Strategic Management and Business Policy - Chapter 5

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Internal Scanning and Organizational Analysis
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1

Competencies are the organization's assets and are the basic building blocks of the organization.

FALSE

2

The resources of an organization include tangible assets, human assets, and intangible assets.

TRUE

3

Capabilities refer to a corporation's ability to exploit its resources.

TRUE

4

New product development would be a core competency if it goes beyond one division.

TRUE

5

General Electric is well known for its distinctive competency in management development.

TRUE

6

Core competencies may mature and become core deficiencies.

TRUE

7

An example of a cluster in the United States is computer technology found in the Silicon Valley.

TRUE

8

The two characteristics that determine the sustainability of a firm's distinctive competency are durability and imitability.

TRUE

9

Durability is the rate at which a firm's underlying resources, capabilities, or core competencies can be duplicated by others.

FALSE

10

A core competency can be easily imitated to the extent that it is transparent, transferable, and replicable.

TRUE

11

Since competitors were not able to understand how Gillette's Fusion razor was produced, it was considered transparent.

FALSE

12

Transferability is the ability of competitors to use duplicated resources and capabilities to imitate the other firm's success.

FALSE

13

Tacit knowledge is harder than explicit knowledge for competitors to imitate.

TRUE

14

eBay and Amazon.com have successfully used the efficiency model by acting as an intermediary to connect multiple sellers to multiple buyers.

FALSE

15

A value chain is a linked set of value-creating activities.

TRUE

16

A company's center of gravity is the part of the value chain that is most important to the company and the point where its greatest expertise and core competencies lie.

TRUE

17

A company's center of gravity is usually the point at which the company started.

TRUE

18

According to Porter, a manufacturing firm's support activities usually begin with inbound logistics, go through an operations process in which a product is manufactured, and continue on to outbound logistics and finally to service.

FALSE

19

When a company uses the same marketing channel for two separate products, this is an example of an economy of scope.

TRUE

20

A functional structure is appropriate for a medium sized firm with several product lines in one industry.

TRUE

21

A divisional structure has no functional or product categories and is appropriate for a small, entrepreneur-dominated company with one or two product lines that operates in a reasonably small, easily identifiable market niche.

FALSE

22

Cultural integration is the degree to which members of a unit accept the norms, values, or other culture content associated with the unit — showing the culture's depth.

FALSE

23

When employees across the organization hold the same cultural values and norms, this demonstrates a high level of cultural integration.

TRUE

24

The corporate culture generally reflects the values of the founder(s) and the mission of the firm.

TRUE

25

The marketing mix refers to product, place, packaging, and price.

FALSE

26

The product life cycle enables a marketing manager to examine the marketing mix of a particular product or group of products in terms of its position in its life cycle.

TRUE

27

Research reveals a positive relationship between corporate reputation and financial performance.

TRUE

28

Research indicates that greater financial leverage has a positive impact on performance for firms in stable environments.

TRUE

29

A good rule of thumb for R&D spending is that a corporation should spend at a "normal" rate for that particular industry unless its strategic plan calls for unusual expenditures.

TRUE

30

A company's capability in product R&D can be measured by consistent reductions in unit manufacturing costs and by the number of product defects.

FALSE

31

It is generally accepted that process R&D normally dominates the early stages of a product's life cycle, whereas product R&D becomes especially important in the later stages.

FALSE

32

Historically, competitive leadership in a market changes hands as one technology nears the end of its S-curve.

TRUE

33

An example of an intermittent manufacturing system is an auto body repair shop.

TRUE

34

Continuous manufacturing systems reap benefits from economies of scale.

TRUE

35

Flexible manufacturing permits the low-volume output of custom-tailored products at relatively low unit costs through economies of scope.

TRUE

36

Using concurrent engineering, Chrysler Corporation was able to reduce its product development cycle from 60 to 36 months.

TRUE

37

To increase flexibility, avoid layoffs, and reduce labor costs, corporations are using more contingent workers.

TRUE

38

A current trend in corporate information systems is the increasing use of the Internet for marketing, intranets for internal communication, and extranets for logistics and distribution.

TRUE

39

The EFAS Table is one way to organize the internal factors into generally accepted categories of strengths and weaknesses as well as to analyze how well a particular company's management is responding to these specific factors in light of the perceived importance of these factors to the company.

FALSE

40

Those critical strengths and weaknesses that are likely to determine if a firm will be able to take advantage of opportunities while avoiding threats are called

A) SWOT.

B) competitive forces.

C) internal strategic factors.

D) quality accounting.

E) factor analysis.

Answer: C

41

Which of the following is NOT one of the four question areas Barney proposes in his VRIO framework used to evaluate a firm's key resources?

A) organization

B) durability

C) rareness

D) value

E) imitability

Answer: B

42

When a company determines that a competency provides a competitive advantage, Barney refers to this issue as

A) value.

B) rareness.

C) imitability.

D) organization.

E) durability.

Answer: A

43

According to Barney's VRIO framework, the firm's exploitation of a competency pertains to

A) value.

B) rareness.

C) imitability.

D) organization.

E) durability.

Answer: D

44

A corporation's ability to exploit its resources is referred to as its

A) resources.

B) capabilities.

C) core competencies.

D) critical success factors.

E) key performance factors.

Answer: B

45

FedEx's application of information technology to all its operations is an example of

A) resources.

B) distinctive competencies.

C) core competencies.

D) critical success factors.

E) key performance factors.

Answer: C

46

When a company's core competencies are superior to those of competitors, these are known as

A) resources.

B) distinctive competencies.

C) core competencies.

D) critical success factors.

E) key performance factors.

Answer: B

47

Which of the following statements is true concerning clusters?

A) The desire to build or upgrade a core competency is one reason why entrepreneurial and other fast-growing firms often tend to locate close to their competitors.

B) Clusters are geographic concentrations of interconnected companies and industries.

C) An example of a cluster in the United States is California's Silicon Valley.

D) According to Porter, clusters provide access to employees, suppliers, specialized information, and complementary products.

E) all of the above

Answer: E

48

The rate at which a firm's underlying resources and capabilities depreciate or become obsolete is called

A) replicability.

B) transparency.

C) imitability.

D) durability.

E) transferability.

Answer: D

49

The rate at which a firm's underlying resources, capabilities, or core competencies can be duplicated by others is called

A) replicability.

B) transparency.

C) imitability.

D) durability.

E) transferability.

Answer: C

50

When a company takes apart a competitor's product in order to find out how it works, this process is known as

A) durability.

B) replicability.

C) reverse engineering.

D) transparency.

E) transferability.

Answer: C

51

The speed with which other firms can understand the relationship of resources and capabilities supporting a successful firm's strategy is called

A) imitability.

B) reverse engineering.

C) transferability.

D) transparency.

E) durability.

Answer: D

52

The ability of competitors to use duplicated resources and capabilities to imitate the other firm's success is called

A) imitability.

B) durability.

C) transferability.

D) transparency.

E) replicability.

Answer: E

53

Knowledge that can be easily articulated and communicated is known as

A) tacit knowledge.

B) explicit knowledge.

C) imitable knowledge.

D) transferable knowledge.

E) durable knowledge.

Answer: B

54

________ is more valuable because it can provide companies with a sustainable competitive advantage that is harder for competitors to imitate.

A) Tacit knowledge

B) Explicit knowledge

C) Imitable knowledge

D) Transferable knowledge

E) Durable knowledge

Answer: A

55

Knowledge that is not easily communicated because it is deeply rooted in employee experience or in a corporation's culture is called

A) tacit knowledge.

B) explicit knowledge.

C) imitable knowledge.

D) transferable knowledge.

E) durable knowledge.

Answer: A

56

On the continuum of resource sustainability, where would streaming movies be placed?

A) slow-cycle resources

B) sustainable resources

C) standard-cycle resources

D) fast-cycle resources

E) down-cycle resources

Answer: D

57

The business model used by IBM to make money not selling IBM products, but by selling its expertise to improve their customers operations is the

A) profit pyramid model.

B) advertising model.

C) customer solutions model.

D) efficiency model.

E) entrepreneurial model.

Answer: C

58

The business model used by HP in selling printers and printer cartridges is the

A) profit pyramid model.

B) advertising model.

C) customer solutions model.

D) efficiency model.

E) multi-component system/installed base model.

Answer: E

59

A linked set of value-creating activities beginning with basic materials provided by suppliers and ending with distributors getting the final product into the hands of the ultimate consumer is called a

A) value chain.

B) continuum of sustainability.

C) strategic capability.

D) fully integrated activity set.

E) strategic group.

Answer: A

60

The part of an industry's value chain that is most important to a company and the point where its greatest expertise and capabilities lie is called the company's

A) functional crossroads.

B) center of gravity.

C) dynamic equilibrium.

D) R&D intensity.

E) economy of scope.

Answer: B

61

Which of the following is NOT a primary activity of the value chain?

A) raw materials handling

B) installation

C) repair

D) purchasing

E) warehousing

Answer: D

62

Which of the following is NOT a support activity of the value chain?

A) procurement

B) technology development

C) human resource management

D) marketing and sales

E) strategic planning

Answer: D

63

When examining the corporate value chain of a particular product or service, which one of the following is NOT one of the PRIMARY activities that usually occur?

A) operations

B) inbound and outbound logistics

C) auditing and accounting

D) marketing and sales

E) customer service

Answer: C

64

The second step in value chain analysis is to

A) identify the legal ramifications and responsibilities of their product or service.

B) examine the linkages among the product's or service's value chain.

C) confirm that all variables have been included and taken into consideration.

D) ensure that quality management is adequately addressed.

E) examine the potential synergies among the corporation's product or business units.

Answer: B

65

When the value chains of two separate products or services share activities, such as the same marketing channels, in order to reduce costs, this is an example of

A) economies of scope.

B) economies of scale.

C) economies of integration.

D) economies of learning.

E) outsourcing.

Answer: A

66

Which of the following describes a typical functional structure?

A) Employees tend to be specialists in the business functions important to that industry such as manufacturing, marketing, finance, and human resources.

B) This is most appropriate for large corporations with many product lines in several related industries, with employees acting as specialists attempting to gain synergy among divisional activities.

C) This is most appropriate for small, entrepreneur-dominated companies with one or two product lines that operate in a small niche market, with employees acting as jack-of-all trades.

D) Employees have two or more superiors, a project manager and a functional manager.

E) This is most appropriate for large corporations with many product lines in several unrelated industries, with employees acting as specialists but with no attempt at gaining synergy among the divisions.

Answer: A

67

Which of the following best describes a simple structure?

A) Work is divided into subunits on the basis of such functions as manufacturing, marketing, finance, and human resources.

B) This is most appropriate for large corporations with many product lines in several related industries, with employees acting as functional specialists attempting to gain synergy among divisional activities.

C) This is most appropriate for small, entrepreneur-dominated companies with one or two product lines that operate in a small niche market, with employees acting as jack-of-all trades.

D) Employees have two or more superiors, a project manager and a functional manager.

E) This is most appropriate for large corporations with many product lines in several unrelated industries, with employees acting as functional specialists but with no attempt at gaining synergy among the divisions.

Answer: C

68

Which one of the following best describes a divisional structure?

A) Work is divided into subunits on the basis of such functions as manufacturing, marketing, finance, and human resources.

B) This is most appropriate for large corporations with many product lines in several related industries, with employees acting as functional specialists attempting to gain synergy among divisional activities.

C) This is most appropriate for small, entrepreneur-dominated companies with one or two product lines that operate in a small niche market, with employees acting as jack-of-all trades.

D) Employees have two or more superiors, a project manager and a functional manager.

E) This is most appropriate for large corporations with many product lines in several unrelated industries, with employees acting as functional specialists but with no attempt at gaining synergy among the divisions.

Answer: B

69

Which one of the following best describes a conglomerate structure?

A) Work is divided into subunits on the basis of such functions as manufacturing, marketing, finance, and human resources.

B) This is most appropriate for large corporations with many product lines in several related industries, with employees acting as functional specialists attempting to gain synergy among divisional activities.

C) This is most appropriate for small, entrepreneur-dominated companies with one or two product lines that operate in a small niche market, with employees acting as jack-of-all trades.

D) Employees have two or more superiors, a project manager and a functional manager.

E) This is most appropriate for large corporations with many product lines in several unrelated industries; unrelatedness prevents any attempt at gaining synergy among the divisions.

Answer: E

70

According to the text, which one of the following is NOT descriptive of a corporation's culture?

A) A corporation's culture is a collection of beliefs, expectations, and values learned and shared by the corporation's members and transmitted from one generation of employees to another.

B) Corporate cultures are only temporary and can be easily changed.

C) Culture gives a company a sense of identity.

D) The culture reflects the company's values.

E) Cultures have a powerful influence on the behavior of managers and can strongly affect a corporation's ability to shift its strategic direction.

Answer: B

71

What are the two distinct attributes of corporate culture?

A) differentiation and integration

B) durability and imitability

C) concern for people and concern for task

D) intensity and integration

E) amount of complexity and tolerance of change

Answer: D

72

What is the attribute of corporate culture that is the degree to which members of a unit accept the norms, values, or other culture content associated with the unit?

A) integration

B) strength

C) intensity

D) coordination

E) unity

Answer: C

73

Which of the following is a function of corporate culture?

  1. A) It encourages a laissez faire set of attitudes.
  2. B) It encourages flexibility and thus constant change.
  3. C) It conveys a sense of identity for employees.
  4. D) It generates creative approaches to new situations.
  5. E) It focuses employee commitment on their own careers.

Answer: C

74

Which of the following is NOT a function of corporate culture?

A) conveys a sense of identity for employees

B) adds to the stability of the organization as a social system

C) helps generate employee commitment to something greater than themselves

D) keeps people guessing about what to do next

E) serves as a frame of reference for employees to use as a guide for appropriate behavior

Answer: D

75

The breadth of an organization's culture is also known as

A) cultural intensity.

B) cultural diversification.

C) cultural integration.

D) cultural strategy.

E) cultural prerogative.

Answer: C

76

Through market research, corporations can target their various products or services so that management can discover what niches to seek or develop, and how to minimize competitive pressure. This is descriptive of

A) marketing position.

B) product life cycle.

C) market segmentation.

D) marketing mix.

E) marketing leverage.

Answer: C

77

The particular combination of product, place, promotion, and price is called

A) marketing position.

B) product life cycle.

C) market segmentation.

D) marketing mix.

E) marketing leverage.

Answer: D

78

An example of the promotion variable of the marketing mix is

A) advertising.

B) discounts.

C) location.

D) services.

E) quality.

Answer: A

79

A graph showing time plotted against the dollar sales of a product as it moves from introduction through growth and maturity to decline is called the

A) marketing position.

B) product life cycle.

C) market segmentation.

D) marketing mix.

E) marketing leverage.

Answer: B

80

Which of the following statements is true concerning a corporate reputation?

A) It is a widely held perception of a company by the general public.

B) A good corporate reputation can be a strategic resource.

C) There is a positive relationship between corporate reputation and financial performance.

D) Reputation tends to be long-lasting and hard for others to duplicate.

E) all of the above

Answer: E

81

As compared to a firm with low financial leverage, a firm with a high amount of financial leverage in an expanding market should have

A) lower profits.

B) higher profits.

C) higher earnings per share.

D) lower earnings per share.

E) higher sales revenue.

Answer: C

82

The ratio of total debt to total assets is known as

A) budgeting leverage.

B) capital finance.

C) capital budgeting.

D) financial leverage.

E) financial budgeting.

Answer: D

83

Which of the following is NOT a responsibility of a research and development manager?

A) choosing among alternative new technologies to use within the corporation

B) developing methods of embodying the new technology in new products and processes

C) deploying resources so that the new technology can be successfully implemented

D) taking the design and operationalizing the plan into mass production

E) suggesting and implementing a corporation's technological strategy in light of its corporate objectives and policies

Answer: D

84

The process of taking a new technology from the laboratory to the marketplace is called

A) economies of scope versus operating leverage.

B) the R&D mix.

C) technological competence.

D) technological transfer.

E) technology discontinuity.

Answer: D

85

When scientists concentrate on quality control and the development of design specifications and improved production equipment, it is referred to as

A) basic R&D.

B) product R&D.

C) engineering R&D.

D) life cycle R&D.

E) R&D mix.

Answer: C

86

The displacement of one technology by another, as shown by two S-shaped curves on a graph, is referred to as

A) economies of scope versus operating leverage.

B) technology transfer.

C) the R&D mix.

D) technological discontinuity.

E) a disjunctive learning or experience curve.

Answer: D

87

The proposition that silicon chips double in complexity every 18 months is referred to as

A) Ohm's Law.

B) Moore's Law.

C) Porter's Five Forces Model.

D) Mintzberg's Rule.

E) Keynesian's Theory.

Answer: B

88

In Christensen's book, The Innovator's Dilemma, he explains that managers remain with certain technologies based on

A) return of investment.

B) net present value.

C) cost reduction.

D) total operating expenses.

E) time spent during technology implementation.

Answer: A

89

According to the text, the primary task of the operations manager is to

A) make sure all the products or services are producing maximum revenue.

B) develop and operate a system that will produce the required number of products or services with a certain quality, at a given cost, within an allotted time.

C) make sure the process has a high quality control.

D) ensure that the process is manufactured or delivered as efficiently as possible.

E) interface with the other functional departments to coordinate their operations in avoiding duplication of effort.

Answer: B

90

Which of the following terms best describes a system in which items are normally processed sequentially, but the work and sequence of the process vary?

A) continuous system

B) debt capacity

C) chronological processing

D) operating leverage

E) intermittent system

Answer: E

91

An automobile assembly line is an example of which approach to manufacturing?

A) continuous system

B) debt capacity

C) sequential processing

D) job shop

E) intermittent system

Answer: A

92

The impact of a specific change in sales volume on net operating income is referred to as the

A) continuous system.

B) chronological processing.

C) debt capacity.

D) operating leverage.

E) intermittent system.

Answer: D

93

The concept that suggests that unit production costs decline by some fixed percent each time the total accumulated volume of production in units doubles is referred to as

A) the experience curve.

B) the R&D mix.

C) technological competence.

D) economy of scale.

E) economy of scope.

Answer: A

94

Which one of the following is NOT descriptive of the experience/learning curve?

A) It is very useful because it is consistent for all organizations within a particular industry.

B) It is used to estimate the production cost of a product produced by newly introduced techniques or processes.

C) The experience curve varies by industry and is based on many variables.

D) The concept was first applied in the airframe industry.

E) It shows that production costs decline by some fixed percentage as production in units doubles.

Answer: A

95

Flexible manufacturing emphasizes

A) high-volume output of mass produced products.

B) the cost advantages of an intermittent system with the customer-oriented advantages of a continuous system.

C) the learning curve is longer since technology is automated.

D) economies of scope over economies of scale.

E) economies of scale over economies of scope.

Answer: D

96

Strategic managers must be concerned with human resource management because

A) dealing with people is their primary job.

B) quality of work life is more important than strategic management.

C) the best strategies are meaningless if employees do not have the skills to carry them out or if jobs cannot be designed to accommodate the available workers.

D) workers are more likely to go on strike if management attempts to cross them.

E) they must be aware of the possibility and potential of unionism.

Answer: C

97

In order to move more quickly through a product's development stage and have people from each discipline get involved in projects early on, companies are using

A) virtual work teams.

B) cross-functional work teams.

C) advisory committees.

D) task forces.

E) continuous engineering.

Answer: B

98

The term that describes putting once isolated specialists together to work and compare notes in a collective product design effort is called

A) simultaneous strategy.

B) participatory planning.

C) jointly designed objectives.

D) concurrent engineering.

E) cooperative design.

Answer: D

99

Human resource departments have found that to reduce employee dissatisfaction and unionization efforts, they must

A) significantly increase their wage rates.

B) shorten the work week to allow for more leisure time.

C) offer a wider variety of benefits and attractive enticements.

D) guarantee their workers lifetime jobs.

E) consider the quality of work life in the design of jobs.

Answer: E

100

Which one of the following is NOT one of the four methods to improve the corporation's quality of work life?

A) improve the work environment

B) introduce participative problem-solving

C) improve the responsiveness of management

D) introduce innovative reward systems

E) restructuring work

Answer: C

101

The mix in the workplace of people from different races, cultures, and backgrounds is referred to as

A) demographics.

B) human diversity.

C) quality of work life.

D) globalization.

E) internationalization.

Answer: B

102

The PRIMARY task of the manager of information systems is to

A) prevent unlawful usage of the information from the system.

B) make sure the information contained in the system is up-to-date and accurate.

C) monitor the input of information into the information system.

D) design and manage the flow of information in a corporation to improve productivity and decision making.

E) ensure that only those who have authorized permission have access to the information system.

Answer: D

103

Describe Barney's VRIO framework.

Answer: Barney, in his VRIO framework of analysis, proposes four questions to evaluate a firm's competencies:

Value: Does it provide customer value and competitive advantage?

Rareness: Do other competitors possess it?

Imitability: Is it costly for others to imitate?

Organization: Is the firm organized to exploit the resource?

104

Discuss the two characteristics that determine the sustainability of a firm's distinctive competency.

Answer: Two characteristics determine the sustainability of a firm's distinctive competency: durability and imitability. Durability is the rate at which a firm's underlying resources, capabilities, or core competencies depreciate or become obsolete. Imitability is the rate at which a firm's underlying resources, capabilities, or core competencies can be duplicated by others.

105

Define a value chain and the significance of the center of gravity.

Answer: A value chain is a linked set of value-creating activities beginning with basic raw materials coming from suppliers, moving on to a series of value-added activities involved in producing and marketing a product or service, and ending with distributors getting the final goods into the hands of the ultimate consumer. A company's center of gravity is the part of the chain that is most important to the company and the point where its greatest expertise and capabilities lie — its core competencies. This is usually the point at which the company started.

106

Discuss the three basic organizational structures.

Answer: The three basic organizational structures are the simple, functional, and divisional. The simple structure has no functional or product categories and is appropriate for a small, entrepreneur-dominated company with one or two product lines that operates in a reasonably small, easily identifiable market niche. Employees tend to be generalists and jacks-of-all-trades. The functional structure is appropriate for a medium-sized firm with several product lines in one industry. Employees tend to be specialists in the business functions important to that industry. The divisional structure is appropriate for a large corporation with many product lines in several related industries. Employees tend to be functional specialists organized according to product-market distinctions.

107

What is corporate culture and what are the two distinct attributes of culture?

Answer: Corporate culture is the collection of beliefs, expectations, and values learned and shared by a corporation's members and transmitted from one generation of employees to another. Corporate culture has two distinct attributes — intensity and integration. Cultural intensity is the degree to which members of a unit accept the norms, values, or other culture content associated with the unit. This shows the culture's depth. Cultural integration is the extent to which units throughout an organization share a common culture. This is the culture's breadth.

108

What is R&D intensity?

Answer: A company's R&D intensity is the firm's spending on R&D as a percentage of sales revenue. This is a principal means of gaining market share in global competition. This amount often varies by industry.

109

Distinguish between continuous and intermittent manufacturing systems providing examples of each.

Answer: Manufacturing can be intermittent or continuous. In intermittent systems (job shops), the item is normally processed sequentially, but the work and sequence of the process vary. An example is an auto body repair shop. Continuous systems are those laid out as lines on which products can be continuously assembled or processed. A firm using continuous systems invests heavily in fixed investments such as automated processes and highly sophisticated machinery. Continuous systems reap benefits from economies of scale. An example is an automobile assembly line.