MGMT461
Through ________, a firm puts its guiding policy into practice by employing a set of coherent actions.
strategy implementation
When do employees fail to adopt the organizational values of a firm?
when the top managers in the firm are merely paying lip service to the firm's stated values
A firm is required by society and its shareholders to meet its ethical and philanthropic responsibilities.
FALSE
Once a strategy has been formulated and implemented, it is important that the firm sticks to it no matter what happens.
FALSE
Which of the following best describes a Level 5 manager in the Level-5 leadership pyramid?
Jim is the CEO of Eco Inc.; he has helped his company in gaining and sustaining a competitive advantage through ethical decision making.
Which of the following methods of developing a strategy best illustrates scenario planning?
The managers at North Clothing Inc. formulated a strategy that can handle small to medium to large increases in the prices of cotton in the future.
The tenet behind the triple-bottom-line is that
a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy.
To be effective, firms need to
back up their visions with strategic commitments that are costly and difficult to reverse.
A firm that achieves superior performance relative to other firms in the same industry or the industry average has a(n)
competitive advantage.
OpenUrToys Inc. is a consulting firm that opens your toys for you and then films your emotional response. They have many clients and are able to generate above average returns relative to their competitors. In this scenario, we would conclude that OpenUrToys Inc. probably has a
competitive advantage.
Underperformance relative to other firms in the same industry or the industry average results in a(n) ________ for a firm.
competitive disadvantage
In the final step of the stakeholder impact analysis, a firm
decides a course of action to address the stakeholders' concerns.
The balanced-scorecard framework is a tool for strategy ________, not ________.
implementation; formulation
Strategic thinking is different from strategic planning in that
strategic thinking includes all types of information sources while strategic planning does not.
A sustainable strategy is one that produces a competitive advantage that can be maintained over time.
FALSE
A "perfectly competitive" industry is one
All of the answers are correct.
Which of the following statements correctly compares Apple and Microsoft in 2016?
Apple had a higher return on invested capital than Microsoft.
Because they are a crucial component of a firm's success, customers are considered internal stakeholders.
FALSE
Tony's Pizza Shop is able to net $10,000 a week; this makes his shop profitable. His number one competitor, Leo's Pies is also profitable, netting $12,000 a week. Lil Anthony's Pizza Palace nets $13,000 a week. Since Tony's Pizza Shop is profitable, we can conclude that he has a competitive advantage in the industry.
False—competitive advantage is only achieved by generating above average returns, relative to competition.
The working capital turnover of Complete Systems Corp. is 6.0. What does this financial data suggest?
For every dollar Complete Systems puts to work, the company realizes $6.00 of sales.
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.
Functional
First Pharma Inc. and GeoVax Inc. are two competing firms in the pharmaceutical industry. While First Pharma Inc.'s vision is "to be a preeminent drug manufacturer in the industry," GeoVax Inc.'s vision is "to make good health a reality for everyone around the world." Which of the following is an implication of these different visions?
GeoVax Inc. will be more flexible than First Pharma Inc. when adapting to changing environments.
Sugar Flakes and Cinnamon Texas Toast both produce similar puffed rice breakfast cereals. For both companies, the cost of producing a box of cereal is 45 cents, and it is not possible for either company to lower their production costs any further. How can one company achieve a competitive advantage over the other?
Increase total perceived consumer benefits through differentiation.
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?
Intel's rule to "maximize margin-per-wafer-start"
How does a sustainable strategy typically help a firm?
It helps the firm achieve positive results along the social and ecological dimensions.
Which of the following expressions accurately describes market cap?
It is the product of the number of outstanding shares and the share price.
Which of the following is a disadvantage of the balanced-scorecard approach?
It provides limited guidance about which metrics to choose.
Which of the following is a primary feature of the five forces model?
It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.
Jill is interested in the concept of strategy and decides to create her own. As a result, Jill says that her strategy is to focus on growth and marketing to achieve competitive advantage. How would you evaluate Jill's statement?
Jill should reevaluate her statement because it fails to meet the principles of what a strategy should be.
Better Capsules is a highly successful vitamin manufacturer. At the close of its most recent fiscal year, the company's balance sheet showed cash holdings of $110 million. Which of the following actions will provide the most benefit for stakeholders?
Reinvest profits into expanding the company and creating more jobs.
________ precisely indicates how much of a firm's sales is converted into profits.
Return on revenue
_______ are the legal owners of public companies.
Shareholders
A company that owns failing movie theaters could leverage existing assets by turning the buildings into performance spaces and conference sites.
TRUE
A vision describes in broad, inspirational terms what an organization hopes to accomplish in the future.
TRUE
In the why, what, who, and how of business models framework, the why dimension asks "why does the business model create value?"
TRUE
Managers must first develop a strategy that is likely to produce a competitive advantage before implementing a balanced-scorecard approach.
TRUE
When smartphone manufacturers began including cameras and voice recorders in their products, that was an example of industry convergence.
TRUE
When the value that a customer attaches to a good or service exceeds the price paid for the good or service, this is a consumer surplus.
TRUE
Which of the following is an advantage of a triple-bottom-line approach?
The approach takes an integrative and holistic view in assessing a company's performance.
SonronMedia sells books by having salespeople set up appointments with potential customers and give them a sales pitch for the product. When a salesperson sells a book, he or she gets a predetermined percentage commission. This type of business model is called
an agency.
WeClean Inc., a manufacturer of cleaning agents, supplies its products to Goodings Inc., a supermarket chain. It demands that Goodings create more shelf space in its stores for WeClean s' products. However, Goodings 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, Goodings Inc. has exercised its bargaining power as a buyer through
backward integration.
TransNational Inc. is a large conglomerate that operates in 17 different countries. The corporate executives at the headquarters have decided that the company's objective for the next two years will be to increase its customer equity, or the value of potential future revenues generated by all its customers in a lifetime. Based on this guideline received from the top management team, the product leader of the home audio division has decided to adopt a cost-leadership strategy in all of his 17 units. Thus, the decision made by the product leader best illustrates a ________ strategy.
business
The Founder of Teach for America, Wendy Kopp, established a mission by building on her vision, which is "One day, all children in this nation will have the opportunity to attain an excellent education." Considering this, how did Klopp implement the mission of Teach for America?
by enlisting talented young professionals as teachers
Susan is trying to determine if her company has a competitive advantage. She must be able to accomplish two critical tasks before she can substantiate this claim. First, she must assess the performance of her company accurately; second, she must
compare and benchmark her firm's performance to other competitors in her same industry.
In the five forces model developed by Michael Porter, ________ is not defined narrowly as a firm's closest competitors but rather more broadly to include other factors in an industry like buyers, suppliers, potential new entry of other firms, and the threat of substitutes.
competition
All of the following are external stakeholders except which of the following?
competitors
Strategic commitments are actions that are
costly, long-term-oriented, and difficult to reverse.
Demand for traditional fast-food providers such as McDonald's, Burger King, and Wendy's has been on a decline in recent years. Consumers have become more health-conscious and demand has shifted to alternative restaurants like Subway, Chick-fil-A, and Chipotle. Attempts by McDonald's and Wendy's to steal customers from one another include frequent discounting tactics such as dollar menus. Such competitive actions are indicative of
cutthroat competition.
Given the structure of the automobile industry, entering the auto manufacturing industry seemed risky. Yet Tesla Motors joined the fray. Rather than attempting to compete head-on with internal combustion engines, Tesla Motors entered the all-electric car segment, a much less crowded niche in the overall car industry. Which of the following is Tesla most hoping to benefit from in this market niche?
economies of scale
The production head at the All Paints and Surface Corp. would frequently stay back after office hours and experiment with new color combinations even though this was part of the new product development team's job. As a result of these experiments, he came up with two new interior paint colors, foggy morning and mint julep. The new colors proved popular among test groups, and quickly became some of Omnitone's best-selling products. Which of the following strategies does this scenario best illustrate?
emergent strategy
Sam, owner of Sam's Hand Sanitizer Inc., is in the middle of the strategy formulation stage. He has already allocated a substantial amount of money that covered his employees' salaries from the prior year (sunk costs) but has failed to see any positive outcomes. Given the money he has already spent, he feels as if he needs to recover those costs and pushes forward even though the outcome seems dim. This best illustrates the concept of
escalating commitment.
In the AFI strategy framework, strategy analysis primarily involves
evaluating the effects of internal resources and core competencies on a firm's potential to gain and sustain a competitive advantage.
Leslie owns a large portion of Hue Apparel's stock. However, she is not employed by the company. In this scenario, Leslie is the company's
internal stakeholder.
Strategic commitments are actions that are
long-term-oriented.
Farm to Table Inc. is a supermarket chain. Due to strong competition from other stores in the industry, Farm to Table has aggressively used branding, pricing, and superior customer service to uniquely position itself in the market. As a result, the supermarket chain has been able to differentiate itself from its competitors and sell its products at higher prices. Which of the following industry competitive structures does this scenario best illustrate?
monopolistic competition
Nye Studios is a large production company that controls a major portion of the television 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, Nye Studios is most likely functioning in a(n) ________ industry.
oligopolistic
Three large firms dominate the telecommunication industry of CallsRUs: TeleFone Inc., Cell Comm Corp., and Talk Now Inc. Instead of cutting prices competitively, these firms have resorted to non-price competition through branding and product differentiation. Which of the following industry competitive structures are these companies most likely in?
oligopoly
New Diamond Inc. is a company that sells 24-carat gold biscuits to companies that manufacture jewelry. Because the company operates in an industry where many other suppliers sell standardized products, it can most likely
only achieve competitive parity.
Homestyle 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
planned emergence approach.
The difference between the price charged for a product and the cost to manufacture it is referred to as the
producer surplus.
A firm is said to gain a competitive advantage when it can
provide products similar to its competitors, but at lower prices.
From an investor's or shareholder's perspective, the measure of competitive advantage that matters most is the
return on risk capital.
As the CEO of a conglomerate, Sarah Cane exhibited her strong commitment toward the company's core value that customers' well-being is more important than profit when she convinced the board of directors to liquidate the company's pesticide subsidiary. The pesticide brand sold by her company was a major revenue earner in lesser-developed nations, but studies indicate that it is a carcinogen. Eva persuaded the board that the company had to be responsible toward society. In this scenario, Sarah has demonstrated
strategic leadership.
Which of the following stages of the strategic management process involves an evaluation of a firm's external and internal environments?
strategy analysis
Which of the following stages in the AFI strategy framework involves designing a business, corporate, and global strategy?
strategy formulation
Denise is the CEO of a profitable business called 4-Ever-Sun Inc. which harnesses solar power, a renewable energy source that is sustainable over time. Instead of pursuing a sustainable competitive advantage, Denise decides to focus on minimizing detrimental effects on society and the planet. This strategy is known as
sustainable strategy.
We Ensure Inc., an insurance firm, replaced its existing project management software with new software from another supplier. Since the new software has different features and abilities, We Ensure has had to spend $10,000 on training its employees to use it. In this scenario, $10,000 represents We Ensure's
switching cost.
Tom is attempting to measure how his customers views his firm. To do this, he uses the balanced-scorecard framework because he knows that
the customer perspective is directly linked to firm revenues and profits.
Who among the following is responsible for making business strategies in a large conglomerate?
the general managers of individual business units
Which of the following was a key motivator for participants in the Occupy movement of 2011?
the issue of income disparity
Visionary companies are able to outperform their competitors because
they provide more aspirational visions.
If you examine various barriers to entry facing firms that might wish to enter the airline industry, this would be most helpful in assessing which of the five forces in that industry?
threat of new entrants
The internet service provider industry in the country of Wakanda 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
threat of new entrants is most likely low.
Which of the following vision statements is most likely to produce a sustainable competitive advantage for a boat dealership?
to help our customers find the perfect boat for their individual needs
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
Amanda is a management consultant for a soda manufacturer that wants to expand into health drinks such as green tea and after-workout drinks. Based on what you have read, which of these is sensible advice for Amanda to offer her client?
"Carefully consider the entry choices over time before making a decision."
During an interview for a CEO position, Jennifer'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?
"Firm effects. I will be able to have the most impact on those."
Which of the following best represents a customer-oriented vision statement?
"We provide solutions to professional communication needs."
Do vision statements help firms gain and sustain competitive advantage?
It depends, because the effectiveness of vision statements differ by type.
Deep Earth Gardening has a vision of helping every American learn how to grow their own food. Its management team recently unveiled the mission statement "A garden at every home." What is wrong with this mission statement?
It does not indicate how the company will accomplish its goals.
Which of the following statements is true about strategic groups?
Profitability varies between different strategic groups.
Which of the following statements about product-oriented visions is true?
They tend to force managers to take a myopic view of the competitive landscape.
You are the founder of NewexSurfboards, and you are considering methods of gaining and sustaining a competitive advantage. Which of the following changes has the best chance of quickly creating a sustainable advantage?
allowing customers to upload their own image designs and help assemble the finished product at retail locations
Which of the following tasks in the AFI strategy framework involves evaluating the internal and external environments in which a firm operates?
analysis
The translation of strategy into action primarily takes place in a firm's
business model.
In the top-down strategic planning approach, all strategic intelligence and decision-making responsibilities rest primarily on the
chief executive officer.
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.
HardLine Ltd. is a landline telephone manufacturer whose average return on invested capital is approximately 2 percent. Because demand for landline telephones has declined significantly, the industry average return on invested capital has been negative (-5 percent) for the last few years. In this scenario, HardLine Ltd. has a
competitive advantage.
Due to political instability in the country of Ferrero, the strategic leaders at the headquarters of Decent Manufacturing have decided to close all production facilities in the country until stability returns. Decent's managers have formulated a ________-level strategy.
corporate
Strategic leadership pertains to the use of power and influence by ________ to direct the activities of others when pursuing an organization's goals.
corporate executives
A(n) ________is best described as the strategic option that top managers decide most closely matches the current reality and which is then executed.
dominant strategic plan
Economies of scale are cost advantages that accrue for firms with
larger output.
Competitive advantage goes to the firm that achieves the
largest economic value created.
Which of the following strategies does Tesla need to implement or achieve to gain a competitive advantage?
reinvest profits to build successively better electric automobiles
A customer-oriented vision statement focuses employees to think about how best to
solve a problem for a consumer.
In ________, a firm frames a guiding policy to address the competitive challenge.
strategy formulation
In a large company, who is most responsible for devising the corporate strategy?
the CEO of the company
Which of the following is an external performance metric?
total return to shareholders
A defining characteristic of the subscription-based business model is that the
user pays for access to a product or service whether he or she uses it during the payment term or not.
A defining characteristic of the pay-as-you-go business model is that the
users pay for only the services they consume.
Which of the following factors most 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.
Brandon is part of a sales team. He effectively coordinates his tasks with others in the team and willingly contributes to their efforts in achieving the team's objectives. Thus, Brandon is in ________ of the Level-5 leadership pyramid.
Level 2
Which of the following is a drawback of Porter's five forces model?
Managers cannot determine the changing speed of an industry or the rate of innovation.
________ are considered the ethical standards and norms that govern the behavior of individuals within a firm.
Organizational core values
Which of the following statements should ideally reflect a firm's strategy for competitive advantage?
Our aim is to create superior customer value while controlling costs.
Questions asked during the strategy analysis stage of the AFI framework include "How does the firm make money?" and "What effects do forces in the external environment have on the firm's potential to gain and sustain a competitive advantage?"
TRUE
Wheat and Steak is a restaurant located inside a five-star hotel. It caters mainly to customers who are concerned about quality dining rather than the prices. In this scenario, which of the following will be a part of Wheat and Steak's strategic group?
a premium rooftop restaurant in the same city
Which of the following is an element of good strategy?
a set of coherent actions to implement the firm's guiding policy
A new company named Waves Inc. entered the radio retail business, which is a fairly consolidated industry. In response, two large incumbent radio retailers, SMS Radio and TruRadio, lowered the price of their radios. Also, they spent more money to improve their radios and on additional marketing. By doing this, SMS Radio and TruRadio
decreased industry profit potential.
Companies in the same strategic group are ________ to each other.
direct competitors
Organizational core values are the ________ that govern the behavior of individuals within a firm or organization.
ethical standards and norms
Which of the following is typically an economic responsibility of a firm?
paying adequate returns to the firm's stockholders on the capital invested by them
A firm's strategic position is likely to be strong when
the gap between the value the firm's product generates and the cost to produce it is large.
How do strong ethical values benefit a firm?
They serve as the guardrails put in place to keep the company on track when pursuing its mission.
________, which is the return on risk capital, includes stock price appreciation plus dividends received over a specific period.
Total return to shareholders
Which of the following scenarios best illustrates bundling?
Warephase Inc. sells seed packages, in which a person can buy a package of three types of seeds at a discounted price compared to buying the seeds individually.
Which of the following frameworks used to measure competitive advantage relies on both an internal and an external view of a firm?
the balanced-scorecard model
Which of the following external forces is a part of a firm's task environment?
the composition of the strategic group to which the firm belongs
A positive relationship between vision statements and firm performance is more likely to exist when
organizational structures are aligned with the firm's vision statement.
According to Porter's Five Forces approach, the overall goal of applying the Five Forces analysis to an industry is to make a judgment about its
overall attractiveness.
Competitive rivalry based solely on ________ is destructive to firms as it transfers most of the value created in the industry to the customers.
promotional campaigns
Dora's Supplies manufactures medical devices. The firm's profitability depends on several variables that are subject to occasional change, including the cost of parts and labor, changes in medical practices, and the price of oil used in both manufacturing and shipping. To account for the potential impact of changes to any of these variables, Dora's Supplies managers should implement a(n) ________ approach.
scenario planning
As the legal owners, ________ have the most legitimate claim on a company's profits.
shareholders
Top-down strategic planning as an approach to the strategic management process will be most effective when the
size of the firm is large.
In recent years a growing number of U.S. consumers have become more health-conscious about what they eat. According to the PESTEL Framework this trend could best be classified as a ________ trend.
sociocultural
If a company wants to gain a competitive advantage in a highly competitive industry, it should ideally
stake out a unique position within the industry.
Return on risk capital primarily includes
stock price appreciation plus dividends received over a specific period.
Makita, DuPont, Builder's Square, and Nut's & Bolts are all hardware stores that compete against each other through everyday low pricing and discounts on bulk purchases. All four stores cater to the needs of highly price-sensitive customers. Thus, together these stores form a ________ group.
strategic
A traditional top-down strategic planning process typically begins with
strategic leaders adjusting a company's vision and mission based on environmental analysis.
The process that describes the method by which managers conceive of and implement a strategy that can lead to a sustainable competitive advantage is called
strategic management.
A high percentage of R&D/Revenue ratio indicates a(n)
strong focus on innovation to improve current products and services.
Bioplex requires its members to pay a quarterly or an annual fee to use its services. Irrespective of whether they frequently use the services during the payment period or not, members have to pay in advance. Which of the following business models does this best illustrate?
subscription-based
Fresher Corp. produces electric bathroom fragrance diffusers and sells the electric outer device at a market rate price. However, they lock their clients into a two-year agreement to purchase the perfume refills solely from them on a monthly basis. Which of the following business models does this best illustrate?
subscription-based
Which of the following is not captured when examining a competitive industry structure?
the ability to engage in forward vertical integration
The top management at Konex Vitamins, through rigorous testing, ensures that the company develops and sells vitamins that are free of harmful side effects. Also, the company ensures that the chemical waste generated in the manufacturing process is kept to a bare minimum and is disposed of according to the regulations of the Environmental Protection Agency. The management assesses its overall performance based on these dimensions. Thus, the managers at Konex Vitamins are applying the ________ approach to measure firm performance.
triple-bottom-line
The cost of capital to create a product is a fixed cost because it is
unaffected by consumer demand.
The primary objective of Porter's five forces model is to
understand the profit potential of industries.
Suzi Lau Apparels Inc. (SLA) had been outsourcing its production to less-developed countries in order to reduce its cost of production. With the emergence of its competitor, Linda Inc., SLA lost its competitive advantage. Linda had its production units in its home country that allowed the company to bring out the latest trends to the market earlier than SLA. Also, SLA frequently suffered due to political instability and lack of intellectual property laws in the outsourced countries. Thus, parts of SLA's strategies became obsolete and it had to relocate its production. What are such obsolete strategies referred to as in the planned emergence model?
unrealized strategy
The CEO of EveryCar was the child of parents who had difficulty making enough money to support their family. As a result, he and his siblings did not have access to many advantages that children from wealthier families had. This CEO, therefore, emphasized making affordable, low-maintenance vehicles that could be bought by low-income households. Which of the following does this example demonstrate?
upper-echelons theory
TalkaLot Corp. incurs a cost of $350 to produce one unit of a cell phone. The company's management has priced the product at $600 in the market. Considering the technological advancement of the cell phone, customers perceive its value to be around $800. What is the economic value created in this scenario?
$450
A firm always has a competitive disadvantage when its return on invested capital is
2 percent or lower in a declining industry.
Which of the following examples reflects the strongest vision?
At Desks.com, all employees are motivated to make the best desks on the market.
Chris is the manager of a graphic design firm, and he relies on a top-down strategic management approach to maintain tight control over the activities of his employees. The company has recently started to lose market share to its more innovative competitors, and Chris wants to encourage his employees to start contributing to the strategy formulation process to make the company more competitive. Which of the following steps should Chris take?
Designate Friday afternoons as time for employees to pursue outside interests loosely related to the business.
________ is best described as the difference between a buyer's willingness to pay for a product or service and a firm's total cost to produce it.
Economic value created
Which of the following is an example of a business acting upon an organizational core value?
Emerald Autos reduces engine emissions below federal guidelines to reduce pollution.
Sasha is the CEO of Enterprise Technologies, a consumer electronics manufacturer. Last year, Enterprise's return on invested capital (ROIC) was 11.6 percent, while Enterprise's closest competitor, Federation Tech, had an ROIC of 17 percent. Which of the following factors might Sasha use to convince investors to invest in Enterprise rather than Federation Tech?
Enterprise's intangible intensity was 6 percent, while Federation Tech's was 3 percent.
A company's total asset base consists of its current assets plus plant, property, and equipment (PPE).
FALSE
A firm will always see its stock price appreciate when it demonstrates measurable growth.
FALSE
Competitive advantage goes to the firm that maximizes the difference between the cost of producing a good and the retail price that consumers pay.
FALSE
Federal and regional laws prevent incumbent firms from dramatically lowering prices or otherwise retaliating when a new entrant joins an industry.
FALSE
Generally speaking, a firm will create value if its return on invested capital (ROIC) is less than the cost of capital.
FALSE
It is helpful to break down strategy formulation and strategy implementation into five distinct areas.
FALSE
Product-oriented vision statements are better suited than customer-oriented vision statements for helping companies to adapt to changes in the external environment.
FALSE
Soft Mattresses Inc. wants to become the largest and most profitable mattress supplier in a three-state area. To do this, Soft should try to create the smallest possible difference between the value that its mattresses creates and the expense that the company must spend to produce the mattresses.
FALSE
The following statement by the chief executive of GoFlix movie studio is an effective strategy: "We will produce the greatest films of the 21st century."
FALSE
The three tasks of the AFI strategy framework are to Assemble a prototype, find a buyer, and Incorporate feedback.
FALSE
How do low interest rates affect a business?
Firms can easily borrow money to finance future growth.
Which of the following is an advantage of the balanced-scorecard?
It allows managers to translate a firm's vision into measurable operational goals.
Which of the following statements is true of the balanced-scorecard?
It attempts to provide a holistic perspective on firm performance.
Core values provide ethical guidelines for how individual employees will behave.
TRUE
TicToc Corp. is a manufacturer of smart watches that track the wearer's heart rate and sleep patterns. Which of the following is most likely an implication of new firms entering this industry?
The incumbent firms will spend more to satisfy their existing customers.
Chad is the founder of a firm producing self-driving vehicles. Because the industry is so new and chaotic, Chad favors a top-down strategic planning approach in which he exerts strong control over all aspects of the business, from product development and design to manufacturing and marketing. What is wrong with this scenario?
The self-driving vehicle industry is changing too much for the top-down approach to be effective.
While Sesmic Inc. operates in a monopolistically competitive industry, Energy 4 All 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 Sesmic than for Energy 4 All.
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.
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.
Both UTech Inc. and Mirco Corp. incur a cost of $200 to manufacture a single unit of a cell phone. However, UTech Inc. charges a higher price than Mirco Corp. does, but it still sells a higher number of phones. What does this imply?
UTech Inc. creates more economic value than Mirco Corp. does.
FMC Corp., a chemical manufacturer, has over 5,000 employees spread across several SBUs which collectively generate over $3 billion in annual revenues. FMC's strategic leaders initially focused solely on financial metrics as their key performance measure but is failing to achieve competitive advantage in their industry. Which of the following questions below should their senior leadership not consider while implementing the balanced score card framework?
When should we decide to divest assets and prepare for an exit strategy?
________ is a business model in which the manufacturer sets a fixed price on a product, but the retailer is free to set its own price.
Wholesale
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
Which of the following is the best characterization of sociocultural forces?
a society's culture, norms, and values
Unlike the financial ratios based on accounting data, total return to shareholders is
an external performance metric.
Jennifer manages a chain of bars and restaurants in a tri-county area that has recently experienced an economic boom because of fracking and high oil prices. What is most likely to happen when there is too much money in the tri-county economy?
an increase in prices
Under the ________ framework, the question "How do we create value?" is relevant when trying to improve innovation and organizational learning.
balanced scorecard
Which of the following is NOT considered an important macro-environmental influence on businesses (that is, a potential influence beyond that of the industry alone)?
bargaining power of suppliers
When the strong dictatorial rule in Arlington unexpectedly collapsed due to the shocking death of the royal family in an explosion, the nation's economy experienced drastic changes. The laws became more restrictive, the country lost many locally produced resources and products, and the distribution of wealth became inequitable. The unexpected event that led to these changes can best be described as a(n) ________ event.
black swan
Organizational values help individuals make choices that are
both ethical and effective in advancing a company's goals.
The balanced-scorecard can accommodate
both short- and long-term performance metrics.
Corporate executives at Fly High Inc. decide to compete in the remote model airplane industry by making the largest model planes available. By doing this, they completed part of their ________ strategy.
business
Writer Button Inc. and Horner Inc. are two companies that have been manufacturing typewriters for almost 30 years. Due to the reduced demand for typewriters today, both companies' average return on invested capital is approximately -5 percent. The current industry average is 2 percent. In this scenario, Writer Button Inc. and Horner Inc. most likely have
competitive parity with each other.
Economic value creation is best expressed as
consumer surplus plus firm profit.
The value a consumer attaches to a product or service is captured in the
consumer's maximum willingness to pay for it.
Threadless allows customers to submit their own designs and to vote on which designs they would like to see printed on a T-shirt. This business uses a ________ technique.
crowdsourcing
Which of the following competitively important assets is typically excluded from a firm's balance sheet?
customer experience
Which of the following functions do the general managers in strategic business units primarily perform?
design generic business strategies based on guidelines received from corporate headquarters
Maria and Tom both serve as SBU managers of their divisions. They have both been asked by the CEO to generate two different courses of action for a new product launch. This strategic decision-making technique can be described as
dialectic inquiry.
Tesla is addressing environmental concerns regarding the carbon emissions of gasoline-powered cars by building zero-emission battery-powered vehicles. This best represents which of the following PESTEL categories?
ecological
In the pyramid of corporate social responsibility, ________ responsibilities are the foundational building block.
economic
A firm incurs $400 to manufacture a computer. In the market, customers are willing to pay a maximum of $600 for the computer priced at $500. The difference of $200 ($600 minus $400) is the
economic value created.
Visionary companies differ from their competition in that
employees in visionary organizations find meaning in their work and are motivated.
To support the rise of emergent strategies, an organization should
empower lower-level employees to take up autonomous actions.
A successful strategy details a set of goal-directed actions that managers make to gain and sustain a competitive advantage; to create this strategy, managers must focus on three pillars. Which of the following below is not one of these pillars?
execution
Contour Inc., a vendor, regularly supplies capacitors to All Purpose Electronics for use in its products. Therefore, Contour Inc. is All Purpose Electronics'
external stakeholder.
Green and Good Inc., a multinational company, relies on its media partner OmniSignal to regularly advertise its offers, sales, and new products. OmniSignal is invested in this relationship because it generates most of its revenue from advertising Green and Good's products. In this scenario, OmniSignal is Green and Good Inc.'s
external stakeholder.
A strategic group will typically include
firms within the same industry.
Which of the following terms describes the guiding policy to address the competitive challenge, and uses corporate- and business-level strategy?
formulation
Dontechi is a file hosting service that allows users to store up to 5GB of data with no restrictions or charges. However, users have to pay a fee for advanced features on the cloud storage system and additional storage space. Which of the following business models does this best illustrate?
freemium
LinkedIn, a professional social media website, allows its users to create their profiles for free, but charges a premium price for additional services. This is an example of a ________ business model.
freemium
To implement specific business strategies, general managers of strategic business units rely on
functional managers.
The distribution department at Wheat, Barley and Whey Corp. has decided to adopt the FIFO (first in, first out) method of inventory to dispatch its bags of wheat. Which of the following strategies does this scenario best illustrate?
functional strategy
As a part of strategy formulation, a firm's functional strategy primarily concerns questions relating to
how to implement business strategy.
After a firm has identified its key stakeholders in stakeholder impact analysis, the immediate next step is to
identify stakeholders' interests and claims.
The first step in stakeholder impact analysis involves
identifying the stakeholders that currently have, or potentially can have, a material effect on a company.
In which of the following situations is a company that exists in the telecommunications industry most likely to face the highest threat of entry?
if the industry has recently become deregulated
Due to several black swan events in the past, the
implicit trust relationship between the corporate world and society at large has deteriorated.
Silvio is a manager at a software firm. The CEO tells him that the industry as a whole has become increasingly profitable over the past five years. Based on this information, Silvio is most likely to expect
increased competition in the future and therefore he should recommend that the company upgrade its products to slow the entry of rival companies.
ECO Jeans, Inc. had a mission to become the leading producer of environmentally friendly blue jeans, an emerging and in-demand category in the apparel industry. Its strategy involved leveraging a network of organic cotton farmers and suppliers of environmentally responsible synthetic materials to create a product that is durable, attractive, affordable, and 100% recyclable. However, because it did not upgrade its outdated production facilities, ECO Jeans could not assemble its products at a low-enough cost to offer the jeans at a price that was attractive to customers. ECO Jeans' strategy failed because
it was not backed up with strategic commitments.
The minimum wage in the country of Hanns is $8 an hour. Delish, a restaurant in Hanns' 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 Hanns, which of the following responsibilities is Delish satisfying?
legal responsibilities
Todd 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 Todd most likely face?
many new competitors
The ratio of SG&A/Revenue is an indicator of a firm's focus on
marketing and sales to promote its products and services.
Hot Wok Cuisine is a premium Asian restaurant chain that differentiates itself from a large number of competitors by providing exclusively organic Chinese cuisine. It has some pricing power because it provides differentiated products and therefore, has some entry barriers in place. In this scenario, Hot Wok Cuisine is most likely operating in a(n)
monopolistically competitive industry.
Urst Ammunition Inc., a firm controlled and managed by the government of Urst, 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?
monopoly
WeBreak4Bikes Inc. has a new U.S.-based client in the bicycle industry. The client's company produces only bicycles for riding on the road. The bicycles are used for reliable general purpose transportation. When asked to identify a potential substitute for the bicycle industry from the Five Forces perspective, you would select
motorcycles.
Firms that are classified as operating in an oligopoly tend to have some pricing power if they are able to differentiate their product or service offerings from those of their competitors, so the recommended mode of competition is
non-price-based competition.
Which of the following tasks in the AFI strategy framework involves putting the formulated strategy into practice through organizational structure, culture, and controls?
strategy implementation
Industrial Drills, a company that manufactures industrial tools, incurs higher costs because of its refusal to outsource its manufacturing to countries where labor costs are lower. This reflects Industrial Drills' ________ responsibility.
ethical
A firm has 10 million shares outstanding, and each share is traded at $100. Also, each shareholder gets a dividend of $2,000 annually. In this case, the market capitalization is
$1 billion, that is, 10 million shares × $100.
A firm incurs $100 to manufacture an office table. It fixes the market price of the table as $250, and discounts the price to $200. However, the maximum a person is willing to pay for it is $180. What is the amount of total perceived consumer benefits in this scenario?
$180
In which of the following situations is the power of suppliers high in an industry?
Suppliers' industry is more concentrated than the industry it sells to.
A key feature of an oligopoly is that competing firms behave interdependently with each other.
TRUE
A mission describes how a firm will accomplish the broad goals set out in a vision statement.
TRUE
A small used tire shop faces significant potential competition because of the low capital requirements compared with business environments such as universities and laboratories.
TRUE
A surprise event that leads to a change in strategic initiatives, such as the accidental discovery of a new use for an existing product, is known as serendipity.
TRUE
A video-streaming service provider such as Amazon Prime is a complement to a manufacturer of streaming video devices such as Roku and the Amazon Firestick.
TRUE
Because competitors in oligopolistic industries are so interdependent, it is especially important for managers in those firms to monitor and respond to changes their competitors make.
TRUE
It was stated that the majority of CEOs spend most of their time in face-to-face meetings because they believe those types of meetings are most effective when trying to get their message across.
TRUE
The efficient-market hypothesis suggests that the market price of a firm's stock is an objective indicator of a firm's past, current, and expected future performance.
TRUE
Hank 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 Hank conclude?
The company is likely to be very profitable as long as the threat to entry is low.
A company uses the planned emergence approach in the development of its strategies. Which of the following is an implication of this?
The company's organizational structure and systems will be designed to support bottom-up strategic initiatives.
The market capitalization of a public company is $5 billion. Each share of the company is traded at $200. What do you infer from this financial data?
The firm's number of outstanding shares is 25 million.
Which of the following is an implication of all firms in an industry pursuing a low-cost position through application of competitive benchmarking?
The firms would eventually have no resources to invest in product and process improvements.
Which of the following is likely to happen due to horizontal mergers between competitors such as Delta and Northwest airlines?
The overall industry profitability will increase.
Siham is a chef who owns three moderately successful restaurants with innovative menus. Based on what you have read, which of these approaches could help her improve her profits?
Use her existing knowledge, equipment, and staff to launch a catering business.
________ denotes the dollar amount a consumer would attach to a good or service.
Value
Which of the following is an assumption that top-down strategic planning rests on?
We can predict the future from the past.
HomeAgain is a nonprofit organization that works toward rehabilitating the homeless. The credo of the organization is "help us help you." For an organization like HomeAgain, which of the following statements would make an appropriate mission?
We help the homeless gain and sustain financial independence by providing employment opportunities.
Hottechi Laminate has developed a new customer-oriented business model. Rather than maintain a network of showrooms across the country, the business will now let customers choose several styles that interest them from an online site, and will ship samples of each of the styles to the customer to test in their home free of charge. Once they have settled on a tile choice, Hottechi Laminate will send a representative to their home to schedule installation. The company has determined that busy middle-class customers will value the convenience of the new model, which allow them to upgrade the look of their homes without spending time browsing showrooms. The new model will be created by selling the old showrooms and shifting resources to the new online site and regional offices for sales personnel. What question remains for Hottechi Laminate to ask in order to put its strategy into action?
What activities need to be performed to create and deliver the offerings to consumers?
________ is best described as a measure of how effectively capital is being used by a firm to generate revenue.
Working capital turnover
How does a firm capture its producer surplus for a good or service?
as profit per unit sold
In an industry, the threat of entry is high when
capital requirements are low.
In an economic context, strategy for producers is primarily about
capturing the economic value created as much as possible.
Jill is exploring multiple suppliers in order to find the best price. However, instead of calling all eight potential suppliers, she only reaches out to the first three and bases her selection on those instead of contacting all suppliers. Jill's action best describes the concept of
cognitive limitations.
Jennifer was just named the CEO of a pen company called National Pens Inc. She immediately changed the name to "Jenn's Pens." When asked why she made this change by the board of directors, who showed research that there was no correlation between success and CEP names, she responded by saying, "my previous company had the name of their CEO in the title, and they were very successful." This fallacy on Jenifer's part reveals her
confirmation bias.
All Foods is the parent company of several chain restaurants offering a variety of cuisines. The top management at All Foods has decided to enter the frozen foods industry based on its assessment of the profit potential in that industry. Which of the following strategies does this best illustrate?
corporate strategy
Bill Burke is the CEO of Project Inc. a supply chain firm. Bill's company considers installing a new piece of machinery in one of his factories. Installing this new machinery will cost money; paying the technicians to install the machinery, transporting the machinery, buying the parts and so on. Bill plans on financing his operations by issuing stock (equity) and issuing bonds (debt). He needs his return on invested capital (ROIC) to exceed his ________ in order to determine if he should take on the project.
cost of capital
The first step to gain and sustain a competitive advantage is to
define a firm's vision, mission, and values.
Progress Apparel's core value statement reads we will ensure our clothing is made with the highest respect toward human rights and environmental protection. Which of the following actions exemplifies how Progress's core values drive its strategic decision making?
demanding that textile suppliers pay liveable wages and maintain safe production facilities
In a firm's external environment, ________trends primarily capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class.
demographic
Batt Packs recently came under criticism when a newspaper article revealed that the company's production plant had leaked a chemical compound into a sensitive wetland ecosystem. Although use of the chemical was not technically prohibited by law, the local government levied a small fine for cleaning up the spill. Environmental groups, however, argued that continued use of the chemical was damaging to the local wildlife and threatened to organize a boycott against Batt Packs. What should Batt Packs do to ensure that it meets its ethical responsibilities?
design batteries without the chemical and market them as environmentally friendly
Jack and Jill both love hot coffee. Jack likes to keep his coffee hot during the day while Jill doesn't mind drinking room temperature coffee. Jack is willing to spend more money on a thermos than Jill is willing to spend. This example illustrates the following major limitation of employing the Economic Value Creation framework because
determining the value of a good/service through the perspective of a consumers is not a simple task because consumers have different spending habits.
By selling a tablet at $1,000 for which consumers are willing to pay up to $1,200, a consumer electronics firm makes a profit of $400 per unit. In this scenario, the amount $600, that is ($1200 - $1000) + $400, is the
economic value created.
Under the ________ framework, producer surplus is important in the quest for competitive advantage because this is the profit that a firm captures when producing and selling a good or service.
economic value creation
The founder of T-Square Construction strongly believes in the notion of corporate social responsibility, so he has proposed several philanthropic activities that he expects the company to pursue. In order to accomplish this vision, the managers should first
ensure that the company is profitable and has a sustainable competitive advantage.
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.
The interaction between a firm and its diverse internal and external stakeholders is best described as a(n)
exchange relationship.
Managers use the AFI strategy framework to
explain and predict differences in firm performance.
Treequote Industries has produced a new piece of technology that will monitor the soil moisture in a user's garden and send a notification to an app on the user's phone when it is time to water their plants. The goal of this inexpensive technology is to entice users to purchase Treequote's more expensive automated watering system, so that they can trigger the watering process from the app on their phones. Which business model is most likely to help Treequote Industries accomplish its goals?
freemium
With the emergence of smartphones, users no longer have to carry a separate music player, a video game, a laptop, or a magazine to keep themselves entertained when traveling. A smartphone is loaded with a variety of applications to satisfy all the customer needs that different industries or products individually satisfied earlier. As a result, the smartphone industry has been posing a threat to a lot of other unrelated industries. What is this phenomenon best known as?
industry convergence
After carefully assessing the market potential for solar-powered mobile devices, the top-level executives of We Know 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
The government of Pentsu 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?
legal factors
Which of the following is a macroeconomic factor that can affect a firm's strategy?
levels of employment
Which of the following options below would serve as a feasible option when deciding how to enter an established industry?
leverage existing assets
Food Shipp Inc. is a food supply company that wants to sell its products directly to consumers through mail order instead of going through supermarkets and other stores. However, supermarket chains want to make this transaction either illegal or more difficult for Food Shipp. To accomplish this, they are using ________to influence the political process.
lobbying forces
Firms that compete within the same strategic group generally experience
more competitive rivalry than firms outside their strategic group.
All Signal Inc., a telephone service provider, has a large user base mainly because phone calls and messages between all All Signal users are free. When a person switches to an All Signals network, his or her entire network of family and friends is likely to switch to the same network to receive the benefit of free calls and messages. In addition, an existing user who gets a new user to register with All Signal Inc. is given a free wireless connection. This has helped to keep competition away from All Signal. In this scenario, which of the following factors is acting as an entry barrier for All Signal Inc.?
network effects
ABC Inc., It's Electric Inc., and Wares 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?
oligopoly
Diana is a recent fashion graduate. She started her own apparel store with an investment of $300,000. In the first year she made a profit of $60,000. If she had taken up a job as a fashion editor for a magazine, she would have earned $50,000 as salary per year. Also, she could have invested her capital, $300,000, in treasury bonds and earned an interest of $12,000. Thus, the amount $62,000 ($50,000 + $12,000) would be Diana's
opportunity cost.
When ASI Inc. 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 ASI Inc.'s
opportunity cost.
The management of Venture Manufacturing showed a commitment to ________ by increasing the salary of many female employees to meet its goal of having equal pay for women and men who perform comparable work.
organizational core values
During an AFI planning session, the managers of the Bronco Motorcycle Corporation decided to place various stages of production in different countries in order to implement the strategy of cutting overhead costs. By doing this, what issue did the firm address?
organizational design
Blackzim Wireless is a cellular service provider that charges its customers $1 for three hours of talk time. So, if a customer's talk time for a month is 60 hours, the company charges him or her $20 at the end of the month. Which of the following business models does this best illustrate?
pay-as-you-go
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 ratio Cost of goods sold/Revenue indicates how efficiently a company can
produce a good.
Yellow Ride Service is a new entrant to the taxi industry. It has achieved success by staking out a unique position in the industry. How did Yellow Ride Service mostly likely achieve this position?
providing long-distance cab fares at a lower rate than competitors; servicing the same area as competitors
Lil Anthony's and Amelia's are two restaurants serving Italian cuisine. While Lil Anthony's focuses on providing quick, affordable pasta dishes for the lunch crowd, Amelia's focuses on serving home-style dishes in an upscale, romantic setting. Both companies have been able to gain a competitive advantage. This is most likely because the companies have
pursued distinct strategic positions.
Managers can justify using the balanced-scorecard framework because research show that both ________ and ________ performance dimensions are important when examining the effectiveness of a firm's strategy.
quantitative, qualitative
Nam-zim sells its e-book readers at the cost price of $15 each. However, the company makes its profits when users have to download or buy books online. Which of the following business models is Nam-zim implementing?
razor-razor-blade
When young start-up entrepreneurs make claims like, "We will be the Uber of X, where X is any other category than ride hailing" or "We will be the Airbnb of Y, where Y is any other category than hospitality services" they are best illustrating which of the following cognitive biases?
representativeness bias
The executives at Dizzy & Sons Corp. are developing strategic plans to address plausible future situations like rise in the prices of cotton and synthetic fabrics by 20 percent, appreciation in the value of the dollar, increase in the cost of labor by 30 percent, and increase in demand for the company's products. By doing so, the company will be well prepared with its planned responses if any of these situations occurs in the future. Thus, Dizzy & Sons Corp. is employing ________ as the approach to the development of strategy.
scenario planning
Which of the following strategy plans might work best in an industry that is considered a fast-changing environment with new laws going into effect regularly?
scenario planning
Which of following practices of a firm satisfies its ethical responsibilities?
selling vaccines at a subsidized price in a less developed country even though this results in reduced shareholder returns
Dimitre Corp. has been able to gain and sustain a competitive advantage due to its strong relationship with its employees, customers, suppliers, and local communities. The company believes in lifetime employment and ensures that its employees grow along with the company. Investors are more than satisfied with the returns on their investments. Also, 3 percent of the company's profit is spent on community development. With initiatives like these, customers feel privileged to associate themselves with Dimitre products. This scenario best illustrates the implementation of a
stakeholder strategy.
Sean, a retired CEO, invests capital in a start-up company that creates budgeting software. He mentors the entrepreneur and the employees of the company because he wants the company to perform well and survive in the market. Thus, Vincente is the start-up company's
stakeholder.
John is a bit confused about the difference between stakeholders and stockholders. You meet with John and inform him that the main difference is that
stakeholders can be both internal and external while stockholders own shares of a firm and are classified as internal to the firm.
The former CEO of Sam's Club, a division with its own profit-and-loss responsibility, Rosalind Brewer, reported 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
A ________ is best described as any activity a firm pursues to explore and develop new products and processes, new markets, or new ventures.
strategic initiative
A firm's ________ relates to its ability to create value for customers (V) while containing the cost to do so (C).
strategic position
Madeline is the founder of an online service that allows users to rent out spare rooms in their homes. She has hired several extremely bright employees whose opinions are central to the company's success in the fast-paced online services industry. Which type of strategic management process would be most likely to fully utilize the strengths embodied by her team and position the company to capitalize upon autonomous actions and serendipity?
strategy as planned emergence
Bright 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 Bright Lighting ample competition. In response, Bright 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, Bright Lighting consistently outperformed its competitors for ten years. In this scenario, Bright Lighting maintained a ________ through its innovative strategy.
sustainable competitive advantage
TopHat & Scarfs Inc., an apparel company, recently moved locations to be closer to their main manufacturer in Ohio. The move required that they upgrade their legacy ordering system with their manufactures ordering system which should facilitate their supply chain to gain future efficiencies and reap future savings. However, the new system costs $75,000.00 and will require a significant amount of time to train their employees. This best represents a significant increase in their
switching cost.
The types of assets that are the primary focus of accounting data but are no longer most important to competitive advantage are
tangible.
The AFI framework (analysis, formulation, implementation) affects a firm at nearly every level. Which of the following would be classified as the top level of strategy within a firm?
the corporate level
Due to economic regression in Jabu, the profitability of the large corporation Honey Comb Inc. was poor. An analysis of the company's business showed that the company could become profitable if it divested a few strategic business units under its banner. From which of the following businesses would Honey Comb Inc. find it most easy to exit?
the e-commerce retail business, where investments on assets are low
Bill 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?
the family size of the firm's target market
Tommy, a manager, is writing an analysis of his employer's current and possible future revenues. Which of the following could he identify as an economic factor in his firm's external general environment?
the stage of the business cycle that the country is in
Jalen Corp., a large conglomerate, wants to liquidate its business in certain industries to improve its overall profitability. Which of the following industries would Jalen Corp. find it most difficult to exit?
the steel industry in which the company has obligations like severance pay toward employees
When automobile magazines face competition from automobile blogs on the web, which of the following forces in Michael Porter's five forces model primarily gets stronger?
the threat of substitutes
Which of the following approaches to assess competitive advantage is based on the view that noneconomic factors can have a significant impact on a firm's financial performance?
the triple-bottom-line approach
Swedish furniture giant IKEA reported sales of $44 billion in 2019. The company turned a profit by recycling waste into some of its best-selling products. Before, this waste had cost the company more than $1 million per year. And the company is well on its way to "zero waste to landfill" worldwide. According to Joanna Yarrow, IKEA's head of sustainability for the United Kingdom, "We don't do this because we're tree huggers, we do this because it's very cost-effective." This passage best represents which of the following frameworks below?
the triple-bottom-line framework
There are several major limitations of employing the balance scorecard framework; which of the following below is not one of those limitations?
the type of marketing and HR functions used to employ the framework
In strategic management, strategists engage in three pillars. Which of the following is not one of these three pillars?
the unification of major goals and objectives
After trying on a dress, a consumer assesses it to be worth a maximum of $100 and is willing to pay that amount for the dress. However, the dress was priced at $80. What is the amount, $100, referred to as?
the value (V) the consumer attaches to the dress
Rub A Dub is a company that manufactures hot tubs. Which of the following best illustrates a product-oriented vision for Rub A Dub?
to be the pioneering manufacturer of hot tubs
Which of the following is a customer-oriented vision?
to enable businesses to improve their employee communications
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 give all children in the United States the opportunity to attain an excellent education
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 management team for Forever Power came up with the following vision statement: "Forever Power will conscientiously track its financial performance to ensure profits for its investors, enhance its community through employment and supporting charities, and dispose of waste in a manner that will not harm the environment." This vision statement is most likely based on the
triple-bottom-line approach.
Which of the following is an example of competitive parity?
A firm produces a similar number of wall clocks at a similar cost as its competitors.
Which of the following statements is true of the social responsibilities of a business?
A firm's ethical responsibilities go beyond its legal responsibilities.
Tommy wants to open his own food truck but doesn't know anything about business. He needs help determining who his competition is, how he should craft his strategy to compete and how he'll implement his strategy to achieve a competitive advantage. He's hired you to help him get started. As a result, you know that you will probably use the
AFI STRATEGY FRAMEWORK
The ________ is a model that links strategy analysis, strategy formulation, and strategy implementation, which together helps managers plan and implement a strategy that can improve performance and result in competitive advantage.
AFI strategy framework
Which of the following scenarios illustrates a firm that has a sustainable competitive advantage?
Bill and Ted Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years.
A firm's resource-allocation process (RAP) has very little effect on its realized strategy.
FALSE
A good strategy is a set of actions that enables a firm to achieve its own internal goals without regard to the external environment.
FALSE
Strategic leaders spend the majority of their time working alone to devise new strategies.
FALSE
The autocratic strategic management process exhibited by the former head of Apple, Steve Jobs, is best described as an emergent strategy.
FALSE
Good Ole Cinemas Inc. and HD Inc. are two companies that own and run movie theaters in malls and other commercial areas. While Good Ole Cinemas Inc. pursues a cost-leadership strategy, HD Inc. adopts a differentiation strategy. Which of the following statements is most likely true of this scenario?
HD and Good Ole Cinemas will not be direct competitors to each other, and their customer segments will overlap very little.
You are the manager in charge of setting the strategy for a new fast-casual restaurant. Which of the following questions would be appropriate for you to ask during the analysis phase of the AFI strategy framework?
How have consumer preferences in the fast-casual restaurant industry changed in the last five years?
Suger & Sweet Sodas has seen its market share erode in recent years, as consumers increasingly turn toward healthier beverage choices such as unsweetened sparkling water. Hoping to rekindle interest in sugary sodas, Suger & Sweet decides to produce a limited run of "throwback" cans using labeling first introduced in the 1980s. What is wrong with this strategy?
It fails to face the competitive challenge.
The average cost of production for a bottle of vitamin water in the industry is $5 while its average price is $8. Facuet H20 Inc. manufactures the same product for $3 per bottle and sells it for $8 per bottle. Which of the following statements is most likely true of Facuet H20 Inc. in this scenario?
It has a competitive advantage in the industry.
Toy sales have declined by 10 percent each year, forcing many retailers to exit the industry. To eliminate its remaining competition, Bargain Toys sells all of its product at a loss and relies on its significant cash holdings to cover costs until its competition is forced to exit the industry. Is this an example of a successful strategy? Why or why not?
No. Bargain's strategy and competitive advantage are unsustainable.
________ is best described as an integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage.
Strategic management
Executives whose visions and decisions help their companies achieve competitive advantage can be considered strategic leaders.
TRUE
Under the strategy as a planned emergence model, even entry-level employees can help generate strategic initiatives.
TRUE
Most consumers and investors today want the firms they do business with to look beyond just the profit motive. In fact, they want firms that behave legally and ethically while also giving back to their communities via philanthropic activities. The framework that attempts to reconcile these wants is known as
corporate social responsibility.
While creating its AFI strategy framework, Gordon's Consultants decided what markets the firm should compete in. By doing this, what type of strategy did the company devise?
corporate strategy
To better achieve a competitive advantage, firms must now adopt a holistic approach towards satisfying multiple stakeholders opposed to focusing on the needs of their stockholders. This integrative approach is referred to as
stakeholder strategy.
A wearable technology company has priced one of its wristwatches at $210. Most of its competitors sell similar watches at $180. Selling anything less than $150 would result in a loss for the company. However, the absolute maximum a customer is willing to pay for it is $170. In this scenario, what is the reservation price of the wristwatch?
$170
Sarah paid $900 for a camera that she thought was worth $1100 for all the features included in it. For the consumer electronics firm selling the camera, however, the cost of producing the camera was only $350. What is the consumer surplus in this scenario?
$200
Which of the following statements with regard to industry structures is true?
A consolidated industry tends to be more profitable than a fragmented one.
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 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.
Bill Lewis wants to become a business strategy consultant and doesn't understand how emerging consultants get started. Bill should familiarize himself with the ________ framework that outlines the important process when examining the concept of strategic management.
AFI: Analyze-Formulate-Implement
Which of the following statements is true of accounting data?
Accounting data are historical data and thus backward-looking.
Big Wheel, Inc. is a company that manufactures a variety of generators that run on wind power. The company envisions that wind technology will replace all forms of exhaustible energy sources in the near future. Which of the following statements will make an accurate vision for Big Wheel?
All nations around the globe should be able to provide energy produced by sustainable sources.
Which of the following fundamental insights was provided by Porter's five forces framework from the completion of the Alta Velocidad Española (AVE)?
Any of the five forces on its own, if sufficiently strong, can extract industry profitability.
Nuke It is a major manufacturer of microwave ovens. Which of the following statements will best inspire the organization with a shared vision for Nuke It?
At Nuke It, employees at all levels are motivated to make the best microwave ovens on the market.
In 2008, BlackBerry's market cap peaked at $75 billion. By 2017 this valuation had fallen more than 90 percent, to $3.9 billion. BlackBerry fell victim to two important PESTEL factors in its external environment: sociocultural and technological. How did technology contribute to BlackBerry's decline?
BlackBerry failed to change its device into one that could perform multiple tasks effectively.
James is a novice investor who wants to decide between purchasing shares in Captial-UP or Mainframe Inc. Captial-UP's return on invested capital (ROIC) was 15 percent, and its cost of capital was 12 percent. During the same period, Mainframe Inc.'s ROIC was 22 percent and its cost of capital was 25 percent. What does this information tell James?
Captial-UP is more likely to create value while Mainframe Inc. is more likely to destroy value.
Upper management at ComfyShoe 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?
ComfyShoe Inc. wants to be the best manufacturer of insoles in the industry.
You are the CEO of a tech company and have recently undertaken a review of your company's strategy. In comparing your stock market valuation to that of your closest competitor, you note that your firm is currently valued at $50 billion, while your competitor is valued at $40 billion. How should you proceed?
Compare the current valuations with past valuations to determine a trend.
Which of the following statements about competitive advantage is true?
Competitive advantage can be assessed by measuring accounting profit, shareholder value, or economic value.
While implementing strategic group mapping for the U.S. domestic airline industry, two strategic groups become apparent: low-cost, point-to-point airlines (Virgin Atlantic, Alaska Airlines, JetBlue, and Southwest Airlines) versus differentiated airlines using a hub-and-spoke system (American, Delta, and United). Which of the following statements is true about these two strategic groups?
Competitive rivalry between Virgin Atlantic and JetBlue is likely to be higher than that between American and Southwest Airlines.
Managers at SunTrustUs Properties 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?
Consumer demand will increase.
The CEO of All Star Corp. has decided to enter the markets of emerging nations like China and Brazil. This means that the books, magazines, and websites published under the Chyron Media 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.
Which of the following statements is true of customer-oriented visions?
Customer-oriented vision statements are not the same as listening to your customer.
Why is it better for firms to keep their vision statements customer-oriented rather than product-oriented?
Customer-oriented visions tend to be more flexible when adapting to changing environments.
Digital Prosper, a web services firm, has experienced a 7 percent decline in revenues in consecutive quarters. In an effort to reduce operating costs, managers reduced the customer service staff from 12 employees to 6. Management also enlisted the remaining employees to help produce a new company vision: to give customers of all budgets a customizable, stress-free web hosting experience. What is wrong with this scenario?
Digital Prosper's organizational structures do not align with the vision.
Pam owns Discount Auto Zone, 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 Discount Auto Zone's problem in this area?
Entry barriers usually protect the incumbent players in a profitable industry.
A local manufacturer that wants to be a global manufacturer faces few mobility barriers because it has not yet invested in supply chains, which can become outdated and expensive.
FALSE
A manager's only responsibility is to monitor and assess the performance of his or her firm.
FALSE
A strategy that has provided competitive advantages in the past will most likely do so in the future.
FALSE
As a rule of thumb, the stronger the five forces, the higher the industry's profit potential, which causes the industry to become less attractive for competitors.
FALSE
Firms within the same industry automatically belong to the same strategic group.
FALSE
For-profit businesses operating in long-standing fields such as energy and transportation usually operate in an environment of price stability.
FALSE
Managers should create two sets of core values: one for employees and one for themselves.
FALSE
Once a firm chooses a business model, it must stick with it for the life of the firm.
FALSE
Strategy formulation concerns the choice of strategy in terms of when and who to compete with. In contrast, strategy implementation concerns the organization, coordination, and integration of how work gets done.
FALSE
Andrew is a management consultant. Hard Supplies Inc. asks him to evaluate their company, and he finds that the difference between the cost of producing the firm's products and the value of those products is extremely narrow. What should Andrew suggest that Hard Supplies Inc. management do?
Find a way to widen the gap between cost and value.
Fun Robotics produces components used in electronic toys. In fiscal year 2017, Fun Robotics earned an accounting profit of $3 million. However, Fun Robotics' production facilities might have also been used to produce components for mobile phones, which would have generated $2 million in revenues and saved the company $500,000 in production costs. Which of the following statements is true?
Fun Robotics earned an economic profit of $500,000.
Which of the following scenarios exemplifies a sustainable strategy under the triple-bottom-line approach?
Gogozoom reformulated its products to eliminate chemicals that were widely used in the industry but were being investigated for their potential negative effects on the environment.
MoreCash Inc. is a major financial services corporation. With the CEO of MoreCash Inc. preparing to retire, several top managers are vying for the position. Jared considers himself to be a leading candidate. He not only has advanced degrees from business schools and more than a decade of experience working for MoreCash Inc., but he also has personally ensured that his division has exceeded its performance benchmarks over the past three years, even though many of his employees are dissatisfied because they feel they are stagnating in their jobs. According to the Level-5 leadership pyramid, why has Jared failed to exhibit the qualities of a Level-5 leader?
He is not able to help others reach their full potential.
Steve manages product design and development at a toy company. The junior managers who report to him tell him that new complementors for the firm's products are available. What should Steve's reaction be?
He needs to find out if his company as well as other companies can provide the complements.
As manager of a major producer of automobile airbags, you have recently introduced the following vision statement: to protect the health of every driver and passenger.
How can you ensure that your employees feel invested in and inspired by the firm's vision?
Organizational values help people make choices that are ethical and company-goal-oriented. These values answer which strategic management question?
How do we accomplish our goals in the organization?
Which of the following is an advantage of applying the economic value creation perspective to assess a firm's performance?
In economic value perspective, analysts not only consider historical costs, but also opportunity costs.
Which of the following statements accurately brings out the difference between monopolistic competition and an oligopoly?
In monopolistic competition, many firms compete against each other; in an oligopoly, there are few large firms competing against each other.
Alan has been an employee with StartsInc. for 15 years. He started with an entry-level job, and today he is a manager of an entire division. Over the years, Alan has acquired a reputation for doing the right things in the company. Hence, as an efficient leader, he is capable of effectively communicating and motivating his subordinates to work toward the company's vision and mission. According to the Level-5 leadership pyramid, which is the highest level of leadership Alan has reached so far?
Level 4
How is a firm's task environment different from its general environment?
Managers have some influence over external factors in the task environment; they have little direct effect over external forces in the general environment.
Maria is the Chief Operating Officer of the start-up Apps4U. In which of the following scenarios does Maria exhibit strategic leadership?
Maria schedules a meeting with the manager of the marketing department and overcomes his skepticism about a new campaign aimed at customers in the 55+ age group. Over the next three months, AppPalace gains 250,000 new users in that group.
Which of the following is a disadvantage of measuring firm performance through total return to shareholders and firm market capitalization?
Market volatility makes it difficult to assess firm performance through these measures, particularly in the short term.
In nearly every case, which of the Five Forces is the most important in determining the relative power structure in an industry?
No single force is dominant in most every case.
Which of the following below are not one of the three dimensions that make up the Triple Bottom Line framework?
None of the answers are correct.
________ is the benefit that is missed or given up when an investor, individual or business chooses one alternative over another.
Opportunity cost
________ are best described as the value of the best forgone alternative use of the resources employed.
Opportunity costs
________ are best described as the ethical standards and norms that govern the behavior of individuals within a firm.
Organizational core values
The ________ allows the scanning, monitoring, and evaluating of changes and trends in a firm's macro environment.
PESTEL framework
Asher has been tasked with formulating the business strategy for Calm Cosmetics' new line of lipsticks. Which of the following ideas would Ida be likely to include in her proposal?
Promote the lipsticks as the longest-lasting on the market.
Ride N Style 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 Ride N Styles pursue instead?
Pursue a differentiated strategy.
Breeze Car Rental follows a cost-leadership strategy. Which of the following firms will most likely be its direct competitor?
Quicker Rental Cars, which follows a low-cost strategy
Sally 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 Sally recommend to the company's owner?
Reduce supply. Customers generally reduce their purchases of luxury items when the economy falters.
Bob is exploring multiple suppliers in order to find the best price. However, instead of calling all eight potential suppliers, he only reaches out to the first three and bases his selection on those instead of contacting all suppliers. Bob's action best describes the concept of
Satisficing.
The three financial ratios that constitute return on revenue are Cost of goods sold/Revenue, Research and Development expense/Revenue, and
Selling, general, and administrative expense/Revenue.
In Strategy Highlight 2.2, what type of strategy did Diana, the Starbucks store manager in southern California, use to develop the new iced beverage for her store?
She used an emergent strategy.
EverMart Inc. is a large company that sells a variety of products such as cosmetics, jewelry, frozen foods, navigation electronics, and airplanes. Apart from this, the company also has a strong presence in the service industry through its chain of dance studios, casinos, and nightclubs. Each of its product divisions operates as an individual business and is responsible for its own profits and losses. Thus, these product divisions under EverMart can be referred to as
Strategic business units.
Which of the following statements is true of strategic initiatives?
Strategic initiatives can be the result of a response to external trends or come from internal sources.
What is the strategic management process?
Strategic leaders design a method to formulate and implement strategy.
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.
The best example of a firm's external stakeholder is a(n)
government agency that regulates the prices of products manufactured by the firm.
For a firm that operates in an industry where competition is high, which of the following practices will result in inferior performance?
trying to be everything to everybody by combining different competitive strategies
During strategy implementation, managers primarily focus on deciding the
type of corporate governance that is most effective and ways in which it can put the formulated strategy into practice.
Bill's Auto & Airplane Repair shop can generate a positive net income of $10,000 a week; this is the industry average. We can conclude that since he has a positive net income, he also has a competitive parity in the industry.
Correct—competitive parity is achieved by generating average returns, relative to competition in each industry.
As the strategic manager of ShRPer Scissors, you are tasked with producing a strategy for introducing a new line of premium scissors. Your competitor produces a line of similar scissors at a cost of $1 and sells them for $12. Because your company has inferior production capabilities, your scissors will cost $3 each to produce. However, your handle is proven to be more comfortable than your competitors'. Assuming you are guaranteed to sell the same number of units as your competitor, which of the following strategies is most likely to achieve a competitive advantage?
Market ShRPer scissors as a higher-quality alternative and sell them for $15.
Which of the following scenarios best illustrates a good stakeholder strategy?
Nowadays Corp. distributes only 40 percent of its annual profit after taxes to shareholders, while the remaining is invested for further research and distributed among employees and the local community.
________ is best described as a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors.
STRATEGY
An employee lacking some of the innate abilities to be a top-level manager can still become an effective strategic leader through hard work and experience.
TRUE
Which of the following provides an example of what AFI strategy framework is used for?
Using AFI, the Quest Auto firm was able to implement a strategy that produced high-quality cars more efficiently and thereby reduced costs.
Which of the following best qualifies as a firm's internal stakeholder?
an auditor assigned to the firm by a federal government agency
If Modern Furniture LLC 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
What part of the AFI strategy framework does the question " How does the firm make money?" relate to?
competitive advantage, firm performance, and business models
The goal of a good strategy is focused primarily on
creating superior value while containing costs.
The amount of polyethanal that can be used in household paint is legally limited to 0.03 percent. Anything beyond this amount is hazardous to health and the environment and is considered a legal offense. Consequently, PrismPaints Corp. has vouched to make its products as safe as possible. Therefore, it manufactures polyethanal-free paints even though this increases its costs and reduces the dividends paid to its shareholders in the long run. Which of the following responsibilities is Prism Paints Corp. primarily compromising in this scenario?
economic responsibilities toward its shareholders
Which of the following three important stakeholder attributes should managers pay special close attention to better understand stakeholder impact analysis?
power, legitimacy, and urgency
BuyNow 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, BuyNow Inc. has most likely been able to provide superior value and cost control through
strategic positioning.
According to AFI strategy framework, in which of the following tasks of strategic management is a firm's vision, mission, and values identified?
strategy analysis