[ANSWERS EXPLAINED] Week 1 Quiz

Question 1

/ 1 pts
A good strategy is a set of actions that enables a firm to achieve its own internal goals without regard to the external environment.

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True

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Correct!

False

Explanation: The success of a strategy heavily depends on the external environment. A good strategy is a set of actions that enables a firm to achieve superior performance relative to its competitors. In this light, a strategy that produces only a minor loss of revenues while competitors suffer heavy losses can be seen as successful.

Question 2

/ 1 pts
The following statement by the chief executive of SunStar movie studio is an effective strategy: “We will produce the greatest films of the 21st century.”

True

Correct!

False

Explanation: Grandiose statements are not a strategy. Although SunStar’s vision of producing the highest-quality films among all studios may lay the foundation for an effective strategy, it must be backed up by a clear set of actions that will allow the firm to address the competitive challenge with clear consideration of value creation and costs.

Question 3

/ 1 pts
A vision describes in broad, inspirational terms what an organization hopes to accomplish in the future.

Correct!

True

Explanation: A vision captures an organization’s aspiration and spells out what it ultimately wants to accomplish. An effective vision pervades the organization with a sense of winning and motivates employees at all levels to aim for the same target while leaving room for individual and team contributions.

False

Question 4

/ 1 pts
A mission describes how a firm will accomplish the broad goals set out in a vision statement.

Correct!

True

Explanation: A mission describes what an organization actually does—that is, the products and services it plans to provide, and the markets in which it will compete. It defines how the vision is accomplished and is often introduced with the preposition by.

False

Question 5

/ 1 pts
Product-oriented vision statements are better suited than customer-oriented vision statements for helping companies to adapt to changes in the external environment.

True

Correct!

False

Explanation: Product-oriented vision statements often constrain the ability of a firm to respond to changes in the external environment by focusing employees on improving existing products and services without consideration of underlying customer problems to be solved. A customer-oriented vision helps firms respond to changes in the external environment by defining the business in terms of providing solutions to customer needs.

Question 6

/ 1 pts
Core values provide ethical guidelines for how individual employees will behave.

Correct!

True

Explanation: Organizational core values are the ethical standards and norms that govern the behavior of individuals within a firm or organization.

False

Question 7

/ 1 pts
Managers should create two sets of core values, one for employees and one for themselves.

True

Correct!

False

Explanation: Employees tend to follow values practiced by strategic leaders. They observe the day-to-day decisions of top managers and quickly decide whether managers are merely paying lip service to the company’s stated values. Organizational core values must be lived with integrity, especially by the top management team.

Question 8

/ 1 pts
The three tasks of the AFI strategy framework are to Assemble a prototype, Find a buyer, and Incorporate feedback.

True

Correct!

False

Explanation: The three tasks of the AFI strategy framework are to Analyze, Formulate, and Implement. This framework (1) explains and predicts differences in firm performance, and (2) helps managers formulate and implement a strategy grounded in the internal and external analysis that can result in superior performance.

Question 9

/ 1 pts
Questions asked during the strategy analysis stage of the AFI framework include “How does the firm make money?” and “What effects do forces in the external environment have on the firm’s potential to gain and sustain a competitive advantage?”

Correct!

True

False

Question 10

/ 1 pts
Once a strategy has been formulated and implemented, it is important that the firm sticks to it no matter what happens.

True

Correct!

False

Explanation: Strategic leaders make decisions under conditions of uncertainty and complexity. They must carefully monitor and evaluate the progress toward key strategic objectives and make adjustments by fine-tuning any strategy as necessary.

Question 11

/ 1 pts
Which of the following stages of the strategic management process involves an evaluation of a firm’s external and internal environments?

strategy control

strategy formulation

Correct!

trategy analysis

Explanation: A good strategy consists of a diagnosis of the competitive challenge. This element is accomplished through strategy analysis of the firm’s external and internal environments.

strategy implementation

Question 12

/ 1 pts
Which of the following is an element of good strategy?

an approach that underestimates the competition

a summary of the firm’s history within its industry

Correct!

a set of coherent actions to implement the firm’s guiding policy

a guiding policy to address employee satisfaction

Question 13

/ 1 pts
Green Jeans, Inc. had a mission to become the leading producer of environmentally friendly blue jeans, an emerging and in-demand category in the apparel industry. Its strategy involved leveraging a network of organic cotton farmers and suppliers of environmentally responsible synthetic materials to create a product that is durable, attractive, affordable, and 100% recyclable. However, because it did not upgrade its outdated production facilities, Green Jeans could not assemble its products at a low-enough cost to offer the jeans at a price that was attractive to customers. Green Jeans’ strategy failed because

it failed to consider the competitive challenge

the company did not stake out a unique strategy position

Correct!

it was not backed up with strategic commitments

Explanation: A formulated strategy must be backed up with strategic commitments, or actions to achieve the mission that are costly, long-term oriented, and difficult to reverse. Green Jeans failed to invest in upgrading its production facilities, leaving it unable to produce its jeans at a low-enough cost to achieve a competitive advantage.

managers did not live by the company’s core values

Question 14

/ 1 pts
Which of the following is an example of competitive parity?

A firm manufactures higher-quality wall clocks than its competitors

A firm sells wall clocks at a lower price than its competitors

Correct!

A firm produces a similar number of wall clocks at a similar cost as its competitors

Explanation: Two or more firms performing at the same level have competitive parity. Therefore, a firm has competitive parity if it produces wall clocks at the same rate as its competitors.

A firm provides wall clocks that its consumers value more than other wall clocks

Question 15

/ 1 pts
Powell Lighting was the first company to start selling LED light bulbs in its country—a product that gained popularity among diverse groups. Soon, other companies started to sell their own brands of LED bulbs, thereby giving Powell Lighting ample competition. In response, Powell Lighting decided to limit its LED light bulbs to outdoor models. However, it ensured that these models were the longest-lasting and lowest-priced on the market. With this innovation, Powell Lighting consistently outperformed its competitors for ten years. In this scenario, Powell Lighting maintained a _____ through its innovative strategy.

balanced scorecard

consistent power position

fiduciary responsibility

Correct!

sustainable competitive advantage

Explanation: In this scenario, Powell Lighting maintained a sustainable competitive advantage through its innovative strategy. A firm that is able to outperform its competitors or the industry average over a prolonged period of time has a sustainable competitive advantage.

Question 16

/ 1 pts
Noodles 2 Go and Sal’s Trattoria are two restaurants serving Italian cuisine. While Noodles 2 Go focuses on providing quick, affordable pasta dishes for the lunch crowd, Sal’s Trattoria focuses on serving home-style dishes in an upscale, romantic setting. Both companies have been able to gain a competitive advantage. This is most likely because the companies have

benefitted from economies of scale

Correct!

pursued distinct strategic positions

Explanation: In this scenario, the two firms have gained a competitive advantage by pursuing distinct strategic positions. Cost-leadership and differentiation are distinct strategic positions. The key to successful strategy is to combine a set of activities to stake out a unique position within an industry.

entered into a cartel arrangement

engaged in direct imitation and substitution

Question 17

/ 1 pts
Free Winds, Inc. is a company that manufactures a variety of generators that run on wind power. The company envisions that wind technology will replace all forms of exhaustible energy sources in the near future. Which of the following statements will make an accurate vision for Free Winds?

The company aims to make working fun and pleasurable for its employees

We provide energy-efficient sources and services by investing in research and innovation

We make products that run on wind energy

Correct!

All nations around the globe should be able to provide energy produced by sustainable sources

Explanation: “In the future, all nations around the globe should have access to a sustainable energy source.” will make an appropriate vision statement for Free Winds Inc. An effective vision talks about what an organization ultimately wants to accomplish; it captures the company’s aspiration.

Question 18

/ 1 pts
Strategic commitments are actions that are

easy to imitate

Correct!

long-term oriented

easy to reverse

inexpensive

Question 19

/ 1 pts
Which of the following summarizes the difference between a firm’s vision and mission?

Correct!

A vision states what a firm wants to accomplish; a mission states how a firm plans to accomplish this vision

Explanation: A vision defines what an organization wants to accomplish ultimately. A mission describes how the vision is accomplished

A vision states the management values of a firm; a mission states the values of the other workers

A vision states how much a firm wants to earn; a mission states how these earnings will be accomplished

A vision states the ethical values of a firm; a mission states the monetary goals of a firm

Question 20

/ 1 pts
Why is it better for firms to keep their vision statements customer-oriented rather than product-oriented?

Customer-oriented visions tend to be more stable when dealing with changing environments

Correct!

Customer-oriented visions tend to be more flexible when adapting to changing environments

Explanation: Customer-oriented visions tend to be more flexible when adapting to changing environments.

Customer-oriented visions tend to have a more myopic view of changing environments

Customer-oriented visions tend to have a more short-range view of changing environments

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