MGT Exam 2 Review

What is the Pareto Principle?

80% of the effects come from 20% of the causes.

An air conditioner manufacturer, Hues Corp., decides to form a strategic alliance with a firm to source components that make up the highest percentage of total costs. Which of the following suppliers is it most likely to choose as a partner?

Fin Inc. which produces the compressors used in Hues air conditioners

Which one of the following types of inputs or activities does not qualify as a "strategic" input that merits forming an alliance relationship?

High value inputs or activities that comprise a low percentage of your total costs

_________ occurs when one partner tries to exploit the alliance-specific investments made by another partner.

Hold-up

What does H&M refer to as regarding risks of alliances? ___________ and ____________.

Hold-up, misrepresentation

Which of the following is an alliance between two firms that do not have a supplier-buyer relationship and are typically positioned at a common stage of the value chain?

Horizontal alliance

Teal Inc. forms a strategic alliance with White Corp. In their contract, they specify how governance issues, operating issues, and termination issues would be resolved. Which of the following is likely to be covered under the clause that deals with governance issues?

How profits will be split between Teal and White

About how much of the initial investment did Disney pay for Tokyo Disneyland? (Ch 8)

Less than 1%

Which of the following is NOT one of the types of inputs and activities that merit forming an alliance relationship?

Low value inputs or activities that make up a low percentage of your total costs

Which stage of the product/business/industry life cycle involves an increase in competitive rivalry and late majority buyers?

Maturity stage

The research and development department of a pharmaceutical company is in the process of developing a new drug to cure Parkinson's disease. It requires additional resources to complete the process. To convince another pharmaceutical company to provide the necessary resources, it gives false information about how long the drug has been in the developmental pipeline and the guidelines followed in the production process. Which of the following is being exemplified in this case?

Misrepresentation

Which of the following is a general cooperative arrangement in which two or more firms combine their resources and capabilities to create new value?

Strategic alliance

Which of the following terms represent a set of companies that compete in similar ways with similar business models pursuing similar sets of customers?

Strategic group

When a large percentage of free users are willing to convert to paid customers for premium features it is called a __________.

high conversion rate

When one partner tries to exploit the alliance-specific investments made by another partner it is called ________.

hold-up

Building on a firm's established knowledge base to create minor improvements to the product or service a firm offers is known as __________.

incremental innovation

Nathan, a designer at Zeal Inc., comes up with a new idea. While Nathan considers turning it into a piece of art, Ricky, his colleague, suggests converting the idea into a product that generates revenue. Ricky's suggestion to convert the idea into a revenue-generating product refers to a(n) ___________.

innovation

In the ___________ of the product/business/industry life cycle, a company attempts to attract new types of buyers who are willing to try out the latest new gadgets.

introduction stage

The most common way to distinguish one type of alliance from another is by the _________.

mechanism used to govern the alliance

The approach, or pricing strategy, a company uses to get paid for the value it delivers through its business model is called the ___________.

revenue model

Paws Corp., a manufacturer of pet products, tries to get a few customers to try out their products. The primary goal of the organization is to get some reference customers that will seed future growth to increase market acceptance. In this case, the organization is in the ___________ stage of the product life cycle.

introduction

Which of the following statements is true of the maturity stage of an industry's life cycle?

Growth starts to slow as total market penetration increases.

_______________ is the creation of a unique or novel concept.

Invention

Which of the following statements refers to incremental innovation?

It can be described as building on a firm's established knowledge base to create minor improvements to the product or service a firm offers.

Identify a true statement about the innovative strategy of disintermediation.

It involves reconfiguring the value chain to eliminate activities or steps.

Timber Inc. enters an exclusive partnership to ally with Teal Corp. in order to enter a foreign market. Which of the following statements is likely to be true in this case?

Timber is likely to acquire an activity or input from Teal to create a new value.

A vertical alliance is between firms who are positioned at different stages along the value chain. (T/F)

True

Companies have three choices when it comes to conducting any particular activity that needs to be done to offer a product or service to a customer: make, buy, or ally. (T/F)

True

The only true way to protect against misrepresentation is to partner with trustworthy individuals. (T/F)

True

Which of the following is one of the three criteria of an innovation presented in the animation?

Useful

Zeal Inc., a software firm, decides to enter the publishing industry. While it has the financial resources required to enter the new market, it lacks the expertise and technical knowledge required to establish itself in the new industry. So, Zeal Inc. enters into strategic alliance with Chrome Corp., a leading e-publisher. Which of the following is likely to be true in this case?

Zeal and Chrome are likely to cooperate even at the stage of research and development.

High conversion rate refers to ___________.

a high percentage of free users who are willing to convert to paid customers for premium features

Palm's, a new restaurant in Boston, enters the market with a new strategy. Cooking enthusiasts can co-create a dish for their family along with the in-house chefs. They also allow families to cook their meals together and dine by the poolside. None of the other restaurants in the city offers this unique service. This is an example of a ___________.

blue ocean strategy

The dominant logic of Netflix vs Blockbuster was to ________.

eliminate retail stores and ship directly to the customer

A(n) _________ occurs when the collaborating firms in an alliance supplement contract with equity holdings in their alliance partners.

equity alliance

Governance clauses include _________.

equity clauses

An alliance is likely to rely most on relationships between individuals when it is based on _________.

goodwill trust

Peach Corp. continues to refine its chocolate products even as they look for innovative ways to reach customers through marketing and new distribution channels. In this case, the organization is in the ___________ stage of the product life cycle.

growth

In the ___________ of the product/business/industry life cycle, sales begin to accelerate as innovation gains traction and increased market acceptance.

growth stage

An alliance between firms who are positioned at different stages along the value chain, such as a supplier and a buyer, is called a _________.

vertical alliance

A cell phone manufacturing company gives away a free case with a purchase of any product higher than $50. Which of the following is being exemplified in this case?

A bundling strategy

Borpon Inc. and Biocolog Corp. are well-established biotechnology companies. They enter into a strategic alliance in which they create and own a legally independent company. The new company is created from resources and assets contributed by the parent firms. Revenues, expenses, and profits are equally shared by both firms. Which of the following strategic alliances is adopted by Borpon and Biocolog?

A joint venture

Sepia Inc., a fertilizer company, needs permission to test its new products on plantations owned by an agro-based industry. In return, the company is willing to pay a percentage of revenue to the agro-based industry. In this case, which of the following contractual alliances should be adopted by Sepia?

A licensing agreement

John requires 500 shirts of a particular fabric and quality. He partners with Loumang Inc., a fabric manufacturing company, to develop certain customized inputs. Which of the following is being exemplified in this scenario?

A supply agreement

Which of the following is not an example of how a company can increase trust in a partnership to decrease the risks of an alliance?

All of these are examples for increasing trust (personal trust, shared ownership/financial collateral bonds, legal contracts)

Which of the following companies uses the strategy of "Eliminating a Step in the Value Chain"?

Amazon

Which of the following is not an example of a company that uses/has used the strategy of Low End Disruptive Innovation?

Amazon

Inks Corp. is a manufacturer of pens. It creates a new product called Quink, a quick-drying ink pen that does not require the use of blotting paper. It creates this product by building on its established knowledge of the properties of ink and the mechanisms of a pen. Which of the following innovations is being exemplified in this case?

An incremental innovation

Creating new demand in an uncontested marketplace is a(n) ____________.

Blue Ocean Strategy

Which of the following involves creating new demand in an uncontested market space?

Blue ocean strategy

Which of the following are ways a firm can take advantage of another firm in an alliance?

Both misrepresentation and hold-up

Why should a company create a strategic alliance with one or more other companies?

Both to differentiate more from competitors and to combine resources and capabilities to create new value

Identify a way firms create value through alliance.

By combining unique resources

Green Dye Inc., a manufacturing firm that produces organic products, is approached by Zoe, a leading clothes designer owning her own label. Together, they create a line of clothes using organic dye and fabric made from pure cotton. Which of the following is likely to be the primary value created by this alliance?

Combining unique resources along different stages of the value chain

Which of the following is not one of the innovative strategies presented in the animation?

Differentiation

What classification of strategy best describes the strategy deployed by Netflix to take on Blockbuster?

Disruptive

What is not part of the definition of innovation according to the text?

Disruptive

___________ is when companies in the same industry find the innovation so unsettling that they can no longer do business as usual.

Disruptive innovation

Which one of the following is NOT one of the basic alliance arrangements?

Equal alliance

A contractual alliance involves writing a contract that describes how much equity each partner receives. (T/F)

False

Alliance-specific resources are owned by one partner, but never jointly held. (T/F)

False

Alliances haven't show to be profitable. (T/F)

False

Disruptive innovation is incremental improvement that disrupts radical innovations. (T/F)

False

Studies show that over 75% of alliances succeed. (T/F)

False

The introduction stage of the product/business/industry life cycle is often initiated by new products entering the market that cause demand to fall. (T/F)

False

The secret to a blue ocean strategy is to provide a valuable free service that attracts either a very large community of product users that can then be segmented in a particular way for advertisers or a targeted community of users that comprises a customer segment, or group of individuals similar on a key dimension.

False

To achieve economies of scale in a strategic alliance, two or more companies combine unique resources. (T/F)

False

Which of the following statements is true about how an arm's-length relationship is used in strategic alliance?

Firms use the arm's-length relationship to purchase inputs at the lowest price.

Gem Inc. a clothing manufacturer, creates a new strategy to increase its customer base. Maya, a marketing student, observes that Gem engages in disintermediation, while Nate, her friend, believes that this observation is incorrect. Which of the following statements is likely to support Maya's observation?

Gem is likely to eliminate middlemen and directly deliver products to customers.

___________ refers to Professor Rich's argument that competitive intensity has increased, and that periods of competitive advantage have decreased.

Hypercompetition

Which of the following statements is true about strategic alliances?

In strategic alliances, companies may choose to cooperate at any stage along the value chain.

Which of the following is not one of the four ways to create value in an alliance/partnership?

Increase transaction costs

_______________ is the conversion of invention into a product, process, or business model that generates revenue and profits.

Innovation

Which of the following statements is true of the blue ocean strategy?

It creates new demand in an uncontested market space.

Which of the following statements is a characteristic of a disruptive innovation?

It disturbs an existing market by displacing an earlier technology.

Which of the following statements is true of a firm that creates a radical innovation?

It employs a fundamentally different business model than its rivals.

Which of the following statements best describes a strategic alliance?

It is a cooperative arrangement in which two or more firms combine their resources and capabilities to create new value.

Ochre Inc. uses the freemium strategy to enter a market. This strategy becomes successful and the organization gains a wide customer base. Which of the following is likely to be true in this case?

It is likely to gain a wide customer base only if there is a high conversion rate.

Which of the following statements is true of an incremental innovation?

It sustains a company's current product offering and revenues.

IM Flash is what type of alliance? (Ch 8)

Joint venture

Which of the following occurs when one partner in an alliance creates false expectations about the resources it brings to the relationship or fails to deliver what it originally promised?

Misrepresentation

_________ occurs when one partner in an alliance creates false expectations about the resources it brings to the relationship or fails to deliver what it originally promised.

Misrepresentation

Which of the following is not an incremental innovation?

Netflix versus Blockbuster

The name of the Japanese company that Disney partnered with to create Tokyo Disneyland is (Ch 8)

OL

An organization forms an alliance contract. It specifies in detail the duties and obligations of each of the partners, how the profits are to be split by the partners, and the process by which disputes will be resolved. Which of the following clauses is likely to cover the duties and obligations of the partners, including warranties and minimum output levels required to satisfy the contract?

Performance clause

________ logic behind how the company is trying to deliver unique value to customers is defined as dominant logic.

Primary

Which of the following is not a category of Innovative Strategies?

Radical Innovations

__________ draws on a different knowledge base, technologies, or methods to deliver value in a truly unique way.

Radical innovation

Copper Inc., an existing clothing outlet, decides to shift from direct to online retailing. It offers the same products at a reduced price as it does not have to incur the costs to manage a store. In this case, which of the following patterns of innovative strategies has Copper adopted?

Reconfiguring the value chain to eliminate activities

Two organizations that are positioned at different stages along the value chain form an alliance. The contract includes the conditions under which the contract will be closed and the consequences of closure for each partner. Which of the following clauses specifies the above conditions?

Termination clauses

Which of the following describes an approach, or pricing strategy, a company uses to get paid for the value it delivers through its business model?

The Revenue Model

Which of the following statements is true about firms in a joint venture?

The parent firms share revenues and expenses in a particular ratio.

Alliances create value if they _________.

combine unique resources

A(n) _________ is one where two or more firms write a contract to govern their relationship and ownership is shared between the companies.

contractual alliance

Toyota's seat supplier built its factory next door to Toyota's main factory and built a conveyor belt that transferred seats from the supplier into the Toyota factory. This is an example of _____________.

creating alliance specific resources

Companies have developed tools to use across the lifecycle of an alliance. During the partner assessment and selection stage, tools to use include the _________.

due diligence team

A salon that specializes in haircuts comes up with a new service that sets it apart from those of its rivals. Clients are requested to send in their photographs; the stylists then create a set of digital images with various looks. Once the client chooses a desired look, a stylist goes to the client's home to deliver the service. The strategy of creating digital images, which requires a unique set of resources and skills, is an example of a(n) ___________.

radical innovation

Drew's Cafe Inc. and Cuppa Corp., two local coffee chains, combine resources to enter the global market. They retain their individual ownership; however, they agree to share production facilities and manpower, and they also decide to market their products through combined promotional tools. The arrangement made by the two retail chains to combine resources and collaborate for a common objective refers to a _________.

strategic alliance

Providing free products to a community of users as a method of generating revenue from a third party who pay to access those users is known as a(n) __________.

third-party pay strategy