Integrated Business Policy and Strat Practice Exam 1

Which of the following summarizes the difference between a firm's vision and mission? -A vision states what a firm wants to accomplish; a mission states how a firm plans to accomplish this vision. -A vision states the ethical values of a firm; a mission states the monetary goals of a firm. -A vision states how much a firm wants to earn; a mission states how these earnings will be accomplished. -A vision states the management values of a firm; a mission states the values of the other workers.

A vision states what a firm wants to accomplish; a mission states how a firm plans to accomplish this vision.

How do low interest rates affect a business? -Firms tend to defer investments until rates rise. -Firms can easily borrow money to finance future growth. -Consumer demand slows down. -Business credit is harder to obtain.

Firms can easily borrow money to finance future growth.

InVue, a consumer electronics company, is the leading manufacturer of high-definition (HD) LED televisions. HD technology has been its core competency and the company holds 60 percent shares in that market. However, InVue's competitors have now begun to produce more-advanced technologies like 4K Ultra HD and Internet-enabled Smart televisions. According to the dynamic capabilities perspective, what should InVue do? -InVue should start working on Ultra HD and Smart television technologies to adapt its core competency to suit the external environment. -InVue should stick to its existing core competency, that is HD LED technology, as it is the best in that segment. -InVue should take steps to reduce the causal ambiguity and socially complexity of its core competency. -InVue should work on enhancing the mobility of its core competency.

InVue should start working on Ultra HD and Smart television technologies to adapt its core competency to suit the external environment.

Understanding the Resource Allocation Process (RAP) will have large effects on shaping a firm's realized strategy. Which of the following is an example of such an allocation of resources? -Starbucks' launch of iced drinks -Teach For America's mission statement -Merck's voluntary withdrawal of Vioxx from the market -Intel's rule to "maximize margin-per-wafer-start"

Intel's rule to "maximize margin-per-wafer-start"

________ are barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy. -Embargoes -Cartel arrangements -Isolating mechanisms -Market niches

Isolating mechanisms

The average cost of production for a bottle of vitamin water in the industry is $4 while its average price is $7. StoreAll Inc. manufactures the same product for $3 per bottle and sells it for $7 per bottle. Which of the following statements is most likely true of StoreAll Inc. in this scenario? -It has a competitive advantage in the industry. -It has a competitive disadvantage in the industry. -It has competitive parity with other firms in the industry. -It has formed a strategic alliance with other firms in the industry.

It has a competitive advantage in the industry.

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. -It creates a situation in which different social and business systems interact with one another. -It makes it difficult for competitors to deploy their resources by creating ambiguity within their organizational structures. -It makes it difficult for competitors to imitate core competencies quickly due to time compression diseconomies.

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

Which of the following is a primary feature of the five forces model? -It is concerned exclusively about the intensity of rivalry among direct competitors. -It takes into account a firm's internal resources, capabilities, and core competencies. -It helps managers determine the changing speed of an industry or the rate of innovation. -It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.

It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.

The owners of Puff Ball bakery want to open a second retail outlet. Which of the following scenarios is most likely to yield a competitive advantage? -Open a shop on an inexpensive piece of land near a new mixed-use residential and business district currently under construction. -Purchase an existing bakery from a business that closed due to declining sales and try to revive it. -Build a shop in a sparsely populated rural area where the land is inexpensive and few other bakeries exist. -Open a shop in a crowded downtown location where several other bakeries have been successful over the years.

Open a shop on an inexpensive piece of land near a new mixed-use residential and business district currently under construction.

Addams Coaches Inc. is a bus line with service to several major cities. It has several competitors that each offer service to one or two cities, and based on its current outlays, it cannot match or beat those competitors on price. Because of long-term contracts and an increase in the cost of gasoline, it is not possible to reduce expenditures at this time. Which of these strategies should Addams pursue instead? -Create a strategic group through mergers. -Compete based on inter-group rivalry, not intra-group rivalry. -Pursue a differentiated strategy. -Close the business until the cost of gas decreases.

Pursue a differentiated strategy.

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? -Devote more resources to an extremely popular advertising campaign to promote an exciting new product. -Shut down struggling retail outlets in an economically depressed region. -Deploy top sales personnel to prevent buyers from migrating towards lower-priced competition. -Reorganize the inefficient research and development department to bring innovative products to market more quickly.

Reorganize the inefficient research and development department to bring innovative products to market more quickly.

Keeping in mind the five forces in the airline industry, which of the following best explains the difficulty airlines have in generating a profit? -Substitutes are readily available in the form of trains, buses, and cars, thus reducing the profit potential in the industry. -Suppliers have weak bargaining power because they offer products that are not differentiated. -Entry barriers in the industry are high, resulting in hardly any new airlines popping up. -Consumers in the industry make decisions based on price, thus reducing the intensity of rivalry in the industry.

Substitutes are readily available in the form of trains, buses, and cars, thus reducing the profit potential in the industry.

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 ran advertising that criticized Gogo's assembly system. - The competitor failed to apply for a patent of its own assembly system. - The competitor infringed on Gogo's patent of the "diagonal assembly system." - The competitor developed an assembly system that worked on a newer theory than Gogo's system.

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

Which of the following is an implication of all firms in an industry pursuing a low-cost position through application of competitive benchmarking? - No firm would face direct competition from others in the industry; hence, profit potential would be high. - Each firm would be catering to a different customer segment. - The firms would eventually have no resources to invest in product and process improvements. - Each firm would be in a better position to gain a competitive advantage.

The firms would eventually have no resources to invest in product and process improvements.

Which of the following methods of developing a strategy best illustrates scenario planning? -Based on the previous year's profits, the CEO of Solva Inc. decided to adopt an expansion strategy in its home market. -A sales person at MP Foods Inc. suggested that the company should introduce an organic version of its gelato to cater to the needs of the increasingly health-conscious population. -The managers at Lyon Clothing Inc. formulated a strategy that is able to handle small to medium to large increases in the prices of cotton in the future. -The CEO of BCT Inc., a large conglomerate, has decided to enter the South American market based on the competitor's success in the same market.

The managers at Lyon Clothing Inc. formulated a strategy that is able to handle small to medium to large increases in the prices of cotton in the future.

True Help is a nonprofit organization that works toward rehabilitating the homeless. The credo of the organization is "help us help you." For an organization like True Help, which of the following statements would make an appropriate mission? - Help us help you find a home. - One day, everyone in this nation will have a home to protect themselves. - We help the homeless gain and sustain financial independence by providing employment opportunities. - Our mission is to turn this not-for-profit organization into a for-profit organization so that the stakeholders benefit.

We help the homeless gain and sustain financial independence by providing employment opportunities.

Samsung and Google cooperate as complementors to compete against Apple's strong position in the mobile device industry, while at the same time Samsung and Google are increasingly becoming competitive with one another. This scenario best illustrates the process of -co-opetition. -perfect competition. -monopolization. -conglomeration.

co-opetition.

If Zephyr Electronics obtains an 18 percent return on invested capital, which of the following will help determine if it has a competitive advantage over other pharmaceutical companies? -comparing the return to the return on invested capital obtained by other firms in the industry -assessing the value based on the shareholders' expectations of return on their capital -evaluating the liquidity ratios for other pharmaceutical companies -comparing the value to the history of the firm's return of investment over a number of years

comparing the return to the return on invested capital obtained by other firms in the industry

Strategies developed at the departmental level, such as the accounting, human resources, production, and marketing departments, within a strategic business unit are referred to as ________ strategies. -grand -corporate -business -functional

functional

Burke Furnishings is a company that manufactures and sells home furniture. It sources its materials from another country to keep costs low. An assembly line worker in one of its manufacturing centers noticed that there was increasing concern regarding the potential toxicity of the flame-resistant materials used in the furniture. In response, she compiled a list of nontoxic flame-resistant materials that the company could use. When her manager learned about this, he presented the prospect and got it approved from the top management team. This is an example of the -top-down strategic planning approach. -planned emergence approach. -scenario planning process. -reverse engineering process.

planned emergence approach.

Which of the following strategies does Tesla need to implement or achieve to gain a competitive advantage? -imitate the features of the most popular SUVs on the market -reinvest profits to build successively better electric automobiles -sell advertising space on their cars' digital displays -substitute less-expensive components to keep costs low

reinvest profits to build successively better electric automobiles

Southwest Airlines (SWA) has enjoyed a sustained competitive advantage, allowing it to outperform its competitors over several decades. Continental and Delta attempted to copy SWA with their offerings of Continental Lite and Song, respectively. Neither Continental nor Delta, however, was able to successfully imitate the resource bundles and firm capabilities that make SWA unique. Which of the following is this case an example of? -resource immobility -resource heterogeneity -resource imitation -resource substitution

resource immobility

A traditional top-down strategic planning process typically begins with -employees at the operational level identifying problems within an organization. -functional managers formulating functional strategies for their respective departments. -strategic leaders adjusting a company's vision and mission based on environmental analysis. -employees who have close contact with customers taking autonomous actions.

strategic leaders adjusting a company's vision and mission based on environmental analysis.

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 lower than its competitors because of minimal investments in operation and administration. In this scenario, FindFor Inc. has most likely been able to provide superior value and cost control through -strategic parity. -strategic profiling. -strategic liquidation. -strategic positioning.

strategic positioning.

Powell Lighting was the first company to start selling LED light bulbs in its country—a product that gained popularity among diverse groups. Soon, other companies started to sell their own brands of LED bulbs, thereby giving Powell Lighting ample competition. In response, Powell Lighting decided to limit its LED light bulbs to outdoor models. However, it ensured that these models were the longest-lasting and lowest-priced on the market. With this innovation, Powell Lighting consistently outperformed its competitors for ten years. In this scenario, Powell Lighting maintained a ________ through its innovative strategy. -balanced scorecard -fiduciary responsibility -consistent power position -sustainable competitive advantage

sustainable competitive advantage

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? -the investments made by Riya on the restaurant's interior -the type of kitchen equipment widely used in her industry -the restaurant's late entry into the market -the building owned by Riya, which reduces cost of operations

the building owned by Riya, which reduces cost of operations

The Founder of Teach for America, Wendy Kopp, wants to make teaching an attractive option for promising young professionals. Identify the phrase that represents the vision she developed for Teach for America. -to improve standardized test scores across the board -to cut wasteful spending from education budgets -to encourage parents to take a more active role in their children's education -to give all children in the United States the opportunity to attain an excellent education.

to give all children in the United States the opportunity to attain an excellent education.

For a firm that operates in an industry where competition is high, which of the following practices will result in inferior performance? -choosing a distinct but different strategic position in the industry -working toward increasing the difference between value creation and cost -trying to be everything to everybody by combining different competitive strategies -focusing on creating value for customers rather than destroying rivals

trying to be everything to everybody by combining different competitive strategies

Which of the following features about a buyer indicates that the buyer has high bargaining power? -when the buyer cannot credibly threaten to backwardly integrate into the industry -when the buyer cannot purchase specific products from other sellers -when the buyer faces high switching costs -when the buyer operates in an industry where products are undifferentiated

when the buyer operates in an industry where products are undifferentiated

Fran owns Consolidated Auto Parts, a company that got its start making auto parts related for hybrid vehicles, but her firm has had difficulty establishing itself as a maker of parts for the more-profitable internal combustion engine. What is most likely contributing to Consolidated's problem in this area? -Newcomers cannot use existing assets or reconfigure their value chains. -New competitors usually ignore stakeholders who are not stockholders. -It is difficult for outsiders to gauge which stage of the "life cycle" that industry is in. -Entry barriers usually protect the incumbent players in a profitable industry.

Entry barriers usually protect the incumbent players in a profitable industry.

Your company, a small software development firm, has attracted many of the top young programmers in your area. As a result, the apps you produce have been praised for their innovative features and intuitive user experience. According to the bathtub metaphor in the dynamic capabilities perspective, what is the best way for you to protect against resource leakage? -Invest in an online marketing campaign for existing products to retain customers. -Open a satellite office overseas to support the company culture of taking chances. -Attempt to undercut the competition by imitating their top-selling product. -Improve the benefits package to retain key employees and reduce turnover.

Improve the benefits package to retain key employees and reduce turnover.

Igor's Furniture has seen its profit margins shrink over the past several years as increased competition has driven down furniture prices. You have been tasked with improving the company's margins. Which of the following approaches makes the most sense within the context of strategic activity systems? -Go against the trend and raise prices. -Install modern manufacturing equipment to improve efficiency. -Increase spending on online marketing efforts. -Focus on imitating the most successful products of competitors.

Install modern manufacturing equipment to improve efficiency.

________ describes a process in which the options one faces in a current situation are limited by decisions made in the past. -Social complexity -Path dependence -Cannibalization -Causal ambiguity

Path dependence

Upper management at Softstep Inc., a manufacturer of insoles for shoes, wants to work on improving the product lines it already has without taking on other challenges at this time. Which of the following vision statements reflects that goal? -Softstep Inc. wants to adapt their insoles to the changing demands of consumers. -Softstep Inc. wants to always satisfy the consumers who purchase insoles. -Softstep Inc. wants to provide the best benefits for employees in the insole industry. -Softstep Inc. wants to be the best manufacturer of insoles in the industry.

Softstep Inc. wants to be the best manufacturer of insoles in the industry.

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? -the company's land and buildings -the company's plant and machinery -the company's raw material supplies -the company's design patents

The company's design patents

Years ago, the travel industry was controlled by a few large travel companies that booked holidays, air tickets, bus tickets, and hotels for their customers. However, with the emergence of the internet, smaller travel agencies started mushrooming in the industry and customers started making their own reservations. Which of the following can be inferred from this information? -The travel industry changed from a consolidated structure to a fragmented one. -The pricing power of the incumbent firms in the travel industry has increased. -The bargaining power of buyers in the travel industry has decreased. -The structure of the travel industry changed from monopolistic competition to an oligopolistic one.

The travel industry changed from a consolidated structure to a fragmented one.

Which of the following best qualifies as a firm's internal stakeholder? -an auditor assigned to the firm by a federal government agency -a labor union with whom the firm's employees can affiliate -a manager taking care of the firm's operations in a foreign market -a competitor manufacturing the same products as that of the firm

a manager taking care of the firm's operations in a foreign market

Which of the following is an element of good strategy? -a summary of the firm's history within its industry -a guiding policy to address employee satisfaction -a set of coherent actions to implement the firm's guiding policy -an approach that underestimates the competition

a set of coherent actions to implement the firm's guiding policy

In an industry, the threat of entry is high when -capital requirements are low. -expected returns are low. -technological know-how is industry specific. -switching costs are high.

capital requirements are low.

Merton's Toothpaste has been the leader of dental care products for about 40 years. However, this company relied too long on its competency of reducing cavities without refining or upgrading other aspects of its product. As a result, other personal hygiene companies that began to offer toothpastes with natural whitening agents gained a competitive advantage over Merton's. This case is an example of -resource flow. -dynamic capabilities. -core rigidity. -value chain.

core rigidity.

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 -value chain disruption. -core rigidity. -resource flows. -resource stocks.

core rigidity.

In the pyramid of corporate social responsibility, ________ responsibilities are the foundational building block. -economic -ethical -philanthropic -legal

economic

A strategic group will typically include -firms within the same industry. -customers belonging to a particular socioeconomic class. -firms employing similar number of employees, irrespective of their industries. -employees within a firm earning the same amount in salary.

firms within the same industry.

After carefully assessing the market potential for solar-powered mobile devices, the top-level executives of Futuretronics Inc. decided that the company would be launching a line of solar-powered tablets within the next two years. This would mean that the tablet division would need to immediately begin research and development efforts. Which of the following strategies in the planned emergence model does this best illustrate? -intended strategy -emergent strategy -unrealized strategy -tactical strategy

intended strategy

The minimum wage in the country of New Morland is $8 an hour. Odion, a restaurant in New Morland's capital city, pays its servers $8 per hour. However, the management of the restaurant feels that this amount is excessive for workers whose only job is to clear tables. By continuing to adhere to the rules set by the government of New Morland, which of the following responsibilities is Odion satisfying? -legal responsibilities -philanthropic responsibilities -ethical responsibilities -demographic responsibilities

legal responsibilities.

Fadia Ammunition Inc., a firm controlled and managed by the government of Fadia, is the only company that has the license to produce defense arms in the country. Which of the following industry competitive structures does this best illustrate? -monopolistic competition -monopoly -oligopoly -perfect competition

monopoly

Eon Inc., Electravia Inc., and FC Inc., the three largest firms in the consumer electronics industry, hold close to 85 percent of the industry's market share. These companies mainly compete against each other by providing unique features in their products rather than pricing them low. These firms are interdependent, and each firm must consider the strategic actions of its competitors. Which of the following industry competitive structures does this scenario best illustrate? -monopolistic competition -oligopoly -monopoly -perfect competition

oligopoly

When companies that manufacture shipping containers want to buy iron ore, the purchase decision is solely based on price. This is because there are a large number of sellers in the iron ore industry, and iron ore is a highly undifferentiated commodity. Which of the following industry competitive structures does the iron ore industry best illustrate? -monopoly -oligopoly -perfect competition -monopolistic competition

perfect competition

Competitive rivalry based solely on ________ is destructive to firms as it transfers most of the value created in the industry to the customers. - price-cutting - new product releases - promotional campaigns - product differentiation

price-cutting

Dynamic capabilities are especially relevant for surviving and competing in markets that -shift quickly. -shift slowly. -remain constant. -remain unpredictable.

shift quickly.