strategic management exam 2
Gina paid $900 for a camera that she thought was worth $1100 for all the features included in it. For the consumer electronics firm selling the camera, however, the cost of producing the camera was only $350. What is the consumer surplus in this scenario?
$200
A firm has 30 million shares outstanding, and each share is traded at $100. Also, each shareholder gets a dividend of $2000 annually. In this case, the market capitalization is _____.
$3 billion, that is, 30 million shares × $100
When a firm manufactures 2,000-3,000 units of a product, it incurs an average cost of $10 per unit. When it manufactures 3,000-4,000 units of the same product, the average cost per unit reduces to $7. However, manufacturing beyond 4,000 units will raise the average cost per unit to $9. Which of the following is the firm's minimum efficient scale?
3,000-4,000 units
Even though many valuable, rare, and inimitable resources were generated at Xerox's Palo Alto Research Center (PARC), the management at Xerox's headquarters failed to gain a competitive advantage by exploiting the breakthroughs in computing software and hardware. What is the most likely implication of this example?
A firm must be effectively organized to capture value
Which of the following statements fails to bring out the essence of the dynamic capabilities perspective?
A firm's competitive advantage is derived from static resource or market advantages
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
Which of the following is an example of a firm's resources?
Assets such as land and building owned by a firm
How did McDonald's leverage internal strengths in brand name and consistency to minimize the external threat of easy-to-prepare grocery items?
By launching a McDonald's line of frozen foods in grocery stores
Body Sync Inc. is a chain of gyms. It offers a fitness package that allows its members to use the gym facilities for 12 months by paying only for 10 months. Included in the package are two health check-ups and a gym kit. These add-ons by themselves are not very valuable, but as a package they can enhance the perceived value of the service offerings. In this case, Body Sync's primary value driver is:
availability of complements
In the context of SWOT analysis, which of the following best exemplifies a firm's internal weakness?
Decline in the firm's market share
_____ describes a firm's ability to create, deploy, modify, reconfigure, upgrade, or leverage its resources over time in its quest for competitive advantage.
Dynamic capability
_____ is best described as the difference between a buyer's willingness to pay for a product or service and a firm's total cost to produce it.
Economic value created
_____ is when a firm is searching for new knowledge that could enhance its future performance.
Exploration
Soapsuds Inc., a manufacturer of cleaning agents, supplies its products to All Needs Inc., a supermarket chain. It demands that All Needs create more shelf space in its stores for Soapsuds' products. However, All Needs Inc. refuses to do this. Instead, it decides to produce its own range of cleaning agents with its own label "All Wash." In this scenario, All Needs Inc. has exercised its bargaining power as a buyer through _____.
backward integration
The receivables turnover of GD Products Inc. is 13.6 and that of its competitor, AP Goods Inc., is 6.0. What does this financial data primarily imply?
GD Products collects accounts receivables faster than what AP Goods does
When using the balanced scorecard approach to assess a firm's performance, which of the following is NOT a key question that managers need to answer?
How do we reduce the economic value created?
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
How are the critical assumptions of the resource-based model of a firm fundamentally different from the way in which a firm is viewed in the perfectly competitive industry structure?
In perfect competition, all firms have access to the same capabilities, whereas in the resource-based model, resource differences exist between firms in the same industry.
Nike has come a long way from its humble beginnings. It has been able to outperform adidas in sales and become the undisputed leader in the athletic shoe and apparel industry. Which of the following statements accurately explains one of the main reasons for Nike's success?
It made the unorthodox move to spend basically its entire budget for a specific sport on a single star athlete
Which of the following statements is true of learning curves?
Learning curves can be observed in manufacturing processes and professional services
BodyBlush Inc. is a brand reputed for its wide variants of body wash that introduced its range of shampoos and skin moisturizers a few years ago. Since most of its products could be produced using the same resources and technology, the company's cost structure lowered, while its product portfolio widened. In this scenario, which of the following value and cost drivers is BodyBlush applying?
Learning-curve effect
Innovate Electronics Inc. allows its customers to personalize their refrigerators in terms of the dimensions, the panels inside, and the color and design of the outer body. Also, customers can include additional features like in-built radios, extra lights, and cold water dispensers based on their individual requirements. The company successfully manufactures these tailor-made goods at a relatively low unit cost and provides it to the customers at a price almost equal to that of the standard refrigerators sold by other companies. What does this scenario best illustrate?
Mass customization
_____ is best described as the output range needed to bring down the cost per unit as much as possible, allowing a firm to stake out the lowest-cost position that is achievable through economies of scale.
Minimum efficient scale
Onyxo Inc., a consumer electronics company, is the leading manufacturer of LCD televisions. LCD technology has been its core competency and the company holds 80 percent shares in that market. However, Onyxo Inc.'s competitors have now moved on to advance technologies like LED and 3D televisions. According to the dynamic capabilities perspective, what should Onyxo Inc. do?
Onyxo Inc. should start working on LED and 3D television technologies to adapt its core competency to suit the external environment
_____ are best described as the value of the best forgone alternative use of the resources employed.
Opportunity costs
Maverick Communications Inc. is a cellular service provider that charges its customers $1 for three hours of talk time. So, if a customer's talk time for a month is 60 hours, the company charges him or her $20 at the end of the month. Which of the following business models does this best illustrate?
Pay-as-you-go
Which of the following resources is a firm's resource stock?
Reputation for quality
Although True Ion Inc. and One Electro Inc. operate in the same consumer electronic industry, True Ion Inc. has better sales and brand equity. This is attributed to True Ion Inc.'s commitment to innovation. The company has adequate financial and human capital to invest in research and development, an area where One Electro Inc. lacks. In this scenario, which of the following critical assumptions of the resource-based view of a firm has been illustrated?
Resource heterogeneity
_____ precisely indicates how much of a firm's sales is converted into profits.
Return on revenue
Jeremy a manager at a multinational organization is trying to carefully scan and link the firm's internal environment to its external environment. The insights from this analysis will allow him to effectively leverage the company's internal strengths to exploit external opportunities, while mitigating internal weaknesses and external threats. In this scenario, which of the following managerial tools is Jeremy employing?
SWOT Analysis
_____ allows managers to synthesize insights obtained from an internal analysis of a company's strengths and weaknesses with those from an analysis of external opportunities and threats.
The SWOT analysis
Which of the following frameworks used to measure competitive advantage relies on both an internal and an external view of a firm?
The balanced scorecard model
Which of the following is an example of a firm's intangible resources?
The firm's organizational culture
In contrast to a differentiator, a cost leader will:
focus its research and development on process technologies to improve efficiency.
Which of the following is a firm effect that has an impact on the competitive advantage of a firm?
the value and the cost position of the firm relative to its competitors
Sarah has recently started a restaurant in a commercial area where there are many other established restaurants and popular fast food chains. Sarah owns the plot on which her restaurant is located and this makes her cost of operations lower than the competitors. This factor allows her to offer her products at a competitive price. Sarah has also invested a huge amount on the interiors of the restaurant and in equipping the kitchen with the latest appliances used by her competitors. In this scenario, which of the following is the most valuable resource for Sarah's business?
The land owned by Sarah, which reduces cost of operations
Why are differentiation and cost-leadership strategies referred to as generic business strategies?
They can be used by any organization independent of industry context.
The perfectly competitive industry structure differs from the resource-based model in its view that:
all firms have access to the same resources
Wear Crush Inc. is an apparel company known for its affordable clothes that follows a cost-leadership strategy. In this scenario, Wear Crush should ideally compare its strategic position with:
an apparel company popular among price-conscious customers
Organizational and managerial skills that find their expression in a company's structure, routines, and culture are referred to as _____.
capabilities
A firm's resources and capabilities are costly to imitate. This is because rival companies do not clearly understand the relationship between the resources and capabilities controlled by the firm. In this case, the firm's competitive advantage is protected against imitation by _____.
causal ambiguity
Competitors have found it extremely difficult to imitate Gene Electronics Inc.'s valuable resources, capabilities, or competencies. This is primarily because the source for the company's success has been unclear. The competitors are uncertain if Gene Electronics Inc.'s success is due to its strong leadership, the skills of its research and development team, or the timing of the company' s product introductions. Gene Electronics Inc. has been protected from losing its competitive advantage as a result of _____.
causal ambiguity
A successfully implemented integration strategy allows a firm to:
charge a higher price than the cost leader in the industry
The value a consumer attaches to a product or service is captured in the:
consumer's maximum willingness to pay for it
Amazon.com's ability to provide the largest selection of items online, combined with superior IT systems and customer service, can be referred to as its _____.
core competency
Firms pursuing a differentiation strategy primarily seek to:
create higher customer perceived value than the value that competitors create
Pulse Mobiles Inc. is a cell phone manufacturing company. Its latest range of smartphones bears a straight resemblance to the Y-series range of smartphones from Talkie Gen Inc., in terms of its shape and look-and-feel. Which of the following strategies has Pulse Mobiles Inc. used to replicate the valuable and rare resource of Talkie Gen Inc.?
direct imitation
In the fiscal year 2012, BlackBerry's Cost of goods sold (COGS)/Revenue ratio was higher than that of its competitor, Apple. This implies that BlackBerry needs to work toward:
driving down its costs.
With regard to the VRIO framework, Crocs Shoes was unable to sustain its competitive advantage primarily because its products were:
easy to imitate
A firm incurs $400 to manufacture a television. In the market, customers are willing to pay a maximum of $600 for the television priced at $500. The difference of $200 ($600 minus $400) is the _____.
economic value created
company that uses a differentiation strategy can achieve a competitive advantage as long as its:
economic value created is greater than that of its competitors
A cost-leader is protected from the threat of new entrants primarily due to its:
economies of scale
KitchenThings Inc. is a company that manufactures plastic kitchenware. It operates at an output level that allows it to keep its unit cost per output to the lowest in the industry. This in turn allows KitchenThings to be the price leader. Other competing companies cannot operate at the same level due to a lack of consumer demand for their products. This puts them at a competitive disadvantage. In this scenario, the cost driver behind KitchenThings's strategic position is _____.
economies of scale
When a firm applies its current knowledge to enhance its performance in the short term, it is referred to as _____.
exploitation
In the context of the resource-based model of competitive advantage, if a successful firm exhibits resource immobility it means that the:
firm will have a sustained competitive advantage because of its unique resources
When the knowledge of a valuable and rare resource diffuses throughout an industry, the:
firms in the industry will be better positioned to achieve competitive parity.
A firm achieves differentiation parity ideally when:
it creates the same customer value as its competitors
When a firm combines experience based learning and process innovation, the firm:
jumps to a steeper learning curve
Competitive advantage goes to the firm that achieves the:
largest economic value created
Both BioThink Inc. and GD Pharma Inc. have discovered similar vaccines to prevent cancer. While GD Pharma's vaccine sells at $100 per unit, BioThink sells its vaccine at $90 per unit. This price differentiation has mainly been attributed to the companies' capital decisions. While BioThink used its retained earnings to develop the vaccine, GD Pharma borrowed funds from banks to develop the vaccine. Thus, GD Pharma pays a higher interest on its capital, which makes it necessary to price its vaccine higher. Thus, the key driver for BioThink's competitive advantage is:
low-cost input factors
To be cost-competitive, a firm should:
operate at the minimum efficient scale
The competitive advantage that one firm has will be short-lived in an industry where:
perfect competition exists
A firm's business strategy will lead to a competitive advantage if it allows the firm to:
perform different activities than its rivals
DFS Electronics Inc. ensures that all its products are highly durable and reliable by using techniques like zero-defect and lean manufacturing systems. These efforts not only add to the products' differential appeal, but also help the company save costs during production and avoid expenses due to after-sales services. Thus, the common value and cost driver responsible for DFS Electronics' strategic position as an integrator is the _____.
quality
In the _____ business model, the initial product is often sold at a loss or given away for free in order to drive demand for complementary goods.
razor-razor-blade
A firm is said to have a competitive advantage over its rivals when it:
reaches the productivity frontier
The resource-based view of a firm assumes that the:
resource bundles of firms competing in the same industry are unique to some extent and thus differ from one another.
To make the SWOT analysis an effective management tool, a strategist must first:
scan a firm's internal and external environments
Return on risk capital primarily includes:
stock price appreciation plus dividends received over a specific period
An integration strategy differs from a low-cost strategy in that:
the intent of an integration strategy is not to be the absolute lowest-cost provider because an integrator must also increase perceived value.
The productivity frontier function is concave, and it captures the:
trade-off between value creation and production cost
Using the _____ approach, managers audit their company's fulfillment of its social and ecological obligations to stakeholders such as employees, customers, suppliers, and communities as conscientiously as they track its financial performance.
triple-bottom-line
In the freemium business model, the:
users are not charged for the basic features of a product or service, but the user must pay for premium advanced features or add-ons
A defining characteristic of the pay-as-you-go business model is that the:
users pay for only the services they consume
Onyx Tech 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 Onyx Tech Inc. to increase its profitability by lowering its production costs. Thus, Onyx's competency in designing and manufacturing microprocessors will be considered a(n) _____ resource in the VRIO framework.
valuable
