Test 1

The ethical standards and norms that should govern the behavior of the individuals within the firm are called what?

values

In scenario planning, what is the key question to ask to begin to generate different scenarios?

what if?

Mission statements have been shown to be associated with firm performance. In many cases, organizations with sound missions are more successful; however, what is far less clear is ________.

whether this mission actually causes a firm to have a competitive advantage

Under the resource-based view of competitive advantage, firm resources such as intellectual knowledge and plant equipment are:

Assets that are key to superior firm performance

In order for managers to determine the vision, mission, and values for their organization, they should

Begin with the "end in mind

There are two critical assumptions underpinning the resource-based model of competitive advantage. One of these is resource heterogeneity. Briefly explain what this means. Provide one example of a heterogeneous resource.

Bundles of resources and capabilities will differ across firms. The insight is that the resource bundles of firms competing in the same industry are unique to some extent and thus differ from one another. The text gives an example of Southwest Airlines, where informal job descriptions help keep the planes running on time and the cost structure lower. Feedback: Pilots may help load luggage to ensure an on-time departure; flight attendants clean airplanes to help turn them around at the gate within 15 minutes from arrival to departure. The other critical assumption is resource immobility.

Bottom-up strategies can emerge as a consequence of the firm's RAP. What is the meaning of RAP

C. ​Resource Allocation Process

Johnson Homes was a real estate development firm with $25 million in available capital. The owner's mission was to "develop the highest-quality housing communities that deliver the ultimate lifestyle." His goal was to build high-end homes on a lake and develop biking trails and other recreational offerings. In order to accomplish this, he needed to pay 15 million dollars for a 10-year project to put in new water facilities, pave new entry and exit roads, and hire consultants to help him navigate state, city, and county regulations. Four years into the project, the owner did not hire the consultants and had only invested 25 percent of the required capital to build the water facility. In addition, he began to travel frequently and did not listen to his employees' complaints. Not surprisingly, the company went bankrupt. Which of these statements is most likely to

C. ​The company failed because it was not backed up with strategic commitment.

In the economic value creation framework of measuring competitive advantage (VPCs), V - P = __________.

Consumer surplus

Scientific improvements and innovations are examples of technological forces

TRUE Scientific improvements and innovations are part of the technological external force under the PESTEL model.

Industry growth rates and even structure change over time. Give an example of an industry that consolidated in the past few years and how this would impact profitability.

The Big Eight accounting firms are now the Big Four. Given only four major firms to service customers the expectation is that their supplier power grew and they should earn higher profits than when large firms were more plentiful. Feedback: This is true given the industry has not declined along with the consolidation.

In Strategy Highlight 3.1, why was the U.S. government putting pressure on UBS, the venerable Swiss bank?

The U.S. government wanted information on potential tax evaders.

Applying the five forces model to the airline and soft drink industries demonstrates all EXCEPT which of the following?

The macro environmental forces are similar between the airline and soft drink industries.

The analogy about building a new home is relevant to strategy because you use vision, mission, and values to begin with the end in mind. Strategic success must be created twice. Once by creating a clear mental picture of what the firm wants to accomplish and second ____________.

by holding department meetings to communicate the vision

If a firm's resources and capabilities are costly to imitate because imitating firms do not understand the relationship between the resources and capabilities controlled by the firm, this firm's competitive advantage is protected from imitation by _________________.

causal ambiguity

what is meant by the term " competitive advantage is transitory"

competitive advantage can be transitory when it is difficult to maintain. a firm that may have enjoyed a competitive advantage in the past can quickly lose such advantages when rivals and the industry adoptthe same processes, information, or technology

Strategic group mapping tells us that:

competitive pressures in an industry favor some strategic groups while threatening others

A ____________ is a product or service that can help raise demand in an industry by indirectly enhancing performance or decreasing prices.

complement

Strategic activity systems that are socially complex are:

difficult to imitate

Any unplanned strategic initiative undertaken by mid-level employees of their own volition is a(n) ________________.

emergent strategy

All of the following are aspects of sociocultural factors influencing industry attractiveness EXCEPT:

environmental protection laws

Total return to shareholders includes stock price appreciation and is an __________ measurement that reflects how the market views a firm's competitive position.

external

It is unwise to initiate strategic moves such as R&D spending during an economic downturn.

false

Realized strategy is a top-down process by which executives design a rational and structured strategic plan.

false Realized strategy is the result of intended and emergent strategies

Teach For America (TFA) has an inspiring mission, which is to eliminate educational inequality in the U.S. What is a major benefit discussed that TFA garnered by effectively using this mission?

​A large number of applicants driving a highly selective group in the teaching jobs.

When strategizing for competitive advantage, managers rely on different approaches that can complement one other. Which one of the following is NOT an approach a firm may use?

strategy implantation

Questions such as "What resources do we need if this happens?" and "How can we shape our anticipated future environment?" are performed under what stage of the AFI framework?

the formulation stage

Which of the following would NOT indicate that buyers are a strong competitive force?

they are reliant on the industrys products

A firm's dynamic capabilities can actually create changes in the market in which it competes.

true

A situation when part or all of a firm's strategic plan falls by the wayside due to unexpected events is called an unrealized strategy

true

Achieving dynamic capabilities is important to a firm because the rate of change in the external environment is accelerating.

true

It is important to measure competitive advantage at the firm level by looking at the economic value created for all products and services offered by the firm

true

One assumption made under the resource-based model is that resources do not move easily from firm to firm.

true

Organizational learning and flexibility are enhanced by the circular nature of scenario planning.

true

The bargaining power of suppliers is high when products are differentiated or have built-in switching costs.

true

​A mission describes what an organization actually does, what its business is, and why it does it.

true

​In the implementation stage of scenario planning, managers will activate the dominant strategic plan.

true

​Industry convergence happens when previously unrelated industries begin to serve the same customer.

true

​The strategic management process describes the method by which managers conceive of and implement a strategy that can lead to a sustainable competitive advantage.

true

As revealed in the Teach For America case, teacher effectiveness improves if their course objectives do what?

Are student-achievement oriented

Explain the three different approaches that managers rely on when it comes to strategizing for competitive advantage.

(1) Strategic (or long-range) planning: This helps manage firms more effectively and enhances their performance. Executive leaders are the ones to create strategic plans, which focus on the past to predict the future (assuming there is no change). (2) Scenario planning: Asking the "what if" questions to anticipate possible futures. (3) Strategy as planned emergence: This can be top-down or bottom-up and can be any unplanned strategic initiative undertaken by mid-level employees of their own volition. Feedback: Strategic planning, scenario planning, and planned emergence are the three methods of producing strategy.

To be effective, firms must implement their mission statements in strategic actions. The decision that Boeing made to develop the 787 Dreamliner is an example of what?

A costly and long-term strategic commitment

Describe how a dominant strategic plan is used within the implementation stage.

A dominant strategic plan is the option that management thinks most accurately matches reality. If reality changes, they can implement another plan that was formed in the formulation stage. Performance in the marketplace acts as feedback for managers. Feedback: The dominant strategic plan is a vital part of scenario planning.

Which of the following frameworks is most effective at demonstrating the difficulty of imitating a firm with 25 interconnected activities?

A strategic activity system

One of Henry Mintzberg's criticisms of the strategic planning process is that:

A. ​It does not allow for strategic thinking.

Performance metrics used to assess the effectiveness of a firm's strategy should be:

Aggregated and viewed from an overall company perspective

Teach For America (TFA) recruits recent college graduates and professionals to teach for a two-year commitment in socially and economically disadvantaged communities. What is a major component of their recruiting campaign for applicants?

An inspiring mission to eliminate educational inequality.

Planned emergence in strategy-making is when:

An organization allows bottom-up initiatives to emerge and be considered by the top.

​Some firms have customer-oriented missions, while others have product-oriented missions. What is the difference between the two and which one is most often preferred?

Customer-oriented. Company's make this their mission if providing solutions to customer needs. (2) Product- oriented. A good or service is provided. (3) Experts believe a customer-oriented mission is the best way for a firm to succeed because it gives customers the solutions they need now and leaves the possibility for more in the future.

Briefly explain the 'virtuous cycle' of complements between Microsoft and Intel as discussed in Strategy Highlight 3.2.

Each time Microsoft issues a new release for its operating system, Intel sells more processors because the new operating systems can use more processing power and the customers want to upgrade their computers to leverage the new operating system. Feedback: Together Microsoft and Intel form the Wintel standard for PCs and this has made both companies highly profitable over the last two decades.

When Disney says its mission is "to make people happy," they translate that mission into which of the following actions as discussed in the text?

Employees are cast members to help the customers enjoy the "show" throughout the park.

In order for a firm's strategy to be effective, it must match all of the following EXCEPT:

External value chain systems.

The underlying industry structure has little effect on individual firms' competitive conduct

FALSE Differences in industry structures determine how firms within those industries compete.

Intended strategy is the combination of emergent and realized strategies.

FALSE Intended strategy is the top-down strategic plan from senior managers.

Under the VRIO framework, it is important to develop as many core competencies as possible because it allows the firm to compete in many markets simultaneously.

FALSE Only a few competencies turn out to be core competencies that fulfill the VRIO requirements, and a company cannot do everything equally well and thus must make necessary trade-offs.

Resource stocks are important to a firm because they are tangible and can be converted into capital quickly.

FALSE Resource stocks are a firm's current level of intangible resources.

Under the VRIO framework, direct imitation is a bigger threat to a firm's competitive advantage than the threat of substitution.

FALSE Under the VRIO framework, both direct imitation and the threat of substitution are equally threatening to a firm's competitive advantage. Thus, a firm should attempt to have resources that are costly to imitate.

Under the value chain concept, only primary activities add incremental value.

FALSE Under the value chain concept, both primary and secondary activities add incremental value.

Performance differences that exist between rivals within the same industry are based primarily on the external environment.

FALSE When performance differences exist between rivals within the same industry, the source for these differences is found inside the firm.

What is the main intention of firms when they use scenario planning?

Firms will refer to scenario planning to help them map out the "what if" questions. Managers anticipate possible futures, especially in a fast-changing environment.

The Five Forces model is primarily used for analysis of the industry's profit potential. What can we say about the relationship between the forces and the profits?

Generally the stronger the forces, the lower the profit potential which makes the industry less attractive to competitors. Feedback: The opposite is also true, weaker forces tend towards higher profits and more attraction as a possibly industry to enter.

Macroeconomic factors such as the unemployment rate and economic contraction:

Have a direct bearing on a firm's stock price.

Under the value chain perspective, managers evaluate a firm's system of activities in order to:

Identify how competitive advantage flows from the inputs to outputs of the firm's distinct activities.

Shell Oil is provided as an example of a firm effectively using scenario planning. In the 1960s, they prepared for a strong OPEC and therefore rising oil prices. What are they now predicting about future energy needs?

In 2025, that 20 percent of our energy will be generated from renewable technologies.

Understanding the Resource Allocation Process (RAP) will have large effects on shaping a firm's realized strategy. Which of the following is an example of such an allocation of resources? c

Intel's rule to "maximize margin-per-wafer-start"

Which one of the following best describes a product-oriented mission?

It defines a business in terms of a good or service provided.

Firms use a balanced scorecard for all of the following reasons EXCEPT

It encourages the firm to improve its ecological position

A dominant strategic plan in the scenario planning tool is which of the following managerial options?

It most accurately matches reality

Toyota lost its competitive advantage when lean manufacturing became an industry standard as other firms learned about and utilized this manufacturing process. These firms learned about lean manufacturing due to:

Knowledge diffusion.

When an organization briefly describes what its business is about and why it does it, they have articulated a _______________.

Mission statement

If the early U.S. railroad companies defined themselves as being in the transportation needs business, which is more customer-oriented, they might have successfully moved into what product/service before any other firm?

Modern shipping and logistics (such as FedEx and

Crocs Shoes (maker of the plastic clog) had tremendous growth from its launch in 2002 to revenue of over $650 million in 2008. However, its market share and stock price plummeted towards the end of 2008. Which VRIO attribute was given as the main cause of the decline of Crocs brand shoes in this period?

Numerous cheap imitators of Crocs have sprung up to copy its colorful and comfortable plastic clog. The firm mainly had problems with low cost of imitation—the "I" in VRIO. Feedback: Despite its patents and celebrity endorsements, other firms were able to more or less directly copy the shoe, taking a big bite into Crocs's profits.

Competitive intensity will increase when all of the following happen EXCEPT:

Proprietary technology is a core capability

Compare and contrast realized and unrealized strategy.

Realized strategy is a combination of serendipity and bottom-up emergent strategy. Unrealized strategy is unexpected events that make a firm's strategies fall by the wayside. Both realized and unrealized strategies have unexpected events (whether good or bad) that force a firm to reevaluate or eliminate a strategic plan. Feedback: Realized strategy is the pattern of actions that constitute a firm's strategy in the Mintzberg framework.

Strategic planning differs from scenario planning in that:

Strategic planning assumes that future success can be predicted; scenario planning allows for more unforeseen events.

When the buyers have high switching costs how does this relate to the expected power of the buyers? (Higher or lower and briefly why?)

Switching costs are the difficulties for a buyer to change from one producer to another for some product or service. When switching costs are high (changing producers is hard) buyers have much less power. The buyer now must account for additional switching costs when evaluating a current producer and negotiating terms of price, delivery and quality.

Intangible resources are more likely than tangible resources to help a firm create and sustain competitive advantage(s).

TRUE

Under the PESTEL framework, external economic factors that are important to a firm's strategy include deflation and levels of employment.

TRUE Deflation and levels of employment are two of the five economic factors that can affect firm strategy.

Intel is provided as an example of a firm that has continuously changed its mission statement, including most recently moving to a customer-focused mission. This is an indication of what?

The mission was changed after Intel had already changed its business focus.

It has been found that visionary companies outperform other companies by more than 1,400 percent. One reason for this is:

Their stated missions encapsulate their aspirations

The fact that many organizations were caught off-guard by the recent economic downturn reflects that:

There is a tendency to ignore negative outcomes when creating future scenarios

Defend or refute this statement: "Strategic groups do not impact competitive rivalry within the industry".

This statement is NOT correct. Rivalry is more intense inside a strategic group than between the groups. The firms that share a strategy and a set of target customers will be more competitive than two firms in the same industry but approaching their business differently

​Defend or refute this statement: "Strategic groups do not impact competitive rivalry within the industry".

This statement is NOT correct. Rivalry is more intense inside a strategic group than between the groups. The firms that share a strategy and a set of target customers will be more competitive than two firms in the same industry but approaching their business differently

One attribute of the VRIO framework is relevant to the organization rather than the resources. Briefly describe this element of the framework and why it is important.

To fully exploit the competitive potential of its resources and capabilities, a firm must be organized to capture value. It must have in place an effective organizational structure and coordinating systems to exploit the potential of the VRI resources of the firm. Feedback: For a firm to gain and sustain a competitive advantage, its resources and capabilities need to interact in such a way as to create unique core competencies. Ultimately, only a few competencies may turn out to be core competencies that fulfill the VRIO requirements.

An important feature of the triple-bottom-line approach to creating a firm's competitive advantage is that it increases the chances that the strategy chosen will be sustainable.

True

Define core competency.

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.

​One of the strategic goals of management is to develop a resource base that is primarily:

Valuable, rare, costly to imitate, and organized to capture value

According to Michael Porter, when it comes to a firm's value chain activities and the essence of strategy, a firm should ask itself

Which activities should be done? And more importantly, what should not be done?

Managers may use _____ perspective to decision making where a large investment decision is broken down into a set of smaller decisions that are staged sequentially over time to obtain more information.

a real options

Real options is a business decision and is seen as _______________.

a right not an obligation

The U.S. airline industry has intense rivalry, primarily undifferentiated products, low entry barriers, and low switching costs. Furthermore, suppliers of aircraft engines to the industry have strong bargaining power. It is no surprise that this industry has been one of the least profitable for years. Michael Porter calls this industry what?

a zero star industry

The three traditional approaches that are considered fairly one-dimensional when measuring competitive advantage include all of the following EXCEPT:

balanced scorecard

A process whereby formerly unrelated industries begin to satisfy the same customer need is often brought on by technological advances. What is this process called?

industry convergence

The strategy originally planned by senior management is known as:

intended strategy

When comparing Exxon Mobil and Liberty Media using the return on revenue metric, __________ had a relative competitive advantage in 2010.

liberty media

Under the VRIO framework, Crocs Shoes was unable to sustain its competitive advantage because its resources were:

not costly to imitate

A business statement defined in terms of a good or service provided is called a _______________.

product-oriented mission

Customer-oriented missions are defined as __________________.

providing solutions to customer needs

Amazon compensated for their lack of valuable and rare resources by implementing a new distribution system to reduce operating costs. This is referred to as:

strategic equivalence

Staking out a desired leadership position that far exceeds a company's current resources and capabilities is called what?

strategic intent