MSM 6650 FINAL EXAM QUESTIONS
WITH CORRECT ANSWERS
What two techniques have proven effective at improving strategic decision making? -
Answer- Devil's advocacy and dialectic inquiry
Dialectic Inquiry - Answer- The generation of a plan (a thesis) and a counterplan (an
antithesis) that reflect plausible but conflicting courses of action.
A firm's external environment consists of what? - Answer- All factors outside of the firm
that can affect its potential to gain and sustain a competitive advantage
Task Environment - Answer- Environments that leaders do have some influence over,
such as the composition of their strategic groups (rivals) or structure of their industry
PESTLE factors are found where? - Answer- In the general environment
Nonmarket Strategy - Answer- Strategic leaders' activities outside market exchanges
where firms sell products or provide services to influence a firm's general environment
through, for example, lobbying, public relations, contributions, and litigation in ways that
are favorable to the firm
What 5 macroeconomic factors can affect a firm's strategy? - Answer- Growth rates
Employment levels
Interest rates
Price stability
Currency exchange rates
Growth Rate - Answer- a measure of the change in the amount of goods and services
produced by a nation's economy
Employment levels are directly effected by what? - Answer- Growth rate
Price Stability - Answer- the lack of change in price levels of goods and services
Price stability is very ________ - Answer- Rare
Inflation occurs when ________. - Answer- There is too much money in the economy
,Deflation - Answer- a decrease in the general level of prices
Sociocultural Factors - Answer- A society's culture, norms, and values
Ecological factors - Answer- involve broad environmental issues such as the natural
environment, global warming, and sustainable economic growth
Organizations and the natural environment coexist in what kind of relationship? -
Answer- Interdependent relationship
Example of innovation in process technology: - Answer- Lean manufacturing
Firm performance is determined primarily by what two factors? - Answer- Industry and
firm effects
Industry Effects - Answer- Firm performance attributed to the structure of the industry in
which the firm competes
Firm Effects - Answer- Firm performance attributed to the actions strategic leaders take
Firm effects explain what percentage of overall performance? - Answer- 55%
Industry Analysis - Answer- A method to (1) identify an industry's profit potential and (2)
derive implications for a firm's strategic position within an industry
Strategic Position - Answer- A firm's strategic profile based on the difference between
value creation and cost (V − C).
Five Forces Model - Answer- A framework that identifies five forces that determine the
profit potential of an industry and shape a firm's competitive strategy
Porter's 5 Forces - Answer- Threat of entry
Power of buyers
Power of suppliers
Threat of substitutes
Rivalry among existing firms
The stronger the five forces the _______ the industry's profit potential - Answer- Lower
Threat of entry depresses industry profit potential in what two ways? - Answer- Firms
may have to lower prices to make entry appear less attractive
Increased spending among incumbent firms to satisfy existing customers
Entry Barriers - Answer- Obstacles that determine how easily a firm can enter an
industry
, Economies of scale - Answer- Cost advantage of firms with larger output because they
can spread fixed costs over more units, employ technology more efficiently, and
demand better terms from suppliers
Threat of potential entry is reduced when _____________ - Answer- Network effects
are present
Strategic Management - Answer- an integrative management field that combines
analysis, formulation, and implementation in the quest for competitive advantage
Strategy defined - Answer- the set of goal-directed actions a firm takes to achieve a
competitive advantage
To achieve superior performance, companies compete for what? - Answer- Resources
A good strategy is based on what 3 elements? - Answer- Competitive advantage
Guiding policy
Coherent actions
Competitive advantage is always ________, not absolute. - Answer- Relative
To assess competitive advantage we compare a firm's performance to what? - Answer-
A benchmark - performance of other firms or the industry average
sustainable competitive advantage - Answer- outperforming competitors or the industry
average over a prolonged period of time
Apple iPhones are an example of what? - Answer- Sustainable competitive advantage
Competitive Disadvantage - Answer- underperformance relative to other competitors in
the same industry or the industry average
Competitive Parity - Answer- performance of two or more firms at the same level
What are the rewards of superior value creation? - Answer- Market share and
profitability
Strategic positioning - Answer- Obtaining a unique position within an industry while
providing value to customers and controlling costs
The greater the difference between value creation and cost, then the greater the
___________ - Answer- Economic contribution
Strategic positioning requires what? - Answer- Trade offs
A well devised strategy is based on what two things? - Answer- What to do
WITH CORRECT ANSWERS
What two techniques have proven effective at improving strategic decision making? -
Answer- Devil's advocacy and dialectic inquiry
Dialectic Inquiry - Answer- The generation of a plan (a thesis) and a counterplan (an
antithesis) that reflect plausible but conflicting courses of action.
A firm's external environment consists of what? - Answer- All factors outside of the firm
that can affect its potential to gain and sustain a competitive advantage
Task Environment - Answer- Environments that leaders do have some influence over,
such as the composition of their strategic groups (rivals) or structure of their industry
PESTLE factors are found where? - Answer- In the general environment
Nonmarket Strategy - Answer- Strategic leaders' activities outside market exchanges
where firms sell products or provide services to influence a firm's general environment
through, for example, lobbying, public relations, contributions, and litigation in ways that
are favorable to the firm
What 5 macroeconomic factors can affect a firm's strategy? - Answer- Growth rates
Employment levels
Interest rates
Price stability
Currency exchange rates
Growth Rate - Answer- a measure of the change in the amount of goods and services
produced by a nation's economy
Employment levels are directly effected by what? - Answer- Growth rate
Price Stability - Answer- the lack of change in price levels of goods and services
Price stability is very ________ - Answer- Rare
Inflation occurs when ________. - Answer- There is too much money in the economy
,Deflation - Answer- a decrease in the general level of prices
Sociocultural Factors - Answer- A society's culture, norms, and values
Ecological factors - Answer- involve broad environmental issues such as the natural
environment, global warming, and sustainable economic growth
Organizations and the natural environment coexist in what kind of relationship? -
Answer- Interdependent relationship
Example of innovation in process technology: - Answer- Lean manufacturing
Firm performance is determined primarily by what two factors? - Answer- Industry and
firm effects
Industry Effects - Answer- Firm performance attributed to the structure of the industry in
which the firm competes
Firm Effects - Answer- Firm performance attributed to the actions strategic leaders take
Firm effects explain what percentage of overall performance? - Answer- 55%
Industry Analysis - Answer- A method to (1) identify an industry's profit potential and (2)
derive implications for a firm's strategic position within an industry
Strategic Position - Answer- A firm's strategic profile based on the difference between
value creation and cost (V − C).
Five Forces Model - Answer- A framework that identifies five forces that determine the
profit potential of an industry and shape a firm's competitive strategy
Porter's 5 Forces - Answer- Threat of entry
Power of buyers
Power of suppliers
Threat of substitutes
Rivalry among existing firms
The stronger the five forces the _______ the industry's profit potential - Answer- Lower
Threat of entry depresses industry profit potential in what two ways? - Answer- Firms
may have to lower prices to make entry appear less attractive
Increased spending among incumbent firms to satisfy existing customers
Entry Barriers - Answer- Obstacles that determine how easily a firm can enter an
industry
, Economies of scale - Answer- Cost advantage of firms with larger output because they
can spread fixed costs over more units, employ technology more efficiently, and
demand better terms from suppliers
Threat of potential entry is reduced when _____________ - Answer- Network effects
are present
Strategic Management - Answer- an integrative management field that combines
analysis, formulation, and implementation in the quest for competitive advantage
Strategy defined - Answer- the set of goal-directed actions a firm takes to achieve a
competitive advantage
To achieve superior performance, companies compete for what? - Answer- Resources
A good strategy is based on what 3 elements? - Answer- Competitive advantage
Guiding policy
Coherent actions
Competitive advantage is always ________, not absolute. - Answer- Relative
To assess competitive advantage we compare a firm's performance to what? - Answer-
A benchmark - performance of other firms or the industry average
sustainable competitive advantage - Answer- outperforming competitors or the industry
average over a prolonged period of time
Apple iPhones are an example of what? - Answer- Sustainable competitive advantage
Competitive Disadvantage - Answer- underperformance relative to other competitors in
the same industry or the industry average
Competitive Parity - Answer- performance of two or more firms at the same level
What are the rewards of superior value creation? - Answer- Market share and
profitability
Strategic positioning - Answer- Obtaining a unique position within an industry while
providing value to customers and controlling costs
The greater the difference between value creation and cost, then the greater the
___________ - Answer- Economic contribution
Strategic positioning requires what? - Answer- Trade offs
A well devised strategy is based on what two things? - Answer- What to do
