Deck 1: What Is Strategy

Question 1

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.

Answer 1

A
Explanation: StoreAll Inc. most likely has a competitive advantage in the industry. A firm that achieves superior performance relative to other competitors in the same industry or the industry average has a competitive advantage.

Question 2

Keeping in mind Apple's competitive advantage, which of the following products was introduced by Apple in 2007?

A) iPad
B) iPhone
C) iPod
D) iTunes

Answer 2

B
Explanation: As mentioned in Chapter Case 1, in 2007, the company revolutionized the smartphone market with the introduction of the iPhone.

Question 3

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.

Answer 3

B
Explanation: To gain a competitive advantage, a firm needs to provide either goods or services consumers value more highly than those of its competitors, or goods or services similar to the competitors' at a lower price.

Question 4

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

Question 5

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

Question 6

Exis Inc.and Stelma 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, Exis Inc.and Stelma 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.

Question 7

True Cinemas Inc.and Digi Future Inc.are two companies that own and run movie theaters in malls and other commercial areas.While True Cinemas Inc.pursues a cost-leadership strategy, Digi Future Inc.adopts a differentiation strategy.Which of the following statements is most likely true of this scenario?

A) True Cinemas will charge a premium price for its customers while Digi Future will implement everyday low pricing.
B) Digi Future and True Cinemas will not be direct competitors to each other and their customer segments will overlap very little.
C) Digi Future will keep its customer service at an acceptable level while True Cinemas will provide superior customer service.
D) True Cinemas and Digi Future will use a similar approach to create value for customers by attempting to offer everything to everybody.

Question 8

New Communications Inc.is a newspaper publishing company whose average return on invested capital is approximately 5 percent.Because newspaper publishing is a declining industry, the industry average has been negative (-5 percent)for the last few years.In this scenario, New Communications Inc.has a _____.

A) competitive advantage
B) balanced scorecard
C) competitive disadvantage
D) power position

Question 9

Cadia Foods Inc.was the first company to start selling energy drinks in its country-a product that gained popularity among diverse groups.Soon, other companies started to sell their own brands of energy drinks, thereby giving Cadia Foods ample competition.In response, Cadia Foods decided to limit its variety of energy drinks to only two.However, it ensured that these two flavors were free of calories and low in cost.With this innovation, Cadia Foods Inc.consistently outperformed its competitors for ten years.In this scenario, Cadia Foods Inc.has maintained a _____ through its innovative strategy.

A) balanced scorecard
B) fiduciary responsibility
C) consistent power position
D) sustainable competitive advantage

Question 10

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

A) strategy control
B) strategy implementation
C) strategy formulation
D) strategy analysis

Question 11

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

Question 12

When a firm adopts a differentiation strategy to attain competitive advantage, it focuses on:

A) delivering unique features to its customers.
B) providing the lowest prices to its customers.
C) maximizing its profits by providing minimal customer service.
D) lowering costs by employing low-skill employees.

Question 13

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

A) Newon Inc. generated a revenue of $300,000 this financial year, which is close to the industrial revenue average of $320,000.
B) SM Inc. almost doubled its sales to 8500 units this year compared to its previous year's sales of 5000 units, though the industry average is 10,000 units.
C) TrueLink Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years.
D) Max Electrova Inc. was able to outperform its competitors with its new production system, in terms of revenue, for a brief period of four months.

Question 14

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

Question 15

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.

Question 16

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

Question 17

_____ 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

Question 18

_____ 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

Question 19

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

Question 20

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

Question 21

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

Question 22

Which of the following factors most effectively contributed to the success of JetBlue airlines in comparison to other airlines like Delta, United, or American?

A) Its point-to-point business model
B) Its reliance on outsourcing
C) Its hub-and-spoke system
D) Its shorter distances

Question 23

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:

A) the companies have executed integrated strategies.
B) the companies have entered into a cartel arrangement.
C) the companies have pursued distinct strategic positions.
D) the companies have engaged in direct imitation and substitution.

Question 24

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

Question 25

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.

Question 26

Industry effects describe the underlying _____ structure of the industry.

A) demographic
B) economic
C) psychographic
D) ethnographic

Question 27

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

Question 28

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 exactly replicating our competitor's strategy.

Question 29

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.

Question 30

TakeFlight Airways is a new entrant to the airline industry.While most of its competitors are pursuing a cost-leadership strategy, TakeFlight Airways has decided to execute a differentiation strategy.Which of the following is the most likely implication of this decision?

A) TakeFlight Airways will not gain a competitive advantage in the airline industry.
B) TakeFlight Airways will gain a competitive advantage by reducing its prices.
C) TakeFlight Airways will face low profit potential by pursuing a different strategy.
D) TakeFlight Airways will create value for customers by delivering unique features.

Question 31

Pure Food Inc., a multinational company, relies on its media partner Radio Ex to regularly advertise its offers, sales, and new products.Radio Ex is invested in this relationship because it generates most of its revenue from advertising Pure Food's products.In this scenario, Radio Ex is Pure Food Inc.'s _____.

A) stockholder
B) workforce
C) internal stakeholder
D) external stakeholder

Question 32

When the strong dictatorial rule in Canria unexpectedly collapsed due to the shocking mass murder of the royal family, 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

Question 33

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.

Question 34

Derek, a retired CEO, invests capital in a start-up company that creates mobile applications.He mentors the entrepreneur and the employees of the company because he wants the company to perform well and survive in the market.Thus, Derek is the start-up company's _____.

A) headhunter
B) category captain
C) employee
D) stakeholder

Question 35

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

Question 36

_____ are incidents that describe highly improbable but high impact events.

A) Miracle events
B) Wild card events
C) Black swan events
D) Fat tail risk events

Question 37

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

Question 38

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.

Question 39

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

Question 40

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.

Question 41

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.

Question 42

Which of the following scenarios best illustrates a good stakeholder strategy?

A) VP Inc. follows a strategy in which maximization of the shareholders 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 tax 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.

Question 43

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.

Question 44

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

Question 45

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

Question 46

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

Question 47

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.

Question 48

Which of the following is an example of a firm's external stakeholder?

A) Employees
B) Customers
C) Shareholders
D) Board members

Question 49

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.

Question 50

_____ 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

Question 51

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

Question 52

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

Question 53

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

Question 54

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

Question 55

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.

Question 56

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.

Question 57

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.

Question 58

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.

Question 59

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

Question 60

RedSteel 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 RedSteel products.This scenario best illustrates the implementation of a _____.

A) strategic analysis
B) stakeholder strategy
C) wild card event
D) black swan event

Question 61

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

Question 62

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.

Question 63

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

Question 64

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

A) creditors
B) employees
C) shareholders
D) board members

Question 65

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

Question 66

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

Question 67

Which of the following does NOT accurately explain why institutional investors are much more potent stakeholders than individual investors?

A) Institutional investors can buy and sell a large number of shares at once.
B) The size of institutional investors' assets under management is larger relative to the investment made by individual investors.
C) Institutional investors can exercise block-voting rights in the corporate-governance process.
D) While institutional investors are external stakeholders of a firm, individual investors are internal stakeholders.

Question 68

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

Question 69

The society and shareholders mandatorily require a firm to perform its _____.

A) ethical responsibilities
B) philanthropic responsibilities
C) legal responsibilities
D) political responsibilities

Question 70

The minimum wage in the country of New Morland is $8 an hour.Odion, a restaurant in the 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

Question 71

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.

Question 72

Paying taxes to local government authorities from the annual revenues generated by a firm represents the firm's _____.

A) philanthropic responsibilities
B) economic responsibilities
C) psychographic responsibilities
D) political responsibilities

Question 73

Cocoa Noir Inc., a company that manufactures chocolates, incurs higher costs because of its refusal to import cocoa beans from countries where child labor is prevalent.This reflects Cocoa Noir's _____ responsibility.

A) economic
B) legal
C) ethical
D) demographic

Question 74

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.

Question 75

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, DM 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 DM 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

Question 76

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.

Question 77

_____ 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

Question 78

Institutional investors have more sway in public companies than individual investors because of the size of their _____.

A) assets under management (AUM)
B) non-performing assets (NPA)
C) current liabilities
D) fixed liabilities

Question 79

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

A) economic responsibilities
B) ethical responsibilities
C) philanthropic responsibilities
D) legal responsibilities

Question 80

The board at Unicore Systems 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