MGT Textbook Questions (1-4)

68. Which of the following statements fails to bring out the essence of the dynamic capabilities perspective? A. A firm's competitive advantage is derived from static resource or market advantages. B. A firm must be able to change its resource base as the external environment changes in order to sustain its competitive advantage. C. A firm should modify its core competencies to effectively compete in dynamic markets. D. A firm's external environment is rarely stable, and in many industries, change is fast and ferocious.

A. A firm's competitive advantage is derived from static resource or market advantages.

Which of the following statements is true of the social responsibilities of a business? A. A firm's ethical responsibilities go beyond its legal responsibilities. B. Shareholders mandatorily require a firm to perform its ethical and philanthropic responsibilities. C. Ethical responsibilities are the foundational building block of a firm's social responsibility. D. Legal responsibilities are often subsumed under the idea of corporate citizenship, reflecting the notion of voluntarily giving back to society.

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

Which of the following summarizes the difference between a firm's vision and mission? A. A vision states what a firm wants to accomplish; a mission states how a firm plans to accomplish this vision. B. A vision states the ethical values of a firm; a mission states the monetary goals of a firm. C. A vision states how much a firm wants to earn; a mission states how these earnings will be accomplished. D. A vision states the management values of a firm; a mission states the values of the other workers.

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

Which of the following is an example of an organizational value? A. Burtell Oil, Inc. increases the inspection of pipelines above the legal requirement to prevent oil spills. B. Burtell Oil, Inc. lowers gas prices to gain an advantage over their closest competitor. C. Burtell Oil, Inc. finances research for finding oil deposits within the United States. D. Burtell Oil, Inc. launches an ad campaign that promotes the company as being environmentally friendly.

A. Burtell Oil, Inc. increases the inspection of pipelines above the legal requirement to prevent oil spills.

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

A. Co-opetition

87. 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? A. Competitive rivalry between Virgin Atlantic and JetBlue is likely to be higher than that between American and Southwest Airlines. B. American, United, and Delta Airlines will be affected differently by Porter's five competitive forces. C. Alaska Airlines and Delta Airlines will be affected by the external environment in very similar ways. D. Competitive rivalry between Virgin Atlantic and Delta Airlines is likely to be higher than that between American, Delta, and United.

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

109. In the luxury cruise industry, the small cruise lines Tropics Inc. and Sunset Inc. merged to form TropicalSunset Inc. After the merge, the competition between TropicalSunset Inc. and the two mega cruise lines, Pacifico and West Winds, has increased significantly. Which of the following statements best explains why this happened? A. Competitive rivalry is strongest between firms that are within the same strategic group. B. Competition always increases when two small firms merge into a mega firm. C. Competition always increases if there are only two or three mega firms competing. D. Competitive rivalry is strongest between firms that service the same region.

A. Competitive rivalry is strongest between firms that are within the same strategic group.

_____ is best described as a framework that helps firms recognize and address the economic, legal, social, and philanthropic expectations that society has of the business enterprise at a given point in time. A. Corporate social responsibility B. Integrated social network C. Strategic positioning D. Strategy formulation

A. Corporate social responsibility

64. _____ describes a firm's ability to create, deploy, modify, reconfigure, upgrade, or leverage its resources over time in its quest for competitive advantage. A. Dynamic capability B. Resource immobility C. Resource heterogeneity D. Time compressed diseconomy

A. Dynamic capability

_____ 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. Functional managers

46. The share price of Groupon, a daily-deal website, fell by 90 percent just a year after its successful initial public offering. The firm was not able to sustain its competitive advantage because of the emergence of other daily-deal sites that were able to better serve the needs of local markets and specific population groups. Which of the following is the most accurate inference from this example? A. Groupon's competency was not hard to imitate. B. Groupon's competency was built more on an intangible resource than on a tangible one. C. Groupon operated in an industry where the barriers to entry were high. D. Groupon invested in resources that were invaluable and common.

A. Groupon's competency was not hard to imitate.

56. 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.

73. Which of the following statements accurately describes a firm's resource flow? A. It is the firm's level of investments to maintain or build a resource. B. It is the firm's current level of intangible resources. C. It is the firm's current level of tangible resources that are common to other firms. D. It is the firm's level of expertise to efficiently deploy a valuable resource.

A. It is the firm's level of investments to maintain or build a resource.

58. How does causal ambiguity act as an isolating mechanism for organizations? A. It makes it difficult for the competitors to understand why a company has been so successful. B. It creates a situation in which different social and business systems interact with one another. C. It makes it difficult for competitors to deploy their resources by creating ambiguity within their organizational structures. D. It makes it difficult for competitors to imitate core competencies quickly due to time compression diseconomies.

A. It makes it difficult for the competitors to understand why a company has been so successful.

74. Which of the following is an implication of high employee turnover in a company? A. It results in a reduction in the company's intangible-resource stocks. B. It makes the source of the company's competitive advantage causally ambiguous. C. It makes the source of the company's competitive advantage socially complex. D. It results in greater immobility and heterogeneity of the company's resources.

A. It results in a reduction in the company's intangible-resource stocks.

102. Which of the following best exemplifies social complexity as an isolating mechanism? A. Kristin's Cosmetics attempted to imitate how Monica's Makeup combined its management and product development systems with little success. B. Kristin's Cosmetics failed to acquire the resources for its eyeliner at a low cost and thereby lost its competitive advantage over Monica's Makeup. C. Kristin's Cosmetics had difficulty competing with Monica's Makeup because it could not access the many makeup factories in Kentucky as easily as its competitor. D. Kristin's Cosmetics did not fully understand the reasons for the success of Monica's Makeup and therefore had difficulty competing with the firm.

A. Kristin's Cosmetics attempted to imitate how Monica's Makeup combined its management and product development systems with little success.

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 willpower and humility when he or she reaches A. Level 5. B. Level 3. C. Level 2. D. Level 1.

A. Level 5.

92. How is a firm's task environment different from its general environment? A. Managers have some influence over external factors in the task environment; they have little direct effect over external forces in the general environment. B. Managers have no direct effect over external factors in the task environment; they have some influence over external forces in the general environment. C. Managers have no direct effect over external factors in the task environment; they have influence over all external forces in the general environment. D. Managers have influence over all external factors in the task environment; they have no direct effect over external forces in the general environment.

A. Managers have some influence over external factors in the task environment; they have little direct effect over external forces in the general environment.

88. _____ are best described as industry-specific factors that separate one strategic group from another. A. Mobility barriers B. Excise duties C. Embargoes D. Learning effects

A. Mobility barriers

69. Onyxo Inc., a consumer electronics company, is the leading manufacturer of LCD televisions. LCD technology has been its core competency and the company holds 80 percent shares in that market. However, Onyxo Inc.'s competitors have now moved on to advance technologies like LED and 3-D televisions. According to the dynamic capabilities perspective, what should Onyxo Inc. do? A. Onyxo Inc. should start working on LED and 3-D television technologies to adapt its core competency to suit the external environment. B. Onyxo Inc. should stick to its existing core competency, that is LCD technology, as it is the best in that segment. C. Onyxo Inc. should take proactive steps to reduce the causal ambiguity and socially complexity of its core competency. D. Onyxo Inc. should work on enhancing the mobility of its core competency.

A. Onyxo Inc. should start working on LED and 3-D television technologies to adapt its core competency to suit the external environment.

_____ 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. Planned emergence

91. While industry forces have been favorable for a long time in the U.S. automotive industry, recent dynamics have lowered the profit potential of competing in this industry and thus reduced its attractiveness. The continued success of Tesla Motors in the industry will depend on other firm and industry factors. Which of the following represents one such factor that directly affects Tesla Motors? A. Since suppliers of its key sources are few, the bargaining power of suppliers is high. B. Since individual buyers do not have many choices, their bargaining power is low. C. There is a lack of balance in demand and supply, demand far exceeds capacity within the industry. D. There is a noticeable absence of complementary products and services for the industry.

A. Since suppliers of its key sources are few, the bargaining power of suppliers is high.

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

17. Keeping in mind 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.

A. Substitutes are readily available in the form of trains and buses, thus reducing the profit potential in the industry.

77. 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. The industry will face excess capacity in the future. D. The structure of the industry will change from consolidated to one that is fragmented.

A. The overall industry profitability will increase.

51. 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.

78. Earlier, the travel industry was controlled by a few large travel companies that booked holidays, air tickets, bus tickets, and hotels for their customers. However, 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 consolidated structure to a fragmented one. B. The pricing power of the incumbent firms in the travel industry has increased. 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.

A. The travel industry changed from a consolidated structure to a fragmented one.

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. They tend to force managers to take a myopic view of the landscape.

26. 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.

Which of the following provides an example of what AFI strategy framework is used for? A. Using AFI, the Gasquet Motor Company was able to implement a strategy that produced high-quality cars more efficiently and thereby reduced costs. B. Using AFI, the Chen Restaurant Group was able to improve employee benefits and thereby increase employee loyalty. C. Using AFI, the Sanchez Clothing Company was able to implement a strategy that allowed them to give more money to charities and thereby gain good press. D. Using AFI, the Richardson Tea Group was able to reduce the pollution it caused while processing tea and thereby receive an award.

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

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. We can predict the future from the past.

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.

Which of the following is the most accurate description of stakeholder impact analysis? A. a decision tool with which managers can recognize the needs of different stakeholders B. a decision tool with which managers can recognize black swans C. a decision tool that emphasizes competitive advantage over corporate citizenship D. a decision tool that emphasizes using the three-step process

A. a decision tool with which managers can recognize the needs of different stakeholders

69. 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

A. a premium car manufactured and sold by Mova Autos Inc., a rival company

The U.S. government legitimized claims by thousands of businesses and individuals in the aftermath of the BP oil spill in the Gulf of Mexico, causing the claims to become of great urgency to BP. This best represents the process of A. addressing stakeholder concerns. B. identifying stakeholders. C. establishing competitive parity. D. implementing a cost-leadership strategy.

A. addressing stakeholder concerns.

23. The perfectly competitive industry structure differs from the resource-based model in its view that A. all firms have access to the same resources. B. accessibility to bundles of resources differ across firms. C. resources tend to be "sticky." D. competencies differ across firms working in the same industry.

A. all firms have access to the same resources.

103. Competitive industry structure refers to elements and features common to A. all industries. B. successful industries. C. new industries. D. incumbent industries.

A. all industries.

62. 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.

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. 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 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.

100. Which of the following describes a situation in which firms acquire resources at a low cost, laying the foundation for a competitive advantage later? A. better expectations of future resource value B. path dependence limiting current decisions C. causal ambiguity D. social complexity

A. better expectations of future resource value

The Chief Executive Officer (CEO) of Yahoo, Marissa Mayer, established a mission by building on her vision. Considering this, how did Mayer implement the mission of Yahoo? A. by making the user experience of the mobile Internet easy and fun B. by convincing employees to work with a purpose C. by making the mobile Internet an efficient tool for researchers D. by convincing employees to make the product more accessible

A. by making the user experience of the mobile Internet easy and fun

25. 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.

73. Samsung and Google cooperate as complementors to compete against Apple's strong position in the mobile device industry, while at the same time Samsung and Google are increasingly becoming competitive with one another. This scenario best illustrates the process of A. co-opetition. B. perfect competition. C. monopolization. D. conglomeration.

A. co-opetition.

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

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.

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.

80. To help a firm achieve a competitive advantage, each distinct activity performed in the value chain needs to A. contribute to the firm's strategic position as either low-cost leader or differentiator. B. reduce the immobility and the heterogeneity of the firm's resources. C. create a static fit between the company's internal resources and the external environment. D. reduce the causal ambiguity and the social complexity of the firm's source of success.

A. contribute to the firm's strategic position as either low-cost leader or differentiator.

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

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

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

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. design generic business strategies based on guidelines received from corporate headquarters

39. Which of the following is a feature of a monopolistically competitive industry? A. differentiated products B. high entry barriers C. no pricing power D. a single firm

A. differentiated products

43. Pulse Mobiles Inc. is a cell phone manufacturing company. Its latest range of smartphones bears a straight resemblance to the Y-series range of smartphones from Talkie Gen Inc., in terms of its shape and look-and-feel. Which of the following strategies has Pulse Mobiles Inc. used to replicate the valuable and rare resource of Talkie Gen Inc.? A. direct imitation B. strategic equivalence C. substitution D. innovation

A. direct imitation

90. 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.

A. draw a strategic-group map.

In the pyramid of corporate social responsibility, _____ responsibilities are the foundational building block. A. economic B. ethical C. philanthropic D. legal

A. economic

24. 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.

In the AFI strategy framework, strategy analysis primarily involves A. evaluating the effects of internal resources and core competencies on a firm's potential to gain and sustain a competitive advantage. B. designing a business, corporate, and global strategy to gain and sustain a competitive advantage. C. organizing a firm in order to effectively put the formulated strategy into practice. D. deciding the type of corporate governance that would be most effective in the implementation of a strategy.

A. evaluating the effects of internal resources and core competencies on a firm's potential to gain and sustain a competitive advantage.

79. 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.

A. firms within the same industry start to satisfy different customer needs.

81. 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.

A. firms within the same industry.

65. A firm will fail to create a sustained competitive advantage when the A. fit between its internal strengths and the external environment is static. B. source of its competitive advantage is causally ambiguous. C. source of its competitive advantage is socially complex. D. resource bundles exhibit heterogeneity and immobility.

A. fit between its internal strengths and the external environment is static.

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.

An effective strategist _____ the formulated strategy through structure, culture, and controls. A. implements B. analyzes C. formulates D. questions

A. implements

83. In the context of the SWOT matrix, which of the following best exemplifies a firm's internal strength? A. increase in a firm's customer loyalty B. growth in the size of the market in which a firm operates C. rise in the income of the demographic segment to which a firm caters D. loss of a competitor's reputation

A. increase in a firm's customer loyalty

80. 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? A. industry convergence B. backward integration C. product differentiation D. customer myopia

A. industry convergence

After carefully assessing the market potential for hybrid motorcycles, it was decided at the corporate headquarters of HyCycles Inc. that the company would be launching a hybrid version of all its motorcycle 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. intended strategy

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

The minimum wage in the country of New Morland is $8 an hour. Odion, a restaurant in New Morland's capital city, pays its servers $8 per hour. However, the management of the restaurant feels that this amount is excessive for workers whose only job is to clear tables. By continuing to adhere to the rules set by the government of New Morland, which of the following responsibilities is Odion satisfying? A. legal responsibilities B. philanthropic responsibilities C. ethical responsibilities D. demographic responsibilities

A. legal responsibilities

98. 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

33. In knowledge-intensive industries, the marginal costs after initial invention are A. low. B. high. C. moderate. D. unpredictable.

A. low.

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. makes productive contributions through motivation, talent, knowledge, and skills.

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.

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. nonfunctional due to unexpected events.

53. 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

54. Which type of industry structure is often analyzed using game theory? A. oligopolistic B. monopolistic C. perfectly competitive D. monopolistically competitive

A. oligopolistic

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. organize resources effectively to accomplish predetermined goals.

51. VRD Systems Inc. took many decades to build its core competencies, and these competencies were based primarily on the decisions made by the company's top management in the past. This process is called A. path dependence. B. dependence complexity. C. causal dependence. D. path immobility.

A. path dependence.

58. During periods of high industry growth A. price competition among firms frequently decreases. B. rivals are focused on taking market share away from one another. C. firms indulge in intense promotional campaigns. D. new product releases with minor modifications become common.

A. price competition among firms frequently decreases.

60. 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

A. price-cutting

108. To increase its competitive advantage, HRV Automobiles seeks to improve the efficiency of its production plants. By doing this, HRV is addressing a _____ in the value chain analysis. A. primary activity B. secondary activity C. support activity D. premier activity

A. primary activity

79. In a generic value chain, a firm's after-sales service will be referred to as its _____. A. primary activity B. support activity C. static resource D. resource flow

A. primary activity

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

In stakeholder impact analysis, identifying the opportunities and threats presented by stakeholders is immediately followed by A. recognizing the economic, legal, ethical, and philanthropic responsibilities of the firm to its stakeholders. B. formulating the stakeholder strategy to address and effectively balance the different needs of various stakeholders. C. identifying the interests and the claims of the stakeholders. D. isolating the external stakeholders from the internal stakeholders.

A. recognizing the economic, legal, ethical, and philanthropic responsibilities of the firm to its stakeholders.

105. Clean Rinse Shampoo has been the leader of hair-cleaning products for about 40 years. However, this company relied too long on its competency without refining or upgrading its product. As a result, other shampoo companies that began to offer organic shampoo gained a competitive advantage over Clean Rinse. This case is an example of A. resource flow. B. dynamic capabilities. C. core rigidity. D. value chain.

A. resource flow.

17. As a result of _____, a critical assumption in the resource-based model of a firm, the resource differences that exist between firms are difficult to replicate. A. resource immobility B. resource homogeneity C. resource perishability D. resource equality

A. resource immobility

96. SWA has enjoyed a sustained competitive advantage, allowing it to outperform its competitors over several decades. Continental and Delta attempted to copy SWA with their offerings of Continental Lite and Song, respectively. Neither Continental nor Delta, however, was able to successfully imitate the resource bundles and firm capabilities that make SWA unique. Which of the following is this case an example of? A. resource immobility B. resource heterogeneity C. resource mobility D. resource homogeneity

A. resource immobility

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 the 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. scenario planning

104. Dynamic capabilities are especially relevant for surviving and competing in markets that A. shift quickly. B. shift slowly. C. remain constant. D. remain unpredictable.

A. shift quickly.

63. An observer may conclude that the organizational culture of Zappos, an online retailer for shoes and clothing, might be the basis for its competitive advantage. However, reverse social engineering to crack Zappos' code of success might be much more difficult for a company trying to exactly imitate its strategy. Thus, the source of Zappos competitive advantage is said to be A. socially complex. B. inexhaustible. C. non-substitutable. D. nonambiguous.

A. socially complex.

55. Due to path dependence A. strategic decisions have long-term consequences. B. the occurrence of time compression diseconomies becomes rare. C. competitors can easily imitate or create core competencies quickly. D. past decisions of a firm do not affect its current situation.

A. strategic decisions have long-term consequences.

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. strategic initiative

As the CEO of a conglomerate, Juana Mark exhibited her strong commitment toward the company's core value that customers' 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 society. In this scenario, Juana has demonstrated A. strategic leadership. B. intrapreneurship. C. Machiavellianism. D. individualism.

A. strategic leadership.

11. A firm's _____ relates to its ability to create value for customers (V) while containing the cost to do so (C). A. strategic position B. incumbency C. threat of entry D. attrition rate

A. strategic position

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

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

The management team at Clear Solutions, Inc. decided to build a branch office in Memphis, Tennessee. Which of the following terms correctly describes this action? A. strategy formulation B. strategy implementation C. execution of strategy D. business strategy

A. strategy formulation

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

28. 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.

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. the CEO of the company

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

3. Which of the following external forces is a part of a firm's task environment? A. the composition of the strategic group to which the firm belongs B. the interest rates prevalent in the economy in which the firm operates C. the inflation level in the economy in which the firm operates D. the recent innovations in process technology, including lean manufacturing

A. the composition of the strategic group to which the firm belongs

49. Path dependence rests on the notion that A. time cannot be compressed at will. B. strategic decisions are easily reversible. C. rare resources can be built in a short period of time. D. competitive advantage can be sustained indefinitely.

A. time cannot be compressed at will.

During strategy implementation, managers primarily focus on deciding the A. type of corporate governance that is most effective and ways in which it can put the formulated strategy into practice. B. industries and markets the firm should compete in to be able to gain and sustain a competitive advantage. C. relationship between competitive advantage and firm performance. D. role strategic leaders should play in gaining and sustaining a competitive advantage.

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

26. Crystal Tech Inc.'s competency in designing and manufacturing efficient microprocessors has made its laptops the most advanced computers in the market. This competency, along with the just-in-time manufacturing system, has enabled Crystal Tech Inc. to increase its profitability by lowering its production costs. Thus, Crystal's competency in designing and manufacturing microprocessors will be considered a(n) _____ resource in the VRIO framework. A. valuable B. inexhaustible C. tangible D. perishable

A. valuable

32. 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

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.

Which of the following is an example of fulfilling philanthropic responsibilities? A. A dentist lowers his fees to make his practice more competitive. B. A legal firm donates large amounts of money to charities. C. A skateboard manufacturer builds a handicap entrance required by law. D. A toy manufacturer changes a product to comply with safety standards.

B. A legal firm donates large amounts of money to charities.

The _____ is a model that links strategy analysis, strategy formulation, and strategy implementation, which together helps managers plan and implement a strategy that can improve performance and result in competitive advantage. A. Ansoff's growth strategy matrix B. AFI strategy framework C. Sarbanes-Oxley Act D. stakeholder impact analysis

B. AFI strategy framework

Free Winds, Inc. is a company that manufactures a variety of generators that run on wind power. The company wants to ensure that wind technology replaces all forms of exhaustible energy sources in the near future. Which of the following statements will make an accurate vision for Free Winds? A. We make products that run on wind 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. All nations around the globe should have access to a sustainable energy source.

Which of the following examples reflects the strongest vision? A. At Fuentes Electronics, many employees get paid well but do not feel their work is important. B. At Fuentes Electronics, all employees are motivated to make the best microwave ovens on the market. C. At Fuentes Electronics, most employees want to create a better microwave oven than their closest competitor. D. At Fuentes Electronics, some employees do not understand the main goal of the company.

B. At Fuentes Electronics, all employees are motivated to make the best microwave ovens on the market.

75. Several senior managers recently left Bass Automobile Inc. and went to work at Unicorn Autos Inc., a rival company. What does this imply? A. The resource stock of Bass Automobiles Inc. increased. B. Bass Automobiles Inc. faced resource leakage. C. The resource flow into Unicorn Autos Inc. reduced. D. Bass Automobiles Inc.'s tangible assets decreased.

B. Bass Automobiles Inc. faced resource leakage.

10. In 2008, BlackBerry's market cap peaked at $75 billion. By 2015 this valuation had fallen more than 90 percent, to less than $7 billion. BlackBerry fell victim to two important PESTEL factors in its external environment: sociocultural and technological. How did technology contribute to BlackBerry's decline? A. BlackBerry failed to offer strong security features for its device. B. BlackBerry failed to change its device into one that could perform multiple tasks effectively. C. BlackBerry failed to adapt to a groundswell that involved workers bringing mobile devices to work. D. BlackBerry failed to produce an efficient emailing system using a keyboard.

B. BlackBerry failed to change its device into one that could perform multiple tasks effectively.

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. CEO of the company.

57. _____ describes a situation in which the cause and effect of a phenomenon are not readily apparent. A. Resource immobility B. Causal ambiguity C. Resource heterogeneity D. Social complexity

B. Causal ambiguity

2. _____ 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

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

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.

32. EasyOpen Inc. gained a patent for an electronic corkscrew. Soon the company made a huge profit on this device. Recently, however, other firms have produced electronic corkscrews. As a result, EasyOpen lost its competitive advantage. Which of the following would most likely be the reason for this development? A. EasyOpen failed to renew the patent after 10 years. B. EasyOpen's patent expired after 20 years. C. EasyOpen failed to copyright the corkscrew. D. EasyOpen's copyright expired after 30 years.

B. EasyOpen's patent expired after 20 years.

Which of the following is an accurate statement about the relationship between firm effects and industry effects? A. Firm effects deal with the action of competitors; industry effects deal with internal circumstances. B. Firm effects deal with a manager's actions; industry effects deal with external circumstances. C. Firm effects deal with a manager's actions; industry effects deal with internal circumstances. D. Firm effects deal with the action of competitors; industry effects deal with external circumstances.

B. Firm effects deal with a manager's actions; industry effects deal with external circumstances.

94. How do low interest rates affect a business? A. Firms tend to defer investments. B. Firms can easily borrow money to finance future growth. C. Consumer demand slows down. D. Business credit is harder to obtain.

B. Firms can easily borrow money to finance future growth.

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. Functional managers are much closer to the final products, services, and customers than corporate- or business-level managers.

61. When evaluating the sustainability of a firm's competitive advantage, which of the following statements is not true? A. The competitive advantage will not be sustainable if there are substitutes for the firm's core competence. B. If managed effectively, existing core competencies can help sustain the competitive advantage indefinitely. C. Social complexity often leads to a competitive advantage that is sustainable. D. When expectations of future resource value turn out to be accurate and can be repeated, then a sustained competitive advantage is realized.

B. If managed effectively, existing core competencies can help sustain the competitive advantage indefinitely.

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. In this process, the formulation of strategy is separate from implementation.

37. 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.

1. Beats Electronics has been able to outperform Audio-Technica, Bose, JBL, Skullcandy, Sennheiser, and Sony in the high-end, premium headphone market. Which of the following statements accurately explains one of the main reasons for the success of Beat? A. It produced the highest-quality headphones. B. It created a perception that owning its products was cool. C. It emphasized marketing over core competency. D. It focused on sponsoring future athletic superstars.

B. It created a perception that owning its products was cool.

11. GN Corp. and BC Inc. are two competing firms in the same industry. GN Corp.'s tangible assets are valued at $15 billion and its intangible assets are valued at $35 billion. BC Inc.'s tangible assets are valued at $5 billion and its intangible assets are valued at $45 billion. What can be concluded from this information? A. It is easier to buy intangible assets with cash than tangible assets. B. It is likely that BC Inc. is better enabled than GN Corp. to gain and sustain a competitive advantage. C. It takes longer time to build tangible assets than intangible assets. D. There is no resource heterogeneity between the two firms, BC Inc. and GN Corp., as they operate in the same industry.

B. It is likely that BC Inc. is better enabled than GN Corp. to gain and sustain a competitive advantage.

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? A. Level 5 B. Level 4 C. Level 3 D. Level 2

B. Level 4

74. 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.

110. Which of the following management tools will help determine the external opportunities and threats that affect a firm? A. Porter's five forces analysis B. PESTEL analysis C. VRIO framework D. Ansoff's matrix

B. PESTEL analysis

48. _____ 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

B. Path dependence

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. Scenario planning helps create strategic plans that are more flexible, and thus more effective, than those created through the more static strategic planning approach.

_____ 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

10. Which of the following statements accurately brings out the difference between tangible and intangible resources? A. Tangible resources contribute to a company's competitive advantage, whereas intangible resources fail to do the same. B. Tangible assets can be bought on the open market, whereas intangible assets cannot be easily purchased. C. Tangible resources take a longer time to build, whereas intangible assets can be built comparatively easily. D. Tangible assets are difficult to imitate, whereas intangible assets can be easily replicated.

B. Tangible assets can be bought on the open market, whereas intangible assets cannot be easily purchased.

81. _____ allows managers to synthesize insights obtained from an internal analysis of a company's strengths and weaknesses with those from an analysis of external opportunities and threats. A. The VRIO framework B. The SWOT analysis C. The break-even analysis D. Ansoff's matrix

B. The SWOT analysis

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

62. 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.

16. 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.

B. The stronger the five forces in an industry, the greater the industry's profit potential.

35. Which of the following is a characteristic of a fragmented industry? A. The entry barriers are high. B. There are many small firms. C. Firms tend to have high profitability. D. Firms have substantial pricing power.

B. There are many small firms.

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.

How do strong ethical values benefit a firm? A. They lay the groundwork for a quick increase of profits and short-term success. B. They serve as the guardrails put in place to keep the company on track when pursuing its mission. C. They provide strong public relations, which can either benefit or hinder competitive advantage. D. They emphasize benefiting employees by significantly increasing profit.

B. They serve as the guardrails put in place to keep the company on track when pursuing its mission.

99. Which of the following provides an example of how a firm's valuable resource can be imitated? A. To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of a sports car. B. To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of the Leaning Tower of Pisa. C. To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of the U.S.S. Enterprise aircraft carrier. D. To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of a grizzly bear.

B. To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of the Leaning Tower of Pisa.

_____ 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. Top-down strategic planning

41. 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.

98. Rice Dazzle Inc. has been making the same breakfast cereal for 50 years. Recently, sales have plummeted. To counteract this, the company created a new package that included an endorsement by a celebrity. As a result, sales increased close to previous highs. However, the cereal itself remained the same. According the VRIO framework, is the new packaging a valuable resource for Rice Dazzle? A. Yes, because the new packaging has an endorsement by a celebrity. B. Yes, because the new packaging made the product more attractive in the eyes of consumers. C. No, because the new packaging did not improve the product itself. D. No, because the new packaging did help to not increase sales past the previous high for sales.

B. Yes, because the new packaging made the product more attractive in the eyes of consumers.

Which of the following is an accurate description of a Level 1 manager? A. an individual who works effectively with others to achieve synergies and team objectives B. a highly capable individual who makes productive contributions through motivation, talent, knowledge, and skills C. an individual who "does things right," is an effective team player, and organizes resources effectively to achieve predetermined goals D. an individual who is an effective strategic leader that builds enduring greatness into the organizations he or she leads

B. a highly capable individual who makes productive contributions through motivation, talent, knowledge, and skills

95. Which of the following is the best characterization of sociocultural forces? A. a firm's culture, norms, and values B. a society's culture, norms, and values C. a competitor's culture, norms, and values D. a focus group's culture, norms, and values

B. a society's culture, norms, and values

110. In the step-by-step process of industry analysis, identifying the underlying drivers of each force is followed by A. drawing a strategicgroup map. B. assessing the overall industry structure. C. identifying key players in each of the five forces. D. defining the relevant industry.

B. assessing the overall industry structure.

57. How can a firm change its industry structure from monopolistically competitive or oligopolistic to a near monopoly? A. by reducing the entry barriers in its industry B. by developing proprietary technology C. by implementing frequent price-cuts D. by decreasing its pricing power

B. by developing proprietary technology

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. chief executive officer.

47. 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

What part of the AFI strategy framework does the question "How does the firm make money?" relate to? A. strategic leadership and the strategy process B. competitive advantage, firm performance, and business models C. external analysis D. internal analysis

B. competitive advantage, firm performance, and business models

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.

106. SooGood Inc. produces a dip that goes extremely well with Crunchy Potato Chips Inc. SooGood Inc., therefore, is a _____ of Crunchy. A. direct competitor B. complementor C. indirect competitor D. shareholder

B. complementor

40. 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

B. computer hardware industry

93. A resource-based view of a firm provides a model that systematically aids in identifying A. related competencies. B. core competencies. C. competitive disadvantage. D. competitive parity.

B. core competencies.

Within corporate social responsibility, _____ essentially reflects the notion of a business voluntarily giving back to society. A. social networking B. corporate citizenship C. corporate governance D. social bookmarking

B. corporate citizenship

While creating its AFI strategy framework, the Kowalski Candy Company decided what markets the firm should compete in. By doing this, what type of strategy did the company devise? A. business strategy B. corporate strategy C. global strategy D. ethical strategy

B. corporate strategy

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

B. customers

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

B. demographic trends

82. Companies in the same strategic group are _____ to each other. A. complementors B. direct competitors C. strategic partners D. shareholders

B. direct competitors

35. With regard to the VRIO framework, Crocs Shoes was unable to sustain its competitive advantage primarily because its products were A. invaluable and common. B. easy to imitate. C. extremely expensive. 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

Paying taxes to local government authorities from the annual revenues generated by a firm represents the firm's _____ responsibilities. A. philanthropic B. economic C. psychographic D. political

B. 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? A. legal responsibilities toward the government B. economic responsibilities toward its shareholders C. philanthropic responsibilities toward the local community D. ethical responsibilities toward the society

B. economic responsibilities toward its shareholders

21. 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 scale C. customer switching costs D. capital requirements

B. economies of scale

The production head at the canned juice unit of True Candy Inc. would frequently stay back after office hours and experiment with new organic hard candy flavors 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 flavors of organic hard candy, raspberry-apricot and strawberry-apple. After rigorous test marketing, which proved that the market would accept the new candy, 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. emergent strategy

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. empower lower-level employees to take up autonomous actions.

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. ethical standards and norms

109. All Purpose Tires, Inc. is planning to build a manufacturing plant in Tornado Alley—an area that often gets hit by tornados. According to the SWOT analysis, this location is considered to be an A. external opportunity. B. external threat. C. internal opportunity. D. internal threat.

B. external threat.

19. In the context of the resource-based model of competitive advantage, if a successful firm exhibits resource immobility it means that the A. rival firms have better accessibility to quality resources. B. firm will have a sustained competitive advantage because of its unique resources. C. competitors can easily replicate or copy the firm's resource bundles and capabilities. D. resources of the firm cannot be effectively deployed within its own organization.

B. firm will have a sustained competitive advantage because of its unique resources.

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.

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

76. The value chain describes the A. competitive challenges a firm faces in a highly dynamic external environment. B. internal activities a firm engages in when transforming inputs into outputs. C. current consequences a firm experiences due to its decisions in the past. D. strategic advantages a firm experiences when its resources lack causal ambiguity.

B. internal activities a firm engages in when transforming inputs into outputs.

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.

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. is responsible for its own profit and loss.

27. If a resource is common A. competitive advantage will persist with one firm for a long period of time. B. it will result in perfect competition. C. it will result in greater resource immobility. D. competitive parity will cease to exist.

B. it will result in perfect competition.

13. Intangible assets add great value to a firm primarily because the firm's A. reputation and brand equity are accumulated quickly and can be leveraged easily. B. knowledge and culture take time to develop and are generally difficult to imitate. C. tangible assets require a higher degree of capital than its intangible assets. D. capabilities are by nature typically tangible.

B. knowledge and culture take time to develop and are generally difficult to imitate.

96. 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. A. ecological factors B. lobbying forces C. interest rates D. demographic research

B. lobbying forces

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

B. long-term oriented.

42. 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

B. monopolistic competition

50. Fadia Ammunition Inc., a firm controlled and managed by the government of Fadia, is the only company that has the license to produce defense arms in the country. Which of the following industry competitive structures does this best illustrate? A. monopolistic competition B. monopoly C. oligopoly D. perfect competition

B. monopoly

45. 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

B. oligopoly

Which of the following is typically an economic responsibility of a firm? A. sourcing raw materials from highly developed countries B. paying adequate returns to the firm's stockholders on the capital invested by them C. donating resources, in terms of money and time, toward community development D. helping a nation increase its import of goods and services

B. paying adequate returns to the firm's stockholders on the capital invested by them

25. 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.

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 nontoxic 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. planned emergence approach.

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.

30. The "Gold Crisps" potato wafers manufactured by True Foods Inc. have been the highest selling wafers in the market. Though the market for wafers is flooded with competitors, True Foods Inc. has been able to maintain its market position for a long time. This is mainly attributed to the unique taste of the wafers that comes from the unique natural flavoring used by the company. This competency of True Foods Inc. will be considered as a(n) _____ resource in the VRIO framework. A. inexhaustible B. rare C. intangible D. virtual

B. rare

70. Which of the following resources is a firm's resource stock? A. cash in the bank B. reputation for quality C. land and building D. plant and machinery

B. reputation for quality

16. Although True Ion Inc. and One Electro Inc. operate in the same consumer electronic industry, True Ion Inc. has better sales and brand equity. This is attributed to True Ion Inc.'s commitment to innovation. The company has adequate financial and human capital to invest in research and development, an area in which One Electro Inc. lacks. In this scenario, which of the following critical assumptions of the resource-based view of a firm has been illustrated? A. resource equality B. resource heterogeneity C. resource mobility D. resource maturity

B. resource heterogeneity

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.

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

103. Dynamic capabilities are essential for moving beyond a(n) _____ advantage. A. long-lived B. short-lived C. competitive D. inconsistent

B. short-lived

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.

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. size of the firm is large.

60. 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.

A(n) _____ is best described as a stand-alone 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. strategic business unit

The CEO of Sam's Club, Rosalind Brewer, 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 manufacturer

B. strategic business unit

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

B. strategy analysis

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

Which of the following tasks in the AFI strategy framework involves putting the formulated strategy into practice through organizational structure, culture, and controls? A. strategy formulation B. strategy implementation C. strategy analysis D. strategy evaluation

B. strategy implementation

78. Chat Zone Inc., a telecommunication company, had been drastically losing its market share due to tough competition in the industry. The management hired a reputed consulting firm to advice the company. The experts from the consulting firm pointed out that the company primarily lost out on its competitive advantage due to its tedious internal policies and procedures. These ineffective policies and procedures made the company operations, marketing, and after-sales service inefficient. Chat Zone Inc. can best solve its problem by working on its A. immobile assets. B. support activities. C. resource flows. D. resource stocks.

B. support activities.

23. 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

What is strategic leadership? A. the ability to delegate authority to create an effective strategic management process B. the executives' use of power and influence to direct the activities of others when pursuing an organization's goals C. the ability to inspire managers and other employees to create the best product possible D. the executives' use of power and influence to inspire workers to take responsibility for the final product

B. the executives' use of power and influence to direct the activities of others when pursuing an organization's goals

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

102. What are network effects? A. the positive cost effects that accrue for firms with larger output because they can spread fixed costs over more units B. the positive effect that one user of a product or service has on the value of that product or service for other users C. the positive effect that the high price of the entry ticket has on incumbent industries D. the positive cost effects that standardized commodities have on incumbent industries

B. the positive effect that one user of a product or service has on the value of that product or service for other users

5. 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

B. the stage of the business cycle that the country is in

64. 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

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

B. they earn low profits or are strapped for cash.

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. they provide more aspirational visions.

18. 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.

12. 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.

36. A firm's resource is most likely to be an internal strength and a core competency when the resource is A. valuable but common. B. valuable and costly to imitate. C. easily accessible and mobile. D. easy to substitute.

B. valuable and costly to imitate.

61. When is the rivalry among existing competitors in an industry likely to be more intense? A. when the industry growth rate is high B. when firms make strategic commitments to compete in an industry C. when firms engage in non-price competition as opposed to price-cutting D. when the industry has low exit barriers

B. when firms make strategic commitments to compete in an industry

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

75. 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.

44. 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.

For a strategist, which of the following is not an implication of effective strategic management? A. The difference between a firm's success and failure lies in its strategy. B. The principles of strategic management can be applied universally to all organizations. C. A firm's performance is determined by a set of independent factors, which includes firm and industry effects. D. It is necessary to maintain an awareness of key stakeholders and how they can affect or be affected by managerial actions.

C. A firm's performance is determined by a set of independent factors, which includes firm and industry effects.

88. Which of the following is a drawback of the SWOT analysis? A. The SWOT analysis takes into account only the internal environment of a firm, ignoring the equally important external environment. B. This framework is only applicable to the manufacturing industries; it is ineffective when applied to the service firms. C. A problem with this framework is that a strength can also be a weakness, and that an opportunity can also simultaneously be a threat. D. A drawback of this framework is that it allows managers to merely evaluate a firm's current situation, and not its future prospects.

C. A problem with this framework is that a strength can also be a weakness, and that an opportunity can also simultaneously be a threat.

52. 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 New Darvland owns 100 percent of the railway transport in the country.

C. An automobile manufacturer uses branding, pricing, and superior advertising to differentiate itself from a large number of other automobile manufacturers.

34. Which of the following fundamental insights was provided by Porter's five forces framework from the completion of the Alta Velocidad Española (AVE) in 2008? A. A strong threat of substitutes decreases the rivalry among existing competitors. B. All the five forces must work together to have a meaningful impact. C. Any of the five forces on its own, if sufficiently strong, can extract industry profitability. D. Competition must be defined more narrowly to remain confined to the industry's closest competitors.

C. Any of the five forces on its own, if sufficiently strong, can extract industry profitability.

_____ 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

86. Go West Airlines Inc. follows a cost-leadership strategy. Which of the following firms will most likely be its direct competitor? A. Deerpath Airlines Inc., which follows a cost-increase strategy B. John Henry Railways, which follows a differentiation strategy C. Blue Skies Airlines Inc., which follows a low-cost strategy D. Blue Cabs Inc., which follows a cost-leadership strategy

C. Blue Skies Airlines Inc., which follows a low-cost strategy

95. Which of the following statements correctly describes resource heterogeneity? A. Bundles of resources, capabilities, and competencies differ temporarily across firms. B. Bundles of resources, capabilities, and competencies are mostly the same across firms. C. Bundles of resources, capabilities, and competencies differ across firms. D. Bundles of resources, capabilities and competencies are all the same across firms.

C. Bundles of resources, capabilities, and competencies differ across firms.

Which of the following statements accurately describes corporate social responsibility (CSR)? A. CSR promotes the view that companies should single-mindedly focus on shareholders alone. B. CSR is limited to the notion of encouraging businesses to "just be nice" to society. C. CSR provides a conceptual model that more completely describes a society's expectations. D. CSR is based on the tenet that the needs of both internal and external stakeholders are the same.

C. CSR provides a conceptual model that more completely describes a society's expectations.

1. 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.

97. Which of the following statements about Porter's five forces model is accurate? A. The potential profit of a company is caused mostly by random factors instead of by industry-specific factors. B. Competition must be defined narrowly to focus on the closest competitors and plan ways increase profit potential. C. Competition must be defined in a broad way to incorporate all of the key factors that influence profit potential. D. The potential profit of a company is caused by two forces: threat of substitutes and rivalry among existing firms.

C. Competition must be defined in a broad way to incorporate all of the key factors that influence profit potential.

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

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

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. Ethan is a top management executive in the company.

24. 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.

45. _____ 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

Jason 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 man power, 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 Jason? A. Level 2 B. Level 3 C. Level 4 D. Level 5

C. Level 4

105. Which of the following is an accurate statement about near monopolies? A. Near monopolies are medium-sized firms that have some market power and thereby can influence the industry structure to a certain extent. B. Near monopolies are small firms in an industry that have differentiated products but little or no ability to raise their prices. C. Near monopolies are firms that have accrued significant market power and thereby are changing the industry structure in their favor. D. Near monopolies are a few large firms that dominate an industry and have differentiated products, high barriers to entry, and some degree of pricing power.

C. Near monopolies are firms that have accrued significant market power and thereby are changing the industry structure in their favor.

Which of the following statements should ideally reflect a firm's strategy for competitive advantage? A. Our strategy is to win at any cost. B. We will be number one in the industry. C. Our aim is to create superior customer value while controlling costs. D. We want to be the market leader by replicating our competitor's strategy.

C. Our aim is to create superior customer value while controlling costs.

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.

85. Which of the following statements is true about strategic groups? A. It is not possible to have two different strategic groups within the same industry. B. Rivalry within the same strategic group tends to be lower than rivalry between different strategic groups. C. Profitability varies between different strategic groups. D. Companies within the same strategic group are complementors to each other.

C. Profitability varies between different strategic groups.

How are the two approaches, strategic planning and scenario planning, different from the 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. 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.

71. Which of the following statements accurately describes a firm's resource stock? A. Resource stocks are a firm's level of resources that are common to competitors. B. Resource stocks are a firm's future estimate of both tangible and intangible resources. C. Resource stocks are a firm's current level of intangible resources. D. Resource stocks are a firm's level of investments to maintain or build a resource.

C. Resource stocks are a firm's current level of intangible resources.

92. Which of the following accurately summarizes the difference between the resources and capabilities of a firm? A. Resources are tangible; capabilities are tangible and intangible. B. Resources are intangible; capabilities are tangible. C. Resources are tangible and intangible; capabilities are intangible. D. Resources are tangible; capabilities are intangible.

C. Resources are tangible and intangible; capabilities are intangible.

68. 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.

C. Samsung's smartphones increase in value when they are preinstalled with Google's Android system.

What is the strategic management process? A. The CEO decides who the product managers will be for a company. B. The CEO defines the main problems facing a company. C. Strategic leaders design a method to formulate and implement strategy. D. Strategic leaders focus on creating a vision that reflects the company's strategy.

C. 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. A. Supply chain management B. Integrated technology management C. Strategic management D. Inventory management

C. Strategic management

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. The company's organizational structure and systems will be designed to support bottom-up strategic initiatives.

34. 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? A. The competitor used a title for its assembly system that was similar to the title of Gogo's system. B. The competitor failed to apply for a patent of its assembly system. C. The competitor infringed on Gogo's patent of the "diagonal assembly system." D. The competitor produced an assembly system that was somewhat similar to Gogo's system.

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

43. Why do firms operating in a monopolistically competitive industry have the power to raise the prices of their products or services? 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.

C. The firms can differentiate their product offerings.

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.

90. Which of the following applies to the Strength-Threats quadrant of the SWOT matrix? A. The local fast-food chain Easy Hot Dogs expanded its limited menu to maintain its advantage against stiff competition. B. The local fast-food chain Easy Hot Dogs added a salad bar to maintain its competitive advantage against stiff competition. C. The local fast-food chain Easy Hot Dogs used its wholesome image to maintain its competitive advantage against stiff competition. D. The local fast-food chain Easy Hot Dogs revised its image of being a cheap-food place to being a wholesome family place in order to maintain its competitive advantage against stiff competition.

C. The local fast-food chain Easy Hot Dogs used its wholesome image to maintain its competitive advantage against stiff competition.

Which of the following methods of developing a strategy best illustrates scenario planning? A. Based on the previous year's profits, the CEO of Solva Inc. decided to adopt an expansion strategy in its home market. B. A sales personnel of MP Foods Inc. suggested that the company should introduce an organic version of its gelato to cater to the needs of the increasing health-conscious population. C. The managers at Lyon Clothing Inc. formulated a strategy to tackle any increase in the prices of cotton in the future. D. The CEO of BCT Inc., a large conglomerate, has decided to enter the South American market based on the competitor's success in the same market.

C. The managers at Lyon Clothing Inc. formulated a strategy to tackle any increase in the prices of cotton in the future.

21. 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.

100. 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.

C. The weaker the five forces, the greater the industry's profit potential—making the industry more attractive.

84. Which of the following management tools will help determine whether a firm's resources, capabilities, and competencies are strengths or weaknesses? A. Porter's five forces analysis B. PESTEL analysis C. VRIO framework D. Ansoff's matrix

C. VRIO framework

True Help is a nonprofit 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. We help the homeless gain and sustain financial independence by providing employment opportunities.

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

67. 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

84. Golden Harvest is a restaurant located inside a five-star hotel. It caters mainly to customers who are concerned about quality dining rather than the prices. In this scenario, which of the following will be a part of Golden Harvest's strategic group? A. a nearby fast-food restaurant B. a food kiosk in an adjacent subway station C. a premium rooftop restaurant in the same city D. a mobile food cart parked opposite to the five-star hotel

C. a premium rooftop restaurant in the same city

Which of the following is an element of good strategy? A. an explanation of the firm's advantages over competitors B. a guiding policy to address employee satisfaction C. a set of coherent actions to implement the firm's guiding policy D. an approach that underestimates the competition

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

87. In the context of SWOT analysis, which of the following best exemplifies a firm's external opportunity? A. an increase in its financial resources B. an increase in its brand equity C. an increase in its customers' disposable income D. an increase in its employee productivity

C. an increase in its customers' disposable income

46. 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.

C. are interdependent.

6. Which of the following is an example of a firm's resources? A. routine activities like order taking and invoicing customers, performed in a firm B. assistance available from the government in the form of rules and regulations C. assets such as land and buildings owned by a firm D. liabilities such as bills payables and short-term debts

C. assets such as land and buildings owned by a firm

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

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

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

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 _____ strategy. A. corporate B. functional C. business D. tactical

C. business

53. 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.

59. 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.

62. It is difficult even for Apple's managers to pinpoint the underlying cause of the company's phenomenal success. The term that best applies to this difficulty is known as A. competitive dependence. B. resource mobility. C. causal ambiguity. D. path dependence.

C. causal ambiguity.

65. 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

C. complementor

5. 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.

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. core values.

Strategic commitments are actions that are A. inexpensive, long-term oriented, and difficult to reverse. B. inexpensive, short-term oriented, and easy to reverse. C. costly, long-term oriented, and difficult to reverse. D. costly, short-term oriented, and easy to reverse.

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

101. A new company named Far Reach Inc. entered the radio retail business. In response, two incumbent radio retailers, Smooth Waves and Clear Signal, lowered the cost of their travel alarm radios and long-distance radios. Also, they spent more money to improve these radios. By doing this, Smooth Waves and Clear Signal A. decreased industry exit barriers. B. increased industry exit barriers. C. decreased industry profit potential. D. increased industry profit potential.

C. decreased industry profit potential.

Customer-oriented visions do not A. leave open the means to of how to meet a need. B. define a business according to solutions. C. define how a customer need will be met. D. provide companies with a competitive advantage.

C. define how a customer need will be met.

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. emergent strategy.

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

Which of the following is not one of the three interdependent tasks of strategic management? A. analyze B. formulate C. estimate D. implement

C. estimate

In 2010, an explosion of a BP oil drill resulted in the deaths of 11 workers and the largest environmental disaster in U.S. history. The BP CEO was fired because of his ineffective handling of the crisis. The CEO lost his job because he failed to uphold _____ responsibilities. A. economic B. legal C. ethical D. philanthropic

C. ethical

Van Dyke's Fashion Inc., a company that manufactures clothing, incurs higher costs because of its refusal to build factories in countries where child labor is prevalent. This reflects Van Dyke's Fashion's _____ responsibility. A. economic B. legal C. ethical D. demographic

C. ethical

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.

13. In the _____ developed by Michael Porter, competition is not defined narrowly as a firm's closest competitors but rather more broadly to include other factors in an industry like buyers, suppliers, potential new entry of other firms, and the threat of substitutes. A. PESTEL framework B. VRIO framework C. five forces model D. value chain analysis

C. five forces model

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

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. how to implement business strategy.

Which of the following happens during the analysis stage of scenario planning? A. formulation of responses to scenarios B. development of different strategic plans C. identification of possible future scenarios D. execution of the dominant strategic plan

C. identification of possible future scenarios

Which of the following is step 3 in the five-step process of stakeholder impact analysis? A. identifying the most powerful stakeholders (both internal and external) and their needs B. identifying the stakeholders' interests and claims C. identifying the opportunities and threats the stakeholders present D. identifying the social responsibilities of the firm toward its stakeholders

C. identifying the opportunities and threats the stakeholders present

106. Each activity a firm performs along the horizontal value chain adds _____ value. A. temporary B. little C. incremental D. absolute

C. incremental

71. 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.

C. incumbent firms are highly committed to the business.

20. Economies of scale are cost advantages that accrue for firms with A. high fixed costs. B. low employee turnover. C. larger output. D. high capital risks.

C. larger output.

The society and shareholders mandatorily require a firm to perform its _____ responsibilities. A. ethical B. philanthropic C. legal D. political

C. legal

93. Which of the following is a macroeconomic factor that can affect a firm's strategy? A. power of buyers B. power of suppliers C. levels of employment D. threat of substitutes

C. levels of employment

56. 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

C. natural monopoly

22. 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

37. Pure Carat Inc. is a company that sells 24-carat gold biscuits to companies that manufacture jewelry. Since the company operates in an industry where many other suppliers sell standardized products, it can most likely A. easily achieve a temporary competitive advantage. B. easily achieve a sustainable competitive advantage. C. only achieve competitive parity. D. maintain its absolute advantage for long time.

C. only achieve competitive parity.

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

36. 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.

15. The resource-based view of a firm assumes that the A. resources of firms are highly scarce and hence the government interferes to ensure equal distribution. B. resources of firms are highly exhaustible and hence they cannot contribute to their competitive advantage. C. resource bundles of firms competing in the same industry are unique to some extent and thus differ from one another. D. resource bundles of firms competing in the same industry tend to be highly mobile, moving easily from firm to firm.

C. resource bundles of firms competing in the same industry are unique to some extent and thus differ from one another.

20. Due to resource immobility, a critical assumption in the resource-based model of a firm, the A. competitive advantage of a firm exists for a short period of time. B. resource bundles of a firm can be easily imitated by competitors. C. resource differences between firms last for a long time. D. competencies and capabilities of all firms in an industry are similar.

C. resource differences between firms last for a long time.

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. scenario planning

61. 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

Which of the following is an example of a firm's internal stakeholders? A. customers B. creditors C. stockholders D. suppliers

C. stockholders

Blue Billion Inc. is a large company that sells a variety of products such as cosmetics, jewelry, frozen foods, navigation electronics, and airplanes. Apart from this, the company also has a strong presence in the service industry through its chain of dance studios, casinos, and nightclubs. Each of its product divisions operates as an individual business and is responsible for its own profits and losses. Thus, these product divisions under Blue Billion can be referred to as A. limited liability companies. B. functional departments. C. strategic business units. D. corporations.

C. strategic business units.

83. Home Savings, Good Deals, Hank's Store, and King Bargains are all departmental stores that compete for advantage against each other through everyday low-pricing and discounts on bulk purchases. All four stores cater to the needs of highly price-sensitive customers. Thus, together Home Savings, Good Deals, Hank's Store, and King Bargains form a A. focus group. B. command group. C. strategic group. D. cross-functional group.

C. strategic group.

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

Executives whose vision and actions enable their organizations to achieve competitive advantage demonstrate A. top-down strategic planning. B. functional strategy. C. strategic leadership. D. dominant strategic planning.

C. strategic leadership.

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

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. strategy implementation

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. team leads of project teams in the organization

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

91. Apple paid $3 billion dollars to acquire Beats. This is the largest acquisition in Apple's history. Which of the following provides a reason for this acquisition? A. the movement in the music industry from renting works to buying works to own B. the need for Apple to create an image as a leader in technical audio research C. the change in content delivery from ownership via downloads to streaming on demand D. the demand for the extremely high-quality headphones that Beat produced

C. the change in content delivery from ownership via downloads to streaming on demand

63. Due to economic regression in United Filipia, the profitability of the large conglomerate Blue Wing Products Inc. (BWP) 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 BWP find it most easy to exit? A. the automobile business where the company has contractual obligations with suppliers B. the airline business where the company's strategic commitments are long-term C. the e-commerce retail business where investments on assets are low D. the pharmaceutical business where the company has a large number of fixed costs

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

9. Smooth Fusion Inc. is a software company, which has built and acquired numerous assets over the years. According to the resource-based view of a firm, which of the following assets of Smooth Fusion Inc. will best enable it to gain and sustain a competitive advantage? A. the resources of the company that are mobile B. the capital raised by the company from its shareholders C. the expertise acquired by the employees in the company D. the headquarters owned by the company

C. the expertise acquired by the employees in the company

9. 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

C. the family size of the firm's target market

29. If a resource is rare or unique to a particular firm, then A. the industry in which the firm operates will experience perfect competition. B. the mobility of the resource will be high. C. the firm will be able to maintain a competitive advantage for a long period. D. it will be less costly for rivals to imitate the resource.

C. the firm will be able to maintain a competitive advantage for a long period.

8. Which of the following is an example of a firm's intangible resources? A. the firm's cash at bank B. the firm's finished goods inventory C. the firm's organizational culture D. the firm's land and building

C. the firm's organizational culture

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. the outcome of a rational and structured, top-down strategic plan.

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

54. 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 most of its competitors had already been in the laptop market for five years. Blue Tech Inc.'s models were inferior to the ones in the market. 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.

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. to enable people throughout the globe to identify their capabilities

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

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. unrealized strategy

The CEO of Juliet Computers 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 computers that could be bought by low-income households. Which of the following does this example demonstrate? A. dominant strategic planning B. Level-5 leadership pyramid C. upper-echelons theory D. scenario planning

C. upper-echelons theory

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. upper-echelons theory

97. According to the VRIO framework, a firm can gain a competitive advantage if it has resources that are _____ and captured by an organized firm. A. varied, refined, costly to introduce B. valuable, refined, costly to introduce C. valuable, rare, costly to imitate D. varied, rare, costly to imitate

C. valuable, rare, costly to imitate

52. Which of the following is not a condition that can help a firm sustain its competitive advantage? A. when managers have consistently better expectations about the future value of resources B. when the resource advantage can only be imitated after a long period of time C. when past decisions act as constraints for the current dynamic capabilities D. when the source of the competitive advantage is causally ambiguous

C. when past decisions act as constraints for the current dynamic capabilities

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. where to compete.

72. GreenHarvest Inc. has used $350,000 from its total annual earnings of $1,250,000 to invest in the research and development of a multi-purpose vaccine. Its account receivable from customers is estimated to be $150,000 and accounts payable $80,000. In monetary terms, what would GreenHarvest Inc.'s resource flows be? A. $1,250,000 B. $150,000 C. $80,000 D. $350,000

D. $350,000

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

Which of the following is an example of competitive parity? A. A firm manufactures higher-quality wall clocks than its competitors B. A firm provides wall clocks that its consumers value more than other wall clocks C. A firm sells wall clocks at a lower price than its competitors D. A firm produces wall clocks at the same rate as its competitors

D. A firm produces wall clocks at the same rate as its competitors

Which of the following does not explain why activist investors have more power over a firm than individual investors? A. Activist investors can buy or sell large numbers of shares at once. B. Activist investors can exercise block-voting rights over individual investors. C. Activist investors can demand seats on company boards. D. Activist investors have more legitimacy than individual investors.

D. Activist investors have more legitimacy than individual investors.

Which of the following is an example of a product-oriented vision statement? A. Andrea, Ltd. wants to adapt their picture frames to the changing demands of consumers. B. Andrea, Ltd. wants to always satisfy the consumers who purchase picture frames. C. Andrea, Ltd. wants to provide the best benefits for employees in the picture-frame industry. D. Andrea, Ltd. wants to be the best manufacturer of picture frames in the industry.

D. Andrea, Ltd. wants to be the best manufacturer of picture frames in the industry.

14. 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.

Which of the following best describes a Level 5 manager in the Level-5 leadership pyramid? A. Connie is an employee who just started her career at DK Inc.; she has already been appreciated for her knowledge and skills in the new company. B. Dmitri is an employee at Infinite Circle Inc.; he has helped his team achieve their targets by contributing to the team's efforts. C. Luigi is part of the marketing team at RT Corp.; he has been given the charge of managing a team of three, so he will be promoted to a manager's position next month. D. Asoka is the CEO of Green Machines Inc.; he has helped his company in gaining and sustaining a competitive advantage through ethical decision making.

D. Asoka is the CEO of Green Machines Inc.; he has helped his company in gaining and sustaining a competitive advantage through ethical decision making.

6. 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. Economic growth rate will fall. D. Consumer demand will increase.

D. Consumer demand will increase.

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.

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

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

48. Which of the following statements accurately brings out the difference between monopolistic competition and an 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. Firms in an oligopoly have no pricing power; firms in a monopolistically competitive industry have the ability to raise prices. D. 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, many firms compete against each other; in an oligopoly, there are few large firms competing against each other.

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

14. Which of the following is a primary feature of the five forces model? A. It is concerned exclusively about the intensity of rivalry among direct competitors. B. It takes into account a firm's internal resources, capabilities, and core competencies. C. It helps managers determine the changing speed of an industry or the rate of innovation. D. It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.

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

Jorge 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, Jorge is in _____ of the Level-5 leadership pyramid. A. Level 5 B. Level 4 C. Level 3 D. Level 2

D. Level 2

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. Level 5

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.

_____ 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. Organizational values

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

D. PESTEL framework

82. Juanita, a manager at a multinational organization, is trying to carefully scan and link the firm's internal environment to its external environment. The insights from this analysis will allow her to effectively leverage the company's internal strengths to exploit external opportunities, while mitigating internal weaknesses and external threats. In this scenario, which of the following managerial tools is Juanita employing? A. Blake Mouton managerial grid B. Ansoff's matrix C. BCG analysis D. SWOT analysis

D. SWOT analysis

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. She used an emergent strategy.

Why is strategy considered to be the science of success and failure? A. Strategies can ensure the exact outcome of all business ventures undertaken. B. Strategies use extensive research by a variety of scientists. C. Strategies require a large amount of thinking and planning. D. Strategies use principles that can be applied universally to all organizations.

D. Strategies use principles that can be applied universally to all organizations.

70. 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.

19. 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 strategies best illustrates a functional strategy? A. The CEO of Sunrise Companies Inc. has decided that the company will be entering the European market. B. The general manager of a product division of Pickford 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 military electronics division of Holden & Co. has decided that the division will pursue backward integration to save costs. D. The production manager at the apparel division of Wilder Style Co. has decided that the department will hire contract workers for three months to meet the temporary demand.

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

107. Which of the following is an accurate statement about value chain analysis? A. The value chain concept can be applied only to manufacturing firms. B. The value chain concept can be applied only to high-tech firms. C. The value chain concept can be applied only to manufacturing and high-tech firms. D. The value chain concept can be applied to all firms, including service firms.

D. The value chain concept can be applied to all firms, including service firms.

7. What is most likely to happen when there is too much money in an economy? A. There are too many goods and services. B. There is a drop in interest rates. C. There is high economic growth. D. There is an increase in prices.

D. There is an increase in prices.

22. In the context of the resource-based model of competitive advantage, which of the following scenarios best exemplifies resource immobility? A. AP Corp. has earned a good reputation among its shareholders by investing more in tangible assets over intangible assets. B. Two Triangle Inc. has lost its market share because its resources are not mobile, that is rigid, inflexible, and static. C. Blue Elixir Corp. has been able to gain a competitive advantage because of its ability to efficiently move its resources from one manufacturing unit to another. D. True 3 Inc. has been able to outperform its competitors because the uniqueness of its resources is difficult to replicate.

D. True 3 Inc. has been able to outperform its competitors because the uniqueness of its resources is difficult to replicate.

99. How did Virgin America enter the airline industry despite the industry's notoriously low profitability? A. Virgin America offered average-cost service between small and large metropolitan cities in the American West. B. Virgin America offered average-cost service between major metropolitan cities along the American East Coast. C. Virgin America offered low-cost service between small and large metropolitan cities in the American South. D. Virgin America offered low-cost service between major metropolitan cities on the American East and West coasts.

D. Virgin America offered low-cost service between major metropolitan cities on the American East and West coasts.

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

107. The Beacon is a newspaper that sold print copies of its paper in a medium-sized town in Kansas for more than 100 years. Recently, the Beacon signed a deal with IntelNews Inc. to present the paper digitally to homes and businesses. This example shows A. a monopoly. B. an oligarchy. C. monopolistic competition. D. an industry convergence.

D. an industry convergence.

29. 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.

94. Superlative Productions spent 10 million dollars to buy the rights to a best-selling novel. The company then prepared for production by hiring a screenwriter to adapt the novel, casting the main roles, renting cameras and other equipment, and scouting locations in southern Arizona. Which of the following pairs of resources are both intangible? A. money spent to buy rights of novel; screenwriter's experience adapting novels B. money spent to buy rights for the novel; locations in southern Arizona C. best-selling novel; locations in southern Arizona D. best-selling novel; screenwriter's experience adapting novels

D. best-selling novel; screenwriter's experience adapting novels

47. 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

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. brainstorming to identify multiple plausible futures.

12. Coral Think Inc. is a new company in the publishing industry. It has raised sufficient capital from multiple sources. It is planning to use its capital to purchase certain assets. Which of the following assets will be the most difficult for Coral Think Inc. to acquire using its capital? A. inventory B. tools and equipment C. land and building D. brand name

D. brand name

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 _______ strategy. A. corporate B. functional C. grand D. business

D. business

The regional head for Creative Design Inc. in Boratania 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 Boratania will be considered as a _____ strategy. A. corporate B. tactical C. functional D. business

D. business

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 A. implementation strategy. B. corporate strategy. C. functional strategy. D. business strategy.

D. business strategy.

4. Organizational and managerial skills that find their expression in a company's structure, routines, and culture are referred to as A. tangible resources. B. reserves. C. capital gains. D. capabilities.

D. capabilities.

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

3. Dandelions Max is a consumer electronics company. It has acquired an edge over its competitors through its ability to provide breakthrough technology at the lowest price in the market. This advantage of Dandelions Max best exemplifies a A. markup. B. resource flow. C. capital gain. D. core competency.

D. core competency.

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. corporate executives

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. corporate strategy.

59. 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.

D. cutthroat competition.

In the final step of the stakeholder impact analysis, a firm A. identifies its stakeholders' interests and claims. B. differentiates its internal stakeholders from its external stakeholders. C. recognizes the opportunities and threats stakeholders present. D. decides a course of action to address the stakeholders' concerns.

D. decides a course of action to address the stakeholders' concerns.

86. In the context of SWOT analysis, which of the following best exemplifies a firm's internal weakness? A. fall in the purchasing power of the firm's customers B. increased competition in the industry where the firm operates C. irregularity in the raw materials supply throughout the industry D. decline in the firm's market share

D. decline in the firm's market share

89. When applying the five forces model, the first step should ideally be A. drawing a strategic-group map. B. identify the underlying drivers of each force. C. assessing the overall industry structure. D. defining the relevant industry.

D. defining the relevant industry.

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

D. dominant strategic plan

66. According to the _____, competitive advantage is the outflow of a firm's ability to modify and leverage its resource base in a way that enables it to gain and sustain competitive advantage in a constantly changing environment. A. value chain perspective B. two-factor theory C. expectancy theory D. dynamic capabilities perspective

D. dynamic capabilities perspective

Hewlett-Packard was not able to maintain its competitive advantage because it did not A. produce high-quality products at a low price. B. allow the freedom to explore new ideas. C. provide lifetime employment and generous benefits for employees. D. effectively address the challenges of mobile computing.

D. effectively address the challenges of mobile computing.

Which of the following is not an example of a black swan event? A. fall of the Berlin Wall B. 9/11 terrorist attacks C. Fukushima nuclear disaster D. election of President Reagan

D. election of President Reagan

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. environment does not change much.

Managers use the AFI strategy framework primarily to A. help their business achieve and sustain competitive parity. B. minimize the wealth of their shareholders. C. help reduce the economic contribution of their business. D. explain and predict differences in firm performance.

D. explain and predict differences in firm performance.

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.

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. A. grand B. corporate C. business D. functional

D. functional

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. functional managers.

A firm's economic responsibilities are primarily directed toward A. minimizing shareholders' wealth. B. acting as a good corporate citizen. C. doing what is right, just, and fair. D. gaining and sustaining competitive advantage.

D. gaining and sustaining competitive advantage.

42. Creating resources that meet the VRIO criteria is strategically important to a firm because it A. helps the firm curb its resource heterogeneity and resource immobility. B. facilitates greater knowledge diffusion in the industry. C. leads to competitive parity within the industry. D. helps the firm to gain and sustain a competitive advantage.

D. helps the firm to gain and sustain a competitive advantage.

40. True Moto Corp. (TMC) is a leading automobile company. The company has been able to sustain its competitive advantage primarily due to its high-quality and efficient electric motors. Most of its competitors have failed to develop similar electric motors at a reasonable price. Which of the following resource attributes listed in the VRIO framework has helped TMC sustain its competitive advantage? A. resource mobility B. inexhaustible nature C. intangibility of the company's resource D. high costs involved in imitation

D. high costs involved in imitation

44. Which of the following is a feature of an oligopolistic industry structure? A. many small sellers B. standardized or undifferentiated products C. limited pricing power D. high entry barriers

D. high entry barriers

76. 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.

D. horizontal mergers and acquisitions.

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.

27. 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 deregulated

D. if the industry has recently become deregulated

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.

101. To gain a competitive advantage, Lopez Industries obtained financing and then used this extra capital to produce the same amount of gaskets in a one-month period that it normally produces in a two-month period. Which of the following is the most likely outcome of this endeavor? A. inconsistent results B. same results C. better results D. inferior results

D. inferior results

67. Given the accelerated pace of technological change, in combination with deregulation, globalization, and demographic shifts, a firm will only be successful today if its A. competitive advantage is derived from static resource or market advantages. B. resource advantage is not causally ambiguous or socially complex. C. resource advantage is maintained for a short period of time. D. internal strengths change with its external environment in a dynamic fashion.

D. internal strengths change with its external environment in a dynamic fashion.

4. 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. ecological factors B. sociocultural factors C. technological factors D. legal factors

D. legal factors

77. According to the value chain analysis, which of the following is a primary activity? A. research and development B. human resources management C. accounting and finance D. marketing and sales

D. marketing and sales

104. 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.

D. monopolistic competition.

55. 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.

D. monopolistically competitive industry.

49. 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

D. oligopoly

Which of the following is not competitive strategy? A. strategic positioning B. unique activities C. product differentiation D. operational effectiveness

D. operational effectiveness

During an AFI planning session, the managers of the Fukuhara Motorcyle Corporation decided to place various stages of production in different countries. By doing this, what issue did the firm address? A. philanthropic strategy B. business ethics C. corporate governance D. organizational design

D. organizational design

The management of Wong Industries 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. A. scenario planning B. upper-echelons theory C. product-oriented vision D. organizational values

D. organizational values

50. Mova Electronics, a leading pager manufacturer, recently declared itself bankrupt. This was attributed to a decision the company made in the past. While most of Mova's competitors were shifting their research focus toward cell phones, Mova invested most of its retained earnings on improvising its pagers. Once the pager market drastically declined, Mova Electronics 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

The society and the shareholders just expect, and do not mandatorily require, a firm to A. pay fair dividends and returns to the investors. B. follow the employment laws of a country. C. provide safe and quality products to the customers. D. pay its workers more than the minimum living wage.

D. pay its workers more than the minimum living wage.

38. In which of the following industry competitive structures do selling firms have the lowest pricing power? A. monopolistic competition B. monopoly C. oligopoly D. perfect competition

D. perfect competition

Which of the following responsibilities results from a society's mere expectations of a business and not because the society and the shareholders mandatorily require the business to demonstrate it? A. economic responsibilities B. legal responsibilities C. contract responsibilities D. philanthropic responsibilities

D. philanthropic responsibilities

39. Otion Inc. is a relatively new firm in the consumer electronics industry. The company's primary objective is to become the market leader in less than 5 years, for which it has to gain and sustain a competitive advantage. In the context of the VRIO framework, which of the following resources should Otion Inc. primarily focus on to achieve its objective? A. quality standards, which are common and mandatory throughout the industry B. inexpensive unskilled labor that is easily accessible by all companies C. component parts that are sourced from competitors' suppliers D. production systems that reduce costs by 30 percent below the current industry standards

D. production systems that reduce costs by 30 percent below the current industry standards

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

31. Next Door Cellular is a leading mobile network operator. Since most of the resources used by Next Door Cellular are easily available, the company's brand name is the only resource that distinguishes it from the other operators. No other competitor in the industry has a strong brand name like that of Next Door Cellular. This unique asset that has helped the company gain a competitive advantage will be considered as a(n) _____ resource in the VRIO framework. A. tangible B. mobile C. imperishable D. rare

D. rare

18. Kaleidoscope Inc. is a leading international apparel company. Competitors across the globe have failed to imitate Kaleidoscope Inc.'s production models, supply chain systems, knowledge systems, and culture. These attributes have remained unique to Kaleidoscope Inc. for a long time. Which of the following assumptions of the resource-based model of competitive advantage does this scenario best illustrate? A. resource homogeneity B. resource perishability C. resource equality D. resource immobility

D. resource immobility

89. To make the SWOT analysis an effective management tool, a strategist must first A. distinguish a firm's resources, competencies, and capabilities from each other. B. separate a firm's primary activities from support activities. C. analyze the pros and cons of strategic options. D. scan a firm's internal and external environments.

D. scan a firm's internal and external environments.

Which of following practices of a firm satisfies its ethical responsibilities? A. using plastic as the packaging material though it is harmful to the environment, yet legal B. outsourcing production to a less developed country and paying wages that are below its own country's accepted minimum wages C. using advertising and other forms of promotion to endorse luxurious lifestyles D. selling vaccines at a subsidized price in a less developed country even though this results in reduced shareholder returns

D. selling vaccines at a subsidized price in a less developed country even though this results in reduced shareholder returns

A customer-oriented vision statement focuses employees to think about how best to A. make a product easier to use. B. increase their efficiency for consumers. C. improve a popular product. D. solve a problem for a consumer.

D. solve a problem for a consumer.

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.

41. During market testing, Sensation Cosmetics (SC) realized that the cosmetics industry was dominated with multiple, well-established brands. These brands mostly sold their products in exclusive outlets and departmental stores. A new entrant like SC would require a different business model to be successful. Thus, SC started selling its products through direct marketing. In this scenario, Sensation Cosmetics accomplished substitution primarily through A. path dependence. B. technology transfer. C. knowledge diffusion. D. strategic equivalence.

D. strategic equivalence.

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.

66. Which of the following forces was not originally a part of Michael Porter's fives forces model? A. threat of substitute products or services B. bargaining power of buyers C. rivalry among existing competitors D. strategic role of complements

D. strategic role of complements

Which of the following stages in the AFI strategy framework involves designing a business, corporate, and global strategy? A. strategy control B. strategy implementation C. strategy analysis D. strategy formulation

D. strategy formulation

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

D. sustainable competitive advantage

28. Gene Craft Inc. is the market leader in the pharmaceutical industry. Though most of its resources are common to those of its competitors, a few rare resources have helped the company gain and sustain a competitive advantage. Which of the following assets of Gene Craft Inc. is most likely to be considered a rare resource that is best contributing to its competitive advantage? A. the company's land and buildings B. the company's plant and machinery C. the company's raw material supplies D. the company's chemical patents

D. the company's chemical patents

7. The management of a company is assessing the value of all the tangible resources the company owns. Which of the following will be included in this assessment? A. the company's copyrights B. the company's brand equity C. the company's patents D. the company's machinery

D. the company's machinery

15. A firm's strategic position is likely to be strong when A. the entry barriers within the industry it operates in are low and the exit barriers are high. B. its suppliers and vendors can easily forward integrate and buyers can backward integrate. C. all the five forces in Porter's model are strong. D. the gap between the value the firm's product generates and the cost to produce it is large.

D. the gap between the value the firm's product generates and the cost to produce it is large.

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. the general managers of individual business units

38. Riya has recently started a restaurant in a commercial area where there are many other established restaurants and popular fast-food chains. Riya owns the plot on which her restaurant is located and this makes her cost of operations lower than the competitors. This factor allows her to offer her products at a competitive price. Riya has also invested a huge amount on the interiors of the restaurant and in equipping the kitchen with the latest appliances used by her competitors. In this scenario, which of the following is the most valuable resource for Riya's business? A. the investments made by Riya on the restaurant's interiors B. the latest kitchen equipment that is at par with the restaurant's competitors C. the restaurant's late entry into the market D. the land owned by Riya, which reduces cost of operations

D. the land owned by Riya, which reduces cost of operations

33. 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 availability of complements D. the threat of substitutes

D. the threat of substitutes

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. these approaches do not allow for the necessary strategic thinking.

Handy Pro, Inc. is a company that manufactures electric tools like drills, screwdrivers, and saws. Which of the following best illustrates a product-oriented vision for Handy Pro? A. to make people's lives simple and easy B. to allow everyone to have the luxury of electric tool technology C. to help people save time and energy spent using manual tools D. to be the pioneering manufacturer of electric tools

D. to be the pioneering manufacturer of electric tools

The Chief Executive Officer (CEO) of Yahoo, Marissa Mayer, maintains that if a company builds the best product possible, profits will come. Identify the phrase that represents the new vision she developed for Yahoo. A. to achieve human sustainability while having fun doing it B. to provide a high-quality product that has environmental sustainability C. to appeal to the whole person at work and at home D. to make the world's daily habits more inspiring and entertaining

D. to make the world's daily habits more inspiring and entertaining

108. Why do companies use strategic group models? A. to reveal product differences between firms in the same industry B. to reveal potential areas of industry convergence between firms in different industries C. to reveal common threads between firms in different industries D. to reveal performance differences between clusters of firms in the same industry

D. to reveal performance differences between clusters of firms in the same industry

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.

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

D. unrealized

85. In the context of SWOT analysis, a firm can develop an offensive strategic option primarily by A. combining an internal weakness with an external threat. B. leveraging its internal strengths to minimize external threats. C. leveraging an external opportunity to overcome an internal threat. D. using its internal strengths to exploit external opportunities.

D. using its internal strengths to exploit external opportunities.

30. 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