Practice questions SM

Economic value added (EVA) is an indicator of a firm accounting profit.(T/F)

False - EVA is the difference between the value of goods and the cost of materials or supplies that are used in producing them.

Business level (competitive) strategies are actions firms take to gain competitive advantages by operating in multiple markets or industries simultaneously. (T/F)

False - a GIVEN market

Business ethics is a type of governance mechanism. (T/F)

False - Business ethics is a system of practices and procedures that help build trust with the consumer NOT run by the gov.

The competition between firms within a strategic group is greater than the competition between a member of a strategic group and companies outside that strategic group.(T/F)

True

The matrix structure can produce conflicts revolving around duties, authority, and resource allocation. " (T/F)

True

The threat of direct competition tends to be high when firms are unable to differentiate their products. (T/F)

True

Unfriendly takeovers can generate anger and animosity among the target firm management that is directed toward the management of the bidding firm." (T/F)

True

When managers receive most of their compensation in the form of stock options, the interests of the senior managers and the owners of the company are likely to be aligned. (T/ F)

True

When the assets of two similar-sized firms are combined, this is known as a merger." (T/F)

True

Strategic fit refers to the need for a firm's strategy to fit the needs of all its stakeholders, not just shareholders. (T/F)

True - Fit for external and internal factors

The socio-cultural component of an organization's external environment is concerned with trends in population characteristics such as age, race, and family composition. (T/F)

True?

Circuit City used in 2008 ________ strategy when it converted its retail stores to cash.

liquidation (divestment)

A ________ is a form of nonequity alliance that exists when one firm grants another firm the right to use its intellectual property in exchange for payment.

liscensing

Nike achieved ________ by centering its manufacturing in countries where labor costs are relatively low.

location economies

Buyers tend to have ________ bargaining power when the products or services being sold to buyers are standard and not differentiated.

low

When the value of the g/s a firm sells increases as a function of the number of businesses that the firm operates in, ________ are said to exist.

synergies

An example of a company that was ________ was K-Mart as the company tried to imitate both Walmart's low-cost strategy and Target's differentiation strategy.

"stuck in the middle"

A business that has achieved ______ is when its competitors in one specific area perform equally well in that area.

Competition parity

xxx strategies are actions firms take to gain competitive advantages in a single market or industry.

Competitive

Which type of control specifies how something is to be done through policies, rules, standard operating procedures, and orders from a superior?

Behavioral control

_______ is a key aspect of running a business, which includes the ability to offer valuable goods and services while contributing to society.

CSR (corporate social responsibility)

In general, due to the intangible nature of knowledge, firms are not able to use alliances to learn from their competitors." (T/F)

False

When the product or service provided by suppliers is not highly differentiated, the bargaining power of the supplier is high. (T/F)

False

Fed Ex entered their market with a well-defined mission and objectives, making strategic choices and implementing those strategies. This is an example of a(n) _____ strategy.

Deliberate

" A firm that chooses a cost-leadership business strategy focuses on gaining advantages by reducing its costs to a level equal to all of its competitors. " (T/F)

False

" Decisions about whether or not to vertically integrate often determine whether or not a firm is operating in a single business or industry or multiple businesses or industries." (T/F)

False

" Firms should only bring market exchanges within their boundaries when the cost of vertical integration is more than the cost of opportunism." (T/F)

False

"Firms should avoid vertically integrating in those businesses where they possess valuable, rare, and costly-to-imitate resources and capabilities." (T/F)

False

"Learning-curve cost advantages are restricted only to manufacturing firms. " (T/F)

False

A firm following multi-domestic strategy views the world as a single marketplace. "(T/F)

False

A firm's supplier poses a greater threat if the supplier's industry has a large number of firms, none of which dominate the supplying industry, than if the supplier's industry is dominated by a small number of firms. (T/F)

False

Firms pursuing a global strategy orient themselves toward maximizing responsiveness to local market conditions. (T/F)

False

The top management typically implements strategy in large, multi-industry corporations." (T/F)

False

When the management of a target firm wants the firm to be acquired, this is known as a hostile takeover." (T/F)

False

"A disadvantage of being a first mover is creating customer switching costs." (T/F)

False - a disadvantage would be the risk of products being copied or improved upon by the competition

The "resource-based view" emphasizes that a firm's strategy needs to be environmentally sustainable. (T/F)

False - a firm can exploit resources to achieve sustainable competitive advantage

The primary distinction between corporate strategy and business strategy is that corporate strategy is concerned with establishing competitive advantage; business strategy with strategy implementation in individual businesses. (T/F)

False - corporate strategy is concerned with how the firm competes within a given industry or market

"Product differentiation increases the threat of substitutes by making a firm's current products appear less attractive than substitutes." (T/F)

False - decreases the threat of substitutes, makes their product more attractive

Economies of scale exist when a firm's costs rise as a function of its volume of production. (T/F)

False - economies of scale exist when a company's production increases in a way that reduces per-unit costs.

"If Dell computers were to open its own factory to manufacture the LCD televisions it sells at its online store; this would be an example of horizontal integration." (T/F)

False - horizontal integration is eg. One entity produces engines for cars, while the other entity produces engines for trucks.

"Economies of scale focus on the relationship between the cumulative volume of production and average unit costs, while the learning curve focuses on the relationship between the volume of production at a given time and average unit costs" (T/F)

False - learning curve relationship between how proficient people are at a task and the amount of experience they have.

Firms that generate less economic value than their rivals experience a competitive parity. (T/F)

False - only if firm generates exact same as rival is it competitive parity

Firms that possess and exploit costly-to-imitate, rare and valuable resources in choosing and implementing their strategies may enjoy a temporary competitive advantage. (T/F)

False - they will have sustainable competitive advantage

Between the 1980s and 1990s the emphasis of strategic analysis shifted from industry analysis to analysis of strategic alliances and other forms of collaboration. (T/F)

False - went from industry org to resource based market

The general public is not a stakeholder for a company. (T/F)

False, it is definitely a stakeholder

Which are the areas in which goals or objectives should be developed for use in the balanced scorecard approach?

Financial Customer Learning Internal Business process

Firm A generates perceived customer benefits of 200 € at a cost of 50 €, whereas Firm B generates perceived customer benefits of 200 € at a cost of 30 € . Which firm has a competitive advantage? What is the source of the firm's competitive advantage?

Firm B; less costs means more economic value thus less costs of production

Which structure simultaneously combines functional and product forms at the same level of the organization?

Matrix

When using a ________ structure, many corporate activities are outsourced.

Network

_______ is an organizational form that lies between the market and the firm, combining cooperation and competition.

Network

_______ occurs when a firm decides to utilize other firms to perform value creating activities that were previously performed in-house.

Out-sourcing

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

Path dependant durable

"Product differentiation reduces the threat of suppliers because a firm with a highly differentiated product can pass increased costs on to customers." (T/F)

True

_____ refers to the consistency of a firm's strategy with its external and internal environments.

Strategic Fit

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

Strategic management process

________ exist(s) when firms coordinate their production and pricing decisions not by directly communicating with each other but by exchanging signals with other firms about their intent to cooperate

Tacit collusion

" A firm engages in backward vertical integration when it incorporates more stages of the value chain within its boundaries and those stages bring it closer to gaining access to raw materials." (T/F)

True

" Firms with a low-cost position can reduce the threat of rivalry in an industry." (T/F)

True

"Expatriates are managers or employees who work in the destination country but come from another country."(T/F)

True

"Franchising involves the transfer of a business concept, with corresponding operational guidelines, to non-domestic parties for a fee. "(T/F)

True

_______ strategy offers competitive advantage to the firm facing pressures for global integration and local responsiveness as well as significant opportunities for leveraging valuable skills within its global network.

Trans-national

"Perhaps the most significant challenge in integrating bidding and target firms has to do with cultural differences." (T/F)

True

"Some firms have engaged in backward vertical integration strategies in order to appropriate the economic profits that would have been earned by suppliers selling to them." (T/F)

True

"The network organization is a series of independent firms or business units linked together through design, production, and marketing. " (T/F)

True

"Two opposing pressures that managers face when they compete in foreign markets are: cost reduction and adaptation to local markets." (T/F)

True

A firm's general environment consists of broad trends in the context within which the firm operates that can have an impact on the firm's strategic choices. (T/F)

True

A firm's plant and equipment, its geographic location and its access to raw materials are all examples of physical resources. (T/F)

True

A resource can still be rare even if more than one firm possesses it. (T/F)

True

As in the case of structure, staffing requirements should follow a change in strategy. " (T/F)

True

Economies of scale, absolute cost advantages, high capital requirements, and limited access to channels of distribution give incumbent firms an advantage over new entrants to an industry. (T/F)

True

For both individuals and businesses, successful strategies are characterized by clear goals, understanding their competitive environment, awareness of internal strengths and weaknesses, and effective implementation. (T/F)

True

If a company fails to take stakeholder claims into account, stakeholders may withdraw their support. (T/F)

True

In an equity alliance, cooperating firms supplement contracts with equity holdings in alliance partners. (T/F)

True

Inside directors are senior managers of the company, such as the CEO. (T/ F)

True

Interpersonal relations among managers and a firm's culture are referred to as socially complex and are costly to imitate. (T/F)

True

Many of the people in the organization who are crucial to successful strategy implementation probably have little to do with the development of the corporate and business strategy. " (T/F)

True

Marketing and sales is a support activity of the value chain.(T/F)

True

Offshoring refers to reallocation of activities to emerging and developing countries". (T/F)

True

Organizational culture can strongly affect a company's ability to shift its strategic direction." (T/F)

True

Resources that are valuable but not rare are organizational strengths. (T/F)

True

Seeking credible commitments could be a way to reduce opportunism in strategic alliances"(T/F).

True

The balanced scorecard combines financial measures that tell the results of actions already taken with operational measures on customer satisfaction, internal processes, and the corporation's innovation and improvement activities. " (T/F)

True

The code of conduct lays out the guiding principles by which employees should behave at work and interact with others. (T/ F)

True

" In general, cost advantages are not possible when competing firms produce similar products. " (T/F)

false - cost advantage is key when it comes to this scenerio

firm engages in a(n) ________ when it purchases a second firm.

acquisition

The ________ problem occurs when managers pursue strategies that are not in the interests of stockholders.

agency

The ________ represent(s) the shareholders' interests in the company.

board of directors

A firm's marketing skills and teamwork as well as its cooperation among managers are examples of ________.

capabilities

Actions that firms take to gain competitive advantage in a single market or industry are known as________ strategies.

competitive

If your customers value your products more when they have your product and another firm's product rather than when they have your product alone, the other firm is likely a producer of ________ .

complementary good

______ strategy is concerned with where the firm competes.

corporate

firm implements a ________ strategy when it operates in multiple industries or markets simultaneously.

corporate

Which of Porter's competitive strategies recommends that a company emphasize a particular buyer group or geographic market and attempts to seek a cost advantage in its targeted segment?

cost focus strategy with cost-leadership

A firm that chooses a ________ strategy focuses on gaining advantages by reducing its cost below all of its competitors.

cost leadership

________ is a business strategy whereby firms attempt to gain a competitive advantage by increasing the perceived value of their products and services relative to the perceived value of other firms' products or services.

differentiation strategy

As the volume of production in a firm increases, the average cost per unit decreases until some optimal volume of production is reached, after which the average costs of production begin to rise because of ________ .

diseconomies of scale

When P&G sold off half of its brands and consolidated others, it was following a ________ strategy.

divestment

Which barrier to entry uses cost advantages associated with large size?

economies of scale

Employees who are sent on international assignments by their firms are known as ________ .

expatriats

By being a ________ in emerging industries, firms can gain product-differentiation advantages based on perceived technological leadership, pre emption of strategically valuable assets, and buyer loyalty due to high switching costs.

first mover

When Apple, Inc. opened retail stores to sell its computers and iPods, this was an example of________ .

forward vertical integration

The primary goal of a(n) ________ strategy is the creation of standardized goods and services that will address the needs of customers worldwide.

global

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

goal strategy objectives

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 ________ competitive rivalry.

high

The strategy that would be most appropriate when the pressures to lower costs are low and the pressures for local adaptation are low is________ .

international strategy

In a ________, cooperating firms create a legally independent firm in which they invest and from which they share any profits that are created.

joint venture

________ structure is typified by the corporation's managing diverse product lines in numerous industries; it decentralizes the decision-making authority.

multi-divisional

Kraft Foods is more concerned with meeting the specific needs of local customers than with reducing manufacturing costs. Which strategy is most likely used by Kraft Foods?

multi-domestic strategy

If one of the suppliers a company purchases its components from purposefully delivered a batch of its product that was substandard but did not inform the company of this, this would be an example of________ .

opportunism

________ specifies the firm's formal reporting relationships, procedures, controls, and authority and decision-making processes.

organizational structure

Which type of control specifies what is to be accomplished by focusing on the end result of behaviors using objectives and performance targets or milestones?

output control

According to Porter's value chain, a manufacturing firm's ________ activities usually begin with inbound logistics, go through an operations process in which a product is manufactured, and continue onto outbound logistics, and finally to service.

primary

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

The main implication of the ________ is that resources and capabilities are the principal basis for firm strategy and the primary source of profitability.

resource-based view

The ________ structure is characterized by informal relationships, few rules, limited task specialization, and unsophisticated information systems.

simple

When a company tries to answer the question " What are local lifestyle trends?", it is analysing ________ component of the general environment.

social cultural

The term ________ is used to collectively refer to any constituencies in an organization's environment that are affected by its decisions and actions.

stakeholders

A(n) ________ exists whenever two or more independent organizations cooperate in the development, manufacture, or sale of products or services.

strategic alliance

A sugar company that is worried that consumers may buy artificial sweetener instead of sugar is concerned about the________.

substitute

Firms that have either recently begun operations in an industry or that threaten to begin operations in an industry soon are known as________ in Porter's five forces framework.

threat of new entrants

the number of steps in a firm's value chain that it accomplishes within its boundaries describes the firm's level of ________ .

vertical integration

The________of a company lays out some desired future state and articulates what the company would like to achieve.

vision