Deck 1: Strategic Management and Strategic Competitiveness

Question 1

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

Answer 1

True

Question 2

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

Answer 2

True

Question 3

Companies searching for opportunities in the global economy would likely conclude that the three leading European economies of Germany, United Kingdom, and France would be good investments because they are predicted to continue increasing in size.

Answer 3

False

Question 4

Since the 1980s, the basis for competition has shifted from intangible resources to hard assets.

Question 5

To implement a firm's strategies, the firm takes actions to enact each strategy with the intent of achieving strategic competitiveness and above-average returns.

Question 6

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

Question 7

Particularly when assessing investments in new venture firms, the most effective, and often the only, way to measure the performance of the firms and determine their viability as an investment option is to examine financial metrics such as returns on assets, and sales.

Question 8

The industrial organization (I/O) model suggests that above-average returns are determined primarily by the firm's unique internal resources rather than by external capabilities.

Question 9

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

Question 10

The new CEO of Opacity Enterprises is determined to make the long-established firm strategically flexible.The CEO should understand that the task is not easy, largely because of inertia that can build up over time.

Question 11

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.

Question 12

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 13

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

Question 14

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

Question 15

The rate of technology diffusion has increased significantly over the last two decades.

Question 16

RelTech is a firm in the electronics industry.It could protect its proprietary technology through patents.However, it likely will not apply for patents to keep competitors from gaining access to the technological knowledge included in the patent application.

Question 17

The difference between average and above-average returns is that average returns are returns that an investor expects to earn from an investment as compared to other investments with similar stock prices, while above-average returns are in excess of expectations for similarly priced stocks.

Question 18

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 19

Examples of incremental innovations include iPads, Wi-Fi, and the web browser.

Question 20

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

Question 21

Strategy formulation and implementation must be simultaneously integrated for a successful strategic management process.

Question 22

The I/O and resource-based models contain many of the same steps.One clear difference between the two models is the resource-based model starts by looking at the internal strengths and weaknesses of a firm, while the I/O model begins with an examination of the external environment.Another key difference is the resource-based model identifies an attractive industry much earlier in the process than does the I/O model.

Question 23

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.

Question 24

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

Question 25

The local government with whom a firm interacts, the people who buy its products, and the contractors who supply raw materials are all part of a firm's capital market stakeholders.

Question 26

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

Question 27

In contrast to shareholders, a firm's customers prefer that investors receive a minimum return on their investments.

Question 28

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

Question 29

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 30

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

Question 31

The firm's mission is more concrete than its vision.

Question 32

All of a firm's resources and capabilities have the potential to be the foundation for a competitive advantage.

Question 33

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

Question 34

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 35

Stakeholders are people located in different areas and levels of the firm using the strategic management process to select strategic actions that help the firm achieve its vision and fulfill its mission.

Question 36

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

Question 37

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

Question 38

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

Question 39

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 40

Power is the most critical criterion in prioritizing stakeholders.

Question 41

In 2018, __________ was the second-largest economy in the world, with a value of $14 trillion.

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

Question 42

The rate of technological diffusion has increased substantially over the past 15 to 20 years.Which of the following was fastest in penetrating 25 percent of homes in the United States?

A) Mobile phones
B) Television
C) Personal computers
D) Internet

Question 43

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 earn above-average returns for investors through effective use of the organization's resources.
D) the full set of commitments, decisions, and actions required for a firm to achieve strategic competitiveness and earn above-average returns.

Question 44

New markets created by the technologies underlying the development of products such as iPods, iPads, and Wi-Fi are a result of:

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

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 when competitors are unable to duplicate a strategy or find it too costly to try to imitate.
D) exists when competing firms are unable to find investors.

Question 46

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 47

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 48

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 in competitive dimensions, including quality and cost.

Question 49

A company's ability to acquire knowledge is:

A) less important in the twenty-first century than in previous periods of business history.
B) an increasingly valuable source of competitive advantage.
C) not considered an asset or resource for businesses.
D) only important in high-technology industries.

Question 50

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

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

Question 51

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 52

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) risk of participating outside a firm's domestic markets in the global economy.
D) preference for "buying local," which always puts foreign firms at a disadvantage when competing in the U.S.market.

Question 53

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 54

RelTech has developed a proprietary approach to supply chain management and uses that expertise as a source of competitive advantage.RelTech is relying on what intangible asset as a basis of competition?

A) Knowledge
B) Insight
C) Intensity
D) Strategic flexibility

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 forward-looking analysis suggests that markets in __________ will yield significant opportunities, as their economies, while currently not the largest, are expected to exceed the size of the U.S.economy by the year 2050.

A) the European Union
B) Germany and India
C) India and China
D) China and Japan

Question 57

The primary drivers of hypercompetition are __________ and __________.

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

Question 58

Which of the following statements about organizational knowledge is true?

A) Knowledge is an intangible resource.
B) Firms with appropriate internal knowledge resources are likely to invest an appropriate amount of money in research and development.
C) The value of knowledge as a proportion of total shareholder value is increasing.
D) All of these are correct.

Question 59

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

A) the increasing importance of emerging economies 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 60

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 61

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 62

The Princeton Alliance Church states on 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 63

The resource-based view of the firm:

A) emphasizes that it is difficult to achieve 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 64

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 65

When capabilities serve as a source of competitive advantage for a firm over its rivals, the firm has created a(n):

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

Question 66

Firms use the five forces model of competition to identify the __________ of an industry, as measured by its __________.

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

Question 67

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 68

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

A) organizational decision makers are assumed to be 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 would result in above-average returns.
D) most firms competing within an industry or within a segment of that industry are assumed to control similar strategically relevant resources and to pursue similar strategies in light of those resources.

Question 69

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

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

Question 70

A key purpose of a vision and 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

__________ is the 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 72

A firm's mission is:

A) a statement of a firm's businesses in which it intends to compete and the customers it intends to serve.
B) an internally-focused affirmation of the organization's financial, social, and ethical goals.
C) mainly intended to emotionally inspire employees and other stakeholders.
D) the foundation for the firm's vision.

Question 73

Alibaba is a company in the Internet services industry that has improved its performance by focusing on its unique abilities in the area of innovation and service diversification.This improved performance is best explained by:

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

Question 74

Jan is the CEO of GlenOak Corp.After analyzing GlenOak's vision statement and aligning it with new environmental conditions, Jan rewrote GlenOak's mission.Which of the following best characterizes Jan's action?

A) Jan should have involved managers at all levels in the firm as well as employees who interact with customers and the markets for input when rewriting the mission statement.
B) Because a mission can change along with environmental circumstances, Jan did the right thing in rewriting the mission.
C) Because the CEO has the final responsibility for forming a firm's mission, it was proper for Jan to rewrite the mission statement.
D) A mission statement is an enduring reflection of the values and aspirations of a firm, and Jan should not have rewritten it.

Question 75

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 76

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 77

An investor is considering in which of two start-up companies to invest.The investor has faith in the industrial organization (I/O) 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 investment decision is the investor most likely to make?

A) The investor will select Green Pastures Foods since it is most consistent with the I/O model.
B) The investor will select RexRich Foods since it is most consistent with the I/O model.
C) Since both firms are consistent with the I/O model, the investor will seek additional information before making a decision.
D) At the entrepreneurial stage, the model that companies follow is not important, and the investor will wait before making any investments.

Question 78

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

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

Question 79

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

A) firms acquire different resources and develop unique capabilities based on how they combine and use resources.
B) firms' performances across time are due primarily to their unique resources and capabilities rather than the industry's structural characteristics.
C) resources and capabilities are highly mobile across firms.
D) differences in resources and capabilities are the basis of competitive advantage.

Question 80

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.