BPS Study Guide 2

22. Which of the following statements is true of accounting data?

a. Accounting data focus mainly on intangible assets, rather than tangible assets. b. Accounting data are historical data and thus backward-looking. c. Accounting data do not have to be adjusted in any manner to compare companies with different capital structures. d. Accounting data consider off-balance sheet items, such as pension obligations of a firm. b

20. Hugo Books Inc. is a retailer that buys books at a fixed price from publishers. Recently, Hugo offered a deal in which customers could buy a package of three mystery books at a discounted rate. Which of the following business models has Hugo Books combined?

a. Agency and freemium b. Wholesale and agency c. Wholesale and bundling d. Agency and bundling c

10. When a firm makes choices between a cost or value position to achieve competitive advantage, it is primarily involved in

a. Collective bargaining b. Strategic trade-offs c. Arbitration d. Mediation b

28. Which of the following statements about competitive advantage is true?

a. Competitive advantage is an absolute measure; it is not relative. b. Competitive advantage is a one-dimensional concept. c. Competitive advantage is permanent and not transitory; once gained by a firm it stays with the firm. d. Competitive advantage can be assessed by measuring accounting profit, shareholder value, or economic value. d

30. Jenny liked a pair of sapphire earrings and thought they would cost around $1,000. She was surprised to find that the price of the earrings was $1,500. However, she decided to buy the earrings anyway. This scenario describes

a. Consumer surplus b. Producer surplus c. Consumer profit d. Producer profit a

29. Triple-bottom-line is a combination of economic, social, and _____ concerns that can lead to a sustainable strategy.

a. Cultural b. Ecological c. Investment d. Aesthetic b

5. 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.?

a. Direct imitation b. Strategic equivalence c. Substitution d. Innovation a

24. _____ are the legal owners of public companies.

a. Employees b. Shareholders c. Category captains d. creditors b

8. What does it mean for a firm to have an 80 percent learning curve?

a. Every time the cumulative output increases by 80 percent, the cost per unit will decline by 20 percent. b. Every time the cumulative output is doubled, the cost per unit will decline by 80 percent. c. Every time the cumulative output goes up by 20 percent, the cost per unit will decline by 80 percent. d. Every time the cumulative output is doubled, the cost per unit will decline by 20 percent d

14. Which of the following is a disadvantage of the balanced-scorecard approach?

a. It fails to link the strategic vision to responsible parties within the organization. b. It fails to translate the vision into measureable operational goals c. It provides limited guidance for designing and planning business processes. d. It provides limited guidance about which metrics to choose. d

21. Which of the following statements is true of the balanced-scorecard?

a. It is a more or less a one-dimensional metric of measuring competitive advantages of a firm. b. It is one of the traditional approaches of measuring firm performance. c. Its primary focus is to base a firm's strategic goals entirely on external performance dimensions. d. It attempts to provide a holistic perspective on firm performance. d

1. Dandelions Max is a consumer electronics company. It has acquired an edge over its competitors through its ability to provide breakthrough technology at the lowest price in the market. This advantage of Dandelions Max best exemplifies a

a. Markup b. Resource flow c. Capital gain d. Core competency d

9. According to the value chain analysis, which of the following is a primary activity?

a. Research and development b. Human resources management c. Accounting and finance d. Marketing and sales d

16. True Moto Corp. (TMC) is a leading automobile company. The company has been able to sustain its competitive advantage primarily due to its high-quality and efficient electric motors. Most of its competitors have failed to develop similar electric motors at a reasonable price. Which of the following resource attributes listed in the VRIO framework has helped TMC sustain its competitive advantage?

a. Resource mobility b. Inexhaustible nature c. Intangibility of the company's resource d. High cost involved in imitation d

19. An observer may conclude that the organizational culture of Zappos, an online retailer for shoes and clothing, might be the basis for its competitive advantage. However, reverse social engineering to crack Zappos' code of success might be much more difficult for a company trying to exactly imitate its strategy. Thus, the source of Zappos competitive advantage is said to be

a. Socially complex b. Inexhaustible c. Non-substitutable d. No ambiguous a

17. Which of the following is more of a value driver than a cost driver?

a. Superior customer service b. Economies of scale c. Learning-curve effects d. Experience-curve effects a

26. Organizational and managerial skills that find their expression in a company's structure, routines, and culture are referred to as

a. Tangible resources b. Reverse c. Capital gains d. Capabilities d

27. Which of the following is not a limitation of the economic value creation framework?

a. The framework falls short when managers are called upon to operationalize competitive advantage. b. The framework is not as effective as accounting profitability or shareholder value creation when the need for "hard numbers" arises. c. The framework fails to provide the foundation that will help firms decide between cost-leadership or differentiation strategies. d. The framework cannot be effectively applied for assessing corporate-level performance of diversified conglomerates. c

23. A blue ocean strategy differs from a low-cost strategy in that

a. The intent of a blue ocean strategy is not to be the absolute lowest-cost provider because a blue ocean must also increase perceived value. b. the focus of a blue ocean strategy is on lowering the economic value created, whereas a cost-leader focuses on increasing the economic value created. c. economies of scale are more important to a blue ocean strategy, while economies of scope are more important to a cost-leader. d. A blue ocean's research and development focus is on process technologies, and a cost-leader's focus is on product technologies a

6. Which of the following describes a situation in which firms acquire resources at a low cost, laying the foundation for a competitive advantage later?

a. better expectations of future resource value b. path dependence limiting current decisions c. causal ambiguity d. Social Complexity a

18. In a focused cost-leadership strategy, a firm

a. caters to the segment of the market that is least cost-sensitive. b. provides high-priced products for many different segments of the mass market. c. delivers low-cost products and services to a specific, narrow part of the market. d. focuses on reducing the economic value created to drive down costs. a

3. A successfully implemented blue ocean strategy allows a firm to

a. charge a higher price than the cost-leader in the industry. b. create lesser economic value than the differentiator in the industry c. reduce its value gap beyond that created by the cost-leader in the industry. d. increase its price above that of the differentiator in the industry a

15. Diseconomies of scale refer to

a. decreases in cost as profit increases b. increases in cost as output increases c. increases in economic value as per-unit cost decreases. d. decreases in profit when consumer demand decreases b

13. A firm's business strategy will lead to a competitive advantage if it allows the firm to

a. execute the same activities performed by the rivals in a similar manner. b. Reduce the value gap. c. perform different activities than its rivals. d. position itself below the productivity frontier c

11. A firm will fail to create a sustained competitive advantage when the

a. fit between its internal strengths and the external environment is static. b. source of its competitive advantage is causally ambiguous. c. source of its competitive advantage is socially complex. d. resource bundles exhibit heterogeneity and immobility. a

12. Firms pursuing a differentiation strategy primarily seek to

a. keep their cost structures lower than that of the cost leader. b. reduce the value gap to gain a competitive advantage. c. provide products that are a direct imitation of the competitors' products. d. create higher customer perceived value than the value that competitors create d

25. The resource-based view of a firm assumes that the

a. resources of firms are highly scarce and hence the government interferes to ensure equal distribution. b. resources of firms are highly exhaustible and hence they cannot contribute to their competitive advantage. c. resource bundles of firms competing in the same industry are unique to some extent and thus differ from one another. d. resource bundles of firms competing in the same industry tend to be highly mobile, moving easily from firm to firm. c

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

a. strong focus on innovation to improve current products and services. b. inefficiency in the management to focus on new products c. strong focus on marketing and sales to promote products and services. d. negligent investment toward research and development. a

2. Which of the following is a firm effect that has an impact on the competitive advantage of a firm?

a. the exit barriers within the industry in which the firm operates b. The number of companies operating in the industry in which the firm operates c. the intensity of rivalry among existing companies in the firm's chosen industry d. the value and the cost position of the firm relative to its competitors d

4. Smooth Fusion Inc. is a software company, which has built and acquired numerous assets over the years. According to the resource-based view of a firm, which of the following assets of Smooth Fusion Inc. will best enable it to gain and sustain a competitive advantage?

a. the resources of the company that are mobile b. the capital raised by the company from its shareholders c. The expertise acquired by the employees in the company d. the headquarters owned by the company c