Strategic Management Chapter 1 - Chapter 3

Myspace, the social networking site, was a leader and innovator for modern social networking. However, not long after Myspace's peak, a new social networking site, Facebook, began quickly gaining ground. Myspace quickly became obsolete because of Facebook's superior functionality, design, and features. Which of the following was Myspace lacking that resulted in the company losing its competitive advantage?

Costly-to-imitate capabilities because it became inexpensive to start a social networking site

Through research and development (R&D), a cable company has found a way to use its existing network lines to serve customers with a new product offering—home security systems. The company is offering the service with a lower monthly fee than most other security companies. However, the sales force didn't see a lot of interest among its customers who had an existing security system from a competitor until they ran a promotion for reduced prices on equipment and free installation. Which of the competitive forces is at play?

Customer switching costs

Which of the following is NOT a concern of a competitor analysis?

Data on what the competitor's available funds are for innovation, as shown by its balance sheet

According to Hitt et al., which of the following would be considered an important step in the A-S-P strategic management process?

Defining the company's corporate mission and major corporate goals

What is the term that is concerned with a population's size, age structure, geographic distribution, ethnic mix, and income distribution?

Demographic segment

Core competencies are capabilities that serve as a source of competitive advantage for a firm against its rivals. Which of these is the strongest core competency that Equal Exchange could leverage to gain a competitive edge?

Fair trade focus

Below are several statements from companies. Which of these is a vision statement?

Habitat for Humanity: A world where everyone has a decent place to live.

Christopher is the CEO of a company. Recently, he scheduled a meeting with a challenging objective—to discuss with a team of his employees a project that is failing. It is costing a lot of investment in time and money and does not appear to have any return on investment in sight. Which of the following approaches would demonstrate successful strategic leadership?

He should start by thanking the team for their hard work on the project so far but explain the company is no longer pursuing it. He should clearly articulate his vision for the future of the company and the team and set a meeting to debrief on the project.

Equal Exchange has a variety of products in a market that is extremely saturated with big brands and organizations that control a majority of the market share. How would you describe Equal Exchange's competitive landscape?

Hypercompetitive

A company is debating whether to enter a new industry. The first order of business is to conduct an analysis of the five forces. Why is this a crucial first step in the decision-making process of entering a new market or industry?

If the barrier for entry is low, and suppliers and buyers have strong bargaining positions, the venture will most likely fail.

TaylorTech, a high-quality metals finishing company, is struggling with its margins. TaylorTech has raw materials delivered to its foundry in Pittsburgh, where the company melts the metals into castings. The firm then polishes them as a value-added process before selling the custom castings to customers. Its unique process is rare in the United States, is very secretive, and results in a more efficient cast that commands a premium price. Unfortunately, the casting process is becoming more expensive due to increased wage pressure from the workers specializing in casting. With these issues, TaylorTech has to make a decision. Which of the following is the most viable option for TaylorTech to increase its margins?

Outsource the casting process

Procter & Gamble (P&G) is a consumer products company that is consistently implementing scanning systems of the environment. They want to identify early signals of environmental changes and trends. P&G's competitors also frequently utilize scanning systems but are not as competitive as P&G. Which of the following could be the reason for P&G's competitiveness?

P&G's ability to take action on ambiguous, incomplete, or unconnected data

Many large corporations have a presence in Washington D.C. in the form of lobbyists. These individuals attempt to have their voice, and the voice of the company they represent, heard. If there is a potential advantage to be had due to new legislation or implementation/abolition of laws and rules, it is the lobbyists' duty to ensure it is in their company's favor. Which of the following segments is this process referring to?

Political/legal segment

What are the possible repercussions of a company that performs unethically in order to receive competitive intelligence to gain an advantage?

Possible jail time or fines, but not always

The term "white space" has become a very popular term over the last few years. This term describes a space in the competitive landscape that competitors are not occupying. Pricing, quality, and distribution channels are examples of what may be plotted along strategic dimensions to determine points of parity and points of difference. As a company, do you want to be in the "white space"?

Possibly, as the "white space" could be a place that is competitive but has been neglected or could also be a space that is not competitive or profitable

The main focus behind why Equal Exchange is in business is to help out the small farmers and be fair to their needs. This is exemplified by the slogan: "Small Farmers, Big Change." Who is Equal Exchange's main focus and target group to satisfy?

Product market stakeholders

Potential competitors may enter an industry and begin to take market share from existing companies. Which of the following is one of the largest challenges a new entrant needs to overcome to be successful when entering an industry?

Production costs are high and require high volumes to achieve profitability.

Product market stakeholders often have very different priorities, but each can exert power and influence over a company. Which of the following correctly describes a way that a product market stakeholder exerted its power to the potential detriment of a company?

Protesters swarmed and picketed Hobby Lobby after it won a U.S. Supreme Court decision allowing it an exemption from covering employees' contraceptives on religious grounds.

What is a set of competitive firms emphasizing similar strategic dimensions and using a similar strategy?

Strategic group

What aspect of business will need to be evaluated for Equal Exchange to determine how it can increase its strategic competiveness and earn above average returns?

Strategic management

Equal Exchange is known for its commitment to fair trade standards. The firm oftentimes exceeds the traditional standards of suppliers to ensure it adheres to its standards. Equal Exchange successfully achieves this goal by utilizing its core competencies. What aspect of the strategic management process results in this success?

Strategy

Which of the following could be a definition of strategic competitiveness?

The ability of a firm to outperform its rivals by forming and executing a strategy that creates value for its stakeholders

What is the most likely outcome for a company if the executives never analyze a competitor's possible reaction to competitive actions the firm takes?

The company will most likely fail because the competitor might neutralize its competitive advantage.

Which of the following represents a core competency for Alibaba as presented in the opening case in the chapter?

The company's diversification of web services tailored to the Chinese market directly, which has resulted in transactions that account for more than 2 percent of China's GDP

A multidivisional corporation that manufactures large steel tanks is considering starting a new business unit to serve the transportation industry. The company is utilizing the I/O model to develop its strategy. Which of the following decisions is consistent with this model?

The company's research into a new railcar guideline that requires all tanker cars to be replaced or retrofitted over the next five years leads its leaders to start a business that manufactures tanker cars to capitalize on the new demand.

Which of the following might be a definition for a value-generating activity?

The core competencies that a company holds that make it possible for it to serve customers in a different way from its competitors

Michael is the CEO of a manufacturer with plants in three countries. He currently has a product line that is manufactured only in the company's U.S. plant. That product has experienced a steady increase in its export sales to Europe over the last three years. The international sales director is recommending that the company expand manufacturing capabilities at the European plant to include this product line. Michael and his management team must consider whether to pursue this strategy. This is:

a decision that would benefit from using the entire strategic management pr

Value is measured by:

a product's performance characteristics and by its attributes for which customers are willing to pay.

Which of the following would be deemed unethical when developing competitor intelligence?

- Analyzing competitors' financial reports - Attending trade shows solely to obtain knowledge of competitors' new products - Obtaining court records in an attempt to find statements that may not be found anywhere else

Every organization has groups of people that it must establish and manage relationships with to be successful. These groups include:

- customers. - shareholders and investors. - employees.

A software company that is seeking a sustained competitive advantage will constantly be facing obsolescence because of environmental change. To generate a sustained competitive advantage, this company must:

be continually building its technological capabilities to develop new skills as technology advances so that it can offer constant upgrades to meet customers' needs.

What is a competitor analysis?

An analysis of companies with which a firm competes directly

Which of the following describes the relationship between Apple, the leading cell phone manufacturer and applications provider, and King, the developers behind the Candy Crush Saga app?

Apple and King are complementors.

Equal Exchange has a unique way of managing and making company decisions. Each employee has Class A voting stock and a vote at the table. Each employee has only one vote, from the CEO to a new employee. Based on this arrangement, what aspect of its business model does Equal Exchange prioritize?

Corporate Governance

For a strategic action to be successful, Equal Exchange will need to determine which individuals it will ask to participate in the strategic management process so that the process will align with the company's mission and vision. For a successful process, Equal Exchange will need to identify its:

strategic leaders.

Identifying internal strengths and weaknesses is important because:

strategies are more successful when they are aligned with a company's resources, capabilities, and core competencies.

As an industry environment evolves over time, the:

strength of the competitive forces in the industry change.

If a start-up U.S.-based automobile parts supplier were to apply a global mind-set to its internal analysis, it would:

study all of its internal resources with an understanding of which capabilities offer value to meet the needs of U.S., Japanese, European, and Korean automakers

Hypercompetition describes a competitive landscape in which:

the industry is constantly changing with global competition and innovative competitors.

The five competitive forces include all of the following forces that shape competition within an industry EXCEPT:

the rate of innovation and change

In the resource-based model of above-average returns, differences in company performance can be attributed to the:

unique capabilities and resources of the company.

The strategic management process is the:

way that businesses formulate initiatives to create superior value for customers, then implement those initiatives to out-perform competitors

A mission statement can describe:

what the company does in terms of its customers and their needs and what core competencies it utilizes to meet those needs.

Suppliers are most powerful when a company:

would have switching costs if it went to a different supplier because the current supplier's products are unique.

A company has identified a core competency in providing telecommunications services for mid-sized businesses through a combination of simple technology and software, excellent customer service, and low-cost hardware. As competitors gain ground in competing for mid-sized companies, this core competency might become a core rigidity if the:

company doesn't keep up with advances in technology and customers begin to expect greater value from the technology.

General Electric (GE), the multinational conglomerate, is researching rivals in the appliance industry by analyzing the financials, current product offerings, and strategies of competitors in order to gain insight as to how to gain a competitive advantage. Which of the following is GE performing?

competitor analysis

Organizational culture is the:

complex set of ideologies, symbols, and core values that are shared throughout a firm that influence how the firm conducts business.

A company is analyzing its value chain to discover its value-creating activities. While formulating its strategy, the firm will:

consider the operational functions and support functions to determine which activities contribute the greatest value in the product or service being sold to customers.

A CEO is in an argument with his board of directors over the direction of the software company he is leading. The CEO wants to branch out and take advantage of its competencies and capabilities to pursue opportunities enabled by new technology that are forecasted to be very profitable. However, these activities are not what the company is used to, and it would have to develop hardware alongside its specialty in software. The board is arguing that the company is a software company and should remain a software company. Which of the following concepts must the CEO overcome?

core rigidity

A sporting goods company developed an innovative material for the manufacture of baseball bats. For many years, the material and its process for manufacturing served as a rare and valuable capability, distinguishing it from competitors. Unfortunately, many of the baseball leagues have been changing their regulations to outlaw bats made of this material because they constitute an unfair advantage for players. As part of its internal analysis, its leaders might:

determine if the company's core competency is in research and development of different materials or only in working with this material specifically

Capabilities develop into core competencies that can serve as the source of competitive advantage when:

employees, or human capital, integrate them and deploy them to deliver value to customers.

An industrial fabrication firm has purchased a facility capable of housing large-scale projects—as long as 120 feet. The firm could develop this tangible resource into a capability by:

employing engineers who can design large projects and welders who have expertise in these projects.

In the resource-based model of above-average returns, a core competency is something that:

gives a company an edge over the competition, something that the company possesses that its competitors do not have, and something that is too difficult or costly for competitors to copy or produce an alternative.

A nonprofit organization is focused on providing mental health services to the homeless in its geographic area. It serves people by ensuring they receive the public assistance they are eligible for and then connects them with care providers that have expertise working with transient patients. The company's primary expenses are the salary and benefits for its staff of social workers, and it receives government funding to cover those. However, the organization does not have enough people to fill its open positions and has a waiting list of homeless people in need of case workers. Which of the following represents a weakness for the nonprofit organization?

human resources

The _____ environment is the set of factors that directly influences a firm and its competitive actions and responses within the industry.

industry

A capability can be considered costly to imitate when:

it is developed because of unique historical conditions.

A resource or capability can be classified as a core competency that can be a source for a sustainable competitive advantage if:

it is different and better than the way a competitor is executing the same capability.

An attorney has grown his law firm, gaining new clients in two diverse areas—estate law and immigration law. He's not sure which specialty will become his focus in the long run. At the same time, he believes he has enough work to support hiring a paralegal. However, he is having trouble hiring a paralegal who can manage both types of clients. He was able to find a freelance paralegal referral service that connects attorneys to paralegals who have experience in a variety of specialties. He might consider outsourcing through the referral service because:

it provides him with the flexibility to gain capabilities to serve both types of clients without making a long-term investment.

A firm should study its internal organization as part of the strategic management process because:

it provides the insights the firm requires to match what the firm can do with what the firm might do when formulating strategies.

An internal analysis is important because:

not all strategies will work for all firms; successful strategies must be aligned with a company's strengths.

A telecommunications company is impacted by government regulations of the wireless spectrum, cell tower locations, and Internet accessibility. The company decides to hire a lobbying firm to represent its interests with the U.S. government, specifically the FCC, FTC, and Congress. This is an example of a company managing _____ forces in the macroenvironment.

political/legal

Strategic leaders:

promote exploratory and exploitative learning, as well as innovation

Logan is an entrepreneur and president of his own company that makes a new software product that manages benefits administration for large multinational corporations. His start-up company grew quickly to a team of about 25. A new federal law recently passed by Congress will cause small-business owners to invest in software like his to manage employee healthcare. Logan announces that the company will be investing in training for employees to better understand small-business owners and research and development (R&D) to create a small-business version of the software. This is an example of:

promoting exploratory and exploitative learning, as well as innovation as a strategic leader.

Outsourcing is the:

purchase of a value-creating activity or support function activity from an external supplier.

The industrial organization (I/O) model of above-average returns:

puts emphasis on the external environment, which plays a role in determining a company's ability to achieve above-average returns.

A company owns a patent, with six more years of protection, on a prescription medication that is used by people around the world. This resource is:

rare and valuable.

A core rigidity arises when a:

resource becomes an obstacle, generating inertia and stifling innovation, often because of conditions in the external environment.

Capital market stakeholders are most satisfied when a company's:

returns align with the amount of risk they incurred by investing in a company or lending the company money.

An intangible resource is one that is:

rooted deeply in the company history, is gathered over time, and is difficult for competitors to analyze or imitate.

A vision statement differs from a mission statement in that it:

speaks in broad terms of what the company ultimately would like to achieve.

Cisco is a technology company looking to diversify its portfolio and compete in a new market. After conducting a scan and forecast, the consultants hired by Cisco provide several options. In which of the following economic segments should Cisco seek to compete?

A relatively stable economy with strong growth potential

Which of the following could be a part of the analysis stage of the strategic management process?

A review of a company's competitive landscape, identifying competitors, naming their differentiations, and detailing a profile of those competitors' customers

Which of the following describes a company that has delivered above-average returns to its investors?

A tool manufacturer that announced it will increase its dividend payment—the highest dividend amongst all of its industry competitors—for the upcoming quarter due to market share gains in overseas markets

A capability is nonsubstitutable when:

A capability is nonsubstitutable when:

Which of the following capabilities meets the criteria for being a core competency, in that it is rare, valuable, costly to imitate, and nonsubstitutable?

A company history and brand

Which of the following represents a product market stakeholder?

A local pipefitters union dealing with a plumbing contractor

Which of the following would be considered an example of a tangible resource?

A network of distribution centers in strategic locations around the world

An industrial tool manufacturer relies on a particular distributor network. This distributor network has the largest online outlet and store network, and its product lines are aimed at construction workers. The distributor network is seeking a manufacturer to provide it with private-label products, as it has decided to offer only its own product line in this category of industrial tools. Now, the industrial tool company must decide whether to agree to this proposition or lose this network as a customer. This is an example of which of the competitive forces at play in this industry?

Bargaining power of buyers

In the toy industry, Mattel is one of the world leaders, especially with their line of Barbie dolls. However, it has faced competition from MGA Entertainment, who has produced Bratz dolls since the 1990s. Which of the following statements is true about the strategic group in which these companies compete?

By competing in the same strategic group, the two companies are dealing with customers who view their products as direct substitutes for each other.

The executive leadership team of a large corporation is analyzing a report. The report's contents have information that can be used to better understand and anticipate a competitor's objectives, strategies, assumptions, and capabilities. Which of the following is the term for the report being analyzed?

Competitor intelligence

You are hired as a strategic analyst for a Fortune 500 company. Your first task is to develop a competitive intelligence report to find key insights on the rivals' latest actions, current capabilities, and potential future actions. Being new to this type of report and the ethical protocols, what should be your first action?

Contact the Strategy and Competitive Intelligence Professionals association

Apple, a leader in mobile technology products, wasn't always focused on mobile technology. In 2007, the company changed its name from Apple Computers to Apple Inc. This change was indicative of a shift in the industry. Apple began introducing iPods, iPhones, iPads, iTunes, and the App Store. Apple recognized its core competencies in hardware design and software engineering should serve as the foundation of its future strategy. Which of the following tools did Apple use to determine its competitive advantage?

Internal analysis

A hospital system operates 22 physicians' offices, five skilled nursing facilities, and two hospitals. The system employs more than 500 people directly and is affiliated with more than 100 additional physicians. The system offers a wide breadth of medical services, including all of the major specialties. The system was recently recognized as the top cardiac hospital in the state. Which of the following represents the company's capabilities?

Its complete list of medical services

Companies must be aware of technological advances within their industry and make strategic management decisions that take into account perpetual innovation and disruptive technologies. Which of the following is an example of a company that did not respond strategically to technological changes?

Kodak revolutionized the automatic snapshot camera more than 100 years ago, making photography accessible to everyone. When innovators brought digital cameras to the marketplace, Kodak focused on making it easy for people to print their photos using this technology.

Marquis is the international operations manager for an athletic clothing line. As part of his responsibilities, he regularly tours the factories of the company's suppliers. He recently took a tour of one of the most efficient plants that delivers low-cost clothing. This gives his company a greater profit margin. However, on the tour, he noticed an 8-year-old child operating one of the machines. Which of the following best describes how Marquis should report back to his CEO about the plant tour?

Marquis should bring this issue to the attention of the CEO and other top leadership immediately. He has a personal, ethical objection to child labor and believes that it is also inconsistent with the company's core values.

In an external environmental analysis, there are two important elements that need to be identified. What are those two elements?

Opportunities and threats

Equal Exchange's leaders are careful about the employees they choose to hire because of the power individuals can hold. Each employee has a Class A voting stock. Leaders ensure that the employee candidates hold the same values and recognize the importance of Equal Exchange's mission. After a year of probation, the company leaders vote on the new employee based on how he or she fits into the:

Organizational Culture

Which element of strategic planning represents the greatest challenge for Equal Exchange?

Organizational culture

Which of the following is an example of a disruptive technology?

The introduction of Global Positioning System (GPS) technology, which is used in standalone and handheld navigation tools, smartphone apps, and in-car navigation systems

Which of the following represents a criticism of the industrial organization (I/O) model of above-average returns?

The model assumes that most firms operating in an industry have similar valuable resources that are mobile across companies, which is not necessarily true.

Which of the following is an example of the mobility of strategies and resources across firms in the mobile network industry, one of the assumptions of the industrial organization (I/O) model of above-average returns?

The spread of 4G technology between Verizon, AT&T, and Sprint makes the high-speed network available to nearly all mobile phone customers.

The country's largest landscape company is the result of a merger between two multistate firms, Brickman Group and ValleyCrest. Now called BrightView, the $2 billion firm was created in 2015. The company is operating in a fragmented industry dominated by small, local businesses. Which of the following identifies a relevant competitive force and a way the company might leverage it?

Threat of New Entrants: BrightView may be able to lessen the impact of this force in a low-barrier industry through economies of scale, specifically discounts on bulk purchases of raw material inputs.

In 2011, Apple and Samsung were in a legal battle over patenting. Apple and Samsung mutually accused each other of infringing on intellectual property, and each took action legally. Why would both parties want to spend the time and resources to reclaim their intellectual property?

To neutralize a threat that could hinder strategic competitiveness

BlackBerry, a one-time leader in secure cell phones, has lost its edge. Without significant upgrades or innovation, the company quickly lost market share to iPhones and Android devices. The company attempted to imitate these advances with the Blackberry Storm product, which flopped. Blackberry was criticized as trying to leverage capabilities beyond its core competencies. Which of the following tools should Blackberry use to regain a scope of their core competencies and determine potential sources of competitive advantage?

Value chain analysis

Equal Exchange's ambition is "... to change the way food is grown, bought, and sold around the world." What can this quote best be described as?

Vision

Strategic groups exist because:

companies within the same industry may position themselves differently regarding distribution channels, market segments, and other differentiators, and affects their strategies.

A local community arts nonprofit organization is seeking to expand its programming and is considering putting just one new program in place this year. It may choose painting workshops, youth summer camps, a musical performing arts series, or classes for seniors. The organization's most committed volunteer is a kindergarten art teacher who has offered to be the leader of whichever new program the organization implements. If the nonprofit is utilizing the resource-based model of above-average returns, in which of the following ways should it expand its programming?

Youth summer camps because the organization should use the knowledge of its passionate volunteer to its greatest advantage

Firms use the strategic management process to:

achieve strategic competitiveness and earn above-average returns.

Car manufacturers have a large lead time on new products. If an idea for a feature on a vehicle is developed, it will likely be two years before consumers know about it and can decide if they want to buy it. Consumer trends are sometimes short lived as they are always evolving. Which external environmental analysis element is a primary focus of car manufacturers?

assessing

Capabilities are the:

combination of tangible and intangible resources to complete the organizational tasks required to produce, distribute, and service the goods or services for customers.