Strategic Management: Chapter 1 T/F
Strategic competitiveness is achieved when a firm successfully formulates and implements a value-creating strategy.
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Strategic leaders must have a strong strategic orientation while embracing change in the dynamic competitive landscape.
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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.
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Although organizational cultures vary considerably, one cannot make an objective judgment that some organizational cultures are more or less functional than others.
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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.
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An effective vision statement will specify the market to be served.
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Average returns are returns in excess of what an investor expects to earn from other investments with a similar amount of risk.
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Corporate-level strategy in a diversified organization requires a common business strategy for each component business.
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Customers, suppliers, unions, and local governments are examples of capital market stakeholders.
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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.
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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.
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Examples of incremental innovations include iPods, PDAs, WiFi, and web browser software.
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Organizational culture refers to the core values shared by the firm's top-level managers but not necessarily accepted by lower-level employees who are often transitory and not committed to the organization.
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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.
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Research shows that a greater percentage of a firm's profitability is explained by the I/O rather than the resource-based model.
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Resources are considered rare when they have no structural equivalent.
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Returns can only be measured in accounting terms such as return on assets, return on equity, or return on sales.
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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 organizational (I/O) model.
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An effective vision stretches and challenges people and can result in increased innovation as illustrated by Apple's CEO Steve Jobs who is known to think bigger and differently than most people ("putting a dent in the universe").
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An organization's willingness to tolerate or encourage unethical behavior is a reflection of its core values.
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Hourly workers on the production line of a chicken-processing plant are considered organizational stakeholders.
T
One capability characteristic of a firm with strategic flexibility is the capacity to learn.
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Organizational mission statements typically do not include statements about profitability and earning above-average returns.
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Profit pools allow strategic leaders to predict the outcomes of their decisions before taking efforts to implement them.
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Relative power is the most critical criteria for prioritizing the demands of stakeholders.
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Risk in terms of financial returns reflects an investor's uncertainty about economic gains or losses that will result from a particular investment.
T
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.
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The needs and desires of organizational stakeholders are inherently contradictory.
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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.
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The rate of growth of Internet-based applications could be affected by the possibility of Internet service providers charging users for downloading those applications.
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The rate of technology diffusion has been steadily increasing over the last two decades.
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The two primary drivers of hypercompetition are the emergence of the global economy and technology.
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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.
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A firm's mission tends to be enduring while its vision can change in light of changing environmental conditions.
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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.
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The I/O (industrial organization) model assumes that the uniqueness of a firm's resources and capabilities are its main source of above-average returns.
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The assumptions of the industrial organizational 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.
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The degree to which the firm is dependent on a stakeholder group gives that stakeholder less influence.
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The goal of strategic management is to develop a competitive advantage that is permanent.
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The rapid rate of technological diffusion has increased the competitive benefits of patents.
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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.
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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.
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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.
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