MGT 449 Exam 2

Argus Inc. is a large multinational company owned by two partners, is active in the petroleum, capital market, chemicals, steel, beverages, hospitality, airlines, education, automobiles, and consumer electronics industries. The company has multiple brands and a large product portfolio under its banner. Which of the following terms would best describe this company? A. A conglomerate B. A flagship Brand C. A single-business firm D. A dominant-business firm

A. A conglomerate

Mega Media sells books by having salespeople set up appointments with potential customers and give them a sales pitch for the product. When a salesperson sells a book, he or she gets a predetermined percentage commission. This type of business model is called A. An agency B. Bundling C. A freemium D. Wholesale

A. An agency

Which of the following expressions accurately describes market cap? A. It is the product of the number of outstanding shares and the share price B. It is the ratio of a firm's equity finance and its debt finance C. It is the difference between the book value and the market value of a firm's assets D. It is the difference between a firm's account receivables and account payables

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

______ is best described as the output range needed to bring down the cost per unit as much as possible, allowing a firm to stake out the lowest-cost position that is achievable through economies of scale A. Minimum efficient Scale B. Optimum sustainable yield C. Maximum output capacity D. Break-even output

A. Minimum efficient scale

Incumbent firms favor incremental innovation over radical innovation because A. Radical innovation will disturb the existing power distribution within the firms B. Their business decisions are independent of other parties in their innovation ecosystem C. Incumbent firms do not have formal organizational structures and processes like the way new entrants do D. Incremental innovations help firms sustain a permanent competitive advantage, whereas radical innovations only help gain a temporary advantage

A. Radical innovation will disturb the existing power distribution within the firms

From an investors' or shareholders' perspective, the measure of competitive advantage that matters most is the A. return on risk capital B. Inventory turnover C. Economic value creation D. Consumer Surplus

A. Return on risk capital

A cost leader is the firm most likely to survive a price war A. True B. False

A. True

Gold Leaf Computers sources the components for its laptops from various suppliers on the market. The firm pays $100 for processors, $35 for disk drives, $50 for screens, $10 for memory, and $40 for graphics and wireless internet cards. Gold Leaf has determined that it would cost $200 per unit to produce all of the necessary components in its in-house manufacturing facility. In this scenario, Gold Leaf should A. Vertically integrate B. Diversify its activities C. Continue to outsource production D. Exit the laptop industry

A. Vertically integrate

Anita has been named CEO of a popular sports apparel company. As CEO, she is tasked with setting the firm's corporate strategy. Which of the following decisions is Anita most likely to make? A. What range of products the firm should offer? B. How to achieve the highest level of customer satisfaction C. Which customer segments to target D. Whether to pursue a differentiation or cost leadership strategy

A. What range of products the firm should offer

When wireless service providers offer free discounted mobile phones for subscriptions to their wireless voice and data service, the perceived value of the service offering increases. In this case, the value driver would be A. Learning-curve effects B. Availability of compenents C. Experience-curve effects D. Economies of scale

B. Availability of complements

A manger's only responsibility is to monitor and assess the performance of his or her firm. A. True B. False

B. False

A sustainable strategy is one that produces a competitive advantage that can be maintained over time. A. True B. False

B. False

Corporate strategy is focused solely on determining the geographic locations in which the firm should compete A. True B. False

B. False

Differentiation and cost leadership are only effective in manufacturing industries. A. True B. False

B. False

Managers have exactly two choices when determining the boundaries of the firm: produce goods and services in-house ("make") or purchase them externally ("buy"). A. True B. False

B. False

Pipeline businesses are typically better than platform businesses at incorporating user feedback and taking advantage of network effects A. True B. False

B. False

The pace of innovation has slowed in the 21st century. A. True B. False

B. False

The leading producer of cell phone backup batteries, Jumpstart, has achieved great success because they produce high-quality battery backups that are not too expensive. Even so, another company that produces lower-quality batteries at the same price has also achieved some success, but not as much as Jumpstart. Also, in general, the price of backup batteries has declined because of economies of scale and learning. In addition, Jumpstart has added complementary assets, such as a carrying case. Considering all of these factors, the backup battery industry is most like in the A. Introduction stage B. Growth stage C. Shakeout stage D. Maturity stage

B. Growth stage

_____ is best described as a situation in which one party is more informed than another, because of the possession of private information A. Information Piracy B. Information Asymmetry C. Information Governance D. Information Deregulation

B. Information Assymetry

Quick Clean Chemicals outsources its production to contract manufacturers located in underdeveloped nations where unskilled labor is available in plenty for very low wages. This has helped the company become a price leader in the chemicals industry. Which of the following is the key driver behind Quick Clean's strategic position? A. Availability of complements B. Low-cost input factors C. Network effects D. Superior customer service

B. Low-cost input factors

Which of the following is a disadvantage of measuring firm performance through total return to shareholders and firm market capitalization? A. Only the book value of the share prices is taken into account when applying these measures, and not the market value B. Market volatility makes it difficult to assess firm performance through these measures, particularly in the short-term C. These tools fail to indicate how the stock market views all available public information about a firm's expected future performance D. These tools measure competitive advantage in absolute terms rather than relative terms

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

Thomas is the owner of a landscaping company that caters to a very wealthy clientele. His company has struggled to differentiate itself form the other high-end landscapers in the area, but because he has hired several expensive but highly-qualified team members, Thomas is unable to shift to a cost leadership strategy. Which strategy is most like to achieve a competitive advantage? A. Maintain prices but replace all the expert employees with less-skilled workers to control costs B. Narrow the scope of competition and focus on unique features such as the use of organic materials C. Offer similar services as competitors but raise prices to increase profits D. Lower prices but continue employing high-paid expert gardeners

B. Narrow the scope of competition and focus on unique features such as the use of organic materials

Which of the following scenarios would be a characteristic of an entrepreneur? A. Alissa scaled back the production of pottery because it wasn't cost effective B. Rachel implemented a new and more efficient way to produce pottery C. Ursula used a proven marketing method to advertise her pottery D. Mary imitated a new, more efficient method of producing pottery

B. Rachel implemented a new and more efficient way to produce pottery

Which of the following is an example of an external transaction cost? A. The cost of setting up a production unit B. The cost of searching for a contract manufacturer C. The cost of maintaining plant and machinery D. The cost of recruiting and retaining employees

B. The cost of searching for a contract manufacturer

Airbase is a consumer electronics company known for its affordable mobile devices that follows a cost-leadership strategy. In this scenario, Airbase should ideally compare its strategic position with A. An online company that sells customized electronics accessories B. A company that sells small kitchen appliances at affordable prices C. A consumer electronics company popular among price-conscious customers D. A consumer electronics company that sells high-end devices

C. A consumer electronics company popular among price-conscious customers

The managers at Camphor Plastics decided that their firm needed to diversify because of overall falling sales and lower performance in one sector. How does diversifying compensate for the lackluster performance in this sector? A. By motivating managers B. By increasing the firm's risk in another sector C. By having higher performance in another sector D. By sharing their market power

C. By having higher performance in another sector

How does availability of complements act as a value driver? A. Complements add value to a product when they imitate it B. Complements add value to a product by offering an inferior substitute to it C. Complements add value to a product when they are consumer in tandem with it D. Complements add value to a product by competing with it

C. Complements add value to a product when they are consumed in tandem with it

When a firm pursues a maintain strategy, it A. Chooses to consolidate the industry by buying rival firms, those who plan to exit B. Exits a declining industry to maintain the goodwill of its overall brand name C. Continues to support marketing efforts even if the demand for the product is declining D. Reduces investments in product support and allocates only a minimum of human and other resources

C. Continues to support marketing efforts even if the demand for the product is declining

______ are best described as the value of the best forgone alternative use of the resources employed. A. Switching Costs B. Variable Costs C. Opportunity Costs D. Social Costs

C. Opportunity Costs

When ReGen Pharmaceuticals released a new drug to treat insomnia, its chemical composition was disclosed at the back of the drug's cover. However, any attempts by competitors to copy the chemical composition would result in infringement of ReGen Pharmaceuticals intellectual property rights. Thus, the drug is protected by a A. Franchise B. Promissory Bill C. Patent D. Royalty

C. Patenet

Which of the following is a drawback of using the industry life cycle as a framework to guide strategic choice? A. The framework believes that the number and size of competitors remain constant throughout the life cycle B. The framework believes that the life cycle of industries is unpredictable C. The framework does not explain everything about changes in industries D. The framework is based on the tenet that industries can be rejuvenated even in the declining stage

C. The framework does not explain everything about changes in industries

The management team for Volcanic Batteries came up with the following vision statement: "Volcanic Batteries will conscientiously track its financial performance to ensure profits for its investors, enhance its community through employment and supporting charities, and dispose of waste in a manner that will not harm the environment." This vision statement is most likely based on the A. Balanced-Scorecard Approach B. Accounting Profitability Approach C. Triple-Bottom-Line Approach D. Economic Value Creation Approach

C. Triple-Bottom-Line Approach

The translation of strategy into action primarily takes place in a firm's A. Mission Statement B. Executive Summary C. Code of Conduct D. Business Model

D. Business Model

Economic value creation is best expressed as A. Producer surplus plus firm profit B. Consumer surplus minus cost of production C. Producer surplus minus consumer surplus D. Consumer surplus plus firm profit

D. Consumer surplus plus firm profit

Mondo Tacos, a fast-food restaurant, operates through a business model in which individuals can buy the rights to set up Mondo Taco stores and sell the company's food 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 offer a menu approved by 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? A. Bootstrapping B. Credit Rationing C. Crowdsourcing D. Franchising

D. Franchising

Lillypad Toys is a manufacturer of educational toys for children. Six months ago, the company's research and development division came up with an idea for a unique touchscreen device that can be used to introduce children to a number of foreign languages. Three months ago, the company produced a working prototype, and last month the company successfully launched its new device on the commercial market. What should Lillypad's managers prepare for next? A. A sharp decline in demand for the product B. A difficult struggle to move from invention to innovation C. A prolonged period of uncontested success D. Increased competition from imitators

D. Increased competition from imitators

Which of the following lists the stages of the industry lifecycle in the correct order? A. Introduction, Growth, Maturity, Shakeout, & Decline B. Introduction, Shakeout, Growth, Maturity, & Decline C. Introduction, Shakeout, Maturity, Growth, & Decline D. Introduction, Growth, Shakeout, Maturity, & Decline

D. Introduction, Growth, Shakeout, Maturity, & Decline

Which of the following best explains why a blue ocean strategy is difficult to implement? A. It requires the combination of fundamentally similar strategic positions - differentiation and strategic innovation B. It combines the benefits of similar strategic positions - differentiation and low cost C. It requires the reconciliation of fundamentally different strategic positions - differentiation and strategic innovation D. It requires the reconciliation of fundamentally different strategic positions - differentiation and low cost

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

Amazon.com has decided to enter the college bookstore market. The goal of "Amazon Campus" is to offer co-branded university-specific websites that offer textbooks and paraphernalia, such as logo sweaters and baseball hats. This development shows Amazon's relentless pursuit of A. Vertical integration B. Geographic diversification C. Horizontal Integration D. Product Diversification

D. Product Diversification

When a firm makes choices between a cost or value position to achieve competitive advantage, it is primarily involved in A. Arbitration B. Mediation C. Collective Bargaining D. Strategic Trade-offs

D. Strategic Trade-Offs