WPC480 MIDTERM #1 EXAM QUESTIONS
WITH 100% CORRECT ANSWERS.
You are evaluating a short business memo from a stock analyst about whether to buy, hold, or sell the
stock of the Kamino Sunscreen Company. Which of the following characteristics of the memo is the
most important for it to seem useful for you and others in making a decision about the stock?
The analyst puts their conclusion in the first sentence.
What is the main reason to do an industry analysis?
Identify all firms that can take profits generated by the firm.
What is the second, critical step in doing an industry analysis? (Note: you may have to iterate on this
step as your analysis leads you to refine this step and you do the analysis again).
Identify relevant competitors that define your industry or industry group.
What is the first, critical step in doing an industry analysis?
Set a goal or specific question to answer from doing the industry analysis.
For each of the dimensions of industry analysis, match the situation that will generally improve the
industry structure for firms inside the industry.
1. Rivalry between competitors
2. Supplier and buyer power
3. Threats of entrants
4. Substitutes
5. Complements
1. Concentration in the industry is high
2. Industry firms have more options available than suppliers and buyers
3. Time necessary to learn how to use industry's technology
4. Relative performance price/output is lower than industry offerings
5. Many firms offer complements that are very similar
When not all competitors within an industry are substantive competitors, an analyst should split the
industry into groups of close competitors and then analyze the industry groups separately.
True
In the PESTEL framework, the first "E" stands for "economic" and refers to the macro-economic
conditions of nations or across nations.
True
What is the primary reason that a strategic analyst does a PESTEL analysis even though the analyst is
only focused on understanding the possible competitive advantage of a single firm?
Specifically identify how very big forces in the world affect a firm's performance.
Ackbar, Inc. has had 40% growth in accounting profits for three years, and each new year has been
the highest profits Ackbar has ever had. What can you conclude from this information about Ackbar's
competitive advantage?
Competitive advantage cannot be assessed.
, Firms that outperform their competitors have a high quality, planned strategy.
False
A firm may have negative accounting profits for several years in a row, and still decide to give a big
performance bonus to the CEO or other top executives. What is the best explanation for getting a
bonus when you aren't making an accounting profit?
The firm has been growing rapidly along with the price of the stock.
For each of the ways to measure firm performance, match it with the major source of inaccuracy as
an estimate of the value and/or performance of the firm.
1. Accounting value
2. Shareholder value
3. Balanced scorecard
1. Based on historical data
2. Based on predictions on future growth
3. Based on perceptions of value by customers
Which of the following are problems with learning how to be successful by asking currently successful
firms to explain how they achieved their success in the past? Please choose ALL the correct answers;
there may be more than one.
People tend to reverse the causality and forget that success came unexpectedly before the strategy.
People tend to attribute all their success to their own efforts.
People tend to forget all the mistakes made along the way.
Match the way of measuring firm performance with the situation or condition where that metric will
be most useful to a strategic analyst.
1. Accounting Value
2. Shareholder Value
3. Balanced Scorecard
1. Firm's value is mostly in tangible assets
2. Firm is rapidly growing in several markets
3. Firm sells a product where brand and status are important
Theories about firm performance ought to be constructed by studying both firms that succeed and
firms that fail.
True
What is the halo effect?
It is attributing performance of a firm to the skill of the top manager.
Why is the halo effect an irrational bias of perception -- that is, why is the halo effect wrong?
The top manager has authority over the firm, but doesn't control the entire firm.
The internal capacities of a firm (e.g., capabilities, core competencies, resources) are more likely to be
a source of competitive advantage than the external situation of the firm (e.g., the industry structure
where the firm resides).
True
WITH 100% CORRECT ANSWERS.
You are evaluating a short business memo from a stock analyst about whether to buy, hold, or sell the
stock of the Kamino Sunscreen Company. Which of the following characteristics of the memo is the
most important for it to seem useful for you and others in making a decision about the stock?
The analyst puts their conclusion in the first sentence.
What is the main reason to do an industry analysis?
Identify all firms that can take profits generated by the firm.
What is the second, critical step in doing an industry analysis? (Note: you may have to iterate on this
step as your analysis leads you to refine this step and you do the analysis again).
Identify relevant competitors that define your industry or industry group.
What is the first, critical step in doing an industry analysis?
Set a goal or specific question to answer from doing the industry analysis.
For each of the dimensions of industry analysis, match the situation that will generally improve the
industry structure for firms inside the industry.
1. Rivalry between competitors
2. Supplier and buyer power
3. Threats of entrants
4. Substitutes
5. Complements
1. Concentration in the industry is high
2. Industry firms have more options available than suppliers and buyers
3. Time necessary to learn how to use industry's technology
4. Relative performance price/output is lower than industry offerings
5. Many firms offer complements that are very similar
When not all competitors within an industry are substantive competitors, an analyst should split the
industry into groups of close competitors and then analyze the industry groups separately.
True
In the PESTEL framework, the first "E" stands for "economic" and refers to the macro-economic
conditions of nations or across nations.
True
What is the primary reason that a strategic analyst does a PESTEL analysis even though the analyst is
only focused on understanding the possible competitive advantage of a single firm?
Specifically identify how very big forces in the world affect a firm's performance.
Ackbar, Inc. has had 40% growth in accounting profits for three years, and each new year has been
the highest profits Ackbar has ever had. What can you conclude from this information about Ackbar's
competitive advantage?
Competitive advantage cannot be assessed.
, Firms that outperform their competitors have a high quality, planned strategy.
False
A firm may have negative accounting profits for several years in a row, and still decide to give a big
performance bonus to the CEO or other top executives. What is the best explanation for getting a
bonus when you aren't making an accounting profit?
The firm has been growing rapidly along with the price of the stock.
For each of the ways to measure firm performance, match it with the major source of inaccuracy as
an estimate of the value and/or performance of the firm.
1. Accounting value
2. Shareholder value
3. Balanced scorecard
1. Based on historical data
2. Based on predictions on future growth
3. Based on perceptions of value by customers
Which of the following are problems with learning how to be successful by asking currently successful
firms to explain how they achieved their success in the past? Please choose ALL the correct answers;
there may be more than one.
People tend to reverse the causality and forget that success came unexpectedly before the strategy.
People tend to attribute all their success to their own efforts.
People tend to forget all the mistakes made along the way.
Match the way of measuring firm performance with the situation or condition where that metric will
be most useful to a strategic analyst.
1. Accounting Value
2. Shareholder Value
3. Balanced Scorecard
1. Firm's value is mostly in tangible assets
2. Firm is rapidly growing in several markets
3. Firm sells a product where brand and status are important
Theories about firm performance ought to be constructed by studying both firms that succeed and
firms that fail.
True
What is the halo effect?
It is attributing performance of a firm to the skill of the top manager.
Why is the halo effect an irrational bias of perception -- that is, why is the halo effect wrong?
The top manager has authority over the firm, but doesn't control the entire firm.
The internal capacities of a firm (e.g., capabilities, core competencies, resources) are more likely to be
a source of competitive advantage than the external situation of the firm (e.g., the industry structure
where the firm resides).
True
