Globus Exam 3
10) How is a firm''s task environment different from its general environment? A) Managers have some influence over external factors in the task environment; they have little direct effect over external forces in the general environment. B) Managers have no direct effect over external factors in the task environment; they have some influence over external forces in the general environment. C) Managers have no direct effect over external factors in the task environment; they have influence over all external forces in the general environment. D) Managers have influence over all external factors in the task environment; they have no direct effect over external forces in the general environment.
A
14) Keeping in mind the five forces in the airline industry, which of the following best explains the difficulty airlines have in generating a profit? A) Substitutes are readily available in the form of trains, buses, and cars, thus reducing the profit potential in the industry. B) Suppliers have weak bargaining power because they offer products that are not differentiated. C) Entry barriers in the industry are high, resulting in hardly any new airlines popping up. D) Consumers in the industry make decisions based on price, thus reducing the intensity of rivalry in the industry.
A
17) In the aircraft manufacturing industry, at least for large commercial jets, Boeing and Airbus are the only competitors. There is not a significant threat of entry because A) entering the aircraft manufacturing industry requires huge capital investments. B) there is expected to be a huge return on investment within this industry .C) there is no credible threat of retaliation from the incumbents. D) entering the aircraft manufacturing industry means violating government policies.
A
22) Competitive rivalry based solely on ________ is destructive to firms as it transfers most of the value created in the industry to the customers. A) price-cutting B) new product releases C) promotional campaigns D) product differentiation
A
24) Jamie is a manager in an industry that has a few large players and that has remained relatively stable over the past few years. He finds out that legislators are proposing new laws to deregulate the industry. If the laws pass, which of these scenarios will Jamie most likely face? A) many new competitors B) technological innovation C) the end of globalization D) across-the-board price increases
A
37) Salubre Pharmaceuticals invested $3.4 billion dollars to develop a new drug for individuals with diabetes. After Salubre receives FDA approval of the drug, its marginal cost to produce the drug for market will be A) low. B) high. C) moderate. D) unpredictable.
A
39) Riya has recently started a restaurant in a commercial area that already has many other established restaurants and popular fast-food chains. Riya owns the building in which her restaurant is located, rather than leasing premises as her competitors do. This factor allows her to offer her products at a more competitive price. Riya has also invested a huge amount in designing the restaurant''s interior and in equipping the kitchen with the appliances that are most widely used in her industry. In this scenario, which of the following is the most valuable resource for Riya''s business? A) the investments made by Riya on the restaurant''s interior B) the type of kitchen equipment widely used in her industry C) the restaurant''s late entry into the market D) the building owned by Riya, which reduces cost of operations
A
49) Which of the following is an implication of high employee turnover in a company? A) It results in a reduction in the company''s intangible-resource stocks. B) It makes the source of the company''s competitive advantage causally ambiguous. C) It makes the source of the company''s competitive advantage socially complex. D) It results in greater immobility and heterogeneity of the company''s resources.
A
51) To help a firm achieve a competitive advantage, each distinct activity performed in the value chain needs to A) contribute to the firm''s strategic position as either low-cost leader or differentiator. B) reduce the immobility and the heterogeneity of the firm''s resources. C) create a static fit between the company''s internal resources and the external environment. D) reduce the causal ambiguity and the social complexity of the firm''s source of success.
A
54) Which of the following describes a situation in which firms acquire resources at a low cost, laying the foundation for a competitive advantage later? A) better expectations of future resource value B) path dependence affecting current decisions C) causal ambiguity D) social complexity
A
55) Dynamic capabilities are especially relevant for surviving and competing in markets that A) shift quickly. B) shift slowly. C) remain constant. D) remain unpredictable.
A
56) To reduce the amount of time it takes to apply packaging to its finished products, North Star Foods is implementing new equipment at its production plants. By doing this, North Star is addressing a ________ in the value chain analysis. A) primary activity B) secondary activity C) support activity D) premier activity
A
53) A resource-based view of a firm provides a model that systematically aids in identifying A) core rigidities. B) core competencies. C) competitive disadvantage. D) competitive parity.
B
57) O''Ryan Plastics 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 A) external opportunity. B) external threat. C) internal strength. D) internal weakness.
B
11) How do low interest rates affect a business? A) Firms tend to defer investments until rates rise. B) Firms can easily borrow money to finance future growth. C) Consumer demand slows down. D) Business credit is harder to obtain.
B
12) The primary objective of Porter''s five forces model is to A) understand valuable, rare, and hard-to-imitate resources. B) understand the profit potential of industries. C) reduce the gap between the value of a firm''s product and its cost of production. D) break down a firm''s value chain activities into primary and support.
B
13) During an interview for a CEO position, Elena''s potential employers ask her, "If you get this job, will you focus more on industry effects or firm effects?" What should her answer be? A) "Neither. I would focus on unexplained variances. They are the most mysterious effects and the most powerful." B) "Firm effects. I will be able to have the most impact on those." C) "Industry effects. They have the most substantial effect on superior firm performance." D) "Neither. I would focus on business cycle effects. These are the most predictable, so they are worth the most effort."
B
15) The internet service provider industry in the country of Megalopolis is an industry characterized by the presence of strong network effects, high brand loyalty, high economies of scale, and proprietary technology among incumbent firms. Thus, in the internet service provider industry, the A) threat of substitutes is most likely high. B) threat of new entrants is most likely low. C) bargaining power of buyers is most likely low. D) entry barriers are most likely nonexistent.
B
23) Peerless Inc., a large conglomerate, wants to liquidate its business in certain industries to improve its overall profitability. Which of the following industries would Peerless Inc. find it most difficult to exit? A) the management consultancy industry in which the company''s fixed costs are low B) the steel industry in which the company has obligations like severance pay toward employees C) the corporate training industry in which the company''s commitments are mostly short-term D) the e-commerce industry where the company has no long-term contractual agreements with suppliers
B
29) Beats Electronics has been able to outperform Audio-Technica, Bose, JBL, Skullcandy, Sennheiser, and Sony in the high-end, premium headphone market. Which of the following statements accurately explains one of the main reasons for the success of Beats? A) It produced the highest-quality headphones. B) It created a perception that owning its products was cool. C) It emphasized marketing over core competency. D) It focused on sponsoring future athletic superstars.
B
33) Which of the following statements accurately brings out the difference between tangible and intangible resources? A) Tangible resources contribute to a company''s competitive advantage, whereas intangible resources have little effect on competitive advantage. B) Tangible assets can be bought on the open market by anyone with the necessary cash, whereas intangible assets cannot be easily purchased. C) Tangible resources take a longer time to build, whereas intangible assets can be built comparatively easily. D) Tangible assets are difficult for competitors to imitate, whereas intangible assets can be easily replicated.
B
35) The competitive advantage that one firm has will be short-lived in an industry in which A) resource immobility is high. B) perfect competition exists. C) resource heterogeneity is high. D) capabilities of a firm are not easily replicable.
B
38) According to an evaluation using the VRIO framework, Crocs Shoes was unable to sustain its competitive advantage primarily because its products were A) invaluable and common. B) easy to imitate. C) extremely rare. D) non-substitutable.
B
43) ________ describes a process in which the options one faces in a current situation are limited by decisions made in the past. A) Social complexity B) Path dependence C) Cannibalization D) Causal ambiguity
B
46) Tony''s Pizza has been trying to directly copy the strategies of Moonlight Pies. Even though it is evident that the success of Moonlight Pies'' success comes from the freshness and variety of ingredients it uses, Tony''s Pizza has not been able to introduce the same types of produce into its recipes. This is because Moonlight''s network of relationships with local growers, as well as its efficient supply chain, are very difficult to emulate. Which of the following barriers to imitation does this scenario best illustrate? A) path dependence B) social complexity C) resource mobility D) resource homogeneity
B
48) Seth''s Computer Repair has maintained a competitive advantage based on its thorough and professional service, reasonable pricing, and money-back guarantee. Management at the company is so committed to doing repairs well that they often have rejected employee suggestions to expedite their processes. Recently, the company has begun to lose customers to a new local service offering same day in-home repairs and 24/7 online customer support. According to the dynamic capabilities perspective, Seth''s Computer Repair has lost its competitive advantage due to A) value chain disruption. B) core rigidity. C) resource flows. D) resource stocks.
B
5) Kirsten, a manager, is writing an analysis of her employer''s current and possible future revenues. Which of the following could she identify as an economic factor in her firm''s external general environment? A) the government regulations and laws in the country in which the firm exists B) the stage of the business cycle that the country is in C) the values and norms prevalent in the society in which the firm operates D) the bargaining power of the firm''s suppliers and buyers
B
7) Marina manages the supply chain for a company that sells diamond watches. She learns that economists are predicting a moderate to severe recession in the next six to eight months. Based on that information, what action should Marina recommend to the company''s owner? A) Increase supply. During recessions, businesses that focus on low-cost solutions make significant profits. B) Reduce supply. Customers generally reduce their purchases of luxury items when the economy falters. C) Maintain the supply at its current rate. Economic forecasts are rarely accurate. D) Wait six months and see what happens. Recessions rarely affect consumer spending.
B
8) In a firm''s external environment, ________ primarily capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class. A) political trends B) demographic trends C) ecological trends D) economic trends
B
34) Due to resource immobility, a critical assumption in the resource-based model of a firm, the A) competitive advantage of a firm exists for a short period of time. B) resource bundles of a firm can be easily imitated by competitors. C) resource differences between firms last for a long time. D) competencies and capabilities of all firms in an industry are similar.
C
41) ________ are barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy. A) Embargoes B) Cartel arrangements C) Isolating mechanisms D) Market niches
C
45) Assume a firm''s resources and capabilities are costly to imitate. This is because rival companies do not clearly understand the relationship between the resources and capabilities controlled by the firm. In this case, the firm''s competitive advantage is protected against imitation by A) path dependence. B) dependence complexity. C) causal ambiguity. D) social complexity.
C
9) Anders is researching sociocultural factors related to his employer, a sporting goods manufacturer. Which of the following would be part of the sociocultural forces in a firm''s external environment? A) the interest rates prevalent in an economy B) the laws protecting small enterprises in a nation' C) the family size of the firm''s target market D) the rate of employee attrition within the firm
C
16) In which of the following situations is the power of suppliers high in an industry? A) Suppliers offer products that are undifferentiated. B) Suppliers can credibly threaten to backward integrate into the industry. C) Suppliers depend heavily on the industry for their revenues. D) Suppliers'' industry is more concentrated than the industry it sells to.
D
18) In which of the following situations is a company that exists in the telecommunications industry most likely to face the highest threat of entry? A) if the company is able to put up a credible threat of retaliation B) if the capital requirements in the industry are high C) if the customer switching costs in the industry are high D) if the industry has recently become deregulated
D
19) Soapsuds Inc., a manufacturer of cleaning agents, supplies its products to All Needs Inc., a supermarket chain. It demands that All Needs create more shelf space in its stores for Soapsuds'' products. However, All Needs Inc. refuses to do this. Instead, it decides to produce its own range of cleaning agents with its own label "All Wash." In this scenario, All Needs Inc. has exercised its bargaining power as a buyer through A) price stability. B) retroactive market share. C) enhanced technology. D) backward integration.
D
20) Which of the following features about a buyer indicates that the buyer has high bargaining power? A) when the buyer cannot credibly threaten to backwardly integrate into the industry B) when the buyer cannot purchase specific products from other sellers C) when the buyer faces high switching costs D) when the buyer operates in an industry where products are undifferentiated
D
21) Lu runs a company that manufactures satellites for commercial and government use. It has few rivals. At the moment, the power of buyers, the power of suppliers, and the threat of substitutes are all low. Based on this information, what can Lu conclude? A) The manufacturer is likely to see little profit until the power of buyers improves. B) In this scenario, suppliers are likely to create and sell effective substitutes. C) This firm is an example of near-perfect competition. D) The company is likely to be very profitable as long as the threat to entry is low.
D
30) Organizational and managerial skills that find their expression in a company''s structure, routines, and culture are referred to as A) tangible resources. B) reserves. C) capital gains. D) capabilities.
D
31) The management of a company is assessing the value of all the tangible resources the company owns. Which of the following will be included in this assessment? A) a reputation for fast customer service B) a culture of proactive communication C) patents for electronic components D) the punch presses that produce parts
D
32) As manager of a relatively new company, you are tasked with analyzing company resources to identify core competencies capable of supporting a competitive advantage. Which of the following resources is most likely to generate a competitive advantage? A) new production facilities B) large cash holdings C) stockpile of supplies D) enthusiastic company culture
D
36) Gladiator Apparel is the market leader in the sportswear industry. Though most of its resources are common to those of its competitors, a few rare resources have helped the company gain and sustain a competitive advantage. Which of the following assets of Gladiator Apparel is most likely to be considered a rare resource that is contributing to its competitive advantage? A) the company''s land and buildings B) the company''s plant and machinery C) the company''s raw material supplies D) the company''s design patents
D
39) Riya has recently started a restaurant in a commercial area that already has many other established restaurants and popular fast-food chains. Riya owns the building in which her restaurant is located, rather than leasing premises as her competitors do. This factor allows her to offer her products at a more competitive price. Riya has also invested a huge amount in designing the restaurant''s interior and in equipping the kitchen with the appliances that are most widely used in her industry. In this scenario, which of the following is the most valuable resource for Riya''s business? A) the investments made by Riya on the restaurant''s interior B) the type of kitchen equipment widely used in her industry C) the restaurant''s late entry into the market D) the building owned by Riya, which reduces cost of operations
D
4) The government of Filvia has mandated that the standard minimum wage in the country be increased to $8,000 per year. Which of the following factors in a firm''s general environment does this mandate best indicate? A) ecological factors B) sociocultural factors C) technological factors D) legal factors
D
42) Keen Beans, a leading coffee roaster, anticipated that the prices of coffee beans from Costa Rica, where its main suppliers were located, would double in less than three years. This would significantly affect Keen Beans'' profit margins. Thus, Keen Beans decided to develop a new partnership with a supplier in Indonesia. As predicted, the price of Costa Rican coffee beans increased twofold. Because the price of Indonesian coffee beans was much lower, Keen Beans was able to maintain its profit margins in turbulent times. Which of the following isolating mechanisms does this scenario best illustrate? A) intellectual property protection B) causal ambiguity C) time compression diseconomies D) better expectations of future resource value
D
44) Iceberg Storage, a leading hard drive manufacturer, recently filed for bankruptcy. While most of Iceberg''s competitors were shifting away from physical data storage devices toward online cloud storage services, Iceberg invested most of its retained earnings in the effort to improve its hard drives. Once the hard-drive market drastically declined, Iceberg Storage was unable to capitalize on the new technology. Which of the following does this scenario best illustrate? A) causal ambiguity B) knowledge diffusion C) social complexity D) path dependence
D
47) Given the accelerated pace of technological change, in combination with deregulation, globalization, and demographic shifts, a firm will be successful today only if its A) competitive advantage is derived from static resource or market advantages. B) resource advantage is not causally ambiguous or socially complex. C) resource advantage is maintained for a short period of time. D) internal strengths change with its external environment in a dynamic fashion.
D
50) According to the value chain analysis, which of the following is a primary activity? A) research and development B) human resources management C) accounting and finance D) marketing and sales
D
52) Juanita, a manager at a multinational organization, is trying to carefully scan and link the firm''s internal environment to its external environment. The insights from this analysis will allow her to effectively leverage the company''s internal strengths to exploit external opportunities, while mitigating internal weaknesses and external threats. In this scenario, which of the following managerial tools is Juanita employing? A) Blake Mouton managerial grid B) Ansoff''s matrix C) BCG analysis D) SWOT analysis
D
58) After conducting a SWOT analysis, your firm has decided to focus on addressing issues located in the Weaknesses-Opportunities quadrant. Which of the following steps are you most likely to take? A) Devote more resources to an extremely popular advertising campaign to promote an exciting new product. B) Shut down struggling retail outlets in an economically depressed region. C) Deploy top sales personnel to prevent buyers from migrating towards lower-priced competition. D) Reorganize the inefficient research and development department to bring innovative products to market more quickly.
D
6) Managers at Sandburg Real Estate are surprised to hear that interest rates are likely to remain low for the next six months. Which of the following is an implication of low interest rates? A) Cost of capital for firms will be high. B) Firms will invest less in future growth. C) Economic growth rate will fall. D) Consumer demand will increase.
D
A) tangible resources. B) reserves. C) capital gains. D) capabilities.
D
T/F 26) One of Rolex''s tangible resources is its well-known brand name and reputation for quality timepieces.
F
T/F 27) Intellectual property (IP) protections such as trademarks or patents are proven methods of establishing permanent barriers to imitation.
F
T/F 28) Accounting, human resources, and research and development (R&D) are examples of primary activities that add value directly to the value chain.
F
T/F 1) For-profit businesses operating in long-standing fields such as energy and transportation usually operate in an environment of price stability.
F
T/F 2) A small coffee shop faces significant potential competition because of the low capital requirements compared with business environments such as universities and laboratories.
T
T/F 25) The core competencies of a firm are determined by the interplay of its tangible resources and intangible capabilities.
T
T/F 3) A company that owns failing movie theaters could leverage existing assets by turning the buildings into performance spaces and conference sites.
T
