Chapter 1 Flashcards
Exam1
A firm has achieved ____ when it successfully formulates and implements a value-creating strategy.
legal and ethical core values
A competitive advantage
can be identified only if it has been unsuccessfully challenged by competitors.
Above-average returns are
returns in excess of what an investor expects to earn from other investments with a similar level of risk.
The strategic management process is
the full set of commitments, decisions, and actions required for the firm to achieve above-average returns and strategic competitiveness.
The primary drivers of hypercompetition are
the emergence of a global economy and rapid technological change.
All of the following are characteristic of the global economy EXCEPT
the increased use of tariffs to protect industries.
Essentially, the _________ has become one of the world’s largest markets with 700 million potential consumers.
European Union
The Chapter 1 Strategic Focus about Huawei illustrates
the challenge of the global economy where emerging market companies are moving aggressively into international markets.
The economic interdependence among countries as reflected in the flow of goods, services, financial capital and knowledge across country borders is defined as
globalization.
Globalization has led to
higher product quality
The “liability of foreignness” is the
overall risks of participating outside a firm’s domestic country when entering global competition.
Even for companies capable of succeeding in global markets, it is critical that they
remain committed to and strategically competitive in their domestic market.
The rate of technological diffusion is increasing. Which of the following was fastest in penetrating 25 percent of homes in the United States market?
Internet
New markets created by iPods, PDAs, and WiFi are a result of
disruptive technologies
Apple’s development of products such as the iPod and iPad (Chapter 1 Strategic Focus) is an example of
disruptive technologies
The ability to effectively and efficiently access and use information is
an important source of competitive advantage in virtually all industries.
The CEO of Ridgeway, Inc., realizes that the company’s survival depends on developing and acquiring knowledge. Which of the following actions by the CEO would be most consistent with this need?
planning extensive employee training and hiring educated and experienced employees.
Knowledge is composed of all the following EXCEPT
insight
In order to cope with hypercompetition, firms need to develop ____ through continuous learning.
strategic flexibility
All of the following are assumptions of the industrial organization (I/O) model EXCEPT
resources to implement strategies are firm-specific and attached to firms over the long-term.
The industrial organization (I/O) model argues that
the key factor in success is choosing the correct industry in which to compete.
Which of the following statements is most consistent under the I/O view? Performance of the firm is most directly attributable to
the profitability of the industry the firm competes in.
Firms use the five forces model to identify the ___________ of the industry as measured by its ____________.
attractiveness, profitability
Although McDonald’s is competing in an unattractive industry, it has improved its performance by focusing on product innovations and by enhancing existing facilities. This improved performance is best explained by
resource-based model
An investor is considering in which of two start-up companies she should invest. The investor has faith in the industrial organizational model of above-average returns, and she is using its concepts to make her decision. Both start-up companies propose to manufacture health-focused foods with such characteristics as 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 healthful lifestyles. Which firm will the investor feel is most consistent with the model of industrial organization?
RexRich Foods
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.
20,36
All of the following are resources of an organization EXCEPT
weak competitors in the industry.
All of the following are assumptions of the resource-based model EXCEPT
Capabilities are highly mobile across firms.
____ is a capacity for a set of resources to perform a task or an activity in an integrative manner.
A capability
When resources and capabilities serve as a source of competitive advantage for a firm, the firm has created a(n)
core competence
In the resource-based model, which of the following factors would be considered a key to organizational success?
skilled employees
To have the potential to become sources of competitive advantage, resources and capabilities must be non-substitutable, valuable, ____, and ____.
rare, costly to imitate
The resource-based model of the firm argues that
resources that are valuable, rare, costly to imitate, and non-substitutable form the basis of a firm’s core competencies.
The resource-based view of the firm
emphasizes that it is difficult to develop and sustain a competitive advantage based on resources alone.
The goal of the organization’s ____ is to capture the hearts and minds of employees, challenge them, and give shape to its intended future.
vision
The Annandale Academy of Fine Arts states in its brochure that “The Academy intends to become the dominant institution in the nation teaching traditional aesthetic values in traditional artistic media targeting both traditional and non-traditional students.” This pronouncement is most precisely a statement of organizational
mission
A firm’s mission
is a statement of a firm’s business in which it intends to compete and the customers it intends to serve.
The final responsibility for forming the organization’s mission lies with the
CEO
The development of a firm’s mission typically involves which of the following?
CEO and Top Managers
Organizational stakeholders include
employees
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.
power of each stakeholder
Capital market stakeholders include
shareholders
Dissatisfied capital market stakeholders may
a. Sell their stock.
b. Tighten loan covenants.
c. Seek to increase their power.
d. All of the above.
D. All of the above.
Greenleaf Property Management has been earning below-average returns for the last three years. Which of the following statements are true?
Greenleaf will not be able to minimally satisfy all stakeholders.
Product market stakeholders include the firm’s customers, and the principal concern of this stakeholder group is:
obtaining reliable products at the lowest possible price.
Generally speaking, product market stakeholders are satisfied when
a firm’s profit margin yields the lowest return to capital market stakeholders that is acceptable to them.
Before liquidating, Circuit City took several actions to try to satisfy its __________ stakeholders.
capital market
The organization’s role as a taxpayer is most important to ____ as stakeholders.
host communities
Although it closed stores, changed the top management team, and sought potential buyers, none of these actions resulted in outcomes that allowed Circuit City to meet the expectations of its ____________ stakeholders.
capital market
Organizational stakeholders are usually satisfied when
companies provide a dynamic, stimulating, and rewarding work environment.
Product market stakeholders include
suppliers
Refuge Nursing Homes, Inc., (RNH) has been highly profitable in the past 10 years, providing its investors returns in excess of direct competitors. 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?
RNH has prioritized the demands of capital market stakeholders over the demands of product market stakeholders.
A prominent national accounting firm runs television advertisements showing an accountant working alone late in the office on a client’s project, while clenching a long-stemmed rose in his teeth and grinning ecstatically. The message of the ad is that this firm’s accountants love their work. This ad seeks to convey a sense of the organization’s ____ to the viewers.
culture
The global economy, globalization, rapid technological change, and the increasing importance of knowledge are creating the need to
delegate strategic responsibilities to employees “closer to the action.”
The strategic leader’s work is characterized by
ambiguous decision situations which make effective decisions difficult to determine.
The profit pool is the
total profits earned in an industry along all points of the value chain.
The steps for identifying the profit pools in an industry include of all of the following except:
defining the competitors in the pool.
Analysis of the industry’s profit pool enables strategic managers to
locate the most promising areas of an industry’s value chain.
If McDonald’s were to map the profit pool in the quick-service restaurant industry, it would do all of the following EXCEPT
Select the strategy to use where the largest profit pools are located.
A major assumption about the strategic management process is that it is
rational
A business-level strategy describes
the firm’s actions to exploit its competitive advantage over rivals.
In a diversified firm, corporate-level strategy is concerned with
determining in which businesses to compete and how resources will be allocated between businesses.
PGG Mining is making a strategic decision whether to shut down a coal mine in Pennsylvania. It is important to consider that the decision
has ethical implications for organizational stakeholders.
It is well-known that the elected school board of a large city engages in unethical and illegal activities involving the awarding of major contracts. This behavior has existed for decades, even as the membership in the school board has changed over time. This behavior reflects
the core values of the school board as an organization.
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 are correct.
d. All are correct.
