CBA-469-001 Test #2 JSU (Dr. Mertens)
During the _____ stage of the industry lifecycle, PRODUCT innovation is DECREASING and PROCESS innovation is INCREASING. A) introduction B) growth C) shakeout D) maturity E) decline
B) growth
First-time buyers rush to purchase a product during the _____ stage of the industry lifecycle. A) introduction B) growth C) shakeout D) maturity E) decline
B) growth
The _____ _____ strategy combines tactics of both the differentiation and cost leadership strategies.
blue ocean
A _____ _____ details how a firm intends to make money and conduct business with its buyers, suppliers, and partners.
business model
Working _____ _____ measures how effectively CAPITAL is being used to generate revenue.
capital turnover
The amount a consumer was willing to pay for a product minus what they paid for it is known as _____ (consumer/producer) surplus.
consumer
The importance of book value is _____ (ascending/declining) in a firm's stock market valuation.
declining
People who introduce change, undertake economic risk, create new products, processes, and organizations, while creating value for society are known as _____.
entrepreneurs
Architectural and incremental are two types of _____ (existing/new) TECHNOLOGICAL innovations.
existing
Incremental and disruptive innovation are two types of _____ (existing/new) MARKET innovations.
existing
Architectural innovation leverages _____ (existing/new) TECHNOLOGY into a _____ (existing/new) MARKET, while disruptive innovation leverages _____ (existing/new) TECHNOLOGY into a _____ (existing/new) MARKET.
existing; new; new; existing
Negotiating, monitoring, and enforcing contracts would be considered an _____ (internal/external) transaction cost.
external
Searching for contractors would be considered an _____ (internal/external) transaction cost.
external
Some ADVANTAGES of organizing economic activity within a _____ (firm/market) are: 1. command and control 2. coordination 3. transaction-specific investments 4. community of knowledge
firm
Some DISADVANTAGES of organizing economic activity within a _____ (firm/market) are: 1. administrative costs 2. low-powered incentives 3. principal-agent problem
firm
The following are reasons why incumbent firms tend to focus only on _____ (incremental/radical) innovation: 1. Economic incentives (they must defend their position) 2. Organizational inertia (they have formalized processes/structures) 3. Innovation ecosystem (they rely on certain suppliers, buyers, complementers)
incremental
A novel and useful idea which is successfully implemented is known as _____.
innovation
Recruiting and retaining employees would be considered an _____ (internal/external) transaction cost.
internal
Since there _____ (is/is no) price competition during the introduction and growth stages of the industry lifecycle, a _____ (cost leadership/differentiation) strategy is necessary.
is no; differentiation
As experience increases, it takes a firm less time to produce the same amount of output. This is called a(n) _____ (experience/learning) curve effect.
learning
With _____ (short/long)-term contracting, a firm sends out RFPs to several companies, and a contract is typically signed AFTER one year.
long
A "cost leadership" strategic position involves _____ (low/high) costs, while a "differentiation" strategic position involves _____ (low/high) costs.
low; high
Some ADVANTAGES of organizing economic activity within a _____ (firm/market) are 1) high-powered incentives and 2) flexibility
market
Some DISADVANTAGES of organizing economic activity within a _____ (firm/market) are: 1. enforcement of contracts 2. incomplete contracting 3. search costs 4. opportunism
market
Architectural and radical innovation are two types of _____ (existing/new) MARKET innovations.
new
Radical and disruptive are two types of _____ (existing/new) TECHNOLOGICAL innovations.
new
The value of the BEST forgone ALTERNATIVE is known as a(n) _____ cost.
opportunity
Strategic _____ (alliances/outsourcing) involve(s) moving internal value chain activities to other firms. (Note: This should NOT be done when the activity is one of the firm's core competencies)
outsourcing
The _____-_____ relationship anchors the "make" side of the make-or-buy continuum. The corporate PARENT owns the SUBSIDIARY and can direct it via command control.
parent-subsidiary
A _____ (pipeline/platform) business consists of a LINEAR transformation from R&D, to design, to manufacture, to selling.
pipeline
A _____ (pipeline/platform) business provides infrastructure and governance, enables interaction between producers and consumers, and enables matches among users.
platform
A solution to the _____-_____ problem is to offer stock options to agents, which would make them owners as well.
principal-agent
When an employee of the firm pursues their own interests rather than the owner of the firm's interests, it is known as the _____-_____ problem.
principal-agent
Competitive advantage is formed from firms acting _____ (proactively/reactively).
proactively
The price a producer charged for a product minus their cost to produce it is known as _____ (consumer/producer) surplus.
producer
"What range of products and services should the firm offer?" relates to the firm's degree of _____ (geographic/product) diversification. "Where should the firm compete, in terms of regional, national, or international markets?" relates to the firm's degree of _____ (geographic/product) diversification.
product; geographic
"Producer surplus" is also called "_____".
profit
Not waiting for OTHERS to disrupt YOU is known as _____ _____.
reverse innovation
Economies of _____ (scale/scope) are designed to decrease the COST PER UNIT.
scale
Two ways a firm can drive DOWN costs are by economies of _____ and economies of _____.
scale; scope
With economies of _____ (scale/scope), the firm produces TWO outputs to decrease cost (ie: Mertens Sucks Inc, a vacuum company, adding brooms to their product line).
scope
With _____ (short/long)-term contracting, a firm sends out RFPs to several companies, and a contract is typically signed WITHIN one year.
short
The _____ stage of the industry lifecycle consists of rapidly increasing demand, emerging product standards, and innovation of both the product and process. A) introduction B) growth C) shakeout D) maturity E) decline
B) growth
Firms often consolidate industries through horizontal mergers and acquisitions to _____. A) lower their stock prices B) increase their market power C) solve principal-agent problems D) motivate managers
B) increase their market power
The MODIFICATION and RECOMBINATION of products is known as an _____. (Hint: It is the transformation of an idea into a product) A) idea B) invention C) innovation D) imitation
B) invention
North Carolina National Bank (NCNB) used its unique core competency of identifying, appraising, and integrating acquisition targets to be rebranded as Bank of America, one of the largest banks in the United States. This is an example of a firm _____. A) building new core competencies to create and compete in markets of the future B) leveraging existing core competencies to improve current market position C) building new core competencies to protect new market position D) redeploying and recombining existing core competencies to compete in markets of the future
B) leveraging existing core competencies to improve current market position
A blue ocean strategy typically allows a firm to _____. A) reduce the value gap created by their products B) offer a differentiated product or service at low cost C) add product features that raise costs without raising the perceived value D) provide unique product or service features at a premium price
B) offer a differentiated product or service at low cost
Dr. Shetty is able to drive down the cost of complex medical procedures from $100,000 to $2,000 not by doing one big thing, but rather by doing a thousand small things. This approach focuses on driving down the cost of healthcare through _____. A) product innovation B) process innovation C) value of input factors D) cost of input factors
B) process innovation
The following are limitations of the _____ framework of measuring firm performance: 1. Stock prices can be volatile (AKA: dynamic/changing) 2. Macroeconomic factors affect stock prices (ie: economic growth, unemployment, interest rates, etc.) 3. Stock prices can reflect the mood of investors A) accounting profitability B) shareholder value creation C) economic value creation
B) shareholder value creation
The "people" dimension of the triple bottom line integrative framework correlates to a firm's _____ performance focus. A) economic B) social C) ecological
B) social
Paying for ACCESS is an example of the "_____" business model. A) razor-razorblade B) subscription C) pay as you go D) freemium E) wholesale F) agency G) bundling
B) subscription
When a Blue Ocean strategy is successfully formulated and implemented, investments in differentiation and low costs are not _____. A) complements but substitutes B) substitutes but complements C) value drivers but cost drivers D) cost drivers but value drivers
B) substitutes but complements
GiftBasket.com has successfully created a higher perceived value in the e-commerce industry, though it offers the same products at slightly higher prices than the competitors. This has been mainly attributed to the company's easy-to-navigate website, simple return procedures, fast delivery, and cash on delivery option. Thus, the value driver for GiftBasket.com is its _____. A) availability of complements B) superior customer service C) lower value gap D) economies of scale
B) superior customer service
Which of the following are possible business strategies for a firm to choose? A) Cost fellowship B) Cost leadership C) Differentiation D) Outsourcing E) Green plateau F) Blue ocean
B, C, & F
_____ (Backward/Forward) vertical integration consists of a firm owning INPUTS of the value chain, such as design and manufacturing.
Backward
Which TWO integrative frameworks, combining quantitative data with qualitative assessments, are used to measure firm performance?
Balanced scorecard & Triple bottom line
_____ value is the value of an asset according to its balance sheet account balance. (ie: original cost of asset - depreciation/amortization/impairment costs)
Book
What does BCG growth-share matrix stand for?
Boston Consulting Group growth-share matrix
Consumers feel that Firm C and Firm D's products offer the same benefits, but Firm C creates more economic value, than does Firm D. Firm _____ (C/D) has a competitive advantage.
C
_____ and _____ both account for 34% of the total market potential. (Select the two which apply) A) Technology enthusiasts B) Early adopters C) Early majority D) Late majority E) Laggards
C & D
_____ ask the question, "What Can This Do For Me?" They weigh the costs/benefits carefully, and rely on endorsements of others. This group is key to catching the growth wave. A) Technology enthusiasts B) Early adopters C) Early majority D) Late majority E) Laggards
C) Early majority
_____ enter the market during the SHAKEOUT stage of the industry lifecycle. A) Technology enthusiasts B) Early adopters C) Early majority D) Late majority E) Laggards
C) Early majority
_____ is known as the COMMERCIALIZATION of an invention. A) An idea B) Invention C) Innovation D) Imitation
C) Innovation
During the _____ stage of the industry lifecycle, PRODUCT innovation is LOW and PROCESS innovation is HIGH. A) introduction B) growth C) shakeout D) maturity E) decline
D) maturity
During the _____ stage of the industry lifecycle, demand consists of mostly replacement or repeat purchases, and the industry growth is zero or negative. A) introduction B) growth C) shakeout D) maturity E) decline
D) maturity
During the _____ stage of the industry lifecycle, only a few large firms remain, utilizing economies of scale to stay at the top. A) introduction B) growth C) shakeout D) maturity E) decline
D) maturity
During the _____ stage of the industry lifecycle, process innovation has reached a maximum, and the market has reached its maximum size as well. A) introduction B) growth C) shakeout D) maturity E) decline
D) maturity
The market size is the GREATEST in the _____ stage of the industry lifecycle. A) introduction B) growth C) shakeout D) maturity E) decline
D) maturity
There exist important trade-offs between value creation and low cost because value creation and cost tend to be _____. A) independent of each other B) inversely related C) negatively correlated D) positively correlated
D) positively correlated
A(n) _____ firm derives less than 70% of its revenues from one business activity, and its other revenues are from unrelated lines of businesses. Also known as a CONGLOMERATE. A) single business B) dominant business C) related diversification D) unrelated diversification
D) unrelated diversification
_____ (Economies/Diseconomies) of scale involve too large of firms and too much coordination, leading to complexity and inflexibility.
Diseconomies
How can diversification enhance firm performance? A) Provides economies of scale B) Provides economies of scope C) Reduces costs and increases value D) A & B E) A-C F) None
E) A-C
Which of the following drives UP perceived value? A) Product features B) Customer service C) Complements D) A & B E) A-C F) None
E) A-C
_____ account for 16% of the total market potential. A) Technology enthusiasts B) Early adopters C) Early majority D) Late majority E) Laggards
E) Laggards
_____ enter the market during the DECLINE stage of the industry lifecycle. A) Technology enthusiasts B) Early adopters C) Early majority D) Late majority E) Laggards
E) Laggards
_____ only adopt a new product if it's necessary. They typically don't want new technology and should not be pursued as future customers. A) Technology enthusiasts B) Early adopters C) Early majority D) Late majority E) Laggards
E) Laggards
During the _____ stage of the industry lifecycle, PRODUCT innovation is at a MINIMUM and PROCESS innovation is at a MAXIMUM. A) introduction B) growth C) shakeout D) maturity E) decline
E) decline
During the _____ stage of the industry lifecycle, demand falls rapidly, innovation efforts cease, and there is a strong pressure on prices. A) introduction B) growth C) shakeout D) maturity E) decline
E) decline
The following four strategic options remain in the _____ stage of the industry lifecycle: 1. Exit (bankruptcy/liquidation) 2. Harvest (reduce further investments) 3. Maintain (support at a given level) 4. Consolidate (buy rivals) A) introduction B) growth C) shakeout D) maturity E) decline
E) decline
The market PRICE is _____ during the DECLINE stage of the industry lifecycle. A) high B) falling C) moderate D) low E) low to high
E) low to high
Paying for products at a DISCOUNT is an example of the "_____" business model. A) razor-razorblade B) subscription C) pay as you go D) freemium E) wholesale F) agency G) bundling
E) wholesale
_____ value creation is the difference between a buyer's willingness to pay for a product and the firm's total cost to produce it. In short, it is the difference between VALUE and COST.
Economic
_____ (Economies/Diseconomies) of scale spreads fixed costs over a larger output, employs specialized systems/equipment, and takes advantage of certain physical properties.
Economies
_____ _____ is one of the greatest entrepreneurs of all time, founding Tesla Motors, Solar City, SpaceX, and PayPal.
Elon Musk
Paying for products sold on COMMISSION is an example of the "_____" business model. A) razor-razorblade B) subscription C) pay as you go D) freemium E) wholesale F) agency G) bundling
F) agency
T/F) External capital markets are a way to allocate capital at a lower cost if the conglomerate's headquarters does a more efficient job.
False (If the conglomerate's headquarters does a more efficient job of allocating capital, then INTERNAL capital markets are used)
T/F) Most innovators successfully transition from one stage of the industry lifecycle to the next.
False (Many DO NOT successfully transition)
T/F) Unfortunately, the blue ocean strategy typically involves being stuck in the middle between cost leadership and value creation.
False (When this strategy is executed properly, a firm should not be stuck in the middle!)
What does FASB stand for?
Financial Accounting Standards Board
_____ (Backward/Forward) vertical integration consists of a firm owning activities CLOSER to the customer, such as marketing, sales, and after-sales support.
Forward
Which of the following are cost drivers which keep costs LOW? A) Cost of input factors (ie: raw materials, labor, capital, & IT services) B) Economies of scale (cost per unit decreases as output increases) C) Learning curve effects (less production time as experience increases) D) Experience curve effects (improvements to technology & production processes) E) B-D F) C & D G) A-D H) None
G) A-D
Paying for MORE than one product at a DISCOUNT is an example of the "_____" business model. A) razor-razorblade B) subscription C) pay as you go D) freemium E) wholesale F) agency G) bundling
G) bundling
Which of the following are ADVANTAGES of the "balanced scorecard" integrative framework? (Select all that apply) A) Links strategic vision to responsible parties B) Translates vision into measurable goals C) Designs and plans business processes D) Implements feedback and organizational learning E) Alerts to needed strategic goal adaptation
A-E
Which of the following are advantages of the PLATFORM business model? (Select all that apply) A) Scale more efficiently than pipeline model B) No gatekeepers C) Unlock new sources of value creation and supply D) Benefit from community feedback E) Success occurs when positive network effects are realized
A-E
Firm A and Firm B offer a product at the same cost to consumers, but Firm B creates more economic value with its product, than does Firm A. Firm _____ (A/B) has a competitive advantage.
B
Which of the following four types of corporate diversification typically perform the best? (Hint: there are two): A) Single business B) Dominant business C) Related diversification D) Unrelated diversification
B & C
Which of the following best illustrates backward vertical integration? A) A supplier of plastic bottles launching his or her own brand of sparkling water B) A chocolate manufacturing company setting up its own cocoa plantations C) A show brand outsourcing its production unit to manufacturers in less developed nations D) An apparel company launching its line of premium wrist watches
B) A chocolate manufacturing company setting up its own cocoa plantations
Which of the following is an advantage of accounting data? A) Accounting data consider off-balance sheet items, which makes comparing companies with different capital structures easy B) Accounting data can be easily transformed into financial ratios to help assess and evaluate the competitive performance of firms C) Accounting profitability ratios not only show us the outcomes from past decisions, but also provide information to guarantee future performance D) Accounting data focus mainly on intangible assets, which are more important than tangible assets in firms' stock market valuations
B) Accounting data can be easily transformed into financial ratios to help assess and evaluate the competitive performance of firms
_____ is best described as the difference between the value a consumer attaches to a good or service and what he or she paid for it. A) Consumer lifetime value B) Consumer surplus C) Consumer price index D) Consumer equity
B) Consumer surplus
Which THREE frameworks are used to measure firm performance?
-Accounting profitability -Shareholder value creation -Economic value creation
What does PPE stand for?
Plant, Property, & Equipment
_____ (Product/Process) innovation consists of new/recombined ASPECTS of a product, while _____ (product/process) innovation consists of new ways to PRODUCE a product. Both of these occur in the growth stage of the industry lifecycle.
Product; process
What does RFP stand for?
Request For Proposal
What does R&D stand for?
Research & Development
_____ describes the process of reorganizing business units and activities to refocus a company, so it leverages its core competencies more fully. The BCG growth-share matrix can help with this.
Restructuring
What does ROA stand for?
Return On Assets
What does ROE stand for?
Return On Equity
What does ROIC stand for?
Return On Invested Capital
What does ROR stand for?
Return On Revenue
The innovation process consists of which four steps? Make sure to order them properly.
1. Idea 2. Invention 3. Innovation 4. Imitation
Put the following five phases of the industry lifecycle in order: A) Maturity B) Growth C) Shakeout D) Decline E) Introduction
1. Introduction 2. Growth 3. Shakeout 4. Maturity 5. Decline
The "triple bottom line" integrative framework focuses on what 3Ps in their sustainable strategy?
1. Profits 2. People 3. Planet
What are the four types of corporate diversification?
1. Single business 2. Dominant business 3. Related diversification 4. Unrelated diversification
The _____ framework to measuring firm performance is available through ACCOUNTING metrics, 10K statements, and PROFITABILITY ratios. A) Accounting profitability B) Shareholder value creation C) Economic value creation
A) Accounting profitability
_____ strategy asks the question, "HOW do we compete in a single product market?" A) Business B) Corporate C Implementation
A) Business
_____ indicates how efficiently a firm can PRODUCE a good. A) COGS B) R&D C) SG&A
A) COGS
In the financial year 2016, for every $100 in revenues, Microsoft earned $21.5 in profit, while Apple earned $20.6 in profit. This demonstrates that _____. A) Microsoft's return on revenue was higher than that of Apple B) Microsoft was more efficient that Apple in producing its goods C) Microsoft was using its capital more efficiently to generate revenue than Apple D) Apple's inventory turnover was more than that of Microsoft's
A) Microsoft's return on revenue was higher than that of Apple
Net Profits / Invested Capital = _____. A) ROIC B) ROE C) ROA D) ROR
A) ROIC
_____ measures how effectively a firm uses its total INVESTED CAPITAL. A) ROIC B) ROE C) ROA D) ROR
A) ROIC
_____ is/are the legal owners of a company because they own shares of stock. A) Shareholders B) Risk capital C) Total return to shareholders D) Market capitalization
A) Shareholders
_____ account for 2.5% of the total market potential. A) Technology enthusiasts B) Early adopters C) Early majority D) Late majority E) Laggards
A) Technology enthusiasts
_____ enter the market during the INTRODUCTORY stage of the industry lifecycle. A) Technology enthusiasts B) Early adopters C) Early majority D) Late majority E) Laggards
A) Technology enthusiasts
_____ have an engineering mind, proactively pursue new TECHNOLOGY, enjoy using beta versions, and tinker with product imperfections. A) Technology enthusiasts B) Early adopters C) Early majority D) Late majority E) Laggards
A) Technology enthusiasts
_____ measures how much WORKING CAPITAL a firm has tied up in its operations. A) Working capital / Revenue B) PPE / Revenue C) Intangibles / Revenue
A) Working capital / Revenue
The following are limitations of the _____ framework of measuring firm performance: 1. All data is historical (AKA: backward-looking) 2. Does not consider off-balance sheet items 3. Focuses mainly on tangible assets A) accounting profitability B) shareholder value creation C) economic value creation
A) accounting profitability
The _____ integrative framework helps managers achieve their strategic objectives by BALANCING both financial and strategic goals. To do this, they use both internal and external performance metrics. A) balanced scorecard B) triple bottom line
A) balanced scorecard
If costs are equal, when a firm has a higher value gap than its competitor, it can be inferred that the firm _____. A) can charge a premium price for its products and services B) has lost its competitive advantage to its competitor C) has achieved a competitive parity in its chosen industry D) can adopt a cost-leadership strategy
A) can charge a premium price for its products and services
The "profits" dimension of the triple bottom line integrative framework correlates to a firm's _____ performance focus. A) economic B) social C) ecological
A) economic
HTC started as an original equipment manufacturing firm (OEM) for brand-name mobile device companies. Later, it started offering a lineup of innovative and high-performance smartphones by acquiring One & Co., a San Francisco-based design firm. This strategic move of HTC is known as _____. A) forward vertical integration B) crowdsourcing C) corporate divestiture D) radical innovation
A) forward vertical integration
In a typical industry life cycle, an industry immediately moves to the _____ after the introduction stage. A) growth stage B) maturity stage C) shakeout stage D) decline stage
A) growth stage
The market PRICE is _____ during the INTRODUCTION stage of the industry lifecycle. A) high B) falling C) moderate D) low E) low to high
A) high
A lot of people believe innovation is made up of simply an _____, but there are actually three more steps to the innovation process. A) idea B) invention C) innovation D) imitation
A) idea
An _____ is formed from abstract concepts or research findings. A) idea B) invention C) innovation D) imitation
A) idea
During the _____ stage of the industry lifecycle, PRODUCT innovation is at a MAXIMUM and PROCESS innovation is at a MINIMUM. A) introduction B) growth C) shakeout D) maturity E) decline
A) introduction
Market acceptance and future growth is the STRATEGIC OBJECTIVE of the _____ stage of the industry lifecycle. A) introduction B) growth C) shakeout D) maturity E) decline
A) introduction
The _____ stage of the industry lifecycle consists of designing a unique product, trying new ideas to attract customers, and producing small quantities. A) introduction B) growth C) shakeout D) maturity E) decline
A) introduction
A disadvantage associated with obtaining goods and services externally includes _____. A) nontrivial search costs to be borne by the firm B) low-powered incentives for an individual to work as an entrepreneur for the firm C) high administrative costs due to increased bureaucracy D) creation of economies of scope for the firm
A) nontrivial search costs to be borne by the firm
_____ strategy asks the question, "WHERE do we compete to create a competitive advantage in several industries and markets simultaneously?" A) Business B) Corporate C Implementation
B) Corporate
_____ strategy consists of the following three dimensions: 1. Vertical integration 2. Diversification 3. Geographic scope A) Business B) Corporate C Implementation
B) Corporate
_____ account for 13.5% of the total market potential. A) Technology enthusiasts B) Early adopters C) Early majority D) Late majority E) Laggards
B) Early adopters
_____ enter the market during the GROWTH stage of the industry lifecycle. A) Technology enthusiasts B) Early adopters C) Early majority D) Late majority E) Laggards
B) Early adopters
When Gilded Products planned to start its operations in Upper Medici, an emerging nation, it realized that it would have to set up its own distribution channels. This would be a risky and expensive strategic move. The company had an option of hiring a small supply chain management company, Canopy Logistics, to reach its ultimate customers. However, this would require Canopy Logistics to make huge investments, which would be of no use to it if Gilded Products decided to exit the market. Thus, to gain Canopy Logistics' confidence, Gilded Products purchased 40 percent of the stock of Canopy Logistics. What does this scenario best illustrate? A) Licensing B) Equity alliance C) Franchising D) Venture capitalism
B) Equity alliance
_____ is best described as the process of transformation of an idea into a new product or process, or the modification and recombination of existing ones. A) Bootstrapping B) Invention C) Lean manufacturing D) Direct imitation
B) Invention
Which of the following is a disadvantage of the balanced scorecard approach to measure firm performance? A) It fails to allow managers and executives to find a balance between financial and strategic goals B) It provides only limited guidance about which performance metrics to choose C) It fails to allow managers to align their different perspectives to create a more focused corporation overall D) It only relies on an internal view of the firm, ignoring the external view
B) It provides only limited guidance about which performance metrics to choose
Which of the following statements accurately brings out the difference between economies of scale and learning effects? A) While there are no diseconomies to scale, there are diseconomies to learning B) Learning effects occur over time, whereas economies of scale are captured at one point in time when output is increased C) Firms experience economies of scale when output increases, and they experience learning effects when output decreases D) Economies of scale reduce cost per unit, whereas learning effects increase cost per unit
B) Learning effects occur over time, whereas economies of scale are captured at one point in time when output is increased
_____ measures how much of a firm's revenues are dedicated to cover PLANT, PROPERTY, & EQUIPMENT. A) Working capital / Revenue B) PPE / Revenue C) Intangibles / Revenue
B) PPE / Revenue
_____ indicates how much of each dollar a firm earns in sales is invested to conduct RESEARCH & DEVELOPMENT. A) COGS B) R&D C) SG&A
B) R&D
_____ is money provided for an equity share. A) Shareholders B) Risk capital C) Total return to shareholders D) Market capitalization
B) Risk capital
Cantaloupe Technologies follows a business model in which the performance of the company is not only based on how much profits were generated, but also on how the community in general benefited from its operations. Thus, the company under its "Plant a Life" campaign promises to plant a tree with every customer purchase. Which of the following terms best describes the performance valuation model of Cantaloupe Technologies? A) Crowdsourcing B) Social entrepreneurship C) Offshoring D) Corporate intrapreneurship
B) Social entrepreneurship
Which of the following statements is true of the growth stage in the industry life cycle? A) The type of buyers during this stage consists of the late majority B) The prices begin to fall during this stage when compared to the introduction stage C) The basis of competition tends to move away from process innovations toward product innovations D) The objective of firms during this stage is to pursue a harvest strategy
B) The prices begin to fall during this stage when compared to the introduction stage
Which of the following best illustrates human-asset specificity? A) Investing in drilling equipment to drill through any commercial metal B) Training employees on how to operate a customized furnace C) Instructing employees on how to operate a standard MRI scanner D) Using standard casting machines in industrial manufacturing
B) Training employees on how to operate a customized furnace
When the costs of pursuing an activity in-house are GREATER than transacting for that activity in the market, then the firm should _____. A) vertically integrate B) consider purchasing C) both D) neither
B) consider purchasing
On the BCG growth-share matrix, a _____ signifies that a firm is experiencing low/unstable earnings, and negative/neutral cash flow. Their strategy is to harvest/divest. (*divest = deprive) A) question mark B) dog C) star D) cash cow
B) dog
A(n) _____ firm derives between 70 and 95% of its revenues from one business activity (ie: 80% selling Harley-Davidson motorcycles and 20% selling accessories and parts). A) single business B) dominant business C) related diversification D) unrelated diversification
B) dominant business
To capture _____, directly communicate with the product's POTENTIAL. Demand is driven by imagination and creativity, not technology. A) technology enthusiasts B) early adopters C) early majority D) late majority E) laggards
B) early adopters
A partnership in which a partner takes partial ownership in another partner is known as a(n) _____ alliance. A) strategic B) equity C) both D) neither
B) equity
All of the following are tools primarily used to achieve cost-leadership EXCEPT _____. A) offering products at a premium price B) learning by doing C) controlling the cost of inputs D) leveraging economies of scale
A) offering products at a premium price
Economic contribution is created when the _____. A) price a customer is willing to pay for a good or service is more than the cost the firm incurs to produce it B) value a consumer attaches to a good or service is lesser than what he or she paid for it C) price a customer is willing to pay for a good is less than what it costs the firm to manufacture it D) revenue generated by selling a unit of a product is equal to the cost incurred by the firm in producing it
A) price a customer is willing to pay for a good or service is more than the cost the firm incurs to produce it
On the BCG growth-share matrix, a _____ signifies that a firm is experiencing low/unstable earnings, and a negative cash flow. Their strategy is to increase market share or harvest/divest. (*divest = deprive) A) question mark B) dog C) star D) cash cow
A) question mark
In the _____, firms change the underlying technology while holding cumulative output constant. A) minimum efficient scale B) experience curve C) learning curve D) maximum efficient scale
B) experience curve
If a pharmaceutical company develops a first-of-its-kind vaccine to prevent HIV/AIDS and thus creates a whole new market for the product (non-infected civilians), it would be a(n) _____ A) radical innovation B) architectural innovation C) incremental innovation D) disruptive innovation
A) radical innovation
Paying for REPLACEMENTS is an example of the "_____" business model. A) razor-razorblade B) subscription C) pay as you go D) freemium E) wholesale F) agency G) bundling
A) razor-razorblade
The market PRICE is _____ during the GROWTH stage of the industry lifecycle. A) high B) falling C) moderate D) low E) low to high
B) falling
Amazon expanded its single-product business by leveraging spare capacity into cloud computing and by offering its Kindle line of tablet computers and Echo line of digital assistants. This is an example of _____. A) related-linked diversification B) backward vertical integration C) unrelated diversification D) taper integration
A) related-linked diversification
A(n) _____ is the HIGHEST price a buyer is willing to PAY, or the LOWEST price a seller is willing to ACCEPT. A) reservation price B) total return to shareholders C) economic value created D) firm's profit
A) reservation price
A(n) _____ firm is characterized by a low level of diversification, because it derives more than 95% of its revenues from one business activity (ie: 95% selling Birkenstock's). A) single business B) dominant business C) related diversification D) unrelated diversification
A) single business
Quick Connect is an instant messaging mobile application. Users have access to a basic version with limited message recipients for free, but they have to pay a fee to have unlimited message recipients or to use advanced features. Which of the following business models does this best illustrate? A) razor-razor-blade B) freemium C) pay-as-you-go D) subscription-based
B) freemium
When creating a business model, which of the following are key questions that managers need to answer? (Select all that apply) A) WHO are the main stakeholders performing the activities? B) WHAT activities need to be performed to create and deliver the offerings to customers? C) WHEN are the activities going to take place? D) WHERE are the activities going to take place? E) WHY does the business model create value? F) HOW are the offerings to the customers created?
A, B, E, & F
_____ are types of strategic alliances. (Select all that apply) A) Long-term contracts B) Equity alliances C) Joint ventures
A-C
Which of the following are DISADVANTAGES of the "balanced scorecard" integrative framework? (Select all that apply) A) Focused on implementation, not formulation B) Limited guidance is provided on the right metrics to USE C) Managers must identify the right metrics to TRACK D) Limited guidance is provided on how to address setbacks
A-D
According to the crossing-the-chasm framework, a firm's transition between the different parts of the industry life cycle is difficult because _____. A) there is a big gulf separating the early adopters from customer segments that make up the mass market B) there are frequent changes in the supply and demand sides of the market throughout the industry life cycle C) the firm tends to follow a predictable industry life cycle D) the number and size of competitors change throughout the industry life cycle
A) there is a big gulf separating the early adopters from customer segments that make up the mass market
When contracting to the market creates issues with raw materials and annoyed customers, _____ is preferred. A) vertical integration B) purchasing within the market C) both D) neither
A) vertical integration
When the costs of pursuing an activity in-house are LESS than transacting for that activity in the market, then the firm should _____. A) vertically integrate B) consider purchasing C) both D) neither
A) vertically integrate
_____ measure how much of a firm's revenues come from INTANGIBLE assets (ie: brand value, patents, copyrights, trademarks, & goodwill). A) Working capital / Revenue B) PPE / Revenue C) Intangibles / Revenue
C) Intangibles / Revenue
_____ indicates how much of each dollar a firm earns in sales is invested in SALES, GENERAL, & ADMINISTRATIVE expenses. A) COGS B) R&D C) SG&A
C) SG&A
Which of the following is an example of internal transaction costs? A) The costs associated with negotiating prices with a business consultancy B) The costs linked to outsourcing payroll maintenance C) The costs pertaining to setting up a shop floor D) The costs associated with searching for suitable manufacturer contracts
C) The costs pertaining to setting up a shop floor
Which of the following statements is typically true of early adopters? A) They enter the market in the maturity stage of the industry life cycle B) They make up the mass market together with the technology enthusiasts C) They appreciate new technology that can add value to their personal and professional lives D) They enjoy using beta versions of products and providing free suggestions to companies
C) They appreciate new technology that can add value to their personal and professional lives
When using the balanced scorecard approach to assess a firm's performance, which of the following is NOT a key question that managers need to answer? A) How do shareholders view us? B) How do customers view us? C) What intangible assets do we need? D) What core competencies do we need? E) How do we create value?
C) What intangible assets do we need?
The rationale behind related diversification is to _____. A) obtain only 10 percent of the revenues from the primary business activities B) limit learning-curve and experience-curve effects C) benefit from economies of scale and scope D) avoid sharing resources and competencies across different business lines
C) benefit from economies of scale and scope
The _____ strategy consists of LOW costs and HIGH consumer-perceived benefits. A) cost leadership B) differentiation C) blue ocean
C) blue ocean
Downtown Coffee Roasters is a premium cafe that is reputed for its superior customer service. The coffee shop also serves gourmet food to its customers, which allows it to charge a premium price. Budget Beans, in contrast, is a chain of coffee shops that charges the lowest price in the industry due to its self-service policy. However, Perky's Coffee Inc. has found a balance between these two strategic groups by using automated ordering to free up its employees to work as master baristas and bakers, thus focusing on creating excellent products. It charges a price slightly above that of Budget Beans. In this scenario, Perky's Coffee is following a _____. A) liquidation strategy B) product diversification strategy C) blue ocean strategy D) market penetration strategy
C) blue ocean strategy
A balanced scorecard gives _____. A) accountability B) measurability C) both D) neither
C) both
In a focused differentiation strategy, a firm seeks to _____. A) deliver products or services with unique features to a specific, narrow part of the market B) focus on reducing the value gap to differentiate itself from the competitors C) create higher customer value than the competitors in different segments of a mass market D) offer low-priced products and services with a narrow focus on a niche market
C) create higher customer value than the competitors in different segments of a mass market
Japanese carmakers first introduced small fuel-efficient cars and then leveraged their low-cost and high-quality advantages into high-end luxury segments, dominated by brands such as Lexus, Infiniti, and Acura. This initiative best illustrates a(n) _____. A) radical innovation B) progressive innovation C) disruptive innovation D) incremental innovation
C) disruptive innovation
The "planet" dimension of the triple bottom line integrative framework correlates to a firm's _____ performance focus. A) economic B) social C) ecological
C) ecological
The sum of consumer surplus and producer surplus for a good or service equals the _____. A) reservation price B) total return to shareholders C) economic value created D) firm's profit
C) economic value created
Value, price, and cost are the three components needed in calculating _____. A) reservation price B) total return to shareholders C) economic value created D) firm profit
C) economic value created
The following are limitations of the _____ framework of measuring firm performance: 1. Determining the value of a good in the eyes of consumers isn't easy 2. The value of a good in the eyes of consumers changes, based on income, preferences, time, etc. A) accounting profitability B) shareholder value creation C) economic value creation
C) economic value creation
An inverted U-shaped relationship between the type of diversification and overall firm performance indicates that _____. A) firms that compete in single markets benefit the most from economies of scope B) moderate levels of diversification fail to achieve additional value creation C) high and low levels of diversification are generally associated with lower overall performance D) levels of vertical integration and overall firm performance share an inverse relationship
C) high and low levels of diversification are generally associated with lower overall performance
2+ partners create and JOINTLY own a new organization. This is known as a _____. A) partnership B) joint tenancy C) joint venture D) concurrent ownership
C) joint venture
The market PRICE is _____ during the SHAKEOUT stage of the industry lifecycle. A) high B) falling C) moderate D) low E) low to high
C) moderate
Paying for what you CONSUME is an example of the "_____" business model. A) razor-razorblade B) subscription C) pay as you go D) freemium E) wholesale F) agency G) bundling
C) pay as you go
A(n) _____ firm derives less than 70% of its revenues from one business activity, but obtains revenues from other related lines of businesses (ie: ExxonMobil bought XTO Energy, which is known for extracting gas out of unconventional places. ExxonMobil hopes to leverage its core competency in the exploration and commercialization of oil into natural gas extraction). A) single business B) dominant business C) related diversification D) unrelated diversification
C) related diversification
A firm that follows the differentiation strategy is protected from the threat of new entrants primarily due to its _____. A) low cost per unit B) diseconomies of scale C) reputation for quality D) low pricing
C) reputation for quality
During the _____ stage of the industry lifecycle, PRODUCT innovation is rapidly DECREASING and PROCESS innovation is rapidly INCREASING. A) introduction B) growth C) shakeout D) maturity E) decline
C) shakeout
During the _____ stage of the industry lifecycle, the industry consolidates, forcing out the weaker firms, and leaving only the strongest competitors to survive. A) introduction B) growth C) shakeout D) maturity E) decline
C) shakeout
The rate of growth declines and firms begin to intensely compete during the _____ stage of the industry lifecycle. Price becomes an important competitive weapon. A) introduction B) growth C) shakeout D) maturity E) decline
C) shakeout
On the BCG growth-share matrix, a _____ signifies that a firm is experiencing high/stable/growing earnings, and neutral cash flow. Their strategy is to hold/invest for growth. A) question mark B) dog C) star D) cash cow
C) star
Both Apple and Nike own retail outlets, but also use other retailers, both the brick-and-mortar type and online. They are said to have _____ integration. A) forward B) backward C) taper
C) taper
Stock price appreciation + dividends is _____. A) a shareholder B) risk capital C) the total return to shareholders D) market capitalization
C) the total return to shareholders
What does COGS stand for?
Cost Of Goods Sold
_____ the _____ framework consists of technology enthusiasts, early adopters, early majority, late majority, and laggards.
Crossing the Chasm
Global Reach Corp. is a public company whose shares are currently trading in the market at $150 each. The company manufacturers smartphones at the cost of $300 per unit and sells them in the market for $500 each. What is the company's producer surplus? A) $650 B) $300 C) $150 D) $200
D) $200
Which of the following examples would most likely limit a firm's growth? A) An entrepreneur views joining a conglomerate as an important opportunity to reduce risks B) An entrepreneur sees retraining managers to eliminate principal-agent problems as a main goal of her firm C) A social entrepreneur wants to combine large profits with a socially responsible approach D) A social entrepreneur makes conservation of the environment the primary goal of his firm
D) A social entrepreneur makes conservation of the environment the primary goal of his firm
Bela is a marketing and sales employee at Hopscotch Foods Inc. She has invented a new way to process and pack the company's food products that would avoid the usage of chemical preservatives. Which of the following terms best describes Bela? A) A category captain B) A franchised dealer C) A venture capitalist D) An intrapreneur
D) An intrapreneur
_____ is best described as the changes in an industry value chain that involve moving ownership of activities upstream to the originating (inputs) point of the value chain. A) Disruptive innovation B) Corporate divestiture C) Reverse engineering D) Backward vertical integration
D) Backward vertical integration
Which of the following is NOT a disadvantage of the balanced scorecard approach? A) It is a tool merely for strategy implementation, not for strategy formulation B) It fails to provide much insight into how metrics that deviate from the set goals can be put back on track C) It provides only limited guidance about which metrics to choose to measure competitive advantage D) It fails to allow managers to prepare the company for future growth
D) It fails to allow managers to prepare the company for future growth
_____ are not as confident in their ability to master the technology, so they wait until standards have emerged. They typically buy from well-established firms. A) Technology enthusiasts B) Early adopters C) Early majority D) Late majority E) Laggards
D) Late majority
_____ enter the market during the MATURITY stage of the industry lifecycle. A) Technology enthusiasts B) Early adopters C) Early majority D) Late majority E) Laggards
D) Late majority
The following are three financial ratios involved in _____. 1. COGS / Revenue 2. R&D expense / Revenue 3. SG&A expense / Revenue A) ROIC B) ROE C) ROA D) ROR
D) ROR
_____ measures how much of a firm's sales is converted into profits. A) ROIC B) ROE C) ROA D) ROR
D) ROR
Which of the following best illustrates a dominant-business firm? A) Fractal Products is a company whose multiple strategic business units contribute equally to the total corporate revenue B) Alliance Metals is a firm that derives 50 percent of its revenues from its steel unit and another 50 percent from its automobile businesses C) Asphalt Autos is a company whose revenues solely come from selling automobiles D) Riva Inc. is a luxury brand that derives 90 percent of its revenues from its apparel line and 10 percent of its revenues from its premium furniture business unit
D) Riva Inc. is a luxury brand that derives 90 percent of its revenues from its apparel line and 10 percent of its revenues from its premium furniture business unit
Which of the following is the BEST example of a platform business? A) L.L. Bean clothing retailers B) Coca Cola soft drink producer C) McDonald's restaurants D) Uber ride-hailing services
D) Uber ride-hailing services
Highly diversified firms experience a diversification discount in the stock market because they _____. A) cannot leverage financial economies B) are unable to overcome institutional weaknesses in emerging economies C) cannot influence costs D) are unable to create additional value
D) are unable to create additional value
On the BCG growth-share matrix, a _____ signifies that a firm is experiencing high/stable earnings, and a high/stable cash flow. Their strategy is to hold. A) question mark B) dog C) star D) cash cow
D) cash cow
STRATEGIC POSITION consists of _____, while COMPETITIVE SCOPE consists of _____. A) cost & narrow; differentiation & broad B) narrow & broad; cost & differentiation C) cost & broad; differentiation & narrow D) cost & differentiation; narrow & broad
D) cost & differentiation; narrow & broad
Firms pursuing a cost-leadership strategy seek to _____. A) keep their cost structures at the same or similar levels as that of the competitors B) gain competitive advantage by reducing the value gap C) create higher value for customers and offer premium pricing D) deliver products or services at a lower cost than competitors
D) deliver products or services at a lower cost than competitors
Paying for EXTRA FEATURES/ADD-ONS is an example of the "_____" business model. A) razor-razorblade B) subscription C) pay as you go D) freemium E) wholesale F) agency G) bundling
D) freemium
COPYING a successful innovation is known as _____. A) an idea B) invention C) innovation D) imitation
D) imitation
The market PRICE is _____ during the MATURITY stage of the industry lifecycle. A) high B) falling C) moderate D) low E) low to high
D) low
If a company has 25 million shares outstanding, and each share is traded at $400, the _____ is $10 billion. A) total return to shareholders B) customer lifetime value C) return on revenue D) market capitalization
D) market capitalization
The dollar value of total shares outstanding is known as _____. A) a shareholder B) risk capital C) the total return to shareholders D) market capitalization
D) market capitalization
What does GAAP stand for?
Generally Accepted Accounting Principles
_____ (Incremental/Radical) innovation builds on established knowledge and targets EXISTING markets and technology. _____ (Incremental/Radical) innovation combines existing knowledge OR builds an entirely new knowledge base, and targets NEW markets and technology.
Incremental; Radical
What is the formula for determining a firm's MARKET CAPITALIZATION?
Market capitalization = (# of outstanding shares) (share price)
What does SG&A stand for?
Selling, General, & Administrative [expenses]
_____ _____ are voluntary arrangements between firms which involve sharing knowledge, research, and capabilities, with the intent of developing products and processes. A huge benefit to these ALLIANCES are that the firms don't encounter the internal transaction costs which exist when owning a firm.
Strategic alliances
_____ (Social/Strategic) entrepreneurship is the pursuit of innovation using STRATEGIC tools, while _____ (social/strategic) entrepreneurship is the pursuit of SOCIAL goals AND a profitable business.
Strategic; social
_____ costs are all costs associated with an economic exchange. By analyzing these costs, managers are able to determine whether it is more cost-effective for their firm to expand through vertical integration or diversification.
Transaction
T/F) "What percentage of a firm's sales is generated within the firm's boundaries?" asks how much of a firm's activities are completed through vertical integration, as opposed to market purchases.
True
T/F) A NARROW competitive scope is the number of needs a firm is satisfying.
True
T/F) A STRATEGY CANVAS graphically depicts a company's performance relative to its competitors. It shows the key areas on which each firm is focusing. (ie: Southwest has low costs in most areas, but is high on customer service and reliability)
True
T/F) Blue oceans represent untapped market space, the creation of additional demand, and opportunities for highly profitable growth.
True
T/F) Business models can be combined, evolved, or disrupted, so the firm's must respond to disruption and adapt.
True
T/F) Continuing to innovate by staying ahead of competition, protecting the low end of the market, and disrupting YOURSELF are ways to respond to disruptive innovation.
True
T/F) GAAP and FASB are metrics used to measure accounting profitability.
True
T/F) Initial innovations are foundational for other rapid innovation.
True
T/F) Innovation can both create and destroy value, and it often comes in waves.
True
T/F) On the "make-or-buy continuum," making vs. buying doesn't have to be black or white. Short-term contracts, strategic alliances, and parent-subsidiary relationships do exist.
True
T/F) Price competition only exists during the shakeout, maturity, and decline stages of the industry lifecycle.
True
T/F) ROIC, ROE, ROA, ROR are four types of profitability ratios.
True
T/F) Supply and demand change as industries age, so each stage of the industry lifecycle requires different competencies.
True
T/F) There is no price competition during the introduction and growth stages of the industry lifecycle.
True
T/F) Vertical market failure occurs when transactions are too risky or costly.
True
To achieve a desired STRATEGIC POSITION, managers must make strategic _____-_____ (AKA: choices between a COST or VALUE position).
trade-offs
The ownership of inputs or distribution channels is known as _____ integration.
vertical
It is _____ (better/worse) for a firm to have MORE working capital tied up in its operations than competitors. Why?
worse, because it means they are using MORE INPUT than competitors to produce the SAME amount of OUTPUT
