6.1.

Brinker International operates restaurants in several different segments of the casual

dining
market. This is
a. a relatively high level of diversification.
b. an example of product diversification.
c. unlikely to reduce variability in the firm's profitability since the restaurants are all in the
casual dining category.
d. an example of related linked diversification.
b. an example of product diversification.
6.2. On the most basic level, corporate-level strategy is concerned with ____ and how to
manage
these businesses.
a. whether the firm should invest in global or domestic businesses
b. what product markets and businesses the firm should be in
c. whether the portfolio of businesses should generate immediate above-average returns or
should be troubled businesses which will create above-average returns only after
restructuring
d. whether to integrate backward or forward.
b. what product markets and businesses the firm should be in
6.3. Which acquisition would be considered the LEAST related?
a. a candy manufacturer purchases a chemical laboratory specializing in food flavorings.
b. a chain of garden centers acquires a landscape architecture firm.
c. a hospital acquires a long-term care nursing home.
d. an upscale "white-tablecloth" restaurant chain acquires a travel agency
d. an upscale "white-tablecloth" restaurant chain acquires a travel agency
6.4. The more "constrained" the relatedness of diversification,
a. the less likely the firm's portfolio of businesses will reduce the firm's variability in
profitability.
b. the wider the variation in the portfolio of businesses owned by the firm.
c. the more links there are among the businesses owned by an organization.
d. lower the proportion of total organizational revenue derived from the dominant-
business.
c. the more links there are among the businesses owned by an organization.
6.5. Which of the following is NOT a limit to vertical integration?
a. bureaucratic costs
b. the loss of flexibility through investment in specific technologies
c. capacity balance and coordination problems from changes in demand
d. imitation of core technology by potential competitors
d. imitation of core technology by potential competitors
7.6. Horizontal acquisitions in the airline industry are typically intended to
a. take advantage of innovations created by the other firm.
b. reduce some of the overcapacity in the industry.
c. control more parts of the value chain.
d. overcome barriers to entry.
b. reduce some of the overcapacity in the industry.
7.7 Foreign firms seeking to acquire U.S. firms are interested in all of the following EXCEPT
a. gaining access to the U.S. company brand names.
b. gaining access to critical resources held by U.S. companies.
c. diversifying into unrelated industries in order to broaden their market scope.
d. acquiring relationships with dealers through horizontal acquisitions.
c. diversifying into unrelated industries in order to broaden their market scope.
7.8 Researchers have found that shareholders of acquired firms often
a. earn above-average returns.
b. earn below-average returns.
c. earn close to zero as a result of the acquisition.
d. are not affected by the acquisition.
.
a. earn above-average returns.
7.9. In a merger
a. one firm buys controlling interest in another firm.
b. two firms agree to integrate their operations on a relatively coequal basis.
c. two firms combine to create a third separate entity.
d. one firm breaks into two firms.
b. two firms agree to integrate their operations on a relatively coequal basis.
7.10 The fastest and easiest way for a firm to diversify its portfolio of businesses is through
acquisition because
a. of barriers to entry in many industries.
b. it is difficult for companies to develop products that differ from their current product line
c. innovation in both the acquired and the acquiring firm is enhanced by the exchange of
competencies resulting from acquisition
d. unrelated acquisitions are usually uncomplicated because the acquired firm is allowed to
continue to function independently as it did before acquisition.
b. it is difficult for companies to develop products that differ from their current product line
7.11 Related acquisitions to build market power
a. are likely to undergo regulatory review.
b. are rarely permitted to occur across international borders.
c. typically involve a firm purchasing one of its suppliers or distributors.
d. concentrate on capturing value at more than one stage in the value chain.
a. are likely to undergo regulatory review.
8. 12. International strategy refers to a(an)
a. action plan pursued by American companies to compete against foreign companies
operating in the United States.
b. strategy through which the firm sells products in markets outside the firm's domestic
market.
c. political and economic action plan developed by businesses and governments to cope
with
global competition.
d. strategy American firms use to dominate international markets.
b. strategy through which the firm sells products in markets outside the firm's domestic
market.
8. 13. U.S. companies moving into the international market need to be sensitive to the need
for local
country or regional responsiveness due to
a. increasing rejection of American culture across much of the world.
b. the sophistication of the international consumer due to the Internet.
c. customization required by cultural differences.
d. the increasing loss of economies of scale.
c. customization required by cultural differences.
8. 14. Which of the following is NOT a motive for firms to become multinational?
a. to take advantage of potential opportunities to expand the market for the firm's
products.
b. to secure needed resources.
c. to avoid high domestic taxation on corporate income.
d. increasing universal product demand.
c. to avoid high domestic taxation on corporate income.
8.15. Which of the following is NOT a factor pressuring companies for local responsiveness?
a. the need for local repair and service to customers
b. customization due to cultural differences
c. government pressure for firms to use local sources for procurement
d. availability of low labor costs
d. availability of low labor costs
8.16. The choices that a firm has for entering the international market include all of the
following
EXCEPT:
a. exporting.
b. licensing.
c. leasing.
d. acquisition.
c. leasing.
9.17. Firms participate in strategic alliances for all the following reasons EXCEPT to
a. enter markets more quickly.
b. acquire technology.
c. create values they could not develop acting independently.
d. retain tight control over intangible core competencies.
d. retain tight control over intangible core competencies.
9.18. When using business-level and corporate-level cooperative strategies, a firm's primary
intent
is to develop strategic alliances that
a. enhance the firm's reputation in the marketplace.
b. are long-lived.
c. will reduce the firm's political risk.
d. create a competitive advantage.
d. create a competitive advantage.
9.19. In a(an) ____ the firms involved own equal shares of a newly-created venture.
a. equality-based strategic alliance
b. non-equity strategic alliance
c. joint venture
d. equity strategic alliance
c. joint venture
9.20. A state-wide alliance of independent hospitals has formed in order to do group
purchasing of
medical supplies. Group purchasing allows the hospital alliance to negotiate lower prices
with
suppliers because of the large quantity of materials ordered. This is an example of the
advantage
of ____ resulting from an alliance.
a. explicit collusion.
b. economies of scale.
c. opportunistic behavior.
d. distribution opportunities.
b. economies of scale.
9.21. Firms entering into synergistic strategic alliances expect to attain
a. technological complexity.
b. economies of scope.
c. monopolistic market power.
d. learning curve efficiencies.
b. economies of scope.
10.22. The top management team at Sierra Infusion is concerned about the declining
performance of
firms in their industry. The team members are becoming concerned about the security of
their
jobs at Sierra Infusion. At a meeting over dinner, the top management team agrees to go to
the
board of directors with a proposal for
a. increased diversification of Sierra Infusion.
b. the addition of outside directors to the board.
c. increased shareholder participation in decision making.
d. greater concentration on Sierra's core industry.
a. increased diversification of Sierra Infusion.
10.23. The separation between firm ownership and management creates a(n) ____
relationship.
a. governance
b. control
c. agency
d. dependent
c. agency
10.24. A primary objective of corporate governance is to
a. determine and control the strategic direction of an organization, so that the top
executives are focused on maximizing corporate profits.
b. ensure that the interests of top-level managers are aligned with the interests of
shareholders.
c. lobby legislators to pass laws that are aligned with the organization's interests.
d. resolve conflicts among corporate employees.
b. ensure that the interests of top-level managers are aligned with the interests of
shareholders.
10.25. Which of the following is NOT an internal governance mechanism?
a. the board of directors
b. ownership concentration
c. executive compensation
d. the market for corporate control
d. the market for corporate control
10.26. A major conflict of interest between top executives and owners, is that top
executives wish to
diversify the firm in order to ____, while owners wish to diversify the firm to ____.
a. generate free cash flows, reduce the risk of total firm failure
b. increase the price of the firm's stock, increase the dividends paid out from free cash
flows
c. reduce the risk of total firm failure, reduce their total portfolio risk
d. reduce their employment risk, increase the company's value
d. reduce their employment risk, increase the company's value
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.
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.
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-for-profit sector.
d. a dynamic process involving the full set of commitments, decisions, and actions related to
the firm.
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.
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.
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.
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.
d. resources that are valuable, rare, costly to imitate, and non-substitutable 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.
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.
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
a. power of each stakeholder
1. The __________ environment is composed of elements in the broader society that can
influence an industry and the firms within it.

a. general
b. competitor
c. sociocultural
d. industry
a. general
2. The environmental segments that comprise the general environment typically will NOT
include:

a. demographic factors.
b. sociocultural factors.
c. substitute products or services.
d. technological factors.
c. substitute products or services.
3. Which of the following is an opportunity for an entrepreneur who wishes to open a
business doing therapeutic massage in his small community?

a. the average age of the population in his community is high

b. the level of unemployment in his community is high
c. a chiropractor and two independent physical therapists located in his community
d. the average income level of the population in his community is low
c. a chiropractor and two independent physical therapists located in his community
4. The economic environment refers to:

a. the nature and direction of the economy in which a firm competes or may compete.
b. the economic outlook of the world provided by the World Bank.
c. an analysis of how the environmental movement and world economy interact.
d. an analysis of how new environmental regulations will affect our economy.
a. the nature and direction of the economy in which a firm competes or may compete.
5. An industry is defined as:

a. a group of firms producing the same item.

b. firms producing items that sell through the same distribution channels.
c. firms that have the same seven digit standard industrial code.
d. a group of firms producing products that are close substitutes.
d. a group of firms producing products that are close substitutes.
6. Which of the following is NOT an entry barrier to an industry?

a. expected competitor retaliation

b. economies of scale
c. customer product loyalty
d. bargaining power of suppliers
d. bargaining power of suppliers
7. Switching costs refer to the:

a. cost to a producer to exchange equipment in a facility when new technologies emerge.

b. cost of changing the firm's strategic group.
c. one-time costs suppliers incur when selling to a different customer.
d. one-time costs customers incur when buying from a different supplier
d. one-time costs customers incur when buying from a different supplier
8. Suppliers are powerful when:

a. satisfactory substitutes are available.

b. they sell a commodity product.
c. they offer a credible threat of forward integration.
d. they are in a highly fragmented industry.
c. they offer a credible threat of forward integration.
9. Buyers are powerful when:

a. there is not a threat of backward integration.

b. they are not a significant purchaser of the supplier's output.
c. there are no switching costs.
d. the buyers' industry is fragmented.
c. there are no switching costs.
10. Upper limits on the prices a firm can charge are impacted by:

a. expected retaliation from competitors.

b. the cost of substitute products.
c. variable costs of production.
d. customers' high switching costs
b. the cost of substitute products.
1. As defined in the text, resources:

a. are concrete sources of value.

b. are easily identified.
c. have two categories: generic and unique.
d. are the source of the firm's capabilities.
d. are the source of the firm's capabilities.
2. Tangible resources include:

a. assets that are people dependent such as know-how.

b. assets that can be seen and quantified.
c. organizational culture.
d. a firm's reputation.
b. assets that can be seen and quantified.
3. Intangible assets include:
a. the firm's reputation.
b. a firm's borrowing capacity.
c. depreciated capital assets.
d. manufacturing facilities.
a. the firm's reputation.
4. Compared to tangible resources, intangible resources are:

a. of less strategic value to the firm.

b. not the focus of strategic analysis.
c. a more potent source of competitive advantage.
d. more likely to be reflected on the firm's balance sheet.
c. a more potent source of competitive advantage.
5. 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.
a. Capabilities emerge over time through complex interactions of tangible and intangible
resources
6. 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
c .developing an environment in which knowledge is widespread among employees
7. 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.
c. imitable.
8. 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.
d. a sustainable competitive advantage.
9. 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
a. scientific transference.
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.
a. business strategy.
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?
d. How will our top management team interact with the customer?
Customer needs are related to the:

a. characteristics that can be used to subdivide a large market into segments.

b. set of values exhibited by a group of customers.
c. use of core competencies to implement a strategy.
d. benefits and features of a good or service that customers want to purchase.
d. benefits and features of a good or service that customers want to purchase.
Business-level strategies are concerned specifically with:

a. creating differences between the firm's position and its rivals.

b. the industries in which the firm will compete.
c. how functional areas will be organized within the firm.
d. how a business with multiple physical locations will operate one of those locations.
a. creating differences between the firm's position and its rivals.
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.
c. limiting the group of product segments served.
A cost leadership strategy provides goods or services with features that are:

a. acceptable to customers.
b. unique to the customer.
c. highly valued by the customer.
d. able to meet unique needs of the customer
a. acceptable to customers
When the costs of supplies increase in an industry, the low-cost leader may:

a. continue competing with rivals on the basis of product features.

b. lose customers as a result of price increases.
c. make it difficult for new entrants to the industry to achieve above-average returns.
d. be the only firm able to pay the higher prices and continue to earn average or above-
average returns.
d. be the only firm able to pay the higher prices and continue to earn average or above-
average returns.
The risks of a cost leadership strategy include:

a. becoming "stuck in the middle."

b. production and distribution processes becoming obsolete
c. the ability of competing firms to provide similar features in a product.
d. customers deciding the product isn't worth what the firm must charge for it.
b. production and distribution processes becoming obsolete
A firm successfully implementing a differentiation strategy would expect:

a. customers to be sensitive to price increases.

b. to charge premium prices.
c. customers to perceive the product as standard.
d. to automatically have high levels of power over suppliers.
b. to charge premium prices.
A differentiation strategy provides products that customers perceive as having:

a. acceptable features.
b. features of little value relative to the value provided by the low-cost leader's product.
c. features for which the customer will pay a low price.
d. features that are non-standardized for which they are willing to pay a premium.
d. features that are non-standardized for which they are willing to pay a premium.
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.
c. customers are loyal to brands that are differentiated in meaningful ways.
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.
d. to serve the specialized needs of a market segment.
T or F? Firms operating in the same market, offering similar products and targeting similar
customers are competitors.
T
T or F? Intensified rivalry within an industry results in decreased average profitability for the
firms within it
T
T or F? Competitive dynamics indicates that firms and their strategic actions are
independent
F
T or F? Extensive market commonality guarantees intense competition in an industry
F
T or F? Two firms that have similar resources, but do not share markets would not be direct
and mutually acknowledged competitors.
T
T or F? Wal-Mart has recently moved to Alsatia, Missouri. Several local small retailers have
decided that choosing not to respond to Wal-Mart's competitive actions is a viable long-
term option, because although the companies have high market commonality they have
little resource similarity. These small retailers are correct in their decision
F
T or F? A competitive action is a strategic or tactical action taken by a firm to gain or defend
a competitive advantage.
T
T or F? First movers can gain a sustained competitive advantage when they reduce their
costs through reverse engineering.
F
T or F? Product quality is a universal theme and is a necessary, but not a sufficient, condition
for competitive success.
T
T or F? The probability of a competitive response to a competitive action is based partly on
the reputation of the competitor
T
1. A firm has achieved ____ when it successfully formulates and implements a value-
creating strategy.

a. strategic competitiveness
b. a temporary competitive advantage
c. substantial returns
d. legal and ethical core values
Not sure atm
1. Above-average returns are:

a. higher profits than the firm earned last year.

b. higher profits than the industry average 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. profits in excess of what an investor expects to earn from other investments with a
similar level of risk.
d. profits in excess of what an investor expects to earn from other investments with a
similar level of risk.
3. The strategic management process is

a. a set of activities that will assure a temporary advantage and 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
achieve above-average returns for investors through effective use of the organization's
resources.
d. the full set of commitments, decisions, and actions required for the firm to achieve
above-average returns and strategic competitiveness.
d. the full set of commitments, decisions, and actions required for the firm to achieve
above-average returns and strategic competitiveness.
All of the following are assumptions of the industrial organization (I/O) model EXCEPT
a. Organizational decision makers are 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 result in above-average returns.
d. Firms in given industries, or given industry segments, are assumed to control similar
strategically relevant resources.
b. Resources to implement strategies are firm-specific and attached to firms over the long-
term.
All of the following are assumptions of the resource-based model EXCEPT
a. Each firm is a unique collection of resources and capabilities.
b. The industry's structural characteristics have little impact on a firm's performance over
time.
c. Capabilities are highly mobile across firms.
d. Differences in resources and capabilities are the basis of competitive advantage.
c. Capabilities are highly mobile across firms.
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
d. skilled employees
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 endowment of $400 million.
c. weak competitors in the industry.
The resource-based model of the firm argues that

a. all resources have the potential to be the basis of sustained competitive advantage.
b. all capabilities 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 and capabilities that are valuable, rare, costly to imitate, and non-substitutable
form the basis of a firm's core competencies.
d. resources and capabilities that are valuable, rare, costly to imitate, and non-substitutable
form the basis of a firm's core competencies.
The goal of the organization's ____ is to capture the hearts and minds of employees,
challenge them, and evoke their emotions and dreams.

a. vision
b. mission
c. culture
d. strategy
a. vision
A firm's mission

a. is a statement of a firm's business in which it intends to compete and the customers

which it intends to serve.
b. is an internally-focused affirmation of the organization's financial, social, and ethical
goals.
c. is mainly intended to emotionally inspire employees and other stakeholders.
d. is developed by a firm before the firm develops its vision.
a. is a statement of a firm's business in which it intends to compete and the customers
which it intends to serve.
The environmental segments that comprise the general environment typically will NOT
include
a. demographic factors.
b. sociocultural factors.
c. substitute products or services.
d. technological factors.
c. substitute products or services.
An analysis of the economic segment of the external environment would include all of the
following EXCEPT
a. interest rates.
b. international trade.
c. the strength of the U.S. dollar.
d. the move toward a contingent workforce.
d. the move toward a contingent workforce.
Product differentiation refers to the:
a. ability of the buyers of a product to negotiate a lower price.
b. response of incumbent firms to new entrants.
c. belief by customers that a product is unique.
d. fact that as more of a product is produced the cheaper it becomes per unit.
c. belief by customers that a product is unique.
Which of the following is NOT an entry barrier to an industry?
a. expected competitor retaliation
b. economies of scale
c. customer product loyalty
d. bargaining power of suppliers
d. bargaining power of suppliers
Switching costs refer to the:
a. cost to a producer to exchange equipment in a facility when new technologies emerge.
b. cost of changing the firm's strategic group.
c. one-time costs suppliers incur when selling to a different customer.
d. one-time costs customers incur when buying from a different supplier.
d. one-time costs customers incur when buying from a different supplier.
New entrants to an industry are more likely when (i.e., entry barriers are low when...)
a. it is difficult to gain access to distribution channels.
b. economies of scale in the industry are high.
c. product differentiation in the industry is low.
d. capital requirements in the industry are high.
c. product differentiation in the industry is low.
Suppliers are powerful when:
a. satisfactory substitutes are available.
b. they sell a commodity product.
c. they offer a credible threat of forward integration.
d. they are in a highly fragmented industry.
c. they offer a credible threat of forward integration.
The highest amount a firm can charge for its products is most directly affected by
a. expected retaliation from competitors.
b. the cost of substitute products.
c. variable costs of production.
d. customers' high switching costs.
b. the cost of substitute products.
All of the following are forces that create high rivalry within an industry EXCEPT
a. numerous or equally balanced competitors.
b. high fixed costs.
c. fast industry growth.
d. high storage costs.
c. fast industry growth.
According to the five factors model, an attractive industry would have all of the following
characteristics EXCEPT:
a. low barriers to entry.
b. suppliers with low bargaining power.
c. a moderate degree of rivalry among competitors.
d. few good product substitutes.
a. low barriers to entry.
Internal analysis enables a firm to determine what the firm
a. can do.
b. should do.
c. will do.
d. might do.
a. can do.
An external analysis enables a firm to determine what the firm
a. can do.
b. should do.
c. will do.
d. might do.
d. might do.
____ is/are the source of a firm's ____, which is/are the source of the firm's ____.
a. Resources, capabilities, core competencies
b. Capabilities, resources, core competencies
c. Capabilities, resources, above average returns
d. Core competencies, resources, competitive advantage
a. Resources, capabilities, core competencies
In the airline industry, frequent-flyer programs, ticket kiosks, and e-ticketing are all
examples of capabilities that are
a. rare.
b. causally ambiguous.
c. socially complex.
d. valuable.
d. valuable.
Compared to tangible resources, intangible resources are
a. of less strategic value to the firm.
b. not the focus of strategic analysis.
c. a more potent source of competitive advantage.
d. more likely to be reflected on the firm's balance sheet.
c. a more potent source of competitive advantage.
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.
a. Capabilities emerge over time through complex interactions of tangible and intangible
resources.
To be a core competency, a capability must satisfy all of the following criteria EXCEPT:
a. be technologically innovative.
b. be hard for competing firms to duplicate.
c. be without good substitutes.
d. be valuable to customers.
a. be technologically innovative.
Capabilities that other firms cannot develop easily are classified as
a. costly to imitate.
b. rare.
c. valuable.
d. nonsubstitutable.
a. costly to imitate.
Costly-to-imitate capabilities can emerge for all of the following reasons EXCEPT
a. lack of scientific transference.
b. social complexity.
c. unique historical conditions.
d. causal ambiguity.
a. lack of scientific transference.
Gamma, Inc., has struggled for industry dominance with Ardent, Inc., its main competitor,
for years. Gamma has gathered and analyzed large amounts of competitive intelligence
about Ardent. It has observed as much of the firm's internal functioning and technology as it
can legally, yet Gamma cannot understand why ABC has a competitive advantage over it.
The source of ABC's success is
a. impregnable.
b. causally ambiguous.
c. rationally obscure.
d. elusive.
b. causally ambiguous.
Firms that achieve competitive parity can expect to:
a. earn below-average returns.
b. earn average returns.
c. earn above-average returns.
d. initially earn above-average returns, declining to average returns.
b. earn average returns.
Business-level strategies detail commitments and actions taken to provide value to
customers and gain competitive advantage by exploiting core competencies in
a. the selection of industries in which the firm will compete.
b. specific product markets.
c. primary value chain activities.
d. particular geographic locations.
b. specific product markets.
The three dimensions of a firm's relationships with customers include all the following
EXCEPT
a. exclusiveness.
b. affiliation.
c. richness.
d. reach.
a. exclusiveness.
The effectiveness of any of the generic business-level strategies is contingent upon
a. customer needs and competitors' strategies.
b. the match between the opportunities and threats in its external market and the strengths
and weaknesses of its internal environment.
c. the trends in the general consumer base and the robustness of the global and industry
economy.
d. the firm's competitive scope and its competitive advantage.
b. the match between the opportunities and threats in its external market and the strengths
and weaknesses of its internal environment.
Business-level strategies are concerned specifically with:
a. creating differences between the firm's position and its rivals.
b. selecting the industries in which the firm will compete.
c. how functional areas will be organized within the firm.
d. how a business with multiple physical locations will operate one of those locations.
a. creating differences between the firm's position and its rivals.
A cost leadership strategy targets the industry's ____ customers.
a. most typical
b. poorest
c. least educated
d. most frugal
a. most typical
When the costs of supplies increase in an industry, the low-cost leader
a. may continue competing with rivals on the basis of product features.
b. will lose customers as a result of price increases.
c. will be unable to absorb higher costs because cost-leaders operate on very narrow profit
margins.
d. may be the only firm able to pay the higher prices and continue to earn average or above-
average returns.
d. may be the only firm able to pay the higher prices and continue to earn average or above-
average returns.
When a product's unique attributes provide value to customers, the firm is implementing
a. a differentiation strategy.
b. a cost leadership strategy.
c. an integrated cost leadership/differentiation strategy.
d. a single-product strategy.
a. a differentiation strategy.
A company pursuing a differentiation or focused differentiation strategy would
a. have highly efficient systems linking suppliers' products with the firm's production
processes.
b. use economies of scale.
c. have strong capabilities in basic research.
d. make investments in easy-to-use manufacturing technologies.
c. have strong capabilities in basic research.
T or F? A firm using a differentiation strategy can charge a premium price.
T
A differentiation strategy can be effective in controlling the power of substitutes in an
industry because
a. customers have low switching costs.
b. substitute products are lower quality.
c. a differentiating firm can always lower prices.
d. customers develop brand loyalty.
d. customers develop brand loyalty.
The typical risks of a differentiation strategy do NOT include which of the following?
a. Customers may find the price differential between the low-cost product and the
differentiated product too large.
b. Customers' experience with other products may narrow customers' perception of the
value of a product's differentiated features.
c. Counterfeit goods are widely available and acceptable to customers.
d. Suppliers of raw materials erode the firm's profit margin with price increases.
d. Suppliers of raw materials erode the firm's profit margin with price increases.
Competitive rivalry has the most effect on the firm's ____ strategies than the firm's other
strategies.
a. business-level
b. corporate-level
c. acquisition
d. international
a. business-level
Multimarket competition occurs when firms
a. sell different products to the same customer.
b. have a high level of awareness of their competitors' strategic intent.
c. simultaneously enter into an attack strategy.
d. compete against each other in several geographic or product markets.
d. compete against each other in several geographic or product markets.
Competitive dynamics refers to the
a. circumstances where competitors are aware of the degree of their mutual
interdependence resulting from market commonality and resource similarity.
b. set of competitive actions and competitive responses the firm takes to build or defend its
competitive advantages and to improve its market position.
c. total set of actions and responses taken by all firms competing within a market.
d. ongoing set of competitive actions and competitive responses between competitors as
they maneuver for advantageous market position.
c. total set of actions and responses taken by all firms competing within a market.
Firms with few competitive resources are more likely
a. to not respond to competitive actions.
b. respond quickly to competitive actions.
c. delay responding to competitive actions.
d. respond to strategic actions, but not to tactical actions.
c. delay responding to competitive actions.
Which of the following would be an example of a strategic action?
a. a "two movies for the price of one" campaign by Blockbuster Video
b. use of product coupons by a local grocer
c. entry into the European market by Home Depot
d. fare increases by Southwest Airlines
c. entry into the European market by Home Depot
The chief disadvantage of being a first mover is the
a. high degree of risk.
b. high level of competition in the new marketplace.
c. inability to earn above-average returns unless the production process is very efficient.
d. difficulty of obtaining new customers.
a. high degree of risk.
On the whole there are more competitive responses to
a. strategic actions than to tactical actions.
b. tactical actions than to strategic actions.
c. buyer pressures than to supplier pressures.
d. the demands of the top management team than to industry structural pressures.
b. tactical actions than to strategic actions.
Competitors are more likely to respond to competitive actions that are taken by
a. differentiators.
b. larger companies.
c. first movers.
d. market leaders.
d. market leaders.
Ninety percent of Wm. Wrigley Company's total revenue comes from chewing gum. This is
an example of
a. market commonality.
b. standard-cycle markets.
c. economies of scale.
d. market dependence.
d. market dependence.
All competitive advantages do not accrue to large sized firms. A major advantage of smaller
firms is that they
a. are more likely to have organizational slack.
b. can launch competitive actions more quickly.
c. have more loyal and diverse workforces.
d. can wait for larger firms to make mistakes in introducing innovative products.
b. can launch competitive actions more quickly.