BUS 495
Which of the following best describes a strategic trade-off?
the tension between value creation and the pressure to keep costs in check
Elvira is the CEO of a firm. She has an opportunity to increase the competitive advantage of her company but is not sure if accepting the opportunity is ethical. Which of the following questions would help her decide if accepting the opportunity is ethical?
How would the media report her decision to accept the opportunity if it were to become public?
At a certain output level, the per-unit cost incurred by a firm to manufacture a product was $70. Once the cumulative output doubled, the cost per unit reduced to $63. All other factors remaining constant, the firm has been able to achieve a(n)
90 percent learning curve.
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? Consider this evidence of a sustainable competitive advantage and maintain your current strategy. Compare the current valuations with past valuations to determine a trend. Assume your current strategy has failed and begin to formulate a new one. Compare your valuation to firms in another industry.
Compare the current valuations with past valuations to determine a trend.
Why should managers using the M-form organizational structure to support a related-diversification strategy ideally concentrate decision making at the top of the organization?
It allows a high level of integration.
Why does strategy implementation often require changes within an organization?
Strategy implementation transforms strategy into actions and business models.
Banana Computers has decided to procure processing chips required for its laptops from external suppliers instead of manufacturing them in their own facilities. How will this decision affect the firm?
The firm will have more flexibility in purchasing and comparing prices of goods and services.
Royal Motor Corp. generates a major portion of its revenues by manufacturing luxury sports cars. However, the company also derives less than 5 percent of its annual revenues by selling its sports merchandise that includes apparel, shoes, and other accessories under the same brand name. Which of the following terms best describes Royal Motor Corp.?
a dominant-business firm
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 firm's resource stock
a firm's current level of intangible resources
Which quadrant in the core competence-market matrix is the hardest to pursue?
building new core competencies to create and compete in markets of the future
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 time compression diseconomies. resource homogeneity. causal ambiguity. path dependence.
causal ambiguity.
Which of the following is primarily a value driver?
complements
What causes the winner's curse?
overpaying for an acquisition
A drawback involved in using cross-border strategic alliances to enter new foreign markets is that
some of the firm's proprietary know-how may be appropriated by the foreign partner.
Which of the following statements correctly compares Apple and Microsoft in 2016? -Apple had a higher return on revenue than Microsoft. -Apple had a higher return on invested capital than Microsoft. Correct -Microsoft had higher total sales than Apple. -Microsoft had a lower cost structure than Apple. Incorrect
Apple had a higher return on invested capital than Microsoft.
Eyenima Inc. is a public stock company. Which of the following best exemplifies the legal personality of the company? Frieda, a shareholder, can legally sell shares of Eyenima in the stock market. Tabitha is a shareholder of Eyenima but does not have any managerial duties. Edward, an employee at Eyenima, is not responsible for any losses that Eyenima incurs. Bjorn Eyenima, the company's founder, died a few years ago, yet the company is doing well.
Bjorn Eyenima, the company's founder, died a few years ago, yet the company is doing well.
Eyenima Inc. is a public stock company. Which of the following best exemplifies the legal personality of the company? Frieda, a shareholder, can legally sell shares of Eyenima in the stock market. Tabitha is a shareholder of Eyenima but does not have any managerial duties. Incorrect Edward, an employee at Eyenima, is not responsible for any losses that Eyenima incurs. Bjorn Eyenima, the company's founder, died a few years ago, yet the company is doing well. Correct Explanation
Bjorn Eyenima, the company's founder, died a few years ago, yet the company is doing well.
In 2008, BlackBerry's market cap peaked at $75 billion. By 2017 this valuation had fallen more than 90 percent, to $3.9 billion. BlackBerry fell victim to two important PESTEL factors in its external environment: sociocultural and technological. How did technology contribute to BlackBerry's decline?
BlackBerry failed to change its device into one that could perform multiple tasks effectively.
How does horizontal integration within an industry affect the surviving firms? By increasing the threat the surviving firms will face from new entrants By strengthening the rivalry among existing firms By requiring the surviving firms to shift their focus from non-price to price competition By strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers
By strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers
It is April 2018 and Mark is a novice investor who wants to decide between purchasing shares in EagleCorp or Myna Bird Inc. In fiscal year 2017, EagleCorp's return on invested capital (ROIC) was 15 percent, and its cost of capital was 12 percent. During the same period, Myna Bird Inc.'s ROIC was 22 percent and its cost of capital was 25 percent. What does this information tell Mark?
EagleCorp is more likely to create value while Myna Bird Inc. is more likely to destroy value.
Elena is the CEO of Geode Technologies, a consumer electronics manufacturer. Last year, Geode's return on invested capital (ROIC) was 11.6 percent, while Geode's closest competitor, NorthWest Tech, had an ROIC of 17 percent. Which of the following factors might Elena use to convince investors to invest in Geode rather than NorthWest Tech? Geode had a Research & development (R&D) expense / Revenue ratio of 16 percent, while NorthWest Tech had an R&D / Revenue ratio of 12 percent. Incorrect Geode's working capital to revenue ratio was 75 percent, while NorthWest Tech's was 68 percent. Geode's intangible intensity was 6 percent, while NorthWest Tech's was 3 percent. Geode's plant, property, and equipment (PPE) over revenue ratio was 19 percent, while NorthWest Tech's was 10 percent.
Geode's intangible intensity was 6 percent, while NorthWest Tech's was 3 percent.
Gino is the CEO of a financial services firm. What action should Gino take to be sure the firm avoids moral hazards? He should closely monitor the behavior and performance of new employees to be certain that they have the skills they claimed to have in interviews. Incorrect Gino must increase hiring and develop influential relationships with government officials so that his firm will be considered "too big to fail." He must create a plan in which government agencies or a consortium of other financial services firms will assume any future debts of the company. Gino should define undue risk-taking, institute strict auditing of loans, and make it clear that the company will fire employees who lend recklessly.
Gino should define undue risk-taking, institute strict auditing of loans, and make it clear that the company will fire employees who lend recklessly.
Gino is the CEO of a financial services firm. What action should Gino take to be sure the firm avoids moral hazards? He should closely monitor the behavior and performance of new employees to be certain that they have the skills they claimed to have in interviews. Incorrect Gino must increase hiring and develop influential relationships with government officials so that his firm will be considered "too big to fail." He must create a plan in which government agencies or a consortium of other financial services firms will assume any future debts of the company. Gino should define undue risk-taking, institute strict auditing of loans, and make it clear that the company will fire employees who lend recklessly. Correct
Gino should define undue risk-taking, institute strict auditing of loans, and make it clear that the company will fire employees who lend recklessly.
Using the Boston Consulting Group growth-share matrix, the managers of Xylicon International determined that their business unit devoted to personal health monitoring devices was a star. Based on this finding, which of the following strategies is likely to produce the best results?
Increase investment in the personal health monitoring unit to encourage future growth.
Why does a firm use an organic organization combined with a functional structure when implementing a differentiation strategy? It allows the firm to create incentives to foster process innovation in order to drive down cost. It allows the firm to reduce its cost below that of competitors while offering acceptable value. It allows the firm to constantly upgrade core competencies in R&D, innovation, and marketing. It allows the firm to nurture and constantly upgrade necessary core competencies in manufacturing and logistics.
It allows the firm to constantly upgrade core competencies in R&D, innovation, and marketing.
Why does a firm use an organic organization combined with a functional structure when implementing a differentiation strategy? It allows the firm to create incentives to foster process innovation in order to drive down cost. It allows the firm to reduce its cost below that of competitors while offering acceptable value. It allows the firm to constantly upgrade core competencies in R&D, innovation, and marketing. Correct It allows the firm to nurture and constantly upgrade necessary core competencies in manufacturing and logistics.
It allows the firm to constantly upgrade core competencies in R&D, innovation, and marketing.
Which of the following is a disadvantage of the balanced-scorecard approach?
It provides limited guidance about which metrics to choose.
Marina manages the supply chain for a company that sells diamond watches. She learns that economists are predicting a moderate to severe recession in the next six to eight months. Based on that information, what action should Marina recommend to the company's owner?
Reduce supply. Customers generally reduce their purchases of luxury items when the economy falters.
Erin is the manager of gardening supplies wholesaler SpringTime Inc. The company's vision is to become the leading supplier of gardening materials west of the Mississippi River. In assessing the firm's current state, Erin has determined that the firm could differentiate itself from competitors with an easy-to-use online ordering system and a two-day delivery guarantee. To accomplish this, Erin has determined that SpringTime must spend the next two quarters honing its capabilities for sourcing materials quickly and improving its web development competencies. According to the balanced scorecard approach, what is wrong with Erin's thinking? She has not considered the opportunity costs associated with launching an online ordering system. She has not addressed the question of which core competencies the firm needs. She has failed to account for external factors such as customer perceptions and shareholder perceptions. She has not addressed the question of how SpringTime will create value.
She has failed to account for external factors such as customer perceptions and shareholder perceptions.
Upper management at Softstep Inc., a manufacturer of insoles for shoes, wants to work on improving the product lines it already has without taking on other challenges at this time. Which of the following vision statements reflects that goal?
Softstep Inc. wants to be the best manufacturer of insoles in the industry.
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?
The firm's number of outstanding shares is 25 million.
Showstopper Inc. dominates the ladies' wig market and wants to expand into men's toupees. How can Showstopper's managers determine whether the company should develop a toupee division internally, ally with a toupee maker, or acquire a toupee-making firm? To protect themselves, Showstopper's managers should choose the option that leads to the largest company with the most managerial positions. The managers need to determine whether the skills needed to create wigs and toupees are similar and whether Showstopper creates better hairpieces than its competitors do. The managers must determine whether wig making and toupee making require substantially different skills. If so, the company should pursue internal development. Unless the market for toupees is booming, Showstopper should stick to what it knows and focus on creating the best ladies' wigs in the industry.
The managers need to determine whether the skills needed to create wigs and toupees are similar and whether Showstopper creates better hairpieces than its competitors do.
Rock Bottom Tiles has developed a new customer-oriented business model. Rather than maintain a network of showrooms across the country, the business will now let customers choose several styles that interest them from an online site, and will ship samples of each of the styles to the customer to test in their home free of charge. Once they have settled on a tile choice, Rock Bottom will send a representative to their home to schedule installation. The company has determined that busy middle-class customers will value the convenience of the new model, which allow them to upgrade the look of their homes without spending time browsing showrooms. The new model will be created by selling the old showrooms and shifting resources to the new online site and regional offices for sales personnel. What question remains for Rock Bottom to ask in order to put its strategy into action? Why does the business model create value? What activities need to be performed to create and deliver the offerings to consumers? How are the offerings to the customers created? Who are the main stakeholders who will be performing the activities?
What activities need to be performed to create and deliver the offerings to consumers?
You are the founder of Shadow Skateboards, and you are considering methods of gaining and sustaining a competitive advantage. Which of the following changes has the best chance of quickly creating a sustainable advantage?
allowing customers to upload their own image designs and help assemble the finished product at retail locations
In the context of SWOT analysis, which of the following best exemplifies a firm's external opportunity? -an increase in its financial resources -an increase in its brand equity -an increase in its customers' disposable income Correct -an increase in its employee productivity
an increase in its customers' disposable income
The value a consumer attaches to a product or service is captured in the -least price a consumer is willing to pay for it. -consumer's maximum willingness to pay for it. Correct -expenses incurred by the firm in manufacturing it. -difference between the price charged for it and the cost to produce it.
consumer's maximum willingness to pay for it.
Seth's Computer Repair has maintained a competitive advantage based on its thorough and professional service, reasonable pricing, and money-back guarantee. Management at the company is so committed to doing repairs well that they often have rejected employee suggestions to expedite their processes. Recently, the company has begun to lose customers to a new local service offering same day in-home repairs and 24/7 online customer support. According to the dynamic capabilities perspective, Seth's Computer Repair has lost its competitive advantage due to
core rigidity.
Demand for traditional fast-food providers such as McDonald's, Burger King, and Wendy's has been on a decline in recent years. Consumers have become more health conscious and demand has shifted to alternative restaurants like Subway, Chick-fil-A, and Chipotle. Attempts by McDonald's and Wendy's to steal customers from one another include frequent discounting tactics such as dollar menus. Such competitive actions are indicative of -profitability increases -perfect competition -natural monopolies -cutthroat competition
cutthroat competition
A new company named Far Reach Inc. entered the radio retail business, which is a fairly consolidated industry. In response, two large incumbent radio retailers, Smooth Waves and Clear Signal, lowered the price of their radios. Also, they spent more money to improve their radios and on additional marketing. By doing this, Smooth Waves and Clear Signal -decreased industry exit barriers -increased industry exit barriers -decreased industry profit potential -increased industry profit potential
decreased industry profit potential
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?
differentiation
Etsuro is a management consultant. Baker Corp. asks him to evaluate their company, and he finds that the difference between the cost of producing the firm's products and the value of those products is extremely narrow. What should Etsuro suggest that Baker Corp. management do?
find a way to widen the gap between cost and value
Heartbeat Industries has recently introduced a new production method that will make the production of their medical devices more cost-effective. Which of the following will most likely be the result of this innovation? jumps to a steeper learning curve destabilizes a steeper learning curve stabilizes the existing learning curve moves down the existing learning curve
jumps to a steeper learning curve
Heartbeat Industries has recently introduced a new production method that will make the production of their medical devices more cost-effective. Which of the following will most likely be the result of this innovation? jumps to a steeper learning curve Correct destabilizes a steeper learning curve stabilizes the existing learning curve moves down the existing learning curve
jumps to a steeper learning curve
A mortgage-loan officer persuades unsuspecting consumers to sign up for exotic mortgages, such as "option ARMs." These mortgages offer borrowers the choice to pay less than the required interest, which is then added to the principal while the interest rate can adjust upward. Because of this setup, many borrowers are unable to repay the mortgage once the interest rates go up. Which of the following phrases best describes this scenario? legal but not ethical ethical but not legal legal and ethical neither legal nor ethical
legal but not ethical
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? transferability of investor ownership legal personality limited liability for investors separation of legal ownership and management control
legal personality
Quick Market Inc. is a food supply company that wants to sell its products directly to consumers through mail order instead of going through supermarkets and other stores. However, supermarket chains want to make this transaction either illegal or more difficult for Quick Market. To accomplish this, they are using _______ to influence the political process. -ecological factors -lobbying forces -interest rates -demographic research
lobbying forces
There are many reasons why firms need to grow. Which of the following reasons is strongly influenced by economies of scale? increasing profits lowering costs Correct reducing risk motivating managers
lowering costs
In Eli Lilly's Office of Alliance Management, the alliance champion is primarily responsible for
making sure that an alliance fits within the firm's existing alliance portfolio and corporate-level strategy.
Which of the following sources of differential appeal is least effective in helping a firm sustain its advantage?
observable product features
Powell Lighting was the first company to start selling LED light bulbs in its country—a product that gained popularity among diverse groups. Soon, other companies started to sell their own brands of LED bulbs, thereby giving Powell Lighting ample competition. In response, Powell Lighting decided to limit its LED light bulbs to outdoor models. However, it ensured that these models were the longest-lasting and lowest-priced on the market. With this innovation, Powell Lighting consistently outperformed its competitors for ten years. In this scenario, Powell Lighting maintained a _____ through its innovative strategy. -balanced scorecard -fiduciary responsibility -consistent power position -sustainable competitive advantage
sustainable competitive advantage
Gladiator Apparel is the market leader in the sportswear industry. Though most of its resources are common to those of its competitors, a few rare resources have helped the company gain and sustain a competitive advantage. Which of the following assets of Gladiator Apparel is most likely to be considered a rare resource that is contributing to its competitive advantage?
the company's design patents
Value drivers contribute to a firm's competitive advantage only if
the increase in value creation exceeds the increase in costs.
Gary owns shares in a company called Archibald Industries Inc. The company's financial performance has been declining over the past few months, and the value of its stock has been decreasing. Gary wants to proactively cut his losses and therefore sells his shares. Anneke, a trading enthusiast, buys shares in Archibald Industries because she believes that the share prices cannot go anywhere but up. Which of the following characteristics of a public stock company does this scenario best exemplify? separation of legal ownership and management control legal personality limited liability for investors transferability of investor ownership
transferability of investor ownership
Cartech Inc. is a manufacturer of automobile parts, which it sells to retail auto supply stores. Its core competencies include superior design and engineering capabilities, as well as a highly integrated and efficient supply chain. To sustain its competitive advantage, Cartech should first -seek to replicate its nearest competitor's competency in innovative marketing. -attempt to cut costs by replacing assembly line workers with robots. Incorrect -upgrade its engineering department and improve its supply chain. Correct -diversify its product offerings by developing parts for construction equipment.
upgrade its engineering department and improve its supply chain.
The pursuit of both differentiation and low cost at the same time in a way that creates a leap in value for both the firm and consumers is called
value innovation.
The pursuit of both differentiation and low cost at the same time in a way that creates a leap in value for both the firm and consumers is called the increase in value creation exceeds the increase in costs. they can shrink the firm's value gap. they can restrict the firm from claiming a premium price for its products. the decrease in perceived value leads to an increase in costs.
value innovation.
Andrew is the president of a technology firm that has recently gone public. What action, if any, should Andrew take to build the confidence of his new shareholders?
He should find out whether the majority of his shareholders want long-term steady growth or short-term spikes in the stock price.
an increase in its customers' disposable income
In the context of SWOT analysis, which of the following best exemplifies a firm's external opportunity? -an increase in its financial resources -an increase in its brand equity -an increase in its customers' disposable income -an increase in its employee productivity
Although JetBlue used a blue ocean strategy to achieve an initial competitive advantage, it failed to maintain this advantage. Which of the following provides the best reason for this development?
It failed to refine its strategic position over time.
Skylark Sodas has been a market leader in the soft drink industry for several decades. However, its market research shows that consumer tastes have begun to shift to sugar-free flavored seltzer waters, a product that Skylark is capable of producing with minimal changes to its facilities and production processes. Based on your knowledge of the core competence-market matrix, which diversification strategy should Skylark pursue? Leverage existing core competencies to improve current market position. Build new core competencies to protect and extend current market position. Redeploy and recombine existing core competencies to compete in markets of the future. Build new core competencies to create and compete in markets of the future.
Redeploy and recombine existing core competencies to compete in markets of the future.
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? Quickly build downstream complementary assets. Enter multiple learning races within strategic alliances. Seek an alliance with a company or companies that will complete the value chain. Pursue managerial hubris at all levels of development.
Seek an alliance with a company or companies that will complete the value chain.
Starfish Sodas has successfully achieved a competitive advantage in the soft drink industry as a differentiator. Which of the following scenarios would undermine Starfish's position?
Starfish's customers start to consider soda a commodity.
Which of the following is likely to happen due to horizontal mergers between competitors such as Delta and Northwest airlines?
The overall industry profitability will increase.
Which of the following is an advantage of equity alliances when compared to non-equity alliances?
They produce stronger ties between partners.
Which of the following examples uses a focused differentiation strategy?
a cosmetics brand that offers superior skin lotion for sensitive skin priced at 100 dollars per bottle
How does a firm capture its producer surplus for a good or service? as cost per unit sold as profit per unit sold Correct as earnings per share as market price per share
as profit per unit sold
In 2007, Salesforce.com recognized an emerging market for platform as a service (PaaS) offerings and developed a new competency in delivering software development and deployment tools. This allowed its customers to either extend their existing CRM offering or build completely new types of software. This is an example of leveraging existing core competencies to improve current market position. building new core competencies to achieve vertical integration. redeploying and recombining existing core competencies to compete in markets of the future. building new core competencies to create and compete in markets of the future.
building new core competencies to create and compete in markets of the future.
The name for an agreed-upon code of conduct in business, based on societal norms, is
business ethics
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
Starling Inc. is a public stock company that provides natural gas for businesses. Although this company generates a large profit, management's focus on reducing costs caused the maintenance budget to be trimmed. Its pipelines have at times leaked, which created significant environmental problems. As a result, the company's value creation has suffered. This scenario supports Michael Porter's warning that public companies
have defined value creation too narrowly in terms of financial performance, thereby contributing to black swan events.
Given the accelerated pace of technological change, in combination with deregulation, globalization, and demographic shifts, a firm will be successful today only if its -competitive advantage is derived from static resource or market advantages. -resource advantage is not causally ambiguous or socially complex. -resource advantage is maintained for a short period of time. -internal strengths change with its external environment in a dynamic fashion.
internal strengths change with its external environment in a dynamic fashion.
There are many reasons why firms need to grow. Which of the following reasons is strongly influenced by economies of scale? increasing profits lowering costs reducing risk motivating managers
lowering costs
Butterfly Technologies produces touch-enabled wearable devices. Its research and development team recently became aware of a new, open-source technology produced by a firm overseas that would improve the processing speed and battery life of all Butterfly devices. In this scenario, Butterfly would be best served to embrace
open innovation.
The competitive advantage that one firm has will be short-lived in an industry in which
perfect competition exists.
A firm's business strategy can lead to a competitive advantage if it allows the firm to
perform different activities than its rivals.
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?
purse a differentiated strategy
A strategy of _____ will be most beneficial for a firm to enhance its overall corporate performance.
related-linked diversification
Disney became the world's leading media company to a large extent by pursuing a corporate strategy of
related-linked diversification.
WJ Group Inc., a large multinational conglomerate, had begun to experience declining revenues over the years. The top management at the headquarters of the company decided that it was important for the company to avoid deviating from its core competencies. Thus, a few of the company's key businesses like energy, telecommunications, and automobiles were centralized, giving the top management more control over them. Also, relatively newer businesses like beverages and food processing were divested. In this scenario, WJ Group is involved in reverse engineering. benchmarking. restructuring. crowdsourcing.
restructuring
WJ Group Inc., a large multinational conglomerate, had begun to experience declining revenues over the years. The top management at the headquarters of the company decided that it was important for the company to avoid deviating from its core competencies. Thus, a few of the company's key businesses like energy, telecommunications, and automobiles were centralized, giving the top management more control over them. Also, relatively newer businesses like beverages and food processing were divested. In this scenario, WJ Group is involved in reverse engineering. benchmarking. restructuring. Correct crowdsourcing.
restructuring
Which of the following is a major issue at the forefront of CEO compensation in recent years?
the absolute size of the CEO pay package compared with the pay of the average employee
When the laptop market overtook the desktop market, Blue Tech Inc., a leader in desktop technology, was left at a competitive disadvantage. Later, Blue Tech Inc.'s management channeled all of the company's efforts and revenue to develop an efficient laptop from scratch in less than a year. However, the company failed because Blue Tech Inc.'s models were inferior to the third- and fourth-generation models its competitors were selling. In this scenario, Blue Tech Inc.'s failure can be best attributed to
time compression diseconomies