Ch. 1 (Multiple Choice)

In the strategic management process ASP stands for a. analyses, successes, and purposes. b. analyses, strategies, and performance. c. ability, strategies, and purposes. d. ability, successes, and performance.

B

PGG Mining is making a strategic decision whether to shut down a coal mine in Pennsylvania. It is important to consider that the decision a. should be based solely on the results of profit-pool mapping. b. has ethical implications for organizational stakeholders. c. need not be socially responsible if the firm is making below-average returns from the mine. d. All of these choices are important to consider.

B

(BLANK) innovation is a term used to describe how rapidly and consistently new, information-intensive technologies replace older ones. a. Perpetual b. Disruptive c. Global d. Diffusion

A

(BLANK) is a capacity for a set of resources to perform a task or an activity in an integrative manner. a. A capability b. A core competence c. Sustainable competitive advantage d. Organizational intelligence

A

A firm has achieved (BLANK) when it successfully formulates and implements a value-creating strategy a. strategic competitiveness b. a permanently sustainable competitive advantage c. substantial returns d. legal and ethical core values

A

A firm's mission a. is a statement of a firm's business in which it intends to compete and the customers it intends to serve. b. is an internally focused affirmation of the organization's financial, social, and ethical goals. c. is mainly intended to emotionally inspire employees and other stakeholders. d. is developed by a firm before the firm develops its vision.

A

A prominent national accounting firm runs television advertisements showing an accountant working alone late in the office on a client's project, while clenching a long-stemmed rose in his teeth and grinning ecstatically. The message of the ad is that this firm's accountants love their work. This ad seeks to convey a sense of the organization's (BLANK) to the viewers. a. culture b. mission c. vision d. personality

A

Before liquidating, Circuit City took several actions to try to satisfy its (BLANK) stakeholders. a. capital market b. product market c. organizational d. governmental

A

Effective strategic leaders a. are willing to be brutally honest. b. focus on strategy formation. c. focus on strategy implementation. d. focus on innovation.

A

Essentially (BLANK) has become one of the world's largest markets with 700 million potential consumers. a. the European Union b. the United States c. China d. Japan

A

Even for companies capable of succeeding in global markets, it is critical that they a. remain committed to and strategically competitive in their domestic market. b. introduce many new products immediately after entering a new market. c. acquire a local competitor in each significant foreign market. d. develop good negotiating skills in order to take advantage of local suppliers in the international market.

A

Generally speaking, product market stakeholders are satisfied when a. a firm's profit margin yields the lowest return to capital market stakeholders that is acceptable to them. b. a firm's profit margin yields an above-average return to its capital market stakeholders. c. the interests of the firm's organizational stakeholders have been maximized. d. the interests of all stakeholders have been at least minimally satisfied.

A

If Southwest Airlines is considering the consequences of videoconferencing on business travel, it is in the profit pool analysis step known as a. defining the pool's boundaries. b. estimating the pool's overall size. c. estimating the size of the value-chain activity in the pool. d. reconciling the calculations.

A

It is important to emphasize that, primarily because they are related to how a firm interacts with its stakeholders, almost all strategic management process decisions have a. ethical dimensions. b. local dimensions. c. political dimensions. d. global dimensions.

A

It is well known that the elected school board of a large city engages in unethical and illegal activities involving the awarding of major contracts. This behavior has existed for decades, even as the membership in the school board has changed over time. This behavior reflects a. the core values of the school board as an organization. b. a functional, although unethical, culture of the school board. c. the lack of an organizational mission for the school board. d. a school board lacking in core competencies.

A

Knowledge is composed of all the following EXCEPT a. insight. b. expertise. c. information. d. intelligence.

A

New markets created by iPods, PDAs, and Wi-Fi are a result of a. disruptive technologies. b. global competition. c. knowledge intensity. d. hypercompetition.

A

Organizational culture refers to a. the social energy that drives, or fails to drive, the organization. b. the complex set of ideologies, symbols, and core values that are shared throughout the firm. c. what people do when no one else is looking. d. All of these options are correct.

A

Product market stakeholders include a. suppliers. b. shareholders. c. employees. d. the firm's chief executive officer.

A

The culmination of the strategic management process is a. performance. b. strategy implementation. c. strategy formulation. d. analysis.

A

The final responsibility for forming the organization's mission lies with the a. CEO. b. top-management team. c. employees. d. organization's stakeholders.

A

The global economy, globalization, rapid technological change, and the increasing importance of knowledge are creating the need to a. delegate strategic responsibilities to employees "closer to the action." b. split responsibilities between the CEO and the board of directors as a result of corporate scandals triggered by unethical CEOs. c. re-centralize the responsibility for strategy to the CEO. d. expand the strategic responsibilities to all organizational stakeholders.

A

The goal of the organization's (BLANK) is to point the firm in the direction of where it would like to be in the years to come a. vision b. mission c. culture d. strategy

A

The industrial organization (I/O) model argues that a. the key factor in success is choosing the correct industry in which to compete. b. the firm's internal resources and capabilities represent the foundation for development of a value-creating strategy. c. the key to earning above-average returns is strategic flexibility. d. the internal structure of the organization must match the industry in which it competes in order to earn above-average returns on investment.

A

The interests of an organization's stakeholders often conflict, and the organization must prioritize its stakeholders if it cannot satisfy them all. The (BLANK) is the most critical criterion in prioritizing stakeholders. a. power of each stakeholder b. urgency of satisfying each stakeholder c. vulnerability of organizational stakeholders d. social value of each stakeholder

A

The resource-based view of the firm a. emphasizes that it is difficult to develop and sustain a competitive advantage based on resources alone. b. argues that the industry environment has a stronger influence on firms' ability to implement strategies successfully than does the competitor environment. c. calls for firms to focus on their homogeneous capabilities to compete against their rivals. d. suggests that vision and mission are closely linked to sustainable competitive advantage.

A

The strategic leader's work is characterized by a. ambiguous decision situations which make effective decisions difficult to determine. b. a willingness to unify stakeholders through skillful manipulation. c. an ability to identify the correct solutions to long-range problems. d. concentration on the practical day-to-day aspects of the organization's operations

A

William Ackman is a hedge fund manager who owned a large share of J.C. Penney stock. He was also a member of the Penney board. He tried to get the CEO fired, but the board and top management said he breached his boardroom duties when he publicly disclosed information on the CEO search and financial condition of the company. He resigned from the board of directors. This is an example of a contentious relationship between a. the capital market stakeholders and the organizational stakeholders. b. the organizational stakeholders and the product market stakeholders. c. the capital market stakeholders and the product market stakeholders. d. all the stakeholders.

A

(BLANK) provides the firm with new and up-to-date skill sets, which allow it to adapt to its environment as it encounters changes. a. Strategic flexibility b. Continuous learning c. Knowledge d. The Internet

B

A (BLANK) is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage. a. goal b. strategy c. tactic d. mission

B

In order to cope with hypercompetition, firms need to develop (BLANK) through continuous learning. a. competitive resilience b. strategic flexibility c. strategic power d. competitive dominance

B

All of the following are assumptions of the industrial organization (I/O) model EXCEPT a. organizational decision makers are rational and committed to acting in the firm's best interests. b. resources to implement strategies are firm-specific and attached to firms over the long-term. c. the external environment is assumed to impose pressures and constraints that determine the strategies that result in above-average returns. d. firms in given industries, or given industry segments, are assumed to control similar strategically relevant resources.

B

Although McDonald's is competing in an unattractive industry, it has improved its performance by focusing on product innovations and by enhancing existing facilities. This improved performance is best explained by a. globalization. b. the resource-based model. c. the I/O model. d. hypercompetition.

B

Although it closed stores, changed the top management team, and sought potential buyers, none of these actions resulted in outcomes that allowed Circuit City to meet the expectations of its (BLANK) stakeholders. a. product market b. capital market c. organizational d. governmental

B

An investor is considering in which of two start-up companies to invest. The investor has faith in the industrial organization model of above-average returns and is using its concepts to make a decision. Both start-up companies propose to manufacture health-focused foods with such characteristics as low salt, low sugar, high fiber, and no artificial additives. RexRich Foods has a business strategy of producing a differentiated product for which consumers will pay more. Green Pastures Foods is in the health-foods industry because of its internal culture and commitment to healthful lifestyles. Which firm will the investor feel is most consistent with the model of industrial organization? a. Green Pastures Foods b. RexRich Foods c. Both firms are consistent with the I/O approach. d. At the entrepreneurial stage, the model which companies follow is not important.

B

Capital market stakeholders include a. industry competitors. b. shareholders. c. employees. d. government regulators

B

Firms use both the (BLANK) and (BLANK) models. In fact, these models complement each other in that one focuses outside the firm while the other focuses inside the firm. a. industry; capability b. I/O; resource-based c. competition; competency d. industry; competency

B

Refuge Nursing Homes, Inc., (RNH) has been highly profitable in the past 10 years, providing its investors higher returns than those earned by its direct competitors' investors. RNH has a reputation for providing high-paying managerial and hourly-employee jobs. However, recent investigations have revealed that the nursing home residents have been provided substandard care, including non-nutritious and unappetizing meals, non-functional medical equipment, and inadequate patient-care staffing. Which statement best describes the situation? a. RNH has been earning below-average returns, so it has had to prioritize the demands of its various stakeholders. b. RNH has prioritized the demands of capital market stakeholders over the demands of product market stakeholders. c. RNH has earned above-average returns and so has satisfied the needs of all relevant stakeholders. d. RNH has been attempting to minimally satisfy the demands of all of its stakeholders.

B

Strategic leaders (BLANK) often work long hours, and their work is filled with ambiguous decision situations. a. at the top of the organization b. regardless of their location in the organization c. in the finance area d. in the operations area

B

Strategic leaders are a. located only at the executive level. b. located in different areas and levels. c. the CEO, COO, and CFO only. d. located at different levels, but only in the operating area of the organization.

B

The CEO of Ridgeway, Inc., realizes that the company's survival depends on developing and acquiring knowledge. Which of the following actions by the CEO would be most consistent with this need? a. ensuring that all current unique knowledge of the firm is protected by patents b. planning extensive employee training and hiring educated and experienced employees c. investing in sophisticated databases in relevant knowledge areas d. establishing a system of organizational intelligence gathering

B

The ability to effectively and efficiently access and use information is a. vitally important at the point where a domestic firm enters the global market. b. an important source of competitive advantage in virtually all industries. c. the minimum required for survival in virtually any industry. d. critically important mainly in high technology industries.

B

The primary drivers of hypercompetition are a. rising global socio-economic instability and increased inflation. b. the emergence of a global economy and rapid technological change. c. increased global competition and decreased tariffs. d. increased availability of capital and increased competition.

B

The profit pool is the a. pool of assets that is distributed to investors. b. total profits earned in an industry along all points of the value chain. c. profits that are accrued when a firm earns above-average returns. d. total profits that can be divided among the competitors within an industry.

B

(BLANK) is an investor's uncertainty about the economic gains or losses that will result from a particular investment. a. Return b. Reward c. Risk d. Revenue

C

(BLANK) should establish a firm's individuality and should be inspiring and relevant to all stakeholders. a. A strategy b. A vision c. A mission d. A goal

C

A business-level strategy describes a. the businesses in which the company intends to compete. b. all policies and procedures used in functional departments. c. the firm's actions to exploit its competitive advantage over rivals. d. a firm's resources, intent, and mission.

C

A competitive advantage a. can be permanent if the firm has successfully implemented the strategic management process. b. entails reducing investors' risk to near zero. c. can be identified only if it has been unsuccessfully challenged by competitors. d. exists when competing firms are unable to find investors.

C

A major assumption about the strategic management process is that it is a. inspired. b. team-based. c. rational. d. inclusive.

C

All of the following are assumptions of the resource-based model EXCEPT a. each firm is a unique collection of resources and capabilities. b. the industry's structural characteristics have little impact on a firm's performance over time. c. capabilities are highly mobile across firms. d. differences in resources and capabilities are the basis of competitive advantage.

C

All of the following are characteristic of the global economy EXCEPT a. the increasing importance of developing countries as sources of revenue growth. b. the free movement of goods, services, people, skills, and ideas across geographic borders. c. the increased use of tariffs to protect industries. d. higher levels of opportunities and challenges.

C

All of the following are resources of an organization EXCEPT a. an hourly production employee's ability to catch subtle quality defects in products. b. oil drilling rights in a promising region. c. weak competitors in the industry. d. a charity's endowment of $400 million.

C

Apple's iPod and iPad are examples of a. the march of globalization. b. rapid technological diffusion. c. disruptive technologies. d. products that were not imitated by competitors.

C

If McDonald's is considering growing potatoes, the step of the profit pool analysis is the one that a. defines the pool's boundaries. b. estimates the pool's overall size. c. estimates the size of the value-chain activity in the pool. d. reconciles the calculations.

C

In a diversified firm, corporate-level strategy is concerned with a. operating each individual business under the corporate umbrella. b. determining how each functional department of the firm will operate. c. determining in which businesses to compete and how resources will be allocated between businesses. d. coordinating the vision and mission of each subsidiary firm.

C

Organizational stakeholders are usually satisfied when a. their return on investment has been maximized. b. customers pay the highest sustainable price for the goods and services they receive. c. companies provide a dynamic, stimulating, and rewarding work environment. d. companies are paying the highest prices to suppliers.

C

Organizational stakeholders include a. unions. b. host communities. c. employees. d. suppliers of capital.

C

Product market stakeholders include the firm's customers, and the principal concern of this stakeholder group is a. maximizing the firm's return on investment. b. receiving the highest-quality products and services in the industry. c. obtaining reliable products at the lowest possible price. d. increasing the profitability of the firm.

C

Strategic delegation helps a. overload middle managers. b. executives control strategy implementation. c. avoid too much managerial hubris. d. emphasize profit maximization.

C

The "liability of foreignness" is the a. inability of most U.S. managers to truly comprehend foreign cultures. b. political disadvantage that U.S. firms have when doing business abroad. c. overall risk of participating outside a firm's domestic country when entering global competition. d. strong cultural preference for "buying local," which puts foreign firms at a disadvantage when competing in the U.S. market.

C

The Chambers of Commerce of cities and towns often implore citizens to buy from local businesses. This is because the organization's role as a taxpayer is most important to (BLANK) as stakeholders. a. major suppliers of capital b. shareholders c. host communities d. unions

C

The I/O model is grounded in a. anthropology. b. psychology. c. economics. d. accounting

C

The Princeton Alliance Church states in its website that "PAC exists to help you live life to the fullest by knowing God, developing community and bringing hope." This pronouncement is most precisely a statement of organizational a. values. b. mission. c. vision. d. culture.

C

The firm's (BLANK) provide the foundation for choosing one or more (BLANK) and deciding how to implement them. a. analyses; strengths b. abilities; strengths c. analyses; strategies d. abilities; strategies

C

The steps for identifying the profit pools in an industry include all of the following EXCEPT a. defining the boundaries of the pool. b. estimating the overall size of the pool. c. defining the competitors in the pool. d. estimating the size of the value-chain activity in the pool.

C

To have the potential to become sources of competitive advantage, resources and capabilities must be non- substitutable, valuable, (BLANK) and (BLANK) a. unique; easy to imitate. b. easy to imitate; difficult to implement. c. rare; costly to imitate. d. easy to implement; unique.

C

When resources and capabilities serve as a source of competitive advantage for a firm, the firm has created a(n) a. strategic mission. b. inspiring vision. c. core competence. d. sustainable market niche.

C

Which of the following statements is most consistent under the I/O view? Performance of the firm is most directly attributable to a. the power of the financial market stakeholders. b. the resources the firm possesses. c. the profitability of the industry in which the firm competes. d. hypercompetition within the industry.

C

Who typically develops a firm's mission statement? a. only the CEO b. only top managers c. the CEO and top managers d. the CEO, COO, and CFO only

C

(BLANK) has become the second-largest economy in the world. a. The United States b. The European Union c. Japan d. China

D

A company competing in a single product market has a. one corporate-level strategy. b. one business-level strategy. c. one business-level strategy for failure. It should seek to diversify. d. one business-level strategy and one corporate-level strategy.

D

Above-average returns are a. higher profits than the firm earned the previous year. b. higher profits than the industry averaged over the last 10 years. c. profits in excess of what an investor expects to earn from a historical pattern of performance of the firm. d. returns in excess of what an investor expects to earn from other investments with a similar level of risk.

D

Analysis of the industry's profit pool enables strategic managers to a. predict future revenue streams for the organization. b. predict growth in sales over the medium to long range. c. determine whether an industry will be viable in the long term. d. locate the most promising areas of an industry's value chain.

D

Dissatisfied capital market stakeholders may a. sell their stock. b. tighten loan covenants. c. seek to increase their power. d. All of these options are correct.

D

Firms use the five forces model to identify the (BLANK) of the industry as measured by its (BLANK) a. size; number of competitors. b. globalization; exports. c. hypercompetition; technology diffusion. d. attractiveness; profitability.

D

Globalization has led to a. lower operational efficiency as firms must transport raw materials and finished goods farther. b. increasing loyalty of customers for products made domestically. c. declining returns from investment in research and development. d. higher product quality.

D

Greenleaf Property Management has been earning below-average returns for the last three years. Which of the following statements are true? a. Greenleaf will be able to satisfy its multiple stakeholders easily as long as the stakeholders are committed to the strategic mission of the firm. b. Greenleaf will be able to at least minimally satisfy the demands of each stakeholder. c. Greenleaf will need to prioritize the demands of its stakeholders based on the political influence each wields. d. Greenleaf will not be able to minimally satisfy all stakeholders.

D

If McDonald's were to map the profit pool in the quick-service restaurant industry, it would do all of the following EXCEPT a. define the industry's boundaries and size. b. estimate the profit potential in each part of the value chain. c. focus on unattractive industries ignored by competitors. d. select the strategy to use where the largest profit pools are located.

D

In smaller, new venture firms, returns are sometimes measured in terms of a. return on assets. b. return on equity. c. return on sales. d. the amount and speed of growth.

D

In the resource-based model, which of the following factors would be considered a key to organizational success? a. unique market niche b. weak competition c. economies of scale d. skilled employees

D

Managers must adopt a new mind-set that values conditions. a. flexibility b. innovation c. speed d. All of these options are correct.

D

McDonald's has been able to a. earn above-average returns. b. achieve strategic competitiveness. c. use the strategic management process. d. All of these options are correct.

D

Research shows that approximately (BLANK) percent of a firm's profitability is explained by the industry in which it competes, whereas (BLANK) percent is explained by the firm's characteristics and actions. a. 90; 10 b. 60; 40 c. 36; 20 d. 20; 36

D

SWOT stands for a. strategy, wealth, organization, and threats. b. success, weakness, opportunities, and taxes. c. strength, wealth, organization, and taxes. d. strengths, weaknesses, opportunities, and threats.

D

Successful strategic leaders are a. committed to helping the firm create value for all stakeholder groups. b. committed to nurturing those around them. c. decisive. d. All of these options are correct.

D

The economic interdependence among countries as reflected in the flow of goods, services, financial capital, and knowledge across country borders is defined as a. hypercompetition. b. boundaryless retailing. c. strategic intensity. d. globalization.

D

The rate of technological diffusion is increasing. Which of the following was fastest in penetrating 25 percent of homes in the U.S. market? a. telephone b. television c. personal computer d. Internet

D

The resource-based model of the firm argues that a. all resources have the potential to be the basis of sustainable competitive advantage. b. resources alone can be a source of sustainable competitive advantage. c. the key to competitive success is the structure of the industry in which the firm competes. d. resources that are valuable, rare, costly to imitate, and non-substitutable form the basis of a firm's core competencies.

D

The strategic management process is a. a set of activities that will assure a sustainable competitive advantage and above-average returns for the firm. b. a decision-making activity concerned with a firm's internal resources, capabilities, and competencies, independent of the conditions in its external environment. c. a process directed by top management with input from other stakeholders that seeks to achieve above- average returns for investors through effective use of the organization's resources. d. the full set of commitments, decisions, and actions required for the firm to achieve above-average returns and strategic competitiveness.

D

The strategic management process is a. a set of activities that will assure a sustainable competitive advantage and above-average returns for the firm. b. a decision-making activity concerned with a firm's internal resources, capabilities, and competencies, independent of the conditions in its external environment. c. a process directed by top-management with input from other stakeholders that seeks to achieve above- average returns for investors through effective use of the organization's resources. d. the full set of commitments, decisions, and actions required for the firm to achieve above-average returns and strategic competitiveness.

D

Which of the following statements about organizational knowledge is correct? a. Knowledge is an intangible resource. b. The importance of knowledge is increasing. c. The value of knowledge as a proportion of shareholder value is increasing. d. All of these options are correct.

D