Management 461 - Exam 2

Not all firms are motivated by a need to grow.

TRUE

Even if a merger may not increase shareholder value as planned, it is often a wise idea to champion it so that managers will have the greater opportunities of working at an expanding company.

FALSE

Firms tend to share only explicit knowledge in an equity alliance.

FALSE

Firms that pursue extremely high or extremely low levels of diversification perform better than those that pursue moderate levels of diversification.

FALSE

High demand for online video streaming options is one of Netflix's core competencies.

FALSE

In general, it is short-sighted to acquire companies as a defensive move to prevent rival organizations from gaining access to certain patents, technology, or customer bases.

FALSE

In recent years strategic alliances have declined because of increasing government regulation.

FALSE

When a firm is able to successfully employ a blue ocean strategy, it will create a competitive advantage by

beating rivals on product attributes while offering a better price.

When executives of a firm consider business opportunities only where they can leverage their existing competencies and resources, it can be concluded that the firm is using

related-constrained diversification.

A strategy of ________ will be most beneficial for a firm to enhance its overall corporate performance.

related-linked diversification

To help a firm achieve a competitive advantage, each distinct activity performed in the value chain needs to

contribute to the firm's strategic position as either low-cost leader or differentiator.

When a firm makes choices between a cost or value position to achieve competitive advantage, it is primarily involved in

strategic tradeoffs.

Decisions relating to the range of products and services a firm will offer determine the firm's

level of diversification.

Which of the following statements is true of joint ventures?

They enable the exchange of both tacit and explicit knowledge.

Which of the following is an advantage of equity alliances when compared to nonequity alliances?

They produce stronger ties between partners.

Which of the following will most likely be considered as an airlines core competency?

the airline's ability to make its fleet more fuel efficient than their competitors

Which of the following best explains why a blue ocean strategy is difficult to implement?

It requires the reconciliation of fundamentally different strategic positions—differentiation and low cost.

Which of the following is an implication of high employee turnover in a company?

It results in a reduction in the company's intangible-resource stocks.

A firm follows a(n) ________ when less than 70 percent of its revenues come from a single business and there are few, if any, linkages among its businesses.

unrelated diversification strategy

The primary goal of a firm pursuing a blue ocean strategy should be to

offer a differentiated product or service at a low cost.

One of the risks of pursuing a blue ocean strategy is that a firm can find itself

"stuck in the middle."

Flectronics has used $700,000 from its total annual earnings of $1,650,000 to invest in upgrading its manufacturing facilities. Its accounts receivable from customers is estimated to be $130,000 and accounts payable $75,000. In monetary terms, what would Flectronics's resource flows be?

$700,000

Amazon's tendency to reinvest a large share of its profits into new services and capabilities exemplifies a low level of resource flows.

FALSE

Corporate strategy is focused solely on determining the geographic locations in which the firm should compete.

FALSE

When a firm operates at an output level of 9,000 units, the per-unit cost is $5. When the production is between 10,000-12,000 units, the per-unit cost is $4. At a production level of 13,000 units, the production cost is again $5 per unit. At 14,000 units and above, the production cost increases further. At what output level does the firm experience economies of scale?

11,000 units

When a firm manufactures 2,000-3,000 units of a product, it incurs an average cost of $10 per unit. When it manufactures 3,000-4,000 units of the same product, the average cost per unit reduces to $7. However, manufacturing beyond 4,000 units will raise the average cost per unit to $9. Which of the following is the firm's minimum efficient scale?

3,000-4,000 units

At a certain output level, the per-unit cost incurred by a firm to manufacture a product was $70. Once the cumulative output doubled, the cost per unit reduced to $63. All other factors remaining constant, the firm has been able to achieve a(n)

90 percent learning curve.

Which of the following best illustrates forward vertical integration?

A firm that manufactures and sells car engines to major automobile companies launches its own line of cars.

Pete's Bikes enjoys a competitive advantage as a cost-leader because high demand for its products has allowed it to operate at the minimum efficient scale. Which of the following scenarios would be most concerning to the managers of Pete's Bikes?

A major winter storm shuts down Pete's production for several days.

Which of the following accurately describes a common difference between a merger and an acquisition?

A merger tends to be friendly; an acquisition can be friendly or unfriendly.

Due to its large sales volume and low-cost structure, Bunny's Lo-Cost enjoys a cost-leadership position. Which of the following scenarios might threaten Bunny's competitive advantage?

A new competitor is perceived to provide similar value, but in addition offers innovative self-checkout that Bunny's doesn't offer.

Which of the following is a drawback of the SWOT analysis?

A problem with this framework is that a strength can also be a weakness, and that an opportunity can also simultaneously be a threat.

Differentiation and cost-leadership strategies are only effective in manufacturing industries.

FALSE

Due to the dynamic nature of business competition, a firm's strategic position should remain fixed over time.

FALSE

AcerWare Inc. manufactures external hard disks for $32 per unit, and the maximum price customers are willing to pay is $47 per unit. Data Driver Inc. is a competitor of AcerWare Inc. that produces external hard disks for $37 per unit, and customers are willing to pay a maximum price of $50 per unit. What does this imply?

AcerWare creates a greater economic value than Data Driver.

Iselectrics, a medium-sized medical technology company, has been successful in its research and development but needs improvement in its European sales. Which of these actions would most likely lead to long-term success for Iselectrics's European sales?

Acquire a company that has a successful medical technology sales force in Europe so that Iselectricscan gain access to new distribution channels.

Susan owns a firm that is considered fully integrated. Which of the following statements below would best describe a firm that is fully integrated?

All of Susan's business activities are conducted within the boundaries of the firm.

Which of the following statements about managing alliance-related tasks is true?

Alliance-management capability is based on three alliance-related tasks.

Which of the following statements is true about managing alliance-related tasks?

Alliance-management capability is based on three alliance-related tasks.

Which of the following best exemplifies social complexity as an isolating mechanism?

Amanda's Cosmetics attempted to imitate how Michele's Makeup combined its management and product development systems with little success.

How is an equity alliance different from a joint venture?

An equity alliance involves taking ownership in a partner; a joint venture involves two or more entities owning a firm.

Cartzy Inc., Cartific Inc., and Clustercart Inc., are three consumer-product retailing companies. Their products consist primarily of day-to-day items that are easy to imitate and sell. All three companies use the same resources and capabilities in the production and distribution of their products. Judging from the market conditions described in this scenario, which of the following statements is true?

Any advantage that one firm has will be short-lived.

American Snacks Inc., a conglomerate, has a strategic alliance with Très Bien Limité, a French snack-maker. However, Très Bien managers are concerned that the different business units of American Snacks will set up partnerships with direct competitors of Très Bien in France. What can owners and managers at American Snacks do to respond to Très Bien's concern?

Arrange for the alliance to be managed at the corporate level.

What is horizontal integration?

the process of merging with a competitor at the same stage of the value chain

Bigger & Better Inc. is a big box retailer who is in direct competition with Walmart and Target. Bigger & Better Inc. initially tried to respond to Walmart by cutting its prices and reducing costs. Walmart has greater buying power and a more efficient supply chain, therefore, Bigger & Better Inc. was not able to compete on costs. The company then tried to differentiate itself by signing a celebrity to create an in-house line of clothing. However, Target has a celebrity clothing line that has a more differentiated appeal. The economic value created by Bigger & Better Inc. is currently less than Target and Walmart. It can be said that

Bigger & Better Inc. is "stuck in the middle" and has a competitive disadvantage.

Janet wants to restructure the portfolio of all her firm's strategic business units. Janet will more than likely employ the ________ tool.

Boston Consulting Group (BCG) matrix

Which of the following is a disadvantage of a horizontal integration corporate strategy?

It increases the potential for legal repercussions.

Which of the following summarizes the benefit of the strategic alliance between HP and DreamWorks?

Both HP and DreamWorks were able to enter a new market that they would not have been able to pursue alone.

Several notable firms like Eli Lilly, HP, Procter & Gamble, and IBM each wish to become the alliance "partner of choice" for small technology ventures, colleges, and inventors. They each know that ________ is a necessary and critical element for an alliance to be a success.

Building interorganizational trust

When performing internal analysis of firms, how would you answer the question, "why do companies exist?"

Companies exist because they create value for customers in ways that customers are unable to replicate on their own.

How does availability of complements act as a value driver?

Complements add value to a product when they are consumed in tandem with it.

CooCoo Cola has successfully achieved a competitive advantage in the soft drink industry as a differentiator. Which of the following scenarios would undermine CooCoo's position?

CooCoo's customers start to consider soda a commodity.

________, which are incurred when pursuing a related-diversification strategy, are a function of the number, size, and types of businesses that are linked to one another.

Coordination costs

________________ allow(s) a firm to differentiate its products and services from those of its rivals, creating higher value for the customer or offering products and services of comparable value at lower cost.

Core competencies

Dana wishes to strengthen her firm's marketing department by partnering with a large marketing firm that can complement her existing value chain. However, she fears potential legal repercussions including potential lawsuits filed by U.S. federal agencies such as the Federal Trade Commission (FTC). Which of the following strategic options should Dana pursue?

Dana should consider forming a strategic alliance with the marketing firm.

How is differentiation parity different from cost parity?

Differentiation parity deals with value not cost.

Which of the following best explains why Disney showed superior post-merger integration capabilities?

Disney managed its new subsidiaries more like alliances rather than attempting full integration.

Which of the following is a drawback of vertical integration?

It increases the potential of legal repercussions.

Which of the following describes an airline that is most likely stuck in the middle?

Eastern Airlines offers high-quality beverages and meals, plush airport lounges, only a few connections via hubs domestically, poor customer service, and low prices.

________ is best described as decreases in cost per unit as output increases.

Economies of scale

Which of the following statements is true of explicit knowledge?

Explicit knowledge is shared in nonequity alliance firms.

While Eye Windows incurs a cost of $12 for a pair of eyeglasses, Dura Frames, its competitor, manufactures a pair of glasses at $10. Both the companies are able to sell their glasses for a maximum of $30 per pair. Which of the following statements is true in this scenario?

Eye Windows and Dura Frames have achieved differentiation parity.

A SWOT analysis would provide a definitive answer as to whether a firm's growing footprint in overseas markets is a strength or weakness.

FALSE

A company that wants to enter a new geographic market within China or Saudi Arabia should avoid joint ventures with companies that are based in that country. Partnering with a foreign entity props up that entity's business rather than weakening it through competition.

FALSE

A differentiator will always benefit when products have become commoditized.

FALSE

A strategy of related-constrained or related-linked diversification is less likely to enhance corporate performance than either a single or dominant level of diversification or an unrelated level of diversification.

FALSE

When pursuing a blue ocean strategy, a firm in a crowded marketplace attempts to out-compete rivals on both cost and product features with the goal of gaining market share at the expense of other competitors in the same industry.

FALSE

Both Tom's Car Repair and Fast Engines. incur a cost of $9,000 to manufacture a vehicle. However, the economic value created by Fast Engines. is more than that created by Tom's Car Repair. What does this indicate?

Fast Enginescan charge a premium price on its automobiles.

Finjob Inc. is following a related-linked diversification strategy, and Rangreen Inc. is following a related-constrained diversification strategy. How do the two firms differ from each other?

Finjob Inc. will share fewer common competencies and resources between its various businesses when compared to Rangreen Inc.

Companies must evaluate the relevancy of their internal resources. This happens in two ways: they test whether resources are (1) similar to those the firm needs to develop and (2) superior to those of competitors in the targeted area. Which of the following is the best way in which firms assess the second test?

Firms can apply the VRIO framework for the second test.

A value curve indicates a lack of effectiveness in a firm's strategic profile when it

zig-zags.

DalTech Inc., a publicly traded company, designs and manufactures wearable technology. What approach should DalTech take after a long period of horizontal integration in its industry? Assume that the industry is now stable and competitors have not made any major changes in price or marketing recently.

Focus on research and development as a form of nonprice competition.

________ is best described as a situation in which one party is more informed than another, because of the possession of private information.

Information asymmetry

Bestie Toys faces stiff competition from FunGadgets Inc., a rival firm with which Bestie Toys has achieved differentiation parity. Both firms have invested in state-of-the art production facilities and have similar learning curves of 85 percent. Assuming neither firm can reduce the cost of its input factors, how can Bestie Toys achieve a competitive advantage as a cost-leader?

Have a cumulative output that is greater than FunGadgets Inc.'s.

________ enables firms to increase their organizational boundaries because the number of competitors decreases. This is demonstrated through the ________ model.

Horizontal integration; structure-conduct-performance

Evaluate the following statement: Strategic leaders should always try to pursue a blue ocean strategy because it is the most complex, coveted, and most desirable strategy that exists.

I disagree; firms should only pursue this strategy if they are able to reconcile the tradeoff's of each generic strategy.

Judging from the Disney-Pixar merger, which of these is an effective way to create shareholder value from a merger?

If the acquired company creates high-quality products or services, don't force it to mirror the management style of the acquiring company.

Your company, a small software development firm, has attracted many of the top young programmers in your area. As a result, the apps you produce have been praised for their innovative features and intuitive user experience. According to the bathtub metaphor in the dynamic capabilities perspective, what is the best way for you to protect against resource leakage?

Improve the benefits package to retain key employees and reduce turnover.

Which of the following statements is true of an equity alliance?

In an equity alliance, the partners frequently exchange personnel to make the acquisition of tacit knowledge possible.

How are the critical assumptions of the resource-based model of a firm fundamentally different from the way in which a firm is viewed in the perfectly competitive industry structure?

In perfect competition, all firms have access to the same capabilities, whereas in the resource-based model, resource differences exist between firms in the same industry.

The smartphone division of the large consumer electronics company, Streethex Inc., has a significant market share in the fast-growing cell phone market. If the company invests further into this division, it will be able to reap increased cash flows.

In the Boston Consulting Group (BCG) growth-share matrix, the smartphone division of Streethex will be categorized under stars.

Using the Boston Consulting Group growth-share matrix, the managers of Fasehatice International determined that their business unit devoted to personal health monitoring devices was a star. Based on this finding, which of the following strategies is likely to produce the best results?

Increase investment in the personal health monitoring unit to encourage future growth.

________ are best described as costs that occur due to political maneuvering by managers to control capital and resource allocation and the resulting inefficiencies stemming from suboptimal allocation of scarce resources.

Influence costs

Have A Seat Furniture has seen its profit margins shrink over the past several years as increased competition has driven down furniture prices. You have been tasked with improving the company's margins. Which of the following approaches makes the most sense within the context of strategic activity systems?

Install modern manufacturing equipment to improve efficiency.

_____ are barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy.

Isolating mechanisms

Why is following an unrelated diversification strategy especially advantageous in an emerging economy?

It allows the conglomerate to overcome institutional weaknesses in emerging economies.

Beats Electronics has been able to outperform Audio-Technica, Bose, JBL, Skullcandy, Sennheiser, and Sony in the high-end, premium headphone market. Which of the following statements accurately explains one of the main reasons for the success of Beats?

It created a perception that owning its products was cool.

How did the strategic alliance between HP and DreamWorks Animation SKG affect HP?

It enabled HP to compete head on with Cisco's videoconferencing solution.

Coca-Cola was primarily known for its core competencies in marketing, bottling, and distributing aerated drinks. However, with the success of Gatorade, Coca-Cola developed competencies in the development and marketing of its own sports drink, Powerade. Which of the following is true of Coca-Cola?

It is building new core competencies to protect and extend its current market position.

Shippity and ShipING Inc. are two competing firms in the same industry. Shippity's tangible assets are valued at $15 billion and its intangible assets are valued at $35 billion. ShipING Inc.'s tangible assets are valued at $5 billion and its intangible assets are valued at $45 billion. What can be concluded from this information?

It is likely that ShipING Inc. is better enabled than Shippity to gain and sustain a competitive advantage.

How is a cost-leader protected from threats from powerful suppliers?

It is more able to absorb price increases through accepting lower profit margins.

Ganjaflex Industries is a major multinational conglomerate. Its business units compete in a range of industries, including home appliances, pharmaceuticals, commercial real estate, and plastics manufacturing. Although its largest business unit, which produces kitchen appliances, is among the most profitable in the industry, it generates only 35 percent of the company's revenues. Which of the following is most likely true of Ganjaflex's stock price?

It is valued at less than the sum of its individual business units.

How does causal ambiguity act as an isolating mechanism for organizations?

It makes it difficult for the competitors to understand why a company has been so successful.

What must a cost-leadership strategy accomplish to be successful?

It must reduce the firm's cost below that of its competitors while offering adequate value.

Konmatfix Inc. recently acquired Finhigh Pharmaceuticals Inc. It now sells its own products along with the products originally sold by Finhigh Pharmaceuticals. As a result, Konmatfix's sales force will also be marketing the acquired company's products. How will this horizontal integration most likely affect Konmatfix?

It will lower its costs through economies of scale.

While KFC focuses on international markets, its competitor, Chick-fil-A, focuses on the domestic U.S. market. What is the reason behind this strategic difference?

KFC has more financial resources than Chick-fil-A since it is a publicly traded stock company.

A firm that decides to stop purchasing components from suppliers and start producing them in-house is pursuing backward vertical integration.

TRUE

A firm's strategic resources and capabilities are the unique assets and skills it possesses.

TRUE

Which of the following is an accurate statement about learning effects?

Learning effects occur over time as output accumulates.

Because strategic alliances rarely work as well as managers expect they will, why do companies continue to go through with them?

Many owners, managers, and business analysts believe they are essential to survive in an industry.

How did Marriott use economies of scope to achieve greater economic value than its competitors?

Marriott lowered its cost structure by sharing its production assets over several types of hotels, which increased the diversity of its hotel line and thus its differentiated appeal.

________ is best described as the output range needed to bring down the cost per unit as much as possible, allowing a firm to stake out the lowest-cost position that is achievable through economies of scale.

Minimum efficient scale

Mohawk is a leader in sustainable and innovative carpeting and floorings, as evidenced by its signature product, the world's first organic cotton carpet. Its product is unique and has appealing customer attributes. If Mohawk's raw material costs increased by 12 percent this year, what would be the likely outcome?

Mohawk would pass a major portion of this increase along as a price increase to its customers.

Jonathan is the owner of a landscaping company that caters to a very wealthy clientele. His company has struggled to differentiate itself from the other high-end landscapers in the area, but because he has hired several expensive but highly qualified team members, Jonathan is unable to shift to a cost-leadership strategy. Which strategy is most likely to achieve a competitive advantage?

Narrow the scope of competition and focus on unique features such as the use of organic materials.

Overall, was the Adidas acquisition of Reebok a success?

No. Adidas has slipped from number two in the U.S. market to number three.

The owners of Always Baked bakery want to open a second retail outlet. Which of the following scenarios is most likely to yield a competitive advantage?

Open a shop on an inexpensive piece of land near a new mixed-use residential and business district currently under construction.

In the context of the resource-based model of competitive advantage, which of the following scenarios best exemplifies resource immobility?

PaluniInc. has been able to outperform its competitors because the uniqueness of its employee experience is difficult for competitors to replicate.

________, which captures the cultural fit between different firms, is one key element needed when selecting an alliance partner.

Partner compatibility

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

Path dependence

Which of the following corresponds to the use of tacit knowledge?

Phil assembles a motorcycle from memory.

What is the main reason that most mergers and acquisitions negatively affect shareholder value?

Promised synergies never take place.

Doncon Guitars is interested in pursuing backward integration to take greater ownership of the extraction of raw materials and production of components used in its signature line of guitars. Although this approach would lower the overall cost of producing a guitar, the costs associated with producing electronic pickups for sound amplification are far greater than those associated with sourcing pickups from a reliable supplier. Which of the following approaches is likely to produce superior results?

Pursue taper integration.

A music distributor that decides to launch a proprietary music streaming service to respond to changes in music consumption trends exhibits dynamic capabilities.

TRUE

Rantouch is one of the largest tax-preparation firms in the United States. It wants to acquire Doncon , a smaller rival. After the merger, Rantouch will be one of the two largest income-tax preparers in the U.S. market. What should Rantouch include in its acquisition plans?

Rantouch will need to explain to the Federal Trade Commission how the acquisition will not result in an increase in prices for consumers.

Plexzap Sodas has been a market leader in the soft drink industry for several decades. However, its market research shows that consumer tastes have begun to shift to sugar-free flavored seltzer waters, a product that Plexzap is capable of producing with minimal changes to its facilities and production processes. Based on your knowledge of the core competence-market matrix, which diversification strategy should Plexzap pursue?

Redeploy and recombine existing core competencies to compete in markets of the future.

After conducting a SWOT analysis, your firm has decided to focus on addressing issues located in the Weaknesses-Opportunities quadrant. Which of the following steps are you most likely to take?

Reorganize the inefficient research and development department to bring innovative products to market more quickly.

Which of the following statements accurately describes a firm's resource stock?

Resource stocks are a firm's current level of intangible resources.

Jennifer, a manager at a multinational organization, is trying to carefully scan and link the firm's internal environment to its external environment. The insights from this analysis will allow her to effectively leverage the company's internal strengths to exploit external opportunities, while mitigating internal weaknesses and external threats. In this scenario, which of the following managerial tools is Jennifer employing?

SWOT analysis

When conducting a _______________, it's best to examine both PESTEL and Porter's five forces analyses because these tools focus on the external environment.

SWOT analysis

Salesforce is one of the leading providers of platform as a service (PaaS) tools and services. They developed a new competency in delivering software development that allows its customers to better customize their future needs. Viewing this through the lens of the Core Competence-Market Matrix, which of the following four options below does Salesforce best exemplify?

Salesforce built new core competencies to create and compete in markets of the future.

Which of the following best illustrates a merger between the two companies Scotfind Inc. and Inity Inc.?

Scotfind Inc. and Inity Inc. join together to form a single new company called ScotfindInity Inc.

Better Pill LLC is a small, new pharmaceutical company that is developing a valuable new drug. Which of these strategies would it be wise for Better Pill's owners or managers to take?

Seek an alliance with a company or companies that will complete the value chain.

According to the resource-based view, a firm that differentiates itself from its competitors through its personalized approach to customer service is likely to sustain its competitive advantage for a long time.

TRUE

Which of the following scenarios best illustrates horizontal integration?

Siliss Inc. joins with Cancity Inc., one of its direct competitors.

Applying the five forces model to business-level strategy allows managers to assess the benefits and risks of both cost-leadership and differentiation strategies.

TRUE

Dev is a strategist for the firm Stark Industries, which produces high-quality HD movie cameras. This company needs a specific material for a new camera they are developing, which is manufactured in large quantities by a competitor called LENS Inc. However, this material is difficult to trade. Because of this, which of the following is most likely the best strategy for Dev to suggest?

Stark Industries should acquire LENS.

________ are best described as voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services to lead to competitive advantage.

Strategic alliances

Differentiators tend to score highly on most competitive elements on a strategy canvas, while cost leaders tend to hover near the bottom of the strategy canvas.

TRUE

Dynamic strategic activity systems help a firm to maintain a competitive advantage for extended periods of time.

TRUE

A conglomerate receives less than 70 percent of its revenues from any single business and features a number of strategic business units that have little to no relationship with each other.

TRUE

A cost-leader is the firm most likely to survive a price war.

TRUE

A firm operating on a 70 percent learning curve will achieve lower per-unit costs after doubling its output than a firm operating on an 80 percent learning curve will.

TRUE

The core competencies of a firm are determined by the interplay of its tangible resources and intangible capabilities.

TRUE

The major value drivers that managers have at their disposal include product features, customer service, and complements.

TRUE

The most challenging diversification strategy is likely to be one that combines new core competencies with new and emerging markets.

TRUE

In order to achieve a competitive advantage, the Heavenly Hotels, a chain of luxury beach resorts, wants to increase its market share. Which of the following strategies is most likely to do so?

Take advantage of economies of scale and scope by opening a chain of lower-priced economy hotels that leverage the Heavenly Hotels brand image.

Which of the following statements accurately brings out the difference between tangible and intangible resources?

Tangible assets can be bought on the open market by anyone with the necessary cash, whereas intangible assets cannot be easily purchased.

Which of the following examples describes the task of an alliance manager?

Teddy trained the employees of his alliance partner in the skills needed to create a display for an e-notebook.

The "diagonal assembly system" was a production system pioneered by the automobile company Gogo. Recently, Gogo was able to sue a competitor and won the suit, thereby receiving $100 million in damages. Which of the following would most likely enable Gogo to win such a lawsuit?

The competitor infringed on Gogo's patent of the "diagonal assembly system."

How does a conglomerate benefit from following an unrelated diversification strategy?

The conglomerate can overcome institutional weaknesses, such as a lack of capital markets, in emerging economies.

Hooli Computers has decided to procure processing chips required for its laptops from external suppliers instead of manufacturing them in their own facilities. How will this decision affect the firm?

The firm will have more flexibility in purchasing and comparing prices of goods and services.

Which of the following applies to the Strength-Threats quadrant of the SWOT matrix?

The local fast-food chain Easy Hot Dogs used its wholesome image to maintain its competitive advantage against stiff competition.

A software firm is interested in acquiring an app development company that is small but highly profitable. The app developer also has a widely admired management structure and much lower attrition rates than are common in the industry. Which of these problems should the software firm anticipate?

The software firm may overpay for the app developer, poorly serving the software firm's shareholders.

A microchip company wants a computer company to produce more powerful tablets and therefore use more of its chips. That same computer company wants the microchip maker to create chips with faster processing power. What approach could these companies take so that both can serve stockholders well?

The two companies should enter a strategic alliance to bring about a win-win situation for them and to limit their rivals' power.

Which of the following is a result of horizontal integration in terms of Porter's five forces model?

There is a reduction of excess capacity in the market.

When examining all the generic strategies, which of the following below is inherently superior in every industry?

There is no single superior business-level strategy.

Which of the following provides an example of how a firm's valuable resource can be imitated?

To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of the Leaning Tower of Pisa.

CarTsar Inc. is a manufacturer of automobile parts, which it sells to retail auto supply stores. Its core competencies include superior design and engineering capabilities, as well as a highly integrated and efficient supply chain.

To sustain its competitive advantage, CarTsar should first upgrade its engineering department and improve its supply chain.

Johnson is an executive vice president at Conecom Hardware. He researches a proposal by a larger company, Openlane Hardware, to combine the two companies. By analyzing past performance, conducting focus groups, and interviewing Openlane employees, Johnson concludes that Openlane has poor profit margins, sells shoddy merchandise, and treats customers poorly. What actions should Johnson and Conecom Hardware take?

Turn down the acquisition offer and prepare to resist a hostile takeover.

________ is best described as a firm's ownership of its production of needed inputs or of the channels by which it distributes its outputs.

Vertical integration

All of the following are questions that managers should ask before crafting a business-level strategy except

When should we introduce our product/service in the market?

Inity Inc. is a large conglomerate. The company's beverages strategic business unit (SBU) has been recognized as a cash cow, and its tobacco SBU has been categorized as a dog. Which of the following can be inferred from this scenario?

While the market share of the company in the beverages industry will be high, the market share in the tobacco industry will be low.

About 20 years ago, Xx-zobam, Inc., produced a sturdy, lightweight backpack in a market that was rapidly growing. Sturdy Light became a leader in this market. Eventually, the backpack market reached the maturity stage and slowed down. However, by this time, Xx-zobam had developed a strong brand name and continued to steadily lead the market. Which of the following describes this scenario?

Xx-zobam was a star that developed into a cash cow.

you are the manager of Value Printing, a leading print shop. Value's resources include a highly experienced staff and state-of-the-art printing presses. However, your closest competition has started to cut into your market share by offering same-day turnaround on most orders. Although your staffing and equipment is not optimized for rapid production, you decide to start offering a same-day guarantee to your customers. According to the resource-based view, what is wrong with this decision?

You have failed to take into account resource immobility.

Tablette Corp. is a consumer electronics company known for its affordable mobile devices that follows a cost-leadership strategy. In this scenario, Tablette Corp. should ideally compare its strategic position with

a consumer electronics company popular among price-conscious customers.

Which of the following examples uses a focused differentiation strategy?

a cosmetics brand that offers superior skin lotion for sensitive skin priced at 100 dollars per bottle

Sonron Auto Corporation generates 85 percent of its annual revenues by manufacturing luxury cars. The company derives 15 percent of its annual revenues by selling its sports merchandise that includes apparel, shoes, and other accessories under the same brand name. Which of the following terms best describes Sonron Auto Corporation?

a dominant-business firm

Openlane and Yearin Technologies have together invested and created a new organization, Globex Corporation, to focus on developing diagnostic devices. Through this new firm, both companies are attempting to combine their core competencies to innovate and reduce their risks associated with transaction-specific investments. However, the new organization operates independent of Openlane and Yearin Technologies. Which of the following alternatives to integration does this scenario best illustrate?

a joint venture

Which of the following best illustrates physical-asset specificity?

a machine solely designed to give a candy its trademarked shape

Grace wants to form a voluntary arrangement with another firm in order to gain more flexibility in her supply chain, complementarity to a few of her support activities via her value chain, and strengthen her firm's overall competitive position. Grace is looking for a simple and common type of alliances, like

a nonequity alliance.

Delos Autos Inc., a large automobile company, made an initial small investment in a start-up company that was developing a solar-powered car. This gave Delos Autos controlling interests in the start-up company. However, Delos Autos had no obligations to make continued investments in the experiments of the start-up company. It could invest small amounts depending on the new product's success at each stage of its development. If the product proved to be successful, Delos Autos would have the right to buy out the start-up company. This approach to strategic alliance is referred to as

a real-options perspective.

Geovax Inc., a biotechnology company, was established to develop an effective vaccine against a deadly virus. As such, a large investment firm formed an equity alliance with Geovax that resulted in a significant financial investment that followed a string of smaller investments so long as Geovax continued to make headway towards their vaccine. This "wait and see approach" can best be described as

a real-options perspective.

Which of the following is an example of explicit knowledge?

a research summary

A primary advantage of organizing economic activity within firms is the

ability to coordinate highly complex tasks to allow for specialized division of labor.

When large, incumbent firms buy start-up companies, the transaction is generally described as a(n)

acquisition.

There are several mechanisms in which strategic alliance can be governed. Which of the following below is not one of those ways?

acquisitions

The Konex Hotel Group purchased Green-Plus Hotels for an estimated value of $120 billion. All the hotels previously owned by Green-Plus Hotels are now managed by the Konex Hotel Group and are known as Konex hotels. What does this scenario best illustrate?

an acquisition

In the context of SWOT analysis, which of the following best exemplifies a firm's external opportunity?

an increase in its customers' disposable income

Tough Guy's Inc. is a chain of gyms. It offers a fitness package that allows its members to use the gym facilities for 12 months by paying only for 10 months. Included in the package are two health check-ups and a gym kit. These add-ons by themselves are not very valuable, but as a package they can enhance the perceived value of the service offerings. In this case, Tough Guy's primary value driver is

availability of complements.

When wireless service providers offer free or discounted mobile phones for subscriptions to their wireless voice and data service, the perceived value of the service offering increases. In this case, the value driver would be

availability of complements.

Golddex Autos currently sources components such as airbags, upholstery, and brake pads from various suppliers in the industry value chain. In order to lower costs and reduce the risk of interruptions in the supply of components, Golddex should pursue

backward integration.

Billy is the CEO of Billy's Kicks, a soccer ball retailer. He decides to purchase the synthetic rubber manufacturing firm so he can create his own soccer balls and sell them, nationally, in his retail stores. In order to do this, Billy will need to engage in ________, which is a corporate level strategy.

backward vertical integration

Firms that use taper integration also use ________ when they rely on outside-market firms for some of their supplies.

backward vertical integration

Hot Caffeine, a leading coffee roaster, anticipated that the prices of coffee beans from Costa Rica, where its main suppliers were located, would double in less than three years. This would significantly affect Hot Caffeine' profit margins. Thus, Hot Caffeine decided to develop a new partnership with a supplier in Indonesia. As predicted, the price of Costa Rican coffee beans increased twofold. Because the price of Indonesian coffee beans was much lower, Hot Caffeine was able to maintain its profit margins in turbulent times. Which of the following isolating mechanisms does this scenario best illustrate?

better expectations of future resource value

Which of the following describes a situation in which firms acquire resources at a low cost, laying the foundation for a competitive advantage later?

better expectations of future resource value

In a successful ________ strategy, the trade-offs between differentiation and low cost are reconciled.

blue ocean

Threadbare Industries is a new high-end textile company that has raised sufficient capital from multiple sources. It is planning to use its capital to purchase certain assets. Which of the following assets will be the most difficult for Threadbare Industries to acquire using its capital?

brand name

Jennifer is the CEO of JustFixIt Inc., a firm that merges technology with commercial hardware. She has been struggling with the decision to allocate her resources for the development of a new system or go to the market and search for an already established system. The Board of Directors for JustFixIt Inc. suggested that enter a contractual agreement with a partner. This scenario best illustrates the concept of

build-borrow-or-buy framework.

When entering a foreign market, it is advisable for a new venture that has a core competency only in R&D to form a strategic alliance with a local partner because

building downstream complementary assets can be expensive and time-consuming.

Which quadrant in the core competence-market matrix is the hardest to pursue?

building new core competencies to create and compete in markets of the future

In 2007, Salesforce.com recognized an emerging market for platform as a service (PaaS) offerings and developed a new competency in delivering software development and deployment tools. This allowed its customers to either extend their existing CRM offering or build completely new types of software. This is an example of

building new core competencies to create and compete in markets of the future.

Betasoloin Corp. is an automobile company whose core competency lies in manufacturing petrol- and diesel-based cars. The company realizes that more of its potential customers are switching to electric cars. The R&D department of the company acquires competencies in developing electric cars and launches its first hybrid car, which uses both gas and electricity. In this scenario, Betasoloin is primarily

building new core competencies to protect and extend current market position.

When pursuing a cost-leadership strategy, a business must remember that

buyers will be reluctant to pay for a product unless the quality is acceptable.

The managers at Acme Corporation decided that their firm needed to diversify because of overall falling sales and lower performance in one sector. How does diversifying compensate for the declining performance in this sector?

by having higher performance in another sector

Tindel Inc. competes on cost with Nirvana Sites in the web design industry. Both firms operate on a 90 percent learning curve, and neither firm is capable of increasing its cumulative output any further. How might Tindel Inc. achieve a cost-leadership position while maintaining customer satisfaction?

by incorporating new programming techniques to take advantage of experience-curve effects

How did the recent horizontal integration in the U.S. airline industry provide benefits to the surviving carriers?

by lowering competitive intensity in the industry overall

How does horizontal integration within an industry affect the surviving firms?

by strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers

Organizational and managerial skills that find their expression in a company's structure, routines, and culture are referred to as

capabilities.

Bob is the strategic business unit (SBU) CEO in charge of manufacturing cufflinks for men's clothing. While the market he competes in is low growth, Bob's SBU's earnings and cash flow are both ranked at high and stable. When examining Bob's SBU through the Boston Consulting Group (BCG) matrix lens, we can conclude that his SBU would be classified as a

cash cow.

Assume a firm's resources and capabilities are costly to imitate. This is because rival companies do not clearly understand the relationship between the resources and capabilities controlled by the firm. In this case, the firm's competitive advantage is protected against imitation by

causal ambiguity.

InGen Pharmaceuticals Inc., Desktop Pharma Inc., and WEN Pharma Inc. are three rival firms who have set up an alliance to conduct research and find a cure for cancer. They have made almost equal contributions to the research, and they also share their expertise with one another. However, the three firms will continue to behave as competitors in markets for other drugs and vaccines. What is this arrangement best referred to as?

co-opetition

Which of the following is primarily a value driver?

complements

The Tata Group, Warren Buffet's Berkshire Hathaway and the Japanese Yamaha group have several strategic business units under one corporate umbrella and are pursuing an unrelated diversification strategy. We would refer to these businesses as

conglomerates.

A resource-based view of a firm provides a model that systematically aids in identifying

core competencies.

Frozen Gold is a fast-growing chain of ice cream shops. It has acquired an edge over its competitors through its ability to provide a wide array of unique flavors and a hip atmosphere in stores. This advantage of Frozen Gold best exemplifies a

core competency.

One of the reasons that Circuit City filed for bankruptcy was due to its inability to reinvest, hone, and upgrade its once impressive resource base. Ultimately, Circuit City's core competences became

core rigidities.

SJobs's Computer Repair has maintained a competitive advantage based on its thorough and professional service, reasonable pricing, and money-back guarantee. Management at the company is so committed to doing repairs well that they often have rejected employee suggestions to expedite their processes. Recently, the company has begun to lose customers to a new local service offering same day in-home repairs and 24/7 online customer support. According to the dynamic capabilities perspective, SJobs's Computer Repair has lost its competitive advantage due to

core rigidity.

Tim's ToothCream has been the leader of dental care products for about 40 years. However, this company relied too long on its competency of reducing cavities without refining or upgrading other aspects of its product. As a result, other personal hygiene companies that began to offer toothpastes with natural whitening agents gained a competitive advantage over Tim's ToothCream. This case is an example of

core rigidity.

John owns John's Trucking Corporation and is trying to determine if his firm should engage in vertical integration and diversify the range of services his business sells. Before John goes through with these decisions, he'll need to consider what is his

corporate level strategy.

Benny's Closet Inc. is an apparel company that caters to highly price-conscious customers. Through its simple apparel designs, acceptable quality levels, and minimal customer service, the company has been able to sell its merchandise at the lowest prices in the industry. Which of the following generic business strategies is Benny's Closet applying?

cost-leadership

Louis's Secondhand Store offers slightly lower quality merchandise than competitors at a much lower price. What strategy is Louis's Secondhand Store using?

cost-leadership

Piper Inc. is a large cosmetics company that made an initial small investment in a start-up company, Oscorp, which was developing an organic face lotion. This gave Piper controlling interests in the start-up company. However, Oscorp soon began to have financial difficulties because of principal-agent problems. As a result, Piper did not invest in the next stage of development and pulled out of the company. This approach to strategic alliance is referred to as a

credible commitment.

In a focused cost-leadership strategy, a firm

delivers low-cost products and services to a specific, narrow part of the market.

Gr8t Food is a chain of "fast casual" restaurants that sells its menu items at higher prices than its competitors. The restaurant has a large customer base due to its wide product portfolio and superior customer service. Which of the following generic business strategies has Gr8t Food adopted in this scenario?

differentiation

Horizontal integration through mergers and acquisitions can help firms strengthen their competitive positions by increasing

differentiation.

A differentiator is least likely to be threatened by increases in input prices due to powerful suppliers when the

differentiator is able to create a significant difference between perceived value and current market prices.

When Total Semiconductors was operating at the minimum efficient scale of 10,000-12,000 units per month, the firm's cost per unit was $45. However, when the output level was increased beyond 12,000 units, the cost per unit increased to $47. This increase was attributed to the wear-and-tear of the machinery, and complexities of managing and coordinating. What is this phenomenon known as?

diseconomies of scale

Ontomedia Inc. is a large multinational conglomerate. As a single business unit, the company's stock price is estimated to be $200. However, by adding the actual market stock prices of each of its individual business units, the stock price of the company as one unit would be $300. What is Ontomedia experiencing in this scenario?

diversification discount

XYZ Inc. is a publicly traded company and a highly diversified firm. However, XYZ's most recent stock price is valued less than the sum of all its individual business units. We would conclude that XYZ is currently experiencing a

diversification discount.

Betatech Group is the parent company of many related businesses under its banner. Each share of the parent company is quoted at $220. However, if this had to be assessed by adding the stock prices of each of its strategic business units, the value would only be $200 per share. In this scenario, what has Betatech Group created?

diversification premium

In the context of the Boston Consulting Group (BCG) growth-share matrix, if one of the strategic business units of a conglomerate is categorized under dogs, the management should

divest the strategic business unit.

Konmatfix Inc., a large consumer electronics company, has divided each product in its portfolio into a separate strategic business unit (SBU). The desktop SBU has been experiencing drastic decline in its cash flow, and its market share has also reduced to an insignificant 10 percent. This has been attributed to the low growth in the desktop market after the arrival of tablet computers and laptops. In the context of the Boston Consulting Group (BCG) growth-share matrix, the desktop SBU will be categorized under

dogs.

Because Facebook receives almost all of its revenues from online advertising, we would conclude that Facebook would be characterized as a(n) ________ firm, which has the lowest levels of corporate diversification.

dominate business

Pete E' Gee sell's Big Dog Choppers, a special type of motorcycle. His business generates roughly 80 percent of his revenues from selling these motorcycles and about 20 percent on motorcycle repair and service. Pete E' Gee would be classified as a ________ firm.

dominate business

Food Tiger Inc. is a large chain of hypermarkets. It has cost benefits due to its extensive operation. The company's marketing and sales, logistics, administrative, and other such related costs get divided between a large number of product units stocked in its stores. This makes it difficult for smaller retail stores and supermarkets to compete against Food Tiger's low prices. Thus, Food Tiger has a competitive advantage due to its

economies of scale.

ComfySeat Furniture is a brand reputed for its wide variants of sofas that introduced a new range of mattresses and bed frames a few years ago. Since most of its products could be produced using the same resources and technology, the company's cost structure lowered, while its product portfolio widened. In this scenario, which of the following value and cost drivers is ComfySeat applying?

economies of scope

Marriott is able to create greater economic value than its competitors due to their ability to take advantage of ________, which describe the savings that come from producing two (or more) outputs at less cost than producing one output individually, while utilizing the same amount of resources and technology.

economies of scope

Finger Lickin' BBQ is a chain of casual restaurants that promises affordable barbecue using top-quality local ingredients. However, the company has struggled to achieve a competitive advantage because of its high overhead costs. Which of the following scenarios is most likely to result in a competitive advantage?

eliminating brick-and-mortar locations and offering delivery from a central kitchen

As manager of a relatively new company, you are tasked with analyzing company resources to identify core competencies capable of supporting a competitive advantage. Which of the following resources is most likely to generate a competitive advantage?

enthusiastic company culture

Which of the following best illustrates site specificity?

equipment necessary for mining bauxite and aluminum smelting

A candy company called Blackzim Inc. forms an agreement with another candy company called Streethex Inc. Through this agreement, Blackzim owns 30 percent of Streethex. However, Streethex does not own any part of Blackzim. This type of agreement is called a(n)

equity alliance.

The concept of a(n) ________ attempts to capture both learning effects and process improvements at firms.

experience curve

Jerry is the proud owner of American BBQ Eateries LLC. They currently operate in the southeast and have recently entered into a nonequity alliance with Big Bills BBQ Grills Inc., with a promise of sharing codified information via a licensing agreement. Which of the following best represents this level of sharing knowledge?

explicit knowledge

Leo's Magic Rails maintains a manufacturing plant overseas. The local government has just been overthrown by a military group that opposes foreign influence in the country. According to the SWOT analysis, the political situation in this location is considered to be an

external threat.

ezTV, a consumer electronics company, is the leading manufacturer of high-definition (HD) LED televisions. HD technology has been its core competency and the company holds 60 percent shares in that market. However, ezTV's competitors have now begun to produce more-advanced technologies like 4K Ultra HD and Internet-enabled Smart televisions. According to the dynamic capabilities' perspective, what should ezTV do?

ezTV should start working on Ultra HD and Smart television technologies to adapt its core competency to suit the external environment.

Google, the leader in online search and advertisement, engaged in a number of smaller acquisitions of tech ventures. It did this in order to

fill gaps in its competency lineup.

A differentiation strategy works best when a

firm has intangible resources, is able to pass on increases in supplier cost to the customer, and its differentiation appeal creates customer loyalty.

In the context of the resource-based model of competitive advantage, if a successful firm exhibits resource immobility it means that the

firm will have a sustained competitive advantage because of its unique resources that are difficult for others to replicate that are difficult for others to replicate.

When a firm combines experience-based learning and process innovation, the firm

jumps to a steeper learning curve.

A firm will fail to create a sustained competitive advantage when the

fit between its internal strengths and the external environment is static.

Power Juice is the owner of a firm that produces sports drinks. Since there are a number of firms in the industry competing on cost, Power Juice has decided to pursue a differentiation strategy. In this case, she should

focus on adding unique features to her product that customers will value.

Whole Foods focuses on a small market segment, affluent consumers who want to buy high-end, organic groceries. What is the appropriate name for Whole Foods's scope of competition?

focused

Bath & Chill is a spa that caters to the needs of a small percentage of highly health-conscious consumers. It offers state-of-the-art treatments in a luxurious setting. Since there are very few spas that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Bath & Chill is following a

focused differentiation strategy.

All of the following are generic business-level strategies except

focused marketing strategy.

Which of the following is an ineffective practice in alliance management?

focusing on developing an alliance-management capability in isolation

Core competencies are derived from the combination of

key strategic resources and a firm's capabilities.

Condax Electronics relied on a large chain of consumer electronics stores to sell its tablet computers, cell phones, and televisions and also to provide customer service and technical support. However, that retailer outsourced its service departments, and customers began to complain that they could not get reliable tech support for Condax products. In response, Condax Electronics decided to set up its own tech support department, and it also began to investigate opening its own brand-based retail stores. What does this scenario best illustrate?

forward vertical integration

Jill is the CEO of Note's Etc, a stationary manufacturer. She decides to open up a retail store to sell her products directly to consumers instead of just selling to retailers. In order to do this, Jill will need to engage in ________, which is a corporate level, strategy.

forward vertical integration

Hot Potatoes, a fast food restaurant, operates through a business model in which individuals can buy the rights to set up Hot Potatoes stores and sell the company's food in return for a lump sum fee at the beginning of the contract and a percentage of revenues every month. The owners of the stores have to offer a menu approved by the company's headquarters and also maintain consistent customer service as expected in its flagship store. Which of the following alternatives to integration does this best illustrate?

franchising

Which of the following drivers simultaneously increases value while lowering cost?

innovation

Trader Joe's successfully used a blue ocean strategy by offering lower-cost food than Whole Foods for the same market of patrons. By doing this, Trader Joe's was able to

gain a market share and make up the loss in margin through increased sales.

When a differentiator charges a similar price as its competitors in the same strategic group but offers more perceived value, it

gains market share from other firms.

Rangreen Watches, a Swiss-based premium watch brand, has recently started selling its watches through company-owned retail outlets in major cities of developing nations. Which of the following types of diversification strategies is the firm pursuing?

geographic diversification strategy

Jennifer is the strategic business unit (SBU) CEO in charge of manufacturing stereo speakers for computers and laptops. Her SBU earnings and cash flow are both low and unstable. Which of the following strategies should Jennifer enact if examining her SBU through the Boston Consulting Group (BCG) matrix lens?

harvest and/or divest

Lightning Drive is a leading automobile company. The company has been able to sustain its competitive advantage primarily due to its high-quality and efficient electric motors. Most of its competitors have failed to develop similar electric motors at a reasonable price. Which of the following resource attributes listed in the VRIO framework has helped Lightning Drive sustain its competitive advantage?

high costs involved in imitation

The strategy canvas for movie theaters includes factors such as prices, comfort, customer service, concessions variety, and hours of operation. Which of the following value curves is most likely to represent a theater that successfully positions itself as a differentiator?

high price, high comfort, high customer service, high concessions variety, low hours of operation

Several drawbacks exist when it comes to horizontal integration. Which of the following below is not one of the drawbacks?

higher costs

Facing stiff competition in the e-reader market, Smart Reads wants to protect its competitive advantage by increasing the perceived value of its reader. Smart Reads' best strategy to accomplish this would be to

highlight the number of celebrities who use Smart Reads e-readers.

Condax Autos Inc. merged with its competitor NOW Autos Inc. This allowed Condax Autos to use its technological competencies along with NOW Autos' marketing capabilities to capture a larger market share than what the two entities individually held. What type of integration does this scenario best illustrate?

horizontal

NoRu Inc. is a publicly traded firm that does not wish to be acquired by FRESHPoP Corporation, a much larger publicly traded firm, who is planning an acquisition of NoRu Inc. This is an example of a

hostile takeover.

The question that business-level strategy answers is ________ the firm will compete.

how

In the context of the SWOT matrix, which of the following best exemplifies a firm's internal strength?

increase in a firm's customer loyalty

Danke Inc. is a diversified firm that creates more value than the cost that it incurs. As a result, they are experiencing a diversification premium in their stock price. Danke Inc. is able to accomplish all of the following except

increase their costs but maintain their current stock price.

The Umbrella Corporation (UC) recently acquired a smaller competitor, Packer and Associates, which specializes in issues not previously covered by UC, such as land use and intellectual property cases. Given the increase in the firm's size and complexity, it is likely that its internal transaction costs will

increase.

Trader Joe's differentiates itself from competitors by offering top-quality foods obtained through sustainable agriculture. This business strategy implies that Trader Joe's focuses on

increasing the perceived value created for customers, which allows it to charge a premium price.

Each stage of the vertical value chain typically represents a distinct ________ in which a number of different firms are competing.

industry

According to the five forces model, which of the following is viewed as a major risk to a business pursuing a cost-leadership strategy?

innovation that allows competitors to emerge with more economical replacements

According to the resource-based view, a firm's competitive advantage often stems from its

intangible resources.

Given the accelerated pace of technological change, in combination with deregulation, globalization, and demographic shifts, a firm will be successful today only if its

internal strengths change with its external environment in a dynamic fashion.

Firms that can employ and establish _________________, are more likely to protect their competitive advantage from being copied and/or eroding away.

isolating mechanisms

NuLiver Corp. has recently introduced a new production method that will make the production of their medical devices more cost-effective. Which of the following will most likely be the result of this innovation?

jumps to a steeper learning curve

Which of the following is a common drawback of a nonequity alliance?

lack of trust between partners

Suppose that several senior managers recently left Target Corporation and went to work at rival Walmart. What part of the ""stocks and flows"" of resources does this represent for Target Corporation?

leakage

Sterling Cooper Footware and NERV Shoes Inc., two competing shoe brands, entered into a strategic alliance to study and acquire each other's competencies. Sterling Cooper Footware entered the strategic alliance to acquire the production system pioneered by NERV Shoes. Similarly, NERV Shoes agreed to the strategic alliance to study the design process of Sterling Cooper Footware. However, Sterling Cooper Footware was more successful and faster than NERV Shoes in accomplishing its alliance goal. What does this scenario best illustrate?

learning races

We Cut Corners lawn service initially spent nine man-hours to assemble a lawnmower. But as the production doubled, the number of hours spent on assembling a mower reduced by 20 percent. This increase in productivity reduced the company's cost per unit. What is this phenomenon referred to as?

learning-curve effect

Initech Inc. developed a superior touch screen technology for tablet computers that enabled multiple users to operate the screen at the same time. The technology was leased to Accent Technologies, a consumer electronics company, for five years. Which of the following alternatives to integration does this best illustrate?

licensing

Spotless Inc. outsources its production to contract manufacturers located in underdeveloped nations where unskilled labor is at very low wages is plentiful. This has helped the company become a price leader in the chemicals industry. Which of the following is the key driver behind Spotless Inc.'s strategic position?

low-cost input factors

Both Acme Inc. and Farma & Farma Corp. have discovered similar vaccines to prevent cancer. While Farma & Farma Corp.'s vaccine sells at $100 per unit, Acme sells its vaccine at $90 per unit. This price differentiation has mainly been attributed to the companies' capital decisions. While Acme used its retained earnings to develop the vaccine, Farma & Farma Corp. borrowed funds from banks to develop the vaccine. Thus, Farma & Farma Corp. pays a higher interest on its capital, which makes it necessary to price its vaccine higher. Thus, the key driver for Acme's competitive advantage is

low-cost input factors.

Pharmacat Pharmaceuticals invested $3.4 billion dollars to develop a new drug for individuals with diabetes. After Pharmacat receives FDA approval of the drug, its marginal cost to produce the drug for market will be

low.

To initiate a strategic move that allows a firm to open up new and uncontested market space through value innovation, managers must address four key questions when formulating a blue ocean business strategy. These questions focus on

lowering cost and increasing perceived customer benefits.

There are many reasons why firms need to grow. Which of the following reasons is strongly influenced by economies of scale?

lowering costs

In Fasehatice's Office of Alliance Management, the alliance champion is primarily responsible for

making sure that an alliance fits within the firm's existing alliance portfolio and corporate-level strategy.

Donware Inc. is a leader in producing winter sports equipment, including skis and skates. Recently, the firm decided to expand into the bobsled market and acquired Sleds by Gogozoom LLC This company produced bobsleds, but its sales had slowed. The managers of Donware convinced themselves that they were able to manage the business of Sleds by Gogozoom LLC more effectively even though they had no experience in the bobsled market. However, this move backfired and the sale of Sleds by Gogozoom LLC's bobsleds plummeted. Which of the following terms is often used to describe this scenario?

managerial hubris

Warephase Airway's decision to acquire Konex Fuels Inc. proved to be ill-fated because the Warephase managers overestimated their abilities and skills. They believed that they had the skills to manage such diversified businesses and create additional shareholder value. However, the acquisition failed to create the anticipated synergies because the managers' capabilities were restricted to the airline industry. What does this scenario best illustrate?

managerial hubris

Why did Quaker Oats Company's acquisition of Snapple fail?

managerial hubris

Tom is the CEO of Endless Possibilities Inc. and proudly boasts his firm's slogan, We Guarantee Success! However, Tom's constituents presented him with data on their latest project which suggests that they should not move forward. Tom, undeterred with this data, decides that he will still accept the project because he believes that he can't lose. This is a classic example of

managerial hubris.

According to the value chain analysis, which of the following is a primary activity?

marketing and sales

Which of the following motivations for business growth involves principal-agent problems?

motivating managers

Combining economies of learning with the existing production technology allows a firm to

move down a given learning curve.

When examining the core competence-market matrix, the most challenging diversification strategy occurs when firms attempt to combine ________ with ________. If done successfully, the firm could have the potential for "mega-opportunities" that may lead to competitive advantage.

new core competencies, new markets

Crocs Shoes was unable to sustain its competitive advantage over their rivals because its key strategic resource was

not costly to imitate by competitors.

Which of the following sources of differential appeal is least effective in helping a firm sustain its advantage?

observable product features

When company managers formulate strategy decisions resulting from their internal analysis, they are primarily making decisions about how to

obtain and allocate critical and scarce resources.

Many financial service firms, IT firms, and health care companies are among the most active when it comes to________, which occurs when value chain activities are taken care of outside the home country of the firm.

offshore outsourcing

Adidas acquired Reebok primarily to

overcome its competitive disadvantage against Nike.

What causes the winner's curse?

overpaying for an acquisition

Goodsilron is a U.S.-based consumer electronics company. It owns smaller firms in Japan and Taiwan where most of its cell phone technology is developed and manufactured before being released worldwide. Which of the following alternatives to integration does this best illustrate?

parent-subsidiary relationship

Chips & Motherboards Inc., a leading hard drive manufacturer, recently filed for bankruptcy. While most of Chips & Motherboards Inc.'s competitors were shifting away from physical data storage devices toward online cloud storage services, Chips & Motherboards Inc. invested most of its retained earnings in the effort to improve its hard drives. Once the hard-drive market drastically declined, Chips & Motherboards Inc. was unable to capitalize on the new technology. Which of the following does this scenario best illustrate?

path dependence

We Build & Build's' core competency is building multi-family housing in urban areas. This competency is based primarily on the decisions made by the company's top management over several years to focus on building in densely populated cities. Management used the process of

path dependence.

The competitive advantage that one firm has will be short-lived in an industry in which

perfect competition exists.

A firm's business strategy can lead to a competitive advantage if it allows the firm to

perform different activities than its rivals.

Rosa is a senior manager at Veridian Dynamics, a motorcycle manufacturer. Veridian Dynamicshas entered an equity alliance with Parker Industries, a moped manufacturer. "Don't worry, Rosa," her counterpart at Parker Industries tells her. "I'm going to send you all our guidelines and documentation for manufacturing catalytic converters, and then you'll be all set." What else should Rosa request from Parker Industries?

personnel exchanges to share tacit knowledge

VineRipe Tomato Inc. makes organic ketchup. To promote its products, this firm decided to make bottles in the shape of tomatoes. To accomplish this, VineRipe worked with its bottle manufacture to create a set of unique molds for its bottles. Which of the following specialized assets does this example demonstrate?

physical-asset specificity

The main reason behind Alphabet's decision to acquire the Israeli start-up company Waze for $1 billion was probably to

preempt its competitors from buying Waze.

Value chain analysis consists of systematically analyzing a firm's key activities that for analysis purposes are categorized into two groups:

primary activities and support activities.

To reduce the amount of time it takes to apply packaging to its finished products, North Star Foods is implementing new equipment at its production plants. By doing this, North Star is addressing a _____ in the value chain analysis.

primary activity

Managers in a firm hired to improve the firm's profitability and ultimately the shareholders' value will add to the overall costs if they pursue their own self-interests. What does this best illustrate?

principal-agent problem

Rebecca is in an interview for a sales job that requires no experience. She is trying to portray herself as a highly enthusiastic, energetic person with high-level communication and interpersonal skills. The interviewer is convinced that Rebecca should be hired as a salesperson in the company. However, in her resume, Rebecca had not mentioned her previous work experience as she was fired from that job because of her frequent absenteeism. Which of the following does this scenario best illustrate?

principal-agent problem

The managers at Statholdings Mobile Inc. want to diversify the business by acquiring a consumer electronics company. This acquisition would mean increased job security, higher compensation, and greater decision-making authority for the managers. The managers correlate this acquisition to greater power for them rather than to the appreciation in shareholder value. In this scenario, this acquisition by Statholdings Mobile Inc. is most likely a result of

principal-agent problems.

Which of the following below is NOT categorized as a primary activity on Porter's Value Chain?

procurement

A firm experiences diseconomies of scale when it

produces at an output level beyond the minimum efficient scale.

J-Texon Manufacturing is a large conglomerate that operates only in its home country. The company competes in industries like the consumer electronics, health care, hotel, airlines, education, and steel industries. Which of the following diversification strategies does this best illustrate?

product diversification

ConnellInc. has been successful at differentiating itself from competitors by claiming a premium price for its digital cameras based on superior image quality and advanced technology. In this scenario, which of the following is the key value driver?

product features

Golden Soles has been successful at differentiating itself from competitors by claiming a premium price for its athletic footwear based on superior design and high-quality materials. In this scenario, which of the following is the key value driver?

product features

Customer service and ________ are two of the value drivers that managers can utilize when trying to improve a firm's differentiation strategic position.

product uniqueness

Singletechno Industries, a U.S.-based large conglomerate, competes in the hospitality, education, telecommunications, entertainment, airlines, and chemical industries. It currently operates in about 30 nations, and is planning to expand its portfolio by investing in rapidly developing countries. Which of the following strategies is Groundswell Industries pursuing?

product-market diversification strategy

PepsiCo operates in many countries and sells a wide variety of aerated drinks, other beverages, different types of chips, and Quaker Oats goods to achieve continuous growth. From this data, we can conclude that PepsiCo has been involved in

product-market diversification.

Soylent Corporation is a major nutritional supplement chain. Its managers are motivated to grow the firm in order to increase their market power and change the industry structure in their favor. Which of the following strategies is most associated with their motive for growth?

purchasing competitors

Blackzim Inc. entered the low-priced digital watch market several years ago. This firm's earnings have been unsteady but might be growing. According to the BCG growth matrix, Blackzim is a

question mark.

The "Natural Nourishment" granola bars manufactured by Global Good Foods have been the top-selling granola bars in the market. Though the market for granola bars is flooded with competitors, Global Good has been able to maintain its market position for a long time. This is mainly attributed to the pleasant texture of its granola, which comes from a proprietary processing technique used by the company. This competency of Global Good Foods will be considered as a(n) _____ resource in the VRIO framework.

rare

The core competency of Newex Motors is its fuel-efficient engine found in its cars. These engines are developed and built in-house. The company realizes that the growing demand for "green" vehicles has created a new market opportunity. Thus, it uses its existing technology to develop an engine that improves the fuel efficiency of recreational motorhomes. In this scenario, Newex Motors is

redeploying and recombining existing core competencies to compete in future markets.

Silis Autos is known for its affordable and reliable brand of consumer vehicles. Because its shareholders expect to see an improved rate of growth in the coming years, Silis' executives have decided to diversify the company's range of products so that at least 40 percent of the firm's revenue is generated by new business units. However, the company's resources, capabilities, and competencies are limited to producing other forms of motorized vehicles, such as motorcycles and all-terrain vehicles (ATVs). Which type of corporate diversification strategy should Beagle pursue?

related-constrained

Plexzap Products started as a luxury brand for designer apparel. Soon, the company expanded by launching its own line of premium perfumes, watches, bags, and home furnishings. This expansion allowed the businesses under the company to share a few of the common competencies in products, services, technology, and distribution. Which of the following corporate strategies is Plexzap pursuing in this scenario?

related-linked strategy

The Boston Consulting Group (BCG) growth-share matrix locates a firm's individual strategic business units (SBUs) in which two dimensions?

relative market share and speed of market growth

Codehow Inc. is a large firm involved in the highly competitive market of high-tech medical equipment. In this market, smaller firms that focus on research are constantly making new technological developments. Which of the following approaches would best serve the needs of Codehow?

serial acquisitions

Dynamic capabilities are especially relevant for surviving and competing in markets that

shift quickly.

In terms of the build-borrow-or-buy framework, a firm's internal resources are considered to be relevant when they are

similar to those that need to be developed and superior to those of competitors in the targeted area.

Since Coca-Cola focuses on selling only soft drinks, a low degree of product diversification, we would conclude that they compete in a(n) ________ market versus their main competitor PepsiCo, that sells a wide variety of products.

single product

Mama Mia's' Pizza & Calzone has been trying to directly copy the strategies of Fuhgeddaboudit Pies. Even though it is evident that the success of Fuhgeddaboudit Pies' success comes from the freshness and variety of ingredients it uses, Mama Mia's Pizza & Calzone' has not been able to introduce the same types of produce into its recipes. This is because Fuhgeddaboudit network of relationships with local growers, as well as its efficient supply chain, are very difficult to emulate. Which of the following barriers to imitation does this scenario best illustrate?

social complexity

An observer may conclude that the organizational culture of Zappos, an online retailer for shoes and clothing, might be the basis for its competitive advantage. However, reverse social engineering to crack Zappos' code of success might be much more difficult for a company trying to exactly imitate its strategy. Thus, the source of Zappos competitive advantage is

socially complex.

A drawback involved in using cross-border strategic alliances to enter new foreign markets is that

some of the firm's proprietary know-how may be appropriated by the foreign partner.

Bill's Hockey Pucks Inc. wishes to pursue international markets like China and Russia. In order to do this, they may wish to consider a possible

strategic alliance with another firm already established in those markets.

A voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services is best described as a

strategic alliance.

During market testing, Rembrandt Cosmetics realized that the cosmetics industry was dominated by multiple, well-established brands. These brands mostly sold their products in exclusive outlets and departmental stores. Rembrandt Cosmetics management realized that a new entrant would require a different business model to be successful. Thus, Rembrandt Cosmetics started selling its products through direct marketing. In this scenario, Rembrandt Cosmetics accomplished substitution primarily through

strategic equivalence.

Todd Wilkinson, the founder of 123.com, looked outside his firm for the right talent in order to develop his firm's website. The search led him and his team to a different country where they were able to procure the right talent to get the job done. This example best illustrates the concept of

strategic outsourcing.

When a blue ocean strategy goes bad, a firm has neither a clear differentiation nor a clear cost-leadership profile. This situation is referred to as

stuck in the middle.

Online retailer eBuy had been drastically losing market share to its competitors. The management hired a reputed consulting firm to advise the company. The experts from the consulting firm pointed out that the company primarily lost out on its competitive advantage due to its poor customer service, including slow response times to customer inquiries and unclear return policies. These ineffective policies and procedures led to many disgruntled customers and a steady migration to more customer-friendly retailers. eBuy can best solve its problem by working on its

support activities.

Amazon.com's network of distribution centers allow it to drastically reduce its delivery times compared to other online retailers. These distribution centers are examples of Amazon's

tangible resources.

Rundofase International, a large conglomerate, procures a few component parts from external suppliers and also manufactures some of the key raw materials in its own subsidiaries. Aside from this, the company does not solely depend on outside distributors to reach its customers. In fact, it has its own retail stores to distribute its products. In this scenario, which of the following alternatives to vertical integration is Rundofase International applying?

taper integration

Mark owns Drones 'R' Us, Inc. and is looking for an alternative to vertical integration. He decides to manufacture some of his own parts while keeping a few key suppliers in his industry value chain as well. This is known as

taper integration.

The Hershey Company, the largest U.S. chocolate manufacturer, decided to enter the Chinese market because

the U.S. population was growing slowly and becoming more health conscious.

Amelia has recently started a restaurant in a commercial area that already has many other established restaurants and popular fast-food chains. Amelia owns the building in which her restaurant is located, rather than leasing premises as her competitors do. This factor allows her to offer her products at a more competitive price. Amelia has also invested a huge amount in designing the restaurant's interior and in equipping the kitchen with the appliances that are most widely used in her industry. In this scenario, which of the following is the most valuable resource for Amelia's business?

the building owned by Amelia, which reduces cost of operations

In order for a firm to formulate an effective business-level strategy, it is important to remember that competitive advantage is determined by

the characteristics of both the industry and the firm.

Which of the following stakeholders of a company would most likely be responsible for formulating a corporate strategy?

the chief executive officer

Viral Apparel is the market leader in the sportswear industry. Though most of its resources are common to those of its competitors, a few rare resources have helped the company gain and sustain a competitive advantage. Which of the following assets of Viral Apparel is most likely to be considered a rare resource that is contributing to its competitive advantage?

the company's design patents

Which of the following is an example of an internal transaction cost?

the cost of maintaining a production unit

Which of the following is an example of an external transaction cost?

the cost of searching for a contract manufacturer

It is necessary for government authorities such as the Federal Trade Commission (FTC) and/or the European Commission to approve any large horizontal integration activity because

the horizontal integration activity has the potential to reduce competitive intensity in an industry.

Value drivers contribute to a firm's competitive advantage only if

the increase in value creation exceeds the increase in costs.

A blue ocean strategy differs from a low-cost strategy in that

the intent of a blue ocean strategy is not to be the absolute lowest-cost provider because a blue ocean must also increase perceived value.

The management of a company is assessing the value of all the tangible resources the company owns. Which of the following will be included in this assessment?

the punch presses that produce parts

In 1990, Roche, a Swiss pharmaceutical company, initially invested $2.1 billion to purchase a controlling interest in the biotech start-up Genentech. In 2009, after witnessing the success of Genentech's drug discovery and development projects, Roche spent $47 billion to purchase the remaining minority interest in Genentech, making it a wholly owned subsidiary. In terms of strategic alliances, this scenario best indicates

the real-options perspective.

A drawback of short-term contracting as an alternative to making a component in-house is that

the supplying firm has no incentive to make any transaction-specific investments to increase performance or quality.

Which of the following best describes a strategic tradeoff?

the tension between value creation and the pressure to keep costs in check

Which of the following is a firm effect that has an impact on the competitive advantage of a firm?

the value and the cost position of the firm relative to its competitors

Business managers are often concerned that just one of their company's activities will make or break their company's competitive advantage. However, you know that

their company's success depends on an array of many key activities, not just one activity.

One of the reasons that big box retailers like Home Depot are able to achieve economies of scale is that

they are able to take advantage of physical properties and maximize their scale efficiencies by stocking more merchandise and handling inventory more efficiently.

When the laptop market overtook the desktop market, Blue Tech Inc., a leader in desktop technology, was left at a competitive disadvantage. Later, Blue Tech Inc.'s management channeled all of the company's efforts and revenue to develop an efficient laptop from scratch in less than a year. However, the company failed because Blue Tech Inc.'s models were inferior to the third- and fourth-generation models its competitors were selling. In this scenario, Blue Tech Inc.'s failure can be best attributed to

time compression diseconomies.

Why did incumbent pharmaceutical firms enter into hundreds of strategic alliances with biotech start-ups?

to make small-scale investments in ventures poised to disrupt existing market economics

WeComput Inc.'s competency in designing and manufacturing efficient microprocessors has made its laptops the most advanced computers in the market. This competency, along with the just-in-time manufacturing system, has enabled WeComput Inc. to increase its profitability by lowering its production costs. Thus, WeComput's competency in designing and manufacturing microprocessors will be considered a(n) _____ resource in the VRIO framework.

valuable

Product features, customer service, and complements are all examples of important

value drivers.

The pursuit of both differentiation and low cost at the same time in a way that creates a leap in value for both the firm and consumers is called

value innovation.

The goal of a strategic position is to create the largest gap possible between the ________ that a firm creates through its offerings and the ________ required to create these offerings.

value; cost

Decisions relating to "what stages of the industry value chain to participate in" determine a firm's

vertical integration.

Massive Dynamic Computers sources the components for its laptops from various suppliers on the market. The firm pays $100 for processors, $35 for disk drives, $50 for screens, $10 for memory, and $40 for graphics and wireless internet cards. Massive Dynamic has determined that it would cost $200 per unit to produce all of the necessary components in its in-house manufacturing facility. In this scenario, Massive Dynamic should

vertically integrate.

Ticker Inc. is a wristwatch company known for its luxury watches, and it follows a differentiation strategy. In this scenario, Ticker Inc. should ideally compare its strategic position with a

watch maker that sells high-end, premium watches.

Mary has been named CEO of an office furniture manufacturing company. As CEO, she is tasked with setting the firm's corporate strategy. Which of the following decisions is Mary most likely to make?

what range of products the firm should offer

When does a merger between companies typically occur?

when two firms of comparable size join to form a combined entity

Buzztronic is a market leader in consumer electronics. If Ficolee and Ficola, companies that manufacture televisions, develop the same customer knowledge base and create products with the same customer appeal as Buzztronic, then

Buzztronic will have a resource that is valuable but no longer rare.

Which of the following provides an example of a firm in a red ocean?

Cool Apparel offered clothing at a low price but failed to differentiate its product as being exclusive.

What does it mean for a firm to have an 80 percent learning curve?

Every time the cumulative output is doubled, the cost per unit will decline by 20 percent.

A value curve that zig-zags across the strategy canvas indicates a focused strategy that is likely to achieve a sustainable competitive advantage.

FALSE

Accounting, human resources, and research and development (R&D) are examples of primary activities that add value directly to the value chain.

FALSE

Although Disney acquired Pixar through a hostile takeover, the merger has proven extremely profitable for both entities.

FALSE

Intellectual property (IP) protections such as trademarks or patents are proven methods of establishing permanent barriers to imitation.

FALSE

Managers have exactly two choices when determining the boundaries of the firm: produce goods and services in-house ("make") or purchase them externally ("buy").

FALSE

Managers who are eager to forge business alliances often forget that the expected benefits of the partnership must represent only a small percentage of its monetary and time-related costs.

FALSE

One of Tiffany & Co's tangible resources is its well-known brand name and reputation for quality timepieces.

FALSE

Sending jobs out of the country to lower costs is known as outsourcing.

FALSE

Support activities, according to the value chain, are the actions a firm takes to directly provide a product or service to the end user.

FALSE

The goal of the differentiator is to have a smaller value gap than competitors.

FALSE

The internal and external costs associated with an economic exchange are known as interaction costs.

FALSE

Victoria's Jewelry Inc. is considering a takeover of its competitor, Ace Diamond LLC. In general, Victoria's should go ahead with the acquisition as long as Ace Diamond is more valuable as a continued standalone company than it would be inside Victoria's.

FALSE

When a firm operates at the minimum efficient scale, there is still opportunity for it to further reduce its cost per unit through economies of scale.

FALSE

When deciding whether to build, borrow, or buy as a means of growth, firms no longer need to consider the need for physical closeness to their resource partners.

FALSE

The fact that both Whole Foods (a high-end grocery store) and Aldi (an inexpensive grocery store) have a competitive advantage in the grocery store industry is an indication that

Following a different generic business strategy within the same industry can lead to a competitive advantage for more than one organization.

Several senior managers recently left Fred's Autos Inc. and went to work at Better Autos Inc., a rival company. What does this imply?

Fred's Autos Inc. faced resource leakage.

Although JetBlue used a blue ocean strategy to achieve an initial competitive advantage, it failed to maintain this advantage. Which of the following provides the best reason for this development?

It failed to refine its strategic position over time.

How has Kraft Foods benefited from its hostile takeover of Cadbury PLC?

It has access to convenience stores and a new distribution channel.

Firms are more capable than markets at coordinating highly complex tasks, while markets are more capable of providing high-powered incentives for entrepreneurship.

TRUE

Horizontal integration through M&A can help firms strengthen their competitive position by increasing the differentiation of their product and service offerings.

TRUE

If two large movie theater chains decide to merge, the result is likely a horizontal integration that creates a more favorable industry structure by decreasing competition.

TRUE

One of the key lessons when differentiating between strategies is that "business level strategy" attempts to define how a firm will compete while "corporate level strategy" is defined by where they compete.

TRUE

Organizations seeking strategic alliances often pursue nonequity alliances because they are the easiest to create and to sever. However, the short duration of these alliances often means there is little trust or commitment on either side.

TRUE

Can't Believe It's Not Hair Inc. (CBNH) dominates the ladies' wig market and wants to expand into men's toupees. How can CBNH 's managers determine whether the company should develop a toupee division internally, ally with a toupee maker, or acquire a toupee-making firm?

The managers need to determine whether the skills needed to create wigs and toupees are similar and whether CBNH creates better hairpieces than its competitors do.

Hatfan Inc. is a large automobile company. The company's petrol cars strategic business unit (SBU) has been recognized as a cash cow, and its hybrid electric cars SBU has been categorized under stars. Which of the following can be inferred from this scenario?

The petrol cars SBU operates in a low-growth market, whereas the hybrid electric cars SBU operates in a high-growth market.

Which of the following is true of acquisitions?

They can be friendly or hostile.

Funholding Inc. is a large multinational company owned by two partners, is active in the petroleum, capital market, chemicals, steel, beverages, hospitality, airlines, education, automobiles, and consumer electronics industries. The company has multiple brands and a large product portfolio under its banner. Which of the following terms would best describe this company?

a conglomerate

Tyrell Corporation, a manufacturer of smartphones, has entered into a 15-year partnership with a software company to develop sophisticated operating systems and innovative mobile applications for its phones. This would mean that both the companies will have to mutually share their resources, knowledge, and capabilities to develop a superior product. What is the relationship between Tyrell Corporation and the software company best referred to as in this scenario?

a strategic alliance

When Aviato Inc. wanted to sell its cars in the country of Yugoslakia, it lacked access to distribution channels and marketing expertise in the country. Thus, Aviato Autos had to enter into a strategic alliance with a local automobile company to get access to the foreign partner's well-established distribution channels. Which of the following reasons for entering into a strategic alliance is best illustrated in this scenario?

accessing critical complementary assets

BestReads spent 10 million dollars to buy the rights to a best-selling novel. The company then prepared for production by hiring a screenwriter to adapt the novel, casting the main roles, renting cameras and other equipment, and scouting locations in southern Montana. Which of the following pairs of resources are both intangible?

best-selling novel; screenwriter's experience adapting novels

In the multiplex industry, Home Again Movies Inc. is an upscale multiplex that focuses on superior customer experience. The firm charges premium prices for its movie tickets and services. Movies-for-less Inc., in contrast, charges the lowest price in the industry with its no-frills approach. In between these two segments is Just Right Films Inc., which offers a customer experience comparable to that of Home Again Movies at a price almost as low as that of Movies-for-less. What strategy is Just Right Films pursuing in this scenario?

blue ocean strategy

Tom Terry is the CEO of BuildIt.com but wants a physical retail presence. In order to accomplish this, Tom formed a joint venture with a major real estate tycoon who has a significant foothold in the commercial property sector. This venture will require exchanging more than just codified information; as such, Tom should expect to share

both tacit and explicit knowledge.

A ________ primarily details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market.

business-level strategy

Competitors have found it extremely difficult to imitate Gene Electronics Inc.'s valuable resources, capabilities, or competencies. This is primarily because the source for the company's success has been unclear. The competitors are uncertain if Gene Electronics Inc.'s success is due to its strong leadership, the skills of its research and development team, or the timing of the company's product introductions. Gene Electronics Inc. has been protected from losing its competitive advantage as a result of

causal ambiguity.

Vehement Capital Partners wanted its research partner, an R&D company, to develop a cancer vaccine. However, the project required huge capital investments, and its research partner was not ready to solely face the risks involved. Thus, to gain its partner's confidence and to prove its involvement, Vehement Capital Partners invested $100 million in the project. This investment made by Vehement Capital Partners will result in a

credible commitment.

In the context of SWOT analysis, which of the following best exemplifies a firm's internal weakness?

decline in the firm's market share

Leading guitar string producer Highly Strung Inc. has enjoyed a competitive advantage based on its proprietary coating that gives its strings a clearer sound and longer lifespan than uncoated strings. One of Highly Strung's competitors, however, has recently developed a similar coating using less expensive ingredients, which allows it to charge a lower price than Highly Strung for similar-quality strings. Highly Strung's competitive advantage is in danger due to

direct imitation and substitution.

The ___________________ suggest(s) that because the external environment changes, strategic leaders must choose their current and future investments carefully over time in order to best maintain their firm's competitive advantage.

dynamic capabilities perspective

According to an evaluation using the VRIO framework, Crocs Shoes was unable to sustain its competitive advantage primarily because its products were

easy to imitate.

Amazon.com has decided to enter the college bookstore market. The goal of "Amazon Campus" is to offer co-branded university-specific web sites that offer textbooks and paraphernalia, such as logo sweaters and baseball hats. This development shows Amazon's relentless pursuit of

product diversification.

Disney became the world's leading media company to a large extent by pursuing a corporate strategy of

related-linked diversification.

Due to resource immobility, a critical assumption in the resource-based model of a firm, the

resource differences between firms last for a long time.

Although eHook Inc. and eFury Inc. operate in the same consumer electronic industry, eHook Inc. has better sales and brand equity. This is attributed to eHook Inc.'s commitment to innovation. The company has adequate financial and human capital to invest in research and development, an area in which eFuryInc. lags behind. In this scenario, which of the following critical assumptions of the resource-based view of a firm has been illustrated?

resource heterogeneity

Southwest Airlines (SWA) and Alaska Airlines both compete as point-to-point airlines, but they draw upon different resource bundles. This example best illustrates which of the following assumptions regarding the resource-based view?

resource heterogeneity

Southwest Airlines (SWA) has enjoyed a sustained competitive advantage, allowing it to outperform its competitors over several decades. Continental and Delta attempted to copy SWA with their offerings of Continental Lite and Song, respectively. Neither Continental nor Delta, however, was able to successfully imitate the resource bundles and firm capabilities that make SWA unique. Which of the following is this case an example of?

resource immobility

Toyago Inc. is a leading educational toy company. Competitors across the globe have failed to imitate Toyago's production models, supply chain systems, knowledge systems, and culture. These attributes have remained unique to Toyago Inc. for a long time. Which of the following assumptions of the resource-based model of competitive advantage does this scenario best illustrate?

resource immobility

Anheuser-Busch InBev sold Busch Entertainment, its theme park unit that owns SeaWorld and Busch Gardens, to a group of private investors for roughly $3 billion. This strategic move allowed InBev to focus more fully on its core business of brewing and distributing beer across the world. This is an example of

restructuring.

The process of alliance management begins with

selecting the best possible partner.

The downside of equity alliances is

the amount of investment that can be involved.

Which of the following reasons motivated Facebook to acquire Instagram, a photo and video-sharing social media site, for $1 billion?

the desire to gain a new capability

In a nonequity alliance, which of the following types of information would firms most likely share?

the documented information about the material composition of a product

STRIKEBYTE Inc. is a software company that has built and acquired numerous assets over the years. According to the resource-based view of a firm, which of the following assets of STRIKEBYTE Inc. will best enable it to gain and sustain a competitive advantage?

the expertise acquired by the employees in the company