Question 1

Differentiate between business level and corporate level strategies and give examples of each.

Accepted Answer

Business level strategies are actions firms take to gain competitive advantages in a single market or industry. The two most common business level strategies are cost leadership, such as Wal-Mart, and product differentiation, such as Tiffany's. Corporate level strategies are actions firms take to gain competitive advantages in multiple markets or industries simultaneously. Common corporate level strategies include vertical integration strategies, diversification strategies, strategic alliance strategies and merger and acquisition strategies.

Question 2

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

Accepted Answer

A) True 
 B)False  True

Question 3

Identify two approaches to estimating a firm's competitive advantages and discuss the strengths and weaknesses of each.

Accepted Answer

The two general approaches to estimating a firm's competitive advantage are measuring accounting performance and measuring economic performance. A firm's accounting performance is a measure of its competitive advantage calculated using information from a firm's published profit and loss and balance sheets. A firm's accounting performance is determined by comparing a firm's accounting ratios with other firms in the industry. The greatest advantage of accounting measures of competitive advantage is that they are relatively easy to compute. The most significant drawback to accounting measures is that they do not consider a firm's cost of capital. Additionally, accounting measures can be difficult to compare across countries.
Economic measures of competitive advantage compare a firm's level of return to its cost of capital instead of to the average level of return in the industry. The primary benefit of economic measures is that if a firm earns at least its cost of capital, it is satisfying two of its important stakeholders, debt holders and equity holders. Disadvantages of economic measures include that it can be difficult to calculate a firm's cost of capital, especially for privately held firms, and economic measures may overstate the importance of debt and equity holders.

Question 4

The greatest disadvantage of accounting measures of competitive performance is that they are relatively difficult to compute.

Accepted Answer

A) True 
 B)False

Question 5

A firm's ________ is a measure of its competitive advantage calculated using information from a firm's published profit and loss and balance sheet statements.

Accepted Answer

A)   economic performance
B)   accounting performance
C)   strategic performance
D)   sustainable performance

Question 6

If TechnoGeek and VarsityBlue compete in the same market for the same customer and TechnoGeek generates $900 of economic value each time it sells a product or service while VarsityBlue generates $400 of economic value each time it sells a product or service, TechnoGeek has a(n) ________ of $500.

Accepted Answer

A)   perceived benefit
B)   economic value
C)   cost advantage
D)   competitive advantage

Question 7

The mission statements of visionary firms

Accepted Answer

A)   suggest that profit maximizing, while an important corporate objective, is not their primary reason for existence.
B)   suggest that profit maximizing is neither an important corporate objective nor their primary reason for existence.
C)   suggest that profit maximizing is their primary reason for existence.
D)   suggest that value maximizing is their primary reason of existence.

Question 8

The percentage of a firm's total capital that is debt times the cost of debt plus the percentage of a firm's total capital; or equity times the cost of equity is the

Accepted Answer

A)   weighted cost of capital.
B)   weighted average cost of capital.
C)   cost of capital.
D)   average cost of capital.

Question 9

The ________ is the rate of return that a firm promises to pay its suppliers of capital to induce them to invest in the firm.

Accepted Answer

A)   cost of debt
B)   cost of advantage
C)   cost of parity
D)   cost of capital

Question 10

When a firm earns above average accounting performance, it is said to enjoy competitive parity.

Accepted Answer

A) True 
 B)False

Question 11

________ measures of competitive advantage compare a firm's level of return to its cost of capital instead of to the average level of return in the industry.

Accepted Answer

A)   Economic
B)   Accounting
C)   Strategic
D)   Sustainable

Question 12

The residual claimants' view of equity holders argues that the interests of equity holders come before all other stakeholders of the firm in receiving payment.

Accepted Answer

A) True 
 B)False

Question 13

________ occurs when a firm adopts organizational policies and practices that are consistent with its strategy.

Accepted Answer

A)   Strategy formulation
B)   Strategic choice
C)   Strategy implementation
D)   Strategic control

Question 14

Green Frog is an environmentally friendly firm in the cosmetics industry. If Green Frog were considering expanding beyond the cosmetics industry into pharmaceuticals in order to gain competitive advantages by operating in multiple markets and industries, this would be an example of which type of strategy?

Accepted Answer

A)   business level strategy
B)   cost leadership strategy
C)   product differentiation strategy
D)   corporate level strategy

Question 15

Ratios that focus on the level of a firm's financial flexibility, including its ability to obtain more debt, are known as

Accepted Answer

A)   leverage ratios.
B)   liquidity ratios.
C)   activity ratios.
D)   profitability ratios.

Question 16

________ helps a firm understand which of its resources and capabilities are likely to be sources of competitive advantage.

Accepted Answer

A)   Competitive analysis
B)   Internal analysis
C)   Strategic choice
D)   External analysis

Question 17

Define strategy implementation and discuss three specific organizational policies and practices that are particularly important in implementing a strategy.

Accepted Answer

The answer of Define strategy implementation and discuss three specific...

Question 18

Emergent strategies are only important when a firm fails to implement the strategic management process effectively.

Accepted Answer

A) True 
 B)False

Question 19

A firm's ________ is defined as its theory about how to gain competitive advantages.

Accepted Answer

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

Question 20

By conducting an external analysis, a firm identifies the critical threats and opportunities in the industry's competitive environment.

Accepted Answer

A) True 
 B)False

Exam 1: What Is Strategy and the Strategic Management Process

Differentiate between business level and corporate level strategies and give examples of each.

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

Identify two approaches to estimating a firm's competitive advantages and discuss the strengths and weaknesses of each.

The greatest disadvantage of accounting measures of competitive performance is that they are relatively difficult to compute.

A firm's ________ is a measure of its competitive advantage calculated using information from a firm's published profit and loss and balance sheet statements.

If TechnoGeek and VarsityBlue compete in the same market for the same customer and TechnoGeek generates $900 of economic value each time it sells a product or service while VarsityBlue generates $400 of economic value each time it sells a product or service, TechnoGeek has a(n) ________ of $500.

The mission statements of visionary firms

The percentage of a firm's total capital that is debt times the cost of debt plus the percentage of a firm's total capital; or equity times the cost of equity is the

The ________ is the rate of return that a firm promises to pay its suppliers of capital to induce them to invest in the firm.

When a firm earns above average accounting performance, it is said to enjoy competitive parity.

________ measures of competitive advantage compare a firm's level of return to its cost of capital instead of to the average level of return in the industry.

The residual claimants' view of equity holders argues that the interests of equity holders come before all other stakeholders of the firm in receiving payment.

________ occurs when a firm adopts organizational policies and practices that are consistent with its strategy.

Ratios that focus on the level of a firm's financial flexibility, including its ability to obtain more debt, are known as

________ helps a firm understand which of its resources and capabilities are likely to be sources of competitive advantage.

Define strategy implementation and discuss three specific organizational policies and practices that are particularly important in implementing a strategy.

Emergent strategies are only important when a firm fails to implement the strategic management process effectively.

A firm's ________ is defined as its theory about how to gain competitive advantages.

By conducting an external analysis, a firm identifies the critical threats and opportunities in the industry's competitive environment.