BUSMHR 4490 Midterm Practice

What are the primary strategy objectives?

- controlling costs - creating value

Demand from which two groups drives most industry growth and firm profitability?

- early majority - late majority

What are the four steps of the innovation process?

- idea - invention - innovation - imitation

What are examples of internal stakeholders?

- board members - employees - stockholders

What are examples of input factors?

- capital - information technology services - labor - raw materials

What are threats to a firm pursuing a cost-leadership strategy?

- competitors adopting similar business strategies - replacement by innovative substitutes - value falling below the acceptable threshold

What are the two generic business-level strategies?

- cost leadership - differentiation

The most important cost drivers are:

- cost of input factors - economies of scale - learning curve effects - experience curve effects

How can incumbent firms counter disruptive innovation?

- disrupt themselves - continue to innovate - protect the low end of the market

In order for a firm to successfully implement a business-level strategy, it must limit the impact of:

- external threats - its own internal weaknesses

What are strategic options in the decline stage?

- harvest - exit - maintain - consolidate

What are the pricing options offered by a blue ocean strategy?

- higher price than the cost leader - lower price than the differentiators

What are ways that a large retailing firm can increase the perceived value of its offerings by focusing on customer service?

- offering a "no questions asked" return policy - maintaining a domestic call center that is open 24/7

What can help a firm extend its competitive advantage?

- path dependence - causal ambiguity - better expectations of future resource value

Two important features that managers can adjust in an effort to improve the firm's strategic position are ___.

- product features - customer service

What are the metrics used by social entrepreneurs to evaluate performance?

- profits - planet - people

What are the types of innovation?

- radical - architectural - disruptive - incremental

First-mover disadvantages can include:

- the need to continuously perfect a product - the need to educate potential customers - the need to find distribution channels

What are questions that managers must answer when pursuing value innovation?

- which product features to reduce below the industry standard - which product features to raise above the industry standard - which product features to eliminate - which new product features to create

In the second step of the stakeholder impact analysis, managers need to identify and understand stakeholders' ___.

interests and claims

___ describes a process in which the options one faces in the current situation are limited by decisions made in the past.

path dependence

To formulate an appropriate business-level strategy, managers must answer the "who-what-why-and-how" questions of competition, which include:

- Which customer segments will we serve? - How will we satisfy our customers' needs? - What customer needs will we satisfy?

What are the stages of the industry life cycle?

- introduction - growth - shakeout - maturity - decline

What are the important core competencies for competitive advantage in the growth stage?

- marketing capabilities - manufacturing capabilities

What are true statements about the industry life cycle?

- not all industries go through the entire cycle - industries can be rejuvenated, even during decline

What are the characteristics of the early majority?

- they rely on reviews by reputable magazines - they have a strong sense of practicality - they weigh benefits and costs carefully

What are ways in which standards can emerge?

- through market competition - by being imposed by government or other agencies

What can cause an outflow of resources from a firm?

- turnover of employees - forgetting knowledge

The industry a firm is in determines about ___% of a firm's profitability.

20

In the external analysis phase of the AFI strategy framework, managers should ask ___.

How do external forces affect our strategy and competitive advantage?

Business-level strategy addresses which overarching question?

How should we compete?

Which capability is required to create superior product features?

R&D

The development of most industries follows an ___.

S-curve

___ is a framework that allows managers to synthesize insights obtained from internal and external analysis.

SWOT analysis

Obstacles that determine how easily a firm can enter an industry are called ___.

entry barriers

In the maturity stage, industry growth ___.

flattens or even declines

The tendency of customers to enter the market in large numbers during the growth stage of the industry life cycle is known as the ___ effect.

herding

Managers must make strategic trade-offs involving choices between cost and value because ___.

higher value tends to require higher costs

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

incremental

What allows a firm to redefine a market in its favor?

innovation

A manufacturer that relies on an established network of suppliers to produce its goods is part of an ___ and less likely to produce radical innovations.

innovation ecosystem

A firm's culture, brand equity, and intellectual property are examples of ___.

intangible resources

Which customer segment will only adopt a new product when it becomes absolutely necessary?

laggards

Managers have ___ resources in their quest for competitive advantage.

limited

The ___ is the range of output needed to minimize the cost per unit as much as possible.

minimum efficient scale

During the shakeout stage, process innovation becomes ___.

more important

Whereas the firm's strategic position can be considered either differentiated or cost-focused, the scope of competition is considered ___.

narrow or broad

The widespread availability of complementary apps for the iPhone created ___ effects that increased the value of the device for its users.

network

When employees feel that a new product cannot be good because R&D is not conducted in-house, the company suffers from ___ syndrome.

not-invented-here

Incorporating technological advancements and innovative ideas from outside agencies into a firm's internal research and development efforts is known as ___ innovation.

open

The third step of stakeholder impact analysis requires managers to identify the ___ and ___ presented by internal and external stakeholders.

opportunities; threats

What is the main strategy used by Threadless to reduce costs?

outsourcing activities to consumers

A form of intellectual property that grants an inventor a temporary monopoly on a new product or process in exchange for disclosing the details of how the product or process is made is called a ___.

patent

Although the five forces model is useful in understanding an industry's profit potential, it provides only a ___.

point-in-time snapshot of a moving target

Firms are able to create a near monopoly by maximizing ___.

product differentiation

The beneficial effect of a differentiation strategy on the power of suppliers in an industry is ___.

protection against an increase in input prices

A resource is ___ if the number of firms that posses it is less than the number of firms required to reach a state of perfect competition.

rare

During the growth stage, firms focus on process innovation to ___

reduce per-unit production costs

In the learning curve, the ___ the learning cure, the more learning takes place.

steeper

Applying concepts from strategic management to the innovation process is known as ___.

strategic entrepreneurship

In a nutshell, strategy is the art and science of ___.

success and failure

According to the crossing-the-chasm framework, the largest difference in consumer expectations is between ___.

the early adopters and the early majority

GE's decision to let a GE company team in China create an inexpensive and portable ultrasound machine for developing markets is an example of ___.

a bottom-up innovation strategy

What could result in strengthening a firm's strategic position?

a firm adds a new product feature that greatly increases the perceived value of the product at a minimal cost to the firm

Sustainable competitive advantage exists when ___.

a firm maintains superior performance relative to its industry over a long period of time

The most rigorous means of analyzing the profit potential within a specific industry is to conduct ___.

a five forces analysis

A firm's ability to integrate external technological developments into its own current products is known as ___ capacity.

absorptive

During the shakeout stage, profits degrade for ___.

all but the most efficient firms

The concept of ___ attempts to combine both learning effects and process improvements.

an experience curve

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

architectural innovation

The key objective for firms in the growth stage is ___.

to establish a strong strategic position so that rivals cannot imitate it easily

When a focal company moves upstream in the industry value chain to his suppliers' business, ___ occurs.

backward integration

Why do many firms fail to successfully implement a blue ocean strategy?

because they end up being "stuck in the middle", unable to increase value and lower cost at the same time

Diseconomies of scale often appear when a firm ___.

becomes too large and complex to manage efficiently

What is an unexpected and unlikely occurrence that has a significant impact on society called?

black swan event

In a ___ strategy formulation, managers focus on deciding HOW the firm should compete.

business

The power of ___ is the pressure they can put on the margins of producers in the industry by demanding a lower price or higher product quality.

buyers

How should managers prioritize stakeholder concerns in the final step of stakeholder impact analysis?

by considering the power, legitimacy, and urgency of stakeholder claims

A disruptive innovation is more likely to be successful if it ___.

captures the low end of the market first

The goal of a ___ strategy is to achieve costs below those of competitors while maintaining similar value.

cost leadership

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

creative destruction

During the growth stage, ___ increases rapidly.

demand

A ___ strategy attempts to create products with unique and attractive features in order to increase the price that consumers are willing to pay.

differentiation

A successful blue ocean strategy requires strategists to reconcile the trade-offs between ___.

differentiation and cost leadership

The cube-square rule makes it ___ for smaller firms to compete with large retailers.

difficult

Introducing a new technology to an existing market to better address consumer needs is known as ___ innovation.

disruptive

The ___ perspective is a model that emphasizes a firm's ability to modify and leverage its resource base in a way that enables it to gain and sustain competitive advantage.

dynamic capabilities

___ describe a firm's ability to create, deploy, modify, reconfigure, upgrade, or leverage its resources in its quest for competitive advantage.

dynamic capabilities

The ___ determines whether an invention can be patented.

U.S. Patent and Trademark Office

What analyzes the resources that can lead to a competitive advantage?

VRIO framework

What are characteristics of a monopolistically competitive industry?

- the ability to raise prices for differentiated products - obstacles to entry - a differentiated product

What questions are part of the five steps in stakeholder impact analysis?

- Who are our stakeholders? - What opportunities and threats do our stakeholders present? - What are our stakeholders' interests and claims?

Capabilities find their expression within:

- a company's culture - a company's routines - a company's organizational structure

In an oligopoly, what conditions exist?

- a few large firms - high barriers to entry - differentiated products

What are elements of a good strategy according to the AFI framework?

- a guiding policy to address the competitive challenge - a diagnosis of the competitive challenge - a set of coherent actions to implement the firm's guiding policy

What are the elements of strategic management?

- analysis - formulation - implementation

What are advantages independent of size that incumbent firms possess?

- brand loyalty - preferential access to distribution channels - proprietary technology - cumulative experience effects

What are examples of isolating mechanisms?

- causal ambiguity - better expectations of future resource value - social complexity - path dependency

Primary activities include:

- supply chain management - operations

A resource is considered valuable when:

- the resource helps the firm increase its economic value creation (V - C) - the resource helps a firm exploit an external opportunity

What can lead to a strong threat of substitutes?

- when the cost of switching to the substitute is low - when the price-performance trade-off is attractive

A company is a complementor to your company if ___.

customers value your product more when they can use it with the other company's product

By definition, resource immobility suggests that resources are ___ to move from firm to firm.

difficult

Firms within the same strategic group are ___ competitors.

direct

Internet privacy, genetic engineering, and stem-cell research are examples of areas in which a firm's ___ responsibilities exceed its legal responsibilities.

ethical

Although ___ coordination such as price fixing is illegal in the United States, ___ coordination such as "an unspoken understanding" is not.

explicit; tacit

In the ___ step of the stakeholder impact analysis, managers need to decide the appropriate course of action for the firm in relation to stakeholder concerns.

fifth

In the ___ step of the stakeholder impact analysis, firms identify those stakeholders that currently have, or potentially can have, a material effect on the company.

first

Resource ___ and resource ___ are the key assumptions behind the resource-based model of the firm.

heterogeneity; immobility

Strategic fit ___ the likelihood that a firm is able to gain a competitive advantage.

increases

The relationship between the natural environment and business organizations can best be described as ___.

interdependent

The stronger the five forces in Porter's model, the ___ the industry's profit potential.

lower

What legal developments allow businesses to function as institutions?

- property rights - contract enforcement

An industry in which only one firm supplies the market is known as a ___.

monopoly

Capital, land, buildings, and plants are examples of ___ resources.

tangible

When restrictive government policies do not exist or when industries become deregulated, the ___ of entry is high.

threat

A firm's attempts to shorten the length of time a process takes may lead to disappointing outcomes due to ___.

time compression diseconomies

Competitive parity occurs when ___.

two or more firms achieve the same performance results

A successful business strategy creates ___ for both producers and consumers.

value

The ___ describes the internal activities a firm engages in when transforming inputs into outputs.

value chain

A ___ is a set of companies that pursue a similar strategy within a specific industry to achieve competitive advantage.

strategic group

In order to achieve and sustain competitive advantage, a company devises and adopts a set of goal-directed actions known collectively as a ___.

strategy

Researchers have determined that a firm's strategy can explain up to ___% of its performance.

55

In addition to the static nature of the strategic group model, what is its other shortcoming?

It does not help us understand why there are performance differences among firms in the same strategic group.

What consequences does a firm like Twitter face if it fails to come up with an effective business strategy?

Twitter could be left vulnerable to takeover by a larger advertising firm like Google

In a perfectly competitive industry, firms have difficulty ___.

achieving competitive advantage

___ are the distinct and fine-grained business processes that enable firms to add incremental value by transforming inputs into goods and services.

activities

A group of companies that deal with more or less the same set of suppliers and buyers make up ___.

an industry

When competitors cooperate in the name of a shared strategic objective, they engage in ___.

co-opetition

Core ___ are generated by the interaction of resources and capabilities.

competencies

When a firm implements a strategy that leads to superior performance relative to other companies in the same industry, it is said to have achieved ___.

competitive advantage

The idea that firms should voluntarily give back to society when they are able to do so is also known as ___.

corporate citizenship

According to the VRIO framework, a rare resource is ___ if firms that do not possess the resource are unable to develop or buy the resource at a comparable cost.

costly to imitate

___ refers to the idea that a firm is a bundle of resources and capabilities that is unique to the firm.

resource heterogeneity

___ are the firm's current level of intangible resources.

resource stocks

The ___ view provides a model that sees certain types of resources as key to superior firm performance.

resource-based

___ are any assets that a firm can draw on when formulating and implementing a strategy.

resources

The intensity with which companies in an industry jockey for market share and profitability is known as ___.

rivalry

The most likely result of failing to meet the needs of shareholders is that they will ___.

sell the company's stock, negatively affecting the firm's market value

Stakeholder strategy argues that focusing only on the needs of ___ places the firm at risk of failure

shareholders

___ describes a situation in which different social and business systems interact with each other.

social complexity

What is a tool that managers can use to address the needs of stakeholders while maintaining a competitive advantage?

stakeholder impact analysis

Managing the interactions of individuals and groups that affect and are affected by the activities of a firm is known as ___.

stakeholder strategy

Groups or individuals who can impact or be impacted by a firm's actions are known as ___.

stakeholders

According to Porter's model, what should be considered when analyzing a firm's competition?

- buyers - suppliers - the threat of substitutes - threat of entry - rivalry among existing competitors

A firm trying to compete with the leading firm in a competitive industry can try to negate the leading firm's competitive advantage through ___.

- direct imitation - substitution

What are the expectations that society has of the business enterprise as described in the CSR framework?

- ethical - philanthropic - legal - economic

What are likely outcomes of a competitive rivalry based entirely on price cutting?

- firms struggle to make profits - most or all value is transferred to customers - investments for firms drop off

What would be considered economic responsibilities of a firm?

- give investors a return on invested capital - repay debts to suppliers

What should a firm do in order to be organized to capture value?

- have a good organizational structure - have good coordinating systems

When a new firm enters an industry, which of the following often occur?

- industry profit potential declines - incumbent firms spend more to satisfy customers - incumbent firms lower prices

What are examples of economic factors in the firm's general environment?

- interest rates - growth rates - price stability

What are the three important stakeholder attributes managers must pay particular attention to during stakeholder impact analysis?

- legitimacy - urgency - power

What are considered nonmarket strategies?

- litigation - public relations - lobbying

What are the four main competitive industry structures?

- perfect competition - monopolistic competition - oligopoly - monopoly

What topics should be considered during the strategy analysis phase of the AFI framework?

- the external environment and associated challenges - the firm's business model and competitive advantages - the role of strategic leadership and the strategy-making process - the firm's internal strengths and resources

According to the PESTEL model, which of the following are kinds of forces that exist in the general external environment?

- political - economic - sociocultural - technological - ecological - legal

What are important strategic dimensions in mapping strategic groups?

- pricing - expenditures on research and development - product and service offerings

Along what dimensions do strategic groups differ from one another?

- pricing - market segments - research and development - customer service

What are examples of commonly encountered capital requirements?

- setting up production facilities - paying for startup losses - managing a production process

What are examples of economies of scale?

- spreading fixed costs over more units - benefit from a more specialized division of labor - having more negotiating power vis-a-vis suppliers

What factors should be examined in the external analysis stage of the AFI strategy framework?

- strategic groups - competitive forces