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TESTBANK: CHAPTER 16
Current Trends in Strategic Management
True/False Questions
1. The business environment of the 21st century has been characterized by turbulence and
unpredictability.
[See p.410]
2. The key feature of the “second economy” that economist Brian Arthur describes is that human
decision makers have been replaced by machines.
[See p.411]
3. The growth of the freelance economy in which taxi services, short-term accommodation, and home
maintenance is provided by self-employed individuals rather than by firms has little to do with
technology, it’s mainly due to the preferences of individuals for the flexibility of self-employment over
the rigidities of a full-time employment.
[See p.411]
4. The emergence of a multipolar world where the US no longer exercises a dominant role is a force for
stability in an otherwise unstable global business environment.
[See p.413]
5. The rise of populist political parties (UK Independence Party, France’s Front Nationale, Greece’s
SYRIZA) and of populist politicians such as Donald Trump in the US and Beppo Grillo in Italy is a
reflection of the declining legitimacy of the capitalist market economy.
[See p.413]
6. Of the 95 Chinese companies that were members of the Fortune Global 500 in 2015, few were state-
owned enterprises.
[See p.413]
7. The experiences of British retailer Marks & Spencer and chocolate maker Cadbury confirms the fact
that commitment to social responsibility and the interests of employees results in a more responsive
and adaptable business enterprise.
[See p.415]
8. The poor performance of the shares of Goldman Sachs after the 2008 financial crisis, News Corp.
after the phone hacking scandal, and VW after its emissions cheating scandal provide support to the
argument that maintaining legitimacy is critical to an organization’s success.
[See p.413]
9. A growing source of competition to western companies has been new computers from emerging
market countries which have made the transition from supplying OEM products to Western
manufactures and distributors to providing products under their own brand names.
[See p.411]
10. The growing interconnectedness of the world economy and human society cannot be regarded as a
contributing factor to the increasing volatility and unpredictability of global environment of business.
[See pp.412-413]
11. Among the mature industrialized nations, three major societal issues are impacting businesses:
equity, ethics, and environmental sustainability
[See p.413-415]
12. For shareholder value maximization to be a helpful goal for top management it needs to focus not
on stock market value but on the fundamental drivers of value.
[See p.415]
13. In a more complex business environment where companies must pursue multiple dimensions of
competitive advantage is consistent with Jim Collins’ recommendation that companies should seek to
be “hedgehogs” rather than “foxes.” (Drawing upon the categorization of intellectuals made by Isaiah
Berlin.)
[See p.416]
14. Companies such as Toyota, Wal-Mart, 3M, and Samsung have sustained strong performance over
long periods of time by basing their competitive advantage on a single core competence.
[See p.416]
15. “Managing real options” means that firms should take a greater interest in how share option
packages are managed, to achieve the best value for shareholders
[See pp.416-417]
16. The complementarity of management practices implies that the effectiveness of a particular
management practice depends upon how it firs with all the other management practices of the
company.
[See p.418]
17. Complementarity research should not be used by a company as an excuse for not adopting a best
practice such as a “six-sigma” quality management systems “lean production” manufacturing
processes, or a “360-degree” employee appraisal system.
[See pp.418-419]
18. Complexity theory predicts that complex, adaptive systems rarely have the capacity to self-
organize—to avoid chaos hierarchical control is essential.
[See p.418]
19. Applications of complexity thinking to management suggest that top management should set rules
governing the interaction of organizational members and their expected behaviour, and relinquish
direct supervisory control
[See p.418]
20. If companies are to put in place the capabilities needed to build multiple layers of competitive
advantage, their organizational structures need to become more complex.
[See pp.419-420]
21. Research into leadership generally supports the view that complex organizations facing uncertain
environments require leaders that are decisive decision makers rather than humble; empathetic
individuals endowed with social and emotional intelligence.
[See pp.422-423]
Multiple Choice Questions
22. The first two decades of the 20th and 21st centuries were similar in terms of factors that were
reshaping the business environment. The most significant of these common factors were:
[See p.410]
23. According to the economist Brian Arthur, the “second economy” comprises:
[See p.411]
24. According to systems theory, high levels of interconnectedness can lead to:
[See p.412]
25. The first 16 years of the 21st century have been characterized by unprecedented turbulence in the
global economy, politics, and society. Two reasons for thinking that this turbulence may continue into
the future are:
[See pp.412-413]
26. Digital technologies are increasing the intensity of competition in the markets for electronic
hardware because they are causing:
[See pp.410-411]
27. The growing number of takeovers of Western companies by Chinese and Indian companies reflects:
[See p.411]
28. A major implication of corporate scandals, inequality, and environmental sustainability implies that
company executives need for firm strategy to pay greater attention to:
[See pp.413-415]
29. Achieving social legitimacy requires that businesses should:
[See p.413]
30. The impact of the 2008/9 financial crisis on financial service firms suggests that loss of legitimacy
is likely to have the following adverse effect:
[See p.413]
31. During 2000-2013, the ratio of CEO compensation to the earnings of production workers among
US companies averaged:
[See p.414
32. The most effective remedy for the problems that have arisen from top managements’ pursuit of
shareholder value is likely to be:
[See pp.415-416]
33. If competition, market turbulence, and accelerating technological change are increasing the pace at
which firms’ competitive advantage is eroded, to sustain competitive advantage companies need to:
[See p.416]
34. During turbulent times, real options are increasingly important sources of value. The following are
strategic measures can create option value for a firm:
[See pp.416-417]
35. Replacing mass manufacturing by lean manufacturing:
[See p.418-419]
36. Complex biological and social systems demonstrate the capacity for self-organization. Self-
organizing systems require:
[See pp.421-422]
37. An implication of complexity theory for the leadership of business enterprises is:
[See p.420
38. As organizations and their environments become more complex and less predictable, the kind of
leadership that fosters effective organizational adaptation is increasingly characterized by:
[See pp.422-423]
39. According to the predictions of complexity theory, which of the following managerial actions is not
likely to promote rapid evolutionary adaptation by an organization?
[See pp.420-422]
40. Real options theory may change strategic management by:
[See pp.416-417]
41. Organizational identity refers to:
[See p.421]
