MGMT 425 Exam - Exam 1 practice questions

Which environmental development represents the clearest technological factor in a PESTEL analysis?

A. New privacy regulations that increase compliance requirements for household-data collection.
B. Growing customer expectations for AI-enabled security features and subscription-based monitoring.
C. Entry by large technology firms that bundle security products with broader digital ecosystems.
D. High software-engineer turnover that weakens NovaHome’s ability to develop and support new offerings.

B — Growing customer expectations for AI-enabled security features and subscription-based monitoring.

PESTEL → external macroenvironment

The entry of large technology firms most directly affects which Five Forces pressure?

A. Bargaining power of suppliers, because technology firms may gain leverage over components and software inputs.
B. Threat of new entrants, because additional firms are entering the smart-home security market with competing offerings.
C. Bargaining power of buyers, because customers may have more alternatives and become more selective about features.
D. Threat of substitutes, because bundled ecosystems may satisfy some security needs through a different product category.

B — Threat of new entrants. New firms entering an industry → Threat of New Entrants

Which statement best evaluates NovaHome’s patented sensor technology as a possible source of sustainable advantage?

A. The patents strengthen appropriability, so the sensor technology should be treated as sustainable unless a rival can legally copy the exact design.
B. The sensor technology can support sustainable advantage only if it creates value, is relatively rare, is difficult to imitate, and lacks strategically equivalent substitutes.
C. The patents may create temporary advantage, but hardware-based resources cannot support sustainable advantage when software features are becoming more important.
D. The sensor technology can support sustainable advantage only if NovaHome pairs it with a lower cost structure than every major competitor in the market.

B. The sensor technology can support sustainable advantage only if it creates value, is relatively rare, is difficult to imitate, and lacks strategically equivalent substitutes.

A valuable resource is not automatically a sustainable advantage.

Which response best represents a SWOT-based strategic response that matches NovaHome’s internal strengths and weaknesses with the external opportunities and threats described in the case?

A. Use NovaHome’s hardware expertise to expand the product line rapidly, while postponing organizational changes until demand for the new models becomes clearer.
B. Protect margins by concentrating investment on additional patented hardware and reducing spending on customer-service activities that do not directly create new products.
C. Leverage NovaHome’s patented sensors and hardware expertise while strengthening software capability and cross-functional knowledge sharing to address AI demand, new competitors, and privacy requirements.
D. Prioritize software hiring and subscription services while reducing investment in patented hardware so the company can move away from its historically hardware-based position.

C. Leverage NovaHome’s patented sensors and hardware expertise while strengthening software capability and cross-functional knowledge sharing to address AI demand, new competitors, and privacy requirements.

SWOT connects internal strengths/weaknesses with external opportunities/threats.

The loss of experienced senior consultants most directly reduces Meridian’s:

A. Organizational capital, because established implementation routines become less reliable when experienced employees depart.
B. Human capital, because valuable knowledge, judgment, and experience leave the firm with the departing consultants.
C. Social capital, because the departures may weaken relationships among employees and with important customers.
D. Technological capital, because fewer experienced consultants may reduce the firm’s ability to translate software features into customer solutions.

B — Human capital.
Person leaves → knowledge leaves with them → Human Capital

The breakdown in knowledge sharing between engineering teams most directly damages:

A. Social capital, because weakened relationships and information flows reduce the ability of teams to combine and leverage knowledge.
B. Human capital, because engineers may become less individually knowledgeable when they no longer receive information from another team.
C. Organizational capital, because formal systems and documented processes may become less useful when teams stop coordinating across boundaries.
D. Technological capital, because reduced collaboration can slow the development and improvement of the firm’s software platform.

A — Social capital.
Knowledge sharing/relationships → Social Capital

Competitors can see Meridian’s software features but still struggle to understand why Meridian historically achieved superior implementations. This is best described as:

A. Path dependence, because Meridian’s implementation capability may have accumulated gradually through years of experience and customer learning.
B. Causal ambiguity, because rivals can observe the outcome but cannot clearly identify the combination of factors that produces superior implementation.
C. Social complexity, because effective implementations may depend on relationships and coordination among consultants, engineers, and customers.
D. Physical uniqueness, because Meridian’s software platform may contain proprietary technical elements that competitors cannot readily obtain.

B — Causal ambiguity.
“They can see what, but not why.”

Which response best demonstrates a dynamic capability?

A. Accelerate the product roadmap so Meridian can match the competitor’s new features before customers begin evaluating alternative vendors.
B. Replace departing consultants quickly and standardize implementation around the routines that produced strong results in the past.
C. Reassess how customer needs and employee departures are changing Meridian’s advantage, mobilize resources around the most valuable capabilities, and redesign knowledge-sharing and implementation routines.
D. Reduce prices for major accounts while increasing service guarantees to discourage customers from switching during the period of employee turnover.

C. Reassess how customer needs and employee departures are changing Meridian’s advantage, mobilize resources around the most valuable capabilities, and redesign knowledge-sharing and implementation routines.

Sense → Seize → Transform

• Sense: Identify changes in customer needs and internal capabilities.

• Seize: Mobilize resources around the most valuable capabilities.

• Transform: Redesign routines and knowledge-sharing systems.

The departure of several senior consultants and the breakdown in knowledge sharing suggest that Meridian’s competitive advantage depends not only on individual human capital, but also on the relationships and routines that allow knowledge to be shared and applied across the firm.

True or False

True

Competitive advantage can depend on integrated intellectual capital, not just individual employees.

Based on HarborFit’s current activities and customer perceptions, which competitive position is the firm most clearly pursuing before the proposed changes?

A. A relatively efficient, convenience-oriented position that delivers reliable service without the extensive amenities associated with premium clubs.
B. A focused differentiation position built around highly customized fitness experiences for customers with specialized service needs.
C. A broad differentiation position based on offering customers more services and amenities than either low-cost gyms or boutique studios.
D. A pure cost-leadership position designed primarily to offer the lowest membership price available in each local market.

A. A relatively efficient, convenience-oriented position that delivers reliable service without the extensive amenities associated with premium clubs.

HarborFit is efficient + convenience-oriented, but not pure cost leadership.

The entry of low-cost gyms offering basic memberships well below HarborFit’s current price most directly intensifies which competitive force?

A. Supplier power, because low-cost competitors can obtain standardized fitness equipment at lower prices.
B. Buyer power, because customers now have additional alternatives and greater ability to compare price with the value HarborFit provides.
C. Threat of substitutes, because low-cost gyms satisfy fitness needs through products outside HarborFit’s industry.
D. Threat of new entrants, because existing low-cost gyms face fewer barriers to expanding their service offerings.

B — Buyer power.

More customer alternatives → greater buyer power.

Suppose management decides not to introduce concierge services and luxury locker rooms, even though some customers say they would value them. Which strategic principle best explains that decision?

A. Firms should avoid differentiation whenever it increases operating costs.
B. Strategic positioning sometimes requires deliberately declining attractive opportunities that would weaken the fit among a firm’s activities.
C. Firms pursuing efficiency should compete only against other firms with similar cost structures.
D. Strategic positioning requires firms to preserve their existing activities whenever competitors introduce different business models.

B. Strategic positioning sometimes requires deliberately declining attractive opportunities that would weaken the fit among a firm’s activities.

Strategy involves deciding what not to do.

What is the difference between a resource and a capability?

A. A resource is always tangible, while a capability is always intangible.
B. A resource is something a firm possesses; a capability is the firm’s ability to use resources in a coordinated way.
C. A capability is a physical asset, while a resource is an organizational routine.
D. There is no meaningful distinction between resources and capabilities.

B. A resource is something a firm possesses; a capability is the firm’s ability to use resources in a coordinated way.

Resource: Something the firm possesses.
Capability: What the firm is able to do using resources in a coordinated way.

What does PESTEL analyze?

A. Internal resources and capabilities
B. Industry-level competitive forces
C. The external macroenvironment
D. A firm’s activity-system fit

C — The external macroenvironment

PESTEL:

Political
Economic
Social
Technological
Environmental
Legal

What are Porter’s Five Forces?

A. Rivalry, innovation, quality, cost, and differentiation
B. Buyers, suppliers, employees, managers, and regulators
C. Rivalry, threat of new entrants, buyer power, supplier power, and threat of substitutes
D. Political, economic, social, technological, and legal forces

C. Rivalry, threat of new entrants, buyer power, supplier power, and threat of substitutes

What is the difference between a new entrant and a substitute?

A. A new entrant is a new product; a substitute is a new company.
B. A new entrant is a new firm entering the industry; a substitute is a different product/service satisfying a similar customer need.
C. Both describe exactly the same competitive force.
D. A substitute must always be cheaper than the existing product.

B. A new entrant is a new firm entering the industry; a substitute is a different product/service satisfying a similar customer need.

Example:
New smart-home security company = new entrant
Videogames competing for children's entertainment time = substitute

What is human capital?

A. Physical equipment owned by the company
B. Relationships between employees
C. Knowledge, skills, experience, judgment, and expertise possessed by individual employees
D. Formal organizational procedures

C. Knowledge, skills, experience, judgment, and expertise possessed by individual employees

Human capital = value of individual people’s knowledge and skills.

What is social capital?

A. The value created through relationships, communication, trust, networks, and information sharing
B. The knowledge held by individual employees
C. A company's physical technology infrastructure
D. Formal organizational policies

A. The value created through relationships, communication, trust, networks, and information sharing

Social capital = relationships + networks + information flows

What is organizational capital?

A. The skills possessed by individual employees
B. The systems, routines, processes, structures, decision rules, and organizational knowledge that help coordinate resources
C. The company's reputation with customers
D. Relationships between the firm and its suppliers

B. The systems, routines, processes, structures, decision rules, and organizational knowledge that help coordinate resources

Organizational capital = systems + routines + processes + organizational knowledge

What is causal ambiguity?

A. Competitors cannot legally copy a patented technology.
B. A firm's advantage is based primarily on its physical assets.
C. Competitors can observe superior performance but cannot determine exactly which combination of resources and capabilities causes it.
D. A firm's advantage developed gradually through historical experience.

C. Competitors can observe superior performance but cannot determine exactly which combination of resources and capabilities causes it.

Competitors can see what the firm achieves, but not why it achieves it.

What is path dependence?

A. The idea that a firm's capabilities are shaped by its historical development and accumulated experience over time
B. The inability of competitors to determine why a firm succeeds
C. The value created by employee relationships
D. A firm's dependence on a single supplier

A. The idea that a firm's capabilities are shaped by its historical development and accumulated experience over time
Path dependence = history matters.

What is social complexity?

A. An advantage based only on a patented physical technology
B. An advantage that depends on complicated relationships and interactions among people, teams, customers, or stakeholders
C. An advantage created by producing at very high volume
D. An advantage caused by having the lowest costs

B. An advantage that depends on complicated relationships and interactions among people, teams, customers, or stakeholders

Social complexity makes capabilities harder to imitate because competitors cannot easily reproduce the relationships and interactions behind them.

What is activity-system fit?

A. Offering the largest possible number of products
B. Choosing the lowest-cost supplier for every activity
C. Ensuring a firm's activities reinforce one another and support its competitive position
D. Making every activity completely independent

C. Ensuring a firm's activities reinforce one another and support its competitive position

Activity-system fit occurs when activities reinforce one another.

Why are strategic trade-offs important?

A. Firms should pursue every profitable opportunity available.
B. Firms often must choose what not to do because additional activities can weaken the fit among existing activities.
C. Trade-offs only matter for firms pursuing cost leadership.
D. Trade-offs occur only when a company is losing money.

B. Firms often must choose what not to do because additional activities can weaken the fit among existing activities.

Strategy requires choices about what to do and what not to do.

What is SWOT used for?

A. Measuring only a firm's financial performance
B. Comparing only direct competitors
C. Connecting internal strengths and weaknesses with external opportunities and threats
D. Identifying only macroeconomic trends

C. Connecting internal strengths and weaknesses with external opportunities and threats

Internal: Strengths + Weaknesses
External: Opportunities + Threats

What are the three components of a dynamic capability?

A. Analyze → Invest → Grow
B. Sense → Seize → Transform
C. Plan → Organize → Control
D. Compete → Differentiate → Expand

B — Sense → Seize → Transform

Can a firm's strength become a weakness?

A. No. Valuable strengths always remain strengths.
B. Yes. A historically valuable capability can become a rigidity when applied in ways that no longer fit the environment or create sufficient value.
C. Only physical resources can become weaknesses.
D. Only technology-related capabilities can become rigidities.

B. Yes. A historically valuable capability can become a rigidity when applied in ways that no longer fit the environment or create sufficient value.

A core rigidity occurs when a historically successful strength becomes difficult or inappropriate to change.

What is the difference between stand-alone profitability and strategic fit?

A. A profitable product always strengthens competitive advantage.
B. Strategic fit only matters when a product loses money.
C. A product can be profitable on its own but still weaken overall competitive advantage if it creates excessive complexity or conflicting activities.
D. Strategic fit and profitability are the same concept.

C. A product can be profitable on its own but still weaken overall competitive advantage if it creates excessive complexity or conflicting activities.
Profitable alone ≠ strategically valuable overall.

Strategic management consists of the analyses, decisions, and actions an organization undertakes in order to create and sustain competitive advantages.

True or False

True

The textbook states that there is a critical need for three types of leaders.________ are individuals that, although having little positional power and formal authority, generate their power through the conviction and clarity of their ideas.

Local line leaders 

Executive leaders

Internal networkers

Shop floor leaders

Internal networkers

Internal networkers, although they have little positional power and formal authority, generate their power through the conviction and clarity of their ideas.

In contrast to the vision of an organization, its mission should

• be shorter in length.

• encompass all the major rules and regulations of the corporate work force.

• encompass both the purpose of the company as well as the basis of competition.

• be less detailed.

Encompass both the purpose of the company as well as the basis of competition.

The mission statement of a company differs from its vision in that it encompasses both the purpose of the company as well as the basis of competition and competitive advantage.

Strategy analysis is the study of only the big picture external environments of the firm.

True or False

False

Strategy analysis is the study of the external and internal environments of a firm, and their fit with organizational vision and goals.

Decisions by boards of directors are always consistent with shareholder interests.

True or False

False

The board of directors (BOD) are the elected representatives of the shareholders, charged with ensuring that the interests and motives of management are aligned with those of the owners (i.e., shareholders). Recent scandals have resulted in criticism and cynicism that the BOD fulfills this charge.

Social responsibility is the idea that organizations are only accountable to stockholders.

True or False

False

Social responsibility is the expectation that businesses or individuals will strive to improve the overall welfare of society. From the perspective of a business, this means that managers must take active steps to make society better by virtue of the business being in existence.

Strategic management requires managers at all levels of the organization to take a segregated view of the organization.

True or False

False

Strategic management requires managers to take an integrative view of the organization and assess how all of the functional areas and activities fit together to help an organization achieve its goals and objectives. This cannot be accomplished if only the top managers in the organization take an integrative, strategic perspective of issues facing the firm, and everyone else fends for themselves in their independent, isolated functional areas. Instead, people throughout the organization must strive toward overall goals.

According to Henry Mintzberg, the final realized strategy of a firm is

• a combination of deliberate and emergent strategies.

• a combination of deliberate and differentiation strategies.

• not deliberate.

• a result of unrealized intended strategy

A combination of deliberate and emergent strategies.

The final realized strategy of any firm is a combination of deliberate and emergent strategies.

Learning organizations permit the entire organization to benefit from________ and________ talents.

• internal; external

• external; individual

• individual; collective

• internal; collective

internal; external

Given rapid and unpredictable change, leaders must create a learning organization so that the entire organization can benefit from individual and collective talents.

Effective leaders set a direction and develop an organization so that it is committed to excellence and________ behavior.

• performant

• strategic

• ethical

• positive

Ethical

Effective leaders set a direction, design the organization, and develop an organization that is committed to excellence and ethical behavior.

The three participants in corporate governance are the shareholders,

• board of directors, and employees.

• labor unions, and employees.

• board of directors, and management.

• banks and lending institutions, and management.

board of directors, and management.

Environmental monitoring deals with tracking changes in environmental trends that are often uncovered during the environmental scanning process.

True or False

True

Which is considered a force in the five forces model?

• increased deregulation in an industry

• the threat of government intervention

• recent technological innovation

• rivalry among competing firms

Rivalry among competing firms

Which of the following would be an entry barrier?

• easy access to raw materials

• low switching costs

• large economies of scale

• low capital requirements

Large economies of scale

Among the major sources of entry barriers are economies of scale, product differentiation, capital requirements, switching costs, and access to raw materials and distribution channels.

Buyer power will be greater when

• the products purchased are highly differentiated.

• it is concentrated or when a buyer group purchases large volumes relative to seller sales.

• the industry product is very important to the quality of the buyer end products or services.

• there are high switching costs.

It is concentrated or when a buyer group purchases large volumes relative to seller sales.

Complements are products or services that have a________ impact on the________ of the products or services of that company.

• known; cost

• real; availability 

• viable; substitutability

• potential; value

Potential; value

Complements typically are products or services that have a potential impact on the value of the products or services of that company. Those who produce complements are usually referred to as complementors.

Strategic groups consist of a group of 

• top executives who make strategies for a company.

• executives drawn from different companies within an industry who make decisions on industry standards.

• firms within an industry that decides to collude rather than compete with each other so that they can increase their profits.

• firms within an industry that follows similar strategies.

Firms within an industry that follows similar strategies.

Strategic groups are clusters of firms that share similar strategies. Rivalry tends to be greater among firms that are alike.

AI reshapes traditional business models by forbidding firms from offering personalized services.

True or False

False

Competitive Intelligence (CI) is a tool that can only provide management with later stage warnings about both threats and opportunities.

True or False

False

Competitive intelligence (CI) helps firms define and understand their industry and identify strengths and weaknesses of rivals. Done properly, competitive intelligence helps a company avoid surprises by anticipating competitor moves and decreasing response time.

Technological innovations can create entirely new industries and alter the boundaries of industries.

True or False

True

The Porter five forces model is designed to help us understand how social attitudes and cultural values impact U.S. businesses.

True or False

False

The five forces model developed by Michael E. Porter has been the most commonly used analytical tool for examining the competitive environment. It describes the competitive environment in terms of five basic competitive forces.Technological innovations can create entirely new industries and alter the boundaries of industries.

Technological innovations can create entirely new industries and alter the boundaries of industries.

True or False

True

In order to improve________, boards of directors use outsiders to critique their strategy.

• financial returns

• perceptual acuity

• organizational hierarchy

• employee relations

Perceptual acuity

A danger of forecasting discussed in the text is that

• in most cases, the expense of collecting the necessary data exceeds the benefit.

• the retrospective nature of forecasting provides little information about the future.

• it can create legal problems for the firm if regulators discover the company is making forecasts.

• managers may view uncertainty as present or absent while ignoring important gray areas

Managers may view uncertainty as present or absent while ignoring important gray areas

Scenario analysis draws on a range of disciplines and interests. It is a more________ approach to forecasting.

• basic

• fundamental

• in-depth

• superficial

In-depth

SWOT analysis raises awareness about the role of strategy in creating a match between the environmental conditions and________ of the firm.

• internal opportunities and threats

• internal strengths and weaknesses

• internal strengths and opportunities

• internal weaknesses and opportunities

Internal strengths and weaknesses

Value-chain analysis can be applied to service organizations as well as manufacturing organizations.

True or False

True

The________ is the best measure of the company ability to meet imminent financial obligations.

• debt ratio

• current ratio

• total asset turnover

• profit margin

Current ratio

The________ ratios reflect whether a firm is efficiently using its resources.

• liquidity

• leverage

• turnover

• profitability

Turnover

Asset utilization (or turnover) ratios are one measure of whether a firm is efficiently using its resources.

This is a profitability ratio.

• Current ratio

• return on equity

• total asset turnover

• total debt ratio

Return on equity

Profitability ratios include: profit margin, return on assets, and return on equity.

In making the decision to enter the pharmaceutical industry, a company would not need to consider which of the following?

• historical comparisons

• comparisons with industry norms

• comparisons with key competitors

• comparisons with non-competitors

Comparisons with non-competitors

A firm that takes on too much long-term debt to finance operations will see an immediate impact on its indicators of________________ leverage.

• short-term financial

• relative budget

• long-term financial

• comparable forecast

Long-term financial

The rise in artificial intelligence and robotic systems has many industry participants scrambling to build intangible resources to outcompete rivals.

True or False

False

Tangible resources are only assets that are difficult to identify, such as financial and physical assets.

True or False

False

Products and services that are easy to imitate help firms sustain their profitability.

True or False

False

For a resource to provide a firm with the potential for a sustainable competitive advantage, it must have four attributes. Among these is the idea that the resource must be difficult for competitors to imitate.

According to Michael Porter in his book, Competitive Advantage, a key concept used in analyzing the competitive position of a firm is creating value for________ that exceeds the costs of production (i.e., margin).

• buyers

• suppliers

• government

• employees

Buyers

Associated with collecting, storing, and distributing the product or service to buyers is________. This consists of warehousing, material handling, delivery operation, order processing, and scheduling.

• services

• outbound logistics

• inbound logistics

• operations

Outbound logistics

Which of the following is a support activity?

• inbound logistics 

• customer service

• technology development

• operations

Technology development

Support activities in the value chain can be divided into four generic categories: general administration, human resource management, technology development, and procurement.

General administration is sometimes viewed as only________, but it can be a powerful source of competitive advantage.

• income 

• value

• overhead

• unimportant

Overhead

A travel agent adds value by creating an itinerary that includes transportation, accommodations, and activities that are customized to your budget and travel dates. In terms of the value-chain analysis, this is an example of a________ organization.

• service

• retail

• manufacturing

• essential

Service

The three key types of resources that are central to the resource-based view of the firm are

• tangible resources, intangible resources, and organizational structure.

• culture, tangible resources, intangible resources.

• tangible resources, intangible resources, and top management.

• tangible resources, intangible resources, and organizational capabilities

Tangible resources, intangible resources, and organizational capabilities

It is easy today to attract talented young professionals who are willing to relocate.

True or False

False

New knowledge involves the________ interaction between________ and________ knowledge.

• rare; intellectual; pragmatic

• infrequent; theoretical; practical

• independent; detailed; tacit

• continual; tacit; explicit

Continual; tacit; explicit

The text discusses three areas a firm must be concerned with to keep its best and brightest employees from leaving. These include all the following except

• hiring/selecting.

• developing.

• sorting/absorbing.

• retaining.

Sorting/absorbing

To handle more efficiently the increasing number of applications received for job openings, firms are turning to algorithms and online skill assessment exercises. The type of algorithm used to compare experiences, skills, and personal attributes with those of top performers in the relevant positions fall most frequently under the category of________ intelligence algorithms.

• reflective 

• analytical

• artificial

• causal

Artificial

According to Strategy Spotlight 4.1: AI Ethics in the textbook, which of the following artificial intelligence algorithm risks is not included? You can reference this in your eBook by using the eBook button in the resource area.

• disqualification of potentially good applicants who have employment gaps

• extension of workplace inequity

• teaching itself to make biased choices

• freeing up human resource staff from manual checks

Freeing up human resource staff from manual checks

The management of intellectual property involves all of the following except

• copyrights and trademark.

• contracts with confidentiality and noncompete clauses.

• patents.

• converting explicit knowledge to tacit knowledge

Converting explicit knowledge to tacit knowledge

Three actions women can take to be more successfully engaged in networking activities does not include

• being a bridge across diverse circles in their network. 

• doing it your way by investing in extracurricular activities.

• joining a professional network of women.

• joining a professional network of men.

Joining a professional network of men

According to the Amazon case discussed in Strategy Spotlight 4.1: AI, Ethics, recruiting algorithms based on the existing employee base of a firm tend to select potential new hires who are similar. You can reference this in your eBook by using the eBook button in the resource area.

True or False

True

Sharing knowledge and information throughout the organization is important for conserving resources, developing products and services, and creating new opportunities.

True or False

True

In addition to knowledge sharing, technology can enable more sophisticated forms of communication.

True or False

True

Intellectual property can be stolen by simply broadcasting it.

True or False

True

Paying people more is usually the most important factor in attracting and retaining human capital.

True or False

False

Creativity and problem-solving ability are considered to be part of________ capital.

• physical

• social

• emotional

• human

Human

The network of relationships that individuals have throughout the organization is known as________ capital.

• Human

• tacit knowledge

• intellectual

• social

Social

Tacit knowledge can be accessed only with the consent of the

• department head.

• corporate attorney.

• CEO.

• individual employee.

Individual employee

If the overall cost leadership strategy is to provide sustainable competitive advantage, the rest of the activities in the value-chain do not need to be evaluated.

True or False

False

The factors that lead to a low-cost position also provide a substantial________ barriers position with respect to________ products introduced by new and existing competitors.

• product; substitute 

• exit; primary

• entry; primary

• entry; substitute

Entry; substitute

An overall________ position enables a firm to achieve above-average returns because it protects firms against powerful________.

• differentiation; sellers

• high-cost; retailers

• focused; competitors

• low-cost; buyers

Low-cost; buyers

The industry life cycle includes the stages of introduction, growth, maturity, and decline that occur over the life of an industry.

True or False

True

Differentiators can attain a level of cost parity relative to competitors by increasing costs in all areas that do not affect differentiation.

True or False

False

Primary value-chain activities that involve the effective layout of inbound logistics and support value-chain activities that include expertise in technology development are characterized by the________ generic strategy.

• differentiation

• overall cost leadership

• stuck-in-the-middle

• differentiation focus

Overall cost leadership

In most industries, experience results in unit costs of production declining as________ increases.

• Costs

• output

• volume

• price

Output

By providing________ against rivalry, a________ strategy enables a business to address the five competitive forces.

• information; low-cost

• better information; cost leadership

• screening; cost focus

• protection; differentiation

Protection; differentiation

Firms are increasingly using________ strategies to build differentiation on multiple fronts, such as developing deeper and more frequent interactions and________ with customers.

• divisive; bonding

• multiple; disconnects

• connected; connections

• linked; distance

Connected; connections

In the________ stage of the industry life cycle, there are many segments,________ is very intense, and the emphasis on process design is low to moderate.

• introduction; supplier power

• maturity; competition

• decline; industrial espionage

• growth; consumer power

Maturity; competition

Using standardization to derive the greatest benefits from economies of scale and experience, a firm typically will achieve an absolute cost advantage by offering a________product or service to a________ target market.

• no-frills; broad

• no-frills; narrow

• complex; narrow

• complex; diverse

No-frills; broad

Retailer consolidation increased the bargaining power of large retailers and made product availability and inventory turns more important to LEGO.

True or False

True

Retail consolidation → greater buyer power

The rapid increase in LEGO shapes, colors, and elements simplified forecasting, manufacturing, and inventory management.

True or False

False

Product variety → greater operational complexity

Because LEGO had a historically strong brand, extending the brand into additional categories generally strengthened competitive advantage even when those extensions required substantially different supporting activities.

True or False

False

Strong brand ≠ automatic strategic fit

LEGO's crisis reflected not only cost pressure but also weakened strategic fit as complexity grew across products, activities, and organizational routines.

True or False

True

Cost problem + strategic-fit problem + organizational complexity