360 Midterm & Finals Review

In the context of the experience curve, what did early work by the Boston Consulting Group show?

A company's relative market share was a key indicator of competitive advantage and profit performance.

Which of the following statements represents related-constrained diversification?

A firm that earns less than 70 percent of its revenue from its main line of business and whose other lines of business share product, technological, and distribution linkages with the main business

Which of the following is a disadvantage of outsourcing?

A lack of control over critical assets or activities results.

Which of the following is an example of a horizontal diversification?

A new company selling a new product in the market

What is meant by diseconomies of scale?

An increase in marginal cost when output is increased

Which of the following scenarios supports the view that a company should engage in outsourcing?

AutoLuxe LLC, an automobile company, which has the flexibility to contract processes to another company at a fast rate

________ requires acquiring and allocating resources.

Building the capacity to deliver unique value

Identify a primary way in which companies achieve cost advantage through lower-cost inputs.

By cooperating especially well with suppliers

Identify a way in which companies can differentiate their products based on features.

By designing products to be customizable by customers

Michelle, the CEO of airline company Nariko Jets, stated that she owes the credit of her professional success to the time spent as a volunteer at a homeless shelter and her passion for artwork. Nariko Jets, according to Michelle, was the result of her life lessons at the homeless shelter and her paintings which provided her the inspiration to create an airline that would make travel easier and comfortable. Her competitors have always envied her success. Which of the following factors of inimitability is best reflected in this scenario?

Causal ambiguity

String Line Inc. has established a loyal supplier base. The management at String Line had created a system in which it chooses a supplier that is reasonably affordable, and instead of quoting the company's price and demanding that it be met, it complies with the supplier's quotes. Over time, this has established a bond of loyalty with the supplier. When String Line opened a new branch, the supplier built its plant close to the branch to save transportation costs. Which of the following has String Line Inc. established with the supplier?

Cooperation

Summer Corp., a retailer of consumer electronics, has been experiencing high profits because an increasing percentage of the customers have sufficient disposable income to afford its products. Similar companies have also experienced a boom in customer demand. Which of the following macroeconomic forces is Summer Corp. experiencing?

Economic growth

In this context of the three Cs of vertical integration, which of the following scenarios accurately depicts capabilities?

GoSpeed Corp., an automobile manufacturing company, evaluates itself by asking if it can perform the vertically integrated activity better than its rivals.

The research and development department of Chi Inc. studies the buying patterns of its customers. If it starts with the customers in the first step of the consumption chain, which of the following does it most likely study?

How do its customers become aware of their needs?

Which of the following questions denotes the last step in a consumption chain?

How is your product repaired, serviced, or disposed of?

What is meant by mapping the consumption chain?

Identifying all the steps through which customers pass, from the time they first become aware of a product to the time they have to dispose it

The board of directors of Indigo Bank implements a sound strategy that will help them gain overall profits and maintain competitive advantage. It claims that supervising and measuring the efficacy of the functional strategies of the company are more than sufficient to implement the company's strategies. However, Klark, one of the board members, argues that this alone is not enough and that the company should think of creating an emotional appeal toward its employees. Which of the following statements strengthens Klark's argument?

Indigo Bank's structure, systems, staff, skills, style, and shared values will help progress strategic implementation if they are designed to facilitate the execution of the strategy.

Which of the following is a disadvantage of the value chain process?

It does not help analyze a company's strength compared to its competitors.

Which of the following is a feature of task specialization?

It enables workers to be more efficient and thus enables them to avoid loss of time.

Which of the following is true of product differentiation?

It is a matter of customer thought and perception.

Identify a true statement about substitutes.

It is a product that is fundamentally different yet serves the same basic function as another product.

Which of the following statements is true about rivalry?

It is an important driving force to increase profitability.

Identify a true statement about tacit knowledge.

It is difficult to learn, teach, or coach.

Which of the following statement is true of the learning curve?

It is the concept that labor costs per unit decrease with increases in volume due to learning.

Which of the following is true of competitive advantage?

It requires a company to consistently outperform its rivals in generating above-average profits.

Which of the following statements is true of external analysis?

It studies the factors that influence an organization's appeal and environment.

Which of the following statements is true of the resource-based view of a firm?

It was developed to explain why some firms outperform other firms in the same industry.

Kim, a consumer, is in the final stage of selecting a product. Which of the following is true if her actions follow the typical consumption chain?

Kim is likely to be persuaded by the product attributes at this stage.

Kleo wants to start his own textile business. He believes that the best way to pull customers into buying his product is to be the first to create lightweight woolen jackets that would keep an individual warm and would also look good on the person. He decides to set up his store in the small town of Marida, which has a rough wintery season almost throughout the year. Kleo believes that he will be able to achieve plenty of profits with this idea with a commodity that is a needed all throughout the year. Which of the following statements strengthen Kleo's idea?

Kleo has access to all the clothing materials that will be needed to create these jackets.

Identify a danger of vertical integration.

Loss of flexibility to quickly make changes to a business

Leon Royal Hotel was the first inn in the county of Belvore. It had started out with only seven rooms, providing bed and breakfast to travelers who came to Belvore. After 20 years of giving unique and satisfying service to its customers, Leon Royal Hotels grew to have more than 1,500 rooms. The facilities and services provided by the hotel made it one of the best hotels in the county. Meltown Inn started out a decade after the Leon Royal Hotel opened. The Meltown Inn started losing profits and eventually shut down in 1968 due to bad service. Which of the following factors of inimitability is explained in this scenario?

Path dependence

Peter always buys shoes from Brown Boot's Inc., although other brands offering shoes of same quality are available closer to home and at lower prices. Brown Boots differentiates itself through a strong brand image. Their advertisements associate the brand with class, style, and elegance. Which of the following is a likely reason for Peter's preference toward Brown Boot's?

Prestige

Which of the following statements is true of cost advantage?

Size and scale do not always guarantee a cost advantage.

Tangerine Inc. differentiates its products by building a brand image, whereas Cloud Inc. does not rely on brand image to differentiate its products. Which of the following statements is likely to be true in this case?

Tangerine is likely to use advertisements to differentiate its products.

Which of the following statements is true about the role of technology in a firm's profitability?

Technological change can often lower barriers to entry.

The board of directors of August Inc., a company that provides legal services, has been debating over whether to provide its 99 full-time employees with health insurance. The managers of the firm, however, are considering dropping employee health insurance as a benefit. Which of the following statements strengthens the managers' consideration?

The fine that August Inc. would face would be cheaper than the current premiums for health insurance.

Identify a true statement about switching costs.

The lower the switching costs, the easier it is for competitors to poach customers.

Juan, the manager of Pvari, a chain of jewelry stores, claims that mass customization is the best way to create value for their products. Nate, the senior designer, believes that every product must be customized from the pre-production stage. Which of the following statements will strengthen Juan's claim?

The production costs will reduce to half if products are made in large scale.

Floyd Inc., a manufacturer of washing machines, encourages customers to choose their brand through extensive marketing. Features of Floyd's products are compared with those of other brands, and customers are made to see the benefits they get from purchasing Floyd's products. Which step of the consumption chain does this scenario depict?

The third step: how do consumers make their final selections?

According to the Boston Consulting Group's growth share matrix, which of the following is true of stars?

They are business units that combine high share with high growth and smart managers should invest heavily in these units to improve their position over time.

Which of the following statements is true of the strategies of successful companies?

They are partly deliberate and partly emergent.

Identify a true statement about dynamic capabilities.

They can help firms modify and evolve processes to keep pace with environmental changes.

Identify a reason why companies choose to make versus buy.

They have the capability to perform an activity better than other firms.

Which of the following statements is true of a company's general and administrative costs (G&A)?

They help a company with high sales volume that creates cost advantage by managing its G&A across more units.

Which of the following statements best describes a firm's capabilities?

They represent how firms do things.

Adia, the chief executive officer (CEO) of Touch Works Corp., believes that outsourcing would be a disadvantage to her company. She states that she would not be able to control the finances and assets of her company if work gets outsourced. Which of the following statements strengthens Adia's belief?

Touch Works Corp. would lose the ability to innovate and create competitive advantage.

Which of the following best describes competitive parity?

When a company survives but has no real competitive advantage over rivals

Under which of the following conditions should a firm ideally choose the acquisition mode of entry?

When its industry is characterized by a steep learning or experience curve

When do companies often turn to brand image as a source of differentiation advantage?

When there is difficulty differentiating products based upon features, reliability, or convenience

In the context of the primary reasons for vertical integration in companies, what do capabilities refer to?

Whether a company has the right resources to perform an activity better than other firms

Elegant Meals Inc., a company that owns a chain of restaurants, sells dinnerware to its customers who fancy them. Since their restaurants are known for their interior designs, they also sell home décor products. By selling these products, Elegant Meals Inc. caters to a(n) _________.

adjacent market

In the context of the three Cs of vertical integration, some activities require lower levels of coordination than others to be successful because the activities _________.

are modular in nature

LittleHut Inc., an international food company, has several resources to its credit. Over the years, the company has acquired factories, machinery, in-depth knowledge, and a stable reputation. The elements mentioned in this scenario can be best categorized as LittleHut Inc.'s __________.

assets

WillowWorks LLC, a retail clothing store, has been sourcing its raw materials from a supplier named ThreadTym Corp. for the last five years. A change of management at ThreadTym resulted in an increase of the prices of the raw materials. As a result, WillowWorks purchases ThreadTym so that it can produce these products on its own. This scenario best illustrates ________.

backward integration

Vertical integration can be best defined as _________.

bringing business processes or activities previously conducted by outside companies in-house

Appetit Corp. is a famous deli in the metropolitan city of Atika. The company became popular because of its consistency in the quality of bread it provided and its creativity in adding unique elements to create different flavors. One of Appetit's products is an infusion of peanut butter and barbeque sauce filled in a bun. Appetit Corp. also engages its customers in contests that ask them to make their own unique variety of bread, which later features among the company's products with the winner's name. All these factors have helped to create unique value that keeps its customers coming back for more. This scenario best illustrates Appetit Corp.'s ________.

capabilities

TumbleDry Inc., a washing machine company, has been able to make minimal profits in the market. However, TumbleDry has not been able to come up with any product innovations that are unique and hard to imitate. This scenario best exemplifies __________.

competitive parity

Products that can be used in tandem with those from another industry best define the term ________.

complementary products

The household appliance industry has few major manufacturers like Nebula Corp., Cook Well Inc., and Mercury Corp. and a few smaller manufacturers. There is not much competition in this industry because the smaller companies cannot afford to compete aggressively with the large firms which do not engage in price wars. This scenario best illustrates a ________.

concentrated industry

Spring Resources LLC creates unique value by establishing a learning organization that coordinates various production tactics and assimilates different types of technologies. This knowledge is distributed to the entire organization so that its branches can adapt and perform according to their own markets. These tactics and technologies distributed throughout the organization that create value for Spring Resources LLC are termed _________.

core competencies

The owners of Carpo Inc., a watch company, also own a steel company and a leather goods manufacturing company. This relieves them from expenses that they would have to bear, if they had to rely on outside sources for the raw materials needed to make their watches. This enables the company to produce watches at a much lesser cost than other companies in the industry. This scenario best illustrates a ________.

cost advantage

OneTick Shop Inc. experienced a loss of finances in the small town of Brightland as a lot of people from the town moved to bigger cities in search of jobs. This resulted in a loss of both returning as well as new customers. This scenario primarily reflects ________.

demographic forces

Delivering unique value requires ________.

developing resources and capabilities that allow a company to perform activities better than competitors

In the context of the six Ss, synergy occurs when ________.

different elements of a system interact in a way that creates more value together than the elements create separately

Procedures, processes, and routines that continuously expand existing resources or improve operating capabilities most accurately define the term __________.

dynamic capabilities

Blaze Corp., a car company, shared its costs of producing cars. It did so by introducing the production of car accessories that are used by customers to upgrade or customize their cars. Blaze Corp. started selling car accessories such as engine oils, wheels, and music player and thus shared its market research costs between cars and car accessories. This led to a definite decrease in the overall cost of production. This scenario best illustrates _____.

economies of scope

Nirvana Publishing House invested in high-end printing equipment. After a year of production, the company had to double the amount of production of its newspapers and weekly magazine because of high customer demand. However, the company did not have to invest in another similar equipment to meet demands. This is an example of a _____.

fixed cost of production

BlockWood Inc. has been providing raw materials to Couches Corp., a furniture company. The management at Couches recently decided to cut the prices it pays for the raw materials. BlockWood Inc. tried to negotiate a price that would be feasible for both companies, but Couches did not agree to pay more than what they had quoted. As BlockWood Inc. was facing similar difficulties with other buyers too, it eventually stopped supplying raw materials and took to manufacturing furniture instead. This scenario best illustrates ________.

forward integration

Sheng, the CEO of Mirrorz Inc., comes up with a plan to implement business unit strategies successfully. He decides to do this by making technical advancements in the manufacturing process of the products and developing a solid financial system run by an efficient team. He also plans to establish a marketing team that would sell to people who would not normally buy the product. The ultimate mission of the company would be to provide a customer friendly environment. The plan initiated by Sheng can be best categorized as a(n) ________.

functional strategy

Lee, the CEO of Libra Inc., decided that the best way to diversify this food processing company would be to set up its own small-scale beverage producing unit in a new area where its new products would have high demands. This decision by Lee best reflects a(n) _________.

greenfield entry

The movement into an adjacent, or unrelated, market that is not along a firm's own value chain defines the term _________.

horizontal diversification

In terms of product differentiation, convenience refers to ________.

how easy it is for customers to purchase a product

Stacy works as a manager at Daffodils Corp., a manufacturing firm that has not been performing well. Despite the availability of research materials and databases, she uses her own experience to make acquisitions because she is usually very confident about the success of her plans. This attitude of Stacy can be termed _________.

hubris

The final step in a strategic management process is to ________.

implement the strategy chosen during the strategy formulation process

The board of directors of Colors Corp., a new startup, chalked out a list of resources that would be needed to optimize the efficiency of the company. It needed a human resources department to take care of recruitment, a few suppliers to provide raw materials, a few data recording equipment such as computers to store and manage data, and a large geographical area to start the company. The board stated that these provisions would help the company obtain desired profits. The resources and provisions mentioned in this scenario are examples of _____.

inputs

Network effect occurs when some products or services are more convenient to use because there is a _____ of other users.

large network

A group of students studying a firm named Sanders & Collins Corp. found that the workers initially learned their task-related activities very fast. In turn, this helped the firm reduce the labor cost incurred in producing each product. However, their rate of learning these tasks reduced over time. This scenario best illustrates the _____.

learning curve

Saturn LLC., a computer manufacturer, uses outdated technology to build specialized graphic cards for its computers. The company finds it difficult to upgrade its graphic card building technology to a newer version. However, Sun Products Inc., one of its competitors, upgrades itself to the new version with lesser difficulty. In this scenario, Saturn LLC is facing a _________.

loss of flexibility

As a danger of vertical integration, a(n) _____refers to the fact that the more different types of activities a firm needs to manage, the harder it is to be world class in all of those activities.

loss of focus

Adia and Ali are two business partners who want to set up a company that sells imported sports gear and equipment. In order to make sure that the company makes and retains profit, they must choose an area that is close to where their products have the highest demand. This area should allow them consistently to make profit. In this scenario, Adia and Ali are looking for a ________.

market

BestBrew Corp. and True Coffee Inc. were two leading coffee manufacturing firms. They united and created a whole new firm called True Brew Inc. that used the best customer front-end and operational back-end processes of the two firms. This union is an example of a _________.

merger

A company's primary purpose that often specifies the business or businesses in which the firm intends to compete—or the customers it intends to serve—refers to its _____.

mission

Having more flexibility, or being less vertically integrated, is more valuable when _________.

new technologies are innovated

Bertha, a business analyst, wants to analyze Shop Wise Inc., a software company. She wants to know how the company, supplying its products and services for over a decade, still maintains competitive advantage over other companies. She does the analysis simply by walking around the company and taking notes. She even tries out one of the company's software programs and finds it useful. This scenario illustrates the use of __________.

observation

Lavender Inc., a computer manufacturing company, sells its products at lower prices than its competitors in order to gain market share and subsequently increase their profitability. The scenario best illustrates the _____.

pricing strategy

Resources that create ________ can be defined as those that create economic value for a firm.

profits

Information that is not public and that is viewed as the property of the holder is called _____.

proprietary knowledge

Apex Electronics LLC requires many teams to work together intensively and in tandem with each other in order to effectively produce its products. A high level of coordination between the working teams is essential for the company to maintain the high quality of its products. This type of interdependence can be best termed as _________.

reciprocal interdependence

Saturn Inc. is an e-commerce company that sells home appliances. The firm recently started selling its line of packaged food items online. In this scenario, Saturn Inc. chose _________.

related-linked diversification

Summer Inc., a departmental store, wants to provide better service to its customers. This includes providing expertise in each type of product and brand. In order to accomplish this, the general manager of the store suggests that they should begin by identifying the different types of customers. By classifying customers, into various groups, such as mothers, athletes, tech-savvy customers and so on, the store's customer care personnel can specialize on detailed product information. With the help of this classification, the store is able to provide better service to each customer by offering more brands to choose from. This scenario best illustrates ________.

segmentation analysis

A firm earning more than 95 percent of the revenues from a single line of business is known as a _____.

single business

Thomas is an important figure at Seasons Inc. All of the company's functions, acquisitions, marketing strategies, and business development plans need to partially receive approval from Thomas. This is due to the fact that Thomas owns 20% of Seasons Inc. In this scenario, Thomas is a ________.

stakeholder

Drew's Cafe Inc. and Cuppa Corp., two local coffee chains, combine resources to enter the global market. They retain their individual ownership; however, they agree to share production facilities and manpower, and they also decide to market their products through combined promotional tools. The arrangement made by the two retail chains to combine resources and collaborate for a common objective refers to a _________.

strategic alliance

A product that is fundamentally different yet serves the same function or purpose as another product best defines the term ________.

substitute

A firm that provides products that are inputs to another firm's production process is known as a(n) _____.

supplier

The attractiveness of an industry is ________.

the degree to which an average firm in the industry can earn good profits

A resource creates _____ if its contributions allow a company to produce a product or service that is of worth to end users.

value

TrueBiz Corp. follows a system wherein all the activities of the company are directed toward converting parts of a product into an entire finished good. These activities are done in tandem so that a perfected product can be created which can be sold to a prospective customer. This is an example of a _____.

value chain

Movement into adjacent markets by a firm along its own value chain can be best termed _________.

vertical integration

Yellow Express LLC is a company in the computer hardware industry that solely manufactures microchips. Yellow Express LLC is _________.

vertically specialized