Strategic Management MidTerm

c. A way to compare a firm's resources and capabilities against those of competitors

"Benchmarking" is: a. A process to ensure that a firm is as similar to competitors as possible b. An HR manager's tool to set and justify the firm's salary scheme versus the industry norm c. A way to compare a firm's resources and capabilities against those of competitors d. All of the above

b. Generalship

"Strategy" derives from a Greek word meaning: a. The art of arranging men in a battlefield b. Generalship c. The art of maintaining a state's security

a. The proprietary trading system is likely to generate better returns since star traders are in a powerful position to negotiate pay packages which appropriate the major part of the profit they create.

A bank is establishing a fixed income trading department. It is considering whether to hire a team of star traders or to invest a similar sum of money in developing a proprietary, automated trading system. The most valid reason for investing in the automated trading system in preference ot hiring star traders is: a. The proprietary trading system is likely to generate better returns since star traders are in a powerful position to negotiate pay packages which appropriate the major part of the profit they create. b. Advanced software is better than human intuition at identifying mispricing in financial markets. c. Star traders are difficult to manage and can easily become "rogue traders". d. It's difficult to motivate traders once they have earned their first few million.

c. The difficulties of quantifying the performance of the stakeholder-focused firm

A major impediment to the stakeholder view of the firm is: a. The inevitable conflicts between the interests of different stakeholders b. The fact that customers and employees are likely to be even more short-term oriented than shareholders c. The difficulties of quantifying the performance of the stakeholder-focused firm d. The difficulty of constituting a board of directors that represents the interests of all stakeholders

b. The undervaluation of intangible resources on companies' balance sheets.

A major reason why many companies have the high valuation ratios (ratio of stock market value to balance sheet net asset value) is: a. Stock market irrationality which results in some companies becoming overvalued. b. The undervaluation of intangible resources on companies' balance sheets. c. Stock market doubts over the valuation of financial assets by companies and their auditors. d. The rise of intellectual property valuation as a result of recent patent litigation.

d. Substitutability on both the demand side and the supply side

A market's boundaries are defined by: a. The geographies of the markets that are supplied by the incumbents b. The type of product which is sold, and the type of customers willing to pay for the product c. Price homogeneity—within the confines of a market, a single price rules d. Substitutability on both the demand side and the supply sided.

d. It tends to be durable, loses value when transferred between firms, and is costly to replicate.

A well-established brand can be a source of sustainable competitive advantage because: a. Consumers will always pay a premium for a recognized brand. b. Brands can be protected by the law relating to trademarks. c. A brand protects a firm form competition from low-cost new entrants. d. It tends to be durable, loses value when transferred between firms, and is costly to replicate.

a. On its own tends to be a poor predictor of future profitability

An industry's current profitability: a. On its own tends to be a poor predictor of future profitability b. Is an excellent predictor of its future profitability since changes in industries' profitability occur slowly c. Is the result of many different factors interacting in unpredictable ways d. Is largely set by the profitability of the biggest company within that industry

b. Establish product differentiation by measures that reward customer loyalty

Airlines' frequent flyer programs and retailer loyalty schemes are both examples of efforts to: a. Offer disguised price reductions to customers b. Establish product differentiation by measures that reward customer loyalty c. Establish competitive advantage that failed because they could be easily imitated by competitors d. Promote a company's product to new customers

b. The external pressures on firms for profitability that arises from (i) strong competition in product markets and (ii) the threat that firms that do not maximize profits will be acquired by forms that do.

Although firms may pursue a variety of goals, the assumption that primary goal of strategy is to maximize profits over the long term may be justified by: a. The fact that in today's intensely competitive markets, firms must focus on profit maximization in order to survive. b. The external pressures on firms for profitability that arises from (i) strong competition in product markets and (ii) the threat that firms that do not maximize profits will be acquired by forms that do. c. The legal requirement on Boards of Directors to ensure that companies are operated in the interests of their shareholders. d. Shareholder pressure on CEOs to maximizing profits.

b. They will compete more fiercely on price

As the competitors in an industry become more diverse in terms of their goals, cost structures, and strategies, it is likely that: a. Their incentives to collude on price increase b. They will compete more fiercely on price c. Their products will become increasingly differentiated d. Mergers, acquisitions and alliances among them will increase

b. Creating value.

Every business enterprise has a distinct purpose; however, common to all businesses is the goal of: a. Making customers satisfied. b. Creating value. c. Satisfying stakeholders. d. Maximizing shareholder value.

d. The relative costs that each party would incur from walking away from the deal

Bargaining power rests, ultimately, on: a. The negotiating skills of the buyer versus the seller b. Tradition c. The respective effectiveness and cohesion of top management teams d. The relative costs that each party would incur from walking away from the deal

b. Corporate level strategy is the domain of headquarters executives, while division managers are in charge of their business level strategies

Between the two levels of strategy, the division of responsibility is consistent with the following principle: a. There is no principle but only limited rationality and trial-and-error processes to find the best allocation between different levels of management b. Corporate level strategy is the domain of headquarters executives, while division managers are in charge of their business level strategies c. Corporate level strategy is the domain of the parent company; business level strategy is handled by the functional department managers d. Corporate and business level strategies are not any specific organizational level's responsibility because of the principle of maximum delegation and decentralization

c. Both of the above

Business strategy defines: a. the way a firm competes in a particular industry or market b. the way a firm establishes a competitive advantage over its rivals within a specific industry or market c. Both of the above d. Neither of the above

a. the scope of the firm in terms of industries and markets, and the allocation of its resources

Corporate strategy is concerned with: a. the scope of the firm in terms of industries and markets, and the allocation of its resources b. a firm's relationships with its principal stakeholders c. the corporate governance of each individual business d. None of the above

b. To the role of resources and capabilities as a foundation for firm strategy

During the 1990s, the focus of strategy analysis shifted: a. From corporate planning to strategic management b. To the role of resources and capabilities as a foundation for firm strategy c. To the application of microeconomics to analyze the sources of firm profitability d. From the structure-based approach to the value-added perspective

d. The price that the customer is willing to pay for a product exceeds the cost of supplying it

Economic value is created when: a. The price that the customer is willing to pay for a product exceeds the costs of the material inputs used to produce the product b. The surplus of value is distributed between customers and producers in the industry by the forces of competition c. The value of a product to consumers exceeds the price they paid for it d. The price that the customer is willing to pay for a product exceeds the cost of supplying it

d. New entrants face high unit costs either because they enter at sub-optimal scale, or they make a large-scale entry that initially operates with substantial excess capacity

Economies of scale are a barrier to entry because: a. New entrants are positioned at the top of their learning curve b. New entrants are uncertain about their future costs which discourages then from making investments c. New entrants face a risk of retaliation from the incumbents whose large scale of operation allows them to flood the market d. New entrants face high unit costs either because they enter at sub-optimal scale, or they make a large-scale entry that initially operates with substantial excess capacity

b. It is available to any firm that wishes to purchase it; hence, it is not scarce

Enterprise Resource Planning software (such as that supplied by SAP) is unlikely, on its own, to be source of competitive advantage because: a. It is expensive to install hence its benefits are offset by its costs b. It is available to any firm that wishes to purchase it; hence, it is not scarce c. It needs to be updated periodically, hence it lacks durability d. Its benefits are limited to those activities that require substantial information processing

c. Are able to integrate their resources most effectively.

Firm's with outstanding capabilities are typically those which: a. Possess the best resources. b. Have developed their organizational routines over the longest periods of time. c. Are able to integrate their resources most effectively. d. Have the most effective leaders.

b. They tend to be sufficiently small that a single firm can often establish a dominant position

Firms supplying niche markets are often highly profitable because: a. They tend to supply specialty products for high income consumers b. They tend to be sufficiently small that a single firm can often establish a dominant position c. They tend to be disregarded by major corporations d. They tend to have high entry barriers

c. Creates value for customers, then appropriate some of that value as profit.

For a value for the firm requires that a firm: a. Earns profits for shareholders, then uses these profits to satisfy the interests of other stakeholders. b. Creates customer loyalty, that can then be converted into profit through increasing prices. c. Creates value for customers, then appropriate some of that value as profit. d. Creates value for employees through attractive pay, benefits, and working conditions, then relying upon employees to drive customer satisfaction and, eventually, profits.

d. All of these

In using accounting ratios to appraise a firm's performance, it is helpful to use: a. Benchmarks b. Trends in these ratios over the past 5 years or more c. Multiple indicators d. All of these

b. Clear goals, deep understanding the competitive environment, careful resource appraisal, and effective implementation

For both individuals and businesses, successful strategies are characterized by: a. Unrelenting commitment to ambitious goals b. Clear goals, deep understanding the competitive environment, careful resource appraisal, and effective implementation c. Meticulous planning d. The possession of superior abilities and resources which are then deployed to build competitive advantage.

d. All the above

For most business enterprises a market is: a. An abstract concept—from the point of view of competition it is a continuum from a firm's closest competitor towards more distant competitors b. A sociological concept that is defined mainly by convention and institutions c. Geographical concept defined by the location of customers and competitors d. All the above

a. A key resource whose characteristics need to be given careful attention when formulating strategy

For most organizations, geographical location should be regarded as: a. A key resource whose characteristics need to be given careful attention when formulating strategy b. A formerly important resource which is becoming increasingly irrelevant in a digital world c. An organizational characteristic, not a resource d. A source of competitive advantage only its gives the organization access to an industry ecosystem such as Silicon Valley for IT firms and New York for advertising firms

b. Profit

For the purposes of strategy analysis, it is convenient to view business strategy is primarily a quest for: a. Attractive markets b. Profit c. Customer loyalty d. Motivated and talented personnel

a. Use a framework or a system that allows them to organize relevant information and rank the importance of different factors

Given the range of external influences that impact a firm, understanding the external environment requires managers to: a. Use a framework or a system that allows them to organize relevant information and rank the importance of different factors b. Monitor competitors closely c. Use all existing sources and techniques to gather and analyze information d. Devote a large proportion of their time to this task

a. Provided a battleground for the debate opposing the Design School and the Learning School

Honda's successful entry into the US motorcycle market has: a. Provided a battleground for the debate opposing the Design School and the Learning School b. Been an extraordinary epic where players were discovering the field while dealing with its traps c. Shown that the rational and analytical model was superior to the emergence model because only intensive analysis and forecasting were able to fuel this success story d. Shown the difficulty of entering the US market for Japanese firms because of the cultural, organizational, and legal gaps

a. Corporate strategy defines the scope of a firm's activities, while business strategy focuses on how to beat the competition in a specific product market

How do corporate level strategy and business level strategy differ? a. Corporate strategy defines the scope of a firm's activities, while business strategy focuses on how to beat the competition in a specific product market b. Corporate strategy defines the scope of a firm's structure, while business strategy emphasizes the relationship of each business with its environment (state, regulators, etc.) c. Corporate strategy focuses on the overall strategic plan, while business strategy focuses on implementing strategic decisions in each product market d. Corporate level strategy is concerned with long term goals, while business level strategy focuses on short term sustainability

a. What do customers want and what should the firm do to survive competition?

Identifying key success factors within an industry requires answers to the following questions: a. What do customers want and what should the firm do to survive competition? b. What is a firm's unique selling proposition? c. Which of the five forces of competition most threaten a firm's survival and how could the firm deal with them? d. What are the main sources of a company's cost efficiency?

a. Strategic fit

If a firm adjusts its strategy to ensure it is consistent with its external environment, it benefits from a: a. Strategic fit b. Strategic leadership c. Location within an attractive industry d. A license to operate

c. It will attract the attention of potential entrants and, unless protected by high barriers to entry, the return on capital will fall

If an industry earns a return on capital in excess of its cost of capital: a. It will soon attracts the attention of competition authorities b. Workers will push for higher pay and benefits causing the level of profitability to fall c. It will attract the attention of potential entrants and, unless protected by high barriers to entry, the return on capital will fall d. Firms within the industry will over-invest causing the return on capital to fall

c. Strategy should be focused on both exploiting and developing firms' core competences

In 1990, C.K. Prahalad and Gary Hamel introduced the concept of "core competence." Their argument was that: a. Competence was more important than capability as a basis for sustainable competitive advantage b. Management should build strategy on competences rather than resources c. Strategy should be focused on both exploiting and developing firms' core competences d. Competitive advantage rather than industry attractiveness was the primary source of superior profitability

b. Return on invested capital is a better indicator than return on sales.

In appraising a firm's profit performance: a. Return on sales is a better indicator than return on invested capital. b. Return on invested capital is a better indicator than return on sales. c. Net margin is a better indicator than operating margin. d. Narrow measures of profit (such as after-tax net income) are better indicators than broad-based measures (such as EBITDA—earnings before interest, tax, depreciation and amortization).

c. The process is divided into consecutive stages, at the end of each a decision is made as to whether to continue to the next stage of development

In new product development, a "phases and gates" approach means that: [See p.56] a. A firm's market is divided into specific segments (or "phases") linked by "gates" which allow synergies to be exploited b. A firm's product development relies on time segments that must be linked through gates c. The process is divided into consecutive stages, at the end of each a decision is made as to whether to continue to the next stage of development d. The product is divided into separate modules where the interface between them are viewed as gates

c. Largely a matter of judgment and experience contingent on the purpose of the analysis

In practice, drawing the boundaries of industries and markets is: a. A matter of the personal preferences of top managers b. Almost impossible to carry out with rigor because it requires many "rules of thumb" and approximations c. Largely a matter of judgment and experience contingent on the purpose of the analysis d. Critical to the output of the analysis and therefore should only be undertaken with the help of an academic or consultant

a. A combination of design and emergence

In regard to strategy making, most firms are likely to exhibit: a. A combination of design and emergence b. A decentralized, bottom-up process c. An interaction between strategic design, through organizational processes, and strategic enactment through decisions made by all d. Limited involvement by boards of directors

a. The application of industrial organization economics for analyzing industry profitability

In the 1980s, Michael Porter pioneered: a. The application of industrial organization economics for analyzing industry profitability b. The development of "PIMS" at the Strategic Planning Institute c. The first synthesis of the resource and capability approach d. The application of game theory to strategic management

b. Tactics relate to specific actions whereas strategy relates to the overall plan

In the military field, we generally make the following distinction between strategy and tactics: a. Tactics comprise the overall plan whereas strategy focuses on specific actions b. Tactics relate to specific actions whereas strategy relates to the overall plan c. Tactics encompass specific political actions within the firm whereas strategy is the overall plan for deploying resources to establish a favorable position d. Tactics form the overall plan whereas strategy is concerned with the maneuvers to win battles

b. High exit barriers, lack of product differentiation, and a high ratio of fixed to variable costs

Industries where a decline in demand is most likely to cause industry-wide losses tend to have the following characteristics: a. High concentration, lack of product differentiation and scale economies b. High exit barriers, lack of product differentiation, and a high ratio of fixed to variable costs c. High exit barriers, lack of product differentiation, and powerful buyers d. Powerful buyers and suppliers and high exit barriers

b. Have fundamental disagreements about the justification for CSR

Influential scholars such as Milton Friedman, Charles Handy, Michael Porter and CK Prahalad: a. Agree that CSR is an essential "moral imperative" b. Have fundamental disagreements about the justification for CSR c. Believe that the capitalist system would operate better if all firms adopted CSR d. Regard most firms' CSR initiatives as primarily exercises in public relations

b. More difficult in fragmented industries than in concentrated industries

Initiatives to improve an industry's profitability through changing its structure are: a. Only feasible for the dominant player within an industry b. More difficult in fragmented industries than in concentrated industries c. Feasible in any industry that is subject to ruinous price competition d. Always risky because they attract the attention of antitrust authorities

c. They are more likely to provide sustainable competitive advantage

Intangible resources tend to be more valuable than tangible resources because: a. They are easier to acquire b. They are cheaper to acquire c. They are more likely to provide sustainable competitive advantage d. All of the above

b. The sources of competitive advantage within an industry

Key success factors are: a. Factors that allow rivals to undermine a firm's competitive advantage b. The sources of competitive advantage within an industry c. The forces of competition that are most influential in determining industry profitability d. The generic strategy that is most closely aligned with customer preferences

b. Positively because they restrict entry to the industry

Legal requirements that banks, providers of wireless telecommunication services, and taxis must obtain a government issued license before going into business impact the profitability of their respective industries: a. Negatively because governments charge high fees for such licenses b. Positively because they restrict entry to the industry c. Negatively because such licensing is usually accompanied by regulation of prices d. Positively if such licenses can be sold on a secondary market

c. Shareholder value is calculated by subtracting debt and other non-equity financial claims from the enterprise value of the firm

Maximizing enterprise value and maximizing shareholder value are closely linked because: a. Enterprise value and shareholder value are the same thing b. Shareholder value is calculated by adding debt and other non-equity financial claims to the DCF value of the firm c. Shareholder value is calculated by subtracting debt and other non-equity financial claims from the enterprise value of the firm d. It is obvious that they must be linked

a. CSR as a value creating activity.

Michael Porter and Mark Kramer's notion of "shared value" reconceptualises CSR (corporate social responsibility) by emphasizing: [See p.50] a. CSR as a value creating activity. b. CSR as a source of legitimacy for a company. c. CSR a means of transferring value from shareholders to less fortunate members of society. d. CSR as a counterweight to greed and amorality among managers and investors.

c. The objective of military strategy is to defeat the enemy; business strategy seeks coexistence rather than annihilation

Military strategy and business strategy differ in that: a. There is no concept like tactics in business b. Good military strategist must first be a good military tactician - practicing it in the field first c. The objective of military strategy is to defeat the enemy; business strategy seeks coexistence rather than annihilation d. None - there is no conceptual difference

b. By aligning their strategies to their resources and capabilities, firms emphasize their differences rather than their similarities

One implication of the resource-based perspective is that: a. Firms tend to adopt similar or close strategies b. By aligning their strategies to their resources and capabilities, firms emphasize their differences rather than their similarities c. Firms focus on building a stronger portfolio of capabilities than their rivals d. Firms focus on reducing their vulnerability by correcting their weaknesses

c. Shared beliefs, values, assumptions, meanings, myths, rituals, and symbols

Organizational culture comprises: a. A shared cognitive framework among organizational members b. Senior managers' beliefs and vision c. Shared beliefs, values, assumptions, meanings, myths, rituals, and symbols d. Organizational identity

d. The desire of oligopolists to avoid price competition

Parallel pricing—the tendency for companies in an industry to move prices more or less simultaneously—is typically an indicator of: a. Healthy price competition b. The sensitivity of the firms in an industry to the unpopularity of price increases c. Lack of product differentiation d. The desire of oligopolists to avoid price competition

b. Closely linked because the present value of a firm's future profits approximates to the market value of its securities

Profit and value of the firm are two concepts which are: a. Unrelated because cash flow not profit is the main determinant of firm value b. Closely linked because the present value of a firm's future profits approximates to the market value of its securities c. Closely linked because dividends are paid out of profits and it is dividends that determine the market value of a firm's shares d. Closely linked because the market value of a firm is determined by its profits multiplied by the price-earnings ratio of its shares

d. An integrated, consistent set of activities designed to maximize productivity and minimize operating costs.

Ryanair's strategic position is as Europe's lowest-cost airline may be attributed to: a. The willingness of its CEO, Michael O'Leary, to challenge conventional notions of customer and employee satisfaction b. Its use of secondary airports where costs are lower c. The high operating costs of major airlines such as British Airways, Lufthansa, and Air France-KLM on short-haul routes d. An integrated, consistent set of activities designed to maximize productivity and minimize operating costs

b. The consistency of a firm's strategy with its external and internal environments

Strategic fit refers to: a. The need for a firm's strategy to be consistent with its vision, mission, and culture b. The consistency of a firm's strategy with its external and internal environments c. The need for a firm's strategy to be unique d. The need for a firm's strategy to meet the needs of all its stakeholders, not just shareholders

d. All of the above

Strategic goals should be: a. Simple b. Consistent c. Long term d. All of the above

d. All of the above

Strategy improves decision-making by: a. Reducing the number of choices being considered b. Integrating and pooling the knowledge of different members of the organization c. Facilitating the use of analytic tools d. All of the above

b. The external environment is in a state of flux.

Strategy needs to take account of both the requirements of the firm's external environment and the firm's own resources and capabilities. Resources and capabilities rather than requirements of the external environment offer a stronger basis for strategy formulation when: a. The firm is engaged in the exploitation of natural resources such as petroleum or metal. b. The external environment is in a state of flux. c. When the firm is supplying producer goods rather than consumer goods. d. When the firm is a multinational corporation.

c. To keep doctors' remuneration high

The American Medical Association encourages limits on the number of medical school places for training new doctors: a. To ensure a high standard of applicant b. To keep class sizes small c. To keep doctors' remuneration high d. To ensure that only the best universities have medical schools

b. Financial, customer, internal, and learning/innovation performance

The Balanced Scorecard is a technique of performance management that establishes and monitors four dimensions of performance: a. Financial, strategic, operational, and ethical performance b. Financial, customer, internal, and learning/innovation performance c. Profit, sales, productivity, and asset management performance d. Shareholder, customer, employee, supplier, and social performance

a. Its relationships with customers, competitors and suppliers

The core of a firm's business environment is comprised by: a. Its relationships with customers, competitors and suppliers b. Its technological environment c. Its relationships with all stakeholders d. The socioeconomic system within which the firm must exist

b. The level of profitability within an industry is determined by the systematic influence of the industry structure which determines the intensity of competition in the industry

The basic premise of industry analysis is that: a. Perfect competition and monopoly are the basic models, most industries lie between these two extremes b. The level of profitability within an industry is determined by the systematic influence of the industry structure which determines the intensity of competition in the industry c. Industry profitability depends upon the interaction among competing firms d. Technology and consumer demand are the basic forces that shape industry structure

b. A performance management system needs short-term indicators to monitor performance, yet the ultimate goal is to enhance the long-term performance of the firm

The biggest problem in designing a performance management system arises as a result of: a. The tendency for performance management systems to be based entirely on financial targets b. A performance management system needs short-term indicators to monitor performance, yet the ultimate goal is to enhance the long-term performance of the firm c. Performance targets are always ineffective because individuals will "game the system" d. The personal interests of organizational members need to be taken into account

b. Sun Tzu's Art of War

The book that is considered as the first treatise on strategy is: a. Carl Von Clausewitz's Vom Kriege (On war) b. Sun Tzu's Art of War c. The Bible d. Niccolo Machiavelli's Dell'arte della Guerra (The art of war)

a. A resource is a productive asset; a capability refers to what the firm can do

The difference between a resource and a capability is: a. A resource is a productive asset; a capability refers to what the firm can do b. A resources tend to be immobile assets; capabilities are dynamic c. A resource is a weak source of competitive advantage whereas a capability is a strong one d. A capability is a type of resource

d. The difficulties established firms experience in building the new capabilities.

The difficulties faced by Eastman Kodak, Smith Corona. and Olivetti in adapting to radical technological change within their markets point to: a. The short-sightedness of senior managers in recognizing the implications of new technologies. b. The power of digital technology as a force for creative destruction. c. The need for firms to devote more resources to technological forecasting. d. The difficulties established firms experience in building the new capabilities.

a. They provide a basis for entering new markets and make a disproportionate contribution to the customer value

The distinguishing attributes of core competences is that: a. They provide a basis for entering new markets and make a disproportionate contribution to the customer value b. They provide a basis for building new technological processes and offer a valuable product or service to a firm's customers c. They are found primarily in Japanese companies such as Honda, Canon, and Sony d. They allow top managers to understand the human resources of their firm and to define and implement a technological strategy

c. Greater for capital-intensive firms than for labor-intensive firms

The divergence between accounting profit and economic profit is likely to: a. Greater for highly leveraged firms than for equity-financed firms b. Greater for labor-intensive firms than for capital-intensive firms c. Greater for capital-intensive firms than for labor-intensive firms d. Greater for technology-based firms than firms in mature industries

d. All of the above

The essence of strategy is: a. Making choices b. Doing things differently c. Where and how to compete d. All of the above

d. Depends upon the extent to those capabilities are embedded in team-based process that are heavily dependent upon corporate systems

The firm's ability to appropriate the rents generated by its organizational capabilities: a. Is guaranteed by the fact that firms have full ownership of their capabilities b. Is greater for firms in high technology than in low technology industries c. Is weakened if a firm uses independent contractors instead of full-time employees d. Depends upon the extent to those capabilities are embedded in team-based process that are heavily dependent upon corporate systems

c. Commerce: transferring products across space and time from where they are valued less to where they are valued.

The firms create value through production—transforming less valuable inputs into more valuable outputs—and also through: a. Entrepreneurship: creating new businesses. b. Restructuring: turning around, and selling off divisions or units. c. Commerce: transferring products across space and time from where they are valued less to where they are valued. d. Marketing: presenting products in a way that makes them more valuable to customers.

c. Firms increasingly depending upon other firms through outsourcing and strategic alliances

The increasingly complex business environment of the 21st century has resulted in: a. Firms shifting their emphasis towards the growth markets of Asia, Africa, and Latin America. Firms abandoning shareholder value maximization in favor of maximizing stakeholder interests c. Firms increasingly depending upon other firms through outsourcing and strategic alliances d. Firms embracing digital technologies

d. Accounting measures are backward looking; stock market measures are forward looking

The main difference between accounting measures of firm performance and stock-market measures of firm performance is: [See pp.43-44] a. Accounting measures are less reliable because of firms' discretion over how they apply accounting conventions b. Stock market measures are less reliable because share prices are so volatile c. Accounting data offers a sound basis for forecasting future performance d. Accounting measures are backward looking; stock market measures are forward looking

c. A more turbulent business environment that became increasingly difficult

The main reason for the transition from corporate planning to strategic management during the latter half of the 1970s was: a. The influence of Michael Porter b. Disappointing returns of corporate diversification c. A more turbulent business environment that became increasingly difficult to predict d. Growing disillusionment with central planning. to predict

b. Adapt strategy to your relative strengths.

The main strategic lesson to be drawn from the Biblical story of David and Goliath is: a. The importance of first-mover advantage. b. Adapt strategy to your relative strengths. c. Conventional strategies don't work for newcomers. d. The Israelis usually win.

d. To understand how the industry's structure has determined competitive intensity and profitability in the past, then to use information on an industry's changing structure to predict how profitability is likely to change in the future

The most useful approach to forecasting industry profitability in the future is: a. To estimate the industry's revenues and costs in future years b. To use an industry's probability at similar stages of the business cycle in the past as an indicator of future profitability c. To extrapolate the trend of industry profitability into the future d. To understand how the industry's structure has determined competitive intensity and profitability in the past, then to use information on an industry's changing structure to predict how profitability is likely to change in the future

d. Answers a and c

The notion of "strategic fit": a. Is common in strategic literature but means different things to different experts b. Implies deep coherence across all functions within the organization c. Expresses how well a firm's strategy fits its internal environment d. Answers a and c

b. Corporate strategy is concerned with where the firm competes; business strategy with how it competes

The primary distinction between corporate strategy and business strategy is: a. Corporate strategy is the responsibility of the CEO, business strategy is formulated by the heads of business units b. Corporate strategy is concerned with where the firm competes; business strategy with how it competes c. Corporate strategy is concerned with establishing competitive advantage; business strategy with strategy implementation in individual businesses d. Corporate strategy is concerned with the long-term performance of the firm; business strategy with resource deployment.

b. Achieving success

The primary purpose of strategy is: a. Being better than rivals b. Achieving success c. Satisfying all stakeholders d. Being an excellent "corporate citizen"

b. Accounting profit includes both economic profit and the normal return on capital to the providers of equity capital.

The principal difference between accounting profit and economic profit is: a. Accounting profit is distorted by the arbitrary treatment of depreciation and unusual items. b. Accounting profit includes both economic profit and the normal return on capital to the providers of equity capital. c. Economic profit is cash flow based and is, hence, less subject to manipulation that accounting profit. d. Economic profit is endorsed by economists who tend to be more rigorous than accountants.

b. They share common concepts and principles

The principal similarity between business and military strategy is that: a. They share the same objective: to annihilate rivals b. They share common concepts and principles c. The nature of leadership is much the same whether in a military or business context d. They are both concerned with tactical maneuvers that can establish positions of advantage.

d. The value of the product for customers, the intensity of competition, and the relative bargaining powers of producers, their suppliers and their buyers

The profits earned by firms in an industry, are determined by: a. The overall state of the economy and the intensity of competition within the industry b. How much customers value the products supplied by the industry c. The extent to which the industry is protected by barriers to entry d. The value of the product for customers, the intensity of competition, and the relative bargaining powers of producers, their suppliers and their buyers

c. Resources and capabilities are the principal basis for firm strategy and the primary source of profitability

The resource-based view of firm implies that: a. The boundaries of the firm are determined by the firm's resources rather than by transaction costs b. The resources of the firm are the foundation for its capabilities c. Resources and capabilities are the principal basis for firm strategy and the primary source of profitability d. Ricardian rents are a more important source of firm profitability than monopoly rents Schumpeter

c. Have a consistency of direction based on clear goals

The successful careers of both Queen Elizabeth II and Lady Gaga may be attributed to the fact that both: a. Have used dressing up as a means of attracting attention and establishing identity b. Have a knack for being in the right place at the right time c. Have a consistency of direction based on clear goals d. Have built a loyal fan base based on astute use of the media.

b. The farming industry tends to be fragmented and supply commodity products

The suppliers of agricultural products tend to lack bargaining power relative to buyers because: a. Farmers tend to be uneducated b. The farming industry tends to be fragmented and supply commodity products c. Agricultural products are essential food products that must be kept at affordable prices d. Most farmers are not forward integrated

a. Ford's acquisition of programmable robots that allow different models of car to be produced on a single assembly line

The two main categories of real options are growth options and flexibility options. Which of the following investments is not a growth option? a. Ford's acquisition of programmable robots that allow different models of car to be produced on a single assembly line b. Facebook's acquisition of WhatsApp 2014 c. Apple's program of research into virtual reality d. Callaway Golf's strategic alliance with Automobili Lamborghini to develop new composite materials

a. a firm's corporate and business strategies

The two questions of "where and how to compete" define: a. a firm's corporate and business strategies b. a firm's strategic management process c. a firm's vision and mission d. a firm's values and culture

d. The Black-Scholes

The value of a real option can be calculated using: a. The Black-Scholes option pricing model b. Binomial options pricing model c. Discounted cash flow analysis d. The Black-Scholes option pricing model OR Binomial options pricing model

a. Market power and superior resources.

There are two primary sources of profit (or "economic rent"): a. Market power and superior resources. b. Market power and competitive advantage. c. Competitive advantage and disequilibrium rents. d. Cost advantage and differentiation advantage.

c. The firm's cost of equity capital

To assess the adequacy of the return on capital employed (ROCE) that a firm earned in its most recent financial year, which of the following would not be an appropriate benchmark: a. The ROCE earned by the same firm in previous years b. The ROCE earned by competitors during the same period c. The firm's cost of equity capital d. The firm's weighted average cost of capital

b. Return on sales varies between industries according to their capital intensity

To assess whether or not a firm is earning an adequate rate of profit, return on capital employed (ROCE) is a better indicator than return on sales because: a. Sales are more variable than capital employed b. Return on sales varies between industries according to their capital intensity c. A firm's return on sales depends upon the choice between gross margin, operating margin, and net margin d. ROCE is based upon cash flow

d. Disaggregate overall return on capital into its component items

To diagnose the sources of a firm's poor financial performance, it is useful to: a. Focus on the firm's cash flow statement rather than its income statement and balance sheet b. Concentrate on sales growth and market share rather than profit data c. Adopt a forward-looking approach through analyzing share price performance rather than looking at backward-looking accounting statements d. Disaggregate overall return on capital into its component items

b. Economizes on underutilized assets and redeploys assets into more profitable uses

To exploit its tangible assets more effectively requires that a firm: a. Economizes on these assets by changing its depreciation policy b. Economizes on underutilized assets and redeploys assets into more profitable uses c. Expands sales in order to ensure they are fully deployed d. Leases assets rather than owning them in order to boost return on capital employed

c. Both (a) and (b).

To identify a firm's resources and capabilities, it is useful: a. To first identify the key success factors within the firm's industry then identify the resources and capabilities needed to satisfy these success factors. b. Identify the firm's value chain, then identify the main resources and capabilities at each stage of the value chain. c. Both (a) and (b). d. Classify resources into tangible, intangible and human.

b. The difference between the sales value of a firm's output and the cost of physical inputs used to produce that output

Value added can be defined as: a. The difference between sales and expenses b. The difference between the sales value of a firm's output and the cost of physical inputs used to produce that output c. The difference between the sales value of a firm's output and the direct costs of producing it

d. All of these

Viewing strategy as a portfolio of options rather than a portfolio of investments relies upon the rationale that: a. Uncertainty means that flexibility is valuable b. Committing to a long-term program of investment can be disastrous if circumstances change c. Most investment projects can be divided into a sequence of stages where, at any point of time, it is only necessary to decide the next stage d. All of these

b. strategy becomes a vital tool to navigate the firm through "stormy seas"

When the environment becomes more turbulent, unpredictable, and full of new opportunities: a. strategy appears to not be very useful b. strategy becomes a vital tool to navigate the firm through "stormy seas" c. strategy should be put into the hands of external consultants d. strategy becomes an "impossible exercise"

a. The 2015 "Race Together" initiative to combat racism and promote racial harmony

Which of the following activities by Starbucks Inc. is least likely to be an example of Michael Porter and Mark Kramer's "shared value creation"? a. The 2015 "Race Together" initiative to combat racism and promote racial harmony b. The introduction in 2014 of college tuition benefits to employees c. Participating in the Coffee and Farm Equity program to benefit growers d. Financial and media support for American Red Cross efforts to aid refugees

c. A high level of differentiation among the products that buyers purchase

Which of the following does not contribute to buyers' bargaining power? a. Low switching costs for buyers b. The size of buyers relative to that of sellers c. A high level of differentiation among the products that buyers purchase d. The ability of buyers to backward integrate