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Indicate whether the statement is true or false.
1. The rate of technology diffusion has been steadily increasing over the last two decades.
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
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11. Resources are considered rare when they have no structural equivalent.
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
40. To implement a firm’s strategies, the firm takes actions to with the goal of achieving strategic competitiveness and
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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
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
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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:
a.
core values of hard work to gain advancement.
b.
unethical corporate culture.
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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.
59. ______ is a capacity for a set of resources to perform a task or an activity in an integrative manner.
a.
A capability
b.
A core competence
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c.
Sustainable competitive advantage
d.
Organizational intelligence
60. ______ provides the firm with new and up-to-date skill sets, which allow it to adapt to its environment as it encounters
changes.
a.
Strategic flexibility
b.
Continuous learning
c.
Knowledge
d.
The Internet
61. Firms use both the ______ and ______ models. In fact, these models complement each other in that one focuses
outside the firm while the other focuses inside the firm.
a.
industry; capability
b.
I/O; resource-based
c.
competition; competency
d.
industry; competency
62. 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 board of directors of experienced executives.
63. The interests of an organization’s stakeholders often conflict, and the organization must prioritize its stakeholders if 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.
vulnerability of organizational stakeholders
d.
social value of each stakeholder
64. SWOT stands for
a.
strategy, wealth, organization, and threats.
b.
success, weakness, opportunities, and taxes.
c.
strength, wealth, organization, and taxes.
d.
strengths, weaknesses, opportunities, and threats.
65. A ______ is an integrated and coordinated set of commitments and actions designed to exploit core competencies and
gain a competitive advantage.
a.
goal
b.
strategy
c.
tactic
d.
mission
66. The resource-based model argues that:
a.
all resources have the potential to be the basis of sustainable competitive advantage.
b.
resources alone can be a source of sustainable competitive advantage.
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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.
67. PGG Mining is making a strategic decision whether to shut down a coal mine in Pennsylvania. It is important to
consider that the decision:
a.
should be based solely on the results of the CEO’s approval of the mine’s general manager.
b.
has ethical implications for organizational stakeholders.
c.
need not be socially responsible if the firm is making below-average returns from the mine.
d.
All of these choices are important to consider.
68. Generally speaking, product market stakeholders are satisfied when:
a.
a firm achieves a balance between profit margins, costs paid to suppliers and prices set for customers.
b.
a firm’s profit margin yields an above-average return to its capital market stakeholders.
c.
the interests of the firm’s organizational stakeholders have been maximized.
d.
the interests of all stakeholders have been at least minimally satisfied.
69. Organizational stakeholders include:
a.
unions.
b.
host communities.
c.
employees.
d.
suppliers of capital.
70. A major assumption about the strategic management process is that it is:
a.
inspired.
b.
team-based.
c.
rational.
d.
inclusive.
71. Organizational culture refers to:
a.
the social energy that drives, or fails to drive, the organization.
b.
the complex set of ideologies, symbols, and core values that are shared throughout the firm.
c.
what people do when no one else is looking.
d.
All of these options are correct.
72. Organizational stakeholders are usually satisfied when
a.
their return on investment has been maximized.
b.
customers pay the highest sustainable price for the goods and services they receive.
c.
companies provide a dynamic, stimulating, and rewarding work environment.
d.
companies are paying the highest prices to suppliers.
73. The goal of the organization’s ______ is to point the firm in the direction of where it would like to be in the years to
come.
a.
vision
b.
mission
c.
culture
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d.
strategy
74. Knowledge is composed of all the following EXCEPT:
a.
insight.
b.
expertise.
c.
information.
d.
intelligence.
75. The “liability of foreignness” is the:
a.
inability of most U.S. managers to truly comprehend foreign cultures.
b.
political disadvantage that U.S. firms have when doing business abroad.
c.
overall risk of participating outside a firm’s domestic country when entering global competition.
d.
preference for “buying local,” which always puts foreign firms at a disadvantage when competing in the U.S.
market.
76. In a diversified firm, corporate-level strategy is concerned with:
a.
operating each individual business under the corporate umbrella.
b.
determining how each functional department of the firm will operate.
c.
determining in which businesses to compete and how resources will be allocated between businesses.
d.
coordinating the vision and mission of each subsidiary firm.
77. The I/O model is grounded in:
a.
anthropology.
b.
psychology.
c.
economics.
d.
accounting.
78. When resources and capabilities serve as a source of competitive advantage for a firm, the firm has created a(n):
a.
strategic mission.
b.
inspiring vision.
c.
core competence.
d.
sustainable market niche.
79. Firms use the five forces model of competition to identify the ______ of the industry. It is measured by its _______.
a.
size; number of competitors.
b.
globalization; export percentages.
c.
hypercompetition; technology diffusion.
d.
attractiveness; profitability.
80. A company’s ability to acquire knowledge is:
a.
less important in the 21st century than in previous periods of business history.
b.
an important source of competitive advantage in virtually all industries.
c.
not considered an asset or resource for businesses.
d.
only important in high technology industries.
81. Successful strategic leaders are:
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a.
committed to helping the firm to create value for all stakeholder groups.
b.
committed to nurturing those around them.
c.
decisive.
d.
All of these options are correct.
82. Refuge Nursing Homes, Inc., (RNH) has been highly profitable in the past 10 years, providing its investors higher
returns than those earned by its direct competitors’ investors. RNH has a reputation for providing high-paying managerial
and hourly-employee jobs. However, recent investigations have revealed that the nursing home residents have been
provided substandard care, including non-nutritious and unappetizing meals, non-functional medical equipment, and
inadequate patient-care staffing. Which statement best describes the situation?
a.
RNH has been earning below-average returns, so it has had to prioritize the demands of its various
stakeholders.
b.
RNH has prioritized the demands of capital market stakeholders and organizational stakeholders, over the
demands of product market stakeholders.
c.
RNH has earned above-average returns and so has satisfied the needs of all relevant stakeholders.
d.
RNH has been attempting to minimally satisfy the demands of all of its stakeholders.
83. The firm’s ______ provide the foundation for choosing one or more ______ and deciding how to implement them.
a.
analyses; strengths
b.
abilities; strengths
c.
analyses; strategies
d.
abilities; strategies
84. The Chambers of Commerce of cities and towns often implore citizens to buy from local businesses. This is because
the organization’s role as a taxpayer is most important to ______ as stakeholders.
a.
major suppliers of capital
b.
shareholders
c.
host communities
d.
unions
85. A firm has achieved ______ when it successfully formulates and implements a value-creating strategy.
a.
strategic competitiveness
b.
a permanently sustainable competitive advantage
c.
substantial returns
d.
legal and ethical core values
86. Effective strategic leaders are chosen based on:
a.
their capabilities and accumulation of human capital over time.
b.
their single-minded focus on strategy formation.
c.
their aptitude for strategy implementation.
d.
their focus on innovation.
87. The industrial organization (I/O) model argues that:
a.
the key factor in success is choosing the correct industry in which to compete.
b.
the firm’s internal resources and capabilities represent the foundation for development of a value-creating
strategy.
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c.
the key to earning above-average returns is strategic flexibility.
d.
the internal structure of the organization must match the industry in which it competes for it to earn above-
average returns on investment.
88. Research shows that approximately ______ percent of a firm’s profitability is explained by the industry in which it
competes, whereas ______ percent is explained by the firm’s characteristics and actions.
a.
90; 10
b.
60; 40
c.
36; 20
d.
20; 36
89. :A business-level strategy describes
a.
the businesses in which the company intends to compete.
b.
all policies and procedures used in functional departments.
c.
the business unit’s actions to exploit its competitive advantage over rivals.
d.
a firm’s resources, intent, and mission.
90. 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.
every firm in an industry controls similar strategically relevant resources.
91. Above-average returns are;
a.
higher profits than the firm earned the previous year.
b.
higher profits than the industry averaged 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.
returns in excess of what an investor expects to earn from other investments with a similar level of risk.
92. ______ has become the second-largest economy in the world.
a.
The United States
b.
The European Union
c.
Japan
d.
China
93. A firm’s mission:
a.
is a statement of a firm’s business in which it intends to compete and the customers 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.
94. The culmination of the strategic management process is:
a.
performance.
b.
strategy implementation.
c.
strategy formulation.
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d.
analysis.
95. ______ should establish a firm’s individuality and should be inspiring and relevant to all stakeholders.
a.
A strategy
b.
A vision
c.
A mission
d.
A goal
96. Product market stakeholders include the firm’s customers, and the principal concern of this stakeholder group is:
a.
maximizing the firm’s return on investment.
b.
receiving the highest-quality services in the industry at any price.
c.
obtaining reliable products at the lowest possible price.
d.
increasing the profitability of the firm.
97. According to Hitt, the final responsibility for forming the organization’s mission lies with the:
a.
CEO.
b.
top-management team.
c.
employees.
d.
organization’s stakeholders.
98. In smaller, new venture firms, returns are sometimes measured in terms of:
a.
return on assets.
b.
return on equity.
c.
return on sales.
d.
the amount and speed of growth.
99. Which of the following statements about organizational knowledge is correct?
a.
Knowledge is an intangible resource.
b.
The importance of knowledge is increasing.
c.
The value of knowledge as a proportion of shareholder value is increasing.
d.
All of these options are correct.
100. Before liquidating during a bankruptcy, a company will take several actions to try to satisfy its ______ stakeholders.
a.
capital market
b.
product market
c.
organizational
d.
governmental
101. In order to cope with hypercompetition, firms need to develop ______ through continuous learning.
a.
competitive resilience
b.
strategic flexibility
c.
strategic power
d.
competitive dominance
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