MGMT 406 HW1-6 midterm practice

Donna can make a chair for $100; she charges customers $150 to buy the chair, and customers perceive that the chair is worth $225. In this case, the consumer surplus is:

$75

Focus strategy can be defined as the strategy:

a company uses when it decides to serve a limited number of segments, or just one segment of the market.

Employee productivity is:

a key determinant of a company's efficiency, cost structure, and profitability.

More people seem to fear a snake bite than a dog bite, and yet statistically one is more likely to be bitten by a dog than by a snake. This is because people tend to estimate the probability of an outcome based on how easy the outcome is to imagine. This represents which of the following cognitive biases? Question 10Select one:a.Escalating commitmentb.Representativenessc.Availability errorCorrectd.Hypothesis biase.Illusion of control

Availability error

Economies of scale can arise from:

an advantage gained by spreading fixed production costs over a large production volume.

When shopping for clothing such as shirts and jeans, Tyrone only buys products from Eastern Clothing Company even if there are several other companies that offer similar products at lower prices. Tyrone's preference for Eastern Clothing Company demonstrates: Question 5Select one:a.lack of economies of scaleb.lack of demand.c.bargaining power.d.risk of entry.e.brand loyalty

brandy loyalty

Mike, the chief executive officer (CEO) of a retail chain, wanted to keep costs low. To set an example for others, he drove his own car and furnished his office with plain, metal desks. In this case, Mike was displaying: Question 9Select one:a.devil's advocacy.b.autocratic leadership.c.ego.d.astute use of power.e.commitment.

commitment

A company pursuing a focus strategy:

concentrates on building market share in one market segment.

Jeffrey Pfeffer believes that a manager's power comes from his or her: Question 7Select one:a.control over important organizational resources.Correctb.personal rapport with the senior management.c.ability to cut overhead costs.d.ability to be emphatic and understanding of the feelings and emotions of subordinates. e.ability to prioritize the well-being of the company over personal well-being.

control over important organizational resources.

Which of the following is NOT one of the macroeconomic forces? Question 11Select one:a.Inflation ratesb.Growth rate of the economyc.Interest ratesd.Cultural changese.Currency exchange rates

cultural changes

Using the value-chain model, which of the following primary activities is performed last, as inputs are transformed into outputs?

customer service

The extent of rivalry among established companies is lowest when: Question 3Select one:a.the industry is entering a decline stage.b.exit barriers are substantial.c.the industry's product is a commodity.d.the fixed costs are high.e.demand is growing rapidly

demand is growing rapidly.

Americans are currently living longer now than in the past because of advances in medicine. As a result, the sale of products that meet the needs of older individuals, such as devices that assist in walking and movement, have increased. In the context of an industry's macroenvironment, age is considered which type of force? Question 21Select one:a.Social b.Legal c.Demographic d.Technological e.Political

demographic

A component of strategy implementation is: Question 1Select one: a. eliminating the feedback loop. b. providing the number and kind of periodic reports that must be submitted by functional-level managers .c. defining the goals and objectives of the organizations. d. answering the question, "What is our business?" e. designing the organization's control and reward systems.

designing the organization's control and reward systems.

A company's hiring strategy:

directly affects employee productivity.

Kodak possesses the leading imaging technology. This technology has allowed the company to differentiate its products from those offered by rivals. Imaging technology is Kodak's:

distinctive competence.

As an industry enters the shakeout stage: Question 7Select one:a.new entrants come into the market.b.excess productive capacity emerges.c.demand grows at a high rate.d.rivalry among companies declines.e.prices of products increase.

excess productive capacity emerges.

Which of the following is NOT a result of reducing lot sizes for manufactured products?

Defects are difficult to identify.

Which of the following is NOT true of capital productivity? Question 11Select one:a.Changing the way a firm handles inventory to reduce capital expenditures can increase capital productivity.b.It is the output produced by a dollar of capital invested in the business.c.It is an important measure of efficiency.d.It is measured by looking at a product's price.e.Higher capital productivity is achieved by eliminating unproductive assets or activities from a firm's capital.

It is measured by looking at a product's price.

A product's appeal to customers' desires cannot be considered a source of differentiation.

false

A resource is inimitable if competitors can copy it easily.

false

Creating a signature scent, choosing an original name, and configuring the shape and look of the bottle are all decisions made in the production phase of the value chain for a perfume company.

false

Customer focus is a function of only the lower levels of an organization.

false

Determining the technological and legal factors surrounding a company's possible international expansion into India is an example of an internal analysis.

false

Emergent strategies arise from within the organization as a direct result of prior planning.

false

One of the factors that distinguish organizations in the nonprofit sector from profit-making businesses is the lack of a need for strategic management. Question 19Select one:

false

Process knowledge includes control systems and incentive systems while organizational architecture includes human skills and the style of decisions are made.

false

The Big Mac, the McFlurry and the McDonald's logo are all examples of the organizational architecture of the McDonald's company.

false

The brand loyalty enjoyed by the differentiated company does not protect it from substitute goods and services.

false

The vision of the company and the mission statement can be used interchangeably.

false

To increase shareholder value, managers must try to venture into new markets whether the results are profitable or not.

false

The Mountain Ski Lodge spent $100,000 marketing and advertising its new ski trails and on-site spa. The money used for marketing and advertising can be referred to as:

fixed costs.

First-time demand expands rapidly due to new customers entering the market in which of the following stages of the industry life cycle? Question 10Select one: a.Maturity b.Embryonic c.Declined.Growthe.Shakeout

growth

Overconfidence about their ability to succeed can lead top managers in a company to be prone to: Question 11Select one:a.illusion of control biases.b.escalating commitment.c.reasoning by analogy.d.prior hypothesis biases.e.representativeness.

illusion of control biases.

Mobility barriers:

inhibit the movement of companies between strategic groups in an industry.

A consolidated industry structure: Question 2Select one:a.is dominated by a small number of companies or, in extreme cases, by just one company, and such companies often are positioned to determine industry pricesb.constitutes a threat rather than an opportunity.c.provides no scope for an oligopoly to exist.d.consists of several small companies or medium-size companies, none of which is positioned to determine industry price.e.is characterized by low-entry barriers and commodity-type products.

is dominated by a small number of companies or, in extreme cases, by just one company, and such companies often are positioned to determine industry prices.

Based on the VRIO framework, a resource can be considered a source of competitive advantage if it:

is rare, valuable, difficult to imitate, and organized or managed by the company.

If economies of scale are an industry's primary entry barrier, a new entrant's major concern is:

its inability to produce in sufficient volume to match the cost advantages of established producers.

Learning effects are cost savings that result from:

knowledge acquired by doing.

Which of the following support activities in the value chain controls the transmission of physical materials through the value chain, from procurement through production and into distribution? Question 13Select one:a.Logisticsb.Operationsc.Research and developmentd.Human resourcese.Information systems

logistics

Evidence suggests that the best way to maximize the long-run return to shareholders is to focus on: Question 3Select one:a.research and development goals.b.compensating managers well.c.increasing prices.d.maximizing employee overtime. e.satisfying customer needs and making sure that employees are fairly treated.

satisfying customer needs and making sure that employees are fairly treated.

When a company recognizes that the needs of one market segment is not the same as another and accordingly customizes its product offerings, it is said to be pursuing a __________ strategy.

segmentation

The experience-curve concept:

suggests that unit manufacturing costs increase by a certain amount each time output is increased.

As a barrier to new entry, absolute cost advantages can be based on:

superior production operations and processes due to accumulated experience, patents, or trade secrets.

A differentiation strategy is based on creating a product that customers perceive as being:

superior to other available products.

An industry's buyers have high bargaining power when: Question 1Select one:a.switching costs are low.b.they purchase in small quantities.c.it is economically impossible for them to purchase an input from several companies at once.d.the industry is a monopoly.e.the supply industry depends upon buyers for a very small percentage of its total orders.

switching costs are low.

In growth industries: Question 13Select one:a.distribution channels are poorly developed.b.the threat from potential competitors is typically highest.c.the intensity of rivalry is very high.d.buyers are not familiar with the industry's products.e.technological expertise is the most important entry barrier.

the threat from potential competitors is typically highest.

Suppliers in an industry are most powerful when: Question 6Select one:a.switching costs are low.b.companies in the industry threaten to enter the suppliers' industry.c.there are few substitutes for the products that they sell.d.their profitability is significantly affected by the purchases of companies in a particular industry.e.they refrain from entering their customers' industry because of lack of resources.

there are few substitutes for the products that they sell.

A generic business-level strategy is a strategy that gives a company a specific form of competitive position and advantage vis-à-vis its rivals, resulting in above-average profitability.

true

A low-cost company is often best positioned to survive price rivalry in its industry.

true

A strategy can be defined as a set of related actions that managers take to increase their company's performance.

true

All else being equal, if a company moves down the experience curve faster than its rivals, it should realize a lower cost structure.

true

At its most basic, a firm's business-level strategy is about whom a company decides to serve, what customer needs and desires the company is trying to satisfy, and how the company decides to satisfy those needs and desires.

true

If a company focuses on its customers and creates incentives for employee productivity, the company will likely be successful in delivering shareholder value.

true

If a company's profitability is higher than the average profitability of all companies in its industry, it has a competitive advantage.

true

In Porter's Five Forces model, as each of the five forces grows stronger, it limits the ability of established companies to raise prices and earn greater profits.

true

Interest rates have an impact on the sale of automobiles, appliances, and capital equipment. This represents a macroeconomic force.

true

Mintzberg maintains that emergent strategies are often successful and may be more appropriate than intended strategies.

true

Poor commercialization occurs when there is definite customer demand for a new product, but the product is not well adapted to customer needs because of factors such as poor design and poor quality.

true

Product attributes that collectively define product excellence include the form, features, performance, durability, reliability, and style of the product.

true

Rapid growth in demand enables companies to expand their revenues and profits without taking market share away from competitors.

true

Return on invested capital (ROIC) is a measure of how efficiently and effectively managers use the capital at their disposal to produce profitability.

true

Technological change can represent both an opportunity and a threat.

true

The effect of value innovation on the efficiency frontier is that a product can be offered at a greater value at a lower cost than was thought possible.

true

Well-constructed goals provide a means by which the performance of managers can be evaluated.

true

Economies of scale are:

unit cost reductions associated with a large-scale output.

The term value innovation is used to describe:

what happens when innovation pushes out the efficiency frontier in an industry, allowing for greater value to be offered through superior differentiation at a lower cost than was previously thought possible.

Rebecca, a manager, was very annoyed after noticing several negligent errors in a critical report. However, while talking to the subordinate who created the report, Rebecca was calm and composed; she did not act impulsively and lose her temper. Which of the following aspects of emotional intelligence is illustrated in this scenario? Question 13Select one:a.Self-regulationb.Motivationc.Empathyd.Self-awarenesse.Social skills

Self-regulation

In what situation can a company have both differentiation and a low-cost position?

With innovation, a company can push out the efficiency frontier in its industry and can deliver more differentiation at a lower cost than its rivals.

Which of the following best describes product innovation? Question 9Select one:a.Identifying and satisfying a customer's needsb.Transforming a quantity of inputs into a given outputc.Developing a new process that focuses on quantity rather than qualityd.Measuring the quantity of outputs produced per employeee.Creating products that have superior attributes than existing products

Creating products that have superior attributes than existing products

Which of the following is a tactical step for getting down the experience curve ahead of competitors?

Adopting an aggressive marketing strategy to build up demand and accumulated volume as quickly as possible

How does a company achieve superior responsiveness to customers?

All of these are ways for a company to achieve superior responsiveness to customers.

Which of the following does the philosophy underlying total quality management (TQM) include?

Better quality leads to higher market share.

Which of the following is a difference between the bargaining power of buyers and the bargaining power of suppliers? Question 17Select one:a.Buyers have the most bargaining power in a monopoly, while suppliers need multiple product substitutes to have bargaining power.b.The potential of a supplier with strong bargaining power is considered a threat, while a buyer with strong bargaining power does not pose a threat to the industry.c.Only suppliers have the ability to make demands based on their power relative to that of the company.d.Buyers bargaining power can raise costs by demanding better quality, while suppliers can raise costs by providing lower quality products.e.A powerful buyer lower costs, while suppliers raise costs to squeeze profits out of an industry.

Buyers bargaining power can raise costs by demanding better quality, while suppliers can raise costs by providing lower quality products.

Which of the following statements about differentiation and cost structure is true?

Differentiation and cost structure decisions affect one another.

Yankee Candle Company offers customers candles that burn for 50-60 hours, much longer than most department store candle brands. Therefore, customers are willing to pay a higher price for these candles. Which of the following strategies is Yankee Candle Company following?

Differentiation strategy

Ralph is a well-liked manager at Aries Inc. He eloquently communicates the goals of the organization and has been successful in making the organization's vision part of its culture. Which of the following characteristics of good strategic leaders can be observed in Ralph? Question 12Select one:a.Devil's advocacyb.Authoritarian leadershipc.Empathyd.Inconsistencye.Eloquence

Eloquence

a manager at Libra Inc., had noticed that her subordinates were experiencing a lot of stress. After conducting a meeting with her subordinates, Karen realized that they were extremely overworked and intimidated by close deadlines. Determined to reduce their stress, she introduced a new process that eliminated time-consuming activities and gave them more flexibility for work timelines. This action taken by Karen demonstrates which of the following aspects of emotional intelligence? Question 8Select one:a.EmpathyCorrectb.Availability errorc.Self-regulationd.Self-awarenesse.Motivation

Empathy

Jordan's Ice Creams is strategically located near a university. After realizing that most of its customers, who are mostly students, prefer a wide range of flavors, it started offering different combinations of premium flavors, cones, and toppings to create hundreds of extravagant, customized products. Which generic business-level strategy is Jordan pursuing?

Focus differentiation strategy

Nick, a professional magician, is often invited to perform magic tricks at birthday parties and other social gatherings from across the country. However, he offers his services only to clients who stay in the same city as him. He is also known to charge less than other magicians in the city. Nick is pursuing which generic business-level strategy?

Focus low-cost strategy

Identify the correct process for strategy-making.

Formulation; Designing, delivering, and supporting products; Improving the efficiency and effectiveness of operations; Designing a company's organizational structure, control systems, and culture.

Dave's Construction Company conducted a SWOT analysis which resulted in a need to implement business strategies that increase customer awareness and widen their customer base through better customer service to gain a competitive advantage in their industry. Which of the following business strategies would this describe? :a.Business-level strategiesb.Global strategiesc.Corporate-level strategiesd.None of the strategies are correct.e.Functional-level strategies

Functional-level strategies

Mike works as a corporate trainer, teaching new employees how to perform manufacturing tasks. In which value-chain activity does Mike work?

Human resources

Which of the following is one of the basic building blocks of competitive advantage? Question 12Select one:a.Quantityb.Innovationc.Distributiond.Logisticse.Variety

Innovation

Which of the following is a benefit of innovation in an industry? Question 9Select one:a.It allows smaller companies the ability to compete with large, established companies by reducing entry barriers and lowering fixed costs of production.b.It increases the barriers to entry to reduce rivalry and competition.c.It emphasizes the importance of industry structure.d.It secures the profitability of strategic groups within an industry.e.It breaks the life cycle pattern and causes growth so rapid it causes stages to be skipped altogether.

It allows smaller companies the ability to compete with large, established companies by reducing entry barriers and lowering fixed costs of production.

Which of the following is a reason for the higher barrier to imitation for a company's that possesses rare and valuable process knowledge? Question 10Select one:a.Process knowledge is often hidden from view within the firm and socially complexb.Individuals hired by rival firms are able to provide a complete picture of a company's process knowledge due to their overall knowledge base.c.By making small changes to the way a firm operates, implementation of a rival firm's process knowledge is relatively easy to achieve.d.In most companies, employees have a complete understanding and direct access to the process knowledge of the firm.e.Rival organization's employees who possess the power and influence to implement change are often driven to appropriate another firm's process knowledge.

Process knowledge is often hidden from view within the firm and socially complex.

Which of the following is NOT a benefit of tight cross-functional integration among research and development (R&D), production, and marketing?

Product development projects are driven by company innovations.

If a product is to be properly commercialized, there must be integration between which of the following functions?

Research and development (R&D); marketing

What makes up the competitive structure of an industry? Question 14Select one:a.The quality of products producedb.The number of manufacturing plantsc.Market segments d.The number of consumerse.The number and size distribution of companies

The number and size distribution of companies

Which of the following statements about complementors is true? Question 8Select one:a.They cannot gain enough power to extract profits from the industry to which they supply complement products. b.They have little importance in high-technology industries.c.They tend to increase the sales of the industry they are supplying complements to by producing fewer low-quality complement products. d.They have the power to impact the sales of the industry to which they supply complement products. e .Their impact on industries was first recognized by Porter's Five Forces model.

They have the power to impact the sales of the industry to which they supply complement products.

Company A has a product that hasn't hit the market yet but has already constructed efficient manufacturing facilities and has lowered costs through learning effects. It has a marketing team in place that has initiated an aggressive advertising campaign with sales promotions that have stimulated demand for the product and accumulate sales volume. Which of the following is true of Company A?

This strategy would help Company A move down the experience curve quickly.

When conducting an internal analysis, a manager must do all of the following EXCEPT: Question 8Select one:a.look at the way in which forces in the macroenvironment affect industry structure and influence opportunities and threats. b.understand the role of rare, valuable, and hard-to-imitate resources in the establishment of competitive advantage.c.analyze the sources of their company's competitive advantage to identify where opportunities for improvement might be.d.analyze the sources of their company's competitive advantage to identify what drives the profitability of their enterprise.e.appreciate how rare, valuable, and hard-to-imitate resources lead to superior efficiency, innovation, quality, and customer responsiveness.

look at the way in which forces in the macroenvironment affect industry structure and influence opportunities and threats.

When a company offers a wide variety of products at lower prices than its rivals, it is most likely pursuing a(n) which of the following strategies?

low-cost

In a typical scenario planning exercise,: Question 6Select one:a.corporate-level managers set targets for functional-level managers.b.managers do a "postmortem" to understand what went wrong with a strategy.c.managers entirely depend on employee feedback.d.managers formulate plans that are based on "what-if" scenarios that are about the future.Correcte.managers try to come up with alternative plans after a business model has failed.

managers formulate plans that are based on "what-if" scenarios that are about the future.

Ted is an accountant at ABC Company. He calculates the difference between total revenues and total costs before tax. Ted calculates the:

net profit

An industry moves from the embryonic to the growth stage when:

ongoing technological progress makes its product easier to use.

Dale's methods of fitting horseshoes save time and money for his employer at the local ranch. However, when Dale suggests that everyone use his method, his boss, Cedric, says, "No. That's not the way we've always done it around here." Cedric's resistance to change illustrates:

organizational inertia.

Good strategic leaders: Question 4Select one:a.make decisions without consulting others.b.are usually inconsistent in their approach.c.possess a willingness to delegate and empower subordinates.Correctd.ensure uniformity of purpose through the authoritarian exercise of power.e.control all facets of decision making.

possess a willingness to delegate and empower subordinates.

A differentiated product is a product that:

provides greater reliability than a rival product.

The basic proposition of the blue ocean strategy is that many successful companies have built their competitive advantage by:

redefining their product offering through value innovation and creating a new market space.