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The terms mergers and acquisitions are synonymous and may be used interchangeably Southwest Airlines operates at a significantly lower cost than its competitors. Answer: True Achieving high levels of local responsiveness will almost always lead to lower cost structure. Answer: […]

Underlying problems can be discovered by assessing financial ratios such as operating liquidity and debt ratios. Vision and mission statements are statements of organizational identity and purpose that can guide executives in making corporate decisions. Answer: True Directors may be […]

Subsequent deals for a company are faster, but are generally not as profitable. The main determinant of CEO pay is the firm’s industry. Answer: False An alliance may eventually become an acquisition. Answer: True Firms generate more profits out of […]

A turbulent environment is characterized by bold dynamic moves on the part of competitors. A challenger can gain a competitive market position to the extent that they can catch the leader unaware. Answer: True Financial budgets impose a form of […]

The profit pool incorporates key complementary businesses near the point at which a firm is directly involved in customer transactions. Buyer power is shaped by product differentiation, bargaining leverage, and brand identity. Answer: True The speed of change is a […]

Alliances are strategies in and of themselves. A potential problem in any alliance is that one partner may take advantage of another. Answer: True Typically, the hardest part of drawing up a good alliance contract is negotiating termination rights. Answer: […]

Entrepreneurs who depend on significant investor capital often find their flexibility considerably increased. Blockholders are considered powerful because they control 10 percent or more of a firm’s shares. Answer: False Intel is successful because it doesn’t license its technology to […]

The generic strategy typology is helpful in selecting a starting strategic position. The market will frequently place higher valuations on risky firms with poor governance characteristics. Answer: False Rebundling resources and capabilities can be accomplished through alliances and acquisitions. Answer: […]

The criterion of inimitability is satisfied if competitors cannot readily acquire the valuable and rare resource. The basic building blocks of a firm’s strategy are its resources and capabilities. Answer: True Capabilities in large-scale manufacturing and distribution generally favor low-cost […]

Slotting fees are the fees that suppliers pay for access to retailers’ shelf space. The person who assumes the role of strategic leadership reports directly to the CEO. Answer: False New-venture activities are typically more predictable and are, therefore, less […]

The entrepreneurial role focuses on both voluntary and proactive initiatives. The process of thinking through the steps of the business plan is probably more important than the business-plan document itself. Answer: True Aspects of strategy must be communicated to external […]

Alliances are ineffective vehicles for creating new capabilities and markets. Industry analysis includes all of a firm’s key external stakeholders. Answer: False An industry that is dominated by a few large firms is called a monopoly. Answer: False Given a […]

In a truly global industry, competitive strategies are integrated in different international markets. A firm that is characterized by multimarket competition encounters the same competitors in many different markets. Answer: True Both supplier and buyer can benefit from gains in […]

The disadvantages a firm faces by not being a local player can be cultural and/or political. In a product-expansion acquisition, one company buys another that offers essentially the same products but that has a presence in a geographic market in […]

Key success factors are firm-specific and nontransferable. Making imitation by other companies difficult helps a company protect its advantage. Answer: True Market valuations of traditional firms are always linked to the firms’ corporate governance characteristics. Answer: False Answer: False

Causal ambiguity is a condition where a resource is considered valuable and rare because it is difficult to identify and understand. Orthodoxies represent the status quo of an industry. Answer: True Making assumptions about sociocultural norms in your home market […]

Technological change is particularly risky when it primarily affects business processes. Managers can integrate what they know about products or industry life cycles with the portfolio visualization tool. Answer: True Tradeoff protection involves trading actions between support and primary value-chain […]

A strategy is only as good as its execution. To address the strategic element of differentiators, a firm must decide whether it will use alliances or acquisitions as international entry strategies. Answer: False The Level 5 Hierarchy is a model […]

Successful strategic positions are based on the effective implementation of the drivers of cost or differentiation. Liability of newness is a disadvantage that tends to increase as international diversification increases. Answer: False Competitors may easily imitate acquiring tangible resources. Answer: […]

Differences in long-term performance between firms in the same industry primarily come from different internal sources of competitive advantage. New-market disruption strategies involve identifying a business that will let a firm shift customers from a high-cost-to-serve to a low-cost-to-serve business […]

Competitive tensions often cause one partner to acquire the other. If the combined resources and capabilities resulting from a merger or acquisition are complementary, the competitive advantage is usually short term in nature. Answer: False Misappropriation occurs when one partner […]

An effective executive team relies partly on the division of labor. Clearly articulated vision and mission statements may be used as substitutes for strategy. Answer: False Good economic times often contribute to organizational problems. Answer: False Greenfield investments do not […]

Strategic coherence is best demonstrated by firms that move in and out of new businesses. The external perspective indicates that differences in competitive advantage are more often a function of industry attractiveness than a function of the firm’s position in […]

If a firm is pursuing a growth strategy, the coevolution perspective would suggest that it divest slow-growth businesses and products. The entrepreneurial model emphasizes a need to choose between opportunity or resources and capabilities. Answer: False The five competitive strategies […]

An acquisition ensures that a firm enters a new business with viable competitive strength. How managers define an industry is critical to the formulation of a strategy for competing in it. Answer: True When bonuses are tied to accounting indicators […]

Decisions about which and how many people to employ hinge on the desire either to improve efficiency or generate new revenues. If a target company in an acquisition has operating loss carry-forwards that cannot be fully utilized, the acquiring company […]

When industry profits fall below normal levels, competition usually decreases. The strategic leader emphasizes the efficient execution of a given plan. Answer: False If new technology is introduced by a new entrant, it stands a good chance to attain market […]

Rebuilding morale after turnaround is as important as restoring return on investment. Almost any organization is a potential alliance partner. Answer: True The absolute amount of knowledge in the world remains absolute. Answer: False Business strategy refers to the choices […]

Portfolio planning was not initially intended to help managers achieve a balanced portfolio of large stable businesses. The source of Jet Blue’s low operating costs is its production technology. Answer: True Wal-Mart’s management of logistics signifies an important intangible resource. […]

Coevolution means that units owned by the same corporation are potentially both collaborators and competitors. Once a strategy is congruent with PESTEL in a firm’s home environment, it will be aligned in new geographic areas. Answer: False Revenue-enhancement opportunities are […]

A strategic group is a subset of firms that have similar strategies and capabilities. Key success factors can be likened to table stakes in a poker game. Answer: True Cooption refers to orchestrating a web of shifting linkages among evolving […]

A weak finance function is often a reflection of larger management problems. Firms that are purely domestic should focus only on events within the domestic borders. Answer: False General conditions of the macro environment can be characterized after PESTL analysis […]

In the functional structure, authority is based on the control of resources and knowledge and not on hierarchical rank. New-market-creation strategies are designed to eliminate, reduce, create, or raise some previously assumed dimension of product/market supply and demand. Answer: True […]

When a merger takes place, there is a transfer of ownership. A frequent flyer program is an example of a barrier to customer mobility. Answer: True Economic logic is the means by which a firm will earn a profit by […]

New ventures face common problems whose solutions involve identifying new opportunities and developing organizational resources and capabilities. Industry concentration affects the intensity of competition in an industry. Answer: True Firms do not typically incur significant additional costs when diversifying their […]

Any firm that invests in resources and capabilities that support innovation and not retaliation may be only prolonging its inevitable demise. A major goal of strategy implementation is to translate good ideas into action and translate actions into good ideas. […]

Diffused cost leadership is one of Michael Porter’s four positions in the field of strategic management. Bootstrapping refers to exploiting a new business opportunity with limited funds. Answer: True A franchisee assumes all management responsibility for individual business locations. Answer: […]

Whenever a common resource can be used across more than one business unit, the company will always generate enhanced shareholder value. Board interlock occurs when a director sits on multiple boards. Answer: True As a result of the Sherman Antitrust […]

The five elements of a strategy are critical to any new or established firm that is engaged in entrepreneurial activity. A firm that controls a valuable and scare resource always has a competitive advantage. Answer: False Successful strategies increasingly require […]

A private firm is one in which the owner(s) has not listed shares of the firm on a public exchange. When managers are owners of the firm, the risk that they will deviate from the organization’s stated purpose increases. Answer: […]

The Bermuda Triangle of Management describes the region where firms are faced with the need to cross over from new ventures to IPOs. Strategy must be internally consistent and externally oriented. Answer: True Economies of scale exist if average costs […]

When an industry is characterized by perfect competition, rivals in the industry will achieve above-average levels of profitability. Strategies provide solutions to problems. Answer: True The burden placed on firms by their nation’s codes of best practice varies across the […]

As a firm increases in size, shareholder wealth automatically increases as well. In a truly global industry, the core product is diversified. Answer: False The degree to which horizontal expansion is desirable depends on the degree to which the new […]

A buyer group’s power is directly impacted by its prestige and the size of its orders. Stakeholder analysis is an important input into both strategy formulation and implementation. Answer: True The terms leadership and strategic leadership may be used interchangeably. […]

The industry-wide effect of the five forces will determine industry attractiveness. When complementary assets are tightly held and the first mover has weak protection from imitation, the value-creating opportunities favor the holders of the complementary assets. Answer: True The VRINE […]

Firms with very different international-strategy configurations can coexist in the same industry. Synergy is the condition in which the combined benefits of multiple activities are greater than the simple sum of those benefits. Answer: True MES varies by industry and […]

When a company raises capital through an IPO, it generally exchanges only a small portion of the firm’s stock for financial capital. The legal and political environments are often interrelated in that laws and regulations only change when politicians decide […]

Economies of scope and synergy are collectively referred to as revenue-enhancement opportunities. Strategy implementation results when a firm performs specific tasks that are required to achieve the goals and objectives described in the strategic plan. Answer: True Mission statements generally […]

Strategic-positioning decisions should be supported by only a select few tactical decisions made to implement and reinforce the firm’s strategy. Early stages of the industry life cycle encourage significant global expansion. Answer: False Industrial organization (I/O) economics is a discipline […]

Many popular U.S. brands have benefited from increasing levels of consumerism in other countries. Staging decisions are typically driven by a single factor, such as resources, urgency, credibility, or the need for early wins. Answer: False Firms that have integrated […]

Minimum efficient scale is an explanation for the use of alliances as a foreign-entry tactic. Companies can reduce human capital loss by developing industry-specific, transferable knowledge. Answer: False Executive compensation tends to be linked to firm size. Answer: True Growth […]

The competitive advantage held by one firm over its competitors tends to change more slowly in stable markets. A strategy that depends on rapid change requires that a firm’s resources and capabilities support stability and continuity. Answer: False Focused differentiation […]

Technological integration is critical in most acquisitions because of the time value of money. The external perspective on competitive advantage is based on the assumption that differences in competitive advantage are a function of the uniqueness of the firm. Answer: […]

Performance gains from internationalization come at the early stages of internationalization. Domestic strategy reflects the choices a firm’s executives make with respect to sourcing and selling its goods in foreign markets. Answer: False Developing value-chain activities and configuring them so […]

Lean manufacturing practices allow companies to decrease the speed of operations to a more normal pace. The external environment in which firms compete exerts a strong influence on firms’ profitability. Answer: True Acquisitions enable companies to accelerate their strategies. Answer: […]

Alliances may fail because partners have overly formalized monitoring systems. Acquisitions are generally regarded as a means of managing competitive uncertainty. Answer: True In the majority of U.S. public firms, the CEO also serves as the chair of the board […]

Competitive advantage occurs when a firm has more resources than its competitors. The more dissimilar the contexts across which its businesses compete, the harder it is to manage a firm’s portfolio and to create value through economies of scope. Answer: […]

A key premise is that all business environments are in a state of change. When the interests of principals and agents are in alignment, the agency problem is small. Answer: True Both the PESTEL and SWOT analyses help managers gain […]

Vertical alliances enable potential competitors to gain a presence in multiple segments of an industry. Moving “upstream” in an industry value chain will draw firms closer to the source of needed raw materials. Answer: True The resource-based inputs into the […]

Mergers may be designed to improve market access for both companies in geographic markets where individually they are weak. The VRINE model cannot be used to assess every resource or capability for potential competitive advantage. Answer: False Learning and economies […]

A firm’s decision to grow rapidly through acquisitions is consistent with a corporate strategy aimed at differentiating its product line. Firms that compete in some aspects of business may actually cooperate in other business areas. Answer: True Business history is […]

Undifferentiated resources are difficult to purchase through normal supply chain channels. The value curve is a convenient tool to help managers visualize how new disruptions might be targeted. Answer: True The two primary dimensions on which alliances can be categorized […]

Outsourcing is what a firm does when it contracts with outside suppliers to perform parts of a company’s value chain of activities. Resources may be both tangible and intangible at the same time. Answer: True Mergers and acquisitions in converging […]

Confusion and ambiguity are potential drawbacks to the network structure. During an industry’s embryonic phase, capital needs may surpass resources and capabilities. Answer: True Large organizations often put too few resources into new ventures. Answer: False Firms with weak cultures […]

Identifying and exploiting differentiators demonstrates that a firm is successful at making tough choices and deciding on tradeoffs. Primary and support activities are both potential sources of competitive advantage. Answer: True People and rewards are the implementation levers that usually […]

An individual with a high tolerance of ambiguity would be extremely uncomfortable in a situation with little information and a great deal of uncertainty. An alliance may involve sharing resources related to only one key activity in the partners’ value […]

As production experience is gained, incremental production costs increase at a constant rate. A “dog” is a business that has a very strong competitive position, but is in a slow-growth industry. Answer: False The definition of public firm versus private […]

Sometimes alliances are necessary in order to include a proportion of local contact in a product. For Lean manufacturing practices to work well in a firm, experts say that the organization’s culture must change in significant ways. Answer: True The […]