Testbank Questions on Strategy PDF

CHAPTER 1 21. The primary purpose of strategy is: [See p.4] a. To maximize shareholder value b. To achieve success* c. To create value for all stakeholders d. To be a responsible corporate citizen 22. The successful careers of both Queen Elizabeth II and Lady Gaga may be attributed to the fact tha...

CHAPTER 1 21. The primary purpose of strategy is: [See p.4] a. To maximize shareholder value b. To achieve success* c. To create value for all stakeholders d. To be a responsible corporate citizen 22. The successful careers of both Queen Elizabeth II and Lady Gaga may be attributed to the fact that both: [See pp.4-9] a. Have used dressing up as a means of attracting attention and establishing identity. b. Have a knack for being in the right place at the right time. c. Have a consistency of direction based on clear goals.* d. Have built a loyal fan base based on astute use of the media. 23. For both individuals and businesses, successful strategies are characterized by: [See p.6-7] a. Unrelenting commitment to ambitious goals. b. Clear goals, understanding their competitive environment, awareness of internal strengths and weaknesses, and effective implementation.* c. Meticulous planning. d. Possessing superior abilities and resources that are then deployed to build competitive advantage. 24. Strategic goals should be: [See p.10] a. Simple b. Consistent c. Long term d. All of these* 25. The main problem of SWOT as a framework for strategy analysis is that: [See p.11] a. Distinguishing opportunities from threats and strengths from weaknesses is often difficult.* b. It has now been superseded by more sophisticated analytical frameworks. c. It is focused on strategy formulation and fails to take account of strategy implementation. d. It is so widely used that it no longer has any novelty. 26. Strategic fit refers to: [See p.10] a. The need for a firm’s strategy to be consistent with its vision, mission, and culture b. The consistency of a firm’s strategy with its external and internal environments* c. The need for a firm’s strategy to be unique d. The need for a firm’s strategy to fit the needs of all its stakeholders, not just shareholders 27. A conceptualization the firm as an “activity system” is a means of depicting: [See pp.10-11] a. The extent to which a management is motivated to implement a firm’s strategy b. The extent to which a firm’s resources and capabilities are aligned with its strategic goals c. The extent to which a firm’s strategic goals are aligned with its industry environment d. Consistency among a firm’s activities* 28. Ryanair’s strategic position is as Europe’s lowest-cost airline may be attributed to: [See pp.11-12] a. The willingness of its CEO, Michael O’Leary, to challenge conventional notions of customer and employee satisfaction b. Its use of secondary airports where costs are lower c. The high operating costs of major airlines such as British Airways, Lufthansa, and Air France-KLM on short- haul routes d. An integrated, consistent set of activities designed to maximize productivity and minimize operating costs* 29. The principal similarity between business and military strategy is that: [See p.12] a. They share the same objective: to annihilate rivals. b. They share common concepts and principles.* c. The nature of leadership is much the same whether in a military or business context. d. They are both concerned with tactical maneuvers that can establish positions of advantage. 30. In the military field, we generally make the following distinction between strategy and tactics: [See p.12] a. Tactics comprise the overall plan whereas strategy focuses on specific actions b. Tactics relate to specific actions whereas strategy relates to the overall plan* c. Tactics encompass specific political actions within the firm whereas strategy is the overall plan for deploying resources to establish a favorable position d. Tactics form the overall plan whereas strategy is concerned with the maneuvers to win battles 31. The main reason for the transition from corporate planning to strategic management during the latter half of the 1970s was: [See p.13] a. The increasing costs of corporate planning departments. b. Disappointing outcomes of corporate diversification. c. A more turbulent business environment that became increasingly difficult to predict.* d. Growing disillusionment with central planning. 32. The primary distinction between corporate strategy and business strategy is: [See p.18] a. Corporate strategy is the responsibility of the CEO; business strategy is formulated by the heads of business units b. Corporate strategy is concerned with where the firm competes; business strategy with how it competes* c. Corporate strategy is concerned with establishing competitive advantage; business strategy with strategy implementation in individual businesses d. Corporate strategy is concerned with the long-term performance of the firm; business strategy with resource deployment. 33. A description of a company’s organizational purpose is called a ______? [See p.10] a. Vision statement b. Values statement c. Mission statement* d. All the above 34. Strategy has its origins in: [See p.17] a. Thought* b. Discussion c. Analytical techniques d. Ethics 35. The book that is considered as the first treatise on strategy is: [See p.12] a. Carl Von Clausewitz’s “On War” (“Vom Kriege”) b. Sun Tzu’s “The Art of War”* c. The Bible d. Niccolo Machiavelli’s “The Art of War” (“Dell’arte della Guerra”) 36. Military strategy and business strategy differ in that: [See p.12] a. There is no concept like tactics in business b. Military strategy can only be learned through field experience; business strategy can be developed through analytical frameworks c. The objective of military strategy is to defeat the enemy; business strategy seeks coexistence rather than annihilation* d. None - there is no conceptual difference 38. In the late 1970s and early 1980s, Michael Porter pioneered: [See p.13] a. The application of industrial organization economics to strategic decisions* b. Empirical research into the relationship between market share and firm profitability c. The resource-based view of the firm d. The application of game theory to strategic management 39. During the 1990s, the focus of strategy analysis shifted: [See p.14] a. From corporate planning to strategic management b. To the role of resources and capabilities as a foundation for firm strategy.* c. To the application of microeconomics to analyze the sources of firm profitability. d. To the analysis of value-added as the basis for strategic decisions 40. During the 21st century, the complexity of the challenges posed by disruptive, digital technologies and accelerating rates of change has encouraged companies to: [See p.14] a. Shift their strategic focus towards the growth markets of Asia, Africa, and Latin America. b. Rejecting shareholder value maximization in favor of maximizing stakeholder interests. c. Depend increasingly upon strategic alliances and other forms of collaboration.* d. Prefer mergers and acquisitions to organic growth. 41. In strategic management, the expression “blue oceans” refers to: [See p.14] a. Radical innovation b. The potential offered by uncontested market space* c. A key theme in the US Navy’s strategic planning process d. The ability to cut costs through moving production to offshore locations. 42. When the environment becomes more turbulent and unpredictable: [See p.15] a. Strategy becomes less important than intuition b. Strategy becomes an increasingly important as a source of direction* c. External consultants need to play a greater role in strategy making d. Strategy becomes an impossible exercise 43. Strategy can help decision making by: [See p.16] a. Expanding the range of decision alternatives under consideration b. Ensuring that strategic decisions are restricted to the CEO and top management team c. Facilitating the use of analytical tools* d. All of these 44. The two questions of “where” and “how” to compete define: [See p.18] a. a firm’s corporate and business strategies* b. a firm’s strategic management process c. a firm’s vision and mission d. a firm’s values and culture 45. The main difference between corporate level strategy and business level strategy is: [See pp.17-18] a. Corporate strategy defines the scope of a firm’s activities, while business strategy focuses on how to beat the competition in specific product markets* b. Corporate strategy defines a firm’s overall structure, while business strategy describes its actions c. Corporate strategy comprises the overall strategic plan, while business strategy focuses on implementing that strategy in each product market d. Corporate level strategy is concerned with long term goals, while business level strategy focuses on short term competitiveness 46. When identifying a company’s strategy, its statements of a strategy found in its public documents need to be: [See pp.17-18] a. Treated with skepticism b. Checked against the company’s decisions and actions* c. Interpreted using modern techniques of textual analysis d. Checked against its statements of vision and mission 47. Business strategy defines: [See p.19] a. the way a firm competes in a particular industry or market b. the way a firm establishes a competitive advantage over its rivals within a specific industry or market c. Both of the above* d. Neither of the above 48. The division of responsibility between corporate and business strategy is consistent with the following principle: [See p.19] a. The hierarchical nature of authority within organizations b. Corporate level strategy is the domain of headquarters executives; divisional managers are responsible for business strategies* c. Corporate level strategy is the domain of the parent company; functional managers are responsible for business strategies d. Delegation is the key to reconciling responsiveness and adaptability with overall integration 49. The relationship between design and emergence in strategy making is best described as: [See p.23] a. An interactive process between strategic planners and line managers b. A tension between the forces of centralization and decentralization c. A process in which intended strategy is adapted as it is implemented* d. An example of the agency problem in which the interests of salaried managers displace the interests of owners 50. Strategy improves decision-making by: [See pp.16-17] a. Reducing the number of choices being considered b. Integrating and pooling the knowledge of different members of the organization c. Facilitating the use of analytic tools d. All of these* 51. The main value of analytical approaches to strategy formulation is: [See pp.23-24] a. To identify the optimal strategy that a firm should adopt. b. To provide understanding of strategic issues.* c. To substitute for manager’s intuition and creativity. d. To ensure that strategic decision making is assigned to the capable people within the organization 52. The extent to which an organization’s strategy is determined by decentralized emergence rather than by centralized design depends mainly upon: [See pp.22-23] a. How turbulent and unpredictable is the external environment of the organization.* b. How the organization is structured. c. The commitment of the organization to experimentation. d. Whether the organization has a formalized process of strategic planning. 53. The applicability of the tools and techniques of strategy analysis to not-for-profit organizations is: [See p.26-28] a. Greater for organizations that face competition than those that do not* b. Greater for organizations that charge for their services than those which do not c. Greater for organizations that compete to for funding than those which compete for customers. d. Is severely limited by the lack of a profit motive CHAPTER 2 26. Every business enterprise has a distinct purpose; however, common to all businesses is the goal of: [See p.37] a. Making customers satisfied. *b. Creating value. c. Satisfying stakeholders. d. Maximizing shareholder value. 27. For the purposes of strategy analysis, it is convenient to view business strategy is primarily a quest for: [See p.39] a. Attractive markets *b. Profit c. Customer loyalty d. Motivated and talented personnel 28. A major impediment to the stakeholder view of the firm is: [See p.39] a. The inevitable conflicts between the interests of different stakeholders b. The fact that customers and employees are likely to be even more short-term oriented than shareholders *c. The difficulties of quantifying the performance of the stakeholder-focused firm d. The difficulty of constituting a board of directors that represents the interests of all stakeholders 29. For a value for the firm requires that a firm: [See p.37] a. Earns profits for shareholders, then uses these profits to satisfy the interests of other stakeholders. b. Creates customer loyalty, that can then be converted into profit through increasing prices. *c. Creates value for customers, then appropriate some of that value as profit. d. Creates value for employees through attractive pay, benefits, and working conditions, then relying upon employees to drive customer satisfaction and, eventually, profits. 30. The firms create value through production—transforming less valuable inputs into more valuable outputs— and also through: [See p.37] a. Entrepreneurship: creating new businesses. b. Restructuring: turning around, and selling off divisions or units. *c. Commerce: transferring products across space and time from where they are valued less to where they are valued. d. Marketing: presenting products in a way that makes them more valuable to customers. 31. Value added can be defined as: [See p.38] a. The difference between sales and expenses *b. The difference between the sales value of a firm’s output and the cost of physical inputs used to produce that output* c. The difference between the sales value of a firm’s output and the direct costs of producing it d. EBITDA (earnings before interest, tax, depreciation, and amortization) 32. Although firms may pursue a variety of goals, the assumption that primary goal of strategy is to maximize profits over the long term may be justified by: [See p.39] a. The fact that in today’s intensely competitive markets, firms must focus on profit maximization in order to survive. *b. The external pressures on firms for profitability that arises from (i) strong competition in product markets and (ii) the threat that firms that do not maximize profits will be acquired by forms that do. c. The legal requirement on Boards of Directors to ensure that companies are operated in the interests of their shareholders. d. Shareholder pressure on CEOs to maximizing profits. 33. The principal difference between accounting profit and economic profit is: [See p.40] a. Accounting profit is distorted by the arbitrary treatment of depreciation and unusual items. *b. Accounting profit includes both economic profit and the normal return on capital to the providers of equity capital. c. Economic profit is cash flow based and is, hence, less subject to manipulation that accounting profit. d. Economic profit is endorsed by economists who tend to be more rigorous than accountants. 34. The divergence between accounting profit and economic profit is likely to: [See p.41] a. Greater for highly leveraged firms than for equity-financed firms b. Greater for labor-intensive firms than for capital-intensive firms *c. Greater for capital-intensive firms than for labor-intensive firms d. Greater for technology-based firms than firms in mature industries 35. Profit and value of the firm are two concepts which are: [See pp.41-42] a. Unrelated because cash flow not profit is the main determinant of firm value *b. Closely linked because the present value of a firm’s future profits approximates to the market value of its securities c. Closely linked because dividends are paid out of profits and it is dividends that determine the market value of a firm’s shares d. Closely linked because the market value of a firm is determined by its profits multiplied by the price-earnings ratio of its shares 36. The main difference between accounting measures of firm performance and stock-market measures of firm performance is: [See pp.43-44] a. Accounting measures are less reliable because of firms’ discretion over how they apply accounting conventions b. Stock market measures are less reliable because share prices are so volatile c. Accounting data offers a sound basis for forecasting future performance *d. Accounting measures are backward looking; stock market measures are forward looking 37. Maximizing enterprise value and maximizing shareholder value are closely linked because: [See p.40] a. Enterprise value and shareholder value are the same thing b. Shareholder value is calculated by adding debt and other non-equity financial claims to the DCF value of the firm *c. Shareholder value is calculated by subtracting debt and other non-equity financial claims from the enterprise value of the firm d. It is obvious that they must be linked 38. To assess the adequacy of the return on capital employed (ROCE) that a firm earned in its most recent financial year, which of the following would not be an appropriate benchmark: [See pp.44-45] a. The ROCE earned by the same firm in previous years b. The ROCE earned by competitors during the same period *c. The firm’s cost of equity capital d. The firm’s weighted average cost of capital 39. To assess whether or not a firm is earning an adequate rate of profit, return on capital employed (ROCE) is a better indicator than return on sales because: [See p.45] a. Sales are more variable than capital employed *b. Return on sales varies between industries according to their capital intensity c. A firm’s return on sales depends upon the choice between gross margin, operating margin, and net margin d. ROCE is based upon cash flow 40. To diagnose the sources of a firm’s poor financial performance, it is useful to: [See pp.45-46] a. Focus on the firm’s cash flow statement rather than its income statement and balance sheet b. Concentrate on sales growth and market share rather than profit data c. Adopt a forward-looking approach through analyzing share price performance rather than looking at backward-looking accounting statements *d. Disaggregate overall return on capital into its component items 41. In using accounting ratios to appraise a firm’s performance, it is helpful to use: [See pp.42-43] a. Benchmarks b. Trends in these ratios over the past 5 years or more c. Multiple indicators *d. All of these 42. In appraising a firm’s profit performance: [See pp.41-42] a. Return on sales is a better indicator than return on invested capital. *b. Return on invested capital is a better indicator than return on sales. c. Net margin is a better indicator than operating margin. d. Narrow measures of profit (such as after-tax net income) are better indicators than broad-based measures (such as EBITDA—earnings before interest, tax, depreciation and amortization). 43. The biggest problem in designing a performance management system arises as a result of: [See pp.45-46] a. The tendency for performance management systems to be based entirely on financial targets *b. A performance management system needs short-term indicators to monitor performance, yet the ultimate goal is to enhance the long-term performance of the firm c. Performance targets are always ineffective because individuals will “game the system” d. The personal interests of organizational members need to be taken into account 44. The Balanced Scorecard is a technique of performance management that establishes and monitors four dimensions of performance: [See p.49] a. Financial, strategic, operational, and ethical performance *b. Financial, customer, internal, and learning/innovation performance c. Profit, sales, productivity, and asset management performance d. Shareholder, customer, employee, supplier, and social performance 45. The main problem of a company establishing shareholder value creation as its primary performance goal is: [See pp.49-51] a. Shareholder value maximization is appropriate only for financial service companies b. Pursuing shareholder value inevitably leads to unethical behavior by senior managers *c. Focusing on shareholder value does not necessarily encourage managers to concentrate on the actions and activities that create the profits that are the source of shareholder value d. Pursuing shareholder value is likely to be detrimental to employee morale and customer satisfaction 46. Influential scholars such as Milton Friedman, Charles Handy, Michael Porter and CK Prahalad: [See p.49] a. Agree that CSR is an essential “moral imperative” *b. Have fundamental disagreements about the justification for CSR c. Believe that the capitalist system would operate better if all firms adopted CSR d. Regard most firms’ CSR initiatives as primarily exercises in public relations 47. Michael Porter and Mark Kramer’s notion of “shared value” reconceptualises CSR (corporate social responsibility) by emphasizing: [See p.50] *a. CSR as a value creating activity. b. CSR as a source of legitimacy for a company. c. CSR a means of transferring value from shareholders to less fortunate members of society. d. CSR as a counterweight to greed and amorality among managers and investors. 48. Which of the following activities by Starbucks Inc. is least likely to be an example of Michael Porter and Mark Kramer’s “shared value creation”? [See p.54] *a. The 2015 “Race Together” initiative to combat racism and promote racial harmony b. The introduction in 2014 of college tuition benefits to employees c. Participating in the Coffee and Farm Equity program to benefit growers d. Financial and media support for American Red Cross efforts to aid refugees 49. In new product development, a “phases and gates” approach means that: [See p.56] a. A firm’s market is divided into specific segments (or “phases”) linked by “gates” which allow synergies to be exploited b. A firm’s product development relies on time segments that must be linked through gates *c. The process is divided into consecutive stages, at the end of each a decision is made as to whether to continue to the next stage of development d. The product is divided into separate modules where the interface between them are viewed as gates 50. Viewing strategy as a portfolio of options rather than a portfolio of investments relies upon the rationale that: [See pp.55-56] a. Uncertainty means that flexibility is valuable b. Committing to a long-term program of investment can be disastrous if circumstances change c. Most investment projects can be divided into a sequence of stages where, at any point of time, it is only necessary to decide the next stage *d. All of these 51. The value of a real option can be calculated using: [See p.56] a. The Black-Scholes option pricing model b. Binomial options pricing model c. Discounted cash flow analysis *d. The Black-Scholes option pricing model OR Binomial options pricing model 52. The two main categories of real options are growth options and flexibility options. Which of the following investments is not a growth option? [See pp.56-57] *a. Ford’s acquisition of programmable robots that allow different models of car to be produced on a single assembly line b. Facebook’s acquisition of WhatsApp 2014 c. Apple’s program of research into virtual reality d. Callaway Golf’s strategic alliance with Automobili Lamborghini to develop new composite materials CHAPTER 3 27. Given the range of external influences that impact a firm, understanding the external environment requires managers to: [See pp.64-65] *a. Use a framework or a system that allows them to organize relevant information and rank the importance of different factors b. Monitor competitors closely c. Use all existing sources and techniques to gather and analyze information d. Devote a large proportion of their time to this task 28. The core of a firm’s business environment is comprised by: [See pp.65-66] *a. Its relationships with customers, competitors and suppliers b. Its technological environment c. Its relationships with all stakeholders d. The socioeconomic system within which the firm must exist 29. Economic value is created when: [See pp.65-66] a. The price that the customer is willing to pay for a product exceeds the costs of the material inputs used to produce the product b. The surplus of value is distributed between customers and producers in the industry by the forces of competition c. The value of a product to consumers exceeds the price they paid for it *d. The price that the customer is willing to pay for a product exceeds the cost of supplying it 30. The profits earned by firms in an industry, are determined by: [See p. 66] a. The overall state of the economy and the intensity of competition within the industry b. How much customers value the products supplied by the industry c. The extent to which the industry is protected by barriers to entry *d. The value of the product for customers, the intensity of competition, and the relative bargaining powers of producers, their suppliers and their buyers 31. The basic premise of industry analysis is that: [See p.66] a. Perfect competition and monopoly are the basic models, most industries lie between these two extremes *b. The level of profitability within an industry is determined by the systematic influence of the industry structure which determines the intensity of competition in the industry c. Industry profitability depends upon the interaction among competing firms d. Technology and consumer demand are the basic forces that shape industry structure 32. If an industry earns a return on capital in excess of its cost of capital: [See p.66] a. It will soon attracts the attention of competition authorities b. Workers will push for higher pay and benefits causing the level of profitability to fall *c. It will attract the attention of potential entrants and, unless protected by high barriers to entry, the return on capital will fall d. Firms within the industry will over-invest causing the return on capital to fall 33. Firms supplying niche markets are often highly profitable because: [See pp.66-67] a. They tend to supply specialty products for high income consumers *b. They tend to be sufficiently small that a single firm can often establish a dominant position c. They tend to be disregarded by major corporations d. They tend to have high entry barriers 34. Economies of scale are a barrier to entry because: [See pp.70-71] a. New entrants are positioned at the top of their learning curve b. New entrants are uncertain about their future costs which discourages then from making investments c. New entrants face a risk of retaliation from the incumbents whose large scale of operation allows them to flood the market *d. New entrants face high unit costs either because they enter at sub-optimal scale, or they make a large-scale entry that initially operates with substantial excess capacity 35. The American Medical Association encourages limits on the number of medical school places for training new doctors: [See p.70] a. To ensure a high standard of applicant b. To keep class sizes small *c. To keep doctors’ remuneration high d. To ensure that only the best universities have medical schools 36. Parallel pricing—the tendency for companies in an industry to move prices more or less simultaneously—is typically an indicator of: [See p.72] a. Healthy price competition b. The sensitivity of the firms in an industry to the unpopularity of price increases c. Lack of product differentiation *d. The desire of oligopolists to avoid price competition 37. As the competitors in an industry become more diverse in terms of their goals, cost structures, and strategies, it is likely that: [See p.73] a. Their incentives to collude on price increase *b. They will compete more fiercely on price c. Their products will become increasingly differentiated d. Mergers, acquisitions and alliances among them will increase 38. Industries where a decline in demand is most likely to cause industry-wide losses tend to have the following characteristics: [See p.73] a. High concentration, lack of product differentiation and scale economies *b. High exit barriers, lack of product differentiation, and a high ratio of fixed to variable costs c. High exit barriers, lack of product differentiation, and powerful buyers d. Powerful buyers and suppliers and high exit barriers 39. Which of the following does not contribute to buyers’ bargaining power? [See pp.74-75] a. Low switching costs for buyers b. The size of buyers relative to that of sellers *c. A high level of differentiation among the products that buyers purchase d. The ability of buyers to backward integrate 40. Bargaining power rests, ultimately, on: [See p.75] a. The negotiating skills of the buyer versus the seller b. Tradition c. The respective effectiveness and cohesion of top management teams *d. The relative costs that each party would incur from walking away from the deal 41. The suppliers of agricultural products tend to lack bargaining power relative to buyers because: [See p.76] a. Farmers tend to be uneducated *b. The farming industry tends to be fragmented and supply commodity products c. Agricultural products are essential food products that must be kept at affordable prices d. Most farmers are not forward integrated 42. The most useful approach to forecasting industry profitability in the future is: [See p.77] a. To estimate the industry’s revenues and costs in future years b. To use an industry’s probability at similar stages of the business cycle in the past as an indicator of future profitability c. To extrapolate the trend of industry profitability into the future *d. To understand how the industry’s structure has determined competitive intensity and profitability in the past, then to use information on an industry’s changing structure to predict how profitability is likely to change in the future 43. An industry’s current profitability: [See p.77] *a. On its own tends to be a poor predictor of future profitability b. Is an excellent predictor of its future profitability since changes in industries’ profitability occur slowly c. Is the result of many different factors interacting in unpredictable ways d. Is largely set by the profitability of the biggest company within that industry 44. Airlines’ frequent flyer programs and retailer loyalty schemes are both examples of efforts to: [See pp.78-79] a. Offer disguised price reductions to customers *b. Establish product differentiation by measures that reward customer loyalty c. Establish competitive advantage that failed because they could be easily imitated by competitors d. Promote a company’s product to new customers 45. Initiatives to improve an industry’s profitability through changing its structure are: [See p.79] a. Only feasible for the dominant player within an industry *b. More difficult in fragmented industries than in concentrated industries c. Feasible in any industry that is subject to ruinous price competition d. Always risky because they attract the attention of antitrust authorities 46. A market’s boundaries are defined by: [See p.81] a. The geographies of the markets that are supplied by the incumbents b. The type of product which is sold, and the type of customers willing to pay for the product c. Price homogeneity—within the confines of a market, a single price rules *d. Substitutability on both the demand side and the supply side 47. In practice, drawing the boundaries of industries and markets is: [See p.82] a. A matter of the personal preferences of top managers b. Almost impossible to carry out with rigor because it requires many “rules of thumb” and approximations *c. Largely a matter of judgment and experience contingent on the purpose of the analysis d. Critical to the output of the analysis and therefore should only be undertaken with the help of an academic or consultant 48. For most business enterprises a market is: [See pp.81-82] a. An abstract concept—from the point of view of competition it is a continuum from a firm’s closest competitor towards more distant competitors b. A sociological concept that is defined mainly by convention and institutions c. Geographical concept defined by the location of customers and competitors *d. All the above 49. Key success factors are: [See p.82] a. Factors that allow rivals to undermine a firm’s competitive advantage *b. The sources of competitive advantage within an industry c. The forces of competition that are most influential in determining industry profitability d. The generic strategy that is most closely aligned with customer preferences 50. Identifying key success factors within an industry requires answers to the following questions: [See p.82] *a. What do customers want and what should the firm do to survive competition? b. What is a firm’s unique selling proposition? c. Which of the five forces of competition most threaten a firm’s survival and how could the firm deal with them? d. What are the main sources of a company’s cost efficiency? 51. Legal requirements that banks, providers of wireless telecommunication services, and taxis must obtain a government issued license before going into business impact the profitability of their respective industries: [See p.71] a. Negatively because governments charge high fees for such licenses *b. Positively because they restrict entry to the industry c. Negatively because such licensing is usually accompanied by regulation of prices d. Positively if such licenses can be sold on a secondary market CHAPTER 4 35. A key limitation of Porter’s five forces model of competition is that: [See p.93] a. It looks only at single industries not at relationships between industries *b. Competitors’ strategies may shape industry structure, rather than structure shaping competition c. Industries are more complexity than can be reduced to five competitive forces d. The different levels of industry analysis that the five forces model can be applied to 36. Empirical research shows that proportion of inter-firm differences in profitability that industry factors explain is: [See p.90] a. More than 75%. b. About half. *c. Less than 25%. d. The question is unanswerable because “industry” is a meaningless concept. 37. The difference between substitute and complementary products may be summarized as follows: [See p.92] *a. Substitutes reduce the value of a product, whereas complements increase value. b. Complements reduce the value of a product, whereas substitutes increase value. c. Substitutes cannot be used together, whereas complements must be used in combination. d. Complementary relationships increase the profitability of all firms engaged in supplying them; substitute relationships reduce the profitability of all firms supplying them. 38. Video game consoles and video games are complementary products: the availability of one increases the value of the other. In the past the suppliers of consoles were able to appropriate most of the profits generated by video game systems because: [See p.92] a. Video game consoles cost more to develop than video games. b. The consoles were more powerful determinant of the consumer experience than the games. *c. The console suppliers controlled technology and distribution giving them more bargaining power than the suppliers of video games. d. The console makers—Nintendo, Sony and Microsoft—had bigger revenues and greater market capitalization than the suppliers of video games. 39. The producer of a complementary product can maximize its relative bargaining power by means of: [See p.93] a. Adopting a differentiation strategy that allows it to sell at a premium price. b. Adopting a cost cutting strategy to provide its product at the lowest possible cost and so exploit economies of scale. c. Restricting complementors’ access to the market. *d. Commoditizing the market for the complementary good. 40. Joseph Schumpeter perceived competition among companies as: [See p.93] a. Corresponding closely to economists’ model of perfect competition where profits are competed away b. A process of oligopolistic rivalry *c. A process of creative destruction d. A process of punctuated equilibrium in which periods of stability were interspersed by bouts of intense competition 41. Schumpeter’s process of “creative destruction” challenges Porter’s five forces of competition framework by: [See p.91] a. Introducing concepts of renewal and rebirth into the analysis of industrial change b. Recognizing the cooperation is as important in business as competition *c. Proposing that competitive behavior determines industry structure rather than the other way round d. Viewing competition is essential for the renewal of mature and declining industries 42. While the Porter five forces framework is built upon the structure-conduct-performance model of industrial economics, Schumpeter’s view of competition as creative destruction builds upon: [See pp.93 and 95] a. Game theory. *b. The Austrian School view of competition as a dynamic. c. Oligopoly theory. d. The Chicago School of economic thought. 43. The key implication of “hypercompetition” in business is that: [See p.95] *a. Competitive advantage is temporary. b. Technological change will continue to accelerate. c. “If it ain’t broke, don’t fix it” is an obsolete piece of advice. d. The concept of Schumpeterian competition needs to be updated to realities of the 21st century. 44. The prediction that hypercompetition makes competitive advantage temporary: [See p.95] a. Is confirmed by empirical research shows that the answer is Yes. b. Is refuted by empirical research shows that the answer is No. *c. Has not been answered by empirical research. d. Cannot be answered by empirical research because competitive advantage cannot be measured. 45. The principal value of game theory to the field of strategic management is in: [See pp.95-96] a. Generating more accurate predictions from competitive situations b. Extending the theory of competition behavior to embrace cooperation c. Extending the analysis of competitive behavior to the realms of politics, diplomacy, and social behavior *d. Permitting a more rigorous framing of competitive situations and strategic decisions 46. In a market where Firm A and Firm B are leading suppliers, if Firm A initiates a price cut, the likelihood that Firm B responds with an identical price cut will be greater: [See pp.96-99] a. If Firm B’s medium term goal is to maximize profit. *b. If Firm B’s medium term goal is to maximize market share. c. If Firm B is a private rather than a public (listed) company. d. If the market is growing. 47. From a game theory perspective, President George W. Bush’s inauguration of a “war on terror”: [See p.98] a. Represented a commitment by the American people to success since the imagery and language of war implies either victory or defeat b. Signaled to other democratic countries the America’s desire for cooperation in order to contain a common threat *c. Lacked effectiveness as a deterrent since the prospect of a “war” not only fails to deter potential terrorists, it may encourage them d. Created a prisoners’ dilemma in which communication between the US and militant Islamic groups became difficult 48. The key insight from the “prisoners’ dilemma” game is: [See p.97] *a. Competitive behavior can create an outcome that is inferior for all involved in a situation b. The principle of “honor among thieves” is inapplicable either to thieves or to business executives c. In every social interaction, the inability to communicate effectively always results in an inferior outcome d. Trust can play a critical role in creating favorable outcomes form both crime and business 49. If administering deterrence is costly or unpleasant for the threatening party, then: [See pp.96 and 98] *a. It may lack credibility b. It will always lack effectiveness c. It will need ot be supported by appropriate signaling d. It reinforces the power of the threatening party 50. The relationship between commitment and strategic options may be beast described as: [See p.98] a. Commitments increase the value of real options b. By committing to a set of options, a firm can reconcile two sources of value: value from deterring competitors and value from real options *c. Making commitments inevitably involve giving up options d. The two reside in different realms of analysis: commitments can be analyzed using game theory; real options can be analyzed using financial theory 51. Signaling refers to: [See p.99] a. Communications that announce your strategic intentions or plans to rivals *b. Any deliberate action that is intended to influence other players’ perceptions or behavior c. Deception through misinformation d. Internal communications that divert strategic orientations and obtain the buy-in of the organization’s key stakeholders 52. The relationship between competition and cooperation can be described as follows: [See p.96] a. Industries either compete or cooperate; if they cooperate they will be investigated by competition bodies b. Cooperation and competition may exist in an industry, but not at the same time *c. Both can co-exist simultaneously d. Both can co-exist at the same time, but not in the same industry segment or strategic group 53. Competitive intelligence, the systematic collection and analysis of information about rival firms, is: [See p.100-101] a. A practice which, though legal in most countries, is unethical. b. Likely to distract firms from their efforts to establish positions of competitive advantage based upon their distinctive strengths. *c. An important component of a firm’s environmental scanning and strategic analysis. d. A useful activity because it can help firms imitate the strategies of their more successful competitors. 54. Competitive intelligence aims to: [See p.100] *a. Forecast competitors’ behavior, predict their reactions, and explore how their behavior may be influenced b. Forecast competitors’ future financial performance and analyze responses to their previous strategic initiatives c. Explore how rivals’ behavior could be positively influenced in the firm’s interest, and signal the firm’s strategic initiatives d. Collect information about rivals in other countries and, especially, to forecast their attacks against the focal firm’s domestic market 55. The distinction between legitimate competitive intelligence and industrial espionage: [See p.101] a. Is clearly defined by legislation and case law relating to trade secrets *b. Is not always clear c. Is non-existent – they overlap to a great extent d. Is easily resolved by hiring a good lawyer 56. To attempt to predict competitive behaviors, Porter suggests a four-step framework, where analysts must identify: [See pp’101-102] *a. The competitor’s current strategy, its objectives, its assumptions about the industry and itself, and its available resources and capabilities b. The competitor’s current strategy, its future strategy, its assumptions, and its vulnerabilities c. The competitor’s assumptions about the industry, its available resources and competencies, its objectives, and its competitive advantage d. The competitor’s available resources and competencies, its objectives, then its competitive advantage, and finally its performance 57. Segmentation is a process through which: [See pp.102-103] a. One can assess the strengths and weaknesses of any firm in its market *b. Industries are divided into specific markets c. Industries are divided into groups of similar products d. Product characteristics are matched with customer preferences 58. The main use of industry segmentation analysis is: [See p.103] *a. Identify the most attractive segments for a firm to locate within b. Understand better the needs of different customer groups c. Formulate better marketing strategies d. Predict the likely evolution of market structure 59. Barriers to mobility are: [See p.105] *a. Barriers that protect a segment from firms established in other segments of the same industry b. Barriers that protect incumbents from established firms in other industries rather than from new start-up companies c. Obstacles that a firm faces in changing its strategy d. Barriers that prevent globalization and developing a firm’s business abroad 60. A firm will choose to compete across multiple segments rather than specialize in a single segment if: [See p.105] a. It is a publicly-listed company that than a family owned company *b. The same resources and capabilities can be deployed in different segments c. Segments are defined by distinct socio-economic groups of customers d. Barriers to mobility are high. 61. The difference between barriers to entry and barriers to mobility is: [See p.105 a. The sources of barriers to mobility are different than the sources of barriers ot mobility b. There is no real difference c. Barriers to mobility are less effective than barriers to entry *d. Barriers to entry protect the industry as a whole whereas barriers to mobility protect segments within the industry 62. “Profit pool mapping” describes a technique for: [See p.104 *a. Analyzing profitability across different stages of the value chain in an industry b. Analyzing expenditures across different stages of the value chain in an industry c. Analyzing market shares in the different stages of the value chain in an industry d. Analyzing different horizontal and vertical activities and the assessment of their strengths and weaknesses 63. Strategic groups consist of: [See p.108] a. Firms that follow similar generic strategies (e.g. focus or differentiation) *b. Firms within an industry that have similar strategies c. Firms that occupy the same industry segment d. Firms that target the same customer groups 64. Strategic group analysis is primarily useful for: [See p.108] a. Identifying “blue ocean” opportunities *b. Describing and understanding the strategic positioning of firms within an industry c. Identifying the strategies that are most conducive ot profitability within an industry d. Identifying which strategic niches in an industry are least saturated and therefore have the greatest profit potential 65. In European airline industry, EasyJet, Baltic Air, WizzAir, and Ryanair: [See p.108] a. Have different route networks; therefore belong to different strategic groups *b. Have similar strategies, hence belong to the same strategic group* c. Belong to the same strategic group and can therefore be expected to have similar financial performance d. Have little in common CHAPTER 5 26. The resource-based view of firm implies that: [See pp.114-115] a. The boundaries of the firm are determined by the firm’s resources rather than by transaction costs b. The resources of the firm are the foundation for its capabilities *c. Resources and capabilities are the principal basis for firm strategy and the primary source of profitability d. Ricardian rents are a more important source of firm profitability than monopoly rents Schumpeter 27. Strategy needs to take account of both the requirements of the firm’s external environment and the firm’s own resources and capabilities. Resources and capabilities rather than requirements of the external environment offer a stronger basis for strategy formulation when: [See pp.114-115] a. The firm is engaged in the exploitation of natural resources such as petroleum or metal. *b. The external environment is in a state of flux. c. When the firm is supplying producer goods rather than consumer goods. d. When the firm is a multinational corporation. 28. The main strategic lesson to be drawn from the Biblical story of David and Goliath is: [See p.115] a. The importance of first-mover advantage. *b. Adapt strategy to your relative strengths. c. Conventional strategies don’t work for newcomers. d. The Israelis usually win. 29. The difficulties faced by Eastman Kodak, Smith Corona. and Olivetti in adapting to radical technological change within their markets point to: [See p.116] a. The short-sightedness of senior managers in recognizing the implications of new technologies. b. The power of digital technology as a force for creative destruction. c. The need for firms to devote more resources to technological forecasting. *d. The difficulties established firms experience in building the new capabilities. 30. In 1990, C.K. Prahalad and Gary Hamel introduced the concept of “core competence.” Their argument was that: [See p.116] a. Competence was more important than capability as a basis for sustainable competitive advantage b. Management should build strategy on competences rather than resources *c. Strategy should be focused on both exploiting and developing firms’ core competences d. Competitive advantage rather than industry attractiveness was the primary source of superior profitability 31. There are two primary sources of profit (or “economic rent”): [See pp.117-118] *a. Market power and superior resources. b. Market power and competitive advantage. c. Competitive advantage and disequilibrium rents. d. Cost advantage and differentiation advantage. 32. The difference between a resource and a capability is: [See p.116] *a. A resource is a productive asset; a capability refers to what the firm can do b. A resources tend to be immobile assets; capabilities are dynamic c. A resource is a weak source of competitive advantage whereas a capability is a strong one d. A capability is a type of resource 33. To identify a firm’s resources and capabilities, it is useful: [See pp.118-123] a. To first identify the key success factors within the firm’s industry then identify the resources and capabilities needed to satisfy these success factors. b. Identify the firm’s value chain, then identify the main resources and capabilities at each stage of the value chain. *c. Both (a) and (b). d. Classify resources into tangible, intangible and human. 34. To exploit its tangible assets more effectively requires that a firm: [See p.120] a. Economizes on these assets by changing its depreciation policy *b. Economizes on underutilized assets and redeploys assets into more profitable uses c. Expands sales in order to ensure they are fully deployed d. Leases assets rather than owning them in order to boost return on capital employed 35. One implication of the resource-based perspective is that: [See pp.115-116] a. Firms tend to adopt similar or close strategies *b. By aligning their strategies to their resources and capabilities, firms emphasize their differences rather than their similarities c. Firms focus on building a stronger portfolio of capabilities than their rivals d. Firms focus on reducing their vulnerability by correcting their weaknesses 36. Intangible resources tend to be more valuable than tangible resources because: [See p.121] a. They are easier to acquire b. They are cheaper to acquire *c. They are more likely to provide sustainable competitive advantage d. All of the above 37. A major reason why many companies have the high valuation ratios (ratio of stock market value to balance sheet net asset value) is: [See p.121] a. Stock market irrationality which results in some companies becoming overvalued. *b. The undervaluation of intangible resources on companies’ balance sheets. c. Stock market doubts over the valuation of financial assets by companies and their auditors. d. The rise of intellectual property valuation as a result of recent patent litigation. 38. Firm’s with outstanding capabilities are typically those which: [See p.124] a. Possess the best resources. b. Have developed their organizational routines over the longest periods of time. *c. Are able to integrate their resources most effectively. d. Have the most effective leaders. 39. Organizational culture comprises: [See p.122] a. A shared cognitive framework among organizational members b. Senior managers’ beliefs and vision *c. Shared beliefs, values, assumptions, meanings, myths, rituals, and symbols d. Organizational identity 40. The distinguishing attributes of core competences is that: [See p.122] *a. They provide a basis for entering new markets and make a disproportionate contribution to the customer value b. They provide a basis for building new technological processes and offer a valuable product or service to a firm’s customers c. They are found primarily in Japanese companies such as Honda, Canon, and Sony d. They allow top managers to understand the human resources of their firm and to define and implement a technological strategy 41. Enterprise Resource Planning software (such as that supplied by SAP) is unlikely, on its own, to be source of competitive advantage because: [See p.127] a. It is expensive to install hence its benefits are offset by its costs *b. It is available to any firm that wishes to purchase it; hence, it is not scarce c. It needs to be updated periodically, hence it lacks durability d. Its benefits are limited to those activities that require substantial information processing 42. For most organizations, geographical location should be regarded as: [See pp.131-133] *a. A key resource whose characteristics need to be given careful attention when formulating strategy b. A formerly important resource which is becoming increasingly irrelevant in a digital world c. An organizational characteristic, not a resource d. A source of competitive advantage only its gives the organization access to an industry ecosystem such as Silicon Valley for IT firms and New York for advertising firms 43. A well-established brand can be a source of sustainable competitive advantage because: [See p.127] a. Consumers will always pay a premium for a recognized brand. b. Brands can be protected by the law relating to trademarks. c. A brand protects a firm form competition from low-cost new entrants. *d. It tends to be durable, loses value when transferred between firms, and is costly to replicate. 44. “Benchmarking” is: [See p.129] a. A process to ensure that a firm is as similar to competitors as possible b. An HR manager’s tool to set and justify the firm’s salary scheme versus the industry norm *c. A way to compare a firm’s resources and capabilities against those of competitors d. All of the above 45. The firm’s ability to appropriate the rents generated by its organizational capabilities: [See p.129] a. Is guaranteed by the fact that firms have full ownership of their capabilities b. Is greater for firms in high technology than in low technology industries c. Is weakened if a firm uses independent contractors instead of full-time employees *d. Depends upon the extent to those capabilities are embedded in team-based process that are heavily dependent upon corporate systems 46. A bank is establishing a fixed income trading department. It is considering whether to hire a team of star traders or to invest a similar sum of money in developing a proprietary, automated trading system. The most valid reason for investing in the automated trading system in preference ot hiring star traders is: [See p.128] *a. The proprietary trading system is likely to generate better returns since star traders are in a powerful position to negotiate pay packages which appropriate the major part of the profit they create. b. Advanced software is better than human intuition at identifying mispricing in financial markets. c. Star traders are difficult to manage and can easily become “rogue traders”. d. It’s difficult to motivate traders once they have earned their first few million. 47. When a company has weaknesses relative to competitors among strategically important resources and capabilities, the appropriate strategic response is to: [See pp.131-132] a. Invest heavy in order to upgrade weaknesses. b. Diversify in order to find new areas of business where these resources and capabilities are unimportant to competitive advantage. *c. Outsource those activities where third parties can offer superior capabilities while positioning the business to reduce vulnerable to remaining weaknesses. d. Employ management consultants to seek a solution. 48. Resources lack transferability between firms when: [See pp.127-128] a. They are embodied in fixed capital b. They are difficult to replicate c. They are subject to time compression diseconomies *d. Market transactions are impeded by imperfect information 49. If an organization possesses strengths in a resource or capability that bears little relationship to the industry’s key success factors it should: [See pp. 132-133] a. Regard that resource or capability as strategically irrelevant. b. Seek to sell that resource r capability to another organization. *c. Seek an innovative approach to making that resource or capability strategically relevant. d. Adopt a niche strategy. CHAPTER 7 33. Competitive advantage can be defined as: [See pp.168-169] a. A firm’s ability to establish market leadership. b. A firm’s ability to grow faster than its competitors. *c. A firm’s potential to earn a rate of profit that is persistently higher than its rivals. d. A firm’s potential for launching innovative new products. 34. A firm’s competitive advantage is not necessarily revealed in higher profitability; it may be reflected in: [See p.169] a. Expanding market share b. An aggressive quest for acquisitions c. Increasing employee bonuses *d. Expanding market share and/or increasing employee bonuses ○ 35. When an industry is subject to externally generated changes, the firms which are most likely to establish a competitive advantage are: [See p.169] a. Those with the highest market share. *b. Those that that respond most quickly to the change and have the resources and capabilities that are most closely aligned to the emerging success factors. c. Those with the greatest agility and capacity for innovation. d. A combination of (a), (b), and (c). 36. As markets become more turbulent and unpredictable, quick-response capability depends primarily upon: [See p.170] a. Good forecasting b. Early identification of emerging changes c. Speed of response *d. Early identification of emerging changes together with speed in responding to them 37. A firm can pre-empt competitors from invading its market space by: [See p.174] a. Vigorous legal action b. Threatening to imitate its imitators *c. Introducing new products to fill each niche, investing in capacity ahead of market growth and filing many patents d. None of these: competitive imitators is inevitable and unstoppable 38. Isolating mechanisms are: [See p.173] *a. Barriers to the erosion of interfirm profit differentials b. Mechanisms that impede the equilibration of rents between industries c. The same as “barriers to mobility” d. Sources of disequilibrium that cause the profitability of different firms in an industry to diverge over time 39. Which of the following is not an isolating mechanism? [See p.173] a. Private ownership of a company which means that it is not obliged to publish its financial statements. b. Competitive advantage which is based upon the interaction of a number of different resources and capabilities. *c. Competitive advantage based upon exploiting pricing anomalies. d. Competitive advantage based upon resources that are difficult to transfer and slow to replicate. 40. Causal ambiguity allows a firm’s competitive advantage to be sustained because potential rivals are: [See p.175] a. Deterred from directly competing with the advantaged firm *b. Unable to identify the sources of the advantaged firm’s superior performance c. Unable to acquire the resources needed to compete against the advantaged firm d. All the above 41. The difference between a “generic” and a “contextual” management practices is: [See pp.175-176] a. None: the concepts are identical in practice. *b. The performance impact of a generic practice is independent of the firm’s other practices; the impact of a contextual practice depends upon the firm’s other practices. c. Generic practices relate to basic functions; contextual practices tend to be more idiosyncratic. d. A generic practices offers incremental performance improvement; a contextual practices leads to a new fitness peak. 42. Advertising costs as a percentage of sales revenue for soft drink brands with large market shares (such as Coca-Cola and Pepsi-Cola) are lower than for brands with small market shares (Dr. Pepper, Schweppes, Fresca). This is because: [See p.182] *a. Advertising campaigns are subject to a large minimum budgets (“indivisibilities”) b. Big brands can negotiate lower rates with advertising agencies and media owners c. Economies of learning—long-established brands such as Coca-Cola and Pepsi have learned how to be more efficient in their advertising campaigns d. Economies of global advertising campaigns 43. In retailing, the cost advantages of large retail chains (such as Wal-Mart in the US, Tesco in Britain, Metro in Germany, and Carrefour in France) is primarily the result of: [See pp.179-185] a. Scale economies in operating large individual retail units. *b. Lower costs of bought-in products as a result of superior bargaining power. c. Higher capacity utilization in retailing and distribution. d. Using superior bargaining power to pay lower wage rates. 44. Compared with simple products like flour or toilet paper, complex products such as cars or hotels: [See p.188] a. Fewer opportunities for differentiation *b. Greater potential for differentiation○ c. Offer similar opportunities for differentiation--it all depends upon the creativity of product designers and marketers d. Fewer incentives for differentiation because of their high costs 45. Which of the following product categories offers the greatest potential for differentiation? [See pp.188-189] *a. Clothes and restaurants b. Cement and wheat c. Jet fuel for airline jets d. Sulfur and ethylene 46. What is the difference between differentiation and segmentation? [See p.189] a. There is no difference between the two *b. Differentiation deals with the “how” a firm chooses to compete, while segmentation describes “where” in the entire market a firm chooses to compete c. Differentiation is a firm’s strategic choice, whereas segmentation is given by its environment d. Segmentation is the head of the marketing department’s responsibility, whereas the CEO is in charge of differentiation 47. In supplying “lifestyle” products which are designed to meet consumers’ social and psychological needs, the key to differentiation advantage is: [See pp.190-193] a. A relentless pursuit of quality. b. Thorough market research. *c. Product integrity. d. Market segmentation. 48. Banks spend more money on their head office buildings than most other large corporations because: [See p.195] a. They tend to be located in financial centers where property prices are high. *b. They offer “experience goods”, hence they need to signal wealth and stability. c. Their CEOs are more committed to the display of wealth than other CEOs. d. Because their products are essentially commodities, they need to find alternative ways of differentiating. 49. “Experience goods” are those which: [See p.194] *a. Have performance attributes that are difficult to ascertain at the moment of purchase b. Only customers with previous experience of using these goods would rationally consider purchasing c. Only firms with wide experience in an industry would rationally consider making d. Have been produced by the firm furthest down the learning curve 50. Firms pursuing differentiation advantages will implement their strategies differently from those pursuing cost advantages. The implementation of differentiation strategy is likely to feature: [See p.199] a. Employee remuneration based upon individual productivity. b. Frequent performance reporting. c. High levels of outsourcing. *d. Low levels of job specialization. 51. According to Porter, cost leadership and differentiation are: [See p.198] a. What leads a firm to “be stuck in the middle” b. Two names for the same fundamental strategy *c. Distinct generic strategies d. Strategies that can be pursued simultaneously 52. The examples of Ikea and Southwest Airlines demonstrate: [See p.199] a. The power of brand as a factor of success b. The quality of the top management of these firms c. The power of advertising *d. How a cost-leadership strategy can be combined with distinctive product differentiation CHAPTER 8 29. The main forces driving industry evolution are: [See p.207] *a. Technology and demand. b. Technology and globalization. c. The quest for cost and differentiation advantage. d. Government policies and global financial flows. 30. Which of the following developments is not a typical feature of the transition from the “introductory” to the “growth” phase of the industry life cycle? [See pp.207-208]2 a. The emergence of a dominant design b. The shift from product to process innovation *c. The shift of production from mature to emerging countries d. Rapid market penetration 31. The duration of the industry life cycle: [See p.211] a. Typically extends over a century or more b. Is determined by the longevity of the firms within the industry *c. Has become compressed as the pace of technological change has accelerated d. Depends upon the ability the industry to sustain innovation 32. The different stages of the industry life cycles are defined primarily on the basis of: [See p.207] *a. The rate of growth of industry sales b. The characteristics of competition within the industry c. The pace of innovation within the industry d. None of the above 33. The characteristic profile of an industry life cycle has an ‘S’ shaped curve because: [See p.209 a. It is modeled on the Product Life Cycle, which is also ‘S’ shaped. b. It is generated by a quadratic function. c. It reflects the changing pace at which technology is diffused. *d. It is the result of changes in rates of growth of market demand. 34. Firm entry rates tend to be highest during the growth stage of an industry life cycle because: [See pp.212-214] a. Shortage of production capacity keeps margins attractive. b. The propensity for entrepreneurs and venture capitalists to imitate one another. c. Growing legitimacy of the industry attracts resources to the industry. *d. Both (a) and (c). 35. The transition from the introduction to growth phase of the industry life cycle features: [See p.209] a. Increasing product differentiation b. Declining innovation c. Offshoring of production *d. Product innovation giving way to process innovation 36. A dominant design is best described as: [See p.208] a. A technical standard b. The product design chosen by the leading firm in an industry *c. A common product architecture d. The culmination of the process of commodification that accompanies industry evolution 37. Which statement best described the extent to which different industries conform to the same life cycle pattern? [See p.211] *a. The duration of the life cycle varies from industry to industry b. The same stages exist whatever the industry c. All industries have experienced a shortening of the stages of their life cycle d. Different go through a renewal of their fife cycle at different stages of their development 38. A technical standard tends to emerge in an industry if: [See p.208] a. Economies of scale are present b. The industry has converged around a dominant design c. The industry is subject to economies of learning *d. Network effects exist 39. Industries change mainly as a result of: [See p.207] a. Government policies. *b. The death of existing firms and the birth of new firms. c. Continuous adaptation by a constant population of firms. d. Changing customer preferences. 40. “Shakeout”—a period when many firms exit from an industry following a period of intense competition— characterizes an industry’s transition from: [See p.213] a. Introduction to growth stage. *b. From growth to maturity. c. From maturity to decline. d. From product innovation to process innovation. 41. With the onset of the maturity stage, the number of firms in most industries: [See p.212] a. Remains stable *b. Decreases significantly, then stabilizes c. Rises d. Rises sharply until shake-out is triggered 42. The term “competency trap”, refers to: [See p.216] a. The hubris that affects the senior managers of successful firms. b. The tendency for firms with competitive advantage based in one industry to fail when they diversify into a new industry. *c The tendency for capabilities based on highly developed organizational routines to be a source of inflexibility. d. The tendency for managers to be reluctant to change the strategies that brought them their initial success. 43. According to institutional sociologists, the propensity for organizations to adopt similar structures (“institutional isomorphism”) is primarily a result of [See p.216] a. Common key success factors within an industry. b. Bounded rationality. c. The complementarity among different managerial practices within firms’ “activity systems”. *d. The propensity of firms to imitate one another in order to gain legitimacy. 44. An organizational routine is: [See p.216] *a. A stable, repeatable, pattern of coordinated activity among organizational members b. A lower-level, operational capability, as opposed to a dynamic capability which tends not to be routinized c. The resource needed to create a new capability d. A new capability after it has been institutionalized within an organization 45. The field of “organizational ecology” studies: [See p.218] a. Companies’ contributions to environmental sustainability. *b. Changes in the evolution of the population of firms in an industry. c. The process of competition between different types of firm. d. Management practices that promote the evolutionary adaptation of firms. 46. Which of the following is not a source of organizational inertia? [See p.216] a. The tendency for organizations to limit themselves to local search b. Organizational routines c. Complementarities between the different activities of a firm *d. The hierarchical structure of organizational capabilities where dynamic capabilities reside at a higher level than operational capabilities 47. When an industry is subject to technological change, the ability of new entrants to displace incumbent firms will be increased if: [See pp.220-221] *a. The technological change represents an architectural innovation rather than component innovation. b. The technological change is competence enhancing rather than competence destroying. c. Incumbent firms are insufficiently attentive to the industry’s largest customers. d. Incumbent firms are geographically dispersed. 48. The reluctance of shipping companies to switch from sail to steam propulsion can be attributed to the fact that: [See p.224 a. The owners of shipping company were resistant to new technology *b. For several decades after the introduction of steam ships, sailing ships were faster, cheaper, and more reliable c. Complementary resources such as engineers and coaling stations were scarce d. Shipping company owners were over the environmental impact of coal burning ships 49. When a company places its new businesses or new products into separate organizational units from its established business activities, this is an example of: [See pp.222-223] a. Contextual ambidexterity *b. Structural ambidexterity c. Both contextual and structural ambidexterity d. Effective change management 50. The main reason why a firm’s distinctive capabilities reflect the conditions that the firm faced during the early years of its development is because: [See pp.225-226] a. Most managers adhere to the old adage: “If it ain’t broke, don’t fix it” *b. Capabilities that develop early become embedded in a firm’s organizational culture c. Exploitation tends to dominate exploration d. Managers’ bounded rationality 51. Organizational structure needs to take account of the capabilities that a company possesses (or wishes to develop) because: [See p.228] a. The managers who are responsible for a capability need to be the heads of organizational units *b. Coordination among the people engaged in performing the capability is facilitated if they are located within the same organizational unit c. The lack of a separate organizational unit will make it more difficult for organizational learning to be retained d. The managers which head different organizational capabilities need to have clear lines of reporting 52. IBM, 3M, and General Electric are companies that demonstrate, over periods of several decades, the capacity to adapt to multiple changes in their external environment. These companies are characterized by: [See p.229] a. Dynamic, entrepreneurial CEOs b. Corporate cultures that value and celebrate risk taking *c. Business processes that sense and seize opportunities d. Embracing diversity 53. The problem for companies which reject conventional management principles and adopt radically new management systems and organizational forms is that: [See p.231] a. Lack of legitimacy hurts their stock market valuations. b. Employees tend to be conservative and prefer the security of traditional modes of management. *c. Most attempts at radical transformation fail. d. Innovations in management conflict with prevailing systems of financial reporting and human resource management. 54. The capabilities of “craft enterprises” are based upon the tacit knowledge of skilled employees. The capabilities of “industrial enterprises” are based upon systematized knowledge located within processes. The key advantage of industrial enterprises over craft enterprises is that: [See p.231-232] *a. They can replicate their capabilities at low cost in multiple locations. b. They are less vulnerable to shortages of skilled workers. c. They can standardize their offerings. d. They can automate their production. CHAPTER 9 23. The 1949 quotation that “computers in the future may…weigh only 1.5 tons” indicates: [See p.241] a. Engineers are generally very poor at forecasting. *b. It is difficult to forecast the development of technology more than a few years ahead. c. The lack of communication among technologists—the transistor had been invented in 1947. d. The acceleration of technological change during the second half of the 20th century. 24. The difference between invention and innovation is: [See p.243] a. Invention requires an inventor, innovation requires no individual person. b. You must innovate before you invent. *c. Invention is the creation of a new device or process, innovation is its commercialization. d. An invention can be patented and hence earn royalties. 25. Which of the following statements about the relationship between innovation and invention are correct? [See p.243] *a. Invention is often the result of an individual’s efforts; innovation typically involves business organizations. b. Intellectual property law offers greater protection to innovation than to invention. c. Complementary resources are more important in supporting invention than in supporting innovation. d. Invention requires genius, innovation requires practical insight. 26. During recent years, the cycle of innovation (from initial knowledge generation to final diffusion) has: [See p.244] *a. Got faster b. Got slower c. Become more global d. Become more uncertain 27. An innovator’s ability to derive profit from an innovation depends primarily upon: [See pp.244-245] *a. Factors that prevent would-be competitors from imitating the innovation. b. The strength of the patents that protect the innovation. c. The innovator’s ability to manufacture and market the innovation. d. The innovator’s financial resources. 28. An innovator may fail to earn any significant returns from an innovation if: [See pp.244-248] a. The innovation fails to create value for users. b. The innovator is unable to appropriate the value the innovation creates. c. Both (a) and (b) are present. *d. If either (a) or (c) is present. 29. The personal computer created a huge amount of value for users. The companies that profited most from the personal computer were: [See p.245] a. The innovators b. The followers *c. The suppliers d. None of the above 30. The following industry offers a strong regime of appropriability for innovators: [See pp.245-246] a. Financial services. b. Processed food products. *c. Pharmaceuticals. d. Handheld mobile devices. 31. The intellectual property of a firm comprises: [See p.246] a. Copyright and patents b. Patents, trademarks, copyrights, trade secrets, and goodwill c. The total of its intangible assets *d. Patents, trademarks, copyrights, and trade secrets 32. The main factor that determines the relative effectiveness of the different instruments used to protect property rights depends on: [See p.249 a. The legal system of the country in which the firm resides b. The effectiveness of the firm’s lawyers c. How much competition the firm faces *d. The characteristics of the innovation that is being protected 33. The distinction between codifiable and tacit knowledge is important in relation to property rights protection because: [See p.247] a. Both types of knowledge are present in innovations b. Patents must be written clearly and in an accurate way, so that they only contain codifiable knowledge c. If an innovation is not described and embedded in a written form, it cannot be effectively protected *d. In the absence of legal protection, the extent to which an innovation can be imitated depends on the ease with which the technology can be comprehended and communicated 34. Lead-time refers to: [See p.247] a. The period of time during which a firm is the leader of an industry b. The period of time during which a firm has discovered the largest number of innovations *c. The time it takes followers to catch up d. None of the above 35. A company may seek to patent an invention even if it has no intentions of commercializing it. Which of the following is not an important reason for such strategic patenting? [See pp.249-250] a. To block competitors’ opportunities for innovation b. To generate licensing revenue c. To increase the company’s bargaining power when negotiating cross-licensing deals with other companies *d. To increase the reputation of company’s R&D department 36. An innovation’s complexity impacts: [See p.247] *a. The ease with which it can be copied b. The resources needed to formalize it and to establish a patent to protect it c. The rate of diffusion of the innovation, and its acceptance by customers d. The probability for a firm to innovate 37. If technological breakthroughs increase the feasibility and attractiveness of fuel cells as a means of propulsion for vehicles, the profits that can be earned from the developers of the fuel cell technology will be limited by: [See p.248] a. The greater environmental attractiveness of battery-powered electric vehicles *b. The dependence of fuel cell technology on specialized investments by auto makers in designing new cars and fuel suppliers in supplying hydrogen refueling facilities c. The likely ineffectiveness of patents relating to fuel cells d. Lack of interest in vehicle owners in fuel cell technology 38. Patents protect innovation better than any mechanism. [See p.249] a. A century of evidence shows this is true b. No one can confirm or disprove this statement c. The evidence is mixed *d. Evidence shows that in most industries this is not true 39. Which of the following factors does not contribute to the attractiveness of licensing provides as a means of exploiting an innovation: [See pp.250-251] *a. The innovating firm possesses most of the complementary resources needed to exploit the innovation b. Patent are strong c. The potential for the innovation to enhance the performance of existing products has been clearly demonstrated d. The innovation has potential applications is several different industries 40. Comparing the development of xerography and the jet engines to satellite-based global positioning (GPS) and MP3 music players illustrates that: [See pp.243-244] a. Invention always precedes innovation b. Financial resources are critical to introduce successful innovations *c. The innovation cycle has speeded up over time d. Digital technology has fundamentally changed the nature of innovation 41. Monsanto’s NutraSweet artificial sweetener, Pfizer’s Viagra, and Pilkington’s float glass process are innovations that are examples of: [See p.246-249] a. Weak regimes of appropriability because the innovations could not be patented *b. Strong regimes of appropriability because of the effectiveness of patent protection c. Strong regimes of appropriability because the innovators possessed strong complementary resources d. Network externalities leading to a winner-take-all market 42. A firm has an innovation that has weak patent protection but its exploitation requires a number of complementary resources that it does not possess. Its best mode of exploiting the innovation is likely ot be: [See pp.250-251] a. Licensing. *b. Joint venture. c. Internal commercialization. d. Acquiring a company that does possess the required complementary resources. 43. The choice of being a leader or a follower in innovation should depend on: [See pp.252-253] a. The extent of legal protection of the innovation, the nature of the knowledge involved, and the potential to establish a standard b. The development cost of the innovation, the importance of complementary resources, and the profitability of the industry in which the innovation is to be applied *c. The extent of protection of the innovation, the potential to establish a standard, and the importance of complementary resources d. The potential to establish a standard, the relative powers of the other players in the industry, and the development cost of the innovation 44. When entering a new product market with an innovative product, an established company should select the optimal time of entry based upon: [See pp.252-253] a. The principle that early-mover advantage is the key to success in new markets b. Recognition that risk is reduced by waiting to see how technology and customer requirements will shape the emerging industry *c. Trading off early mover advantages against the benefits of waiting to the point when an established firm’s resources and capabilities can maximize their effectiveness d. The potential to exploit network externalities in order to establish a dominant standard 45. When reliable forecasting is not available, risk can be managing implemented through: [See pp.254-255] a. Alertness b. Responsiveness c. Avoiding large scale commitment *d. All of these 46. Cooperation with lead users is a useful tool of innovation management because: [See pp’254-255] a. Lead users set the trend for the mass market b. Due to their price insensitivity, lead users tend to be the most profitable customers *c. Lead users provide both information feedback and revenues that can assist ongoing product development d. Because lead users are so discerning, they have a key role in providing both discipline and incentives 47. In digital markets, once a company is losing a standards war, its best strategy may be: [See pp.259-261] a. Exit before it loses even more money b. Apply additional resources ot courting supporters *c. Go open source d. Seek alliances 48. Standards are important in an industry because: [See pp.259-260] *a. They allow interoperability and industry growth, and are linked with network externalities b. They are established by the dominant player in the industry c. They are imposed by the government and have the force of law behind them d. High-tech industries are the only industries that cannot effectively function without standards 49. Cooperation with lead users is a useful tool of innovation management because: [See pp.254-255] a. Lead users set the trend for the mass market b. Due to their price insensitivity, lead users tend to be the most profitable customers c. Lead users provide both information feedback and revenues that can assist ongoing product development *d. Because lead users are so discerning, they have a key role in providing both discipline and incentives 50. The principal difference between public and private standards is: [See pp.255-256] a. Standards set by public firms vs. standards established by privately-owned companies b. Standards established by governments vs. standards set by companies *c. Standards available for all organizations and industry players vs. standards owned by firms or individuals d. Free standards vs. standards users have to pay for 51. It may be preferable for government to intervene to impose a public standard rather than let a private, de facto standard be determined through competition because: [See p.256] a. Governments are superior to markets in selecting the best technology *b. A private, de facto standard can take a long time to become established, thereby delaying the adoption of a new technology c. Competition is always wasteful d. De facto standards tend to be set by US companies 52. “Network externalities” refer to: [See p.257] a. The benefits that firms derive from using social networks (such as Facebook and Google+) in their marketing *b. The value that the user of a product derives from the number of other users of the same product c. The costs and benefits that are borne by or received by society as a result of the actions of a business enterprise d. The consequences of platform-based competition 53. Network externalities in smartphones arise primarily from: [See pp.261-262] a. Direct user-to-user externalities *b. The availability of complementary products c. The popularity of the Apple iPhone d. Google’s decision to make its android operating system open source 54. When network externalities are available in a market, the typical outcome is: [See p.257] *a. A winner-take-all market b. Monopolistic abuse requiring antitrust intervention c. More rapid technological innovation d. Lack of consumer choice 55. In video cassette recorders (VCRs), Matsushita’s VHS format won against Sony’s Betamax format because: [See p.260] a. VHS was technically superior to Betamax b. VHS VCRs were cheaper than Betamax VCRs *c. Matsushita’s licensing of its VHS format to other manufacturers of VCRs led to its gaining a lead in market share d. Sony entered the market too early 56. The market share leadership in smartphone operating systems possessed by Google’s Android operating system reveals: [See pp.260-261] a. It’s generally better to be a follower than a first mover. b. In digital markets where network externalities are present, Google’s huge user base typically gives it a huge advantage over rivals. *c. Where network externalities are present, an open source strategy can often be effective in undermining a competitor’s market share lead. d. Strength in complementary resources and capabilities can allow a strong company to overcome the initial lead of an early innovator. 57. “Creative abrasion” can facilitate product development through: [See p.263] *a. Creating a work environment of aggressive individualism b. Providing strong financial i9ncnetives for individual creativity c. Establishing a professional setting in which development teams abandon social conventions of respect and mutual support in order to critique their current efforts d. Subjecting technologists and engineers to criticism from rank-and-file employees 58. Cross functional product development teams, product champions, and incubators are organizational devices used: [See p.266-268] a. By top managers to control the technological development of their firms *b. To reconcile the conflicting requirements of operations and innovation c. To build new organizational structures, inspired by innovation in high-tech industries d. To reconcile coordination and specialization needs CHAPTER 11 21. The opening quotation concerning Bath Fitter illustrates the following benefits of vertical integration: [See p.291] a. Technical economies from the physical integration of processes. *b. Avoiding the transactions costs involved monitoring and enforcing contracts with external suppliers. c. Economies of scale. d. None of the above. 22. The opening quotation from Tom Peters states that as “yesterday’s highly integrated giants” de-integrate, their vertical relationships are taking the form of: [See p.291] a. Market contracts. b. Long-term contracts. *c. Alliances and partnerships. d. All of the above. 23. Corporate strategy decisions are concerned with: [See p.292] a. Establishing competitive advantage *b. The scope of the firm’s activities c. The geographical boundaries of the firm d. Diversification and vertical integration 24. The corporate scope of Walt Disney Company may be described as follows: [See p.292] a. A broad product and geographical scope, but narrow vertical scope. b. A broad product and vertical scope, but a narrow geographical scope. c. A broad vertical and geographical scope but narrow product scope. *d. A broad product, geographical and vertical scope. 25. The main business of the Coca-Cola Company is manufacturing, marketing and distributing concentrate for soda drinks to bottlers in over 200 countries of the world. The corporate scope of the Coca-Cola Company is best described as: [See p.292] a. A broad product, geographical, and vertical scope. b. A broad product and vertical scope, and a narrow geographical scope. *c. A broad geographical scope and narrow product and vertical scope. d. A broad product and geographical scope and narrow vertical scope. 26. The capitalist economy comprises two forms of economic organization, the market mechanism operated by prices and the administrative mechanism of firms. [See p.293] a. The market mechanism is referred to as the “visible hand” while the administrative mechanism of firms is referred to as the “invisible hand”. *b. The market mechanism is referred to as the “invisible hand” while the administrative mechanism of firms is referred to as the “visible hand”. c. The simultaneous operation of both “hands” means that the capitalist system is often referred to as an “ambidextrous organization”. d. The notion of the capitalist economy as governed by market processes is a myth. In reality the global capitalist economy is controlled by large corporations. 27. The vertical scope of a firm relates to: [See p.293] *a. The extent to which a firm owns adjacent stages of the industry value chain. b. The proportion of the firm’s inputs that are produced in-house. c. The size of the firm’s value added. d. The number of hierarchical layers of the firm’s management structure. 28. The growth in the scope of business enterprises for most of the 19th and 20th centuries can be attributed to a drop in administrative costs of firms relative to the transaction costs of market. This resulted from: [See p.293] a. The monopolistic power of large firms to raise prices and push down wages b. Globalization c. The growing transaction costs of markets as a result of taxes, regulation, and litigation *d. Innovation in information and communications technology and in management 29. The main cause of downsizing, refocusing, and outsourcing during the latter part of the 20th century was: [See p.295] a. Developments in IT—especially the advent of the internet. b. A greater turbulence in the environment. *c. Both (a) and (b). d. Neither (a) nor (b). 30. Vertical integration by industrial firms during the major part of the 20th century was motivated primarily by firms’ desire for: [See p.298 a. Reducing costs b. Securing scare inputs *c. Reducing risk and improving coordination d. Increasing speed 31. Which of the following factors is not conducive to vertical integration between two adjacent stages of production? [See p.303] a. Similarity of the optimum scale of production between the two stages b. Few companies at each of the two stages c. Stability in the technologies used at each stage *d. Different organizational capabilities are required at each stage 32. Which of the following factors has not contributed to the trend towards outsourcing in recent decades? [See p.295] a. The advent of the internet *b. Increasing emphasis of the need for speed c. Increasing turbulence of the business environment d. Increasing emphases on the need for competitive advantage based upon superior capabilities 33. Vertical integration is: [See p.295] *a. A firm’s ownership of vertically related activities b. A firm’s control over its input sources and the distribution of its output c. A firm establishing close relationships with its suppliers and its buyers d. A firm’s acquisition of a supplier or one of its buyers 34. When a winery opens a tasting room through which it sells its wine to visitors, this represents: [See p.295] a. Backward integration *b. Forward integration c. Partial integration d. Diversification 35. The reason that the producers of wood pulp have often forward integrated into the production of paper is: [See p.297] a. To increase value added by moving closer to the final customer. *b. To exploit technical economies of co-locating pulp and paper making plants while avoiding transaction costs caused by transaction-specific investments. c. To be able to respond quicker to demand fluctuations because of superior coordination. d. To insulate the firm from fluctuations in the price of wood pulp. 36. The reason that most food processing firms do not backward integrate into farming is that: [See pp.297-300] a. Most food products are supplier through competitive markets where transaction costs are low b. Farming and food processing are strategically dissimilar businesses *c. Both of these d. Neither of these 37. Which of the following factors is not an explanation for the lack of vertical integration between steel producers and shipbuilders? [See p.301-305] a. The market for steel has many suppliers and buyers, good information flows, and little need for transaction- specific investments b. Steel is a commodity product available in standardized grades *c. The world’s biggest shipbuilding countries (South Korea, Japan, and China) are also among the leading steel producing countries d. Steel production and shipbuilding are strategically very different industries 38. In order for a manufacturer of consumer goods to maximize responsiveness to changes in consumer demand for its products: [See pp.300-301] a. It is best to outsource the production of components and materials. b. It is best to be backward integrated into the production of components and materials. *c. It depends upon the type of flexibility that is desired. d. It is best to be partially backward integrated. 39. Starbucks owns and operates most of its retail outlets; McDonalds franchises most of its retail outlets. An advantage of franchising over vertical integration is: [See p.305] a. Franchising permits superior coordination of retail activities with upstream activities. *b. Franchising subjects the operators of retail outlets being subject to “high-powered” incentives. c. Franchising permits more effective quality control of the retail outlet. d. Franchising is always more profitable than vertical integration because the franchisor does not bear the costs of owning the retail outlets and paying their staff. 40. Vendor partnerships based on relational contacts—such as the relationships between Toyota and its major component suppliers—are more successful than either pure market contracts or vertical integration because: [See p.304] a. They give the buyer immense bargaining power over its suppliers. b. They offer similar benefits of high-powered incentives and flexibility that market contracts. c. They offer similar coordination benefits as vertical integration. *d. They combine the coordination benefits of vertical integration with the incentive and flexibility benefits of market contracts. 41. The main lesson to be drawn from the delays to the launch of Boeing’s 787 Dreamliner is that, when developing complex products that embody diverse new technologies: [See pp.304-307] a. It is best to do it in-house without heavy reliance on external suppliers. b. Extensive outsourcing is inevitable as no single company has sufficient technological capabilities in-house. *c. The principal firm must possess well-developed integration capabilities. d. A competitor such as Airbus Industrie which began as an alliance among a number of separate companies will always have an advantage. 42. Vertical integration by Zara, the main division and brand of the Spanish clothing firm Inditex, illustrates: [See pp.300-301] a. The potential of vertical integration to offer flexibility in responding to seasonal fluctuations in demand. *b. The potential for vertical integration to offer flexibility in responding to rapid changes in customer product preferences. c. The potential for vertical integration to overcome problems arising from the need for transaction-specific investments by garment manufacturers. d. The potential for vertical integration to exploit technical economies from co-locating adjacent processes. CHAPTER 12 25. Uber’s distribution of ice cream in over 38 counties of the world on July 17, 2014, exemplifies the following feature of international business: [See p.311] a. The demand for ice cream is global b. U.S companies have mastered international expansion more effectively than those from any other country *c. The pace of transition from being a domestic to a global competitor is much faster in ecommerce than in traditional business sectors d. Once a company has built a network, that network can be used to distribute a wider range of offerings 26. Firms internationalize through two mechanisms: [See p.313] a. Exports and imports. b. Trade in goods (visible trade) and trade in services (invisible trade). c. Direct and indirect investment. *d. Trade and direct investment. 27. Global industries are those where: [See p.313] a. International trade (imports and exports) are high in relation to industry sales b. Technology transfers are high c. Foreign direct investment is high *d. Both trade and direct investment are high 28. With internationalization, the threat of new entry into domestic industries is increases because: [See p.314] a. Customer preferences for imported products b. The World Trade Organization (WTO) prevents governments protecting their domestic industries through subsidies and import restrictions *c. Barriers to entry that would deter domestic firms may be easily overcome by large firms from other countries d. Foreign-based, state-owned enterprises are not deterred by losses earned in overseas markets 29. Which aspect of internationalization by companies does not increase the intensity of competition within national markets? [See p.318] a. Internationalization increases the diversity of firms competing in each national market b. Internationalization increases the number of firms in each national market *c Internationalization stimulates mergers and acquisitions within an industry d. Internationalization increases investment in new capacity 30. The theory of comparative advantage is concerned with