Student name:__________
TRUE/FALSE - Write 'T' if the statement
is true and 'F' if the statement is false.
1) According to Strategy Spotlight 6.3,
JAB Holding Co., a Luxembourg-based
holding company, uses divestiture to
extract value from the many firms it has
acquired.
⊚ true
⊚ false
2) Research shows that most acquisitions of
public corporations result in value
creation rather than value destruction.
⊚ true
⊚ false
3) Diversification initiatives must be
justified by the creation of value for
shareholders.
⊚ true
⊚ false
4) When firms diversify into unrelated
businesses, the primary potential
benefits are horizontal relationships, i.e.,
businesses sharing tangible and
intangible resources.
⊚ true
⊚ false
5) With unrelated diversification, potential
benefits can be gained from vertical or
hierarchical relationships; that is, the
creation of synergies from the
interaction of the corporate office with
outside stakeholders.
⊚ true
⊚ false
Version 1
6) Restructuring requires the corporate
office to find either exceptionally
performing firms with realized potential
or firms in industries on the threshold of
significant, negative change.
⊚ true
⊚ false
7) Portfolio management should be
considered as the primary basis for
formulating corporate-level strategies.
⊚ true
⊚ false
8) Diversified public corporations, such as
Berkshire Hathaway and Virgin Group,
create value through management
expertise by improving plans and
budgets. This is an example of a related
diversification strategy.
⊚ true
⊚ false
9) Portfolio models such as the BCG
Portfolio matrix are limited in value
because they only compare the SBU on
four dimensions.
⊚ true
⊚ false
10) A disadvantage of mergers and
acquisitions is that they can enable a
firm to rapidly enter new product
markets.
⊚ true
⊚ false
1
11) Through joint ventures, firms can
directly acquire the assets and
competencies of other firms.
⊚ true
⊚ false
12) The potential advantages of strategic
alliances and joint ventures include
entering new markets as well as
developing and diffusing new
technologies.
⊚ true
⊚ false
13) A golden parachute is a prearranged
contract with managers specifying that,
in the event of a hostile takeover, the
target company managers will be paid a
significant severance package.
⊚ true
⊚ false
14) According to the Learning from
Mistakes case in Chapter 6, the merger
of Newell and Jarden failed because of
poor post-merger integration of Jarden.
⊚ true
⊚ false
15) According to Strategy Spotlight 6.1,
Geely, a Chinese auto manufacturer,
bought Volvo from Ford in order to
improve its designs through the
integration of Volvo’s core
competencies.
⊚ true
⊚ false
Version 1
16) 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
17) Trade-off decisions between
effectiveness and efficiency are
important in the practice of strategic
management.
⊚ true
⊚ false
18) All successful firms compete and
outperform their rivals by developing
bases for competitive advantage, which
can be achieved only through cost
leadership.
⊚ true
⊚ false
19) The vision of an organization is at the
top level of its hierarchy of
organizational goals. The vision
statement should be massively inspiring,
overarching, and long term.
⊚ true
⊚ false
2
MULTIPLE CHOICE - Choose the one
alternative that best completes the
statement or answers the question.
20) 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.
21) 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.
22) Effectiveness is often defined as
A) doing things right.
B) stakeholder satisfaction.
C) doing the right thing.
D) productivity enhancement.
23) ________ 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
Version 1
24) 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
25) 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.
26) 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.
3
27) 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.
28) Stockholders as a stakeholder group are
interested primarily in
A) payment of interest and
repayment of principal.
B) value and warranties.
C) dividends and capital
appreciation.
D) taxes and compliance with
regulations.
29) Some benefits of sustainability projects
include
A) reducing risks.
B) lagging behind regulations.
C) displeasing communities.
D) ignoring employee morale.
30) 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
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31) The hierarchy of organizational goals is
in the following 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.
32) 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) are massively inspiring.
33) 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.
4
34) 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
35) What is the overall purpose of a
corporation?
A) to maximize the long-term return
to the shareholders
B) to maximize the short-term return
to the shareholders
C) to maximize the long-term return
to all the stakeholders
D) to maximize the short-term return
to all the stakeholders
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36) The strategically relevant factors outside
a company's industry boundaries—
economic conditions, political factors,
sociocultural forces, technological
factors, environmental factors, and
legal/regulatory conditions—are known
as
A) the industry and the competitive
arena in which the company
operates.
B) general economic conditions plus
the factors driving change in the
markets where a company
operates.
C) a company's macro-environment.
D) the competitive market
environment that exists between
a company and its competitors.
E) the dominant economic features
of a company's industry.
37) The most powerful and widely used
conceptual tool for diagnosing the
principal competitive pressures in a
market is
A) the five forces framework.
B) PESTEL.
C) the driving forces model.
D) strategic group mapping.
E) SWOT analysis.
5
38) The five forces of competitive pressures 40) Market maneuvering among industry
do not include rivals
A) the power and influence of A) determines whether the industry's
social/demographic trends. strategic group map will be static
B) the bargaining power of suppliers or dynamic.
and seller-supplier collaboration. A) centers around collaborative
C) the threat of new entrants into the efforts to overcome the
market. bargaining power of powerful
D) the attempts of companies in suppliers and powerful buyers.
other industries to win customers B) is usually an industry's strongest
over to their own substitute driving force.
products. C) is usually one of the two or three
E) the market maneuvering and weakest competitive forces
jockeying for buyer patronage because of the close familiarity
that goes on among rival sellers that rivals have for one another's
in the industry. likely next moves.
D) is ongoing and dynamic, with
39) Market maneuvering and jockeying for moves and countermoves of
buyer patronage that goes on among rivals producing a continually
rival sellers in the industry evolving competitive landscape
A) is less strong than the that delivers winners and losers.
competitive pressures that stem
from the ready availability of
attractively priced substitute
products.
B) is the strongest force among the
five forces that drive profitability
in an industry.
C) emerges from close collaboration
with suppliers and the
competitive pressures that such
collaboration creates.
D) is less important than competitive
pressure associated with the
potential entry of new
competitors.
E) has about the same impact as
bargaining power and leverage
that large customers are able to
exercise.

Version 1 6
41) Predictable external forces in the natural
environment include
A) the trend toward healthier
lifestyles, which can shift
spending toward exercise
equipment and health clubs and
away from alcohol and snack
foods.
B) air and/or water pollution, the
depletion of irreplaceable natural
resources, global warming, or
inefficient energy/resource
usage.
C) interest rates, exchange rates, the
inflation rate, the unemployment
rate, the rate of economic
growth, trade deficits or
surpluses, savings rates, and per-
capita domestic product.
D) tax policy, fiscal policy, tariffs,
the political climate, and the
strength of institutions such as
the federal banking system.
E) societal shocks such as terrorism,
pandemics, civil wars, and
foreign invasions.
42) Which of the following is generally not
considered a barrier to entry?
A) restrictive regulatory policies
B) high capital requirements
C) strong brand preferences
D) many industry patents in place
E) weak network effects in customer
demand
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43) Which of the following is a good
example of a substitute product that
triggers stronger competitive pressures?
A) Coca-Cola as a substitute for
Pepsi
B) Netflix as a substitute for Prime
Video
C) Papa John’s as a substitute for
Domino’s Pizza
D) distance learning via Zoom as a
substitute for in-class sessions
E) Gold’s Gyms as a substitute for
24-Hour Fitness
44) The higher the switching costs for
industry members, the more it can
A) limit supplier bargaining power.
B) enhance supplier bargaining
power.
C) enhance the quality of parts and
components being supplied, and
in effect reduce defect rates.
D) provide important cost savings
for the collaborative supplier-
seller relationship.
E) limit the supply of products
and/or services.
7
45) The "driving forces" in an industry
A) are usually triggered by changing
technology or stronger
learning/experience curve
effects.
B) usually are spawned by growing
demand for the product, the
outbreak of price-cutting, and big
reductions in entry barriers.
C) are major underlying causes of
changing industry and
competitive conditions and have
the biggest influences in
reshaping the industry landscape
and altering competitive
conditions.
D) appear when an industry begins
to mature but are seldom present
during early stages of the
industry life cycle.
E) are usually triggered by shifting
buyer needs and expectations or
by the appearance of new
substitute products.
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46) One of the steps of driving-forces
analysis is to identify which
A) strategy changes a company may
need to make to prepare for the
impacts of the driving forces.
B) strategic group is the most
powerful.
C) industry member is likely to
become (or remain) the industry
leader and why.
D) key success factors are most
likely to help their company gain
a competitive advantage.
E) of the five competitive forces
will be the strongest driver of
industry change.
47) Which of the following is not a common
type of driving force?
A) reductions in uncertainty and
business risk
B) changing societal concerns,
attitudes, and lifestyles
C) diffusion of technical know-how
across companies and countries
D) increasing efforts to collaborate
closely with suppliers
E) advances in technology and
manufacturing process
innovation
8
48) A strategic group
A) consists of those industry
members that are growing at
about the same rate and have
similar product line breadth.
B) includes all rival firms having
comparable profitability.
C) is a cluster of industry members
with similar competitive
approaches and market positions
in the market.
D) consists of those firms whose
market shares are about the same
size.
E) is made up of those firms having
comparable profit margins.
50) Strategic group mapping is a visual
technique for displaying
A) how many rivals are pursuing
each type of strategy.
B) which companies have the
biggest market share and who the
industry leader really is.
C) the different market or
competitive positions that rival
firms occupy in an industry and
for identifying each rival's
closest competitors.
D) which companies have the
highest degrees of brand loyalty.
E) which companies have failing
business models.

49) When all sellers pursue essentially

identical strategies and have similar
market positions
A) they remain subject to different
driving forces.
B) they place about the same
emphasis on various distribution
channels.
C) they use the same key success
factors to differentiate their
products.
D) the industry can be said to
contain one strategic group.
E) they still must possess customer
service attributes that
differentiate them from one
another in the marketplace.

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51) The key success factors in an industry
A) are those competitive factors that
most affect industry members'
abilities to prosper in the
marketplace—the particular
strategy elements, product
attributes, operational
approaches, resources, and
competitive capabilities that spell
the difference between being a
strong competitor and a weak
one, and between profit and loss.
B) are determined by the industry's
driving forces, which are
essential to surviving and
thriving in the industry.
C) hinge on how many different
strategic groups the industry has
operating within the industry and
their level of profitability and
sustainable advantages.
D) depend on how many rivals are
trying to move from one strategic
group to another without losing
momentum.
E) are a function of such
considerations as how many
firms are in the industry, how
many have market shares above
5 percent, and whether the
business models being used are
similar or diverse.
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52) Which of the following is not a question
asked to deduce a marketing-related key
success factor?
A) What are the industry product
R&D capabilities and expertise
in product design?
B) On what basis do buyers choose
between the competing brands of
sellers?
C) What product attributes and
service characteristics are
crucial?
D) What resources must a company
have to be competitive?
E) What shortcomings are almost
certain to put a company at a
significant disadvantage?
53) In evaluating how well a company's
strategy is working, the two best
indicators are
A) SWOT and value chain analyses.
B) Porter’s five forces and Value
Net analyses.
C) value chain and PESTEL
analyses.
D) competitive strength and
financial ratio analyses.
E) SWOT and PESTEL analyses.
10
54) Teresa is CFO of a company that sells
prescription eyeglasses online. Which
financial ratio would indicate to Teresa
how well her company's strategy is
working?
A) return on liquidity
B) gross profit margin
C) time-to-market ratio
D) market share
E) webpage views and click-through
benchmarks
55) A company's resources and capabilities
represent
A) the firm's net working capital and
related determinants for
measuring operating performance
and capabilities.
B) the firm's competitive assets that
determine its competitiveness
and ability to succeed in the
marketplace.
C) whether the firm has the
industry's most efficient value
chain.
D) management's sources and uses
of funding for new strategic
initiatives.
E) positive trends with relevant
cultural factors related to buyers'
choices and product
modifications.
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56) The difference between a resource and a
capability is a resource
A) is a productive input or
competitive asset, whereas a
capability is the capacity of the
firm to perform some internal
activity competently.
B) is a reserve supply or back-up
supply function, whereas a
capability is the ability to
manage the resource function.
C) is a mechanism used for carrying
out some responsibility, whereas
a capability possesses the ability
to monitor the resource.
D) represents the firm's fixed assets,
whereas a capability defines
whether the firm is competent to
perform some function with these
assets.
E) represents the firm's human
assets, whereas a capability
defines the skills and knowledge
of these human resources.
57) Tangible resources do not include
A) physical resources.
B) financial resources.
C) human assets.
D) technological assets.
E) organizational resources.
11
58) Tangible resources include
A) human assets and intellectual
capital, which can include the
talent of the work force and the
creativity and innovativeness of
certain personnel.
B) reputational assets, which can
include the company's reputation
for quality, service, and
reliability as well as its
reputation for fair dealings with
suppliers.
C) relationships such as alliances
that provide access to
technologies, specialized know-
how, or geographic markets.
D) technological assets such as
patents, copyrights, and
innovation technologies.
E) company culture and incentive
system, which includes the
norms of behavior and business
principles.
59) Warby Parker, an online merchant of
prescription eyewear, has linked and
closely integrated competitive assets
centered around one or more cross-
functional capabilities, which are
sometimes referred to as resource
A) bundles.
B) capabilities.
C) assets.
D) functions.
E) competencies.
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60) The four tests of a resource's competitive
power are often referred to as the
A) SCIR test, which asks if a
resource is sustainable,
competitive, internalized, and
reproducible.
B) competitive advantage
sustainable method test.
C) reliability resources simulation.
D) VRIN test, which asks if a
resource is valuable, rare,
inimitable, and nonsubstitutable.
E) organizational capability metric
analysis.
61) When a company has become proficient
in modifying, upgrading, or deepening
the company's resources and capabilities
in response to its changing environment
and market opportunities, it is called the
company's
A) dynamic capability.
B) core competence.
C) distinct competence.
D) strategic assessment.
E) benchmarking exercise.
12
62) A competitively valuable resource or
capability is a company's
A) enabling foundation of its
business model.
B) equally valuable substitute
resource providing a competitive
advantage.
C) assessment of the availability of
superior substitutes.
D) unsurpassed worker productivity
and product quality.
E) unique piecework incentive
system, providing a competitive
advantage.
63) A dynamic capability is the
A) ongoing capacity to modify
existing resources and
capabilities to create new ones.
B) improvement evaluation process
for eliminating waste in the firm.
C) functional and operating
resources management process.
D) ongoing capability to understand
and establish a commitment to
resource alignment.
E) improvement evaluation process
for repurposing waste in the firm.
64) ________ identifies and assesses a
company's resource strengths and
weaknesses and its external
opportunities and threats.
A) A SWOT analysis
B) A competitive asset/liability
analysis
C) A competitive positioning
analysis
D) A strategic resource assessment
E) Company resource mapping
Version 1
65) A first-rate SWOT analysis
A) is a way to measure whether a
company's value chain is longer
or shorter than the chains of key
rivals.
B) is a tool for benchmarking
whether a firm's strategy is
closely matched to industry key
success factors.
C) reveals whether a company is
competitively stronger than its
closest rivals.
D) provides a good basis for crafting
a strategy.
66) SWOT analysis is a simple but powerful
tool for
A) gauging whether a company has
a cost-competitive value chain.
B) sizing up a company's resources
and capabilities, strengths and
deficiencies, its market
opportunities, and the external
threats to its future well-being.
C) evaluating whether a company is
in the most appropriate strategic
group.
D) determining a company's
competitive strength vis-à-vis
close rivals.
E) identifying the market segments
in which a company is strongly
positioned and weakly
positioned.
13
67) When an activity becomes something a
company has learned to perform
proficiently and capably, the company is
said to have a
A) competence.
B) competitive advantage over
rivals.
C) key value chain proficiency.
D) distinctive capability.
E) resource advantage.
68) When a company has a proficiency in
performing a strategically and
competitively important value chain
activity better than its rivals, it is said to
have a
A) company competence.
B) core competence.
C) distinctive competence.
D) key value chain proficiency.
E) competitive advantage over
rivals.
69) When a company performs a particular
competitively important activity truly
well in comparison to its rivals, it is said
to have a
A) company competence.
B) strategic resource.
C) distinctive competence.
D) core competence.
E) key success factor.
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70) An external threat to a company's future
profitability does not include
A) the lack of a distinctive
competence.
B) new legislation that entails
burdensome and costly
government regulations.
C) slowdowns in market growth.
D) more intense competitive
pressures.
E) the introduction of restrictive
trade policies in countries where
the company does business.
71) External threats to a company's future
profitability and well-being do not
include
A) the likely entry of potent new
competitors.
B) the lack of a well-known brand
name with which to attract new
customers and help retain
existing customers.
C) shifts in buyer needs and tastes
away from the industry's product.
D) costly new regulatory
requirements.
E) growing bargaining power on the
part of the company's major
customers and major suppliers.
14
72) Two analytical tools useful in
determining whether a company's prices
and costs are competitive are
A) SWOT analysis and key success
factor analysis.
B) SWOT analysis and
benchmarking.
C) value chain analysis and
benchmarking.
D) competitive position assessment
and competitive strength
assessment.
E) driving-forces analysis and
SWOT analysis.
73) A much-used and potent managerial tool
for determining whether a company
performs particular functions or
activities in a manner that represents
"the best practice" when both cost and
effectiveness are taken into account is
A) competitive strength analysis.
B) activity-based costing.
C) resource cost mapping.
D) SWOT analysis.
E) benchmarking.
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74) Benchmarking involves
A) comparing how different
companies perform various value
chain activities and then making
cross-company comparisons of
the costs and effectiveness of
these activities.
B) checking whether a company has
achieved more of its financial
and strategic objectives over the
past five years relative to its
direct competitors.
C) studying whether a company's
resource strengths are more/less
powerful than the resource
strengths of rival companies.
D) studying how a company's
competitive capabilities stack up
against the competitive
capabilities of selected
companies known to have world-
class competitive capabilities.
E) comparing the best practices in
one industry against the best
practices in another industry.
15
75) The options for remedying a supplier-
related cost disadvantage include
A) pressuring suppliers for more
favorable prices, switching to
lower-priced substitute inputs,
and collaborating closely to
identify mutual cost-saving
opportunities.
B) instituting forward vertical
integration.
C) shifting into the production of
substitute products.
D) shifting from a low-cost
leadership strategy to a
differentiation or focus strategy.
E) cutting selling prices and trying
to win a bigger market share.
76) A company's competitive strategy
should
A) ensure it is designed to
concentrate on a small range of
products so it can react quickly to
competitive moves.
B) be well matched to its internal
situation and predicated on
leveraging its collection of
competitively valuable resources
and competencies.
C) be well matched to its resources
and capabilities in order to
incorporate standard attributes
into its product offering.
D) be supportive with its objective
to become at least an average
performer within its industry.
E) be well attuned to doing an
outstanding job of satisfying the
needs and expectations of niche
buyers.
Version 1
77) The five generic competitive strategies
include
A) low-cost differentiation.
B) no-cost provider.
C) best-margin.
D) narrow differentiation.
E) high-cost.
78) The generic types of competitive
strategies include
A) market share growth provider,
sales revenue leader strategy, and
market share retention strategy.
B) offensive strategies, defensive
strategies, and counter
maneuvers strategies.
C) low-cost provider, broad
differentiation, best-cost
provider, focused low-cost, and
focused differentiation strategies.
D) low-cost/low-price strategies,
high-quality/high-price
strategies, and medium
quality/medium price strategies.
E) price leader strategies, price
follower strategies, technology
leader strategies, and first-mover
strategies.
16
79) A low-cost leader's basis for competitive
advantage is
A) lowest possible prices for
comparable products.
B) a low-cost/moderate price
approach to gain the biggest
market share.
C) high buyer switching costs.
D) meaningful lower overall costs
than rivals on comparable
products.
E) higher unit sales than rivals.
80) The major avenues for achieving a cost
advantage over rivals include
A) performing value chain activities
more cost effectively than rivals
or revamping the firm's overall
value chain to eliminate or
bypass some cost-producing
activities.
B) having a management team that
is highly skilled in cutting costs.
C) being a first-mover in adopting
the latest state-of-the-art
technologies, especially those
relating to low-cost manufacture.
D) outsourcing high-cost activities
to cost-efficient vendors.
E) paying lower wages and salaries
than rivals.
Version 1
81) A major drawback of using a low-cost
provider strategy is
A) industry cost leadership.
B) capturing volume gains and
achieving economies of scale.
C) relying on approaches to reduce
costs that can be easily copied.
D) beneficial and sustainable cost
reduction.
E) development of a cost-saving
technological breakthrough that
cannot be readily adopted by
rival firms.
82) Opportunities to differentiate a
company's product offering
A) are most reliably found in the
R&D portion of the value chain.
B) are typically located in the sales
and marketing portion of the
value chain.
C) can exist in activities all along an
industry's value chain.
D) usually are tied to product quality
and customer service.
E) are most frequently attached to a
company's manufacturing
expertise and to its ability to
achieve economies of scale in
production.
17
83) A route to take in developing a
differentiation advantage includes
A) incorporating product attributes
and user features that raise the
buyer's overall costs, but keep
the price minimal.
B) incorporating tangible features
that add functionality, and
increase customer satisfaction
with the product specifications,
functions, and styling.
C) signaling value by targeting
sophisticated buyers.
D) incorporating intangible features
that enhance buyer satisfaction in
economic ways.
E) emphasizing high quality and
performance of products through
a standard and simple, no-fuss
packaging.
84) Differentiation strategies
A) strive to create value for
customers.
B) offer trivial improvements in
quality, service, or performance
features.
C) often result in overcharging for
the differentiating features.
D) add so many frills and extra
features that the end product
exceeds the needs of buyers.
E) often result in overspending on
efforts to differentiate the
company's product offering.
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85) The target market of a best-cost provider
is
A) value-conscious buyers.
B) brand-conscious buyers.
C) price-sensitive buyers.
D) middle-income buyers.
E) young adults (in the 18–35 age
group).
86) Zara, a Spanish clothing company, often
uses strategic alliances when entering
new geographic markets. Which of the
following best explains the potential
advantage for them?
A) gaining knowledge about
different cultures and regulatory
environments
B) increasing administrative costs in
the value chain
C) developing and diffusing new
technologies
D) eliminating costs in the value
chain
87) Ford and VW signed a memorandum of
understanding to work together to
develop autonomous vehicles. Which of
the following best explains the potential
advantage for them?
A) entering new markets
B) increasing administrative costs in
the value chain
C) developing and diffusing new
technologies
D) eliminating costs in the value
chain
18
88) Disney is competing against Netflix,
Amazon, and other streaming services
by
A) increasing subscription prices.
B) diversifying its operations.
C) teaming up with other suppliers.
D) outsourcing its distribution.
89) Corporate-level strategy focuses on
A) gaining long-term revenue.
B) gaining short-term profits.
C) decreasing business locations.
D) managing investment bankers
and their interests.
90) An acquisition that results in ________
commonly indicates that expectations
were not met.
A) expansion
B) divestiture
C) cost savings
D) increased sales
91) Which of the following potential
advantages of strategic alliances best
describes the current Honda solution,
according to Strategy Spotlight 6.5?
A) entering new markets
B) reducing manufacturing costs in
the value chain
C) developing and diffusing new
technologies
D) reducing other costs in the value
chain
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92) Which of the following situations does
not exemplify the impact of macro-
environment on a company’s strategic
opportunities?
A) Sales of Stolichnaya Vodka in
the United States dwindle on
account of a boycott of Russian
products.
B) Consumer confidence in
Volkswagen drops precipitously
because of falsified emissions
data.
C) Netflix squares off with Amazon
Prime as its most potent rival in
the streaming television and film
industry.
D) Traffic increases at the outlets of
Whole Foods following its
introduction of stores containing
solely generic products.
E) Sales of FitBit surge on account
of a new feature that monitors
users' blood pressure.
19
93) Using the five forces model of
competition to determine the character
and strength of the competitive forces
within a given industry involves
A) building the picture of
competition in three steps: (1)
identify the different parties
involved, along with specific
factors that bring about
competitive pressures; (2)
evaluate how strong the pressures
stemming from each of the five
forces are (strong, moderate or
weak); and (3) determine
whether the collective impact of
the five competitive forces is
conducive to earning attractive
profits in the industry.
B) building the picture of
competition in two steps: (1)
determine which rival has the
biggest competitive advantage
and (2) assess whether the
competitive advantages
possessed by various industry
members allow most industry
members to earn above-average
profits.
C) evaluating whether competition
is being intensified or weakened
by the industry's driving forces
and key success factors.
D) assess whether the collective
impact of all five forces is weak
enough to allow industry
members to go on the offensive
or use a defensive strategy to
insulate against fierce
competitive pressures.

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 E) gauging the overall strength of 95) Competing companies are seldom able
competition based on how many to strengthen their market positions via
industry rivals are operating with A) accumulating vast amounts of
a competitive advantage and how capital in order to raise barriers
many are operating at a to entry.
competitive disadvantage. B) differentiating their products by
offering higher quality than
94) Potential entrants are more likely to be rivals.
deterred from actually entering an C) using patents and trademarks to
industry when protect their intellectual property.
A) incumbent firms are willing and D) enjoying cost advantages due to
able to be aggressive in economies of scale and/or
defending their market positions economies of scope.
against entry. E) reducing distribution capabilities
B) incumbent firms are complacent. and market presence.
C) buyers are not particularly price-
sensitive and the industry already
contains a dozen or more rivals.
D) the relative cost positions of
incumbent firms are about the
same, such that no one
incumbent has a meaningful cost
advantage.
E) buyer switching costs are
moderately low because of strong
product differentiation among
incumbent firms.

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96) In which of the following instances is
rivalry among competing sellers not
more intense?
A) when certain competitors are
dissatisfied with their market
position and make moves to
bolster their standing
B) when strong companies outside
the industry acquire weak firms
in the industry and launch
aggressive moves to transform
their newly acquired competitors
into stronger market contenders
C) when competitors are fairly equal
in size and capability
D) when the products of rivals are
weakly differentiated, buyer
switching costs are low, and
market demand is growing
slowly
E) when there are vast numbers of
small rivals so the impact of any
one company's actions is spread
thinly across all industry
members
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97) The competitive threat that outsiders will
enter a market is weaker when
A) financially strong industry
members send strong signals that
they will launch strategic
initiatives to combat the entry of
newcomers.
B) the industry's market growth is
rapid.
C) the pool of entry candidates is
large and some have resources
that would make them
formidable market contenders.
D) newcomers can be expected to
earn attractive profits.
E) buyers have little loyalty to the
brands and product offerings of
existing industry members.
98) The competitive pressures from
substitute products tend to be stronger
when
A) good substitutes are readily
available.
B) there are fewer number of
substitute products.
C) substitutes have lower
performance features.
D) buyers incur high costs in
switching to substitutes.
E) substitutes are priced above the
market.
22
99) Competitive pressures associated with
the threat of entry are greater in all of the
following situations except when
A) incumbent firms are willing to
strongly contest the entry of
newcomers with moves designed
to make entry unprofitable.
B) a large pool of potential entrants
exists, some of which have the
capabilities to overcome high
entry barriers.
C) entry barriers are relatively low
and buyer demand for the
product is growing rapidly, and
newcomers can expect to earn
attractive profits without inviting
a strong reaction from
incumbents.
D) existing industry members are
looking to expand their market
reach by entering product
segments or geographic areas
where they currently do not have
a presence.
E) customers have low brand
preferences and low degrees of
loyalty to seller.
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100) The intensity of rivalry among
competing sellers does not depend on
whether
A) the industry has more than two
strong driving forces and whether
the industry has more than two
diverse and capable strategic
groups.
B) competitors are diverse in terms
of long-term directions,
objectives, strategies, and
countries of origin.
C) strong companies outside the
industry have acquired weak
firms in the industry and are
launching aggressive moves to
transform the acquired
companies into strong market
contenders.
D) one or two rivals have
particularly powerful and
successful strategies to grow the
business, attract and retain
buyers, and develop a sustained
competitive advantage.
E) industry conditions attract
industry members to use price
cuts or other competitive
weapons to boost total sales
volume and market share.
23
101) In analyzing the strength of
competition among rival firms, an
important consideration is
A) the potential for buyers to
exercise strong bargaining
power.
B) the diversity of competitors in
terms of long-term direction,
objectives, strategies, and
countries of origin.
C) the number of firms pursuing
differentiation strategies versus
the number pursuing low-cost
leadership strategies and focus
strategies.
D) the extent to which some rivals
have more than two
competitively valuable
competencies or capabilities.
E) whether the industry is
characterized by a strong
learning/experience curve and
whether the industry is composed
of many or few strategic groups.
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102) Rivalry among competing sellers is
generally less intense when
A) there are relatively more industry
key success factors.
B) the industry's driving forces are
weak and rivals have mostly
commodity products.
C) barriers to entry are moderately
low and the pool of likely entry
candidates is large.
D) rivals are wary of making fresh
moves to lower prices, introduce
new products, increase
promotional efforts and
advertising, and otherwise gain
sales and market share.
E) buyers have many alternative
products or services from which
to choose.
103) Rivalry among competing sellers
decreases
A) when buyer demand is growing
rapidly.
B) as it becomes less costly for
buyers to switch brands.
C) as the products of rival sellers
become commoditized.
D) when there is excess production
relative to demand.
E) as the number of competitors
increases.
24
104) Key functional strategies of 106) Organizational capabilities are
SunPower, a solar power manufacturing virtually always
and installation company (described in A) knowledge based, residing in
Illustration Capsule 4.2) include people and in the company's
A) R&D, technology, and product intellectual capital, or in
design. organizational processes and
B) benchmarking against rival firms. systems, which embody tacit
C) diversifying beyond the low-cost, knowledge.
large-scale utility solar market B) more complex than resources and
and into residential and are exercised only through key
commercial markets. personnel.
D) divestment of noncore assets. C) require constant evaluation to
E) forecasting how solar power ensure cooperative support from
prices are likely to fluctuate over management.
time. D) easier and less challenging to
categorize than resources
105) Starbucks’s employee management, because there are fewer to be
training, and real estate are concerned about.
A) also known as Starbucks’s E) reflective of the industry's
productive inputs or competitive driving forces.
assets, while human assets and
intellectual capital are considered
capabilities or competencies.
B) only representative of
Starbucks’s physical resources.
C) part of Starbucks’s inventory of
the firm's strengths, weaknesses,
opportunities, and threats.
D) capabilities that Starbucks
developed and enabled via the
deployment of company
resources.
E) considered Starbucks’s
organizational resources because
they consist of processes.

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107) How are a company's organizational
capabilities developed and enabled?
A) by strengthening the traditions
that company executives are
committed to maintaining
B) through deployment of a
company's resources or some
combination of its resources
C) by talking openly about the
problems of the present company
and determining how new
behaviors will improve
performance
D) by shifting from decentralized to
centralized decision making
E) by urging company personnel to
search outside the company for
work practices and operating
approaches that may be an
improvement over what the
company is presently doing
108) Resource and capability analysis is
achieved by
A) probing the caliber of a firm's
competitive assets relative to
those of rival firms.
B) attaining price stability.
C) analyzing only internal strengths
and weaknesses through a matrix
comparison model.
D) cost-benefit analysis of the
company's core product sales.
E) performing resource-specific
activities within the organization
to allocate available capital.
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109) A company that has competitive
assets that are central to its company
strategy and superior to those of rival
firms creates a
A) long-term derivative strategy.
B) cash flow feasibility analysis.
C) competitive advantage over other
companies.
D) resource deployment strategic
plan.
E) cost underestimation and benefit
overestimation.
110) The competitive power of a company
resource strength or competitive
capability hinges on
A) whether or not it can be
measured by financial ratio
analysis.
B) whether or not it is contributing
to stakeholder wealth
appreciation.
C) whether it is tangible or
intangible.
D) whether or not it is rare.
E) whether or not it is impacted by
macro-economic forces.
26
111) A company's strengths are important
because they
A) pave the way for establishing a
low-cost advantage over rivals.
B) represent the quality of its
competitive assets that enhance
its competitiveness in the
marketplace.
C) provide extra muscle in helping
lengthen the company's value
chain.
D) give it competitive protection
against the industry's driving
forces.
E) provide extra organizational
muscle in turning a core
competence into a key success
factor.
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112) The difference between a core
competence and a distinctive
competence is that a
A) distinctive competence refers to a
company's strongest resource or
competitive capability, whereas a
core competence refers to a
company's lowest-cost and most
efficiently executed value-chain
activity.
B) core competence usually resides
in a company's base of
intellectual capital, whereas a
distinctive competence stems
from the superiority of a
company's physical and tangible
assets.
C) core competence is a
competitively and strategically
relevant activity that a firm
performs well compared to its
other activities, whereas a
distinctive competence is a
competitively relevant activity a
firm performs well compared to
other rival firms.
D) core competence represents a
resource strength, whereas a
distinctive competence is
achieved by having more
resource strengths than rival
companies.
E) core competence usually resides
in a company's technology and
physical assets, whereas a
distinctive competence usually
resides in a company's know-
how, expertise, and intellectual
capital.
27
113) The payoff of doing a thorough
SWOT analysis is
A) identifying whether the
company's value chain is cost-
effective vis-à-vis the value
chains of rivals.
B) helping strategy makers
benchmark the company's
resource strengths against
industry key success factors.
C) enabling a company to assess its
overall competitive position
relative to its key rivals.
D) revealing whether a company's
market share, measures of
profitability, and sales compare
favorably or unfavorably vis-à-
vis key competitors.
E) assisting strategy makers in
crafting a strategy that is well-
matched to the company's
resources and capabilities, its
market opportunities, and the
external threats to its future well-
being.
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114) Examples of a potential resource
weakness or competitive deficiency for a
company do not include
A) less productive R&D efforts than
rivals.
B) having a single, unified
functional strategy instead of
several distinct functional
strategies.
C) lack of a strong brand image and
reputation (as compared to
rivals).
D) higher overall unit costs relative
to rivals.
E) too narrow a product line relative
to rivals.
28
115) If you were asked to conduct a
SWOT analysis for your company, you
would not be able to assess
A) how to improve your company’s
strategy by building on its
strengths and capabilities.
B) which market opportunities are
best suited to your company’s
strengths and capabilities.
C) which of your company’s
resource weaknesses and
deficiencies need to be corrected
so as to better enable the pursuit
of important market
opportunities and to better defend
against certain external threats.
D) how your company’s
management could turn a core
competence into a distinctive
competence.
E) whether any of your company’s
resource strengths can be used to
help lessen the impact of external
threats.
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116) A company's value-creating
activities can offer a competitive
advantage in one of these ways.
A) contribute to greater efficiency
and lower costs and provide a
basis for differentiation
B) contribute expense savings and
enhance product exclusivity
C) reduce cost disadvantages and
market price anomalies
D) contribute customer experience
value and conserve operating
functionality
E) contribute to competitive assets
and discontinue distinctive
competencies
117) The means to enhance differentiation
through activities at the forward end of
the value chain system do not include
A) engaging in cooperative
advertising and promotions.
B) creating exclusive arrangements
with downstream sellers or other
mechanisms that increase their
incentives for enhanced-delivery
customer value.
C) creating and enforcing standards
for downstream activities.
D) assisting in training channel
partners in business practices.
E) enhancing cost-reducing
activities with defensive
functionality designed to create
incentives.
29
118) To build a competitive advantage by 120) A company's competitive strength
out-managing rivals in performing value scores pinpoint its strengths and
chain activities, a company must weaknesses against rivals and
A) position itself in the industry's A) suggest the company use its
more favorably situated strategic strengths to exploit its own
group. competitive liabilities.
B) develop resource strengths that B) point directly to the kinds of
will enable it to pursue the offensive/defensive actions it can
industry's most attractive use to exploit its competitive
opportunities. strengths and reduce its
C) develop core competencies and competitive liabilities.
maybe a distinctive competence C) point directly to the company to
that rivals don't have or can't use its weaknesses as offensive
quite match and that are moves to challenge rivals'
instrumental in helping it deliver weaknesses.
attractive value to customers. D) suggest receptivity for astute
D) outsource all of its value chain companies to drive their
activities to world-class vendors operating practices if the strength
and suppliers. scores are very low.
E) eliminate its resource E) point directly to accepting the
weaknesses. competitive strength scores on
face value.
119) For a company to translate its
performance of value chain activities
into a competitive advantage, it must
A) undertake ongoing and persistent
efforts to be cost-efficient and
develop differentiation
advantages.
B) have more core competencies
than rivals.
C) have at least three distinctive
competencies.
D) have competencies that allow it
to produce the highest-quality
product in the industry.
E) have more competitive assets
than competitive liabilities.

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121) Calculating competitive strength
ratings for a company and its rivals
using the industry's most telling
measures of competitive strength or
weakness
A) is a way of determining which
competitor has the highest
overall competitive advantage in
the marketplace and which
competitor is faced with the
lowest overall competitive
disadvantage.
B) is the most reliable indicator of
which industry member has the
highest overall product quality.
C) is a powerful way of revealing
which competitors are in the best
and worst strategic groups.
D) is the most reliable indicator of
which industry member has the
lowest overall costs and is the
low-cost leader.
E) pinpoints which industry rivals
are most insulated from the
industry's driving forces.

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