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Answer Key
1. True
2. True
3. True
4. False
5. True
6. False
7. False
8. False
9. True
10. True
11. False
12. True
13. False
14. False
15. True
16. False
17. False
18. True
19. True
20. True
21. False
22. False
23. True
25. False
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26. True
27. False
28. False
29. True
30. False
31. False
32. False
33. True
34. True
35. False
36. True
37. False
38. False
39. False
40. True
41. b
42. c
43. d
44. d
45. c
46. b
47. c
48. c
49. a
51. d
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52. b
53. d
54. b
55. a
56. a
57. c
58. d
59. a
60. b
61. b
62. c
63. a
64. d
65. b
66. d
67. b
68. a
69. c
70. c
71. d
72. c
73. a
74. a
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77. c
78. c
79. d
80. b
81. d
82. b
83. c
84. c
85. a
86. a
87. a
88. d
89. c
90. b
91. d
92. d
93. a
94. a
95. c
96. c
97. a
98. d
99. d
100. a
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a.
True
b.
False
2. An organization’s willingness to tolerate or encourage unethical behavior is a reflection of its core values.
a.
True
b.
False
3. Risk in terms of financial returns reflects an investor’s uncertainty about economic gains or losses that will result from a
particular investment.
a.
True
b.
False
4. Research shows that a greater percentage of a firm’s profitability is explained by the I/O rather than the resource-based
model.
a.
True
b.
False
5. Above average returns are those in excess of what an investor expects to earn from other investments with similar stock
prices.
a.
True
b.
False
6. Organizational stakeholders are the firm’s internal resources, capabilities, and core competencies that are used to
accomplish what may appear to be unattainable goals in the competitive environment.
a.
True
b.
False
7. Economies of scale and huge advertising budgets are just as effective in the new competitive landscape as they were in
the past.
a.
True
b.
False
8. An effective vision statement must specify the industry in which a company will operate.
a.
True
b.
False
9. Organizational mission statements typically do not include statements about profitability and earning above-average
returns.
a.
True
b.
False
10. The rate of growth of Internet-based applications could be affected by strategies of Internet service providers charging
users for downloading those applications.
a.
True
b.
False
11. Resources are considered rare when they have no structural equivalent.
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a.
True
b.
False
12. Strategic leaders must have a strong strategic orientation while embracing change in the dynamic competitive
landscape.
a.
True
b.
False
13. Customers, suppliers, unions, and local governments are examples of capital market stakeholders.
a.
True
b.
False
14. The assumptions of the industrial organization model and the resource-based model are contradictory. Therefore,
organizational strategists must choose one or the other model as the basis for developing a strategic plan.
a.
True
b.
False
15. An effective vision stretches and challenges people and can result in increased innovation. This is illustrated by
Apple’s CEO Steve Jobs, who was known to think bigger and differently than most people (“putting a dent in the
universe”).
a.
True
b.
False
16. The rapid rate of technological diffusion has increased the competitive benefits of patents.
a.
True
b.
False
17. The resource-based model assumes that firms must have resources that are rare or costly to imitate to form a basis for
competitive advantage.
a.
True
b.
False
18. While patents may be an effective way of protecting proprietary technology, many firms competing in the electronics
industry do not apply for patents to prevent competitors from utilizing the technological knowledge that would be
included in the patent application.
a.
True
b.
False
19. The two primary drivers of hypercompetition are the emergence of the global economy and technology.
a.
True
b.
False
20. The five forces model suggests that firms should target the industry with the highest potential for above-average
returns and then implement either a cost-leadership strategy or a differentiation strategy.
a.
True
b.
False
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21. Corporate-level strategy in a diversified organization requires a common business strategy for each component
business.
a.
True
b.
False
22. Examples of incremental innovations include iPods, PDAs, Wi-Fi, and web browser software.
a.
True
b.
False
23. Strategic competitiveness is achieved when a firm successfully formulates and implements a value-creating strategy.
a.
True
b.
False
24. The I/O (industrial organization) model assumes that the uniqueness of a firm’s resources and capabilities is the main
source of above-average returns.
a.
True
b.
False
25. If a firm is dependent on a specific stakeholder group, that group has less influence on the firm’s strategic decision
making.
a.
True
b.
False
26. The uniqueness of a firm’s resources and capabilities is the basis for a firm’s strategy and determines its ability to earn
above-average returns under the I/O view.
a.
True
b.
False
27. The CEO of Twin Spires, Inc., is committed to using the expertise and resources currently in the firm to serve the
needs of the natural gardening community by providing rare and native plants to individuals and nurseries around the
United States. The perspective of the CEO of Twin Spires is consistent with the assumptions of the industrial
organization (I/O) model.
a.
True
b.
False
28. A firm’s mission tends to be enduring while its vision can change in light of changing environmental conditions.
a.
True
b.
False
29. Relative power is the most critical element for prioritizing the demands of stakeholders.
a.
True
b.
False
30. When a firm earns lower-than-average returns, the highest priority is given to satisfying the needs of capital market
stakeholders over the needs of product market and organizational shareholders.
a.
True
b.
False
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31. Average returns are those in excess of what an investor expects to earn from other investments with a similar amount
of risk.
a.
True
b.
False
32. Although organizational cultures vary considerably, one cannot make an objective judgment that some organizational
cultures are more or less functional than others in terms of ethical considerations.
a.
True
b.
False
33. The new CEO of Opacity Enterprises is determined to make the long-established firm strategically flexible. The CEO
feels that the employees of the company have the ability, training, and resources to engage in continuous learning. The
CEO must encourage ambidextrous learning, absorbing new knowledge and building incremental knowledge.
a.
True
b.
False
34. Hourly workers on the production line of a chicken-processing plant are considered organizational stakeholders.
a.
True
b.
False
35. Returns can only be measured in accounting terms such as return on assets, return on equity, or return on sales.
a.
True
b.
False
36. Six years ago, Colette Smith founded a successful catering company that specializes in providing a wide assortment of
miniature cheesecakes for corporate and social events. Although Ms. Smith is no longer active in the actual production of
the cheesecakes, she continues as president of the catering company. Ms. Smith could be considered a strategic leader of
this firm.
a.
True
b.
False
37. The goal of strategy implementation is to develop a permanent competitive advantage.
a.
True
b.
False
38. Alligator Enterprises has earned above-average returns since its founding five years ago. No other firm has challenged
Alligator in its particular market niche; therefore, the firm’s owners can feel secure that Alligator has established a
competitive advantage.
a.
True
b.
False
39. Developed countries still have major advantages in their access to information technology when compared to
emerging economies because of the significant cost of the infrastructure needed for computing power.
a.
True
b.
False
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40. To implement a firm’s strategies, the firm takes actions to with the goal of achieving strategic competitiveness and
above average returns.
a.
True
b.
False
Indicate the answer choice that best completes the statement or answers the question.
41. A key purpose of a mission statement is to inform _________what a firm is, what it seeks to accomplish and who it
seeks to serve.
a.
CEOs
b.
stakeholders
c.
regulators
d.
former employees
42. 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.
43. The strategic management process is;
a.
a set of activities that will assure a sustainable competitive advantage and above-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 formulation and implementation of a full set of commitments, decisions, and actions required for the firm
to achieve above-average returns and strategic competitiveness.
44. The rate of technological diffusion is increasing. Which of the following was fastest in penetrating 25 percent of
homes in the U.S. market?
a.
Mobile Phone
b.
Television
c.
Personal Computer
d.
Internet
45. The Princeton Alliance Church states in its website that “PAC exists to help you live life to the fullest by knowing
God, developing community and bringing hope.” This pronouncement is most precisely a statement of organizational:
a.
values.
b.
structure.
c.
vision.
d.
culture.
46. An investor is considering in which of two start-up companies to invest. The investor has faith in the industrial
organization model of above-average returns and is using that as a guideline to make a decision. Both start-up companies
propose to manufacture health-focused foods with low salt, low sugar, high fiber, and no artificial additives. RexRich
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Foods has a business strategy of producing a differentiated product for which consumers will pay more. Green Pastures
Foods is in the health-foods industry because of its internal culture and commitment to healthy lifestyles, but it does not
have any executives with experience in food production. Which firm will the investor feel is most consistent with the
model of industrial organization?
a.
Green Pastures Foods
b.
RexRich Foods
c.
Both firms are consistent with the I/O approach.
d.
At the entrepreneurial stage, the model that companies follow is not important.
47. Henry Ford once said, “If I had asked people what they wanted, they would have said faster horses.” The invention of the
car is an early example of:
a.
the march of globalization.
b.
rapid technological diffusion.
c.
disruptive technologies.
d.
products that were not imitated by competitors.
48. All of the following are characteristics of the global economy EXCEPT:
a.
the increasing importance of developing countries as sources of revenue growth.
b.
the free movement of goods, services, people, skills, and ideas across geographic borders.
c.
the increased use of tariffs to protect industries.
d.
higher levels of opportunities and challenges in new geographic markets.
49. The strategic leader’s work is characterized by:
a.
ambiguous decision situations where the best course of action is not always easy to identify.
b.
a willingness to unify stakeholders through skillful manipulation.
c.
an ability to identify solutions to long-range problems.
d.
concentration on the practical day-to-day aspects of the organization’s operations.
50. It is important to emphasize that almost all strategic management process decisions have ______ because they are
related to how a firm interacts with its stakeholders.
a.
ethical dimensions.
b.
local dimensions.
c.
political dimensions.
d.
global dimensions.
51. The economic interdependence among countries which is reflected in the flow of goods, services, financial capital,
and knowledge across country borders is defined as:
a.
hypercompetition.
b.
boundaryless retailing.
c.
strategic intensity.
d.
globalization.
52. A large corporation has earned a reputation for being a challenging work environment for employees, placing
demands on employees’ time and pushing them to accomplish tasks, sometimes with little recognition. A recent audit
found that the company was denying employees overtime pay despite the extra work. This is a reflection of the
company’s:
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a.
core values of hard work to gain advancement.
b.
unethical corporate culture.
c.
lack of an organizational mission.
d.
search for its core competencies.
53. 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
54. Strategic leaders, ______, often work long hours, and their work is filled with ambiguous decision situations.
a.
at the top of the organization
b.
regardless of their location in the organization
c.
in the finance area
d.
in the operations area
55. The resource-based view of the firm:
a.
emphasizes that it is difficult to develop and sustain a competitive advantage based on resources alone.
b.
argues that the industry environment has a stronger influence on firms’ ability to implement strategies
successfully than does the competitive environment.
c.
calls for firms to focus on their homogeneous capabilities to compete against their rivals.
d.
suggests that vision and mission are marketing messages not tied to strategic plans.
56. The global economy, globalization, rapid technological change, and the increasing importance of knowledge are
creating the need to:
a.
delegate strategic responsibilities to employees “closer to the action.“
b.
split responsibilities between the CEO and the board of directors to minimize the possibility of corporate
scandals triggered by unethical CEOs.
c.
re-centralize the responsibility for strategy to the CEO.
d.
expand the strategic responsibilities to all organizational stakeholders.
57. Which of the following statements is most consistent with the I/O view? Performance of a firm is most directly
attributable to:
a.
the power of the financial market stakeholders.
b.
the resources the firm possesses.
c.
the profitability of the industry in which the firm competes.
d.
hypercompetition within the industry.
58. A company competing in a single product market has
a.
one corporate-level strategy.
b.
one business-level strategy.
c.
one business-level strategy for failure. It should seek to diversify.
d.
one business-level strategy and one corporate-level strategy.