Business Policy Exam 1

While implementing strategic group mapping for the U.S. domestic airline industry, two strategic groups become apparent: low-cost, point-to-point airlines (Virgin Atlantic, Alaska Airlines, JetBlue, and Southwest Airlines) versus differentiated airlines using a hub-and-spoke system (American, Delta, and United). Which of the following statements is true about these two strategic groups? A) Competitive rivalry between Virgin Atlantic and JetBlue is likely to be higher than that between American and Southwest Airlines. B) American, United, and Delta Airlines will be affected differently by Porter's five competitive forces. C) Alaska Airlines and Delta Airlines will be affected by the external environment in very similar ways. D) Competitive rivalry between Virgin Atlantic and Delta Airlines is likely to be higher than that between American, Delta, and United.

A Competitive rivalry between Virgin Atlantic and JetBlue is likely to be higher than that between American and Southwest Airlines. Competitive rivalry is strongest between firms that are within the same strategic group. The closer firms are on the strategic group map, the more directly and intensely they are in competition with one another.

Which of the following best represents a customer-oriented vision statement? A) "We provide solutions to professional communication needs." B) "We are in the typewriter business." C) "To be the safest, most progressive North American railroad." D) "We aim to build the fastest computing devices in the World."

A) "We provide solutions to professional communication needs." Customer-oriented vision statements allow companies to adapt to changing environments and are not limited to specific products.

Which of the following statements is true of the social responsibilities of a business? A) A firm's ethical responsibilities go beyond its legal responsibilities. B) Shareholders mandatorily require a firm to perform its ethical and philanthropic responsibilities. C) Ethical responsibilities are the foundational building block of a firm's social responsibility. D) Legal responsibilities are often subsumed under the idea of corporate citizenship, reflecting the notion of voluntarily giving back to society.

A) A firm's ethical responsibilities go beyond its legal responsibilities. A firm's ethical responsibilities go beyond its legal responsibilities. They embody the full scope of expectations, norms, and values of its stakeholders. Managers are called upon to do what society deems just and fair.

Bill Lewis wants to become a business strategy consultant and doesn't understand how emerging consultants get started. Bill should familiarize himself with the ________ framework that outlines the important process when examining the concept of strategic management. A) AFI: Analyze-Formulate-Implement B) AFE: Analyze-Formulate-Execute C) API: Analyze-Plan-Implement D) APE: Analyze-Plan-Execute

A) AFI: Analyze-Formulate-Implement There are three steps in the strategic management process: analysis, formulation, and implementation.

Chris is the manager of a graphic design firm, and he relies on a top-down strategic management approach to maintain tight control over the activities of his employees. The company has recently started to lose market share to its more innovative competitors, and Chris wants to encourage his employees to start contributing to the strategy formulation process to make the company more competitive. Which of the following steps should Chris take? A) Designate Friday afternoons as time for employees to pursue outside interests loosely related to the business. B) Schedule individual meetings with employees and demand that they come prepared with five ideas. C) Take an extended vacation and see how the business naturally reorganizes itself in his absence. D) Allow employees to take whatever approach they feel is appropriate when dealing with customers.

A) Designate Friday afternoons as time for employees to pursue outside interests loosely related to the business. Strategic leaders that want to create a work environment in which autonomous actions and serendipity can flourish often provide time and resources for employees to pursue other interests. In the strategy-as-planned-emergence approach, however, executives still need to decide which of the bottom-up initiatives to pursue and which to shut down.

Andrew is a management consultant. Hard Supplies Inc. 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 Andrew suggest that Hard Supplies Inc. management do? A) Find a way to widen the gap between cost and value. B) Find a way to pass on as much profit as possible to suppliers and customers. C) Shore up the company's strong position by erecting entry barriers. D) Encourage customers to buy complements to their products.

A) Find a way to widen the gap between cost and value. Firms create economic value by expanding as much as possible the gap between the value the firm's product or service generates and the cost to produce it.

Suger & Sweet Sodas has seen its market share erode in recent years, as consumers increasingly turn toward healthier beverage choices such as unsweetened sparkling water. Hoping to rekindle interest in sugary sodas, Suger & Sweet decides to produce a limited run of "throwback" cans using labeling first introduced in the 1980s. What is wrong with this strategy? A) It fails to face the competitive challenge. B) It does not involve concrete actions. C) It lacks strategic commitments. D) It tries to be everything to everybody.

A) It fails to face the competitive challenge. Suger & Sweet's strategy fails to face the competitive challenge of changing consumer tastes. Instead of trying to give customers what they want by producing its own line of sparkling waters, Suger & Sweet simply continues to produce the same sugary sodas and is likely to see its market share continue to decline.

Which of the following is an implication of high employee turnover in a company? A) It results in a reduction in the company's intangible-resource stocks. B) It makes the source of the company's competitive advantage causally ambiguous. C) It makes the source of the company's competitive advantage socially complex. D) It results in greater immobility and heterogeneity of the company's resources.

A) It results in a reduction in the company's intangible-resource stocks. An implication of high turnover in a company is that it results in a reduction in the company's intangible-resource stocks. The outflows of resources represent a reduction in a firm's intangible-resource stocks. Significant resource leakage can erode a firm's competitive advantage.

In nearly every case, which of the Five Forces is the most important in determining the relative power structure in an industry? A) No single force is dominant in most every case. B) current competitors C) potential entrants D) past participants

A) No single force is dominant in most every case. There is never a single dominating force that reigns supreme in every industry—it's relative.

________ are considered the ethical standards and norms that govern the behavior of individuals within a firm. A) Organizational core values B) Mission statements C) Vision statements D) Strategic leadership

A) Organizational core values Organizational core values are the ethical standards and norms that govern the behavior of individuals within a firm or organization.

Which of the following is an assumption that top-down strategic planning rests on? A) We can predict the future from the past. B) Time cannot be compressed at will. C) Decisions made in the past do not affect our future. D) Change is constant.

A) We can predict the future from the past. Top-down strategic planning rests on the assumption that the future can be predicted from the past. The approach works reasonably well when the environment does not change much.

You are the manager of Value Printing, a leading print shop. Value's resources include a highly experienced staff and state-of-the-art printing presses. However, your closest competition has started to cut into your market share by offering same-day turnaround on most orders. Although your staffing and equipment is not optimized for rapid production, you decide to start offering a same-day guarantee to your customers. According to the resource-based view, what is wrong with this decision? A) You have failed to take into account resource immobility. B) Customers tend to have negative opinions of firms that imitate other firms. C) Employees are often resistant to changes in strategy. D) Your business is not organized to capture value.

A) You have failed to take into account resource immobility. One of the critical assumptions of the resource-based view is resource immobility, or the idea that resources are "sticky" and hard to replicate. By offering a service that you do not have the resources to provide, you risk disappointing and alienating your customers, which could lead to further losses of market share.

Which of the following tasks in the AFI strategy framework involves evaluating the internal and external environments in which a firm operates? A) analysis B) formulation C) implementation D) competitive advantage

A) analysis Strategic analysis, the "A" in the AFI strategy framework, includes analyzing the internal and external environments of a firm.

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) co-opetition. B) perfect competition. C) monopolization. D) conglomeration.

A) co-opetition. This scenario best illustrates the process of co-opetition. Co-opetition is cooperation by competitors to achieve a strategic objective.

Jennifer was just named the CEO of a pen company called National Pens Inc. She immediately changed the name to "Jenn's Pens." When asked why she made this change by the board of directors, who showed research that there was no correlation between success and CEP names, she responded by saying, "my previous company had the name of their CEO in the title, and they were very successful." This fallacy on Jenifer's part reveals her A) confirmation bias. B) optimal decision making. C) escalation of commitment. D) groupthink.

A) confirmation bias. Confirmation bias is the tendency of individuals to search for information that confirms their existing beliefs. When confronted with evidence that contradicts these beliefs, they either ignore the evidence or interpret it such that it supports their beliefs.

The CEO of All Star Corp. has decided to enter the markets of emerging nations like China and Brazil. This means that the books, magazines, and websites published under the Chyron Media banner would be made available in these nations. Which of the following strategies does this scenario best illustrate? A) corporate strategy B) functional strategy C) business strategy D) divisional strategy

A) corporate strategy The given scenario of All Star Corp. describes a corporate strategy. Corporate strategy concerns questions relating to where to compete (industry, markets, and geography). Corporate executives at headquarters formulate corporate strategy.

TalkaLot Inc. is a cell phone manufacturing company. Its latest range of smartphones are visually similar to the Y-series range of smartphones from Talkie Gen Inc., in terms of its shape and look-and-feel. Which of the following strategies has TalkaLot Inc. used to replicate the valuable and rare resource of Talkie Gen Inc.? A) direct imitation B) strategic equivalence C) substitution D) innovation

A) direct imitation TalkaLot Inc. has used direct imitation to replicate the valuable and rare resource of Talkie Gen Inc. A competing firm can succeed in replicating a firm's valuable and rare resource by directly imitating the resource in question (direct imitation) or through working around it to provide a comparable product or service (substitution).

The ___________________ suggest(s) that because the external environment changes, strategic leaders must choose their current and future investments carefully over time in order to best maintain their firm's competitive advantage. A) dynamic capabilities perspective B) VRIO framework C) SWOT analysis framework D) law of diminishing returns

A) dynamic capabilities perspective Dynamic capabilities allow a firm to integrate, build, and reconfigure internal and external competences to address rapidly changing environments.

Tesla is addressing environmental concerns regarding the carbon emissions of gasoline-powered cars by building zero-emission battery-powered vehicles. This best represents which of the following PESTEL categories? A) ecological B) economic C) political D) technological

A) ecological The ecological factor refers to broad changes in environmental concerns, such as a reduction in a firm's carbon footprint.

Visionary companies differ from their competition in that A) employees in visionary organizations find meaning in their work and are motivated. B) a visionary company focuses on scenario planning and future competitive threats. C) in a visionary company it is the CEO's managerial style that gives the company its emergent strategy. D) visionary companies typically emphasize measuring financial performance.

A) employees in visionary organizations find meaning in their work and are motivated. The vision is the first principle that needs to be defined because it succinctly identifies the primary long-term objective of the organization. Strategic leaders need to begin with the end in mind.

In the AFI strategy framework, strategy analysis primarily involves A) evaluating the effects of internal resources and core competencies on a firm's potential to gain and sustain a competitive advantage. B) designing a business, corporate, and global strategy to gain and sustain a competitive advantage. C) organizing a firm in order to effectively put the formulated strategy into practice. D) deciding the type of corporate governance that would be most effective in the implementation of a strategy.

A) evaluating the effects of internal resources and core competencies on a firm's potential to gain and sustain a competitive advantage. Strategy analysis involves internal analysis, that is, what effects do internal resources, capabilities, and core competencies have on the firm's potential to gain and sustain a competitive advantage.

A firm will fail to create a sustained competitive advantage when the A) fit between its internal strengths and the external environment is static. B) source of its competitive advantage is causally ambiguous. C) source of its competitive advantage is socially complex. D) resource bundles exhibit heterogeneity and immobility.

A) fit between its internal strengths and the external environment is static. A firm must be able to change its resource base as the external environment changes. Rather than creating a static fit, the firm's internal strengths should change with its external environment in a dynamic fashion.

The distribution department at Wheat, Barley and Whey Corp. 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) functional strategy B) corporate strategy C) master strategy D) business strategy

A) functional strategy The distribution department of Wheat, Barley and Whey Corp. 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.

In the context of the SWOT matrix, which of the following best exemplifies a firm's internal strength? A) increase in a firm's customer loyalty B) growth in the size of the market in which a firm operates C) rise in the income of the demographic segment to which a firm caters D) loss of a competitor's reputation

A) increase in a firm's customer loyalty The increase in a firm's customer loyalty best exemplifies a firm's internal strength. Strengths and weaknesses are internal to an organization, whereas opportunities and threats are external to the organization.

Silvio is a manager at a software firm. The CEO tells him that the industry as a whole has become increasingly profitable over the past five years. Based on this information, Silvio is most likely to expect A) increased competition in the future and therefore he should recommend that the company upgrade its products to slow the entry of rival companies. B) increased profitability in the future and therefore he should recommend that the company remain on its current course. C) a leveling off of profitability in the next few years and therefore he should recommend that the company cooperate with its rivals to stimulate the industry. D) decreased competition in the next few years and therefore he should recommend that the company take advantage of its pricing power.

A) increased competition in the future and therefore he should recommend that the company upgrade its products to slow the entry of rival companies. One of the key insights of the five forces model is that the more profitable an industry, the more attractive it becomes to competitors. With the threat of additional capacity coming into an industry, incumbent firms may lower prices to make entry appear less attractive to the potential new competitors, or they may spend more to satisfy their existing customers.

With the emergence of smartphones, users no longer have to carry a separate music player, a video game, a laptop, or a magazine to keep themselves entertained when traveling. A smartphone is loaded with a variety of applications to satisfy all the customer needs that different industries or products individually satisfied earlier. As a result, the smartphone industry has been posing a threat to a lot of other unrelated industries. What is this phenomenon best known as? A) industry convergence B) backward integration C) product differentiation D) customer myopia

A) industry convergence This phenomenon is best known as industry convergence. Industry convergence is a process whereby formerly unrelated industries begin to satisfy the same customer need. Industry convergence is often brought on by technological advances.

Core competencies are derived from the combination of A) key strategic resources and a firm's capabilities. B) export barriers, trade barriers, and credit barriers faced recently by the company. C) tax policy changes driven by federal programs and R&D grants at the state level. D) knowledge brought in by new graduates and the mentoring they receive from existing employees.

A) key strategic resources and a firm's capabilities. It takes the combination of a firm's strategic resources and their capabilities in order to build core competencies.

The minimum wage in the country of Hanns is $8 an hour. Delish, a restaurant in Hanns' capital city, pays its servers $8 per hour. However, the management of the restaurant feels that this amount is excessive for workers whose only job is to clear tables. By continuing to adhere to the rules set by the government of Hanns, which of the following responsibilities is Delish satisfying? A) legal responsibilities B) philanthropic responsibilities C) ethical responsibilities D) demographic responsibilities

A) legal responsibilities By adhering to the rules set by the government of Hanns, Delish is satisfying its legal responsibilities. Laws and regulations are a society's codified ethics, embodying notions of right and wrong. They also establish the rules of the game.

Which of the following options below would serve as a feasible option when decidinghow to enter an established industry? A) leverage existing assets B) initiate a greenfield operation C) raise stakeholder capital by issuing stock D) only enter if it's an oligopoly

A) leverage existing assets The first mechanism that firms can use to determine how thy should enter an industry would require them to examine their current assets; if they can utilize their current assets in a way that would add to their competitiveness, then they should consider industry entry.

WeBreak4Bikes Inc. has a new U.S.-based client in the bicycle industry. The client's company produces only bicycles for riding on the road. The bicycles are used for reliable general purpose transportation. When asked to identify a potential substitute for the bicycle industry from the Five Forces perspective, you would select A) motorcycles. B) hot air balloons. C) tractors. D) None of these are substitutes.

A) motorcycles. Substitutes must exist outside the given industry but still offer an attractive price/performance tradeoff.

When company managers formulate strategy decisions resulting from their internal analysis, they are primarily making decisions about how to A) obtain and allocate critical and scarce resources. B) reduce costs in their industry. C) minimize foreign corporate income taxes. D) grow their company at any cost.

A) obtain and allocate critical and scarce resources. Because resources are finite, it's important for a manager to allocate his or her firm's resources in ways that will aid in its ability to generate above average returns (achieve competitive advantage).

We Build & Build's' core competency is building multi-family housing in urban areas. This competency is based primarily on the decisions made by the company's top management over several years to focus on building in densely populated cities. Management used the process of A) path dependence. B) dependence complexity. C) causal dependence. D) path immobility.

A) path dependence. Path dependence is a process in which the options that one faces in a current situation are affected by decisions made in the past.

Value chain analysis consists of systematically analyzing a firm's key activities that for analysis purposes are categorized into two groups: A) primary activities and support activities. B) products and service activities. C) customers and suppliers. D) profits and losses.

A) primary activities and support activities. Value chain represents all the internal activities a firm engages in to produce goods and services. Value chain is formed of primary activities that add value to the final product directly and support activities that add value indirectly.

Which of the following below is NOT categorized as a primary activity on Porter's Value Chain? A) procurement B) operations C) after sales service D) marketing and sales

A) procurement All of the answers listed are primary activities except for procurement, which is a support activity.

Bob is exploring multiple suppliers in order to find the best price. However, instead of calling all eight potential suppliers, he only reaches out to the first three and bases his selection on those instead of contacting all suppliers. Bob's action best describes the concept of A) satisficing. B) optimal decision making. C) the illusion of control. D) escalating commitment.

A) satisficing. Cognitive limitations tend to lead us to choose the "good enough option" that satisfies our immediate needs, rather than to search for an optimal solution.

The executives at Dizzy & Sons Corp. are developing strategic plans to address plausible future situations like rise in the prices of cotton and synthetic fabrics by 20 percent, appreciation in the value of the dollar, increase in the cost of labor by 30 percent, and increase in demand for the company's products. By doing so, the company will be well prepared with its planned responses if any of these situations occurs in the future. Thus, Dizzy & Sons Corp. is employing ________ as the approach to the development of strategy. A) scenario planning B) top-down strategic planning C) reverse engineering D) pattern recognition

A) scenario planning Scenario planning asks those "what if" questions. Similar to top-down strategic planning, scenario planning also uses a rational, scientific approach to the strategy process. In addition, in scenario planning managers envision different scenarios, to anticipate plausible futures.

An observer may conclude that the organizational culture of Zappos, an online retailer for shoes and clothing, might be the basis for its competitive advantage. However, reverse social engineering to crack Zappos' code of success might be much more difficult for a company trying to exactly imitate its strategy. Thus, the source of Zappos competitive advantage is A) socially complex. B) inexhaustible. C) non-substitutable. D) nonambiguous.

A) socially complex. Although an observer may conclude that Zappos' culture, with its focus on providing superior customer service, might be the basis for its competitive advantage, engaging in reverse social engineering to crack Zappos' code of success might be much more difficult. A firm may be able to protect its competitive advantage (even for long periods of time) when the source of its competitive advantage is causally ambiguous or socially complex.

Which of the following stages of the strategic management process involves an evaluation of a firm's external and internal environments? A) strategy analysis B) strategy implementation C) strategy formulation D) strategy control

A) strategy analysis A good strategy consists of a diagnosis of the competitive challenge. This element is accomplished through strategy analysis of the firm's external and internal environments.

Good Ole Cinemas Inc. and HD Inc. are two companies that own and run movie theaters in malls and other commercial areas. While Good Ole Cinemas Inc. pursues a cost-leadership strategy, HD Inc. adopts a differentiation strategy. Which of the following statements is most likely true of this scenario? A) Good Ole Cinemas will charge a premium price for its customers, while HD will implement everyday low pricing. B) HD and Good Ole Cinemas will not be direct competitors to each other, and their customer segments will overlap very little. C) HD will keep its customer service at an acceptable level, while Good Ole Cinemas will provide superior customer service. D) Good Ole Cinemas and HD will use a similar approach to create value for customers by attempting to offer everything to everybody.

B) HD and Good Ole Cinemas will not be direct competitors to each other, and their customer segments will overlap very little. Although these companies are in the same industry, their customer segments will most likely overlap very little, and they will not be direct competitors. That is because each firm has chosen a distinct but different strategic position; both can win if they have a distinct and well-executed competitive strategy.

Have A Seat Furniture has seen its profit margins shrink over the past several years as increased competition has driven down furniture prices. You have been tasked with improving the company's margins. Which of the following approaches makes the most sense within the context of strategic activity systems? A) Go against the trend and raise prices. B) Install modern manufacturing equipment to improve efficiency. C) Increase spending on online marketing efforts. D) Focus on imitating the most successful products of competitors.

B) Install modern manufacturing equipment to improve efficiency. Strategic activity systems are networks of connected activities that each contribute incremental value to the value chain. To reduce costs and improve the chances of establishing or sustaining a competitive advantage, strategic activity systems must be continuously analyzed and improved to address changes in the external environment. Improving a primary activity, such as manufacturing, is the best option to reduce costs and improve margins.

Writer Button Inc. and Horner 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, Writer Button Inc. and Horner Inc. most likely have A) competitive advantage over other firms in their industry. B) competitive parity with each other. C) strategic alliance with each other. D) economies of scope instead of economies of scale.

B) competitive parity with each other. In this scenario, Writer Button Inc. and Horner Inc. most likely have competitive parity with each other. Competitive parity refers to the performance of two or more firms at the same level.

Shippity and ShipING Inc. are two competing firms in the same industry. Shippity's tangible assets are valued at $15 billion and its intangible assets are valued at $35 billion. ShipING Inc.'s tangible assets are valued at $5 billion and its intangible assets are valued at $45 billion. What can be concluded from this information? A) ShipING Inc. will be less competitive than Shippity because of its smaller investment in tangible assets. B) It is likely that ShipING Inc. is better enabled than Shippity to gain and sustain a competitive advantage. C) Judging from the assets listed, ShipING Inc. has probably been in the industry a much shorter time than Shippity. D) There is no resource heterogeneity between the two firms, ShipING Inc. and Shippity, as they operate in the same industry.

B) It is likely that ShipING Inc. is better enabled than Shippity to gain and sustain a competitive advantage. It can be concluded that ShipING Inc. is better positioned than Shippity to gain and sustain a competitive advantage. Competitive advantage is more likely to spring from intangible rather than tangible resources. Tangible assets, like buildings or computer servers, can be bought on the open market by any comers who have the necessary cash. However, a brand name must be built, often over long periods of time.

Alan has been an employee with StartsInc. for 15 years. He started with an entry-level job, and today he is a manager of an entire division. Over the years, Alan has acquired a reputation for doing the right things in the company. Hence, as an efficient leader, he is capable of effectively communicating and motivating his subordinates to work toward the company's vision and mission. According to the Level-5 leadership pyramid, which is the highest level of leadership Alan has reached so far? A) Level 5 B) Level 4 C) Level 3 D) Level 2

B) Level 4 Alan has reached Level 4 of the Level-5 leadership pyramid so far. At Level 4, the effective Level 3 manager becomes a leader who determines what the right decisions are. The Level 4 manager effectively communicates a compelling vision and mission to guide the firm toward superior performance. He or she "does the right things."

Sally 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 Sally recommend to the company's owner? A) Increase supply. During recessions, businesses that focus on low-cost solutions make significant profits. B) Reduce supply. Customers generally reduce their purchases of luxury items when the economy falters. C) Maintain the supply at its current rate. Economic forecasts are rarely accurate. D) Wait six months and see what happens. Recessions rarely affect consumer spending.

B) Reduce supply. Customers generally reduce their purchases of luxury items when the economy falters. While it is true that businesses that focus on low-cost solutions can make significant profits during a recession, most other businesses do not. For customers, expenditures on luxury products (such as diamond watches) are often the first to be cut during recessionary periods.

To support the rise of emergent strategies, an organization should A) centralize decision making and all other activities. B) empower lower-level employees to take up autonomous actions. C) limit serendipity that is in the form of random events and accidental happenstances. D) rely solely on hard data to formulate strategies.

B) empower lower-level employees to take up autonomous actions. Successful emergent strategies are sometimes the result of serendipity combined with autonomous actions of lower-level employees.

Leslie owns a large portion of Hue Apparel's stock. However, she is not employed by the company. In this scenario, Leslie is the company's A) external stakeholder. B) internal stakeholder. C) creditor. D) customer

B) internal stakeholder. In this scenario, Leslie is the company's internal stakeholder. Internal stakeholders of a firm include stockholders, employees (including executives, managers, and workers), and board members.

ECO Jeans, Inc. had a mission to become the leading producer of environmentally friendly blue jeans, an emerging and in-demand category in the apparel industry. Its strategy involved leveraging a network of organic cotton farmers and suppliers of environmentally responsible synthetic materials to create a product that is durable, attractive, affordable, and 100% recyclable. However, because it did not upgrade its outdated production facilities, ECO Jeans could not assemble its products at a low-enough cost to offer the jeans at a price that was attractive to customers. ECO Jeans' strategy failed because A) it failed to consider the competitive challenge. B) it was not backed up with strategic commitments. C) managers did not live by the company's core values. D) the company did not stake out a unique strategy position.

B) it was not backed up with strategic commitments. A formulated strategy must be backed up with strategic commitments, or actions to achieve the mission that are costly, long-term oriented, and difficult to reverse. ECO Jeans failed to invest in upgrading its production facilities, leaving it unable to produce its jeans at a low-enough cost to achieve a competitive advantage.

Food Shipp 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 Food Shipp. To accomplish this, they are using ________ to influence the political process. A) ecological factors B) lobbying forces C) interest rates D) demographic research

B) lobbying forces Many large companies use powerful lobbying forces to influence the political process.

Homestyle is a company that manufactures and sells home furniture. It sources its materials from another country to keep costs low. An assembly line worker in one of its manufacturing centers noticed that there was increasing concern regarding the potential toxicity of the flame-resistant materials used in the furniture. In response, she compiled a list of nontoxic flame-resistant materials that the company could use. When her manager learned about this, he presented the prospect and got it approved from the top management team. This is an example of the A) top-down strategic planning approach. B) planned emergence approach. C) scenario planning process. D) reverse engineering process.

B) planned emergence approach. This scenario exemplifies a planned emergence approach. A planned emergence is a strategy process in which organizational structure and systems allow bottom-up strategic initiatives to emerge and be evaluated and coordinated by top management. In the strategy-as-planned-emergence approach, strategic initiatives can come from anywhere within a firm.

Which of the following three important stakeholder attributes should managers pay special close attention to in order to better understand stakeholder impact analysis? A) competitive advantage, economic value, and time B) power, legitimacy, and urgency C) grace under pressure, financial control, and reward power D) shareholder rights plan, board representation and CEO influence

B) power, legitimacy, and urgency Stakeholder impact analysis provides a decision tool with which strategic leaders can recognize, prioritize, and address the needs of different stakeholders—during each step managers must pay attention to three important stakeholder attributes: power, legitimacy, and urgency.

A firm is said to gain a competitive advantage when it can A) exceed its own previous performances. B) provide products similar to its competitors, but at lower prices. C) perform at the same level as that of its competitors. D) minimize the difference between value creation and cost.

B) provide products similar to its competitors, but at lower prices. To gain a competitive advantage, a firm needs to provide either goods or services consumers value more highly than those of its competitors, or goods or services similar to the competitors' at a lower price.

Dora's Supplies manufactures medical devices. The firm's profitability depends on several variables that are subject to occasional change, including the cost of parts and labor, changes in medical practices, and the price of oil used in both manufacturing and shipping. To account for the potential impact of changes to any of these variables, Dora's Supplies managers should implement a(n) ________ approach. A) top-down strategic planning B) scenario planning C) upper-echelon D) strategic business units

B) scenario planning In scenario planning, top management envisions different scenarios, to anticipate plausible futures in order to derive strategic responses. By implementing a scenario planning approach, managers at Dora's Supplies can prepare strategic responses to any changes in the external environment.

Online retailer eBuy had been drastically losing market share to its competitors. The management hired a reputed consulting firm to advise the company. The experts from the consulting firm pointed out that the company primarily lost out on its competitive advantage due to its poor customer service, including slow response times to customer inquiries and unclear return policies. These ineffective policies and procedures led to many disgruntled customers and a steady migration to more customer-friendly retailers. eBuy can best solve its problem by working on its A) immobile assets. B) support activities. C) resource flows. D) resource stocks.

B) support activities. Support activities are firm activities that add value indirectly, but are necessary to sustain primary activities. Thus, eBuy could solve its problem by working on its support activities.

We Ensure Inc., an insurance firm, replaced its existing project management software with new software from another supplier. Since the new software has different features and abilities, We Ensure has had to spend $10,000 on training its employees to use it. In this scenario, $10,000 represents We Ensure's A) opportunity cost. B) switching cost. C) octroi charge. D) excise duty.

B) switching cost. In this scenario, $10,000 represents We Ensure's switching cost. Switching costs are incurred by moving from one supplier to another. Changing vendors may require the buyer to alter product specifications, retrain employees, and/or modify existing processes.

Jalen Corp., a large conglomerate, wants to liquidate its business in certain industries to improve its overall profitability. Which of the following industries would Jalen Corp. find it most difficult to exit? A) the management consultancy industry in which the company's fixed costs are low B) the steel industry in which the company has obligations like severance pay toward employees C) the corporate training industry in which the company's commitments are mostly short-term D) the e-commerce industry where the company has no long-term contractual agreements with suppliers

B) the steel industry in which the company has obligations like severance pay toward employees Jalen Corp. would find it most difficult to exit the steel industry in which the company has obligations like severance pay toward employees. Exit barriers are comprised of both economic and social factors. A company exiting an industry may still have contractual obligations to suppliers, such as employee health care and retirement benefits, as well as severance pay.

Which of the following fundamental insights was provided by Porter's five forces framework from the completion of the Alta Velocidad Española (AVE)? A) A strong threat of substitutes decreases the rivalry among existing competitors. B) All of the five forces must work together to have a meaningful impact. C) Any of the five forces on its own, if sufficiently strong, can extract industry profitability. D) Competition must be defined more narrowly to remain confined to the industry's closest competitors.

C) Any of the five forces on its own, if sufficiently strong, can extract industry profitability. The AVE example highlights the two fundamental insights provided by Porter's five forces framework. First, competition must be defined more broadly to go beyond direct industry competitors. Second, any of the five forces on its own, if sufficiently strong, can extract industry profitability.

Which of the following scenarios illustrates a firm that has a sustainable competitive advantage? A) Samson LLC generated revenue of $300,000 this financial year, which is close to the industrial revenue average of $320,000. B) GoNow Inc. almost doubled its sales to 9,000 units this year compared to its previous year's sales of 5,000 units, though the industry average is 10,000 units. C) Bill and Ted Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years. D) Johnson Inc. was able to outperform its competitors with its new production system, in terms of revenue, for a brief period of four months.

C) Bill and Ted Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years. A firm that is able to outperform its competitors or the industry average over a prolonged period of time has a sustainable competitive advantage. Thus, Bill and Ted Corp. has a sustainable competitive advantage because it has been able to hold its market share of 68 percent in the social networking industry for more than three years.

Bill's Auto & Airplane Repair shop is able to generate a positive net income of $10,000 a week; this is the industry average. We can conclude that since he has a positive net income, he also has a competitive parity in the industry. A) Correct—competitive advantage is achieved through profitability alone. B) Correct—competitive advantage is achieved since Bill's Auto & Airplane Repair shop has a positive net income. C) Correct—competitive parity is achieved by generating average returns, relative to competition in a given industry. D) Incorrect—Bill's Auto & Airplane Repair shop more than likely has a sustained competitive advantage since his business is diversified.

C) Correct—competitive parity is achieved by generating average returns, relative to competition in a given industry. A competitive parity is defined as a firm's ability to generate average returns relative to the industry in which they operate.

Which of the following statements is true about strategic groups? A) It is not possible to have two different strategic groups within the same industry. B) Rivalry within the same strategic group tends to be lower than rivalry between different strategic groups. C) Profitability varies between different strategic groups. D) Companies within the same strategic group are complementors to each other.

C) Profitability varies between different strategic groups. Some strategic groups tend to be more profitable than others. This difference implies that firm performance is determined not only by the industry to which the firm belongs, but also by its strategic group membership.

Ride N Style 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 Ride N Styles pursue instead? A) Create a strategic group through mergers. B) Compete based on inter-group rivalry, not intra-group rivalry. C) Pursue a differentiated strategy. D) Close the business until the cost of gas decreases.

C) Pursue a differentiated strategy. A differentiated competitor usually has higher cost structures and therefore charges higher prices. Differentiated competitors usually offer customers more convenience, luxury, or options.

The "diagonal assembly system" was a production system pioneered by the automobile company Gogo. Recently, Gogo was able to sue a competitor and won the suit, thereby receiving $100 million in damages. Which of the following would most likely enable Gogo to win such a lawsuit? A) The competitor ran advertising that criticized Gogo's assembly system. B) The competitor failed to apply for a patent of its own assembly system. C) The competitor infringed on Gogo's patent of the "diagonal assembly system." D) The competitor developed an assembly system that worked on a newer theory than Gogo's system.

C) The competitor infringed on Gogo's patent of the "diagonal assembly system." A company can often win a lawsuit against a competitor when the court finds that the competitor infringed on patents owned by the company.

Which of the following applies to the Strength-Threats quadrant of the SWOT matrix? A) The local fast-food chain Easy Hot Dogs expanded its limited menu to maintain its advantage against stiff competition. B) The local fast-food chain Easy Hot Dogs added a salad bar to maintain its competitive advantage against stiff competition. C) The local fast-food chain Easy Hot Dogs used its wholesome image to maintain its competitive advantage against stiff competition. D) The local fast-food chain Easy Hot Dogs revised its image of being a cheap-food place to being a wholesome family place to maintain its competitive advantage against stiff competition.

C) The local fast-food chain Easy Hot Dogs used its wholesome image to maintain its competitive advantage against stiff competition. The Strength-Threats quadrant of the SWOT matrix uses an external strength, such as a wholesome image, to minimize the effect of an external threat, such as stiff competition.

HomeAgain is a nonprofit organization that works toward rehabilitating the homeless. The credo of the organization is "help us help you." For an organization like HomeAgain, which of the following statements would make an appropriate mission? A) Help us help you find a home. B) One day, everyone in this nation will have a home to protect themselves. C) We help the homeless gain and sustain financial independence by providing employment opportunities. D) Our mission is to turn this not-for-profit organization into a for-profit organization so that the stakeholders benefit.

C) We help the homeless gain and sustain financial independence by providing employment opportunities. Building on the vision, organizations establish a mission, which describes what an organization actually does—that is, the products and services it plans to provide, and the markets in which it will compete. "We help the homeless gain and sustain financial independence by providing employment opportunities" would make an appropriate mission for True Help.

Which of the following best qualifies as a firm's internal stakeholder? A) an auditor assigned to the firm by a federal government agency B) a labor union with whom the firm's employees can affiliate C) a manager taking care of the firm's operations in a foreign market D) a competitor manufacturing the same products as that of the firm

C) a manager taking care of the firm's operations in a foreign market 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.

When the strong dictatorial rule in Arlington unexpectedly collapsed due to the shocking death of the royal family in an explosion, the nation's economy experienced drastic changes. The laws became more restrictive, the country lost many locally produced resources and products, and the distribution of wealth became inequitable. The unexpected event that led to these changes can best be described as a(n) ________ event. A) extinction B) wild card C) black swan D) miracle

C) black swan The unexpected event that led to these changes can best be described as a black swan event. The metaphor of a black swan describes the high impact of a highly improbable event.

Tim's ToothCream has been the leader of dental care products for about 40 years. However, this company relied too long on its competency of reducing cavities without refining or upgrading other aspects of its product. As a result, other personal hygiene companies that began to offer toothpastes with natural whitening agents gained a competitive advantage over Tim's ToothCream. This case is an example of A) resource flow. B) dynamic capabilities. C) core rigidity. D) value chain.

C) core rigidity. A core competency can turn into a core rigidity if a firm relies too long on the competency without honing, refining, and upgrading as the environment changes.

Industrial Drills, a company that manufactures industrial tools, incurs higher costs because of its refusal to outsource its manufacturing to countries where labor costs are lower. This reflects Industrial Drills' ________ responsibility. A) economic B) legal C) ethical D) demographic

C) ethical This reflects Industrial Drills' ethical responsibility. A firm's ethical responsibilities go beyond its legal responsibilities. They embody the full scope of expectations, norms, and values of its stakeholders. Managers are called upon to do what society deems just and fair.

Lil Anthony's and Amelia's are two restaurants serving Italian cuisine. While Lil Anthony's focuses on providing quick, affordable pasta dishes for the lunch crowd, Amelia's focuses on serving home-style dishes in an upscale, romantic setting. Both companies have been able to gain a competitive advantage. This is most likely because the companies have A) benefitted from economies of scale. B) entered into a cartel arrangement. C) pursued distinct strategic positions. D) engaged in direct imitation and substitution.

C) pursued distinct strategic positions. In this scenario, the two firms have gained a competitive advantage by pursuing distinct strategic positions. Cost-leadership and differentiation are distinct strategic positions. The key to successful strategy is to combine a set of activities to stake out a unique position within an industry.

STRIKEBYTE Inc. is a software company that has built and acquired numerous assets over the years. According to the resource-based view of a firm, which of the following assets of STRIKEBYTE Inc. will best enable it to gain and sustain a competitive advantage? A) the cloud computing service that it uses B) the capital the company raised from its shareholders C) the expertise acquired by the employees in the company D) the headquarters building owned by the company

C) the expertise acquired by the employees in the company The expertise acquired by the employees in the company is the asset that will best enable Smooth Fusion Inc. to gain and sustain a competitive advantage. The resource-based view is a model that sees certain types of resources as key to superior firm performance. If a resource exhibits VRIO attributes, the resource enables the firm to gain and sustain a competitive advantage. Competitive advantage is more likely to spring from intangible rather than tangible resources.

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 A) causal ambiguity. B) diseconomies of scope and scale. C) time compression diseconomies. D) social complexity.

C) time compression diseconomies. In this scenario, Blue Tech Inc.'s failure can be attributed to time compression diseconomies. When attempting to compress lots of effort and resources such as R&D into a short time period, it will not be as effective as when a firm spreads out its effort and investments over a longer period. Trying to achieve the same outcome in a short time period, even with higher investments, tends to lead to inferior results.

Which of the following is a customer-oriented vision? A) to be the most progressive insurance company B) to be the best automobile company in the world C) to enable businesses to improve their employee communications D) to manufacture innovative products through continuous learning

C) to enable businesses to improve their employee communications A customer-oriented vision defines a business in terms of providing solutions to customer needs. The statement "to enable businesses to improve their employee communications" is a customer-oriented vision.

The CEO of EveryCar was the child of parents who had difficulty making enough money to support their family. As a result, he and his siblings did not have access to many advantages that children from wealthier families had. This CEO, therefore, emphasized making affordable, low-maintenance vehicles that could be bought by low-income households. Which of the following does this example demonstrate? A) dominant strategic planning B) Level-5 leadership pyramid C) upper-echelons theory D) scenario planning

C) upper-echelons theory Upper-echelons theory is a conceptual framework that views organizational outcomes—strategic choices and performance levels—as reflections of the values of the members of the top management team, who interpret situations through the lens of their unique perspectives. The values of the CEO of EveryCar influenced organizational outcomes, specifically making affordable vehicles that could be bought by low-income households.

A "perfectly competitive" industry is one that A) has commodity product offerings. B) usually exhibits low profitability. C) have difficulty achieving even a temporary competitive advantage. D) All of the answers are correct.

D) All of the answers are correct. All of these are elements that demonstrate a perfectly competitive industry.

Cartzy Inc., Cartific Inc., and Clustercart Inc., are three consumer-product retailing companies. Their products consist primarily of day-to-day items that are easy to imitate and sell. All three companies use the same resources and capabilities in the production and distribution of their products. Judging from the market conditions described in this scenario, which of the following statements is true? A) Resource immobility of the firms will be low. B) The industry structure will be far from perfect competition. C) Barriers to entry within the industry will be high. D) Any advantage that one firm has will be short-lived.

D) Any advantage that one firm has will be short-lived. If a resource is common, it will result in perfect competition where no firm is able to maintain a competitive advantage. In perfect competition, all firms have access to the same resources and capabilities, ensuring that any advantage that one firm has will be short-lived.

Managers at SunTrustUs Properties are surprised to hear that interest rates are likely to remain low for the next six months. Which of the following is an implication of low interest rates? A) Cost of capital for firms will be high. B) Firms will invest less in future growth. C) Economic growth rate will fall. D) Consumer demand will increase.

D) Consumer demand will increase. Low interest rates have a direct bearing on consumer demand. When credit is cheap (because interest rates are low), consumers buy homes, automobiles, computers, and even vacations on credit; in turn, all of this demand fuels economic growth. During periods of low interest rates, firms can easily borrow money to finance future growth. Borrowing at lower rates lowers the cost of capital and enhances a firm's competitiveness.

MoreCash Inc. is a major financial services corporation. With the CEO of MoreCash Inc. preparing to retire, several top managers are vying for the position. Jared considers himself to be a leading candidate. He not only has advanced degrees from business schools and more than a decade of experience working for MoreCash Inc., but he also has personally ensured that his division has exceeded its performance benchmarks over the past three years, even though many of his employees are dissatisfied because they feel they are stagnating in their jobs. According to the Level-5 leadership pyramid, why has Jared failed to exhibit the qualities of a Level-5 leader? A) His individual skills are not well developed. B) His actions do not match the organization's strategy. C) He lacks the organizational ability to accomplish the organization's goals. D) He is not able to help others reach their full potential.

D) He is not able to help others reach their full potential. At Level 5, the strategic leader builds enduring greatness by combining willpower and humility. This implies that a Level-5 executive works to help the organization succeed and others to reach their full potential. Even though Jared's division has exceeded expectations over the past three years, the fact that several of his employees feel that they are stagnating suggests that he has not mastered the capabilities necessary to be a Level-5 executive.

As the strategic manager of ShRPer 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) Reduce the quality of materials used in ShRPer scissors to bring unit costs down to $1, then sell the scissors for $12. B) Continue to produce ShRPer scissors for $3 but set the price at $10. C) Offer a buy-one-get-one-free sale on ShRPer scissors. D) Market ShRPer scissors as a higher-quality alternative and sell them for $15.

D) Market ShRPer scissors as a higher-quality alternative and sell them for $15. By emphasizing the quality and comfort of ShRPer 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.

Hank runs a company that manufactures satellites for commercial and government use. It has few rivals. At the moment, the power of buyers, the power of suppliers, and the threat of substitutes are all low. Based on this information, what can Hank conclude? A) The manufacturer is likely to see little profit until the power of buyers improves. B) In this scenario, suppliers are likely to create and sell effective substitutes. C) This firm is an example of near-perfect competition. D) The company is likely to be very profitable as long as the threat to entry is low.

D) The company is likely to be very profitable as long as the threat to entry is low. The stronger the forces (threat of entry, power of buyers and suppliers, and threat of substitutes) are, the stronger the expected competitive intensity, which in turn limits the industry's profit potential. Therefore, the weaker these forces are, the more profitable a firm in this industry is likely to be.

BestReads spent 10 million dollars to buy the rights to a best-selling novel. The company then prepared for production by hiring a screenwriter to adapt the novel, casting the main roles, renting cameras and other equipment, and scouting locations in southern Montana. Which of the following pairs of resources areboth intangible? A) money spent to buy rights to the novel; screenwriter's experience adapting novels B) money spent to buy rights to the novel; locations in southern Montana C) best-selling novel; locations in southern Montana D) best-selling novel; screenwriter's experience adapting novels

D) best-selling novel; screenwriter's experience adapting novels The best-selling novel is intellectual property and therefore is an intangible resource. Also, a worker's experience is an intangible resource.

Corporate executives at Fly High Inc. decide to compete in the remote model airplane industry by making the largest model planes available. By doing this, they completed part of their ________ strategy. A) implementation B) corporate C) functional D) business

D) business Business strategy deals with differentiation, such as making a product that is in some way different from the product of competitors. Fly High, Inc. is doing this by making the largest model planes available.

All of the following are external stakeholders except which of the following? A) customers B) creditors C) alliance partners D) competitors

D) competitors Competitors are not considered internal or external stakeholders in the firm.

In the final step of the stakeholder impact analysis, a firm A) identifies its stakeholders' interests and claims. B) differentiates its internal stakeholders from its external stakeholders. C) recognizes the opportunities and threats stakeholders present. D) decides a course of action to address the stakeholders' concerns.

D) decides a course of action to address the stakeholders' concerns. In the final step of the stakeholder impact analysis, the firm asks, "What should we do to effectively address any stakeholder concerns?"

LightningDrive is a leading automobile company. The company has been able to sustain its competitive advantage primarily due to its high-quality and efficient electric motors. Most of its competitors have failed to develop similar electric motors at a reasonable price. Which of the following resource attributes listed in the VRIO framework has helped LightningDrive sustain its competitive advantage? A) resource mobility B) inexhaustible nature C) intangibility of the company's resource D) high costs involved in imitation

D) high costs involved in imitation A resource is costly to imitate if firms that do not possess the resource are unable to develop or buy the resource at a reasonable price. If the resource in question is valuable, rare, and costly to imitate, then it is an internal strength and a core competency.

The first step in stakeholder impact analysis involves A) formulating a stakeholder strategy to balance the different needs of various stakeholders. B) identifying the opportunities and threats the stakeholders present. C) describing the economic, legal, ethical, and philanthropic responsibilities of the firm toward society. D) identifying the stakeholders that currently have, or potentially can have, a material effect on a company.

D) identifying the stakeholders that currently have, or potentially can have, a material effect on a company. In the first step of stakeholder impact analysis, the firm focuses on stakeholders that currently have, or potentially can have, a material effect on a company. This prioritization identifies the most powerful stakeholders (both internal and external) and their needs.

In which of the following situations is a company that exists in the telecommunications industry most likely to face the highest threat of entry? A) if the company is able to put up a credible threat of retaliation B) if the capital requirements in the industry are high C) if the customer switching costs in the industry are high D) if the industry has recently become deregulated

D) if the industry has recently become deregulated A company will most likely face the highest threat of entry if the telecommunications industry has recently become deregulated.

Due to several black swan events in the past, the A) shareholders of public companies have become more confident in investing their resources in businesses. B) need for corporate governance and transparency has decreased within various industries. C) nations around the globe have explicitly appreciated and accepted capitalism as an economic system. D) implicit trust relationship between the corporate world and society at large has deteriorated.

D) implicit trust relationship between the corporate world and society at large has deteriorated. The implicit trust relationship between the corporate world and society at large has deteriorated due to the arrival of several black swans.

The government of Pentsu has mandated that the standard minimum wage in the country be increased to $8,000 per year. Which of the following factors in a firm's general environment does this mandate best indicate? A) ecological factors B) sociocultural factors C) technological factors D) legal factors

D) legal factors This mandate best indicates legal factors in a firm's general environment. The legal environment captures the official outcomes of political processes as manifested in laws, mandates, regulations, and court decisions—all of which can have a direct bearing on a firm's profit potential.

Hot Wok Cuisine is a premium Asian restaurant chain that differentiates itself from a large number of competitors by providing exclusively organic Chinese cuisine. It has some pricing power because it provides differentiated products and therefore, has some entry barriers in place. In this scenario, Hot Wok Cuisine is most likely operating in a(n) A) oligopoly. B) monopoly. C) perfectly competitive industry. D) monopolistically competitive industry.

D) monopolistically competitive industry. In this scenario, Hot Wok Cuisine is most likely operating in a monopolistically competitive industry. A monopolistically competitive industry is characterized by many firms, a differentiated product, some obstacles to entry, and the ability to raise prices for a relatively unique product while retaining customers.

Three large firms dominate the telecommunication industry of CallsRUs: TeleFone Inc., Cell Comm Corp., and Talk Now Inc. Instead of cutting prices competitively, these firms have resorted to non-price competition through branding and product differentiation. Which of the following industry competitive structures are these companies most likely in? A) monopoly B) perfect competition C) monopolistic competition D) oligopoly

D) oligopoly These companies are most likely in an oligopolistic industry, which is consolidated with few (large) firms, differentiated products, high barriers to entry, and some degree of pricing power. In oligopoly, nonprice competition is the preferred mode of competition.

The management of Venture Manufacturing showed a commitment to ________ by increasing the salary of many female employees to meet its goal of having equal pay for women and men who perform comparable work. A) scenario planning B) upper-echelons theory C) product-oriented vision D) organizational core values

D) organizational core values Equal pay for women and men employees for comparable work is an organizational value. The management of Venture Manufacturing showed a commitment to this value by increasing the salary of many female employees.

During an AFI planning session, the managers of the Bronco Motorcycle Corporation decided to place various stages of production in different countries in order to implement the strategy of cutting overhead costs. By doing this, what issue did the firm address? A) philanthropic strategy B) business ethics C) corporate governance D) organizational design

D) organizational design Organizational design involves deciding how the firm should organize to turn the formulated strategy into action.

Toyago Inc. is a leading educational toy company. Competitors across the globe have failed to imitate Toyago's production models, supply chain systems, knowledge systems, and culture. These attributes have remained unique to Toyago Inc. for a long time. Which of the following assumptions of the resource-based model of competitive advantage does this scenario best illustrate? A) resource homogeneity B) resource cost C) resource substitution D) resource immobility

D) resource immobility The scenario best illustrates resource immobility. A critical assumption of the resource-based model—resource immobility—is that resources tend to be "sticky" and don't move easily from firm to firm. Because of that stickiness, the resource differences that exist between firms are difficult to replicate and, therefore, can last for a long time.

If a company wants to gain a competitive advantage in a highly competitive industry, it should ideally A) execute an integrated cost-leadership and differentiation position. B) copy the strategies of other firms through competitive benchmarking. C) provide goods or services similar to its competitors at higher prices. D) stake out a unique position within the industry.

D) stake out a unique position within the industry. The key to successful strategy is to combine a set of activities to stake out a unique position within an industry. Competitive advantage has to come from performing different activities or performing the same activities differently than rivals are doing. Competing to be similar but just a bit better than a competitor is likely to be a recipe for cutthroat competition and low profit potential.

Viral 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 Viral Apparel is most likely to be considered a rare resource that is contributing to its competitive advantage? A) the company's land and buildings B) the company's plant and machinery C) the company's raw material supplies D) the company's design patents

D) the company's design patents Viral's design patents would be considered a rare resource that is best contributing to its competitive advantage. A resource is rare if only one or a few firms possess it.

Who among the following is responsible for making business strategies in a large conglomerate? A) the board of directors at the headquarters B) the shareholder of the company C) the lower-level employees in the company D) the general managers of individual business units

D) the general managers of individual business units General managers in strategic business units (SBUs) must answer business strategy questions relating to how to compete in order to achieve superior performance.

The management of a company is assessing the value of all the tangible resources the company owns. Which of the following will be included in this assessment? A) a reputation for fast customer service B) a culture of proactive communication C) patents for electronic components D) the punch presses that produce parts

D) the punch presses that produce parts The company's plant and machinery will be included in the assessment of the value of all the tangible resources the company owns. Tangible resources have physical attributes and are visible. Examples of tangible resources are labor, capital, land, buildings, plant, equipment, and supplies.

Rub A Dub is a company that manufactures hot tubs. Which of the following best illustrates a product-oriented vision for Rub A Dub? A) to make people's lives simple and easy B) to demonstrate to customers the health benefits of hot tubs C) to help people improve the value of their homes D) to be the pioneering manufacturer of hot tubs

D) to be the pioneering manufacturer of hot tubs "To be the pioneering manufacturer of hot tubs" best illustrates a product-oriented vision for Rub A Dub. A product-oriented vision defines a business in terms of a good or service provided.

Which of the following features about a buyer indicates that the buyer has high bargaining power? A) when the buyer cannot credibly threaten to backwardly integrate into the industry B) when the buyer cannot purchase specific products from other sellers C) when the buyer faces high switching costs D) when the buyer purchases inputs that are standardized or undifferentiated commodities

D) when the buyer purchases inputs that are standardized or undifferentiated commodities The power of buyers is high when the industry's products are standardized or undifferentiated commodities.