Chapter 1: Questions
B
A company wants to determine how industry effects have affected its profitability. Which of the following elements should the company focus on? A. the barriers to entry and exit in other industries B. the barriers to entry and exit within the industry C. the brand strategy the managers adopt to establish the firm in the industry D. the strategic position the firm pursues within the industry E. the pricing method opted by the managers to face competition within the industry
A
A firm always has a competitive advantage when its return on invested capital is A. above the industry average B. 2 percent or lower in a declining industry C. about the same as its closest competitor D. declining steadily over two or more years E. below the industry average
B
A firm is said to gain a competitive advantage when it can A. exceed its own previous performances B. provide products similar to its competitors, but at lower prices C. perform at the same level as that of its competitors D. minimize the difference between value creation and cost. E. provide products similar to its competitors, but at higher prices
A
A firm that achieves superior performance relative to other firms in the same industry or the industry average has a(n) A. competitive advantage B. absolute advantage C. balanced scorecard D. power position E. A and B
C
A strategic perspective in an organization should be emphasized A. at the top of the organization. B. at the middle of the organization. C. throughout the organization. D. from the bottom up.
D
FindFor Inc. is an e-commerce retail firm that sells a variety of merchandise online. Through services like cash on delivery, easy return, and online tracking, the company has created more customer value than its competitors (brick and-mortar businesses) at the same price. Also, the company's costs are substantially low due to minimal investment in operation and administration. In this scenario, FindFor Inc. has most likely been able to provide superior value and cost control through A. strategic parity B. strategic profiling C. strategic liquidation D. strategic positioning E. C and D
C
For a firm that operates in an industry where competition is high, which of the following practices will result in inferior performance? A. choosing a distinct but different strategic position in the industry B. working toward increasing the difference between value creation and cost C. trying to be everything to everybody by combining different competitive strategies D. focusing on creating value for customers rather than destroying rivals
C
If SA Pharmaceuticals obtains an 18 percent return on invested capital, which of the following will help determine if it has a competitive advantage over other pharmaceutical companies? A. comparing the return to the return on invested capital obtained by other firms in other industries B. assessing the value based on the shareholders' expectations of return on their capital C. comparing the return to the return on invested capital obtained by other firms in the same industry D. comparing the value to the history of the firm's return of investment over a number of years
E
If a company wants to gain a competitive advantage in a highly competitive industry, it should ideally A. execute an integrated cost-leadership and differentiation position B. copy the strategies of other firms through competitive benchmarking C. provide goods or services similar to its competitors at higher prices D. stake out a unique position in another industry E. stake out a unique position within the industry
C
In _____, a firm frames a guiding policy to address the competitive challenge. A. strategy control B. strategy implementation C. strategy formulation D. strategy analysis E. C and D
B
Industry effects describe the underlying _____ structure of the industry A. demographic B. economic C. psychographic D. ethnographic
D
Jake's Taxi Service is a new entrant to the taxi industry. It has achieved success by staking out a unique position in the industry. How did Jake's Taxi Service mostly likely achieve this position? A. providing long-distance cab fares at a higher rate than competitors; servicing a larger area than competitors B. providing long-distance cab fares at a lower rate than competitors; servicing a smaller area than competitors C. providing long-distance cab fares at a higher rate than competitors; servicing the same area as competitors D. providing long-distance cab fares at a lower rate than competitors; servicing the same area as competitors
D
Patterson Foods Inc. was the first company to start selling energy bars in its country—a product that gained popularity among diverse groups. Soon, other companies started to sell their own brands of energy bars, thereby giving Patterson Foods ample competition. In response, Patterson Foods decided to limit its variety of energy bars to only four. However, it ensured that these four varieties were low in calories and low in cost. With this innovation, Patterson Foods Inc. consistently outperformed its competitors for ten years. In this scenario, Patterson Foods Inc. maintained a _____ through its innovative strategy. A. balanced scorecard B. fiduciary responsibility C. consistent power position D. sustainable competitive advantage E. sustainable absolute advantage
C
Pink Couture Inc. and Pink Blush Inc. are two companies in the apparel industry. While Pink Couture Inc. focuses on providing unique product features and superior customer service, Pink Blush Inc. focuses on low prices and minimal customer service. Both companies have been able to gain a competitive advantage. This is most likely because the companies have A. executed integrated strategies B. entered into a cartel arrangement C. pursued distinct strategic positions D. engaged in direct imitation and substitution E. B and C
B
Rapida Inc. and Click Inc. are two companies that have been manufacturing typewriters for almost 30 years. Due to the reduced demand for typewriters today, both companies' average return on invested capital is approximately -5 percent. The current industry average is 2 percent. In this scenario, Rapida Inc. and Click Inc. most likely have A. competitive advantage over other firms in their industry B. competitive parity with each other C. strategic alliance with each other D. economies of scope instead of economies of scale
C
Silver Screen Cinemas Inc. and Digi Now Inc. are two companies that own and run movie theaters in malls and other commercial areas. While Silver Screen Cinemas Inc. pursues a cost-leadership strategy, Digi Now Inc. adopts a differentiation strategy. Which of the following statements is most likely true of this scenario? A. Silver Screen Cinemas will charge a premium price for its customers, while Digi Now will implement everyday low pricing B. Digi Now will keep its customer service at an acceptable level, while Silver Screen Cinemas will provide superior customer service C. Digi Now and Silver Screen Cinemas will not be direct competitors to each other, and their customer segments will overlap very little D. Silver Screen Cinemas and Digi Now will use a similar approach to create value for customers by attempting to offer everything to everybody
D
The Scoop, Ltd. is a magazine publishing company whose average return on invested capital is approximately 5 percent. Because magazine publishing is a declining industry, the industry average has been negative (-5 percent) for the last few years. In this scenario, The Scoop Ltd. has a A. competitive disadvantage B. absolute advantage C. balanced scorecard D. competitive advantage E. power position
B
The average cost of production for a bottle of vitamin water in the industry is $4 while its average price is $7. StoreAll Inc. manufactures the same product for $3 per bottle and sells it for $7 per bottle. Which of the following statements is most likely true of StoreAll Inc. in this scenario? A. It has a competitive disadvantage in the industry B. It has a competitive advantage in the industry C. It has competitive parity with other firms in the industry D. It has formed a strategic alliance with other firms in the industry E. It has the same strategies with all the other firms in the industry
B
Through _____, a firm puts its guiding policy into practice by employing a set of coherent actions. A. strategy control B. strategy implementation C. strategy formulation D. strategy analysis E. strategy modification
D
Underperformance relative to other firms in the same industry or the industry average results in a(n) _____ for a firm. A. sustainable competitive advantage B. sustainable absolute advantage C. increased power distance D. competitive disadvantage E. competitive advantage
False
When you company purchase back your common stocks, other things equal, your EPS decreases True/False
True
When your company acquires additional loans, other things equal, your credit rating decreases immediately True/False
False
When your company issues more shares of stock, other things equal, your EPS increases. True/False
False
When your company issues more shares of stock, other things equal, your ROE increases True/False
A
Which of the following factors most effectively contributed to the success of Threadless in comparison to other companies with T-shirt designs, including American Eagle, Old Navy, and Urban Outfitters? A. its reliance on crowdsourcing B. its point-to-point business model C. its hub-and-spoke system D. its shorter distances
C
Which of the following forces tends to be more important in determining a firm's performance? A. the underlying economic structure B. the entry barriers in the industry C. the actions of managers within the firm D. the number and size of other firms in the industry E. the actions of the shareholders of the firm
C
Which of the following is an implication of all firms in an industry pursuing a low-cost position through application of competitive benchmarking? A. No firm would face direct competition from others in the industry; hence, profit potential would be high B. Each firm would be catering to a different customer segment C. The firms would eventually have no resources to invest in product and process improvements D. Each firm would be in a better position to gain a competitive advantage
C
Which of the following scenarios illustrates a firm that has a sustainable competitive advantage? A. Jamison Inc. generated revenue of $300,000 this financial year, which is close to the industrial revenue average of $320,000 B. CR Inc. almost doubled its sales to 9,000 units this year compared to its previous year's sales of 5,000 units, though the industry average is 10,000 units C. Wang Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years D. Peak Inc. was able to outperform its competitors with its new production system, in terms of revenue, for a brief period of four months E. None of them
A
Which of the following stages of the strategic management process involves an evaluation of a firm's external and internal environments? A. strategy analysis B. strategy implementation C. strategy formulation D. strategy control E. A and B
D
Which of the following statements about strategy is not true? A. Grandiose statements of desire, on their own, are not strategy B. Strategy is as much about deciding what not to do, as it is about deciding what to do C. Strategy is about creating superior value, while containing the cost to create it D. Operational effectiveness and competitive benchmarking should be treated as strategy
B
Which of the following statements accurately describes firm effects? A. They attribute firm performance to the actions managers take within a chosen industry B. They attribute firm performance to the industry in which the firm competes C. They refer to the value-creation potential of a large, diversified enterprise D. They refer to the external circumstances surrounding all the firms in an industry
E
Which of the following statements should ideally reflect a firm's strategy for competitive advantage? A. Our strategy is to win at any cost B. We will be number one in the industry C. Our aim is to create superior supplier value while controlling costs D. We want to be the market leader by replicating our competitor's strategy E. Our aim is to create superior customer value while controlling costs
B
Which of the following strategies does Twitter need to implement to increase its competitive advantage? A. charge no fee to individual users B. increase its user base C. deliver ads in real time D. allow core users to stay always connected E. B and C
C
While working to prioritize and fulfill their responsibilities, members of a firm's management team should A. represent their own interests. B. represent the interests of the creditors. C. represent the interests of the shareholders D. direct all actions of the CEO. E. emphasize the importance of short-term goals.
B
_____ is best described as a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors. A. Behavior modification B. Strategy C. Credo D. Competency management E. Policy
C
_____ is best described as an integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage. A. Supply chain management B. Integrated technology management C. Strategic management D. Inventory management E. C and D
C
__________ involves ensuring proper strategic controls and organizational designs. A. Corporate governance B. Corporate-level strategy C. Strategy implementation D. Business-level strategy
C
__________ may be considered the "advance work" that must be done in order to effectively formulate and implement strategies. A. Goal setting B. Corporate entrepreneurship C. Strategy analysis D. Organizational design
