Chapter 1 (T or F)

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.

False

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.

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.

False

Research shows that a greater percentage of a firm's profitability is explained by the I/O rather than the resource-based model.

False

Resources are considered rare when they have no structural equivalent.

False

Returns can only be measured in accounting terms such as return on assets, return on equity, or return on sales.

False

The rapid rate of technological diffusion has increased the competitive benefits of patents.

False

Strategic competitiveness is achieved when a firm successfully formulates and implements a value-creating strategy.

True

According to the Chapter 1 Opening Case, Barnes & Noble and Amazon were more competitive than Borders and adjusted more effectively to changes in the retail book market.

True

According to the Chapter 1 Opening Case, Barnes & Noble and Amazon were more effective than Borders in using the strategic management process as the foundation for the commitments, decisions, and actions they took to pursue strategic competitiveness and above-average returns.

True

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").

True

An organization's willingness to tolerate or encourage unethical behavior is a reflection of its core values

True

Apple (Chapter 1 Strategic Focus) is a source of hypercompetition through its development and introduction of disruptive technologies such as the iPod.

True

Hourly workers on the production line of a chicken-processing plant are considered organiza-tional stakeholders.

True

One capability characteristic of a firm with strategic flexibility is the capacity to learn.

True

Organizational mission statements typically do not include statements about profitability and earning above-average returns.

True

Profit pools allow strategic leaders to predict the outcomes of their decisions before taking ef-forts to implement them.

True

Relative power is the most critical criteria for prioritizing the demands of stakeholders.

True

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

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.

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.

True

The rate of technology diffusion has been steadily increasing over the last two decades.

True

The two primary drivers of hypercompetition are the emergence of the global economy and technology.

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 pa-tents.

True

An effective vision statement will specify the market to be served.

False

Average returns are returns in excess of what an investor expects to earn from other investments with a similar amount of risk.

False

The goal of strategic management is to develop a competitive advantage that is permanent.

False

A firm's mission tends to be enduring while its vision can change in light of changing environ-mental conditions."

False

According to the Chapter 1 Strategic Focus, Huawei was successful in the US market primarily because of its ability to build Guanxi with the US government.

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.

False

Although organizational cultures vary considerably, one cannot make an objective judgment that some organizational cultures are more or less functional than others.

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.

False

Corporate-level strategy in a diversified organization requires a common business strategy for each component business.

False

Customers, suppliers, unions, and local governments are examples of capital market stakehold-ers.

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.

False

Examples of incremental innovations include iPods, PDAs, WiFi, and web browser software.

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 organizational (I/O) model

False

The Chapter 1 Opening Case illustrates that while Borders was able to achieve strategic competi-tiveness, it did not achieve above-average returns because of conditions beyond the control of of its top management.

False

The Chapter 1 Opening Case shows that Borders was unsuccessful in competing in Internet book sales, but not against brick-and-mortar stores.

False

The Chapter 1 Strategic Focus shows that while Guanxi is an important element of doing busi-ness in China, it is unimportant in doing business in the United States as Huawei discovered when it entered US markets.

False

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.

False

The assumptions of the industrial organizational model and the resource-based model are con-tradictory. Therefore, organizational strategists must choose one or the other model as the basis for developing a strategic plan.

False

The degree to which the firm is dependent on a stakeholder group gives that stakeholder less influence.

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.

False

The uniqueness of a firm's resources and capabilities is the basis for a firm's strategy and de-termines its ability to earn above-average returns under the I/O view.

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.

False

Strategic leaders must have a strong strategic orientation while embracing change in the dynamic competitive landscape.

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.

True

The needs and desires of organizational stakeholders are inherently contradictory.

True

The new CEO of Opacity Enterprises is determined to make the long-established firm strategi-cally 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.

True