Strategic Management Exam 1 Review, Strategic Management Exam 2

A voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services is best described as a

strategic alliance.

A ________ is best described as any activity a firm pursues to explore and develop new products and processes, new markets, or new ventures.

strategic initiative

Why does a functional structure rely on a flat organizational structure?

It allows for efficient bottom-up and top-down communication.

How does availability of complements act as a value driver?

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

Managers at SunTrustUs Properties are surprised to hear that interest rates are likely to remain low for the next six months. Which of the following is an implication of low interest rates?

Consumer demand will increase.

Which of the following best explains why Disney showed superior post-merger integration capabilities?

Disney managed its new subsidiaries more like alliances rather than attempting full integration.

What must a cost-leadership strategy accomplish to be successful?

It must reduce the firm's cost below that of its competitors while offering adequate value.

Which of the following is a primary feature of the five forces model?

It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.

A candy company called Blackzim Inc. forms an agreement with another candy company called Streethex Inc. Through this agreement, Blackzim owns 30 percent of Streethex. However, Streethex does not own any part of Blackzim. This type of agreement is called a(n)

equity alliance.

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

overall attractiveness.

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

strategic position

Strategic thinking is different from strategic planning in that

strategic thinking includes all types of information sources while strategic planning does not.

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

the increase in value creation exceeds the increase in costs.

WeComput Inc.'s competency in designing and manufacturing efficient microprocessors has made its laptops the most advanced computers in the market. This competency, along with the just-in-time manufacturing system, has enabled WeComput Inc. to increase its profitability by lowering its production costs. Thus, WeComput's competency in designing and manufacturing microprocessors will be considered a(n) _____ resource in the VRIO framework.

valuable

Which of the following is an advantage of applying the economic value creation perspective to assess a firm's performance?

In economic value perspective, analysts not only consider historical costs, but also opportunity costs.

________ are best described as costs that occur due to political maneuvering by managers to control capital and resource allocation and the resulting inefficiencies stemming from suboptimal allocation of scarce resources.

Influence costs

According to AFI strategy framework, in which of the following tasks of strategic management is a firm's vision, mission, and values identified?

strategy analysis

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

strong focus on innovation to improve current products and services.

Bioplex requires its members to pay a quarterly or an annual fee to use its services. Irrespective of whether they frequently use the services during the payment period or not, members have to pay in advance. Which of the following business models does this best illustrate?

subscription-based

At a certain output level, the per-unit cost incurred by a firm to manufacture a product was $70. Once the cumulative output doubled, the cost per unit reduced to $63. All other factors remaining constant, the firm has been able to achieve a(n)

90 percent learning curve.

Which of the following best exemplifies social complexity as an isolating mechanism?

Amanda's Cosmetics attempted to imitate how Michele's Makeup combined its management and product development systems with little success.

Cartzy Inc., Cartific Inc., and Clustercart Inc., are three consumer-product retailing companies. Their products consist primarily of day-to-day items that are easy to imitate and sell. All three companies use the same resources and capabilities in the production and distribution of their products. Judging from the market conditions described in this scenario, which of the following statements is true?

Any advantage that one firm has will be short-lived.

Which of the following statements is true of an equity alliance?

In an equity alliance, the partners frequently exchange personnel to make the acquisition of tacit knowledge possible.

Weyland Yutani Inc. is an electronic appliances manufacturer that has many strategic business units (SBUs), among which, television and computers share a close relationship. These SBUs have to fight each other for R&D funding because there is a combined amount set aside for these two units. However, they share technological findings with each other and work together to ensure that their combined output is better that of the other SBUs. Such a relationship between SBUs in a business is referred to as

co-opetition.

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

produce a good.

EverMart Inc. is a large company that sells a variety of products such as cosmetics, jewelry, frozen foods, navigation electronics, and airplanes. Apart from this, the company also has a strong presence in the service industry through its chain of dance studios, casinos, and nightclubs. Each of its product divisions operates as an individual business and is responsible for its own profits and losses. Thus, these product divisions under EverMart can be referred to as

strategic business units.

Fresher Corp. produces electric bathroom fragrance diffusers and sells the electric outer device at a market rate price. However, they lock their clients into a two-year agreement to purchase the perfume refills solely from them on a monthly basis. Which of the following business models does this best illustrate?

subscription-based

Leo's Magic Rails maintains a manufacturing plant overseas. The local government has just been overthrown by a military group that opposes foreign influence in the country. According to the SWOT analysis, the political situation in this location is considered to be an

external threat.

The fact that both Whole Foods (a high-end grocery store) and Aldi (an inexpensive grocery store) have a competitive advantage in the grocery store industry is an indication that

following a different generic business strategy within the same industry can lead to a competitive advantage for more than one organization.

McDonald's operates Hamburger University that trains students to ensure consistent food quality across its outlets throughout the world. This indicates that McDonalds's

is mechanistic in nature.

Suppose that several senior managers recently left Target Corporation and went to work at rival Walmart. What part of the ""stocks and flows"" of resources does this represent for Target Corporation?

leakage

Mary has been named CEO of an office furniture manufacturing company. As CEO, she is tasked with setting the firm's corporate strategy. Which of the following decisions is Mary most likely to make?

what range of products the firm should offer

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

Selling, general, and administrative expense/Revenue.

Under the ________ framework, the question "How do we create value?" is relevant when trying to improve innovation and organizational learning.

balanced scorecard

Hot Caffeine, a leading coffee roaster, anticipated that the prices of coffee beans from Costa Rica, where its main suppliers were located, would double in less than three years. This would significantly affect Hot Caffeine' profit margins. Thus, Hot Caffeine decided to develop a new partnership with a supplier in Indonesia. As predicted, the price of Costa Rican coffee beans increased twofold. Because the price of Indonesian coffee beans was much lower, Hot Caffeine was able to maintain its profit margins in turbulent times. Which of the following isolating mechanisms does this scenario best illustrate?

better expectations of future resource value

Jennifer is the CEO of JustFixIt Inc., a firm that merges technology with commercial hardware. She has been struggling with the decision to allocate her resources for the development of a new system or go to the market and search for an already established system. The Board of Directors for JustFixIt Inc. suggested that enter a contractual agreement with a partner. This scenario best illustrates the concept of

build-borrow-or-buy framework.

Frozen Gold is a fast-growing chain of ice cream shops. It has acquired an edge over its competitors through its ability to provide a wide array of unique flavors and a hip atmosphere in stores. This advantage of Frozen Gold best exemplifies a

core competency.

In a focused cost-leadership strategy, a firm

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

Which of the following is a drawback of the SWOT analysis?

A problem with this framework is that a strength can also be a weakness, and that an opportunity can also simultaneously be a threat.

________ is best described as a situation in which one party is more informed than another, because of the possession of private information.

Information asymmetry

Which of the following is an advantage offered by a functional structure?

It allows for a higher degree of specialization and deeper domain expertise

Konmatfix Inc. recently acquired Finhigh Pharmaceuticals Inc. It now sells its own products along with the products originally sold by Finhigh Pharmaceuticals. As a result, Konmatfix's sales force will also be marketing the acquired company's products. How will this horizontal integration most likely affect Konmatfix?

It will lower its costs through economies of scale.

Stratton Oakmont pursues a related diversification strategy, deriving less than 70 percent of revenues from its original business unit, Stratton Piedmont, and maintaining several related units including Stratton Wellmont and Stratton Fredmont. Which of the following structures is most likely to support this strategy?

M-Form with centralized decision-making power (cooperative multidivisional)

Jonathan is the owner of a landscaping company that caters to a very wealthy clientele. His company has struggled to differentiate itself from the other high-end landscapers in the area, but because he has hired several expensive but highly qualified team members, Jonathan is unable to shift to a cost-leadership strategy. Which strategy is most likely to achieve a competitive advantage?

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

Hank runs a company that manufactures satellites for commercial and government use. It has few rivals. At the moment, the power of buyers, the power of suppliers, and the threat of substitutes are all low. Based on this information, what can Hank conclude?

The company is likely to be very profitable as long as the threat to entry is low.

The market capitalization of a public company is $5 billion. Each share of the company is traded at $200. What do you infer from this financial data?

The firm's number of outstanding shares is 25 million.

Why is it difficult to imitate the organizational culture of firms like Southwest Airlines and Zappos?

Their culture reflects complex relationships with their employees, customers, and suppliers.

Which of the following is true of the process of organizing for competitive advantage?

To maintain competitive advantage, companies need to restructure as they grow and the competitive environment changes.

Which of the following provides an example of what AFI strategy framework is used for?

Using AFI, the Quest Auto firm was able to implement a strategy that produced high-quality cars more efficiently and thereby reduced costs.

About 20 years ago, Xx-zobam, Inc., produced a sturdy, lightweight backpack in a market that was rapidly growing. Sturdy Light became a leader in this market. Eventually, the backpack market reached the maturity stage and slowed down. However, by this time, Xx-zobam had developed a strong brand name and continued to steadily lead the market. Which of the following describes this scenario?

Xx-zobam was a star that developed into a cash cow.

Angelika is the Chief Operating Officer of One Spice Inc., a firm that grows and processes the Naga Viper pepper, one of the world's hottest peppers. Angelika wants to better understand the relationship between her firm's organizational culture and the ability to achieve competitive advantage. The relationship between these two states that

a firm can achieve competitive advantage if their organizational culture follows the VRIO principles.

Grace wants to form a voluntary arrangement with another firm in order to gain more flexibility in her supply chain, complementarity to a few of her support activities via her value chain, and strengthen her firm's overall competitive position. Grace is looking for a simple and common type of alliances, like

a nonequity alliance.

SonronMedia 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

an agency.

When wireless service providers offer free or 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

availability of complements.

Companies in the same strategic group are ________ to each other.

direct competitors

According to an evaluation using the VRIO framework, Crocs Shoes was unable to sustain its competitive advantage primarily because its products were

easy to imitate.

In the pyramid of corporate social responsibility, ________ responsibilities are the foundational building block.

economic

Given the structure of the automobile industry, entering the auto manufacturing industry seemed risky. Yet Tesla Motors joined the fray. Rather than attempting to compete head-on with internal combustion engines, Tesla Motors entered the all-electric car segment, a much less crowded niche in the overall car industry. Which of the following is Tesla most hoping to benefit from in this market niche?

economies of scale

The production head at the All Paints and Surface Corp. would frequently stay back after office hours and experiment with new color combinations even though this was part of the new product development team's job. As a result of these experiments, he came up with two new interior paint colors, foggy morning and mint julep. The new colors proved popular among test groups, and quickly became some of Omnitone's best-selling products. Which of the following strategies does this scenario best illustrate?

emergent strategy

The distribution department at Wheat, Barley and Whey Corp. has decided to adopt the FIFO (first in, first out) method of inventory to dispatch its bags of wheat. Which of the following strategies does this scenario best illustrate?

functional strategy

Trader Joe's successfully used a blue ocean strategy by offering lower-cost food than Whole Foods for the same market of patrons. By doing this, Trader Joe's was able to

gain a market share and make up the loss in margin through increased sales.

With the emergence of smartphones, users no longer have to carry a separate music player, a video game, a laptop, or a magazine to keep themselves entertained when traveling. A smartphone is loaded with a variety of applications to satisfy all the customer needs that different industries or products individually satisfied earlier. As a result, the smartphone industry has been posing a threat to a lot of other unrelated industries. What is this phenomenon best known as?

industry convergence

Which of the following drivers simultaneously increases value while lowering cost?

innovation

All Signal Inc., a telephone service provider, has a large user base mainly because phone calls and messages between all All Signal users are free. When a person switches to an All Signals network, his or her entire network of family and friends is likely to switch to the same network to receive the benefit of free calls and messages. In addition, an existing user who gets a new user to register with All Signal Inc. is given a free wireless connection. This has helped to keep competition away from All Signal. In this scenario, which of the following factors is acting as an entry barrier for All Signal Inc.?

network effects

When examining the core competence-market matrix, the most challenging diversification strategy occurs when firms attempt to combine ________ with ________. If done successfully, the firm could have the potential for "mega-opportunities" that may lead to competitive advantage.

new core competencies, new markets

Many financial service firms, IT firms, and health care companies are among the most active when it comes to________, which occurs when value chain activities are taken care of outside the home country of the firm.

offshore outsourcing

E Corp is a pharmaceutical company that has many breakthroughs in medicine to its credit. Unlike many other pharmaceutical companies, E Corp has a relaxed work environment where employees are free to discuss projects with each other. Employees are encouraged to choose the projects that interest them; communication between team members and their supervisors is open and easy. Because of the company's work culture, its employees feel motivated to work harder and display more entrepreneurial behaviors. In this scenario, E Corp Inc. is most likely an organization that is

organic.

Goodsilron is a U.S.-based consumer electronics company. It owns smaller firms in Japan and Taiwan where most of its cell phone technology is developed and manufactured before being released worldwide. Which of the following alternatives to integration does this best illustrate?

parent-subsidiary relationship

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.

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.

A firm is said to gain a competitive advantage when it can

provide products similar to its competitors, but at lower prices.

Nam-zim sells its e-book readers at the cost price of $15 each. However, the company makes its profits when users have to download or buy books online. Which of the following business models is Nam-zim implementing?

razor-razor-blade

Piper Inc. is a large cosmetics company that made an initial small investment in a start-up company, Oscorp, which was developing an organic face lotion. This gave Piper controlling interests in the start-up company. However, Oscorp soon began to have financial difficulties because of principal-agent problems. As a result, Piper did not invest in the next stage of development and pulled out of the company. This approach to strategic alliance is referred to as a

real-options perspective.

Vanessa just graduated from law school and wants to open her own law firm. Vanessa should probably adopt a(n) ______ structure for the firm.

simple

Sean, a retired CEO, invests capital in a start-up company that creates budgeting software. He mentors the entrepreneur and the employees of the company because he wants the company to perform well and survive in the market. Thus, Vincente is the start-up company's

stakeholder.

The smartphone division of the large consumer electronics company, Streethex Inc., has a significant market share in the fast-growing cell phone market. If the company invests further into this division, it will be able to reap increased cash flows. In the Boston Consulting Group (BCG) growth-share matrix, the smartphone division of Streethex will be categorized under

stars.

Bill's Hockey Pucks Inc. wishes to pursue international markets like China and Russia. In order to do this, they may wish to consider a possible

strategic alliance with another firm already established in those markets.

Online retailer eBuy had been drastically losing market share to its competitors. The management hired a reputed consulting firm to advise the company. The experts from the consulting firm pointed out that the company primarily lost out on its competitive advantage due to its poor customer service, including slow response times to customer inquiries and unclear return policies. These ineffective policies and procedures led to many disgruntled customers and a steady migration to more customer-friendly retailers. eBuy can best solve its problem by working on its

support activities.

The Hershey Company, the largest U.S. chocolate manufacturer, decided to enter the Chinese market because

the U.S. population was growing slowly and becoming more health conscious.