final study guide - quizzes

When one firm acquires a(n) ________ of another firm, it has acquired enough of that firm's assets so that the acquiring firm is able to make all the management and strategic decisions in the target firm.

Controlling share

Vertical integration is a type of A) business strategy. B) corporate strategy. C) generic strategy. D) differentiation strategy.

Corporate

Actions firms take to gain competitive advantages by operating in multiple markets or industries simultaneously are known as A) business-level strategies .B) corporate-level strategies. C) functional-level strategies. D) macro-level strategies.

Corporate Level Strategies

Whether explicit or implicit, firms that engage in collusion face a number of fundamental ethical challenges.True / False

True

While firms often alter the objective properties of their products or services in order to implement a product-differentiation strategy, the existence of product differentiation is always a matter of customer perception.True / False

True

A decision-making setting is said to be ________ when the outcomes of that decision are not known with certainty, and the possible outcomes associated with that decision, and their probability, are also not known before a decision is made. A) risky B) uncertain C) strategic D) typical

Uncertain

t is usually possible to know for sure that a firm is choosing the right strategy. True / False

False

Hedonic Price Definition

A hedonic price is that part of the price of a product or service that is attributable to a particular characteristic of that product or service

In the Wall Street Journal article "The Man from Rivian Who Wants to Change How We Buy Cars", Rivian wants to sell cars --A) From their own stores and bypass dealers B) Directly to the Customer from the Internet C) Through existing Franchised Locations D) Sell at other EV dealerships to reduce costs

A) From their own stores and bypass dealers

The difference between the current market price of a target firm's shares and the price a potential acquirer offers to pay for those shares is known as an

A) acquisition premium.

As the volume of production in a firm increase, the average cost per unit decreases until some optimal volume of production is reached, after which the average costs of production begin to rise because of A) diseconomies of scale. B) economies of scope. C) diseconomies of scope. D) economies of scale.

A) diseconomies of scale.

While firms often alter the ________ of their products or services in order to implement a product-differentiation strategy, the existence of product differentiation, in the end, is always a matter of ________. A) objective properties; customer perception B) customer perceptions; objective properties C) objective properties; price D) customer perceptions; price

A) objective properties; customer perception

According to the Wall Street Article, "The Next Big Battle Between Google and Apple Is forthe Soul of Your Car." - A. Car makers will need to decide between doing software development in-house or signing partnerships with external technology partners and potential sources of future revenues B. Apple is winning the war with Car Markers with "Hey Siri" - CarPlay C. Google is winning the war with Car Makers with "Hey Google" - Android Auto D. Apple has the wild-card by developing their own Car

A. Car makers will need to decide between doing software development in-house or signing partnerships with external technology partners and potential sources of future revenues

A firm building a manufacturing plant that employs only general-purpose machinery is an example of the option to ________. A) defer B) grow C) abandon D) contract

Abandon

Strategic options exist when firms have the ________, but not the ________, to invest in a particular strategy. A) ability; obligation B) obligation; ability C) money; people D) people; money

Ability, Obligation

A firm engages in a(n) ________ when it purchases a second firm.

Acquisition

In the Wall Street Journal article "Chinese Companies Alter Products, Strategiesto Offset Rising Costs" in response to inflationary pricing, the companies are altering their product and service strategies by -A) Sourcing products from third-world economies such as Vietnam and Cambodia B) Bundling less costly accompaniments such as condiments, rice, noodles, and tea with other main dishes, hoping the practice will increase sales volume C) Modifying the supply chain to create areas of efficiency D) Considering relocating factories in areas outside of China

B) Bundling less costly accompaniments such as condiments, rice, noodles, and tea with other main dishes, hoping the practice will increase sales volume

________ are said to exist when the increase in firm size (measured in terms of volume of production) are associated with lower costs (measured in terms of average costs per unit of production). A) Sustainable competitive advantages B) Economies of scale C) Temporary competitive advantages D) Economies of scope

B) Economies of scale

Which of the following is the best example of forwading vertical integration A) a car dealership opening up its own automobile manufacturing plant B) a car company opening its own dealerships to sell its products directly to customers C) a car company opening its own chain of video rental stores D) a car company opening a plant to produce motorcycles

B) a car company opening its own dealerships to sell its products directly to customers

Which of the following economies of scope is costly to duplicate? A) shared activities B) internal capital allocation C) risk reduction D) tax advantages

B) internal capital allocation

If Dell computers were to open its own factory to manufacture the LCD televisions it sells at its online store, this would be an example of A) forward vertical integration .B) product differentiation. C) backward vertical integration. D) forward horizontal integration.

Backward Integration

Which of the following is an example of formal management controls? A) a firm's culture B) the willingness of employees to monitor each other C) budgeting and reporting activities D) managerial motivation

Budgeting and reporting activities

According the Wall Street Journal article, "Burger King's New U.S. CEO Seeks to Restore Chain's Luster", the reasons for Burger King's decreasing sales and marketshare are due to -A) Chick-fil-A rise in dominance with the Chicken Sandwich and excellent Customer Service B) McDonald's revamping its menu and growing polarity of McDonald's App C) Burger Kings overly complex menus, slow operations and outdated restaurants had tarnished Burger King's standing with diners and investors D) Wendy's delivery of "fresh beef" and expanding into breakfast sales

Burger Kings overly complex menus, slow operations and outdated restaurants had tarnished Burger King's standing with diners and investors

1) Actions that firms take to gain a competitive advantage in a single market or industry are known as A) business-level strategies. B) corporate-level strategies. C) functional-level strategies. D) macro-level strategies.

Business Level Strategies

What is Collusion

Collusion exists when firms in an industry or market cooperate to reduce competition.

According to the Wall Street Journal Article, "Some RadioShack Dealers Aren't Happy as the Brand Leans on NSFW Tweets", Radio Shack's new marketing strategy - A) Focuses on building on existing customer loyalty B) Focuses on drumming up attention on new products and services C) Focuses on Not Safe for Work Tweets such as references to porn-related topics D) Focuses on returning to the glory days of Radio Shack

C) Focuses on Not Safe for Work Tweets such as references to porn-related topics

10) Per the Wall Street Article "Disney's New Pricing Magic: More Profit From Fewer Park Visitors", Disney has made a significant strategic shift by A) Allowing Disney Characters to appear at Home Parties and Special Events B) Developing small-scale "Mini & Mickey Theme Parks" in Malls and Cityscapes C) Focusing less on maximizing the number of visitors and more on increasing how much money each visitor spends D) Marketing to international guests with high discretionary incomes and large families

C) Focusing less on maximizing the number of visitors and more on increasing how much money each visitor spends

Which of the following bases of product differentiation attempts to create the perception that a firm's products or services are unusually valuable by focusing directly on the attributes of the products or services a firm sells? A) Product customization B) Consumer marketing C) Product complexity D) Reputation

C) Product complexity

________ in the RBV are defined as the tangible and intangible assets that a firm controls that it can use to conceive and implement its strategies. A) Management controls B) Capabilities C) Resources D) Compensation policies

C) Resources

The most obvious way that firms can try to differentiate their products is by A) making the product more complex. B) introducing the product at the right time. C) altering the features of the products they sell. D) customizing the product for a particular segment.

C) altering the features of the products they sell.

By increasing the perceived value of a firm's products or services, a firm will be able to A) charge a lower price than it would otherwise be able to do. B) sell its products at lower prices than firms pursuing a cost-leadership strategy. C) charge a higher price than it would otherwise be able to do. D) gain significantly more market share than firms pursuing a cost-leadership strategy.

C) charge a higher price than it would otherwise be able to do.

The essence of the ________ to vertical integration is that if a firm possesses valuable, rare, and costly-to-imitate resources in a business activity, it should vertically integrate into that activity otherwise it should not vertically integrate into that activity. A) flexibility-based explanation B) opportunism-based explanation C) firm capability explanation D) opportunity-based explanation

C) firm capability explanation

Research over the years has demonstrated conclusively that the primary determinant of the compensation of top managers in a firm is A) not the size of the firm, usually measured in sales, but the economic performance of the firm. B) both the economic performance of the firm as well as the size of the firm, usually measured in sales. C) not the economic performance of the firm but the size of the firm, usually measured in sales. D) neither the economic performance of the firm nor the size of the firm.

C) not the economic performance of the firm but the size of the firm, usually measured in sales.

________ are a subset of a firm's resources and are defined as tangible and intangible assets that enable a firm to take full advantage of other resources it controls. A) Retained earnings B) Capabilities C) Human resources D) Financial resources

Capabilities

ESPN's development of an extensive offering of X-Games coverage that is unmatched by any other sports outlet is an example of which element of the VRIO framework? A) organization B) imitability C) competitive parity D) rarity

D rarity

A firm's ability to learn is known as its A) competitive position .B) competitive advantage .C) distinctive competence. D) absorptive capacity.

D) absorptive capacity.

A firm's marketing skills and teamwork as well as its cooperation among managers are examples of A) financial resources. B) human resources. C) physical resources. D) capabilities.

D) capabilities

In emerging industries A) firms that are first movers are unlikely to gain product-differentiation advantages based on buyer loyalty and high switching costs. B) product-differentiation efforts are focused on product refinement as a basis of product differentiation .C) firms can sometimes be tempted to exaggerate the extent to which they have refined and improved their products and services. D) firms that are first movers can gain product-differentiation advantages based on perceived technological leadership.

D) firms that are first movers can gain product-differentiation advantages based on perceived technological leadership.

Firms that possess and exploit costly-to-imitate, rare and valuable resources in choosing and implementing their strategies may enjoy a period of A) temporary competitive advantage .B) competitive disadvantage. C) competitive parity. D) sustained competitive advantage.

D) sustained competitive advantage.

Which of the following economies of scope do not have the potential for generating positive returns for a firm's equity holders since the economies of scope can be realized by outside equity holders at a low cost by investing in a diversified portfolio of stock? A) shared activities B) diversification to maximize the size of a firm C) internal capital allocation D) exploiting market power

Diversification to maximize the size of a firm

The economic profits generated by generic business strategies—cost leadership, product differentiation, and flexibility—can be thought of as ________ profits. A) efficiency B) normal C) abnormal D) sustainable

Efficiency

Which of the following economies of scope is less costly to duplicate? A) employee compensation B) core competencies C) multipoint competition D) exploiting market power

Employee compensation

In general, firms that use their resources and capabilities to exploit opportunities or neutralize threats will see no increase in their net revenues nor a decrease in their net costs compared to the situation where they are not using these resources and capabilities to exploit opportunities or neutralize threats. True / False

False

An ______ is any individual, group, or organization outside a firm that seeks to reduce the level of that firm's performance - env. threat - env. opportunity - env. equalizer - competitive advantage

Env. Threat

Explicit Collusion

Explicit collusion exists when firms in an industry directly negotiate agreements about how to reduce competition.

Conducting an _____ a firm identifies the critical threats and opportunities in its competitive environment.

External analysis

14) The acquisition of strategically unrelated targets will generate substantial economic profits for both the bidding and the target firms.True / False

False

Business strategy is a firm's theory of how to gain competitive advantage by operating in several businesses simultaneously.True / False

False

If Wal-Mart were to purchase a factory to make socks and it planned to sell these socks in its stores, this would be an example of forward vertical integration.True / False

False

In the structure-conduct-performance model, the term "performance" refers solely to the performance of individual firms. True / False

False

Learning curve-cost advantages are restricted solely to manufacturing and the advantage associated only with the manufacturing business function.True / False

False

Learning-curve cost advantages are present when the cost of production falls with the cumulative volume of production. True / False

False

Tacit collusion requires firms to signal their willingness to cooperate to reduce competition directly.True / False

False

The physical location of a firm cannot be a source of product differentiation.True / False

False, can be true

Wal-Mart exemplifies a firm pursuing a product-differentiation strategy while Victoria's Secret exemplifies a firm pursuing a cost-leadership strategy.True / False

False, opposite

Which of the following statements is accurate? A) A cost-leadership competitive strategy increases the threat of new entrants by lowering barriers to entry. B) Firms with a low-cost position can reduce the threat of rivalry in an industry. C) Cost leaders are especially vulnerable to substitute products. D) Cost leaders are especially vulnerable to the threat of suppliers.

Firms with a low-cost position can reduce the threat of rivalry in an industry.

Over the last decade, more and more diversified firms have been abandoning efforts at managing each business's activities independently in favor of increased activity sharing.

Flase

When Apple, Inc. opened retail stores to sell its computers and iPods, this was an example of A) forward vertical integration. B) backward vertical integration .C) forward horizontal integration. D) backward horizontal integration.

Forward Vertical Integration

A(n) ________ acquisition occurs when the management of a target firm wants to be acquired.

Friendly

A firm building a plant with the ability to add capacity at low cost is an example of the option to ________. A) defer B) grow C) contract D) abandon

Grow

If an individual is considering purchasing a Toyota Camry or a Ferrari and decides that it is worth paying the extra money for the prestige that is associated with the Ferrari, the additional money the customer is willing to pay for the prestige is known as a(n) A) altruistic price. B) fair market value. C) hedonic price D) margin price.

Hedonic Price

economies of scope exists when

It is cheaper to produce two products together (joint production) than to produce them separately

In a ________, cooperating firms create a legally independent firm in which they invest and from which they share any profits that are created. A) licensing agreement B) supply agreement C) distribution agreement D) joint venture

Joint Venture

________ exists when two or more diversified firms simultaneously compete in multiple markets .A) Multipoint competition B) Dynamic competition C) Multipoint cooperation D) Dynamic cooperation

Multipoint competition

An oil company leasing land for potential exploration instead of buying it is an example of the option to ________. A) defer B) grow C) contract D) expand

Option to defer

________ is a business strategy whereby firms attempt to gain a competitive advantage by increasing the perceived value of their products or services relative to the perceived value of other firms' products or services. A) Related diversification B) Product differentiation C) Cost leadership D) Best-cost provider

Product differentiation

A ________ exists when a firm has the ability, but not the obligation, to invest in real assets of some type .A) core competency B) corporate option C) real option D) strategic intent

Real option

A firm's ________ is really no more than a socially complex relationship between a firm and its customers and can serve as a basis for product differentiation. A) location B) consumer marketing C) reputation D) architectural competence

Reputation

A decision-making setting is said to be ________ when the outcome of that decision is not known with certainty, but the possible outcomes associated with that decision, and their probability, are known before a decision is made. A) risky' B) uncertain C) typical D) atypical

Risky

In which type of limited corporate diversification do firms have greater than 95% of their total sales in a single product market? A) dominant-business firms B) single-business firms C) related-constrained firms D) related-linked firms

Single-business firms

6) ________ are substitutes for exploiting economies of scope in diversification. A) Tax havens B) Tax shelters C) Tax freedom D) Strategic alliances

Strategic alliances

The major substitute for vertical integration is A) vertical disintegration. B) a product-differentiation strategy. C) strategic alliances. D) a low-cost strategy.

Strategic alliances

The essence of __________________ is choosing what _______ to do.

Strategy, Not

7) ________ exist(s) when firms coordinate their production and pricing decisions not by directly communicating with each other but by exchanging signals with other firms about their intent to cooperate .A) Economies of scale B) Explicit collusion C) A learning race D) Tacit collusion

Tacit Collusion

Any actions a firm takes that have the effect of reducing the level of rivalry in an industry that also do not require firms in an industry to directly communicate or negotiate with each other can be thought of as A) tacit cooperation. B) tacit collusion. C) explicit collusion. D) competitive parity.

Tacit Cooperation

Tactic collusion

Tacit collusion, on the other hand, can be legal. Tacit collusion exists when firms cooperate in reducing competition, but engage in no face-to-face negotiations to do so.

A firm engages in backward vertical integration when it incorporates more stages of the value chain within its boundaries and those stages bring it closer to gaining access to raw materials.True / False

True

A firm has implemented a strategy of limited corporate diversification when all or most of its business activities fall within a single industry and geographic market.True / False

True

A firm's level of vertical integration is the number of steps in its value chain that the firm accomplishes within its boundaries.True / False

True

A firm's strategy is defined as its theory about how to gain competitive advantages. True / False

True

Capabilities are a subset of a firm's resources and are defined as tangible and intangible assets that enable a firm to take full advantage of other resources it controls.True / False

True

Coca-Cola's decision to focus on the Western European market and Pepsi's decision to focus on the Russian market is an example of collusion.True / False

True

Compensation policies are the ways that firms pay employees, and such policies create incentives for employees to behave in certain ways.True / False

True

Explicit collusion exists when firms in an industry directly negotiate agreements about how to reduce competition.True / False

True

Firms should not vertically integrate into business activities where they do not possess the resources necessary to gain competitive advantages.True / False

True

In general, as long as the number of firms that possess a particularly valuable resource or capability is less than the number of firms needed to generate perfect competition dynamics in an industry, that resource or capability can be considered rare and a potential source of competitive advantage.True / False

True

In general, firms attempting to implement a cost-leadership strategy will choose to produce relatively simple standardized products that sell for relatively low prices compared to the products and prices of firms pursuing other business or corporate strategies.True / False

True

Incumbent firms may have a whole range of cost advantages compared to new competitors. True / False

True

Many firms have resources and capabilities that are used to neutralize threats, and the use of these resources enables the firms to increase their net revenues.True / False

True

The set of business activities in which a firm engages to develop, produce, and market its products or services is known as its A) value chain .B) physical resources. C) organizational resources. D) human resources.

Value chain

Firms pursuing a cost-leadership strategy are typically characterized by A) loose cost control systems. B) a de-emphasis on quantitative cost goals and costs. C) infrequent cost control reports. D) close supervision of labor, raw materials, inventory, and other costs.

close supervision of labor, raw materials, inventory, and other costs.

To the extent that other firms may have competitive advantages in business activities that a firm is considering to enter through vertical integration, vertically integrating into these activities could put the firm at a A) competitive advantage. B) temporary dynamic disadvantage .C) competitive disadvantage. D) sustainable competitive advantage.

competitive disadvantage

If there are no vertical, horizontal, product extension, or market extension links between firms, the FTC defines the merger or acquisition activity between firms as a ________ merger.

conglomerate

A firm implements a ________ when it operates in multiple industries or markets simultaneously A) vertical integration strategy B) corporate diversification strategy C) business diversification strategy D) product-differentiation strategy

corporate diversification strategy

A firm that chooses a _______ focuses on gaining advantages by reducing its cost below all of its competitors. A) diversification strategy B) product-differentiation business strategy C) corporate strategy D) cost-leadership business strategy

cost-leadership business strategy

The price of each of a firm's shares multiplied by the number of shares outstanding represents the firm's

current market value

____ exists when a firm's costs rise as a function of its volume production

diseconomies of scale

________ exist(s) when firms directly communicate with each other to coordinate their levels of production and/or their prices. A) Economies of scale B) Explicit collusion C) A learning race D) Tacit collusion

explicit collusion

Strategic alliances can create economic value through helping firms improve their current operations by A) facilitating the development of technology standards. B) facilitating tacit collusion. C) exploiting economies of scale. D) managing uncertainty.

exploiting economies of scale

Collusion is the ability of a group of firms to work together to increase competition in their market or industry.True / False

false

In a nonequity alliance, firms create a legally independent firm in which they invest and from which they share any profits that are created.True/False

false

In an acquisition a tender offer can only be made with the support of the management of the acquired firm.True / False

false

When a firm operates in multiple industries simultaneously it is said to be implementing a geographic market diversification strategy.True / False

false

When the management of a target firm wants the firm to be acquired, this is known as a hostile takeover.True / False

false

A(n) ________ approach to vertical integration suggests that rather than vertically integrating into a business activity whose value is highly uncertain firms should not vertically integrate and instead should form a strategic alliance to manage this exchange. A) alliance-based B) firm capabilities-based C) flexibility-based D) opportunism-based

flexibility based

Cost-leadership and product-differentiation strategies are so widely recognized that they are often called A) common business strategies. B) generic corporate strategies. C) generic business strategies. D) common corporate strategies.

generic business strategies.

Substitutes for exploiting economies of scope in diversification include A) growing and developing independent businesses within a diversified firm and vertical integration. B) vertical integration and strategic alliances .C) growing and developing independent businesses within a diversified firm and strategic alliances .D) strategic alliances and multipoint competition.

growing and developing independent businesses within a diversified firm and strategic alliances

If eBay were to acquire a smaller online auction company, this would be an example of a ________ merger.

horizontal

When both parties to an alliance are seeking to learn something from that alliance, a ________ can evolve. A) learning race B) dynamic race C) learning dynamic D) learning curve

learning race

A ________ is a form of nonequity alliance that exists when one firm allows another to use its brand name to sell its products. A) supply agreement B) distribution agreement C) licensing agreement D) joint venture

licensing

The CEO and the top management team at Conglomerate, Inc. have the unrealistic belief that they should have an aggressive merger and acquisition strategy because they can manage the assets of a target firm better than the managers of the target firm. Conglomerate, Inc.'s CEO and the top management team suffer from ________.

mangerial hubris

When Sears and Kmart, two retail firms of relatively equal size in the United States, agreed to combine their assets, this was an example of a(n)

merger

A firm's ________ is its long-term purpose that defines both what it aspires to be in the long run and what it wants to avoid in the meantime. - mission - strategy -objective - goal

mission

____ are specific, measurable targets a firm can use to evaluate the extent to which it is realizing its mission

objectives

Which of the explanations of vertical integration is the oldest and has received the greatest empirical support? A) opportunism-based B) flexibility-based C) firm capabilities-based D) alliance-based

opportunity-based

Choices which firms make about the kinds of products and services they will sell that impact their relative cost position are known as A) technological hardware. B) policy choices. C) technological software. D) corporate level strategies.

policy choices

_______ can be can be a source of product differentiation when a single set of customers purchases several of a firm's products. A) Product mix B) Product placements C) Reputation D) Architectural competence

product mix

A(n) ________ exists whenever two or more independent organizations cooperate in the development, manufacture, or sale of products or services. A) vertical market B) strategic alliance C) initial public offering D) market transaction

strategic alliance

A sequential set of analyses and choices that can increase the likelihood that a firm will choose a strategy that generates competitive advantage is the

strategic mgt. process

A firm's _____ is defined as its theory how to gain competitive advantages - mission - vision - objective - strategy

strategy

To the extent that a firm's resources and capabilities enhance a firm's competitive position by enabling a firm to exploit opportunities or neutralize its threats, these resources and capabilities are valuable and are known as A) temporary competitive advantages. B) sustainable competitive advantages. C) core competencies. D) strengths.

strengths

____ make a wide variety of raw materials, labor, and other critical assets available to firms - buyers - suppliers - rivals - substitutes

suppliers

11) The use of strategic alliances to manage economic exchanges has grown substantially over the last several years.True/False

true

13) When a firm cannot realize the cost savings from economies of scale all by itself, it may join in a strategic alliance with other firms so that together both firms will have sufficient volume to be able to gain the cost advantages of economies of scale.True/False

true

14) Firms with high levels of absorptive capacity will learn at faster rates than firms with low levels of absorptive capacity, even if these two firms are trying to learn exactly the same things in an alliance.True/False

true

15) In new and uncertain environments, it is not unusual for firms to develop numerous strategic alliances.True/False

true

A cost-leadership competitive strategy can reduce both the threat of substitutes and the threat of suppliers that a firm may face.True / False

true

A firm implements a corporate diversification strategy when it operates in multiple industries or markets simultaneously.True / False

true

As the volume of production in a firm increases, the average cost per unit decreases until some optimal production volume is reached, after which the average costs per unit of production begin to rise because of diseconomies of scale.True / False

true

Both shared activities and internal capital allocation are examples of economies of scope that have the potential for generating positive returns for a firm's equity holders.True / False

true

Economies of scale are said to exist when the increase in firm size (measured in terms of volume of production) are associated with lower costs (measured in terms of average costs per unit of production).True / False

true

Firms should pursue merger and acquisition strategies only to obtain valuable economies of scope that outside investors find too costly to create on their own.True / False

true

Product differentiation is a business strategy whereby firms attempt to gain a competitive advantage by increasing the perceived value of their products and services relative to the perceived value of other firms' products or services.True / False

true

To the extent that differences in product complexity lead customers to conclude that the products of some firms are more valuable than the product of other firms, then product complexity can be a basis of product differentiation.True / False

true

While mergers typically begin as a transaction between equals, that is, between firms of equal size and profitability, they often evolve after a merger such that one firm is more dominant in the management of the merged firm than the other.True / False

true

A decision-making setting is ________ when the future of an exchange cannot be known when investments in that exchange are being made. A) uncertain B) opportunistic C) flexible D) dynamic

uncertain

Strategic alliances are particularly valuable in facilitating market entry and exit when the value of market entry or exit is A) high .B) low .C) moderate .D) uncertain.

uncertain

If an electronics manufacturer were to acquire a chain of retail electronic stores to sell its products, this would be an example of a ________ merger.

vertical