True/False
Indicate whether the sentence or statement is true
or false.
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1.
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Increasingly, people are an important source of competitive advantage for firms
competing in the global economy.
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2.
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Firms
can earn above-average returns even if they do not develop or sustain a competitive
advantage.
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3.
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A
low-cost position in the industry is not a valuable defense against rivals when competing on the
basis of price.
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4.
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A
differentiator's product price is typically less than that of a cost leader.
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5.
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Firms
operating in the same market, offering similar products and targeting similar customers are
competitors.
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6.
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The
description of firms' strategic actions as dynamic in nature suggests that actions taken by one firm
cause responses from competitors.
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7.
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Firms
are more likely to imitate the actions of a competitor that is noted for risky, complex, and
unpredictable behavior because this is a way to imitate intangible resources.
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8.
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Market power exists when a firm is able to sell its products above the existing
competitive level or decrease the costs of its primary and support activities below the competitive
level, or both.
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9.
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Many
manufacturing firms are de-integrating and moving to independent supplier networks.
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10.
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Related diversification by a firm tends to reduce a manager's executive compensation,
whereas unrelated diversification tends to increase it.
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Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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11.
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Even
for companies capable of succeeding in global markets, it is critical that they: a. | remain committed
to and strategically competitive in their domestic market. | b. | introduce many
new products immediately after entering a new market. | c. | acquire a local
competitor. | d. | develop good negotiating skills in order to take advantage of
local suppliers in the international market. | | |
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12.
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Organizational stakeholders include which of the following? a. | Unions | b. | Host communities | c. | Employees | d. | Suppliers of capital | | |
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13.
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In a
diversified firm, corporate-level strategy is concerned with: a. | operating each
individual business. | b. | determining how each functional department of the firm will
operate. | c. | determining in which businesses to compete and how resources
will be allocated between businesses. | d. | maximizing product distribution over
rivals. | | |
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14.
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According to the five factors model, an attractive industry would have all of the
following characteristics EXCEPT: a. | low barriers to entry. | b. | suppliers with
low bargaining power. | c. | a moderate degree of rivalry among
competitors. | d. | few good product substitutes. | | |
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15.
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Firms
within strategic groups: a. | follow dissimilar strategies. | b. | follow similar
strategies across certain dimensions. | c. | typically engage in greater amounts of intergroup rivalry than
intragroup rivalry. | d. | exist almost exclusively in the manufacturing
sector. | | |
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16.
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The
firm's reputation for quality is: a. | an example of a tangible resource. | b. | not an issue of
principal concern for a firm. | c. | an example of an intangible resource that can provide a
competitive advantage. | d. | a resource for the firm on which funds can easily be
borrowed. | | |
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17.
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Causally ambiguous means that: a. | the connection between cause and effect of capital is unclear
in the firm. | b. | rivals find it difficult to understand how the firm uses its
capabilities to gain competitive advantage. | c. | the connection
between industry and firm performance is unclear. | d. | the effect of a
firm's resources are unclear to the firm itself. | | |
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18.
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A
company using a narrow scope in its business strategy is: a. | following a cost
leadership business strategy. | b. | focusing on a broad array of geographic
markets. | c. | limiting the group of product segments
served. | d. | likely to earn only average returns. | | |
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19.
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A
cost leadership strategy can be summarized as: a. | providing products with features acceptable to customers at the
lowest competitive price. | b. | providing products with features that are very inexpensive so
that the price of the product is very low. | c. | providing products that are so unique that customers are
willing to pay a premium. | d. | focusing on a few unique features for which customers are
willing to pay a premium. | | |
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20.
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A
differentiation strategy can be effective in controlling the power of substitutes in an industry
because: a. | customers have
low switching costs. | b. | substitute products are from a different
industry. | c. | customers want the low cost product. | d. | customers
develop brand loyalty. | | |
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21.
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The
integrated cost leadership/differentiation strategy: a. | is one of the
most common successful business strategies. | b. | has been shown
by research to be consistently correlated with above-average returns. | c. | is more risky to
implement than the cost-leadership or differentiation business strategies. | d. | is a more stable
business strategy once the firm is established in a leadership position. | | |
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22.
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__________ relates to the gains or losses are firm will experience if it attacks a
rival or responds to an attack by a rival. a. | Motivation | b. | Awareness | c. | Responsiveness | d. | Ability | | |
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23.
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First
movers are: a. | entrepreneurs
who lead in the establishment of new industries. | b. | firms that are
first to exit an industry that begins to decline. | c. | firms that take
an initial competitive action. | d. | individuals who move frequently as employment opportunities
change in a locale. | | |
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24.
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Late
movers are those firms that: a. | wait to act for a long period of time after the second movers
have responded. | b. | respond to a first mover's competitive action often through
imitation or a move designed to counter the effects of the action. | c. | take an initial
competitive action (either strategic or tactical). | d. | typically
achieve higher-than-average returns because they can imitate the most efficient
actor. | | |
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25.
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Which
of the following would be an example of a strategic action? a. | a "two
movies for the price of one" campaign by Blockbuster Video | b. | use of product
coupons by a local grocer | c. | entry into the European market by Home
Depot | d. | Fare increases by Southwest Airlines | | |
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26.
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Ninety percent of Wm. Wrigley Company's total revenue comes from chewing gum. This is
a good example of: a. | market commonality. | b. | standard-cycle
markets. | c. | economies of scale. | d. | market
dependence. | | |
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27.
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In
order to compete effectively, standard-cycle firms need: a. | organizational
slack. | b. | economies of scale. | c. | first mover
capability. | d. | innovative products. | | |
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28.
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If
Wm. Wrigley Jr. Company had succeeded in buying Hershey's chocolate: a. | Wrigley would be
moving away from its traditional dominant business strategy. | b. | Wrigley would be
a conglomerate since Hershey's is an unrelated business. | c. | This purchase
would be a move toward vertical integration. | d. | Wrigley would be
easily able to achieve both operational and corporate relatedness since both companies are in the
snack food business. | | |
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29.
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A
company pursuing vertical integration can gain market power over its competitors through all of the
following EXCEPT: a. | improved process innovation. | b. | savings on
operations costs. | c. | improved product quality. | d. | avoidance of
market costs. | | |
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30.
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In
the diversified firm, internal capital allocation may provide greater gains relative to external
capital market allocation because: a. | internal capital allocation always leads to an optimal level of
diversification. | b. | the corporate office has superior information about its
businesses compared to the information outside investors have about those
enterprises. | c. | the firms act as a mutual fund when investing internal
capital. | d. | management maintains control of all invested
capital. | | |
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