Question 1

If SA Pharmaceuticals obtains an 18 percent return on invested capital,which of the following will help determine if it has a competitive advantage over other pharmaceutical companies?
A) comparing the return to the return on invested capital obtained by other firms in the industry
B) assessing the value based on the shareholders' expectations of return on their capital
C) evaluating the liquidity ratios for other pharmaceutical companies
D) comparing the value to the history of the firm's return of investment over a number of years

Accepted Answer

Comparing the return to the return on invested capital obtained by other firms in the industry will help determine if SA Pharmaceuticals has a competitive advantage. Competitive advantage is always relative, not absolute.

Question 2

In _____,a firm frames a guiding policy to address the competitive challenge.
A) strategy control
B) strategy implementation
C) strategy formulation
D) strategy analysis

Accepted Answer

A good strategy includes a guiding policy to address the competitive challenge. This element is accomplished through strategy formulation, resulting in the firm's corporate, business, and functional strategies.

Question 3

FindFor Inc.is an e-commerce retail firm that sells a variety of merchandise online.Through services like cash on delivery,easy return,and online tracking,the company has created more customer value than its competitors (brick-and-mortar businesses)at the same price.Also,the company's costs are substantially low due to minimal investment in operation and administration.In this scenario,FindFor Inc.has most likely been able to provide superior value and cost control through
A) strategic parity.
B) strategic profiling.
C) strategic liquidation.
D) strategic positioning.

Accepted Answer

In this scenario, FindFor Inc. has been able to provide superior value and control its costs through strategic positioning. Strategy is about creating superior value, while containing the cost to create it. Managers achieve this combination of value and cost through strategic positioning. That is, they stake out a unique position within an industry that allows the firm to provide value to customers, while controlling costs.

Question 4

A firm always has a competitive disadvantage when its return on invested capital is
A) below the industry average.
B) 2 percent or lower in a declining industry.
C) about the same as its closest competitor.
D) declining steadily over two or more years.

Accepted Answer

A firm always has a competitive disadvantage when its return on invested capital is below the industry average.

Question 5

_____ is best described as an integrative management field that combines analysis,formulation,and implementation in the quest for competitive advantage.
A) Supply chain management
B) Integrated technology management
C) Strategic management
D) Inventory management

Accepted Answer

Strategic management is the integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage. Mastery of strategic management enables an individual to view a firm in its entirety. It also enables an individual to think like a general manager to help position his or her firm for superior performance.

Question 6

For a firm that operates in an industry where competition is high,which of the following practices will result in inferior performance?
A) choosing a distinct but different strategic position in the industry
B) working toward increasing the difference between value creation and cost
C) trying to be everything to everybody by combining different competitive strategies
D) focusing on creating value for customers rather than destroying rivals

Accepted Answer

Because resources are limited, managers must carefully consider their strategic choices in the quest for competitive advantage. Trying to be everything to everybody will likely result in inferior performance. Although the idea of combining different business strategies seems appealing, it is actually quite difficult to execute.

Question 7

The average cost of production for a bottle of vitamin water in the industry is $4 while its average price is $7.StoreAll Inc.manufactures the same product for $3 per bottle and sells it for $7 per bottle.Which of the following statements is most likely true of StoreAll Inc.in this scenario?
A) It has a competitive advantage in the industry.
B) It has a competitive disadvantage in the industry.
C) It has competitive parity with other firms in the industry.
D) It has formed a strategic alliance with other firms in the industry.

Accepted Answer

StoreAll Inc. most likely has a competitive advantage in the industry. A firm that achieves superior performance relative to other competitors in the same industry or the industry average has a competitive advantage.

Question 8

Which of the following scenarios illustrates a firm that has a sustainable competitive advantage?
A) Jamison Inc. generated revenue of $300,000 this financial year, which is close to the industrial revenue average of $320,000.
B) CR Inc. almost doubled its sales to 9,000 units this year compared to its previous year's sales of 5,000 units, though the industry average is 10,000 units.
C) Zhang Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years.
D) Peak Inc. was able to outperform its competitors with its new production system, in terms of revenue, for a brief period of four months.

Accepted Answer

A firm that is able to outperform its competitors or the industry average over a prolonged period of time has a sustainable competitive advantage. Thus, Zhang Corp. has a sustainable competitive advantage because it has been able to hold its market share of 68 percent in the social networking industry for more than three years.

Question 9

Through _____,a firm puts its guiding policy into practice by employing a set of coherent actions.
A) strategy control
B) strategy implementation
C) strategy formulation
D) strategy analysis

Accepted Answer

A good strategy includes a set of coherent actions to implement the firm's guiding policy. This element is accomplished through strategy implementation.

Question 10

Patterson Foods Inc.was the first company to start selling energy bars in its country-a product that gained popularity among diverse groups.Soon,other companies started to sell their own brands of energy bars,thereby giving Patterson Foods ample competition.In response,Patterson Foods decided to limit its variety of energy bars to only four.However,it ensured that these four varieties were low in calories and low in cost.With this innovation,Patterson Foods Inc.consistently outperformed its competitors for ten years.In this scenario,Patterson Foods Inc.maintained a _____ through its innovative strategy.
A) balanced scorecard
B) fiduciary responsibility
C) consistent power position
D) sustainable competitive advantage

Accepted Answer

In this scenario, Patterson Foods Inc. maintained a sustainable competitive advantage through its innovative strategy. A firm that is able to outperform its competitors or the industry average over a prolonged period of time has a sustainable competitive advantage.

Question 11

Underperformance relative to other firms in the same industry or the industry average results in a(n)_____ for a firm.
A) sustainable competitive advantage
B) increased power distance
C) diseconomies of scope
D) competitive disadvantage

Accepted Answer

If a firm underperforms relative to its rivals or the industry average, it has a competitive disadvantage.

Question 12

Which of the following stages of the strategic management process involves an evaluation of a firm's external and internal environments?
A) strategy analysis
B) strategy implementation
C) strategy formulation
D) strategy control

Accepted Answer

A good strategy consists of a diagnosis of the competitive challenge. This element is accomplished through strategy analysis of the firm's external and internal environments.

Question 13

Rapida Inc.and Click Inc.are two companies that have been manufacturing typewriters for almost 30 years.Due to the reduced demand for typewriters today,both companies' average return on invested capital is approximately -5 percent.The current industry average is 2 percent.In this scenario,Rapida Inc.and Click Inc.most likely have
A) competitive advantage over other firms in their industry.
B) competitive parity with each other.
C) strategic alliance with each other.
D) economies of scope instead of economies of scale.

Accepted Answer

In this scenario, Rapida Inc. and Click Inc. most likely have competitive parity with each other. Competitive parity refers to the performance of two or more firms at the same level.

Question 14

A firm that achieves superior performance relative to other firms in the same industry or the industry average has a(n)
A) competitive advantage.
B) balanced scorecard.
C) power position.
D) equity leverage.

Accepted Answer

A firm that achieves superior performance relative to other competitors in the same industry or the industry average has a competitive advantage.

Question 15

The Scoop,Ltd.is a magazine publishing company whose average return on invested capital is approximately 5 percent.Because magazine publishing is a declining industry,the industry average has been negative (-5 percent)for the last few years.In this scenario,The Scoop Ltd.has a
A) competitive advantage.
B) balanced scorecard.
C) competitive disadvantage.
D) power position.

Accepted Answer

If a firm's return on invested capital is 5 percent in a declining industry such as newspaper publishing, where the industry average has been negative (-5 percent) for the last few years, then the firm has a competitive advantage.

Question 16

Silver Screen Cinemas Inc.and Digi Now Inc.are two companies that own and run movie theaters in malls and other commercial areas.While Silver Screen Cinemas Inc.pursues a cost-leadership strategy,Digi Now Inc.adopts a differentiation strategy.Which of the following statements is most likely true of this scenario?
A) Silver Screen Cinemas will charge a premium price for its customers, while Digi Now will implement everyday low pricing.
B) Digi Now and Silver Screen Cinemas will not be direct competitors to each other, and their customer segments will overlap very little.
C) Digi Now will keep its customer service at an acceptable level, while Silver Screen Cinemas will provide superior customer service.
D) Silver Screen Cinemas and Digi Now will use a similar approach to create value for customers by attempting to offer everything to everybody.

Accepted Answer

Although these companies are in the same industry, their customer segments will most likely overlap very little, and they will not be direct competitors. That is because each firm has chosen a distinct but different strategic position; both can win if they have a distinct and well-executed competitive strategy.

Question 17

A firm is said to gain a competitive advantage when it can
A) exceed its own previous performances.
B) provide products similar to its competitors, but at lower prices.
C) perform at the same level as that of its competitors.
D) minimize the difference between value creation and cost.

Accepted Answer

To gain a competitive advantage, a firm needs to provide either goods or services consumers value more highly than those of its competitors, or goods or services similar to the competitors' at a lower price.

Question 18

_____ is best described as a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors.
A) Behavior modification
B) Strategy
C) Credo
D) Competency management

Accepted Answer

Strategy is a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors.

Question 19

If a company wants to gain a competitive advantage in a highly competitive industry,it should ideally
A) execute an integrated cost-leadership and differentiation position.
B) copy the strategies of other firms through competitive benchmarking.
C) provide goods or services similar to its competitors at higher prices.
D) stake out a unique position within the industry.

Accepted Answer

The key to successful strategy is to combine a set of activities to stake out a unique position within an industry. Competitive advantage has to come from performing different activities or performing the same activities differently than rivals are doing. Competing to be similar but just a bit better than a competitor is likely to be a recipe for cutthroat competition and low profit potential.

Question 20

Which of the following strategies does Twitter need to implement to increase its competitive advantage?
A) charge no fee to individual users
B) increase its user base
C) deliver ads in real time
D) allow core users to stay always connected

Accepted Answer

As mentioned in Chapter Case 1, Twitter struggles to grow its user base, which hinders its quest for a competitive advantage.

Quiz 1: What Is Strategy

If SA Pharmaceuticals obtains an 18 percent return on invested capital,which of the following will help determine if it has a competitive advantage over other pharmaceutical companies?

In _____,a firm frames a guiding policy to address the competitive challenge.

A firm always has a competitive disadvantage when its return on invested capital is

_____ is best described as an integrative management field that combines analysis,formulation,and implementation in the quest for competitive advantage.

For a firm that operates in an industry where competition is high,which of the following practices will result in inferior performance?

The average cost of production for a bottle of vitamin water in the industry is $4 while its average price is $7.StoreAll Inc.manufactures the same product for $3 per bottle and sells it for $7 per bottle.Which of the following statements is most likely true of StoreAll Inc.in this scenario?

Which of the following scenarios illustrates a firm that has a sustainable competitive advantage?

Through _____,a firm puts its guiding policy into practice by employing a set of coherent actions.

Underperformance relative to other firms in the same industry or the industry average results in a(n) _____ for a firm.

Which of the following stages of the strategic management process involves an evaluation of a firm's external and internal environments?

A firm that achieves superior performance relative to other firms in the same industry or the industry average has a(n)

The Scoop,Ltd.is a magazine publishing company whose average return on invested capital is approximately 5 percent.Because magazine publishing is a declining industry,the industry average has been negative (-5 percent) for the last few years.In this scenario,The Scoop Ltd.has a

A firm is said to gain a competitive advantage when it can

_____ is best described as a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors.

If a company wants to gain a competitive advantage in a highly competitive industry,it should ideally

Which of the following strategies does Twitter need to implement to increase its competitive advantage?