Competing for Advantage 3rd Edition by Hoskisson – Test Bank

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Competing for Advantage 3rd Edition by Hoskisson – Test Bank

 

Chapter 2 – Strategic Leadership

 

TRUE/FALSE

 

  1. Different approaches to leadership by CEOs such as Jack Welch and Sam Walton demonstrate the profound influence strategic leaders can have on an organization.

 

ANS:  T                    PTS:   1                    DIF:    med                REF:   p. 34

OBJ:   1                    NOT:  application

 

  1. Strategic leadership is the ability to anticipate, envision, maintain flexibility, and empower others to create strategic change as necessary.

 

ANS:  T                    PTS:   1                    DIF:    med                REF:   p. 35

OBJ:   1                    NOT:  knowledge

 

  1. Strategic leadership entails the set of assumptions, premises, and accepted wisdom that bounds or frames a manager’s understanding of the firm.

 

ANS:  F                    PTS:   1                    DIF:    med                REF:   p. 35

OBJ:   1                    NOT:  knowledge

 

  1. Effective strategic leaders are willing to make candid, courageous, yet pragmatic, decisions—decisions based mostly on the leader’s seasoned intuition.

 

ANS:  F                    PTS:   1                    DIF:    med                REF:   p. 37

OBJ:   2                    NOT:  comprehension

 

  1. A manager’s decision discretion is influenced by his or her own characteristics, environmental sources external to the firm, and characteristics of the Board of Directors.

 

ANS:  F                    PTS:   1                    DIF:    hard               REF:   p. 37

OBJ:   2                    NOT:  comprehension

 

  1. Firm size, firm age, tolerance for ambiguity, and commitment to strategic outcomes are all examples of characteristics of the organization that may affect managerial discretion.

 

ANS:  F                    PTS:   1                    DIF:    hard               REF:   p. 37

OBJ:   2                    NOT:  comprehension

 

  1. External environmental factors that may affect managerial discretion include industry structure, rate of market growth, and degree of product differentiation.

 

ANS:  T                    PTS:   1                    DIF:    hard               REF:   p. 37

OBJ:   2                    NOT:  comprehension

 

  1. In addition to determining new strategic initiatives, top-level managers also develop the appropriate organizational structure and reward systems of a firm.

 

ANS:  T                    PTS:   1                    DIF:    med                REF:   p. 40

OBJ:   3                    NOT:  knowledge

 

  1. The more heterogeneous and the larger the top management team, the easier it is to implement strategy effectively.

 

ANS:  F                    PTS:   1                    DIF:    hard               REF:   p. 42

OBJ:   3                    NOT:  comprehension

 

  1. The more homogeneous a top management team, the more likely those managers will be innovative and willing to pursue strategic change.

 

ANS:  F                    PTS:   1                    DIF:    med                REF:   p. 41

OBJ:   3                    NOT:  comprehension

 

  1. Heterogeneous top management teams are more likely to change their firm’s strategies when necessary and to support innovation.

 

ANS:  T                    PTS:   1                    DIF:    med                REF:   p. 41

OBJ:   3                    NOT:  comprehension

 

  1. It is very uncommon for a CEO to appoint a number of outside board members.

 

ANS:  F                    PTS:   1                    DIF:    med                REF:   p. 42

OBJ:   4                    NOT:  comprehension

 

  1. The experience that results from long tenure in a firm is known to extend the breadth of an executive’s knowledge base.

 

ANS:  F                    PTS:   1                    DIF:    med                REF:   p. 44

OBJ:   4                    NOT:  comprehension

 

  1. Selection of an insider as a new CEO indicates a firm’s desire to encourage innovation and strategic change.

 

ANS:  F                    PTS:   1                    DIF:    med                REF:   p. 46

OBJ:   4                    NOT:  comprehension

 

  1. When a new CEO is selected from outside the firm, a change of strategy is likely, especially if the top management team is homogenous and highly cohesive.

 

ANS:  F                    PTS:   1                    DIF:    hard               REF:   p. 46

OBJ:   4                    NOT:  comprehension

 

  1. An organization leader’s new vision must take into account the current and core competencies of the firm.

 

ANS:  T                    PTS:   1                    DIF:    med                REF:   p. 50

OBJ:   5                    NOT:  comprehension

 

  1. Neither hiring temporary workers nor star players is sufficient for developing an effective organizational team.

 

ANS:  T                    PTS:   1                    DIF:    hard               REF:   p. 51

OBJ:   6                    NOT:  comprehensive

 

  1. The training of future strategic leaders yields a competitive advantage for a firm, in part because knowledge and skills are necessary for successful execution of strategy.

 

ANS:  T                    PTS:   1                    DIF:    med                REF:   p. 51

OBJ:   6                    NOT:  comprehension

 

  1. Competitive aggressiveness, proactiveness, risk aversion, innovativeness, and autonomy are the five dimensions characterizing a firm’s entrepreneurial orientation.

 

ANS:  F                    PTS:   1                    DIF:    hard               REF:   p. 52

OBJ:   6                    NOT:  comprehension

 

  1. Corporate cultures emerge in organizations, but their development is so subtle that top managers cannot influence their formation.

 

ANS:  F                    PTS:   1                    DIF:    med                REF:   p. 52

OBJ:   6                    NOT:  comprehension

 

  1. Money motivates, social capital inspires.

 

ANS:  T                    PTS:   1                    DIF:    med                REF:   p. 55

OBJ:   8                    NOT:  comprehension

 

  1. An emphasis on strategic controls encourages managers to focus on more short-term goals and efficient operations.

 

ANS:  F                    PTS:   1                    DIF:    med                REF:   p. 58

OBJ:   9                    NOT:  comprehension

 

MULTIPLE CHOICE

 

  1. Effective strategic leadership entails the ability to articulate clear ____ and ____.
a. employee attitudes, corporate culture
b. strategic change, performance trends
c. goals, objectives
d. strategic intent, motivate followers

 

 

ANS:  D                    PTS:   1                    DIF:    hard               REF:   p. 36

OBJ:   1                    NOT:  comprehension

 

  1. The ability to manage ____ may be the most important skill a strategic leader must have.
a. human capital c. responses to competitors’ actions
b. capital resources d. investment strategies

 

 

ANS:  A                    PTS:   1                    DIF:    med                REF:   p. 50

OBJ:   1                    NOT:  comprehension

 

  1. Some researchers argue that a firm’s long-term competitiveness depends on the:
a. ability of managers to maintain a constant managerial frame.
b. ability of managers to challenge their managerial frames on a continual basis.
c. ability of managers to fend off change.
d. abilities of lower-level management teams.

 

 

ANS:  B                    PTS:   1                    DIF:    med                REF:   p. 40

OBJ:   1                    NOT:  comprehension

 

  1. Which of the following is NOT a factor that determines the amount of a manager’s decision discretion?
a. Characteristics of the manager
b. Characteristics of the organization
c. Cohesiveness of the Board of Directors
d. External environmental sources

 

 

ANS:  C                    PTS:   1                    DIF:    med                REF:   p. 37

OBJ:   2                    NOT:  comprehension

 

  1. All of the following are external environmental sources that affect managerial discretion EXCEPT:
a. industry structure.
b. corporate culture.
c. market growth rate.
d. potential for product differentiation.

 

 

ANS:  B                    PTS:   1                    DIF:    med                REF:   p. 37

OBJ:   2                    NOT:  knowledge

 

  1. All of the following are characteristics of the organization that affect managerial discretion EXCEPT:
a. size of the company.
b. availability of resources.
c. corporate culture.
d. degree of managerial self-confidence.

 

 

ANS:  D                    PTS:   1                    DIF:    med                REF:   p. 37

OBJ:   2                    NOT:  knowledge

 

  1. A characteristic of the manager that may affect managerial discretion is his/her:
a. interpersonal skills. c. tolerance for ambiguity.
b. commitment to the firm. d. aspiration levels.

 

 

ANS:  A                    PTS:   1                    DIF:    med                REF:   p. 37

OBJ:   2                    NOT:  knowledge

 

  1. The larger the top management team:
a. the more difficult it is for the team to implement strategies.
b. the more likely it is that the team will be homogeneous.
c. the less innovative the team’s decisions are.
d. the higher quality the team’s decisions are.

 

 

ANS:  A                    PTS:   1                    DIF:    med                REF:   p. 42

OBJ:   3                    NOT:  knowledge

 

  1. A heterogeneous top management team is composed of individuals with:
a. different functional backgrounds, experience, and education.
b. similar experiences and similar education.
c. a high level of education.
d. a similar level of technical training.

 

 

ANS:  A                    PTS:   1                    DIF:    med                REF:   p. 40

OBJ:   3                    NOT:  knowledge

 

  1. Which of the following is NOT associated with heterogeneous top management teams?
a. Innovation
b. Identification of environmental changes
c. Diminished debate
d. Strategic change

 

 

ANS:  C                    PTS:   1                    DIF:    hard               REF:   p. 41

OBJ:   3                    NOT:  comprehension

 

  1. The more involved a board of directors is in shaping the firm’s strategic direction:
a. the lower is the corporation’s performance.
b. the higher is the corporation’s performance.
c. the more likely it is that the firm’s top management team is homogenous in its makeup.
d. the more difficult it becomes to make executive decisions.

 

 

ANS:  B                    PTS:   1                    DIF:    med                REF:   p. 42

OBJ:   3                    NOT:  comprehension

 

  1. A CEO obtains power from all of the following EXCEPT:
a. the fact that many of the outside directors are appointed by the CEO.
b. the CEO is also the chairman of the board.
c. the tenure of the top management team is shorter than that of the board.
d. the fact that inside board members report to the CEO.

 

 

ANS:  C                    PTS:   1                    DIF:    hard               REF:   p. 42

OBJ:   4                    NOT:  comprehension

 

  1. Which of the following is NOT related to a CEO’s having long tenure in his or her position?
a. more effective strategic control
b. greater influence on organizational decisions
c. more limited perspective
d. high level of innovation

 

 

ANS:  D                    PTS:   1                    DIF:    hard               REF:   p. 42

OBJ:   4                    NOT:  comprehension

 

  1. An external labor market is:
a. the opportunities for managerial positions within a firm.
b. a collection of career opportunities for managers in organizations outside of the one for which they currently work.
c. the relationship between the CEO and its subordinates.
d. influential in the building of a homogenous top management team.

 

 

ANS:  B                    PTS:   1                    DIF:    med                REF:   p. 44

OBJ:   4                    NOT:  knowledge

 

  1. Which of the following is NOT a benefit to the firm using the internal labor market to select a new CEO?
a. Internal hiring results in a higher turnover rate of existing personnel.
b. Insiders are familiar with the firm’s products.
c. Insider hiring reflects a desire for continuity.
d. Insiders are more familiar with a firm’s operating procedures.

 

 

ANS:  A                    PTS:   1                    DIF:    med                REF:   p. 45

OBJ:   4                    NOT:  comprehension

 

  1. A CEO’s commitment to the status quo is influenced strongly by:
a. educational training.
b. the prestige of the university from which the CEO earned his or her degree.
c. long tenure with one firm.
d. the breadth of knowledge of the top management team.

 

 

ANS:  C                    PTS:   1                    DIF:    med                REF:   p. 45

OBJ:   4                    NOT:  comprehension

 

  1. Which of the following is NOT likely to encourage change in a firm’s strategy?
a. A new CEO from outside the firm
b. A homogeneous top management team
c. A top management team with managers from different functional backgrounds
d. A new CEO from outside the industry

 

 

ANS:  B                    PTS:   1                    DIF:    hard               REF:   p. 45 (Figure 2.2)

OBJ:   4                    NOT:  comprehension

 

  1. A new CEO selected from outside the firm:
a. will successfully guide the company to higher profits.
b. has a narrower perspective of the firm and its competitive environment.
c. usually encourages innovation and strategic change.
d. will not be inclined to change the strategic direction of the firm.

 

 

ANS:  C                    PTS:   1                    DIF:    med                REF:   p. 45

OBJ:   4                    NOT:  comprehension

 

  1. When the top management team is homogeneous and a new CEO is selected from inside the firm, it is:
a. unlikely for the current strategy to change.
b. likely that product innovation will continue.
c. likely there will be a change in strategy.
d. unlikely the new CEO will have a long tenure.

 

 

ANS:  A                    PTS:   1                    DIF:    med                REF:   p. 45 (Figure 2.2)

OBJ:   4                    NOT:  comprehension

 

  1. If a firm is to have an adequate number of highly qualified managers, it must tap the following highly qualified labor pool:
a. Former employees.
b. College interns.
c. Foreign-born but U.S.-trained applicants.
d. Women.

 

 

ANS:  D                    PTS:   1                    DIF:    med                REF:   p. 45

OBJ:   4                    NOT:  knowledge

 

  1. Which of the following is NOT an action of effective strategic leadership?
a. Establishing ethical practices
b. Fostering an effective corporate culture
c. Developing human capital
d. De-emphasizing core competencies

 

 

ANS:  D                    PTS:   1                    DIF:    med                REF:   p. 48

OBJ:   5                    NOT:  comprehension

 

  1. Determining the strategic direction for the firm refers to:
a. developing a short-term vision of the firm’s strategic intent.
b. developing a tactical strategic response.
c. developing a long-term vision of the firm’s strategic intent.
d. the top management team’s heterogeneous status.

 

 

ANS:  C                    PTS:   1                    DIF:    med                REF:   p. 54

OBJ:   5                    NOT:  knowledge

 

  1. It is clear that large firms:
a. develop core competencies in a single functional area when implementing strategy.
b. exploit core competencies across different organizational units when implementing strategy.
c. have an identifiable brand name in order to create a competitive advantage during the implementation stage.
d. make a number of acquisitions in order to develop and exploit core competencies within the organization.

 

 

ANS:  B                    PTS:   1                    DIF:    med                REF:   p. 52

OBJ:   5                    NOT:  comprehension

 

  1. Human capital refers to the:
a. number of employees employed by a firm.
b. resources available to the Human Resources department.
c. number of individuals comprising the top management team.
d. knowledge and skills of the firm’s work force.

 

 

ANS:  D                    PTS:   1                    DIF:    med                REF:   p. 50

OBJ:   5                    NOT:  knowledge

 

  1. Much of the development of U.S. industry can be attributed to:
a. the educational level of its workforce.
b. its emphasis on innovation.
c. the effectiveness of its human capital.
d. the country’s financial markets.

 

 

ANS:  C                    PTS:   1                    DIF:    med                REF:   p. 50

OBJ:   6                    NOT:  knowledge

 

  1. The effective development and management of the firm’s ____ may be the primary determinant of its sustainable competitive advantage.
a. capital base
b. human capital
c. technology
d. competitive edge

 

 

ANS:  B                    PTS:   1                    DIF:    med                REF:   p. 51

OBJ:   6                    NOT:  knowledge

 

  1. The process of transferring host-country or third-country national managers into the domestic market of the multinational firm is known as:
a. expatriation.
b. repatriation.
c. inpatriation.
d. reverse patriation.

 

 

ANS:  C                    PTS:   1                    DIF:    hard               REF:   p. 51

OBJ:   6                    NOT:  knowledge

 

  1. Many companies are now requiring ____ for top management positions.
a. development of a successful advertising campaign
b. MBAs from prestigious schools
c. specialized knowledge in a functional area
d. global competency

 

 

ANS:  D                    PTS:   1                    DIF:    med                REF:   p. 51

OBJ:   6                    NOT:  comprehension

 

  1. Which of the following will lead to the probability that a manager will be a successful strategic leader?
a. Appointing many outside board members
b. Increasing the firm’s sales
c. Increased expenditures on capital equipment
d. Training and development programs

 

 

ANS:  D                    PTS:   1                    DIF:    med                REF:   p. 51

OBJ:   6                    NOT:  comprehension

 

  1. The benefits of training and development programs include all of the following EXCEPT:
a. establishing independent core values.
b. promoting the firm’s strategic vision.
c. providing a systematic view of the organization.
d. building knowledge and skills.

 

 

ANS:  A                    PTS:   1                    DIF:    hard               REF:   p. 51

OBJ:   6                    NOT:  comprehension

 

  1. Which of the following is a source of competitive advantage at General Electric?
a. The firm’s Internet strategy
b. The firm’s emphasis on technology management
c. The firm’s system of training and development of future leaders
d. The firm’s strategic orientation

 

 

ANS:  C                    PTS:   1                    DIF:    hard               REF:   p. 51

OBJ:   6                    NOT:  application

 

  1. To successfully implement a firm’s strategy, employees must be viewed as:
a. a cost to be minimized.
b. expendable.
c. a resource to be maximized.
d. part of the organization that must be restructured.

 

 

ANS:  C                    PTS:   1                    DIF:    med                REF:   p. 50

OBJ:   6                    NOT:  comprehension

 

  1. Which of the following statements is true regarding effective organizational cultures?
a. Once a corporate culture is developed, strategic leaders can focus on other activities.
b. It is not possible to develop a corporate culture into a core competency.
c. A central task of strategic leaders is to change the corporate culture on an annual basis after analyzing the changes occurring in the competitive environment.
d. Organizational culture can be a source of competitive advantage because it influences employee behavior and the firm’s conduct in the marketplace.

 

 

ANS:  D                    PTS:   1                    DIF:    med                REF:   p. 52

OBJ:   6                    NOT:  comprehension

 

  1. If a firm is a market leader, rather than a market follower, it can be characterized as being ____.
a. proactive c. strategic
b. aggressive d. risk-taking

 

 

ANS:  A                    PTS:   1                    DIF:    med                REF:   p. 52

OBJ:   6                    NOT:  knowledge

 

  1. The concept of employee autonomy is highly related to the concept of ____.
a. cohesiveness c. charisma
b. loyalty d. empowerment

 

 

ANS:  D                    PTS:   1                    DIF:    med                REF:   p. 52

OBJ:   7                    NOT:  comprehension

 

  1. Which of the following is NOT one of the five dimensions thought to characterize a firm’s entrepreneurial orientation?
a. Autonomy c. Risk taking
b. Reactivity d. Innovativeness

 

 

ANS:  B                    PTS:   1                    DIF:    hard               REF:   p. 52

OBJ:   6                    NOT:  knowledge

 

  1. A firm that has the ability to be a market leader rather than a follower is said to be:
a. innovative.
b. a risk taker.
c. proactive.
d. competitively aggressive.

 

 

ANS:  C                    PTS:   1                    DIF:    med                REF:   p. 52

OBJ:   6                    NOT:  knowledge

 

  1. Competitive aggressiveness describes a firm’s:
a. tendency to engage in new ideas and creative processes.
b. tendency to allow employees to take actions free of organizational constraints.
c. ability to be a leader in the marketplace.
d. propensity to take actions that allow it to outperform rivals consistently and substantially.

 

 

ANS:  D                    PTS:   1                    DIF:    med                REF:   p. 52

OBJ:   6                    NOT:  knowledge

 

  1. Shaping and reinforcing a new firm culture requires all of the following EXCEPT:
a. effective communication.
b. effective performance appraisals.
c. the firing of non-performing employees.
d. an appropriate reward system.

 

 

ANS:  C                    PTS:   1                    DIF:    med                REF:   p. 52

OBJ:   7                    NOT:  comprehension

 

  1. One catalyst for critical changes in the organizational culture is:
a. the selection of top managers from outside the corporation.
b. change in the industry structure.
c. new competition from foreign firms.
d. decreasing industry profits.

 

 

ANS:  A                    PTS:   1                    DIF:    med                REF:   p. 53

OBJ:   7                    NOT:  comprehension

 

  1. The Enron scandal is a good example of ____.
a. managerial opportunism
b. failure to implement the balanced scorecard
c. poor implementation of corporate culture
d. failure to adhere to the counsel of staff attorneys

 

 

ANS:  A                    PTS:   1                    DIF:    med                REF:   p. 56

OBJ:   8                    NOT:  application

 

  1. When organizations are reported to engage in unethical practices:
a. poor financial controls will usually be to blame.
b. the value in the stock market tends to drop sharply.
c. the Justice Department oversees the reorganization of the firm.
d. they become takeover targets.

 

 

ANS:  B                    PTS:   1                    DIF:    hard               REF:   p. 56

OBJ:   8                    NOT:  comprehension

 

  1. The ____ is a framework firms can use to verify that they have established both strategic and financial controls.
a. managerial model c. balanced scorecard
b. holistic control system d. dual oversight system

 

 

ANS:  C                    PTS:   1                    DIF:    med                REF:   p. 59

OBJ:   9                    NOT:  knowledge

 

  1. ____ provide information about the results of past actions, but do not communicate the drivers of the firm’s future performance.
a. Financial controls c. Policies and procedures
b. Accounting information systems d. Strategic feedback systems

 

 

ANS:  A                    PTS:   1                    DIF:    med                REF:   p. 59

OBJ:   9                    NOT:  knowledge

 

  1. Which of the following is NOT one of the four perspectives in the balanced scorecard framework?
a. entrepreneurial c. customer
b. financial d. learning and growth

 

 

ANS:  A                    PTS:   1                    DIF:    med                REF:   p. 59

OBJ:   9                    NOT:  knowledge

 

  1. In the balanced scorecard framework ____ controls are used to assess the organization’s performance relative to learning and growth.
a. developmental c. holistic
b. strategic d. financial

 

 

ANS:  B                    PTS:   1                    DIF:    med                REF:   p. 59

OBJ:   9                    NOT:  knowledge

 

  1. Criteria for reevaluating internal business processes using the balanced scorecard include all of the following EXCEPT ____.
a. improvements in innovative ability
b. asset utilization improvements
c. increases in employee morale
d. changes in employee turnover

 

 

ANS:  A                    PTS:   1                    DIF:    med                REF:   p. 59

OBJ:   9                    NOT:  knowledge

 

  1. Most corporate restructuring is designed to ____.
a. refocus the firm on its core businesses
b. reduce costs, especially labor costs
c. simultaneously stimulate centralization and decentralization.
d. generate rapid growth

 

 

ANS:  A                    PTS:   1                    DIF:    med                REF:   p. 59

OBJ:   9                    NOT:  comprehension

 

  1. Ethical practices within a firm tend to increase:
a. as its top managers gain experience.
b. the effectiveness of strategic implementation processes.
c. the market performance of the firm.
d. as the firm becomes more international in its operations.

 

 

ANS:  B                    PTS:   1                    DIF:    med                REF:   p. 56

OBJ:   8                    NOT:  comprehension

 

  1. Managerial opportunism occurs when managers:
a. have opportunities in the external labor market.
b. have opportunities in the internal labor market.
c. take actions that are in their own best interests but not in the firm’s best interests.
d. take actions that are in their own best interests and also in the firm’s best interests.

 

 

ANS:  C                    PTS:   1                    DIF:    med                REF:   p. 56

OBJ:   8                    NOT:  knowledge

 

  1. In the text, unethical practices are compared to ____.
a. a terminal illness c. corporate schizophrenia
b. broken promises d. a contagious disease

 

 

ANS:  D                    PTS:   1                    DIF:    med                REF:   p. 56

OBJ:   8                    NOT:  knowledge

 

  1. The practices associated with an ethical culture have become institutionalized in the firm if they:
a. are integrated to form a written code of ethics.
b. are mentioned in the firm’s mission statement.
c. are first embraced by the CEO of the company.
d. become the set of behaviors and actions accepted by most of the firm’s employees and stakeholders.

 

 

ANS:  D                    PTS:   1                    DIF:    med                REF:   p. 57

OBJ:   8                    NOT:  comprehension

 

  1. Actions that effective strategic leaders can take to develop an ethical organizational culture include all of the following EXCEPT:
a. communicating goals that describe the firm’s ethical standards.
b. using reward systems that recognize acts of courage.
c. relying on the fundamental goodness of individuals.
d. creating a work environment where individuals are treated with dignity.

 

 

ANS:  C                    PTS:   1                    DIF:    med                REF:   p. 57

OBJ:   8                    NOT:  comprehension

 

  1. Organizational controls provide:
a. the parameters within which strategies are to be implemented.
b. goals and objectives that must be achieved.
c. information on action steps to be taken to implement the corporate strategy.
d. managers with guidelines on how to treat employees.

 

 

ANS:  A                    PTS:   1                    DIF:    med                REF:   p. 58

OBJ:   9                    NOT:  knowledge

 

  1. Financial controls focus on:
a. the strategic actions of the firm.
b. the long-term performance of the firm.
c. short-term financial outcomes.
d. the risk taking ability of the top management team.

 

 

ANS:  C                    PTS:   1                    DIF:    med                REF:   p. 58

OBJ:   9                    NOT:  knowledge

 

  1. Strategic controls focus on the:
a. short-term performance of the firm.
b. outcomes of strategic actions.
c. long-term goals of the firm.
d. content of strategic actions.

 

 

ANS:  D                    PTS:   1                    DIF:    med                REF:   p. 58

OBJ:   9                    NOT:  knowledge

 

  1. An emphasis on ____ produces short-term and risk-averse managerial decisions.
a. strategic controls c. financial controls
b. corporate culture d. balanced organizational controls

 

 

ANS:  C                    PTS:   1                    DIF:    med                REF:   p. 58

OBJ:   9                    NOT:  comprehension

 

ESSAY

 

  1. What is strategic leadership and how important are top-level managers as an organizational resource?

 

ANS:

Strategic leadership is the ability to anticipate, envision, maintain flexibility, and empower others to create strategic change. The six key components of strategic leadership are: determining a strategic direction, exploiting and maintaining core competencies, developing human capital, sustaining an effective organizational culture, emphasizing ethical practices, and establishing balanced organizational control systems. The CEO has primary responsibility for strategic leadership, which is shared with the board of directors, the top management team and divisional general managers. Strategic leaders have complex, substantial decision-making responsibilities that cannot be delegated. Strategies cannot be formulated and implemented to achieve above-average returns without effective strategic leaders.

 

PTS:   1                    REF:   p. 35|p. 36     OBJ:   1

 

  1. Define top management teams and explain the effect of top management team characteristics on the effectiveness of a firm’s strategy.

 

ANS:

The top management team is defined as the key managers in the organization who are responsible for selecting and implementing the firm’s strategy or strategies. Typically, the top management team includes all officers of the firm (defined by the title of vice president or above) and/or those who serve as a member of the board of directors. Team characteristics have been shown to affect the strategy of the organization. A heterogeneous top management team is composed of individuals with varied functional backgrounds, experiences, and education. A homogeneous team’s members are similar to one another. A heterogeneous team is more likely to formulate an effective strategy because of its varied expertise and knowledge. Additionally, heterogeneous top management teams have been shown to positively affect performance. In particular, heterogeneous teams positively affect innovation and strategic change in firms.

 

PTS:   1                    REF:   p. 40|p. 42     OBJ:   3

 

  1. Discuss how the managerial labor market (CEO succession) and the top management team composition interact to affect strategy.

 

ANS:

Internal labor markets represent the opportunities for managerial positions (including the position of CEO) within a firm. The external labor market is the collection of career opportunities for managers in firms outside of the one for which they currently work. CEOs may be selected from internal or external candidates. Internal CEO selection is preferred by employees, and external CEO succession is considered a sign that the board of directors wants change. Internal CEOs are less likely to seek change in the firm’s strategy than external CEOs. It is important to note that the CEOs selection from the internal or external labor market and the top management team’s composition interact and affect the likelihood of strategic change. If a firm hires a new internal CEO and has a homogeneous top management team, it is unlikely that the firm’s strategy will change. If the firm employs a new internal CEO but has a heterogeneous top management team, it will maintain a stable strategy but will pursue it with innovation. If the top management team is homogeneous but an external CEO is chosen, the situation will be ambiguous. Finally, if the top management team is heterogeneous and an external CEO is chosen, strategic change is likely.

 

PTS:   1                    REF:   p. 44|p. 46 (Figure 2.2)                   OBJ:   3

 

  1. Describe the importance of core competencies in the pursuit of value creation and above-average returns.

 

ANS:

Core competencies are the resources and capabilities that serve as a source of competitive advantage over rivals. Typically, core competencies refer to an organization’s functional skills. Strategic leaders must verify that their firm exploits its core competencies in the implementation of its strategies. In large, related diversified firms, core competencies are exploited effectively when they are shared across organizational units.

 

PTS:   1                    REF:   p. 47              OBJ:   5

 

  1. Define human capital and its importance to the firm’s efforts if these are to be successful.

 

ANS:

Human capital represents the knowledge and skills of the firm’s entire workforce. Effective strategic leaders view human capital as a resource to be maximized rather than as a cost to be minimized. As a result, the use of programs designed to train current and future leaders are needed if these leaders are to have the skills necessary to develop the remaining human capital of the firm. Programs that gain outstanding results in the training of future leaders can become a competitive advantage for a firm.

 

PTS:   1                    REF:   p. 50|p. 51     OBJ:   6

 

  1. Define organizational culture and discuss the ways in which a firm’s culture can be changed.

 

ANS:

Organizational culture is the set of ideologies, symbols, and core values that is shared throughout the organization and that influences the way the firm conducts its business. It is more difficult to change a firm’s culture than to sustain it. But effective strategic leadership recognizes when a change in a firm’s culture is often necessary. Incremental changes to the firm’s culture are typically used to implement strategies. Sometimes radical changes are used to support strategies that differ from the firm’s historical pattern. Shaping and reinforcing change in an organization’s culture require: communication and problem solving, selection processes that find people with the right values, effective performance appraisals, and appropriate reward systems. Change occurs when it is actively supported by the CEO, other top managers, and middle management. Selecting top managers from outside the corporation can also be a catalyst for change in a firm’s culture.

 

PTS:   1                    REF:   p. 52|p. 53     OBJ:   8

 

  1. Describe what strategic leaders can do to establish and emphasize ethical practices.

 

ANS:

Ethical practices should be institutionalized within the organization. That is, ethical practices should become the set of behavior commitments and actions accepted by the firm’s employees and other stakeholders. Strategic leaders can shape ethical practices in a firm by:

(1) establishing and communicating specific goals to describe the firm’s ethical standards (e.g., developing and disseminating a code of conduct),

(2) continuously revising and updating the code of conduct, based on inputs from people throughout the firm and from other stakeholders (e.g., customers and suppliers),

(3) disseminating the code of conduct to all stakeholders to inform them of the firm’s ethical standards and practices,

(4) developing and implementing methods and procedures to use in achieving the firm’s ethical standards (e.g., use of internal auditing practices that are consistent with the standards),

(5) creating and using explicit reward systems that recognize acts of courage (e.g., rewarding those who use proper channels and procedures to report observed wrongdoing), and

(6) creating a work environment in which all people are treated with dignity.

 

PTS:   1                    REF:   p. 55|p. 57     OBJ:   8

 

  1. Describe organizational controls and discuss their use and importance.

 

ANS:

Controls are the formal, information-based procedures used by managers to maintain or alter patterns in organizational activities. Controls provide the parameters within which strategies are to be implemented and corrective actions when adjustments are required. There are two main types of controls: financial and strategic. Financial controls focus on short-term financial outcomes. Strategic controls focus on the content of strategic actions. Financial controls give feedback about the outcomes of past actions. Strategic controls communicate the drivers of the firm’s future performance. The balanced scorecard approach allows firms to verify that they have established both strategic and financial controls.

 

PTS:   1                    REF:   p. 58|p. 60     OBJ:   9

Chapter 4 – The Internal Organization: Resources, Capabilities, and Core Competencies

 

TRUE/FALSE

 

  1. Firms should seek to obtain a sustainable competitive advantage through implementation of strategies based on their particular resources, capabilities, and core competencies.

 

ANS:  T                    PTS:   1                    DIF:    med                REF:   p. 107

OBJ:   1                    NOT:  comprehension

 

  1. Firms can earn above-average returns even if they do not develop or sustain a competitive advantage.

 

ANS:  F                    PTS:   1                    DIF:    med                REF:   p. 107|p. 121

OBJ:   1                    NOT:  comprehension

 

  1. The sustainability of a competitive advantage depends upon the imitability of the core competence, the availability of substitutes for the core competence, and the rate of core competence obsolescence.

 

ANS:  T                    PTS:   1                    DIF:    hard               REF:   p. 107

OBJ:   1                    NOT:  knowledge

 

  1. Analyzing the internal environment enables a firm to determine what it might be able to do by identifying what opportunities exist.

 

ANS:  F                    PTS:   1                    DIF:    hard               REF:   p. 107

OBJ:   1                    NOT:  comprehension

 

  1. Value of a product is measured by the variable and fixed costs associated with its production.

 

ANS:  F                    PTS:   1                    DIF:    med                REF:   p. 110

OBJ:   2                    NOT:  knowledge

 

  1. Before the firm can make strategic decisions, managers must prioritize the decisions that generate adequate quarterly earning numbers.

 

ANS:  F                    PTS:   1                    DIF:    med                REF:   p. 127

OBJ:   1                    NOT:  comprehension

 

  1. Individually, resources typically result in a sustainable competitive advantage.

 

ANS:  F                    PTS:   1                    DIF:    hard               REF:   p. 112

OBJ:   3                    NOT:  comprehension

 

  1. A firm’s ability to achieve a competitive advantage is reflected in its financial capital base.

 

ANS:  F                    PTS:   1                    DIF:    med                REF:   p. 114|p. 116

OBJ:   3                    NOT:  comprehension

 

  1. A competitive advantage can be created when several resources are bundled together in a unique fashion.

 

ANS:  T                    PTS:   1                    DIF:    med                REF:   p. 107

OBJ:   3                    NOT:  comprehension

 

  1. A resource has high strategic value even if it has no effect on the competitive advantage of the firm.

 

ANS:  F                    PTS:   1                    DIF:    hard               REF:   p. 115

OBJ:   3                    NOT:  comprehension

 

  1. Capabilities of an organization emerge over time through complex interactions between and among tangible and intangible resources.

 

ANS:  T                    PTS:   1                    DIF:    med                REF:   p. 115

OBJ:   4                    NOT:  comprehension

 

  1. Capabilities can be developed quickly in response to changes in the new competitive landscape.

 

ANS:  F                    PTS:   1                    DIF:    med                REF:   p. 115

OBJ:   4                    NOT:  comprehension

 

  1. Not all resources and capabilities are core competencies.

 

ANS:  T                    PTS:   1                    DIF:    med                REF:   p. 116

OBJ:   5                    NOT:  knowledge

 

  1. Every core competence is a capability and every capability is a core competence.

 

ANS:  F                    PTS:   1                    DIF:    med                REF:   p. 118

OBJ:   5                    NOT:  knowledge

 

  1. Only capabilities that are valuable, rare, costly to imitate, and non-substitutable are sources of sustainable competitive advantage.

 

ANS:  T                    PTS:   1                    DIF:    med                REF:   p. 118

OBJ:   5                    NOT:  knowledge

 

  1. Only capabilities that are valuable, common, costly to imitate, and substitutable can be strategic capabilities.

 

ANS:  F                    PTS:   1                    DIF:    hard               REF:   p. 118

OBJ:   5                    NOT:  knowledge

 

  1. Capabilities may be costly to imitate if they are causally ambiguous or socially complex.

 

ANS:  T                    PTS:   1                    DIF:    med                REF:   p. 120

OBJ:   5                    NOT:  comprehension

 

  1. A company can earn above-average returns only when the value it creates is less than the costs incurred to create that value.

 

ANS:  F                    PTS:   1                    DIF:    hard               REF:   p. 121

OBJ:   6                    NOT:  comprehension

 

  1. For capabilities to be a source of competitive advantage, they must allow a firm to perform value-creating activities that competitors are also able to complete.

 

ANS:  F                    PTS:   1                    DIF:    hard               REF:   p. 122|p. 123

OBJ:   6                    NOT:  comprehension

 

  1. There are correct models and rules that must be followed when conducting a value chain analysis or the correct answer will not be determined.

 

ANS:  F                    PTS:   1                    DIF:    med                REF:   p. 124

OBJ:   6                    NOT:  comprehension

 

  1. Outsourcing is a way to add value to the business that converts an external value creating activity into an internal supplier.

 

ANS:  F                    PTS:   1                    DIF:    hard               REF:   p. 125

OBJ:   7                    NOT:  knowledge

 

  1. Outsourcing is a matter of convenience for most firms because they usually possess the resources and capabilities required for competitive advantage superiority in all primary and secondary activities.

 

ANS:  F                    PTS:   1                    DIF:    med                REF:   p. 125

OBJ:   7                    NOT:  comprehension

 

  1. Once a core competence has been identified and perfected, it is a stable source of competitive advantage.

 

ANS:  F                    PTS:   1                    DIF:    med                REF:   p. 126

OBJ:   8                    NOT:  comprehension

 

  1. The objectives of various stakeholder groups often differ from one another, sometimes placing managers in situations in which they must make trade-offs.

 

ANS:  T                    PTS:   1                    DIF:    med                REF:   p. 127

OBJ:   9                    NOT:  application

 

  1. Managers should establish measures that reflect how well the firm responds to needs and desires of key stakeholders.

 

ANS:  T                    PTS:   1                    DIF:    med                REF:   p. 128

OBJ:   9                    NOT:  knowledge

 

  1. Sustainable development is strategically important business growth that depletes natural resources.

 

ANS:  F                    PTS:   1                    DIF:    med                REF:   p. 131

OBJ:   9                    NOT:  knowledge

 

  1. Power is the most critical criterion decision makers use to priortize stakeholder interests.

 

ANS:  T                    PTS:   1                    DIF:    easy               REF:   p. 127

OBJ:   9                    NOT:  knowledge

 

  1. Firms have legal obligations to all stakeholder groups.

 

ANS:  F                    PTS:   1                    DIF:    med                REF:   p. 127

OBJ:   9                    NOT:  knowledge

 

  1. Both shareholders and lenders expect returns commensurate with the degree of risk associated with their investments.

 

ANS:  T                    PTS:   1                    DIF:    easy               REF:   p. 127

OBJ:   9                    NOT:  knowledge

 

  1. Firms can measure success in supplier relationships in terms of the way suppliers serve them and their eagerness to engage in business.

 

ANS:  T                    PTS:   1                    DIF:    med                REF:   p. 130

OBJ:   9                    NOT:  knowledge

 

  1. Union interests and demands are typically consistent with employees’ needs.

 

ANS:  T                    PTS:   1                    DIF:    med                REF:   p. 131

OBJ:   9                    NOT:  knowledge

 

  1. Most organizations such as McDonald’s and Chipotle define their sustainability programs in terms of what they are doing to advance technology while at the same time protecting the environment and serving and protecting the communities and societies in which they operate.

 

ANS:  T                    PTS:   1                    DIF:    med                REF:   p. 132

OBJ:   9                    NOT:  knowledge

 

MULTIPLE CHOICE

 

  1. In the global economy, ____ has made it increasingly difficult for a firm to develop and sustain a competitive advantage.
a. the Internet
b. the increasing homogenization of global culture
c. the increasing hostility to American culture
d. the development of second world economies into true global contenders

 

 

ANS:  A                    PTS:   1                    DIF:    med                REF:   p. 133

OBJ:   1                    NOT:  knowledge

 

  1. Which of the following is NOT a factor affecting sustainability of a competitive advantage?
a. The availability of substitutes for a firm’s core competence
b. The rate at which obsolescence of the core competence occurs
c. The imitability of a core competence
d. The availability of resources to the firm

 

 

ANS:  D                    PTS:   1                    DIF:    med                REF:   p. 107

OBJ:   5                    NOT:  knowledge

 

  1. Internal analysis enables a firm to determine:
a. what the firm can do. c. what the firm should have done.
b. what the firm should do. d. when the firm should act.

 

 

ANS:  A                    PTS:   1                    DIF:    med                REF:   p. 107

OBJ:   1                    NOT:  knowledge

 

  1. The proper matching of what a firm can do with what it might do allows the:
a. development of a top management team.
b. development of a successful low-cost strategy.
c. development of strategic intent, strategic mission, and the formulation of strategies.
d. formation of a strategic group.

 

 

ANS:  C                    PTS:   1                    DIF:    hard               REF:   p. 107

OBJ:   1                    NOT:  knowledge

 

  1. According to the discussion in the textbook, Kodak:
a. did not recognize the shift from analog to digital technologies early enough.
b. was not able to overcome the inertia of its analog imaging capabilities so it could develop capabilities in digital imaging.
c. conducted inadequate internal analysis.
d. in the end, successfully negotiated the change in the competitive environment.

 

 

ANS:  B                    PTS:   1                    DIF:    hard               REF:   p. 109

OBJ:   1                    NOT:  application

 

  1. The three conditions that characterize difficult managerial decisions concerning resources, capabilities, and core competencies are:
a. complexity, rarity, and capacity.
b. uncertainty, complexity, and intraorganizational conflicts.
c. imitability, complexity, and interorganizational conflicts.
d. uncertainty, value, and availability of resources.

 

 

ANS:  B                    PTS:   1                    DIF:    hard               REF:   p. 109

OBJ:   5                    NOT:  knowledge

 

  1. The condition of uncertainty in managerial decision-making occurs when:
a. it is difficult to determine which core competency to nurture.
b. a wide range of internal issues must be examined.
c. there are changes in technologies, economic and political trends, and societal values.
d. managers are unable to determine the best course of action to take.

 

 

ANS:  C                    PTS:   1                    DIF:    hard               REF:   p. 109

OBJ:   1                    NOT:  knowledge

 

  1. Competitive advantage typically comes from:
a. individual resources.
b. one very outstanding resource.
c. several outstanding resources acting independently.
d. the unique bundling of several resources.

 

 

ANS:  D                    PTS:   1                    DIF:    med                REF:   p. 112

OBJ:   4                    NOT:  knowledge

 

  1. Tangible resources include:
a. assets that are people dependent such as know-how.
b. assets that can be seen and quantified.
c. organizational culture.
d. a firm’s reputation.

 

 

ANS:  B                    PTS:   1                    DIF:    med                REF:   p. 112

OBJ:   3                    NOT:  knowledge

 

  1. Intangible assets include:
a. the firm’s reputation for its goods and services.
b. a firm’s borrowing capacity.
c. depreciated capital assets.
d. manufacturing facilities.

 

 

ANS:  A                    PTS:   1                    DIF:    med                REF:   p. 113

OBJ:   3                    NOT:  knowledge

 

  1. Which of the following is NOT an intangible asset?
a. Trademarks c. Production equipment
b. Organizational culture d. Brand name

 

 

ANS:  C                    PTS:   1                    DIF:    med                REF:   p. 113

OBJ:   3                    NOT:  knowledge

 

  1. The firm’s reputation for quality is:
a. an example of a tangible resource.
b. not an issue of principal concern for a firm.
c. an example of an intangible resource that can provide a competitive advantage.
d. a resource for the firm on which funds can easily be borrowed.

 

 

ANS:  C                    PTS:   1                    DIF:    med                REF:   p. 113|p. 114

OBJ:   3                    NOT:  comprehension

 

  1. Compared to tangible resources, intangible resources are:
a. of less strategic value to the firm.
b. not the focus of strategic analysis.
c. a more potent source of competitive advantage.
d. more likely to be reflected on the firm’s balance sheet.

 

 

ANS:  C                    PTS:   1                    DIF:    hard               REF:   p. 113

OBJ:   3                    NOT:  comprehension

 

  1. Which of the following statements is in disagreement with the discussion in your textbook about knowledge?
a. “Knowledge is power” and this is the rationale for individuals in organizations to hoard information.
b. Sharing knowledge does not diminish its value for any one person.
c. Knowledge is an intangible asset that can be leveraged.
d. Knowledge is not diluted when it is shared.

 

 

ANS:  A                    PTS:   1                    DIF:    med                REF:   p. 114

OBJ:   3                    NOT:  comprehension

 

  1. When a firm such as Harley-Davidson has a strong brand name, it is challenged to:
a. develop another source of competitive advantage.
b. exploit the brand name as a competitive advantage.
c. develop new bundles of resources to be used to gain a competitive advantage.
d. identify new core competencies in the firm.

 

 

ANS:  B                    PTS:   1                    DIF:    hard               REF:   p. 114|p. 115

OBJ:   3                    NOT:  application

 

  1. Capabilities can be based on all of the following EXCEPT:
a. information-based resources. c. tangible resources.
b. intangible resources. d. unknown resources.

 

 

ANS:  D                    PTS:   1                    DIF:    med                REF:   p. 115

OBJ:   4                    NOT:  knowledge

 

  1. The foundation for a firm’s capabilities is (are) the:
a. ability to increase capacity as demand warrants.
b. amount of capital resources readily available.
c. good reputation a firm has built throughout its customer base.
d. skills and knowledge of its employees.

 

 

ANS:  D                    PTS:   1                    DIF:    med                REF:   p. 115

OBJ:   4                    NOT:  comprehension

 

  1. The critical executive skill of the age is fast becoming ____.
a. the ability to manage information systems.
b. the ability to balance and combine tangible and intangible resources.
c. the capacity to manage human intellect.
d. expertise in handling global relationships.

 

 

ANS:  C                    PTS:   1                    DIF:    med                REF:   p. 115

OBJ:   3                    NOT:  knowledge

 

  1. Which of the following is a true statement about capabilities?
a. Capabilities derive from the firm’s capacity to deploy resources that have been integrated to achieve a desired end state.
b. Capabilities emerge quickly when resources interact.
c. Human capital cannot be a firm’s capability.
d. Capabilities become weaker and less valuable through repetition and practice.

 

 

ANS:  A                    PTS:   1                    DIF:    hard               REF:   p. 115

OBJ:   4                    NOT:  comprehension

 

  1. The knowledge possessed by a firm’s human capital is:
a. easily reproduced by competitor firms which allows them to obtain a competitive advantage.
b. a significant organizational capability and may be the root of all competitive advantage.
c. not a primary source of competitive advantage.
d. centered in a firm’s top management team.

 

 

ANS:  B                    PTS:   1                    DIF:    hard               REF:   p. 116

OBJ:   5                    NOT:  knowledge

 

  1. Global business leaders increasingly believe ____ may be the root of all competitive advantages.
a. knowledge c. capital resources
b. workforce skills d. business relationships

 

 

ANS:  A                    PTS:   1                    DIF:    hard               REF:   p. 116

OBJ:   4                    NOT:  knowledge

 

  1. Because knowledge acquisition and development has become so important in large companies, many firms have created a management position with the title of:
a. Vice President of Training and Development.
b. Senior Vice President of Training and Recruiting.
c. Chief Learning Officer.
d. Senior Information Executive.

 

 

ANS:  C                    PTS:   1                    DIF:    med                REF:   p. 116

OBJ:   4                    NOT:  knowledge

 

  1. What is the job of a Chief Learning Officer?
a. Implementing employee training and development programs
b. Educating customers about the firm’s products
c. Developing an environment in which knowledge is widespread among employees
d. Establishing programs to promote education in the community

 

 

ANS:  C                    PTS:   1                    DIF:    med                REF:   p. 116

OBJ:   4                    NOT:  knowledge

 

  1. A firm’s resources and capabilities:
a. are always core competencies.
b. may be a source of incompetence.
c. are all a firm needs to focus on.
d. are inherited, not created.

 

 

ANS:  B                    PTS:   1                    DIF:    hard               REF:   p. 116

OBJ:   4                    NOT:  comprehension

 

  1. Resources and capabilities are core competencies only when their use:
a. leads to a competitive advantage for the firm.
b. permits diffusion of threats in the external environment.
c. provides opportunities to defeat competitors.
d. encourages quick responses to changes in the global economy.

 

 

ANS:  A                    PTS:   1                    DIF:    med                REF:   p. 116

OBJ:   5                    NOT:  comprehension

 

  1. McKinsey and Company recommends that firms identify ____ competencies around which their strategic actions can be framed.
a. 1 or 2 c. 6 or 7
b. 3 or 4 d. 10

 

 

ANS:  B                    PTS:   1                    DIF:    med                REF:   p. 117

OBJ:   4                    NOT:  knowledge

 

  1. ____ is an example of a capability that is based in the functional area of distribution.
a. Effective use of logistics management techniques
b. Effective control of inventories through point-of-purchase data collection
c. Effective organizational structure
d. Product and design quality

 

 

ANS:  A                    PTS:   1                    DIF:    med                REF:   p. 117 (Table 4.3)

OBJ:   4                    NOT:  knowledge

 

  1. To be a strategic capability, a capability must satisfy all of the following criteria EXCEPT:
a. be technologically innovative.
b. be hard for competing firms to duplicate.
c. be without good substitutes.
d. be valuable to customers.

 

 

ANS:  A                    PTS:   1                    DIF:    med                REF:   p. 119

OBJ:   5                    NOT:  comprehension

 

  1. From the customer’s point of view, a capability can be a core competence if it is:
a. easily accessible to workers.
b. supported by the top management team.
c. valuable and nonsubstitutable.
d. a stable feature of the firm’s environment.

 

 

ANS:  C                    PTS:   1                    DIF:    hard               REF:   p. 118

OBJ:   5                    NOT:  knowledge

 

  1. When a resource or capability is valuable, rare, costly to imitate, and nonsubstitutable, firms may obtain:
a. a temporary competitive advantage.
b. a complex competitive advantage.
c. competitive parity.
d. a sustainable competitive advantage.

 

 

ANS:  D                    PTS:   1                    DIF:    hard               REF:   p. 118 (Table 4.4)

OBJ:   5                    NOT:  comprehension

 

  1. Capabilities that other firms cannot develop easily are classified as:
a. costly to imitate. c. valuable.
b. rare. d. nonsubstitutable.

 

 

ANS:  A                    PTS:   1                    DIF:    med                REF:   p. 119

OBJ:   5                    NOT:  knowledge

 

  1. Organizational culture is:
a. usually quick to form.
b. a potential source of competitive advantage.
c. so difficult to analyze that most firms should choose to ignore it.
d. rarely unique to a single firm.

 

 

ANS:  B                    PTS:   1                    DIF:    hard               REF:   p. 120

OBJ:   5                    NOT:  comprehension

 

  1. McKinsey & Co.’s corporate culture is an example of a ____ capability.
a. valuable c. costly-to-imitate
b. substitutable d. rare

 

 

ANS:  C                    PTS:   1                    DIF:    med                REF:   p. 120

OBJ:   5                    NOT:  application

 

  1. LVMH’s ability to design a wide range of luxury products is an example of a(n) ____ capability.
a. valuable c. imitable
b. rare d. nonsubstitutable

 

 

ANS:  A                    PTS:   1                    DIF:    med                REF:   p. 119

OBJ:   5                    NOT:  application

 

  1. Which of the following is NOT a reason that costly-to-imitate capabilities can emerge?
a. Environmental opportunity c. Historical conditions
b. Social complexity d. Causal ambiguity

 

 

ANS:  A                    PTS:   1                    DIF:    med                REF:   p. 120

OBJ:   5                    NOT:  knowledge

 

  1. Causally ambiguous means that:
a. the connection between cause and effect of capital is unclear in the firm.
b. rivals find it difficult to understand how the firm uses its capabilities to gain competitive advantage.
c. the connection between industry and firm performance is unclear.
d. the effect of a firm’s resources are unclear to the firm itself.

 

 

ANS:  B                    PTS:   1                    DIF:    hard               REF:   p. 120

OBJ:   5                    NOT:  knowledge

 

  1. A firm’s inability to understand how a competitor uses its capabilities to gain competitive advantage is an example of:
a. social complexity.
b. causal ambiguity.
c. the rarity of a capability.
d. the nonsubstitutability of a capability.

 

 

ANS:  B                    PTS:   1                    DIF:    hard               REF:   p. 120

OBJ:   5                    NOT:  knowledge

 

  1. Capabilities are nonsubstitutable when:
a. there are no direct substitutes in the five forces model.
b. the firm’s products cannot be a substitute for others’ products.
c. the switching costs in the industry are very high.
d. they do not have strategic equivalents.

 

 

ANS:  D                    PTS:   1                    DIF:    med                REF:   p. 120

OBJ:   5                    NOT:  knowledge

 

  1. According to the textbook, UPS has built its success on the competitive fundamental strength of a unique:
a. value proposition c. organizational culture.
b. organizational strategy d. strategic intent

 

 

ANS:  C                    PTS:   1                    DIF:    med                REF:   p. 120

OBJ:   5                    NOT:  application

 

  1. Southwest Airlines uses causal ambiguity to make its value-creating strategy difficult to imitate, and this is possible because of the firm’s focus on:
a. globalization.
b. culture, technology, and human capital.
c. its unique branding of products.
d. cutting-edge advertising campaigns.

 

 

ANS:  B                    PTS:   1                    DIF:    med                REF:   p. 120

OBJ:   5                    NOT:  application

 

  1. Value chain analysis is a tool used to:
a. analyze a firm’s external environment.
b. concentrate on a firm’s internal environment without exercising a concern about the actions of those companies with which the firm competes.
c. understand the parts of the firm’s organization that create value and those that do not.
d. determine how long an opportunity in a firm’s external environment can be expected to last.

 

 

ANS:  C                    PTS:   1                    DIF:    hard               REF:   p. 121

OBJ:   6                    NOT:  comprehension

 

  1. Which of the following is NOT true about value chain analysis?
a. The value chain is a template the firm can use to understand its cost position.
b. This analysis helps to identify the single most important means that will facilitate strategy implementation.
c. Both value chain activities and support functions should be analyzed.
d. It can be used to guide the implementation of business-level strategies.

 

 

ANS:  B                    PTS:   1                    DIF:    hard               REF:   p. 121|p. 122

OBJ:   6                    NOT:  comprehension

 

  1. Value chain activities are:
a. involved with the support of the organization.
b. involved in a product’s physical creation, its distribution, and its service after the sale.
c. the most important activities and tasks in the firm.
d. the activities and tasks that the top management team most values.

 

 

ANS:  B                    PTS:   1                    DIF:    med                REF:   p. 122

OBJ:   6                    NOT:  knowledge

 

  1. In a globally competitive economy, the most valuable links on the value chain relate(s) to:
a. knowledge about customers. c. the firm’s value chain activities.
b. corporate analysts. d. the firm’s support functions.

 

 

ANS:  A                    PTS:   1                    DIF:    med                REF:   p. 122

OBJ:   6                    NOT:  comprehension

 

  1. FedEx based its success on the reconfiguration of a value chain activity and a support function. Which activities and tasks did they reconfigure?
a. operations and technological development
b. marketing / sales and procurement
c. service and firm infrastructure
d. outbound logistics and human resources

 

 

ANS:  D                    PTS:   1                    DIF:    hard               REF:   p. 123

OBJ:   6                    NOT:  application

 

  1. In what way did Federal Express reconfigure the value chain that has resulted in changing the nature of the delivery business?
a. Decreased its technological development activity
b. Changed from an informal to a formal firm infrastructure
c. Reconfigured its outbound logistics and human resource management
d. Changed its procurement policies and procedures

 

 

ANS:  C                    PTS:   1                    DIF:    med                REF:   p. 123

OBJ:   6                    NOT:  application

 

  1. Value chain activities which create value for the customer include:
a. training human resources in ways that produce core competencies.
b. identifying and utilizing sophisticated technologies.
c. selecting appropriate distribution channels.
d. acquiring and managing financial resources.

 

 

ANS:  C                    PTS:   1                    DIF:    hard               REF:   p. 122 (Figure 4.5)|p. 124

OBJ:   6                    NOT:  comprehension

 

  1. Examples of support functions include all of the following EXCEPT:
a. human resources. c. service after the sale.
b. finance. d. management information systems.

 

 

ANS:  C                    PTS:   1                    DIF:    med                REF:   p. 122|p. 124 (Figure 4.7)

OBJ:   6                    NOT:  knowledge

 

  1. Value chain activities include all of the following EXCEPT:
a. technology development. c. marketing.
b. operations. d. follow-up service.

 

 

ANS:  A                    PTS:   1                    DIF:    med                REF:   p. 122 (Figure 4.5)

OBJ:   6                    NOT:  knowledge

 

  1. Value chain support functions include:
a. converting inputs into product.
b. developing advertising and promotional campaigns.
c. distributing the product to customers.
d. recruiting, hiring, and training personnel.

 

 

ANS:  D                    PTS:   1                    DIF:    hard

REF:   p. 122 (Figure 4.5)|p. 124 (Figure 4.7)                            OBJ:   6

NOT:  comprehension

 

  1. Outsourcing is the:
a. selling of a value-creating activity to other firms in an industry.
b. selling of a value-creating activity to other firms, whether or not they are in your industry.
c. purchase of a value-creating activity from an external supplier.
d. use of computers to obtain data from the Internet.

 

 

ANS:  C                    PTS:   1                    DIF:    med                REF:   p. 125

OBJ:   7                    NOT:  knowledge

 

  1. A major reason outsourcing is being used is that:
a. it allows top managers to focus on operational details.
b. few firms possess superior capability in all primary and support activities.
c. it permits unlimited access to capital resources.
d. competitors do not have access to the same external sources.

 

 

ANS:  B                    PTS:   1                    DIF:    med                REF:   p. 125

OBJ:   7                    NOT:  comprehension

 

  1. Four skills are essential for managers involved in outsourcing programs. Which of the following is NOT one of these skills?
a. strategic thinking c. partnership governance
b. deal making d. marketing expertise

 

 

ANS:  D                    PTS:   1                    DIF:    med                REF:   p. 125

OBJ:   7                    NOT:  knowledge

 

  1. When selecting activities to outsource, firms should select activities that:
a. capture and create value. c. are critical to their success.
b. neutralize external threats. d. are nonstrategic capabilities.

 

 

ANS:  D                    PTS:   1                    DIF:    hard               REF:   p. 125

OBJ:   7                    NOT:  comprehension

 

  1. Which statement is TRUE about outsourcing?
a. In general, activities requiring low skilled labor should be outsourced to countries with low labor costs.
b. In general, activities that cannot be codified should be outsourced to companies skilled in administration.
c. In general, activities requiring strong organizational culture should be outsourced to consultants skilled in relationship-building.
d. In general, support activities should be outsourced.

 

 

ANS:  A                    PTS:   1                    DIF:    hard               REF:   p. 125

OBJ:   7                    NOT:  comprehension

 

  1. What causes core capabilities to become core rigidities?
a. Changes in the external and internal environment
b. Inertia and competition
c. Strategic myopia and managerial inflexibility
d. Lack of knowledge and poor use of assets

 

 

ANS:  C                    PTS:   1                    DIF:    hard               REF:   p. 126

OBJ:   8                    NOT:  knowledge

 

  1. Events occurring in the external environment create conditions through which core competencies do all of the following EXCEPT:
a. become core rigidities.
b. produce inertia.
c. stifle innovation.
d. sustain the firm’s competitive advantage.

 

 

ANS:  D                    PTS:   1                    DIF:    med                REF:   p. 126

OBJ:   8                    NOT:  application

 

  1. Which of the following is NOT an external event that reveals the “dark side” of core capabilities?
a. A new competitor figures out a better way to serve the firm’s customers.
b. New technologies emerge and replace those used by the firm.
c. A firm changes its focus to a new core competence.
d. Political or social events shift the foundation of current core capabilities.

 

 

ANS:  C                    PTS:   1                    DIF:    hard               REF:   p. 126

OBJ:   8                    NOT:  comprehension

 

  1. The level of stakeholder influence can come from all of the following EXCEPT:
a. economic power. c. formal power.
b. political power. d. social power.

 

 

ANS:  D                    PTS:   1                    DIF:    med                REF:   p. 127

OBJ:   9                    NOT:  knowledge

 

  1. A socially responsible firm does all of the following EXCEPT:
a. treats employees and managers well.
b. pays list price to suppliers.
c. provides stable returns to shareholders.
d. adds positively to its community.

 

 

ANS:  B                    PTS:   1                    DIF:    med                REF:   p. 130|p. 131 (Table 4.7)

OBJ:   9                    NOT:  knowledge

 

  1. Which of the following statements is NOT true with regard to firm performance?
a. Stakeholders continue supporting a firm when its performance meets or exceeds expectations. c. Various stakeholdes’ objectives differ from one another, sometimes requiring managers to make trade-offs.
b. Various types of firm performance have an equivalent influence on the three primary stakeholder groups. d. Firms have legal obligations to shareholders, and they are legally obliged to satisfy government regulations.

 

 

ANS:  B                    PTS:   1                    DIF:    med                REF:   p. 126|p. 128

OBJ:   9                    NOT:  knowledge

 

  1. Which of the following is a measure of profitability?
a. Total shareholder return c. Growth in revenues
b. Return on equity d. Asset  turnover

 

 

ANS:  B                    PTS:   1                    DIF:    hard               REF:   p. 129

OBJ:   9                    NOT:  comprehension

 

  1. Which of the following is NOT a measure of a firm’s internal efficiency?
a. Return on assets c. Worker productivity
b. Current ratio d. Inventory turnover

 

 

ANS:  A                    PTS:   1                    DIF:    hard               REF:   p. 129

OBJ:   9                    NOT:  comprehension

 

ESSAY

 

  1. Describe the importance of internal analysis to the strategic success of the firm.

 

ANS:

In global competition today, what has been thought of as traditional sources of competitive advantage (labor costs, capital costs, raw materials) are much less effective. Rather, a firm today should see itself as a bundle of heterogeneous resources, capabilities, and core competencies that can be used to create an exclusive market position. Therefore, a firm must understand not only its own capabilities and how they lead to core competencies, but also those of its competitors. This understanding is generated through an internal analysis.

 

PTS:   1                    REF:   p. 106|p. 110                                  OBJ:   1

 

  1. Describe the various types of resources.

 

ANS:

Resources are either tangible or intangible. Tangible resources are those assets that can be seen and quantified. There are four types: financial resources (borrowing capacity, ability to generate internal funds); physical resources (plant and equipment, access to raw materials); technological resources (patents, trademarks, and copyrights), and organizational resources (formal reporting structure, planning, controlling and coordinating systems). Intangible resources are those assets in the firm that are less visible. There are three types of such resources: human resources (knowledge, trust, management capabilities, organizational routines), resources for innovation (ideas, scientific capability, capacity for innovation), and reputation (brand name, perceptions of product quality, supplier and customer relations, and relationships).

 

PTS:   1                    REF:   p. 112|p. 115                                  OBJ:   3

 

  1. Define capabilities and how they affect the firm’s strategic success.

 

ANS:

Capabilities represent a firm’s capacity to deploy integrated resources to achieve a desired end state. Capabilities are based on developing, carrying, and exchanging information and knowledge through the firm’s human resources. The value of human capital in developing and using capabilities and core competencies cannot be overstated.

 

PTS:   1                    REF:   p. 115|p. 116                                  OBJ:   4

 

  1. Describe the four specific criteria that managers can use to decide which of their firm’s capabilities have the potential to create a sustainable competitive advantage.

 

ANS:

Capabilities that are valuable, rare, costly to imitate, and nonsubstitutable are strategic capabilities and a source of sustainable competitive advantage. For a capability to be valuable means that it helps the firm to exploit opportunities and/or to neutralize threats in the external environment. Rare means that few if any competitors possess the particular capability. Costly to imitate means a capability cannot be easily developed by other firms. Finally, nonsubstitutable capabilities do not have strategic equivalents.

 

PTS:   1                    REF:   p. 118|p. 121                                  OBJ:   5

 

  1. Describe a value chain analysis.

 

ANS:

The value chain analysis allows a firm to understand the activities that create value for the firm and those that do not. There are two central types of activities in a value chain. The first type is called value chain activities. These are activities and tasks that are involved in a product’s physical creation, its sale and distribution to buyers, and its service after the sale. The support functions are those activities and tasks necessary for the value chain activities to take place. To conduct a value chain analysis, people should study and identify all activities of the firm and evaluate their impact on the effort to create value for the customer. This analysis should be conducted with an attempt to assess the competitor’s capabilities in these same areas.

 

PTS:   1                    REF:   p. 121|p. 124                                  OBJ:   6

 

  1. Why is it important to prevent core competencies from becoming core rigidities?

 

ANS:

All core competencies have the potential to become core rigidities and to generate failure. Each competence is a weakness because if it is emphasized when it is no longer competitively relevant it can generate organizational inertia.

 

PTS:   1                    REF:   p. 126            OBJ:   8

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