Aryan School of Business Management,

MBA, CS, Module 2

MCQs

Corporate Strategies
Module 2
1. A sustained or sustainable competitive advantage requires that:
a. the value creating strategy be in a formulation stage.
b. competitors be simultaneously implementing the strategy.
c. other companies not be able to duplicate the strategy.
d. average returns be earned by the company.
Answer: c. other companies not be able to duplicate the strategy.
2. Investors in a company judge the adequacy of the returns on their investment in relation to:
a. the returns on other investments of similar risk..
b. the stock market's overall performance.
c. the initial size of the investment.
d. the prime interest rate.
Answer: a. the returns on other investments of similar risk..
3. The strategic management process is:
a. a set of activities that is guaranteed to prevent organizational failure.
b. a process concerned with a firm's resources, capabilities, and competencies, but not the conditions
in its external environment.
c. a set of activities that to date have not been used successfully in the not-for-profit sector.
d. a dynamic process involving the full set of commitments, decisions, and actions related to the firm.
Answer: d. a dynamic process involving the full set of commitments, decisions, and actions related to
the firm.
4. Which of the following is NOT an assumption of the Industrial Organization, or I/O, model?
a. Organizational decision makers are rational and committed to acting in the firm's best interests.
b. Resources to implement strategies are not highly mobile across firms.
c. The external environment is assumed to impose pressures and constraints that determine the
strategies that result in superior performance.
d. Firms in given industries, or given industry segments, are assumed to control similar strategically
relevant resources.
Answer: d. Firms in given industries, or given industry segments, are assumed to control similar
strategically relevant resources.
5. Which of the following is NOT an assumption of the resource-based model?
a. Each firm is a unique collection of resources and capabilities.
b. All firms possess the same strategically relevant resources.
c. Resources are not highly mobile across firms.
d. Firms acquire different resources and capabilities over time.
Answer: b. All firms possess the same strategically relevant resources.
6. In contrast to the industrial organization model, in a resource-based model, which of the
following factors would be considered a key to organizational success?
a. unique market niche.
b. weak competition.
c. economies of scale.
d. loyal employees.
Answer: d. loyal employees.
7. The resource-based model of the firm argues that:
a. all resources have the potential to be the basis of sustained competitive
advantage.
b. resources are not a source of potential competitive advantage.
c. the key to competitive success is the structure of the industry in which the firm competes.
d. resources that are valuable, rare, costly to imitate, and non-substitutable form the basis of a firm's
core competencies.
Answer: d. resources that are valuable, rare, costly to imitate, and non-substitutable form the basis of
a firm's core competencies.
Aryan School of Business Management,
MBA, CS, Module 2
8. The I/O model and the resource-based view of the firm suggest conditions that firms should
study in order to:
a. compete in domestic but not international markets.
b. examine strategic outputs achieved mainly in the last 5-year period.
c. engage in different sets of competitive dynamics.
d. develop the most effective strategy.
Answer: d. develop the most effective strategy.
9. Strategic mission:
a. is a statement of a firm's unique purpose and scope of operations.
b. is an internally-focused affirmation of the organization's societal and ethical goals.
c. does not limit the firm by specifying the industry in which the firm intends to compete.
d. is developed by a firm before the firm develops its strategic intent.
Answer: a. is a statement of a firm's unique purpose and scope of operations.
10. The interests of an organization's stakeholders often conflict, and the organization must
prioritize its stakeholders because it cannot satisfy them all. The ________ is the most critical
criterion in prioritizing stakeholders.
a. power of each stakeholder
b. urgency of satisfying each stakeholder
c. importance of each stakeholder to the firm
d. influence of each stakeholder
Answer: a. power of each stakeholder

1. The __________ environment is composed of elements in the broader society that can influence an
industry and the firms within it.
a. general
b. competitor
c. sociocultural
d. industry
Answer: a. general
2. 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.
Answer: c. substitute products or services.
3. Which of the following is an opportunity for an entrepreneur who wishes to open a business
doing therapeutic massage in his small community?
a. the average age of the population in his community is high
b. the level of unemployment in his community is high
c. a chiropractor and two independent physical therapists located in his community
d. the average income level of the population in his community is low
Answer: c. a chiropractor and two independent physical therapists located in his community
4. The economic environment refers to:
a. the nature and direction of the economy in which a firm competes or may compete.
b. the economic outlook of the world provided by the World Bank.
c. an analysis of how the environmental movement and world economy interact.
d. an analysis of how new environmental regulations will affect our economy.
Answer: a. the nature and direction of the economy in which a firm competes or may compete.
5. An industry is defined as:
a. a group of firms producing the same item.
b. firms producing items that sell through the same distribution channels.
c. firms that have the same seven digit standard industrial code.
Aryan School of Business Management,
MBA, CS, Module 2
d. a group of firms producing products that are close substitutes.
Answer: d. a group of firms producing products that are close substitutes.
6. Which of the following is NOT an entry barrier to an industry?
a. expected competitor retaliation
b. economies of scale
c. customer product loyalty
d. bargaining power of suppliers
Answer: d. bargaining power of suppliers
7. Switching costs refer to the:
a. cost to a producer to exchange equipment in a facility when new technologies emerge.
b. cost of changing the firm's strategic group.
c. one-time costs suppliers incur when selling to a different customer.
d. one-time costs customers incur when buying from a different supplier
Answer: d. one-time costs customers incur when buying from a different supplier
8. Suppliers are powerful when:
a. satisfactory substitutes are available.
b. they sell a commodity product.
c. they offer a credible threat of forward integration.
d. they are in a highly fragmented industry.
Answer: c. they offer a credible threat of forward integration.
9. Buyers are powerful when:
a. there is not a threat of backward integration.
b. they are not a significant purchaser of the supplier's output.
c. there are no switching costs.
d. the buyers' industry is fragmented.
Answer: c. there are no switching costs.
10. Upper limits on the prices a firm can charge are impacted by:
a. expected retaliation from competitors.
b. the cost of substitute products.
c. variable costs of production.
d. customers' high switching costs
Answer: b. the cost of substitute products.

1. As defined in the text, resources:

a. are concrete sources of value.

b. are easily identified.
c. have two categories: generic and unique.
d. are the source of the firm's capabilities.
Answer: d. are the source of the firm's capabilities.
2. Tangible resources include:
a. assets that are people dependent such as know-how.
b. assets that can be seen and quantified.
c. organizational culture.
d. a firm's reputation.
Answer: b. assets that can be seen and quantified.
3. Intangible assets include:
a. the firm's reputation.
b. a firm's borrowing capacity.
c. depreciated capital assets.
d. manufacturing facilities.
Answer: a. the firm's reputation.
Aryan School of Business Management,
MBA, CS, Module 2
4. Compared to tangible resources, intangible resources are:
a. of less strategic value to the firm.
b. not the focus of strategic analysis.
c. a more potent source of competitive advantage.
d. more likely to be reflected on the firm's balance sheet.
Answer: c. a more potent source of competitive advantage.
5. Which of the following is a true statement about capabilities?
a. Capabilities emerge over time through complex interactions of tangible and intangible resources.
b. Valuable capabilities are based almost entirely on tangible resources.
c. Capabilities based on human capital are more vulnerable to obsolescence than other intangible
capabilities because of the tendency for employee knowledge to become outdated.
d. The link between firm financial performance and capabilities is dependent on whether the
capabilities are based on tangible or intangible resources.
Answer: a. Capabilities emerge over time through complex interactions of tangible and intangible
resources
6. What is the job of a Chief Learning Officer?
a. implementing employee training and development programs
b. educating customers about the firm's products
c. developing an environment in which knowledge is widespread among employees
d. establishing programs to promote education in the community
Answer: c .developing an environment in which knowledge is widespread among employees
7. A major department store chain has a strict policy of banning photographs of its sales floor
or back room operations. It also does not allow academics to include it in research studies for
publication in research journals. In fact, some of its own top managers refer to the store
policies on secrecy as "verging on paranoid." These policies indicate that the top management
of the firm believes the organization's core competencies are:
a. causally ambiguous.
b. unobservable.
c. imitable.
d. valuable.
Answer: c. imitable.
8. When a resource or capability is valuable, rare, costly to imitate, and nonsubstitutable firms
may obtain:
a. a temporary competitive advantage.
b. a complex competitive advantage.
c. competitive parity.
d. a sustainable competitive advantage.
Answer: d. a sustainable competitive advantage.
9. Costly-to-imitate capabilities can emerge for all of the following reasons EXCEPT:
a. scientific transference.
b. social complexity
c. historical conditions
d. causal ambiguity
Answer: a. scientific transference.
An integrated and coordinated set of commitments and actions designed to exploit core
competencies and gain a competitive advantage in a specific product market is a definition of:
a. business strategy.
b. core competencies.
c. sustained competitive advantage.
d. strategic mission.
Answer: a. business strategy.
In evaluating its customers, which of the following is NOT a relevant question?
a. How will core competencies meet the customer's needs?
b. Who is the customer?
c. What are the customers' needs?
Aryan School of Business Management,
MBA, CS, Module 2
d. How will our top management team interact with the customer?
Answer: d. How will our top management team interact with the customer?
Customer needs are related to the:
a. characteristics that can be used to subdivide a large market into segments.
b. set of values exhibited by a group of customers.
c. use of core competencies to implement a strategy.
d. benefits and features of a good or service that customers want to purchase.
Answer: d. benefits and features of a good or service that customers want to purchase.
Business-level strategies are concerned specifically with:
a. creating differences between the firm's position and its rivals.
b. the industries in which the firm will compete.
c. how functional areas will be organized within the firm.
d. how a business with multiple physical locations will operate one of those locations.
Answer: a. creating differences between the firm's position and its rivals.
A company using a narrow scope in its business strategy is:
a. following a cost leadership business strategy.
b. focusing on a broad array of geographic markets.
c. limiting the group of product segments served.
d. likely to earn only average returns.
Answer: c. limiting the group of product segments served.
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A cost leadership strategy provides goods or services with features that are:
a. acceptable to customers.
b. unique to the customer.
c. highly valued by the customer.
d. able to meet unique needs of the customer
Answer: a. acceptable to customers
When the costs of supplies increase in an industry, the low-cost leader may:
a. continue competing with rivals on the basis of product features.
b. lose customers as a result of price increases.
c. make it difficult for new entrants to the industry to achieve above-average returns.
d. be the only firm able to pay the higher prices and continue to earn average or above- average
returns.
Answer: d. be the only firm able to pay the higher prices and continue to earn average or above-
average returns.
The risks of a cost leadership strategy include:
a. becoming "stuck in the middle."
b. production and distribution processes becoming obsolete
c. the ability of competing firms to provide similar features in a product.
d. customers deciding the product isn't worth what the firm must charge for it.
Answer: b. production and distribution processes becoming obsolete
A firm successfully implementing a differentiation strategy would expect:
a. customers to be sensitive to price increases.
b. to charge premium prices.
c. customers to perceive the product as standard.
d. to automatically have high levels of power over suppliers.
Answer: b. to charge premium prices.
A differentiation strategy provides products that customers perceive as having:
a. acceptable features.
b. features of little value relative to the value provided by the low-cost leader's product.
c. features for which the customer will pay a low price.
d. features that are non-standardized for which they are willing to pay a premium.
Answer: d. features that are non-standardized for which they are willing to pay a premium.
The differentiation strategy can be effective in controlling the power of rivalry with existing
competitors in an industry because:
Aryan School of Business Management,
MBA, CS, Module 2
a. customers will seek out the lowest cost product.
b. customers of non-differentiated products are sensitive to price increases.
c. customers are loyal to brands that are differentiated in meaningful ways.
d. the differentiation strategy benefits from rivalry.
Answer: c. customers are loyal to brands that are differentiated in meaningful ways.
When implementing a focus strategy, the firm seeks:
a. to be the lowest cost producer in an industry.
b. to offer products with unique features for which customers will pay a premium.
c. to avoid being stuck in the middle.
d. to serve the specialized needs of a market segment.
Answer: d. to serve the specialized needs of a market segment.
T or F? Firms operating in the same market, offering similar products and targeting similar
customers are competitors.
Answer: T
T or F? Intensified rivalry within an industry results in decreased average profitability for the
firms within it
Answer: T
T or F? Competitive dynamics indicates that firms and their strategic actions are independent
Answer: F
T or F? Extensive market commonality guarantees intense competition in an industry
Answer: F
T or F? Two firms that have similar resources, but do not share markets would not be direct
and mutually acknowledged competitors.
Answer: T
T or F? Wal-Mart has recently moved to Alsatia, Missouri. Several local small retailers have
decided that choosing not to respond to Wal-Mart's competitive actions is a viable long-term
option, because although the companies have high market commonality they have little
resource similarity. These small retailers are correct in their decision
Answer: F
T or F? A competitive action is a strategic or tactical action taken by a firm to gain or defend a
competitive advantage.
Answer: T
T or F? First movers can gain a sustained competitive advantage when they reduce their costs
through reverse engineering.
Answer: F
T or F? Product quality is a universal theme and is a necessary, but not a sufficient, condition
for competitive success.
Answer: T
T or F? The probability of a competitive response to a competitive action is based partly on the
reputation of the competitor
Answer: T