BUS/475: Integrated Business Topics - Week 4

Which of the following statements about the make-or-buy continuum is true?

The "make" and "buy" choices anchor each end of the continuum.

______ costs are all of the costs associated with an economic exchange.

Transaction

______ refers to the firms' ownership of its production of needed inputs or of the channels by which it distributes its outputs.

Vertical integration

Using known components, based on existing technologies, in a new configuration to create a new market is known as ______.

architectural innovation

The code of professional conduct based on societal norms and expectations is known as ______.

business ethics

Which of the following terms describes the strengths that allow a firm to distinguish itself from the competition?

core competencies

The key question of where to compete is addressed by ___.

corporate strategy

Demand declines most rapidly in the ______ stage of the industry life cycle.

decline

During the growth stage of the industry life cycle, ______ increases rapidly.

demand

It is challenging for firms to "cross the chasm" because ______.

each stage of the industry life cycle features a different group of customers with different preferences and demands

Taking on an economic risk in order to innovate is known as ______.

entrepreneurship

In the maturity stage of the industry life cycle, industry growth ______.

flattens or even declines

Which of the following have been found to be ethical norms in business? (Check all that apply.)

honesty reciprocity fairness

Corporate strategy needs to be dynamic over time in order to ______. (Check all that apply.)

keep and maintain a competitive advantage diversify to capture growth opportunities respond to the ever-changing external environment

Increases in the value of a product or service that result from a corresponding increase in the number of users are known as ___.

network effects

Which of the following statements about the maturity stage of the industry life cycle is true?

Only a few large firms remain.

Which of the following are important components of fostering ethical behavior in employees?

Board members setting clear ethical expectations Strategic goals that are achievable with legal means Executive behavior that is in sync with the organization's vision and values

What are the three dimensions along which executives formulate corporate strategy?

The type of diversification The geographic scope The degree of vertical integration

Which of the following are advantages of platform businesses compared to pipeline businesses? (Check all that apply.)

They benefit from community feedback. They scale efficiently by eliminating gatekeepers. They unlock new sources of value creation and supply.

Which of the following statements about platform businesses is true?

They can grow faster than pipeline businesses.

Firms that pursue an unrelated diversification strategy and are unable to create additional value tend to experience which of the following?

a diversification discount

Who sets the tone for the ethical climate within an organization?

strategic leaders

Benny's Baos had an edge in the market, but other companies began to enter the market. Benny is now losing customers even though he has launched an aggressive marketing campaign in an attempt to attract customers. Benny's Baos is likely in the ______ stage of the industry life cycle.

shakeout

TWN, a large multinational corporation, chose to spin off one of its SBUs that was unrelated to TWN's core business in order to avoid the ______. When they announced the spin-off, the stock price of TWN went up by 5%.

diversification discount

What happens when the markets along the industry value chain are too risky and alternatives too costly in time or money?

vertical market failure

Amazon's continued focus on ______ is a key to its ongoing success.

innovation

Which of the following is a primary factor in avoiding creative destruction?

innovation

To get the benefits of vertical integration without the accompanying risks, companies can ______. (Check all that apply.)

use taper integration choose strategic outsourcing

Which of the following statements about platform business is true?

It creates value not only for the businesses but also for consumers.

Which statement describes the long tail?

A large amount of revenue derived from a small number of units among almost unlimited choices

__ strategy involves the decisions that senior management makes and the goal-directed actions it takes to gain and sustain competitive advantage in several industries and markets simultaneously.

Corporate

______ refers to an increase in the variety of products and services a firm offers or markets and the geographic regions in which it competes.

Diversification

What question is asked along the horizontal axis of the markets-and-technology framework?

Does the innovation build on existing technologies or create new ones?

What is the relationship between innovation and competitive advantage?

Innovation is a powerful weapon for gaining and maintaining competitive advantage.

Which statement best describes the speed of innovation over the past hundred years?

It has accelerated dramatically.

Which of the following statements about a business pipeline is true?

It is the traditional system of horizontal business organization.

Which of the following is an example of the principal-agent problem even when the principal's goal is to create shareholder value?

a manager flying first class on all business trips

An architectural innovation is ______.

a new product in which existing technologies are used in a novel way to create new markets

A non-diversified company focuses on which of the following?

a single market

When facing an ethical dilemma, a manager should ______. (Check all that apply.)

determine whether he or she could comfortably defend the action to the public consider whether the action in question conforms to the firm's code of conduct and industry practices

In the ______ quadrant of the core competence--market matrix, a firm combines existing core competencies with existing markets.

existing core competence--existing market

Which are the four steps of the innovation process?

idea imitation innovation invention

The most common type of innovation is ______ innovation.

incremental

The ______ identifies how industries tend to develop and change over time.

industry life cycle

Innovation can ______. (Select all that apply.)

make existing products or businesses obsolete provide firms with a competitive advantage

One way to overcome the principal-agent problem is to ______.

make managers owners through stock options

Employees who work in organizations that emphasize ethical behavior are ______.

more likely to act ethically.

A firm that successfully leverages network effects can ___.

push its industry into the growth stage

A business model in which companies can obtain a large part of their revenues by selling a small number of units from among almost unlimited choice is referred to as _____.

the long tail

The degree of vertical integration corresponds to ______.

the number of industry value chain stages in which a firm directly participates

Why do some firms choose alternatives to vertical integration?

to avoid the risks associated with vertical integration

Amazon's explosive success is largely due to which of the following? (Check all that apply.)

vertical integration diversification

Which of the following have significantly more value in their intended use than in their next-best use?

specialized assets

A conglomerate fits which type of corporate diversification model?

unrelated diversification

In order for a firm to lower costs, it must ______.

grow

______ are unique assets with high opportunity cost.

Specialized assets

It can be riskier to own parts of the supply chain than to rely on external supply chains.

True

True or false: Industries often tend to follow a predictable industry life cycle.

True

The negative effect of innovative ride-sharing services, such as Uber and Lyft, on traditional taxi cab companies is an example of ______.

creative destruction

In the ______ stage of the industry life cycle, falling demand leads to a reduction in market size.

decline

What are the main types of corporate diversification? (Check all that apply.)

dominant business diversification unrelated diversification single business diversification related diversification

Which of the following are the four underlying strategic management concepts that determine the scope of a firm? (Check all that apply.)

economies of scale core competencies economies of scope transaction costs

The stage during which a new product has gained some acceptance, thus causing first-time buyers to eagerly acquire the product and accelerate demand, is the ______ stage.

growth

Which type of innovation applies to existing markets and existing technologies?

incremental

An enterprise that creates value by matching external producers and consumers in a way that creates value for all participants and that depends on the infrastructure that the platform manages is a(n) ______.

platform business

Long-term contracts (such as licensing and franchising), equity alliances, and joint ventures are examples of which of the following?

strategic alliances

Simone was the first among her peers to try the new unicorn hair dye. For months she was the only person with unicorn hair. After some time, though, the product became available everywhere, and nearly every other person began sporting unicorn hair, even Simone's mom. This situation describes which of the following?

the crossing-the-chasm framework

Which of the following are among the reasons firms need to grow? (Check all that apply.)

to motivate management to increase profits

True or false: Any action taken by a manager that is within the bounds of the law is, by definition, an ethical action.

False

Pavel works for a successful pharmaceutical company. Despite several years of unprecedented growth, the company wants to boost profits even more. It has taken steps to drastically raise the prices of its most widely distributed medications, which are difficult to imitate. Research into employee ethical decision-making capacity indicates that Pavel will ______.

act in a manner that reflects his company's organizational culture

The process in which change agents create new products or processes at significant economic risk is known as ______.

entrepreneurship

The persons responsible for forming corporate-level strategy are the ___.

executives

In the ______ quadrant of the core competence--market matrix, the focus is on leveraging current core competencies to improve current market position.

existing competence--existing market

Companies that transact in the open market incur ______.

external transaction costs

If a company moves ownership of activities closer to the end customer, such as providing after-sales support, it is engaging in ______ vertical integration.

forward

Which of the following are types of vertical integration along the industry value chain? (Check all that apply.)

forward backward

Which of the following are types of innovation? (Check all that apply.)

incremental architectural radical disruptive

When a company introduces a new product or process or business model with the intent of gaining a competitive advantage, that company is engaging in ______.

innovation

The business structure that is linear and has producers at one end and consumers at the other is known as a(n) ______.

pipeline

During the shakeout stage of the industry life cycle, profits degrade for ______.

all but the most efficient firms

In which stage of the industry life cycle does competition become more intense, forcing weaker firms out of the industry?

shakeout

Place the four steps of the innovation process in order from first to last. Place the first step at the top.

idea invention innovation imitation