BUS POL EXAM 1
According to the resource-based view, a firm's competitive advantage often stems from its A) intangible resources. B) tangible resources. C) dynamic strengths. D) external environment.
A Brand reputation, trademarks, intellectual property are all intangible assets. Unlike physical resources, brand reputation is built over a long time and is something that other companies cannot buy from the market. Intangible resources usually stay within a company and are the main source of sustainable competitive advantage.
Firms that can employ and establish _________________, are more likely to protect their competitive advantage from being copied and/or eroding away. A) isolating mechanisms B) key human capital C) cash equivalents D) a strong competitor response
A Isolating mechanisms help prevent other firms from competing away any above-average returns that a firm earns as a result of its competitive advantage.
To reduce the amount of time it takes to apply packaging to its finished products, North Star Foods is implementing new equipment at its production plants. By doing this, North Star is addressing a _____ in the value chain analysis. A) primary activity B) secondary activity C) support activity D) premier activity
A Production plants are part of a firm's operations. Operations are primary activities in the value chain analysis.
Southwest Airlines (SWA) and Alaska Airlines both compete as point-to-point airlines, but they draw upon different resource bundles. This example best illustrates which of the following assumptions regarding the resource-based view? A) resource heterogeneity B) resource homogeneity C) resource allocation process D) resource immobility
A Resource heterogeneity suggests that not all firms have access to the same resources, as is the case with Southwest Airlines.
When performing internal analysis of firms, how would you answer the question, "why do companies exist?" A) Companies exist because they create value for customers in ways that customers are unable to replicate on their own. B) Companies exist because they provide a means of investment income for shareholders, who otherwise would be able to invest only in government securities. C) Companies exist because they provide a tax base for government to draw upon in creating and maintaining public works projects. D) Companies exist because they give college professors something to teach about.
A This fundamental question about strategy attempts to illustrate the importance of why firms exist in the first place
Deep Earth Gardening has a vision of helping every American learn how to grow their own food. Its management team recently unveiled the mission statement "A garden at every home." What is wrong with this mission statement? A) It does not indicate how the company will accomplish its goals. B) It does not include a stretch goal. C) It is not inspirational and motivating for employees. D) It is too specific.
A --> A mission describes what an organization does; it defines how the vision is accomplished and is often introduced with the preposition by. Deep Earth Gardening's mission statement does not indicate how the company will achieve its goal of helping to place a garden at every home, and is thus more suited as a vision statement.
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 in salary.
A --> A strategic group is a set of companies that pursue a similar strategy within a specific industry in their quest for competitive advantage.
If you examine various barriers to entry facing firms that might wish to enter the airline industry, this would be most helpful in assessing which of the five forces in that industry? A) threat of new entrants B) power of supplier C) competitive rivalry D) threat of substitute products
A --> Barriers to entry are indirectly related to the threat of new entrants.
Firms that are classified as operating in an oligopoly tend to have some pricing power if they are able to differentiate their product or service offerings from those of their competitors, so the recommended mode of competition is A) non-price-based competition. B) price-based competition. C) hypercompetition. D) service-based competition.
A --> Because of their interdependence, firms must not get stuck in a price war with each other because industry profitability will decrease; instead they must look for ways to compete in non-price related ways.
The minimum wage in the country of Hanns is $8 an hour. Delish, a restaurant in Hanns' 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 Hanns, which of the following responsibilities is Delish satisfying? A) legal responsibilities B) philanthropic responsibilities C) ethical responsibilities D) demographic responsibilities
A --> By adhering to the rules set by the government of Hanns, Delish is satisfying its legal responsibilities. Laws and regulations are a society's codified ethics, embodying notions of right and wrong. They also establish the rules of the game.
The owners of Always Baked bakery want to open a second retail outlet. Which of the following scenarios is most likely to yield a competitive advantage? A) Open a shop on an inexpensive piece of land near a new mixed-use residential and business district currently under construction. B) Purchase an existing bakery from a business that closed due to declining sales and try to revive it. C) Build a shop in a sparsely populated rural area where the land is inexpensive and few other bakeries exist. D) Open a shop in a crowded downtown location where several other bakeries have been successful over the years.
A --> By opening a shop near the future location of many new homes and businesses, Always Baked bakery's managers are able to secure a valuable future resource (a location in a high-density area with no competition and many future customers) at a low 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 --> Causal ambiguity describes a situation in which the cause and effect of a phenomenon are not readily apparent. To formulate and implement a strategy that enhances a firm's chances of gaining and sustaining a competitive advantage, managers need to have a hypothesis or theory of how to compete. Understanding the underlying reasons of observed phenomena is, however, far from trivial.
Jill is exploring multiple suppliers in order to find the best price. However, instead of calling all eight potential suppliers, she only reaches out to the first three and bases her selection on those instead of contacting all suppliers. Jill's action best describes the concept of A) cognitive limitations. B) optimal decision making. C) the illusion of control. D) escalating commitment.
A --> Cognitive limitations tend to lead us to choose the "good enough option" that satisfies our immediate needs, rather than to search for an optimal solution.
Sam, owner of Sam's Hand Sanitizer Inc., is in the middle of the strategy formulation stage. He has already allocated a substantial amount of money that covered his employees' salaries from the prior year (sunk costs) but has failed to see any positive outcomes. Given the money he has already spent, he feels as if he needs to recover those costs and pushes forward even though the outcome seems dim. This best illustrates the concept of A) escalating commitment. B) optimal decision making. C) cognitive limitations. D) the illusion of control.
A --> Cognitive limitations tend to lead us to choose the "good enough option" that satisfies our immediate needs, rather than to search for an optimal solution.
________________ allow(s) 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) Core competencies B) Strengths C) A value chain D) Competition
A --> Core competencies are the resources and/or strategic advantages of a business, including the combination of pooled knowledge and technical capacities, that allow it to be competitive in the marketplace.
One of the reasons that Circuit City filed for bankruptcy was due to its inability to reinvest, hone, and upgrade its once impressive resource base. Ultimately, Circuit City's core competences became A) core rigidities. B) value chain activities. C) strategic resources. D) costly to imitate.
A --> Core rigidities occur when a firm fails to reinvest their core competencies and thus lose their competitive advantage.
Most consumers and investors today want the firms they do business with to look beyond just the profit motive. In fact, they want firms that behave legally and ethically while also giving back to their communities via philanthropic activities. The framework that attempts to reconcile these wants is known as A) corporate social responsibility. B) stakeholder impact analysis. C) business model analysis. D) value chain driven decision making.
A --> Corporate social responsibility is a framework that helps firms recognize and address the economic, legal, ethical, and philanthropic expectations that society has of the business enterprise at a given point in time.
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
A --> External factors in a firm's task environment are ones that managers do have some influence over, such as the composition of their strategic groups (a set of close rivals) or the structure of the industry.
Which of the following strategy plans might work best in an industry that is considered a fast-changing environment with new laws going into effect regularly? A) scenario planning B) top-down planning C) bottom-up planning D) dominant planning
A --> In scenario planning, top management envisions different scenarios, to anticipate plausible futures in order to derive strategic responses.
As the CEO of a conglomerate, Sarah Cane exhibited her strong commitment toward the company's core value that customers' well-being is more important than profit when she convinced the board of directors to liquidate the company's pesticide subsidiary. The pesticide brand sold by her company was a major revenue earner in lesser-developed nations, but studies indicate that it is a carcinogen. Eva persuaded the board that the company had to be responsible toward society. In this scenario, Sarah has demonstrated A) strategic leadership. B) intrapreneurship. C) Machiavellianism. D) individualism.
A --> In this scenario, Sarah has demonstrated strategic leadership. Strategic leadership pertains to executives' use of power and influence to direct the activities of others when pursuing an organization's goals.
Which of the following is an example of a business acting upon an organizational core value? A) Emerald Autos reduces engine emissions below federal guidelines to reduce pollution. B) Emerald Autos lowers its retail prices to gain an advantage over its closest competitor. C) Emerald Autos finances research for developing more powerful engines. D) Emerald Autos launches an ad campaign that promotes the company as being environmentally friendly
A --> Organizational core values are the ethical standards and norms that govern the behavior of individuals within a firm or organization. By lowering engine emissions below beyond what federal laws require, Emerald Autos is acting on an ethical standard and thus an organizational value.
Progress Apparel's core value statement reads we will ensure our clothing is made with the highest respect toward human rights and environmental protection. Which of the following actions exemplifies how Progress's core values drive its strategic decision making? A) demanding that textile suppliers pay liveable wages and maintain safe production facilities B) introducing an online customer service unit to keep customers happy C) investing in more efficient machinery to reduce costs and lower prices for consumers D) purchasing a full-page advertisement in a major newspaper touting the company's values
A --> Progress's core values are best reflected in the decision to demand that all members of the supply chain exhibit a similar concern with the environment and human rights. If the company did not enforce these standards among its suppliers, its products would not comply with the company's stated values, and Fuller would be vulnerable to other ethical lapses and negative public attention.
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) growth strategy C) industry analysis D) co-operative strategy
A --> Strategic positions require that firms stake out a unique position in an industry—it requires trade-offs that should increase the value of their products/services while still maintain an effective cost structure.
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.
A --> Strategy analysis involves internal analysis, that is, what effects do internal resources, capabilities, and core competencies have on the firm's potential to gain and sustain a competitive advantage
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.
A --> Strategy analysis involves internal analysis, that is, what effects do internal resources, capabilities, and core competencies have on the firm's potential to gain and sustain a competitive advantage?
Suger & Sweet Sodas has seen its market share erode in recent years, as consumers increasingly turn toward healthier beverage choices such as unsweetened sparkling water. Hoping to rekindle interest in sugary sodas, Suger & Sweet decides to produce a limited run of "throwback" cans using labeling first introduced in the 1980s. What is wrong with this strategy? A) It fails to face the competitive challenge. B) It does not involve concrete actions. C) It lacks strategic commitments. D) It tries to be everything to everybody.
A --> Suger & Sweet's strategy fails to face the competitive challenge of changing consumer tastes. Instead of trying to give customers what they want by producing its own line of sparkling waters, Suger & Sweet simply continues to produce the same sugary sodas and is likely to see its market share continue to decline.
Which of the following is not captured when examining a competitive industry structure? A) the ability to engage in forward vertical integration B) the number and size of an industries competitors C) the firm's degree of pricing power D) the type of product or service (commodity or differentiated product)
A --> The ability to engage in horizontal integration would capture elements in a competitive structure, not forward vertical integration.
Keeping in mind the five forces in the airline industry, which of the following best explains the difficulty airlines have in generating a profit? A) Substitutes are readily available in the form of trains, buses, and cars, 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.
A --> The competitive forces are quite unfavorable for generating a profit potential in the domestic airline industry. Substitutes are readily available: If customers believe prices are too high, they can drive their cars or use the train or bus.
Which of the following is NOT considered an important macro-environmental influence on businesses (that is, a potential influence beyond that of the industry alone)? A) bargaining power of suppliers B) economic factors C) political changes D) technological factors
A --> The power of suppliers is from the five forces, not from PESTEL.
In recent years a growing number of U.S. consumers have become more health-conscious about what they eat. According to the PESTEL Framework this trend could best be classified as a ________ trend. A) sociocultural B) healthy eating C) political D) legal
A --> The sociocultural factor refers to broad changes in consumer tastes and preferences.
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.
A --> The threat of entry is low when incumbents possess cumulative learning and experience effects.
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.
A --> There is not a significant threat of entry because entering the aircraft manufacturing industry requires huge capital investments
After carefully assessing the market potential for solar-powered mobile devices, the top-level executives of We Know Inc. decided that the company would be launching a line of solar-powered tablets within the next two years. This would mean that the tablet division would need to immediately begin 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 --> Top-level executives design an intended strategy—the outcome of a rational and structured, top-down strategic plan
Firms that compete within the same strategic group generally experience A) more competitive rivalry than firms outside their strategic group. B) less competitive rivalry than firms outside their strategic group. C) the same competitive rivalry than firms outside their strategic group. D) no competitive rivalry because they are substitutes.
A--> Because of proximity, firms located in the same strategic group will compete more intensely with one another than firms that are located in a different strategic group.
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, which they will be able to acquire and deploy to their benefit. B) firm will have a sustained competitive advantage because of its unique resources that are difficult for others to replicate. 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.
B In the context of the resource-based model of competitive advantage, if a successful firm exhibits resource immobility it means that the firm will have a sustained competitive advantage due to its unique resources. In the resource-based view, resource immobility is an assumption that resources of a firm tend to be "sticky" and do not move easily from firm to firm. Because of that stickiness, the resource differences that exist between firms are difficult to replicate and, therefore, can last for a long time.
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 have little effect on competitive advantage. B) Tangible assets can be bought on the open market by anyone with the necessary cash, 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 for competitors to imitate, whereas intangible assets can be easily replicated.
B Tangible assets, such as buildings or computer servers, can be bought on the open market by any comers who have the necessary cash. However, an intangible asset such as a brand name or corporate culture must be built, often over long periods of time.
SJobs's Computer Repair has maintained a competitive advantage based on its thorough and professional service, reasonable pricing, and money-back guarantee. Management at the company is so committed to doing repairs well that they often have rejected employee suggestions to expedite their processes. Recently, the company has begun to lose customers to a new local service offering same day in-home repairs and 24/7 online customer support. According to the dynamic capabilities perspective, SJobs's Computer Repair has lost its competitive advantage due to A) value chain disruption. B) core rigidity. C) resource flows. D) resource stocks.
B When a firm relies on a core competency for too long and fails to adapt to changes in the external environment, its core competency becomes a core rigidity. Seth's failure to upgrade its service model to compete with the features offered by its competitors is a core rigidity that has led to a competitive disadvantage.
ECO Jeans, Inc. had a mission to become the leading producer of environmentally friendly blue jeans, an emerging and in-demand category in the apparel industry. Its strategy involved leveraging a network of organic cotton farmers and suppliers of environmentally responsible synthetic materials to create a product that is durable, attractive, affordable, and 100% recyclable. However, because it did not upgrade its outdated production facilities, ECO Jeans could not assemble its products at a low-enough cost to offer the jeans at a price that was attractive to customers. ECO Jeans' strategy failed because A) it failed to consider the competitive challenge. B) it was not backed up with strategic commitments. C) managers did not live by the company's core values. D) the company did not stake out a unique strategy position.
B --> A formulated strategy must be backed up with strategic commitments, or actions to achieve the mission that are costly, long-term oriented, and difficult to reverse. ECO Jeans failed to invest in upgrading its production facilities, leaving it unable to produce its jeans at a low-enough cost to achieve a competitive advantage.
Which of the following examples reflects the strongest vision? A) At Desks.com, many employees get paid well but do not feel their work is important. B) At Desks.com, all employees are motivated to make the best desks on the market. C) At Desks.com, most employees want to create a better desk than their closest competitor. D) At Desks.com, some employees do not understand the main goal of the company.
B --> A strong vision pervades the organization with a sense of winning and motivates employees at all levels to aim for the same target.
Nuke It is a major manufacturer of microwave ovens. Which of the following statements will best inspire the organization with a shared vision for Nuke It? A) At Nuke It, employees know that they will make a competitive wage. B) At Nuke It, employees at all levels are motivated to make the best microwave ovens on the market. C) At Nuke It, employees want to create a cheaper microwave oven than our closest competitor does. D) At Nuke It, employees can trust our managers to steer the company.
B --> A strong vision pervades the organization with a sense of winning and motivates employees at all levels to aim for the same target. Therefore, all employees at Nuke It being motivated to make the best microwaves ovens on the market reflects a strong vision. Also, a vision captures an organization's aspiration and spells out what it ultimately wants to accomplish. In addition, it helps employees find meaning in their work.
Facing stiff competition in the e-reader market, Smart Reads wants to protect its competitive advantage by increasing the perceived value of its reader. Smart Reads' best strategy to accomplish this would be to A) increase the cost of production to add innovative new features. B) highlight the number of celebrities who use Smart Reads e-readers. C) lower the retail price of its e-reader to attract new customers. D) try to imitate some of the features found in competing products.
B --> A valuable product enables a firm to improve its profit margin by increasing sales without raising production costs. By touting the use of Smart Reads e-readers by celebrities, Smart Reads can differentiate itself from competitors and improve its perceived value, leading to higher sales. Adding expensive new features or lowering the retail price, on the other hand, will erode Smart Reads's profit margins, while imitating competitors will make it difficult for Sumac to differentiate itself.
In 2008, BlackBerry's market cap peaked at $75 billion. By 2017 this valuation had fallen more than 90 percent, to $3.9 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.
B --> Although BlackBerry devices were great in productivity applications, such as receiving and responding to email via typing on its iconic physical keyboard, they did not provide effective access to texting, surfing the web, taking pictures, or playing games. Because of this, BlackBerry declined because it could not compete with iPhone, which performed multiple tasks effectively.
Good Ole Cinemas Inc. and HD Inc. are two companies that own and run movie theaters in malls and other commercial areas. While Good Ole Cinemas Inc. pursues a cost-leadership strategy, HD Inc. adopts a differentiation strategy. Which of the following statements is most likely true of this scenario? A) Good Ole Cinemas will charge a premium price for its customers, while HD will implement everyday low pricing. B) HD and Good Ole Cinemas will not be direct competitors to each other, and their customer segments will overlap very little. C) HD will keep its customer service at an acceptable level, while Good Ole Cinemas will provide superior customer service. D) Good Ole Cinemas and HD will use a similar approach to create value for customers by attempting to offer everything to everybody.
B --> Although these companies are in the same industry, their customer segments will most likely overlap very little, and they will not be direct competitors. That is because each firm has chosen a distinct but different strategic position; both can win if they have a distinct and well-executed competitive strategy.
Asher has been tasked with formulating the business strategy for Calm Cosmetics' new line of lipsticks. Which of the following ideas would Ida be likely to include in her proposal? A) Open kiosks in shopping centers located in developing countries with rising disposable incomes. B) Promote the lipsticks as the longest-lasting on the market. C) Invest in building an online store for Calm products. D) Reorganize the manufacturing division to gain efficiency.
B --> Business strategy concerns the question of how to compete. Three generic business strategies are available: cost-leadership, differentiation, or value innovation. By suggesting that Calm market its new products as the longest-lasting, Asher is pursuing a differentiation strategy.
Crocs Shoes was unable to sustain its competitive advantage over their rivals because its key strategic resource was A) valuable in the eyes of the consumer. B) not costly to imitate by competitors. C) too inexpensive. D) not comfortable or waterproof.
B --> Despite its patents and celebrity endorsements, other firms were able to more or less directly copy the shoe, taking a big bite into Crocs' profits.
Leslie owns a large portion of Hue Apparel's stock. However, she is not employed by the company. In this scenario, Leslie is the company's A) external stakeholder. B) internal stakeholder. C) creditor. D) customer.
B --> In this scenario, Leslie is the company's internal stakeholder. Internal stakeholders of a firm include stockholders, employees (including executives, managers, and workers), and board members.
Writer Button Inc. and Horner 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, Writer Button Inc. and Horner 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.
B --> In this scenario, Writer Button Inc. and Horner Inc. most likely have competitive parity with each other. Competitive parity refers to the performance of two or more firms at the same level
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 --> It is important not to confuse customer-oriented vision statements with listening to the customer. They are not the same thing. Customer-oriented visions identify a critical need but leave open the means of how to meet that need.
Amanda is a management consultant for a soda manufacturer that wants to expand into health drinks such as green tea and after-workout drinks. Based on what you have read, which of these is sensible advice for Amanda to offer her client? A) "Pinpoint the best time to enter this new market, and then make a yes-or-no decision quickly." B) "Carefully consider the entry choices over time before making a decision." C) "Your best bet is to undercut competitors' prices and lure them into a price war." D) "Focus on what your company does well rather than trying to expand into untried areas."
B --> Rather than considering firm entry as a discrete event (i.e., simple yes-or-no decision), or a discrete event of five parts, this model suggests that the entry choices firms make constitute a strategic process unfolding over time.
The former CEO of Sam's Club, a division with its own profit-and-loss responsibility, Rosalind Brewer, reported 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
B --> Strategic business units, or SBUs, are the standalone divisions of a larger conglomerate, each with its own profit-and-loss responsibility. Sam's Club is the SBU of Walmart.
Tommy, a manager, is writing an analysis of his employer's current and possible future revenues. Which of the following could he identify as an economic factor in his 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 overall economic growth rate is a measure of the change in the amount of goods and services produced by a nation's economy. It indicates what stage of the business cycle the economy is in—that is, whether business activity is expanding (boom) or contracting (recession).
Farm to Table Inc. is a supermarket chain. Due to strong competition from other stores in the industry, Farm to Table 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 --> This scenario best illustrates a monopolistically competitive structure. A monopolistically competitive industry is characterized by many firms, a differentiated product, some obstacles to entry, and the ability to raise prices for a relatively unique product while retaining customers.
The production head at the All Paints and Surface Corp. would frequently stay back after office hours and experiment with new color combinations even though this was part of the new product development team's job. As a result of these experiments, he came up with two new interior paint colors, foggy morning and mint julep. The new colors proved popular among test groups, and quickly became some of Omnitone's best-selling products. Which of the following strategies does this scenario best illustrate? A) intended strategy B) emergent strategy C) unrealized strategy D) tactical strategy
B --> This scenario best illustrates an emergent strategy. An emergent strategy describes any unplanned strategic initiative undertaken by mid-level employees of their own volition. If successful, emergent strategies have the potential to influence and shape a firm's strategy.
SJobs's Computer Repair has maintained a competitive advantage based on its thorough and professional service, reasonable pricing, and money-back guarantee. Management at the company is so committed to doing repairs well that they often have rejected employee suggestions to expedite their processes. Recently, the company has begun to lose customers to a new local service offering same day in-home repairs and 24/7 online customer support. According to the dynamic capabilities perspective, SJobs's Computer Repair has lost its competitive advantage due to A) value chain disruption. B) core rigidity. C) resource flows. D) resource stocks.
B --> When a firm relies on a core competency for too long and fails to adapt to changes in the external environment, its core competency becomes a core rigidity. Seth's failure to upgrade its service model to compete with the features offered by its competitors is a core rigidity that has led to a competitive disadvantage.
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 --> With the five-forces-plus-complements model, one cannot determine the changing speed of an industry or the rate of innovation. This drawback implies that managers must repeat their analysis over time in order to create a more accurate picture of their industry.
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.
B -->Corporate executives at headquarters formulate corporate strategy. They need to formulate a strategy that can create synergies across business units that may be quite different and determine the boundaries of the firm by deciding whether to enter certain industries and markets and whether to sell certain divisions.
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 evaluate only a firm's current situation and not its future prospects
C Although the SWOT analysis is a widely used management framework, however, a word of caution is in order. A problem with this framework is that a strength can also be a weakness, and that an opportunity can also simultaneously be a threat.
Assume 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 describes a situation in which the cause and effect of a phenomenon are not readily apparent. In the given scenario, the firm's competitive advantage is protected against imitation by causal ambiguity.
John is a bit confused about the difference between stakeholders and stockholders. You meet with John and inform him that the main difference is that A) stakeholders are both internal and external to the firm while stockholders are considered external to the firm. B) stakeholders are considered internal to the firm while stockholders are external to the firm. C) stakeholders can be both internal and external while stockholders own shares of a firm and are classified as internal to the firm. D) stakeholders are external to the firm while stockholders are considered internal to the firm.
C -- >Stakeholder strategy is an integrative approach to managing a diverse set of stakeholders effectively in order to gain and sustain competitive advantage. Internal stakeholders include; employees (executives, managers, and workers), stockholders, and board members. External stakeholders include customers, suppliers, alliance partners, creditors, unions, communities, governments at various levels, and the media
Which of the following scenarios illustrates a firm that has a sustainable competitive advantage? A) Samson LLC generated revenue of $300,000 this financial year, which is close to the industrial revenue average of $320,000. B) GoNow 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) Bill and Ted Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years. D) Johnson Inc. was able to outperform its competitors with its new production system, in terms of revenue, for a brief period of four months.
C --> A firm that is able to outperform its competitors or the industry average over a prolonged period of time has a sustainable competitive advantage. Thus, Bill and Ted Corp. has a sustainable competitive advantage because it has been able to hold its market share of 68 percent in the social networking industry for more than three years.
Steve manages product design and development at a toy company. The junior managers who report to him tell him that new complementors for the firm's products are available. What should Steve's reaction be? A) He should consult lawyers about the possibility of suing for copyright infringement. B) If the industry barriers to entry are low, he doesn't need to do anything. C) He needs to find out if his company as well as other companies can provide the complements. D) If the industry barriers to entry are high, he doesn't need to do anything.
C --> Complements increase demand for the primary product, thereby enhancing the profit potential for the industry and the firm. Firms may choose to provide the complements themselves or work with another company to accomplish this.
Steve manages product design and development at a toy company. The junior managers who report to him tell him that new complementors for the firm's products are available. What should Steve's reaction be? A) He should consult lawyers about the possibility of suing for copyright infringement. B) If the industry barriers to entry are low, he doesn't need to do anything. C) He needs to find out if his company as well as other companies can provide the complements. D) If the industry barriers to entry are high, he doesn't need to do anything.
C --> Complements increase demand for the primary product, thereby enhancing the profit potential for the industry and the firm. Firms may choose to provide the complements themselves or work with another company to accomplish this.
CarTsar Inc. is a manufacturer of automobile parts, which it sells to retail auto supply stores. Its core competencies include superior design and engineering capabilities, as well as a highly integrated and efficient supply chain. To sustain its competitive advantage, CarTsar should first A) seek to replicate its nearest competitor's competency in innovative marketing. B) attempt to cut costs by replacing assembly line workers with robots. C) upgrade its engineering department and improve its supply chain. D) diversify its product offerings by developing parts for construction equipment.
C --> Core competencies that are not continuously nourished will lose their ability to yield a competitive advantage. Cartech should prioritize upgrading or improving its core competencies to ensure that competitors do not develop superior skills in those areas.
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 --> In a traditional top-down strategic planning process, strategic planners first provide careful analyses of internal and external data and apply it to all quantifiable areas: prices, costs, margins, market demand, head count, and production runs. Based on a careful analysis of these data, top managers reconfirm or adjust the company's vision, mission, and values before formulating corporate, business, and functional strategies.
All Signal Inc., a telephone service provider, has a large user base mainly because phone calls and messages between all All Signal users are free. When a person switches to an All Signals network, his or her entire network of family and friends is likely to switch to the same network to receive the benefit of free calls and messages. In addition, an existing user who gets a new user to register with All Signal Inc. is given a free wireless connection. This has helped to keep competition away from All Signal. In this scenario, which of the following factors is acting as an entry barrier for All Signal Inc.? A) economies of scale B) high capital requirement C) network effects D) high fixed costs
C --> In this scenario, network effects are acting as an entry barrier for All Signal Inc. Network effects describe the positive effect (externality) that one user of a product or service has on the value of that product or service for other users. When network effects are present, the value of the product or service increases with the number of users.
Lil Anthony's and Amelia's are two restaurants serving Italian cuisine. While Lil Anthony's focuses on providing quick, affordable pasta dishes for the lunch crowd, Amelia's focuses on serving home-style dishes in an upscale, romantic setting. Both companies have been able to gain a competitive advantage. This is most likely because the companies have A) benefitted from economies of scale. B) entered into a cartel arrangement. C) pursued distinct strategic positions. D) engaged in direct imitation and substitution
C --> In this scenario, the two firms have gained a competitive advantage by pursuing distinct strategic positions. Cost-leadership and differentiation are distinct strategic positions. The key to successful strategy is to combine a set of activities to stake out a unique position within an industry.
Tony's Pizza Shop is able to net $10,000 a week; this makes his shop profitable. His number one competitor, Leo's Pies is also profitable, netting $12,000 a week. Lil Anthony's Pizza Palace nets $13,000 a week. Since Tony's Pizza Shop is profitable, we can conclude that he has a competitive advantage in the industry. A) True—competitive advantage is achieved through profitability alone. B) True—competitive advantage is achieved since Tony has a positive net income. C) False—competitive advantage is only achieved by generating above average returns, relative to competition. D) False—Tony more than likely has a sustained competitive advantage since he's been in business longer.
C --> Profitability does not necessarily equate to competitive advantage. A competitive advantage is measured by a firm's ability to generate above average returns, not just a measure of profitability
Breeze Car Rental follows a cost-leadership strategy. Which of the following firms will most likely be its direct competitor? A) Auto Rent Inc., which follows a cost-increase strategy B) Samson Truck Rentals, which follows a differentiation strategy C) Quicker Rental Cars, which follows a low-cost strategy D) Rent and Buy Corp., which follows a standardization strategy
C --> Quicker Rental Cars, which follows a low-cost strategy, will be Breeze's direct competitor. Companies in the same strategic group are direct competitors.
When young start-up entrepreneurs make claims like, "We will be the Uber of X, where X is any other category than ride hailing" or "We will be the Airbnb of Y, where Y is any other category than hospitality services" they are best illustrating which of the following cognitive biases? A) groupthink B) escalation of commitment C) representativeness bias D) confirmation bias
C --> Representativeness refers to the cognitive bias of drawing conclusions based on small samples, or even from one memorable case or anecdote
New Diamond Inc. is a company that sells 24-carat gold biscuits to companies that manufacture jewelry. Because 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.
C --> Since the company operates in an industry where many other suppliers sell standardized products, it can most likely only achieve competitive parity. Firms in perfect competition have difficulty achieving even a temporary competitive advantage and can achieve only competitive parity.
Maria is the Chief Operating Officer of the start-up Apps4U. In which of the following scenarios does Maria exhibit strategic leadership? A) Maria directs the company to produce an app for reptile enthusiasts, a community she happens to be a part of. Even though the app ends up losing significant amounts of money, Maria is proud of the product and uses it every day. B) Citing budget concerns, Maria ignores the directions from Apps4U's CEO to double the size of the customer support staff. As a result, the company misses its third quarter customer satisfaction target but exceeds its net profit expectations by 5 percent. C) Maria schedules a meeting with the manager of the marketing department and overcomes his skepticism about a new campaign aimed at customers in the 55+ age group. Over the next three months, AppPalace gains 250,000 new users in that group. D) With a major pitch to potential investors coming up, Maria works alone for 10 hours a day until she writes the perfect sales pitch. Even though the rest of her team doubts that they can meet the performance goals Maria has set, she makes the presentation anyway.
C --> Strategic leadership pertains to executives' use of power and influence to direct the activities of others when pursuing an organization's goals. Power is defined as the strategic leader's ability to influence the behavior of other organizational members to do things, including things they would not do otherwise. Maria's ability to influence the behavior of the marketing department to target a new, underserved customer segment enables Apps4U to achieve a competitive advantage.
Industrial Drills, a company that manufactures industrial tools, incurs higher costs because of its refusal to outsource its manufacturing to countries where labor costs are lower. This reflects Industrial Drills' ________ responsibility. A) economic B) legal C) ethical D) demographic
C --> This reflects Industrial Drills' ethical responsibility. A firm's ethical responsibilities go beyond its legal responsibilities. They embody the full scope of expectations, norms, and values of its stakeholders. Managers are called upon to do what society deems just and fair.
Makita, DuPont, Builder's Square, and Nut's & Bolts are all hardware stores that compete 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 these stores form a ________ group. A) focus B) command C) strategic D) cross-functional
C --> Together the four stores form a strategic group. A strategic group is a set of companies that pursue a similar strategy within a specific industry in their quest for competitive advantage. Companies in the same strategic group are direct competitors.
Amelia has recently started a restaurant in a commercial area that already has many other established restaurants and popular fast-food chains. Amelia owns the building in which her restaurant is located, rather than leasing premises as her competitors do. This factor allows her to offer her products at a more competitive price. Amelia has also invested a huge amount in designing the restaurant's interior and in equipping the kitchen with the appliances that are most widely used in her industry. In this scenario, which of the following is the most valuable resource for Amelia's business? A) the investments made by Amelia on the restaurant's interior B) the type of kitchen equipment widely used in her industry C) the restaurant's late entry into the market D) the building owned by Amelia, which reduces cost of operations
D A resource is valuable if it helps a firm increase the perceived value of its product or service in the eyes of consumers, either by adding attractive features or by lowering price because the resource helps the firm lower its costs.
Frozen Gold is a fast-growing chain of ice cream shops. It has acquired an edge over its competitors through its ability to provide a wide array of unique flavors and a hip atmosphere in stores. This advantage of Frozen Gold best exemplifies a A) markup. B) resource flow. C) capital gain. D) core competency.
D Core competencies 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.
Given the accelerated pace of technological change, in combination with deregulation, globalization, and demographic shifts, a firm will be successful today only 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.
D Given the accelerated pace of technological change, in combination with deregulation, globalization, and demographic shifts, dynamic markets today are the rule rather than the exception. As a response, a firm may create, deploy, modify, reconfigure, or upgrade resources to provide value to customers and/or lower costs in a dynamic environment.
Jennifer, 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 Jennifer employing? A) Blake Mouton managerial grid B) Ansoff's matrix C) BCG analysis D) SWOT analysis
D In this scenario, Jennifer is using the SWOT analysis. SWOT analysis is a framework that allows managers to synthesize insights obtained from an internal analysis of the company's strengths and weaknesses (S and W) with those from an analysis of external opportunities and threats (O and T).
After conducting a SWOT analysis, your firm has decided to focus on addressing issues located in the Weaknesses-Opportunities quadrant. Which of the following steps are you most likely to take? A) Devote more resources to an extremely popular advertising campaign to promote an exciting new product. B) Shut down struggling retail outlets in an economically depressed region. C) Deploy top sales personnel to prevent buyers from migrating towards lower-priced competition. D) Reorganize the inefficient research and development department to bring innovative products to market more quickly.
D The lack of research and development productivity is an internal weakness that prevents your firm from taking advantage of external opportunities by being the first to offering new products and services. By addressing the lack of productivity with a departmental reorganization, the firm has produced a strategic alternative based on the weaknesses-opportunities quadrant of the SWOT matrix.
Chips & Motherboards Inc., a leading hard drive manufacturer, recently filed for bankruptcy. While most of Chips & Motherboards Inc.'s competitors were shifting away from physical data storage devices toward online cloud storage services, Chips & Motherboards Inc. invested most of its retained earnings in the effort to improve its hard drives. Once the hard-drive market drastically declined, Chips & Motherboards Inc. 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
D The scenario best illustrates path dependence. Path dependence is a situation in which the options one faces in the current situation are limited by decisions made in the past.
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
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 is an example of a generic business strategy. Business strategy occurs within strategic business units, or SBUs, the standalone divisions of a larger conglomerate, each with its own profit-and-loss responsibility. Within the guidelines received from corporate headquarters, they formulate an appropriate generic business strategy (cost-leadership, differentiation, or integration) in their quest for competitive advantage.
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.
D --> A firm's strategic position relates to its ability to create value for customers (V) while containing the cost to do so (C). Competitive advantage flows to the firm that is able to create as large a gap as possible between the value the firm's product or service generates and the cost required to produce it.
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.
D --> A monopolistically competitive industry has many firms competing against each other, and an oligopolistic industry is consolidated with few (large) firms.
Your company, a small software development firm, has attracted many of the top young programmers in your area. As a result, the apps you produce have been praised for their innovative features and intuitive user experience. According to the bathtub metaphor in the dynamic capabilities perspective, what is the best way for you to protect against resource leakage? A) Invest in an online marketing campaign for existing products to retain customers. B) Open a satellite office overseas to support the company culture of taking chances. C) Attempt to undercut the competition by imitating their top-selling product. D) Improve the benefits package to retain key employees and reduce turnover.
D --> According to the bathtub metaphor, resource leakage occurs when employee turnover is high or when the firm does not engage in certain activities for some time and forgets how to do them well. Since your employees are the primary drivers of your reputation for innovation, the best way to protect your stock of intangible resources against resource leakage is to ensure that employees are not recruited away by other firms.
Which of following practices of a firm satisfies its ethical responsibilities? A) using plastic as the packaging material, even 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
D --> Selling vaccines at a subsidized price in a less developed country even though this results in reduced shareholder returns satisfies a firm's ethical responsibilities. A firm's ethical responsibilities go beyond its legal responsibilities. They embody the full scope of expectations, norms, and values of its stakeholders. Managers are called upon to do what society deems just and fair.
As the strategic manager of ShRPer Scissors, you are tasked with producing a strategy for introducing a new line of premium scissors. Your competitor produces a line of similar scissors at a cost of $1 and sells them for $12. Because your company has inferior production capabilities, your scissors will cost $3 each to produce. However, your handle is proven to be more comfortable than your competitors'. Assuming you are guaranteed to sell the same number of units as your competitor, which of the following strategies is most likely to achieve a competitive advantage? A) Reduce the quality of materials used in ShRPer scissors to bring unit costs down to $1, then sell the scissors for $12. B) Continue to produce ShRPer scissors for $3 but set the price at $10. C) Offer a buy-one-get-one-free sale on ShRPer scissors. D) Market ShRPer scissors as a higher-quality alternative and sell them for $15.
D --> By emphasizing the quality and comfort of ShRPer scissors, you differentiate the product and create superior value for customers. Although your scissors are more expensive to make at $3 each, the increased perceived value of your product allows you to sell them for $15, making the difference between value creation and cost greater than your competitor's. The greater the difference between value creation and cost, the greater the firm's economic contribution and the more likely it will gain competitive advantage.
As manager of a relatively new company, you are tasked with analyzing company resources to identify core competencies capable of supporting a competitive advantage. Which of the following resources is most likely to generate a competitive advantage? A) new production facilities B) large cash holdings C) stockpile of supplies D) enthusiastic company culture
D --> Competitive advantage is more likely to spring from intangible resources, such as an energetic and enthusiastic company culture, than from tangible resources, such as buildings, capital, or supplies.
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 concerns questions relating to where to compete in terms of industry, markets, and geography. Business strategy concerns the question of how to compete.
In the context of the resource-based model of competitive advantage, which of the following scenarios best exemplifies resource immobility? A) Acme Corp. has earned a good reputation among its shareholders by investing more heavily in equipment than in building up brand equity. B) TooFirm Inc. has lost its market share because its resources are rigid, inflexible, and static. C) Purple Dreams 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) PaluniInc. has been able to outperform its competitors because the uniqueness of its employee experience is difficult for competitors to replicate.
D --> In the resource-based model of competitive advantage, resource immobility refers to the assumption that resources of a firm tend to be "sticky" and do not move easily from firm to firm. Because of that stickiness, the resource differences that exist between firms are difficult to replicate and, therefore, can last for a long time.
27) WeClean Inc., a manufacturer of cleaning agents, supplies its products to Goodings Inc., a supermarket chain. It demands that Goodings create more shelf space in its stores for WeClean s' products. However, Goodings 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, Goodings Inc. has exercised its bargaining power as a buyer through A) price stability. B) retroactive market share. C) enhanced technology. D) backward integratio
D --> In this scenario, Goodings Inc. has exercised its bargaining power as a buyer through backward integration. Buyers are powerful when they can credibly threaten backward integration. Backward integration occurs when a buyer moves upstream in the industry value chain, into the seller's business.
WeClean Inc., a manufacturer of cleaning agents, supplies its products to Goodings Inc., a supermarket chain. It demands that Goodings create more shelf space in its stores for WeClean s' products. However, Goodings 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, Goodings Inc. has exercised its bargaining power as a buyer through A) price stability. B) retroactive market share. C) enhanced technology. D) backward integration.
D --> In this scenario, Goodings Inc. has exercised its bargaining power as a buyer through backward integration. Buyers are powerful when they can credibly threaten backward integration. Backward integration occurs when a buyer moves upstream in the industry value chain, into the seller's business.
Pam owns Discount Auto Zone, a company that got its start making auto parts related for hybrid vehicles, but her firm has had difficulty establishing itself as a maker of parts for the more profitable internal combustion engine. What is most likely contributing to Discount Auto Zone's problem in this area? A) Newcomers cannot use existing assets or reconfigure their value chains. B) New competitors usually ignore stakeholders who are not stockholders. C) It is difficult for outsiders to gauge which stage of the "life cycle" that industry is in. D) Entry barriers usually protect the incumbent players in a profitable industry.
D --> One of the challenges that strategic leaders face is that often the most attractive industries in terms of profitability are also the hardest to break into because they are protected by entry barriers.
During an AFI planning session, the managers of the Bronco Motorcycle Corporation decided to place various stages of production in different countries in order to implement the strategy of cutting overhead costs. By doing this, what issue did the firm address? A) philanthropic strategy B) business ethics C) corporate governance D) organizational design
D --> Organizational design involves deciding how the firm should organize to turn the formulated strategy into action.
TransNational Inc. is a large conglomerate that operates in 17 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, or the value of potential future revenues generated by all its customers in a lifetime. Based on this guideline received from the top management team, the product leader of the home audio division has decided to adopt a cost-leadership strategy in all of his 17 units. Thus, the decision made by the product leader best illustrates a ________ strategy. A) corporate B) functional C) grand D) business
D --> The given decision made by the product leader best illustrates a business strategy. General managers in strategic business units must answer business strategy questions relating to how to compete in order to achieve superior performance. Within the guidelines received from corporate headquarters, they formulate an appropriate generic business strategy (cost-leadership, differentiation, or integration) in their quest for competitive advantage.
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 decreased 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
D --> The implicit trust relationship between the corporate world and society at large has deteriorated due to the arrival of several black swans.
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.
D --> The key to successful strategy is to combine a set of activities to stake out a unique position within an industry. Competitive advantage has to come from performing different activities or performing the same activities differently than rivals are doing. Competing to be similar but just a bit better than a competitor is likely to be a recipe for cutthroat competition and low profit potential.
After conducting a SWOT analysis, your firm has decided to focus on addressing issues located in the Weaknesses-Opportunities quadrant. Which of the following steps are you most likely to take? A) Devote more resources to an extremely popular advertising campaign to promote an exciting new product. B) Shut down struggling retail outlets in an economically depressed region. C) Deploy top sales personnel to prevent buyers from migrating towards lower-priced competition. D) Reorganize the inefficient research and development department to bring innovative products to market more quickly.
D --> The lack of research and development productivity is an internal weakness that prevents your firm from taking advantage of external opportunities by being the first to offering new products and services. By addressing the lack of productivity with a departmental reorganization, the firm has produced a strategic alternative based on the weaknesses-opportunities quadrant of the SWOT matrix.
In strategic management, strategists engage in three pillars. Which of the following is not one of these three pillars? A) the implementation of major goals and objectives B) the analysis of major goals and objectives C) the formulation of major goals and objectives D) the unification of major goals and objectives
D --> The strategic management process follows the AFI framework; analysis, formulation and implementation.
Jennifer manages a chain of bars and restaurants in a tri-county area that has recently experienced an economic boom because of fracking and high oil prices. What is most likely to happen when there is too much money in the tri-county economy? A) too many goods and services B) a drop in interest rates C) high economic growth D) an increase in prices
D --> Too much money in an economy is characterized by rising prices—inflation. Inflation tends to go along with higher interest rates and lower economic growth.
