Strategic Management Exam 1

Analyzing the internal environment enables a firm to determine what it CAN DO by identifying resources, capabilities, and core competencies in the internal organization.

True

The ________ environment is composed of dimensions in the broader society that influence an industry and the firms within it.

general/macro

A manufacturer of washing machines has expanded its plant and created excess capacity, just as the general economy takes a downturn. The company is likely to:

offer rebates and incentives to customers to promote sales

A family just changed to a different mobile phone and data service provider. They now need to take some time to transfer their content to the new phones and learn the features of the new service. This is an example of:

switching cost customers incur changing to a new supplier

Alligator Enterprises has earned above-average returns since its founding five years ago. Since no other firm has challenged Alligator in its particular market niche, the firm's owners can feel secure that Alligator has established a competitive advantage.

False

Research shows that a greater percentage of a firm's profitability is explained by the I/O model rather than the resource-based model.

False

The CEO of Twin Spires, Inc., is committed to using the expertise and resources currently in the firm to serve the needs of the natural gardening community by providing rare and native plants to individuals and nurseries around the United States. The perspective of the CEO of Twin Spires is consistent with the assumptions of the industrial organization model.

False

The uniqueness of a firm's resources and capabilities is the basis for a firm's strategy and its ability to earn above-average returns under the industrial organization model.

False

Economies of scale refers to the fact that as the quantity of product produced in a given time period __________, the cost manufacturing each unit _____.

Increases; Decreases

RelTech is a firm in the electronics industry. It could protect its proprietary technology through patents. However, it likely will not apply for patents to keep competitors from gaining access to the technological knowledge included in the patent application.

True

The difference between average and above-average returns is that average returns are returns that an investor expects to earn from an investment as compared to other investments with similar stock prices, while above-average returns are in excess of expectations for similarly priced stocks.

True

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

True

Walmart uses core competencies, such as information technology and distribution channels, to create value for its customers through its "everyday low prices."

True

Consolidation among fuel providers serving airport facilities is viewed in the five forces model of competition as a(n):

an increase in the bargaining power of suppliers of a critical input

Firms use the five forces model of competition to identify the ______ of the industry. It is measured by its _______.

attractiveness ; profitability potential

Which of the following is NOT an entry barrier to an industry?

bargaining power of suppliers

A competitive advantage:

can be identified when competitors are unable to duplicate a strategy or find it too costly to try and imitate.

Acme Valves, Inc., has been a successful player in the oil field supply industry in the last 15 years. Acme maintained its traditional strategy and product characteristics over this time period. However, the company has experienced declines in sales and profits over the last four quarters. The CEO of Acme should:

conduct an analysis of the external environment and potential changes in internal resources

Customer loyalty programs such as airline frequent flyer miles are an attempt to:

increase customers switching costs

A certain marble quarry provides a unique type of marble that is richly colored and strikingly veined. It has been used for churches and public buildings throughout the world. The architect of a new headquarters for a prestigious Fortune 500 firm has specified the use of this marble, and this marble only, for this project. Which of the following statements is most likely to be true?

the cost of the marble will be expensive because of the bargaining power of the supplier

What is the relationship between a firm's industry environment and the firm's earning potential?

the more a firm can favorably influence its industry environment, the more likely it is to achieve above-average returns