Management Capstone Exam 2
10) In the ________ developed by Michael Porter, competition is not defined narrowly as a firm's closest competitors but rather more broadly to include other factors in an industry like buyers, suppliers, potential new entry of other firms, and the threat of substitutes. A) VRIO framework B) five forces model C) value chain analysis D) PESTEL framework
B
9) The primary objective of Porter's five forces model is to: A) break down a firm's value chain activities into primary and support. B) replace a firm's competitive advantage with competitive parity. C) reduce the gap between the value of a firm's product and its cost of production. D) understand the profit potential of different industries.
D
1) Nike has come a long way from its humble beginnings. It has been able to outperform adidas in sales and become the undisputed leader in the athletic shoe and apparel industry. Which of the following statements accurately explains one of the main reasons for Nike's success? A) It made the unorthodox move to spend basically its entire budget for a specific sport on a single star athlete. B) It focused on sponsoring future athletic superstars who embodied a likely success story. C) It spread its marketing budget more widely. D) It stopped spending money on celebrity endorsements and started restricting its expenditure for sponsoring only track and field sports stars.
a
1) Which of the following is a firm effect that has an impact on the competitive advantage of a firm? A) The value and the cost position of the firm relative to its competitors B) The exit barriers within the industry in which the firm operates C) The intensity of rivalry among existing companies in the firm's chosen industry D) The number of companies operating in the industry in which the firm operates
a
10) Which of the following is an example of a firm's intangible resources? A) The firm's organizational culture B) The firm's land and building C) The firm's cash at bank D) The firm's finished goods inventory
a
11) A firm's strategic position is likely to be strong when: A) the gap between the value the firm's product generates and the cost to produce it is large. B) all the five forces in Porter's model are strong. C) the entry barriers within the industry it operates in are low and the exit barriers are high. D) its suppliers and vendors can easily forward integrate and buyers can backward integrate.
a
11) True Sync Inc. is a software company, which has built and acquired numerous assets over the years. According to the resource-based view of a firm, which of the following assets of True Sync Inc. will best enable it to gain and sustain a competitive advantage? A) The expertise acquired by the employees in the company B) The capital raised by the company from its shareholders C) The headquarters owned by the company D) The resources of the company that are mobile
a
12) True Home Inc., Super Cart Inc., and Daily Things 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. Which of the following is an implication of the market condition indicated in this scenario? A) Any advantage that one firm has will be short-lived. B) Barriers to entry within the industry will be high. C) Resource immobility of the firms will be low. D) The industry structure will be far from perfect competition.
a
12) Which of the following ratios best expresses inventory turnover? A) Cost of goods sold/Inventory B) Inventory/Working capital C) Inventory/Per unit cost of production D) Annul profits/Inventory
a
14) Both Viten Electronics Inc. and JL Electronics Inc. incur a cost of $400 to manufacture an LED television. However, the economic value created by JL Electronics is more than that created by Viten Electronics. What does this indicate? A) JL Electronics can charge a premium price on its televisions. B) Viten Electronics has created a higher value gap than JL Electronics. C) Viten Electronics has a competitive advantage over JL Electronics. D) Both Viten Electronics and JL Electronics have achieved competitive parity.
a
14) Trust Machines Inc. is a company that manufactures and markets consumer electronics. The unique microprocessors developed by the company contribute to its high resource immobility. According to the resource-based view of competitive advantage, which of the following is an implication of this situation? A) The resources of Trust Machine Inc. are difficult to replicate or imitate. B) The competitive advantage of Trust Machine Inc. will soon be lost. C) The resource heterogeneity of Trust Machine Inc. is low within the industry. D) The environment in which Trust Machine Inc. operates is closest to perfect competition.
a
15) A firm pursuing a differentiation strategy as opposed to a low-cost strategy will: A) focus its research and development on product technologies to add uniqueness. B) build an organization structure that relies on strict budget controls. C) concentrate on leveraging its economies of scale through process technologies. D) create a lower economic value as compared to its competitors.
a
15) The competitive advantage that one firm has will be short-lived in an industry where: A) perfect competition exists. B) capabilities of a firm are not easily replicable. C) resource immobility is high. D) resource heterogeneity is high.
a
15) Which of the following is NOT true of risk capital? A) Risk capital invested in a firm can be legally recovered if the firm goes bankrupt. B) Return on risk capital includes stock price appreciation plus dividends received over a specific period. C) A person who provides capital to a firm gets equity shares in return. D) From the shareholders' perspective, the measure of competitive advantage is primarily based on return on their risk capital.
a
15) Which of the following is most likely an implication of new firms entering an industry? A) The incumbent firms will spend more to satisfy their existing customers. B) The rivalry among existing competitors will reduce. C) The industry's overall profit potential and sales will increase. D) The bargaining power of buyers will reduce.
a
16) When a differentiator charges a similar price as its competitors in the same strategic group but offers more perceived value, it: A) gains market share from other firms. B) results in diseconomies of scale. C) loses its competitive advantage. D) lowers the economic value created.
a
17) Both Myoco Electronics Inc. and Electra Series Inc. have achieved cost parity in the television market. To gain and sustain a competitive advantage against Electra Series, Myoco Electronics should: A) create greater perceived economic value than Electra Series. B) increase its cost of production to more than that of Electra Series. C) keep its value gap lower than that of Electra Series. D) achieve differentiation parity with Electra Series.
a
2) Which of the following equations best expresses return on revenue? A) Net profits/Revenue B) Sales/Revenue C) Revenue - Gross profits D) Revenue - Cost
a
2. Bill is a strategy consultant who is currently analyzing the medical devices industry. He conducts an industry analysis and find that the Hirschmann-Herfindahl index is at 2700, the buyer bargaining power as measured through the regression coefficient is at 2.7, the supplier bargaining power as measured through the regression coefficient is at 3.8 and the threat of substitutes again as measured through a regression coefficient is at -2.9. What can he best conclude given this analysis? a. Willingness to Pay may increase, Price may increase and Costs may increase b. Willingness to Pay may increase Price may increase and Costs may decrease c. Willingness to Pay may stay constant, Price may increase and Costs may increase d. Willingness to Pay may increase, Price may stay constant and Costs may increase
a
20) Which of the following statements is true of accounting data? A) Accounting data are historical data and thus backward-looking. B) Accounting data consider off-balance sheet items, such as pension obligations of a firm. C) Accounting data do not have to be adjusted in any manner to compare companies with different capital structures. D) Accounting data focus mainly on intangible assets, rather than tangible assets.
a
22) The perfectly competitive industry structure differs from the resource-based model in its view that: A) all firms have access to the same resources. B) accessibility to bundles of resources differ across firms. C) competencies differ across firms working in the same industry. D) resources tend to be "sticky."
a
23) Which of the following is an external performance metric? A) Total return to shareholders B) Inventory turnover C) Return on revenue D) Fixed assets turnover
a
26) Maroon Inc. is a leading international apparel company. Competitors across the globe have failed to imitate Maroon Inc.'s production models, supply chain systems, knowledge systems, and culture. These attributes have remained unique to Maroon Inc. for a long time. Which of the following assumptions of the resource-based model of competitive advantage does this scenario best illustrate? A) Resource immobility B) Resource equality C) Resource perishability D) Resource homogeneity
a
28) TrueDisk Inc. manufactures external hard disks for $32 per unit, and the maximum price customers are willing to pay is $47 per unit. SW Storage Inc. is a competitor of TrueDisk 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? A) TrueDisk creates a greater economic value than SW Storage. B) SW Storage has a competitive advantage over TrueDisk in terms of perceived value. C) SW Storage is a cost leader when compared to TrueDisk. D) TrueDisk and SW Storage share differentiation parity.
a
28) Unlike the financial ratios based on accounting data, total return to shareholders is: A) an external performance metric. B) backward-looking and historic in nature. C) an absolute measure of competitive advantage. D) unaffected by market volatility or macroeconomic factors
a
3) Dandelions Max is a consumer electronics company. It has acquired an edge over its competitors through its ability to provide breakthrough technology at the lowest price in the market. This advantage of Dandelions Max best exemplifies a ________. A) core competency B) resource flow C) capital gain D) markup
a
30) A firm incurs $400 to manufacture a television. In the market, customers are willing to pay a maximum of $600 for the television priced at $500. The difference of $200 ($600 minus $400) is the ________. A) economic value created B) consumer surplus C) total return to shareholders D) customer lifetime value
a
32) A firm's resource is most likely to be an internal strength and a core competency when the resource is: A) valuable and costly to imitate. B) easily accessible and mobile. C) easy to substitute. D) valuable but common.
a
32) In contrast to a differentiator, a cost leader will: A) focus its research and development on process technologies to improve efficiency. B) avoid an organizational structure that relies on strict budget controls. C) charge a premium price for its products and services. D) build an organization culture where creativity and customer responsiveness thrive.
a
33) Rosa Apparels Inc. outsources its production to contract manufacturers located in underdeveloped nations where unskilled labor is available in plenty for very low wages. This has helped the apparel brand become a price leader in the industry. Which of the following is the key driver behind Rosa Apparel's strategic position? A) Low-cost input factors B) Availability of complements C) Network effects D) Superior customer service
a
34) Both BioThink Inc. and GD Pharma Inc. have discovered similar vaccines to prevent cancer. While GD Pharma's vaccine sells at $100 per unit, BioThink sells its vaccine at $90 per unit. This price differentiation has mainly been attributed to the companies' capital decisions. While BioThink used its retained earnings to develop the vaccine, GD Pharma borrowed funds from banks to develop the vaccine. Thus, GD Pharma pays a higher interest on its capital, which makes it necessary to price its vaccine higher. Thus, the key driver for BioThink's competitive advantage is: A) low-cost input factors. B) superior customer service. C) availability of complements. D) economies of scale.
a
34) Creating resources that meet the VRIO criteria is strategically important to a firm because it: A) helps the firm to gain and sustain a competitive advantage. B) leads to competitive parity within the industry. C) facilitates greater knowledge diffusion in the industry. D) helps the firm curb its resource heterogeneity and resource immobility
a
34) The difference between the price charged for a product and the cost to manufacture it is referred to as the ________. A) producer surplus B) consumer surplus C) break-even price D) reservation price
a
35) The value a consumer attaches to a product or service is captured in the: A) consumer's maximum willingness to pay for it. B) difference between the price charged for it and the cost to produce it. C) expenses incurred by the firm in manufacturing it. D) least price a consumer is willing to pay for it.
a
37) How does a firm capture its producer surplus for a good or service? A) As profit per unit sold B) As cost per unit sold C) As market price per share D) As earnings per share
a
39) In the multiplex industry, Vibrant Movies Inc. is an upscale multiplex that focuses on superior customer experience. The firm charges premium prices for its movie tickets and services. Global Cine Inc., in contrast, charges the lowest price in the industry with its no-frills approach. In between these two segments is True Movies Inc., which offers a customer experience comparable to that of Vibrant Movies at a price almost as low as that of Global Cine. What strategy is True Movies pursuing in this scenario? A) Integration strategy B) Liquidation strategy C) Market penetration strategy D) Product diversification strategy
a
40) 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 ________. A) causal ambiguity B) time compression diseconomies C) resource homogeneity D) path dependence
a
41) In an economic context, strategy for producers is primarily about: A) capturing the economic value created as much as possible. B) lowering producer surplus and increasing consumer surplus. C) distributing the economic value created equally between consumers and themselves. D) reducing the difference between consumer's willingness to pay for a product and the cost to produce it.
a
42) Which of the following is NOT an accurate expression of the economic value created per unit of a product sold? A) The difference between the price charged and the firm's cost B) The sum of consumer surplus and firm profit C) The difference between consumer's reservation price and firm's cost D) The sum of consumer surplus and producer surplus
a
43) KitchenThings Inc. is a company that manufactures plastic kitchenware. It operates at an output level that allows it to keep its unit cost per output to the lowest in the industry. This in turn allows KitchenThings to be the price leader. Other competing companies cannot operate at the same level due to a lack of consumer demand for their products. This puts them at a competitive disadvantage. In this scenario, the cost driver behind KitchenThings' strategic position is ________. A) economies of scale B) superior customer service C) availability of complements D) learning-curve effects
a
44) Competitive advantage goes to the firm that achieves the: A) largest economic value created. B) highest payable turnover. C) lowest producer surplus. D) highest Cost of goods sold/Revenue ratio.
a
48) Andrew invested $200,000 in the shares of a company. At the end of a year, he had earned $7,000 as dividends on his shares along with a $1,000 appreciation in the overall value of his shares. However, if Andrew had invested the same amount on an asset, like gold, the appreciation in its value would have earned him $10,000 at the end of the year. In this scenario, which of the following is Andrew's opportunity cost? A) $10,000 B) $200,000 C) $2,000 D) $7,000
a
48) It is difficult even for Apple's managers to pinpoint the underlying cause of the company's phenomenal success. The term that best applies to this difficulty is known as ________. A) causal ambiguity B) competitive dependence C) resource mobility D) path dependence
a
49) A cost-leader is protected from the threat of new entrants primarily due to its: A) economies of scale. B) premium pricing. C) superior customer service. D) luxury goods.
a
5) Home Smart Inc. is a chain of supermarkets that sells its products at higher prices than its competitors. Yet, the supermarket chain has a large customer base due to its wide product portfolio and superior customer service. Which of the following generic business strategies has Home Smart adopted in this scenario? A) Differentiation B) Product diversification C) Market penetration D) Cost-leadership
a
5) 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? A) The company's machinery B) The company's patents C) The company's brand equity D) The company's copyrights
a
51) According to the five forces model, which of the following is viewed as a major risk to a business pursuing a cost-leadership strategy? A) Innovation that allows competitors to emerge with more economical replacements B) New entrants with small production scale C) Suppliers requesting a 2% price increase across the industry D) Competition switching from non-price attributes to pricing
a
53) The concept of a(n) ________ attempts to capture both learning effects and process improvements at firms. A) experience curve B) managerial grid C) growth matrix D) diminishing utility curve
a
57) Which of the following sources of differential appeal is least effective in helping a firm sustain its advantage? A) Observable product features B) Reputation for quality C) Superior customer experience D) Reputation for innovation
a
60) In a successful ________, the trade-offs between differentiation and low cost are reconciled. A) integration strategy B) focused differentiation strategy C) divestment strategy D) liquidation strategy
a
64) Which of the following statements is true of a strategic position? A) Choosing a strategic position requires making important trade-offs between value and cost positions. B) A firm is said to have a competitive advantage when it ends up with strategic positions below the productivity frontier. C) Differentiation and cost leadership require similar strategic positions. D) Strategic positions are fixed; they do not change like the environment.
a
7) In a focused cost-leadership strategy, a firm: A) delivers low-cost products and services to a specific, narrow part of the market. B) caters to the segment of the market that is least cost-sensitive. C) focuses on reducing the economic value created to drive down costs. D) provides high-priced products for many different segments of the mass market.
a
8) Why are differentiation and cost-leadership strategies referred to as generic business strategies? A) They can be used by any organization independent of industry context. B) They can be simultaneously pursued by a firm without any trade-offs. C) They can be applied only by businesses which have a competitive advantage. D) They require similar strategic positions in order to increase a firm's chances to gain competitive advantage.
a
9) Which of the following statements accurately brings out the difference between tangible and intangible resources? A) Tangible assets can be bought on the open market, whereas intangible assets cannot be easily purchased. B) Tangible resources take a longer time to build, whereas intangible assets can be built comparatively easily. C) Tangible resources contribute to a company's competitive advantage, whereas intangible resources fail to do the same. D) Tangible assets are difficult to imitate, whereas intangible assets can be easily replicated.
a
1) ________ precisely indicates how much of a firm's sales is converted into profits. A) Break-even price B) Return on revenue C) Inventory turnover D) Working capital turnover
b
40) 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? A) Below 2,000 units B) 3,000-4,000 units C) Above 4,000 units D) 2,000-3,000 units
b
1. Geronimo Inc. is operating in an industry where there are three other competitors. In the previous five years, Geronimo has held a market share of around 60% consistently and the undisputed market leader in the industry. The products produced by Geronimo are generic and not differentiated. However, given their market leadership Geronimo decides to increase its prices for the coming year. Identify the impact of this decision a. Willingness to Pay for Geronimo's product may go up b. Geronimo is likely to lose market share c. Geronimo is likely to see an increase in market share d. None of the above
b
10) ________ most precisely measures how well a company leverages its fixed assets, particularly property, plant, and equipment (PPE). A) Working capital turnover B) Fixed asset turnover C) Capital leverage ratio D) Fixed assets to equity ratio
b
11) Wear Crush Inc. is an apparel company known for its affordable clothes that follows a cost-leadership strategy. In this scenario, Wear Crush should ideally compare its strategic position with: A) a company that sells wristwatches at affordable prices. B) an apparel company popular among price-conscious customers. C) an online company that sells customized pet clothing. D) a luxury apparel company that sells designer clothes.
b
12) Green Curry is a restaurant that caters to the needs of a small percentage of highly health-conscious consumers. It has an all-organic, vegan menu. Since there are very few restaurants that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Green Curry is following a ________. A) product diversification strategy B) focused differentiation strategy C) liquidation strategy D) mass market strategy
b
13) The resource-based view of a firm assumes that the: A) resources of firms are highly scarce and hence the government interferes to ensure equal distribution. B) resource bundles of firms competing in the same industry are unique to some extent and thus differ from one another. C) resource bundles of firms competing in the same industry tend to be highly mobile, moving easily from firm to firm. D) resources of firms are highly exhaustible and hence they cannot contribute to their competitive advantage.
b
14) The telecom industry in the country of Andalus is an industry characterized by the presence of strong network effects, high brand loyalty, high economies of scale, and proprietary technology among incumbent firms. Thus, in the telecom industry, the: A) entry barriers are most likely non-existent. B) threat of new entrants is most likely low. C) threat of substitutes is most likely high. D) bargaining power of buyers is most likely low
b
16) ________ indicates how much a firm benefits from interest-free loans extended by its suppliers and creditors. A) Inventory turnover B) Payables turnover C) Assets turnover D) Receivables turnover
b
18) Which of the following will hamper a differentiator's ability to achieve a competitive advantage? A) Lower production costs B) Lower value gap C) Customized goods D) Premium prices
b
19) Onyx Tech 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 Onyx Tech Inc. to increase its profitability by lowering its production costs. Thus, Onyx's competency in designing and manufacturing microprocessors will be considered a(n) ________ resource in the VRIO framework. A) perishable B) valuable C) tangible D) inexhaustible
b
20) When Internet service providers offer free routers for subscriptions to their wireless Internet packs, the perceived value of the service offering increases. In this case, the value driver would be: A) economies of scale. B) availability of complements. C) experience-curve effects. D) learning-curve effects.
b
21) Value drivers contribute to a firm's competitive advantage only if: A) the decrease in perceived value leads to an increase in costs. B) the increase in value creation exceeds the increase in costs. C) they can restrict the firm from claiming a premium price for its products. D) they can shrink the firm's value gap.
b
21) Which of the following competitively important assets is typically excluded from a firm's balance sheet? A) Accounts payable B) Customer experience C) Land and building D) Patents
b
22) The relative bargaining power of suppliers is high when: A) suppliers depend heavily on the industry for a large portion of their revenues. B) suppliers provide products that are differentiated. C) incumbent firms can credibly threaten to backward integrate into the industry. D) incumbent firms face low supplier switching costs.
b
24) Which of the following features about a buyer indicates that the buyer has high bargaining power? A) When the buyer cannot credibly threaten to backwardly integrate into the industry. B) When the buyer operates in an industry where products are undifferentiated. C) When the buyer faces high switching costs. D) When the buyer cannot purchase specific products from other sellers.
b
25) In the context of the resource-based model of competitive advantage, if a successful firm exhibits resource immobility it means that the: A) competitors can easily replicate or copy the firm's resource bundles and capabilities. B) firm will have a sustained competitive advantage because of its unique resources. C) resources of the firm cannot be effectively deployed within its own organization. D) rival firms have better accessibility to quality resources.
b
25) While industry forces have been favorable for a long time in the U.S. automotive industry, recent dynamics have lowered the profit potential of competing in this industry and thus reduced its attractiveness. The continued success of Tesla Motors in the industry will depend on other firm and industry factors. Which of the following represents one such factor that directly affects Tesla Motors? A) There is a lack of balance in demand and supply: demand far exceeds capacity within the industry. B) Since suppliers of its key sources are few, the bargaining power of suppliers is high. C) Since individual buyers do not have many choices, their bargaining power is low. D) There is a noticeable absence of complementary products and services for the industry.
b
41) When a firm operates at the minimum efficient scale, the: A) firm experiences diseconomies of scale. B) returns to scale are constant. C) cost per unit is the highest. D) firm attains the highest cost position.
b
27) Which of the following is a disadvantage of measuring firm performance through total return to shareholders and firm market capitalization? A) These tools fail to indicate how the stock market views all available public information about a firm's expected future performance. B) Market volatility makes it difficult to assess firm performance through these measures, particularly in the short term. C) These tools measure competitive advantage in absolute terms rather than relative terms. D) Only the book value of the share prices is taken into account when applying these measures, and not the market value.
b
27) Which of the following is a drawback of Porter's five forces model? A) The model describes competition narrowly as a firm's closest competitors. B) Managers cannot determine the changing speed of an industry or the rate of innovation. C) The model fails to consider that threat of substitutes can come from outside a given industry. D) It fails to provide a basis for deriving implications for a firm's strategic position within an industry.
b
27) While Aros Inc. incurs a cost of $20 for a pair of shoes, Shoes Cult Inc., its competitor, manufactures a pair of shoes at $22. Both the companies are able to sell their shoes for a maximum of $30 per pair. Which of the following statements is NOT true in this scenario? A) Aros has created a greater economic value than Shoes Cult. B) Shoes Cult has a competitive advantage over Aros. C) Both Aros and Shoes Cult have achieved differentiation parity. D) Aros is a cost leader when compared to Shoes Cult.
b
28) TrueCandy Inc., a confectionery manufacturing company, lost its competitive advantage when its strategy of placing kiosks at prominent locations throughout the state was followed by most of its competitors. In this scenario, TrueCandy Inc.'s loss of competitive advantage can be primarily attributed to ________. A) technology convergence B) knowledge diffusion C) divergent production D) resource immobility
b
29) Evia Cycles Inc. incurs $400 to manufacture a bicycle, and the maximum price customers are willing to pay is $550 per unit. Archer Cycles Inc., its competitor, incurs $450 to manufacture a similar bicycle, and customers are willing to pay a maximum price of $620 for it. What does this indicate? A) Evia Cycles has a competitive advantage over Archer Cycles. B) Archer Cycles has created a greater economic value than Evia Cycles. C) Both Evia Cycles and Archer Cycles have achieved differentiation parity. D) Both Evia Cycles and Archer Cycles have achieved cost parity.
b
29) ________ is best described as the difference between a buyer's willingness to pay for a product or service and a firm's total cost to produce it. A) Break-even point B) Economic value created C) Consumer surplus D) Cost of capital
b
31) Both Vibrant Phones Inc. and Oryxo Inc. incur a cost of $200 to manufacture a single unit of a cell phone. However, Vibrant Phones creates more economic value than what Oryxo does. What does this imply? A) Oryxo has a competitive advantage over Vibrant Phones. B) Vibrant Phones sells its products at a better price than Oryxo. C) Oryxo's offering has greater total perceived consumer benefits than Vibrant Phones' offering. D) Vibrant Phones and Oryxo have achieved a competitive parity.
b
33) Otion Inc. is a relatively new firm in the consumer electronics industry. The company's primary objective is to become the market leader in less than 5 years, for which it has to gain and sustain a competitive advantage. In the context of the VRIO framework, which of the following resources should Otion Inc. primarily focus on to achieve its objective? A) Inexpensive unskilled labor that is easily accessible by all companies B) Production systems that reduce costs by 30 percent below the current industry standards C) Quality standards, which are common and mandatory throughout the industry D) Component parts that are sourced from competitors' suppliers
b
33) ________ denotes the dollar amount a consumer would attach to a good or service. A) Utility B) Value C) Economic contribution D) Consumer surplus
b
36) After trying on a dress, a consumer assesses it to be worth a maximum of $100 and is willing to pay that amount for the dress. However, the dress was priced at $80. What is the amount, $100, referred to as? A) The firm's cost (C) in manufacturing the dress B) The value (V) the consumer attaches to the dress C) The producer surplus D) The consumer surplus
b
36) Even though many valuable, rare, and inimitable resources were generated at Xerox's Palo Alto Research Center (PARC), the management at Xerox's headquarters failed to gain a competitive advantage by exploiting the breakthroughs in computing software and hardware. What is the most likely implication of this example? A) Competitive advantage cannot be gained through unrelated diversification. B) A firm must be effectively organized to capture value. C) It is better to build competitive advantage on tangible assets rather than intangible assets. D) It is advisable to outsource research and development functions.
b
38) Gina paid $900 for a camera that she thought was worth $1100 for all the features included in it. For the consumer electronics firm selling the camera, however, the cost of producing the camera was only $350. What is the consumer surplus in this scenario? A) $900 B) $200 C) $550 D) $1100
b
39) Economic value creation is best expressed as ________. A) producer surplus minus consumer surplus B) consumer surplus plus firm profit C) producer surplus plus firm profit D) consumer surplus minus cost of production
b
4. Motor Cult Inc. is an automobile firm whose core competency lies in manufacturing petrol- and diesel-based cars. The industry has been going through some ups and downs with the advent of electric cars. The firm has observed from experience that more of its potential customers are switching to electric cars. To learn more about the industry the firm is considering looking at market reports offered by different consultants. The firm has received four different market reports with different numbers and hence are confused as to which market report is more accurate. Based on your understanding of industry analysis, which of these market reports are consistent with the observation that electric cars are taking over petrol/diesel-based cars: a. Report 1: Buyer Bargaining power = 2 and Threat of substitutes = 4 b. Report 2: Buyer Bargaining power = -8 and Threat of substitutes = 6 c. Report 3: Rivalry = 1800 and Threat of substitutes = 5 d. Report 4: Buyer Bargaining power= -4, Rivalry = 2900 and Threat of substitutes= - 2
b
41) ________ describes a process in which the options one faces in a current situation are limited by decisions made in the past. A) Social complexity B) Path dependence C) Causal ambiguity D) Cannibalization
b
43) When fashion magazines face competition from fashion blogs on the web, which of the following forces in Michael Porter's five forces model primarily gets stronger? A) The availability of complements B) The threat of substitutes C) The emergence of entry barriers D) The bargaining power of suppliers
b
43) ________ describes a situation in which the cause and effect of a phenomenon are not readily apparent. A) Resource immobility B) Causal ambiguity C) Social complexity D) Resource heterogeneity
b
45) A firm experiences ________ when there are increases in cost per unit as output increases. A) economies of flow B) diseconomies of scale C) time compression diseconomies D) economies of scope
b
46) When Jean Cult Inc. was operating at the minimum efficient scale of 10,000-12,000 units per month, the firm's cost per unit was $20. However, when the output level was increased beyond 12,000 units, the cost per unit increased to $22. This increase was attributed to the wear-and-tear of the machinery, and complexities of managing and coordinating. What is this phenomenon known as? A) Network effect B) Diseconomies of scale C) Learning-curve effect D) Resource ambiguity
b
47) True Autos Inc. has been trying to directly copy the strategies of Red Autos Inc. Even though it is evident that Red Auto's Inc.'s success comes from its just-in-time inventory system, True Auto's Inc. has not been able to effectively apply the system in the same way. This is because the organizational structures, employees, cultures, and the overall business systems of both the companies vary from each other. Which of the following barriers to imitation does this scenario best illustrate? A) Path dependence B) Social complexity C) Resource homogeneity D) Resource mobility
b
49) 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 said to be ________. A) non-substitutable B) socially complex C) inexhaustible D) non-ambiguous
b
5) A high percentage of R&D/Revenue ratio indicates a(n): A) strong focus on marketing and sales to promote products and services. B) strong focus on innovation to improve current products and services. C) negligent investment toward research and development. D) inefficiency in the management to focus on new products.
b
50) Which of the following is an advantage of applying the economic value creation perspective to assess a firm's performance? A) It is the most efficient tool for assessing corporate-level competitive advantage of highly diversified companies with large product portfolios. B) In economic value perspective, analysts not only consider historical costs, but also opportunity costs. C) Arriving at the economic value created is easy because determining the value of a good in the eyes of consumers is a simple task. D) When the need for "hard numbers" arises, managers and analysts rely on economic value creation perspective to measure competitive advantage.
b
52) Which of the following situations will have greater effects from economies of scale than from learning effects? A) When practicing corporate law B) When mass manufacturing pens C) When making business decisions D) When conducting surgeries
b
56) The primary goal of a firm pursuing an integration strategy should be to: A) create the highest perceived value in its respective industry. B) achieve a larger economic value created than that of rivals in the industry. C) build a reputation of being the lowest-cost producer in its chosen industry. D) achieve a less steeper learning curve.
b
56) Which of the following approaches to assess competitive advantage is based on the view that noneconomic factors can have a significant impact on a firm's financial performance? A) The balanced scorecard B) The triple-bottom-line approach C) The accounting profitability approach D) The economic value creation framework
b
58) The top management at BioTrue Pharma Inc. through rigorous testing ensures that the company develops and sells drugs that are free of harmful side-effects. Also, the company ensures that the chemical waste generated in the manufacturing process is kept to a bare minimum and is disposed of according to the regulations of the Environmental Protection Agency. The management assesses its overall performance based on these dimensions. Thus, the managers at Bio True Pharma are applying the ________ approach to measure firm performance. A) accounting profitability B) triple bottom line C) economic value creation D) shareholder value creation
b
60) The translation of strategy into action primarily takes place in a firm's ________. A) mission statement B) business model C) code of conduct D) executive summary
b
65) When a firm is successful at pursuing an integration strategy, ________. A) low cost acts as a substitute B) investments in differentiation are complements C) value and cost exhibit a positive correlation D) investments in process and product technologies are substitutes
b
66) An integration strategy differs from a low-cost strategy in that: A) economies of scale are more important to an integrator, while economies of scope are more important to a cost leader. B) the intent of an integration strategy is not to be the absolute lowest-cost provider because an integrator must also increase perceived value. C) the focus of an integrator is on lowering the economic value created, whereas a cost leader focuses on increasing the economic value created. D) an integrator's research and development focus is on process technologies, and a cost-leader's focus is on product technologies.
b
7) The working capital turnover of Tesva Systems Corp. is 6.0. What does this financial data suggest? A) For every $6.00 Tesva Systems puts to work, the company realizes a sales of $1.00. B) For every dollar Tesva Systems puts to work, the company realizes $6.00 of sales. C) For every dollar Tesva Systems puts to work, the company realizes $6.00 in loss. D) For every $6.00 Tesva Systems puts to work, the company incurs a cost of $1.00.
b
8) The working capital of a small home-based business is $200,000. The revenues generated account to $600,000, and the profits incurred are $300,000. What would be the company's working capital turnover? A) 2, that is, $600,000/$300,000 B) 3, that is, $600,000/$200,000 C) $300,000, that is, $600,000 - $300,000 D) $100,000, that is, $300,000 - $200,000
b
9) The fixed asset turnover of a company is 8.3. What do you infer from this? A) The cost of capital invested on fixed assets is 8.3% of the total profit. B) Every dollar spent on the company's fixed assets generates $8.30 of revenue. C) The return on fixed assets will break even in 8.3 years. D) 8.3% of the company's revenue is invested in fixed assets.
b
12) Keeping in mind the five forces in the airline industry, which of the following best explains the situation in the industry? A) Entry barriers in the industry are high resulting in hardly any new airlines popping up. B) Consumers in the industry make decisions based on price, thus reducing the intensity of rivalry in the industry. C) Substitutes are readily available in the form of trains and buses, thus reducing the profit potential in the industry. D) Suppliers have weak bargaining power because they offer products that are not differentiated.
c
13) ________ indicates how fast a firm is collecting the credit amount extended by a firm to its customers. A) Payables turnover B) Assets turnover C) Receivables turnover D) Inventory turnover
c
18) If a resource is rare or unique to a particular firm, then: A) the industry in which the firm operates will experience perfect competition. B) it will be less costly for rivals to imitate the resource. C) the firm will be able to maintain a competitive advantage for a long period. D) the mobility of the resource will be high.
c
19) Bass Watches Inc. initially spent eight man-hours to assemble a wrist watch. But as the production doubled, the number of hours spent on assembling a watch reduced by 20 percent. This increase in productivity reduced the company's cost per unit. What is this phenomenon referred to as? A) Black-swan event B) Network effect C) Learning-curve effect D) Time compression diseconomies
c
19) In the fiscal year 2012, BlackBerry's Cost of goods sold (COGS)/Revenue ratio was higher than that of its competitor, Apple. This implies that BlackBerry needs to work toward: A) increasing its fixed costs and decreasing its variable costs. B) lowering its inventory turnover. C) driving down its costs. D) reducing its return on revenue.
c
20) Gene Craft Inc. is the market leader in the pharmaceutical 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 Gene Craft Inc. is most likely to be considered a rare resource that is best contributing to its competitive advantage? A) The company's raw material supplies B) The company's plant and machinery C) The company's chemical patents D) The company's land and buildings
c
21) 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? A) In perfect competition, it is extremely difficult to replicate the resource bundles of a firm, whereas in the resource-based model, it is extremely easy to imitate them. B) In the resource-based model, resources are freely available and mobile, whereas in the perfectly competitive industry structure, resources are highly immobile. C) 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. D) In the resource-based model, only physical assets of a firm are considered as resources, whereas in perfect competition, a firm's capabilities and competencies are also considered as resources.
c
22) Body Sync 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, Body Sync's primary value driver is: A) experience-curve effects. B) learning-curve effects. C) availability of complements. D) economies of scale.
c
22) ________ are the legal owners of public companies. A) Employees B) Creditors C) Shareholders D) Category captains
c
23) Whole Foods differentiates itself from competitors by offering top-quality foods obtained through sustainable agriculture. This business strategy implies that Whole Foods focuses on: A) maintaining a less steeper learning curve as compared to its competitors. B) lowering its costs compared to its competitors', while offering adequate value for its products and services. C) increasing the perceived value created for customers, which allows it to charge a premium price. D) decreasing the existing value gap by providing luxury goods to customers.
c
24) A firm has 30 million shares outstanding, and each share is traded at $100. Also, each shareholder gets a dividend of $2000 annually. In this case, the market capitalization is ________. A) $200,000, that is, $2000 × $100 B) 30,000 shares, that is, 30 million shares/$100 C) $3 billion, that is, 30 million shares × $100 D) 20:1, that is, $2000/$100
c
25) A firm experiences diseconomies of scale when it: A) has a constant returns to scale. B) has a steep learning curve when compared to its competitors. C) produces at an output level beyond the minimum efficient scale. D) moves down the experience curve.
c
25) The market capitalization of a public company is $5 billion. Each share of the company is traded at $200. What do you infer from this financial data? A) The firm's total return to shareholder is $5 billion. B) The firm's economic value created is $5 billion. C) The firm's number of outstanding shares is 25 million. D) The firm pays an annual dividend of 10 percent.
c
26) Which of the following expressions accurately describes market cap? A) It is the difference between a firm's account receivables and account payables. B) It is the ratio of a firm's equity finance and its debt finance. C) It is the product of the number of outstanding shares and the share price. D) It is the difference between the book value and the market value of a firm's assets.
c
27) As a result of ________, a critical assumption in the resource-based model of a firm, the resource differences that exist between firms are difficult to replicate. A) resource equality B) resource homogeneity C) resource immobility D) resource perishability
c
29) When the knowledge of a valuable and rare resource diffuses throughout an industry, the: A) structure of the industry will no longer be perfectly competitive. B) ability to sustain a competitive advantage will be restricted to one firm. C) firms in the industry will be better positioned to achieve competitive parity. D) mobility and homogeneity of the resource will decrease.
c
3) True Machine Inc. and One Electrona Inc. are two competing consumer electronics companies. While True Machine's COGS/Revenue is 66%, One Electrona's is 74%. What do you infer from this financial data? A) One Electrona has a competitive advantage over True Machine. B) One Electrona is more efficient than True Machine by eight percentage points. C) True Machine's profit margin is higher than that of One Electrona. D) True Machine should focus more on driving down costs, while increasing revenues, and One Electrona should focus more on increasing its fixed asset turnover
c
3) When a firm makes choices between a cost or value position to achieve competitive advantage, it is primarily involved in ________. A) arbitration B) collective bargaining C) strategic trade-offs D) mediation
c
30) Even without differentiation parity, a firm pursuing a cost-leadership strategy can still gain a competitive advantage as long as its: A) value gap is lower than that of its competitors. B) learning curve is not steeper than that of its competitors. C) economic value creation exceeds that of its competitors. D) per-unit costs are higher than that of its competitors.
c
31) Which of the following factors contributes to the success of the cost-leadership strategy of Ryanair airlines? A) The luxury services B) The lower value gap C) The rock-bottom air fares D) The high input costs
c
31) With regard to the VRIO framework, Crocs Shoes was unable to sustain its competitive advantage primarily because its products were: A) non-substitutable. B) invaluable and common. C) easy to imitate. D) extremely expensive.
c
35) Pulse Mobiles Inc. is a cell phone manufacturing company. Its latest range of smartphones bears a straight resemblance to the Y-series range of smartphones from Talkie Gen Inc., in terms of its shape and look-and-feel. Which of the following strategies has Pulse Mobiles Inc. used to replicate the valuable and rare resource of Talkie Gen Inc.? A) Substitution B) Innovation C) Direct imitation D) Strategic equivalence
c
36) ________ is best described as decreases in cost per unit as output increases. A) Time compression economies B) Economies of replication C) Economies of scale D) Economies of scope
c
37) ________ are barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy. A) Market niches B) Cartel arrangements C) Isolating mechanisms D) Embargoes
c
39) Brown Foods Inc., a leading chocolate producer, anticipated that the prices of cocoa beans would double in less than three years. This would disrupt the availability of cocoa in the industry. Thus, Brown Foods Inc. decided to purchase cocoa plantations in Ghana. As predicted, the prices of cocoa increased twofold. Because of the company-owned cocoa plantations, Brown Foods Inc. was able to sustain its competitive advantage in turbulent times. Which of the following isolating mechanisms does this scenario best illustrate? A) Causal ambiguity B) Time compression diseconomies C) Better expectations of future resource value D) Social complexity
c
4) Firms pursuing a differentiation strategy primarily seek to: A) keep their cost structures lower than that of the cost leader. B) reduce the value gap to gain a competitive advantage. C) create higher customer perceived value than the value that competitors create. D) provide products that are a direct imitation of the competitors' products.
c
4) Which of the following is an example of a firm's resources? A) Liabilities such as bills payables and short-term debts B) Routine activities like order taking and invoicing customers, performed in a firm C) Assets such as land and building owned by a firm D) Assistance available from the government in the form of rules and regulations
c
42) To be cost-competitive, a firm should: A) attain the highest cost position. B) position itself below the productivity frontier. C) operate at the minimum efficient scale. D) avoid moving on to a steeper experience curve.
c
43) By selling a laptop at $1000 for which consumers are willing to pay up to $1200, a consumer electronics firm makes a profit of $400 per unit. In this scenario, the amount $600, that is ($1200 - $1000) + $400, is the ________. A) opportunity cost B) consumer surplus C) economic value created D) reservation price
c
45) 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 ________. A) social complexity B) path dependence C) causal ambiguity D) dependence complexity
c
46) Vior Systems Inc. took many decades to build its core competencies, and these competencies were based primarily on the decisions made by the company's top management in the past. This process is called: A) causal dependence. B) dependence complexity. C) path dependence. D) path immobility.
c
46) ________ are best described as the value of the best forgone alternative use of the resources employed. A) Social costs B) Switching costs C) Opportunity costs D) Variable costs
c
47) A successfully implemented integration strategy allows a firm to: A) reduce its value gap beyond that created by the cost leader in the industry. B) create lesser economic value than the differentiator in the industry. C) charge a higher price than the cost leader in the industry. D) increase its price above that of the differentiator in the industry.
c
47) Samantha is a recent fashion graduate. She started her own apparel store with an investment of $300,000. In the first year she made a profit of $60,000. If she had taken up a job as a fashion editor for a magazine, she would have earned $50,000 as salary per year. Also, she could have invested her capital, $300,000, in treasury bonds and earned an interest of $12,000. Thus, the amount $62,000 ($50,000 + $12,000) would be Samantha's ________. A) social cost B) reservation price C) opportunity cost D) break-even price
c
48) As the cumulative output in a firm increases, managers learn how to optimize the production process and improve workers' performance through repetition. This drives down the per-unit cost. Which of the following phenomena is best described here? A) Productivity frontier B) Network effects C) Learning effects D) Diseconomies of scale
c
49) When GD Inc. declared a dividend of $20,000,000, its market value increased from $8 billion to $8.5 billion. However, it lost a chance to reinvest $20,000,000 in the research and development of a new product which would have earned a profit of $200 million. Thus, this $200 million is referred to as GD Inc.'s ________. A) producer surplus B) social cost C) opportunity cost D) consumer surplus
c
5. Green Curry is a restaurant that caters to the needs of a small percentage of highly health-conscious consumers. It has an all-organic, vegan menu. Sincere there are very few restaurants that offer the same unique services, customers are willing to pay a premium price for its products and services. Through market research the company estimates that if they increase price by 1%, their demand is likely to increase by around 3%. Meanwhile, Red Curry is a restaurant that does not offer organic vegan menu. Through market research, Green Curry also finds that increase their price by 1% will lead to a decline in demand for Red Curry's products by around 2% In this backdrop the optimal decision for Green Curry is to? a. Maintain price parity with competitors. b. Reduce price over its competitors. c. Increase price over its competitors. d. Focus less on price and work on cutting costs.
c
50) Which of the following statements is true of learning curves? A) The steeper the learning curve, the lesser the learning effects. B) Learning curves are captured at one point in time when output is increased. C) Learning curves can be observed in manufacturing processes and professional services. D) As cumulative output increases, the learning curve becomes less steeper.
c
51) Which of the following is NOT a limitation of the economic value creation framework? A) The framework cannot be effectively applied for assessing corporate-level performance of diversified conglomerates. B) The framework falls short when managers are called upon to operationalize competitive advantage. C) The framework fails to provide the foundation that will help firms decide between cost-leadership or differentiation strategies. D) The framework is not as effective as accounting profitability or shareholder value creation when the need for "hard numbers" arises.
c
52) When using the balanced scorecard approach to assess a firm's performance, which of the following is NOT a key question that managers need to answer? A) How do shareholders view us? B) What core competencies do we need? C) How do we reduce the economic value created? D) How do customers view us?
c
53) Which of the following statements is true of the balanced scorecard? A) Its primary focus is to base a firm's strategic goals entirely on external performance dimensions. B) It is one of the traditional approaches of measuring firm performance. C) It attempts to provide a holistic perspective on firm performance. D) It is a more or less a one-dimensional metric of measuring competitive advantages of a firm.
c
54) When a firm combines experience based learning and process innovation, the firm: A) experiences an increase in per-unit cost. B) moves down the existing learning curve. C) jumps to a steeper learning curve. D) loses its competitive advantage.
c
57) Which of the following statements is true of the triple bottom line? A) Its primary focus is to base a firm's strategic goals entirely on external performance dimensions. B) According to this approach, achieving positive results in any one of the dimensions, economic, social, and ecological, can lead to a sustainable strategy. C) Three dimensions, economic, social, and ecological, make up the triple bottom line. D) It is more or less a one-dimensional metric of measuring competitive advantage of a firm.
c
59) A differentiation strategy works best when a: A) firm's focus of competition shifts to price, and when increasing differentiation of product features do not create additional value. B) firm's differentiated products are commoditized, and costs of providing uniqueness do not rise above the customer's willingness to pay. C) firm has intangible resources, is able to pass on increases in supplier cost to the customer, and its differentiation appeal creates customer loyalty. D) firm has tangible resources, its focus of competition shifts to price, and equivalent substitutes are readily available.
c
59) Using the ________ approach, managers audit their company's fulfillment of its social and ecological obligations to stakeholders such as employees, customers, suppliers, and communities as conscientiously as they track its financial performance. A) accounting profitability B) shareholder value creation C) triple-bottom-line D) economic value creation
c
6) Free Color Inc. is an apparel company that caters to the 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 Free Color applying? A) Differentiation B) Product diversification C) Cost-leadership D) Niche marketing
c
61) ________ is best described as the process of manufacturing a large variety of tailor-made products or services at a relatively low unit cost. A) Product diversification B) Unit-cost production C) Mass customization D) Just-in-time manufacturing
c
62) BodyBlush Inc. is a brand reputed for its wide variants of body wash that introduced its range of shampoos and skin moisturizers 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 BodyBlush applying? A) Learning-curve effect B) Mass customization C) Economies of scope D) Network effect
c
63) Which of the following drivers simultaneously increases value while lowering cost? A) Economies of scale B) Superior customer service C) Innovation D) Availability of complements
c
8) Coral Think Inc. is a new company in the publishing industry. It 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 Coral Think Inc. to acquire using its capital? A) Tools and equipment B) Land and building C) Brand name D) Inventory
c
10) Diseconomies of scale refer to: A) increases in economic value as per-unit cost decreases. B) decreases in profit when consumer demand decreases. C) decreases in cost as profit increases. D) increases in cost as output increases.
d
11) Which of the following best expresses fixed asset turnover? A) Fixed assets/Total return to shareholders B) Fixed assets/Current liabilities C) Current assets/Fixed assets D) Revenue/Fixed assets
d
13) A company that uses a differentiation strategy can achieve a competitive advantage as long as its: A) products and services create a lower consumer surplus than that of its competitors. B) strategic position is below the productivity frontier. C) value gap is lower than that of its competitors. D) economic value created is greater than that of its competitors.
d
13) Which of the following statements is NOT true about the five forces in Porter's competitive analysis model? A) The relative strengths of the five forces that shape competition are context-dependent. B) Competition in the model is described as the tug-of-war between the five forces to capture as much as possible of the economic value created in an industry. C) An analysis of the five forces provides the basis for how a firm should position itself to gain and sustain a competitive advantage. D) The stronger the five forces in an industry, the greater the industry's profit potential.
d
14) Return on risk capital primarily includes: A) account receivables plus account payables. B) economic value created by a firm plus reservation price. C) consumer surplus plus firm profit. D) stock price appreciation plus dividends received over a specific period.
d
16) The "Gold Crisps" potato wafers manufactured by True Foods Inc. have been the highest selling wafers in the market. Though the market for wafers is flooded with competitors, True Foods Inc. has been able to maintain its market position for a long time. This is mainly attributed to the unique taste of the wafers that comes from the unique natural flavoring used by the company. This competency of True Foods Inc. will be considered as a(n) ________ resource in the VRIO framework. A) intangible B) virtual C) inexhaustible D) rare
d
17) Connect Plus Cellular is a leading mobile network operator. Since most of the resources used by Connect Plus Cellular is easily available, the company's brand name is the only resource that distinguishes it from the other operators. No other competitor in the industry has a strong brand name like that of Connect Plus Cellular. This unique asset that has helped the company gain a competitive advantage will be considered as a(n) ________ resource in the VRIO framework. A) imperishable B) mobile C) tangible D) rare
d
17) The payable turnover for Apple and BlackBerry (as of fiscal year 2012) was 7.4 and 24.8 respectively. From this data we can conclude that: A) BlackBerry can extend its payment periods, while Apple is required to pay its creditors more quickly. B) BlackBerry has a clear advantage over Apple as its credits are paid much faster than that of Apple. C) BlackBerry has taken a longer time to pay its creditors as compared to Apple. D) Apple has been more efficient than Blackberry in paying creditors and generating interest-free loans from suppliers.
d
18) The receivables turnover of GD Products Inc. is 13.6 and that of its competitor, AP Goods Inc., is 6.0. What does this financial data primarily imply? A) GD Products is less efficient than AP Goods in collecting accounts receivables. B) AP Goods has a larger value gap as compared to GD Products. C) AP Goods pays its creditors more quickly as compared to GD Products. D) GD Products collects accounts receivables faster than what AP Goods does.
d
2) A firm's business strategy will lead to a competitive advantage if it allows the firm to: A) reduce the value gap. B) position itself below the productivity frontier. C) execute the same activities performed by the rivals in a similar manner. D) perform different activities than its rivals.
d
2) ________ are best described as unique strengths, embedded deep within a firm, that allow 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. A) Resource leverages B) Equity reserves C) Capital gains D) Core competencies
d
23) In the context of the resource-based model of competitive advantage, which of the following scenarios best exemplifies resource immobility? A) Blue Elixir Corp. has been able to gain a competitive advantage because of its ability to efficiently move its resources from one manufacturing unit to another. B) AP Corp. has earned a good reputation among its shareholders by investing more in tangible assets over intangible assets. C) Two Triangle Inc. has lost its market share because its resources are not mobile, that is rigid, inflexible, and static. D) True 3 Inc. has been able to outperform its competitors because the uniqueness of its resources is difficult to replicate.
d
24) Although True Ion Inc. and One Electro Inc. operate in the same consumer electronic industry, True Ion Inc. has better sales and brand equity. This is attributed to True Ion Inc.'s commitment to innovation. The company has adequate financial and human capital to invest in research and development, an area where One Electro Inc. lacks. In this scenario, which of the following critical assumptions of the resource-based view of a firm has been illustrated? A) Resource mobility B) Resource maturity C) Resource equality D) Resource heterogeneity
d
24) Which of the following statements accurately brings out the difference between economies of scale and learning effects? A) Economies of scale reduce cost per unit, learning effects increase cost per unit. B) Economies of scale occur over time, whereas learning effects are captured at one point in time. C) Firms experience economies of scale when output increases, and learning effects when output decreases. D) While there are no diseconomies to learning, there are diseconomies to scale.
d
26) A firm achieves differentiation parity ideally when: A) its product features and services are better than that of its competitors. B) it successfully sells its products and services at a higher price than its competitors. C) its cost of production is higher than that of its competitors. D) it creates the same customer value as its competitors.
d
26) When applying the five forces model, the first step should ideally be: A) assessing the overall industry structure. B) drawing a strategic group map. C) identify the underlying drivers of each force. D) defining the relevant industry.
d
3. Clare, the CEO of Femica Inc., reads a market report which shows that the price elasticity of demand as measured by the change in demand for the products of Femica Inc. for a given change in the price of the product produced by the firm is around 4. Based on this piece of information, what should Femica do? a. Increase Price b. Decrease Price c. Hold Price constant d. Insufficient Information for Pricing decision
d
30) Sarah has recently started a restaurant in a commercial area where there are many other established restaurants and popular fast food chains. Sarah owns the plot on which her restaurant is located and this makes her cost of operations lower than the competitors. This factor allows her to offer her products at a competitive price. Sarah has also invested a huge amount on the interiors of the restaurant and in equipping the kitchen with the latest appliances used by her competitors. In this scenario, which of the following is the most valuable resource for Sarah's business? A) The restaurant's late entry into the market B) The investments made by Sarah on the restaurant's interiors C) The latest kitchen equipment that is at par with the restaurant's competitors D) The land owned by Sarah, which reduces cost of operations
d
32) A firm incurs $100 to manufacture an office table. It fixes the market price of the table as $250, and discounts the price to $200. However, the maximum a person is willing to pay for it is $180. What is the amount of total perceived consumer benefits in this scenario? A) $200 B) $100 C) $250 D) $180
d
35) Which of the following statements accurately brings out the difference between economies of scale and economies of scope? A) Economies of scale refer to the decreases in per-unit cost with decreases in output, whereas economies of scope refer to the increases in per-unit cost with increases in output. B) Economies of scale result in decreasing returns to scale, and economies of scope result in constant returns to scale. C) Economies of scope are realized when a firm operates at the minimum efficient scale, whereas economies of scale are realized when the firm operates beyond the minimum efficient scale. D) Economies of scope are the savings that come from producing two or more outputs from the same resources, whereas economies of scale are decreases in per-unit cost with increases in output.
d
37) Economies of scale do NOT allow firms to: A) take advantage of certain physical properties. B) employ specialized systems and equipment. C) spread their fixed costs over a larger output. D) spread their variable costs over a larger output.
d
38) The share price of Groupon, a daily-deal website, fell by 90 percent just a year after its successful initial public offering. The firm was not able to sustain its competitive advantage because of the emergence of other daily-deal sites that were able to better serve the needs of local markets and specific population groups. Which of the following is the most accurate inference from this example? A) Groupon operated in an industry where the barriers to entry were high. B) Groupon's competency was built more on an intangible resource than on a tangible one. C) Groupon invested in resources that were invaluable and common. D) Groupon's competency was not hard to imitate.
d
38) ________ 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. A) Optimum sustainable yield B) Maximum output capacity C) Break-even output D) Minimum efficient scale
d
4) From an investors' or shareholders' perspective, the measure of competitive advantage that matters most is the ________. A) consumer surplus B) inventory turnover C) economic value created D) return on risk capital
d
40) Osion Electronics Inc. incurs a cost of $350 to produce one unit of a cell phone. The company's management has priced the product at $600 in the market. Considering the technological advancement of the cell phone, customers perceive its value to be around $800. What is the economic value created in this scenario? A) $800 B) $350 C) $200 D) $450
d
42) Mova Electronics, a leading pager manufacturer, recently declared itself bankrupt. This was attributed to a decision the company made in the past. While most of Mova's competitors were shifting their research focus toward cell phones, Mova invested most of its retained earnings on improvising its pagers. Once the pager market drastically declined, Mova Electronics was unable to capitalize on the new technology. Which of the following does this scenario best illustrate? A) Causal ambiguity B) Social complexity C) Knowledge diffusion D) Path dependence
d
44) BuyMart 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 BuyMart's low prices. Thus, BuyMart has a competitive advantage due to its: A) time compression economies. B) learning-curve effects. C) superior customer service. D) economies of scale.
d
44) How does causal ambiguity act as an isolating mechanism for organizations? A) It makes it difficult for competitors to imitate core competencies quickly due to time compression diseconomies. B) It makes it difficult for competitors to deploy their resources by creating ambiguity within their organizational structures. C) It creates a situation in which different social and business systems interact with one another. D) It makes it difficult for the competitors to understand why a company has been so successful.
d
45) In order to achieve a competitive advantage, a firm should be able to: A) keep its producer surplus low. B) increase the difference between consumer surplus and its profits. C) increase its payable turnover. D) increase the difference between the value created and the cost to produce it.
d
54) Which of the following is an advantage of the balanced scorecard? A) The balanced scorecard is independent of the skills of the managers responsible for its implementation. B) Its implementation is a one-time effort and does not require continuous tracking of metrics or updating of strategic objectives. C) It is a tool for both strategic formulation and strategic implementation. D) It allows managers to translate a firm's vision into measureable operational goals.
d
55) GlamorRace is a cosmetic brand that pursues a cost-leader strategy. Which of the following statements is true of the cosmetic brand? A) It directly competes against luxury cosmetic brands that charge premium prices. B) It charges a premium price for its products. C) Its primary value driver is product uniqueness. D) It appeals to the price-conscious buyers.
d
55) Which of the following is NOT an advantage of the balanced scorecard approach to assess firm performance? A) It helps managers to implement feedback and organizational learning in order to modify and adapt strategic goals when indicated. B) It provides a concise report that tracks chosen metrics and measures and compares them to target values. C) It allows managers to communicate and link the strategic vision to responsible parties within an organization. D) It is a tool which can be effectively used by managers for both strategic implementation and strategic formulation.
d
58) A differentiator is least likely to be threatened by increases in input prices due to powerful suppliers when the: A) source of a competitor's differential appeal is tangible rather than intangible. B) differentiator is able to significantly reduce the value gap. C) new product features added raise costs but not the perceived value in the minds of consumers. D) differentiator is able to create a significant difference between perceived value and current market prices.
d
6) Intangible assets add great value to a firm primarily because the firm's: A) tangible assets require a higher degree of capital than its intangible assets. B) capabilities are by nature typically tangible. C) reputation and brand equity are accumulated quickly and can be leveraged easily. D) knowledge and culture take time to develop and are generally difficult to imitate.
d
6) ________ is best described as a measure of how effectively capital is being used by a firm to generate revenue. A) Revenue per employee B) Risk capital C) Return on revenue D) Working capital turnover
d
7) GN Corp. and BC Inc. are two competing firms in the same industry. GN Corp.'s tangible assets are valued at $15 billion and its intangible assets are valued at $35 billion. BC 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? A) There is no resource heterogeneity between the two firms, BC Inc. and GN Corp. as they operate in the same industry. B) It is easier to buy intangible assets with cash than tangible assets. C) It takes longer time to build tangible assets than intangible assets. D) It is likely that BC Inc. is better enabled than GN Corp. to gain and sustain a competitive advantage.
d
9) True Empire Autos Inc. is an automobile company known for its luxury cars and follows a differentiation strategy. In this scenario, True Empire Autos should ideally compare its strategic position with a(n) ________. A) automobile company that sells pre-owned cars B) pen manufacturing company that follows a differentiation strategy C) automobile company that manufactures economy cars D) automobile company that sells high-end, premium cars
d
