Multiple Choice Questions.doc

Chapter 1The Concept of Strategy Multiple Choice Questions 21. The primary purpose of strategy is: @ Pages and References: p4 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: @ Pages and References: pp4-5 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: @ Pages and References: p8 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: @ Pages and References: pp9-10 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: @ Pages and References: p11 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from threats and strengths from weaknesses is often difficult b. It has been around for five decades and has now been superseded by more sophisticated analytical frameworks c. It is focused on strategy formulation and fails to take account of strategy implementation d. It is so widely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: @ Pages and References: p10 a. Strategic fit b. Strategic leadership c. Location within an attractive industry d. A license to operate 27. Strategic fit refers to: @ Pages and References: pp10-11 a. The need for a firm’s strategy to be consistent with its vision, mission, and culture b. The consistency of a firm’s strategy with its external and internal environments c. The need for a firm’s strategy to be unique d. The need for a firm’s strategy to meet the needs of all its stakeholders, not just shareholders © 2013 Robert M. Grant www.contemporarystrategyanalysis.com 1 28. Ryanair’s strategic position is as Europe’s lowest-cost airline may be attributed to: @ Pages and References: pp11-12 a. The willingness of its CEO, Michael O’Leary, 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: @ Pages and References: p12 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: @ Pages and References: p12 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: @ Pages and References: p13 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: @ Pages and References: p19 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”: @ Pages and References: p10 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 firm’s strategy fits its internal environment d. Answers a and c 34. “Strategy” derives from a Greek word meaning: @ Pages and References: p13 a. The art of arranging men in a battlefield b. Generalship c. The art of maintaining a state’s security d. Maintaining ethical and spiritual purity © 2013 Robert M. Grant www.contemporarystrategyanalysis.com 2 Firms abandoning shareholder value maximization in favor of maximizing stakeholder interests c. The objective of military strategy is to defeat the enemy. and full of new opportunities: @ Pages and References: p16 a.35. Where and how to compete d. None . When the environment becomes more turbulent. To the role of resources and capabilities as a foundation for firm strategy c. The increasingly complex business environment of the 21st century has resulted in: @ Pages and References: p14 a. Firms increasingly depending upon other firms through outsourcing and strategic alliances d. Doing things differently c. Niccolo Machiavelli’s Dell’arte della Guerra (The art of war) 36. strategy should be put into the hands of external consultants d. From corporate planning to strategic management b. strategy becomes a vital tool to navigate the firm through “stormy seas” c. Good military strategist must first be a good military tactician – practicing it in the field first c.contemporarystrategyanalysis. There is no concept like tactics in business b. Making choices b. The development of “PIMS” at the Strategic Planning Institute c. an expression coined by business school professors to make their book more appealing to practicing managers 42. The first synthesis of the resource and capability approach d. Firms embracing digital technologies 41. the focus of strategy analysis shifted: @ Pages and References: p14 a. From the structure-based approach to the value-added perspective 40. The expression “blue oceans” in strategic management is: @ Pages and References: p14 a. The essence of strategy is: @ Pages and References: p12-16 a. a concept that signifies the immensity of potential new markets c.com 3 . The book that is considered as the first treatise on strategy is: @ Pages and References: p12 a. The application of game theory to strategic management 39. Carl Von Clausewitz’s Vom Kriege (On war) b. Grant www. unpredictable. Michael Porter pioneered: @ Pages and References: p13 a. In the 1980s. Firms shifting their emphasis towards the growth markets of Asia. Sun Tzu’s Art of War c. and Latin America.there is no conceptual difference 38. Africa. All of the above © 2013 Robert M. During the 1990s. The application of industrial organization economics for analyzing industry profitability b. strategy becomes an “impossible exercise” 43. business strategy seeks coexistence rather than annihilation d. Military strategy and business strategy differ in that: @ Pages and References: p12 a. a concept employed in the US Navy’s strategic planning process d. strategy appears to not be very useful b. The Bible d. only a figure of speech b. To the application of microeconomics to analyze the sources of firm profitability d. A combination of design and emergence b. the scope of the firm in terms of industries and markets. business level strategy is handled by the functional department managers d. Corporate strategy defines the scope of a firm’s structure. An interaction between strategic design. while division managers are in charge of their business level strategies c. Reducing the number of choices being considered b. a firm’s vision and mission d. a firm’s relationships with its principal stakeholders c.contemporarystrategyanalysis. Corporate level strategy is the domain of the parent company. There is no principle but only limited rationality and trial-and-error processes to find the best allocation between different levels of management b. bottom-up process c. Corporate and business level strategies are not any specific organizational level’s responsibility because of the principle of maximum delegation and decentralization 49. Neither of the above 48. How do corporate level strategy and business level strategy differ? @ Pages and References: p18 a. and the allocation of its resources b. A decentralized. Corporate strategy focuses on the overall strategic plan. Corporate level strategy is the domain of headquarters executives. while business strategy focuses on implementing strategic decisions in each product market d. Integrating and pooling the knowledge of different members of the organization c. through organizational processes. the corporate governance of each individual business d. Between the two levels of strategy. a firm’s strategic management process c. All of the above © 2013 Robert M. Corporate level strategy is concerned with long term goals.) c. None of the above 47. The two questions of “where and how to compete” define: @ Pages and References: p18 a. a firm’s corporate and business strategies b. most firms are likely to exhibit: @ Pages and References: p23 a. Corporate strategy defines the scope of a firm’s activities. Facilitating the use of analytic tools d. the way a firm competes in a particular industry or market b. while business strategy emphasizes the relationship of each business with its environment (state. while business level strategy focuses on short term sustainability 46. Grant www. In regard to strategy making. etc. Limited involvement by boards of directors 50. while business strategy focuses on how to beat the competition in a specific product market b.com 4 .44. Both of the above d. Strategy improves decision-making by: @ Pages and References: pp16-17 a. Corporate strategy is concerned with: @ Pages and References: p19 a. regulators. and strategic enactment through decisions made by all d. the way a firm establishes a competitive advantage over its rivals within a specific industry or market c. a firm’s values and culture 45. the division of responsibility is consistent with the following principle: @ Pages and References: p19 a. Business strategy defines: @ Pages and References: p19 a. Provided a battleground for the debate opposing the Design School and the Learning School b. strategy making involves a combination of top-down strategy design and decentralized mergence. Greater for organizations that both charge for their services and face competition than those which are monopolists providing services free of charge. Shown the difficulty of entering the US market for Japanese firms because of the cultural. The extent to which decision making is centralized c. Is severely limited by the lack of a profit motive. The commitment of the organization to experimentation d. 26. Business strategy is primarily a quest for: @ Pages and References: p35 a. The applicability of the tools and techniques of strategy analysis to not-for-profit organizations is: @ Pages and References: p25 a. Honda’s successful entry into the US motorcycle market has: @ Pages and References: p23 a. Motivated and talented personnel 27. To survive and prosper over the long run requires a firm to: @ Pages and References: p37 © 2013 Robert M. Superior technology d. Maximizing dividend payments to shareholders over the long term. common to all businesses is the goal of: @ Pages and References: p35 a. How turbulent and unpredictable is the external environment of the organization b. Creating value c. Making customers satisfied and happy b.contemporarystrategyanalysis. Greater for organizations that face competitions than those that do not. In all organizations. The balance between the two depends mainly upon: @ Pages and References: p23 a. Been an extraordinary epic where players were discovering the field while dealing with its traps c. Values and Performance 25. Every business enterprise has a distinct purpose. The difficulties of quantifying the performance of the stakeholder-focused firm d. Profit c. Attractive markets *b. Greater for organizations that charge for their services than those which do not c. 28. Grant www. however.51. The need to represent each stakeholder group on the board of directors. organizational. Chapter 2 Goals. The extent to which the organization has a formalized process of strategic planning. Satisfying as many stakeholders as possible d. A major impediment to the stakeholder view of the firm is: @ Pages and References: p36 a. d.com 5 . 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. and legal gaps 52. 53. b. The fact that customers and employees are likely to be even more short-term oriented than shareholders c. The practical problem of taking account of multiple goals in strategic decision making b. For a firm to create value involves: @ Pages and References: p35 a. eventually. Accounting profit is distorted by the arbitrary treatment of depreciation and unusual items b.com 6 .a. The primary justification for the assumption that primary goal of strategy is to maximize profits over the long term is: @ Pages and References: p37 a. firms must attend to the interests of all their stakeholders d. political. Advertising which increases consumer’s perception of a product’s value. Physically transforming products b. Commerce d. Creating strong customer loyalty. Shareholders will oust CEOs that are not effective at maximizing profits. The difference between sales and wages d. The legal requirement on Boards of Directors to ensure that companies are operated in the interests of their shareholders c. 34. then relying upon employees to drive customer satisfaction and. Repositioning products in time d. and selling off divisions or units c. © 2013 Robert M. Entrepreneurship: creating new businesses b. Economic profit is endorsed by economists who tend to be more rigorous than accountants. The principal means by which firms create value is through production: transforming less valuable inputs into more valuable outputs. The retained profits 33. and work conditions. The difference between sales and expenses b. accounting profit includes the normal return to the providers of equity capital. Economic profit is cash flow based and is less subject to manipulation that accounting profit d. and then to progressively increase prices. 30.. Restructuring: turning around. then using these profits to fund lower prices for customers b.contemporarystrategyanalysis. Pursue simultaneously strategies of low cost and differentiation d. Earning profits for shareholders. The fact that in today’s intensely competitive markets. and appropriate some of that value as then extracting some of that customer value as profit d. Creating value for employees through attractive pay. profits. 31. Ensure the ethical conduct of executives 29. Be responsive to its external environment—including its social. Value added can be defined as: @ Pages and References: p35 a. c. The difference between the money values of a firm’s output and physical inputs c. The principal difference between accounting profit and economic profit is: @ Pages and References: p38 a. Repositioning products in space c. Grant www. Commerce creates value by: @ Pages and References: p35 a. thereby creating extra value c. In order to earn profits over the long run. benefits. Commit itself to growing its sales b. and natural environment c. Creating value for customers. firms must focus on profit maximization in order to survive b. Repositioning products in space and time 32. Economic profit is pure surplus. Firms can also create value through: @ Pages and References: p35 a. Grant www. discounted at the cost of equity d. Focus on the firm’s cash flow statement rather than its income statement and balance sheet b. it is useful to: @ Pages and References: p43 a. A key merit of long-term profit maximization as a prime goal is its: @ Pages and References: p41 a. Adopt a forward-looking approach through analyzing share price performance rather than looking at backward-looking accounting statements © 2013 Robert M. Profit maximization and value of the firm are two concepts which are: @ Pages and References: p39 a. Accounting profit and the economic profit d. Use accounting data and directly extrapolate from the past the future cash flows d. shareholder value is calculated by adding debt and other non-equity financial claims to the DCF value of the firm c. To determine these estimates management will: @ Pages and References: p40 a. To use the Discounted Cash Flow method. Maximizing enterprise value and maximizing shareholder value are linked because: @ Pages and References: p40 a. consistency over time c. The normal return to capital and the abnormal return of capital b. Unrelated because cash flow is only one component of a firm’s value b. Use a benchmarking approach to align the firm’s cash flows with its rivals’ cash flows c. tendency to optimize long-term survival d. Reach consensus by discussion with a group of external experts such as stockbrokers 40. profit and all other significant figures b. The sum of its cash flows in each year. The sum of its free cash flows in each year. There are two main concepts of profit: @ Pages and References: p38 a. shareholder value is calculated by subtracting debt and other non-equity financial claims from the enterprise value of the firm d. the future cash flows have to be forecasted. simplicity b. Unrelated because the Net Present Value is used to assess the value of a firm d.35. Make justified assumptions about income. Economic rent and the economic profit 36. Closely linked because profit maximization translates into maximizing a firm’s value c. It is obvious that they must be linked 39. discounted at the risk-free rate of interest 38. expenses. The value of a firm can be defined as: @ Pages and References: p39 a. Closely linked because the value of a firm is the sum of its free cash flows in each year discounted at the firm’s interest rate 37. Concentrate on sales growth and market share rather than profit data c.com 7 . The sum of its free cash flows in each year.contemporarystrategyanalysis. All of the above 41. discounted at the firm’s weighted average cost of capital (WACC) b. discounted at the firm’s cost of capital c. To diagnose the sources of a firm’s poor financial performance. The sum of the firm’s operating cash flows in each year. Enterprise value and shareholder value are the same thing b. Return on capital and return on sales c. Management should focus upon the factors that drive profitability and shareholder value rather than profitability and shareholder value themselves. Profit. © 2013 Robert M. A performance management systems needs short-term measures to assess performance. Believe that the capitalist system would operate better if all firms adopted CSR d. Benchmarks b. strategic. operational. The tendency for performance management systems to be based entirely on financial targets b. Net margin is a better indicator than operating margin d. and ethical performance b. Analyzing trends over at least 5 years c. 44. Shareholder. Shareholder value maximization is only appropriate to financial service companies b. Using accounting ratios to analyze firm performance: @ Pages and References: pp42-43 a. Agree that CSR is an essential “moral imperative” b. Financial. Grant www. Managerial. internal. Narrow measures of profit (such as after-tax net income) are better indicators than broadbased measures (such as EBITDA—earnings before interest. CSR a means of transferring value from shareholders to less fortunate members of society d. employee.d. and asset management performance d. The Balanced Scorecard is a technique of performance management that establishes and monitors four dimensions of performance: @ Pages and References: p46 a. All of the above 43. and learning/innovation performance c. yet the ultimate goal is to enhance the long-term performance of the firm c. The main lesson to be drawn from Boeing’s deteriorating performance during the late 1990s when top management emphasized the pursuit of profit and shareholder value is: @ Pages and References: p48 a. Focusing on the interests of shareholders is detrimental to employee morale and customer satisfaction d. depreciation and amortization). Disaggregate overall return on capital into its component items. CSR as a value creating activity b. Financial. sales. customer. In appraising a firm’s profit performance: @ Pages and References: pp41-42 a.com 8 . Multiple indicators d. 42. Michael Porter and CK Prahalad: @ Pages and References: p49 a. Regard most firms’ CSR initiatives as primarily exercises in public relations 48 Michael Porter and Mark Kramer’s notion of “shared value” reconceptualises CSR (corporate social responsibility) by emphasizing: @ Pages and References: p50 a. 47. CSR as a counterweight to greed and amorality among managers. productivity. supplier. CSR as advantageous to the firm by conferring reputational and legitimacy benefits c. Disagree widely about the justification for CSR c. tax. Performance targets always lead to unintended consequences because individuals always “game the system” d. Charles Handy. customer. political and personal interests need to be taken into account 45.contemporarystrategyanalysis. and social performance 46. Influential scholars such as Milton Friedman. Return on invested capital is a better indicator than return on sales c. Return on sales is a better indicator than return on invested capital b. Pursuing profit and shareholder value will inevitably lead to damaging ethical problems c. The fundamental problem of any type of performance management system is: @ Pages and References: pp45-46 a. product development is split into several consecutive phases. government and suppliers Its relationships with its major stakeholders d. relies upon the central idea that: @ Pages and References: p52 a. Corporate finance c. which must be crossed to establish synergies across segments b. a firm’s product development relies on time segments that must be linked through gates c. Given the plethora of external influences. Viewing strategy as a portfolio of options rather than a portfolio of investments. at the end of each the product is reassessed to continue ( go through the “gate” ) or discontinue d. Use all existing techniques to gather and analyze information d. It allows firms to create value from flexibility and a wider range of growth opportunities b. and some are abandoned until there is only one left. “all or nothing” strategic projects can be such costly mistakes as to be fatal to the firm c. 52. For each gate. competitors and suppliers b. Work on the matter full-time 25. The field of “real option analysis” emerged in: @ Pages and References: p50 a.contemporarystrategyanalysis. competitors. strategy needs to reconcile direction and flexibility in an uncertain environment b. the value of each product is assessed. It renders obsolete most conventional tools and techniques of strategy analysis. Systems theory d.com 9 . Use a framework or a system that allows them to organize information and rank factors b. In formulating strategies under uncertainty. a “phases and gates” approach means that: @ Pages and References: p52 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 © 2013 Robert M. Its relationships with customers. a firm’s market is divided into specific phases separated by gates. For product development. 51. the advantage of an option follows from the potential to amend or stop a strategic project during the development d. understanding the external environment requires managers to: @ Pages and References: pp61-62 a. Grant www. Industrial economics b. It can assist firms in using complex financial derivatives to hedge risk c. Its relationships with customers. Monitor their rivals closely to detect signals of change in their strategies c. real option analysis is a valuable strategic tool because: @ Pages and References: p52 a. It allows firms to make investment decisions without the need to forecast cash flows long into the future d. Value is created when: @ Pages and References: pp61-62 a.49. Strategic management 50. The social and economic sstems withn which the firm must coexist 27. All of the above Chapter 3 Industry Analysis: The Fundamentals 24. The core of a firm’s business environment is determined by: @ Pages and References: pp61-62 a. 36. The basic premise of industry analysis is that: @ Pages and References: p63 a. To keep doctors’ remuneration high d. To ensire that medical school graduates will find work at medical doctors © 2013 Robert M. and the relative bargaining powers of producers. The extent to which the industry is protected by barriers to entry d. New entrants do not know the economies they can generate in the future and therefore cannot precisely determine their selling price c. The American Medical Association encourages limits on the number of medical school places for training new doctors: a. are determined by: @ Pages and References: p62 a. The profits earned by firms iIn an industry. 30. Firm strategies and their intereactions are the key determinnats of the industry envirnbment d. New entrants do not know where they are positioned on their learning curve b.com 10 . Hw much customers value the products supplied by the industry c. The value of a product to consumers exceeds the price they paid for it. in practive most industries are oligopolies b.contemporarystrategyanalysis. The surplus of value is distributed between customers and producers in the industry by the forces of competition c. Workers will push for higher pay and benefits causing the level of profuitability to fall c. The value of the product for customers. their suppliers and their buyers 31. They tend to be disregarded by major corproations d. d. If an industry earns a return on capital in excess of its cost of capital: @ Pages and References: pp61-63 a. unless the industry is protected by high barriers ot ewntry. 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. The overall state of the economy and the intensity of competition within the industry b. 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. It will soon attracts the attention of competition authorities b. the return on capital will fall d. Economies of scale are a barrier to entry because: @ Pages and References: p67 a. Perfect competition and monopoly are theoretical modls. the intensity of competition.b. Firms suppling niche markets are often hiughl profitable becuae:: @ Pages and References: pp63-64 a. In the interests of ensuring that only the the most capable applicnsats are admitted ot the medical profession b. Tend to have high entry barriers 37. The basic forces of technolog and consumer demand are the fundamental forces that shape industry structure 35. The high profits earned will encourage over-investment by firms causing the return on capital to fall. It is likely to attract the attention of potential entrants. 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. Grant www. To ensure that the United Stsates maintains the highest standards of training in the world c. The price that the customer is willing to pay for a product exceeds the cost of supplying it. 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. Should really only be used by academics. Develop a deep understanding of how the industry creates value now and in the future. The buyer’s price sensitivity b. Suppose that an industry’s profitability is zero or negative overall: @ Pages and References: p78 a. Their value depends on the skill with which they are deployed. on: @ Pages and References: p76 a. c. ultimately. and to forecast the probable overall industry profit c. whether they use the tools described in the chapter or not 49. When the suppliers’ industry is concentrated b. Look at the probability of new entries in the industry. Then the biggest firm in the industry is performing badly d. Look at the link between industry and structure performance . The size of buers relative ot that of sellers c. The size and concentration of buyers relative to suppliers c. Grant www.com 11 . The bargaining power of buyers depends on: @ Pages and References: p76 a. When suppliers are supplying differentiated products c. 48. When “our” (the customer’s) industry is relatively fragmented d. Must be used if one is to understand the industry structure b.contemporarystrategyanalysis. On its own tends to be a poor predictor of future profitability b. Then even so it’s entirely possible that some firms are making very good profits © 2013 Robert M. All of the items below b. All of the above 47. An industry’s current profitability: @ Pages and References: p78 a.43. The ability of buers ot backward integrate 44. Then no firm in the industry can be performing well c. A buyer’s access to information about products and costs d. Is an excellent predictor of its future profitability c. To forecast industry profitability consistently accurately. use information on major trends in industry structure to predict their effects upon the forces of competition b. to determine the major trends. Bargaining power rests. and to identify their strengths and weaknesses d. The respective effectiveness and cohesion of top management teams d. d. The negotiating skills of the buyer versus the seller b. Historic and accidental events c. Then all firms in the industry are performing badly b. 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. then. Are simply that. professional analysts have to: @ Pages and References: p78 a. The ability or threat to integrate vertically 46. The relative bargaining power of buyers depends on: @ Pages and References: p76 a. The analytical tools described in the text: @ Pages and References: p78 a. The perceived or real threat for one party to refuse to deal with the other party 45. Determine the five larger players in the industry and their relative bargaining power in regards to their buyers and customers. Both A and C above. just tools. Buyer’s price sensitivity and the bargaining power of buyers relative to that of sellers d. The bargaining power of suppliers is likely to be high: @ Pages and References: p77 a. but does not bring any value for strategic management c. Is of academic interest. Substitutability on both the demand side and the supply side. Very specific economics terms which must be rigidly adhered to b. combined with an element of judgment depending on context and purpose 56. The market for all products which consumers may choose to spend their money on. and can be used interchangeably d. Exclusively used in marketing and strategic management respectively 54. and rivals b.51. with no clearly defined boundar c. A way to enable managers to allocate their resources where competition is the strongest d. A largely futile exercise for managers b. markets tend to be defined more narrowly than industries b. Analogous concepts but.contemporarystrategyanalysis. “The market” and “the industry” are: @ Pages and References: p83 a. Critical to the output of the analysis and therefore should only be undertaken with the help of an academic or consultant 57. with a specific analysis of products. A risky strategic move that may backfire. Largely a matter of judgment and experience contingent on the purpose of the analysis d. The market in which a consumer produce competes is. Substitutability on the demand side and substitutability on the supply side d. A continuum. A way to enable managers to position the firm where its particular capabilities can be deployed to best advantage 52. A market’s boundaries are defined by: @ Pages and References: p85 a. because of retaliation from the industry’s incumbents d. The geographies of the markets that are supplied by the incumbents b. An endeavor that firms are undertaking on a permanent basis with great success c. A matter of the personal preference of top managers b. in some sense d. if the mix of drivers for change and existing structure make it susceptible to change 53. in practice. Answers b and c © 2013 Robert M. while industries refer to specific technologies 55. Precisely defined. Grant www. markets. Market and industry are: @ Pages and References: p83 a. Concepts whose everyday meaning has become divorced from their true economic definitions c. Understanding the competitive forces in an industry is: @ Pages and References: p78 a. c. Are concepts which require careful consideration of their philosophical underpinning to use correctly. The type of product which is sold. Sometimes possible even by small firms. Changing the industry structure is: @ Pages and References: p82 a.com 12 . drawing the boundaries of industries and markets is: @ Pages and References: p85 a. Somewhat flexible in scope depending on what aspect of business you are considering d. Close concepts where market is identified with broader sectors. and the type of customers willing to pay for the product c. Not really within the power of a single firm b. Exactly the same concept. In practice. Almost impossible to carry out with rigor because it requires many “rules of thumb” and approximations c. in reality: @ Pages and References: p85 a. Self-evident b. Is not relevant because customers will show their preferences through their behavior b. The question “What does a firm need to survive competition?”: @ Pages and References: p86 a.58. there are always some detractors 63. The comparative modeling of one industry versus another industry d. consulting and academic worlds. Can be addressed by studying very carefully the two largest rivals in the industry c. because competitors will not divulge what they are doing 62. Factors derived from the competitive environment that a firm’s must satisfy if it is to succeed. Generally accepted by the corporate. An industry “direct modeling of profitability” is defined in the text as: @ Pages and References: p86 a. since it’s the driving force behind generating profit. Requires an understanding of the current and future basis of competition specific to the industry d. Which of the five forces of competition most threaten a firm’s survival and how could the firm deal with them? d. The value to managers of understanding key success factors is: @ Pages and References: p86 a. The identification of the drivers of a firm’s relative profitability within an industry b. What do customers want and what type of operational changes should a firm implement to survive competition? c. c. The question “What do customers want?”: @ Pages and References: p86 a. Grant www. even at the edge of legality and ethics b. In question because some academics disagree with it. Can be addressed through a careful analysis of competitors using all possible means. d. Key success factors are: @ Pages and References: p86 a. Must be asked by managers. What should managers do to a information collected from the market and the firm’s operational units? 60. Factors that lead rivals to undermine a firm’s competitive advantage b. The statistical modeling of the profit as determined by several variables. Can never be answered clearly. and an accurate answer obtained and understood. using multiple regression analysis c. Factors in the five forces of competition that are critical for a firm’s survival and prosperity 59. c. Legitimate because it is accepted by the academic world c. Factors in the internal environment that determine a firm’s ability to survive and prosper d. One useful way to analyse the drivers of a firm’s relative profitability is: @ Pages and References: p86 a. To undertake a benchmarking study to compare a firm’s profitability with that of its rivals © 2013 Robert M. To disaggregate return on capital employed into component ratios that point to the main underlying drivers of profitability b. Setting up a model of industry profitability from the interaction of the Five Forces 64. Analyzing key success factors leads one to ask the following two questions: @ Pages and References: p86 a. To disaggregate assets into component parts that point to the main drivers of profitability c.contemporarystrategyanalysis. Is best answered by ensuring that certain managers are educated in Marketing 61. What do customers want which we could supply and what should the firm do to survive competition? b. but as with most business concepts and models.com 13 . Can be addressed by an extremely good Market Research company d. e-service and fast food industries? @ Pages and References: p71 a.contemporarystrategyanalysis. The economic rent would significantly increase for all suppliers 66. telecommunications. The intensity of competition is lower in the first category of industries than in the second category 68. Only an illustration of the intervention of the state on business practices 69. Identifying the boundaries for furniture manufacturing industries in comparison to the same analysis for television programming and entertainment industries (Fox and NBC) b. An illustration of how governments and regulators unfairly protect incumbents from competition c. on the other hand. The capital requirements are very high for the first category and relatively low for the second category c.com 14 . Which is the most difficult? @ Pages and References: p78 a. the US chewing tobacco industry and the Chicago grain market illustrate: @ Pages and References: p66 a. and. The customers would not change their level of consumption. 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. Which characteristics differentiate industries such as. Industries exhibit strong differences in structure which is reflected in very different competitive outcomes—for example. An illustration of barriers to entry imposed by legal or professional authorities b. Describing the key success factors for steel. The existence of many suppliers would drive down prices to the cost of supplying these beverages (with the assumption that no collusion emerges) d. Grant www. Commercial activities which are ethically questionable b. respectively. on the one hand. In a nightclub. If many suppliers could offer their products on the same site: @ Pages and References: p65 a. whereas the second category relies upon marketing competencies d. Each illustrates. with thousands of players b. leading to a decrease in the return for all suppliers c.d. aircraft manufacturers and commercial satellites. a situation of low risk and a situation of high risk in terms of business activity fluctuations 67. Regulations in banking. To conduct a survey of managers to ask what they think are the reasons why their firm is profitable 65. a single supplier of beverages can charge a price that exploits its position and the customers’ willingness-to-pay. Identifying the boundaries between service industries in comparison to doing the same between manufacturing industries © 2013 Robert M. 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. The first category is highly sophisticated and requires top notch technical skills. and broadcasting industries are: @ Pages and References: p71 a. The suppliers would collude to maintain an artificially high selling price to preserve their return b. Constraints on competition that are essential to protect consumers d. The second category of industries has very few players whereas the first category of industries is very fragmented. airlines and automobiles in comparison to identifying the critical factors for Fox and NBC in the television programming and entertainment industries c. It creates a differentiated market got its product and commodity market for the complementary good. Whether video games are exclusive to a single video console platform d. © 2013 Robert M. The difference between substitute and complementary products may be summarized as follows: @ Pages and References: p89 a. Substitutes reduce the value of a product. The size of the video console producers relative to the size of the video game publishers. rather than structure shaping competition c. Complements reduce the value of a product. About half c. Grant www. Complements cannot be used together. The question is cannot be answered because “industry” is a meaningless concept. The producer of a complementary product can maximize its relative bargaining power by means of: @ Pages and References: pp90-91 a. Adopting a differentiation strategy that allows it to sell at a premium price b. Less than 25% d. Complements increase the average price of any of them. Empirical research shows that proportion of inter-firm differences in profitability that industry factors explain is: @ Pages and References: p88 a. The bargaining power of the different groups and the effectiveness with which it is deployed d. How this value is distributed between the suppliers of video game consoles and the suppliers of video games depends upon: @ Pages and References: p90 a. Adopting a cost cutting strategy to provide its product at the lowest possible cost and so exploit economies of scale c.Chapter 4 Further Topics in Industry and Competitive Analysis 30. The different levels of industry analysis that the five forces model can be applied to 31. Aggressive rivalry over appropriation where the outcome is often to destroy much of the aggregate value created 35. 34. The relative technological complexity of the two products c. Video game consoles and video games are complementary products: the availability of one increases the value of the other. Agreement that share it on an equal basis where each player has an incentive to stay b. Reducing the value contributed by restricting complementors’ access to the market d. Relative bargaining power c. 32. whereas substitutes can d. The relationships of substitution between products or services within one segment of the market b. Which costs more to develop. consoles or video games b. Competitors’ strategies may shape the industry structure.contemporarystrategyanalysis. The combined value created by complementary products is shared among different groups of producers according to: @ Pages and References: pp90-91 a. The complexity and stability of the competitive world where rivals’ strategies affect each other d.com 15 . whereas complements increase value b. More than 75% b. whereas substitutes do the opposite 33. Porter’s five forces model of competition is too simple as originally conceived because it overlooks phenomena such as: @ Pages and References: p88 a. whereas substitutes increase value c. Competitive advantage is temporary b.com 16 . In a market where Firm A and Firm B are leading suppliers. competition: @ Pages and References: pp92-93 a. predicting the outcome of competitive situations. Empirical research shows that the answer is Yes b. Competition is essential for the renewal of mature and declining industries 38. and social behavior d. 40. Cooperation is more common in business than competition c. Extending the theory of competition behavior to embrace cooperative behavior c. In many business relationships. While the Porter five forces framework views industry structure as determining competitive behavior. Framing strategic decisions. Is so different from cooperation that a comparison does not make sense © 2013 Robert M. 43. compared to cooperation c. We can all see evidence of the absence of the phenomenon 41. A gale of creative destruction c. Schumpeter and the Austrian School view: @ Pages and References: p91 a. If the market is growing. and identify optimal strategic choices. Bringing greater rigor to the analysis of competition b. Competitors’ behavior determines industry structure rather than the other way round d. “If it ain’t broke. The value of game theory to the field of management is in: @ Pages and References: p96 a. Results in a superior outcome for the players. Results in an inferior outcome for the players. An unstable and dynamic field where more destruction exists than creation b. Competition as a temporary phase before the emergence of monopolies. The key implication of “hypercompetition” in business is that: @ Pages and References: p91 a. Technological change will continue to accelerate c. 42. Schumpeter’s process of “creative destruction” suggests that: @ Pages and References: p91 a. diplomacy.36. Competition as determining industry structure d. Competition as an active rather than a passive force b. Joseph Schumpeter viewed competition as: @ Pages and References: p91 a. Is hyper-competition a common phenomenon across industries? @ Pages and References: pp91-92 a. 39. If Firm B is a private rather than a public (listed) company d. Empirical research remains inconclusive d. compared to cooperation b. Inevitable 37. the likelihood that Firm B responds with an identical price cut will be greater: @ Pages and References: pp94-96 a. Extending the analysis of competitive behavior to the realms of politics. If Firm B’s medium term goal is to maximize market share○ c. A breeze of creative destruction d. Hindu and Buddhist notions of rebirth are applicable to business strategy b. The concept of Schumpeterian competition needs to be updated to realities of the 21st century. Empirical research shows that the answer is No c. don’t fix it” is an obsolete piece of advice d. if Firm A initiates a price cut. Grant www. compared to cooperation d. Results in an outcome not statistically different. If Firm B’s medium term goal is to maximize profit b.contemporarystrategyanalysis. Competition as a disequilibrium phenomenon c. Increased risk and removal of some possible strategic operations 48. It appears as not at all credible b. A strong incentive not to behave in a certain way c. Commitment involves: @ Pages and References: pp93-95 a. Hard commitment for first movers or soft commitment for fast second movers d. Any deliberate action that is intended to influence rivals’ perceptions or behavior c. Increased risk and measurement of rivals’ determination before a competitive attack c. then: @ Pages and References: p93 a. It makes deterrence appear more credible b. Both can co-exist at the same time. A situation where prisoners representing industry players exhibit behavior showing that collusion would improve outcome b. Cooperation and competition may exist in an industry. It shows the power of the focal firm c. It reinforces the power of the threatening party 47. A strong incentive to create organizational punishment d. Grant www. Deception through misinformation d. A situation where prisoners rat on each other and finally get out of jail c. but not in the same industry segment or strategic group © 2013 Robert M. Why is commitment so important? Because: @ Pages and References: pp93-95 a. Signaling refers to: @ Pages and References: pp95-96 a. Internal communications that divert strategic orientations and obtain the buy-in of the organization’s key stakeholders 50. It appears as extremely credible c. The relationship between competition and cooperation can be described as follows: @ Pages and References: p93 a. A strong incentive to delay the game until a Nash equilibrium appears optimal for all 46. but not at the same time c. Communications that announce your strategic intentions or plans to rivals b.44. It demonstrates the will of rivals to resist d. It strengthens a leader’s image in the eyes of his followers 49. Both can co-exist simultaneously d. If administering deterrence is costly or unpleasant for the threatening party. A strong incentive to behave in a certain way b. if they cooperate they will be investigated by competition bodies b. Increased risk and better solutions for building successful strategies b. Industries either compete or cooperate. The “prisoners’ dilemma” can be described as: @ Pages and References: p94 a. An invention of business journalists to illustrate the fight between substitute product sellers 45. Deterrence is defined as: @ Pages and References: p93 a.contemporarystrategyanalysis. A situation where no one can obtain an optimal outcome because actors are playing blind and can only ever reach “Nash equilibrium” d. It does not influence its power d.com 17 . To attempt to predict competitive behaviors. its objectives. Firms forming an industry association to represent their common interests b. The rival’s current strategy. Is easily resolved by hiring a good lawyer 54. then its competitive advantage. Is not always clear c.com 18 . A practice which.51. Is clearly defined by legislation and case law relating to trade secrets b. In the automobile industry. an example of an industry recipe is: @ Pages and References: p99 a. its future strategy. though legal in most countries. The rival’s available resources and competencies. Competitive intelligence. its assumptions about the industry and itself. Forecast competitors’ future financial performance and analyze responses to their previous strategic initiatives c. is: @ Pages and References: pp97-99 a. A useful activity that forms an important element of firm’s environmental scanning and strategic analysis d. its objectives. The level of a rival’s current performance. The distinction between legitimate competitive intelligence and industrial espionage: @ Pages and References: pp97-99 a. The assumption that all cars must have an engine and four wheels 57. its available resources and competencies. in relation to its objectives: @ Pages and References: pp98-99 a. The rival’s assumptions about the industry. c. to forecast their attacks against the focal firm’s domestic market 53. and explore how their behavior may be positively influenced b. Segmentation is a process through which: @ Pages and References: pp99-100 a. Determines the likelihood of the rival’s strategy change c. the systematic collection and analysis of information about rival firms. Likely to distract firms from their efforts to establish positions of competitive advantage based upon their distinctive strengths c. where analysts must identify: @ Pages and References: pp98-99 a. Determines the likelihood of a strategy change in your firm d . Is a myth – they are almost the same d.contemporarystrategyanalysis. One can assess the strengths and weaknesses of any firm in its market © 2013 Robert M. its objectives. The perception that cost efficiency requires an annual production volume of over four million cars annually. its assumptions. and signal the firm’s strategic initiatives d. Determines the likelihood of a state’s intervention in the competitive game 56. Has no specific influence on any player’s strategy b. Competitive intelligence aims to: @ Pages and References: pp97-99 a. A useful activity because it can help firms imitate the strategies of their more successful competitors. Grant www. predict their reactions. especially. and its competitive advantage d. Porter suggests a four-step framework. The formation of strategic alliances with one another d. Explore how rivals’ behavior could be positively influenced in the firm’s interest. To analyse the rival’s current strategy. and its vulnerabilities c. 52. Collect information about rivals in other countries and. is unethical b. and its available resources and capabilities b. Forecast competitors’ behavior. and finally its performance 55. Firms in an industry with similar strategies c. obstacles to changing a firm’s strategy over time. Firms that target the same customer groups © 2013 Robert M. There are large differences in income among consumers d. Firms that follow similar generic strategies (e. 62. The evolution of competition within an industry d. focus or differentiation) b. Product characteristics are matched with customer preferences 58. Why some groups of firms within an industry are more profitable than others b. Analyzing different horizontal and vertical activities and the assessment of their strengths and weaknesses 64. Identifying area of “blue ocean” within an industry.contemporarystrategyanalysis. Analyzing market shares in the different stages of the value chain in an industry d. Barriers to mobility are high. barriers that protect a segment from firms established in other industries c. The main use of industry segmentation analysis is: @ Pages and References: p100 a. barriers that protect a segment from firms established in other segments of the same industry b. Barriers to mobility protect a dynamic industry while barriers to entry protect a static industry d. Analyzing expenditures across different stages of the value chain in an industry c. Industries are divided into groups of similar products d. Analyzing profitability across different stages of the value chain in an industry b. Grant www.g. barriers that prevent globalization and developing a firm’s business abroad 60. 61. Barriers to mobility are: @ Pages and References: p102 a. Identify the most attractive segments for a firm to locate within○ b. Strategic groups consists of: @ Pages and References: pp104-105 a.b. Barriers to entry protect the industry as a whole whereas barriers to mobility protect segments within the industry 63. There is no real difference c. Formulate better marketing strategies d. The positioning of different firms and patterns of competition within an industry c. “Profit pool mapping” describes a technique for: @ Pages and References: p104 a. Understand better the needs of different customer groups c. Barriers to entry target more specifically the entry by aggressive would-be incumbents b. once it becomes obsolete or inadequate for the changing environment d. The main usefulness of strategic group analysis is in understanding: @ Pages and References: pp104-105 a. A firm will choose to compete across multiple segments rather than specialize in a single segment if: @ Pages and References: p102 a. Firms that occupy the same industry segment d.com 19 . It is a family owned firm b. Predict the likely evolution of market structure 59. If the same resources and capabilities can be shared across different segments c. Industries are divided into specific markets c. The difference between barriers to entry and barriers to mobility is what? @ Pages and References: p102 a. 65.contemporarystrategyanalysis. Grant www. BalticAir. EasyJet.com 20 . SkyEurope. Have nothing in common © 2013 Robert M. Are generally small size firms. Belong to the same strategic group d. this small size gives them the advantage of flexibility and the capacity to adapt rapidly c. Answers a and b d. Neither a nor b 66. Describing and understanding the strategic positioning of firms within an industry c. therefore do not compete directly b. Strategic group analysis is primarily useful for: @ Pages and References: p105 a. Identifying strategic niches b. and Ryanair: @ Pages and References: p105 a. Have different route networks. In European airline industry.