Multiple Choice Questions

Chapter 1
The Concept of Strategy

Multiple Choice Questions
21. The primary purpose of strategy is:
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a. Being better than rivals
b. Achieving success
c. Satisfying all stakeholders
d. Being an excellent corporate citizen
22. The successful careers of both Queen Elizabeth II and Lady Gaga may be attributed to
the fact that both:
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a. Have used dressing up as a means of attracting attention and establishing identity
b. Have a knack for being in the right place at the right time
c. Have a consistency of direction based on clear goals
d. Have built a loyal fan base based on astute use of the media.
23. For both individuals and businesses, successful strategies are characterized by:
a. Unrelenting commitment to ambitious goals
b. Clear goals, deep understanding the competitive environment, careful resource appraisal,
and effective implementation
c. Meticulous planning
d. The possession of superior abilities and resources which are then deployed to build
competitive advantage.
24. Strategic goals should be:
a. Simple
b. Consistent
c. Long term
d. All of the above
25. The main problem of SWOT as a framework for strategy analysis is that:
a. Distinguishing opportunities from threats and strengths from weaknesses is often difficult
b. It has been around for five decades and has now been superseded by more sophisticated
analytical frameworks
c. It is focused on strategy formulation and fails to take account of strategy implementation
d. It is so widely used that it no longer has any novelty.
26. If a firm adjusts its strategy to ensure it is consistent with its external environment, it
benefits from a:
a. Strategic fit
b. Strategic leadership
c. Location within an attractive industry
d. A license to operate
27. Strategic fit refers to:
a. The need for a firms strategy to be consistent with its vision, mission, and culture
b. The consistency of a firms strategy with its external and internal environments
c. The need for a firms strategy to be unique
d. The need for a firms strategy to meet the needs of all its stakeholders, not just
shareholders
2013 Robert M. Grant
www.contemporarystrategyanalysis.com
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28. Ryanairs strategic position is as Europes lowest-cost airline may be attributed to:
a. The willingness of its CEO, Michael OLeary, to challenge conventional notions of
customer and employee satisfaction
b. Its use of secondary airports where costs are lower
c. The high operating costs of major airlines such as British Airways, Lufthansa, and Air
France-KLM on short-haul routes
d. An integrated, consistent set of activities designed to maximize productivity and minimize
operating costs.
29. The principal similarity between business and military strategy is that:
a. They share the same objective: to annihilate rivals
b. They share common concepts and principles
c. The nature of leadership is much the same whether in a military or business context
d. They are both concerned with tactical maneuvers that can establish positions of
advantage.
30. In the military field, we generally make the following distinction between strategy and
tactics:
a. Tactics comprise the overall plan whereas strategy focuses on specific actions
b. Tactics relate to specific actions whereas strategy relates to the overall plan
c. Tactics encompass specific political actions within the firm whereas strategy is the overall
plan for deploying resources to establish a favorable position
d. Tactics form the overall plan whereas strategy is concerned with the maneuvers to win
battles
31. The main reason for the transition from corporate planning to strategic management
during the latter half of the 1970s was:
a. The influence of Michael Porter
b. Disappointing returns of corporate diversification
c. A more turbulent business environment that became increasingly difficult to predict
d. Growing disillusionment with central planning.
32. The primary distinction between corporate strategy and business strategy is:
a. Corporate strategy is the responsibility of the CEO, business strategy is formulated by the
heads of business units
b. Corporate strategy is concerned with where the firm competes; business strategy with how
it competes
c. Corporate strategy is concerned with establishing competitive advantage; business
strategy with strategy implementation in individual businesses
d. Corporate strategy is concerned with the long-term performance of the firm; business
strategy with resource deployment.
33. The notion of strategic fit:
a. Is common in strategic literature but means different things to different experts
b. Implies deep coherence across all functions within the organization
c. Expresses how well a firms strategy fits its internal environment
d. Answers a and c
34. Strategy derives from a Greek word meaning:
a. The art of arranging men in a battlefield
b. Generalship
c. The art of maintaining a states security
d. Maintaining ethical and spiritual purity
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35. The book that is considered as the first treatise on strategy is:
a. Carl Von Clausewitzs Vom Kriege (On war)
b. Sun Tzus Art of War
c. The Bible
d. Niccolo Machiavellis Dellarte della Guerra (The art of war)
36. Military strategy and business strategy differ in that:
a. There is no concept like tactics in business
b. Good military strategist must first be a good military tactician practicing it in the field first
c. The objective of military strategy is to defeat the enemy; business strategy seeks
coexistence rather than annihilation
d. None - there is no conceptual difference
38. In the 1980s, Michael Porter pioneered:
a. The application of industrial organization economics for analyzing industry profitability
b. The development of PIMS at the Strategic Planning Institute
c. The first synthesis of the resource and capability approach
d. The application of game theory to strategic management
39. During the 1990s, the focus of strategy analysis shifted:
a. From corporate planning to strategic management
b. To the role of resources and capabilities as a foundation for firm strategy
c. To the application of microeconomics to analyze the sources of firm profitability
d. From the structure-based approach to the value-added perspective
40. The increasingly complex business environment of the 21st century has resulted in:
a. Firms shifting their emphasis towards the growth markets of Asia, Africa, and Latin
America. Firms abandoning shareholder value maximization in favor of maximizing
stakeholder interests
c. Firms increasingly depending upon other firms through outsourcing and strategic alliances
d. Firms embracing digital technologies
41. The expression blue oceans in strategic management is:
a. only a figure of speech
b. a concept that signifies the immensity of potential new markets
c. a concept employed in the US Navys strategic planning process
d. an expression coined by business school professors to make their book more appealing to
practicing managers
42. When the environment becomes more turbulent, unpredictable, and full of new
opportunities:
a. strategy appears to not be very useful
b. strategy becomes a vital tool to navigate the firm through stormy seas
c. strategy should be put into the hands of external consultants
d. strategy becomes an impossible exercise
43. The essence of strategy is:
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a. Making choices
b. Doing things differently
c. Where and how to compete
d. All of the above
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44. The two questions of where and how to compete define:

a. a firms corporate and business strategies
b. a firms strategic management process
c. a firms vision and mission
d. a firms values and culture
45. How do corporate level strategy and business level strategy differ?
a. Corporate strategy defines the scope of a firms activities, while business strategy focuses
on how to beat the competition in a specific product market
b. Corporate strategy defines the scope of a firms structure, while business strategy
emphasizes the relationship of each business with its environment (state, regulators, etc.)
c. Corporate strategy focuses on the overall strategic plan, while business strategy focuses
on implementing strategic decisions in each product market
d. Corporate level strategy is concerned with long term goals, while business level strategy
focuses on short term sustainability
46. Corporate strategy is concerned with:
a. the scope of the firm in terms of industries and markets, and the allocation of its resources
b. a firms relationships with its principal stakeholders
c. the corporate governance of each individual business
d. None of the above
47. Business strategy defines:
a. the way a firm competes in a particular industry or market
b. the way a firm establishes a competitive advantage over its rivals within a specific industry
or market
c. Both of the above
d. Neither of the above
48. Between the two levels of strategy, the division of responsibility is consistent with the
following principle:
a. There is no principle but only limited rationality and trial-and-error processes to find the
best allocation between different levels of management
b. Corporate level strategy is the domain of headquarters executives, while division managers
are in charge of their business level strategies
c. Corporate level strategy is the domain of the parent company; business level strategy is
handled by the functional department managers
d. Corporate and business level strategies are not any specific organizational levels
responsibility because of the principle of maximum delegation and decentralization
49. In regard to strategy making, most firms are likely to exhibit:
a. A combination of design and emergence
b. A decentralized, bottom-up process
c. An interaction between strategic design, through organizational processes, and strategic
enactment through decisions made by all
d. Limited involvement by boards of directors
50. Strategy improves decision-making by:
a. Reducing the number of choices being considered
b. Integrating and pooling the knowledge of different members of the organization
c. Facilitating the use of analytic tools
d. All of the above
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51. Hondas successful entry into the US motorcycle market has:

a. Provided a battleground for the debate opposing the Design School and the Learning
School
b. Been an extraordinary epic where players were discovering the field while dealing with its
traps
c. Shown that the rational and analytical model was superior to the emergence model
because only intensive analysis and forecasting were able to fuel this success story
d. Shown the difficulty of entering the US market for Japanese firms because of the cultural,
organizational, and legal gaps
52. In all organizations, strategy making involves a combination of top-down strategy design
and decentralized mergence. The balance between the two depends mainly upon:
a. How turbulent and unpredictable is the external environment of the organization
b. The extent to which decision making is centralized
c. The commitment of the organization to experimentation
d. The extent to which the organization has a formalized process of strategic planning.
53. The applicability of the tools and techniques of strategy analysis to not-for-profit
organizations is:
a. Greater for organizations that face competitions than those that do not.
b. Greater for organizations that charge for their services than those which do not
c. Greater for organizations that both charge for their services and face competition than
those which are monopolists providing services free of charge.
d. Is severely limited by the lack of a profit motive.
Chapter 2
Goals, Values and Performance
25. Every business enterprise has a distinct purpose, however, common to all businesses is
the goal of:
a. Making customers satisfied and happy
b. Creating value
c. Satisfying as many stakeholders as possible
d. Maximizing dividend payments to shareholders over the long term.
26. Business strategy is primarily a quest for:
a. Attractive markets
*b. Profit
c. Superior technology
d. Motivated and talented personnel
27. A major impediment to the stakeholder view of the firm is:
a. The practical problem of taking account of multiple goals in strategic decision making
b. The fact that customers and employees are likely to be even more short-term oriented
than shareholders
c. The difficulties of quantifying the performance of the stakeholder-focused firm
d. The need to represent each stakeholder group on the board of directors.
28. To survive and prosper over the long run requires a firm to:
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a. Commit itself to growing its sales

b. Be responsive to its external environmentincluding its social, political, and natural
environment
c. Pursue simultaneously strategies of low cost and differentiation
d. Ensure the ethical conduct of executives
29. For a firm to create value involves:
a. Earning profits for shareholders, then using these profits to fund lower prices for customers
b. Creating strong customer loyalty, and then to progressively increase prices, thereby
creating extra value
c. Creating value for customers, and appropriate some of that value as then extracting some
of that customer value as profit
d. Creating value for employees through attractive pay, benefits, and work conditions, then
relying upon employees to drive customer satisfaction and, eventually, profits.
30. The principal means by which firms create value is through production: transforming less
valuable inputs into more valuable outputs. Firms can also create value through:
a. Entrepreneurship: creating new businesses
b. Restructuring: turning around, and selling off divisions or units
c. Commerce
d. Advertising which increases consumers perception of a products value.
31. Commerce creates value by:
a. Physically transforming products
b. Repositioning products in space
c. Repositioning products in time
d. Repositioning products in space and time
32. Value added can be defined as:
a. The difference between sales and expenses
b. The difference between the money values of a firms output and physical inputs
c. The difference between sales and wages
d. The retained profits
33. The primary justification for the assumption that primary goal of strategy is to maximize
profits over the long term is:
a. The fact that in todays intensely competitive markets, firms must focus on profit
maximization in order to survive
b. The legal requirement on Boards of Directors to ensure that companies are operated in the
interests of their shareholders
c. In order to earn profits over the long run, firms must attend to the interests of all their
stakeholders
d. Shareholders will oust CEOs that are not effective at maximizing profits.
34. The principal difference between accounting profit and economic profit is:
a. Accounting profit is distorted by the arbitrary treatment of depreciation and unusual items
b. Economic profit is pure surplus; accounting profit includes the normal return to the
providers of equity capital.
c. Economic profit is cash flow based and is less subject to manipulation that accounting
profit
d.. Economic profit is endorsed by economists who tend to be more rigorous than
accountants.

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35. There are two main concepts of profit:

a. The normal return to capital and the abnormal return of capital
b. Return on capital and return on sales
c. Accounting profit and the economic profit
d. Economic rent and the economic profit
36. Profit maximization and value of the firm are two concepts which are:
a. Unrelated because cash flow is only one component of a firms value
b. Closely linked because profit maximization translates into maximizing a firms value
c. Unrelated because the Net Present Value is used to assess the value of a firm
d. Closely linked because the value of a firm is the sum of its free cash flows in each year
discounted at the firms interest rate
37. The value of a firm can be defined as:
a. The sum of its free cash flows in each year, discounted at the firms weighted average cost
of capital (WACC)
b. The sum of the firms operating cash flows in each year, discounted at the firms cost of
capital
c. The sum of its free cash flows in each year, discounted at the cost of equity
d. The sum of its cash flows in each year, discounted at the risk-free rate of interest
38. Maximizing enterprise value and maximizing shareholder value are linked because:
a. Enterprise value and shareholder value are the same thing
b. shareholder value is calculated by adding debt and other non-equity financial claims to the
DCF value of the firm
c. shareholder value is calculated by subtracting debt and other non-equity financial claims
from the enterprise value of the firm
d. It is obvious that they must be linked
39. To use the Discounted Cash Flow method, the future cash flows have to be forecasted. To
determine these estimates management will:
a. Make justified assumptions about income, expenses, profit and all other significant figures
b. Use a benchmarking approach to align the firms cash flows with its rivals cash flows
c. Use accounting data and directly extrapolate from the past the future cash flows
d. Reach consensus by discussion with a group of external experts such as stockbrokers
40. A key merit of long-term profit maximization as a prime goal is its:
a. simplicity
b. consistency over time
c. tendency to optimize long-term survival
d. All of the above
41. To diagnose the sources of a firms poor financial performance, it is useful to:
a. Focus on the firms cash flow statement rather than its income statement and balance
sheet
b. Concentrate on sales growth and market share rather than profit data
c. Adopt a forward-looking approach through analyzing share price performance rather than
looking at backward-looking accounting statements
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d. Disaggregate overall return on capital into its component items.

42. Using accounting ratios to analyze firm performance:
a. Benchmarks
b. Analyzing trends over at least 5 years
c. Multiple indicators
d. All of the above
43. In appraising a firms profit performance:
a. Return on sales is a better indicator than return on invested capital
b. Return on invested capital is a better indicator than return on sales
c. Net margin is a better indicator than operating margin
d. Narrow measures of profit (such as after-tax net income) are better indicators than broadbased measures (such as EBITDAearnings before interest, tax, depreciation and
amortization).
44. The fundamental problem of any type of performance management system is:
a. The tendency for performance management systems to be based entirely on financial
targets
b. A performance management systems needs short-term measures to assess performance,
yet the ultimate goal is to enhance the long-term performance of the firm
c. Performance targets always lead to unintended consequences because individuals always
game the system
d. Managerial, political and personal interests need to be taken into account
45. The Balanced Scorecard is a technique of performance management that establishes
and monitors four dimensions of performance:
a. Financial, strategic, operational, and ethical performance
b. Financial, customer, internal, and learning/innovation performance
c. Profit, sales, productivity, and asset management performance
d. Shareholder, customer, employee, supplier, and social performance
46. The main lesson to be drawn from Boeings deteriorating performance during the late
1990s when top management emphasized the pursuit of profit and shareholder value is:
a. Shareholder value maximization is only appropriate to financial service companies
b. Pursuing profit and shareholder value will inevitably lead to damaging ethical problems
c. Focusing on the interests of shareholders is detrimental to employee morale and customer
satisfaction
d. Management should focus upon the factors that drive profitability and shareholder value
rather than profitability and shareholder value themselves.
47. Influential scholars such as Milton Friedman, Charles Handy, Michael Porter and CK
Prahalad:
a. Agree that CSR is an essential moral imperative
b. Disagree widely about the justification for CSR
c. Believe that the capitalist system would operate better if all firms adopted CSR
d. Regard most firms CSR initiatives as primarily exercises in public relations
48 Michael Porter and Mark Kramers notion of shared value reconceptualises CSR
(corporate social responsibility) by emphasizing:
a. CSR as a value creating activity
b. CSR as advantageous to the firm by conferring reputational and legitimacy benefits
c. CSR a means of transferring value from shareholders to less fortunate members of society
d. CSR as a counterweight to greed and amorality among managers.
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49. The field of real option analysis emerged in:

a. Industrial economics
b. Corporate finance
c. Systems theory
d. Strategic management
50. In formulating strategies under uncertainty, real option analysis is a valuable strategic tool
because:
a. It allows firms to create value from flexibility and a wider range of growth opportunities
b. It can assist firms in using complex financial derivatives to hedge risk
c. It allows firms to make investment decisions without the need to forecast cash flows long
into the future
d. It renders obsolete most conventional tools and techniques of strategy analysis.
51. For product development, a phases and gates approach means that:
a. a firms market is divided into specific phases separated by gates, which must be crossed
to establish synergies across segments
b. a firms product development relies on time segments that must be linked through gates
c. product development is split into several consecutive phases, at the end of each the
product is reassessed to continue ( go through the gate ) or discontinue
d. For each gate, the value of each product is assessed, and some are abandoned until there
is only one left.
52. Viewing strategy as a portfolio of options rather than a portfolio of investments, relies
upon the central idea that:
a. strategy needs to reconcile direction and flexibility in an uncertain environment
b. all or nothing strategic projects can be such costly mistakes as to be fatal to the firm
c. the advantage of an option follows from the potential to amend or stop a strategic project
during the development
d. All of the above
Chapter 3
Industry Analysis: The Fundamentals
24. Given the plethora of external influences, understanding the external environment
requires managers to:
a. Use a framework or a system that allows them to organize information and rank factors
b. Monitor their rivals closely to detect signals of change in their strategies
c. Use all existing techniques to gather and analyze information
d. Work on the matter full-time
25. The core of a firms business environment is determined by:
a. Its relationships with customers, competitors and suppliers
b. Its relationships with customers, competitors, government and suppliers
Its relationships with its major stakeholders
d. The social and economic sstems withn which the firm must coexist
27. Value is created when:
a. The price that the customer is willing to pay for a product exceeds the costs of the material
inputs used to produce the product
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b. The surplus of value is distributed between customers and producers in the industry by the
forces of competition
c. The value of a product to consumers exceeds the price they paid for it.
d. The price that the customer is willing to pay for a product exceeds the cost of supplying it.
30. The profits earned by firms iIn an industry, are determined by:
a. The overall state of the economy and the intensity of competition within the industry
b. Hw much customers value the products supplied by the industry
c. The extent to which the industry is protected by barriers to entry
d. The value of the product for customers, the intensity of competition, and the relative
bargaining powers of producers, their suppliers and their buyers
31. The basic premise of industry analysis is that:
a. Perfect competition and monopoly are theoretical modls, in practive most industries are
oligopolies
b. The level of profitability within an industry is determined by the systematic influence of the
industry structure which determines the intensity of competition in the industry
c. Firm strategies and their intereactions are the key determinnats of the industry envirnbment
d. The basic forces of technolog and consumer demand are the fundamental forces that
shape industry structure
35. If an industry earns a return on capital in excess of its cost of capital:
a. It will soon attracts the attention of competition authorities
b. Workers will push for higher pay and benefits causing the level of profuitability to fall
c. It is likely to attract the attention of potential entrants; unless the industry is protected by
high barriers ot ewntry, the return on capital will fall
d. The high profits earned will encourage over-investment by firms causing the return on
capital to fall.
36. Firms suppling niche markets are often hiughl profitable becuae::
a. They tend to supply specialty products for high income consumers
*b. They tend to be sufficiently small that a single foirm can establish a dominant position
c. They tend to be disregarded by major corproations
d. Tend to have high entry barriers
37. Economies of scale are a barrier to entry because:
a. New entrants do not know where they are positioned on their learning curve
b. New entrants do not know the economies they can generate in the future and therefore
cannot precisely determine their selling price
c. New entrants face a risk of retaliation from the incumbents which could occur immediately
on a large scale and start a price war as a deterrent of their entry
d. New entrants face the cost and risk of creating large-scale capacity to start with or a severe
cost disadvantage if they enter on a smaller scale
38. The American Medical Association encourages limits on the number of medical school
places for training new doctors:
a. In the interests of ensuring that only the the most capable applicnsats are admitted ot the
medical profession
b. To ensure that the United Stsates maintains the highest standards of training in the world
c. To keep doctors remuneration high
d. To ensire that medical school graduates will find work at medical doctors

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43. The bargaining power of buyers depends on:

a. The buyers price sensitivity
b. The size of buers relative ot that of sellers
c. Buyers price sensitivity and the bargaining power of buyers relative to that of sellers
d. The ability of buers ot backward integrate
44. Bargaining power rests, ultimately, on:
a. The negotiating skills of the buyer versus the seller
b. Historic and accidental events
c. The respective effectiveness and cohesion of top management teams
d. The perceived or real threat for one party to refuse to deal with the other party
45. The relative bargaining power of buyers depends on:
a. All of the items below
b. The size and concentration of buyers relative to suppliers
c. A buyers access to information about products and costs
d. The ability or threat to integrate vertically
46. The bargaining power of suppliers is likely to be high:
a. When the suppliers industry is concentrated
b. When suppliers are supplying differentiated products
c. When our (the customers) industry is relatively fragmented
d. All of the above
47. The analytical tools described in the text:
a. Must be used if one is to understand the industry structure
b. Are simply that; just tools. Their value depends on the skill with which they are deployed.
c. Should really only be used by academics.
d. Both A and C above.
48. To forecast industry profitability consistently accurately, professional analysts have to:
a. Look at the link between industry and structure performance , then, use information on
major trends in industry structure to predict their effects upon the forces of competition
b. Look at the probability of new entries in the industry, to determine the major trends, and to
forecast the probable overall industry profit
c. Determine the five larger players in the industry and their relative bargaining power in
regards to their buyers and customers, and to identify their strengths and weaknesses
d. Develop a deep understanding of how the industry creates value now and in the future,
whether they use the tools described in the chapter or not
49. An industrys current profitability:
a. On its own tends to be a poor predictor of future profitability
b. Is an excellent predictor of its future profitability
c. Explains the past in that industry
d. Is determined by the forces of competition and so many other factors that gaining insights
into its causes is almost impossible
50. Suppose that an industrys profitability is zero or negative overall:
a. Then all firms in the industry are performing badly
b. Then no firm in the industry can be performing well
c. Then the biggest firm in the industry is performing badly
d. Then even so its entirely possible that some firms are making very good profits
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51. Understanding the competitive forces in an industry is:

a. A largely futile exercise for managers
b. Is of academic interest, but does not bring any value for strategic management
c. A way to enable managers to allocate their resources where competition is the strongest
d. A way to enable managers to position the firm where its particular capabilities can be
deployed to best advantage
52. Changing the industry structure is:
a. Not really within the power of a single firm
b. An endeavor that firms are undertaking on a permanent basis with great success
c. A risky strategic move that may backfire, because of retaliation from the industrys
incumbents
d. Sometimes possible even by small firms, if the mix of drivers for change and existing
structure make it susceptible to change
53. The market and the industry are:
a. Analogous concepts but, in practice, markets tend to be defined more narrowly than
industries
b. Concepts whose everyday meaning has become divorced from their true economic
definitions
c. Exactly the same concept, and can be used interchangeably
d. Exclusively used in marketing and strategic management respectively
54. Market and industry are:
a. Very specific economics terms which must be rigidly adhered to
b. Are concepts which require careful consideration of their philosophical underpinning to use
correctly.
c. Somewhat flexible in scope depending on what aspect of business you are considering
d. Close concepts where market is identified with broader sectors, while industries refer to
specific technologies
55. A markets boundaries are defined by:
a. The geographies of the markets that are supplied by the incumbents
b. The type of product which is sold, and the type of customers willing to pay for the product
c. Substitutability on the demand side and substitutability on the supply side
d. Substitutability on both the demand side and the supply side, combined with an element of
judgment depending on context and purpose
56. In practice, drawing the boundaries of industries and markets is:
a. A matter of the personal preference of top managers
b. Almost impossible to carry out with rigor because it requires many rules of thumb and
approximations
c. Largely a matter of judgment and experience contingent on the purpose of the analysis
d. Critical to the output of the analysis and therefore should only be undertaken with the help
of an academic or consultant
57. The market in which a consumer produce competes is, in reality:
a. Precisely defined, with a specific analysis of products, markets, and rivals
b. A continuum, with no clearly defined boundar
c. The market for all products which consumers may choose to spend their money on, in
some sense
d. Answers b and c
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58. Key success factors are:

a. Factors that lead rivals to undermine a firms competitive advantage
b. Factors derived from the competitive environment that a firms must satisfy if it is to
succeed.
c. Factors in the internal environment that determine a firms ability to survive and prosper
d. Factors in the five forces of competition that are critical for a firms survival and prosperity
59. Analyzing key success factors leads one to ask the following two questions:
a. What do customers want which we could supply and what should the firm do to survive
competition?
b. What do customers want and what type of operational changes should a firm implement to
survive competition?
c. Which of the five forces of competition most threaten a firms survival and how could the
firm deal with them?
d. What should managers do to a information collected from the market and the firms
operational units?
60. The question What do customers want?:
a. Is not relevant because customers will show their preferences through their behavior
b. Must be asked by managers, and an accurate answer obtained and understood, since its
the driving force behind generating profit.
c. Can be addressed by an extremely good Market Research company
d. Is best answered by ensuring that certain managers are educated in Marketing
61. The question What does a firm need to survive competition?:
a. Can be addressed through a careful analysis of competitors using all possible means, even
at the edge of legality and ethics
b. Can be addressed by studying very carefully the two largest rivals in the industry
c. Requires an understanding of the current and future basis of competition specific to the
industry
d. Can never be answered clearly, because competitors will not divulge what they are doing
62. The value to managers of understanding key success factors is:
a. Self-evident
b. Legitimate because it is accepted by the academic world
c. In question because some academics disagree with it.
d. Generally accepted by the corporate, consulting and academic worlds, but as with most
business concepts and models, there are always some detractors
63. An industry direct modeling of profitability is defined in the text as:
a. The identification of the drivers of a firms relative profitability within an industry
b. The statistical modeling of the profit as determined by several variables, using multiple
regression analysis
c. The comparative modeling of one industry versus another industry
d. Setting up a model of industry profitability from the interaction of the Five Forces
64. One useful way to analyse the drivers of a firms relative profitability is:
a. To disaggregate return on capital employed into component ratios that point to the main
underlying drivers of profitability
b. To disaggregate assets into component parts that point to the main drivers of profitability
c. To undertake a benchmarking study to compare a firms profitability with that of its rivals
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d. To conduct a survey of managers to ask what they think are the reasons why their firm is
profitable
65. In a nightclub, a single supplier of beverages can charge a price that exploits its position
and the customers willingness-to-pay. If many suppliers could offer their products on the
same site:
a. The suppliers would collude to maintain an artificially high selling price to preserve their
return
b. The customers would not change their level of consumption, leading to a decrease in the
return for all suppliers
c. The existence of many suppliers would drive down prices to the cost of supplying these
beverages (with the assumption that no collusion emerges)
d. The economic rent would significantly increase for all suppliers
66. Industries exhibit strong differences in structure which is reflected in very different
competitive outcomesfor example, the US chewing tobacco industry and the Chicago grain
market illustrate:
a. Commercial activities which are ethically questionable
b. A situation of quasi-monopoly; the other situation of near-perfect competition
c. The immense profits can be earned in both monopolistic and intensely competitive markets
d. Each illustrates, respectively, a situation of low risk and a situation of high risk in terms of
business activity fluctuations
67. Which characteristics differentiate industries such as, on the one hand, aircraft
manufacturers and commercial satellites, and, on the other hand, e-service and fast food
industries?
a. The second category of industries has very few players whereas the first category of
industries is very fragmented, with thousands of players
b. The capital requirements are very high for the first category and relatively low for the
second category
c. The first category is highly sophisticated and requires top notch technical skills, whereas
the second category relies upon marketing competencies
d. The intensity of competition is lower in the first category of industries than in the second
category
68. Regulations in banking, telecommunications, and broadcasting industries are:
a. An illustration of barriers to entry imposed by legal or professional authorities
b. An illustration of how governments and regulators unfairly protect incumbents from
competition
c. Constraints on competition that are essential to protect consumers
d. Only an illustration of the intervention of the state on business practices
69. Which is the most difficult?
a. Identifying the boundaries for furniture manufacturing industries in comparison to the same
analysis for television programming and entertainment industries (Fox and NBC)
b. Describing the key success factors for steel, airlines and automobiles in comparison to
identifying the critical factors for Fox and NBC in the television programming and entertainment
industries
c. Analyzing the bargaining power of suppliers in cartels (such as OPEC) in comparison to
identifying the bargaining power of customers in the Personal Computer industry
*d. Identifying the boundaries between service industries in comparison to doing the same
between manufacturing industries

14
Chapter 4
Further Topics in Industry and Competitive Analysis
30. Porters five forces model of competition is too simple as originally conceived because it
overlooks phenomena such as:
a. The relationships of substitution between products or services within one segment of the
market
b. Competitors strategies may shape the industry structure, rather than structure shaping
competition
c. The complexity and stability of the competitive world where rivals strategies affect each
other
d. The different levels of industry analysis that the five forces model can be applied to
31. Empirical research shows that proportion of inter-firm differences in profitability that
industry factors explain is:
a. More than 75%
b. About half
c. Less than 25%
d. The question is cannot be answered because industry is a meaningless concept.
32. The difference between substitute and complementary products may be summarized as
follows:
a. Substitutes reduce the value of a product, whereas complements increase value
b. Complements reduce the value of a product, whereas substitutes increase value
c. Complements cannot be used together, whereas substitutes can
d. Complements increase the average price of any of them, whereas substitutes do the
opposite
33. Video game consoles and video games are complementary products: the availability of
one increases the value of the other. How this value is distributed between the suppliers of
video game consoles and the suppliers of video games depends upon:
a. Which costs more to develop, consoles or video games
b. Relative bargaining power
c. Whether video games are exclusive to a single video console platform
d. The size of the video console producers relative to the size of the video game publishers.
34. The combined value created by complementary products is shared among different
groups of producers according to:
a. Agreement that share it on an equal basis where each player has an incentive to stay
b. The relative technological complexity of the two products
c. The bargaining power of the different groups and the effectiveness with which it is deployed
d. Aggressive rivalry over appropriation where the outcome is often to destroy much of the
aggregate value created
35. The producer of a complementary product can maximize its relative bargaining power by
means of:
a. Adopting a differentiation strategy that allows it to sell at a premium price
b. Adopting a cost cutting strategy to provide its product at the lowest possible cost and so
exploit economies of scale
c. Reducing the value contributed by restricting complementors access to the market
d. It creates a differentiated market got its product and commodity market for the
complementary good.
15
36. Joseph Schumpeter viewed competition as:

a. An unstable and dynamic field where more destruction exists than creation
b. A gale of creative destruction
c. A breeze of creative destruction
d. Inevitable
37. Schumpeters process of creative destruction suggests that:
a. Hindu and Buddhist notions of rebirth are applicable to business strategy
b. Cooperation is more common in business than competition
c. Competitors behavior determines industry structure rather than the other way round
d. Competition is essential for the renewal of mature and declining industries
38. While the Porter five forces framework views industry structure as determining competitive
behavior, Schumpeter and the Austrian School view:
a. Competition as an active rather than a passive force
b. Competition as a disequilibrium phenomenon
c. Competition as determining industry structure
d. Competition as a temporary phase before the emergence of monopolies.
39. The key implication of hypercompetition in business is that:
a. Competitive advantage is temporary
b. Technological change will continue to accelerate
c. If it aint broke, dont fix it is an obsolete piece of advice
d. The concept of Schumpeterian competition needs to be updated to realities of the 21st
century.
40. Is hyper-competition a common phenomenon across industries?
a. Empirical research shows that the answer is Yes
b. Empirical research shows that the answer is No
c. Empirical research remains inconclusive
d. We can all see evidence of the absence of the phenomenon
41. The value of game theory to the field of management is in:
a. Bringing greater rigor to the analysis of competition
b. Extending the theory of competition behavior to embrace cooperative behavior
c. Extending the analysis of competitive behavior to the realms of politics, diplomacy, and
social behavior
d. Framing strategic decisions, predicting the outcome of competitive situations, and identify
optimal strategic choices.
42. In a market where Firm A and Firm B are leading suppliers, if Firm A initiates a price cut,
the likelihood that Firm B responds with an identical price cut will be greater:
a. If Firm Bs medium term goal is to maximize profit
b. If Firm Bs medium term goal is to maximize market share
c. If Firm B is a private rather than a public (listed) company
d. If the market is growing.
43. In many business relationships, competition:
a. Results in an inferior outcome for the players, compared to cooperation
b. Results in a superior outcome for the players, compared to cooperation
c. Results in an outcome not statistically different, compared to cooperation
d. Is so different from cooperation that a comparison does not make sense
16
44. The prisoners dilemma can be described as:

a. A situation where prisoners representing industry players exhibit behavior showing that
collusion would improve outcome
b. A situation where prisoners rat on each other and finally get out of jail
c. A situation where no one can obtain an optimal outcome because actors are playing blind
and can only ever reach Nash equilibrium
d. An invention of business journalists to illustrate the fight between substitute product sellers
45. Deterrence is defined as:
a. A strong incentive to behave in a certain way
b. A strong incentive not to behave in a certain way
c. A strong incentive to create organizational punishment
d. A strong incentive to delay the game until a Nash equilibrium appears optimal for all
46. If administering deterrence is costly or unpleasant for the threatening party, then:
a. It appears as not at all credible
b. It appears as extremely credible
c. It does not influence its power
d. It reinforces the power of the threatening party
47. Commitment involves:
a. Increased risk and better solutions for building successful strategies
b. Increased risk and measurement of rivals determination before a competitive attack
c. Hard commitment for first movers or soft commitment for fast second movers
d. Increased risk and removal of some possible strategic operations
48. Why is commitment so important? Because:
a. It makes deterrence appear more credible
b. It shows the power of the focal firm
c. It demonstrates the will of rivals to resist
d. It strengthens a leaders image in the eyes of his followers
49. Signaling refers to:
a. Communications that announce your strategic intentions or plans to rivals
b. Any deliberate action that is intended to influence rivals perceptions or behavior
c. Deception through misinformation
d. Internal communications that divert strategic orientations and obtain the buy-in of the
organizations key stakeholders
50. The relationship between competition and cooperation can be described as follows:
a. Industries either compete or cooperate; if they cooperate they will be investigated by
competition bodies
b. Cooperation and competition may exist in an industry, but not at the same time
c. Both can co-exist simultaneously
d. Both can co-exist at the same time, but not in the same industry segment or strategic group

17
51. Competitive intelligence, the systematic collection and analysis of information about rival
firms, is:
a. A practice which, though legal in most countries, is unethical
b. Likely to distract firms from their efforts to establish positions of competitive advantage
based upon their distinctive strengths
c. A useful activity that forms an important element of firms environmental scanning and
strategic analysis
d. A useful activity because it can help firms imitate the strategies of their more successful
competitors.
52. Competitive intelligence aims to:
a. Forecast competitors behavior, predict their reactions, and explore how their behavior may
be positively influenced
b. Forecast competitors future financial performance and analyze responses to their previous
strategic initiatives
c. Explore how rivals behavior could be positively influenced in the firms interest, and signal
the firms strategic initiatives
d. Collect information about rivals in other countries and, especially, to forecast their attacks
against the focal firms domestic market
53. The distinction between legitimate competitive intelligence and industrial espionage:
a. Is clearly defined by legislation and case law relating to trade secrets
b. Is not always clear
c. Is a myth they are almost the same
d. Is easily resolved by hiring a good lawyer
54. To attempt to predict competitive behaviors, Porter suggests a four-step framework, where
analysts must identify:
a. To analyse the rivals current strategy, its objectives, its assumptions about the industry and
itself, and its available resources and capabilities
b. The rivals current strategy, its future strategy, its assumptions, and its vulnerabilities
c. The rivals assumptions about the industry, its available resources and competencies, its
objectives, and its competitive advantage
d. The rivals available resources and competencies, its objectives, then its competitive
advantage, and finally its performance
55. The level of a rivals current performance, in relation to its objectives:
a. Has no specific influence on any players strategy
b. Determines the likelihood of the rivals strategy change
c. Determines the likelihood of a strategy change in your firm
d . Determines the likelihood of a states intervention in the competitive game
56. In the automobile industry, an example of an industry recipe is:
a. Firms forming an industry association to represent their common interests
b. The perception that cost efficiency requires an annual production volume of over four
million cars annually.
c. The formation of strategic alliances with one another
d. The assumption that all cars must have an engine and four wheels
57. Segmentation is a process through which:
a. One can assess the strengths and weaknesses of any firm in its market
18
b. Industries are divided into specific markets

c. Industries are divided into groups of similar products
d. Product characteristics are matched with customer preferences
58. The main use of industry segmentation analysis is:
a. Identify the most attractive segments for a firm to locate within
b. Understand better the needs of different customer groups
c. Formulate better marketing strategies
d. Predict the likely evolution of market structure
59. Barriers to mobility are:
a. barriers that protect a segment from firms established in other segments of the same
industry
b. barriers that protect a segment from firms established in other industries
c. obstacles to changing a firms strategy over time, once it becomes obsolete or inadequate
for the changing environment
d. barriers that prevent globalization and developing a firms business abroad
60. A firm will choose to compete across multiple segments rather than specialize in a single
segment if:
a. It is a family owned firm
b. If the same resources and capabilities can be shared across different segments
c. There are large differences in income among consumers
d. Barriers to mobility are high.
61. The main usefulness of strategic group analysis is in understanding:
a. Why some groups of firms within an industry are more profitable than others
b. The positioning of different firms and patterns of competition within an industry
c. The evolution of competition within an industry
d. Identifying area of blue ocean within an industry.
62. The difference between barriers to entry and barriers to mobility is what?
a. Barriers to entry target more specifically the entry by aggressive would-be incumbents
b. There is no real difference
c. Barriers to mobility protect a dynamic industry while barriers to entry protect a static
industry
d. Barriers to entry protect the industry as a whole whereas barriers to mobility protect
segments within the industry
63. Profit pool mapping describes a technique for:
a. Analyzing profitability across different stages of the value chain in an industry
b. Analyzing expenditures across different stages of the value chain in an industry
c. Analyzing market shares in the different stages of the value chain in an industry
d. Analyzing different horizontal and vertical activities and the assessment of their strengths
and weaknesses
64. Strategic groups consists of:
a. Firms that follow similar generic strategies (e.g. focus or differentiation)
b. Firms in an industry with similar strategies
c. Firms that occupy the same industry segment
d. Firms that target the same customer groups
19
65. Strategic group analysis is primarily useful for:

a. Identifying strategic niches
b. Describing and understanding the strategic positioning of firms within an industry
c. Answers a and b
d. Neither a nor b
66. In European airline industry, EasyJet, BalticAir, SkyEurope, and Ryanair:
a. Have different route networks, therefore do not compete directly
b. Are generally small size firms; this small size gives them the advantage of flexibility and the
capacity to adapt rapidly
c. Belong to the same strategic group
d. Have nothing in common

20

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Chapter 1

The Concept of Strategy

44. The two questions of where and how to compete define:

51. Hondas successful entry into the US motorcycle market has:

a. Commit itself to growing its sales

2013 Robert M. Grant

35. There are two main concepts of profit:

d. Disaggregate overall return on capital into its component items.

49. The field of real option analysis emerged in:

2013 Robert M. Grant

43. The bargaining power of buyers depends on:

51. Understanding the competitive forces in an industry is:

58. Key success factors are:

2013 Robert M. Grant

36. Joseph Schumpeter viewed competition as:

44. The prisoners dilemma can be described as:

2013 Robert M. Grant

b. Industries are divided into specific markets

65. Strategic group analysis is primarily useful for:

2013 Robert M. Grant

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