Deck 1: Strategic Management and Strategic Competitiveness

Question 1

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

Answer 1

True

Question 2

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

Answer 2

True

Question 3

Economies of scale and huge advertising budgets are just as effective in the new competitive landscape as they were in the past, but they must be reinforced by strategic flexibility.

Answer 3

False

Question 4

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

Question 5

By focusing on product innovations and upgrades of its properties, McDonald's was able to achieve strategic competitiveness and above average returns.

Question 6

The Opening Case shows that McDonald's is one of the few firms able to achieve strategic competitiveness from its founding until the present time.

Question 7

While patents may be an effective way of protecting proprietary technology in some industries such as pharmaceuticals, many firms competing in the electronics industry do not apply for patents.

Question 8

Part of McDonald's strategy was the choice that it would remain involved in additional food concepts such as Boston Market and Chipotle.

Question 9

The goal of strategic management is to develop a competitive advantage that is permanent.

Question 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

Best Buy outperforming Circuit City, and Best Buy's continuing good performance illustrate that permanent success is possible.

Question 15

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

Question 16

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

Question 17

Examples of incremental innovations include iPods, PDAs, WiFi, and web browser software.

Question 18

In the chapter Strategic Focus case, Circuit City did not achieve strategic competitiveness and above-average returns because it failed to successfully implement its strategy.

Question 19

Wal-Mart is trying to achieve a boundaryless retailing empire by implementing global pricing, sourcing, and logistics.

Question 20

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

Question 21

An effective vision statement will specify the market to be served.

Question 22

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

Question 23

The assumptions of the industrial organizational 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 24

The resource-based model assumes that if firms have resources that are rare or costly to imitate, this is sufficient to form a basis for competitive advantage.

Question 25

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

Question 26

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

Question 27

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

Question 28

The degree to which the firm is dependent on a stakeholder group gives that stakeholder less influence.

Question 29

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

Question 30

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 main obstacle the CEO must face is inertia.

Question 31

The needs and desires of organizational stakeholders are inherently contradictory.

Question 32

Although the fast food (or quick-service) industry is unattractive, McDonald's has earned above-average returns through product innovations, enhancing existing facilities, and buying properties outside the United States.

Question 33

The CEO of Twin Spires, Inc., is emotionally and intellectually committed to using the resources of 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. This commitment has carried the CEO through long periods of below average returns on investment. The perspective of the CEO of Twin Spires is consistent with the assumptions of the industrial organizational (I/O) model.

Question 34

Organizational vision and mission statements require deep, critical, and reflective thinking to form them.

Question 35

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

Question 36

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 37

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 38

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

Question 39

Resources are considered rare when they have no structural equivalent.

Question 40

One capability characteristic of a firm with strategic flexibility is the capacity to learn.

Question 41

The economic interdependence among countries as reflected in the free movement of goods, services, financial capital and knowledge across geographic borders is defined as

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

Question 42

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 full set of commitments, decisions, and actions required for the firm to achieve above-average returns and strategic competitiveness.

Question 43

Which of the following was not a reason for Circuit City's failure?

A) It had laid off several higher paid employees, including sales personnel.
B) It focused on short-term profits.
C) It established larger stores in superior locations.
D) It did not take the threat of Best Buy seriously enough.

Question 44

According to the Chapter 1 Opening Case, McDonald's strategic leaders decided in 2003 that

A) McDonald's would remain involved with additional food concepts such as Boston Market and Chipotle.
B) instead of upgrading existing facilities, McDonald's would pursue a focus on current product offerings.
C) the current strategy should not be changed.
D) existing facilities should be upgraded and there should be a focus on product innovations.

Question 45

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 only if it has been unsuccessfully challenged by competitors.
D) exists when competing firms are unable to find investors.

Question 46

Organizational culture refers to the core values shared by the firm's top-level managers but not necessarily accepted by lower-level employees who are often transitory and not committed to the organization.

Question 47

Considering both GDP and the number of potential consumers, what is the world's largest single market?

A) Europe
B) The United States
C) China
D) Japan

Question 48

Above-average returns are

A) higher profits than the firm earned last 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) profits in excess of what an investor expects to earn from other investments with a similar level of risk.

Question 49

Profit pools allow strategic leaders to predict the outcomes of their decisions before taking efforts to implement them.

Question 50

All of the following are characteristic 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 performance standards.

Question 51

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 52

When the 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 53

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 decreasing tariffs.
D) increased availability of capital and increased competition.

Question 54

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

Question 55

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 56

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 product quality.

Question 57

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

Question 58

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

Question 59

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

Question 60

A hard working, analytical individual who requires large amounts of concrete and precise data and a predictable environment in order to make a decision is probably poorly suited to being a strategic leader.

Question 61

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

A) Telephone
B) Television
C) Personal computer
D) Internet

Question 62

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 choices are correct.

Question 63

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 endowment of $400 million.

Question 64

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 65

Firms use the five forces model to identify the ___________ of the industry as measured by its ____________.

A) size, number of competitors
B) globalization, exports
C) hypercompetition, technology diffusion
D) attractiveness, profitability

Question 66

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 67

Knowledge is composed of all the following EXCEPT

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

Question 68

____ 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 69

New markets created by iPods, PDAs, and WiFi are a result of

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

Question 70

An investor is considering in which of two start-up companies she should invest. The investor has faith in the industrial organizational model of above-average returns, and she is using its concepts to make her decision. Both start-up companies propose to manufacture health-focused foods with such characteristics as 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 healthful lifestyles. 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 which companies follow is not important.

Question 71

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 72

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 73

Which of the following statements is most consistent under the I/O view? Performance of the 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 the firm competes in.
D) hypercompetition within the industry.

Question 74

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) firms in given industries, or given industry segments, are assumed to control similar strategically relevant resources.

Question 75

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 in order to earn above-average returns on investment.

Question 76

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 a domestic firm encounters when entering global competition.
D) strong cultural preference for "buying local," which puts foreign firms at a disadvantage when competing in the U.S. market.

Question 77

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 recruiting programs
C) investing in sophisticated databases in relevant knowledge areas
D) establishing a system of organizational intelligence gathering

Question 78

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 79

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 80

The ability to effectively and efficiently access and use information is

A) vitally important at the point where a domestic firm enters the global market.
B) an important source of competitive advantage in virtually all industries.
C) the minimum required for survival in virtually any industry.
D) critically important mainly in high technology industries.