MGMT 304 Chapter Quizzes

Strategy leaders set the tone for ethical conduct within an organization. - True - False

True

A firm can try to protect and sustain its competitive advantage by making it costly for rivals to imitate its capabilities. - True - False

- True

A value chain is a linked set of value-creating activities - True - False

- True

Strategic decisions consider, in part, uncertainty and complexity. - True - False

- True

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

- True

In the airline industry, which of the following contribute to a company's cost leadership strategy? A. initial use of a single type of airplane (e.g., A320) B. minimizing reservation expenses C. cumulative experience (pilots, attendants, mechanics) with the same aircraft D. all of the above E. none of the above

A. initial use of a single type of airplane (e.g., A320) B. minimizing reservation expenses C. cumulative experience (pilots, attendants, mechanics) with the same aircraft D. ALL OF THE ABOVE

Performance is measured by __________________ A. profits B. return on equity C. market share D. market penetration E. revenues F. all of the above G. none of the above

A. profits B. return on equity C. market share D. market penetration E. revenues F. ALL OF THE ABOVE

In order to better achieve a competitive advantage, firms must now adopt a holistic approach towards satisfying multiple stakeholders opposed to focusing on the needs of their stockholders. This integrative approach is referred to as A. stakeholder strategy. B. exchange relationship strategy. C. integration strategy. D. internal shareholder strategy.

A. stakeholder strategy. Stakeholder strategy is an integrative approach to managing a diverse set of stakeholders effectively in order to gain and sustain competitive advantage.

STRIKEBYTE Inc. is a software company that has built and acquired numerous assets over the years. According to the resource-based view of a firm, which of the following assets of STRIKEBYTE Inc. will best enable it to gain and sustain a competitive advantage? A. the expertise acquired by the employees in the company. B. the cloud computing service that it uses. C. the capital the company raised from its shareholders. D. the headquarters building owned by the company.

A. the expertise acquired by the employees in the company. Feedback: The expertise acquired by the employees in the company is the asset that will best enable Smooth Fusion Inc. to gain and sustain a competitive advantage. The resource-based view is a model that sees certain types of resources as key to superior firm performance. If a resource exhibits VRIO attributes, the resource enables the firm to gain and sustain a competitive advantage. Competitive advantage is more likely to spring from intangible rather than tangible resources.

What is the purpose of an internal analysis? A. to uncover the competitive strengths of a firm from its actual behavior (rather than espoused or emergent strategy) B. to understand the external environment of a firm C. to identify the strategic group of the firm D. to conduct a financial analysis on the firm

A. to uncover the competitive strengths of a firm from its actual behavior (rather than espoused or emergent strategy)

A low-cost leader optimizes all of its ___________ in order to achieve a low cost position. A. value chain activities B. five forces activities C. strategic group activities D. immobility barriers

A. value chain activities

Intangible assets add great value to a firm because _________ A. All of these B. A firm's culture, knowledge, and intellectual property take time to develop and are generally difficult to imitate. C. A firm's reputation and brand equity are accumulated quickly and can be leveraged easily. D. Tangible assets require a high degree of capital; intangible assets do not.

B. A firm's culture, knowledge, and intellectual property take time to develop and are generally difficult to imitate.

The three parts to Rothaermel's overarching AFI framework are: A. Actors, Factors, Integrity B. Analysis, Formulation, Implementation C. Action, Functions, Interative Thinking D. Ability, Finesse, Integrity

B. Analysis, Formulation, Implementation

Which of the following is NOT one of Porter's five forces? A. Suppliers B. Complements C. Substitutes D. Buyers

B. Complements Feedback: The industry-level five forces are: buyers, suppliers, rivalry, threat of new entrants and substitutes. Complements add to existing products to enhance the sales of existing products, build loyalty, increase switching costs between rivals' products/services. Complements can be important (very important when examining network effects).

What is NOT a dimension of the V-R-I-O framework? A. Inimitable B. Routinely C. Organized D. Valuable

B. Routinely

Key assumptions of the RBV (resource-based view) of the firm are: A. most firms within an industry start with similar resources and can buy/sell resources as needed, if needed B. firms have unique resources, capabilities and some resources tend to be 'sticky' C. external pressures are most important in assessing future performance outcomes D. intangible resources explain and predict profits

B. firms have unique resources, capabilities and some resources tend to be 'sticky'

In strategic management, strategists engage in three pillars. Which of the following is NOT one of these three pillars? A. the formulation of major goals and objectives B. the unification of major goals and objectives C. the analysis of major goals and objectives D. the implementation of major goals and objectives

B. the unification of major goals and objectives Feedback:The strategic management process follows the AFI framework; analysis, formulation and implementation.

5. Starbucks encourages baristas to focus on no more than 1 or 2 drinks at a time, brews coffee regularly throughout the entire day to have the fresh smell of coffee, provides unique seasonal offerings, builds a cozy ambiance with music and comfortable chairs and expanded its product offerings to include take-a-way food and desserts. These activities are examples of: A. Objectives B. Strategies C. Tactics D. None of the above

C. Tactics

What are the two generic competitive strategies that are used as the means for outperforming other corporations in a particular industry? A. diversification and concentration B. competitive scope and differentiation C. cost leadership and differentiation D. lower cost and competitive scope

C. cost leadership and differentiation

Which of the following accurately defines strategy, as we have talked about in class and as the textbook clarifies? A. An agreed upon, formalized 'blueprints' (plans) designed to benchmark the company with industry leaders. B. None of these, something else entirely. C. An unchanging company guideline for its day-to-day operations. D. A set of goal-directed actions a firm takes to gain and/or sustain superior performance relative to others.

D. A set of goal-directed actions a firm takes to gain and/or sustain superior performance relative to others.

The ____________ is the centerpiece of corporate governance and is composed of inside and outside members. A. Shareholders B. Scientific Advisory Board C. Chief Executive's Office (C-Suite) D. Board of Directors

D. Board of Directors

Which of the following is a strategic (competitive challenge) question: A. What should our wages be for starting sales employees? B. Should we give Jan, our floor manager, a raise? C. Do we need more inventory during this busy season? D. How do we differentiate from other companies?

D. How do we differentiate from other companies?

Why do firms in highly competitive industries bother creating product extension or product/service bundling (complements)? A. Decreases barriers to entry for the industry B. Customers are loyal C. Suppliers want them D. Keeps the power to set prices with the manufacturer

D. Keeps the power to set prices with the manufacturer Feedback: Keeps the power to set prices with the manufacturer. Complements are defined (page 89, 3e) as "a product, service, or competency that adds value to the original product offering when the two are used in tandem. Complements increase demand for the primary product, thereby enhancing the profit potential for the industry and the firm."

For a manufactured product what would be the beginning and ending of the value chain? A. Retail, Fabrication B. Raw Material, Distributor C. Primary Manufacturing, Distributor D. Raw material, Retail E. Fabrication, Product Producer

D. Raw material, Retail

The major theme of stakeholder theory is that ______________________________ A. Stakeholders' interests are less important B. Stakeholders are only useful as a part of the firm's supply chain C. Stakeholders usually create problems for the firm D. The relationships among stakeholders and the the firm is a complex network and the relationships need to be carefully managed

D. The relationships among stakeholders and the the firm is a complex network and the relationships need to be carefully managed

Which decision is an example of a consumer facing switching costs? A. Vijay must decide between Joe's soy ketchup vs. HJ Heinz tomato ketchup B. Vijay goes without a condiment C. Vijay decides he wants a wrap instead D. Vijay must decide between ketchup, mustard, relish or other condiments

D. Vijay must decide between ketchup, mustard, relish or other condiments

The PESTEL framework is a model regarding a firm's A. internal issues B. strategic group C. industry conditions D. external macro-level environment

D. external macro-level environment

Strategy is defined as a coherent set of future-oriented actions a firm takes to create value relative to competitors. - True - False

True Feedback: True. Each of the component parts are important:coherent set of actions future-oriented (also considered goal directed)creating value is important relative to others (NOT an absolute term)

Which competitive (corporate) strategy supports a low‑cost position to give the company a defense against rivals while allowing it to earn profits during times of heavy competition? A. cost-based accounting B. cost-leadership C. differentiation D. competitive advantage

B. cost-leadership

What types of decisions are made at the Board level? A. Aspirations of the corporation B. Evaluation of corporate projections, 3-5 years out C. Validating the purpose, vision, objectives of the corporation D. All of the above E. None of the above

A. Aspirations of the corporation B. Evaluation of corporate projections, 3-5 years out C. Validating the purpose, vision, objectives of the corporation D. ALL OF THE ABOVE

All of the following are roles played by the board of directors except ______________________ A. Creating the firm's strategy B. Transporting information from external sources C. Providing leads for acquisition candidates D. Providing advice for the CEO and other executives

A. Creating the firm's strategy

Tony's Pizza Shop is able to net $10,000 a week; this makes his shop profitable. His number one competitor, Leo's Pies is also profitable, netting $12,000 a week. Lil Anthony's Pizza Palace nets $13,000 a week. Since Tony's Pizza Shop is profitable, we can conclude that he has a competitive advantage in the industry. A. False—competitive advantage is only achieved by generating above average returns, relative to competition. B. False—Tony more than likely has a sustained competitive advantage since he's been in business longer. C. True—competitive advantage is achieved since Tony has a positive net income. D. True—competitive advantage is achieved through profitability alone.

A. False—competitive advantage is only achieved by generating above average returns, relative to competition. Feedback:Profitability does not necessarily equate to competitive advantage. A competitive advantage is measured by a firm's ability to generate above average returns, not just a measure of profitability. That is, competitive advantage is relative to others.

Inside directors are important to an effective Board because they: A. Have information pertaining to the company's workings B. Are part of the senior management team such as the CEO (chief executive officer), the CFO (chief financial officer), and/or the CIO (Chief information officer) C. Appointed by shareholders D. All of the above E. None of the above

A. Have information pertaining to the company's workings B. Are part of the senior management team such as the CEO (chief executive officer), the CFO (chief financial officer), and/or the CIO (Chief information officer) C. Appointed by shareholders D. ALL OF THE ABOVE

Which of the following is a disadvantage of measuring firm performance through total return to shareholders and firm market capitalization? A. Market volatility makes it difficult to assess firm performance through these measures, particularly in the short term. B. These tools fail to indicate how the stock market views all available public information about a firm's expected future performance. C. These tools measure competitive advantage in absolute terms rather than relative terms. D. Only the book value of the share prices is taken into account when applying these measures, and not the market value.

A. Market volatility makes it difficult to assess firm performance through these measures, particularly in the short term. Feedback: Stock prices can be highly volatile, making it difficult to assess firm performance, particularly in the short term. This volatility implies that total return to shareholders is a better measure over the long term due to the "noise" introduced by market volatility, external factors, and investor sentiment.

Technology does which of the following ....... A. Overcome barriers to entry B. Changes how firms compete C. Makes rivalry more intense D. Create substitutes E. All of these answers

A. Overcome barriers to entry B. Changes how firms compete C. Makes rivalry more intense D. Create substitutes E. ALL OF THESE ANSWERS Feedback:Makes rivals more intense, decreases barriers to entry, creates viable substitutes via disruption, and changes the way in which firms compete. Technology is a very significant threat as a substitute. Technology changes consumers preferences, it changes how rivals compete, it can improve operational efficiency leaded into even more intense rivalry in a consolidated industry, it can allow new entrants (with proprietary technology or portable technology, or just in time technology) to be very competitive against established incumbents (think Prius or Tesla with hybrid/electric engines in the automobile industry). Thought experiment about technology changing the health services industry: Think about how covid-19 digitally transformed many industries including electronic healthcare records and the organizations that deliver health services in the next five years.

Firm resources such as intellectual property and brand equity are important to a firm because: A. They are intangible, costly to imitate, and can lead to sustained competitive advantage(s). B. Once created, maintaining such resources takes little managerial effort C. Having such resources allows for a firm to achieve competitive parity D. They are tangible and have a high degree of resource mobility

A. They are intangible, costly to imitate, and can lead to sustained competitive advantage(s).

As competitors attempt to imitate another company's activities (e.g., the intense rivalry between Coke and Pepsi), what was once an advantage becomes A. a minimum requirement to compete in the industry B. a complementary resource C. an intangible resource D. a critical success factor

A. a minimum requirement to compete in the industry

Economies of scale allow firms to do which of the following __________________________ A. employ specialized systems and equipment B. spread their fixed costs over a larger output C. decrease per unit costs of their product D. all of the above E. none of the above

A. employ specialized systems and equipment B. spread their fixed costs over a larger output C. decrease per unit costs of their product D. ALL OF THE ABOVE

Using Tesla as an example in the automobile industry, barriers to entry can be overcome by A. government subsidies B. patent for electric battery C. technology D. all of the above E. none of the above

A. government subsidies B. patent for electric battery C. technology D. ALL OF THE ABOVE

After successfully completing an external and internal analysis, you find yourself contemplating an appropriate strategy statement for the organization. A better strategy statement contains: A. identifies competitive strengths B. interweaves different functions of the organization C. multiple V-R-I-O resources D. all of these answers

A. identifies competitive strengths B. interweaves different functions of the organization C. multiple V-R-I-O resources D. all of these answers

The real value of modern strategic management is more A. In the formality of the process B. In the strategic thinking and organizational learning C. In the planning D. In the resulting written strategic plan

B. In the strategic thinking and organizational learning

All of the following are tangible resources EXCEPT: A. production equipment B. a firm's reputation C. distribution centers D. a firm's headquarters building

B. a firm's reputation

The objective of Porter's five forces model is to: A. Analyze the economic conditions of the industry B. Assess the potential for profits within an industry C. Assess firm profitability D. Emphasize the intensity of rivalry within an industry

B. Assess the potential for profits within an industry Feedback:Answer: Assess the potential for profits within an industry. Straight from the textbook where it is repeatedly stressed that profit potential in an industry is the key aspect here. Who has the power to set prices translates (in large part) to profit potential. For those that responded with "analyze the economic conditions of the industry" that is an incomplete answer. The five forces model incorporates all of the PESTEL (political, economic, socio-cultural, technical, ecological and legal) pressures to assess competitiveness and future profit potential. Economic conditions may be necessary but not sufficient to capture or create value (think of patents, dictators, political upheavals, technical substitution, etc.).

Strategy formulation and implementation affect the organization at every level. What is the most comprehensive (top-most) level of strategy within an organization? A. Business B. Corporate C. Production D. Functional

B. Corporate

Which of the following is an example of a corporate strategy? A. Increase sales by 10% over last year. B. Develop and sell quality appliances worldwide C. Pay highest salaries to keep high quality employees D. Divide a sales region into a group of sales districts

B. Develop and sell quality appliances worldwide

Starbucks ability to create a unique customer experience with worldwide consistency is an example of what type of generic competitive strategy? A. focus strategy B. differentiation strategy C. a grandiose strategy D. a benchmarking strategy E. cost-leadership strategy

B. differentiation strategy

To support the rise of emergent strategies, an organization should A. limit serendipity that is in the form of random events and accidental happenstances. B. empower lower-level employees to take up autonomous actions. C. rely solely on hard data to formulate strategies. D. centralize decision making and all other activities.

B. empower lower-level employees to take up autonomous actions. Feedback:Successful emergent strategies are sometimes the result of serendipity combined with autonomous actions of lower-level employees.

Which of the following is a tool that is typically used to achieve differentiation? A. controlling the costs of inputs B. operational efficiency C. leveraging economics of scale D. offering products that have superior value

D. offering products that have superior value

From a Porter's Five Forces Industry Analysis, Coke and Pepsi are an example of: A. substitutes B. none of these answers C. fragmented industry D. switching costs E. intense rivals

E. intense rivals Feedback:From an industry perspective they are rivals—they compete with one another. They are essentially the only two players in the worldwide carbonated soft drink industry and many consumers may easily substitute one for another. Take a taste test. Note: it was asked but Coke and Pepsi are NOT substitutes in the Five Forces Industry model. Substitutes (page 81-82, 3e) 'meet the same basic customer needs as the industry's product but in a different way'. Thus a substitute for a soft drink beverage might be water, fruit juices, or non-carbonated sports drinks. Note: from an individual consumers' perspective the two firms and their products might be interchangeable with little/no preference for one or the other which might lead you to think they are 'substitutes' in local parlance from a consumers perspective. Porters Five Forces model, however, asks you to elevate your thinking to the industry level (and not examine products of firms at the consumer/individual level). Looking too myopically at the individual/consumer/product level may lead a strategist to miss opportunities or to miss technical threats that can significantly change your business and how your industry competes.

Competitive advantage is an absolute measure of superior firm performance. - True - False

False Feedback:Yes, competitive advantage is always always relative.