Chapter 1
1. According to the Chapter 1 Opening Case, Borders did not
d. all of these answers are correct.
2. A firm has achieved ____ when it successfully formulates and implements a value-creating
strategy.
d. legal and ethical core values
3. A competitive advantage
c. can be identified only if it has been unsuccessfully challenged by competitors.
4. Above-average returns are
d. returns in excess of what an investor expects to earn from other investments with a
similar level of risk.
5. The strategic management process is
d. the full set of commitments, decisions, and actions required for the firm to achieve
above-average returns and strategic competitiveness.
6. The primary drivers of hypercompetition are
b. the emergence of a global economy and rapid technological change.
7. All of the following are characteristic of the global economy EXCEPT
c. the increased use of tariffs to protect industries.
8. Essentially, the _________ has become one of the world’s largest markets with 700 million
potential consumers.
a. European Union
9. The Chapter 1 Strategic Focus about Huawei illustrates
a. the challenge of the global economy where emerging market companies are
moving aggressively into international markets.
10. The economic interdependence among countries as reflected in the flow of goods, services,
financial capital and knowledge across country borders is defined as
d. globalization.
11. Globalization has led to
d. higher product quality.
,12. The “liability of foreignness” is the
c. overall risks of participating outside a firm’s domestic country when entering
global competition.
13. Even for companies capable of succeeding in global markets, it is critical that they
a. remain committed to and strategically competitive in their domestic market.
14. The rate of technological diffusion is increasing. Which of the following was fastest in
penetrating 25 percent of homes in the United States market?
d. Internet
15. New markets created by iPods, PDAs, and WiFi are a result of
a. disruptive technologies.
16. Apple’s development of products such as the iPod and iPad (Chapter 1 Strategic Focus) is an
example of
c. disruptive technologies.
17. The ability to effectively and efficiently access and use information is
b. an important source of competitive advantage in virtually all industries.
18. 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?
b. planning extensive employee training and hiring educated and experienced
employees.
19. Knowledge is composed of all the following EXCEPT
a. insight.
20. Which of the following statements about organizational knowledge is correct?
d. All of these choices are correct.
21. In order to cope with hypercompetition, firms need to develop ____ through continuous learning.
b. strategic flexibility
22. All of the following are assumptions of the industrial organization (I/O) model EXCEPT
b. resources to implement strategies are firm-specific and attached to firms over the
long-term.
23. The industrial organization (I/O) model argues that
a. the key factor in success is choosing the correct industry in which to compete.
,24. Which of the following statements is most consistent under the I/O view? Performance of the
firm is most directly attributable to
c. the profitability of the industry the firm competes in.
25. Firms use the five forces model to identify the ___________ of the industry as measured by its
____________.
d. attractiveness, profitability
26. 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
b. the resource-based model.
27. 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?
b. RexRich Foods
28. 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.
d. 20, 36
29. All of the following are resources of an organization EXCEPT
c. weak competitors in the industry.
30. All of the following are assumptions of the resource-based model EXCEPT
c. Capabilities are highly mobile across firms.
31. ____ is a capacity for a set of resources to perform a task or an activity in an integrative manner.
a. A capability
32. When resources and capabilities serve as a source of competitive advantage for a firm, the firm
has created a(n)
c. core competence.
33. In the resource-based model, which of the following factors would be considered a key to
organizational success?
d. skilled employees
, 34. To have the potential to become sources of competitive advantage, resources and capabilities
must be non-substitutable, valuable, ____, and ____.
c. rare, costly to imitate.
35. The resource-based model of the firm argues that
d. resources that are valuable, rare, costly to imitate, and non-substitutable form the
basis of a firm’s core competencies.
36. The resource-based view of the firm
a. emphasizes that it is difficult to develop and sustain a competitive advantage based
on resources alone.
37. The goal of the organization’s ____ is to capture the hearts and minds of employees, challenge
them, and give shape to its intended future.
a. Vision
38. 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
b. mission.
39. A firm’s mission
a. is a statement of a firm’s business in which it intends to compete and the customers
it intends to serve.
40. The final responsibility for forming the organization’s mission lies with the
a. CEO.
41. The development of a firm’s mission typically involves which of the following?
c. The CEO and top managers.
42.
Organizational stakeholders include
c. employees.
43. 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.
a. power of each stakeholder
44. Capital market stakeholders include
b. shareholders.
1. According to the Chapter 1 Opening Case, Borders did not
d. all of these answers are correct.
2. A firm has achieved ____ when it successfully formulates and implements a value-creating
strategy.
d. legal and ethical core values
3. A competitive advantage
c. can be identified only if it has been unsuccessfully challenged by competitors.
4. Above-average returns are
d. returns in excess of what an investor expects to earn from other investments with a
similar level of risk.
5. The strategic management process is
d. the full set of commitments, decisions, and actions required for the firm to achieve
above-average returns and strategic competitiveness.
6. The primary drivers of hypercompetition are
b. the emergence of a global economy and rapid technological change.
7. All of the following are characteristic of the global economy EXCEPT
c. the increased use of tariffs to protect industries.
8. Essentially, the _________ has become one of the world’s largest markets with 700 million
potential consumers.
a. European Union
9. The Chapter 1 Strategic Focus about Huawei illustrates
a. the challenge of the global economy where emerging market companies are
moving aggressively into international markets.
10. The economic interdependence among countries as reflected in the flow of goods, services,
financial capital and knowledge across country borders is defined as
d. globalization.
11. Globalization has led to
d. higher product quality.
,12. The “liability of foreignness” is the
c. overall risks of participating outside a firm’s domestic country when entering
global competition.
13. Even for companies capable of succeeding in global markets, it is critical that they
a. remain committed to and strategically competitive in their domestic market.
14. The rate of technological diffusion is increasing. Which of the following was fastest in
penetrating 25 percent of homes in the United States market?
d. Internet
15. New markets created by iPods, PDAs, and WiFi are a result of
a. disruptive technologies.
16. Apple’s development of products such as the iPod and iPad (Chapter 1 Strategic Focus) is an
example of
c. disruptive technologies.
17. The ability to effectively and efficiently access and use information is
b. an important source of competitive advantage in virtually all industries.
18. 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?
b. planning extensive employee training and hiring educated and experienced
employees.
19. Knowledge is composed of all the following EXCEPT
a. insight.
20. Which of the following statements about organizational knowledge is correct?
d. All of these choices are correct.
21. In order to cope with hypercompetition, firms need to develop ____ through continuous learning.
b. strategic flexibility
22. All of the following are assumptions of the industrial organization (I/O) model EXCEPT
b. resources to implement strategies are firm-specific and attached to firms over the
long-term.
23. The industrial organization (I/O) model argues that
a. the key factor in success is choosing the correct industry in which to compete.
,24. Which of the following statements is most consistent under the I/O view? Performance of the
firm is most directly attributable to
c. the profitability of the industry the firm competes in.
25. Firms use the five forces model to identify the ___________ of the industry as measured by its
____________.
d. attractiveness, profitability
26. 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
b. the resource-based model.
27. 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?
b. RexRich Foods
28. 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.
d. 20, 36
29. All of the following are resources of an organization EXCEPT
c. weak competitors in the industry.
30. All of the following are assumptions of the resource-based model EXCEPT
c. Capabilities are highly mobile across firms.
31. ____ is a capacity for a set of resources to perform a task or an activity in an integrative manner.
a. A capability
32. When resources and capabilities serve as a source of competitive advantage for a firm, the firm
has created a(n)
c. core competence.
33. In the resource-based model, which of the following factors would be considered a key to
organizational success?
d. skilled employees
, 34. To have the potential to become sources of competitive advantage, resources and capabilities
must be non-substitutable, valuable, ____, and ____.
c. rare, costly to imitate.
35. The resource-based model of the firm argues that
d. resources that are valuable, rare, costly to imitate, and non-substitutable form the
basis of a firm’s core competencies.
36. The resource-based view of the firm
a. emphasizes that it is difficult to develop and sustain a competitive advantage based
on resources alone.
37. The goal of the organization’s ____ is to capture the hearts and minds of employees, challenge
them, and give shape to its intended future.
a. Vision
38. 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
b. mission.
39. A firm’s mission
a. is a statement of a firm’s business in which it intends to compete and the customers
it intends to serve.
40. The final responsibility for forming the organization’s mission lies with the
a. CEO.
41. The development of a firm’s mission typically involves which of the following?
c. The CEO and top managers.
42.
Organizational stakeholders include
c. employees.
43. 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.
a. power of each stakeholder
44. Capital market stakeholders include
b. shareholders.
