Management, 3e (Hitt)
Chapter 4 Strategic Management
1) A firm’s ability to provide value to customers that exceeds what competitors can provide is
called competitive advantage.
2) A pizzeria in Milford always delivers its orders within 15 minutes. The other pizzerias have
failed in their efforts to do so. This is an example of a comparative advantage.
3) Brand recognition can last a long time and may take years to deteriorate.
4) Statements of strategic intent are typically longer than mission statements.
5) The components of a mission statement include company philosophy, customers and markets,
and geographic focus.
6) The general environment’s effects on a business are very direct.
7) Managers need to focus on two basic dimensions of the technology environment: product and
process changes.
8) Process technological changes are those that lead to completely new products as well as new
features and capabilities for existing products.
9) In an industrial company, such as a manufacturer of automobiles, employees are its primary
assets.
10) As a dimension of the external business environment in a foreign country, physical forces
include rules, policies, and enforcement processes.
11) The balance of power between a firm and its customers affects its ability to compete
effectively and earn above-average returns.
12) The supply chain consists of a set of key activities that directly produce (or support the
production of) the products or services that a firm offers to its customers.
13) According to Michael Porter, primary activities facilitate the creation of a product or service
and its transfer to the customer.
14) The strengths and weaknesses of a company’s business partners throughout the entire value
network have little effect on the competitive position and advantage of the firm.
15) In SWOT analysis, strengths and weaknesses are internal characteristics, whereas,
opportunities and threats are external characteristics.
16) Unless an organization translates its strategic intent and mission into specific goals, they will
remain statements of good intentions and unrealized achievements.
17) Corporate-level strategy is the most important for achieving a competitive advantage.
18) A firm can limit its strategic scope by focusing on a specific customer segment.
19) A firm can use a multipoint competitive strategy to compete with firms across markets by
using strengths in one market to overcome weaknesses in another market.
20) The key to successful strategy implementation is having an internal organization that is
consistent with and supportive of the strategy.
21) The concept of ________ is the ability of a firm to provide value to customers that exceeds
what competitors can provide.
A) strategic management
B) distinctive competence
C) competitive advantage
D) core competence
22) Nobelle, a chocolatier based in France, produces candy containing exotic ingredients from
the rain forests of Brazil. The ingredients are provided by a single supplier who has an exclusive
contract with Nobelle. The chocolate manufacturer thus has a great deal of power over the
market. This is an example of ________.
A) strategic management
B) distinctive competence
C) competitive advantage
D) strategic vision
23) Crystal is a vintage champagne, meaning that the champagne is made in the best years for
wine production and all grapes used to make the wine are harvested in the same year. No other
champagne can match this quality. Crystal has a ________.
A) consistent advantage
B) competitive advantage
C) strategic vision
D) production advantage
24) Which one of the following is necessary if a firm is to maintain a competitive advantage?
A) winning consistently over the short term in a competitive situation
B) charging a higher price than what competitors charge
C) reproducing the successful actions of competitors
D) providing products and services of a superior value than those of competitors
25) Aliva, a bottled water company, places a premium on the marketing and sales of its products
by offering purified water from the natural streams of the Himalayas. This way, compared to
other companies, it provides superior value. This is an example of ________.
A) open source advantage
B) absolute advantage
C) first-mover advantage
D) comparative advantage
26) Products of a company would ________ when no other firms can have the capabilities
needed to provide the same quality and quantity of products and services.
A) have no market value
B) be a rarity
C) be difficult to imitate
D) be substituted easily
27) Which of following is a requirement for a product to have competitive advantage over
others?
A) durability
B) responsiveness
C) rarity
D) assurance
28) ________ refers to the ability to fulfill a customer’s need by alternative means.
A) Rearrangement
B) Segmentation
C) Elimination
D) Substitution
29) Which of the following best describes a situation where there is a high potential for
substitutes?
A) the unique and highly valued flavor, including the taste and texture, of Godiva chocolates
B) the superior after-sales service offered by Toyota to customers of its Lexus brand of
automobiles
C) Consumers can choose between soda, water, iced tea and many other options to quench their
thirst.
D) Windows software is used by a wide variety of customers, from household users to giant
industries.
30) If a firm can earn ________, the firm is creating value for its shareholders.
A) diminishing returns
B) above-average returns
C) marginal returns
D) market-average returns
31) A(n) ________ provides a view of the firm over the long term and what it should achieve in
the future.
A) strategic vision
B) annual report
C) differentiated leadership strategy
D) multipoint competitive analysis
32) Which of the following is the first step in the strategic management process?
A) determining strategic vision
B) securing interim financing
C) establishing objectives
D) formulating strategy
33) A(n) ________ articulates the fundamental purpose of the organization and often contains
several components.
A) income statement
B) annual report
C) statement of faith
D) mission statement
34) By stating its intention to “To be the world’s leading sports and fitness company,” Nike is
articulating its ________.
A) action plan
B) mission statement
C) global forecast
D) marketing target
35) Which one of the following is NOT included in a firm’s mission statement?
A) company philosophy
B) sources of revenues
C) principal products or services
D) customers and markets
36) Which of the following best illustrates the assertion that “demographics provide important
data about the population, but societal values translate that data into business implications”?
A) Many North American steel manufacturers were driven into bankruptcy because they were
slow to adopt an important new process technology.
B) The construction industry tends to have higher peaks and lower valleys than the overall
national economy.
C) New pollution laws significantly increased the operating costs of coal-burning power plants.
D) Baby boomers will be reaching retirement age, however, society’s idea of retirement has
expanded to include the pursuit of second careers. Therefore, companies will be able to hire
experienced workers at open-market prices.
37) ________ are those that lead to new features and capabilities in existing products or to
completely new products.
A) Sociocultural changes
B) Economic changes
C) Process technological changes
D) Product technological changes
38) ________ typically relate to alterations in how to make products or how to manage
enterprises.
A) Economic changes
B) Process technological changes
C) Product technological changes
D) Sociocultural changes
39) Which of the following is true about the economic forces in the external environment?
A) All economic forces affect all organizations equally.
B) In many service companies, such as consulting and law firms, the company’s primary assets
are its people.
C) Changes in the economy are usually temporary and are not long-term, structural changes.
D) Structural changes significantly affect the current and future dynamics of economic activity.
40) In Albany, Georgia, the bars and restaurants built outdoor seating areas after the city passed
laws banning indoor smoking to accommodate customers who smoked. To what dimension of
the general environment were the bar and restaurant owners reacting?
A) political-legal forces
B) economic forces
C) institutional forces
D) sociocultural forces
41) When conducting an environmental analysis in a foreign country, two additional dimensions
of the external environment that are typically examined are ________ environmental forces.
A) commercial and industrial
B) military and governmental
C) institutional and physical
D) educational and cultural
42) Federal spending pushes the federal deficit up, causing an increase in interest rates. What is
the LEAST likely result of this occurrence?
A) unemployment increases
B) it becomes more expensive to borrow money
C) businesses expand at a slower rate
D) consumer spending increases
43) In a global context, ________ include the rules, policies, and enforcement processes that
influence the behavior of individuals and organizations within a country.
A) physical forces
B) institutional forces
C) sociocultural forces
D) technological forces
44) ________ involve a country’s infrastructure, such as roads, telecommunications, air links,
arable land, deep water harbors, mineral resources, forests, and climate.
A) Physical forces
B) Institutional forces
C) Sociocultural forces
D) Geopolitical forces
45) Which of the following would lead to higher profits for an industry?
A) price-based competition
B) many new entrants
C) fragmented customers
D) few suppliers
46) Which of the following would lead to lower profits for an industry?
A) low entry barriers
B) many suppliers
C) few substitutes
D) quality-based competition
47) Action Shoes is a company that manufactures shoes. It has a lot of competitors in the market.
However, it only builds its strength around market segments that the other companies avoid. It
can be said that Action Shoes understands the ________ among its competitors.
A) substitutes
B) suppliers
C) new entrants
D) nature of rivalry
48) A newly established company, The Malt Company, wishes to enter the beer market in
Country A by building a new brewery there. Many companies already have breweries in Country
A. These companies spend heavily on advertising, which Malt is finding difficult to afford. This
is an example of ________.
A) low costs of switching
B) barriers to entry
C) substitution
D) high costs of switching
49) A firm’s value chain consists of ________.
A) primary and support activities
B) primary and secondary activities
C) observable and surreptitious activities
D) regional and global activities
50) According to Michael Porter, primary value chain activities involve ________.
A) planning, finance, accounting, legal activities, and government relations
B) acquiring, training, evaluating, compensating, and developing human resources
C) expertise and the tools or equipment related to the exercise of that expertise
D) creating a product or service and distributing it to customers
51) Redeem is a local microbrewery that is working on its methods of advertising, promoting,
and selling its product. This is an example of ________.
A) primary activities in the value chain
B) support activities in the value chain
C) procurement activities in the value chain
D) service activities in the value chain
52) In the value chain, ________ facilitate the creation of the product or service and its transfer
to the customer.
A) primary activities
B) tertiary activities
C) support activities
D) procurement activities
53) The ________ of a product or service is a function of how many customers are willing to
purchase the product or service and how much they are willing to pay for it.
A) market value
B) relative value
C) absolute value
D) intrinsic value
54) The ________ component of the value chain consists of activities that are designed to
receive, store, and then disseminate various inputs related to the firm’s products or services.
A) procurement
B) inbound logistics
C) operations
D) service
55) Activities that transform inputs into the products and services of the firm, as well as
maintenance of machines, are part of the ________.
A) operations component of the value chain
B) procurement component of the value chain
C) inbound logistics component of the value chain
D) outbound logistics component of the value chain
56) In the value chain, ________ include activities that move the product or service from the
firm to the customers.
A) technology developments
B) services
C) marketing and sales
D) outbound logistics