Strat Management Quizzes

Which of the following has contributed to Twitter's loss of a competitive advantage? A. Core users of Twitter are unable to stay connected permanently. B. Twitter does not allow advertisers to target their online ads precisely enough. C. Individuals pay nothing to use Twitter, which gives Twitter free user-generated content. D. Twitter delivers ads in real time, as opposed to competitors such as Facebook.

B. Twitter does not allow advertisers to target their online ads precisely enough. Twitter does not allow advertisers to target their ads as precisely as other competitors, such as Facebook. As a result, Twitter's competitive advantage has suffered.

How has Threadless staked out a unique strategic position? A. by providing more discounts than other T-shirt companies B. by providing faster service than other T-shirt companies C. by providing customers a voice in product design D. by providing higher quality T-shirts than other companies

C. by providing customers a voice in product design As mentioned in Strategy Highlight 1.1, Threadless leverages crowdsourcing, a process in which a group of people voluntarily perform tasks that traditionally were completed by a firm's employees. Customers test design ideas before they are put into production, so the resulting T-shirts sell out very quickly.

Which of the following statements about patents is not true? a. A patent over a product translates into a permanent monopoly position. b. A patent can be enforced in court. c. A patent is a form of intellectual property. d. A patent can be obtained when an invention is useful, novel, and nonobvious.

a. A patent over a product translates into a permanent monopoly position. In the United States, the time period for the right to exclude others from the use of the technology is 20 years from the filing date of a patent application. Exclusive rights often translate into a temporary monopoly position until the patent expires.

Which of the following companies would most likely benefit from an economic recession? a. Fast Chow Inc., which specializes in selling low-cost Asian food b. Top Grill Inc., which offers expensive steaks and other meats c. Luxury Suites Inc., which provides luxurious hotel accommodations d. Fancy Jewelers Inc., which sells top-end gold and platinum jewelry

a. Fast Chow Inc., which specializes in selling low-cost Asian food For customers, expenditures on luxury products are often the first to be cut during recessionary periods. As a result, companies that specialize in low-cost goods often benefit during recessions.

__________ is best described as the process of transformation of an idea into a new product or process, or the modification and recombination of existing ones. a. Invention b. Direct imitation c. Bootstrapping d. Lean manufacturing

a. Invention Invention describes the transformation of an idea into a new product or process, or the modification and recombination of existing ones.

Why did the local Metro Transit Authority (MTA) order Uber to cease and desist? a. MTA argued that Uber was operating a taxi service without proper licensing. b. MTA claimed that Uber failed to uphold its promise to give part of its profit to MTA. c. MTA argued that Uber failed to comply with the emission standards for vehicles. d. MTA claimed that Uber was attempting to create a monopoly on taxi services.

a. MTA argued that Uber was operating a taxi service without proper licensing. MTA argued that Uber was operating a taxi service without proper licensing. Ignoring such warnings, Uber continued to expand.

Quick Eats is a fast-food restaurant that has recently entered the hospitality industry. Since most of its competitors are pursuing a low-cost position and doing well, Quick Eats also wants to adopt the same strategy. Which of the following will be a likely implication of this decision? a. Quick Eats will face low profit potential. b. Quick Eats will be able to create higher value for its customers. c. Quick Eats will be better placed to gain a competitive advantage in the industry. d. Quick Eats will not face any direct competition in the industry.

a. Quick Eats will face low profit potential. Quick Eats will face low profit potential. The key to successful strategy is to combine a set of activities to stake out a unique position within an industry. Competing to be similar but just a bit better than a competitor is likely to be a recipe for cutthroat competition and low profit potential.

How is the characteristic of separation of legal ownership and management control disadvantageous to publicly traded companies? a. The managers delegated to make decisions on behalf of shareholders might pursue their personal interests. b. The shareholders may misuse their power to make decisions for the company and make decisions only for their profit. c. The managers delegated to make decisions may be too focused on maximizing total returns to shareholders. d. The shareholders do not directly supervise the activities of the board of directors.

a. The managers delegated to make decisions on behalf of shareholders might pursue their personal interests. In publicly traded companies, the stockholders are the legal owners of the company, but they delegate decision-making authority to professional managers. The conflict arises if the agents pursue their own personal interests, which can be at odds with the principals' goals.

While the industry for 3-D televisions is in the introduction stage, the industry for LCD televisions is in the maturity stage. What does this imply? a. The market for LCD televisions has reached its maximum size, whereas the market for 3-D televisions is still small in size. b. The 3-D television industry will focus on process innovation, whereas the LCD television industry will focus on product innovation. c. The LCD television industry is likely to focus on achieving market acceptance, while the 3-D television industry is likely to focus on the harvest strategy. d. The 3-D television industry will focus on pursuing an integration strategy, while the LCD television industry will focus on pursuing a differentiation strategy.

a. The market for LCD televisions has reached its maximum size, whereas the market for 3-D televisions is still small in size. The market for LCD televisions has reached its maximum size, whereas the market for 3-D televisions is still small in size. During the fourth stage of the industry life cycle, the industry structure morphs into an oligopoly with only a few large firms. The market has reached its maximum size, and industry demand is likely to be zero or even negative going forward. In the introduction stage, however, the initial market size is very small.

Which of the following is true of public stock companies? a. There exists an implicit contract based on trust between society and the public stock company. b. Public stock companies are not required to disclose financial statements. c. The public stock company is not an important institutional arrangement in developing economies. d. Society expects public stock companies to add value to society by making profits for shareholders.

a. There exists an implicit contract based on trust between society and the public stock company. There exists an implicit contract based on trust between society and the public stock company. Society grants the right to incorporation, but in turn expects companies to be good citizens by adding value to society.

In developed countries, the industry for flash drives is in the maturity stage, and the industry for floppy disks is in the decline stage. What does this imply? a. While the flash drive industry has reached its maximum market size, the market size for floppy disks is small and contracting. b. The industry structure for floppy disks is that of perfect competition, whereas the industry structure for flash drives is monopolistically competitive. c. The number of new entrants in the floppy disks industry will be more when compared to the industry for flash drives. d. While the buyers of floppy disks can be categorized under early majority, the customers of flash drives can be categorized under late majority.

a. While the flash drive industry has reached its maximum market size, the market size for floppy disks is small and contracting. Changes in the external environment often take industries from maturity to decline. In this final stage of the industry life cycle, the size of the market contracts as demand falls.

A(n) _____ describes the purchase or takeover of one company by another. a. acquisition b. merger c. cartel venture d. joint venture

a. acquisition An acquisition describes the purchase or takeover of one company by another.

TeleFlight Products Inc., a large conglomerate, took over a small startup company that had made some breakthrough innovations in the field of telecommunications. This purchase would help TeleFlight Products to gain access to the startup company's superior technology and human capital. This transaction is an example of a(n) a. acquisition. b. affiliate leadership. c. joint venture. d. cartel.

a. acquisition. This transaction is an example of an acquisition. When large, incumbent firms such as the Tata Group, GE, or Microsoft buy startup companies, the transaction is generally described as an acquisition.

In the context of the VRIO framework, a resource is said to be valuable if it a. allows a firm to take advantage of an external opportunity. b. helps a firm increase its costs. c. results in a perfectly competitive industry structure. d. leads to competitive parity within an industry.

a. allows a firm to take advantage of an external opportunity. In the context of the VRIO framework, a resource is said to be valuable if it allows a firm to take advantage of an external opportunity and/or neutralize an external threat. A resource is valuable if it helps a firm increase the perceived value of its product or service in the eyes of consumers, either by adding attractive features, or by lowering price because the resource helps the firm lower its costs.

Due to a programming error in its pricing engine, Zappos accidentally capped the sales price at $49.95 for all products sold on its subsidiary site ( www.6pm.com ). The mistake was not discovered until 6 a.m. Even though Zappos' terms and conditions clearly state that the firm is under no obligation to fulfill orders placed due to pricing mistakes, Zappos decided to honor every sale made in the time frame between midnight and 6 a.m.—resulting in a loss of over $1.6 million. Which of the following strategies is least illustrated by Zappos' actions in this scenario? a. cost-leadership strategy b. differentiation strategy c. integration strategy d. organic strategy

a. cost-leadership strategy Zappos' actions in this scenario least illustrate a cost-leadership strategy. As discussed in Chapter Case 11, even though Zappos' terms and conditions clearly state that the firm is under no obligation to fulfill orders placed due to pricing mistakes, Zappos decided to honor every sale made in the time frame between midnight and 6 a.m.—resulting in a loss of over $1.6 million.

Strategic business units (SBUs) in a company that uses an unrelated-diversification strategy are in direct competition with each other because a. each SBU is evaluated as a standalone, profit-and-loss center. b. decision making is concentrated at the top of the organization. c. each SBU shares its core competencies with the other SBUs. d. the firm follows a single business or dominant business strategy at the corporate level.

a. each SBU is evaluated as a standalone, profit-and-loss center. Managers using the M-form structures to support an unrelated-diversification strategy should decentralize decision making. Doing so allows general managers to respond to specific circumstances, and leads to a low level of integration at corporate headquarters. Since each SBU is evaluated as a standalone, profit-and-loss center, SBUs end up in competition with each other.

Widgets Inc. is a vendor who supplies machine parts to an appliance manufacturing company. In return, Widgets Inc. relies on the company for its revenue and is affected by any decisions taken by the company. In this scenario, Widgets Inc. is a(n) _____ for the appliance manufacturing company. a. external stakeholder b. focus group c. representative sample d. internal stakeholder

a. external stakeholder In this scenario, Widgets Inc. is an external stakeholder for the appliance manufacturing company.

Sam Walton was responsible for Walmart's cost-leadership strategy that continues to guide it to this day. His influence on the organization's culture is best described as a. founder imprinting. b. differentiation. c. groupthink. d. co-opetition.

a. founder imprinting. Walmart's founder Sam Walton personified the retailer's cost-leadership strategy. Everything Sam Walton did was consistent with the low-cost strategy. Walmart stays true to its founder's tradition. Often, company founders define and shape an organization's culture, which can persist for many decades after their departure. This phenomenon is called founder imprinting.

In order to implement a cost-leadership strategy effectively, a _________ structure is preferred in a firm. a. functional and mechanistic b. simple and organic c. functional and organic d. simple and M-form

a. functional and mechanistic To effectively implement a cost-leadership strategy, managers must create a functional structure that contains the organizational elements of a mechanistic structure—one that is centralized, with well-defined lines of authority up and down the hierarchy.

An inverted U-shaped relationship between the type of diversification and overall firm performance indicates that a. high and low levels of diversification are generally associated with lower overall performance. b. moderate levels of diversification fail to achieve additional value creation. c. firms that compete in single markets benefit the most from economies of scope. d. levels of vertical integration and overall firm performance share an inverse relationship.

a. high and low levels of diversification are generally associated with lower overall performance. The diversification-performance relationship is a function of the underlying type of diversification. A cumulative body of research indicates an inverted U-shaped relationship between the type of diversification and overall firm performance. High and low levels of diversification are generally associated with lower overall performance, while moderate levels of diversification are associated with higher firm performance.

GoodLife Inc. is a luxury condominium-building company that is based in the country of El Verdad. It sells highly priced homes to consumers in El Verdad as well as to consumers in other countries. It has extremely high brand loyalty. The industry it operates in is characterized by low pressure for local responsiveness and low pressure for cost reductions. In this scenario, GoodLife Inc. most likely pursues a(n) _________ strategy. a. international b. localization c. multidomestic d. transnational

a. international In this scenario, El Verdad Inc. most likely pursues an international strategy. An international strategy is advantageous when the multinational enterprise (MNE) faces low pressures for both local responsiveness and cost reductions.

North Carolina National Bank (NCNB) used its unique core competency of identifying, appraising, and integrating acquisition targets to be rebranded as Bank of America, one of the largest banks in the United States. This is an example of a firm a. leveraging existing core competencies to improve current market position. b. building new core competencies to protect new market position. c. redeploying and recombining existing core competencies to compete in markets of the future. d. building new core competencies to create and compete in markets of the future.

a. leveraging existing core competencies to improve current market position. North Carolina National Bank (NCNB) leverages existing core competencies to improve current market position. When combining existing core competencies with existing markets, managers must come up with ideas of how to leverage existing core competencies to improve the firm's current market position.

Since W. L. Gore's core competency is innovation, a(n) ________ would most likely be detrimental to its efforts. a. mechanistic structure b. organic structure c. differentiation strategy d. integration strategy

a. mechanistic structure A mechanistic structure would not allow Zappos or W. L. Gore to develop and hone their respective core competencies in customer service and product innovation. To gain and sustain competitive advantage, structure must follow strategy.

A consolidated industry turns into a fragmented industry when a. restrictive government policies are introduced in the industry. b. firms reduce competition within the industry through mergers and acquisitions. c. technological advances lead to industry convergence. d. network effects enjoyed by incumbent firms within the industry become stronger.

a. restrictive government policies are introduced in the industry. Consolidated industry structures may break up and become more fragmented. This generally happens when there are external shocks to an industry such as deregulation, new legislation, technological innovation, or globalization. Industry convergence is often brought on by technological advances.

The black swan events in the past have demonstrated that a. stakeholders can affect or be affected by a firm's actions. b. capitalism as an economic system is highly reliable. c. companies can successfully integrate cost-leadership and differentiation strategies. d. globalization has reduced the need for standardized corporate ethics.

a. stakeholders can affect or be affected by a firm's actions. With regard to black swan events, two common features are pertinent to the study of strategic management. First, these events demonstrate that managerial actions can affect the economic well-being of large numbers of people around the globe. The second pertinent feature relates to stakeholders—organizations, groups, and individuals who can affect or be affected by a firm's actions.

Which of the following groups will not be considered a company's internal stakeholder? a. suppliers b. board members c. shareholders d. managers

a. suppliers A firm's external stakeholders include customers, suppliers, alliance partners, creditors, unions, communities, media, and governments at various levels. Its internal stakeholders are stockholders, employees (including executives, managers, and workers), and board members.

Which of the following is an example of internal transaction costs? a. the costs pertaining to setting up a shop floor b. the costs associated with searching for suitable manufacturer contracts c. the costs associated with negotiating prices with a business consultancy d. the costs linked to outsourcing payroll maintenance

a. the costs pertaining to setting up a shop floor Transaction costs can occur within a firm. Considered internal transaction costs, these include costs pertaining to organizing an economic exchange within a firm—for example, the costs of recruiting and retaining employees, paying salaries and benefits, setting up a shop floor, providing office space and computers, and organizing, monitoring, and supervising work.

According to the CAGE distance framework, what does cultural distance represent? a. the cultural disparity between an internationally expanding firm's home country and its targeted host country b. the difference between a firm's organizational culture and its competitor's organizational culture c. the cultural disparity between the employees of two companies in a joint venture d. the geographical distance between two countries that have similar national cultures

a. the cultural disparity between an internationally expanding firm's home country and its targeted host country Cultural distance is the cultural disparity between an internationally expanding firm's home country and its targeted host country.

While most of Savvy Inc.'s competitors were moving toward developing and emerging markets, Savvy Inc. decided to keep its operations limited to its home country so that it could gain some advantage. A few years later, however, Savvy Inc. lost its footing in the home market due to a sharp fall in demand. It then decided to invest in large-scale operations in the same developing nations as its competitors, within a short period of six months. However, its costs kept increasing and it could not compete against the already established brands. In this scenario, the failure of Savvy Inc. can be best attributed to a. time compression diseconomies. b. knowledge diffusion. c. economies of scale. d. resource mobility.

a. time compression diseconomies. This failure of Savvy Inc. can be best attributed to time compression diseconomies. When attempting to compress lots of effort and resources such as research and development into a short time period, it will not be as effective as when a firm spreads out its effort and investments over a longer period of time. Trying to achieve the same outcome in a short time period, even with higher investments, tends to lead to inferior results.

Michael Porter is in favor of the Shared Value creation framework because he believes that it a. will not only allow companies to gain and sustain a competitive advantage, but also reshape capitalism and its relationship to society. b. is the responsibility of the company to focus on creating profits and nothing else. c. is the duty of a company to focus on benefitting shareholders who have the most legitimate claim on profits. d. will help to pit economic and societal needs in a trade-off.

a. will not only allow companies to gain and sustain a competitive advantage, but also reshape capitalism and its relationship to society. Porter argues that managers need to reestablish the important relationship between superior firm performance and societal progress. This dual point of view, Porter argues, will not only allow companies to gain and sustain a competitive advantage, but also reshape capitalism and its relationship to society.

Which of the following is a feature of a fragmented industry? a. A fragmented industry tends to generate high profitability. b. A fragmented industry consists of many small firms. c. A fragmented industry allows firms to set prices. d. A fragmented industry is dominated by one large firm.

b. A fragmented industry consists of many small firms. A fragmented industry consists of many small firms and tends to generate low profitability.

Which of the following statements is true of an oligopoly? a. In an oligopoly, price-competition is the preferred mode of competition. b. An oligopoly is often analyzed using game theory. c. In an oligopoly, competing firms are most often independent of each other. d. An oligopoly is characterized by low entry barriers.

b. An oligopoly is often analyzed using game theory. An oligopoly is often analyzed using game theory, which attempts to predict strategic behaviors by assuming that the moves and reactions of competitors can be anticipated.

Which of the following statements is true of local responsiveness? a. It helps reinforce a cost-leadership strategy at the business level. b. It generally entails higher costs. c. It reduces the differentiation of products and services. d. It forms the basis for the globalization hypothesis.

b. It generally entails higher costs. Local responsiveness generally entails higher costs, and sometimes even outweighs cost advantages from economies of scale and lower-cost input factors.

Revved Rider Inc., a motorcycle company, is the market leader due to its superior engine technology and service orientation. These unique qualities have helped the company generate revenues that are consistently higher than other firms in the same industry. Which of the following can be concluded about Revved Rider Inc. from this scenario? a. It has a direct investment in the other firms. b. It has a competitive advantage over the other firms. c. It has an exchange relationship with the other firms. d. It has competitive parity with the other firms.

b. It has a competitive advantage over the other firms. Revved Rider Inc. has a competitive advantage over the other firms. A firm that achieves superior performance relative to other competitors in the same industry or the industry average has a competitive advantage.

Which of the following is a shortcoming of the matrix structure? a. It cannot effectively address a higher level of diversification, which often stems from further growth. b. Its implementation is difficult due to significant organizational complexity and increased administrative costs. c. It frequently lacks effective communication channels across departments. d. It often leads to an overload for the founder and/or CEO when the firms experience growth.

b. Its implementation is difficult due to significant organizational complexity and increased administrative costs. Though it is appealing in theory, the matrix structure does have shortcomings. It is usually difficult to implement: implementing two layers of organizational structure creates significant organizational complexity and increases administrative costs.

Which of the following statements accurately brings out the difference between economies of scale and learning effects? a. While there are no diseconomies to scale, there are diseconomies to learning. b. Learning effects occur over time, whereas economies of scale are captured at one point in time when output is increased. c. Firms experience economies of scale when output increases, and they experience learning effects when output decreases. d. Economies of scale reduce cost per unit, whereas learning effects increase cost per unit.

b. Learning effects occur over time, whereas economies of scale are captured at one point in time when output is increased. Learning effects occur over time as output is accumulated, while economies of scale are captured at one point in time when output is increased.

How are the early majority and late majority different in their attitudes toward technology? a. The early majority is very concerned with what new technology can do for them; the late majority is not. b. The early majority is confident in their ability to master the new technology; the late majority is not. c. The early majority is concerned that many new technologies will fade away; the late majority is not. d. The early majority is strongly influenced by the endorsements of others; the late majority is not.

b. The early majority is confident in their ability to master the new technology; the late majority is not. The early majority is confident in their ability to master the new technology; the late majority is not.

Which of the following statements is true of the growth stage in the industry life cycle? a. The objective of firms during this stage is to pursue a harvest strategy. b. The prices begin to fall during this stage when compared to the introduction stage. c. The type of buyers during this stage consists of the late majority. d. The basis of competition tends to move away from process innovations toward product innovations.

b. The prices begin to fall during this stage when compared to the introduction stage. Prices begin to fall in the growth stage, often rapidly, as standard business processes are put in place and firms begin to reap economies of scale and learning.

Which of the following statements is typically true of early adopters? a. They enter the market in the maturity stage of the industry life cycle. b. They appreciate new technology that can add value to their personal and professional lives. c. They make up the mass market together with the technology enthusiasts. d. They enjoy using beta versions of products and providing free suggestions to companies.

b. They appreciate new technology that can add value to their personal and professional lives. Early adopters recognize and appreciate the possibilities the new technology can afford them in their professional and personal lives. Early adopters' demand is fueled more by intuition and vision rather than technology concerns.

While the industry for tablet computers is in the growth stage, the laptop industry is in its shakeout stage. What does this imply? a. The tablet industry is ahead of the laptop industry in the industry life cycle. b. While the market demand for tablets will be high, the demand for laptops will be limited. c. The number of competitors entering the laptop industry will be more than those entering the tablet computers industry. d. While competition for the tablet industry is primarily based on price, it is not so for the laptop industry.

b. While the market demand for tablets will be high, the demand for laptops will be limited. Given the large market size achieved from the growth stage, any additional market demand in the next stage is limited. Demand now consists of replacement or repeat purchases only. This limited market demand in turn increases competitive intensity within the industry.

In public stock companies, inside directors a. generally form the lower levels of management in an organization. b. are appointed by shareholders to provide the board with necessary company information. c. are not full-time employees of the firm. d. are more likely to watch out for shareholder's interests than external directors.

b. are appointed by shareholders to provide the board with necessary company information. Inside directors are generally part of the company's senior management team, such as the chief financial officer (CFO), and the chief operating officer (COO). They are appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance.

Highly diversified firms experience a diversification discount in the stock market because they a. cannot leverage financial economies. b. are unable to create additional value. c. cannot influence costs. d. are unable to overcome institutional weaknesses in emerging economies.

b. are unable to create additional value. Firms that pursue unrelated diversification are often unable to create additional value. They experience a diversification discount in the stock market.

There are several cost drivers that can be managed in order to establish a low-cost leadership advantage. One of the primary cost drivers is a. adding unique features that turn standard commodities into differentiated products. b. combining experience-based learning and process innovation to move onto a steeper learning curve. c. creating personalized customer service in order to minimize price sensitivity among customers. d. shifting to small-scale production processes in order to create highly customized products.

b. combining experience-based learning and process innovation to move onto a steeper learning curve. By choosing a cost-leadership strategy, managers must focus their attention on lowering the overall costs of producing a product or service while maintaining an acceptable level of quality that will serve the needs of the customer. Combining experience-based learning and process innovation allows the firm to leapfrog to a steeper learning curve, thereby driving down its per-unit costs.

In the _____, firms change the underlying technology while holding cumulative output constant. a. learning curve b. experience curve c. minimum efficient scale d. maximum efficient scale

b. experience curve In the experience curve, firms change the underlying technology while holding cumulative output constant.

Bric Autos Inc., a Campora-based automobile company, made a capital investment of $300,000 to set up production units and distribution channels in the country of Bryon from where it plans to access the Bryonian market. Such investments are best known as a. corporate leveraged buyouts. b. foreign direct investments. c. corporate venture capital investments. d. foreign exchange.

b. foreign direct investments. Such investments are best known as foreign direct investments. By making investments in value chain activities abroad, multinational enterprises (MNEs) engage in foreign direct investment (FDI).

Zenovo Inc. is an electronics company based in the country of Linx. Zenovo has manufacturing facilities in four other countries where labor costs are low. It also has its research centers in three other countries, because these countries offer best-of-class capabilities. However, Zenovo does not offer much product differentiation because of which price is the main competitive weapon. In this scenario, Zenovo Inc. most likely implements a __________ strategy. a. transnational b. global-standardization c. multidomestic d. global matrix

b. global-standardization In this scenario, Zenovo Inc. most likely implements a global-standardization strategy. Multinational enterprises (MNEs) following a global-standardization strategy attempt to reap significant economies of scale and location economies by pursuing a global division of labor based on wherever best-of-class capabilities reside at the lowest cost.

In the restaurant industry, a large number of restaurants cater to the similar food-related needs of customers. However, each restaurant makes its product unique by offering a different cuisine, a different ambience, or different services like home delivery and organic ingredients. This differentiation allows each restaurant to set its own prices. Thus, the restaurant industry best illustrates a(n) a. perfectly competitive structure. b. monopolistically competitive structure. c. monogopoly. d. oligopoly.

b. monopolistically competitive structure. The restaurant industry best illustrates a monopolistically competitive structure. A monopolistically competitive industry is characterized by many firms, a differentiated product, some obstacles to entry, and the ability to raise prices for a relatively unique product while retaining customers.

There exist important trade-offs between value creation and low cost because value creation and cost tend to be a. negatively correlated. b. positively correlated. c. independent of each other. d. inversely related.

b. positively correlated. To achieve a desired strategic position, managers must make strategic trade-offs—choices between a cost or value position. Differentiation and cost leadership require distinct strategic positions in order to increase a firm's chances to gain and sustain a competitive advantage. Because value creation and cost tend to be positively correlated, there exist important trade-offs between value creation and low cost.

The reasons firms enter strategic alliances include all of the following except a. accessing critical complementary assets. b. reducing the value gap created. c. lowering costs. d. learning new capabilities.

b. reducing the value gap created. To affect a firm's competitive advantage, an alliance must promise a positive effect on the firm's economic value creation (value gap) through increasing value and/or lowering costs.

The annual net profit after taxes for RSL Corp., a multinational conglomerate, is $5.5 billion. As legal owners, which of the following stakeholder groups has the most legitimate claim on this profit? a. managers b. shareholders c. local communities d. government

b. shareholders As the legal owners, shareholders have the most legitimate claim on the company's profits. A firm has to ensure that its primary stakeholders—the firm's shareholders and other investors—achieve their objectives.

DigiLife Electronics Inc. follows a business model in which the performance of the company is not only based on how much profits were generated, but also on how the community in general benefited from its operations. Thus, the company under its "Plant a Life" campaign promises to plant a tree with every customer purchase. Which of the following terms best describes the business model of DigiLife Electronics? a. crowdsourcing b. social entrepreneurship c. offshoring d. corporate intrapreneurship

b. social entrepreneurship DigiLife Electronics Inc. uses the social entrepreneurship business model. Social entrepreneurship describes the pursuit of social goals by using entrepreneurship. Social entrepreneurs evaluate the performance of their ventures not only by financial metrics but also by ecological and social contribution.

The auditor of a public company is assessing the value of all the intangible assets owned by the company. Which of the following would most likely be included in this assessment? a. the company's headquarters b. the company's brand equity c. the company's cash reserves d. the company's plant and equipment

b. the company's brand equity Intangible resources have no physical attributes and thus are invisible. Examples of intangible resources are a firm's culture, its knowledge, brand equity, reputation, and intellectual property.

Which of the following best illustrates human-asset specificity? a. investing in drilling equipment to drill through any commercial metal b. training employees on how to operate a customized furnace c. using standard casting machines in industrial manufacturing d. instructing employees on how to operate a standard MRI scanner

b. training employees on how to operate a customized furnace Human-asset specificity refers to investments made in human capital to acquire unique knowledge and skills (such as training employees on how to operate a customized furnace), which are not transferable to a different employer.

Which of the following best illustrates horizontal integration? a. Ignited Autos Inc. sets up its own component-part manufacturing units to have strong control over production. b. Skin Love Inc. sets up its own retail stores to directly sell its products, rather than selling them through large departmental stores. c. B9 Electronics Inc. acquires its competitor, Virtue Electronics Inc., to gain access to its core competencies. d. Polka Couture Inc. outsources its production to contract manufacturers in labor-intensive countries.

c. B9 Electronics Inc. acquires its competitor, Virtue Electronics Inc., to gain access to its core competencies. B9 Electronics acquiring its competitor, Virtue Electronics, to gain access to its core competencies best illustrates horizontal integration. Horizontal integration is the process of merging with a competitor at the same stage of the value chain.

________ is best described as the process of merging with a competitor at the same stage of the value chain. a. Backward integration b. Forward integration c. Horizontal integration d. Taper integration

c. Horizontal integration Horizontal integration is the process of merging with a competitor at the same stage of the value chain. Horizontal integration is a type of corporate strategy that can improve a firm's strategic position in a single industry.

Which of the following is a feature of Logitech as a global collaboration network? a. The company has been able to operate as a multinational company with self-contained operations in a few key countries. b. The company has been able keep its knowledge flow one-way, from its domestic headquarters to international outposts. c. The company has been able to organize work continuously because its teams in different locations around the globe can work 24/7. d. The company has been unable to keep its costs low because of its centers of expertise that are spread across the globe.

c. The company has been able to organize work continuously because its teams in different locations around the globe can work 24/7. Underlying Logitech's innovation competence is a network of best-in-class skills around the globe. Moreover, Logitech can organize work continuously because its teams in different locations around the globe can work 24/7.

How do complements affect a primary product or service? a. They reduce the value of the primary product. b. They act as the strategic equivalent of the primary product. c. They increase the demand for the primary product. d. They lower the utility of the primary product.

c. They increase the demand for the primary product. Complements increase the demand for a primary product, thereby enhancing the profit potential for the industry and the firm.

While Cadzia Electronics Inc. incurs $450 to manufacture a laptop, its competitor, Virtue Electronics Inc., incurs $400. However, laptops of both the companies have been able to create the same value among customers. From the given scenario, it can be inferred that a. Cadzia Electronics has a competitive advantage over Virtue Electronics. b. Cadzia Electronics is a cost leader when compared to Virtue Electronics. c. Virtue Electronics and Cadzia Electronics share a differentiation parity. d. Virtue Electronics can charge a higher price for its laptops.

c. Virtue Electronics and Cadzia Electronics share a differentiation parity. From the given scenario, it can be inferred that Virtue Electronics and Cadzia Electronics share differentiation parity. A cost leader can achieve a competitive advantage as long as its economic value created is greater than that of its competitors. A firm achieves differentiation parity when it creates the same perceived value as its rival firm.

For an asset or a capability to be included in a firm's resource stock, it should be a. readily available for purchase using cash. b. commonly shared by other firms in the same industry. c. built through investments over time. d. capable of reducing the barriers to entry in an industry.

c. built through investments over time. For an asset or a capability to be included in a firm's resource stock, it should be built through investments over time. According to the dynamic capabilities perspective, the managers' task is to decide which investments to make over time in order to best position the firm for competitive advantage in a changing environment.

In the context of the SWOT matrix, which of the following best exemplifies an external opportunity for a firm? a. increasing productivity of the employees b. decreasing employee attrition within the firm c. decreasing government interference in the target market d. increasing inflation rates in the target market

c. decreasing government interference in the target market Decreasing government interference in the target market best exemplifies an external opportunity for a firm. Strengths and weaknesses are internal to an organization, whereas opportunities and threats are external to the organization.

In a focused differentiation strategy, a firm seeks to a. offer low-priced products and services with a narrow focus on a niche market. b. create higher customer value than the competitors in different segments of a mass market. c. deliver products or services with unique features to a specific, narrow part of the market. d. focus on reducing the value gap to differentiate itself from the competitors.

c. deliver products or services with unique features to a specific, narrow part of the market. A focused differentiation strategy is same as the differentiation strategy except with a narrow focus on a niche market.

HTC started as an original equipment manufacturing firm (OEM) for brand-name mobile device companies. Later, it started offering a lineup of innovative and high-performance smartphones by acquiring One & Co., a San Francisco-based design firm. This strategic move of HTC is known as a. crowdsourcing. b. corporate divestiture. c. forward vertical integration. d. radical innovation.

c. forward vertical integration. This strategic move of HTC is known as forward vertical integration. Forward vertical integration involves moving ownership of activities closer to the end customer.

The starting point of the build-borrow-or-buy framework is management's a. evaluation of the firm's existing internal resources to check if they are relevant. b. comparison of the internal transaction costs against the external transaction costs. c. identification of a strategic resource gap that will impede future growth. d. evaluation of the alliance partners' compatibility and commitment.

c. identification of a strategic resource gap that will impede future growth. The build-borrow-or-buy framework provides a conceptual model that aids strategists in deciding whether to pursue internal development (build), enter a contract arrangement or strategic alliance (borrow), or acquire new resources, capabilities, and competencies (buy). The starting point is management's identification of a strategic resource gap that will impede future growth.

Firms often consolidate industries through horizontal mergers and acquisitions to a. solve principal-agent problems. b. lower their stock prices. c. increase their market power. d. motivate managers.

c. increase their market power. Firms often consolidate industries through horizontal mergers and acquisitions to increase their market power.

An experience curve attempts to capture both a. network effects and diseconomies of scale. b. time compression diseconomies and mass customizations. c. learning effects and process improvements. d. economies of scope and network effects.

c. learning effects and process improvements. The concept of an experience curve attempts to capture both learning effects and process improvements.

A disadvantage associated with obtaining goods and services externally includes a. high administrative costs due to increased bureaucracy. b. low-powered incentives for an individual to work as an entrepreneur for the firm. c. nontrivial search costs to be borne by the firm. d. creation of economies of scope for the firm.

c. nontrivial search costs to be borne by the firm. On a very fundamental level, perhaps the biggest disadvantage of transacting in markets, rather than owning the various production and distribution activities within the firm itself, entails nontrivial search costs. In particular, a firm faces search costs when it must scour the market to find reliable suppliers from among the many firms competing to offer similar products and services.

Over time, 3M has relied on the results-only-work-environment (ROWE) framework and has morphed into a highly science-driven innovation company. At 3M, employees are encouraged to spend 15 percent of their time on projects of their own choosing. If any of these projects look promising, 3M provides financing through an internal venture-capital fund and other resources to further develop their commercial potential. This real-world scenario best illustrates a. organizational culture. b. input controls. c. output controls. d. organizational strategy.

c. output controls. This real-world scenario best illustrates output controls. At 3M, employees are encouraged to spend 15 percent of their time on projects of their own choosing. If any ofthese projects look promising, 3M provides financing through an internal venture-capital fund and other resources to further develop their commercial potential.

Which of the following is a benefit of a high degree of formalization in an organization? a. high innovation b. excellent customer service c. predictable results d. fast decision making

c. predictable results Formalization is not necessarily negative; often it is necessary to achieve consistent and predictable results. Yet a high degree of formalization can slow decision making, reduce creativity and innovation, and hinder customer service.

Which of the following is one of the problems that corporate governance seeks to address? a. limited liability for investors b. shared-value creation c. principal-agent problem d. ecomagination problem

c. principal-agent problem Corporate governance attempts to address the principal-agent problem, which can occur any time an agent performs activities on behalf of a principal. This problem can arise whenever a principal delegates decision making and control over resources to agents, with the expectation that they will act in the principal's best interest.

As differentiation and cost leadership are distinct strategic positions that require important trade-offs, it is a. easy to build an ambidextrous organization. b. best for firms to avoid pursuing a generic business-level strategy. c. quite difficult to translate a Blue Ocean strategy into reality. d. easy to increase value and lower cost at the same time.

c. quite difficult to translate a Blue Ocean strategy into reality. Although appealing in a theoretical sense, a Blue Ocean strategy is actually quite difficult to translate into reality. The reason is that differentiation and cost leadership are distinct strategic positions that require important trade-offs.

Companies from wealthy countries tend to trade with other rich countries rather than poor countries because they can a. benefit from economic arbitrage. b. increase the per capita income of consumers in the poor countries. c. replicate their existing business model more easily. d. take advantage of the price differences between the two markets.

c. replicate their existing business model more easily. Companies from wealthy countries benefit in cross-border trade with other wealthy countries when their competitive advantage is based on economies of experience, scale, scope, and standardization. This is because replication of an existing business model is much easier in a country where the incomes are relatively similar and resources, complements, and infrastructure are of roughly equal quality.

A firm decides to retain $20,000 from its annual earnings and invest it in developing an advanced manufacturing system. In this scenario, the $20,000 would most likely be referred to as the firm's a. capital gain. b. frozen asset. c. resource flow. d. marginal utility.

c. resource flow. In this scenario, the $20,000 would most likely be referred to as the firm's resource flow. Resource flows are the firm's level of investments to maintain or build a resource.

Which of the following will most likely be considered as an automobile company's core competency? a. the company's ability to follow federal laws just like its competitors b. the company's ability to start distributing its cars in areas where a competitor is the market leader c. the company's ability to make its cars more fuel efficient than most of its competitors d. the company's ability to manufacture cars at a cost that is average in the industry

c. the company's ability to make its cars more fuel efficient than most of its competitors The company's ability to make its cars more fuel efficient than most of its competitors will most likely be considered as an automobile company's core competency. Core competencies are 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.

Using the _______, managers can see how competitive advantage flows from a firm's distinct set of activities. a. resource-based view b. VRIO framework c. value chain analysis d. SWOT analysis

c. value chain analysis Although the resource-based view of the firm helps to identify the integrated set of resources and capabilities that are the building blocks of core competencies, the value chain perspective enables managers to see how competitive advantage flows from the firm's distinct set of activities.

The _____ describes the internal activities a firm engages in when transforming inputs into outputs. a. resource-based view b. PESTEL analysis c. value chain view d. SWOT analysis

c. value chain view The value chain view describes the internal activities a firm engages in when transforming inputs into outputs.

One of the major differences between inside directors and outside directors of a company is that outside directors are more likely to a. be full-time professionals at the company. b. provide the board with information regarding the company's performance. c. watch out for the interests of the shareholders of the company. d. align interests with the management and CEO of the company.

c. watch out for the interests of the shareholders of the company. Outside directors are not employees of the firm. They frequently are senior executives from other firms or full-time professionals, who are appointed to a board and who serve on several boards simultaneously. Given their independence, they are more likely to watch out for the interests of shareholders.

______________ is best described as a firm's ability to understand external technology developments, evaluate them, and integrate them into current products or create new ones. a. Minimum efficient scale b. Technical efficiency c. Market liquidity d. Absorptive capacity

d. Absorptive capacity A firm's absorptive capacity is its ability to understand external technology developments, evaluate them, and integrate them into current products or create new ones.

Which of the following is one of the implications of information asymmetry between principals and agents? a. The information is delivered to all stakeholders simultaneously, which is disadvantageous to the stockholders. b. Principals tend to be better informed than the agents, and thus will avoid delegating decision-making authority to their agents. c. Outsiders, such as shareholders, are the first to learn about important developments, before the information is released to the employees. d. Agents can pass on the information to select principals who can trade stocks based on this information.

d. Agents can pass on the information to select principals who can trade stocks based on this information. Managers, executives, and board members tend to have access to private information concerning important company developments that outsiders, especially investors, are not privy to. Although possessing insider information is not illegal and indeed is part of an executive's job, what is illegal is acting upon it through trading stocks or passing on the information to others who might do so.

Which of the following explains how dynamic capabilities are different from the resource-based view? a. Dynamic capabilities deal with resource heterogeneity. b. Dynamic capabilities deal with intangible resources. c. Dynamic capabilities deal with tangible resources. d. Dynamic capabilities deal with applying resources over time.

d. Dynamic capabilities deal with applying resources over time. Dynamic capabilities deal with applying resources over time; the resource-based view does not.

Which of the following real-world examples best exemplifies a Shared Value creation framework? a. HP's appointment of Leo Apotheker as the CEO after he was relieved by SAP b. GE's strategy of developing multiple products for the same purpose and altering its products to suit the culture of different countries c. HP's decision to ask its CEO, Mark Hurd, to resign after he was accused of sexual harassment d. GE's ecomagination strategy that focuses on providing cleaner and efficient sources of energy, while generating billions in revenues

d. GE's ecomagination strategy that focuses on providing cleaner and efficient sources of energy, while generating billions in revenues The Shared Value creation framework proposes that managers maintain a dual focus on shareholder value creation and value creation for society. Ecomagination is GE's strategic initiative to provide cleaner and more efficient sources of energy, provide abundant sources of clean water anywhere in the world, and reduce emissions.

Which of the following statements best supports the fact that even during a period of low demand in the U.S. automotive industry, excess capacity remained? a. Suppliers in the automotive industry had low bargaining power. b. Other American automakers of plug-in hybrid sports cars, like Fisker Automotive, filed for bankruptcy. c. Complementary products and services like battery charging and service stations were pervasive. d. GM and Chrysler, despite their bankruptcy, restructured instead of exiting the industry.

d. GM and Chrysler, despite their bankruptcy, restructured instead of exiting the industry. As discussed in Chapter Case 3, when demand is slowing, excess capacity tends to develop in the automotive industry, and the incumbent car companies begin to initiate a cut-throat price competition to move inventory. Although both GM and Chrysler went into bankruptcy, neither exited the industry but rather restructured, causing excess capacity to remain in the industry.

Which of the following is an advantage of using licensing or franchising as a foreign entry mode? a. Licensing or franchising reduces a firm's exposure to loss of reputation. b. Licensing or franchising reduces a firm's exposure to loss of intellectual property. c. Licensing or franchising allows for high levels of control. d. Licensing or franchising requires low capital investments.

d. Licensing or franchising requires low capital investments. Exporting, licensing, and franchising are vehicles of foreign expansion that require low investments, but also allow for a low level of control. Foreign entry modes with a high level of control such as foreign acquisitions or greenfield plants reduce the firm's exposure to two particular downsides of global business: loss of reputation and loss of intellectual property.

_________ is best described as a form of self-delusion in which managers convince themselves of their superior skills in the face of clear evidence to the contrary. a. Self-actualization b. Managerial myopia c. Self-efficacy d. Managerial hubris

d. Managerial hubris Managerial hubris is a form of self-delusion in which managers convince themselves of their superior skills in the face of clear evidence to the contrary.

Which of the following statements is true of the real-options perspective? a. The approach obligates the incumbent firm to make continued investments when demanded by its partner. b. The approach fails to provide the incumbent firm a hedge against uncertainty. c. The approach involves making large investments at the end of a project, irrespective of whether the project is successful or not. d. The approach allows the incumbent firm to obtain additional information at predetermined stages.

d. The approach allows the incumbent firm to obtain additional information at predetermined stages. This approach allows the firm to obtain additional information at predetermined stages. At each stage, after new information is revealed, the firm evaluates whether or not to make further investments.

Coastal Islands Products Inc. is a 100-year-old, multinational enterprise (MNE). Which of the following activities would the company most likely have been involved in during the stage of Globalization 2.0? a. The company would have restricted all its business activities to its home country. b. The company would have ventured into foreign markets essentially by exporting goods. c. The company would have organized itself as a global collaboration network with the help of Internet technologies. d. The company would have increased its local responsiveness to country-specific circumstances by duplicating business functions overseas.

d. The company would have increased its local responsiveness to country-specific circumstances by duplicating business functions overseas. The company would have increased its local responsiveness to country-specific circumstances by duplicating business functions overseas. From 1945 to the end of the 20th century, in the Globalization 2.0 stage, MNEs began to create smaller, self-contained copies of themselves, with all business functions intact, in a few key countries (notably, Western European countries, Japan, and Australia). Although it was costly to duplicate business functions in overseas outposts, doing so allowed for greater local responsiveness to country-specific circumstances.

Which of the following firms most likely has the lowest bargaining power as a buyer? a. an automobile company that can backwardly integrate to produce its own component parts b. a fast food chain that has multiple suppliers for processed meat c. a government agency that buys large quantities of cement from a private supplier d. a cell phone company that requires highly customized software for its phones

d. a cell phone company that requires highly customized software for its phones The firm that most likely has the lowest bargaining power as a buyer is a cell phone company that requires highly customized software for its phones. The power of buyers is high when the industry's products are standardized or undifferentiated commodities. When suppliers offer products that are differentiated, the bargaining power of buyers reduces.

Which of the following foreign entry modes requires the highest level of investment in terms of capital and other resources and allows for a high level of control? a. exporting b. franchising c. joint ventures d. acquisitions

d. acquisitions Foreign entry modes with a high level of control such as foreign acquisitions or greenfield plants reduce the firm's exposure to two particular downsides of global business: loss of reputation and loss of intellectual property.

Which of the following groups is most likely to be considered a firm's internal stakeholder? a. creditors b. customers c. alliance partners d. board members

d. board members Stakeholders can be grouped by whether they are internal or external to a firm. Internal stakeholders include stockholders, employees (including executives, managers, and workers), and board members.

Hawthorne Inc. is a pen manufacturing company based in Massachusetts. Hawthorne's main area of operation is Massachusetts, and it has a stronghold over the market. It employs a robust production system, which helps it sell pens at exceptionally low prices. In this scenario, which of the following strategies is Hawthorne Inc. most likely using? a. ambidextrous strategy b. differentiation strategy c. integration strategy d. cost-leadership strategy

d. cost-leadership strategy In this scenario, Hawthorne Inc. is most likely using a cost-leadership strategy. The goal of a cost-leadership strategy is to create a competitive advantage by reducing the firm's cost below that of competitors while offering acceptable value. The cost leader sells a no-frills, standardized product or service to the mainstream customer.

A strategic alliance has the potential to help a firm gain and sustain a competitive advantage when it joins together resources and knowledge that are a. common in the industry. b. inexpensive to acquire. c. less differentiated. d. difficult to imitate.

d. difficult to imitate. A strategic alliance has the potential to help a firm gain and sustain a competitive advantage when it joins together resources and knowledge in a combination that obeys the VRIO principles. The basis for competitive advantage is formed when a strategic alliance creates resource combinations that are valuable, rare, and difficult to imitate; and the alliance is organized appropriately to allow for value capture.

A tightly coupled system of strategy and structure is prone to break apart when a. input and output controls restrict information flow. b. organizational culture becomes adaptive to change. c. managers fail to recognize the need for organizational inertia. d. external and internal shifts put pressure on the system.

d. external and internal shifts put pressure on the system. Success in the current environment can lead to a firm's downfall in the future, when the tightly coupled system of strategy and structure experiences internal or external shifts. Such a tightly coupled system is prone to break apart when external and internal shifts put pressure on the system.

A financial advisor has heard from a relative of NR Industries Inc.'s CEO that the company is planning to shut down its operations in Europe next year. The financial advisor realizes that this decision may cause a decline in the value of the company's shares and decides to sell them off. A buyer, unaware of the company's future plans, sees this as a potential opportunity and invests in the company. What does this scenario best illustrate? a. network effects b. experience-curve effects c. principal-agent problems d. information asymmetries

d. information asymmetries The scenario best illustrates information asymmetries. Frequently, sellers have better information about products and services than buyers, which in turn creates information asymmetries, situations in which one party is more informed than another, because of the possession of private information.

Travis owns shares of Lobster Krown Inc., a food and beverages company. The company's financial situation takes a turn for the worse and ends up in severe debt. Despite owning shares of Lobster Krown, Travis is not responsible for bringing more money into the company to get it out of its debt. Which characteristic of public stock companies does this scenario best exemplify? a. transferability of investor ownership b. legal personality c. separation of legal ownership and management control d. limited liability for investors

d. limited liability for investors The characteristic of public stock companies that this scenario best exemplifies is limited liability for investors. This characteristic means that the shareholders who provide the risk capital are liable only to the capital specifically invested, and not for other investments they may have made or for their personal wealth. Limited liability encourages investments by the wider public and entrepreneurial risk-taking.

A Blue Ocean strategy typically allows a firm to a. provide unique product or service features at a premium price. b. add product features that raise costs without raising the perceived value. c. reduce the value gap created by their products. d. offer a differentiated product or service at low cost.

d. offer a differentiated product or service at low cost. A Blue Ocean strategy allows a firm to offer a differentiated product or service at low cost.

Coffee bean producers in the country of Matterstein grow their own coffee beans and supply them to various stores and restaurants all over the country. There are many producers supplying to a huge number of companies, and they are typically unable to differentiate their products from each other. They also do not have the power to fix their own prices in the industry. In addition, these suppliers can only achieve competitive parity and not a competitive advantage. Thus, the coffee bean industry in Matterstein best illustrates a(n)___ structure. a. monopolistically competitive b. oligopolistic c. monopolistic d. perfectly competitive

d. perfectly competitive The coffee bean industry in Matterstein best illustrates a perfectly competitive industry structure. A perfectly competitive industry is characterized as fragmented and has many small firms, a commodity product, ease of entry, and little or no ability for each individual firm to raise its prices.

Restrictions imposed by the government, such as export quotas on certain products, are a part of the _______ environment of the PESTEL framework. a. economic b. sociocultural c. ecological d. political

d. political The political environment describes the processes and actions of government bodies that can influence the decisions and behavior of firms. Governments, for example, can affect firm performance by exerting political pressure on companies.

Mega Products Inc., a large multinational conglomerate, has hired an external consultant to process and audit its payroll. This allows the company to focus on manufacturing and marketing activities rather than developing and maintaining its own human resource management systems. Which of the following alternatives to vertical integration has Mega Products adopted? a. crowdsourcing b. forward integration c. backward integration d. strategic outsourcing

d. strategic outsourcing Mega Products Inc. has adopted the strategic outsourcing strategy. An alternative to vertical integration is strategic outsourcing, which involves moving one or more internal value chain activities outside the firm's boundaries to other firms in the industry value chain.

When a Blue Ocean strategy is successfully formulated and implemented, investments in differentiation and low costs are not a. value drivers but cost drivers. b. cost drivers but value drivers. c. complements but substitutes. d. substitutes but complements.

d. substitutes but complements. When a Blue Ocean strategy is successfully formulated and implemented, investments in differentiation and low costs are not substitutes but complements, providing important positive spill-over effects.

Which of the following does a firm possess when it can outperform other firms in the same industry or the industry average over a prolonged period of time? a. consistent power position b. long-term capital gain c. strategic positioning d. sustainable competitive advantage

d. sustainable competitive advantage A firm that is able to outperform its competitors or the industry average over a prolonged period of time has a sustainable competitive advantage.

What happens in the third phase of alliance management? a. the alliance partners choose an appropriate governance mechanism b. the incumbent firm designs the alliance c. the firm initiating the alliance selects its partner d. the alliance partners make relation-specific investments

d. the alliance partners make relation-specific investments The third phase in a firm's alliance management capability concerns the ongoing management of the alliance. To be a source of competitive advantage, the partnership needs to create resource combinations that obey the VRIO criteria. This can be most likely accomplished if the alliance partners make relation-specific investments, establish knowledge-sharing routines, and build interfirm trust.