CHAPTER 5: STRATEGIC MANAGEMENTMultiple Choice Questions

1. The concept of _____ is the ability of a firm to provide value to customers that exceeds what competitors can provide. a. strategic managementb. distinctive competencec. competitive advantaged. comparative advantage

2. Which one of the following is necessary if a firm is to maintain a competitive advantage?a. winning consistently over the long term in a competitive situationb. charging a lower price than what competitors chargec. reproducing the successful actions of competitorsd. providing products and services of a superior quality to those of competitors

3. Achievement of which of the following will usually give a competitive advantage?a. rarity, durability, non-substitutability, and tangibilityb. responsiveness, rarity, empathy, and durabilityc. superiority, non-substitutability, inimitability, and rarityd. superiority, assurance, non-substitutability, and durability

4. Dom Pérignon is only made during the best years and all grapes used to make it are harvested during the same year. As such, it is a “vintage” champagne, which has achieved a _____. a. strategic advantageb. competitive advantagec. comparative advantaged. distinctive advantage

5. Which of the following best describes a situation where there is a high potential for substitutes?a. A car manufacturer offers a wide range of vehicles at different prices.b. The trans-Atlantic airline routes are serviced by a great many different carriers.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.

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6. Which one of the following is NOT included in a firm’s mission statement?a. company philosophyb. customers and marketsc. principal products or servicesd. sources of revenues

7. A _____ provides a view of the firm over the long term and what it should achieve in the future. a. strategic visionb. mission statementc. differentiated leadership strategyd. multipoint competitive analysis

8. By stating its intention to have “Kellogg’s Products on Every Table in the World,” Kellogg’s is articulating its _____.a. action planb. strategic visionc. global forecastd. marketing target

9. Which of the following is NOT a step in the strategic management process?a. determining strategic visionb. securing interim financingc. establishing objectivesd. formulating strategy

10. A mission statement articulates the fundamental purpose of the organization and often contains all of the following EXCEPT _____.a. competitive profilesb. company philosophyc. obligations to shareholdersd. commitment to employees

11. In order to determine what strategy to pursue, a company must analyze its _____.a. internal capabilitiesb. external environment c. internal resourcesd. all of the above

12. Within a global context, _____ include the rules, policies, and enforcement processes that influence the behavior of individuals and organizations within a country. a. physical forces

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b. institutional forcesc. sociocultural forcesd. geopolitical forces

13. _____ consist primarily of the demographics and cultural characteristics of the societies in which an organization operates. a. Open-market forcesb. Sociocultural forcesc. Environmental forcesd. Technological forces

14. _____ are NOT considered one of the dimensions of a firm’s general environment.a. Primary forcesb. Economic forcesc. Technological forcesd. Sociocultural forces

15. 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. The longevity of the Japanese when combined with their low birthrate means that

fewer and fewer Japanese workers will have to support more and more retirees.b. Global warming and rising gas prices will increase the demand for hybrid cars.c. Falling birthrates and modestly increasing education standards are expected to

lead to a shortage of qualified technicians in the United States.d. Baby Boomers will be reaching retirement age by 2010; 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.

16. In a certain city, the bars and restaurants built outdoor seating areas prior to the city passing laws banning indoor smoking of tobacco products. To what dimension of the general environment were the bar and restaurant owners reacting?a. political-legal forces b. economic forcesc. institutional forcesd. sociocultural forces

17. When conducting an environmental analysis in a foreign country, two additional dimensions of the external environment are typically examined: _____.

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a. commercial and industrial forcesb. military and governmental forcesc. institutional and physical forcesd. educational and cultural forces

18. Federal spending pushes the federal deficit up, causing an increase in interest rates. What is the LEAST likely result of this occurrence?a. unemployment increasesb. it becomes more expensive to borrow moneyc. businesses expand at a slower rated. consumer spending rises

19. Which of the following is not one of the five forces in the industry and competitive environment identified by Porter?a. substitutesb. alliancesc. new entrants d. the nature of rivalry

20. Within the context of Porter’s Five Forces, all of the following EXCEPT _____ are dimensions that will lead to lower profits.a. few suppliersb. price-based competitionc. fragmented customersd. low entry barriers

21. The XYZ Company wishes to enter the beer market in Country A by building a new brewery there. Many companies already have breweries in Country A. Furthermore, a new brewery will be very expensive to build. Which of the following is the obstacle that makes it difficult for The XYZ Company to start this business in Country A?a. low costs of switchingb. high costs of switchingc. low barriers to entryd. high barriers to entry

22. A firm’s value chain consists of _____.a. primary and support activitiesb. primary and secondary activitiesc. observable and surreptitious activitiesd. regional and global activities

23. According to Michael Porter, primary value chain activities involve _____.

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a. planning, finance, accounting, legal activities, and government relationsb. acquiring, training, evaluating, compensating, and developing human resourcesc. expertise and the tools or equipment related to the exercise of that expertised. creating a product or service and distributing it to customers

24. A local microbrewery is working on its methods of advertising, promoting, and selling its product. This is an example of _____.a. primary activities in the value chainb. support activities in the value chainc. procurement activities in the value chaind. service activities in the value chain

25. 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 valueb. relative valuec. absolute valued. intrinsic value

26. In the cut flower industry, fresh flowers must be available to customers as soon as possible after they have been harvested. This places a premium on which of the primary activities in the value chain? a. operations and serviceb. procurement and managementc. operations and the value chain d. inbound and outbound logistics

27. According to Michael Porter, _____ is NOT a support activity in the value chain.a. procurementb. marketing and salesc. technology developmentd. human resource management

28. Which of the following is NOT a primary activity, according to Porter?a. operationsb. procurementc. inbound logisticsd. marketing and sales

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29. 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 chainb. procurement component of the value chainc. inbound logistics component of the value chaind. outbound logistics component of the value chain

30. A _____ is an interrelated set of activities that can deliver competitive advantage not only in the short term but also into the future. a. core competenceb. corporate strategyc. competitive advantaged. strategic vision

31. SWOT analysis stands for _____.a. strengths, weaknesses, opportunities, and toolsb. strengths, weaknesses, opportunities, and threatsc. strengths, weaknesses, organizations, and threatsd. strengths, weaknesses, organizations, and tools

32. Petro is the premier provider of oilfield consultancy services in a certain region. Its consultants are experts in local conditions. Recent discoveries of metal deposits in its region have spawned attractive new markets outside of the oilfield. Global firms with cutting-edge technology that Petro cannot afford have been attracted by the new markets. If Petro did a SWOT analysis, what would be one of its weaknesses?a. access to cutting edge technologyb. recent discoveries of metal deposits c. detailed knowledge of local oil marketsd. entry of international companies into the market

33. What part of a SWOT analysis focuses on the external environment?a. strengths and weaknessesb. weaknesses and threatsc. opportunities and threatsd. strengths and opportunities

34. _____ translate the strategic intent and mission of the firm into concrete and measurable goals. a. Inbound logisticsb. Core competenciesc. Strategic objectives

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d. Differentiated forecasts

35. Setting strategic objectives facilitates the ability of a firm to do all of the following EXCEPT _____. a. allocate resources appropriatelyb. clarify yearly objectives or goalsc. hold people accountable for resultsd. reach a shared understanding of priorities

36. Managers pursuing a _____ seek to make their product or service different from those of competitors on dimensions valued by customers.a. global strategyb. differentiation strategyc. cost leadership strategyd. multipoint competition strategy

37. A manufacturer striving to be the lowest-cost producer of a product or service, while charging slightly less than industry-average prices, is pursuing a/an_____.a. cost leadership strategyb. differentiation strategyc. integrated leadership strategyd. multipoint competition strategy

38. Cost leadership and differentiation are _____.a. focused strategies for management processesb. targeted strategies for gaining market sharec. generic strategies for obtaining a competitive advantaged. strategic methods for integrating internal and external analyses

39. Which of the following typically does NOT help achieve cost leadership?a. use of special technologyb. employing economies of scalec. offering superior products and servicesd. selling more products through existing sales channels

40. If a firm has lower costs than its competitors and it can command prices similar to its competitors, then it can obtain _____. a. average profitsb. premium profitsc. fair-market profits

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d. above-average profits

41. Which of the following provides the best explanation of why consumers are willing to pay a premium price for Starbucks coffee?a. Starbucks coffee is roasted, giving it a distinctive flavor.b. Starbucks is a clearly recognized and respected brand.c. Starbucks employees are trained to be attentive to customers.d. Starbucks differentiates itself through its product, service, and brand reputation.

42. A customer segment is defined as a group of customers who _____.a. place similar value on product featuresb. are the first to purchase innovative productsc. are found in the same geographical locationd. have homogenous demographic characteristics

43. A firm that differentiates its product based on style and performance and targets a narrow segment of customers is pursuing a/an _____.a. multipoint competition strategyb. focused differentiation strategyc. focused cost leadership strategyd. integrated differentiation-cost leadership strategy

44. To succeed when pursuing a _____, there must be significant differences among the firm’s target customers or among geographical segments of its customers. a. focus strategy b. global strategyc. leveraged strategyd. competitive strategy

45. A company seeks to enter the soda market by introducing an unusual line of sodas that glow in the dark. It intends to sell these sodas at no greater cost than normal sodas. What strategy is the company using in entering the soda market?a. cost leadership strategyb. multipoint differentiation strategyc. focused differentiation strategy d. integrated differentiation-cost leadership strategy

46. A _____ involves competing with firms across markets by using strengths in one market to overcome weaknesses in another market.

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a. global strategyb. multicultural strategyc. differentiation strategyd. multipoint competition strategy

47. A company decides to enter the commercial education market by purchasing a small company that prepares paying students to take high-stakes tests. How is the company choosing to enter this new market?a. by acquisitionb. by organic growth c. by strategic alliance d. by leveraging core competencies

48. The “Seven S” approach developed by McKinsey Consulting _____.a. helps managers develop appropriate strategic alliancesb. allows managers to acquire, train, and develop personnelc. provides instant access to and immediate knowledge of new markets d. is perhaps the most widely used strategy implementation framework

49. McKinsey discovered that performance declined when many of their clients implemented new strategic plans because the strategies were _____.a. not developed organically within the companyb. executed without sufficient studies of the competitive environmentc. implemented within old structures, cultures, skills, styles, and staffd. not designed, recommended, and reviewed by McKinsey consultants

50. Companies perform _____ to reinforce efforts that have contributed to desired results and to correct those that have not.a. internal auditsb. SWOT analysesc. benchmarking exercisesd. organizational performance evaluations

Short Essay Questions

51. What is the meaning of the term “competitive advantage”? (p. 116)

The concept of competitive advantage involves the ability of a firm to win consistently over the long term in a competitive situation.

52. Discuss the four required elements for competitive advantage. (pp. 116 – 117)

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These elements are superiority, rarity, inimitability, and non-substitutability.

Superior value is sometimes referred to as either comparative advantage or distinctive competence. The essence of superior value as an aspect of competitive value is embodied in the following question: Does the firm provide products and services that produce value for customers that is superior to any provided by competitors?

When applied to a company, the element of rarity means that no other firms can have the capabilities needed to provide the quality and quantity of services it can produce. If no other firms hold similar capabilities, and the company produces superior value for its customers, then it will hold a competitive advantage.

Possessing rare capabilities that enable it to provide superior value for customers will only give a company a temporary advantage. Therefore, companies must create barriers that make it difficult for others to imitate these capabilities. Such barriers can range from the size of the company to its culture and corporate reputation.

Finally, a low possibility of substitution is required for a company to maintain its competitive advantage over time. The term “substitution” refers to the ability of customers to fulfill their needs by alternate means.

53. What is the purpose of a strategic vision? (p. 118)

The strategic vision provides a view of the firm over the long term and what it should achieve in the future. It is the heart of the firm’s strategy and strategic plan.

54. What elements are included in a firm’s mission statement? (pp. 118 – 119)

A mission statement includes the following: company philosophy, company identity, primary products or services, customers and markets, geographic focus, obligations to shareholders, and commitment to employees.

55. Name the forces in the general environment that can influence the effectiveness of an organization’s strategy. (p. 119)

The general environment consists of sociocultural, technological, economic, political-legal, and global forces.

56. Name the five industry and competitor forces that can significantly influence the performance of organizations within an industry. (p. 123)

Michael Porter developed perhaps the most well known model for analyzing a firm’s industry and competitor environment. The framework focuses on five forces: the nature of rivalry, new entrants, substitutes, customers, and suppliers.

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57. What is a value chain? (p. 126)

A value chain is a set of key activities that directly produce or support the production of what a firm ultimately offers to customers. The primary activities of a value chain include inbound logistics, operations, outbound logistics, marketing and sales, and after-sale service. The support activities of a value chain include firm infrastructure, human resource management, technology development, and procurement.

58. What happens during a SWOT analysis? (p. 129)

During a SWOT analysis, a firm’s internal strengths and weaknesses are weighed, as well as its external opportunities and threats. First, a company should identify and evaluate its strengths and weaknesses. Next, it should focus on the external environment; that is, the opportunities and threats. Important insights can be obtained after comparing and matching the strengths and weaknesses of the organization and the opportunities and threats of the business environment.

59. What is the importance to a business of setting strategic objectives? (p. 130)

Setting strategic objectives is a critical step in the strategic management process because it assists in (1) appropriate allocation of resources, (2) reaching a mutual understanding of priorities, (3) delegating responsibilities, and (4) holding people accountable for results.

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