MIS 44285 Exam 1
3. A firm sells approximately 10,000 units of its product each month. Which of the following will best help establish that the firm has a competitive advantage? A) The firm's 10,000 units must be more than the number of units sold each month by other firms in the industry. B) The firm must be able to break even with 10,000 units per month. C) The firm must be able to supply more products than the market demand so that labor productivity is high. D) The firm's 10,000 units must compare substantially to the firm's previous years' production.
A To establish a competitive advantage, the firm's 10,000 units must be more than the number of units sold each month by other firms in the same industry. A firm that achieves superior performance relative to other competitors in the same industry or the industry average has a competitive advantage. Competitive advantage is always relative, not absolute.
1. P&G differentiates itself from its competitors by offering branded consumer product goods with distinct features and attributes. This business strategy implies that P&G: A) focuses on increasing the perceived value created for customers, which allows it to charge a premium price. B) is primarily focusing on achieving a differentiation parity with its competitors. C) is pursuing a cost-leadership strategy by focusing on increasing the perceived value created for customers. D) focuses on pricing its products lower than its competitors.
A In Chapter Case 6, it has been discussed that P&G differentiates itself from competitors by offering branded consumer product goods with distinct features and attributes. This business strategy implies that P&G focuses on increasing the perceived value created for customers, which allows it to charge a premium price. This approach proved successful, especially in rich countries such as the United States. Over time, though, in response to changes in the external environment, the strategy needed to be fine-tuned.
9. In the context of the value chain analysis, a firm's customer service activities are referred to as its _____ activities. A) primary B) support C) indirect D) ancillary
A In the context of the value chain analysis, a firm's customer service activities are referred to as its primary activities. The primary activities add value directly as the firm transforms inputs into outputs—from raw materials through production phases to sales and marketing and finally customer service. Primary activities are: supply chain management, operations, distribution, marketing and sales, and after sales service.
7. Cars Alot Inc. proactively ordered several thousand tons of steel a few years ago because the price per ton was exceptionally low, at $700. Currently, the price of steel is nearly double. This has allowed Cars Alot Inc. to manufacture and sell cars at a price lower than its competitors without affecting its profits. In this scenario, which of the following isolating mechanisms has primarily helped Cars Alot Inc. gain competitive advantage? A) Better expectation of future resource value B) Path dependence C) Causal ambiguity D) Time compression economy
A In this scenario, better expectation of future resource value is the isolating mechanism that has helped Cars Alot Inc. gain competitive advantage. Sometimes firms can acquire resources at a low cost, which lays the foundation for a competitive advantage later when expectations about the future of the resource turn out to be more accurate.
1. Ketone Inc. has been a market leader in the pharmaceutical industry for more than 10 years. Due to its breakthrough research activities and groundbreaking development, Ketone Inc. has consistently been able to stay ahead of the other pharmaceutical companies. Ketone Inc.'s unique strength in research and development can be referred to as its _____. A) core competency B) primary activity C) market liquidity D) capital gain
A Ketone Inc.'s unique strength in research and development can be referred to as its core competency. Core competencies are unique strengths, embedded deep within a firm, that allow a firm to differentiate its products and services from those of its rivals, creating higher value for the customer or offering products and services of comparable value at lower cost.
5. _____ is best described as a firm's performance metric that captures the total dollar market value of all of a company's outstanding shares at any given point in time. A) Market cap B) Total return to shareholders C) Market share D) Return on revenue
A Market capitalization (or market cap) captures the total dollar market value of a company's outstanding shares at any given point in time.
2. Higher ratios of _____ indicate inefficiency and are disadvantageous to a firm. A) payables turnover B) inventory turnover C) receivables turnover D) return on revenue
A Payables turnover (Revenue/Accounts payable) indicates how fast the firm is paying its creditors and how much it benefits from interest-free loans extended by its suppliers. A lower ratio indicates more efficient management in paying creditors and generating interest-free loans from suppliers.
2. Google hires programmers to write software code in-house because: A) its costs associated with maintaining computer programmers are less than what they would be in the open market. B) the company can effectively avoid the problem of economies of scope when doing so. C) software code is not a valuable or rare resource for the company in gaining competitive advantage. D) it helps the company reduce bureaucracy, organizational size, and complexity.
A Rather than contracting in the open market for individual pieces of software code, Google hires programmers to write code in-house. Owning these software-development capabilities is valuable to the firm because its costs such as salaries and employee benefits to in-house computer programmers are less than what they would be in the open market.
5. In _____, the firm sources intermediate goods and components from in-house suppliers as well as outside suppliers. A) taper integration B) backward vertical integration C) forward vertical integration D) horizontal integration
A Taper integration is a way of orchestrating value activities in which a firm is backwardly integrated, but it also relies on outside-market firms for some of its supplies, and/or is forwardly integrated but also relies on outside-market firms for some if its distribution.
7. Univer Electonics Inc. charges $900 for a television for which it incurs a total cost of $400. The difference amount, $500, is referred to as the _____. A) producer surplus B) consumer surplus C) break-even price D) reservation price
A The difference between the price charged for a product (P) and the cost to produce it (C) is the producer surplus (P - C). The firm captures this amount as profit per unit sold.
5. A firm that follows a differentiation strategy: A) can sell its products or services at a premium price. B) has to sell its products or services at its cost price. C) can only sell its products or services below their cost per unit. D) has to have the lowest prices in its strategic group.
A The goal of a generic differentiation strategy is to add unique features that will increase the perceived value of goods and services in the minds of the consumers so they are willing to pay a higher price.
6. Which of the following statements is true of the relationship between strategic management and the role of business in society? A) Value creation lays the foundation for the benefits that successful economies can provide; however, strategic mistakes can be expensive. B) When companies compete in their own self-interest while obeying the law, they ultimately destroy value. C) Superior performance allows a firm to reinvest some of its profits and to grow; however, this reduces the opportunities for fulfilling careers. D) Black swan events erode trust in business as an institution but reinforce faith in capitalism as an economic system.
A Value creation lays the foundation for the benefits that successful economies can provide: education, public safety, and health care, among others. Superior performance allows a firm to reinvest some of its profits and to grow, which in turn provides more opportunities for employment and fulfilling careers. In contrast, strategic mistakes can be expensive.
2. When a company defines its _____, it is primarily determining whether to pursue a specific, narrow part of the market or go after the broader market. A) scope of competition B) chain of command C) locus of control D) scalar chain
A When considering different business strategies, managers must define the scope of competition—whether to pursue a specific, narrow part of the market or go after the broader market.
A(n) _____ is best described as a product, service, or competency that adds value to the original product offering when the two are used in tandem. A) substitute B) complement C) superior good D) augmented product
A complement is a product, service, or competency that adds value to the original product offering when the two are used in tandem. Complements increase demand for the primary product, thereby enhancing the profit potential for the industry and the firm.
A(n) _____ is best described as a set of companies that pursue a similar strategy within a specific industry in their quest for competitive advantage. A) strategic group B) industry mix C) focus group D) stratified sample
A strategic group is a set of companies that pursue a similar strategy within a specific industry in their quest for competitive advantage.
The economy of Cadvia is going through a recessionary period. Keeping in mind the macroeconomic factors that can affect firms, which of the following businesses would most likely be the first to get adversely affected during this period? A) An apparel store that sells clothes at a discounted price B) A supermarket that offers everyday low pricing on most of its items C) A travel agency that sells premium cruise holiday packages D) A pharmaceutical company that manufactures drugs for diabetics and hypertension
A travel agency that sells premium cruise holiday packages would most likely be the first to get affected during this period. During recessionary periods, companies that focus on low-cost solutions may benefit from economic contractions because demand for their products or services rise in such times.
Although Tesla Motors has been successful in entering the U.S. automotive market using innovative new technology, its continued success will depend on other firms and industry factors. Which of the following, if true, is an industry factor that will play a role in Tesla Motors' future success? A) If the bargaining power of suppliers in the electric car segment is weak. B) If the bargaining power of buyers is strong because they have many choices. C) If Tesla Motors' managers follow a cost-leadership strategy. D) If there is a high rate of turnover among the management in Tesla Motors.
As discussed in Chapter Case 3, in the automotive industry, the bargaining power of buyers is strong. Individual buyers have many choices, and electric cars tend to be priced at a steep premium due to low production runs. Large-scale buyers such as rental car companies Avis and Hertz or the New York City taxi fleet all have significant purchasing power, further driving down profit potential.
10. In the context of the SWOT matrix, which of the following best exemplifies an external threat to a firm? A) The amount spent by a company on employee benefits B) An increase in the share prices of a competitor C) The causally ambiguous resources of a company D) A fall in the firm's employee turnover
B An increase in the share prices of a competitor best exemplifies an external threat to a firm. Strengths and weaknesses are internal to an organization, whereas opportunities and threats are external to the organization. External opportunities and threats are in the firm's general environment and can be captured by PESTEL and Porter's five forces analyses.
4. Competitive advantage of a firm typically comes from: A) pursuing an integrated cost-leadership and differentiation position. B) performing different activities relative to its competitors. C) pursuing the same strategic position as that of its competitors. D) reducing the difference between value creation and cost.
B Competitive advantage has to come from performing different activities or performing the same activities differently than rivals are doing.
1. _____ comprises the decisions that senior management makes and the goal-directed actions it takes in the quest for competitive advantage in several industries and markets simultaneously. A) Functional strategy B) Corporate strategy C) Business-unit strategy D) Departmental strategy
B Corporate strategy comprises the decisions that senior management makes and the goal-directed actions it takes in the quest for competitive advantage in several industries and markets simultaneously. It provides answers to the key question of where to compete.
8. A diversification discount is a situation in which the: A) customers are benefitted from the discounted prices available on products manufactured by firms pursuing unrelated diversification due to economies of scope. B) overall value creation of highly diversified firms is more than the sum of the value created by individual business units. C) shareholders are benefitted from the market capitalization of a highly diversified firm because of its economies of scale. D) stock price of highly diversified firms is valued at less than the sum of their individual business units.
B Firms that pursue unrelated diversification are often unable to create additional value. They experience a diversification discount in the stock market: The stock price of such highly diversified firms is valued at less than the sum of their individual business units.
1. The return on revenue (ROR) for Oniyo Electronics Inc. is 28%. What does this financial data suggest? A) For every dollar Oniyo Electronics puts to work, the company realizes $28 of sales. B) For every $100 in revenues, Oniyo Electronics earns $28 in profit. C) For every dollar invested, Oniyo Electronics pays its shareholders an interest of $28. D) For every $28 in revenues, Oniyo Electronics incurs a cost of $1.
B From the given data, it can be inferred that for every $100 in revenues, Oniyo Electronics earns $28 in profit. Return on revenue (ROR) indicates how much of the firm's sales is converted into profits.
3. How is a firm's receivables turnover best expressed? A) Accounts receivable / Profit B) Revenue / Accounts receivable C) Accounts receivable / Working capital D) Cost of goods sold / Accounts receivable
B Receivables turnover (Revenue / Accounts receivable) indicates how fast the firm is collecting the accounts receivable from its customers.
3. Which of the following is a critical assumption behind the resource-based view of competitive advantage? A) Resources and capabilities are equally available to all firms. B) Resource bundles differ across firms operating in the same industry. C) Resource bundles are easy to replicate and therefore, cannot last for a long time. D) Resources tend to be highly mobile and move freely across firms.
B Resource heterogeneity is a critical assumption behind the resource-based view of a firm. It refers to the fact that bundles of resources, capabilities, and competencies differ across firms.
8. _____ are best described as organizations, groups, and individuals who have a vested claim or interest in the performance and continued survival of the firm. A) Headhunters B) Stakeholders C) Focus groups D) Category captains
B Stakeholders are organizations, groups, and individuals who can affect or be affected by a firm's actions. They have a vested claim or interest in the performance and continued survival of the firm.
8. The _____ is a strategy implementation tool that harnesses multiple internal and external performance metrics in order to balance financial and strategic goals. A) economic value creation framework B) balanced scorecard C) 360 degree performance appraisal D) network externalities model
B The balanced scorecard is an approach that harnesses multiple internal and external performance metrics in order to balance both financial and strategic goals.
8. The concept _____ best describes the savings that come from producing two (or more) outputs at less cost than producing each output individually, despite using the same resources and technology. A) break-even point B) economies of scope C) returns to scale D) network effects
B The concept economies of scope describes the savings that come from producing two (or more) outputs at less cost than producing each output individually, even though using the same resources and technology.
2. Which of the following is true of the resource-based view of competitive advantage? A) It enables managers to see how competitive advantage flows from the firm's distinct set of activities. B) It systematically aids in identifying core competencies and sees means as key to superior firm performance. C) It allows managers to synthesize insights obtained from an internal analysis of a company with those obtained from an analysis of its external opportunities and threats. D) It allows managers to group business units based on their growth, market share, and assessed value of resources.
B The resource-based view of a firm provides a model that systematically aids in identifying core competencies. As the name suggests, this model sees resources as key to superior firm performance.
3. First Foods Inc., a company that produces a variety of processed foods, sold its canned baked beans to major food companies who then sold the product to customers under their own brand names. Thus, First Foods only acted as a manufacturer in the industry value chain. However, the company soon realized that it would earn more profits by selling its canned baked beans directly to customers. Hence, it launched its own brand "Bean Cult" and distribution channel to directly sell its canned baked beans to the customers. What does this scenario best illustrate? A) Crowdsourcing B) Forward vertical integration C) New product development D) Viral marketing
B The scenario best illustrates forward vertical integration. Forward vertical integration involves moving ownership of activities closer to the end customer.
10. A(n) _____ is best described as an organizational plan that details a firm's competitive tactics and initiatives. A) promissory note B) business model C) executive summary D) Gantt chart
B The translation of strategy into action takes place in the firm's business model, which details the firm's competitive tactics and initiatives. Simply put, the firm's business model explains how the firm intends to make money.
2. During the strategy formulation stage of the strategic management process, a firm primarily: A) conducts a study on its external and internal environments. B) employs a set of coherent actions to effectively implement the guiding policy. C) designs an overarching policy on how to deal with the competitive challenges. D) performs a critical and honest assessment of its status quo.
C A good strategy defines the competitive challenges facing an organization through a critical and honest assessment of the status quo. Second, a good strategy provides an overarching approach (policy) on how to deal with the competitive challenges identified. Last, a good strategy requires effective implementation through a coherent set of actions.
9. An integration strategy is quite difficult to translate into reality because it: A) treats investments in differentiation and low cost as substitutes for each other. B) focuses on achieving the lowest value gap in the industry. C) involves increasing value and lowering cost, which have opposite effects. D) involves making a choice between two generic strategies, differentiation or cost-leadership.
C An integration strategy is difficult to implement because it requires the reconciliation of fundamentally different strategic positions—differentiation and low cost—which in turn require distinct internal value chain activities in order to allow the firm to increase value and lower cost at the same time.
5. _____ refer to the value-creation potential of a large, diversified enterprise. A) Industry effects B) Business cycle effects C) Corporate effects D) Plant effects
C Corporate effects refer to the value-creation potential of a large, diversified enterprise such as General Electrics (GE), Berkshire Hathaway, or the Tata Group of India.
10. General Electric (GE) was engaging in _____ when it divested business units like NBC Universal and split its energy business into three standalone strategic business units. A) reverse engineering B) backward integration C) restructuring D) disruptive innovation
C In Chapter Case 8, we see that General Electric has been refocusing its businesses through aggressive corporate divestitures and restructuring. It divested NBC Universal, chemicals, and insurance. It also restructured GE Capital. It continued its corporate restructuring and split the energy business into three standalone strategic business units in 2012: Power and Water; Oil and Gas; and Energy Management.
9. The Boston Consulting Group (BCG) growth-share matrix is a tool primarily used to: A) assess the performance of employees. B) measure the effectiveness of a corporate strategy. C) guide corporate portfolio planning. D) plan if an economic activity should be performed in-house or outsourced.
C One helpful tool to guide corporate portfolio planning is the Boston Consulting Group (BCG) growth-share matrix.
4. _____ is best described as the money provided by shareholders in exchange for an equity share in a company. A) Royalty fee B) Stock dividend C) Risk capital D) Trade credit
C Risk capital is the money provided by shareholders in exchange for an equity share in a company; it cannot be recovered if the firm goes bankrupt.
5. With regard to the resource-based model, one of the assumptions made about Southwest Airlines (SWA) is that SWA has been able to sustain a competitive advantage because its resources and capabilities are difficult to imitate and do not easily leave the firm. Which of the following is a reason for this resource immobility? A) Lack of imitation attempts from rival firms like Continental and Delta B) Perfect competition in the airline industry C) Resource bundles differ across firms D) Competitive advantage based on valuable and rare resources can last forever
C SWA has enjoyed a sustained competitive advantage, allowing it to outperform its competitors over several decades. That resource difference is not due to a lack of imitation attempts, though. The important point is that resource bundles are different across firms, and these differences can persist for long periods of time.
6. A cost leader primarily focuses on: A) reducing the value gap by bringing down its costs. B) offering unique products and services so as to charge a premium price. C) offering lower prices than that of the competitors by reducing production costs. D) using value drivers, like superior customer service, to differentiate itself from competitors.
C The cost leader, as the name implies, focuses its attention and resources on reducing the cost to manufacture a product or deliver service in order to offer lower prices to its customers. The cost leader optimizes all of its value chain activities to achieve a low-cost position.
4. The goal of a generic differentiation strategy is to: A) lower the cost of production to have a cost advantage over competitors. B) reduce the value gap created by a firm. C) add unique features to goods and services to increase their perceived value. D) sell products and services at the lowest price in the industry.
C The goal of a generic differentiation strategy is to add unique features that will increase the perceived value of goods and services in the minds of the consumers so they are willing to pay a higher price.
4. Home&More is a specialty store that sells home and office furniture, upholstery, and other decorative accessories. The company's strong brand equity, loyal customer base, and highly efficient sales staff have helped make it the market leader. Competitor companies have unsuccessfully tried imitating the resource bundles and firm capabilities that make Home&More unique. However, Home&More remains the market leader. Which of the following assumptions of the resource-based model of competitive advantage does this scenario best illustrate? A) Resource curse B) Resource depletion C) Resource immobility D) Resource homogeneity
C This scenario best illustrates resource immobility, which states that resources tend to be "sticky" and don't move easily from firm to firm. Because of that stickiness, the resource differences that exist between firms are difficult to replicate and, therefore, can last for a long time.
9. The _____ approach considers a combination of economic, social, and ecological concerns that can lead to a sustainable strategy. A) balanced scorecard B) economic value creation C) triple bottom line D) shareholder value creation
C Three dimensions—economic, social, and ecological—make up the triple bottom line. According to this approach, achieving positive results in all three areas can lead to a sustainable strategy—a strategy that can endure over time.
Which of the following factors is most likely to break up a consolidated industry structure so that it becomes a more fragmented one? A) The occurrence of external shocks to an industry B) The occurrence of horizontal mergers and acquisitions in the industry C) The existence of fewer competitors in a fragmented industry D) The greater profitability of fragmented industries
Consolidated industry structures may break up and become more fragmented. This generally happens when there are external shocks to an industry such as deregulation, new legislation, technological innovation, or globalization.
In a perfectly competitive industry: A) entry barriers are extremely high. B) individual firms have the power to set their own prices. C) individual firms can easily gain and sustain competitive advantage. D) consumers make purchasing decisions solely on price.
Consumers in a perfectly competitive industry make purchasing decisions solely on price, because the commodity product offerings are more or less identical.
1. What should Apple do to sustain competitive advantage and become the first $1 trillion company on the planet? A) It must facilitate turnover of its top management team so that the original team is replaced by individuals who are not limited by Steve Jobs' way of doing things. B) It must enter into licensing agreements that would allow other companies to benefit from Apple's proprietary technology. C) It must stay within the current industry, while at the same time reduce its product diversity to create only highly customized products. D) It must continue to find new industries to revolutionize, while at the same time increase its global market penetration in emerging economies such as China and India.
D As mentioned in Chapter Case 1, according to some analysts, Apple may become the first $1 trillion company on the planet. To do so, Apple must continue to find new industries to revolutionize, while at the same time increase its global market penetration in emerging economies such as China and India.
11. Which of the following statements is NOT true of competitive advantage? A) Competitive advantage is reflected in superior firm performance. B) Competitive advantage is a multifaceted concept. C) Competitive advantage is not an absolute measure. D) Competitive advantage is not related to a firm's triple bottom line.
D Competitive advantage has been linked to a firm's triple bottom line, the ability to maintain performance in the economic, social, and ecological contexts to achieve a sustainable strategy.
3. AllRun Inc. is a sports shoe manufacturing company that solely concentrates on developing highly affordable shoes for those who wear prosthetic legs. The company aims to bring out the athletic spirit in them through its innovative and low-priced shoes. Which of the following business strategies does this best exemplify? A) Product diversification strategy B) Direct imitation strategy C) Mass market strategy D) Focused cost-leadership strategy
D Focused cost-leadership strategy is same as the cost-leadership strategy except with a narrow focus on a niche market.
7. Which of the following is primarily a framework to guide managerial decisions in the context of diversification strategies? A) VRIO framework B) Core competence-market matrix C) AFI strategy model D) Five forces framework
D Gary Hamel and C. K. Prahalad advanced the core competence-market matrix as a way to guide managerial decisions in regard to diversification strategies.
7. Which of the following sources of differential appeal is most effective in helping a firm sustain its advantage? A) Availability of complements B) Imitable product features C) Observable service features D) Reputation for innovation
D If the source of the differential appeal is intangible rather than tangible (e.g., reputation rather than observable product and service features), a differentiator is even more likely to sustain its advantage. Competitors will find such intangible advantages time-consuming and costly, and maybe impossible, to imitate.
6. Both Future Autos Inc. and Fire Autos Inc. incur a cost of $12,000 to manufacture a single unit of a car. However, Future Autos creates more economic value than Fire Autos. Which of the following statements is true in this scenario? A) Future Autos has a cost advantage over Fire Autos. B) Future Autos and Fire Autos have achieved a competitive parity within the automobile industry. C) Future Autos has to sell its cars at a lower price than that of Fire Autos. D) Future Autos has an advantage over Fire Autos based on superior product differentiation.
D In this case, competitive advantage is based on greater economic value creation due to superior product differentiation. Competitive advantage based on superior differentiation leads to higher perceived value.
10. ____ is the value-cost relationship that captures the result of performing best practices at any given time. A) Demand function B) Experience-curve effect C) Minimum efficient scale D) Productivity frontier
D Productivity frontier is the value-cost relationship that captures the result of performing best practices at any given time. Firms that exhibit effectiveness and efficiency reach the productivity frontier; others are left behind.
8. Which of the following assets will be categorized under resource stocks? A) Apple's headquarters on Infinite Loop in Cupertino B) Google's server farms C) Hyundai's plant and machinery D) Ritz-Carlton's excellence in customer responsiveness
D Resource stocks are the firm's current level of intangible resources. Many intangible resources, such as Hyundai's reputation for quality or Ritz-Carlton's excellence in customer responsiveness, take a long time to build.
10. As part of its strategic management process, an automobile company evaluates its business model and assesses and measures its competitive advantage. Which of the following tasks in the AFI strategy framework is the company performing? A) Strategy benchmarking B) Strategy formulation C) Strategy implementation D) Strategy analysis
D The company is performing the strategy analysis task in the AFI strategy framework. In strategy analysis the topics covered are: Strategic leadership and the strategy process: What roles do strategic leaders play? What are the firm's vision, mission, and values? What is the firm's process for creating strategy (how does strategy come about)?
9. The key challenge of stakeholder management is to: A) limit the participation of external stakeholders in value creation. B) single-mindedly focus on the wealth maximization of shareholders. C) isolate internal stakeholders from external stakeholders. D) effectively balance the needs of various stakeholders.
D The key challenge of stakeholder management is to effectively balance the needs of various stakeholders. The firm of course wants to ensure that its primary stakeholders—the firm's shareholders and other investors—achieve their objectives. At the same time, the firm wants to recognize and address the needs of other stakeholders—employees, suppliers, and customers—in an ethical and fair manner, so that they too are satisfied.
6. Which of the following scenarios best illustrates strategic equivalence as a way to imitate a firm's valuable and rare resource? A) Onyxo Automobiles Inc. duplicates the inventory and distribution system of Mova Autos Inc. so that it becomes more efficient in its operations. B) AZ Phones Inc. copies the exact features and technology of Red Mobiles Inc. and sells its products at a lower cost in less developed countries. C) Mint Pearl Inc. sells its merchandise online to face the competition from ClothesForAll.com. D) Rare Books Inc. duplicates the financial model of Booker Inc. but is the only company that sells its collection of rare books exclusively online.
D The scenario that best illustrates strategic equivalence as a way to imitate a firm's valuable and rare resource is Rare Books Inc., which duplicates the financial model of Booker Inc. but is the only company that sells its collection of rare books exclusively online. An avenue of imitation for a firm's valuable and rare resource is through substitution. This is often accomplished through strategic equivalence.
7. In today's business world, the metaphor of a _____ describes the high impact of a highly improbable event. A) high horse B) dark horse C) cash cow D) black swan
D Today, the metaphor of a black swan describes the high impact of a highly improbable event. Black swan events are considered to be highly improbable and thus unexpected, but when they do occur, each has a very profound impact.
4. Which of the following is a risk associated with a firm vertically integrating along its value chain? A) The firm will lose ownership and control over stages in the industry value chain. B) The firm will fail to reap the benefits of economies of scope or increase differentiation. C) The firm will fail to effectively plan its production and respond to changes in demand. D) The firm will face legal repercussions if it tries to create a monopoly industry structure.
D U.S. regulators like the Federal Trade Commission (FTC) and the Justice Department (DOJ) tend to allow vertical integration, arguing that it generally makes firms more efficient and lowers costs, which in turn can benefit customers. However, due to monopoly concerns, vertical integration has not gone entirely unchallenged. Before engaging in vertical integration, managers need to be aware that this corporate strategy can increase the potential for legal repercussions.
6. Viosa, a luxury brand, earns 70 percent of its revenues from its shoe line and the rest of its revenues from its line of leather bags. On the basis of this information, we can conclude that the firm is pursuing the: A) taper integration strategy. B) cost-leadership strategy. C) backward integration strategy. D) related diversification strategy.
D Viosa is pursuing a related diversification strategy. A firm follows a related diversification strategy when it derives less than 70 percent of its revenues from a single business activity and obtains revenues from other lines of business linked to the primary business activity.
Which of the following external factors is a part of a firm's general environment? A) The currency exchange rates of the economy in which the firm operates B) The composition of the strategic group to which the firm belongs C) The structure of the industry in which the firm operates D) The knowledge and skills of the firm's employees
External forces in the firm's general environment are ones that managers have little direct influence over, such as macro-economic factors including interest or currency exchange rates.
Aimex Inc., a pioneer manufacturer of computer microprocessors, supplies its microprocessors to Omexo Hardware Inc. Together, Aimex and Omexo Hardware compete against Zavex Inc.'s strong position in the laptop market. However, Aimex has recently acquired a small computer hardware company to launch its own line of laptops. This will now make Aimex a supplier as well as a direct competitor to Omexo Hardware. What is this arrangement in business best known as? A) Cartel B) Co-opetition C) Amalgamation D) Conglomeration
The arrangement between Aimex Inc. and Omexo Hardware Inc. is referred to as co-opetition. Co-opetition is cooperation by competitors to achieve a strategic objective.
Which of the following statements accurately brings out the difference between a perfectly competitive industry and a monopolistically competitive industry? A) While there are a large number of firms in a perfectly competitive industry, a monopolistically competitive industry is dominated by one large firm. B) Firms in a monopolistically competitive industry can only achieve competitive parity, whereas firms in a perfectly competitive industry can easily gain a competitive advantage. C) While all firms in a perfectly competitive industry sell more or less identical products, firms in a monopolistically competitive industry offer products with unique features. D) Sellers in a monopolistically competitive industry have no pricing power, whereas sellers in a perfectly competitive industry have the freedom to raise prices.
The firms operating in a perfectly competitive structure are approximately similar in size and resources. Their commodity product offerings are more or less identical. In a monopolistically competitive industry structure, firms offer products or services with unique features.
In an industry, the power of buyers is high when: A) they purchase small quantities. B) the industry's products are highly differentiated and unstandardized. C) they face high switching costs. D) they can threaten to backwardly integrate into the industry.
The power of buyers is high when buyers can credibly threaten to backwardly integrate into the industry.
