BSM 600 FINAL EXAM UPDATED ACTUAL QUESTIONS
AND CORRECT ANSWERS
Question:
1. The Strategic Management Process involves making 4 strategic choices. What are they?
Answer:
(1) markets to compete in; (2) unique value the firm will offer in those markets; (3) the resources and
capabilities required to offer that unique value better than competitors; and (4) ways to sustain the
advantage by preventing imitation.
Question:
2. The 2 strategies for offering unique value are...
Answer:
Cost Advantage: An advantage that a firm has over its competitors in the activities associated with
producing a product or service, thereby allowing it to produce the same product at lower cost.
Differentiation Advantage: An advantage a firm has over its competitors by making a product more
attractive by offering unique qualities in the form of features, reliability, and convenience that distinguish
it from competing products.
Question:
3. What's the difference between external and internal analysis?
Answer:
External Analysis: Examining the forces that influence industry attractiveness, including opportunities and
threats that exist in the environment.
Internal Analysis: The analysis of a firm's resources and capabilities, its strengths and weaknesses, to
assess how effectively the firm is able to deliver the unique value (value proposition) that it hopes to
provide to customers.
Question:
4. What is a mission statement?
Answer:
Companies often begin with a mission to define their purpose and core values. Examples include
Starbucks' mission to bring high-quality coffee to the masses and Apple's evolution from a computer
company to a diverse tech innovator.
Question:
5. Describe the various phases in the Strategic Management Process
Answer:
Write down the chart on a piece of paper
Question:
6. Describe the various phases of strategic analysis
Answer:
Write down the chart on a piece of paper
,Question:
7. What is SWOT Analysis?
Answer:
SWOT Analysis: Strategic planning method used to evaluate the strengths, weaknesses, opportunities, and
threats involved in a business.
Question:
8. What are Porter's Five Forces?
Answer:
Rivalry Threat of new entrants Supplier power Buyer power Substitutes
Question:
9. What is rivalry among existing competitors?
Answer:
Influenced by industry growth, product differentiation, and the number of competitors. Standardized
products often lead to higher competition as buyers have low switching costs.
Question:
10. What is the threat of new entrants?
Answer:
Barriers like economies of scale, capital requirements, and brand loyalty prevent new competitors.
Network effects and government regulations also influence entry barriers.
Question:
11. What is bargaining power of suppliers?
Answer:
Suppliers can exert power by raising prices or reducing quality. This power increases when suppliers are
concentrated or if switching suppliers is costly.
Question:
12. What is bargaining power of buyers?
Answer:
Buyers gain power if they can easily switch suppliers or if products are undifferentiated. Price-sensitive
buyers can force companies to lower prices or improve quality.
Question:
13. What is threat of new entrants?
Answer:
Substitute products or services can limit industry profitability. Awareness, availability, and
price-performance trade-offs affect substitute threats.
Question:
14. General Environment Factors Affecting Profitability Part 1
, Answer:
Demographics: Changes in population size, age distribution, and cultural norms can reshape demand in
industries. Strategic shifts may be required to align with emerging demographic trends.
Economic Factors: Economic growth boosts demand and reduces price sensitivity. Recessions increase
rivalry and reduce supplier and customer spending.
Technological Changes: Advances in technology can create new industries or disrupt existing ones. Early
adopters often gain competitive advantages through market share and cost efficiencies.
Ecological/Natural Environment: Environmental trends influence industries dependent on natural
resources. Examples include shifts to renewable energy or public awareness of ecological impacts.
Question:
15. General Environment Factors Affecting Profitability Part 2
Answer:
Global Forces: International competition and globalization open new markets but increase competition.
Strategic adaptation to regional and global trends is crucial.
Political, Legal, and Regulatory Factors: Policies can dramatically alter industry landscapes, such as
regulations in healthcare or environmental standards. Firms need to be agile in response to regulatory
changes.
Social and Cultural Trends: Societal attitudes, values, and lifestyles shape consumer behavior and industry
practices. Firms must consider cultural nuances when expanding globally.
Question:
16. What are complimentary products?
Answer:
Complementary goods or services can enhance industry attractiveness. Examples: The growth of app
ecosystems boosted by smartphone operating systems like Apple's iOS or Android.
Question:
17. What factors go into industry attractiveness?
Answer:
Industry profitability is determined by all five forces (rivalry, new entrants, buyer/supplier power, and
substitutes).
Competitive dynamics vary significantly across industries and affect strategic decision-making.
External actions, such as government policies or technological changes, can reshape industry profitability.
Question:
18. What is the VRIO Model?
Answer:
1. Value - its contributions allow a company to produce a product or service that is of worth to end users.
Source of direct or indirect pleasure or satisfaction (e.g., Mickey Mouse for Disney).
2. Rarity - scarcity. When products or services are scarce, users are often willing to pay a higher price for
them (e.g., unique locations for McDonald's).
3. Inimitability - sources of value in the own products and services cannot be replicated (e.g., NBA, or
NFL games).
4. Organized to Exploit - ability to capture the value from their rare and inimitable resources (e.g.,
NFLPA).
AND CORRECT ANSWERS
Question:
1. The Strategic Management Process involves making 4 strategic choices. What are they?
Answer:
(1) markets to compete in; (2) unique value the firm will offer in those markets; (3) the resources and
capabilities required to offer that unique value better than competitors; and (4) ways to sustain the
advantage by preventing imitation.
Question:
2. The 2 strategies for offering unique value are...
Answer:
Cost Advantage: An advantage that a firm has over its competitors in the activities associated with
producing a product or service, thereby allowing it to produce the same product at lower cost.
Differentiation Advantage: An advantage a firm has over its competitors by making a product more
attractive by offering unique qualities in the form of features, reliability, and convenience that distinguish
it from competing products.
Question:
3. What's the difference between external and internal analysis?
Answer:
External Analysis: Examining the forces that influence industry attractiveness, including opportunities and
threats that exist in the environment.
Internal Analysis: The analysis of a firm's resources and capabilities, its strengths and weaknesses, to
assess how effectively the firm is able to deliver the unique value (value proposition) that it hopes to
provide to customers.
Question:
4. What is a mission statement?
Answer:
Companies often begin with a mission to define their purpose and core values. Examples include
Starbucks' mission to bring high-quality coffee to the masses and Apple's evolution from a computer
company to a diverse tech innovator.
Question:
5. Describe the various phases in the Strategic Management Process
Answer:
Write down the chart on a piece of paper
Question:
6. Describe the various phases of strategic analysis
Answer:
Write down the chart on a piece of paper
,Question:
7. What is SWOT Analysis?
Answer:
SWOT Analysis: Strategic planning method used to evaluate the strengths, weaknesses, opportunities, and
threats involved in a business.
Question:
8. What are Porter's Five Forces?
Answer:
Rivalry Threat of new entrants Supplier power Buyer power Substitutes
Question:
9. What is rivalry among existing competitors?
Answer:
Influenced by industry growth, product differentiation, and the number of competitors. Standardized
products often lead to higher competition as buyers have low switching costs.
Question:
10. What is the threat of new entrants?
Answer:
Barriers like economies of scale, capital requirements, and brand loyalty prevent new competitors.
Network effects and government regulations also influence entry barriers.
Question:
11. What is bargaining power of suppliers?
Answer:
Suppliers can exert power by raising prices or reducing quality. This power increases when suppliers are
concentrated or if switching suppliers is costly.
Question:
12. What is bargaining power of buyers?
Answer:
Buyers gain power if they can easily switch suppliers or if products are undifferentiated. Price-sensitive
buyers can force companies to lower prices or improve quality.
Question:
13. What is threat of new entrants?
Answer:
Substitute products or services can limit industry profitability. Awareness, availability, and
price-performance trade-offs affect substitute threats.
Question:
14. General Environment Factors Affecting Profitability Part 1
, Answer:
Demographics: Changes in population size, age distribution, and cultural norms can reshape demand in
industries. Strategic shifts may be required to align with emerging demographic trends.
Economic Factors: Economic growth boosts demand and reduces price sensitivity. Recessions increase
rivalry and reduce supplier and customer spending.
Technological Changes: Advances in technology can create new industries or disrupt existing ones. Early
adopters often gain competitive advantages through market share and cost efficiencies.
Ecological/Natural Environment: Environmental trends influence industries dependent on natural
resources. Examples include shifts to renewable energy or public awareness of ecological impacts.
Question:
15. General Environment Factors Affecting Profitability Part 2
Answer:
Global Forces: International competition and globalization open new markets but increase competition.
Strategic adaptation to regional and global trends is crucial.
Political, Legal, and Regulatory Factors: Policies can dramatically alter industry landscapes, such as
regulations in healthcare or environmental standards. Firms need to be agile in response to regulatory
changes.
Social and Cultural Trends: Societal attitudes, values, and lifestyles shape consumer behavior and industry
practices. Firms must consider cultural nuances when expanding globally.
Question:
16. What are complimentary products?
Answer:
Complementary goods or services can enhance industry attractiveness. Examples: The growth of app
ecosystems boosted by smartphone operating systems like Apple's iOS or Android.
Question:
17. What factors go into industry attractiveness?
Answer:
Industry profitability is determined by all five forces (rivalry, new entrants, buyer/supplier power, and
substitutes).
Competitive dynamics vary significantly across industries and affect strategic decision-making.
External actions, such as government policies or technological changes, can reshape industry profitability.
Question:
18. What is the VRIO Model?
Answer:
1. Value - its contributions allow a company to produce a product or service that is of worth to end users.
Source of direct or indirect pleasure or satisfaction (e.g., Mickey Mouse for Disney).
2. Rarity - scarcity. When products or services are scarce, users are often willing to pay a higher price for
them (e.g., unique locations for McDonald's).
3. Inimitability - sources of value in the own products and services cannot be replicated (e.g., NBA, or
NFL games).
4. Organized to Exploit - ability to capture the value from their rare and inimitable resources (e.g.,
NFLPA).
