Business Capstone Test 1 Review

When a stakeholder has power over a company it is ______.

Able to influence the company to do something it would otherwise not do.

In the PESTEL model, political factors are those that relate to ______.

Government bodies

Price discounts, frequent new product releases with minor modifications, and intense promotional campaigns are all tactics indicative of an industry with ______ growth. Multiple choice question.

slow or negative

The positive effect that one user of a product or service has on the value of that product or service for other users is known as the ___. Multiple choice question.

Netowork effect

The field of management that focuses on attaining competitive advantage by combining analysis, formulation, and implementation is known as ______.

Strategic management

Burger Bomb is a new hamburger restaurant. In order to compete successfully against its many competitors, Burger Bomb has decided to focus on quality and an interesting, unique menu that uses locally sourced, organic ingredients. This is known as Burger Bomb's ______.

Strategy

There is a(n) ______ relationship between competitive intensity and the power of the five forces.

Strong

Cost advantages that accrue for firms with larger output because they can spread fixed costs over more units and can employ technology more efficiently are called ______.

Economies of scale

What are the categories of expectations that society has of the business enterprise as described in the CSR framework?

Legal Economic Philanthropic Ethical

When firms compete by offering unique product features rather than competing on price, ______ occurs.

Non-price competition

In order to influence changes in their political environment, firms pursue ______.

Nonmarket strategies

What might potential substitutes do to make themselves more attractive to customers?

Offer a lower price and offer a higher value proposition.

When suppliers can demand higher prices for their inputs or reduce the quality of the input factor delivered, they demonstrate that they are ______.

Powerful

Which of the following are advantages, independent of size, that incumbent firms possess?

Proprietary technology. Cumulative experience effects. Brand loyalty. Preferential access to distribution channels.

Among the various types of responsibilities a business firm has, which are specifically considered to be economic responsibilities?

Repaying debts to creditors. Giving investors a return on invested capital.

The intensity with which companies in an industry jockey for market share and profitability is known as ______.

Rivalry

The cost advantages that a firm obtains by increasing output, such as by spreading fixed costs over more units, are called economies of _____.

Scale

The stronger the five forces in Porter's model, the _______ the industry's profit potential.

Lower

The online auction site eBay has more than 100 million active users, so buyers are more likely to find what they are looking for while sellers are more likely to find buyers for the items they are offering. This is an example of __.

Network effects

According to Michael Porter, the profit potential of an industry is ______.

A function of five forces related to competition.

Which of the following are characteristics of a perfectly competitive industry?

Firms in the industry sell a commodity product. The industry is fragmented. Individual firms have little or no ability to raise prices.

The Alta Velocidad Espanola high-speed trains allow passengers to travel in comfort and reach their destinations in less time than it would take to fly to the same location. As a result, many people choose to take the train when traveling. Which of the following points are illustrated by this example?

Firms must look beyond their immediate industry for competitors. A higher value proposition can make a substitute more appealing.

When a new firm enters an industry, which of the following often occur?

Incumbent firms spend more to satisfy customers. Industry profit potential declines. Incumbent firms lower prices.

Which of the following tend to result from strong competitive rivalry?

Limits to the industry's profit potential.

The threat of entry is high when capital requirements are in comparison to the expected returns.

Low

A perfectly competitive industry has ______ entry barriers and ______ small firms.

Low; many

If the US dollar depreciates compared to the euro, it will take ______ dollars to buy one euro.

More

For consumers who only watch a couple of movies per month, Redbox, which offers movie rentals for just $2, offers an attractive price-performance trade-off with low switching costs in comparison to which of the following?

Movie theater tickets, Netflix's streaming services, and DVD purchases

Which of the following are important sources of entry barriers?

Network effects. Economies of scale. Government policy. Capital requirements. Credible threat of retaliation.

According to the PESTEL model, which of the following are kinds of forces that exist in the general external environment?

Political, economic, sociocultural, technological, ecological, and legal

The economic recession that began in 2008 in the United States was the result of unwise investment in ______.

Real estate

Which of the following are ways that powerful suppliers are a threat to firms?

They can capture part of the economic value created by firms. They can reduce the industry's profit potential. They can force the cost of production to increase.

Place the five steps of the stakeholder impact analysis in order, with the first step at the top.

1. Who are our stakeholders? 2. What are our stakeholders' interests? 3. What opportunities and threats do our stakeholders present? 4. What economic, legal, ethical, and philanthropic responsibilities do we have to our stakeholders? 5. What should we do to effectively address the stakeholder concerns?

When a firm implements a strategy that leads to superior performance relative to other companies in the same industry, it is said to have achieved ______.

A competitive advantage.

Redbox offers DVD rentals for $2, which is inexpensive when compared to the price of purchasing a DVD, which may be $10 or more. This is an example of ______.

An attractive price-performance trade off resulting in a high threat of substitution.

Global warming would be an example of ______ factor in a firm's external environment.

An ecological

A group of companies that deal with more or less the same set of suppliers and buyers make up ______.

An industry

The most rigorous means of analyzing the profit potential within a specific industry is to conduct ______.

An industry analysis

The amount that savers are paid for use of their money and the amount that borrowers pay for that use is known as ______.

An interest rate

What is the first step in the AFI strategy framework?

Analysis

Walmart producing private-label brands, such as Equate health and beauty items and Parent's choice baby products, is an example of ______.

Backward integration

When a buyer moves upstream in the industry value chain, into the suppliers' business, ______ occurs.

Backward integration

The pressures that industry suppliers can exert on an industry's profit potential, is also called the ______.

Bargaining power of suppliers.

In a(n) ______ strategy formulation, managers focus on deciding HOW the firm should compete.

Business

A rise in economic growth is reflected by ______.

Businesses expanding operations to satisfy demand.

The power of ______ is the pressure they can put on the margins of producers in the industry by demanding a lower price or higher product quality.

Buyers

According to Porter's model, which of the following should be considered when analyzing a firm's competition?

Buyers, suppliers, and the threat of substitutes.

How should managers prioritize stakeholder concerns in the final step of stakeholder impact analysis?

By considering the power, legitimacy, and urgency of stakeholder claims.

Which of the following are ways in which the power of buyers affects producers?

By obtaining price discounts. By requesting more service. By demanding higher quality.

Using a(n) ______ strategy formulation, managers examine where and how the firm should compete around the world.

Global

New firms have been established in the airline and telecommunications industries after ______.

Deregulation

Internet privacy, genetic engineering, and stem-cell research are examples of areas in which a firm's ______ responsibilities exceed its legal responsibilities.

Ethical

Starbucks's commitment to fair trade and responsible growing practices indicates that the firm takes its ______ responsibilities seriously.

Ethical

The obstacles that determine how easily a firm can leave an industry, are called ______.

Exit barriers

Although ______ coordination, such as price fixing, is illegal in the United States, ______ coordination such as "an unspoken understanding" is not.

Explicit; tacit

An increase in the overall price level is also called ______.

Inflation

Exit barriers, strategic commitments, and competitive industry structure are important factors in determining the _____________.

Intensity of rivalry

The relationship between the natural environment and business organizations can best be described as ______.

Interdependent

In the second step of the stakeholder impact analysis, managers need to identify and understand stakeholders' ______.

Interests and claims

Which of the following legal developments allow business to function as an institution?

Property rights and contract enforcement.

Strategic positioning allows managers to ______.

Provide customers value while controlling costs.

The threat of ______ is one of the five forces and can be exemplified by the threat that videoconferencing presents to business travel.

Substitutes

A competitive advantage that lasts for a long period of time is said to be ______.

Sustainable

If a business considers changing vendors, but doing so would require that business to alter product specifications, retrain employees, and/or modify existing processes, we would say the business faces significant ______.

Switching costs

When a firm is able to maximize the gap between ______, it increases its competitive advantage.

The cost of production and the value of what it produces.

In the external analysis phase of the AFI strategy framework, managers should ask,

"How do external forces affect our strategy and competitive advantage?"

A firm's overall efforts to gain and sustain competitive advantage is referred to as which of the following?

A competitive strategy

A good strategy consists of three elements. The first element is accomplished through analysis of the firm's external and internal environments. We also call this ______.

A diagnosis of the competitive advantage.

Which of the following are characteristics of a monopolistically competitive industry?

A differentiated product. Obstacles to entry. The ability to raise prices for differentiated products.

Which statement about strategies is true? A. Statements of desire typically address economic fundamentals. B. "We will be the best!" is an example of a strategy. C. Vision and mission statements cannot lay the foundation for good strategies. D. A statement of desire on its own often leads to goal conflict.

A statement of desire often leads to goal conflict.

Based on its long dominance as a coffeehouse chain, Starbucks has ______.

A sustainable competitive advantage.

Advantages based on brand loyalty, proprietary technology, preferential access to raw materials, and favorable geographic locations are examples of ______.

Advantages independent of size

Shareholder activists, such as Bill Ackman and Carl Icahn, have much more power over a firm than individual investors, because they ______.

Can exercise block-voting rights or otherwise influence the corporate government process. Are able to buy or sell a much larger number of shares than individuals can.

The external forces called technological factors ______.

Capture the application of knowledge to create new process and products.

Which of the following are primary strategy objectives? (Check all that apply.) A. strengthening relationships B. creating value C. maximizing sales D. controlling costs

Creating value and controlling costs.

The ______ rate determines how many dollars one must pay for a unit of foreign currency.

Currency exchange

When identifying stakeholders, a firm should focus on those stakeholders that ______.

Currently have, or could potentially have, a material effect on the firm.

In an oligopoly, which of the following conditions exist?

Differentiated products, high barriers to entry, and a few large firms.

Which of the following incentivize workers by offering them discounted shares or retirement plans based on company stock?

Employee stock ownership plans (ESOPs)

Obstacles that determine how easily a firm can enter an industry, are called ______.

Entry barriers

Customers, suppliers, creditors, unions, and governments are known as ______.

External stakeholders

True or false: Sociocultural factors tend to be fixed.

False

In the ______ step of the stakeholder impact analysis, managers need to decide the appropriate course of action for the firm in relation to stakeholder concerns.

Fifth

In general, a firm improves its strategic position by ______.

Increasing its competitive advantage.

Which statements about the threat of retaliation are true?

Incumbent firms may retaliate in ways that go beyond price competition. The threat of retaliation often acts as a deterrent to entry. New entrants must anticipate how incumbent firms will react to their entry.

Which of the following are important factors in determining the intensity of rivalry among existing competitors?

Industry growth, competitive industry structure, exit barriers, and strategic commitments.

In a period of economic boom, unemployment is ______, and human resources become expensive.

Low

Which of the following are factors in a firm's legal environment?

Mandates, regulations, and laws

Through use of the PESTEL model, firms are able to do which of the following?

Monitor external factors. Evaluate external trends.

Who among the following are considered internal stakeholders? (Check all that apply.) A. Competitors B. Governments C. Unions D. Stockholders E. Employees F. Customers G. Board members

Stockholders, employees, and board members.

The expected competitive intensity is stronger when the other four forces are ______, and weaker when the other four forces are ______.

Stronger; weaker

Strategy is ______.

The set of actions a firm takes to achieve a competitive advantage.

Which of the following statements regarding tasks in the AFI strategy framework is true?

The tasks are very interdependent.

The fact that tax preparation software such as Intuit's TurboTax is a valid alternative for professional services offered by H&R Block and others, is an example of ______.

The threat of substitutes

Which statement about the five forces that shape competition is true?

Their strengths are context-dependent.

Which statement is true about pricing strategies, internet strategies, alliance strategies, and brand strategies? A. They may be a necessary part of a firm's initiatives to support its competitive strategies. B. They are all that a firm needs to achieve competitive advantage. C. They represent a complete, consistent guiding policy and a good strategy. D. They often play a role in day-to-day operations, but they have no bearing on gaining competitive advantage.

They may be a necessary part of a firm's initiatives to support its competitive strategies.

In the ______ step of the stakeholder impact analysis, the firm identifies the opportunities and threats that stakeholders present to the firm.

Third

Which of the following conditions lead to a strong threat of substitutes?

When the cost of switching to the substitute is low. When the price-performance trade-off is attractive.

A good strategy consists of three elements. The second element is accomplished through strategy formulation, resulting in the firm's functional, business-level, and corporate-level strategies. This is also called ______.

A guiding policy to address the competitive challenge.

A stakeholder has ______ when its needs are within the bounds of the law or are otherwise relevant to the firm.

A legitimate claim

Deregulation of industries leads to intensified competition and higher value at lower prices for consumers. This is an example of ______ factors influencing business.

Legal

Consumers tend to buy homes, automobiles, and computers when interest rates are ____ because credit is inexpensive.

Low

The concept, or framework, of corporate social ____ guides firms in identifying and addressing their economic, legal, ethical, and philanthropic obligations to society.

Responsibility

In which of the following situations can a firm providing goods and services gain a competitive advantage? (Check all that apply.) A. Their offerings cost more to produce than competitors' offerings. B. Their offerings are similar to competitors' offerings at higher prices. C. Their offerings are of similar quality to competitors' offerings but can be sold at lower prices due to lower costs. D. Their offerings provide more value for consumers than competitors' offerings.

Their offerings are of similar quality to competitors' offerings but can be sold at lower prices due to lower costs. Their offerings provide more value for consumers than competitors' offerings.

Which of the following questions are part of the five steps in stakeholder impact analysis? (Check all that apply.) A. How can we gain maximum competitive advantage without taking our stakeholders into account? B. What are our stakeholders' interests and claims? C. Who are our stakeholders? D. Which stakeholders have little to no power over us? E. What opportunities and threats do our stakeholders present?

What are our stakeholders' interests and claims? Who are our stakeholders? What opportunities and threats do our stakeholders present?

Which statement about strategies is true? A. A statement of desire on its own often leads to goal conflict. B. "We will be the best!" is an example of a strategy. C. Vision and mission statements cannot lay the foundation for good strategies. D. Statements of desire typically address economic fundamentals.

A statement of desire on its own often leads to goal conflict.

A key feature of an oligopoly is that the competing firms in the industry ______, meaning the actions of any one firm will influence the behaviors of the other firms.

Are interdependent.

In Porter's model, there are five key ______ forces, including threat of entry, power of suppliers, and threat of substitute products.

Competitive

Burger Bomb has been outperforming other burger restaurants for a decade. This indicates that Burger Bomb has which of the following?

Competitive advantage

The idea that firms should voluntarily give back to society when they are able to do so is also known as ______.

Corporate citizenship

Which framework helps firms to identify their economic, legal, ethical, and philanthropic obligations to society?

Corporate social responsibility (CSR)

It might be a good idea to expand or upgrade a firm's human capital base during a ______, because unemployment is high and therefore human capital is abundant and wages usually _____.

Downturn; fall

When companies seek ways to recharge car batteries in a sustainable way, it is an example of ______ factors creating business opportunities.

Ecological

Growth rates, interest rates, and levels of employment would be considered ______ factors in a firm's general environment.

Economic

Which of the four corporate social responsibilities is considered first and foremost for business enterprises?

Economic

In the early 2000s, easy credit made real estate the investment of choice in the United States. By the end of the decade, however, a recession had set in, impacting almost all businesses in the country. This example shows that _____.

Economic boom periods can overheat and lead to speculative bubbles.

True or false: A statement such as, "We will be the biggest company in the world," is an example of strategy.

False

True or false: The only legal means of retaliation against new entrants is price competition.

False

True or false: The relationship between firms and the natural environment must be adversarial.

False

The question "How do we implement the formulated strategy through an organizational structure, culture, and control system that values and encourages ethical behavior?" would most likely be examined by managers in the ______ phase of the AFI strategy framework.

Implementation

Which of the following are likely outcomes of a competitive rivalry based entirely on price cutting?

Investments from firms drop off. Firms struggle to make profits. Most or all value is transferred to customers.

Deflation is a serious threat to economic growth for which of the following reasons?

It stops companies from investing in new production capacity because they expect a further decline in prices. It distorts expectations about the future.

The economic factors that affect a firm's external environment are ______.

Largely macroeconomic

An example of a recent innovation in PROCESS technology is ______.

Lean manufacturing, Six Sigma quality, and biotechnology

Which of the following are employed as nonmarket strategies to influence government bodies?

Litigation, lobbying, and public relations.

Many firms of all sizes actively compete in the computer hardware industry, and there are no firms with a large market share. Product offerings tend to be similar but are differentiated in ways that enable some firms to raise or impact pricing. The computer hardware industry is an example of ______.

Monopolistic competition

The third step of stakeholder impact analysis requires managers to identify the ______ presented by internal and external stakeholders.

Opportunities and threats

In the ______ step of the strategy implementation phase of the AFI strategy framework, managers would examine how the firm should be structured in order to implement the desired strategy.

Organizational design

Which of the following are the four main competitive industry structures?

Perfect competition, oligopoly, monopoly, and monopolistic competition.

Microsoft donating more than $3 billion in cash and software to people in need is an example of which type of corporate social responsibility?

Philanthropic

According to the five forces model, a firm seeking to compete in an established industry should seek to do which of the following?

Position itself in a way that relaxes the constraints of strong forces. Position itself in a way that leverages weak forces.

In the ______ step of the stakeholder impact analysis the firm identifies their stakeholders' interests and claims according to the power, legitimacy, and urgency framework.

Second

Which of the following are examples of commonly encountered capital requirements?

Setting up production facilities. Managing a production process. Paying for start-up losses.

Which of the following help determine competitive industry structure?

Size and number of competitors. Firms' degree of pricing power. Height of entry barriers.

The cultures, norms, and values of the society in which a firm competes are considered ______ factors.

Sociocultural

Price ______ is the lack of change in price levels of goods and services.

Stability

Which of the following is a tool that managers can use to address the needs of stakeholders while maintaining a competitive advantage?

Stakeholder impact analysis

Which of the following are the relationships that a firm has with stakeholders? A. The firm controls the actions of stakeholders. B. Stakeholders can affect the firm's actions. C. The actions of the firm can affect stakeholders. D. The stakeholders generally have no interest in the firm.

Stakeholders can affect the firm's actions. The actions of the firm can affect stakeholders.

The groups or individuals who can impact or be impacted by a firm's actions are known as ______.

Stakeholders.

When a person that has been using a PC with a Microsoft Windows operating system starts using an Apple computer (which has a different operating system), that person will incur significant customer ______________.

Switching costs

The Bright Bulb light bulb company produces a line of LED bulbs that customers consider very similar to competitors' LED bulbs. Which of the following conditions must be true for Bright Bulb to have a competitive advantage?

The bulbs must have a lower cost than competitors' bulbs.

Which of the following topics should be considered during the analysis phase of the AFI framework?

The firm's business model and competitive advantages. The firm's internal strengths and resources. The external environment and associated challenges. The role of strategic leadership and the strategy process.

Walmart and Nordstrom maintain very different strategic profiles, one based on cost-leadership and the other based on differentiation through superior customer service. This is an example of ______.

The trade-offs required by strategic positioning.

Which of the following are examples of sociocultural factors?

The widespread adoption of smart phones. An increased demand by consumers for gluten-free products. The growth of the Hispanic population.

When restrictive government policies do not exist or when industries become deregulated, the of entry is high.

Threat

The risk that potential competitors will enter the industry is known as the ______.

Threat of entry

Which of the following are forces in Porter's five forces model?

Threat of substitute products or services. Bargaining power of buyers. Threat of new entrants.

The _______ is the idea that products or services available from outside the given industry will come close to meeting the needs of current customers.

Threat of substitutes

Managers often have to make decisions between two conflicting strategic options, otherwise known as ______.

Trade-offs

True or false: Firms should obey all the laws, including but not limited to labor, consumer protection, and the environment.

True

True or false: The relative strengths of the five forces that shape competition are largely dependent on the context.

True

In the ______ step of a stakeholder impact analysis, firms identify those stakeholders that currently have, or potentially can have, a material effect on the company.

First

Stakeholder impact analysis is a _____-step process that allows managers to better understand and address stakeholders' needs.

Five

In the _____ step of the stakeholder impact analysis, firms identify their various social responsibilities to stakeholders.

Fourth

What is the overall purpose of strategic management?

Gain competitive advantage

Which of the following are examples of demographic factors?

Gender, sexual orientation, and age.

When buyers can credibly threaten to backwardly integrate into the industry, the power of buyers is ______.

High

When suppliers do not depend heavily on the industry for a large portion of their revenues, the power of suppliers is ______.

High

When suppliers offer products that are differentiated, the power of suppliers is ______.

High

When there are a few buyers and each buyer purchases large quantities relative to the size of a single seller, the power of buyers is ______.

High

Changes in prices (a lack of price stability) is a direct function of ______.

How much money is in the economy.

The expectations that society has toward business, in contrast to what society requires, result in which of the following elements of the pyramid of corporate social responsibility?

Philanthropic responsibilities and ethical responsibilities.

Match the element of the pyramid of corporate social responsibility with its explanation

Philanthropic responsibilities: corporate citizenship Ethical responsibilities: do what is right, just, and fair. Legal responsibilities: laws and regulations are society's codified ethics; define minimum acceptable standards. Economic responsibilities: gain and sustain competitive advantage.

______ factors result from the processes and actions of government bodies that influence the decisions and behavior of firms.

Political

The ______ is a measure of the change in the amount of goods and services produced by a nation's economy.

Economic growth rate

Which statement about shareholders and employees is true? A. Shareholders and employees are entirely separate groups. B. The separation between the claims of management and of ownership has been increasing. C. Employees are often made into shareholders through employee stock ownership plans. D. The interests of stakeholders who are employed by a firm are the same as stakeholders who simply own stock.

Employees are often made into shareholders through employee stock ownership plans.

Which statement about shareholders and employees is true? A. The interests of stakeholders who are employed by a firm are the same as stakeholders who simply own stock. B. Employees are often made into shareholders through employee stock ownership plans. C. Shareholders and employees are entirely separate groups. D. The separation between the claims of management and of ownership has been increasing.

Employees are often made into shareholders through employee stock ownership plans.

True or false: Although they are more vocal, activist investors have the same amount of power as individual investors.

False. Shareholder activists have more power over firms than individual investors do.