BUS 401 EXAM 2

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A corporation's star SBUs will A. hold a high market share in a fast-growing market. B. experience low and unstable earnings in a fast-growing market. C. hold a small market share in a low-growth market. D. compete in a low-growth market but hold considerable market share.

Competitive advantage goes to the firm that achieves the A. largest economic value created. B. lowest producer surplus. C. highest payable turnover. D. highest Cost of goods sold/Revenue ratio.

Higher value tends to require A. higher costs. B. higher quantities. C. more complements. D. more trade-offs.

In a successful _____ strategy, the trade-offs between differentiation and low cost are reconciled. A. blue ocean B. focused differentiation C. liquidation D. divestment

The market for 3-D televisions is in the introduction stage of the industry life cycle. What does this imply? A. There are only a few competitors in the 3-D television market. B. The number of buyers in the market is high. C. The prices of 3-D televisions will be lowest during this stage. D. The barriers to entry are low in the industry.

Which of the following best illustrates forward vertical integration? A. A firm that manufactures and sells car engines to major automobile companies launches its own line of cars. B. A chain of ice cream parlors launches a brand of toys and accessories for children. C. A multinational coffee chain sources its coffee beans from plantations in Brazil and Vietnam. D. A designer shoe company that previously purchased leather from external suppliers establishes its own leather tannery.

Which of the following business models has been traditionally used by the magazine and newspaper industry? A. subscription-based B. razor-razor-blade C. pay-as-you-go D. freemium

_____ indicates how much a firm benefits from interest-free loans extended by its suppliers and creditors. A. Payables turnover B. Receivables turnover C. Assets turnover D. Inventory turnover

_____ is best described as the output range needed to bring down the cost per unit as much as possible, allowing a firm to stake out the lowest-cost position that is achievable through economies of scale. A. Minimum efficient scale B. Break-even output C. Maximum output capacity D. Optimum sustainable yield

_____, which are incurred when pursuing a related-diversification strategy, are a function of the number, size, and types of businesses that are linked to one another. A. Coordination costs B. Fixed costs C. Agency costs D. Network costs

_____, which is the return on risk capital, includes stock price appreciation plus dividends received over a specific period. A. Total return to shareholders B. Earnings per share C. Receivables turnover D. Dividend yield

Photohome is a file hosting service that allows users to store up to 5GB of data with no restrictions or charges. However, users have to pay a fee for advanced features on the cloud storage system and additional storage space. Which of the following business models does this best illustrate? A. subscription-based B. freemium C. pay-as-you-go D. razor-razor-blade

A blue ocean strategy tends to be successful only if a firm is able to rely on a _____ that allows it to reconcile trade-offs. A. value driver B. value innovation C. product feature D. product complement

The crossing-the-chasm framework states that _____ need to be adjusted for each customer segment. A. incremental contributions B. business strategies C. innovations D. competitors

The solar-powered car division of a large automobile company has been experiencing negative cash flows though the market growth for such cars is predicted to be high. If the company invests further resources into this division, it can increase its relative market share in the future. However, if due to technological changes the car cannot create sufficient consumer demand, then the division can prove to be unprofitable. In the Boston Consulting Group (BCG) growth-share matrix, the solar-powered car division will be categorized under A. dogs. B. question marks. C. stars. D. underdogs.

Which of the following is a key question managers must answer to formulate an appropriate business-level strategy? A. When will we satisfy our customer needs? B. How will we satisfy our customer needs? C. Where will we satisfy our customer needs? D. Can we satisfy our customer needs?

_____ indicates how fast a firm is collecting the credit amount extended by a firm to its customers. A. Payables turnover B. Receivables turnover C. Assets turnover D. Inventory turnover

_____ is best described as a form of long-term contracting in the manufacturing sector that enables firms to commercialize intellectual property. A. Lean manufacturing B. Licensing C. Crowdsourcing D. Bootlegging

_____ is best described as a situation in which one party is more informed than another, because of the possession of private information. A. Information governance B. Information asymmetry C. Information deregulation D. Information piracy

A firm's resistance to changes in the status quo is referred to as A. organizational parity. B. organizational liquidity. C. organizational inertia. D. organizational efficacy.

The customers entering the market in the growth stage are primarily A. technology enthusiasts. B. laggards. C. early adopters. D. late majority.

A cost-leader is protected from the threat of new entrants primarily due to its A. superior customer service. B. luxury goods. C. economies of scale. D. premium pricing.

A _____ is a graphical depiction of a company's relative performance vis-à-vis its competitors across the industry's key success factors. A. value curve B. value canvas C. strategy curve D. strategy canvas

A firm incurs $400 to manufacture a television. In the market, customers are willing to pay a maximum of $600 for the television priced at $500. The difference of $200 ($600 minus $400) is the A. consumer surplus. B. total return to shareholders. C. customer lifetime value. D. economic value created.

How does availability of complements act as a value driver? A. Complements add value to a product by offering an inferior substitute to it. B. Complements add value to a product by competing with it. C. Complements add value to a product when they imitate it. D. Complements add value to a product when they are consumed in tandem with it.

The four-step innovation process ends with A. idea generation. B. invention. C. idea testing. D. imitation.

Which of the following alternatives on the make-or-buy continuum allows for most integration? A. short-term contracting B. joint ventures C. licensing D. parent-subsidiary relationship

Which of the following is an example of an internal transaction cost? A. the cost of searching for a contract manufacturer B. the cost of signing a contract with a supplier C. the cost of buying raw materials D. the cost of maintaining a production unit

Which of the following is primarily a cost driver? A. product features B. customer service C. complements D. economies of scale

DiscountHaven Inc. is a large chain of hypermarkets. It has cost benefits due to its extensive operation. The company's marketing and sales, logistics, administrative, and other such related costs get divided between a large number of product units stocked in its stores. This makes it difficult for smaller retail stores and supermarkets to compete against DiscountHaven's low prices. Thus, DiscountHaven has a competitive advantage due to its A. superior customer service. B. time compression economies. C. economies of scale. D. learning-curve effects.

A _____ is best defined as a company that combines two or more strategic business units under one overarching corporation and follows an unrelated diversification strategy. A. conglomerate B. single-business firm C. parent company D. subsidiary

A _____ is best described as a form of intellectual property that gives the inventor exclusive rights to benefit from commercializing a technology for a specified time period in exchange for public disclosure of the underlying idea. A. patent B. promissory note C. franchise D. royalty

A _____ primarily details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market. A. business-level strategy B. code of ethics C. mission statement D. functional-level strategy

A blue ocean strategy differs from a low-cost strategy in that A. the intent of a blue ocean strategy is not to be the absolute lowest-cost provider because a blue ocean must also increase perceived value. B. the focus of a blue ocean strategy is on lowering the economic value created, whereas a cost-leader focuses on increasing the economic value created. C. economies of scale are more important to a blue ocean strategy, while economies of scope are more important to a cost-leader. D. a blue ocean's research and development focus is on process technologies, and a cost-leader's focus is on product technologies.

A company that uses a differentiation strategy can achieve a competitive advantage as long as its A. economic value created is greater than that of its competitors. B. value gap is lower than that of its competitors. C. strategic position is below the productivity frontier. D. products and services create a lower consumer surplus than that of its competitors.

When a blue ocean strategy goes bad, a firm has neither a clear differentiation nor a clear cost-leadership profile. This situation is referred to as A. stuck in the middle. B. buried at the bottom. C. burned at the top. D. caught in the transition.

A differentiator is least likely to be threatened by increases in input prices due to powerful suppliers when the A. differentiator is able to create a significant difference between perceived value and current market prices. B. differentiator is able to significantly reduce the value gap. C. source of a competitor's differential appeal is tangible rather than intangible. D. new product features added raise costs but not the perceived value in the minds of consumers.

A factor favoring the success of disruptive innovation is that A. incumbent firms are slow to change. B. new entrants have highly formal organizational structures and processes. C. the low end of the market is highly guarded. D. incumbent firms focus on radical innovation rather than incremental innovation.

A firm achieves differentiation parity ideally when A. it creates the same customer value as its competitors. B. its cost of production is higher than that of its competitors. C. it successfully sells its products and services at a higher price than its competitors. D. its product features and services are better than that of its competitors.

A firm experiences _____ when there are increases in cost per unit as output increases. A. diseconomies of scale B. economies of scope C. time compression diseconomies D. economies of flow

A firm pursuing a differentiation strategy as opposed to a low-cost strategy will A. focus its research and development on product technologies to add uniqueness. B. concentrate on leveraging its economies of scale through process technologies. C. build an organization structure that relies on strict budget controls. D. create a lower economic value as compared to its competitors.

A firm's learning curve is steeper than that of its competitor. What does this imply? A. The firm is at an advantage when compared to its competitor. B. The firm and its competitor have achieved cost parity. C. The firm experiences negative returns to scale. D. The firm experiences diseconomies of scale when compared to the competitor.

A high percentage of R&D/Revenue ratio indicates a(n) A. strong focus on innovation to improve current products and services. B. inefficiency in the management to focus on new products. C. strong focus on marketing and sales to promote products and services. D. negligent investment toward research and development.

A new product often has a high price when it is launched because of a A. large investment in designing a product while producing small quantities. B. large investment in marketing a product while producing small quantities. C. large investment in designing a product while producing large quantities. D. large investment in marketing a product while producing large quantities.

A primary advantage of organizing economic activity within firms is the A. ability to coordinate highly complex tasks to allow for specialized division of labor. B. low administrative costs because of reduced bureaucracy. C. eradication of the principal-agent problem. D. high-powered incentive to work as salaried employees for an existing firm.

A successfully implemented blue ocean strategy allows a firm to A. charge a higher price than the cost-leader in the industry. B. create lesser economic value than the differentiator in the industry. C. reduce its value gap beyond that created by the cost-leader in the industry. D. increase its price above that of the differentiator in the industry.

A(n) _____ leverages new technologies to attack existing markets. A. disruptive innovation B. incremental innovation C. radical innovation D. architectural innovation

About 20 years ago, Sturdy Light, Inc., produced a sturdy, lightweight backpack in a market that was rapidly growing. Sturdy Light became a leader in this market. Eventually, the backpack market reached the maturity stage and slowed down. However, by this time, Sturdy Light had developed a strong brand name and continued to steadily lead the market. Which of the following describes this scenario? A. Sturdy Light was a star that developed into a cash cow. B. Sturdy Light was a question mark that developed into a star. C. Sturdy Light was a dog that developed into a question mark. D. Sturdy Light was a cash cow that developed into a star.

Allure is a cosmetic brand that pursues a cost-leader strategy. Which of the following statements is true of the cosmetic brand? A. It appeals to the price-conscious buyers. B. Its primary value driver is product uniqueness. C. It charges a premium price for its products. D. It directly competes against luxury cosmetic brands that charge premium prices.

Although TechnoWare Electronics Inc. still sells its VCR players, a product in its decline stage, the investments made by the company on improving or marketing the product are very low. The company has allocated the least amount of human and financial capital to this department. Which of the following strategies has TechnoWare Electronics adopted in this scenario? A. harvest strategy B. maintain strategy C. consolidation strategy D. differentiation strategy

Value drivers contribute to a firm's competitive advantage only if A. the increase in value creation exceeds the increase in costs. B. they can shrink the firm's value gap. C. they can restrict the firm from claiming a premium price for its products. D. the decrease in perceived value leads to an increase in costs.

As a research scholar, Ricardo had built a helicam as part of his project. The helicam could capture aerial images. Realizing the potential use of this product in movie production and military and rescue operations, he started a new venture where he could customize these helicams to fit the specific needs of the buyers and sell them. Ricardo can be best described as a(n) A. entrepreneur. B. category captain. C. franchisor. D. early adopter.

As the cumulative output in a firm increases, managers learn how to optimize the production process and improve workers' performance through repetition. This drives down the per-unit cost. Which of the following phenomena is best described here? A. learning effects B. network effects C. diseconomies of scale D. productivity frontier

As the inventor of hypertension medication, OneSure Pharmaceuticals (OSP) Inc. was able to reap the benefits of economies of scale due to a large consumer demand for the drug. Even when competitors later developed similar drugs after the expiry of OSP's patents, regular users did not want to switch because they were concerned about possible side effects. Which of the following benefits does this scenario best illustrate? A. first-mover advantages B. social benefits C. network externalities D. fringe benefits

At a certain output level, the per-unit cost incurred by a firm to manufacture a product is $5. Other factors remaining constant, what will be the new per-unit cost if the cumulative output is doubled, and the firm is able to achieve an 80 percent learning curve? A. $4 B. $5 C. $3 D. $6

Bargain Styles Inc. is an apparel company that caters to the highly price-conscious customers. Through its simple apparel designs, acceptable quality levels, and minimal customer service, the company has been able to sell its merchandise at the lowest prices in the industry. Which of the following generic business strategies is Bargain Styles applying? A. cost-leadership B. differentiation C. niche marketing D. product diversification

Bass Watches Inc. initially spent eight man-hours to assemble a wristwatch. But as the production doubled, the number of hours spent on assembling a watch reduced by 20 percent. This increase in productivity reduced the company's cost per unit. What is this phenomenon referred to as? A. learning-curve effect B. network effect C. black-swan event D. time compression diseconomies

BestDrive Inc. is a large automobile company. The company's petrol cars strategic business unit (SBU) has been recognized as a cash cow, and its hybrid electric cars SBU has been categorized under stars. Which of the following can be inferred from this scenario? A. The petrol cars SBU operates in a low-growth market, whereas the hybrid electric cars SBU operates in a high-growth market. B. The petrol cars SBU will have a relatively low market share in its industry, whereas the hybrid electric cars SBU will have the least market share in its industry. C. The strategic recommendation for the hybrid electric cars SBU will be to harvest it, whereas for the petrol cars SBU, the company should just maintain it. D. The petrol cars SBU is more important than the hybrid electric cars SBU in terms of future growth for the company.

Both BioThink Inc. and GD Pharma Inc. have discovered similar vaccines to prevent cancer. While GD Pharma's vaccine sells at $100 per unit, BioThink sells its vaccine at $90 per unit. This price differentiation has mainly been attributed to the companies' capital decisions. While BioThink used its retained earnings to develop the vaccine, GD Pharma borrowed funds from banks to develop the vaccine. Thus, GD Pharma pays a higher interest on its capital, which makes it necessary to price its vaccine higher. Thus, the key driver for BioThink's competitive advantage is A. low-cost input factors. B. economies of scale. C. superior customer service. D. availability of complements.

Canon was able to redesign the copying machine so that it didn't need professional service—reliability was built directly into the machine, and the user could replace parts, such as the cartridge. What Xerox had not envisioned was the possibility that the components of the copying machine could be put together in an altogether different way that was more user-friendly. This example describes A. architectural innovation. B. incremental innovation. C. radical innovation. D. disruptive innovation.

Chao is in an interview for a sales job that requires no experience. He is trying to portray himself as a highly enthusiastic, energetic person with high-level communication and interpersonal skills. The interviewer is convinced that Chao should be hired as a salesperson in the company. However, in his resume, Chao had not mentioned his previous work experience as he was fired from that job because he used illegal drugs. Which of the following does this scenario best illustrate? A. information asymmetry B. principal-agent problem C. experience-curve effect D. learning-curve effect

Decisions relating to the range of products and services a firm will offer determine the firm's A. level of diversification. B. geographic scope. C. vertical integration. D. absorptive capacity.

Divina Pharma Inc. and MF Electronics Inc. have together invested and created a new organization, FirstHealth Inc., to focus on developing diagnostic devices. Through this new firm, both companies are attempting to combine their core competencies to innovate and reduce their risks associated with transaction-specific investments. However, the new organization operates independent of Divina Pharma and MF Electronics. Which of the following alternatives to integration does this scenario best illustrate? A. a joint venture B. a franchisee C. a licensing contract D. a corporate acquisition

What does blue ocean strategy attempt to reconcile? A. the conflicting requirements of two generic strategies B. the conflicting requirements of two value drivers C. the conflicting requirements of two cost drivers D. the conflicting requirements of two or more unique strategies

Each stage of the vertical value chain typically represents a distinct _____ in which a number of different firms are competing. A. industry B. functional department C. economy D. customer segment

Firms that use taper integration also use _____ when they rely on outside-market firms for some of their supplies. A. backward vertical integration B. forward vertical integration C. backward horizontal integration D. forward horizontal integration

Gotta Get Chocolates, Inc. has recently introduced a new production method that will make the production of their chocolates more cost-effective. Which of the following will most likely be the result of this innovation? A. jumps to a steeper learning curve B. destabilizes a steeper learning curve C. stabilizes the existing learning curve D. moves down the existing learning curve

Hitoro Inc. developed a superior touch screen technology for tablet computers that enabled multiple users to operate the screen at the same time. The technology was leased to Revox Inc., a consumer electronics company, for five years. Which of the following alternatives to integration does this best illustrate? A. licensing B. franchising C. crowdsourcing D. bootlegging

How can a firm pursuing a diversification strategy enhance its overall corporate performance by leveraging financial economies? A. by using internal capital markets as a source of value creation B. by adding more unrelated businesses into its corporate portfolio C. by increasing its coordination and influence costs D. by investing in businesses under the question mark quadrant of the BCG matrix

How is a cost-leader protected from threats from powerful buyers? A. It is more able to absorb price increases through accepting lower profit margins. B. It is more able to absorb price increase through generating higher profit margins. C. It is able to create a significant difference between perceived value and current market prices. D. It is able to create a significant difference between actual value and future market prices.

How is the triple-bottom-line approach different from the traditional approaches to measuring competitive advantage? A. The triple-bottom-line takes a more integrative and holistic view in assessing a company's performance than traditional approaches do. B. The triple-bottom-line places less emphasis on financial success in assessing a company's performance than traditional approaches do. C. The triple-bottom-line uses a more one-dimensional approach in assessing a company's performance than traditional approaches do. D. The triple-bottom-line relies more on internal factors in assessing a company's performance than traditional approaches do.

In the United States, the time period for the right to exclude others from the use of a patented technology is _____ from the filing date of a patent application. A. 20 years B. 25 months C. 15 months D. 25 years

In the early 1990s, Gatorade dominated the market for sports drinks, a segment in which it had been the original innovator. For decades, Coca-Cola had been a leader in marketing, bottling, and distributing soft drinks. However these drinks did not include a sports drink. Soon after Gatorade appeared, Coca-Cola developed and marketed its own sports drink, Powerade. In this example, Coca-Cola A. built new core competencies to protect and extend its current market position. B. built new core competencies to create and compete in markets of the future. C. leveraged core competencies to improve current market position. D. redeployed and recombined core competencies to compete in markets of the future.

What is an invention? A. the transformation of an idea into a new product or process B. a unique idea that has not been thought of before C. the transformation of an idea into a successful product D. a unique idea that has been patented

Lush Roses is a chain of premium hotels around the globe that charges higher prices for its rooms and suites when compared to the average industry standards. Yet, the hotel enjoys the largest market share in the industry. This is mainly due its highly responsive staff that has a strong commitment toward achieving a 100 percent guest satisfaction. In this scenario, which of the following is the key value driver? A. superior customer service B. low cost of input factors C. availability of complements D. economies of scale

Pilot Games Inc. allows users to play the trial versions of its games without any charge. However, users have to purchase the games to access the upgraded version of the games with advanced features. Which of the following business models is Pilot Games using in this scenario? A. freemium B. subscription-based C. pay-as-you-go D. razor-razor-blade

RoboToys, Inc. is involved in the production of robotic toys. This firm produces the raw materials, including metals and oils for plastic; creates the integrated circuits, displays, and batteries; and assembles the toys. Which of the following stages of the industry value chain is RoboToys involved in? A. stages 1, 2, and 3 B. stages 1, 2, and 4 C. stages 2, 3, and 4 D. stages 2, 3, and 5

Tangles Costume Jewelry offers slightly lowerquality merchandise than competitors at a much lower price. What strategy is Tangles using? A. cost-leadership B. differentiation C. niche marketing D. product diversification

The managers at AHL Chemicals Inc. decided that their firm needed to diversify because of falling sales and lower performance in one sector. How does diversifying compensate for the lackluster performance in this sector? A. by having higher performance in another sector B. by sharing their market power C. by increasing the firm's risk in another sector D. by motivating managers

The strategic objective of a first mover during the introduction stage of the industry life cycle is to A. pursue a harvest strategy. B. survive by drawing on deep pockets. C. achieve market acceptance. D. lower entry barriers.

Today, many companies use PeopleSoft and EDS to avoid maintaining a human resource management system. By doing this, these firms are A. engaging in strategic outsourcing. B. increasing their level of vertical integration. C. offshoring their core activities. D. engaging in unrelated diversification.

Trader Joe's successfully used a blue ocean strategy by offering lower cost food than Whole Foods for the same market of patrons. By doing this, Trader Joe's was able to A. gain a market share and make up the loss in margin through increased sales. B. create higher value creation and thus generate greater profit margins. C. gain a market share and make up the loss in margin through increased pricing. D. create higher value creation and thus generate greater sales.

When a firm combines experience based learning and process innovation, the firm A. jumps to a steeper learning curve. B. experiences an increase in per-unit cost. C. loses its competitive advantage. D. moves down the existing learning curve.

When a firm is successful at pursuing a blue ocean strategy, A. investments in differentiation are complements. B. value and cost exhibit a positive correlation. C. low cost acts as a substitute. D. investments in process and product technologies are substitutes.

When a firm operates at the minimum efficient scale, the A. returns to scale are constant. B. cost per unit is the highest. C. firm experiences diseconomies of scale. D. firm attains the highest cost position.

When executives of a firm consider business opportunities only where they can leverage their existing competencies and resources, it can be concluded that the firm is using A. related-constrained diversification. B. related-linked diversification. C. strategic outsourcing. D. offshore outsourcing.

Which of the conditions prevail when an industry is at the end of its life cycle? A. The level of process innovation reaches its maximum as firms attempt to lower cost. B. The industry structure is perfectly competitive with a large number of buyers and sellers. C. The strategic objectives of businesses will involve gaining market acceptance. D. The market reaches its maximum size at this stage.

Which of the following approaches to assess competitive advantage is based on the view that noneconomic factors can have a significant impact on a firm's financial performance? A. the triple-bottom-line approach B. the economic value creation framework C. the accounting profitability approach D. the balanced-scorecard

Which of the following best illustrates site specificity? A. equipment necessary for mining bauxite and aluminum smelting B. bottling machinery to manufacture bottles with trademarked shapes C. investment made in human capital to master procedures of a specific organization D. investment made to train employees to operate computers

Which of the following customer segments as described in the chasm framework make up the mass market? A. the early and late majority together B. the early adopters alone C. the technology enthusiasts and laggards together D. the technology enthusiasts alone

Which of the following is a feature of the growth stage of the industry life cycle? A. The consumer demand increases. B. The prices of goods begin to rise. C. The basis of competition moves away from process innovation. D. The number of competitors decreases.

Which of the following is an accurate definition of the customer segment "laggards"? A. the last consumer segment to come into the market, entering in the declining stage of the industry life cycle B. the last consumer segment to come into the market during the growth stage of the industry life cycle C. the last consumer segment to come into the market during the shakeout stage of the industry life cycle D. the last consumer segment to come into the market, entering in the maturity stage of the industry life cycle

Which of the following is more of a value driver than a cost driver? A. superior customer service B. economies of scale C. learning-curve effects D. experience-curve effects

Which of the following is true of a disruptive innovation? A. It targets existing markets. B. It initially provides high-cost solutions to existing problems. C. It introduces a radical idea and creates a new industry. D. It attacks the market through a top-down process.

Which of the following key assumptions are innovations like Procter & Gamble's "Connect + Develop" based on? A. Combining the best of internal and external R&D will more likely lead to a competitive advantage. B. Almost 40 percent of sales comes from 80 percent of product selection found in the short head. C. The low end of a market is highly vulnerable to competitive attacks. D. Since the best people, the smartest people in the industry work for P&G, the best discoveries must be invented at P&G.

Which of the following lists the stages of the industry life cycle in the correct order? A. introduction, growth, shakeout, maturity, and decline B. introduction, shakeout, growth, maturity, and decline C. introduction, growth, maturity, shakeout, and decline D. introduction, shakeout, maturity, growth, and decline

Which of the following provides an example of a firm in a red ocean? A. Chique Apparel offered clothing at a low price but failed to differentiate its product as being exclusive. B. Cheap Apparel offered clothing at a price matching that of its competitors and, as a result, it had lower profit margins. C. Goode Apparel offered clothing at a mid-range price but failed to differentiate its product as being of decent quality. D. Top Drawer Apparel offered clothing at a higher price than competitors and, as a result, failed to make a profit.

Which of the following scenarios would be characteristic of an entrepreneur? A. Rachel implemented a new and more efficient way to produce pottery. B. Mary imitated a new, more efficient method of producing pottery. C. Alissa scaled back the production of pottery because it wasn't cost effective. D. Ursula used a proven marketing method to advertise her pottery.

Which of the following scenarios would typically happen in a firm that uses open innovation? A. a meeting with professors at a university to get ideas for product B. a survey of employees to get ideas for a product C. a meeting of department heads to get ideas for a product D. a conference of R&D employees from various branches to get ideas for a product

Which of the following statements accurately brings out the difference between economies of scale and learning effects? A. While there are no diseconomies to learning, there are diseconomies to scale. B. Economies of scale occur over time, whereas learning effects are captured at one point in time. C. Firms experience economies of scale when output increases, and learning effects when output decreases. D. Economies of scale reduce cost per unit, learning effects increase cost per unit.

Which of the following statements accurately brings out the distinction between the introduction and growth stages of the industry life cycle? A. There is more strategic variety in the growth stage when compared to the introduction stage. B. The number of competitors is more in the introduction stage than the growth stage. C. The market size for a new product or service is larger in the introduction stage when compared to the growth stage. D. While achieving market acceptance is the strategic objective during the introduction stage, the objective in the growth stage is to pursue a harvest strategy.

Which of the following statements is true of a strategic position? A. Choosing a strategic position requires making important trade-offs between value and cost positions. B. Strategic positions are fixed; they do not change like the environment. C. Differentiation and cost leadership require similar strategic positions. D. A firm is said to have a competitive advantage when it ends up with strategic positions below the productivity frontier.

While KFC focuses on international markets, its competitor, Chick-fil-A, focuses on the domestic U.S. market. What is the reason behind this strategic difference? A. KFC has more financial resources than Chick-fil-A since it is a publicly traded stock company. B. Chick-fil-A has a larger customer base and number of outlets in the U.S. market than its competitor KFC. C. KFC wants to follow a differentiation strategy, and Chick-fil-A wants to pursue a cost-leadership strategy. D. Chick-fil-A is part of a large conglomerate, whereas KFC has more flexibility to pursue a geographic diversification strategy.

Why is following an unrelated diversification strategy especially advantageous in an emerging economy? A. It allows the conglomerate to overcome institutional weaknesses in emerging economies. B. It allows the conglomerate to form a monopoly in emerging economies. C. It allows the conglomerate to use well-defined legal systems in emerging economies. D. It allows the conglomerate to take advantage of strong capital markets in emerging economies.

Win Goods Inc. is a large multinational conglomerate. As a single business unit, the company's stock price is estimated to be $200. However, by adding the actual market stock prices of each of its individual business units, the stock price of the company as one unit would be $300. What is Win Goods experiencing in this scenario? A. diversification discount B. learning-curve effects C. experience-curve effects D. economies of scale

_____ is best described as changes in an industry value chain that involve moving ownership of activities closer to the end (customer) point of the value chain. A. Forward vertical integration B. Corporate divestiture C. Reverse engineering D. Closed innovation

_____ is best described as decreases in cost per unit as output increases. A. Economies of scale B. Economies of scope C. Time compression economies D. Economies of replication

_____ is best described as moving one or more internal value chain activities outside the firm's boundaries to other firms in the industry value chain. A. Strategic outsourcing B. Reverse engineering C. Forward integration D. Horizontal integration

As it takes less and less time to produce the same output, learning curves usually A. go up. B. go down. C. stay the same. D. fluctuate.

At a certain output level, the per-unit cost incurred by a firm to manufacture a product was $60. Once the cumulative output doubled, the cost per unit reduced to $54. All other factors remaining constant, the firm has been able to achieve a(n) A. 80 percent learning curve. B. 90 percent learning curve. C. 60 percent learning curve. D. 54 percent learning curve.

A drawback of short-term contracting as an alternative to making a component in-house is that A. it is the most-integrated alternative to performing an activity so the principal company has no control over the agent. B. the supplying firm has no incentive to make any transaction-specific investments to increase performance or quality. C. it fails to allow a long planning period that individual market transactions provide. D. the buying firm cannot demand lower prices due to the lack of a competitive bidding process.

A firm follows a(n) _____ when less than 70 percent of its revenues come from a single business and there are few, if any, linkages among its businesses. A. related-constrained strategy B. unrelated diversification strategy C. differentiation strategy D. dominant-business strategy

A firm that engages in strategic outsourcing typically A. increases its internal transaction costs. B. reduces its level of vertical integration. C. reduces its level of external transaction costs. D. increases its level of horizontal integration.

A value curve indicates a lack of effectiveness in a firm's strategic profile when it A. stays level. B. zigzags. C. trends downward. D. trends upward.

According to the five forces model, which of the following is viewed as a major risk to a business pursuing a cost-leadership strategy? A. competition switching from non-price attributes to pricing B. innovation that allows competitors to emerge with more economical replacements C. new entrants with small production scale D. suppliers requesting a 2% price increase across the industry

After Jeff Bezos read about how the Internet was growing by 2,000 percent a month, he set out to use the Internet as a new distribution channel and founded Amazon, which is now the world's largest online retailer. This is clearly an example of a(n) A. firm that uses closed innovation. B. entrepreneur who commercialized invention into an innovation. C. business that entered the industry during its maturity stage. D. exception to the long tail business model.

Although JetBlue used a blue ocean strategy to achieve an initial competitive advantage, it failed to maintain this advantage. Which of the following provides the best reason for this development? A. It failed to drive up the perceived customer value. B. It failed to refine its strategic position over time. C. It failed to move into a non-contested market space. D. It failed to offer enough strategic trade-offs.

Amazon.com has decided to enter the college bookstore market. The goal of "Amazon Campus" is to offer co-branded university-specific web sites that offer textbooks and paraphernalia, such as logo sweaters and baseball hats. This development shows Amazon's relentless pursuit of A. geographic diversification. B. product diversification. C. vertical integration. D. horizontal integration.

An intrapreneur is described as a person who A. restricts changes within an organization. B. innovates within existing companies. C. introduces new products or services by starting his or her own ventures. D. invests funds in the ideas of another person in the same organization.

BM Goods Inc. is a large conglomerate that operates only in its home country. The company competes in industries like the consumer electronics, health care, hotel, airlines, education, and steel industries. Which of the following diversification strategies does this best illustrate? A. process diversification B. product diversification C. geographic diversification D. market diversification

By introducing Vscan, a small, wireless ultrasound device, GE Healthcare (General Electric) was primarily trying to A. cater to the healthcare needs of the developed countries over developing countries. B. invade the healthcare market from the bottom up. C. leverage existing technologies to attack new markets. D. find a market for high-end, high-price diagnostic devices.

Coca-Cola was primarily known for its core competencies in marketing, bottling, and distributing aerated drinks. However, with the success of Gatorade, Coca-Cola developed competencies in the development and marketing of its own sports drink, Powerade. Which of the following is true of Coca-Cola? A. It is leveraging existing core competencies to improve current market position. B. It is building new core competencies to protect and extend its current market position. C. It is redeploying and recombining existing core competencies to compete in markets of the future. D. It is targeting the chasm between the early adopter and early majority market segment.

Combining economies of learning with the existing production technology allows a firm to A. move up a given experience curve. B. move down a given learning curve. C. jump to a less steeper learning curve. D. jump to a flatter experience curve.

Companies that pursue related diversification are more likely to improve their performance than companies that pursue unrelated diversification because they create a A. diversification discount. B. diversification premium. C. conglomerate discount. D. conglomerate premium.

Cool Cat Inc. has dominated the high-end refrigerator market by producing a reliable refrigerator with many bonus features that appeal to customers. Recently, a competitor has developed a refrigerator that offers many of the same features as Cool Cat's refrigerator. Which of the following will most likely help Cool Cat to keep its competitive advantage? A. a reduction of price B. the loyalty of its customers C. an increase of price D. the loyalty of its retail stores

Diseconomies of scale refer to A. decreases in cost as profit increases. B. increases in cost as output increases. C. increases in economic value as per-unit cost decreases. D. decreases in profit when consumer demand decreases.

ESB Group is the parent company of many related businesses under its banner. Each share of the parent company is quoted at $220. However, if this had to be assessed by adding the stock prices of each of its strategic business units, the value would only be $200 per share. In this scenario, what has ESB Group created? A. capital liquidity B. diversification premium C. diversification discount D. demand-pull inflation

General Electric (GE) disrupted itself in the healthcare industry by A. replacing the top levels of the executive hierarchy. B. introducing inexpensive and smaller diagnostic devices in developing countries. C. saturating the global market with multiple diagnostic devices. D. targeting the comparatively less price-sensitive sections of the market.

GreenCure Pharma Inc. wanted its research partner, an R&D company, to develop a cancer vaccine. However, the project required huge capital investments, and its research partner was not ready to solely face the risks involved. Thus, to gain its partner's confidence and to prove its involvement, GreenCure Pharma invested $100 million in the project. This investment made by GreenCure Pharma will result in a A. cartel. B. credible commitment. C. corrective action. D. parent-subsidiary relationship.

Home Smart Inc. is a chain of supermarkets that sells its products at higher prices than its competitors. Yet, the supermarket chain has a large customer base due to its wide product portfolio and superior customer service. Which of the following generic business strategies has Home Smart adopted in this scenario? A. cost-leadership B. differentiation C. market penetration D. product diversification

How does a firm capture its producer surplus for a good or service? A. as cost per unit sold B. as profit per unit sold C. as earnings per share D. as market price per share

How is an equity alliance different from a joint venture? A. An equity alliance involves ownership that facilitates transaction-specific ventures; a joint venture involves taking ownership by buying stock. B. An equity alliance involves taking ownership in a partner; a joint venture involves two or more people owning a firm. C. An equity alliance involves taking ownership in a partner; a joint venture involves taking ownership by buying stock. D. An equity alliance involves partners contributing equity to a joint venture; a joint venture involves two or more people owning a firm.

If a strategic business unit is recognized as a cash cow, it is advisable to A. harvest the business. B. invest into the business to hold its current position. C. divest the business due to its low market share. D. maintain it till it turns into a dog.

How is differentiation parity different from cost parity? A. Differentiation parity deals with pricing not innovation. B. Differentiation parity deals with innovation not value. C. Differentiation parity deals with pricing not value. D. Differentiation parity deals with value not pricing.

In developed economies, the electric car industry is in the introduction stage, and the industry for MP3 players is in the shakeout phase. What does this imply? A. The mode of competition in the electric car industry will be based on price, whereas in the MP3 player industry, the mode of competition will be non-price based. B. The industry for electric cars will focus more on product innovation, whereas in the MP3 player industry, the focus will be on process innovation. C. The electric car industry will move to the maturity stage, whereas the industry for MP3 players will enter the growth stage next. D. The industry for electric cars will primarily pursue an integration strategy, whereas in the MP3 players industry, the focus will be on differentiation.

In the context of industrial growth, which of the following statements is true of standards? A. Standards emerge exclusively from bottom-up through competition in the marketplace. B. As the size of a market expands, a standard signals the market's agreement on a common set of engineering features and design choices. C. Standards are exclusively imposed top-down by government or other standard-setting agencies such as the Institute of Electrical and Electronics Engineers. D. After a standard is established in an industry, the basis of competition tends to move away from process innovations toward product innovations.

In the decline stage, which of the following strategies involves a reduction of investments in product support? A. exit strategy B. harvest strategy C. maintain strategy D. consolidate strategy

In which of the following stages of the industry life cycle is a standard first established? A. maturity stage B. growth stage C. shakeout stage D. introduction stage

Incumbent firms favor incremental innovation over radical innovation because A. their business decisions are independent of the other parties in their innovation ecosystem. B. radical innovation will disturb the existing power distribution within the firms. C. incumbent firms do not have formal organizational structures and processes like the way new entrants do. D. incremental innovations help firms sustain a permanent competitive advantage, whereas radical innovations only help gain a temporary advantage.

Intel's Celeron chip and Atom chip are initiatives to A. introduce a new product in a new market to extend its leadership. B. guard the company against disruptive innovation by protecting the low end of the market. C. stall its own disruption strategies and wait for its rivals to introduce disruptive forces. D. target that section of the market that is not particularly price sensitive.

Investments in specialized assets tend to incur high opportunity costs because the A. assets can be profitably used for multiple purposes. B. threat of one of the partners pursuing his or her self-interest is high. C. social costs associated with these assets are high. D. firms can avoid backward integration by investing in these assets.

KitchenThings Inc. is a company that manufactures plastic kitchenware. It operates at an output level that allows it to keep its unit cost per output to the lowest in the industry. This in turn allows KitchenThings to be the price leader. Other competing companies cannot operate at the same level due to a lack of consumer demand for their products. This puts them at a competitive disadvantage. In this scenario, the cost driver behind KitchenThings's strategic position is A. superior customer service. B. economies of scale. C. availability of complements. D. learning-curve effects.

Managers in a firm hired to improve the firm's profitability and ultimately the shareholders' value will add to the overall costs if they pursue their own self-interests. What does this best illustrate? A. diseconomies of scale B. principal-agent problem C. experience-curve effects D. information asymmetries

Norce Autos Inc. allows its customers, suppliers, researchers, and the community in general to contribute their ideas toward new product developments. Customers and other interested stakeholders can let the company know what new features they want to see in their next car. If the company faces any technical complexities that its internal R&D team cannot solve, it posts the problem on its website and allows people from the external community to provide solutions. In this scenario, Norce Autos Inc. is primarily leveraging its A. economies of scope. B. open innovation model. C. razor-razor-blade business model. D. experience-curve effects.

On which of the following tenets is the crossing-the-chasm framework, suggested by Geoffrey Moore, based? A. The number and size of competitors remain constant throughout the industry life cycle. B. Each stage of the industry life cycle is dominated by a different customer group. C. Industries tend to follow an unpredictable industry life cycle. D. The supply and demand sides of the market remain constant irrespective of the phase of the industry life cycle.

Osion Electronics Inc. incurs a cost of $350 to produce one unit of a cell phone. The company's management has priced the product at $600 in the market. Considering the technological advancement of the cell phone, customers perceive its value to be around $800. What is the economic value created in this scenario? A. $350 B. $450 C. $800 D. $200

PrimoDisk Inc. holds the highest market share in the low-growth compact disk industry. With the introduction of flash drives, the market for compact disks has reduced. However, PrimoDisk has been able to generate sufficient revenues for the parent company by selling its products in less developed countries. In the Boston Consulting Group (BCG) growth-share matrix, PrimoDisk will be categorized under A. dogs. B. cash cows. C. stars. D. question marks.

PureRinse Inc. is a brand reputed for its wide variants of body wash that introduced its range of shampoos and skin moisturizers a few years ago. Since most of its products could be produced using the same resources and technology, the company's cost structure lowered, while its product portfolio widened. In this scenario, which of the following value and cost drivers is PureRinse applying? A. mass customization B. economies of scope C. learning-curve effect D. network effect

Researchers at Games First Inc. spent several months coming up with a fun game for toddlers that incorporates a new idea in preschool education. This scenario describes step _____ of the innovation process. A. one B. two C. three D. four

Sara can be categorized under the late majority customer segment. Which of the following behaviors is she most likely to exhibit? A. She will be confident in her ability to master any new technology. B. She will prefer to buy from well-established brands rather than unknown new ventures. C. She will not rely on endorsements by the early majority or early adopters. D. She will buy beta versions of new products and technology.

Supply, distribution, and licensing contractual agreements between firms, which result in vertical strategic alliances, are all examples of A. cartel arrangements. B. non-equity alliances. C. joint ventures. D. equity alliances.

SyncTouch Inc. is a manufacturer of cell phones. It has released an improvised version of its smartphone in markets in which the company already operates. Which of the following types of innovations does this scenario best illustrate? A. radical innovation B. incremental innovation C. architectural innovation D. disruptive innovation

The Boston Consulting Group (BCG) growth-share matrix locates a firm's individual strategic business units (SBUs) in which two dimensions? A. start-up capital required and stage of industry life cycle B. relative market share and speed of market growth C. economic value created and costs incurred D. amount of debt financing and equity financing

The core competency of MotorCraft Inc. is its fuel-efficient engine found in its cars. These engines are developed and built in-house. The company realizes that there is a new market opportunity to diversify. Thus, it produces the car engines on a large scale and sells them to other automobile companies. In this scenario, MotorCraft is A. leveraging existing core competencies to target the chasm between the early adopter and early majority market segment. B. redeploying and recombining existing core competencies to compete in future markets. C. building new core competencies to create and compete in future markets. D. building new core competencies to protect and extend current market position.

The key objective for firms during the growth phase is to A. invest as many resources as possible in product innovations. B. stake out a strong strategic position not easily imitated by rivals. C. pursue a harvest strategy. D. reduce their network effects.

The leading producer of gardening tools, YourGarden Inc, has achieved great success because they produce high-quality tools that are not too expensive. Even so, another company that produces lower-quality tools at the same price has also achieved some success, but not as much as YourGarden. Also, in general, the price of gardening tools has declined because of economies of scale and learning. In addition, YourGarden has added complementary assets, such as gardening instruction. Considering all of these factors, the gardening tool industry is most likely in the A. introduction stage. B. growth stage. C. shakeout stage. D. maturity stage.

The most efficient way to overcome the principal-agent problem in a firm is to A. increase the level of vertical integration within the firm. B. provide stock options to managers. C. downsize the existing workforce. D. organize economic activities within the firm.

The smartphone division of the large consumer electronics company, True Electra Inc., has a significant market share in the fast-growing cell phone market. If the company invests further into this division, it will be able to reap increased cash flows. In the Boston Consulting Group (BCG) growth-share matrix, the smartphone division of True Electra will be categorized under A. question marks. B. stars. C. cash cows. D. dogs.

The strategic objective of businesses during the shakeout phase of the industry life cycle will primarily be to A. move toward product innovations and away from process innovations. B. survive by drawing on "deep pockets." C. achieve market acceptance. D. reduce the barriers to entry in the industry.

The typical four-step innovation process begins with A. the modification and recombination of an existing product or process. B. the presentation of an idea as findings derived from basic research. C. the commercialization of an invention by entrepreneurs. D. a competitor's attempt to imitate an innovation.

There are many reasons why firms need to grow. Which of the following reasons is strongly influenced by economies of scale? A. increasing profits B. lowering costs C. reducing risk D. motivating managers

To be cost-competitive, a firm should A. position itself below the productivity frontier. B. operate at the minimum efficient scale. C. attain the highest cost position. D. avoid moving on to a steeper experience curve.

TravelCheap Inc. is a car rental business that charges customers based on how many miles they put on a car on a daily basis. As result, a person who uses a car to travel from Chicago to Denver during a week is charged much more than a person who uses a car only to travel one mile to the grocery store six times a week. TravelCheap uses a business model called A. freemium. B. pay-as-you-go. C. agency. D. bundling.

Triple-bottom-line is a combination of economic, social, and _____ concerns that can lead to a sustainable strategy. A. cultural B. ecological C. investment D. aesthetic

True Empire Autos Inc. is an automobile company known for its luxury cars and follows a differentiation strategy. In this scenario, True Empire Autos should ideally compare its strategic position with a(n) A. automobile company that sells pre-owned cars. B. automobile company that sells high-end, premium cars. C. automobile company that manufactures economy cars. D. pen manufacturing company that follows a differentiation strategy.

Virtue Products Inc., a large conglomerate, procures a few component parts from external suppliers and also manufactures some of the key raw materials in its own subsidiaries. This apart, the company does not solely depend on outside distributors to reach its customers. In fact, it has its own retail stores to distribute its products. In this scenario, which of the following alternatives to vertical integration is Virtue Products applying? A. concentric integration B. taper integration C. horizontal integration D. conglomerate integration

What is a value gap? A. real versus perceived value B. economic value creation C. lack of perceived value D. economic value differentiation

What is strategic entrepreneurship? A. the pursuit of an innovation that uses concepts from the triple-bottom-line approach B. the pursuit of an innovation that uses concepts from strategic management C. the pursuit of an innovation that benefits the ecosystem D. the pursuit of an innovation that benefits society

What must a cost-leadership strategy accomplish to be successful? A. It must increase the firm's cost above that of its competitors while offering adequate value. B. It must reduce the firm's cost below that of its competitors while offering adequate value. C. It must increase the firm's cost above that of its competitors while offering superior value. D. It must reduce the firm's cost below that of its competitors while offering superior value.

When Jean Cult Inc. was operating at the minimum efficient scale of 10,000-12,000 units per month, the firm's cost per unit was $20. However, when the output level was increased beyond 12,000 units, the cost per unit increased to $22. This increase was attributed to the wear-and-tear of the machinery, and complexities of managing and coordinating. What is this phenomenon known as? A. resource ambiguity B. diseconomies of scale C. network effect D. learning-curve effect

When Toyota wanted to secure a long-term supply of lithium, it had to create a bond of trust with an Australian company, Orocobre Ltd. Orocobre wanted to establish the bond of trust before making huge investments in specialized equipment required to extract the high-quality lithium. What did Toyota do to instill this trust? A. It offered Orocobre exposure to Toyota's proprietary information. B. It made a credible commitment by taking an equity stake in Orocobre. C. It acquired Orocobre as part of its backward vertical integration plans. D. It offered Orocobre franchising opportunities to sell hybrid vehicles.

When TrueHeal Pharma Inc. released a new drug to treat insomnia, its chemical composition was disclosed at the back of the drug's cover. However, any attempts by competitors to copy the chemical composition would result in infringement of TrueHeal Pharma's intellectual property rights. Thus, the drug is protected by a A. promissory bill. B. patent. C. franchise. D. royalty.

When a differentiator charges a similar price as its competitors in the same strategic group but offers more perceived value, it A. loses its competitive advantage. B. gains market share from other firms. C. lowers the economic value created. D. results in diseconomies of scale.

When a firm is said to be pursuing a geographic diversification strategy, it means that the firm will A. introduce different products and services in an existing single market. B. sell its products in several different regional, national, and international markets. C. operate from multiple headquarters across the globe. D. depend solely on its in-house facilities for all its production purposes.

When a firm makes choices between a cost or value position to achieve competitive advantage, it is primarily involved in A. collective bargaining. B. strategic trade-offs. C. arbitration. D. mediation.

When a firm manufactures 2,000-3,000 units of a product, it incurs an average cost of $10 per unit. When it manufactures 3,000-4,000 units of the same product, the average cost per unit reduces to $7. However, manufacturing beyond 4,000 units will raise the average cost per unit to $9. Which of the following is the firm's minimum efficient scale? A. 2,000-3,000 units B. 3,000-4,000 units C. below 2,000 units D. above 4,000 units

When a firm operates at an output level of 9,000 units, the per-unit cost is $5. When the production is between 10,000-12,000 units, the per-unit cost is $4. At a production level of 13,000 units, the production cost is again $5 per unit. At 14,000 units and above, the production cost increases further. At what output level does the firm experience economies of scale? A. 9,000 units B. 11,000 units C. 13,000 units D. 15,000 units

When approaching a bank for a loan, the borrower has better knowledge than the lender about his or her own ability to repay the loan without defaulting. What is this situation referred to as? A. principal-agent problem B. information asymmetry C. experience-curve effect D. learning-curve effect

Which of the following accurately describes how Netflix used innovation to gain a competitive advantage? A. Netflix moved from content development to upgrading its data analytics to provide faster online streaming. B. Netflix applied big data analytics to its user preferences to provide highly personalized viewing recommendations. C. Netflix moved from online streaming to online DVD rentals via the Internet. D. Netflix applied first mover advantages to lock up talent needed to produce original content for DVD rentals and online streaming.

Which of the following best explains why a blue ocean strategy is difficult to implement? A. It requires the combination of fundamentally similar strategic positions—differentiation and low cost. B. It requires the reconciliation of fundamentally different strategic positions—differentiation and low cost. C. It requires the combination of fundamentally similar strategic positions—differentiation and strategic trade-offs. D. It requires the reconciliation of fundamentally different strategic positions—differentiation and strategic trade-offs.

Which of the following best illustrates a process innovation as opposed to product innovation? A. a consumer electronics company developing a new generation of tablet computers B. an automobile company using computer-aided design in its production C. a consumer electronics company launching 3-D televisions D. an automobile company commercializing electric cars

Which of the following companies will be considered as a conglomerate? A. ExxonMobil, after it acquired XTO Energy—a natural gas company B. The Tata Group, active in industries such as tea, steel, IT, power, and automobiles C. Harley-Davidson, with its Harley-Davidson branded motorcycle clothing and attire D. Coca-Cola, which solely focuses on soft drinks but operates in many countries

Which of the following is a drawback of using the industry life cycle as a framework to guide strategic choice? A. The framework believes that the life cycle of industries is unpredictable. B. The framework does not explain everything about changes in industries. C. The framework is based on the tenet that industries can be rejuvenated even in the declining stage. D. The framework believes that the number and size of competitors remain constant throughout the life cycle.

Which of the following is a feature of the maturity stage of the industry life cycle? A. The competitive intensity within the industry is at its peak. B. The market reaches its maximum size. C. The industry structure is more monopolistically competitive. D. The focus on product innovation is higher than that on process innovation.

Which of the following is an accurate statement about learning effects? A. Learning effects involve the dilution of output over time. B. Learning effects involve the accumulation of output over time. C. Learning effects involve the increase of output at a point in time. D. Learning effects involve the decrease of output at a point in time.

Which of the following is an example of an external transaction cost? A. the cost of setting up a production unit B. the cost of searching for a contract manufacturer C. the cost of recruiting and retaining employees D. the cost of maintaining plant and machinery

Which of the following is one of the reasons that led to CNN, an innovator, losing its leadership position in the 24-hour cable news industry? A. The cable news industry was in the maturity stage of the industry life cycle. B. The second movers imitated CNN's incremental innovation to continuously improve their offering. C. It failed to cross the large competitive chasm between the early adopters and early majority. D. Its business model relied heavily on crowdsourcing for its user-generated content.

Which of the following questions challenges managers to come up with strategic objectives that ensure future competitiveness? A. How do customers view us? B. How do we create value? C. What core competencies do we need? D. How do shareholders view us?

Which of the following reasons led to the launch of Procter & Gamble's "Connect + Develop," a web-based interface that connects the company's internal-innovation capability with the distributed knowledge in the global community? A. The company wanted to focus on process innovation rather than product innovation. B. The company was no longer able to generate adequate growth through closed innovation. C. The company wanted to carefully protect its intellectual property. D. The supply and mobility of unskilled workers within the industry had increased drastically.

Which of the following statements accurately brings out the difference between closed innovation and open innovation? A. Firms following the open innovation model are much more likely to be prone to the not-invented-here syndrome than firms pursuing a closed innovation model. B. While open innovation focuses on building an effective business model to commercialize R&D, closed innovation focuses on being first to market. C. Firms following the open innovation model are more protective about their intellectual property than firms pursuing a closed innovation model. D. While open innovation means introducing new technologies to new markets, closed innovation refers to introducing new technologies to existing markets.

Which of the following statements accurately brings out the difference between technology enthusiasts and early adopters? A. While the customer segment in the introduction stage consists of early adopters, the customers entering the market in the growth stage are technology enthusiasts. B. Unlike technology enthusiasts, early adopters' demand is fueled more by intuition and vision rather than technology concerns. C. While early adopters make up the smallest market segment, technology enthusiasts make up the mass market. D. Firms need to communicate products' potential applications in a more direct way when attracting technology enthusiasts rather than early adopters.

Which of the following statements is true of firms pursuing a closed innovation? A. Firms following the closed innovation model are less likely to be prone to the not-invented-here syndrome. B. Firms in the closed innovation model are extremely protective of their intellectual property. C. Firms in the closed innovation model focus on building a more effective business model to commercialize R&D, rather than focusing on being first to market. D. Firms following the closed innovation model will find activities such as spin-out ventures or strategic alliances crucial to commercialize their internally developed R&D.

Which of the following statements is true of laggards? A. They make up the largest customer segment for any business. B. They tend to enter the market frequently during the decline stage. C. They do not like waiting too long for new technology to release. D. They are customers who adopt a new product even if it is not necessary.

Which of the following statements is true of learning curves? A. Learning curves are captured at one point in time when output is increased. B. Learning curves can be observed in manufacturing processes and professional services. C. As cumulative output increases, the learning curve becomes less steep. D. The steeper the learning curve, the lesser the learning effects.

Which of the following would be the result of product innovation? A. a new system for shipping large packages B. an inexpensive, high-quality refrigerator C. an inexpensive method of producing bicycle wheels D. a new technology for Internet servers

Which quadrant in the core competence-market matrix is the hardest to pursue? A. building new core competencies to protect and extend current market position B. building new core competencies to create and compete in markets of the future C. leveraging core competencies to improve current market position D. redeploying and recombining core competencies to compete in markets of the future

While cell phones with holographic keyboards are currently in the introduction stage of the industry life cycle, tablet computers are in the growth stage. In the context of this scenario, which of the following statements is true? A. The industry for cell phones with holographic keyboards will face greater competition than the tablet industry. B. While the industry for cell phones with holographic keyboards will focus on product innovation, the tablet industry will focus on process innovation. C. While the industry for cell phones with holographic keyboards can reap the benefits of economies of scale, the tablet industry will experience no such benefits. D. The industry for cell phones with holographic keyboards will face price competition, whereas, in the tablet industry, the mode of competition will be non-price.

While the industry for 3-D televisions is in the introduction stage of the industry life cycle, the CRT (cathode ray tube) television industry is in its decline stage. Which of the following statements will be true in this scenario? A. The market size for 3-D televisions is extremely large, while the market size for CRT televisions is moderate. B. While product innovation will be at its maximum for the 3-D television industry, process innovation will be more crucial for the CRT television industry. C. The focus in the 3-D television industry will be on cost-leadership, whereas in the CRT television industry, the focus will be on differentiation. D. While the strategic objective of the CRT television industry will be achieving market acceptance, the strategic objective of the 3-D television industry will be pursuing a harvest strategy.

Why are differentiation and cost-leadership strategies referred to as generic business strategies? A. They can be simultaneously pursued by a firm without any trade-offs. B. They can be used by any organization independent of industry context. C. They require similar strategic positions in order to increase a firm's chances to gain competitive advantage. D. They can be applied only by businesses, which have a competitive advantage.

With reference to the Strategy Highlight 8.2, the Tata Group's corporate strategy is attempting to A. move from unrelated diversification to related-constrained diversification. B. integrate different strategic positions, pursued by different strategic business units. C. pursue a focused differentiation strategy over a focused cost-leadership strategy. D. depend on a single product market to generate most of its revenues.

_____ are best described as contractual alliances in which the participants regularly exchange codified knowledge. A. Cartels B. Licensing agreements C. Equity alliances D. Acquisitions

_____ are best described as costs that occur due to political maneuvering by managers to control capital and resource allocation and the resulting inefficiencies stemming from suboptimal allocation of scarce resources. A. Fixed costs B. Influence costs C. Coordination costs D. Opportunity costs

_____ is best described as the process of reorganizing and divesting business units and activities to refocus a company in order to leverage its core competencies more fully. A. Reverse engineering B. Restructuring C. Rebooting D. Reverse brainstorming

A few efficient and strong firms in the laptop industry have remained and emerged successful from the shakeout stage. Which of the following stages of the industry life cycle will they move to next? A. growth stage B. introduction stage C. maturity stage D. decline stage

A firm experiences diseconomies of scale when it A. has a constant return to scale. B. moves down the experience curve. C. produces at an output level beyond the minimum efficient scale. D. has a steep learning curve when compared to its competitors.

A firm's ability to understand external technology developments, evaluate them, and integrate them into current products or create new ones is called A. disruptive innovation. B. reverse innovation. C. absorptive capacity. D. open capacity.

A firm's business strategy will lead to a competitive advantage if it allows the firm to A. execute the same activities performed by the rivals in a similar manner. B. reduce the value gap. C. perform different activities than its rivals. D. position itself below the productivity frontier.

A(n) _____ is best used to depict the transformation of raw materials into finished goods and services along distinct vertical stages. A. encrypt B. chain of command C. industry value chain D. scatter chart

A. G. Lafley at Procter & Gamble (P&G), had implemented an open-innovation model, which had greatly benefitted the company. In the light of this information, we can conclude that A. G. Lafley is a(n) A. venture capitalist. B. category captain. C. intrapreneur. D. early adopter.

AccuroDisk Inc. manufactures external hard disks for $32 per unit, and the maximum price customers are willing to pay is $47 per unit. TD Storage Inc. is a competitor of AccuroDisk Inc. that produces external hard disks for $37 per unit, and customers are willing to pay a maximum price of $50 per unit. What does this imply? A. AccuroDisk and TD Storage share differentiation parity. B. TD Storage has a competitive advantage over AccuroDisk in terms of perceived value. C. AccuroDisk creates a greater economic value than TD Storage. D. TD Storage is a cost-leader when compared to AccuroDisk.

Assume that the market for print book publishing has entered the maturity stage. Which of the following would most likely exist during this stage? A. a few start-up publishers B. many small to midsized publishers C. a few large publishers D. one large publisher

Body Sync Inc. is a chain of gyms. It offers a fitness package that allows its members to use the gym facilities for 12 months by paying only for 10 months. Included in the package are two health checkups and a gym kit. These add-ons by themselves are not very valuable, but as a package they can enhance the perceived value of the service offerings. In this case, Body Sync's primary value driver is A. economies of scale. B. learning-curve effects. C. availability of complements. D. experience-curve effects.

Both Blue Horizons Electronics Inc. and CLR Inc. have achieved cost parity in the television market. To gain and sustain a competitive advantage against CLR, Blue Horizons Electronics should A. achieve differentiation parity with CLR. B. keep its value gap lower than that of CLR. C. create greater perceived economic value than CLR. D. increase its cost of production to more than that of CLR.

Both Viten Electronics Inc. and JL Electronics Inc. incur a cost of $400 to manufacture a LED television. However, the economic value created by JL Electronics is more than that created by Viten Electronics. What does this indicate? A. Viten Electronics has a competitive advantage over JL Electronics. B. Both Viten Electronics and JL Electronics have achieved competitive parity. C. JL Electronics can charge a premium price on its televisions. D. Viten Electronics has created a higher value gap than JL Electronics.

Caring Ketchup Inc. makes organic ketchup. To promote its products, this firm decided to make bottles in the shape of tomatoes. To accomplish this, Caring Ketchup worked with its bottle manufacture to create a set of unique molds for its bottles. Which of the following specialized assets does this example demonstrate? A. site specificity B. research specificity C. physical-asset specificity D. human-asset specificity

Clean Machine Inc. produces a high-quality dishwashing machine that is reliable and durable. How would this product most likely act as a cost driver? A. reduce purchase cost B. increase after-sales service cost C. reduce the total cost of ownership D. increase shipping cost

Companies that pursue related diversification are able to create a diversification premium because they A. are able to leverage time compression economies. B. can operate beyond the minimum efficient scale. C. are able to increase value due to economies of scope. D. can reduce the value gap created by its products.

DFS Electronics Inc. ensures that all its products are highly durable and reliable by using techniques like zero-defect and lean manufacturing systems. These efforts not only add to the products' differential appeal, but also help the company save costs during production and avoid expenses due to after-sales services. Thus, the common value and cost driver responsible for DFS Electronics' strategic position as an integrator is the A. network effect. B. availability of complements. C. quality. D. diseconomies of scale.

Decisions relating to "what stages of the industry value chain to participate in" determine a firm's A. level of diversification. B. geographic scope. C. vertical integration. D. absorptive capacity.

Diversification premium is a situation in which A. customers have to pay premium prices on products manufactured by firms pursuing unrelated diversification due to the lack of economies of scope. B. the overall value creation of highly diversified firms is more than the sum of the value created by individual business units. C. the stock price of related-diversification firms is valued at greater than the sum of their individual business units. D. shareholders are benefitted from the market capitalization of a highly diversified firm because of its economies of scale.

Dollar Shave Club is an ecommerce start-up that delivers razors by mail. By doing this, Dollar Shave Club is using a(n) _____ to disrupt an existing market. A. innovation ecosystem B. architectural innovation C. business model innovation D. incremental innovation

EasyOpen Inc. has entered a stage in which the demand for their innovative electric can openers has declined. Now most customers are buying replacement parts or buying their second can opener from the firm. What stage in the industry life cycle does this scenario describe? A. growth stage B. maturity stage C. shakeout stage D. decline stage

Economies of scale do not allow firms to A. spread their fixed costs over a larger output. B. employ specialized systems and equipment. C. spread their variable costs over a larger output. D. take advantage of certain physical properties.

ElectraSync Inc., a large consumer electronics company, has divided each product in its portfolio into a separate strategic business unit (SBU). The desktop SBU has been experiencing drastic decline in its cash flow, and its market share has also reduced to an insignificant 10 percent. This has been attributed to the low growth in the desktop market after the arrival of tablet computers and laptops. In the context of the Boston Consulting Group (BCG) growth-share matrix, the desktop SBU will be categorized under A. stars. B. question marks. C. dogs. D. cash cows.

PepsiCo operates in many countries and sells a wide variety of aerated drinks, other beverages, different types of chips, and Quaker Oats goods to achieve continuous growth. From this data, we can conclude that PepsiCo has been involved in A. strategic outsourcing. B. lean manufacturing. C. product-market diversification. D. process diversification.

Even without differentiation parity, a firm pursuing a cost-leadership strategy can still gain a competitive advantage as long as its A. learning curve is not steeper than that of its competitors. B. per-unit costs are higher than that of its competitors. C. economic value creation exceeds that of its competitors. D. value gap is lower than that of its competitors.

Evia Cycles Inc. incurs $400 to manufacture a bicycle, and the maximum price customers are willing to pay is $550 per unit. Archer Cycles Inc., its competitor, incurs $450 to manufacture a similar bicycle, and customers are willing to pay a maximum price of $620 for it. What does this indicate? A. Both Evia Cycles and Archer Cycles have achieved differentiation parity. B. Evia Cycles has a competitive advantage over Archer Cycles. C. Archer Cycles has created a greater economic value than Evia Cycles. D. Both Evia Cycles and Archer Cycles have achieved cost parity.

Fantastica Industries, a U.S.-based large conglomerate, competes in the hospitality, education, telecommunications, entertainment, airlines, and chemical industries. It currently operates in about 30 nations, and is planning to expand its portfolio by investing in rapidly developing countries. Which of the following strategies is Fantastica Industries pursuing? A. zone pricing B. niche marketing C. product-market diversification strategy D. process diversification strategy

First movers often have several competitive benefits including A. incremental effects. B. shakeout effects. C. network effects. D. experience effects.

Georgia Ray is the founder of the departmental stores chain, Ether Inc. She ensures that the products in her stores are ethically and responsibly sourced. Most products are therefore 100 percent organic and manufactured from recycled material. Also, her company purchases handicrafts from nonprofit organizations supporting the aged. Georgia's belief is that her company should be able to support the community at large. Which of the following terms best describes Georgia Ray? A. headhunter B. category captain C. social entrepreneur D. trade creditor

Globe Source Inc. is a consumer electronics company that follows an open innovation model. Which of the following can be concluded about this firm? A. The firm will suffer from the not-invented-here syndrome. B. The firm is less likely to commercialize researches from other firms. C. The firm will buy others' intellectual property whenever it advances its own business model. D. The firm will equate R&D with a high likelihood of benefitting from first-mover advantages.

Grace Apparel Inc. has decided to procure fabrics required for its garments from external suppliers instead of maintaining its own dyeing and weaving facilities. How will this decision affect the firm? A. The firm will be protected against the principal-agent problem. B. The firm's administrative costs will be low because of necessary bureaucracy. C. The firm will have more flexibility in purchasing and comparing prices of goods and services. D. The firm will have high-powered incentives, such as hourly wages and salaries.

Handy Helper, Inc. produces decent-quality woodworking tools at a mid-range price. Master Tools, Inc. produces high-quality tools also at a mid-range price. Master Tools gained a competitive advantage because it has ______ than Handy Helper. A. higher economies of scope B. lower economies of scope C. a higher value gap D. a lower value gap

Help Yourself Inc. publishes many types self-help books. Recently, the consumer demand for winter gardening books has increased significantly. Although Help Yourself has limited production facilities, it has increased the production of these books to meet this demand. It hopes to get books to the market faster than its closest competitor, who is also increasing the production of winter gardening books. Which of the following aspects of business-level strategy has Help Yourself accomplished? A. It has enhanced its internal strengths. B. It has eliminated its weaknesses. C. It has exploited external opportunities. D. It has avoided external threats.

How does a conglomerate benefit from following an unrelated diversification strategy? A. The conglomerate can solely depend on its primary business activity for a major portion of its revenues. B. The conglomerate can share most of its competencies in products, services, technology, or distribution between all its businesses. C. The conglomerate can overcome institutional weaknesses, such as a lack of capital markets, in emerging economies. D. The conglomerate can limit the learning- and experience-curve effects it faces.

How is the early majority section of consumers different from the late majority section? A. While the early majority makes up the mass market, the late majority is the smallest market segment. B. The late majority enters the market in the decline stage, whereas the early majority enters the market during the maturity stage. C. Although the early majority is confident in their ability to master a new technology, the late majority is not. D. While the late majority prefers buying from unknown new ventures, the early majority relies only on well-established brands.

Hugo Books Inc. is a retailer that buys books at a fixed price from publishers. Recently, Hugo offered a deal in which customers could buy a package of three mystery books at a discounted rate. Which of the following business models has Hugo Books combined? A. agency and freemium B. wholesale and agency C. wholesale and bundling D. agency and bundling

In a focused cost-leadership strategy, a firm A. caters to the segment of the market that is least cost-sensitive. B. provides high-priced products for many different segments of the mass market. C. delivers low-cost products and services to a specific, narrow part of the market. D. focuses on reducing the economic value created to drive down costs.

In a radical innovation, a firm targets A. existing markets by using new technologies. B. new markets by using existing technologies. C. new markets by using new technologies. D. existing markets by using existing technologies.

In emerging economies, the LCD television industry is in that phase of the industry life cycle in which the previously increasing market demand becomes limited. The competitive intensity within the industry is high, and inefficient firms have begun to exit the industry. This has allowed only a few major companies to come out as cost-leaders and hold the shrinking market. Which of the following stages of the industry life cycle is the LCD television industry currently in? A. growth stage B. introduction stage C. shakeout stage D. decline stage

It is important for a firm to win over the early majority section of the market to ensure the commercial success of an innovation because they A. are driven by technology concerns rather than the practicality of a new product. B. influence the purchase decisions of early adopters. C. enter into the market in large numbers, creating a herding effect. D. have the highest purchasing power when compared to the other customer segments.

Neon Electronics Inc. sourced touch screens required for its tablet computers, cell phones, and televisions from a manufacturer in China. But the demand for such components was high globally, and the supplier could not meet the quality standards of Neon Electronics. Thus, Neon Electronics decided to set up its own unit to develop and manufacture the required touch screens. What does this scenario best illustrate? A. crowdsourcing B. new product development C. backward vertical integration D. conglomerate diversification

Oviyo Inc. has been successful at differentiating itself from competitors by claiming a premium price for its digital cameras based on superior image quality and advanced technology. In this scenario, which of the following is the key value driver? A. economies of scale B. low-cost input factors C. product features D. premium prices

Real Goods Inc. is a large conglomerate. The company's beverages strategic business unit (SBU) has been recognized as a cash cow, and its tobacco SBU has been categorized as a dog. Which of the following can be inferred from this scenario? A. While the tobacco SBU operates in a low-growth market, the beverages SBU operates in a high-growth market. B. The management of the company should use the cash inflow from the beverages SBU and invest it in the tobacco SBU. C. While the market share of the company in the beverages industry will be high, the market share in the tobacco industry will be low. D. The tobacco SBU should follow a backward integration strategy, and the beverages SBU should pursue a forward integration strategy.

Silver Weave Inc., an apparel company, operates through a business model in which individuals can buy the rights to set up Silver Weave stores and sell the company's merchandise in return for a lump sum fee at the beginning of the contract and a percentage of revenues every month. The owners of the stores have to stock the collection approved from the company's headquarters and also maintain consistent customer service as expected in its flagship store. Which of the following alternatives to integration does this best illustrate? A. crowdsourcing B. credit rationing C. franchising D. bootstrapping

Symphon Times Inc., a Swiss-based premium watch brand, has recently started selling its watches through company-owned retail outlets in major cities of the emerging nations. Which of the following types of diversification strategies is the firm pursuing? A. product diversification strategy B. process diversification strategy C. geographic diversification strategy D. product-market diversification strategy

TL & Co. is following a related-linked diversification strategy, and Soar Inc. is following a related-constrained diversification strategy. How do the two firms differ from each other? A. Soar Inc. generates 70 percent of its revenues from its primary business, while TL & Co. generates only 10 percent of its revenues from its primary business. B. Soar Inc. pursues a backward diversification strategy, while TL & Co. pursues a forward diversification strategy. C. TL & Co. will share fewer common competencies and resources between its various businesses when compared to Soar Inc. D. TL & Co. pursues a differentiation strategy, and Soar Inc. pursues a cost-leadership strategy, to gain a competitive advantage.

Taking advantage of the pricing flexibility inherent in the wholesale model, Amazon offered many books (especially e-books) below the cost that other retailers had to pay to publishers. By doing this, Amazon showed how business models can be affected through A. combination. B. evolution. C. disruption. D. combustion.

The 3-D television division of a large consumer electronics company has been recognized as a question mark. The company's LCD television division has been categorized under dogs. Which of the following statements will hold well in this scenario? A. The strategic recommendation for the 3-D television division is to harvest it, and the strategic recommendation for the LCD television division is to invest further in it. B. The 3-D television division will have a high market share in its industry, whereas the LCD television division will have a low-market share in its industry. C. The 3-D television division operates in a high-growth market, whereas the LCD television division operates in a low-growth market. D. The LCD television division will benefit by pursuing a differentiation strategy, and the 3-D television division will benefit by following a cost-leadership strategy.

The balanced-scorecard can accommodate A. only short-term performance metrics. B. only long-term performance metrics. C. both short- and long-term performance metrics. D. neither short- or long-term performance metrics.

The concept of a(n) _____ attempts to capture both learning effects and process improvements at firms. A. managerial grid B. growth matrix C. experience curve D. diminishing utility curve

The demand for video recorders has drastically reduced, and there are only a few consumer electronics companies selling them at extremely low prices. Also, the current buyers of video recorders are mainly categorized under laggards. Which of the following stages of the industry life cycle is the video recorder industry in currently? A. growth stage B. maturity stage C. decline stage D. commercialization stage

The management team for SafeCare Chemicals Inc. came up with the following vision statement: "SafeCare Chemicals will conscientiously track its financial performance to ensure profits for its investors, enhance its community through employment and supporting charities, and dispose of waste in a manner that will not harm the environment." This vision statement is most likely based on the A. accounting profitability approach. B. economic value creation approach. C. triple-bottom-line approach. D. balanced-scorecard approach.

The primary goal of a firm pursuing a blue ocean strategy should be to A. create the highest perceived value in its respective industry. B. build a reputation of being the lowest-cost producer in its chosen industry. C. offer a differentiated product or service at a low cost. D. achieve a less steeper learning curve.

To be successful and to survive the shakeout stage of the industry life cycle, a firm should A. charge higher prices than its competitors. B. focus on product innovation rather than process innovation. C. gain economies of scale. D. shift from price to non-price competition.

To initiate a strategic move that allows a firm to open up new and uncontested market space through value innovation, managers must address four key questions when formulating a blue ocean business strategy. These questions focus on A. increasing cost and maintaining perceived customer benefits. B. lowering cost and maintaining perceived customer benefits. C. lowering cost and increasing perceived customer benefits. D. increasing cost and increasing perceived customer benefits.

WJ Group Inc., a large multinational conglomerate, had begun to experience declining revenues over the years. The top management at the headquarters of the company decided that it was important for the company to avoid deviating from its core competencies. Thus, a few of the company's key businesses like energy, telecommunications, and automobiles were centralized, giving the top management more control over them. Also, relatively newer businesses like beverages and food processing were divested. In this scenario, WJ Group is involved in A. reverse engineering. B. benchmarking. C. restructuring. D. crowdsourcing.

Wear Crush Inc. is an apparel company known for its affordable clothes that follows a cost-leadership strategy. In this scenario, Wear Crush should ideally compare its strategic position with A. a company that sells wristwatches at affordable prices. B. a luxury apparel company that sells designer clothes. C. an apparel company popular among price-conscious customers. D. an online company that sells customized pet clothing.

When Japanese carmakers attacked the existing U.S. automobile market by first offering small fuel-efficient cars, and then leveraging their low-cost and high-quality advantages into high-end luxury segments, they were engaging in A. regressive innovation. B. radical innovation. C. disruptive innovation. D. architectural innovation.

When a firm pursues a maintain strategy, it A. exits a declining industry to maintain the goodwill of its overall brand name. B. reduces investments in product support and allocates only a minimum of human and other resources. C. continues to support marketing efforts even if the demand for the product is declining. D. chooses to consolidate the industry by buying rival firms, those who plan to exit.

When does a firm fall into the large competitive chasm between early adopters and early majority? A. when it cannot attract technological enthusiasts to try the beta versions of its products B. when it creates strong network effects during the growth stage C. when it fails to successfully launch a mass-market version of its product D. when the early majority create herding effects for its products

When firms innovate by leveraging existing technologies into new markets, they are said to be involved in A. incremental innovations. B. radical innovations. C. architectural innovations. D. disruptive innovations.

When the market for photo film negatives declined with the arrival of digital cameras, Momento Films Inc., a manufacturer of film negatives, bought out most of its rivals that were planning to exit. This allowed the company to get rid of all the excess capacity and acquire a monopolistic market power in the declining industry. Which of the following strategies has Momento Films adopted in this scenario? A. harvest strategy B. maintain strategy C. consolidated strategy D. differentiation strategy

Which of the following best describes a strategic trade-off? A. the tension between innovation and keeping manufacturing costs down B. the tension between maintaining both high-quality products and service C. the tension between value creation and the pressure to keep cost in check D. the tension between raising prices and keeping a loyal clientele

Which of the following corporate strategies did ExxonMobil pursue by acquiring XTO Energy, a natural gas company? A. taper integration strategy B. differentiation strategy C. related diversification strategy D. cost-leadership strategy

Which of the following describes an airline that is most likely stuck in the middle? A. Red Carpet Airline that offers complimentary drinks and meals, coast-to-coast coverage via connecting hubs, plush airport lounges, and high prices. B. Plush Airline that offers international routes and global coverage, high customer service, high reliability, and high prices. C. Just Right Airline offers high-quality beverages and meals, plush airport lounges, only a few connections via hubs domestically, poor customer service, and low prices. D. Bottom Line Airline that offers no assigned seating, no in-flight amenities, no drinks or meals, no airport lounges, and low prices.

Which of the following firms is most prone to experiencing a diversification discount? A. a company that deals in petroleum as well as natural gas B. a company that derives its revenues from selling aerated drinks and health drinks C. a company that pursues unrelated diversification D. a company that pursues related-constrained diversification

Which of the following is a drawback of vertical integration? A. It increases the difficulty of securing critical supplies. B. It impedes scheduling and planning. C. It increases the potential of legal repercussions. D. It impedes investments in special assets.

Which of the following is a feature of the shakeout phase of the industry life cycle? A. There is rapid industry growth during this stage. B. Market demand in this stage primarily consists of first-time adopters. C. Competitive intensity within the industry increases. D. The mode of competition shifts from price to non-price in this stage.

Which of the following is true of the parent-subsidiary relationship? A. The ability to create a community of knowledge is low. B. The parent firm has no control and command over the subsidiary. C. The transaction costs that arise are frequently due to transfer prices. D. The parent firm will lack specialization and division of labor.

Which of the following most accurately describes a difference between incremental innovation and radical innovation? A. Incremental innovation researches new materials; radical innovation researches new processes. B. Incremental innovation targets new markets and technologies; radical innovation reinvents markets and technologies. C. Incremental innovation builds on an established knowledge base; radical innovation uses an entirely different knowledge base. D. Incremental innovation draws on novel methods; radical innovation draws on proven methods.

While the domestic airline industry is in the maturity stage of the industry life cycle, the pet clothing industry is in its growth stage. Which of the following can be inferred from the given data? A. Competitive intensity will be higher in the domestic airline industry than the pet clothing industry. B. The pet clothing industry is ahead of the domestic airline industry in the industry life cycle. C. While the domestic airline industry is free from excess capacity, the pet clothing industry will have new entrants. D. The mode of competition will be price-based in the pet clothing industry and will be non-price-based in the domestic airline industry.

Which of the following scenarios would threaten a firm that uses a differentiation strategy? A. The firm increases the uniqueness of its product without increasing its price. B. The firm adds product features that raise cost and perceived value. C. The firm's focus shifts to price rather than value-creating features. D. The firm's product has not established an acceptable standard of quality.

Which of the following situations will have greater effects from economies of scale than from learning effects? A. when conducting surgeries B. when practicing corporate law C. when mass manufacturing pens D. when making business decisions

Which of the following stakeholders of a company would most likely be responsible for formulating a corporate strategy? A. the first-line employees B. the creditors C. the chief executive officer D. the middle manager

Which of the following statements accurately brings out the difference between economies of scale and economies of scope? A. Economies of scale refer to the decreases in per-unit cost with decreases in output, whereas economies of scope refer to the increases in per-unit cost with increases in output. B. Economies of scale result in decreasing returns to scale, and economies of scope result in constant returns to scale. C. Economies of scope are the savings that come from producing two or more outputs from the same resources, whereas economies of scale are decreases in per-unit cost with increases in output. D. Economies of scope are realized when a firm operates at the minimum efficient scale, whereas economies of scale are realized when the firm operates beyond the minimum efficient scale.

Which of the following statements is not true about innovation? A. Innovation as a competitive weapon can simultaneously create and destroy value. B. Successful innovation allows a firm to extract temporary monopoly profits. C. Innovation has to be high-tech in order to be a potent competitive weapon. D. Process innovations are made possible through advances such as the Internet.

Which of the following statements is strongly influenced by the not-invented-here syndrome? A. If a product was created and developed at our company, it probably is good enough. B. If a product was not created and developed at our company, it probably is good enough. C. If a product was not created and developed at our company, it could not be good enough. D. If a product was created and developed at our company, it could not be good enough.

Which of the following statements is true of internal transaction costs? A. Internal transaction costs arise when companies transact in the open market. B. When the internal costs involved in pursuing an activity in-house are more than the costs of transacting, then the concerned firm should vertically integrate. C. Internal transaction costs tend to increase with organizational size and complexity. D. It is beneficial to "buy" goods or services rather than "make" when internal transaction costs are low.

Which of the following statements is true of taper integration? A. It is the most integrated alternative to performing an activity within one's own corporate family. B. It refers to a situation in which firms narrow their focus on downstream value chain activities and ignore the upstream value chain activities. C. It exposes in-house suppliers and distributors to market competition to make performance comparisons possible. D. It does not rely on outside-market firms for its supplies.

Which of the following statements is true of the early majority section of consumers? A. They come into the market during the introduction stage. B. They are unaware that many hyped new product introductions will fade away. C. They weigh the benefits and costs carefully when adopting a new product. D. They make up the smallest market segment.

Which of the following will hamper a differentiator's ability to achieve a competitive advantage? A. lower production costs B. premium prices C. lower value gap D. customized goods

Which of the following would hinder firm performance? A. diversification providing economies of scale B. diversification exploiting economies of scope C. diversification raising costs D. diversification raising value

While the personal computer industry is flooded and growing with laptops and tablets, Ivan recently bought a desktop, his first personal computer. He realized that a computer at home would be helpful for his children for their school projects, and he could use it to maintain the simple accounts of his plumbing business. Which of the following customer segments does Ivan best represent? A. early adopters B. category captains C. laggards D. early majority

White Leo Motors (WLM) Inc. generates a major portion of its revenues by manufacturing luxury sports cars. However, the company also derives an insignificant percent of its annual revenues by selling its sports merchandise that includes apparel, shoes, and other accessories under the same brand name. Which of the following terms best describes WLM? A. a conglomerate B. a subsidiary C. a dominant-business firm D. a single-business firm

Whole Foods differentiates itself from competitors by offering top-quality foods obtained through sustainable agriculture. This business strategy implies that Whole Foods focuses on A. decreasing the existing value gap by providing luxury goods to customers. B. maintaining a less steeper learning curve as compared to its competitors. C. increasing the perceived value created for customers, which allows it to charge a premium price. D. lowering its costs compared to its competitors,' while offering adequate value for its products and services.

Why is it easier for new entrants to involve in radical innovations when compared to incumbent firms? A. Unlike incumbent firms, new entrants do not have to face the high entry barriers, initially. B. New entrants are embedded in an innovation ecosystem, while incumbent firms are not. C. Unlike incumbent firms, new entrants do not have formal organizational structures and processes. D. Incumbent firms do not have the advantages of network effects that new entrants have.

_____ are best described as unique assets with high opportunity costs that have significantly more value in their intended use than in their next-best use. A. Cost drivers B. Value drivers C. Specialized assets D. Liquid assets

_____ are best described as voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services to lead to competitive advantage. A. Embargos B. Cartel agreements C. Strategic alliances D. Corporate acquisitions

_____ are strategic business units that compete in a low-growth market but hold considerable market share. A. Dogs B. Question marks C. Cash cows D. Stars

_____ is best described as a firm's ownership of its production of needed inputs or of the channels by which it distributes its outputs. A. Venture capitalism B. Bootlegging C. Vertical integration D. Crowdsourcing

_____ is best described as an increase in the variety of products and services a firm offers or markets and the geographic regions in which it competes. A. Taper integration B. Open innovation C. Diversification D. Differentiation

_____ is best described as the commercialization of any new product, process, or the modification and recombination of existing ones. A. Direct imitation B. Mass customization C. Innovation D. Headhunting

_____ is when a firm moves activities and jobs outside its home country. A. Conglomerate outsourcing B. Alliance outsourcing C. Off-shore outsourcing D. External outsourcing

A differentiation strategy works best when a A. firm has tangible resources, its focus of competition shifts to price, and equivalent substitutes are readily available. B. firm's focus of competition shifts to price, and when increasing differentiation of product features do not create additional value. C. firm's differentiated products are commoditized, and costs of providing uniqueness do not rise above the customer's willingness to pay. D. firm has intangible resources, is able to pass on increases in supplier cost to the customer, and its differentiation appeal creates customer loyalty.

A firm sources intermediate goods and components from in-house suppliers as well as outside suppliers. In a similar fashion, another firm sells its products through company-owned retail outlets and through independent retailers. Both of these examples demonstrate A. strategic outsourcing. B. strategic insourcing. C. backward horizontal integration. D. taper integration.

A strategy of _____ will be most beneficial for a firm to enhance its overall corporate performance. A. unrelated level of diversification B. single-business level of diversification C. dominant-business level of diversification D. related-linked diversification

After trying on a dress, a consumer assesses it to be worth a maximum of $100 and is willing to pay that amount for the dress. However, the dress was priced at $80. What is the amount, $100, referred to as? A. the producer surplus B. the firm's cost (C) in manufacturing the dress C. the consumer surplus D. the value (V) the consumer attaches to the dress

Apple and Nike have their own retail outlets and also use other independent retailers, both the brick-and-mortar type and online, to sell their products. This is an example of A. monopsony. B. geographic diversification. C. crowdsourcing. D. taper integration.

As a start-up company, Virtue Mobiles Inc. entered the low end of the highly competitive cell phone industry with its low-cost smartphones. Initially, the company was able to sell its inferior technology due to its low prices. Over the years, however, its rate of technology improvements increased above the industry standards. This helped the company to create a strong strategic position for its smartphones in the high-end segment and claim a premium price. Which of the following types of innovation does this scenario best illustrate? A. radical innovation B. incremental innovation C. architectural innovation D. disruptive innovation

At the time when Kevin decided to purchase a tablet computer, the product had just become accessible to the mass market. He purchased the tablet only after he was completely convinced that the benefits it would offer him would far exceed its price. Also, he waited for his friends to try the product and popular gadget television shows to endorse it. Which of the following customer segments does Kevin best represent? A. laggards B. technology enthusiasts C. early adopters D. early majority

Digital photography replacing film photography would be an example of a(n) A. regressive innovation. B. radical innovation. C. architectural innovation. D. disruptive innovation.

DigitalHealth Electronics Inc. is a company that builds diagnostic devices. It was the first company to develop a compact MRI scanner by reconfiguring the components of the MRI technology. This smaller and user-friendly version of the huge MRI scanner created demand from small hospitals, nursing homes, and private practice doctors who were earlier dependent on the scanning machines in large hospitals. Which of the following types of innovations does this scenario best illustrate? A. disruptive innovation B. incremental innovation C. radical innovation D. architectural innovation

Evara Inc. started as a luxury brand for designer apparel. Soon, the company expanded by launching its own line of premium perfumes, watches, bags, and home furnishings. This expansion allowed the businesses under the company to share a few, if not all, of the common competencies in products, services, technology, and distribution. Which of the following corporate strategies is Evara pursuing in this scenario? A. taper integration strategy B. niche marketing strategy C. related-constrained strategy D. related-linked strategy

Firms pursuing a differentiation strategy primarily seek to A. keep their cost structures lower than that of the cost leader. B. reduce the value gap to gain a competitive advantage. C. provide products that are a direct imitation of the competitors' products. D. create higher customer perceived value than the value that competitors create.

Futura Inc. introduced an automobile that could run completely on electricity for longer periods of time than any other electronic or hybrid automobile. Also, this vehicle was less expensive than the vehicles of competitors. On the downside, it required more repairs than the competition's automobiles. However, the technology of the Futura vehicle improved rapidly, thereby improving its repair record. This example describes A. architectural innovation. B. incremental innovation. C. radical innovation. D. disruptive innovation.

Genevieve is a recent fashion graduate. She started her own apparel store with an investment of $300,000. In the first year she made a profit of $60,000. If she had taken up a job as a fashion editor for a magazine, she would have earned $50,000 as salary per year. Also, she could have invested her capital, $300,000, in treasury bonds and earned an interest of $12,000. Thus, the amount $62,000 ($50,000 + $12,000) would be Genevieve's A. social cost. B. break-even price. C. reservation price. D. opportunity cost.

How did Marriott use economies of scope to achieve greater economic value than its competitors? A. Marriott increases in cost per hotel unit as number of customers increases. B. Marriott decreases in cost per hotel unit as number of customers increases. C. Marriott lowered its cost structure by focusing its production assets on one type of hotel, which increased its menu and thus its differentiated appeal. D. Marriott lowered its cost structure by sharing its production assets over a several types of hotels, which increased its menu and thus its differentiated appeal.

How do firms benefit from vertical integration? A. Vertical integration allows firms to reduce organizational complexity and administrative costs. B. Firms that vertically integrate will have increased strategic flexibility when faced with technological changes. C. Firms that vertically integrate do not have to make transaction-specific investments. D. Vertical integration allows firms to increase operational efficiencies through improved coordination of adjacent value chain activities.

How does a sustainable strategy typically help a firm? A. It helps the firm focus solely on its financial goals. B. It reduces the need for corporate social responsibility within the firm. C. It facilitates the firm in effectively isolating its external stakeholders. D. It helps the firm achieve positive results along the social and ecological dimensions.

How has Apple been able to sustain its competitive advantage in the smartphone industry? A. by reducing its network effects B. by targeting its new products and services toward laggards C. by driving the price for the end user to zero D. by regularly introducing incremental improvements in its products

How was Netflix able to outperform both Hulu and Amazon? A. by focusing its resources on buying classic blockbusters movies B. by expanding its content streaming to include foreign markets C. by expanding from content streaming to theatrical releases and cable content D. by focusing its resources on producing high-quality content for content streaming

In 2007, Salesforce.com recognized an emerging market for platform as a service (PaaS) offerings and developed a new competency in delivering software development and deployment tools. This allowed its customers to either extend their existing CRM offering or build completely new types of software. This is an example of A. leveraging existing core competencies to improve current market position. B. building new core competencies to achieve vertical integration. C. redeploying and recombining existing core competencies to compete in markets of the future. D. building new core competencies to create and compete in markets of the future.

In 2009, ExxonMobil bought XTO Energy, a natural gas company, for $31 billion. XTO Energy is known for its core competency to extract natural gas from unconventional places such as shale rock—the type of deposits currently being exploited in the United States. ExxonMobil hopes to leverage its core competency in the exploration and commercialization of oil into natural gas extraction. Based on this example, ExxonMobil is engaging in A. unrelated-linked diversification. B. unrelated-constrained diversification. C. related-linked diversification. D. related-constrained diversification.

In the Boston Consulting Group (BCG) growth-share matrix, strategic business units categorized under dogs A. compete in a low-growth market but hold considerable market share. B. hold a high market share in a fast-growing market. C. compete in a high-growth market but have low and unstable earnings. D. hold a small market share in a low-growth market.

In the context of the Boston Consulting Group (BCG) growth-share matrix, if one of the strategic business units of a conglomerate is categorized under dogs, the management should A. infuse more capital into the strategic business unit. B. provide more human resources to the business. C. hold the business till it turns into a star. D. divest the strategic business unit.

In the market for used cars, which of the following is a reason behind the crowding out of desirable cars by lemons or inferior ones? A. experience-curve effects B. time compression diseconomies C. principal-agent problem D. information asymmetry

In the multiplex industry, Vibrant Movies Inc. is an upscale multiplex that focuses on superior customer experience. The firm charges premium prices for its movie tickets and services. Global Cine Inc., in contrast, charges the lowest price in the industry with its no-frills approach. In between these two segments is True Movies Inc., which offers a customer experience comparable to that of Vibrant Movies at a price almost as low as that of Global Cine. What strategy is True Movies pursuing in this scenario? A. liquidation strategy B. product diversification strategy C. market penetration strategy D. blue ocean strategy

Juanita Apparels Inc. outsources its production to contract manufacturers located in underdeveloped nations where unskilled labor is available in plenty for very low wages. This has helped the apparel brand become a price leader in the industry. Which of the following is the key driver behind Juanita Apparel's strategic position? A. network effects B. superior customer service C. availability of complements D. low-cost input factors

Large companies, such as AT&T, IBM, and GE, have been shifting their knowledge landscape from closed innovation to open innovation because of the A. decreasing capability of external suppliers and vendors. B. lack of reliability on venture capital. C. increasing need to internally control research and development. D. increasing supply and mobility of skilled workers.

NextDoor is an instant messaging application for smartphones. New smartphone users find it easier to connect with friends and relatives through this mobile app when compared to other similar instant messaging applications. Hence, it has the largest user base in the industry. Thus, NextDoor app's value has increased primarily due to its A. learning curve effects. B. economies of scale. C. economies of scope. D. network effects.

Organic Eats is a restaurant that caters to the needs of a small percentage of highly health-conscious consumers. It has an all-organic, vegan menu. Since there are very few restaurants that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Organic Eats is following a A. product diversification strategy. B. liquidation strategy. C. mass market strategy. D. focused differentiation strategy.

Process innovation is more important than product innovation during the growth stage because A. companies produce very few products during the growth stage, often just prototypes or beta versions. B. technological and commercial uncertainties about a new product still exist during this stage. C. it is more crucial to adopt the integration strategy during this stage. D. a standard, in terms of engineering features and design choices, has been set across the industry.

Product features, customer service, and complements are all examples of important A. cost curves. B. cost drivers. C. value curves. D. value drivers.

Red Empire Inc., a large multinational company owned by two partners, is active in the petroleum, capital market, chemicals, steel, beverages, hospitality, airlines, education, automobiles, and consumer electronics industries. The company has multiple brands and a large product portfolio under its banner. Which of the following terms would best describe this company? A. a flagship brand B. a single-business firm C. a dominant-business firm D. a conglomerate

Stellar Products Inc. is a U.S.-based consumer electronics company. It owns smaller firms in Japan and Taiwan where most of its cell phone technology is developed and manufactured before being released worldwide. Which of the following alternatives to integration does this best illustrate? A. venture capitalism B. franchising C. joint venture D. parent-subsidiary relationship

Strategic business units that have a relatively low market share but have the potential to grow are best categorized under _____ in the Boston Consulting Group (BCG) growth-share matrix. A. dogs B. stars C. cash cows D. question marks

The compact disk (CD) industry is in the maturity phase of its industry life cycle. What conditions prevail for an industry in this stage? A. The type of buyers at this stage will be early adopters. B. The mode of competition at this stage will be based on non-price factors. C. The market growth is positive or high at this stage. D. The industry structure is an oligopoly with only a few large firms.

The cost of capital to create a product is a fixed cost because it is A. directly proportional to the output level. B. uniform throughout all firms and industries. C. not a part of the profit calculations. D. unaffected by consumer demand.

The increasing availability of external options to commercialize ideas that were previously shelved is one of the factors that led to the shift from the A. maturity stage to the shakeout stage. B. shakeout stage to the maturity stage. C. open innovation to closed innovation. D. closed innovation to open innovation.

The pursuit of both differentiation and low cost at the same time in a way that creates a leap in value for both the firm and consumers is called A. cost driving. B. cost innovation. C. value driving. D. value innovation.

The three financial ratios that constitute return on revenue are Cost of goods sold/Revenue, Research & Development expense/Revenue, and A. Accounting profitability/Revenue. B. Economic value created/Revenue. C. Total return to shareholders/Revenue. D. Selling, general, & administrative expense/Revenue.

The translation of strategy into action takes place in the firm's _____, which details the firm's competitive tactics and initiatives. A. scorecard model B. economic value creation C. shareholder's value creation D. business model

The working capital turnover of Tesva Systems Corp. is 6.0. What does this financial data suggest? A. For every $6.00 Tesva Systems puts to work, the company incurs a cost of $1.00. B. For every $6.00 Tesva Systems puts to work, the company realizes sales of $1.00. C. For every dollar Tesva Systems puts to work, the company realizes $6.00 in loss. D. For every dollar Tesva Systems puts to work, the company realizes $6.00 of sales.

TimeEnough Inc. entered the low-priced digital watch market several years ago. This firm's earnings have been unsteady, but might be growing. According to the BCG growth matrix, TimeEnough is a A. cash cow. B. star. C. dog. D. question mark.

Vehmo Inc. is an automobile company whose core competency lies in manufacturing petrol- and diesel-based cars. The company realizes that more of its potential customers are switching to electric cars. The R&D department of the company acquires competencies in developing electric cars and launches its first hybrid car. In this scenario, Vehmo is primarily A. leveraging new core competencies to improve current market position. B. redeploying existing core competencies to compete in future markets. C. unlearning existing core competencies to create and compete in markets of the future. D. building new core competencies to protect and extend current market position.

What does it mean for a firm to have an 80 percent learning curve? A. Every time the cumulative output increases by 80 percent, the cost per unit will decline by 20 percent. B. Every time the cumulative output is doubled, the cost per unit will decline by 80 percent. C. Every time the cumulative output goes up by 20 percent, the cost per unit will decline by 80 percent. D. Every time the cumulative output is doubled, the cost per unit will decline by 20 percent.

When Internet service providers offer free routers for subscriptions to their wireless Internet packs, the perceived value of the service offering increases. In this case, the value driver would be A. economies of scale. B. learning-curve effects. C. experience-curve effects. D. availability of complements.

When a firm does not have the resource required for pursuing a growth strategy, and if the resource in question is not easily tradable, the implication for the strategist is most likely to A. borrow via a contractual agreement. B. pursue internal development. C. enter into a licensing agreement. D. consider an outright acquisition.

When a firm pursues a harvest strategy, it A. exits the industry by bankruptcy or liquidation. B. invests significant resources in product innovations. C. buys out its rivals to strengthen its strategic position. D. reduces investments in product support.

Which of the following best illustrates physical-asset specificity? A. a unique training program developed in an organization B. a ship container designed to carry more than the average load of iron ore C. a generic machine that can be used to churn different mixtures D. a machine solely designed to give a candy its trademarked shape

Which of the following competitively important assets is typically excluded from a firm's balance sheet? A. land and building B. accounts payable C. patents D. customer experience

Which of the following contributed the most to JCPenny's failed blue ocean strategy? A. failure to win legal battles against its closest competitors B. failure to conduct an accurate pretest in the market C. failure to apply the strategy to enough stores at the same time D. failure to combine a cost-leadership position with a differentiation position

Which of the following drivers simultaneously increases value while lowering cost? A. economies of scale B. superior customer service C. availability of complements D. innovation

Which of the following examples uses a focused differentiation strategy? A. a tennis pro shop that sells low-quality racquets priced at 150 dollars per racquet B. a coffee shop that offers mediocre lattes at a price of five dollars for a small latte C. a hotel chain that offers high-quality service with room rates of under 75 dollars per night D. a cosmetics brand that offers superior-quality skin lotion priced at 100 dollars per bottle

Which of the following firms is least integrated? A. a firm that enters a joint venture with another company to develop a new technology B. a firm that owns production subsidiaries across the globe C. a firm that makes equity investments in its supplier's company D. a firm that buys all the required raw materials from multiple external vendors

Which of the following is a competitive benefit experienced by the first mover firm in an industry? A. The first mover will be able to achieve a less steep learning curve. B. The first mover will be able to reduce the switching costs. C. The first mover will not have to patent its products or technology. D. The first mover will be able to reduce costs through economies of scale.

Which of the following is a disadvantage of the balanced-scorecard approach? A. It fails to link the strategic vision to responsible parties within the organization. B. It fails to translate the vision into measureable operational goals. C. It provides limited guidance for designing and planning business processes. D. It provides limited guidance about which metrics to choose.

Which of the following is a firm effect that has an impact on the competitive advantage of a firm? A. the exit barriers within the industry in which the firm operates B. the number of companies operating in the industry in which the firm operates C. the intensity of rivalry among existing companies in the firm's chosen industry D. the value and the cost position of the firm relative to its competitors

Which of the following is an example of social entrepreneurship? A. The committee approved the new formula for an all-purpose cleaner because it cleaned better than other cleaners and used easy-to-obtain ingredients. B. The committee approved the new formula for an all-purpose cleaner because it cleaned better than other cleaners and did not cost more to produce. C. The committee approved the new formula for an all-purpose cleaner because it cleaned as well as other cleaners and could be produced more efficiently. D. The committee approved the new formula for an all-purpose cleaner because it cleaned as well as other cleaners and used organic ingredients.

Which of the following is an external performance metric? A. return on revenue B. fixed assets turnover C. inventory turnover D. total return to shareholders

Which of the following is an open innovation principle? A. The smart people in our field work for us. B. To profit from R&D, we must discover it, develop it, and ship it ourselves. C. If we discover it ourselves, we will get it to market first. D. External R&D can create significant value.

Which of the following is primarily a value driver? A. cost of input factors B. economies of scope C. experience-curve effects D. complements

Which of the following motivations for business growth involves principal-agent problems? A. increasing profits B. increasing market power C. reducing risk D. motivating managers

Which of the following scenarios best illustrates horizontal integration? A. Regal Autos Inc. enters into a licensing contract with a distributor in a new international market. B. Regal Autos Inc. acquires a component parts manufacturer who previously supplied to Regal Autos' competitor. C. Regal Autos Inc. sets up its own distribution channel and retail stores. D. Regal Autos Inc. joins with Marcus Motors Inc., one of its direct competitors.

Which of the following sources of differential appeal is least effective in helping a firm sustain its advantage? A. reputation for innovation B. reputation for quality C. superior customer experience D. observable product features

Which of the following statements accurately describes social entrepreneurs? A. Social entrepreneurs are individuals who invest in start-up businesses in order to earn huge returns. B. Social entrepreneurs are individuals who rely primarily on social networking sites to generate revenues. C. Social entrepreneurs are employees within organizations who are responsible for carrying out lean production. D. Social entrepreneurs are those who consider financial, ecological, and social metrics to evaluate their firm's performance.

Which of the following statements is true of a disruptive innovation? A. It begins as a low-cost solution to a new problem. B. It initially performs better than the existing technology. C. It involves leveraging existing technologies in new markets. D. It invades the market from the bottom up, by first capturing the low end.

Which of the following statements is true of technology enthusiasts? A. They make up the largest market segment. B. They are the customer segment in the maturity stage of the industry life cycle. C. They are highly price conscious buyers. D. They enjoy using beta versions of products and providing feedback to companies.

Which of the following statements is true of the balanced-scorecard? A. It is a more or less a one-dimensional metric of measuring competitive advantages of a firm. B. It is one of the traditional approaches of measuring firm performance. C. Its primary focus is to base a firm's strategic goals entirely on external performance dimensions. D. It attempts to provide a holistic perspective on firm performance.

Which of the following statements is true of transaction costs? A. When the costs of pursuing an activity in-house are more than the costs of transacting for that activity in the market, then the concerned firm should vertically integrate. B. When companies transact in the open market, they incur internal transaction costs. C. Transaction costs exclusively consist of external costs associated with economic exchanges. D. Transaction costs are necessary to explain and predict the boundaries of a firm.

While Aros Inc. incurs a cost of $20 for a pair of shoes, Shoes Cult Inc., its competitor, manufactures a pair of shoes at $22. Both the companies are able to sell their shoes for a maximum of $30 per pair. Which of the following statements is true in this scenario? A. Both Aros and Shoes Cult have achieved differentiation parity. B. Aros is a cost-leader when compared to Shoes Cult. C. Aros has created a greater economic value than Shoes Cult. D. Shoes Cult has a competitive advantage over Aros.

While the industry for e-book readers is in its growth stage, the industry for landline telephones is in the decline stage of the industry life cycle. Which of the following can be inferred from this? A. While firms in the e-book reader industry will focus on pursuing a harvest strategy, firms in the landline telephone industry will focus on product innovations. B. The e-book reader industry is at a more advanced stage than the landline industry of the industry life cycle. C. While firms in the e-book reader industry will attract customers categorized under late majority, firms in the landline telephone industry will attract the early majority customers. D. The number of competitors in the e-book reader industry will be larger when compared to the landline telephone industry.

Why is the phase after the growth stage of the industry life cycle referred to as the shakeout stage? A. The barriers to entry increase during this stage. B. The firms in the industry yield the highest profits during this phase. C. Rivalry among competitors decreases in this stage. D. The weaker firms are forced out of the industry in this stage.

_____ is a business model in which the manufacturer sets a fixed price on a product, but the retailer is to free set its own price. A. Agency B. Freemium C. Bundling D. Wholesale

In contrast to a differentiator, a cost-leader will A. charge a premium price for its products and services. B. build an organizational culture where creativity and customer responsiveness thrive. C. focus its research and development on process technologies to improve efficiency. D. avoid an organizational structure that relies on strict budget controls.

A defining characteristic of the pay-as-you-go business model is that the A. users pay for only the services they consume. B. users pay for access to a product or service whether they use it during the payment term or not. C. initial product is often sold at a loss in order to drive demand for complementary goods. D. the basic features of a service are provided free of charge, but the user must pay for premium services.

Best Cut Inc. sells cutlery by having salespeople set up appointments with potential customers and give them a sales pitch for the product. When a salesperson sells cutlery, he or she gets a predetermined percentage commission. This type of business model is called A. an agency. B. bundling. C. wholesale. D. a freemium.

During the process of formulating an effective business model, a firm's managers should first A. transform their strategy of how to compete into a blueprint of actions and initiatives. B. implement their strategy at corporate, strategic business unit, and functional levels. C. implement their blueprint of actions and initiatives through structures, processes, culture, and procedures. D. evaluate the firm's strategy already in effect and take corrective actions if necessary.

From an investors' or shareholders' perspective, the measure of competitive advantage that matters most is the A. return on risk capital. B. economic value created. C. consumer surplus. D. inventory turnover.

GlobalCom Inc. is an Internet service provider. It provides a router free of charge when users sign up for a two-year wireless service plan. In this plan, users pay in advance irrespective of whether they use the Internet package during the two-year period or not. Which of the following business models does this scenario best illustrate? A. a combination of the razor-razor-blade model and the subscription-based business model B. the pay-as-you-go business model C. a combination of the freemium business model and the pay-as-you-go business model D. the direct sales business model

In 2014, Apple turned over its inventory more than 53 times. In stark contrast, Microsoft turned over its inventory only about 10 times during the year. Which of the following best explains this difference? A. Apple had a more effective management of its global supply chain than Microsoft. B. Microsoft had a stronger demand for its tablet computer than Apple did for its tablet computer. C. Apple operated its own production facilities and therefore had lower production costs than Microsoft. D. Microsoft had production facilities in countries with lower production costs than Apple.

Jenny liked a pair of sapphire earrings and thought they would cost around $1,000. She was surprised to find that the price of the earrings was $1,500. However, she decided to buy the earrings anyway. This scenario describes A. consumer surplus. B. producer surplus. C. consumer profit. D. producer profit.

Manufacturers of electric fragrance diffusers sell the electric outer device at an extremely low price, sometimes even at a loss. However, they make their money on the product by charging a premium on the perfume refills that have to be replaced regularly. Which of the following business models does this best illustrate? A. razor-razor-blade B. subscription-based C. freemium D. pay-as-you-go

Return on risk capital primarily includes A. stock price appreciation plus dividends received over a specific period. B. consumer surplus plus firm profit. C. account receivables plus account payables. D. economic value created by a firm plus reservation price.

The fixed asset turnover of a company is 8.3. What do you infer from this? A. Every dollar spent on the company's fixed assets generates $8.30 of revenue. B. 8.3% of the company's revenue is invested in fixed assets. C. The return on fixed assets will break even in 8.3 years. D. The cost of capital invested on fixed assets is 8.3% of the total profit.

The market capitalization of a public company is $5 billion. Each share of the company is traded at $200. What do you infer from this financial data? A. The firm's number of outstanding shares is 25 million. B. The firm pays an annual dividend of 10 percent. C. The firm's total return to shareholder is $5 billion. D. The firm's economic value created is $5 billion.

The ratio Cost of goods sold/Revenue indicates how efficiently a company can A. produce a good. B. sell a good. C. advertise a good. D. design a good.

The working capital of a small home-based business is $200,000. The revenues generated account to $600,000, and the profits incurred are $300,000. What would be the company's working capital turnover? A. 3, that is, $600,000/$200,000 B. $300,000, that is, $600,000 - $300,000 C. 2, that is, $600,000/$300,000 D. $100,000, that is, $300,000 - $200,000

Using the _____ approach, managers audit their company's fulfillment of its social and ecological obligations to stakeholders such as employees, customers, suppliers, and communities as conscientiously as they track its financial performance. A. triple-bottom-line B. economic value creation C. accounting profitability D. shareholder value creation

Which of the following expressions accurately describes market cap? A. It is the product of the number of outstanding shares and the share price. B. It is the difference between the book value and the market value of a firm's assets. C. It is the ratio of a firm's equity finance and its debt finance. D. It is the difference between a firm's account receivables and account payables.

Which of the following is a disadvantage of measuring firm performance through total return to shareholders and firm market capitalization? A. Market volatility makes it difficult to assess firm performance through these measures, particularly in the short-term. B. These tools fail to indicate how the stock market views all available public information about a firm's expected future performance. C. These tools measure competitive advantage in absolute terms rather than relative terms. D. Only the book value of the share prices is taken into account when applying these measures, and not the market value.

Which of the following is an advantage of a triple-bottom-line approach? A. The approach takes an integrative and holistic view in assessing a company's performance. B. The approach does not rely on an external view of a firm to assess its performance. C. The approach is more of a quantitative performance metric rather than a mere conceptual framework. D. The framework can help managers assess a firm's competitive advantage without taking into account the firm's performance along noneconomic dimensions.

Which of the following is the most accurate characterization of stakeholder theory? A. an approach to understanding a firm as embedded in a network of internal and external constituencies that each make contributions and expect consideration in return B. an approach to understanding a firm as being in a highly competitive industry, which requires the use of effective market capitalization to gain a competitive advantage C. an approach to understanding a firm, which involves balancing tangible assets and intangible assets to achieve high accounting profitability D. an approach to understanding a firm, which involves balancing multiple internal and external performance metrics in order to gain a competitive advantage

_____ is best described as the difference between a buyer's willingness to pay for a product or service and a firm's total cost to produce it. A. Economic value created B. Break-even point C. Consumer surplus D. Cost of capital

A defining characteristic of the subscription-based business model is that the A. user pays for only the services he or she consumes. B. user pays for access to a product or service whether he or she uses it during the payment term or not. C. basic features of a product or service are provided free of charge, but the user must pay for premium services such as advanced features or add-ons. D. initial product is often sold at a loss or given away for free in order to drive demand for complementary goods.

Andrew invested $200,000 in the shares of a company. At the end of a year, he had earned $7,000 as dividends on his shares along with a $1,000 appreciation in the overall value of his shares. However, if Andrew had invested the same amount on an asset, like gold, the appreciation in its value would have earned him $10,000 at the end of the year. In this scenario, which of the following is Andrew's opportunity cost? A. $7,000 B. $10,000 C. $2,000 D. $200,000

By selling a laptop at $1,000 for which consumers are willing to pay up to $1,200, a consumer electronics firm makes a profit of $400 per unit. In this scenario, the amount $600, that is ($1200 - $1000) + $400, is the A. opportunity cost. B. economic value created. C. reservation price. D. consumer surplus.

If a firm's market capitalization is $1 billion and the share price is $50, how many shares outstanding does the firm have? A. 20 thousand B. 20 million C. 500 thousand D. 50 million

In 2014, Apple had a return on revenue of 29.3 percent, and Microsoft had a return on revenue of 32 percent. Even so, Apple had a higher return on invested capital than Microsoft. Why did this happen? A. Apple had a higher cost structure than Microsoft. B. Apple was able to charge a much higher margin for its products and services than Microsoft. C. Apple spent more on research and development and marketing and sales than Microsoft. D. Apple had a much higher selling, general, and administrative expense that Microsoft.

In the _____ business model, the initial product is often sold at a loss or given away for free in order to drive demand for complementary goods. A. subscription-based B. razor-razor-blade C. pay-as-you-go D. direct sales

Janet is the CEO of Far Sight Inc., which uses a triple-bottom-line approach. As a result, Janet will tend to A. view superior financial performance as the sole objective of her firm. B. expect her company to be socially responsible. C. use fossil fuels to run her company's production plants. D. ignore the ecological dimension for her company.

Mia has purchased an Internet package for three months, in which she can use 30 mbps Internet speed. However, for the service, she needs to pay a fee of $50 in advance irrespective of whether she uses the Internet during the service period or not. This arrangement best illustrates the _____ strategy. A. razor-razor-blade B. subscription-based C. pay-as-you-go D. freemium

The ratio of SG&A/Revenue is an indicator of a firm's focus on A. researching to produce innovative products and services. B. marketing to promote its products and services. C. producing a good in an efficient manner. D. creating a good that is cost-effective.

The value a consumer attaches to a product or service is captured in the A. least price a consumer is willing to pay for it. B. consumer's maximum willingness to pay for it. C. expenses incurred by the firm in manufacturing it. D. difference between the price charged for it and the cost to produce it.

True Vibgyor Inc. sells its e-book readers at the cost price of $15 each. However, the company makes its profits when users have to download or buy books online. Which of the following business models is True Vibgyor implementing? A. subscription-based B. razor-razor-blade C. pay-as-you-go D. direct sales

Unlike the financial ratios based on accounting data, total return to shareholders is A. backward-looking and historic in nature. B. an external performance metric. C. an absolute measure of competitive advantage. D. unaffected by market volatility or macroeconomic factors.

Value is determined by the perceived benefits a good or service provides to a(n) A. manufacturer. B. buyer. C. investor. D. retailer.

When using the balanced-scorecard approach to assess a firm's performance, which of the following is not a key question that managers need to answer? A. How do customers view us? B. How do we reduce the economic value created? C. What core competencies do we need? D. How do shareholders view us?

Which of the following best expresses fixed asset turnover? A. Current assets/Fixed assets B. Revenue/Fixed assets C. Fixed assets/Total return to shareholders D. Fixed assets/Current liabilities

Which of the following is an advantage of applying the economic value creation perspective to assess a firm's performance? A. When the need for "hard numbers" arises, managers and analysts rely on economic value creation perspective to measure competitive advantage. B. In economic value perspective, analysts not only consider historical costs, but also opportunity costs. C. Arriving at the economic value created is easy because determining the value of a good in the eyes of consumers is a simple task. D. It is the most efficient tool for assessing corporate-level competitive advantage of highly diversified companies with large product portfolios.

Which of the following is an advantage of the balanced-scorecard? A. It is a tool for both strategic formulation and strategic implementation. B. It allows managers to translate a firm's vision into measureable operational goals. C. The balanced-scorecard is independent of the skills of the managers responsible for its implementation. D. Its implementation is a one-time effort and does not require continuous tracking of metrics or updating of strategic objectives.

Which of the following is not true of risk capital? A. From the shareholders' perspective, the measure of competitive advantage is primarily based on return on their risk capital. B. Risk capital invested in a firm can be legally recovered if the firm goes bankrupt. C. A person who provides capital to a firm gets equity shares in return. D. Return on risk capital includes stock price appreciation plus dividends received over a specific period.

Which of the following statements is true of accounting data? A. Accounting data focus mainly on intangible assets, rather than tangible assets. B. Accounting data are historical data and thus backward-looking. C. Accounting data do not have to be adjusted in any manner to compare companies with different capital structures. D. Accounting data consider off-balance sheet items, such as pension obligations of a firm.

_____ are best described as the value of the best forgone alternative use of the resources employed. A. Variable costs B. Opportunity costs C. Social costs D. Switching costs

_____ are the legal owners of public companies. A. Employees B. Shareholders C. Category captains D. Creditors

_____ denotes the dollar amount a consumer would attach to a good or service. A. Utility B. Value C. Consumer surplus D. Economic contribution

_____ most precisely measures how well a company leverages its fixed assets, particularly property, plant, and equipment (PPE). A. Working capital turnover B. Fixed asset turnover C. Fixed assets to equity ratio D. Capital leverage ratio

A firm has 30 million shares outstanding, and each share is traded at $100. Also, each shareholder gets a dividend of $2,000 annually. In this case, the market capitalization is A. 30,000 shares, that is, 30 million shares/$100. B. $200,000, that is, $2,000 × $100. C. $3 billion, that is, 30 million shares × $100. D. 20:1, that is, $2,000/$100.

A firm incurs $100 to manufacture an office table. It fixes the market price of the table as $250, and discounts the price to $200. However, the maximum a person is willing to pay for it is $180. What is the amount of total perceived consumer benefits in this scenario? A. $250 B. $200 C. $180 D. $100

A watchmaking company has priced one of its wristwatches at $210. Most of its competitors sell similar watches at $180. Selling anything less than $150 would result in a loss for the company. However, the absolute maximum a customer is willing to pay for it is $170. In this scenario, what is the reservation price of the wristwatch? A. $150 B. $180 C. $170 D. $210

Airbnb rents spaces that previously would have been unused to generate revenue, while also dramatically increasing the potential amount of accommodation space in the 191 countries. This business uses a _____ technique. A. offshoring B. crowdsourcing C. peer-to-peer D. binge watching

Apple Watch retailed for $349 in 2015, and the firm was predicted to sell millions of units. The firm's total cost in terms of materials and labor for the Apple Watch was no more than $84. Thus, Apple's profit for each watch sold is an estimated $265, with a profit margin of _____ percent. A. 215 B. 265 C. 315 D. 365

Best Fit Club, a chain of gyms and spas, requires its customers to pay a quarterly or an annual fee to use its services. Irrespective of whether they frequently use the services during the payment period or not, members have to pay in advance. Which of the following business models does this best illustrate? A. razor-razor-blade B. pay-as-you-go C. subscription-based D. freemium

Both Vibrant Phones Inc. and Oryxo Inc. incur a cost of $200 to manufacture a single unit of a cell phone. However, Vibrant Phones creates more economic value than Oryxo does. What does this imply? A. Vibrant Phones and Oryxo have achieved a competitive parity. B. Oryxo has a competitive advantage over Vibrant Phones. C. Vibrant Phones sells its products at a better price than Oryxo. D. Oryxo's offering has greater total perceived consumer benefits than Vibrant Phones's offering.

Economic value creation is best expressed as A. producer surplus minus consumer surplus. B. consumer surplus minus cost of production. C. consumer surplus plus firm profit. D. producer surplus plus firm profit.

Free Spirit Communications Inc. is a cellular service provider that charges its customers $1 for three hours of talk time. So, if a customer's talk time for a month is 60 hours, the company charges him or her $20 at the end of the month. Which of the following business models does this best illustrate? A. razor-razor-blade B. subscription-based C. pay-as-you-go D. freemium

In an economic context, strategy for producers is primarily about A. distributing the economic value created equally between consumers and themselves. B. reducing the difference between consumer's willingness to pay for a product and the cost to produce it. C. capturing the economic value created as much as possible. D. lowering producer surplus and increasing consumer surplus.

In order to achieve a competitive advantage, a firm should be able to A. increase its payable turnover. B. keep its producer surplus low. C. increase the difference between the value created and the cost to produce it. D. increase the difference between consumer surplus and its profits.

In the freemium business model, the A. initial product is sold at a premium price and the complementary goods are given free. B. users are free to pay for the services in advance or after using the services. C. users are not charged for the basic features of a product or service, but the user must pay for premium advanced features or add-ons. D. users pay for access to a product or service whether they use it during the payment term or not.

Smart Feet Inc. produces shoes that are better quality and cost more to make than the shoes of its competitors. Smart Feet realizes that there will be a large difference between the cost to produce the shoes and the consumer's willingness to pay for them. Even so, Smart Feet decides to charge the same price as its competitors. Which of the following will most likely be the result of this action? A. Smart Feet will go out of business. B. Smart Feet will increase its marketability. C. Smart Feet will gain market share. D. Smart Feet will be bought by a competitor.

The difference between the price charged for a product and the cost to manufacture it is referred to as the A. consumer surplus. B. break-even price. C. producer surplus. D. reservation price.

The receivables turnover of VK Products Inc. is 13.6 and that of its competitor DL Goods Inc. is 6.0. What does this financial data primarily imply? A. VK Products is less efficient than DL Goods in collecting accounts receivables. B. DL Goods pays its creditors more quickly as compared to VK Products. C. VK Products collects accounts receivables faster than AP Goods does. D. DL Goods has a larger value gap as compared to VK Products.

The tenet behind the triple-bottom-line is that A. a firm should solely focus on increasing the economic value created to/for its customers. B. a firm's primary objective should be increasing the total returns to its shareholders. C. a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy. D. a firm's return on revenue can be broken down into three ratios: COGS/Revenue, R&D/Revenue, and SG&A/Revenue.

The translation of strategy into action primarily takes place in a firm's A. mission statement. B. executive summary. C. business model. D. code of conduct.

When GD Inc. declared a dividend of $20,000,000, its market value increased from $8 billion to $8.5 billion. However, it lost a chance to reinvest $20,000,000 in the research and development of a new product which would have earned a profit of $200 million. Thus, this $200 million is referred to as GD Inc.'s A. producer surplus. B. consumer surplus. C. opportunity cost. D. social cost.

Which of the following describes a peer-to-peer technique? A. A company offers a cleaning service free of charge on a first-time trial basis. B. A company offers a package of cleaning supplies at a discount. C. A company matches an individual with a cleaning service. D. A company places a low retail price on low-selling cleaning supplies.

Which of the following is not a limitation of the economic value creation framework? A. The framework falls short when managers are called upon to operationalize competitive advantage. B. The framework is not as effective as accounting profitability or shareholder value creation when the need for "hard numbers" arises. C. The framework fails to provide the foundation that will help firms decide between cost-leadership or differentiation strategies. D. The framework cannot be effectively applied for assessing corporate-level performance of diversified conglomerates.

Which of the following statements is not true of competitive advantage? A. Competitive advantage is reflected in superior firm performance. B. Competitive advantage is a multifaceted concept. C. Competitive advantage is an absolute measure. D. Competitive advantage has been linked to a firm's triple-bottom-line.

_____ is best described as a measure of how effectively capital is being used by a firm to generate revenue. A. Return on revenue B. Risk capital C. Working capital turnover D. Revenue per employee

_____ is the money shareholders provide in return for an equity share, which they cannot recover if the firm goes bankrupt. A. Tangible assets B. Value creation C. Risk capital D. Market capitalization

_____ of receivables turnover imply more efficient management in collecting accounts receivable and shorter durations of interest-free loans to customers. A. Unsteady ratios B. Steady ratios C. Higher ratios D. Lower ratios

_____ precisely indicates how much of a firm's sales is converted into profits. A. Break-even price B. Working capital turnover C. Return on revenue D. Inventory turnover

Kerry the Kangaroo Inc. specializes in producing and selling a stuffed kangaroo named Kerry. Although the stuffed kangaroo has sold well, the clothes that can be bought to dress the kangaroo have not sold as well as expected. As a result, Kerry the Kangaroo has warehouses full of hats, pants, sweaters, and shoes to dress Kerry. This firm used a _____ to determine how much of its capital is tied up in these accessory items. A. payables turnover B. receivables turnover C. fixed asset turnover D. inventory turnover

Nicki paid $900 for a camera that she thought was worth $1100 for all the features included in it. For the consumer electronics firm selling the camera, however, the cost of producing the camera was only $350. What is the consumer surplus in this scenario? A. $900 B. $1,100 C. $550 D. $200

Which of the following frameworks used to measure competitive advantage relies on both an internal and an external view of a firm? A. the economic value creation model B. the accounting profitability model C. the shareholder value creation model D. the balanced-scorecard model

Which of the following is not a factor that makes total return to shareholders and market capitalization unreliable measures of company performance? A. the volatility of stock prices B. the effects of the unemployment rate C. variations in interest and exchange rates D. the unpredictability of return on revenue

Which of the following is not an accurate expression of the economic value created per unit of a product sold? A. the sum of consumer surplus and producer surplus B. the difference between consumer's reservation price and firm's cost C. the sum of consumer surplus and firm profit D. the difference between the price charged and the firm's cost

Which of the following is not an advantage of the balanced-scorecard approach to assess firm performance? A. It allows managers to communicate and link the strategic vision to responsible parties within an organization. B. It helps managers to implement feedback and organizational learning in order to modify and adapt strategic goals when indicated. C. It provides a concise report that tracks chosen metrics and measures and compares them to target values. D. It is a tool which can be effectively used by managers for both strategic implementation and strategic formulation.

Which of the following ratios best expresses inventory turnover? A. Inventory/Working capital B. Annul profits/Inventory C. Inventory/Per unit cost of production D. Cost of goods sold/Inventory

Which of the following scenarios best illustrates bundling? A. Clean Brush Inc. sells its electric toothbrushes for a low cost, but charges a high price for replacement brushes. B. Cumulus Media Inc. sells its cloud computing network by having customers pay for the service as they use it. C. Sharp Cable Inc. sells its basic TV channels for free but charges high prices for any channels that customers add on later. D. Fresh Seeds Inc. sells seed packages, in which a person can buy a package of three types of seeds at a discounted price compared to buying the seeds individually.

Which of the following statements about competitive advantage is true? A. Competitive advantage is an absolute measure; it is not relative. B. Competitive advantage is a one-dimensional concept. C. Competitive advantage is permanent and not transitory; once gained by a firm it stays with the firm. D. Competitive advantage can be assessed by measuring accounting profit, shareholder value, or economic value.

Which of the following statements is true of the triple-bottom-line? A. It is more or less a one-dimensional metric of measuring competitive advantage of a firm. B. Its primary focus is to base a firm's strategic goals entirely on external performance dimensions. C. According to this approach, achieving positive results in any one of the dimensions, economic, social, and ecological, can lead to a sustainable strategy. D. Three dimensions, economic, social, and ecological, make up the triple-bottom-line.

The top management at Parallela Pharma Inc., through rigorous testing, ensures that the company develops and sells drugs that are free of harmful side effects. Also, the company ensures that the chemical waste generated in the manufacturing process is kept to a bare minimum and is disposed of according to the regulations of the Environmental Protection Agency. The management assesses its overall performance based on these dimensions. Thus, the managers at Parallela Pharma are applying the _____ approach to measure firm performance. A. economic value creation B. shareholder value creation C. triple-bottom-line D. accounting profitability

BUS 401 EXAM 2

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