BUS 498 Chapter 1-6

A firm always has a competitive disadvantage when its return on invested capital is A. below the industry average. B. 2 percent or lower in a declining industry. C. about the same as its closest competitor. D. declining steadily over two or more years.

below the industry average.

A watchmaking company has priced one of its wristwatches at $210. Most of its competitors sell similar watches at $180. Selling anything less than $150 would result in a loss for the company. However, the absolute maximum a customer is willing to pay for it is $170. In this scenario, what is the reservation price of the wristwatch? A. $150 B. $180 C. $170 D. $210

$170

With regard to the VRIO framework, Crocs Shoes was unable to sustain its competitive advantage primarily because its products were A. invaluable and common. B. easy to imitate. C. extremely expensive. D. non-substitutable.

easy to imitate.

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

ecological

In the pyramid of corporate social responsibility, _____ responsibilities are the foundational building block. A. economic B. ethical C. philanthropic D. legal

economic

_____ 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. A. The VRIO framework B. The SWOT analysis C. The break-even analysis D. Ansoff's matrix

The SWOT analysis

Dynamic capabilities are especially relevant for surviving and competing in markets that A. shift quickly. B. shift slowly. C. remain constant. D. remain unpredictable.

shift quickly.

When parts of a firm's intended strategy fall by the wayside due to unpredictable events, it turns into a(n) _____ strategy. A. tactical B. dominant C. emergent D. unrealized

unrealized

How is a cost-leader protected from threats from powerful buyers? A. It is more able to absorb price increases through accepting lower profit margins. B. It is more able to absorb price increase through generating higher profit margins. C. It is able to create a significant difference between perceived value and current market prices. D. It is able to create a significant difference between actual value and future market prices.

A. It is more able to absorb price increases through accepting lower profit margins.

_____ is best described as a strategy process in which organizational structure and systems allow bottom-up strategic initiatives to emerge and be evaluated and coordinated by top management. A. Planned emergence B. Scenario planning C. Top-down strategic planning D. Reverse engineering

A. Planned emergence

In a generic value chain, a firm's after-sales service will be referred to as its _____. A. primary activity B. support activity C. static resource D. resource flow

A. primary activity

_____ describes a situation in which the cause and effect of a phenomenon are not readily apparent. A. Resource immobility B. Causal ambiguity C. Resource heterogeneity D. Social complexity

Causal ambiguity

Which of the following managers in the Level-5 leadership pyramid are most capable of leading their organizations into great success by guiding the organizations toward building a sustainable competitive advantage? A. Level 1 B. Level 2 C. Level 3 D. Level 5

D. Level 5

_____ are primarily responsible for decisions and actions within their respective departments like finance, human resources, marketing, and production in a strategic business unit. A. Functional managers B. Corporate executives C. Strategic leaders D. General managers

Functional managers

Industry effects describe the underlying _____ structure of the industry. A. demographic B. economic C. psychographic D. ethnographic

economic

Which of the following is not an example of a black swan event? A. fall of the Berlin Wall B. 9/11 terrorist attacks C. Fukushima nuclear disaster D. election of President Reagan

election of President Reagan

Which type of industry structure is often analyzed using game theory? A. oligopolistic B. monopolistic C. perfectly competitive D. monopolistically competitive

A. oligopolistic

_____ is best described as a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors. A. Behavior modification B. Strategy C. Credo D. Competency management

B. Strategy

Which of the following questions challenges managers to come up with strategic objectives that ensure future competitiveness? A. How do customers view us? B. How do we create value? C. What core competencies do we need? D. How do shareholders view us?

How do we create value?

The working capital turnover of Tesva Systems Corp. is 6.0. What does this financial data suggest? A. For every $6.00 Tesva Systems puts to work ,the company incurs a cost of $1.00. B. For every $6.00 Tesva Systems puts to work, the company realizes sales of $1.00. C. For every dollar Tesva Systems puts to work, the company realizes $6.00 in loss. D. For every dollar Tesva Systems puts to work, the company realizes $6.00 of sales.

D. For every dollar Tesva Systems puts to work, the company realizes $6.00 of sales.

Customer-oriented visions do not A. leave open the means to of how to meet a need. B. define a business according to solutions. C. define how a customer need will be met. D. provide companies with a competitive advantage.

define how a customer need will be met.

In the context of the resource-based model of competitive advantage, if a successful firm exhibits resource immobility it means that the A. rival firms have better accessibility to quality resources. B. firm will have a sustained competitive advantage because of its unique resources. C. competitors can easily replicate or copy the firm's resource bundles and capabilities. D. resources of the firm cannot be effectively deployed within its own organization.

firm will have a sustained competitive advantage because of its unique resources.

Higher value tends to require A. higher costs. B. higher quantities. C. more complements. D. more trade-offs.

higher costs

In knowledge-intensive industries, the marginal costs after initial invention are A. low. B. high. C. moderate. D. unpredictable.

low

The translation of strategy into action primarily takes place in a firm's A. mission statement. B. executive summary. C. business model. D. code of conduct.

business model

The translation of strategy into action takes place in the firm's _____, which details the firm's competitive tactics and initiatives. A. score card model B. economic value creation C. shareholder's value creation D. business model

business model

Organizational and managerial skills that find their expression in a company's structure, routines, and culture are referred to as A. tangible resources. B. reserves. C. capital gains. D. capabilities.

capabilities.

In an industry, the threat of entry is high when A. capital requirements are low. B. expected returns are high. C. technological know-how is industry specific. D. switching costs are high.

capital requirements are low.

In an economic context, strategy for producers is primarily about A. distributing the economic value created equally between consumers and themselves. B. reducing the difference between consumer's willingness to pay for a product and the cost to produce it. C. capturing the economic value created as much as possible. D. lowering producer surplus and increasing consumer surplus.

capturing the economic value created as much as possible.

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 A. time compression diseconomies. B. resource homogeneity. C. causal ambiguity. D. path dependence.

causal ambiguity.

A resource-based view of a firm provides a model that systematically aids in identifying A. related competencies. B. core competencies. C. competitive disadvantage. D. competitive parity.

core competencies.

Unrealized strategy is when parts of a firm's intended strategy is A. nonfunctional due to unexpected events. B. not revealed to the lower-level employees. C. implemented and controlled by front-line employees. D. planned to tackle some unforeseen events.

nonfunctional due to unexpected events.

A(n) _____ is best described as a stand-alone division of a larger conglomerate, with its own profit-and-loss responsibility. A. corporation B. strategic business unit C. affiliate company D. functional department

strategic business unit

Which of the following groups is considered to be the primary stakeholder for public-stock companies? A. suppliers of capital B. employees C. suppliers D. potential customers

suppliers of capital

Gene Craft Inc. is the market leader in the pharmaceutical industry. Though most of its resources are common to those of its competitors, a few rare resources have helped the company gain and sustain a competitive advantage. Which of the following assets of Gene Craft Inc. is most likely to be considered a rare resource that is best contributing to its competitive advantage? A. the company's land and buildings B. the company's plant and machinery C. the company's raw material supplies D. the company's chemical patents

the company's chemical patents

Which of the following external forces is a part of a firm's task environment? A. the composition of the strategic group to which the firm belongs B. the interest rates prevalent in the economy in which the firm operates C. the inflation level in the economy in which the firm operates D. the recent innovations in process technology, including lean manufacturing

the composition of the strategic group to which the firm belongs

The cost of capital to create a product is a fixed cost because it is A. directly proportional to the output level. B. uniform throughout all firms and industries. C. not a part of the profit calculations. D. unaffected by consumer demand.

unaffected by consumer demand.

In a firm, a strategist's job should be to A. limit the participation of external stakeholders—customers and suppliers—in value creation. B. isolate the firm's internal stakeholders from its external stakeholders. C. focus solely, in a single-minded manner, on maximizing shareholder wealth. D. understand the complex web of exchange relationships among different stakeholders.

understand the complex web of exchange relationships among different stakeholders.

Which of the following is an external performance metric? A. return on revenue B. fixed assets turnover C. inventory turnover D. total return to shareholders

total return to shareholders

The _____ allows the scanning, monitoring, and evaluating of changes and trends in a firm's macro environment. A. VRIO framework B. SWOT analysis C. BCG matrix D. PESTEL framework

PESTEL framework

_____ describes a process in which the options one faces in a current situation are limited by decisions made in the past. A. Social complexity B. Path dependence C. Cannibalization D. Causal ambiguity

Path dependence

The ratio Cost of goods sold/Revenue indicates how efficiently a company can A. produce a good. B. sell a good. C. advertise a good. D. design a good.

produce a good.

_____ 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. A. Minimum efficient scale B. Break-even output C. Maximum output capacity D. Optimum sustainable yield

Minimum efficient scale

_____ precisely indicates how much of a firm's sales is converted into profits. A. Break-even price B. Working capital turnover C. Return on revenue D. Inventory turnover

Return on revenue

Which of the following best expresses fixed asset turnover? A. Current assets/Fixed assets B. Revenue/Fixed assets C. Fixed assets/Total return to share holders D. Fixed assets/Current liabilities

Revenue/Fixed assets

Trust Machines Inc. is a company that manufactures and markets consumer electronics. The unique microprocessors developed by the company contribute to its high resource immobility. According to the resource-based view of competitive advantage, which of the following is an implication of this situation? A. The competitive advantage of Trust Machines Inc. will soon be lost. B. The resource heterogeneity of Trust Machines Inc. is low within the industry. C. The resources of Trust Machines Inc. are difficult to replicate or imitate. D. The environment in which Trust Machines Inc. operates is closest to perfect competition.

The resources of Trust Machines Inc. are difficult to replicate or imitate.

What is most likely to happen when there is too much money in an economy? A. There are too many goods and services. B. There is a drop in interest rates. C. There is high economic growth. D. There is an increase in prices.

There is an increase in prices.

True Help is a nonprofit organization that works toward rehabilitating the homeless. The credo of the organization is "help us help you." For an organization like True Help, which of the following statements would make an appropriate mission? A. Help us help you find a home. B. One day, everyone in this nation will have a home to protect themselves. C. We help the homeless gain and sustain financial independence by providing employment opportunities. D. Our mission is to turn this not-for-profit organization into a for-profit organization so that the stakeholders are benefited.

We help the homeless gain and sustain financial independence by providing employment opportunities.

A firm's stakeholder strategy primarily allows the firm to A. analyze and manage how various external and internal stakeholders interact to jointly create and trade value. B. effectively isolate its internal stakeholders (like shareholders and employees) from its external stakeholders (like customers and media). C. transfer the contributions external stakeholders make into benefits for the internal stakeholders. D. facilitate the development of a competitive relationship between its internal and external stakeholders.

analyze and manage how various external and internal stakeholders interact to jointly create and trade value.

Which of the following is an example of a firm's resources? A. routine activities like order taking and invoicing customers, performed in a firm B. assistance available from the government in the form of rules and regulations C. assets such as land and buildings owned by a firm D. liabilities such as bills payables and short-term debts

assets such as land and buildings owned by a firm

As the legal owners, _____ have the most legitimate claim on a company's profits. A. creditors B. employees C. shareholders D. board members

shareholders

Unplanned strategic initiatives taken by the _____ within an organization will be referred to as an emergent strategy. A. suppliers and vendors of the organization B. shareholders of the organization C. team leads of project teams in the organization D. corporate executives in the organization's headquarters

team leads of project teams in the organization

Which of the following is an example of a firm's intangible resources? A. the firm's cash at bank B. the firm's finished goods inventory C. the firm's organizational culture D. the firm's land and building

the firm's organizational culture

Which of the following is likely to happen due to horizontal mergers between competitors such as Delta and Northwest airlines? A. The overall industry profitability will increase. B. The threat of strong competitive forces such as supplier power will increase. C. The industry will face excess capacity in the future. D. The structure of the industry will change from consolidated to one that is fragmented.

A. The overall industry profitability will increase.

While Burger Cult Inc. operates in a monopolistically competitive industry, Citizen Telecom Inc. operates in a monopoly. Keeping this information in mind, which of the following statements is most likely true? A. The threat of new entrants will be higher for Burger Cult Inc. than Citizen Telecom Inc. B. Burger Cult Inc. will have more pricing power than Citizen Telecom Inc. C. Burger Cult Inc. will have more profit potential than Citizen Telecom Inc. D. The number of buyers will be limited for both Burger Cult Inc. and Citizen Telecom Inc.

A. The threat of new entrants will be higher for Burger Cult Inc. than Citizen Telecom Inc.

_____, which is the return on risk capital, includes stock price appreciation plus dividends received over a specific period. A. Total return to shareholders B. Earnings per share C. Receivables turnover D. Dividend yield

A. Total return to shareholders

Which of the following provides an example of what AFI strategy framework is used for? A. Using AFI, the Gasquet Motor Company was able to implement a strategy that produced high-quality cars more efficiently and thereby reduced costs. B. Using AFI, the Chen Restaurant Group was able to improve employee benefits and thereby increase employee loyalty. C. Using AFI, the Sanchez Clothing Company was able to implement a strategy that allowed them to give more money to charities and thereby gain good press. D. Using AFI, the Richardson Tea Group was able to reduce the pollution it caused while processing tea and thereby receive an award.

A. Using AFI, the Gasquet Motor Company was able to implement a strategy that produced high-quality cars more efficiently and thereby reduced costs.

Which of the following statements accurately brings out the difference between economies of scale and learning effects? A. While there are no diseconomies to learning, there are diseconomies to scale. B. Economies of scale occur over time, whereas learning effects are captured at one point in time. C. Firms experience economies of scale when output increases, and learning effects when output decreases. D. Economies of scale reduce cost per unit, learning effects increase cost per unit.

A. While there are no diseconomies to learning, there are diseconomies to scale.

Which of the following statements accurately brings out the difference between tangible and intangible resources? A. Tangible resources contribute to a company's competitive advantage, whereas intangible resources fail to do the same. B. Tangible assets can be bought on the open market, whereas intangible assets cannot be easily purchased. C. Tangible resources take a longer time to build, whereas intangible assets can be built comparatively easily. D. Tangible assets are difficult to imitate, whereas intangible assets can be easily replicated.

B. Tangible assets can be bought on the open market, whereas intangible assets cannot be easily purchased.

GlobalCom Inc. is an Internet service provider. It provides a router free of charge when users sign up for a two-year wireless service plan. In this plan, users pay in advance irrespective of whether they use the Internet package during the two-year period or not. Which of the following business models does this scenario best illustrate? A. a combination of the razor-razor-blade model and the subscription-based business model B. the pay-as-you-go business model C. a combination of the freemium business model and the pay-as-you-go business model D. the direct sales business model

A. a combination of the razor-razor-blade model and the subscription-based business model

Which of the following is the most accurate description of stakeholder impact analysis? A. a decision tool with which managers can recognize the needs of different stakeholders B. a decision tool with which managers can recognize black swans C. a decision tool that emphasizes competitive advantage over corporate citizenship D. a decision tool that emphasizes using the three-step process

A. a decision tool with which managers can recognize the needs of different stakeholders

The management of Five Square Corp. wants to reduce the separation between ownership (by shareholders) and control of the firm (by professional managers). Which of the following practices would best help the company do this? A. allowing employees to purchase the stock of the company at a discounted rate B. reinvesting the annual profits of the company into research and development C. issuing new additional shares to the existing stockholders in proportion to their current holdings D. declaring the annual profits as bonus dividends to the existing stockholders

A. allowing employees to purchase the stock of the company at a discounted rate

Which of the following is an implication of high exit barriers in an industry? A. The number of underperforming firms in the industry will be low. B. The industry will face excess capacity. C. The competitive pressure among existing firms will be low. D. The industry will be more attractive for new entrants.

B. The industry will face excess capacity.

Which of the following statements is not true about the five forces in Porter's competitive analysis model? A. The relative strengths of the five forces that shape competition are context-dependent. B. The stronger the five forces in an industry, the greater the industry's profit potential. C. Competition in the model is described as the tug-of-war between the five forces to capture as much as possible of the economic value created in an industry. D. An analysis of the five forces provides the basis for how a firm should position itself to gain and sustain a competitive advantage.

B. The stronger the five forces in an industry, the greater the industry's profit potential.

Which of the following is the most accurate characterization of stakeholder theory? A. an approach to understanding a firm as embedded in a network of internal and external constituencies that each make contributions and expect consideration in return B. an approach to understanding a firm as being in a highly competitive industry, which requires the use of effective market capitalization to gain a competitive advantage C. an approach to understanding a firm, which involves balancing tangible assets and intangible assets to achieve high accounting profitability D. an approach to understanding a firm, which involves balancing multiple internal and external performance metrics in order to gain a competitive advantage

A. an approach to understanding a firm as embedded in a network of internal and external constituencies that each make contributions and expect consideration in return

To be effective, firms need to A. back up their visions with strategic commitments that are costly and difficult to reverse. B. increase their strategic flexibility by developing product-oriented vision statements. C. isolate top managers from the organizational values. D. pursue visions that are exclusively financial and not aspirational.

A. back up their visions with strategic commitments that are costly and difficult to reverse.

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. better expectations of future resource value

In a successful _____ strategy, the trade-offs between differentiation and low cost are reconciled. A. blue ocean B. focused differentiation C. liquidation D. divestment

A. blue ocean

_____ is best described as a rational process in which executives at a company's headquarters take primary responsibility to program future success of the company they lead. A. Bottom-up strategic approach B. Top-down strategic planning C. Reverse mentoring D. Emergent strategic plan

B. Top-down strategic planning

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. charge a higher price than the cost-leader in the industry.

A firm that achieves superior performance relative to other firms in the same industry or the industry average has a(n) A. competitive advantage. B. balanced scorecard. C. power position. D. equity leverage.

A. competitive advantage.

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. producerprofit.

A. consumer surplus.

Bauer Inc. is a company that manufactures plastics, fertilizers, tractors, and headphones under a single brand. The top management at Bauer has decided to enter the medical equipment industry based on its assessment of the profit potential in that industry. Which of the following strategies does this best illustrate? A. corporate strategy B. business strategy C. functional strategy D. divisional strategy

A. corporate strategy

Tangles Costume Jewelry offers slightly lowerquality merchandise than competitors at a much lower price. What strategy is Tangles using? A. cost-leadership B. differentiation C. niche marketing D. product diversification

A. cost-leadership

The first step in the strategic management process is to A. define a firm's vision, mission, and values. B. understand the strategies of the competitors. C. put the guiding policies of a firm into practice. D. develop functional and business-level strategies.

A. define a firm's vision, mission, and values.

Which of the following is a feature of a monopolistically competitive industry? A. differentiated products B. high entry barriers C. no pricing power D. a single firm

A. differentiated products

A firm experiences _____ when there are increases in cost per unit as output increases. A. diseconomies of scale B. economies of scope C. time compression diseconomies D. economies of flow

A. diseconomies of scale

A company that uses a differentiation strategy can achieve a competitive advantage as long as its A. economic value created is greater than that of its competitors. B. value gap is lower than that of its competitors. C. strategic position is below the productivity frontier. D. products and services create a lower consumer surplus than that of its competitors.

A. economic value created is greater than that of its competitors.

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. fit between its internal strengths and the external environment is static.

Free Spirit 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? A. razor-razor-blade B. subscription-based C. pay-as-you-go D. freemium

C. pay-as-you-go

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 A. gain a market share and make up the loss in margin through increased sales. B. create higher value creation and thus generate greater profit margins. C. gain a market share and make up the loss in margin through increased pricing. D. create higher value creation and thus generate greater sales.

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

An effective strategist _____ the formulated strategy through structure, culture, and controls. A. implements B. analyzes C. formulates D. questions

A. implements

After carefully assessing the market potential for hybrid motorcycles, it was decided at the corporate headquarters of HyCycles Inc. that the company would be launching a hybrid version of all its motorcycle models within the next two years. This would mean that each strategic business unit under the company would be involving in its own research and development efforts. Which of the following strategies in the planned emergence model does this best illustrate? A. intended strategy B. emergent strategy C. unrealized strategy D. tactical strategy

A. intended strategy

When a firm is successful at pursuing a blue ocean strategy, A. investments in differentiation are complements. B. value and cost exhibit a positive correlation. C. low cost acts as a substitute. D. investments in process and product technologies are substitutes.

A. investments in differentiation are complements.

Which of the following factors most effectively contributed to the success of Threadless in comparison to other companies with T-shirt designs, including American Eagle, Old Navy, and Urban Outfitters? A. its reliance on crowdsourcing B. its point-to-point business model C. its hub-and-spoke system D. its shorter distances

A. its reliance on crowdsourcing

Gotta Get Chocolates, Inc. has recently introduced a new production method that will make the production of their chocolates more cost-effective. Which of the following will most likely be the result of this innovation? A. jumps to a steeper learning curve B. destabilizes a steeper learning curve C. stabilizes the existing learning curve D. moves down the existing learning curve

A. jumps to a steeper learning curve

Bass Watches Inc. initially spent eight man-hours to assemble a wristwatch. But as the production doubled, the number of hours spent on assembling a watch reduced by 20 percent. This increase in productivity reduced the company's cost per unit. What is this phenomenon referred to as? A. learning-curve effect B. network effect C. black-swan event D. time compression diseconomies

A. learning-curve effect

According to the Level-5 leadership pyramid, a manager in Level 1 typically A. makes productive contributions through motivation, talent, knowledge, and skills. B. works effectively with others to achieve synergies and team objectives. C. presents compelling vision and mission to guide groups toward superior performance. D. builds enduring greatness into the organizations he or she leads.

A. makes productive contributions through motivation, talent, knowledge, and skills.

According to the Level-5 leadership pyramid, a manager at Level 3 has acquired the ability to A. organize resources effectively to accomplish predetermined goals. B. build enduring greatness into the organizations he or she leads. C. identify the vision and the mission of the company. D. justify unethical activities as legal and ethical.

A. organize resources effectively to accomplish predetermined goals.

VRD Systems Inc. took many decades to build its core competencies, and these competencies were based primarily on the decisions made by the company's top management in the past. This process is called A. path dependence. B. dependence complexity. C. causal dependence. D. path immobility.

A. path dependence.

During periods of high industry growth A. price competition among firms frequently decreases. B. rivals are focused on taking market share away from one another. C. firms indulge in intense promotional campaigns. D. new product releases with minor modifications become common.

A. price competition among firms frequently decreases.

Manufacturers of electric fragrance diffusers sell the electric outer device at an extremely low price, sometimes even at a loss. However, they make their money on the product by charging a premium on the perfume refills that have to be replaced regularly. Which of the following business models does this best illustrate? A. razor-razor-blade B. subscription-based C. freemium D. pay-as-you-go

A. razor-razor-blade

As a result of _____, a critical assumption in the resource-based model of a firm, the resource differences that exist between firms are difficult to replicate. A. resource immobility B. resource homogeneity C. resource perishability D. resource equality

A. resource immobility

From an investors' or shareholders' perspective, the measure of competitive advantage that matters most is the A. return on risk capital. B. economic value created. C. consumer surplus. D. inventory turnover.

A. return on risk capital.

The executives at Red Couture Inc. are developing strategic plans to address plausible future situations like rise in the prices of cotton and synthetic fabrics by 20 percent, appreciation in the value of the dollar, increase in the cost of labor by 30 percent, and increase in demand for the company's products. By doing so, the company will be well prepared with its planned responses if any of these situations occurs in the future. Thus, Red Couture is employing _____ as the approach to the development of strategy. A. scenario planning B. top-down strategic planning C. reverse engineering D. pattern recognition

A. scenario planning

A firm's _____ relates to its ability to create value for customers (V) while containing the cost to do so (C). A. strategic position B. incumbency C. threat of entry D. attrition rate

A. strategic position

Which of the following stages of the strategic management process involves an evaluation of a firm's external and internal environments? A. strategy analysis B. strategy implementation C. strategy formulation D. strategy control

A. strategy analysis

The management team at Clear Solutions, Inc. decided to build a branch office in Memphis, Tennessee. Which of the following terms correctly describes this action? A. strategy formulation B. strategy implementation C. execution of strategy D. business strategy

A. strategy formulation

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. strong focus on innovation to improve current products and services.

When a blue ocean strategy goes bad, a firm has neither a clear differentiation nor a clear cost-leadership profile. This situation is referred to as A. stuck in the middle. B. buried at the bottom. C. burned at the top. D. caught in the transition.

A. stuck in the middle

In a large company, who is most responsible for devising the corporate strategy? A. the CEO of the company B. the lower-level employees in the company C. the head of the production department in the company D. the human resource manager in the company

A. the CEO of the company

A company wants to determine how industry effects have affected its profitability. Which of the following elements should the company focus on? A. the barriers to entry and exit within the industry B. the pricing method opted by the managers to face competition within the industry C. the brand strategy the managers adopt to establish the firm in the industry D. the strategic position the firm pursues within the industry

A. the barriers to entry and exit within the industry

What does blue ocean strategy attempt to reconcile? A. the conflicting requirements of two generic strategies B. the conflicting requirements of two value drivers C. the conflicting requirements of two cost drivers D. the conflicting requirements of two or more unique strategies

A. the conflicting requirements of two generic strategies

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. 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.

During strategy implementation, managers primarily focus on deciding the A. type of corporate governance that is most effective and ways in which it can put the formulated strategy into practice. B. industries and markets the firm should compete in to be able to gain and sustain a competitive advantage. C. relationship between competitive advantage and firm performance. D. role strategic leaders should play in gaining and sustaining a competitive advantage.

A. type of corporate governance that is most effective and ways in which it can put the formulated strategy into practice.

A defining characteristic of the pay-as-you-go business model is that the A. users pay for only the services they consume. B. users pay for access to a product or service whether they use it during the payment term or not. C. initial product is often sold at a loss in order to drive demand for complementary goods. D. the basic features of a service are provided free of charge, but the user must pay for premium services.

A. users pay for only the services they consume.

The _____ is a model that links strategy analysis, strategy formulation, and strategy implementation, which together helps managers plan and implement a strategy that can improve performance and result in competitive advantage. A. Ansoff's growth strategy matrix B. AFI strategy framework C. Sarbanes-Oxley Act D. stakeholder impact analysis

AFI strategy framework

Beans Inc. operates in a perfectly competitive agricultural industry. Classica Apparel Inc., in contrast, operates in a monopolistically competitive industry. Keeping this information in mind, which of the following statements is true? A. Beans Inc. will face competition from many sellers, whereas Classica Apparel Inc. will be the only seller in the market. B. While Classica Apparel Inc. will have the power to set the prices for its products, Beans Inc. will have little or no ability to do so. C. Beans Inc. will have many buyers for its products, whereas Classica Apparel Inc. will have very few buyers for its products. D. While Beans Inc. will communicate the degree of product differentiation through advertising, Classica Apparel Inc. will need no advertising.

B. While Classica Apparel Inc. will have the power to set the prices for its products, Beans Inc. will have little or no ability to do so.

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.

Accounting data are historical data and thus backward-looking.

AccuroDisk Inc. manufactures external hard disks for $32 per unit, and the maximum price customers are willing to pay is $47 per unit. TD Storage Inc. is a competitor of AccuroDisk Inc. that produces external hard disks for $37 per unit, and customers are willing to pay a maximum price of $50 per unit. What does this imply? A. AccuroDisk and TD Storage share differentiation parity. B. TD Storage has a competitive advantage over AccuroDisk in terms of perceived value. C. AccuroDisk creates a greater economic value than TD Storage. D. TD Storage is a cost-leader when compared to AccuroDisk.

AccuroDisk creates a greater economic value than TD Storage.

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 A. network effect. B. availability of complements. C. quality. D. diseconomies of scale.

C. quality

Free Winds, Inc. is a company that manufactures a variety of generators that run on wind power. The company wants to ensure that wind technology replaces all forms of exhaustible energy sources in the near future. Which of the following statements will make an accurate vision for Free Winds? A. We make products that run on wind energy. B. All nations around the globe should have access to a sustainable energy source. C. The company aims to make working fun and pleasurable for its employees. D. We provide energy-efficient sources and services by investing in research and innovation.

All nations around the globe should have access to a sustainable energy source.

Which of the following best illustrates a firm operating in a monopolistically competitive industry? A. A foreign exchange company sells currencies of different countries at market prices as it cannot differentiate its products from its competitors. B. A chain of multiplex theaters, along with its competitor, owns 80 percent of the multiplex market share. C. An automobile manufacturer uses branding, pricing, and superior advertising to differentiate itself from a large number of other automobile manufacturers. D. A railway company owned by the government of New Darvland owns 100 percent of the railway transport in the country.

An automobile manufacturer uses branding, pricing, and superior advertising to differentiate itself from a large number of other automobile manufacturers.

Clean Machine Inc. produces a high-quality dishwashing machine that is reliable and durable. How would this product most likely act as a cost driver? A. reduce purchase cost B. increase after-sales service cost C. reduce the total cost of ownership D. increase shipping cost

C. reduce the total cost of ownership

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. resource bundles of firms competing in the same industry are unique to some extent and thus differ from one another.

Due to resource immobility, a critical assumption in the resource-based model of a firm, the A. competitive advantage of a firm exists for a short period of time. B. resource bundles of a firm can be easily imitated by competitors. C. resource differences between firms last for a long time. D. competencies and capabilities of all firms in an industry are similar.

C. resource differences between firms last for a long time.

Which of the following is a top-down approach to the development of strategy that involves asking "what if" questions to anticipate plausible futures? A. top-down strategic planning B. bottom-up strategic thinking C. scenario planning D. reverse mentoring

C. scenario planning

Which of the following is an example of a firm's internal stakeholders? A. customers B. creditors C. stockholders D. suppliers

C. stockholders

Home Savings, Good Deals, Hank's Store, and King Bargains are all departmental stores that compete for advantage against each other through everyday low-pricing and discounts on bulk purchases. All four stores cater to the needs of highly price-sensitive customers. Thus, together Home Savings, Good Deals, Hank's Store, and King Bargains form a A. focus group. B. command group. C. strategic group. D. cross-functional group.

C. strategic group.

Which of the following is an example of a product-oriented vision statement? A. Andrea, Ltd. wants to adapt their picture frames to the changing demands of consumers. B. Andrea, Ltd. wants to always satisfy the consumers who purchase picture frames. C. Andrea, Ltd. wants to provide the best benefits for employees in the picture-frame industry. D. Andrea, Ltd. wants to be the best manufacturer of picture frames in the industry.

Andrea, Ltd. wants to be the best manufacturer of picture frames in the industry.

How does a firm capture its producer surplus for a good or service? A. as cost per unit sold B. as profit per unit sold C. as earnings per share D. as market price per share

B. as profit per unit sold

In the step-by-step process of industry analysis, identifying the underlying drivers of each force is followed by A. drawing a strategic group map. B. assessing the overall industry structure. C. identifying key players in each of the five forces. D. defining the relevant industry.

B. assessing the overall industry structure.

How can a firm change its industry structure from monopolistically competitive or oligopolistic to a near monopoly? A. by reducing the entry barriers in its industry B. by developing proprietary technology C. by implementing frequent price-cuts D. by decreasing its pricing power

B. by developing proprietary technology

Home Value Inc., Max Cart Inc., and Nice Necessities 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. Which of the following is an implication of the market condition indicated in this scenario? A. Resource immobility of the firms will be low. B. The industry structure will be far from perfect competition. C. Barriers to entry within the industry will be high. D. Any advantage that one firm has will be short-lived.

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

Which of the following fundamental insights was provided by Porter's five forces framework from the completion of the Alta Velocidad Española (AVE) in 2008? A. A strong threat of substitutes decreases the rivalry among existing competitors. B. All the five forces must work together to have a meaningful impact. C. Any of the five forces on its own, if sufficiently strong, can extract industry profitability. D. Competition must be defined more narrowly to remain confined to the industry's closest competitors.

Any of the five forces on its own, if sufficiently strong, can extract industry profitability.

A traditional top-down strategic planning process typically begins with A. employees at the operational level identifying problems within an organization. B. functional managers formulating functional strategies for their respective departments. C. strategic leaders adjusting a company's vision and mission based on environmental analysis. D. employees who have close contact with customers taking autonomous actions.

C. strategic leaders adjusting a company's vision and mission based on environmental analysis.

Executives whose vision and actions enable their organizations to achieve competitive advantage demonstrate A. top-down strategic planning. B. functional strategy. C. strategic leadership. D. dominant strategic planning.

C. strategic leadership.

In _____, a firm frames a guiding policy to address the competitive challenge. A. strategy control B. strategy implementation C. strategy formulation D. strategy analysis

C. strategy formulation

Lower-level employees focus mainly on _____ when a firm is using top-down or scenario planning as an approach to the strategic management process. A. strategy formulation B. strategy analysis C. strategy implementation D. strategy initiation

C. strategy implementation

In 2014, Apple had a return on revenue of 29.3 percent, and Microsoft had a return on revenue of 32 percent. Even so, Apple had a higher return on invested capital than Microsoft. Why did this happen? A. Apple had a higher cost structure than Microsoft. B. Apple was able to charge a much higher margin for its products and services than Microsoft. C. Apple spent more on research and development and marketing and sales than Microsoft. D. Apple had a much higher selling, general, and administrative expense that Microsoft.

Apple was able to charge a much higher margin for its products and services than Microsoft.

Evia Cycles Inc. incurs $400 to manufacture a bicycle, and the maximum price customers are willing to pay is $550 per unit. Archer Cycles Inc., its competitor, incurs $450 to manufacture a similar bicycle, and customers are willing to pay a maximum price of $620 for it. What does this indicate? A. Both Evia Cycles and Archer Cycles have achieved differentiation parity. B. Evia Cycles has a competitive advantage over Archer Cycles. C. Archer Cycles has created a greater economic value than Evia Cycles. D. Both Evia Cycles and Archer Cycles have achieved cost parity.

Archer Cycles has created a greater economic value than Evia Cycles.

Which of the following best describes a Level 5 manager in the Level-5 leadership pyramid? A. Connie is an employee who just started her career at DK Inc.; she has already been appreciated for her knowledge and skills in the new company. B. Dmitri is an employee at Infinite Circle Inc.; he has helped his team achieve their targets by contributing to the team's efforts. C. Luigi is part of the marketing team at RT Corp.; he has been given the charge of managing a team of three, so he will be promoted to a manager's position next month. D. Asoka is the CEO of Green Machines Inc.; he has helped his company in gaining and sustaining a competitive advantage through ethical decision making.

Asoka is the CEO of Green Machines Inc.; he has helped his company in gaining and sustaining a competitive advantage through ethical decision making.

The "diagonal assembly system" was a production system pioneered by the automobile company Gogo. Recently, Gogo was able to sue a competitor and won the suit, thereby receiving $100 million in damages. Which of the following would most likely enable Gogo to win such a lawsuit? A. The competitor used a title for its assembly system that was similar to the title of Gogo's system. B. The competitor failed to apply for a patent of its assembly system. C. The competitor infringed on Gogo's patent of the "diagonal assembly system." D. The competitor produced an assembly system that was somewhat similar to Gogo's system.

C. The competitor infringed on Gogo's patent of the "diagonal assembly system."

Which of the following is an implication of all firms in an industry pursuing a low-cost position through application of competitive benchmarking? A. No firm would face direct competition from others in the industry; hence, profit potential would be high. B. Each firm would be catering to a different customer segment. C. The firms would eventually have no resources to invest in product and process improvements. D. Each firm would be in a better position to gain a competitive advantage.

C. The firms would eventually have no resources to invest in product and process improvements.

Which of the following forces tends to be more important in determining a firm's performance? A. the underlying economic structure B. the entry barriers in the industry C. the actions of managers within the firm D. the number and size of other firms in the industry

C. the actions of managers within the firm

Apple paid $3 billion dollars to acquire Beats. This is the largest acquisition in Apple's history. Which of the following provides a reason for this acquisition? A. the movement in the music industry from renting works to buying works to own B. the need for Apple to create an image as a leader in technical audio research C. the change in content delivery from ownership via downloads to streaming on demand D. the demand for the extremely high-quality headphones that Beat produced

C. the change in content delivery from ownership via downloads to streaming on demand

Which of the following examples reflects the strongest vision? A. At Fuentes Electronics, many employees get paid well but do not feel their work is important. B. At Fuentes Electronics, all employees are motivated to make the best microwave ovens on the market. C. At Fuentes Electronics, most employees want to create a better microwave oven than their closest competitor. D. At Fuentes Electronics, some employees do not understand the main goal of the company.

At Fuentes Electronics, all employees are motivated to make the best microwave ovens on the market.

Which of the following applies to the Strength-Threats quadrant of the SWOT matrix? A. The local fast-food chain Easy Hot Dogs expanded its limited menu to maintain its advantage against stiff competition. B. The local fast-food chain Easy Hot Dogs added a salad bar to maintain its competitive advantage against stiff competition. C. The local fast-food chain Easy Hot Dogs used its wholesome image to maintain its competitive advantage against stiff competition. D. The local fast-food chain Easy Hot Dogs revised its image of being a cheap-food place to being a wholesome family place in order to maintain its competitive advantage against stiff competition.

C. The local fast-food chain Easy Hot Dogs used its wholesome image to maintain its competitive advantage against stiff competition.

Which of the following do the sociocultural forces in a firm's external environment best represent? A. the interest rates prevalent in an economy B. the laws protecting small enterprises in a nation C. the family size of the firm's target market D. the rate of employee attrition within the firm

C. the family size of the firm's target market

If a resource is rare or unique to a particular firm, then A. the industry in which the firm operates will experience perfect competition. B. the mobility of the resource will be high. C. the firm will be able to maintain a competitive advantage for a long period. D. it will be less costly for rivals to imitate the resource.

C. the firm will be able to maintain a competitive advantage for a long period.

Which of the following strategies will be most detrimental to firms that are close rivals operating in an oligopolistic industry structure? A. competing against each other through product differentiation B. competing against each other through price-cutting C. competing against each other through new-product introductions D. competing against each other through lifestyle advertisements

B. competing against each other through price-cutting

What part of the AFI strategy framework does the question "How does the firm make money?" relate to? A. strategic leadership and the strategy process B. competitive advantage, firm performance, and business models C. external analysis D. internal analysis

B. competitive advantage, firm performance, and business models

SooGood Inc. produces a dip that goes extremely well with Crunchy Potato Chips Inc. SooGood Inc., therefore, is a _____ of Crunchy. A. direct competitor B. complementor C. indirect competitor D. shareholder

B. complementor

Which of the following is an example of monopolistic competition? A. iron ore industry B. computer hardware industry C. express delivery industry D. beverages industry

B. computer hardware industry

While creating its AFI strategy framework, the Kowalski Candy Company decided what markets the firm should compete in. By doing this, what type of strategy did the company devise? A. business strategy B. corporate strategy C. global strategy D. ethical strategy

B. corporate strategy

Both Vibrant Phones Inc. and Oryxo Inc. incur a cost of $200 to manufacture a single unit of a cell phone. However, Vibrant Phones creates more economic value than Oryxo does. What does this imply? A. Vibrant Phones and Oryxo have achieved a competitive parity. B. Oryxo has a competitive advantage over Vibrant Phones. C. Vibrant Phones sells its products at a better price than Oryxo. D. Oryxo's offering has greater total perceived consumer benefits than Vibrant Phones' offering.

C. Vibrant Phones sells its products at a better price than Oryxo.

Companies in the same strategic group are _____ to each other. A. complementors B. direct competitors C. strategic partners D. shareholders

B. direct competitors

When Jean Cult Inc. was operating at the minimum efficient scale of 10,000-12,000 units per month, the firm's cost per unit was $20. However, when the output level was increased beyond 12,000 units, the cost per unit increased to $22. This increase was attributed to the wear-and-tear of the machinery, and complexities of managing and coordinating. What is this phenomenon known as? A. resource ambiguity B. diseconomies of scale C. network effect D. learning-curve effect

B. diseconomies of scale

Paying taxes to local government authorities from the annual revenues generated by a firm represents the firm's _____ responsibilities. A. philanthropic B. economic C. psychographic D. political

B. economic

Which of the following best describes a strategic trade-off? A. the tension between innovation and keeping manufacturing costs down B. the tension between maintaining both high-quality products and service C. the tension between value creation and the pressure to keep cost in check D. the tension between raising prices and keeping a loyal clientele

C. the tension between value creation and the pressure to keep cost in check

By selling a laptop at $1,000 for which consumers are willing to pay up to $1,200, a consumer electronics firm makes a profit of $400 per unit. In this scenario, the amount $600, that is ($1200 - $1000) + $400, is the A. opportunity cost. B. economic value created. C. reservation price. D. consumer surplus.

B. economic value created

What is a value gap? A. real versus perceived value B. economic value creation C. lack of perceived value D. economic value differentiation

B. economic value creation

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 A. superior customer service. B. economies of scale. C. availability of complements. D. learning-curve effects.

B. economies of scale

PureRinse 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 PureRinse applying? A. mass customization B. economies of scope C. learning-curve effect D. network effect

B. economies of scope

All Purpose Tires, Inc. is planning to build a manufacturing plant in Tornado Alley—an area that often gets hit by tornados. According to the SWOT analysis, this location is considered to be an A. external opportunity. B. external threat. C. internal opportunity. D. internal threat.

B. external threat.

When a differentiator charges a similar price as its competitors in the same strategic group but offers more perceived value, it A. loses its competitive advantage. B. gains market share from other firms. C. lowers the economic value created. D. results in diseconomies of scale.

B. gains market share from other firms.

According to the five forces model, which of the following is viewed as a major risk to a business pursuing a cost-leadership strategy? A. competition switching from non-price attributes to pricing B. innovation that allows competitors to emerge with more economical replacements C. new entrants with small production scale D. suppliers requesting a 2% price increase across the industry

B. innovation that allows competitors to emerge with more economical replacements

Intangible assets add great value to a firm primarily because the firm's A. reputation and brand equity are accumulated quickly and can be leveraged easily. B. knowledge and culture take time to develop and are generally difficult to imitate. C. tangible assets require a higher degree of capital than its intangible assets. D. capabilities are by nature typically tangible.

B. knowledge and culture take time to develop and are generally difficult to imitate.

Corner Market Inc. is a supermarket chain. Due to strong competition from other stores in the industry, Corner Market has aggressively used branding, pricing, and superior customer service to uniquely position itself in the market. As a result, the supermarket chain has been able to differentiate itself from its competitors and sell its products at higher prices. Which of the following industry competitive structures does this scenario best illustrate? A. perfect competition B. monopolistic competition C. monopoly D. oligopoly

B. monopolistic competition

Combining economies of learning with the existing production technology allows a firm to A. move up a given experience curve. B. move down a given learning curve. C. jump to a less steeper learning curve. D. jump to a flatter experience curve.

B. move down a given learning curve.

To be cost-competitive, a firm should A. position itself below the productivity frontier. B. operate at the minimum efficient scale. C. attain the highest cost position. D. avoid moving on to a steeper experience curve.

B. operate at the minimum efficient scale.

Which of the following is typically an economic responsibility of a firm? A. sourcing raw materials from highly developed countries B. paying adequate returns to the firm's stockholders on the capital invested by them C. donating resources, in terms of money and time, toward community development D. helping a nation increase its import of goods and services

B. paying adequate returns to the firm's stockholders on the capital invested by them

Teddiez Inc. is a company that manufactures and sells stuffed toys. It sources its materials from another country to keep costs low. A sales personnel in one of its retail stores noticed that there was increasing concern regarding the potential toxicity of the materials in the dolls. In response, she found an economical, organic, and nontoxic cloth filling that the company could use. When her manager learned about this, he presented the prospect and got it approved from the top management team. This is an example of the A. top-down strategic planning approach. B. planned emergence approach. C. scenario planning process. D. reverse engineering process.

B. planned emergence approach.

Which of the following scenarios illustrates a firm that has a sustainable competitive advantage? A. Jamison Inc. generated revenue of $300,000 this financial year, which is close to the industrial revenue average of $320,000. B. CR Inc. almost doubled its sales to 9,000 units this year compared to its previous year's sales of 5,000 units, though the industry average is 10,000 units. C. Zhang Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years. D. Peak Inc. was able to outperform its competitors with its new production system, in terms of revenue, for a brief period of four months.

C. Zhang Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years.

Which of the following resources is a firm's resource stock? A. cash in the bank B. reputation for quality C. land and building D. plant and machinery

B. 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 in which One Electro Inc. lacks. In this scenario, which of the following critical assumptions of the resource-based view of a firm has been illustrated? A. resource equality B. resource heterogeneity C. resource mobility D. resource maturity

B. resource heterogeneity

Handy Helper, Inc. produces decent-quality woodworking tools at a mid-range price. Master Tools, Inc. produces high-quality tools also at a mid-range price. Master Tools gained a competitive advantage because it has ______ than Handy Helper. A. higher economies of scope B. lower economies of scope C. a higher value gap D. a lower value gap

C. a higher value gap

A core tenet of stakeholder strategy is that a A. firm should isolate its internal stakeholders from its external stakeholders. B. single-minded focus on shareholders alone exposes a firm to undue risks that can threaten the very survival of the enterprise. C. multifaceted exchange relationship with internal and external stakeholders can lead to a firm's competitive disadvantage. D. firm should work toward competitive parity rather than gaining and sustaining a competitive advantage.

B. single-minded focus on shareholders alone exposes a firm to undue risks that can threaten the very survival of the enterprise.

Top-down strategic planning as an approach to the strategic management process will be most effective when the A. environment is constantly changing. B. size of the firm is large. C. probability of black swan events is high. D. top management wants to decentralize decision making.

B. size of the firm is large.

Which of the following best qualifies as a firm's internal stakeholder? A. an auditor assigned to the firm by a federal government agency B. a labor union with whom the firm's employees can affiliate C. a manager taking care of the firm's operations in a foreign market D. a competitor manufacturing the same products as that of the firm

C. a manager taking care of the firm's operations in a foreign market

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. strategic trade-offs

Through _____, a firm puts its guiding policy into practice by employing a set of coherent actions. A. strategy control B. strategy implementation C. strategy formulation D. strategy analysis

B. strategy implementation

Which of the following tasks in the AFI strategy framework involves putting the formulated strategy into practice through organizational structure, culture, and controls? A. strategy formulation B. strategy implementation C. strategy analysis D. strategy evaluation

B. strategy implementation

First Ledger Inc., an auditing company, replaced its existing accounting software with new accounting software from another supplier. Since the new software has different features and abilities, First Ledger Inc. has had to spend $10,000 on training its employees to use it. In this scenario, $10,000 represents First Ledger Inc.'s A. opportunity cost. B. switching cost. C. octroi charge. D. excise duty.

B. switching cost.

In the United States, which of the following was born out of dissatisfaction with the capitalist system in 2011? A. the Sarbanes-Oxley Act B. the Occupy movement C. the Tea Party movement D. the Taft-Hartley Act

B. the Occupy movement

Which of the following was a key driver in the Occupy movement of 2011? A. the need for a capitalist economic system B. the issue of income disparity C. the need to reduce government intervention in businesses D. the issue related to dumping of cheap foreign products

B. the issue of income disparity

Cool Cat Inc. has dominated the high-end refrigerator market by producing a reliable refrigerator with many bonus features that appeal to customers. Recently, a competitor has developed a refrigerator that offers many of the same features as Cool Cat's refrigerator. Which of the following will most likely help Cool Cat to keep its competitive advantage? A. a reduction of price B. the loyalty of its customers C. an increase of price D. the loyalty of its retail stores

B. the loyalty of its customers

Which of the following represents an economic factor in a firm's external general environment? A. the government regulations and laws in the country in which the firm exists B. the stage of the business cycle that the country is in C. the values and norms prevalent in the society in which the firm operates D. the bargaining power of the firm's suppliers and buyers

B. the stage of the business cycle that the country is in

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 checkups 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 A. economies of scale. B. learning-curve effects. C. availability of complements. D. experience-curve effects.

C. availability of complements

Organizational values help individuals make choices that are A. legal but unethical. B. both illegal and effective. C. both ethical and effective in advancing a company's goals. D. ethical but ineffective in achieving long-term success.

C. both ethical and effective in advancing a company's goals.

The primary objective of Porter's five forces model is to A. replace a firm's competitive advantage with competitive parity. B. understand the profit potential of different industries. C. reduce the gap between the value of a firm's product and its cost of production. D. break down a firm's value chain activities into primary and support.

B. understand the profit potential of different industries.

A value curve indicates a lack of effectiveness in a firm's strategic profile when it A. stays level. B. zigzags. C. trends downward. D. trends upward.

B. zigzags

Several senior managers recently left Bass Automobile Inc. and went to work at Unicorn Autos Inc., a rival company. What does this imply? A. The resource stock of Bass Automobiles Inc. increased. B. Bass Automobiles Inc. faced resource leakage. C. The resource flow into Unicorn Autos Inc. reduced. D. Bass Automobiles Inc.'s tangible assets decreased.

Bass Automobiles Inc. faced resource leakage.

_____ are incidents that describe highly improbable but highly impactful events. A. Miracle events B. Wild card events C. Black swan events D. Fat tail risk events

Black swan events

In 2008, BlackBerry's market cap peaked at $75 billion. By 2015 this valuation had fallen more than 90 percent, to less than $7 billion. BlackBerry fell victim to two important PESTEL factors in its external environment: sociocultural and technological. How did technology contribute to BlackBerry's decline? A. BlackBerry failed to offer strong security features for its device. B. BlackBerry failed to change its device into one that could perform multiple tasks effectively. C. BlackBerry failed to adapt to a groundswell that involved workers bringing mobile devices to work. D. BlackBerry failed to produce an efficient emailing system using a keyboard.

BlackBerry failed to offer strong security features for its device.

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 A. path dependence. B. dependence complexity. C. causal ambiguity. D. social complexity.

C. causal ambiguity.

Economic value creation is best expressed as A. producer surplus minus consumer surplus. B. consumer surplus minus cost of production. C. consumer surplus plus firm profit. D. producer surplus plus firm profit.

C. consumer surplus plus firm profit.

Molly Hue Apparels Inc. (MHA) had been outsourcing its production to less-developed countries in order to reduce its cost of production. With the emergence of its competitor, Hova Inc., MHA lost its competitive advantage. Hova had its production units in its home country that allowed the company to bring out the latest trends to the market earlier than MHA. Also, MHA frequently suffered due to political instability and lack of intellectual property laws in the outsourced countries. Thus, parts of MHA's strategies became obsolete and it had to relocate its production. What are such obsolete strategies referred to as in the planned emergence model? A. intended strategy B. emergent strategy C. unrealized strategy D. tactical strategy

C. unrealized strategy

The CEO of Juliet Computers was the child of parents who had difficulty making enough money to support their family. As a result, he and his siblings did not have access to many advantages that children from wealthier families had. This CEO, therefore, emphasized making affordable computers that could be bought by low-income households. Which of the following does this example demonstrate? A. dominant strategic planning B. Level-5 leadership pyramid C. upper-echelons theory D. scenario planning

C. upper-echelons theory

The board at TriCom Manufacturing Corp. has decided to allocate 20 percent of the company's shares to its workforce, at a discounted price. Apart from being a valued investment, the plan will allow the employees to take personal responsibility for the firm's performance. Which of the following employee incentive schemes does this best illustrate? A. employee provident fund B. employee gratuity fund C. employee stock ownership plan D. employee emergency loan program

C. employee stock ownership plan

Which of the following is not a condition that can help a firm sustain its competitive advantage? A. when managers have consistently better expectations about the future value of resources B. when the resource advantage can only be imitated after a long period of time C. when past decisions act as constraints for the current dynamic capabilities D. when the source of the competitive advantage is causally ambiguous

C. when past decisions act as constraints for the current dynamic capabilities

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. wholesale and bundling

According to the upper-echelons theory, the organizational outcomes of a company primarily reflect the values of the A. production workers in the company. B. CEO of the company. C. housekeeping staff in the company. D. external stakeholders of the company.

CEO of the company.

In the _____ developed by Michael Porter, competition is not defined narrowly as a firm's closest competitors but rather more broadly to include other factors in an industry like buyers, suppliers, potential new entry of other firms, and the threat of substitutes. A. PESTEL framework B. VRIO framework C. five forces model D. value chain analysis

C. five forces model

In contrast to a differentiator, a cost-leader will A. charge a premium price for its products and services. B. build an organizational culture where creativity and customer responsiveness thrive. C. focus its research and development on process technologies to improve efficiency. D. avoid an organizational structure that relies on strict budget controls.

C. focus its research and development on process technologies to improve efficiency.

Which of the following is step 3 in the five-step process of stakeholder impact analysis? A. identifying the most powerful stakeholders (both internal and external) and their needs B. identifying the stakeholders' interests and claims C. identifying the opportunities and threats the stakeholders present D. identifying the social responsibilities of the firm toward its stakeholders

C. identifying the opportunities and threats the stakeholders present

In order to achieve a competitive advantage, a firm should be able to A. increase its payable turnover. B. keep its producer surplus low. C. increase the difference between the value created and the cost to produce it. D. increase the difference between consumer surplus and its profits.

C. increase the difference between the value created and the cost to produce it.

Andrew invested $200,000 in the shares of a company. At the end of a year, he had earned $7,000 as dividends on his shares along with a $1,000 appreciation in the overall value of his shares. However, if Andrew had invested the same amount on an asset, like gold, the appreciation in its value would have earned him $10,000 at the end of the year. In this scenario, which of the following is Andrew's opportunity cost? A. $7,000 B. $10,000 C. $2,000 D. $200,000

B. $10,000

When a firm operates at an output level of 9,000 units, the per-unit cost is $5. When the production is between 10,000-12,000 units, the per-unit cost is $4. At a production level of 13,000 units, the production cost is again $5 per unit. At 14,000 units and above, the production cost increases further. At what output level does the firm experience economies of scale? A. 9,000 units B. 11,000 units C. 13,000 units D. 15,000 units

B. 11,000 units

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? A. 2,000-3,000 units B. 3,000-4,000 units C. below 2,000 units D. above 4,000 units

B. 3,000-4,000 units

To initiate a strategic move that allows a firm to open up new and uncontested market space through value innovation, managers must address four key questions when formulating a blue ocean business strategy. These questions focus on A. increasing cost and maintaining perceived customer benefits. B. lowering cost and maintaining perceived customer benefits. C. lowering cost and increasing perceived customer benefits. D. increasing cost and increasing perceived customer benefits.

C. lowering cost and increasing perceived customer benefits.

Which of the following statements correctly describes resource heterogeneity? A. Bundles of resources, capabilities, and competencies differ temporarily across firms. B. Bundles of resources, capabilities, and competencies are mostly the same across firms. C. Bundles of resources, capabilities, and competencies differ across firms. D. Bundles of resources, capabilities and competencies are all the same across firms.

C. Bundles of resources, capabilities, and competencies differ across firms.

Which of the following statements accurately describes corporate social responsibility (CSR)? A. CSR promotes the view that companies should single-mindedly focus on shareholders alone. B. CSR is limited to the notion of encouraging businesses to "just be nice" to society. C. CSR provides a conceptual model that more completely describes a society's expectations. D. CSR is based on the tenet that the needs of both internal and external stakeholders are the same.

C. CSR provides a conceptual model that more completely describes a society's expectations.

Which of the following statements about Porter's five forces model is accurate? A. The potential profit of a company is caused mostly by random factors instead of by industry-specific factors. B. Competition must be defined narrowly to focus on the closest competitors and plan ways increase profit potential. C. Competition must be defined in a broad way to incorporate all of the key factors that influence profit potential. D. The potential profit of a company is caused by two forces: threat of substitutes and rivalry among existing firms.

C. Competition must be defined in a broad way to incorporate all of the key factors that influence profit potential.

Why is it better for firms to keep their vision statements customer-oriented rather than product-oriented? A. Customer-oriented visions tend to have a more short-range view of changing environments. B. Customer-oriented visions tend to have a more myopic view of changing environments. C. Customer-oriented visions tend to be more flexible when adapting to changing environments. D. Customer-oriented visions tend to be more stable when dealing with changing environments.

C. Customer-oriented visions tend to be more flexible when adapting to changing environments.

Help Yourself Inc. publishes many types self-help books. Recently, the consumer demand for winter gardening books has increased significantly. Although Help Yourself has limited production facilities, it has increased the production of these books to meet this demand. It hopes to get books to the market faster than its closest competitor, who is also increasing the production of winter gardening books. Which of the following aspects of business-level strategy has Help Yourself accomplished? A. It has enhanced its internal strengths. B. It has eliminated its weaknesses. C. It has exploited external opportunities. D. It has avoided external threats.

C. It has exploited external opportunities.

Which of the following factors best contributes to the U.S. automotive industry being characterized by high entry barriers? A. New auto companies create electric cars powered by simpler motors and gearboxes. B. New entrants in the automotive industry expect that incumbents will not or cannot retaliate. C. Car manufacturers require large-scale production in order to be cost-competitive. D. Few industrial products are as easy to build as cars powered by internal combustion engines.

Car manufacturers require large-scale production in order to be cost-competitive.

Which of the following statements is true of a strategic position? A. Choosing a strategic position requires making important trade-offs between value and cost positions. B. Strategic positions are fixed; they do not change like the environment. C. Differentiation and cost leadership require similar strategic positions. D. A firm is said to have a competitive advantage when it ends up with strategic positions below the productivity frontier.

Choosing a strategic position requires making important trade-offs between value and cost positions.

Which of the following is an accurate statement about near monopolies? A. Near monopolies are medium-sized firms that have some market power and thereby can influence the industry structure to a certain extent. B. Near monopolies are small firms in an industry that have differentiated products but little or no ability to raise their prices. C. Near monopolies are firms that have accrued significant market power and thereby are changing the industry structure in their favor. D. Near monopolies are a few large firms that dominate an industry and have differentiated products, high barriers to entry, and some degree of pricing power.

C. Near monopolies are firms that have accrued significant market power and thereby are changing the industry structure in their favor.

_____ is best described as cooperation by competitors to achieve a strategic objective. A. Co-opetition B. Conglomeration C. Amalgamation D. Liquidation

Co-opetition

Which of the following statements is true of customer-oriented visions? A. Customer-oriented visions identify how a customer need will be met. B. Customer-oriented vision statements are not the same as listening to your customer. C. Customer-oriented visions reduce a company's ability to adapt to a changing environment. D. Customer-oriented visions define a business in terms of goods or services provided.

B. Customer-oriented vision statements are not the same as listening to your customer.

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.

Competitive advantage can be assessed by measuring accounting profit, shareholder value, or economic value.

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 an absolute measure. D. Competitive advantage has been linked to a firm's triple-bottom-line.

Competitive advantage is an absolute measure.

Which of the following reasons justifies the view that functional managers should be allowed to initiate strategic initiatives based on autonomous actions? A. Functional managers have more control and power in the organization than corporate executives. B. Functional managers are much closer to the final products, services, and customers than corporate- or business-level managers. C. Functional managers have a bigger role in identifying a company's vision and mission than the strategic leaders. D. Functional managers are Level 5 managers in the Level-5 leadership pyramid when compared to the executives who are at Level 4.

B. Functional managers are much closer to the final products, services, and customers than corporate- or business-level managers.

Which of the following scenarios best illustrates a good stakeholder strategy? A. VP Inc. follows a strategy in which maximization of the shareholder's wealth is the primary concern of the managers. B. Carrvero Inc. ensures that its employees are paid the least in the industry so that its external stakeholders can get the best price. C. PA Corp. distributes only 70 percent of its annual profit after taxes to shareholders, while the remaining is distributed among employees and the local community, and invested for further research. D. Gen Pharma Corp. ensures that it fully exploits free natural resources, so that most of its profits go to shareholders in the form of dividends.

C. PA Corp. distributes only 70 percent of its annual profit after taxes to shareholders, while the remaining is distributed among employees and the local community, and invested for further research.

Which of the following accurately summarizes the difference between the resources and capabilities of a firm? A. Resources are tangible; capabilities are tangible and intangible. B. Resources are intangible; capabilities are tangible. C. Resources are tangible and intangible; capabilities are intangible. D. Resources are tangible; capabilities are intangible.

C. Resources are tangible and intangible; capabilities are intangible.

If Finolo and Ethver, companies that manufacture televisions, develop the same customer knowledge base and create products that provide the same customer appeal as Invoro, a market leader in consumer electronics, then A. Finolo and Ethver will have a VRIO resource. B. Invoro will have a resource that is valuable but no longer rare. C. Invoro will have a sustainable competitive advantage in the industry. D. Invoro will have a resource that is rare but no longer valuable.

B. Invoro will have a resource that is valuable but no longer rare.

Beats Electronics has been able to outperform Audio-Technica, Bose, JBL, Skullcandy, Sennheiser, and Sony in the high-end, premium headphone market. Which of the following statements accurately explains one of the main reasons for the success of Beat? A. It produced the highest-quality headphones. B. It created a perception that owning its products was cool. C. It emphasized marketing over core competency. D. It focused on sponsoring future athletic superstars.

B. It created a perception that owning its products was cool.

What must a cost-leadership strategy accomplish to be successful? A. It must increase the firm's cost above that of its competitors while offering adequate value. B. It must reduce the firm's cost below that of its competitors while offering adequate value. C. It must increase the firm's cost above that of its competitors while offering superior value. D. It must reduce the firm's cost below that of its competitors while offering superior value.

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

In the smartphone industry, Google is a complementor to Samsung. Which of the following statements best explains why this is true? A. Samsung apps are tailored exclusively for Google smartphones and tablets. B. Google's smartphones increase in value because they face strong buying power from Samsung. C. Samsung's smartphones increase in value when they are preinstalled with Google's Android system. D. Google accounts for a large quantity of Samsung's overall sales.

C. Samsung's smartphones increase in value when they are preinstalled with Google's Android system.

Which of the following best explains why a blue ocean strategy is difficult to implement? A. It requires the combination of fundamentally similar strategic positions—differentiation and low cost. B. It requires the reconciliation of fundamentally different strategic positions—differentiation and low cost. C. It requires the combination of fundamentally similar strategic positions—differentiation and strategic trade-offs. D. It requires the reconciliation of fundamentally different strategic positions—differentiation and strategic trade-offs.

B. It requires the reconciliation of fundamentally different strategic positions—differentiation and low cost.

Which of the following is an accurate statement about learning effects? A. Learning effects involve the dilution of output over time. B. Learning effects involve the accumulation of output over time. C. Learning effects involve the increase of output at a point in time. D. Learning effects involve the decrease of output at a point in time.

B. Learning effects involve the accumulation of output over time.

A firm incurs $100 to manufacture an office table. It fixes the market price of the table as $250, and discounts the price to $200. However, the maximum a person is willing to pay for it is $180. What is the amount of total perceived consumer benefits in this scenario? A. $250 B. $200 C. $180 D. $100

$180

Nicki 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? A. $900 B. $1,100 C. $550 D. $200

$200

A firm has 30 million shares outstanding, and each share is traded at $100. Also, each shareholder gets a dividend of $2,000 annually. In this case, the market capitalization is A. 30,000 shares, that is, 30 million shares/$100. B. $200,000, that is, $2,000 × $100. C. $3 billion, that is, 30 million shares×$100. D. 20:1, that is, $2,000/$100.

$3 billion, that is, 30 million shares×$100.

_____ is best described as an integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage. A. Supply chain management B. Integrated technology management C. Strategic management D. Inventory management

C. Strategic management

GreenHarvest Inc. has used $350,000 from its total annual earnings of $1,250,000 to invest in the research and development of a multi-purpose vaccine. Its account receivable from customers is estimated to be $150,000 and accounts payable $80,000. In monetary terms, what would GreenHarvest Inc.'s resource flows be? A. $1,250,000 B. $150,000 C. $80,000 D. $350,000

$350,000

At a certain output level, the per-unit cost incurred by a firm to manufacture a product is $5. Other factors remaining constant, what will be the new per-unit cost if the cumulative output is doubled, and the firm is able to achieve an 80 percent learning curve? A. $4 B. $5 C. $3 D. $6

$4

Osion Electronics Inc. incurs a cost of $350 to produce one unit of a cell phone. The company's management has priced the product at $600 in the market. Considering the technological advancement of the cell phone, customers perceive its value to be around $800. What is the economic value created in this scenario? A. $350 B. $450 C. $800 D. $200

$450

If a firm's market capitalization is $1 billion and the share price is $50, how many shares outstanding does the firm have? A. 20 thousand B. 20 million C. 500 thousand D. 50 million

20 million

The working capital of a small home-based business is $200,000. The revenues generated account to $600,000, and the profits incurred are $300,000. What would be the company's working capital turnover? A. 3, that is, $600,000/$200,000 B. $300,000, that is, $600,000 - $300,000 C. 2, that is, $600,000/$300,000 D. $100,000, that is, $300,000 - $200,000

3, that is, $600,000/$200,000

Which of the following is a drawback of Porter's five forces model? A. The model describes competition narrowly as a firm's closest competitors. B. Managers cannot determine the changing speed of an industry or the rate of innovation. C. It fails to provide a basis for deriving implications for a firm's strategic position within an industry. D. The model fails to consider that threat of substitutes can come from outside a given industry.

B. Managers cannot determine the changing speed of an industry or the rate of innovation.

At a certain output level, the per-unit cost incurred by a firm to manufacture a product was $60. Once the cumulative output doubled, the cost per unit reduced to $54. All other factors remaining constant, the firm has been able to achieve a(n) A. 80 percent learning curve. B. 90 percent learning curve. C. 60 percent learning curve. D. 54 percent learning curve.

90 percent learning curve

Which of the following describes a peer-to-peer technique? A. A company offers a cleaning service free of charge on a first-time trial basis. B. A company offers a package of cleaning supplies at a discount. C. A company matches an individual with a cleaning service. D. A company places a low retail price on low-selling cleaning supplies.

A company matches an individual with a cleaning service.

Which of the following statements is true of corporate strategy? A. The objective of corporate-level strategy is to ensure that the sum of the values of individual business units is greater than the overall corporate value. B. A corporate strategy must be able to create synergies across business units that are quite different. C. Formulating a corporate strategy involves general managers answering questions relating to how to compete in order to achieve superior performance. D. Deciding whether to adopt a differentiation or a cost-leadership strategy is part of formulating the corporate strategy.

A corporate strategy must be able to create synergies across business units that are quite different.

Which of the following strategies best illustrates a generic business strategy? A. A cost-cutting strategy that corporate executives in the headquarters want all business units of a large conglomerate to implement B. A strategy to use monetary incentives to motivate employees working on a project C. A decision to computerize a firm's database in order to improve customer service D. A decision to niche market the jewelry sold by a company while the apparel division under the same company sells its products through mass marketing

A decision to niche market the jewelry sold by a company while the apparel division under the same company sells its products through mass marketing

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. It is advisable to outsource research and development functions. B. Competitive advantage cannot be gained through unrelated diversification. C. A firm must be effectively organized to capture value. D. It is better to build competitive advantage on tangible assets rather than intangible assets.

A firm must be effectively organized to capture value.

Which of the following is an example of competitive parity? A. A firm manufactures higher-quality wall clocks than its competitors B. A firm provides wall clocks that its consumers value more than other wall clocks C. A firm sells wall clocks at a lower price than its competitors D. A firm produces wall clocks at the same rate as its competitors

A firm produces wall clocks at the same rate as its competitors

For a strategist, which of the following is not an implication of effective strategic management? A. The difference between a firm's success and failure lies in its strategy. B. The principles of strategic management can be applied universally to all organizations. C. A firm's performance is determined by a set of independent factors, which includes firm and industry effects. D. It is necessary to maintain an awareness of key stakeholders and how they can affect or be affected by managerial actions.

A firm's performance is determined by a set of independent factors, which includes firm and industry effects.

Which of the following is an example of fulfilling philanthropic responsibilities? A. A dentist lowers his fees to make his practice more competitive. B. A legal firm donates large amounts of money to charities. C. A skateboard manufacturer builds a handicap entrance required by law. D. A toy manufacturer changes a product to comply with safety standards.

A legal firm donates large amounts of money to charities.

Which of the following statements fails to bring out the essence of the dynamic capabilities perspective? A. A firm's competitive advantage is derived from static resource or market advantages. B. A firm must be able to change its resource base as the external environment changes in order to sustain its competitive advantage. C. A firm should modify its core competencies to effectively compete in dynamic markets. D. A firm's external environment is rarely stable, and in many industries, change is fast and ferocious.

A. A firm's competitive advantage is derived from static resource or market advantages.

Which of the following statements is true of the social responsibilities of a business? A. A firm's ethical responsibilities go beyond its legal responsibilities. B. Shareholders mandatorily require a firm to perform its ethical and philanthropic responsibilities. C. Ethical responsibilities are the foundational building block of a firm's social responsibility. D. Legal responsibilities are often subsumed under the idea of corporate citizenship, reflecting the notion of voluntarily giving back to society.

A. A firm's ethical responsibilities go beyond its legal responsibilities.

Which of the following summarizes the difference between a firm's vision and mission? A. A vision states what a firm wants to accomplish; a mission states how a firm plans to accomplish this vision. B. A vision states the ethical values of a firm; a mission states the monetary goals of a firm. C. A vision states how much a firm wants to earn; a mission states how these earnings will be accomplished. D. A vision states the management values of a firm; a mission states the values of the other workers.

A. A vision states what a firm wants to accomplish; a mission states how a firm plans to accomplish this vision.

In 2014, Apple turned over its inventory more than 53 times. In stark contrast, Microsoft turned over its inventory only about 10 times during the year. Which of the following best explains this difference? A. Apple had a more effective management of its global supply chain than Microsoft. B. Microsoft had a stronger demand for its tablet computer than Apple did for its tablet computer. C. Apple operated its own production facilities and therefore had lower production costs than Microsoft. D. Microsoft had production facilities in countries with lower production costs than Apple.

A. Apple had a more effective management of its global supply chain than Microsoft.

Which of the following provides an example of a firm in a red ocean? A. Chique Apparel offered clothing at a low price but failed to differentiate its product as being exclusive. B. Cheap Apparel offered clothing at a price matching that of its competitors and, as a result, it had lower profit margins. C. Goode Apparel offered clothing at a mid-range price but failed to differentiate its product as being of decent quality. D. Top Drawer Apparel offered clothing at a higher price than competitors and, as a result, failed to make a profit.

A. Chique Apparel offered clothing at a low price but failed to differentiate its product as being exclusive.

In the luxury cruise industry, the small cruise lines Tropics Inc. and Sunset Inc. merged to form TropicalSunset Inc. After the merge, the competition between TropicalSunset Inc. and the two mega cruise lines, Pacifico and West Winds, has increased significantly. Which of the following statements best explains why this happened? A. Competitive rivalry is strongest between firms that are within the same strategic group. B. Competition always increases when two small firms merge into a mega firm. C. Competition always increases if there are only two or three mega firms competing. D. Competitive rivalry is strongest between firms that service the same region.

A. Competitive rivalry is strongest between firms that are within the same strategic group.

_____ 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. A. Economic value created B. Break-even point C. Consumer surplus D. Cost of capital

A. Economic value created

_____ is best described as decreases in cost per unit as output increases. A. Economies of scale B. Economies of scope C. Time compression economies D. Economies of replication

A. Economies of scale

Which of the following is not true of risk capital? A. From the shareholders' perspective, the measure of competitive advantage is primarily based on return on their risk capital. B. Risk capital invested in a firm can be legally recovered if the firm goes bankrupt. C. A person who provides capital to a firm gets equity shares in return. D. Return on risk capital includes stock price appreciation plus dividends received over aspecific period.

B. Risk capital invested in a firm can be legally recovered if the firm goes bankrupt.

Which of the following best explains why IBM has been able to maintain its competitive advantage? A. IBM successfully transformed itself multiple times in the data information industry over a period of more than 100 years. B. IBM hired a new CEO to refocus the company on satisfying market needs, which demanded IT services. C. IBM focused on producing mainframe and mini-computers that would be produced by fully integrated companies. D. IBM helped kick-start the PC revolution in 1981 by setting an open standard in the computer industry with the introduction of the IBM PC.

A. IBM successfully transformed itself multiple times in the data information industry over a period of more than 100 years.

Allure is a cosmetic brand that pursues a cost-leader strategy. Which of the following statements is true of the cosmetic brand? A. It appeals to the price-conscious buyers. B. Its primary value driver is product uniqueness. C. It charges a premium price for its products. D. It directly competes against luxury cosmetic brands that charge premium prices.

A. It appeals to the price-conscious buyers.

Which of the following statements accurately describes a firm's resource flow? A. It is the firm's level of investments to maintain or build a resource. B. It is the firm's current level of intangible resources. C. It is the firm's current level of tangible resources that are common to other firms. D. It is the firm's level of expertise to efficiently deploy a valuable resource.

A. It is the firm's level of investments to maintain or build a resource.

Which of the following expressions accurately describes market cap? A. It is the product of the number of outstanding shares and the share price. B. It is the difference between the book value and the market value of a firm's assets. C. It is the ratio of a firm's equity finance and its debt finance. D. It is the difference between a firm's account receivables and account payables.

A. It is the product of the number of outstanding shares and the share price.

How does causal ambiguity act as an isolating mechanism for organizations? A. It makes it difficult for the competitors to understand why a company has been so successful. B. It creates a situation in which different social and business systems interact with one another. C. It makes it difficult for competitors to deploy their resources by creating ambiguity within their organizational structures. D. It makes it difficult for competitors to imitate core competencies quickly due to time compression diseconomies.

A. It makes it difficult for the competitors to understand why a company has been so successful.

Which of the following best exemplifies social complexity as an isolating mechanism? A. Kristin's Cosmetics attempted to imitate how Monica's Makeup combined its management and product development systems with little success. B. Kristin's Cosmetics failed to acquire the resources for its eyeliner at a low cost and thereby lost its competitive advantage over Monica's Makeup. C. Kristin's Cosmetics had difficulty competing with Monica's Makeup because it could not access the many makeup factories in Kentucky as easily as its competitor. D. Kristin's Cosmetics did not fully understand the reasons for the success of Monica's Makeup and therefore had difficulty competing with the firm.

A. Kristin's Cosmetics attempted to imitate how Monica's Makeup combined its management and product development systems with little success.

How is a firm's task environment different from its general environment? A. Managers have some influence over external factors in the task environment; they have little direct effect over external forces in the general environment. B. Managers have no direct effect over external factors in the task environment; they have some influence over external forces in the general environment. C. Managers have no direct effect over external factors in the task environment; they have influence over all external forces in the general environment. D. Managers have influence over all external factors in the task environment; they have no direct effect over external forces in the general environment.

A. Managers have some influence over external factors in the task environment; they have little direct effect over external forces in the general environment.

Clear Calls Inc., a telephone service provider, has a large user base mainly because phone calls and messages between all Clear Calls users are free. When a person switches to a Clear Calls network, his or her entire network of family and friends is likely to switch to the same network to avail the benefit of free calls and messages. In addition, an existing user who gets a new user to register with Clear Calls Inc. is given a free wireless connection. This has helped to keep competition away from Clear Calls. In this scenario, which of the following factors is acting as an entry barrier for Clear Calls Inc.? A. economies of scale B. high capital requirement C. network effects D. high fixed costs

C. network effects

The primary goal of a firm pursuing a blue ocean strategy should be to A. create the highest perceived value in its respective industry. B. build a reputation of being the lowest-cost producer in its chosen industry. C. offer a differentiated product or service at a low cost. D. achieve a less steeper learning curve.

C. offer a differentiated product or service at a low cost.

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 3-D televisions. According to the dynamic capabilities perspective, what should Onyxo Inc. do? A. Onyxo Inc. should start working on LED and 3-D television technologies to adapt its core competency to suit the external environment. B. Onyxo Inc. should stick to its existing core competency, that is LCD technology, as it is the best in that segment. C. Onyxo Inc. should take proactive steps to reduce the causal ambiguity and socially complexity of its core competency. D. Onyxo Inc. should work on enhancing the mobility of its core competency.

A. Onyxo Inc. should start working on LED and 3-D television technologies to adapt its core competency to suit the external environment.

Which of the following is an accurate statement about the relationship between firm effects and industry effects? A. Firm effects deal with the action of competitors; industry effects deal with internal circumstances. B. Firm effects deal with a manager's actions; industry effects deal with external circumstances. C. Firm effects deal with a manager's actions; industry effects deal with internal circumstances. D. Firm effects deal with the action of competitors; industry effects deal with external circumstances.

Firm effects deal with a manager's actions; industry effects deal with external circumstances.

How do low interest rates affect a business? A. Firms tend to defer investments. B. Firms can easily borrow money to finance future growth. C. Consumer demand slows down. D. Business credit is harder to obtain.

Firms can easily borrow money to finance future growth.

Which of the following scenarios best illustrates bundling? A. Clean Brush Inc. sells its electric toothbrushes for a low cost, but charges a high price for replacement brushes. B. Cumulus Media Inc. sells its cloud computing network by having customers pay for the service as they use it. C. Sharp Cable Inc. sells its basic TV channels for free but charges high prices for any channels that customers add on later. D. Fresh Seeds Inc. sells seed packages, in which a person can buy a package of three types of seeds at a discounted price compared to buying the seeds individually.

Fresh Seeds Inc. sells seed packages, in which a person can buy a package of three types of seeds at a discounted price compared to buying the seeds individually.

Pioneer Pharma Inc. and GH Medicines Corp. are two competing firms in the pharmaceutical industry. While Pioneer Pharma Inc.'s vision is "to be a preeminent drug manufacturer in the industry," GH Medicines Corp.'s vision is "to make good health a reality for everyone around the world." Which of the following is an implication of these different visions? A. GH Medicines' vision is more product-oriented than the vision of Pioneer Pharma. B. Pioneer Pharma is more likely to have a positive relationship between its vision and firm performance than GH Medicines. C. Pioneer Pharma's vision is more long-term and futuristic than GH Medicines' vision. D. GH Medicines will be more flexible than Pioneer Pharma when adapting to changing environments.

GH Medicines will be more flexible than Pioneer Pharma when adapting to changing environments.

The share price of Groupon, a daily-deal website, fell by 90 percent just a year after its successful initial public offering. The firm was not able to sustain its competitive advantage because of the emergence of other daily-deal sites that were able to better serve the needs of local markets and specific population groups. Which of the following is the most accurate inference from this example? A. Groupon's competency was not hard to imitate. B. Groupon's competency was built more on an intangible resource than on a tangible one. C. Groupon operated in an industry where the barriers to entry were high. D. Groupon invested in resources that were invaluable and common.

Groupon's competency was not hard to imitate.

_____ of receivables turnover imply more efficient management in collecting accounts receivable and shorter durations of interest-free loans to customers. A. Unsteady ratios B. Steady ratios C. Higher ratios D. Lower ratios

Higher ratios

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? A. How do customers view us? B. How do we reduce the economic value created? C. What core competencies do we need? D. How do shareholders view us?

How do we reduce the economic value created?

Which of the following is a key question managers must answer to formulate an appropriate business-level strategy? A. When will we satisfy our customer needs? B. How will we satisfy our customer needs? C. Where will we satisfy our customer needs? D. Can we satisfy our customer needs?

How will we satisfy our customer needs?

When evaluating the sustainability of a firm's competitive advantage, which of the following statements is not true? A. The competitive advantage will not be sustainable if there are substitutes for the firm's core competence. B. If managed effectively, existing core competencies can help sustain the competitive advantage indefinitely. C. Social complexity often leads to a competitive advantage that is sustainable. D. When expectations of future resource value turn out to be accurate and can be repeated, then a sustained competitive advantage is realized.

If managed effectively, existing core competencies can help sustain the competitive advantage indefinitely.

Which of the following is an advantage of applying the economic value creation perspective to assess a firm's performance? A. When the need for "hard numbers" arises, managers and analysts rely on economic value creation perspective to measure competitive advantage. B. In economic value perspective, analysts not only consider historical costs, but also opportunity costs. C. Arriving at the economic value created is easy because determining the value of a good in the eyes of consumers is a simple task. D. It is the most efficient tool for assessing corporate-level competitive advantage of highly diversified companies with large product portfolios

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

Which of the following statements accurately brings out the difference between monopolistic competition and an oligopoly? A. Sellers in an oligopoly provide highly differentiated products; in monopolistic competition, the products sold are undifferentiated or standardized. B. In an oligopoly, the number of buyers is large; in monopolistic competition, the number of buyers is limited to three or four. C. Firms in an oligopoly have no pricing power; firms in a monopolistically competitive industry have the ability to raise prices. D. In monopolistic competition, many firms compete against each other; in an oligopoly, there are few large firms competing against each other.

In monopolistic competition, many firms compete against each other; in an oligopoly, there are few large firms competing against each other.

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? A. In the resource-based model, resources are freely available and mobile, whereas in the perfectly competitive industry structure, resources are highly immobile. B. In perfect competition, it is extremely difficult to replicate the resource bundles of a firm, whereas in the resource-based model, it is extremely easy to imitate them. C. 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. D. In the resource-based model, only physical assets of a firm are considered as resources, whereas in perfect competition, a firm's capabilities and competencies are also considered as resources.

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.

Which of the following statements is true of top-down strategic planning? A. Information flows both ways in the process, from the upper management to the lower management and also the other way around. B. In this process, the formulation of strategy is separate from implementation. C. Employees at the operation level have major responsibility in strategizing for competitive advantage. D. The process is based on the assumption that the past cannot be used to predict the future.

In this process, the formulation of strategy is separate from implementation.

Understanding the Resource Allocation Process (RAP) will have large effects on shaping a firm's realized strategy. Which of the following is an example of such an allocation of resources? A. Starbucks' launch of iced drinks B. Teach For America's mission statement C. Merck's voluntary withdrawal of Vioxx from the market D. Intel's rule to "maximize margin-per-wafer-start"

Intel's rule to "maximize margin-per-wafer-start"

_____ are barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy. A. Embargoes B. Cartel arrangements C. Isolating mechanisms D. Market niches

Isolating mechanisms

Which of the following is an advantage of the balanced-scorecard? A. It is a tool for both strategic formulation and strategic implementation. B. It allows managers to translate a firm's vision into measureable operational goals. C. The balanced- scorecard is independent of the skills of the managers responsible for its implementation. D. Its implementation is a one-time effort and does not require continuous tracking of metrics or updating of strategic objectives.

It allows managers to translate a firm's vision into measureable operational goals.

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.

It attempts to provide a holistic perspective on firm performance.

Although JetBlue used a blue ocean strategy to achieve an initial competitive advantage, it failed to maintain this advantage. Which of the following provides the best reason for this development? A. It failed to drive up the perceived customer value. B. It failed to refine its strategic position over time. C. It failed to move into a non-contested market space. D. It failed to offer enough strategic trade-offs.

It failed to refine its strategic position over time.

The average cost of production for a bottle of vitamin water in the industry is $4 while its average price is $7. StoreAll Inc. manufactures the same product for $3 per bottle and sells it for $7 per bottle. Which of the following statements is most likely true of StoreAll Inc. in this scenario? A. It has a competitive advantage in the industry. B. It has a competitive disadvantage in the industry. C. It has competitive parity with other firms in the industry. D. It has formed a strategic alliance with other firms in the industry.

It has a competitive advantage in the industry.

How does a sustainable strategy typically help a firm? A. It helps the firm focus solely on its financial goals. B. It reduces the need for corporate social responsibility within the firm. C. It facilitates the firm in effectively isolating its external stakeholders. D. It helps the firm achieve positive results along the social and ecological dimensions.

It helps the firm achieve positive results along the social and ecological dimensions.

GN Corp. and BC Inc. are two competing firms in the same industry. GN Corp.'s tangible assets are valued at $15 billion and its intangible assets are valued at $35 billion. BC Inc.'s tangible assets are valued at $5 billion and its intangible assets are valued at $45 billion. What can be concluded from this information? A. It is easier to buy intangible assets with cash than tangible assets. B. It is likely that BC Inc. is better enabled than GN Corp. to gain and sustain a competitive advantage. C. It takes longer time to build tangible assets than intangible assets. D. There is no resource heterogeneity between the two firms, BC Inc. and GN Corp., as they operate in the same industry.

It is likely that BC Inc. is better enabled than GN Corp. to gain and sustain a competitive advantage.

Which of the following is an implication of high employee turnover in a company? A. It results in a reduction in the company's intangible-resource stocks. B. It makes the source of the company's competitive advantage causally ambiguous. C. It makes the source of the company's competitive advantage socially complex. D. It results in greater immobility and heterogeneity of the company's resources.

It results in a reduction in the company's intangible-resource stocks.

Both Viten Electronics Inc. and JL Electronics Inc. incur a cost of $400 to manufacture a LED television. However, the economic value created by JL Electronics is more than that created by Viten Electronics. What does this indicate? A. Viten Electronics has a competitive advantage over JL Electronics. B. Both Viten Electronics and JL Electronics have achieved competitive parity. C. JL Electronics can charge a premium price on its televisions. D. Viten Electronics has created a higher value gap than JL Electronics.

JL Electronics can charge a premium price on its televisions.

Which of the following describes an airline that is most likely stuck in the middle? A. Red Carpet Airline that offers complimentary drinks and meals, coast-to-coast coverage via connecting hubs, plush airport lounges, and high prices. B. Plush Airline that offers international routes and global coverage, high customer service, high reliability, and high prices. C. Just Right Airline offers high-quality beverages and meals, plush airport lounges, only a few connections via hubs domestically, poor customer service, and low prices. D. Bottom Line Airline that offers no assigned seating, no in-flight amenities, no drinks or meals, no airport lounges, and low prices.

Just Right Airline offers high-quality beverages and meals, plush airport lounges, only a few connections via hubs domestically, poor customer service, and low prices.

Which of the following statements is true of learning curves? A. Learning curves are captured at one point in time when output is increased. B. Learning curves can be observed in manufacturing processes and professional services. C. As cumulative output increases, the learning curve becomes less steep. D. The steeper the learning curve, the lesser the learning effects.

Learning curves can be observed in manufacturing processes and professional services.

Jorge is part of a sales team. He effectively coordinates his tasks with others in the team and willingly contributes to their efforts in achieving the team's objectives. Thus, Jorge is in _____ of the Level-5 leadership pyramid. A. Level 5 B. Level 4 C. Level 3 D. Level 2

Level 2

Jason is a manager. His colleagues and subordinates look up to him as a man who always does the right things. Along with other skills, his ability to effectively organize and deploy resources like man power, material, and money has been appreciated by his seniors. According to the Level-5 leadership pyramid, which of the following levels would be the immediate next step for Jason? A. Level 2 B. Level 3 C. Level 4 D. Level 5

Level 4

Trung has been an employee with PureEnergy Inc. for 15 years. He started with an entry-level job, and today he is a manager of an entire division. Over the years, Trung has acquired a reputation for doing the right things in the company. Hence, as an efficient leader, he is capable of effectively communicating and motivating his subordinates to work toward the company's vision and mission. According to the Level-5 leadership pyramid, which is the highest level of leadership Trung has reached so far? A. Level 5 B. Level 4 C. Level 3 D. Level 2

Level 4

According to the Level-5 leadership pyramid, a manager turns into an executive who is capable of building lasting greatness into the organization through a combination of willpower and humility when he or she reaches A. Level 5. B. Level 3. C. Level 2. D. Level 1.

Level 5.

Which of the following is a disadvantage of measuring firm performance through total return to shareholders and firm market capitalization? A. Market volatility makes it difficult to assess firm performance through these measures, particularly in the short-term. B. These tools fail to indicate how the stock market views all available public information about a firm's expected future performance. C. These tools measure competitive advantage in absolute terms rather than relative terms. D. Only the book value of the share prices is taken into account when applying these measures, and not the market value.

Market volatility makes it difficult to assess firm performance through these measures, particularly in the short-term.

_____ are best described as industry-specific factors that separate one strategic group from another. A. Mobility barriers B. Excise duties C. Embargoes D. Learning effects

Mobility barriers

_____ are best described as the value of the best forgone alternative use of the resources employed. A. Variable costs B. Opportunity costs C. Social costs D. Switching cost

Opportunity costs

_____ are best described as the ethical standards and norms that govern the behavior of individuals within a firm. A. Job descriptions B. Customs duties C. Corrective controls D. Organizational values

Organizational values

Which of the following statements should ideally reflect a firm's strategy for competitive advantage? A. Our strategy is to win at any cost. B. We will be number one in the industry. C. Our aim is to create superior customer value while controlling costs. D. We want to be the market leader by replicating our competitor's strategy.

Our aim is to create superior customer value while controlling costs.

Which of the following management tools will help determine the external opportunities and threats that affect a firm? A. Porter's five forces analysis B. PESTEL analysis C. VRIO framework D. Ansoff's matrix

PESTEL analysis

____ indicates how much a firm benefits from interest-free loans extended by its suppliers and creditors. A. Payables turnover B. Receivables turnover C. Assets turnover D. Inventory turnover

Payables turnover

Which of the following statements is true about strategic groups? A. It is not possible to have two different strategic groups within the same industry. B. Rivalry within the same strategic group tends to be lower than rivalry between different strategic groups. C. Profitability varies between different strategic groups. D. Companies within the same strategic group are complementors to each other.

Profitability varies between different strategic groups.

____ indicates how fast a firm is collecting the credit amount extended by a firm to its customers. A. Payables turnover B. Receivables turnover C. Assets turnover D. Inventory turnover

Receivables turnover

How are the two approaches, strategic planning and scenario planning, different from the strategy-as-planned-emergence approach? A. Strategy as a planned emergence model was introduced before strategic planning and scenario planning. B. Unlike strategic planning and scenario planning, strategy as a planned emergence model does not begin with a strategic plan. C. Relative to strategic planning and scenario planning, strategy as a planned emergence model is a less formal and less stylized approach to the development of strategy. D. Unlike strategic planning and scenario planning, strategy as a planned emergence model is a rational top-down planning approach.

Relative to strategic planning and scenario planning, strategy as a planned emergence model is a less formal and less stylized approach to the development of strategy.

_____ is the money shareholders provide in return for an equity share, which they cannot recover if the firm goes bankrupt. A. Tangible assets B. Value creation C. Risk capital D. Market capitalization

Risk capital

Juanita, 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 her 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 Juanita employing? A. Blake Mouton managerial grid B. Ansoff's matrix C. BCG analysis D. SWOT analysis

SWOT analysis

Which of the following statements accurately brings out the difference between top-down strategic planning and scenario planning? A. While in top-down strategic planning a top-down approach is used to develop strategies, in scenario planning a bottom-up approach is used. B. Scenario planning helps create strategic plans that are more flexible, and thus more effective, than those created through the more static strategic planning approach. C. While top-down strategic planning takes place at both the corporate and business levels of strategy, scenario planning takes place only at the corporate level. D. Top-down strategic planning addresses only pessimistic futures, whereas scenario planning addresses only optimistic futures.

Scenario planning helps create strategic plans that are more flexible, and thus more effective, than those created through the more static strategic planning approach.

____ are the legal owners of public companies. A. Employees B. Shareholders C. Category captains D. Creditors

Shareholders

While Aros Inc. incurs a cost of $20 for a pair of shoes, Shoes Cult Inc., its competitor, manufactures a pair of shoes at $22. Both the companies are able to sell their shoes for a maximum of $30 per pair. Which of the following statements is true in this scenario? A. Both Aros and Shoes Cult have achieved differentiation parity. B. Aros is a cost-leader when compared to Shoes Cult. C. Aros has created a greater economic value than Shoes Cult. D. Shoes Cult has a competitive advantage over Aros.

Shoes Cult has a competitive advantage over Aros.

While industry forces have been favorable for a long time in the U.S. automotive industry, recent dynamics have lowered the profit potential of competing in this industry and thus reduced its attractiveness. The continued success of Tesla Motors in the industry will depend on other firm and industry factors. Which of the following represents one such factor that directly affects Tesla Motors? A. Since suppliers of its key sources are few, the bargaining power of suppliers is high. B. Since individual buyers do not have many choices, their bargaining power is low. C. There is a lack of balance in demand and supply, demand far exceeds capacity within the industry. D. There is a noticeable absence of complementary products and services for the industry.

Since suppliers of its key sources are few, the bargaining power of suppliers is high.

Smart Feet Inc. produces shoes that are better quality and cost more to make than the shoes of its competitors. Smart Feet realizes that there will be a large difference between the cost to produce the shoes and the consumer's willingness to pay for them. Even so, Smart Feet decides to charge the same price as its competitors. Which of the following will most likely be the result of this action? A. Smart Feet will go out of business. B. Smart Feet will increase its marketability. C. Smart Feet will gain market share. D. Smart Feet will be bought by a competitor.

Smart Feet will gain market share.

_____ provides a decision tool that enables a firm to act as a good corporate citizen by allowing its managers to recognize, prioritize, and address the needs of different groups of individuals who take personal interest in the firm's performance and survival. A. Strategy analysis B. Stakeholder impact analysis C. The SWOT analysis D. Strategic positioning

Stakeholder impact analysis

Which of the following statements is true of strategic initiatives? A. Strategic initiatives can be the result of a response to external trends or come from internal sources. B. When lower-level employees are less empowered, the possibility of strategic initiatives is higher. C. Strategic initiatives result from top-down planning by executives and not through a bottom-up process. D. Random events and accidental happenstances reduce the possibility of strategic initiatives in organizations.

Strategic initiatives can be the result of a response to external trends or come from internal sources.

What is the strategic management process? A. The CEO decides who the product managers will be for a company. B. The CEO defines the main problems facing a company. C. Strategic leaders design a method to formulate and implement strategy. D. Strategic leaders focus on creating a vision that reflects the company's strategy.

Strategic leaders design a method to formulate and implement strategy.

Why is strategy considered to be the science of success and failure? A. Strategies can ensure the exact outcome of all business ventures undertaken. B. Strategies use extensive research by a variety of scientists. C. Strategies require a large amount of thinking and planning. D. Strategies use principles that can be applied universally to all organizations.

Strategies use principles that can be applied universally to all organizations.

Keeping in mind the five forces in the airline industry, which of the following best explains the situation in the industry? A. Substitutes are readily available in the form of trains and buses, thus reducing the profit potential in the industry. B. Suppliers have weak bargaining power because they offer products that are not differentiated. C. Entry barriers in the industry are high resulting in hardly any new airlines popping up. D. Consumers in the industry make decisions based on price, thus reducing the intensity of rivalry in the industry.

Substitutes are readily available in the form of trains and buses, thus reducing the profit potential in the industry.

Which of the following is an advantage of a triple-bottom-line approach? A. The approach takes an integrative and holistic view in assessing a company's performance. B. The approach does not rely on an external view of a firm to assess its performance. C. The approach is more of a quantitative performance metric rather than a mere conceptual framework. D. The framework can help managers assess a firm's competitive advantage without taking into account the firm's performance along noneconomic dimensions.

The approach takes an integrative and holistic view in assessing a company's performance.

A company uses the planned emergence approach in the development of its strategies. Which of the following is an implication of this? A. The employees will be isolated from the process of setting the company's vision and mission. B. The lower-level employees will be restricted to the tasks involved in strategic implementation. C. The company's organizational structure and systems will be designed to support bottom-up strategic initiatives. D. The top management will create a strategy that is based on hard data alone, rather than an inspiring vision.

The company's organizational structure and systems will be designed to support bottom-up strategic initiatives.

Which of the following best illustrates a strategic business unit (SBU)? A. The human resource department of a large company that is responsible for hiring employees for all its divisional branches B. The consumer electronics division of a large company that also manufactures automobiles, apparel, and processed food C. The product development team at the headquarters of a fast-food chain D. The market segment which can be categorized between the income levels $10,000 and $25,000

The consumer electronics division of a large company that also manufactures automobiles, apparel, and processed food

A firm's learning curve is steeper than that of its competitor. What does this imply? A. The firm is at an advantage when compared to its competitor. B. The firm and its competitor have achieved cost parity. C. The firm experiences negative returns to scale. D. The firm experiences diseconomies of scale when compared to the competitor.

The firm is at an advantage when compared to its competitor.

Which of the following scenarios would threaten a firm that uses a differentiation strategy? A. The firm increases the uniqueness of its product without increasing its price. B. The firm adds product features that raise cost and perceived value. C. The firm's focus shifts to price rather than value-creating features. D. The firm's product has not established an acceptable standard of quality.

The firm's focus shifts to price rather than value-creating features.

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? A. The firm's number of outstanding shares is 25 million. B. The firm pays an annual dividend of 10 percent. C. The firm's total return to shareholder is $5 billion. D. The firm's economic value created is $5 billion.

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

Why do firms operating in a monopolistically competitive industry have the power to raise the prices of their products or services? A. The competition in the industry is insignificant. B. The number of buyers in the industry is small. C. The firms can differentiate their product offerings. D. The entry barriers in the industry are extremely high.

The firms can differentiate their product offerings.

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.

The framework fails to provide the foundation that will help firms decide between cost-leadership or differentiation strategies.

Which of the following methods of developing a strategy best illustrates scenario planning? A. Based on the previous year's profits, the CEO of Solva Inc. decided to adopt an expansion strategy in its home market. B. A sales personnel of MP Foods Inc. suggested that the company should introduce an organic version of its gelato to cater to the needs of the increasing health-conscious population. C. The managers at Lyon Clothing Inc. formulated a strategy to tackle any increase in the prices of cotton in the future. D. The CEO of BCT Inc., a large conglomerate, has decided to enter the South American market based on the competitor's success in the same market.

The managers at Lyon Clothing Inc. formulated a strategy to tackle any increase in the prices of cotton in the future.

Which of the following strategies best illustrates a functional strategy? A. The CEO of Sunrise Companies Inc. has decided that the company will be entering the European market. B. The general manager of a product division of Pickford Products Inc. has decided that 30 percent of the division's annual profits will be invested in research and development. C. The regional manager for the military electronics division of Holden & Co. has decided that the division will pursue backward integration to save costs. D. The production manager at the apparel division of Wilder Style Co. has decided that the department will hire contract workers for three months to meet the temporary demand.

The production manager at the apparel division of Wilder Style Co. has decided that the department will hire contract workers for three months to meet the temporary demand.

Earlier, the travel industry was controlled by a few large travel companies that booked holidays, air tickets, bus tickets, and hotels for their customers. However, with the emergence of the Internet, smaller travel agencies started mushrooming in the industry and customers started making their own reservations. Which of the following can be inferred from this information? A. The travel industry changed from a consolidated structure to a fragmented one. B. The pricing power of the incumbent firms in the travel industry has increased. C. The bargaining power of buyers in the travel industry has decreased. D. The structure of the travel industry changed from monopolistic competition to an oligopolistic one.

The travel industry changed from a consolidated structure to a fragmented one.

How is the triple-bottom-line approach different from the traditional approaches to measuring competitive advantage? A. The triple-bottom-line takes a more integrative and holistic view in assessing a company's performance than traditional approaches do. B. The triple-bottom-line places less emphasis on financial success in assessing a company's performance than traditional approaches do. C. The triple-bottom-line uses a more one-dimensional approach in assessing a company's performance than traditional approaches do. D. The triple-bottom-line relies more on internal factors in assessing a company's performance than traditional approaches do.

The triple-bottom-line takes a more integrative and holistic view in assessing a company's performance than traditional approaches do.

What is the rule of thumb behind Porter's five forces model? A. The stronger the five forces, the greater the industry's profit potential—making the industry less attractive. B. The stronger the five forces, the lower the industry's profit potential—making the industry more attractive. C. The weaker the five forces, the greater the industry's profit potential—making the industry more attractive. D. The weaker the five forces, the lower the industry's profit potential—making the industry less attractive.

The weaker the five forces, the greater the industry's profit potential- making the industry more attractive.

Which of the following is a characteristic of a fragmented industry? A. The entry barriers are high. B. There are many small firms. C. Firms tend to have high profitability. D. Firms have substantial pricing power.

There are many small firms.

Which of the following statements accurately describes firm effects? A. They attribute firm performance to the industry in which the firm competes. B. They attribute firm performance to the actions managers take within a chosen industry. C. They refer to the value-creation potential of a large, diversified enterprise. D. They refer to the external circumstances surrounding all the firms in an industry.

They attribute firm performance to the actions managers take within a chosen industry.

Why are differentiation and cost-leadership strategies referred to as generic business strategies? A. They can be simultaneously pursued by a firm without any trade-offs. B. They can be used by any organization independent of industry context. C. They require similar strategic positions in order to increase a firm's chances to gain competitive advantage. D. They can be applied only by businesses, which have a competitive advantage.

They can be used by any organization independent of industry context.

How do strong ethical values benefit a firm? A. They lay the groundwork for a quick increase of profits and short-term success. B. They serve as the guardrails put in place to keep the company on track when pursuing its mission. C. They provide strong public relations, which can either benefit or hinder competitive advantage. D. They emphasize benefiting employees by significantly increasing profit.

They serve as the guardrails put in place to keep the company on track when pursuing its mission.

Which of the following statements about product-oriented visions is true? A. They tend to force managers to take a myopic view of the landscape. B. They allow companies to effectively adapt to changing environments. C. They define a business in terms of providing solutions to customers. D. They allow firms to take a need-based approach to their goals.

They tend to force managers to take a myopic view of the landscape.

How are cumulative learning and experience effects of a company most likely to affect Michael Porter's five forces? A. Threat of new entrants will be low. B. Bargaining power of suppliers will be high. C. Availability of complements will be low. D. Threat of substitute products and services will be high.

Threat of new entrants will be low.

Which of the following provides an example of how a firm's valuable resource can be imitated? A. To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of a sports car. B. To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of the Leaning Tower of Pisa. C. To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of the U.S.S. Enterprise aircraft carrier. D. To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of a grizzly bear.

To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of the Leaning Tower of Pisa.

In the context of the resource-based model of competitive advantage, which of the following scenarios best exemplifies resource immobility? A. AP Corp. has earned a good reputation among its shareholders by investing more in tangible assets over intangible assets. B. Two Triangle Inc. has lost its market share because its resources are not mobile, that is rigid, inflexible, and static. C. Blue Elixir Corp. has been able to gain a competitive advantage because of its ability to efficiently move its resources from one manufacturing unit to another. D. True 3 Inc. has been able to outperform its competitors because the uniqueness of its resources is difficult to replicate.

True 3 Inc. has been able to outperform its competitors because the uniqueness of its resources is difficult to replicate.

The receivables turnover of VK Products Inc. is 13.6 and that of its competitor DL Goods Inc. is 6.0. What does this financial data primarily imply? A. VK Products is less efficient than DL Goods in collecting accounts receivables. B. DL Goods pays its creditors more quickly as compared to VK Products. C. VK Products collects accounts receivables faster than AP Goods does. D. DL Goods has a larger value gap as compared to VK Products.

VK Products collects accounts receivables faster than AP Goods does.

Which of the following management tools will help determine whether a firm's resources, capabilities, and competencies are strengths or weaknesses? A. Porter's five forces analysis B. PESTEL analysis C. VRIO framework D. Ansoff's matrix

VRIO framework

_____ denotes the dollar amount a consumer would attach to a good or service. A. Utility B. Value C. Consumer surplus D. Economic contribution

Value

How did Virgin America enter the airline industry despite the industry's notoriously low profitability? A. Virgin America offered average-cost service between small and large metropolitan cities in the American West. B. Virgin America offered average-cost service between major metropolitan cities along the American East Coast. C. Virgin America offered low-cost service between small and large metropolitan cities in the American South. D. Virgin America offered low-cost service between major metropolitan cities on the American East and West coasts.

Virgin America offered low-cost service between major metropolitan cities on the American East and West coasts.

Which of the following statements about a firm's stakeholders is true? A. Irrespective of whether the stakeholders are internal or external, the claims and interests of all stakeholders are the same. B. As the legal owners, employees in a public-stock company have the most legitimate claim on a company's profits. C. Within stakeholder groups there can be significant variation in the power a stakeholder may exert on a firm. D. Only internal stakeholders make specific contributions to a firm, which in turn provides different types of benefits to the external stakeholders.

Within stakeholder groups there can be significant variation in the power a stakeholder may exert on a firm.

_____ is best described as a measure of how effectively capital is being used by a firm to generate revenue. A. Return on revenue B. Risk capital C. Working capital turnover D. Revenue per employee

Working capital turnover

Rice Dazzle Inc. has been making the same breakfast cereal for 50 years. Recently, sales have plummeted. To counteract this, the company created a new package that included an endorsement by a celebrity. As a result, sales increased close to previous highs. However, the cereal itself remained the same. According the VRIO framework, is the new packaging a valuable resource for Rice Dazzle? A. Yes, because the new packaging has an endorsement by a celebrity. B. Yes, because the new packaging made the product more attractive in the eyes of consumers. C. No, because the new packaging did not improve the product itself. D. No, because the new packaging did help to not increase sales past the previous high for sales.

Yes, because the new packaging made the product more attractive in the eyes of consumers.

Which of the following firms will most likely not be a complementor to a firm that manufactures computers? A. a company that develops operating software B. a company that develops application software C. a company that manufactures its own brand of desktops and laptops D. a company that manufactures portable external disks

a company that manufactures its own brand of desktops and laptops

Which of the following examples uses a focused differentiation strategy? A. a tennis pro shop that sells low-quality racquets priced at 150 dollars per racquet B. a coffee shop that offers mediocre lattes at a price of five dollars for a small latte C. a hotel chain that offers high-quality service with room rates of under 75 dollars per night D. a cosmetics brand that offers superior-quality skin lotion priced at 100 dollars per bottle

a cosmetics brand that offers superior-quality skin lotion priced at 100 dollars per bottle

The tenet behind the triple-bottom-line is that A. a firm should solely focus on increasing the economic value created to/for its customers. B. a firm's primary objective should be increasing the total returns to its shareholders. C. a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy. D. a firm's return on revenue can be broken down into three ratios: COGS/Revenue, R&D/Revenue, and SG&A/Revenue.

a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy

Which of the following is an accurate description of a Level 1 manager? A. an individual who works effectively with others to achieve synergies and team objectives B. a highly capable individual who makes productive contributions through motivation, talent, knowledge, and skills C. an individual who "does things right," is an effective team player, and organizes resources effectively to achieve predetermined goals D. an individual who is an effective strategic leader that builds enduring greatness into the organizations he or she leads

a highly capable individual who makes productive contributions through motivation, talent, knowledge, and skills

Shield Autos Inc. has newly launched a luxury car into the European market. Which of the following would most likely not be a complement to the car? A. a premium car manufactured and sold by Mova Autos Inc., a rival company B. a bank that insures cars against theft and accidents C. a car service station managed and run by Shield Autos Inc. D. a stereo system that can be used as a GPS system in cars

a premium car manufactured and sold by Mova Autos Inc., a rival company

Golden Harvest is a restaurant located inside a five-star hotel. It caters mainly to customers who are concerned about quality dining rather than the prices. In this scenario, which of the following will be a part of Golden Harvest's strategic group? A. a nearby fast-food restaurant B. a food kiosk in an adjacent subway station C. a premium rooftop restaurant in the same city D. a mobile food cart parked opposite to the five-star hotel

a premium rooftop restaurant in the same city

Which of the following is an element of good strategy? A. an explanation of the firm's advantages over competitors B. a guiding policy to address employee satisfaction C. a set of coherent actions to implement the firm's guiding policy D. an approach that underestimates the competition

a set of coherent actions to implement the firm's guiding policy

Which of the following is the best characterization of sociocultural forces? A. a firm's culture, norms, and values B. a society's culture, norms, and values C. a competitor's culture, norms, and values D. a focus group's culture, norms, and values

a society's culture, norms, and values

Which of the following is not a stakeholder attribute that managers consider during stakeholder impact analysis? A. a stakeholder's power B. a stakeholder's legitimate claim C. a stakeholder's urgent claim D. a stakeholder's liquidity

a stakeholder's liquidity

The perfectly competitive industry structure differs from the resource-based model in its view that A. all firms have access to the same resources. B. accessibility to bundles of resources differ across firms. C. resources tend to be "sticky." D. competencies differ across firms working in the same industry.

all firms have access to the same resources.

Competitive industry structure refers to elements and features common to A. all industries. B. successful industries. C. new industries. D. incumbent industries.

all industries.

Best Cut Inc. sells cutlery by having salespeople set up appointments with potential customers and give them a sales pitch for the product. When a salesperson sells cutlery, he or she gets a predetermined percentage commission. This type of business model is called A. an agency. B. bundling. C. wholesale. D. a freemium.

an agency

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 A. a company that sells wristwatches at affordable prices. B. a luxury apparel company that sells designer clothes. C. an apparel company popular among price-conscious customers. D. an online company that sells customized pet clothing.

an apparel company popular among price-conscious customers.

Unlike the financial ratios based on accounting data, total return to shareholders is A. backward-looking and historic in nature. B. an external performance metric. C. an absolute measure of competitive advantage. D. unaffected by market volatility or macroeconomic factors.

an external performance metric.

In the context of SWOT analysis, which of the following best exemplifies a firm's external opportunity? A. an increase in its financial resources B. an increase in its brand equity C. an increase in its customers' disposable income D. an increase in its employee productivity

an increase in its customers' disposable income

The Beacon is a newspaper that sold print copies of its paper in a medium-sized town in Kansas for more than 100 years. Recently, the Beacon signed a deal with IntelNews Inc. to present the paper digitally to homes and businesses. This example shows A. a monopoly. B. an oligarchy. C. monopolistic competition. D. an industry convergence.

an industry convergence.

True Empire Autos Inc. is an automobile company known for its luxury cars and follows a differentiation strategy. In this scenario, True Empire Autos should ideally compare its strategic position with a(n) A. automobile company that sells pre-owned cars. B. automobile company that sells high-end, premium cars. C. automobile company that manufactures economy cars. D. pen manufacturing company that follows a differentiation strategy.

automobile company that sells high-end, premium cars.

Superlative Productions spent 10 million dollars to buy the rights to a best-selling novel. The company then prepared for production by hiring a screenwriter to adapt the novel, casting the main roles, renting cameras and other equipment, and scouting locations in southern Arizona. Which of the following pairs of resources are both intangible? A. money spent to buy rights of novel; screenwriter's experience adapting novels B. money spent to buy rights for the novel; locations in southern Arizona C. best-selling novel; locations in southern Arizona D. best-selling novel; screenwriter's experience adapting novels

best-selling novel; screenwriter's experience adapting novels

When the strong dictatorial rule in Backenstein unexpectedly collapsed due to the shocking death of the royal family in an explosion, the nation's economy experienced drastic changes. The laws became more restrictive, the country lost many locally produced resources and products, and the distribution of wealth became inequitable. The unexpected event that led to these changes can best be described as a(n) _____ event. A. extinction B. wild card C. black swan D. miracle

black swan

Scenario planning typically begins with managers A. developing different strategic plans to address possible future scenarios. B. building a portfolio of future strategic options. C. executing a dominant strategic plan. D. brainstorming to identify multiple plausible futures.

brainstorming to identify multiple plausible futures.

Coral Think Inc. is a new company in the publishing industry. It has raised sufficient capital from multiple sources. It is planning to use its capital to purchase certain assets. Which of the following assets will be the most difficult for Coral Think Inc. to acquire using its capital? A. inventory B. tools and equipment C. land and building D. brand name

brand name

The regional head for Creative Design Inc. in Boratania has decided to sell the company's products directly through company-owned stores because the distribution system in the market is primitive. In six other markets, however, the company will continue to operate through a franchise system. Thus, this decision made by the regional head at Boratania will be considered as a _____ strategy. A. corporate B. tactical C. functional D. business

business

White Leo Autos manufactures and markets four different cars: Leo Sport, Leo Prestige, Leo Spark, and Leo Ease. These four product variants are operated as individual business units. While the product leaders of Leo Sport, Leo Prestige, and Leo Spark have adopted a differentiation strategy to attract the niche market: the product leader of Leo Ease follows a cost-leadership strategy to suit the mass market. This decision of the product leader of Leo Ease can be ideally categorized as a _____ strategy. A. corporate B. functional C. business D. tactical

business

A _____ primarily details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market. A. business-level strategy B. code of ethics C. mission statement D. functional-level strategy

business-level strategy

Value is determined by the perceived benefits a good or service provides to a(n) A. manufacturer. B. buyer. C. investor. D. retailer.

buyer

The Chief Executive Officer (CEO) of Yahoo, Marissa Mayer, established a mission by building on her vision. Considering this, how did Mayer implement the mission of Yahoo? A. by making the user experience of the mobile Internet easy and fun B. by convincing employees to work with a purpose C. by making the mobile Internet an efficient tool for researchers D. by convincing employees to make the product more accessible

by making the user experience of the mobile Internet easy and fun

It is difficult even for Apple's managers to pinpoint the underlying cause of the company's phenomenal success. The term that best applies to this difficulty is known as A. competitive dependence. B. resource mobility. C. causal ambiguity. D. path dependence.

causal ambiguity.

In the top-down strategic planning approach, all strategic intelligence and decision-making responsibilities rest primarily on the A. functional managers. B. chief executive officer. C. external stakeholders. D. general manager.

chief executive officer.

Samsung and Google cooperate as complementors to compete against Apple's strong position in the mobile device industry, while at the same time Samsung and Google are increasingly becoming competitive with one another. This scenario best illustrates the process of A. co-opetition. B. perfect competition. C. monopolization. D. conglomeration.

co-opetition.

If SA Pharmaceuticals obtains an 18 percent return on invested capital, which of the following will help determine if it has a competitive advantage over other pharmaceutical companies? A. comparing the return to the return on invested capital obtained by other firms in the industry B. assessing the value based on the shareholders' expectations of return on their capital C. evaluating the liquidity ratios for other pharmaceutical companies D. comparing the value to the history of the firm's return of investment over a number of years

comparing the return to the return on invested capital obtained by other firms in the industry

The Scoop, Ltd. is a magazine publishing company whose average return on invested capital is approximately 5 percent. Because magazine publishing is a declining industry, the industry average has been negative (-5 percent) for the last few years. In this scenario, The Scoop Ltd. has a A. competitive advantage. B. balanced scorecard. C. competitive disadvantage. D. power position.

competitive advantage.

Underperformance relative to other firms in the same industry or the industry average results in a(n) _____ for a firm. A. sustainable competitive advantage B. increased power distance C. diseconomies of scope D. competitive disadvantage

competitive disadvantage

Rapida Inc. and Click Inc. are two companies that have been manufacturing typewriters for almost 30 years. Due to the reduced demand for typewriters today, both companies' average return on invested capital is approximately -5 percent. The current industry average is 2 percent. In this scenario, Rapida Inc. and Click Inc. most likely have A. competitive advantage over other firms in their industry. B. competitive parity with each other. C. strategic alliance with each other. D. economies of scope instead of economies of scale.

competitive parity with each other.

A company is best described as a _____ to an existing company if customers value the existing company's product or service offering more when they are able to combine it with the other company's product or service. A. competitor B. shareholder C. complementor D. strategic equivalent

complementor

The value a consumer attaches to a product or service is captured in the A. least price a consumer is willing to pay for it. B. consumer's maximum willingness to pay for it. C. expenses incurred by the firm in manufacturing it. D. difference between the price charged for it and the cost to produce it.

consumer's maximum willingness to pay for it.

To help a firm achieve a competitive advantage, each distinct activity performed in the value chain needs to A. contribute to the firm's strategic position as either low-cost leader or differentiator. B. reduce the immobility and the heterogeneity of the firm's resources. C. create a static fit between the company's internal resources and the external environment. D. reduce the causal ambiguity and the social complexity of the firm's source of success.

contribute to the firm's strategic position as either low-cost leader or differentiator.

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 A. equity reserve. B. economic equity. C. core competency. D. capital gain.

core competency.

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.

core competency.

The pharmaceutical company Merck's new drug Vioxx was a blockbuster, generating revenues of $2.5 billion a year by 2002 and growing fast. When allegations began to appear in the medical community, Merck announced the voluntary withdrawal of Vioxx from the market. In this example, Merck provides an example of what can happen if a company deviates from its A. voluntary responsibilities. B. realized strategy. C. core values. D. strategic decisions.

core values.

Strategic leadership pertains to the use of power and influence by _____ to direct the activities of others when pursuing an organization's goals. A. production workers B. lower-level managers C. external stakeholders D. corporate executives

corporate executives

The CEO of True West Products Inc. (TWP) is a company that sells a wide range of products. It has decided to enter the markets of emerging nations like China and Brazil. This means that the cars, consumer electronics, and services such as hotels included under the TWP banner would be made available in these nations. Which of the following strategies does this scenario best illustrate? A. corporate strategy B. functional strategy C. business strategy D. divisional strategy

corporate strategy

Due to political instability in the country of United Mapa, the strategic leaders at the headquarters of FT Supplies Inc. have decided to divest the company's business from the foreign market in United Mapa. This decision would be applicable to all the business units of FT Supplies Inc. operating in United Mapa. Thus, this is a A. business strategy. B. divisional strategy. C. functional strategy. D. corporate strategy.

corporate strategy.

Bargain Styles Inc. is an apparel company that caters to the highly price-conscious customers. Through its simple apparel designs, acceptable quality levels, and minimal customer service, the company has been able to sell its merchandise at the lowest prices in the industry. Which of the following generic business strategies is Bargain Styles applying? A. cost-leadership B. differentiation C. niche marketing D. product diversification

cost-leadership

Both Blue Horizons Electronics Inc. and CLR Inc. have achieved cost parity in the television market. To gain and sustain a competitive advantage against CLR, Blue Horizons Electronics should A. achieve differentiation parity with CLR. B. keep its value gap lower than that of CLR. C. create greater perceived economic value than CLR. D. increase its cost of production to more than that of CLR.

create greater perceived economic value than CLR.

Which of the following competitively important assets is typically excluded from a firm's balance sheet? A. land and building B. accounts payable C. patents D. customer experience

customer experience

Which of the following is an example of a firm's external stakeholder? A. employees B. customers C. shareholders D. board members

customers

Demand for traditional fast-food providers such as McDonald's, Burger King, and Wendy's has been on a decline in recent years. Consumers have become more health conscious and demand has shifted to alternative restaurants like Subway, Chick-fil-A, and Chipotle. Attempts by McDonald's and Wendy's to steal customers from one another include frequent discounting tactics such as dollar menus. Such competitive actions are indicative of A. profitability increases. B. perfect competition. C. natural monopolies. D. cutthroat competition.

cutthroat competition.

In the context of SWOT analysis, which of the following best exemplifies a firm's internal weakness? A. fall in the purchasing power of the firm's customers B. increased competition in the industry where the firm operates C. irregularity in the raw materials supply throughout the industry D. decline in the firm's market share

decline in the firm's market share

A new company named Far Reach Inc. entered the radio retail business. In response, two incumbent radio retailers, Smooth Waves and Clear Signal, lowered the cost of their travel alarm radios and long-distance radios. Also, they spent more money to improve these radios. By doing this, Smooth Waves and Clear Signal A. decreased industry exit barriers. B. increased industry exit barriers. C. decreased industry profit potential. D. increased industry profit potential.

decreased industry profit potential.

When applying the five forces model, the first step should ideally be A. drawing a strategic-group map. B. identify the underlying drivers of each force. C. assessing the overall industry structure. D. defining the relevant industry.

defining the relevant industry.

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.

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

In a firm's external environment, _____ primarily capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class. A. political trends B. demographic trends C. ecological trends D. economic trends

demographic trends

Which of the following functions do the general managers in strategic business units primarily perform? A. design generic business strategies based on guidelines received from corporate headquarters B. set overarching strategic objectives to unify the entire conglomerate under one mission C. take responsibility for decisions and actions within a single functional area D. allocate scarce resources among different business divisions

design generic business strategies based on guidelines received from corporate headquarters

Home Smart Inc. is a chain of supermarkets that sells its products at higher prices than its competitors. Yet, the supermarket chain has a large customer base due to its wide product portfolio and superior customer service. Which of the following generic business strategies has Home Smart adopted in this scenario? A. cost-leadership B. differentiation C. market penetration D. product diversification

differentiation

A differentiator is least likely to be threatened by increases in input prices due to powerful suppliers when the A. differentiator is able to create a significant difference between perceived value and current market prices. B. differentiator is able to significantly reduce the value gap. C. source of a competitor's differential appeal is tangible rather than intangible. D. new product features added raise costs but not the perceived value in the minds of consumers.

differentiator is able to create a significant difference between perceived value and current market prices.

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

direct imitation

Taking advantage of the pricing flexibility inherent in the wholesale model, Amazon offered many books (especially e-books) below the cost that other retailers had to pay to publishers. By doing this, Amazon showed how business models can be affected through A. combination. B. evolution. C. disruption. D. combustion.

disruption

The final step in industry analysis is to A. draw a strategic-group map. B. identify the underlying drivers of the five forces. C. identify the key players in each of the five forces. D. define the relevant industry.

draw a strategic-group map.

According to the _____, competitive advantage is the outflow of a firm's ability to modify and leverage its resource base in a way that enables it to gain and sustain competitive advantage in a constantly changing environment. A. value chain perspective B. two-factor theory C. expectancy theory D. dynamic capabilities perspective

dynamic capabilities perspective

The amount of xylene that can be used in household paint is legally limited to 0.03 percent. Anything beyond this amount is hazardous to health and the environment, and considered a legal offense. Consequently, CW Paints Corp. has vouched to make its products as safe as possible. Therefore, it manufactures xylene-free paints even though this increases its costs and reduces the dividends paid to its shareholders in the long run. Which of the following responsibilities is CW Paints Corp. primarily compromising in this scenario? A. legal responsibilities toward the government B. economic responsibilities toward its shareholders C. philanthropic responsibilities toward the local community D. ethical responsibilities toward the society

economic responsibilities toward its shareholders

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 A. consumer surplus. B. total return to shareholders. C. customer life time value. D. economic value created.

economic value created

Even without differentiation parity, a firm pursuing a cost-leadership strategy can still gain a competitive advantage as long as its A. learning curve is not steeper than that of its competitors. B. per-unit costs are higher than that of its competitors. C. economic value creation exceeds that of its competitors. D. value gap is lower than that of its competitors.

economic value creation exceeds that of its competitors.

A cost-leader is protected from the threat of new entrants primarily due to its A. superior customer service. B. luxury goods. C. economies of scale. D. premium pricing.

economies of scale

DiscountHaven Inc. is a large chain of hypermarkets. It has cost benefits due to its extensive operation. The company's marketing and sales, logistics, administrative, and other such related costs get divided between a large number of product units stocked in its stores. This makes it difficult for smaller retail stores and supermarkets to compete against DiscountHaven's low prices. Thus, DiscountHaven has a competitive advantage due to its A. superior customer service. B. time compression economies. C. economies of scale. D. learning-curve effects.

economies of scale

Given the industry structure in the automobile business, entering the auto manufacturing industry doesn't seem advisable. Yet Tesla Motors is joining the fray. Rather than attempting to compete head-on in internal combustion engines, Tesla Motors is entering 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? A. network effects B. economies of scale C. customer switching costs D. capital requirements

economies of scale

Hewlett-Packard was not able to maintain its competitive advantage because it did not A. produce high-quality products at a low price. B. allow the freedom to explore new ideas. C. provide lifetime employment and generous benefits for employees. D. effectively address the challenges of mobile computing.

effectively address the challenges of mobile computing.

The production head at the canned juice unit of True Candy Inc. would frequently stay back after office hours and experiment with new organic hard candy flavors 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 flavors of organic hard candy, raspberry-apricot and strawberry-apple. After rigorous test marketing, which proved that the market would accept the new candy, the product variants were successfully launched. Which of the following strategies does this scenario best illustrate? A. intended strategy B. emergent strategy C. unrealized strategy D. tactical strategy

emergent strategy

Any unplanned strategic initiative undertaken by mid-level employees of their own volition is a(n) A. dominant strategic plan. B. unrealized strategy. C. emergent strategy. D. intended strategy.

emergent strategy.

To support the rise of emergent strategies, an organization should A. centralize decision making and all other activities. B. empower lower-level employees to take up autonomous actions. C. limit serendipity that is in the form of random events and accidental happenstances. D. rely solely on hard data to formulate strategies.

empower lower-level employees to take up autonomous actions.

In the aircraft manufacturing industry, at least for large commercial jets, Boeing and Airbus are the only competitors. There is not a significant threat of entry because A. entering the aircraft manufacturing industry requires huge capital investments. B. there is expected to be a huge return on investment within this industry. C. there is no credible threat of retaliation from the incumbents. D. entering the aircraft manufacturing industry means violating government policies.

entering the aircraft manufacturing industry requires huge capital investments.

In 2010, an explosion of a BP oil drill resulted in the deaths of 11 workers and the largest environmental disaster in U.S. history. The BP CEO was fired because of his ineffective handling of the crisis. The CEO lost his job because he failed to uphold _____ responsibilities. A. economic B. legal C. ethical D. philanthropic

ethical

Van Dyke's Fashion Inc., a company that manufactures clothing, incurs higher costs because of its refusal to build factories in countries where child labor is prevalent. This reflects Van Dyke's Fashion's _____ responsibility. A. economic B. legal C. ethical D. demographic

ethical

Organizational values are the _____ that govern the behavior of individuals within a firm or organization. A. economic measures B. ethical standards and norms C. political principles and policies D. social beliefs and actions

ethical standards and norms

In the AFI strategy framework, strategy analysis primarily involves A. evaluating the effects of internal resources and core competencies on a firm's potential to gain and sustain a competitive advantage. B. designing a business, corporate, and global strategy to gain and sustain a competitive advantage. C. organizing a firm in order to effectively put the formulated strategy into practice. D. deciding the type of corporate governance that would be most effective in the implementation of a strategy.

evaluating the effects of internal resources and core competencies on a firm's potential to gain and sustain a competitive advantage.

The interaction between a firm and its diverse internal and external stakeholders is best described as a(n) A. ergonomic relationship. B. cartel arrangement. C. exchange relationship. D. fiduciary responsibility.

exchange relationship.

Janet is the CEO of Far Sight Inc., which uses a triple-bottom-line approach. As a result, Janet will tend to A. view superior financial performance as the sole objective of her firm. B. expect her company to be socially responsible. C. use fossil fuels to run her company's production plants. D. ignore the ecological dimension for her company.

expect her company to be socially responsible.

The concept of a(n) _____ attempts to capture both learning effects and process improvements at firms. A. managerial grid B. growth matrix C. experience curve D. diminishing utility curve

experience curve

Managers use the AFI strategy framework primarily to A. help their business achieve and sustain competitive parity. B. minimize the wealth of their shareholders. C. help reduce the economic contribution of their business. D. explain and predict differences in firm performance.

explain and predict differences in firm performance.

Organic Food Inc., a multinational company, relies on its media partner Radio Plus to regularly advertise its offers, sales, and new products. Radio Plus is invested in this relationship because it generates most of its revenue from advertising Organic Food's products. In this scenario, Radio Plus is Organic Food Inc.'s A. stockholder. B. workforce. C. internal stakeholder. D. external stakeholder.

external stakeholder.

State-level government agencies that check whether firms are meeting statutory safety measures in their production units are considered to be the firms' A. stockholders. B. shareholders. C. internal stakeholders. D. external stakeholders.

external stakeholders.

A strategic group will typically include A. firms within the same industry. B. customers belonging to a particular socioeconomic class. C. firms employing similar number of employees, irrespective of their industries. D. employees within a firm earning the same amount of salaries.

firms within the same industry.

A firm pursuing a differentiation strategy as opposed to a low-cost strategy will A. focus its research and development on product technologies to add uniqueness. B. concentrate on leveraging its economies of scale through process technologies. C. build an organization structure that relies on strict budget controls. D. create a lower economic value as compared to its competitors.

focus its research and development on product technologies to add uniqueness.

Industry convergence is a process whereby A. firms within the same industry start to satisfy different customer needs. B. formerly unrelated industries begin to satisfy the same customer need. C. excess capacity within an industry is reduced through horizontal mergers. D. firms within an industry start to target a narrow market segment.

formerly unrelated industries begin to satisfy the same customer need.

Photohome is a file hosting service that allows users to store up to 5GB of data with no restrictions or charges. However, users have to pay a fee for advanced features on the cloud storage system and additional storage space. Which of the following business models does this best illustrate? A. subscription-based B. freemium C. pay-as-you-go D. razor-razor-blade

freemium

Pilot Games Inc. allows users to play the trial versions of its games without any charge. However, users have to purchase the games to access the upgraded version of the games with advanced features. Which of the following business models is Pilot Games using in this scenario? A. freemium B. subscription-based C. pay-as-you-go D. razor-razor-blade

freemium

Green Rabbit Products Inc. (GRP) is a large conglomerate. The human resources department of its telecom division has decided to reduce its employee turnover by encouraging internal promotions. Which of the following strategies does this scenario best illustrate? A. corporate strategy B. business strategy C. functional strategy D. grand strategy

functional strategy

The production department at Coral Cements that is a subsidiary of the large conglomerate Five East Corp. has decided to adopt the FIFO (first in, first out) method of inventory to dispatch its cement bags. Which of the following strategies does this scenario best illustrate? A. functional strategy B. corporate strategy C. master strategy D. business strategy

functional strategy

Stakeholder impact analysis primarily helps a firm A. gain a competitive advantage while acting as a good corporate citizen. B. lower the difference between its value creation and costs. C. single-mindedly focus on shareholders alone. D. exploit external stakeholders to benefit internal stakeholders.

gain a competitive advantage while acting as a good corporate citizen.

Stakeholder strategy is an integrative approach to managing a diverse set of stakeholders effectively in order to A. single-mindedly focus on the stockholders alone. B. gain and sustain competitive advantage. C. minimize the joint value created. D. minimize the difference between value creation and cost.

gain and sustain competitive advantage.

A firm's economic responsibilities are primarily directed toward A. minimizing shareholders' wealth. B. acting as a good corporate citizen. C. doing what is right, just, and fair. D. gaining and sustaining competitive advantage.

gaining and sustaining competitive advantage.

As it takes less and less time to produce the same output, learning curves usually A. go up. B. go down. C. stay the same. D. fluctuate.

go down

The best example of a firm's external stakeholder is a(n) A. government agency that regulates the prices of products manufactured by the firm. B. board member from a wholly-owned foreign subsidiary of the firm. C. shareholder who has invested money in the firm but is not employed by the firm. D. employee of the firm who is responsible for a contract project.

government agency that regulates the prices of products manufactured by the firm.

While implementing strategic group mapping for the U.S. domestic airline industry, two strategic groups become apparent: low-cost, point-to-point airlines (Virgin Atlantic, Alaska Airlines, JetBlue, and Southwest Airlines) versus differentiated airlines using a hub-and-spoke system (American, Delta, and United). Which of the following statements is true about these two strategic groups? A. Competitive rivalry between Virgin Atlantic and JetBlue is likely to be higher than that between American and Southwest Airlines. B. American, United, and Delta Airlines will be affected differently by Porter's five competitive forces. C. Alaska Airlines and Delta Airlines will be affected by the external environment in very similar ways. D. Competitive rivalry between Virgin Atlantic and Delta Airlines is likely to be higher than that between American, Delta, and United.

Competitive rivalry between Virgin Atlantic and JetBlue is likely to be higher than that between American and Southwest Airlines.

Which of the following is an implication of low interest rates? A. Cost of capital for firms will be high. B. Firms will invest less in future growth. C. Economic growth rate will fall. D. Consumer demand will increase.

Consumer demand will increase.

_____ are best described as 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. A. Resource leverages B. Core competencies C. Capital gains D. Equity reserves

Core competencies

_____ is best described as a framework that helps firms recognize and address the economic, legal, social, and philanthropic expectations that society has of the business enterprise at a given point in time. A. Corporate social responsibility B. Integrated social network C. Strategic positioning D. Strategy formulation

Corporate social responsibility

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 costs involved in imitation

high costs involved in imitation

Which of the following is a feature of an oligopolistic industry structure? A. many small sellers B. standardized or undifferentiated products C. limited pricing power D. high entry barriers

high entry barriers

Which of the following ratios best expresses inventory turnover? A. Inventory/Working capital B. Annul profits/Inventory C. Inventory/Per unit cost of production D. Cost of goods sold/Inventory

Cost of goods sold/Inventory

As a part of strategy formulation, a firm's functional strategy primarily concerns questions relating to A. where to compete. B. when to compete. C. how to implement business strategy. D. how to enter target markets.

how to implement business strategy.

Which of the following does not explain why activist investors have more power over a firm than individual investors? A. Activist investors can buy or sell large numbers of shares at once. B. Activist investors can exercise block-voting rights over individual investors. C. Activist investors can demand seats on company boards. D. Activist investors have more legitimacy than individual investors.

D. Activist investors have more legitimacy than individual investors.

Which of the following summarizes the difference between corporate strategy and business strategy? A. Corporate strategy deals with how to compete; business strategy deals with where to compete. B. Corporate strategy deals with when to compete; business strategy deals with how to compete. C. Corporate strategy deals with how to compete; business strategy deals with when to compete. D. Corporate strategy deals with where to compete; business strategy deals with how to compete.

D. Corporate strategy deals with where to compete; business strategy deals with how to compete.

How is differentiation parity different from cost parity? A. Differentiation parity deals with pricing not innovation. B. Differentiation parity deals with innovation not value. C. Differentiation parity deals with pricing not value. D. Differentiation parity deals with value not pricing.

D. Differentiation parity deals with value not pricing.

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. Every time the cumulative output is doubled, the cost per unit will decline by 20 percent.

Which of the following is not an advantage of the balanced-scorecard approach to assess firm performance? A. It allows managers to communicate and link the strategic vision to responsible parties within an organization. B. It helps managers to implement feedback and organizational learning in order to modify and adapt strategic goals when indicated. C. It provides a concise report that tracks chosen metrics and measures and compares them to target values. D. It is a tool which can be effectively used by managers for both strategic implementation and strategic formulation.

D. It is a tool which can be effectively used by managers for both strategic implementation and strategic formulation.

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. It provides limited guidance about which metrics to choose.

Which of the following is a primary feature of the five forces model? A. It is concerned exclusively about the intensity of rivalry among direct competitors. B. It takes into account a firm's internal resources, capabilities, and core competencies. C. It helps managers determine the changing speed of an industry or the rate of innovation. D. It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.

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

How did Marriott use economies of scope to achieve greater economic value than its competitors? A. Marriott increases in cost per hotel unit as number of customers increases. B. Marriott decreases in cost per hotel unit as number of customers increases. C. Marriott lowered its cost structure by focusing its production assets on one type of hotel, which increased its menu and thus its differentiated appeal. D. Marriott lowered its cost structure by sharing its production assets over a several types of hotels, which increased its menu and thus its differentiated appeal.

D. Marriott lowered its cost structure by sharing its production assets over a several types of hotels, which increased its menu and thus its differentiated appeal.

Which of the following statements about strategy is not true? A. Grandiose statements of desire, on their own, are not strategy. B. Strategy is as much about deciding what not to do, as it is about deciding what to do. C. Strategy is about creating superior value, while containing the cost to create it. D. Operational effectiveness and competitive benchmarking should be treated as strategy.

D. Operational effectiveness and competitive benchmarking should be treated as strategy.

The three financial ratios that constitute return on revenue are Cost of goods sold/Revenue, Research & Development expense/Revenue, and A. Accounting profitability/Revenue. B. Economic value created/Revenue. C. Total return to shareholders/Revenue. D. Selling, general, & administrative expense/Revenue.

D. Selling, general, & administrative expense/Revenue.

In Strategy Highlight 2.2, what type of strategy did Diana, the Starbucks store manager in southern California, use to develop the new iced beverage for her store? A. She used a rational planning approach to strategy planning. B. She created a dominant strategy plan. C. She used scenario planning. D. She used an emergent strategy.

D. She used an emergent strategy.

In which of the following situations is the power of suppliers high in an industry? A. Suppliers offer products that are undifferentiated. B. Suppliers can credibly threaten to backward integrate into the industry. C. Suppliers depend heavily on the industry for their revenues. D. Suppliers' industry is more concentrated than the industry it sells to.

D. Suppliers' industry is more concentrated than the industry it sells to.

Which of the following is most likely an implication of new firms entering an industry? A. The bargaining power of buyers will reduce. B. The industry's overall profit potential and sales will increase. C. The rivalry among existing competitors will reduce. D. The incumbent firms will spend more to satisfy their existing customers.

D. The incumbent firms will spend more to satisfy their existing customers.

Which of the following statements is true of the triple-bottom-line? A. It is more or less a one-dimensional metric of measuring competitive advantage of a firm. B. Its primary focus is to base a firm's strategic goals entirely on external performance dimensions. C. According to this approach, achieving positive results in any one of the dimensions, economic, social, and ecological, can lead to a sustainable strategy. D. Three dimensions, economic, social, and ecological, make up the triple-bottom-line.

D. Three dimensions, economic, social, and ecological, make up the triple-bottom-line.

_____ is a business model in which the manufacturer sets a fixed price on a product, but the retailer is to free set its own price. A. Agency B. Freemium C. Bundling D. Wholesale

D. Wholesale

When Internet service providers offer free routers for subscriptions to their wireless Internet packs, the perceived value of the service offering increases. In this case, the value driver would be A. economies of scale. B. learning-curve effects. C. experience-curve effects. D. availability of complements.

D. availability of complements

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 A. forward integration. B. product differentiation. C. crowdsourcing. D. backward integration.

D. backward integration.

Ambrosia Inc., a leading chocolate producer, anticipated that the prices of cocoa beans would double in less than three years. This would disrupt the availability of cocoa in the industry. Thus, Ambrosia Inc. decided to purchase cocoa plantations in Ghana. As predicted, the prices of cocoa increased twofold. Because of the company-owned cocoa plantations, Ambrosia Inc. was able to sustain its competitive advantage in turbulent times. Which of the following isolating mechanisms does this scenario best illustrate? A. social complexity B. causal ambiguity C. time compression diseconomies D. better expectations of future resource value

D. better expectations of future resource value

In the multiplex industry, Vibrant Movies Inc. is an upscale multiplex that focuses on superior customer experience. The firm charges premium prices for its movie tickets and services. Global Cine Inc., in contrast, charges the lowest price in the industry with its no-frills approach. In between these two segments is True Movies Inc., which offers a customer experience comparable to that of Vibrant Movies at a price almost as low as that of Global Cine. What strategy is True Movies pursuing in this scenario? A. liquidation strategy B. product diversification strategy C. market penetration strategy D. blue ocean strategy

D. blue ocean strategy

T & R Autos Inc. is a large conglomerate that operates in 12 different countries. The corporate executives at the headquarters have decided that the company's objective for the next two years will be to increase its customer equity. Based on this guideline received from the top management team, the product leader of the home appliances division has decided to adopt a cost-leadership strategy in all his 12 units. Thus, the decision made by the product leader best illustrates a _______ strategy. A. corporate B. functional C. grand D. business

D. business

Corporate executives at LikeReal, Inc. decide to compete in the remote model airplane industry by making the largest model planes available. By doing this, they completed part of their A. implementation strategy. B. corporate strategy. C. functional strategy. D. business strategy.

D. business strategy.

Which of the following is primarily a value driver? A. cost of input factors B. economies of scope C. experience-curve effects D. complements

D. complements

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. create higher customer perceived value than the value that competitors create

In the final step of the stakeholder impact analysis, a firm A. identifies its stakeholders' interests and claims. B. differentiates its internal stakeholders from its external stakeholders. C. recognizes the opportunities and threats stakeholders present. D. decides a course of action to address the stakeholders' concerns.

D. decides a course of action to address the stakeholders' concerns.

Which of the following happens during the analysis stage of scenario planning? A. formulation of responses to scenarios B. development of different strategic plans C. identification of possible future scenarios D. execution of the dominant strategic plan

identification of possible future scenarios

After a firm has identified its key stakeholders in stakeholder impact analysis, the immediate next step is to A. recognize the opportunities and threats the stakeholders present. B. identify stakeholders' interests and claims. C. formulate a stakeholder strategy. D. address the stakeholders' concerns.

identify stakeholders' interests and claims.

In which of the following situations is a company that exists in the telecommunications industry most likely to face the highest threat of entry? A. if the company is able to put up a credible threat of retaliation B. if the capital requirements in the industry are high C. if the customer switching costs in the industry are high D. if the industry has recently become deregulated

if the industry has recently become deregulated

Due to several black swan events in the past, the A. shareholders of public companies have become more confident in investing their resources in businesses. B. need for corporate governance and transparency has reduced within various industries. C. nations around the globe have explicitly appreciated and accepted capitalism as an economic system. D. implicit trust relationship between the corporate world and society at large has deteriorated.

implicit trust relationship between the corporate world and society at large has deteriorated.

A(n) _____ is best described as the strategic option that top managers decide most closely matches the current reality and which is then executed. A. bottom-up emergent strategy B. executive summary C. realized strategy D. dominant strategic plan

D. dominant strategic plan

Which of the following is primarily a cost driver? A. product features B. customer service C. complements D. economies of scale

D. economies of scale

Top-down strategic planning works best when the A. events in the future are highly unpredictable. B. past cannot be used to predict the future. C. lower-level employees in an organization are highly empowered. D. environment does not change much.

D. environment does not change much.

Sun Inc., a vendor, regularly supplies pallets to Octangle Corp. for its shipping business. Therefore, Sun Inc. is Octangle Corp.'s A. internal stakeholder. B. stockholder. C. shareholder. D. external stakeholder.

D. external stakeholder.

Whole Foods differentiates itself from competitors by offering top-quality foods obtained through sustainable agriculture. This business strategy implies that Whole Foods focuses on A. decreasing the existing value gap by providing luxury goods to customers. B. maintaining a less steeper learning curve as compared to its competitors. C. increasing the perceived value created for customers, which allows it to charge a premium price. D. lowering its costs compared to its competitors,' while offering adequate value for its products and services.

increasing the perceived value created for customers, which allows it to charge a premium price.

Each activity a firm performs along the horizontal value chain adds _____ value. A. temporary B. little C. incremental D. absolute

incremental

In an industry, the rivalry among existing competitors is high when A. fixed costs are low and marginal costs are high. B. exit barriers are low. C. incumbent firms are highly committed to the business. D. industry growth is high.

incumbent firms are highly committed to the business.

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? A. industry convergence B. backward integration C. product differentiation D. customer myopia

industry convergence

To gain a competitive advantage, Lopez Industries obtained financing and then used this extra capital to produce the same amount of gaskets in a one-month period that it normally produces in a two-month period. Which of the following is the most likely outcome of this endeavor? A. inconsistent results B. same results C. better results D. inferior results

inferior results

The value chain describes the A. competitive challenges a firm faces in a highly dynamic external environment. B. internal activities a firm engages in when transforming inputs into outputs. C. current consequences a firm experiences due to its decisions in the past. D. strategic advantages a firm experiences when its resources lack causal ambiguity.

internal activities a firm engages in when transforming inputs into outputs.

Given the accelerated pace of technological change, in combination with deregulation, globalization, and demographic shifts, a firm will only be successful today if its A. competitive advantage is derived from static resource or market advantages. B. resource advantage is not causally ambiguous or socially complex. C. resource advantage is maintained for a short period of time. D. internal strengths change with its external environment in a dynamic fashion.

internal strengths change with its external environment in a dynamic fashion.

Kerry the Kangaroo Inc. specializes in producing and selling a stuffed kangaroo named Kerry. Although the stuffed kangaroo has sold well, the clothes that can be bought to dress the kangaroo have not sold as well as expected. As a result, Kerry the Kangaroo has warehouses full of hats, pants, sweaters, and shoes to dress Kerry. This firm used a _____ to determine how much of its capital is tied up in these accessory items. A. payables turnover B. receivables turnover C. fixed asset turnover D. inventory turnover

inventory turnover

Which of the following contributed the most to JCPenny's failed blue ocean strategy? A. failure to win legal battles against its closest competitors B. failure to conduct an accurate pretest in the market C. failure to apply the strategy to enough stores at the same time D. failure to combine a cost-leadership position with a differentiation position

D. failure to combine a cost-leadership position with a differentiation position

A company's strategic business unit A. does not need to adopt the overall corporate strategy. B. is responsible for its own profit and loss. C. is a division solely created to design strategies during turbulent times. D. decides which industries and markets to compete in for an entire conglomerate.

is responsible for its own profit and loss.

firm achieves differentiation parity ideally when A. it creates the same customer value as its competitors. B. its cost of production is higher than that of its competitors. C. it successfully sells its products and services at a higher price than its competitors. D. its product features and services are better than that of its competitors.

it creates the same customer value as its competitors.

Economies of scale are cost advantages that accrue for firms with A. high fixed costs. B. low employee turnover. C. larger output. D. high capital risks.

larger output.

Competitive advantage goes to the firm that achieves the A. largest economic value created. B. lowest producer surplus. C. highest payable turnover. D. highest Cost of goods sold/Revenue ratio.

largest economic value created.

As the cumulative output in a firm increases, managers learn how to optimize the production process and improve workers' performance through repetition. This drives down the per-unit cost. Which of the following phenomena is best described here? A. learning effects B. network effects C. diseconomies of scale D. productivity frontier

learning effects

The society and shareholders mandatorily require a firm to perform its _____ responsibilities. A. ethical B. philanthropic C. legal D. political

legal

A differentiation strategy works best when a A. firm has tangible resources, its focus of competition shifts to price, and equivalent substitutes are readily available. B. firm's focus of competition shifts to price, and when increasing differentiation of product features do not create additional value. C. firm's differentiated products are commoditized, and costs of providing uniqueness do not rise above the customer's willingness to pay. D. firm has intangible resources, is able to pass on increases in supplier cost to the customer, and its differentiation appeal creates customer loyalty.

D. firm has intangible resources, is able to pass on increases in supplier cost to the customer, and its differentiation appeal creates customer loyalty.

Organic Eats is a restaurant that caters to the needs of a small percentage of highly health-conscious consumers. It has an all-organic, vegan menu. Since there are very few restaurants that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Organic Eats is following a A. product diversification strategy. B. liquidation strategy. C. mass market strategy. D. focused differentiation strategy.

D. focused differentiation strategy.

To implement specific business strategies, general managers of strategic business units rely on A. external stakeholders. B. corporate executives. C. strategic leaders. D. functional managers.

D. functional managers.

A fragmented industry is made into a consolidated industry through A. governmental deregulation. B. globalization. C. technological innovation and new legislation. D. horizontal mergers and acquisitions.

D. horizontal mergers and acquisitions.

The government of Filvia has mandated that the standard minimum wage in the country be increased to $8,000 per year. This has ensured that all firms in the country pay their employees at least $8,000 per year, which has brought about a higher standard of living for the people of Filvia. Which of the following factors in a firm's general environment does this mandate best indicate? A. ecological factors B. sociocultural factors C. technological factors D. legal factors

legal factors

The minimum wage in the country of New Morland is $8 an hour. Odion, a restaurant in New Morland's capital city, pays its servers $8 per hour. However, the management of the restaurant feels that this amount is excessive for workers whose only job is to clear tables. By continuing to adhere to the rules set by the government of New Morland, which of the following responsibilities is Odion satisfying? A. legal responsibilities B. philanthropic responsibilities C. ethical responsibilities D. demographic responsibilities

legal responsibilities

Which of the following is a macroeconomic factor that can affect a firm's strategy? A. power of buyers B. power of suppliers C. levels of employment D. threat of substitutes

levels of employment

Quick Market Inc. is a food supply company that wants to sell its products directly to consumers through mail order instead of going through supermarkets and other stores. However, supermarket chains want to make this transaction either illegal or more difficult for Quick Market. To accomplish this, they are using _______ to influence the political process. A. ecological factors B. lobbying forces C. interest rates D. demographic research

lobbying forces

Strategic commitments are actions that are A. inexpensive. B. long-term oriented. C. easy to reverse. D. easy to imitate.

long-term oriented.

Which of the following will hamper a differentiator's ability to achieve a competitive advantage? A. lower production costs B. premium prices C. lower value gap D. customized goods

lower value gap

The past black swan events in the United States demonstrate that A. managerial actions can affect the economic well-being of large numbers of people around the globe. B. decisions and strategies implemented within a firm will only affect the firm and not the entire industry. C. corporate governance is unnecessary as firms are becoming socially responsible. D. industry effects are more important than firm effects in determining firm performance.

managerial actions can affect the economic well-being of large numbers of people around the globe.

Which of the following drivers simultaneously increases value while lowering cost? A. economies of scale B. superior customer service C. availability of complements D. innovation

D. innovation

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

marketing and sales

The ratio of SG&A/Revenue is an indicator of a firm's focus on A. researching to produce innovative products and services. B. marketing to promote its products and services. C. producing a good in an efficient manner. D. creating a good that is cost-effective.

marketing to promote its products and services.

An industry has many firms that compete in it. While products between competitors tend to be similar, they are by no means identical. As a consequence, managers selling a product with unique features tend to have some ability to raise prices. This type of industry is an example of A. oligopoly. B. monopoly. C. perfect competition. D. monopolistic competition.

monopolistic competition.

Fadia Ammunition Inc., a firm controlled and managed by the government of Fadia, is the only company that has the license to produce defense arms in the country. Which of the following industry competitive structures does this best illustrate? A. monopolistic competition B. monopoly C. oligopoly D. perfect competition

monopoly

In Rozinia Republic, the federal government owns and manages all the nuclear power plants. This is because the business would not be profitable if there was more than one supplier in the nuclear power industry. Which of the following industry competitive structures does the scenario best illustrate? A. monopolistic competition B. oligopoly C. natural monopoly D. perfect competition

natural monopoly

Juanita Apparels Inc. outsources its production to contract manufacturers located in underdeveloped nations where unskilled labor is available in plenty for very low wages. This has helped the apparel brand become a price leader in the industry. Which of the following is the key driver behind Juanita Apparel's strategic position? A. network effects B. superior customer service C. availability of complements D. low-cost input factors

D. low-cost input factors

Which of the following sources of differential appeal is least effective in helping a firm sustain its advantage? A. reputation for innovation B. reputation for quality C. superior customer experience D. observable product features

observable product features

Rhino Pictures Inc. is a large production company that controls a major portion of the movie industry's market share along with two other firms. Despite its competitiveness with the two other firms, it is influenced by their actions and often has to consider their strategic actions before acting on its own. In this scenario, Rhino Pictures Inc. is most likely functioning in a(n) _____ industry. A. oligopolistic B. monopolistic C. perfectly competitive D. monopolistically competitive

oligopolistic

Eon Inc., Electravia Inc., and FC Inc., the three largest firms in the consumer electronics industry, hold close to 85 percent of the industry's market share. These companies mainly compete against each other by providing unique features in their products rather than pricing them low. These firms are interdependent, and each firm must consider the strategic actions of its competitors. Which of the following industry competitive structures does this scenario best illustrate? A. monopolistic competition B. oligopoly C. monopoly D. perfect competition

oligopoly

The telecommunication industry of United Canava is primarily dominated by three large firms: AD Telecom Inc., Mystic Telecom Corp., and Total Talk Inc. Instead of cutting prices competitively, these firms have resorted to non-price competition through branding and product differentiation. Which of the following industry competitive structures are these companies most likely in? A. monopoly B. perfect competition C. monopolistic competition D. oligopoly

oligopoly

Pure Carat Inc. is a company that sells 24-carat gold biscuits to companies that manufacture jewelry. Since the company operates in an industry where many other suppliers sell standardized products, it can most likely A. easily achieve a temporary competitive advantage. B. easily achieve a sustainable competitive advantage. C. only achieve competitive parity. D. maintain its absolute advantage for long time.

only achieve competitive parity.

Which of the following is not competitive strategy? A. strategic positioning B. unique activities C. product differentiation D. operational effectiveness

operational effectiveness

Curry Rush is a premium Asian restaurant chain that differentiates itself from a large number of competitors by providing exclusively organic Vietnamese cuisine. It has some pricing power because it provides differentiated products and therefore, has some entry barriers in place. In this scenario, Curry Rush is most likely operating in a(n) A. oligopoly. B. monopoly. C. perfectly competitive industry. D. monopolistically competitive industry.

D. monopolistically competitive industry.

Genevieve is a recent fashion graduate. She started her own apparel store with an investment of $300,000. In the first year she made a profit of $60,000. If she had taken up a job as a fashion editor for a magazine, she would have earned $50,000 as salary per year. Also, she could have invested her capital, $300,000, in treasury bonds and earned an interest of $12,000. Thus, the amount $62,000 ($50,000 + $12,000) would be Genevieve's A. social cost. B. break-even price. C. reservation price. D. opportunity cost.

opportunity cost

When GD Inc. declared a dividend of $20,000,000, its market value increased from $8 billion to $8.5 billion. However, it lost a chance to reinvest $20,000,000 in the research and development of a new product which would have earned a profit of $200 million. Thus, this $200 million is referred to as GD Inc.'s A. producer surplus. B. consumer surplus. C. opportunity cost. D. social cost.

opportunity cost

Mova Electronics, a leading pager manufacturer, recently declared itself bankrupt. This was attributed to a decision the company made in the past. While most of Mova's competitors were shifting their research focus toward cell phones, Mova invested most of its retained earnings on improvising its pagers. Once the pager market drastically declined, Mova Electronics was unable to capitalize on the new technology. Which of the following does this scenario best illustrate? A. causal ambiguity B. knowledge diffusion C. social complexity D. path dependence

path dependence

TravelCheap Inc. is a car rental business that charges customers based on how many miles they put on a car on a daily basis. As result, a person who uses a car to travel from Chicago to Denver during a week is charged much more than a person who uses a car only to travel one mile to the grocery store six times a week. TravelCheap uses a business model called A. freemium. B. pay-as-you-go. C. agency. D. bundling.

pay-as-you-go

Airbnb rents spaces that previously would have been unused to generate revenue, while also dramatically increasing the potential amount of accommodation space in the 191 countries. This business uses a _____ technique. A. offshoring B. crowdsourcing C. peer-to-peer D. binge watching

peer-to-peer

When companies that manufacture shipping containers want to buy iron ore, the purchase decision is solely based on price. This is because there are a large number of sellers in the iron ore industry, and iron ore is a highly undifferentiated commodity. Which of the following industry competitive structures does the iron ore industry best illustrate? A. monopoly B. oligopoly C. perfect competition D. monopolistic competition

perfect competition

The competitive advantage that one firm has will be short-lived in an industry where A. resource immobility is high. B. perfect competition exists. C. resource heterogeneity is high. D. capabilities of a firm are not easily replicable.

perfect competition exists.

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.

perform different activities than its rivals.

Competitive rivalry based solely on _____ is destructive to firms as it transfers most of the value created in the industry to the customers. A. price-cutting B. new product releases C. promotional campaigns D. product differentiation

price-cutting

To increase its competitive advantage, HRV Automobiles seeks to improve the efficiency of its production plants. By doing this, HRV is addressing a _____ in the value chain analysis. A. primary activity B. secondary activity C. support activity D. premier activity

primary activity

During an AFI planning session, the managers of the Fukuhara Motorcyle Corporation decided to place various stages of production in different countries. By doing this, what issue did the firm address? A. philanthropic strategy B. business ethics C. corporate governance D. organizational design

D. organizational design

The difference between the price charged for a product and the cost to manufacture it is referred to as the A. consumer surplus. B. break-even price. C. producer surplus. D. reservation price.

producer surplus.

A firm experiences diseconomies of scale when it A. has a constant return to scale. B. moves down the experience curve. C. produces at an output level beyond the minimum efficient scale. D. has a steep learning curve when compared to its competitors.

produces at an output level beyond the minimum efficient scale.

Oviyo Inc. has been successful at differentiating itself from competitors by claiming a premium price for its digital cameras based on superior image quality and advanced technology. In this scenario, which of the following is the key value driver? A. economies of scale B. low-cost input factors C. product features D. premium prices

product features

Which of the following is not an example of a software company's external stakeholder? A. creditors B. customers C. alliance partners D. project managers

project managers

A firm is said to gain a competitive advantage when it can A. exceed its own previous performances. B. provide products similar to its competitors, but at lower prices. C. perform at the same level as that of its competitors. D. minimize the difference between value creation and cost.

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

Jake's Taxi Service is a new entrant to the taxi industry. It has achieved success by staking out a unique position in the industry. How did Jake's Taxi Service mostly likely achieve this position? A. providing long-distance cab fares at a higher rate than competitors; servicing a larger area than competitors B. providing long-distance cab fares at a lower rate than competitors; servicing a smaller area than competitors C. providing long-distance cab fares at a higher rate than competitors; servicing the same area as competitors D. providing long-distance cab fares at a lower rate than competitors; servicing the same area as competitors

providing long-distance cab fares at a lower rate than competitors; servicing the same area as competitors

Pink Couture Inc. and Pink Blush Inc. are two companies in the apparel industry. While Pink Couture Inc. focuses on providing unique product features and superior customer service, Pink Blush Inc. focuses on low prices and minimal customer service. Both companies have been able to gain a competitive advantage. This is most likely because the companies have A. executed integrated strategies. B. entered into a cartel arrangement. C. pursued distinct strategic positions. D. engaged in direct imitation and substitution.

pursued distinct strategic positions.

Which of the following would be considered a weak stakeholder strategy? A. putting shareholder interests above the interests of other stakeholders B. addressing the concerns of all stakeholders, including employees C. always using fair and ethical practices to satisfy stakeholders D. ensuring that the primary stakeholders achieve their objectives

putting shareholder interests above the interests of other stakeholders

Next Door Cellular is a leading mobile network operator. Since most of the resources used by Next Door Cellular are easily available, the company's brand name is the only resource that distinguishes it from the other operators. No other competitor in the industry has a strong brand name like that of Next Door Cellular. This unique asset that has helped the company gain a competitive advantage will be considered as a(n) _____ resource in the VRIO framework. A. tangible B. mobile C. imperishable D. rare

rare

The "Gold Crisps" potato wafers manufactured by True Foods Inc. have been the highest selling wafers in the market. Though the market for wafers is flooded with competitors, True Foods Inc. has been able to maintain its market position for a long time. This is mainly attributed to the unique taste of the wafers that comes from the unique natural flavoring used by the company. This competency of True Foods Inc. will be considered as a(n) _____ resource in the VRIO framework. A. inexhaustible B. rare C. intangible D. virtual

rare

True Vibgyor Inc. 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 True Vibgyor implementing? A. subscription-based B. razor-razor-blade C. pay-as-you-go D. direct sales

razor-razor-blade

In stakeholder impact analysis, identifying the opportunities and threats presented by stakeholders is immediately followed by A. recognizing the economic, legal, ethical, and philanthropic responsibilities of the firm to its stakeholders. B. formulating the stakeholder strategy to address and effectively balance the different needs of various stakeholders. C. identifying the interests and the claims of the stakeholders. D. isolating the external stakeholders from the internal stakeholders.

recognizing the economic, legal, ethical, and philanthropic responsibilities of the firm to its stakeholders.

Kaleidoscope Inc. is a leading international apparel company. Competitors across the globe have failed to imitate Kaleidoscope Inc.'s production models, supply chain systems, knowledge systems, and culture. These attributes have remained unique to Kaleidoscope Inc. for a long time. Which of the following assumptions of the resource-based model of competitive advantage does this scenario best illustrate? A. resource homogeneity B. resource perishability C. resource equality D. resource immobility

resource immobility

SWA has enjoyed a sustained competitive advantage, allowing it to outperform its competitors over several decades. Continental and Delta attempted to copy SWA with their offerings of Continental Lite and Song, respectively. Neither Continental nor Delta, however, was able to successfully imitate the resource bundles and firm capabilities that make SWA unique. Which of the following is this case an example of? A. resource immobility B. resource heterogeneity C. resource mobility D. resource homogeneity

resource immobility

Strategic flexibility is achieved when managers A. choose to keep their vision statements more product-oriented rather than customer-oriented. B. respond to reality changes by activating alternate dominant plans or modifying the old plan. C. implement static top-down strategic planning approach to the development of strategy. D. overlook pessimistic future scenarios and only prepare for optimistic futures.

respond to reality changes by activating alternate dominant plans or modifying the old plan.

To make the SWOT analysis an effective management tool, a strategist must first A. distinguish a firm's resources, competencies, and capabilities from each other. B. separate a firm's primary activities from support activities. C. analyze the pros and cons of strategic options. D. scan a firm's internal and external environments.

scan a firm's internal and external environments.

Which of following practices of a firm satisfies its ethical responsibilities? A. using plastic as the packaging material though it is harmful to the environment, yet legal B. outsourcing production to a less developed country and paying wages that are below its own country's accepted minimum wages C. using advertising and other forms of promotion to endorse luxurious lifestyles D. selling vaccines at a subsidized price in a less developed country even though this results in reduced shareholder returns

selling vaccines at a subsidized price in a less developed country even though this results in reduced shareholder returns

Dynamic capabilities are essential for moving beyond a(n) _____ advantage. A. long-lived B. short-lived C. competitive D. inconsistent

short-lived

Value Autos Inc. has been trying to directly copy the strategies of Honk Autos Inc. Even though it is evident that Honk Autos Inc.'s success comes from its just-in-time inventory system, Value Autos Inc. has not been able to effectively apply the system in the same way. This is because the organizational structures, employees, cultures, and the overall business systems of both the companies vary from each other. Which of the following barriers to imitation does this scenario best illustrate? A. path dependence B. social complexity C. resource mobility D. resource homogeneity

social complexity

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. nonambiguous.

socially complex.

A customer-oriented vision statement focuses employees to think about how best to A. make a product easier to use. B. increase their efficiency for consumers. C. improve a popular product. D. solve a problem for a consumer.

solve a problem for a consumer.

Economies of scale do not allow firms to A. spread their fixed costs over a larger output. B. employ specialized systems and equipment. C. spread their variable costs over a larger output. D. take advantage of certain physical properties.

spread their variable costs over a larger output.

If a company wants to gain a competitive advantage in a highly competitive industry, it should ideally A. execute an integrated cost-leadership and differentiation position. B. copy the strategies of other firms through competitive benchmarking. C. provide goods or services similar to its competitors at higher prices. D. stake out a unique position within the industry.

stake out a unique position within the industry.

BlueStainless Corp. has been able to gain and sustain a competitive advantage due to its strong relationship with its employees, customers, suppliers, and local communities. The company believes in lifetime employment and ensures that its employees grow along with the company. Investors are more than satisfied with the returns on their investments. Also, 3 percent of the company's profit is spent on community development. With initiatives like these, customers feel privileged to associate themselves with BlueStainless products. This scenario best illustrates the implementation of a A. strategic analysis. B. stakeholder strategy. C. wild card event. D. black swan event.

stakeholder strategy.

Return on risk capital primarily includes A. stock price appreciation plus dividends received over a specific period. B. consumer surplus plus firm profit. C. account receivables plus account payables. D. economic value created by a firm plus reservation price.

stock price appreciation plus dividends received over a specific period.

The CEO of Sam's Club, Rosalind Brewer, reports to Walmart's CEO, C. Douglas McMillon, who as corporate executive oversees Walmart's entire operations. Sam's Club, therefore, is a _____ of Walmart. A. corporate partner B. strategic business unit C. branch office D. house brand manufacturer

strategic business unit

Blue Billion 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 Blue Billion can be referred to as A. limited liability companies. B. functional departments. C. strategic business units. D. corporations.

strategic business units.

Due to path dependence A. strategic decisions have long-term consequences. B. the occurrence of time compression diseconomies becomes rare. C. competitors can easily imitate or create core competencies quickly. D. past decisions of a firm do not affect its current situation.

strategic decisions have long-term consequences.

During market testing, Sensation Cosmetics (SC) realized that the cosmetics industry was dominated with multiple, well-established brands. These brands mostly sold their products in exclusive outlets and departmental stores. A new entrant like SC would require a different business model to be successful. Thus, SC started selling its products through direct marketing. In this scenario, Sensation Cosmetics accomplished substitution primarily through A. path dependence. B. technology transfer. C. knowledge diffusion. D. strategic equivalence.

strategic equivalence.

A _____ is best described as any activity a firm pursues to explore and develop new products and processes, new markets, or new ventures. A. strategic initiative B. value chain C. supply chain D. corrective action

strategic initiative

As the CEO of a conglomerate, Juana Mark exhibited her strong commitment toward the company's core value that customers' well-being is more important than profit when she decided to liquidate the company's tobacco subsidiary. The tobacco brand sold by her company was a major revenue earner in lesser-developed nations. However, Juana believed that her company had to be responsible toward society. In this scenario, Juana has demonstrated A. strategic leadership. B. intrapreneurship. C. Machiavellianism. D. individualism.

strategic leadership.

FindFor Inc. is an e-commerce retail firm that sells a variety of merchandise online. Through services like cash on delivery, easy return, and online tracking, the company has created more customer value than its competitors (brick-and-mortar businesses) at the same price. Also, the company's costs are substantially low due to minimal investment in operation and administration. In this scenario, FindFor Inc. has most likely been able to provide superior value and cost control through A. strategic parity. B. strategic profiling. C. strategic liquidation. D. strategic positioning.

strategic positioning.

Strategic thinking is different from strategic planning in that A. strategic thinking includes all types of information sources while strategic planning does not. B. strategic thinking relies more on hard data than strategic planning. C. strategic thinking is regimented and confining, whereas strategic planning is more flexible. D. strategic thinking can create an illusion of control, whereas strategic planning avoids this.

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

According to AFI strategy framework, in which of the following tasks of strategic management is a firm's vision, mission, and values identified? A. strategy control B. strategy analysis C. strategy formulation D. strategy implementation

strategy analysis

A _____ is a graphical depiction of a company's relative performance vis-à-vis its competitors across the industry's key success factors. A. value curve B. value canvas C. strategy curve D. strategy canvas

strategy canvas

Which of the following stages in the AFI strategy framework involves designing a business, corporate, and global strategy? A. strategy control B. strategy implementation C. strategy analysis D. strategy formulation

strategy formulation

Best Fit Club, a chain of gyms and spas, requires its customers 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? A. razor-razor-blade B. pay-as-you-go C. subscription-based D. freemium

subscription-based

Mia has purchased an Internet package for three months, in which she can use 30 mbps Internet speed. However, for the service, she needs to pay a fee of $50 in advance irrespective of whether she uses the Internet during the service period or not. This arrangement best illustrates the _____ strategy. A. razor-razor-blade B. subscription-based C. pay-as-you-go D. freemium

subscription-based

Which of the following business models has been traditionally used by the magazine and newspaper industry? A. subscription-based B. razor-razor-blade C. pay-as-you-go D. freemium

subscription-based

Javier, 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, Javier is the start-up company's A. headhunter. B. category captain. C. employee. D. stakeholder.

D. stakeholder.

Lush Roses is a chain of premium hotels around the globe that charges higher prices for its rooms and suites when compared to the average industry standards. Yet, the hotel enjoys the largest market share in the industry. This is mainly due its highly responsive staff that has a strong commitment toward achieving a 100 percent guest satisfaction. In this scenario, which of the following is the key value driver? A. superior customer service B. low cost of input factors C. availability of complements D. economies of scale

superior customer service

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

superior customer service

The relative bargaining power of suppliers is high when A. suppliers provide products that are differentiated. B. incumbent firms face low supplier switching costs. C. incumbent firms can credibly threaten to backward integrate into the industry. D. suppliers depend heavily on the industry for a large portion of their revenues.

suppliers provide products that are differentiated.

Chat Zone Inc., a telecommunication company, had been drastically losing its market share due to tough competition in the industry. The management hired a reputed consulting firm to advice the company. The experts from the consulting firm pointed out that the company primarily lost out on its competitive advantage due to its tedious internal policies and procedures. These ineffective policies and procedures made the company operations, marketing, and after-sales service inefficient. Chat Zone Inc. can best solve its problem by working on its A. immobile assets. B. support activities. C. resource flows. D. resource stocks.

support activities.

Patterson Foods Inc. was the first company to start selling energy bars in its country—a product that gained popularity among diverse groups. Soon, other companies started to sell their own brands of energy bars, thereby giving Patterson Foods ample competition. In response, Patterson Foods decided to limit its variety of energy bars to only four. However, it ensured that these four varieties were low in calories and low in cost. With this innovation, Patterson Foods Inc. consistently outperformed its competitors for ten years. In this scenario, Patterson Foods Inc. maintained a _____ through its innovative strategy. A. balanced scorecard B. fiduciary responsibility C. consistent power position D. sustainable competitive advantage

sustainable competitive advantage

Which of the following frameworks used to measure competitive advantage relies on both an internal and an external view of a firm? A. the economic value creation model B. the accounting profitability model C. the shareholder value creation model D. the balanced-scorecard model

the balanced-scorecard model

The management of a company is assessing the value of all the tangible resources the company owns. Which of the following will be included in this assessment? A. the company's copyrights B. the company's brand equity C. the company's patents D. the company's machinery

D. the company's machinery

Which of the following is not an accurate expression of the economic value created per unit of a product sold? A. the sum of consumer surplus and producer surplus B. the difference between consumer's reservation price and firm's cost C. the sum of consumer surplus and firm profit D. the difference between the price charged and the firm's cost

the difference between the price charged and the firm's cost

Due to economic regression in United Filipia, the profitability of the large conglomerate Blue Wing Products Inc. (BWP) was poor. An analysis of the company's business showed that the company could become profitable if it divested a few strategic business units under its banner. From which of the following businesses would BWP find it most easy to exit? A. the automobile business where the company has contractual obligations with suppliers B. the airline business where the company's strategic commitments are long-term C. the e-commerce retail business where investments on assets are low D. the pharmaceutical business where the company has a large number of fixed costs

the e-commerce retail business where investments on assets are low

What is strategic leadership? A. the ability to delegate authority to create an effective strategic management process B. the executives' use of power and influence to direct the activities of others when pursuing an organization's goals C. the ability to inspire managers and other employees to create the best product possible D. the executives' use of power and influence to inspire workers to take responsibility for the final product

the executives' use of power and influence to direct the activities of others when pursuing an organization's goals

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

the expertise acquired by the employees in the company

Who among the following is responsible for making business strategies in a large conglomerate? A. the board of directors at the headquarters B. the shareholder of the company C. the lower-level employees in the company D. the general managers of individual business units

D. the general managers of individual business units

A firm's strategic position is likely to be strong when A. the entry barriers within the industry it operates in are low and the exit barriers are high. B. its suppliers and vendors can easily forward integrate and buyers can backward integrate. C. all the five forces in Porter's model are strong. D. the gap between the value the firm's product generates and the cost to produce it is large.

the gap between the value the firm's product generates and the cost to produce it is large.

Riya has recently started a restaurant in a commercial area where there are many other established restaurants and popular fast-food chains. Riya 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. Riya 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 Riya's business? A. the investments made by Riya on the restaurant's interiors B. the latest kitchen equipment that is at par with the restaurant's competitors C. the restaurant's late entry into the market D. the land owned by Riya, which reduces cost of operations

D. the land owned by Riya, which reduces cost of operations

When fashion magazines face competition from fashion blogs on the web, which of the following forces in Michael Porter's five forces model primarily gets stronger? A. the emergence of entry barriers B. the bargaining power of suppliers C. the availability of complements D. the threat of substitutes

D. the threat of substitutes

Value drivers contribute to a firm's competitive advantage only if A. the increase in value creation exceeds the increase in costs. B. they can shrink the firm's value gap. C. they can restrict the firm from claiming a premium price for its products. D. the decrease in perceived value leads to an increase in costs.

the increase in value creation exceeds the increase in costs.

Why do companies use strategic group models? A. to reveal product differences between firms in the same industry B. to reveal potential areas of industry convergence between firms in different industries C. to reveal common threads between firms in different industries D. to reveal performance differences between clusters of firms in the same industry

D. to reveal performance differences between clusters of firms in the same industry

An intended strategy is best described as A. a combination of its top-down strategic intentions and bottom-up emergent strategy. B. any unplanned strategic initiative undertaken by mid-level employees of their own volition. C. the outcome of a rational and structured, top-down strategic plan. D. a strategy developed at the lower levels of management to tackle unpredictable events.

the outcome of a rational and structured, top-down strategic plan.

What are network effects? A. the positive cost effects that accrue for firms with larger output because they can spread fixed costs over more units B. the positive effect that one user of a product or service has on the value of that product or service for other users C. the positive effect that the high price of the entry ticket has on incumbent industries D. the positive cost effects that standardized commodities have on incumbent industries

the positive effect that one user of a product or service has on the value of that product or service for other users

In the context of SWOT analysis, a firm can develop an offensive strategic option primarily by A. combining an internal weakness with an external threat. B. leveraging its internal strengths to minimize external threats. C. leveraging an external opportunity to overcome an internal threat. D. using its internal strengths to exploit external opportunities.

D. using its internal strengths to exploit external opportunities.

Which of the following features about a buyer indicates that the buyer has high bargaining power? A. when the buyer cannot credibly threaten to backwardly integrate into the industry B. when the buyer cannot purchase specific products from other sellers C. when the buyer faces high switching costs D. when the buyer operates in an industry where products are undifferentiated

D. when the buyer operates in an industry where products are undifferentiated

Silver Screen Cinemas Inc. and Digi Now Inc. are two companies that own and run movie theaters in malls and other commercial areas. While Silver Screen Cinemas Inc. pursues a cost-leadership strategy, Digi Now Inc. adopts a differentiation strategy. Which of the following statements is most likely true of this scenario? A. Silver Screen Cinemas will charge a premium price for its customers, while Digi Now will implement everyday low pricing. B. Digi Now and Silver Screen Cinemas will not be direct competitors to each other, and their customer segments will overlap very little. C. Digi Now will keep its customer service at an acceptable level, while Silver Screen Cinemas will provide superior customer service. D. Silver Screen Cinemas and Digi Now will use a similar approach to create value for customers by attempting to offer everything to everybody.

Digi Now and Silver Screen Cinemas will not be direct competitors to each other, and their customer segments will overlap very little.

Peerless Inc., a large conglomerate, wants to liquidate its business in certain industries to improve its overall profitability. Which of the following industries would Peerless Inc. find it most difficult to exit? A. the management consultancy industry in which the company's fixed costs are low B. the steel industry in which the company has obligations like severance pay toward employees C. the corporate training industry in which the company's commitments are mostly short-term D. the e-commerce industry where the company has no long-term contractual agreements with suppliers

the steel industry in which the company has obligations like severance pay toward employees

Which of the following approaches to assess competitive advantage is based on the view that noneconomic factors can have a significant impact on a firm's financial performance? A. the triple-bottom-line approach B. the economic value creation framework C. the accounting profitability approach D. the balanced-scorecard

the triple-bottom-line approach

Which of the following forces is most closely related to industry effects within the automobile industry? A. the actions taken to improve employee productivity within a firm B. the human resource strategy managers adopt to acquire the best talent from the industry C. the types of products and the services offered within the industry D. the decisions made within a firm regarding pricing of a product in the market

the types of products and the services offered within the industry

Which of the following is not a factor that makes total return to shareholders and market capitalization unreliable measures of company performance? A. the volatility of stock prices B. the effects of the unemployment rate C. variations in interest and exchange rates D. the unpredictability of return on revenue

the unpredictability of return on revenue

After trying on a dress, a consumer assesses it to be worth a maximum of $100 and is willing to pay that amount for the dress. However, the dress was priced at $80. What is the amount, $100, referred to as? A. the producer surplus B. the firm's cost (C) in manufacturing the dress C. the consumer surplus D. the value (V) the consumer attaches to the dress

the value (V) the consumer attaches to the dress

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

the value and the cost position of the firm relative to its competitors

The critics of top-down strategic planning and scenario planning argue that A. the strategies developed through these approaches are primarily based on an inspirational vision and not on hard data. B. these approaches do not believe that we can predict the future from the past. C. the development of strategies through these approaches is highly dependent on experience of front-line employees. D. these approaches do not allow for the necessary strategic thinking.

these approaches do not allow for the necessary strategic thinking.

Buyers are highly price sensitive when A. their purchase represents a small fraction of their procurement budget. B. they earn low profits or are strapped for cash. C. the quality of their products and services are highly affected by the quality of the inputs. D. the industry's products are highly characterized with non-price competition.

they earn low profits or are strapped for cash.

Visionary companies are able to outperform their competitors because A. their vision statements are more product-oriented. B. they provide more aspirational visions. C. their visions are exclusively financial. D. they isolate internal stakeholders in defining their visions.

they provide more aspirational visions.

The telecom industry in the country of New Taria is an industry characterized by the presence of strong network effects, high brand loyalty, high economies of scale, and proprietary technology among incumbent firms. Thus, in the telecom industry, the A. threat of substitutes is most likely high. B. threat of new entrants is most likely low. C. bargaining power of buyers is most likely low. D. entry barriers are most likely nonexistent.

threat of new entrants is most likely low.

When the laptop market overtook the desktop market, Blue Tech Inc., a leader in desktop technology, was left at a competitive disadvantage. Later, Blue Tech Inc.'s management channeled all of the company's efforts and revenue to develop an efficient laptop from scratch in less than a year. However, the company failed because most of its competitors had already been in the laptop market for five years. Blue Tech Inc.'s models were inferior to the ones in the market. In this scenario, Blue Tech Inc.'s failure can be best attributed to A. causal ambiguity. B. diseconomies of scope and scale. C. time compression diseconomies. D. social complexity.

time compression diseconomies.

Handy Pro, Inc. is a company that manufactures electric tools like drills, screwdrivers, and saws. Which of the following best illustrates a product-oriented vision for Handy Pro? A. to make people's lives simple and easy B. to allow everyone to have the luxury of electric tool technology C. to help people save time and energy spent using manual tools D. to be the pioneering manufacturer of electric tools

to be the pioneering manufacturer of electric tools

Which of the following is a customer-oriented vision? A. to be the most progressive insurance company B. to be the best automobile company in the world C. to enable people throughout the globe to identify their capabilities D. to manufacture innovative products through continuous learning

to enable people throughout the globe to identify their capabilities

The Chief Executive Officer (CEO) of Yahoo, Marissa Mayer, maintains that if a company builds the best product possible, profits will come. Identify the phrase that represents the new vision she developed for Yahoo. A. to achieve human sustainability while having fun doing it B. to provide a high-quality product that has environmental sustainability C. to appeal to the whole person at work and at home D. to make the world's daily habits more inspiring and entertaining

to make the world's daily habits more inspiring and entertaining

_____ describes a firm's ability to create, deploy, modify, reconfigure, upgrade, or leverage its resources over time in its quest for competitive advantage. A. Dynamic capability B. Resource immobility C. Resource heterogeneity D. Time compressed diseconomy

Dynamic capability

During the process of formulating an effective business model, a firm's managers should first A. transform their strategy of how to compete in to a blue print of actions and initiatives. B. implement their strategy at corporate, strategic business unit, and functional levels. C. implement their blueprint of actions and initiatives through structures, processes, culture, and procedures. D. evaluate the firm's strategy already in effect and take corrective actions if necessary.

transform their strategy of how to compete in to a blue print of actions and initiatives.

The top management at Parallela Pharma Inc., through rigorous testing, ensures that the company develops and sells drugs that are free of harmful side effects. Also, the company ensures that the chemical waste generated in the manufacturing process is kept to a bare minimum and is disposed of according to the regulations of the Environmental Protection Agency. The management assesses its overall performance based on these dimensions. Thus, the managers at Parallela Pharma are applying the _____ approach to measure firm performance. A. economic value creation B. shareholder value creation C. triple-bottom-line D. accounting profitability

triple-bottom-line

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. A. triple-bottom-line B. economic value creation C. accounting profitability D. shareholder value creation

triple-bottom-line

The management team for SafeCare Chemicals Inc. came up with the following vision statement: "SafeCare Chemicals will conscientiously track its financial performance to ensure profits for its investors, enhance its community through employment and supporting charities, and dispose of waste in a manner that will not harm the environment." This vision statement is most likely based on the A. accounting profitability approach. B. economic value creation approach. C. triple-bottom-line approach. D. balanced-scorecard approach.

triple-bottom-line approach.

For a firm that operates in an industry where competition is high, which of the following practices will result in inferior performance? A. choosing a distinct but different strategic position in the industry B. working toward increasing the difference between value creation and cost C. trying to be everything to everybody by combining different competitive strategies D. focusing on creating value for customers rather than destroying rivals

trying to be everything to everybody by combining different competitive strategies

The _____ is a conceptual framework that views organizational outcomes—strategic choices and performance levels—as reflections of the values of the members of the top management team, who interpret situations through the lens of their unique perspectives. A. two-factor theory B. expectancy theory C. upper-echelons theory D. value orientation theory

upper-echelons theory

A defining characteristic of the subscription-based business model is that the A. user pays for only the services he or she consumes. B. user pays for access to a product or service whether he or she uses it during the payment term or not. C. basic features of a product or service are provided free of charge, but the user must pay for premium services such as advanced features or add-ons. D. initial product is often sold at a loss or given away for free in order to drive demand for complementary goods.

user pays for access to a product or service whether he or she uses it during the payment term or not.

In the freemium business model, the A. initial product is sold at a premium price and the complementary goods are given free. B. users are free to pay for the services in advance or after using the services. C. 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. D. users pay for access to a product or service whether they use it during the payment term or not.

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.

Crystal 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 Crystal Tech Inc. to increase its profitability by lowering its production costs. Thus, Crystal's competency in designing and manufacturing microprocessors will be considered a(n) _____ resource in the VRIO framework. A. valuable B. inexhaustible C. tangible D. perishable

valuable

A firm's resource is most likely to be an internal strength and a core competency when the resource is A. valuable but common. B. valuable and costly to imitate. C. easily accessible and mobile. D. easy to substitute.

valuable and costly to imitate.

According to the VRIO framework, a firm can gain a competitive advantage if it has resources that are _____ and captured by an organized firm. A. varied, refined, costly to introduce B. valuable, refined, costly to introduce C. valuable, rare, costly to imitate D. varied, rare, costly to imitate

valuable, rare, costly to imitate

Product features, customer service, and complements are all examples of important A. cost curves. B. cost drivers. C. value curves. D. value drivers.

value drivers

The pursuit of both differentiation and low cost at the same time in a way that creates a leap in value for both the firm and consumers is called A. cost driving. B. cost innovation. C. value driving. D. value innovation.

value innovation

EasyOpen Inc. gained a patent for an electronic corkscrew. Soon the company made a huge profit on this device. Recently, however, other firms have produced electronic corkscrews. As a result, EasyOpen lost its competitive advantage. Which of the following would most likely be the reason for this development? A. EasyOpen failed to renew the patent after 10 years. B. EasyOpen's patent expired after 20 years. C. EasyOpen failed to copyright the corkscrew. D. EasyOpen's copyright expired after 30 years.

EasyOpen's patent expired after 20 years.

Which of the following statements accurately brings out the difference between economies of scale and economies of scope? A. Economies of scale refer to the decreases in per-unit cost with decreases in output, whereas economies of scope refer to the increases in per-unit cost with increases in output. B. Economies of scale result in decreasing returns to scale, and economies of scope result in constant returns to scale. C. Economies of scope are the savings that come from producing two or more outputs from the same resources, whereas economies of scale are decreases in per-unit cost with increases in output. D. Economies of scope are realized when a firm operates at the minimum efficient scale, whereas economies of scale are realized when the firm operates beyond the minimum efficient scale.

Economies of scope are the savings that come from producing two or more outputs from the same resources, whereas economies of scale are decreases in per-unit cost with increases in output.

When is the rivalry among existing competitors in an industry likely to be more intense? A. when the industry growth rate is high B. when firms make strategic commitments to compete in an industry C. when firms engage in non-price competition as opposed to price-cutting D. when the industry has low exit barriers

when firms make strategic commitments to compete in an industry

Which of the following situations will have greater effects from economies of scale than from learning effects? A. when conducting surgeries B. when practicing corporate law C. when mass manufacturing pens D. when making business decisions

when mass manufacturing pens

When do employees fail to adopt the organizational values of a firm? A. when the internal stakeholders of the firm are involved in designing the values B. when the top managers in the firm are merely paying lip service to the firm's stated values C. when the strategic leaders in the firm propagate and exhibit the same values D. when the organizational structure, such as its strategic decision making, is aligned with its values

when the top managers in the firm are merely paying lip service to the firm's stated values

During an assessment of employees and leaders in a company, Ethan Browne was categorized as a Level 5 manager in the Level-5 leadership pyramid. Which of the following can be inferred from this information? A. Ethan is currently a team lead in the company. B. Ethan shows no signs of being a good leader. C. Ethan is a top management executive in the company. D. Ethan has just started his career as a member of a team in the company.

Ethan is a top management executive in the company.

The fixed asset turnover of a company is 8.3. What do you infer from this? A. Every dollar spent on the company's fixed assets generates $8.30 of revenue. B. 8.3% of the company's revenue is invested in fixed assets. C. The return on fixed assets will break even in 8.3 years. D. The cost of capital invested on fixed assets is 8.3% of the total profit.

Every dollar spent on the company's fixed assets generates $8.30 of revenue.

Which of the following is an example of an organizational value? A. Burtell Oil, Inc. increases the inspection of pipelines above the legal requirement to prevent oil spills. B. Burtell Oil, Inc. lowers gas prices to gain an advantage over their closest competitor. C. Burtell Oil, Inc. finances research for finding oil deposits within the United States. D. Burtell Oil, Inc. launches an ad campaign that promotes the company as being environmentally friendly.

A. Burtell Oil, Inc. increases the inspection of pipelines above the legal requirement to prevent oil spills.

When a firm combines experience based learning and process innovation, the firm A. jumps to a steeper learning curve. B. experiences an increase in per-unit cost. C. loses its competitive advantage. D. moves down the existing learning curve.

A. jumps to a steeper learning curve.

Path dependence rests on the notion that A. time cannot be compressed at will. B. strategic decisions are easily reversible. C. rare resources can be built in a short period of time. D. competitive advantage can be sustained indefinitely.

A. time cannot be compressed at will.

_____ most precisely measures how well a company leverages its fixed assets, particularly property, plant, and equipment (PPE). A. Working capital turnover B. Fixed asset turnover C. Fixed assets to equity ratio D. Capital leverage ratio

B. Fixed asset turnover

Which of the following strategies does Twitter need to implement to increase its competitive advantage? A. charge no fee to individual users B. increase its user base C. deliver ads in real time D. allow core users to stay always connected

B. increase its user base

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. increases in cost as output increases.

Rachel owns a large portion of GM Cube Inc.'s stocks. However, she is not employed by the company. In this scenario, Rachel is the company's A. external stakeholder. B. internal stakeholder. C. creditor. D. customer.

B. internal stakeholder.

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. A. subscription-based B. razor-razor-blade C. pay-as-you-go D. direct sales

B. razor-razor-blade

A blue ocean strategy tends to be successful only if a firm is able to rely on a _____ that allows it to reconcile trade-offs. A. value driver B. value innovation C. product feature D. product complement

B. value innovation

Apple Watch retailed for $349 in 2015, and the firm was predicted to sell millions of units. The firm's total cost in terms of materials and labor for the Apple Watch was no more than $84. Thus, Apple's profit for each watch sold is an estimated $265, with a profit margin of _____ percent. A. 215 B. 265 C. 315 D. 365

C. 315

Which of the following statements with regard to industry structures is true? A. They are stable over time, not dynamic. B. Having a large number of competitors generally equates to higher industry profitability. C. A consolidated industry tends to be more profitable than a fragmented one. D. Having few but large competitors increases the threat of strong competitive forces such as supplier or buyer power.

C. A consolidated industry tends to be more profitable than a fragmented one.

Which of the following is a drawback of the SWOT analysis? A. The SWOT analysis takes into account only the internal environment of a firm, ignoring the equally important external environment. B. This framework is only applicable to the manufacturing industries; it is ineffective when applied to the service firms. C. A problem with this framework is that a strength can also be a weakness, and that an opportunity can also simultaneously be a threat. D. A drawback of this framework is that it allows managers to merely evaluate a firm's current situation, and not its future prospects.

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

Go West Airlines Inc. follows a cost-leadership strategy. Which of the following firms will most likely be its direct competitor? A. Deerpath Airlines Inc., which follows a cost-increase strategy B. John Henry Railways, which follows a differentiation strategy C. Blue Skies Airlines Inc., which follows a low-cost strategy D. Blue Cabs Inc., which follows a cost-leadership strategy

C. Blue Skies Airlines Inc., which follows a low-cost strategy

Which of the following statements accurately describes a firm's resource stock? A. Resource stocks are a firm's level of resources that are common to competitors. B. Resource stocks are a firm's future estimate of both tangible and intangible resources. C. Resource stocks are a firm's current level of intangible resources. D. Resource stocks are a firm's level of investments to maintain or build a resource.

C. Resource stocks are a firm's current level of intangible resources.

A key feature of an oligopoly is that the competing firms A. are independent. B. have no pricing power. C. are interdependent. D. have no barriers to entry.

C. are interdependent.

Clean Rinse Shampoo has been the leader of hair-cleaning products for about 40 years. However, this company relied too long on its competency without refining or upgrading its product. As a result, other shampoo companies that began to offer organic shampoo gained a competitive advantage over Clean Rinse. This case is an example of A. resource flow. B. dynamic capabilities. C. core rigidity. D. value chain.

C. core rigidity.

Strategic commitments are actions that are A. inexpensive, long-term oriented, and difficult to reverse. B. inexpensive, short-term oriented, and easy to reverse. C. costly, long-term oriented, and difficult to reverse. D. costly, short-term oriented, and easy to reverse.

C. costly, long-term oriented, and difficult to reverse.

How does availability of complements act as a value driver? A. Complements add value to a product by offering an inferior substitute to it. B. Complements add value to a product by competing with it. C. Complements add value to a product when they imitate it. D. Complements add value to a product when they are consumed in tandem with it.

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

The first step in stakeholder impact analysis involves A. formulating a stakeholder strategy to balance the different needs of various stakeholders. B. identifying the opportunities and threats the stakeholders present. C. describing the economic, legal, ethical, and philanthropic responsibilities of the firm toward the society. D. identifying the stakeholders that currently have, or potentially can have, a material effect on a company.

D. identifying the stakeholders that currently have, or potentially can have, a material effect on a company.

The society and the shareholders just expect, and do not mandatorily require, a firm to A. pay fair dividends and returns to the investors. B. follow the employment laws of a country. C. provide safe and quality products to the customers. D. pay its workers more than the minimum living wage.

D. pay its workers more than the minimum living wage.

In which of the following industry competitive structures do selling firms have the lowest pricing power? A. monopolistic competition B. monopoly C. oligopoly D. perfect competition

D. perfect competition

Which of the following responsibilities results from a society's mere expectations of a business and not because the society and the shareholders mandatorily require the business to demonstrate it? A. economic responsibilities B. legal responsibilities C. contract responsibilities D. philanthropic responsibilities

D. philanthropic responsibilities

Otion Inc. is a relatively new firm in the consumer electronics industry. The company's primary objective is to become the market leader in less than 5 years, for which it has to gain and sustain a competitive advantage. In the context of the VRIO framework, which of the following resources should Otion Inc. primarily focus on to achieve its objective? A. quality standards, which are common and mandatory throughout the industry B. inexpensive unskilled labor that is easily accessible by all companies C. component parts that are sourced from competitors' suppliers D. production systems that reduce costs by 30 percent below the current industry standards

D. production systems that reduce costs by 30 percent below the current industry standards

Which of the following forces was not originally a part of Michael Porter's fives forces model? A. threat of substitute products or services B. bargaining power of buyers C. rivalry among existing competitors D. strategic role of complements

D. strategic role of complements

Which of the following is an accurate statement about value chain analysis? A. The value chain concept can be applied only to manufacturing firms. B. The value chain concept can be applied only to high-tech firms. C. The value chain concept can be applied only to manufacturing and high-tech firms. D. The value chain concept can be applied to all firms, including service firms.

The value chain concept can be applied to all firms, including service firms.

Which of the following is an assumption that top-down strategic planning rests on? A. We can predict the future from the past. B. Time cannot be compressed at will. C. Decisions made in the past do not affect our future. D. Change is constant.

We can predict the future from the past.

Shortly after the small island of Balamia experienced multiple unexpected high-intensity earthquakes that caused massive destruction, many banks and insurance companies filed for bankruptcy. This left the economy of the country in a poor state. The natural calamity in Balamia best exemplifies A. a black swan event. B. a wild card event. C. skewness risk. D. kurtosis risk.

a black swan event.

The U.S. government legitimized claims by thousands of businesses and individuals in the aftermath of the BP oil spill in the Gulf of Mexico, causing the claims to become of great urgency to BP. This best represents the process of A. addressing stakeholder concerns. B. identifying stakeholders. C. establishing competitive parity. D. implementing a cost-leadership strategy.

addressing stakeholder concerns.

The balanced-scorecard can accommodate A. only short-term performance metrics. B. only long-term performance metrics. C. both short- and long-term performance metrics. D. neither short- or long-term performance metrics.

both short- and long-term performance metrics.

Within corporate social responsibility, _____ essentially reflects the notion of a business voluntarily giving back to society. A. social networking B. corporate citizenship C. corporate governance D. social bookmarking

corporate citizenship

Which of the following is not one of the three interdependent tasks of strategic management? A. analyze B. formulate C. estimate D. implement

estimate

Strategies developed at the departmental level, such as the accounting, human resources, production, and marketing departments, within a strategic business unit are referred to as _____ strategies. A. grand B. corporate C. business D. functional

functional

Creating resources that meet the VRIO criteria is strategically important to a firm because it A. helps the firm curb its resource heterogeneity and resource immobility. B. facilitates greater knowledge diffusion in the industry. C. leads to competitive parity within the industry. D. helps the firm to gain and sustain a competitive advantage.

helps the firm to gain and sustain a competitive advantage.

In the context of the SWOT matrix, which of the following best exemplifies a firm's internal strength? A. increase in a firm's customer loyalty B. growth in the size of the market in which a firm operates C. rise in the income of the demographic segment to which a firm caters D. loss of a competitor's reputation

increase in a firm's customer loyalty

If a resource is common A. competitive advantage will persist with one firm for a long period of time. B. it will result in perfect competition. C. it will result in greater resource immobility. D. competitive parity will cease to exist.

it will result in perfect competition.

Five years ago, Palomino Airline was able to get a strong foothold in the airline industry by hiring a few pilots and crew and renting two airplanes, which flew routes between Denver, Omaha, Pierre, Cheyenne, and Helena. Which of the following summarizes the above factors that enabled Palomino to get started? A. low entry barriers B. low competition C. low fares D. low flight cancellations

low entry barriers

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 A. low-cost input factors. B. economies of scale. C. superior customer service. D. availability of complements.

low-cost input factors

A positive relationship between vision statements and firm performance is more likely to exist when A. visions are product-oriented. B. internal stakeholders are isolated from defining and revising the visions. C. organizational structures are aligned with the firm's vision statement. D. vision statements are equivalent to listening to the customers.

organizational structures are aligned with the firm's vision statement.

The management of Wong Industries showed a commitment to ______ by increasing the salary of many female employees to meet its goal of having equal pay for women and men who perform comparable work. A. scenario planning B. upper-echelons theory C. product-oriented vision D. organizational values

organizational values

When a firm operates at the minimum efficient scale, the A. returns to scale are constant. B. cost per unit is the highest. C. firm experiences diseconomies of scale. D. firm attains the highest cost position.

returns to scale are constant.

Which of the following would most likely not indicate that sellers are a strong competitive force in an industry? A. when the buyers' cost of switching to substitutes is low B. when the products and services they provide can be differentiated C. when the buyers of their products are customers who buy in small quantities D. when the components they supply affect buyers' product quality

when the buyers' cost of switching to substitutes is low

As a part of strategy formulation, corporate strategy concerns questions relating to A. why we should compete. B. how to compete. C. where to compete. D. how to implement the business strategy.

where to compete.