Chapter 1 Part 2 - Exam Review

_____ is best described as a framework that helps firms recognize and address the economic, legal, social, and philanthropic expectations that society has of the business enterprise at a given point in time. A. Corporate social responsibility B. Integrated social network C. Strategic positioning D. Strategy formulation

A. Corporate social responsibility

Which of the following would be considered a weak stakeholder strategy? A. putting shareholder interests above the interests of other stakeholders B. addressing the concerns of all stakeholders, including employees C. always using fair and ethical practices to satisfy stakeholders D. ensuring that the primary stakeholders achieve their objectives

A. putting shareholder interests above the interests of other stakeholders

In stakeholder impact analysis, identifying the opportunities and threats presented by stakeholders is immediately followed by A. recognizing the economic, legal, ethical, and philanthropic responsibilities of the firm to its stakeholders. B. formulating the stakeholder strategy to address and effectively balance the different needs of various stakeholders. C. identifying the interests and the claims of the stakeholders. D. isolating the external stakeholders from the internal stakeholders.

A. recognizing the economic, legal, ethical, and philanthropic responsibilities of the firm to its stakeholders.

Which of the following groups is considered to be the primary stakeholder for public-stock companies? A. suppliers of capital B. employees C. suppliers D. potential customers For public-stock companies, key stakeholders are the shareholders and other suppliers of capital. If shareholders are not satisfied with returns to investment, they will sell the company's stock, leading to depreciation in the firm's market value.

A. suppliers of capital

Within corporate social responsibility, _____ essentially reflects the notion of a business voluntarily giving back to society. A. social networking B. corporate citizenship C. corporate governance D. social bookmarking

B. corporate citizenship

In the final step of the stakeholder impact analysis, a firm A. identifies its stakeholders' interests and claims. B. differentiates its internal stakeholders from its external stakeholders. C. recognizes the opportunities and threats stakeholders present. D. decides a course of action to address the stakeholders' concerns.

D. decides a course of action to address the stakeholders' concerns.

Hewlett-Packard was not able to maintain its competitive advantage because it did not A. produce high-quality products at a low price. B. allow the freedom to explore new ideas. C. provide lifetime employment and generous benefits for employees. D. effectively address the challenges of mobile computing.

D. effectively address the challenges of mobile computing.

Which of the following scenarios best illustrates a good stakeholder strategy? A. VP Inc. follows a strategy in which maximization of the shareholder's wealth is the primary concern of the managers. B. Carrvero Inc. ensures that its employees are paid the least in the industry so that its external stakeholders can get the best price. C. PA Corp. distributes only 70 percent of its annual profit after taxes to shareholders, while the remaining is distributed among employees and the local community, and invested for further research. D. Gen Pharma Corp. ensures that it fully exploits free natural resources, so that most of its profits go to shareholders in the form of dividends.

C. PA Corp. distributes only 70 percent of its annual profit after taxes to shareholders, while the remaining is distributed among employees and the local community, and invested for further research.

Stakeholder impact analysis primarily helps a firm A. gain a competitive advantage while acting as a good corporate citizen. B. lower the difference between its value creation and costs. C. single-mindedly focus on shareholders alone. D. exploit external stakeholders to benefit internal stakeholders. Stakeholder impact analysis is a decision tool with which managers can recognize, prioritize, and address the needs of different stakeholders, enabling the firm to achieve competitive advantage while acting as a good corporate citizen.

A. gain a competitive advantage while acting as a good corporate citizen.

Which of the following statements is true of the social responsibilities of a business? A. A firm's ethical responsibilities go beyond its legal responsibilities. B. Shareholders mandatorily require a firm to perform its ethical and philanthropic responsibilities. C. Ethical responsibilities are the foundational building block of a firm's social responsibility. D. Legal responsibilities are often subsumed under the idea of corporate citizenship, reflecting the notion of voluntarily giving back to society.

A. A firm's ethical responsibilities go beyond its legal responsibilities.

The U.S. government legitimized claims by thousands of businesses and individuals in the aftermath of the BP oil spill in the Gulf of Mexico, causing the claims to become of great urgency to BP. This best represents the process of A. addressing stakeholder concerns. B. identifying stakeholders. C. establishing competitive parity. D. implementing a cost-leadership strategy.

A. addressing stakeholder concerns.

The management of Five Square Corp. wants to reduce the separation between ownership (by shareholders) and control of the firm (by professional managers). Which of the following practices would best help the company do this? A. allowing employees to purchase the stock of the company at a discounted rate B. reinvesting the annual profits of the company into research and development C. issuing new additional shares to the existing stockholders in proportion to their current holdings D. declaring the annual profits as bonus dividends to the existing stockholders

A. allowing employees to purchase the stock of the company at a discounted rate

In the pyramid of corporate social responsibility, _____ responsibilities are the foundational building block. A. economic B. ethical C. philanthropic D. legal

A. economic

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.

The minimum wage in the country of New Morland is $8 an hour. Odion, a restaurant in New Morland's capital city, pays its servers $8 per hour. However, the management of the restaurant feels that this amount is excessive for workers whose only job is to clear tables. By continuing to adhere to the rules set by the government of New Morland, which of the following responsibilities is Odion satisfying? A. legal responsibilities B. philanthropic responsibilities C. ethical responsibilities D. demographic responsibilities

A. legal responsibilities

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 board at TriCom Manufacturing Corp. has decided to allocate 20 percent of the company's shares to its workforce, at a discounted price. Apart from being a valued investment, the plan will allow the employees to take personal responsibility for the firm's performance. Which of the following employee incentive schemes does this best illustrate? A. employee provident fund B. employee gratuity fund C. employee stock ownership plan D. employee emergency loan program

C. employee stock ownership plan

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

Which of the following is an accurate statement about the relationship between firm effects and industry effects? A. Firm effects deal with the action of competitors; industry effects deal with internal circumstances. B. Firm effects deal with a manager's actions; industry effects deal with external circumstances. C. Firm effects deal with a manager's actions; industry effects deal with internal circumstances. D. Firm effects deal with the action of competitors; industry effects deal with external circumstances.

B. Firm effects deal with a manager's actions; industry effects deal with external circumstances.

_____ provides a decision tool that enables a firm to act as a good corporate citizen by allowing its managers to recognize, prioritize, and address the needs of different groups of individuals who take personal interest in the firm's performance and survival. A. Strategy analysis B. Stakeholder impact analysis C. The SWOT analysis D. Strategic positioning

B. Stakeholder impact analysis

Paying taxes to local government authorities from the annual revenues generated by a firm represents the firm's _____ responsibilities. A. philanthropic B. economic C. psychographic D. political

B. economic

The amount of xylene that can be used in household paint is legally limited to 0.03 percent. Anything beyond this amount is hazardous to health and the environment, and considered a legal offense. Consequently, CW Paints Corp. has vouched to make its products as safe as possible. Therefore, it manufactures xylene-free paints even though this increases its costs and reduces the dividends paid to its shareholders in the long run. Which of the following responsibilities is CW Paints Corp. primarily compromising in this scenario? A. legal responsibilities toward the government B. economic responsibilities toward its shareholders C. philanthropic responsibilities toward the local community D. ethical responsibilities toward the society

B. economic responsibilities toward its shareholders

After a firm has identified its key stakeholders in stakeholder impact analysis, the immediate next step is to A. recognize the opportunities and threats the stakeholders present. B. identify stakeholders' interests and claims. C. formulate a stakeholder strategy. D. address the stakeholders' concerns.

B. identify stakeholders' interests and claims.

Which of the following is typically an economic responsibility of a firm? A. sourcing raw materials from highly developed countries B. paying adequate returns to the firm's stockholders on the capital invested by them C. donating resources, in terms of money and time, toward community development D. helping a nation increase its import of goods and services

B. paying adequate returns to the firm's stockholders on the capital invested by them

A core tenet of stakeholder strategy is that a A. firm should isolate its internal stakeholders from its external stakeholders. B. single-minded focus on shareholders alone exposes a firm to undue risks that can threaten the very survival of the enterprise. C. multifaceted exchange relationship with internal and external stakeholders can lead to a firm's competitive disadvantage. D. firm should work toward competitive parity rather than gaining and sustaining a competitive advantage.

B. single-minded focus on shareholders alone exposes a firm to undue risks that can threaten the very survival of the enterprise.

BlueStainless Corp. has been able to gain and sustain a competitive advantage due to its strong relationship with its employees, customers, suppliers, and local communities. The company believes in lifetime employment and ensures that its employees grow along with the company. Investors are more than satisfied with the returns on their investments. Also, 3 percent of the company's profit is spent on community development. With initiatives like these, customers feel privileged to associate themselves with BlueStainless products. This scenario best illustrates the implementation of a A. strategic analysis. B. stakeholder strategy. C. wild card event. D. black swan event.

B. stakeholder strategy.

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

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

Which of the following is not one of the three interdependent tasks of strategic management? A. analyze B. formulate C. estimate D. implement

C. estimate

For a strategist, which of the following is not an implication of effective strategic management? A. The difference between a firm's success and failure lies in its strategy. B. The principles of strategic management can be applied universally to all organizations. C. A firm's performance is determined by a set of independent factors, which includes firm and industry effects. D. It is necessary to maintain an awareness of key stakeholders and how they can affect or be affected by managerial actions.

C. A firm's performance is determined by a set of independent factors, which includes firm and industry effects.

Which of the following statements accurately describes corporate social responsibility (CSR)? A. CSR promotes the view that companies should single-mindedly focus on shareholders alone. B. CSR is limited to the notion of encouraging businesses to "just be nice" to society. C. CSR provides a conceptual model that more completely describes a society's expectations. D. CSR is based on the tenet that the needs of both internal and external stakeholders are the same.

C. CSR provides a conceptual model that more completely describes a society's expectations.

Which of the following statements about a firm's stakeholders is true? A. Irrespective of whether the stakeholders are internal or external, the claims and interests of all stakeholders are the same. B. As the legal owners, employees in a public-stock company have the most legitimate claim on a company's profits. C. Within stakeholder groups there can be significant variation in the power a stakeholder may exert on a firm. D. Only internal stakeholders make specific contributions to a firm, which in turn provides different types of benefits to the external stakeholders.

C. Within stakeholder groups there can be significant variation in the power a stakeholder may exert on a firm.

Which of the following is an element of good strategy? A. an explanation of the firm's advantages over competitors 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

Van Dyke's Fashion Inc., a company that manufactures clothing, incurs higher costs because of its refusal to build factories in countries where child labor is prevalent. This reflects Van Dyke's Fashion's _____ responsibility. A. economic B. legal C. ethical D. demographic

C. ethical

Which of the following is step 3 in the five-step process of stakeholder impact analysis? A. identifying the most powerful stakeholders (both internal and external) and their needs B. identifying the stakeholders' interests and claims C. identifying the opportunities and threats the stakeholders present D. identifying the social responsibilities of the firm toward its stakeholders

C. identifying the opportunities and threats the stakeholders present

The society and shareholders mandatorily require a firm to perform its _____ responsibilities. A. ethical B. philanthropic C. legal D. political

C. legal

As the legal owners, _____ have the most legitimate claim on a company's profits. A. creditors B. employees C. shareholders D. board members

C. shareholders

Which of the following is an example of a firm's internal stakeholders? A. customers B. creditors C. stockholders D. suppliers

C. stockholders

Which of the following is an example of competitive parity? A. A firm manufactures higher-quality wall clocks than its competitors B. A firm provides wall clocks that its consumers value more than other wall clocks C. A firm sells wall clocks at a lower price than its competitors D. A firm produces wall clocks at the same rate as its competitors

D. A firm produces wall clocks at the same rate as its competitors

Which of the following does not explain why activist investors have more power over a firm than individual investors? A. Activist investors can buy or sell large numbers of shares at once. B. Activist investors can exercise block-voting rights over individual investors. C. Activist investors can demand seats on company boards. D. Activist investors have more legitimacy than individual investors.

D. Activist investors have more legitimacy than individual investors.

Which of the following is not a stakeholder attribute that managers consider during stakeholder impact analysis? A. a stakeholder's power B. a stakeholder's legitimate claim C. a stakeholder's urgent claim D. a stakeholder's liquidity

D. a stakeholder's liquidity

Which of the following is not an example of a black swan event? A. fall of the Berlin Wall B. 9/11 terrorist attacks C. Fukushima nuclear disaster D. election of President Reagan

D. election of President Reagan

Managers use the AFI strategy framework primarily 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.

A firm's economic responsibilities are primarily directed toward A. minimizing shareholders' wealth. B. acting as a good corporate citizen. C. doing what is right, just, and fair. D. gaining and sustaining competitive advantage.

D. gaining and sustaining competitive advantage.

The first step in stakeholder impact analysis involves A. formulating a stakeholder strategy to balance the different needs of various stakeholders. B. identifying the opportunities and threats the stakeholders present. C. describing the economic, legal, ethical, and philanthropic responsibilities of the firm toward the society. D. identifying the stakeholders that currently have, or potentially can have, a material effect on a company.

D. identifying the stakeholders that currently have, or potentially can have, a material effect on a company.

The society and the shareholders just expect, and do not mandatorily require, a firm to A. pay fair dividends and returns to the investors. B. follow the employment laws of a country. C. provide safe and quality products to the customers. D. pay its workers more than the minimum living wage.

D. pay its workers more than the minimum living wage.

Which of the following responsibilities results from a society's mere expectations of a business and not because the society and the shareholders mandatorily require the business to demonstrate it? A. economic responsibilities B. legal responsibilities C. contract responsibilities D. philanthropic responsibilities

D. philanthropic responsibilities

Which of following practices of a firm satisfies its ethical responsibilities? A. using plastic as the packaging material though it is harmful to the environment, yet legal B. outsourcing production to a less developed country and paying wages that are below its own country's accepted minimum wages C. using advertising and other forms of promotion to endorse luxurious lifestyles D. selling vaccines at a subsidized price in a less developed country even though this results in reduced shareholder returns

D. selling vaccines at a subsidized price in a less developed country even though this results in reduced shareholder returns

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

In a firm, a strategist's job should be to A. limit the participation of external stakeholders—customers and suppliers—in value creation. B. isolate the firm's internal stakeholders from its external stakeholders. C. focus solely, in a single-minded manner, on maximizing shareholder wealth. D. understand the complex web of exchange relationships among different stakeholders.

D. understand the complex web of exchange relationships among different stakeholders.