Business Strategy Exam 2
Sarah paid $900 for a camera that she thought was worth $1100 for all the features included in it. For the consumer electronics firm selling the camera, however, the cost of producing the camera was only $350. What is the consumer surplus in this scenario? $900 $1,100 $550 $200
$200
5) The question that business-level strategy answers is ________ the firm will compete. A) when B) where C) who D) how
5) D; how
Which of the following businesses is most likely to disrupt an existing industry? A) Black Rock developed an earphone that receives emails and text messages and converts them to voice messages. The first models had poor reception, but they rapidly improved over time. B) Touch Tech Inc. reconfigured the components used in its touchscreen tablets to create a new type of wearable device for use in restaurants and other service industries C) Stark and Son's developed a teleportation technology that can transport physical materials instantaneously across great distances D) GSX Techedu added advanced camera technology to its premium line of smartphones so that they would take the highest-quality photos of all phones in the market.
A) Black Rock developed an earphone that receives emails and text messages and converts them to voice messages. The first models had poor reception, but they rapidly improved over time.
Which of the following is an advantage of a triple-bottom-line approach? A) The approach takes an integrative and holistic view in assessing a company's performance. B) The approach does not rely on an external view of a firm to asses its performance. C) The approach is more of a quantitative performance metric rather than a mere conceptual framework. D) The framework can help managers asses a firm's competitive advantage
A) The approach takes an integrative and holistic view in assessing a company's performance.
All of the following are questions that managers should ask before crafting a business-level strategy except A) When should we introduce our product/service in the market? B) What customer needs, wishes, and desires will we satisfy? C) Why do we want to satisfy them? D) Who-which customer segments-will we serve?
A) When should we introduce our product/service in the market?
Revolve Group is a mobile platform that matches independent fashion designers with customers who want a personalized wardrobe. Which of the following initiatives would best allow Revolve group to fine-tune its offerings to better meet the needs of its customers? A) allowing users to provide feedback to producers on the style and fit of clothing B) conducting anonymous phone surveys about consumers' fashion preferences C) hiring an outside consultant to evaluate the offerings of Revolve Group's producers D) studying the financial records of various fashion design companies
A) allowing users to provide feedback to producers on the style and fit of clothing
When pursuing a cost leadership strategy a business must remember that A) buyers will be reluctant to pay for a product unless the quality is acceptable. B) buyers will be reluctant to pay for a product unless the quality is superior. C) buyers will be reluctant to pay for the product unless it is customized. D) product quality is more important in a broad market than in a narrow one
A) buyers will be reluctant to pay for a product unless the quality is acceptable.
Which of the following is not true about the decline stage of an industry life cycle? A) firms that consolidate by purchasing their rivals will find themselves at a disadvantage. B) There is generally excess industry capacity during the decline stage C) The last consumer segment called "laggards" will finally enter the market D) Inefficient firms will usually exit the industry.
A) firms that consolidate by purchasing their rivals will find themselves at a disadvantage.
BellRing Brands is manufacturer of educational toys for children. Six months ago, the company's research and development division came up with an idea for a unique touchscreen device that can be used to introduce children to a number of foreign languages. three months ago, the company produces a working prototype, and last month the company successfully launched its new device on the commercial market. What should bellRing Brands's managers prepare for next? A) increased competition from imitators B) a prolonged period of uncontested success C) a sharp decline in demand for the product D) a difficult struggle to move from invention to innovation
A) increased competition from imitators
Denise is the CEO of a profitable business called 4-Ever-Sun Inc. which harnesses solar power, a renewable energy source that is sustainable over time. instead of pursuing a sustainable competitive advantage, Denise decides to focus on minimizing detrimental effects on society and the planet. This strategy is known as A) sustainable strategy B) the balanced scorecard C) corporate diversification strategy D) cost leadership strategy
A) sustainable strategy
Which of the following statements is true of accounting data? A) accounting data focus mainly on intangible assets, rather than tangible assets. B) Accounting data are historical data and thus backward-looking C) Accounting data do not have to be adjusted in any manner to compare companies with different capital structures D) Accounting data consider off-balance sheet items, such as pension obligations of a firm.
B) Accounting data are historical data and thus backward-looking
Bigger & better Inc. is a big box retailer who is in direct competition with Walmart and Target. Bigger & Better Inc. initially tried to respond to Walmart by cutting its prices and reducing costs. Walmart has greater buying power and am ore efficient supply chain, therefore, Bigger & Better Inc. was not able to compete on costs. The company then tried to differentiate itself by signing a celebrity to create an in-house line of clothing. However, Target has a celebrity clothing line that has a more differentiated appeal. The economic value created by Bigger & better Inc. is currently less than Target and Walmart. it can be said that A) Bigger & Better Inc. is successful in creating an integration strategy positioned between Walmart and Target. B) Bigger & Better Inc. is "stuck in the middle" and has a competitive disadvantage. C) Bigger & Better Inc. is still creating an integration strategy positioned between Walmart and Target and is on the right track. it should continue this business strategy. D) Bigger & better Inc. is "stuck in the middle" and has a competitive advantage.
B) Bigger & Better Inc. is "stuck in the middle" and has a competitive disadvantage.
Which of the following is a drawback of using the industry life cycle as a framework to guide strategic choice? A) The framework believes that the life cycle of industries is unpredictable B) The framework does not explain everything about changes in industries. C) The framework is based on the tenet that industries can be rejuvenated even in the declining stage D) the framework believes that the number and size of competitors remain constant throughout the life cycle.
B) The framework does not explain everything about changes in industries.
A firm has 10 million shares outstanding, and each share is traded at $100. Also, each shareholder gets a dividend of $2,000 annually. In this case, the market capitalization is A) 10,000 shares, that is, 10 million shares/$100. B) $200,000, that is, $2,000/$100. C) $1 billion, that is, 10 million shares x $100. D) 20:1, that is, $2,000/$100
C) $1 billion, that is, 10 million shares x $100.
Both UTech Inc. and Mirco Corp. incur a cost of $200 to manufacture a single unit of a cell phone. However, UTech Inc. charges a higher price than Mirco Corp. does, but it still sells a higher number of phones. What does this imply? A) UTech Inc. and Micro Corp. have achieved a competitive parity. B) Micro Corp. has a competitive advantage over UTech Inc. C) UTech Inc. creates more economic value than Micro Corp. does. D) Micro Corp. is not charging enough for this product.
C) UTech Inc. creates more economic value than Micro Corp. does.
The working capital turnover of Complete Systems Corp. is 6.0. What does this financial data suggest? A) For every $6.00 Complete Systems puts to work, the company incurs a cost of $1.00. B) For every $6.00 Complete Systems puts to work, the company realizes sales of $1.00. C) For every dollar Complete Systems puts to work, the company realizes $6.00 in loss. D) For every dollar Complete Systems puts to work, the company realizes $6.00 of sales.
D) For every dollar Complete Systems puts to work, the company realizes $6.00 of sales.
Which of the following below is not considered an advantage of utilizing a platform business model? A) Platforms scale more efficiently than pipelines by eliminating gatekeepers B) Platforms unlock new sources of value creation and supply like Airbnb C) Platforms benefit from community feedback, allowing for more fine-tuning. D) Platforms push firms to constantly engage in radical innovation in order to produce goods and services for the market
D) Platforms push firms to constantly engage in radical innovation in order to produce goods and services for the market
Which of the following is an example of social entrepreneurship? The committee approved the new formula for an all-purpose cleaner because it A) cleaned better than other cleaners and used easy-to-obtain ingredients. B) cleaned better than other cleaners and did not cost more to produce. C) cleaned as well as other cleaners and could be produced more efficiently. D) cleaned as well as other cleaners and used organic ingredients
D) cleaned as well as other cleaners and used organic ingredients
Which of the following statements is true of the balanced-scorecard? A) it is a more or less a one-dimensional metric of measuring competitive advantages of a firm. B) it is one of the traditional approaches of measuring firm performance C) its primary focus to base a firm's strategic goals entirely on external performance D) it attempts to provide a holistic perspective on firm performance.
D) it attempts to provide a holistic perspective on firm performance.
__________ is best described as decreases in cost per unit as output increases Economies of scale Economies of scope time compression economies economies of replication
Economies of scale
Fun Robotics produces components used in electronic toys. In fiscal year 2017, Fun Robotics earned an accounting profit of $3 million. However, Fun Robotics' production facilities might have also been used to produce components for mobile phones, which would have generated $2 million in revenues and saved the company $500,000 in production costs. Which of the following statements is true? Fun Robotics earned an economic profit of $5.5 million. Fun Robotics earned an economic profit of $500,000. Fun Robotics suffered an economic loss of $500,000. Fun Robotics suffered an economic loss of $2.5 million.
Fun Robotics earned an economic profit of $500,000.
Can a balanced scorecard formulate strategy?
No, balanced scorecard framework can only be used to implement business strategy
_________ is the benefit that is missed or given up when an investor, individual or business chooses one alternative over another. Value Creation Opportunity Cost Accounting Profitability Reservation Price
Opportunity Cost
Why is the phase after the growth stage of the industry life cycle referred to as the shakeout stage? The barriers to entry increase during this stage. The firms in the industry yield the highest profits during this phase. Rivalry among competitors decreases in this stage. The weaker firms are forced out of the industry in this stage.
The weaker firms are forced out of the industry in this stage.
process innovation
a new method to produce an existing product
Canon was able to redesign the copying machine so that it didn't need professional service—reliability was built directly into the machine, and the user could replace parts, such as the cartridge. What Xerox had not envisioned was the possibility that the components of the copying machine could be put together in an altogether different way that was more user-friendly. This example describes architectural innovation. incremental innovation. radical innovation. disruptive innovation.
architectural innovation.
Under the ________ framework, the question "How do we create value?" is relevant when trying to improve innovation and organizational learning. triple-bottom-line economic value creation balanced scorecard operational effectiveness
balanced scorecard
Experience Curve
combination of learning curve & improved processes (includes technological change)
Louis's Secondhand Store offers slightly lower quality merchandise than competitors at a much lower price. What strategy is Louis's Secondhand Store using? cost-leadership differentiation niche marketing product diversification
cost-leadership
Differentiation Parity
creating the same value while offering a "differentiated" product
Marriott is able to create greater economic value than its competitors due to their ability to take advantage of ________, which describe the savings that come from producing two (or more) outputs at less cost than producing one output individually, while utilizing the same amount of resources and technology. diseconomies of scale economies of scale economies of scope cost of input factors
economies of scale
disruptive innovation
existing market, new technology
incremental innovation
existing technology, existing market
Intel's Celeron chip and Atom chip are initiatives to introduce a new product in a new market to extend its leadership. guard the company against disruptive innovation by protecting the low end of the market. stall its own disruption strategies and wait for its rivals to introduce disruptive forces. target that section of the market that is not particularly price sensitive.
guard the company against disruptive innovation by protecting the low end of the market.
In the decline stage, which of the following strategies involves a reduction of investments in product support? exit strategy harvest strategy maintain strategy consolidate strategy
harvest strategy
The vast majority of innovations in an industry _________, because they build on a firm's existing knowledge base and reinforce the existing organizational structure and network relationships. disruptive architectural radical incremntal
incremntal
Combining economies of learning with existing production technology allows a firm to move up a given experience curve move down a given learning curve jump to a less steeper learning curve jump to a flatter experience curve
move down a given learning curve
Architectural Innovation
new market with existing technology
radical innovation
new technology, new market
network effects
only the positive effects that one user of a product or service has on the value of that product for other users.
When ASI Inc. declared a dividend of $20,000,000, its market value increased from $8 billion to $8.5 billion. However, it lost a chance to reinvest $20,000,000 in the research and development of a new product which would have earned a profit of $200 million. Thus, this $200 million is referred to as ASI Inc.'s producer surplus consumer surplus opportunity cost social cost.
opportunity cost
A firm's business strategy can lead to competitive advantage if it allows the firm to execute the same activities performed by the rivals in a similar manner reduce the value gap perform different activities than its rivals position itself below the productivity frontier.
perform different activities than its rivals
Golden Soles has been successful at differentiating itself from competitors by claiming a premium price for its athletic footwear based on superior design and high-quality materials. in this scenario, which of the following is the key value driver? economies of scale low-cost input factors product features premium prices
product features
Learning curves
representation of per unit costs over output; 90% learning curve = 10% reduction in cost per unit 80% learning curve = 20% reduction in cost per unit etc.
When a blue ocean strategy goes bad, a firm has neither a clear differentiation nor a clear cost-leadership profile. This situation is referred to as stuck in the middle buried at the bottom burned at the top caught in the transition
stuck in the middle
Sweedish furniture giant IKEA reported sales of $44 billion in 2019. The company turned a profit by recycling waste into some of its best selling products. Before, this waste had cost the company more than $1 million per year. And the company is well on its way to "zero waste to landfill" worldwide. According to Joanna Yarrow, IKEA's head of sustainability for the United Kingdom, "We don't do this because we're tree huggers, we do this because it's very cost effective." This passage best represents which of the following frameworks below? the balanced scorecard framework the PESTEL framework the tripple-bottom-line framework the economic value framework
the tripple-bottom-line
product features, customer service, complements are all examples of important cost curves cost drivers value curves value drivers
value drivers
1) NuLiver Corp. 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? A) jumps to a steeper learning curve B) destabilizes a steeper learning curve C) stabilizes the existing learning curve D) moves down the existing learning curve
1) A; jumps to a steeper learning curve
Hottechi Laminate 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, Hottechi Laminate 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 Hottechi Laminate to ask in order to put its strategy into action? A) Why does the business model create value? B) What activities need to be performed to create and deliver the offerings to consumers? C) How are the offerings to the customers created? D) Who are the main stakeholders who will be performing the activities?
1) B; What activities need to be performed to create and deliver the offerings to consumers?
1) The leading producer of cell phone backup batteries, Progyny, has achieved great success because they produce high-quality battery backups that are not too expensive. Even so, another company that produces lower-quality batteries at the same price has also achieved some success, but not as much as Progyny. Also, in general, the price of backup batteries has declined because of economies of scale and learning. In addition, Progyny has added complementary assets, such as a carrying case. Considering all of these factors, the backup battery industry is most likely in the ________ stage. A) introduction B) growth C) shakeout D) maturity
1) B; growth
TalkaLot Corp. incurs a cost of $350 to produce one unit of a cell phone. The company's management has priced the product at $600 in the market. Considering the technological advancement of the cell phone, customers perceive its value to be around $800. What is the economic value created in this scenario? A) $350 B) $450 C) $800 D) $200
10) B; $450
10) How does availability of complements act as a value driver? A) Complements add value to a product by offering an inferior substitute to it. B) Complements add value to a product by competing with it. C) Complements add value to a product when they imitate it. D) Complements add value to a product when they are consumed in tandem with it.
10) D; Complements add value to a product when they are consumed in tandem with it.
10) Which of the following is a competitive benefit experienced by the first-mover firm in an industry? A) The first mover will be able to achieve a less steep learning curve. B) The first mover will be able to reduce the switching costs. C) The first mover will not have to patent its products or technology. D) The first mover will be able to reduce costs through economies of scale.
10) D; The first mover will be able to reduce costs through economies of scale.
8) Digital photography replacing film photography is an example of which type of innovation? A) incremental B) architectural C) radical D) disruptive
8) D; disruptive
Sugar Flakes and Cinnamon Texas Toast both produce similar puffed rice breakfast cereals. For both companies, the cost of producing a box of cereal is 45 cents, and it is not possible for either company to lower their production costs any further. How can one company achieve a competitive advantage over the other? A) Increase total perceived consumer benefits through differentiation. B) Raise prices above the current reservation price. C) Lower prices to the break-even price. D) Increase the number of stock market shares available to investors.
9) A; Increase total perceived consumer benefits through differentiation.
9) Incumbent firms prefer to focus on incremental innovations which reinforce their established organizational structure and power distribution and avoid radical innovation that could disrupt their existing power distribution. This is known as A) organizational inertia. B) organization culture. C) organizational design. D) organization complexity.
9) A; organizational inertia.
9) In a focused cost-leadership strategy, a firm A) caters to the segment of the market that is least cost sensitive. B) provides high-priced products for many different segments of the mass market. C) delivers low-cost products and services to a specific, narrow part of the market. D) focuses on reducing the economic value created to drive down costs.
9) C; delivers low-cost products and services to a specific, narrow part of the market.
You are the CEO of a tech company and have recently undertaken a review of your company's strategy. In comparing your stock market valuation to that of your closest competitor, you note that your firm is currently valued at $50 billion, while your competitor is valued at $40 billion. How should you proceed? A) Consider this evidence of a sustainable competitive advantage and maintain your current strategy. B) Compare the current valuations with past valuations to determine a trend. C) Assume your current strategy has failed and begin to formulate a new one. D) Compare your valuation to firms in another industry.
11) B; Compare the current valuations with past valuations to determine a trend.
11) Susan is the founder of the restaurant chain Right and Fresh. She ensures that the products in her stores are ethically and responsibly sourced. Most products are therefore 100 percent organic and all packaging is manufactured from recycled material. Also, her company sources ingredients from farms within 100 miles from her locations. Susan's belief is that her restaurants should be able to support the community at large. Which of the following terms best describes Susan? A) headhunter B) category captain C) social entrepreneur D) trade creditor
11) C; social entrepreneur
11) When wireless service providers offer free or discounted mobile phones for subscriptions to their wireless voice and data service, the perceived value of the service offering increases. In this case, the value driver would be A) economies of scale. B) learning-curve effects. C) experience-curve effects. D) availability of complements.
11) D; availability of complements.
12) Which of the conditions prevail when an industry is at the end of its life cycle? A) The level of process innovation reaches its maximum as firms attempt to lower cost. B) The industry structure is perfectly competitive with a large number of buyers and sellers. C) The strategic objectives of businesses will involve gaining market acceptance. D) The market reaches its maximum size at this stage.
12) A; The level of process innovation reaches its maximum as firms attempt to lower cost.
James is a novice investor who wants to decide between purchasing shares in Captial-UP or Mainframe Inc. Captial-UP's return on invested capital (ROIC) was 15 percent, and its cost of capital was 12 percent. During the same period, Mainframe Inc.'s ROIC was 22 percent and its cost of capital was 25 percent. What does this information tell James? A) Mainframe Inc. is more likely to create value while Captial-UP is more likely to destroy value. B) Captial-UP is more likely to create value while Mainframe Inc. is more likely to destroy value. C) Both Mainframe Inc. and Captial-UP are likely to create value. D) Neither Mainframe Inc. nor Captial-UP are likely to create value.
12) B; Captial-UP is more likely to create value while Mainframe Inc. is more likely to destroy value.
12) What must a cost-leadership strategy accomplish to be successful? A) It must increase the firm's cost above that of its competitors while offering adequate value. B) It must reduce the firm's cost below that of its competitors while offering adequate value. C) It must increase the firm's cost above that of its competitors while offering superior value. D) It must reduce the firm's cost below that of its competitors while offering superior value.
12) B; It must reduce the firm's cost below that of its competitors while offering adequate value.
2) While cell phones with holographic keyboards are currently in the introduction stage of the industry life cycle, tablet computers are in the growth stage. In the context of this scenario, which of the following statements is true? A) The industry for cell phones with holographic keyboards will face greater competition than the tablet industry. B) While the industry for cell phones with holographic keyboards will focus more on product innovation, the tablet industry will focus more on process innovation. C) While the industry for cell phones with holographic keyboards can reap the benefits of economies of scale, the tablet industry will experience no such benefits. D) The industry for cell phones with holographic keyboards will face price competition, whereas, in the tablet industry, the mode of competition will be nonprice.
2) B; While the industry for cell phones with holographic keyboards will focus more on product innovation, the tablet industry will focus more on process innovation.
2) Pete's Bikes enjoys a competitive advantage as a cost-leader because high demand for its products has allowed it to operate at the minimum efficient scale. Which of the following scenarios would be most concerning to the managers of Pete's Bikes? A) Pete's leading competitor develops a new low-sodium product. B) Pete's most reliable production worker takes a job in another industry. C) A major winter storm shuts down Pete's production for several days. D) A wheat shortage raises input costs across the industry.
2) C; A major winter storm shuts down Pete's production for several days.
Blackzim Wireless is a cellular service provider that charges its customers $1 for three hours of talk time. So, if a customer's talk time for a month is 60 hours, the company charges him or her $20 at the end of the month. Which of the following business models does this best illustrate? A) razor-razor-blade B) subscription-based C) pay-as-you-go D) freemium
2) C; pay-as-you-go
3) 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) A) 80 percent learning curve. B) 90 percent learning curve. C) 60 percent learning curve. D) 54 percent learning curve.
3) B; 90 percent learning curve.
Bioplex requires its members to pay a quarterly or an annual fee to use its services. Irrespective of whether they frequently use the services during the payment period or not, members have to pay in advance. Which of the following business models does this best illustrate? A) razor-razor-blade B) pay-as-you-go C) subscription-based D) freemium
3) C; subscription-based
3) At the time when Laura decided to purchase a tablet computer, the product had just become accessible to the mass market. She did not purchase the tablet until after she was convinced that the benefits it would offer her would far exceed its price. Also, she waited for her friends to try the product and popular gadget television shows to endorse it. Which of the following customer segments does Laura best represent? A) laggards B) technology enthusiasts C) early adopters D) early majority
3) D; early majority
When a firm manufactures 2,000-3,000 units of a product, it incurs an average cost of $10 per unit. When it manufactures 3,000-4,000 units of the same product, the average cost per unit reduces to $7. However, manufacturing beyond 4,000 units will raise the average cost per unit to $9. Which of the following is the firm's minimum efficient scale? 2,000-3,000 units 3,000-4,000 units below 2,000 units above 4,000 units
3,000-4,000 units
Threadless allows customers to submit their own designs and to vote on which designs they would like to see printed on a T-shirt. This business uses a ________ technique. A) offshoring B) crowdsourcing C) peer-to-peer D) binge watching
4) B; crowdsourcing
4) Finger Lickin' BBQ is a chain of casual restaurants that promises affordable barbecue using top-quality local ingredients. However, the company has struggled to achieve a competitive advantage because of its high overhead costs. Which of the following scenarios is most likely to result in a competitive advantage? A) lowering the quality of ingredients below what customers expect to control costs B) eliminating brick-and-mortar locations and offering delivery from a central kitchen C) raising prices without improving on the quality of food D) marketing itself as a high-end restaurant and competing with more refined restaurants in the area
4) B; eliminating brick-and-mortar locations and offering delivery from a central kitchen
4) Afya Limited is a new firm that entered the smartwatch industry during the growth stage of the industry life cycle. It managed to become one of the top-three smartwatch manufacturers during the shakeout stage due to its low-cost structure. What features should Afya Limited emphasize in its product marketing to ensure it successfully crosses the chasm into the maturity stage? A) advanced capabilities B) the company's outsider status C) sleek and trendy design D) ease of use
4) D; ease of use
SonronMedia sells books by having salespeople set up appointments with potential customers and give them a sales pitch for the product. When a salesperson sells a book, he or she gets a predetermined percentage commission. This type of business model is called A) an agency. B) bundling. C) wholesale. D) a freemium.
5) A; an agency.
5) Jerry is the owner of All Hinges Inc. and has recently modified his firm's strategic objective based on a shift in his industry. Jerry is responding to a(n) ________ life cycle. A) entrepreneurial B) economic C) growth D) industry
5) D; industry
6) Which of the following is not an advantage when it comes to "first-mover advantages"? A) First movers may be able to lock-in key suppliers. B) First movers may benefit from network effects. C) First movers must educate potential customers about the product. D) First movers may hold important intellectual property such as critical patents.
6) C; First movers must educate potential customers about the product.
How does a sustainable strategy typically help a firm? A) It helps the firm focus solely on its financial goals. B) It reduces the need for corporate social responsibility within the firm. C) It facilitates the firm in effectively isolating its external stakeholders. D) It helps the firm achieve positive results along the social and ecological dimensions.
6) D; It helps the firm achieve positive results along the social and ecological dimensions.
6) When a firm is able to successfully employ a blue ocean strategy, it will create a competitive advantage by A) combining high quality and product features to provide service that customers truly value. B) using a first-mover advantage to be the lowest price in the market. C) winning market share with a highly differentiated product. D) beating rivals on product attributes while offering a better price.
6) D; beating rivals on product attributes while offering a better price.
7) The group of customers referred to as the ________ lead the wave of increased demand as the industry moves from the introduction stage to the growth stage. A) early majority B) laggards C) late majority D) early adopters
7) A; early majority
7) Which of the following examples uses a focused differentiation strategy? A) a tennis pro shop that sells low-quality racquets priced at 150 dollars per racquet B) a coffee shop that offers mediocre lattes at a price of five dollars for a small latte C) a hotel chain that offers high-quality furnishings and service with room rates of under 75 dollars per night D) a cosmetics brand that offers superior skin lotion for sensitive skin priced at 100 dollars per bottle
7) D; a cosmetics brand that offers superior skin lotion for sensitive skin priced at 100 dollars per bottle
LinkedIn, a professional social media website, allows its users to create their profiles for free, but charges a premium price for additional services. This is an example of a ________ business model. A) subscription-based B) peer-to-peer C) crowdsourcing D) freemium
7) D; freemium
8) Ticker Inc. is a wristwatch company known for its luxury watches, and it follows a differentiation strategy. In this scenario, Ticker Inc. should ideally compare its strategic position with a A) watch retailer that sells pre-owned watches. B) watch maker that sells high-end, premium watches. C) watch maker that manufactures low-priced watches. D) watch maker that follows a differentiation strategy.
8) B; watch maker that sells high-end, premium watches.
A firm incurs $100 to manufacture an office table. It fixes the market price of the table as $250, and discounts the price to $200. However, the maximum a person is willing to pay for it is $180. What is the amount of total perceived consumer benefits in this scenario? A) $250 B) $200 C) $180 D) $100
8) C; $180
Under the ________ framework, producer surplus is important in the quest for competitive advantage because this is the profit that a firm captures when producing and selling a good or service. A) economic value creation B) accounting profitability C) shareholder value creation D) PESTEL
A) economic value creation
The fact that both whole foods (a high-end grocery store) and Aldi (an inexpensive grocery store) have a competitive advantage in the grocery store industry is an indication that A) following a different generic business strategy within the same industry can lead to a competitive advantage for more than one organization B) following the same generic business strategy can allow for two firms competing in the same industry to have a competitive advantage at the same time C) in order to evaluate whether Whole Foods has sustained a competitive advantage it is useful to compare it to Aldi from a cost perspective D) in order to evaluate whether Aldi has a sustained competitive advantage, it is useful to compare it to Whole Foods from a different perspective.
A) following a different generic business strategy within the same industry can lead to a competitive advantage for more than one organization
Which of the following scenarios best exemplifies a platform business? A) Jill purchases electronic parts from a variety of vendors and assembles them into inexpensive MP3 players that he sells to customers B) Samantha operates an industrial test kitchen in which local growers bring their produce to local chefs, who use the kitchen to try new recipe's and determine which produce to buy. C) Tony operates a consulting firm in which business hire him to asses deficiencies in their organizational culture D) Allison founded a bike-based transportation company that offers environmentally-friendly rides to customers within a 25-mile radius.
B) Samantha operates an industrial test kitchen in which local growers bring their produce to local chefs, who use the kitchen to try new recipe's and determine which produce to buy.
Which of the following statements accurately brings out the difference between technology enthusiasts and early adopters? A) While the customer segment in the introduction stage consists of early adopter, the customers entering the market in the growth stage are technology enthusiasts. B) Unlike technology enthusiasts, early adopters' demand is fueled more by intuition and vision rather than technology concerns. C) While early adopters make up the smallest market segment, technology enthusiasts make up the mass market D) Firms need to communicate products' potential applications in a more direct way when attracting technology enthusiasts rathe than early adopters.
B) Unlike technology enthusiasts, early adopters' demand is fueled more by intuition and vision rather than technology concerns.
AcerWare Inc. manufactures external hard disks for $32 per unit, and the maximum price customers are willing to pay is $47 per unit. Data Driver Inc. is a competitor of AcerWare inc. that produces external hard disks for $37 per unit, and customers are willing to pay a maximum price of $50 per unit. What does this imply? A) AcerWare and Data Driver share differentiation parity. B) Data Driver has a competitive advantage over AcerWare in terms of perceived value. C) AcerWare creates greater economic value than Data Driver D) Data Driver is a cost-leader when compared to AcerWare.
C) AcerWare creates greater economic value than Data Driver
Sasha is the CEO of Enterprise Technologies, a consumer electronics manufacturer. Last year, Enterprise's return on invested capital (ROIC) was 11.6 percent, while Enterprise's closest competitor, Federation Tech, had an ROIC of 17 percent. Which of the following factors might Sasha use to convince investors to invest in Enterprise rather than Federation Tech? A) Enterprise's working capital to revenue ratio was 75 percent, while Federation Tech had an R&D/Revenue ration of 12 percent. B) Enterprise's working capital to revenue ratio was 75 percent, while Federation Tech's was 68 percent. C) Enterprise's intangible intensity was 6 percent, while Federation Tech's was 3 percent D) Enterprise's plant, property, and equipment (PPE) over revenue ratio was 19 percent, while Federation Tech's was 10 percent
C) Enterprise's intangible intensity was 6 percent, while Federation Tech's was 3 percent
strategic tradeoff
Choices between a cost or value position. Such choices are necessary because higher value creation tends to generate higher cost.
The tenet behind the triple-bottom-line is that A) a firm should solely focus on increasing the economic value created to/for its customers. B) a firm's primary objective should be increasing the total return to its shareholders. C) a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy. D) a firm's return on revenue can be broken down into three ratio: COGS/Revenue, R&D/Revenue, and SG&A/Revenue.
C) a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy.
You are the founder of NewexSurfboards, 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? A) devoting significant resources to researching and developing new products that will be more durable than competitor's price B) automating the manufacturing process to reduce production costs C) allowing customers to upload their own image designs and help assemble the finished product at retail locations D) switching to a just-in-time inventory system to reduce inventory costs
C) allowing customers to upload their own image designs and help assemble the finished product at retail locations
Susan is trying to determine if her company has a competitive advantage. She must be able to accomplish two critical tasks before she can substantiate this claim. First, she must asses the performance of her company accurately; second, she must A) asses her capital and liquid position to ensure funding for future projects. B) focus on creating value by utilizing operational effectiveness such as Six Sigma and lean manufacturing. C) compare and benchmark her firm's performance to other competitors in her same industry D) ensure the right strategic leaders are in place that can execute her strategy
C) compare and benchmark her firm's performance to other competitors in her same industry
the primary goal of a firm pursuing a blue ocean strategy should be to A) create the highest perceived value in its respective industry B) build a reputation of being the lowest-cost producer in its chosen industry C) offer a differentiated product or service at a low cost D) achieve a less seep learning curve
C) offer a differentiated product or service at a low cost
Gr8t Food is a chain of "fast casual" restaurants that sells its menu items at higher prices than its competitors. 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 Gr8t Food adopted in this scenario? cost-leadership differentiation market penetration product diversification
differentiation
When Total Semiconductors was operating at the minimum efficient scale of 10,000-12,000 units per month, the firm's cost per unit increased to $47. this increase was attributed to the wear-and-tear of the machinery, and complexities of managing and coordinating. What is this phenomenon known as? minimum efficient scale diseconomies of scale experience-curve effect learning-curve effect
diseconomies of scale
After trying on a dress, a consumer assesses it to be worth a maximum of $100 and is willing to pay that amount for the dress. However, the dress was priced at $80. What is the amount, $100, referred to as? the producer surplus the firm's cost (C) in manufacturing the dress the consumer surplus the value (V) the consumer attaches to the dress
the value (V) the consumer attaches to the dress
