Global & Strategic Management Exam 2 Ch 5,6,7,8

7/8- Decisions relating to "what stages of the industry value chain to participate in" determine a firm's

vertical integration.

5- 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

$3 billion, that is, 30 million shares × $100.

7/8-Which of the following best illustrates forward vertical integration?

A firm that manufactures and sells car engines to major automobile companies launches its own line of cars.

5- Which of the following statements is true of accounting data?

Accounting data are historical data and thus backward-looking.

5- 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?

Apple had a more effective management of its global supply chain than Microsoft.

5- 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?

How do we reduce the economic value created?

5- Which of the following statements is not true of competitive advantage?

Competitive advantage is an absolute measure.

5- _______ 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 create

6-________ is best described as decreases in cost per unit as output increases.

Economies of scale

5- _______ most precisely measures how well a company leverages its fixed assets, particularly property, plant, and equipment (PPE)

Fixed asset turnover

7/8-________ 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.

Forward vertical integration

5- Which of the following scenarios best illustrates bundling?

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.

5- ________ of receivables turnover imply more efficient management in collecting accounts receivable and shorter durations of interest-free loans to customers.

Higher ratios

5- Which of the following is an advantage of the balanced-scorecard?

It allows managers to translate a firm's vision into measureable operational goals

5- Which of the following expressions accurately describes market cap?

It is the product of the number of outstanding shares and the share price.

5- Which of the following is a disadvantage of the balanced-scorecard approach?

It provides limited guidance about which metrics to choose.

6-Which of the following best explains why a blue ocean strategy is difficult to implement?

It requires the reconciliation of fundamentally different strategic positions—differentiation and low cost.

5- Which of the following is a disadvantage of measuring firm performance through total return to shareholders and firm market capitalization?

Market volatility makes it difficult to assess firm performance through these measures, particularly in the short-term.

5- ________ are best described as the value of the best forgone alternative use of the resources employed.

Opportunity costs

5- ________ precisely indicates how much of a firm's sales is converted into profits.

Return on revenue

5- Which of the following is not true of risk capital?

Risk capital invested in a firm can be legally recovered if the firm goes bankrupt.

5- The three financial ratios that constitute return on revenue are Cost of goods sold/Revenue, Research & Development expense/Revenue, and

Selling, general, & administrative expense/Revenue.

5- ________ are the legal owners of public companies.

Shareholders

5- 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?

Smart Feet will gain market share.

7/8- ________ 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

7/8-________ 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

5- Which of the following statements is true of the triple-bottom-line?

Three dimensions, economic, social, and ecological, make up the triple-bottom-line.

7/8- Which of the following statements is true of transaction costs?

Transaction costs are necessary to explain and predict the boundaries of a firm.

5- 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?

VK Products collects accounts receivables faster than AP Goods does

7/8-How do firms benefit from vertical integration?

Vertical integration allows firms to increase operational efficiencies through improved coordination of adjacent value chain activities.

5- ________ is best described as a measure of how effectively capital is being used by a firm to generate revenue.

Working capital turnover

5- The tenet behind the triple-bottom-line is that

a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy.

7/8- Which of the following firms is least integrated?

a firm that buys all the required raw materials from multiple external vendors

7/8- 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?

backward vertical integration

6-In a successful ________ strategy, the trade-offs between differentiation and low cost are reconciled.

blue ocean

5- The translation of strategy into action primarily takes place in a firm's

business model.

6- A ________ primarily details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market.

business-level strategy

6-A successfully implemented blue ocean strategy allows a firm to

charge a higher price than the cost-leader in the industry.

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?

cost-leadership

6-In a focused cost-leadership strategy, a firm

delivers low-cost products and services to a specific, narrow part of the market.

6-A firm experiences ________ when there are increases in cost per unit as output increases.

diseconomies of scale

5- 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.

6-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.

6-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

economies of scale.

7/8- Today, many companies use PeopleSoft and EDS to avoid maintaining a human resource management system. By doing this, these firms are

engaging in strategic outsourcing.

6-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

focused differentiation strategy.

7/8-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?

franchising

6-When a differentiator charges a similar price as its competitors in the same strategic group but offers more perceived value, it

gains market share from other firms.

7/8- 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?

geographic diversification strategy

6-Diseconomies of scale refer to

increases in cost as output increases.

7/8- A(n) ________ is best used to depict the transformation of raw materials into finished goods and services along distinct vertical stages

industry value chain

5- Competitive advantage goes to the firm that achieves the

largest economic value created.

6-The primary goal of a firm pursuing a blue ocean strategy should be to

offer a differentiated product or service at a low cost.

6-Firms pursuing a differentiation strategy primarily seek to

perform different activities than its rivals.

7/8-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?

principal-agent problem

5- The ratio Cost of goods sold/Revenue indicates how efficiently a company can

produce a good.

6-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?

product diversification

7/8-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?

product diversification

7/8-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

product diversification.

7/8-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

product-market diversification

7/8-A firm that engages in strategic outsourcing typically

reduces its level of vertical integration.

7/8- When a firm is said to be pursuing a geographic diversification strategy, it means that the firm will

sell its products in several different regional, national, and international markets.

5- A high percentage of R&D/Revenue ratio indicates a(n)

strong focus on innovation to improve current products and services.

6-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

stuck in the middle.

5- Which of the following business models has been traditionally used by the magazine and newspaper industry?

subscription-based

7/8- Which of the following is an example of an external transaction cost?

the cost of searching for a contract manufacturer

6-Value drivers contribute to a firm's competitive advantage only if

the increase in value creation exceeds the increase in costs.

6-A blue ocean strategy differs from a low-cost strategy in that

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.

5- 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?

the value (V) the consumer attaches to the dress

6-Which of the following is a firm effect that has an impact on the competitive advantage of a firm?

the value and the cost position of the firm relative to its competitors

5- Which of the following is an external performance metric?

total return to shareholders

5- During the process of formulating an effective business model, a firm's managers should first

transform their strategy of how to compete into a blueprint of actions and initiatives.

5- In the freemium business model, the

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.

5- A defining characteristic of the pay-as-you-go business model is that the

users pay for access to a product or service whether they use it during the payment term or not.