man4720 chapter 1

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

True

32. Relative power is the most critical element for prioritizing the demands of stakeholders. (A) True (B) False

True

33. Hourly workers on the production line of a chicken-processing plant are considered organizational stakeholders. (A) True (B) False

True

40. An organization's willingness to tolerate or encourage unethical behavior is a reflection of its core values. (A) True (B) False

True

17. 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 CEO must encourage ambidextrous learning, absorbing new knowledge and building incremental knowledge. (A) True (B) False

True

23. The resource-based model assumes that firms must have resources that are rare or costly to imitate to form a basis for competitive advantage. (A) True (B) False

false

25. The assumptions of the industrial organization 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. (A) True (B) False

false

70. ______ 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) A capability

98. :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 business unit's actions to exploit its competitive advantage over rivals. (D) a firm's resources, intent, and mission.

74. The resource-based model 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) resources that are valuable, rare, costly to imitate, and non-substitutable form the basis of a firm's core competencies.

119. SWOT stands for (A) strategy, wealth, organization, and threats. (B) success, weakness, opportunities, and taxes. (C) strength, wealth, organization, and taxes. (D) strengths, weaknesses, opportunities, and threats.

(D) strengths, weaknesses, opportunities, and threats.

102. In smaller, new venture firms, returns are sometimes measured in terms of: (A) return on assets. (B) return on equity. (C) return on sales. (D) the amount and speed of growth.

(D) the amount and speed of growth.

44. 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 formulation and implementation of a full set of commitments, decisions, and actions required for the firm to achieve above-average returns and strategic competitiveness.

(D) the formulation and implementation of a full set of commitments, decisions, and actions required for the firm to achieve above-average returns and strategic competitiveness.

1. Strategic competitiveness is achieved when a firm successfully formulates and implements a value-creating strategy. (A) True (B) Fals

true

20. 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. (A) True (B) False

true

36. 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. (A) True (B) False

true

67. Research shows that approximately ______ percent of a firm's profitability is explained by the industry in which it competes, whereas ______ percent is explained by the firm's characteristics and actions. (A) 90; 10 (B) 60; 40 (C) 36; 20 (D) 20; 36

(D) 20; 36

113. Strategic leaders are: (A) located only at the executive level. (B) located in different areas and levels. (C) the CEO, COO, and CFO only. (D) located at different levels, but only in the operating area of the organization.

(B) located in different areas and levels.

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

True

80. A key purpose of a mission statement is to inform _________what a firm is, what it seeks to accomplish and who it seeks to serve. (A) CEOs (B) stakeholders (C) regulators (D) former employees

(B) stakeholders

103. A ______ is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage. (A) goal (B) strategy (C) tactic (D) mission

(B) strategy

13. Examples of incremental innovations include iPods, PDAs, Wi-Fi, and web browser software. (A) True (B) False

False

41. 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. Strategic competitiveness

Above-average returns are; (A) higher profits than the firm earned the previous 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) returns in excess of what an investor expects to earn from other investments with a similar level of risk

38. Strategic leaders must have a strong strategic orientation while embracing change in the dynamic competitive landscape. (A) True (B) False

true

79. According to Hitt, 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) CEO.

107. ______ innovation is a term used to describe how rapidly and consistently new, information- intensive technologies replace older ones. (A) Perpetual (B) Disruptive (C) Global (D) Diffusion

(A) Perpetual

87. Generally speaking, product market stakeholders are satisfied when: (A) a firm achieves a balance between profit margins, costs paid to suppliers and prices set for customers. (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) a firm achieves a balance between profit margins, costs paid to suppliers and prices set for customers.

96. The strategic leader's work is characterized by: (A) ambiguous decision situations where the best course of action is not always easy to identify. (B) a willingness to unify stakeholders through skillful manipulation. (C) an ability to identify solutions to long-range problems. (D) concentration on the practical day-to-day aspects of the organization's operations.

(A) ambiguous decision situations where the best course of action is not always easy to identify.

88. Before liquidating during a bankruptcy, a company will take several actions to try to satisfy its ______ stakeholders. (A) capital market (B) product market (C) organizational (D) governmental

(A) capital market

95. 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 to minimize the possibility 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) delegate strategic responsibilities to employees "closer to the action."

54. New markets created by iPods, PDAs, and Wi-Fi are a result of: (A) disruptive technologies. (B) global competition. (C) knowledge intensity. (D) hypercompetition.

(A) disruptive technologies.

104. ______ is an investor's uncertainty about the economic gains or losses that will result from a particular investment. (A) Return (B) Reward (C) Risk (D) Revenue

75. 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 competitive environment. (C) calls for firms to focus on their homogeneous capabilities to compete against their rivals. (D) suggests that vision and mission are marketing messages not tied to strategic plans.

(A) emphasizes that it is difficult to develop and sustain a competitive advantage based on resources alone.

122. It is important to emphasize that almost all strategic management process decisions have ______ because they are related to how a firm interacts with its stakeholders. (A) ethical dimensions. (B) local dimensions. (C) political dimensions. (D) global dimensions.

(A) ethical dimensions.

110. Firms use both the ______ and ______ models. In fact, these models complement each other in that one focuses outside the firm while the other focuses inside the firm. (A) industry; capability (B) I/O; resource-based (C) competition; competency (D) industry; competency

(A) industry; capability

58. Knowledge is composed of all the following EXCEPT: (A) insight. (B) expertise. (C) information. (D) intelligence.

(A) insight.

78. 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) is a statement of a firm's business in which it intends to compete and the customers it intends to serve.

105. The culmination of the strategic management process is: (A) performance. (B) strategy implementation. (C) strategy formulation. (D) analysis.

(A) performance.

82. 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) power of each stakeholder

52. 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) remain committed to and strategically competitive in their domestic market.

92. Product market stakeholders include (A) suppliers. (B) shareholders. (C) employees. (D) the firm's chief executive officer.

(A) suppliers.

47. Essentially, _______ has become one of the world's largest markets with 700 million potential consumers. (A) the European Union (B) the United States (C) China (D) Japan

(A) the European Union

112. William Ackman is a hedge fund manager who owned a large share of J.C. Penney stock. He was also a member of the J.C. Penney board. He tried to get the CEO fired, but the board and top management said he breached his boardroom duties when he publicly disclosed information about the CEO search and financial condition of the company. He resigned from the board of directors. This is an example of a contentious relationship between: (A) the capital market stakeholders and the organizational stakeholders. (B) the organizational stakeholders and the product market stakeholders. (C) the capital market stakeholders and the product market stakeholders. (D) all the stakeholders.

(A) the capital market stakeholders and the organizational stakeholders.

62. The industrial organization (I/O) model argues that: (A) the key factor in success is choosing the correct industry in which to compete. (B) the firm's internal resources and capabilities represent the foundation for development of a value-creating strategy. (C) the key to earning above-average returns is strategic flexibility. (D) the internal structure of the organization must match the industry in which it competes for it to earn above-average returns on investment.

(A) the key factor in success is choosing the correct industry in which to compete.

117. Effective strategic leaders are chosen based on: (A) their capabilities and accumulation of human capital over time. (B) their single-minded focus on strategy formation. (C) their aptitude for strategy implementation. (D) their focus on innovation.

(A) their capabilities and accumulation of human capital over time.

76. The goal of the organization's ______ is to point the firm in the direction of where it would like to be in the years to come. (A) vision (B) mission (C) culture (D) strategy

(A) vision

108. ______ provides the firm with new and up-to-date skill sets, which allow it to adapt to its environment as it encounters changes. (A) Strategic flexibility (B) Continuous learning (C) Knowledge (D) The Internet

(B) Continuous learning

57. The CEO of Ridgeway, Inc., realizes that the company's survival depends on developing and acquiring knowledge. Which of the following actions by the CEO would be most consistent with this need? (A) Ensuring that all current unique knowledge of the firm is protected by patents (B) Planning extensive employee training and hiring educated and experienced employees (C) Investing in sophisticated databases in relevant knowledge areas (D) Establishing a system of organizational intelligence gathering

(B) Planning extensive employee training and hiring educated and experienced employees

42. 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 when competitors are unable to duplicate or find it too costly to try to imitate. (D) exists when competing firms are unable to find investors.

111. ______ should establish a firm's individuality and should be inspiring and relevant to all stakeholders. (A) A strategy (B) A vision (C) A mission (D) A goal

93. Refuge Nursing Homes, Inc., (RNH) has been highly profitable in the past 10 years, providing its investors higher returns than those earned by its direct competitors' investors. RNH has a reputation for providing high-paying managerial and hourly-employee jobs. However, recent investigations have revealed that the nursing home residents have been provided substandard care, including non-nutritious and unappetizing meals, non-functional medical equipment, and inadequate patient-care staffing. Which statement best describes the situation? (A) RNH has been earning below-average returns, so it has had to prioritize the demands of its various stakeholders. (B) RNH has prioritized the demands of capital market stakeholders and organizational stakeholders, over the demands of product market stakeholders. (C) RNH has earned above-average returns and so has satisfied the needs of all relevant stakeholders. (D) RNH has been attempting to minimally satisfy the demands of all of its stakeholders.

(B) RNH has prioritized the demands of capital market stakeholders and organizational stakeholders, over the demands of product market stakeholders.

66. An investor is considering in which of two start-up companies to invest. The investor has faith in the industrial organization model of above-average returns and is using that as a guideline to make a decision. Both start-up companies propose to manufacture health-focused foods with low salt, low sugar, high fiber, and no artificial additives. RexRich Foods has a business strategy of producing a differentiated product for which consumers will pay more. Green Pastures Foods is in the health- foods industry because of its internal culture and commitment to healthy lifestyles, but it does not have any executives with experience in food production. Which firm will the investor feel is most consistent with the model of industrial organization? (A) Green Pastures Foods (B) RexRich Foods (C) Both firms are consistent with the I/O approach. (D) At the entrepreneurial stage, the model that companies follow is not important.

(B) RexRich Foods

56. A company's ability to acquire knowledge is: (A) less important in the 21st century than in previous periods of business history. (B) an important source of competitive advantage in virtually all industries. (C) not considered an asset or resource for businesses. (D) only important in high technology industries.

(B) an important source of competitive advantage in virtually all industries.

120. In the strategic management process ASP stands for (A) analyses, successes, and purposes. (B) analyses, strategies, and performance. (C) ability, strategies, and purposes. (D) ability, successes, and performance.

(B) analyses, strategies, and performance.

90. A retail outlet can attempt several remedies to improve profitability to meet the expectations of its _______ stakeholders, including closing stores, changing the top management team, and seeking potential buyers. (A) product market (B) capital market (C) organizational (D) governmental

(B) capital market

100. PGG Mining is making a strategic decision whether to shut down a coal mine in Pennsylvania. It is important to consider that the decision: (A) should be based solely on the results of the CEO's approval of the mine's general manager. (B) has ethical implications for organizational stakeholders. (C) need not be socially responsible if the firm is making below-average returns from the mine. (D) All of these choices are important to consider.

(B) has ethical implications for organizational stakeholders.

94. A prominent national website services company runs Super Bowl advertisements showing a small business owner working alone in the office on a project, during the big game. The message of the ad is that the company understands the sacrifices of its customers. This ad seeks to convey a sense of the organization's ____ to the product market stakeholders. (A) culture of recognition and reward (B) mission to radically shift the global economy toward small businesses (C) leadership as a technology company (D) personality as sports lovers

(B) mission to radically shift the global economy toward small businesses

118. Strategic leaders, ______, often work long hours, and their work is filled with ambiguous decision situations. (A) at the top of the organization (B) regardless of their location in the organization (C) in the finance area (D) in the operations area

(B) regardless of their location in the organization

61. 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) every firm in an industry controls similar strategically relevant resources.

(B) resources to implement strategies are firm-specific and attached to firms over the long-term.

83. Capital market stakeholders include: (A) industry competitors. (B) shareholders. (C) employees. (D) government regulators.

(B) shareholders.

60. 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) strategic flexibility

45. According to Hitt, 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 decreased tariffs. (D) increased availability of capital and increased competition.

(B) the emergence of a global economy and rapid technological change.

65. Although Alibaba is competing in the internet services industry, it has improved its performance by focusing on innovation and service diversification. This improved performance is best explained by: (A) globalization. (B) the resource-based model. (C) the I/O model. (D) hypercompetition.

(B) the resource-based model.

101. A large corporation has earned a reputation for being a challenging work environment for employees, placing demands on employees' time and pushing them to accomplish tasks, sometimes with little recognition. A recent audit found that the company was denying employees overtime pay despite the extra work. This is a reflection of the company's: (A) core values of hard work to gain advancement. (B) unethical corporate culture. (C) lack of an organizational mission. (D) search for its core competencies.

(B) unethical corporate culture.

121. The firm's ______ provide the foundation for choosing one or more ______ and deciding how to implement them. (A) analyses; strengths (B) abilities; strengths (C) analyses; strategies (D) abilities; strategies

115. Strategic delegation helps: (A) overload middle managers. (B) executives control strategy implementation. (C) avoid too much managerial hubris. (D) emphasize profit maximization.

69. 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.

91. 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.

71. 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.

99. 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.

55. Henry Ford once said, "If I had asked people what they wanted, they would have said faster horses." The invention of the car is an early example of: (A) the march of globalization. (B) rapid technological diffusion. (C) disruptive technologies. (D) products that were not imitated by competitors.

109. The I/O model is grounded in: (A) anthropology. (B) psychology. (C) economics. (D) accounting.

81. Organizational stakeholders include: (A) unions. (B) host communities. (C) employees. (D) suppliers of capital.

89. The Chambers of Commerce of cities and towns often implore citizens to buy from local businesses. This is because 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

86. 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 services in the industry at any price. (C) obtaining reliable products at the lowest possible price. (D) increasing the profitability of the firm.

51. 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 risk of participating outside a firm's domestic country when entering global competition. (D) preference for "buying local," which always puts foreign firms at a disadvantage when competing in the U.S. market.

73. 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.

97. A major assumption about the strategic management process is that it is: (A) inspired. (B) team-based. (C) rational. (D) inclusive.

46. All of the following are characteristics 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 in new geographic markets.

63. Which of the following statements is most consistent with the I/O view? Performance of a 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 in which the firm competes. (D) hypercompetition within the industry.

77. The Princeton Alliance Church states in its website that "PAC exists to help you live life to the fullest by knowing God, developing community and bringing hope." This pronouncement is most precisely a statement of organizational: (A) values. (B) structure. (C) vision. (D) culture.

68. 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 board of directors of experienced executives.

106. Managers must adopt a new mind-set that values ______ and the challenges that evolve from constantly changing conditions. (A) flexibility (B) innovation (C) speed (D) All of these options are correct.