Business Policies Test 1 (Ch. 1-4)

Although business-level strategy choices matter, long-term performance is not linked to a firm's strategies.

FALSE

An attractive industry is one that is characterized by high entry barriers, suppliers and buyers with strong bargaining power, low threats from substitute products, and low rivalry among firms.

FALSE

Custom Customers, suppliers, unions, and local governments are examples of capital market stakeholders.

FALSE

Financial resources can be defined as formal reporting structures of the firm.

FALSE

Firms can directly control the elements of the seven segments of the general environment.

FALSE

Satisfying customers is not related to successful business strategies.

FALSE

Focused strategy is integrated set of actions taken to produce goods or services that serve the needs of a particular competitive segment.

TRUE

Global mindset can be described as the ability to study an internal environment in ways that are not dependent on the assumptions of a single country, culture, or context.

TRUE

High entry barriers tend to increase the returns for existing firms in the industry and may allow firms to dominate the industry.

TRUE

Hypercompetition can be characterized by market instability and aggressive challengers.

TRUE

IKEA provides low cost products for those interested in metro style furniture. It is the example of focused cost leadership strategy.

TRUE

India is the world's largest democracy.

TRUE

Key issues in business-level strategy includes who will be served, what needs will be satisfied, and how will those needs be satisfied.

TRUE

Learning can be generated by making and correcting mistakes.

TRUE

Market segmentation is a process used to cluster people with similar needs into individual and identifiable groups.

TRUE

Microsoft is experiencing a severe external threat as smartphones are expected to surpass personal computer (PC) sales in the near future.

TRUE

Not all of a firm's resources and capabilities have the potential to be the foundation for a competitive advantage. This potential is realized when resources and capabilities are valuable, rare, costly to imitate, and nonsubstitutable.

TRUE

One source of competitive advantage is possessing the capability to differentiate the firm's product or service and command a premium price.

TRUE

Reputation can also sustain the competitive advantage of firms following a differentiation strategy.

TRUE

Resources tend to be broad in scope.

TRUE

Southwest's competitive advantage includes tight integration among activities and unique culture.

TRUE

Strategic competitiveness is achieved when a firm successfully formulates and implements a value-creating strategy.

TRUE

Strategic leaders are people located in different areas and levels of the firm using the strategic management process to select strategic actions that help the firm achieve its vision and fulfill its mission

TRUE

Strategic management process is a rational approach firms use to achieve strategic competitiveness and earn above-average returns.

TRUE

Stratetic decisions tend to be non-routine.

TRUE

Superior product reliability and durability and high-performance sound systems are among the differentiated features of Toyota Motor Corporation's Lexus products. However, Lexus offers its vehicles to customers at a competitive purchase price relative to other luxury automobiles. As with Lexus products, a product's unique attributes, rather than its purchase price, provide the value for which customers are willing to pay. Toyota uses a differentiation strategy.

TRUE

Supplier power increases when suppliers have substantial resources and provide a highly differentiated product.

TRUE

Suppliers are powerful when the industry is dominated by a few large companies, no satisfactory substitutes are available, and switching costs are high.

TRUE

Sustainable competitive advantage lasts for a relatively long period of time if all four of the criteria discussed are satisfied.

TRUE

Technological segment of the external enviornment includes private and government-supported expenditures, product innovations, and applications of knowledge.

TRUE

The Chapter 2 Opening Case suggests that in the future, BP and all other oil and gas firms should expect regulatory change in the political/legal segment of the general environment.

TRUE

The competitor analysis includes understanding and anticipating competitors' objectives, strategies, assumptions, and capabilities (e.g., Coca-Cola and PepsiCo, Home Depot and Lowe's, and Airbus and Boeing).

TRUE

The fact remains that Walmart is the largest retailer in North America, thus giving the firm a great deal of power with its suppliers.

TRUE

The five forces model expands the arena of competitive analysis beyond direct competitors (i.e., rivals) to include buyers and suppliers who may also be a source of competition.

TRUE

The five forces model includes among five forces: suppliers, buyers, competitive rivalry among firms currently in the industry, product substitutes, and potential entrants to the industry.

TRUE

The objective of assessing the external environment is to determine the timing and importance of the effects of environmental changes and trends on the strategic management of the firm.

TRUE

The two primary drivers of hypercompetition are the emergence of the global economy and technology.

TRUE

Three sources of flexibility useful for this strategy include flexible manufacturing systems, information networks, and total quality management systems.

TRUE

Uncertainty exists about the characteristics of the firm's general and industry environments and customers' need

TRUE

Value chain analysis allows the firm to understand the parts of its operations that create value and those that do not.

TRUE

Walmart, Dollar stores, and Amazon are examples of firms utilizing cost leadership strategies.

TRUE

With its vision of being "The World's Best Bargain Place," Big Lots is the largest closeout retailer in the United States with annual sales of over $5 billion from more than 1,400 stores with approximately 13,000 employees. For Big Lots, closeout goods are brand-name products sold by other retailers provided for sale at substantially lower prices. It means Big Lots uses a cost leadership strategy.

TRUE

Business-level strategy is concerned with determining the businesses in which the company intends to compete as well as how to manage its different businesses.

FALSE

Buyer power increases when switching costs are high (to other industry product).

FALSE

Compared with the industry environment, the general environment has a more direct effect on the firms strategic competitiveness.

FALSE

Competitive advantage often lasts forever.

FALSE

Differentiation strategy can be described as producing standardized goods or services at costs below those of competitors.

FALSE

Four specific criteria of sustainable competitive advantage include substitutable capabilities.

FALSE

Hoon really likes the unique design of desks in the classroom. The unique design of desk is classified as tangible resources.

FALSE

Industry incumbents want to maintain low entry barriers in order to discourage potential competitors from entering the industry

FALSE

Internal organization is more likely to be related to what a firm might do rather than what a firm can do.

FALSE

Low cost leadership in the market has nothing to do with competitive advantage.

FALSE

Psychological factors of consumer markets include social class.

FALSE

Rapid product innovations is not included in differentiation approaches.

FALSE

Resources are considered rare when they have no structural equivalent.

FALSE

Scanning involves detecting meaning through early signals of environmental trends.

FALSE

Sharing risks increases investment requirements and make firms less flexible.

FALSE

Sociocultural segment does not include diversity attitudes about the quality of work life.

FALSE

The CEO of Twin Spires, Inc., is emotionally and intellectually committed to using the resources of the firm to serve the needs of the natural gardening community by providing rare and native plants to individuals and nurseries around the United States. This commitment has carried the CEO through long periods of below average returns on investment. The perspective of the CEO of Twin Spires is consistent with the assumptions of the industrial organizational (I/O) model.

FALSE

The Chapter 2 Strategic Focus notes that McDonald's has pursued green restaurant design, sustainable packaging, waste management, and energy efficiency all of which are aspects of the technological segment of the general environment.

FALSE

The I/O (industrial organization) model assumes that the uniqueness of a firm's resources and capabilities are its main source of above-average returns.

FALSE

The cost leadership strategy is risk free.

FALSE

The degree to which the firm is dependent on a stakeholder group gives that stakeholder less influence.

FALSE

The focus of differentiation strategy is on standardized rather than non-standardized products.

FALSE

The goal of flexible manufacturing systems is to enhance the low cost versus wide product variety tradeoff.

FALSE

Value cannot be measured by product performance characteristics.

FALSE

(Strategic Focus, P&G, p83) Typically, P&G likes to use its capabilities and competencies to grow organically rather than through mergers and acquisitions or through cooperative relationships.

TRUE

A strategy is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage.

TRUE

Above-average returns are returns in excess of what an investor expects to earn from other investments with a similar amount of risk.

TRUE

According to a recent study reported in the Wall Street Journal, 95% of consumer products examined committed at least one offense of "green washing," a term used to describe unproven environmental claims (Chapter 2 Strategic Focus).

TRUE

According to resource based view, the uniqueness of its resources and capabilities is the basis of a firm's strategy and its ability to earn above-average returns.

TRUE

According to strategic focus (p78-79) in Ch3, leaders at Advance Publications Inc., parent company of Condé Nast, a publisher of multiple magazines such as Vogue, GQ, Golf Digest, Bon Appetit, Conde Nast Traveler, and Wired among others, has decided to invest $500 million of its financial resources (a tangible resource) in digital properties as a way of stimulating growth. This decision concerning the use of firms' resources is being made under conditions of uncertainty about a number of factors, including customers' preferences, global economic conditions, and potential changes in various nations' business-related regulations.

TRUE

Acme company fail to invest in new, rising industry as expected due to the resistance of departments responsibile for existing products. It can be an example of intra organizational conflicts as conditions affecting managerial decisions about resources.

TRUE

Apple's R&D function is likely one of its core competencies. This example can be supported by resource based view.

TRUE

Appropriate resources and capabilities are needed to develop desired strategy and create value for customers and other stakeholders.

TRUE

Assessing can be described as determining the timing and significance of the effects of environmental trends that have been identified.

TRUE

Business-level strategy focuses on how to compete in a specific industry.

TRUE

By nurturing a smaller number of capabilities, a firm increases the probability of developing core competencies and achieving a competitive advantage because it does not become overextended.It is one of logics supporting outsouring.

TRUE

Capabilities exist when resources have been purposely integrated to achieve a specific task of set of tasks.

TRUE

Capabilities may emerge over time through complex interactions among tangible and intangible resources

TRUE

Common rivarly dimensions include price and innovation.

TRUE

Compared to tangible resources, intangible resources are a superior source of core competencies

TRUE

Core competencies can be described as resources and superior capabilities that are sources of competitive advantage over a firm's rival.

TRUE

Cost leadership strategy can be described as an integrated set of actions taken to produce goods or services with features that are acceptable to customers at the lowest cost, relative to that of competitors with features that are acceptable to customer.

TRUE

Demographic, economic, political/legal, sociocultural, technological, global, and physical are the seven elements comprising the general environment.

TRUE

Differentiation approaches include different tastes.

TRUE

Differentiation strategy is appropriate when customers value differentiated features more than they value low cost.

TRUE

Bargaining power of buyers increases when the industry's products are differentiated.

FALSE

All types of resources guarantee sustainable competitive advantage of the firm.

FALSE

An effective vision statement should specify the market to be served.

FALSE