Chapters 5-7 MGT Exam

Let's Talk Corp. is a public company whose shares are currently trading in the market at $150 each. The company manufactures smartphones at the cost of $300 per unit and sells them in the market for $500 each. What is the company's producer surplus? $150 $300 $650 $200

$200

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.

First movers must educate potential customers about the product.

Digital photography replacing film photography is an example of which type of innovation? incremental architectural radical disruptive

disruptive

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

early adopters

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.

a. Increase total perceived consumer benefits through differentiation

Which of the following statements accurately brings out the distinction between the introduction and growth stages of the industry life cycle? a. There is more strategic variety in the growth stage when compared to the introduction stage. b. The number of competitors is more in the introduction stage than the growth stage. c. The market size for a new product or service is larger in the introduction stage when compared to the growth stage. d. While achieving market acceptance is the strategic objective during the introduction stage, the objective in the growth stage is to pursue a harvest strategy.

a. There is more strategic variety in the growth stage when compared to the introduction stage.

Revolve Group is a mobile platform that matches independent fashion designers with consumers 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 consumers? 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 to determine trends

a. allowing users to provide feedback to producers on the style and fit of clothing

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.

a. an agency.

William estimated that a pair of Perfect Fit jeans would be worth $60 for its brand and durability. However, at the Perfect Fit store, the pair of jeans he wanted was available for $45. The difference of $15 in this scenario is referred to as the: a. consumer surplus. b. reservation price. c. producer surplus. d. break-even price.

a. consumer surplus.

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 a sustained 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 differentiation perspective.

a. following a different generic business strategy within the same industry can lead to a competitive advantage for more than one organization.

BellRing Brands is a 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 produced 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

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

a. jumps to a steeper learning curve

A new product often has a high price when it is launched because of a: a. large investment in designing a product while producing small quantities. b. large investment in marketing a product while producing small quantities. c. large investment in designing a product while producing large quantities. d. large investment in marketing a product while producing large quantities.

a. large investment in designing a product while producing small quantities.

We Cut Corners lawn service initially spent nine man-hours to assemble a lawnmower. But as the production doubled, the number of hours spent on assembling a mower reduced by 20 percent. This increase in productivity reduced the company's cost per unit. What is this phenomenon referred to as? a. learning-curve effect b. network effect c. black-swan event d. time compression diseconomies

a. learning-curve effect

The ratio Cost of goods sold/Revenue indicates how efficiently a company can: a. produce a good. b. sell a good. c. advertise a good. d. design a good.

a. produce a good.

As a start-up company, Cambium Networks entered the low end of the highly competitive smartwatch industry with its low-cost smartwatches. Initially, the company was able to sell its inferior technology due to its low prices. Over the years, however, its rate of technology improvements increased above the industry standards. This helped the company to create a strong strategic position for its smartwatches in the high-end segment and claim a premium price. Which of the following types of innovation does this scenario best illustrate? a. radical innovation b. incremental innovation c. architectural innovation d. disruptive innovation

a. radical innovation

A high percentage of R&D/Revenue ratio indicates a(n): a. strong focus on innovation to improve current products and services. b. inefficiency in the management to focus on new products. c. strong focus on marketing and sales to promote products and services. d. negligent investment toward research and development.

a. strong focus on innovation to improve current products and services.

Which of the following statements correctly compares Apple and Microsoft in 2016? a. Apple had a higher return on revenue than Microsoft. b. Apple had a higher return on invested capital than Microsoft. c. Microsoft had higher total sales than Apple. d. Microsoft had a lower cost structure than Apple.

b. Apple had a higher return on invested capital than Microsoft.

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 a more 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.

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.

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

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.

b. Compare the current valuations with past valuations to determine a trend.

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? a. Fun Robotics earned an economic profit of $5.5 million. b. Fun Robotics earned an economic profit of $500,000. c. Fun Robotics suffered an economic loss of $500,000. d. Fun Robotics suffered an economic loss of $2.5 million.

b. Fun Robotics earned an economic profit of $500,000.

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. - (integration strategy)

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

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 consumers. b. Samantha operates an industrial test kitchen in which local growers bring their produce to local chefs, who use the kitchen to try new recipes and determine which produce to buy. c. Tony operates a consulting firm in which businesses hire him to assess 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 recipes and determine which produce to buy.

In developed economies, the electric car industry is in the introduction stage, and the industry for MP3 players is in the shakeout phase. What does this imply? a. The mode of competition in the electric car industry will be based on price, whereas in the MP3 player industry, the mode of competition will be nonprice-based. b. The industry for electric cars will focus more on product innovation, whereas in the MP3 player industry, the focus will be on process innovation. c. The electric car industry will move to the growth stage, whereas the industry for MP3 players will enter the growth stage next. d. The industry for electric cars will primarily pursue an integration strategy, whereas in the MP3 players industry, the focus will be on differentiation.

b. The industry for electric cars will focus more on product innovation, whereas in the MP3 player industry, the focus will be on process innovation.

Which of the following statements accurately brings out the difference between technology enthusiasts and early adopters? a. While the customer segment in the introduction stage consists of early adopters, the customers entering the market in the growth stage are technology enthusiasts. b. Unlike technology enthusiasts, early adopters' demand is fueled more by intuition and vision rather than technology concerns. c. While early adopters make up the smallest market segment, technology enthusiasts make up the mass market. d. Firms need to communicate products' potential applications in a more direct way when attracting technology enthusiasts rather than early adopters.

b. Unlike technology enthusiasts, early adopters' demand is fueled more by intuition and vision rather than technology concerns.

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.

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.

Jack and Jill both love hot coffee. Jack likes to keep his coffee hot during the day while Jill doesn't mind drinking room temperature coffee. Jack is willing to spend more money on a thermos than Jill is willing to spend. This example illustrates the following major limitation of employing the Economic Value Creation framework because: a. overall macroeconomic factors such as the unemployment rate, and interest and exchange rates all have a direct bearing on stock prices. b. determining the value of a good/service through the perspective of a consumers is not a simple task because consumers have different spending habits. c. accounting data focus mainly on tangible assets, which are no longer the most important. d. accounting data are historical and thus backward-looking.

b. determining the value of a good/service through the perspective of a consumers is not a simple task because consumers have different spending habits.

When Total Semiconductors was operating at the minimum efficient scale of 10,000-12,000 units per month, the firm's cost per unit was $45. However, when the output level was increased beyond 12,000 units, the 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? a. minimum efficient scale b. diseconomies of scale c. experience-curve effect d. earning-curve effect

b. diseconomies of scale

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

b. eliminating brick-and-mortar locations and offering delivery from a central kitchen

According to the five forces model, which of the following is viewed as a major risk to a business pursuing a cost-leadership strategy? a. competition switching from non-price attributes to pricing b. innovation that allows competitors to emerge with more economical replacements c. new entrants with small production scale d. suppliers requesting a 2 percent price increase across the industry

b. innovation that allows competitors to emerge with more economical replacements

The ratio of SG&A/Revenue is an indicator of a firm's focus on: a. researching to produce innovative products and services. b. marketing and sales to promote its products and services. c. producing a good in an efficient manner. d. creating a good that is cost-effective.

b. marketing and sales to promote its products and services.

A wearable technology company has priced one of its wristwatches at $210. Most of its competitors sell similar watches at $180. Selling anything less than $150 would result in a loss for the company. However, the absolute maximum a customer is willing to pay for it is $170. In this scenario, what is the reservation price of the wristwatch? a. $150 b. $180 c. $170 d. $210

c. $170

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 a greater economic value than Data Driver. d. Data Driver is a cost-leader when compared to AcerWare.

c. AcerWare creates a greater economic value than Data Driver.

Which of the following scenarios exemplifies a sustainable strategy under the triple-bottom-line approach? a. Rather than complying with the restrictive recycling laws in the United States, Gogozoom outsourced its manufacturing to a country that has fewer environmental restrictions. b. Gogozoom developed a chemical additive that doubled the life of its plastics. The additive was currently legal, but environmental groups argued that it harmed the environment. c. Gogozoom reformulated its products to eliminate chemicals that were widely used in the industry but were being investigated for their potential negative effects on the environment. d. Gogozoom's nearest competitor increased the salaries of its production workers by 30 percent, but Impervious kept its wages the same to gain a cost advantage over its competitor.

c. Gogozoom reformulated its products to eliminate chemicals that were widely used in the industry but were being investigated for their potential negative effects on the environment.

Mohawk is a leader in sustainable and innovative carpeting and floorings, as evidenced by its signature product, the world's first organic cotton carpet. Its product is unique and has appealing customer attributes. If Mohawk's raw material costs increased by 12 percent this year, what would be the likely outcome? a. Mohawk would lower profit margins to absorb this cost increase. b. The company would launch an all-out effort to reduce other costs by 12 percent. c. Mohawk would pass a major portion of this increase along as a price increase to its customers. d. Mohawk would seek to find other materials with lower costs, even if it meant losing the carbon-neutral label on the product.

c. Mohawk would pass a major portion of this increase along as a price increase to its customers.

Jonathan is the owner of a landscaping company that caters to a very wealthy clientele. His company has struggled to differentiate itself from the other high-end landscapers in the area, but because he has hired several expensive but highly qualified team members, Jonathan is unable to shift to a cost-leadership strategy. Which strategy is most likely to achieve a competitive advantage? a. Offer similar services as competitors but raise prices to increase profits. b. Lower prices but continue employing high-paid expert gardeners. c. Narrow the scope of competition and focus on unique features such as the use of organic materials. d. Maintain prices but replace all the expert employees with less-skilled workers to control costs.

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

Though the microwaves manufactured by Nuked Inc. and Hot Box Inc. sell at the same price of $600 per unit, the economic value created by Nuked Inc. is more than that of Hot Box Inc. In the context of this scenario, which of the following statements is true? a. Nuked and Hot Box Inc. have achieved a competitive parity. b. Hot Box Inc. has differentiated its products more than Nuked Inc. has. c. Nuked has a relative cost advantage over Hot Box Inc. d. Hot Box Inc. has been able to create more producer surplus for itself than Hot Box Inc.

c. Nuked has a relative cost advantage over Hot Box Inc.

When examining all the generic strategies, which of the following below is inherently superior in every industry? a. broad differentiation b. focused differentiation c. not an inherently superior strategy

c. not an inherently superior strategy

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

c. pay-as-you-go

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

c. subscription-based

Swedish 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? a. the balance scorecard framework b. the PESTEL framework c. the triple-bottom-line framework d. the economic value framework

c. the triple-bottom-line framework

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? a. $900 b. $1,100 c. $550 d. $200

d. $200

Adaptive Biotechnologies Inc. is a company that builds diagnostic devices. It was the first company to develop a compact MRI scanner by reconfiguring the components of the MRI technology. This smaller and user-friendly version of the huge MRI scanner created demand from small hospitals, nursing homes, and private practice doctors who were earlier dependent on the scanning machines in large hospitals. Which of the following types of innovations does this scenario best illustrate? a. disruptive innovation b. incremental innovation c. radical innovation d. architectural innovation

d. architectural innovation

In the multiplex industry, Home Again Movies Inc. is an upscale multiplex that focuses on superior customer experience. The firm charges premium prices for its movie tickets and services. Movies-for-less Inc., in contrast, charges the lowest price in the industry with its no-frills approach. In between these two segments is Just Right Films Inc., which offers a customer experience comparable to that of Home Again Movies at a price almost as low as that of Movies-for-less. What strategy is Just Right Films pursuing in this scenario? a. liquidation strategy b. product diversification strategy c. market penetration strategy d. blue ocean strategy

d. blue ocean strategy

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

d. early majority

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

d. ease of use

A differentiation strategy works best when a: a.firm has tangible resources, its focus of competition shifts to price, and equivalent substitutes are readily available. b.firm's focus of competition shifts to price, and when increasing differentiation of product features do not create additional value. c.firm's differentiated products are commoditized, and costs of providing uniqueness do not rise above the customer's willingness to pay. d.firm has intangible resources, is able to pass on increases in supplier cost to the customer, and its differentiation appeal creates customer loyalty.

d.firm has intangible resources, is able to pass on increases in supplier cost to the customer, and its differentiation appeal creates customer loyalty.

Benny's Closet Inc. is an apparel company that caters to highly price-conscious customers. Through its simple apparel designs, acceptable quality levels, and minimal customer service, the company has been able to sell its merchandise at the lowest prices in the industry. Which of the following generic business strategies is Benny's Closet applying? a. cost-leadership b. differentiation c. niche marketing d. product diversification

a. cost-leadership

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

b. $450

When a firm operates at an output level of 9,000 units, the per-unit cost is $5. When the production is between 10,000-12,000 units, the per-unit cost is $4. At a production level of 13,000 units, the production cost is again $5 per unit. At 14,000 units and above, the production cost increases further. At what output level does the firm experience economies of scale? a. 9,000 units b. 11,000 units c. 13,000 units d. 15,000 units

b. 11,000 units

Karat Packaging has entered a stage in which the demand for their innovative fax machines has declined. Now most customers are buying replacement parts or buying their second fax machine from the firm. What stage in the industry life cycle does this scenario describe? a. growth stage b. maturity stage c. shakeout stage d. decline stage

b. maturity stage

Nam-zim sells its e-book readers at the cost price of $15 each. However, the company makes its profits when users have to download or buy books online. Which of the following business models is Nam-zim implementing? a. subscription-based b. razor-razor-blade c. pay-as-you-go d. direct sales

b. razor-razor-blade

Tablette Corp. is a consumer electronics company known for its affordable mobile devices that follows a cost-leadership strategy. In this scenario, Tablette Corp. should ideally compare its strategic position with: a. a company that sells small kitchen appliances at affordable prices. b. a consumer electronics company that sells high-end devices. c. a consumer electronics company popular among price-conscious customers. d. an online company that sells customized electronics accessories.

c. a consumer electronics company popular among price-conscious customers.

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.

d. Complements add value to a product when they are consumed in tandem with it.

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.

How has Apple been able to sustain its competitive advantage in the smartphone industry? a. by reducing its network effects b. by targeting its new products and services toward laggards c. by driving the price for the end user to zero d. by regularly introducing incremental improvements in its products

d. by regularly introducing incremental improvements in its products

A blue ocean strategy differs from a low-cost strategy in that: a. the intent of a blue ocean strategy is not to be the absolute lowest-cost provider because a blue ocean must also increase perceived value. b. the focus of a blue ocean strategy is on lowering the economic value created, whereas a cost-leader focuses on increasing the economic value created. c. economies of scale are more important to a blue ocean strategy, while economies of scope are more important to a cost-leader. d. a blue ocean's research and development focus is on process technologies, and a cost-leader's focus is on product technologies.

a. the intent of a blue ocean strategy is not to be the absolute lowest-cost provider because a blue ocean must also increase perceived value.

One of the reasons that big box retailers like Home Depot are able to achieve economies of scale is that: a. they have both broad and narrow economies of scope. b. they are able to take advantage of physical properties and maximize their scale efficiencies by stocking more merchandise and handling inventory more efficiently. c. they are able to take advantage of market size and spread investment losses over many locations. d. they have been able to protect themselves from the threat of buyer power by increasing input prices.

b. they are able to take advantage of physical properties and maximize their scale efficiencies by stocking more merchandise and handling inventory more efficiently.

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 × $100. d. 20:1, that is, $2,000/$100.

c. $1 billion, that is, 10 million shares × $100.

Amber is the manager of gardening supplies wholesaler DigIt Inc. The company's vision is to become the leading supplier of gardening materials in the northeast. In assessing the firm's current state, Amber has determined that the firm could differentiate itself from competitors with an easy-to-use online ordering system and a two-day delivery guarantee. To accomplish this, Amber has determined that DigIt must spend the next two quarters honing its capabilities for sourcing materials quickly and improving its web development competencies. According to the balanced-scorecard approach, what is wrong with Amber's thinking? a. She has not considered the opportunity costs associated with launching an online ordering system. b. She has not addressed the question of which core competencies the firm needs. c. She has failed to account for external factors such as customer perceptions and shareholder perceptions. d. She has not addressed the question of how DigIt will create value.

c. She has failed to account for external factors such as customer perceptions and shareholder perceptions.

The demand for flip phones has drastically reduced, and there are only a few consumer electronics companies selling them at extremely low prices. Also, the current buyers of flip phones are mainly categorized under laggards. Which of the following stages of the industry life cycle is the flip phone industry in currently? a. growth stage b. maturity stage c. decline stage d. commercialization stage

c. decline stage

The concept of a(n) ________ attempts to capture both learning effects and process improvements at firms. a. managerial grid b. growth matrix c. experience curve d. diminishing utility curve

c. experience curve

Bath & Chill is a spa that caters to the needs of a small percentage of highly health-conscious consumers. It offers state-of-the-art treatments in a luxurious setting. Since there are very few spas that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Bath & Chill is following a: a. product diversification strategy. b. liquidation strategy. c. broad differentiation strategy. d. focused differentiation strategy.

d. focused differentiation strategy.

Susan wants to create a networking site that would connect local artists to homeowners who are looking for unique and original art. She knows that network effects will play a big role in her success and doesn't want to build her business using a linear value chain. Susan would best be served by employing a(n) a. pipeline business model. b. innovative social networking website. c. razor-razor blade business model. d. platform business model.

d. platform business model.

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

d.incremental

Potomac Interactive is a manufacturer of high-definition televisions. The industry has gone through a period of rapid growth and expansion and has started to experience a decline in the rate of growth. Several smaller firms have been bought out by larger competitors, and competition for market share is intensifying. Which of the following strategies is most likely to give Peloton Interactive a competitive advantage? a. Implement process innovations that lower per-unit costs. b. Introduce product innovations that differentiate Potomac televisions from the competition. c. Imitate the features of the highest-selling television on the market. d. Increase spending on marketing and attempt to acquire a high-profile celebrity spokesperson.

a. Implement process innovations that lower per-unit costs.

A differentiator is least likely to be threatened by increases in input prices due to powerful suppliers when the: a. differentiator is able to create a significant difference between perceived value and current market prices. b. differentiator is able to significantly reduce the value gap. c. source of a competitor's differential appeal is tangible rather than intangible. d. new product features added raise costs but not the perceived value in the minds of consumers.

a. differentiator is able to create a significant difference between perceived value and current market prices.

Although Dynatrace Holdings still sells its DVD players, a product in its decline stage, the investments made by the company on improving or marketing the product are very low. The company has allocated the least amount of human and financial capital to this department. Which of the following strategies has Dynatrace Holdings adopted in this scenario? a. harvest strategy b. maintain strategy c. consolidation strategy d. differentiation strategy

a. harvest strategy

Hit Me Up is an instant messaging mobile application. Users have access to a basic version with limited message recipients for free, but they have to pay a fee to have unlimited message recipients or to use advanced features. Which of the following business models does this best illustrate? a. subscription-based b. freemium c. pay-as-you-go d. razor-razor-blade

b. freemium

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

b. growth

Fulcrum Feet is a manufacturer of athletic shoes. It has released an improved version of its premier running shoe in markets in which the company already operates. Which of the following types of innovations does this scenario best illustrate? a. radical innovation b. incremental innovation c. architectural innovation d. disruptive innovation

b. incremental innovation