Strategic Management: Creating Competitive Advantages 8th Edition Test Bank

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1-1Copyright © 2016 McGraw-Hill Education. All rightsreserved. No reproduction or distribution without the prior written consent ofMcGraw-Hill Education.Chapter 01Strategic Management: Creating Competitive AdvantagesTrue / False Questions1.Hewlett-Packard's failure and success under the leadership first of Carly Fiorina and then of Mark Hurdwas said to be a direct result of the quality ofleadership of each of these CEOs. According to the text, thiswould be an example of the "romantic" perspective of leadership.TrueFalse2.Strategic management consists of the analyses, decisions, and actions an organization undertakes in orderto create and sustain competitive advantages.TrueFalse3.Strategic management is concerned with the analysis of strategic goals as stated in the vision, mission, andstrategic objectives of a firm.TrueFalse4.The three interrelated and principal activities of strategic management are: strategy analysis, strategyformulation, and strategy implementation.TrueFalse5.Strategic management isnotconcerned with how to create competitive advantage in the marketplace.TrueFalse6.Management innovations such as total quality, just-in-time, benchmarking, business process reengineering,and outsourcing are important, but not enough for building sustainable competitive advantage.TrueFalse7.Making trade-off decisions between effectiveness and efficiency is central to the practice of strategicmanagement.TrueFalse8.Only shareholders in a publicly held company arestakeholders because they are the only group that has astake in the success of the organization.TrueFalse9.Strategic management is only concerned with short-term perspectives.TrueFalse

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1-2Copyright © 2016 McGraw-Hill Education. All rightsreserved. No reproduction or distribution without the prior written consent ofMcGraw-Hill Education.10.Focusing on a single stakeholder is a good strategic principle for managers to follow.TrueFalse11.According to Peter Senge, a leading strategic management author, creative tension results from the need toincorporate both short-term and long-term perspectives in strategicmanagement.TrueFalse12.Shareholders expect only short-term value and therefore good managers should only focus on meetingshort-term performance targets.TrueFalse13.Focusing on the short term and efficiency is always a bad management principle.TrueFalse14.Ambidexterity refers to a manager's challenge to align resources, without having to take advantage ofexisting product markets or to proactively explore new opportunities.TrueFalse15.According to a recent study involving 41 business units in 10 multinational companies, one ambidextrousbehavior exhibited by managers is that of being brokers who are always looking to build internal networks.TrueFalse16.According to Henry Mintzberg, a management scholar, most firms realize their original intended strategy.TrueFalse17.The final realized strategy of a firm is a combination of deliberate and emergent strategies.TrueFalse18.In the Mintzberg model,organizational decisions determined only by analysis are intended strategy.TrueFalse19.Strategy analysis is the study of the external environments of the firm.TrueFalse20.Both the internal and external environments of a firmmust be analyzed as well as the goals of the firmbefore managers can formulate and implement appropriate strategies.TrueFalse21.Strategy formulation involves decisions made by firms regarding investments, commitments, and otheraspects of operations that create and sustain competitive advantage.TrueFalse

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1-3Copyright © 2016 McGraw-Hill Education. All rightsreserved. No reproduction or distribution without the prior written consent ofMcGraw-Hill Education.22.All successful firms compete and outperform their rivals by developing bases for competitive advantage,which can be achieved only through cost leadership.TrueFalse23.Business-level strategy focuses on (1) what businesses to compete in and (2) the management of thebusiness portfolio to create synergy among its businesses.TrueFalse24.Corporate-level strategy addresses how firms compete and outperform their rivals as well as achieve andsustain competitive advantages.TrueFalse25.International strategy involves decisions concerning appropriate entry strategy and attaining competitiveadvantage in international markets.TrueFalse26.Entrepreneurial activity aimed at new value creation isnota major engine for economic growth.TrueFalse27.Strategy implementation involves actions that carry out the formulated strategy including proper strategiccontrols, organizational designs, and leadership.TrueFalse28.Effective leadership can play a large role in fostering corporate entrepreneurship. Corporateentrepreneurship can have a very positive impact on the bottom line of a firm.TrueFalse29.Firms mustexercise either informational control or behavioral control in order to assure proper strategyimplementation.TrueFalse30.Leaders are responsible for creating a learning organization so that the entire organization can benefit onlyfrom the individual talents.TrueFalse31.The three primary participants in corporate governance are: (1) the shareholders, (2) the management (ledby the chief executive officer), and (3) the employees.TrueFalse32.Decisions by boards ofdirectors are always consistent with shareholder interests.TrueFalse

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1-4Copyright © 2016 McGraw-Hill Education. All rightsreserved. No reproduction or distribution without the prior written consent ofMcGraw-Hill Education.33.Ensuring effective corporate governance requires an effective and engaged board of directors, uninvolvedshareholders, and proper managerial rewards and incentives.TrueFalse34.Auditors, banks, and analysts are external control mechanisms to ensure effective corporate governance.TrueFalse35.Former Chrysler vice chairman Robert Lutz observed that companies exist to serve the shareholder andcreate shareholder value. He insisted that the only person who owns the company is the person who paidgood money for it. This is an example of a symbiotic approach to stakeholder management.TrueFalse36.Stakeholders make various claims on a company. Their interests must be taken into account in the strategicmanagement process.TrueFalse37.Stockholders in a company are the only individuals with an interest in the financial performance of thecompany.TrueFalse38.Stockholders, employees, and the community-at-large are among the stakeholders of a firm.TrueFalse39.Symbiosis is the ability to recognize interdependencies among the interests of multiple stakeholders withinand outside an organization.TrueFalse40.Procter and Gamble developed a laundry detergent compaction technique that appeals to consumers,retailers, shipping and wholesalers, and environmentalists. This is an example of stakeholder symbiosis.TrueFalse41.Partnering with governments, communities, suppliers, customers, and rivals is a way to manage conflictingstakeholder interests.TrueFalse42.The Higgs Index enables companies to compare environmental performance outcomes in order to improvetheir environmental impact and is an example of how rivals work together to resolve complex problems.TrueFalse43.As a stakeholder group, creditors are interested in taxes and compliance with regulations.TrueFalse44.As astakeholder group, customers are interested in dividends and capital appreciation.TrueFalse

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1-5Copyright © 2016 McGraw-Hill Education. All rightsreserved. No reproduction or distribution without the prior written consent ofMcGraw-Hill Education.45.As a stakeholder group, communities are interested in good citizenship behavior.TrueFalse46.Social responsibility is the idea thatorganizations are not only accountable to stockholders but also to thecommunity-at-large.TrueFalse47.What constitutes socially responsible behavior changes over time.TrueFalse48.Shell, NEC, and Procter and Gamble have been measuring their performance according to what has beencalled a triple bottom line. This technique involves an assessment of financial, social, and environmentalperformance.TrueFalse49.Demands for greater corporate responsibility are decreasing today.TrueFalse50.A key stakeholder group that appears to be particularly susceptible to corporate social responsibility (CSR)initiatives is customers.TrueFalse51.There is a positive influence of CSR on the consumerevaluation of companies and their purchasingdecisions, according to recent studies.TrueFalse52.Environmental sustainability is a value embraced by the most competitive and successful multinationalcompanies.TrueFalse53.For many successful firms, environmental values are not central to the company culture and managementprocesses.TrueFalse54.Sustainability is being increasingly recognized as a source of cost efficiencies and revenue growth.TrueFalse55.The ROIs on sustainability projects are often very difficult to quantify because the data necessary tocalculate ROI accurately are often not available when it comes to sustainability projects.TrueFalse56.Many of the benefits from sustainability projects are intangible, making it difficult to calculate the ROI.TrueFalse

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1-6Copyright © 2016 McGraw-Hill Education. All rightsreserved. No reproduction or distribution without the prior written consent ofMcGraw-Hill Education.57.The intangible benefits of sustainability projects, such as reducing risks, staying ahead of regulations,pleasing communities, and enhancing employeemorale, are substantial even when they are difficult toquantify.TrueFalse58.Sustainability projects often require shorter-term payback windows than other projects.TrueFalse59.Sustainability initiatives rarely have difficulty making it through the conventional approval process withincorporations because managers arenotconcerned about their return on investment.TrueFalse60.The ROI on a sustainability project generally is easy to quantify.TrueFalse61.Strategic management requires managers at all levels of the organization to take a segregated view of theorganization.TrueFalse62.The strategic management process should be addressed only by top-level executives. Mid-level and low-level employees are best equipped to implement the strategies of the organization.TrueFalse63.To develop and mobilize people and other assets, leaders are needed throughout the organization.TrueFalse64.In the strategic managementprocess, only local line leaders and executive leaders are needed.TrueFalse65.Internal networks have great positional power and formal authority.TrueFalse66.Local line leaders have little profit-and-lossresponsibility.TrueFalse67.Executive leaders champion and guide ideas.TrueFalse68.Local line leaders are key in setting the tone for the empowerment of employees.TrueFalse

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1-7Copyright © 2016 McGraw-Hill Education. All rightsreserved. No reproduction or distribution without the prior written consent ofMcGraw-Hill Education.69.Richard Branson, the founder of theVirgin Group, is well known for creating an inclusive organizationalstructure in which anybody in the organization can be involved in generating and activating upon newbusiness ideas.TrueFalse70.To inculcate a strategic management perspective, managers must often make a major effort to effecttransformational change.TrueFalse71.To effect transformational change in an organization, managers must communicate extensively and provideincentives, training, and development.TrueFalse72.Nancy Snyder, corporate vice president of Whirlpool, shifted the reputation of the firm to that of aninnovator by investing financially in capital spending.TrueFalse73.Successful executives do not reward honesty and input and do not show their interest in learning whatothers are thinking.TrueFalse74.According to the CEO of IDEO, Tim Brown, spotting and promoting at any level in the firm is important.TrueFalse75.There are few benefits to having broadinvestment throughout the organization in the strategic managementprocess.TrueFalse76.Showing interest in learning what others are thinking is a leadership weakness.TrueFalse77.The vision of an organization is the top level ofits hierarchy of organizational goals. The vision statementshould be massively inspiring, overarching, and long term.TrueFalse78.Strategic objectives are more specific than vision statements.TrueFalse79.According to the text, a mission statement is an overarching statement that is massively inspiring, longterm, and only discusses the purpose of the company.TrueFalse

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1-8Copyright © 2016 McGraw-Hill Education. All rightsreserved. No reproduction or distribution without the prior written consent ofMcGraw-Hill Education.80.A mission statement encompasses both the purpose of the organization as well as its basis ofcompetition,and the basis of its competitive advantage.TrueFalse81.Strategic objectives should be measurable, specific, appropriate, and realistic, but not constrained by timedeadlines.TrueFalse82.Much research has supported the notion that individuals work much harder when they are asked to do theirbest rather than when they are striving toward a specific goal.TrueFalse83.Objectives in organizations should be clear, stated, and known by employees throughout the organization.TrueFalse84.Strategic management should only include short-term objectives. Long-term objectives are covered in thevision statement of the organization.TrueFalse85.Organizational goals and objectives should be vague in order to allow for changes in strategy.TrueFalse86.An idealistic vision can arouse employee enthusiasm and therefore is a good vision.TrueFalse87.One of the reasons a vision fails is that too much focus can lead to missedopportunities.TrueFalse88.Visions need to be anchored in reality in order to be successful.TrueFalse89.Effective mission statements incorporate the concept of stakeholder management, suggesting thatorganizations mustrespond to a single constituency.TrueFalse90.A good mission statement, by addressing each principal theme, must communicate why an organization isspecial and different.TrueFalse91.When formulating strategic objectives, managers need to remember that too many objectives can result in alack of focus and diminished results.TrueFalse

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1-9Copyright © 2016 McGraw-Hill Education. All rightsreserved. No reproduction or distribution without the prior written consent ofMcGraw-Hill Education.Multiple Choice Questions92.The text addresses two perspectives of leadership as well as their implications. These twoperspectives areA.romantic and unromantic.B.romantic and internal control.C.external control and unromantic.D.romantic and external control.93.A CEO made a lot of mistakes in assessing the market and the competitiveconditions and improperlyredesigning the organization into numerous business units. Such errors led to significant performancedeclines. According to the text, this example illustrates the __________ perspective of leadership.A.external controlB.romanticC.internal mechanismD.operational94.According to the external control view of leadership, which of the following factors wouldnotbeconsidered an external factor that might positively or negatively affect a firm's success?A.economic downturnsB.governmental legislationC.outbreak of warD.company employee morale95.Melvin Alexander, executivedirector of Principled Solutions Enterprise, a management consulting firmspecializing in health care, suggests that environmental changes oblige firms to make strategic changes inorder to survive. Which of the following is one of the strategic changes he foresees will occur in the nextthree to five years?A.changes in the behavior of the health care consumersB.reduction in the number of available medical doctorsC.increases in the number of locations of health care facilitiesD.decreases in information technology investment96.According to the text, the strategic management process entails three ongoing processes. They areA.analyses, actions, and synthesis.B.analyses, decisions, and actions.C.analyses, evaluation, and critique.D.analyses, synthesis, and decisions.

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1-10Copyright © 2016 McGraw-Hill Education. All rightsreserved. No reproduction or distribution without the prior written consent ofMcGraw-Hill Education.97.Management innovations such as total quality, benchmarking, and business process reengineering cannotlead to sustainable competitive advantage becauseA.companies that have implemented these techniques have lost money.B.there is no proof that these techniques work.C.they cost too much money and effort to implement.D.every company is trying to implement them.98.Theorganizational versus the individual rationality perspective suggests that objectives that areA.good for a functional area are always good for the overall organization.B.good for the overall organization are always best for a functional area.C.best for a functional area may not be best for the overall organization.D.best for one functional area will never be best for all functional areas.99.The four key attributes of strategic management include the idea that strategy mustA.be directed toward overall organizational goals and objectives.B.be focused only on long-term objectives.C.be focused on only one specific area of an organization.D.focus only on competitor strengths.100.The four key attributes of strategic management include all of the followingexceptA.including multiple stakeholder interests in decision making.B.incorporating both short-term and long-term perspectives.C.recognizing the trade-offs between effectiveness and efficiency.D.emphasis on the attainment of short-term objectives.101.Effectiveness is often defined asA.doing things right.B.stakeholder satisfaction.C.doing the right thing.D.productivityenhancement.102.In choosing to focus on stakeholders, which of the following willnotlead to success for a manager?A.shareholders and employeesB.employees and suppliersC.customers and the community at largeD.customers only

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1-11Copyright © 2016 McGraw-Hill Education. All rightsreserved. No reproduction or distribution without the prior written consent ofMcGraw-Hill Education.103.In strategic management, both the short-term and long-term perspectives need to be considered becauseA.shareholder value is only measured by short-term returns.B.shareholders only care about long-term returns.C.long-termvision precludes the analysis of present operating needs.D.the creative tension between the two forces managers to develop more successful strategy.104.Strategic management involves the recognition of trade-offs betweeneffectiveness andA.cost.B.value.C.return on investment.D.efficiency.105.All of the following are ambidextrous behaviorsexceptA.taking initiative and being alert to opportunities beyond the job description.B.being cooperative and seeking opportunities to combine personal efforts with that of others.C.intensely focusing on the responsibilities of one individual and maximizing the output of the departmentin the organization in which that individual works.D.being brokers, always looking to build internal linkages.106.Ambidextrous behaviors in individuals illustrate how a dual capacity for _______ can be woven into thefabric of an organization at the individual level.A.alignment andadaptabilityB.alignment and transparencyC.alignment and internal linkagesD.alignment and efficiency107.According to Henry Mintzberg, the final realized strategy of a firm isA.a combination of deliberate and emergentstrategies.B.a combination of deliberate and differentiation strategies.C.not deliberate.D.a result of unrealized intended strategy.108.__________ may be considered the advance work that must be done in order to effectivelyformulate andimplement strategies.A.Goal settingB.Corporate entrepreneurshipC.Strategy analysisD.Organizational design

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1-12Copyright © 2016 McGraw-Hill Education. All rightsreserved. No reproduction or distribution without the prior written consent ofMcGraw-Hill Education.109.Strategy analysis is the starting point of the strategic management process and consists of theA.analysis only of the vision, mission, and objectives of the firm.B.analysis of the relevant internal and external environmental factors only.C.analysis of relevant competitors only.D.matching of vision, mission, and objectives withthe relevant internal and external environmentalfactors.110.Strategy formulation at the business level addresses best how to compete in a given business:A.to attain competitive advantageB.to reduce costsC.to decrease buyerpowerD.to thwart entry of new rivals111.Corporate level strategy focuses on what businesses to compete in andA.how business can be managed to achieve synergy.B.how business can be managed to reduce synergy.C.how the firm canwork as a stand-alone entity.D.how the firm can create more value by operating alone.112.Corporate-level strategy looks at how to manage the ______ of its businesses to create synergies.A.portfolioB.stock pricesC.competitorsD.market pricing113.Entering foreign markets requires firms to ascertain foremost how they will attainA.market share.B.low costs.C.competitive advantage.D.low returns on investment.114.New valuecreation is a major engine for economic growth and is the main focus of _______________strategy.A.portfolioB.corporate-levelC.business-levelD.entrepreneurial

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1-13Copyright © 2016 McGraw-Hill Education. All rightsreserved. No reproduction or distribution without the prior written consent ofMcGraw-Hill Education.115.Two types of strategic control that firms must exercise forgood strategy implementation areA.informational and confrontational.B.confrontational and behavioral.C.behavioral and financial.D.informational and behavioral.116.Effective organizational design means that firms must have________ that are consistent with theirstrategy.A.designs and plansB.organizational structures and designsC.adopters and designsD.adopters and plans117.Learning organizations permit the entire organization to benefit from____________ talents.A.internal and externalB.individual and collectiveC.internal and collectiveD.external and individual118.Effective leaders set a direction and develop an organization so that it is committed toexcellence and___________ behavior.A.performantB.strategicC.ethicalD.positive119.Strategies should be formulated that enhance foremost the ____________ capacity of a firm.A.innovativeB.learningC.implementationD.business-level120.The three participants in corporate governance are the shareholders,A.board of directors, and employees.B.labor unions, and employees.C.board of directors, and management.D.banks andlending institutions, and management.

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1-14Copyright © 2016 McGraw-Hill Education. All rightsreserved. No reproduction or distribution without the prior written consent ofMcGraw-Hill Education.121.While working to prioritize and fulfill their responsibilities, members of the board of directors of anorganization shouldA.represent their own interests.B.represent the interests of theshareholders.C.direct all actions of the CEO.D.emphasize the importance of short-term goals.122.Members of boards of directors areA.appointed by the Securities and Exchange Commission.B.elected by the shareholders as theirrepresentatives.C.elected by the public.D.only allowed to serve one term of four years.123.An organization is responsible to many different entities. In order to meet the demands of these groups,organizations must participate instakeholder management. Stakeholder management means thatA.interests of the stockholders are not the only interests that matter.B.stakeholders are second in importance to the stockholders.C.stakeholders and managers inevitably work atcross-purposes.D.all stakeholders receive financial rewards.124.Stakeholders areA.a new way to describe stockholders.B.individuals, groups, and organizations who have a stake in the success of the organization.C.creditors who hold a lien on the assets of the organization.D.attorneys and their clients who sue the organization.125.Procter and Gamble has perfected a technique for compacting cleaning powder into a liquid concentration.Consumers,retailers, shipping and wholesalers, and environmentalists all have benefited from the resultingchange in consumer shopping habits and the revolution in industry supply-chain economics. According tothe text, this is an example ofA.zero-sum relationship among stakeholders.B.stakeholder symbiosis.C.rewarding stakeholders.D.emphasizing financial returns.126.There are several perspectives of competition. One perspective is zero-sum thinking. Zero-sum thinkingmeans thatA.all parts of the organization gain at no loss.B.in order for someone to gain others must experience no gain or benefit.C.one can only gain at the expense of someone else.D.everyone in the organization shares gains and losses equally.

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1-15Copyright © 2016 McGraw-Hill Education. All rightsreserved. No reproduction or distribution without the prior written consent ofMcGraw-Hill Education.127.Managers should do more than focus on short-term financial performance. One concept that helpsmanagers do this is stakeholder symbiosis. This means thatA.stakeholders are dependent on each other for their success.B.stakeholders look out for their individual interests.C.one can only gain at the expense of someone else.D.all stakeholders want to maximize shareholder returns.128.Employee stakeholders are concerned withA.taxes,warranties, and regulations.B.wages, benefits, and job security.C.good citizenship behavior.D.dividends.129.Stockholders as a stakeholder group are interested primarily byA.payment of interest and repayment ofprincipal.B.value and warranties.C.dividends and capital appreciation.D.taxes and compliance with regulations.130.The Sustainable Apparel Coalition accounts for more than one-third of the globalA.apparel and washingproduct industry.B.consumer product industry.C.refinery industry.D.apparel and footwear industry.131.Wall Street executives have received excessive bonus pay in the past. This concerns which of the followingstakeholder groupsmost directly?A.governmentB.suppliersC.creditorsD.stockholders132.Supplier stakeholders are concerned withA.assurance of a continued relationship with the firm.B.employee benefits.C.safe workingconditions.D.capital appreciation.

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