BCOR-460 Midterm Multiple-Choice Review

Commuter Scooter is a public company whose shares are currently trading in the market at $100 each. The company manufactures electric scooters at the cost of $600 per unit and sells them in the market for $1,000 each. What is the company's producer surplus? $300 $400 $500 $700

$400

By selling a laptop at $1,500 for which consumers are willing to pay up to $1,750, a consumer electronics firm makes a profit of $500 per unit. What is the economic value created in this scenario? $500 $750 $1,000 $1,250

$750

Which of the following real-world examples best supports the statement that strategic commitments to a specific industry may be the result of political rather than economic considerations? A number of European governments created Airbus through direct subsidies to provide a countervailing power to Boeing. Airbus and Boeing are likely to exit the aircraft manufacturing industry when industry profit potential falls to zero. The traditional U.S. airlines Delta, United, and American Airlines have large fixed costs to maintain their network of routes that affords global coverage, frequently in conjunction with foreign partner airlines. Given their strategic commitments, neither Delta nor United is likely to merge with other airlines.

A number of European governments created Airbus through direct subsidies to provide a countervailing power to Boeing.

Which of the following explains how dynamic capabilities are different from the resource-based view? Dynamic capabilities deal with resource heterogeneity. Dynamic capabilities deal with intangible resources. Dynamic capabilities deal with tangible resources. Dynamic capabilities deal with applying resources over time.

Dynamic capabilities deal with applying resources over time.

Ez Solutions Inc. has been operating in the country of Jamtland for almost a decade. The nation is currently experiencing an economic downturn. Which of the following is the most likely benefit of this economic condition for Ez Solutions Inc.? Ez Solutions Inc. will have better access to highly skilled human capital at a lower cost. Ez Solutions Inc. will have to expand its operations to meet the increasing consumer demand. Ez Solutions Inc. will experience less competition from rival companies. Ez Solutions Inc. will find it easier to raise prices to increase profits.

Ez Solutions Inc. will have better access to highly skilled human capital at a lower cost.

Which of the following is a feature of a fragmented industry? It tends to generate high profitability. It consists of many small firms. It allows firms to set prices. One large firm dominates the industry.

It consists of many small firms.

Which of the following is a disadvantage of the balanced scorecard approach to measure firm performance? It fails to allow managers and executives to find a balance between financial and strategic goals. It only relies on an internal view of the firm, ignoring the external view. It fails to allow managers to align their different perspectives to create a more focused corporation overall. It provides only limited guidance about which performance metrics to choose.

It provides only limited guidance about which performance metrics to choose.

________Blank are industry-specific factors that separate one strategic group from another. Mobility barriers Competitive differences Complementary products/services Barriers to entry

Mobility barriers

________Blank factors in the PESTEL framework result from the pressure that various groups, such as government bodies, nongovernmental organizations, and social movements, can exert to influence the decisions and behaviors of firms. Economic Sociocultural Ecological Political

Political

When the Alta Velocidad Española (AVE) was completed, it impacted Spain's local airline industry. Which of the following statements about the five forces does this reflect? Substitutes were not readily available because customers cannot use other means of transport. Substitutes made it difficult for generating a profit potential in Spain's airline industry. The combination of the competitive forces leads to collusion among existing airlines. Entry barriers in Spain's airline industry are relatively high because of the high costs involved.

Substitutes made it difficult for generating a profit potential in Spain's airline industry.

Which of the following examples shows economic value created? The revenue generated by selling a unit of a product is equal to the cost incurred by the firm in producing it. The price a customer is willing to pay for a good or service is more than the cost the firm incurs to produce it. The price a customer is willing to pay for a good is less than what it costs the firm to manufacture it. The value a consumer attaches to a good or service is lesser than what he or she paid for it.

The price a customer is willing to pay for a good or service is more than the cost the firm incurs to produce it.

Incumbent firms can benefit from several important sources of entry barriers. Economies of scale are one such source. Which of the following is an implication of economies of scale for incumbent firms? They cannot employ technology efficiently. They can spread fixed costs over lesser units. They benefit from a less specialized division of labor. They can demand better terms from their suppliers.

They can demand better terms from their suppliers

How do complements affect a primary product or service? They reduce the value of the primary product. They act as the strategic equivalent of the primary product. They increase the demand for the primary product. They lower the utility of the primary product.

They increase the demand for the primary product.

Which of the following statements accurately brings out the distinction between a firm's resources and capabilities? While a firm's resources are always tangible, its capabilities are by their very nature intangible. While resources reinforce core competencies, capabilities allow managers to orchestrate their core competencies. Unlike resources, capabilities do not find their expression in the firm's structure, routines, and culture. Unlike capabilities, the resources of the firm cannot be imitated by its competitors.

While resources reinforce core competencies, capabilities allow managers to orchestrate their core competencies.

Total Tools is a chain of home improvement stores that sells tools, paint, and construction products at higher prices than its competitors. Yet, the chain has a large customer base due to its wide product inventory and superior customer service. Which of the following generic business strategies has Total Tools likely adopted in this scenario? a differentiation strategy a cost-leadership strategy a market penetration strategy a growth strategy

a differentiation strategy

A firm's _______ are best described as distinct and fine-grained business processes such as taking orders, delivering products, or invoicing customers. resource flows capital gains capabilities activities

activities

In a perfectly competitive industry structure, resource immobility is high. resource heterogeneity is high. any competitive advantage that one firm has will be short-lived. competitors cannot quickly acquire resources used by the current market leader.

any competitive advantage that one firm has will be short-lived.

Supreme Coffee Roasters is a premium cafe that is reputed for its superior customer service. The coffee shop also serves gourmet food to its customers, which allows it to charge a premium price. Cheap Beans, in contrast, is a chain of coffee shops that charges the lowest price in the industry due to its self-service policy. However, Vale's Coffee Inc. has found a balance between these two strategic groups by using automated ordering to free up its employees to work as master baristas and bakers, thus focusing on creating excellent products. It charges a price slightly above that of Cheap Beans. In this scenario, Vale's Coffee is following a liquidation strategy. product diversification strategy. market penetration strategy. blue ocean strategy.

blue ocean strategy.

If costs are equal, when a firm has a higher value gap than its competitor, it can be inferred that the firm can charge a premium price for its products and services. has achieved a competitive parity in its chosen industry. has lost its competitive advantage to its competitor. can adopt a cost-leadership strategy.

can charge a premium price for its products and services.

There are several cost drivers that can be managed in order to establish a low-cost leadership advantage. One of the primary cost drivers is adding unique features that turn standard commodities into differentiated products. combining experience-based learning and process innovation to move onto a steeper learning curve. creating personalized customer service in order to minimize price sensitivity among customers. shifting to small-scale production processes in order to create highly customized products.

combining experience-based learning and process innovation to move onto a steeper learning curve.

In the dynamic capabilities perspective, ________Blank flows from a firm's capacity to modify and leverage its resource base in a way that helps it gain and sustain a competitive advantage. real purchasing power competitive advantage deregulation dynamic reconfiguration

competitive advantage

Fatima estimated that a pair of Odyssey boots would be worth $100 for its brand and durability. However, at the Odyssey outlet the boots she wanted were available for $75. The difference of $25 in this scenario is referred to as the consumer surplus. reservation price. producer surplus. break-even price.

consumer surplus.

Which of the following describes the concept of co-opetition? cooperation by competitors who want to achieve a strategic objective a product, service, or competency that adds value to the original product offering when the two are used in tandem obstacles that interfere with a firm's ability to leave an industry decisions that are costly, have a long-term impact, and are difficult to reverse

cooperation by competitors who want to achieve a strategic objective

Measuring how a customer views a firm under the balanced scorecard framework is important because customer perspective is directly linked to a firm's revenue and profit. the customer perspective reveals how rivals operate in the same industry. garnering customer feedback signals their importance to the company. knowing how customers view us can help us predict when an economic recession is coming.

customer perspective is directly linked to a firm's revenue and profit.

In the context of the SWOT matrix, which of the following best exemplifies an external opportunity for a firm? increasing productivity of the employees decreasing employee attrition within the firm decreasing government interference in the target market increasing inflation rates in the target market

decreasing government interference in the target market

The viability of a differentiation strategy is severely undermined when the difference between perceived value and costs is significant. focus of competition shifts to value-creating features rather than price. differential appeal is based more on intangible resources than tangible resources. differentiated products become commoditized throughout the industry.

differentiated products become commoditized throughout the industry.

ACME Inc. has retained you to review their low-cost strategy for their company. Based on several consultations with the client, you realize that their per unit costs are actually increasing as their business grows and expands. You conclude that this firm is experiencing diseconomies of scale. economies of scope. diseconomies of scope. economies of scale.

diseconomies of scale.

For a firm to sustain its competitive advantage, any fit between its internal strengths and the external environment must be dynamic. static. valuable. permanent.

dynamic.

The sum of consumer surplus and producer surplus for a good or service equals the reservation price. firm's profit. economic value created. total return to shareholders.

economic value created.

The value of goods/services in the eyes of consumers is not static which makes it difficult to accurately assess what someone is willing to pay for that product and service. This limitation is most directly tied to which of the following performance perspectives? return on invested capital (ROIC) accounting profitability shareholder value appreciation economic value creation

economic value creation

The idea that all available information about a firm's past, current state, and expected future performance is embedded in the market price of the firm's stock is called the time compression economies. upper-echelons theory. price-demand function. efficient-market hypothesis.

efficient-market hypothesis.

In the context of a SWOT analysis, one way a firm can develop a defensive strategic alternative is by maximizing an external strength to exploit an internal opportunity. eliminating or minimizing an internal weakness to mitigate an external threat. leveraging an external opportunity to overcome an internal threat. using an internal strength to exploit an external opportunity.

eliminating or minimizing an internal weakness to mitigate an external threat.

In the ________Blank, firms change the underlying technology while holding cumulative output constant. learning curve experience curve minimum efficient scale maximum efficient scale

experience curve

Because a consolidated industry tends to be more profitable than a fragmented one, firms have a tendency to change the industry structure in their favor, making it more consolidated through restrictive government policies .horizontal mergers and acquisitions a reduction in barriers to the industry increasing the number of products or services offered.

horizontal mergers and acquisitions.

ABC Hardrives Inc., All Digital Inc., and FastFax Corp. are all companies that manufacture and sell consumer electronics. They procure their component parts from a similar set of suppliers in China and sell the final product to customers with similar needs. Thus, the three companies together are a part of a(n) plant. focus group. industry. occupational group.

industry.

One major limitation of using shareholder value appreciation as a measure for assessing competitive advantage is that stock prices often times reflect the irrational and psychological mood and behaviors of investors. Alan Greenspan, former head of the Federal Reserve referred to this as the efficient-market hypothesis. economic value creation. the tragedy of the commons. irrational exuberance.

irrational exuberance.

If a company has 50 million shares outstanding, and each share is traded at $200, the ________Blank is $10 billion. total return to shareholders market capitalization customer lifetime value return on revenue

market capitalization

The cost-leadership strategy helps a firm achieve competitive advantage when it does which one of the following? helps a firm create as large a gap as possible between the differential value created and the cost required permits a firm to perform similar activities than its rivals with greater costs or lower value creation permits a firm to perform different activities than its rivals with greater value creation permits a firm to perform similar activities differently than its rivals with resulting lower costs

permits a firm to perform similar activities differently than its rivals with resulting lower costs

Dr. Shetty is able to drive down the cost of complex medical procedures from $100,000 to $2,000 not by doing one big thing, but rather by doing a thousand small things. This approach focuses on driving down the cost of health care through value of input factors. cost of input factors. process innovation. product innovation.

process innovation.

As differentiation and cost-leadership are distinct strategic positions that require important trade-offs, it is easy to build an ambidextrous organization. best for firms to avoid pursuing a generic business-level strategy. quite difficult to translate a blue ocean strategy into reality. easy to increase value and lower cost at the same time.

quite difficult to translate a blue ocean strategy into reality.

A firm decides to retain $20,000 from its annual earnings and invest it in developing an advanced manufacturing system. According to the dynamic capabilities perspective, the $20,000 would most likely be referred to as the firm's capital gain. frozen asset. resource flow. marginal utility.

resource flow.

According to the SWOT analysis, which of the following choices concerns a firm's internal strengths and weakness? general environment resources, support activities, and future prospects dynamic strategic fit resources, capabilities, and competencies

resources, capabilities, and competencies

A consolidated industry turns into a fragmented industry when restrictive government policies are introduced in the industry. firms reduce competition within the industry through mergers and acquisitions. technological advances lead to industry convergence. network effects enjoyed by incumbent firms within the industry become stronger.

restrictive government policies are introduced in the industry.

When a blue ocean strategy is successfully formulated and implemented, investments in differentiation and low costs are not value drivers but cost drivers. cost drivers but value drivers. complements but substitutes. substitutes but complements.

substitutes but complements.

The online retailer SW19 Inc. has successfully created a higher perceived value in the tennis equipment and apparel industry, even though it offers the same products at slightly higher prices than its competitors. This has been mainly attributed to the company's easy-to-navigate website, simple return procedures, and fast delivery. Thus, the value driver for SW19 is its lower value gap. superior customer service. economies of scale. availability of complements.

superior customer service.

One major limitation of using accounting profitability as a measure for competitive advantage is its focus on tangible assets versus intangible assets. resources rather than capabilities. business strategy versus corporate strategy. ROIC rather than net profit.

tangible assets versus intangible assets.

The ________Blank describes the internal activities a firm engages in when transforming inputs into outputs. value chain PESTEL model SWOT analysis resource-based view

value chain

Using the ________Blank, strategic leaders can see how competitive advantage flows from a firm's distinct set of activities. resource-based view VRIO framework value chain analysis SWOT analysis

value chain analysis