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1.

A sustained or sustainable competitive advantage requires that:


a. the value creating strategy be in a formulation stage.
b. competitors be simultaneously implementing the strategy.
c. other companies not be able to duplicate the strategy.
d. average returns be earned by the company.
Answer: c. other companies not be able to duplicate the strategy.
2. Investors in a company judge the adequacy of the returns on their investment
in relation to:
a. the returns on other investments of similar risk..
b. the stock market's overall performance.
c. the initial size of the investment.
d. the prime interest rate.
Answer: a. the returns on other investments of similar risk..
3. The strategic management process is:
a. a set of activities that is guaranteed to prevent organizational failure.
b. a process concerned with a firm's resources, capabilities, and competencies,
but not the conditions in its external environment.
c. a set of activities that to date have not been used successfully in the not-forprofit sector.
d. a dynamic process involving the full set of commitments, decisions, and
actions related to the firm.
Answer: d. a dynamic process involving the full set of commitments, decisions,
and actions related to the firm.
4. Which of the following is NOT an assumption of the Industrial Organization, or
I/O, model?
a. Organizational decision makers are rational and committed to acting in the
firm's best interests.
b. Resources to implement strategies are not highly mobile across firms.
c. The external environment is assumed to impose pressures and constraints
that determine the strategies that result in superior performance.
d. Firms in given industries, or given industry segments, are assumed to control
similar strategically relevant resources.
Answer: d. Firms in given industries, or given industry segments, are assumed to
control similar strategically relevant resources.
5. Which of the following is NOT an assumption of the resource-based model?
a. Each firm is a unique collection of resources and capabilities.
b. All firms possess the same strategically relevant resources.
c. Resources are not highly mobile across firms.
d. Firms acquire different resources and capabilities over time.

Answer: b. All firms possess the same strategically relevant resources.


6. In contrast to the industrial organization model, in a 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. loyal employees.
Answer: d. loyal employees.
7. The resource-based model of the firm argues that:
a. all resources have the potential to be the basis of sustained competitive
advantage.
b. resources are not a source of potential 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.
Answer: d. resources that are valuable, rare, costly to imitate, and nonsubstitutable form the basis of a firm's core competencies.
8. The I/O model and the resource-based view of the firm suggest conditions that
firms should study in order to:
a. compete in domestic but not international markets.
b. examine strategic outputs achieved mainly in the last 5-year period.
c. engage in different sets of competitive dynamics.
d. develop the most effective strategy.
Answer: d. develop the most effective strategy.
9. Strategic mission:
a. is a statement of a firm's unique purpose and scope of operations.
b. is an internally-focused affirmation of the organization's societal and ethical
goals.
c. does not limit the firm by specifying the industry in which the firm intends to
compete.
d. is developed by a firm before the firm develops its strategic intent.
Answer: a. is a statement of a firm's unique purpose and scope of operations.
10. The interests of an organization's stakeholders often conflict, and the
organization must prioritize its stakeholders because it cannot satisfy them all.
The ________ is the most critical criterion in prioritizing stakeholders.
a. power of each stakeholder

b. urgency of satisfying each stakeholder


c. importance of each stakeholder to the firm
d. influence of each stakeholder
Answer: a. power of each stakeholder
11. Which of the following is a true statement about capabilities?
a. Capabilities emerge over time through complex interactions of tangible and
intangible resources.
b. Valuable capabilities are based almost entirely on tangible resources.
c. Capabilities based on human capital are more vulnerable to obsolescence
than other intangible capabilities because of the tendency for employee
knowledge to become outdated.
d. The link between firm financial performance and capabilities is dependent on
whether the capabilities are based on tangible or intangible resources.
Answer: a. Capabilities emerge over time through complex interactions of
tangible and intangible resources
12. What is the job of a Chief Learning Officer?
a. implementing employee training and development programs
b. educating customers about the firm's products
c. developing an environment in which knowledge is widespread among
employees
d. establishing programs to promote education in the community
Answer: c .developing an environment in which knowledge is widespread among
employees
13. A major department store chain has a strict policy of banning photographs of
its sales floor or back room operations. It also does not allow academics to
include it in research studies for publication in research journals. In fact, some of
its own top managers refer to the store policies on secrecy as "verging on
paranoid." These policies indicate that the top management of the firm believes
the organization's core competencies are:
a. causally ambiguous.
b. unobservable.
c. imitable.
d. valuable.
Answer: c. imitable.
14. When a resource or capability is valuable, rare, costly to imitate, and
nonsubstitutable firms may obtain:
a. a temporary competitive advantage.
b. a complex competitive advantage.
c. competitive parity.

d. a sustainable competitive advantage.


Answer: d. a sustainable competitive advantage.
15. Costly-to-imitate capabilities can emerge for all of the following reasons
EXCEPT:
a. scientific transference.
b. social complexity
c. historical conditions
d. causal ambiguity
Answer: a. scientific transference.
16. An integrated and coordinated set of commitments and actions designed to
exploit core competencies and gain a competitive advantage in a specific product
market is a definition of:
a. business strategy.
b. core competencies.
c. sustained competitive advantage.
d. strategic mission.
Answer: a. business strategy.
17. In evaluating its customers, which of the following is NOT a relevant
question?
a. How will core competencies meet the customer's needs?
b. Who is the customer?
c. What are the customers' needs?
d. How will our top management team interact with the customer?
Answer: d. How will our top management team interact with the customer?
18. A company using a narrow scope in its business strategy is:
a. following a cost leadership business strategy.
b. focusing on a broad array of geographic markets.
c. limiting the group of product segments served.
d. likely to earn only average returns.
Answer: c. limiting the group of product segments served.
19. The differentiation strategy can be effective in controlling the power of rivalry
with existing competitors in an industry because:
a. customers will seek out the lowest cost product.
b. customers of non-differentiated products are sensitive to price increases.
c. customers are loyal to brands that are differentiated in meaningful ways.
d. the differentiation strategy benefits from rivalry.
Answer: c. customers are loyal to brands that are differentiated in meaningful
ways.

20. When implementing a focus strategy, the firm seeks:


a. to be the lowest cost producer in an industry.
b. to offer products with unique features for which customers will pay a premium.
c. to avoid being stuck in the middle.
d. to serve the specialized needs of a market segment.
Answer: d. to serve the specialized needs of a market segment.