Strategic Management - Exam 1

a successful strategy details a set of goal-detailed actions that managers make to gain and sustain a competitive advantage; in order to create this stategy, managers must focus on three pillars. which of the following below is not of these pillars.

execution

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 unique resources that are difficult for others to replicate.

The term "tragedy of the commons" refers to a problem that affects a company's shareholders but not its management or board of directors.

False

a firm is required by society and its shareholders to meet its ethical and philanthropic responsibilities.

False

Lawrence decided to copy the competition to gain a competitive advantage for his company. after a year, he realized his company failed to gain such an advantage. lawrence most likely failed because of the ______ effect.

Red Queen

When conducting a________ it's best to examine both PESTEL and Porter's five forces analyses because these tools focus on the external environment.

SWOT analysis

Which of the following strategy plans might work best in an industry that is considered a fast-changing environment with new laws going into effect regularly?

Scenario Planning

Stark Industries is a public stock company. Which of the following statements about the company best illustrates the fact that its investors have limited liability?

Shareholders of Stark Industries are responsible to the company only to the capital they have invested.

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

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

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

corporate executives

Wellness Data Corp. focuses on its competitive advantage as its fundamental and top priority; it uses some of its profits to do good in its community. This demonstrates

corporate social responsibility.

As the manager of a relatively new company assessing what could give your business a competitive advantage, you are analyzing company resources to identify core competencies. Which of the following resources is most likely to generate a competitive advantage?

enthusiastic company culture

John is a bit confused about the difference between stakeholders and stockholders. You meet with john and inform him that the main difference is that

stakeholders can be both internal and external while stockholders own shares of a firm and are classified as internal to the firm

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

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

Juan wants to open his own hot dog restaurant but doesn't know anything about business. He needs help determining who his competition is, how he should craft his strategy to compete and how he'll implement his strategy to achieve a competitive advantage. He's hired you to help him get started. As a result, you will probably use which of the following?

AFI strategy framework

Agro Ecology Inc. is a company that manufactures mechanical and biological products to support sustainable farming methods. The company envisions that sustainable farming will replace industrial agricultural practices in the near future. Which of the following statements would make an accurate vision for Agro Ecology?

All people should have access to food and fibers produced using sustainable farming methods.

Bigger & Better Inc. is a big-box retailer in direct competition with Walmart and Target. Bigger & Better Inc. initially tried to respond to Walmart by cutting its prices and reducing costs. Walmart has greater buying power and a more efficient supply chain; therefore, Bigger & Better Inc. was not able to compete on costs. The company then tried to differentiate itself by signing a celebrity to create an in-house line of clothing. However, Target has a celebrity clothing line that has a more differentiated appeal. The economic value created by Bigger & Better Inc. is currently less than Target and Walmart. It can be said that

Bigger & Better Inc. is "stuck in the middle" and has a competitive disadvantage.

Upper management at ComfyShoe Inc., a manufacturer of insoles for shoes, wants to work on improving the product lines it already has without taking on other challenges at this time. Which of the following vision statements reflects that goal?

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

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.

________ allow(s) 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.

Core competencies

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

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

Why does Michael Porter recommend expanding the customer base of an organization in terms of the shared value creation framework?

Doing so could yield significant business opportunities that could improve the living standard of people living below the poverty line around the world.

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.

A CSV perspective leads to tinkering with isolated components as needed; in contrast, the CSR approach is an integral part of a firm's competitive strategy from the beginning.

False

The upper-echelons theory favors the idea that effective strategic leadership results from innate abilities rather than learning.

False; The upper-echelons theory favors the idea that effective strategic leadership results from innate abilities and learning. By mastering each level of the Level-5 leadership pyramid, an employee can learn to become an effective strategic leader.

First Pharma Inc. and GeoVax Inc. are two competing firms in the pharmaceutical industry. While First Pharma Inc.'s vision is "to be a preeminent drug manufacturer in the industry," GeoVax Inc.'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?

GeoVax Inc. will be more flexible than First Pharma Inc. when adapting to changing environments.

Great Sound Inc. is a publicly traded company that specializes in manufacturing consumer electronics. Which of the following best exemplifies the implementation of a shared value creation framework at Great Sound Inc.?

Great Sound uses recycled materials to create its commercially successful products.

Organizational values help people make choices that are ethical and company-goal-oriented. These values answer which strategic management question?

How do we accomplish our goals in the organization?

Evaluate the following statement: Strategic leaders should always try to pursue a blue ocean strategy because it is the most complex, coveted, and most desirable strategy that exists.

I disagree; firms should only pursue this strategy if they are able to reconcile the tradeoffs of each generic strategy.

Do vision statements help firms gain and sustain competitive advantage?

It depends, because the effectiveness of vision statements differs by type.

Mohawk is a leader in sustainable and innovative carpeting and floorings, as evidenced by its signature product, the world's first organic cotton carpet. Its product is unique and has appealing customer attributes. If Mohawk's raw material costs increased by 12 percent this year, what would be the likely outcome?

Mohawk would pass a major portion of this increase along as a price increase to its customers.

________ are best described as the ethical standards and norms that govern the behavior of individuals within a firm.

Organizational core values

Gina is the founder and CEO of a successful technology firm. In a memo, she informs the company's employees that remote workers will be required to attend onsite teambuilding events at least once per quarter. In this example, Gina's authority to institute a policy change is based on

Position Power: Strategic leaders can draw on position power based on their authority—for example, as chief executive officer (CEO) or draw on informal power, such as persuasion, to influence others when implementing strategy. As the CEO of the company she founded, Gina holds position power, which she used to establish a new policy affecting remote workers.

Sean, a retired CEO, invests capital in a start-up company that creates budgeting software. He mentors the entrpreneur and the employees of the company because to perform well nad survive in the market. This, sean is the start-up company's

Stakeholder

The process that describes the method by which managers conceive of and implement a strategy that can lead to a sustainable competitive advantage is called

Strategic Management

Keeping in mind the five forces in the airline industry, which of the following best explains the difficulty airlines 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.

Which of the following descriptions correctly characterizes a CSV perspective?

The company identity and budget are entirely aligned around creating shared value.

Which one of the following statements below can best be linked to the Nobel laureate Milton Friedman?

The social responsibility of a business is to increase its profits.

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

Threat of new entrants will be low.

Which of the following examples uses a focused differentiation strategy?

a tennis pro shop that sells high-quality, custom racquets priced at $350 dollars per racquet

Applying the five forces model to business-level strategy allows managers to assess the benefits and risks of both cost-leadership and differentiation strategies.

True

One of Apple's core competencies is establishing and maintaining a digital ecosystem.

True

The stronger the five forces, the lower the industry's ability to earn above-average profits and gain and sustain a competitive advantage.

True

Both Lorenzo's Engines and Water King incur a cost of $5,000 to manufacture a boat engine. However, the economic value created by Water King is more than that created by Lorenzo's Engines. What does this indicate?

Water King can charge a premium price on its boat engines.

Which of the following goals relates to the G dimension of ESG criteria for evaluating company performance?

We will adhere to universally accepted and accurate accounting principles.

Which of the following questions should strategic leaders ask while formulating a business-level strategy?

What customer needs, wishes, and desires will we satisfy?

Frozen Gold is a fast-growing chain of ice cream shops. It has developed an edge over its competitors by providing customers with a wide array of unique flavors and fostering a hip atmosphere in its stores. This advantage of Frozen Gold best exemplifies a

core competency.

The strategic decision to design a supply chain to provide higher quality products at a lower cost while also reducing environmental impact represents

a CSV approach.

When a firm is able to successfully employ a blue ocean strategy, it will create a competitive advantage by

beating rivals on product attributes while offering a better price.

Organizational values help individuals make choices that are

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

A________ primarily details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market.

business-level strategy

When pursuing a cost-leadership strategy, a business must remember that

buyers will be reluctant to pay for a product unless the quality is acceptable.

One of the reasons that Circuit City filed for bankruptcy was due to its inability to reinvest, hone, and upgrade its once-impressive resource base. Ultimately, Circuit City's core competences became

core rigidities.

In the five forces model developed by Michael Porter,________ is not defined narrowly as a firm's closest competitors but rather more broadly to include other factors in an industry, such as buyers, suppliers, the potential new entry of other firms, and the threat of substitutes.

competition

Sophie's sandwich shop offers burgers and sandwiches similar to national competitors in the fast-food market but at a much lower price. What strategy is Sophie's using?

cost-leadership

Strategic commitments are actions that are

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

the goal of a good strategy is focused primarily on

creating superior value while containing costs

In a focused cost-leadership strategy, a firm

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

Abdul and Laticia both love hot coffee. Abdul likes to keep his coffee hot during the day, while Laetitia doesn't mind drinking room temperature coffee. Abdul is willing to spend more money on a thermos than Laticia is willing to spend. This example illustrates the following major limitation of employing the economic value creation framework because

determining the value of a good/service through the perspective of consumers is not a simple task because consumers have different spending habits.

Skin Science Inc. produces a line of skincare products that it sells at higher prices than its competitors. The company has a large and loyal customer base due to its unique formulations, high-quality ingredients, and superior customer service. Which of the following generic business strategies has Skin Science adopted in this scenario?

differentiation

Given the structure of the automobile industry, entering the auto manufacturing industry seemed risky. Yet Tesla Motors joined the fray. Rather than attempting to compete head-on with internal combustion engines, Tesla Motors entered 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?

economies of scale

Marriott is able to create greater economic value than its competitors due to its ability to take advantage of________, which describe the savings that come from producing two (or more) outputs at less cost than producing one output individually, while utilizing the same amount of resources and technology.

economies of scope

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.

PolyCon Inc. is a public stock company that provides natural gas for businesses. Although this company generates a large profit, management's focus on reducing costs caused the maintenance budget to be trimmed. Its pipelines have at times leaked, which created significant environmental problems. As a result, the company's value creation has suffered. This scenario supports strategy scholars' warning that public companies

have defined value creation too narrowly in terms of financial performance, thereby contributing to black swan events.

According to the perspective of shareholder capitalism, shareholders in public stock companies

have the most legitimate claim on profits.

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

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

The broad question that business-level strategy answers is________ the firm will compete.

how

In strategic management, strategists engage in three pillars. these three pillars include the ______ of major goals and objectives.

implementation

According to the resource-based view, a firm's competitive advantage often stems from its

intangible resources.

Firms that can employ and establish________ are more likely to protect their competitive advantage from being copied and/or eroding away.

isolating mechanisms

A company employing a CSV perspective focuses on

joint company, community, and societal value creation.

Five Star Inc. is a knife manufacturer known for its high-quality steel chef's knives, and it follows a differentiation strategy. In this scenario, Five Star Inc. should ideally compare its strategic position with a

knife maker that produces high-end chef's knives.

Josie wants to invest in the stock market but is afraid of losing more money than what she invests. Josie need not worry because of

limited liability for investors.

Firms that compete within the same strategic group generally experience

more competitive rivalry than firms outside their strategic group.

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

network effects

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

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

The competitive advantage that one firm has will be short-lived in an industry in which

perfect competition exists.

A firm's business strategy can lead to a competitive advantage if it allows the firm to

perform different activities than its rivals.

According to the five forces model, the stronger the five forces, the lower the industry's

profit potential.

Southwest Airlines (SWA) and Alaska Airlines (ASA) both compete in the same strategic group as low-cost, point-to-point airlines, but they draw upon different resource bundles. SWA's employee productivity tends to be higher than ASA's because the two companies differ in their human and organizational resources. This example best illustrates which of the following assumptions regarding the resource-based view?

resource heterogeneity

Which of the following characteristics of a public stock company deals with principals and agents?

separation of legal ownership and management control

Crocs, inventor of the iconic plastic clog, was unable to sustain its competitive advantage over its rivals because its key strategic resource was

simple to imitate.

In recent years a growing number of U.S. consumers have become more health conscious about what they eat. According to the PESTEL Framework this trend could best be classified as a________ trend.

sociocultural

A firm's________ is based on creating value for customers (V) while containing the cost (C).

strategic position

The types of assets that are the primary focus of accounting data but are no longer most important to competitive advantage are

tangible

Amazon's network of distribution centers allows it to drastically reduce its delivery times compared with most other online retailers. These distribution centers are examples of Amazon's

tangible resources.

Which of the following is not captured when examining a competitive industry structure?

the ability to engage in forward vertical integration

Which of the following external forces is a part of a firm's task environment?

the composition of the strategic group to which the firm belongs

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.

Khaled, 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

Visionary companies are able to outperform their competitors because

they provide more aspirational visions.

Which of the five forces is Starbucks answering when it repeatedly upgrades and refreshes its stores and offerings?

threat of entry

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

threat of new entrants is most likely low.

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

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

A problem that arises when individuals, companies, or nations pursue their own self-interest without considering the well-being of society or the global community is known as a

tragedy of the commons.

CarTsar Inc. is a manufacturer of automobile parts, which it sells to retail auto supply stores. Its core competencies include superior design and engineering capabilities, as well as a highly integrated and efficient supply chain. To sustain its competitive advantage, CarTsar should first

upgrade its engineering department and improve its supply chain.

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

upper-echelons theory

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

value drivers.

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.

What does ESG stand for in corporate strategy?

environmental, social, governance

The fact that both Whole Foods (a high-end grocery store) and Aldi (an inexpensive grocery store) have a competitive advantage in the grocery store industry is an indication that

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

Firms that are classified as operating in an oligopoly tend to have some pricing power if they are able to differentiate their product or service offerings from those of their competitors, so the recommended mode of competition is

non-price competition.

In the context of the resource-based model of competitive advantage, which of the following scenarios best exemplifies resource immobility?

Avenir Inc. has been able to outperform its competitors because its method of training cross-department teams is difficult for competitors to replicate.

Axe Capital is a public stock company. Which of the following best exemplifies the legal personality of the company?

Axel, the company's founder, died a few years ago, yet the company is doing well.

A SWOT analysis would provide a definitive answer as to whether a firm's growing footprint in overseas markets is a strength or weakness.

False

Differentiation and cost-leadership strategies are only effective in manufacturing industries.

False

One of holding company Alphabet's tangible resources is Google, its most prominent subsidiary.

False

Tony's Pizza Shop is able to net $10,000 a week; this makes his shop profitable. Its number one competitor, Leo's Pies is also profitable, netting $12,000 a week. Lil Anthony's Pizza Palace nets $13,000 a week. Since Tony's Pizza Shop is profitable, we can conclude that he has a competitive advantage in the industry.

False - competitive advantage is only achieved by generating above average returns, relative to competition