MGMT 493 Chp 1-4 True/False
In recent times, businesspeople have become more confident in the ability of economists to provide valid and reliable predictions about the world's economic environment. a. True b. False
b. False
Interpersonal relationships, trust, friendships, and a firm's reputation are all examples of complex social phenomena that make capabilities easy to imitate. a. True b. False
b. False
Returns can only be measured in accounting terms such as return on assets, return on equity, or return on sales. a. True b. False
b. False
Tablets such as the iPad have had little effect on the sale of PCs in the United States, and PC producers such as Taiwan's Acer Computers have experienced significant growth. a. True b. False
b. False
The CEO of Twin Spires, Inc., is emotionally and intellectually committed to using the resources of 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. This commitment has carried the CEO through long periods of below-average returns on investment. The perspective of the CEO of Twin Spires is consistent with the assumptions of the industrial organization (I/O) model. a. True b. False
b. False
When firms analyze the external environment, they typically have complete and unambiguous data. a. True b. False
b. False
When the firm earns lower-than-average returns, the highest priority is given to satisfying the needs of capital market stakeholders over the needs of product market and organizational shareholders. a. True b. False
b. False
Exit barriers are especially low in the airline industry as aircraft are not particularly specialized and can easily be sold to other airlines, air cargo companies, the military, or even to wealthy individuals who want to own a private jet. a. True b. False
a. True
Firms implementing cost leadership strategies often sell no-frills standardized goods or services (but with competitive levels of differentiation) to the industry's most typical customers. a. True b. False
a. True
Global competition has increased the options for consumers and has made it more imperative for firms to identify the needs of customers in order to earn above-average returns. a. True b. False
a. True
Hourly workers on the production line of a chicken-processing plant are considered organizational stakeholders. a. True b. False
a. True
Low-cost leaders usually concentrate on the value chain activities of inbound logistics and outbound logistics as a means to reduce costs. a. True b. False
a. True
The process of competitor analysis should examine the competitor's future objectives, current strategy, assumptions, and capabilities. a. True b. False
a. True
When Delta Air Lines wants to study Continental Airlines, it must examine both Continental and its complementor, Star Alliance. a. True b. False
a. True
When selecting a business level strategy, the firm determines who will be served, what customer needs will be satisfied, and how those needs will be satisfied. a. True b. False
a. True
While patents may be an effective way of protecting proprietary technology in some industries such as pharmaceuticals, many firms competing in the electronics industry do not apply for patents. a. True b. False
a. True
A company can earn above-average returns only when the value it creates is less than the costs incurred to create that value. a. True b. False
b. False
A firm's mission tends to be enduring while its vision can change in light of changing environmental conditions. a. True b. False
b. False
Compared to tangible resources, intangible resources are an inferior source of core competencies. a. True b. False
b. False
Competitor analysis is focused on the factors and conditions influencing an industry's profitability potential. a. True b. False
b. False
Contrary to popular belief, the global segment of the external environment does not provide many opportunities for firms such as H.J. Heinz, SAB Miller, and Citigroup, all of which recently experienced low growth and profits coming from emerging markets. a. True b. False
b. False
Customers, suppliers, unions, and local governments are examples of capital market stakeholders. a. True b. False
b. False
Although health care reform legislation was passed in the early part of the Obama administration, it continues to be a bone of contention for employers, employees, and politicians because of its delays and increased expenses. These attitudes about health care reform make up the sociocultural segment of the general environment. a. True b. False
a. True
Early adopters of new technology often achieve higher market shares and higher returns than later adopters of the technology. a. True b. False
a. True
Effective use of the generic business strategies allows the firm to favorably position itself relative to the five forces. a. True b. False
a. True
A risk of a focus strategy is that the needs of the customer within a narrow competitive segment may become more similar to those needs of customers in the whole market. a. True b. False
a. True
A risk of the differentiation strategy is that the firm's means of differentiation may eventually not provide value for which customers are willing to pay. a. True b. False
a. True
Almost any identifiable human or organizational characteristic can be used to subdivide a market into segments that differ from one another on a given characteristic. a. True b. False
a. True
Firms achieve strategic competitiveness and earn above-average returns by acquiring, bundling, and leveraging their resources for the purpose of taking advantage of opportunities in the external environment in ways that create value for customers. a. True b. False
a. True
One criterion for a resource or capability to be a source of competitive advantage is that it must allow the firm to perform a value-creating activity that competitors cannot perform. a. True b. False
a. True
Organizational mission statements typically do not include statements about profitability and earning above-average returns. a. True b. False
a. True
PepsiCo's strategy called "capital performance with a purpose" links green efforts in ll businesses to the bottom line. This is an example of addressing concerns in the physical segment of the general environment. a. True b. False
a. True
Profit pools allow strategic leaders to predict the outcomes of their decisions before taking efforts to implement them. a. True b. False
a. True
Relative power is the most critical criterion for prioritizing the demands of stakeholders. a. True b. False
a. True
Resources are the source of capabilities, some of which lead to the development of core competencies; in turn, some core competencies may lead to competitive advantage. a. True b. False
a. True
Resources must be combined to form capabilities, as illustrated by Subway, which linked its fresh ingredients with several other resources, including the continual training it provides to those running the firm's units as the foundation for customer service as a capability. a. True b. False
a. True
The industry environment directly influences the firm and its competitive actions and responses. a. True b. False
a. True
By themselves, resources can allow firms to create value for customers as the foundation for earning above- average returns. a. True b. False
b. False
Capabilities are usually developed separately from specific functional areas such as manufacturing, R&D, and marketing. a. True b. False
b. False
Capabilities of an organization emerge spontaneously through the interaction of tangible and intangible resources. a. True b. False
b. False
Companies without the core competencies in their value chain activities and support functions are still able to implement successfully a either a cost leadership or a differentiation strategy, although they cannot implement an integrated cost leadership/differentiation strategy. a. True b. False
b. False
Corporate-level strategy in a diversified organization requires a common business strategy for each component business. a. True b. False
b. False
Costly-to-imitate capabilities are those which other firms cannot easily develop as they have no strategic equivalent. a. True b. False
b. False
Developed countries still have major advantages in access to information technology over emerging economies because of the significant cost of the infrastructure needed for computing power. a. True b. False
b. False
Developing a political strategy by the newly formed General Motors would likely be ineffective as firms are generally unable to influence the political/legal environment. a. True b. False
b. False
Eavesdropping by the NSA on average Americans is ethical because it is a governmental organization instead of a for-profit company. a. True b. False
b. False
Eavesdropping is an ethical way to obtain information about competitors' actions. a. True b. False
b. False
Economies of scale and huge advertising budgets are just as effective in the new competitive landscape as they were in the past, but they must be reinforced by strategic flexibility. a. True b. False
b. False
Every firm uses all levels of strategy: corporate, acquisition and restructuring, international and cooperative. a. True b. False
b. False
Examples of incremental innovations include iPods, PDAs, Wi-Fi, and web browser software. a. True b. False
b. False
Firms can directly control the elements of the seven segments of the general environment. a. True b. False
b. False
Firms should never outsource a primary activity because of the danger of the activity being imitated by rivals. a. True b. False
b. False
Firms should seek to continually develop new core competencies because all core competencies guarantee above- average profit. a. True b. False
b. False
Flexible manufacturing systems, information networks, and total quality management are three techniques that make it possible for firms to implement the focused differentiation strategy. a. True b. False
b. False
GE's brand name is a tangible source of competitive advantage for the company. a. True b. False
b. False
Generally, the stronger the competitive forces, the higher the profit potential of an industry. a. True b. False
b. False
Global warming and energy consumption are aspects of the technological environment segment that firms should monitor. a. True b. False
b. False
Globalfocusing is often used by firms with high levels of international operations who further increase their internationalization by focusing on global niche markets. a. True b. False
b. False
Human resources and other support functions are not value-creating activities in the value chain; only the value chain activities create value. a. True b. False
b. False
In general, firms can be most effective if they develop business-level strategies that will serve the needs of the "typical customer" in the industry. a. True b. False
b. False
Monitoring involves the development of a forecast of what might happen at a future point in time. a. True b. False
b. False
Older employees are less valuable resources to firms than younger employees, because the older employees have lower stocks of knowledge. Consequently, employee reductions should begin with early-retirement inducements. a. True b. False
b. False
One of the benefits of the integrated cost leadership/differentiation strategy is that it is less risky than either the cost leadership or differentiation strategies. a. True b. False
b. False
Organizational stakeholders are the firm's internal resources, capabilities, and core competencies that are used to accomplish what may at first appear to be unattainable goals in the competitive environment. a. True b. False
b. False
Research shows that a greater percentage of a firm's profitability is explained by the I/O rather than the resource- based model. a. True b. False
b. False
Research shows that firms using a hybrid strategy (i.e., integrated cost leadership/differentiation) often outperform firms using pure strategies ( i.e., cost leadership or differentiation). a. True b. False
b. False
Resources are considered rare when they have no structural equivalent. a. True b. False
b. False
Scanning involves detecting meaning through early signals of environmental trends. a. True b. False
b. False
Southwest Airlines' tightly integrated activities make its cost leadership strategy more vulnerable to imitation than if its activities were loosely integrated. a. True b. False
b. False
Strategic groups are firms in different industries following the same or similar strategies. a. True b. False
b. False
Switching costs, access to distribution channels, economies of scale, large numbers of competing firms, and slow industry growth are some of the entry barriers that may affect the threat of new entrants to an industry. a. True b. False
b. False
Technology is a critical resource for helping organizations learn how to continually innovate. a. True b. False
b. False
The rapid rate of technological diffusion has increased the competitive benefits of patents. a. True b. False
b. False
The resource-based model assumes that if firms have resources that are rare or costly to imitate, this is sufficient to form a basis for competitive advantage. a. True b. False
b. False
The strengths of the five competitive forces are similar across strategic groups within an industry. a. True b. False
b. False
The value of tangible assets such as the firm's borrowing capacity and its physical plant is high because they can be easily leveraged to derive additional value. a. True b. False
b. False
The value-creating activities associated with the cost leadership strategy and differentiation strategy are the same. a. True b. False
b. False
Unlike a cost leadership and a differentiation strategy, both focus strategies are less dependent on the completion of various value chain and support activities in order to compete in a superior manner. a. True b. False
b. False
Valuable capabilities allow the firm to exploit strengths or neutralize weaknesses in the internal environment. a. True b. False
b. False
Value chain activities in the value chain create value, whereas support functions generate costs. a. True b. False
b. False
Value is measured by the variable and fixed costs associated with the production and marketing of a particular product compared with the revenue and profits the product generates. a. True b. False
b. False
Walmart's change in strategy to attract more upscale customers will likely succeed because cost leaders are good at differentiating. a. True b. False
b. False
When Philip Morris International studies the cigarette tax policies of various nations, it is engaged in the forecasting component of the environmental analysis process. a. True b. False
b. False
An effective vision statement will specify the market to be served. a. True b. False
b. False
"Motivating, empowering, and retaining employees" is an example of a capability that resides within the human resources functional area. a. True b. False
a. True
A business-level strategy is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage in specific product markets. a. True b. False
a. True
A firm should outsource only activities where it cannot create value or where it is at a substantial disadvantage compared to competitors. a. True b. False
a. True
A flexible manufacturing system is a computer-controlled process used to produce a variety of products in moderate, flexible quantities with minimal manual intervention. a. True b. False
a. True
A new generation of lunch trucks in cities such as New York, San Francisco, and Los Angeles serving high-end fare such as hamburgers made from grassfed cattle, escargot, and crème brulee illustrate the focus cost leadership strategy. a. True b. False
a. True
Although it is a cost leader, IKEA also offers differentiated features that appeal to its target customers, including its unique furniture designs, in-store playrooms for children, wheelchairs for customer use, and extended hours. a. True b. False
a. True
An effective vision stretches and challenges people and can result in increased innovation as 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
a. True
An example of a government policy barrier to entry would be a situation in which the Antitrust Division of the Department of Justice disallows a merger because it creates a firm that is too dominant and would thus create unfair competition. a. True b. False
a. True
An organization's willingness to tolerate or encourage unethical behavior is a reflection of its core values. a. True b. False
a. True
Analyzing the internal environment enables a firm to determine what it can do by identifying resources, capabilities, and core competencies in the internal organization. a. True b. False
a. True
Any core competency has the potential to lose its value-creating ability. a. True b. False
a. True
Apple has combined some of its tangible resources (such as financial resources and research laboratories) and intangible resources (such as scientists, engineers, and organizational routines) to create a capability in R&D which creates a core competence in innovation. a. True b. False
a. True
At IBM, human capital is critical to forming and using the firm's capabilities in customer relationships, scientific and research skills, and technical skills in hardware, software, and services. a. True b. False
a. True
At Southwest Airlines, the complex interrelationship between its culture and human capital adds value for customers in ways that other airlines cannot, such as jokes on flights by flight attendants and cooperation between gate personnel and pilots. a. True b. False
a. True
Capabilities may be costly to imitate if firms have unique and valuable organizational cultures, are causally ambiguous, and socially complex. a. True b. False
a. True
Changing consumer needs is illustrated by Starbucks' allowing consumers to have an experience rather than just a cup of coffee and to design their own drinks. a. True b. False
a. True
Core competencies are capabilities that serve as a source of competitive advantage for a firm over its rivals. a. True b. False
a. True
Creating customer value is the source of the firm's potential to earn above-average returns. a. True b. False
a. True
Demographic, economic, political/legal, sociocultural, technological, global, and physical are the seven elements comprising the industry environment. a. True b. False
a. True
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
a. True
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
a. True
Strategic competitiveness is achieved when a firm successfully formulates and implements a value-creating strategy. a. True b. False
a. True
Strategic fit among the many activities in the value chain is critical for competitive advantage because it is more difficult for a competitor to match a configuration of integrated activities than to imitate a particular activity such as sales promotion or a process technology. a. True b. False
a. True
Strategic leaders must have a strong strategic orientation while embracing change in the dynamic competitive landscape. a. True b. False
a. True
Suppliers are powerful when the industry is dominated by a few large companies, no satisfactory substitutes are available, the selling industry is relatively more concentrated than the purchasing industry, and switching costs are high. a. True b. False
a. True
The European sovereign-debt crisis and political upheavals in Egypt, Tunisia, Libya, and Syria illustrate uncertainties in the political/legal segment of the general environment that could affect the performance of business firms. a. True b. False
a. True
The competitor analysis is the final part of the external environment analysis and focuses on each company against which a firm directly competes (for example, Coca-Cola and PepsiCo, Home Depot and Lowe's, and Airbus and Boeing). a. True b. False
a. True
The five forces model expands the arena of competitive analysis beyond direct competitors (i.e., rivals) to include buyers and suppliers who may also be a source of competition. a. True b. False
a. True
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
a. True
The foundation of many capabilities lies in the unique skills and knowledge of a firm's employees. a. True b. False
a. True
The generalized forms of value that goods and services provide are either low cost with acceptable features or highly differentiated features with acceptable cost. a. True b. False
a. True
The hazard of getting "stuck in the middle" applies to firms using any business strategy. a. True b. False
a. True
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 main obstacle the CEO must face is inertia. a. True b. False
a. True
The objective of assessing the external environment is to determine the timing and importance of the effects of environmental changes and trends on the strategic management of the firm. a. True b. False
a. True
The rate of growth of Internet-based applications could be affected by the possibility of Internet service providers charging users for downloading those applications. a. True b. False
a. True
The rate of technology diffusion has been steadily increasing over the last two decades. a. True b. False
a. True
The recent bankruptcy filings by General Motors and Chrysler Corporation illustrate that firms cannot directly control the general environment's segments. a. True b. False
a. True
The two primary drivers of hypercompetition are the emergence of the global economy and technology. a. True b. False
a. True
The uniqueness of a firm's resources and capabilities is the basis for a firm's strategy and determines its ability to earn above-average returns under the I/O view. a. True b. False
a. True
To position itself differently from competitors, a firm must decide to either perform activities differently or to perform different activities. a. True b. False
a. True
Two concerns about outsourcing are the potential loss of a firm's innovative ability and the loss of jobs within companies that decide to outsource some of their work. a. True b. False
a. True
Understanding how to leverage the firm's unique bundle of resources and capabilities is a key outcome decision makers seek when analyzing the internal organization. a. True b. False
a. True
Walmart uses core competencies such as information technology and distribution channels to create value for its customers through its "everyday low prices." a. True b. False
a. True
Walmart's actions of becoming more upscale with the intent of taking sales away from Target provided an opening for competitors such as Amazon and Family Dollar to better compete on the basis of price and attract some of Walmart's customer. a. True b. False
a. True
The need to meet quarterly earnings numbers disciplines managers to accurately examine the firm's internal organization. a. True b. False
b. False
A low-cost position in the industry is not a valuable defense against rivals when competing on the basis of price. a. True b. False
b. False
Age structure, geographic distribution, income distribution, interest rates, and process innovations are all elements of concern when studying the demographic segment of the general environment. a. True b. False
b. False
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. a. True b. False
b. False
Although an organization's good reputation is a valuable resource that takes years of superior marketplace competence to achieve, it is not a good basis for building a competitive advantage because it can be destroyed almost instantly by bad publicity. a. True b. False
b. False
Although organizational cultures vary considerably, one cannot make an objective judgment that some organizational cultures are more or less functional than others. a. True b. False
b. False
Although the fast food (or quick-service) industry is unattractive, McDonald's has earned above-average returns through product innovations, enhancing existing facilities, and buying properties outside the United States. a. True b. False
b. False
An English professor spends her summers writing low-brow romance novels that sell directly to paperback. She writes under a fictional name because she is embarrassed to admit to her colleagues and students how she earns the extra money for foreign vacations. The professor is correct in her concern that she is serving customer needs that are objectively inferior and bad. a. True b. False
b. False
An attractive industry is one that is characterized by high entry barriers, suppliers and buyers with strong bargaining power, low threats from substitute products, and low rivalry among firms. a. True b. False
b. False
Analyzing the internal environment enables a firm to determine what it might do by identifying what opportunities and threats exist. a. True b. False
b. False
Any competitor intelligence practice that is legal is also ethical. a. True b. False
b. False
At the conclusion of the internal analysis, firms must identify their opportunities and threats in resources, capabilities, and core competencies. a. True b. False
b. False
Average returns are returns in excess of what an investor expects to earn from other investments with a similar amount of risk. a. True b. False
b. False
Because of its focus on innovation and quality manufacturing, Total Quality Management is not useful for firms that follow a cost leadership strategy. a. True b. False
b. False
The I/O (industrial organization) model assumes that the uniqueness of a firm's resources and capabilities is its main source of above-average returns. a. True b. False
b. False
The activities in the value chains of companies using focus strategies are quite different than the activities in the value chains of companies using industry-wide business strategies. a. True b. False
b. False
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
b. False
The best of the generic business strategies is the integrated cost leadership/differentiation strategy. a. True b. False
b. False
The degree to which the firm is dependent on a stakeholder group gives that stakeholder less influence. a. True b. False
b. False
The difference between the cost leadership and differentiation business-level strategies, and the focused cost leadership and focused differentiation strategies, is their basis for customer value. a. True b. False
b. False
The differentiation strategy is effective for products that are expensive, luxury consumer goods. It is not effective for common, inexpensive products such as doughnuts. a. True b. False
b. False
The external environment facing business stays relatively constant over time. a. True b. False
b. False
The firm with the most capabilities wins. a. True b. False
b. False
The goal of strategic management is to develop a competitive advantage that is permanent. a. True b. False
b. False
The integrated cost leadership/differentiation strategy is superior to the other business-level strategies. a. True b. False
b. False
The key to Southwest Airlines' success has been its ability to continuously reduce costs while providing customers with superior levels of differentiation such as an engaging culture. a. True b. False
b. False
The learning generated by making and correcting mistakes is generally unimportant to efforts to create new capabilities and core competencies. a. True b. False
b. False
The legislation introduced in the U.S. Congress during the early tenure of the Obama administration intended to reduce the amount of work U.S. companies outsource and is an example of a potential change in the sociocultural segment of the general environment. a. True b. False
b. False
The more distant strategic groups are in terms of their strategies, the greater the likelihood of rivalry between the groups. a. True b. False
b. False
