A firm's _____ is defined as its theory about how to gain competitive advantages.
objective
mission
vision
strategy
A sequential set of analyses and choices that can increase the likelihood that a firm will choose a strategy that generates competitive advantages is the
organizational change process
strategic management process.
mission statement process.
goal setting process
A firm's ________ is its long-term purpose that defines both what it aspires to be in the long run and what it wants to avoid in the meantime
goal
The strategic management process begins when a firm
determines its objectives
defines its mission.
makes a strategic choice.
implements its strategy
Firms whose mission is central to all they do are known as ________ firms.
missionary
emergent
parity
visionary
From 1926 to 1995, visionary firms earned ________ returns compared to firms that were not visionary firms
substantially lower
substantially higher
marginally lower
equivalent
The mission statements of visionary firms
suggest that profit maximizing, while an important corporate objective, is not their primary reason for existence
suggest that profit maximizing is neither an important corporate objective nor their primary reason for existence
suggest that profit maximizing is their primary reason for existence.
suggest that value maximizing is their primary reason of existence.
Which of the following statements regarding firm mission is accurate
While some firms have used their missions to develop strategies that create significant competitive advantages, firm missions can hurt a firm's performance as well
Virtually all firms have used missions to develop strategies that create significant competitive advantages, while very few firms have used missions that can hurt their performance
It is very rare for firms to be able to use their missions to develop strategies that create significant competitive advantages, and most firm missions actually hurt their performance
Missions tend to have very little impact on a firm's ability to create significant competitive advantages
________ are specific measurable targets a firm can use to evaluate the extent to which it is realizing its mission
Strategies
Missions
Competitive advantages
Objectives
High quality objectives are those that are
tightly connected to elements of a firm's mission and are relatively easy to measure and track over time.
difficult to measure and track over time.
non-existent.
not quantitative.
By conducting a(n) ________, a firm identifies the critical threats and opportunities in its competitive environment.
internal analysis
competitive analysis
external analysis
strategic choice
________ helps a firm understand which of its resources and capabilities are likely to be sources of competitive advantage.
Competitive analysis
Internal analysis
Strategic choice
External analysis
Actions firms take to gain competitive advantages in a single market or industry are known as
business level strategies.
corporate level strategies.
diversification strategies.
strategy implementation.
Actions firms take to gain competitive advantages by operating in multiple markets or industries simultaneously are known as
strategic alliance strategies.
________ occurs when a firm adopts organizational policies and practices that are consistent with its strategy.
Strategy formulation
Strategy implementation
Strategic control
When a firm is able to create more economic value than rival firms it is said to have a(n)
comparative advantage
competitive advantage
residual advantage.
economic advantage.
The difference between the perceived benefits gained by a customer who purchases a firm's products or services and the full economic cost of these products or services is the
value proposition.
cost advantage.
economic value.
competitive advantage.
If TechnoGeek and VarsityBlue compete in the same market for the same customer and TechnoGeek generates $900 of economic value each time it sells a product or service while VarsityBlue generates $400 of economic value each time it sells a product or service, TechnoGeek has a(n) ________ of $500.
perceived benefit
economic value
cost advantage
A competitive advantage that lasts a very short period of time is known as a ________ competitive advantage.
temporary
sustained
transient
perpetual
The center of Osterwalder and Pigneur's business model canvas is the
parity point.
strategy box.
Firms that generate less economic value than their rivals experience a competitive
advantage
disadvantage
In many ways, the difference between traditional economics research and strategic management research is that the former attempts to explain why ________, while the latter attempts to explain ________.
competitive advantages should not persist; when they can
competitive advantages should persist; when they can
competitive advantages should persist; why they should not
competitive parity should not persist; why they should
The two types of measures of competitive advantage include
accounting measures and strategic measures.
strategic measures and economic measures.
accounting measures and economic measures.
qualitative measures and quantitative measures.
A firm's ________ is a measure of its competitive advantage calculated using information from a firm's published profit and loss and balance sheet statements.
economic performance
accounting performance
strategic performance
sustainable performance
________ are ratios with some measure of profit in the numerator and some measure of firms' size or assets in the denominator.
Liquidity ratios
Leverage ratios
Activity ratios
Profitability ratios
Ratios that focus on the level of a firm's financial flexibility, including its ability to obtain more debt, are known as
leverage ratios.
liquidity ratios.
activity ratios.
profitability ratios.
Using ratio analysis, a firm earns ________ when its performance is greater than the industry average.
above average economic performance
below average accounting performance
above average accounting performance
below average economic performance
The ________ is the rate of return that a firm promises to pay its suppliers of capital to induce them to invest in the firm.
cost of debt
cost of advantage
cost of parity
cost of capital
________ measures of competitive advantage compare a firm's level of return to its cost of capital instead of to the average level of return in the industry.
Economic
Accounting
Strategic
Sustainable
The percentage of a firm's total capital that is debt times the cost of debt plus the percentage of a firm's total capital; or equity times the cost of equity is the
weighted cost of capital.
weighted average cost of capital.
cost of capital.
average cost of capital.
A firm that is able to attract additional capital because debt holders and equity holders will scramble to make additional funds available for it is likely earning
normal economic performance.
average accounting performance.
temporary advantage.
above normal economic performance.
An important limitation of comparing a firm's performance to its cost of capital occurs when a firm is
privately held.
an IPO.
an entrepreneurial venture.
experiencing below normal economic performance.
A firm that earns its cost of capital is said to be earning
below normal economic performance.
normal accounting performance.
The view that equity holders only receive payment on their investment in a firm after all legitimate claims by a firm's other stakeholders are satisfied is known as the ________ view of equity holders.
stakeholder
residual claimants
legitimate claimants
extraordinary claims
Theories of how to gain competitive advantage in an industry that emerge over time or that have been radically reshaped once they are initially implemented are known as
emergent strategies.
objective strategies.
planned strategies.
ad hoc strategies.
The realized strategy of most firms tends to be
almost exclusively a reflection of their intended strategy.
almost exclusively a reflection of their emergent strategy.
a combination of both intended and emergent strategies.
reflective of neither the firms' intended nor emergent strategy.
Which of the following is a reason why it is important for students to study strategy and the strategic management process?
Studying strategy and the strategic management process can give students tools to evaluate the strategies of firms that may employ them.
It can be very important to a new hire's career success to understand the strategies of the firm that hired them and their place in implementing these strategies.
While strategic choices are generally limited to very experienced senior managers in large organizations, in smaller and entrepreneurial firms many employees end up being involved in the strategic management process.
All of the above
Fed Ex entered their market with a well-defined mission and objectives, making strategic choices and implementing those strategies. This is an example of which type of strategy?
intended
economic
Which type of ratios focus on the ability of a firm to meet its short-term financial obligations?
activity ratios
liquidity ratios
leverageratios
profitability ratios
One of the first scholars to examine the longevity of competitive advantage was
Dennis Mueller.
Geoffrey Waring.
Peter Roberts.
Rich Houston.
Which ratio signals a greater risk of bankruptcy as it increases?
debt to equity
quick ratio
debt to assets
cash flow per share
Accounts receivable turnover is an example of which type of ratio?
profitability
activity
liquidity
leverage
Thermacorp's weighted average cost of capital is 13.5. If the average WACC in the heating and cooling industry is 19, Thermacorp can be said to be earning
above normal accounting performance.
below normal accounting performance.
Thermacorp's 17.3% ROE is an example of a(n) ________ ratio.
If the average ROE in the heating and cooling industry is 10.1%, and Thermacorp's ROE is 17.3%, Thermacorp is said to have
below average accounting performance.
above average economic performance.
above average accounting performance.
below average economic performance.
Green Frog is an environmentally friendly firm in the cosmetics industry that has decided to undertake a strategic planning project. It wants to ensure that it performs the process correctly and so intends to start the process with the first step of the strategic planning process, which is
defining its mission.
setting objectives.
measuring performance.
defining its business level strategy.
Green Frog is an environmentally friendly firm in the cosmetics industry. Even though Green Frog is environmentally friendly, the strategic planning team had decided that financial performance is one of the company's top priorities. Which of the following is the best example of an objective the company might use to help it achieve its goal of superior financial performance?
increasing profitability
growing market share annually
improving product quality every quarter
growth in earnings per share averaging 15% or better annually for the next five years
Green Frog is an environmentally friendly firm in the cosmetics industry. If during the strategic planning process Green Frog tried to determine the critical threats and opportunities in its competitive environment, it would be performing a(n)
internal analysis.
external analysis.
WACC analysis.
economic analysis.
Green Frog is an environmentally friendly firm in the cosmetics industry. If Green Frog undertook an analysis to help it understand which of its resources and capabilities are likely to be sources of competitive advantage and which are less likely to sources of such advantages it would be performing a(n)
WACC analysis
economic analysis
Green Frog is an environmentally friendly firm in the cosmetics industry. If Green Frog were considering expanding beyond the cosmetics industry into pharmaceuticals in order to gain competitive advantages by operating in multiple markets and industries, this would be an example of which type of strategy?
business level strategy
cost leadership strategy
product differentiation strategy
corporate level strategy
