Strategic Management Ch. 1

Strategy Formulation

In _____, a firm frames a guiding policy to address the competitive challenge. A. strategy control B. strategy implementation C. strategy formulation D. strategy analysis

A. competitive advantage

The Scoop, Ltd. is a magazine publishing company whose average return on invested capital is approximately 5 percent. Because magazine publishing is a declining industry, the industry average has been negative (-5 percent) for the last few years. In this scenario, The Scoop Ltd. has a A. competitive advantage. B. balanced scorecard. C. competitive disadvantage. D. power position.

Strategy Implementation

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

Competitive Disadvantage

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

A. the barriers to entry and exit within the industry

A company wants to determine how industry effects have affected its profitability. Which of the following elements should the company focus on? A. the barriers to entry and exit within the industry B. the pricing method opted by the managers to face competition within the industry C. the brand strategy the managers adopt to establish the firm in the industry D. the strategic position the firm pursues within the industry

A. below the industry average.

A firm always has a competitive disadvantage when its return on invested capital is A. below the industry average. B. 2 percent or lower in a declining industry. C. about the same as its closest competitor. D. declining steadily over two or more years.

B. provide products similar to its competitors, but at lower prices.

A firm is said to gain a competitive advantage when it can A. exceed its own previous performances. B. provide products similar to its competitors, but at lower prices. C. perform at the same level as that of its competitors. D. minimize the difference between value creation and cost.

Competitive Advantage

A firm that achieves superior performance relative to other firms in the same industry or the industry average has a(n) A. competitive advantage. B. balanced scorecard. C. power position. D. equity leverage.

D. implicit trust relationship between the corporate world and society at large has deteriorated.

Due to several black swan events in the past, the A. shareholders of public companies have become more confident in investing their resources in businesses. B. need for corporate governance and transparency has reduced within various industries. C. nations around the globe have explicitly appreciated and accepted capitalism as an economic system. D. implicit trust relationship between the corporate world and society at large has deteriorated.

D. strategic positioning.

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 low due to minimal investment 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.

C. trying to be everything to everybody by combining different competitive strategies

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

A. comparing the return to the return on invested capital obtained by other firms in the industry

If SA Pharmaceuticals obtains an 18 percent return on invested capital, which of the following will help determine if it has a competitive advantage over other pharmaceutical companies? A. comparing the return to the return on invested capital obtained by other firms in the industry B. assessing the value based on the shareholders' expectations of return on their capital C. evaluating the liquidity ratios for other pharmaceutical companies D. comparing the value to the history of the firm's return of investment over a number of years

D. stake out a unique position within the industry.

If a company wants to gain a competitive advantage in a highly competitive industry, it should ideally A. execute an integrated cost-leadership and differentiation position. B. copy the strategies of other firms through competitive benchmarking. C. provide goods or services similar to its competitors at higher prices. D. stake out a unique position within the industry.

B. economic

Industry effects describe the underlying _____ structure of the industry. A. demographic B. economic C. psychographic D. ethnographic

D. providing long-distance cab fares at a lower rate than competitors; servicing the same area as competitors

Jake's Taxi Service is a new entrant to the taxi industry. It has achieved success by staking out a unique position in the industry. How did Jake's Taxi Service mostly likely achieve this position? A. providing long-distance cab fares at a higher rate than competitors; servicing a larger area than competitors B. providing long-distance cab fares at a lower rate than competitors; servicing a smaller area than competitors C. providing long-distance cab fares at a higher rate than competitors; servicing the same area as competitors D. providing long-distance cab fares at a lower rate than competitors; servicing the same area as competitors

D. stakeholder.

Javier, a retired CEO, invests capital in a start-up company that creates budgeting software. He mentors the entrepreneur and the employees of the company because he wants the company to perform well and survive in the market. Thus, Javier is the start-up company's A. headhunter. B. category captain. C. employee. D. stakeholder.

D. external stakeholder.

Organic Food Inc., a multinational company, relies on its media partner Radio Plus to regularly advertise its offers, sales, and new products. Radio Plus is invested in this relationship because it generates most of its revenue from advertising Organic Food's products. In this scenario, Radio Plus is Organic Food Inc.'s A. stockholder. B. workforce. C. internal stakeholder. D. external stakeholder.

Sustainable Competitive Advantage

Patterson Foods Inc. was the first company to start selling energy bars in its country—a product that gained popularity among diverse groups. Soon, other companies started to sell their own brands of energy bars, thereby giving Patterson Foods ample competition. In response, Patterson Foods decided to limit its variety of energy bars to only four. However, it ensured that these four varieties were low in calories and low in cost. With this innovation, Patterson Foods Inc. consistently outperformed its competitors for ten years. In this scenario, Patterson Foods Inc. maintained a _____ through its innovative strategy. A. balanced scorecard B. fiduciary responsibility C. consistent power position D. sustainable competitive advantage

C. pursued distinct strategic positions.

Pink Couture Inc. and Pink Blush Inc. are two companies in the apparel industry. While Pink Couture Inc. focuses on providing unique product features and superior customer service, Pink Blush Inc. focuses on low prices and minimal customer service. Both companies have been able to gain a competitive advantage. This is most likely because the companies have A. executed integrated strategies. B. entered into a cartel arrangement. C. pursued distinct strategic positions. D. engaged in direct imitation and substitution.

B. internal stakeholder.

Rachel owns a large portion of GM Cube Inc.'s stocks. However, she is not employed by the company. In this scenario, Rachel is the company's A. external stakeholder. B. internal stakeholder. C. creditor. D. customer.

B. competitive parity with each other

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. Digi Now and Silver Screen Cinemas will not be direct competitors to each other, and their customer segments will overlap very little.

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.

A. It has a competitive advantage in the industry.

The average cost of production for a bottle of vitamin water in the industry is $4 while its 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. managerial actions can affect the economic well-being of large numbers of people around the globe.

The past black swan events in the United States demonstrate that A. managerial actions can affect the economic well-being of large numbers of people around the globe. B. decisions and strategies implemented within a firm will only affect the firm and not the entire industry. C. corporate governance is unnecessary as firms are becoming socially responsible. D. industry effects are more important than firm effects in determining firm performance.

C. the types of products and the services offered within the industry

Which of the following forces is most closely related to industry effects within the automobile industry? A. the actions taken to improve employee productivity within a firm B. the human resource strategy managers adopt to acquire the best talent from the industry C. the types of products and the services offered within the industry D. the decisions made within a firm regarding pricing of a product in the market

C. the actions of managers within the firm

Which of the following forces tends to be more important in determining a firm's performance? A. the underlying economic structure B. the entry barriers in the industry C. the actions of managers within the firm D. the number and size of other firms in the industry

C. The firms would eventually have no resources to invest in product and process improvements.

Which of the following is an implication of all firms in an industry pursuing a low-cost position through application of competitive benchmarking? A. No firm would face direct competition from others in the industry; hence, profit potential would be high. B. Each firm would be catering to a different customer segment. C. The firms would eventually have no resources to invest in product and process improvements. D. Each firm would be in a better position to gain a competitive advantage.

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 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.

Strategy Analysis

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

D. Operational effectiveness and competitive benchmarking should be treated as strategy.

Which of the following statements about strategy is not true? A. Grandiose statements of desire, on their own, are not strategy. B. Strategy is as much about deciding what not to do, as it is about deciding what to do. C. Strategy is about creating superior value, while containing the cost to create it. D. Operational effectiveness and competitive benchmarking should be treated as strategy.

B. They attribute firm performance to the actions managers take within a chosen industry.

Which of the following statements accurately describes firm effects? A. They attribute firm performance to the industry in which the firm competes. B. They attribute firm performance to the actions managers take within a chosen industry. C. They refer to the value-creation potential of a large, diversified enterprise. D. They refer to the external circumstances surrounding all the firms in an industry.

C. Our aim is to create superior customer value while controlling costs.

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. Black swan events

_____ are incidents that describe highly improbable but highly impactful events. A. Miracle events B. Wild card events C. Black swan events D. Fat tail risk events

Strategy

_____ is best described as a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors.

Strategic Management

_____ is best described as an integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage.