Chapter 4

Although important, innovation plays a minor role in achieving competitive advantage.

f

Dell Computer was one of the last computer companies to implement online selling of computers.

f

Functional strategies, because they occur at a low level in the firm, play only a small role in organizational success.

f

Harvard Business School found no differences in learning effects among hospitals performing a new cardiac procedure.

f

Learning effects tend to be more significant when a technologically complex task is performed only occasionally.

f

Quantum innovation refers to an extension of existing technology.

f

The challenge for a company's human resource function is to find ways to lower wage and benefits costs.

f

The law of economies of scale suggests that unit costs continue to fall indefinitely as output volume increases.

f

There is a negative relationship between the length of time that a customer stays with a company and profit per customer.

f

While Information Systems (IS) have greatly improved externally focused decision making, they have had little impact on lowering costs.

f

A company's infrastructure includes the company's A. organization structure, culture, and style of leadership. B. organization structure and morale level. C. culture and productivity levels. D. overall profitability levels. E. short-run objectives.

a

A company's hiring strategy A. directly affects employee productivity. B. has little effect on employee productivity. C. does not relate to profitability. D. is not part of the company's overall human resource strategy. E. None of these choices.

a

A computer manufacturer allows scientists and engineers a certain amount of company time to work on independent research projects. This company is trying to A. achieve superior innovation. B. achieve superior quality. C. achieve superior efficiency. D. achieve superior customer responsiveness. E. minimize the time to market.

a

Economies of scale may be found A. in several of a company's departments. B. only in manufacturing operations. C. principally in research and development activities. D. primarily in administrative areas of a company. E. none of these choices.

a

Formulating a plan to close the quality gap A. requires a strong customer focus. B. is the exclusive responsibility of top management. C. is an example of finding ways to measure quality. D. is the responsibility of manufacturing. E. should be done by qualified TQM consultants.

a

If a product is to be properly commercialized, there must be integration between A. research and development (R&D) and marketing. B. R&D and materials management. C. marketing and materials management. D. finance and marketing. E. marketing and after-sales support.

a

Quality circles are a valuable tool for TQM because they A. solicit employee suggestions for improvement. B. identify and rework defective products. C. are used by top managers to communicate their intentions to workers. D. design high-quality products. E. survey customer attitudes about quality.

a

Research and development (R&D) can help a company improve quality by A. designing products that are easy to manufacture. B. pursuing economies of scale. C. developing new products. D. integrating R&D with marketing. E. integrating R&D with materials management.

a

The failure rate of innovative products is A. high. B. low. C. consistent with failure rates in other areas of a company's operations. D. moderate. E. too difficult to assess.

a

Which of the following recommendations would not be appropriate for a manager who was starting a cross-functional product-development team? A. Let the team members co-manage the team. B. Locate team members in the same physical space. C. Allow the team to develop its own communication and conflict resolution processes. D. Compose the team with members from each of the key functional areas. E. Give the team the task of developing one project all the way from initial idea to market introduction.

a

Employee productivity is A. a function of employee socialization. B. one of the key determinants of a company's efficiency, cost structure, and profitability. C. not subject to measurement. D. typically not sustainable in the long run. E. none of these choices.

b

Learning effects are a result of A. automation. B. learning by doing. C. sound product planning tactics. D. diseconomies of scale. E. product standardization.

b

Limiting the number of suppliers from many to a manageable number A. is the responsibility of top management. B. may help a firm to achieve superior quality. C. may help a firm to achieve superior innovation. D. is the responsibility of research and development. E. is the responsibility of manufacturing.

b

Quality can best be thought of as A. product usefulness. B. quality as reliability and quality as excellence. C. product innovation. D. a matter for a company's managers to decide for themselves without external input. E. a matter for the marketing function of a company to decide.

b

The concept of the development funnel suggests that A. senior managers should decide whether to accept or reject a project at the end of the idea generation phase. B. senior managers should decide whether to accept or reject a project at the end of the project refinement phase. C. cross-functional teams should decide whether to accept or reject a project at the end of the idea generation phase. D. cross-functional teams should decide whether to accept or reject a project at the end of the project refinement phase. E. project proposals should be implemented by the marketing function.

b

The experience curve concept A. is a result of a combination of learning effects and economies of scale. B. is a result of a combination of learning effects and economies of scale and suggests that unit manufacturing costs decline by a certain amount each time output is doubled. C. suggests that achieving low costs allows a firm to charge a premium price. D. is most important for specialized or customized production. E. suggests that unit manufacturing costs decline by a certain amount each time output is doubled.

b

The resources and capabilities that lead to the formation of distinctive competencies are mostly created at which level of the organization? A. Business B. Functional C. Corporate D. Global E. Industry

b

The use of self-managing teams A. is limited to only very large organizations. B. requires members to coordinate their own activities and make decisions. C. typically increases the need for supervisors. D. all of these choices. E. none of these choices.

b

Traditional manufacturing A. is no longer used. B. requires a tradeoff between unit costs and product variety. C. has higher unit costs than does flexible manufacturing. D. produces a variety of products in high volume. E. has higher unit costs than does flexible manufacturing and requires a tradeoff between unit costs and product variety.

b

Flexible production technology is sometimes referred to as A. just-in-time manufacturing. B. quick technology. C. lean production. D. stable production. E. unscheduled manufacturing.

c

Just-in-time inventory systems A. are used only by manufacturing firms. B. are implemented primarily by the manufacturing function. C. have components arrive at a manufacturing plant just in time to enter the production process. D. are valuable when there is a labor dispute with a key supplier. E. always keep extra inventory on hand for emergencies.

c

Pay for performance tends to A. increase per-unit costs. B. decrease employee output. C. increase employee output. D. have little effect on employee output. E. be used only for individual workers, not for teams.

c

Poor commercialization of new products A. is the result of inefficient manufacturing technology. B. occurs when a company markets a product for which there is not enough demand. C. occurs when a product is not well adapted to a customer's needs. D. is due to poor quality. E. is the result of uncertainty.

c

Quality improvement efforts should focus on the A. product. B. external environment. C. customer. D. material costs. E. internal operations.

c

The experience curve refers to the A. learning by doing technique. B. company's overall experience in a particular industry. C. systematic lowering of the cost structure and unit cost reductions. D. diseconomies of scale caused by inexperienced workers. E. increases in unit costs experienced over time.

c

Which of the following is not a benefit of tight cross-functional integration among research and development (R&D), production, and marketing? A. New products are designed for ease of manufacture. B. Development costs are kept in check. C. Product development projects are driven by company innovations. D. Time to market is minimized. E. Customer needs are considered in the product development process.

c

____ refers to unit cost increases associated with a large scale of output. A. Economies of scale B. Learning effects C. Diseconomies of scale D. Flexible manufacturing E. Mass customization

c

Learning effects A. result in unit manufacturing costs declining by a certain amount each time output is doubled. B. result in unit manufacturing costs declining by a certain amount each time accumulated output is reduced. C. are more significant when simple steps in an assembly process are repeated. D. are more significant when a technologically complex task is repeated. E. lead to economies of scale.

d

Managers should not become complacent about efficiency-based cost advantages because A. neither learning effects nor economics of scale go on forever. B. the experience curve is likely to bottom out at some point. C. cost advantages gained from experience effects can be made obsolete by the development of new technologies. D. all of these choices. E. none of these choices

d

The marketing strategy that a company adopts A. has little impact on a company's efficiency and cost structure. B. has an effect on efficiency and cost structure, but the extent of this effect cannot be determined. C. should not take into account the impact the strategy has on efficiency or cost structure. D. can have a major impact on efficiency and cost structure. E. none of these choices

d

When a company successfully implements Six Sigma quality, how many units will be defective? A. 17% (one-sixth of the units) B. 6% C. 0.6% D. Three per million E. Three per 10 million

d

Which of the following is a tactical step for getting down the experience curve ahead of competitors? A. Premium pricing to create an image of uniqueness in consumers' minds B. Pursuing a distinctive competence in focused marketing C. Constructing a manufacturing plant of less than minimum efficient scale D. Using aggressive pricing and promotions to expand sales volume as rapidly as possible E. Making the assembly of the product as complex as possible because this results in greater learning effects

d

Which of the following is not a product attribute? A. Form B. Features C. Style D. Price E. Reliability

d

Which of the following is one of the important skills required for effective project management? A. Ability to generate as many good ideas as possible B. Ability to select among competing projects at an early stage of development so that the most promising receive funding and potential costly failures are killed off C. Ability to minimize time to market D. All of these choices E. None of these choices

d

Which of the following statements concerning customer defection rates is incorrect? A. Defection rates are determined by customer loyalty. B. The longer a company holds on to a customer, the greater is the volume of customer-generated unit sales and the lower is the average cost of each sale. C. Lowering customer defection rates allows a company to achieve a lower cost structure. D. Research and development should address the issue of customer loyalty in product development. E. There is a positive relationship between the length of time that a customer stays with the company and profit per customer.

d

Which of the following trends has led to the fragmentation of many consumer markets? A. Self-managing teams B. Project management C. TQM D. Customization E. Increased response time

d

According to the TQM philosophy, who should be the primary evaluator of product quality? A. Top management B. Manufacturing workers C. Quality consultants D. The federal government E. Customers

e

Customer defection rates are A. a reflection of customer loyalty. B. an indication of a company's ability to satisfy its customers. C. important to consider because of their potential impact on advertising and marketing costs. D. an important consideration because of their effect on sales volumes. E. all of the above.

e

Economies of scale are A. unit cost reductions associated with learning effects. B. unit cost reductions associated with superior customer responsiveness. C. realized when output is as large as possible. D. realized when the point of maximum efficient scale is reached. E. unit cost reductions associated with a large-scale output.

e

Effective employee training within an organization A. results in more productive employees. B. increases employee efficiency. C. raises employee skill levels. D. enables employees to perform tasks faster. E. all of these choices

e

Flexible manufacturing technologies allow companies to A. mass-produce a standardized output at a low delivered cost. B. avoid plant-level diseconomies of scale. C. produce small batches of high-quality customized products at a high cost. D. ride down the experience curve more rapidly than competitors. E. produce small batches of customized products at a relatively low cost.

e

Instead of completing one task before starting another, Perry's team begins each task as soon as possible, allowing tasks to overlap where possible. Perry's team is using A. a self-managing team. B. a sequential process. C. TQM. D. customization. E. a partly parallel process.

e

Marina's new paint formulation builds on other product innovations to create paint with fewer toxic fumes. Marina's new paint is A. lower cost. B. poorly commercialized. C. efficient. D. a quantum innovation. E. an incremental innovation.

e

Self-managing work teams A. increase per-unit costs of manufactured items. B. perform all workplace tasks except the making of hiring decisions. C. increase the cycle time of manufacturing items. D. require greater task specialization by members of the team. E. tend to increase productivity.

e

The philosophy underlying TQM includes which of the following? A. Improved quality results in cost decreases. B. Better quality leads to higher market share. C. Better quality increases a company's profitability. D. Management should create an environment in which employees do not fear expressing themselves. E. All of these choices

e

The role played by infrastructure leadership in implementing reliability methodologies includes which of the following? A. Providing leadership and commitment quality B. Finding ways to manage quality C. Setting goals and creating incentives D. Soliciting input from employees E. All of these choices

e

Which of the following is not correct concerning self-managed teams? A. Increased responsibility and empowerment are seen as motivators. B. Performance bonuses linked to team production and quality targets are seen as motivators. C. Cost savings arise from eliminating supervisors. D. A flatter organizational hierarchy is created. E. All of these choices.

e

Which of the following is not one of the principles commonly found in companies that have successfully embraced the TQM philosophy? A. Building an organizational commitment to quality B. Finding ways to measure quality C. A strong customer focus D. Close supplier relations E. Creating a separate quality department within the firm

e

Which of the following statements about customer focus is false? A. It must start at the top of the organization. B. It is a central part of TQM. C. It can be facilitated by soliciting feedback from the customer. D. It requires that all employees see the customer as the focus of their activity. E. It can be achieved by mass customization.

e

A benefit of long-time customer loyalty is the free advertising that customers provide for a company through referrals.

t

A vital source of information about the causes of poor quality are the firm's own employees.

t

All else being equal, if a company moves down the experience curve faster than its rivals, it should realize a lower cost structure.

t

An imperative of any quality improvement program is to create a metric that can be used to measure quality.

t

Diseconomies of scale are the unit cost increases associated with a large scale of output.

t

Distinctive competencies shape the functional-level strategies that a company can pursue.

t

Flexible manufacturing technologies enable companies to produce small batches of high-quality customized products at a cost that, at one time, could be achieved only through mass production.

t

In the partly parallel development process, development stages overlap.

t

Mass customization describes the ability of companies to use flexible manufacturing technology to reconcile the two goals of low cost and differentiation through product customization.

t

Materials management encompasses the activities necessary to get inputs and components to a production facility, through the production process, and out through a distribution system to the end user.

t

No matter how complex the task is, learning effects typically die out after a limited period of time.

t

One of Otis Elevator's strengths is the ability to continue to improve employee productivity.

t

Poor commercialization occurs when there is definite customer demand for a new product, but the product is not well adapted to customer needs because of factors such as poor design and poor quality.

t

Poor positioning strategy arises when a company introduces a potentially attractive new product but sales fail to materialize because it is poorly positioned in the marketplace.

t

Six Sigma is a quality and efficiency program derived from the concept of Total Quality Management, and was widely used in Japan before acceptance in the U.S.

t

Strong brand loyalty leads to more sales and the ability to charge higher prices.

t

Technological myopia occurs when a firm develops an exciting new technology but fails to determine whether there is customer demand for the product.

t

The Six Sigma name refers to the Greek letter meaning standard deviation from the mean.

t

Tight integration between research and development (R&D), production and marketing can help a company avoid innovation failures.

t

Top management should take primary responsibility for establishing measures of quality.

t