CH 1
Cobalt Sodas has seen its market share erode in recent years, as consumers increasingly turn toward healthier beverage choices such as unsweetened sparkling water. Hoping to rekindle interest in sugary sodas, Cobalt decides to produce a limited run of "throwback" cans using labeling first introduced in the 1980s. What is wrong with this strategy? A) It fails to face the competitive challenge. B) It does not involve concrete actions. C) It lacks strategic commitments. D) It tries to be everything to everybody.
A) It fails to face the competitive challenge.
average price is $7. StoreAll Inc. manufactures the same product for $3 per bottle and sells it for $7 per bottle. Which of the following statements is most likely true of StoreAll Inc. in this scenario? A) It has a competitive advantage in the industry. B) It has a competitive disadvantage in the industry. C) It has competitive parity with other firms in the industry. D) It has formed a strategic alliance with other firms in the industry.
A) It has a competitive advantage in the industry.
Which of the following provides an example of what AFI strategy framework is used for? A) Using AFI, the Gasquet Motor Company was able to implement a strategy that produced high-quality cars more efficiently and thereby reduced costs. B) Using AFI, the Chen Restaurant Group was able to improve employee benefits and thereby increase employee loyalty. C) Using AFI, the Sanchez Clothing Company was able to implement a strategy that allowed them to give more money to charities and thereby gain good press. D) Using AFI, the Richardson Tea Group was able to reduce the pollution it caused while processing tea and thereby receive an award
A) Using AFI, the Gasquet Motor Company was able to implement a strategy that produced high-quality cars more efficiently and thereby reduced costs.
66) Fuller Apparel's core value statement reads we will ensure our clothing is made with the highest respect toward human rights and environmental protection. Which of the following actions exemplifies how Fuller's core values drive its strategic decision making? A) demanding that textile suppliers pay livable wages and maintain safe production facilities B) introducing an online customer service unit to keep customers happy C) investing in more efficient machinery to reduce costs and lower prices for consumers D) purchasing a full-page advertisement in a major newspaper touting the company's values
A) demanding that textile suppliers pay livable wages and maintain safe production facilities
In the AFI strategy framework, strategy analysis primarily involves A) evaluating the effects of internal resources and core competencies on a firm's potential to gain and sustain a competitive advantage. B) designing a business, corporate, and global strategy to gain and sustain a competitive advantage. C) organizing a firm in order to effectively put the formulated strategy into practice. D) deciding the type of corporate governance that would be most effective in the implementation of a strategy.
A) evaluating the effects of internal resources and core competencies on a firm's potential to gain and sustain a competitive advantage.
14) Which of the following stages of the strategic management process involves an evaluation of a firm's external and internal environments? A) strategy analysis B) strategy implementation C) strategy formulation D) strategy control
A) strategy analysis
80) During strategy implementation, managers primarily focus on deciding the A) type of corporate governance that is most effective and ways in which it can put the formulated strategy into practice. B) industries and markets the firm should compete in to be able to gain and sustain a competitive advantage. C) relationship between competitive advantage and firm performance. D) role strategic leaders should play in gaining and sustaining a competitive advantage.
A) type of corporate governance that is most effective and ways in which it can put the formulated strategy into practice.
During strategy implementation, managers primarily focus on deciding the A) type of corporate governance that is most effective and ways in which it can put the formulated strategy into practice. B) industries and markets the firm should compete in to be able to gain and sustain a competitive advantage. C) relationship between competitive advantage and firm performance. D) role strategic leaders should play in gaining and sustaining a competitive advantage.
A) type of corporate governance that is most effective and ways in which it can put the formulated strategy into practice.
The ________ is a model that links strategy analysis, strategy formulation, and strategy implementation, which together helps managers plan and implement a strategy that can improve performance and result in competitive advantage. A) Ansoff's growth strategy matrix B) AFI strategy framework C) Sarbanes-Oxley Act D) stakeholder impact analysis
B) AFI strategy framework
58) Which of the following statements is true of customer-oriented visions? A) Customer-oriented visions identify how a customer need will be met. B) Customer-oriented vision statements are not the same as listening to your customer. C) Customer-oriented visions reduce a company's ability to adapt to a changing environment. D) Customer-oriented visions define a business in terms of goods or services provided.
B) Customer-oriented vision statements are not the same as listening to your customer.
Silver Screen Cinemas Inc. and Digi Now Inc. are two companies that own and run movie theaters in malls and other commercial areas. While Silver Screen Cinemas Inc. pursues a cost-leadership strategy, Digi Now Inc. adopts a differentiation strategy. Which of the following statements is most likely true of this scenario? A) Silver Screen Cinemas will charge a premium price for its customers, while Digi Now will implement everyday low pricing. B) Digi Now and Silver Screen Cinemas will not be direct competitors to each other, and their customer segments will overlap very little. C) Digi Now will keep its customer service at an acceptable level, while Silver Screen Cinemas will provide superior customer service. D) Silver Screen Cinemas and Digi Now will use a similar approach to create value for customers by attempting to offer everything to everybody.
B) Digi Now and Silver Screen Cinemas will not be direct competitors to each other, and their customer segments will overlap very little.
You are the manager in charge of setting the strategy for a new frozen yogurt company. Which of the following questions would be appropriate for you to ask during the analysis phase of the AFI strategy framework? A) Should we open our first location in Los Angeles or New York City? B) How have consumer preferences in frozen yogurt flavors changed in the last five years? C) Should we be competing nationally or internationally? D) Can we secure relationships with enough organic dairy farmers to meet our commitment to using the healthiest ingredients?
B) How have consumer preferences in frozen yogurt flavors changed in the last five years?
13) ________ is best described as a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors. A) Behavior modification B) Strategy C) Credo D) Competency management
B) Strategy
82) What part of the AFI strategy framework does the question "How does the firm make money?" relate to? A) strategic leadership and the strategy process B) competitive advantage, firm performance, and business models C) external analysis D) internal analysis
B) competitive advantage, firm performance, and business models
What part of the AFI strategy framework does the question "How does the firm make money?" relate to? A) strategic leadership and the strategy process B) competitive advantage, firm performance, and business models C) external analysis D) internal analysis
B) competitive advantage, firm performance, and business models
26) Rapida Inc. and Click Inc. are two companies that have been manufacturing typewriters for almost 30 years. Due to the reduced demand for typewriters today, both companies' average return on invested capital is approximately -5 percent. The current industry average is 2 percent. In this scenario, Rapida Inc. and Click Inc. most likely have A) competitive advantage over other firms in their industry. B) competitive parity with each other. C) strategic alliance with each other. D) economies of scope instead of economies of scale.
B) competitive parity with each other.
While creating its AFI strategy framework, Valdez Consultants decided what markets the firm should compete in. By doing this, what type of strategy did the company devise? A) business strategy B) corporate strategy C) global strategy D) ethical strategy
B) corporate strategy
48) To be effective, firms need to A) back up their visions with strategic commitments that are costly and difficult to reverse. B) increase their strategic flexibility by developing product-oriented vision statements. C) isolate top managers from the organizational values. D) pursue visions that are exclusively financial and not aspirational.
B) increase their strategic flexibility by developing product-oriented vision statements.
Green Jeans, Inc. had a mission to become the leading producer of environmentally friendly blue jeans, an emerging and in-demand category in the apparel industry. Its strategy involved leveraging a network of organic cotton farmers and suppliers of environmentally responsible synthetic materials to create a product that is durable, attractive, affordable, and 100% recyclable. However, because it did not upgrade its outdated production facilities, Green Jeans could not assemble its products at a low-enough cost to offer the jeans at a price that was attractive to customers. Green Jeans' strategy failed because A) it failed to consider the competitive challenge. B) it was not backed up with strategic commitments. C) managers did not live by the company's core values. D) the company did not stake out a unique strategy position.
B) it was not backed up with strategic commitments.
46) Strategic commitments are actions that are A) inexpensive. B) long-term oriented. C) easy to reverse. D) easy to imitate.
B) long-term oriented.
11) Which of the following strategies does Tesla need to implement or achieve to gain a competitive advantage? A) imitate the features of the most popular SUVs on the market B) reinvest profits to build successively better electric automobiles C) sell advertising space on their cars' digital displays D) substitute less-expensive components to keep costs low
B) reinvest profits to build successively better electric automobiles
75) According to AFI strategy framework, in which of the following tasks of strategic management is a firm's vision, mission, and values identified? A) strategy control B) strategy analysis C) strategy formulation D) strategy implementation
B) strategy analysis
According to AFI strategy framework, in which of the following tasks of strategic management is a firm's vision, mission, and values identified? A) strategy control B) strategy analysis C) strategy formulation D) strategy implementation
B) strategy analysis
16) Through ________, a firm puts its guiding policy into practice by employing a set of coherent actions. A) strategy control B) strategy implementation C) strategy formulation D) strategy analysis
B) strategy implementation
79) Which of the following tasks in the AFI strategy framework involves putting the formulated strategy into practice through organizational structure, culture, and controls? A) strategy formulation B) strategy implementation C) strategy analysis D) strategy evaluation
B) strategy implementation
47) Visionary companies are able to outperform their competitors because A) their vision statements are more product-oriented. B) they provide more aspirational visions. C) their visions are primarily financial. D) they isolate internal stakeholders in defining their visions.
B) they provide more aspirational visions.
70) When do employees fail to adopt the organizational values of a firm? A) when the internal stakeholders of the firm are involved in designing the values B) when the top managers in the firm are merely paying lip service to the firm's stated values C) when the strategic leaders in the firm propagate and exhibit the same values D) when the organizational structure, such as its strategic decision making, is aligned with its values
B) when the top managers in the firm are merely paying lip service to the firm's stated values
85) As manager of a major producer of automobile airbags, you have recently introduced the following vision statement: to protect the health of every driver and passenger. How can you ensure that your employees feel invested in and inspired by the firm's vision? A) Include a "vision adherence assessment" in each employee's annual performance review. B) Hang banners around the production facility touting the new vision statement. C) Ask employees for feedback on the vision statement and revise based on their input. D) Give a speech explaining why everyone should support the new vision.
C) Ask employees for feedback on the vision statement and revise based on their input.
55) Why is it better for firms to keep their vision statements customer-oriented rather than product-oriented? A) Customer-oriented visions tend to have a more short-range view of changing environments. B) Customer-oriented visions tend to have a more myopic view of changing environments. C) Customer-oriented visions tend to be more flexible when adapting to changing environments. D) Customer-oriented visions tend to be more stable when dealing with changing environments.
C) Customer-oriented visions tend to be more flexible when adapting to changing environments.
Which of the following statements should ideally reflect a firm's strategy for competitive advantage? A) Our strategy is to win at any cost. B) We will be number one in the industry. C) Our aim is to create superior customer value while controlling costs. D) We want to be the market leader by replicating our competitor's strategy.
C) Our aim is to create superior customer value while controlling costs.
12) ________ is best described as an integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage. A) Supply chain management B) Integrated technology management C) Strategic management D) Inventory management
C) Strategic management
22) Which of the following scenarios illustrates a firm that has a sustainable competitive advantage? A) Jamison Inc. generated revenue of $300,000 this financial year, which is close to the industrial revenue average of $320,000. B) CR Inc. almost doubled its sales to 9,000 units this year compared to its previous year's sales of 5,000 units, though the industry average is 10,000 units. C) Zhang Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years. D) Peak Inc. was able to outperform its competitors with its new production system, in terms of revenue, for a brief period of four months.
C) Zhang Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years.
Which of the following is an element of good strategy? A) a summary of the firm's history within its industry B) a guiding policy to address employee satisfaction C) a set of coherent actions to implement the firm's guiding policy D) an approach that underestimates the competition
C) a set of coherent actions to implement the firm's guiding policy
72) The pharmaceutical company Merck's new drug Vioxx was a blockbuster, generating revenues of $2.5 billion a year by 2002 and growing fast. When allegations that the drug caused heart attacks and strokes began to appear in the medical community, and that Merck had suppressed evidence about Vioxx's dangerous side effects from early clinical trials, Merck announced the voluntary withdrawal of Vioxx from the market. In this example, Merck provides an example of what can happen if a company deviates from its A) voluntary responsibilities. B) realized strategy. C) core values. D) strategic decisions.
C) core values.
The pharmaceutical company Merck's new drug Vioxx was a blockbuster, generating revenues of $2.5 billion a year by 2002 and growing fast. When allegations that the drug caused heart attacks and strokes began to appear in the medical community, and that Merck had suppressed evidence about Vioxx's dangerous side effects from early clinical trials, Merck announced the voluntary withdrawal of Vioxx from the market. In this example, Merck provides an example of what can happen if a company deviates from its A) voluntary responsibilities. B) realized strategy. C) core values. D) strategic decisions.
C) core values.
49) Strategic commitments are actions that are A) inexpensive, long-term oriented, and difficult to reverse. B) inexpensive, short-term oriented, and easy to reverse. C) costly, long-term oriented, and difficult to reverse. D) costly, short-term oriented, and easy to reverse.
C) costly, long-term oriented, and difficult to reverse.
62) A positive relationship between vision statements and firm performance is more likely to exist when A) visions are product-oriented. B) internal stakeholders are isolated from defining and revising the visions. C) organizational structures are aligned with the firm's vision statement. D) vision statements are equivalent to listening to the customers.
C) organizational structures are aligned with the firm's vision statement.
36) Noodles 2 Go and Sal's Trattoria are two restaurants serving Italian cuisine. While Noodles 2 Go focuses on providing quick, affordable pasta dishes for the lunch crowd, Sal's Trattoria focuses on serving home-style dishes in an upscale, romantic setting. Both companies have been able to gain a competitive advantage. This is most likely because the companies have A) benefitted from economies of scale. B) entered into a cartel arrangement. C) pursued distinct strategic positions. D) engaged in direct imitation and substitution.
C) pursued distinct strategic positions.
15) In ________, a firm frames a guiding policy to address the competitive challenge. A) strategy control B) strategy implementation C) strategy formulation D) strategy analysis
C) strategy formulation
33) For a firm that operates in an industry where competition is high, which of the following practices will result in inferior performance? A) choosing a distinct but different strategic position in the industry B) working toward increasing the difference between value creation and cost C) trying to be everything to everybody by combining different competitive strategies D) focusing on creating value for customers rather than destroying rivals
C) trying to be everything to everybody by combining different competitive strategies
30) As the strategic manager of CutRite Scissors, you are tasked with producing a strategy for introducing a new line of premium scissors. Your competitor produces a line of similar scissors at a cost of $1 and sells them for $12. Because your company has inferior production capabilities, your scissors will cost $3 each to produce. However, your handle is proven to be more comfortable than your competitors'. Assuming you are guaranteed to sell the same number of units as your competitor, which of the following strategies is most likely to achieve a competitive advantage? A) Reduce the quality of materials used in CutRite scissors to bring unit costs down to $1, then sell the scissors for $12. B) Continue to produce CutRite scissors for $3 but set the price at $10. C) Offer a buy-one-get-one-free sale on CutRite scissors. D) Market CutRite scissors as a higher-quality alternative and sell them for $15.
D) Market CutRite scissors as a higher-quality alternative and sell them for $15.
38) Toy sales have declined by 10 percent each year, forcing many retailers to exit the industry. To eliminate its remaining competition, Bleaker Toys sells all of its product at a loss and relies on its significant cash holdings to cover costs until its competition is forced to exit the industry. Is this an example of a successful strategy? Why or why not? A) Yes. Any strategy that forces competition from the market is by definition successful. B) Yes. Bleaker has achieved a sustainable competitive advantage by selling its toys at a lower price than competitors. C) No. Bleaker has failed to create value for its customers. D) No. Bleaker's strategy and competitive advantage are unsustainable.
D) No. Bleaker's strategy and competitive advantage are unsustainable.
Toy sales have declined by 10 percent each year, forcing many retailers to exit the industry. To eliminate its remaining competition, Bleaker Toys sells all of its product at a loss and relies on its significant cash holdings to cover costs until its competition is forced to exit the industry. Is this an example of a successful strategy? Why or why not? A) Yes. Any strategy that forces competition from the market is by definition successful. B) Yes. Bleaker has achieved a sustainable competitive advantage by selling its toys at a lower price than competitors. C) No. Bleaker has failed to create value for its customers. D) No. Bleaker's strategy and competitive advantage are unsustainable.
D) No. Bleaker's strategy and competitive advantage are unsustainable.
53) Upper management at Softstep Inc., a manufacturer of insoles for shoes, wants to work on improving the product lines it already has without taking on other challenges at this time. Which of the following vision statements reflects that goal? A) Softstep Inc. wants to adapt their insoles to the changing demands of consumers. B) Softstep Inc. wants to always satisfy the consumers who purchase insoles. C) Softstep Inc. wants to provide the best benefits for employees in the insole industry. D) Softstep Inc. wants to be the best manufacturer of insoles in the industry.
D) Softstep Inc. wants to be the best manufacturer of insoles in the industry.
24) Underperformance relative to other firms in the same industry or the industry average results in a(n) ________ for a firm. A) sustainable competitive advantage B) increased power distance C) diseconomies of scope D) competitive disadvantage
D) competitive disadvantage
Managers use the AFI strategy framework to A) help their business achieve and sustain competitive parity. B) minimize the wealth of their shareholders. C) help reduce the economic contribution of their business. D) explain and predict differences in firm performance.
D) explain and predict differences in firm performance.
During an AFI planning session, the managers of the Fukuhara Motorcycle Corporation decided to place various stages of production in different countries in order to implement the strategy of cutting overhead costs. By doing this, what issue did the firm address? A) philanthropic strategy B) business ethics C) corporate governance D) organizational design
D) organizational design
54) A customer-oriented vision statement focuses employees to think about how best to A) make a product easier to use. B) increase their efficiency to benefit consumers. C) improve a popular product. D) solve a problem for a consumer.
D) solve a problem for a consumer.
FindFor Inc. is an e-commerce retail firm that sells a variety of merchandise online. Through services like cash on delivery, easy return, and online tracking, the company has created more customer value than its competitors (brick-and-mortar businesses) at the same price. Also, the company's costs are substantially lower than its competitors because of minimal investments in operation and administration. In this scenario, FindFor Inc. has most likely been able to provide superior value and cost control through A) strategic parity. B) strategic profiling. C) strategic liquidation. D) strategic positioning.
D) strategic positioning.
78) Which of the following stages in the AFI strategy framework involves designing a business, corporate, and global strategy? A) strategy control B) strategy implementation C) strategy analysis D) strategy formulation
D) strategy formulation
21) Powell Lighting was the first company to start selling LED light bulbs in its country—a product that gained popularity among diverse groups. Soon, other companies started to sell their own brands of LED bulbs, thereby giving Powell Lighting ample competition. In response, Powell Lighting decided to limit its LED light bulbs to outdoor models. However, it ensured that these models were the longest-lasting and lowest-priced on the market. With this innovation, Powell Lighting consistently outperformed its competitors for ten years. In this scenario, Powell Lighting maintained a ________ through its innovative strategy. A) balanced scorecard B) fiduciary responsibility C) consistent power position D) sustainable competitive advantage
D) sustainable competitive advantage
Powell Lighting was the first company to start selling LED light bulbs in its country—a product that gained popularity among diverse groups. Soon, other companies started to sell their own brands of LED bulbs, thereby giving Powell Lighting ample competition. In response, Powell Lighting decided to limit its LED light bulbs to outdoor models. However, it ensured that these models were the longest-lasting and lowest-priced on the market. With this innovation, Powell Lighting consistently outperformed its competitors for ten years. In this scenario, Powell Lighting maintained a ________ through its innovative strategy. A) balanced scorecard B) fiduciary responsibility C) consistent power position D) sustainable competitive advantage
D) sustainable competitive advantage
61) Which of the following vision statements is most likely to produce a sustainable competitive advantage for an auto dealership? A) to generate the highest revenues of any dealership in the region B) to sell only the highest-rated luxury vehicles C) to open dealerships all across the country. D) to help our customers find the perfect car for their individual needs.
D) to help our customers find the perfect car for their individual needs.
1) A good strategy is a set of actions that enables a firm to achieve its own internal goals without regard to the external environment.
F
10) Once a strategy has been formulated and implemented, it is important that the firm sticks to it no matter what happens.
F
2) The following statement by the chief executive of SunStar movie studio is an effective strategy: "We will produce the greatest films of the 21st century."
F
5) Product-oriented vision statements are better suited than customer-oriented vision statements for helping companies to adapt to changes in the external environment.
F
7) Managers should create two sets of core values, one for employees and one for themselves.
F
8) The three tasks of the AFI strategy framework are to Assemble a prototype, Find a buyer, and Incorporate feedback.
F
3) A vision describes in broad, inspirational terms what an organization hopes to accomplish in the future.
T
4) A mission describes how a firm will accomplish the broad goals set out in a vision statement.
T
6) Core values provide ethical guidelines for how individual employees will behave.
T
9) Questions asked during the strategy analysis stage of the AFI framework include "How does the firm make money?" and "What effects do forces in the external environment have on the firm's potential to gain and sustain a competitive advantage?"
T