Chapter 01
What Is Strategy and Why Is It Important?
True / False Questions
1. A firm that formulates and implements a strategy that leads to superior performance has
competitive advantage.
True
False
2. Competitive advantage is an absolute measure of superior firm performance.
True
False
3. The essential core of strategy is doing the same thing as your rivals but being more effective at
it.
True
False
4. The term strategy is meant to describe the firm's overall quest for competitive advantage.
True
False
5. Assumptions have no major role in the development of strategies for an organization.
True
False
6. Industry effects clearly are more significant than firm-level effects on firm performance.
True
False
7. Business strategy concerns the choice of strategy in terms of where to compete.
True
False
8. A business model is not directly connected to how a firm makes money.
True
False
9. IBM as a U.S. company has a majority of its revenues from the United States.
True
False
10. BRIC countries include Britain, Russia, Ireland, and Chile and are likely to be the fastest-growing
economies in the world.
True
False
11. Firms will refer to the "bottom of the pyramid" of the global economy for significant business
opportunities, thus improving the living standard of the world's poorest.
True
False
12. Crowdsourcing is where a group of people voluntarily performs tasks that were traditionally
completed by a firm's employees.
True
False
13. The AOL TimeWarner merger is viewed as beneficial for shareholder value.
True
False
14. Stakeholders cannot exert a powerful influence on firms.
True
False
15. The AFI Strategy Framework is used by managers to implement a human resource strategy for
all employees within a firm.
True
False
Multiple Choice Questions
16. Google's initial competitive advantage over AltaVista and Yahoo was what?
A. Its location in Menlo Park
B. The PageRank algorithm
C. Brand recognition
D. The Keywords product
17. What might Microsoft have used their 1998 purchase of LinkExchange to build a competitive
advantage in?
A. Online search and advertising
B. Cloud storage
C. Business Intelligence Tools
D. Server Virtualization
18. Microsoft is building up its share of the search engine market by partnering with which firm?
A. AltaVista
B. Yahoo
C. Google
D. LinkExchange
19. Microsoft is partnering with Yahoo for what major purpose?
A. To improve their search speeds
B. To remove Yahoo as a competitor
C. To build market share for its Bing search engine
D. To compete with Apple
20. Which of the following is NOT a major component of the overarching integrative management
field of strategic management?
A. Financial investment strategy
B. Implementation
C. Analysis
D. Formulation
21. The Oakland A's used new metrics to assess player potential. This gave them an ability to do
what?
A. Use their high-salary athletes to their best advantage
B. Publish new metrics in the Oakland Tribune newspaper
C. Launch a new advertising campaign for season tickets
D. Field low-cost teams that were still competitive
22. It appears that Google has a sustained competitive advantage because _________.
A. They are highly profitable and growing
B. They have outperformed rivals consistently over time
C. They currently have the leading online search engine
D. They are willing to take on the Chinese government
23. Duke basketball winning by two points over Butler in the 2010 NCAA championship game is an
example of what?
A. A competitive parity
B. A sustained competitive advantage
C. A temporary competitive advantage
D. A competitive business model
24. If Smith Pharmaceuticals has a 15% return on invested capital (RoIC), what do you need to know
to determine if it has a competitive advantage?
A. It must be compared to the RoIC of the competitors and industry.
B. Nothing, 15% is a terrific return for the shareholders.
C. It must be evaluated for depreciation of the capital.
D. It must be compared to the history of the firm's RoIC over a number of years.
25. When competitors cooperate with one another to achieve strategic objectives, this is called?
A. Co-opetition
B. A merger
C. Functional tasks
D. A strategic initiative
26. The ups and downs within industries and corporations suggest that competitive advantage
__________.
A. Will remain constant
B. Will fail rapidly
C. Will likely be transitory
D. Will not be affected by industry cycles
27. Strategy is primarily about ____________.
A. Maximizing firm profits
B. Deriving operation effectiveness
C. Creating superior value
D. Competitive benchmarking
28. Co-opetition seems to be on the increase. Which of the following would be a good definition of coopetition?
A. Competitors cooperating with one another to achieve strategic objectives
B. Suppliers working with their customers to improve product quality
C. Firms from different industries forming strategic alliances for a common goal
D. Customers offering their services voluntarily on the Internet
29. Which of the following is not an aspect of the book's definition of strategy?
A. It is goal-directed.
B. It is profit-seeking.
C. It is about competitive advantage.
D. It is sustained over time.
30. Strategic __________ is staking out a unique and valuable spot that allows the firm to meet
customer demands.
A. Positioning
B. Advantage
C. Goal
D. Segmentation
31. JCPenney and Neiman Marcus these firms have different business strategies. They both
accomplish this by providing value to their customers while controlling costs. This is known as
__________.
A. Co-opetition
B. Complementary business models
C. A competitive advantage
D. Differential strategic positioning
32. Business managers test their theories in the marketplace. An accurate set of assumptions will
yield enhanced strategic decisions. When the Apple Newton product failed in 1993, what
feedback did Apple (and its alert competitors) collect from the experience?
A. It was too early for personal mobile products.
B. The price and bulkiness were not right for the PDA market then.
C. The color and styling of the device were not well liked.
D. It was not possible to have a competitive advantage then.
33. The never-ending cycle of analysis, formulation, implementation, and feedback is called what?
A. The strategic management process
B. A sustained competitive advantage
C. The cycle of the bottom of the pyramid
D. The interaction of firm and industry effects
34. The difference in managerial theories can have a large impact on the success or failure of
businesses. In the automobile industry, what effect has the difference in assumptions between
U.S. and Japanese manufacturers had on the market?
A. The Japanese market was so small they needed to expand to reach economies of scale.
B. Lower fuel prices in the U.S. have yielded a sustained competitive advantage for U.S. firms
thus far in the 21st century.
C. Fuel pricing differences have pushed the market to competitive parity.
D. Higher gas prices in Japan drove the market toward more fuel-efficient products sooner than in
the U.S.
35. Determining firm performance is a complex interaction of firm effects and industry effects, with
other factors also considered. Based on historical analysis, what do we know about firm and
industry effects?
A. Managerial actions rather than firm effects have a large role in firm performance.
B. Macro environmental effects such as a recession have more impact than either firm or industry
effects.
C. Firm effects have more impact on performance than industry effects.
D. Industry effects have more impact on performance than firm effects.
36. The textbook divides the impacts explaining superior firm performance into three categories:
Industries Effects, Firm Effects, and Other Effects. Which is the smallest of the effects?
A. Industry Effects
B. Unexplained Variance
C. Other Effects
D. Firm Effects
37. The term "strategy" has grown in usage in a variety of fields today. Which of the following is the
best use of the term for this course?
A. Competitive benchmarking to improve the firm's position
B. The firm's efforts to gain and sustain competitive advantage
C. Implementing a company-wide Six Sigma program to strategically lower costs
D. Aligning with key corporations to form a competitive landscape of co-opetition
38. Which of the following does not support the book's definition of strategy?
A. It is about being different from your rivals.
B. It requires long-term commitments that are often not easily reversible.
C. It is about deciding what to do and what not to do.
D. It is about raising prices while containing costs.
39. Strategy formulation and implementation affect the organization at every level. What is the top
level of strategy within an organization?
A. Business
B. Functional
C. Corporate
D. Production
40. What is a standalone division of a larger conglomerate, with its own profit-and-loss
responsibility?
A. A strategic business element
B. A strategic business unit
C. A business model
D. A corporate division
41. The General Manager of a strategic business unit (SBU) would be mostly concerned with
questions of ____________.
A. How to compete
B. Where to compete
C. How to implement a business strategy
D. How to form strategic alliances
42. Functional managers have the ability to come up with strategic initiatives that may influence the
direction of the company. The reason for this is?
A. Since they are responsible for executing a business strategy, how they do it impacts what
actually happens.
B. They are closer to products, services, and customers.
C. Since strategic planning is a bottom-up process, they are responsible for developing the
scenarios looked at.
D. They have a better understanding of what the company's capabilities are and can discern new
opportunities that match.
43. Who has the responsibility for implementing business strategy within a single area?
A. General managers
B. The executive staff
C. The Chief Executive Officer
D. Functional managers
44. IBM's CEO Sam Palmisano has moved the firm more into global IT services and out of its
traditional hardware focus. What level of strategic decisions do these moves represent?
A. Corporate strategy
B. Functional strategy
C. Business-level strategy
D. Alliance strategy
45. According to the text, which part of the organization seeks superior performance by asking the
question "how to compete"?
A. Corporate strategy
B. Functional strategy
C. Business level strategy
D. Project strategy
46. The division director of marketing of a major consulting firm is most often making decisions at
which level of strategy?
A. Corporate strategy
B. Functional strategy
C. Business-level strategy
D. Alliance strategy
47. Which of the following is a major decision that was generated from a change in corporate
strategy?
A. Changing Google's pricing model on its Google Ads products
B. Providing superior customer service at Neiman Marcus retail stores
C. Selling IBM's personal computer business to the Chinese firm Lenovo
D. Applying for patents on Pfizer's cholesterol-lowering drug Lipitor
48. A strategy is a manager's theory of how to compete; however, the theory is useless if it is NOT
put into action. What is the translation of strategy that details the firm's competitive tactics and
initiatives?
A. The business model
B. The business formula
C. The corporate model
D. The corporate formula
49. Gillette invented a "razor-razor-blade" model of business, whereby the razor handle is provided at
a low cost and the replacement razor blades are sold relatively expensively. Which of the
following is another example of this business model?
A. Audible.com audiobooks
B. HP laser printers
C. Tom's shoe sales "1 for 1"
D. The New York Times newspaper
50. A business model is the translation of strategy into action, which details the firm's competitive
tactics and initiatives. Another way to say this is ___________.
A. It's reliant on co-opetition to be successful
B. It's a crowdsourcing process for the firm
C. It's how the firm intends to make money
D. It's how network effects are taken into account
51. The U.S. cell-phone industry uses a combination of the razor-razor-blade model with which other
model when it offers a two-year contract in exchange for a heavily subsidized new phone?
A. A subscription-based model
B. An ink cartridge model
C. A bait-and-switch model
D. A network effects model
52. Which of the following is not an example of the razor-razor-blade business model?
A. Razor blades
B. Cell phones
C. Inkjet printers
D. Digital cameras
53. Google and Microsoft have approached the market using quite different business models. Over
time, they have engaged in multi-point competition. Which of the following best describes this
competition today?
A. They have very divergent corporate strategies.
B. They are an example of co-opetition in action.
C. They are largely competing in mobile device operating systems.
D. They compete for market share in several different product categories.
54. Web 2.0 relies on the idea that the value of a product or service increases as more people use it.
This concept is called what?
A. Network consolidation
B. Network effects
C. Internet strategy
D. Accelerated technological change
55. In recent years, China has invested a tremendous amount of money on increasing its
infrastructure with high-speed rails, state-of-the-art airports, and modern roads. China also has
the largest number of Internet users of any country in the world. How will this combination of
infrastructure and technology likely impact China over the next few years?
A. New innovations will diffuse more quickly throughout China than in the past.
B. It will not have a major impact as China's economy is too diverse.
C. It will increase the income disparity between coastal and rural areas of China.
D. These investments will increase the costs and therefore slow down the growth of new
technologies in China.
56. People who grew up with the Internet and need no help in adapting to new technologies have
been called digital natives. Those who have not grown up with such technologies but are
adapting to them are called what?
A. Electronic infants
B. The greatest generation
C. Luddites
D. Digital immigrants
57. BRIC countries have more than 40% of the world's population and occupy more than a quarter of
the world's landmass. Which of these countries is not a part of BRIC?
A. India
B. Brazil
C. Canada
D. Russia
58. IBM is headquartered in Armonk, New York, but more than 70% of its employees work for the
company outside of the U.S. What is given as a major reason for this in the text?
A. IBM is following Coca-Cola and Sony corporate strategies.
B. Two-thirds of its revenue and most of its growth are occurring outside the U.S.
C. Bottom-of-the-pyramid effects on technology consulting.
D. High corporate tax rates in the U.S. are driving firms offshore.
59. The idea of firms creating significant business opportunities for some 4 billion people on the
planet who live in poverty is called ______________.
A. Top of the pyramid
B. Bottom of the line
C. Bottom of the pyramid
D. Top of the line
60. Grameen Telecom and the Nano car introduced by Tata are examples of what new business
model?
A. A subscription model of services available to all
B. Making a small revenue but across a large base of the world's poorest
C. Not-for-profit businesses trying to aid the world's poor
D. A crowdsourcing model targeted at the world's most impoverished
61. Given current trends, several industries promise significant potential for value creation and thus
career opportunities. Which of the following is not one of them described by the text?
A. Health care
B. The green economy
C. Web 2.0
D. Petroleum
62. While the favorable demographics of the U.S. and most developed economies would seem to
provide significant business opportunities in health care, managers must balance this with the risk
from what?
A. Under health care reform, the government is going to ration health care.
B. The "flat world" tells us that even medical care will be sent off-shore.
C. The reimbursement rates for specific procedures will likely go down.
D. The weight of competition will keep profit margins low.
63. Health care became the largest industry in the U.S. when it grew to 16% of the total economic
activity. Projections are that the sector will grow to 20% of the economy by 2019. As compelling
as the size and growth of the industry, what other reason does the text provide for businesses to
expand into this arena?
A. Much of the wealth in the U.S. is in the aging baby-boomer population.
B. Medical providers like doctors can afford more services from business.
C. There is a social good in improving health care.
D. Government regulations provide a stable business climate in the U.S.
64. One firm has announced a major initiative in the health care field called healthymagination. This
initiative is geared to draw on existing expertise in other business units to find new emerging
opportunities in health care. What firm has launched this initiative?
A. International Business Machines (IBM)
B. Siemens
C. General Electric (GE)
D. 23andMe
65. The vast majority of today's economic activity around the globe is powered by carbon-based
sources of energy. Which of the following is not considered a carbon-based source of energy?
A. Oil
B. Coal
C. Wind
D. Natural gas
66. In today's economic activity, carbon-based energy sources come with certain costs for business
and consumers, some of which include, but are not limited to, CO2 emissions, air pollution, and
global warming. These costs are described as ____________.
A. Environmental economics
B. Moral hazards
C. Systematic risks
D. Externalities
67. Business opportunities in the clean-tech economy have much potential. Production of solar
panels in China has brought the prices down by 50%, while many countries are providing
incentives to invest in the field. However, in strategy we must always look at both opportunities
and threats. Which of the following is NOT a threat to the growth of the clean-tech economy?
A. The energy sector is rapidly growing worldwide.
B. It is not currently cost-competitive with coal and oil.
C. The U.S. has 30% of the world's known coal reserves.
D. Market externalities are not priced into current fossil fuels.
68. The increasing interactivity and collective intelligence available on the Internet is called what?
A. The Internet strategy
B. Bottom of the pyramid
C. Web 2.0
D. Electronic commerce
69. The idea to let consumers work for you and form a hybrid between producers and consumers is
called ___________.
A. Professional consumers
B. Consumer employees
C. Prosumers
D. Consumer innovators
70. Threadless is an online apparel store. Its business model is quite different from most other
apparel stores. Threadless leverages Web 2.0 capabilities by using crowdsourcing. How does
this benefit Threadless in their T-shirt design process?
A. Only professional designs are considered.
B. It both lowers the cost and ensures the popularity of selected designs.
C. The quality of the submissions is high.
D. It streamlines the production process.
71. Creating prosumers is the idea of allowing consumers to work for you, which forms a hybrid
between consumer and producer. Which of the following companies exploits prosumers in their
business model?
A. eBay
B. Amazon
C. General Electric
D. Threadless
72. One of the key aspects of the Threadless business strategy is the use of ____________.
A. Volume discounts
B. Nationwide retail locations
C. Network effects
D. Free shipping
73. All of the following are external stakeholders except which of the following?
A. Alliance partners
B. Customers
C. Creditors
D. Competitors
74. How does Web 2.0 help improve Google's search engine results?
A. Google's algorithm is based on highly sophisticated software.
B. The PageRank algorithm relies on feedback from prior search results.
C. Customers using Google search will e-mail them with questions.
D. It makes the results run faster on the hardware servers.
75. Individuals or groups that can affect or be affected by the actions of a firm are called _________.
A. Stakeholders
B. Senators
C. Associates
D. Competitors
76. All of the following are considered an internal stakeholder within a firm except for which of the
following?
A. Stockholders
B. Customers
C. Employees
D. Board members
77. All of the following are considered an external stakeholder within a firm except which of the
following?
A. Alliance partners
B. Governments
C. Employees
D. Creditors
78. Stakeholder power and influence will vary by industry. In investment banking, skilled human
capital is important. This means one of the key stakeholders for firms in this industry will be
________.
A. Alliance partners
B. Creditors
C. Employees
D. Communities
79. Stakeholder power and influence will vary by industry. In the ________, one of the most powerful
external stakeholders has historically been unions.
A. Hospitality industry
B. Health care industry
C. Computer industry
D. Automotive industry
80. If some stakeholder groups are able to extract significant value, the firm's competitive advantage
may not be realized when compared to its rivals. This situation can place the firm in a
________________.
A. Competitive advantage
B. Competitive disadvantage
C. Competitive position
D. Competitive paralysis
81. The text provides an example of stakeholder power in the investment banking industry. In 2007,
the net income of the top five U.S. investment banks was roughly $10 billion. This sounds pretty
good until you find out that in this same year the salary and bonuses paid to their employees was
FOUR times that amount ($40B). This is an example of what?
A. Strong internal stakeholders capturing the value that would otherwise go to others (such as
stockholders).
B. Strong external stakeholders having an undue influence on managerial decisions inside the
firm.
C. Weak internal stakeholders not getting inducements commensurate with their contributions to
the firm.
D. In the end, all stakeholder groups are rewarded well if the firm is successful.
82. A successful strategy details a set of goal-directed actions that managers intend to take to
improve or maintain overall firm performance. To build this strategy, managers focus on three
broad management tasks. Which of the following is NOT one of these management tasks?
A. Analyze
B. Formulate
C. Implement
D. Forecast technology
83. Microsoft, Google, and Facebook are three powerful companies in the emerging field of Web 2.0.
How these firms choose to compete with each other and what business models they use to bring
in revenues will, at least to some degree, shape the structure of this industry. The partnership in
"social search" discussed between Facebook and Microsoft is an example of what?
A. Crowdsourcing
B. Co-opetition
C. Competitive parity
D. Industry effects
Short Answer Questions
84. Why is Google characterized as having sustainable competitive advantage? Will they always
maintain sustainable advantage?
85. What is competitive advantage?
86. Name two firms in one industry that have taken different strategic positions. Briefly describe the
difference in their approaches.
87. Explain how a corporation might use co-opetition as a strategy.
88. What is strategic positioning?
89. Name a firm with generally successful results and what some of its underlying assumptions would
be to achieve such performance.
90. What is the essence of strategy?
91. What is the relationship between firm effects and industry effects?
92. In strategy formulation, firms have three distinct levels that comprise the organization. Explain a
senior executive's duties when creating a corporate strategy.
93. Explain the relation between a general manager and a strategic business unit.
94. Explain the differences between a strategy and business model.
95. Once a firm has outlined a business model, explain what the next step for an organization to
follow is.
96. Explain why Generation-Y population is also referred to as digital natives.
97. Briefly describe the BRIC countries and their expected role in the 21st-century economy.
98. Explain and give an example of how firms will use the theory of bottom of the pyramid in the
global economy.
99. Give two examples of how green economies can be considered to be a future industry.
100.Explain how the small firm Threadless uses prosumers and crowdsourcing as an integral part of
their business model. Please provide an example for each idea.
101.Give an example of a stakeholder group having so much power that it can be detrimental to the
long-term health of a firm.
Chapter 01 What Is Strategy and Why Is It Important? Answer Key
True / False Questions
1.
A firm that formulates and implements a strategy that leads to superior performance has
(p. 4)
competitive advantage.
TRUE
Competitive advantage is superior firm performance.
AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 01-01 Define competitive advantage; sustainable competitive advantage; competitive disadvantage; and competitive parity.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
2.
Competitive advantage is an absolute measure of superior firm performance.
(p. 5)
FALSE
Competitive advantage is a relative performance measure.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-01 Define competitive advantage; sustainable competitive advantage; competitive disadvantage; and competitive parity.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
3.
The essential core of strategy is doing the same thing as your rivals but being more effective
(p. 6)
at it.
FALSE
The essential core is to do different things than your rivals.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-02 Define strategy and explain its role in a firm's quest for competitive advantage.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
4.
The term strategy is meant to describe the firm's overall quest for competitive advantage.
(p. 6)
TRUE
Strategy is the quest for competitive advantage.
AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 01-02 Define strategy and explain its role in a firm's quest for competitive advantage.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
5.
Assumptions have no major role in the development of strategies for an organization.
(p. 7)
FALSE
Assumptions are a key aspect of effective strategies.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-02 Define strategy and explain its role in a firm's quest for competitive advantage.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
6.
Industry effects clearly are more significant than firm-level effects on firm performance.
(p. 8)
FALSE
Firm effects have a larger impact on performance than industry effects.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-03 Explain the role of firm effects and industry effects in determining firm performance.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
7.
Business strategy concerns the choice of strategy in terms of where to compete.
(p. 10)
FALSE
Business-level strategy is about "how to compete."
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-04 Describe the role of corporate; business; and functional managers in strategy formulation and implementation.
Topic: Formulating Strategy across Levels: Corporate, Business, and Functional Managers
8.
A business model is not directly connected to how a firm makes money.
(p. 11)
FALSE
A business model is how a firm makes its money.
AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 01-05 Outline how business models put strategy into action.
Topic: Business Models: Putting Strategy into Action
9.
IBM as a U.S. company has a majority of its revenues from the United States.
(p. 14)
FALSE
IBM reaps only about 30% of its revenues inside the U.S.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-06 Describe and assess the opportunities and challenges managers face in the 21st century.
Topic: Strategy in the 21st Century
10.
BRIC countries include Britain, Russia, Ireland, and Chile and are likely to be the fastest-
(p. 14)
growing economies in the world.
FALSE
BRIC is likely to include the fastest-growing emerging economies, but the BRIC countries are
Brazil, Russia, India, and China.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-06 Describe and assess the opportunities and challenges managers face in the 21st century.
Topic: Strategy in the 21st Century
11.
Firms will refer to the "bottom of the pyramid" of the global economy for significant business
(p. 15)
opportunities, thus improving the living standard of the world's poorest.
TRUE
Four billion people are at the "bottom of the pyramid."
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-06 Describe and assess the opportunities and challenges managers face in the 21st century.
Topic: Strategy in the 21st Century
12.
Crowdsourcing is where a group of people voluntarily performs tasks that were traditionally
(p. 17)
completed by a firm's employees.
TRUE
Crowdsourcing is enabled in Web 2.0 and allows a range of individuals to participate in tasks
traditionally performed by employees.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-06 Describe and assess the opportunities and challenges managers face in the 21st century.
Topic: Strategy in the 21st Century
13.
The AOL TimeWarner merger is viewed as beneficial for shareholder value.
(p. 18)
FALSE
This merger is generally considered one of the worst in U.S. history for destruction of
shareholder value.
AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 01-07 Critically evaluate the role that different stakeholders play in the firm's quest for competitive advantage.
Topic: Stakeholders
14.
Stakeholders cannot exert a powerful influence on firms.
(p. 18)
FALSE
Both internal and external shareholders can have a tremendous influence on the firm's
competitive advantage.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-07 Critically evaluate the role that different stakeholders play in the firm's quest for competitive advantage.
Topic: Stakeholders
15.
The AFI Strategy Framework is used by managers to implement a human resource strategy
(p. 20)
for all employees within a firm.
FALSE
AFI is the overarching framework of the strategic management process.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-07 Critically evaluate the role that different stakeholders play in the firm's quest for competitive advantage.
Topic: Stakeholders
Multiple Choice Questions
16.
Google's initial competitive advantage over AltaVista and Yahoo was what?
(p. 3)
A. Its location in Menlo Park
B. The PageRank algorithm
C. Brand recognition
D. The Keywords product
The algorithm-producing superior search result was the initial competitive advantage for
Google.
AACSB: Analytic
Blooms: Analyze
Difficulty: 2 Medium
Learning Objective: 01-01 Define competitive advantage; sustainable competitive advantage; competitive disadvantage; and competitive parity.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
17.
What might Microsoft have used their 1998 purchase of LinkExchange to build a competitive
(p. 3)
advantage in?
A. Online search and advertising
B. Cloud storage
C. Business Intelligence Tools
D. Server Virtualization
Microsoft closed out the Keywords online search project after they bought LinkExchange, but it
was an early effort at online search.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-01 Define competitive advantage; sustainable competitive advantage; competitive disadvantage; and competitive parity.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
18.
Microsoft is building up its share of the search engine market by partnering with which firm?
(p. 4)
A. AltaVista
B. Yahoo
C. Google
D. LinkExchange
Microsoft partnered with Yahoo and immediately improved their market share of the online
search market.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-01 Define competitive advantage; sustainable competitive advantage; competitive disadvantage; and competitive parity.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
19.
Microsoft is partnering with Yahoo for what major purpose?
(p. 4)
A. To improve their search speeds
B. To remove Yahoo as a competitor
C. To build market share for its Bing search engine
D. To compete with Apple
Microsoft partnered with Yahoo to increase its market share of the online search market. It did
nothing for their search speeds. It did remove Yahoo as a search competitor, but it's pretty
clear Microsoft has been focused on Google as its primary competitor, so this was likely not a
large consideration.
AACSB: Analytic
Blooms: Analyze
Difficulty: 3 Hard
Learning Objective: 01-01 Define competitive advantage; sustainable competitive advantage; competitive disadvantage; and competitive parity.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
20.
Which of the following is NOT a major component of the overarching integrative management
(p. 20)
field of strategic management?
A. Financial investment strategy
B. Implementation
C. Analysis
D. Formulation
Financial investment is an important tool for the firm and is often viewed as a functional
process. It is not part of the overarching strategic management process.
AACSB: Analytic
Blooms: Analyze
Difficulty: 2 Medium
Learning Objective: 01-07 Critically evaluate the role that different stakeholders play in the firm's quest for competitive advantage.
Topic: The AFI Strategy Framework
21.
The Oakland A's used new metrics to assess player potential. This gave them an ability to do
(p. 4)
what?
A. Use their high-salary athletes to their best advantage
B. Publish new metrics in the Oakland Tribune newspaper
C. Launch a new advertising campaign for season tickets
D. Field low-cost teams that were still competitive
Using superior and nontraditional measures, Oakland was able to utilize players other teams
overlooked and therefore reduced their salary demands.
AACSB: Analytic
Blooms: Analyze
Difficulty: 2 Medium
Learning Objective: 01-01 Define competitive advantage; sustainable competitive advantage; competitive disadvantage; and competitive parity.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
22.
It appears that Google has a sustained competitive advantage because _________.
(p. 5)
A. They are highly profitable and growing
B. They have outperformed rivals consistently over time
C. They currently have the leading online search engine
D. They are willing to take on the Chinese government
For a decade, Google's search engine has been dominating the market, even though many
other competitors were already there when Google started.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-01 Define competitive advantage; sustainable competitive advantage; competitive disadvantage; and competitive parity.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
23.
Duke basketball winning by two points over Butler in the 2010 NCAA championship game is
(p. 5)
an example of what?
A. A competitive parity
B. A sustained competitive advantage
C. A temporary competitive advantage
D. A competitive business model
One championship win is not a sustained competitive advantage; it is a temporary competitive
advantage.
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 01-01 Define competitive advantage; sustainable competitive advantage; competitive disadvantage; and competitive parity.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
24.
If Smith Pharmaceuticals has a 15% return on invested capital (RoIC), what do you need to
(p. 5)
know to determine if it has a competitive advantage?
A. It must be compared to the RoIC of the competitors and industry.
B. Nothing, 15% is a terrific return for the shareholders.
C. It must be evaluated for depreciation of the capital.
D. It must be compared to the history of the firm's RoIC over a number of years.
Competitive advantage is relative to competitors or the industry average, so we must have a
basis of comparison for this RoIC performance.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-01 Define competitive advantage; sustainable competitive advantage; competitive disadvantage; and competitive parity.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
25.
When competitors cooperate with one another to achieve strategic objectives, this is called?
(p. 6)
A. Co-opetition
B. A merger
C. Functional tasks
D. A strategic initiative
When competitors cooperate, it is called co-opetition. This could also be a strategic initiative,
but it is not necessarily one.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 01-02 Define strategy and explain its role in a firm's quest for competitive advantage.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
26.
The ups and downs within industries and corporations suggest that competitive advantage
(p. 9)
__________.
A. Will remain constant
B. Will fail rapidly
C. Will likely be transitory
D. Will not be affected by industry cycles
Competitive advantage is difficult to sustain over long periods of time.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-03 Explain the role of firm effects and industry effects in determining firm performance.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
27.
Strategy is primarily about ____________.
(p. 6)
A. Maximizing firm profits
B. Deriving operation effectiveness
C. Creating superior value
D. Competitive benchmarking
A strategy must create superior value to drive competitive advantage for the firm.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-02 Define strategy and explain its role in a firm's quest for competitive advantage.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
28.
Co-opetition seems to be on the increase. Which of the following would be a good definition of
(p. 6)
co-opetition?
A. Competitors cooperating with one another to achieve strategic objectives
B. Suppliers working with their customers to improve product quality
C. Firms from different industries forming strategic alliances for a common goal
D. Customers offering their services voluntarily on the Internet
Co-opetition is competitors cooperating with one another to achieve strategic objectives.
AACSB: Analytic
Blooms: Analyze
Difficulty: 2 Medium
Learning Objective: 01-02 Define strategy and explain its role in a firm's quest for competitive advantage.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
29.
Which of the following is not an aspect of the book's definition of strategy?
(p. 6)
A. It is goal-directed.
B. It is profit-seeking.
C. It is about competitive advantage.
D. It is sustained over time.
Strategy is goal-directed actions a firm intends to take in its quest to gain and sustain
competitive advantage. It is NOT about merely seeking profits.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-02 Define strategy and explain its role in a firm's quest for competitive advantage.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
30.
Strategic __________ is staking out a unique and valuable spot that allows the firm to meet
(p. 6)
customer demands.
A. Positioning
B. Advantage
C. Goal
D. Segmentation
Strategic positioning is staking out a unique and valuable spot that allows the firm to meet
customer demands.
AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 01-02 Define strategy and explain its role in a firm's quest for competitive advantage.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
31.
JCPenney and Neiman Marcus these firms have different business strategies. They both
(p. 6)
accomplish this by providing value to their customers while controlling costs. This is known as
__________.
A. Co-opetition
B. Complementary business models
C. A competitive advantage
D. Differential strategic positioning
These two firms represent different strategic positions within the same industry.
AACSB: Analytic
Blooms: Analyze
Difficulty: 2 Medium
Learning Objective: 01-02 Define strategy and explain its role in a firm's quest for competitive advantage.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
32.
Business managers test their theories in the marketplace. An accurate set of assumptions will
(p. 7)
yield enhanced strategic decisions. When the Apple Newton product failed in 1993, what
feedback did Apple (and its alert competitors) collect from the experience?
A. It was too early for personal mobile products.
B. The price and bulkiness were not right for the PDA market then.
C. The color and styling of the device were not well liked.
D. It was not possible to have a competitive advantage then.
The underlying assumptions need to be reviewed for both market successes and failures. In
the case of the Newton from Apple, the price, size, and interface were not what the market
found useful.
AACSB: Analytic
Blooms: Analyze
Difficulty: 2 Medium
Learning Objective: 01-02 Define strategy and explain its role in a firm's quest for competitive advantage.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
33.
The never-ending cycle of analysis, formulation, implementation, and feedback is called
(p. 7)
what?
A. The strategic management process
B. A sustained competitive advantage
C. The cycle of the bottom of the pyramid
D. The interaction of firm and industry effects
The strategic management process is a never-ending cycle of analysis, formulation,
implementation, and feedback.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 01-02 Define strategy and explain its role in a firm's quest for competitive advantage.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
34.
The difference in managerial theories can have a large impact on the success or failure of
(p. 8)
businesses. In the automobile industry, what effect has the difference in assumptions between
U.S. and Japanese manufacturers had on the market?
A. The Japanese market was so small they needed to expand to reach economies of scale.
B. Lower fuel prices in the U.S. have yielded a sustained competitive advantage for U.S. firms
thus far in the 21st century.
C. Fuel pricing differences have pushed the market to competitive parity.
D. Higher gas prices in Japan drove the market toward more fuel-efficient products sooner
than in the U.S.
The context of higher gas prices in Japan gave those firms an added reason to focus on fuelefficient vehicles while the U.S. was building SUVs and Hummers.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-02 Define strategy and explain its role in a firm's quest for competitive advantage.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
35.
Determining firm performance is a complex interaction of firm effects and industry effects, with
(p. 8)
other factors also considered. Based on historical analysis, what do we know about firm and
industry effects?
A. Managerial actions rather than firm effects have a large role in firm performance.
B. Macro environmental effects such as a recession have more impact than either firm or
industry effects.
C. Firm effects have more impact on performance than industry effects.
D. Industry effects have more impact on performance than firm effects.
Managerial actions are part of the firm effects, and firm effects have more impact than industry
effects on performance.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-03 Explain the role of firm effects and industry effects in determining firm performance.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
36.
The textbook divides the impacts explaining superior firm performance into three categories:
(p. 8)
Industries Effects, Firm Effects, and Other Effects. Which is the smallest of the effects?
A. Industry Effects
B. Unexplained Variance
C. Other Effects
D. Firm Effects
Industry effects accounted for roughly 20%, while firm effects and other effects were both
about 40%.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-03 Explain the role of firm effects and industry effects in determining firm performance.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
37.
The term "strategy" has grown in usage in a variety of fields today. Which of the following is
(p. 9)
the best use of the term for this course?
A. Competitive benchmarking to improve the firm's position
B. The firm's efforts to gain and sustain competitive advantage
C. Implementing a company-wide Six Sigma program to strategically lower costs
D. Aligning with key corporations to form a competitive landscape of co-opetition
Strategy is the firm's efforts to gain and sustain competitive advantage. Competitive
benchmarking and Six Sigma can be effective tools to use but are not in themselves part of
the strategy of the firm.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-03 Explain the role of firm effects and industry effects in determining firm performance.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
38.
Which of the following does not support the book's definition of strategy?
(p. 9)
A. It is about being different from your rivals.
B. It requires long-term commitments that are often not easily reversible.
C. It is about deciding what to do and what not to do.
D. It is about raising prices while containing costs.
Strategy includes being different from rivals, deciding what NOT to do, and it requires longterm often irreversible commitments.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-03 Explain the role of firm effects and industry effects in determining firm performance.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
39.
Strategy formulation and implementation affect the organization at every level. What is the top
(p. 10)
level of strategy within an organization?
A. Business
B. Functional
C. Corporate
D. Production
Corporate is strategy at the highest level, followed by business and functional strategies
flowing into the organization.
AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 01-04 Describe the role of corporate; business; and functional managers in strategy formulation and implementation.
Topic: Formulating Strategy across Levels: Corporate, Business, and Functional Managers
40.
What is a standalone division of a larger conglomerate, with its own profit-and-loss
(p. 10)
responsibility?
A. A strategic business element
B. A strategic business unit
C. A business model
D. A corporate division
A strategic business unit (SBU) is a standalone division of a larger conglomerate, with its own
profit-and-loss responsibility.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-04 Describe the role of corporate; business; and functional managers in strategy formulation and implementation.
Topic: Formulating Strategy across Levels: Corporate, Business, and Functional Managers
41.
The General Manager of a strategic business unit (SBU) would be mostly concerned with
(p. 10)
questions of ____________.
A. How to compete
B. Where to compete
C. How to implement a business strategy
D. How to form strategic alliances
The General Manager of a strategic business unit (SBU) would be mostly concerned with the
question of "how to compete."
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-04 Describe the role of corporate; business; and functional managers in strategy formulation and implementation.
Topic: Formulating Strategy across Levels: Corporate, Business, and Functional Managers
42.
Functional managers have the ability to come up with strategic initiatives that may influence
(p. 11)
the direction of the company. The reason for this is?
A. Since they are responsible for executing a business strategy, how they do it impacts what
actually happens.
B. They are closer to products, services, and customers.
C. Since strategic planning is a bottom-up process, they are responsible for developing the
scenarios looked at.
D. They have a better understanding of what the company's capabilities are and can discern
new opportunities that match.
Functional managers are closer to products, services, and customers, and therefore may have
the ability to come up with strategic initiatives that may influence the direction of the company.
AACSB: Analytic
Blooms: Analyze
Difficulty: 2 Medium
Learning Objective: 01-04 Describe the role of corporate; business; and functional managers in strategy formulation and implementation.
Topic: Formulating Strategy across Levels: Corporate, Business, and Functional Managers
43.
Who has the responsibility for implementing business strategy within a single area?
(p. 11)
A. General managers
B. The executive staff
C. The Chief Executive Officer
D. Functional managers
Functional managers are responsible for implementing a business strategy within a single
area.
AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 01-04 Describe the role of corporate; business; and functional managers in strategy formulation and implementation.
Topic: Formulating Strategy across Levels: Corporate, Business, and Functional Managers
44.
IBM's CEO Sam Palmisano has moved the firm more into global IT services and out of its
(p. 10)
traditional hardware focus. What level of strategic decisions do these moves represent?
A. Corporate strategy
B. Functional strategy
C. Business-level strategy
D. Alliance strategy
This is answering the question "where to compete" and is part of corporate strategy.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-04 Describe the role of corporate; business; and functional managers in strategy formulation and implementation.
Topic: Formulating Strategy across Levels: Corporate, Business, and Functional Managers
45.
According to the text, which part of the organization seeks superior performance by asking the
(p. 10)
question "how to compete"?
A. Corporate strategy
B. Functional strategy
C. Business level strategy
D. Project strategy
Business-level strategy answers the question "how to compete."
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-04 Describe the role of corporate; business; and functional managers in strategy formulation and implementation.
Topic: Formulating Strategy across Levels: Corporate, Business, and Functional Managers
46.
The division director of marketing of a major consulting firm is most often making decisions at
(p. 11)
which level of strategy?
A. Corporate strategy
B. Functional strategy
C. Business-level strategy
D. Alliance strategy
The division director of marketing of a major consulting firm is most often making decisions in
the functional strategy area of her department.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-04 Describe the role of corporate; business; and functional managers in strategy formulation and implementation.
Topic: Formulating Strategy across Levels: Corporate, Business, and Functional Managers
47.
Which of the following is a major decision that was generated from a change in corporate
(p. 10)
strategy?
A. Changing Google's pricing model on its Google Ads products
B. Providing superior customer service at Neiman Marcus retail stores
C. Selling IBM's personal computer business to the Chinese firm Lenovo
D. Applying for patents on Pfizer's cholesterol-lowering drug Lipitor
Selling IBM's personal computer business to the Chinese firm Lenovo was a decision
crystallized in a change of corporate strategy.
AACSB: Analytic
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 01-04 Describe the role of corporate; business; and functional managers in strategy formulation and implementation.
Topic: Formulating Strategy across Levels: Corporate, Business, and Functional Managers
48.
A strategy is a manager's theory of how to compete; however, the theory is useless if it is NOT
(p. 11)
put into action. What is the translation of strategy that details the firm's competitive tactics and
initiatives?
A. The business model
B. The business formula
C. The corporate model
D. The corporate formula
Business models are the translation of strategy that details the firm's competitive tactics and
initiatives.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-05 Outline how business models put strategy into action.
Topic: Business Models: Putting Strategy into Action
49.
Gillette invented a "razor-razor-blade" model of business, whereby the razor handle is
(p. 11)
provided at a low cost and the replacement razor blades are sold relatively expensively. Which
of the following is another example of this business model?
A. Audible.com audiobooks
B. HP laser printers
C. Tom's shoe sales "1 for 1"
D. The New York Times newspaper
HP laser printers are sold relatively inexpensively and HP makes a large portion of its printer
profits on the sale of ink cartridges.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-05 Outline how business models put strategy into action.
Topic: Business Models: Putting Strategy into Action
50.
A business model is the translation of strategy into action, which details the firm's competitive
(p. 11)
tactics and initiatives. Another way to say this is ___________.
A. It's reliant on co-opetition to be successful
B. It's a crowdsourcing process for the firm
C. It's how the firm intends to make money
D. It's how network effects are taken into account
A business model, at its heart, is how the firm does or intends to make money.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-05 Outline how business models put strategy into action.
Topic: Business Models: Putting Strategy into Action
51.
The U.S. cell-phone industry uses a combination of the razor-razor-blade model with which
(p. 11)
other model when it offers a two-year contract in exchange for a heavily subsidized new
phone?
A. A subscription-based model
B. An ink cartridge model
C. A bait-and-switch model
D. A network effects model
The U.S. cell-phone industry uses a combination of the razor-razor-blade model and a
subscription-based model.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-05 Outline how business models put strategy into action.
Topic: Business Models: Putting Strategy into Action
52.
Which of the following is not an example of the razor-razor-blade business model?
(p. 12)
A. Razor blades
B. Cell phones
C. Inkjet printers
D. Digital cameras
The film is cheap in a digital camera as the price per gigabyte of memory cards has dropped
enormously in recent years. However, razor blades, cell-phone minutes (including data plans),
and ink for printers are quite expensive and generate significant profits for the firms able to
collect on them.
AACSB: Analytic
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 01-05 Outline how business models put strategy into action.
Topic: Business Models: Putting Strategy into Action
53.
Google and Microsoft have approached the market using quite different business models.
(p. 12)
Over time, they have engaged in multi-point competition. Which of the following best describes
this competition today?
A. They have very divergent corporate strategies.
B. They are an example of co-opetition in action.
C. They are largely competing in mobile device operating systems.
D. They compete for market share in several different product categories.
Google and Microsoft are competing in several different product categories today, and
indications are this trend will continue despite their quite different roads to reach this point.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-05 Outline how business models put strategy into action.
Topic: Business Models: Putting Strategy into Action
54.
Web 2.0 relies on the idea that the value of a product or service increases as more people use
(p. 12)
it. This concept is called what?
A. Network consolidation
B. Network effects
C. Internet strategy
D. Accelerated technological change
Network effects is the idea that the value of a product or service increases as more people use
it. One telephone is useless if there is no other one to answer it.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-05 Outline how business models put strategy into action.
Topic: Business Models: Putting Strategy into Action
55.
In recent years, China has invested a tremendous amount of money on increasing its
(p. 13)
infrastructure with high-speed rails, state-of-the-art airports, and modern roads. China also has
the largest number of Internet users of any country in the world. How will this combination of
infrastructure and technology likely impact China over the next few years?
A. New innovations will diffuse more quickly throughout China than in the past.
B. It will not have a major impact as China's economy is too diverse.
C. It will increase the income disparity between coastal and rural areas of China.
D. These investments will increase the costs and therefore slow down the growth of new
technologies in China.
With accelerating technological change, the infrastructure China is building will help it adopt
new technologies more rapidly and more widely than ever before.
AACSB: Analytic
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 01-06 Describe and assess the opportunities and challenges managers face in the 21st century.
Topic: Strategy in the 21st Century
56.
People who grew up with the Internet and need no help in adapting to new technologies have
(p. 14)
been called digital natives. Those who have not grown up with such technologies but are
adapting to them are called what?
A. Electronic infants
B. The greatest generation
C. Luddites
D. Digital immigrants
Digital immigrants have not grown up with such technologies but are adapting to them.
AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 01-06 Describe and assess the opportunities and challenges managers face in the 21st century.
Topic: Strategy in the 21st Century
57.
BRIC countries have more than 40% of the world's population and occupy more than a quarter
(p. 14)
of the world's landmass. Which of these countries is not a part of BRIC?
A. India
B. Brazil
C. Canada
D. Russia
The BRIC emerging markets are in Brazil, Russia, India, and China.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-06 Describe and assess the opportunities and challenges managers face in the 21st century.
Topic: Strategy in the 21st Century
58.
IBM is headquartered in Armonk, New York, but more than 70% of its employees work for the
(p. 14)
company outside of the U.S. What is given as a major reason for this in the text?
A. IBM is following Coca-Cola and Sony corporate strategies.
B. Two-thirds of its revenue and most of its growth are occurring outside the U.S.
C. Bottom-of-the-pyramid effects on technology consulting.
D. High corporate tax rates in the U.S. are driving firms offshore.
IBM employment trends are following its revenue and growth pattern.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-06 Describe and assess the opportunities and challenges managers face in the 21st century.
Topic: Strategy in the 21st Century
59.
The idea of firms creating significant business opportunities for some 4 billion people on the
(p. 15)
planet who live in poverty is called ______________.
A. Top of the pyramid
B. Bottom of the line
C. Bottom of the pyramid
D. Top of the line
Bottom of the pyramid is the trend given for firms creating significant business opportunities for
some 4 billion people on the planet who live in poverty.
AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 01-06 Describe and assess the opportunities and challenges managers face in the 21st century.
Topic: Strategy in the 21st Century
60.
Grameen Telecom and the Nano car introduced by Tata are examples of what new business
(p. 15)
model?
A. A subscription model of services available to all
B. Making a small revenue but across a large base of the world's poorest
C. Not-for-profit businesses trying to aid the world's poor
D. A crowdsourcing model targeted at the world's most impoverished
Microloans and the small Nano car are both very inexpensive but have the potential to spread
across a large base of the world's poorest populations at the bottom of the pyramid.
AACSB: Analytic
Blooms: Analyze
Difficulty: 2 Medium
Learning Objective: 01-06 Describe and assess the opportunities and challenges managers face in the 21st century.
Topic: Strategy in the 21st Century
61.
Given current trends, several industries promise significant potential for value creation and
(p. 15)
thus career opportunities. Which of the following is not one of them described by the text?
A. Health care
B. The green economy
C. Web 2.0
D. Petroleum
The book highlights health care, the green economy, and Web 2.0 as future growth-oriented
industries.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-06 Describe and assess the opportunities and challenges managers face in the 21st century.
Topic: Strategy in the 21st Century
62.
While the favorable demographics of the U.S. and most developed economies would seem to
(p. 15-16)
provide significant business opportunities in health care, managers must balance this with the
risk from what?
A. Under health care reform, the government is going to ration health care.
B. The "flat world" tells us that even medical care will be sent off-shore.
C. The reimbursement rates for specific procedures will likely go down.
D. The weight of competition will keep profit margins low.
The reimbursement rates for specific procedures will likely go down in the coming years for
U.S. health care.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-06 Describe and assess the opportunities and challenges managers face in the 21st century.
Topic: Strategy in the 21st Century
63.
Health care became the largest industry in the U.S. when it grew to 16% of the total economic
(p. 15)
activity. Projections are that the sector will grow to 20% of the economy by 2019. As
compelling as the size and growth of the industry, what other reason does the text provide for
businesses to expand into this arena?
A. Much of the wealth in the U.S. is in the aging baby-boomer population.
B. Medical providers like doctors can afford more services from business.
C. There is a social good in improving health care.
D. Government regulations provide a stable business climate in the U.S.
The aging baby-boomer generation has much of the wealth in the U.S. economy and will likely
spend much of it on health care.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-06 Describe and assess the opportunities and challenges managers face in the 21st century.
Topic: Strategy in the 21st Century
64.
One firm has announced a major initiative in the health care field called healthymagination.
(p. 15)
This initiative is geared to draw on existing expertise in other business units to find new
emerging opportunities in health care. What firm has launched this initiative?
A. International Business Machines (IBM)
B. Siemens
C. General Electric (GE)
D. 23andMe
GE has launched a major initiative in the health care field called healthymagination.
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 01-06 Describe and assess the opportunities and challenges managers face in the 21st century.
Topic: Strategy in the 21st Century
65.
The vast majority of today's economic activity around the globe is powered by carbon-based
(p. 16)
sources of energy. Which of the following is not considered a carbon-based source of
energy?
A. Oil
B. Coal
C. Wind
D. Natural gas
Wind is a renewable energy and not carbon-based.
AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 01-06 Describe and assess the opportunities and challenges managers face in the 21st century.
Topic: Strategy in the 21st Century
66.
In today's economic activity, carbon-based energy sources come with certain costs for
(p. 16)
business and consumers, some of which include, but are not limited to, CO2 emissions, air
pollution, and global warming. These costs are described as ____________.
A. Environmental economics
B. Moral hazards
C. Systematic risks
D. Externalities
Externalities are side effects of production and consumption that are not reflected in the price
of a product.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-06 Describe and assess the opportunities and challenges managers face in the 21st century.
Topic: Strategy in the 21st Century
67.
Business opportunities in the clean-tech economy have much potential. Production of solar
(p. 17)
panels in China has brought the prices down by 50%, while many countries are providing
incentives to invest in the field. However, in strategy we must always look at both opportunities
and threats. Which of the following is NOT a threat to the growth of the clean-tech economy?
A. The energy sector is rapidly growing worldwide.
B. It is not currently cost-competitive with coal and oil.
C. The U.S. has 30% of the world's known coal reserves.
D. Market externalities are not priced into current fossil fuels.
Several threats exist for the growth of clean energy: cost-competitiveness, externalities, and
large coal reserves are among these factors.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-06 Describe and assess the opportunities and challenges managers face in the 21st century.
Topic: Strategy in the 21st Century
68.
The increasing interactivity and collective intelligence available on the Internet is called what?
(p. 17)
A. The Internet strategy
B. Bottom of the pyramid
C. Web 2.0
D. Electronic commerce
Web 2.0 is considered the increasing interactivity and collective intelligence available on the
Internet.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-06 Describe and assess the opportunities and challenges managers face in the 21st century.
Topic: Strategy in the 21st Century
69.
The idea to let consumers work for you and form a hybrid between producers and consumers
(p. 17)
is called ___________.
A. Professional consumers
B. Consumer employees
C. Prosumers
D. Consumer innovators
Prosumers is a term for a hybrid between producers and consumers used by firms such as
Threadless.
AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 01-06 Describe and assess the opportunities and challenges managers face in the 21st century.
Topic: Strategy in the 21st Century
70.
Threadless is an online apparel store. Its business model is quite different from most other
(p. 17)
apparel stores. Threadless leverages Web 2.0 capabilities by using crowdsourcing. How does
this benefit Threadless in their T-shirt design process?
A. Only professional designs are considered.
B. It both lowers the cost and ensures the popularity of selected designs.
C. The quality of the submissions is high.
D. It streamlines the production process.
Crowdsourcing both lowers the cost and ensures the popularity of selected designs.
AACSB: Analytic
Blooms: Analyze
Difficulty: 2 Medium
Learning Objective: 01-06 Describe and assess the opportunities and challenges managers face in the 21st century.
Topic: Strategy in the 21st Century
71.
Creating prosumers is the idea of allowing consumers to work for you, which forms a hybrid
(p. 17)
between consumer and producer. Which of the following companies exploits prosumers in
their business model?
A. eBay
B. Amazon
C. General Electric
D. Threadless
Threadless exploits a hybrid between consumer and producer called a prosumer.
AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 01-06 Describe and assess the opportunities and challenges managers face in the 21st century.
Topic: Strategy in the 21st Century
72.
One of the key aspects of the Threadless business strategy is the use of ____________.
(p. 17)
A. Volume discounts
B. Nationwide retail locations
C. Network effects
D. Free shipping
Network effects are key for Threadless to leverage the online community and keep growing its
markets.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-06 Describe and assess the opportunities and challenges managers face in the 21st century.
Topic: Strategy in the 21st Century
73.
All of the following are external stakeholders except which of the following?
(p. 18)
A. Alliance partners
B. Customers
C. Creditors
D. Competitors
Competitors are not considered internal or external stakeholders in the firm.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-07 Critically evaluate the role that different stakeholders play in the firm's quest for competitive advantage.
Topic: Stakeholders
74.
How does Web 2.0 help improve Google's search engine results?
(p. 17)
A. Google's algorithm is based on highly sophisticated software.
B. The PageRank algorithm relies on feedback from prior search results.
C. Customers using Google search will e-mail them with questions.
D. It makes the results run faster on the hardware servers.
Google's PageRank algorithm relies on Web 2.0 interactions for continuing improvement of the
search results.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-06 Describe and assess the opportunities and challenges managers face in the 21st century.
Topic: Strategy in the 21st Century
75.
Individuals or groups that can affect or be affected by the actions of a firm are called
(p. 18)
_________.
A. Stakeholders
B. Senators
C. Associates
D. Competitors
Stakeholders are individuals or groups that can affect or be affected by the actions of a firm.
AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 01-07 Critically evaluate the role that different stakeholders play in the firm's quest for competitive advantage.
Topic: Stakeholders
76.
All of the following are considered an internal stakeholder within a firm except for which of the
(p. 18)
following?
A. Stockholders
B. Customers
C. Employees
D. Board members
Customers are external stakeholders for the firm.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-07 Critically evaluate the role that different stakeholders play in the firm's quest for competitive advantage.
Topic: Stakeholders
77.
All of the following are considered an external stakeholder within a firm except which of the
(p. 18)
following?
A. Alliance partners
B. Governments
C. Employees
D. Creditors
Employees are an internal, NOT an external, stakeholder.
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 01-07 Critically evaluate the role that different stakeholders play in the firm's quest for competitive advantage.
Topic: Stakeholders
78.
Stakeholder power and influence will vary by industry. In investment banking, skilled human
(p. 18)
capital is important. This means one of the key stakeholders for firms in this industry will be
________.
A. Alliance partners
B. Creditors
C. Employees
D. Communities
Employees are a key stakeholder for investment banks.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-07 Critically evaluate the role that different stakeholders play in the firm's quest for competitive advantage.
Topic: Stakeholders
79.
Stakeholder power and influence will vary by industry. In the ________, one of the most
(p. 18)
powerful external stakeholders has historically been unions.
A. Hospitality industry
B. Health care industry
C. Computer industry
D. Automotive industry
The unions have been an important stakeholder in the automobile industry for several
decades.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-07 Critically evaluate the role that different stakeholders play in the firm's quest for competitive advantage.
Topic: Stakeholders
80.
If some stakeholder groups are able to extract significant value, the firm's competitive
(p. 18)
advantage may not be realized when compared to its rivals. This situation can place the firm in
a ________________.
A. Competitive advantage
B. Competitive disadvantage
C. Competitive position
D. Competitive paralysis
When one stakeholder group extracts significant value, this can leave the firm at a competitive
disadvantage.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-07 Critically evaluate the role that different stakeholders play in the firm's quest for competitive advantage.
Topic: Stakeholders
81.
The text provides an example of stakeholder power in the investment banking industry. In
(p. 19)
2007, the net income of the top five U.S. investment banks was roughly $10 billion. This
sounds pretty good until you find out that in this same year the salary and bonuses paid to
their employees was FOUR times that amount ($40B). This is an example of what?
A. Strong internal stakeholders capturing the value that would otherwise go to others (such as
stockholders).
B. Strong external stakeholders having an undue influence on managerial decisions inside the
firm.
C. Weak internal stakeholders not getting inducements commensurate with their contributions
to the firm.
D. In the end, all stakeholder groups are rewarded well if the firm is successful.
Such large compensation packages are an indication that strong internal stakeholders can
capture the value that would otherwise go to others (such as stockholders).
AACSB: Analytic
Blooms: Analyze
Difficulty: 2 Medium
Learning Objective: 01-07 Critically evaluate the role that different stakeholders play in the firm's quest for competitive advantage.
Topic: Stakeholders
82.
A successful strategy details a set of goal-directed actions that managers intend to take to
(p. 20)
improve or maintain overall firm performance. To build this strategy, managers focus on three
broad management tasks. Which of the following is NOT one of these management tasks?
A. Analyze
B. Formulate
C. Implement
D. Forecast technology
Forecasting technology is not part of the broad management tasks in the Analyze, Formulate,
and Implement (AFI) framework.
AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 01-07 Critically evaluate the role that different stakeholders play in the firm's quest for competitive advantage.
Topic: Stakeholders
83.
Microsoft, Google, and Facebook are three powerful companies in the emerging field of Web
(p. 21)
2.0. How these firms choose to compete with each other and what business models they use
to bring in revenues will, at least to some degree, shape the structure of this industry. The
partnership in "social search" discussed between Facebook and Microsoft is an example of
what?
A. Crowdsourcing
B. Co-opetition
C. Competitive parity
D. Industry effects
The partnership in "social search" discussed between Facebook and Microsoft is an example
of two competitors deciding to cooperate, which is termed co-opetition.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-07 Critically evaluate the role that different stakeholders play in the firm's quest for competitive advantage.
Topic: Stakeholders
Short Answer Questions
84.
Why is Google characterized as having sustainable competitive advantage? Will they always
(p. 4-5)
maintain sustainable advantage?
Google is characterized as having sustainable competitive advantage because it outperforms
its rivals such as Yahoo consistently over time. However, their past performance will not
guarantee Google to maintain their status amongst other search engines.
Feedback: Google has been tremendously successful in its first decade, but the future could
yield different results.
AACSB: Analytic
Blooms: Analyze
Difficulty: 2 Medium
Learning Objective: 01-01 Define competitive advantage; sustainable competitive advantage; competitive disadvantage; and competitive parity.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
85.
What is competitive advantage?
(p. 4)
Superior performance relative to other competitors in the same industry or to the industry
average.
Feedback: This is the definition of competitive advantage.
AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 01-01 Define competitive advantage; sustainable competitive advantage; competitive disadvantage; and competitive parity.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
86.
Name two firms in one industry that have taken different strategic positions. Briefly describe
(p. 6)
the difference in their approaches.
Students may give several answers; the text uses JCPenney as a low-cost retailer and
Neiman Marcus as a highly differentiated retailer. Google positioned as a search engine and
Microsoft starting with an operating system focus would be other examples from the software
industry.
Feedback: Typically, a high-end differentiated firm and a low-cost leader make good examples
for this question.
AACSB: Analytic
Blooms: Analyze
Difficulty: 2 Medium
Learning Objective: 01-02 Define strategy and explain its role in a firm's quest for competitive advantage.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
87.
Explain how a corporation might use co-opetition as a strategy.
(p. 6)
Direct competitors will cooperate with one another to achieve strategic objectives. For
example, the new Cell microprocessor powers Sony's PlayStation 3. This was accomplished
by a collaborative effort between IBM, Toshiba, and Sony. All three companies are
competitors with one another in other markets.
Feedback: Any example of competitors agreeing to work together for a substantial project is
likely to be correct here.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-02 Define strategy and explain its role in a firm's quest for competitive advantage.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
88.
What is strategic positioning?
(p. 6)
Staking out a unique position in an industry that allows the firm to provide value to customers
while at the same time controlling costs.
Feedback: This is the definition of strategic positioning.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 01-02 Define strategy and explain its role in a firm's quest for competitive advantage.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
89.
Name a firm with generally successful results and what some of its underlying assumptions
(p. 8)
would be to achieve such performance.
Students may give several answers; the text uses Walmart and the assumption of the need for
low retail prices in underserved rural markets. Toyota would also be an example shaped by
the Japanese context of high gas prices driving an assumption of needing good fuel efficiency
for market success in automobiles.
Feedback: The key here is to tie the assumption to the resulting business model.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-02 Define strategy and explain its role in a firm's quest for competitive advantage.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
90.
What is the essence of strategy?
(p. 6)
The goal-directed actions a firm intends to take in the quest to gain and sustain competitive
advantage. Put more succinctly: being different from rivals and thus unique in some regards.
Feedback: This is the definition of strategy.
AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 01-02 Define strategy and explain its role in a firm's quest for competitive advantage.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
91.
What is the relationship between firm effects and industry effects?
(p. 8)
While firm effects (such as the results of managerial decisions) are generally larger than
industry effects (the choice of industry in which to compete). It is the interdependence of the
two that jointly determines the firm's overall performance. Firm effects tend to have more
impact than industry effects.
Feedback: This is a key point about industry and firm effects.
AACSB: Analytic
Blooms: Analyze
Difficulty: 2 Medium
Learning Objective: 01-03 Explain the role of firm effects and industry effects in determining firm performance.
Topic: What Strategy Is: Gaining and Sustaining Competitive Advantage
92.
In strategy formulation, firms have three distinct levels that comprise the organization. Explain
(p. 10)
a senior executive's duties when creating a corporate strategy.
Corporate executives need to determine which industries, markets, and geographies their
company should compete in and how they can create synergies across business units that
may be quite different. The key question for Corporate Strategy… Where to compete? (See
Exhibit 1.3.)
Feedback: The executive's duties surrounding corporate strategy.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-04 Describe the role of corporate; business; and functional managers in strategy formulation and implementation.
Topic: Formulating Strategy across Levels: Corporate, Business, and Functional Managers
93.
Explain the relation between a general manager and a strategic business unit.
(p. 10)
General managers in SBUs must answer the strategic question of "how to compete" in order to
achieve superior performance. A strategic business unit is a standalone division of a larger
conglomerate, with its own profit and loss responsibility. General managers have the
responsibility to formulate a strategic position for their business unit.
Feedback: This is the role of business-level strategy.
AACSB: Analytic
Blooms: Analyze
Difficulty: 2 Medium
Learning Objective: 01-04 Describe the role of corporate; business; and functional managers in strategy formulation and implementation.
Topic: Formulating Strategy across Levels: Corporate, Business, and Functional Managers
94.
Explain the differences between a strategy and business model.
(p. 11)
A strategy is a theory on how to compete, and what strategic position the firm should seek.
The theory is ineffective if there is no action. A business model provides a firm's blueprints of
competitive tactics and initiatives. The business model will tell a firm how it intends to make its
money. If the firm translates the strategy into a profitable business model, it will thrive.
Feedback: This is an important differentiation to cover.
AACSB: Analytic
Blooms: Analyze
Difficulty: 2 Medium
Learning Objective: 01-05 Outline how business models put strategy into action.
Topic: Business Models: Putting Strategy into Action
95.
Once a firm has outlined a business model, explain what the next step for an organization to
(p. 11)
follow is.
The second step, the organization implements the blueprint through structures, processes,
culture, and procedures.
Feedback: Implementation is often overlooked but very important.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-05 Outline how business models put strategy into action.
Topic: Business Models: Putting Strategy into Action
96.
Explain why Generation-Y population is also referred to as digital natives.
(p. 13-14)
The Gen-Y cohorts came of age during the boom of the Internet, and thus are used to being
constantly connected to the Web. They are comfortable with rapid technological change,
which comes naturally to them.
Feedback: Generational differences create digital natives and digital immigrants.
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 01-06 Describe and assess the opportunities and challenges managers face in the 21st century.
Topic: Strategy in the 21st Century
97.
Briefly describe the BRIC countries and their expected role in the 21st-century economy.
(p. 14)
Brazil, Russia, India, and China have more than 40% of the world's population. They are
rapidly developing, and as a group their economic activity is likely to surpass today's
wealthiest countries. Many multinational firms are focused on markets in the BRIC countries to
build a competitive advantage there now.
Feedback: BRIC nations will be vital in shaping the 21st century.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-06 Describe and assess the opportunities and challenges managers face in the 21st century.
Topic: Strategy in the 21st Century
98.
Explain and give an example of how firms will use the theory of bottom of the pyramid in the
(p. 14-15)
global economy.
Firms can find significant business opportunities serving the 4 billion people at the bottom of
the pyramid. In the process, they can improve the living standard of the world's poorest. How
can they do this? One example is Muhammad Yunus, who discovered a way to provide small
loans (microcredit) to impoverished villagers in Bangladesh. These loans have allowed
villagers to overcome their poverty.
Feedback: This is an example of helping the world's most impoverished people and still
creating a viable business model.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-06 Describe and assess the opportunities and challenges managers face in the 21st century.
Topic: Strategy in the 21st Century
99.
Give two examples of how green economies can be considered to be a future industry.
(p. 16-17)
The green and clean-tech economy describes future business opportunities in renewable
energy, energy conservation, efficient energy use, and energy technology. Several
governments around the world have already invested resources and effort into this industry.
These include Germany, Denmark, Israel, and Spain. These countries provide incentives for
their businesses and citizens, thus creating sustainable jobs. China is becoming the world's
leading producer in solar panels. This has driven the price down by 50%.
Feedback: This could be an important industry for the next several decades.
AACSB: Analytic
Blooms: Analyze
Difficulty: 3 Hard
Learning Objective: 01-06 Describe and assess the opportunities and challenges managers face in the 21st century.
Topic: Strategy in the 21st Century
100.
Explain how the small firm Threadless uses prosumers and crowdsourcing as an integral part
(p. 17)
of their business model. Please provide an example for each idea.
Prosumers—consumers are given the opportunity to design and create their own T-shirts.
Once created, consumers then post their designs on the website. This ultimately makes the
consumers the producers also, since only those shirts with community support (votes) are
manufactured and sold by the firm.
Crowdsourcing—Instead of outsourcing designs, Threadless relies on their "community" to
make a decision on which designs they want on a T-shirt. Therefore, the firm only makes
shirts that the online community has already said it will buy.
Feedback: This business model is likely to grow in usage in the coming years.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-06 Describe and assess the opportunities and challenges managers face in the 21st century.
Topic: Strategy in the 21st Century
101.
Give an example of a stakeholder group having so much power that it can be detrimental to
(p. 18)
the long-term health of a firm.
Students may give other examples, but the text refers to the UAW in the U.S. auto industry
creating a competitive disadvantage relative to foreign producers who came into the U.S. more
recently with either no unions or contracts under much more favorable terms. The largest
bonuses in the top five investment banks is another example in the text that likely reduced
stockholder values of the firms and transferred that wealth to the high-skilled employees.
Feedback: An important point is made that there are trade-offs between different stakeholder
groups.
AACSB: Analytic
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 01-07 Critically evaluate the role that different stakeholders play in the firm's quest for competitive advantage.
Topic: Stakeholders