Training test for the midterm mgmt 430

Practice Test for the Midterm MGMT 430 2015
Practice Test for the Midterm - KEY
1. Organizational vision and mission serve as emotional tools for the firm, and, as such, have
little impact on firm performance.
True/False
2. Organizational stakeholders are the firm’s internal resources, capabilities, and core
competencies that are used to accomplish what may at first appear to be unattainable goals in
the competitive environment.
True/False
3. Shareholders are satisfied when return on investment has been maximized.
True/False
4. Organizational stakeholders are the firm’s internal resources, capabilities, and core
competencies that are used to accomplish what may at first appear to be unattainable goals in
the competitive environment.
True/False
5. Organizational culture refers to the core values shared by the firm’s top-level managers but
not necessarily accepted by lower-level employees who are often transitory and not
committed to the organization.
True/False
6. Above-average returns are
a. higher profits than the firm earned last year.
b. higher profits than the industry averaged over the last 10 years.
c. profits in excess of what an investor expects to earn from a historical pattern of
performance of the firm.
d. profits in excess of what an investor expects to earn from other investments with a
similar level of risk.
7. The strategic management process is
a. a set of activities that will assure a sustainable competitive advantage and above-
average returns for the firm.
b. a decision-making activity concerned with a firm’s internal resources, capabilities, and
competencies, independent of the conditions in its external environment.
c. a process directed by top-management with input from other stakeholders that seeks
to achieve above-average returns for investors through effective use of the
organization’s resources.
d. the full set of commitments, decisions, and actions required for the firm to achieve
above-average returns and strategic competitiveness.

8. Which of the following statements about organizational knowledge is correct?
a. Knowledge is an intangible resource.
b. The importance of knowledge is increasing.
c. The value of knowledge as a proportion of shareholder value is increasing.
d. All of the above are correct.
9. Which of the following statements is most consistent under the I/O view? Performance of the
firm is most directly attributable to
a. the power of the financial market stakeholders.
b. the resources the firm possesses.
c. the profitability of the industry the firm competes in.
d. hypercompetition within the industry.
10. The five forces model suggests that an industry’s profitability is a function of all the following
factors EXCEPT
a. buyers.
b. competitive rivalry.
c. suppliers.
d. the economic environment.
11. A firm’s mission
a. is a statement of a firm’s business in which it intends to compete and the customers it
intends to serve.
b. is an internally-focused affirmation of the organization’s financial, social, and ethical
goals.
c. is mainly intended to emotionally inspire employees and other stakeholders.
d. is developed by a firm before the firm develops its vision.
12. The strategies that a company's managers pursue
a) have a major impact on the company's performance relative to its competitors.
b) have little or no effect on overall profitability.
c) typically result in higher per-unit cost of production.
d) result in significant industry structural changes.
e) none of the above.
13. An effective business model
A) involves how a company selects its customers.
B) creates value for its customers.
C) achieves and sustains a high level of profitability.
D) produces goods and services.
E) all of the above.

14. Which of the following cognitive biases refers to the fact that decision makers who have
strong prior beliefs about the relationship between two variables tend to make decisions on
the basis of these beliefs, even when presented with evidence that their beliefs are wrong?
A) Prior hypothesis bias
B) Reasoning by analogy
C) Illusion of control
D) Escalating commitment
E) Representativeness
15. Sam Walton wanted Wal-Mart to keep costs low. Therefore, as an example to others, he drove
his own car and furnished his office with plain, steel desks. In this case, Mr. Walton was
displaying his
A) commitment.
B) vision.
C) astute use of power.
D) emotional intelligence.
E) eloquence.
16. Which of the following is not a characteristic of well-constructed goals?
A) They are precise and measurable.
B) They are the result of a group decision process.
C) They specify a time period.
D) They are challenging but realistic.
E) They address critical issues.
17. An important first step in the process of formulating a company's mission is to
A) describe the technological processor.
B) identify the customer segment served by the company.
C) answer the question, "What is our business?"
D) decide what the company will be like ten years from now.
E) evaluate the company's most recent performance.
18. The final result of successful strategic competitiveness is above-average returns.
True/False
19. External environmental analysis should be conducted annually.
True/False
20. Monitoring involves the development of a forecast of what might happen at a future point in
time.
True/False
21. Because the health of a nation’s economy affects the performance of individual firms and
industries, companies study the economic environment to identify changes, trends, and their
strategic implications.
True/False

22. The importance that a society places on universal access to healthcare would be considered
part of the sociocultural aspect of the external environment.
True/False
23. A high threat of new entrants keeps pricing pressures on existing firms, keeping consumers
happy and making the industry attractive and profitable.
True/False
24. The main competitive factor facing companies offering traditional telephone service is the
existence of substitute products and services.
True/False
25. High exit barriers are factors that cause a company to remain in an industry even though the
profitability of doing may be questionable.
True/False
26. Generally, the stronger the competitive forces, the higher the profit potential of an industry.
True/False
27. Eavesdropping is an ethical way to obtain information about competitors’ actions.
True/False
28. To be effective, when should environmental analysis be conducted?
a. on an on-going basis
b. Quarterly
c. Annually
d. every 3-5 years
29. Which of the following identified in an analysis of the general environment is an opportunity
for an entrepreneur who wishes to open a business doing “Fitness for Life” physical
conditioning services (strength, balance, and flexibility training) in a city of 100,000 people?
a. the average age of the population in his community is high
b. the level of unemployment in his community is high
c. a chiropractor and two independent physical therapists are located in his community
d. the average education level of the population in his community is low
30. Given enough time, any firm’s competitive advantage can be imitated by its competitors.
True/False
31. In the global economy, traditional factors such as labor costs, access to financial resources
and raw materials, and protected or regulated markets are no longer sources of competitive
advantage.
True/False
32. A global mind-set is free of the assumptions of a single country, culture, or context.
True/False
33. Analysis of the firm’s internal organization examines the firm’s portfolio of resources but
excludes the bundles of heterogeneous resources and capabilities.
True/False

34. Value is created when the firm exploits its core competencies or competitive advantages to
meet or exceed the demanding standards of global competition.
True/False
35. Creating customer value is the source of the firm’s potential to earn above-average returns.
True/False
36. In the long run, if an organization does not change it will fail.
True/False
37. A competitive advantage can be created when several resources are bundled together in a
unique fashion.
True/False
38. Compared to tangible resources, intangible resources are an inferior source of core
competencies.
True/False
39. The capacity to manage human intellect—and to convert it into useful products and services—
is fast becoming the critical executive skill of the age.
True/False
40. Every core competence is a capability and every capability is a core competence.
True/False
41. Resources and capabilities can be a source of rigidity for the firm.
True/False
42. Criticism of 3M’s reduced spending on research and development represent concerns over
what?
a. A decline in the firm’s profitability.
b. A reduction in the firms capability for innovation.
c. The substitution of innovation for efficiency.
d. The increase in expenses for downsizing resulting from this decision.
43. Internal analysis enables a firm to determine what the firm
a. can do.
b. should do.
c. will do.
d. might do.
44. The proper matching of what a firm can do with what it might do allows the firm to
a. balance the internal characteristics of the firm with the characteristics of the external
environment.
b. overcome the rigidity and inertia resulting from a history of success.
c. develop its vision, pursue its mission, and select and implement its strategies.
d. develop core competencies based on human knowledge.

45. Value consists of
a. A product’s proprietary characteristics and by its attributes for which customers are
willing to pay.
b. A product’s performance characteristics and by its attributes for which customers are
willing to pay.
c. A product’s proprietary characteristics and by its attributes for which customers
consider paying for.
d. A product’s performance characteristics and by its attributes for which customers
consider paying for.
46. By exploiting their core competencies to meet or exceed the standards of global competition,
firms create ____ for customers.
a. Validation
b. Valuation
c. Valuables
d. Value
47. A decision that results in failure
a. is a career-ending event because it is so unusual.
b. often results from lack of accountability.
c. fosters organizational inertia.
d. allows for learning.
48. The quality of Hyundai vehicles has increased dramatically. Its cars now rank at the top of the
list in vehicle quality, exceeding even Toyota. To management’s surprise, this has not led to
an increase in sales. From the standpoint of capabilities, what can we conclude about
Hyundai’s quality?
a. The increased quality fails the “value” test.
b. The increased quality fails the “rare” test.
c. The increased quality fails the “costly to imitate” test.
d. The increased quality fails the “nonsubstitutable” test.
49. Competitive advantage typically comes from
a. individual resources.
b. one unique resource.
c. several outstanding resources used independently.
d. the unique bundling of several resources.
50. Tangible resources include
a. assets that are people-dependent such as know-how.
b. assets that can be seen and quantified.
c. organizational culture.

d. a firm’s reputation.
51. Compared to tangible resources, intangible resources are
a. of less strategic value to the firm.
b. not the focus of strategic analysis.
c. a more potent source of competitive advantage.
d. more likely to be reflected on the firm’s balance sheet.
52. Compared to tangible resources, intangible resources are ____ and ____.
a. less visible; more difficult to copy.
b. less visible; less difficult to copy.
c. more visible; more difficult to copy.
d. more visible; less difficult to copy.
53. An investor is considering buying a restaurant that has been in operation for a number of
years. The restaurant has a highly-reputed chef, and many long-term kitchen and wait staff
who work together smoothly. It has a reputation for dishes of consistently high quality and an
appealing dining atmosphere.
a. The success of this restaurant is so heavily based on human resources that the
business will likely be subject to inertia in the future.
b. The investor will find that the restaurant’s financial statements will undervalue the true
value of its resources.
c. The investor should be aware that intangible assets are difficult to leverage into
additional business.
d. The investor should search for a firm which has competitive advantages based on
tangible resources.
54. To provide a sustainable competitive advantage, a capability must satisfy all of the following
criteria EXCEPT
a. be technologically innovative.
b. be hard for competing firms to duplicate.
c. be without good substitutes.
d. be valuable to customers.
55. Organizational culture is
a. amorphous and changeable.
b. not easily imitable.
c. so difficult to analyze that most firms should choose to ignore it.
d. typically fragile in the face of changes in the external environment.
56. Primary activities are
a. the activities most likely to be imitated by competitors.
b. involved in a product’s physical creation, its distribution, and its service after the sale.

c. the core competencies of the organization.
d. the activities most crucial to implementing the firm’s business strategy.
57. Value chain activities
a. are used to identify the industry profit pool that the firm should target.
b. show that there are multiple means that can be used to implement a business
strategy.
c. focus on the links between primary activities, because these are the true source of
competitive advantage for the firm.
d. can be used in not-for-profit organizations if the analysis focuses on support activities.
58. The goal of business-level strategy is to earn above-average returns.
True/False
59. Every firm uses all levels of strategy: corporate, acquisition and restructuring, international
and cooperative.
True/False
60. There are three generic business level strategies.
True/False
61. Business-level strategies detail commitments and actions taken to provide value to customers
and gain competitive advantage by exploiting core competencies in
a. the selection of industries in which the firm will compete.
b. specific product markets.
c. primary value chain activities.
d. particular geographic locations.
62. Which of the following is TRUE?
a. As customer loyalty increases, customers are more sensitive to price increases.
b. Customer loyalty has a positive relationship with firm profitability.
c. Customer loyalty is fragile and cannot reliably be considered a factor in firm success.
d. Customer loyalty is of importance only to firms using a differentiation strategy.
63. A cost leadership strategy provides goods or services with features that are
a. acceptable.
b. unique.
c. substandard.
d. mediocre.
64. A river barge company can offer cheaper, although slower, per pound transportation of
products to companies when compared with transportation by air, truck, or rail. The river
barge company should first target customers whose companies use
a. the integrated cost leadership/differentiation strategy.
b. either of the focus strategies.

c. the cost-leadership strategy.
d. any of the strategies except the focused differentiation strategy.
65. A firm successfully implementing a differentiation strategy would expect
a. customers to be sensitive to price increases.
b. to charge premium prices.
c. customers to perceive the product as standard.
d. to have high levels of power over suppliers.
66. The differentiation strategy can be effective in controlling the power of rivalry with existing
competitors in an industry because
a. customers will seek out the lowest cost product.
b. customers of non-differentiated products are sensitive to price increases.
c. customers are loyal to brands that are differentiated in meaningful ways.
d. the differentiation strategy benefits from rivalry because it forces the firm to innovate.
67. The risks of a focus strategy include
a. a competitor’s ability to use its core competencies to outfocus the focuser by serving
an even more narrowly defined segment.
b. a competitor’s ability to use its core competencies to outfocus the focuser by serving
an even more broadly defined segment.
c. decisions by industry-wide competitors to use their resources to serve a wider range
of customers’ needs than the focuser has been serving.
d. decisions by focused competitors to use their resources to serve a wider range of
customers’ needs.
68. Land’s End offers jeans personally tailored to the customer’s individual body measurements,
resulting in a garment that is uniquely sized. This is an example of
a. Total Quality Management.
b. an enterprise resource planning system.
c. a flexible manufacturing system.
d. a customer relationship management system.
69. A firm that formulates and implements a strategy that leads to superior performance has
competitive advantage
True/False
70. In the implementation stage of scenario planning, managers will activate the dominant
strategic plan.
True/False
71. In both monopolistically competitive industries and oligopolistic industries, the ability to
differentiate a product provides a firm with pricing power.
True/False

72. The five forces analysis is focused on factors that influence an industry's profitability
potential.
True/False
73. The primary role of R&D in achieving superior customer responsiveness is
a) Use web-based information systems to increase responsiveness to customers
b) Use information systems to reduce costs of coordination
c) Achieve rapid response through flexible manufacturing
d) Bring customers into the product development process
74. A business-level strategy indicates product markets and businesses in which the firm should
compete.
True/False
75. A major advantage of diversification is that overall monitoring costs are reduced, since each
separate business comes under the control of corporate headquarters.
True/False
76. All of Krispy Kreme’s revenues come from its one main product, doughnuts. It can be
considered a classic example of a firm following a constrained strategy.
True/False
77. Related linked firms share more resources and assets between their businesses than do
related constrained firms.
True/False
78. A high number of opportunities to share activities among companies in a diversified
organization is called high operational relatedness.
True/False
79. PepsiCo uses its own distribution system to deliver multiple Pepsi branded beverage
products. Pepsi recently acquired Gatorade and delivers these products using the Pepsi
distribution system. This use of Pepsi’s outbound logistics is an example of activity sharing.
True/False
80. Economies of scope are cost savings resulting from a firm successfully leveraging, either
through sharing or transferring, some of its capabilities and competencies developed in one
business to another business.
True/False
81. Market power exists when a firm is able to sell its products above the existing competitive
level or decrease the costs of its primary and support activities below the competitive level, or
both.
True/False
82. Equator, a U.S. manufacturer of pharmaceuticals, has acquired a firm in the same industry in
Ireland. It plans to move one of its key managers from its plant in St. Louis to Ireland. This can
be considered a method of transferring corporate-level core competencies.
True/False
83. Partial vertical integration is not practical because it involves excessive levels of coordination
between internal company units and outside contractors.

True/False
84. Contract manufacturers who manage their customers’ entire product line, and offer services
ranging from inventory management to delivery and after-sales services are prime examples
of vertical integration.
True/False
85. Virtual integration tends to erode the relationships between suppliers and customers as
personal contacts are replaced with impersonal electronic communications.
True/False
86. Firms with both operational and corporate relatedness are favorites of investment analysts
because the transparency and clarity of their financial statements clearly show the value-
creation resulting from the combination of multiple businesses.
True/False
87. A significant benefit of an internal capital market is limiting competitors’ access to information
about the performance of the individual businesses within the corporation.
True/False
88. Unrelated diversification has been the norm for the most successful firms in many
industrialized countries such as Germany, Italy, and France.
True/False
89. Low performance is associated with increased diversification.
True/False
90. Without strict governance mechanisms, the majority of executives will act in their own self-
interest rather than acting as positive stewards of firm resources.
True/False
91. On the most basic level, corporate-level strategy is concerned with ____ and how to manage
these businesses.
a. whether the firm should invest in global or domestic businesses
b. what product markets and businesses the firm should be in
c. whether the portfolio of businesses should generate immediate above-average returns or
should be troubled businesses which will create above-average returns only after
restructuring
d. whether to integrate backward or forward.
92. The ultimate test of the value of a corporate-level strategy is whether the
a. corporation earns a great deal of money.
b. top management team is satisfied with the corporation's performance.
c. businesses in the portfolio are worth more under the management of the company in
question than they would be under any other ownership.
d. businesses in the portfolio increase the firm’s financial returns.
93. A firm that earns less than 70% of revenue from its dominant business and has direct
connections between its businesses is engaging in ____ diversification.
a. Unrelated
b. related constrained
c. related linked
d. dominant-business

94. The lowest level of diversification is the _________ level.
a. single business
b. dominant-business
c. related constrained
d. unrelated
95. The term “conglomerates” refers to firms using the ____ diversification strategy.
a. Unrelated
b. related constrained
c. related linked
d. Global
96. An office management firm has developed a system for efficiently organizing small medical
and dental practices both through proprietary software and through unique training programs
for staff. It has recently acquired a firm specializing in providing management services for
veterinary practices. The office management firm is hoping to
a. achieve economies of scope.
b. implement vertical integration.
c. achieve financial economies through an unrelated acquisition.
d. acquire specialized talent from the veterinary management company.
97. Firms seek to create value from economies of scope through all of the following EXCEPT
a. activity sharing.
b. skill transfers.
c. transfers of corporate core competencies.
d. de-integration.
98. Operational relatedness is created by ____ activities within the ____.
a. sharing; capabilities
b. sharing; value chain
c. transferring; value chain
d. transferring; capabilities
99. Research has shown that horizontal acquisitions
a. tend to have disappointing financial results in the long run.
b. are being replaced by virtual acquisitions.
c. result in lower levels of performance than unrelated acquisitions.
d. are able to use activity sharing to successfully create economies of scope.
100. A noted professional art academy has founded an “artists and friends” travel company
specializing in tours for artists to scenic locales, using its faculty as traveling teachers. In
addition, the art academy has purchased a framing company to both make frames for
academy art works, but also to sell museum-quality framing services to the public. The art
academy is engaging in diversification based on ____ relatedness.
a. Operational
b. Corporate
c. Intellectual
d. Constrained
101. The purchasing of firms in the same industry is called:

a. unrelated diversification.
b. vertical integration.
c. networking the organization.
d. horizontal acquisition.
102. In related linked diversified firms, ____ are a complex set of resources that link the
different businesses through managerial and technological knowledge, experience, and
expertise.
a. corporate core competencies
b. Strategies
c. support activities
d. intangible assets
103. Backward integration occurs when a company
a. produces its own inputs.
b. owns its own source of distribution of outputs.
c. is concentrated in a single industry.
d. is divesting unrelated businesses.
104. Specialty Steel, Inc., needs a particular type of brick to line its kilns in order to safely
achieve the high temperatures needed for the unusually strong steel it produces. The clay to
make this brick is very rare and only two brick plants in the U.S. make this type of brick.
Specialty Steel has decided to buy one of these brick plants. This is an example of
a. backward integration.
b. forward integration.
c. horizontal integration.
d. virtual integration.
105. Luxottica is a sunglass manufacturer which has traditionally served the fashion segment.
Luxottica recently purchased Oakley, Inc., a manufacturer of sunglasses in the sportswear
segment. The potential synergies from this acquisition include
a. Operational relatedness.
b. Corporate relatedness.
c. Both operational and corporate relatedness.
d. Neither operational nor corporate relatedness.
106. Successful unrelated diversification through restructuring is typically accomplished by
a. focusing on mature, low-technology businesses.
b. a “random walk” of good luck in picking firms to buy.
c. seeking out high technology firms in high growth industries.
d. a top management team that is not constrained by pre-established ideas of how the firm’s
portfolio should be developed.
107. Free cash flows are
a. liquid financial assets for which investments in current businesses are no longer
economically viable.
b. liquid financial assets that for tax purposes must be reinvested in the firm if not distributed
as dividends to shareholders.
c. the profits resulting after a restructured firm has been sold.
d. dividends that have been distributed to shareholders that are taxed as capital gains.
108. Synergy exists when

a. cost savings are realized through improved allocations of financial resources based on
investments inside or outside the firm.
b. two units create value by utilizing market power in their respective industries.
c. firms utilize constrained related diversification to build an attractive portfolio of
businesses.
d. the value created by business units working together exceeds the value the units create
when working independently.
109. Personal motives for managers to seek diversification include a desire to
a. improve their marketability to other firms.
b. effectively use corporate resources.
c. provide higher returns to corporate stakeholders.
d. increase their compensation.
110. As a formerly innovative product becomes standardized, its production can be moved out
of the U.S. to a country with low manufacturing costs, thus extending the product's life cycle.
True/False
111. Universal product demand has permeated all types of goods and services so thoroughly
that firms rarely find they need to customize products for particular cultures or nations.
True/False
112. The requirement for local repair and service capabilities has discouraged manufacturers
of household appliances, such as General Motors and Toyota, from diversifying
internationally.
True/False
113. Part of Japan’s success in the video game industry is derived from two related and
support industries, cartoons and animation, and electronics.
True/False
114. A company that chooses a truly global corporate-level strategy assumes that the liability
of foreignness will be minimal.
True/False

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