Deck 1: Strategic Management and Strategic Competitiveness

Question 1

Average returns are those in excess of what an investor expects to earn from other investments with a similar amount of risk.

Answer 1

False

Question 2

While patents may be an effective way of protecting proprietary technology, many firms competing in the electronics industry do not apply for patents to prevent competitors from utilizing the technological knowledge that would be included in the patent application.

Answer 2

True

Question 3

The CEO of Twin Spires, Inc., is committed to using the expertise and resources currently in the firm to serve the needs of the natural gardening community by providing rare and native plants to individuals and nurseries around the United States.  The perspective of the CEO of Twin Spires is consistent with the assumptions of the industrial organization (I/O) model.

Answer 3

False

Question 4

The rate of growth of Internet-based applications could be affected by strategies of Internet service providers charging users for downloading those applications.

Question 5

Returns can only be measured in accounting terms such as return on assets, return on equity, or return on sales.

Question 6

The new CEO of Opacity Enterprises is determined to make the long-established firm strategically flexible. The CEO feels that the employees of the company have the ability, training, and resources to engage in continuous learning.  The CEO must encourage ambidextrous learning, absorbing new knowledge and building incremental knowledge.

Question 7

The goal of strategy implementation is to develop a permanent competitive advantage.

Question 8

Examples of incremental innovations include iPods, PDAs, Wi-Fi, and web browser software.

Question 9

Economies of scale and huge advertising budgets are just as effective in the new competitive landscape as they were in the past.

Question 10

The rapid rate of technological diffusion has increased the competitive benefits of patents.

Question 11

Risk in terms of financial returns reflects an investor's uncertainty about economic gains or losses that will result from a particular investment.

Question 12

The I/O (industrial organization) model assumes that the uniqueness of a firm's resources and capabilities is the main source of above-average returns.

Question 13

Strategic competitiveness is achieved when a firm successfully formulates and implements a value-creating strategy.

Question 14

The five forces model suggests that firms should target the industry with the highest potential for above-average returns and then implement either a cost-leadership strategy or a differentiation strategy.

Question 15

Alligator Enterprises has earned above-average returns since its founding five years ago. No other firm has challenged Alligator in its particular market niche; therefore, the firm's owners can feel secure that Alligator has established a competitive advantage.

Question 16

The rate of technology diffusion has been steadily increasing over the last two decades.

Question 17

?Above average returns are those in excess of what an investor expects to earn from other investments with similar stock prices.

Question 18

?To implement a firm's strategies, the firm takes actions to with the goal of achieving strategic competitiveness and above average returns.

Question 19

The two primary drivers of hypercompetition are the emergence of the global economy and technology.

Question 20

Developed countries still have major advantages in their access to information technology when compared to emerging economies because of the significant cost of the infrastructure needed for computing power.

Question 21

An organization's willingness to tolerate or encourage unethical behavior is a reflection of its core values.

Question 22

Six years ago, Colette Smith founded a successful catering company that specializes in providing a wide assortment of miniature cheesecakes for corporate and social events. Although Ms. Smith is no longer active in the actual production of the cheesecakes, she continues as president of the catering company. Ms. Smith could be considered a strategic leader of this firm.

Question 23

When a firm earns lower-than-average returns, the highest priority is given to satisfying the needs of capital market stakeholders over the needs of product market and organizational shareholders.

Question 24

Corporate-level strategy in a diversified organization requires a common business strategy for each component business.

Question 25

The assumptions of the industrial organization model and the resource-based model are contradictory. Therefore, organizational strategists must choose one or the other model as the basis for developing a strategic plan.

Question 26

Research shows that a greater percentage of a firm's profitability is explained by the I/O rather than the resource-based model.

Question 27

Although organizational cultures vary considerably, one cannot make an objective judgment that some organizational cultures are more or less functional than others in terms of ethical considerations.

Question 28

The resource-based model assumes that firms must have resources that are rare or costly to imitate to form a basis for competitive advantage.

Question 29

The uniqueness of a firm's resources and capabilities is the basis for a firm's strategy and determines its ability to earn above-average returns under the I/O view.

Question 30

Organizational stakeholders are the firm's internal resources, capabilities, and core competencies that are used to accomplish what may appear to be unattainable goals in the competitive environment.

Question 31

If a firm is dependent on a specific stakeholder group, that group has less influence on the firm's strategic decision making.

Question 32

An effective vision stretches and challenges people and can result in increased innovation.  This is illustrated by Apple's CEO Steve Jobs, who was known to think bigger and differently than most people ("putting a dent in the universe").

Question 33

Resources are considered rare when they have no structural equivalent.

Question 34

An effective vision statement must specify the industry in which a company will operate.

Question 35

Customers, suppliers, unions, and local governments are examples of capital market stakeholders.

Question 36

Hourly workers on the production line of a chicken-processing plant are considered organizational stakeholders.

Question 37

Strategic leaders must have a strong strategic orientation while embracing change in the dynamic competitive landscape.

Question 38

Organizational mission statements typically do not include statements about profitability and earning above-average returns.

Question 39

A firm's mission tends to be enduring while its vision can change in light of changing environmental conditions.

Question 40

Relative power is the most critical element for prioritizing the demands of stakeholders.

Question 41

The strategic management process is;

A) a set of activities that will assure a sustainable competitive advantage and above-average returns for the firm.
B) a decision-making activity concerned with a firm's internal resources, capabilities, and competencies, independent of the conditions in its external environment.
C) a process directed by top-management with input from other stakeholders that seeks to achieve above-average returns for investors through effective use of the organization's resources.
D) the formulation and implementation of a full set of commitments, decisions, and actions required for the firm to achieve above-average returns and strategic competitiveness.

Question 42

Globalization has led to:

A) lower operational efficiency as firms must transport raw materials and finished goods farther.
B) increasing loyalty of customers for products made domestically.
C) declining returns from investment in research and development.
D) higher performance standards including quality and cost.

Question 43

The economic interdependence among countries which is reflected in the flow of goods, services, financial capital, and knowledge across country borders is defined as:

A) hypercompetition.
B) boundaryless retailing.
C) strategic intensity.
D) globalization.

Question 44

According to Hitt, the primary drivers of hypercompetition are:

A) rising global socio-economic instability and increased inflation.
B) the emergence of a global economy and rapid technological change.
C) increased global competition and decreased tariffs.
D) increased availability of capital and increased competition.

Question 45

A company's ability to acquire knowledge is:

A) less important in the 21st century than in previous periods of business history.
B) an important source of competitive advantage in virtually all industries.
C) not considered an asset or resource for businesses.
D) only important in high technology industries.

Question 46

Knowledge is composed of all the following EXCEPT:

A) insight.
B) expertise.
C) information.
D) intelligence.

Question 47

The "liability of foreignness" is the:

A) inability of most U.S. managers to truly comprehend foreign cultures.
B) political disadvantage that U.S. firms have when doing business abroad.
C) overall risk of participating outside a firm's domestic country when entering global competition.
D) preference for "buying local," which always puts foreign firms at a disadvantage when competing in the U.S. market.

Question 48

In order to cope with hypercompetition, firms need to develop ______ through continuous learning.

A) competitive resilience
B) strategic flexibility
C) strategic power
D) competitive dominance

Question 49

The rate of technological diffusion is increasing. Which of the following was fastest in penetrating 25 percent of homes in the U.S. market?

A) Mobile Phone
B) Television
C) Personal Computer
D) Internet

Question 50

______ has become the second-largest economy in the world.

A) The United States
B) The European Union
C) Japan
D) China

Question 51

Even for companies capable of succeeding in global markets, it is critical that they:

A) remain committed to and strategically competitive in their domestic market.
B) introduce many new products immediately after entering a new market.
C) acquire a local competitor in each significant foreign market.
D) develop good negotiating skills in order to take advantage of local suppliers in the international market.

Question 52

Essentially, _______ has become one of the world's largest markets with 700 million potential consumers.

A) the European Union
B) the United States
C) China
D) Japan

Question 53

New markets created by iPods, PDAs, and Wi-Fi are a result of:

A) disruptive technologies.
B) global competition.
C) knowledge intensity.
D) hypercompetition.

Question 54

Which of the following statements about organizational knowledge is correct?

A) Knowledge is an intangible resource.
B) The importance of knowledge is increasing.
C) The value of knowledge as a proportion of shareholder value is increasing.
D) All of these options are correct.

Question 55

Above-average returns are;

A) higher profits than the firm earned the previous year.
B) higher profits than the industry averaged over the last 10 years.
C) profits in excess of what an investor expects to earn from a historical pattern of performance of the firm.
D) returns in excess of what an investor expects to earn from other investments with a similar level of risk.

Question 56

A competitive advantage:

A) can be permanent if the firm has successfully implemented the strategic management process.
B) entails reducing investors' risk to near zero.
C) can be identified when competitors are unable to duplicate or find it too costly to try to imitate.
D) exists when competing firms are unable to find investors.

Question 57

All of the following are characteristics of the global economy EXCEPT:

A) the increasing importance of developing countries as sources of revenue growth.
B) the free movement of goods, services, people, skills, and ideas across geographic borders.
C) the increased use of tariffs to protect industries.
D) higher levels of opportunities and challenges in new geographic markets.

Question 58

A firm has achieved ______ when it successfully formulates and implements a value-creating strategy.

A) strategic competitiveness
B) a permanently sustainable competitive advantage
C) substantial returns
D) legal and ethical core values

Question 59

Henry Ford once said, "If I had asked people what they wanted, they would have said faster horses."  The invention of the car is an early example of:

A) the march of globalization.
B) rapid technological diffusion.
C) disruptive technologies.
D) products that were not imitated by competitors.

Question 60

The CEO of Ridgeway, Inc., realizes that the company's survival depends on developing and acquiring knowledge. Which of the following actions by the CEO would be most consistent with this need?

A) Ensuring that all current unique knowledge of the firm is protected by patents
B) Planning extensive employee training and hiring educated and experienced employees
C) Investing in sophisticated databases in relevant knowledge areas
D) Establishing a system of organizational intelligence gathering

Question 61

All of the following are assumptions of the industrial organization (I/O) model EXCEPT:

A) organizational decision makers are rational and committed to acting in the firm's best interests.
B) resources to implement strategies are firm-specific and attached to firms over the long-term.
C) the external environment is assumed to impose pressures and constraints that determine the strategies that result in above-average returns.
D) every firm in an industry controls similar strategically relevant resources.

Question 62

Which of the following statements is most consistent with the I/O view? Performance of a firm is most directly attributable to:

A) the power of the financial market stakeholders.
B) the resources the firm possesses.
C) the profitability of the industry in which the firm competes.
D) hypercompetition within the industry.

Question 63

According to Hitt, the final responsibility for forming the organization's mission lies with the:

A) CEO.
B) top-management team.
C) employees.
D) organization's stakeholders.

Question 64

______ is a capacity for a set of resources to perform a task or an activity in an integrative manner.

A) A capability
B) A core competence
C) Sustainable competitive advantage
D) Organizational intelligence

Question 65

An investor is considering in which of two start-up companies to invest. The investor has faith in the industrial organization model of above-average returns and is using that as a guideline to make a decision. Both start-up companies propose to manufacture health-focused foods with low salt, low sugar, high fiber, and no artificial additives. RexRich Foods has a business strategy of producing a differentiated product for which consumers will pay more. Green Pastures Foods is in the health-foods industry because of its internal culture and commitment to healthy lifestyles, but it does not have any executives with experience in food production. Which firm will the investor feel is most consistent with the model of industrial organization?

A) Green Pastures Foods
B) RexRich Foods
C) Both firms are consistent with the I/O approach.
D) At the entrepreneurial stage, the model that companies follow is not important.

Question 66

The resource-based view of the firm:

A) emphasizes that it is difficult to develop and sustain a competitive advantage based on resources alone.
B) argues that the industry environment has a stronger influence on firms' ability to implement strategies successfully than does the competitive environment.
C) calls for firms to focus on their homogeneous capabilities to compete against their rivals.
D) suggests that vision and mission are marketing messages not tied to strategic plans.

Question 67

Although Alibaba is competing in the internet services industry, it has improved its performance by focusing on innovation and service diversification. This improved performance is best explained by:

A) globalization.
B) the resource-based model.
C) the I/O model.
D) hypercompetition.

Question 68

Firms use the five forces model of competition to identify the ______ of the industry.  It is measured by its _______.

A) size; number of competitors.
B) globalization; export percentages.
C) hypercompetition; technology diffusion.
D) attractiveness; profitability.

Question 69

Research shows that approximately ______ percent of a firm's profitability is explained by the industry in which it competes, whereas ______ percent is explained by the firm's characteristics and actions.

A) 90; 10
B) 60; 40
C) 36; 20
D) 20; 36

Question 70

A key purpose of a mission statement is to inform _________what a firm is, what it seeks to accomplish and who it seeks to serve.

A) CEOs
B) stakeholders
C) regulators
D) former employees

Question 71

The goal of the organization's ______ is to point the firm in the direction of where it would like to be in the years to come.

A) vision
B) mission
C) culture
D) strategy

Question 72

The resource-based model argues that:

A) all resources have the potential to be the basis of sustainable competitive advantage.
B) resources alone can be a source of sustainable competitive advantage.
C) the key to competitive success is the structure of the industry in which the firm competes.
D) resources that are valuable, rare, costly to imitate, and non-substitutable form the basis of a firm's core competencies.

Question 73

In the resource-based model, which of the following factors would be considered a key to organizational success?

A) Unique market niche
B) Weak competition
C) Economies of scale
D) Skilled employees

Question 74

All of the following are resources of an organization EXCEPT:

A) an hourly production employee's ability to catch subtle quality defects in products.
B) oil drilling rights in a promising region.
C) weak competitors in the industry.
D) a charity's board of directors of experienced executives.

Question 75

When resources and capabilities serve as a source of competitive advantage for a firm, the firm has created a(n):

A) strategic mission.
B) inspiring vision.
C) core competence.
D) sustainable market niche.

Question 76

The Princeton Alliance Church states in its website that "PAC exists to help you live life to the fullest by knowing God, developing community and bringing hope." This pronouncement is most precisely a statement of organizational:

A) values.
B) structure.
C) vision.
D) culture.

Question 77

A firm's mission:

A) is a statement of a firm's business in which it intends to compete and the customers it intends to serve.
B) is an internally focused affirmation of the organization's financial, social, and ethical goals.
C) is mainly intended to emotionally inspire employees and other stakeholders.
D) is developed by a firm before the firm develops its vision.

Question 78

All of the following are assumptions of the resource-based model EXCEPT:

A) each firm is a unique collection of resources and capabilities.
B) the industry's structural characteristics have little impact on a firm's performance over time.
C) capabilities are highly mobile across firms.
D) differences in resources and capabilities are the basis of competitive advantage.

Question 79

The industrial organization (I/O) model argues that:

A) the key factor in success is choosing the correct industry in which to compete.
B) the firm's internal resources and capabilities represent the foundation for development of a value-creating strategy.
C) the key to earning above-average returns is strategic flexibility.
D) the internal structure of the organization must match the industry in which it competes for it to earn above-average returns on investment.

Question 80

To have the potential to become sources of competitive advantage, resources and capabilities must be non-substitutable, valuable, ______, and  ______.

A) unique; easy to imitate.
B) easy to imitate; difficult to implement.
C) rare; costly to imitate.
D) easy to implement; unique.