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Test Bank for Strategic Management, 6th Edition by Frank Rothaermel
Test Bank for Strategic Management, 6th Edition by Frank Rothaermel
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Test Bank forStrategic Management 6th Edition Rothaermel Frank
ISBN 9781265954574
Chapter 1-12 Answers are at the End of Each Chapter
Chapter 1
Student name:__________
1) A good strategy allows a firm to achieve superior performance and sustainable competitive
advantage without regard to the external environment.
⊚ true
⊚ false
2) The following statement by the chief executive of MegaFilms movie studio should not be
used as a strategy: “We will produce the greatest films of the 21st century.”
⊚ true
⊚ false
3) The three tasks of the AFI strategy framework are to Assemble a prototype, Find a buyer, and
Incorporate feedback.
⊚ true
⊚ false
4) Questions asked during the strategy analysis stage of the AFI framework should include
“What effects do forces in the external environment have on the firm’s potential to gain and
sustain a competitive advantage?”
⊚ true
⊚ false
,5) Once a strategy has been formulated and implemented, it is important that the firm sticks to it
no matter what happens.
⊚ true
⊚ false
6) Because they are a crucial component of a firm’s success, customers are considered internal
stakeholders.
⊚ true
⊚ false
7) A firm is required by society and its shareholders to meet its ethical and philanthropic
responsibilities.
⊚ true
⊚ false
8) Stakeholder impact analysis provides a decision tool that helps strategic leaders recognize the
needs of different stakeholders.
⊚ true
⊚ false
9) Juan wants to open his own hot dog restaurant but doesn’t know anything about business. He
needs help determining who his competition is, how he should craft his strategy to compete
and how he’ll implement his strategy to achieve a competitive advantage. He’s hired you to
help him get started. As a result, you will probably use which of the following?
A) AFI strategy framework
B) Red Queen effect
C) competitive benchmarking
D) Stakeholder Impact analysis
,10) Roberta is interested in the concept of strategy and decides to create her own. As a result,
Roberta says that her strategy is to focus on competitive benchmarking to achieve
competitive advantage. Which is the best evaluation of Roberta’s statement?
A) Roberta’s strategy is clear, but she should provide more detail.
B) Roberta’s strategy reveals a clear strategic position and tradeoff, so she should
proceed.
C) Roberta should reevaluate her statement because it fails to mention more than one
strategy.
D) Roberta should reevaluate her statement because it fails to meet the principles of what
a strategy should be.
11) Tony’s Pizza Shop is able to net $10,000 a week; this makes the shop profitable. Its number
one competitor, Leo’s Pies, is also profitable, netting $12,000 a week. Lil Anthony’s Pizza
Palace nets $13,000 a week. Since Tony’s Pizza Shop is profitable, we can conclude that it
has a competitive advantage in its industry.
A) True—competitive advantage is achieved through profitability alone.
B) True—competitive advantage is achieved since Tony has a positive net income.
C) False—competitive advantage is only achieved by generating above average returns,
relative to competition.
D) False—Tony more than likely has a sustained competitive advantage since he’s been
in business longer.
12) Bill’s Auto & Airplane Repair shop is able to generate a positive net income of $10,000 a
week, which is about the same as the income of a close competitor. As a result, we can
conclude that the two businesses also have a competitive parity in the industry.
A) Correct—competitive advantage is achieved through profitability alone.
B) Correct—competitive advantage is achieved since Bill’s Auto & Airplane Repair shop
has a positive net income.
C) Correct—competitive parity is a performance of two or more firms at the same level.
D) Incorrect—Bill’s Auto & Airplane Repair shop more than likely has a sustained
competitive advantage because the business is diversified.
,13) To better achieve a competitive advantage, firms must now adopt a holistic approach towards
satisfying multiple stakeholders opposed to focusing on the needs of their shareholders. What
term is used for this approach?
A) stakeholder strategy
B) internal shareholder strategy
C) value creation strategy
D) shareholder relationship strategy
14) All of the following are external stakeholders except which of the following?
A) customers
B) creditors
C) alliance partners
D) competitors
15) John is a bit confused about the difference between stakeholders and stockholders. You meet
with John and inform him that the main difference is that
A) stakeholders are both internal and external to the firm while stockholders are
considered external to the firm.
B) stakeholders are considered internal to the firm while stockholders are external to the
firm.
C) stakeholders can be both internal and external while stockholders own shares of a
firm and are classified as internal to the firm.
D) stakeholders are external to the firm while stockholders are considered internal to the
firm.
16) Which of the following three important stakeholder attributes should managers pay special
close attention to in order to better understand stakeholder impact analysis?
A) competitive advantage, economic value, and time
B) power, legitimacy, and urgency
C) grace under pressure, financial control, and reward power
D) shareholder rights plan, board representation and CEO influence
,17) Most consumers and investors today want the firms they do business with to look beyond just
the profit motive. In fact, they want firms that behave legally and ethically while also giving
back to their communities via philanthropic activities. The framework that attempts to
reconcile these wants is known as
A) corporate social responsibility.
B) stakeholder impact analysis.
C) business model analysis.
D) value chain driven decision making.
18) Which of the following terms describes the guiding policy to address the competitive
challenge, and uses corporate- and business-level strategy?
A) analysis
B) formulation
C) implementation
D) competitive advantage
19) In strategic management, strategists engage in three pillars. These three pillars include
the________ of major goals and objectives.
A) implementation
B) presentation
C) objectification
D) unification
20) Which of the following tasks in the AFI strategy framework involves evaluating the internal
and external environments in which a firm operates?
A) analysis
B) formulation
C) implementation
D) competitive advantage
21) The goal of a good strategy is focused primarily on
A) creating superior value while containing costs.
B) making as much money as possible.
C) employing lean manufacturing and Six Sigma.
D) encouraging investors to buy more shares of the firm.
,22) For a corporate strategy, which question is often asked?
A) How do strategic leaders help shape a firm’s vision, mission, and values?
B) How should the firm compete: cost leadership, differentiation, or value innovation?
C) How do we create shared value?
D) Where should the firm compete in terms of industry, markets, and geography?
23) A successful strategy details a set of goal-directed actions that managers make to gain and
sustain a competitive advantage; in order to create this strategy, managers must focus on
three pillars. Which of the following below is not one of these pillars?
A) formulation
B) execution
C) implementation
D) analysis
24) The________ effect involves studying and copying the competition, which results in
unsuccessful efforts to gain a competitive advantage.
A) Mad Hatter
B) Black Swan
C) Red Queen
D) Wizard of Oz
25) Lawrence decided to copy the competition to gain a competitive advantage for his company.
After a year, he realized his company failed to gain such an advantage. Lawrence most likely
failed because of the________ effect.
A) Green Pawn
B) grandiose
C) globalization
D) Red Queen
26) Hewlett-Packard was not able to address the competitive challenges of cloud and mobile
computing. The company therefore destroyed shareholder value by failing to create
A) a strong infrastructure.
B) value for society.
C) a need for printers.
D) foreign contacts.
,27) Sean, a retired CEO, invests capital in a start-up company that creates budgeting software.
He mentors the entrepreneur and the employees of the company because he wants the
company to perform well and survive in the market. Thus, Sean is the start-up company’s
A) headhunter.
B) category captain.
C) employee.
D) stakeholder.
28) Green and Good Inc., a multinational company, relies on its media partner OmniSignal to
regularly advertise its offers, sales, and new products. OmniSignal is invested in this
relationship because it generates most of its revenue from advertising Green and Good’s
products. In this scenario, OmniSignal is Green and Good Inc.’s
A) stockholder.
B) workforce.
C) internal stakeholder.
D) external stakeholder.
29) Louise owns a large portion of Sturdy Appliance’s stock. However, she is not employed by
the company. In this scenario, Louise is the company’s
A) external stakeholder.
B) internal stakeholder.
C) creditor.
D) customer.
30) Contour Inc., a vendor, regularly supplies capacitors to All Purpose Electronics for use in its
products. Therefore, Contour Inc. is All Purpose Electronics’
A) internal stakeholder.
B) director.
C) shareholder.
D) external stakeholder.
,31) Which of the following best qualifies as a firm’s internal stakeholder?
A) an auditor assigned to the firm by a federal government agency
B) a labor union with whom the firm’s employees can affiliate
C) a manager taking care of the firm’s operations in a foreign market
D) a competitor manufacturing the same products as that of the firm
32) The best example of a firm’s external stakeholder is a(n)
A) government agency that regulates the prices of products manufactured by the firm.
B) board member from a wholly-owned foreign subsidiary of the firm.
C) shareholder who has invested money in the firm but is not employed by the firm.
D) employee of the firm who is responsible for a contract project.
33) The interaction between a firm and its diverse internal and external stakeholders is best
described as a(n)
A) ergonomic relationship.
B) cartel arrangement.
C) exchange relationship.
D) fiduciary responsibility.
34) Dimitre Corp. has been able to gain and sustain a competitive advantage due to its strong
relationship with its employees, customers, suppliers, and local communities. The company
believes in lifetime employment and ensures that its employees grow along with the
company. Investors are more than satisfied with the returns on their investments. Also, 3
percent of the company’s profit is spent on community development. With initiatives like
these, customers feel privileged to associate themselves with Dimitre products. This scenario
best illustrates the implementation of a
A) strategic analysis.
B) stakeholder strategy.
C) wild card event.
D) black swan event.
,35) Which of the following scenarios best illustrates a good stakeholder strategy?
A) ASI Inc. follows a strategy in which maximization of the shareholder’s wealth is the
primary concern of the managers.
B) Ben’s Buttons Inc. ensures that its employees are paid the least in the industry so that
its external stakeholders can get the best price.
C) Nowadays Corp. distributes only 40 percent of its annual profit after taxes to
shareholders, while the remaining is invested for further research and distributed
among employees and the local community.
D) Knights for Lights Corp. ensures that it fully exploits free natural resources, so that
most of its profits go to shareholders in the form of dividends.
36) Better Capsules is a highly successful vitamin manufacturer. At the close of its most recent
fiscal year, the company’s balance sheet showed cash holdings of $110 million. Which of the
following actions will provide the most benefit for stakeholders?
A) Reinvest profits into expanding the company and creating more jobs.
B) Reward the CEO with a significant bonus payment.
C) Save the excess cash as a precaution against black swan events.
D) Buy out the leading competitor to reduce competition and maintain price stability.
37) The first step in stakeholder impact analysis involves which of the following?
A) identifying the social responsibilities to stakeholders
B) identifying the opportunities that stakeholders present
C) identifying the interests of the stakeholders
D) identifying who the stakeholders are
38) After a firm has recognized its key stakeholders in stakeholder impact analysis, the
immediate next step is to
A) recognize the opportunities and threats the stakeholders present.
B) identify stakeholders’ interests and claims.
C) formulate a stakeholder strategy.
D) address the stakeholders’ concerns.
, 39) As the legal owners,________ have the most legitimate claim on a company’s profits.
A) creditors
B) employees
C) shareholders
D) board members
40) Which of the following is typically an economic responsibility of a firm?
A) sourcing raw materials from highly developed countries
B) paying adequate returns to the firm’s stockholders on the capital invested by them
C) donating resources, in terms of money and time, toward community development
D) helping a nation increase its import of goods and services
41) The minimum wage in the country of Hanns is $8 an hour. Delish, a restaurant in Hanns’
capital city, pays its servers $8 per hour. However, the management of the restaurant feels
that this amount is excessive for workers whose only job is to clear tables. By continuing to
adhere to the rules set by the government of Hanns, which of the following responsibilities is
Delish satisfying?
A) legal responsibilities
B) philanthropic responsibilities
C) ethical responsibilities
D) demographic responsibilities
42) The amount of polyethanal that can be used in household paint is legally limited to 0.03
percent. Anything beyond this amount is hazardous to health and the environment and is
considered a legal offense. Consequently, PrismPaints Corp. has vouched to make its
products as safe as possible. Therefore, it manufactures polyethanal-free paints even though
this increases its costs and reduces the dividends paid to its shareholders in the long run.
Which of the following responsibilities is Prism Paints Corp. primarily compromising in this
scenario?
A) legal responsibilities toward the government
B) economic responsibilities toward its shareholders
C) philanthropic responsibilities toward the local community
D) ethical responsibilities toward the society
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