Chapter 1—Strategic Management and Strategic Competitiveness

1. The Opening Case shows that McDonald’s is one of the few firms able to achieve strategic competitiveness from its founding until the present time. ANS: F PTS: 1 DIF: Medium REF: 3 OBJ: 01-01 TYPE: application NOT: AACSB: Multicultural & Diversity | Management: Environmental Influence | Dierdorff & Rubin: Managing strategy and innovation 2. By focusing on product innovations and upgrades of its properties, McDonald’s was able to achieve strategic competitiveness and above average returns. ANS: T PTS: 1 DIF: Medium REF: 3-4 OBJ: 01-01 TYPE: application NOT: AACSB: Business Knowledge and Analytical Skills | Management: Strategy| Dierdorff & Rubin: Managing strategy and innovation 3. Strategic competitiveness is achieved when a firm successfully formulates and implements a valuecreating strategy. ANS: T PTS: 1 DIF: Easy REF: 4 OBJ: 01-01 TYPE: knowledge NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin: Managing strategy & innovation 4. Part of McDonald’s strategy was the choice that it would remain involved in additional food concepts such as Boston Market and Chipotle. ANS: T PTS: 1 DIF: Easy REF: 4 OBJ: 01-01 TYPE: application NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin: Managing strategy & innovation 5. Alligator Enterprises has earned above-average returns since its founding five years ago. Since no other firm has challenged Alligator in its particular market niche, the firm’s owners can feel secure that Alligator has established a competitive advantage. ANS: F PTS: 1 DIF: Hard REF: 5 OBJ: 01-01 TYPE: application NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin: Managing the task environment 6. The goal of strategic management is to develop a competitive advantage that is permanent. ANS: F PTS: 1 DIF: Medium REF: 5 OBJ: 01-01 TYPE: comprehension NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin: Managing strategy & innovation Your text here 1 7. Risk in terms of financial returns reflects an investor’s uncertainty about economic gains or losses that will result from a particular investment. ANS: T PTS: 1 DIF: Easy REF: 5 OBJ: 01-01 TYPE: knowledge NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin: Foundational skills 8. Average returns are returns in excess of what an investor expects to earn from other investments with a similar amount of risk. ANS: F PTS: 1 DIF: Medium REF: 5 OBJ: 01-01 TYPE: knowledge NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin: Foundational skills 9. Returns can only be measured in accounting terms such as return on assets, return on equity, or return on sales. ANS: F PTS: 1 DIF: Easy REF: 5 OBJ: 01-01 TYPE: knowledge NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin: Foundational skills 10. Best Buy outperforming Circuit City, and Best Buy’s continuing good performance illustrate that permanent success is possible. ANS: F PTS: 1 DIF: Medium REF: 6 OBJ: 01-01 TYPE: application NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin: Managing strategy & innovation 11. In the chapter Strategic Focus case, Circuit City did not achieve strategic competitiveness and aboveaverage returns because it failed to successfully implement its strategy. ANS: T PTS: 1 DIF: Easy REF: 8 OBJ: 01-01 TYPE: application NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin: Managing strategy & innovation 12. Economies of scale and huge advertising budgets are just as effective in the new competitive landscape as they were in the past, but they must be reinforced by strategic flexibility. ANS: F PTS: 1 DIF: Hard REF: 9 OBJ: 01-02 TYPE: comprehension NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Management: Creation of Value 13. Wal-Mart is trying to achieve a boundaryless retailing empire by implementing global pricing, sourcing, and logistics. ANS: T PTS: 1 DIF: Easy REF: 10 OBJ: 01-02 TYPE: application NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff & Rubin: Managing logistics & technology 14. The two primary drivers of hypercompetition are the emergence of the global economy and technology. ANS: T PTS: 1 DIF: Easy REF: 9 OBJ: 01-02 TYPE: knowledge NOT: AACSB: Multicultural & Diversity | Management: Environmental Influence | Dierdorff & Rubin: Managing strategy & innovation 15. The rate of technology diffusion has been steadily increasing over the last two decades. ANS: T PTS: 1 DIF: Easy REF: 11 OBJ: 01-02 TYPE: knowledge NOT: AACSB: Information Technology | Management: Information Technology | Dierdorff & Rubin: Knowledge of technology, design, & production 16. While patents may be an effective way of protecting proprietary technology in some industries such as pharmaceuticals, many firms competing in the electronics industry do not apply for patents. ANS: T PTS: 1 DIF: Medium REF: 12 OBJ: 01-02 TYPE: application NOT: AACSB: Information Technology | Management: Information Technology | Dierdorff & Rubin: Knowledge of technology, design, & production 17. Examples of incremental innovations include iPods, PDAs, WiFi, and web browser software. ANS: F PTS: 1 DIF: Medium REF: 12 OBJ: 01-02 TYPE: application NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff & Rubin: Managing strategy & innovation 18. The rapid rate of technological diffusion has increased the competitive benefits of patents. ANS: F PTS: 1 DIF: Medium REF: 12 OBJ: 01-02 TYPE: comprehension NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff & Rubin: Knowledge of technology, design, & production 19. Developed countries still have major advantages in access to information technology over emerging economies because of the significant cost of the infrastructure needed for computing power. ANS: F PTS: 1 DIF: Hard REF: 12 OBJ: 01-02 TYPE: knowledge NOT: AACSB: Multicultural & Diversity | Management: Information Technology | Dierdorff & Rubin: Knowledge of technology, design, & production 20. The rate of growth of Internet-based applications could be affected by the possibility of Internet service providers charging users for downloading those applications. ANS: T PTS: 1 DIF: Medium REF: 12 OBJ: 01-02 TYPE: comprehension NOT: AACSB: Information Technology | Management: Creation of Value | Dierdorff & Rubin: Managing logistics and technology 21. The new CEO of Opacity Enterprises is determined to make the long-established firm strategically flexible. The CEO feels that the employees of the company have the ability, training, and resources to engage in continuous learning. The main obstacle the CEO must face is inertia. ANS: T PTS: 1 DIF: Medium REF: 13 OBJ: 01-02 TYPE: application NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff & Rubin: Managing administration & control 22. One capability characteristic of a firm with strategic flexibility is the capacity to learn. ANS: T PTS: 1 DIF: Easy REF: 13 OBJ: 01-02 TYPE: knowledge NOT: AACSB: Reflective Thinking Skills | Management: Creation of Value | Dierdorff & Rubin: Managing strategy & innovation 23. The I/O (industrial organization) model assumes that the uniqueness of a firm’s resources and capabilities are its main source of above-average returns. ANS: F PTS: 1 DIF: Medium REF: 13-15 OBJ: 01-03 TYPE: comprehension NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Strategic & systems skills 24. The CEO of Twin Spires, Inc., is emotionally and intellectually committed to using the resources of the firm to serve the needs of the natural gardening community by providing rare and native plants to individuals and nurseries around the United States. This commitment has carried the CEO through long periods of below average returns on investment. The perspective of the CEO of Twin Spires is consistent with the assumptions of the industrial organizational (I/O) model. ANS: F PTS: 1 DIF: Hard REF: 15-16 OBJ: 01-03 TYPE: application NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Strategic & systems skills 25. Although the fast food (or quick-service) industry is unattractive, McDonald’s has earned aboveaverage returns through product innovations, enhancing existing facilities, and buying properties outside the United States. ANS: F PTS: 1 DIF: Easy REF: 3-4 | 14 OBJ: 01-02 TYPE: application NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment 26. The five forces model suggests that firms should target the industry with the highest potential for above-average returns and then implement either a cost-leadership strategy or a differentiation strategy. ANS: T PTS: 1 DIF: Hard REF: 17 (Figure 1.3) OBJ: 01-03 TYPE: knowledge NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment 27. The uniqueness of a firm’s resources and capabilities is the basis for a firm’s strategy and determines its ability to earn above-average returns under the I/O view. ANS: F PTS: 1 DIF: Medium REF: 13-15 OBJ: 01-04 TYPE: comprehension NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin: Managing the task environment 28. Research shows that a greater percentage of a firm’s profitability is explained by the I/O rather than the resource-based model. ANS: F PTS: 1 DIF: Medium REF: 14 OBJ: 01-04, 05 TYPE: comprehension NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin: Managing the task environment 29. The resource-based model assumes that if firms have resources that are rare or costly to imitate, this is sufficient to form a basis for competitive advantage. ANS: F PTS: 1 DIF: Hard REF: 16 OBJ: 01-04 TYPE: comprehension NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin: Managing strategy & innovation 30. Resources are considered rare when they have no structural equivalent. ANS: F PTS: 1 DIF: Medium REF: 16 OBJ: 01-04 TYPE: knowledge NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin: Managing strategy & innovation 31. The assumptions of the industrial organizational model and the resource-based model are contradictory. Therefore, organizational strategists must choose one or the other model as the basis for developing a strategic plan. ANS: F PTS: 1 DIF: Medium REF: 14|16 OBJ: 01-04 TYPE: comprehension NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin: Managing strategy & innovation 32. An effective vision statement will specify the market to be served. ANS: F PTS: 1 DIF: Easy REF: 17 OBJ: 01-05 TYPE: comprehension NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin: Managing decision-making processes 33. Organizational mission statements typically do not include statements about profitability and earning above-average returns. ANS: T PTS: 1 DIF: Easy REF: 18 OBJ: 01-05 TYPE: knowledge NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin: Managing decision-making processes