Policy and Strategy Exam 1

Which of the following real-world examples best supports the statement that strategic commitments to a specific industry may be the result of political rather than economic considerations?

A number of European governments created Airbus through direct subsidies to provide a countervailing power to Boeing.

If a firm is not effectively organized to exploit the competitive potential of a valuable, rare, and costly to imitate (VRI) resource, the best-case scenario is:

A temporary competitive advantage.

Which of the following statements is true of strategy?

Actions that allow a firm to address a competitive challenge are strategy.

In the context of the VRIO framework, a resource is said to be valuable if it:

Allows a firm to take advantage of an external opportunity.

Generally speaking, which of these situations is likely to lead to greater profits?

An industry with fewer but larger competitors

In a perfectly competitive industry structure:

Any competitive advantage that one firm has will be short-lived.

Which of the following groups is most likely to be considered a firm's internal stake holder?

Board members

In the 1980s, Japanese competitors brought better-quality chips to the market at lower cost, threatening Intel Corporation's position and strategic plan regarding the production of DRAM (dynamic random-access memory) chips. When the functional managers at Intel came up with the simple rule of producing whichever product delivered the higher margin, the front-line managers shifted Intel's production capacity away from the lower-margin DRAM business to the higher-margin semiconductor business. This ________ emerged as a consequence of the firm's resource allocation process.

Bottom-up strategy

In the dynamic capabilities perspective, ________ flows from a firm's capacity to modify and leverage its resource base in a way that helps it gain and sustain a competitive advantage.

Competitive advantage

Which of the following statements about a firm's core competencies is true?

Competitive advantage is frequently the result of a firm's core competencies.

According to the Level-5 leadership pyramid, the Level 2 manager is a(n):

Contributing team member.

Which of the following describes the concept of co-opetition?

Cooperation by competitors who want to achieve a strategic objective.

The board of directors of Qwik Inc., a company that has a large product mix, has decided to get actively involved in research and development for the next three financial years. Budget for each business unit under the company will be allocated from the headquarters in proportion to its previous performance. The board has also decided to liquidate those units that have failed to perform so far. Which of the following strategies does this scenario best illustrate?

Corporate strategy

To make a cost-competitive mass-market vehicle, Tesla must do which of the following?

Decrease the cost per vehicle as output increases

In the context of the SWOT matrix, which of the following best exemplifies an external opportunity for a firm?

Decreasing government interference in the target market

Which of the following is a decision framework that begins with one team generating a detailed course of action that is then challenged and criticized by a second team?

Devil's advocacy

Which of the following explains how dynamic capabilities are different from the resource-based view?

Dynamic capabilities deal with applying resources over time.

Which of the following statements is true of the Level-5 leadership pyramid?

Each level of leadership builds upon the previous one in the pyramid.

In the context of a SWOT analysis, one way a firm can develop a defensive strategic alternative is by:

Eliminating or minimizing an internal weakness to mitigate an external threat.

All of the following below are examples of external stakeholders except:

Employees

Which of these is a way to reconfigure a value chain?

Entering an industry by offering sporting events on streaming video when competitors are offering them through cable hookups

Ez Solutions Inc. has been operating in the country of Jamtland for almost a decade. The nation is currently experiencing an economic downturn. Which of the following is the most likely benefit of this economic condition for Ez Solutions Inc.?

Ez Solutions Inc. will have better access to highly skilled human capital at a lower cost.

MicroChips Corp. is a company that supplies microprocessors to 2020 Processors Inc., a computer hardware company. When 2020 Processors Inc. demands lower prices for the microprocessors, MicroChips Corp. makes it clear that it would profit more from launching its own brand of laptops and desktops in the market. Fearing the competition it would then face from MicroChips Corp., 2020 Processors Inc. decides to buy the microprocessors at the quoted price itself. In this scenario, MicroChips Corp., as a supplier, has exercised its bargaining power by threatening to:

Forward-integrate.

The greater the difference between value creation and cost, the....

Greater a firm's economic contribution

The pattern of faulty and biased decision making that occurs when opinions coalesce around a leader without individuals critically evaluating and challenging that leader's opinions and assumptions is called:

Groupthink.

Because a consolidated industry tends to be more profitable than a fragmented one, firms have a tendency to change the industry structure in their favor, making it more consolidated through:

Horizontal mergers and acquisitions.

Which of the following questions would a firm's business strategy ideally answer?

How should we compete?

The relative bargaining power of suppliers is most likely low when:

Incumbent firms face low switching costs when changing suppliers.

ABC Hardrives Inc., All Digital Inc., and FastFax Corp. are all companies that manufacture and sell consumer electronics. They procure their component parts from a similar set of suppliers in China and sell the final product to customers with similar needs. Thus, the three companies together are a part of a(n):

Industry.

A firm's ________ strategy is likely to fall by the wayside because of unpredictable events and turn into unrealized strategy.

Intended

The amount that creditors earn for lending their money and the amount that debtors pay to use that money, adjusted for inflation, is best described as a(n):

Interest rate.

Which of the following is a feature of a fragmented industry?

It consists of many small firms.

Which of the following is not true concerning a customer-oriented mission?

It defines the means of how a customer need will be met.

Free 2 Roam Inc., an all-terrain vehicle company, is the market leader due to its superior engine technology and service orientation. These unique qualities have helped the company generate revenues that are consistently higher than other firms in the same industry. which of the following can be concluded about Free 2 Roam Inc. from this scenario?

It has a competitive advantage over the other firms

Mei has been recently promoted to the position of team leader in an investment firm. This promotion was based on her boss's assessment that Mei does things the right way and is efficient and effective in organizing resources to accomplish stated goals and objectives. From this scenario, we can say that Mei is at ________ of the Level-5 leadership pyramid.

Level 3

An organization's ________ describes what the organization actually does—the products and services it plans to provide, and the markets in which it will compete.

Mission

Owners of coffee plantations in the country of Cantonica grow their own coffee beans and supply them to various stores and restaurants all over the country. There are many plantation owners supplying to a huge number of companies, and they are typically unable to differentiate their products from one another. They also do not have the power to fix their own prices in the industry. In addition, these suppliers can only achieve competitive parity and not a competitive advantage. Thus, the coffee bean industry in Cantonica best illustrates a(n) ________ structure.

Perfectly competitive

________ factors in the PESTEL framework result from the pressure that various groups, such as government bodies, nongovernmental organizations, and social movements, can exert to influence the decisions and behaviors of firms.

Political

Prestigo Systems and Zykolux Systems are two competing firms. Prestigo Systems has $400,000 in tangible assets and $150,000 in intangible assets. Zykolux Systems has $130,000 in tangible assets and $415,000 in intangible assets. In the context of the resource-based view, which of the following is the most likely implication of the asset values of the two companies?

Prestigo Systems will find it harder than Zykolux Systems to attain competitive advantage.

An organizational statement that provides managers with goals to improve service is a(n):

Product-oriented vision statement.

A firm is likely to have a competitive advantage when it:

Provides services that customers will value more than those of its rivals

Which is an example of a philanthropic program by a firm?

Providing software to people without access to computer technology

Which of the following is a key criterion in the VRIO framework?

Rare

The __________ effect happens when companies copy other companies, thereby keeping the relative strategic position the same.

Red Queen

An industry with high exit barriers has ________ because excess capacity often remains much longer than economically justifiable.

Reduced profit potential

According to the value chain analysis, which of the following is a support activity?

Research and development

A firm decides to retain $20,000 from its annual earnings and invest it in developing an advanced manufacturing system. According to the dynamic capabilities perspective, the $20,000 would most likely be referred to as the firm's:

Resource flow.

A consolidated industry turns into a fragmented industry when:

Restrictive government policies are introduced in the industry.

When asked to explore the strengths and weaknesses of a firm, which of the following would be the best framework to employ?

SWOT analysis

Which of the following is an example of a firm's capabilities?

Skills involved in training and managing a workforce

_________ is an important tool because it allows a manager to recognize, prioritize and address the needs of various stakeholders.

Stakeholder impact analysis

________ is best described as executives' use of power and influence to direct the activities of others when pursuing an organization's goals.

Strategic leadership

When the Alta Velocidad Española (AVE) was completed, it impacted Spain's local airline industry. Which of the following statements about the five forces does this reflect?

Substitutes made it difficult for generating a profit potential in Spain's airline industry.

All of the following are examples of internal stakeholders except:

Suppliers

Which of the following groups will not be considered a company's internal stakeholder?

Suppliers

Which of the following does a firm possess when it can outperform other firms in the same industry or the industry average over a prolonged period of time?

Sustainable competitive advantage

If a company chooses to keep its vision product-oriented rather than customer-oriented, what will be the implication of that decision?

The company will tend to be less flexible when adapting to changing environments.

Which of the following actions of an automobile firm will be considered as a strategic commitment?

The firm investing eight years and $4 billion to develop a range of hybrid cars with which it will compete in the future

Which of the following statements will effectively guide a strategist?

The principles of strategic management can be applied universally to all organizations.

Onivo Auto has been the leader in low-cost and fuel-efficient engine technology for many years. It has been able to sustain its competitive advantage primarily because of its highly efficient automobile engines, which competitors have been unable to develop or buy at a comparable price. In the context of the VRIO framework, which of the following resource attributes most likely underpins Onivo's competitive advantage?

The resource is costly to imitate.

Which of the following statements is true of a monopoly?

There is only one, often large firm supplying the market.

Incumbent firms can benefit from several important sources of entry barriers. Economies of scale are one such source. Which of the following is an implication of economies of scale for incumbent firms?

They can demand better terms from their suppliers.

Which of the following statements is true of customer-oriented visions?

They define a business in terms of providing solutions to people's needs.

How do complements affect a primary product or service?

They increase the demand for the primary product.

While most of Savvy Inc.'s competitors were moving toward developing and emerging markets, Savvy Inc. decided to keep its operations limited to its home country so that it could gain some advantage. A few years later, however, Savvy Inc. lost its footing in the home market due to a sharp fall in demand. It then decided to invest in large-scale operations in the same developing nations as its competitors within a short period of six months. However, Savvy Inc.'s costs kept increasing, so it could not compete against the already established brands. In this scenario, the failure of Savvy Inc. can be best attributed to:

Time compression diseconomies.

Evaluating the data collected from environmental analysis, the corporate executives of BigPharma Inc. realized that it was the right time to expand the business. The company's vision was accordingly adjusted from "To Be the Best in the Pharmaceutical Industry" to "To Make Good Health Accessible to Everyone around the Globe." To support the new vision, the executives decided that the company would first enter the Asian market where its growth potential would be huge. To further support these decisions, the general managers of different SBUs and the functional managers formulated their own strategies. Which of the following approaches to the development of strategy does this best illustrate?

Top-down strategic planning

Strategic positioning requires which of the following?

Using trade-offs

The ________ describes the internal activities a firm engages in when transforming inputs into outputs.

Value chain

Using the ________, strategic leaders can see how competitive advantage flows from a firm's distinct set of activities.

Value chain analysis

A good strategy should be able to provide products and services to customers at an attractive price point while maintaining internal costs, resulting in:

Value creation

Which of the following statements accurately brings out the difference between an organization's vision and mission?

Vision defines what the organization wants to accomplish ultimately, whereas the mission defines the means by which vision is accomplished.

A company's vision primarily states:

What the company wants to ultimately accomplish.

Which of the following statements related to a firm's stakeholders is not true?

While external stakeholders are those who make contributions toward the firm, internal stakeholders are those who reap all the benefits.

Which of the following statements accurately brings out the distinction between a firm's resources and capabilities?

While resources reinforce core competencies, capabilities allow managers to orchestrate their core competencies.

In which of the following cases was a company at a major competitive disadvantage?

Without a clear strategic position, Sears tried to be too many things for too many types of customers.

Some scholars have added a sixth force to Porter's Five Forces model. This sixth force, ________, is believed to add value to the original product offering (or service) when the two are used in tandem.

complement

According to the resource-based view, a firm's competitive advantage is more likely to stem from its ________ as opposed to its ________.

intangible resources; tangible resources

According to the upper-echelons theory:

organizational outcomes reflect the values of the top management team.