TEST BANK For Strategic Management, 6th Edition 2024 By
Rothaermel Frank, Verified Chapters 1 - 12, Complete Newest
Version
What is competitive advantage? - ANSWER: a firm that formulates and implements a
strategy that leads to superior performance relative to other competitors in the
same industry or the industry average
What are the levels of strategy formulation? - ANSWER: corporate, business,
functional
What is the difference between corporate and business strategies? - ANSWER:
Corporate strategy is formulated at headquarters and business strategy occurs
within strategic business units
Mission statements - ANSWER: describes what the organization actually does --the
products and services it plans to provide and the markets in which it plans to
compete
PESTEL Framework - ANSWER: Allows firm to look at external environment: political,
economic, socio-cultural, technological, ecological, legal; factors are interdependent
Economic factors - ANSWER: - growth rates
- interest rates
- levels of employment
- price stability
- currency exchange rates
socio-cultural factors - ANSWER: society's cultural norms, values, and cultures; ex)
ppl become more health conscience
technological factors - ANSWER: capture the application of knowledge to create new
processes and products
environmental factors - ANSWER: concern broad environmental issues such as
natural environment, global warming, and sustainable economic growth
legal factors - ANSWER: outcomes of the political processes manifested in laws,
mandates, regulations, and court decisions
Industry - ANSWER: group of companies offering similar products or services
consolidated industry structures - ANSWER: dominated by a few firms which are
highly profitable
, Four main industry types - ANSWER: 1) perfect competition
2) monopolistic competition
3) oligopoly
4) monopoly
Perfect competition - ANSWER: many small firms, commodity product, easy entry,
little or no ability for a firm to raise its prices
monopolistically competitive - ANSWER: many firms, differentiated product, some
obstacles to entry, basis for raising prices is pretty unique product while retaining
customers
Oligopoly - ANSWER: "few sellers"; few (large) firms, differentiated products, high
barriers to entry, some degree of pricing power
- firms are interdependent
- analyzed using game theory
Monopoly - ANSWER: only one firm supplying the market; many barriers to entry,
considerable pricing power
the 5 forces model - ANSWER: 1) threat of entry
2) power of suppliers
3) power of buyers
4) threat of substitutes
5) rivalry among existing competitors
Threat of entry - ANSWER: barriers/obstacles that determine how easily a firm can
enter an industry
many barriers can = highly profitable industry
Power of suppliers - ANSWER: the bargaining power of suppliers captures the
pressure that suppliers place on industry profitability
- ex) labor unions
power of buyers - ANSWER: the bargaining power of buyers; demanding lower price
for a better product; strong buyers reduce a firm's profitability
Threat of substitutes - ANSWER: idea that products or services from outside the
given industry will come close to meeting the needs of current customers
rivalry among existing competitors - ANSWER: the intensity with which companies in
an industry jockey for market share and profitability
Rothaermel Frank, Verified Chapters 1 - 12, Complete Newest
Version
What is competitive advantage? - ANSWER: a firm that formulates and implements a
strategy that leads to superior performance relative to other competitors in the
same industry or the industry average
What are the levels of strategy formulation? - ANSWER: corporate, business,
functional
What is the difference between corporate and business strategies? - ANSWER:
Corporate strategy is formulated at headquarters and business strategy occurs
within strategic business units
Mission statements - ANSWER: describes what the organization actually does --the
products and services it plans to provide and the markets in which it plans to
compete
PESTEL Framework - ANSWER: Allows firm to look at external environment: political,
economic, socio-cultural, technological, ecological, legal; factors are interdependent
Economic factors - ANSWER: - growth rates
- interest rates
- levels of employment
- price stability
- currency exchange rates
socio-cultural factors - ANSWER: society's cultural norms, values, and cultures; ex)
ppl become more health conscience
technological factors - ANSWER: capture the application of knowledge to create new
processes and products
environmental factors - ANSWER: concern broad environmental issues such as
natural environment, global warming, and sustainable economic growth
legal factors - ANSWER: outcomes of the political processes manifested in laws,
mandates, regulations, and court decisions
Industry - ANSWER: group of companies offering similar products or services
consolidated industry structures - ANSWER: dominated by a few firms which are
highly profitable
, Four main industry types - ANSWER: 1) perfect competition
2) monopolistic competition
3) oligopoly
4) monopoly
Perfect competition - ANSWER: many small firms, commodity product, easy entry,
little or no ability for a firm to raise its prices
monopolistically competitive - ANSWER: many firms, differentiated product, some
obstacles to entry, basis for raising prices is pretty unique product while retaining
customers
Oligopoly - ANSWER: "few sellers"; few (large) firms, differentiated products, high
barriers to entry, some degree of pricing power
- firms are interdependent
- analyzed using game theory
Monopoly - ANSWER: only one firm supplying the market; many barriers to entry,
considerable pricing power
the 5 forces model - ANSWER: 1) threat of entry
2) power of suppliers
3) power of buyers
4) threat of substitutes
5) rivalry among existing competitors
Threat of entry - ANSWER: barriers/obstacles that determine how easily a firm can
enter an industry
many barriers can = highly profitable industry
Power of suppliers - ANSWER: the bargaining power of suppliers captures the
pressure that suppliers place on industry profitability
- ex) labor unions
power of buyers - ANSWER: the bargaining power of buyers; demanding lower price
for a better product; strong buyers reduce a firm's profitability
Threat of substitutes - ANSWER: idea that products or services from outside the
given industry will come close to meeting the needs of current customers
rivalry among existing competitors - ANSWER: the intensity with which companies in
an industry jockey for market share and profitability
