BUS 400 - Chapter 1 & 2

In order to cope with hypercompetition, firms need to develop ____ through continuous learning. a. competitive resilience b. strategic flexibility c. strategic power d. competitive dominance

B

Organizational culture refers to the core values shared by the firm's top-level managers but not necessarily accepted by lower-level employees who are often transitory and not committed to the organization.

False

An effective vision stretches and challenges people and can result in increased innovation as illustrated by Apple's CEO Steve Jobs who is known to think bigger and differently than most people ("putting a dent in the universe").

True

An organization's willingness to tolerate or encourage unethical behavior is a reflection of its core values.

True

One capability characteristic of a firm with strategic flexibility is the capacity to learn.

True

Organizational mission statements typically do not include statements about profitability and earning above-average returns.

True

Profit pools allow strategic leaders to predict the outcomes of their decisions before taking efforts to implement them.

True

Examples of incremental innovations include iPods, PDAs, WiFi, and web browser software.

False

A firm has achieved ____ when it successfully formulates and implements a value-creating strategy. a. strategic competitiveness b. a permanently sustainable competitive advantage c. substantial returns d. legal and ethical core values

A

A firm's mission a. is a statement of a firm's business in which it intends to compete and the customers it intends to serve. b. is an internally-focused affirmation of the organization's financial, social, and ethical goals. c. is mainly intended to emotionally inspire employees and other stakeholders. d. is developed by a firm before the firm develops its vision.

A

A prominent national accounting firm runs television advertisements showing an accountant working alone late in the office on a client's project, while clenching a long-stemmed rose in his teeth and grinning ecstatically. The message of the ad is that this firm's accountants love their work. This ad seeks to convey a sense of the organization's ____ to the viewers. a. culture b. mission c. vision d. personality

A

Before liquidating, Circuit City took several actions to try to satisfy its __________ stakeholders. a. capital market b. product market c. organizational d. governmental

A

Essentially, the _________ has become one of the world's largest markets with 700 million potential consumers. a. European Union b. The United States c. China d. Japan

A

Even for companies capable of succeeding in global markets, it is critical that they a. remain committed to and strategically competitive in their domestic market. b. introduce many new products immediately after entering a new market. c. acquire a local competitor in each significant foreign market. d. develop good negotiating skills in order to take advantage of local suppliers in the international market.

A

Generally speaking, product market stakeholders are satisfied when a. a firm's profit margin yields the lowest return to capital market stakeholders that is acceptable to them. b. a firm's profit margin yields an above-average return to its capital market stakeholders. c. the interests of the firm's organizational stakeholders have been maximized. d. the interests of all stakeholders have been at least minimally satisfied.

A

Knowledge is composed of all the following EXCEPT a. insight. b. expertise. c. information. d. intelligence.

A

New markets created by iPods, PDAs, and WiFi are a result of a. disruptive technologies. b. global competition. c. knowledge intensity. d. hypercompetition.

A

Product market stakeholders include a. suppliers. b. shareholders. c. employees. d. the firm's chief executive officer.

A

The final responsibility for forming the organization's mission lies with the a. CEO. b. top-management team. c. employees. d. organization's stakeholders.

A

The global economy, globalization, rapid technological change, and the increasing importance of knowledge are creating the need to a. delegate strategic responsibilities to employees "closer to the action." b. split responsibilities between the CEO and the board of directors as a result of corporate scandals triggered by unethical CEOs. c. re-centralize the responsibility for strategy to the CEO. d. expand the strategic responsibilities to all organizational stakeholders.

A

The goal of the organization's ____ is to capture the hearts and minds of employees, challenge them, and give shape to its intended future. a. vision b. mission c. culture d. strategy

A

The interests of an organization's stakeholders often conflict, and the organization must prioritize its stakeholders if it cannot satisfy them all. The ____ is the most critical criterion in prioritizing stakeholders. a. power of each stakeholder b. urgency of satisfying each stakeholder c. vulnerability of organizational stakeholders d. social value of each stakeholder

A

The resource-based view of the firm a. emphasizes that it is difficult to develop and sustain a competitive advantage based on resources alone. b. argues that the industry environment has a stronger influence on firms' ability to implement strategies successfully than does the competitor environment. c. calls for firms to focus on their homogeneous capabilities to compete against their rivals. d. suggests that vision and mission are closely linked to sustainable competitive advantage.

A

The strategic leader's work is characterized by a. ambiguous decision situations which make effective decisions difficult to determine. b. a willingness to unify stakeholders through skillful manipulation. c. an ability to identify the correct solutions to long-range problems. d. concentration on the practical day-to-day aspects of the organization's operations.

A

____ is a capacity for a set of resources to perform a task or an activity in an integrative manner. a. A capability b. A core competence c. Sustainable competitive advantage d. Organizational intelligence

A

All of the following are assumptions of the industrial organization (I/O) model EXCEPT a. organizational decision makers are rational and committed to acting in the firm's best interests. b. resources to implement strategies are firm-specific and attached to firms over the long-term. c. the external environment is assumed to impose pressures and constraints that determine the strategies that result in above-average returns. d. firms in given industries, or given industry segments, are assumed to control similar strategically relevant resources.

B

Although McDonald's is competing in an unattractive industry, it has improved its performance by focusing on product innovations and by enhancing existing facilities. This improved performance is best explained by a. globalization. b. the resource-based model. c. the I/O model. d. hypercompetition.

B

Although it closed stores, changed the top management team, and sought potential buyers, none of these actions resulted in outcomes that allowed Circuit City to meet the expectations of its ____________ stakeholders. a. product market b. capital market c. organizational d. governmental

B

Capital market stakeholders include a. industry competitors. b. shareholders. c. employees. d. government regulators.

B

The ability to effectively and efficiently access and use information is a. vitally important at the point where a domestic firm enters the global market. b. an important source of competitive advantage in virtually all industries. c. the minimum required for survival in virtually any industry. d. critically important mainly in high technology industries.

B

The primary drivers of hypercompetition are a. rising global socio-economic instability and increased inflation. b. the emergence of a global economy and rapid technological change. c. increased global competition and decreasing tariffs. d. increased availability of capital and increased competition.

B

The profit pool is the a. pool of assets that is distributed to investors. b. total profits earned in an industry along all points of the value chain. c. profits that are accrued when a firm earns above-average returns. d. total profits that can be divided up among the competitors within an industry.

B

A business-level strategy describes a. the businesses in which the company intends to compete. b. all policies and procedures used in functional departments. c. the firm's actions to exploit its competitive advantage over rivals. d. a firm's resources, intent, and mission.

C

A competitive advantage a. can be permanent if the firm has successfully implemented the strategic management process. b. entails reducing investors' risk to near zero. c. can be identified only if it has been unsuccessfully challenged by competitors. d. exists when competing firms are unable to find investors.

C

A major assumption about the strategic management process is that it is a. inspired. b. team-based. c. rational. d. inclusive.

C

All of the following are assumptions of the resource-based model EXCEPT a. Each firm is a unique collection of resources and capabilities. b. The industry's structural characteristics have little impact on a firm's performance over time. c. Capabilities are highly mobile across firms. d. Differences in resources and capabilities are the basis of competitive advantage.

C

All of the following are characteristic of the global economy EXCEPT a. the increasing importance of developing countries as sources of revenue growth. b. the free movement of goods, services, people, skills, and ideas across geographic borders. c. the increased use of tariffs to protect industries. d. higher levels of opportunities and challenges.

C

All of the following are resources of an organization EXCEPT a. an hourly production employee's ability to catch subtle quality defects in products. b. oil drilling rights in a promising region. c. weak competitors in the industry. d. a charity's endowment of $400 million.

C

In a diversified firm, corporate-level strategy is concerned with a. operating each individual business under the corporate umbrella. b. determining how each functional department of the firm will operate. c. determining in which businesses to compete and how resources will be allocated between businesses. d. coordinating the vision and mission of each subsidiary firm.

C

Organizational stakeholders are usually satisfied when a. their return on investment has been maximized. b. customers pay the highest sustainable price for the goods and services they receive. c. companies provide a dynamic, stimulating, and rewarding work environment. d. companies are paying the highest prices to suppliers.

C

Organizational stakeholders include a. unions. b. host communities. c. employees. d. suppliers of capital.

C

Product market stakeholders include the firm's customers, and the principal concern of this stakeholder group is: a. maximizing the firm's return on investment. b. receiving the highest quality products and services in the industry. c. obtaining reliable products at the lowest possible price. d. increasing the profitability of the firm.

C

Firms use the five forces model to identify the ___________ of the industry as measured by its ____________. a. size, number of competitors b. globalization, exports c. hypercompetition, technology diffusion d. attractiveness, profitability

D

The "liability of foreignness" is the a. inability of most U.S. managers to truly comprehend foreign cultures. b. political disadvantage that U.S. firms have when doing business abroad. c. overall risks of participating outside a firm's domestic country when entering global competition. d. strong cultural preference for "buying local," which puts foreign firms at a disadvantage when competing in the U.S. market.

C

The development of a firm's mission typically involves which of the following? a. Only the CEO. b. Only top managers. c. The CEO and top managers. d. None of the these.

C

The organization's role as a taxpayer is most important to ____ as stakeholders. a. major suppliers of capital b. shareholders c. host communities d. unions

C

To have the potential to become sources of competitive advantage, resources and capabilities must be non-substitutable, valuable, ____, and ____. a. unique, easy to imitate. b. easy to imitate, difficult to implement. c. rare, costly to imitate. d. easy to implement, unique.

C

When resources and capabilities serve as a source of competitive advantage for a firm, the firm has created a(n) a. strategic mission. b. inspiring vision. c. core competence. d. sustainable market niche.

C

Which of the following statements is most consistent under the I/O view? Performance of the firm is most directly attributable to a. the power of the financial market stakeholders. b. the resources the firm possesses. c. the profitability of the industry the firm competes in. d. hypercompetition within the industry.

C

Above-average returns are a. higher profits than the firm earned last year. b. higher profits than the industry averaged over the last 10 years. c. profits in excess of what an investor expects to earn from a historical pattern of performance of the firm. d. returns in excess of what an investor expects to earn from other investments with a similar level of risk.

D

Analysis of the industry's profit pool enables strategic managers to a. predict future revenue streams for the organization. b. predict growth in sales over the medium to long range. c. determine whether an industry will be viable in the long term. d. locate the most promising areas of an industry's value chain.

D

Dissatisfied capital market stakeholders may: a. Sell their stock. b. Tighten loan covenants. c. Seek to increase their power. d. All of the these.

D

Globalization has led to a. lower operational efficiency as firms must transport raw materials and finished goods farther. b. increasing loyalty of customers for products made domestically. c. declining returns from investment in research and development. d. higher product quality.

D

In the resource-based model, which of the following factors would be considered a key to organizational success? a. unique market niche b. weak competition c. economies of scale d. skilled employees

D

The economic interdependence among countries as reflected in the flow of goods, services, financial capital and knowledge across country borders is defined as a. hypercompetition. b. boundaryless retailing. c. strategic intensity. d. globalization.

D

The rate of technological diffusion is increasing. Which of the following was fastest in penetrating 25 percent of homes in the United States market? a. Telephone b. Television c. Personal computer d. Internet

D

The resource-based model of the firm argues that a. all resources have the potential to be the basis of sustainable competitive advantage. b. resources alone can be a source of sustainable competitive advantage. c. the key to competitive success is the structure of the industry in which the firm competes. d. resources that are valuable, rare, costly to imitate, and non-substitutable form the basis of a firm's core competencies.

D

The strategic management process is a. a set of activities that will assure a sustainable competitive advantage and above-average returns for the firm. b. a decision-making activity concerned with a firm's internal resources, capabilities, and competencies, independent of the conditions in its external environment. c. a process directed by top-management with input from other stakeholders that seeks to achieve above-average returns for investors through effective use of the organization's resources. d. the full set of commitments, decisions, and actions required for the firm to achieve above-average returns and strategic competitiveness.

D

A firm's mission tends to be enduring while its vision can change in light of changing environmental conditions.

False

Although the fast food (or quick-service) industry is unattractive, McDonald's has earned above-average returns through product innovations, enhancing existing facilities, and buying properties outside the United States

False

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

False

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

False

Corporate-level strategy in a diversified organization requires a common business strategy for each component business.

False

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

False

Developed countries still have major advantages in access to information technology over emerging economies because of the significant cost of the infrastructure needed for computing power.

False

Economies of scale and huge advertising budgets are just as effective in the new competitive landscape as they were in the past, but they must be reinforced by strategic flexibility.

False

Resources are considered rare when they have no structural equivalent.

False

Returns can only be measured in accounting terms such as return on assets, return on equity, or return on sales.

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 assumptions of the industrial organizational model and the resource-based model are contradictory. Therefore, organizational strategists must choose one or the other model as the basis for developing a strategic plan.

False

The goal of strategic management is to develop a competitive advantage that is permanent.

False

The rapid rate of technological diffusion has increased the competitive benefits of patents.

False

The resource-based model assumes that if firms have resources that are rare or costly to imitate, this is sufficient to form a basis for competitive advantage.

False

The uniqueness of a firm's resources and capabilities is the basis for a firm's strategy and determines its ability to earn above-average returns under the I/O view.

False

Relative power is the most critical criteria for prioritizing the demands of stakeholders.

True

Risk in terms of financial returns reflects an investor's uncertainty about economic gains or losses that will result from a particular investment.

True

Six years ago, Colette Smith founded a successful catering company that specializes in providing a wide assortment of miniature cheesecakes for corporate and social events. Although Ms. Smith is no longer active in the actual production of the cheesecakes, she continues as president of the catering company. Ms. Smith could be considered a strategic leader of this firm.

True

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

True

Strategic leaders must have a strong strategic orientation while embracing change in the dynamic competitive landscape.

True

The five forces model suggests that firms should target the industry with the highest potential for above-average returns and then implement either a cost-leadership strategy or a differentiation strategy.

True

The new CEO of Opacity Enterprises is determined to make the long-established firm strategically flexible. The CEO feels that the employees of the company have the ability, training, and resources to engage in continuous learning. The main obstacle the CEO must face is inertia.

True

The rate of growth of Internet-based applications could be affected by the possibility of Internet service providers charging users for downloading those applications.

True

The rate of technology diffusion has been steadily increasing over the last two decades.

True

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

True

While patents may be an effective way of protecting proprietary technology in some industries such as pharmaceuticals, many firms competing in the electronics industry do not apply for patents.

True