Strategic Management Exam Questions With
Correct Answers
What is competitive advantage? - answer✔a firm that formulates and implements a strategy that leads
to superior performance relative to other competitors in the same industry or the industry average
What are the levels of strategy formulation? - answer✔corporate, business, functional
What is the difference between corporate and business strategies? - answer✔Corporate strategy is
formulated at headquarters and business strategy occurs within strategic business units
Mission statements - answer✔describes what the organization actually does --the products and services
it plans to provide and the markets in which it plans to compete
Strategy as planned emergence - answer✔describes any unplanned strategic initiative undertaken by
mid-level employees of their own volition
legal factors - answer✔outcomes of the political processes manifested in laws, mandates, regulations,
and court decisions
Industry - answer✔group of companies offering similar products or services
structure-conduct-performance (SCP) model - answer✔theoretical framework, developed in industrial-
organization economics, explains differences in industry performance; underlying industry structure
determines firm conduct
fragmented industry structures - answer✔small firms trying to generate low profitability
consolidated industry structures - answer✔dominated by a few firms which are highly profitable
Four main industry types - answer✔1) perfect competition
2) monopolistic competition
3) oligopoly
4) monopoly
Perfect competition - answer✔many small firms, commodity product, easy entry, little or no ability for a
firm to raise its prices
monopolistically competitive - answer✔many firms, differentiated product, some obstacles to entry,
basis for raising prices is pretty unique product while retaining customers
Oligopoly - answer✔"few sellers"; few (large) firms, differentiated products, high barriers to entry, some
degree of pricing power
- firms are interdependent
- analyzed using game theory
Monopoly - answer✔only one firm supplying the market; many barriers to entry, considerable pricing
power
the 5 forces model - answer✔1) threat of entry
2) power of suppliers
3) power of buyers
4) threat of substitutes
5) rivalry among existing competitors
Threat of entry - answer✔barriers/obstacles that determine how easily a firm can enter an industry
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