Exam 2 MGMT 4363.501 Policy and Strategy

The management of a company is assessing the value of all the tangible resources the company owns. Which of the following will be included in this assessment?

the punch presses that produce parts

Which of the following competitively important assets is typically excluded from a firm's balance sheet?

customer experience

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?

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?

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

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?

Enterprise's intangible intensity was 6 percent, while Federation Tech's was 3 percent.

What does it mean for a firm to have an 80 percent learning curve?

Every time the cumulative output is doubled, the cost per unit will decline by 20 percent.

While Eye Windows incurs a cost of $12 for a pair of eyeglasses, Dura Frames, its competitor, manufactures a pair of glasses at $10. Both the companies are able to sell their glasses for a maximum of $30 per pair. Which of the following statements is true in this scenario?

Eye Windows and Dura Frames have achieved differentiation parity.

_____ are barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy.

Isolating mechanisms

How does causal ambiguity act as an isolating mechanism for organizations?

It makes it difficult for the competitors to understand why a company has been so successful.

Which of the following is an implication of high employee turnover in a company?

It results in a reduction in the company's intangible-resource stocks.

How did Marriott use economies of scope to achieve greater economic value than its competitors?

Marriott lowered its cost structure by sharing its production assets over several types of hotels, which increased the diversity of its hotel line and thus its differentiated appeal.

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?

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

________ are the legal owners of public companies.

Shareholders

The "diagonal assembly system" was a production system pioneered by the automobile company Gogo. Recently, Gogo was able to sue a competitor and won the suit, thereby receiving $100 million in damages. Which of the following would most likely enable Gogo to win such a lawsuit?

The competitor infringed on Gogo's patent of the "diagonal assembly system."

Which of the following applies to the Strength-Threats quadrant of the SWOT matrix?

The local fast-food chain Easy Hot Dogs used its wholesome image to maintain its competitive advantage against stiff competition.

Which of the following provides an example of how a firm's valuable resource can be imitated?

To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of the Leaning Tower of Pisa.

________, which is the return on risk capital, includes stock price appreciation plus dividends received over a specific period.

Total return to shareholders

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?

UTech Inc. creates more economic value than Mirco Corp. does.

________ is a business model in which the manufacturer sets a fixed price on a product, but the retailer is free to set its own price.

Wholesale

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?

allowing customers to upload their own image designs and help assemble the finished product at retail locations

Unlike the financial ratios based on accounting data, total return to shareholders is

an external performance metric.

In the context of SWOT analysis, which of the following best exemplifies a firm's external opportunity?

an increase in its customers' disposable income

How does a firm capture its producer surplus for a good or service?

as profit per unit sold

In an economic context, strategy for producers is primarily about

capturing the economic value created as much as possible.

Economic value creation is best expressed as

consumer surplus plus firm profit.

To help a firm achieve a competitive advantage, each distinct activity performed in the value chain needs to

contribute to the firm's strategic position as either low-cost leader or differentiator.

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?

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

According to the resource-based view, a firm's competitive advantage often stems from its

intangible resources.

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

path dependence.

From an investor's or shareholder's perspective, the measure of competitive advantage that matters most is the

return on risk capital.

Dynamic capabilities are especially relevant for surviving and competing in markets that

shift quickly.

There are several major limitations of employing the balance scorecard framework; which of the following below is not one of those limitations?

the type of marketing and HR functions used to employ the framework

When the laptop market overtook the desktop market, Blue Tech Inc., a leader in desktop technology, was left at a competitive disadvantage. Later, Blue Tech Inc.'s management channeled all of the company's efforts and revenue to develop an efficient laptop from scratch in less than a year. However, the company failed because Blue Tech Inc.'s models were inferior to the third- and fourth-generation models its competitors were selling. In this scenario, Blue Tech Inc.'s failure can be best attributed to

time compression diseconomies.

The goal of a strategic position is to create the largest gap possible between the ________ that a firm creates through its offerings and the ________ required to create these offerings.

value; cost

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

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

Both Tom's Car Repair and Fast Engines. incur a cost of $9,000 to manufacture a vehicle. However, the economic value created by Fast Engines. is more than that created by Tom's Car Repair. What does this indicate?

Fast Engines can charge a premium price on its automobiles.

Bestie Toys faces stiff competition from FunGadgets Inc., a rival firm with which Bestie Toys has achieved differentiation parity. Both firms have invested in state-of-the art production facilities and have similar learning curves of 85 percent. Assuming neither firm can reduce the cost of its input factors, how can Bestie Toys achieve a competitive advantage as a cost-leader?

Have a cumulative output that is greater than FunGadgets Inc.'s.

Evaluate the following statement: Strategic leaders should always try to pursue a blue ocean strategy because it is the most complex, coveted, and most desirable strategy that exists.

I disagree; firms should only pursue this strategy if they are able to reconcile the tradeoff's of each generic strategy.

The translation of strategy into action primarily takes place in a firm's

business model.

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

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

Leading guitar string producer Highly Strung Inc. has enjoyed a competitive advantage based on its proprietary coating that gives its strings a clearer sound and longer lifespan than uncoated strings. One of Highly Strung's competitors, however, has recently developed a similar coating using less expensive ingredients, which allows it to charge a lower price than Highly Strung for similar-quality strings. Highly Strung's competitive advantage is in danger due to

direct imitation and substitution.

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?

diseconomies of scale

CarTsar Inc. is a manufacturer of automobile parts, which it sells to retail auto supply stores. Its core competencies include superior design and engineering capabilities, as well as a highly integrated and efficient supply chain. To sustain its competitive advantage, CarTsar should first

upgrade its engineering department and improve its supply chain.

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

watch maker that sells high-end, premium watches.

A value curve indicates a lack of effectiveness in a firm's strategic profile when it

zig-zags.

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

availability of complements.

Leo's Magic Rails maintains a manufacturing plant overseas. The local government has just been overthrown by a military group that opposes foreign influence in the country. According to the SWOT analysis, the political situation in this location is considered to be an

external threat.

All of the following are generic business-level strategies except

focused marketing strategy.

Treequote Industries has produced a new piece of technology that will monitor the soil moisture in a user's garden and send a notification to an app on the user's phone when it is time to water their plants. The goal of this inexpensive technology is to entice users to purchase Treequote's more expensive automated watering system, so that they can trigger the watering process from the app on their phones. Which business model is most likely to help Treequote Industries accomplish its goals?

freemium

The strategy canvas for movie theaters includes factors such as prices, comfort, customer service, concessions variety, and hours of operation. Which of the following value curves is most likely to represent a theater that successfully positions itself as a differentiator?

high price, high comfort, high customer service, high concessions variety, low hours of operation

Core competencies are derived from the combination of

key strategic resources and a firm's capabilities.

Combining economies of learning with the existing production technology allows a firm to

move down a given learning curve.

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?

pay-as-you-go

The "Natural Nourishment" granola bars manufactured by Global Good Foods have been the top-selling granola bars in the market. Though the market for granola bars is flooded with competitors, Global Good has been able to maintain its market position for a long time. This is mainly attributed to the pleasant texture of its granola, which comes from a proprietary processing technique used by the company. This competency of Global Good Foods will be considered as a(n) _____ resource in the VRIO framework.

rare

Fresher Corp. produces electric bathroom fragrance diffusers and sells the electric outer device at a market rate price. However, they lock their clients into a two-year agreement to purchase the perfume refills solely from them on a monthly basis. Which of the following business models does this best illustrate?

subscription-based

Amazon.com's network of distribution centers allow it to drastically reduce its delivery times compared to other online retailers. These distribution centers are examples of Amazon's

tangible resources.

Although eHook Inc. and eFury Inc. operate in the same consumer electronic industry, eHook Inc. has better sales and brand equity. This is attributed to eHook Inc.'s commitment to innovation. The company has adequate financial and human capital to invest in research and development, an area in which eFuryInc. lags behind. In this scenario, which of the following critical assumptions of the resource-based view of a firm has been illustrated?

resource heterogeneity

A differentiator is least likely to be threatened by increases in input prices due to powerful suppliers when the

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