Firms should never outsource a primary activity because of the danger of the activity

being imitated by rivals.

Select one:
True
False
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The correct answer is 'False'.

Question 2
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Primary activities in the value chain create value, whereas support activities in the value
chain generate costs

Select one:
True
False
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The correct answer is 'False'.

Question 3
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Acme Valves, Inc., has been a successful player in the oil field supply industry in the last
15 years. Acme maintained its traditional strategy and product characteristics over this
time period. But, Acme has experienced declines in sales and profits over the last four
quarters. The CEO of Acme should
Select one:

a.
focus on improving efficiency of production and cost control.

b.
continue with the proven strategy because its returns over the long run are important.

c.
immediately begin making incremental adjustments to the traditional business strategy
in an effort to improve sales.

d.
conduct an analysis of the external environment.

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The correct answer is: conduct an analysis of the external environment.

Question 4
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Human resources and other support activities are not value-creating activities in the
value chain; only the primary activities create value.

Select one:
True
False
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The correct answer is 'False'.

Question 5
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Analyzing income distribution would include all of the following EXCEPT

Select one:

a.
how income is distributed among regions of the U.S.

b.
the discretionary income of various ethnic groups.

c.
the purchasing power of various age groups.

d.
wage differentials between male and female employees working for a large
manufacturer.
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The correct answer is: wage differentials between male and female employees working
for a large manufacturer.

Question 6
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Analyzing the internal environment enables a firm to determine what it might be able to
do by identifying what opportunities exist.

Select one:
True
False
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The correct answer is 'False'.

Question 7
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The five forces model expands the arena of competitive analysis beyond direct
competitors (i.e., rivals) to include buyers and suppliers who may also be a source of
competition.

Select one:
True
False
Feedback
The correct answer is 'False'.

Question 8
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People are a critical resource for helping organizations learn how to continuously
innovate.

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True
False
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The correct answer is 'True'.

Question 9
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Product differentiation refers to the

a.
b.
c.
d.

Select one:

a.
belief by customers that a product is unique.
b.
response of incumbent firms to new entrants.

c.
fact that as more of a product is produced the cheaper it becomes per unit.

d.
ability of the buyers of a product to negotiate a lower price.

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The correct answer is: belief by customers that a product is unique.

Question 10
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Capabilities may be costly to imitate if they are causally ambiguous or socially complex

Select one:
True
False
Feedback
The correct answer is 'True'.
The use of a differentiation strategy would be expected to be LEAST effective in which of
the following markets?

Select one:

a.
Writing instruments

b.
Motion pictures

c.
Popular music

d.
Commodity goods

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The correct answer is: Commodity goods

Question 12
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The activities in the value chains of companies using focus strategies are quite different
than the activities in the value chains of companies using industry-wide business
strategies

Select one:
 True
False
Feedback
The correct answer is 'False'.

Question 13
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Effective use of the generic business strategies allows the firm to favorably position itself
relative to the five forces

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True
False
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The correct answer is 'True'.

Question 14
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The likelihood of entry of new competitors is affected by ____ and ____.

Select one:

a.
barriers to entry, expected retaliation of current industry organizations
b.
the demand for the product, the profitability of the competitors

c.
the power of existing suppliers, buyers

d.
the profitability of the industry, the market share of its leading firm

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The correct answer is: barriers to entry, expected retaliation of current industry
organizations

Question 15
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Firms should outsource only activities where they can create the most value or where
they are at an advantage compared to competitors.

Select one:
True
False
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The correct answer is 'False'.

Question 16
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Demographic changes include variations in income distribution. Which of the following
statements is true?

Select one:

a.
The general loss in real income has been somewhat offset by the increase in dual-career
couples

b.
Firms are most interested in the consumers comprising the top ten percent of the
household income.

c.
Consumers’ real income has been increasing steadily since 1976.

d.
Workforce diversity is making the concept of average income obsolete
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The correct answer is: The general loss in real income has been somewhat offset by the
increase in dual-career couples

Question 17
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Support activities in the value chain are generic across business strategies

Select one:
True
False
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The correct answer is 'False'.

Question 18
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The value of tangible assets such as the firm’s borrowing capacity and its physical plant
are high because they can be easily leveraged to derive additional value

Select one:
True
False
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The correct answer is 'False'.

Question 19
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The Strategic Focus case on firm’s efforts to take care of the physical environment noted
that one popular approach was

Select one:

a.
making donations to the Sierra Club and other environmental organizations.

b.
increasing health benefit for employees.

c.
producing and selling additional green products.

d.
lobbying the government to reduce environmental regulations.

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The correct answer is: producing and selling additional green products.

Question 20
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Value chain support activities include
Select one:

a.
converting inputs into products.

b.
developing advertising and promotional campaigns.

c.
distributing the product to customers.

d.
recruiting, hiring, and training personnel
Feedback
Your answer is incorrect.
The correct answer is: recruiting, hiring, and training personnel

A firm’s core strategy is its ____ strategy

Select one:

a.
international

b.
corporate

c.
pricing
d.
business
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The correct answer is: business

Question 22
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Valuable capabilities allow the firm to exploit strengths or neutralize weaknesses in the
internal environment

Select one:
True
False
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The correct answer is 'False'.

Question 23
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The foundation of many capabilities lies in the unique skills and knowledge of a firm’s
employees.

Select one:
True
False
Feedback
The correct answer is 'True'.

Question 24
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Any competitor intelligence practice that is legal is also ethical.

Select one:
True
False
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The correct answer is 'False'.

Question 25
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The threat from substitutes is high when

Select one:

a.
the quality of the substitute product is lower than the quality of the industry’s product.
b.
the substitute product stimulates new process innovations within the industry.

c.
the substitute product’s price is lower than the industry product’s price.

d.
switching costs are high.

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The correct answer is: the substitute product’s price is lower than the industry product’s
price.

Question 26
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Every firm uses all levels of strategy: corporate, acquisition and restructuring,
international and cooperative.

Select one:
True
False
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The correct answer is 'False'.

Question 27
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Target’s brand promise “Expect More. Pay Less” and appeal to higher-income, fashion
conscious discount shoppers illustrates the ________________strategy

Select one:

a.
focused differentiation

b.
cost leadership

c.
integrated cost leadership/differentiation

d.
differentiation

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The correct answer is: integrated cost leadership/differentiation

Question 28
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Switching costs, access to distribution channels, economies of scale, large numbers of
competing firms, and slow industry growth are some of the entry barriers that may
affect the threat of new entrants to an industry

Select one:
True
False
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The correct answer is 'False'.

Question 29
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According to the five forces model, an unattractive industry would include all of the
following characteristics EXCEPT

Select one:

a.
high bargaining power of buyers due to low switching costs.

b.
low economies of scale needed for new firms to enter.
c.
high threat of substitute products due to a large number of low cost alternatives.

d.
low supplier power due to commodity inputs.

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The correct answer is: low economies of scale needed for new firms to enter.

Question 30
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The environmental segments that comprise the general environment typically
will NOT include

a. demographic factors.
b. sociocultural factors.
c. substitute products or services.
d. technological factors.
Select one:

a.
substitute products or services.

b.
technological factors.
c.
sociocultural factors.

d.
demographic factors.

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The correct answer is:
Suppliers are powerful when the industry is dominated by a few large companies, no
satisfactory substitutes are available, the selling industry is relatively more concentrated
than the purchasing industry, and switching costs are high.

Select one:
True
False
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The correct answer is 'True'.

Question 32
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It is more common for firms to attempt to use the integrated cost
leadership/differentiation strategy now than in the past because

Select one:

a.
customers have increasingly high expectations when purchasing a good or service.

b.
other firms have established unassailable market dominance with the other four
strategies.

c.
one strategy is not enough for most large firms.

d.
global markets allow for much broader competitive scope.

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The correct answer is: customers have increasingly high expectations when purchasing a
good or service.

Question 33
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One of the benefits of the integrated cost leadership/differentiation strategy is that it is
less risky than either the cost leadership or differentiation strategies.

Select one:
True
False
Feedback
The correct answer is 'False'.

Question 34
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Creating customer value is the source of the firm’s potential to earn above-average
returns.

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True
False
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The correct answer is 'True'.

Question 35
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The key to maintaining competitive advantage and earning above-average returns over
the long run is to effectively manage current core competencies

Select one:

a.
and develop a continuous stream of new competitive advantages

b.
in a way that uniquely bundles and leverages the firm’s existing resources

c.
and imitate the core competencies of successful competitors

d.
in order to preserve and enhance them against the firm’s competitors
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The correct answer is: and develop a continuous stream of new competitive advantages

Question 36
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Some resources, such as financial capital, have inherent value to the firm, while others
are not inherently valuable.

Select one:
True
False
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The correct answer is 'False'.

Question 37
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Primary activities are
Select one:

a.
the core competencies of the organization

b.
the activities most likely to be imitated by competitors

c.
involved in a product’s physical creation, its distribution, and its service after the sale

d.
the activities most crucial to implementing the firm’s business strategy
Feedback
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The correct answer is: involved in a product’s physical creation, its distribution, and its
service after the sale

Question 38
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Economies of scale refer to the fact that as the

Select one:

a.
quantity of product produced in a given time period increases, the cost of
manufacturing each unit remains constant.
b.
quantity of product produced in a given time period decreases, the cost of
manufacturing each unit decreases.

c.
quantity of product produced in a given time period increases, the cost of
manufacturing each unit increases.

d.
quantity of product produced in a given time period increases, the cost of
manufacturing each unit decreases.
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The correct answer is: quantity of product produced in a given time period increases, the
cost of manufacturing each unit decreases.

Question 39
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According to the five forces model, an attractive industry would have all of the following
characteristics EXCEPT

Select one:

a.
few good product substitutes.
b.
a moderate degree of rivalry among competitors.

c.
low barriers to entry.

d.
suppliers and buyers with little bargaining power.

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The correct answer is: low barriers to entry.

Question 40
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Firms and managers can learn from the failure resulting from a mistake—that is,
what not to do when seeking competitive advantage

Select one:
True
False
Feedback
The correct answer is 'True'.
An attractive industry is one that is characterized by high entry barriers, suppliers and
buyers with strong bargaining power, low threats from substitute products, and low
rivalry among firms
Select one:
True
False
Feedback
The correct answer is 'False'.

Question 42
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Which of the following is NOT an activity used in the external environmental analysis
process?

Select one:

a.
Scanning

b.
Decrypting

c.
Assessing
d.
Monitoring

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The correct answer is: Decrypting

Question 43
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Firms implementing cost leadership strategies often sell no-frills standardized goods or
services to the industry’s most typical customers.

Select one:
True
False
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The correct answer is 'True'.

Question 44
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The Strategic Focus case notes that several companies have used the environmental
analysis process (scanning, monitoring, forecasting, and assessing) to respond to
customers’ desire for more value from brand-name products. All of the following are
examples of “different” values that companies are providing as a result of this process
EXCEPT

Select one:

a.
Frito-Lay added 20% more product to selected snack offerings without increasing prices.

b.
Premium-priced builders responded to the trend of buyers wanting larger houses.

c.
Kohler provided energy efficient faucets, toilets, and showerheads at the same price as
its less efficient products

d.
GE’s efficient hybrid water heaters that reduced energy costs.

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The correct answer is: Premium-priced builders responded to the trend of buyers
wanting larger houses.

Question 45
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Companies successfully implementing an integrated cost leadership/differentiation
strategy are better positioned than firms pursuing the other four business strategies to
do all of the following EXCEPT
Select one:

a.
adapt quickly to a changing environment

b.
reduce the risks for stakeholders of the firm

c.
have more primary and support activities in which they are competent

d.
learn new skills.

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The correct answer is: reduce the risks for stakeholders of the firm

Question 46
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A business-level strategy is an integrated and coordinated set of commitments and
actions designed to exploit core competencies and gain a competitive advantage in
specific product markets.

Select one:
True
False
Feedback
The correct answer is 'True'.

Question 47
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Compared to tangible resources, intangible resources are an inferior source of core
competencies.

Select one:
True
False
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The correct answer is 'False'.

Question 48
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The five forces model expands the arena of competitive analysis beyond direct
competitors (i.e., rivals) to include buyers and suppliers who may also be a source of
competition.

Select one:
True
False
Feedback
The correct answer is 'True'.
Question 49
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To position itself differently from competitors, a firm must decide to either perform
activities differently or to perform different activities

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True
False
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The correct answer is 'True'.

Question 50
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The sustainability of a competitive advantage depends upon the imitability of the core
competence, the availability of substitutes for the core competence, and the rate of
obsolescence of the core competence.

Select one:
True
False
Feedback
The correct answer is 'True'.

Resources are bundled to create capabilities which in turn are the source of core
competencies which are then the basis of competitive advantages.
Select one:
True
False
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The correct answer is 'True'.

Question 52
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When Philip Morris International studies the cigarette tax policies of various nations, it is
engaged in the forecasting component of the environmental analysis process

Select one:
True
False
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The correct answer is 'False'.

Question 53
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If a core competence is emphasized when it is no longer competitively relevant, it can
become a core rigidity

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True
False
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The correct answer is 'True'.

Question 54
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When Delta airlines wants to study Continental Airlines, it must examine both
Continental and its complementor, Star Alliance

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True
False
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Question 55
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Costly-to-imitate capabilities are those which other firms cannot easily develop as they
have no strategic equivalent.

Select one:
True
False
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The correct answer is 'False'.

Question 56
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Value is created when the firm exploits its core competencies or competitive advantages
to meet or exceed the demanding standards of global competition

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True
False
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The correct answer is 'True'.

Question 57
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Age structure, geographic distribution, income distribution, interest rates, and process
innovations are all elements of concern when studying the demographic segment of the
general environment

Select one:
True
False
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The correct answer is 'False'.

Question 58
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Core competencies are capabilities that serve as a source of competitive advantage for a
firm over its rivals

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True
False
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The correct answer is 'True'.

Question 59
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Judgment is the capability of making successful decisions when no obviously correct
model or rule is available or when relevant data are unreliable or incomplete.

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True
False
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The correct answer is 'True'.

Question 60
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The external environment facing business stays relatively constant over time.
Select one:
True
False
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The correct answer is 'False'.

From a customer’s point of view, for an organization’s capability to be a core

Select one:

a.
inimitable and unique

b.
inimitable and nonsubstitutable

c.
valuable and unique
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The correct answer is: valuable and unique

Question 62
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Unlike a cost leadership and a differentiation strategy, both focus strategies are less
dependent on the completion of various primary and secondary activities in order to
compete in a superior manner.

Select one:
True
 False
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The correct answer is 'False'.

Question 63
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Two concerns about outsourcing are the potential loss of a firm’s innovative ability and
the loss of jobs within companies that decide to outsource some of their work

Select one:
True
False
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The correct answer is 'True'.

Question 64
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The essential purpose of the value chain is to create additional value without incurring
significant costs while doing so and to capture the value that has been created.

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True
False
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The correct answer is 'True'.

Question 65
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A manufacturer of washing machines has expanded its plant and has created excess
capacity, just as the general economy has taken a downturn. The company is likely to

Select one:

a.
offer rebates and incentives for customers who purchase washing machines.

b.
suffer from intense rivalry from international manufacturers.

c.
be vulnerable to new entrants to an attractive market.

d.
raise prices on washing machines to offset lost sales.

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The correct answer is: offer rebates and incentives for customers who purchase washing
machines.

Question 66
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Scanning involves detecting meaning through early signals of environmental trends.

Select one:
True
False
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The correct answer is 'False'.

Question 67
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A general environmental analysis can be expected to produce all of the following
EXCEPT

Select one:

a.
objective answers.

b.
recognition of environmental trends.

c.
identification of organizational opportunities.

identification of organizational opportunities.

d.
identification of organizational threats.

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The correct answer is: objective answers.

Question 68
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The Strategic Focus case example of the premium-priced home builders who discovered
the trend towards desiring smaller homes illustrated the application of the external
environmental analysis process by these builders.

Select one:
True
False
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The correct answer is 'True'.

Question 69
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The goal of business-level strategy is to earn above-average

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True
False
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Question 70
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The technological segment of environmental analysis includes

Select one:

a.
places where a firm’s technology will allow that firm to dominate a given market.

b.
the determination of when machinery will need to be replaced in a given firm.

c.
the need for new technology in order for a firm to gain a competitive advantage.
d.
institutions and activities involved with creating new knowledge and translating that
knowledge into new outputs.
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The correct answer is: institutions and activities involved with creating new knowledge
and translating that knowledge into new outputs.

An analysis of the economic segment of the external environment would include all of
the following EXCEPT

Select one:

a.
the strength of the U.S. dollar.

b.
international trade.

c.
interest rates.

d.
the move toward a contingent workforce.
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The correct answer is: the move toward a contingent workforce.

Question 72
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Any core competency has the potential to lose its value creating ability.

Select one:
True
False
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Question 73
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Value-creating primary activities include

Select one:

a.
recruiting, training, developing, and compensating employees.

b.
planning corporate strategy and setting goals.
c.
selecting appropriate distribution channels.

d.
purchasing raw materials and supplies.

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The correct answer is: selecting appropriate distribution channels.

Question 74
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An attractive industry is one that is characterized by high entry barriers, suppliers and
buyers with strong bargaining power, low threats from substitute products, and low
rivalry among firms.

Select one:
True
False
Feedback
The correct answer is 'False'.

Question 75
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Which of the following is a true statement about capabilities?

Select one:

a.
Capabilities based on human capital are more vulnerable to obsolescence than other
intangible capabilities because of the tendency for employee knowledge to become
outdate

b.
Capabilities exist when resources have been purposely integrated to achieve a specific
task or set of tasks

c.
The link between firm financial performance and capabilities is dependent on whether
the capabilities are based on tangible or intangible resources

d.
Valuable capabilities are based almost entirely on tangible resources
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The correct answer is: Capabilities exist when resources have been purposely integrated
to achieve a specific task or set of tasks

Question 76
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Companies without the core competencies to link primary and support activities are still
able to implement successfully a either a cost leadership or a differentiation strategy,
although they cannot implement an integrated cost leadership/differentiation strategy

Select one:
True
False
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The correct answer is 'False'.

Question 77
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Buyers are powerful when

Select one:

a.
there is a threat of forward integration.

b.
they purchase a small proportion of the supplier’s output.

c.
switching costs are low.

d.
the buyers’ industry is fragmented.

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The correct answer is: switching costs are low.

Question 78
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A low-cost leader may create entry barriers to potential entrants by continually
improving its levels of efficiency.

Select one:
True
False
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The correct answer is 'True'.

Question 79
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The more core competencies a firm has, the more likely it is to generate a sustained
competitive advantage.

Select one:
True
False
Feedback
The correct answer is 'False'.

Question 80
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The use of the Internet by Netflix to collect data on customer preferences is an example
of

a. assessing.
b. monitoring.
c. forecasting.
d. scanning.

Select one:

a.
assessing.

b.
scanning.

c.
monitoring.

d.
forecasting.

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The correct answer is: scanning

Capabilities are often developed in specific functional areas such as manufacturing,

Select one:
True
False
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The correct answer is 'True'.

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The objective of assessing the external environment is to determine the timing and
importance of the effects of environmental changes and trends on the strategic
management of the firm

Select one:
True
False
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The correct answer is 'True'.

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Value is measured by the variable and fixed costs associated with the production and
marketing of a particular product compared with the revenue and profits the product
generates

Select one:
True
False
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The correct answer is 'False'.

Question 84
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Capabilities

Select one:

a.
are often developed in specific functional areas

b.
tend to be developed through firm-wide interactions and reside in the firm as a whole

c.
tend to be concentrated in the primary activities of the value chain

d.
tend to be concentrated in the support activities of the value chain
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The correct answer is: are often developed in specific functional areas

Question 85
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A company can earn above-average returns only when the value it creates is less than
the costs incurred to create that value

Select one:
True
False
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Question 86
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If a firm has a service that is valuable, rare, and costly-to-imitate, but a substitute exists
for the service, the firm will

Select one:

a.
have a competitive disadvantage

b.
have a temporary competitive advantage
c.
gain a sustainable competitive advantage

d.
achieve competitive parity
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The correct answer is: have a temporary competitive advantage

Question 87
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The existence of high exit barriers such as ownership of specialized assets (e.g., large
aircraft) in the airline industry indicates that

Select one:

a.
the industry is moving toward differentiation of services.

b.
the economic segment of the external environment has shifted, but airline strategies
have not changed.

c.
c
customers are relatively weak because of the high switching costs created by frequent
flyer programs

d.
the competitive rivalry in the industry is severe.

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the competitive rivalry in the industry is severe.

Question 88
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Three sources of flexibility in completing primary and support activities are particularly
useful for firms using the integrated strategy. These are

Select one:

a.
Outsourcing, Reengineering, and Flexible Manufacturing Systems.

b.
Flexible Manufacturing Systems, Total Quality Management, and Information
Networks.

c.
Outsourcing, Total Quality Management, and Information Networks.

d.
Flexible Manufacturing Systems, Reengineering, and Total Quality Management.

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The correct answer is:
Flexible Manufacturing Systems, Total Quality Management, and Information
Networks.
Question 89
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Competitor analysis focuses on

Select one:

a.
all firms in the industry

b.
firms with which the company competes directly

c.
companies that might enter the industry.

d.
firms that produce products that are substitutes.
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The correct answer is: firms with which the company competes directly

Question 90
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All of the following are forces that create high rivalry within an industry EXCEPT

Select one:

a.
high storage costs.

b.
numerous or equally balanced competitors.

c.
high fixed costs.

d.
fast industry growth.
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The correct answer is: fast industry growth.

Competitive advantage typically comes from

a.
several outstanding resources used independently

b.
the unique bundling of several resources

c.
individual resources

d.
one unique resource
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The correct answer is: the unique bundling of several resources

Question 92
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New entrants to an industry are more likely when

Select one:

a.
product differentiation in the industry is low.

b.
economies of scale in the industry are high.
c.
capital requirements in the industry are high.

d.
it is difficult to gain access to distribution channels.

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The correct answer is: it is difficult to gain access to distribution channels.

Question 93
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The proper matching of what a firm can do with what it might do allows the firm to

Select one:

a.
develop its vision, pursue its mission, and select and implement its strategies.

b.
overcome the rigidity and inertia resulting from a history of success

c.
balance the internal characteristics of the firm with the characteristics of the external
environment
d.
develop core competencies based on human knowledge
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The correct answer is: develop its vision, pursue its mission, and select and implement its
strategies.

Question 94
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One criteria for a resource or capability to be a source of competitive advantage is that
it allows the firm to perform a value-creating activity that competitors cannot perform.

Select one:
True
False
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Question 95
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The difference between the cost leadership and differentiation business-level strategies,
and the focused cost leadership and focused differentiation strategies, is their
competitive reach

Select one:
True
 False
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The correct answer is 'False'.

Question 96
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When rival firms compete aggressively by trying to attract competitors’ customers, this
might be an indication of

Select one:

a.
increasing economies of scale.

b.
high bargaining power among buyers.

c.
an industry with low exit barriers.

d.
slow industry growth.
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The correct answer is:
slow industry growth.

Question 97
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A firm should outsource only activities where it cannot create value or where it is at a
substantial disadvantage compared to competitors

Select one:
True
False
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The correct answer is 'True'.

Question 98
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All of the following are aspects of the political/legal segment of the general
environment EXCEPT

Select one:

a.
antitrust laws.
b.
attitudes and values.

c.
industries chosen for deregulation.

d.
free trade agreements between nations.

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The correct answer is: attitudes and values.

Question 99
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Competitor intelligence is

Select one:

a.
the data that the firm gathers to understand competitors’ objectives, strategies,
assumptions, and capabilities.

b.
illegal to gather under the Sarbanes-Oxley Act.

c.
strategic information gained from industrial espionage targeting international
competitors.

d.
legally or illegally-gained data about competitors’ internal strategic processes and
competitive decisions
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The correct answer is: the data that the firm gathers to understand competitors’
objectives, strategies, assumptions, and capabilities.

Question 100
Question text
At the conclusion of the internal analysis, firms must identify their strengths and
weaknesses in resources, capabilities, and core competencies

Select one:
True
False
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The correct answer is 'True'.