Ch 1-3 Strategic Management

A firm's ________ is a measure of its competitive advantages calculated using information from a firm's published profit and loss and balanced sheet statements.

Accounting performance

The products or services provided by a firm's direct competitors meet _______ customer needs in ______ ways as the product provided by the firm itself.

Approximately the same; the same

_____ are the subset of a firms resources and are defined as tangible and intangible assets that enable a firm to take full advantage of other resources it controls.

Capabilities

The Bates Company has been producing tools for over fifty years. In that time the company has been acknowledged as a producer of high quality tools as a reasonable price. Bates' competitive price can be attributed to three factors. First, the company recognized early in its development that tools made from specific blends of various types of metal were less costly to produce and had superior performance compared to traditional metals. Accordingly, Bates made investments in developing tools made for specialty metals long before other competitors and has made a series of investment over its operating history that have put it far ahead of its competitors in terms of product development. Industry analysts believe that based on these investments it would be difficult and extremely costly, if it were even possible, for rivals to catch up with Bates. Second, in recognizing the importance of certain metals, Bates was able to sign long-term contracts with suppliers of the metals that have provided Bates with a lasting cost advantage. Finally, Bates maintains its cost advantages by using a thorough budgeting and reporting system that allows it to closely control costs, and these systems are supported by a frugal company culture and financial incentives that reward employees for finding ways to save money throughout the company. The reward system Bates uses to encourage employees to find ways to reduce costs is an example a(n)

Compensation policy

In the S-C-P model, _____ refers to the strategies that firms in an industry implement.

Conduct

_______ costs exist when customers make investments in order to use a firm's particular products or services.

Customer-switching

A(n) _____ is any individual, group, or organization outside a firm that seeks to reduce the level of that firm's performance.

Environmental threat

An industry in which a large number of small or medium-sized firms operate and no small set of firms has dominant market share or creates dominant technologies is known as a(n) ________ industry.

Fragmented

If firms that do not possess valuable and rare resources or capabilities face a cost disadvantage in obtaining these resources or capabilities compared to the firms that already possess them, these resources and capabilities are termed.

Imperfectly imitable

Southwest Airlines' strong internal culture that helps ensure that employees act in ways consistent with the company's is an example of a(n)

Informal management control

Fed Ex enters their market with a well-defined mission and objectives, making strategic choices and implementing those strategies. This is an example of which type of strategy.

Intended

_______ helps a firm understand which of its resources and capabilities are likely to be sources of competitive advantages.

Internal analysis

Resources and capabilities, such as interpersonal relations among managers and a firm's culture, that may be costly to imitate because they re beyond the ability of firms to systematically manage and influence are referred to as

Socially Complex?

Which of the following statements regarding competitive parity and competitive advantage is accurate?

Some firms develop valuable, rare, and costly-to- imitate resources and capabilities in being efficient second movers, that is, in rapidly imitating and improving on the product and technological innovations of other firms.

________ are specific measurable targets a firm can use to evaluate the extent to which it is realizing its mission.

Objectives

LaserTech is a manufacturer of industrial lasers and has developed a new, patented technology that allows its customers to manufacture their products more precisely with a higher level of consistency and at a lower cost than they could previously. LaserTechs executives believe that no rivals have a similar technology and that it would be very difficult for rivals to copy this technology since the benefits of the new technology can only be realized within LaserTech's system, which includes processes that are protected by trade secrets, making it difficult for rivals to understand the relationship between the company's new technology and its competitive advantage. The inability of rivals to develop or acquire technology similar to that of LaswerTech is an illustration of

Resource Immobility

A sequential sent of analyses and choices that can increase the likelihood that a firm will choose a strategy that generates competitive advantages is the

Strategic management process

From 1926 to 1995, visionary firms earned ___________ returns compared to firms that were not visionary firms.

Substantially higher

Which of the following statements regarding firm mission is accurate?

While some firms have used their missions to develop strategies that create significant competitive advantages, firm missions can hurt a firms performance as well.

Mature industries are characterized by

a slowdown in the introduction of new products or service.

Actions firms take to gain competitive advantage in a single market or industry are known as

business level strategies

In many ways, the difference between traditional economics research and strategic management research is that the former attempts to explain why _____, while the later attempts to explain ____.

competitive advantages should not persist; when they can

If Delta Airlines were to significantly change its fare structure and flight schedule to enhance its competitive position in response to aggressive price cutting by southwest Airlines, this would be an example of

competitive dynamics

If your customers value your products more when they have your product and another firms product rather than when they have your product alone, the other firm is considered to be a

complementor

The strategic management process begins when a firm

defines its mission.

Theories of how to gain competitive advantage in an industry that emerge overtime or that have been radically reshaped once they are initially implemented are known as

emergent strategies

Green Frog is an environmentally friendly firm in the cosmetics industry. If during the strategic planning process Green Frog tried to determine the critical threats and opportunities in its competitive environment, it would be performing a(n)

external analysis

The advantages that come to firms that make important strategic and technological decisions early in the development of an industry are known as ____ advantages.

first mover

Firms in a declining industry that engage in a long, systematic phased withdrawal from the industry, extracting as much value as possible during the withdrawal period period, are following a(n) _____ strategy.

harvest

Frequent price cutting by firms in an industry, frequent introduction of new products by firms in an industry and intense advertising campaigns are indications of

high levels of direct competition.

Ratios that focus on the level of a firms financial flexibility, including its ability to obtain more debt, are known as

leverage ratios

Hickory Divine is one of the leading manufacturers in the hardwood furniture industry. Hickory Divine has many small competitors, none of which controls a significant portion of the industry. Hickory, like most of the furniture manufacturers, sells its products to a broad variety of small furniture stores throughout the country, none of which represents a large percentage of Hickory's sales. When purchasing the products it uses for manufacturing its furniture, Hickory is able to choose from many supplier since the wood it uses is an undifferentiated commodity, and Hickory is able to easily switch to any supplier that has the best price and delivery times. While growth in the hardwood furniture industry has historically been in the double digits, the industry growth rates has slowed considerably into the single digits, to approximately 5% in recent years; consumers have been purchasing less expensive furniture made of composite wood that is considerable less expensive than hardwood furniture but that looks and functions very similarly once it is painted. The threat of suppliers in the hardwood furniture can best be described as

low because there are a large number of suppliers selling an undifferentiated product.

Which type of competition is characterized by a small number of firms, homogeneous products and costly entry and exit?

oligopoly

A process is said to be ______ when events early in the evolution of a process have significant effect on subsequent events.

path dependent

In general, as long as the number of firms that possess a particular valuable resource or capability is less than the number of firms needed to generate perfect competition dynamics in an industry, that resource or capability can be considered _____ and a potential source of competitive advantage.

rare

When activity in an economy is relatively low for a short period of time, the economy is said to be in a

recession.

The VRIO assumption that some of the resource and capability differences among firms may be long lasting because it may be very costly for firms without certain resources and capabilities to develop or acquire them is known as

resource immobility.

To the extent that a firms resources and capabilities enhance a firm's competitive position by enabling a firm to exploit its opportunities or neutralize its threats, these resources and capabilities are valuable and are known as

strengths.

The mission statements of visionary firms

suggest that profit maximizing, while an important corporate objective, is not their primary reason for existence.

Any actions a firm takes that have the effect of reducing the level of rivalry in an industry that also do not require firms in an industry to directly communicate or negotiate with each other can be thought of as

tacit cooperation \

The specific actions a firm takes to implement its strategies are known as

tactics.

A competitive advantage that lasts a very short period of time is known as a _______ competitive advantage.

temporary

Buyers tend to have less power when

the supplies they purchase are an insignificant portion of the costs of their final products.

High quality objectives are those that are

tightly connected to elements of a firm's mission and are relatively easy to measure and track overtime.

In general, first-mover advantages can arise from any of these sources except.

using an imitative strategy to introduce improved versions of competitor's new products

LaserTech is a manufacturer of industrial lasers and has developed a new, patented technology that allows its customers to manufacture their products more precisely with a higher level of consistency and at a lower cost than they could previously. LaserTech's executives believe that no rivals have a similar technology and that it would be very difficult for rivals to copy this technology since the benefits of the new technology can only be realized within LaserTech's system, which includes processes that are protected by trade secrets, making it difficult for rivals to understand the relationship between the company's new technology and its competitive advantage. LaserTech's new technology appears to be

valuable, rare, and costly to imitate.