Chapter 6 - practices questions - Chapter 06 Defining the Organization’s Strategic Direction - Studeersnel (2025)

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Chapter 06

Defining the Organization’s Strategic Direction

True/False

1. In Prahalad and Hamel’s model, it is possible for a firm to develop core competenciesto a set of abilities that enable it to quickly reconfigure its organizational structure androutines in response to new opportunities.

Answer: TrueDifficulty: Medium

2. Dynamic capabilities enable firms to quickly adapt to emerging markets or majortechnological discontinuities.

Answer: TrueDifficulty: Easy

3. A firm’s strategic intent helps in the development of new businesses and markets.

Answer: TrueDifficulty: Easy

4. Low exit barriers intensify rivalry by making firms reluctant to abandon the industry.

Answer: FalseDifficulty: Easy

5. According to Porter’s five-force model, the threat of potential entrants is influencedby the height of entry barriers.Answer: TrueDifficulty: Easy

6. According to Porter’s five-force model, the degree to which a firm relies on one or afew suppliers will influence its ability to negotiate good terms.

Answer: TrueDifficulty: Easy

7. The Weekly News bought the paper mill that supplied paper for printing its magazine.This is an example of horizontal integration.

Answer: FalseDifficulty: Medium

8. A music downloading software and an MP3 player are substitutes for one another.

Answer: FalseDifficulty: Medium

9. Ammunition can be considered a complement for firearms.

Answer: TrueDifficulty: Medium

10. If a firm’s product is undifferentiated, buyers will typically experience lesserbargaining power.

Answer: FalseDifficulty: Easy

11. A strategic stakeholder analysis emphasizes the stakeholder management issues thefirm ought to attend to due to their ethical or moral implications.

Answer: FalseDifficulty: Easy

12. According to Porter’s value chain, firm infrastructure is a primary activity.

Answer: FalseDifficulty: Medium

13. Resources of a tangible nature that can be readily codified are called tacit resources.

Answer: False

20. When demand is increasing, there is less revenue to go around and firms willexperience more competitive pressure.

Answer: FalseDifficulty: Medium

Multiple Choice

21. Which of the following statements is true of Porter’s five-force model?a. It states that the attractiveness of an industry is unaffected by the industry’s degreeof rivalry.b. It fails to acknowledge the role of substitutes.c. It is often used, in practice, to assess a specific firm’s external environment.d. It emphasizes the stakeholder management issues that are likely to impact the firm’sfinancial performance.

Answer: cDifficulty: Medium

22. Mr. Crunchy Inc. is a firm that manufactures potato chips. With more and morepeople becoming health conscious, it made no profit in the last quarter. But with largeinitial investment, factories, and the high-technology chips-making machines, the firmfound it difficult to abandon the industry. According to Porter’s five-force model, thecompany was facing a(n):a. vertical integration.b. exit barrier.c. horizontal integration.d. substitute threat.

Answer: bDifficulty: Medium

23. Many people dream of opening their own restaurant someday and restaurant supplyhouses provide easy finance options for equipment purchases. Also, a high growth isprojected for the restaurant industry sector. According to Porter’s five-force model, thisis one of the reasons why the _____ in this industry is so high.a. failure rateb. exit barrierc. threat of potential entrantsd. technological breakthrough

Answer: cDifficulty: Medium

24. According to Porter’s five-force model, the more suppliers there are, providingsimilar supplies to a particular industry:a. the less powerful those suppliers will be.b. the more powerful those suppliers will be.c. the higher is the level of vertically integration in the industry.d. the less powerful buyers will be.

Answer: aDifficulty: Medium

25. Ceramic Customs Co. requires a specific type of ceramic to make custom-made tiles.Since only one supplier makes that particular ceramic, the firm is forced to source all ofits supplies from it. The firm tried negotiating the price at which it purchases thematerial, but failed to get any reduction on the cost. This is because:a. the supplier has more bargaining power than the firm.b. the supply is unlimited.c. the supply exceeds the demand.d. the industry has barriers to entry.

Answer: aDifficulty: Medium

26. According to Porter’s five-force model, if a buyer can threaten to backward verticallyintegrate, it will:a. decrease the buyer’s bargaining power.b. increase the buyer’s bargaining power.c. increase the supplier’s bargaining power.d. lower the threat of entry into the industry.

Answer: bDifficulty: Easy

27. Factors that make it difficult or expensive to change suppliers or buyers are referredto as _____ costs.a. transactionalb. opportunity

28. Perfecto Espresso is a coffeehouse located opposite Ching’s Kitchen, a restaurant.According to Porter’s five-force model, the services and products provided by both aremost likely to be classified as:a. complements.b. competitors.c. substitutes.d. intermediates.

Answer: cDifficulty: Easy

32. Sam’s Sugar Co. is a leading cane sugar manufacturer. The company faced a threat ofgoing out of business when a rival company introduced a zero-calorie sweetener toreplace the high-calorie cane sugar. According to Porter’s five-force model, the twoproducts are:a. complements.b. supplements.c. intermediates.d. substitutes.

Answer: dDifficulty: Easy

33. The Corner Shop is a leading supermarket in Chicago. According to Michael Porter’smodel of a value chain, which of the following activities of the firm is a primary activity?a. A training session for the floor attendants at The Corner Shop outletsb. An advertising campaign for a new The Corner Shop outletc. The accounting function at The Corner Shop outletsd. The hiring of lawyers to ensure the firm adheres to labor laws

Answer: bDifficulty: Hard

34. According to Michael Porter’s model of a value chain, which of the following is asupport activity?a. Accounting activitiesb. Outbound logisticsc. Marketingd. Inbound logistics

Answer: a

Difficulty: Easy

35. Which of the following would be an example of a tacit resource?a. An oddsmaker who works for a large casino in Las Vegas and is correct 95 percent ofthe timeb. A boutique purchases hand-woven fabrics from local shopsc. A retail shoe chain that has prime locations in 200 malls across the countryd. A flashy ad campaign for a malt liquor

Answer: aDifficulty: Hard

35. A resource can be extremely difficult to imitate if:a. it can be readily codified in written form.b. it is not path dependent.c. it arises through the complex interaction of multiple people.d. it is clear how the resource gives rise to value.

Answer: cDifficulty: Medium, 117

37. Socially complex resources refer to:a. resources or activities that emerge through the interaction of multiple individuals.b. resources that cannot be defined in terms of a numerical value.c. resources that require public sanction in order to be utilized for profit-makingpurposes.d. resources that are shared by different parties thereby necessitating the need for legalintervention.

Answer: aDifficulty: Easy

38. Which of the following is an example of a socially complex resource?a. A team of graphic designers who combine their skills to create productsb. A food preservation technology that is available to most firms in the industryc. A pharmaceutical firm which acquires land at a subsidized price from the governmentd. A restaurant that procures its raw materials from a local market

Answer: aDifficulty: Medium

43. Piezo Tech Solutions supplies hospitals with software to track insurance claims. Sinceinsurance regulations and policies are always changing, its software needs to have theability to be agile and responsive to change. In other words the software needs:a. dynamic capabilities.b. tacit resources.c. rigid competencies.d. to be path dependent.

Answer: aDifficulty: Easy

44. When Western Franchise Services announced that its plans to go international in thenext 15 years, it stated its:a. core competence.b. inventory of capabilities.c. strategic intent.d. supplier bargaining power.

Answer: cDifficulty: Easy

45. When Faslow Medical Center changed its name to Faslow Hospital, it also unveiled aplan to build a medical tower doubling its physical facilities by 100% within the next 10years. It also announced that its goal was to not only serve Exeter County, but the entireregion including the 5 contiguous counties. This is an expression of:a. vertically integration.b. strategic intent.c. core competencies.d. supplier bargaining power.

Answer: bDifficulty: Easy

Essay

46. Even though many aerospace manufacturing firms are very profitable, there are veryfew upcoming firms. Explain the reason using Porter’s five-force model.

Answer: According to Porter’s five-force model, the threat of potential entrants isinfluenced by both the degree to which the industry is likely to attract new entrants

(i., is it profitable, growing, or otherwise alluring?) and the height of entry barriers.Entry barriers can include such factors as large start-up costs, brand loyalty, difficulty ingaining access to suppliers or distributors, government regulation, threat of retaliationby existing competitors, and many others. In the aerospace manufacturing industry, thisthreat is relatively low because of the entry barriers. The cost of starting an aerospacecompany is high and the existing companies are well-established. These companies arelarge, have the contacts, personnel, and skills necessary to meet the market demand,making it almost impossible for a new company to compete with them.

Difficulty: Medium

47. Recently, three cell phone companies announced the addition of a nationwide“walkie-talkie” service to supplement their regular cell phone service. Will this be asustainable competitive advantage? Justify your answer.

Answer: This will most likely not be a sustainable competitive advantage. To be apotential source of sustainable competitive advantage, resources must be rare,valuable, durable, and inimitable. Since three companies are offering this service it isobvious that this resource can be imitated and while it may be somewhat rare initially, itwill most likely become commonplace. This does not mean that the cell phonecompanies should not offer this service, however. To do so would only make them fallbehind the competition. Students’ answers may vary.

Difficulty: Medium

48. What are core competencies?

Answer: A company’s core competencies are typically considered to be those thatdifferentiate it strategically. A core competency is more than just a core technology. Acore competency arises from a firm’s ability to combine and harmonize multiple primaryabilities in which the firm excels into a few key building blocks of specialized expertise.

Difficulty: Easy

49. Explain the advantages and disadvantages of rewarding and promoting developmentof the core competency.

Answer: By rewarding and promoting the development of your core competencies youcan really excel at it and continue to be successful in your industry. After all, the corecompetence gives you an advantage over your competition and you should leveragethat as far as possible. By viewing the business as a portfolio of core competencies,