Strategic Management Date: 26th October, 2013

Quiz 2

Time allowed: 20 mins Max. marks: 24

Multiple Choice Questions (Encircle the right choice) 1. aThe perceived importance of resources and capabilities to firms strategies became prominent because

Top managers have understood the importance of competitive advantages from major academic papers published at the time. b- The general environment has become more unstable and the structure of industries has evolved towards simultaneously more cooperation and more competition c- The planning school of strategy has been heavily criticized and planning departments in large firms have almost disappeared d- It became increasingly apparent that competitive advantage was more important to profit generation than mere characteristics of the industry as a whole. Ultimately, industry attractiveness derives from the ownership of resources. This statement is true This statement is wrong This statement can be true under certain circumstances This statement does not make sense Whats the difference between a resource and a capability? A resource is a productive asset of the firm whereas a capability refers to what the firm can do A resource is an immobile asset whereas a capability is a dynamic concept. A resource is a weak source of competitive advantage whereas a capability is a strong one It is very difficult to elucidate. In exploring how to create more value from tangible assets, two questions must be addressed:

2. abcd3. abcd4. a-

Can a firm save money on these assets by changing the depreciation policy, and how can it delay replacing them? b- How can a firm reduce cost/unit of output on underutilized assets, and/or how can it redeploy them more profitably? c- How can a firm beat its rivals regarding these assets, and how can it build a better reputation in regards to its external environment? d- How can a firm acquire more efficient assets from external markets, or how can it build these assets in-house? McDonalds can illustrate the concept of: Adaptability A large size firm Routinization Flexibility

5. abcd-

6.

Core competences possess several attributes:

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 firms customers c- They deliver value to a firm and provide a basis for entering international markets d- They allow top managers to understand the human resources of their firm and to define and implement a technological strategy 7. abcd8. abcd9. abcdWhat does Asset mass efficiencies mean for a firm? A firm should try to corner the market in a scarce resource. A strong initial position for a specific resource facilitates the subsequent accumulation of more of that resource It means the achievement of economies of scale through selling to a mass-market. For the same resource, a larger amount is always more productive and efficient than a smaller one For an organic entity, such as a firm, path-dependency means that: That this firms capabilities today are the result of its history This firms way forward depends on decisions to be made at future crossroads This firms history is dependent upon it developing a clear path forward There is only one path for this firm to evolve over time The difference between knowing how and knowing about is? Knowing about is implicit or tacit knowledge Know-how is implicit or tacit knowledge and includes performance skills Know-how is explicit knowledge about facts, instructions and theories Know-how and knowing about are just semantic differences

10. A fundamental challenge of managing a large firm is to achieve an optimal trade-off between: abcdCooperation and division of unqualified labor Division of labor and efficiency Division of labour, specialisation, co-ordination and co-operation. Cooperation, coordination and profit.

11. The agency problem refers to: abcdThe risk that the agent does not behave in the principals interest Problems that occur between a corporate headquarters and its branches or heads of divisions Top managers unethical and fraudulent behaviors The problem with using outside contractors.

12. Rules and directives, mutual adjustment, and routines are: abcdOnly organizational devices that every firm has to use Means for controlling employees in an organization Means for people to build a hierarchy within the firm Means for achieving required levels of coordination between workers

13. An advantage of the systems view of hierarchy is: abcdIts simplicity It economizes on coordination It enables adaptability because subsystems can change more readily Both b and c

14. An analogy to illustrate the adaptability of modular organizational structures may be: abcdA car in which the gearbox can be replaced with an updated design, without needing to alter the rest of the car. A car in which the rear seats fold down to make more space for luggage. A car manufactured in several stages. Confusing

15. At the reciprocal level of interdependence: abcdIndividuals are mutually dependent Individuals operate independently The output of one individual is the input of the next Individuals expect to be assisted in return if they assist a colleague

16. In practice, matrix structures tend to: abcdLead to excessive complexity Slow down the decision-making processes Result in many political battles between managers All of the above

17. To successfully imitate the strategy of another firm, an organization must: Identify and diagnose the rivals advantage, believe in its ability to deliver a superior return, and, finally, acquire the resource b- Identify and diagnose the rivals advantage, and then acquire the resource c- Benchmark the rivals activities and resources, believe in a superior return, and build the rivals resource inhouse d- Benchmark the rivals activities and resources, identify the rivals weaknesses, and, finally, believe in its ability to deliver a superior return 18. The simple form of the theory of limit pricing postulates that: A firm in a strong market position can obscure superior performance by limiting the release of information about prices b- A firm always tries to limit price increases to what its customers can afford c- There is a natural and objective limit to prices, imposed by the market d- A firm in a strong market position sets prices at a level that dissuades entrants from entering 19. Regarding causal ambiguity and uncertain imitability : a- These are academic phrases to describe a state of confusion b- Causal ambiguity causes uncertain imitability c- Anyone who tries to imitate something they dont fully understand is asking for trouble d- All of the above are true aa-

20. To assist in achieving the cost reduction related to the learning curve, firms should: abcdSet price on the basis of anticipated costs rather than on the basis of current costs Set price on the basis of current costs rather than on the basis of anticipated costs Integrate fixed costs in their calculation Only price at the correct level

21. Three main sources generate economies of scale: abcdSpecialization, indivisibilities, and R&D Technical input-output relationship, indivisibilities, and scale effect on advertising Indivisibilities, specialization, and division of labor Technical input-output relationship, specialization, and indivisibilities

22. In Business Process Reengineering, the key aspect was: abcdTo start with a clean sheet To be critical about existing processes Cultural change Integration of stakeholders interests

23. Locational differences in input prices, non union labor, and bargaining power are examples of: abcdSources of lower input cost Sources of higher input cost Sources of product differentiation Sources of strengths and weaknesses

24. Residual efficiency: abcdIs defined as the remaining unit cost differences between firms once all other drivers are taken into account Is often called organizational fat Depends on a firms ability to eliminate organizational slack All of the above