Deck 1: Strategic Management and Strategic Competitiveness Emea Edition

Question 1

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

Answer 1

False

Question 2

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.

Answer 2

False

Question 3

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

Answer 3

True

Question 4

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

Question 5

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 6

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

Question 7

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

Question 8

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

Question 9

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.

Question 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

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

Question 15

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 16

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 17

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

Question 18

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 19

Resources are considered rare when they have no structural equivalent.

Question 20

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

Question 21

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

Question 22

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

Question 23

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 24

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 25

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

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

Question 26

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 27

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

Question 28

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 29

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 30

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 31

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 32

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

Question 33

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

Question 34

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 35

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 36

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

Question 37

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 38

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 39

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

Question 40

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 41

It is well-known that the elected school board of a large city engages in unethical and illegal activities involving the awarding of major contracts. This behavior has existed for decades, even as the membership in the school board has changed over time. This behavior reflects

A) the core values of the school board as an organization.
B) a functional, although unethical, culture of the school board.
C) the lack of an organizational mission for the school board.
D) a school board lacking in core competencies.

Question 42

Capital market stakeholders include

A) industry competitors.
B) shareholders.
C) employees.
D) government regulators.

Question 43

PGG Mining is making a strategic decision whether to shut down a coal mine in Pennsylvania. It is important to consider that the decision

A) should be based solely on the results of profit pool mapping.
B) has ethical implications for organizational stakeholders.
C) need not be socially responsible if the firm is making below-average returns from the mine.
D) all of these choices are important to consider.

Question 44

A prominent national accounting firm runs television advertisements showing an accountant working alone late in the office on a client's project, while clenching a long-stemmed rose in his teeth and grinning ecstatically. The message of the ad is that this firm's accountants love their work. This ad seeks to convey a sense of the organization's ____ to the viewers.

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

Question 45

Analysis of the industry's profit pool enables strategic managers to

A) predict future revenue streams for the organization.
B) predict growth in sales over the medium to long range.
C) determine whether an industry will be viable in the long term.
D) locate the most promising areas of an industry's value chain.

Question 46

The strategic leader's work is characterized by

A) ambiguous decision situations which make effective decisions difficult to determine.
B) a willingness to unify stakeholders through skillful manipulation.
C) an ability to identify the correct solutions to long-range problems.
D) concentration on the practical day-to-day aspects of the organization's operations.

Question 47

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 48

The goal of the organization's ____ is to capture the hearts and minds of employees, challenge them, and evoke their emotions and dreams.

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

Question 49

The Annandale Academy of Fine Arts states in its brochure that "The Academy intends to become the dominant institution in the nation teaching traditional aesthetic values in traditional artistic media targeting both traditional and non-traditional students." This pronouncement is most precisely a statement of organizational

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

Question 50

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 51

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.

Question 52

____ 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 53

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 54

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 55

Refuge Nursing Homes, Inc., (RNH) has been highly profitable in the past 10 years, providing its investors returns in excess of direct competitors. RNH has a reputation for providing high-paying managerial and hourly-employee jobs. However, recent investigations have revealed that the nursing home residents have been provided substandard care, including non-nutritious and unappetizing meals, non-functional medical equipment, and inadequate patient-care staffing. Which statement best describes the situation?

A) RNH has been earning below-average returns, so it has had to prioritize the demands of its various stakeholders.
B) RNH has prioritized the demands of capital market stakeholders over the demands of product market stakeholders.
C) RNH has earned above-average returns and so has satisfied the needs of all relevant stakeholders.
D) RNH has been attempting to minimally satisfy the demands of all of its stakeholders.

Question 56

Greenleaf Property Management has been earning below-average returns for the last three years. Which of the following statements are true?

A) Greenleaf will be able to satisfy its multiple stakeholders easily as long as the stakeholders are committed to the strategic mission of the firm.
B) Greenleaf will be able to at least minimally satisfy the demands of each stakeholder.
C) Greenleaf will need to prioritize the demands of its stakeholders based on the political influence each wields.
D) Greenleaf will not be able to minimally satisfy all stakeholders.

Question 57

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 58

Product market stakeholders include the firm's customers, and the principal concern of this stakeholder group is:

A) maximizing the firm's return on investment.
B) receiving the highest quality products and services in the industry.
C) obtaining reliable products at the lowest possible price.
D) increasing the profitability of the firm.

Question 59

A business-level strategy describes

A) the businesses in which the company intends to compete.
B) all policies and procedures used in functional departments.
C) the firm's actions to exploit its competitive advantage over rivals.
D) a firm's resources, intent, and mission.

Question 60

Organizational stakeholders are usually satisfied when

A) their return on investment has been maximized.
B) customers pay the highest sustainable price for the goods and services they receive.
C) companies provide a dynamic, stimulating, and rewarding work environment.
D) companies are paying the highest prices to suppliers.

Question 61

Describe the industrial organization (I/O) model of above-average returns. What are its main assumptions? What is the key to success according to the I/O model?

Question 62

Describe and discuss the resource-based model of above-average returns.

Question 63

Explain the relationship of the strategic management process to organizational ethics.

Question 64

Describe an organization's various stakeholders and their different interests. Under what condition can the firm most easily satisfy all stakeholders? If the firm cannot satisfy all stakeholders, which ones must it satisfy in order to survive?

Question 65

Define strategic competitiveness and above-average returns. What is the relationship between strategic competitiveness and returns on investment?