WPC 480 quizzes
A customer-oriented vision statement focuses employees to think about how best to: a.increase their efficiency to benefit consumers. b.make a product easier to use. c.improve a popular product. d.solve a problem for a consumer.
d A customer-oriented vision statement focuses employees to think about how best to solve a problem for a consumer.
________ is best described as a measure of how effectively capital is being used by a firm to generate revenue. a. Working capital turnover b. Return on revenue c. Revenue per employee d. Risk capital
a A component of return on invested capital is working capital turnover, which is a measure of how effectively capital is being used by a firm to generate revenue.
________ is best described as decreases in cost per unit as output increases. a. Time compression economies b. Economies of scope c. Economies of replication d. Economies of scale
d Firms with greater market share might be in a position to reap economies of scale, which is described as decreases in cost per unit as output increases
In a radical innovation, a firm targets a. new markets by using new technologies. b. existing markets by using new technologies. c. new markets by using existing technologies. d. existing markets by using existing technologies.
a A radical innovation draws on novel methods or materials, is derived either from an entirely different knowledge base or from a recombination of existing knowledge bases with a new stream of knowledge, or targets new markets by using new technologies.
Which of the following types of organizations best helps match a differentiation strategy to a functional structure? a. organic organization b. ambidextrous organization c. rigid organization d. mechanistic organization
a An organic organization helps match a differentiation strategy to a functional structure. Organic organizations are characterized by a low degree of specialization and formalization, a flat organizational structure, and decentralized decision making.
What is most likely to happen if a firm relies too long on a competency without honing, refining, and upgrading as the firm and the environment change? a. The firm's culture can turn from a core competency into a core rigidity. b. The firm's original core competency can turn from a liability into an asset. c. The firm's competitive parity can turn into its competitive advantage. d. The firm's organizational inertia can turn into its core rigidity.
a An organization's culture can be one of its strongest assets, but also its greatest liability. An organization's culture can turn from a core competency into a core rigidity if a firm relies too long on the competency without honing, refining, and upgrading as the firm and the environment change.
Which of the following is an advantage of equity alliances when compared to non-equity alliances? a. They produce stronger ties between partners. b. They are based on contracts rather than ownership. c. They require smaller capital investments. d. They are more flexible and easy to initiate and terminate.
a Because equity alliances are based on partial ownership rather than contracts, they are used to signal stronger commitments, due to which trust and commitment between alliance partners can emerge.
Bellhaven Inc. has a board of directors that consists of seven members. Which of the following is most likely an accurate statement about Bellhaven's board of directors? a. Bellhaven's board of directors has a minority number of inside directors and it evaluates the firm's strategic initiatives. b. Bellhaven's board of directors provides guidance for the firm's CEO but does not monitor the firm's corporate actions. c. Bellhaven's board of directors oversees the firm's succession plan but does not evaluate the firm's CEO. d. Bellhaven's board of directors ensures the firm's compliance with laws and regulations but does not conduct risk assessments.
a Bellhaven's board of directors most likely has a minority number of inside directors and it evaluates the firm's strategic initiatives. The board of director's functions include:Selecting, evaluating, and compensating the CEO. The CEO reports to the board. Should the CEO lose the board's confidence, the board may fire him or her.Overseeing the company's CEO succession planProviding guidance to the CEO in the selection, evaluation, and compensation of other senior executivesReviewing, monitoring, evaluating, and approving any significant strategic initiatives and corporate actions such as large acquisitionsConducting a thorough risk assessment and proposing options to mitigate riskEnsuring that the firm's audited financial statements represent a true and accurate picture of the firmEnsuring the firm's compliance with laws and regulations
The German multimedia conglomerate Bertelsmann operates in more than 60 countries throughout the world and owns many regional leaders in their specific product categories, including Random House Publishing in the United States. Bertelsmann operates its more than 500 regional media divisions as more or less autonomous profit-and-loss centers, but it attempts to share best practices across units. Global learning and human resource strategies for executives are coordinated at the network level. Bertelsmann is following a(n) a. transnational strategy. b. multidomestic strategy. c. global-standardization strategy. d. international strategy.
a Bertelsmann follows a transnational strategy. This type of strategy attempts to combine the benefits of localization and standardization strategies by creating a global matrix structure.
Which of the following is an observable feature in the Globalization 3.0 stage? a. Based on an optimal mix of costs, skills, and PESTEL factors, companies now freely locate business functions anywhere in the world. b. Knowledge flow between the local replicas of the multinational enterprises and their U.S. headquarters is limited. c. The typical firm has reorganized from a global enterprise with different centers of expertise to a multinational company with self-contained operations in a few selected countries. d. Only sales and distribution functions of a multinational enterprise are located in a few key countries.
a Companies now freely locate business functions anywhere in the world based on an optimal mix of costs, capabilities, and PESTEL factors. Multinational companies have reorganized from self-contained operations in a few selected countries to a more seamless global enterprise with centers of expertise.
Competitive advantage goes to the firm that achieves the a. largest economic value created. b. highest payable turnover. c. highest Cost of goods sold/Revenue ratio. d. lowest producer surplus.
a Competitive advantage goes to the firm that achieves the largest economic value created, which is the difference between V, the consumer's willingness to pay, and C, the cost to produce the good or service.
Devonshire Ventures is a large snack-food conglomerate that operates in more than 50 countries and employs more than 80,000 people across the world. It operates through multiple regional product divisions, which tend to function as autonomous profit-and-loss centers. This allows the company to reap significant economies of scale. Though each division acts as an autonomous firm with its individual regional leaders, frequent sharing of knowledge between the divisions allows for global learning. These factors help the company reconcile product and service differentiations at low cost. Which of the following strategies does Devonshire most likely use? a. a transnational strategy b. an international strategy c. a multidomestic strategy d. a focused-differentiation strategy
a Devonshire Ventures most likely uses a transnational strategy. Multinational enterprises (MNEs) pursuing a transnational strategy attempt to combine the benefits of a localization strategy (high local-responsiveness) with those of a global-standardization strategy (lowest cost position attainable).
Ironhorse Tools has used $700,000 from its total annual earnings of $1,650,000 to invest in upgrading its manufacturing facilities. Its accounts receivable from customers is estimated to be $130,000 and accounts payable $75,000. In monetary terms, what would Ironhorse's resource flows be? a. $700,000 b. $130,000 c. $75,000 d. $1,650,000
a In monetary terms, Ironhorse Tools' resource flows would be $700,000. Resource flows are a firm's level of investments to maintain or build a resource.
Rapida Inc. and Click Inc. are two companies that have been manufacturing typewriters for almost 30 years. Due to the reduced demand for typewriters today, both companies' average return on invested capital is approximately -5 percent. The current industry average is 2 percent. In this scenario, Rapida Inc. and Click Inc. most likely have a. competitive parity with each other. b. competitive advantage over other firms in their industry. c. strategic alliance with each other. d. economies of scope instead of economies of scale.
a In this scenario, Rapida Inc. and Click Inc. most likely have competitive parity with each other. Competitive parity refers to the performance of two or more firms at the same level.
When companies that manufacture shipping containers want to buy iron ore, the purchase decision is solely based on price. This is because there are a large number of sellers in the iron ore industry, and iron ore is a highly undifferentiated commodity. Which of the following industry competitive structures does the iron ore industry best illustrate? a. perfect competition b. monopoly c. oligopoly d. monopolistic competition
a The iron ore industry best illustrates a perfect competition. A perfectly competitive industry is characterized as fragmented and has many small firms, a commodity product, ease of entry, and little or no ability for each individual firm to raise its prices.
You are the CEO of a home appliance manufacturing company and have recently undertaken a review of your company's strategy. In comparing your stock market valuation to that of your closest competitor, you note that your firm is currently valued at $50 billion, while your competitor is valued at $40 billion. How should you proceed? a. Compare the current valuations with past valuations to determine a trend. b. Assume your current strategy has failed and begin to formulate a new one. c. Consider this evidence of a sustainable competitive advantage and maintain your current strategy. d. Compare your valuation to firms in another industry.
a When assessing and evaluating competitive advantage, a comparison of rival firms' share price development or market capitalization provides a helpful yardstick when used over the long term. In order for this comparison of market capitalization to yield useful information, you must consider how it has changed over time. If your competitor has seen significant growth in market cap over the preceding year while your firm has seen its valuation decline slightly, for example, you would have evidence that your firm has begun to lose its competitive advantage.
What part of the AFI strategy framework does the question "How does the firm make money?" relate to? a. competitive advantage, firm performance, and business models b. internal analysis c. strategic leadership and the strategy process d. external analysis
a While completing the business model of the AFI strategy framework, a firm addresses the question: How does the firm make money?
Which of the following strategies best illustrates a generic business strategy? a. a decision to computerize a firm's database in order to improve customer service b. a decision to niche market the jewelry sold by a company while the apparel division under the same company sells its products through mass marketing c. a strategy to use monetary incentives to motivate employees working on a project d. a cost-cutting strategy that corporate executives in the headquarters want all business units of a large conglomerate to implement
b A decision to niche market the jewelry sold by a company while the apparel division under the same company sells its products through mass marketing is an example of a generic business strategy. Business strategy occurs within strategic business units, or SBUs, the stand-alone divisions of a larger conglomerate, each with its own profit-and-loss responsibility. Within the guidelines received from corporate headquarters, they formulate an appropriate generic business strategy (cost-leadership, differentiation, or integration) in their quest for competitive advantage.
While Fun Frames incurs a cost of $12 for a pair of eyeglasses, Highwire, its competitor, manufactures a pair of glasses at $10. Both the companies are able to sell their glasses for a maximum of $30 per pair. Which of the following statements is true in this scenario? a. Highwire has a higher opportunity cost than Fun Frames. b. Fun Frames and Highwire have achieved differentiation parity. c. Fun Frames is a cost-leader when compared to Highwire. d. Fun Frames has created a greater economic value than Highwire.
b A firm achieves differentiation parity when it creates the same perceived value as its rival firm.
Which of the following is an advantage offered by a functional structure? a. It facilitates a lower division of labor, which is linked to higher productivity. b. It allows for a higher degree of specialization and deeper domain expertise. c. It facilitates a lower level of specialization. d. It allows for an efficient top-down communication chain and thus relies on a relatively tall structure.
b A functional structure allows for a higher degree of specialization and deeper domain expertise than a simple structure. Higher specialization also allows for a greater division of labor, which is linked to higher productivity.
Which of the following best qualifies as a firm's internal stakeholder? a. a competitor manufacturing the same products as that of the firm b. a manager taking care of the firm's operations in a foreign market c. a labor union with whom the firm's employees can affiliate d. an auditor assigned to the firm by a federal government agency
b A manager taking care of the firm's operations in a foreign market best qualifies as the firm's internal stakeholder. A firm's internal stakeholders include stockholders, employees (including executives, managers, and workers), and board members.
Riya has recently started a restaurant in a commercial area that already has many other established restaurants and popular fast-food chains. Riya owns the building in which her restaurant is located, rather than leasing premises as her competitors do. This factor allows her to offer her products at a more competitive price. Riya has also invested a huge amount in designing the restaurant's interior and in equipping the kitchen with the appliances that are most widely used in her industry. In this scenario, which of the following is the most valuable resource for Riya's business? a. the type of kitchen equipment widely used in her industry b. the building owned by Riya, which reduces cost of operations c. the restaurant's late entry into the market d. the investments made by Riya on the restaurant's interior
b A resource is valuable if it helps a firm increase the perceived value of its product or service in the eyes of consumers, either by adding attractive features or by lowering price because the resource helps the firm lower its costs.
Why is it better for firms to keep their vision statements customer-oriented rather than product-oriented? a. Customer-oriented visions tend to have a more short-range view of changing environments. b. Customer-oriented visions tend to be more flexible when adapting to changing environments. c. Customer-oriented visions tend to have a more myopic view of changing environments. d. Customer-oriented visions tend to be more stable when dealing with changing environments.
b Customer-oriented visions tend to be more flexible when adapting to changing environments.
Which of the following modes of entering a foreign market allows for the lowest level of control? a. greenfield ventures b. exporting c. joint ventures d. acquisitions
b Exporting, licensing, and franchising are vehicles of foreign expansion that require low investments but also allow for a low level of control.
Fine Lines Inc. is a notebook manufacturing company based in Ohio. Fine Lines' main market is Ohio. It aims at providing its products at better prices than its competitors. Which of the following structures is Fine Lines Inc. likely to use if it has functional setup? a. organic b. mechanistic c. simple d. matrix
b Fine Lines Inc. is most likely to use a mechanistic structure if it has a functional setup. A functional structure is recommended when a firm has a fairly narrow focus in terms of product/service offerings (i.e., low level of diversification) combined with a small geographic footprint. To effectively implement a cost-leadership strategy, managers must create a functional structure that contains the organizational elements of a mechanistic structure.
Why did incumbent pharmaceutical firms enter into hundreds of strategic alliances with biotech start-ups? a. to share their continuously updated research technology with the biotech start-ups b. to make small-scale investments in ventures poised to disrupt existing market economics c. to invest their excess cash flow in the superior technology of the biotech start-ups d. to pursue an unrelated-options perspective without disrupting existing market economics
b In dynamic markets, strategic alliances allow firms to limit their exposure to uncertainty in the market. For instance, in the wake of the biotechnology revolution, incumbent pharmaceutical firms such as Pfizer, Novartis, and Roche entered into hundreds of strategic alliances with biotech start-ups. These alliances allowed the big pharma firms to make small-scale investments in many of the new biotechnology ventures that were poised to disrupt existing market economics.
Eleanor owns a large portion of Apex Apparel's stock. However, she is not employed by the company. In this scenario, Rachel is the company's a. creditor. b. internal stakeholder. c. customer. d. external stakeholder.
b In this scenario, Eleanor is the company's internal stakeholder. Internal stakeholders of a firm include stockholders, employees (including executives, managers, and workers), and board members.
As the inventor of hypertension medication, OneSure Pharmaceuticals (OSP) Inc. was able to reap the benefits of economies of scale due to a large consumer demand for the drug. Even when competitors later developed similar drugs after the expiry of OSP's patents, regular users did not want to switch because they were concerned about possible side effects. Which of the following benefits does this scenario best illustrate? a. social benefits b. first-mover advantages c. network externalities d. fringe benefits
b In this scenario, OneSure Pharmaceuticals enjoys first-mover advantages. First-mover advantages are competitive benefits that accrue to the successful innovator.
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. economies of scale. b. low-cost input factors. c. superior customer service. d. availability of complements.
b The key driver for BioThink's competitive advantage is low-cost input factors. One of the most basic advantages a firm can have over its rivals is access to lower-cost input factors such as raw materials, capital, labor, and IT services.
Which of the following real-world scenarios best exemplifies information asymmetry in a public stock company? a. Goldman Sachs followed through with the Abacus deal despite knowing its shortcomings. b. Based on a tip-off by a Goldman Sachs employee, the Galleon Group sold its holdings in Goldman Sachs' stocks prior to the announcement of missed earnings estimates. c. Mark Hurd, CEO of HP, was unaware of the sexual harassment allegations, and the board's demand for him to resign caught him by surprise. d. GE knew that it could create a profitable venture out of producing green products, so it rolled out the Ecomagination strategy.
b The real-world scenario that best exemplifies information symmetry in a public stock company is that based on a tip-off by a Goldman Sachs employee, the Galleon Group was able to sell its holdings in Goldman Sachs' stocks prior to the announcement of missed earnings estimates. Insider trading cases provide an example of egregious exploitation of information asymmetry.
Samsung and Google cooperate as complementors to compete against Apple's strong position in the mobile device industry, while at the same time Samsung and Google are increasingly becoming competitive with one another. This scenario best illustrates the process of a. perfect competition. b. co-opetition. c. monopolization. d. conglomeration.
b This scenario best illustrates the process of co-opetition. Co-opetition is cooperation by competitors to achieve a strategic objective.
Calabash Inc. is located in the nation of West Fenwick near the nation of East Fenwick. Calabash is considering expanding into East Fenwick. Both countries have similar consumer incomes and knowledge bases and share a common language. Also, the transportation networks between the countries are strong. Even so, the two nations have a long-standing dispute concerning the control of an area of land along their common border. Currently, West Fenwick rules this land. Which of the following would most likely prevent Calabash from expanding into East Fenwick? a. geographic distance b. political distance c. economic distance d. cultural distance
b This scenario shows a situation with extreme political distance between two countries, caused by a dispute over an area of land. Such political distance could prevent Calabash from expanding into East Fenwick.
Which of the following statements accurately brings out the difference between technology enthusiasts and early adopters? a. While the customer segment in the introduction stage consists of early adopters, the customers entering the market in the growth stage are technology enthusiasts. b. Unlike technology enthusiasts, early adopters' demand is fueled more by intuition and vision rather than technology concerns. c. While early adopters make up the smallest market segment, technology enthusiasts make up the mass market. d. Firms need to communicate products' potential applications in a more direct way when attracting technology enthusiasts rather than early adopters.
b Unlike technology enthusiasts, early adopters' demand is driven by their imagination and creativity rather than by the technology per se. They recognize and appreciate the possibilities the new technology can afford them in their professional and personal lives.
WellMade Manufacturing is a large conglomerate that operates only in its home country. The company competes in industries like the consumer electronics, health care, hotel, airlines, education, and steel industries. Which of the following diversification strategies does this best illustrate? a. process diversification b. product diversification c. geographic diversification d. market diversification
b WellMade Manufacturing is pursuing a product diversification strategy. A firm that is active in several different product markets is pursuing a product diversification strategy.
Which of the following provides an example of how a firm's valuable resource can be imitated? a. To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of the U.S.S. Enterprise aircraft carrier. b. To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of a castle from a fantasy movie. c. To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of the Leaning Tower of Pisa. d. To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of a generic medieval cathedral.
c A competing firm can succeed in imitating another firm's valuable resource by directly imitating the resource in question (direct imitation) or through working around it to provide a comparable product or service (substitution). So Best Replica imitated Build Your Own's model of the Eiffel Tower by coming out with a comparable product, namely a model of another landmark—the Leaning Tower of Pisa.
Which of the following statements about managing alliance-related tasks is true? a. A merger is one of the three options for alliance design and governance. b. Forming an alliance with another firm prohibits that firm from forming other alliances. c. Alliance management capability is based on three alliance-related tasks. d. In post-formation alliance management, none of the firms in an alliance is permitted to gain a competitive advantage.
c Alliance management capability is a firm's ability to effectively manage three alliance-related tasks concurrently, often across a portfolio of many different alliances. The firms in an alliance must choose an appropriate governance mechanism from among the three options: non-equity contractual agreement, equity alliances, or joint venture. To be a source of competitive advantage, the partnership needs to create resource combinations that obey the VRIO criteria.
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 a. learning-curve effects. b. experience-curve effects. c. availability of complements. d. economies of scale.
c Body Sync'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.
A firm's business strategy can lead to a competitive advantage if it allows the firm to a. execute the same activities performed by the rivals in a similar manner. b. position itself below the productivity frontier. c. perform different activities than its rivals. d. reduce the value gap.
c Business strategy is more likely to lead to a competitive advantage if it allows firms to either perform similar activities differently, or perform different activities than their rivals that result in creating more value or offering similar products or services at lower cost.
Which of the following motivations for business growth involves principal-agent problems? a. increasing market power b. increasing profits c. motivating managers d. reducing risk
c Firms may grow to achieve goals that benefit its managers more than their stockholders. This motivation for managers is called the principal-agent problem.
In the context of SWOT analysis, which of the following best exemplifies a firm's internal weakness? a. increased competition in the industry where the firm operates b. irregularity in the raw materials supply throughout the industry c. decline in the firm's market share d. fall in the purchasing power of the firm's customers
c In the context of SWOT analysis, decline in a firm's market share best exemplifies a firm's internal weakness. Strengths and weaknesses are internal to an organization, whereas opportunities and threats are external to the organization.
While the personal computer industry is flooded and growing with laptops and tablets, Malik recently bought a desktop, his first personal computer. He realized that a computer at home would be helpful for his children for their school projects, and he could use it to maintain the simple accounts of his plumbing business. Which of the following customer segments does Ivan best represent? a. early adopters b. category captains c. laggards d. early majority
c Malik best represents the laggards segment. Laggards are customers who adopt a new product only if it is absolutely necessary. They tend to enter the market after it is completely mature and frequently during the decline stage.
Juno LLC is a small, new pharmaceutical company that is developing a valuable new drug. Which of these strategies would it be wise for Juno's owners or managers to take? a. Pursue managerial hubris at all levels of development. b. Quickly build downstream complementary assets. c. Seek an alliance with a company or companies that will complete the value chain. d. Enter multiple learning races within strategic alliances.
c New firms are in need of complementary assets to complete the value chain from upstream innovation to downstream commercialization. This implies that a new venture that has a core competency in R&D, for example, will need to access distribution channels and marketing expertise to complete the value chain. Building downstream complementary assets such as marketing and regulatory expertise or a sales force is often prohibitively expensive and time-consuming, and thus frequently not an option for new ventures. Strategic alliances allow firms to match complementary skills and resources to complete the value chain. Moreover, licensing agreements of this sort allow the partners to benefit from a division of labor, allowing each to efficiently focus on its core competency.
The distribution department at Golden Grains Wheat Company has decided to adopt the FIFO (first in, first out) method of inventory to dispatch its bags of wheat. Which of the following strategies does this scenario best illustrate? a. master strategy b. corporate strategy c. functional strategy d. business strategy
c The distribution department of Golden Grains has decided to implement a functional strategy. Within each strategic business unit are various business functions: accounting, finance, human resources, product development, operations, manufacturing, marketing, and customer service. Each functional manager is responsible for decisions and actions within a single functional area.
Due to several black swan events in the past, the a. need for corporate governance and transparency has decreased within various industries. b. shareholders of public companies have become more confident in investing their resources in businesses. c. implicit trust relationship between the corporate world and society at large has deteriorated. d. nations around the globe have explicitly appreciated and accepted capitalism as an economic system.
c The implicit trust relationship between the corporate world and society at large has deteriorated due to the arrival of several black swans.
Jaronda founded Diamond Communications Inc. in 1993. Ten years later, the company went public. Despite Jaronda's death in 2005, the company reported a 75 percent increase in revenue in 2006. Which of the following characteristics of a publicly traded company does this scenario best exemplify? a. transferability of investor ownership b. separation of legal ownership and management control c. legal personality d. limited liability for investors
c The scenario best exemplifies the law of legal personality. Legal personality regards a non-living entity such as a for-profit firm as similar to a person, with legal rights and obligations. Legal personality allows a firm's continuation beyond the founder or the founder's family.
________ is best described as a firm's ownership of its production of needed inputs or of the channels by which it distributes its outputs. a. Venture capitalism b. Crowdsourcing c. Vertical integration d. Bootlegging
c Vertical integration is a firm's ownership of its production of needed inputs or of the channels by which it distributes its outputs. Vertical integration can be measured by a firm's value added: What percentage of a firm's sales is generated within the firm's boundaries?
Addams Coaches Inc. is a bus line with service to several major cities. It has several competitors that each offer service to one or two cities, and based on its current outlays, it cannot match or beat those competitors on price. Because of long-term contracts and an increase in the cost of gasoline, it is not possible to reduce expenditures at this time. Which of these strategies should Addams pursue instead? a. Create a strategic group through mergers. b. Compete based on inter-group rivalry, not intra-group rivalry. c. Close the business until the cost of gas decreases. d. Pursue a differentiated strategy.
d A differentiated competitor usually has higher cost structures and therefore charges higher prices. Differentiated competitors usually offer customers more convenience, luxury, or options.
Which of the following customer segments as described in the chasm framework make up the mass market? a. the technology enthusiasts alone b. the technology enthusiasts and laggards together c. the early adopters alone d. the early and late majority together
d As described in the chasm framework, the early and late majority make up the mass market.
As the strategic manager of CutRite Scissors, you are tasked with producing a strategy for introducing a new line of premium scissors. Your competitor produces a line of similar scissors at a cost of $1 and sells them for $12. Because your company has inferior production capabilities, your scissors will cost $3 each to produce. However, your handle is proven to be more comfortable than your competitors'. Assuming you are guaranteed to sell the same number of units as your competitor, which of the following strategies is most likely to achieve a competitive advantage? a. Offer a buy-one-get-one-free sale on CutRite scissors. b. Reduce the quality of materials used in CutRite scissors to bring unit costs down to $1, then sell the scissors for $12. c. Continue to produce CutRite scissors for $3 but set the price at $10. d. Market CutRite scissors as a higher-quality alternative and sell them for $15.
d By emphasizing the quality and comfort of CutRite scissors, you differentiate the product and create superior value for customers. Although your scissors are more expensive to make at $3 each, the increased perceived value of your product allows you to sell them for $15, making the difference between value creation and cost greater than your competitor's. The greater the difference between value creation and cost, the greater the firm's economic contribution and the more likely it will gain competitive advantage.
Jamie is a manager in an industry that has a few large players and that has remained relatively stable over the past few years. He finds out that legislators are proposing new laws to deregulate the industry. If the laws pass, which of these scenarios will Jamie most likely face? a. across-the-board price increases b. the end of globalization c. technological innovation d. many new competitors
d Consolidated industry structures may break up and become more fragmented. This generally happens when there are external shocks to an industry such as deregulation, new legislation, technological innovation, or globalization. For example, the emergence of the internet moved the stock brokerage business from an oligopoly controlled by full-service firms to monopolistic competition with many generic online brokers.
Which of the following is a common drawback of a non-equity alliance? a. lack of flexibility for the partners b. difficulty terminating the contract c. difficulty initiating the contract d. lack of trust between partners
d Non-equity alliances are weak ties between partners, which can result in a lack of trust and commitment.
The Boston Consulting Group (BCG) growth-share matrix locates a firm's individual strategic business units (SBUs) in which two dimensions? a. economic value created and costs incurred b. amount of debt financing and equity financing c. start-up capital required and stage of industry life cycle d. relative market share and speed of market growth
d One helpful tool to guide corporate portfolio planning is the Boston Consulting Group (BCG) growth-share matrix. This matrix locates the firm's individual SBUs in two dimensions: relative market share (horizontal axis) and speed of market growth (vertical axis).
Which of the following is a disadvantage of the balanced-scorecard approach? a. It fails to translate the vision into measureable operational goals. b. It provides limited guidance for designing and planning business processes. c. It fails to link the strategic vision to responsible parties within the organization. d. It provides limited guidance about which metrics to choose.
d The balanced-scorecard approach provides only limited guidance about which metrics to choose. Different situations call for different metrics.
How does a firm capture its producer surplus for a good or service? a. as market price per share b. as earnings per share c. as cost per unit sold d. as profit per unit sold
d The difference between the price charged for a product (P), and the cost to produce it (C), is the producer surplus. Firms capture this amount as profit per unit sold.
A drawback of short-term contracting as an alternative to making a component in-house is that a. it is the most-integrated alternative to performing an activity so the principal company has no control over the agent. b. the buying firm cannot demand lower prices due to the lack of a competitive bidding process. c. it fails to allow a long planning period that individual market transactions provide. d. the supplying firm has no incentive to make any transaction-specific investments to increase performance or quality.
d The drawback of short-term contracts is that firms responding to the requests for proposals (RFPs) have no incentive to make any transaction-specific investments (e.g., buy new machinery to improve product quality) due to the short duration of the contract.
After conducting a SWOT analysis, your firm has decided to focus on addressing issues located in the Weaknesses-Opportunities quadrant. Which of the following steps are you most likely to take? a. Shut down struggling retail outlets in an economically depressed region. b. Devote more resources to an extremely popular advertising campaign to promote an exciting new product. c. Deploy top sales personnel to prevent buyers from migrating towards lower-priced competition. d. Reorganize the inefficient research and development department to bring innovative products to market more quickly.
d The lack of research and development productivity is an internal weakness that prevents your firm from taking advantage of external opportunities by being the first to offering new products and services. By addressing the lack of productivity with a departmental reorganization, the firm has produced a strategic alternative based on the weaknesses-opportunities quadrant of the SWOT matrix.
Sirhan is president of a medium-sized bank. What can he do to lessen the chances of employees or board members taking part in insider trading? a. Forbid board members from having access to private information. b. Forbid managers and executives from having access to private information. c. Work with analysts and customer-facing employees to root out information asymmetry. d. Create a strict code of ethics and explain that inside traders will be fired.
d The risk of opportunism on behalf of agents is worsened by information asymmetry: The agents are generally better informed than the principals. Managers, executives, and board members tend to have access to private information concerning important company developments that outsiders, especially investors, are not privy to. Often this informational advantage is based on timing—insiders are the first to learn about important developments before the information is released to the public. Although possessing insider information is not illegal and indeed is part of an executive's job, what is illegal is acting upon it through trading stocks or passing on the information to others who might do so. Insider-trading cases, therefore, provide an example of egregious exploitation of information asymmetry.
How are cumulative learning and experience effects of a company most likely to affect Michael Porter's five forces? a. Bargaining power of suppliers will be high. b. Threat of substitute products and services will be high. c. Availability of complements will be low. d. Threat of new entrants will be low.
d The threat of entry is low when incumbents possess cumulative learning and experience effects.
Marika received a tip from a close friend who is an executive manager of a publicly traded company called MicroGreen Inc. The manager received some inside information about how to trade MicroGreen stock to get a huge profit. He shared this information with Marika. This scenario is an example of a. shared value creation. b. adverse selection. c. stakeholder strategy. d. information asymmetry.
d This scenario is an example of information asymmetry. Information asymmetry happens when managers, executives, and board members have access to private information concerning important company developments that outsiders, especially investors, are not privy to. Although possessing insider information is not illegal and indeed is part of an executive's job, what is illegal is acting upon it through trading stocks or passing on the information to others who might do so.
Why does a firm use an organic organization combined with a functional structure when implementing a differentiation strategy? a. It allows the firm to create incentives to foster process innovation in order to drive down cost. b. It allows the firm to reduce its cost below that of competitors while offering acceptable value. c. It allows the firm to nurture and constantly upgrade necessary core competencies in manufacturing and logistics. d. It allows the firm to constantly upgrade core competencies in R&D, innovation, and marketing.
d Using a functional structure with an organic organization allows the differentiator to nurture and constantly upgrade necessary core competencies in R&D, innovation, and marketing. The functional structure should be set up to allow the firm to reap economies of scope from its core competencies, such as by leveraging its brand name across different products or its technology across different devices.
