Strategic Management, 4e (Rothaermel)
Chapter 1 What Is Strategy?
1) A good strategy is a set of actions that enables a firm to achieve its own internal goals without regard to the external environment.
2) The following statement by the chief executive of SunStar movie studio is an effecti...
,Strategic Management, 4e (Rothaermel)
Chapter 1 What Is Strategy?
1) A good strategy is a set of actions that enables a firm to achieve its own internal goals without
regard to the external environment.
Answer: 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 which produces only a minor loss of revenues while
competitors suffer heavy losses can be seen as successful.
Difficulty: 2 Medium
Topic: Strategy and the Strategic Management Process
Learning Objective: 01-01 Explain the role of strategy in a firm's quest for competitive
advantage.
Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
2) 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."
Answer: FALSE
Explanation: Grandiose statements are not 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.
Difficulty: 2 Medium
Topic: Strategy and the Strategic Management Process
Learning Objective: 01-02 Define competitive advantage, sustainable competitive advantage,
competitive disadvantage and competitive parity.
Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
,3) A vision describes in broad, inspirational terms what an organization hopes to accomplish in
the future.
Answer: 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.
Difficulty: 1 Easy
Topic: The Roles of Vision, Mission, and Values in the Strategic Management Process
Learning Objective: 01-03 Describe the roles of vision, mission, and values in a firm's strategy.
Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
4) A mission describes how a firm will accomplish the broad goals set out in a vision statement.
Answer: 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.
Difficulty: 1 Easy
Topic: The Roles of Vision, Mission, and Values in the Strategic Management Process
Learning Objective: 01-03 Describe the roles of vision, mission, and values in a firm's strategy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
5) Product-oriented vision statements are better suited than customer-oriented vision statements
for helping companies to adapt to changes in the external environment.
Answer: 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.
Difficulty: 2 Medium
Topic: The Roles of Vision, Mission, and Values in the Strategic Management Process
Learning Objective: 01-04 Evaluate the strategic implications of product-oriented and customer-
oriented vision statements.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
, 6) Core values provide ethical guidelines for how individual employees will behave.
Answer: TRUE
Explanation: Organizational core values are the ethical standards and norms that govern the
behavior of individuals within a firm or organization.
Difficulty: 2 Medium
Topic: Leaders Role in Establishing a Firm's Ethical Climate
Learning Objective: 01-05 Justify why anchoring a firm in ethical core values is essential for
long-term success.
Bloom's: Remember
AACSB: Ethics
Accessibility: Keyboard Navigation
7) Managers should create two sets of core values, one for employees and one for themselves.
Answer: 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.
Difficulty: 1 Easy
Topic: Leaders Role in Establishing a Firm's Ethical Climate
Learning Objective: 01-05 Justify why anchoring a firm in ethical core values is essential for
long-term success.
Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
8) The three tasks of the AFI strategy framework are to Assemble a prototype, Find a buyer, and
Incorporate feedback.
Answer: 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 internal and external analysis
that can result in superior performance.
Difficulty: 2 Medium
Topic: The Strategic Role of Managers in Strategy Formulation and Implementation
Learning Objective: 01-06 Explain the AFI strategy framework.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
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