MGT 491 Exam 1
Mara 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 Mara to offer her client?
"Carefully consider the entry choices over time before making a decision."
During an interview for a CEO position, Elena's potential employers ask her, "If you get this job, will you focus more on industry effects or firm effects?" What should her answer be?
"Firm effects. I will be able to have the most impact on those."
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.
Free Winds, 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 Free Winds?
All nations around the globe should be able to provide energy produced by sustainable sources.
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?
Ask employees for feedback on the vision statement and revise based on their input.
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.
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 Sandburg Real Estate are surprised to hear that interest rates are likely to remain low for the next six months. Which of the following is an implication of low interest rates?
Consumer demand will increase.
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.
Perpetual Batteries 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 Perpetual Batteries. What should Perpetual Batteries do to ensure that it meets its ethical responsibilities?
Design batteries without the chemical and market them as environmentally friendly.
Carlos 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 Carlos 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 Carlos take?
Designate Friday afternoons as time for employees to pursue outside interests loosely related to the business.
Fran owns Consolidated Auto Parts, a company that got its start making auto parts related for hybrid vehicles, but her firm has had difficulty establishing itself as a maker of parts for the more-profitable internal combustion engine. What is most likely contributing to Consolidated's problem in this area?
Entry barriers usually protect the incumbent players in a profitable industry.
Etsuro is a management consultant. Baker Corp. 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 Etsuro suggest that Baker Corp. management do?
Find a way to widen the gap between cost and value.
Pioneer Pharma Inc. and GH Medicines Corp. are two competing firms in the pharmaceutical industry. While Pioneer Pharma Inc.'s vision is "to be a preeminent drug manufacturer in the industry," GH Medicines Corp.'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?
GH Medicines will be more flexible than Pioneer Pharma when adapting to changing environments.
Hannah is the Chief Operating Officer of the startup AppPalace. In which of the following scenarios does Hannah exhibit strategic leadership?
Hannah 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.
TriCorp is a major financial services corporation. With the CEO of TriCorp 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 TriCorp, 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.
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.
Soil and Sod Gardening Supplies 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.
The average cost of production for a bottle of vitamin water in the industry is $4 while its average price is $7. StoreAll Inc. manufactures the same product for $3 per bottle and sells it for $7 per bottle. Which of the following statements is most likely true of StoreAll Inc. in this scenario?
It has a competitive advantage in the industry.
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.
Yuki 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, Yuki is in ________ of the Level-5 leadership pyramid.
Level 2
Trung has been an employee with PureEnergy Inc. for 15 years. He started with an entry-level job, and today he is a manager of an entire division. Over the years, Trung 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 Trung has reached so far?
Level 4
As the strategic manager of CutRite 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 CutRite scissors as a higher-quality alternative and sell them for $15.
PowerPills 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.
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.
________ is best described as an integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage.
Strategic management
Lu runs a company that manufactures satellites for commercial and government use. It has few rivals. At the moment, the power of buyers, the power of suppliers, and the threat of substitutes are all low. Based on this information, what can Lu conclude?
The company is likely to be very profitable as long as the threat to entry is low.
Kimba Inc. 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.
Which of the following methods of developing a strategy best illustrates scenario planning?
The managers at Lyon Clothing Inc. formulated a strategy that is able to handle small to medium to large increases in the prices of cotton in the future.
Ivan is the founder of a firm producing self-driving vehicles. Because the industry is so new and chaotic, Ivan 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.
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.
Bethany 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.
Which of the following provides an example of what AFI strategy framework is used for?
Using AFI, the Gasquet Motor Company was able to implement a strategy that produced high-quality cars more efficiently and thereby reduced costs.
Which of the following scenarios illustrates a firm that has a sustainable competitive advantage?
Zhang Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years.
Which of the following best qualifies as a firm's internal stakeholder?
a manager taking care of the firm's operations in a foreign market
Which of the following is the best characterization of sociocultural forces?
a society's culture, norms, and values
Luz 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
When the strong dictatorial rule in Backenstein 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
Corporate executives at LikeReal, 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
business strategy.
If Zephyr Electronics obtains an 18 percent return on invested capital, which of the following will help determine if it has a competitive advantage over other pharmaceutical companies?
comparing the return to the return on invested capital obtained by other firms in the industry
A firm that achieves superior performance relative to other firms in the same industry or the industry average has a(n)
competitive advantage.
The pharmaceutical company Merck's new drug Vioxx was a blockbuster, generating revenues of $2.5 billion a year by 2002 and growing fast. When allegations that the drug caused heart attacks and strokes began to appear in the medical community, and that Merck had suppressed evidence about Vioxx's dangerous side effects from early clinical trials, Merck announced the voluntary withdrawal of Vioxx from the market. In this example, Merck provides an example of what can happen if a company deviates from its
core values.
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
While creating its AFI strategy framework, Valdez Consultants decided what markets the firm should compete in. By doing this, what type of strategy did the company devise?
corporate strategy
The first step to gain and sustain a competitive advantage is to
define a firm's vision, mission, and values.
In the pyramid of corporate social responsibility, ________ responsibilities are the foundational building block.
economic
The amount of xylene 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 considered a legal offense. Consequently, CW Paints Corp. has vouched to make its products as safe as possible. Therefore, it manufactures xylene-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 CW Paints Corp. primarily compromising in this scenario?
economic responsibilities toward its shareholders
The production head at the Omnitone Paint Company 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
The founder of T-Square Construction strongly believes in the notion of corporate social responsibility, so he has proposed a number of 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.
The interaction between a firm and its diverse internal and external stakeholders is best described as a(n)
exchange relationship.
Windmill Inc., a vendor, regularly supplies capacitors to Inland Electronics for use in its products. Therefore, Windmill Inc. is Inland Electronics'
external stakeholder.
A strategic group will typically include
firms within the same industry.
Strategies developed at the departmental level, such as the accounting, human resources, production, and marketing departments, within a strategic business unit are referred to as ________ strategies.
functional
The distribution department at Golden Grains Wheat Company 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
The best example of a firm's external stakeholder is a(n)
government agency that regulates the prices of products manufactured by the firm.
As a part of strategy formulation, a firm's functional strategy primarily concerns questions relating to
how to implement business strategy.
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
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 Futuretronics Inc. decided that the company would be launching a line of solar-powered tablets within the next two years. This would mean that the tablet division would need to immediately begin research and development efforts. Which of the following strategies in the planned emergence model does this best illustrate?
intended strategy
Green 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, Green Jeans could not assemble its products at a low-enough cost to offer the jeans at a price that was attractive to customers. Green Jeans' strategy failed because
it was not backed up with strategic commitments.
Economies of scale are cost advantages that accrue for firms with
larger output.
Which of the following is a macroeconomic factor that can affect a firm's strategy?
levels of employment
Quick Market 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 Quick Market. To accomplish this, they are using ________ to influence the political process.
lobbying forces
Jamie is a manager in an industry that has a few large players and that has remained relatively stable over the past few years. He finds out that legislators are proposing new laws to deregulate the industry. If the laws pass, which of these scenarios will Jamie most likely face?
many new competitors
Clear Calls Inc., a telephone service provider, has a large user base mainly because phone calls and messages between all Clear Calls users are free. When a person switches to a Clear Calls network, his or her entire network of family and friends is likely to switch to the same network to receive the benefit of free calls and messages. In addition, an existing user who gets a new user to register with Clear Calls Inc. is given a free wireless connection. This has helped to keep competition away from Clear Calls. In this scenario, which of the following factors is acting as an entry barrier for Clear Calls Inc.?
network effects
Magical Productions 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, Magical Productions is most likely functioning in a(n) ________ industry.
oligopolistic
Eon Inc., Electravia Inc., and FC Inc., the three largest firms in the consumer electronics industry, hold close to 85 percent of the industry's market share. These companies mainly compete against each other by providing unique features in their products rather than pricing them low. These firms are interdependent, and each firm must consider the strategic actions of its competitors. Which of the following industry competitive structures does this scenario best illustrate?
oligopoly
Three large firms dominate the telecommunication industry of United Canava: AD Telecom Inc., Mystic Telecom Corp., and Total Talk 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
During an AFI planning session, the managers of the Fukuhara 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
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.
Competitive rivalry based solely on ________ is destructive to firms as it transfers most of the value created in the industry to the customers.
price-cutting
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
InTex 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, InTex 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
Top-down strategic planning as an approach to the strategic management process will be most effective when the
size of the firm is large.
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.
BlueStainless 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 BlueStainless products. This scenario best illustrates the implementation of a
stakeholder strategy.
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
As the CEO of a conglomerate, Eva Morris 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, Eva has demonstrated
strategic leadership.
FindFor Inc. is an e-commerce retail firm that sells a variety of merchandise online. Through services like cash on delivery, easy return, and online tracking, the company has created more customer value than its competitors (brick-and-mortar businesses) at the same price. Also, the company's costs are substantially lower than its competitors because of minimal investments in operation and administration. In this scenario, FindFor Inc. has most likely been able to provide superior value and cost control through
strategic positioning.
Strategic thinking is different from strategic planning in that
strategic thinking includes all types of information sources while strategic planning does not.
Which of the following stages of the strategic management process involves an evaluation of a firm's external and internal environments?
strategy analysis
Zenya is the founder of an online service that allows users to rent out spare rooms in their homes. She has hired a number of 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
In ________, a firm frames a guiding policy to address the competitive challenge.
strategy formulation
Through ________, a firm puts its guiding policy into practice by employing a set of coherent actions.
strategy implementation
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
Powell Lighting was the first company to start selling LED light bulbs in its country—a product that gained popularity among diverse groups. Soon, other companies started to sell their own brands of LED bulbs, thereby giving Powell Lighting ample competition. In response, Powell Lighting decided to limit its LED light bulbs to outdoor models. However, it ensured that these models were the longest-lasting and lowest-priced on the market. With this innovation, Powell Lighting consistently outperformed its competitors for ten years. In this scenario, Powell Lighting maintained a ________ through its innovative strategy.
sustainable competitive advantage
Due to economic regression in Freedonia, the profitability of the large corporation Happiness Products Inc. (HPI) 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 HPI find it most easy to exit?
the e-commerce retail business, where investments on assets are low
The internet service provider industry in the country of Megalopolis is an industry characterized by the presence of strong network effects, high brand loyalty, high economies of scale, and proprietary technology among incumbent firms. Thus, in the internet service provider industry, the
threat of new entrants is most likely low.
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.
Which of the following vision statements is most likely to produce a sustainable competitive advantage for an auto dealership?
to help our customers find the perfect car for their individual needs.
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.
Molly Hue Apparels Inc. (MHA) had been outsourcing its production to less-developed countries in order to reduce its cost of production. With the emergence of its competitor, Hova Inc., MHA lost its competitive advantage. Hova had its production units in its home country that allowed the company to bring out the latest trends to the market earlier than MHA. Also, MHA frequently suffered due to political instability and lack of intellectual property laws in the outsourced countries. Thus, parts of MHA'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 Mabel Automobiles 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
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
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 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 summarizes the difference between corporate strategy and business strategy?
Corporate strategy deals with where to compete; business strategy deals with how to compete.
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"
Strategic commitments are actions that are
costly, long-term oriented, and difficult to reverse.
A traditional top-down strategic planning process typically begins with
strategic leaders adjusting a company's vision and mission based on environmental analysis.