MGT 499 Exam 2

_____ is a condition where decision-making authority is concentrated at a high level in a management hierarchy.

Centralization

After a company has developed a value innovation in a fragmented industry, it often needs to scale up quickly. Which of these is a strategy for growing a business with multiple corporate-owned locations?

Chaining

A manufacturing company has been growing over the past few years due to the introduction of new products. Recently, the pace of innovation has slowed. Previously, the most successful innovations came from suggestions from shop floor employees. The company has also seen some quality control issues. Local quality managers have uncovered the source and made appropriate corrections, but they were slowed by waiting for approvals from corporate headquarters. What should Kyle, a board member, suggest to the rest of the board to resolve similar issues in the future?

Decentralization

A CEO decides that too many managers have made the company top heavy and wants to make the company leaner and faster. The CEO lays off 50 employees and forms a new structure that gives the remaining workers much more flexibility. What process has the CEO just executed?

Delayering

Using her beloved grandmother's recipe for fruit-filled empanadas, Marianna opens a drive-up kiosk specializing in these sweet treats. The concept is profitable and gains a lot of media attention. Marianna wants to open additional locations, but she doesn't have a lot of start-up capital. Which of these consolidation strategies for fragmented industries could she utilize?

Franchising

In a mature industry, a company can employ several potential strategies to compete with existing companies in the industry. Which of these is a strategy that a company in this situation uses to manage rivalry?

Identify a new market for the company's existing products

If an industry includes a single, dominant company operating as a near-monopoly, it is most likely in which stage of the industry life cycle?

Mature

Microsoft and Apple are widely known as technological rivals. When one company comes out with a new laptop, the other is quick to respond with a new product offering using its respective operating system. Both companies seek to control the technical standards in the personal computer market. This competition is referred to as:

Microsoft and Apple are widely known as technological rivals. When one company comes out with a new laptop, the other is quick to respond with a new product offering using its respective operating system. Both companies seek to control the technical standards in the personal computer market. This competition is referred to as:

Social media has become an excellent strategy for start-up companies with little access to capital to help spread the word about their innovative products. Using video and customer testimonials and encouraging others to share their experiences with the product, companies can generate third-party endorsements of their products and services. This is an example of what strategy?

Observability

As a new hire in a technology company, Harris is assigned to a group that is in product development. Harris's position includes weekly meetings with R&D, marketing, and production. Co-workers tell Harris this group structure is a prototype and may or may not be permanent. What current integrating mechanism structure is the company testing?

Teams

Which of the following would exemplify a company crossing the competitive chasm?

a. A company enters an industry during the embryonic stage of that industry and then seeks to grow with the industry to serve the mass market.

Which of these examples represents a company that has selected a differentiation strategy?

a. A grocery store chain is converting its local neighborhood stores to warehouses and having customers select items online or through an app and pick them up in a drive-through without having to leave their vehicles.

How can companies avoid letting disruptive technology be the reason they fail?

a. By investing in emerging technologies that have the potential to become disruptive

The 12 nations of OPEC gather regularly to discuss oil production across the globe. Their decisions and announcements drive crude oil production and prices, even for nonmember countries. What type of strategy is OPEC using?

a. Capacity control strategy

What is the importance of complements in a format war?

a. Complements stimulate the incentive to buy the original product because customers will then have a large supply of complements to use in conjunction with the main product.

YUM!, one of the world's largest restaurant companies, has a variety of brands, including KFC, Pizza Hut, and Taco Bell. Each one operates independently and is responsible for its own performance. Each has a separate CEO responsible for managing its supply chain, marketing, and R&D. Knowing this, how does YUM! organize its structure?

a. Decentralized with autonomous subunits

An entrepreneur establishes a social justice online retail company. The company purchases authentic artwork, jewelry, and crafts at a fair price from artisans in developing countries and sells them through a website. As a company following a differentiation strategy, which of these functional-level strategies will be important for sustaining the business?

a. Developing a robust marketing program to promote the social justice elements of the business and gain insights into consumer purchasing behavior on the website

A pharmaceutical company was the first to introduce a revolutionary treatment for rheumatoid arthritis. Sales and demand increased rapidly; however, the company could not meet the demand due to lack of manufacturing power. Based on what you know about the company, which innovation strategy should it have implemented?

a. Enter into an alliance with another company.

A small HR consulting business is looking to grow. The leadership team—made up of people with training and more than 20 years of experience each in organizational development and training—is deciding whether the company should pursue a low-cost strategy or a differentiation strategy. The team believes they bring together a unique group of experts who can deliver solutions to mid-sized companies. Which strategy do you recommend the consulting company pursue to market its services?

a. Focus differentiation strategy

In creating the Wii and providing a sufficient supply of games to run on the Wii system, what strategy was Nintendo using to motivate customers to adopt its new video game format?

a. It created complementary products (games).

A company that finds itself "stuck in the middle" between a low-cost strategy and a differentiation strategy can utilize value innovation to push toward or past the efficiency frontier. Consider the example of Eddie Bauer in the text. How might the company introduce a value innovation to move closer to the efficiency frontier?

a. It must find a way to reduce its costs without sacrificing style and other elements of its differentiation.

Often companies employ a blend of the franchising and chaining model, with some locations owned by franchisees and others owned by the corporation. Which of these is an example of this blended model and the implications the structure can have on a stakeholder group?

a. McDonald's announced plans to increase the minimum wage of its workers at 1,500 corporate-owned stores, but the decision had no impact on the workers at 40,000 independent stores.

A company consists of a corporate officer and operating divisions. Each operating division represents a separate business or profit center in which the top corporate officer delegates responsibilities for day-to-day operations and business-unit strategy to division managers. What type of structure does this company have?

a. Multidivisional structure

Which of the following is NOT indicative of a technological paradigm shift?

a. New technologies are immediately more efficient than established technologies.

Kristin feels energized coming to work and loves her office environment. She feels comfortable asking fellow workers for help, and they are more than happy to oblige. The team even has dinners together every Thursday after work. What aspect of the company is Kristin happy with?

a. Organizational culture

Which of these terms describe a company's personality and its character within, such as labeling a company as casual, serious, fun, or boring?

a. Organizational culture

Keesha, the marketing manager for a running shoe company, has been tasked with implementing a market development strategy. What first step could she take?

a. Research the market segments of individuals who might purchase running shoes and compare them to the demographics of the company's existing customers. Identify any customer segments the company is not currently serving.

How can a high-tech company implementing a low-cost structure strategy when faced with high fixed costs and low marginal costs increase profitability?

a. Stimulate demand and increase volume

Paradigm shifts are more likely to occur in an industry with which of the following conditions?

a. Technology in the industry is mature, and a disruptive technology has entered the marketplace.

What kind of structure might a company employ to dedicate resources for developing and exploiting new disruptive technologies while maximizing sales from existing technologies?

a. The company can establish a separate division dedicated to the new technology with distinct R&D and sales resources.

Which of these industries exhibits the most factors that indicate it is in a severe decline?

a. The wired telecommunications industry has a mature infrastructure, and nearly all of the companies operating in the industry offer the same services to the same customers.

The CEO of a company receives a list of goals from the board of directors. Among the specific results the board would like the company to attain are a 10% increase in revenue and a 6% increase in profit. The CEO knows that simply telling subordinates about the goals will not provide them with an organized way to achieve them. What is her logical next step?

a. To determine subgoals for employees and divisions

The business-level strategies that support a differentiation strategy are:

a. based around ensuring that customers perceive a product to have greater value targeted to the unique needs of a single customer niche.

Companies utilizing a focus differentiation strategy:

a. can sell at higher volumes and greater profitability than companies that appeal to a broader market.

Understanding market segmentation is an important step in formulating business-level strategies because:

a. companies can choose one of three different kinds of approaches based on their strategy to offer a standard or customized product to customers with different needs.

If there is a sudden influx of various technology formats for the same type of product, consumers may delay their purchase as a result of the confusion. Companies try to avoid this occurrence by:

a. cooperating with one another.

A company can achieve value innovation by:

a. identifying a process innovation that would be challenging for its rivals to imitate because of their prior strategic commitments.

A group of strategies designed to moderate the intensity of competition within a mature industry among existing companies within that industry is known as:

a. managing rivalry.

For companies to successfully implement a divestment strategy, they must:

a. recognize the signs of an industry's decline earlier than their competitors to divest while the company still has something to offer.

Companies that select a differentiation strategy must also recognize:

a. the importance of controlling costs to maintain profitability.

A jeans company is pursuing a low-cost strategy and has achieved a position in which it is the lowest-cost manufacturer of denim products. One of the ways the company can achieve a competitive advantage against its rivals is to:

a. undercut them in a price war to increase volume and drive weaker low-cost rivals out of business.

Companies that have found the right balance between differentiation and low-cost strategies:

a. would be positioned on the efficiency frontier.

Which of these functional-level strategies is designed to improve quality in terms of reliability for a company pursuing a low-cost strategy?

b. A manufacturer implements a Six Sigma training program with a goal to double the number of Six Sigma black belts within five years.

Three companies, Fast Forward, Ultra Entertainment, and LBS, are investing in developing Blu-ray players for a premium, enhanced media experience for customers. The three companies decided to work together, combining their technologies in order to avoid introducing competing and incompatible technology. What strategy did the companies use to establish their technology as a standard?

b. Cooperate with competitors

In most high-tech industries, which of the following statements best describes the behaviors of fixed costs and the costs of producing one extra unit of the product?

b. Fixed costs are high, and costs for one extra unit are low.

Which of these designations indicates a type of technology industry in which the underlying scientific knowledge that companies use is rapidly advancing, as are the attributes of the products and services that result from its application?

b. High-tech

Companies in a fragmented industry can combine into a single, larger enterprise to build a more compelling national brand. What type of strategy are they using?

b. Horizontal acquisitions

Which of these companies pushed the efficiency frontier in its industry with a value innovation?

b. Ikea created a store environment in which customers select their own flat-packed furniture and assemble it themselves at home.

Instead of improving upon its technology faster than what consumers demand, a company can instead serve "segment zero." What is the strategic benefit of this move?

b. It reaches consumers who prefer low-end technologies that fit their needs.

Which of the following is a concern within tall hierarchies?

b. Managers' salaries

At Nokia, managers try to achieve tight coordination between functions, particularly R&D, production, and marketing, and many employees belong to two subunits within the firm. What type of structure does Nokia use?

b. Matrix structure

Lee, the operations officer of a manufacturing plant, has been given a goal to increase profits. Lee set a subgoal to produce more units to drive down costs and lower the price to market. Lee told team members that if they produced 5,000 more units in Q4, they would be given bonuses. After Lee's team produced 7,000 more units in Q4, sales did not increase in alignment with production, leading to excess inventory and lower profitability of 2%. The team's focus on production and reducing the cost per unit caused them to ignore sales forecasts and overproduce products. What was the underlying cause behind Lee missing the original goal?

b. Misaligned output controls

Recently, a startup has begun developing appliances with built-in technology features, such as WiFi connections to smartphone apps that track refrigerator stock in staple items. Craig, the product development manager in an established home appliance company, needs to deal with this situation. Which of these strategies can he use to deter this rival before it gains traction in the industry?

b. Move up the launch date for a new line of tech-connected appliances his team has been working on.

What is the totality of a firm's organizational arrangements, including its formal organizational structure, control systems, incentive systems, organizational culture, organization processes, and human capital?

b. Organizational architecture

Ross was appointed CEO of an auto parts manufacturer about six months ago. Almost immediately, he recognized a competitive advantage the company could develop, but many lower-level managers from numerous departments have pushed back on his recommendations. What challenge is Ross facing?

b. Organizational inertia

Several strategies for mature industries have the potential to result in antitrust violations that could result in court action if not implemented correctly. Each of these strategies must be undertaken ethically and legally to avoid these kinds of repercussions. Which describes a potentially illegal implementation?

b. Price leadership: Apple collaborates with e-book publishers to raise prices on millions of titles offered through the iBooks store.

Which of these companies is pursuing a differentiation strategy to gain a competitive advantage?

b. Starbucks utilizes an upscale customer experience, high-quality coffee drinks, and brand building to charge a premium price for its products.

You have just been hired by a marketing company to manage the day-to-day activities of a team of 21 people. You are finding it difficult to keep up with all of the associates, the quantity of information you receive, and the approvals needed to keep work moving. You spend most of your time responding to emails, critiquing work, and sitting in meetings, and you're beginning to feel overwhelmed. What can you do to ensure that decisions are made in a timely manner?

b. Suggest decentralization

An industry moves from the embryonic stage to the growth stage when a mass market starts to develop for its product. What three things spur a mass market to emerge?

b. Technology advances to make the product easier to use, complementary products are developed, and the industry finds ways to reduce the cost of the product and lower prices.

A nonprofit relief organization decides to take lessons from the world of business to improve its delivery of emergency supplies to those in need. What strategy could it use as a value innovation to make it possible to deliver greater value to the communities it serves?

b. The relief group could utilize information systems to track and manage relief supply inventories and strategically locate them closest to locations most likely to be hit by a natural disaster.

Nurturing a knowledge network in an organization provides which of the following major benefits?

b. The sharing of knowledge ensures that employees with different skills will be able to aid each other easily.

Social media has become an excellent tool for organizations to help spread the word about their products and causes. Which of these demonstrates viral diffusion at work on a social media platform?

b. Through a video campaign on social media that included numerous videos of celebrities dumping buckets of water over their heads, the ALS Association raised more than $220 million.

Which of these companies developed a business concept that included value innovation, allowing it to compete in a blue ocean?

b. Uber, founded in 2009, introduced peer-to-peer ride sharing for the first time, redefining the taxi and limousine service industry.

Which of the following would NOT be among the assumptions related to an industry's efficiency frontier?

b. When an enterprise already has significant differentiation built into its product offering, increasing differentiation requires no additional costs.

A company can lower costs through functional-level strategy and organization by

b. achieving economies of scale, using information systems to automate business processes, and adopting lean production technologies.

Nonprice competition is a group of market strategies that companies utilize to manage rivalry without price cutting and price wars. To employ one of these strategies, a company must:

b. define its differentiation through products or market segments.

Jinan is part of the team developing strategies for new wearable technology that integrates smartphone and fitness tracker tools. To accelerate customer demand and demonstrate the product's relative advantage, Jinan should recommend:

b. educating customers about the ways in which the new device replaces several products among their personal gadgets and showing how the consolidated product saves them money and helps them achieve their fitness goals.

In theory, if a company aligns its strategy and structure, it will see:

b. improving performance.

The video game Halo was built for the Xbox platform and was so popular that many consumers bought an Xbox system in order to play the game. When a product is so compelling that it persuades consumers to adopt a particular format or technology, which reduces demand for competing formats, it is known as a:

b. killer application.

Companies utilize strategies that deter entry into their mature industries because:

b. new entrants can generate additional competitive forces that may cause a company to lose customers, lose profitability, and reduce the return on investment.

In an effort to cut down on the thousands of tons of waste generated each year by the inclusion of unwanted chargers with every new handset, most cell phone manufacturers adopted the Micro USB connector for charging their devices. This format represents a:

b. technical standard.

Nokia was once one of the front-runners of the mobile phone industry. However, when smartphone technology was introduced, Nokia was quickly forgotten. Basic phones became largely obsolete, and the selection decreased exponentially as the demand for smartphones heavily increased. Apple, Android, and Samsung now currently hold the largest market share for the smartphone industry. With this information, we can conclude that Nokia was affected by a(n):

b. technological paradigm shift.

The arrival of personal computer technology gave rise to client server networks that replaced traditional mainframe and minicomputers for many business uses. Companies such as Wang, Control Data, and DEC did not survive this revolutionized computer industry. What happened in this instance is a prime example of a(n):

b. technological paradigm shift.

Companies competing with a blue ocean strategy can create an advantage because:

b. they are able to define and set the rules for the new industry segment in which they are operating.

A low-cost strategy is one in which a company:

b. undercuts its rivals on price to gain market share while still making a profit.

Organizations can experience a high return on investment if they are able to consolidate a fragmented industry. This is known as:

b. value innovation.

Increased competition among high-technology markets tends to lead to faster improvement of technology than consumers can fully utilize. Why?

c. A company that outputs higher technology can demand higher premium price points to attempt to set the standard of the market.

In which of the following companies is a low integration control system most likely to work best?

c. A construction subcontractor looking to diversify its service lines with services that are unrelated

Which of these companies is achieving a competitive advantage through a low-cost strategy?

c. A high-volume, quick-serve restaurant chain that is controlling costs through centralized food production and a streamlined supply chain

While working for a start-up software company with an innovative product in an embryonic industry, Avery has been asked to suggest a strategy for developing a mass market for the company. Which of these strategies should Avery recommend?

c. A strategy to increase the efficiency of the product, lowering its cost and price to consumers

Which of the following statements about organization processes is NOT true?

c. An organization's processes can be summarized by means of an organizational chart.

Which of the following statements best describes the distinction between industry standards set by consumers versus industry standards set collectively by companies?

c. Customers set the standards as a result of their buying patterns; companies set the standards by lobbying the government to mandate them.

To develop a blue ocean strategy a company should consider four actions: eliminate, reduce, raise, and create. A start-up video game company is considering how it can operate in a blue ocean. What action might it take?

c. Develop a video game platform that seriously reduces the manufacturing cost, and therefore the price, of the console without limiting technology.

What is the biggest benefit to a company that is acting as a first-mover?

c. Enduring competitive advantage

An executive team wants to implement some new strategic initiatives, but they will need to carefully coordinate the activities of different functions and divisions within the organization in order to succeed with their new strategies. What tool can help the team accomplish this goal?

c. Integrating mechanisms

The four generic business-level strategies include the dimensions of broad and narrow approaches to a market. What are the other two dimensions?

c. Low-cost and differentiation

GM, one of the world's largest automobile companies, has a variety of brands. Its brands include Chevrolet, Buick, Cadillac, and GMC, each of which is responsible for its own performance. GM has separate CEOs for specific brands, who are responsible for managing their supply chains, marketing, and R&D. Which is most likely GM's structural form?

c. Multidivisional structure

The passenger railroad industry in the United States has been in decline for the last several decades. For example, Amtrak is sustained for most of its operations by taxpayer subsidies. There is one exception—the Northeast corridor, which serves Boston, Philadelphia, New York City, and Washington, D.C. Identify the strategy that passenger rail companies are using there and how they could use this same strategy to serve other parts of the country.

c. Niche strategy: Southern California could also have rail passenger lines connecting densely populated cities with strong commercial ties in a region of the country with heavy car traffic.

Shannon is a manager for a high-tech company and is analyzing the results of various teams. The stats are startling with performance numbers not where they were projected to be, even though quality and speed were up to par. Which of the following best describes what Shannon is experiencing?

c. Performance ambiguity

A property management company hit its corporate goals for the year by increasing profits by 5%, two points higher than its 3% goal. Management was very pleased with the results and decided to celebrate with an extravagant meal for all managers. The following year, the company set the same goal, 3%, but fell very short. When digging into the cause, management found out that the associates were not as productive or as motivated as they were the year before. What should the company do to ensure it hits its goals for years to come?

c. Provide positive reinforcement for hitting goals

When a company redefines its product offering through value innovation to create a new market space, it has implemented:

c. a blue ocean strategy.

A pet products company is developing a dog feeding system that senses when a dog is hungry and dispenses food into its bowl. This product is marketed toward owners with long, unpredictable workdays who want their pets to remain on a regular eating schedule. The company has the complementary assets necessary to fully develop the product. There are also high barriers to imitating the innovation and a very limited number of competitors. Based on this information, the company should:

c. develop and market the product alone.

If a company's strategy is to deliver products with superior functions and features, it is using a:

c. differentiation strategy.

Logan Company wishes to exit a declining industry and is making decisions to optimize its cash flow in the short term. The company is using a:

c. harvest strategy.

A company in a declining industry employs several tactics as part of its current strategy, including slashing prices, ramping up marketing, and acquiring smaller businesses. This company is executing a:

c. leadership strategy.

Pricing the product low in order to stimulate demand and increase the installed base, then trying to make high profits on the sale of complements that are relatively high in price, is known as the:

c. razor and blade strategy.

Canon offers a line of ink-jet printers for the home office with prices that begin as low as $29, with most selling for $80 to $120. Replacement ink cartridges for the printers range in price from $12 for a single ink cartridge to $50 or more for cartridges to replace all four colors. This strategy is Canon's version of:

c. razor and blade.

As a customer group, innovators are:

c. skilled in technology and able to experiment with systems that have glitches and failures.

Sets of technical specifications that producers adhere to when making a product or a component of it are known as:

c. technical standards.

In which of the following contexts would bureaucratic control be most effective?

d. A firm that operates with thin margins and so must keep costs low

A company has a chief executive officer and a limited corporate staff, with line managers in dominant organizational areas, such as production, accounting, marketing, engineering, and human resources. What type of structure is in place here?

d. A functional structure

A restaurant conducted an internal review of its resources and distinctive competencies. It concluded that customers perceive the company's dessert menu to be more delicious and of greater value than that of the competitors. Which business-level strategy should the company consider?

d. Differentiation strategy

James is the sales director of a consumer packaged-goods company. The company has been successful in spurring innovation for the product line. However, company sales have not exceeded expectations. Employees are slow to reach their quarterly sales goals, and it usually doesn't happen until the last few weeks of each quarter. Then, instead of pushing ahead, they seem to wait for the goals to reset with the new quarter. What device could James utilize to motivate the salespeople?

d. Incentives

A software firm has chosen to implement a differentiation strategy, offering its products in a software as a service (SaaS) platform with a monthly subscription in the cloud. Most of the firm's competitors are selling their products as a one-time purchase on a disc in a retail store. Which of these functional-level strategies will be critical to implementing this strategy?

d. Instituting a 24/7 technical support hotline with a team that is knowledgeable about the product and business goals of the company's customers

A fragmented industry would be characterized by which of the following?

d. Low barriers to entry and a steady stream of new entrants

In examining an industry's technology S-curve, where would we find the inflection point?

d. Midway between the points of increasing returns and diminishing returns

A company was able to substantially increase its profits by implementing a new order management system that included better, real-time communication and monitoring of goal achievement. What type of control is at work here?

d. Output control

Which of the following most strongly supports decentralization?

d. Permitting greater flexibility

A fitness electronics company is a first-mover in wearable fitness trackers. Its innovative everyday activity and exercise bracelet has created a monopoly for its product. Executives are apprehensive about the company's ability to maintain its competitive advantage because they know that rival companies have competent research and development skills and access to marketing, sales knowhow, and manufacturing capabilities. These rivals are considered:

d. capable competitors.

Often, only one standard dominates a market. This makes it important for a company to have ownership of the technical standards to maintain and increase:

d. competitive advantage.

Largely replaced by streaming media, the VCR is a seldom-used piece of electronics found in few remaining homes. The VCR industry is thus in the ending portion of the _____ stage.

d. declining

In the market demand S-shaped growth curve, the early majority is the:

d. group of customers who begin purchasing a product at the beginning of an industry's transition from embryonic to growing.

Superior quality is an important functional-level strategy for both low-cost and differentiation strategies. Strategic managers for a company pursuing a low-cost strategy should focus on:

d. improving the ability to manufacture products by reducing production inputs to lower costs.

The incentive structure and organization of a company can be an important part of a business-level strategy. Flat organizations can be a structure used by companies pursuing a:

d. low-cost strategy.

The regulation of behavior of individuals and units within an enterprise by setting up an internal market for some valuable resources, such as capital, refers to:

d. market controls.

JVC and Matsushita implemented a licensing strategy whereby any consumer electronics company could manufacture VHS-format players. In doing this, the demand for VHS tapes of films increased, causing movie studios to issue more films for rental in VHS format. This process is referred to as:

d. network effects.

A strategy that involves developing new products to serve every niche and segment of the marketplace to prevent startup companies from entering an industry is known as the:

d. product proliferation strategy.

In order to compete with a new line of furniture made popular by IKEA, a Midwestern furniture manufacturer plans to expand its output. In doing so, it experiences an increase in marginal costs. This phenomenon is known as:

d. the law of diminishing returns.

When a company offers a product or service that provides greater value through superior differentiation at a lower cost than was previously thought possible, it is presenting:

d. value innovation.