barney smca5 tif ch1

7/21/2019 Barney Smca5 Tif Ch1

http://slidepdf.com/reader/full/barney-smca5-tif-ch1 1/24

Strategic Management and Competitive Advantage, 5e (Barney)

Chapter 1 What is Strategy and the Strategic Management Process?

1) One of the central questions that all strategic managers must address, regardless of theindustry they work in, is "How is the industry likely to evolve?"

Answer: !#$iff: 1%earning O&'(: 1(1: $efine trategyAA*+: Analytical hinking

) here is com-lete consensus among strategic managers and academic researchers a&out whata "strategy" is(Answer: .A%#$iff: 1%earning O&'(: 1(1: $efine trategyAA*+: Analytical hinking

/) .or the -ur-oses of this &ook, a firm0s strategy is defined as its theory a&out how to gaincom-etitive advantages(Answer: !#$iff: 1%earning O&'(: 1(1: $efine trategyAA*+: Analytical hinking

) A "good strategy" does not necessarily have to create a com-etitive advantage(Answer: .A%#$iff:

%earning O&'(: 1(1: $efine trategyAA*+: Analytical hinking

2) he greater the e3tent to which a firm0s assum-tions and hy-otheses accurately descri&e howthe com-etition in the industry is likely to evolve, and how that evolution can &e e3-loited toearn a -rofit, the more likely it is that a firm will gain a com-etitive advantage fromim-lementing its strategies(Answer: !#$iff: 1%earning O&'(: 1(1: $efine trategyAA*+: Analytical hinking

4) 5t is usually -ossi&le to know for sure that a firm is choosing the right strategy(Answer: .A%#$iff: %earning O&'(: 1(1: $efine trategyAA*+: Analytical hinking

1

*o-yright 6 712 8earson #ducation, 5nc(



9) he strategic management -rocess is a sequential set of analyses and choices that can increasethe likelihood that a firm will choose a good strategy that generates com-etitive advantages(Answer: !#$iff: 1%earning O&'(: 1(: $escri&e the trategic anagement 8rocess

AA*+: Analytical hinking

;) he second ste- in the strategic management -rocess is the definition of a firm0s mission(Answer: .A%#$iff: 1%earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking

<) A firm0s mission defines &oth what it wants to &e in the long run and what it wants to avoid inthe meantime(Answer: !#$iff: 1%earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking

17) ission statements often contain so many common elements that even if a firm0s missionstatement does not influence &ehavior throughout an organi=ation, it is likely to have asignificant im-act on a firm0s actions(Answer: .A%#$iff: %earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking

11) .irms whose mission statement is central to all they do are known as missionary firms(Answer: .A%#$iff: 1%earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking

1) >isionary firms earn su&stantially higher returns than average firms &ecause theyacknowledge that -rofit ma3imi=ing is their -rimary reason for e3istence(Answer: .A%#$iff: /%earning O&'(: 1(: $escri&e the trategic anagement 8rocess


1/) ission statements that are very inwardly focused and are defined only with reference to the -ersonal values and -riorities of its founders and to- managers can hurt a firm0s -erformance(Answer: !#$iff: %earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking




1) O&'ectives are the s-ecific measura&le targets a firm can use to evaluate the e3tent to whichit is reali=ing its mission(Answer: !#$iff: 1

%earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking

12) High quality o&'ectives are tightly connected to the elements of a firm0s mission &ut tend to &e relatively difficult to measure and track over time(Answer: .A%#$iff: /%earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking

14) +y conducting an e3ternal analysis, a firm identifies the critical threats and o--ortunities inthe industry0s com-etitive environment(Answer: !#$iff: %earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking

19) *or-orate level strategies are actions firms take to gain com-etitive advantages in a singlemarket or industry(Answer: .A%#$iff: 1%earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking

1;) +usiness level strategies are actions firms take to gain com-etitive advantages &y o-eratingin multi-le markets or industries simultaneously(Answer: .A%#$iff: 1%earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking

1<) trategy im-lementation occurs when a firm ado-ts organi=ational -olicies and -ractices thatare consistent with its strategy(Answer: !#

$iff: 1%earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking

/




7) he ultimate o&'ective of the strategic management -rocess is to ena&le a firm to choose andim-lement a strategy that leads to a com-etitive advantage(Answer: !#$iff: 1%earning O&'(: 1(/: $efine *om-etitive Advantage and #3-lain 5ts !elationshi- to #conomic

>alue *reationAA*+: Analytical hinking

1) he si=e of a firm0s com-etitive advantage is the sum of the economic value a firm is a&le tocreate and the economic value rivals are a&le to create(Answer: .A%#$iff: %earning O&'(: 1(/: $efine *om-etitive Advantage and #3-lain 5ts !elationshi- to #conomic>alue *reationAA*+: Analytical hinking

) A sustained com-etitive advantage is virtually -ermanent(Answer: .A%#$iff: %earning O&'(: 1(/: $efine *om-etitive Advantage and #3-lain 5ts !elationshi- to #conomic>alue *reationAA*+: Analytical hinking

/) aring found that firms that o-erate in industries that are informationally com-le3, requirecustomers to know a great deal in order to use the industry0s -roducts, require a great deal of ! @$, and have significant economies of scale are more likely to have sustained com-etitiveadvantage than those firms in industries without those characteristics(Answer: !#$iff: /%earning O&'(: 1(/: $efine *om-etitive Advantage and #3-lain 5ts !elationshi- to #conomic>alue *reationAA*+: Analytical hinking

) A firm0s accounting -erformance is a measure of its com-etitive advantage calculated usinginformation from a firm0s -u&lished -rofit and loss and &alance sheet statements(Answer: !#$iff: 1%earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive AdvantageAA*+: Analytical hinking

2) A--lying accounting measures of com-etitive advantage for firms that are headquartered indifferent has &ecome less challenging today with the glo&ali=ation of &usiness(Answer: .A%#$iff: %earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive AdvantageAA*+: Analytical hinking




4) Activity ratios are ratios with some measure of -rofit in the numerator and some measure offirm si=e or assets in the denominator(Answer: .A%#$iff: 1%earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive Advantage


9) %iquidity ratios are ratios that focus on the firm0s a&ility to meet its shortterm financialo&ligations(Answer: !#$iff: 1%earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive AdvantageAA*+: Analytical hinking

;) hen a firm earns a&ove average accounting -erformance, it is said to en'oy com-etitive -arity(

Answer: .A%#$iff: %earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive AdvantageAA*+: Analytical hinking

<) A firm that earns &elow average accounting -erformance generally e3-eriences a com-etitivedisadvantage(Answer: !#$iff: %earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive AdvantageAA*+: Analytical hinking

/7) he greatest disadvantage of accounting measures of com-etitive -erformance is that theyare relatively difficult to com-ute(Answer: .A%#$iff: 1%earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive AdvantageAA*+: Analytical hinking

/1) #conomic measures of com-etitive advantage com-are a firm0s level of return to its costs ofca-ital instead of to the average level of return to the industry(Answer: !#$iff: 1

%earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive AdvantageAA*+: Analytical hinking

2




/) he cost of equity is equal to the interest a firm must -ay its de&t holders in order to inducethose de&t holders to lend money to the firm(Answer: .A%#$iff: 1%earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive Advantage


//) he residual claimants0 view of equity holders argues that the interests of equity holderscome &efore all other stakeholders of the firm in receiving -ayment(Answer: .A%#$iff: /%earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive AdvantageAA*+: Analytical hinking

/) he correlation &etween economic and accounting measures of com-etitive advantage isgenerally low(

Answer: .A%#$iff: %earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive AdvantageAA*+: Analytical hinking

/2) #mergent strategies are theories of how to gain com-etitive advantage in an industry thatemerge over time or that have &een radically resha-ed once they are initially im-lemented(Answer: !#$iff: %earning O&'(: 1(2: #3-lain the $ifference +etween #mergent and 5ntended trategiesAA*+: Analytical hinking

/4) Bohnson @ Bohnson0s introduction of "Bohnson0s oilet and +a&y 8owder" as a result ofcustomers asking to -urchase the talcum -owder is an e3am-le of a -lanned strategy(Answer: .A%#$iff: %earning O&'(: 1(2: #3-lain the $ifference +etween #mergent and 5ntended trategiesAA*+: Analytical hinking

/9) #mergent strategies are only im-ortant when a firm fails to im-lement the strategicmanagement -rocess effectively(Answer: .A%#$iff:

%earning O&'(: 1(2: #3-lain the $ifference +etween #mergent and 5ntended trategiesAA*+: Analytical hinking

4




/;) .irms with strategies that are unlikely to &e a source of com-etitive advantage will rarely -rovide the same career o--ortunities as firms with strategies that do generate such advantages(Answer: !#$iff: 1%earning O&'(: 1(4: $iscuss the 5m-ortance of nderstanding a .irm0s trategy #ven if Cou are

Dot a enior anager in a .irmAA*+: Analytical hinking

/<) trategic choices are generally limited to very e3-erienced senior managers in largecor-orationsE in smaller and entre-reneurial firms, many em-loyees end u- &eing involved in thestrategic management -rocess(Answer: !#$iff: 1%earning O&'(: 1(4: $iscuss the 5m-ortance of nderstanding a .irm0s trategy #ven if Cou are Dot a enior anager in a .irmAA*+: Analytical hinking

7) All firms have almost entirely emergent strategies(Answer: .A%#$iff: %earning O&'(: 1(2: #3-lain the $ifference +etween #mergent and 5ntended trategiesAA*+: Analytical hinking

1) A firm0s FFFFFFFF is defined as its theory a&out how to gain com-etitive advantages(A) o&'ective+) mission*) vision$) strategyAnswer: $$iff: 1%earning O&'(: 1(1: $efine trategyAA*+: Analytical hinking

) A sequential set of analyses and choices that can increase the likelihood that a firm willchoose a strategy that generates com-etitive advantages is theA) organi=ational change -rocess(+) strategic management -rocess(*) mission statement -rocess($) goal setting -rocess(

Answer: +$iff: %earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking

9




/) A firm0s FFFFFFFF is its longterm -ur-ose that defines &oth what it as-ires to &e in the longrun and what it wants to avoid in the meantime(A) mission+) strategy*) o&'ective

$) goalAnswer: A$iff: 1%earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking

) he strategic management -rocess &egins when a firmA) determines its o&'ectives(+) defines its mission(*) makes a strategic choice($) im-lements its strategy(

Answer: +$iff: %earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking

2) .irms whose mission is central to all they do are known as FFFFFFFF firms(A) missionary+) emergent*) -arity$) visionaryAnswer: $$iff: %earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking

4) .rom 1<4 to 1<<2, visionary firms earned FFFFFFFF returns com-ared to firms that werenot visionary firms(A) su&stantially lower +) su&stantially higher *) marginally lower $) equivalentAnswer: +$iff: %earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking

;




9) he mission statements of visionary firmsA) suggest that -rofit ma3imi=ing, while an im-ortant cor-orate o&'ective, is not their -rimaryreason for e3istence(+) suggest that -rofit ma3imi=ing is neither an im-ortant cor-orate o&'ective nor their -rimaryreason for e3istence(

*) suggest that -rofit ma3imi=ing is their -rimary reason for e3istence($) suggest that value ma3imi=ing is their -rimary reason of e3istence(Answer: A$iff: %earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking

;) hich of the following statements regarding firm mission is accurate?A) hile some firms have used their missions to develo- strategies that create significantcom-etitive advantages, firm missions can hurt a firm0s -erformance as well(+) >irtually all firms have used missions to develo- strategies that create significant com-etitive

advantages, while very few firms have used missions that can hurt their -erformance(*) 5t is very rare for firms to &e a&le to use their missions to develo- strategies that createsignificant com-etitive advantages, and most firm missions actually hurt their -erformance($) issions tend to have very little im-act on a firm0s a&ility to create significant com-etitiveadvantages(Answer: A$iff: /%earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking

<) FFFFFFFF are s-ecific measura&le targets a firm can use to evaluate the e3tent to which it isreali=ing its mission(A) trategies+) issions*) *om-etitive advantages$) O&'ectivesAnswer: $$iff: 1%earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking

27) High quality o&'ectives are those that areA) tightly connected to elements of a firm0s mission and are relatively easy to measure and trackover time(+) difficult to measure and track over time(*) none3istent($) not quantitative(Answer: A$iff: %earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking

<




21) +y conducting aGn) FFFFFFFF, a firm identifies the critical threats and o--ortunities in itscom-etitive environment(A) internal analysis+) com-etitive analysis*) e3ternal analysis

$) strategic choiceAnswer: *$iff: 1%earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking

2) FFFFFFFF hel-s a firm understand which of its resources and ca-a&ilities are likely to &esources of com-etitive advantage(A) *om-etitive analysis+) 5nternal analysis*) trategic choice

$) #3ternal analysisAnswer: +$iff: %earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking

2/) Actions firms take to gain com-etitive advantages in a single market or industry are knownasA) &usiness level strategies(+) cor-orate level strategies(*) diversification strategies($) strategy im-lementation(Answer: A$iff: %earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking

2) Actions firms take to gain com-etitive advantages &y o-erating in multi-le markets orindustries simultaneously are known asA) cor-orate level strategies(+) diversification strategies(*) &usiness level strategies($) strategic alliance strategies(Answer: A$iff: %earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking

17




22) FFFFFFFF occurs when a firm ado-ts organi=ational -olicies and -ractices that are consistentwith its strategy(A) trategy formulation+) trategic choice*) trategy im-lementation

$) trategic controlAnswer: *$iff: 1%earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking

24) hen a firm is a&le to create more economic value than rival firms it is said to have aGn)A) com-arative advantage(+) com-etitive advantage(*) residual advantage($) economic advantage(Answer: +$iff: %earning O&'(: 1(/: $efine *om-etitive Advantage and #3-lain 5ts !elationshi- to #conomic>alue *reationAA*+: Analytical hinking

29) he difference &etween the -erceived &enefits gained &y a customer who -urchases a firm0s -roducts or services and the full economic cost of these -roducts or services is the GDote: 8orterwas deleted from this edition)A) value -ro-osition(+) cost advantage(*) economic value($) com-etitive advantage(Answer: *$iff: 1%earning O&'(: 1(/: $efine *om-etitive Advantage and #3-lain 5ts !elationshi- to #conomic>alue *reationAA*+: Analytical hinking

11




2;) 5f echnoeek and >arsity+lue com-ete in the same market for the same customer andechnoeek generates I<77 of economic value each time it sells a -roduct or service while>arsity+lue generates I77 of economic value each time it sells a -roduct or service,echnoeek has aGn) FFFFFFFF of I277(A) -erceived &enefit

+) economic value*) cost advantage$) com-etitive advantageAnswer: $$iff: /%earning O&'(: 1(/: $efine *om-etitive Advantage and #3-lain 5ts !elationshi- to #conomic>alue *reationAA*+: A--lication of Jnowledge

2<) A com-etitive advantage that lasts a very short -eriod of time is known as a FFFFFFFFcom-etitive advantage(

A) tem-orary+) sustained*) transient$) -er-etualAnswer: A$iff: 1%earning O&'(: 1(/: $efine *om-etitive Advantage and #3-lain 5ts !elationshi- to #conomic>alue *reationAA*+: Analytical hinking

47) he center of Osterwalder and 8igneur0s &usiness model canvas is theA) -arity -oint(+) value -ro-osition(*) com-etitive advantage($) strategy &o3(Answer: +$iff: 1%earning O&'(: 1(/: $efine *om-etitive Advantage and #3-lain 5ts !elationshi- to #conomic>alue *reationAA*+: Analytical hinking

41) .irms that generate less economic value than their rivals e3-erience a com-etitiveA) advantage(

+) -arity(*) disadvantage($) -erceived &enefit(Answer: *$iff: %earning O&'(: 1(/: $efine *om-etitive Advantage and #3-lain 5ts !elationshi- to #conomic>alue *reationAA*+: Analytical hinking

1




4) 5n many ways, the difference &etween traditional economics research and strategicmanagement research is that the former attem-ts to e3-lain why FFFFFFFF, while the latterattem-ts to e3-lain FFFFFFFF(A) com-etitive advantages should not -ersistE when they can

+) com-etitive advantages should -ersistE when they can*) com-etitive advantages should -ersistE why they should not$) com-etitive -arity should not -ersistE why they shouldAnswer: A$iff: /%earning O&'(: 1(/: $efine *om-etitive Advantage and #3-lain 5ts !elationshi- to #conomic>alue *reationAA*+: Analytical hinking

4/) he two ty-es of measures of com-etitive advantage includeA) accounting measures and strategic measures(

+) strategic measures and economic measures(*) accounting measures and economic measures($) qualitative measures and quantitative measures(Answer: *$iff: %earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive AdvantageAA*+: Analytical hinking

4) A firm0s FFFFFFFF is a measure of its com-etitive advantage calculated using informationfrom a firm0s -u&lished -rofit and loss and &alance sheet statements(A) economic -erformance+) accounting -erformance*) strategic -erformance$) sustaina&le -erformanceAnswer: +$iff: %earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive AdvantageAA*+: Analytical hinking

42) FFFFFFFF are ratios with some measure of -rofit in the numerator and some measure offirms0 si=e or assets in the denominator(A) %iquidity ratios+) %everage ratios

*) Activity ratios$) 8rofita&ility ratiosAnswer: $$iff: 1%earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive AdvantageAA*+: Analytical hinking

1/




44) !atios that focus on the level of a firm0s financial fle3i&ility, including its a&ility to o&tainmore de&t, are known asA) leverage ratios(+) liquidity ratios(*) activity ratios(

$) -rofita&ility ratios(Answer: A$iff: 1%earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive AdvantageAA*+: Analytical hinking

49) sing ratio analysis, a firm earns FFFFFFFF when its -erformance is greater than the industryaverage(A) a&ove average economic -erformance+) &elow average accounting -erformance*) a&ove average accounting -erformance

$) &elow average economic -erformanceAnswer: *$iff: 1%earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive AdvantageAA*+: Analytical hinking

4;) he FFFFFFFF is the rate of return that a firm -romises to -ay its su--liers of ca-ital toinduce them to invest in the firm(A) cost of de&t+) cost of advantage*) cost of -arity$) cost of ca-italAnswer: $$iff: %earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive AdvantageAA*+: Analytical hinking

4<) FFFFFFFF measures of com-etitive advantage com-are a firm0s level of return to its cost ofca-ital instead of to the average level of return in the industry(A) #conomic+) Accounting*) trategic$) ustaina&le

Answer: A$iff: %earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive AdvantageAA*+: Analytical hinking

1




97) he -ercentage of a firm0s total ca-ital that is de&t times the cost of de&t -lus the -ercentageof a firm0s total ca-italE or equity times the cost of equity is theA) weighted cost of ca-ital(+) weighted average cost of ca-ital(*) cost of ca-ital(

$) average cost of ca-ital(Answer: +$iff: /%earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive AdvantageAA*+: Analytical hinking

91) A firm that is a&le to attract additional ca-ital &ecause de&t holders and equity holders willscram&le to make additional funds availa&le for it is likely earningA) normal economic -erformance(+) average accounting -erformance(*) tem-orary advantage(

$) a&ove normal economic -erformance(Answer: $$iff: /%earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive AdvantageAA*+: Analytical hinking

9) An im-ortant limitation of com-aring a firm0s -erformance to its cost of ca-ital occurs whena firm isA) -rivately held(+) an 58O(*) an entre-reneurial venture($) e3-eriencing &elow normal economic -erformance(Answer: A$iff: %earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive AdvantageAA*+: Analytical hinking

9/) A firm that earns its cost of ca-ital is said to &e earningA) a&ove normal economic -erformance(+) normal economic -erformance(*) &elow normal economic -erformance($) normal accounting -erformance(Answer: +

$iff: 1%earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive AdvantageAA*+: Analytical hinking

12




9) he view that equity holders only receive -ayment on their investment in a firm after alllegitimate claims &y a firm0s other stakeholders are satisfied is known as the FFFFFFFF view ofequity holders(A) stakeholder +) residual claimants

*) legitimate claimants$) e3traordinary claimsAnswer: +$iff: %earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive AdvantageAA*+: Analytical hinking

92) heories of how to gain com-etitive advantage in an industry that emerge over time or thathave &een radically resha-ed once they are initially im-lemented are known asA) emergent strategies(+) o&'ective strategies(

*) -lanned strategies($) ad hoc strategies(Answer: A$iff: 1%earning O&'(: 1(2: #3-lain the $ifference +etween #mergent and 5ntended trategiesAA*+: Analytical hinking

94) he reali=ed strategy of most firms tends to &eA) almost e3clusively a reflection of their intended strategy(+) almost e3clusively a reflection of their emergent strategy(*) a com&ination of &oth intended and emergent strategies($) reflective of neither the firms0 intended nor emergent strategy(Answer: *$iff: %earning O&'(: 1(2: #3-lain the $ifference +etween #mergent and 5ntended trategiesAA*+: Analytical hinking

14




99) hich of the following is a reason why it is im-ortant for students to study strategy and thestrategic management -rocess?A) tudying strategy and the strategic management -rocess can give students tools to evaluatethe strategies of firms that may em-loy them(+) 5t can &e very im-ortant to a new hire0s career success to understand the strategies of the firm

that hired them and their -lace in im-lementing these strategies(*) hile strategic choices are generally limited to very e3-erienced senior managers in largeorgani=ations, in smaller and entre-reneurial firms many em-loyees end u- &eing involved in thestrategic management -rocess($) All of the a&ove(Answer: $$iff: %earning O&'(: 1(4: $iscuss the 5m-ortance of nderstanding a .irm0s trategy #ven if Cou are Dot a enior anager in a .irmAA*+: Analytical hinking

9;) .ed #3 entered their market with a welldefined mission and o&'ectives, making strategicchoices and im-lementing those strategies( his is an e3am-le of which ty-e of strategy?A) intended+) economic*) emergent$) visionaryAnswer: A$iff: %earning O&'(: 1(2: #3-lain the $ifference +etween #mergent and 5ntended trategiesAA*+: A--lication of Jnowledge

9<) hich ty-e of ratios focus on the a&ility of a firm to meet its shortterm financialo&ligations?A) activity ratios+) liquidity ratios*) leverage ratios$) -rofita&ility ratiosAnswer: +$iff: 1%earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive AdvantageAA*+: Analytical hinking

19




;7) One of the first scholars to e3amine the longevity of com-etitive advantage wasA) $ennis ueller(+) eoffrey aring(*) 8eter !o&erts($) !ich Houston(

Answer: A$iff: /%earning O&'(: 1(/: $efine *om-etitive Advantage and #3-lain 5ts !elationshi- to #conomic>alue *reationAA*+: Analytical hinking

;1) hich ratio signals a greater risk of &ankru-tcy as it increases?A) de&t to equity+) quick ratio*) de&t to assets$) cash flow -er shareAnswer: *$iff: %earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive AdvantageAA*+: A--lication of Jnowledge

;) Accounts receiva&le turnover is an e3am-le of which ty-e of ratio?A) -rofita&ility+) activity*) liquidity$) leverageAnswer: +$iff: %earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive AdvantageAA*+: Analytical hinking

;/) hermacor-0s weighted average cost of ca-ital is 1/(2( 5f the average A** in the heatingand cooling industry is 1<, hermacor- can &e said to &e earningA) a&ove normal economic -erformance(+) a&ove normal accounting -erformance(*) &elow normal economic -erformance($) &elow normal accounting -erformance(Answer: *$iff:

%earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive AdvantageAA*+: A--lication of Jnowledge

1;




;) hermacor-0s 19(/K !O# is an e3am-le of aGn) FFFFFFFF ratio(A) liquidity+) -rofita&ility*) activity$) leverage

Answer: +$iff: 1%earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive AdvantageAA*+: A--lication of Jnowledge

;2) 5f the average !O# in the heating and cooling industry is 17(1K, and hermacor-0s !O# is19(/K, hermacor- is said to haveA) &elow average accounting -erformance(+) a&ove average economic -erformance(*) a&ove average accounting -erformance($) &elow average economic -erformance(

Answer: *$iff: %earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive AdvantageAA*+: A--lication of Jnowledge

;4) reen .rog is an environmentally friendly firm in the cosmetics industry that has decided toundertake a strategic -lanning -ro'ect( 5t wants to ensure that it -erforms the -rocess correctlyand so intends to start the -rocess with the first ste- of the strategic -lanning -rocess, which isA) defining its mission(+) setting o&'ectives(*) measuring -erformance($) defining its &usiness level strategy(Answer: A$iff: 1%earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: A--lication of Jnowledge

;9) reen .rog is an environmentally friendly firm in the cosmetics industry( #ven though reen.rog is environmentally friendly, the strategic -lanning team had decided that financial -erformance is one of the com-any0s to- -riorities( hich of the following is the &est e3am-le of an o&'ective the com-any might use to hel- it achieve its goal of su-erior financial -erformance?A) increasing -rofita&ility+) growing market share annually

*) im-roving -roduct quality every quarter $) growth in earnings -er share averaging 12K or &etter annually for the ne3t five yearsAnswer: $$iff: %earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: A--lication of Jnowledge

1<




;;) reen .rog is an environmentally friendly firm in the cosmetics industry( 5f during thestrategic -lanning -rocess reen .rog tried to determine the critical threats and o--ortunities inits com-etitive environment, it would &e -erforming aGn)A) internal analysis(+) e3ternal analysis(

*) A** analysis($) economic analysis(Answer: +$iff: %earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: A--lication of Jnowledge

;<) reen .rog is an environmentally friendly firm in the cosmetics industry( 5f reen .rogundertook an analysis to hel- it understand which of its resources and ca-a&ilities are likely to &esources of com-etitive advantage and which are less likely to sources of such advantages itwould &e -erforming aGn)

A) internal analysis(+) e3ternal analysis(*) A** analysis($) economic analysis(Answer: A$iff: %earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: A--lication of Jnowledge

<7) reen .rog is an environmentally friendly firm in the cosmetics industry( 5f reen .rog wereconsidering e3-anding &eyond the cosmetics industry into -harmaceuticals in order to gaincom-etitive advantages &y o-erating in multi-le markets and industries, this would &e ane3am-le of which ty-e of strategy?A) &usiness level strategy+) cost leadershi- strategy*) -roduct differentiation strategy$) cor-orate level strategyAnswer: $$iff: %earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: A--lication of Jnowledge

7




<1) $efine the term "strategy," discuss the set of assum-tions and hy-otheses that a strategy is &ased on and discuss what makes a good strategy(Answer: A firm0s strategy is defined as its theory a&out how to gain com-etitive advantages(his theory is &ased on a set of assum-tions and hy-otheses a&out how com-etition in thisindustry is likely to evolve and how that evolution can &e e3-loited to earn a -rofit( o the e3tent

that these assum-tions and hy-otheses accurately descri&e how com-etition in this industryactually evolves, the more likely it is that a firm will gain a com-etitive advantage fromim-lementing its strategies( hus, a "good strategy" is a strategy that actually generates suchadvantages($iff: %earning O&'(: 1(1: $efine trategyAA*+: Analytical hinking

<) $efine the term "mission" and discuss how a firm0s mission can &oth -ositively andnegatively im-act a firm0s -erformance(Answer: A firm0s mission is its longterm -ur-ose and it defines &oth what a firm as-ires to &e in

the long run and what it wants to avoid in the meantime( 5f a mission statement does notinfluence firm &ehavior, it is unlikely to have an im-act on a firm0s actions( However, visionaryfirms, or firms whose mission is central to all they do, tend to earn su&stantially higher returnsthan average over the long run even though their mission statements suggest that -rofitma3imi=ation is not their -rimary reason for e3istence( However, missions that are inwardlyfocused and defined only with reference to the -ersonal values and -riorities of their founders orto- managers, inde-endent of whether or not those values and -riorities are consistent with theeconomic realities facing a firm, are not likely to &e a source of com-etitive advantage($iff: %earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking

</) hat are o&'ectives, what role do they -lay in the strategic management -rocess and whatdifferentiates high quality o&'ectives from low quality o&'ectives?Answer: O&'ectives are s-ecific measura&le targets a firm can use to evaluate the e3tent towhich it is reali=ing its mission( High quality o&'ectives are tightly connected to elements of afirm0s mission and are relatively easy to measure and track over time( %ow quality o&'ectiveseither do not e3ist or are not connected to elements of a firm0s mission, are not quantitative, orare difficult to measure or are difficult to track over time($iff: %earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking

1




<) $ifferentiate &etween &usiness level and cor-orate level strategies and give e3am-les ofeach(Answer: +usiness level strategies are actions firms take to gain com-etitive advantages in asingle market or industry( he two most common &usiness level strategies are cost leadershi-,such as alart, and -roduct differentiation, such as iffany0s( *or-orate level strategies are

actions firms take to gain com-etitive advantages in multi-le markets or industriessimultaneously( *ommon cor-orate level strategies include vertical integration strategies,diversification strategies, strategic alliance strategies and merger and acquisition strategies($iff: %earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking

<2) $efine strategy im-lementation and discuss three s-ecific organi=ational -olicies and -ractices that are -articularly im-ortant in im-lementing a strategy(Answer: trategy im-lementation occurs when a firm ado-ts organi=ational -olicies and -ractices that are consistent with its strategy( hree s-ecific organi=ational -olicies and -ractices

are -articularly im-ortant in im-lementing a strategy: a firm0s formal organi=ational structure, itsformal and informal management control systems, and em-loyee com-ensation -olicies($iff: %earning O&'(: 1(: $escri&e the trategic anagement 8rocessAA*+: Analytical hinking

<4) $iscuss a firm0s com-etitive advantage( 5dentify when a firm has a com-etitive advantageand distinguish &etween a tem-orary com-etitive advantage and a sustaina&le com-etitiveadvantage(Answer: 5n general, a firm has a com-etitive advantage when it is a&le to generate moreeconomic value than rival firms(( A tem-orary com-etitive advantage is a com-etitive advantagethat lasts a very short -eriod of time while a sustained com-etitive advantage lasts much longer($iff: %earning O&'(: 1(/: $efine *om-etitive Advantage and #3-lain 5ts !elationshi- to #conomic>alue *reationAA*+: Analytical hinking




<9) 5dentify two a--roaches to estimating a firm0s com-etitive advantages and discuss thestrengths and weaknesses of each(Answer: he two general a--roaches to estimating a firm0s com-etitive advantage are measuringaccounting -erformance and measuring economic -erformance( A firm0s accounting -erformanceis a measure of its com-etitive advantage calculated using information from a firm0s -u&lished

-rofit and loss and &alance sheets( A firm0s accounting -erformance is determined &y com-aringa firm0s accounting ratios with other firms in the industry( he greatest advantage of accountingmeasures of com-etitive advantage is that they are relatively easy to com-ute( he mostsignificant draw&ack to accounting measures is that they do not consider a firm0s cost of ca-ital(Additionally, accounting measures can &e difficult to com-are across countries(#conomic measures of com-etitive advantage com-are a firm0s level of return to its cost ofca-ital instead of to the average level of return in the industry( he -rimary &enefit of economicmeasures is that if a firm earns at least its cost of ca-ital, it is satisfying two of its im-ortantstakeholders, de&t holders and equity holders( $isadvantages of economic measures include thatit can &e difficult to calculate a firm0s cost of ca-ital, es-ecially for -rivately held firms, andeconomic measures may overstate the im-ortance of de&t and equity holders(

$iff: %earning O&'(: 1(: $escri&e wo $ifferent easures of *om-etitive AdvantageAA*+: Analytical hinking

<;) $escri&e the difference &etween emergent and intended strategies( hy might firms em-loyan emergent strategy?Answer: 5ntended strategies can &est &e descri&ed as a firm0s theories of how to gain acom-etitive advantage that are develo-ed as a result of the strategic management -rocess(5ntended strategies are develo-ed when firms choose and im-lement their strategies e3actly asdescri&ed &y the strategic management -rocess( Alternately, emergent strategies are theories ofhow to gain a com-etitive advantage in an industry that emerge over time or that have &eenradically resha-ed once they are im-lemented( .irms em-loy emergent strategies since some ofthe information needed to com-lete the strategic management -rocess may not &e availa&le whenfirms are develo-ing their intended strategies($iff: %earning O&'(: 1(2: #3-lain the $ifference +etween #mergent and 5ntended trategiesAA*+: Analytical hinking

<<) hy is it im-ortant to understand a firm0s strategy, even if you are not a senior manager in afirm?Answer: .irst, studying strategy and the strategic management -rocess can give individuals thetools they need to evaluate the strategies of the firms that may hire them( econd, once anindividual is working for a firm, understanding that firm0s strategy, and their -lace in it, can &every im-ortant to their -ersonal success since the e3-ectations of how they -erform theirfunction will &e im-acted &y the firm0s strategy( .inally, while strategic choices are generallylimited to very e3-erienced managers in large organi=ations, in smaller and entre-reneurialfirms, many em-loyees end u- &eing involved in the strategic management -rocess($iff: %earning O&'(: 1(4: $iscuss the 5m-ortance of nderstanding a .irm0s trategy #ven if Cou are Dot a enior anager in a .irmAA*+: Analytical hinking

/




177) hat is the residual claimants view of equity holders?Answer: he residual claimants view is that equity holders only receive -ayment on theirinvestment in a firm after all legitimate claims &y a firm0s other stakeholders are satisfied( hisview -osits that &y ma3imi=ing returns to its equity holders, a firm is ensuring that its otherstakeholders are fully com-ensated for investing in a firm(

$iff: %earning O&'(: 1(2: #3-lain the $ifference +etween #mergent and 5ntended trategiesAA*+: Analytical hinking

barney smca5 tif ch1

Documents