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Strategic Management and Competitive Advantage 5th Edition
Barney Test Bank
Strategic Management and Competitive Advantage, 5e (Barney)
Chapter 1 What is Strategy and the Strategic Management Process?
1) One of the central questions that all strategic managers must address, regardless of the
industry they work in, is “How is the industry likely to evolve?”
Answer: TRUE
Diff: 1
Learning Obj.: 1.1: Define Strategy
AACSB: Analytical Thinking
2) There is complete consensus among strategic managers and academic researchers about what
a “strategy” is.
Answer: FALSE
Diff: 1
Learning Obj.: 1.1: Define Strategy
AACSB: Analytical Thinking
3) For the purposes of this book, a firm’s strategy is defined as its theory about how to gain
competitive advantages.
Answer: TRUE
Diff: 1
Learning Obj.: 1.1: Define Strategy
AACSB: Analytical Thinking
4) A “good strategy” does not necessarily have to create a competitive advantage.
Answer: FALSE
Diff: 2
Learning Obj.: 1.1: Define Strategy
AACSB: Analytical Thinking
5) The greater the extent to which a firm’s assumptions and hypotheses accurately describe how
the competition in the industry is likely to evolve, and how that evolution can be exploited to
earn a profit, the more likely it is that a firm will gain a competitive advantage from
implementing its strategies.
Answer: TRUE
Diff: 1
Learning Obj.: 1.1: Define Strategy
AACSB: Analytical Thinking
6) It is usually possible to know for sure that a firm is choosing the right strategy.
Answer: FALSE
Diff: 2
Learning Obj.: 1.1: Define Strategy
2
AACSB: Analytical Thinking
7) The strategic management process is a sequential set of analyses and choices that can increase
the likelihood that a firm will choose a good strategy that generates competitive advantages.
Answer: TRUE
Diff: 1
Learning Obj.: 1.2: Describe the Strategic Management Process
AACSB: Analytical Thinking
8) The second step in the strategic management process is the definition of a firm’s mission.
Answer: FALSE
Diff: 1
Learning Obj.: 1.2: Describe the Strategic Management Process
AACSB: Analytical Thinking
9) A firm’s mission defines both what it wants to be in the long run and what it wants to avoid in
the meantime.
Answer: TRUE
Diff: 1
Learning Obj.: 1.2: Describe the Strategic Management Process
AACSB: Analytical Thinking
10) Mission statements often contain so many common elements that even if a firm’s mission
statement does not influence behavior throughout an organization, it is likely to have a
significant impact on a firm’s actions.
Answer: FALSE
Diff: 2
Learning Obj.: 1.2: Describe the Strategic Management Process
AACSB: Analytical Thinking
11) Firms whose mission statement is central to all they do are known as missionary firms.
Answer: FALSE
Diff: 1
Learning Obj.: 1.2: Describe the Strategic Management Process
AACSB: Analytical Thinking
12) Visionary firms earn substantially higher returns than average firms because they
acknowledge that profit maximizing is their primary reason for existence.
Answer: FALSE
Diff: 3
Learning Obj.: 1.2: Describe the Strategic Management Process
AACSB: Analytical Thinking
13) Mission statements that are very inwardly focused and are defined only with reference to the
personal values and priorities of its founders and top managers can hurt a firm’s performance.
Answer: TRUE
Diff: 2
Learning Obj.: 1.2: Describe the Strategic Management Process
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AACSB: Analytical Thinking
14) Objectives are the specific measurable targets a firm can use to evaluate the extent to which
it is realizing its mission.
Answer: TRUE
Diff: 1
Learning Obj.: 1.2: Describe the Strategic Management Process
AACSB: Analytical Thinking
15) High quality objectives are tightly connected to the elements of a firm’s mission but tend to
be relatively difficult to measure and track over time.
Answer: FALSE
Diff: 3
Learning Obj.: 1.2: Describe the Strategic Management Process
AACSB: Analytical Thinking
16) By conducting an external analysis, a firm identifies the critical threats and opportunities in
the industry’s competitive environment.
Answer: TRUE
Diff: 2
Learning Obj.: 1.2: Describe the Strategic Management Process
AACSB: Analytical Thinking
17) Corporate level strategies are actions firms take to gain competitive advantages in a single
market or industry.
Answer: FALSE
Diff: 1
Learning Obj.: 1.2: Describe the Strategic Management Process
AACSB: Analytical Thinking
18) Business level strategies are actions firms take to gain competitive advantages by operating
in multiple markets or industries simultaneously.
Answer: FALSE
Diff: 1
Learning Obj.: 1.2: Describe the Strategic Management Process
AACSB: Analytical Thinking
19) Strategy implementation occurs when a firm adopts organizational policies and practices that
are consistent with its strategy.
Answer: TRUE
Diff: 1
Learning Obj.: 1.2: Describe the Strategic Management Process
AACSB: Analytical Thinking
4
20) The ultimate objective of the strategic management process is to enable a firm to choose and
implement a strategy that leads to a competitive advantage.
Answer: TRUE
Diff: 1
Learning Obj.: 1.3: Define Competitive Advantage and Explain Its Relationship to Economic
Value Creation
AACSB: Analytical Thinking
21) The size of a firm’s competitive advantage is the sum of the economic value a firm is able to
create and the economic value rivals are able to create.
Answer: FALSE
Diff: 2
Learning Obj.: 1.3: Define Competitive Advantage and Explain Its Relationship to Economic
Value Creation
AACSB: Analytical Thinking
22) A sustained competitive advantage is virtually permanent.
Answer: FALSE
Diff: 2
Learning Obj.: 1.3: Define Competitive Advantage and Explain Its Relationship to Economic
Value Creation
AACSB: Analytical Thinking
23) Waring found that firms that operate in industries that are informationally complex, require
customers to know a great deal in order to use the industry’s products, require a great deal of R &
D, and have significant economies of scale are more likely to have sustained competitive
advantage than those firms in industries without those characteristics.
Answer: TRUE
Diff: 3
Learning Obj.: 1.3: Define Competitive Advantage and Explain Its Relationship to Economic
Value Creation
AACSB: Analytical Thinking
24) A firm’s accounting performance is a measure of its competitive advantage calculated using
information from a firm’s published profit and loss and balance sheet statements.
Answer: TRUE
Diff: 1
Learning Obj.: 1.4: Describe Two Different Measures of Competitive Advantage
AACSB: Analytical Thinking
25) Applying accounting measures of competitive advantage for firms that are headquartered in
different has become less challenging today with the globalization of business.
Answer: FALSE
Diff: 2
Learning Obj.: 1.4: Describe Two Different Measures of Competitive Advantage
AACSB: Analytical Thinking