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BPL 5100 Test Bank / BPL5100 Test Bank (TRUE/FALSE)(Latest 2020): Baruch College Test Bank for BPL 5100 / Test Bank for BPL5100 (TRUE/FALSE) (Latest 2020): Baruch College Chapter 1 1. The three interrelated and principal activities of strategic management are: strategy analysis, strategy formulation, and strategy implementation.
 2. Strategic management is not concerned with how to create competitive advantage in the marketplace 3. 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. 4. Hewlett-Packard's failure and success under the leadership first of Carly Fiorina and then of Mark Hurd was said to be a direct result of the quality of leadership of each of these CEOs. According to the text, this would be an example of the "romantic" perspective of leadership 5. Strategic management consists of the analyses, decisions, and actions an organization undertakes in order to create and sustain competitive advantages. 
 6. Strategic management is concerned with the analysis of strategic goals as stated in the vision, mission, and strategic objectives of a firm.
 7. Making trade-off decisions between effectiveness and efficiency is central to the practice of strategic management. 
 8. Only shareholders in a publicly held company are stakeholders because they are the only group that has a stake in the success of the organization.
 9. Strategic management is only concerned with short-term perspectives. 10. Focusing on a single stakeholder is a good strategic principle for managers to follow. 
 11. According to Peter Senge, a leading strategic management author, creative tension results from the need to incorporate both short-term and long-term perspectives in strategic management. 12. Shareholders expect only short-term value and therefore good managers should only focus on meeting short-term performance targets.
 13. Focusing on the short term and efficiency is always a bad management principle. 
 14. Ambidexterity refers to a manager's challenge to align resources, without having to take advantage of existing product markets or to proactively explore new opportunities.
 15. According to a recent study involving 41 business units in 10 multinational companies, one ambidextrous behavior exhibited by managers is that of being brokers who are always looking to build internal networks.
 16. According to Henry Mintzberg, a management scholar, most firms realize their original intended strategy. 
 17. The final realized strategy of a firm is a combination of deliberate and emergent strategies. 
 18. In the Mintzberg model, organizational decisions determined only by analysis are intended strategy. 
 19. Strategy analysis is the study of the external environments of the firm. 20. Both the internal and external environments of a firm must be analyzed as well as the goals of the firm before managers can formulate and implement appropriate strategies.
 20. Strategy formulation involves decisions made by firms regarding investments, commitments, and other aspects of operations that create and sustain competitive advantage.
 21. All successful firms compete and outperform their rivals by developing bases for competitive advantage, which can be achieved only through cost leadership.
 22. Business-level strategy focuses on (1) what businesses to compete in and (2) the management of the business portfolio to create synergy among its businesses.
 24. Corporate-level strategy addresses how firms compete and outperform their rivals as well as achieve and sustain competitive advantages.
 25. International strategy involves decisions concerning appropriate entry strategy and attaining competitive advantage in international markets.
 26. Entrepreneurial activity aimed at new value creation is not a major engine for economic growth. 
 27. Strategy implementation involves actions that carry out the formulated strategy including proper strategic controls, organizational designs, and leadership.
 28. Effective leadership can play a large role in fostering corporate entrepreneurship. Corporate entrepreneurship can have a very positive impact on the bottom line of a firm.
 29. Firms must exercise either informational control or behavioral control in order to assure proper strategy implementation. 
 30. Leaders are responsible for creating a learning organization so that the entire organization can benefit only from the individual talents.
 31. The three primary participants in corporate governance are: (1) the shareholders, (2) the management (led by the chief executive officer), and (3) the employees.
 32. Decisions by boards of directors are always consistent with shareholder interests. 
 33. Ensuring effective corporate governance requires an effective and engaged board of directors, uninvolved shareholders, and proper managerial rewards and incentives.
 34. Auditors, banks, and analysts are external control mechanisms to ensure effective corporate governance. 
 35. Former Chrysler vice chairman Robert Lutz observed that companies exist to serve the shareholder and create shareholder value. He insisted that the only person who owns the company is the
person who paid good money for it. This is an example of a symbiotic approach to stakeholder management. 
 Stakeholders make various claims on a company. Their interests must be taken into account in the strategic management process 36. Stockholders in a company are the only individuals with an interest in the financial performance of the company. 
 38. Stockholders, employees, and the community-at-large are among the stakeholders of a firm. 
 39. Symbiosis is the ability to recognize interdependencies among the interests of multiple stakeholders within and outside an organization.
 40. 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.
 41. Partnering with governments, communities, suppliers, customers, and rivals is a way to manage conflicting stakeholder interests.
 42. The Higgs Index enables companies to compare environmental performance outcomes in order to improve their environmental impact and is an example of how rivals work together to resolve complex problems.
 43. As a stakeholder group, creditors are interested in taxes and compliance with regulations. 
 44. As a stakeholder group, customers are interested in dividends and capital appreciation. 
 45. As a stakeholder group, communities are interested in good citizenship behavior. 
 46. Social responsibility is the idea that organizations are not only accountable to stockholders but also to the community-at-large. 
 47. What constitutes socially responsible behavior changes over time. 
 48. Shell, NEC, and Procter and Gamble have been measuring their performance according to what has been called a triple bottom line. This technique involves an assessment of financial, social, and environmental performance.
 49. Demands for greater corporate responsibility are decreasing today. 
 50. A key stakeholder group that appears to be particularly susceptible to corporate social responsibility (CSR) initiatives is customers. 51. There is a positive influence of CSR on the consumer evaluation of companies and their purchasing decisions, according to recent studies.
 52. Environmental sustainability is a value embraced by the most competitive and successful multinational companies. 
 53. For many successful firms, environmental values are not central to the company culture and management processes. 
 54. Sustainability is being increasingly recognized as a source of cost efficiencies and revenue growth. 
 55. The ROIs on sustainability projects are often very difficult to quantify because the data necessary to calculate ROI accurately are often not available when it comes to sustainability projects.
 56. Many of the benefits from sustainability projects are intangible, making it difficult to calculate the ROI. 
 57. The intangible benefits of sustainability projects, such as reducing risks, staying ahead of regulations, pleasing communities, and enhancing employee morale, are substantial even when they are difficult to quantify.
 58. Sustainability projects often require shorter-term payback windows than other projects. 
 59. Sustainability initiatives rarely have difficulty making it through the conventional approval process within corporations because managers are not concerned about their return on investment.
 60. The ROI on a sustainability project generally is easy to quantify. 
 61. Strategic management requires managers at all levels of the organization to take a segregated view of the organization. 
 62. 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.
 63. To develop and mobilize people and other assets, leaders are needed throughout the organization. 
 64. In the strategic management process, only local line leaders and executive leaders are needed. 
 65. Internal networks have great positional power and formal authority. 
 66. Local line leaders have little profit-and-loss responsibility. 
 67. Executive leaders champion and guide ideas. 
 68. Local line leaders are key in setting the tone for the empowerment of employees. 
 69. Richard Branson, the founder of the Virgin Group, is well known for creating an inclusive organizational structure in which anybody in the organization can be involved in generating and activating upon new business ideas.
 70. To inculcate a strategic management perspective, managers must often make a major effort to effect transformational change. 
 71. To effect transformational change in an organization, managers must communicate extensively and provide incentives, training, and development.
 72. Nancy Snyder, corporate vice president of Whirlpool, shifted the reputation of the firm to that of an innovator by investing financially in capital spending.
 73. Successful executives do not reward honesty and input and do not show their interest in learning what others are thinking. 
 74. According to the CEO of IDEO, Tim Brown, spotting and promoting at any level in the firm is important. 
 75. There are few benefits to having broad investment throughout the organization in the strategic management process. 
 76. Showing interest in learning what others are thinking is a leadership weakness. 
 77. The vision of an organization is the top level of its hierarchy of organizational goals. The vision statement should be massively inspiring, overarching, and long term.
 78. Strategic objectives are more specific than vision statements. 79. According to the text, a mission statement is an overarching statement that is massively inspiring, long term, and only discusses the purpose of the company.
 80. A mission statement encompasses both the purpose of the organization as well as its basis of competition, and the basis of its competitive advantage.
 80. Strategic objectives should be measurable, specific, appropriate, and realistic, but not constrained by time deadlines. 
 81. Much research has supported the notion that individuals work much harder when they are asked to do their best rather than when they are striving toward a specific goal.
 82. Objectives in organizations should be clear, stated, and known by employees throughout the organization. 
 84. Strategic management should only include short-term objectives. Long-term objectives are covered in the vision statement of the organization.
 85. Organizational goals and objectives should be vague in order to allow for changes in strategy. 
 86. An idealistic vision can arouse employee enthusiasm and therefore is a good vision. 
 87. One of the reasons a vision fails is that too much focus can lead to missed opportunities. 
 88. Visions need to be anchored in reality in order to be successful. 
 89. Effective mission statements incorporate the concept of stakeholder management, suggesting that organizations must respond to a single constituency.
 90. A good mission statement, by addressing each principal theme, must communicate why an organization is special and different.
 91. When formulating strategic objectives, managers need to remember that too many objectives can result in a lack of focus and diminished results.
 Chapter 2 1. Environmental scanning and competitor intelligence provide important inputs for forecasting activities. 
 2. Perceptual acuity, according to Ram Charan, is the ability to know for certain what will happen in the future. 
 3. Ted Turner saw the potential of 24-hour news before anyone else. This is an example of perceptual acuity. 
 4. Perceptual acuity can be improved by sitting alone and not consulting others. 
 5. One CEO gets together with his critical people for half a day every eight weeks to discuss what's new and what's going on in the world. The setting is informal, and outsiders often attend. This is an example of how not to improve perceptual acuity.
 6. A CEO meets four times a year with about four other CEOS of large, but noncompeting, diverse global companies. This is an example of how to improve perceptual acuity.
 7. Two companies ask outsiders to critique strategy during their board's strategy sessions. Such input typically leads to spirited discussions that provide valued input on the hinge assumptions and options that are under consideration. This is an example of how to improve perceptual acuity.
 8. Scenario planning is useful for anticipating major future changes in the external environment. 
 12. Environmental monitoring is not an input to forecasting. 
 13. When management assumptions, premises, or beliefs are incorrect or when internal inconsistencies among them render the overall theory of the business invalid, the strategy of the firm needs to be updated.
 14. Consider the example of Salemi Industries and the launch of its product, Cell Zone, in 2005. Although it tried to carefully analyze its potential market, it misread the market demand for the product and paid a steep price for its mistake. This is an example of internal forecasting.
 15. If companies miscalculate the market, opportunities will be lost. 
 13. Blockbuster, Borders, Circuit City, and Radio Shack are examples of firms that did not have good perceptual acuity. 
 14. Environmental monitoring deals with tracking changes in environmental trends that are often uncovered during the environmental scanning process.
 15. Competitor Intelligence (CI) is a tool that can provide management with early warnings about both threats and opportunities. 
 16. Competitive intelligence generally does not benefit very much from gathering information on 
competitors from sources in the public domain. 
 17. Even with all of the advances in recent years, forecasting is typically considered more of an art than a science and it is of little use in generating accurate predictions.
 18. Environmental scanning involves surveillance of the internal environment of a firm to predict environmental changes and detect changes already under way.
 19. Scenario analysis is a superficial approach to forecasting that seeks to explore possible developments that many only be connected to the past.
 20. SWOT analysis is useful in part because it obliges the firm to act proactively by putting an emphasis on identifying opportunities and threats that constrain the action choices a firm might make as a result of its internal and external environmental scan.
 23. In the SWOT framework, the Strengths and Weaknesses are external environmental factors to consider. 
 24. In the SWOT framework, Opportunities and Threats are environmental conditions internal to the firm. 
 25. A Motel 6 executive indicates that he regularly reviews the number of rooms in the budget segment of the industry in the United States and the difference between the average daily room rate and the consumer price index (CPI). This is an example of Competitive Intelligence.
 26. Keeping track of competitors has become more difficult today with the amount of information that is available on the Internet. 
 28. Code of Ethics guidelines can assist companies in avoiding aggressive competitive intelligence gathering that results from illegal behaviors.
 29. Even with all of the advances in recent years, forecasting is typically considered more of an art than a science and it is of little use in generating accurate predictions.
 30. Scenario planning is usually concerned with short-term forecasts. 
 31. The strengths and weaknesses of a SWOT analysis refer to the external conditions of the firm. 
 32. The opportunities and threats of a SWOT analysis refer to the internal conditions of the firm. 
 33. To understand the business environment of a particular firm, you need to analyze both the general environment and the firm industry and competitive environment.
 34. Underestimating uncertainty can lead to strategies that neither defend against threats nor take advantage of opportunities. 
 35. PPG Industries has developed four alternative futures based on differing assumptions about two key variables: the cost of energy and the extent of opportunity for growth in emerging markets. This is called demand monitoring.
 36. The SWOT analysis framework leads to a conceptually simple approach to identifying the important factors that constrain strategic choices without sacrificing analytical rigor.
 37. Steve Jobs, the former chairman of Apple, used intuition and judgment to forecast the future. 
 37. Scenario analysis is a form of environmental forecasting. 
 38. Scenario analysis relies on the extrapolation of historical trends. 
 39. An industry is composed of a set of firms that produce similar products or services, sell to similar customers, and use similar methods of production.
 40. Only one scenario is considered in a scenario analysis in order to envision possible future outcomes. 
 39. Although changes in the general environment may often adversely or favorably impact a firm, they seldom alter an entire industry.
 40. The impact of a demographic trend varies across industries. 41. A major sociocultural trend in the United States is the increased educational attainment by women. 
 42. Technological innovations can create entirely new industries and alter the boundaries of industries. 
 43. There is generally a weak relationship between equity markets (e.g., New York Stock Exchange) and economic indicators. 
 44. The Internet is a leading component in the rising emergence of digital technology. 
 45. Globalization provides opportunities to access larger potential markets and a narrow base of production factors such as raw materials, labor, skilled managers, and technical professionals. 
 46. A demographic trend in the United States, the aging of the population, has important implications for the economic segment (in terms of tax policies to provide benefits to increasing numbers of older citizens).
 47. Crowdsourcing is used by companies to develop products. 48. By inviting customers to write online reviews, Amazon used crowdsourcing to build value to its offer. 
 49. Research shows that many immigrants to the United States are prodigious job creators. This supports legislative battles to increase the number of H-1B visas for foreign workers.
 49. It is not important to consider the potential impact of government regulation when developing new innovations. 
 50. Developments in technology and other innovations can create new industries and alter the boundaries of existing industries. 
 51. The competitive environment consists of many factors that are particularly relevant to company strategy. This includes competitors, customers, and suppliers.
 53. The Porter five-forces model is designed to help us understand how social attitudes and cultural values impact U.S. businesses. 54. The five-forces model helps to determine both the nature of competition in an industry and the profit potential for the industry. 55. In some industries, high switching costs can act as an important barrier to entry. 56. Industries characterized by high economies of scale typically attract fewer new entrants. 57. The power of a buyer group is increased if the buyer group has less concentration than the supplier group. 58. Buyer power tends to be higher if suppliers provide undifferentiated or standard products. 59. Supplier power tends to be highest in industries where products are vital to buyers, where switching from one supplier to another is very costly, and where there are many suppliers.
 60. The power of suppliers will be enhanced if they are able to maintain a credible threat of forward integration. 61. The more attractive the price/performance ratio of substitute products, the tighter it constrains the ability of an industry to charge high prices.
 62. Rivalry is most intense when there are high exit barriers and high industry growth. 63. Rivalry will be most intense when there is a lack of differentiation or switching costs. 64. Rivalry is not always cutthroat; sometimes, it can be gentlemanly. . 65. In most industries, new entrants will not be a threat because the internet lowers entry barriers. 53. The Internet and digital technologies suppress the bargaining power of buyers by providing them with more information to make buying decisions.
 54. Switching costs for an end user are likely to be much higher because of the Internet. 
 55. Because of the Internet and digital technologies, it is very difficult for suppliers to create purchasing techniques that lower switching costs.
 56. Reintermediation is responsible for an overall reduction in business opportunities. 
 56. The Internet heightens the threat of substitutes because it creates new ways to accomplish the same task. 
 57. Five-forces analysis implicitly assumes a zero-sum game, a perspective that can be short-sighted. 
 58. Michael Porter's five-forces Analysis is a dynamic tool for analyzing industry attractiveness. 
 59. Complement products typically have no impact on the value of products and services of the firm. 
 60. The Nintendo success story in the early 1990s was a result of its ability to manage its relationship with its complementors, such as the licensee rights given to outside firms to develop games using the Nintendo game console.
 61. Apple used complementors to gain market share in the digital music business. 
 62. Establishing long-term mutually beneficial relationships with suppliers improves the company ability to implement just-in-time (JIT) inventory systems, which let it manage inventories better and respond quickly to market demands.
 64. In conducting a good industry analysis that will yield an improved understanding of the root causes of profitability, rigorous quantification of the five forces is not necessary.
 65. Competition tends to be more intense among firms within a strategic group than between strategic groups. 
 66. The same environmental trend or event may have a very different impact on different strategic groups within the same industry. 
 67. The use of the strategic group concept is generally not helpful in charting the future directions of the 
strategies of a firm. 
 68. Strategic groupings help a firm identify barriers to mobility that protect a group from attacks by other groups. 
 69. Another value of strategic grouping is that it helps a firm identify groups whose competitive position may be marginal or tenuous. 
 70. Strategic groupings are of no assistance in charting the future direction of company strategy. 
 72. Strategic groups are helpful in thinking through the implications of each industry trend for the strategic group as a whole. 
 73. A sharp increase in interest rates, for example, tends to have more impact on providers of higher- priced goods (e.g., Porsches) than on providers of lower-priced goods (e.g., Chevrolet Cobalt), whose customer base is much more price-sensitive.
 74. If all strategic groups are moving in a similar direction, this could indicate a high degree of future volatility and intensity of competition.
 76. The strategic groups concept is valuable for determining mobility barriers across groups, identifying groups with marginal competitive positions, charting the future directions of firm strategies, and assessing the implications of industry trends for the strategic group as a whole.
 77. The concept of strategic groups is also important to the external environment of a firm. 
 78. The strategic groups concept is valuable for identifying groups with marginal competitive positions. 
 Chapter 3 5. One advantage of SWOT analysis is that it helps managers to identify strengths that are almost always sources of sustainable competitive advantages. 
 6. The SWOT analysis can show managers how to achieve a competitive advantage. 
 7. The strengths and capabilities of a firm are enough to enable it to achieve a competitive advantage in 
the marketplace. 
 9. Toyota paid a heavy price for its excessive emphasis on cost control. By focusing on one strength exclusively, it suffered severe losses. This is an example of the limitations of a SWOT analysis. 
 10. In conducting a SWOT analysis, a risk for strategists is that they rely on traditional definitions of their 
industry and competitive environment and therefore focus too narrowly on current competitors. 
 11. The SWOT framework is sufficient as the primary basis for evaluating the external opportunities and 
threat of the company. 
 12. The SWOT framework is not sufficient as the primary basis for evaluating the internal strengths and 
weaknesses of a company. 16. Top managers have learned not to rely on SWOT to stimulate self-reflection and group discussions about how to improve their firm and position for success. 
 17. Company strengths and weaknesses are tied to its stated goals and objectives. 
 18. If a firm builds its strategy on a capability that cannot, by itself, create or sustain competitive 
advantage, it is wasting its time and resources. 

 19. Focusing too narrowly on current customers, technologies and competitors can lead a company to 
overlook periphery industry boundaries and a new set of competitive relationships. 17. Encyclopedia Britannica lost competitive positioning due to a misunderstanding of the change in competitors, when the CD-based encyclopedia became popular for home computers. 
 18. The static nature of the SWOT assessment is a positive advantage for it as an evaluation 
 19. Value-chain analysis assumes that the basic economic purpose of a firm is to create value and it is a 
useful framework for analyzing the strengths and weaknesses of the firm. 
 20. In value-chain analysis, value is measured by the market value of the total stock outstanding of the 
company. 21. Primary activities contribute to the physical creation of a product or service, its sale and transfer to the buyer, and its service after the sale. 
 22. The value-chain concept assumes that both primary and support activities are capable of producing 
value for customers. 
 23. Inbound logistics include all activities associated with transforming inputs into the final product form 
such as machining, packaging, assembly, equipment, testing, printing, and facility operations. 
 24. Support activities provide support for primary activities, but not each other. 
 27. Establishing a customer service hotline to handle customer complaints would be considered a primary activity in value-chain analysis. 
 28. Technology development is a much broader concept than research and development. 
 29. In value-chain analysis, finance and accounting are considered part of the general administration of a 
 30. Frito-Lay uses crowdsourcing to make its Super Bowl ads. This is an example of a primary activity in 
the value chain. 
 32. Campbell Soup uses an electronic network to facilitate its continuous-replenishment program with its most progressive retailers. This is known as an operations primary activity in the value chain. 
 33. Technip has developed intelligent pipes that can monitor and regulate the temperature throughout an 
oil pipeline. This is an example of a procurement support activity in the value chain. 
 34. At S, a customer service representative taking a phone call from a repeat customer has 
instant access to what shade of lipstick she likes best. This is an example of a procurement support activity in the value chain. 
 27. Managers should focus their attention on interrelationships among value-chain activities within the firm, not on relationships among activities within the firm and other organizations (such as suppliers and customers). 
 28. Some leading edge companies are applying the prosumer concept. Here, firms team up with their suppliers and alliance partners to satisfy their customer needs. 29. Value-chain analysis can only be applied to manufacturing operations. 30. Information technology (IT) can also play a key role in enhancing the value that a company can provide its customers and, in turn, increasing its own revenues and profits. IT is an activity within the support activities of general administration. 
 31. Campbell Soup uses electronic networks in order to improve the efficiency of outbound logistics. This is an example of relationships among activities within the firm and with other stakeholders that are part of the company expanded value chain. 
 32. Some firms find great value by not incorporating their customers into the value creation process. 33. Crowdsourcing has many benefits, including the example in which McDonalds set up a Twitter campaign to promote positive word of mouth which became a platform for people looking to bash the chain. 
 34. Strong brands are typically built through consistent, effective marketing, and companies need to weigh the potential for misbehaving customers to thwart their careful efforts. 35. Porsche received a lot of negative feedback when it announced plans to release an SUV, but it went ahead anyway, and the Porsche Cayenne was a great success. This is an example of a peril of making decisions based on crowdsourcing. 
 36. At times, the difference between manufacturing and service is in providing a customized solution rather than mass production, as is common in manufacturing. 
 37. A travel agent does not add value by creating an itinerary that includes transportation, accommodations, and activities that are customized to your budget and travel dates. 38. A law firm renders services that are specific to client needs and circumstances. This is an example of the transformation process of a service organization. 39. The activities that may provide support only to one company may be critical to the primary value- adding activity of another firm. 
 40. The resource-based view of the firm focuses solely on the internal analysis of the operations of the firm. 41. Tangible resources are assets that are relatively easy to identify such as financial and physical assets. 42. Intangible resources of a firm refer to its capacity to deploy tangible resources over time and leverage those resources effectively. 43. Financial resources such as cash and cash equivalents are intangible resources. 44. Effective strategic planning processes are intangible resources. 45. Company reputation with customers, suppliers and other stakeholders is an intangible resource 46. Examples of organizational capabilities are outstanding customer service, excellent product development capabilities, superb innovation processes, and flexibility in manufacturing processes. 47. Harley-Davidson sells accessories, clothing, toys and motorcycles. They have a brand image in common which is a tangible resource. 
 48. Comcast gets a bad review on Yelp. This is an example of harm to a tangible resource. 49. FedEx employees take computer-based job competency tests every 6 to 12 months in order to identify areas of individual weakness and provide input to a computer database of employee skills. This is an example of a tangible resource. 
 50. Trade secrets are intangible resources. 51. Modern plant and facilities as well as favorable manufacturing locations are tangible resources. 52. Patents, copyrights, and trademarks are intangible resources. 53. Products and services that are difficult to imitate help firms sustain their profitability. 54. Path dependency has no impact on the inimitability of resources. 55. Capabilities that exhibit causal ambiguity are difficult to imitate. 56. For a resource to provide a firm with potential sustainable advantages it must satisfy only two criteria: rareness and difficulty in substitution. 57. Firms that are successful in creating competitive advantages that are sustainable for a period of time do not have to be concerned about profits being retained by employees or managers. 58. Employee exit cost is a factor that can increase employee bargaining power and help him or her appropriate profits of the firm. 
 59. Amazon Prime is an example of a difficult to imitate capability that gives it competitive advantage over its rivals. 60. Dell lost its competitive advantage by 2009 in part because it placed its efforts on operational excellence to the exclusion of reinvention. 61. The corporate culture at Southwest airlines is an example of causal ambiguity. 62. People want to partner with you because they have heard you are a credible company built through
a culture of trust. In a sense, being a great company to work for also makes you a great company to work with. This is an example of causal ambiguity. 63. Two valuable firm resources (or two bundles of resources) are strategically equivalent when each one can be exploited separately to implement the same strategies. 64. Though two teams could have different ages, functional backgrounds, experience, and so on, they could be strategically equivalent and thus substitutes for one another. 
 65. Several pharmaceutical firms have seen the value of patent protection erode in the face of new drugs that are based on different production processes and act in different ways, but can be used in similar treatment regimes. This example illustrates the lack of sustainable competitive advantage being offered by the product. 
 66. Financial analysis provides an accurate way to assess the relative strengths of firms and can be used as a complete guide to study companies. 67. Leverage ratios provide measures of the capacity of a firm to meet its long-term financial obligations. 68. Historical comparisons are most appropriate during periods of recession or economic boom. 69. When using industry norms as a standard of comparison, managers must be sure that the firms used in the comparisons are representative of all sizes and strategies within the industry. 70. The current ratio is used to measure long-term solvency. 71. The price-earnings ratio is used to measure profitability. 72. The total debt ratio is used to measure profitability. 73. Inventory turnover is a measure of asset utilization. 74. The profit margin ratio is used to measure long-term solvency. 75. The return on assets ratio is used to measure short-term solvency of the firm. 76. A meaningful ratio analysis need only include how ratios change over time. 77. When using industry norms as a standard of comparison, managers must be sure that the firms used in the comparisons are representative of all sizes and strategies within the industry. 78. When evaluating the financial performance of a firm, it is important to compare the results with industry norms. 79. A primary benefit of the balanced scorecard is that it complements financial indicators with operational measures of customer satisfaction, internal processes, and the innovation and improvement activities of the organization. 
 35. The balanced scorecard enables managers to evaluate their business from only two perspectives: customer and financial. 
 36. An important implication of the balanced scorecard is that managers need not look at their job as 
primarily balancing stakeholder demands. 
 37. A strength of the balanced scorecard is that it is very easy to implement and that there is little need for 
executive sponsorship. 
 38. In considering the business from the innovation and learning perspective using the balanced scorecard, 
the ability of the firm to do well is more dependent on its intangible and tangible assets. 
 38. In considering the business from the customer perspective using the balanced scorecard, company performance is essential. 
 39. In considering the business from the internal business perspective using the balanced scorecard, 
customer-based measures must be translated into indicators of what the firm must do internally to meet customer expectations. 
 40. In considering the business from the internal business perspective using the balanced scorecard, 
periodic financial statements are used to indicate the consequences of improved quality, response time, productivity, and innovative products. These consequences include improved sales. 
 41. For the balanced scorecard to work, managers must articulate goals for five categories of customer concerns: time, quality, performance and service, cost, and design. 
 42. Excellent customer performance results from processes, decisions, and actions that occur only in the 
marketing efforts of the firm. 43. To survive and prosper, managers must not make frequent changes to existing products and services, 
because it will confuse the customer. 
 44. The ability of a firm to do well from an innovation and learning perspective is most dependent on its 
tangible assets. 
 43. For the balanced scorecard implementation to be effective, a set of rules for employees that address continuous process improvement and the personal improvement of individual employees needs to be established so that employees buy-in to the change. 
 Chapter 5 1. A business-level strategy is a strategy designed for a multi-business company that competes across multiple businesses. 2. The three generic strategies that Michael Porter believes a firm can use to overcome the five forces and achieve competitive advantage include overall price leadership.
 3. Concentrating solely on one form of competitive advantage generally leads to the highest possible level of profitability. 4. A firm striving for cost leadership will typically spend relatively more on product-related research and development than on process-related research and development.
 5. To generate above average returns, a firm following an overall cost leadership position should not be concerned with attaining parity or proximity on the basis of differentiation relative to its peers. 6. The experience curve concept suggests that production costs tend to decrease as production increases. 7. A firm can attain an overall cost leadership position by increasing the management layers in order to reduce overhead costs. 8. A firm can attain an overall cost leadership position by using automated technology to reduce scrappage rates. 9. A firm can attain an overall cost leadership position by purchasing media in large blocks and maximizing sales force utilization through territory management.
 10. The Yugo car was cheap, but it was poorly made. Consumers did not purchase it. This is an example of failure to attain parity on the basis of differentiation.
 11. The experience curve is a way of looking at price benefits that come from studying sales figures. 12. Competitive parity on the basis of differentiation permits a cost leader to maximize disadvantages and turn them into higher profits than competitors.
 13. Zulily keeps very little inventory. It orders products from vendors after their customer has completed the purchase. This is an example of how Zulily intends to enhance a cost leadership position.
 8. The French automobile maker, Renault, attains competitive advantage by revamping cars to be more cost efficient. 
 9. An overall high-cost position enables a firm to achieve above-average returns despite strong competition. 
 10. An overall low-cost position protects a firm against rivalry from competitors, because higher costs allow a firm to earn returns even if its competitors eroded their profits through intense rivalry. 
 17. A low-cost position protects firms against powerful buyers. 20. A low-cost position provides more flexibility to cope with demands from powerful suppliers for input cost decreases. 
 21. The factors that lead to a low-cost position do not provide a substantial entry barriers position with respect to substitute products introduced by new and existing competitors.
 22. Zulily pays close attention to costs which helps to protect the company from buyer power and intense rivalry from competitors. 
 23. Renault both lessens the degree of rivalry it faces and increases entry barriers for new entrants by increasing productivity and lowering unit costs.
 21. The supermarket, Aldi, places extreme focus on minimizing costs across its operations which ultimately makes it more vulnerable to substitutes.
 22. Discount retailers like Walmart and dollar stores are prime substitutes for Aldi, because Aldi focuses on minimizing costs across its operations.
 23. Firms that compete on overall cost leadership are vulnerable if there is an increase in the cost of the inputs on which the advantage is based.
 24. Too much focus on one or a few value-chain activities can be a pitfall of the overall cost leadership strategy. 
 25. A cost leadership strategy can be at risk of becoming obsolete and must be evaluated regularly in terms of current competitor responses.
 26. A cost leadership strategy is not susceptible to the risk of reduced flexibility. 
 27. Cheesecake Factory differentiates itself along several different dimensions at once by offering high- quality food, the widest and deepest menu in its class of restaurants, and premium locations.
 28. A successful differentiation strategy lowers entry barriers because of customer loyalty and the ability of the firm to provide uniqueness in its products and services.
 31. A successful differentiation strategy increases rivalry since buyers become more price-sensitive. 
 32. If a firm has a successful differentiation strategy, it is necessary to attain parity on cost. 
 33. One potential pitfall of a differentiation strategy is that identification of the brand in the marketplace may become diluted through excessive product line extensions.
 35. Focus, by itself, often constitutes a competitive advantage. 
 36. A potential pitfall of a focus strategy is that focusers can become too focused to satisfy buyer needs. 
 37. A potential pitfall of a focus strategy is that cost advantages will not change over time. 
 38. A potential pitfall of a focus strategy is that highly focused product and service offerings are not 
subject to competition from new entrants and from imitation. 
 39. A disadvantage of firms that successfully integrate overall cost leadership and a differentiation strategy is that they are relatively easy for competitors to imitate.
 40. The combination strategy of low-cost and differentiation provides lower prices and no differentiated attributes for customers. 
 41. Mass customization enables manufacturers to be more responsive to customer demands for high quality products. 
 42. An important idea behind the profit pool concept is that there is always a strong relationship between the generation of revenues and the capturing of profits.
 41. An important potential pitfall of an integrated overall cost leadership and differentiation strategy is that firms may fail to implement either one and become stuck in the middle.
 42. Firms can underestimate the challenges and expenses associated with coordinating value-creating activities in the extended value chain. This is an advantage of integrated overall cost leadership and differentiation.
 43. Firms may fail to accurately assess sources of revenue and profits in their value chain. This might be a result of an unbiased manager. 
 45. If a car manufacturer focuses a lot on downstream activities such as warranty fulfillment and financing operations, but also considers the differentiation and cost of the cars themselves, the resulting strategy is likely to be a failed strategy.
 46. Integration of information systems, logistics, and transportation at Walmart helps it to drive down costs and provide outstanding product selection. This serves to erect low entry barriers to potential competitors.
 47. Due to its size with over 475 billion USD in sales in 2014, Walmart has enormous bargaining power over its suppliers. 
 44. The overall value proposition of Walmart makes potential substitute products such as Internet competitors a more viable threat.
 45. By separating the value of the actual flight from the services associated with flying, airlines have greatly expanded the profit pool associated with flying. This combines the advantages of integrating overall low cost and differentiation strategies.
 46. Big Data efforts have the potential to allow firms to better customize their product and service offerings to customers but are less efficient at using the resources of the company. Kaiser Permanente is an example of how big data does not lead to cost-conscious treatment patterns.
 45. In technology intensive industries, the duration of competitive advantages is declining. 
 46. Competitive advantage is not affected by actions by rivals from within and outside of the industry. 
 47. The reason Dell lost its competitive advantage is that it focused too much on operational efficiency and not enough on innovations demanded by the changing market.
 48. Rapid changes in technology, globalization, and actions by rivals cannot erode company advantages. 
 52. The increasing use of technology in low tech industries has made competitive advantages more sustainable. 
 53. Competitive advantage can be found in just-in-time manufacturing processes. 
 54. An important issue in evaluating the sustainability of a unique strategy is whether or not rivals will be able to imitate its strategy or create a viable substitute.
 55. Using information systems to streamline and automate the primary activities of a manufacturing company value chain does not provide competitive advantage.
 57. In the textbook example of Atlas Door, it created low entry barriers for new entrants through its development of competitive advantages.
 58. In the textbook example of Atlas Door, it integrated many value-chain activities with the firm in order to support its just-in-time strategy. This, however, did not provide sustainable competitive advantage.
 59. Many companies have a tight integration among their value-creating activities and have implemented just-in-time manufacturing. The textbook example of Atlas Door suggests that this is a competitive advantage, but it is easily imitated and therefore may not be sustainable in the long run.
 60. In the textbook example of Atlas Door, human talent trained in the new just-in-time systems have little reason to leave the company and therefore this is a sustainable competitive advantage.
 61. In the textbook example of Atlas Door, the threat of new rivals who could bring new technologies and processes to a similar business model diminishes the sustainability of the Atlas Door just-in-time model.
 62. The market life cycle should be used for short run forecasting, because it provides a conceptual framework for understanding what changes typically occur over the life of an industry. 64. An important advantage of first movers in a market is that they may establish brand recognition that may later serve as an important switching cost.
 65. During the growth stage of the market life cycle, customers are very likely to establish brand loyalty. 66. Given the attractiveness of premium pricing during the growth stage of the market life cycle, managers should emphasize short-term results to increase profits.
 67. As markets mature, competition on the basis of differentiation is preferable to price competition. 68. As markets mature the magnitude of differentiation and cost leadership advantages among competitors decrease. 69. With reverse positioning, a strategy to be used during the mature stage of the industry life cycle, a product escapes its category by deliberately associating with a different one.
 70. Businesses that compete in markets that are in decline should simply be harvested or divested since they are no longer profitable. 71. During the decline stage of the product life cycle, a harvesting strategy means that a firm keeps a product going without significantly reducing marketing support, technological development, or other investments, while hoping that competitors will exit the market.
 72. The decline stage of the industry life cycle stage is inevitably followed by death. 73. The Commerce Bank gains customers by using reverse positioning to structure its offers. It pared down its offers to just four checking accounts.
 74. Swatch defined its watches as playful fashion accessories which were showily promoted. This is an example of reverse positioning.
 75. The desktop computer is in the decline stage of the industry life cycle, but it is not dead because companies have found ways to improve the price-performance trade-off.
 76. Many firms facing a turnaround situation try to reduce their costs by outsourcing the production of many inputs. 63. A need for turnaround occurs only during the maturity or declining stage of the life cycle. 
 64. Procter and Gamble successfully implemented a turnaround strategy by discontinuing brands and focusing all resources on a few core brands.
 65. Few turnarounds require firms to analyze both the external and internal environments relevant to their firm. 
 66. Mature firms tend to have assets that continue to produce significant returns. 
 68. Firms in turnaround situations find that cutting administrative expenses and inventories and speeding up collection of receivables provide no real value.
 69. Piecemeal productivity improvements can be used by a mature business in need of a turnaround. 
 70. HSN CEO Mindy Grossman managed a successful turnaround by first engaging with employees. 
 71. HSN CEO Mindy Grossman tailored the company offerings to meet the changing needs of her customer base in her quest to turnaround the company.
 71. When company performance severely erodes, no strategies exist that can help to reverse its situation and enhance its competitive position.
 72. Piecemeal productivity improvements are not useful as a turnaround strategy because they are not cumulative. 
 73. Firms in turnaround situations find that cutting administrative expenses and inventories and speeding up collection of receivables are ineffective strategies.
 74. When a company finds that its performance is in decline at any stage in the life cycle, it can look toward a turnaround strategy that is designed to help it to grow but not necessarily to be profitable.

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