Policy/Strategy Exam 1 (Ch. 1,2,3,4)
threat of entry
the risk that potential competitors will enter an industry
Industrial Drills, a company that manufactures industrial tools, incurs higher costs because of its refusal to outsource its manufacturing to countries where labor costs are lower. This reflects Industrial Drills' __________ responsibility
ethical
Strategic leadership
executives' use of power and influence to direct the activities of others when pursuing an organization's goals
representativeness
A cognitive bias in which conclusions are based on small samples, or even from one memorable case or anecdote
illusion of control
A cognitive bias that highlights people's tendency to overestimate their ability to control events
upper-echelons theory
A conceptual framework that views organizational out-comes strategic choices and performance levels as reflections of the values of the members of the top management team.
PESTEL model
A framework that categorizes and analyzes an important set of external factors (political, economic, sociocultural, technological, ecological, and legal) that might impinge upon a firm. These factors can create both opportunities and threats for the firm.
corporate social responsibility
A framework that helps firms recognize and ad-dress the economic, le-gal, social, and philanthropic expecta-tions that society has of the business enterprise at a given point in time.
five forces model
A framework that identifies five forces that determine the profit potential of an industry and shape a firm's competitive strategy.
industry
A group of incumbent companies that face more or less the same set of sup-pliers and buyers.
industry analysis
A method to (1) identify an industry's profit potential and (2) derive implications for a firm's strategic position within an industry.
Which of the following is a drawback of the SWOT analysis?
A problem with this framework is that a strength can also be a weakness, and that an opportunity can also simultaneously be a threat
complement
A product, service, or competency that adds value to the original product offering when the two are used in tandem.
Nuke It is a major manufacturer of microwave ovens. Which of the following statements will best inspire the organization with a shared vision for Nuke It?
At Nuke It, employees at all levels are motivated to make the best microwaves on the market
Which of the following scenarios illustrates a firm that has a sustainable competitive advantage?
Bill and Ted Corp. was able to hold its market share of 68% in the social networking industry for more than three years
In 2008, BlackBerry's market cap peaked at $75 billion. By 2017, this valuation had fallen more than 90 percent to $3.9 billion. BlackBerry fell victim to two important PESTEL factors in its external environment: sociocultural and technological. How did technology contribute to BlackBerry's decline?
BlackBerry failed to change its device into one that could perform multiple tasks effectively
Which of the following summarizes the difference between corporate strategy and business strategy?
Corporate strategy deals with where to compete; business strategy deals with how to compete
Which of the following statements is true of customer-oriented visions?
Customer-oriented vision statements are not the same as listening to your customer
Progress Apparel's core value statement reads we will ensure our clothing is made with the highest respect toward human rights and environmental protection. Which of the following actions exemplifies how Progress's core values drive its strategic decision making?
Demanding that textile suppliers pay liveable wages and maintain safe production facilities
competitive industry structure
Elements and features common to all industries, including the number and size of competitors, the firms' degree of pricing power, the type of product or service offered, and the height of entry barriers.
Which of the following is an example of a business acting upon an organizational core value?
Emerald Autos reduces engine emissions below federal guidelines to reduce pollution
Sam, owner of Sam's Hand Sanitizer Inc. is in the middle of the strategy formulation stage. He has already allocated a substantial amount of money that covered his employees salaries from the prior year (sunk costs) but has failed to see any positive outcomes. Given the money he has already spent, he feels as if he needs to recover those costs and pushes forward even though the outcome seems dim. This best illustrates the concept of_____
Escalating commitment
In the AFI strategy framework, strategy analysis primarily involves
Evaluating the effects of internal resources and core competencies on a firms potential to gain and sustain a competitive advantage
black swan events
Incidents that describe highly improbable but high-impact events.
dialectic inquiry
The generation of a plan (a thesis) and a counterplan (an antithesis) that reflect plausible but conflicting courses of action.
Economic Responsibilities.
To accomplish all this, firms must obey the law and act ethically in their quest to gain and sustain competitive advantage
reason by analogy
a cognitive bias in which individuals use simple analogies to make sense out of complex problems
complementor
a company that provides a good or service that leads customers to value your firm's offering more when the two are combined
Which of the following strategies best illustrates a generic business strategy?
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
strategic position
a firm's strategic profile based on the difference between value creation and cost (V-C)
Which of the following is NOT considered an important macro-environmental influence on businesses (that is, a potential influence beyond that of the industry alone)?
bargaining power of suppliers
realized strategy
combination of intended and emergent strategy
Due to several black swan events in the past, the
implicit trust relationship between the corporate world and society at large has deteriorated
According to the resource-based view, a firm's competitive advantage often stems from
intangible resources
Farm to Table Inc. is a supermarket chain. Due to strong competition from other stores in the industry, Farm to Table 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?
monopolistic competition
Tommy, a manager, is writing an analysis of his employer's current and possible future revenues. Which of the following could he identify as an economic factor in his firm's external general environment?
the stage of the business cycle that the country is in
network effects
the value of a product or service for an individual user increases with the number of total users
resource-allocation process
the way a firm allocates its resources based on a predetermined policies, which can be critical in shaping its realized strategy
Which of the following statements is true of corporate strategy?
A corporate strategy must be able to create synergies across business units that are quite different
Steve manages product design and development at a toy company. The junior managers who report to him tell him that new complementors for the firm's products are available. What should Steve's reaction be?
He needs to find out if his company as well as other companies can provide the complements
Which of the following is a drawback of Porter's five forces model?
Managers cannot determine the changing speed of an industry or the rate of innovation
Asher has been tasked with formulating business strategy for Calm Cosmetics' new line of lipsticks. Which of the following ideas would Ida be likely to include in her proposal?
Promote the lipsticks as the longest-lasting on the market
Breeze Car Rental follows a cost-leadership strategy. Which of the following firms will most likely be its direct competitor?
Quicker Rental Cars, which follows a low-cost strategy
After conducting a SWOT analysis, your firm has decided to focus on addressing issue located in the weaknesses-opportunities quadrant. Which of the following steps are you most likely to take?
Recognize the inefficient research and development department to bring innovative products to market more quickly
Jennifer, a manager at a multination 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 Jennifer employinh?
SWOT analysis
confirmation bias
a tendency to search for information that supports our preconceptions and to ignore or distort contradictory evidence
Stakeholder strategy
an integrative approach to managing a diverse set of stakeholders effectively in order to gain and sustain competitive advantage
strategic initiative
any activity a firm pursues to explore and develop new products and processes, new markets, or new ventures
emergent strategy
any unplanned strategic initiative bubbling up from the bottom of the organization
WeClean Inc., a manufacturer of cleaning agents, supplies its products to Goodings Inc., a supermarket chain. It demands that Goodings create more shelf space in its stores for WeClean s' products. However, Goodings 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, Goodings Inc. has exercised its bargaining power as a buyer through
backward integration
Assume 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
casual ambiguity
When performing internal analysis of firms, how would you answer the question, "why do companies exist?"
companies exist because they create value for customers in ways that customers are unable to replicate on their own
Strategy formulation
concerns the choice of strategy in terms of where and how to compete
strategy implementation
concerns the organization, coordination, and integration of how work gets done
cognitive limitations
constraints such as time or the brain's in-ability to process large amounts of data that prevent us from appropriately processing and evaluating each piece of information we encounter.
co-opetition
cooperation by competitors to achieve a strategic objective
Frozen Gold is a fast-growing chain of ice cream shops. It has acquired an edge over its competitors through its ability to provide a wide array of unique flavors and a hip atmosphere in stores. This advantage of Frozen Gold best exemplifies a
core competency
Firm effects
firm performance attributed to the actions managers take
Which of the following statements accurately brings out the difference between tangible and intangible resources?
Tangible assets can be bought on the open market by anyone with the necessary cash, whereas intangible assets cannot be easily purchased
SJobs's Computer Repair has maintained a competitive advantage based on its thorough and professional service, reasonable pricing, and money-back guarantee. Management at the company is so committed to doing repairs well that they often have rejected employee suggestions to expedite their processes. Recently, the company has begun to lose customers to a new local service offering same day in-home repairs and 24/7 online customer support. According to the dynamic capabilities perspective, SJobs's Computer Repair has lost its competitive advantage due to
core rigidity
Most consumers and investors today want the firms they do business with to look beyond just the profit motive. In fact, they want firms that behave legally and ethically while also giving back to their communities via philanthropic activities. The framework that attempts to reconcile these wants is known as
corporate social responsibility
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
entering the aircraft manufacturing industry requires huge capital investments
Industry effects
firm performance attributed to the structure of the industry in which the firm competes
In the context of the resource-based model of competitive advantage, if a successful firm exhibits resource immobility it means that the
firm will have a sustained competitive advantage because of its unique resources that are difficult for others to replicate
A strategic group will typically include
firms within the same industry
Good Ole Cinemas Inc. and HD Inc. are two companies that own and run movie theaters in malls and other commercial areas. While Good Ole Cinemas Inc. purses a cost-leadership strategy, HD Inc. adopts a differentiation strategy. Which of the following statements is most likely true of this scenarios
iHD and Good Ole Cinemas will not be direct competitors to each other, and their customer segments will overlap very little
Which of the following statements accurately brings out the difference between monopolistic competition and an oligopoly?
in monopolistic competition, many firms compete against each other, in an oligopoly, there are few large firms competing against each other
The minimum wage in the country of Hanns is $8 an hour. Delish, a restaurant in capital city, pays its servers $8 per hour. However, the management of the restaurant feels that this amount is excessive for workers who only job is clear to tables. By continuing to adhere to the rules set by the government of Hanns, which of the following responsibilities is Delish satisfying?
legal responsibilities
entry barriers
obstacles that determine how easily a firm can enter an industry and often significantly predict industry profit potential
Value creation
occurs because companies with a good strategy are able to provide products or services to consumers at a price point that they can afford while keeping their costs in check, thus making a profit at the same time
New Diamond Inc. is a company that sells-carat gold biscuits to companies that manufacture jewelry. Because the company operates in an industry where many other suppliers sell standardized products, it can most likely
only achieve competitive parity
Chips & Motherboards Inc., a leading hard drive manufacturer, recently filed for bankruptcy. While most of Chips & Motherboards Inc.'s competitors were shifting away from physical data storage devices toward online cloud storage services, Chips & Motherboards Inc. invested most of its retained earnings in the effort to improve its hard drives. Once the hard-drive market drastically declined, Chips & Motherboards Inc. was unable to capitalize on the new technology. Which of the following does this scenario best illustrate?
path dependence
To reduce the amount of time it takes to apply packaging to its finished products, North Star Foods is implementing new equipment at its production plants. By doing this, North Star is addressing a _________ in the value chain analysis.
primary activity
Which of the following practices of a firm satisfies its ethical responsibilities?
selling vaccines at subsidized price in a less developed country even though this results in reduced shareholder returns
autonomous actions
strategic initiatives undertaken by lower-level employees on their own volition and often in response to unexpected situations
planned emergence
strategy process in which organizational structure and systems allow bottom-up strategic initiatives to emerge and be evaluated and coordinated by top management
Keeping in mind the five forces in the airline industry, which of the following best explains the difficulty airline have in generating a profit?
substitutes are readily available in the form of trains, buses, and cars, thus reducing the profit potential in the industry
escalating commitment
the continuation of a course of action even though it is not working
A firm's strategic position is likely to be strong when
the gap between the value the firm's product generates and the cost to produce it is large
intended strategy
the outcome of a rational and structured top-down strategic plan
If you examine various barrier to entry facing firms that might wish to enter the airline industry, this would be most helpful in assessing which of the five forces in that industry?
threat of new entrants
Given the accelerated pace of technological change, in combination with deregulation, globalization, and demographic shifts, a firm will only be successful today if its
internal strengths change with its external environment in a dynamic fashion
Strategic management
is the integrative management field that combines analysis, formu-lation, and implementation in the quest for competitive advantage.
Firms that can employ and establish ___________ are more likely to protect their competitive advantage from being copies and/or eroding away.
isolating mechanisms
Stakeholder impact analysis
provides a decision tool with which strategic leaders can recognize, prioritize, and address the needs of different stakeholders
Southwest Airlines (SWA) and Alaska Airlines both compete as point-to-point airlines, but they draw upon different resource bundles. This example best illustrates which of the following assumptions regarding the resource-based view?
resource heterogeneity
Which of the following is not captured when examining a competitive industry structure?
the ability to engage in forward vertical integration
Amelia has recently started a restaurant in a commercial area that already has many other established restaurants and popular fast-food chains. Amelia owns the building in which her restaurant is located, rather than leasing premises as her competitors do. This factor allows her to offer her products at a more competitive price. Amelia has also invested a huge amount in designing the restaurant's interior and in equipping the kitchen with the appliances that are most widely used in her industry. In this scenario, which of the following is the most valuable resource for Amelia's business?
the building owned by Amelia, which reduces cost of operation
How are cumulative learning and experience effects of a company most likely to affect Michael Porter's five forces?
threat of new entrants will be low