Test Bank For Strategic Management Text and Cases 8th Edition by Gregory G Dess Dr.

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Strategic Management Text and Cases 8th Edition by Gregory G Dess Dr. –
Test Bank
SAMPLE QUESTIONS

Chapter 01

Strategic Management: Creating Competitive Advantages

 

True / False Questions

1. Hewlett-Packard’s failure and success under the leadership first of Carly Fiorina and then of Mark Hurd was said to be a direct result of the quality of leadership of each of these CEOs. According to the text, this would be an example of the “romantic” perspective of leadership.

True    False

 

2. Strategic management consists of the analyses, decisions, and actions an organization undertakes in order to create and sustain competitive advantages.

True    False

 

3. Strategic management is concerned with the analysis of strategic goals as stated in the vision, mission, and strategic objectives of a firm.

True    False

 

4. The three interrelated and principal activities of strategic management are: strategy analysis, strategy formulation, and strategy implementation.

True    False

 

5. Strategic management is not concerned with how to create competitive advantage in the marketplace.

True    False

 

6. Management innovations such as total quality, just-in-time, benchmarking, business process reengineering, and outsourcing are important, but not enough for building sustainable competitive advantage.

True    False

 

7. Making trade-off decisions between effectiveness and efficiency is central to the practice of strategic management.

True    False

 

8. Only shareholders in a publicly held company are stakeholders because they are the only group that has a stake in the success of the organization.

True    False

 

9. Strategic management is only concerned with short-term perspectives.

True    False

 

10. Focusing on a single stakeholder is a good strategic principle for managers to follow.

True    False

 

11. According to Peter Senge, a leading strategic management author, creative tension results from the need to incorporate both short-term and long-term perspectives in strategic management.

True    False

 

12. Shareholders expect only short-term value and therefore good managers should only focus on meeting short-term performance targets.

True    False

 

13. Focusing on the short term and efficiency is always a bad management principle.

True    False

 

14. Ambidexterity refers to a manager’s challenge to align resources, without having to take advantage of existing product markets or to proactively explore new opportunities.

True    False

 

15. According to a recent study involving 41 business units in 10 multinational companies, one ambidextrous behavior exhibited by managers is that of being brokers who are always looking to build internal networks.

True    False

 

16. According to Henry Mintzberg, a management scholar, most firms realize their original intended strategy.

True    False

 

17. The final realized strategy of a firm is a combination of deliberate and emergent strategies.

True    False

 

18. In the Mintzberg model, organizational decisions determined only by analysis are intended strategy.

True    False

 

19. Strategy analysis is the study of the external environments of the firm.

True    False

 

20. Both the internal and external environments of a firm must be analyzed as well as the goals of the firm before managers can formulate and implement appropriate strategies.

True    False

 

21. Strategy formulation involves decisions made by firms regarding investments, commitments, and other aspects of operations that create and sustain competitive advantage.

True    False

 

22. All successful firms compete and outperform their rivals by developing bases for competitive advantage, which can be achieved only through cost leadership.

True    False

 

23. Business-level strategy focuses on (1) what businesses to compete in and (2) the management of the business portfolio to create synergy among its businesses.

True    False

 

24. Corporate-level strategy addresses how firms compete and outperform their rivals as well as achieve and sustain competitive advantages.

True    False

 

25. International strategy involves decisions concerning appropriate entry strategy and attaining competitive advantage in international markets.

True    False

 

26. Entrepreneurial activity aimed at new value creation is not a major engine for economic growth.

True    False

 

27. Strategy implementation involves actions that carry out the formulated strategy including proper strategic controls, organizational designs, and leadership.

True    False

 

28. Effective leadership can play a large role in fostering corporate entrepreneurship. Corporate entrepreneurship can have a very positive impact on the bottom line of a firm.

True    False

 

29. Firms must exercise either informational control or behavioral control in order to assure proper strategy implementation.

True    False

 

30. Leaders are responsible for creating a learning organization so that the entire organization can benefit only from the individual talents.

True    False

 

31. The three primary participants in corporate governance are: (1) the shareholders, (2) the management (led by the chief executive officer), and (3) the employees.

True    False

 

32. Decisions by boards of directors are always consistent with shareholder interests.

True    False

 

33. Ensuring effective corporate governance requires an effective and engaged board of directors, uninvolved shareholders, and proper managerial rewards and incentives.

True    False

 

34. Auditors, banks, and analysts are external control mechanisms to ensure effective corporate governance.

True    False

 

35. Former Chrysler vice chairman Robert Lutz observed that companies exist to serve the shareholder and create shareholder value. He insisted that the only person who owns the company is the person who paid good money for it. This is an example of a symbiotic approach to stakeholder management.

True    False

 

36. Stakeholders make various claims on a company. Their interests must be taken into account in the strategic management process.

True    False

 

37. Stockholders in a company are the only individuals with an interest in the financial performance of the company.

True    False

 

38. Stockholders, employees, and the community-at-large are among the stakeholders of a firm.

True    False

 

39. Symbiosis is the ability to recognize interdependencies among the interests of multiple stakeholders within and outside an organization.

True    False

 

40. Procter and Gamble developed a laundry detergent compaction technique that appeals to consumers, retailers, shipping and wholesalers, and environmentalists. This is an example of stakeholder symbiosis.

True    False

 

41. Partnering with governments, communities, suppliers, customers, and rivals is a way to manage conflicting stakeholder interests.

True    False

 

42. The Higgs Index enables companies to compare environmental performance outcomes in order to improve their environmental impact and is an example of how rivals work together to resolve complex problems.

True    False

 

43. As a stakeholder group, creditors are interested in taxes and compliance with regulations.

True    False

 

44. As a stakeholder group, customers are interested in dividends and capital appreciation.

True    False

 

45. As a stakeholder group, communities are interested in good citizenship behavior.

True    False

 

46. Social responsibility is the idea that organizations are not only accountable to stockholders but also to the community-at-large.

True    False

 

47. What constitutes socially responsible behavior changes over time.

True    False

 

48. Shell, NEC, and Procter and Gamble have been measuring their performance according to what has been called a triple bottom line. This technique involves an assessment of financial, social, and environmental performance.

True    False

 

49. Demands for greater corporate responsibility are decreasing today.

True    False

 

50. A key stakeholder group that appears to be particularly susceptible to corporate social responsibility (CSR) initiatives is customers.

True    False

 

51. There is a positive influence of CSR on the consumer evaluation of companies and their purchasing decisions, according to recent studies.

True    False

 

52. Environmental sustainability is a value embraced by the most competitive and successful multinational companies.

True    False

 

53. For many successful firms, environmental values are not central to the company culture and management processes.

True    False

 

54. Sustainability is being increasingly recognized as a source of cost efficiencies and revenue growth.

True    False

 

55. The ROIs on sustainability projects are often very difficult to quantify because the data necessary to calculate ROI accurately are often not available when it comes to sustainability projects.

True    False

 

56. Many of the benefits from sustainability projects are intangible, making it difficult to calculate the ROI.

True    False

 

57. The intangible benefits of sustainability projects, such as reducing risks, staying ahead of regulations, pleasing communities, and enhancing employee morale, are substantial even when they are difficult to quantify.

True    False

 

58. Sustainability projects often require shorter-term payback windows than other projects.

True    False

 

59. Sustainability initiatives rarely have difficulty making it through the conventional approval process within corporations because managers are not concerned about their return on investment.

True    False

 

60. The ROI on a sustainability project generally is easy to quantify.

True    False

 

61. Strategic management requires managers at all levels of the organization to take a segregated view of the organization.

True    False

 

62. The strategic management process should be addressed only by top-level executives. Mid-level and low-level employees are best equipped to implement the strategies of the organization.

True    False

 

63. To develop and mobilize people and other assets, leaders are needed throughout the organization.

True    False

 

64. In the strategic management process, only local line leaders and executive leaders are needed.

True    False

 

65. Internal networks have great positional power and formal authority.

True    False

 

66. Local line leaders have little profit-and-loss responsibility.

True    False

 

67. Executive leaders champion and guide ideas.

True    False

 

68. Local line leaders are key in setting the tone for the empowerment of employees.

True    False

 

69. Richard Branson, the founder of the Virgin Group, is well known for creating an inclusive organizational structure in which anybody in the organization can be involved in generating and activating upon new business ideas.

True    False

 

70. To inculcate a strategic management perspective, managers must often make a major effort to effect transformational change.

True    False

 

71. To effect transformational change in an organization, managers must communicate extensively and provide incentives, training, and development.

True    False

 

72. Nancy Snyder, corporate vice president of Whirlpool, shifted the reputation of the firm to that of an innovator by investing financially in capital spending.

True    False

 

73. Successful executives do not reward honesty and input and do not show their interest in learning what others are thinking.

True    False

 

74. According to the CEO of IDEO, Tim Brown, spotting and promoting at any level in the firm is important.

True    False

 

75. There are few benefits to having broad investment throughout the organization in the strategic management process.

True    False

 

76. Showing interest in learning what others are thinking is a leadership weakness.

True    False

 

77. The vision of an organization is the top level of its hierarchy of organizational goals. The vision statement should be massively inspiring, overarching, and long term.

True    False

 

78. Strategic objectives are more specific than vision statements.

True    False

 

79. According to the text, a mission statement is an overarching statement that is massively inspiring, long term, and only discusses the purpose of the company.

True    False

 

80. A mission statement encompasses both the purpose of the organization as well as its basis of competition, and the basis of its competitive advantage.

True    False

 

81. Strategic objectives should be measurable, specific, appropriate, and realistic, but not constrained by time deadlines.

True    False

 

82. Much research has supported the notion that individuals work much harder when they are asked to do their best rather than when they are striving toward a specific goal.

True    False

 

83. Objectives in organizations should be clear, stated, and known by employees throughout the organization.

True    False

 

84. Strategic management should only include short-term objectives. Long-term objectives are covered in the vision statement of the organization.

True    False

 

85. Organizational goals and objectives should be vague in order to allow for changes in strategy.

True    False

 

86. An idealistic vision can arouse employee enthusiasm and therefore is a good vision.

True    False

 

87. One of the reasons a vision fails is that too much focus can lead to missed opportunities.

True    False

 

88. Visions need to be anchored in reality in order to be successful.

True    False

 

89. Effective mission statements incorporate the concept of stakeholder management, suggesting that organizations must respond to a single constituency.

True    False

 

90. A good mission statement, by addressing each principal theme, must communicate why an organization is special and different.

True    False

 

91. When formulating strategic objectives, managers need to remember that too many objectives can result in a lack of focus and diminished results.

True    False

 

 

Multiple Choice Questions

92. The text addresses two perspectives of leadership as well as their implications. These two perspectives are

A. romantic and unromantic.

 

B. romantic and internal control.

 

C. external control and unromantic.

 

D. romantic and external control.

 

93. A CEO made a lot of mistakes in assessing the market and the competitive conditions and improperly redesigning the organization into numerous business units. Such errors led to significant performance declines. According to the text, this example illustrates the __________ perspective of leadership.

A. external control

 

B. romantic

 

C. internal mechanism

 

D. operational

 

94. According to the external control view of leadership, which of the following factors would not be considered an external factor that might positively or negatively affect a firm’s success?

A. economic downturns

 

B. governmental legislation

 

C. outbreak of war

 

D. company employee morale

 

95. Melvin Alexander, executive director of Principled Solutions Enterprise, a management consulting firm specializing in health care, suggests that environmental changes oblige firms to make strategic changes in order to survive. Which of the following is one of the strategic changes he foresees will occur in the next three to five years?

A. changes in the behavior of the health care consumers

 

B. reduction in the number of available medical doctors

 

C. increases in the number of locations of health care facilities

 

D. decreases in information technology investment

 

96. According to the text, the strategic management process entails three ongoing processes. They are

A. analyses, actions, and synthesis.

 

B. analyses, decisions, and actions.

 

C. analyses, evaluation, and critique.

 

D. analyses, synthesis, and decisions.

 

97. Management innovations such as total quality, benchmarking, and business process reengineering cannot lead to sustainable competitive advantage because

A. companies that have implemented these techniques have lost money.

 

B. there is no proof that these techniques work.

 

C. they cost too much money and effort to implement.

 

D. every company is trying to implement them.

 

98. The organizational versus the individual rationality perspective suggests that objectives that are

A. good for a functional area are always good for the overall organization.

 

B. good for the overall organization are always best for a functional area.

 

C. best for a functional area may not be best for the overall organization.

 

D. best for one functional area will never be best for all functional areas.

 

99. The four key attributes of strategic management include the idea that strategy must

A. be directed toward overall organizational goals and objectives.

 

B. be focused only on long-term objectives.

 

C. be focused on only one specific area of an organization.

 

D. focus only on competitor strengths.

 

100. The four key attributes of strategic management include all of the following except

A. including multiple stakeholder interests in decision making.

 

B. incorporating both short-term and long-term perspectives.

 

C. recognizing the trade-offs between effectiveness and efficiency.

 

D. emphasis on the attainment of short-term objectives.

 

101. Effectiveness is often defined as

A. doing things right.

 

B. stakeholder satisfaction.

 

C. doing the right thing.

 

D. productivity enhancement.

 

102. In choosing to focus on stakeholders, which of the following will not lead to success for a manager?

A. shareholders and employees

 

B. employees and suppliers

 

C. customers and the community at large

 

D. customers only

 

103. In strategic management, both the short-term and long-term perspectives need to be considered because

A. shareholder value is only measured by short-term returns.

 

B. shareholders only care about long-term returns.

 

C. long-term vision precludes the analysis of present operating needs.

 

D. the creative tension between the two forces managers to develop more successful strategy.

 

104. Strategic management involves the recognition of trade-offs between effectiveness and

A. cost.

 

B. value.

 

C. return on investment.

 

D. efficiency.

 

105. All of the following are ambidextrous behaviors except

A. taking initiative and being alert to opportunities beyond the job description.

 

B. being cooperative and seeking opportunities to combine personal efforts with that of others.

 

C. intensely focusing on the responsibilities of one individual and maximizing the output of the department in the organization in which that individual works.

 

D. being brokers, always looking to build internal linkages.

 

106. Ambidextrous behaviors in individuals illustrate how a dual capacity for _______ can be woven into the fabric of an organization at the individual level.

A. alignment and adaptability

 

B. alignment and transparency

 

C. alignment and internal linkages

 

D. alignment and efficiency

 

107. According to Henry Mintzberg, the final realized strategy of a firm is

A. a combination of deliberate and emergent strategies.

 

B. a combination of deliberate and differentiation strategies.

 

C. not deliberate.

 

D. a result of unrealized intended strategy.

 

108. __________ may be considered the advance work that must be done in order to effectively formulate and implement strategies.

A. Goal setting

 

B. Corporate entrepreneurship

 

C. Strategy analysis

 

D. Organizational design

 

109. Strategy analysis is the starting point of the strategic management process and consists of the

A. analysis only of the vision, mission, and objectives of the firm.

 

B. analysis of the relevant internal and external environmental factors only.

 

C. analysis of relevant competitors only.

 

D. matching of vision, mission, and objectives with the relevant internal and external environmental factors.

 

110. Strategy formulation at the business level addresses best how to compete in a given business:

A. to attain competitive advantage

 

B. to reduce costs

 

C. to decrease buyer power

 

D. to thwart entry of new rivals

 

111. Corporate level strategy focuses on what businesses to compete in and

A. how business can be managed to achieve synergy.

 

B. how business can be managed to reduce synergy.

 

C. how the firm can work as a stand-alone entity.

 

D. how the firm can create more value by operating alone.

 

112. Corporate-level strategy looks at how to manage the ______ of its businesses to create synergies.

A. portfolio

 

B. stock prices

 

C. competitors

 

D. market pricing

 

113. Entering foreign markets requires firms to ascertain foremost how they will attain

A. market share.

 

B. low costs.

 

C. competitive advantage.

 

D. low returns on investment.

 

114. New value creation is a major engine for economic growth and is the main focus of _______________ strategy.

A. portfolio

 

B. corporate-level

 

C. business-level

 

D. entrepreneurial

 

115. Two types of strategic control that firms must exercise for good strategy implementation are

A. informational and confrontational.

 

B. confrontational and behavioral.

 

C. behavioral and financial.

 

D. informational and behavioral.

 

116. Effective organizational design means that firms must have ________ that are consistent with their strategy.

A. designs and plans

 

B. organizational structures and designs

 

C. adopters and designs

 

D. adopters and plans

 

117. Learning organizations permit the entire organization to benefit from ____________ talents.

A. internal and external

 

B. individual and collective

 

C. internal and collective

 

D. external and individual

 

118. Effective leaders set a direction and develop an organization so that it is committed to excellence and ___________ behavior.

A. performant

 

B. strategic

 

C. ethical

 

D. positive

 

119. Strategies should be formulated that enhance foremost the ____________ capacity of a firm.

A. innovative

 

B. learning

 

C. implementation

 

D. business-level

 

120. The three participants in corporate governance are the shareholders,

A. board of directors, and employees.

 

B. labor unions, and employees.

 

C. board of directors, and management.

 

D. banks and lending institutions, and management.

 

121. While working to prioritize and fulfill their responsibilities, members of the board of directors of an organization should

A. represent their own interests.

 

B. represent the interests of the shareholders.

 

C. direct all actions of the CEO.

 

D. emphasize the importance of short-term goals.

 

122. Members of boards of directors are

A. appointed by the Securities and Exchange Commission.

 

B. elected by the shareholders as their representatives.

 

C. elected by the public.

 

D. only allowed to serve one term of four years.

 

123. An organization is responsible to many different entities. In order to meet the demands of these groups, organizations must participate in stakeholder management. Stakeholder management means that

A. interests of the stockholders are not the only interests that matter.

 

B. stakeholders are second in importance to the stockholders.

 

C. stakeholders and managers inevitably work at cross-purposes.

 

D. all stakeholders receive financial rewards.

 

124. Stakeholders are

A. a new way to describe stockholders.

 

B. individuals, groups, and organizations who have a stake in the success of the organization.

 

C. creditors who hold a lien on the assets of the organization.

 

D. attorneys and their clients who sue the organization.

 

125. Procter and Gamble has perfected a technique for compacting cleaning powder into a liquid concentration. Consumers, retailers, shipping and wholesalers, and environmentalists all have benefited from the resulting change in consumer shopping habits and the revolution in industry supply-chain economics. According to the text, this is an example of

A. zero-sum relationship among stakeholders.

 

B. stakeholder symbiosis.

 

C. rewarding stakeholders.

 

D. emphasizing financial returns.

 

126. There are several perspectives of competition. One perspective is zero-sum thinking. Zero-sum thinking means that

A. all parts of the organization gain at no loss.

 

B. in order for someone to gain others must experience no gain or benefit.

 

C. one can only gain at the expense of someone else.

 

D. everyone in the organization shares gains and losses equally.

 

127. Managers should do more than focus on short-term financial performance. One concept that helps managers do this is stakeholder symbiosis. This means that

A. stakeholders are dependent on each other for their success.

 

B. stakeholders look out for their individual interests.

 

C. one can only gain at the expense of someone else.

 

D. all stakeholders want to maximize shareholder returns.

 

128. Employee stakeholders are concerned with

A. taxes, warranties, and regulations.

 

B. wages, benefits, and job security.

 

C. good citizenship behavior.

 

D. dividends.

 

129. Stockholders as a stakeholder group are interested primarily by

A. payment of interest and repayment of principal.

 

B. value and warranties.

 

C. dividends and capital appreciation.

 

D. taxes and compliance with regulations.

 

130. The Sustainable Apparel Coalition accounts for more than one-third of the global

A. apparel and washing product industry.

 

B. consumer product industry.

 

C. refinery industry.

 

D. apparel and footwear industry.

 

131. Wall Street executives have received excessive bonus pay in the past. This concerns which of the following stakeholder groups most directly?

A. government

 

B. suppliers

 

C. creditors

 

D. stockholders

 

132. Supplier stakeholders are concerned with

A. assurance of a continued relationship with the firm.

 

B. employee benefits.

 

C. safe working conditions.

 

D. capital appreciation.

 

133. Community stakeholders are concerned primarily with

A. product warranties.

 

B. corporate citizenship behavior.

 

C. capital appreciation.

 

D. repayment of principal.

 

134. Firms must be aware of goals other than short-term profit maximization. One area of concern should be social responsibility, which is the

A. expectation that business will strive to improve the overall welfare of society.

 

B. idea that organizations are solely responsible to local citizens.

 

C. fact that court costs could impact the financial bottom line.

 

D. idea that businesses are responsible for maintaining a healthy social climate for their employees.

 

135. According to the text, the triple bottom line approach to corporate accounting includes which three components?

A. financial, environmental, and customer

 

B. financial, organizational, and customer

 

C. financial, environmental, and social

 

D. financial, organizational, and psychological

 

136. Demands for greater corporate responsibility have accelerated today. They focus on issues such as

A. labor standards and environmental sustainability.

 

B. taxation.

 

C. product benefits.

 

D. service benefits.

 

137. A key stakeholder group that is particularly susceptible to corporate social responsibility (CSR) initiatives is

A. suppliers.

 

B. rivals.

 

C. government agencies.

 

D. consumers.

 

138. According to the Corporate Citizenship poll conducted by Cone Communications, most Americans say they would be likely to switch brands to one associated with a good cause, if there are similarities between

A. price and availability.

 

B. availability and quality.

 

C. price and quality.

 

D. price and durability.

 

139. According to a CEO survey by Accenture, __________________ are not mutually exclusive corporate goals.

A. quality and profitability

 

B. sustainability and profitability

 

C. ROI and quality

 

D. availability and ROI

 

140. The Clorox Green Works line of plant-based cleaning materials captured 42 percent of the natural cleaning products market in its first year. This is an example of the benefit of

A. sustainability efforts.

 

B. cost reduction efforts.

 

C. marketing programs.

 

D. process management.

 

141. Northrup Grumman saved $2 million in energy costs at a single facility by installing reflective roofs and fluorescent lighting, replacing old equipment, and making minor temperature and humidity-level adjustments. This is an example of the benefit of

A. increasing revenue efforts.

 

B. marketing programs.

 

C. sustainability efforts.

 

D. process management.

 

142. The Fairmont Royal York in Toronto invested $25,000 in an energy conservation program to replace leaky steam traps and fix leaks, which resulted in an annual savings of over $200,000. This is an example of a sustainability effort to

A. increase innovation.

 

B. decrease revenue.

 

C. lower costs.

 

D. increase customers.

 

143. The ROI on sustainability efforts can be difficult to quantify because

A. an excess of necessary data for accurate calculation is readily available.

 

B. benefits from such projects are tangible.

 

C. the payback period is on a different time frame.

 

D. the payback period is on the same time frame.

 

144. Sustainability programs often find their success beyond company boundaries, thus ______ systems and _____ metrics cannot capture all of the relevant numbers.

A. external; bio

 

B. internal; process

 

C. external; external

 

D. internal; internal

 

145. Traditional financial models are built around relatively easy-to-measure, monetized results; whereas, the benefits of sustainability projects involve

A. clear tangibles.

 

B. clear intangibles.

 

C. fuzzy tangibles.

 

D. fuzzy intangibles.

 

146. The case for sustainability projects needs to be made on the basis of a more holistic and comprehensive understanding of all the _____________ benefits.

A. measurable and unmeasurable

 

B. financial and physical

 

C. tangible and intangible

 

D. measurable and physical

 

147. Some benefits of sustainability projects include

A. reducing risks.

 

B. lagging behind regulations.

 

C. displeasing communities.

 

D. ignoring employee morale.

 

148. Many organizations have a large number of functional areas with very diverse and sometimes competing interests. Such organizations will be most effective if

A. each functional area focuses on achieving their own goals.

 

B. goals are defined at the bottom and implemented at the top.

 

C. functional areas work together to attain overall goals.

 

D. management and employees have separate goals.

 

149. Strategy formulation and implementation is a challenging ongoing process. To be effective, it should not involve

A. the CEO and the board of directors.

 

B. the board of directors, CEO, and CFO.

 

C. rivals.

 

D. line and staff managers.

 

150. The text argues that a strategic perspective in an organization should be emphasized

A. at the top of the organization.

 

B. at the middle of the organization.

 

C. throughout the organization.

 

D. from the bottom up.

 

151. Peter Senge, of MIT, recognized three types of leaders. __________ are individuals that, although having little positional power and formal authority, generate their power through the conviction and clarity of their ideas.

A. Local line leaders

 

B. Executive leaders

 

C. Internal networkers

 

D. Shop floor leaders

 

152. Peter Senge, of MIT, recognized three types of leaders. These individuals champion and guide ideas, create a learning infrastructure, and establish a domain for taking action.

A. local line leaders

 

B. executive leaders

 

C. internal networkers

 

D. shop floor leaders

 

153. Leadership is a necessary (but not sufficient) condition for organizational success. Leaders should emerge at which level(s) of an organization?

A. only at the top

 

B. in the middle

 

C. throughout the organization

 

D. only during times of change

 

154. Local line leaders have __________ responsibility.

A. local

 

B. executive

 

C. profit-and-loss

 

D. no

 

155. Internal networks generate their power through the _____________ of their ideas.

A. validity and correctness

 

B. conviction and clarity

 

C. validation and recognition

 

D. approval and awareness

 

156. Executive leaders champion and guide ideas by

A. reinforcing ideas that did not work.

 

B. creating a learning infrastructure.

 

C. validating their formal authority.

 

D. increasing their personal power.

 

157. Richard Branson, founder of the Virgin Group, empowers his companies through a(n) _______ structure in which anyone can bring forth new ideas.

A. formal

 

B. hierarchal

 

C. multi-level

 

D. informal

 

158. Transformational change involves

A. extensive communication.

 

B. little training.

 

C. no employee development.

 

D. few incentives.

 

159. Whirlpool’s transformation under corporate vice president Nancy Snyder included financial investments in

A. shareholder dividends.

 

B. capital spending.

 

C. community development.

 

D. paying down borrowed debt.

 

160. Methods by which successful executives show their interest in learning what others are thinking include

A. holding town hall meetings and consulting employees on what they would do if in charge.

 

B. holding town hall meetings and consulting bankers on what they would do if in charge.

 

C. holding retreats and consulting rivals on what they would do if in charge.

 

D. consulting rivals and consulting investment bankers.

 

161. Tim Brown, CEO of IDEO, believes that the ________ of a person should not dictate the level of influence their ideas should be accorded.

A. age

 

B. seniority

 

C. position

 

D. education

 

162. The hierarchy of organizational goals is in this order (least specific to most specific):

A. vision statements, strategic objectives, mission statements

 

B. mission statements, strategic objectives, vision statements

 

C. vision statements, mission statements, strategic objectives

 

D. mission statements, vision statements, strategic objectives

 

163. Vision statements are used to create a better understanding of the overall purpose and direction of the organization. Vision statements

A. are very specific.

 

B. provide specific objectives.

 

C. set organizational structure.

 

D. evoke powerful and compelling mental images.

 

164. Effective vision statements include

A. all strategic directions of the organization.

 

B. a brief statement of the company’s direction.

 

C. strategic posturing and future objectives.

 

D. financial objectives and projected figures.

 

165. WellPoint Health Network states: WellPoint will redefine our industry: through a new generation of consumer-friendly products that put individuals back in control of their future. This is an example of a

A. strategic objective.

 

B. vision statement.

 

C. vague statement of direction.

 

D. line manager’s individual goal.

 

166. Although such visions cannot be accurately measured by a specific indicator of how well they are being achieved, they do provide a fundamental statement of the __________ of an organization.

A. values, aspirations, and goals

 

B. expected returns and limitations

 

C. outstanding debt

 

D. credibility

 

167. In contrast to the vision of an organization, its mission should

A. be shorter in length.

 

B. encompass both the purpose of the company as well as the basis of competition.

 

C. encompass all the major rules and regulations of the corporate work force.

 

D. be less detailed.

 

168. The vision and mission statements of a company set the overall direction of the organization. Strategic objectives serve what role?

A. operationalize the mission statement

 

B. modify the mission statement

 

C. are a shorter version of the mission statement

 

D. are only clarified by the board of directors

 

169. Successful organizations are effective in motivating people. Employees work best when

A. they are asked to do their best.

 

B. work requirements are vague and unclear.

 

C. they are striving toward specific goals.

 

D. they are guided by an abstract mission statement.

 

170. Fortune Brands states they will cut corporate overhead costs by $30 million a year. This is an example of a

A. nonfinancial strategic objective.

 

B. financial strategic objective.

 

C. vision statement.

 

D. mission statement.

 

171. We want to be the top-ranked supplier to our customers. (PPG) This is an example of a

A. nonfinancial strategic objective.

 

B. financial strategic objective.

 

C. vision statement.

 

D. mission statement.

 

172. In large organizations, conflicts can arise between functional areas. In order to resolve these conflicts, strategic objectives

A. put financial objectives above human considerations.

 

B. align departments toward departmental goals.

 

C. help resolve conflicts through their common purpose.

 

D. cause debate and increase conflict.

 

173. Which of the following is not an example of a financial strategic objective?

A. Increase sales growth 6 percent to 8 percent and accelerate core net earnings growth from 13 percent to15 percent per share in each of the next 5 years. (Procter & Gamble)

 

B. Reduce volatile air emissions 15 percent by 2015 from 2010 base year, indexed to net sales. (3M)

 

C. Generate Internet-related revenue of $1.5 billion. (AutoNation)

 

D. Cut corporate overhead costs by $30 million per year. (Fortune Brands)

 

174. In large organizations, the potential exists for different parts of an organization to pursue its own goals rather than the overall company goals. Proper _______ can help to resolve conflicts when they arise.

A. mission statements

 

B. vision statements

 

C. organization structure

 

D. objectives

 

Chapter 01 Strategic Management: Creating Competitive Advantages Answer Key

True / False Questions

1. Hewlett-Packard’s failure and success under the leadership first of Carly Fiorina and then of Mark Hurd was said to be a direct result of the quality of leadership of each of these CEOs. According to the text, this would be an example of the “romantic” perspective of leadership.

TRUE

In the romantic view of leadership, the implicit assumption is that the leader is the key force in determining an organization’s success or lack thereof. The Board of Directors fired CEO Carly Fiorina in 2004 and HP’s stock increased immediately by 7 percent. Upon the sudden resignation of her successor, Mark Hurd in 2010, HP’s stock price dropped 12 percent almost immediately.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 2 Medium
Topic: What is Strategic Management?

 

2. Strategic management consists of the analyses, decisions, and actions an organization undertakes in order to create and sustain competitive advantages.

TRUE

According to the textbook, this is the definition of strategic management.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 1 Easy
Topic: What is Strategic Management?

 

3. Strategic management is concerned with the analysis of strategic goals as stated in the vision, mission, and strategic objectives of a firm.

TRUE

Strategic management is concerned with the analysis of strategic goals (vision, mission, and strategic objectives) along with the analysis of the internal and external environments of the organization.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 1 Easy
Topic: What is Strategic Management?

 

4. The three interrelated and principal activities of strategic management are: strategy analysis, strategy formulation, and strategy implementation.

TRUE

Strategic management is defined by the text as consisting of the analyses, decisions, and actions an organization undertakes in order to create and sustain competitive advantage.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 1 Easy
Topic: The Strategic Management Process

 

5. Strategic management is not concerned with how to create competitive advantage in the marketplace.

FALSE

The essence of strategic management is the study of why some firms outperform others. Managers need to determine how a firm is to compete so that it can obtain advantages that are sustainable over a lengthy period of time. That means focusing on how to compete in order to create competitive advantages in the marketplace and how to create competitive advantages in the marketplace that are unique, valuable, and difficult for rivals to copy or substitute.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 2 Medium
Topic: What is Strategic Management?

 

6. Management innovations such as total quality, just-in-time, benchmarking, business process reengineering, and outsourcing are important, but not enough for building sustainable competitive advantage.

TRUE

Sustainable competitive advantage cannot be achieved through operational effectiveness alone. Popular management innovations of the last two decades like total quality, just-in-time, benchmarking, business process reengineering, and outsourcing are concerned with operational effectiveness.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 2 Medium
Topic: What is Strategic Management?

 

7. Making trade-off decisions between effectiveness and efficiency is central to the practice of strategic management.

TRUE

The fourth attribute of strategic management is that it involves the recognition of trade-offs between effectiveness and efficiency. Some authors have referred to this as the difference between doing the right thing (effectiveness) and doing things right (efficiency).

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 2 Medium
Topic: What is Strategic Management?

 

8. Only shareholders in a publicly held company are stakeholders because they are the only group that has a stake in the success of the organization.

FALSE

Stakeholders are those individuals, groups, and organizations that have a stake in the success of the organization, including owners (shareholders in a publicly held corporation), employees, customers, suppliers, the community at large, and so on.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Process

 

9. Strategic management is only concerned with short-term perspectives.

FALSE

Strategic management requires incorporating both short-term and long-term perspectives.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Process

 

10. Focusing on a single stakeholder is a good strategic principle for managers to follow.

FALSE

Stakeholders are those individuals, groups, and organizations that have a “stake” in the success of the organization. Managers will not be successful if they focus on a single stakeholder.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Process

 

11. According to Peter Senge, a leading strategic management author, creative tension results from the need to incorporate both short-term and long-term perspectives in strategic management.

TRUE

Strategic management requires incorporating both short-term and long-term perspectives. Peter Senge, a leading strategic management author, has referred to this need as a creative tension. That is, managers must maintain both a vision for the future of the organization and a focus on its present operating needs.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Process

 

12. Shareholders expect only short-term value and therefore good managers should only focus on meeting short-term performance targets.

FALSE

Managers must maintain both a vision for the future of the organization and a focus on its present operating needs. Strategic management requires incorporating both short-term and long-term perspectives.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Process

 

13. Focusing on the short term and efficiency is always a bad management principle.

FALSE

Successful managers must make many trade-offs. It is central to the practice of strategic management. At times, managers must focus on the short term and efficiency.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Process

 

14. Ambidexterity refers to a manager’s challenge to align resources, without having to take advantage of existing product markets or to proactively explore new opportunities.

FALSE

Ambidexterity is the challenge managers face in both aligning resources to take advantage of existing product markets and proactively exploring new opportunities.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Process

 

15. According to a recent study involving 41 business units in 10 multinational companies, one ambidextrous behavior exhibited by managers is that of being brokers who are always looking to build internal networks.

TRUE

As an example of this ambidextrous behavior, a Canadian plant manager connected a regional manager, who was looking for ways to build his business, with an $10 million investment opportunity in St Louis for a new tape manufacturing plant.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Process

 

16. According to Henry Mintzberg, a management scholar, most firms realize their original intended strategy.

FALSE

Henry Mintzberg states that the intended strategy rarely survives in its original form. Unforeseen environmental developments, unanticipated resource constraints, or changes in managerial preferences may result in at least some parts of the intended strategy remaining unrealized. On the other hand, good managers will want to take advantage of a new opportunity presented by the environment, even if it was not part of the original set of intentions.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-02 The strategic management process and its three interrelated and principal activities.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Process

 

17. The final realized strategy of a firm is a combination of deliberate and emergent strategies.

TRUE

Realized strategy is that strategy of a firm in which organizational decisions are determined by both analysis and unforeseen environmental developments, unanticipated resource constraints, and/or changes in managerial preferences.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-02 The strategic management process and its three interrelated and principal activities.
Level of Difficulty: 1 Easy
Topic: The Strategic Management Process

 

18. In the Mintzberg model, organizational decisions determined only by analysis are intended strategy.

TRUE

Henry Mintzberg, a management scholar at McGill University, argues that viewing the strategic management process as one in which analysis is followed by optimal decisions and their subsequent meticulous implementation neither describes the strategic management process accurately nor prescribes ideal practice. In the Mintzberg model, decisions following from analysis constitute the intended strategy of the firm.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-02 The strategic management process and its three interrelated and principal activities.
Level of Difficulty: 1 Easy
Topic: The Strategic Management Process

 

19. Strategy analysis is the study of the external environments of the firm.

FALSE

Strategy analysis is study of the external and internal environments of a firm, and their fit with organizational vision and goals.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-02 The strategic management process and its three interrelated and principal activities.
Level of Difficulty: 1 Easy
Topic: The Strategic Management Process

 

20. Both the internal and external environments of a firm must be analyzed as well as the goals of the firm before managers can formulate and implement appropriate strategies.

TRUE

Many strategies fail because managers may want to formulate and implement strategies without a careful analysis of the overarching goals of the organization and without a thorough analysis of its external and internal environments.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-02 The strategic management process and its three interrelated and principal activities.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Process

 

21. Strategy formulation involves decisions made by firms regarding investments, commitments, and other aspects of operations that create and sustain competitive advantage.

TRUE

Strategy formulation is developed at several levels and addresses the decisions made by firms regarding investments, commitments, and other aspects of operations that create and sustain competitive advantage.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-02 The strategic management process and its three interrelated and principal activities.
Level of Difficulty: 1 Easy
Topic: The Strategic Management Process

 

22. All successful firms compete and outperform their rivals by developing bases for competitive advantage, which can be achieved only through cost leadership.

FALSE

Successful firms strive to develop bases for competitive advantage, which can be achieved through cost leadership and/or differentiation as well as by focusing on a narrow or industrywide market segment.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-02 The strategic management process and its three interrelated and principal activities.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Process

 

23. Business-level strategy focuses on (1) what businesses to compete in and (2) the management of the business portfolio to create synergy among its businesses.

FALSE

Corporate-level strategy focuses on the issues of what businesses to compete in and how this portfolio of businesses can be managed to achieve value synergy.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-02 The strategic management process and its three interrelated and principal activities.
Level of Difficulty: 1 Easy
Topic: The Strategic Management Process

 

24. Corporate-level strategy addresses how firms compete and outperform their rivals as well as achieve and sustain competitive advantages.

FALSE

Business-level strategy addresses the issue of how to compete in a given business to attain competitive advantage.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-02 The strategic management process and its three interrelated and principal activities.
Level of Difficulty: 1 Easy
Topic: The Strategic Management Process

 

25. International strategy involves decisions concerning appropriate entry strategy and attaining competitive advantage in international markets.

TRUE

When firms enter foreign markets, they face both opportunities and pitfalls. Managers must decide not only on the most appropriate entry strategy but also how they will go about attaining competitive advantages in international markets.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-02 The strategic management process and its three interrelated and principal activities.
Level of Difficulty: 1 Easy
Topic: The Strategic Management Process

 

26. Entrepreneurial activity aimed at new value creation is not a major engine for economic growth.

FALSE

Entrepreneurial activity aimed at new value creation is a major engine for economic growth. For entrepreneurial initiatives to succeed, viable opportunities must be recognized and effective strategies must be formulated.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-02 The strategic management process and its three interrelated and principal activities.
Level of Difficulty: 1 Easy
Topic: The Strategic Management Process

 

27. Strategy implementation involves actions that carry out the formulated strategy including proper strategic controls, organizational designs, and leadership.

TRUE

Sound strategies are of no value if they are not properly implemented. Strategy implementation involves ensuring proper strategic controls, organizational designs, and leadership, which includes establishing effective means to coordinate and integrate activities within the firm as well as with its suppliers, customers, and alliance partners.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-02 The strategic management process and its three interrelated and principal activities.
Level of Difficulty: 1 Easy
Topic: The Strategic Management Process

 

28. Effective leadership can play a large role in fostering corporate entrepreneurship. Corporate entrepreneurship can have a very positive impact on the bottom line of a firm.

TRUE

Entrepreneurial activity aimed at new value creation is a major engine for economic growth. For entrepreneurial initiatives to succeed viable opportunities must be recognized and effective strategies must be formulated. This requires effective leadership.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-02 The strategic management process and its three interrelated and principal activities.
Level of Difficulty: 1 Easy
Topic: The Strategic Management Process

 

29. Firms must exercise either informational control or behavioral control in order to assure proper strategy implementation.

FALSE

Firms must exercise two types of strategic control. First, informational control requires that organizations continually monitor and scan the environment and respond to threats and opportunities. Second, behavioral control involves the proper balance of rewards and incentives as well as cultures and boundaries (or constraints).

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-02 The strategic management process and its three interrelated and principal activities.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Process

 

30. Leaders are responsible for creating a learning organization so that the entire organization can benefit only from the individual talents.

FALSE

Given rapid and unpredictable change, leaders must create a learning organization so that the entire organization can benefit from individual and collective talents.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-02 The strategic management process and its three interrelated and principal activities.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Process

 

31. The three primary participants in corporate governance are: (1) the shareholders, (2) the management (led by the chief executive officer), and (3) the employees.

FALSE

The primary participants are: (1) the shareholders, (2) the management (led by the chief executive officer), and (3) the board of directors.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 1 Easy
Topic: The Role of Corporate Governance and Stakeholder Management

 

32. Decisions by boards of directors are always consistent with shareholder interests.

FALSE

The board of directors (BOD) are the elected representatives of the shareholders, charged with ensuring that the interests and motives of management are aligned with those of the owners (i.e., shareholders). Recent scandals have resulted in criticism and cynicism that the BOD fulfills this charge.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

33. Ensuring effective corporate governance requires an effective and engaged board of directors, uninvolved shareholders, and proper managerial rewards and incentives.

FALSE

We focus on three important mechanisms to ensure effective corporate governance: an effective and engaged board of directors, shareholder activism, and proper managerial rewards and incentives.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

34. Auditors, banks, and analysts are external control mechanisms to ensure effective corporate governance.

TRUE

A key role is played by various external control mechanisms in assuring effective corporate governance. These include the auditors, banks, analysts, an active financial press, and the threat of hostile takeovers.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

35. Former Chrysler vice chairman Robert Lutz observed that companies exist to serve the shareholder and create shareholder value. He insisted that the only person who owns the company is the person who paid good money for it. This is an example of a symbiotic approach to stakeholder management.

FALSE

This is zero-sum stakeholder management. On the other hand, organizations can achieve mutual benefit through stakeholder symbiosis, which recognizes that stakeholders are dependent upon each other for their success and well-being.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

36. Stakeholders make various claims on a company. Their interests must be taken into account in the strategic management process.

TRUE

A stakeholder can be defined as an individual or group, inside or outside the company that has a stake in and can influence organizational performance. Each stakeholder group makes various claims on the company and must be taken into account in the strategic management process.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

37. Stockholders in a company are the only individuals with an interest in the financial performance of the company.

FALSE

A stakeholder can be defined as an individual or group, inside or outside the company that has a stake in and can influence the performance of the organization. Each stakeholder group makes various claims on the company.

Refer To: Exhibit 1.5

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 1 Easy
Topic: The Role of Corporate Governance and Stakeholder Management

 

38. Stockholders, employees, and the community-at-large are among the stakeholders of a firm.

TRUE

A stakeholder can be defined as an individual or group, inside or outside the company that has a stake in and can influence the performance of the organization. Stakeholders include stockholders, employees, suppliers, governments, and others.

Refer To: Exhibit 1.5

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 1 Easy
Topic: The Role of Corporate Governance and Stakeholder Management

 

39. Symbiosis is the ability to recognize interdependencies among the interests of multiple stakeholders within and outside an organization.

TRUE

Organizations can achieve mutual benefit through stakeholder symbiosis, which recognizes that stakeholders are dependent upon each other for their success and well-being.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 1 Easy
Topic: The Role of Corporate Governance and Stakeholder Management

 

40. Procter and Gamble developed a laundry detergent compaction technique that appeals to consumers, retailers, shipping and wholesalers, and environmentalists. This is an example of stakeholder symbiosis.

TRUE

According to the text, the Procter and Gamble technique that compacts two to three times as much cleaning powder into a liquid concentration has led to a change in consumer shopping habits and has revolutionized industry supply-chain economics. This is an example of stakeholder symbiosis in action.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

41. Partnering with governments, communities, suppliers, customers, and rivals is a way to manage conflicting stakeholder interests.

TRUE

Although it often appears the interests of stakeholder groups are in conflict with each other, leading companies are increasingly realizing that learning to partner with governments and communities, suppliers, customers, and even longtime rivals is essential for dealing with big, complex problems.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

42. The Higgs Index enables companies to compare environmental performance outcomes in order to improve their environmental impact and is an example of how rivals work together to resolve complex problems.

TRUE

Rival firms like Nike, Walmart, and Patagonia have started working with a number of stakeholder groups through the Sustainable Apparel Coalition in order to improve the environmental impact of their products. They convened a group of 10 apparel companies in the belief that the adoption of a single, standardized index would drive efficiency and innovation across the apparel value chain and reduce environmental impact and supply chain risks. The so-called Higgs Index enabled companies to compare environmental performance outcomes in areas such as energy efficiency, material waste, water use, and sustainable raw materials.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

43. As a stakeholder group, creditors are interested in taxes and compliance with regulations.

FALSE

Creditors are interested in the payment of interest and the repayment of principal.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

44. As a stakeholder group, customers are interested in dividends and capital appreciation.

FALSE

Customers are interested in value and warranties.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

45. As a stakeholder group, communities are interested in good citizenship behavior.

TRUE

Communities are interested in good citizenship behavior such as charities, employment, and not polluting the environment.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

46. Social responsibility is the idea that organizations are not only accountable to stockholders but also to the community-at-large.

TRUE

Social responsibility is the expectation that businesses or individuals will strive to improve the overall welfare of society. From the perspective of a business, this means that managers must take active steps to make society better by virtue of the business being in existence.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 1 Easy
Topic: The Role of Corporate Governance and Stakeholder Management

 

47. What constitutes socially responsible behavior changes over time.

TRUE

What constitutes socially responsible behavior changes over time. In the 1970s affirmative action was a high priority; during the 1990s and up to the present time, the public has been concerned about environmental quality.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

48. Shell, NEC, and Procter and Gamble have been measuring their performance according to what has been called a triple bottom line. This technique involves an assessment of financial, social, and environmental performance.

TRUE

Many companies are now measuring what has been called a triple bottom line. This involves assessing financial, social, and environmental performance. Shell, NEC, Procter and Gamble, and others have recognized that failing to account for the environmental and social costs of doing business poses risks to the company and its community.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

49. Demands for greater corporate responsibility are decreasing today.

FALSE

Today, demands for greater corporate responsibility have accelerated. These include corporate critics, social investors, activists, and, increasingly, customers who claim to assess corporate responsibility when making purchasing decisions.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

50. A key stakeholder group that appears to be particularly susceptible to corporate social responsibility (CSR) initiatives is customers.

TRUE

A key stakeholder group that appears to be particularly susceptible to corporate social responsibility (CSR) initiatives is customers. Surveys indicate a strong positive relationship between CSR behaviors and consumer reaction to the products and services of a firm.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

51. There is a positive influence of CSR on the consumer evaluation of companies and their purchasing decisions, according to recent studies.

TRUE

A large body of research confirms the positive influence of CSR on consumer evaluations of companies and product purchase intentions across a broad range of product categories.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

52. Environmental sustainability is a value embraced by the most competitive and successful multinational companies.

TRUE

Environmental sustainability is now a value embraced by the most competitive and successful multinational companies. The McKinsey Corporation’s survey of more than 400 senior executives of companies around the world found that 92 percent agreed with former Sony president Akio Morita that the environmental challenge will be one of the central issues in the 21st century.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

53. For many successful firms, environmental values are not central to the company culture and management processes.

FALSE

For many successful firms, environmental values are now becoming a central part of their cultures and management processes. Environmental impacts are being audited and accounted for as the third bottom line.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

54. Sustainability is being increasingly recognized as a source of cost efficiencies and revenue growth.

TRUE

A CEO survey on sustainability by Accenture debunks the notion that sustainability and profitability are mutually exclusive corporate goals. The study found that sustainability is being increasingly recognized as a source of cost efficiencies and revenue growth. In many companies, sustainability activities have led to increases in revenue and profits.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

55. The ROIs on sustainability projects are often very difficult to quantify because the data necessary to calculate ROI accurately are often not available when it comes to sustainability projects.

TRUE

The ROIs on sustainability projects are often very difficult to quantify for a number of reasons. Among these is the fact that the data necessary to calculate ROI accurately are often not available when it comes to sustainability projects. However, sustainability programs may often find their success beyond company boundaries, so internal systems and process metrics cannot capture all the relevant numbers.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

56. Many of the benefits from sustainability projects are intangible, making it difficult to calculate the ROI.

TRUE

The payback period for sustainability projects is on a different time frame. Even when their future benefits can be forecast, sustainability projects often require longer-term payback windows.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

57. The intangible benefits of sustainability projects, such as reducing risks, staying ahead of regulations, pleasing communities, and enhancing employee morale, are substantial even when they are difficult to quantify.

TRUE

Just as companies spend large fortunes on launching advertising campaigns or initiating R and D projects without a clear quantification of financial returns, sustainability investments are necessary even when it is difficult to calculate the ROE of such investments. The alternative of not making these investments is often no longer feasible.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

58. Sustainability projects often require shorter-term payback windows than other projects.

FALSE

The payback period is on a different time frame. Even when their future benefits can be forecast, sustainability projects often require longer-term payback windows.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

59. Sustainability initiatives rarely have difficulty making it through the conventional approval process within corporations because managers are not concerned about their return on investment.

FALSE

Sustainability initiatives often have difficulty making it through the conventional approval process within corporations. This is primarily because, before companies make investments in projects, managers want to know their return on investment.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

60. The ROI on a sustainability project generally is easy to quantify.

FALSE

The ROIs on sustainability projects are often very difficult to quantify because of the unavailability of data, the intangibility of the benefits, and the long-term payback period of such projects.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

61. Strategic management requires managers at all levels of the organization to take a segregated view of the organization.

FALSE

Strategic management requires managers to take an integrative view of the organization and assess how all of the functional areas and activities fit together to help an organization achieve its goals and objectives. This cannot be accomplished if only the top managers in the organization take an integrative, strategic perspective of issues facing the firm and everyone else fends for themselves in their independent, isolated functional areas. Instead, people throughout the organization must strive toward overall goals.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 1 Easy
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

62. The strategic management process should be addressed only by top-level executives. Mid-level and low-level employees are best equipped to implement the strategies of the organization.

FALSE

To develop and mobilize people and other assets, leaders are needed throughout the organization. No longer can organizations be effective if the top level does the thinking and the rest of the organization does the work. Everyone must be involved in the strategic management process.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 1 Easy
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

63. To develop and mobilize people and other assets, leaders are needed throughout the organization.

TRUE

To develop and mobilize people and other assets, leaders are needed throughout the organization. No longer can organizations be effective if the top level does the thinking and the rest of the organization does the work. Everyone must be involved in the strategic management process.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 1 Easy
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

64. In the strategic management process, only local line leaders and executive leaders are needed.

FALSE

Everyone must be involved in the strategic management process. There is a critical need for three types of leaders: Local line leaders who have significant profit-and-loss responsibility; Executive leaders who champion and guide ideas, create a learning infrastructure, and establish a domain for taking action; and internal networkers who, although they have little positional power and formal authority, generate their power through the conviction and clarity of their ideas.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 1 Easy
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

65. Internal networks have great positional power and formal authority.

FALSE

Internal networkers, although they have little positional power and formal authority, generate their power through the conviction and clarity of their ideas.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

66. Local line leaders have little profit-and-loss responsibility.

FALSE

Local line leaders have significant profit-and-loss responsibility.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

67. Executive leaders champion and guide ideas.

TRUE

Executive leaders champion and guide ideas, create a learning infrastructure, and establish a domain for taking action.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

68. Local line leaders are key in setting the tone for the empowerment of employees.

FALSE

Top-level executives are key in setting the tone for the empowerment of employees.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

69. Richard Branson, the founder of the Virgin Group, is well known for creating an inclusive organizational structure in which anybody in the organization can be involved in generating and activating upon new business ideas.

TRUE

Richard Branson, founder of the Virgin Group, whose core businesses include retail operations, hotels, communications, and an airline, is well known for creating a culture and an informal structure where anybody in the organization can be involved in generating and acting upon new business ideas.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

70. To inculcate a strategic management perspective, managers must often make a major effort to effect transformational change.

TRUE

To inculcate a strategic management perspective, managers must often make a major effort to effect transformational change. This involves extensive communication, incentives, training, and development.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

71. To effect transformational change in an organization, managers must communicate extensively and provide incentives, training, and development.

TRUE

To inculcate a strategic management perspective, managers must often make a major effort to effect transformational change. This involves extensive communication, incentives, training, and development.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

72. Nancy Snyder, corporate vice president of Whirlpool, shifted the reputation of the firm to that of an innovator by investing financially in capital spending.

TRUE

Under the direction of Nancy Snyder, a corporate vice president, Whirlpool, brought about a significant shift in its reputation as an innovator. This five-year initiative included financial investments in capital spending as well as a series of changes in management processes, including training innovation mentors, making innovation a significant portion of leadership development programs, enrolling all salaried employees in online courses in business innovation, and providing employees an innovation portal to access multiple innovation tools and data.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

73. Successful executives do not reward honesty and input and do not show their interest in learning what others are thinking.

FALSE

Many successful executives reward honesty and input and show their interest in learning what others are thinking.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

74. According to the CEO of IDEO, Tim Brown, spotting and promoting at any level in the firm is important.

TRUE

As noted by Tim Brown, CEO of the premier design consulting firm IDEO: The best can come from anywhere in an organization. So you had better do a good job of spotting and promoting them when they come, and not let positions of people dictate how influential their ideas are.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

75. There are few benefits to having broad investment throughout the organization in the strategic management process.

FALSE

Inexperience can be a virtue as demonstrated in the filming of the movie, Gorillas in the Mist. It further reinforces the benefits of having broad involvement throughout the organization in the strategic management process.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

76. Showing interest in learning what others are thinking is a leadership weakness.

FALSE

Many successful executives reward honesty and input and show their interest in learning what others are thinking.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

77. The vision of an organization is the top level of its hierarchy of organizational goals. The vision statement should be massively inspiring, overarching, and long term.

TRUE

A vision is a goal that is massively inspiring, overarching, and long term.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-06 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Level of Difficulty: 2 Medium
Topic: Ensuring Coherence in Strategic Direction

 

78. Strategic objectives are more specific than vision statements.

TRUE

Strategic objectives are used to operationalize the mission statement.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-06 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Level of Difficulty: 2 Medium
Topic: Ensuring Coherence in Strategic Direction

 

79. According to the text, a mission statement is an overarching statement that is massively inspiring, long term, and only discusses the purpose of the company.

FALSE

A mission statement is a set of organizational goals that includes the purpose of the organization, its scope of operations, and the basis of its competitive advantage.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-06 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Level of Difficulty: 1 Easy
Topic: Ensuring Coherence in Strategic Direction

 

80. A mission statement encompasses both the purpose of the organization as well as its basis of competition, and the basis of its competitive advantage.

TRUE

A mission statement is a set of organizational goals that includes the purpose of the organization, its scope of operations, and the basis of its competitive advantage.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-06 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Level of Difficulty: 1 Easy
Topic: Ensuring Coherence in Strategic Direction

 

81. Strategic objectives should be measurable, specific, appropriate, and realistic, but not constrained by time deadlines.

FALSE

Timely is one of the five criteria that strategic objectives must meet in order to be considered meaningful. There must be a time frame for achieving the objective.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-06 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Level of Difficulty: 1 Easy
Topic: Ensuring Coherence in Strategic Direction

 

82. Much research has supported the notion that individuals work much harder when they are asked to do their best rather than when they are striving toward a specific goal.

FALSE

Challenging objectives can help to motivate and inspire employees to higher levels of commitment and effort. Much research has supported the notion that people work harder when they are striving toward specific goals instead of being asked simply to do their best.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-06 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Level of Difficulty: 2 Medium
Topic: Ensuring Coherence in Strategic Direction

 

83. Objectives in organizations should be clear, stated, and known by employees throughout the organization.

TRUE

For objectives to be meaningful, they need to satisfy several criteria. For one, they must be specific. This provides a clear message as to what needs to be accomplished.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-06 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Level of Difficulty: 2 Medium
Topic: Ensuring Coherence in Strategic Direction

 

84. Strategic management should only include short-term objectives. Long-term objectives are covered in the vision statement of the organization.

FALSE

Strategic objectives are typically more long term. Organizations have lower-level objectives that are more specific than strategic objectives. These are often referred to as short-term objectives.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-06 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Level of Difficulty: 2 Medium
Topic: Ensuring Coherence in Strategic Direction

 

85. Organizational goals and objectives should be vague in order to allow for changes in strategy.

FALSE

Specific is one criterion for strategic objectives. This provides a clear message as to what needs to be accomplished.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-06 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Level of Difficulty: 1 Easy
Topic: Ensuring Coherence in Strategic Direction

 

86. An idealistic vision can arouse employee enthusiasm and therefore is a good vision.

FALSE

An idealistic vision can arouse employee enthusiasm. However, that same enthusiasm can be quickly dashed if employees find that senior management behavior is not consistent with the vision.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-06 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Level of Difficulty: 2 Medium
Topic: Ensuring Coherence in Strategic Direction

 

87. One of the reasons a vision fails is that too much focus can lead to missed opportunities.

TRUE

The downside of too much focus is that in directing people and resources toward a grandiose vision, losses can be devastating.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-06 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Level of Difficulty: 1 Easy
Topic: Ensuring Coherence in Strategic Direction

 

88. Visions need to be anchored in reality in order to be successful.

TRUE

Although visions are not designed to mirror reality, they must be anchored somehow in it. People have difficulty identifying with a vision that paints a rosy picture of the future but does not account for the often hostile environment in which the firm competes or that ignores some of the firm’s weaknesses.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-06 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Level of Difficulty: 1 Easy
Topic: Ensuring Coherence in Strategic Direction

 

89. Effective mission statements incorporate the concept of stakeholder management, suggesting that organizations must respond to a single constituency.

FALSE

Effective mission statements incorporate the concept of stakeholder management, suggesting that organizations must respond to multiple constituencies.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-06 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Level of Difficulty: 1 Easy
Topic: Ensuring Coherence in Strategic Direction

 

90. A good mission statement, by addressing each principal theme, must communicate why an organization is special and different.

TRUE

A good mission statement, by addressing each principal theme, must communicate why an organization is special and different. Two studies that linked corporate values and mission statements with financial performance found that the most successful firms mentioned values other than profits. The less successful firms focused almost entirely on profitability.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-06 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Level of Difficulty: 1 Easy
Topic: Ensuring Coherence in Strategic Direction

 

91. When formulating strategic objectives, managers need to remember that too many objectives can result in a lack of focus and diminished results.

TRUE

When formulating strategic objectives, managers need to remember that too many objectives can result in a lack of focus and diminished results.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-06 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Level of Difficulty: 1 Easy
Topic: Ensuring Coherence in Strategic Direction

 

Multiple Choice Questions

92. The text addresses two perspectives of leadership as well as their implications. These two perspectives are

A. romantic and unromantic.

 

B. romantic and internal control.

 

C. external control and unromantic.

 

D. romantic and external control.

The two perspectives of leadership are the romantic and the external control perspectives.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 1 Easy
Topic: What is Strategic Management?

 

93. A CEO made a lot of mistakes in assessing the market and the competitive conditions and improperly redesigning the organization into numerous business units. Such errors led to significant performance declines. According to the text, this example illustrates the __________ perspective of leadership.

A. external control

 

B. romantic

 

C. internal mechanism

 

D. operational

In the romantic view of leadership, the implicit assumption is that the leader is the key force in determining the success (or lack of success) of an organization. This view dominates the popular press in business magazines such as Fortune, BusinessWeek, and Forbes, wherein the CEO is either lauded for the success of the firm or chided for its demise.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 2 Medium
Topic: What is Strategic Management?

 

94. According to the external control view of leadership, which of the following factors would not be considered an external factor that might positively or negatively affect a firm’s success?

A. economic downturns

 

B. governmental legislation

 

C. outbreak of war

 

D. company employee morale

In the external control view of leadership, external factors are responsible for positively or negatively affecting company success. These external factors often are unanticipated and are not due to the company’s leadership.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 2 Medium
Topic: What is Strategic Management?

 

95. Melvin Alexander, executive director of Principled Solutions Enterprise, a management consulting firm specializing in health care, suggests that environmental changes oblige firms to make strategic changes in order to survive. Which of the following is one of the strategic changes he foresees will occur in the next three to five years?

A. changes in the behavior of the health care consumers

 

B. reduction in the number of available medical doctors

 

C. increases in the number of locations of health care facilities

 

D. decreases in information technology investment

There will be new strategies to ensure success of the new law (ACA) as well as to achieve projected returns on the large investments made. The new strategies will center on changing the behavior of the health care consumers (e.g., patients, insured beneficiaries). Areas ranging from preventive care to new providers of health care to improved technology will be focal points of the strategies. To ensure success and compliance, there will likely be both carrot and stick incentives for health consumers to comply.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 2 Medium
Topic: What is Strategic Management?

 

96. According to the text, the strategic management process entails three ongoing processes. They are

A. analyses, actions, and synthesis.

 

B. analyses, decisions, and actions.

 

C. analyses, evaluation, and critique.

 

D. analyses, synthesis, and decisions.

The strategic management of an organization entails three ongoing processes: analyses, decisions, and actions.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 1 Easy
Topic: What is Strategic Management?

 

97. Management innovations such as total quality, benchmarking, and business process reengineering cannot lead to sustainable competitive advantage because

A. companies that have implemented these techniques have lost money.

 

B. there is no proof that these techniques work.

 

C. they cost too much money and effort to implement.

 

D. every company is trying to implement them.

The popular management innovations of the last two decades (total quality, just-in-time, benchmarking, business process reengineering and outsourcing) are all about operational effectiveness. Each of these is important, but none leads to sustainable competitive advantage because everyone is doing them. Strategy is all about being different.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 2 Medium
Topic: What is Strategic Management?

 

98. The organizational versus the individual rationality perspective suggests that objectives that are

A. good for a functional area are always good for the overall organization.

 

B. good for the overall organization are always best for a functional area.

 

C. best for a functional area may not be best for the overall organization.

 

D. best for one functional area will never be best for all functional areas.

Strategic management is directed toward overall organizational goals and objectives. Effort must be directed at what is best for the total organization, not just a single functional area. Some authors have referred to this perspective as organizational versus individual rationality. What might look rational or ideal for one functional area, such as operations, may not be in the best interest of the overall firm.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 2 Medium
Topic: What is Strategic Management?

 

99. The four key attributes of strategic management include the idea that strategy must

A. be directed toward overall organizational goals and objectives.

 

B. be focused only on long-term objectives.

 

C. be focused on only one specific area of an organization.

 

D. focus only on competitor strengths.

The key attributes of strategic management are that it directs the organization toward overall goals and objectives, includes multiple stakeholders in decision making, needs to incorporate short-term and long-term perspectives, and recognizes trade-offs between efficiency and effectiveness.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 2 Medium
Topic: What is Strategic Management?

 

100. The four key attributes of strategic management include all of the following except

A. including multiple stakeholder interests in decision making.

 

B. incorporating both short-term and long-term perspectives.

 

C. recognizing the trade-offs between effectiveness and efficiency.

 

D. emphasis on the attainment of short-term objectives.

The key attributes of strategic management are that it directs the organization toward overall goals and objectives, includes multiple stakeholders in decision making, needs to incorporate short-term and long-term perspectives, and recognizes trade-offs between efficiency and effectiveness.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 1 Easy
Topic: What is Strategic Management?

 

101. Effectiveness is often defined as

A. doing things right.

 

B. stakeholder satisfaction.

 

C. doing the right thing.

 

D. productivity enhancement.

Effectiveness is tailoring actions to the needs of an organization rather than wasting effort, or doing the right thing.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 1 Easy
Topic: What is Strategic Management?

 

102. In choosing to focus on stakeholders, which of the following will not lead to success for a manager?

A. shareholders and employees

 

B. employees and suppliers

 

C. customers and the community at large

 

D. customers only

Stakeholders are those individuals, groups, and organizations that have a stake in the success of the organization, including owners (shareholders in a publicly held corporation), employees, customers, suppliers, the community at large, and so on. Managers will not be successful if they focus on a single stakeholder.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 2 Medium
Topic: What is Strategic Management?

 

103. In strategic management, both the short-term and long-term perspectives need to be considered because

A. shareholder value is only measured by short-term returns.

 

B. shareholders only care about long-term returns.

 

C. long-term vision precludes the analysis of present operating needs.

 

D. the creative tension between the two forces managers to develop more successful strategy.

Strategic management requires incorporating both short-term and long-term perspectives. Peter Senge, a leading strategic management author, has referred to this need as a creative tension. That is, managers must maintain both a vision for the future of the organization and a focus on its present operating needs.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 2 Medium
Topic: What is Strategic Management?

 

104. Strategic management involves the recognition of trade-offs between effectiveness and

A. cost.

 

B. value.

 

C. return on investment.

 

D. efficiency.

Strategic management involves the recognition of trade-offs between effectiveness and efficiency. Some authors have referred to this as the difference between doing the right thing (effectiveness) and doing things right (efficiency).

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 2 Medium
Topic: What is Strategic Management?

 

105. All of the following are ambidextrous behaviors except

A. taking initiative and being alert to opportunities beyond the job description.

 

B. being cooperative and seeking opportunities to combine personal efforts with that of others.

 

C. intensely focusing on the responsibilities of one individual and maximizing the output of the department in the organization in which that individual works.

 

D. being brokers, always looking to build internal linkages.

Ambidextrous behaviors include the following: (1) Individuals take time and are alert to opportunities beyond the confines of their own jobs; (2) they are cooperative and seek out opportunities to combine their efforts with others; (3) they are brokers, always looking to build internal networks; and (4) they are multitaskers, who are comfortable wearing more than one hat.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 2 Medium
Topic: What is Strategic Management?

 

106. Ambidextrous behaviors in individuals illustrate how a dual capacity for _______ can be woven into the fabric of an organization at the individual level.

A. alignment and adaptability

 

B. alignment and transparency

 

C. alignment and internal linkages

 

D. alignment and efficiency

A recent study involving 41 business units in 10 multinational companies identified four ambidextrous behaviors in individuals. Such behaviors are the essence of ambidexterity, and they illustrate how a dual capacity for alignment and adaptability can be woven into the fabric of an organization at the individual level.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-01 The definition of strategic management and its four key attributes.
Level of Difficulty: 2 Medium
Topic: What is Strategic Management?

 

107. According to Henry Mintzberg, the final realized strategy of a firm is

A. a combination of deliberate and emergent strategies.

 

B. a combination of deliberate and differentiation strategies.

 

C. not deliberate.

 

D. a result of unrealized intended strategy.

The final realized strategy of any firm is a combination of deliberate and emergent strategies.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-02 The strategic management process and its three interrelated and principal activities.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Process

 

108. __________ may be considered the advance work that must be done in order to effectively formulate and implement strategies.

A. Goal setting

 

B. Corporate entrepreneurship

 

C. Strategy analysis

 

D. Organizational design

Strategy analysis may be looked upon as the starting point of the strategic management process. It consists of the advance work that must be done in order to effectively formulate and implement strategies.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-02 The strategic management process and its three interrelated and principal activities.
Level of Difficulty: 1 Easy
Topic: The Strategic Management Process

 

109. Strategy analysis is the starting point of the strategic management process and consists of the

A. analysis only of the vision, mission, and objectives of the firm.

 

B. analysis of the relevant internal and external environmental factors only.

 

C. analysis of relevant competitors only.

 

D. matching of vision, mission, and objectives with the relevant internal and external environmental factors.

Strategy analysis may be looked upon as the starting point of the strategic management process. It consists of the advance work that must be done in order to effectively formulate and implement strategies. Many strategies fail because managers may want to formulate and implement strategies without a careful analysis of the overarching goals of the organization and without a thorough analysis of its external and internal environments.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-02 The strategic management process and its three interrelated and principal activities.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Process

 

110. Strategy formulation at the business level addresses best how to compete in a given business:

A. to attain competitive advantage

 

B. to reduce costs

 

C. to decrease buyer power

 

D. to thwart entry of new rivals

Business-level strategy addresses the issue of how to compete in a given business to attain competitive advantage.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-02 The strategic management process and its three interrelated and principal activities.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Process

 

111. Corporate level strategy focuses on what businesses to compete in and

A. how business can be managed to achieve synergy.

 

B. how business can be managed to reduce synergy.

 

C. how the firm can work as a stand-alone entity.

 

D. how the firm can create more value by operating alone.

Corporate-level strategy focuses on two issues: (a) what businesses to compete in and (b) how businesses can be managed to achieve synergy; that is, they create more value by working together than by operating as stand-alone businesses.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-02 The strategic management process and its three interrelated and principal activities.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Process

 

112. Corporate-level strategy looks at how to manage the ______ of its businesses to create synergies.

A. portfolio

 

B. stock prices

 

C. competitors

 

D. market pricing

Corporate-level strategy addresses a portfolio (or group) of businesses of the firm. It addresses: (1) What business (or businesses) should we compete in and (2) How can we manage this portfolio of businesses to create synergies among the businesses.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-02 The strategic management process and its three interrelated and principal activities.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Process

 

113. Entering foreign markets requires firms to ascertain foremost how they will attain

A. market share.

 

B. low costs.

 

C. competitive advantage.

 

D. low returns on investment.

When firms enter foreign markets, they face both opportunities and pitfalls. Managers must decide not only on the most appropriate entry strategy but also how they will go about attaining competitive advantages in international markets.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-02 The strategic management process and its three interrelated and principal activities.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Process

 

114. New value creation is a major engine for economic growth and is the main focus of _______________ strategy.

A. portfolio

 

B. corporate-level

 

C. business-level

 

D. entrepreneurial

Entrepreneurial activity aimed at new value creation is a major engine for economic growth. In order for entrepreneurial initiatives to succeed, viable opportunities must be recognized and effective strategies must be formulated.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-02 The strategic management process and its three interrelated and principal activities.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Process

 

115. Two types of strategic control that firms must exercise for good strategy implementation are

A. informational and confrontational.

 

B. confrontational and behavioral.

 

C. behavioral and financial.

 

D. informational and behavioral.

Firms must exercise two types of strategic control. First, informational control requires that organizations continually monitor and scan the environment and respond to threats and opportunities. Second, behavioral control involves the proper balance of rewards and incentives as well as cultures and boundaries (or constraints).

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-02 The strategic management process and its three interrelated and principal activities.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Process

 

116. Effective organizational design means that firms must have ________ that are consistent with their strategy.

A. designs and plans

 

B. organizational structures and designs

 

C. adopters and designs

 

D. adopters and plans

Firms must have organizational structures and designs that are consistent with their strategy. In the rapidly changing competitive environments today, firms must ensure that their organizational boundaries (those internal to the firm and external) are more flexible and permeable.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-02 The strategic management process and its three interrelated and principal activities.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Process

 

117. Learning organizations permit the entire organization to benefit from ____________ talents.

A. internal and external

 

B. individual and collective

 

C. internal and collective

 

D. external and individual

Given rapid and unpredictable change, leaders must create a learning organization so that the entire organization can benefit from individual and collective talents.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-02 The strategic management process and its three interrelated and principal activities.
Level of Difficulty: 1 Easy
Topic: The Strategic Management Process

 

118. Effective leaders set a direction and develop an organization so that it is committed to excellence and ___________ behavior.

A. performant

 

B. strategic

 

C. ethical

 

D. positive

Effective leaders set a direction, design the organization, and develop an organization that is committed to excellence and ethical behavior.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-02 The strategic management process and its three interrelated and principal activities.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Process

 

119. Strategies should be formulated that enhance foremost the ____________ capacity of a firm.

A. innovative

 

B. learning

 

C. implementation

 

D. business-level

Firms must continually improve and grow as well as find new ways to renew their organizations. Corporate entrepreneurship and innovation provide firms with new opportunities, and strategies should be formulated that enhance the innovative capacity of the firm.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-02 The strategic management process and its three interrelated and principal activities.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Process

 

120. The three participants in corporate governance are the shareholders,

A. board of directors, and employees.

 

B. labor unions, and employees.

 

C. board of directors, and management.

 

D. banks and lending institutions, and management.

The primary participants in corporate governance are: (1) the shareholders, (2) the management (led by the chief executive officer), and (3) the board of directors.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 1 Easy
Topic: The Role of Corporate Governance and Stakeholder Management

 

121. While working to prioritize and fulfill their responsibilities, members of the board of directors of an organization should

A. represent their own interests.

 

B. represent the interests of the shareholders.

 

C. direct all actions of the CEO.

 

D. emphasize the importance of short-term goals.

The board of directors (BOD) consists of the elected representatives of the shareholders charged with ensuring that the interests and motives of management are aligned with those of the owners (i.e., shareholders).

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

122. Members of boards of directors are

A. appointed by the Securities and Exchange Commission.

 

B. elected by the shareholders as their representatives.

 

C. elected by the public.

 

D. only allowed to serve one term of four years.

The board of directors (BOD) consists of the elected representatives of the shareholders charged with ensuring that the interests and motives of management are aligned with those of the owners (i.e., shareholders).

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

123. An organization is responsible to many different entities. In order to meet the demands of these groups, organizations must participate in stakeholder management. Stakeholder management means that

A. interests of the stockholders are not the only interests that matter.

 

B. stakeholders are second in importance to the stockholders.

 

C. stakeholders and managers inevitably work at cross-purposes.

 

D. all stakeholders receive financial rewards.

Stakeholder management is the strategy of the firm for recognizing and responding to the interests of all its salient stakeholders.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 1 Easy
Topic: The Role of Corporate Governance and Stakeholder Management

 

124. Stakeholders are

A. a new way to describe stockholders.

 

B. individuals, groups, and organizations who have a stake in the success of the organization.

 

C. creditors who hold a lien on the assets of the organization.

 

D. attorneys and their clients who sue the organization.

A stakeholder can be defined as an individual or group that is inside or outside the company and has a stake in and can influence organizational performance. Each stakeholder group makes various claims on the company.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 1 Easy
Topic: The Role of Corporate Governance and Stakeholder Management

 

125. Procter and Gamble has perfected a technique for compacting cleaning powder into a liquid concentration. Consumers, retailers, shipping and wholesalers, and environmentalists all have benefited from the resulting change in consumer shopping habits and the revolution in industry supply-chain economics. According to the text, this is an example of

A. zero-sum relationship among stakeholders.

 

B. stakeholder symbiosis.

 

C. rewarding stakeholders.

 

D. emphasizing financial returns.

Organizations can achieve mutual benefit through stakeholder symbiosis, which recognizes that stakeholders are dependent upon each other for their success and well-being.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

126. There are several perspectives of competition. One perspective is zero-sum thinking. Zero-sum thinking means that

A. all parts of the organization gain at no loss.

 

B. in order for someone to gain others must experience no gain or benefit.

 

C. one can only gain at the expense of someone else.

 

D. everyone in the organization shares gains and losses equally.

In the zero-sum view, the role of management is to look upon the various stakeholders as competing for the resources of the organization. In essence, the gain of one individual or group is the loss of another individual or group.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 1 Easy
Topic: The Role of Corporate Governance and Stakeholder Management

 

127. Managers should do more than focus on short-term financial performance. One concept that helps managers do this is stakeholder symbiosis. This means that

A. stakeholders are dependent on each other for their success.

 

B. stakeholders look out for their individual interests.

 

C. one can only gain at the expense of someone else.

 

D. all stakeholders want to maximize shareholder returns.

Organizations can achieve mutual benefit through stakeholder symbiosis, which recognizes that stakeholders are dependent upon each other for their success and well-being.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 1 Easy
Topic: The Role of Corporate Governance and Stakeholder Management

 

128. Employee stakeholders are concerned with

A. taxes, warranties, and regulations.

 

B. wages, benefits, and job security.

 

C. good citizenship behavior.

 

D. dividends.

Employees as a stakeholder group are concerned with wages, benefits, safe working environment, and job security.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 1 Easy
Topic: The Role of Corporate Governance and Stakeholder Management

 

129. Stockholders as a stakeholder group are interested primarily by

A. payment of interest and repayment of principal.

 

B. value and warranties.

 

C. dividends and capital appreciation.

 

D. taxes and compliance with regulations.

Stockholders are interested in dividends and capital appreciation.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 1 Easy
Topic: The Role of Corporate Governance and Stakeholder Management

 

130. The Sustainable Apparel Coalition accounts for more than one-third of the global

A. apparel and washing product industry.

 

B. consumer product industry.

 

C. refinery industry.

 

D. apparel and footwear industry.

The SAC now has approximately 145 members, representing brands, retailers, suppliers, and other organizations that together account for more than one-third of the global apparel and footwear industry.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

131. Wall Street executives have received excessive bonus pay in the past. This concerns which of the following stakeholder groups most directly?

A. government

 

B. suppliers

 

C. creditors

 

D. stockholders

For example, JPMorgan CEO Jamie Dimon was the highest-paid banker with $23.1 million in compensation, an 11 percent increase from the previous year. The shareholders of the firm did not do as well, because the stock fell 20 percent.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 3 Hard
Topic: The Role of Corporate Governance and Stakeholder Management

 

132. Supplier stakeholders are concerned with

A. assurance of a continued relationship with the firm.

 

B. employee benefits.

 

C. safe working conditions.

 

D. capital appreciation.

Supplier stakeholders are concerned with on-time payment and assurance of a continued relationship with the firm.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 1 Easy
Topic: The Role of Corporate Governance and Stakeholder Management

 

133. Community stakeholders are concerned primarily with

A. product warranties.

 

B. corporate citizenship behavior.

 

C. capital appreciation.

 

D. repayment of principal.

Community stakeholders are concerned with good citizenship behavior such as charities, employment, and not polluting the environment.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-03 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.
Level of Difficulty: 1 Easy
Topic: The Role of Corporate Governance and Stakeholder Management

 

134. Firms must be aware of goals other than short-term profit maximization. One area of concern should be social responsibility, which is the

A. expectation that business will strive to improve the overall welfare of society.

 

B. idea that organizations are solely responsible to local citizens.

 

C. fact that court costs could impact the financial bottom line.

 

D. idea that businesses are responsible for maintaining a healthy social climate for their employees.

Social responsibility is the expectation that businesses or individuals will strive to improve the overall welfare of society. From the perspective of a business, this means that managers must take active steps to make society better by virtue of the business being in existence.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 1 Easy
Topic: The Role of Corporate Governance and Stakeholder Management

 

135. According to the text, the triple bottom line approach to corporate accounting includes which three components?

A. financial, environmental, and customer

 

B. financial, organizational, and customer

 

C. financial, environmental, and social

 

D. financial, organizational, and psychological

Many companies are now measuring what has been called a triple bottom line. This involves assessing financial, social, and environmental performance.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 1 Easy
Topic: The Role of Corporate Governance and Stakeholder Management

 

136. Demands for greater corporate responsibility have accelerated today. They focus on issues such as

A. labor standards and environmental sustainability.

 

B. taxation.

 

C. product benefits.

 

D. service benefits.

Today, demands for greater corporate responsibility have accelerated. These include corporate critics, social investors, activists, and, increasingly, customers who claim to assess corporate responsibility when making purchasing decisions. Such demands go well beyond product and service quality. They include a focus on issues such as labor standards, environmental sustainability, financial and accounting reporting, procurement, and environmental practices.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

137. A key stakeholder group that is particularly susceptible to corporate social responsibility (CSR) initiatives is

A. suppliers.

 

B. rivals.

 

C. government agencies.

 

D. consumers.

A key stakeholder group that appears to be particularly susceptible to corporate social responsibility (CSR) initiatives is customers. Surveys indicate a strong positive relationship between CSR behaviors and consumer reaction to products and services of a firm.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

138. According to the Corporate Citizenship poll conducted by Cone Communications, most Americans say they would be likely to switch brands to one associated with a good cause, if there are similarities between

A. price and availability.

 

B. availability and quality.

 

C. price and quality.

 

D. price and durability.

A Corporate Citizenship poll conducted by Cone Communications found that 84 percent of Americans say they would be likely to switch brands to one associated with a good cause, if price and quality are similar.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

139. According to a CEO survey by Accenture, __________________ are not mutually exclusive corporate goals.

A. quality and profitability

 

B. sustainability and profitability

 

C. ROI and quality

 

D. availability and ROI

A CEO survey on sustainability by Accenture debunks the notion that sustainability and profitability are mutually exclusive corporate goals. The study found that sustainability is being increasingly recognized as a source of cost efficiencies and revenue growth.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

140. The Clorox Green Works line of plant-based cleaning materials captured 42 percent of the natural cleaning products market in its first year. This is an example of the benefit of

A. sustainability efforts.

 

B. cost reduction efforts.

 

C. marketing programs.

 

D. process management.

In days past, many sustainability efforts would have been the result of government prodding or public pressure, or would have been undertaken for PR purposes. Some well-known firms have benefited financially from such initiatives.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 1 Easy
Topic: The Role of Corporate Governance and Stakeholder Management

 

141. Northrup Grumman saved $2 million in energy costs at a single facility by installing reflective roofs and fluorescent lighting, replacing old equipment, and making minor temperature and humidity-level adjustments. This is an example of the benefit of

A. increasing revenue efforts.

 

B. marketing programs.

 

C. sustainability efforts.

 

D. process management.

In days past, many sustainability efforts would have been the result of government prodding or public pressure, or would have been undertaken for PR purposes. Some well-known firms have benefited financially from such initiatives.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

142. The Fairmont Royal York in Toronto invested $25,000 in an energy conservation program to replace leaky steam traps and fix leaks, which resulted in an annual savings of over $200,000. This is an example of a sustainability effort to

A. increase innovation.

 

B. decrease revenue.

 

C. lower costs.

 

D. increase customers.

In days past, many sustainability efforts would have been the result of government prodding or public pressure, or would have been undertaken for PR purposes. Some well-known firms have benefited financially from such initiatives. Executives know better. They realize that green, our convenient euphemism for sustainability, is the color of money. This is an example of a sustainability effort to lower costs.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

143. The ROI on sustainability efforts can be difficult to quantify because

A. an excess of necessary data for accurate calculation is readily available.

 

B. benefits from such projects are tangible.

 

C. the payback period is on a different time frame.

 

D. the payback period is on the same time frame.

The ROIs on sustainability projects are often very difficult to quantify for a number of reasons. Among these are: (1) The data necessary to calculate ROI accurately are often not available when it comes to sustainability projects; (2) Many of the benefits from such projects are intangible; and (3) The payback period is on a different time frame.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

144. Sustainability programs often find their success beyond company boundaries, thus ______ systems and _____ metrics cannot capture all of the relevant numbers.

A. external; bio

 

B. internal; process

 

C. external; external

 

D. internal; internal

The data necessary to calculate ROI accurately are often not available when it comes to sustainability projects. However, sustainability programs may often find their success beyond company boundaries, so internal systems and process metrics cannot capture all the relevant numbers.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

145. Traditional financial models are built around relatively easy-to-measure, monetized results; whereas, the benefits of sustainability projects involve

A. clear tangibles.

 

B. clear intangibles.

 

C. fuzzy tangibles.

 

D. fuzzy intangibles.

Traditional financial models are built around relatively easy-to-measure, monetized results. Yet many of the benefits of sustainability projects involve fuzzy intangibles, such as the goodwill that can enhance firm brand equity.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

146. The case for sustainability projects needs to be made on the basis of a more holistic and comprehensive understanding of all the _____________ benefits.

A. measurable and unmeasurable

 

B. financial and physical

 

C. tangible and intangible

 

D. measurable and physical

Clearly, the case for sustainability projects needs to be made on the basis of a more holistic and comprehensive understanding of all the tangible and intangible benefits rather than whether or not they meet existing hurdle rates for traditional investment projects. For example, 3M uses a lower hurdle rate for pollution prevention projects.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 2 Medium
Topic: The Role of Corporate Governance and Stakeholder Management

 

147. Some benefits of sustainability projects include

A. reducing risks.

 

B. lagging behind regulations.

 

C. displeasing communities.

 

D. ignoring employee morale.

The intangible benefits of sustainability projects such as reducing risks, staying ahead of regulations, pleasing communities, and enhancing employee morale are substantial, even when they are difficult to quantify.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-04 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
Level of Difficulty: 1 Easy
Topic: The Role of Corporate Governance and Stakeholder Management

 

148. Many organizations have a large number of functional areas with very diverse and sometimes competing interests. Such organizations will be most effective if

A. each functional area focuses on achieving their own goals.

 

B. goals are defined at the bottom and implemented at the top.

 

C. functional areas work together to attain overall goals.

 

D. management and employees have separate goals.

Strategic management requires managers to take an integrative view of the organization and assess how all of the functional areas and activities fit together to help an organization achieve its goals and objectives. This cannot be accomplished if only the top managers in the organization take an integrative, strategic perspective of issues facing the firm and everyone else fends for themselves in their independent, isolated functional areas. Instead, people throughout the organization must strive toward overall goals.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

149. Strategy formulation and implementation is a challenging ongoing process. To be effective, it should not involve

A. the CEO and the board of directors.

 

B. the board of directors, CEO, and CFO.

 

C. rivals.

 

D. line and staff managers.

To develop and mobilize people and other assets, leaders are needed throughout the organization. No longer can organizations be effective if the top does the thinking and the rest of the organization does the work. People throughout the organization must strive toward overall goals.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

150. The text argues that a strategic perspective in an organization should be emphasized

A. at the top of the organization.

 

B. at the middle of the organization.

 

C. throughout the organization.

 

D. from the bottom up.

No longer can organizations be effective if the top does the thinking and the rest of the organization does the work. People throughout the organization must strive toward overall goals.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

151. Peter Senge, of MIT, recognized three types of leaders. __________ are individuals that, although having little positional power and formal authority, generate their power through the conviction and clarity of their ideas.

A. Local line leaders

 

B. Executive leaders

 

C. Internal networkers

 

D. Shop floor leaders

Internal networkers, although they have little positional power and formal authority, generate their power through the conviction and clarity of their ideas.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 1 Easy
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

152. Peter Senge, of MIT, recognized three types of leaders. These individuals champion and guide ideas, create a learning infrastructure, and establish a domain for taking action.

A. local line leaders

 

B. executive leaders

 

C. internal networkers

 

D. shop floor leaders

Executive leaders champion and guide ideas, create a learning infrastructure, and establish a domain for taking action.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 1 Easy
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

153. Leadership is a necessary (but not sufficient) condition for organizational success. Leaders should emerge at which level(s) of an organization?

A. only at the top

 

B. in the middle

 

C. throughout the organization

 

D. only during times of change

To develop and mobilize people and other assets, leaders are needed throughout the organization.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

154. Local line leaders have __________ responsibility.

A. local

 

B. executive

 

C. profit-and-loss

 

D. no

Local line leaders have significant profit-and-loss responsibility.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

155. Internal networks generate their power through the _____________ of their ideas.

A. validity and correctness

 

B. conviction and clarity

 

C. validation and recognition

 

D. approval and awareness

Internal networkers have little positional power and formal authority, but generate their power through the conviction and clarity of their ideas.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

156. Executive leaders champion and guide ideas by

A. reinforcing ideas that did not work.

 

B. creating a learning infrastructure.

 

C. validating their formal authority.

 

D. increasing their personal power.

Executive leaders champion and guide ideas, create a learning infrastructure, and establish a domain for taking action.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

157. Richard Branson, founder of the Virgin Group, empowers his companies through a(n) _______ structure in which anyone can bring forth new ideas.

A. formal

 

B. hierarchal

 

C. multi-level

 

D. informal

Richard Branson, founder of the Virgin Group, whose core businesses include retail operations, hotels, communications, and an airline, is well known for creating an informal structure and culture where anyone in the organization can be involved in generating and acting upon new business ideas.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

158. Transformational change involves

A. extensive communication.

 

B. little training.

 

C. no employee development.

 

D. few incentives.

Transformational change involves extensive communication, incentives, training, and development.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

159. Whirlpool’s transformation under corporate vice president Nancy Snyder included financial investments in

A. shareholder dividends.

 

B. capital spending.

 

C. community development.

 

D. paying down borrowed debt.

Under the direction of Nancy Snyder, a corporate vice president, Whirlpool, the world’s largest producer of household appliances, brought about a significant shift in the firm’s reputation as an innovator. This five-year initiative included financial investments in capital spending.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

160. Methods by which successful executives show their interest in learning what others are thinking include

A. holding town hall meetings and consulting employees on what they would do if in charge.

 

B. holding town hall meetings and consulting bankers on what they would do if in charge.

 

C. holding retreats and consulting rivals on what they would do if in charge.

 

D. consulting rivals and consulting investment bankers.

Many successful executives reward honesty and input and show their interest in learning what others are thinking. Methods vary and include holding town-hall meetings, seeking the advice of people at all levels of the firm, and asking employees what they would do if they were in charge.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

161. Tim Brown, CEO of IDEO, believes that the ________ of a person should not dictate the level of influence their ideas should be accorded.

A. age

 

B. seniority

 

C. position

 

D. education

As noted by Tim Brown, CEO of the premier design consulting firm IDEO: The best can come from anywhere in an organization. So you had better do a good job of spotting and promoting them when they come, and not let their positions dictate how influential their ideas are.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-05 The need for greater empowerment throughout the organization.
Level of Difficulty: 2 Medium
Topic: The Strategic Management Perspective: An Imperative throughout the Organization

 

162. The hierarchy of organizational goals is in this order (least specific to most specific):

A. vision statements, strategic objectives, mission statements

 

B. mission statements, strategic objectives, vision statements

 

C. vision statements, mission statements, strategic objectives

 

D. mission statements, vision statements, strategic objectives

Organizations express priorities best through stated goals and objectives that form a hierarchy of goals, which includes its vision, mission, and strategic objectives. What visions may lack in specificity, they make up for in their ability to evoke powerful and compelling mental images. On the other hand, strategic objectives tend to be more specific and provide a more direct means of determining if the organization is moving toward broader, overall goals.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-06 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Level of Difficulty: 1 Easy
Topic: Ensuring Coherence in Strategic Direction

 

163. Vision statements are used to create a better understanding of the overall purpose and direction of the organization. Vision statements

A. are very specific.

 

B. provide specific objectives.

 

C. set organizational structure.

 

D. evoke powerful and compelling mental images.

A vision is an organizational goal(s) that evoke(s) powerful and compelling mental images.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-06 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Level of Difficulty: 1 Easy
Topic: Ensuring Coherence in Strategic Direction

 

164. Effective vision statements include

A. all strategic directions of the organization.

 

B. a brief statement of the company’s direction.

 

C. strategic posturing and future objectives.

 

D. financial objectives and projected figures.

A vision is a goal that is massively inspiring, overarching, and long-term. It represents a destination that is driven by and evokes passion. What visions may lack in specificity, they make up for in their ability to evoke powerful and compelling mental images.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-06 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Level of Difficulty: 1 Easy
Topic: Ensuring Coherence in Strategic Direction

 

165. WellPoint Health Network states: WellPoint will redefine our industry: through a new generation of consumer-friendly products that put individuals back in control of their future. This is an example of a

A. strategic objective.

 

B. vision statement.

 

C. vague statement of direction.

 

D. line manager’s individual goal.

Effective visions provide a fundamental statement of the values, aspirations and goals of an organization. Such visions go well beyond narrow financial objectives, of course, and strive to capture both the minds and hearts of employees.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-06 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Level of Difficulty: 2 Medium
Topic: Ensuring Coherence in Strategic Direction

 

166. Although such visions cannot be accurately measured by a specific indicator of how well they are being achieved, they do provide a fundamental statement of the __________ of an organization.

A. values, aspirations, and goals

 

B. expected returns and limitations

 

C. outstanding debt

 

D. credibility

Although such visions cannot be accurately measured by a specific indicator of how well they are being achieved, they do provide a fundamental statement of organization values, aspirations, and goals. Such visions go well beyond narrow financial objectives, of course, and strive to capture both the minds and hearts of employees.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-06 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Level of Difficulty: 2 Medium
Topic: Ensuring Coherence in Strategic Direction

 

167. In contrast to the vision of an organization, its mission should

A. be shorter in length.

 

B. encompass both the purpose of the company as well as the basis of competition.

 

C. encompass all the major rules and regulations of the corporate work force.

 

D. be less detailed.

The mission statement of a company differs from its vision in that it encompasses both the purpose of the company as well as the basis of competition and competitive advantage.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-06 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Level of Difficulty: 1 Easy
Topic: Ensuring Coherence in Strategic Direction

 

168. The vision and mission statements of a company set the overall direction of the organization. Strategic objectives serve what role?

A. operationalize the mission statement

 

B. modify the mission statement

 

C. are a shorter version of the mission statement

 

D. are only clarified by the board of directors

Strategic objectives are used to operationalize the mission statement. That is, they help to provide guidance on how the organization can fulfill or move toward the higher goals in the goal hierarchy, that of the mission and vision.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 01-06 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Level of Difficulty: 1 Easy
Topic: Ensuring Coherence in Strategic Direction

 

169. Successful organizations are effective in motivating people. Employees work best when

A. they are asked to do their best.

 

B. work requirements are vague and unclear.

 

C. they are striving toward specific goals.

 

D. they are guided by an abstract mission statement.

Challenging objectives can help to motivate and inspire employees to higher levels of commitment and effort. Much research has supported the notion that people work harder when they are striving toward specific goals instead of being asked simply to do their best.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-06 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Level of Difficulty: 2 Medium
Topic: Ensuring Coherence in Strategic Direction

 

170. Fortune Brands states they will cut corporate overhead costs by $30 million a year. This is an example of a

A. nonfinancial strategic objective.

 

B. financial strategic objective.

 

C. vision statement.

 

D. mission statement.

Strategic objectives are used to operationalize the mission statement. This is an example of a financial strategic objective.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-06 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Level of Difficulty: 2 Medium
Topic: Ensuring Coherence in Strategic Direction

 

171. We want to be the top-ranked supplier to our customers. (PPG) This is an example of a

A. nonfinancial strategic objective.

 

B. financial strategic objective.

 

C. vision statement.

 

D. mission statement.

Strategic objectives are used to operationalize the mission statement. This is an example of a nonfinancial strategic objective.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-06 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Level of Difficulty: 2 Medium
Topic: Ensuring Coherence in Strategic Direction

 

172. In large organizations, conflicts can arise between functional areas. In order to resolve these conflicts, strategic objectives

A. put financial objectives above human considerations.

 

B. align departments toward departmental goals.

 

C. help resolve conflicts through their common purpose.

 

D. cause debate and increase conflict.

There is always the potential for different parts of an organization to pursue their own goals rather than overall company goals. Although well intentioned, these may work at cross-purposes to the organization as a whole. Meaningful objectives thus help to resolve conflicts when they arise.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-06 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Level of Difficulty: 2 Medium
Topic: Ensuring Coherence in Strategic Direction

 

173. Which of the following is not an example of a financial strategic objective?

A. Increase sales growth 6 percent to 8 percent and accelerate core net earnings growth from 13 percent to15 percent per share in each of the next 5 years. (Procter & Gamble)

 

B. Reduce volatile air emissions 15 percent by 2015 from 2010 base year, indexed to net sales. (3M)

 

C. Generate Internet-related revenue of $1.5 billion. (AutoNation)

 

D. Cut corporate overhead costs by $30 million per year. (Fortune Brands)

Reduce volatile air emissions 15 percent by 2015 from 2010 base year, indexed to net sales (3M) is a nonfinancial strategic objective.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-06 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Level of Difficulty: 2 Medium
Topic: Ensuring Coherence in Strategic Direction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

174. In large organizations, the potential exists for different parts of an organization to pursue its own goals rather than the overall company goals. Proper _______ can help to resolve conflicts when they arise.

A. mission statements

 

B. vision statements

 

C. organization structure

 

D. objectives

As we noted earlier in the chapter, there is always the potential for different parts of an organization to pursue their own goals rather than overall company goals. Although well intentioned, these may work at cross-purposes to the organization as a whole. Meaningful objectives thus help to resolve conflicts when they arise.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 01-06 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Level of Difficulty: 2 Medium
Topic: Ensuring Coherence in Strategic Direction

 

Chapter 03

Assessing the Internal Environment of the Firm

 

True / False Questions

1. One advantage of SWOT analysis is that it helps managers to identify strengths that are almost always sources of sustainable competitive advantages.

True    False

 

2. The SWOT analysis can show managers how to achieve a competitive advantage.

True    False

 

3. The strengths and capabilities of a firm are enough to enable it to achieve a competitive advantage in the marketplace.

True    False

 

4. Toyota paid a heavy price for its excessive emphasis on cost control. By focusing on one strength exclusively, it suffered severe losses. This is an example of the limitations of a SWOT analysis.

True    False

 

5. In conducting a SWOT analysis, a risk for strategists is that they rely on traditional definitions of their industry and competitive environment and therefore focus too narrowly on current competitors.

True    False

 

6. The SWOT framework is sufficient as the primary basis for evaluating the external opportunities and threat of the company.

True    False

 

7. The SWOT framework is not sufficient as the primary basis for evaluating the internal strengths and weaknesses of a company.

True    False

 

8. Top managers have learned not to rely on SWOT to stimulate self-reflection and group discussions about how to improve their firm and position for success.

True    False

 

9. Company strengths and weaknesses are tied to its stated goals and objectives.

True    False

 

10. If a firm builds its strategy on a capability that cannot, by itself, create or sustain competitive advantage, it is wasting its time and resources.

True    False

 

11. Focusing too narrowly on current customers, technologies and competitors can lead a company to overlook periphery industry boundaries and a new set of competitive relationships.

True    False

 

12. Encyclopedia Britannica lost competitive positioning due to a misunderstanding of the change in competitors, when the CD-based encyclopedia became popular for home computers.

True    False

 

13. The static nature of the SWOT assessment is a positive advantage for it as an evaluation framework.

True    False

 

14. Value-chain analysis assumes that the basic economic purpose of a firm is to create value and it is a useful framework for analyzing the strengths and weaknesses of the firm.

True    False

 

15. In value-chain analysis, value is measured by the market value of the total stock outstanding of the company.

True    False

 

16. Primary activities contribute to the physical creation of a product or service, its sale and transfer to the buyer, and its service after the sale.

True    False

 

17. The value-chain concept assumes that both primary and support activities are capable of producing value for customers.

True    False

 

18. Inbound logistics include all activities associated with transforming inputs into the final product form such as machining, packaging, assembly, equipment, testing, printing, and facility operations.

True    False

 

19. Support activities provide support for primary activities, but not each other.

True    False

 

20. Establishing a customer service hotline to handle customer complaints would be considered a primary activity in value-chain analysis.

True    False

 

21. Technology development is a much broader concept than research and development.

True    False

 

22. In value-chain analysis, finance and accounting are considered part of the general administration of a firm.

True    False

 

23. Frito-Lay uses crowdsourcing to make its Super Bowl ads. This is an example of a primary activity in the value chain.

True    False

 

24. Campbell Soup uses an electronic network to facilitate its continuous-replenishment program with its most progressive retailers. This is known as an operations primary activity in the value chain.

True    False

 

25. Technip has developed intelligent pipes that can monitor and regulate the temperature throughout an oil pipeline. This is an example of a procurement support activity in the value chain.

True    False

 

26. At Sephora.com, a customer service representative taking a phone call from a repeat customer has instant access to what shade of lipstick she likes best. This is an example of a procurement support activity in the value chain.

True    False

 

27. Managers should focus their attention on interrelationships among value-chain activities within the firm, not on relationships among activities within the firm and other organizations (such as suppliers and customers).

True    False

 

28. Some leading edge companies are applying the prosumer concept. Here, firms team up with their suppliers and alliance partners to satisfy their customer needs.

True    False

 

29. Value-chain analysis can only be applied to manufacturing operations.

True    False

 

30. Information technology (IT) can also play a key role in enhancing the value that a company can provide its customers and, in turn, increasing its own revenues and profits. IT is an activity within the support activities of general administration.

True    False

 

31. Campbell Soup uses electronic networks in order to improve the efficiency of outbound logistics. This is an example of relationships among activities within the firm and with other stakeholders that are part of the company expanded value chain.

True    False

 

32. Some firms find great value by not incorporating their customers into the value creation process.

True    False

 

33. Crowdsourcing has many benefits, including the example in which McDonalds set up a Twitter campaign to promote positive word of mouth which became a platform for people looking to bash the chain.

True    False

 

34. Strong brands are typically built through consistent, effective marketing, and companies need to weigh the potential for misbehaving customers to thwart their careful efforts.

True    False

 

35. Porsche received a lot of negative feedback when it announced plans to release an SUV, but it went ahead anyway, and the Porsche Cayenne was a great success. This is an example of a peril of making decisions based on crowdsourcing.

True    False

 

36. At times, the difference between manufacturing and service is in providing a customized solution rather than mass production, as is common in manufacturing.

True    False

 

37. A travel agent does not add value by creating an itinerary that includes transportation, accommodations, and activities that are customized to your budget and travel dates.

True    False

 

38. A law firm renders services that are specific to client needs and circumstances. This is an example of the transformation process of a service organization.

True    False

 

39. The activities that may provide support only to one company may be critical to the primary value-adding activity of another firm.

True    False

 

40. The resource-based view of the firm focuses solely on the internal analysis of the operations of the firm.

True    False

 

41. Tangible resources are assets that are relatively easy to identify such as financial and physical assets.

True    False

 

42. Intangible resources of a firm refer to its capacity to deploy tangible resources over time and leverage those resources effectively.

True    False

 

43. Financial resources such as cash and cash equivalents are intangible resources.

True    False

 

44. Effective strategic planning processes are intangible resources.

True    False

 

45. Company reputation with customers, suppliers and other stakeholders is an intangible resource.

True    False

 

46. Examples of organizational capabilities are outstanding customer service, excellent product development capabilities, superb innovation processes, and flexibility in manufacturing processes.

True    False

 

47. Harley-Davidson sells accessories, clothing, toys and motorcycles. They have a brand image in common which is a tangible resource.

True    False

 

48. Comcast gets a bad review on Yelp. This is an example of harm to a tangible resource.

True    False

 

49. FedEx employees take computer-based job competency tests every 6 to 12 months in order to identify areas of individual weakness and provide input to a computer database of employee skills. This is an example of a tangible resource.

True    False

 

50. Trade secrets are intangible resources.

True    False

 

51. Modern plant and facilities as well as favorable manufacturing locations are tangible resources.

True    False

 

52. Patents, copyrights, and trademarks are intangible resources.

True    False

 

53. Products and services that are difficult to imitate help firms sustain their profitability.

True    False

 

54. Path dependency has no impact on the inimitability of resources.

True    False

 

55. Capabilities that exhibit causal ambiguity are difficult to imitate.

True    False

 

56. For a resource to provide a firm with potential sustainable advantages it must satisfy only two criteria: rareness and difficulty in substitution.

True    False

 

57. Firms that are successful in creating competitive advantages that are sustainable for a period of time do not have to be concerned about profits being retained by employees or managers.

True    False

 

58. Employee exit cost is a factor that can increase employee bargaining power and help him or her appropriate profits of the firm.

True    False

 

59. Amazon Prime is an example of a difficult to imitate capability that gives it competitive advantage over its rivals.

True    False

 

60. Dell lost its competitive advantage by 2009 in part because it placed its efforts on operational excellence to the exclusion of reinvention.

True    False

 

61. The corporate culture at Southwest airlines is an example of causal ambiguity.

True    False

 

62. People want to partner with you because they have heard you are a credible company built through a culture of trust. In a sense, being a great company to work for also makes you a great company to work with. This is an example of causal ambiguity.

True    False

 

63. Two valuable firm resources (or two bundles of resources) are strategically equivalent when each one can be exploited separately to implement the same strategies.

True    False

 

64. Though two teams could have different ages, functional backgrounds, experience, and so on, they could be strategically equivalent and thus substitutes for one another.

True    False

 

65. Several pharmaceutical firms have seen the value of patent protection erode in the face of new drugs that are based on different production processes and act in different ways, but can be used in similar treatment regimes. This example illustrates the lack of sustainable competitive advantage being offered by the product.

True    False

 

66. Financial analysis provides an accurate way to assess the relative strengths of firms and can be used as a complete guide to study companies.

True    False

 

67. Leverage ratios provide measures of the capacity of a firm to meet its long-term financial obligations.

True    False

 

68. Historical comparisons are most appropriate during periods of recession or economic boom.

True    False

 

69. When using industry norms as a standard of comparison, managers must be sure that the firms used in the comparisons are representative of all sizes and strategies within the industry.

True    False

 

70. The current ratio is used to measure long-term solvency.

True    False

 

71. The price-earnings ratio is used to measure profitability.

True    False

 

72. The total debt ratio is used to measure profitability.

True    False

 

73. Inventory turnover is a measure of asset utilization.

True    False

 

74. The profit margin ratio is used to measure long-term solvency.

True    False

 

75. The return on assets ratio is used to measure short-term solvency of the firm.

True    False

 

76. A meaningful ratio analysis need only include how ratios change over time.

True    False

 

77. When using industry norms as a standard of comparison, managers must be sure that the firms used in the comparisons are representative of all sizes and strategies within the industry.

True    False

 

78. When evaluating the financial performance of a firm, it is important to compare the results with industry norms.

True    False

 

79. A primary benefit of the balanced scorecard is that it complements financial indicators with operational measures of customer satisfaction, internal processes, and the innovation and improvement activities of the organization.

True    False

 

80. The balanced scorecard enables managers to evaluate their business from only two perspectives: customer and financial.

True    False

 

81. An important implication of the balanced scorecard is that managers need not look at their job as primarily balancing stakeholder demands.

True    False

 

82. A strength of the balanced scorecard is that it is very easy to implement and that there is little need for executive sponsorship.

True    False

 

83. In considering the business from the innovation and learning perspective using the balanced scorecard, the ability of the firm to do well is more dependent on its intangible and tangible assets.

True    False

 

84. In considering the business from the customer perspective using the balanced scorecard, company performance is essential.

True    False

 

85. In considering the business from the internal business perspective using the balanced scorecard, customer-based measures must be translated into indicators of what the firm must do internally to meet customer expectations.

True    False

 

86. In considering the business from the internal business perspective using the balanced scorecard, periodic financial statements are used to indicate the consequences of improved quality, response time, productivity, and innovative products. These consequences include improved sales.

True    False

 

87. For the balanced scorecard to work, managers must articulate goals for five categories of customer concerns: time, quality, performance and service, cost, and design.

True    False

 

88. Excellent customer performance results from processes, decisions, and actions that occur only in the marketing efforts of the firm.

True    False

 

89. To survive and prosper, managers must not make frequent changes to existing products and services, because it will confuse the customer.

True    False

 

90. The ability of a firm to do well from an innovation and learning perspective is most dependent on its tangible assets.

True    False

 

91. For the balanced scorecard implementation to be effective, a set of rules for employees that address continuous process improvement and the personal improvement of individual employees needs to be established so that employees buy-in to the change.

True    False

 

 

Multiple Choice Questions

92. Which of the following is not a limitation of SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis?

A. Organizational strengths may not lead to competitive advantage.

 

B. The SWOT focus on the external environment is too broad and integrative.

 

C. SWOT gives a one-shot view of a moving target.

 

D. SWOT overemphasizes a single dimension of strategy.

 

93. Which of the following is a limitation of SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis?

A. Organizational strengths may not lead to competitive advantage.

 

B. The SWOT focus on internal environment is too broad and integrative.

 

C. SWOT gives a multi-shot view of a moving target.

 

D. SWOT overemphasizes a multiple dimensions of strategy.

 

94. A key __________ of SWOT is that it is primarily a static assessment.

A. strength

 

B. threat

 

C. opportunity

 

D. weakness

 

95. Strategists who rely on traditional definitions of their industry and competitive environment often focus their sights too ___________ on current customers, technologies, and competitors.

A. broadly

 

B. narrowly

 

C. aggressively

 

D. widely

 

96. Company __________, no matter how unique or impressive, may not enable it to achieve a competitive advantage in the marketplace.

A. strengths and opportunities

 

B. strengths and threats

 

C. opportunities

 

D. strengths and capabilities

 

97. Sometimes firms become preoccupied with _________ or a key feature of the product or service they are offering and ignore other factors needed for competitive success.

A. multiple strengths

 

B. multiple opportunities

 

C. a single strength

 

D. a single opportunity

 

98. __________ among organizations is played out over time.

A. Negotiation

 

B. Sustainability

 

C. Competition

 

D. Learning

 

99. Focusing too narrowly on current customers, technologies, and competitors can lead to a failure to notice important changes on the periphery of their environment that may trigger the need to redefine industry boundaries and identify a whole new set of competitive relationships. This is a result of relying

A. on traditional definitions of all industries and competitive environments.

 

B. on traditional definitions of the relevant industry and competitive environment.

 

C. solely on intuition.

 

D. on a superficial evaluation of the relevant industry and competitive environment.

 

100. Toyota, the giant automaker, paid a heavy price for its ___________ emphasis on cost control. The resulting problems with quality and the negative publicity led to severe financial losses and an erosion of its reputation in many markets.

A. minimal

 

B. superficial

 

C. low-budget

 

D. excessive

 

101. Competition among organizations is played out over time. As circumstances, capabilities, and strategies change, _________ techniques do not reveal the dynamics of the competitive environment.

A. transactional analysis

 

B. variable analysis

 

C. static analysis

 

D. continuous

 

102. A SWOT analysis alone __________ helps a firm develop competitive advantages that it can sustain over time.

A. usually

 

B. often

 

C. rarely

 

D. regularly

 

103. Inbound logistics include

A. machining and packaging.

 

B. repair and parts supply.

 

C. promotion and packaging.

 

D. warehousing and inventory control.

 

104. In assessing its primary activities, an airline would examine

A. employee training programs.

 

B. baggage handling.

 

C. criteria for lease versus purchase decisions.

 

D. the effectiveness of its lobbying activities.

 

105. Advertising is a __________ activity. Supply of replacement parts is a __________ activity.

A. support; primary

 

B. primary; primary

 

C. primary; support

 

D. support; secondary

 

106. Which of the following examples demonstrates how successful organizations manage their primary activities?

A. Motorola has revised its compensation system to reward employees who learn a variety of skills.

 

B. Wal-Mart implemented a sophisticated information system that resulted in reduced inventory carrying costs and shortened customer response times.

 

C. National Steel improved its efficiency by reducing the number of job classifications.

 

D. Hewlett Packard has cut lead time from five days to one by employing JIT inventory management.

 

107. Which of the following is not an advantage of Just-In-Time inventory systems?

A. reduced raw material storage costs

 

B. minimized idle production facilities and workers

 

C. reduced work-in-process inventories

 

D. reduced dependence on suppliers

 

108. XYZ Corp. is focusing on the objective of low-cost, high quality, on-time production by minimizing idle productive facilities and workers. The XYZ Corp. is taking advantage of a __________ system.

A. Last In, First Out (LIFO)

 

B. Highly mechanized

 

C. First In, First Out (FIFO)

 

D. Just-In-Time (JIT)

 

109. ___________ is/are associated with collecting, storing, and distributing the product or service to buyers. They consist of warehousing, material handling, delivery operation, order processing, and scheduling.

A. Services

 

B. Inbound logistics

 

C. Outbound logistics

 

D. Operations

 

110. Customer service includes

A. product promotion.

 

B. procurement of critical supplies.

 

C. product distribution.

 

D. parts supply.

 

111. Which of the following is a support activity?

A. inbound logistics

 

B. customer service

 

C. technology development

 

D. operations

 

112. Which of the following lists consists of support activities?

A. human resource management, technology development, customer service, and procurement

 

B. human resource management, customer service, marketing and sales, and operations

 

C. customer service, information systems, technology development, and procurement

 

D. human resource management, technology development, procurement, and general administration

 

113. Human resource management consists of activities involved in the recruiting, hiring, training, development, and compensation of all types of personnel. It supports

A. only individual primary activities.

 

B. mostly support activities but does have some impact on primary activities.

 

C. only individual support activities.

 

D. both individual primary and support activities and the entire value chain.

 

114. According to value-chain analysis, which of the following would be considered part of the general administration in a firm?

A. information systems

 

B. technology development

 

C. human resource management

 

D. procurement

 

115. A marketing department that promises delivery faster than the ability of the production department to produce is an example of a lack of understanding of the

A. interrelationships among functional areas and firm strategies organizational culture and leadership.

 

B. organizational culture and leadership.

 

C. need to maintain the reputation of the company.

 

D. synergy of the business units.

 

116. In a retail service industry, which of the following is not a primary value-chain activity?

A. purchasing goods

 

B. human resource management

 

C. partnering with vendors

 

D. operating stores

 

117. In terms of value chain analysis, a telephone operating company would find that negotiating and maintaining ongoing relations with regulatory bodies are important activities for achieving

A. returns on investment.

 

B. customer awareness.

 

C. competitive advantage.

 

D. better employees.

 

118. General administration is sometimes viewed as only _______ but can be a powerful source of competitive advantage.

A. income

 

B. value

 

C. overhead

 

D. unimportant

 

119. German truck and trailer manufacturer, Schmitz Cargobull, mainly serves customers that are operators of truck or trailer fleets. What sets the company apart is its expertise in telematics (the integrated application of telecommunications data) to monitor the current state of any Schmitz Cargobull-produced trailer. This is an example of using ________ to enhance customer value and increase _______ position.

A. sales; competitive

 

B. operations; marketing

 

C. information technology; competitive

 

D. human resources; marketing

 

120. In an interview with Lise Saari, former director of global workforce research at IBM, she notes that HR must be a true partner of the business, with a deep and up-to-date understanding of business realities and objectives, and must ensure HR initiatives fully support them at all points of the value chain. This is an example of

A. relationships among activities within the firm and with other stakeholders.

 

B. relationships between firms.

 

C. interrelationships among activities within the firm.

 

D. interrelationships among firms.

 

121. Regarding the value-chain concept, the most important interrelationship is between the organization and its

A. board of directors.

 

B. employees.

 

C. management.

 

D. customers.

 

122. In contrast to __________ interactions, which allow the firm to gain insights on the needs of a particular customer, ___________ offers the opportunity to leverage the wisdom of a larger crowd.

A. consumer; sourcing

 

B. prosumer; outsourcing

 

C. prosumer; crowdsourcing

 

D. marketing; crowdsourcing

 

123. In using crowdsourcing as a means to integrate the customer into the value chain, there are some perils to consider. Which of the following is not related to crowdsourcing perils?

A. Giving customers the opportunity to tarnish the company brand.

 

B. Asking for consumer input when demand is highly uncertain.

 

C. Repeatedly getting feedback from the same customer.

 

D. Asking for consumer input when demand is certain.

 

124. Accounting is a sort of transformation process that converts daily records of individual transactions into monthly financial reports. The __________ are the inputs, accounting is the operation that adds value, and ___________ are the outputs.

A. transaction records; financial statements

 

B. financial statements; transaction records

 

C. employee records; transaction records

 

D. health records; transaction statements

 

125. A travel agent adds value by creating an itinerary that includes transportation, accommodations, and activities that are customized to your budget and travel dates. In terms of the value chain analysis, this is an example of a ____________ organization.

A. retail

 

B. service

 

C. manufacturing

 

D. travel

 

126. For an engineering services firm, ________________ provides inputs, the transformation process is the engineering itself, and innovative designs and practical solutions are the outputs.

A. experimentation

 

B. customer support

 

C. research and development

 

D. human resource management

 

127. The resource-based view (RBV) of the firm combines the following two perspectives:

A. the primary and support activities of the firm.

 

B. the interrelationships among the primary activities of the firm and corporate management.

 

C. the internal analysis of the firm and the external analysis of the industry and competitive environment.

 

D. the industry and the competitive environment.

 

128. The three key types of resources that are central to the resource-based view of the firm are

A. tangible resources, intangible resources, and organizational structure.

 

B. culture, tangible resources, intangible resources.

 

C. tangible resources, intangible resources, and organizational capabilities.

 

D. tangible resources, intangible resources, and top management.

 

129. In the resource-based view of the firm, examples of tangible resources include

A. financial resources, human resources, and firm competencies.

 

B. financial resources, physical resources, and technological resources.

 

C. financial resources, physical resources, and the capacity to combine intangible resources.

 

D. outstanding customer service, innovativeness of products, and reputation.

 

130. _____________ are typically embedded in unique routines and practices that have evolved and accumulated over time such as effective work teams.

A. Tangible resources

 

B. Intangible resources

 

C. Reputational resources

 

D. Organizational capabilities

 

131. Apple combines and packages proven technology in new and innovative ways. This is an example of its use of

A. tangible resources.

 

B. intangible resources.

 

C. organizational capabilities.

 

D. strong primary activities.

 

132. __________ are the competencies or skills that a firm employs to transform inputs into outputs.

A. Tangible resources

 

B. Reputational resources

 

C. Organizational capabilities

 

D. Intangible resources

 

133. Which of the following is not an example of organizational capabilities?

A. outstanding customer service

 

B. reputation with customers for quality and reliability

 

C. innovativeness of products and services

 

D. ability to hire, motivate, and retain human capital

 

134. The ability to hire, motivate, and retain human capital is an example of ________ capabilities in the resource-based view of the firm.

A. tangible

 

B. organizational

 

C. management

 

D. design

 

135. In order to be considered strategic resources that contribute competitive advantage, they must have several characteristics. Which of the following is not one of these?

A. rare

 

B. valuable

 

C. inexpensive to imitate

 

D. costly to substitute

 

136. Which of the following is not a tangible resource?

A. technical and scientific skills

 

B. trade secrets, patents, copyrights

 

C. state-of-the art machinery

 

D. company borrowing capacity

 

137. Intangible resources are typically embedded in ________ routines and practices that have evolved and accumulated over time.

A. rare

 

B. standard

 

C. unique

 

D. obvious

 

138. The culture of a firm also may be a resource that provides competitive advantage. Which of these companies might be a good example of this intangible resource?

A. Google

 

B. Kmart

 

C. Costco

 

D. Walmart

 

139. For a resource to provide a firm with the potential for a sustainable competitive advantage, it must have four attributes. Which of the following is not one of these attributes?

A. rare

 

B. valuable

 

C. easy for competitors to substitute

 

D. difficult for competitors to imitate

 

140. A competitive advantage based on inimitability can be sustained for at least some time, if it has the following characteristics:

A. psychographic uniqueness, path dependency, causal ambiguity, and substitutability.

 

B. physical uniqueness, path dependency, causal ambiguity, and social complexity.

 

C. rarity, path dependency, causal ambiguity, and social substitutability.

 

D. geographic uniqueness, cause dependency, social ambiguity, and path complexity.

 

141. A crash R&D program by one firm cannot replicate a successful technology developed by another firm, when research findings cumulate. This is an example of

A. social complexity.

 

B. physical uniqueness.

 

C. path dependency.

 

D. causal ambiguity.

 

142. A variety of firm resources include interpersonal relations among managers in the firm, its culture, and its reputation with its suppliers and customers. Such competitive advantages are based upon

A. path dependency.

 

B. social complexity.

 

C. physical uniqueness.

 

D. tangible resources.

 

143. All of the following are examples of socially complex organizational phenomena except

A. a firm’s culture.

 

B. complex physical technology.

 

C. interpersonal relations among a firm’s managers.

 

D. leadership and trust.

 

144. A resource is valuable and rare but neither difficult to imitate nor without substitutes. This should enable the firm to attain

A. no competitive advantage.

 

B. a temporary competitive advantage.

 

C. competitive parity.

 

D. a sustainable competitive advantage.

 

145. Employees will be able to obtain a proportionately high level of profits they generate (relative to the firm) if

A. suppliers are loyal to the firm.

 

B. their expertise is firm-specific.

 

C. the cost to the firm of replacing them is high.

 

D. the firm’s resources are path dependent.

 

146. Which of the following is not a factor that helps to explain the extent to which employees and managers will be able to obtain a proportionately high level of the profits that they generate?

A. Employees have high bargaining power.

 

B. The cost of employee replacement is high.

 

C. The cost of exit is high for an employee.

 

D. Managers have low bargaining power.

 

147. Amazon Prime is credited for helping to increase the Amazon stock price by nearly 300 percent from 2008 to 2010. This competitive advantage is known as

A. causal ambiguity.

 

B. product rarity.

 

C. service validity.

 

D. substitutability.

 

148. Four factors help explain the extent to which employees and managers will be able to obtain a proportionately high level of the profits that they generate. Which is not one of these factors?

A. employee bargaining power

 

B. employee replacement cost

 

C. employee exit costs

 

D. competitor bargaining power

 

149. Which of the following groups generally is charged with creating value through the process of organizing, coordinating, and leveraging employees as well as other forms of capital such as plant, equipment, and financial capital?

A. unions

 

B. boards of directors

 

C. managers

 

D. stakeholders

 

150. Raymond Ozzie, the software designer who was critical in the development of Lotus Notes, was able to dictate the terms under which IBM acquired Lotus. This illustrates that he had ______ bargaining power based on the ________ cost required by the firm to replace him.

A. low; low

 

B. low; high

 

C. high; low

 

D. high; high

 

151. Historical comparisons provide information to managers about changes in the competitive position of a firm. Historical comparisons often are misleading

A. if the overall strategy of the firm is the same.

 

B. if the firm shows constant growth.

 

C. in periods of recession or economic boom.

 

D. if the firm’s stock is publicly traded.

 

152. The best measure of company ability to meet imminent financial obligations is known as the

A. debt ratio.

 

B. profit margin.

 

C. total asset turnover.

 

D. current ratio.

 

153. Which of the following would be most difficult to assess?

A. the liquidity position of a firm

 

B. market share growth

 

C. the legitimacy and reputation of a firm

 

D. the efficiency with which a firm utilizes its assets

 

154. Which of these categories of financial ratios is used to measure the ability of a firm to meet its short-term financial obligations?

A. liquidity ratios

 

B. profitability ratios

 

C. activity ratios

 

D. leverage ratios

 

155. Ratios that reflect whether or not a firm is efficiently using its resources are known as

A. turnover ratios.

 

B. leverage ratios.

 

C. liquidity ratios.

 

D. profitability ratios.

 

156. Which of the following is a profitability ratio?

A. current ratio

 

B. total debt ratio

 

C. total asset turnover

 

D. return on equity

 

157. Financial ratio analysis measures the performance of the firm based on all but which of the following?

A. balance sheet

 

B. market valuation

 

C. income statement

 

D. industry comparison

 

158. Comparing your firm with all other firms in your industry assesses _________ performance.

A. excessive

 

B. consistent

 

C. relative

 

D. non-comparable

 

159. Making comparisons between a firm and its most direct rivals is useful because firms within the same strategic industry group have _______ strategies.

A. different

 

B. the same

 

C. similar

 

D. relative

 

160. In making the decision to enter the pharmaceutical industry, a company would not need to consider which of the following?

A. historical comparisons

 

B. comparisons with industry norms

 

C. comparisons with key competitors

 

D. comparisons with non-competitors

 

161. A firm that takes on too much long-term debt to finance operations will see an immediate impact on its indicators of _______ financial leverage.

A. short-term

 

B. long-term

 

C. relative

 

D. comparable

 

162. Apple Inc. reported revenues of 171 billion USD and net income of 37 billion USD in 2012. These figures represent a stunning annual growth in revenue and net income of 57 percent and 43 percent, respectively, for the 2011 to 2013 time period. This information indicates the importance of using __________ to evaluate company financial performance.

A. financial ratios

 

B. industry norms

 

C. historical comparisons

 

D. competitor analysis

 

163. The balanced scorecard provides top managers with a __________ view of the business.

A. detailed and complex

 

B. simple and routine

 

C. fast but comprehensive

 

D. long-term financial

 

164. The balanced scorecard, developed by Kaplan and Norton, helps to integrate

A. financial analysis and the reputation of a firm.

 

B. intangible resources and operational measures.

 

C. financial analysis and stakeholder perspectives.

 

D. short-term perspectives and strategic positioning.

 

165. The balanced scorecard enables managers to consider their business from all of the following perspectives except

A. customer perspective.

 

B. internal perspective.

 

C. innovation and learning perspective.

 

D. ethical perspective.

 

166. An important implication of the balanced scorecard approach is that

A. managers need to recognize that satisfaction of stockholder demands is their primary job.

 

B. the emphasis on customer satisfaction and financial goals are only a means to that end.

 

C. managers should not look at their job as primarily balancing stakeholder demands.

 

D. gains in financial performance must come at a cost of employee satisfaction.

 

167. The financial perspective of the balanced scorecard answers which of the following questions?

A. How do customers see us?

 

B. What must we excel at?

 

C. How do we look to shareholders?

 

D. Can we continue to improve and create value?

 

168. The innovation and learning perspective of the balanced scorecard answers which of the following questions?

A. How do customers see us?

 

B. What must we excel at?

 

C. How do we look to shareholders?

 

D. Can we continue to improve and create value?

 

169. The customer perspective of the balanced scorecard answers which of the following questions?

A. How do customers see us?

 

B. What must we excel at?

 

C. How do we look to shareholders?

 

D. Can we continue to improve and create value?

 

170. The internal business perspective of the balanced scorecard answers which of the following questions?

A. How do customers see us?

 

B. What must we excel at?

 

C. How do we look to shareholders?

 

D. Can we continue to improve and create value?

 

171. The internal measures should reflect business processes that have ______ impact on customer satisfaction. These include factors that affect cycle time, quality, employee skills, and productivity.

A. the least

 

B. variable

 

C. the most

 

D. potential

 

172. From the innovation and learning perspective, survival is dependent upon managers making _________ changes to existing products and services as well as introduce entirely new products with expanded capabilities.

A. few

 

B. no

 

C. frequent

 

D. rare

 

173. If managers do not recognize from the beginning that the balanced scorecard is not a _________ and fail to commit to it long term, the organization will be disappointed.

A. panacea

 

B. quick fix

 

C. marketing ploy

 

D. cheap solution

 

174. With the total performance indicators in place at Sears, it can evaluate if a single store improves its employee attitude by 5 percent and therefore predict with confidence that if the revenue growth in the district as a whole is 5 percent, the revenue growth in this particular store would be 5.5 percent. This is an example of the _______ perspective of the balanced scorecard.

A. customer

 

B. internal business

 

C. financial

 

D. innovation and learning

 

Chapter 03 Assessing the Internal Environment of the Firm Answer Key

True / False Questions

1. One advantage of SWOT analysis is that it helps managers to identify strengths that are almost always sources of sustainable competitive advantages.

FALSE

The strengths and capabilities of a firm, no matter how unique or impressive, may not enable it to achieve a competitive advantage in the marketplace.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-01 The benefits and limitations of SWOT analysis in conducting an internal analysis of the firm.
Level of Difficulty: 2 Medium
Topic: The benefits and limitations of SWOT analysis

 

2. The SWOT analysis can show managers how to achieve a competitive advantage.

FALSE

SWOT has its limitations. It is just a starting point for discussion. By listing the company attributes, managers have the raw material needed to perform more in-depth strategic analysis. However, SWOT cannot show them how to achieve a competitive advantage. They must not make SWOT analysis an end in itself, temporarily raising awareness about important issues but failing to lead to the kind of action steps necessary to enact strategic change.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-01 The benefits and limitations of SWOT analysis in conducting an internal analysis of the firm.
Level of Difficulty: 2 Medium
Topic: The benefits and limitations of SWOT analysis

 

3. The strengths and capabilities of a firm are enough to enable it to achieve a competitive advantage in the marketplace.

FALSE

The strengths and capabilities of a firm, no matter how unique or impressive, may not enable it to achieve a competitive advantage in the marketplace. If a firm builds its strategy on a capability that cannot, by itself, create or sustain competitive advantage, it is essentially a wasted use of resources.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-01 The benefits and limitations of SWOT analysis in conducting an internal analysis of the firm.
Level of Difficulty: 2 Medium
Topic: The benefits and limitations of SWOT analysis

 

4. Toyota paid a heavy price for its excessive emphasis on cost control. By focusing on one strength exclusively, it suffered severe losses. This is an example of the limitations of a SWOT analysis.

TRUE

Sometimes firms become preoccupied with a single strength or a key feature of the product or service they are offering and ignore other factors needed for competitive success. For example, Toyota, the giant automaker, paid a heavy price for its excessive emphasis on cost control. The resulting problems with quality and the negative publicity led to severe financial losses and an erosion of its reputation in many markets.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-01 The benefits and limitations of SWOT analysis in conducting an internal analysis of the firm.
Level of Difficulty: 2 Medium
Topic: The benefits and limitations of SWOT analysis

 

5. In conducting a SWOT analysis, a risk for strategists is that they rely on traditional definitions of their industry and competitive environment and therefore focus too narrowly on current competitors.

TRUE

Strategists who rely on traditional definitions of their industry and competitive environment often focus their sights too narrowly on current customers, technologies, and competitors. Hence they fail to notice important changes on the periphery of their environment that may trigger the need to redefine industry boundaries and identify a whole new set of competitive relationships.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-01 The benefits and limitations of SWOT analysis in conducting an internal analysis of the firm.
Level of Difficulty: 2 Medium
Topic: The benefits and limitations of SWOT analysis

 

6. The SWOT framework is sufficient as the primary basis for evaluating the external opportunities and threat of the company.

FALSE

While we believe SWOT analysis is very helpful as a starting point, it should not form the primary basis for evaluating the internal strengths and weaknesses of the company or the opportunities and threats in the environment.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-01 The benefits and limitations of SWOT analysis in conducting an internal analysis of the firm.
Level of Difficulty: 2 Medium
Topic: The benefits and limitations of SWOT analysis

 

7. The SWOT framework is not sufficient as the primary basis for evaluating the internal strengths and weaknesses of a company.

TRUE

While we believe SWOT analysis is very helpful as a starting point, it should not form the primary basis for evaluating the internal strengths and weaknesses of the company or the opportunities and threats in the environment.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-01 The benefits and limitations of SWOT analysis in conducting an internal analysis of the firm.
Level of Difficulty: 2 Medium
Topic: The benefits and limitations of SWOT analysis

 

8. Top managers have learned not to rely on SWOT to stimulate self-reflection and group discussions about how to improve their firm and position for success.

FALSE

SWOT analysis is a tried-and-true tool of strategic analysis. SWOT (strengths, weaknesses, opportunities, threats) analysis is used regularly in business to initially evaluate the opportunities and threats in the business environment as well as the strengths and weaknesses of a firm’s internal environment. Top managers rely on SWOT to stimulate self-reflection and group discussions about how to improve their firm and position it for success.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-01 The benefits and limitations of SWOT analysis in conducting an internal analysis of the firm.
Level of Difficulty: 2 Medium
Topic: The benefits and limitations of SWOT analysis

 

9. Company strengths and weaknesses are tied to its stated goals and objectives.

TRUE

Company strengths and capabilities, no matter how unique or impressive, may not enable it to achieve a competitive advantage in the marketplace. It is akin to recruiting a concert pianist to join a gang of thugs; even though such an ability is rare and valuable, it hardly helps the organization attain its goals and objectives.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-01 The benefits and limitations of SWOT analysis in conducting an internal analysis of the firm.
Level of Difficulty: 2 Medium
Topic: The benefits and limitations of SWOT analysis

 

10. If a firm builds its strategy on a capability that cannot, by itself, create or sustain competitive advantage, it is wasting its time and resources.

TRUE

If a firm builds its strategy on a capability that cannot, by itself, create or sustain competitive advantage, it is essentially a wasted use of resources.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-01 The benefits and limitations of SWOT analysis in conducting an internal analysis of the firm.
Level of Difficulty: 2 Medium
Topic: The benefits and limitations of SWOT analysis

 

11. Focusing too narrowly on current customers, technologies and competitors can lead a company to overlook periphery industry boundaries and a new set of competitive relationships.

TRUE

Strategists who rely on traditional definitions of their industry and competitive environment often focus their sights too narrowly on current customers, technologies, and competitors. Hence they fail to notice important changes on the periphery of their environment that may trigger the need to redefine industry boundaries and identify a whole new set of competitive relationships.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-01 The benefits and limitations of SWOT analysis in conducting an internal analysis of the firm.
Level of Difficulty: 2 Medium
Topic: The benefits and limitations of SWOT analysis

 

12. Encyclopedia Britannica lost competitive positioning due to a misunderstanding of the change in competitors, when the CD-based encyclopedia became popular for home computers.

TRUE

Consider Encyclopedia Britannica, whose competitive position was severely eroded by a nontraditional competitor, the CD-based encyclopedias (e.g., Microsoft Encarta) that could be used on home computers followed by online encyclopedias (e.g., Wikipedia).

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-01 The benefits and limitations of SWOT analysis in conducting an internal analysis of the firm.
Level of Difficulty: 2 Medium
Topic: The benefits and limitations of SWOT analysis

 

13. The static nature of the SWOT assessment is a positive advantage for it as an evaluation framework.

FALSE

A key weakness of SWOT is that it is primarily a static assessment. It focuses too much company attention on one moment in time. Essentially, this is like studying a single frame of a motion picture. You may be able to identify the principal actors and learn something about the setting, but it does not tell you much about the plot.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-01 The benefits and limitations of SWOT analysis in conducting an internal analysis of the firm.
Level of Difficulty: 2 Medium
Topic: The benefits and limitations of SWOT analysis

 

14. Value-chain analysis assumes that the basic economic purpose of a firm is to create value and it is a useful framework for analyzing the strengths and weaknesses of the firm.

TRUE

Value-chain analysis views the organization as a sequential process of value-creating activities. It provides greater insights into analyzing the competitive position of a firm than SWOT analysis does by itself.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-02 The primary and support activities of a firm’s value chain.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

15. In value-chain analysis, value is measured by the market value of the total stock outstanding of the company.

FALSE

Value is the amount that buyers are willing to pay for what a firm provides them and is measured by total revenue, a reflection of the price the product of the firm commands and the quantity it can sell.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-02 The primary and support activities of a firm’s value chain.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

16. Primary activities contribute to the physical creation of a product or service, its sale and transfer to the buyer, and its service after the sale.

TRUE

The five primary activities in the Porter value chain model (inbound logistics, operations, outbound logistics, marketing and sales, and service) contribute to the physical creation of the product or service, its sale and transfer to the buyer, and its service after the sale.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-02 The primary and support activities of a firm’s value chain.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

17. The value-chain concept assumes that both primary and support activities are capable of producing value for customers.

TRUE

Both types of activities can add value, either directly or through important relationships with other activities.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-02 The primary and support activities of a firm’s value chain.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

18. Inbound logistics include all activities associated with transforming inputs into the final product form such as machining, packaging, assembly, equipment, testing, printing, and facility operations.

FALSE

Inbound logistics is primarily associated with receiving, storing, and distributing inputs to the product. Operations include all activities associated with transforming inputs into the final product form, such as machining, packaging, assembly, testing, printing, and facility operations.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-02 The primary and support activities of a firm’s value chain.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

19. Support activities provide support for primary activities, but not each other.

FALSE

Support activities (procurement, technology development, human resource management, and general administration) either add value by themselves or add value through important relationships with both primary activities and other support activities.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-02 The primary and support activities of a firm’s value chain.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

20. Establishing a customer service hotline to handle customer complaints would be considered a primary activity in value-chain analysis.

TRUE

Service is a primary activity which includes all actions associated with providing service to enhance or maintain the value of the product, such as installation, repair, training, parts supply, and product adjustment.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-02 The primary and support activities of a firm’s value chain.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

21. Technology development is a much broader concept than research and development.

TRUE

Every value activity embodies technology. The array of technologies employed in most firms is very broad, ranging from technologies used to prepare documents and transport goods to those embodied in processes and equipment or the product itself. Technology development related to the product and its features supports the entire value chain, while other technology development is associated with particular primary or support activities.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-02 The primary and support activities of a firm’s value chain.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

22. In value-chain analysis, finance and accounting are considered part of the general administration of a firm.

TRUE

General administration consists of a number of activities, including general management, planning, finance, accounting, legal and government affairs, quality management, and information systems. Administration typically supports the entire value chain and not individual activities.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-02 The primary and support activities of a firm’s value chain.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

23. Frito-Lay uses crowdsourcing to make its Super Bowl ads. This is an example of a primary activity in the value chain.

TRUE

Marketing and sales activities are associated with purchases of products and services by end users and the inducements used to get them to make purchases. They include advertising, promotion, sales force, quoting, channel selection, channel relations, and pricing. Frito-Lay uses crowdsourcing to create competition for ads. The best ones air during the Super Bowl.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-02 The primary and support activities of a firm’s value chain.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

24. Campbell Soup uses an electronic network to facilitate its continuous-replenishment program with its most progressive retailers. This is known as an operations primary activity in the value chain.

FALSE

Outbound logistics is associated with collecting, storing, and distributing the product or service to buyers. These activities include finished goods, warehousing, material handling, delivery vehicle operation, order processing, and scheduling. Campbell Soup uses an electronic network to facilitate its continuous-replenishment program with its most progressive retailers.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-02 The primary and support activities of a firm’s value chain.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

25. Technip has developed intelligent pipes that can monitor and regulate the temperature throughout an oil pipeline. This is an example of a procurement support activity in the value chain.

FALSE

In collaboration with oil services giant Schlumberger, Technip has developed intelligent pipes that can monitor and regulate the temperature throughout an oil pipeline, which is an important value-added activity for its customers, large oil producers. Fluctuating temperatures can cause changes in pipe diameter, which makes the flow of oil more variable. This is an example of technology development as a support activity in the value chain.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-02 The primary and support activities of a firm’s value chain.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

26. At Sephora.com, a customer service representative taking a phone call from a repeat customer has instant access to what shade of lipstick she likes best. This is an example of a procurement support activity in the value chain.

FALSE

Service is a primary activity in the value chain that includes all actions associated with providing service to enhance or maintain the value of the product, such as installation, repair, training, parts supply, and product adjustment. At Sephora.com, a customer service representative taking a phone call from a repeat customer has instant access to what type of lipstick she likes best.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-02 The primary and support activities of a firm’s value chain.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

27. Managers should focus their attention on interrelationships among value-chain activities within the firm, not on relationships among activities within the firm and other organizations (such as suppliers and customers).

FALSE

The importance of relationships among value-chain activities has two levels: (1) interrelationships among activities within the firm and (2) relationships among activities within the firm and with other stakeholders that are part of the expanded value chain of the firm.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-03 How value-chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

28. Some leading edge companies are applying the prosumer concept. Here, firms team up with their suppliers and alliance partners to satisfy their customer needs.

FALSE

In the future, we will be talking more and more about the prosumer, a customer/producer who is even more extensively integrated into the value chain. As a consequence, production processes will be customized more precisely and individually. Including customers in the actual production process can create greater satisfaction among them, result in significant cost savings, and generate innovative ideas for the firm.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-03 How value-chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

29. Value-chain analysis can only be applied to manufacturing operations.

FALSE

The value chain can be applied to service organizations, suggesting that the value-adding process may be configured differently depending on the type of business a firm is engaged in.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-03 How value-chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

30. Information technology (IT) can also play a key role in enhancing the value that a company can provide its customers and, in turn, increasing its own revenues and profits. IT is an activity within the support activities of general administration.

TRUE

Information technology (IT) can also play a key role in enhancing the value that a company can provide its customers and, in turn, increasing its own revenues and profits. General administration consists of a number of activities, including general management, planning, finance, accounting, legal and government affairs, quality management, and information systems.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-03 How value-chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

31. Campbell Soup uses electronic networks in order to improve the efficiency of outbound logistics. This is an example of relationships among activities within the firm and with other stakeholders that are part of the company expanded value chain.

FALSE

Relationships among value-chain activities exist at two levels: (1) interrelationships among activities within the firm and (2) relationships among activities within the firm and with other stakeholders (e.g., customers and suppliers) that are part of the firm’s expanded value chain.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-03 How value-chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

32. Some firms find great value by not incorporating their customers into the value creation process.

FALSE

When addressing the value-chain concept, it is important to focus on the interrelationship between the organization and its most important stakeholder, its customers. Some firms find great value by directly incorporating their customers into the value creation process.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-03 How value-chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

33. Crowdsourcing has many benefits, including the example in which McDonalds set up a Twitter campaign to promote positive word of mouth which became a platform for people looking to bash the chain.

FALSE

While crowdsourcing offers great promise, in practice such programs are difficult to run. At times, customers can hijack them. McDonalds set up a Twitter campaign to promote positive word of mouth. But this initiative became a platform for people looking to bash the chain.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-03 How value-chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

34. Strong brands are typically built through consistent, effective marketing, and companies need to weigh the potential for misbehaving customers to thwart their careful efforts.

TRUE

Strong brands are typically built through consistent, effective marketing, and companies need to weigh the potential for misbehaving customers to thwart their careful efforts.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-03 How value-chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

35. Porsche received a lot of negative feedback when it announced plans to release an SUV, but it went ahead anyway, and the Porsche Cayenne was a great success. This is an example of a peril of making decisions based on crowdsourcing.

TRUE

Firms are generally more likely to ask for customer input when market conditions are changing. However, this often backfires when demand is highly uncertain, because customers in such markets often don’t know what they want or what they will like. For example, Porsche received a lot of negative feedback when it announced plans to release an SUV, but it went ahead anyway, and the Porsche Cayenne was a great success.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-03 How value-chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

36. At times, the difference between manufacturing and service is in providing a customized solution rather than mass production, as is common in manufacturing.

TRUE

At times, the difference between manufacturing and service is in providing a customized solution rather than mass production, as is common in manufacturing.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-03 How value-chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

37. A travel agent does not add value by creating an itinerary that includes transportation, accommodations, and activities that are customized to your budget and travel dates.

FALSE

The value chain can be applied to service organizations, suggesting that the value-adding process may be configured differently depending on the type of business a firm is engaged in. A travel agent adds value by creating an itinerary that includes transportation, accommodations, and activities that are customized to your budget and travel dates.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-03 How value-chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

38. A law firm renders services that are specific to client needs and circumstances. This is an example of the transformation process of a service organization.

TRUE

The value chain can be applied to service organizations, suggesting that the value-adding process may be configured differently depending on the type of business a firm is engaged in. A law firm renders services that are specific to client needs and circumstances. This is an example of the transformation process of a service organization.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-03 How value-chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

39. The activities that may provide support only to one company may be critical to the primary value-adding activity of another firm.

TRUE

The value chain can be applied to service organizations, suggesting that the value-adding process may be configured differently depending on the type of business a firm is engaged in. The activities that may provide support only to one company may be critical to the primary value-adding activity of another firm.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-03 How value-chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

40. The resource-based view of the firm focuses solely on the internal analysis of the operations of the firm.

FALSE

The resource-based view (RBV) of the firm combines two perspectives: (1) the internal analysis of phenomena within a company and (2) an external analysis of the industry and its competitive environment.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-04 The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities.
Level of Difficulty: 2 Medium
Topic: Resource-Based View of the Firm

 

41. Tangible resources are assets that are relatively easy to identify such as financial and physical assets.

TRUE

Tangible resources are assets that are relatively easy to identify. They include the physical and the financial assets that an organization uses to create value for its customers.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-04 The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities.
Level of Difficulty: 2 Medium
Topic: Resource-Based View of the Firm

 

42. Intangible resources of a firm refer to its capacity to deploy tangible resources over time and leverage those resources effectively.

FALSE

Intangible resources are organizational assets that are difficult to identify and to account for and are typically embedded in unique routines and practices, including human resources, innovation resources, and reputation resources.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-04 The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities.
Level of Difficulty: 2 Medium
Topic: Resource-Based View of the Firm

 

43. Financial resources such as cash and cash equivalents are intangible resources.

FALSE

Intangible resources are organizational assets that are difficult to identify and to account for and are typically embedded in unique routines and practices, including human resources, innovation resources, and reputation resources. Tangible resources are assets that are relatively easy to identify. They include the physical and the financial assets that an organization uses to create value for its customers.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-04 The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities.
Level of Difficulty: 2 Medium
Topic: Resource-Based View of the Firm

 

44. Effective strategic planning processes are intangible resources.

FALSE

Intangible resources are organizational assets that are difficult to identify and to account for and are typically embedded in unique routines and practices, including human resources, innovation resources, and reputation resources. Tangible resources are assets that are relatively easy to identify. They include the physical and the financial assets that an organization uses to create value for its customers.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-04 The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities.
Level of Difficulty: 2 Medium
Topic: Resource-Based View of the Firm

 

45. Company reputation with customers, suppliers and other stakeholders is an intangible resource.

TRUE

Intangible resources are organizational assets that are difficult to identify and to account for and are typically embedded in unique routines and practices, including human resources, innovation resources, and reputation resources.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-04 The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities.
Level of Difficulty: 2 Medium
Topic: Resource-Based View of the Firm

 

46. Examples of organizational capabilities are outstanding customer service, excellent product development capabilities, superb innovation processes, and flexibility in manufacturing processes.

TRUE

Organizational capabilities are not specific tangible or intangible assets, but rather the competencies or skills that a firm employs to transform inputs into outputs. In short, they refer to an organization’s capacity to deploy tangible and intangible resources over time and generally in combination and to leverage those capabilities to bring about a desired end.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-04 The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities.
Level of Difficulty: 2 Medium
Topic: Resource-Based View of the Firm

 

47. Harley-Davidson sells accessories, clothing, toys and motorcycles. They have a brand image in common which is a tangible resource.

FALSE

Intangible resources are organizational assets that are difficult to identify and to account for and are typically embedded in unique routines and practices, including human resources, innovation resources, and reputation resources.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-04 The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities.
Level of Difficulty: 2 Medium
Topic: Resource-Based View of the Firm

 

48. Comcast gets a bad review on Yelp. This is an example of harm to a tangible resource.

FALSE

Intangible resources are organizational assets that are difficult to identify and to account for and are typically embedded in unique routines and practices, including human resources, innovation resources, and reputation resources.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-04 The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities.
Level of Difficulty: 2 Medium
Topic: Resource-Based View of the Firm

 

49. FedEx employees take computer-based job competency tests every 6 to 12 months in order to identify areas of individual weakness and provide input to a computer database of employee skills. This is an example of a tangible resource.

TRUE

Tangible resources organizational assets that are relatively easy to identify, including physical assets, financial resources, organizational resources, and technological resources.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-04 The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities.
Level of Difficulty: 2 Medium
Topic: Resource-Based View of the Firm

 

50. Trade secrets are intangible resources.

FALSE

Tangible resources organizational assets that are relatively easy to identify, including physical assets, financial resources, organizational resources, and technological resources. Intangible resources are organizational assets that are difficult to identify and to account for and are typically embedded in unique routines and practices, including human resources, innovation resources, and reputation resources.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-04 The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities.
Level of Difficulty: 2 Medium
Topic: Resource-Based View of the Firm

 

51. Modern plant and facilities as well as favorable manufacturing locations are tangible resources.

TRUE

Tangible resources organizational assets that are relatively easy to identify, including physical assets, financial resources, organizational resources, and technological resources.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-04 The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities.
Level of Difficulty: 2 Medium
Topic: Resource-Based View of the Firm

 

52. Patents, copyrights, and trademarks are intangible resources.

FALSE

Tangible resources organizational assets that are relatively easy to identify, including physical assets, financial resources, organizational resources, and technological resources. Intangible resources are organizational assets that are difficult to identify and to account for and are typically embedded in unique routines and practices, including human resources, innovation resources, and reputation resources.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-04 The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities.
Level of Difficulty: 2 Medium
Topic: Resource-Based View of the Firm

 

53. Products and services that are difficult to imitate help firms sustain their profitability.

TRUE

For a resource to provide a firm with the potential for a sustainable competitive advantage, it must have four attributes. Among these is the idea that the resource must be difficult for competitors to imitate.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-05 The four criteria that a firm’s resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers.
Level of Difficulty: 2 Medium
Topic: Resource-Based View of the Firm

 

54. Path dependency has no impact on the inimitability of resources.

FALSE

Many resources cannot be imitated because of what economists refer to as path dependency. This means that resources are unique and therefore scarce because of all that has happened along the path followed in their development and/or accumulation. Competitors cannot buy these resources quickly and easily; they must be built up over time in ways that are difficult to accelerate.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-05 The four criteria that a firm’s resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers.
Level of Difficulty: 2 Medium
Topic: Resource-Based View of the Firm

 

55. Capabilities that exhibit causal ambiguity are difficult to imitate.

TRUE

One source of inimitability is termed causal ambiguity. This means that would-be competitors may be thwarted because it is impossible to disentangle the causes (or possible explanations) of either what the valuable resource is or how it can be re-created.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-05 The four criteria that a firm’s resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers.
Level of Difficulty: 2 Medium
Topic: Resource-Based View of the Firm

 

56. For a resource to provide a firm with potential sustainable advantages it must satisfy only two criteria: rareness and difficulty in substitution.

FALSE

For a resource to provide a firm with the potential for a sustainable competitive advantage, it must have four attributes. First, the resource must be valuable in the sense that it exploits opportunities and or neutralizes threats in the environment of the firm. Second, it must be rare among the current and potential competitors of the firm. Third, the resource must be difficult for competitors to imitate. Fourth, the resource must have no strategically equivalent substitutes.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-05 The four criteria that a firm’s resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers.
Level of Difficulty: 2 Medium
Topic: Resource-Based View of the Firm

 

57. Firms that are successful in creating competitive advantages that are sustainable for a period of time do not have to be concerned about profits being retained by employees or managers.

FALSE

Firms may be successful in creating competitive advantages that can be sustainable for a period of time. However, much of the profits can be retained by its employees and managers or other stakeholders instead of flowing to the owners of the firm.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-05 The four criteria that a firm’s resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers.
Level of Difficulty: 2 Medium
Topic: Resource-Based View of the Firm

 

58. Employee exit cost is a factor that can increase employee bargaining power and help him or her appropriate profits of the firm.

FALSE

Employee exit costs may tend to reduce employee bargaining power. An individual may face high personal costs when leaving the organization. Thus, the threat of the individual leaving may not be credible. In addition, employee expertise may be firm-specific and of limited value to other firms.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-05 The four criteria that a firm’s resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers.
Level of Difficulty: 2 Medium
Topic: Resource-Based View of the Firm

 

59. Amazon Prime is an example of a difficult to imitate capability that gives it competitive advantage over its rivals.

TRUE

Amazon Prime has proven to be extremely hard for rivals to copy. It enables Amazon to exploit its wide selection, low prices, network of third-party merchants, and finely tuned distribution system, while keying into that faintly irrational human need to maximize the benefits of a club that you have already paid to join. The four criteria a resource must possess in order to maintain a sustainable advantage are: valuable, rarity, difficult to imitate, and difficult to substitute.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-05 The four criteria that a firm’s resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers.
Level of Difficulty: 2 Medium
Topic: Resource-Based View of the Firm

 

60. Dell lost its competitive advantage by 2009 in part because it placed its efforts on operational excellence to the exclusion of reinvention.

TRUE

Dell illustrates what can happen when a company emphasizes optimization to the exclusion of reinvention. According to author Inder Sidhu, the Dell obsession with operational excellence prevented it from delivering innovations that the market wanted, costing it a great deal of goodwill and prestige.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-05 The four criteria that a firm’s resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers.
Level of Difficulty: 2 Medium
Topic: Resource-Based View of the Firm

 

61. The corporate culture at Southwest airlines is an example of causal ambiguity.

TRUE

When Continental and United tried to mimic the successful low-cost strategy of Southwest Airlines, the planes, routes, and fast gate turnarounds were not the most difficult aspects for them to copy. Those were all rather easy to observe and, at least in principle, easy to duplicate. However, they could not replicate Southwest’s culture of fun, family, frugality, and focus since no one can clearly specify exactly what that culture is or how it came to be.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-05 The four criteria that a firm’s resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers.
Level of Difficulty: 2 Medium
Topic: Resource-Based View of the Firm

 

62. People want to partner with you because they have heard you are a credible company built through a culture of trust. In a sense, being a great company to work for also makes you a great company to work with. This is an example of causal ambiguity.

FALSE

Company resources may be imperfectly inimitable because they reflect a high level of social complexity. Such phenomena are typically beyond the ability of firms to systematically manage or influence. When competitive advantages are based on social complexity, it is difficult for other firms to imitate them.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-05 The four criteria that a firm’s resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers.
Level of Difficulty: 2 Medium
Topic: Resource-Based View of the Firm

 

63. Two valuable firm resources (or two bundles of resources) are strategically equivalent when each one can be exploited separately to implement the same strategies.

TRUE

The fourth requirement for a firm resource to be a source of sustainable competitive advantage is that there must be no strategically equivalent valuable resources that are themselves not rare or inimitable. Two valuable firm resources (or two bundles of resources) are strategically equivalent when each one can be exploited separately to implement the same strategies.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-05 The four criteria that a firm’s resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers.
Level of Difficulty: 2 Medium
Topic: Resource-Based View of the Firm

 

64. Though two teams could have different ages, functional backgrounds, experience, and so on, they could be strategically equivalent and thus substitutes for one another.

TRUE

Clearly, a firm seeking to imitate another high-quality top management team from a competitor firm would be unable to copy the team exactly. However, it might be able to develop its own unique management team. Though these two teams would have different ages, functional backgrounds, experience, and so on, they could be strategically equivalent and thus substitutes for one another.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-05 The four criteria that a firm’s resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers.
Level of Difficulty: 2 Medium
Topic: Resource-Based View of the Firm

 

65. Several pharmaceutical firms have seen the value of patent protection erode in the face of new drugs that are based on different production processes and act in different ways, but can be used in similar treatment regimes. This example illustrates the lack of sustainable competitive advantage being offered by the product.

TRUE

The fourth requirement for a firm resource to be a source of sustainable competitive advantage is that there must be no strategically equivalent valuable resources that are themselves not rare or inimitable. Two valuable firm resources (or two bundles of resources) are strategically equivalent when each one can be exploited separately to implement the same strategies. several pharmaceutical firms have seen the value of patent protection erode in the face of new drugs that are based on different production processes and act in different ways, but can be used in similar treatment regimes. The coming years will likely see even more radical change in the pharmaceutical industry as the substitution of genetic therapies eliminates certain uses of chemotherapy.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-05 The four criteria that a firm’s resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers.
Level of Difficulty: 2 Medium
Topic: Resource-Based View of the Firm

 

66. Financial analysis provides an accurate way to assess the relative strengths of firms and can be used as a complete guide to study companies.

FALSE

The financial position of a firm should not be analyzed in isolation. Important reference points are needed. Some issues that must be taken into account to make financial analysis more meaningful include: historical comparisons, comparisons with industry norms, and comparisons with key competitors.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-06 The usefulness of financial ratio analysis, its inherent limitations, and how to make meaningful comparisons of performance across firms.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

67. Leverage ratios provide measures of the capacity of a firm to meet its long-term financial obligations.

TRUE

Financial leverage ratios are also known as long-term solvency ratios. They measure the capacity of the firm to meets its long-term obligations.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 03-06 The usefulness of financial ratio analysis, its inherent limitations, and how to make meaningful comparisons of performance across firms.
Level of Difficulty: 1 Easy
Topic: Evaluating Firm Performance: Two Approaches

 

68. Historical comparisons are most appropriate during periods of recession or economic boom.

FALSE

Exhibit 3.9 illustrates a 10-year period of return on sales (ROS) for a hypothetical company. As indicated by the dotted trend lines, the rate of growth (or decline) differs substantially over time periods, and periods of recession and economic boom may make the trends unreliable.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-06 The usefulness of financial ratio analysis, its inherent limitations, and how to make meaningful comparisons of performance across firms.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

69. When using industry norms as a standard of comparison, managers must be sure that the firms used in the comparisons are representative of all sizes and strategies within the industry.

FALSE

Comparing a firm with all other firms in that industry assesses relative performance. Banks often use such comparisons when evaluating the creditworthiness of an individual firm.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-06 The usefulness of financial ratio analysis, its inherent limitations, and how to make meaningful comparisons of performance across firms.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

70. The current ratio is used to measure long-term solvency.

FALSE

The current ratio (current assets divided by current liabilities) is used to measure short-term solvency or liquidity.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-06 The usefulness of financial ratio analysis, its inherent limitations, and how to make meaningful comparisons of performance across firms.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

71. The price-earnings ratio is used to measure profitability.

FALSE

The price-earnings ratio (price per share divided by earnings per share) is used to measure market value.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-06 The usefulness of financial ratio analysis, its inherent limitations, and how to make meaningful comparisons of performance across firms.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

72. The total debt ratio is used to measure profitability.

FALSE

The total debt ratio (the difference between total assets and total equity, divided by total assets) is used to measure long-term solvency.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-06 The usefulness of financial ratio analysis, its inherent limitations, and how to make meaningful comparisons of performance across firms.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

73. Inventory turnover is a measure of asset utilization.

TRUE

Inventory turnover (cost of goods sold divided by inventory) is a measure of asset utilization.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-06 The usefulness of financial ratio analysis, its inherent limitations, and how to make meaningful comparisons of performance across firms.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

74. The profit margin ratio is used to measure long-term solvency.

FALSE

The profit margin ratio (net income divided by sales) is used to measure profitability of the firm.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-06 The usefulness of financial ratio analysis, its inherent limitations, and how to make meaningful comparisons of performance across firms.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

75. The return on assets ratio is used to measure short-term solvency of the firm.

FALSE

The return on assets ratio (net income divided by total assets) is used to measure the profitability of the firm.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-06 The usefulness of financial ratio analysis, its inherent limitations, and how to make meaningful comparisons of performance across firms.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

76. A meaningful ratio analysis need only include how ratios change over time.

FALSE

A meaningful ratio analysis must go beyond the calculation and interpretation of financial ratios. It must include how ratios change over time as well as how they are interrelated.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-06 The usefulness of financial ratio analysis, its inherent limitations, and how to make meaningful comparisons of performance across firms.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

77. When using industry norms as a standard of comparison, managers must be sure that the firms used in the comparisons are representative of all sizes and strategies within the industry.

FALSE

Comparing a firm with all other firms in that industry assesses relative performance. Banks often use such comparisons when evaluating the creditworthiness of an individual firm.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-06 The usefulness of financial ratio analysis, its inherent limitations, and how to make meaningful comparisons of performance across firms.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

78. When evaluating the financial performance of a firm, it is important to compare the results with industry norms.

TRUE

When you are evaluating financial performance of a firm, remember also to compare it with industry norms. The company current ratio or profitability may appear impressive at first glance. However, it may pale when compared with industry standards or norms.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-06 The usefulness of financial ratio analysis, its inherent limitations, and how to make meaningful comparisons of performance across firms.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

79. A primary benefit of the balanced scorecard is that it complements financial indicators with operational measures of customer satisfaction, internal processes, and the innovation and improvement activities of the organization.

TRUE

A balanced scorecard provides top managers with a fast but comprehensive view of the business. In a nutshell, it includes financial measures that reflect the results of actions already taken, but it complements these indicators with measures of customer satisfaction, internal processes, and the innovation and improvement activities of the organization (operational measures that drive future financial performance).

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-07 The value of the “balanced scorecard” in recognizing how the interests of a variety of stakeholders can be interrelated.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

80. The balanced scorecard enables managers to evaluate their business from only two perspectives: customer and financial.

FALSE

The balanced scorecard enables managers to consider their business from four key perspectives: customer, internal, innovation and learning, and financial.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 03-07 The value of the “balanced scorecard” in recognizing how the interests of a variety of stakeholders can be interrelated.
Level of Difficulty: 1 Easy
Topic: Evaluating Firm Performance: Two Approaches

 

81. An important implication of the balanced scorecard is that managers need not look at their job as primarily balancing stakeholder demands.

TRUE

A key implication is that managers do not need to look at their job as balancing stakeholder demands. The balanced scorecard provides a win-win approach, increasing satisfaction among a wide variety of organizational stakeholders, including employees, customers, and stockholders.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-07 The value of the “balanced scorecard” in recognizing how the interests of a variety of stakeholders can be interrelated.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

82. A strength of the balanced scorecard is that it is very easy to implement and that there is little need for executive sponsorship.

FALSE

The key limitation of the balanced scorecard is that some executives may view it as a quick fix that can be easily installed. Implementing a balanced metrics system is an evolutionary process. It is not a one-time task that can be quickly checked off as completed. If managers do not recognize this from the beginning and fail to commit to it long term, the organization will be disappointed.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-07 The value of the “balanced scorecard” in recognizing how the interests of a variety of stakeholders can be interrelated.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

83. In considering the business from the innovation and learning perspective using the balanced scorecard, the ability of the firm to do well is more dependent on its intangible and tangible assets.

TRUE

The ability of the firm to do well from an innovation and learning perspective is more dependent on its intangible than tangible assets. Three categories of intangible assets are critically important: human capital (skills, talent, and knowledge), information capital (information systems, networks), and organization capital (culture, leadership).

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-07 The value of the “balanced scorecard” in recognizing how the interests of a variety of stakeholders can be interrelated.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

84. In considering the business from the customer perspective using the balanced scorecard, company performance is essential.

TRUE

How a company is performing from the perspective of its customers is a top priority for management. The balanced scorecard requires that managers translate their general mission statements on customer service into specific measures that reflect the factors that really matter to customers.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-07 The value of the “balanced scorecard” in recognizing how the interests of a variety of stakeholders can be interrelated.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

85. In considering the business from the internal business perspective using the balanced scorecard, customer-based measures must be translated into indicators of what the firm must do internally to meet customer expectations.

TRUE

Customer-based measures are important. However, they must be translated into indicators of what the firm must do internally to meet customer expectations. The internal measures should reflect business processes that have the greatest impact on customer satisfaction.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-07 The value of the “balanced scorecard” in recognizing how the interests of a variety of stakeholders can be interrelated.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

86. In considering the business from the internal business perspective using the balanced scorecard, periodic financial statements are used to indicate the consequences of improved quality, response time, productivity, and innovative products. These consequences include improved sales.

TRUE

Measures of financial performance indicate whether the company strategy, implementation, and execution are indeed contributing to bottom-line improvement. Typical financial goals include profitability, growth, and shareholder value. Periodic financial statements remind managers that improved quality, response time, productivity, and innovative products benefit the firm only when they result in improved sales, increased market share, reduced operating expenses, or higher asset turnover.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-07 The value of the “balanced scorecard” in recognizing how the interests of a variety of stakeholders can be interrelated.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

87. For the balanced scorecard to work, managers must articulate goals for five categories of customer concerns: time, quality, performance and service, cost, and design.

FALSE

For the balanced scorecard to work, managers must articulate goals for four key categories of customer concerns: time, quality, performance and service, and cost.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-07 The value of the “balanced scorecard” in recognizing how the interests of a variety of stakeholders can be interrelated.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

88. Excellent customer performance results from processes, decisions, and actions that occur only in the marketing efforts of the firm.

FALSE

Excellent customer performance results from processes, decisions, and actions that occur throughout organizations in a coordinated fashion, and managers must focus on those critical internal operations that enable them to satisfy customer needs.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-07 The value of the “balanced scorecard” in recognizing how the interests of a variety of stakeholders can be interrelated.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

89. To survive and prosper, managers must not make frequent changes to existing products and services, because it will confuse the customer.

FALSE

To survive and prosper, managers must make frequent changes to existing products and services as well as introduce entirely new products with expanded capabilities.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-07 The value of the “balanced scorecard” in recognizing how the interests of a variety of stakeholders can be interrelated.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

90. The ability of a firm to do well from an innovation and learning perspective is most dependent on its tangible assets.

FALSE

The ability of a firm to do well from an innovation and learning perspective is more dependent on its intangible than tangible assets.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-07 The value of the “balanced scorecard” in recognizing how the interests of a variety of stakeholders can be interrelated.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

91. For the balanced scorecard implementation to be effective, a set of rules for employees that address continuous process improvement and the personal improvement of individual employees needs to be established so that employees buy-in to the change.

TRUE

Problems often occur in the balanced scorecard implementation efforts when the commitment to learning is insufficient and employee personal ambitions are included. Without a set of rules for employees that address continuous process improvement and the personal improvement of individual employees, there will be limited employee buy-in and insufficient cultural change. Thus, many improvements may be temporary and superficial.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-07 The value of the “balanced scorecard” in recognizing how the interests of a variety of stakeholders can be interrelated.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

Multiple Choice Questions

92. Which of the following is not a limitation of SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis?

A. Organizational strengths may not lead to competitive advantage.

 

B. The SWOT focus on the external environment is too broad and integrative.

 

C. SWOT gives a one-shot view of a moving target.

 

D. SWOT overemphasizes a single dimension of strategy.

Among the limitations of SWOT are: organizational strengths may not lead to competitive advantage; the SWOT focus on the external environment is too narrow; it gives a one-shot view of a moving target; and it overemphasizes a single dimension of strategy.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-01 The benefits and limitations of SWOT analysis in conducting an internal analysis of the firm.
Level of Difficulty: 2 Medium
Topic: The benefits and limitations of SWOT analysis

 

93. Which of the following is a limitation of SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis?

A. Organizational strengths may not lead to competitive advantage.

 

B. The SWOT focus on internal environment is too broad and integrative.

 

C. SWOT gives a multi-shot view of a moving target.

 

D. SWOT overemphasizes a multiple dimensions of strategy.

Among the limitations of SWOT are: organizational strengths may not lead to competitive advantage; the SWOT focus on the external environment is too narrow; it gives a one-shot view of a moving target; and it overemphasizes a single dimension of strategy.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-01 The benefits and limitations of SWOT analysis in conducting an internal analysis of the firm.
Level of Difficulty: 2 Medium
Topic: The benefits and limitations of SWOT analysis

 

94. A key __________ of SWOT is that it is primarily a static assessment.

A. strength

 

B. threat

 

C. opportunity

 

D. weakness

A key weakness of SWOT is that it is primarily a static assessment. It focuses too much of company attention on one moment in time. Essentially, this is like studying a single frame of a motion picture.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-01 The benefits and limitations of SWOT analysis in conducting an internal analysis of the firm.
Level of Difficulty: 2 Medium
Topic: The benefits and limitations of SWOT analysis

 

95. Strategists who rely on traditional definitions of their industry and competitive environment often focus their sights too ___________ on current customers, technologies, and competitors.

A. broadly

 

B. narrowly

 

C. aggressively

 

D. widely

Strategists who rely on traditional definitions of their industry and competitive environment often focus their sights too narrowly on current customers, technologies, and competitors.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-01 The benefits and limitations of SWOT analysis in conducting an internal analysis of the firm.
Level of Difficulty: 2 Medium
Topic: The benefits and limitations of SWOT analysis

 

96. Company __________, no matter how unique or impressive, may not enable it to achieve a competitive advantage in the marketplace.

A. strengths and opportunities

 

B. strengths and threats

 

C. opportunities

 

D. strengths and capabilities

Company strengths and capabilities, no matter how unique or impressive, may not enable it to achieve a competitive advantage in the marketplace.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-01 The benefits and limitations of SWOT analysis in conducting an internal analysis of the firm.
Level of Difficulty: 2 Medium
Topic: The benefits and limitations of SWOT analysis

 

97. Sometimes firms become preoccupied with _________ or a key feature of the product or service they are offering and ignore other factors needed for competitive success.

A. multiple strengths

 

B. multiple opportunities

 

C. a single strength

 

D. a single opportunity

Sometimes firms become preoccupied with a single strength or a key feature of the product or service they are offering and ignore other factors needed for competitive success.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-01 The benefits and limitations of SWOT analysis in conducting an internal analysis of the firm.
Level of Difficulty: 2 Medium
Topic: The benefits and limitations of SWOT analysis

 

98. __________ among organizations is played out over time.

A. Negotiation

 

B. Sustainability

 

C. Competition

 

D. Learning

Competition among organizations is played out over time.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-01 The benefits and limitations of SWOT analysis in conducting an internal analysis of the firm.
Level of Difficulty: 2 Medium
Topic: The benefits and limitations of SWOT analysis

 

99. Focusing too narrowly on current customers, technologies, and competitors can lead to a failure to notice important changes on the periphery of their environment that may trigger the need to redefine industry boundaries and identify a whole new set of competitive relationships. This is a result of relying

A. on traditional definitions of all industries and competitive environments.

 

B. on traditional definitions of the relevant industry and competitive environment.

 

C. solely on intuition.

 

D. on a superficial evaluation of the relevant industry and competitive environment.

Strategists who rely on traditional definitions of their industry and competitive environment often focus their sights too narrowly on current customers, technologies, and competitors. Hence they fail to notice important changes on the periphery of their environment that may trigger the need to redefine industry boundaries and identify a whole new set of competitive relationships.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-01 The benefits and limitations of SWOT analysis in conducting an internal analysis of the firm.
Level of Difficulty: 2 Medium
Topic: The benefits and limitations of SWOT analysis

 

100. Toyota, the giant automaker, paid a heavy price for its ___________ emphasis on cost control. The resulting problems with quality and the negative publicity led to severe financial losses and an erosion of its reputation in many markets.

A. minimal

 

B. superficial

 

C. low-budget

 

D. excessive

Toyota, the giant automaker, paid a heavy price for its excessive emphasis on cost control. The resulting problems with quality and the negative publicity led to severe financial losses and an erosion of its reputation in many markets.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-01 The benefits and limitations of SWOT analysis in conducting an internal analysis of the firm.
Level of Difficulty: 2 Medium
Topic: The benefits and limitations of SWOT analysis

 

101. Competition among organizations is played out over time. As circumstances, capabilities, and strategies change, _________ techniques do not reveal the dynamics of the competitive environment.

A. transactional analysis

 

B. variable analysis

 

C. static analysis

 

D. continuous

Competition among organizations is played out over time. As circumstances, capabilities, and strategies change, static analysis techniques do not reveal the dynamics of the competitive environment.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-01 The benefits and limitations of SWOT analysis in conducting an internal analysis of the firm.
Level of Difficulty: 2 Medium
Topic: The benefits and limitations of SWOT analysis

 

102. A SWOT analysis alone __________ helps a firm develop competitive advantages that it can sustain over time.

A. usually

 

B. often

 

C. rarely

 

D. regularly

SWOT analysis has much to offer, but only as a starting point. By itself, it rarely helps a firm develop competitive advantages that it can sustain over time.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-01 The benefits and limitations of SWOT analysis in conducting an internal analysis of the firm.
Level of Difficulty: 2 Medium
Topic: The benefits and limitations of SWOT analysis

 

103. Inbound logistics include

A. machining and packaging.

 

B. repair and parts supply.

 

C. promotion and packaging.

 

D. warehousing and inventory control.

Inbound logistics is associated primarily with receiving, storing, and distributing inputs to the product. It includes material handling, warehousing, inventory control, vehicle scheduling, and returns to suppliers.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-02 The primary and support activities of a firm’s value chain.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

104. In assessing its primary activities, an airline would examine

A. employee training programs.

 

B. baggage handling.

 

C. criteria for lease versus purchase decisions.

 

D. the effectiveness of its lobbying activities.

Five primary activities: inbound logistics, operations (which would include baggage handling for an airline), outbound logistics, marketing and sales, and service contribute to the physical creation of the product or service, its sale and transfer to the buyer, and its service after the sale.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-02 The primary and support activities of a firm’s value chain.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

105. Advertising is a __________ activity. Supply of replacement parts is a __________ activity.

A. support; primary

 

B. primary; primary

 

C. primary; support

 

D. support; secondary

Five primary activities (inbound logistics, operations, outbound logistics, marketing and sales, and service) contribute to the physical creation of the product or service, its sale and transfer to the buyer, and its service after the sale. Inbound logistics is primarily associated with receiving, storing, and distributing inputs to the product. Marketing and sales activities include advertising.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-02 The primary and support activities of a firm’s value chain.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

106. Which of the following examples demonstrates how successful organizations manage their primary activities?

A. Motorola has revised its compensation system to reward employees who learn a variety of skills.

 

B. Wal-Mart implemented a sophisticated information system that resulted in reduced inventory carrying costs and shortened customer response times.

 

C. National Steel improved its efficiency by reducing the number of job classifications.

 

D. Hewlett Packard has cut lead time from five days to one by employing JIT inventory management.

Just-in-time (JIT) inventory systems were designed to achieve efficient inbound logistics, which is one of the five primary activities in value-chain analysis. With JIT inventory systems, parts deliveries arrive at the assembly plants only hours before they are needed.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-02 The primary and support activities of a firm’s value chain.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

107. Which of the following is not an advantage of Just-In-Time inventory systems?

A. reduced raw material storage costs

 

B. minimized idle production facilities and workers

 

C. reduced work-in-process inventories

 

D. reduced dependence on suppliers

With JIT inventory systems, parts deliveries arrive at the assembly plants only hours before they are needed. This requires greater reliance on superior performance of suppliers.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-02 The primary and support activities of a firm’s value chain.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

108. XYZ Corp. is focusing on the objective of low-cost, high quality, on-time production by minimizing idle productive facilities and workers. The XYZ Corp. is taking advantage of a __________ system.

A. Last In, First Out (LIFO)

 

B. Highly mechanized

 

C. First In, First Out (FIFO)

 

D. Just-In-Time (JIT)

Just-in-time (JIT) inventory systems were designed to achieve efficient inbound logistics, which is one of the five primary activities in value-chain analysis. With JIT inventory systems, parts deliveries arrive at the assembly plants only hours before they are needed, which reduces idle production capacity.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-02 The primary and support activities of a firm’s value chain.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

109. ___________ is/are associated with collecting, storing, and distributing the product or service to buyers. They consist of warehousing, material handling, delivery operation, order processing, and scheduling.

A. Services

 

B. Inbound logistics

 

C. Outbound logistics

 

D. Operations

Outbound logistics is associated with collecting, storing, and distributing the product or service to buyers. These activities include finished goods, warehousing, material handling, delivery vehicle operation, order processing, and scheduling.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-02 The primary and support activities of a firm’s value chain.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

110. Customer service includes

A. product promotion.

 

B. procurement of critical supplies.

 

C. product distribution.

 

D. parts supply.

Service activity includes all actions associated with providing service to enhance or maintain the value of the product, such as installation, repair, training, parts supply, and product adjustment.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-02 The primary and support activities of a firm’s value chain.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

111. Which of the following is a support activity?

A. inbound logistics

 

B. customer service

 

C. technology development

 

D. operations

Support activities in the value chain can be divided into four generic categories: general administration, human resource management, technology development, and procurement.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-02 The primary and support activities of a firm’s value chain.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

112. Which of the following lists consists of support activities?

A. human resource management, technology development, customer service, and procurement

 

B. human resource management, customer service, marketing and sales, and operations

 

C. customer service, information systems, technology development, and procurement

 

D. human resource management, technology development, procurement, and general administration

Support activities in the value chain can be divided into four generic categories: general administration, human resource management, technology development, and procurement.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-02 The primary and support activities of a firm’s value chain.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

113. Human resource management consists of activities involved in the recruiting, hiring, training, development, and compensation of all types of personnel. It supports

A. only individual primary activities.

 

B. mostly support activities but does have some impact on primary activities.

 

C. only individual support activities.

 

D. both individual primary and support activities and the entire value chain.

Human resource management consists of activities involved in the recruiting, hiring, training, development, and compensation of all types of personnel. It supports both individual primary and support activities and the entire value chain.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-02 The primary and support activities of a firm’s value chain.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

114. According to value-chain analysis, which of the following would be considered part of the general administration in a firm?

A. information systems

 

B. technology development

 

C. human resource management

 

D. procurement

General administration consists of a number of activities, including general management, planning, finance, accounting, legal and government affairs, quality management, and information systems. Administration typically supports the entire value chain and not individual activities.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-02 The primary and support activities of a firm’s value chain.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

115. A marketing department that promises delivery faster than the ability of the production department to produce is an example of a lack of understanding of the

A. interrelationships among functional areas and firm strategies organizational culture and leadership.

 

B. organizational culture and leadership.

 

C. need to maintain the reputation of the company.

 

D. synergy of the business units.

Important to value-chain analysis are interrelationships which are the collaborative and strategic exchange relationships between value-chain activities either (a) within firms or (b) between firms. Strategic exchange relationships involve exchange of resources such as information, people, technology, or money that contribute to the success of the firm.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-03 How value-chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

116. In a retail service industry, which of the following is not a primary value-chain activity?

A. purchasing goods

 

B. human resource management

 

C. partnering with vendors

 

D. operating stores

Primary value-chain activities include: inbound logistics, operations, outbound logistics, marketing and sales, and service. Human resource management is a support activity.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-03 How value-chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

117. In terms of value chain analysis, a telephone operating company would find that negotiating and maintaining ongoing relations with regulatory bodies are important activities for achieving

A. returns on investment.

 

B. customer awareness.

 

C. competitive advantage.

 

D. better employees.

Although general administration is sometimes viewed only as overhead, it can be a powerful source of competitive advantage. In a telephone operating company, for example, negotiating and maintaining ongoing relations with regulatory bodies can be among the most important activities for competitive advantage.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-03 How value-chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

118. General administration is sometimes viewed as only _______ but can be a powerful source of competitive advantage.

A. income

 

B. value

 

C. overhead

 

D. unimportant

Although general administration is sometimes viewed only as overhead, it can be a powerful source of competitive advantage.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-03 How value-chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

119. German truck and trailer manufacturer, Schmitz Cargobull, mainly serves customers that are operators of truck or trailer fleets. What sets the company apart is its expertise in telematics (the integrated application of telecommunications data) to monitor the current state of any Schmitz Cargobull-produced trailer. This is an example of using ________ to enhance customer value and increase _______ position.

A. sales; competitive

 

B. operations; marketing

 

C. information technology; competitive

 

D. human resources; marketing

Information technology (IT) can also play a key role in enhancing the value that a company can provide its customers and, in turn, increasing its own revenues and profits. Schmitz Cargobull, a German truck and trailer manufacturer, uses IT to further its competitive position.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-03 How value-chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

120. In an interview with Lise Saari, former director of global workforce research at IBM, she notes that HR must be a true partner of the business, with a deep and up-to-date understanding of business realities and objectives, and must ensure HR initiatives fully support them at all points of the value chain. This is an example of

A. relationships among activities within the firm and with other stakeholders.

 

B. relationships between firms.

 

C. interrelationships among activities within the firm.

 

D. interrelationships among firms.

Managers must not ignore the importance of relationships among value-chain activities. These can be collaborative and strategic exchange relationships between value-chain activities either (a) within firms or (b) between firms. With regard to this example of the Lise Saari interview, this demonstrates interrelationships among activities within the firm.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-03 How value-chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

121. Regarding the value-chain concept, the most important interrelationship is between the organization and its

A. board of directors.

 

B. employees.

 

C. management.

 

D. customers.

When addressing the value-chain concept, it is important to focus on the interrelationship between the organization and its most important stakeholder, its customers. Some firms find great value by directly incorporating their customers into the value creation process.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-03 How value-chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

122. In contrast to __________ interactions, which allow the firm to gain insights on the needs of a particular customer, ___________ offers the opportunity to leverage the wisdom of a larger crowd.

A. consumer; sourcing

 

B. prosumer; outsourcing

 

C. prosumer; crowdsourcing

 

D. marketing; crowdsourcing

In contrast to prosumer interactions, which allow the firm to gain insights on the needs of a particular customer, crowdsourcing offers the opportunity to leverage the wisdom of a larger crowd.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-03 How value-chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

123. In using crowdsourcing as a means to integrate the customer into the value chain, there are some perils to consider. Which of the following is not related to crowdsourcing perils?

A. Giving customers the opportunity to tarnish the company brand.

 

B. Asking for consumer input when demand is highly uncertain.

 

C. Repeatedly getting feedback from the same customer.

 

D. Asking for consumer input when demand is certain.

Research has identified three areas of particular concern: Strong brand reputation, high demand uncertainty, too many initiatives.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-03 How value-chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

124. Accounting is a sort of transformation process that converts daily records of individual transactions into monthly financial reports. The __________ are the inputs, accounting is the operation that adds value, and ___________ are the outputs.

A. transaction records; financial statements

 

B. financial statements; transaction records

 

C. employee records; transaction records

 

D. health records; transaction statements

Accounting is a sort of transformation process that converts daily records of individual transactions into monthly financial reports. In this example, the transaction records are the inputs, accounting is the operation that adds value, and financial statements are the outputs.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-03 How value-chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

125. A travel agent adds value by creating an itinerary that includes transportation, accommodations, and activities that are customized to your budget and travel dates. In terms of the value chain analysis, this is an example of a ____________ organization.

A. retail

 

B. service

 

C. manufacturing

 

D. travel

A travel agent adds value by creating an itinerary that includes transportation, accommodations, and activities that are customized to your budget and travel dates. These are the operations, or transformation processes, of a service organization.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-03 How value-chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

126. For an engineering services firm, ________________ provides inputs, the transformation process is the engineering itself, and innovative designs and practical solutions are the outputs.

A. experimentation

 

B. customer support

 

C. research and development

 

D. human resource management

For an engineering services firm, research and development provides inputs, the transformation process is the engineering itself, and innovative designs and practical solutions are the outputs.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-03 How value-chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.
Level of Difficulty: 2 Medium
Topic: Value-Chain Analysis

 

127. The resource-based view (RBV) of the firm combines the following two perspectives:

A. the primary and support activities of the firm.

 

B. the interrelationships among the primary activities of the firm and corporate management.

 

C. the internal analysis of the firm and the external analysis of the industry and competitive environment.

 

D. the industry and the competitive environment.

The resource-based view (RBV) of the firm combines two perspectives: (1) the internal analysis of phenomena within a company and (2) an external analysis of the industry and its competitive environment.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-04 The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities.
Level of Difficulty: 2 Medium
Topic: The Resource-Based View of the Firm

 

128. The three key types of resources that are central to the resource-based view of the firm are

A. tangible resources, intangible resources, and organizational structure.

 

B. culture, tangible resources, intangible resources.

 

C. tangible resources, intangible resources, and organizational capabilities.

 

D. tangible resources, intangible resources, and top management.

Firm resources are all assets, capabilities, organizational processes, information, and knowledge controlled by a firm that enable it to develop and implement value-creating strategies. The three types of resources are tangible resources, intangible resources and organizational capabilities.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-04 The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities.
Level of Difficulty: 2 Medium
Topic: The Resource-Based View of the Firm

 

129. In the resource-based view of the firm, examples of tangible resources include

A. financial resources, human resources, and firm competencies.

 

B. financial resources, physical resources, and technological resources.

 

C. financial resources, physical resources, and the capacity to combine intangible resources.

 

D. outstanding customer service, innovativeness of products, and reputation.

Examples of tangible resources are financial resources, physical resources, organizational resources, and technological resources.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-04 The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities.
Level of Difficulty: 2 Medium
Topic: The Resource-Based View of the Firm

 

130. _____________ are typically embedded in unique routines and practices that have evolved and accumulated over time such as effective work teams.

A. Tangible resources

 

B. Intangible resources

 

C. Reputational resources

 

D. Organizational capabilities

Intangible resources are typically embedded in unique routines and practices that have evolved and accumulated over time. These include human resources (e.g., experience and capability of employees, trust, and effectiveness of work teams).

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-04 The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities.
Level of Difficulty: 2 Medium
Topic: The Resource-Based View of the Firm

 

131. Apple combines and packages proven technology in new and innovative ways. This is an example of its use of

A. tangible resources.

 

B. intangible resources.

 

C. organizational capabilities.

 

D. strong primary activities.

Organizational capabilities are the competencies or skills that a firm employs to transform inputs into outputs. Examples of organizational capabilities are outstanding customer service, excellent product development capabilities, superb innovation processes, and flexibility in manufacturing processes.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-04 The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities.
Level of Difficulty: 2 Medium
Topic: The Resource-Based View of the Firm

 

132. __________ are the competencies or skills that a firm employs to transform inputs into outputs.

A. Tangible resources

 

B. Reputational resources

 

C. Organizational capabilities

 

D. Intangible resources

Organizational capabilities are the competencies or skills that a firm employs to transform inputs into outputs. Examples of organizational capabilities are outstanding customer service, excellent product development capabilities, superb innovation processes, and flexibility in manufacturing processes.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-04 The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities.
Level of Difficulty: 2 Medium
Topic: The Resource-Based View of the Firm

 

133. Which of the following is not an example of organizational capabilities?

A. outstanding customer service

 

B. reputation with customers for quality and reliability

 

C. innovativeness of products and services

 

D. ability to hire, motivate, and retain human capital

Organizational capabilities are the competencies or skills that a firm employs to transform inputs into outputs. Examples of organizational capabilities are outstanding customer service, excellent product development capabilities, superb innovation processes, and flexibility in manufacturing processes. Reputation with customers for quality and reliability is an intangible resource.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-04 The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities.
Level of Difficulty: 2 Medium
Topic: The Resource-Based View of the Firm

 

134. The ability to hire, motivate, and retain human capital is an example of ________ capabilities in the resource-based view of the firm.

A. tangible

 

B. organizational

 

C. management

 

D. design

Organizational capabilities are the competencies or skills that a firm employs to transform inputs into outputs. Examples of organizational capabilities are outstanding customer service, excellent product development capabilities, superb innovation processes, and flexibility in manufacturing processes. The ability to hire, motivate, and retain human capital is an example of organizational capabilities in the resource-based view of the firm.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-04 The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities.
Level of Difficulty: 2 Medium
Topic: The Resource-Based View of the Firm

 

135. In order to be considered strategic resources that contribute competitive advantage, they must have several characteristics. Which of the following is not one of these?

A. rare

 

B. valuable

 

C. inexpensive to imitate

 

D. costly to substitute

The resource-based view (RBV) of the firm perspective states that company competitive advantages are due to their endowment of strategic resources that are valuable, rare, costly to imitate, and costly to substitute.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-04 The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities.
Level of Difficulty: 2 Medium
Topic: The Resource-Based View of the Firm

 

136. Which of the following is not a tangible resource?

A. technical and scientific skills

 

B. trade secrets, patents, copyrights

 

C. state-of-the art machinery

 

D. company borrowing capacity

Tangible resources are assets that are relatively easy to identify. They include the physical and financial assets that an organization uses to create value for its customers. Among them are financial resources, physical resources, organizational resources, and technological resources.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-04 The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities.
Level of Difficulty: 2 Medium
Topic: The Resource-Based View of the Firm

 

137. Intangible resources are typically embedded in ________ routines and practices that have evolved and accumulated over time.

A. rare

 

B. standard

 

C. unique

 

D. obvious

Much more difficult for competitors to account for or imitate are intangible resources, which are typically embedded in unique routines and practices that have evolved and accumulated over time.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-04 The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities.
Level of Difficulty: 2 Medium
Topic: The Resource-Based View of the Firm

 

138. The culture of a firm also may be a resource that provides competitive advantage. Which of these companies might be a good example of this intangible resource?

A. Google

 

B. Kmart

 

C. Costco

 

D. Walmart

Much more difficult for competitors (and, for that matter, the company managers) to account for or imitate are intangible resources, which are typically embedded in unique routines and practices that have evolved and accumulated over time. The company culture may also be a resource that provides competitive advantage. Google is a good example of a corporate culture that is difficult to imitate.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-04 The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities.
Level of Difficulty: 2 Medium
Topic: The Resource-Based View of the Firm

 

139. For a resource to provide a firm with the potential for a sustainable competitive advantage, it must have four attributes. Which of the following is not one of these attributes?

A. rare

 

B. valuable

 

C. easy for competitors to substitute

 

D. difficult for competitors to imitate

For a resource to provide a firm with the potential for a sustainable competitive advantage, it must have four attributes. First, the resource must be valuable in the sense that it exploits opportunities and/or neutralizes threats in the firm’s environment. Second, it must be rare among current and potential competitors of the firm. Third, the resource must be difficult for competitors to imitate. Fourth, the resource must have no strategically equivalent substitutes.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 03-05 The four criteria that a firm’s resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers.
Level of Difficulty: 1 Easy
Topic: The Resource-Based View of the Firm

 

140. A competitive advantage based on inimitability can be sustained for at least some time, if it has the following characteristics:

A. psychographic uniqueness, path dependency, causal ambiguity, and substitutability.

 

B. physical uniqueness, path dependency, causal ambiguity, and social complexity.

 

C. rarity, path dependency, causal ambiguity, and social substitutability.

 

D. geographic uniqueness, cause dependency, social ambiguity, and path complexity.

An advantage based on inimitability will not last forever. Competitors will eventually discover a way to copy most valuable resources. However, managers can forestall them and sustain profits for a while by developing strategies around resources that have at least one of the following four characteristics: physical uniqueness, path dependency, causal ambiguity, and social complexity.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-05 The four criteria that a firm’s resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers.
Level of Difficulty: 2 Medium
Topic: The Resource-Based View of the Firm

 

141. A crash R&D program by one firm cannot replicate a successful technology developed by another firm, when research findings cumulate. This is an example of

A. social complexity.

 

B. physical uniqueness.

 

C. path dependency.

 

D. causal ambiguity.

Path dependency means that resources are unique and therefore scarce because of all that has happened along the path followed in their development and/or accumulation. A crash R&D program generally cannot replicate a successful technology, when research findings cumulate. These path-dependent conditions build protection for the original resource. The benefits from experience and learning through trial and error cannot be duplicated overnight.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-05 The four criteria that a firm’s resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers.
Level of Difficulty: 2 Medium
Topic: The Resource-Based View of the Firm

 

142. A variety of firm resources include interpersonal relations among managers in the firm, its culture, and its reputation with its suppliers and customers. Such competitive advantages are based upon

A. path dependency.

 

B. social complexity.

 

C. physical uniqueness.

 

D. tangible resources.

Resources of a firm may be imperfectly inimitable, because they reflect a high level of social complexity. A wide variety of firm resources may be considered socially complex. Examples include interpersonal relations among the managers in a firm, its culture, and its reputation with its suppliers and customers.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 03-05 The four criteria that a firm’s resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers.
Level of Difficulty: 1 Easy
Topic: The Resource-Based View of the Firm

 

143. All of the following are examples of socially complex organizational phenomena except

A. a firm’s culture.

 

B. complex physical technology.

 

C. interpersonal relations among a firm’s managers.

 

D. leadership and trust.

Social complexity is a characteristic of the resources of a firm that is costly to imitate because the social engineering required is beyond the capability of competitors, including interpersonal relations among managers, organizational culture, and reputation with suppliers and customers.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-05 The four criteria that a firm’s resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers.
Level of Difficulty: 2 Medium
Topic: The Resource-Based View of the Firm

 

144. A resource is valuable and rare but neither difficult to imitate nor without substitutes. This should enable the firm to attain

A. no competitive advantage.

 

B. a temporary competitive advantage.

 

C. competitive parity.

 

D. a sustainable competitive advantage.

Resources and capabilities must be rare and valuable as well as difficult to imitate or substitute in order for a firm to attain competitive advantages that are sustainable over time. When a resource is valuable and rare but neither difficult to imitate nor without substitutes, it is likely to result in a temporary competitive advantage.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-05 The four criteria that a firm’s resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers.
Level of Difficulty: 2 Medium
Topic: The Resource-Based View of the Firm

 

145. Employees will be able to obtain a proportionately high level of profits they generate (relative to the firm) if

A. suppliers are loyal to the firm.

 

B. their expertise is firm-specific.

 

C. the cost to the firm of replacing them is high.

 

D. the firm’s resources are path dependent.

Several factors help explain the extent to which employees and managers will be able to obtain a proportionately high level of the profits, including if they generate high employee replacement costs. If employee skills are idiosyncratic and rare (a source of resource-based advantages), they should have high bargaining power based on the high cost required by the firm to replace them.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-05 The four criteria that a firm’s resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers.
Level of Difficulty: 2 Medium
Topic: The Resource-Based View of the Firm

 

146. Which of the following is not a factor that helps to explain the extent to which employees and managers will be able to obtain a proportionately high level of the profits that they generate?

A. Employees have high bargaining power.

 

B. The cost of employee replacement is high.

 

C. The cost of exit is high for an employee.

 

D. Managers have low bargaining power.

Four factors help explain the extent to which employees and managers will be able to obtain a proportionately high level of the profits that they generate: employee bargaining power, employee replacement cost, employee exit costs, and manager bargaining power. Manager power is based on how well they create resource-based advantages. They are generally charged with creating value through the process of organizing, coordinating, and leveraging employees as well as other forms of capital such as plant, equipment, and financial capital. Such activities provide managers with sources of information that may not be readily available to others.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-05 The four criteria that a firm’s resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers.
Level of Difficulty: 2 Medium
Topic: The Resource-Based View of the Firm

 

147. Amazon Prime is credited for helping to increase the Amazon stock price by nearly 300 percent from 2008 to 2010. This competitive advantage is known as

A. causal ambiguity.

 

B. product rarity.

 

C. service validity.

 

D. substitutability.

Causal ambiguity means that would-be competitors may be thwarted because it is impossible to disentangle the causes (or possible explanations) of either what the valuable resource is or how it can be re-created. The continued success of Amazon as the largest global online marketplace is an example of competitive advantage through causal ambiguity. Competitors recently tried to imitate the Amazon free shipping strategy, but with limited success. The reason is that Amazon has developed an array of interrelated elements of strategy which their rivals find too difficult to imitate.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-05 The four criteria that a firm’s resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers.
Level of Difficulty: 2 Medium
Topic: The Resource-Based View of the Firm

 

148. Four factors help explain the extent to which employees and managers will be able to obtain a proportionately high level of the profits that they generate. Which is not one of these factors?

A. employee bargaining power

 

B. employee replacement cost

 

C. employee exit costs

 

D. competitor bargaining power

Four factors help explain the extent to which employees and managers will be able to obtain a proportionately high level of the profits that they generate: employee, bargaining power, employee replacement cost, employee exit costs, and manager bargaining power.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-05 The four criteria that a firm’s resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers.
Level of Difficulty: 2 Medium
Topic: The Resource-Based View of the Firm

 

149. Which of the following groups generally is charged with creating value through the process of organizing, coordinating, and leveraging employees as well as other forms of capital such as plant, equipment, and financial capital?

A. unions

 

B. boards of directors

 

C. managers

 

D. stakeholders

Manager power is based on how well they create resource-based advantages. They are generally charged with creating value through the process of organizing, coordinating, and leveraging employees as well as other forms of capital such as plant, equipment, and financial capital. Such activities provide managers with sources of information that may not be readily available to others.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-05 The four criteria that a firm’s resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers.
Level of Difficulty: 2 Medium
Topic: The Resource-Based View of the Firm

 

150. Raymond Ozzie, the software designer who was critical in the development of Lotus Notes, was able to dictate the terms under which IBM acquired Lotus. This illustrates that he had ______ bargaining power based on the ________ cost required by the firm to replace him.

A. low; low

 

B. low; high

 

C. high; low

 

D. high; high

If employee skills are idiosyncratic and rare (a source of resource-based advantages), they should have high bargaining power based on the high cost required by the firm to replace them. For example, Raymond Ozzie, the software designer who was critical in the development of Lotus Notes, was able to dictate the terms under which IBM acquired Lotus.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-05 The four criteria that a firm’s resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers.
Level of Difficulty: 2 Medium
Topic: The Resource-Based View of the Firm

 

151. Historical comparisons provide information to managers about changes in the competitive position of a firm. Historical comparisons often are misleading

A. if the overall strategy of the firm is the same.

 

B. if the firm shows constant growth.

 

C. in periods of recession or economic boom.

 

D. if the firm’s stock is publicly traded.

Exhibit 3.9 illustrates a 10-year period of return on sales (ROS) for a hypothetical company. As indicated by the dotted trend lines, the rate of growth (or decline) differs substantially over time periods, and periods of recession and economic boom may make the trends unreliable.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-06 The usefulness of financial ratio analysis, its inherent limitations, and how to make meaningful comparisons of performance across firms.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

152. The best measure of company ability to meet imminent financial obligations is known as the

A. debt ratio.

 

B. profit margin.

 

C. total asset turnover.

 

D. current ratio.

According to Exhibit 3.8, short-term solvency ratios are also known as liquidity ratios. The best measure of the ability of a company to meet imminent financial obligations is the current ratio, the ratio of current assets to current liabilities.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 03-06 The usefulness of financial ratio analysis, its inherent limitations, and how to make meaningful comparisons of performance across firms.
Level of Difficulty: 1 Easy
Topic: Evaluating Firm Performance: Two Approaches

 

153. Which of the following would be most difficult to assess?

A. the liquidity position of a firm

 

B. market share growth

 

C. the legitimacy and reputation of a firm

 

D. the efficiency with which a firm utilizes its assets

The legitimacy and reputation of a firm are harder to assess, because there is no simple mathematical formula to compute them.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-06 The usefulness of financial ratio analysis, its inherent limitations, and how to make meaningful comparisons of performance across firms.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

154. Which of these categories of financial ratios is used to measure the ability of a firm to meet its short-term financial obligations?

A. liquidity ratios

 

B. profitability ratios

 

C. activity ratios

 

D. leverage ratios

Short-term solvency ratios are also known as liquidity ratios. These ratios are used to assess the ability of a company to meet imminent financial obligations.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 03-06 The usefulness of financial ratio analysis, its inherent limitations, and how to make meaningful comparisons of performance across firms.
Level of Difficulty: 1 Easy
Topic: Evaluating Firm Performance: Two Approaches

 

155. Ratios that reflect whether or not a firm is efficiently using its resources are known as

A. turnover ratios.

 

B. leverage ratios.

 

C. liquidity ratios.

 

D. profitability ratios.

Asset utilization (or turnover) ratios are one measure of whether a firm is efficiently using its resources.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 03-06 The usefulness of financial ratio analysis, its inherent limitations, and how to make meaningful comparisons of performance across firms.
Level of Difficulty: 1 Easy
Topic: Evaluating Firm Performance: Two Approaches

 

156. Which of the following is a profitability ratio?

A. current ratio

 

B. total debt ratio

 

C. total asset turnover

 

D. return on equity

Profitability ratios include: profit margin, return on assets, and return on equity.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 03-06 The usefulness of financial ratio analysis, its inherent limitations, and how to make meaningful comparisons of performance across firms.
Level of Difficulty: 1 Easy
Topic: Evaluating Firm Performance: Two Approaches

 

157. Financial ratio analysis measures the performance of the firm based on all but which of the following?

A. balance sheet

 

B. market valuation

 

C. income statement

 

D. industry comparison

Financial ratio analysis a technique for measuring the performance of a firm according to its balance sheet, income statement, and market valuation.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 03-06 The usefulness of financial ratio analysis, its inherent limitations, and how to make meaningful comparisons of performance across firms.
Level of Difficulty: 1 Easy
Topic: Evaluating Firm Performance: Two Approaches

 

158. Comparing your firm with all other firms in your industry assesses _________ performance.

A. excessive

 

B. consistent

 

C. relative

 

D. non-comparable

Comparing your firm with all other firms in your industry assesses relative performance. Banks often use such comparisons when evaluating company creditworthiness.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-06 The usefulness of financial ratio analysis, its inherent limitations, and how to make meaningful comparisons of performance across firms.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

159. Making comparisons between a firm and its most direct rivals is useful because firms within the same strategic industry group have _______ strategies.

A. different

 

B. the same

 

C. similar

 

D. relative

Firms with similar strategies are members of a strategic group in an industry. Furthermore, competition is more intense among competitors within groups than across groups. Thus, you can gain valuable insights into the financial and competitive position of a firm, if you make comparisons between a firm and its most direct rivals.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-06 The usefulness of financial ratio analysis, its inherent limitations, and how to make meaningful comparisons of performance across firms.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

160. In making the decision to enter the pharmaceutical industry, a company would not need to consider which of the following?

A. historical comparisons

 

B. comparisons with industry norms

 

C. comparisons with key competitors

 

D. comparisons with non-competitors

The financial position of a firm should not be analyzed in isolation. Important reference points are needed. We will address some issues that must be taken into account to make financial analysis more meaningful: historical comparisons, comparisons with industry norms, and comparisons with key competitors.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 03-06 The usefulness of financial ratio analysis, its inherent limitations, and how to make meaningful comparisons of performance across firms.
Level of Difficulty: 1 Easy
Topic: Evaluating Firm Performance: Two Approaches

 

161. A firm that takes on too much long-term debt to finance operations will see an immediate impact on its indicators of _______ financial leverage.

A. short-term

 

B. long-term

 

C. relative

 

D. comparable

a firm that takes on too much long-term debt to finance operations will see an immediate impact on its indicators of long-term financial leverage.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 03-06 The usefulness of financial ratio analysis, its inherent limitations, and how to make meaningful comparisons of performance across firms.
Level of Difficulty: 1 Easy
Topic: Evaluating Firm Performance: Two Approaches

 

162. Apple Inc. reported revenues of 171 billion USD and net income of 37 billion USD in 2012. These figures represent a stunning annual growth in revenue and net income of 57 percent and 43 percent, respectively, for the 2011 to 2013 time period. This information indicates the importance of using __________ to evaluate company financial performance.

A. financial ratios

 

B. industry norms

 

C. historical comparisons

 

D. competitor analysis

When evaluating company financial performance, it is very useful to compare its financial position over time. This provides a means of evaluating trends. For example, Apple Inc. reported revenues of 171 billion USD and net income of 37 billion USD in 2012. These figures represent a stunning annual growth in revenue and net income of 57 percent and 43 percent, respectively, for the 2011 to 2013 time period. Had Apple’s revenues and net income in 2013 been 80 billion USD and 20 billion USD, respectively, it would still be a very large and highly profitable enterprise. However, such performance would have significantly damaged Apples market valuation and reputation as well as the careers of many of its executives.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-06 The usefulness of financial ratio analysis, its inherent limitations, and how to make meaningful comparisons of performance across firms.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

163. The balanced scorecard provides top managers with a __________ view of the business.

A. detailed and complex

 

B. simple and routine

 

C. fast but comprehensive

 

D. long-term financial

A balanced scorecard provides top managers with a fast but comprehensive view of the business. In a nutshell, it includes financial measures that reflect the results of actions already taken, but it complements these indicators with measures of customer satisfaction, internal processes, and the innovation and improvement activities of the organization.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 03-07 The value of the “balanced scorecard” in recognizing how the interests of a variety of stakeholders can be interrelated.
Level of Difficulty: 1 Easy
Topic: Evaluating Firm Performance: Two Approaches

 

164. The balanced scorecard, developed by Kaplan and Norton, helps to integrate

A. financial analysis and the reputation of a firm.

 

B. intangible resources and operational measures.

 

C. financial analysis and stakeholder perspectives.

 

D. short-term perspectives and strategic positioning.

The balanced scorecard enables managers to consider their business from four key perspectives: customer, internal, innovation and learning, and financial.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 03-07 The value of the “balanced scorecard” in recognizing how the interests of a variety of stakeholders can be interrelated.
Level of Difficulty: 1 Easy
Topic: Evaluating Firm Performance: Two Approaches

 

165. The balanced scorecard enables managers to consider their business from all of the following perspectives except

A. customer perspective.

 

B. internal perspective.

 

C. innovation and learning perspective.

 

D. ethical perspective.

The balanced scorecard enables managers to consider their business from four key perspectives: customer, internal, innovation and learning, and financial.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 03-07 The value of the “balanced scorecard” in recognizing how the interests of a variety of stakeholders can be interrelated.
Level of Difficulty: 1 Easy
Topic: Evaluating Firm Performance: Two Approaches

 

166. An important implication of the balanced scorecard approach is that

A. managers need to recognize that satisfaction of stockholder demands is their primary job.

 

B. the emphasis on customer satisfaction and financial goals are only a means to that end.

 

C. managers should not look at their job as primarily balancing stakeholder demands.

 

D. gains in financial performance must come at a cost of employee satisfaction.

A key implication is that managers do not need to look at their job as balancing stakeholder demands. The balanced scorecard provides a win-win approach, increasing satisfaction among a wide variety of organizational stakeholders, including employees (at all levels), customers, and stockholders.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-07 The value of the “balanced scorecard” in recognizing how the interests of a variety of stakeholders can be interrelated.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

167. The financial perspective of the balanced scorecard answers which of the following questions?

A. How do customers see us?

 

B. What must we excel at?

 

C. How do we look to shareholders?

 

D. Can we continue to improve and create value?

Measures of financial performance indicate whether the company strategy, implementation, and execution are indeed contributing to bottom-line improvement. This interests the shareholder.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-07 The value of the “balanced scorecard” in recognizing how the interests of a variety of stakeholders can be interrelated.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

168. The innovation and learning perspective of the balanced scorecard answers which of the following questions?

A. How do customers see us?

 

B. What must we excel at?

 

C. How do we look to shareholders?

 

D. Can we continue to improve and create value?

Given the rapid rate of markets, technologies, and global competition, the criteria for success are constantly changing. To survive and prosper, managers must make frequent changes to existing products and services as well as introduce entirely new products with expanded capabilities. The company ability to do well from an innovation and learning perspective is more dependent on its intangible than tangible assets.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-07 The value of the “balanced scorecard” in recognizing how the interests of a variety of stakeholders can be interrelated.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

169. The customer perspective of the balanced scorecard answers which of the following questions?

A. How do customers see us?

 

B. What must we excel at?

 

C. How do we look to shareholders?

 

D. Can we continue to improve and create value?

Clearly, how a company is performing from the customer perspective is a top priority for management. The balanced scorecard requires that managers translate their general mission statements on customer service into specific measures that reflect the factors that really matter to customers.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-07 The value of the “balanced scorecard” in recognizing how the interests of a variety of stakeholders can be interrelated.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

170. The internal business perspective of the balanced scorecard answers which of the following questions?

A. How do customers see us?

 

B. What must we excel at?

 

C. How do we look to shareholders?

 

D. Can we continue to improve and create value?

The internal measures should reflect business processes that have the greatest impact on customer satisfaction. These include factors that affect cycle time, quality, employee skills, and productivity.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-07 The value of the “balanced scorecard” in recognizing how the interests of a variety of stakeholders can be interrelated.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

171. The internal measures should reflect business processes that have ______ impact on customer satisfaction. These include factors that affect cycle time, quality, employee skills, and productivity.

A. the least

 

B. variable

 

C. the most

 

D. potential

The internal measures should reflect business processes that have the greatest impact on customer satisfaction. These include factors that affect cycle time, quality, employee skills, and productivity.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-07 The value of the “balanced scorecard” in recognizing how the interests of a variety of stakeholders can be interrelated.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

172. From the innovation and learning perspective, survival is dependent upon managers making _________ changes to existing products and services as well as introduce entirely new products with expanded capabilities.

A. few

 

B. no

 

C. frequent

 

D. rare

Given the rapid rate of markets, technologies, and global competition, the criteria for success are constantly changing. To survive and prosper, managers must make frequent changes to existing products and services as well as introduce entirely new products with expanded capabilities.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-07 The value of the “balanced scorecard” in recognizing how the interests of a variety of stakeholders can be interrelated.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

173. If managers do not recognize from the beginning that the balanced scorecard is not a _________ and fail to commit to it long term, the organization will be disappointed.

A. panacea

 

B. quick fix

 

C. marketing ploy

 

D. cheap solution

There is general agreement that there is nothing inherently wrong with the concept of the balanced scorecard. The key limitation is that some executives may view it as a quick fix that can be easily installed. If managers do not recognize this from the beginning and fail to commit to it long term, the organization will be disappointed.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-07 The value of the “balanced scorecard” in recognizing how the interests of a variety of stakeholders can be interrelated.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

174. With the total performance indicators in place at Sears, it can evaluate if a single store improves its employee attitude by 5 percent and therefore predict with confidence that if the revenue growth in the district as a whole is 5 percent, the revenue growth in this particular store would be 5.5 percent. This is an example of the _______ perspective of the balanced scorecard.

A. customer

 

B. internal business

 

C. financial

 

D. innovation and learning

Sears, the retailer, found a strong causal relationship between employee attitudes, customer attitudes, and financial outcomes. Through an ongoing study, Sears developed what it calls its total performance indicators (TPI) which is a set of indicators for assessing its performance with customers, employees, and investors. The Sears quantitative model has shown that a 5 percent improvement in employee attitudes leads to a 1.3 percent improvement in customer satisfaction, which in turn drives a 0.5 percent improvement in revenue. Thus, if a single store improved its employee attitude by 5 percent, Sears could predict with confidence that if the revenue growth in the district as a whole were 5 percent, the revenue growth in this particular store would be 5.5 percent.

 

 

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 03-07 The value of the “balanced scorecard” in recognizing how the interests of a variety of stakeholders can be interrelated.
Level of Difficulty: 2 Medium
Topic: Evaluating Firm Performance: Two Approaches

 

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