MGT 400 - Exam 1
Key Points About Strategy
- intended strategy - realized strategy - emergent strategy
Emergent strategy
-any unplanned strategic initiative - bubbles up from the bottom of the organization - can influence and shape a firm's overall strategy
As a part of strategy formulation, a firm's functional strategy primarily concerns questions relating to A. how to implement business strategy B. when to compete C. where to compete D. how to enter target markets
A
Green Jeans, Inc. had a mission to become the leading producer of environmentally friendly blue jeans, an emerging and in-demand category in the apparel industry. Its strategy involved leveraging a network of organic cotton farmers and suppliers of environmentally responsible synthetic materials to create a product that is durable, attractive, affordable, and 100% recyclable. However, because it did not upgrade its outdated production facilities, Green Jeans could not assemble its products at a low-enough cost to offer the jeans at a price that was attractive to customers. Green Jeans' strategy failed because A. It was not backed up with strategic commitments B. it failed to consider the competitive challenge C. Managers did not live by the company's core values D. the company did not stake out a unique strategy position.
A
How does causal ambiguity act as an isolating mechanism for organizations? A. It makes it difficult for the competitors to understand why a company has been so successful. B. It creates a situation in which different social and business systems interact with one another. C. It makes it difficult for competitors to deploy their resources by creating ambiguity within their organizational structures. D. It makes it difficult for competitors to imitate core competencies quickly due to time compression diseconomies.
A
The CEO of Chyron Media has decided to enter the markets of emerging nations like China and Brazil. This means that the books, magazines, and websites published under the Chyron Media banner would be made available in these nations. Which of the following strategies does this scenario best illustrate? A. corporate strategy B. business strategy C. functional strategy D. divisional strategy
A
Through ________, a firm puts its guiding policy into practice by employing a set of coherent actions. A. Strategy implementation B. Strategy control C. Strategy analysis D. Strategy formulation
A
Trung has been an employee with PureEnergy Inc. for 15 years. He started with an entry-level job, and today he is a manager of an entire division. Over the years, Trung has acquired a reputation for doing the right things in the company. Hence, as an efficient leader, he is capable of effectively communicating and motivating his subordinates to work toward the company's vision and mission. According to the Level-5 leadership pyramid, which is the highest level of leadership Trung has reached so far? A. Level 4 B. Level 2 C. Level 3 D. Level 5
A
Which of the following external forces is a part of a firm's task environment? A. the composition of the strategic group to which the firm belongs B. The interest rates prevalent in the economy in which the firm operates C. the inflation level in the economy in which the firm operates D. the recent innovations in process technology, including lean manufacturing
A
Which of the following methods of developing a strategy best illustrates scenario planning? A. The managers at Lyon Clothing Inc. formulated a strategy that is able to handle small to medium to large increases in the prices of cotton in the future B. A sales person at MP Foods Inc. suggested that the company should introduce an organic version of its gelato to cater to the needs of the increasingly health-conscious population. C. The CEO of BCT Inc., a large conglomerate, has decided to enter the South American market based on the competitor's success in the same market. D. Based on the previous year's profits, the CEO of Solva Inc. decided to adopt an expansion strategy in its home market.
A
________ is best described as an integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage. A. Strategic management B. Inventory Management C. Integrated technology management D. Supply chain management
A
________ is best described as the difference between a buyer's willingness to pay for a product or service and a firm's total cost to produce it. A. Economic value created B. Break-even point C. Consumer surplus D. Cost of capital
A
Strategic Management
A process that consists of three key elements - Diagnosis of the competitive challenge (analysis) - A guiding policy to address the competitive challenge (formulation) - set of coherent actions to implement the firms guiding policy (implementation)
Strategic groups
A set of companies that pursue a similar strategy in a specific industry
Strategic positioning
A unique position within an industry that allows the firm to provide value to customers, while controlling costs
A firm's ________ relates to its ability to create value for customers (V) while containing the cost to do so (C). A. Industry effects B. strategic position C. advantage of the marketplace D. industry analysis
B
Beats Electronics has been able to outperform Audio-Technica, Bose, JBL, Skullcandy, Sennheiser, and Sony in the high-end, premium headphone market. Which of the following statements accurately explains one of the main reasons for the success of Beats? A. it produced the highest-quality headphones B. it created a perception that owning its products was cool C. it emphasized marketing over core competency D. it focused on sponsoring future athletic superstars.
B
During an interview for a CEO position, Elena's potential employers ask her, "If you get this job, will you focus more on industry effects or firm effects?" What should her answer be? A. "Neither. I would focus on unexplained variances. They are the most mysterious effects and the most powerful." B. "Firm effects. I will be able to have the most impact on those." C. "Industry effects. They have the most substantial effect on superior firm performance." D. "Neither. I would focus on business cycle effects. These are the most predictable, so they are worth the most effort."
B
The internet service provider industry in the country of Megalopolis is an industry characterized by the presence of strong network effects, high brand loyalty, high economies of scale, and proprietary technology among incumbent firms. Thus, in the internet service provider industry, the A. threat of substitutes is most likely high B. threat of new entrants is most likely low C. bargaining power of buyers is most likely low D. entry barriers are most likely nonexistent.
B
The primary objective of Porter's five forces model is to A. understand valuable, rare, and hard-to-imitate resources B. understand the profit potential of industries C. reduce the gap between the value of a firm's product and its cost of production D. break down a firm's value chain activities into primary and support.
B
Which of the following scenarios illustrates a firm that has a sustainable competitive advantage? A. Peak Inc. was able to outperform its competitors with its new production system, in terms of revenue, for a brief period of four months. B. Zhang Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years. C. Jamison Inc. generated revenue of $300,000 this financial year, which is close to the industrial revenue average of $320,000. D. 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.
B
Which of the following should managers NOT consider when specifying and assessing the interest and claims of pertinent stakeholders? A. power B. reciprocity C. legitimacy D. urgency
B
Which of the following statements accurately brings out the difference between tangible and intangible resources? A. Tangible resources contribute to a company's competitive advantage, whereas intangible resources have little effect on competitive advantage. B. Tangible assets can be bought on the open market by anyone with the necessary cash, whereas intangible assets cannot be easily purchased. C. Tangible resources take a longer time to build, whereas intangible assets can be built comparatively easily. D. Tangible assets are difficult for competitors to imitate, whereas intangible assets can be easily replicated.
B
Which of the following statements correctly compares Apple and Microsoft in 2016? A. Apple had a higher return on revenue than Microsoft B. Apple had a higher return on invested capital than Microsoft C. Microsoft had higher total sales than Apple D. Microsoft had a lower cost structure than Apple
B
________ is best described as a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors. A. Competency management B. Strategy C. Credo D. Behavior modification
B
As the CEO of a conglomerate, Eva Morris exhibited her strong commitment toward the company's core value that customers' well-being is more important than profit when she convinced the board of directors to liquidate the company's pesticide subsidiary. The pesticide brand sold by her company was a major revenue earner in lesser-developed nations, but studies indicate that it is a carcinogen. Eva persuaded the board that the company had to be responsible toward society. In this scenario, Eva has demonstrated A. individualism B. Intrepreneurship C. Strategic leadership D. Machiavellianism
C
Cartech Inc. is a manufacturer of automobile parts, which it sells to retail auto supply stores. Its core competencies include superior design and engineering capabilities, as well as a highly integrated and efficient supply chain. To sustain its competitive advantage, Cartech should first A. seek to replicate its nearest competitor's competency in innovative marketing. B. attempt to cut costs by replacing assembly line workers with robots. C. upgrade its engineering department and improve its supply chain. D. diversify its product offerings by developing parts for construction equipment.
C
Elena is the CEO of Geode Technologies, a consumer electronics manufacturer. Last year, Geode's return on invested capital (ROIC) was 11.6 percent, while Geode's closest competitor, NorthWest Tech, had an ROIC of 17 percent. Which of the following factors might Elena use to convince investors to invest in Geode rather than NorthWest Tech? A. Geode had a Research & development (R&D) expense / Revenue ratio of 16 percent, while NorthWest Tech had an R&D / Revenue ratio of 12 percent. B. Geode's working capital to revenue ratio was 75 percent, while NorthWest Tech's was 68 percent. C. Geode's intangible intensity was 6 percent, while NorthWest Tech's was 3 percent. D. Geode's plant, property, and equipment (PPE) over revenue ratio was 19 percent, while NorthWest Tech's was 10 percent.
C
In ________, a firm frames a guiding policy to address the competitive challenge. A. Strategy control B. Strategy Implementation C. Strategy Formulation D. Strategy Analysis
C
When companies that manufacture shipping containers want to buy iron ore, the purchase decision is solely based on price. This is because there are a large number of sellers in the iron ore industry, and iron ore is a highly undifferentiated commodity. Which of the following industry competitive structures does the iron ore industry best illustrate? A. monopoly B. oligopoly C. perfect competition D. monopolistic competition
C
Which of the following is an element of good strategy? A. A guiding policy to address employee satisfaction B. An approach that underestimates the competition C. A set of coherent actions to implement the firm's guiding policy D. A summary of the firm's history within its industry
C
Which of the following strategies does Tesla need to implement or achieve to gain a competitive advantage? A. imitate the features of the most popular SUVs on the market B. Substitute less-expensive components to keep costs low C. Reinvest profits to build successively better electric automobiles D. Sell advertising space on their car's digital displays
C
________ precisely indicates how much of a firm's sales is converted into profits. A. break-even price B. working capital turnover C. return on revenue D. inventory turnover
C
Realized strategy
Combination of intended and emergent strategy
Sixth force of competition
Complements -A product, service or competency that adds value when used with the original product increase demand for primary product and enhances the profit potential for the industry and the firm
Cloud Cones is a fast-growing chain of ice cream shops. It has acquired an edge over its competitors through its ability to provide a wide array of unique flavors and a hip atmosphere in stores. This advantage of Cloud Cones best exemplifies a A. markup B. resource flow C. capital gain D. core competency
D
Home Value Inc., Max Cart Inc., and Nice Necessities Inc. are three consumer-product retailing companies. Their products consist primarily of day-to-day items that are easy to imitate and sell. All three companies use the same resources and capabilities in the production and distribution of their products. Judging from the market conditions described in this scenario, which of the following statements is true? A. resource immobility of the firms will be low B. the industry structure will be far from perfect competition C. barriers to entry within the industry will be high D. any advantage that one firm has will be short-lived
D
The ________ allows the scanning, monitoring, and evaluating of changes and trends in a firm's macro environment. A. VRIO framework B. SWOT analysis C. BCG matrix D. PESTEL framework
D
The former CEO of Sam's Club, a division with its own profit-and-loss responsibility, Rosalind Brewer, reported to Walmart's CEO, C. Douglas McMillon, who as corporate executive oversees Walmart's entire operations. Sam's Club, therefore, is a ________ of Walmart. A. Branch office B. Corporate partner C. house brand manufacturer D. strategic business unit
D
The government of Filvia has mandated that the standard minimum wage in the country be increased to $8,000 per year. Which of the following factors in a firm's general environment does this mandate best indicate? A. ecological factors B. sociocultural factors C. technological factors D. legal factors
D
The management of a company is assessing the value of all the tangible resources the company owns. Which of the following will be included in this assessment? A. a reputation for fast customer service B. a culture of proactive communication C. patents for electronic components D. the punch presses that produce parts
D
Which of the following is an external performance metric? A. return on revenue B. fixed assets turnover C. inventory turnover D. total return to shareholders
D
Which of the following stages of the strategic management process involves an evaluation of a firm's external and internal environments? A. Strategy implementation B. Strategy control C. Strategy formulation D. Strategy analysis
D
Yuki is part of a sales team. He effectively coordinates his tasks with others in the team and willingly contributes to their efforts in achieving the team's objectives. Thus, Yuki is in ________ of the Level-5 leadership pyramid. A. Level 5 B. Level 4 C. Level 3 D. Level 2
D
Zenya is the founder of an online service that allows users to rent out spare rooms in their homes. She has hired a number of extremely bright employees whose opinions are central to the company's success in the fast-paced online services industry. Which type of strategic management process would be most likely to fully utilize the strengths embodied by her team and position the company to capitalize upon autonomous actions and serendipity? A. ad-hoc planning B. strategic planning C. scenario planning D. strategy as planned emergence
D
T/F The following statement by the chief executive of SunStar movie studio is an effective strategy: "We will produce the greatest films of the 21st century."
False
Strategic commitments
Firms actions that are - costly, long-term oriented and difficult to reverse Can stem from - large, fixed-cost requirements -non-economic considerations Affects intensity of rivalry among competitors
Leadership pyramid
Level 5: Executive Level 4: Effective Leader Level 3: Competent Manager Level 2: Contributing Team Member Level 1: Highly Capable Individual
Stakeholders
Organizations, groups, and individuals - can affect or can be affected by a firm's actions - have an interest in the performance or survival of the firm
Resource stocks vs resource flows
Resource stocks are the firms current level of intangible resources. New product development, engineering expertise, innovation capability. Resource flows are the firms level of investments to maintain or build a resource
Stakeholder analysis
Step one: Who are our stakeholders? Step two: What are our stakeholder's interests and claims? Step three: What opportunities and threats do our stakeholders present? Step four: What economic, legal, ethical, and philanthropic responsibilities do we have to our stakeholders? Step five: What should we do to effectively address the stakeholder concerns?
Intended strategy
The outcome of a rational and structured top-down strategic plan
T/F Executives whose vision and decisions help their companies achieve competitive advantage can be considered strategic leaders.
True
Resources
any assets that a firm can draw on ex. cash, buildings, machinery, or intellectual property
Isolating mechanisms
barriers to imitation. Helps sustain competitive advantage ex. intellectual property Path dependence: past decisions limit current options.
Competitive industry structure
defined by number and size of competitors, firms degree of pricing power, type of product or service, height of entry barriers
Business models
details a firm's competitive tactics and initiatives. It explains how the firm intends to make money and conducts its business with buyers suppliers and partners
Macroeconomic factors
growth rates, levels of employment, interest rates, price stability, currency exchange rates
Capabilities
organizational and managerial skills necessary to orchestrate a diverse set of resources and deploy them strategically Ex. structure, routines, culture
Competitive Parity
performance of two or more firms at the same level
External factors
political, economic, sociocultural, technological, ecological, legal
Competitive Advantage
superior performance relative to other competitors in the same industry or the industry average
Core competencies
unique strengths, embedded deep within a firm, that are critical to gaining and sustaining competitive advantage allows the firm to differentiate from rivals results in creating higher value for the customer or results in products and services offered at a lower cost Expressed through structures, processes, routines
Competitive Disadvantage
underperformance relative to other competitors in the same industry or the industry average
