Deck 1: What Is Strategy and the Strategic Management Process

Question 1

The strategic management process begins when a firm

A)determines its objectives.
B)defines its mission.
C)makes a strategic choice.
D)implements its strategy.

Answer 1

B

Question 2

High quality objectives are those that are

A)tightly connected to elements of a firm's mission and are relatively easy to measure and track over time.
B)difficult to measure and track over time.
C)non-existent.
D)not quantitative.

Answer 2

A

Question 3

Actions firms take to gain competitive advantages by operating in multiple markets or industries simultaneously are known as

A)corporate level strategies.
B)diversification strategies.
C)business level strategies.
D)strategic alliance strategies.

Answer 3

A

Question 4

________ are specific measurable targets a firm can use to evaluate the extent to which it is realizing its mission.

A)Strategies
B)Missions
C)Competitive advantages
D)Objectives

Question 5

From 1926 to 1995,visionary firms earned ________ returns compared to firms that were not visionary firms.

A)substantially lower
B)substantially higher
C)marginally lower
D)equivalent

Question 6

Actions firms take to gain competitive advantages in a single market or industry are known as

A)business level strategies.
B)corporate level strategies.
C)diversification strategies.
D)strategy implementation.

Question 7

The mission statements of visionary firms

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

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

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

Question 9

Green Frog is an environmentally friendly firm in the cosmetics industry.If during the strategic planning process Green Frog tried to determine the critical threats and opportunities in its competitive environment,it would be performing a(n)

A)internal analysis.
B)external analysis.
C)WACC analysis.
D)economic analysis.

Question 10

By conducting a(n)________,a firm identifies the critical threats and opportunities in its competitive environment.

A)internal analysis
B)competitive analysis
C)external analysis
D)strategic choice

Question 11

Green Frog is an environmentally friendly firm in the cosmetics industry.Even though Green Frog is environmentally friendly,the strategic planning team had decided that financial performance is one of the company's top priorities.Which of the following is the best example of an objective the company might use to help it achieve its goal of superior financial performance?

A)increasing profitability
B)growing market share annually
C)improving product quality every quarter
D)growth in earnings per share averaging 15% or better annually for the next five years

Question 12

A sequential set of analyses and choices that can increase the likelihood that a firm will choose a strategy that generates competitive advantages is the

A)organizational change process.
B)strategic management process.
C)mission statement process.
D)goal setting process.

Question 13

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

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

Question 14

Which of the following statements regarding firm mission is accurate?

A)While some firms have used their missions to develop strategies that create significant competitive advantages,firm missions can hurt a firm's performance as well.
B)Virtually all firms have used missions to develop strategies that create significant competitive advantages,while very few firms have used missions that can hurt their performance.
C)It is very rare for firms to be able to use their missions to develop strategies that create significant competitive advantages,and most firm missions actually hurt their performance.
D)Missions tend to have very little impact on a firm's ability to create significant competitive advantages.

Question 15

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

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

Question 16

Green Frog is an environmentally friendly firm in the cosmetics industry that has decided to undertake a strategic planning project.It wants to ensure that it performs the process correctly and so intends to start the process with the first step of the strategic planning process,which is

A)defining its mission.
B)setting objectives.
C)measuring performance.
D)defining its business level strategy.

Question 17

Green Frog is an environmentally friendly firm in the cosmetics industry.If Green Frog undertook an analysis to help it understand which of its resources and capabilities are likely to be sources of competitive advantage and which are less likely to sources of such advantages it would be performing a(n)

A)internal analysis.
B)external analysis.
C)WACC analysis.
D)economic analysis.

Question 18

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?

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

Question 19

Firms whose mission is central to all they do are known as ________ firms.

A)missionary
B)emergent
C)parity
D)visionary

Question 20

A firm's ________ is its long-term purpose that defines both what it aspires to be in the long run and what it wants to avoid in the meantime.

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

Question 21

A "good strategy" does not necessarily have to generate a competitive advantage.

Question 22

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

Question 23

The strategic management process is a sequential set of analyses and choices that can increase the likelihood that a firm will choose a good strategy that generates competitive advantages.

Question 24

Mission statements that are very inwardly focused and are defined only with reference to the personal values and priorities of its founders and top managers can hurt a firm's performance.

Question 25

Business level strategies are actions firms take to gain competitive advantages by operating in multiple markets or industries simultaneously.

Question 26

For the purposes of this book,a firm's strategy is defined as its theory about how to gain competitive advantages.

Question 27

Define the term "strategy," discuss the set of assumptions and hypotheses that a strategy is based on and discuss what makes a good strategy.

Question 28

High quality objectives are tightly connected to the elements of a firm's mission but tend to be relatively difficult to measure and track over time.

Question 29

The greater the extent to which a firm's assumptions and hypotheses accurately describe how the competition in the industry is likely to evolve,and how that evolution can be exploited to earn a profit,the more likely it is that a firm will gain a competitive advantage from implementing its strategies.

Question 30

Mission statements often contain so many common elements that even if a firm's mission statement does not influence behavior throughout an organization,it is likely to have a significant impact on a firm's actions.

Question 31

One of the central questions that all strategic managers must address,regardless of the industry they work in,is "How is the industry likely to evolve?"

Question 32

Visionary firms earn substantially higher returns than average firms because they acknowledge that profit maximizing is their primary reason for existence.

Question 33

Corporate level strategies are actions firms take to gain competitive advantages in a single market or industry.

Question 34

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

Question 35

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

Question 36

The second step in the strategic management process is the definition of a firm's mission.

Question 37

It is usually possible to know for sure that a firm is choosing the right strategy.

Question 38

Objectives are the specific measurable targets a firm can use to evaluate the extent to which it is realizing its mission.

Question 39

There is complete consensus among strategic managers and academic researchers about what a "strategy" is.

Question 40

Firms whose mission statement is central to all they do are known as missionary firms.

Question 41

In many ways,the difference between traditional economics research and strategic management research is that the former attempts to explain why ________,while the latter attempts to explain ________.

A)competitive advantages should not persist; when they can
B)competitive advantages should persist; when they can
C)competitive advantages should persist; why they should not
D)competitive parity should not persist; why they should

Question 42

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

Question 43

________ are ratios with some measure of profit in the numerator and some measure of firms' size or assets in the denominator.

A)Liquidity ratios
B)Leverage ratios
C)Activity ratios
D)Profitability ratios

Question 44

The center of Osterwalder and Pigneur's business model canvas is the

A)parity point.
B)value proposition.
C)competitive advantage.
D)strategy box.

Question 45

What are objectives,what role do they play in the strategic management process and what differentiates high quality objectives from low quality objectives?

Question 46

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.

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

Question 47

Define the term "mission" and discuss how a firm's mission can both positively and negatively impact a firm's performance.

Question 48

A sustained competitive advantage is virtually permanent.

Question 49

Firms that generate less economic value than their rivals experience a competitive

A)advantage.
B)parity.
C)disadvantage.
D)perceived benefit.

Question 50

The size of a firm's competitive advantage is the sum of the economic value a firm is able to create and the economic value rivals are able to create.

Question 51

When a firm is able to create more economic value than rival firms it is said to have a(n)

A)comparative advantage.
B)competitive advantage.
C)residual advantage.
D)economic advantage.

Question 52

The two types of measures of competitive advantage include

A)accounting measures and strategic measures.
B)strategic measures and economic measures.
C)accounting measures and economic measures.
D)qualitative measures and quantitative measures.

Question 53

The difference between what customers are willing to pay for a firm's products or services and the full economic cost of these products or services is the

A)value proposition.
B)cost advantage.
C)economic value.
D)competitive advantage.

Question 54

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

Question 55

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.

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

Question 56

Discuss a firm's competitive advantage.Identify when a firm has a competitive advantage and distinguish between a temporary competitive advantage and a sustainable competitive advantage.

Question 57

Waring found that firms that operate in industries that are informationally complex,require customers to know a great deal in order to use the industry's products,require a great deal of R & D,and have significant economies of scale are more likely to have sustained competitive advantage than those firms in industries without those characteristics.

Question 58

A competitive advantage that lasts a very short period of time is known as a ________ competitive advantage.

A)temporary
B)sustained
C)transient
D)perpetual

Question 59

One of the first scholars to examine the longevity of competitive advantage was

A)Dennis Mueller.
B)Geoffrey Waring.
C)Peter Roberts.
D)Rich Houston.

Question 60

The ultimate objective of the strategic management process is to enable a firm to choose and implement a strategy that leads to a competitive advantage.

Question 61

An important limitation of comparing a firm's performance to its cost of capital occurs when a firm is

A)privately held.
B)an IPO.
C)an entrepreneurial venture.
D)experiencing below normal economic performance.

Question 62

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

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

Question 63

Which type of ratios focus on the ability of a firm to meet its short-term financial obligations?

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

Question 64

Applying accounting measures of competitive advantage for firms that are headquartered in different countries has become less challenging today with the globalization of business.

Question 65

A firm that earns its cost of capital is said to be earning

A)above normal economic performance.
B)normal economic performance.
C)below normal economic performance.
D)normal accounting performance.

Question 66

Liquidity ratios are ratios that focus on the firm's ability to meet its short-term financial obligations.

Question 67

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

Question 68

Using ratio analysis,a firm earns ________ when its performance is greater than the industry average.

A)above average economic performance
B)below average accounting performance
C)above average accounting performance
D)below average economic performance

Question 69

Which ratio signals a greater risk of bankruptcy as it increases?

A)debt to equity
B)quick ratio
C)debt to assets
D)cash flow per share

Question 70

The view that equity holders only receive payment on their investment in a firm after all legitimate claims by a firm's other stakeholders are satisfied is known as the ________ view of equity holders.

A)stakeholder
B)residual claimants
C)legitimate claimants
D)extraordinary claims

Question 71

Activity ratios are ratios with some measure of profit in the numerator and some measure of firm size or assets in the denominator.

Question 72

Accounts receivable turnover is an example of which type of ratio?

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

Question 73

________ 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.

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

Question 74

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

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

Question 75

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

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

Question 76

Thermacorp's 17.3% ROE is an example of a(n)________ ratio.

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

Question 77

If the average ROE in the heating and cooling industry is 10.1%,and Thermacorp's ROE is 17.3%,Thermacorp is said to have

A)below average accounting performance.
B)above average economic performance.
C)above average accounting performance.
D)below average economic performance.

Question 78

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 sheet statements.

Question 79

A firm that is able to attract additional capital because debt holders and equity holders will scramble to make additional funds available for it is likely earning

A)normal economic performance.
B)average accounting performance.
C)temporary advantage.
D)above normal economic performance.

Question 80

Thermacorp's weighted average cost of capital is 13.5.If the average WACC in the heating and cooling industry is 19,Thermacorp can be said to be earning

A)above normal economic performance.
B)above normal accounting performance.
C)below normal economic performance.
D)below normal accounting performance.