a strategic alliance with a local partner because
building downstream complementary assets can be expensive and time-consuming.
How was Netflix able to outperform both Hulu and Amazon?
by focusing its resources on producing high-quality content for content streaming
Taking advantage of the pricing flexibility inherent in the wholesale model, Amazon offered many books (especially e-books) below the cost that other retailers had to pay to publishers. By doing this, Amazon showed how business models can be affected through
disruption.
According to the _____, competitive advantage is the outflow of a firm's ability to modify and leverage its resource base in a way that enables it to gain and sustain competitive advantage in a constantly changing environment.
dynamic capabilities perspective
A company that uses a differentiation strategy can achieve a competitive advantage as long as its
economic value created is greater than that of its competitors.
When a differentiator charges a similar price as its competitors in the same strategic group but offers more perceived value, it
gains market share from other firms.
What element of organizational structure deals with positioned-based reporting lines?
hierarchy
A factor favoring the success of disruptive innovation is that
incumbent firms are slow to change
By introducing Vscan, a small, wireless ultrasound device, GE Healthcare (General Electric) was primarily trying to
invade the healthcare market from the bottom up.
Managers in a firm hired to improve the firm's profitability and ultimately the shareholders' value will add to the overall costs if they pursue their own self-interests. What does this best illustrate?
principal-agent problem
Who among the following is responsible for making business strategies in a large conglomerate?
the general managers of individual business units
Organizational design is
the process of creating, implementing, and modifying the structure of an organization.
A drawback of short-term contracting as an alternative to making a component in-house is that
the supplying firm has no incentive to make any transaction-specific investments to increase performance or quality.
For a firm that operates in an industry where competition is high, which of the following practices will result in inferior performance?
Trying to be everything to everybody by combining different competitive strategies
Why is it easier for new entrants to involve in radical innovations when compared to incumbent firms?
Unlike incumbent firms, new entrants do not have formal organizational structures and processes.
How do firms benefit from vertical integration?
Vertical integration allows firms to increase operational efficiencies through improved coordination of adjacent value chain activities.
If a firm's market capitalization is $1 billion and the share price is $50, how many shares outstanding does the firm have?
20 million
Which of the following has been a key driver for firms to expand globally during the Globalization 3.0 stage?
Benefits from lower labor costs in manufacturing and services
Which of the following summarizes the benefit of the strategic alliance between HP and DreamWorks?
Both HP and DreamWorks were able to enter a new market that they would not have been able to pursue alone.
Which of the following perspectives best supports the shared value creation framework?
Externalities such as pollution wasted energy, and costly accidents actually create internal costs.
Which of the following most accurately describes a difference between incremental innovation and radical innovation?
Incremental innovation builds on an established knowledge base; radical innovation uses an entirely different knowledge base.
A firm's learning curve is steeper than that of its competitor. What does this imply?
The firm is at an advantage when compared to its competitor.
Which of the following is an implication of all firms in an industry pursuing a low-cost position through application of competitive benchmarking?
The firms would eventually have no resources to invest in product and process improvements.
Which of the following is a competitive benefit experienced by the first mover firm in an industry?
The first mover will be able to reduce costs through economies of scale.
Which of the following is true of the parent-subsidiary relationship?
The transaction costs that arise are frequently due to transfer prices
Which of the following forces is most closely related to industry effects within the automobile industry?
The types of products and the services offered within the industry
How will an increase in coordinated economic and political integration between countries affect the world economy?
There will be gains in social welfare and living standards across the globe.
According to Michael Porter, which of the following is a problem with many publicly traded companies?
They have defined value creation too narrowly in terms of financial performance
Which of the following is not a reason why firms enter alliances?
To replace competitive advantage with competitive parity
An industry has many firms that compete in it. While products between competitors tend to be similar, they are by no means identical. As a consequence, managers selling a product with unique features tend to have some ability to raise prices. This type of industry is an example of
monopolistic competition.
A firm achieves differentiation parity ideally when
it creates the same customer value as its competitors.
Dynamic capabilities are essential for moving beyond a(n) _____ advantage.
short-lived
A drawback involved in using cross-border strategic alliances to enter new foreign markets is that
some of the firm's proprietary know-how may be appropriated by the foreign partner.
Which of the following is not a factor that makes total return to shareholders and market capitalization unreliable measures of company performance?
the unpredictability of return on revenue
