MGMT 495

Mara is a management consultant for a soda manufacturer that wants to expand into health drinks such as green tea and after-workout drinks. Based on what you have read, which of these is sensible advice for Mara to offer her client?

"Carefully consider the entry choices over time before making a decision."

During an interview for a CEO position, Elena's potential employers ask her, "If you get this job, will you focus more on industry effects or firm effects?" What should her answer be?

"Firm effects. I will be able to have the most impact on those."

66. Which of the following strategies best illustrates a generic business strategy? A. A cost-cutting strategy that corporate executives in the headquarters want all business units of a large conglomerate to implement B. A strategy to use monetary incentives to motivate employees working on a project C. A decision to computerize a firm's database in order to improve customer service D. A decision to niche market the jewelry sold by a company while the apparel division under the same company sells its products through mass marketing

D. A decision to niche market the jewelry sold by a company while the apparel division under the same company sells its products through mass marketing

88. Gilroy Crackers enjoys a competitive advantage as a cost leader because high demand for its products has allowed it to operate at the minimum efficient scale. Which of the following scenarios would be most concerning to the managers of Gilroy Crackers for sustaining its competitive advantage? A. Gilroy's leading competitor develops a new low-sodium product B. Gilroy's most reliable production worker takes a job in another industry C. A major winter storm shuts down Gilroy's production for several days D. A wheat shortage raises input costs across the industry

D. A wheat shortage raises input costs across the industry

73. Home Value Inc., Max Cart Inc., and Nice Necessities Inc. are three consumer-product retailing companies. Their products consist primarily of day-to-day items that are easy to imitate and sell. All three companies use the same resources and capabilities in the production and distribution of their products. Which of the following is an implication of the market condition indicated in this scenario? A. Resource immobility of the firms will be low. B. The industry structure will be far from perfect competition. C. Barriers to entry within the industry will be high. D. Any advantage that one firm has will be short-lived.

D. Any advantage that one firm has will be short-lived.

13) Which of the following summarizes the difference between corporate strategy and business strategy? A. Corporate strategy deals with how to compete; business strategy deals with where to compete. B. Corporate strategy deals with when to compete; business strategy deals with how to compete. C. Corporate strategy deals with how to compete; business strategy deals with when to compete. D. Corporate strategy deals with where to compete; business strategy deals with how to compete.

D. Corporate strategy deals with where to compete; business strategy deals with how to compete.

10) What does it mean for a firm to have an 80 percent learning curve? A. Every time the cumulative output increases by 80 percent, the cost per unit will decline by 20 percent. B. Every time the cumulative output is doubled, the cost per unit will decline by 80 percent. C. Every time the cumulative output goes up by 20 percent, the cost per unit will decline by 80 percent. D. Every time the cumulative output is doubled, the cost per unit will decline by 20 percent.

D. Every time the cumulative output is doubled, the cost per unit will decline by 20 percent.

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.

D. Operational effectiveness and competitive benchmarking should be treated as strategy.

7) In which of the following situations is the power of suppliers high in an industry? A. Suppliers offer products that are undifferentiated. B. Suppliers can credibly threaten to backward integrate into the industry. C. Suppliers depend heavily on the industry for their revenues. D. Suppliers' industry is more concentrated than the industry it sells to.

D. Suppliers' industry is more concentrated than the industry it sells to.

61. Which of the following is most likely an implication of new firms entering an industry? A. The bargaining power of buyers will reduce. B. The industry's overall profit potential and sales will increase. C. The rivalry among existing competitors will reduce. D. The incumbent firms will spend more to satisfy their existing customers.

D. The incumbent firms will spend more to satisfy their existing customers.

Which of the following is not a stakeholder attribute that managers consider during stakeholder impact analysis? A. a stakeholder's power B. a stakeholder's legitimate claim C. a stakeholder's urgent claim D. a stakeholder's liquidity

D. a stakeholder's liquidity

85. When wireless service providers offer free or discounted mobile phones for subscriptions to their wireless voice and data service, the perceived value of the service offering increases. In this case, the value driver would be A. economies of scale B. learning-curve effects C. experience-curve effects D. availability of complements

D. availability of complements

14) When Internet service providers offer free routers for subscriptions to their wireless Internet packs, the perceived value of the service offering increases. In this case, the value driver would be A. economies of scale. B. learning-curve effects. C. experience-curve effects. D. availability of complements.

D. availability of complements.

22) Soapsuds Inc., a manufacturer of cleaning agents, supplies its products to All Needs Inc., a supermarket chain. It demands that All Needs create more shelf space in its stores for Soapsuds' products. However, All Needs Inc. refuses to do this. Instead, it decides to produce its own range of cleaning agents with its own label "All Wash." In this scenario, All Needs Inc. has exercised its bargaining power as a buyer through A. forward integration. B. product differentiation. C. crowdsourcing. D. backward integration.

D. backward integration.

3) Keen Beans, a leading coffee roaster, anticipated that the prices of coffee beans from Costa Rica, where its main suppliers were located, would double in less than three years. This would significantly affect Keen Beans' profit margins. Thus, Keen Beans decided to develop a new partnership with a supplier in Indonesia. As predicted, the price of Costa Rican coffee beans increased twofold. Because the price of Indonesian coffee beans was much lower, Keen Beans was able to maintain its profit margins in turbulent times. Which of the following isolating mechanisms does this scenario best illustrate? A. intellectual property protection B. causal ambiguity C. time compression diseconomies D. better expectations of future resource value

D. better expectations of future resource value

62. Ambrosia Inc., a leading chocolate producer, anticipated that the prices of cocoa beans would double in less than three years. This would disrupt the availability of cocoa in the industry. Thus, Ambrosia Inc. decided to purchase cocoa plantations in Ghana. As predicted, the prices of cocoa increased twofold. Because of the company-owned cocoa plantations, Ambrosia Inc. was able to sustain its competitive advantage in turbulent times. Which of the following isolating mechanisms does this scenario best illustrate? A. social complexity B. causal ambiguity C. time compression diseconomies D. better expectations of future resource value

D. better expectations of future resource value

87. How was Netflix able to outperform both Hulu and Amazon? A. by focusing its resources on buying classic blockbusters movies B. by expanding its content streaming to include foreign markets C. by expanding from content streaming to theatrical releases and cable content D. by focusing its resources on producing high-quality content for content streaming

D. by focusing its resources on producing high-quality content for content streaming

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. increased power distance C. diseconomies of scope D. competitive disadvantage

D. competitive disadvantage

Organic Food Inc., a multinational company, relies on its media partner Radio Plus to regularly advertise its offers, sales, and new products. Radio Plus is invested in this relationship because it generates most of its revenue from advertising Organic Food's products. In this scenario, Radio Plus is Organic Food Inc.'s A. stockholder. B. workforce. C. internal stakeholder. D. external stakeholder.

D. external stakeholder.

Sun Inc., a vendor, regularly supplies pallets to Octangle Corp. for its shipping business. Therefore, Sun Inc. is Octangle Corp.'s A. internal stakeholder. B. stockholder. C. shareholder. D. external stakeholder.

D. external stakeholder.

State-level government agencies that check whether firms are meeting statutory safety measures in their production units are considered to be the firms' A. stockholders. B. shareholders. C. internal stakeholders. D. external stakeholders.

D. external stakeholders.

27) JCPenny tried implementing a Blue Ocean Strategy (see last couple of slides ). Which of the following contributed the most to JCPenny's failed blue ocean strategy? A. failure to win legal battles against its closest competitors B. failure to conduct an accurate pretest in the market C. failure to apply the strategy to enough stores at the same time D. failure to combine a cost-leadership position with a differentiation position

D. failure to combine a cost-leadership position with a differentiation position

19) Swan Song is a spa that caters to the needs of a small percentage of highly health-conscious consumers. It offers state-of-the-art treatments in a luxurious setting. Since there are very few spas that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Swan Song is following a A. product diversification strategy B. liquidation strategy C. broad differentiation strategy D. focused differentiation strategy

D. focused differentiation strategy

8) Organic Eats is a restaurant that caters to the needs of a small percentage of highly health-conscious consumers. It has an all-organic, vegan menu. Since there are very few restaurants that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Organic Eats is following a A. product diversification strategy. B. liquidation strategy. C. mass market strategy. D. focused differentiation strategy

D. focused differentiation strategy

40) Aguilar Industries has produced a new piece of technology that will monitor the soil moisture in a user's garden and send a notification to an app on the user's phone when it is time to water their plants. The goal of this inexpensive technology is to entice users to purchase Aguilar's more expensive automated watering system, so that they can trigger the watering process from the app on their phones. Which business model is most likely to help Aguilar Industries accomplish its goals? A. agency B. wholesale C. pay-as-you-go D. freemium

D. freemium

The first step in stakeholder impact analysis involves A. formulating a stakeholder strategy to balance the different needs of various stakeholders. B. identifying the opportunities and threats the stakeholders present. C. describing the economic, legal, ethical, and philanthropic responsibilities of the firm toward the society. D. identifying the stakeholders that currently have, or potentially can have, a material effect on a company.

D. identifying the stakeholders that currently have, or potentially can have, a material effect on a company.

Due to several black swan events in the past, the A. shareholders of public companies have become more confident in investing their resources in businesses. B. need for corporate governance and transparency has reduced within various industries. C. nations around the globe have explicitly appreciated and accepted capitalism as an economic system. D. implicit trust relationship between the corporate world and society at large has deteriorated.

D. implicit trust relationship between the corporate world and society at large has deteriorated.

42) Iceberg Storage, a leading hard drive manufacturer, recently filed for bankruptcy. While most of Iceberg's competitors were shifting away from physical data storage devices toward online cloud storage services, Iceberg invested most of its retained earnings in the effort to improve its hard drives. Once the hard-drive market drastically declined, Iceberg Storage was unable to capitalize on the new technology. Which of the following does this scenario best illustrate? A. causal ambiguity B. knowledge diffusion C. social complexity D. path dependence

D. path dependence

Which of the following is not an example of a software company's external stakeholder? A. creditors B. customers C. alliance partners D. project managers

D. project managers

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. providing long-distance cab fares at a lower rate than competitors; servicing the same area as competitors

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 within the industry.

D. stake out a unique position within the industry.

Javier, a retired CEO, invests capital in a start-up company that creates budgeting software. He mentors the entrepreneur and the employees of the company because he wants the company to perform well and survive in the market. Thus, Javier is the start-up company's A. headhunter. B. category captain. C. employee. D. stakeholder.

D. stakeholder

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.

D. strategic positioning

In a firm, a strategist's job should be to A. limit the participation of external stakeholders—customers and suppliers—in value creation. B. isolate the firm's internal stakeholders from its external stakeholders. C. focus solely, in a single-minded manner, on maximizing shareholder wealth. D. understand the complex web of exchange relationships among different stakeholders.

D. understand the complex web of exchange relationships among different stakeholders.

58. Which of the following features about a buyer indicates that the buyer has high bargaining power? A. when the buyer cannot credibly threaten to backwardly integrate into the industry B. when the buyer cannot purchase specific products from other sellers C. when the buyer faces high switching costs D. when the buyer operates in an industry where products are undifferentiated

D. when the buyer operates in an industry where products are undifferentiated

D

Demand for traditional fast-food providers such as McDonald's, Burger King, and Wendy's has been on a decline in recent years. Consumers have become more health conscious and demand has shifted to alternative restaurants like Subway, Chick-fil-A, and Chipotle. Attempts by McDonald's and Wendy's to steal customers from one another include frequent discounting tactics such as dollar menus. Such competitive actions are indicative of A. profitability increases B. perfect competition C. natural monopolies D. cutthroat competition

Perpetual Batteries recently came under criticism when a newspaper article revealed that the company's production plant had leaked a chemical compound into a sensitive wetland ecosystem. Although use of the chemical was not technically prohibited by law, the local government levied a small fine for cleaning up the spill. Environmental groups, however, argued that continued use of the chemical was damaging to the local wildlife and threatened to organize a boycott against Perpetual Batteries. What should Perpetual Batteries do to ensure that it meets its ethical responsibilities?

Design batteries without the chemical and market them as environmentally friendly.

Carlos is the manager of a graphic design firm, and he relies on a top-down strategic management approach to maintain tight control over the activities of his employees. The company has recently started to lose market share to its more innovative competitors, and Carlos wants to encourage his employees to start contributing to the strategy formulation process to make the company more competitive. Which of the following steps should Carlos take?

Designate Friday afternoons as time for employees to pursue outside interests loosely related to the business.

B

Earlier, the travel industry was controlled by a few large travel companies that booked holidays, air tickets, bus tickets, and hotels for their customers. With the emergence of the Internet, smaller travel agencies started mushrooming in the industry and customers started making their own reservations. Which of the following can be inferred from this information? A. The travel industry changed from a fragmented structure to a consolidated one. B. The travel industry changed from a consolidated structure to a fragmented one. C. The bargaining power of buyers in the travel industry has decreased. D. The structure of the travel industry changed from monopolistic competition to an oligopolistic one. E. The pricing power of the incumbent firms in the travel industry has increased.

Which of the following is an implication for the strategist in the context of corporate governance and a company's success?

Effective corporate governance and solid business ethics are critical to gaining and sustaining competitive advantage.

Fran owns Consolidated Auto Parts, a company that got its start making auto parts related for hybrid vehicles, but her firm has had difficulty establishing itself as a maker of parts for the more-profitable internal combustion engine. What is most likely contributing to Consolidated's problem in this area?

Entry barriers usually protect the incumbent players in a profitable industry.

B

Eon Inc., Electravia Inc., and FC Inc., the three largest firms in the consumer electronics industry, hold close to 85 percent of the industry's market share. These companies mainly compete against each other by providing unique features in their products rather than pricing them low. These firms are interdependent, and each firm must consider the strategic actions of its competitors. Which of the following industry competitive structures does this scenario best illustrate? A. monopolistic competition B. oligopoly C. monopoly D. perfect competition

Etsuro is a management consultant. Baker Corp. asks him to evaluate their company, and he finds that the difference between the cost of producing the firm's products and the value of those products is extremely narrow. What should Etsuro suggest that Baker Corp. management do?

Find a way to widen the gap between cost and value.

B

First Ledger Inc., an auditing company, replaced its existing accounting software with new accounting software from another supplier. Since the new software has different features and abilities, First Ledger Inc. has had to spend $10,000 on training its employees to use it. In this scenario, $10,000 represents First Ledger Inc.'s A. opportunity cost. B. switching cost C. octroi charge D. excise duty

Blue Bird Products Inc. (BBP) is a large conglomerate. The human resources department of its telecom division has decided to reduce its employee turnover by encouraging internal promotions. Which of the following strategies does this scenario best illustrate? Corporate strategy Business strategy Functional strategy Grand strategy

Functional strategy

Pioneer Pharma Inc. and GH Medicines Corp. are two competing firms in the pharmaceutical industry. While Pioneer Pharma Inc.'s vision is "to be a preeminent drug manufacturer in the industry," GH Medicines Corp.'s vision is "to make good health a reality for everyone around the world." Which of the following is an implication of these different visions?

GH Medicines will be more flexible than Pioneer Pharma when adapting to changing environments.

Pioneer Pharma Inc. and GH Medicines Corp. are two competing firms in the pharmaceutical industry. While Pioneer Pharma Inc.'s vision is "to be a preeminent drug manufacturer in the industry," GH Medicines Corp.'s vision is "to make good health a reality for everyone around the world." Which of the following is an implication of these different visions? GH Medicines's vision is more product-oriented than the vision of Pioneer Pharma. Pioneer Pharma is more likely to have a positive relationship between its vision and firm performance than GH Medicines. Pioneer Pharma's vision is more long-term and futuristic than GH Medicines's vision. GH Medicines will be more flexible than Pioneer Pharma when adapting to changing environments.

GH Medicines will be more flexible than Pioneer Pharma when adapting to changing environments.

C

Given the industry structure in the automobile business, entering the auto manufacturing industry doesn't seem advisable. Yet Tesla Motors is joining the fray. Rather than attempting to compete head-on in internal combustion engines, Tesla Motors is entering the all-electric car segment, a much less crowded niche in the overall car industry. Which of the following is Tesla most hoping to benefit from in this market niche? A. network effects B. economies of life C. economies of scale D. capital requirements E. customer switching costs

Hannah is the Chief Operating Officer of the startup AppPalace. In which of the following scenarios does Hannah exhibit strategic leadership?

Hannah schedules a meeting with the manager of the marketing department and overcomes his skepticism about a new campaign aimed at customers in the 55+ age group. Over the next three months, AppPalace gains 250,000 new users in that group.

TriCorp is a major financial services corporation. With the CEO of TriCorp preparing to retire, several top managers are vying for the position. Jared considers himself to be a leading candidate. He not only has advanced degrees from business schools and more than a decade of experience working for TriCorp, but he also has personally ensured that his division has exceeded its performance benchmarks over the past three years, even though many of his employees are dissatisfied because they feel they are stagnating in their jobs. According to the level 5 leadership pyramid, why has Jared failed to exhibit the qualities of a level-5 leader?

He is not able to help others reach their full potential.

You are the manager in charge of setting the strategy for a new frozen yogurt company. Which of the following questions would be appropriate for you to ask during the analysis phase of the AFI strategy framework?

How have consumer preferences in frozen yogurt flavors changed in the last five years?

C

In Rozinia Republic, the federal government owns and manages all the nuclear power plants. This is because the business would not be profitable if there was more than one supplier in the nuclear power industry. Which of the following industry competitive structures does the scenario best illustrate? A. monopolistic competition B. oligopoly C. natural monopoly D. perfect competition

A

In a firm's external environment, _____ primarily capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class. A. demographic trends B. political trends C. ecological trends D. economic trends E. technical trends

delivers low-cost products and services to a specific, narrow part of the market.

In a focused cost-leadership strategy, a firm:

Blue Ocean

In a successful ________ strategy, the trade-offs between differentiation and low cost are reconciled.

C

In an industry, the rivalry among existing competitors is high when A. fixed costs are low and marginal costs are high. B. exit barriers are low. C. incumbent firms are highly committed to the business. D. industry growth is high.

A

In an industry, the threat of entry is high when A. capital requirements are low. B. expected returns are high. C. technological know-how is industry specific. D. switching costs are high.

Which of the following statements accurately brings out the difference between monopolistic competition and an oligopoly?

In monopolistic competition, many firms compete against each other; in an oligopoly, there are few large firms competing against each other.

E

In the aircraft manufacturing industry, at least for large commercial jets, Boeing and Airbus are the only competitors. There is not a significant threat of entry because A. entering the aircraft manufacturing industry requires less capital investments. B. there is expected to be a huge return on investment within this industry. C. there is no credible threat of retaliation from the incumbents. D. entering the aircraft manufacturing industry means violating government policies. E. entering the aircraft manufacturing industry requires huge capital investments

C

A company is best described as a _____ to an existing company if customers value the existing company's product or service offering more when they are able to combine it with the other company's product or service. A. competitor B. shareholder C. complementor D. strategic equivalent

Which of the following statements with regard to industry structures is true?

A consolidated industry tends to be more profitable than a fragmented one.

Which of the following statements is true of corporate strategy?

A corporate strategy must be able to create synergies across business units that are quite different.

solve a problem for a consumer

A customer-oriented vision statement focuses employees to think about how best to:

provide products similar to its competitors, but at lower prices.

A firm is said to gain a competitive advantage when it can:

Which of the following is an example of competitive parity?

A firm produces a similar number of wall clocks at a similar cost as its competitors

Which of the following statements is true of the social responsibilities of a business?

A firm's ethical responsibilities go beyond its legal responsibilities.

D

A fragmented industry is made into a consolidated industry through A. governmental deregulation B. globalization C. technological innovation and new legislation D. horizontal mergers and acquisitions

C

A key feature of an oligopoly is that the competing firms A. are independent. B. have no pricing power C. are interdependent D. have no barriers to entry

A

A large fabricator of building components purchased a steel company to provide raw materials for its production process. This is an example of A. backward integration. B. economies of scale. C. forward integration. D. product differentiation.

organizational structures are aligned with the firm's vision statement

A positive relationship between vision statements and firm performance is more likely to exist when:

A

A strategic group will typically include A. firms within the same industry. B. customers belonging to a particular socioeconomic class. C. firms employing similar number of employees, irrespective of their industries. D. employees within a firm earning the same amount of salaries.

Which of the following summarizes the difference between a firm's vision and mission?

A vision states what a firm wants to accomplish; a mission states how a firm plans to accomplish this vision.

63. At a certain output level, the per-unit cost incurred by a firm to manufacture a product is $5. Other factors remaining constant, what will be the new per-unit cost if the cumulative output is doubled, and the firm is able to achieve an 80 percent learning curve? A. $4 B. $5 C. $3 D. $6

A. $4

80. Which of the following provides an example of a firm in a red ocean? A. Chique Apparel offered clothing at a low price but failed to differentiate its product as being exclusive. B. Cheap Apparel offered clothing at a price matching that of its competitors and, as a result, it had lower profit margins C. Goode Apparel offered clothing at a mid-range price but failed to differentiate its product as being of decent quality D. Top Drawer Apparel offered clothing at a higher price than competitors and, as a result, failed to make a profit

A. Chique Apparel offered clothing at a low price but failed to differentiate its product as being exclusive

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. balanced scorecard. C. power position. D. equity leverage.

A. Competitive advantage

71. The fact that both Rolex and Timex have a competitive advantage selling wristwatches is an indication that: A. Following a different generic business strategy within the same industry can lead to a competitive advantage for more than one organization. B. Following the same generic business strategy can allow for two firms competing in the same industry to have a competitive advantage at the same time. C. In order to evaluate whether Rolex has a sustained competitive advantage it is useful to compare it to Timex from a cost perspective. D. In order to evaluate whether Timex has a sustained competitive advantage, it is useful to compare it to Rolex from a differentiation perspective.

A. Following a different generic business strategy within the same industry can lead to a competitive advantage for more than one organization.

26) Which of the following best explains why IBM has been able to maintain its competitive advantage? A. IBM successfully transformed itself multiple times in the data information industry over a period of more than 100 years. B. IBM hired a new CEO to refocus the company on satisfying market needs, which demanded IT services. C. IBM focused on producing mainframe and mini-computers that would be produced by fully integrated companies. D. IBM helped kick-start the PC revolution in 1981 by setting an open standard in the computer industry with the introduction of the IBM PC

A. IBM successfully transformed itself multiple times in the data information industry over a period of more than 100 years.

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 advantage in the industry. B. It has a competitive disadvantage 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.

A. It has a competitive advantage in the industry.

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

A. Strategy Analysis

34) While Burger Cult Inc. operates in a monopolistically competitive industry, Citizen Telecom Inc. operates in a monopoly. Keeping this information in mind, which of the following statements is most likely true? A. The threat of new entrants will be higher for Burger Cult Inc. than Citizen Telecom Inc. B. Burger Cult Inc. will have more pricing power than Citizen Telecom Inc. C. Burger Cult Inc. will have more profit potential than Citizen Telecom Inc. D. The number of buyers will be limited for both Burger Cult Inc. and Citizen Telecom Inc.

A. The threat of new entrants will be higher for Burger Cult Inc. than Citizen Telecom Inc.

38) How are cumulative learning and experience effects of a company most likely to affect Michael Porter's five forces? A. Threat of new entrants will be low. B. Bargaining power of suppliers will be high. C. Availability of complements will be low. D. Threat of substitute products and services will be high

A. Threat of new entrants will be low.

Shortly after the small island of Balamia experienced multiple unexpected high-intensity earthquakes that caused massive destruction, many banks and insurance companies filed for bankruptcy. This left the economy of the country in a poor state. The natural calamity in Balamia best exemplifies A. a black swan event. B. a wild card event. C. skewness risk. D. kurtosis risk.

A. a black swan event.

81. Which of the following business models in the landscaping industry is likely to scale most efficiently?. A. a company that offers three different bundles of services at a low, medium, and high price point depending on the level of care required by the customer B. a company that deploys a team of both skilled and unskilled landscapers to each customer's location regardless of their needs C. a company that charges the same hourly rate for landscaping services no matter what the situation requires D. a company that allows users of its website to schedule appointments with landscapers who specialize in the exact service required

A. a company that offers three different bundles of services at a low, medium, and high price point depending on the level of care required by the customer

The management of Five Square Corp. wants to reduce the separation between ownership (by shareholders) and control of the firm (by professional managers). Which of the following practices would best help the company do this? A. allowing employees to purchase the stock of the company at a discounted rate B. reinvesting the annual profits of the company into research and development C. issuing new additional shares to the existing stockholders in proportion to their current holdings D. declaring the annual profits as bonus dividends to the existing stockholders

A. allowing employees to purchase the stock of the company at a discounted rate

A firm's stakeholder strategy primarily allows the firm to A. analyze and manage how various external and internal stakeholders interact to jointly create and trade value. B. effectively isolate its internal stakeholders (like shareholders and employees) from its external stakeholders (like customers and media). C. transfer the contributions external stakeholders make into benefits for the internal stakeholders. D. facilitate the development of a competitive relationship between its internal and external stakeholders.

A. analyze and manage how various external and internal stakeholders interact to jointly create and trade value.

A firm always has a competitive disadvantage when its return on invested capital is A. below 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.

A. below the industry average.

64. In an industry, the threat of entry is high when A. capital requirements are low. B. expected returns are high. C. technological know-how is industry specific. D. switching costs are high.

A. capital requirements are low.

33) A successfully implemented blue ocean strategy allows a firm to A. charge a higher price than the cost-leader in the industry. B. create lesser economic value than the differentiator in the industry. C. reduce its value gap beyond that created by the cost-leader in the industry. D. increase its price above that of the differentiator in the industry.

A. charge a higher price than the cost-leader in the industry.

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 the industry B. assessing the value based on the shareholders' expectations of return on their capital C. evaluating the liquidity ratios for other pharmaceutical companies D. comparing the value to the history of the firm's return of investment over a number of years

A. comparing the return to the return on invested capital obtained by other firms in the industry

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 advantage. B. balanced scorecard. C. competitive disadvantage. D. power position.

A. competitive advantage

21) Bauer Inc. is a company that manufactures plastics, fertilizers, tractors, and headphones under a single brand. The top management at Bauer has decided to enter the medical equipment industry based on its assessment of the profit potential in that industry. Which of the following strategies does this best illustrate? A. corporate strategy B. business strategy C. functional strategy D. divisional strategy

A. corporate strategy

52. The CEO of True West Products Inc. (TWP) is a company that sells a wide range of products. It has decided to enter the markets of emerging nations like China and Brazil. This means that the cars, consumer electronics, and services such as hotels included under the TWP banner would be made available in these nations. Which of the following strategies does this scenario best illustrate? A. corporate strategy B. functional strategy C. business strategy D. divisional strategy

A. corporate strategy

67. In the aircraft manufacturing industry, at least for large commercial jets, Boeing and Airbus are the only competitors. There is not a significant threat of entry because A. entering the aircraft manufacturing industry requires huge capital investments. B. there is expected to be a huge return on investment within this industry. C. there is no credible threat of retaliation from the incumbents. D. entering the aircraft manufacturing industry means violating government policies.

A. entering the aircraft manufacturing industry requires huge capital investments.

48. The production department at Coral Cements that is a subsidiary of the large conglomerate Five East Corp. has decided to adopt the FIFO (first in, first out) method of inventory to dispatch its cement bags. Which of the following strategies does this scenario best illustrate? A. functional strategy B. corporate strategy C. master strategy D. business strategy

A. functional strategy

Stakeholder impact analysis primarily helps a firm A. gain a competitive advantage while acting as a good corporate citizen. B. lower the difference between its value creation and costs. C. single-mindedly focus on shareholders alone. D. exploit external stakeholders to benefit internal stakeholders.

A. gain a competitive advantage while acting as a good corporate citizen.

The best example of a firm's external stakeholder is a(n) A. government agency that regulates the prices of products manufactured by the firm. B. board member from a wholly-owned foreign subsidiary of the firm. C. shareholder who has invested money in the firm but is not employed by the firm. D. employee of the firm who is responsible for a contract project.

A. government agency that regulates the prices of products manufactured by the firm.

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

A. its reliance on crowdsourcing

51. Five years ago, Palomino Airline was able to get a strong foothold in the airline industry by hiring a few pilots and crew and renting two airplanes, which flew routes between Denver, Omaha, Pierre, Cheyenne, and Helena. Which of the following summarizes the above factors that enabled Palomino to get started? A. low entry barriers B. low competition C. low fares D. low flight cancellations

A. low entry barriers

The past black swan events in the United States demonstrate that A. managerial actions can affect the economic well-being of large numbers of people around the globe. B. decisions and strategies implemented within a firm will only affect the firm and not the entire industry. C. corporate governance is unnecessary as firms are becoming socially responsible. D. industry effects are more important than firm effects in determining firm performance.

A. managerial actions can affect the economic well-being of large numbers of people around the globe.

Rhino Pictures Inc. is a large production company that controls a major portion of the movie industry's market share along with two other firms. Despite its competitiveness with the two other firms, it is influenced by their actions and often has to consider their strategic actions before acting on its own. In this scenario, Rhino Pictures Inc. is most likely functioning in a(n) _____ industry. A. oligopolistic B. monopolistic C. perfectly competitive D. monopolistically competitive

A. oligopolistic

Which of the following would be considered a weak stakeholder strategy? A. putting shareholder interests above the interests of other stakeholders B. addressing the concerns of all stakeholders, including employees C. always using fair and ethical practices to satisfy stakeholders D. ensuring that the primary stakeholders achieve their objectives

A. putting shareholder interests above the interests of other stakeholders

Which of the following groups is considered to be the primary stakeholder for public-stock companies? A. suppliers of capital B. employees C. suppliers D. potential customers

A. suppliers of capital

49. The relative bargaining power of suppliers is high when A. suppliers provide products that are differentiated. B. incumbent firms face low supplier switching costs. C. incumbent firms can credibly threaten to backward integrate into the industry. D. suppliers depend heavily on the industry for a large portion of their revenues.

A. suppliers provide products that are differentiated.

20) 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 within the industry B. the pricing method opted by the managers to face competition 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

A. the barriers to entry and exit within the industry

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 within the industry B. the pricing method opted by the managers to face competition 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

A. the barriers to entry and exit within the industry

57. A blue ocean strategy differs from a low-cost strategy in that A. the intent of a blue ocean strategy is not to be the absolute lowest-cost provider because a blue ocean must also increase perceived value. B. the focus of a blue ocean strategy is on lowering the economic value created, whereas a cost-leader focuses on increasing the economic value created C. economies of scale are more important to a blue ocean strategy, while economies of scope are more important to a cost-leader D. a blue ocean's research and development focus is on process technologies, and a cost-leader's focus is on product technologies

A. the intent of a blue ocean strategy is not to be the absolute lowest-cost provider because a blue ocean must also increase perceived value.

86. During the process of formulating an effective business model, a firm's managers should first. A. transform their strategy of how to compete into a blueprint of actions and initiatives B. implement their strategy at corporate, strategic business unit, and functional levels C. implement their blueprint of actions and initiatives through structures, processes, culture, and procedures D. evaluate the firm's strategy already in effect and take corrective actions if necessary

A. transform their strategy of how to compete into a blueprint of actions and initiatives

54. Which of the following would most likely not indicate that sellers are a strong competitive force in an industry? A. when the buyers' cost of switching to substitutes is low B. when the products and services they provide can be differentiated C. when the buyers of their products are customers who buy in small quantities D. when the components they supply affect buyers' product quality

A. when the buyers' cost of switching to substitutes is low

Free Winds, Inc. is a company that manufactures a variety of generators that run on wind power. The company envisions that wind technology will replace all forms of exhaustible energy sources in the near future. Which of the following statements will make an accurate vision for Free Winds?

All nations around the globe should be able to provide energy produced by sustainable sources.

18) Which of the following statements is true of corporate strategy? A. The objective of corporate-level strategy is to ensure that the sum of the values of individual business units is greater than the overall corporate value. B. A corporate strategy must be able to create synergies across business units that are quite different. C. Formulating a corporate strategy involves general managers answering questions relating to how to compete in order to achieve superior performance. D. Deciding whether to adopt a differentiation or a cost-leadership strategy is part of formulating the corporate strategy.

B. A corporate strategy must be able to create synergies across business units that are quite different.

35) _____ are best described as unique strengths, embedded deep within a firm, that allow a firm to differentiate its products and services from those of its rivals, creating higher value for the customer or offering products and services of comparable value at lower cost. A. Resource leverages B. Core competencies C. Capital gains D. Equity reserves

B. Core competencies

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 and Silver Screen Cinemas will not be direct competitors to each other, and their customer segments will overlap very little. C. Digi Now will keep its customer service at an acceptable level, while Silver Screen Cinemas will provide superior customer service. D. Silver Screen Cinemas and Digi Now will use a similar approach to create value for customers by attempting to offer everything to everybody.

B. Digi Now and Silver Screen Cinemas will not be direct competitors to each other, and their customer segments will overlap very little.

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

B. Increase its user base

65. If Finolo and Ethver, companies that manufacture televisions, develop the same customer knowledge base and create products that provide the same customer appeal as Invoro, a market leader in consumer electronics, then A. Finolo and Ethver will have a VRIO resource. B. Invoro will have a resource that is valuable but no longer rare. C. Invoro will have a sustainable competitive advantage in the industry. D. Invoro will have a resource that is rare but no longer valuable.

B. Invoro will have a resource that is valuable but no longer rare.

36) What must a cost-leadership strategy accomplish to be successful? A. It must increase the firm's cost above that of its competitors while offering adequate value B. It must reduce the firm's cost below that of its competitors while offering adequate value C. It must increase the firm's cost above that of its competitors while offering superior value D. It must reduce the firm's cost below that of its competitors while offering superior value

B. It must reduce the firm's cost below that of its competitors while offering adequate value

43) Which of the following is a drawback of Porter's five forces model? A. The model describes competition narrowly as a firm's closest competitors. B. Managers cannot determine the changing speed of an industry or the rate of innovation. C. It fails to provide a basis for deriving implications for a firm's strategic position within an industry. D. The model fails to consider that threat of substitutes can come from outside a given industry.

B. Managers cannot determine the changing speed of an industry or the rate of innovation.

84. Which of the following accurately describes how Netflix used innovation to gain a competitive advantage? A. Netflix moved from content development to upgrading its data analytics to provide faster online streaming. B. Netflix applied big data analytics to its user preferences to provide highly personalized viewing recommendations. C. Netflix moved from online streaming to online DVD rentals via the Internet. D. Netflix applied first mover advantages to lock up talent needed to produce original content for DVD rentals and online streaming.

B. Netflix applied big data analytics to its user preferences to provide highly personalized viewing recommendations.

45) _____ describes a process in which the options one faces in a current situation are limited by decisions made in the past. A. Social complexity B. Path dependence C. Cannibalization D. Causal ambiguity A. Social complexity B. Path dependence C. Cannibalization D. Causal ambiguity

B. Path dependence

_____ provides a decision tool that enables a firm to act as a good corporate citizen by allowing its managers to recognize, prioritize, and address the needs of different groups of individuals who take personal interest in the firm's performance and survival. A. Strategy analysis B. Stakeholder impact analysis C. The SWOT analysis D. Strategic positioning

B. Stakeholder impact analysis

_____ 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

B. Strategy

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

B. Strategy implementation

39) Which of the following best illustrates a strategic business unit (SBU)? A. The human resource department of a large company that is responsible for hiring employees for all its divisional branches B. The consumer electronics division of a large company that also manufactures automobiles, apparel, and processed food C. The product development team at the headquarters of a fast-food chain D. The market segment which can be categorized between the income levels $10,000 and $25,000

B. The consumer electronics division of a large company that also manufactures automobiles, apparel, and processed food

11) Which of the following is an implication of high exit barriers in an industry? A. The number of underperforming firms in the industry will be low. B. The industry will face excess capacity. C. The competitive pressure among existing firms will be low. D. The industry will be more attractive for new entrants.

B. The industry will face excess capacity.

Which of the following statements accurately describes firm effects? A. They attribute firm performance to the industry in which the firm competes. B. They attribute firm performance to the actions managers take within a chosen industry. 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.

B. They attribute firm performance to the actions managers take within a chosen industry.

70. Beans Inc. operates in a perfectly competitive agricultural industry. Classica Apparel Inc., in contrast, operates in a monopolistically competitive industry. Keeping this information in mind, which of the following statements is true? A. Beans Inc. will face competition from many sellers, whereas Classica Apparel Inc. will be the only seller in the market. B. While Classica Apparel Inc. will have the power to set the prices for its products, Beans Inc. will have little or no ability to do so. C. Beans Inc. will have many buyers for its products, whereas Classica Apparel Inc. will have very few buyers for its products. D. While Beans Inc. will communicate the degree of product differentiation through advertising, Classica Apparel Inc. will need no advertising.

B. While Classica Apparel Inc. will have the power to set the prices for its products, Beans Inc. will have little or no ability to do so.

16) Which of the following strategies will be most detrimental to firms that are close rivals operating in an oligopolistic industry structure? A. competing against each other through product differentiation B. competing against each other through price-cutting C. competing against each other through new-product introductions D. competing against each other through lifestyle advertisements

B. competing against each other through price-cutting

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.

B. competitive parity with each other.

Which of the following is an example of a firm's external stakeholder? A. employees B. customers C. shareholders D. board members

B. customers

68. Using the VRIO framework, why has Crocs Shoes' products been unable to sustain its competitive advantage? A. invaluable and common. B. easy to imitate. C. extremely rare. D. non-substitutable.

B. easy to imitate.

Industry effects describe the underlying _____ structure of the industry. A. demographic B. economic C. psychographic D. ethnographic

B. economic

Stakeholder strategy is an integrative approach to managing a diverse set of stakeholders effectively in order to A. single-mindedly focus on the stockholders alone. B. gain and sustain competitive advantage. C. minimize the joint value created. D. minimize the difference between value creation and cost.

B. gain and sustain competitive advantage.

After a firm has identified its key stakeholders in stakeholder impact analysis, the immediate next step is to A. recognize the opportunities and threats the stakeholders present. B. identify stakeholders' interests and claims. C. formulate a stakeholder strategy. D. address the stakeholders' concerns.

B. identify stakeholders' interests and claims.

Rachel owns a large portion of GM Cube Inc.'s stocks. However, she is not employed by the company. In this scenario, Rachel is the company's A. external stakeholder. B. internal stakeholder. C. creditor. D. customer.

B. internal stakeholder.

53. The competitive advantage that one firm has will be short-lived in an industry where A. resource immobility is high. B. perfect competition exists. C. resource heterogeneity is high. D. capabilities of a firm are not easily replicable.

B. perfect competition exists.

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.

B. provide products similar to its competitors, but at lower prices.

77. The "Natural Nourishment" granola bars manufactured by Global Good Foods have been the top-selling granola bars in the market. Though the market for granola bars is flooded with competitors, Global Good has been able to maintain its market position for a long time. This is mainly attributed to the pleasant texture of its granola, which comes from a proprietary processing technique used by the company. This competency of Global Good Foods will be considered as a(n) ________ resource in the VRIO framework A. imitable. B. rare. C. intangible. D. organized to capture value.

B. rare.

A core tenet of stakeholder strategy is that a A. firm should isolate its internal stakeholders from its external stakeholders. B. single-minded focus on shareholders alone exposes a firm to undue risks that can threaten the very survival of the enterprise. C. multifaceted exchange relationship with internal and external stakeholders can lead to a firm's competitive disadvantage. D. firm should work toward competitive parity rather than gaining and sustaining a competitive advantage.

B. single-minded focus on shareholders alone exposes a firm to undue risks that can threaten the very survival of the enterprise.

12) Value Autos Inc. has been trying to directly copy the strategies of Honk Autos Inc. Even though it is evident that Honk Autos Inc.'s success comes from its just-in-time inventory system, Value Autos Inc. has not been able to effectively apply the system in the same way. This is because the organizational structures, employees, cultures, and the overall business systems of both the companies vary from each other. Which of the following barriers to imitation does this scenario best illustrate? A. path dependence B. social complexity C. resource mobility D. resource homogeneity

B. social complexity

BlueStainless Corp. has been able to gain and sustain a competitive advantage due to its strong relationship with its employees, customers, suppliers, and local communities. The company believes in lifetime employment and ensures that its employees grow along with the company. Investors are more than satisfied with the returns on their investments. Also, 3 percent of the company's profit is spent on community development. With initiatives like these, customers feel privileged to associate themselves with BlueStainless products. This scenario best illustrates the implementation of a A. strategic analysis. B. stakeholder strategy. C. wild card event. D. black swan event.

B. stakeholder strategy.

76. The CEO of Sam's Club, John Furner, reports to Walmart's CEO, C. Douglas McMillon, who as corporate executive oversees Walmart's entire operations. Sam's Club, therefore, is a _____ of Walmart. A. corporate partner B. strategic business unit C. branch office D. house brand manufacture

B. strategic business unit

41) First Ledger Inc., an auditing company, replaced its existing accounting software with new accounting software from another supplier. Since the new software has different features and abilities, First Ledger Inc. has had to spend $10,000 on training its employees to use it. In this scenario, $10,000 represents First Ledger Inc.'s A. opportunity cost. B. switching cost. C. octroi charge. D. excise duty

B. switching cost.

In the United States, which of the following was born out of dissatisfaction with the capitalist system in 2011? A. the Sarbanes-Oxley Act B. the Occupy movement C. the Tea Party movement D. the Taft-Hartley Act

B. the Occupy movement

Which of the following was a key driver in the Occupy movement of 2011? A. the need for a capitalist economic system B. the issue of income disparity C. the need to reduce government intervention in businesses D. the issue related to dumping of cheap foreign products

B. the issue of income disparity

74. Peerless Inc., a large conglomerate, wants to liquidate its business in certain industries to improve its overall profitability. Which of the following industries would Peerless Inc. find it most difficult to exit? A. the management consultancy industry in which the company's fixed costs are low B. the steel industry in which the company has obligations like severance pay toward employees C. the corporate training industry in which the company's commitments are mostly short-term D. the e-commerce industry where the company has no long-term contractual agreements with suppliers

B. the steel industry in which the company has obligations like severance pay toward employees

78. The telecom industry in the country of New Taria is an industry characterized by the presence of strong network effects, high brand loyalty, high economies of scale, and proprietary technology among incumbent firms. Thus, in the telecom industry, the A. threat of substitutes is most likely high. B. threat of new entrants is most likely low. C. bargaining power of buyers is most likely low. D. entry barriers are most likely nonexistent.

B. threat of new entrants is most likely low.

15) The primary objective of Porter's five forces model is to A. replace a firm's competitive advantage with competitive parity. B. understand the profit potential of different industries. C. reduce the gap between the value of a firm's product and its cost of production. D. break down a firm's value chain activities into primary and support.

B. understand the profit potential of different industries.

Differentiation

Beach Grub is a chain of "fast casual" restaurants that sells its menu items at higher prices than its competitors. Yet, the restaurant has a large customer base due to its wide product portfolio and superior customer service. Which of the following generic business strategies has Beach Grub adopted in this scenario?

B

Beans Co. operates in a perfectly competitive agricultural industry. Apparel Co., in contrast, operates in a monopolistic competitive industry. Keeping this information in mind, which of the following statements is true? A. Beans Co. will face competition from many sellers, whereas Apparel Co. will be the only seller in the mark B. While Apparel Co. will have the power to set the prices for its products, Beans Co. will have little or no ability to do so. C. Beans Co. will have many buyers for its products, whereas Apparel Co. will have few buyers for its products. D. While Beans Co. will communicate the degree of product differentiation through advertising, Apparel Co. will need no advertising.

C

In the smartphone industry, Google is a complementor to Samsung. Which of the following statements best explains why this is true? A. Samsung apps are tailored exclusively for Google smartphones and tablets. B. Google's smartphones increase in value because they face strong buying power from Samsung. C. Samsung's smartphones increase in value when they are preinstalled with Google's Android system. D. Google accounts for a large quantity of Samsung's overall sales.

E

In which of the following situations is a company that exists in the telecommunications industry most likely to face the highest threat of entry? A. if the company is able to put up a credible threat of retaliation B. if the capital requirements in the industry are high C. if the customer switching costs in the industry are high D. if the industry has recently become more regulated E. if the industry has recently become deregulated

E

In which of the following situations is the power of suppliers high in an industry? A. Suppliers offer products that are undifferentiated. B. Suppliers can credibly threaten to backward integrate into the industry. C. Suppliers depend heavily on the industry for their revenues. D. Suppliers' industry is less concentrated than the industry it sells to E. Suppliers' industry is more concentrated than the industry it sells to.

C

Increasingly larger numbers of women entering the work force since the early 1970s is an example of A. demographic changes. B. political and legal environmental changes. C. sociocultural changes. D. technological developments.

B

Industry convergence is a process whereby A. firms within the same industry start to satisfy different customer needs. B. formerly unrelated industries begin to satisfy the same customer need. C. excess capacity within an industry is reduced through horizontal mergers D. firms within an industry start to target a narrow market segment

Understanding the Resource Allocation Process (RAP) will have large effects on shaping a firm's realized strategy. Which of the following is an example of such an allocation of resources?

Intel's rule to "maximize margin-per-wafer-start"

B

Interest-rate increases have a __________ impact on the residential home construction industry and a __________ effect on industries that produce consumer necessities such as prescription drugs or basic grocery items. A. positive; negligible B. negative; negligible C. negative; positive D. positive; negative

C

Buyers are highly price sensitive when A. their purchase represents a small fraction of their procurement budget B. they earn high profits or are strapped for cash C. they earn low profits or are strapped for cash D. the industry's products are highly characterized with non-price competition E. the quality of their products and services are highly affected by the quality of the inputs

47. Which of the following statements with regard to industry structures is true? A. They are stable over time, not dynamic. B. Having a large number of competitors generally equates to higher industry profitability. C. A consolidated industry tends to be more profitable than a fragmented one. D. Having few but large competitors increases the threat of strong competitive forces such as supplier or buyer power.

C. A consolidated industry tends to be more profitable than a fragmented one.

50. Even though many valuable, rare, and inimitable resources were generated at Xerox's Palo Alto Research Center (PARC), the management at Xerox's headquarters failed to gain a competitive advantage by exploiting the breakthroughs in computing software and hardware. What is the most likely implication of this example? A. It is advisable to outsource research and development functions. B. Competitive advantage cannot be gained through unrelated diversification. C. A firm must be effectively organized to capture value. D. It is better to build competitive advantage on tangible assets rather than intangible assets.

C. A firm must be effectively organized to capture value.

5) AccuroDisk Inc. manufactures external hard disks for $32 per unit, and the maximum price customers are willing to pay is $47 per unit. TD Storage Inc. is a competitor of AccuroDisk Inc. that produces external hard disks for $37 per unit, and customers are willing to pay a maximum price of $50 per unit. What does this imply? A. AccuroDisk and TD Storage share differentiation parity B. TD Storage has a competitive advantage over AccuroDisk in terms of perceived value C. AccuroDisk creates a greater economic value than TD Storage D. TD Storage is a cost-leader when compared to AccuroDisk

C. AccuroDisk creates a greater economic value than TD Storage

_____ are incidents that describe highly improbable but highly impactful events. A. Miracle events B. Wild card events C. Black swan events D. Fat tail risk events

C. Black swan events

28) Which of the following factors best contributes to the U.S. automotive industry being characterized by high entry barriers? A. New auto companies create electric cars powered by simpler motors and gearboxes. B. New entrants in the automotive industry expect that incumbents will not or cannot retaliate. C. Car manufacturers require large-scale production in order to be cost-competitive. D. Few industrial products are as easy to build as cars powered by internal combustion engines

C. Car manufacturers require large-scale production in order to be cost-competitive.

60. How are the critical assumptions of the resource-based model of a firm fundamentally different from the way in which a firm is viewed in the perfectly competitive industry structure? A. In the resource-based model, resources are freely available and mobile, whereas in the perfectly competitive industry structure, resources are highly immobile. B. In perfect competition, it is extremely difficult to replicate the resource bundles of a firm, whereas in the resource-based model, it is extremely easy to imitate them. C. In perfect competition, all firms have access to the same capabilities, whereas in the resource-based model, resource differences exist between firms in the same industry. D. In the resource-based model, only physical assets of a firm are considered as resources, whereas in perfect competition, a firm's capabilities and competencies are also considered as resources.

C. In perfect competition, all firms have access to the same capabilities, whereas in the resource-based model, resource differences exist between firms in the same industry.

83. ________ are barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy. A. Embargoes B. Cartel arrangements C. Isolating mechanisms D. Market niches

C. Isolating mechanisms

69. Which of the following describes an airline that is most likely stuck in the middle? A. Red Carpet Airline that offers complimentary drinks and meals, coast-to-coast coverage via connecting hubs, plush airport lounges, and high prices. B. Plush Airline that offers international routes and global coverage, high customer service, high reliability, and high prices. C. Just Right Airline offers high-quality beverages and meals, plush airport lounges, only a few connections via hubs domestically, poor customer service, and low prices. D. Bottom Line Airline that offers no assigned seating, no in-flight amenities, no drinks or meals, no airport lounges, and low prices.

C. Just Right Airline offers high-quality beverages and meals, plush airport lounges, only a few connections via hubs domestically, poor customer service, and low prices.

2) Thomas is the owner of a landscaping company that caters to a very wealthy clientele. His company has struggled to differentiate itself from the other high-end landscapers in the area, but because he has hired several expensive but highly-qualified team members, Thomas is unable to shift to a cost leadership strategy. Which strategy is most likely to achieve a competitive advantage? A. Offer similar services as competitors but raise prices to increase profits B. Lower prices but continue employing high-paid expert gardeners C. Narrow the scope of competition and focus on unique features such as the use of organic materials D. Maintain prices but replace all the expert employees with less-skilled workers to control costs

C. Narrow the scope of competition and focus on unique features such as the use of organic materials

Which of the following scenarios best illustrates a good stakeholder strategy? A. VP Inc. follows a strategy in which maximization of the shareholder's wealth is the primary concern of the managers. B. Carrvero Inc. ensures that its employees are paid the least in the industry so that its external stakeholders can get the best price. C. PA Corp. distributes only 70 percent of its annual profit after taxes to shareholders, while the remaining is distributed among employees and the local community, and invested for further research. D. Gen Pharma Corp. ensures that it fully exploits free natural resources, so that most of its profits go to shareholders in the form of dividends.

C. PA Corp. distributes only 70 percent of its annual profit after taxes to shareholders, while the remaining is distributed among employees and the local community, and invested for further research.

9) Which of the following is NOT a major consideration of barriers to entry? A. Capital requirements. B. Brand identity. C. Positive growth rate. D. Economies of scale.

C. Positive growth rate.

31) Both Bison Autos and Sparrow Inc. incur a cost of $9,000 to manufacture a vehicle. However, the economic value created by Sparrow Inc. is more than that created by Bison Autos. What does this indicate? A. Bison Autos has a competitive advantage over Sparrow Inc. B. Both Bison Autos and Sparrow Inc. have achieved competitive parity. C. Sparrow Inc. can charge a premium price on its automobiles. D. Bison Autos has created a higher value gap than Sparrow Inc

C. Sparrow Inc. can charge a premium price on its automobiles.

_____ 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

C. Strategic management

In _____, a firm frames a guiding policy to address the competitive challenge. A. strategy control B. strategy implementation C. strategy formulation D. strategy analysis

C. Strategy formulation

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. The firms would eventually have no resources to invest in product and process improvements.

17) Trust Machines Inc. is a company that manufactures and markets consumer electronics. The unique microprocessors developed by the company contribute to its high resource immobility. According to the resource-based view of competitive advantage, which of the following is an implication of this situation? A. The competitive advantage of Trust Machines Inc. will soon be lost. B. The resource heterogeneity of Trust Machines Inc. is low within the industry. C. The resources of Trust Machines Inc. are difficult to replicate or imitate. D. The environment in which Trust Machines Inc. operates is closest to perfect competition.

C. The resources of Trust Machines Inc. are difficult to replicate or imitate.

Which of the following statements about a firm's stakeholders is true? A. Irrespective of whether the stakeholders are internal or external, the claims and interests of all stakeholders are the same. B. As the legal owners, employees in a public-stock company have the most legitimate claim on a company's profits. C. Within stakeholder groups there can be significant variation in the power a stakeholder may exert on a firm. D. Only internal stakeholders make specific contributions to a firm, which in turn provides different types of benefits to the external stakeholders.

C. Within stakeholder groups there can be significant variation in the power a stakeholder may exert on a firm.

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. Zhang 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.

C. Zhang Corp.

4) 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. Zhang 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.

C. Zhang Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years.

25) Which of the following firms will most likely not be a complementor to a firm that manufactures computers? A. a company that develops operating software B. a company that develops application software C. a company that manufactures its own brand of desktops and laptops D. a company that manufactures portable external disks

C. a company that manufactures its own brand of desktops and laptops

Which of the following best qualifies as a firm's internal stakeholder? A. an auditor assigned to the firm by a federal government agency B. a labor union with whom the firm's employees can affiliate C. a manager taking care of the firm's operations in a foreign market D. a competitor manufacturing the same products as that of the firm

C. a manager taking care of the firm's operations in a foreign market

When the strong dictatorial rule in Backenstein unexpectedly collapsed due to the shocking death of the royal family in an explosion, the nation's economy experienced drastic changes. The laws became more restrictive, the country lost many locally produced resources and products, and the distribution of wealth became inequitable. The unexpected event that led to these changes can best be described as a(n) _____ event. A. extinction B. wild card C. black swan D. miracle

C. black swan

46. Dollar Shave Club is an ecommerce start-up that delivers razors to its subscribers by mail. By doing this, Dollar Shave Club is using a(n) _____ to disrupt an existing market A. innovation ecosystem B. platform C. business model innovation D. incremental innovation

C. business model innovation

82. Dollar Shave Club is an ecommerce start-up that delivers razors to its subscribers by mail. By doing this, Dollar Shave Club is using a(n) _____ to disrupt an existing market A. innovation ecosystem B. platform C. business model innovation D. incremental innovation

C. business model innovation

29) A firm's resources and capabilities are costly to imitate. This is because rival companies do not clearly understand the relationship between the resources and capabilities controlled by the firm. In this case, the firm's competitive advantage is protected against imitation by A. path dependence. B. dependence complexity. C. causal ambiguity. D. social complexity.

C. causal ambiguity.

56. Competitors have found it extremely difficult to imitate Gene Electronics Inc.'s valuable resources, capabilities, or competencies. This is primarily because the source for the company's success has been unclear. The competitors are uncertain if Gene Electronics Inc.'s success is due to its strong leadership, the skills of its research and development team, or the timing of the company' s product introductions. Gene Electronics Inc. has been protected from losing its competitive advantage as a result of A. time compression diseconomies. B. resource homogeneity. C. causal ambiguity. D. path dependence.

C. causal ambiguity.

23) Amazon.com's ability to provide the largest selection of items online, combined with superior IT systems and customer service, can be referred to as its A. equity reserve. B. economic equity. C. core competency. D. capital gain.

C. core competency.

55. In a focused cost-leadership strategy, a firm A. caters to the segment of the market that is least cost-sensitive. B. provides high-priced products for many different segments of the mass market. C. delivers low-cost products and services to a specific, narrow part of the market. D. focuses on reducing the economic value created to drive down costs.

C. delivers low-cost products and services to a specific, narrow part of the market.

32) Leading guitar string producer Wound Up Inc. has enjoyed a competitive advantage based on its proprietary coating that gives its strings a clearer sound and longer lifespan than uncoated strings. One of Wound Up's competitors, however, has recently developed a similar coating using less expensive ingredients, which allows it to charge a lower price than Wound Up for similar-quality strings. Wound Up's competitive advantage is in danger due to A. a lack of perceived value B. a lack of organization C. direct imitation and substitution D. resource immobility

C. direct imitation and substitution

The board at TriCom Manufacturing Corp. has decided to allocate 20 percent of the company's shares to its workforce, at a discounted price. Apart from being a valued investment, the plan will allow the employees to take personal responsibility for the firm's performance. Which of the following employee incentive schemes does this best illustrate? A. employee provident fund B. employee gratuity fund C. employee stock ownership plan D. employee emergency loan program

C. employee stock ownership plan

The interaction between a firm and its diverse internal and external stakeholders is best described as a(n) A. ergonomic relationship. B. cartel arrangement. C. exchange relationship. D. fiduciary responsibility.

C. exchange relationship.

79. Green Rabbit Products Inc. (GRP) is a large conglomerate. The human resources department of its telecom division has decided to reduce its employee turnover by encouraging internal promotions. Which of the following strategies does this scenario best illustrate? A. corporate strategy B. business strategy C. functional strategy D. grand strategy

C. functional strategy

30) Clear Calls Inc., a telephone service provider, has a large user base mainly because phone calls and messages between all Clear Calls users are free. When a person switches to a Clear Calls network, his or her entire network of family and friends is likely to switch to the same network to avail the benefit of free calls and messages. In addition, an existing user who gets a new user to register with Clear Calls Inc. is given a free wireless connection. This has helped to keep competition away from Clear Calls. In this scenario, which of the following factors is acting as an entry barrier for Clear Calls Inc A. economies of scale B. high capital requirement C. network effects D. high fixed costs

C. network effects

44) When SW International declared a dividend of $20,000,000, its market value increased from $8 billion to $8.5 billion. However, it lost a chance to reinvest $20,000,000 in the research and development of a new product which would have earned a profit of $200 million. Thus, this $200 million is referred to as SW International's A. producer surplus B. consumer surplus C. opportunity cost D. social cost

C. opportunity cost

37) When companies that manufacture shipping containers want to buy iron ore, the purchase decision is solely based on price. This is because there are a large number of sellers in the iron ore industry, and iron ore is a highly undifferentiated commodity. Which of the following industry competitive structures does the iron ore industry best illustrate? A. monopoly B. oligopoly C. perfect competition D. monopolistic competition

C. perfect competition

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.

C. pursued distinct strategic positions.

As the legal owners, _____ have the most legitimate claim on a company's profits. A. creditors B. employees C. shareholders D. board members

C. shareholders

75. Amazon.com's network of distribution centers allow it to drastically reduce its delivery times compared to other online retailers. These distribution centers are examples of Amazon's A. core competency. B. intangible resources. C. tangible resources. D. capabilities.

C. tangible resources.

6) 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

C. the actions of managers within the firm

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

C. the actions of managers within the firm

24) Which of the following best describes a strategic trade-off? A. the tension between innovation and keeping manufacturing costs down B. the tension between maintaining both high-quality products and service C. the tension between value creation and the pressure to keep costs in check D. the tension between raising prices and keeping a loyal clientele

C. the tension between value creation and the pressure to keep costs in check

Which of the following forces is most closely related to industry effects within the automobile industry? A. the actions taken to improve employee productivity within a firm B. the human resource strategy managers adopt to acquire the best talent from the industry C. the types of products and the services offered within the industry D. the decisions made within a firm regarding pricing of a product in the market

C. the types of products and the services offered within the industry

59. When the laptop market overtook the desktop market, Blue Tech Inc., a leader in desktop technology, was left at a competitive disadvantage. Later, Blue Tech Inc.'s management channeled all of the company's efforts and revenue to develop an efficient laptop from scratch in less than a year. However, the company failed because Blue Tech Inc.'s models were inferior to the third- and fourth-generation models its competitors were selling. In this scenario, Blue Tech Inc.'s failure can be best attributed to A. causal ambiguity B. diseconomies of scope and scale C. time compression diseconomies D. social complexity

C. time compression diseconomies

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. trying to be everything to everybody by combining different competitive strategies

Which of the following factors most contributes to the U.S. automotive industry being characterized by high entry barriers?

Car manufacturers require large-scale production in order to be cost-competitive.

A

Competitive rivalry based solely on _____ is destructive to firms as it transfers most of the value created in the industry to the customers. A. price-cutting B. new product releases C. promotional campaigns D. product differentiation

While implementing strategic group mapping for the U.S. domestic airline industry, two strategic groups become apparent: low-cost, point-to-point airlines (Virgin Atlantic, Alaska Airlines, JetBlue, and Southwest Airlines) versus differentiated airlines using a hub-and-spoke system (American, Delta, and United). Which of the following statements is true about these two strategic groups?

Competitive rivalry between Virgin Atlantic and JetBlue is likely to be higher than that between American and Southwest Airlines.

A

Consider the five forces in the airline industry, which of the following best explains the situation in the industry? A. Substitutes are readily available in the form of trains and buses, thus reducing the profit potential in the industry. B. Suppliers have weak bargaining power because they offer products that are not differentiated C. Entry barriers in the industry are high resulting in hardly any new airlines popping up D. Consumers in the industry make decisions based on price, thus reducing the intensity of rivalry in the industry.

Managers at Sandburg Real Estate are surprised to hear that interest rates are likely to remain low for the next six months. Which of the following is an implication of low interest rates?

Consumer demand will increase.

B

Corner Market Inc. is a supermarket chain. Due to strong competition from other stores in the industry, Corner Market has aggressively used branding, pricing, and superior customer service to uniquely position itself in the market. As a result, the supermarket chain has been able to differentiate itself from its competitors and sell its products at higher prices. Which of the following industry competitive structures does this scenario best illustrate? A. perfect competition B. monopolistic competition C. monopoly D. oligopoly

Which of the following summarizes the difference between corporate strategy and business strategy?

Corporate strategy deals with where to compete; business strategy deals with how to compete.

D

Curry Rush is a premium Asian restaurant chain that differentiates itself from a large number of competitors by providing exclusively organic Vietnamese cuisine. It has some pricing power because it provides differentiated products and therefore, has some entry barriers in place. In this scenario, Curry Rush is most likely operating in a(n) A. oligopoly B. monopoly C. perfectly competitive industry D. monopolistically competitive industry

Which of the following statements is true of customer-oriented visions? Customer-oriented visions reduce a company's ability to adapt to a changing environment. Customer-oriented vision statements are not the same as listening to your customer. Customer-oriented visions identify how a customer need will be met. Customer-oriented visions define a business in terms of goods or services provided.

Customer oriented vision statements are not the same as listening to your customer

Why is it better for firms to keep their vision statements customer-oriented rather than product-oriented? Customer-oriented visions tend to have a more myopic view of changing environments. Customer-oriented visions tend to have a more short-range view of changing environments. Customer-oriented visions tend to be more flexible when adapting to changing environments. Customer-oriented visions tend to be more stable when dealing with changing environments.

Customer oriented visions tend to be more flexible when adapting to changing environments

Why is it better for firms to keep their vision statements customer-oriented rather than product-oriented?

Customer-oriented visions tend to be more flexible when adapting to changing environments.

A

Rhino Pictures Inc. is a large production company that controls a major portion of the movie industry's market share along with two other firms. Despite its competitiveness with the two other firms, it is influenced by their actions and often has to consider their strategic actions before acting on its own. In this scenario, Rhino Pictures Inc. is most likely functioning in a(n) _____ industry A. oligopolistic B. monopolistic C. perfectly competitive D. monopolistically competitive

In Strategy Highlight 2.1, what type of strategy did Diana, the Starbucks store manager in southern California, use to develop the new iced beverage for her store?

She used an emergent strategy.

A

Shield Autos Inc. has newly launched a luxury car into the European market. Which of the following would most likely not be a complement to the car? A. a premium car manufactured and sold by Mova Autos Inc., a rival company B. a bank that insures cars against theft and accidents C. a car service station managed and run by Shield Autos Inc. D. a stereo system that can be used as a GPS system in cars

D

Soapsuds Inc., a manufacturer of cleaning agents, supplies its products to All Needs Inc., a supermarket chain. It demands that All Needs create more shelf space in its stores for Soapsuds' products. However, All Needs Inc. refuses to do this. Instead, it decides to produce its own range of cleaning agents with its own label "All Wash." In this scenario, All Needs Inc. has exercised its bargaining power as a buyer through A. forward integration B. product differentiation C. crowdsourcing D. backward integration

Upper management at Softstep Inc., a manufacturer of insoles for shoes, wants to work on improving the product lines it already has without taking on other challenges at this time. Which of the following vision statements reflects that goal? Softstep Inc. wants to provide the best benefits for employees in the insole industry. Softstep Inc. wants to be the best manufacturer of insoles in the industry. Softstep Inc. wants to adapt their insoles to the changing demands of consumers. Softstep Inc. wants to always satisfy the consumers who purchase insoles.

Softstep Inc. wants to be the best manufacturer of insoles in the industry.

Both Bison Autos and Sparrow Inc. incur a cost of $9,000 to manufacture a vehicle. However, the economic value created by Sparrow Inc. is more than that created by Bison Autos. What does this indicate?

Sparrow Inc. can charge a premium price on its automobiles.

long-term oriented

Strategic commitments are actions that are:

Which of the following statements is true of strategic initiatives?

Strategic initiatives can be the result of a response to external trends or come from internal sources.

Which of the following statements is true of strategic initiatives? Strategic initiatives can be the result of a response to external trends or come from internal sources. When lower-level employees are less empowered, the possibility of strategic initiatives is higher. Strategic initiatives result from top-down planning by executives and not through a bottom-up process. Random events and accidental happenstances reduce the possibility of strategic initiatives in organizations.

Strategic initiatives can be the result of a response to external trends or come from internal sources.

What is the strategic management process?

Strategic leaders design a method to formulate and implement strategy.

________ is best described as an integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage.

Strategic management

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

Sustainable competitive advantage

In a large company, who is most responsible for devising the corporate strategy? The CEO of the company The lower-level employees in the company The head of the production department in the company The human resource manager in the company

The CEO of the company

C

The _____ allows the scanning, monitoring, and evaluating of changes and trends in a firm's macro environment A. VRIO framework B. SWOT analysis C. PESTEL framework D. BCG matrix E. Five Force model

Yuki is part of a sales team. He effectively coordinates his tasks with others in the team and willingly contributes to their efforts in achieving the team's objectives. Thus, Yuki is in ________ of the Level-5 leadership pyramid.

Level 2

Gerald has been an employee with GeoFuture Inc. for 15 years. He started with an entry-level job, and today he is a manager of an entire division. Over the years, Gerald has acquired a reputation for doing the right things in the company. Hence, as an efficient leader, he is capable of effectively communicating and motivating his subordinates to work toward the company's vision and mission. According to the Level-5 leadership pyramid, which is the highest level of leadership Gerald has reached so far? Level 5 Level 4 Level 3 Level 2

Level 4

Trung has been an employee with PureEnergy Inc. for 15 years. He started with an entry-level job, and today he is a manager of an entire division. Over the years, Trung has acquired a reputation for doing the right things in the company. Hence, as an efficient leader, he is capable of effectively communicating and motivating his subordinates to work toward the company's vision and mission. According to the Level-5 leadership pyramid, which is the highest level of leadership Trung has reached so far?

Level 4

competitive advantage

Mainline Ltd. is a landline telephone manufacturer whose average return on invested capital is approximately 2 percent. Because demand for landline telephones has declined significantly, the industry average return on invested capital has been negative (-5 percent) for the last few years. In this scenario, Mainline Ltd. has a:

Marigold's organizational structures do not align with the vision.

Marigold Servers, a web services firm, has experienced a 7% decline in revenues in consecutive quarters. In an effort to reduce operating costs, managers reduced the customer service staff from 12 employees to 6. Management also enlisted the remaining employees to help produce a new company vision: to give customers of all budgets a customization, stress-free web hosting experience. What is wrong with this scenario?

Marigold Servers, a web services firm, has experienced a 7% decline in revenues in consecutive quarters. In an effort to reduce operating costs, managers reduced the customer service staff from 12 employees to 6. Management also enlisted the remaining employees to help produce a new company vision: to give customers of all budgets a customizable, stress-free web hosting experience. What is wrong with this scenario? Marigold's vision is not aspirational. Marigold's organizational structures do not align with the vision. Marigold's vision is not customer-oriented. Internal stakeholders were not invested in defining the vision.

Marigold's organizational structures do not align with the vision

As the strategic manager of CutRite Scissors, you are tasked with producing a strategy for introducing a new line of premium scissors. Your competitor produces a line of similar scissors at a cost of $1 and sells them for $12. Because your company has inferior production capabilities, your scissors will cost $3 each to produce. However, your handle is proven to be more comfortable than your competitors'. Assuming you are guaranteed to sell the same number of units as your competitor, which of the following strategies is most likely to achieve a competitive advantage?

Market CutRite scissors as a higher-quality alternative and sell them for $15.

Toy sales have declined by 10 percent each year, forcing many retailers to exit the industry. To eliminate its remaining competition, Bleaker Toys sells all of its product at a loss and relies on its significant cash holdings to cover costs until its competition is forced to exit the industry. Is this an example of a successful strategy? Why or why not? Yes. Any strategy that forces competition from the market is by definition successful. No. Bleaker has failed to create value for its customers. No. Bleaker's strategy and competitive advantage are unsustainable. Yes. Bleaker has achieved a sustainable competitive advantage by selling its toys at a lower price than competitors.

No. Bleaker's strategy and competitive advantage are unsustainable

Toy sales have declined by 10 percent each year, forcing many retailers to exit the industry. To eliminate its remaining competition, Bleaker Toys sells all of its product at a loss and relies on its significant cash holdings to cover costs until its competition is forced to exit the industry. Is this an example of a successful strategy? Why or why not?

No. Bleaker's strategy and competitive advantage are unsustainable.

Which of the following is an example of a business acting upon an organizational core value? Pegasus Autos reduces engine emissions below federal guidelines to reduce pollution. Pegasus Autos lowers its retail prices to gain an advantage over its closest competitor. Pegasus Autos finances research for developing more powerful engines. Pegasus Autos launches an ad campaign that promotes the company as being environmentally friendly.

Pegasus Autos reduces engine emissions below federal guidelines to reduce pollution

value drivers

Product features, customer service, and complements are all examples of important:

Ida has been tasked with formulating the business strategy for Contour Cosmetics' new line of lipsticks. Which of the following ideas would Ida be likely to include in her proposal?

Promote the lipsticks as the longest-lasting on the market.

PowerPills is a highly successful vitamin manufacturer. At the close of its most recent fiscal year, the company's balance sheet showed cash holdings of $110 million. Which of the following actions will provide the most benefit for stakeholders?

Reinvest profits into expanding the company and creating more jobs.

Soil and Sod Gardening Supplies has a vision of helping every American learn how to grow their own food. Its management team recently unveiled the mission statement "A garden at every home." What is wrong with this mission statement?

It does not indicate how the company will accomplish its goals.

Cobalt Sodas has seen its market share erode in recent years, as consumers increasingly turn toward healthier beverage choices such as unsweetened sparkling water. Hoping to rekindle interest in sugary sodas, Cobalt decides to produce a limited run of "throwback" cans using labeling first introduced in the 1980s. What is wrong with this strategy? It fails to face the competitive challenge. It does not involve concrete actions. It lacks strategic commitments. It tries to be everything to everybody.

It fails to face the competitive challenge

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?

It has a competitive advantage in the industry.

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? It has formed a strategic alliance with other firms in the industry. It has a competitive disadvantage in the industry. It has a competitive advantage in the industry. It has competitive parity with other firms in the industry.

It has a competitive advantage in the industry.

Which of the following best explains why a blue ocean strategy is difficult to implement?

It requires the reconciliation of fundamentally different strategic positions—differentiation and low cost.

Which of the following is a primary feature of the five forces model?

It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.

B

The aging of the population, changes in ethnic composition, and effects of the baby boom are A. macroeconomic changes. B. demographic changes. C. global changes. D. sociocultural changes

Lu runs a company that manufactures satellites for commercial and government use. It has few rivals. At the moment, the power of buyers, the power of suppliers, and the threat of substitutes are all low. Based on this information, what can Lu conclude?

The company is likely to be very profitable as long as the threat to entry is low.

The "diagonal assembly system" was a production system pioneered by the automobile company Gogo. Recently, Gogo was able to sue a competitor and won the suit, thereby receiving $100 million in damages. Which of the following would most likely enable Gogo to win such a lawsuit?

The competitor infringed on Gogo's patent of the "diagonal assembly system."

A

The final step in industry analysis is to A. draw a strategic-group map. B. identify the underlying drivers of the five forces. C. identify the key players in each of the five forces. D. define the relevant industry.

define a firm's vision, mission, and values.

The first step to gain and sustain a competitive advantage is to:

A

The government of Filvia has mandated that the standard minimum wage in the country be increased to $8,000 per year. This has ensured that all firms in the country pay their employees at least $8,000 per year, which has brought about a higher standard of living for the people of Filvia. Which of the following factors in a firm's general environment does this mandate best indicate? A. legal factors B. sociocultural factors C. technological factors D. ecological factors E. economic factors

Kimba Inc. is a manufacturer of smart watches that track the wearer's heart rate and sleep patterns. Which of the following is most likely an implication of new firms entering this industry?

The incumbent firms will spend more to satisfy their existing customers.

Which of the following methods of developing a strategy best illustrates scenario planning?

The managers at Lyon Clothing Inc. formulated a strategy that is able to handle small to medium to large increases in the prices of cotton in the future.

C

The primary objective of Porter's five forces model is to A. replace a firm's competitive advantage with competitive parity. B. understand the cost potential of different industries. C. understand the profit potential of different industries. D. break down a firm's value chain activities into primary and support E. reduce the gap between the value of a firm's product and its cost of production.

Which of the following strategies best illustrates a functional strategy? The CEO of Dawn Companies Inc. has decided that the company will be entering the Asian market. The general manager of a product division of Aster Products Inc. has decided that 30 percent of the division's annual profits will be invested in research and development. The regional manager for the consumer electronics division of Dawson & Co. has decided that the division will pursue backward integration to save costs. The production manager at the apparel division of Style Culture Co. has decided that the department will hire contract workers for three months to meet the temporary demand.

The production manager at the apparel division of Style Culture Co. has decided that the department will hire contract workers for three months to meet the temporary demand.

B

The relative bargaining power of suppliers is high when A. suppliers provide products that are identical B. suppliers provide products that are differentiated C. incumbent firms can credibly threaten to backward integrate into the industry D. suppliers depend heavily on the industry for a large portion of their revenues E. incumbent firms face low supplier switching costs

Ivan is the founder of a firm producing self-driving vehicles. Because the industry is so new and chaotic, Ivan favors a top-down strategic planning approach in which he exerts strong control over all aspects of the business, from product development and design to manufacturing and marketing. What is wrong with this scenario?

The self-driving vehicle industry is changing too much for the top-down approach to be effective.

D

The telecommunication industry of United Canava is primarily dominated by three large firms: AD Telecom Inc., Mystic Telecom Corp., and Total Talk Inc. Instead of cutting prices competitively, these firms have resorted to non-price competition through branding and product differentiation. Which of the following industry competitive structures are these companies most likely in? A. monopoly B. perfect competition C. monopolistic competition D. oligopoly

How are cumulative learning and experience effects of a company most likely to affect Michael Porter's five forces?

Threat of new entrants will be low.

Which of the following is a customer-oriented vision? To be the most progressive insurance company To be the best automobile company in the world To enable people throughout the globe to identify their capabilities To manufacture innovative products through continuous learning

To enable people throughout the globe to identify their capabilities

competitive disadvantage

Under-performance relative to other firms in the same industry or the industry average results in a(n) ________ for a firm.

Bethany is a chef who owns three moderately successful restaurants with innovative menus. Based on what you have read, which of these approaches could help her improve her profits?

Use her existing knowledge, equipment, and staff to launch a catering business.

Which of the following provides an example of what AFI strategy framework is used for?

Using AFI, the Gasquet Motor Company was able to implement a strategy that produced high-quality cars more efficiently and thereby reduced costs.

________ denotes the dollar amount a consumer would attach to a good or service.

Value

the increase in value creation exceeds the increase in costs.

Value drivers contribute to a firm's competitive advantage only if:

Which of the following best describes a Level-5 manager in the Level-5 leadership pyramid? Gina is an employee who just started her career GL Inc.; she has already been appreciated for her knowledge and skills in the new company. Derek is an employee at One Triangle Inc.; he has helped his team achieve their targets by contributing to the team's efforts. Harry is part of the marketing team at JB Corp.; he has been given the charge of managing a team of three based on which he will be promoted to a manager's position next month. Walter is the CEO of Red Autos Inc.; he has helped his company in gaining and sustaining a competitive advantage through ethical decision making.

Walter is the CEO of Red Autos Inc.; he has helped his company in gaining and sustaining a competitive advantage through ethical decision making.

The CEO of True West Products Inc. (TWC) is a company that sells a wide range of products. It has decided to enter the markets of emerging nations like China and Brazil. This means that the cars, consumer electronics, and services such as hotels included under the TWC banner would be made available in these nations. Which of the following strategies does this scenario best illustrate? A. Corporate strategy-where to compete -W-W B. Functional strategy C. Business strategy D. Divisional strategy

a

The Chief Executive Officer (CEO) of PepsiCo, Indra Nooyi, subscribes to a triple-bottom-line approach to competitive advantage—considering not only economic, but also social and environmental performance. Based on this, which of the following is a mission of PepsiCo? A. Including healthy choices in its lineup B. Performing with a purpose C. Focusing on only the nonalcoholic beverages line of business D. Splitting PepsiCo into two standalone companies each focusing on beverages and snack foods respectively

a

The executives at Red Couture Inc. are developing strategic plans to address plausible future situations like rise in the prices of cotton and synthetic fabrics by 20 percent, appreciation in the value of dollar, increase in the cost of labor by 30 percent, and increase in demand for the company's products. By doing so, the company will be well-prepared with its planned responses if any of these situations occurs in the future. Thus, Red Couture is employing _____ as the approach to the development of strategy. A. scenario planning B. top-down strategic planning C. reverse engineering D. pattern recognition

a

The first step in the strategic management process is to: A. define a firm's vision, mission, and values. B. understand the strategies of the competitors. C. put the guiding policies of a firm into practice. D. develop functional and business level strategies.

a

The production department at Coral Cements that is a subsidiary of the large conglomerate Five East Corp. has decided to adopt the FIFO (first in, first out) method of inventory to dispatch its cement bags. Which of the following strategies does this scenario best illustrate? A. Functional strategy B. Corporate strategy C. Master strategy D. Business strategy

a

To be effective, firms need to: A. back up their visions with strategic commitments that are costly and difficult to reverse. B. increase their strategic flexibility by developing product-oriented vision statements. C. isolate top managers from the organizational values. D. pursue visions that are exclusively financial and not aspirational.

a

Unrealized strategy is when parts of a firm's intended strategy is: A. nonfunctional due to unexpected events. B. not revealed to the lower-level employees. C. implemented and controlled by front-line employees. D. planned to tackle some unforeseen events.

a

Which of the following functions do the general managers in strategic business units primarily perform? A. Design generic business strategies based on guidelines received from corporate headquarters B. Set overarching strategic objectives to unify the entire conglomerate under one mission C. Take responsibility for decisions and actions within a single functional area D. Allocate scarce resources among different business divisions

a

Which of the following is an assumption that top-down strategic planning rests on? A. We can predict the future from the past. B. Time cannot be compressed at will. C. Decisions made in the past do not affect our future. D. Change is constant.

a

Which of the following statements about product-oriented visions is true? A. They tend to force managers to take a myopic view of the landscape. B. They allow companies to effectively adapt to changing environments. C. They define a business in terms of providing solutions to customers. D. They allow firms to take a need-based approach to their goals.

a

Which of the following statements is true of strategic initiatives? A. Strategic initiatives can be the result of a response to external trends or come from internal sources. B. When lower-level employees are less empowered, the possibility of strategic initiatives is higher. C. Strategic initiatives result from top-down planning by executives and not through a bottom-up process. D. Random events and accidental happenstances reduce the possibility of strategic initiatives in organizations.

a

_____ are primarily responsible for decisions and actions within their respective departments like finance, human resources, marketing, and production in a strategic business unit. A. Functional managers B. Corporate executives C. Strategic leaders D. General managers

a

_____ is best described as a strategy process in which organizational structure and systems allow bottom-up strategic initiatives to emerge and be evaluated and coordinated by top management. A. Planned emergence B. Scenario planning C. Top-down strategic planning D. Reverse engineering

a

Which of the following best qualifies as a firm's internal stakeholder?

a manager taking care of the firm's operations in a foreign market

Which of the following is an element of good strategy? an approach that underestimates the competition a set of coherent actions to implement the firm's guiding policy a guiding policy to address employee satisfaction a summary of the firm's history within its industry

a set of coherent actions to implement the firm's guiding policy

Which of the following is the best characterization of sociocultural forces?

a society's culture, norms, and values

C

What is the rule of thumb behind Porter's five forces model? A. The stronger the five forces, the greater the industry's profit potential—making the industry less attractive.. B. The stronger the five forces, the lower the industry's profit potential—making the industry more attractive. C. The weaker the five forces, the greater the industry's profit potential—making the industry more attractive. D. The weaker the five forces, the lower the industry's profit potential—making the industry less attractive.

stuck in the middle

When a blue ocean strategy goes bad, a firm has neither a clear differentiation nor a clear cost-leadership profile. This situation is referred to as:

C

When companies that manufacture shipping containers want to buy iron ore, the purchase decision is solely based on price. This is because there are a large number of sellers in the iron ore industry, and iron ore is a highly undifferentiated commodity. Which of the following industry competitive structures does the iron ore industry best illustrate? A. monopoly B. oligopoly C. perfect competition D. monopolistic competition E. C and D

C

When fashion magazines face competition from fashion blogs on the web, which of the following forces in Michael Porter's five forces model primarily gets stronger? A. the emergence of entry barriers B. the bargaining power of suppliers C. the threat of substitutes D. the threat of complements E. the availability of complements

the tension between value creation and the pressure to keep costs in check

Which of the following best describes a strategic trade-off?

C

Which of the following best illustrates a firm operating in a monopolistically competitive industry? A. A foreign exchange company sells currencies of different countries at market prices as it cannot differentiate its products from its competitors. B. A chain of multiplex theaters, along with its competitor, owns 80 percent of the multiplex market share. C. An automobile manufacturer uses branding, pricing, and superior advertising to differentiate itself from a large number of other automobile manufacturers. D. A railway company owned by the government of Darvland owns 100% of the railway transport in the country.

C

Which of the following do the sociocultural forces in a firm's external environment best represent? A. the interest rates prevalent in an economy B. the laws protecting small enterprises in a nation C. the family size of the firm's target market D. the rate of employee attrition within the firm

E

Which of the following factors best contributes to the U.S. automotive industry being characterized by high entry barriers? A. New auto companies create electric cars powered by simpler motors and gearboxes B. New entrants in the automotive industry expect that incumbents will not or cannot retaliate C. Car manufacturers require small-scale production in order to be cost-competitive D. Few industrial products are as easy to build as cars powered by internal combustion engines E. Car manufacturers require large-scale production in order to be cost-competitive

a set of coherent actions to implement the firm's guiding policy

Which of the following is an element of good strategy?

B

Which of the following is an example of monopolistic competition? A. iron ore industry B. computer hardware industry C. express delivery industry D. beverages industry E. utility industry

C

Which of the following is an implication of low interest rates? A. Cost of capital for firms will be high B. Firms will invest less in future growth C. Consumer demand will increase D. Economic growth rate will fall E. Consumer demand will decrease

E

Which of the following is likely to happen due to horizontal mergers between competitors such as Delta and Northwest airlines? A. The overall industry profitability will increase. B. The threat of strong competitive forces such as supplier power will increase. C. There will be fewer competitors. D. The structure of the industry will change from consolidated to one that is fragmented. E. A and C

D

Which of the following is most likely an implication of new firms entering an industry? A. The bargaining power of buyers will reduce B. The industry's overall profit potential and sales will increase C. The rivalry among existing competitors will reduce D. The incumbent firms will spend more to satisfy their existing customers

B

Which of the following represents an economic factor in a firm's external general environment A. the government regulations and laws in the country in which the firm exists B. the stage of the business cycle that the country is in C. the values and norms prevalent in the society in which the firm operates D. the bargaining power of the firm's suppliers and buyers

C

Which of the following statements accurately brings out the difference between monopolistic competition and oligopoly? A. Sellers in an oligopoly provide highly differentiated products; in monopolistic competition, the products sold are undifferentiated or standardized B. In an oligopoly, the number of buyers is large; in monopolistic competition, the number of buyers is limited to three or four. C. In monopolistic competition, many firms compete against each other; in an oligopoly, there are few large firms competing against each other D. In monopolistic competition, a few compete against each other; in an oligopoly, there are many large firms competing against each other. E. Firms in an oligopoly have no pricing power; firms in a monopolistically competitive industry have the ability to raise prices.

B

Which of the following statements is not true about the five forces in Porter's competitive analysis model? A. The relative strengths of the five forces that shape competition are context-dependent B. The stronger the five forces in an industry, the greater the industry's profit potential C. Competition in the model is described as the tug-of-war between the five forces to capture as much as possible of the economic value created in an industry D. An analysis of the five forces provides the basis for how a firm should position itself to gain and sustain a competitive advantage

C

Which of the following statements with regard to industry structures is true? A. They are stable over time, not dynamic. B. Having a large number of competitors generally equates to higher industry profitability. C. A consolidated industry tends to be more profitable than a fragmented one. D. Having few but large competitors increases the threat of strong competitive forces such as supplier/buyer power.

B

Which of the following strategies will be most detrimental to firms that are close rivals operating in an oligopolistic industry structure? A. competing against each other through product differentiation B. competing against each other through price-cutting C. competing against each other through new-product introductions D. competing against each other through lifestyle advertisements

B

While Burger Cult Inc. operates in a monopolistically competitive industry, Citizen Telecom Inc. operates in a monopoly. Keeping this information in mind, which of the following statements is most likely true? A. The threat of new entrants will be lower for Burger Cult Inc. than Citizen Telecom Inc. B. The threat of new entrants will be higher for Burger Cult Inc. than Citizen Telecom Inc. C. Burger Cult Inc. will have more profit potential than Citizen Telecom Inc. D. The number of buyers will be limited for both Burger Cult Inc. and Citizen Telecom Inc. E. Burger Cult Inc. will have more pricing power than Citizen Telecom Inc.

C

Why do firms operating in a monopolistically competitive industry have the power to raise the prices of their products? A. The competition in the industry is insignificant B. The number of buyers in the industry is small C. The firms can differentiate their product offerings D. The entry barriers in the industry are extremely high

Which of the following scenarios illustrates a firm that has a sustainable competitive advantage?

Zhang Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years.

A

_____ is best described as cooperation by competitors to achieve a strategic objective. A. Co-opetition B. Conglomeration C. Amalgamation D. Liquidation

Strategy

________ is best described as a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors.

Economies of scale

________ is best described as decreases in cost per unit as output increases.

Minimum efficient scale

________ is best described as the output range needed to bring down the cost per unit as much as possible, allowing a firm to stake out the lowest-cost position that is achievable through economies of scale.

A _____ is best described as any activity a firm pursues to explore and develop new products and processes, new markets, or new ventures. A. strategic initiative B. value chain C. supply chain D. corrective action

a

According to the Level-5 leadership pyramid, a manager at Level 3 has acquired the ability to: A. organize resources effectively to accomplish predetermined goals. B. build enduring greatness into the organizations he or she leads. C. identify the vision and the mission of the company. D. justify unethical activities as legal and ethical.

a

According to the Level-5 leadership pyramid, a manager in Level 1 typically: A. makes productive contributions through motivation, talent, knowledge, and skills. B. works effectively with others to achieve synergies and team objectives. C. presents compelling vision and mission to guide groups toward superior performance. D. builds enduring greatness into the organizations he or she leads.

a

According to the Level-5 leadership pyramid, a manager turns into an executive who is capable of building lasting greatness into the organization through a combination of will power and humility when he or she reaches _____. A. Level 5 B. Level 3 C. Level 2 D. Level 1

a

After carefully assessing the market potential for hybrid cars, it was decided at the corporate headquarters of Unidawn Autos Inc. that the company would be launching a hybrid version of all its car models within the next two years. This would mean that each strategic business unit under the company would be involving in its own research and development efforts. Which of the following strategies in the planned emergence model does this best illustrate? A. Intended strategy B. Emergent strategy C. Unrealized strategy D. Tactical strategy

a

As the CEO of a conglomerate, Juana Mark exhibited her strong commitment toward the company's core value that customer's well-being is more important than profit when she decided to liquidate the company's tobacco subsidiary. The tobacco brand sold by her company was a major revenue earner in lesser-developed nations. However, Juana believed that her company had to be responsible toward the society. In this scenario, Juana has demonstrated _____. A. strategic leadership B. intrapreneurship C. Machiavellianism D. individualism

a

Carrvour Inc. is a company that manufactures steel, cement, cars, and consumer electronics under a single brand. The top management at Carrvour has decided to enter the banking and insurance industry based on its assessment of the profit potential in that industry. Which of the following strategies does this best illustrate? A. Corporate strategy B. Business strategy C. Functional strategy D. Divisional strategy

a

In a large company, who is most responsible for devising the corporate strategy? A. The CEO of the company B. The lower-level employees in the company C. The head of the production department in the company D. The human resource manager in the company

a

Strategic thinking is different from strategic planning in that: A. strategic thinking includes all types of information sources while strategic planning does not. B. strategic thinking relies more on hard data than strategic planning. C. strategic thinking is regimented and confining, whereas strategic planning is more flexible. D. strategic thinking can create an illusion of control, whereas strategic planning avoids this.

a

Kirsten, a manager, is writing an analysis of her employer's current and possible future revenues. Which of the following could she identify as an economic factor in her firm's external general environment?

the stage of the business cycle that the country is in

The internet service provider industry in the country of Megalopolis is an industry characterized by the presence of strong network effects, high brand loyalty, high economies of scale, and proprietary technology among incumbent firms. Thus, in the internet service provider industry, the

threat of new entrants is most likely low.

When the laptop market overtook the desktop market, Blue Tech Inc., a leader in desktop technology, was left at a competitive disadvantage. Later, Blue Tech Inc.'s management channeled all of the company's efforts and revenue to develop an efficient laptop from scratch in less than a year. However, the company failed because Blue Tech Inc.'s models were inferior to the third- and fourth-generation models its competitors were selling. In this scenario, Blue Tech Inc.'s failure can be best attributed to

time compression diseconomies.

The Founder of Teach for America, Wendy Kopp, wants to make teaching an attractive option for promising young professionals. Identify the phrase that represents the vision she developed for Teach for America. to improve standardized test scores across the board to encourage parents to take a more active role in their children's education to cut wasteful spending from education budgets to give all children in the United States the opportunity to attain an excellent education.

to give all children in the United States the opportunity to attain an excellent education

The Founder of Teach for America, Wendy Kopp, wants to make teaching an attractive option for promising young professionals. Identify the phrase that represents the vision she developed for Teach for America.

to give all children in the United States the opportunity to attain an excellent education.

Which of the following vision statements is most likely to produce a sustainable competitive advantage for an auto dealership?

to help our customers find the perfect car for their individual needs.

During the process of formulating an effective business model, a firm's managers should first

transform their strategy of how to compete into a blueprint of actions and initiatives.

Questions asked during the strategy analysis stage of the AFI framework include "How does the firm make money?" and "What effects do forces in the external environment have on the firm's potential to gain and sustain a competitive advantage?" T/F

true

For a firm that operates in an industry where competition is high, which of the following practices will result in inferior performance?

trying to be everything to everybody by combining different competitive strategies

During strategy implementation, managers primarily focus on deciding the

type of corporate governance that is most effective and ways in which it can put the formulated strategy into practice.

Molly Hue Apparels Inc. (MHA) had been outsourcing its production to less-developed countries in order to reduce its cost of production. With the emergence of its competitor, Hova Inc., MHA lost its competitive advantage. Hova had its production units in its home country that allowed the company to bring out the latest trends to the market earlier than MHA. Also, MHA frequently suffered due to political instability and lack of intellectual property laws in the outsourced countries. Thus, parts of MHA's strategies became obsolete and it had to relocate its production. What are such obsolete strategies referred to as in the planned emergence model?

unrealized strategy

The CEO of Mabel Automobiles was the child of parents who had difficulty making enough money to support their family. As a result, he and his siblings did not have access to many advantages that children from wealthier families had. This CEO, therefore, emphasized making affordable, low-maintenance vehicles that could be bought by low-income households. Which of the following does this example demonstrate?

upper-echelons theory

Product features, customer service, and complements are all examples of important

value drivers.

When do employees fail to adopt the organizational values of a firm?

when the top managers in the firm are merely paying lip service to the firm's stated values

As a part of strategy formulation, corporate strategy concerns questions relating to: why we should compete. how to compete. where to compete. how to implement the business strategy.

where to compete.

Nate is a recent graduate who states that he has interned at a major accounting firm so that his value as a candidate for employment increases. A start-up recruits Nate based on his stated credentials without verifying them. Two days into the job, Nate's team lead realizes that Nate does not know much of what he claimed to know during the interview. This scenario best exemplifies

adverse selection.

Unlike the financial ratios based on accounting data, total return to shareholders is

an external performance metric.

Luz manages a chain of bars and restaurants in a tri-county area that has recently experienced an economic boom because of fracking and high oil prices. What is most likely to happen when there is too much money in the tri-county economy?

an increase in prices

Body Sync Inc. is a chain of gyms. It offers a fitness package that allows its members to use the gym facilities for 12 months by paying only for 10 months. Included in the package are two health checkups and a gym kit. These add-ons by themselves are not very valuable, but as a package they can enhance the perceived value of the service offerings. In this case, Body Sync's primary value driver is

availability of complements.

A company's strategic business unit: A. does not need to adopt the overall corporate strategy. B. is responsible for its own profit and loss. C. is a division solely created to design strategies during turbulent times. D. decides which industries and markets to compete in for an entire conglomerate.

b

A(n) _____ is best described as a standalone division of a larger conglomerate, with its own profit-and-loss responsibility. A. corporation B. strategic business unit C. affiliate company D. functional department

b

A(n) _____ is best described as the strategic option that top managers decide most closely matches the current reality and which is then executed. A. bottom-up emergent strategy B. executive summary C. realized strategy D. dominant strategic plan

b

According to the upper-echelons theory, the organizational outcomes of a company primarily reflect the values of the _____. A. production workers in the company B. CEO of the company C. housekeeping staff in the company D. external stakeholders of the company

b

Gerald has been an employee with GeoFuture Inc. for 15 years. He started with an entry-level job, and today he is a manager of an entire division. Over the years, Gerald has acquired a reputation for doing the right things in the company. Hence, as an efficient leader, he is capable of effectively communicating and motivating his subordinates to work toward the company's vision and mission. According to the Level-5 leadership pyramid, which is the highest level of leadership Gerald has reached so far? A. Level 5 B. Level 4 C. Level 3 D. Level 2

b

In the top-down strategic planning approach, all strategic intelligence and decision-making responsibilities rest primarily on the _____. A. functional managers B. chief executive officer C. external stakeholders D. general manager

b

Orange Synergy Inc. is a company that manufactures a variety of products that run on solar power. The company wants to ensure that solar technology replaces all forms of exhaustible energy sources in the near future. Which of the following statements will make an accurate vision for Orange Synergy? A. We make products that run on solar energy. B. All nations around the globe should have access to a sustainable energy source. C. The company aims to make working fun and pleasurable for its employees. D. We provide energy-efficient sources and services by investing in research and innovation.

b

Organizational values are the _____ that govern the behavior of individuals within a firm or organization. A. economic measures B. ethical standards and norms C. political principles and policies D. social beliefs and actions

b

Strategic commitments are actions that are: A. inexpensive. B. long-term oriented. C. easy to reverse. D. easy to imitate.

b

Teddiez Inc. is a company that manufactures and sells stuffed toys. It sources its materials from another country to keep costs low. A sales personnel in one of its retail stores noticed that there was increasing concern regarding the potential toxicity of the materials in the dolls. In response, she found an economical, organic, and non-toxic cloth filling that the company could use. When her manager learned about this, he presented the prospect and got it approved from the top management team. This is an example of the: A. top-down strategic planning approach. B. planned emergence approach. C. scenario planning process. D. reverse engineering process.

b

The production head at the canned juice unit of True Foods Inc. would frequently stay back after office hours and experiment with new fruit juice flavors though this was part of the new product development team's job. As a result of these experiments, he came up with two new flavors of fruit juices, cherry-melon and melon-mint. After rigorous test marketing, which proved that the market would accept the new drinks, the product variants were successfully launched. Which of the following strategies does this scenario best illustrate? A. Intended strategy B. Emergent strategy C. Unrealized strategy D. Tactical strategy

b

To support the rise of emergent strategies, an organization should: A. centralize decision-making and all other activities. B. empower lower-level employees to take up autonomous actions. C. limit serendipity that is in the form of random events and accidental happenstances. D. rely solely on hard data to formulate strategies.

b

Top-down strategic planning as an approach to the strategic management process will be most effective when the: A. environment is constantly changing. B. size of the firm is large. C. probability of black swan events is high. D. top management wants to decentralize decision making.

b

Visionary companies are able to outperform their competitors because: A. their vision statements are more product-oriented. B. they provide more aspirational visions. C. their visions are exclusively financial. D. they isolate internal stakeholders in defining their visions.

b

When do employees fail to adopt the organizational values of a firm? A. When the internal stakeholders of the firm are involved in designing the values B. When the top managers in the firm are merely paying lip service to the firm's stated values C. When the strategic leaders in the firm propagate and exhibit the same values D. When the organizational structure, such as its strategic decision making, is aligned with its values

b

Which of the following best illustrates a strategic business unit (SBU)? A. The human resource department of a large company that is responsible for hiring employees for all its divisional branches B. The consumer electronics division of a large company that also manufactures automobiles, apparel, and processed food C. The product development team at the headquarters of a fast-food chain D. The market segment which can be categorized between the income levels $10,000 and $25,000

b

Which of the following reasons justifies the view that functional managers should be allowed to initiate strategic initiatives based on autonomous actions? A. Functional managers have more control and power in the organization than corporate executives. B. Functional managers are much closer to the final products, services, and customers than corporate-or business-level managers. C. Functional managers have a bigger role in identifying a company's vision and mission than the strategic leaders. D. Functional managers are Level-5 managers in the Level-5 leadership pyramid when compared to the executives who are at Level-4.

b

Which of the following statements accurately brings out the difference between top-down strategic planning and scenario planning? A. While in top-down strategic planning a top-down approach is used to develop strategies, in scenario planning a bottom-up approach is used. B. Scenario planning helps create strategic plans that are more flexible, and thus more effective, than those created through the more static strategic planning approach. C. While top-down strategic planning takes place at both the corporate and business levels of strategy, scenario planning takes place only at the corporate level. D. Top-down strategic planning addresses only pessimistic futures, whereas scenario planning addresses only optimistic futures.

b

Which of the following statements is true of corporate strategy? A. The objective of corporate-level strategy is to ensure that the sum of the values of individual business units is greater than the overall corporate value. B. A corporate strategy must be able to create synergies across business units that are quite different. C. Formulating a corporate strategy involves general managers answering questions relating to how to compete in order to achieve superior performance. D. Deciding whether to adopt a differentiation or a cost-leadership strategy is part of formulating the corporate strategy.

b

Which of the following statements is true of customer-oriented visions? A. Customer-oriented visions identify how a customer need will be met. B. Customer-oriented vision statements are not the same as listening to your customer. C. Customer-oriented visions reduce a company's ability to adapt to a changing environment. D. Customer-oriented visions define a business in terms of goods or services provided.

b

Which of the following statements is true of top-down strategic planning? A. Information flows both ways in the process, from the upper management to the lower management and also the other way around. B. In this process, the formulation of strategy is separate from implementation. C. Employees at the operation level have major responsibility in strategizing for competitive advantage. D. The process is based on the assumption that the past cannot be used to predict the future.

b

_____ is best described as a rational process in which executives at a company's headquarters take primary responsibility to program future success of the company they lead. A. Bottom-up strategic approach B. Top-down strategic planning C. Reverse mentoring D. Emergent strategic plan

b

To be effective, firms need to pursue visions that are exclusively financial and not aspirational. increase their strategic flexibility by developing product-oriented vision statements. isolate top managers from the organizational values. back up their visions with strategic commitments that are costly and difficult to reverse.

back up their visions with strategic commitments that are costly and difficult to reverse

A firm always has a competitive disadvantage when its return on invested capital is below the industry average. declining steadily over two or more years. about the same as its closest competitor. 2 percent or lower in a declining industry.

below the industry average

Which of the following describes a situation in which firms acquire resources at a low cost, laying the foundation for a competitive advantage later?

better expectations of future resource value

When the strong dictatorial rule in Backenstein unexpectedly collapsed due to the shocking death of the royal family in an explosion, the nation's economy experienced drastic changes. The laws became more restrictive, the country lost many locally produced resources and products, and the distribution of wealth became inequitable. The unexpected event that led to these changes can best be described as a(n) ________ event.

black swan

Organizational values help individuals make choices that are: legal but unethical. both illegal. both ethical and effective in advancing a company's goals. ethical but ineffective in achieving long-term success.

both ethical and effective in advancing a company's goals.

The name for an agreed-upon code of conduct in business, based on societal norms, is

business ethics.

Corporate executives at LikeReal, Inc. decide to compete in the remote model airplane industry by making the largest model planes available. By doing this, they completed part of their

business strategy.

A company uses the planned emergence approach in the development of its strategies. Which of the following is an implication of this? A. The employees will be isolated from the process of setting the company's vision and mission. B. The lower-level employees will be restricted to the tasks involved in strategic implementation. C. The company's organizational structure and systems will be designed to support bottom-up strategic initiatives. D. The top management will create a strategy that is based on hard data alone, rather than an inspiring vision.

c

A positive relationship between vision statements and firm performance is more likely to exist when: A. visions are product-oriented. B. internal stakeholders are isolated from defining and revising the visions. C. organizational structures are aligned with the firm's vision statement. D. vision statements are equivalent to listening to the customers.

c

A traditional top-down strategic planning process typically begins with: A. employees at the operational level identifying problems within an organization. B. functional managers formulating functional strategies for their respective departments. C. strategic leaders adjusting a company's vision and mission based on environmental analysis. D. employees who have close contact with customers taking autonomous actions.

c

An intended strategy is best described as: A. a combination of its top-down strategic intentions and bottom-up emergent strategy. B. any unplanned strategic initiative undertaken by mid-level employees of their own volition. C. the outcome of a rational and structured, top-down strategic plan. D. a strategy developed at the lower levels of management to tackle unpredictable events.

c

Any unplanned strategic initiative undertaken by mid-level employees of their own volition is a(n) _____. A. dominant strategic plan B. unrealized strategy C. emergent strategy D. intended strategy

c

As a part of strategy formulation, a firm's functional strategy primarily concerns questions relating to: A. where to compete. B. when to compete. C. how to implement business strategy. D. how to enter target markets.

c

As a part of strategy formulation, corporate strategy concerns questions relating to: A. why we should compete. B. how to compete. C. where to compete. D. how to implement the business strategy.

c

Blue Bird Products Inc. (BBP) is a large conglomerate. The human resources department of its telecom division has decided to reduce its employee turnover by encouraging internal promotions. Which of the following strategies does this scenario best illustrate? A. Corporate strategy B. Business strategy C. Functional strategy D. Grand strategy

c

During an assessment of employees and leaders in a company, Ethan Browne was categorized as a Level-5 manager in the Level-5 leadership pyramid. Which of the following can be inferred from this information? A. Ethan is currently a team lead in the company. B. Ethan shows no signs of being a good leader. C. Ethan is a top management executive in the company. D. Ethan has just started his career as a member of a team in the company.

c

How are the two approaches namely strategic planning and scenario planning different from strategy-as-planned-emergence approach? A. Strategy as a planned emergence model was introduced before strategic planning and scenario planning. B. Unlike strategic planning and scenario planning, strategy as a planned emergence model does not begin with a strategic plan. C. Relative to strategic planning and scenario planning, strategy as a planned emergence model is a less formal and less stylized approach to the development of strategy. D. Unlike strategic planning and scenario planning, strategy as a planned emergence model is a rational top-down planning approach.

c

Lower-level employees focus mainly on _____ when a firm is using top-down or scenario planning as an approach to the strategic management process. A. strategy formulation B. strategy analysis C. strategy implementation D. strategy initiation

c

Molly Hue Apparels Inc. (MHA) had been outsourcing its production to less-developed countries in order to reduce its cost of production. With the emergence of its competitor, Hova Inc., MHA lost its competitive advantage. Hova had its production units in its home country that allowed the company to bring out the latest trends to the market earlier than MHA. Also, MHA frequently suffered due to political instability and lack of intellectual property laws in the outsourced countries. Thus, parts of MHA's strategies became obsolete and it had to relocate its production. What are such obsolete strategies referred to as in the planned emergence model? A. Intended strategy B. Emergent strategy C. Unrealized strategy D. Tactical strategy

c

Organizational values help individuals make choices that are: A. legal but unethical. B. both illegal. C. both ethical and effective in advancing a company's goals. D. ethical but ineffective in achieving long-term success.

c

Red Million Inc. is a large company that sells a variety of products such as apparel, jewelry, canned foods, consumer electronics, and automobiles. Apart from this, the company also has a strong presence in the service industry through its chain of hotels, fast food restaurants, and amusement parks. Each of its product divisions operates as an individual business and is responsible for its own profits and losses. Thus, these product divisions under Red Million can be referred to as _____. A. limited liability companies B. functional departments C. strategic business units D. corporations

c

Richard is a manager. His colleagues and subordinates look up to him as a man who always does the right things. Along with other skills, his ability to effectively organize and deploy resources like manpower, material, and money has been appreciated by his seniors. According to the Level-5 leadership pyramid, which of the following levels would be the immediate next step for Richard? A. Level 2 B. Level 3 C. Level 4 D. Level 5

c

The _____ is a conceptual framework that views organizational outcomes—strategic choices and performance levels—as reflections of the values of the members of the top management team, who interpret situations through the lens of their unique perspectives. A. two-factor theory B. expectancy theory C. upper-echelons theory D. value orientation theory

c

The pharmaceutical company Merck's new drug Vioxx was a blockbuster, generating revenues of $2.5 billion a year by 2002 and growing fast. When allegations began to appear in the medical community, Merck announced the voluntary withdrawal of Vioxx from the market. In this example, Merck provides an example of what can happen if a company deviates from its _____. A. voluntary responsibilities B. realized strategy C. core values D. strategic decisions

c

True Help is a non-profit organization that works toward rehabilitating the homeless. The credo of the organization is "help us help you." For an organization like True Help, which of the following statements would make an appropriate mission? A. Help us help you find a home. B. One day, everyone in this nation will have a home to protect themselves. C. We help the homeless gain and sustain financial independence by providing employment opportunities. D. Our mission is to turn this not-for-profit organization into a for-profit organization so that the stakeholders are benefited.

c

Unplanned strategic initiatives taken by the _____ within an organization will be referred to as an emergent strategy. A. suppliers and vendors of the organization B. shareholders of the organization C. team leads of project teams in the organization D. corporate executives in the organization's headquarters

c

Which of the following is a customer-oriented vision? A. To be the most progressive insurance company B. To be the best automobile company in the world C. To enable people throughout the globe to identify their capabilities D. To manufacture innovative products through continuous learning

c

Which of the following is a top-down approach to the development of strategy that involves asking "what if" questions to anticipate plausible futures? A. Top-down strategic planning B. Bottom-up strategic thinking C. Scenario planning D. Reverse mentoring

c

Which of the following methods of developing a strategy best illustrates scenario planning? A. Based on the previous year's profits, the CEO of Kelvon Inc. decided to adopt an expansion strategy in its home market. B. A sales personnel of GL Foods Inc. suggested that the company should introduce a baked version of its potato wafers to cater to the needs of the increasing health-conscious population. C. The managers at Vion Autos Inc. formulated a strategy to tackle any increase in the prices of aluminum sheets in the future. D. The CEO of DHP Inc., a large conglomerate, has decided to enter the Asian market based on the competitor's success in the same market.

c

White Leo Autos manufactures and markets four different cars, Leo Sport, Leo Prestige, Leo Spark, and Leo Ease. These four product variants are operated as individual business units. While the product leaders of Leo Sport, Leo Prestige, and Leo Spark have adopted a differentiation strategy to attract the niche market, the product leader of Leo Ease follows a cost-leadership strategy to suit the mass market. This decision of the product leader of Leo Ease can be ideally categorized as a _____. A. corporate strategy B. functional strategy C. business strategy-how to compete D. tactical strategy

c

In the top-down strategic planning approach, all strategic intelligence and decision-making responsibilities rest primarily on the _____. functional managers chief executive officer external stakeholders general manager

chief executive officer

If Zephyr Electronics 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?

comparing the return to the return on invested capital obtained by other firms in the industry

If Zephyr Electronics 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? evaluating the liquidity ratios for other pharmaceutical companies comparing the return to the return on invested capital obtained by other firms in the industry assessing the value based on the shareholders' expectations of return on their capital comparing the value to the history of the firm's return of investment over a number of years

comparing the return to the return on invested capital obtained by other firms in the industry

A firm that achieves superior performance relative to other firms in the same industry or the industry average has a(n) competitive advantage. power position. equity leverage. balanced scorecard.

competitive advantage

Mainline Ltd. is a landline telephone manufacturer whose average return on invested capital is approximately 2 percent. Because demand for landline telephones has declined significantly, the industry average return on invested capital has been negative (-5 percent) for the last few years. In this scenario, Mainline Ltd. has a competitive advantage. power position. competitive disadvantage. balanced scorecard.

competitive advantage

A firm that achieves superior performance relative to other firms in the same industry or the industry average has a(n)

competitive advantage.

Merton's Toothpaste has been the leader of dental care products for about 40 years. However, this company relied too long on its competency of reducing cavities without refining or upgrading other aspects of its product. As a result, other personal hygiene companies that began to offer toothpastes with natural whitening agents gained a competitive advantage over Merton's. This case is an example of

core rigidity.

The pharmaceutical company Merck's new drug Vioxx was a blockbuster, generating revenues of $2.5 billion a year by 2002 and growing fast. When allegations that the drug caused heart attacks and strokes began to appear in the medical community, and that Merck had suppressed evidence about Vioxx's dangerous side effects from early clinical trials, Merck announced the voluntary withdrawal of Vioxx from the market. In this example, Merck provides an example of what can happen if a company deviates from its

core values.

Strategic leadership pertains to the use of power and influence by ________ to direct the activities of others when pursuing an organization's goals.

corporate executives

While creating its AFI strategy framework, Valdez Consultants decided what markets the firm should compete in. By doing this, what type of strategy did the company devise?

corporate strategy

Tangles Costume Jewelry offers slightly lower quality merchandise than competitors at a much lower price. What strategy is Tangles using?

cost-leadership

Strategic commitments are actions that are

costly, long-term oriented, and difficult to reverse.

Cuisine Pro Inc. is a company that manufactures consumer electronics like refrigerators, washing machines, and dishwashers. Which of the following best illustrates a product-oriented vision for Cuisine Pro? A. To make people's life simple and easy B. To allow everyone to have the luxury of domestic technology C. To help people save time and energy spent on household chores D. To be the pioneering manufacturer of home and kitchen appliances

d

Due to political instability in the country of United Mapa, the strategic leaders at the headquarters of FT Supplies Inc. have decided to divest the company's business from the foreign market in United Mapa. This decision would be applicable to all the business units of FT Supplies Inc. operating in United Mapa. Thus, this is a _____. A. business strategy B. divisional strategy C. functional strategy D. corporate strategy

d

In Strategy Highlight 2.2, what type of strategy did Diana, the Starbucks store manager in southern California, use to develop the new iced beverage for her store? A. She used a rational planning approach to strategy planning. B. She created a dominant strategy plan. C. She used scenario planning. D. She used an emergent strategy.

d

Nathan is part of a sales team. He effectively coordinates his tasks with others in the team and willingly contributes to their efforts in achieving the team's objectives. Thus, Nathan is in _____ of the Level-5 leadership pyramid. A. Level 5 B. Level 4 C. Level 3 D. Level 2

d

Pioneer Pharma Inc. and GH Medicines Corp. are two competing firms in the pharmaceutical industry. While Pioneer Pharma Inc.'s vision is "to be a preeminent drug manufacturer in the industry," GH Medicines Corp.'s vision is "to make good health a reality for everyone around the world." Which of the following is an implication of these different visions? A. GH Medicines's vision is more product-oriented than the vision of Pioneer Pharma. B. Pioneer Pharma is more likely to have a positive relationship between its vision and firm performance than GH Medicines. C. Pioneer Pharma's vision is more long-term and futuristic than GH Medicines's vision. D. GH Medicines will be more flexible than Pioneer Pharma when adapting to changing environments.

d

Scenario planning typically begins with managers: A. developing different strategic plans to address possible future scenarios. B. building a portfolio of future strategic options. C. executing a dominant strategic plan. D. brainstorming to identify multiple plausible futures.

d

Strategic flexibility is achieved when managers: A. choose to keep their vision statements more product-oriented rather than customer-oriented. B. respond to reality changes by activating alternate dominant plans or modifying the old plan. C. implement static top-down strategic planning approach to the development of strategy. D. overlook pessimistic future scenarios and only prepare for optimistic futures.

d

Strategic leadership pertains to the use of power and influence by _____ to direct the activities of others when pursuing an organization's goals. A. production workers B. lower-level managers C. external stakeholders D. corporate executives

d

Strategies developed at the departmental level, such as the accounting human resource, production, and marketing departments, within a strategic business unit are referred to as _____. A. grand strategies B. corporate strategies C. business strategies D. functional strategies

d

T & R Autos Inc. is a large conglomerate that operates in 12 different countries. The corporate executives at the headquarters have decided that the company's objective for the next two years will be to increase its customer equity. Based on this guideline received from the top management team, the product leader of the home appliances division has decided to adopt a cost leadership strategy in all his 12 units. Thus, the decision made by the product leader best illustrates a _____. A. corporate strategy B. functional strategy C. grand strategy D. business strategy

d

The Chief Executive Officer (CEO) of PepsiCo, Indra Nooyi, subscribes to a triple-bottom-line approach to competitive advantage—considering not only economic, but also social and environmental performance. Identify the phrase that represents the vision of PepsiCo as described by Ms. Nooyi. A. Human sustainability B. Environmental sustainability C. The whole person at work D. Performance with a Purpose

d

The critics of top-down strategic planning and scenario planning argue that: A. the strategies developed through these approaches are primarily based on an inspirational vision and not on hard data. B. these approaches do not believe that we can predict the future from the past. C. the development of strategies through these approaches is highly dependent on experience of front-line employees. D. these approaches do not allow for the necessary strategic thinking.

d

The regional head for First Electronics Inc. in New Dalvia has decided to sell the company's products directly through company-owned stores because the distribution system in the market is primitive. In six other markets, however, the company will continue to operate through a franchise system. Thus, this decision made by the regional head at New Dalvia will be considered as a _____. A. corporate strategy B. tactical strategy C. functional strategy D. business strategy

d

To implement specific business strategies, general managers of strategic business units rely on: A. external stakeholders. B. corporate executives. C. strategic leaders. D. functional managers.

d

Top-down strategic planning works best when the: A. events in the future are highly unpredictable. B. past cannot be used to predict the future. C. lower-level employees in an organization are highly empowered. D. environment does not change much.

d

Understanding the Resource Allocation Process (RAP) will have large effects on shaping a firm's realized strategy. Which of the following is an example of such an allocation of resources? A. Starbucks' launch of iced drinks B. Teach For America's mission statement C. Merck's voluntary withdrawal of Vioxx from the market D. Intel's rule to "maximize margin-per-wafer-start"

d

When parts of a firm's intended strategy fall by the wayside due to unpredictable events, it turns into a(n) _____. A. tactical strategy B. dominant strategy C. emergent strategy D. unrealized strategy

d

Which of the following best describes a Level-5 manager in the Level-5 leadership pyramid? A. Gina is an employee who just started her career GL Inc.; she has already been appreciated for her knowledge and skills in the new company. B. Derek is an employee at One Triangle Inc.; he has helped his team achieve their targets by contributing to the team's efforts. C. Harry is part of the marketing team at JB Corp.; he has been given the charge of managing a team of three based on which he will be promoted to a manager's position next month. D. Walter is the CEO of Red Autos Inc.; he has helped his company in gaining and sustaining a competitive advantage through ethical decision making.

d

Which of the following managers in the Level-5 leadership pyramid are most capable of leading their organizations into great success by guiding the organizations toward building a sustainable competitive advantage? A. Level 1 B. Level 2 C. Level 3 D. Level 5

d

Which of the following strategies best illustrates a functional strategy? A. The CEO of Dawn Companies Inc. has decided that the company will be entering the Asian market. B. The general manager of a product division of Aster Products Inc. has decided that 30 percent of the division's annual profits will be invested in research and development. C. The regional manager for the consumer electronics division of Dawson & Co. has decided that the division will pursue backward integration to save costs. D. The production manager at the apparel division of Style Culture Co. has decided that the department will hire contract workers for three months to meet the temporary demand.

d

Which of the following strategies best illustrates a generic business strategy? A. A cost-cutting strategy that corporate executives in the headquarters want all business units of a large conglomerate to implement B. A strategy to use monetary incentives to motivate employees working on a project C. A decision to computerize a firm's database in order to improve customer service D. A decision to niche market the jewelry sold by a company while the apparel division under the same company sells its products through mass marketing

d

Who among the following is responsible for making business strategies in a large conglomerate? A. The board of directors at the headquarters B. The shareholder of the company C. The lower-level employees in the company D. The general managers of individual business units

d

_____ are best described as the ethical standards and norms that govern the behavior of individuals within a firm. A. Job descriptions B. Customs duties C. Corrective controls D. Organizational values

d

The first step to gain and sustain a competitive advantage is to

define a firm's vision, mission, and values.

Fuller Apparel's core value statement reads we will ensure our clothing is made with the highest respect toward human rights and environmental protection. Which of the following actions exemplifies how Fuller's core values drive its strategic decision making? investing in more efficient machinery to reduce costs and lower prices for consumers purchasing a full-page advertisement in a major newspaper touting the company's values demanding that textile suppliers pay livable wages and maintain safe production facilities introducing an online customer service unit to keep customers happy

demanding that textile suppliers pay livable wages and maintain safe production facilities

In a firm's external environment, ________ primarily capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class.

demographic trends

In the pyramid of corporate social responsibility, ________ responsibilities are the foundational building block.

economic

The amount of xylene that can be used in household paint is legally limited to 0.03 percent. Anything beyond this amount is hazardous to health and the environment, and considered a legal offense. Consequently, CW Paints Corp. has vouched to make its products as safe as possible. Therefore, it manufactures xylene-free paints even though this increases its costs and reduces the dividends paid to its shareholders in the long run. Which of the following responsibilities is CW Paints Corp. primarily compromising in this scenario?

economic responsibilities toward its shareholders

Any unplanned strategic initiative undertaken by mid-level employees of their own volition is a(n) _____. dominant strategic plan unrealized strategy emergent strategy intended strategy

emergent strategy

The production head at the Omnitone Paint Company would frequently stay back after office hours and experiment with new color combinations even though this was part of the new product development team's job. As a result of these experiments, he came up with two new interior paint colors, foggy morning and mint julep. The new colors proved popular among test groups, and quickly became some of Omnitone's best-selling products. Which of the following strategies does this scenario best illustrate?

emergent strategy

The founder of T-Square Construction strongly believes in the notion of corporate social responsibility, so he has proposed a number of philanthropic activities that he expects the company to pursue. In order to accomplish this vision, the managers should first

ensure that the company is profitable and has a sustainable competitive advantage.

The interaction between a firm and its diverse internal and external stakeholders is best described as a(n)

exchange relationship.

Managers use the AFI strategy framework to

explain and predict differences in firm performance.

Windmill Inc., a vendor, regularly supplies capacitors to Inland Electronics for use in its products. Therefore, Windmill Inc. is Inland Electronics'

external stakeholder.

A strategic group will typically include

firms within the same industry.

Strategies developed at the departmental level, such as the accounting, human resources, production, and marketing departments, within a strategic business unit are referred to as ________ strategies.

functional

The distribution department at Golden Grains Wheat Company has decided to adopt the FIFO (first in, first out) method of inventory to dispatch its bags of wheat. Which of the following strategies does this scenario best illustrate?

functional strategy

The best example of a firm's external stakeholder is a(n)

government agency that regulates the prices of products manufactured by the firm.

Facing stiff competition in the e-reader market, Sumac Industries wants to protect its competitive advantage by increasing the perceived value of its reader. Sumac's best strategy to accomplish this would be to

highlight the number of celebrities who use Sumac e-readers.

As a part of strategy formulation, a firm's functional strategy primarily concerns questions relating to

how to implement business strategy.

The first step in stakeholder impact analysis involves

identifying the stakeholders that currently have, or potentially can have, a material effect on a company.

In which of the following situations is a company that exists in the telecommunications industry most likely to face the highest threat of entry?

if the industry has recently become deregulated

With the emergence of smartphones, users no longer have to carry a separate music player, a video game, a laptop, or a magazine to keep themselves entertained when traveling. A smartphone is loaded with a variety of applications to satisfy all the customer needs that different industries or products individually satisfied earlier. As a result, the smartphone industry has been posing a threat to a lot of other unrelated industries. What is this phenomenon best known as?

industry convergence

After carefully assessing the market potential for solar-powered mobile devices, the top-level executives of Futuretronics Inc. decided that the company would be launching a line of solar-powered tablets within the next two years. This would mean that the tablet division would need to immediately begin research and development efforts. Which of the following strategies in the planned emergence model does this best illustrate?

intended strategy

Soil and Sod Gardening Supplies has a vision of helping every American learn how to grow their own food. Its management team recently unveiled the mission statement "A garden at every home." What is wrong with this mission statement? It does not include a stretch goal. It is not inspirational and motivating for employees. It does not indicate how the company will accomplish its goals. It is too specific.

it does not indicate how the company will accomplish its goals.

Green Jeans, Inc. had a mission to become the leading producer of environmentally friendly blue jeans, an emerging and in-demand category in the apparel industry. Its strategy involved leveraging a network of organic cotton farmers and suppliers of environmentally responsible synthetic materials to create a product that is durable, attractive, affordable, and 100% recyclable. However, because it did not upgrade its outdated production facilities, Green Jeans could not assemble its products at a low-enough cost to offer the jeans at a price that was attractive to customers. Green Jeans' strategy failed because

it was not backed up with strategic commitments.

Economies of scale are cost advantages that accrue for firms with

larger output.

Jaronda founded Diamond Communications Inc. in 1993. Ten years later, the company went public. Despite Jaronda's death in 2005, the company reported a 75 percent increase in revenue in 2006. Which of the following characteristics of a publicly traded company does this scenario best exemplify?

legal personality

Which of the following is a macroeconomic factor that can affect a firm's strategy?

levels of employment

Quick Market Inc. is a food supply company that wants to sell its products directly to consumers through mail order instead of going through supermarkets and other stores. However, supermarket chains want to make this transaction either illegal or more difficult for Quick Market. To accomplish this, they are using ________ to influence the political process.

lobbying forces

Strategic commitments are actions that are inexpensive. long-term oriented. easy to imitate. easy to reverse.

long term oriented

Jamie is a manager in an industry that has a few large players and that has remained relatively stable over the past few years. He finds out that legislators are proposing new laws to deregulate the industry. If the laws pass, which of these scenarios will Jamie most likely face?

many new competitors

Clear Calls Inc., a telephone service provider, has a large user base mainly because phone calls and messages between all Clear Calls users are free. When a person switches to a Clear Calls network, his or her entire network of family and friends is likely to switch to the same network to receive the benefit of free calls and messages. In addition, an existing user who gets a new user to register with Clear Calls Inc. is given a free wireless connection. This has helped to keep competition away from Clear Calls. In this scenario, which of the following factors is acting as an entry barrier for Clear Calls Inc.?

network effects

Magical Productions is a large production company that controls a major portion of the television industry's market share along with two other firms. Despite its competitiveness with the two other firms, it is influenced by their actions and often has to consider their strategic actions before acting on its own. In this scenario, Magical Productions is most likely functioning in a(n) ________ industry.

oligopolistic

Eon Inc., Electravia Inc., and FC Inc., the three largest firms in the consumer electronics industry, hold close to 85 percent of the industry's market share. These companies mainly compete against each other by providing unique features in their products rather than pricing them low. These firms are interdependent, and each firm must consider the strategic actions of its competitors. Which of the following industry competitive structures does this scenario best illustrate?

oligopoly

Three large firms dominate the telecommunication industry of United Canava: AD Telecom Inc., Mystic Telecom Corp., and Total Talk Inc. Instead of cutting prices competitively, these firms have resorted to non-price competition through branding and product differentiation. Which of the following industry competitive structures are these companies most likely in?

oligopoly

When SW International declared a dividend of $20,000,000, its market value increased from $8 billion to $8.5 billion. However, it lost a chance to reinvest $20,000,000 in the research and development of a new product which would have earned a profit of $200 million. Thus, this $200 million is referred to as SW International's

opportunity cost.

The management of Toshi Manufacturing showed a commitment to ________ by increasing the salary of many female employees to meet its goal of having equal pay for women and men who perform comparable work. product-oriented vision scenario planning upper-echelons theory organizational core values

organizational core values

________ are best described as the ethical standards and norms that govern the behavior of individuals within a firm. Corrective controls Job descriptions Organizational core values Customs duties

organizational core values

During an AFI planning session, the managers of the Fukuhara Motorcycle Corporation decided to place various stages of production in different countries in order to implement the strategy of cutting overhead costs. By doing this, what issue did the firm address?

organizational design

During an AFI planning session, the managers of the Fukuhara Motorcycle Corporation decided to place various stages of production in different countries in order to implement the strategy of cutting overhead costs. By doing this, what issue did the firm address? organizational design corporate governance business ethics philanthropic strategy

organizational design

A positive relationship between vision statements and firm performance is more likely to exist when

organizational structures are aligned with the firm's vision statement.

Competitive rivalry based solely on ________ is destructive to firms as it transfers most of the value created in the industry to the customers.

price-cutting

Yelena, the CEO of Andron Inc., reports to the board of directors appointed by the shareholders of Andron. Based on shareholder suggestions, the board ties Yelena's compensation to the performance of Andron. Due to this pressure, Yelena begins devoting extra time to projects and undertakes other activities to ensure that she has job security and that she receives adequate compensation. The reasons why the board ties Yelena's compensation to firm performance is to overcome

principal-agent problem.

Noodles 2 Go and Sal's Trattoria are two restaurants serving Italian cuisine. While Noodles 2 Go focuses on providing quick, affordable pasta dishes for the lunch crowd, Sal's Trattoria focuses on serving home-style dishes in an upscale, romantic setting. Both companies have been able to gain a competitive advantage. This is most likely because the companies have pursued distinct strategic positions. entered into a cartel arrangement. engaged in direct imitation and substitution. benefitted from economies of scale.

pursued distinct strategic positions

Which of the following strategies does Tesla need to implement or achieve to gain a competitive advantage?

reinvest profits to build successively better electric automobiles

Strategic flexibility is achieved when managers: choose to keep their vision statements more product-oriented rather than customer-oriented. respond to reality changes by activating alternate dominant plans or modifying the old plan. implement static top-down strategic planning approach to the development of strategy. overlook pessimistic future scenarios and only prepare for optimistic futures.

respond to reality changes by activating alternate dominant plans or modifying the old plan.

InTex manufactures medical devices. The firm's profitability depends on several variables that are subject to occasional change, including the cost of parts and labor, changes in medical practices, and the price of oil used in both manufacturing and shipping. To account for the potential impact of changes to any of these variables, InTex managers should implement a(n) ________ approach.

scenario planning

The executives at Red Couture Inc. are developing strategic plans to address plausible future situations like rise in the prices of cotton and synthetic fabrics by 20 percent, appreciation in the value of dollar, increase in the cost of labor by 30 percent, and increase in demand for the company's products. By doing so, the company will be well-prepared with its planned responses if any of these situations occurs in the future. Thus, Red Couture is employing _____ as the approach to the development of strategy. scenario planning top-down strategic planning reverse engineering pattern recognition

scenario planning

As the legal owners, ________ have the most legitimate claim on a company's profits.

shareholders

Top-down strategic planning as an approach to the strategic management process will be most effective when the

size of the firm is large

Top-down strategic planning as an approach to the strategic management process will be most effective when the

size of the firm is large.

Top-down strategic planning as an approach to the strategic management process will be most effective when the: environment is constantly changing. size of the firm is large. probability of black swan events is high. top management wants to decentralize decision making.

size of the firm is large.

If a company wants to gain a competitive advantage in a highly competitive industry, it should ideally

stake out a unique position within the industry.

If a company wants to gain a competitive advantage in a highly competitive industry, it should ideally copy the strategies of other firms through competitive benchmarking. stake out a unique position within the industry. provide goods or services similar to its competitors at higher prices. execute an integrated cost-leadership and differentiation position.

stake out unique position within the industry

BlueStainless Corp. has been able to gain and sustain a competitive advantage due to its strong relationship with its employees, customers, suppliers, and local communities. The company believes in lifetime employment and ensures that its employees grow along with the company. Investors are more than satisfied with the returns on their investments. Also, 3 percent of the company's profit is spent on community development. With initiatives like these, customers feel privileged to associate themselves with BlueStainless products. This scenario best illustrates the implementation of a

stakeholder strategy.

The former CEO of Sam's Club, a division with its own profit-and-loss responsibility, Rosalind Brewer, reported to Walmart's CEO, C. Douglas McMillon, who as corporate executive oversees Walmart's entire operations. Sam's Club, therefore, is a ________ of Walmart.

strategic business unit

A traditional top-down strategic planning process typically begins with

strategic leaders adjusting a company's vision and mission based on environmental analysis.

A traditional top-down strategic planning process typically begins with: employees at the operational level identifying problems within an organization. functional managers formulating functional strategies for their respective departments. strategic leaders adjusting a company's vision and mission based on environmental analysis. employees who have close contact with customers taking autonomous actions.

strategic leaders adjusting a company's vision and mission based on environmental analysis.

As the CEO of a conglomerate, Juana Mark exhibited her strong commitment toward the company's core value that customer's well-being is more important than profit when she decided to liquidate the company's tobacco subsidiary. The tobacco brand sold by her company was a major revenue earner in lesser-developed nations. However, Juana believed that her company had to be responsible toward the society. In this scenario, Juana has demonstrated _____. strategic leadership intrapreneurship Machiavellianism individualism

strategic leadership

As the CEO of a conglomerate, Eva Morris exhibited her strong commitment toward the company's core value that customers' well-being is more important than profit when she convinced the board of directors to liquidate the company's pesticide subsidiary. The pesticide brand sold by her company was a major revenue earner in lesser-developed nations, but studies indicate that it is a carcinogen. Eva persuaded the board that the company had to be responsible toward society. In this scenario, Eva has demonstrated

strategic leadership.

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 lower than its competitors because of minimal investments in operation and administration. In this scenario, FindFor Inc. has most likely been able to provide superior value and cost control through strategic positioning. strategic profiling. strategic liquidation. strategic parity.

strategic positioning

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 lower than its competitors because of minimal investments in operation and administration. In this scenario, FindFor Inc. has most likely been able to provide superior value and cost control through

strategic positioning.

Strategic thinking is different from strategic planning in that

strategic thinking includes all types of information sources while strategic planning does not.

Strategic thinking is different from strategic planning in that: strategic thinking includes all types of information sources while strategic planning does not. strategic thinking relies more on hard data than strategic planning. strategic thinking is regimented and confining, whereas strategic planning is more flexible. strategic thinking can create an illusion of control, whereas strategic planning avoids this.

strategic thinking includes all types of information sources while strategic planning does not.

________ is best described as a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors. Strategy Credo Behavior modification Competency management

strategy

According to AFI strategy framework, in which of the following tasks of strategic management is a firm's vision, mission, and values identified? strategy formulation strategy analysis strategy implementation strategy control

strategy analysis

Which of the following stages of the strategic management process involves an evaluation of a firm's external and internal environments?

strategy analysis

Which of the following stages of the strategic management process involves an evaluation of a firm's external and internal environments? strategy analysis strategy implementation strategy control strategy formulation

strategy analysis

Zenya is the founder of an online service that allows users to rent out spare rooms in their homes. She has hired a number of extremely bright employees whose opinions are central to the company's success in the fast-paced online services industry. Which type of strategic management process would be most likely to fully utilize the strengths embodied by her team and position the company to capitalize upon autonomous actions and serendipity?

strategy as planned emergence

In ________, a firm frames a guiding policy to address the competitive challenge.

strategy formulation

In ________, a firm frames a guiding policy to address the competitive challenge. strategy formulation strategy implementation strategy control strategy analysis

strategy formulation

Through ________, a firm puts its guiding policy into practice by employing a set of coherent actions.

strategy implementation

Which of the following tasks in the AFI strategy framework involves putting the formulated strategy into practice through organizational structure, culture, and controls?

strategy implementation

A high percentage of R&D/Revenue ratio indicates a(n)

strong focus on innovation to improve current products and services.

Powell Lighting was the first company to start selling LED light bulbs in its country—a product that gained popularity among diverse groups. Soon, other companies started to sell their own brands of LED bulbs, thereby giving Powell Lighting ample competition. In response, Powell Lighting decided to limit its LED light bulbs to outdoor models. However, it ensured that these models were the longest-lasting and lowest-priced on the market. With this innovation, Powell Lighting consistently outperformed its competitors for ten years. In this scenario, Powell Lighting maintained a ________ through its innovative strategy.

sustainable competitive advantage

Due to economic regression in Freedonia, the profitability of the large corporation Happiness Products Inc. (HPI) was poor. An analysis of the company's business showed that the company could become profitable if it divested a few strategic business units under its banner. From which of the following businesses would HPI find it most easy to exit?

the e-commerce retail business, where investments on assets are low

D

An industry has many firms that compete in it. While products between competitors tend to be similar, they are by no means identical. As a consequence, managers selling a product with unique features tend to have some ability to raise prices. This type of industry is an example of A. oligopoly B. monopoly C. perfect competition D. monopolistic competition

As manager of a major producer of automobile airbags, you have recently introduced the following vision statement: to protect the health of every driver and passenger. How can you ensure that your employees feel invested in and inspired by the firm's vision? Give a speech explaining why everyone should support the new vision. Hang banners around the production facility touting the new vision statement. Include a "vision adherence assessment" in each employee's annual performance review. Ask employees for feedback on the vision statement and revise based on their input.

Ask employees for feedback on the vision statement and revise based on their input

As manager of a major producer of automobile airbags, you have recently introduced the following vision statement: to protect the health of every driver and passenger. How can you ensure that your employees feel invested in and inspired by the firm's vision?

Ask employees for feedback on the vision statement and revise based on their input.