Strategic Management Exam 1

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TRUE OR FALSE: Intellectual property rights are easier to define and protect than property rights for physical assets (e.g., plant and equipment).

FALSE Intellectual property rights are more difficult to define and protect than property rights for physical assets (e.g., plant, equipment, and land). If, however, intellectual property rights are not reliably protected by the state, there will be no incentive to develop new products and services.

TRUE OR FALSE: Intellectual property rights are the tangible property owned by a firm.

FALSE Intellectual property rights are the intangible property owned by a firm in the forms of patents, copyrights, trademarks, or trade secrets.

TRUE OR FALSE: Knowledge-based resources tend to be more explicit in nature.

FALSE Knowledge-based resources tend to be more tacit in nature. Therefore, they are much more difficult to protect against loss (i.e., the individual quitting the organization) than other types of capital, such as equipment, machinery, and land.

TRUE OR FALSE: One potential downside of building social capital in an organization is groupthink. This means everyone in the group thinks on his or her own and comes up with new ideas.

FALSE Some firms have been adversely affected by very high levels of social capital because it may breed groupthink, a tendency not to question shared beliefs. In effect, too many warm and fuzzy feelings among group members prevent people from rigorously challenging each other.

TRUE OR FALSE: Support activities provide support for primary activities, but not each other.

FALSE Support activities (procurement, technology development, human resource management, and general administration) either add value by themselves or add value through important relationships with both primary activities and other support activities.

TRUE OR FALSE: The more reliance a firm has on intellectual capital, the closer its book value will be to its market value.

FALSE The gap between the market value and book value of a firm is far greater for knowledge-intensive corporations than for firms with strategies based primarily on tangible assets.

TRUE OR FALSE: The return on assets ratio is used to measure short-term solvency of the firm.

FALSE The return on assets ratio (net income divided by total assets) is used to measure the profitability of the firm

TRUE OR FALSE: The power of a buyer group is increased if the buyer group has less concentration than the supplier group.

FALSE: A buyer group is powerful when it is concentrated or purchases large volumes relative to seller sales. If a large percentage of a supplier sales are purchased by a single buyer, the importance of the buyer business to the supplier increases.

TRUE OR FALSE: Environmental scanning involves surveillance of the internal environment of a firm to predict environmental changes and detect changes already under way.

FALSE: Environmental scanning involves surveillance of the external environment of the firm to predict environmental changes and detect changes already under way. This alerts the organization to critical trends and events before changes develop a discernible pattern and before competitors recognize them.

Apple combines and packages proven technology in new and innovative ways. This is an example of its use of A. tangible resources. B. intangible resources. C. organizational capabilities. D. strong primary activities

C. organizational capabilities

Why must successful managers recognize opportunities and threats in their company external environment? A. If they miscalculate the market, opportunities will be lost. B. If they misread the market, they are likely to become rich. C. If they identify all of the environmental threats, they are guaranteed to acquire large market share. D. If they identify all of the environmental opportunities, they are guaranteed to acquire large market share.

A. If they miscalculate the market, opportunities will be lost.

The four key attributes of strategic management include the idea that strategy must A. be directed toward overall organizational goals and objectives. B. be focused only on long-term objectives. C. be focused on only one specific area of an organization. D. focus only on competitor strengths.

A. be directed toward overall organizational goals and objectives.

Firms must be aware of goals other than short-term profit maximization. One area of concern should be social responsibility, which is the A. expectation that business will strive to improve the overall welfare of society. B. idea that organizations are solely responsible to local citizens. C. fact that court costs could impact the financial bottom line. D. idea that businesses are responsible for maintaining a healthy social climate for their employees.

A. expectation that business will strive to improve the overall welfare of society.

Firms that were successful in the past can fail today because A. they keep pace with changes in the nature of competition. B. their financial situation is resilient. C. the company strategy is outdated. D. management monitors the relevant environmental factors regularly.

A. they keep pace with changes in the nature of competition.

A resource is valuable and rare but neither difficult to imitate nor without substitutes. This should enable the firm to attain A. no competitive advantage. B. a temporary competitive advantage. C. competitive parity. D. a sustainable competitive advantage.

B. a temporary competitive advantage.

Effective vision statements include A. all strategic directions of the organization. B. a brief statement of the company's direction. C. strategic posturing and future objectives. D. financial objectives and projected figures.

B. a brief statement of the company's direction

Which of the following firms would likely pose the least competitive threat? A. a firm in the same industry and in the same strategic group B. a competitor to your product where a high switching cost exists C. a firm that produces substitute goods to your product line D. a firm in the same industry and in the nearest strategic group looking to join your group

B. a competitor to your product where a high switching cost exists

According to the text, the strategic management process entails three ongoing processes. They are A. analyses, actions, and synthesis. B. analyses, decisions, and actions. C. analyses, evaluation, and critique. D. analyses, synthesis, and decisions.

B. analyses, decisions, and actions.

Managing a knowledge intensive workforce is very challenging. The best way for a firm to manage its workforce is to A. retain knowledge workers. B. balance efforts in the attraction, selection, and retention of top talent. C. attract the brightest employees. D. ensure that it pays higher salaries than its rivals.

B. balance efforts in the attraction, selection, and retention of top talent.

Tacit knowledge A. is the same as explicit knowledge. B. can be accessed only with the consent of the employees. C. is found mostly at the lower levels of the organization. D. can be codified but not reproduced.

B. can be accessed only with the consent of the employees.

Banks and airlines are examples of two industries that track competitor offers continually. This is called the process of gathering A. consumer responses. B. competitive intelligence. C. past decisions. D. mainline information.

B. competitive intelligence.

The aging of the population, changes in ethnic composition, and effects of the baby boom are __________ changes. A. macroeconomic B. demographic C. global D. sociocultural

B. demographic

Strategic groups consist of a group of A. top executives that makes strategies for a company. B. firms within an industry that follows similar strategies. C. executives drawn from different companies within an industry that makes decisions on industry standards. D. firms within an industry that decides to collude rather than compete with each other so that they can increase their profits

B. firms within an industry that follows similar strategies

Buyer power will be greater when A. the products purchased are highly differentiated. B. it is concentrated or when a buyer group purchases large volumes relative to seller sales. C. the industry product is very important to the quality of the buyer end products or services. D. there are high switching costs.

B. it is concentrated or when a buyer group purchases large volumes relative to seller sales

The threat of new entrants is high when there are A. high capital requirements. B. low economies of scale. C. high switching costs. D. high differentiation among competitors products and services.

B. low economies of scale.

Strategists who rely on traditional definitions of their industry and competitive environment often focus their sights too ___________ on current customers, technologies, and competitors. A. broadly B. narrowly C. aggressively D. widely

B. narrowly

PPG Industries, the Pittsburgh-based manufacturer of paints, coatings, optical products, specialty materials, chemicals, glass, and fiber glass suffered serious failures in 1986 and 1987 when it attempted to diversify its offers. It used a technique to help it identify possible future strategies. What was it? A. crowdsourcing B. scenario analysis C. competitive intelligence D. monitoring

B. scenario analysis

The network of relationships that individuals have throughout the organization is known as A. human capital. B. social capital. C. intellectual capital. D. tacit knowledge

B. social capital.

A variety of firm resources include interpersonal relations among managers in the firm, its culture, and its reputation with its suppliers and customers. Such competitive advantages are based upon A. path dependency. B. social complexity. C. physical uniqueness. D. tangible resources.

B. social complexity.

Procter and Gamble has perfected a technique for compacting cleaning powder into a liquid concentration. Consumers, retailers, shipping and wholesalers, and environmentalists all have benefited from the resulting change in consumer shopping habits and the revolution in industry supply-chain economics. According to the text, this is an example of A. zero-sum relationship among stakeholders. B. stakeholder symbiosis. C. rewarding stakeholders. D. emphasizing financial returns.

B. stakeholder symbiosis.

Scanning the general environment would identify information on A. substitute goods. B. the aging population and ethnic shifts. C. customer and firm bargaining power. D. competitive rivalry.

B. the aging population and ethnic shifts.

__________ may be considered the advance work that must be done in order to effectively formulate and implement strategies. A. Goal setting B. Corporate entrepreneurship C. Strategy analysis D. Organizational design

C. Strategy analysis

Attracting and retaining human capital is a challenge for many firms today. Firms experiencing high turnover should A. focus on increased recruiting. B. decrease money spent on human capital. C. adopt effective retention strategies. D. make their work environment less stimulating.

C. adopt effective retention strategies

The three participants in corporate governance are the shareholders, A. board of directors, and employees. B. labor unions, and employees. C. board of directors, and management. D. banks and lending institutions, and management.

C. board of directors, and management.

In terms of value chain analysis, a telephone operating company would find that negotiating and maintaining ongoing relations with regulatory bodies are important activities for achieving A. returns on investment. B. customer awareness. C. competitive advantage. D. better employees

C. competitive advantage.

The management of intellectual property involves all of the following except A. copyrights and trademark. B. contracts with confidentiality and non-compete clauses. C. converting explicit knowledge to tacit knowledge. D. patents.

C. converting explicit knowledge to tacit knowledge.

According to the resource-based view of the firm, competitive advantages are ______ for competitors to copy, if they are based on unique bundles of resources. A. easier B. faster C. harder D. more reliable

C. harder

In order to be considered strategic resources that contribute competitive advantage, they must have several characteristics. Which of the following is not one of these? A. rare B. valuable C. inexpensive to imitate D. costly to substitute

C. inexpensive to imitate

In general, the threat of substitutes is heightened because the Internet A. lowers switching costs. B. lowers barriers to entry. C. introduces new ways to accomplish the same task. D. increases output per unit of cost

C. introduces new ways to accomplish the same task.

By emphasizing the importance of identifying opportunities and threats, the SWOT framework makes firms act ________ rather than ___________. A. quickly; slowly B. immediately; eventually C. proactively; reactively D. intelligently; uninformed

C. proactively; reactively

Strategic groups are clusters of firms that share __________ strategies. A. differing B. the same C. similar D. new

C. similar

The resource-based view (RBV) of the firm combines the following two perspectives: A. the primary and support activities of the firm. B. the interrelationships among the primary activities of the firm and corporate management. C. the internal analysis of the firm and the external analysis of the industry and competitive environment. D. the industry and the competitive environment.

C. the internal analysis of the firm and the external analysis of the industry and competitive environment.

Developing human capital is essential to maintaining a competitive advantage in the current knowledge economy. Efforts and initiatives to develop human capital should be directed A. at top managers. B. at human resource departments. C. throughout the firm at all levels. D. at the employees themselves.

C. throughout the firm at all levels.

Which of the following examples demonstrates how successful organizations manage their primary activities? A. Motorola has revised its compensation system to reward employees who learn a variety of skills. B. Wal-Mart implemented a sophisticated information system that resulted in reduced inventory carrying costs and shortened customer response times. C. National Steel improved its efficiency by reducing the number of job classifications. D. Hewlett Packard has cut lead time from five days to one by employing JIT inventory management.

D. Hewlett Packard has cut lead time from five days to one by employing JIT inventory management.

Which of the following is not an example of an IP-related litigation? A. Apple and HTC sue each other based on patent infringement. B. Apple sues smartphone makers running Android, the Google mobile operating system. C. China is sued by U.S. manufacturers of video games. D. The United States sues to get access to physical plant assets in China.

D. The United States sues to get access to physical plant assets in China

In the knowledge economy, if a large portion of company value is in intellectual and human assets, the difference between the market value and book value of the company should ___________ a company with mostly physical and financial assets A. be equal to B. not be correlated with C. be smaller than D. be larger than

D. be larger than

Human resource management consists of activities involved in the recruiting, hiring, training, development, and compensation of all types of personnel. It supports A. only individual primary activities. B. mostly support activities but does have some impact on primary activities. C. only individual support activities. D. both individual primary and support activities and the entire value chain.

D. both individual primary and support activities and the entire value chain.

In social network analysis, the importance of ties connecting heterogeneous people that help to ensure a wide range of diversity in information and perspective is known as A. closure. B. social supports. C. redundancy. D. bridging relationships

D. bridging relationships

Human capital includes A. the relationships between people. B. an improved product. C. the output from assembly line employees. D. capabilities, knowledge, and skills of an individual.

D. capabilities, knowledge, and skills of an individual

The bargaining power of suppliers is enhanced under the following market condition: A. no threat of forward integration. B. low differentiation of the supplier products. C. greater availability of substitute products. D. dominance by a few suppliers.

D. dominance by a few suppliers.

Strategy analysis is the starting point of the strategic management process and consists of the A. analysis only of the vision, mission, and objectives of the firm. B. analysis of the relevant internal and external environmental factors only. C. analysis of relevant competitors only. D. matching of vision, mission, and objectives with the relevant internal and external environmental factors.

D. matching of vision, mission, and objectives with the relevant internal and external environmental factors.

Which of the following is a profitability ratio? A. current ratio B. total debt ratio C. total asset turnover D. return on equity

D. return on equity

Which is considered a force in the five-forces model? A. increased deregulation in an industry B. the threat of government intervention C. recent technological innovation D. rivalry among competing firms

D. rivalry among competing

The text addresses two perspectives of leadership as well as their implications. These two perspectives are A. romantic and unromantic. B. romantic and internal control. C. external control and unromantic. D. romantic and external control.

D. romantic and external control.

Wall Street executives have received excessive bonus pay in the past. This concerns which of the following stakeholder groups most directly? A. government B. suppliers C. creditors D. stockholders

D. stockholders

In the SWOT framework, ______________ are internal factors that are specific to the company. A. strengths and opportunities B. strengths and threats C. threats and weaknesses D. strengths and weaknesses

D. strengths and weaknesses

In strategic management, both the short-term and long-term perspectives need to be considered because A. shareholder value is only measured by short-term returns. B. shareholders only care about long-term returns. C. long-term vision precludes the analysis of present operating needs. D. the creative tension between the two forces managers to develop more successful strategy.

D. the creative tension between the two forces managers to develop more successful strategy.

Inbound logistics include A. machining and packaging. B. repair and parts supply. C. promotion and packaging. D. warehousing and inventory control.

D. warehousing and inventory control.

TRUE OR FALSE: Explicit knowledge is generally known to everyone in the firm and is not a critical concern of management.

FALSE: Explicit (or codified) knowledge is knowledge that can be documented, widely distributed, and easily replicated. One of the challenges of knowledge-intensive organizations is to capture and codify the knowledge and experience that, in effect, resides in the heads of its employees. Otherwise, they will have to constantly reinvent the wheel, which is both expensive and inefficient.

TRUE OR FALSE: Globalization provides opportunities to access larger potential markets and a narrow base of production factors such as raw materials, labor, skilled managers, and technical professionals.

FALSE: Globalization provides both opportunities to access larger potential markets and a broad base of production factors such as raw materials, labor, skilled managers, and technical professionals. However, such endeavors also carry many political, social, and economic risks.

TRUE OR FALSE: The importance of human capital has decreased in recent years. For this reason, many firms have placed greater attention on attracting talent, but not on developing or retaining it.

FALSE: In the knowledge economy, wealth is increasingly created by effective management of knowledge workers, instead of physical and financial assets. The growing importance of knowledge, coupled with the move by labor markets to reward knowledge work, tells us that investing in a company is, in essence, buying a set of talents, capabilities, skills, and ideas (intellectual capital) not physical and financial resources.

TRUE OR FALSE: Financial resources such as cash and cash equivalents are intangible resources.

FALSE: Intangible resources are organizational assets that are difficult to identify and to account for and are typically embedded in unique routines and practices, including human resources, Innovation resources, and reputation resources. Tangible resources are assets that are relatively easy to identify. They include the physical and the financial assets that an organization uses to create value for its customers.

TRUE OR FALSE: Path dependency has no impact on the inimitability of resources.

FALSE: Many Resources cannot be imitated because of what economists refer to as path dependency. This means that resources are unique and therefore scarce because of all that has happened along the path followed in their development and/or accumulation. Competitors cannot buy these resources quickly and easily; they must be built up over time in ways that are difficult to accelerate.

TRUE OR FALSE: Only shareholders in a publicly held company are stakeholders because they are the only group that has a stake in the success of the organization.

FALSE: Stakeholders are those individuals, groups, and organizations that have a stake in the success of the organization, including owners (shareholders in a publicly held corporation), employees, customers, suppliers, the community at large, and so on.

TRUE OR FALSE: Only shareholders in a publicly held company are stakeholders because they are the only groupthat has a stake in the success of the organization.

FALSE: Stakeholders are those individuals, groups, and organizations that have a stake in the successof the organization, including owners (shareholders in a publicly held corporation), employees,customers, suppliers, the community at large, and so on.

TRUE OR FALSE: Strategic management is only concerned with short-term perspectives.

FALSE: Strategic management requires incorporating both short-term and long-term perspectives.

TRUE OR FALSE: Strategic management requires managers at all levels of the organization to take a segregated view of the organization.

FALSE: Strategic management requires managers to take an integrative view of the organization and assess how all of the functional areas and activities fit together to help an organization achieve its goals and objectives. This cannot be accomplished if only the top managers in the organization take an integrative, strategic perspective of issues facing the firm and everyone else fends for themselves in their independent, isolated functional areas. Instead, people throughout the organization must strive toward overall goals.

TRUE OR FALSE: Strategic management should only include short-term objectives. Long-term objectives are covered in the vision statement of the organization.

FALSE: Strategic objectives are typically more long term. Organizations have lower-level objectives that are more specific than strategic objectives. These are often referred to as short-term objectives.

TRUE OR FALSE: Strategy analysis is the study of the external environments of the firm.

FALSE: Strategy analysis is study of the external and internal environments of a firm, and their fit with organizational vision and goals.

TRUE OR FALSE: All successful firms compete and outperform their rivals by developing bases for competitive advantage, which can be achieved only through cost leadership.

FALSE: Successful firms strive to develop bases for competitive advantage, which can be achieved through cost leadership and/or differentiation as well as by focusing on a narrow or industrywide market segment.

TRUE OR FALSE: Patents, copyrights, and trademarks are intangible resources.

FALSE: Tangible resources organizational assets that are relatively easy to identify, including physical assets, financial resources, organizational resources, and technological resources. Intangible resources are organizational assets that are difficult to identify and to account for and are typically embedded in unique routines and practices, including human resources, innovation resources, and reputation resources.

TRUE OR FALSE: The opportunities and threats of a SWOT analysis refer to the internal conditions of the firm.

FALSE: The Opportunities and Threats are environmental conditions external to the firm. These could be factors either in the general or competitive environment. In the general environment, one might experience developments beneficial for most companies such as improving economic conditions, that lower borrowing costs or trends that benefit some companies and harm others.

TRUE OR FALSE: In the SWOT framework, the Strengths and Weaknesses are external environmental factors to consider.

FALSE: The Strengths and Weaknesses refer to the internal conditions of the firm in which a firm excels (strengths) and where it may be lacking relative to competitors (weaknesses).

TRUE OR FALSE: Michael Porter's five-forces Analysis is a dynamic tool for analyzing industry attractiveness.

FALSE: The five-forces analysis also has been criticized for being essentially a static analysis. External forces as well as strategies of individual firms are continually changing the structure of all industries.

TRUE OR FALSE: The Porter five-forces model is designed to help us understand how social attitudes and cultural values impact U.S. businesses.

FALSE: The five-forces model developed by Michael E. Porter has been the most commonly used analytical tool for examining the competitive environment. It describes the competitive environment in terms of five basic competitive forces.

TRUE OR FALSE: The three primary participants in corporate governance are: (1) the shareholders, (2) the management (led by the chief executive officer), and (3) the employees.

FALSE: The primary participants are: (1) the shareholders, (2) the management (led by the chief executive officer), and (3) the board of directors.

TRUE OR FALSE: The resource-based view of the firm focuses solely on the internal analysis of the operations of the firm.

FALSE: The resource-based view (RBV) of the firm combines two perspectives: (1) the internal analysis of phenomena within a company and (2) an external analysis of the industry and its competitive environment.

The strengths and capabilities of a firm are enough to enable it to achieve a competitive advantage in the marketplace.

FALSE: The strengths and capabilities of a firm, no matter how unique or impressive, may not enable it to achieve a competitive advantage in the marketplace. If a firm builds its strategy on a capability that cannot, by itself, create or sustain competitive advantage, it is essentially a wasted use of resources.

TRUE OR FALSE: Value-chain analysis can only be applied to manufacturing operations.

FALSE: The value chain can be applied to service organizations, suggesting that the value-adding process may be configured differently depending on the type of business a firm is engaged in.

TRUE OR FALSE: In value-chain analysis, value is measured by the market value of the total stock outstanding of the company.

FALSE: Value is the amount that buyers are willing to pay for what a firm provides them and is measured by total revenue, a reflection of the price the product of the firm commands and the quantity it can sell.

TRUE OR FALSE: Amazon Prime is an example of a difficult to imitate capability that gives it competitive advantage over its rivals.

TRUE Amazon Prime has proven to be extremely hard for rivals to copy. It enables Amazon to exploit its wide selection, low prices, network of third-party merchants, and finely tuned distribution system, while keying into that faintly irrational human need to maximize the benefits of a club that you have already paid to join. The four criteria a resource must possess in order to maintain a sustainable advantage are: valuable, rarity, difficult to imitate, and difficult to substitute.

TRUE OR FALSE: Firms such as Apple and Microsoft will tend to have a higher ratio of market value to book value than industrial companies such as Nucor Steel.

TRUE As shown in Exhibit 4.1, firms such as Apple and Microsoft have very high market value to book value ratios because of their high investment in knowledge resources and technological expertise. In contrast, firms in more traditional industry sectors, such as Nucor, have relatively low market to book ratios.

TRUE OR FALSE: The value-chain concept assumes that both primary and support activities are capable of producing value for customers.

TRUE Both types of activities can add value, either directly or through important relationships with other activities.

TRUE OR FALSE: Companies have found that referrals from their own employees are generally an effective approach to recruiting top talent.

TRUE Companies like GE Medical Systems have found that current employees are the best source for new ones. When someone refers a former colleague or friend for a job, his or her credibility is on the line. Employees are careful about recommending people unless they are reasonably confident they are good candidates.

TRUE OR FALSE: One of the most important elements in a good employee is his or her attitude. Firms should follow the adage: hire for attitude, train for skill.

TRUE Firms can identify top performers by focusing on key employee mind-sets, attitudes, social skills, and general orientations. If they get these elements right, the task-specific skills can be learned quickly. This does not imply that task-specific skills are unimportant; rather, it suggests that the requisite skill sets must be viewed as a necessary but not sufficient condition.

TRUE OR FALSE: Inventory turnover is a measure of asset utilization.

TRUE Inventory turnover (cost of goods sold divided by inventory) is a measure of asset utilization.

TRUE OR FALSE: Social responsibility is the idea that organizations are not only accountable to stockholders but also to the community-at-large.

TRUE Social responsibility is the expectation that businesses or individuals will strive to improve the overall welfare of society. From the perspective of a business, this means that managers must take active steps to make society better by virtue of the business being in existence.

TRUE OR FALSE: Social capital helps organizations leverage human capital within and across the firm.

TRUE The key role of social capital is in leveraging human capital within and across the firm.

TRUE OR FALSE: Stakeholders make various claims on a company. Their interests must be taken into account in the strategic management process.

TRUE: A stakeholder can be defined as an individual or group, inside or outside the company that has a stake in and can influence organizational performance. Each stakeholder group makes various claims on the company and must be taken into account in the strategic management process.

TRUE OR FALSE: The power of suppliers will be enhanced if they are able to maintain a credible threat of forward integration.

TRUE: A supplier group will be powerful when the supplier group poses a credible threat of forward integration. This provides a check against the industry ability to improve the terms by which it purchases.

TRUE OR FALSE: Strategic Management consists of the analyses, decisions, and actions an organization undertakes in order to create and sustain competitive advantages.

TRUE: According to the textbook, this is the definition of strategic management.

TRUE OR FALSE: Strategic management consists of the analyses decisions and actions an organization undertakes in order to create and sustain competitive advantages.

TRUE: According to the textbook, this is the definition of strategic management.

TRUE OR FALSE: Competitor Intelligence (CI) is a tool that can provide management with early warnings about both threats and opportunities.

TRUE: Competitive intelligence (CI) helps firms define and understand their industry and identify strengths and weaknesses of rivals. Done properly, competitive intelligence helps a company avoid surprises by anticipating competitor moves and decreasing response time.

TRUE OR FALSE: SWOT analysis is useful in part because it obliges the firm to act proactively by putting an emphasis on identifying opportunities and threats that constrain the action choices a firm might make as a result of its internal and external environmental scan.

TRUE: Despite its apparent simplicity, the SWOT approach has been very popular. First, it forces managers to consider both internal and external factors simultaneously. Second, its emphasis on identifying opportunities and threats makes firms act proactively rather than reactively. Third, it raises awareness about the role of strategy in creating a match between the environmental conditions and the internal strengths and weaknesses of the firm.

TRUE OR FALSE: To understand the business environment of a particular firm, you need to analyze both the general environment and the firm industry and competitive environment.

TRUE: Generally, firms compete with other firms in the same industry. An industry is composed of a set of firms that produce similar products or services, sell to similar customers, and use similar methods of production. Gathering industry information and understanding competitive dynamics among the different companies in your industry is key to successful strategic management. To understand the business environment of a particular firm, you need to analyze both the general environment and the firm industry and competitive environment.

If a firm builds its strategy on a capability that cannot, by itself, create or sustain competitive advantage, it is wasting its time and resources.

TRUE: If a firm builds its strategy on a capability that cannot, by itself, create or sustain competitive advantage, it is essentially a wasted use of resources.

TRUE OR FALSE: Hewlett-Packards failure and success under the leadership first of Carly Fiorina and then of Mark Hurd was said to be a direct result of the quality of leadership of each of these CEOs. According to the text, this would be an example of the "romantic" perspective of leadership.

TRUE: In the Romantic view of leadership, the implicit assumption is that the leader is the key force in determine an organizations success or lack thereof. The BOD fired CEO Carly Fiorina in 2004 and HP's stock increased immediately by 7 percent. Upon the sudden resignation of her successor, Mark Hurd in 2010, HP's stock price dropped 12 percent almost immediately.

TRUE OR FALSE: Hewlett-Packard's failure and success under the leadership first of Carly Fiorina and then of Mark Hurd was said to be a direct result of the quality of leadership of each of these CEOs. According to the text this would be an example of the "romantic" perspective of leadership.

TRUE: In the romantic view of leadership, the implicit assumption is that the leader is the key force in determining an organization's success or lack thereof. The Board of Directors fired CEO Carly Fiorina in 2004 and HP's stock increased immediately by 7 percent. Upon the sudden resignation of her successor, Mark Hurd in 2010, HP's stock price dropped 12 percent almost immediately.

TRUE OR FALSE: Company reputation with customers, suppliers and other stakeholders is an intangible resource.

TRUE: Intangible resources are organizational assets that are difficult to identify and to account for and are typically embedded in unique routines and practices, including human resources, innovation resources, and reputation resources.

TRUE OR FALSE: Both the internal and external environments of a firm must be analyzed as well as the goals of the firm before managers can formulate and implement appropriate strategies.

TRUE: Many strategies fail because managers may want to formulate and implement strategies without a careful analysis of the overarching goals of the organization and without a thorough analysis of its external and internal environments.

TRUE OR FALSE: The final realized strategy of a firm is a combination of deliberate and emergent strategies

TRUE: Realized strategy is that strategy of a firm in which organizational decisions are determined by both analysis and unforeseen environmental developments, unanticipated resource constraints ,and/or changes in managerial preferences.

TRUE OR FALSE: The final realized strategy of a firm is a combination of deliberate and emergent strategies.

TRUE: Realized strategy is that strategy of a firm in which organizational decisions are determined by both analysis and unforeseen environmental developments, unanticipated resource constraints, and/or changes in managerial preferences.

TRUE OR FALSE: Scenario planning is useful for anticipating major future changes in the external environment.

TRUE: Scenario planning is important in anticipating major future changes in the external environment.

TRUE OR FALSE: Strategic management is concerned with the analysis of strategic goals as stated in the vision mission and strategic objectives of a firm.

TRUE: Strategic management is concerned with the analysis of strategic goals (vision, mission, and strategic objectives) along with the analysis of the internal and external environments of the organization.

TRUE OR FALSE: Strategic management is concerned with the analysis of strategic goals as stated in the vision,mission, and strategic objectives of a firm.

TRUE: Strategic management is concerned with the analysis of strategic goals (vision, mission, andstrategic objectives) along with the analysis of the internal and external environments of theorganization.

TRUE OR FALSE: Management innovations such as total quality just-in-time benchmarking business process reengineering and outsourcing are important but not enough for building sustainable competitive advantage.

TRUE: Sustainable competitive advantage cannot be achieved through operational effectiveness alone. Popular management innovations of the last two decades like total quality, just-in-time, benchmarking, business process reengineering, and outsourcing are concerned with operational effectiveness.

TRUE OR FALSE: Management innovations such as total quality, just-in-time, benchmarking, business processreengineering, and outsourcing are important, but not enough for building sustainablecompetitive advantage.

TRUE: Sustainable competitive advantage cannot be achieved through operational effectiveness alone.Popular management innovations of the last two decades like total quality, just-in-time,benchmarking, business process reengineering, and outsourcing are concerned with operational effectiveness

TRUE OR FALSE: Tangible resources are assets that are relatively easy to identify such as financial and physical assets.

TRUE: Tangible resources are assets that are relatively easy to identify. They include the physical and the financial assets that an organization uses to create value for its customers.

TRUE OR FALSE: The five-forces model helps to determine both the nature of competition in an industry and the profit potential for the industry.

TRUE: The five-forces model developed by Michael E. Porter describes the competitive environment in terms of five basic competitive forces that affect the ability of a firm to compete in a given market. Together, they determine the profit potential for a particular industry.

TRUE OR FALSE: Environmental scanning and competitor intelligence provide important inputs for forecasting activities.

TRUE: Three important processes (scanning, monitoring, and gathering competitive intelligence) are used to develop forecasts.

TRUE OR FALSE: Value-chain analysis assumes that the basic economic purpose of a firm is to create value and it is a useful framework for analyzing the strengths and weaknesses of the firm.

TRUE: Value-chain analysis views the organization as a sequential process of value-creating activities. It provides greater insights into analyzing the competitive position of a firm than SWOT analysis does by itself.

TRUE OR FALSE: Rivalry will be most intense when there is a lack of differentiation or switching costs.

TRUE: Where the product or service is perceived as a commodity or near commodity, the buyer's choice is typically based on price and service, resulting in pressures for intense price and service competition. Lack of switching costs has the same effect.

TRUE OR FALSE: Steve Jobs, the former chairman of Apple, used intuition and judgment to forecast the future.

TRUE: While analysis is necessary, it is also equally important to recognize the role played by intuition and judgment. Steve Jobs, the legendary former chairman of Apple, took a very different approach in determining what customers really wanted. Jobs relied on his own intuition, his radar-like feel for emerging technologies and how they could be brought together to create insanely great products that ultimately made the difference.


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