190 test bank for concepts strategic management and competitive advantage 3rd edition barney

Test Bank for Concepts Strategic Management and Competitive Advantage 3rd Edition Barney 80 Test Bank True – False Questions 20 Test Bank Free Text Questions 90 Test Bank Multiple Choice Questions Multiple Choice Questions - Page From 1926 to 1995, visionary firms earned returns compared to firms that were not visionary firms A) marginally lower B) substantially equivalent C) substantially lower D) substantially higher Firms whose mission is central to all they are known as firms A) parity B) visionary C) legendary D) missionary Actions firms take to gain competitive advantages in a single market or industry are known as A) corporate level strategies B) sustainable strategies C) business level strategies D) functional level strategies Actions firms take to gain competitive advantages by operating in multiple markets or industries simultaneously are known as A) corporate level strategies B) macro level strategies C) business level strategies D) functional strategies helps a firm understand which of its resources and capabilities are likely to be sources of competitive advantage A) Competitive analysis B) Internal analysis C) External analysis D) Comparative analysis A firm's is its long-term purpose that defines both what a firm aspires to be in the long run and what it wants to avoid in the meantime A) goal B) mission C) objective D) vision The sequential set of analyses and choices that can increase the likelihood that a firm will choose a strategy that generates competitive advantages is the A) strategic management process B) organizational change process C) mission statement process D) goal setting process A firm's is a measure of its competitive advantage calculated using information from a firm's published profit and loss and balance sheet statements A) sustainable performance B) strategic performance C) accounting performance D) economic performance When a firm is able to create more economic value than rival firms it is said to have a(n) A) strategic choice B) comparative advantage C) competitive advantage D) economic advantage By conducting a(n) , a firm identifies the critical threats and opportunities in its competitive environment A) competitive analysis B) economic analysis C) external analysis D) internal analysis _ occurs when a firm adopts organizational policies and practices that are consistent with its strategy A) Strategy formulation B) Strategic control C) Strategy implementation D) Organizational change are specific measurable targets a firm can use to evaluate the extent to which it is realizing its mission A) Objectives B) Visions C) Competitive Advantages D) Missions Using ratio analysis, a firm earns when its performance is greater than the industry average A) above average accounting performance B) below average economic performance C) above average economic performance D) below average accounting performance Ratios that focus on the level of a firm's financial flexibility, including its ability to obtain more debt, are known as A) activity ratios B) leverage ratios C) liquidity ratios D) profitability ratios Firms that generate less economic value than their rivals experience a competitive A) disadvantage B) advantage C) parity D) preference In many ways, the difference between traditional economics research and strategic management research is that the former attempts to explain why , while the latter attempts to explain A) competitive parity should not persist; why they should B) competitive advantages should persist; when they can C) competitive advantages should persist; why they should not D) competitive advantages should not persist; when they can High quality objectives are those that are A) difficult to track over time B) tightly connected to elements of a firm's mission C) not quantitative D)difficult to measure The mission statements of visionary firms A) suggest that profit maximizing is an important corporate objective and is their primary reason of existence B) suggest that profit maximizing is their primary reason for existence C) suggest that profit maximizing, while an important corporate objective, is not their primary reason for existence D) suggest that profit maximizing is neither an important corporate objective nor their primary reason for existence The difference between the perceived benefits gained by a customer that purchases a firm's products or services and the full economic costs of these products or services is known as A) comparative value B) accounting value C) economic value D) sustainable value Missions are often written down in the form of A) corporate objectives B) mission statements C) organizational goals D) vision statements A competitive advantage that lasts a very short period of time is known as a competitive advantage A) transient B) sustained C) temporary D) perpetual A firm's is defined as its theory about how to gain competitive advantages A) mission B) strategy C) objectives D) vision The is the rate of return that a firm promises to pay its suppliers of capital to induce them to invest in the firm A) cost of debt B) cost of parity C) cost of capital D) cost of advantage The percentage of a firm's total capital that is debt times the cost of debt plus the percentage of a firm's total capital that is equity times the cost of equity is the A) weighted average cost of capital B) unweighted average cost of capital C) weighted cost of capital D) average cost of capital Which of the following statements regarding firm mission is accurate? A) While some firms have used their missions to develop strategies that create significant competitive advantages, firm missions can hurt a firm's performance as well B) It is very rare for firms to be able to use their missions to develop strategies that create significant competitive advantages, and most firm missions actually hurt their performance C) Virtually all firms have used missions to develop strategies that create significant competitive advantages, while very few firms have used missions that can hurt their performance D) Missions tend to have very little impact on a firm's ability to create significant competitive advantages measures of competitive advantage compare a firm's level of return to its cost of capital instead of to the average level of return in the industry A) Sustainable B) Strategic C) Accounting D) Economic _ are ratios with some measure of profit in the numerator and some measure of firms' size or assets in the denominator A) Profitability ratios B) Liquidity ratios C) Activity ratios D) Leverage ratios If TechnoGeek and VarsityBlue compete in the same market for the same customer and TechnoGeek generates $900 of economic value each time it sells a product or service while VarsityBlue generates $400 of economic value each time it sells a product or service, TechnoGeek has a competitive advantage of A) $360,000 B) $3,600 C) $500 D) $1,300 Firms that create the same economic value as their rivals experience competitive A) superiority B) parity C) advantage D) disadvantage The two types of measures of competitive advantage include A) accounting measures and strategic measures B) qualitative measures and quantitative measures C) accounting measures and economic measures D) strategic measures and economic measures 90 Free Test Bank for Concepts Strategic Management and Competitive Advantage 3rd Edition Barney Multiple Choice Questions - Page If the risk free rate of return is 4%, the market rate of return is 9%, and a firm's beta is 2.0, what is the firm's cost of equity? A) B) 14 C) 18 D) 30 Theories of how to gain competitive advantage in an industry that emerge over time or that have been radically reshaped once they are initially implemented are known as A) ad hoc strategies B) objective strategies C) emergent strategies D) planned strategies A firm that earns its cost of capital is said to be earning A) above normal economic performance B) normal accounting performance C) below normal economic performance D) normal economic performance The values, beliefs and norms that guide behavior in society are known as A) culture B) economics C) climate D) demographics When activity in an economy is relatively low for a short period of time, the economy is said to be in a A) depression B) boom C) prosperous cycle D) recession If a firm has total assets of $10 million, stockholder's equity of $6 million, a cost of equity of 10, and an after tax cost of debt of 5%, what is the firm's Weighted Average Cost of Capital? A) B) C) D) 18 Green Frog is an environmentally friendly firm in the cosmetics industry If during the strategic planning process Green Frog tried to determine the critical threats and opportunities in its competitive environment, it would be performing a(n) A) internal analysis B) external analysis C) economic analysis D) WACC analysis Within the five forces framework, the five most common threats facing firms from their competitive environment include each of the following except A) substitutes B) buyers For the purposes of this book, a firm's strategy is defined as its theory about how to gain competitive advantages True False Strategic choices are generally limited to very experienced senior managers in large corporations; in smaller and entrepreneurial firms, many employees end up being involved in the strategic management process True False Mission statements often contain so many common elements that even if a firm's mission statement does not influence behavior throughout an organization, it is likely to have a significant impact on a firm's actions True False All firms have almost entirely emergent strategies True False 80 Free Test Bank for Concepts Strategic Management and Competitive Advantage 3rd Edition Barney True - False Questions - Page The S-C-P model assumes that any competitive advantages a firm has in an industry must benefit society True False Product innovation is an effort to refine and improve a firm's current processes True False A firm's suppliers pose a greater threat if the supplier's industry has a large number of firms, none of which dominate the supplying industry, than if the supplier's industry is dominated by a small number of firms True False A fragmented industry is an industry that has experienced an absolute decline in unit sales over a sustained period of time True False Proprietary technology is more important as a barrier to entry than is managerial know how True False Brand identification and customer loyalty serve as entry barriers because new entrants not only have to absorb the standard costs associated with starting production in a new industry, but also have to absorb the costs associated with overcoming incumbent firm's differentiation advantages True False Sophisticated software can enhance the value that customers receive from a personal computer Therefore, software can be said to be a complementor of a personal computer True False Monopolistically competitive industries consist of only a single firm True False Suppliers are a greater threat to firms in an industry when suppliers are threatened by substitutes True False Learning-curve cost advantages are present when the cost of production falls with the cumulative volume of production True False Culture is the values, beliefs and norms that guide a behavior in a society, and culture is largely the same across the world True False A firm's general environment consists of broad trends in the context within which the firm operates that can have an impact on the firm's strategic choices True False An emerging industry is an industry in which a large number of small or medium-sized firms operate and no small set of firms has a dominant market share or creates dominant technologies True False It is possible for a single firm to be a complementor of one firm and a competitor of another True False First movers that invest only in technology usually obtain sustained competitive advantages, even if they not tie up strategically valuable resources in an industry before their full value is widely-understood True False The objective of divestment is to extract a firm from a declining industry True False In general, it is rarely the case that all five forces in the five forces framework will be equally threatening at the same time True False A firm following a niche strategy in a declining industry reduces its scope of operations and focuses on narrow segments of the declining industry True False Mature industries are characterized by elements such as slowing growth in total industry demand, a slowdown in increases in product capacity, and an overall increase in the profitability of firms in the industry True False The threat of entry in an industry depends on the cost of entry, and the cost of entry, in turn, depends upon the existence and "height" of barriers to entry True False The five forces framework is based on the S-C-P model and identifies the five most common threats facing firms from their local competitive environment and the conditions under which these threats are more or less likely to be present True False If the owner of a jewelry store who normally purchased diamonds from a diamond brokerage firm were to open its own diamond brokerage firm, this would be an example of forward vertical integration True False All divestments are caused by industry decline True False The major opportunity facing firms in fragmented industries is the implementation of strategies that begin to consolidate the industry into a smaller number of firms True False If you were to purchase a new Apple iPod, and were unable to use your previously downloaded library of digital music with your new iPod, this would be an example of a customer-switching cost you would incur to use Apple's product True False Firms pursuing a harvest strategy in a declining industry not expect to remain in the industry over the long term True False Within the five forces framework, when all five threats are very high competition in the industry begins to approach a monopoly True False In a perfectly competitive industry, there are large numbers of firms operating in the industry whose products and services are similar to each other, and it is not very costly for firms to enter into or exit these markets True False In an industry, the products or services provided by a firm's rivals meet approximately the same customer needs in the same way as the products or services provided by the firm itself, but substitutes meet approximately the same customer needs but so in different ways True False According to Bradenburger and Nalebluff, a firm's competitors help increase the size of a firm's markets while complementors divide this market among a set of firms True False To a firm seeking competitive advantage, an environmental threat is any individual, group, or organization outside a firm that seeks to reduce the level of that firm's performance True False The aging of the "baby boomer" generation in American society is an example of a demographic trend True False The threat of buyers is greater if the products or services that are being sold to buyers are standard and not differentiated than if the products sold to buyers are highly differentiated True False Diseconomies of scale exist in an industry when a firm's costs fall as a function of that firm's volume of production True False The threat of rivalry tends to be high in an industry when firms are able to meaningfully differentiate their products True False According to the S-C-P model, attributes of the industry structure within which a firm operates define the range of options and constraints facing a firm True False In the structure-conduct-performance model, the term performance refers solely to the performance of individual firms True False In general, technological change creates opportunities, but not threats True False In the structure-conduct-performance model, the term structure refers to industry structure, measured by such factors as the number of competitors in an industry True False A severe recession that lasts for several years is known as a depression True False 20 Free Test Bank for Concepts Strategic Management and Competitive Advantage 3rd Edition Barney Free Text Questions Define the term "strategy," discuss the set of assumptions and hypotheses that a strategy is based on and discuss what makes a good strategy Answer Given A firm's strategy is defined as its theory about how to gain competitive advantages This theory is based on a set of assumptions and hypotheses about how competition in this industry is likely to evolve, and how that evolution can be exploited to earn a profit To the extent that these assumptions and hypotheses accurately describe how competition in this industry actually evolves, the more likely it is that a firm will gain a competitive advantage from implementing its strategies Thus, a "good strategy" is a strategy that actually generates such advantages Differentiate between business level and corporate level strategies and give examples of each Answer Given Business level strategies are actions firms take to gain competitive advantages in a single market or industry The two most common business level strategies are cost leadership, such as Wal-Mart, and product differentiation, such as Macy's Corporate level strategies are actions firms take to gain competitive advantages in multiple markets or industries simultaneously Common corporate level strategies include vertical integration strategies, diversification strategies, strategic alliances strategies and merger and acquisition strategies What are objectives, what role they play in the strategic management process and what differentiates high quality objectives from low quality objectives Answer Given Objectives are specific measurable targets a firm can use to evaluate the extent to which it is realizing its mission High quality objectives are tightly connected to elements of a firm's mission and are relatively easy to measure and track over time Low quality objectives either not exist or are not connected to elements of a firm's mission, are not quantitative, are difficult to measure or difficult to track over time Identify and define the three elements of the S-C-P model Answer Given The three elements of the S-C-P model are structure which in this model refers to industry structure, measured by such factors as the number of competitors in an industry, the heterogeneity of products in an industry, and the cost of entry and exit in an industry, conduct, which refers to the strategies that firms in an industry implement and performance, which includes both the performance of individual firms and the performance of the economy as a whole Identify two approaches to estimating a firm's competitive advantages and discuss the strengths and weaknesses of each Answer Given The two general approaches to estimating a firm's competitive advantage are measuring accounting performance and measuring economic performance A firm's accounting performance is a measure of its competitive advantage calculated using information from a firm's published profit and loss and balance sheets and a firm's accounting performance is determined by comparing a firm's accounting ratios with other firms in the industry The greatest measure of accounting measures of competitive advantage is that they are relatively easy to compute The most significant drawback to accounting measures is that they not consider a firm's cost of capital Additionally, accounting measures can be difficult to compare across countries Economic measures of competitive advantage compare a firm's level of return to its cost of capital instead of to the average level of return in the industry The primary benefit of economic measures is that if a firm earns at least its cost of capital, it is satisfying two of its important stakeholdersdebt holders and equity holders Disadvantages of economic measures include that it can be difficult to calculate a firm's cost of capital, especially for privately held firms, and economic measures may overstate the importance of debt and equity holders What is the residual claimants view of equity holders? Answer Given The residual claimants view is that equity holders only receive payment on their investment in a firm after all legitimate claims by a firm's other stakeholders are satisfied This view then, posits that maximizing returns to its equity holders, a firm is ensuring that its other stakeholders are fully compensated for investing in a firm Define the term "mission" and discuss how a firm's mission can both positively and negatively impact a firm's performance Answer Given A firm's mission is its long-term purpose and it defines both what a firm aspires to be in the long run and what it wants to avoid in the meantime If a mission statement does not influence firm behavior, it is unlikely to have an impact on a firm's actions However, visionary firms, or firms whose mission is central to all they do, tend to earn substantially higher returns than average over the long-run even though their mission statements suggest that profit maximization is not their primary reason for existence However, missions that are inwardly focused and defined only with reference to the personal values and priorities of its founders or top managers, independent of whether or not those values and priorities are consistent with the economic realities facing a firm are not likely to be a source of competitive advantage Discuss the difference between a company's rivals and its substitutes and discuss the role substitutes play in an industry Answer Given The products or services provided by a firm's rivals meet approximately the same customers needs in the same ways as the products or services provided by the firm itself, while substitutes meet approximately the same customers needs but so in different ways Substitutes place a ceiling on the prices firms in an industry can charge and on the profits firms in an industry can earn Discuss the nature of a sustainable competitive advantage In your answer, identify when a firm has a competitive advantage, define the term "economic value" and distinguish between a temporary competitive advantage and a sustainable competitive advantage Answer Given In general, a firm has a competitive advantage when it is able to generate more economic value than rival firms Economic value is simply the difference between the perceived benefits gained by a customer that purchases a firm's products or services and the full economic cost of these products and services A temporary competitive advantage is a competitive advantage that lasts a very short period of time while a sustained competitive advantage lasts much longer Identify the four types of competition, the attributes of each type and the expected performance under each Answer Given The four types of competition include perfect competition, monopolistic competition, oligopoly and monopoly Perfect competition is characterized by a large number of firms, homogeneous products, low cost entry and exit and firms in these industries can expect to earn only competitive parity Monopolistic competition is characterized by a large number of firms, heterogeneous products, low cost entry and exit and firms in such industries can earn a competitive advantage Oligopoly is characterized by a small number of firms, homogeneous products, and costly entry and exit, firms in such industries can earn a competitive advantage Finally, monopoly is characterized by one firm and costly entry Firms in such industries can earn a competitive advantage Identify the five most common threats facing firms from their local competitive environment that are represented in the five forces framework, and discuss under what conditions firms in a specific industry are most likely to earn an above average profit and when they are to likely to earn a below average profit Answer Given The five threats that constitute the five forces framework include the threat of entry, the threat of rivalry, the threat of substitutes, the threat of suppliers, and the threat of buyers When all five threats are low, competition begins to approach what economists call a monopoly, and firms are able to earn above average profits Alternately when all give forces are very high, competition begins to approach perfect competition and the best firms can hope to earn is competitive parity Describe the difference between a competitor and a complementor and identify the role complementors play in an industry Answer Given A firm is a competitor if your customers value your product less when they have this other firm's product than when they have your product alone On the other hand, another firm is a complementor if your customers value your products more when they have this other firm's product than when they have your product alone It is possible for a firm to be a complementor for some firms and competitors for others and it is also possible for a single firm to be both a competitor and a complementor, especially in industries where it is important to create technological standards Identify the six inter-related elements that comprise a firm's general environment Answer Given The six inter-related elements of a firm's general environment include technological change, demographic trends, cultural trends, the economic climate, legal and political conditions and specific international events Why is it important to understand a firm's strategy, even if you are not a senior manager in a firm? Answer Given First, studying strategy and the strategic management process can give individuals the tools they need to evaluate the strategies of the firms that may hire them Second, once an individual is working for a firm, understanding that firm's strategy, and their place in it, can be very important to their personal success since the expectations of how they perform their function will be impacted by the firm's strategy Finally, while strategic choices are generally limited to very experienced managers in large organizations, in smaller and entrepreneurial firms, many employees end up being involved in the strategic management process Describe the difference between emergent and intended strategies Why might firms employ an emergent strategy? Answer Given Intended strategies can best be described as a firm's theories of how to gain a competitive advantage that are developed as a result of the strategic management process Intended strategies are developed when firms choose and implement their strategies exactly as described by the strategic management process Alternately, emergent strategies are theories of how to gain a competitive advantage in an industry that emerge over time or that have been radically reshaped once they are implemented Firms employ emergent strategies since some of the information needed to complete the strategic management process may not be available when firms are developing their intended strategies Define strategy implementation and discuss three specific organizational policies and practices that are particularly important in implementing a strategy Answer Given Strategy implementation occurs when a firm adopts organizational policies and practices that are consistent with its strategy Three specific organizational policies and practices are particularly important in implementing a strategy: a firm's formal organizational structure, its formal and informal management control systems, and employee compensation policies What is a harvest strategy? Answer Given In a harvest strategy, which is usually employed in a declining industry, the firm engages in a long, systematic withdrawal, extracting as much value as possible during the withdrawal period This can work if there is some value to harvest Identify the four generic industry structures and the specific strategic opportunities in each of these industries Answer Given The four generic industry structures are fragmented industries, emerging industries, mature industries, and declining industries Fragmented industries are industries in which a large number of small or medium-sized firms operate and no small set of firms has dominant market share or creates dominant technologies The major opportunity facing firms in fragmented industries is the implementation of strategies that begin to consolidate the industry into smaller firms Emerging industries are newly created, or newly recreated industries formed by technological innovations, changes in demand, and the emergence of new customer needs The opportunities that face firms in emerging industries fall into the general category of first-mover advantages or making important strategic and technological decisions early in the development of an industry Industries begin to enter the mature stage when the rate of innovation in new products and technologies drops Opportunities for firms in mature industries focus on a greater emphasis on refining a firm's current products, and emphasis on increasing the quality of service and a focus on reducing manufacturing costs and increased quality through process innovations A declining industry is an industry that has experienced an absolute decline in unit sales over a sustained period of time The major strategic options that face firms in this kind of industry are leadership, niche, harvest and divestment Identify and clearly distinguish between the four strategic options available to firms in a declining industry Answer Given The four major strategic options available to firms in a declining industry are leadership, niche, harvest and divestment One strategy is for a firm to position itself to become a market leader in the pre-shakeout industry by becoming the firm with the largest market share in that industry The purpose of becoming the marker leader is to facilitate the exit of firms that are not likely to survive a shakeout A firm following a niche strategy in a declining industry reduces its scope of operations and focuses on narrow segments of the declining industry Firms pursuing a harvest strategy engage in a long, systematic, phased withdrawal, extracting as much value as possible during the withdrawal period Finally, firms pursuing divestment extract a firm from the declining industry, but so soon after a pattern of decline is established in an industry What are customer-switching costs? Answer Given Customer-switching costs exist when customers make investments in order to use a firm's particular products or services These investments tie customers to a particular firm and make it more difficult for customers to begin purchasing from other firms ... False 80 Free Test Bank for Concepts Strategic Management and Competitive Advantage 3rd Edition Barney True - False Questions - Page The S-C-P model assumes that any competitive advantages a firm... performance 4 D) above average accounting performance 90 Free Test Bank for Concepts Strategic Management and Competitive Advantage 3rd Edition Barney Multiple Choice Questions - Page exist... economic measures D) strategic measures and economic measures 90 Free Test Bank for Concepts Strategic Management and Competitive Advantage 3rd Edition Barney Multiple Choice Questions - Page