Exam 1 quizzes

While Aros Inc. incurs a cost of $20 for a pair of shoes, Shoes Cult Inc., its competitor, manufactures a pair of shoes at $22. Both the companies are able to sell their shoes for a maximum of $30 per pair. Which of the following statements is true in this scenario?

Shoes Cult has a competitive advantage over Aros.

Which of the following statements about a firm's stakeholders is true?

Within stakeholder groups there can be significant variation in the power a stakeholder may exert on a firm.

Shortly after the small island of Balamia experienced multiple unexpected high-intensity earthquakes that caused massive destruction, many banks and insurance companies filed for bankruptcy. This left the economy of the country in a poor state. The natural calamity in Balamia best exemplifies

a black swan event.

Which of the following does not explain why activist investors have more power over a firm than individual investors?

Activist investors have more legitimacy than individual investors.

Why are differentiation and cost-leadership strategies referred to as generic business strategies?

They can be used by any organization independent of industry context.

How did Virgin America enter the airline industry despite the industry's notoriously low profitability?

Virgin America offered low-cost service between major metropolitan cities on the American East and West coasts.

Evia Cycles Inc. incurs $400 to manufacture a bicycle, and the maximum price customers are willing to pay is $550 per unit. Archer Cycles Inc., its competitor, incurs $450 to manufacture a similar bicycle, and customers are willing to pay a maximum price of $620 for it. What does this indicate?

Archer Cycles has created a greater economic value than Evia Cycles.

Go West Airlines Inc. follows a cost-leadership strategy. Which of the following firms will most likely be its direct competitor?

Blue Skies Airlines Inc., which follows a low-cost strategy

Which of the following factors best contributes to the U.S. automotive industry being characterized by high entry barriers?

Car manufacturers require large-scale production in order to be cost-competitive.

Silver Screen Cinemas Inc. and Digi Now Inc. are two companies that own and run movie theaters in malls and other commercial areas. While Silver Screen Cinemas Inc. pursues a cost-leadership strategy, Digi Now Inc. adopts a differentiation strategy. Which of the following statements is most likely true of this scenario?

Digi Now and Silver Screen Cinemas will not be direct competitors to each other, and their customer segments will overlap very little.

How is a firm's task environment different from its general environment?

Managers have some influence over external factors in the task environment; they have little direct effect over external forces in the general environment.

Which of the following statements about strategy is not true?

Operational effectiveness and competitive benchmarking should be treated as strategy.

Which of the following scenarios best illustrates a good stakeholder strategy?

PA Corp. distributes only 70 percent of its annual profit after taxes to shareholders, while the remaining is distributed among employees and the local community, and invested for further research.

Which of the following is not a stakeholder attribute that managers consider during stakeholder impact analysis?

a stakeholder's liquidity

Competitive industry structure refers to elements and features common to

all industries.

In the step-by-step process of industry analysis, identifying the underlying drivers of each force is followed by

assessing the overall industry structure.

True Empire Autos Inc. is an automobile company known for its luxury cars and follows a differentiation strategy. In this scenario, True Empire Autos should ideally compare its strategic position with a(n)

automobile company that sells high-end, premium cars.

A ________ primarily details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market.

business-level strategy

A firm that achieves superior performance relative to other firms in the same industry or the industry average has a(n)

competitive advantage.

In which of the following industry competitive structures do selling firms have the lowest pricing power?

perfect competition

Both Blue Horizons Electronics Inc. and CLR Inc. have achieved cost parity in the television market. To gain and sustain a competitive advantage against CLR, Blue Horizons Electronics should

create greater perceived economic value than CLR.

Firms pursuing a differentiation strategy primarily seek to

create higher customer perceived value than the value that competitors create.

Home Smart Inc. is a chain of supermarkets that sells its products at higher prices than its competitors. Yet, the supermarket chain has a large customer base due to its wide product portfolio and superior customer service. Which of the following generic business strategies has Home Smart adopted in this scenario?

differentiation

Even without differentiation parity, a firm pursuing a cost-leadership strategy can still gain a competitive advantage as long as its

economic value creation exceeds that of its competitors.

Given the industry structure in the automobile business, entering the auto manufacturing industry doesn't seem advisable. Yet Tesla Motors is joining the fray. Rather than attempting to compete head-on in internal combustion engines, Tesla Motors is entering the all-electric car segment, a much less crowded niche in the overall car industry. Which of the following is Tesla most hoping to benefit from in this market niche?

economies of scale

Sun Inc., a vendor, regularly supplies pallets to Octangle Corp. for its shipping business. Therefore, Sun Inc. is Octangle Corp.'s

external stakeholder.

A firm pursuing a differentiation strategy as opposed to a low-cost strategy will

focus its research and development on product technologies to add uniqueness.

Organic Eats is a restaurant that caters to the needs of a small percentage of highly health-conscious consumers. It has an all-organic, vegan menu. Since there are very few restaurants that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Organic Eats is following a

focused differentiation strategy.

When a differentiator charges a similar price as its competitors in the same strategic group but offers more perceived value, it

gains market share from other firms.

The best example of a firm's external stakeholder is a(n)

government agency that regulates the prices of products manufactured by the firm.

Which of the following is a feature of an oligopolistic industry structure?

high entry barriers

Whole Foods differentiates itself from competitors by offering top-quality foods obtained through sustainable agriculture. This business strategy implies that Whole Foods focuses on

increasing the perceived value created for customers, which allows it to charge a premium price.

Which of the following drivers simultaneously increases value while lowering cost?

innovation

A firm achieves differentiation parity ideally when

it creates the same customer value as its competitors.

Which of the following factors most effectively contributed to the success of Threadless in comparison to other companies with T-shirt designs, including American Eagle, Old Navy, and Urban Outfitters?

its reliance on crowdsourcing

A firm's business strategy will lead to a competitive advantage if it allows the firm to

perform different activities than its rivals.

Which of the following will hamper a differentiator's ability to achieve a competitive advantage?

lower value gap

Which of the following is not an example of a software company's external stakeholder?

project managers

In stakeholder impact analysis, identifying the opportunities and threats presented by stakeholders is immediately followed by

recognizing the economic, legal, ethical, and philanthropic responsibilities of the firm to its stakeholders.

Which of following practices of a firm satisfies its ethical responsibilities?

selling vaccines at a subsidized price in a less developed country even though this results in reduced shareholder returns

As the legal owners, ________ have the most legitimate claim on a company's profits.

shareholders

A core tenet of stakeholder strategy is that a

single-minded focus on shareholders alone exposes a firm to undue risks that can threaten the very survival of the enterprise.

FindFor Inc. is an e-commerce retail firm that sells a variety of merchandise online. Through services like cash on delivery, easy return, and online tracking, the company has created more customer value than its competitors (brick-and-mortar businesses) at the same price. Also, the company's costs are substantially low due to minimal investment in operation and administration. In this scenario, FindFor Inc. has most likely been able to provide superior value and cost control through

strategic positioning.

Which of the following tasks in the AFI strategy framework involves putting the formulated strategy into practice through organizational structure, culture, and controls?

strategy implementation

In the United States, which of the following was born out of dissatisfaction with the capitalist system in 2011?

the Occupy movement

Value drivers contribute to a firm's competitive advantage only if

the increase in value creation exceeds the increase in costs.

Which of the following is a firm effect that has an impact on the competitive advantage of a firm?

the value and the cost position of the firm relative to its competitors

Buyers are highly price sensitive when

they earn low profits or are strapped for cash.

During strategy implementation, managers primarily focus on deciding the

type of corporate governance that is most effective and ways in which it can put the formulated strategy into practice.

The pursuit of both differentiation and low cost at the same time in a way that creates a leap in value for both the firm and consumers is called

value innovation.