Business Policy Exam 3
What part of the AFI strategy framework does the question "How does the firm make money?" relate to? strategic leadership and the strategy process competitive advantage, firm performance, and business models internal analysis external analysis
competitive advantage, firm performance, and business models
Melissa owns a firm that produces sports drinks. Since there are a number of firms in the industry competing on cost, Melissa has decided to pursue a differentiation strategy. In this case, she should enforce strict budget controls at all levels of the organization. devote all resources to reducing the value gap. focus on adding unique features to her product that customers will value. concentrate on improving process technologies to achieve economies of scale.
focus on adding unique features to her product that customers will value.
Canon was able to redesign the copying machine so that it didn't need professional service—reliability was built directly into the machine, and the user could replace parts, such as the cartridge. What Xerox had not envisioned was the possibility that the components of the copying machine could be put together in an altogether different way that was more user-friendly. This example describes incremental innovation. radical innovation. architectural innovation. disruptive innovation.
architectural innovation.
In the context of industrial growth, which of the following statements is true of standards? After a standard is established in an industry, the basis of competition tends to move away from process innovations toward product innovations. As the size of a market expands, a standard signals the market's agreement on a common set of engineering features and design choices. Standards are exclusively imposed top-down by government or other standard-setting agencies such as the Institute of Electrical and Electronics Engineers. Standards emerge exclusively from bottom-up through competition in the marketplace.
As the size of a market expands, a standard signals the market's agreement on a common set of engineering features and design choices.
As the top manager of a major producer of automobile airbags, you have recently introduced the following vision statement: to protect the health of every driver and passenger. How can you ensure that your employees feel invested in and inspired by the firm's vision? Hang banners around the production facility touting the new vision statement. Ask employees for feedback on the vision statement and revise based on their input. Include a "vision adherence assessment" in each employee's annual performance review. Give a speech explaining why everyone should support the new vision.
Ask employees for feedback on the vision statement and revise based on their input.
Which of the following factors most contributes to the U.S. automotive industry being characterized by high entry barriers? New entrants in the automotive industry expect that incumbents will not or cannot retaliate. New auto companies create electric cars powered by simpler motors and gearboxes. 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.
Car manufacturers require large-scale production in order to be cost-competitive.
Beatsall 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 Beatsall's low prices. Thus, Beatsall has a competitive advantage due to its superior customer service. economies of scale. time compression economies. learning-curve effects.
He is not able to help others reach their full potential.
________ is best described as a situation in which one party is more informed than another, because of the possession of private information. Information piracy Information deregulation Information asymmetry Information governance
Information asymmetry
How does causal ambiguity act as an isolating mechanism for organizations? It makes it difficult for competitors to deploy their resources by creating ambiguity within their organizational structures. It makes it difficult for the competitors to understand why a company has been so successful. It makes it difficult for competitors to imitate core competencies quickly due to time compression diseconomies. It creates a situation in which different social and business systems interact with one another.
It makes it difficult for the competitors to understand why a company has been so successful.
Pick the best example of a platform business from the following scenarios: Gena founded a bike-based transportation company that offers environmentally-friendly rides to customers within a 25-mile radius. Devin purchases electronic parts from a variety of vendors and assembles them into inexpensive MP3 players that he sells to consumers. Raul operates a consulting firm in which businesses hire him to assess deficiencies in their organizational culture. Myra operates an industrial test kitchen in which local growers bring their produce to local chefs, who use the kitchen to try new recipes and determine which produce to buy.
Myra operates an industrial test kitchen in which local growers bring their produce to local chefs, who use the kitchen to try new recipes and determine which produce to buy.
Christina is a strategist for the firm Optikana Inc., which produces high-quality HD movie cameras. This company needs a specific material for a new camera they are developing, which is manufactured in large quantities by a competitor called Miracle Technology Inc. However, this material is difficult to trade. Because of this, which of the following is most likely the best strategy for Christina to suggest? Optikana should form a short-term agreement with Miracle Technology. Optikana should enter into co-opetition with Miracle Technology. Optikana should acquire Miracle Technology. Optikana should form a long-term agreement with Miracle Technology.
Optikana should acquire Miracle Technology.
Juniper LLC is a small, new pharmaceutical company that is developing a valuable new drug. Which of these strategies would it be wise for Juniper's owners or managers to take? Seek an alliance with a company or companies that will complete the value chain. Enter multiple learning races within strategic alliances. Pursue managerial hubris at all levels of development. Quickly build downstream complementary assets.
Seek an alliance with a company or companies that will complete the value chain.
From among the following scenarios, pick the one that best illustrates bundling? Suresprout 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. Snappy Cable Inc. sells its basic TV channels for free but charges high prices for any channels that customers add on later. CurtisMedia Inc. sells its cloud computing network by having customers pay for the service as they use it. Sparkle Brush Inc. sells its electric toothbrushes for a low cost, but charges a high price for replacement brushes.
Suresprout 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.
Mango Computers has decided to procure processing chips required for its laptops from external suppliers instead of manufacturing them in their own facilities. How will this decision affect the firm? The firm will have high-powered incentives, such as hourly wages and salaries. The firm's administrative costs will be low because of necessary bureaucracy. The firm will be protected against the principal-agent problem. The firm will have more flexibility in purchasing and comparing prices of goods and services.
The firm will have more flexibility in purchasing and comparing prices of goods and services.
Which of the following is a competitive benefit experienced by the first mover firm in an industry? The first mover will not have to patent its products or technology. The first mover will be able to reduce costs through economies of scale. The first mover will be able to reduce the switching costs. The first mover will be able to achieve a less steep learning curve.
The first mover will be able to reduce costs through economies of scale.
A microchip company wants a computer company to produce more powerful tablets and therefore use more of its chips. That same computer company wants the microchip maker to create chips with faster processing power. What approach could these companies take so that both can serve stockholders well? For data security reasons, both companies should remain separate and refrain from sharing information. Both companies should reduce prices to force out competitors and make entering the market less appealing to potential rivals The two companies should enter a strategic alliance to bring about a win-win situation for them and to limit their rivals' power. Whichever company is larger should acquire the smaller one and impose its management system on the acquired company.
The two companies should enter a strategic alliance to bring about a win-win situation for them and to limit their rivals' power.
Which of the following statements accurately brings out the distinction between the introduction and growth stages of the industry life cycle? While achieving market acceptance is the strategic objective during the introduction stage, the objective in the growth stage is to pursue a harvest strategy. There is more strategic variety in the growth stage when compared to the introduction stage. The market size for a new product or service is larger in the introduction stage when compared to the growth stage. The number of competitors is more in the introduction stage than the growth stage.
There is more strategic variety in the growth stage when compared to the introduction stage.
XLC & Co. is following a related-linked diversification strategy, and Soar Inc. is following a related-constrained diversification strategy. How do the two firms differ from each other? Soar Inc. pursues a backward diversification strategy, while XLC & Co. pursues a forward diversification strategy. Soar Inc. generates 70 percent of its revenues from its primary business, while XLC & Co. generates only 10 percent of its revenues from its primary business. XLC & Co. will share fewer common competencies and resources between its various businesses when compared to Soar Inc. XLC & Co. pursues a differentiation strategy, and Soar Inc. pursues a cost-leadership strategy, to gain a competitive advantage.
XLC & Co. will share fewer common competencies and resources between its various businesses when compared to Soar Inc.
Assume that the market for print book publishing has entered the maturity stage. Which of the following would most likely exist during this stage? a few start-up publishers one large publisher a few large publishers many small to midsized publishers
a few large publishers
The managers at Clarkson Plastics decided that their firm needed to diversify because of overall falling sales and lower performance in one sector. How does diversifying compensate for the lackluster performance in this sector? by motivating managers by increasing the firm's risk in another sector by having higher performance in another sector by sharing their market power
by having higher performance in another sector
Beatsall 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 Beatsall's low prices. Thus, Beatsall has a competitive advantage due to its superior customer service. economies of scale. time compression economies. learning-curve effects.
economies of scale.
It is important for a firm to win over the early majority section of the market to ensure the commercial success of an innovation because they enter into the market in large numbers, creating a herding effect. have the highest purchasing power when compared to the other customer segments. are driven by technology concerns rather than the practicality of a new product. influence the purchase decisions of early adopters.
enter into the market in large numbers, creating a herding effect.
Although Mountainview Electronics still sells its DVD players, a product in its decline stage, the investments made by the company on improving or marketing the product are very low. The company has allocated the least amount of human and financial capital to this department. Which of the following strategies has Mountainview Electronics adopted in this scenario? differentiation strategy consolidation strategy maintain strategy harvest strategy
harvest strategy
Kreativ Toys is a manufacturer of educational toys for children. Six months ago, the company's research and development division came up with an idea for a unique touchscreen device that can be used to introduce children to a number of foreign languages. Three months ago, the company produced a working prototype, and last month the company successfully launched its new device on the commercial market. What should Kreativ's managers prepare for next? increased competition from imitators a sharp decline in demand for the product a difficult struggle to move from invention to innovation a prolonged period of uncontested success
increased competition from imitators
Hirez Inc. developed a superior touch screen technology for tablet computers that enabled multiple users to operate the screen at the same time. The technology was leased to Marquee Technologies, a consumer electronics company, for five years. Which of the following alternatives to integration does this best illustrate? crowdsourcing franchising bootlegging licensing
licensing
Faxxtech has entered a stage in which the demand for their innovative fax machines has declined. Now most customers are buying replacement parts or buying their second fax machine from the firm. What stage in the industry life cycle does this scenario describe? maturity stage shakeout stage decline stage growth stage
maturity stage
Sunsweet Tomato Inc. makes organic ketchup. To promote its products, this firm decided to make bottles in the shape of tomatoes. To accomplish this, Sunsweet Tomato worked with its bottle manufacture to create a set of unique molds for its bottles. Which of the following specialized assets does this example demonstrate? physical-asset specificity site specificity research specificity human-asset specificity
physical-asset specificity
Amazon.com has decided to enter the college bookstore market. The goal of "Amazon Campus" is to offer co-branded university-specific web sites that offer textbooks and paraphernalia, such as logo sweaters and baseball hats. This development shows Amazon's relentless pursuit of product diversification. vertical integration. horizontal integration. geographic diversification.
product diversification.
Dominant Burger is a major fast food chain. Its managers are motivated to grow the firm in order to increase their market power and change the industry structure in their favor. Which of the following strategies is most associated with their motive for growth? employing celebrity spokespeople purchasing competitors increasing executive salaries implementing automated burger-making machinery
purchasing competitors
Incumbent firms favor incremental innovation over radical innovation because incumbent firms do not have formal organizational structures and processes like the way new entrants do. radical innovation will disturb the existing power distribution within the firms. incremental innovations help firms sustain a permanent competitive advantage, whereas radical innovations only help gain a temporary advantage. their business decisions are independent of the other parties in their innovation ecosystem.
radical innovation will disturb the existing power distribution within the firms.
Benton Autos is known for its affordable and reliable brand of consumer vehicles. Because its shareholders expect to see an improved rate of growth in the coming years, Benton's executives have decided to diversify the company's range of products so that at least 40 percent of the firm's revenue is generated by new business units. However, the company's resources, capabilities, and competencies are limited to producing other forms of motorized vehicles, such as motorcycles and all-terrain vehicles (ATVs). Which type of corporate diversification strategy should Benton pursue? dominant business related-constrained unrelated related-linked
related-constrained
A drawback involved in using cross-border strategic alliances to enter new foreign markets is that the foreign firm will need to make larger investments when compared to entering the new market on its own. the shareholder value of the foreign partner will decline drastically. all potential business risks in the new market will have to be faced alone by the foreign firm. some of the firm's proprietary know-how may be appropriated by the foreign partner.
some of the firm's proprietary know-how may be appropriated by the foreign partner.
Sweep International, a large conglomerate, procures a few component parts from external suppliers and also manufactures some of the key raw materials in its own subsidiaries. Aside from this, the company does not solely depend on outside distributors to reach its customers. In fact, it has its own retail stores to distribute its products. In this scenario, which of the following alternatives to vertical integration is Sweep International applying? horizontal integration concentric integration taper integration conglomerate integration
taper integration
Olympia Apparel is the market leader in the sportswear 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 Olympia Apparel is most likely to be considered a rare resource that is contributing to its competitive advantage? the company's land and buildings the company's raw material supplies the company's design patents the company's plant and machinery
the company's design patents
Which of the following is an example of an internal transaction cost? the cost of buying raw materials the cost of maintaining a production unit the cost of searching for a contract manufacturer the cost of signing a contract with a supplier
the cost of maintaining a production unit
Due to economic regression in the country of Gremalta, the profitability of the large corporation Wonder Products Inc. (HPI) 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 HPI find it easiest to exit? the automobile industry, where the company has contractual obligations with suppliers the pharmaceutical business, where the company has a large number of fixed costs the e-commerce retail business, where investments on assets are low the airline business, where the company's strategic commitments are long-term
the e-commerce retail business, where investments on assets are low
The innovation process consists of four stages or steps. It begins with the presentation of an idea as findings derived from basic research. a competitor's attempt to imitate an innovation. the modification and recombination of an existing product or process. the commercialization of an invention by entrepreneurs.
the presentation of an idea as findings derived from basic research.
The management team for Volta Batteries came up with the following vision statement: "Volta Batteries 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 accounting profitability approach. balanced-scorecard approach. economic value creation approach. triple-bottom-line approach.
triple-bottom-line approach.
The CEO of Superior Autos 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, low-maintenance vehicles that could be bought by low-income households. Which of the following does this example demonstrate? Level-5 leadership pyramid scenario planning upper-echelons theory dominant strategic planning
upper-echelons theory
Annette has been named CEO of a popular sports apparel company. As CEO, she is tasked with setting the firm's corporate strategy. Which of the following decisions is Annette most likely to make? how to achieve the highest levels of customer satisfaction what range of products the firm should offer whether to pursue a differentiation or cost leadership strategy which customer segments to target
what range of products the firm should offer