MGT exam 2

How is differentiation parity different from cost parity?

Differentiation parity deals with value not cost.

Which of the following is an example of social entrepreneurship? The committee approved the new formula for an all-purpose cleaner because it Select one: a.cleaned better than other cleaners and used easy-to-obtain ingredients. b.cleaned better than other cleaners and did not cost more to produce. c.cleaned as well as other cleaners and could be produced more efficiently. d.cleaned as well as other cleaners and used organic ingredients.

cleaned as well as other cleaners and used organic ingredients.

argain Styles 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 Bargain Styles applying?

cost-leadership

In a focused cost-leadership strategy, a firm

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

Digital photography replacing film photography is an example of which type of innovation?

disruptive

A new product often has a high price when it is launched because of a

large investment in designing a product while producing small quantities.

The difference between the price charged for a product and the cost to manufacture it is referred to as the

producer surplus.

Nam-zim sells its e-book readers at the cost price of $15 each. However, the company makes its profits when users have to download or buy books online. Which of the following business models is Nam-zim implementing?

razor-razor blade

What is an invention?

the transformation of an idea into a new product or process

When the value that a customer attaches to a good or service exceeds the price paid for the good or service, this is a consumer surplus.

true

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?

$180

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

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

________ denotes the dollar amount a consumer would attach to a good or service.

Value

The tenet behind the triple-bottom-line is that

a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy.

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

business-level strategy

How has Apple been able to sustain its competitive advantage in the smartphone industry?

by regularly introducing incremental improvements in its products

Beach Grub is a chain of "fast casual" restaurants that sells its menu items at higher prices than its competitors. Yet, the restaurant has a large customer base due to its wide product portfolio and superior customer service. Which of the following generic business strategies has Beach Grub adopted in this scenario? Select one: a.product diversification b.market penetration c.cost-leadership d.differentiation

differentiation

The type of customers vital to a firm introducing a new innovation are the ________, who are willing to pay higher prices and like to tinker with new products.

early adopters

The group of customers referred to as the ________ lead the wave of increased demand as the industry moves from the introduction stage to the growth stage.

early majority

Toyota's "Let's Go Places" tag line was intended to evoke the forward-looking and optimistic momentum of Toyota in America. It invites consumers on a journey to see new places, discover new possibilities and dream big dreams together with Toyota. It promotes excitement and exploration and a sense of freedom from constraints. It is an example of product differentiation based on _______________.

emotion

As a research scholar, Denise 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. Denise can be best described as a(n)

entreprenuer

A firm will always see its stock price appreciate when it demonstrates measurable growth.

false

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

false

The pace of innovation has slowed in the 21st century.

false

reequote Industries has produced a new piece of technology that will monitor the soil moisture in a user's garden and send a notification to an app on the user's phone when it is time to water their plants. The goal of this inexpensive technology is to entice users to purchase Treequote's more expensive automated watering system, so that they can trigger the watering process from the app on their phones. Which business model is most likely to help Treequote Industries accomplish its goals?

freemium

The vast majority of innovations in an industry are ________, because they build on a firm's existing knowledge base and reinforce the existing organizational structure and network relationships.

incremental

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)

network effect

A disruptive innovation leverages ________ technologies, while architectural innovations are based on ________ technologies.

new; existing

_______ precisely indicates how much of a firm's sales is converted into profits.

return on revenue

The typical four-step innovation process begins with

the presentation of an idea as findings derived from basic research.

Which of the following is a firm effect that has an impact on the competitive advantage of a firm? Select one: a.the value and the cost position of the firm relative to its competitors b.the intensity of rivalry among existing companies in the firm's chosen industry c.the number of companies operating in the industry in which the firm operates d.the exit barriers within the industry in which the firm operates

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

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

true

TalkaLot Corp. 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?

$450

Which of the following is not an advantage when it comes to "first-mover advantages"? Select one: a.First movers may be able to lock-in key suppliers. b.First movers may benefit from network effects. c.First movers must educate potential customers about the product. d.First movers may hold important intellectual property such as critical patents.

.First movers must educate potential customers about the product.

Which of the following scenarios best illustrates bundling? Select one: a.Isdom Inc. sells its basic TV channels for free but charges high prices for any channels that customers add on later. b.CondaxMedia Inc. sells its cloud computing network by having customers pay for the service as they use it. c.Warephase Inc. sells seed packages, in which a person can buy a package of three types of seeds at a discounted price compared to buying the seeds individually. d.Yearin Inc. sells its electric toothbrushes for a low cost, but charges a high price for replacement brushes.

.Warephase Inc. sells seed packages, in which a person can buy a package of three types of seeds at a discounted price compared to buying the seeds individually.

Which of the following lists the stages of the industry life cycle in the correct order? Select one: a.introduction, growth, shakeout, maturity, and decline b.introduction, shakeout, growth, maturity, and decline c.introduction, growth, maturity, shakeout, and decline d.introduction, shakeout, maturity, growth, and decline

.introduction, growth, shakeout, maturity, and decline

Which of the following statements is true of accounting data? Select one: a.Accounting data are historical data and thus backward-looking. b.Accounting data do not have to be adjusted in any manner to compare companies with different capital structures. c.Accounting data focus mainly on intangible assets, rather than tangible assets. d.Accounting data consider off-balance sheet items, such as pension obligations of a firm.

Accounting data are historical data and thus backward-looking.

AccuroDisk Inc. manufactures external hard disks for $32 per unit, and the maximum price customers are willing to pay is $47 per unit. TD Storage Inc. is a competitor of AccuroDisk 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?

AccuroDisk creates a greater economic value than TD Storage.

James is a novice investor who wants to decide between purchasing shares in Captial-UP or Mainframe Inc. Captial-UP's return on invested capital (ROIC) was 15 percent, and its cost of capital was 12 percent. During the same period, Mainframe Inc.'s ROIC was 22 percent and its cost of capital was 25 percent. What does this information tell James?

Captial-UP is more likely to create value while Mainframe Inc. is more likely to destroy value.

Which of the following statements about competitive advantage is true? Select one: a.Competitive advantage is an absolute measure; it is not relative. b.Competitive advantage is a one-dimensional concept. c.Competitive advantage can be assessed by measuring accounting profit, shareholder value, or economic value. d.Competitive advantage is permanent and not transitory; once gained by a firm it stays with the firm.

Competitive advantage can be assessed by measuring accounting profit, shareholder value, or economic value.

Which of the following scenarios would be characteristic of an entrepreneur? Select one: a.John implemented a new and more efficient way to produce pottery. b.Karen imitated a new, more efficient method of producing pottery. c.Hugo scaled back the production of pottery because it wasn't cost effective. d.Juliana used a proven marketing method to advertise her pottery.

John implemented a new and more efficient way to produce pottery.

Which of the following describes an airline that is most likely stuck in the middle? Select one: a.Plush Airline that offers international routes and global coverage, high customer service, high reliability, and high prices. b.Red Carpet Airline that offers complimentary drinks and meals, coast-to-coast coverage via connecting hubs, plush airport lounges, and high prices. c.Bottom Line Airline that offers no assigned seating, no in-flight amenities, no drinks or meals, no airport lounges, and low prices. d.Just Right Airline offers high-quality beverages and meals, plush airport lounges, only a few connections via hubs domestically, poor customer service, and low prices.

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

Thomas 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, Thomas is unable to shift to a cost leadership strategy. Which strategy is most likely to achieve a competitive advantage? Select one: a.Offer similar services as competitors but raise prices to increase profits. b.Maintain prices but replace all the expert employees with less-skilled workers to control costs. c.Lower prices but continue employing high-paid expert gardeners. d.Narrow the scope of competition and focus on unique features such as the use of organic materials.

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

Which of the following is a competitive benefit experienced by the first-mover firm in an industry? Select one: a.The first mover will be able to achieve a less steep learning curve. b.The first mover will be able to reduce the switching costs. c.The first mover will not have to patent its products or technology. d.The first mover will be able to reduce costs through economies of scale.

The first mover will be able to reduce costs through economies of scale.

Which of the following examples uses a focused differentiation strategy? Select one: a.a tennis pro shop that sells low-quality racquets priced at 150 dollars per racquet b.a coffee shop that offers mediocre lattes at a price of five dollars for a small latte c.a hotel chain that offers high-quality furnishings and service with room rates of under 75 dollars per night d.a cosmetics brand that offers superior skin lotion for sensitive skin priced at 100 dollars per bottle

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

SonronMedia sells books by having salespeople set up appointments with potential customers and give them a sales pitch for the product. When a salesperson sells a book, he or she gets a predetermined percentage commission. This type of business model is called

an agency

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 checkups 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

availability of complements.

A strategy that has provided competitive advantages in the past will most likely do so in the future.

false

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

false

Once a firm chooses a business model, it must stick with it for the life of the firm.

false

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

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

When ReGen Pharmaceuticals released a new drug to treat insomnia, its chemical composition was disclosed at the back of the drug's cover. However, any attempts by competitors to copy the chemical composition would result in infringement of ReGen Pharmaceuticals intellectual property rights. Thus, the drug is protected by a

patent

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

perform different activities than its rivals.

Generally, as the level of ________ innovation declines, the level of ________ innovation increases.

product; process

Which of the following is an advantage of a triple-bottom-line approach? Select one: a.The approach takes an integrative and holistic view in assessing a company's performance. b.The approach does not rely on an external view of a firm to assess its performance. c.The approach is more of a quantitative performance metric rather than a mere conceptual framework. d.The framework can help managers assess a firm's competitive advantage without taking into account the firm's performance along noneconomic dimensions.

the approach takes an integrative and holistic view in assessing a company's performance.

According to the crossing-the-chasm framework, the biggest chasm between customer segments is between early adopters and the mass market made up of the early majority and the late majority.

true

A defining characteristic of the subscription-based business model is that the

user pays for access to a product or service whether he or she uses it during the payment term or not.

A defining characteristic of the pay-as-you-go business model is that the

users pay for only the services they consume.

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

value drivers

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

value; cost