Exam 1

Tesla is addressing environmental concerns regarding the carbon emissions of gasoline-powered cars by building zero-emission battery-powered vehicles. This best represents which of the following PESTEL categories?

Ecological

What are examples of barriers to entry? (Mark all that apply)

Economies of scale, Network effects, Customer switching costs, Capital requirements, Advantages independent of size (brand loyalty, patents, experience), Government policy, Credible threat of retaliation

Firms trying for a low-cost position will often search for __________. (Mark all that apply)

Economies of scale, slope, learning curve

As a rule of thumb, the stronger the five forces (Threat of entry, threat of substitutes, power of suppliers, power of buyers, rivalry), the higher the industry's profit potential, which causes the industry to become less attractive for competitors. (True or False)

False

The threat of rivalry in the lodging industry is high because ________. (Mark all that apply)

High fixed costs, pressure to sell capacity by price cutting - Large # of competitors

What best explains direct network effects?

Increase WTP whenever additional customers purchase a product

Complements are important because they ________.

Increase demand for the primary

Lowering willingness-to-sell by increasing job amenities or reducing disamenities create similar value, but are not equally desirable. In general, firms should _________.

Increase job amenities

According to value-based strategy, firms can create value by ________. (Mark all that apply)

Increasing WTP and decreasing WTS

What is an important assumption of the Resource Based View?

heterogeneous and immobile

Demand for a product decreases if the price of complements __________.

increase

The Five Forces framework seeks to explain differences in potential profitability across ________.

industries

How did Hubert Joly (Best Buy) create customer value? (Mark all that apply)

the stores would serve four functions: points of sale (the traditional role), showrooms for brands that built stores-within-a-store, pickup locations, and mini-warehouses

Firms are more likely to adopt a differentiation strategy if they do not have influence over prices. (True or False)

true

Vertical differentiation refers to the case where all consumers prefer a high-quality product over a lowquality product if both products have the same price. (True or False)

true

Developing and maintaining relationships with suppliers are important for value creation but also challenging and time-consuming. Firms should prioritize relationships that ___________. (Mark all that apply)

you need to consider their value potential, the specificity of the investments, and contractual incompleteness.

Which core competencies help Netflix create and capture value? (Mark all that apply)

-algorithm - data - content

How can firms lower the willingness-to-sell of suppliers? (Mark all that apply)

By making it more cost effective to sell to your organization Ex: Buying large quantities in a predictable manner - Investment in information technologies - Transfer of management practices

What are examples of complements? (Mark all that apply)

Car & car repair shop Gaming system and games Milk and cereal

Core competencies are built through the interplay of several firm attributes. These attributes include a firm's:

Competitive advantage through resources, capabilities and activities

What factors lead to high (price) rivalry? (Mark all that apply)

Competitive industry structure (number and size of competitors) • Industry growth • Strategic commitments • Exit barriers

Mark TWO examples of trade-offs that create challenges for rivals to copy a firm strategy.

Differentiation vs low-cost strategy, Product or service characteristics, Narrow customer segmentation

What are examples of generic business strategies? (Mark all that apply)

Differentiation, cost leadership, focus

What is correct about minimum efficient scale (MES) of production?

the lowest point on a cost curve at which a company can produce its product at a competitive price.

How can firms attract talented workers without increasing compensation? (Mark all that apply)

Lower WTS, "attractive working conditions

Recent changes in the economy have increased labor turnover (the number of your workers who quit) goes up. Does this matter more if your strategic advantage is based on learning curves or economies of scale?

Matters more if based on learning curves If turnover goes up, and new workers need to be retrained for many years to match efficiency of old workers, then harder to maintain advantage based on learning curve. With economy of scale, it is being big, not having learned in the past, that matters, so turnover not as important.

What is the fundamental tradeoff of differentiation?

Moving away from the mass of demand while lowering the extent of price competition from your rival, position of a cost leader

As more customers purchase smartphones, developers will create more apps. And the availability of a greater number of useful apps raises the WTP for smartphones, thereby attracting additional customers. This process is an example of ________

Network effects

What are examples of isolating mechanisms according to the Resource Based View? (Mark all that apply)

Path dependence Causal Ambiguity Social complexity Intellectual property protection

What type(s) of network effects does Facebook enjoy?

Platform - as they attract different groups of people Direct network effects - as additional customers get facebook, the desire to get one increaes geography both limits and enhances the strategic value of network effects. If these are local in nature, different companies win in different markets. But if the markets are small enough, they are more likely to tip and create a single winner. The net result is a patchwork of local champions.

The initiatives advanced by MaryAnn Camacho (Quest Diagnostics) helped Quest's call centers by __________. (Mark all that apply)

Raising base pay, adding incentives that reward performance, making the job easier, created career paths for long term, shifting ownership to individuals, bilingual reps know the language ahead of time, include patient IDs on faxes

If price varies and demand is inelastic, why do firms may increase differentiation?

Rivalry resistance, position advantage Customers always buys from someone

Does experience (history of production) matter more for a firm's learning curve or economies of scale?

Scale effects relate to current output. Learning effects relate to cumulative output.

In recent years, a growing number of U.S. consumers have become more health-conscious about what they eat. According to the PESTEL Framework this trend could best be classified as a ________ trend.

Sociocultural

What factors lead to high bargaining power for suppliers? (Mark all that apply)

There are only a few suppliers • Suppliers do not depend heavily on the industry • Incumbent firms face significant switching costs • Suppliers offer products that are differentiated

Companies that produce their own complements may benefit from shifting profit pools from one complement to another. (True or False)

True

The major problem of differentiation is that it often lowers the total value created (economic surplus) in the market. (True or False)

True

What are the reasons why firms engage in product differentiation? (Mark all that apply)

Unique product features (e.g., Apple's iPhone) Customer service (e.g., Zappos) Differentiated products (e.g., General Mills' Cheerios) Marketing and promotion (e.g., PepsiCo's Gatorade)

If a firm's strategy is difficult to imitate because outsiders do not understand the relationship between the resources and capabilities controlled by the firm and the outcomes achieved by the firm, then this firm's competitive advantage is protected from imitation by ________________.

casual am

Firms that focus on willingness-to-pay (WTP) can enjoy __________.

long - term competitive advantages

According to Porter's Five Forces approach, the overall goal of applying the Five Forces analysis to an industry is to make a judgment about its ________.

profit potential

A firm's ________ relates to its ability to create value for customers (V) while containing the cost to do so (C).

strategic position