Chapter 1

1. Above-average returns are:

a. higher profits than the firm earned the previous year.
b. higher profits than the industry averaged over the last 10 years.
c. profits in excess of what an investor expects to earn from a historical pattern of performance
of the firm.
d. returns in excess of what an investor expects to earn from other investments with a similar
level of risk.

2. Strategic leaders are:

a. located only at the executive level.
b. located in different areas and levels.
c. the CEO, COO, and CFO only.
d. located at different levels, but only in the operating area of the organization.

3. The final responsibility for forming the firm's mission rests with the:
a. CEO.
b. top-level managers.
c. employees.
d. stakeholders.

4. A highly important means of building employee skills for the global competitive landscape is through:
a. establishing first-mover advantage.
b. international assignments.
c. rigorous diversity training programs.
d. knowledge spillovers.

5. A firm's mission is:

a. a statement of a firm's businesses in which it intends to compete and the customers it intends
to serve.
b. an internally-focused affirmation of the organization's financial, social, and ethical goals.
c. mainly intended to emotionally inspire employees and other stakeholders.
d. the foundation for the firm's vision.

6. Refuge Nursing Homes, Inc., (RNH) has been highly profitable in the past 10 years, providing its
investors higher returns than those earned by its direct competitors' investors. RNH has a reputation for
providing high-paying managerial and hourly-employee jobs. However, recent investigations have
revealed that the nursing home residents have been provided substandard care, including non-nutritious
and unappetizing meals, non-functional medical equipment, and inadequate patient-care staffing. Which
of the following statements best describes the situation?
a. RNH has been earning below-average returns, so it has had to prioritize the demands of its
various stakeholders.
b. RNH has prioritized the demands of capital market stakeholders and organizational
stakeholders over the demands of product market stakeholders.
 c. RNH has earned above-average returns and so has satisfied the needs of all relevant
stakeholders.
d. RNH has been attempting to minimally satisfy the demands of all of its stakeholders.

7. __________ provides the firm with new and up-to-date skill sets, which allow it to adapt to its
environment as it encounters changes.
a. Strategic flexibility
b. Continuous learning
c. Knowledge
d. The Internet

8. __________ is the capacity for a set of resources to perform a task or an activity in an integrative
manner.
a. A capability
b. A core competence
c. Sustainable competitive advantage
d. Organizational intelligence

9. The interests of an organization's stakeholders often conflict, and the organization must prioritize its
stakeholders if it cannot satisfy all of them. The __________ is the MOST critical criterion in prioritizing
stakeholders.
a. power of each stakeholder
b. urgency of satisfying each stakeholder
c. vulnerability of organizational stakeholders
d. social value of each stakeholder

10. In the resource-based model, which of the following factors would be considered a key to
organizational success?
a. Unique market niche
b. Weak competition
c. Economies of scale
d. Skilled employees

Chapter 2

1. An analysis of income distribution would include all of the following EXCEPT:

a. the purchasing power of various age groups.
b. the discretionary income of various ethnic groups.
c. wage differentials between male and female employees working for a large manufacturer.
d. how income is distributed among regions of the United States.

2. Which of the following, identified in an analysis of the general environment, is an opportunity for an
entrepreneur who wishes to open a business providing "Fitness for Life" physical conditioning services
(strength, balance, and flexibility training) in a city of 100,000 people?
a. The average age of the population in his community is high.
 b. The level of unemployment in his community is high.
c. A chiropractor and two independent physical therapists are located in his community.
d. The average education level of the population in his community is low.

3. The environmental segments that make up the general environment typically will NOT include:
a. demographic factors.
b. sociocultural factors.
c. substitute products or services.
d. technological factors.

4. The __________ environment is composed of dimensions in the broader society that influence an
industry and the firms within it.
a. general
b. competitor
c. sociocultural
d. industry

5. Which of the following would NOT be identified in an analysis of the economic portion of the general
environment?
a. The willingness of Chrysler's buyers to purchase large vehicles in light of an increase in oil
prices
b. The ability of Ford to issue new debt in light of its recent financial performance
c. The ability of BMW's buyers to finance car purchases in light of a change in interest rates
d. The willingness of GM buyers to purchase new vehicles in light of the threat of recession

6. Applications developed for iPhones make the phone more valuable to iPhone users. App developers
are __________ to Apple.
a. suppliers
b. customers
c. competitors
d. complementors

7. An analysis of society's attitudes and values would be conducted when studying the __________
segment of the general environment.
a. sociocultural
b. global
c. demographic
d. economic

8. In a suburban community outside a city in Alabama, a retail store opened that specialized in dancewear
for children and adults. It was moderately successful for five years until the local newspaper published an
exposé that scanty lingerie stocked in the back of the store's showroom was selling briskly to a certain
clientele. Afterward, the store lost most of its customers and nearly closed. Which of the following
segments of the environment did the store owners fail to take into account when they began selling the
lingerie?
 a. Sociocultural
b. Economic
c. Demographic
d. Political/legal

9. One popular approach to taking care of the physical environment is:

a. producing and selling additional green products.
b. lobbying the government to reduce environmental regulations.
c. making donations to the Sierra Club and other environmental organizations.
d. increasing health benefits for employees.

Chapter 3

1. From a customer's point of view, for an organization's capability to be a core competence, it must be:
a. inimitable and unique.
b. valuable and unique.
c. inimitable and nonsubstitutable.
d. valuable and nonsubstitutable.

2. Firms that achieve competitive parity can expect to:

a. earn below-average returns.
b. earn average returns.
c. earn above-average returns.
d. initially earn above-average returns, declining to average returns.
3. Acme Auto Repair has a thriving business based on its reputation for high-quality work, honesty, and
skilled employees. For continued long-term success, Acme's owner should:
a. concentrate on maintaining Acme's current core competencies.
b. focus on developing Acme's future competitive advantages.
c. place more emphasis on tangible resources, which are less vulnerable to obsolescence than
intangible resources.
d. recognize that core competencies derived from human resources are more subject to becoming
core rigidities than are core competencies based on other types of resources.

4. Which of the following is NOT a component of internal analysis leading to competitive advantage?
a. Tangible and intangible resources
b. Analysis of supplier power
c. Capabilities
d. Core competencies

5. Capabilities:
a. tend to be developed through firm-wide interactions and reside in the firm as a whole.
b. tend to be concentrated in the support activities of the value chain.
 c. tend to be concentrated in the primary activities of the value chain.
d. are often developed in specific functional areas.

6. Government agencies are known for having so many layers and rules that decisions are made slowly
and inefficiently. In this case, the __________ resource is a detriment to taxpayers using and paying for
the bureaucracy.
a. financial
b. organizational
c. physical
d. technological

7. Valuable capabilities allow the firm to:

a. exploit opportunities in its external environment.
b. neutralize threats in its internal environment.
c. exploit opportunities or neutralize threats in its external environment.
d. neutralize opportunities in its internal environment.

Chapter 4

1. Ever-improving levels of efficiency enhance profit margins for a cost leader. This affects which of the
following forces of industry structure most directly?
a. Potential entrants
b. Substitutes
c. Buyer power
d. Supplier power

2. Durable Ceramics, Inc., provides inexpensive ceramic tile to builders of institutional buildings such as
schools, prisons, and public administration buildings. It has always competed on a cost leadership basis.
Most of its products are purchased by a few commercial construction firms, so it is fairly dependent on
these construction firms for selling its product. Durable Ceramics' next most-efficient competitor, Cost-
Less Ceramics, Inc., earns average returns, whereas Durable earns above-average returns. The
commercial construction firms are putting pressure on Durable to reduce its prices. If Durable reduces its
prices below those of Cost-Less's prices, it is likely that:
a. both Durable and Cost-Less will devise additional ways to become more efficient in their
production processes.
b. Durable will be unable to absorb the lower cost and will go out of business.
c. both Cost-Less and Durable will go out of business, leaving the customers with fewer
alternative sources of low-cost tile.
d. Cost-Less will go out of business, and Durable will gain higher power over its customers.

3. The products or services that are differentiated from others have qualities that are:
a. perceived by the customer to add value that they will pay a premium to purchase.
b. valued by the typical industry customer.
c. perceived as standardized by the customer.
d. seen as classic attributes rather than passing fads.
4. Customer ratings of products they bought online is an example of:
a. loyalty.
b. reach.
c. richness.
d. affiliation.

5. An analysis of the activity map of a successful company such as Southwest Airlines emphasizes how:
a. the organizational culture of Southwest Airlines is the key to its success.
b. understanding the profitability in an industry indicates to companies where above-average
returns can be earned.
c. it is harder for rivals to match a configuration of integrated activities than to imitate a single
activity.
d. the primary and support activities of a successful company capture value all along the value
chain.

6. An interior decorator has moved his business from Los Angeles to St. Paul, Minnesota, because his
spouse's company transferred her to St. Paul. The decorator is distressed because the customers in his
target market have, in his words, "banal and bourgeois taste." Which of the following is the decorator's
problem?
a. The decorator does not understand that customer needs are neither right nor wrong, and
neither good nor bad.
b. The decorator has no core competencies that will transfer to his new geographic market.
c. The decorator should choose a strategy of cost leadership in this environment.
d. The decorator is highly affiliated with the new target market and understands how he can
create value for it.

Chapter 5

1. Multimarket competition occurs when firms:

a. sell different products to the same customer.
b. have a high level of awareness of their competitors' strategic intent.
c. simultaneously enter into an attack strategy.
d. compete against each other in several geographic or product markets.

2. A competitive action can be one of two types, either __________ or __________.

a. aggressive; defensive
b. quality-based; cost-based
c. strategic; tactical
d. market-based; resource-based

3. __________ relates to the gains or losses a firm will experience if it attacks a rival or responds to an
attack by a rival.
a. Motivation
b. Awareness
c. Responsiveness
 d. Ability

4. In general, firms are more aware of competitors that have similar resources and that:
a. have low market dependence.
b. are late movers.
c. have low market commonality.
d. compete against the firm in multiple markets.

5. First movers are:

a. entrepreneurs who lead in the establishment of new industries.
b. firms that are first to exit a declining industry.
c. firms that take an initial competitive action.
d. individuals who move frequently as employment opportunities change in a locale.

6. Late movers are those firms that:

a. respond to a competitive action a significant amount of time after the first mover's action and
the second mover's response.
b. respond to a first mover's competitive action often through imitation or a move designed to
counter the effects of the action.
c. take an initial competitive action (either strategic or tactical).
d. typically achieve higher-than-average returns because they can imitate the most efficient
actor.

7. Competitive rivalry has more effect on a firm's __________ strategies than the firm's other strategies.
a. business-level
b. corporate-level
c. acquisition
d. international