Chapter 1 the Concept of Strategy

1. The successful careers of both Queen Elizabeth II and Lady Gaga may be attributed to the fact that both: Correct Answer: have consistency of direction based on a clear goals 2. For both individuals and businesses, successful strategies are characterized by: Correct Answer: clear goals, understanding the competitive environment, resource appraisal & implementation 3. The main problem of SWOT as a framework for strategy analysis is that: Correct Answer: distinguishing opportunities from threats and strengths from weaknesses is often difficult 4. Strategic fit refers to: Correct Answer: the consistency of a firms strategy with its external and internal environments 5. Ryanairs strategic position is as Europes lowest-cost airline may be attributed to: Correct Answer: an integrated, consistent set of activities to maximize productivity & minimize operating costs 6. The principal similarity between business and military strategy is that: Correct Answer: they share many common concepts and principles 7. The main reason for the transition from corporate planning to strategic management during the latter half of the 1970s was: Correct Answer: a more turbulent business environment that became increasingly difficult to predict 8. The primary distinction between corporate strategy and business strategy is: Correct Answer: CS is concerned with where the firm competes; BS with how it competes 9. In all organizations, strategy making involves a combination of top-down strategy design and decentralized emergence. The balance between the two depends mainly upon: Correct Answer: how turbulent and unpredictable is the external environment of the organization 10. The applicability of the tools and techniques of strategy analysis to not-for-profit organizations is: Correct Answer: greater for organizations that charge for services & face competition than monopolists who do not

Chapter 2 Goals, Value and Performance

1. Every business enterprise has a distinct purpose, however, common to all businesses is the goal of: Correct Answer: creating value 2. A major impediment to the stakeholder view of the firm is: Correct Answer: the practical problem of taking account of multiple goals in strategic decision making 3. The primary justification for the assumption that primary goal of strategy is to maximize profits over the long term is: Correct Answer: in todays intensely competitive markets, firms must focus on profit maximization in order to survive 4. The principal difference between accounting profit and economic profit is: Correct Answer: EP is pure surplus; AP includes the normal return to the providers of equity capital 5. To diagnose the sources of a firms poor financial performance, it is useful to: Correct Answer: disaggregate overall return on capital into its component items 6. In appraising a firms profit performance: Correct Answer: return on invested capital is a better indicator than return on sales 7. The Balanced Scorecard is a technique of performance management that establishes and monitors four dimensions of performance: Correct Answer: financial, customer, internal, and learning/innovation performance 8. The main lesson to be drawn from Boeings deteriorating performance during the late 1990s when top management emphasized the pursuit of profit and shareholder value is: Correct Answer: management should focus upon the factors that drive profitability and shareholder value 9. Michael Porter and Mark Kramers notion of shared value reconceptualises CSR (corporate social responsibility) by emphasizing: Correct Answer: CSR as a value creating activity 10. In formulating strategies under uncertainty, real option analysis is a valuable strategic tool because: Correct Answer: it allows firms to create value from flexibility and a wider range of growth opportunities

Chapter 3 Industry Analysis: The Fundamentals

1. Value is created when: Correct Answer: the price that the customer is willing to pay for a product exceeds the firms cost of supplying it 2. Niche markets (small markets for specialized goods and services such as chewing tobacco, sausage skins, and gambling machines) tend to be profitable because: Correct Answer: they can often be dominated by a single firm or by a very small number of firms 3. The pharmaceutical industry is highly profitable because: Correct Answer: patents on drugs limit new entry and ensure that each supplier of a patented drug is a monopolist 4. Supplying personal computers (PCs) has been a low profitability business for most of the major suppliers (HP, Lenovo, Acer, Dell) for many years. The low profitability of the PC industry is the result of: Correct Answer: strong supplier power, lack of product differentiation, and growing substitute competition 5. In Household and Personal Products (cleaning products, toiletries, cosmetics, etc.) the major barriers to entry are: Correct Answer: product differentiation and limited access to channels of distribution 6. Industries where high levels of industry rivalry cause fierce price competition and lack of profits are those where: Correct Answer: there is excess capacity, commodity products, high fixed costs, and exit barriers 7. Industries supplying differentiated products tend to earn higher profits than industries supplying commodity products because: Correct Answer: competition in commodity markets is mainly price competition which is destructive to profit margins 8. In the airline business, the main factors that determine the relative success of an airline (key success factors) are Correct Answer: the airlines load factor, revenue per passenger mile flown, and the costs per passenger mile flown

Chapter 4: Further Topics in Industry and Competitive Analysis

1. Empirical research shows that proportion of inter-firm differences in profitability that industry factors explain is: Correct Answer: less than 25% 2. Video game consoles and video games are complementary products: the availability of one increases the value of the other. How this value is distributed between the suppliers of video game consoles and the suppliers of video games depends upon: Correct Answer: relative bargaining power 3. While the Porter five forces framework views industry structure as determining competitive behavior, Joseph Schumpeter and the Austrian School view: Correct Answer: competition as determining industry structure 4. The key implication of hypercompetition in business is that: Correct Answer: competitive advantage is temporary 5. The value of game theory to the field of management is in: Correct Answer: frame strategic decisions, predict outcomes of competitive situations, ID optimal strategic choices 6. In a market where Firm A and Firm B are leading suppliers, if Firm A initiates a price cut, the likelihood that Firm B responds with an identical price cut will be greater: Correct Answer: if Firm Bs medium term goal is to maximize market share 7. Competitive intelligence, the systematic collection and analysis of information about rival firms, is: Correct Answer: a useful activity that forms an element of firms environmental scanning and strategic analysis 8. The main use of industry segmentation analysis is: Correct Answer: identify the most attractive segments for a firm to locate within 9. A firm will choose to compete across multiple segments rather than specialize in a single segment if: Correct Answer: the same resources and capabilities can be shared across different segments 10. The main usefulness of strategic group analysis is in understanding: Correct Answer: the positioning of different firms and patterns of competition within an industry

Chapter 5: Analyzing Resources and Capabilities

1. Strategy needs to take account of both the requirements of the firms external environment and the firms own resources and capabilities. Resources and capabilities rather than requirements of the external environment offer a stronger basis for strategy formulation when: Correct Answer: the external environment is in a state of flux 2. The difficulties faced by Eastman Kodak and Olivetti in adapting to radical technological change within their markets point to: Correct Answer: the difficulties established firms experience in building the new technological capabilities 3. There are two primary sources of profit (or economic rent): Correct Answer: market power and superior resources 4. To identify a firms resources and capabilities, it is useful: Correct Answer: undertake an analysis both of key success factors and the value chain 5. A major reason for the high valuation ratios (ratio of stock market value to balance sheet net asset value) for some companies is: Correct Answer: the undervaluation of intangible resources on companies balance sheets 6. Firms with outstanding capabilities are typically those which: Correct Answer: are able to integrate their resources most effectively 7. Enterprise Resource Planning software (such as that supplied by SAP) is unlikely, on its own, to be source of competitive advantage because: Correct Answer: it is available to any firm that wishes to purchase it; hence, it is not scarce 8. A well established brand can be a source of sustainable competitive advantage because: Correct Answer: brands tend to lose value when transferred to another firm & new brands are slow & costly to build 9. It is better for an investment bank to have its trading capabilities based upon proprietary trading systems than upon the skills of a few star traders because: Correct Answer: they are in a position to negotiate pay which appropriate the major part of the profit they create 10. When a company has weaknesses relative to competitors among strategically important resources and capabilities, the appropriate strategic response is to: Correct Answer: outsource those activities while positioning the business to reduce remaining weaknesses

Chapter 6: Organization Structure and Management Systems

1. In most large companies strategic planning is: Correct Answer: a process that combines top-down initiatives and directives and bottom-up proposals 2. the most valuable contribution of strategic planning processes to the success of companies: Correct Answer: creating a dialogue for sharing knowledge and ideas, and building consensus 3. The main changes in strategic planning systems over recent decades are: Correct Answer: shorter time horizons, less emphasis on detailed planning & more emphasis on overall direction 4. The primary mechanisms through which companies translate strategic plans into action are: Correct Answer: operating plans and capital expenditure budgets 5. The main factors facilitating the emergence of large industrial enterprises towards the end of the 19th century were: Correct Answer: the introduction of limited liability, the railroad, and the telegraph 6. The Tata Group and the Virgin Group are examples of: Correct Answer: holding companies 7. The agency problem refers to the: Correct Answer: misalignment of goals between a principal and his/her agent 8. The major influence on the organizational culture of most companies is the: Correct Answer: the personality and beliefs of the founder 9. In doubles tennis, the main mechanism through which the players coordinate their actions is: Correct Answer: mutual adjustment 10. Organic organizational forms are preferable to mechanistic organizational forms: Correct Answer: for firms in dynamic, uncertain environments

Chapter 7 the Sources and Dimensions of Competitive Advantage

1. Competitive advantage can be defined as a firm's: Correct Answer: potential to earn a rate of profit that is persistently higher than its rivals 2. A firms competitive advantage is not necessarily revealed in higher profitability, it may be reflected in: Correct Answer: expanding market share and/or increasing employee bonuses 3. When an industry is subject to externally generated changes, the firms which are most likely to establish a competitive advantage are those: Correct Answer: that respond quickly to change and have the R&Cs that are aligned to the emerging success factors 4. An isolating mechanism is a barrier that prevents the erosion of a firms competitive advantage. Which of the following is not an isolating mechanism: Correct Answer: competitive advantage based upon exploiting pricing anomalies 5. Advertising costs as a percentage of sales revenue for soft drink brands with large market shares (such as Coca-Cola and Pepsi-Cola) are lower than for brands with small market shares (Dr Pepper, Schweppes, Fresca). This is because: Correct Answer: advertising campaigns are subject to a large minimum budgets (indivisibilities) 6. In retailing, the cost advantages of large retail chains (such as Wal-Mart in the US, Tesco in Britain, Metro in Germany, and Carrefour in France) is primarily the result of: Correct Answer: lower costs of bought-in products as a result of superior bargaining power 7. Compared with simple products like flour or toilet paper, complex products such as cars or hotels: Correct Answer: greater potential for differentiation 8. In supplying lifestyle products which are designed to meet consumers social and psychological needs, the key to differentiation advantage is: Correct Answer: product integrity 9. Banks spend more money on their head office buildings than most other large corporations because: Correct Answer: they offer experience goods, hence they need to signal wealth and stability 10. Firms that pursue cost advantage will different structures and systems than those pursuing differentiation advantages. Among the following features, which is not typically found among firms pursuing cost advantage: Correct Answer: low levels of job specialization

Chapter 8: Industry Evolution and Strategic Change

1. The main forces driving industry evolution are: Correct Answer: technology and demand 2. Which of the following developments is not a typical feature of the transition from the introductory to the growth phase of the industry life cycle: Correct Answer: the shift of production from mature to emerging countries 3. There are two primary sources of profit (or economic rent): Correct Answer: network effects 4. Shakeout --a period when many firms exit from an industry following a period of intense competition-characterizes an industrys transition from: Correct Answer: from growth to maturity 5. The field of organizational ecology studies: Correct Answer: the evolution of the population of firms in an industry 6. Which of the following is not a source of organizational inertia? Correct Answer: The primacy of shareholder value maximization as a corporate goal 7. When an industry is subject to technological change, the ability of new entrants to displace incumbent firms will be increased by the following factors: Correct Answer: the extent to which the technological change is a source of architectural innovation rather than component innovation 8. The steam ship was invented in 1781, yet sailing ships remained dominant for ocean transport for another 100 years. The main reason was that: Correct Answer: sailing ships were faster and cheaper over most of the period 9. When a company organizes its research, new business development, and product development activities into separate organizational units firm its operational and administrative activities, this is an example of: Correct Answer: structural ambidexterity 10. The main reason why a firms distinctive capabilities reflect the conditions that the firm faced during the early years of its development is because: Correct Answer: capabilities that develop early become embedded in a firms organizational culture