MGMT 4900
At a certain output level, the per-unit cost incurred by a firm to manufacture a product is $5. Other factors remaining constant, what will be the new per-unit cost if the cumulative output is doubled, and the firm is able to achieve an 80 percent learning curve?
$4
Which of the following statements is true of corporate strategy?
A corporate strategy must be able to create synergies across business units that are quite different.
Which of the following strategies best illustrates a generic business strategy?
A decision to niche market the jewelry sold by a company while the apparel division under the same company sells its products through mass marketing
AccuroDisk Inc. manufactures external hard disks for $32 per unit, and the maximum price customers are willing to pay is $47 per unit. TD Storage Inc. is a competitor of AccuroDisk Inc. that produces external hard disks for $37 per unit, and customers are willing to pay a maximum price of $50 per unit. What does this imply?
Accuro Disk Creates a greater economic value than TD storage
Thomas is the owner of a landscaping company that caters to a very wealthy clientele. His company has struggled to differentiate itself from the other high-end landscapers in the area, but because he has hired several expensive but highly-qualified team members, Thomas is unable to shift to a cost leadership strategy. Which strategy is most likely to achieve a competitive advantage?
C. Narrow the scope of competition and focus on unique features such as the use of organic materials (not sure)
Which of the following provides an example of a firm in a red ocean?
Chique Apparel offered clothing at a low price but failed to differentiate its product as being exclusive.
Which of the following scenarios illustrates a firm that has a sustainable competitive advantage?
Zhang Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years.
The fact that both Rolex and Timex have a competitive advantage selling wristwatches is an indication that:
Following a different generic business strategy within the same industry can lead to a competitive advantage for more than one organization.
Which of the following best explains why IBM has been able to maintain its competitive advantage?
IBM successfully transformed itself multiple times in the data information industry over a period of more than 100 years.
How are the critical assumptions of the resource-based model of a firm fundamentally different from the way in which a firm is viewed in the perfectly competitive industry structure?
In perfect competition, all firms have access to the same capabilities, whereas in the resource-based model, resource differences exist between firms in the same industry.
If Finolo and Ethver, companies that manufacture televisions, develop the same customer knowledge base and create products that provide the same customer appeal as Invoro, a market leader in consumer electronics, then
Invoro will have a resource that is valuable but no longer rare.
Which of the following describes an airline that is most likely stuck in the middle?
Just Right Airline offers high-quality beverages and meals, plush airport lounges, only a few connections via hubs domestically, poor customer service, and low prices.
Which of the following accurately describes how Netflix used innovation to gain a competitive advantage?
Netflix applied big data analytics to its user preferences to provide highly personalized viewing recommendations.
Both Bison Autos and Sparrow Inc. incur a cost of $9,000 to manufacture a vehicle. However, the economic value created by Sparrow Inc. is more than that created by Bison Autos. What does this indicate?
Sparrow Inc can charge a premium price on its automobiles
In which of the following situations is the power of suppliers high in an industry?
Suppliers can credibly threaten to backward integrate into the industry
Which of the following best illustrates a strategic business unit (SBU)?
The consumer electronics division of a large company that also manufactures automobiles, apparel, and processed food
Which of the following is a characteristic of a fragmented industry?
There are many small firms
Beans Inc. operates in a perfectly competitive agricultural industry. Classica Apparel Inc., in contrast, operates in a monopolistically competitive industry. Keeping this information in mind, which of the following statements is true?
While Classica Apparel Inc. will have the power to set the prices for its products, Beans Inc. will have little or no ability to do so.
Which of the following firms will most likely not be a complementor to a firm that manufactures computers?
a company that manufactures its own brand of desktops and laptops
Which of the following statements with regard to industry structures is true?
a consolidated industry tends to be more profitable than a fragmented one
Even though many valuable, rare, and inimitable resources were generated at Xerox's Palo Alto Research Center (PARC), the management at Xerox's headquarters failed to gain a competitive advantage by exploiting the breakthroughs in computing software and hardware. What is the most likely implication of this example?
a firm must be effectively organized to capture value
The relative bargaining power of suppliers is high when
a firm must be effectively organized to capture value
Gilroy Crackers enjoys a competitive advantage as a cost leader because high demand for its products has allowed it to operate at the minimum efficient scale. Which of the following scenarios would be most concerning to the managers of Gilroy Crackers for sustaining its competitive advantage?
a wheat shortage raises input costs across the country
Home Value Inc., Max Cart Inc., and Nice Necessities Inc. are three consumer-product retailing companies.Their products consist primarily of day-to-day items that are easy to imitate and sell. All three companies use the same resources and capabilities in the production and distribution of their products. Which of the following is an implication of the market condition indicated in this scenario?
any advantage that one firm has will be short lived
When Internet service providers offer free routers for subscriptions to their wireless Internet packs, the perceived value of the service offering increases. In this case, the value driver would be
availability of complements
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
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
backward integration
Ambrosia Inc., a leading chocolate producer, anticipated that the prices of cocoa beans would double in less than three years. This would disrupt the availability of cocoa in the industry. Thus, Ambrosia Inc. decided to purchase cocoa plantations in Ghana. As predicted, the prices of cocoa increased twofold. Because of the company-owned cocoa plantations, Ambrosia Inc. was able to sustain its competitive advantage in turbulent times. Which of the following isolating mechanisms does this scenario best illustrate?
better expectations of future resource value
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?
better expectations of future resource value
Dollar Shave Club is an ecommerce start-up that delivers razors to its subscribers by mail. By doing this, Dollar Shave Club is using a(n) to disrupt an existing market
business model innovation
How was Netflix able to outperform both Hulu and Amazon?
by focusing its resources on producing high-quality content for content streaming
In an industry, the threat of entry is high when
capital requirements are low.
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
Competitors have found it extremely difficult to imitate Gene Electronics Inc.'s valuable resources, capabilities, or competencies. This is primarily because the source for the company's success has been unclear. The competitors are uncertain if Gene Electronics Inc.'s success is due to its strong leadership, the skills of its research and development team, or the timing of the company' s product introductions. Gene Electronics Inc. has been protected from losing its competitive advantage as a result of
casual ambiguity
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
causal ambiguity
a successfully implemented blue ocean strategy allows a firm to
charge a higher price than the cost leader in the industry
Which of the following strategies will be most detrimental to firms that are close rivals operating in an oligopolistic industry structure?
competing against one another through price cutting
are best described as unique strengths, embedded deep within a firm, that allow a firm to differentiate its products and services from those of its rivals, creating higher value for the customer or offering products and services of comparable value at lower cost.
core competencies
Amazon.com's ability to provide the largest selection of items online, combined with superior IT systems and customer service, can be referred to as its
core competency
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
core competency
Bauer Inc. is a company that manufactures plastics, fertilizers, tractors, and headphones under a single brand.The top management at Bauer has decided to enter the medical equipment industry based on its assessment of the profit potential in that industry. Which of the following strategies does this best illustrate?
corporate strategy
The CEO of True West Products Inc. (TWP) is a company that sells a wide range of products. It has decided to enter the markets of emerging nations like China and Brazil. This means that the cars, consumer electronics, and services such as hotels included under the TWP banner would be made available in these nations. Which of the following strategies does this scenario best illustrate?
corporate strategy
Which of the following summarizes the difference between corporate strategy and business strategy?
corporate strategy deals with where to compete, business strategy deals with how to compete
In a focused cost leadership strategy a firm
delivers low-cost products and services to a specific, narrow part of the market.
Leading guitar string producer Wound Up 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 Wound Up's competitors, however, has recently developed a similar coating using less expensive ingredients, which allows it to charge a lower price than Wound Up for similar-quality strings. Wound Up's competitive advantage is in danger due to
direct imitation and substitution
Using the VRIO framework, why has Crocs Shoes' products been unable to sustain its competitive advantage?
easy to imitate
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
entering the aircraft manufacturing industry requires huge capital investments
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
JCPenny tried implementing a Blue Ocean Strategy (see last couple of slides ). Which of the following contributed the most to JCPenny's failed blue ocean strategy?
failure to combine a cost leadership position with a differentiation position
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
Swan Song is a spa that caters to the needs of a small percentage of highly health-conscious consumers. It offers state-of-the-art treatments in a luxurious setting. Since there are very few spas that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Swan Song is following a
focused differentiation strategy
Aguilar 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 Aguilar'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 Aguilar Industries accomplish its goals?
freemium
Green Rabbit Products Inc. (GRP) is a large conglomerate. The human resources department of its telecom division has decided to reduce its employee turnover by encouraging internal promotions. Which of the following strategies does this scenario best illustrate?
functional strategy
The production department at Coral Cements that is a subsidiary of the large conglomerate Five East Corp. has decided to adopt the FIFO (first in, first out) method of inventory to dispatch its cement bags. Which of the following strategies does this scenario best illustrate?
functional strategy
are barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy.
isolating mechanisms
What must a cost-leadership strategy accomplish to be successful?
it must reduce the firms cost below that of its competitors while offering adequate value
Five years ago, Palomino Airline was able to get a strong foothold in the airline industry by hiring a few pilots and crew and renting two airplanes, which flew routes between Denver, Omaha, Pierre, Cheyenne, and Helena. Which of the following summarizes the above factors that enabled Palomino to get started?
low entry barriers
which of the following is a drawback of porters five forces
managers cannot determine the changing speed of an industry or the rate of an innovation
Clear Calls Inc., a telephone service provider, has a large user base mainly because phone calls and messages between all Clear Calls users are free. When a person switches to a Clear Calls network, his or her entire network of family and friends is likely to switch to the same network to avail the benefit of free calls and messages. In addition, an existing user who gets a new user to register with Clear Calls Inc. is given a free wireless connection. This has helped to keep competition away from Clear Calls. In this scenario, which of the following factors is acting as an entry barrier for Clear Calls Inc.?
network effects
Rhino Pictures Inc. is a large production company that controls a major portion of the movie industry's market share along with two other firms. Despite its competitiveness with the two other firms, it is influenced by their actions and often has to consider their strategic actions before acting on its own. In this scenario, Rhino Pictures Inc. is most likely functioning in a(n) industry.
oligopolistic
When SW International declared a dividend of $20,000,000, its market value increased from $8 billion to $8.5 billion. However, it lost a chance to reinvest $20,000,000 in the research and development of a new product which would have earned a profit of $200 million. Thus, this $200 million is referred to as SW International's
opportunity cost
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
organized to capture value?
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?
path dependence
describes a process in which the options one faces in a current situation are limited by decisions made in the past.
path dependence
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?
perfect competition
The competitive advantage that one firm has will be short-lived in an industry where
perfect competition exists
Which of the following is NOT a major consideration of barriers to entry?
positive growth rate
Value Autos Inc. has been trying to directly copy the strategies of Honk Autos Inc. Even though it is evident that Honk Autos Inc.'s success comes from its just-in-time inventory system, Value Autos Inc. has not been able to effectively apply the system in the same way. This is because the organizational structures, employees, cultures, and the overall business systems of both the companies vary from each other. Which of the following barriers to imitation does this scenario best illustrate?
social complexity
The CEO of Sam's Club, John Furner, reports to Walmart's CEO, C. Douglas McMillon, who as corporate executive oversees Walmart's entire operations. Sam's Club, therefore, is a of Walmart.
strategic business unit
First Ledger Inc., an auditing company, replaced its existing accounting software with new accounting software from another supplier. Since the new software has different features and abilities, First Ledger Inc. has had to spend $10,000 on training its employees to use it. In this scenario, $10,000 represents First Ledger Inc.'s
switching cost
Which of the following forces tends to be more important in determining a firm's performance?
the actions of managers within the firm
A company wants to determine how industry effects have affected its profitability. Which of the following elements should the company focus on?
the barrieres to exit and entry in the industry
Which of the following is most likely an implication of new firms entering an industry?
the incumbent firms will spend more to satisfy their existing customers
Which of the following is an implication of high exit barriers in an industry?
the industry will face excess capacity
A blue ocean strategy differs from a low-cost strategy in that
the intent of a blue ocean strategy is not to be the absolute lowest-cost provider because a blue ocean must also increase perceived value.
Trust Machines Inc. is a company that manufactures and markets consumer electronics. The unique microprocessors developed by the company contribute to its high resource immobility. According to the resource-based view of competitive advantage, which of the following is an implication of this situation?
the resources of trust machines are difficult to replicate or imitate
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?
the steel industry in which the company has obligations like severance pay toward employees
Which of the following best describes a strategic trade-off?
the tension between value creation and the pressure to keep costs in check
While Burger Cult Inc. operates in a monopolistically competitive industry, Citizen Telecom Inc. operates in a monopoly. Keeping this information in mind, which of the following statements is most likely true?
the threat of new entrants will be higher for burger cult inc. than citizen telecome inc.
The telecom industry in the country of New Taria 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 telecom industry, the
threat of new entrants is most likely low
How are cumulative learning and experience effects of a company most likely to affect Michael Porter's five forces?
threat of new entrants will be low
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
During the process of formulating an effective business model, a firm's managers should first.
transform their strategy of how to compete into a blueprint of actions and initiatives
The primary objective of Porter's five forces model is to
understand the profit potential of different industries
Which of the following features about a buyer indicates that the buyer has high bargaining power?
when the buyer operates in an industry where products are undifferentiated
Which of the following would most likely not indicate that sellers are a strong competitive force in an industry?
when the buyers cost of switching substitutes is low
