Most technological developments in an industry are diffused throughout firms in that
industry in a relatively brief period of time, but only if the technology in question has
not been patented.
Answer:
The aging of the “baby boomer” generation in American society is an example of a
demographic trend.
Answer:
Flexibility is only valuable when the decision-making setting a firm is facing is
uncertain.
Answer:
In an initial public offering, a firm (typically working with an investment banker) sells
its equity to the public at large.
Answer:
Firms that may appear to be unrelated diversified firms, but that are, in fact, related
diversified firms without any shared activities are referred to as seemingly related firms.
Answer:
Firms pursuing a differentiation strategy often use temporary cross-divisional and
cross-functional teams to manage the development and implementation of new,
innovative and highly differentiated products.
Answer:
In general, contracts are sufficient to resolve all the problems associated with cheating
in an alliance.
Answer:
One of the limits of activity sharing is that sharing activities may limit the ability of a
particular business to meet its specific customers’ needs.
Answer:
Moral hazard occurs when partners in an alliance possess high-quality resources and
capabilities of significant value in an alliance but fail to make those resources and
capabilities available to alliance partners.
Answer:
There are physical limitations to the size of some manufacturing processes and when
this size is exceeded, diseconomies of scale are experienced.
Answer:
Product features as a basis for product differentiation are generally not easy to
duplicate.
Answer:
Whenever the sources for competitive advantage are widely diffused across people,
locations, and processes in a firm, those sources will be costly to imitate.
Answer:
Employee compensation is an example of costly-to-duplicate economies of scope.
Answer:
Decisions made by other firms given the strategic choices of a particular firm define the
nature of the competitive dynamics that exist in an industry.
Answer:
Product differentiation is ultimately an expression of the creativity of individuals and
groups within firms and is limited only by the opportunities that exist, or that can be
created, in a particular industry and by the willingness and ability of firms to creatively
explore ways to take advantage of those opportunities.
Answer:
If a firm creates environmental pollution in the process of manufacturing its goods, the
pollution is known as an externality.
Answer:
Different physical standards can require a firm pursuing international opportunities to
change its current products or services to sell them into a nondomestic market.
Answer:
In general, due to the intangible nature of knowledge, firms are not able to use alliances
to learn from their competitors.
Answer:
A sustained competitive advantage can be competed away by strategic imitation if
competing firms face an important cost disadvantage in duplicating a successful firm’s
valuable resources.
Answer:
Transaction cost economics suggests that going it alone is not a substitute for strategic
alliances since they are best chosen only when other alternatives are not viable.
Answer:
Business level strategies are actions firms take to gain competitive advantages by
operating in multiple markets or industries simultaneously.
Answer:
All firms have almost entirely emergent strategies.
Answer:
A firm that earns below average accounting performance generally experiences a
competitive disadvantage.
Answer:
Economic methods of divisional performance in a diversified firm build on accounting
methods but adjust those methods to incorporate short-term investments that may
generate long-term benefits.
Answer:
If a firm has capabilities that are valuable and rare, then vertically integrating into
businesses that exploit these capabilities can enable the firm to gain at least a temporary
competitive advantage.
Answer:
The threat of existing competition tends to be high in an industry when firms are able to
meaningfully differentiate their products.
Answer:
Sometimes the value of cheating in a joint venture is sufficiently large that a firm cheats
even though doing so hurts the joint venture and forecloses future opportunities.
Answer:
The ultimate objective of the strategic management process is to enable a firm to
choose and implement a strategy that leads to a competitive advantage.
Answer:
Limiting the involvement of functional managers in strategy formulation can limit their
commitment to the chosen strategy.
Answer:
The existence of strategic relatedness between bidding and target firms is sufficient for
the equity holders of bidding firms to earn economic profits from their acquisition
strategies.
Answer:
A firm that chooses a cost-leadership business strategy focuses on gaining advantages
by reducing its costs to a level equal to all of its competitors.
Answer:
One of the least important productive inputs in almost all companies is labor and it is
unlikely that differential low cost access to labor can give a firm a cost advantage.
Answer:
The difference between the perceived benefits gained by a customer who purchases a
firm’s products or services and the full economic cost of these products or services is
the (Note: Porter was deleted from this edition)
A) value proposition.
B) cost advantage.
C) economic value.
D) competitive advantage.
Answer:
Which one of the following is not one of the reasons that Jensen and Ruback listed as to
why bidding firms might want to engage in merger and acquisition strategies?
A) to reduce production or distribution costs
B) to gain market power in product markets
C) to expand individual managers’ power within an organization
D) to eliminate inefficient target management
Answer:
Which of the following statements regarding firm mission is accurate?
A) While some firms have used their missions to develop strategies that create
significant competitive advantages, firm missions can hurt a firm’s performance as well.
B) Virtually all firms have used missions to develop strategies that create significant
competitive advantages, while very few firms have used missions that can hurt their
performance.
C) It is very rare for firms to be able to use their missions to develop strategies that
create significant competitive advantages, and most firm missions actually hurt their
performance.
D) Missions tend to have very little impact on a firm’s ability to create significant
competitive advantages.
Answer:
One survey indicated that the foreign experience of ________ percent of U.S. CEOs
was limited to vacation travel.
A) 14
B) 56
C) 48
D) 61
Answer:
While firms often alter the ________ of their products or services in order to implement
a product-differentiation strategy, the existence of product differentiation, in the end, is
always a matter of ________.
A) customer perceptions; objective properties
B) objective properties; price
C) customer perceptions; price
D) objective properties; customer perception
Answer:
According to the opportunism-based explanations of vertical integration, which of the
following would be the most appropriate type of compensation to support strategy
implementation?
A) cash bonuses for corporate performance
B) cash bonuses for group performance
C) stock options for individual performance
D) stock grants for individual performance
Answer:
In a functional structure, each of the major business functions is managed by a
A) functional manager.
B) divisional manager.
C) chief executive officer.
D) line manager.
Answer:
There are relatively few examples of pure ________ in today’s economy.
A) decentralized federations
B) transnational structures
C) centralized hubs
D) coordinated federations
Answer:
A firm implements a(n) ________ strategy when it diversifies its business operations
across country boundaries.
A) functional
B) operational
C) international
D) transnational
Answer:
________ is the ability to use organizational structure to facilitate coordination among
specific disciplines to conduct research.
A) Architectural competence
B) Cross-functional linking
C) Organizational coordination
D) Managerial leverage
Answer:
Firms implementing cost-leadership strategies will generally adopt a
A) multidivisional structure.
B) product divisional structure.
C) functional organizational structure.
D) matrix structure.
Answer:
Which of the following statements regarding the rarity of diversification is accurate?
A) If only a few competing firms have exploited a particular economy of scope, that
economy of scope can be rare.
B) A particular economy of scope can only be rare if no other firms are exploiting that
economy of scope.
C) A particular economy of scope can be rare even if many other firms are exploiting
that economy of scope.
D) If only a few competing firms have exploited a particular economy of scope, that
economy of scope can be rare but only if the firm is pursuing unrelated diversification.
Answer:
________ are payments to employees in a firm’s stock.
A) Stock grants
B) Cash grants
C) Flexibility grants
D) Option grants
Answer:
Cost-leadership and product-differentiation strategies are so widely recognized that they
are often called
A) common business strategies.
B) generic corporate strategies.
C) generic business strategies.
D) common corporate strategies.
Answer:
________ is an example of an ineffective and inconsequential response with the idea
that sometimes a bidding firm is interested in just a few of the businesses currently
being operated by the target firm.
A) A Pac Man defense
B) A Blue Man defense
C) A crown jewel sale
D) A golden parachute defense
Answer:
Which of the following statements about cost leadership and the threat of buyers is
accurate?
A) If buyers demand increased quality or service, cost leaders can absorb these costs
and may still have a cost advantage over the competition.
B) Being a cost leader encourages buyer backward vertical integration.
C) Firms pursuing a cost-leadership strategy are especially vulnerable to powerful
buyers who insist on low prices or higher quality and service from their suppliers.
D) Cost leaders are not able to absorb costs associated with buyers’ demands for
increased quality or service.
Answer:
Firms that have either recently begun operations in an industry or that threaten to begin
operations in an industry soon are considered to be ________ in the five forces
framework.
A) barriers to entry
B) new competitors
C) suppliers
D) buyers
Answer:
When a firm operates in multiple geographic markets simultaneously it is said to be
implementing a(n)
A) international diversification strategy.
B) product-differentiation strategy.
C) geographic market diversification strategy.
D) geographic market differentiation strategy.
Answer:
When compared to the strategy implementation responsibilities of senior executives in
U-form organizations, when implementing strategy, division general managers in
M-form organizations
A) tend to have to deal with less conflict.
B) have to compete for external capital funding.
C) tend to have to deal with substantially more conflict.
D) must cooperate with other divisions to exploit corporate economies of scope.
Answer:
The rarity of strategic alliances
A) depends solely on the number of competing firms that have already implemented an
alliance.
B) depends solely on whether or not the benefits that firms obtain from their alliances
are not common across firms in the industry.
C) depends not only on the number of competing firms that have already implemented
an alliance but also on whether or not the benefits that firms obtain from their alliances
are common across competing firms in the industry.
D) depends solely on the number of substitutes available for alliances.
Answer:
In the S-C-P model, ________ refers to the strategies that firms in an industry
implement.
A) structure
B) strategy
C) conduct
D) performance
Answer:
A firm’s marketing skills and teamwork as well as its cooperation among managers are
examples of
A) financial resources.
B) human resources.
C) physical resources.
D) capabilities.
Answer:
Overall, the average level of performance in an industry is likely to be highest when
A) the threat level of all five forces is high.
B) the threat level of rivalry and substitutes is low, but the threat level of suppliers,
buyers and new entrants is high.
C) the threat level of rivalry, substitutes and new entrants is high, but the threat level of
buyers and supplies is low.
D) the threat level of all five forces is low.
Answer:
A firm that is able to attract additional capital because debt holders and equity holders
will scramble to make additional funds available for it is likely earning
A) normal economic performance.
B) average accounting performance.
C) temporary advantage.
D) above normal economic performance.
Answer:
A sequential set of analyses and choices that can increase the likelihood that a firm will
choose a strategy that generates competitive advantages is the
A) organizational change process.
B) strategic management process.
C) mission statement process.
D) goal setting process.
Answer:
According to Coach’s website, the company has built a distinctive style and prestigious
image over the past 40 years to develop a reputation as “America’s preeminent designer,
producer, and marketer of fine accessories and gifts for women and men including
handbags, business cases, luggage and travel accessories, wallets, outerwear, eyewear,
gloves, scarves and fine jewelry.” Coach employs a multi-channel distribution channel
to reach its customers, including company-owned stores and boutiques in the stores of
prominent specialty retailers both within the United States and abroad, and the company
operates an online store. Consumers who purchase coach products are generally willing
to pay the premium price due to the superior quality of Coach’s products as well as the
perceived prestige of owning a Coach product. Coach stresses these features in its
advertising campaigns and regularly allows movies and television shows to favorably
feature Coach products in appropriate scenes. Over the last five years. Coach has
partnered with automobile manufacturers such as Lexus to produce automobiles with
Coach interiors. In an effort to expand its international reach, Coach intends to increase
its international distribution and is expanding into Japan through Coach Japan, Inc., a
joint venture with a local company that will allow Coach to control international
distribution and to maintain a consistent brand strategy domestically and abroad.
If Coach had an organizational structure that used cross-functional teams, the members
of which reported not only to their functional boss (i.e. the head of production) but also
to the head of the team, Coach could be said to be using which organizational structure?
A) product divisional
B) matrix
C) U-form
D) multi-domestic
Answer:
The second stage in the product life cycle is the ________ stage.
A) introduction
B) growth
C) maturity
D) decline
Answer:
Which of the following is a reason why it is important for students to study strategy and
the strategic management process?
A) Studying strategy and the strategic management process can give students tools to
evaluate the strategies of firms that may employ them.
B) It can be very important to a new hire’s career success to understand the strategies of
the firm that hired them and their place in implementing these strategies.
C) While strategic choices are generally limited to very experienced senior managers in
large organizations, in smaller and entrepreneurial firms many employees end up being
involved in the strategic management process.
D) All of the above.
Answer:
The threat of suppliers in the hardwood furniture can best be described as
A) low because there are a large number of suppliers selling an undifferentiated
product.
B) high because there are a large number of suppliers selling an undifferentiated
product.
C) moderate because the large number of suppliers is offset by the undifferentiated
products they are selling.
D) moderate because of the slowing growth rate in the industry and the commodity
nature of the products produced by suppliers.
Answer:
Often both parties in a failed alliance accuse each other of
A) adverse selection.
B) tacit collusion.
C) moral hazard.
D) holdup.
Answer:
Explain how strategic alliances are a substitute for exploiting economies of scope in
diversification.
Answer:
What is the connection between strategic alliances and real options?
Answer:
What is a harvest strategy?
Answer:
Identify the four generic industry structures and the specific strategic opportunities in
each of these industries.
Answer:
Identify four components of a firm’s organization that are relevant to the question of
organization and discuss what role they play in building a competitive advantage.
Answer:
Discuss the importance of compensation policies in diversified firms and identify the
CEO compensation package that most closely aligns the interests of the CEO with those
of stockholders.
Answer:
If there is one target firm with a current market value of $20,000 as a stand-alone entity
and five bidding firms, each of which has a current market value of $30,000 as a
stand-alone entity, and the value of the target firms and any of the bidding firms
combined is $60,000, estimate the price the bidding firms would be willing to pay for
the target firm and the return to stockholders of bidding and target firms when there is
strategic relatedness between firms.
Answer:
What are objectives, what role do they play in the strategic management process and
what differentiates high quality objectives from low quality objectives?
Answer:
Define product differentiation and discuss the role that customer perceptions play in
product differentiation.
Answer:
Discuss a firm’s competitive advantage. Identify when a firm has a competitive
advantage and distinguish between a temporary competitive advantage and a
sustainable competitive advantage.
Answer:
Identify four reasons why economies of scale can exist and four reasons why
diseconomies of scale can exist.
Answer:
Identify which bases of product differentiation are likely to be almost always easy to
duplicate, which can sometimes be costly to duplicate and which are usually costly to
duplicate and discuss under what conditions a base of differentiation is likely to be
costly to imitate and can be a source of sustained competitive advantage.
Answer:
Identify the responsibilities of the senior executive in an M-form organization and
discuss the three different roles in the office of the president and the responsibilities of
each role.
Answer:
Define the term “mission” and discuss how a firm’s mission can both positively and
negatively impact a firm’s performance.
Answer:
Discuss the similarities and differences of the organizational structures used by firms
pursuing a cost-leadership and a product-differentiation strategy and discuss the
importance of broad decision-making authority within a product-differentiation
strategy.
Answer:
Define the concept of a value chain.
Answer: