Strategic Management Exam Solutions
Course Introduction
Strategic Management explores the formulation, implementation, and evaluation of cross-functional decisions that enable an organization to achieve its long-term objectives. The course covers fundamental concepts and analytical tools for analyzing the internal and external environments of a business, identifying competitive advantages, and developing strategies at the corporate, business, and functional levels. Students will examine case studies, apply strategic frameworks, and learn how to address real-world challenges related to competition, innovation, global expansion, and organizational change, ultimately preparing them to think and act as effective strategic leaders. Recommended Textbook
Strategic Management and Competitive Advantage Concepts and Cases 5th Edition by Jay
11 Chapters
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Page 2
B.
Chapter 1: What Is Strategy and the Strategic Management Process
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Sample Questions
Q1) Define the term "mission" and discuss how a firm's mission can both positively and negatively impact a firm's performance.
Answer: 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 their 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.
Q2) Which ratio signals a greater risk of bankruptcy as it increases?
A) debt to equity
B) quick ratio
C) debt to assets
D) cash flow per share
Answer: C
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Chapter 2: Evaluating a Firms External Environment
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Sample Questions
Q1) An industry 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 is known as a(n) ________ industry.
A) fragmented
B) consolidated
C) mature
D) emerging
Answer: A
Q2) Product innovation is an effort to refine and improve a firm's current processes.
A)True
B)False
Answer: False
Q3) In the S-C-P model, ________ refers to the strategies that firms in an industry implement.
A) structure
B) strategy
C) conduct
D) performance
Answer: C
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Page 4
Chapter 3: Evaluating a Firms Internal Capabilities
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Sample Questions
Q1) Most firms have a resource base that is composed primarily of valuable but common resources and capabilities, some of which are essential if a firm is to gain competitive parity.
A)True
B)False
Answer: True
Q2) If a firm's resources and capabilities are costly to imitate because imitating firms may not understand the relationship between the resources and capabilities controlled by a firm and that firm's competitive advantage, this competitive advantage is said to be protected from imitation by A) path dependence.
B) causal ambiguity.
C) unique historical conditions.
D) social complexity.
Answer: B
Q3) In the VRIO framework, the R represents resources.
A)True
B)False
Answer: False
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Page 5
Chapter 4: Cost Leadership
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Sample Questions
Q1) Differential low-cost access to productive inputs may create cost differences among firms producing similar products in an industry.
A)True
B)False
Q2) Learning curve-cost advantages are restricted solely to manufacturing and the advantage associated only with the manufacturing business function.
A)True
B)False
Q3) The U in U-form structure stands for
A) "uniform."
B) "unitary."
C) "unilateral."
D) "unambiguous."
Q4) A firm that chooses a cost-leadership business strategy focuses on gaining advantages by reducing its costs to a level equal to all of its competitors.
A)True
B)False
Q5) Identify six reasons firms can differ in their costs.
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Chapter 5: Product Differentiation
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Sample Questions
Q1) Timing-based product differentiation relies solely on being a first mover.
A)True
B)False
Q2) Firms that are stuck in the middle attempt to sell
A) high-priced products and gain small market share.
B) low-priced products and gain large market share.
C) high-priced products and gain a large market share.
D) medium-priced products and gain medium market share.
Q3) What is the relationship between product differentiation and managerial creativity?
Q4) By increasing the perceived value of a firm's products or services, a firm will be able to
A) charge a lower price than it would otherwise be able to do.
B) charge a higher price than it would otherwise be able to do.
C) sell its products at lower prices than firms pursuing a cost-leadership strategy.
D) gain significantly more market share than firms pursuing a cost-leadership strategy.
Q5) Identify the two primary forms that the substitutes for bases of product differentiation can take.
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Page 7
Chapter 6: Vertical Integration
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Sample Questions
Q1) Firm-specific investments are a type of ________ investments.
A) operational
B) contingent
C) transaction-specific
D) horizontal
Q2) When companies staffed and operated their own call centers in the United States, they were engaging in backward vertical integration, but when they started using independent companies in India to staff and operate these centers, they were more vertically integrated.
A)True
B)False
Q3) What type of compensation approach goes best with the flexibility explanation of vertical integration?
Q4) Discuss the flexibility-based explanation of vertical integration. In discussing this explanation be sure to define flexibility, the role of uncertainty in this explanation, and identify when, under this explanation, firms should engage in vertical integration.
Q5) Flexibility is always valuable.
A)True
B)False
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Chapter 7: Corporate Diversification
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Sample Questions
Q1) The only two economies of scope that do not have the potential for generating positive returns for a firm's equity holders are diversification in order to maximize the size of a firm and diversification to reduce risk.
A)True
B)False
Q2) Internal capital allocation is an example of less costly-to-duplicate economies of scope.
A)True
B)False
Q3) If one of the reasons that Peach Computers entered into the electronics industry was to offset weakness in the computer industry because when the computer industry was weak, the electronics industry was strong, and vice versa, Peach Computers would be pursuing which economy of scope?
A) core competencies
B) multipoint competition
C) tax advantages
D) risk reduction
Q4) Explain how strategic alliances are a substitute for exploiting economies of scope in diversification.
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Chapter 8: Organizing to Implement Corporate
Diversification
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Q1) A(n) ________ occurs when a large, typically diversified firm divests itself of a business in which it has historically been operating and the divested business operates as an independent unit.
A) harvest
B) liquidation
C) initial public offering
D) corporate spin-off
Q2) If the bulk materials division of SpandoCorp sold its reams of Spandex to the military division and set the transfer price of these reams equal to the bulk materials actual cost of production, SpandoCorp would be using the ________ transfer pricing scheme.
A) exchange autonomy
B) mandated full cost
C) mandated market based
D) dual pricing
Q3) Discuss the importance of compensation policies in diversified firms and identify the CEO compensation package that most closely aligns the interests of the CEO with those of stockholders.
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Page 10
Chapter 9: Strategic Alliances
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Sample Questions
Q1) ________ exist(s) when firms directly communicate with each other to coordinate their levels of production and/or their prices.
A) Economies of scale
B) Explicit collusion
C) A learning race
D) Tacit collusion
Q2) While it is often the case that there will be important information asymmetries between firms in an alliance, these asymmetries are likely to be ________ when alliances partners come from different countries.
A) much less
B) about the same as
C) much greater
D) marginally greater
Q3) A firm's ability to learn is known as its
A) competitive position.
B) competitive advantage.
C) distinctive competence.
D) absorptive capacity.
Q4) Discuss when strategic alliances may be costly to directly duplicate.
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Chapter 10: Mergers and Acquisitions
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Sample Questions
Q1) Operational, functional, strategic, and cultural differences between bidding and target firms can all be compounded by the merger and acquisition process especially if that process was unfriendly.
A)True
B)False
Q2) Entrepreneurs must rely on capital generated from their ongoing operations or ________ and debt capital provided by banks.
A) initial public offering
B) retained earnings
C) venture capital firms
D) operating budgets
Q3) The price of each of a firm's shares multiplied by the number of shares outstanding represents the firm's
A) total equity base.
B) current market value.
C) total market share.
D) current market share.
Q4) Discuss the differences between mergers and acquisitions and differentiate between friendly and unfriendly acquisitions.
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Chapter 11: International Strategies
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Sample Questions
Q1) Broad changes in the political situation in a foreign country is an example of political risk that affects the international strategies at the ________ level.
A) macro
B) micro
C) functional
D) cultural
Q2) What is the local responsiveness/international integration trade-off that firms face when they go into international markets?
Q3) Agrestal's use of hedging is a way for the company to guard against ________ risks.
A) political
B) market
C) business
D) financial
Q4) General Electric (GE) uses a ________ structure to manage its global operations.
A) transnational
B) centralized hub
C) decentralized federation
D) coordinated federation
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