How capital market stakeholders and product/market stakeholders influence organizational strategic management?

Name: Class: Date:

Chapter 01: Strategic Management and Strategic Competitiveness

True / False

1. Strategic competitiveness is achieved when a firm successfully formulates and implements a value-creating strategy.

a. True

b. False

ANSWER: True

2. Alligator Enterprises has earned above-average returns since its founding five years ago. No other firm has challenged

Alligator in its particular market niche; therefore, the firm's owners can feel secure that Alligator has established a

competitive advantage.

a. True

b. False

ANSWER: False

3. The goal of strategy implementation is to develop a permanent competitive advantage.

a. True

b. False

ANSWER: False

4. Risk in terms of financial returns reflects an investor's uncertainty about the economic gains or losses that will result

from a particular investment.

a. True

b. False

ANSWER: True

5. The difference between average and above-average returns is that average returns are returns that an investor expects to

earn from an investment as compared to other investments with similar stock prices, while above-average returns are in

excess of expectations for similarly priced stocks.

a. True

b. False

ANSWER: False

6. Above-average returns are returns in excess of what an investor expects to earn from other investments with a similar

amount of risk.

a. True

b. False

ANSWER: True

7. Particularly when assessing investments in new venture firms, the most effective, and often the only, way to measure

the performance of the firms and determine their viability as an investment option is to examine financial metrics such as

returns on assets, and sales.

a. True

b. False

ANSWER: False

8. To implement a firm’s strategies, the firm takes actions to enact each strategy with the intent of achieving strategic

Copyright Cengage Learning. Powered by Cognero.Page 1

Capital markets are at the heart of a free-market system. They bring together issuers, which need capital to pay for operations and services, and investors looking for profitable investment opportunities. Most individuals and organizations have a direct or indirect stake in the capital markets, which include stock exchanges, bond markets and money markets.

Issuers

1. Issuers issue securities to raise money. They include small businesses, global corporations and governments. Businesses may issue stocks, which represent shares and ownership interests in companies, or bonds, which are loans that require issuers to pay regular interest payments to investors. Governments also issue bonds to raise money for operations, social services and infrastructure, such as schools, roads and bridges.

Investors

1. Investors may buy securities directly or indirectly through mutual funds. The investment community includes individuals, pension funds, venture capitalists and governments. Stocks are usually suitable for aggressive investors, who can tolerate some market volatility in return for long-term capital appreciation, while bonds are generally suitable for conservative investors, who want capital preservation and modest regular income.

Exchanges

1. Market exchanges process orders from investors and match buyers with sellers. Stocks trade on stock exchanges, such as the New York Stock Exchange, while bonds trade on the bond markets, which are over-the-counter electronic markets operated by financial institutions around the world.

Regulators

1. Regulators provide structure to the capital markets. They specify rules and guidelines for issuing securities and providing timely financial disclosures. The U.S. Securities and Exchange Commission is the primary enforcement agency for monitoring U.S. capital markets.

Analysts

1. Research analysts serve as impartial reviewers of securities. They analyze published financial statements, review industry data and talk to senior company management to assess the financial health and future prospects of publicly traded companies. Analysts often make recommendations on which securities investors should buy, sell or hold.

Intermediaries

1. Intermediaries facilitate the actions of investors and issuers. For example, investment banks, accountants and lawyers help issuers file the necessary forms and market their securities, while brokerages facilitate securities trading.

Media

1. The media includes the business sections of newspapers, television news programs, 24-hour cable news channels and the Internet. The media provide reports on companies and capital-market trends. Some also offer opinion on how individual stocks and overall markets are likely to perform in the future.

Others

1. Other stakeholders include industry trade groups, which lobby policy makers for regulatory changes; universities, which train future market participants; and suppliers of products and services to capital-market participants, such as computer vendors and accounting firms.

What is the role of stakeholders in strategic management?

Why are capital market stakeholders important?

What are capital market stakeholders?

How do the three primary stakeholder groups influence organizations?