MGMT Practice Quizzes Ch 5,6,7

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? A) cost-leadership B) differentiation C) niche marketing D) product diversification

A) cost-leadership Benny's Closet is applying the cost-leadership strategy. A cost-leadership strategy seeks to create the same or similar value for customers by delivering products or services at a lower cost than competitors, enabling the firm to offer lower prices to its customers.

As a research scholar, Linda had built a helicam as part of her project. The helicam could capture aerial images. Realizing the potential use of this product in movie production and military and rescue operations, she started a new venture where she could customize these helicams to fit the specific needs of the buyers and sell them. Linda can be best described as a(n) A) entrepreneur. B) category captain. C) franchisor. D) early adopter.

A) entrepreneur. In the context of this scenario, Linda can be best described as an entrepreneur. Entrepreneurs are the agents who introduce change into the competitive system. They do this not only by figuring out how to use inventions, but also by introducing new products or services, new production processes, and new forms of organization. Entrepreneurs can introduce change by starting new ventures.

The balanced-scorecard framework is a tool for strategy ________, not ________. A) implementation; formulation B) analysis; sustainability C) formulation, implementation D) sustainability, economic value creation

A) implementation; formulation The balanced scorecard is a tool for strategy implementation, not for strategy formulation. It is up to a firm's managers to formulate a strategy that will enhance the chances of gaining and sustaining a competitive advantage.

Facebook has become one of the largest media companies in the world, valued at nearly 50 billion in 2019, but hasn't produced a single piece of content. Facebook is an example of a A) pipeline business. B) platform business. C) strategic business unit. D) a typical value chain driven business.

B) platform business. A platform business is an enterprise that creates value by matching external producers and consumers in a way that creates value for all participants.

Assume that the market for print book publishing has entered the maturity stage. Which of the following would most likely exist during this stage? A) a few start-up publishers B) many small to midsized publishers C) a few large publishers D) one large publisher

C) a few large publishers During the fourth stage of the industry life cycle, the industry structure morphs into an oligopoly with only a few large firms.

Karat Packaging has entered a stage in which the demand for their innovative fax machines has declined. Now most customers are buying replacement parts or buying their second fax machine from the firm. What stage in the industry life cycle does this scenario describe? A) growth stage B) maturity stage C) shakeout stage D) decline stage

C) shakeout stage Karat Packaging has entered the maturity stage. Demand was largely satisfied in the prior shakeout stage. Demand now consists of replacement or repeat purchases only.

A firm incurs $400 to manufacture a computer. In the market, customers are willing to pay a maximum of $600 for the computer priced at $500. The difference of $200 ($600 minus $400) is the A) consumer surplus. B) total return to shareholders. C) customer lifetime value. D) economic value created.

D) economic value created. In this scenario, the difference of $200 ($600 minus $400) is the economic value created. Economic value created is the difference between a buyer's willingness to pay for a product or service and the firm's total cost to produce it.In this scenario, the difference of $200 ($600 minus $400) is the economic value created. Economic value created is the difference between a buyer's willingness to pay for a product or service and the firm's total cost to produce it.

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 A) product diversification strategy. B) liquidation strategy. C) broad differentiation strategy. D) focused differentiation strategy.

D) focused differentiation strategy. Bath & Chill is following a focused differentiation strategy. The focused differentiation strategy is the same as the differentiation strategy except with a narrow focus on a niche market, in this case highly health-conscious consumers. A differentiation strategy seeks to create higher value for customers than the value that competitors create, by delivering products or services with unique features while keeping costs at the same or similar levels.

Which of the following is a firm effect that has an impact on the competitive advantage of a firm? A) the exit barriers within the industry in which the firm operates B) the number of companies operating in the industry in which the firm operates C) the intensity of rivalry among existing companies in the firm's chosen industry D) the value and the cost position of the firm relative to its competitors

D) the value and the cost position of the firm relative to its competitors To formulate an effective business strategy, managers need to keep in mind that competitive advantage is determined jointly by industry and firm effects. At the firm level, performance is determined by value and cost positions relative to competitors. This is the firm's strategic position.

Which of the following is a disadvantage of measuring firm performance through total return to shareholders and firm market capitalization? A) Market volatility makes it difficult to assess firm performance through these measures, particularly in the short term. B) These tools fail to indicate how the stock market views all available public information about a firm's expected future performance. 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.

A) Market volatility makes it difficult to assess firm performance through these measures, particularly in the short term. Stock prices can be highly volatile, making it difficult to assess firm performance, particularly in the short term. This volatility implies that total return to shareholders is a better measure over the long term due to the "noise" introduced by market volatility, external factors, and investor sentiment.

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 number of outstanding shares is 25 million. B) The firm pays an annual dividend of 10 percent. C) The firm's total return to shareholder is $5 billion. D) The firm's economic value created is $5 billion.

A) The firm's number of outstanding shares is 25 million. Market capitalization (or market cap) captures the total dollar market value of a company's outstanding shares at any given point in time (Market cap = Number of outstanding shares × Share price).

All of the following are generic business-level strategies except A) broad differentiation. B) focused cost-leadership. C) focused marketing strategy. D) broad cost-leadership.

C) focused marketing strategy. Focused marketing strategy is not one of Porter's identified strategies.

After the creation of social networking websites were introduced, their value increased exponentially as the number of users increased. This is the positive effect of a(n) A) network effect. B) confirmation effect. C) impression management effect. D) user effect.

A) network effect. Network effects occur when the value of a product or service increases, often exponentially, with the number of users, as evidenced by social networking sites.

A disruptive innovation leverages ________ technologies, while architectural innovations are based on ________ technologies. A) new; existing B) existing; novel C) drastic; new D) required; established

A) new; existing A disruptive innovation leverages new technologies, while architectural innovations are based on existing ones.

Connell Inc. 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? A) product features B) economies of scale C) low-cost input factors D) customer service

A) product features The value drivers that support a differentiation strategy are product features, customer service, customization, and complements.

Customer service and ________ are two of the value drivers that managers can utilize when trying to improve a firm's differentiation strategic position. A) product uniqueness B) experience curve C) cost of input factors D) economies of scale

A) product uniqueness The most salient value drivers that managers have at their disposal when executing a differentiation strategy are product features, customer service, customization, and complements.

A high percentage of R&D/Revenue ratio indicates a(n) A) strong focus on innovation to improve current products and services. B) inefficiency in the management to focus on new products. C) strong focus on marketing and sales to promote products and services. D) negligent investment toward research and development.

A) strong focus on innovation to improve current products and services. The R&D/Revenue ratio indicates how much of each dollar that a firm earns in sales is invested to conduct research and development. A higher percentage is generally an indicator of a stronger focus on innovation to improve current products and services, and to come up with new ones.

Fresher Corp. produces electric bathroom fragrance diffusers and sells the electric outer device at a market rate price. However, they lock their clients into a two-year agreement to purchase the perfume refills solely from them on a monthly basis. Which of the following business models does this best illustrate? A) subscription-based B) peer-to-peer C) crowdsourcing D) freemium

A) subscription-based Users pay for access to a product or service whether they use the product or service during the payment term or not.

Which of the following statements correctly compares Apple and Microsoft in 2016? A) Apple had a higher return on revenue than Microsoft. B) Apple had a higher return on invested capital than Microsoft. C) Microsoft had higher total sales than Apple. D) Microsoft had a lower cost structure than Apple.

B) Apple had a higher return on invested capital than Microsoft. Apple's ROIC was 18.3 percent in 2016, while Microsoft's was 13.7 percent.

Jimmy can be categorized under the late majority customer segment. Which of the following behaviors is he most likely to exhibit? A) He will be confident in her ability to master any new technology. B) He will prefer to buy from well-established brands rather than unknown new ventures. C) He will not rely on endorsements by the early majority or early adopters. D) He will buy beta versions of new products and technology.

B) He will prefer to buy from well-established brands rather than unknown new ventures. Jimmy is most likely to buy from well-established brands rather than unknown new ventures. The late majority prefers to buy from well-established firms with a strong brand image rather than from unknown new ventures.

Feran is the founder of an innovative "impromptu catering" business that provides elegant, healthy party food and decorations on less than 24 hours' notice. The company has grown by over 150 percent in the past year. Feran credits some of the company's success to studying the strategies of prominent social entrepreneurs, such as Wikipedia's Jimmy Wales. What can Feran do to exemplify the social entrepreneurship model? A) Launch a social media platform for food lovers. B) Provide free weekly catered meals for the homeless. C) Seek investments from venture capitalists. D) Buy out his closest competitors to ensure a competitive advantage.

B) Provide free weekly catered meals for the homeless. Social entrepreneurship describes the pursuit of social goals while creating profitable businesses. Social entrepreneurs evaluate the performance of their ventures not only by financial metrics but also by ecological and social contribution (profits, planet, and people). They use a triple-bottom-line approach to assess performance. Feran can pursue social entrepreneurship by donating some of the company's time and resources to helping homeless individuals in the community.

Managers can justify using the balanced-scorecard framework because research show that both ________ and ________ performance dimensions are important when examining the effectiveness of a firm's strategy. A) economic, stock price B) quantitative, qualitative C) customer survey, peer evaluation D) financial, accounting

B) quantitative, qualitative Both quantitative and qualitative performance dimensions matter in judging the effectiveness of a firm's strategy. Those who focus on only one metric will risk being blindsided by poor performance on another. Rather, strategic leaders need to rely on a more holistic perspective when assessing firm performance, measuring different dimensions over different time periods.

One of the reasons that big box retailers like Home Depot are able to achieve economies of scale is that A) they have both broad and narrow economies of scope. B) they are able to take advantage of physical properties and maximize their scale efficiencies by stocking more merchandise and handling inventory more efficiently. C) they are able to take advantage of market size and spread investment losses over many locations. D) they have been able to protect themselves from the threat of buyer power by increasing input prices.

B) they are able to take advantage of physical properties and maximize their scale efficiencies by stocking more merchandise and handling inventory more efficiently. Big box retailers like Home Depot are able to reap economies of scale by taking advantage of physical size ("big box"), stock more inventory, and manage it more efficiently.

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? A) Offer similar services as competitors but raise prices to increase profits. B) Lower prices but continue employing high-paid expert gardeners. C) Narrow the scope of competition and focus on unique features such as the use of organic materials. D) Maintain prices but replace all the expert employees with less-skilled workers to control costs.

C) Narrow the scope of competition and focus on unique features such as the use of organic materials. When considering different business strategies, managers also must define the scope of competition—whether to pursue a specific, narrow part of the market or go after the broader market. To achieve a competitive advantage in the crowded high-end landscaping industry, Jonathan should focus on a smaller market segment, such as environmentally conscious homeowners who are willing to pay a premium price for organic landscaping.

While the domestic airline industry is in the maturity stage of the industry life cycle, the internet-enabled appliance industry is in its growth stage. Which of the following can be inferred from the given data? A) The number of competitors will be greater in the domestic airline industry than the internet-enabled appliance industry. B) The internet-enabled appliance industry is ahead of the domestic airline industry in the industry life cycle. C) While the domestic airline industry is mostly free from excess capacity, the internet-enabled appliance industry will have new entrants. D) The mode of competition will be price-based in the internet-enabled appliance industry and will be nonprice-based in the domestic airline industry.

C) While the domestic airline industry is mostly free from excess capacity, the internet-enabled appliance industry will have new entrants. Generally, the larger firms enjoying economies of scale are the ones that survived the shakeout phase. After the shakeout is completed and a few firms remain, the industry enters the maturity stage. The numbers of competitors are fewer at this stage when compared to the growth stage.

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) a company that sells small kitchen appliances at affordable prices. B) a consumer electronics company that sells high-end devices. C) a consumer electronics company popular among price-conscious customers. D) an online company that sells customized electronics accessories.

C) a consumer electronics company popular among price-conscious customers. In this scenario, Tablette Corp. should ideally compare its strategic position with a consumer electronics popular company among price-conscious customers. A cost-leadership strategy seeks to create the same or similar value for customers by delivering products or services at a lower cost than competitors, enabling the firm to offer lower prices to its customers. The idea is to compare Tablette Corp.'s strategic position with another cost-leader. In this case, it will be an electronics company popular among price-conscious customers.

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 A) economies of scale. B) learning-curve effects. C) availability of complements. D) experience-curve effects.

C) availability of complements. Tough Guy's primary value driver is availability of complements. Complements add value to a product or service when they are consumed in tandem. Finding complements, therefore, is an important task for managers in their quest to enhance the value of their offerings.

Susan wants to create a networking site that would connect local artists to homeowners who are looking for unique and original art. She knows that network effects will play a big role in her success and doesn't want to build her business using a linear value chain. Susan would best be served by employing a(n) A) pipeline business model. B) innovative social networking website. C) razor-razor blade business model. D) platform business model.

D) platform business model. Susan needs to focus on a platform business model because she needs value-creating interactions between external producers and consumers.

The types of assets that are the primary focus of accounting data but are no longer most important to competitive advantage are A) market brand value. B) organizational culture. C) intangible. D) tangible.

D) tangible. Tangible assets are the primary focus of accounting data even though intangibles are most important to competitive advantage.

Tom is attempting to measure how his customers views his firm. To do this, he uses the balanced-scorecard framework because he knows that A) customer surveys will help him determine future industry attractiveness. B) this will guarantee his company a sustainable competitive advantage. C) the framework will help him increase his stock price. D) the customer perspective is directly linked to firm revenues and profits.

D) the customer perspective is directly linked to firm revenues and profits. Customer perspective is directly linked to firm revenues and profits and this is why it is included in the balanced-scorecard framework.