Strategic Management and Business Policy, 15e (Wheelen et al.

)
Chapter 5 Organizational Analysis and Competitive Advantage

1) Those critical strengths and weaknesses that are likely to determine if a firm will be able to
take advantage of opportunities while avoiding threats are called
A) SWOT.
B) competitive forces.
C) internal strategic factors.
D) quality accounting.
E) factor analysis.
Answer: C
Difficulty: Easy
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Application of knowledge

2) Which of the following is not one of the four question areas Barney proposes in his VRIO
framework used to evaluate a firm's key resources?
A) organization
B) durability
C) rareness
D) valuable
E) imitability
Answer: B
Difficulty: Moderate
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Application of knowledge

3) When a company determines that a competency provides a competitive advantage, Barney

refers to this issue as
A) value.
B) rareness.
C) imitability.
D) organization.
E) durability.
Answer: A
Difficulty: Moderate
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Analytical thinking
4) According to Barney's VRIO framework, the firm's exploitation of a competency pertains to
A) value.
B) rareness.
C) imitability.
D) organization.
E) durability.
Answer: D
Difficulty: Moderate
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Application of knowledge

5) A corporation's ability to exploit its resources is referred to as its

A) business expertise.
B) capabilities.
C) core competencies.
D) critical success factors.
E) key performance factors.
Answer: B
Difficulty: Easy
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Application of knowledge

6) FedEx's application of information technology to all its operations is an example of

A) resources.
B) distinctive competencies.
C) core competencies.
D) critical success factors.
E) key performance factors.
Answer: C
Difficulty: Difficult
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Analytical thinking

7) When a company's core competencies are superior to those of competitors, these are known as
A) resources.
B) distinctive competencies.
C) core competencies.
D) critical success factors.
E) key performance factors.
Answer: B
Difficulty: Moderate
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Application of knowledge
8) Which of the following statements is true concerning clusters?
A) The desire to build or upgrade a core competency is one reason why entrepreneurial and other
fast-growing firms often tend to locate close to their competitors.
B) Clusters are geographically dispersed companies operating within the same industry.
C) The United States does not have any clusters; they are all located in Europe.
D) According to Porter, clusters provide barriers to the access of employees, suppliers, and
specialized information.
E) Employees from competitive firms in a cluster are not permitted to socialize with one another.
Answer: A
Difficulty: Difficult
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Analytical thinking

9) A winemaker in California finds it difficult to duplicate a French winery's key resources of

land and climate. This is an example of
A) transferability.
B) transparency.
C) replicability.
D) tacit knowledge.
E) explicit knowledge.
Answer: A
Difficulty: Moderate
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Analytical thinking

10) The rate at which others can duplicate a firm's underlying resources, capabilities, or core
competencies is called
A) replicability.
B) transparency.
C) imitability.
D) durability.
E) transferability.
Answer: C
Difficulty: Easy
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Application of knowledge
11) When a company takes apart a competitor's product in order to find out how it works, this
process is known as
A) durability.
B) replicability.
C) reverse engineering.
D) transparency.
E) transferability.
Answer: C
Difficulty: Moderate
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Application of knowledge

12) The speed with which other firms can understand the relationship of resources and
capabilities supporting a successful firm's strategy is called
A) imitability.
B) reverse engineering.
C) transferability.
D) transparency.
E) durability.
Answer: D
Difficulty: Moderate
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Application of knowledge

13) The ability of competitors to use duplicated resources and capabilities to imitate the other
firm's success is called
A) imitability.
B) durability.
C) transferability.
D) transparency.
E) replicability.
Answer: E
Difficulty: Easy
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Application of knowledge
14) Knowledge that can be easily articulated and communicated is known as
A) tacit knowledge.
B) explicit knowledge.
C) imitable knowledge.
D) transferable knowledge.
E) durable knowledge.
Answer: B
Difficulty: Easy
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Application of knowledge

15) ________ is more valuable because it can provide companies with a sustainable competitive
advantage that is harder for competitors to imitate.
A) Tacit knowledge
B) Explicit knowledge
C) Imitable knowledge
D) Transferable knowledge
E) Durable knowledge
Answer: A
Difficulty: Difficult
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Analytical thinking

16) Knowledge that is not easily communicated because it is deeply rooted in employee
experience or in a corporation's culture is called
A) tacit knowledge.
B) explicit knowledge.
C) imitable knowledge.
D) transferable knowledge.
E) durable knowledge.
Answer: A
Difficulty: Moderate
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Application of knowledge

17) Competencies are the organization's assets and are the basic building blocks of the
organization.
Answer: FALSE
Difficulty: Easy
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Application of knowledge
18) The resources of an organization include tangible assets, human assets, and intangible assets.
Answer: TRUE
Difficulty: Moderate
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Application of knowledge

19) Capabilities refer to a corporation's ability to exploit its resources.

Answer: TRUE
Difficulty: Moderate
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Application of knowledge

20) New product development would be a core competency if it goes beyond one division.
Answer: TRUE
Difficulty: Moderate
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Application of knowledge

21) General Electric is well known for its distinctive competency in management development.
Answer: TRUE
Difficulty: Moderate
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Application of knowledge

22) Core competencies may mature and become core deficiencies.

Answer: TRUE
Difficulty: Moderate
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Analytical thinking

23) An example of a cluster in the United States is computer technology found in the Silicon
Valley.
Answer: TRUE
Difficulty: Moderate
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Analytical thinking
24) The attempt to hire brand managers away from P&G to learn how to duplicate the firm's
brand management success is a competitor's attempt to address replicability.
Answer: TRUE
Difficulty: Difficult
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Analytical thinking

25) Durability is the rate at which others can duplicate a firm's underlying resources, capabilities,
or core competencies.
Answer: FALSE
Difficulty: Easy
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Application of knowledge

26) A core competency can be easily imitated to the extent that it is transparent, transferable, and
replicable.
Answer: TRUE
Difficulty: Difficult
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Application of knowledge

27) Since competitors were not able to understand how Gillette's Fusion razor was produced, it
was considered transparent.
Answer: FALSE
Difficulty: Moderate
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Application of knowledge

28) Transferability is the ability of competitors to use duplicated resources and capabilities to
imitate the other firm's success.
Answer: FALSE
Difficulty: Easy
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Application of knowledge

29) Tacit knowledge is harder than explicit knowledge for competitors to imitate.
Answer: TRUE
Difficulty: Easy
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Analytical thinking

30) Describe Barney's VRIO framework.

Answer: Barney, in his VRIO framework of analysis, proposes four questions to evaluate a
firm's competencies:
1. Valuable: Does it provide customer value and competitive advantage?
2. Rareness: Do other competitors possess it?
3. Imitability: Is it costly for others to imitate?
4. Organization: Is the firm organized to exploit the resource?

If the answer to each of these questions is yes for a particular competency, it is considered to be a
strength and thus a distinctive competence. This should provide the company with a possible
competitive advantage and lead to higher performance.
Difficulty: Difficult
Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to
determine core and distinctive competencies
AACSB: Application of knowledge

31) The business model used by Spirit Airlines in offering a low-priced fare to the mass market
is the
A) efficiency model.
B) advertising model.
C) customer solutions model.
D) entrepreneurial model.
E) profit pyramid model.
Answer: A
Difficulty: Difficult
Learning Obj.: 5.2: Explain company business models and how they can be imitated
AACSB: Analytical thinking

32) The business model used by IBM to make money not selling IBM products, but by selling its
expertise to improve their customers operations is the
A) profit pyramid model.
B) advertising model.
C) customer solutions model.
D) efficiency model.
E) entrepreneurial model.
Answer: C
Difficulty: Difficult
Learning Obj.: 5.2: Explain company business models and how they can be imitated
AACSB: Analytical thinking
33) The business model used by HP in selling printers and printer cartridges is the
A) profit pyramid model.
B) advertising model.
C) customer solutions model.
D) efficiency model.
E) multi-component system/installed base model.
Answer: E
Difficulty: Difficult
Learning Obj.: 5.2: Explain company business models and how they can be imitated
AACSB: Analytical thinking

34) On the continuum of resource sustainability, where would streaming movies be placed?
A) slow-cycle resources
B) sustainable resources
C) standard-cycle resources
D) fast-cycle resources
E) down-cycle resources
Answer: D
Difficulty: Difficult
Learning Obj.: 5.2: Explain company business models and how they can be imitated

35) eBay and Amazon.com have successfully used the efficiency model by acting as an
intermediary to connect multiple sellers to multiple buyers.
Answer: FALSE
Difficulty: Difficult
Learning Obj.: 5.2: Explain company business models and how they can be imitated
AACSB: Analytical thinking

36) A linked set of value-creating activities beginning with basic materials provided by suppliers
and ending with distributors getting the final product into the hands of the ultimate consumer is
called a
A) value chain.
B) continuum of sustainability.
C) strategic capability.
D) fully integrated activity set.
E) strategic group.
Answer: A
Difficulty: Moderate
Learning Obj.: 5.3: Use value chain to assess the activities of an industry and of an organization
AACSB: Application of knowledge
37) The part of an industry's value chain that is most important to a company and the point where
its greatest expertise and capabilities lie is called the company's
A) functional crossroads.
B) center of gravity.
C) dynamic equilibrium.
D) R&D intensity.
E) economy of scope.
Answer: B
Difficulty: Moderate
Learning Obj.: 5.3: Use value chain to assess the activities of an industry and of an organization
AACSB: Application of knowledge

38) Which of the following is not a primary activity of the value chain?
A) raw materials handling
B) installation
C) repair
D) purchasing
E) warehousing
Answer: D
Difficulty: Moderate
Learning Obj.: 5.3: Use value chain to assess the activities of an industry and of an organization
AACSB: Analytical thinking

39) Which of the following is not a support activity of the value chain?
A) procurement
B) technology development
C) human resource management
D) marketing and sales
E) strategic planning
Answer: D
Difficulty: Moderate
Learning Obj.: 5.3: Use value chain to assess the activities of an industry and of an organization
AACSB: Analytical thinking

40) When examining the corporate value chain of a particular product or service, which one of
the following is not one of the primary activities that usually occur?
A) operations
B) inbound and outbound logistics
C) auditing and accounting
D) marketing and sales
E) customer service
Answer: C
Difficulty: Moderate
Learning Obj.: 5.3: Use value chain to assess the activities of an industry and of an organization
AACSB: Analytical thinking
41) The second step in value chain analysis is to
A) identify the legal ramifications and responsibilities of their product or service.
B) examine the linkages within each product's value chain.
C) confirm that all variables have been included and taken into consideration.
D) ensure that quality management is adequately addressed.
E) examine the potential synergies among the corporation's product or business units.
Answer: B
Difficulty: Difficult
Learning Obj.: 5.3: Use value chain to assess the activities of an industry and of an organization
AACSB: Application of knowledge

42) When the value chains of two separate products or services share activities, such as the same
marketing channels, in order to reduce costs, this is an example of
A) economies of scope.
B) economies of scale.
C) economies of integration.
D) economies of learning.
E) outsourcing.
Answer: A
Difficulty: Moderate
Learning Obj.: 5.3: Use value chain to assess the activities of an industry and of an organization
AACSB: Analytical thinking

43) A value chain is a linked set of value-creating activities.

Answer: TRUE
Difficulty: Easy
Learning Obj.: 5.3: Use value chain to assess the activities of an industry and of an organization
AACSB: Application of knowledge

44) A company's center of gravity is the part of the value chain that is most important to the
company and the point where its greatest expertise and core competencies lie.
Answer: TRUE
Difficulty: Moderate
Learning Obj.: 5.3: Use value chain to assess the activities of an industry and of an organization
AACSB: Application of knowledge

45) A company's center of gravity is usually the point at which the company started.
Answer: TRUE
Difficulty: Moderate
Learning Obj.: 5.3: Use value chain to assess the activities of an industry and of an organization
AACSB: Application of knowledge
46) According to Porter, a manufacturing firm's support activities usually begin with inbound
logistics, go through an operations process in which a product is manufactured, and continue on
to outbound logistics, and finally to service.
Answer: FALSE
Difficulty: Moderate
Learning Obj.: 5.3: Use value chain to assess the activities of an industry and of an organization
AACSB: Analytical thinking

47) When a company uses the same marketing channel for two separate products, this is an
example of an economy of scope.
Answer: TRUE
Difficulty: Moderate
Learning Obj.: 5.3: Use value chain to assess the activities of an industry and of an organization
AACSB: Application of knowledge

48) Discuss primary and support activities in a value chain.

Answer: Porter proposed that a corporation's value chain is comprised of primary and support
activities. Primary activities include inbound logistics (raw material handling and warehousing),
operations (machining, assembling, and testing), outbound logistics (warehousing and
distribution of finished goods), marketing and sales (advertising, promotion, pricing and channel
relations) and service (installation, repair and parts). The support activities include firm
infrastructure (general management, accounting, finance, and strategic planning), human
resource management (recruiting, training and development), technology development (R&D),
product and process improvement, and procurement (purchasing of raw materials, machines, and
supplies). The systematic examination of individual value activities can lead to a better
understanding of a corporation's strengths and weaknesses. According to Porter, "Differences
among competitor value chains are a key source of competitive advantage."
Difficulty: Difficult
Learning Obj.: 5.3: Use value chain to assess the activities of an industry and of an organization
AACSB: Application of knowledge

49) Define a value chain and the significance of the center of gravity.
Answer: A value chain is a linked set of value-creating activities beginning with basic raw
materials coming from suppliers, moving on to a series of value-added activities involved in
producing and marketing a product or service, and ending with distributors getting the final
goods into the hands of the ultimate consumer. A company's center of gravity is the part of the
chain that is most important to the company and the point where its greatest expertise and
capabilities lie – its core competencies. This is usually the point at which the company started.
Difficulty: Difficult
Learning Obj.: 5.3: Use value chain to assess the activities of an industry and of an organization
AACSB: Application of knowledge
50) Which of the following describes a typical functional structure?
A) Employees tend to be specialists in the business functions important to that industry such as
manufacturing, marketing, finance, and human resources.
B) This is most appropriate for large corporations with many product lines in several related
industries, with employees acting as specialists attempting to gain synergy among divisional
activities.
C) This is most appropriate for small, entrepreneur-dominated companies with one or two
product lines that operate in a small niche market, with employees acting as jack-of-all trades.
D) Employees have two or more superiors, a project manager and a functional manager.
E) This is most appropriate for large corporations with many product lines in several unrelated
industries, with employees acting as specialists but with no attempt at gaining synergy among the
divisions.
Answer: A
Difficulty: Difficult
Learning Obj.: 5.4: Explain why different organizational structures are utilized in business
AACSB: Analytical thinking

51) Which of the following best describes a simple structure?

A) Work is divided into subunits on the basis of such functions as manufacturing, marketing,
finance, and human resources.
B) This is most appropriate for large corporations with many product lines in several related
industries, with employees acting as functional specialists attempting to gain synergy among
divisional activities.
C) This is most appropriate for small, entrepreneur-dominated companies with one or two
product lines that operate in a small niche market, with employees acting as jack-of-all trades.
D) Employees have two or more superiors, a project manager and a functional manager.
E) This is most appropriate for large corporations with many product lines in several unrelated
industries, with employees acting as functional specialists but with no attempt at gaining synergy
among the divisions.
Answer: C
Difficulty: Moderate
Learning Obj.: 5.4: Explain why different organizational structures are utilized in business
AACSB: Application of knowledge
52) Which one of the following best describes a divisional structure?
A) Work is divided into subunits on the basis of such functions as manufacturing, marketing,
finance, and human resources.
B) This is most appropriate for large corporations with many product lines in several related
industries, with employees acting as functional specialists attempting to gain synergy among
divisional activities.
C) This is most appropriate for small, entrepreneur-dominated companies with one or two
product lines that operate in a small niche market, with employees acting as jack-of-all trades.
D) Employees have two or more superiors, a project manager and a functional manager.
E) This is most appropriate for large corporations with many product lines in several unrelated
industries, with employees acting as functional specialists but with no attempt at gaining synergy
among the divisions.
Answer: B
Difficulty: Difficult
Learning Obj.: 5.4: Explain why different organizational structures are utilized in business
AACSB: Analytical thinking

53) Which one of the following best describes a conglomerate structure?

A) Work is divided into subunits on the basis of such functions as manufacturing, marketing,
finance, and human resources.
B) This is most appropriate for large corporations with many product lines in several related
industries, with employees acting as functional specialists attempting to gain synergy among
divisional activities.
C) This is most appropriate for small, entrepreneur-dominated companies with one or two
product lines that operate in a small niche market, with employees acting as jack-of-all trades.
D) Employees have two or more superiors, a project manager and a functional manager.
E) This is appropriate for a large corporation with many product lines in several unrelated
industries.
Answer: E
Difficulty: Moderate
Learning Obj.: 5.4: Explain why different organizational structures are utilized in business
AACSB: Analytical thinking

54) A functional structure is appropriate for a medium-sized firm with several product lines in
one industry.
Answer: TRUE
Difficulty: Easy
Learning Obj.: 5.4: Explain why different organizational structures are utilized in business
AACSB: Application of knowledge
55) A divisional structure has no functional or product categories and is appropriate for a small,
entrepreneur-dominated company with one or two product lines that operates in a reasonably
small, easily identifiable market niche.
Answer: FALSE
Difficulty: Moderate
Learning Obj.: 5.4: Explain why different organizational structures are utilized in business
AACSB: Application of knowledge

56) Discuss the three basic organizational structures.

Answer: The three basic organizational structures are the simple, functional, and divisional. The
simple structure has no functional or product categories and is appropriate for a small,
entrepreneur-dominated company with one or two product lines that operates in a reasonably
small, easily identifiable market niche. Employees tend to be generalists and jacks-of-all-trades.
The functional structure is appropriate for a medium-sized firm with several product lines in one
industry. Employees tend to be specialists in the business functions important to that industry.
The divisional structure is appropriate for a large corporation with many product lines in several
related industries. Employees tend to be functional specialists organized according to product-
market distinctions.
Difficulty: Moderate
Learning Obj.: 5.4: Explain why different organizational structures are utilized in business
AACSB: Application of knowledge

57) What is R&D intensity?

Answer: A company's R&D intensity is the firm's spending on R&D as a percentage of sales
revenue. This is a principal means of gaining market share in global competition. This amount
often varies by industry.
Difficulty: Easy
Learning Obj.: 5.4: Explain why different organizational structures are utilized in business
AACSB: Application of knowledge

58) Distinguish between continuous and intermittent manufacturing systems, providing examples
of each.
Answer: Manufacturing can be intermittent or continuous. In intermittent systems (job shops),
the item is normally processed sequentially, but the work and sequence of the process vary. An
example is an auto body repair shop. Continuous systems are those laid out as lines on which
products can be continuously assembled or processed. A firm using continuous systems invests
heavily in fixed investments such as automated processes and highly sophisticated machinery.
Continuous systems reap benefits from economies of scale. An example is an automobile
assembly line.
Difficulty: Difficult
Learning Obj.: 5.4: Explain why different organizational structures are utilized in business
AACSB: Application of knowledge
59) According to the text, which one of the following is not descriptive of a corporation's
culture?
A) A corporation's culture is a collection of beliefs, expectations, and values learned and shared
by the corporation's members and transmitted from one generation of employees to another.
B) Corporate cultures are only temporary and can be easily changed.
C) Culture gives a company a sense of identity.
D) The culture reflects the company's values.
E) Cultures have a powerful influence on the behavior of managers and can strongly affect a
corporation's ability to shift its strategic direction.
Answer: B
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Analytical thinking

60) What are the two distinct attributes of corporate culture?

A) differentiation and integration
B) durability and imitability
C) concern for people and concern for task
D) intensity and integration
E) amount of complexity and tolerance of change
Answer: D
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge

61) What is the attribute of corporate culture that is the degree to which members of a unit accept
the norms, values, or other culture content associated with the unit?
A) integration
B) strength
C) intensity
D) coordination
E) unity
Answer: C
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge
62) Which of the following is a function of corporate culture?
A) It encourages a laissez faire set of attitudes.
B) It encourages flexibility and thus constant change.
C) It conveys a sense of identity for employees.
D) It generates creative approaches to new situations.
E) It focuses employee commitment on their careers.
Answer: C
Difficulty: Difficult
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge

63) Which of the following is not a function of corporate culture?

A) conveys a sense of identity for employees
B) adds to the stability of the organization as a social system
C) helps generate employee commitment to something greater than themselves
D) keeps people guessing about what to do next
E) serves as a frame of reference for employees to use as a guide for appropriate behavior
Answer: D
Difficulty: Difficult
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge

64) The breadth of an organization's culture or the extent to which units throughout an
organization share a common culture is also known as
A) cultural intensity.
B) cultural diversification.
C) cultural integration.
D) cultural strategy.
E) cultural prerogative.
Answer: C
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge
65) Through market research, corporations are able to practice ________ with various products
or services so that managers can discover what niches to seek, which new types of products to
develop, and how to ensure that a company's many products do not directly compete with one
another.
A) marketing position.
B) product life cycle.
C) market segmentation.
D) marketing mix.
E) marketing leverage.
Answer: C
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge

66) The particular combination of product, place, promotion, and price is called
A) marketing position.
B) product life cycle.
C) market segmentation.
D) marketing mix.
E) marketing leverage.
Answer: D
Difficulty: Easy
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge

67) An example of the promotion variable of the marketing mix is

A) advertising.
B) discounts.
C) location.
D) services.
E) quality.
Answer: A
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge
68) A graph showing time plotted against the dollar sales of a product as it moves from
introduction through growth and maturity to decline is called the
A) marketing position.
B) product life cycle.
C) market segmentation.
D) marketing mix.
E) marketing leverage.
Answer: B
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge

69) Which of the following statements is not true concerning a corporate reputation?
A) It is a widely held perception of a company by the general public.
B) A good corporate reputation can be a strategic resource.
C) There is a positive relationship between corporate reputation and financial performance.
D) Reputation tends to be long lasting and hard for others to duplicate.
E) Research shows no positive relationship between corporate reputation and financial
performance.
Answer: E
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Analytical thinking

70) As compared to a firm with low financial leverage, a firm with a high amount of financial
leverage in an expanding market should have
A) lower profits.
B) higher profits.
C) higher earnings per share.
D) lower earnings per share.
E) higher sales revenue.
Answer: C
Difficulty: Difficult
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Analytical thinking
71) The ratio of total debt to total assets is known as
A) budgeting leverage.
B) capital finance.
C) capital budgeting.
D) financial leverage.
E) financial budgeting.
Answer: D
Difficulty: Easy
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge

72) Which of the following is not a responsibility of a research and development manager?
A) choosing among alternative new technologies to use within the corporation
B) developing methods of embodying the new technology in new products and processes
C) deploying resources so that the new technology can be successfully implemented
D) taking the design and operationalizing the plan into mass production
E) suggesting and implementing a corporation's technological strategy in light of its corporate
objectives and policies
Answer: D
Difficulty: Difficult
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge

73) The process of taking a new technology from the laboratory to the marketplace is called
A) economies of scope versus operating leverage.
B) the R&D mix.
C) technological competence.
D) technology transfer.
E) technology discontinuity.
Answer: D
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge
74) When scientists concentrate on quality control and the development of design specifications
and improved production equipment, it is referred to as
A) basic R&D.
B) product R&D.
C) engineering R&D.
D) life cycle R&D.
E) R&D mix.
Answer: C
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge

75) The displacement of one technology by another, as shown by two S-shaped curves on a
graph, is referred to as
A) economies of scope versus operating leverage.
B) technology transfer.
C) the R&D mix.
D) technological discontinuity.
E) a disjunctive learning or experience curve.
Answer: D
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge

76) The proposition that silicon chips double in complexity every 18 months is referred to as
A) Ohm's Law.
B) Moore's Law.
C) Porter's Five Forces Model.
D) Mintzberg's Rule.
E) Keynesian's Theory.
Answer: B
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge
77) In Christensen's book, The Innovator's Dilemma, he explains that established market leaders
are typically reluctant to move in a timely manner to a new technology. This reluctance to switch
technologies is because the resource allocation process in most companies gives priority to those
projects with the greatest likelihood of generating a
A) good return of investment.
B) high net present value.
C) significant cost reduction.
D) reduction in total operating expenses.
E) lowered time spent during technology implementation.
Answer: A
Difficulty: Difficult
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Analytical thinking

78) According to the text, the primary task of the operations manager is to
A) make sure all the products or services are producing maximum revenue.
B) develop and operate a system that will produce the required number of products or services
with a certain quality, at a given cost, within an allotted time.
C) make sure the process has a high quality control.
D) ensure that the process is manufactured or delivered as efficiently as possible.
E) interface with the other functional departments to coordinate their operations in avoiding
duplication of effort.
Answer: B
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Analytical thinking

79) Which of the following terms best describes a system in which items are normally processed
sequentially, but the work and sequence of the process vary?
A) continuous system
B) debt capacity
C) chronological processing
D) operating leverage
E) intermittent system
Answer: E
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge
80) An automobile assembly line is an example of which approach to manufacturing?
A) continuous system
B) debt capacity
C) sequential processing
D) job shop
E) intermittent system
Answer: A
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Analytical thinking

81) ________ is the impact of a specific change in sales volume on net operating income.
A) Continuous system
B) Chronological processing
C) Debt capacity
D) Operating leverage
E) Intermittent system
Answer: D
Difficulty: Easy
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge

82) ________ suggests that unit production costs decline by some fixed percent each time the
total accumulated volume of production in units doubles.
A) The experience curve
B) The R&D mix
C) Technological competence
D) Economy of scale
E) Economy of scope
Answer: A
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Analytical thinking
83) Which one of the following is not descriptive of the experience curve?
A) It is very useful because it is consistent for all organizations within a particular industry.
B) It is used to estimate the production cost of a product produced by newly introduced
techniques or processes.
C) The experience curve varies by industry and is based on many variables.
D) The concept was first applied in the airframe industry.
E) It shows that production costs decline by some fixed percentage as production in units
doubles.
Answer: A
Difficulty: Difficult
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Analytical thinking

84) Flexible manufacturing emphasizes

A) high-volume output of mass-produced products.
B) the cost advantages of an intermittent system with the customer-oriented advantages of a
continuous system.
C) the learning curve is longer since technology is automated.
D) economies of scope over economies of scale.
E) economies of scale over economies of scope.
Answer: D
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Analytical thinking

85) Strategic managers must be concerned with human resource management because
A) dealing with people is their primary job.
B) quality of work life is more important than strategic management.
C) the best strategies are meaningless if employees do not have the skills to carry them out or if
jobs cannot be designed to accommodate the available workers.
D) workers are more likely to go on strike if management attempts to cross them.
E) they must be aware of the possibility and potential of unionism.
Answer: C
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge
86) In order to move more quickly through a product's development stage and have people from
each discipline get involved in projects early on, companies are using
A) virtual work teams.
B) cross-functional work teams.
C) advisory committees.
D) task forces.
E) continuous engineering.
Answer: B
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Analytical thinking

87) In a process called ________, the once-isolated specialists now work side-by-side and
compare notes constantly in an effort to design cost-effective products with features customers
want.
A) simultaneous strategy
B) participatory planning
C) jointly designed objectives
D) concurrent engineering
E) cooperative design
Answer: D
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Analytical thinking

88) Human resource departments have found that to reduce employee dissatisfaction and
unionization efforts, they must
A) significantly increase their wage rates.
B) shorten the workweek to allow for more leisure time.
C) offer a wider variety of benefits and attractive enticements.
D) guarantee their workers lifetime jobs.
E) consider the quality of work life in the design of jobs.
Answer: E
Difficulty: Difficult
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge
89) Which of the following is not one of the four methods to improve the corporation's quality of
work life?
A) improve the work environment
B) introduce participative problem solving
C) improve the responsiveness of management
D) introduce innovative reward systems
E) restructuring work
Answer: C
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge

90) The mix in the workplace of people from different races, cultures, and backgrounds is
referred to as
A) demographics.
B) diversity.
C) quality of work life.
D) globalization.
E) internationalization.
Answer: B
Difficulty: Easy
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge

91) The PRIMARY task of the manager of information systems is to

A) prevent unlawful usage of the information from the system.
B) make sure the information contained in the system is up-to-date and accurate.
C) monitor the input of information into the information system.
D) design and manage the flow of information in a corporation to improve productivity and
decision-making.
E) ensure that only those who have authorized permission have access to the information system.
Answer: D
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge

92) Cultural integration is the degree to which members of a unit accept the norms, values, or
other cultural content associated with the unit—showing the culture's depth.
Answer: FALSE
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge

93) When employees across the organization hold the same cultural values and norms, this
demonstrates a high level of cultural integration.
Answer: TRUE
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge

94) The corporate culture generally reflects the values of the founder(s) and the mission of the
firm.
Answer: TRUE
Difficulty: Easy
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge

95) The marketing mix refers to product, place, packaging, and price.
Answer: FALSE
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge

96) The product life cycle enables a marketing manager to examine the marketing mix of a
particular product or group of products in terms of its position in its life cycle.
Answer: TRUE
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge

97) Research reveals a positive relationship between corporate reputation and financial
performance.
Answer: TRUE
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Analytical thinking

98) Research indicates that greater leverage has a positive impact on performance for firms in
stable environments, but a negative impact for firms in dynamic environments.
Answer: TRUE
Difficulty: Difficult
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Analytical thinking

99) A good rule of thumb for R&D spending is that a corporation should spend at a "normal" rate
for that particular industry unless its strategic plan calls for unusual expenditures.
Answer: TRUE
Difficulty: Easy
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Analytical thinking

100) A company's capability in product R&D can be measured by consistent reductions in unit
manufacturing costs and by the number of product defects.
Answer: FALSE
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Analytical thinking

101) It is generally accepted that process R&D normally dominates the early stages of a
product's life cycle, whereas product R&D becomes especially important in the later stages.
Answer: FALSE
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Analytical thinking

102) Historically, competitive leadership in a market changes hands as one technology nears the
end of its S-curve.
Answer: TRUE
Difficulty: Easy
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge

103) An example of an intermittent manufacturing system is an auto body repair shop.

Answer: TRUE
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Analytical thinking

104) Continuous manufacturing systems reap benefits from economies of scale.

Answer: TRUE
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Analytical thinking

105) Flexible manufacturing permits the low-volume output of custom-tailored products at

relatively low unit costs through economies of scope.
Answer: TRUE
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Analytical thinking

106) Using concurrent engineering, Chrysler Corporation was able to reduce its product
development cycle from 60 to 36 months.
Answer: TRUE
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Analytical thinking

107) To increase flexibility, avoid layoffs, and reduce labor costs, corporations are using more
contingent workers.
Answer: TRUE
Difficulty: Easy
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge

108) A current trend in corporate information systems is the increasing use of the Internet for
marketing, intranets for internal communication, and extranets for logistics and distribution.
Answer: TRUE
Difficulty: Easy
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge

109) What is corporate culture and what are the two distinct attributes of culture?
Answer: Corporate culture is the collection of beliefs, expectations, and values learned and
shared by a corporation's members and transmitted from one generation of employees to another.
Corporate culture has two distinct attributes – intensity and integration. Cultural intensity is the
degree to which members of a unit accept the norms, values, or other culture content associated
with the unit. This shows the culture's depth. Cultural integration is the extent to which units
throughout an organization share a common culture. This is the culture's breadth.
Difficulty: Moderate
Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed
strategy
AACSB: Application of knowledge
110) The EFAS Table is one way to organize the internal factors into generally accepted
categories of strengths and weaknesses as well as to analyze how well a particular company's
management is responding to these specific factors in light of the perceived importance of these
factors to the company.
Answer: FALSE
Difficulty: Moderate
Learning Obj.: 5.6: Construct an IFAS Table that summarizes internal factors
AACSB: Analytical thinking