TEK017 Exam January 2022_publish_on_canvas.pdf

Question 1

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.

Answer 1

True

Question 2

The more stable is a firm’s external environment, the more likely it is that the firm’s resources and capabilities, rather than customer needs, will offer a more stable foundation for strategy.

Answer 2

False

Question 3

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.

Answer 3

False

Question 4

Applying real options thinking to industry analysis implies that industry attractiveness is less about an industry’s profit potential and is more concerned with the range of strategic opportunities that an industry offers.

Answer 4

True

Question 5

Honda Motor Company, Microsoft, and 3M Corporation are examples of companies whose corporate strategies have been focused on satisfying a clearly defined customer need.

Answer 5

False

Question 6

The failure of Eastman Kodak points to the difficulties that companies face in acquiring the resources and capabilities needed to adapt to a radical technological change that transforms their core business.

Answer 6

True

Question 7

One indicator of the growing importance of intangible resources is the widening difference between firms’ market capitalization and the balance sheet value of their assets.

Answer 7

True

Question 8

When component suppliers increasingly control automotive technology, the automotive industry becomes more attractive.

Answer 8

False

Question 9

For a resource or capability to be a source of competitive advantage, two conditions must be present: scarcity and relevance.

Answer 9

True

Question 10

Little excess capacity in an industry is associated with great rivalry between firms in the industry.

Answer 10

False

Question 11

Superior capability needs to be based upon superior resources.

Answer 11

False

Question 12

According to Prahalad and Hamel, a company’s core competences are those capabilities that are fundamental to its strategy and to its performance.

Answer 12

True

Question 13

Porter’s value chain is a useful tool for understanding the sequence of activities that a firm performs but is of limited value in mapping a firm’s resources and capabilities.

Answer 13

False

Question 14

According to Mintzberg, intended strategy and realized strategy largely overlap.

Answer 14

False

Question 15

When a firm’s capabilities are based upon team effort rather than the skills of star employees, the returns from those capabilities accrue to employees rather than to shareholders.

Answer 15

False

Question 16

Corporate balance sheets do not include human resources, apart from this major exception balance sheets offer a comprehensive picture of a firm’s resources.

Answer 16

False

Question 17

When a firm identifies a resource or capability that is a key weakness, the strategic response should be to upgrade that resource or capability through investment.

Answer 17

False

Question 18

Companies with the highest ratios of market value to book value tend to be those with valuable brands or valuable proprietary technologies.

Answer 18

True

Question 19

‘Organizational capability’ and ‘organizational competence’ refer to two concepts which, although related, are different.

Answer 19

False

Question 20

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:

a. Political turbulence: in the early 20th century the collapse of the Austro-Hungarian and Ottoman empires, in the 21st century the ethnic and religious strife and the rise of populism

b. Technology: in the 20th century electricity, the telephone and the automobile; in the 21st century the internet and mobile communication

c. Popular disaffection with big business: in the 20th century opposition to the concentration of economic power in monopolies and trusts, in the 21st the inequality associated with the capitalist economy

d. Corporate social responsibility: in the 20th century outrage against unsafe and unhealthy products and worker exploitation; in the 21st century concerns over environmental irresponsibility and exploitation of third world workers.

Answer 20

b

Question 21

The main problem in using a company’s balance sheet to identify its resources and capabilities is that:

a. Human resources are not included
b. Intangible resources are mis-valued, and some are excluded
c. Both (a) and (b)
d. Neither (a) nor (b)

Answer 21

c. Both (a) and (b)

Question 22

Achieving social legitimacy requires that businesses should:

a. Seek permission from the local community to operate
b. Adapt to societal pressures
c. Follow accepted ethical codes
d. Replace shareholder value maximization by stakeholder value
maximization

Answer 22

b. Adapt to societal pressures

Question 23

It is better for an investment bank to have its trading capabilities based upon proprietary trading systems than upon the skills of a few star traders:

a. Because star traders are in a powerful position to negotiate pay packages which appropriate the major part of the profit they create
b. Because advanced software is better than human intuition at identifying mispricing in financial markets
c. Because star traders are difficult to manage and can easily become “rogue traders”
d. It’s difficult to motivate traders once they have earned their first few million

Answer 23

a. Because star traders are in a powerful position to negotiate pay packages which appropriate the major part of the profit they create

Question 24

Strategy needs to take account of both the requirements of the firm’s external environment and the firm’s own resources and capabilities. Resources and capabilities rather than requirements of the external environment offer a more stable basis for strategy formulation when:

a. The firm is engaged in the exploitation of natural resources such as petroleum or metal
b. The external environment is in a state of flux
c. When the firm is supplying producer goods rather than consumer goods
d. When the firm is a multinational corporation

Answer 24

b. The external environment is in a state of flux

Question 25

Intangible resources tend to be more valuable than tangible resources because:

a. They are easier to acquire
b. They are cheaper to acquire
c. They are more likely to provide sustainable competitive advantage
d. All of the above

Answer 25

c. They are more likely to provide sustainable competitive advantage

Question 26

The statement: ‘Economies of scope in shared resources do not provide a sufficient justification for diversification’ is:

a. Correct: Cost savings form shared resources are of little value unless there are also organizational capabilities that can be transferred between the businesses
b. Correct: to justify diversification, economies of scope needs to be supported by transactions costs in the market for the particular resources
c. Incorrect: economies of scope are sufficient grounds for diversification on their own
d. Incorrect: the benefits from economies of scope need to exceed the administrative costs of the corporate HQ

Answer 26

b

Question 27

There are two primary sources of profit (or ‘economic rent’):

a. Market power and superior resources
b. Market power and competitive advantage
c. Competitive advantage and disequibrium rents
d. Cost advantage and differentiation advantage

Answer 27

a. Market power and superior resources

Question 28

Two advantages of the M-form organization are:

a. Allowing decision-making to be closer to the markets (dispersed around the organization) and centralizing high-frequency decision making
b. Allowing decision-making to be closer to the markets (dispersed around the organization) and decentralizing high-frequency decision making
c. Making the top management team responsible for coordination across the company and decentralizing high-frequency decision making
d. Making the top management team responsible for coordination across the company and centralizing high-frequency decision-making

Answer 28

b

Question 29

Successful strategy-making involves:

a. Both central planning and decentralized adaptation
b. Mainly central planning
c. Mainly decentralized planning
d. No planning

Answer 29

a. Both central planning and decentralized adaptation

Question 30

A functioning market for components is most likely associated with:

a. A low threat from substitutes
b. A high threat of substitutes
c. A low threat from entrants
d. A high threat from entrants

Answer 30

d

Question 31

Forward integration means:

a. Gaining control of distributors
b. Gaining control of retailers
c. All of the above
d. None of the above

Answer 31

c. All of the above

Question 32

When an industry is subject to externally generated changes, the firms which are most likely to establish a competitive advantage are:

a. Those with the highest market share
b. Those that that respond most quickly to the change and have the resources and capabilities that are most closely aligned to the emerging success factors
c. Those with the greatest capacity for innovation
d. A combination of (a), (b), and (c)

Answer 32

b. Those that respond most quickly to the change and have the resources and capabilities that are most closely aligned to the emerging success factors

Question 33

Despite the heterogeneity of the goods and services supplied by General Electric (GE), we can consider GE’s diversification to be into strategically related industries because:

a. Most products are supplied under the GE brand
b. It applies similar general management capabilities across all its businesses
c. It operates a balanced portfolio of cash generating and cash using businesses
d. It is continually looking for opportunities to generate additional revenues from cross-selling and product bundling

Answer 33

b. It applies similar general management capabilities across all its businesses