Test Bank all Chapter

Competing for Advantage 3e Robert Hoskisson Michael Hitt Duane Ireland Jeffrey Harrison

(Test Bank all Chapter)

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Chapter 1 - Introduction to Strategic Management

TRUE/FALSE

• A sustained or sustainable competitive advantage occurs when a firm has implemented a

value-creating strategy that current competitors currently do not have, even if they are able to duplicate that strategy in the near future.

ANS: F PTS: 1 DIF: med REF: p. 2 OBJ: 1 NOT: knowledge

• Average returns are returns in excess of what an investor expects to earn from other investments with a

similar amount of risk.

ANS: F PTS: 1 DIF: med REF: p. 3 OBJ: 1 NOT: knowledge

• The strategic management process requires the making of only a single decision about the overall

strategy of a firm.

ANS: F PTS: 1 DIF: med REF: p. 3 OBJ: 6 NOT: comprehension

• Organizations must choose between the Industrial Organization Model and the Resource-Based Model

when it sets out on the strategic management process.

ANS: F PTS: 1 DIF: med REF: p. 3 OBJ: 6 NOT: comprehension

• Businesses that have become uncompetitive because of an inability to make necessary changes for

continued success are even more common than businesses that fail.

ANS: T PTS: 1 DIF: med REF: p. 4 OBJ: 1 NOT: knowledge

• In a hypercompetitive market, firms often aggressively challenge their competitors in hopes of

improving their competitive position and ultimately their performance.

ANS: T PTS: 1 DIF: med REF: p. 5 OBJ: 1 NOT: knowledge

• E-culture is the unique organizational environment created by Internet-based firms.

ANS: F PTS: 1 DIF: med REF: p. 7 OBJ: 1 NOT: knowledge

• Information or intelligence does not help the organization compete unless it is transformed into usable

knowledge and diffused rapidly throughout the firm.

ANS: T PTS: 1 DIF: med REF: p. 7 OBJ: 1 NOT: comprehension

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• The I/O (Industrial Organization) model assumes that a firm’s unique resources and capabilities are its

main source of above-average returns.

ANS: F PTS: 1 DIF: hard REF: p. 11 OBJ: 2 NOT: comprehension

• The I/O model suggests that above-average returns are earned when firms implement the strategy

dictated by the characteristics of the general, industry, and competitive environments.

ANS: T PTS: 1 DIF: hard REF: p. 13 (Figure 1.2) OBJ: 2 NOT: comprehension

• The resource-based model assumes that firms may form a competitive advantage by having resources

that are rare or costly to imitate.

ANS: T PTS: 1 DIF: med REF: p. 14 OBJ: 3 NOT: comprehension

• Resources are considered rare when they allow firms to exploit opportunities in the external

environment.

ANS: F PTS: 1 DIF: med REF: p. 16 OBJ: 3 NOT: knowledge

• The I/O (Industrial Organization) model argues that core competencies are the basis of a firm’s

competitive advantage.

ANS: F PTS: 1 DIF: med REF: p. 14 OBJ: 2 NOT: comprehension

• Customers, suppliers, unions, and local governments are examples of capital market stakeholders.

ANS: F PTS: 1 DIF: hard REF: p. 17 OBJ: 4 NOT: knowledge

• Employees, managers, and non-managers are examples of organizational stakeholders.

ANS: T PTS: 1 DIF: hard REF: p. 17 OBJ: 4 NOT: knowledge

• An organization’s “dream” is its strategic mission created by organizational strategists.

ANS: F PTS: 1 DIF: hard REF: p. 21 OBJ: 6 NOT: knowledge

• A stakeholder approach to strategic management is highly pertinent to a central problem management

is facing today - a general lack of trust of corporations and their managers.

ANS: T PTS: 1 DIF: med REF: p. 18 OBJ: 4 NOT: comprehension

• Strategic thinking ignores the past and only focuses on value creation in the future.

ANS: F PTS: 1 DIF: med REF: p. 21 3 / 4

OBJ: 5 NOT: knowledge

• Firms must provide enough flexibility in their strategic management process to allow for the

incorporation of new ideas with high potential.

ANS: T PTS: 1 DIF: med REF: p. 21 OBJ: 5 NOT: comprehension

• The strategic management process is an informal approach to helping firms respond effectively to the

competitive environment.

ANS: F PTS: 1 DIF: hard REF: p. 22 OBJ: 6 NOT: comprehension

• Corporate-level strategy is concerned with how a diversified firm competes in each industry in which

it is active.

ANS: F PTS: 1 DIF: med REF: p. 23 OBJ: 6 NOT: knowledge

• An organization’s willingness to tolerate or encourage unethical behavior is a reflection of its core

values.

ANS: T PTS: 1 DIF: med REF: p. 24 OBJ: 6 NOT: comprehension

• Effective strategic leadership is essential to both strategic thinking and strategic flexibility.

ANS: T PTS: 1 DIF: easy REF: p. 8 OBJ: 5 NOT: knowledge

MULTIPLE CHOICE

• What has a firm achieved when it successfully formulates and implements a value-creating strategy?
• Value creation
• A permanently sustainable competitive advantage
• Substantial returns
• Average returns

ANS: A PTS: 1 DIF: med REF: p. 3 OBJ: 1 NOT: comprehension

2. The strategic management process is:

• a set of activities that is guaranteed to prevent organizational failure.
• a process concerned with a firm’s resources, capabilities, and competencies, but not the

conditions in its external environment.

• a set of activities that to date have not been used successfully in the not-for-profit sector.
• a dynamic process involving the full set of commitments, decisions, and actions related to

the firm.

ANS: D PTS: 1 DIF: hard REF: p. 3 OBJ: 6 NOT: comprehension

• Two of the primary drivers of the new competitive landscape are:
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