Strategic Management Test 1

It is possible for a single firm to be a complementor of one firm and a competitor of another.

True

Firms in industries characterized by ________ can expect to earn only competitive parity. A) perfect competition B) monopolistic competition C) oligopoly D) monopoly

A) perfect competition

________ is/are the distribution of individuals in a society in terms of age, sex, marital status, income, ethnicity, and other personal attributes that may determine buying patterns. A) Demographics B) Economics C) Technological trends D) Culture

A) Demographics

Firms in industries characterized by ________ can expect to earn only competitive parity. A) perfect competition B) monopolistic competition C) oligopoly D) monopoly

A) perfect competition

Which of the following statements regarding substitutes is accurate? A) In the extreme, substitutes can ultimately replace an industry's products or services. B) Substitutes place a floor on the prices firms in an industry can charge and on the profits firms in an industry can earn. C) Substitutes rarely impact the profitability that firms in an industry can earn. D) The importance of substitutes in reducing the profit potential in a wide variety of industries is decreasing.

A) In the extreme, substitutes can ultimately replace an industry's products or services.

Which of the following statements regarding firm mission is accurate? A) While some firms have used their missions to develop strategies that create significant competitive advantages, firm missions can hurt a firm's performance as well. B) Virtually all firms have used missions to develop strategies that create significant competitive advantages, while very few firms have used missions that can hurt their performance. C) It is very rare for firms to be able to use their missions to develop strategies that create significant competitive advantages, and most firm missions actually hurt their performance. D) Missions tend to have very little impact on a firm's ability to create significant competitive advantages.

A) While some firms have used their missions to develop strategies that create significant competitive advantages, firm missions can hurt a firm's performance as well.

If one of LaserTech's rivals were to decide to divest its industrial laser manufacturing business in response to LaserTech's new technology, this would be an example of A) competitive dynamics. B) tacit collusion. C) a sustainable distinctive competence. D) competitive parity.

A) competitive dynamics.

For BidBuy, services such as those offered by DollarDog that make BidBuy's services more valuable for customers who use the services of both companies are best described as A) complementors. B) substitutes. C) rivals. D) suppliers.

A) complementors.

According to the research in strategic human resources management, A) firms that are able to use human resource practices to develop socially complex human and organizational resources are able to gain competitive advantage over firms that do not engage in these practices. B) firms that are able to use human resource practices to develop socially simplistic human and organizational resources are able to gain competitive advantage over firms that do not engage in these practices. C) firms that are able to use human resource practices to develop socially complex human and organizational resources gain little advantage over firms that do not engage in these practices. D) firms that are able to use human resource practices to develop socially complex human and organizational resources are at a competitive disadvantage when compared to firms that do not engage in these practices.

A) firms that are able to use human resource practices to develop socially complex human and organizational resources are able to gain competitive advantage over firms that do not engage in these practices.

When activity in an economy is relatively low for a short period of time, the economy is said to be in a A) recession. B) depression. C) prosperous cycle. D) boom.

A) recession.

Any actions a firm takes that have the effect of reducing the level of rivalry in an industry that also do not require firms in an industry to directly communicate or negotiate with each other can be thought of as A) tacit cooperation. B) tacit collusion. C) explicit collusion. D) competitive parity.

A) tacit cooperation.

The set of business activities in which a firm engages to develop, produce, and market its products or services is known as its A) value chain. B) physical resources. C) organizational resources. D) human resources.

A) value chain.

________ are a subset of a firm's resources and are defined as tangible and intangible assets that enable a firm to take full advantage of other resources it controls. A) Retained earnings B) Capabilities C) Human resources D) Financial resources

B) Capabilities

The products or services provided by a firm's direct competitors meet ________ customer needs in ________ ways as the product provided by the firm itself. A) different; the same B) approximately the same; the same C) different; different D) approximately the same; different

B) approximately the same; the same

Within the five forces framework, the five most common threats facing firms from their competitive environment include each of the following except A) substitutes. B) complementors. C) suppliers. D) buyers.

B) complementors.

The strategic management process begins when a firm A) determines its objectives. B) defines its mission. C) makes a strategic choice. D) implements its strategy.

B) defines its mission.

Inputs whose quantity of supply is fixed and does not respond to price increases are said to be A) elastic in supply. B) inelastic in supply. C) elastic in demand. D) perfectly competitive.

B) inelastic in supply.

Which type of competition is characterized by a large number of firms, heterogeneous products and low cost of entry and exit? A) perfect competition B) monopolistic competition C) oligopoly D) monopoly

B) monopolistic competition

Firms that have either recently begun operations in an industry or that threaten to begin operations in an industry soon are considered to be ________ in the five forces framework. A) barriers to entry B) new competitors C) suppliers D) buyers

B) new competitors

Computer hardware and software technology, robots used in manufacturing and automated warehouses are examples of which type of resources? A) financial resources B) physical resources C) human resources D) organizational resources

B) physical resources

Civil wars, political coups, terrorism, wars between countries, famines, and country or regional economic recessions are all examples of which element of the general environment? A) demographics B) specific international events C) economics D) culture

B) specific international events

From 1926 to 1995, visionary firms earned ________ returns compared to firms that were not visionary firms. A) substantially lower B) substantially higher C) marginally lower D) equivalent

B) substantially higher

________ in the RBV are defined as the tangible and intangible assets that a firm controls that it can use to conceive and implement its strategies. A) Management controls B) Capabilities C) Resources D) Compensation policies

C) Resources

Mature industries are characterized by A) an increase in total industry demand. B) faster increases in production capacity. C) a slowdown in the introduction of new products or services. D) a decrease in the amount of international competition.

C) a slowdown in the introduction of new products or services.

If Delta Airlines were to significantly change its fare structure and flight schedule to enhance its competitive position in response to aggressive price cutting by Southwest Airlines, this would be an example of: A) explicit collusion. B) tacit collusion. C) competitive dynamics. D) a harvest strategy.

C) competitive dynamics.

In the S-C-P model, ________ refers to the strategies that firms in an industry implement. A) structure B) strategy C) conduct D) performance

C) conduct

All of the following are elements of the general environment except A) technological trends. B) demographic trends. C) industrial trends. D) cultural trends.

C) industrial trends.

52) Which type of competition is characterized by a small number of firms, homogeneous products and costly entry and exit? A) perfect competition B) monopolistic competition C) oligopoly D) monopoly

C) oligopoly

Which of the following best describes the competition in the U.S. online auction industry? A) perfect competition B) monopolistic competition C) oligopoly D) monopoly

C) oligopoly

The VRIO assumption that some of the resource and capability differences among firms may be long lasting because it may be very costly for firms without certain resources and capabilities to develop or acquire them is known as A) resource mobility. B) resource homogeneity. C) resource immobility. D) resource heterogeneity.

C) resource immobility.

Tacit cooperation is only a viable strategy when A) an industry is perfectly competitive. B) an industry is heterogeneous with respect to the products it sells and their cost structure. C) there is a strong market share leader in the industry. D) there are low entry barriers in the industry.

C) there is a strong market share leader in the industry.

________ implies that for a given business activity, some firms may be more skilled in accomplishing this activity than other firms. A) Resource mobility B) Resource homogeneity C) Resource immobility D) Resource heterogeneity

D) Resource heterogeneity

The products or services provided by a firm's substitutes meet ________ customer needs in ________ ways as the product provided by the firm itself. A) different; the same B) approximately the same; the same C) different; different D) approximately the same; different

D) approximately the same; different

A firm's marketing skills and teamwork as well as its cooperation among managers are examples of A) financial resources. B) human resources. C) physical resources. D) capabilities.

D) capabilities.

The values, beliefs and norms that guide behavior in a society are known as A) climate. B) demographics. C) economics. D) culture.

D) culture.

Factors such as BidBuy's feedback rating system that are valuable to the company's customers but which are not useful on other online auction sites are examples of A) first-mover advantages. B) complementors. C) substitutes. D) customer-switching costs.

D) customer-switching costs.

Which of the following is not one of the six distinct activities in McKinsey and Company's value chain model? A) technology development B) product design C) manufacturing D) inbound logistics

D) inbound logistics

In a perfectly competitive industry, A) there are relatively few firms operating in the industry. B) the products and services sold by firms in the industry are very different from each other. C) it is very costly for firms to enter the industry. D) it is not very costly for firms to enter or exit the industry.

D) it is not very costly for firms to enter or exit the industry.

A firm's formal reporting structure, its formal and informal planning and its controlling and coordinating systems are examples of which type of resources? A) financial resources B) physical resources C) human resources D) organizational resources

D) organizational resources

ESPN's development of an extensive offering of X-Games coverage that is unmatched by any other sports outlet is an example of which element of the VRIO framework? A) organization B) imitability C) competitive parity D) rarity

D) rarity

Overall, the average level of performance in an industry is likely to be highest when A) the threat level of all five forces is high. B) the threat level of rivalry and substitutes is low, but the threat level of suppliers, buyers and new entrants is high. C) the threat level of rivalry, substitutes and new entrants is high, but the threat level of buyers and supplies is low. D) the threat level of all five forces is low.

D) the threat level of all five forces is low.

All divestments are caused by industry decline.

False

Culture is largely the same across the world.

False

Firms whose mission statement is central to all they do are known as missionary firms.

False

In general, technological change creates opportunities, but not threats.

False

In the VRIO framework, the R represents resources.

False

In the structure-conduct-performance model, the term "performance" refers solely to the performance of individual firms.

False

Mature industries are characterized by elements such as increasing growth in total industry demand, significant increases in product capacity, and an overall increase in the profitability of firms in the industry.

False

Mission statements often contain so many common elements that even if a firm's mission statement does not influence behavior throughout an organization, it is likely to have a significant impact on a firm's actions.

False

Monopolistically competitive industries consist of only a single firm.

False

Studying a firm's value chain forces us to think about firm resources in an aggregated way.

False

Suppliers are a greater threat to firms in an industry when suppliers are threatened by substitutes

False

Tacit cooperation is only a viable strategy when an industry is perfectly competitive.

False

The S-C-P model assumes that any competitive advantages a firm has in an industry must benefit society.

False

The second step in the strategic management process is the definition of a firm's mission.

False

The threat of existing competition tends to be high in an industry when firms are able to meaningfully differentiate their products.

False

The value chain model developed by McKinsey and Company divides value-creating activities into two large categories: primary activities and secondary activities.

False

Within the five forces framework, when all five threats are very high, competition in the industry begins to approach a monopoly.

False

An emerging industry is an industry in which a large number of small or medium-sized firms operate and no small set of firms has a dominant market share or creates dominant technologies.

False (Fragmented industry)

High quality objectives are tightly connected to the elements of a firm's mission but tend to be relatively difficult to measure and track over time.

False (easy to measure and track)

Organizational resources include the training, experience, judgment, intelligence, relationships and insight of individual managers and workers in a firm, while human resources are an attribute of collections of individuals.

False (human resources)

Visionary firms earn substantially higher returns than average firms because they acknowledge that profit maximizing is their primary reason for existence.

False (primary reasons for existance are reflected in a widely held set of values and beliefs that inform day-to-day decision making

Mission statements that are very inwardly focused and are defined only with reference to the personal values and priorities of its founders and top managers can hurt a firm's performance.

True

A firm following a niche strategy in a declining industry reduces its scope of operations and focuses on narrow segments of the declining industry.

True

A firm's mission defines both what it wants to be in the long run and what it wants to avoid in the meantime.

True

According to the S-C-P model, attributes of the industry structure within which a firm operates define the range of options and constraints facing a firm.

True

In a perfectly competitive industry, a large number of firms have products and services that are similar to each other and it is not very costly for firms to enter into or exit these markets.

True

In an industry, the products or services provided by a firm's competition meet approximately the same customer needs in the same way as the products or services provided by the firm itself, whereas substitutes meet approximately the same customer needs but do so in different ways.

True

In general, it is rarely the case that all five forces in the five forces framework will be equally threatening at the same time.

True

In the structure-conduct-performance model, the term "structure" refers to industry structure, which can be measured by such factors as the number of competitors in an industry.

True

One of the key assumptions of the RBV is resource homogeneity.

True

The aging of the "baby boomer" generation in American society is an example of a demographic trend.

True

The five forces framework is based on the S-C-P model and identifies the five most common threats facing firms from their local competitive environment and the conditions under which these threats are more or less likely to be present.

True

The strategic management process is a sequential set of analyses and choices that can increase the likelihood that a firm will choose a good strategy that generates competitive advantages.

True

Understanding a firm's general environment can help the firm identify some of the threats and opportunities it faces.

True

When tacit cooperation has the effect of reducing supply and increasing prices, it is known as tacit collusion.

True

Within the VRIO framework, resources and capabilities that are not valuable are also known as weaknesses.

True

Within the VRIO framework, valuable resources and capabilities are also known as strengths.

True