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2. Investors in a company judge the adequacy of the returns on their investment in relation to:
a. the returns on other investments of similar risk..
b. the stock market's overall performance.
c. the initial size of the investment.
d. the prime interest rate.
Answer: a. the returns on other investments of similar risk..
4. Which of the following is NOT an assumption of the Industrial Organization, or I/O, model?
a. Organizational decision makers are rational and committed to acting in the firm's best interests.
b. Resources to implement strategies are not highly mobile across firms.
c. The external environment is assumed to impose pressures and constraints that determine the
strategies that result in superior performance.
d. Firms in given industries, or given industry segments, are assumed to control similar strategically
relevant resources.
Answer: d. Firms in given industries, or given industry segments, are assumed to control similar
strategically relevant resources.
TOP
4 RECRUITMENT
FIRMS
STRATEGIC
5 BUSINESS
PLANNING
BUSINESS
6 MANAGEMENT
DEGREES
8. The I/O model and the resource-based view of the firm suggest conditions that firms should
study in order to:
CHANGE
a. compete in domestic but not international markets. 7
MANAGEMENT
b. examine strategic outputs achieved mainly in the last 5-year period.
c. engage in different sets of competitive dynamics.
d. develop the most effective strategy. STRATEGIC
Answer: d. develop the most effective strategy. 8 PLANNING
PROCESS
9. Strategic mission:
a. is a statement of a firm's unique purpose and scope of operations.
b. is an internally-focused affirmation of the organization's societal and ethical goals.
c. does not limit the firm by specifying the industry in which the firm intends to compete.
d. is developed by a firm before the firm develops its strategic intent.
Answer: a. is a statement of a firm's unique purpose and scope of operations.
10. The interests of an organization's stakeholders often conflict, and the organization must
prioritize its stakeholders because it cannot satisfy them all. The ________ is the most critical
criterion in prioritizing stakeholders.
a. power of each stakeholder
b. urgency of satisfying each stakeholder
c. importance of each stakeholder to the firm
d. influence of each stakeholder
Answer: a. power of each stakeholder
1. The __________ environment is composed of elements in the broader society that can influence an
industry and the firms within it.
a. general
b. competitor
c. sociocultural
d. industry
Answer: a. general
2. The environmental segments that comprise the general environment typically will NOT
include:
a. demographic factors.
b. sociocultural factors.
c. substitute products or services.
d. technological factors.
Answer: c. substitute products or services.
3. Which of the following is an opportunity for an entrepreneur who wishes to open a business
doing therapeutic massage in his small community?
a. the average age of the population in his community is high
b. the level of unemployment in his community is high
c. a chiropractor and two independent physical therapists located in his community
2 d. the average income level of the population in his community is low
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Answer: c. a chiropractor and two independent physical therapists located in his community
10. Upper limits on the prices a firm can charge are impacted by:
a. expected retaliation from competitors.
b. the cost of substitute products.
c. variable costs of production.
d. customers' high switching costs
Answer: b. the cost of substitute products.
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7. A major department store chain has a strict policy of banning photographs of its sales floor
or back room operations. It also does not allow academics to include it in research studies for
publication in research journals. In fact, some of its own top managers refer to the store
policies on secrecy as "verging on paranoid." These policies indicate that the top management
of the firm believes the organization's core competencies are:
a. causally ambiguous.
b. unobservable.
c. imitable.
d. valuable.
Answer: c. imitable.
8. When a resource or capability is valuable, rare, costly to imitate, and nonsubstitutable firms
may obtain:
a. a temporary competitive advantage.
b. a complex competitive advantage.
c. competitive parity.
d. a sustainable competitive advantage.
Answer: d. a sustainable competitive advantage.
9. Costly-to-imitate capabilities can emerge for all of the following reasons EXCEPT:
a. scientific transference.
b. social complexity
c. historical conditions
d. causal ambiguity
Answer: a. scientific transference.
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An integrated and coordinated set of commitments and actions designed to exploit core
competencies and gain a competitive advantage in a specific product market is a definition of:
a. business strategy.
b. core competencies.
c. sustained competitive advantage.
d. strategic mission.
Answer: a. business strategy.
A cost leadership strategy provides goods or services with features that are:
a. acceptable to customers.
b. unique to the customer.
c. highly valued by the customer.
d. able to meet unique needs of the customer
Answer: a. acceptable to customers (http://www.vuzs.info/)
When the costs of supplies increase in an industry, the low-cost leader may:
a. continue competing with rivals on the basis of product features.
b. lose customers as a result of price increases.
c. make it difficult for new entrants to the industry to achieve above-average returns.
d. be the only firm able to pay the higher prices and continue to earn average or above- average
returns.
Answer: d. be the only firm able to pay the higher prices and continue to earn average or above-
average returns.
The differentiation strategy can be effective in controlling the power of rivalry with existing
competitors in an industry because:
a. customers will seek out the lowest cost product.
b. customers of non-differentiated products are sensitive to price increases.
c. customers are loyal to brands that are differentiated in meaningful ways.
d. the differentiation strategy benefits from rivalry.
Answer: c. customers are loyal to brands that are differentiated in meaningful ways.
T or F? Firms operating in the same market, offering similar products and targeting similar
customers are competitors.
Answer: T
T or F? Intensified rivalry within an industry results in decreased average profitability for the
firms within it
Answer: T
T or F? Competitive dynamics indicates that firms and their strategic actions are independent
Answer: F
T or F? Two firms that have similar resources, but do not share markets would not be direct and
mutually acknowledged competitors.
Answer: T
T or F? Wal-Mart has recently moved to Alsatia, Missouri. Several local small retailers have
decided that choosing not to respond to Wal-Mart's competitive actions is a viable long-term
option, because although the companies have high market commonality they have little
resource similarity. These small retailers are correct in their decision
Answer: F
T or F? First movers can gain a sustained competitive advantage when they reduce their costs
through reverse engineering.
Answer: F
T or F? Product quality is a universal theme and is a necessary, but not a sufficient, condition
for competitive success.
Answer: T
T or F? The probability of a competitive response to a competitive action is based partly on the
reputation of the competitor
Answer: T
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