1 - 1 Copyright © 2016 McGraw - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. Chapter 01 Strategic Management: Creating Competitive Advantages True / False Questions 1. Hewlett - Packard's failure and success under the leadership first of Carly Fiorina and then of Mark Hurd was said to be a direct result of the quality of leadership of each of these CEOs. According to the text, this would be an example of the "romantic" perspective of leadership. True False 2. Strategic management consists of the analyses, decisions, and actions an organization undertakes in order to create and sustain competitive advantages. True False 3. Strategic management is concerned with the analysis of strategic goals as stated in the vision, mission, and strategic objectives of a firm. True False 4. The three interrelated and principal activities of strategic management are: strategy analysis, strategy formulation, and strategy implementation. True False 5. Strategic management is not concerned with how to create competitive advantage in the marketplace. True False 6. Management innovations such as total quality, just - in - time, benchmarking, business process reengineering, and outsourcing are important, but not enough for building sustainable competitive advantage. True False 7. Making trade - off decisions between effectiveness and efficiency is central to the practice of strategic management. True False 8. Only shareholders in a publicly held company are stakeholders because they are the only group that has a stake in the success of the organization. True False 9. Strategic management is only concerned with short - term perspectives. True False 1 - 2 Copyright © 2016 McGraw - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. 10. Focusing on a single stakeholder is a good strategic principle for managers to follow. True False 11. According to Peter Senge, a leading strategic management author, creative tension results from the need to incorporate both short - term and long - term perspectives in strategic management. True False 12. Shareholders expect only short - term value and therefore good managers should only focus on meeting short - term performance targets. True False 13. Focusing on the short term and efficiency is always a bad management principle. True False 14. Ambidexterity refers to a manager's challenge to align resources, without having to take advantage of existing product markets or to proactively explore new opportunities. True False 15. According to a recent study involving 41 business units in 10 multinational companies, one ambidextrous behavior exhibited by managers is that of being brokers who are always looking to build internal networks. True False 16. According to Henry Mintzberg, a management scholar, most firms realize their original intended strategy. True False 17. The final realized strategy of a firm is a combination of deliberate and emergent strategies. True False 18. In the Mintzberg model, organizational decisions determined only by analysis are intended strategy. True False 19. Strategy analysis is the study of the external environments of the firm. True False 20. Both the internal and external environments of a firm must be analyzed as well as the goals of the firm before managers can formulate and implement appropriate strategies. True False 21. Strategy formulation involves decisions made by firms regarding investments, commitments, and other aspects of operations that create and sustain competitive advantage. True False 1 - 3 Copyright © 2016 McGraw - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. 22. All successful firms compete and outperform their rivals by developing bases for competitive advantage, which can be achieved only through cost leadership. True False 23. Business - level strategy focuses on (1) what businesses to compete in and (2) the management of the business portfolio to create synergy among its businesses. True False 24. Corporate - level strategy addresses how firms compete and outperform their rivals as well as achieve and sustain competitive advantages. True False 25. International strategy involves decisions concerning appropriate entry strategy and attaining competitive advantage in international markets. True False 26. Entrepreneurial activity aimed at new value creation is not a major engine for economic growth. True False 27. Strategy implementation involves actions that carry out the formulated strategy including proper strategic controls, organizational designs, and leadership. True False 28. Effective leadership can play a large role in fostering corporate entrepreneurship. Corporate entrepreneurship can have a very positive impact on the bottom line of a firm. True False 29. Firms must exercise either informational control or behavioral control in order to assure proper strategy implementation. True False 30. Leaders are responsible for creating a learning organization so that the entire organization can benefit only from the individual talents. True False 31. The three primary participants in corporate governance are: (1) the shareholders, (2) the management (led by the chief executive officer), and (3) the employees. True False 32. Decisions by boards of directors are always consistent with shareholder interests. True False 1 - 4 Copyright © 2016 McGraw - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. 33. Ensuring effective corporate governance requires an effective and engaged board of directors, uninvolved shareholders, and proper managerial rewards and incentives. True False 34. Auditors, banks, and analysts are external control mechanisms to ensure effective corporate governance. True False 35. Former Chrysler vice chairman Robert Lutz observed that companies exist to serve the shareholder and create shareholder value. He insisted that the only person who owns the company is the person who paid good money for it. This is an example of a symbiotic approach to stakeholder management. True False 36. Stakeholders make various claims on a company. Their interests must be taken into account in the strategic management process. True False 37. Stockholders in a company are the only individuals with an interest in the financial performance of the company. True False 38. Stockholders, employees, and the community - at - large are among the stakeholders of a firm. True False 39. Symbiosis is the ability to recognize interdependencies among the interests of multiple stakeholders within and outside an organization. True False 40. Procter and Gamble developed a laundry detergent compaction technique that appeals to consumers, retailers, shipping and wholesalers, and environmentalists. This is an example of stakeholder symbiosis. True False 41. Partnering with governments, communities, suppliers, customers, and rivals is a way to manage conflicting stakeholder interests. True False 42. The Higgs Index enables companies to compare environmental performance outcomes in order to improve their environmental impact and is an example of how rivals work together to resolve complex problems. True False 43. As a stakeholder group, creditors are interested in taxes and compliance with regulations. True False 44. As a stakeholder group, customers are interested in dividends and capital appreciation. True False 1 - 5 Copyright © 2016 McGraw - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. 45. As a stakeholder group, communities are interested in good citizenship behavior. True False 46. Social responsibility is the idea that organizations are not only accountable to stockholders but also to the community - at - large. True False 47. What constitutes socially responsible behavior changes over time. True False 48. Shell, NEC, and Procter and Gamble have been measuring their performance according to what has been called a triple bottom line. This technique involves an assessment of financial, social, and environmental performance. True False 49. Demands for greater corporate responsibility are decreasing today. True False 50. A key stakeholder group that appears to be particularly susceptible to corporate social responsibility (CSR) initiatives is customers. True False 51. There is a positive influence of CSR on the consumer evaluation of companies and their purchasing decisions, according to recent studies. True False 52. Environmental sustainability is a value embraced by the most competitive and successful multinational companies. True False 53. For many successful firms, environmental values are not central to the company culture and management processes. True False 54. Sustainability is being increasingly recognized as a source of cost efficiencies and revenue growth. True False 55. The ROIs on sustainability projects are often very difficult to quantify because the data necessary to calculate ROI accurately are often not available when it comes to sustainability projects. True False 56. Many of the benefits from sustainability projects are intangible, making it difficult to calculate the ROI. True False 1 - 6 Copyright © 2016 McGraw - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. 57. The intangible benefits of sustainability projects, such as reducing risks, staying ahead of regulations, pleasing communities, and enhancing employee morale, are substantial even when they are difficult to quantify. True False 58. Sustainability projects often require shorter - term payback windows than other projects. True False 59. Sustainability initiatives rarely have difficulty making it through the conventional approval process within corporations because managers are not concerned about their return on investment. True False 60. The ROI on a sustainability project generally is easy to quantify. True False 61. Strategic management requires managers at all levels of the organization to take a segregated view of the organization. True False 62. The strategic management process should be addressed only by top - level executives. Mid - level and low - level employees are best equipped to implement the strategies of the organization. True False 63. To develop and mobilize people and other assets, leaders are needed throughout the organization. True False 64. In the strategic management process, only local line leaders and executive leaders are needed. True False 65. Internal networks have great positional power and formal authority. True False 66. Local line leaders have little profit - and - loss responsibility. True False 67. Executive leaders champion and guide ideas. True False 68. Local line leaders are key in setting the tone for the empowerment of employees. True False 1 - 7 Copyright © 2016 McGraw - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. 69. Richard Branson, the founder of the Virgin Group, is well known for creating an inclusive organizational structure in which anybody in the organization can be involved in generating and activating upon new business ideas. True False 70. To inculcate a strategic management perspective, managers must often make a major effort to effect transformational change. True False 71. To effect transformational change in an organization, managers must communicate extensively and provide incentives, training, and development. True False 72. Nancy Snyder, corporate vice president of Whirlpool, shifted the reputation of the firm to that of an innovator by investing financially in capital spending. True False 73. Successful executives do not reward honesty and input and do not show their interest in learning what others are thinking. True False 74. According to the CEO of IDEO, Tim Brown, spotting and promoting at any level in the firm is important. True False 75. There are few benefits to having broad investment throughout the organization in the strategic management process. True False 76. Showing interest in learning what others are thinking is a leadership weakness. True False 77. The vision of an organization is the top level of its hierarchy of organizational goals. The vision statement should be massively inspiring, overarching, and long term. True False 78. Strategic objectives are more specific than vision statements. True False 79. According to the text, a mission statement is an overarching statement that is massively inspiring, long term, and only discusses the purpose of the company. True False 1 - 8 Copyright © 2016 McGraw - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. 80. A mission statement encompasses both the purpose of the organization as well as its basis of competition, and the basis of its competitive advantage. True False 81. Strategic objectives should be measurable, specific, appropriate, and realistic, but not constrained by time deadlines. True False 82. Much research has supported the notion that individuals work much harder when they are asked to do their best rather than when they are striving toward a specific goal. True False 83. Objectives in organizations should be clear, stated, and known by employees throughout the organization. True False 84. Strategic management should only include short - term objectives. Long - term objectives are covered in the vision statement of the organization. True False 85. Organizational goals and objectives should be vague in order to allow for changes in strategy. True False 86. An idealistic vision can arouse employee enthusiasm and therefore is a good vision. True False 87. One of the reasons a vision fails is that too much focus can lead to missed opportunities. True False 88. Visions need to be anchored in reality in order to be successful. True False 89. Effective mission statements incorporate the concept of stakeholder management, suggesting that organizations must respond to a single constituency. True False 90. A good mission statement, by addressing each principal theme, must communicate why an organization is special and different. True False 91. When formulating strategic objectives, managers need to remember that too many objectives can result in a lack of focus and diminished results. True False 1 - 9 Copyright © 2016 McGraw - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. Multiple Choice Questions 92. The text addresses two perspectives of leadership as well as their implications. These two perspectives are A. romantic and unromantic. B. romantic and internal control. C. external control and unromantic. D. romantic and external control. 93. A CEO made a lot of mistakes in assessing the market and the competitive conditions and improperly redesigning the organization into numerous business units. Such errors led to significant performance declines. According to the text, this example illustrates the __________ perspective of leadership. A. external control B. romantic C. internal mechanism D. operational 94. According to the external control view of leadership, which of the following factors would not be considered an external factor that might positively or negatively affect a firm's success? A. economic downturns B. governmental legislation C. outbreak of war D. company employee morale 95. Melvin Alexander, executive director of Principled Solutions Enterprise, a management consulting firm specializing in health care, suggests that environmental changes oblige firms to make strategic changes in order to survive. Which of the following is one of the strategic changes he foresees will occur in the next three to five years? A. changes in the behavior of the health care consumers B. reduction in the number of available medical doctors C. increases in the number of locations of health care facilities D. decreases in information technology investment 96. According to the text, the strategic management process entails three ongoing processes. They are A. analyses, actions, and synthesis. B. analyses, decisions, and actions. C. analyses, evaluation, and critique. D. analyses, synthesis, and decisions. 1 - 10 Copyright © 2016 McGraw - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. 97. Management innovations such as total quality, benchmarking, and business process reengineering cannot lead to sustainable competitive advantage because A. companies that have implemented these techniques have lost money. B. there is no proof that these techniques work. C. they cost too much money and effort to implement. D. every company is trying to implement them. 98. The organizational versus the individual rationality perspective suggests that objectives that are A. good for a functional area are always good for the overall organization. B. good for the overall organization are always best for a functional area. C. best for a functional area may not be best for the overall organization. D. best for one functional area will never be best for all functional areas. 99. The four key attributes of strategic management include the idea that strategy must A. be directed toward overall organizational goals and objectives. B. be focused only on long - term objectives. C. be focused on only one specific area of an organization. D. focus only on competitor strengths. 100. The four key attributes of strategic management include all of the following except A. including multiple stakeholder interests in decision making. B. incorporating both short - term and long - term perspectives. C. recognizing the trade - offs between effectiveness and efficiency. D. emphasis on the attainment of short - term objectives. 101. Effectiveness is often defined as A. doing things right. B. stakeholder satisfaction. C. doing the right thing. D. productivity enhancement. 102. In choosing to focus on stakeholders, which of the following will not lead to success for a manager? A. shareholders and employees B. employees and suppliers C. customers and the community at large D. customers only 1 - 11 Copyright © 2016 McGraw - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. 103. In strategic management, both the short - term and long - term perspectives need to be considered because A. shareholder value is only measured by short - term returns. B. shareholders only care about long - term returns. C. long - term vision precludes the analysis of present operating needs. D. the creative tension between the two forces managers to develop more successful strategy. 104. Strategic management involves the recognition of trade - offs between effectiveness and A. cost. B. value. C. return on investment. D. efficiency. 105. All of the following are ambidextrous behaviors except A. taking initiative and being alert to opportunities beyond the job description. B. being cooperative and seeking opportunities to combine personal efforts with that of others. C. intensely focusing on the responsibilities of one individual and maximizing the output of the department in the organization in which that individual works. D. being brokers, always looking to build internal linkages. 106. Ambidextrous behaviors in individuals illustrate how a dual capacity for _______ can be woven into the fabric of an organization at the individual level. A. alignment and adaptability B. alignment and transparency C. alignment and internal linkages D. alignment and efficiency 107. According to Henry Mintzberg, the final realized strategy of a firm is A. a combination of deliberate and emergent strategies. B. a combination of deliberate and differentiation strategies. C. not deliberate. D. a result of unrealized intended strategy. 108. __________ may be considered the advance work that must be done in order to effectively formulate and implement strategies. A. Goal setting B. Corporate entrepreneurship C. Strategy analysis D. Organizational design 1 - 12 Copyright © 2016 McGraw - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. 109. Strategy analysis is the starting point of the strategic management process and consists of the A. analysis only of the vision, mission, and objectives of the firm. B. analysis of the relevant internal and external environmental factors only. C. analysis of relevant competitors only. D. matching of vision, mission, and objectives with the relevant internal and external environmental factors. 110. Strategy formulation at the business level addresses best how to compete in a given business: A. to attain competitive advantage B. to reduce costs C. to decrease buyer power D. to thwart entry of new rivals 111. Corporate level strategy focuses on what businesses to compete in and A. how business can be managed to achieve synergy. B. how business can be managed to reduce synergy. C. how the firm can work as a stand - alone entity. D. how the firm can create more value by operating alone. 112. Corporate - level strategy looks at how to manage the ______ of its businesses to create synergies. A. portfolio B. stock prices C. competitors D. market pricing 113. Entering foreign markets requires firms to ascertain foremost how they will attain A. market share. B. low costs. C. competitive advantage. D. low returns on investment. 114. New value creation is a major engine for economic growth and is the main focus of _______________ strategy. A. portfolio B. corporate - level C. business - level D. entrepreneurial 1 - 13 Copyright © 2016 McGraw - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. 115. Two types of strategic control that firms must exercise for good strategy implementation are A. informational and confrontational. B. confrontational and behavioral. C. behavioral and financial. D. informational and behavioral. 116. Effective organizational design means that firms must have ________ that are consistent with their strategy. A. designs and plans B. organizational structures and designs C. adopters and designs D. adopters and plans 117. Learning organizations permit the entire organization to benefit from ____________ talents. A. internal and external B. individual and collective C. internal and collective D. external and individual 118. Effective leaders set a direction and develop an organization so that it is committed to excellence and ___________ behavior. A. performant B. strategic C. ethical D. positive 119. Strategies should be formulated that enhance foremost the ____________ capacity of a firm. A. innovative B. learning C. implementation D. business - level 120. The three participants in corporate governance are the shareholders, A. board of directors, and employees. B. labor unions, and employees. C. board of directors, and management. D. banks and lending institutions, and management. 1 - 14 Copyright © 2016 McGraw - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. 121. While working to prioritize and fulfill their responsibilities, members of the board of directors of an organization should A. represent their own interests. B. represent the interests of the shareholders. C. direct all actions of the CEO. D. emphasize the importance of short - term goals. 122. Members of boards of directors are A. appointed by the Securities and Exchange Commission. B. elected by the shareholders as their representatives. C. elected by the public. D. only allowed to serve one term of four years. 123. An organization is responsible to many different entities. In order to meet the demands of these groups, organizations must participate in stakeholder management. Stakeholder management means that A. interests of the stockholders are not the only interests that matter. B. stakeholders are second in importance to the stockholders. C. stakeholders and managers inevitably work at cross - purposes. D. all stakeholders receive financial rewards. 124. Stakeholders are A. a new way to describe stockholders. B. individuals, groups, and organizations who have a stake in the success of the organization. C. creditors who hold a lien on the assets of the organization. D. attorneys and their clients who sue the organization. 125. Procter and Gamble has perfected a technique for compacting cleaning powder into a liquid concentration. Consumers, retailers, shipping and wholesalers, and environmentalists all have benefited from the resulting change in consumer shopping habits and the revolution in industry supply - chain economics. According to the text, this is an example of A. zero - sum relationship among stakeholders. B. stakeholder symbiosis. C. rewarding stakeholders. D. emphasizing financial returns. 126. There are several perspectives of competition. One perspective is zero - sum thinking. Zero - sum thinking means that A. all parts of the organization gain at no loss. B. in order for someone to gain others must experience no gain or benefit. C. one can only gain at the expense of someone else. D. everyone in the organization shares gains and losses equally. 1 - 15 Copyright © 2016 McGraw - Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw - Hill Education. 127. Managers should do more than focus on short - term financial performance. One concept that helps managers do this is stakeholder symbiosis. This means that A. stakeholders are dependent on each other for their success. B. stakeholders look out for their individual interests. C. one can only gain at the expense of someone else. D. all stakeholders want to maximize shareholder returns. 128. Employee stakeholders are concerned with A. taxes, warranties, and regulations. B. wages, benefits, and job security. C. good citizenship behavior. D. dividends. 129. Stockholders as a stakeholder group are interested primarily by A. payment of interest and repayment of principal. B. value and warranties. C. dividends and capital appreciation. D. taxes and compliance with regulations. 130. The Sustainable Apparel Coalition accounts for more than one - third of the global A. apparel and washing product industry. B. consumer product industry. C. refinery industry. D. apparel and footwear industry. 131. Wall Street executives have received excessive bonus pay in the past. This concerns which of the following stakeholder groups most directly? A. government B. suppliers C. creditors D. stockholders 132. Supplier stakeholders are concerned with A. assurance of a continued relationship with the firm. B. employee benefits. C. safe working conditions. D. capital appreciation.