MBA 705 - Exam 1

MBA 705 - Exam 1
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1. Mission is a broadly defined but enduring statement of pur-

pose that identifies the scope of an organization's op-
erations and its offerings to the various stakeholders
2. Strategy refers to top management's plans to develop and sus-

tain competitive advantage so that the organization's
mission is fulfilled.
3. Competitive advan- is a state whereby a firm's successful strategies can-

tage not be easily duplicated by its competitors. Maintain-
ing a sustained competitive advantage over time can
be challenging.
4. sustained competi- A company's strategies enable it to maintain

tive advantage above-average profitability for a number of years
5. Strategic Manage- is a process that includes top management's analysis

ment of the environment in which the organization operates
prior to formulating a strategy, as well as the plan for
implementation and control of the strategy.
6. Difference between SM includes considering what must be done before

strategy v. strategic a strategy is formulated through assessing whether
management is or not the success of the implemented strategy was
successful.
7. The Strategic Man- 1. External Analysis

agement Process 2. Internal Analysis
3. Strategy Formulation
4. Strategy Implementation
5. Strategic Control
8. External Analysis Analyze the opportunities and threats, or constraints,

that exist in the organization's external environment,
including industry and forces in the external environ-
ment
9. Internal Anaylsis Analyze the organization's strengths and weakness-

es in its internal environment. Consider the context of
managerial ethics and corporate social responsibility
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MBA 705 - Exam 1
10. T/F: Internal and ex- True

ternal analysis often
occur simultaneous-
ly.
11. strategy formulation Formulate strategies that build and sustain com-
petitive advantage by matching the organization's
strengths and weaknesses with the environment's
opportunities and threats.
12. Strategic Implemen- Implement the strategies that have been developed.
tation (Execution)
13. Strategic Control Measure success and make corrections when the
strategies are not producing the desired outcomes.
14. "Outsider" perspec- these should apply a systemic approach that pro-
tive gresses through these steps in order. Doing so devel-
ops a holistic understanding of the firm, its industry,
and its strategic challenges.
15. Business model explains how the organization seeks to earn a profit
by selling its goods.
Progressive firms often devise innovative business

models that extract revenue - and ultimately profits -
from sources not identified by competitors.
16. Five Characteristics 1. Understand the competitive environment.

of a Successful 2. Understand how resources translate into strengths
Strategy and weaknesses.
3. The strategy is consistent with the mission and
goals of the organization.
4. Plans for putting the strategy into action are de-
signed before it is implemented.
5. Possible future changes (i.e., strategic control) are
evaluated before the strategy is adopted.
17. Intended Strategy

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MBA 705 - Exam 1
what management originally plans.
may be realized just as it was planned, in a modified

form, or even in an entirely different form.
18. Realized Strategy what management actually implements.
Hence, the original strategy may be realized with

desirable or undesirable results, or it may be modified
as changes in the firm or the environment become
known.
19. Gap between Intend- results from unforeseen environmental or organiza-

ed and Realized tional events, better information that was not available
when the strategy was formulated, or an improvement
in top management's ability to assess its environment.
Hence, it is common for such a gap to exist, creating
the need for constant strategic action if a firm is to
stay on course. Instead of resisting modest strate-
gic changes when new information is discovered,
managers should search for new information and be
willing to make such changes when necessary. This
activity is part of strategic control —the final step in
the strategic management process.
20. Strategy as an Art The lack of environmental predictability and the fast
pace of change render elaborate strategy planning as
suspect at best.
Strategic managers should emphasize creativity and

innovation.
Strategies should be developed like a potter molds

clay.
21. Strategy as a Sci- The scientific approach is the most widely recognized
ence view of strategy.
Strategic managers are encouraged to systematically

assess the firm's external environment and evaluate
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MBA 705 - Exam 1
the pros and cons of myriad alternatives before for-
mulating strategy.
The scientific approach is more prominent in this text.
22. Influence on Strate- -Industrial Organization

gic Management -Resource-based theory
-Contingency theory
23. Industrial Organiza- a branch of microeconomics, emphasizes the influ-

tion ence of the industry environment on the firm.
IO theory is the notion that a firm must adapt to influ-
ences in its industry to survive and prosper~ thus, its
financial performance is determined by the success
of the industry in which it competes.
24. Resource-based the- views performance primarily as a function of a firm's

ory ability to utilize its resources and emphasize the de-
velopment of a distinctive competence.
-focuses primarily on individual firms rather than on
the competitive environment.
25. Contingency theory represents a middle ground perspective that views

organizational performance as the joint outcome of
environmental forces and the firm's strategic actions.
26. Corporate Gover- refers to the board of directors, institutional investors

nance (e.g., pension and retirement funds, mutual funds,
banks, insurance companies, among other money
managers), and large shareholders known as block-
holders who monitor firm strategies to ensure effec-
tive management.
Strategic decisions are typically made by the owners

in small privately held firms. It's much more compli-
cated in large corporations.
27. Blockholders tend to 20% of the shares, so their influence is less than
hold less than institutional investors.
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MBA 705 - Exam 1
28. Board of Directors Boards consist of officials elected by shareholders
who are responsible for monitoring activities in the
organization.
29. Boards are responsi- 1. Evaluating top management's strategic proposals.

ble for: 2. Establishing broad direction for the firm
3. Selecting and determining the compensation for the
chief executive
30. Criticisms of Boards 1. CEO Duality—when the CEO also serves as the
chairman of the board—represents a potential conflict
of interest.
2. Some boards simply "rubber stamp" top manage-

ment's proposals. (Don't aggressively challenge exec-
utive decisions)
3. Evidence suggests that many boards are becoming

more responsive and assertive in their responsibili-
ties.
31. hedge fund an investment fund open to only a small number of

investors but permitted by regulators to undertake
riskier and more speculative investments
32. Sarbanes - Oxley Act 1. Covers public firms in the United States
(2002) 2. Requires that both the CEO and the CFO certify
every report that contains company financial state-
ments
3. Restricts membership of the firm's audit committee
to outsiders
4. Prohibits firms from extending personal loans to
board members or executives
33. Four Characteristics 1. Based on a systematic, comprehensive analysis of

of Strategic Deci- internal and external factors.
sions 2. Long-term and future-oriented—usually several
years to a decade or longer.
3. Seek to capitalize on favorable situations outside
the organization.
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MBA 705 - Exam 1
4. Involve choices and trade-offs.
Strategic decisions are typically made by a top man-

agement team, although the CEO alone is usually
held responsible.
34. The Global Impera- } Most firms are involved globally to some extent.
tive
} The basis for global involvement is comparative ad-
vantage, the idea that certain products may be pro-
duced more cheaply or at a higher quality in particular
countries due to cost or technology advantages.
35. Case Analysis Step 1 This step provides background information and cre-
- Introduction of the ates the context for the analysis.
Organization } When and how did the organization form?
} Is the company public or private?
} What is the firm's mission?
} What is the firm's basic business model?
36. comparative advan- the idea that certain products may be produced more
tage cheaply or at a higher quality in particular countries
due to advantages in labor costs or technology.
37. Blockholders: Large shareholders who monitor firm strategies to

ensure effective management.
38. Top Management A team of top-level executives—headed by the

Team: CEO—all of whom play instrumental roles in the
strategic management process.
39. Industry a group of rivals that produce competing products or

services.
-Rivals often share critical success factors (CSFs)
40. critical success fac- elements of the strategy that are promote (but do not
tors guarantee) success among most or all competitors
within a given industry.
41. primary industry

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MBA 705 - Exam 1
consists of a firm's most direct competitors. A sec-
ondary industry also includes less direct rivals.
42. Example of industry -The old SIC system and its successor, the NAICS,
can be used as a starting point. Outside sources can
help define an industry, but top managers must make
their own determination.
43. Market share A competitors' share of the total industry sales.
When data is not readily available or a firm wishes to

focus on only a subset of the industry, relative market
share is a useful substitute
44. relative market the firm's percentage of sales in an "industry" restrict-

share ed to select competitors
45. Case Analysis Step -Use other sources and classifications to guide think-
2 Identify Industry & ing, but make your own assessment.
Competitors -Consider the question "Where would the firm's cus-
tomers go if the firm did not exist?" when determining
competitors.
-Draw a picture to illustrate firms inside and outside of
the industry.
-Provide market shares if possible. Compute relative
market shares if market share data is not readily
available.
46. Industry Life Cycle introduction, growth, shakeout, maturity, decline

Stages
47. Introduction Phase -A young industry beginning to form and usually

(Stage 1) progress very quickly
-Demand for output is low because product is still de-
veloping. -Virtually all purchasers are first-time buyers
and tend to be affluent, risk tolerant, and innovative.
-Technology is a key concern in this stage because
businesses often seek ways to improve production
and distribution.
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MBA 705 - Exam 1
48. Growth Phase -Normally, after key technological issues are ad-
(Stage 2) dressed and customer demand begins to rise.
-Growth continues but tends to slow as the market
demand approaches saturation.
-Fewer first-time buyers remain, and most purchases
tend to be upgrades or replacements.
-Some of the industry's weaker competitors may go
out of business in this stage.
49. Shakeout Phase -occurs when industry growth is no longer rapid

(Stage 3) enough to support the increasing number of competi-
tors.
-firm's growth is contingent on its resources and com-
petitive positioning instead of a high growth rate within
the industry. -Marginal competitors are forced out, and
a small number of industry leaders may emerge.
50. Maturity Phase -reached when the market demand for the industry's
(Stage 4) outputs is becoming saturated.
-industry growth may be low, nonexistent, or even
negative. -Industry standards for quality and service
have been established, and customer expectations
tend to be more consistent than in previous stages.
-The U.S. automobile industry is a classic example of
a mature industry.
51. Decline Phase -occurs when demand for an industry's products

(Stage 5) and services decreases and often begins when con-
sumers begin to turn to more convenient, safer, or
higher quality offerings from firms in substitute indus-
tries.
-Some firms may divest their business units in this
stage whereas others may seek to "reinvent" them-
selves and pursue a new wave of growth associated
with a similar product or service.
52. Hypercompetition: The notion that industries emerge, develop, and

evolve so rapidly that identifying the current life cycle
stage may be neither possible or worthwhile.
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MBA 705 - Exam 1
53. Porter's Five Forces A model for analyzing the competitive forces within
Model the environment in which a company operates, to
assess the potential for profitability in an industry.
54. Essentials of -Collectively, the five forces determine an industry's

Porter's Five Forces potential for profitability. However, forces do not guar-
Model antee that an individual firm will be profitable or un-
profitable.
-Ideally, firms should seek to compete in industries
with a high potential for profitability.
55. Intensity of Rival- -Competition intensifies when a firm identifies the op-
ry Among Incum- portunity to improve its position or senses competitive
bent Firms pressure from other businesses in its industry.
-Intense competition can result in price wars, adver-
tising battles, new product introductions or modifica-
tions, and even increased customer service or war-
ranties.
56. Intensity of Rivalry -Industries with few firms tend to be less competitive,
Factor #1 :Concen- but those with many firms tend to be more competi-
tration of competitive, as each firm fights for dominance.
tors
57. Herfind- a commonly accepted, more sophisticated measure

ahl-Hirschman of market concentration. The HHI is calculated by
Index (HHI) summing the squares of the market shares for each
firm competing in an industry.
-scores >1,800 are concentrated and <1,000 uncon-
centrated.
58. Regulators often mergers and acquisitions

block proposed
_______ _______
_______ when in-
dustry concentra-
tion is high.
59. -Firms with high fixed costs are most likely to cut
prices when excess capacity exists because they
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MBA 705 - Exam 1
Intensity of Rivalry must operate near capacity to be able to spread their
Factor #2: High fixed overhead over more units of production.
or storage costs
60. Intensity of Rivalry -Firms in industries that grow slowly are more likely
Factor #3: Slow in- to be highly competitive than those in fast-growing in-
dustry growth dustries because one firm's increase in market share
must come primarily at the expense of rivals.
61. Intensity of Rivalry -The more similar the offerings among competitors,
Factor #4 :Lack of the more likely customers are to shift from one to
differentiation or low another.
switching costs -When products or services are less differentiated,
purchase decisions are often based on price, thereby
increasing rivalry.
62. switching costs are incurred by buyers if they switch from one com-
petitor to another. When they are low, firms are under
more pressure to satisfy customers.
63. Intensity of Rivalry -If economies of scale or other factors dictate that pro-
Factor #5: Capacity duction be augmented in large blocks, then capacity
augmented in large additions may lead to temporary overcapacity in the
increments industry, and firms may cut prices to clear inventories.
64. Intensity of Rivalry -Companies that are diverse in their origins, cultures,
Factor #6 : Diversity and strategies often have different goals and means
of competitors of competition.
-Such firms may have a difficult time agreeing on a set
of "rules of combat" and increase rivalry.
65. Intensity of Rival- -Competitive rivalry is likely to be high if firms also

ry Factor #7: High have high stakes in achieving success in a particular
strategic stakes industry.
66. Intensity of Rivalry -economic, strategic, or emotional factors that keep

Factor #7: High exit companies from leaving an industry even though they
barriers are not profitable or may even be losing money
67. Threat of Entry

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MBA 705 - Exam 1
-New entrants threaten the hold existing firms have
on an industry and thereby tend to lower profits. The
likelihood that prospective competitors will join an
industry depends on barriers to entry.
}Firms often erect entry barriers to keep potential
competitors out of the industry.
68. barriers to entry factors that make it difficult and costly for an organiza-
tion to enter a particular task environment or industry
69. Threat of Entry Fac- -Substantial economies of scale deter new entrants
tor #1 : Economies of by forcing them either to enter an industry at a large
Scale scale or suffer substantial cost disadvantages asso-
ciated with a small-scale operation.
70. Threat of Entry Fac- -Established firms may enjoy strong brand identifica-
tor #2 :Brand identi- tion and customer loyalties that are based on actual
ty and product differ- or perceived product or service differences. Typically,
entiation new entrants must incur substantial marketing and
other costs to overcome this barrier.
71. Threat of Entry Fac- -Higher entry costs tend to restrict new competitors
tor #3 : Capital Re- and ultimately increase industry profitability for exist-
quirements ing competitors.
72. Threat of Entry Fac- -When switching costs are high, buyers often need an
tor #4 : Switching incentive to try a new competitor; this raises costs for
costs the new company and acts as a barrier.
73. Threat of Entry Fac- -Existing competitors might have distribution channel
tor #5 : Access ties based on long-standing or even exclusive rela-
to distribution chan- tionships, requiring the new entrant to create its own
nels channels of distribution.
74. Threat of Entry Fac- -Existing competitors may have developed cost ad-
tor #6 : Cost disadvantages not related to firm size that cannot be easily
vantages indepen- duplicated by newcomers. These advantages discour-
dent of size age other firms from entering the industry.
-Cost advantages that are dependent on size are
economies of scale
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MBA 705 - Exam 1
75. Threat of Entry Fac- -Governments often control entry to certain indus-
tor #7 :Government tries with licensing requirements or other regulations.
Policy Alcohol sales are regulated in many locales in the
U.S. Health care providers, insurance companies, and
banks must meet certain requirements in order to
operate.
76. Pressure from Sub- -Substitute products come from outside of the indus-
stitute Products try, not from competitors.
-Substitutes present acceptable alternatives in some
cases, but not others.
77. Buyers Have Bar- 1.Buyers are concentrated or each one purchases a
gaining Power significant percentage of total industry sales.
When: 2.The products that the buyers purchase represent a
significant percentage of the buyers' costs.
3.The products are standard or undifferentiated.
4.Buyers face few switching costs.
5.Buyers earn low profits, creating pressure for them
to reduce their purchasing costs.
6.Buyers have the ability to become their own suppli-
ers (backward integration).
7.The industry's product is relatively unimportant to
the quality of the buyers' products or services.
8.Buyers have complete information.
78. Suppliers Have 1.The supplying industry is dominated by one or a few

Bargaining Power companies.
When: 2.There are few or no substitute products.
3.The buying industry is not a major customer of the
suppliers.
4.Suppliers are capable of becoming their own cus-
tomers (forward integration)
5.Suppliers' products are differentiated or have
built-in switching costs, reducing the ability of buyers
to play one supplier against another.
79. -Assumes a clear, recognizable industry and does not

consider partner firms.
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MBA 705 - Exam 1
Limitations of -Assumes that large firms cannot influence the indus-
Porter's Five Forces try structure.
Model -Assumes industry factors, not firm resources, are
primary profit drivers.
-Difficult to apply to firms operating in multiple coun-
tries where industry environments vary considerably.
80. Case Analysis Step -Apply Porter's five forces model in detail.
3: Potential Prof- -Analyze the industry, not the firm. Firm-specific is-
itability of the Indus- sues will be considered later in the SWOT analysis.
try -Make a judgment (positive, negative, or neutral)
about the effect of each force on the potential for
profits.
-Provide a summary of overall industry profitability.
81. Case Analysis Step -What firms in the industry have succeeded and failed
4: Industry Success- in the past? The same company may have succeeded
es & Failures and failed at different times in the past.
-Why did these firms succeed or fail?
-Based on these examples, identify any critical suc-
cess factors (CSFs) for the industry.
82. Substitute Products Alternative offerings produced by firms in another

industry that satisfy similar consumer needs.
83. Analysis of the -Macroenvironmental forces affect industries and in-

Macroenvironment dividual firms within industries. The focus at this stage
of analysis is on the industry, not the firm.
-Certain forces may be more prominent in some in-
dustries than in others.
84. Macroenvironmen- 1.Political-Legal forces

tal Forces 2.Economic & Ecological forces
3.Social forces
4.Technological forces
85. Political-Legal -Outcomes of elections

Forces -Legislation
-Judicial court decisions
-Governmental agency activity
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MBA 705 - Exam 1
86. Pension Security Gives workers more freedom to diversify their invest-
Act (2002) ments and greater access to quality investment ad-
vice concerning their 401(k) plans.
87. CAN SPAM Act Prescribes rules and penalties for e-mail "spammers,"
(2003) although enforcement is difficult.
Dodd-Frank Wall Street Reform and Consumer
88. Dodd-Frank Wall Increases regulations of U.S. financial markets and

Street Reform and credit rating agencies.
Consumer Protec-
tion Act (2010)
89. Government Regula- -Regulation can be costly to firms, but are not always
tions opposed. Sometimes large firms even lobby for regu-
lations that create entry barriers.
-Example: President Obama increased average gas
mileage (CAFÉ) standards to 55 miles per gallon by
2025. Some analysts estimate that production costs
will rise by as much as $3000 per vehicle to meet the
requirement.
90. Patient Protection -Increases regulations on health care providers and

and Affordable Care insurance companies in the U.S. in an effort to lower
Act (2010) costs and expand coverage
-The short- and long-term effects are still widely de-
bated.
91. Global Trends -Globally, regulation and protectionism rose after

World War II, gradually shifting toward free trade in
the late 1980s through the 2000s.
92. U.S. Trends -In the U.S., the trend shifted back toward greater
regulation in the late 2000s, sparked by the financial
crisis and the election of President Obama.
93. Economic Forces -Gross Domestic Product (GDP) & Recessions

-Inflation Rates
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MBA 705 - Exam 1
-Interest Rates
-Exchange Rates
94. GDP refers to the value of a nation's annual total production of

goods and services.
95. a GDP decline sig- lower consumer spending and decreased demand for
nals goods and services
96. When GDP declines in a recession

for two consecutive
quarters, a nation's
economy is general-
ly considered to be
97. Firms typically re- cutting costs.

spond to economic
downturns by
98. Ecological Influ- -Ecological influences are part of the economic en-
ences vironment because they can alter cost structures in
entire industries.
-Ecological forces are often intertwined with politi-
cal-legal forces because governments frequently at-
tempt to manage economic development or address
ecological concerns with regulations.
99. Key Economic Con- -When the dollar declines in value, U.S. exports be-
siderations come less expensive but U.S. imports become more
expensive, at least in the short run.
-A good economy is not good for all industries. Pawn
shops and discount stores often thrive during reces-
sions.
100. Case Analysis Steps -Identify the specific political-legal (step 5) and eco-
5-6Political/Legal & nomic/ecological (step 6) forces that affect the indus-
Economic Forces try.
-Specify precisely how the factors identified affect the
industry.
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MBA 705 - Exam 1
-Focus on the industry, not the firm. Specific applica-
tions to the firm come later.
101. Macroenvironment: The general environment that affects all business

firms in an industry, which includes political-legal,
economic, social, and technological forces.
102. Ecology: Relationships between humans and their surrounding

environment, including other living creatures, plants,
air, and water.
103. anthropogenic cli- The notion that human activity (e.g., heavy manu-
mate change facturing) has a substantial effect on global weather
patterns.
104. It is unusual for a True - Macroenvironmental forces affect industries

single firm to in- and are only occasionally influenced by a single large,
fluence a macroen- dominant firm.
vironmental force.
(True or False)
105. Government regula- False.

tions in the Unit- The shift toward deregulation crested in the
ed States have de- mid-2000s; government regulations have increased
clined consistently steadily since that time.
since the mid-2000s.
(True of False)
106. Some firms favor True.

specific regulations
because they erect While existing competitors might be able to afford to
barriers to newcom- comply with new regulations, prospective ones often
ers in the industry. stay out of an industry because of the additional costs.
(True of False)
107. The Collective Trade False.

Assessment (CTA) The World Trade Organization (WTO) has sought to
has worked toward enhance greater freedom in trade.
greater freedom in
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MBA 705 - Exam 1
trade across na-
tions. (True of False)
108. A decline in GDP False.

negatively affects all Some industries actually benefit from economic de-
industries. (True of clines.
False)
109. When the dollar False.

is weak, American When the dollar is strong, American manufacturers
manufacturers often tend to locate more of their plants abroad and make
open new produc- purchases from foreign sources.
tion facilities abroad
and increase pur-
chases from for-
eign sources.(True
or False)
110. The acronym refer- PEST refers to the analysis of the four macroen-
ring to the analy- vironmental forces: Political, Economic, Social, and
sis of macroenviron- Technological.
mental forces is
A. WASP.
B. PEST.
C. STOP.
D. SERCH.
111. In the Exter- B. In this stage, it is important to consider the effects of

nal stage of specific external forces to the industry. Firm-specific
analysis, macroen- effects will be considered later.
vironmental forces
should be applied to
A. the firm.
B. the industry.
C. all industries.
D. multiple firms.
112. Increased govern- D. Some firms favor specific regulations because they
ment regulation create entry barriers to prospective rivals. Regula-
A. is universally options do not promote free trade.
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MBA 705 - Exam 1
posed by firms.
B. is necessary to
promote free trade.
C. both A & B
D. neither A nor B
113. At the global lev- A. Global trade protectionism was common from the
el, the period from mid-1940s through the 1980s.
World War II to
the late 1980s was
marked by
A. an increase in
trade protection.
B. a decrease in
trade protection.
C. an absence of U.S.
imports.
D. none of the above
114. When the value of B. A strong U.S. dollar raises the prices of U.S.
the U.S. dollar in- goods abroad, creating a disadvantage for U.S. firms
creases, U.S. firms abroad.
A. compete at an ad-
vantage in foreign
markets.
B. compete at a dis-
advantage in foreign
markets.
C. tend to de-
crease exports to na-
tions whose curren-
cies are directly tied
to the dollar.
115. Subjective Value The idea that a resource's value differs across firms
because it is determined by the individuals or the
organization processing it. This explains why firms
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MBA 705 - Exam 1
obtain different resources and implement different
strategies.
116. Efficient Market Hy- The idea that all individuals or firms in a market earn
pothesis the same returns in the long run. If that were com-
pletely true then strategy wouldn't matter.
117. A strategy seeks to True

develop and sustain
competitive advan-
tage. (True or False)
118. Strategic manage- False

ment refers to for-
mulating successful
strategies for an or-
ganization. (True or
False)
119. Each step in the False

strategic manage-
ment process is in-
dependent so that
changes in one step
will not substan-
tially affect other
steps.(True or False)
120. The intended strate- False

gy and the realized
strategy can never
be the same.(True
orFalse)
121. Whereas IO theo- True

ry emphasizes the
influence of in-
dustry factors of
firm performance,
resource-based the-
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MBA 705 - Exam 1
ory emphasizes the
role of firm factors.
(True or False)
122. Strategic decisions False

are made solely by
and are ultimately
the responsibility of
the CEO alone. (True
or False)
123. Strategies are for- A. the assessment of internal strengths and weak-
mulated in the nesses
strategic manage-
ment stage that oc-
curs immediately af-
ter __________.
A. the assessment
of internal strengths
and weaknesses
B. implementation of
the strategy
C. control of the
strategy
124. The strategy orig- D. none of the above

inally planned by
top management is
called __________.
A. grand strategy
B. realized strategy
C. emergent strategy
125. The notion that suc- A. IO Theory

cessful firms tend
to be the ones
that adapt to influ-
ences in their in-
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MBA 705 - Exam 1
dustries is based on
__________.
A. IO theory
B. resource-based
theory
C. contingency theo-
ry
126. The notion of dis- B. resource-based theory

tinctive competence
is consistent with
__________.
A. IO theory
B. resource-based
theory
C. contingency theo-
ry
127. In order to con- D. All of the above

tribute to sus-
tained competitive
advantage, firm re-
sources should be
__________.
A. valuable and rare
B. not subject to per-
fect imitation
C. without strate-
gically relevant re-
sources
D. all of the above
128. A firm always oper- False.

ates in a single, dis- Many firm have multiple business units, each of which
tinct industry: True operated in a distinct industry.
or False
129.
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MBA 705 - Exam 1
All industries follow False.
the stages of the Not all industries fallow the model.
industry life cycle
Model:True or False
130. The likelihood that True.

new firms will ender When existing competitors erect more barriers to
an industry is con- keep out new entrants, prospective competitors be-
tingent on the ex- come less likely to enter the industry.
tent to which bar-
riers to entry have
been erected:True or
False
131. Higher capital re- True.

quirements for en- Higher capital requirements keep out newcomers,
tering an indus- lessening competition and increasing profitability for
try untimely raise existing rivals.
average profitability
within that indus-
try:True or False
132. Substitute products False.

are produced by Substitute products are produced by firms in other
competitors in the industries.
same industry.True
or False
133. A key limitation of False.

Porter's five forces
model is its reliance Porter's five forces model is based on the industrial
on resource-based organization perspective on firm performance, not the
theory. (True or resource-based perspective.
False)
134. Industry growth is B. Growth slows to a nominal level or even stops when
no longer rapid an industry enters the shakeout stage.
enough to sup-
port a large num-
ber of competitors in
22 / 24
MBA 705 - Exam 1
which stage of in-
dustry growth?
A. growth
B. shakeout
C. maturity
D. decline
135. The intensity of ri- D. All of the other choices are factors that define the
valry among firms in intensity of rivalry in an industry.
an industry is depen-
dent on which of the
following?
A. concentration of
competitors
B. high fixed or stor-
age costs
C. high exit barriers
D. all of the above
136. The decline in unit C. The decline in unit costs of a product or service
costs of a product or that occurs when the absolute volume of production
service that occurs increases is known as economies of scale
as the absolute vol-
ume of production
increases is known
as
A. production effec-
tiveness
B. effective opera-
tions management
C. economies of
scale
D. technological
analysis
137. When switching A. When switching costs are high, customers must
costs are high spend more to switch from one competitor to another.
A. customers are
less likely to try a
23 / 24
MBA 705 - Exam 1
new competitor.
B. companies spend
more on technology.
C. companies seek
new suppliers to re-
duce costs.
138. Which of the follow- D. A high volume of production creates economies of

ing is not a cost scale and is therefore not independent of scale.
advantage indepen-
dent of scale?
A. proprietary tech-
nology
B. favorable loca-
tions
C. experience in the
industry
D. high volume of
production
139. What is occurring D. Higher bargaining power of buyers occurs when

when those who pur- those who purchase an industry's goods and services
chase an industry's exercise great control over pricing and other terms.
goods and services
exercise great con-
trol over pricing and
other terms?
A. a high bargaining
power of suppliers.
B. a low bargaining
power of suppliers.
C. a balance of pow-
er among suppliers.
24 / 24

MBA 705 - Exam 1

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MBA 705 - Exam 1

Study online at https://quizlet.com/_etaerw

1. Mission is a broadly defined but enduring statement of pur-

2. Strategy refers to top management's plans to develop and sus-

3. Competitive advan- is a state whereby a firm's successful strategies can-

4. sustained competi- A company's strategies enable it to maintain

5. Strategic Manage- is a process that includes top management's analysis

6. Difference between SM includes considering what must be done before

7. The Strategic Man- 1. External Analysis

8. External Analysis Analyze the opportunities and threats, or constraints,

9. Internal Anaylsis Analyze the organization's strengths and weakness-

10. T/F: Internal and ex- True

Progressive firms often devise innovative business

16. Five Characteristics 1. Understand the competitive environment.

17. Intended Strategy

may be realized just as it was planned, in a modified

18. Realized Strategy what management actually implements.

Hence, the original strategy may be realized with

19. Gap between Intend- results from unforeseen environmental or organiza-

Strategic managers should emphasize creativity and

Strategies should be developed like a potter molds

Strategic managers are encouraged to systematically

The scientific approach is more prominent in this text.

22. Influence on Strate- -Industrial Organization

23. Industrial Organiza- a branch of microeconomics, emphasizes the influ-

24. Resource-based the- views performance primarily as a function of a firm's

25. Contingency theory represents a middle ground perspective that views

26. Corporate Gover- refers to the board of directors, institutional investors

Strategic decisions are typically made by the owners

29. Boards are responsi- 1. Evaluating top management's strategic proposals.

2. Some boards simply "rubber stamp" top manage-

3. Evidence suggests that many boards are becoming

31. hedge fund an investment fund open to only a small number of

33. Four Characteristics 1. Based on a systematic, comprehensive analysis of

Strategic decisions are typically made by a top man-

37. Blockholders: Large shareholders who monitor firm strategies to

38. Top Management A team of top-level executives—headed by the

39. Industry a group of rivals that produce competing products or

41. primary industry

43. Market share A competitors' share of the total industry sales.

When data is not readily available or a firm wishes to

44. relative market the firm's percentage of sales in an "industry" restrict-

46. Industry Life Cycle introduction, growth, shakeout, maturity, decline

47. Introduction Phase -A young industry beginning to form and usually

49. Shakeout Phase -occurs when industry growth is no longer rapid

51. Decline Phase -occurs when demand for an industry's products

52. Hypercompetition: The notion that industries emerge, develop, and

54. Essentials of -Collectively, the five forces determine an industry's

57. Herfind- a commonly accepted, more sophisticated measure

58. Regulators often mergers and acquisitions

65. Intensity of Rival- -Competitive rivalry is likely to be high if firms also

66. Intensity of Rivalry -economic, strategic, or emotional factors that keep

67. Threat of Entry

78. Suppliers Have 1.The supplying industry is dominated by one or a few

79. -Assumes a clear, recognizable industry and does not

82. Substitute Products Alternative offerings produced by firms in another

83. Analysis of the -Macroenvironmental forces affect industries and in-

84. Macroenvironmen- 1.Political-Legal forces

85. Political-Legal -Outcomes of elections

88. Dodd-Frank Wall Increases regulations of U.S. financial markets and