STRATEGIC MANAGEMENT OF TECHNOLOGICAL INNOVATION 3RD EDITION BY SCHILLING – TEST BANK

STRATEGIC MANAGEMENT OF TECHNOLOGICAL INNOVATION 3RD EDITION BY SCHILLING – TEST BANK

Chapter 06

Defining the Organization’s Strategic Direction

True/False

1. In formulating a technological innovation strategy, the first step first involves an accurate appraisal of where the firm currently is followed by the articulation of its strategic direction.

Answer: True

Difficulty: Moderate

Page: 113

2. When using the five-force model to assess industry attractiveness, the analysis is focused at the firm level, treating all competitors as unique, and its objective is to ascertain whether the firm can survive within the industry.

Answer: False

Difficulty: Moderate

Page: 114

3. In Canada, the wireless market is dominated by three main players—Rogers Wireless, Bell Mobility, and Telus. This is an example of an oligopolistic industry.

Answer: True

Difficulty: Moderate

Page: 115

4. Since the commercial aircraft industry is oligopolistic, one would expect the rivalry to be modest to low.

Answer: False

Difficulty: Moderate

Page: 115

5. A firm’s intellectual property can act as an entry barrier for other firms.

Answer: True

Difficulty: Easy

Page: 116

6. Firms may utilize the capabilities of other firms in order to overcome certain entry barriers.

Answer: True

Difficulty: Moderate

Page: 116

7. The Saturday Evening Post bought the paper mills that supplied the paper for printing the magazine. This is an example of horizontal integration.

Answer: False

Difficulty: Moderate

Page: 116

8. A music downloading software and an MP3 player are substitutes for one another.

Answer: False

Difficulty: Moderate

Page: 117

9. Ammunition can be considered a complement for the companies who make firearms.

Answer: True

Difficulty: Easy

Page: 117

10. If a firm’s product is undifferentiated, buyers will typically experience lesser bargaining power.

Answer: False

Difficulty: Easy

Page: 117

11. A stakeholder analysis emphasizes the stakeholder management issues the firm ought to attend to due to their ethical or moral implications.

Answer: False

Difficulty: Easy

Page: 117

12. According to Porter’s value chain model, firm infrastructure is a primary activity.

Answer: False

Difficulty: Moderate

Page: 118

13. Kingsize Burgers says it will develop a core competence in good tasting French fries. This is a core competency that is unlikely to give the company a sustainable competitive advantage.

Answer: True

Difficulty: Easy

Page: 119

14. The Friedman Clinic in Switzerland is said to have the best cosmetic surgeon in the world for rhinoplasty, so many people travel from all over the world for this service. This is a core competency of the clinic that can easily be copied.

Answer: False

Difficulty: Easy

Page: 122

15. The Zippo Company has identified 30 capabilities so it now knows its core competencies.

Answer: False

Difficulty: Hard

Page: 124

16. Organizational aptitude refers to those abilities that make a firm more agile and responsive to change.

Answer: False

Difficulty: Moderate

Page: 124

17. The Adamus Corporation was the maker of the best metal pole for pole vaulters. It hired metallurgists and encouraged the study of metals within the company. When fiberglass poles hit the market and Adamus sales plummeted, it realized it suffered due to core rigidities.

Answer: True

Difficulty: Moderate

Page: 124

18. The balanced scorecard emphasizes measuring performance from primarily a financial perspective.

Answer: False

Difficulty: Easy

Page: 127

19. The percentage of repeat purchases can be used to measure organizational performance from the internal perspective.

Answer: False

Difficulty: Moderate

Page: 128

20. The goal of reducing employee accidents by 5% would reflect the innovation and learning perspective of the balanced scorecard.

Answer: False

Difficulty: Easy

Page: 128

Multiple Choice

21. Pine Street Knitting Mill was not making a profit on its textile lines, but was reluctant to withdraw from textile manufacturing because it had so many sewing machines and workers who knew how to use them. Pine Street was suffering from
22. creeping obsolescence.
23. exit barriers.
24. sentimental proclivity.
25. attitudinal cohesiveness.

Answer: b

Difficulty: Easy

Page: 116

22. Many people dream of opening their own restaurant someday and restaurant supply houses provide easy financing for equipment. This is one of the reasons why the _____ in this industry is so high.
23. failure rate
24. exit barrier
25. threat of entry
26. technological breakthrough

Answer: c

Difficulty: Moderate

Page: 116

23. Other things being equal, the more suppliers there are providing similar supplies to a particular industry,
24. the less powerful those suppliers will be.
25. the more powerful those suppliers will be.
26. the more competitors there will be in the industry.
27. the less powerful buyers will be.

Answer: a

Difficulty: Easy

Page: 116

24. Other things being equal, if a buyer can threaten to vertically integrate backwards, this will
25. decrease the buyers bargaining power.
26. increase the buyers bargaining power.
27. have no effect on the buyers bargaining power.
28. lower the threat of entry into the industry.

Answer: b

Difficulty: Easy

Page: 116

25. Dr. Stone wanted to get a good deal on a laser which would help him in providing sight-correcting surgeries. He soon found out that prices were not very negotiable. This might be due to the fact that
26. the bargaining power of suppliers is high because there are so few of them.
27. the industry is heavily regulated by the government.
28. supply exceeds demand.
29. laser manufacturing companies are not allowed to discount their products.

Answer: a

Difficulty: Moderate

Page: 116

26. For several years, Mountain Home University had used IBM computers. Recently, Apple Computers offered them a better machine at lower a price for one of the University’s labs; however Mountain Home did not buy them because the _____ costs were too high.
27. transactional
28. opportunity
29. marginal
30. switching

Answer: d

Difficulty: Moderate

Page: 116

27. When the Arizona grocery store chain, Smitty’s, told Associated Grocers (AG) to give them a bigger price discount or they would open their own warehouse and distribution center, AG listened because Smitty’s was a big customer. This is an example of the
28. bargaining power of buyers.
29. bargaining power of sellers.
30. threat of substitutes.
31. technological substitution.

Answer: a

Difficulty: Easy

Page: 117

28. Mountain Home University realized that due to the “war on terrorism” some potential students were joining the military while others were choosing technical training. It could be said that the military and technical training were _____.
29. opposites.
30. imitations.
31. substitutes.
32. complements.

Answer: c

Difficulty: Moderate

Page: 117

29. Which of the following would describe a primary activity according to Michael Porter’s model of the value chain?
30. The human resource activities of Wal-Mart
31. A Wal-Mart advertising campaign
32. The accounting function at Wal-Mart
33. The development of new scanning equipment at Wal-Mart

Answer: b

Difficulty: Hard

Page: 118

30. Which of the following strengths would competitors least likely be able to copy?
31. Mountain Home University begins an evening program for adults in which students take one class two nights per week for one month.
32. Measurement Systems comes out with a blood sugar monitoring device that works with an insulin pump that diabetics already use.
33. Kingdom Investments’ chief stock analyst has been able to provide investors with a 20% return on investment for the last 10 years.
34. Choice Brands introduces a new cereal with dried fruit.

Answer: c

Difficulty: Moderate

Page: 121

31. Which of the following would be an example of a tacit resource?
32. An odds maker who works for a large casino in Las Vegas and is correct 95 percent of the time.
33. A highly effective and efficient distribution network throughout the continental U.S.
34. A retail shoe chain that has prime locations in 200 malls across the country.
35. A flashy ad campaign for a malt liquor.

Answer: a

Difficulty: Hard

Page: 121

32. The teamwork of the Super Bowl champions in the National Football League is an example of a(n) _____ resource.
33. imitable
34. socially complex
35. causally ambiguous
36. durable

Answer: b

Difficulty: Moderate

Page: 121

33. Socially complex resources refer to
34. resources or activities that emerge through the interaction of multiple individuals.
35. resources that cannot be defined in terms of a numerical value.
36. resources that require public sanction in order to be utilized for profit-making purposes.
37. resources that are shared by different parties thereby necessitating the need for legal intervention.

Answer: a

Difficulty: Moderate

Page: 121-122

34. Xerox is noted for the quality of its copy machines and service. This can be considered as Xerox’s
35. strategic intent.
36. core competency.
37. core rigidity.
38. external opportunity.

Answer: b

Difficulty: Easy

Page: 122

35. Honda’s core competencies lie in manufacturing and innovation which it has used to create its world renowned engines. These engines are also used in Honda’s portable generators, lawn mowers, motorcycles, automobiles, and several other products. According to the comparison made by Prahalad and Hamel, Honda’s portable generators are
36. the fruits.
37. the trunk of the tree.
38. the branches.
39. the roots.

Answer: a

Difficulty: Hard

Page: 122-123

36. At a strategic management retreat, Pentel Corporation discussed questions such as “Does this ability make us unique?”, “Does it cove a range of businesses?”, and “Is it hard to imitate?”. It would seem that Pentel is trying to
37. figure out what it does.
38. change strategic directions.
39. identify its core competencies.
40. discover its threats and opportunities.

Answer: c

Difficulty: Moderate

Page: 123-124

37. Pacer Corporation had formed a steering committee that had gathered a list of capabilities within the company. The list was analyzed and candidates’ core competencies were identified. Next, Pacer should
38. communicate these competencies throughout the company to engender loyalty to them.
39. test the candidates’ core competencies with the Prahalad and Hamel criteria.
40. align its strategy in accordance with this list.
41. ask the entire company to vote on the list.

Answer: b

Difficulty: Moderate

Page: 123-124

38. Apex Corporation supplies hospitals with software to track insurance claims. Since insurance regulations and policies are always changing, Apex needs to have the ability to be agile and responsive to change. In other words it needs
39. dynamic capabilities.
40. shifting competencies.
41. respondent capability.
42. floating capabilities.

Answer: a

Difficulty: Easy

Page: 124

39. When Western Franchise Services announced is plans to go international in the next 15 years, it was expressing its
40. core competence.
41. future business model.
42. strategic intent.
43. core capability.

Answer: c

Difficulty: Easy

Page: 125

40. When Poduck Memorial Hospital changed its name to Poduck Regional Medical Center, it also unveiled a plan to build a medical tower doubling its physical facilities by 100% within the next 10 years. It announced that its goal was to not only serve Exeter County, but the entire region including the 5 contiguous counties. This is an expression of
41. progressive competitiveness.
42. strategic intent.
43. core competencies.
44. alliance building.

Answer: b

Difficulty: Easy

Page: 125

41. Mountain Home University has announced a plan to begin offering more graduate programs and off-site classes in nearby cities in order to become the largest provider of such programs in the region. This is their strategic intent. What should the university do next?
42. Identify resources and capabilities to make this happen.
43. Petition government agencies for permission to spread beyond its traditional markets.
44. Reduce on-campus and undergraduate enrollments to divert resources to this new strategic initiative.
45. Hire a new vice-president to head up the new effort.

Answer: a

Difficulty: Easy

Page: 126

42. The balanced scorecard
43. is an alternative accounting technique.
44. is a method for balancing assets with liabilities and equity.
45. emphasizes four perspectives the firm should take in formulating goals.
46. helps managers evaluate all aspects of an employee’s performance.

Answer: c

Difficulty: Hard

Page: 127

43. Go Systems set a goal to double its corporate value in seven years. This is a goal from the_____ perspective of the balanced scorecard.
44. operational
45. financial
46. technical
47. internal

Answer: b

Difficulty: Easy

Page: 127

44. The Food Baskets grocery chain set a goal to reduce their stock out rates by 20 percent. This is a goal according to the _____ perspective of the balanced scorecard.
45. internal
46. logistics
47. operational
48. learning

Answer: a

Difficulty: Easy

Page: 128

45. Which of the following goals best represents the business process perspective of the balanced scorecard?
46. Improve customer loyalty by 50%
47. Develop five new products
48. Double net worth
49. Reduce excess inventory

Answer: d

Difficulty: Moderate

Page: 128

46. Which of the following goals best represents the learning perspective of the balanced scorecard?
47. Improve customer loyalty by 50%
48. Improve new product development
49. Double net worth
50. Reduce excess inventory

Answer: b

Difficulty: Moderate

Page: 128

Essay

47. Even though many aerospace manufacturing firms are very profitable, there are very few upcoming firms. Explain the reason for using at least one force from Porter’s Model.

Answer: The important factor from Porter’s Five-Force Model is the threat of potential entrants. This threat is relatively low because of the entry barriers. The cost of starting an aerospace company is high and the existing companies are well-established. These companies are large, have the contacts, personnel, and skills necessary to meet the market demand, making it almost impossible for a new company to compete with them. Hence the threat of potential entrants remains low.

Difficulty: Easy

Page: 116

48. Recently, three cell phone companies announced the addition of a nationwide “walkie-talkie” service to supplement their regular cell phone service. Will this be a sustainable competitive advantage? Justify your answer.

Answer: This will most likely not be a sustainable competitive advantage. As pointed out in the text, to be a potential source of sustainable competitive advantage, resources must be rare, valuable, durable, and inimitable. Since three companies are offering this service it is obvious that this resource can be imitated and while it may be somewhat rare initially, it will most likely soon be commonplace. This does not mean that the cell phone companies should not offer this service, however. To do so would only make them fall behind the competition.

Difficulty: Moderate

Page: 119

49. Explain why Prahalad and Hamel compare core competencies to roots.

Answer: They see core products as coming from core competencies in the way that trees are dependent on strong and sound roots to grow. From these core products come business units which are viewed as the branches of the tree. End products are viewed as the fruits.

Difficulty: Moderate

Page: 122-123

50. Explain the advantages and disadvantages of rewarding and promoting development of the core competency.

Answer: By rewarding and promoting the development of your core competencies you can really excel at it and continue to be successful in your industry. After all, the core competence gives you an advantage over your competition and you should leverage that as far as possible. The disadvantage is that it may hinder the development of new technologies or ideas. If you are preoccupied with just what you currently do well, you will not look for new and improved ways of doing things. You will be less likely to identify further improvements and could eventually lose any competitive advantage you have.

Difficulty: Hard

Page: 124

51. What is the danger of not having a strategic intent? In your answer assume you are a hospital in a city with a population of 30,000 people, located about 50 miles away from a large city.

Answer: Without a strategic intent, the hospital will fail to recognize future market needs and will only try to maintain its current market position. Most likely hospitals from the larger city will try to become more regional in nature by opening satellite centers in the county where the local hospital is located. They will also adopt the latest medical technology. Local physicians may start sending patients to the larger hospitals as the hospital will not be able to provide the best medical treatment to its patients. Employees will complain about having out of date technology and of losing patients to larger hospitals. This lower morale will adversely affect turnover. The local community will probably also become disgruntled.

Difficulty: Moderate

Page: 125-126