Capstone MGMT 4860 Final

Even though many valuable, rare, and inimitable resources were generated at Xerox's Palo Alto Research Center (PARC), the management at Xerox's headquarters failed to gain a competitive advantage by exploiting the breakthroughs in computing software and hardware. What is the most likely implication of this example?

A firm must be effectively organized to capture value.

Describe the difference between tangible and intangible resources?

A tangible resource is something that has physcial attributes like a building or labor, etc. and therefor is visible. Intangible resources are things that DO NOT have physical attributes like a patent or culture and are invisible. Now in the current market, more than ever, companies are beginning to realize that intangible assets are "more important" in creating a competitive advantage than tangible assets are. For example, google is worth 6 times more than GM is and obviously GM has a much larger physical inventory than google does. Also, google is currently value at 160 billion dollars and only 16 billion of that is tangible assets!! The reason a company like google can be SO successful compared to a company like GM, who has such a greater physical inventory, is because intangible assets are the foundation of a business! They are SO HARD to replicate and immitate. You can't copy an incredible enviorment and leadership teams. These are things that take years of trial and error to create with a great group of people surrounding each other. To be truly successful, a business doesn't need to entirely rely on meteralistic things and that is why business peronel is beginning to see the power of intangible assets.

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?

Apple was able to charge a much higher margin for its products and services than Microsoft.

Describe the competitive implications of different stages in the industry life cycle.

As an industry evolves over time, we can identify 5 stages; First, introduction which there are new products that will emerge and the companies main strategic goal should be R&D. The main objective here is to achieve market acceptance and speed future growth. Second, we have growth. Process innovation really ramps up here because the business is trying to keep up with rapidly rising demands. Process innovation is key here. Third, Shakeout- As the growth rates decline, intensity between firms increases as firms battle for market share. Here, the weaker firms are "weeded" out. Fourth Maturity- Here the industry becomes and oligopoly with only a few large firms that are still standing. Lastly, fifth, The Decline Stage- Here, the innovation of products and process cease. Managers have to step up to the plate and make crucial decisions on what they want to do with their current processes/ products and services.

_____ are incidents that describe highly improbable but highly impactful events.

Black swan events

Which of the following is an example of an organizational value?

Burtell Oil, Inc. increases the inspection of pipelines above the legal requirement to prevent oil spills.

Define business-level strategy and describe how it determines a firm's strategic position.

Business-level strategy details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market.3 It may involve a single product or a group of similar products that use the same distribution channel. It concerns the broad question, "How should we compete?" To formulate an appropriate business-level strategy, managers must answer the who, what, why, and how questions of competition: Who—which customer segments will we serve? What will customer needs, wishes, and desires we satisfy? Why do we want to satisfy them? How will we satisfy our customers' needs?4

Which of the following factors best contributes to the U.S. automotive industry being characterized by high entry barriers?

Car manufacturers require large-scale production in order to be cost-competitive.

Which of the following is an implication of low interest rates?

Consumer demand will increase.

Which of the following summarizes the difference between corporate strategy and business strategy?

Corporate strategy deals with where to compete; business strategy deals with how to compete.

_____ 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.

Economic value created

_____ is best described as decreases in cost per unit as output increases.

Economies of scale

Define and name Michael Porter's 5 Forces Model of Competition

Entry level threat- This is where companies like Starbucks keep other companies from ever even having a chance!! Starbucks chooses to dig into their profit margins to keep their stores and menus constantly updates. Other small companies know that they do not have the capital to even begin to have products or stores as attractive as Starbucks so they wont even give it a shot to "start-up". Even through Starbucks knows they are losing profit by doing this, they do it to keep their massive market share. buyers threat- Buyers can demand a lower price or a higher quality and this will cut into profit margins for the suppliers. Supplies threat- Suppliers can demand a higher price or create a lower quality which will take away from profits. threat of substitutes- People can make cheaper alts. competition threat- ppl already in the maret can maket better products or have cheaper prices.

Explain why firms need to grow, and evaluate different growth motives.

For public companies, growth is very important because the bigger the firm gets, the more success they will obtain and the greater their stock price will grow. Another great reason firms need to grow is because when they do, they have more bargaining power. With this growth and power, they will be able to buy more units because they are selling more. When you are buying more or creating more, you are going to be demanding more from your suppliers and the bigger the orders are, the lower the price per unit usually is. Also when a firm grows, they are able to expand into different markets and sell different products. This is great for reducing risk because when one market segment may be performing poorly, the other market segments may be doing great which will balance the companies performance out. Also when companies grow, the management may be looking to pursure their own interests more so than the interest of the stock holders in the company. Growth will also give managers and managment a bigger spending budget for retreats and other personal benefits and this will push them to work harder for the company.

Which of the following questions challenges managers to come up with strategic objectives that ensure future competitiveness?

How do we create value?

Which of the following is a key question managers must answer to formulate an appropriate business-level strategy?

How will we satisfy our customer needs?

The average cost of production for a bottle of vitamin water in the industry is $4 while its average price is $7. StoreAll Inc. manufactures the same product for $3 per bottle and sells it for $7 per bottle. Which of the following statements is most likely true of StoreAll Inc. in this scenario?

It has a competitive advantage in the industry.

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?

It is building new core competencies to protect and extend its current market position.

Which of the following is a primary feature of the five forces model?

It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.

Trung has been an employee with PureEnergy Inc. for 15 years. He started with an entry-level job, and today he is a manager of an entire division. Over the years, Trung has acquired a reputation for doing the right things in the company. Hence, as an efficient leader, he is capable of effectively communicating and motivating his subordinates to work toward the company's vision and mission. According to the Level-5 leadership pyramid, which is the highest level of leadership Trung has reached so far?

Level 4

_____ is best described as a form of long-term contracting in the manufacturing sector that enables firms to commercialize intellectual property.

Licensing

What is the difference between a company's "Vision Statement" and its "Mission Statement".

Mission: Description of what an organization actually does—the products and services it plans to provide, and the markets in which it will compete. Vision: A statement about what an organization ultimately wants to accomplish; it captures the company's aspiration.

Which of the following best expresses fixed asset turnover?

Revenue/Fixed assets

Briefly, describe a Stakeholder Impact Analysis and its purpose in developing an organizational strategy.

Stakeholder impact analysis provides a decision tool with which managers can recognize, prioritize, and address the needs of different stakeholders. This tool helps the firm achieve a competitive advantage while acting as a good corporate citizen. Stakeholder impact analysis takes managers through a five-step process of recognizing stakeholders' claims. In each step, managers must pay particular attention to three important stakeholder attributes: power, legitimacy, and urgency. Text Page 15. Stakeholder impact analysis provides a decision tool with which managers can recognize, prioritize, and address the needs of different stakeholders. This tool helps the firm achieve a competitive advantage while acting as a good corporate citizen. Stakeholder impact analysis takes managers through a five-step process of recognizing stakeholders' claims. In each step, managers must pay particular attention to three important stakeholder attributes: power, legitimacy, and urgency. Text Page 15.

_____ 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.

Strategic alliances

_____ is best described as an integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage.

Strategic management

_____ 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.

Strategic outsourcing

Keeping in mind the five forces in the airline industry, which of the following best explains the situation in the industry?

Substitutes are readily available in the form of trains and buses, thus reducing the profit potential in the industry.

Which of the following statements accurately brings out the difference between tangible and intangible resources?

Tangible assets can be bought on the open market, whereas intangible assets cannot be easily purchased.

Define the "Balanced Scorecard" Please be specific:

The Balanced Scorecard is a strategy implementation tool that uses multiple internal and external performance metrics that balance strategic and financial goals. There are multiple questions a firm can ask itself to start with. For example, how do shareholders view us? How do customers view us? By aswering these questions, firms can obtain a quick but rather detailed idea of the current state of their firm. They can also use the balanced score card to access a competitive advantage. Something also very important to note is that the Balanced Scorecard is a strategy implementation tool, NOT a strategy FORMATION tool!

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?

The industry for electric cars will focus more on product innovation, whereas in the MP3 player industry, the focus will be on process innovation.

Which of the following is a feature of the maturity stage of the industry life cycle?

The market reaches its maximum size

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?

The number of competitors in the e-book reader industry will be larger when compared to the landline telephone industry.

How is the triple-bottom-line approach different from the traditional approaches to measuring competitive advantage?

The triple-bottom-line takes a more integrative and holistic view in assessing a company's performance than traditional approaches do.

Which of the following is an accurate statement about value chain analysis?

The value chain concept can be applied to all firms, including service firms.

Which of the following statements accurately describes firm effects?

They attribute firm performance to the actions managers take within a chosen industry.

Which of the following statements is true of technology enthusiasts?

They enjoy using beta versions of products and providing feedback to companies.

How do strong ethical values benefit a firm?

They serve as the guardrails put in place to keep the company on track when pursuing its mission.

Why is it easier for new entrants to involve in radical innovations when compared to incumbent firms?

Unlike incumbent firms, new entrants do not have formal organizational structures and processes.

_____ is best described as a firm's ownership of its production of needed inputs or of the channels by which it distributes its outputs.

Vertical integration

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?

Vibrant Phones sells its products at a better price than Oryxo.

Rice Dazzle Inc. has been making the same breakfast cereal for 50 years. Recently, sales have plummeted. To counteract this, the company created a new package that included an endorsement by a celebrity. As a result, sales increased close to previous highs. However, the cereal itself remained the same. According the VRIO framework, is the new packaging a valuable resource for Rice Dazzle?

Yes, because the new packaging made the product more attractive in the eyes of consumers.

The strategic objective of a first mover during the introduction stage of the industry life cycle is to

achieve market acceptance.

Soapsuds Inc., a manufacturer of cleaning agents, supplies its products to All Needs Inc., a supermarket chain. It demands that All Needs create more shelf space in its stores for Soapsuds' products. However, All Needs Inc. refuses to do this. Instead, it decides to produce its own range of cleaning agents with its own label "All Wash." In this scenario, All Needs Inc. has exercised its bargaining power as a buyer through

backward integration.

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.

business model innovation

How has Apple been able to sustain its competitive advantage in the smartphone industry?

by regularly introducing incremental improvements in its products

In an industry, the threat of entry is high when

capital requirements are low.

A firm that achieves superior performance relative to other firms in the same industry or the industry average has a(n)

competitive advantage

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

consumer surplus.

The value a consumer attaches to a product or service is captured in the

consumer's maximum willingness to pay for it.

To help a firm achieve a competitive advantage, each distinct activity performed in the value chain needs to

contribute to the firm's strategic position as either low-cost leader or differentiator.

A resource-based view of a firm provides a model that systematically aids in identifying

core competencies.

Which of the following is an example of a firm's external stakeholder?

customers

The first step in the strategic management process is to

define a firm's vision, mission, and values.

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

disruption.

The final step in industry analysis is to

draw a strategic-group map.

The customers entering the market in the growth stage are primarily

early adopters.

A company that uses a differentiation strategy can achieve a competitive advantage as long as its

economic value created is greater than that of its competitors.

The concept of a(n) _____ attempts to capture both learning effects and process improvements at firms.

experience curve

In the context of the resource-based model of competitive advantage, if a successful firm exhibits resource immobility it means that the

firm will have a sustained competitive advantage because of its unique resources.

In contrast to a differentiator, a cost-leader will

focus its research and development on process technologies to improve efficiency.

A firm pursuing a differentiation strategy as opposed to a low-cost strategy will

focus its research and development on product technologies to add uniqueness.

Creating resources that meet the VRIO criteria is strategically important to a firm because it

helps the firm to gain and sustain a competitive advantage.

As a part of strategy formulation, a firm's functional strategy primarily concerns questions relating to

how to implement business strategy.

The first step in stakeholder impact analysis involves

identifying the stakeholders that currently have, or potentially can have, a material effect on a company.

The four-step innovation process ends with

imitation

In order to achieve a competitive advantage, a firm should be able to

increase the difference between the value created and the cost to produce it.

A(n) _____ is best used to depict the transformation of raw materials into finished goods and services along distinct vertical stages.

industry value chain

Which of the following drivers simultaneously increases value while lowering cost?

innovation

According to the five forces model, which of the following is viewed as a major risk to a business pursuing a cost-leadership strategy?

innovation that allows competitors to emerge with more economical replacements

Economies of scale are cost advantages that accrue for firms with

larger output.

According to the value chain analysis, which of the following is a primary activity?

marketing and sales

A firm's business strategy will lead to a competitive advantage if it allows the firm to

perform different activities than its rivals.

Dynamic capabilities are essential for moving beyond a(n) _____ advantage.

short-lived

The CEO of Sam's Club, Rosalind Brewer, reports to Walmart's CEO, C. Douglas McMillon, who as corporate executive oversees Walmart's entire operations. Sam's Club, therefore, is a _____ of Walmart.

strategic business unit

When a firm makes choices between a cost or value position to achieve competitive advantage, it is primarily involved in

strategic trade-offs.

Which of the following stages of the strategic management process involves an evaluation of a firm's external and internal environments?

strategy analysis

The relative bargaining power of suppliers is high when

suppliers provide products that are differentiated.

Patterson Foods Inc. was the first company to start selling energy bars in its country—a product that gained popularity among diverse groups. Soon, other companies started to sell their own brands of energy bars, thereby giving Patterson Foods ample competition. In response, Patterson Foods decided to limit its variety of energy bars to only four. However, it ensured that these four varieties were low in calories and low in cost. With this innovation, Patterson Foods Inc. consistently outperformed its competitors for ten years. In this scenario, Patterson Foods Inc. maintained a _____ through its innovative strategy.

sustainable competitive advantage

First Ledger Inc., an auditing company, replaced its existing accounting software with new accounting software from another supplier. Since the new software has different features and abilities, First Ledger Inc. has had to spend $10,000 on training its employees to use it. In this scenario, $10,000 represents First Ledger Inc.'s

switching cost.

In a large company, who is most responsible for devising the corporate strategy?

the CEO of the company

A company wants to determine how industry effects have affected its profitability. Which of the following elements should the company focus on?

the barriers to entry and exit within the industry

Which of the following stakeholders of a company would most likely be responsible for formulating a corporate strategy?

the chief executive officer

Which of the following is an example of an external transaction cost?

the cost of searching for a contract manufacturer

Which of the following is a customer-oriented vision?

to enable people throughout the globe to identify their capabilities

The Chief Executive Officer (CEO) of Yahoo, Marissa Mayer, maintains that if a company builds the best product possible, profits will come. Identify the phrase that represents the new vision she developed for Yahoo.

to make the world's daily habits more inspiring and entertaining

Decisions relating to "what stages of the industry value chain to participate in" determine a firm's

vertical integration.