MGMT 4513 EXAM 1 – SEO QUESTIONS AND
ANSWERS
What is strategic management? - Answer -Helps a business gain profits, outperform
others, and gain a competitive advantage
Why do we need to study strategic management? - Answer -- may become a top
manager
- may start a new venture
- can have a meaningful competition with a top manager
What is strategy? - Answer -a set (system) of goal-directed actions to gain and sustain
superior performance relative to competitors; addresses top (firm level) decisions
Definition of strategy: Key terms - Answer -set - not a single action but a system of
actions
goal-directed - importance of coherency
actions - plan and implement
relative to competitors - competitive advantage
gain and sustain - longterm performance
What is industry? - Answer -a set of firms providing a similar product or service; nested
concept
S-C-P Paradigm - Answer -Industry Structure, Firm Conduct, and Performance
What is the 5-forces framework? - Answer -determines strengths of five forces:
- rivalry intensity
- threat of new entrants
- threat of subsitutes
- power of buyers
- power of suppliers
Main purpose of the 5-forces framework - Answer -predicts potential industry
profitability
When is rivalry intensity strong in an industry? - Answer -- low industry concentration
(<50% four-firm concentration)
- slow growth
- high strategic commitment is required
- high exit barriers
When is threat of new entrants strong? - Answer -- small economies of scale
- small network effects
, - small customer switching costs
- large capital investments not required
What is the PESTEL Framework? - Answer -macro environment analysis that focuses
on future trends of an industry and how they affect the five forces of an industry
Six PESTEL factors - Answer -Political, Economic, Sociocultural, Technological,
Ecological, Legal
Industry effects vs. firm effects - Answer -industry - performance resulting from being in
a more/less profitable indsutry
firm - internal source of sustainable competitive advantage
Resource heterogeneity vs. resource immobility - Answer -heterogeneity - a firm is a
bundle of resources and capabilities that differ across firms
immobility - a firm has resources that then to be "sticky" that don't move easily from firm
to firm
What is resource analysis? - Answer -looking inside the firm
What is a resource-based view? - Answer -firms' heterogeneous, immobile resources
affect their behavior and determine their performance
What is the VRIO framework? - Answer -tool to analyse a firms internal resources and
capabilities to see if it could be a source of comp adv; resources and capabilities
interplay core competencies
valuable, rare, costly to imitate, organized to capture value
What are the 4 isolating mechanisms (barriers to imitation)? - Answer -- legal protection
- path dependence (time compression diseconomies)
- causal ambiguity
- social complexity
Describe primary activities vs. support activities - Answer -primary - activities that add
value directly by transforming inputs into outputs
- support - activities that add value indirectly, but are necessary to sustain primary
activities
When is threat of substitutes strong? - Answer -- attractive price and performance of
substitutes
- low customer switching costs
When is power of suppliers strong? - Answer -- suppliers are highly concentrated
- suppliers don't depend highly on focal industry
- high switching costs for focal industry
ANSWERS
What is strategic management? - Answer -Helps a business gain profits, outperform
others, and gain a competitive advantage
Why do we need to study strategic management? - Answer -- may become a top
manager
- may start a new venture
- can have a meaningful competition with a top manager
What is strategy? - Answer -a set (system) of goal-directed actions to gain and sustain
superior performance relative to competitors; addresses top (firm level) decisions
Definition of strategy: Key terms - Answer -set - not a single action but a system of
actions
goal-directed - importance of coherency
actions - plan and implement
relative to competitors - competitive advantage
gain and sustain - longterm performance
What is industry? - Answer -a set of firms providing a similar product or service; nested
concept
S-C-P Paradigm - Answer -Industry Structure, Firm Conduct, and Performance
What is the 5-forces framework? - Answer -determines strengths of five forces:
- rivalry intensity
- threat of new entrants
- threat of subsitutes
- power of buyers
- power of suppliers
Main purpose of the 5-forces framework - Answer -predicts potential industry
profitability
When is rivalry intensity strong in an industry? - Answer -- low industry concentration
(<50% four-firm concentration)
- slow growth
- high strategic commitment is required
- high exit barriers
When is threat of new entrants strong? - Answer -- small economies of scale
- small network effects
, - small customer switching costs
- large capital investments not required
What is the PESTEL Framework? - Answer -macro environment analysis that focuses
on future trends of an industry and how they affect the five forces of an industry
Six PESTEL factors - Answer -Political, Economic, Sociocultural, Technological,
Ecological, Legal
Industry effects vs. firm effects - Answer -industry - performance resulting from being in
a more/less profitable indsutry
firm - internal source of sustainable competitive advantage
Resource heterogeneity vs. resource immobility - Answer -heterogeneity - a firm is a
bundle of resources and capabilities that differ across firms
immobility - a firm has resources that then to be "sticky" that don't move easily from firm
to firm
What is resource analysis? - Answer -looking inside the firm
What is a resource-based view? - Answer -firms' heterogeneous, immobile resources
affect their behavior and determine their performance
What is the VRIO framework? - Answer -tool to analyse a firms internal resources and
capabilities to see if it could be a source of comp adv; resources and capabilities
interplay core competencies
valuable, rare, costly to imitate, organized to capture value
What are the 4 isolating mechanisms (barriers to imitation)? - Answer -- legal protection
- path dependence (time compression diseconomies)
- causal ambiguity
- social complexity
Describe primary activities vs. support activities - Answer -primary - activities that add
value directly by transforming inputs into outputs
- support - activities that add value indirectly, but are necessary to sustain primary
activities
When is threat of substitutes strong? - Answer -- attractive price and performance of
substitutes
- low customer switching costs
When is power of suppliers strong? - Answer -- suppliers are highly concentrated
- suppliers don't depend highly on focal industry
- high switching costs for focal industry
