MGT Practice Questions

The downside of equity alliances is A. the weaker ties and reduced trust between partners. B. the amount of investment that can be involved. C. that the alliances cannot be abandoned if not promising. D. that they are not useful stepping-stones toward full integration of the partner firms.

B. the amount of investment that can be involved.

Which of the following is an example of an external transaction cost? A. the cost of setting up a production unit B. the cost of searching for a contract manufacturer C. the cost of recruiting and retaining employees D. the cost of maintaining plant and machinery

B. the cost of searching for a contract manufacturer

A firm's resource is most likely to be an internal strength and a core competency when the resource is A. valuable but common. B. valuable and costly to imitate. C. easily accessible and mobile. D. easy to substitute.

B. valuable and costly to imitate.

Which of the following is a key question managers must answer to formulate an appropriate business-level strategy?

B. How will we satisfy our customer needs?

A watchmaking 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? A. $150 B. $180 C. $170 D. $210

C. $170

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? A. $250 B. $200 C. $180 D. $100

C. $180

The Securities and Exchange Commission (SEC) makes all financial reports filed by public companies available electronically via the _____ database. A. GAAP B. JASON C. EDGAR D. PARMER

C. EDGAR

Which of the following lists the stages of the industry life cycle in the correct order? A. introduction, growth, shakeout, maturity, and decline B. introduction, shakeout, growth, maturity, and decline C. introduction, growth, maturity, shakeout, and decline D. introduction, shakeout, maturity, growth, and decline

A. introduction, growth, shakeout, maturity, and decline

United Borova Laboratories Inc. has a national competitive advantage in the pharmaceutical industry. This means that the country A. is a world leader in the pharmaceutical industry. B. has nationalized the pharmaceutical industry. C. has low levels of competition, providing other multinational companies with an opportunity to take over the pharmaceutical industry. D. is a potential foreign market for multinational pharmaceutical companies to sell their products.

A. is a world leader in the pharmaceutical industry.

McDonald's uses mutton instead of beef in India and offers teriyaki burgers in Japan. Which of the following strategies is the fast-food chain pursuing? A. multidomestic strategy B. focused differentiation strategy C. global-standardization strategy D. international strategy

A. multidomestic strategy

Ethics is A. not synonymous with law. B. impossible to codify into law. C. always universal and cannot differ between cultures. D. the minimum acceptable standard in business practice.

A. not synonymous with law.

SWA has enjoyed a sustained competitive advantage, allowing it to outperform its competitors over several decades. Continental and Delta attempted to copy SWA with their offerings of Continental Lite and Song, respectively. Neither Continental nor Delta, however, was able to successfully imitate the resource bundles and firm capabilities that make SWA unique. Which of the following is this case an example of? A. resource immobility B. resource heterogeneity C. resource mobility D. resource homogeneity

A. resource immobility

Employees learn about an organization's culture through the process of A. socialization. B. exploitation. C. co-opetition. D. acculturation.

A. socialization.

During the process of formulating an effective business model, a firm's managers should first A. transform their strategy of how to compete into a blueprint of actions and initiatives. B. implement their strategy at corporate, strategic business unit, and functional levels. C. implement their blueprint of actions and initiatives through structures, processes, culture, and procedures. D. evaluate the firm's strategy already in effect and take corrective actions if necessary.

A. transform their strategy of how to compete into a blueprint of actions and initiatives.

Tangles Costume Jewelry offers slightly lowerquality merchandise than competitors at a much lower price. What strategy is Tangles using?

A. cost-leadership

A firm experiences _____ when there are increases in cost per unit as output increases.

A. diseconomies of scale

A blue ocean strategy differs from a low-cost strategy in that

A. the intent of a blue ocean strategy is not to be the absolute lowest-cost provider because a blue ocean must also increase perceived value.

What best describes transferability of investor ownership in a public stock company? A. Investors can give out company stocks as a gift. B. Investors are allowed to trade shares of stocks. C. Investors are allowed to participate in strategy formulation. D. Investors can be hired as employees.

B. Investors are allowed to trade shares of stocks.

Which of the following is not true of risk capital? A. From the shareholders' perspective, the measure of competitive advantage is primarily based on return on their risk capital. B. Risk capital invested in a firm can be legally recovered if the firm goes bankrupt. C. A person who provides capital to a firm gets equity shares in return. D. Return on risk capital includes stock price appreciation plus dividends received over a specific period.

B. Risk capital invested in a firm can be legally recovered if the firm goes bankrupt.

Terranova Autos Inc., a large automobile company, made an initial small investment in a start-up company that was developing a solar-powered car. This gave Terranova Autos controlling interests in the start-up company. However, Terranova Autos had no obligations to make continued investments in the experiments of the start-up company. It could invest in small amounts depending on the new product's success at each stage of its development. If the product proved to be successful, Terranova Autos would have the right to buy out the start-up company. This approach to strategic alliance is referred to as A. a break-even analysis. B. a real-options perspective. C. credible commitment. D. transaction cost economics.

B. a real-options perspective.

Raj is a recent graduate who states that he has interned at a major accounting firm so that his value as a candidate for employment increases. A start-up recruits Raj based on his stated credentials without verifying them. Two days into the job, Raj's team lead realizes that Raj does not know much of what he claimed to know during the interview. This scenario best exemplifies A. moral hazard. B. adverse selection. C. shared value creation. D. corporate governance.

B. adverse selection.

A(n) _____ organization always attempts to balance and harness different activities in trade-off situations. A. centralized B. ambidextrous C. mechanistic D. formalized

B. ambidextrous

Which of the following best illustrates a process innovation as opposed to product innovation? A. a consumer electronics company developing a new generation of tablet computers B. an automobile company using computer-aided design in its production C. a consumer electronics company launching 3-D televisions D. an automobile company commercializing electric cars

B. an automobile company using computer-aided design in its production

Unlike the financial ratios based on accounting data, total return to shareholders is A. backward-looking and historic in nature. B. an external performance metric. C. an absolute measure of competitive advantage. D. unaffected by market volatility or macroeconomic factors.

B. an external performance metric.

Which of the following would be the result of product innovation? A. a new system for shipping large packages B. an inexpensive, high-quality refrigerator C. an inexpensive method of producing bicycle wheels D. a new technology for Internet servers

B. an inexpensive, high-quality refrigerator

How does a firm capture its producer surplus for a good or service? A. as cost per unit sold B. as profit per unit sold C. as earnings per share D. as market price per share

B. as profit per unit sold

The _____ is the centerpiece of corporate governance and is composed of inside and outside members. A. institutional investors group B. board of directors C. group of shareholders D. scientific advisory board

B. board of directors

Which of the following is an important internal corporate-governance mechanism? A. shareholder capitalism B. board of directors C. market for corporate control D. activist investors

B. board of directors

The value a consumer attaches to a product or service is captured in the A. least price a consumer is willing to pay for it. B. consumer's maximum willingness to pay for it. C. expenses incurred by the firm in manufacturing it. D. difference between the price charged for it and the cost to produce it.

B. consumer's maximum willingness to pay for it

A resource-based view of a firm provides a model that systematically aids in identifying A. related competencies. B. core competencies. C. competitive disadvantage. D. competitive parity.

B. core competencies.

By selling a laptop 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 A. opportunity cost. B. economic value created. C. reservation price. D. consumer surplus.

B. economic value created.

Monica's Cosmetics Inc. has a functional structure that is flexible enough to allow it to leverage its brand name across different products. By doing this, Monica's is reaping ____ from its core competencies. A. economies of scale B. economies of scope C. diversification D. centralization

B. economies of scope

The leading producer of gardening tools, YourGarden Inc, has achieved great success because they produce high-quality tools that are not too expensive. Even so, another company that produces lower-quality tools at the same price has also achieved some success, but not as much as YourGarden. Also, in general, the price of gardening tools has declined because of economies of scale and learning. In addition, YourGarden has added complementary assets, such as gardening instruction. Considering all of these factors, the gardening tool industry is most likely in the A. introduction stage. B. growth stage. C. shakeout stage. D. maturity stage.

B. growth stage.

Intel's Celeron chip and Atom chip are initiatives to A. introduce a new product in a new market to extend its leadership. B. guard the company against disruptive innovation by protecting the low end of the market. C. stall its own disruption strategies and wait for its rivals to introduce disruptive forces. D. target that section of the market that is not particularly price sensitive.

B. guard the company against disruptive innovation by protecting the low end of the market.

General Electric (GE) disrupted itself in the healthcare industry by A. replacing the top levels of the executive hierarchy. B. introducing inexpensive and smaller diagnostic devices in developing countries. C. saturating the global market with multiple diagnostic devices. D. targeting the comparatively less price-sensitive sections of the market.

B. introducing inexpensive and smaller diagnostic devices in developing countries.

McDonald's operates Hamburger University that trains students to ensure consistent food quality across its outlets throughout the world. This indicates that McDonalds's A. is organic in nature. B. is mechanistic in nature. C. has an informal structure. D. has a decentralized structure.

B. is mechanistic in nature.

A firm is said to be pursuing a polycentric innovation strategy when A. its research facility is situated in the headquarters and all other business activities are located around the world. B. it draws from multiple, equally important research facilities located throughout the world. C. it restricts its innovation to Western economies and production to developing markets. D. its knowledge flow takes a one-way path—from its headquarters to the subsidiaries.

B. it draws from multiple, equally important research facilities located throughout the world.

The day-to-day operations of a publicly traded company are conducted by A. people who own the company, such as shareholders. B. its managers and lower-level employees. C. people who finance the company, such as investors. D. the CEO and the board of directors.

B. its managers and lower-level employees.

When entering new geographic markets, some governments, such as those of Saudi Arabia and China, require that foreign firms have a local A. market partner. B. joint venture partner. C. strategic alliance partner. D. merger partner.

B. joint venture partner.

Ridemore Autos Inc. has shifted its research and development unit from its home country to Germany. This allows the company to be better informed about the latest developments in the automotive industry by tapping into the highly advanced automotive industry in Germany. In this scenario, Ridemore Autos Inc. is reaping the benefits of A. economies of scope. B. location economies. C. resource immobility. D. resource ambiguity.

B. location economies.

Which of the following shows founder imprinting? A. A company's founder defines and shapes her organization; the founder dies; the influence of the founder on the organization's culture persists for decades. B. A company's founder defines and shapes her organization; the founder dies; the influence of the founder on the organization's culture changes after a few years. C. A company's founder strongly influences her organization; the founder sells the company; the organization's culture changes despite resistance from some employees. D. A company's founder strongly influences her organization; the founder sells the company; the organization's culture changes after it is sold again in five years.

A. A company's founder defines and shapes her organization; the founder dies; the influence of the founder on the organization's culture persists for decades.

Who appoints the board of directors in a public stock company? A. auditors B. shareholders C. employees D. CEOs

B. shareholders

Vijay is a firm believer in Milton Friedman's view of a firm's social obligations. With which of the following statements is Vijay most likely to agree? A. Businesses can use their resources to create profit as long as they do so within the rules of the game. B. Firms should not go beyond their economic responsibility to increase profits. C. Firms should define value creation more narrowly in terms of financial performance. D. Businesses should engage in open and free competition without deception or fraud, only as long as their competitors do so.

A. Businesses can use their resources to create profit as long as they do so within the rules of the game.

Grey Designs Inc., a graphic design firm, has offices in New York, Texas, California, New Mexico, and New Jersey. Each of these offices is headed by a president who reports directly to Charles Grey, the CEO. The heads of the centralized HR, Finance, and Marketing teams report to Charles Grey as well. Managers in the various offices also report to the CEO directly. Based on this information, which of the following statements is most likely to be true? A. Charles Grey has a wide span of control. B. Grey Designs Inc. has a tall hierarchical structure. C. Charles Grey is underworked. D. Grey Designs Inc. is a mechanistic organization.

A. Charles Grey has a wide span of control.

Which of the following key assumptions are innovations like Procter & Gamble's "Connect + Develop" based on? A. Combining the best of internal and external R&D will more likely lead to a competitive advantage. B. Almost 40 percent of sales comes from 80 percent of product selection found in the short head. C. The low end of a market is highly vulnerable to competitive attacks. D. Since the best people, the smartest people in the industry work for P&G, the best discoveries must be invented at P&G.

A. Combining the best of internal and external R&D will more likely lead to a competitive advantage.

A high degree of formalization in an organization is most likely to A. improve customer service. B. slow down decision making. C. produce inconsistent results. D. increase creativity and innovation.

B. slow down decision making.

The share price of Groupon, a daily-deal website, fell by 90 percent just a year after its successful initial public offering. The firm was not able to sustain its competitive advantage because of the emergence of other daily-deal sites that were able to better serve the needs of local markets and specific population groups. Which of the following is the most accurate inference from this example? A. Groupon's competency was not hard to imitate. B. Groupon's competency was built more on an intangible resource than on a tangible one. C. Groupon operated in an industry where the barriers to entry were high. D. Groupon invested in resources that were invaluable and common.

A. Groupon's competency was not hard to imitate.

Which of the following best explains why IBM has been able to maintain its competitive advantage? A. IBM successfully transformed itself multiple times in the data information industry over a period of more than 100 years. B. IBM hired a new CEO to refocus the company on satisfying market needs, which demanded IT services. C. IBM focused on producing mainframe and mini-computers that would be produced by fully integrated companies. D. IBM helped kick-start the PC revolution in 1981 by setting an open standard in the computer industry with the introduction of the IBM PC.

A. IBM successfully transformed itself multiple times in the data information industry over a period of more than 100 years.

Which of the following is an advantage of using a functional structure when pursuing a cost-leadership strategy? A. It allows a cost-leader to upgrade core competencies in manufacturing and logistics. B. It enables a cost-leader to build products that are different from its competitors' offerings. C. It enables a cost-leader to increase costs above that of its competitors. D. It allows a cost-leader to operate in a decentralized organizational structure.

A. It allows a cost-leader to upgrade core competencies in manufacturing and logistics.

Which of the following statements is true of an international strategy? A. It enables firms to leverage their home-based core competencies in foreign markets. B. It is advantageous when firms face high pressures for both local responsiveness and cost reductions. C. It relies on joint ventures to reap economies of scale by accessing a larger market. D. It effectively protects a firm from exchange rate fluctuations.

A. It enables firms to leverage their home-based core competencies in foreign markets.

Which of the following statements accurately describes a firm's resource flow? A. It is the firm's level of investments to maintain or build a resource. B. It is the firm's current level of intangible resources. C. It is the firm's current level of tangible resources that are common to other firms. D. It is the firm's level of expertise to efficiently deploy a valuable resource.

A. It is the firm's level of investments to maintain or build a resource.

What was Goldman Sachs' rebuttal to SEC's claim that it defrauded investors? A. It is up to the clients to assess the risks involved in any investments. B. Fabrice Tourre was responsible for putting the deal together, and it was the lapse of an individual, not the entire firm. C. John Paulson did not reveal his intentions behind creating Abacus. D. Goldman Sachs' itself lost $100 million in the deal.

A. It is up to the clients to assess the risks involved in any investments.

How does causal ambiguity act as an isolating mechanism for organizations? A. It makes it difficult for the competitors to understand why a company has been so successful. B. It creates a situation in which different social and business systems interact with one another. C. It makes it difficult for competitors to deploy their resources by creating ambiguity within their organizational structures. D. It makes it difficult for competitors to imitate core competencies quickly due to time compression diseconomies.

A. It makes it difficult for the competitors to understand why a company has been so successful.

_____ are best described as situations in which both partners in a strategic alliance are motivated to form an alliance for learning, but the rate at which the firms learn may vary. A. Learning races B. Learning networks C. Learning effects D. Learning matrices

A. Learning races

The key objective for firms during the growth phase is to A. invest as many resources as possible in product innovations. B. stake out a strong strategic position not easily imitated by rivals. C. pursue a harvest strategy. D. reduce their network effects.

B. stake out a strong strategic position not easily imitated by rivals.

Which of the following best exemplifies the use of input controls? A. McDonald's use of standard operating procedures B. GM's use of the multidivisional strategy C. Zappos' use of monitoring-free customer service calls D. Southwest Airline's use of employee friendliness

A. McDonald's use of standard operating procedures

Dream Slope Inc. is a leader in producing winter sports equipment, including skis and skates. Recently, the firm decided to expand into the bobsled market and acquired Sleek Phantom Inc. This company produced bobsleds, but its sales had slowed. The managers of Dream Slope convinced themselves that they were able to manage the business of Sleek Phantom more effectively even though they had no experience in the bobsled market. However, this move backfired and the sale of Sleek Phantom's bobsleds plummeted. Which of the following terms is often used to describe this scenario? A. managerial disadvantage B. managerial hubris C. managerial sympathy D. managerial empathy

B. managerial hubris

Why did Quaker Oats Company's acquisition of Snapple fail? A. strong competitive disadvantage B. managerial hubris C. inferior acquisitions ability D. shareholder unrest

B. managerial hubris

_____ indicates how much a firm benefits from interest-free loans extended by its suppliers and creditors. A. Payables turnover B. Receivables turnover C. Assets turnover D. Inventory turnover

A. Payables turnover

Which of the conditions prevail when an industry is at the end of its life cycle? A. The level of process innovation reaches its maximum as firms attempt to lower cost. B. The industry structure is perfectly competitive with a large number of buyers and sellers. C. The strategic objectives of businesses will involve gaining market acceptance. D. The market reaches its maximum size at this stage.

A. The level of process innovation reaches its maximum as firms attempt to lower cost.

_____ describes the degree to which a task is divided into separate jobs. A. Hierarchy B. Formalization C. Centralization D. Specialization

D. Specialization

How has Apple been able to sustain its competitive advantage in the smartphone industry? A. by reducing its network effects B. by targeting its new products and services toward laggards C. by driving the price for the end user to zero D. by regularly introducing incremental improvements in its products

D. by regularly introducing incremental improvements in its products

What is the term used to describe a situation in which a manager of a company has more inside information than an investor of the company? A. insider monopoly B. stakeholder strategy C. moral hazard D. information asymmetry

D. information asymmetry

Which of the following is primarily a value driver?

D. complements

Which of the following stages of the strategic management process involves an evaluation of a firm's external and internal environments? A. Strategy analysis B. Strategy implementation C. Strategy formulation D. Strategy control

a

_____ is best described as cooperation by competitors to achieve a strategic objective. A. Co-opetition B. Conglomeration C. Amalgamation D. Liquidation

a

Cocoa Noir Inc., a company that manufactures chocolates, incurs higher costs because of its refusal to import cocoa beans from countries where child labor is prevalent. This reflects Cocoa Noir's _____ responsibility. A. economic B. legal C. ethical D. demographic

c

Which of the following is an implication of all firms in an industry pursuing a low-cost position through application of competitive benchmarking? A. No firm would face direct competition from others in the industry; hence, profit potential would be high. B. Each firm would be catering to a different customer segment. C. The firms would eventually have no resources to invest in product and process improvements. D. Each firm would be in a better position to gain a competitive advantage.

c

A fragmented industry is made into a consolidated industry through: A. governmental deregulation. B. globalization. C. technological innovation and new legislation. D. horizontal mergers and acquisitions.

d

In the United States, the time period for the right to exclude others from the use of a patented technology is _____ from the filing date of a patent application. A. 20 years B. 25 months C. 15 months D. 25 years

A. 20 years

The working capital of a small home-based business is $200,000. The revenues generated account to $600,000, and the profits incurred are $300,000. What would be the company's working capital turnover? A. 3, that is, $600,000/$200,000 B. $300,000, that is, $600,000 - $300,000 C. 2, that is, $600,000/$300,000 D. $100,000, that is, $300,000 - $200,000

A. 3, that is, $600,000/$200,000

Which of the following best illustrates forward vertical integration? A. A firm that manufactures and sells car engines to major automobile companies launches its own line of cars. B. A chain of ice cream parlors launches a brand of toys and accessories for children. C. A multinational coffee chain sources its coffee beans from plantations in Brazil and Vietnam. D. A designer shoe company that previously purchased leather from external suppliers establishes its own leather tannery.

A. A firm that manufactures and sells car engines to major automobile companies launches its own line of cars.

Which of the following statements fails to bring out the essence of the dynamic capabilities perspective? A. A firm's competitive advantage is derived from static resource or market advantages. B. A firm must be able to change its resource base as the external environment changes in order to sustain its competitive advantage. C. A firm should modify its core competencies to effectively compete in dynamic markets. D. A firm's external environment is rarely stable, and in many industries, change is fast and ferocious.

A. A firm's competitive advantage is derived from static resource or market advantages

Why must managers use a mechanistic structure to implement a cost-leadership strategy? A. A mechanistic structure offers a centralized structure with well-defined lines of authority. B. A mechanistic structure allows for a lower degree of specialization. C. A mechanistic structure offers continuous innovation and flexibility as well as creativity. D. A mechanistic structure allows for the CEO to delegate tasks.

A. A mechanistic structure offers a centralized structure with well-defined lines of authority

Which of the following best defines duality in a board of directors? A. A person holds both the role of CEO and chairperson of the board. B. A person holds both the role of inside director and outside director of the board. C. A person holds both the role of director and shareholder of the company. D. A person holds the role of CEO on the boards of two companies.

A. A person holds both the role of CEO and chairperson of the board.

Which of the following is true of acquisitions? A. Acquisitions can be friendly or hostile. B. Acquisitions can occur only when the involved entities are of comparable size. C. In acquisitions, two independent companies join to form a separate third entity. D. Acquisitions increase the competitive intensity in an industry.

A. Acquisitions can be friendly or hostile.

In 2014, Apple turned over its inventory more than 53 times. In stark contrast, Microsoft turned over its inventory only about 10 times during the year. Which of the following best explains this difference? A. Apple had a more effective management of its global supply chain than Microsoft. B. Microsoft had a stronger demand for its tablet computer than Apple did for its tablet computer. C. Apple operated its own production facilities and therefore had lower production costs than Microsoft. D. Microsoft had production facilities in countries with lower production costs than Apple.

A. Apple had a more effective management of its global supply chain than Microsoft.

Although long-standing enemies, Apple and IBM formed an alliance partnership. How did this partnership benefit both Apple and IBM? A. Apple's core competency with consumer services and IBM's core competency with business services complemented each other. B. Apple's core competency with business services and IBM's core competency with consumer services complemented each other. C. Apple's core competency with marketing and IBM's core competency with manufacturing complemented each other. D. Apple's core competency with manufacturing and IBM's core competency with marketing complemented each other.

A. Apple's core competency with consumer services and IBM's core competency with business services complemented each other.

Which of the following real-world scenarios best exemplifies information asymmetry in a public stock company? A. Based on a tip-off by a Goldman Sachs employee, the Galleon Group was able to sell its holdings in Goldman Sachs' stocks prior to the announcement. B. GE knew that it could create a profitable venture out of producing green products, so it rolled out the ecomagination strategy. C. Mark Hurd, CEO of HP, was unaware of the sexual harassment allegations, and the board's demand for him to resign caught him by surprise. D. Goldman Sachs was party to the Abacus deal despite knowing its shortcomings.

A. Based on a tip-off by a Goldman Sachs employee, the Galleon Group was able to sell its holdings in Goldman Sachs' stocks prior to the announcement.

Which of the following provides an example of a common drawback of a functional strategy? A. Bert had a difficult time communicating efficiently with the manager of another department. B. Marietta was surprised about the inflexibility of her firm when it rejected her marketing plan. C. Juan's manager dismissed his idea because it was too innovative. D. Mary did not accept the position with the firm because it has an ineffective cost-leadership strategy.

A. Bert had a difficult time communicating efficiently with the manager of another department.

Which of the following is true of business ethics? A. Certain notions such as fairness, honesty, and reciprocity are universal norms. B. Business ethics is an agreed-upon code of conduct in business, based on laws. C. The perception of what is ethical and what is not is similar across different cultures. D. Business ethics needs to be codified into law in order to be followed.

A. Certain notions such as fairness, honesty, and reciprocity are universal norms.

_____, which are incurred when pursuing a related-diversification strategy, are a function of the number, size, and types of businesses that are linked to one another. A. Coordination costs B. Fixed costs C. Agency costs D. Network costs

A. Coordination costs

_____ are best described as equity investments by large established firms making in entrepreneurial ventures to gain access to new, and potentially disruptive, technologies. A. Corporate venture capital investments B. Greenfield ventures C. Joint ventures D. Loan sharks

A. Corporate venture capital investments

Susan is a strategist for the firm, DigiVision Inc., which produces high-quality HD movie cameras. This company needs a specific material for a new camera they are developing, which is manufactured in large quantities by a competitor called Tech Resources Inc. However, this material is difficult to trade for. Because of this, which of the following is most likely the best strategy for Susan to suggest? A. DigiVision should acquire Tech Resources. B. DigiVision should form a short-term agreement with Tech Resources. C. DigiVision should form a long-term agreement with Tech Resources. D. DigiVision should enter into co-opetition with Tech Resources.

A. DigiVision should acquire Tech Resources.

Why does Michael Porter recommend expanding the customer base of an organization in terms of the shared value creation framework? A. Doing so could yield significant business opportunities that could improve the standard of living of the poor. B. Doing so is the best way to ensure that shareholders have the most legitimate claim on profits made by the organization. C. Doing so could be the only way to meet stockholder expectations in a highly competitive market. D. Doing so will help to prevent the inclusion of more nontraditional partners into internal firm value chains.

A. Doing so could yield significant business opportunities that could improve the standard of living of the poor.

_____ describes a firm's ability to create, deploy, modify, reconfigure, upgrade, or leverage its resources over time in its quest for competitive advantage. A. Dynamic capability B. Resource immobility C. Resource heterogeneity D. Time compressed diseconomy

A. Dynamic capability

_____ 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. A. Economic value created B. Break-even point C. Consumer surplus D. Cost of capital

A. Economic value created

The fixed asset turnover of a company is 8.3. What do you infer from this? A. Every dollar spent on the company's fixed assets generates $8.30 of revenue. B. 8.3% of the company's revenue is invested in fixed assets. C. The return on fixed assets will break even in 8.3 years. D. The cost of capital invested on fixed assets is 8.3% of the total profit.

A. Every dollar spent on the company's fixed assets generates $8.30 of revenue.

Which of the following statements is true of a multidomestic strategy? A. Firms frequently use a multidomestic strategy when entering host countries with large and/or idiosyncratic local markets. B. The multidomestic strategy is one of the main strategies companies pursued in the Globalization 1.0 stage. C. Companies pursuing a multidomestic strategy generally follow a cost-leadership strategy at the business level. D. The multidomestic strategy effectively protects firms from the risk of intellectual property appropriation.

A. Firms frequently use a multidomestic strategy when entering host countries with large and/or idiosyncratic local markets.

_____ is best described as changes in an industry value chain that involve moving ownership of activities closer to the end (customer) point of the value chain. A. Forward vertical integration B. Corporate divestiture C. Reverse engineering D. Closed innovation

A. Forward vertical integration

Fragra Inc., a company that manufactures and sells premium perfumes, is pursuing an international strategy. SaveMart Inc., a supermarket chain, follows a multidomestic strategy. Which of the following statements is most likely true of this scenario? A. Fragra Inc. will sell the same products and services in both domestic and foreign markets, whereas SaveMarket Inc. will customize its product offerings to suit local requirements. B. Fragra Inc. will pursue a differentiation strategy at the business level, whereas SaveMarket Inc. will pursue a cost-leadership strategy at the business level. C. Fragra Inc. will be better protected from exchange rate fluctuations when compared to SaveMarket Inc. D. Fragra Inc. will not be able to leverage its home-based core competencies in foreign markets as much as SaveMarket Inc.

A. Fragra Inc. will sell the same products and services in both domestic and foreign markets, whereas SaveMarket Inc. will customize its product offerings to suit local requirements.

Hans is a strategist who wants to decide on the appropriate strategy to help his firm "go global." Which of the following should Hans consider while choosing his strategy? A. He must be aware of the fact that despite globalization and the emergence of the Internet, firm geographic location has actually maintained its importance. B. He should rely on his firm's business-level strategy as a clue to possible strategies pursued globally. C. He should remember that he has only one framework at his disposal to make global strategy decisions. D. He must remember that higher levels of control and a lower likelihood of any loss in reputation go along with less investment-intensive foreign entry modes.

A. He must be aware of the fact that despite globalization and the emergence of the Internet, firm geographic location has actually maintained its importance.

Why is following an unrelated diversification strategy especially advantageous in an emerging economy? A. It allows the conglomerate to overcome institutional weaknesses in emerging economies. B. It allows the conglomerate to form a monopoly in emerging economies. C. It allows the conglomerate to use well-defined legal systems in emerging economies. D. It allows the conglomerate to take advantage of strong capital markets in emerging economies.

A. It allows the conglomerate to overcome institutional weaknesses in emerging economies.

Which of the following is a benefit of the transnational strategy? A. It facilitates global learning and harnesses economies of location. B. It completely eliminates a firm's risk of intellectual property expropriation. C. It helps to create a matrix global structure, which is cost-effective and easy to implement. D. It helps a firm pursue a cost-leadership strategy by minimizing the need for local responsiveness.

A. It facilitates global learning and harnesses economies of location.

Which of the following is one of the features of an international strategy? A. It is characterized by limited local responsiveness. B. It is one of the newest types of global strategies. C. It is characterized by cost-leadership as a preferred business strategy. D. It is often used successfully by firms with relatively small domestic markets.

A. It is characterized by limited local responsiveness.

Which of the following expressions accurately describes market cap? A. It is the product of the number of outstanding shares and the share price. B. It is the difference between the book value and the market value of a firm's assets. C. It is the ratio of a firm's equity finance and its debt finance. D. It is the difference between a firm's account receivables and account payables.

A. It is the product of the number of outstanding shares and the share price.

What most likely happens when a firm optimizes its organizational structure to its current situation? A. It plants the seed of subsequent failure: the tightly coupled system can break apart when internal or external pressures occur. B. It achieves superior performance. C. It makes it difficult for managers to make the necessary changes due to its effects on resource allocation and power distribution. D. It transforms strategy into actions and business models.

A. It plants the seed of subsequent failure: the tightly coupled system can break apart when internal or external pressures occur.

Which of the following is an implication of high employee turnover in a company? A. It results in a reduction in the company's intangible-resource stocks. B. It makes the source of the company's competitive advantage causally ambiguous. C. It makes the source of the company's competitive advantage socially complex. D. It results in greater immobility and heterogeneity of the company's resources.

A. It results in a reduction in the company's intangible-resource stocks

Which of the following is true of a disruptive innovation? A. It targets existing markets. B. It initially provides high-cost solutions to existing problems. C. It introduces a radical idea and creates a new industry. D. It attacks the market through a top-down process.

A. It targets existing markets.

Plethora Inc., a well-established and reputed multinational enterprise (MNE), is headquartered in a highly developed economy. It wants to start its operations in United Bejukistan, which has been recognized as one of the less-developed nations in the world. How will this strategic move most likely affect Plethora Inc.? A. It will be able to benefit from economic arbitrage. B. It will be able to successfully leverage its competitive advantage from economies of standardization. C. It will be able to replicate its existing business model easily. D. It will be able to easily sell products for which demand varies by income.

A. It will be able to benefit from economic arbitrage.

Why is the optimal organizational structure a multidivisional structure? A. Its focus is on driving down costs. B. Its focus is on producing differentiated products. C. Its focus is on retaining activities within a single geographic area. D. Its focus is on establishing a flat hierarchy operated in a decentralized fashion.

A. Its focus is on driving down costs.

While KFC focuses on international markets, its competitor, Chick-fil-A, focuses on the domestic U.S. market. What is the reason behind this strategic difference? A. KFC has more financial resources than Chick-fil-A since it is a publicly traded stock company. B. Chick-fil-A has a larger customer base and number of outlets in the U.S. market than its competitor KFC. C. KFC wants to follow a differentiation strategy, and Chick-fil-A wants to pursue a cost-leadership strategy. D. Chick-fil-A is part of a large conglomerate, whereas KFC has more flexibility to pursue a geographic diversification strategy.

A. KFC has more financial resources than Chick-fil-A since it is a publicly traded stock company.

Which of the following best exemplifies social complexity as an isolating mechanism? A. Kristin's Cosmetics attempted to imitate how Monica's Makeup combined its management and product development systems with little success. B. Kristin's Cosmetics failed to acquire the resources for its eyeliner at a low cost and thereby lost its competitive advantage over Monica's Makeup. C. Kristin's Cosmetics had difficulty competing with Monica's Makeup because it could not access the many makeup factories in Kentucky as easily as its competitor. D. Kristin's Cosmetics did not fully understand the reasons for the success of Monica's Makeup and therefore had difficulty competing with the firm.

A. Kristin's Cosmetics attempted to imitate how Monica's Makeup combined its management and product development systems with little success.

Which of the following is a disadvantage of measuring firm performance through total return to shareholders and firm market capitalization? A. Market volatility makes it difficult to assess firm performance through these measures, particularly in the short-term. B. These tools fail to indicate how the stock market views all available public information about a firm's expected future performance. C. These tools measure competitive advantage in absolute terms rather than relative terms. D. Only the book value of the share prices is taken into account when applying these measures, and not the market value.

A. Market volatility makes it difficult to assess firm performance through these measures, particularly in the short-term.

Opal, a recent fashion design school graduate, has received praise for her clothing designs from her peers and friends on social networking sites; this has inspired her to set up a store where she can design and sell apparel. After experiencing some success with sales, she recruits two employees to handle customers at the store. However, she handles other day-to-day affairs herself, while continuing to design clothes. Which of the following is likely to be a pitfall of this organizational structure established by Opal? A. Once the firm starts growing and attracting more customers she is likely to feel overloaded. B. Hiring more employees will result in loss of intellectual property. C. People are highly unlikely to buy clothes from a store run by a fashion design student. D. The online admiration of her designs will not translate into sales.

A. Once the firm starts growing and attracting more customers she is likely to feel overloaded.

Onyxo Inc., a consumer electronics company, is the leading manufacturer of LCD televisions. LCD technology has been its core competency and the company holds 80 percent shares in that market. However, Onyxo Inc.'s competitors have now moved on to advance technologies like LED and 3-D televisions. According to the dynamic capabilities perspective, what should Onyxo Inc. do? A. Onyxo Inc. should start working on LED and 3-D television technologies to adapt its core competency to suit the external environment. B. Onyxo Inc. should stick to its existing core competency, that is LCD technology, as it is the best in that segment. C. Onyxo Inc. should take proactive steps to reduce the causal ambiguity and socially complexity of its core competency. D. Onyxo Inc. should work on enhancing the mobility of its core competency.

A. Onyxo Inc. should start working on LED and 3-D television technologies to adapt its core competency to suit the external environment.

Which of the following is an advantage that a private company enjoys over a public company? A. Private companies are not required to disclose financial statements. B. Private companies experience more scrutiny from analysts. C. Private companies can focus more on short-term viability. D. Private companies often do not have a CEO.

A. Private companies are not required to disclose financial statements.

PureSource Pharma Inc. recently acquired BioChem Pharmaceuticals Inc. It now sells its own products along with the products originally sold by BioChem Pharmaceuticals. As a result, PureSource Pharma's sales force will also be marketing the acquired company's products. How will this horizontal integration most likely affect PureSource Pharma? A. PureSource Pharma will lower its costs through economies of scale. B. PureSource Pharma will diminish its economic value creation. C. PureSource Pharma will increase its cost of distribution. D. PureSource Pharma will reduce the size of its sales force.

A. PureSource Pharma will lower its costs through economies of scale.

Which of the following scenarios would be characteristic of an entrepreneur? A. Rachel implemented a new and more efficient way to produce pottery. B. Mary imitated a new, more efficient method of producing pottery. C. Alissa scaled back the production of pottery because it wasn't cost effective. D. Ursula used a proven marketing method to advertise her pottery.

A. Rachel implemented a new and more efficient way to produce pottery.

_____ is best described as moving one or more internal value chain activities outside the firm's boundaries to other firms in the industry value chain. A. Strategic outsourcing B. Reverse engineering C. Forward integration D. Horizontal integration

A. Strategic outsourcing

About 20 years ago, Sturdy Light, Inc., produced a sturdy, lightweight backpack in a market that was rapidly growing. Sturdy Light became a leader in this market. Eventually, the backpack market reached the maturity stage and slowed down. However, by this time, Sturdy Light had developed a strong brand name and continued to steadily lead the market. Which of the following describes this scenario? A. Sturdy Light was a star that developed into a cash cow. B. Sturdy Light was a question mark that developed into a star. C. Sturdy Light was a dog that developed into a question mark. D. Sturdy Light was a cash cow that developed into a star.

A. Sturdy Light was a star that developed into a cash cow.

Which of the following is an advantage of a triple-bottom-line approach? A. The approach takes an integrative and holistic view in assessing a company's performance. B. The approach does not rely on an external view of a firm to assess its performance. C. The approach is more of a quantitative performance metric rather than a mere conceptual framework. D. The framework can help managers assess a firm's competitive advantage without taking into account the firm's performance along noneconomic dimensions.

A. The approach takes an integrative and holistic view in assessing a company's performance.

A bank, YPC, offers a customer a personal loan. In which of the following circumstances will this decision most likely be considered unethical? A. The bank knows that the customer will be unable to pay the loan if the interest rate rises. B. The bank is not aware of the investments made by the customer. C. The bank has the financial statements of the customer, but it is not aware of each source of income. D. The bank is depending on the customer to pay back the loan before term completion.

A. The bank knows that the customer will be unable to pay the loan if the interest rate rises.

Which of the following is a feature of the growth stage of the industry life cycle? A. The consumer demand increases. B. The prices of goods begin to rise. C. The basis of competition moves away from process innovation. D. The number of competitors decreases.

A. The consumer demand increases.

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? A. The firm's number of outstanding shares is 25 million. B. The firm pays an annual dividend of 10 percent. C. The firm's total return to shareholder is $5 billion. D. The firm's economic value created is $5 billion.

A. The firm's number of outstanding shares is 25 million.

Which of the following is most likely an accurate statement? A. The multinational enterprise PanDigital benefited from advances in communications technology. B. The multinational enterprise TransEuropa was hindered by falling investments barriers. C. The multinational enterprise ShopWorld benefited from rising trade barriers. D. The multinational enterprise GeoPlus was hindered by reduced transportation costs.

A. The multinational enterprise PanDigital benefited from advances in communications technology.

Which of the following is a common result of a hostile takeover of a company? A. The new owner sells the company in pieces. B. The new owner keeps the company intact. C. The new owner keeps the board of directors of the company the same. D. The new owner enhances the reputations of the company's management.

A. The new owner sells the company in pieces.

Which of the following scenarios best exemplifies a leveraged buyout of a telecommunications firm, Telbok Inc.? A. The owner of another company buys all the outstanding shares of Telbok. B. A private equity firm, Rainbow Inc., buys a large amount of shares of Telbok. C. Telbok sells all its shares and declares bankruptcy. D. Telbok buys back a large amount of its own shares from the stock market.

A. The owner of another company buys all the outstanding shares of Telbok.

BestDrive Inc. is a large automobile company. The company's petrol cars strategic business unit (SBU) has been recognized as a cash cow, and its hybrid electric cars SBU has been categorized under stars. Which of the following can be inferred from this scenario? A. The petrol cars SBU operates in a low-growth market, whereas the hybrid electric cars SBU operates in a high-growth market. B. The petrol cars SBU will have a relatively low market share in its industry, whereas the hybrid electric cars SBU will have the least market share in its industry. C. The strategic recommendation for the hybrid electric cars SBU will be to harvest it, whereas for the petrol cars SBU, the company should just maintain it. D. The petrol cars SBU is more important than the hybrid electric cars SBU in terms of future growth for the company.

A. The petrol cars SBU operates in a low-growth market, whereas the hybrid electric cars SBU operates in a high-growth market.

How is the triple-bottom-line approach different from the traditional approaches to measuring competitive advantage? A. The triple-bottom-line takes a more integrative and holistic view in assessing a company's performance than traditional approaches do. B. The triple-bottom-line places less emphasis on financial success in assessing a company's performance than traditional approaches do. C. The triple-bottom-line uses a more one-dimensional approach in assessing a company's performance than traditional approaches do. D. The triple-bottom-line relies more on internal factors in assessing a company's performance than traditional approaches do.

A. The triple-bottom-line takes a more integrative and holistic view in assessing a company's performance than traditional approaches do.

Why is it difficult to imitate the organizational culture of firms like Southwest Airlines and Zappos? A. Their culture reflects complex relationships with their employees, customers, and suppliers. B. They produce products that cannot be copied easily because of their complex designs. C. The employees in the organization themselves are unaware of the factors contributing to their organizational culture. D. It is not commercially viable for other companies to implement the same culture.

A. Their culture reflects complex relationships with their employees, customers, and suppliers.

The market for 3-D televisions is in the introduction stage of the industry life cycle. What does this imply? A. There are only a few competitors in the 3-D television market. B. The number of buyers in the market is high. C. The prices of 3-D televisions will be lowest during this stage. D. The barriers to entry are low in the industry.

A. There are only a few competitors in the 3-D television market.

Which of the following statements accurately brings out the distinction between the introduction and growth stages of the industry life cycle? A. There is more strategic variety in the growth stage when compared to the introduction stage. B. The number of competitors is more in the introduction stage than the growth stage. C. The market size for a new product or service is larger in the introduction stage when compared to the growth stage. D. While achieving market acceptance is the strategic objective during the introduction stage, the objective in the growth stage is to pursue a harvest strategy.

A. There is more strategic variety in the growth stage when compared to the introduction stage.

Which of the following did management at Zappos do to reduce the level of formalization in their organization? A. They avoided asking their customer service reps in call centers to follow a detailed script. B. They increased their reliance on drop-shipment orders. C. They established top-down management as their primary strategy. D. They put an end to the practice that enabled employees to horizontally rotate to different jobs once they had mastered a particular job.

A. They avoided asking their customer service reps in call centers to follow a detailed script.

Which of the following is an advantage of joint ventures? A. They create strong ties, trust, and commitment between the partners. B. They are based on contractual agreements rather than partial ownership. C. They require the lowest amount of investment relative to the other alliance types. D. They can be easily initiated and terminated.

A. They create strong ties, trust, and commitment between the partners.

Which of the following is true of the codes of conduct of an organization? A. They detail how the organization expects an employee to behave and to represent the company in business dealings. B. They are a reiteration of the laws pertaining to business dealings in a corporate environment. C. They are a guide to determine what is lawful and what is unlawful. D. They help the board of directors and the CEO implement shareholder capitalism.

A. They detail how the organization expects an employee to behave and to represent the company in business dealings.

Which of the following statements is true of joint ventures? A. They enable the exchange of both tacit and explicit knowledge. B. They reduce the possibilities of trust and commitment. C. They are characterized by single reporting lines. D. They cannot entail long negotiations.

A. They enable the exchange of both tacit and explicit knowledge.

Which of the following is true of the process of organizing for competitive advantage? A. To maintain competitive advantage, companies need to restructure as they grow and the competitive environment changes. B. Strategy formulation and strategy implementation are independent activities. C. Organizing for competitive advantage is a static and not a dynamic process. D. Formulating an effective strategy is a necessary and sufficient condition for gaining and sustaining competitive advantage.

A. To maintain competitive advantage, companies need to restructure as they grow and the competitive environment changes.

_____, which is the return on risk capital, includes stock price appreciation plus dividends received over a specific period. A. Total return to shareholders B. Earnings per share C. Receivables turnover D. Dividend yield

A. Total return to shareholders

Which of the following is true of the board of directors in a public stock company? A. Votes at shareholder meetings determine whose representatives are appointed to the board of directors. B. Because shareholders generally have uniform interests, the composition of the board is generally a unanimous decision. C. The board of directors acts as a facilitator to convey interests of the stockholders to the management without any real authority. D. The functions of the board of directors are limited to ensuring the hiring and firing of CEOs.

A. Votes at shareholder meetings determine whose representatives are appointed to the board of directors.

Sam is a manager at StyleOne Apparels Inc. and is friends with the company's CEO. This privilege gives Sam the information that StyleOne Apparels is in the midst of talks to take over a leading rival. Sam buys stocks of StyleOne with the expectation that its stocks will appreciate. But the deal falls through and the stocks of StyleOne depreciate in the following months. Are Sam's actions unethical? Why? A. Yes, because it is unethical to trade stocks based on insider information irrespective of the final outcome. B. Yes, because it is illegal and unethical for Sam to possess any kind of insider information. C. No, because Sam did not ask the CEO to disclose such information to him. D. No, because Sam did not make any profits from trading stocks using this information.

A. Yes, because it is unethical to trade stocks based on insider information irrespective of the final outcome.

GlobalCom Inc. is an Internet service provider. It provides a router free of charge when users sign up for a two-year wireless service plan. In this plan, users pay in advance irrespective of whether they use the Internet package during the two-year period or not. Which of the following business models does this scenario best illustrate? A. a combination of the razor-razor-blade model and the subscription-based business model B. the pay-as-you-go business model C. a combination of the freemium business model and the pay-as-you-go business model D. the direct sales business model

A. a combination of the razor-razor-blade model and the subscription-based business model

Which of the following best illustrates a non-equity alliance? A. a contractual agreement that provides Motor Source Inc. non-exclusive rights to supply component parts to Pristine Autos Inc. B. an alliance between RedGate Systems Inc. and DB Computers Inc. that results in DB Gate Inc., an independent third company C. a collusion between two competitors, RP Pharma Inc. and Vital Pharma Inc., to fix prices D. an alliance that allows Virtue Insurance Inc. to claim 49 percent ownership in Mercury Finance Inc.

A. a contractual agreement that provides Motor Source Inc. non-exclusive rights to supply component parts to Pristine Autos Inc

Divina Pharma Inc. and MF Electronics Inc. have together invested and created a new organization, FirstHealth Inc., to focus on developing diagnostic devices. Through this new firm, both companies are attempting to combine their core competencies to innovate and reduce their risks associated with transaction-specific investments. However, the new organization operates independent of Divina Pharma and MF Electronics. Which of the following alternatives to integration does this scenario best illustrate? A. a joint venture B. a franchisee C. a licensing contract D. a corporate acquisition

A. a joint venture

Which of the following scenarios would typically happen in a firm that uses open innovation? A. a meeting with professors at a university to get ideas for product B. a survey of employees to get ideas for a product C. a meeting of department heads to get ideas for a product D. a conference of R&D employees from various branches to get ideas for a product

A. a meeting with professors at a university to get ideas for product

Evara Cosmetics Inc. is a company that operates in 20 countries around the globe. The company clearly understands that the skin and hair type of customers varies from one country to another. Consequently, its products are customized to suit local needs and preferences of customers, even though the costs incurred while producing these products are exceptionally high. This strategy helps the company behave as a local firm in a foreign market. In this scenario, which of the following strategies does Evara Cosmetics Inc. most likely implement? A. a multidomestic strategy B. an international strategy C. a global-standardization strategy D. a one-product strategy

A. a multidomestic strategy

A primary advantage of organizing economic activity within firms is the A. ability to coordinate highly complex tasks to allow for specialized division of labor. B. low administrative costs because of reduced bureaucracy. C. eradication of the principal-agent problem. D. high-powered incentive to work as salaried employees for an existing firm.

A. ability to coordinate highly complex tasks to allow for specialized division of labor.

The perfectly competitive industry structure differs from the resource-based model in its view that A. all firms have access to the same resources. B. accessibility to bundles of resources differ across firms. C. resources tend to be "sticky." D. competencies differ across firms working in the same industry.

A. all firms have access to the same resources.

Best Cut Inc. sells cutlery by having salespeople set up appointments with potential customers and give them a sales pitch for the product. When a salesperson sells cutlery, he or she gets a predetermined percentage commission. This type of business model is called A. an agency. B. bundling. C. wholesale. D. a freemium.

A. an agency.

Which of the following is the most accurate characterization of stakeholder theory? A. an approach to understanding a firm as embedded in a network of internal and external constituencies that each make contributions and expect consideration in return B. an approach to understanding a firm as being in a highly competitive industry, which requires the use of effective market capitalization to gain a competitive advantage C. an approach to understanding a firm, which involves balancing tangible assets and intangible assets to achieve high accounting profitability D. an approach to understanding a firm, which involves balancing multiple internal and external performance metrics in order to gain a competitive advantage

A. an approach to understanding a firm as embedded in a network of internal and external constituencies that each make contributions and expect consideration in return

Which of the following is the best definition of a complementary asset? A. an asset a firm needs to complete the value chain from upstream innovation to downstream commercialization B. an asset a firm would like to add to its portfolio even though it is not vital to the running of the company C. an asset a firm can use to attract a potential joint venture partner D. an asset a firm keeps because it helps them maintain a strong image for marketing

A. an asset a firm needs to complete the value chain from upstream innovation to downstream commercialization

W. L. Gore & Associates is the inventor of path-breaking new products such as breathable GORE-TEX fabrics, Glide dental floss, and Elixir guitar strings. Which of the following would be most likely to hinder its intention of fostering employee satisfaction, retention, and creativity? A. an extremely formalized organizational structure B. a highly organic organizational structure C. a low degree of centralization D. a flat organization structure

A. an extremely formalized organizational structure

Canon was able to redesign the copying machine so that it didn't need professional service—reliability was built directly into the machine, and the user could replace parts, such as the cartridge. What Xerox had not envisioned was the possibility that the components of the copying machine could be put together in an altogether different way that was more user-friendly. This example describes A. architectural innovation. B. incremental innovation. C. radical innovation. D. disruptive innovation.

A. architectural innovation.

Partner compatibility and partner commitment are necessary conditions for successful alliance formation. Partner compatibility captures A. aspects of cultural fit between different firms in an alliance. B. features of the financial health of the different alliance partners. C. the readiness to accept short-term sacrifices to ensure long-term awards. D. the willingness to make available necessary resources.

A. aspects of cultural fit between different firms in an alliance.

Firms that use taper integration also use _____ when they rely on outside-market firms for some of their supplies. A. backward vertical integration B. forward vertical integration C. backward horizontal integration D. forward horizontal integration

A. backward vertical integration

Why do shareholders of public companies need to appoint a board of directors to represent their interests? A. because of the separation of ownership and control B. because employees of a company cannot be shareholders C. because the board of directors itself is made up of shareholders D. because they want tighter control over day-to-day operations of a company

A. because of the separation of ownership and control

Which of the following has been a key driver for firms to expand globally during the Globalization 3.0 stage? A. benefits from lower labor costs in manufacturing and services B. access to low-cost raw materials such as lumber and iron ore C. low levels of economic growth in emerging economies D. inefficient infrastructure in countries like China, which have brought down setting-up costs

A. benefits from lower labor costs in manufacturing and services

Which of the following describes a situation in which firms acquire resources at a low cost, laying the foundation for a competitive advantage later? A. better expectations of future resource value B. path dependence limiting current decisions C. causal ambiguity D. social complexity

A. better expectations of future resource value

In the early 1990s, Gatorade dominated the market for sports drinks, a segment in which it had been the original innovator. For decades, Coca-Cola had been a leader in marketing, bottling, and distributing soft drinks. However these drinks did not include a sports drink. Soon after Gatorade appeared, Coca-Cola developed and marketed its own sports drink, Powerade. In this example, Coca-Cola A. built new core competencies to protect and extend its current market position. B. built new core competencies to create and compete in markets of the future. C. leveraged core competencies to improve current market position. D. redeployed and recombined core competencies to compete in markets of the future.

A. built new core competencies to protect and extend its current market position.

Which of the following is regarded as the most internal of control mechanisms? A. business ethics B. executive compensation C. the market for corporate control D. government regulation

A. business ethics

The managers at AHL Chemicals Inc. decided that their firm needed to diversify because of falling sales and lower performance in one sector. How does diversifying compensate for the lackluster performance in this sector? A. by having higher performance in another sector B. by sharing their market power C. by increasing the firm's risk in another sector D. by motivating managers

A. by having higher performance in another sector

How can a firm pursuing a diversification strategy enhance its overall corporate performance by leveraging financial economies? A. by using internal capital markets as a source of value creation B. by adding more unrelated businesses into its corporate portfolio C. by increasing its coordination and influence costs D. by investing in businesses under the question mark quadrant of the BCG matrix

A. by using internal capital markets as a source of value creation

According to the agency theory, A. conflicts that arise in corporations should be addressed in the legal realm. B. corporations are more than a set of contracts between parties. C. companies should focus on generating profits for stockholders. D. principals and agents have interchangeable roles.

A. conflicts that arise in corporations should be addressed in the legal realm.

A _____ is best defined as a company that combines two or more strategic business units under one overarching corporation and follows an unrelated diversification strategy. A. conglomerate B. single-business firm C. parent company D. subsidiary

A. conglomerate

Jenny liked a pair of sapphire earrings and thought they would cost around $1,000. She was surprised to find that the price of the earrings was $1,500. However, she decided to buy the earrings anyway. This scenario describes A. consumer surplus. B. producer surplus. C. consumer profit. D. producer profit.

A. consumer surplus.

To help a firm achieve a competitive advantage, each distinct activity performed in the value chain needs to A. contribute to the firm's strategic position as either low-cost leader or differentiator. B. reduce the immobility and the heterogeneity of the firm's resources. C. create a static fit between the company's internal resources and the external environment. D. reduce the causal ambiguity and the social complexity of the firm's source of success.

A. contribute to the firm's strategic position as either low-cost leader or differentiator.

Michael Porter recommends that managers use the shared value creation framework to focus on A. creating new regional clusters. B. narrowing the customer base to eliminate nonconsumers. C. streamlining traditional internal firm value chains. D. reducing the involvement of nongovernmental organizations.

A. creating new regional clusters.

The _____ states that geographic location alone should not lead to firm-level competitive advantage because firms are now, more than ever, able to source inputs globally. A. death-of-distance hypothesis B. local-responsiveness hypothesis C. real options framework D. dynamic capabilities framework

A. death-of-distance hypothesis

Pulse Mobiles Inc. is a cell phone manufacturing company. Its latest range of smartphones bears a straight resemblance to the Y-series range of smartphones from Talkie Gen Inc., in terms of its shape and look-and-feel. Which of the following strategies has Pulse Mobiles Inc. used to replicate the valuable and rare resource of Talkie Gen Inc.? A. direct imitation B. strategic equivalence C. substitution D. innovation

A. direct imitation

A(n) _____ leverages new technologies to attack existing markets. A. disruptive innovation B. incremental innovation C. radical innovation D. architectural innovation

A. disruptive innovation

Win Goods Inc. is a large multinational conglomerate. As a single business unit, the company's stock price is estimated to be $200. However, by adding the actual market stock prices of each of its individual business units, the stock price of the company as one unit would be $300. What is Win Goods experiencing in this scenario? A. diversification discount B. learning-curve effects C. experience-curve effects D. economies of scale

A. diversification discount

The relationship between strategy and structure that directly impacts a firm's performance is A. dynamic. B. independent. C. static. D. unpredictable.

A. dynamic.

Today, many companies use PeopleSoft and EDS to avoid maintaining a human resource management system. By doing this, these firms are A. engaging in strategic outsourcing. B. increasing their level of vertical integration. C. offshoring their core activities. D. engaging in unrelated diversification.

A. engaging in strategic outsourcing.

As a research scholar, Ricardo had built a helicam as part of his project. The helicam could capture aerial images. Realizing the potential use of this product in movie production and military and rescue operations, he started a new venture where he could customize these helicams to fit the specific needs of the buyers and sell them. Ricardo can be best described as a(n) A. entrepreneur. B. category captain. C. franchisor. D. early adopter.

A. entrepreneur.

Which of the following best illustrates site specificity? A. equipment necessary for mining bauxite and aluminum smelting B. bottling machinery to manufacture bottles with trademarked shapes C. investment made in human capital to master procedures of a specific organization D. investment made to train employees to operate computers

A. equipment necessary for mining bauxite and aluminum smelting

Which alliance type is the Renault-Nissan alliance, where Nissan owns 15 percent of Renault, and Renault owns 44.4 percent in Nissan? A. equity alliance B. non-equity alliance C. greenfield venture D. joint venture

A. equity alliance

During the period of Globalization 1.0, the mode of entry into foreign markets primarily involved A. exporting goods. B. making foreign direct investments. C. making foreign institutional investments. D. licensing production and distribution.

A. exporting goods.

As the inventor of hypertension medication, OneSure Pharmaceuticals (OSP) Inc. was able to reap the benefits of economies of scale due to a large consumer demand for the drug. Even when competitors later developed similar drugs after the expiry of OSP's patents, regular users did not want to switch because they were concerned about possible side effects. Which of the following benefits does this scenario best illustrate? A. first-mover advantages B. social benefits C. network externalities D. fringe benefits

A. first-mover advantages

A firm will fail to create a sustained competitive advantage when the A. fit between its internal strengths and the external environment is static. B. source of its competitive advantage is causally ambiguous. C. source of its competitive advantage is socially complex. D. resource bundles exhibit heterogeneity and immobility.

A. fit between its internal strengths and the external environment is static

For which of the following products is an international strategy most suitable? A. for luxury goods that can be shipped across the globe B. for products with low value-to-weight ratios such as steel C. for food products that are specific to certain cultures D. for products with high linguistic content

A. for luxury goods that can be shipped across the globe

McDonald's uses detailed standard operating procedures throughout the world to ensure product quality. This implies that McDonald's has a high degree of A. formalization. B. specialization. C. decentralization. D. hierarchy.

A. formalization.

Pilot Games Inc. allows users to play the trial versions of its games without any charge. However, users have to purchase the games to access the upgraded version of the games with advanced features. Which of the following business models is Pilot Games using in this scenario? A. freemium B. subscription-based C. pay-as-you-go D. razor-razor-blade

A. freemium

A firm that uses a structure that is organized along different business functions such as HR, R&D, Sales, and Marketing and also along different geographical areas such as different countries of the world is most likely using a _____ structure. A. global matrix B. multidivisional C. functional D. simple

A. global matrix

Toyota is selling its hybrid Prius vehicle, built on global platforms, successfully in 80 countries. This information best supports the assumptions made under the A. globalization hypothesis. B. upper-echelons theory. C. real-options perspective. D. global scaling theory.

A. globalization hypothesis.

Lucar Steels Inc. has decided to enter into a foreign market by setting up its own production facilities and distribution channels from scratch. This will allow it to have strong control over all of its business activities. What is the foreign entry mode most likely opted by Lucar Steels Inc.? A. greenfield operation B. export C. joint venture D. acquisition

A. greenfield operation

Although TechnoWare Electronics Inc. still sells its VCR players, a product in its decline stage, the investments made by the company on improving or marketing the product are very low. The company has allocated the least amount of human and financial capital to this department. Which of the following strategies has TechnoWare Electronics adopted in this scenario? A. harvest strategy B. maintain strategy C. consolidation strategy D. differentiation strategy

A. harvest strategy

The global-standardization strategy arises out of the combination of A. high pressure for cost reductions and low pressure for local responsiveness. B. high pressure for local responsiveness and low pressure for cost reductions. C. low pressure for both local responsiveness and cost reductions. D. high pressure for both local responsiveness and cost reductions.

A. high pressure for cost reductions and low pressure for local responsiveness.

Emirates, Etihad Airlines, and Qatar Airways are a threat to U.S. legacy carriers because they offer A. higher quality for lower costs for international routes. B. higher quality for similar costs for U.S domestic routes. C. similar quality for lower costs for international routes. D. similar quality for lower costs for U.S domestic routes.

A. higher quality for lower costs for international routes.

A corporation's star SBUs will A. hold a high market share in a fast-growing market. B. experience low and unstable earnings in a fast-growing market. C. hold a small market share in a low-growth market. D. compete in a low-growth market but hold considerable market share.

A. hold a high market share in a fast-growing market.

To maintain its core competency of providing a superior customer experience in the face of explosive growth, Zappos split the organization into 10 standalone units. Which of the following does this scenario best illustrate? A. how an organization accommodates strategy implementation through a flexible organizational structure B. how strategy implementation has an effect on resource allocation and power distribution C. how an organization demonstrates organizational inertia, and therefore sets the stage for the firm's subsequent failure D. how an organization optimizes its organizational structure to the current situation

A. how an organization accommodates strategy implementation through a flexible organizational structure

In the context of the SWOT matrix, which of the following best exemplifies a firm's internal strength? A. increase in a firm's customer loyalty B. growth in the size of the market in which a firm operates C. rise in the income of the demographic segment to which a firm caters D. loss of a competitor's reputation

A. increase in a firm's customer loyalty

A factor favoring the success of disruptive innovation is that A. incumbent firms are slow to change. B. new entrants have highly formal organizational structures and processes. C. the low end of the market is highly guarded. D. incumbent firms focus on radical innovation rather than incremental innovation.

A. incumbent firms are slow to change.

Each stage of the vertical value chain typically represents a distinct _____ in which a number of different firms are competing. A. industry B. functional department C. economy D. customer segment

A. industry

Chao is in an interview for a sales job that requires no experience. He is trying to portray himself as a highly enthusiastic, energetic person with high-level communication and interpersonal skills. The interviewer is convinced that Chao should be hired as a salesperson in the company. However, in his resume, Chao had not mentioned his previous work experience as he was fired from that job because he used illegal drugs. Which of the following does this scenario best illustrate? A. information asymmetry B. principal-agent problem C. experience-curve effect D. learning-curve effect

A. information asymmetry

Adverse selection in a public stock company occurs when A. information asymmetry increases the likelihood of selecting inferior alternatives. B. a firm's work tasks, incentives, and employment contracts minimize opportunism by agents. C. a principal is not aware of the context from which information from an agent is derived. D. an agent manipulates information to benefit stockholders.

A. information asymmetry increases the likelihood of selecting inferior alternatives.

Jennifer received a tip from a close friend who is an executive manager of a publicly traded company called MegaRed Inc. The manager received some inside information about how to trade MegaRed stock to get a huge profit. He shared this information with his Jennifer. This scenario is an example of A. information asymmetry. B. adverse selection. C. stakeholder strategy. D. shared value creation.

A. information asymmetry.

The root cause of the principal-agent problem between senior executives and lower-level employees can be explained by the A. informational advantage of the lower-level employees. B. higher number of lower-level employees than senior executives. C. knowledge of employees regarding day-to-day tasks. D. operational expertise of lower-level employees in concentrated areas of a particular field.

A. informational advantage of the lower-level employees.

Output controls can sometimes discourage collaboration among different strategic business units. However, more and more work requires creativity and innovation, especially in highly-developed economies. One way firms are grappling with this issue is by A. introducing results-only-work-environments to tap intrinsic motivations. B. refining the budgeting process to encourage more department collaboration. C. updating standard operating procedures to allow more process flexibility. D. using output controls only when the goal is to ensure a predictable outcome.

A. introducing results-only-work-environments to tap intrinsic motivations.

Organizational culture can be the basis of a firm's competitive advantage if A. it is valuable, rare, and difficult to imitate. B. it is trademarked and copyright protected. C. it converts the organization's core competency into its core rigidity. D. it changes the organization's inertia into its core rigidity.

A. it is valuable, rare, and difficult to imitate.

New United Motor Manufacturing, Inc. (NUMMI), formed between General Motors (GM) and Toyota in 1984 was the first _____ in the U.S. automobile industry. A. joint venture B. non-equity alliance C. hostile takeover D. equity alliance

A. joint venture

Wave Motors Inc., a Kempa-based automobile company, has entered into a partnership with Sphere Autos Inc., headquartered in United Cadvia. The parent companies, together, have established a stand-alone firm called Genuine Autos Inc. This arrangement best exemplifies a A. joint venture. B. partnership. C. non-equity alliance. D. proprietorship.

A. joint venture.

Global Frontier Inc. wants to expand into the international market. It does not want to spend a very large amount of money for this process. However, Global Frontier wants to maintain some control in the foreign market. Which of the following would be the best entry mode for this firm? A. joint ventures B. acquisitions C. greenfield operations D. exports

A. joint ventures

Which of the following will most likely increase geographic distance between two countries? A. lack of adequate transportation between the two countries B. differences in consumer incomes between the two countries C. lack of human resources available in the two countries D. different knowledge base in the two countries

A. lack of adequate transportation between the two countries

Which of the following is a common drawback of a non-equity alliance? A. lack of trust between partners B. difficulty initiating the contract C. difficulty terminating the contract D. lack of flexibility for the partners

A. lack of trust between partners

A new product often has a high price when it is launched because of a A. large investment in designing a product while producing small quantities. B. large investment in marketing a product while producing small quantities. C. large investment in designing a product while producing large quantities. D. large investment in marketing a product while producing large quantities.

A. large investment in designing a product while producing small quantities.

Competitive advantage goes to the firm that achieves the A. largest economic value created. B. lowest producer surplus. C. highest payable turnover. D. highest Cost of goods sold/Revenue ratio.

A. largest economic value created.

A mortgage-loan officer persuades unsuspecting consumers to sign up for exotic mortgages, such as "option ARMs." These mortgages offer borrowers the choice to pay less than the required interest, which is then added to the principal while the interest rate can adjust upward. Because of this setup, many borrowers are unable to repay the mortgage once the interest rates go up. Which of the following phrases best describes this scenario? A. legal but not ethical B. ethical but not legal C. legal and ethical D. neither legal nor ethical

A. legal but not ethical

Decisions relating to the range of products and services a firm will offer determine the firm's A. level of diversification. B. geographic scope. C. vertical integration. D. absorptive capacity.

A. level of diversification.

Hitoro Inc. developed a superior touch screen technology for tablet computers that enabled multiple users to operate the screen at the same time. The technology was leased to Revox Inc., a consumer electronics company, for five years. Which of the following alternatives to integration does this best illustrate? A. licensing B. franchising C. crowdsourcing D. bootlegging

A. licensing

Unilever's new-concept center is situated in downtown Shanghai, China, attracting hundreds of eager volunteers to test the firm's latest product innovations on-site while Unilever researchers monitor consumer reactions. In this example, Unilever is trying to reap the benefits of A. location economies. B. economies of scope. C. learning races. D. network effects.

A. location economies.

In knowledge-intensive industries, the marginal costs after initial invention are A. low. B. high. C. moderate. D. unpredictable.

A. low.

In Eli Lilly's Office of Alliance Management, the alliance champion is primarily responsible for A. making sure that an alliance fits within the firm's existing alliance portfolio and corporate-level strategy. B. providing technical expertise and knowledge needed for the specific technical area in an alliance. C. providing alliance training and development, as well as diagnostic tools. D. serving as an alliance process resource and business integrator between the two alliance partners.

A. making sure that an alliance fits within the firm's existing alliance portfolio and corporate-level strategy.

Swiss-based Nestlé, the largest food company in the world, is well-known for customizing its product offerings to suit local preferences, tastes, and requirements. By doing this, Nestlé is pursuing a(n) A. multidomestic strategy. B. international strategy. C. global-standardization strategy. D. transnational strategy.

A. multidomestic strategy.

If a firm pursues only a differentiation strategy, it is most likely a(n) _____ organization. A. organic B. mechanistic C. integrated D. centralized

A. organic

Adidas acquired Reebok primarily to A. overcome its competitive disadvantage against Nike. B. get access to the superior technology of Reebok. C. overcome its principal-agent problems. D. pursue an unrelated diversification strategy.

A. overcome its competitive disadvantage against Nike.

A _____ is best described as a form of intellectual property that gives the inventor exclusive rights to benefit from commercializing a technology for a specified time period in exchange for public disclosure of the underlying idea. A. patent B. promissory note C. franchise D. royalty

A. patent

The main reason behind Google's decision to acquire the Israeli start-up company Waze for $1 billion was to A. preempt its competitors from buying Waze. B. share its capabilities with Waze. C. support start-up companies with venture capital. D. gain access to technology that is alien to it.

A. preempt its competitors from buying Waze.

The ratio Cost of goods sold/Revenue indicates how efficiently a company can A. produce a good. B. sell a good. C. advertise a good. D. design a good.

A. produce a good.

The strategic objective of a first mover during the introduction stage of the industry life cycle is to A. pursue a harvest strategy. B. survive by drawing on deep pockets. C. achieve market acceptance. D. lower entry barriers.

A. pursue a harvest strategy.

Manufacturers of electric fragrance diffusers sell the electric outer device at an extremely low price, sometimes even at a loss. However, they make their money on the product by charging a premium on the perfume refills that have to be replaced regularly. Which of the following business models does this best illustrate? A. razor-razor-blade B. subscription-based C. freemium D. pay-as-you-go

A. razor-razor-blade

When executives of a firm consider business opportunities only where they can leverage their existing competencies and resources, it can be concluded that the firm is using A. related-constrained diversification. B. related-linked diversification. C. strategic outsourcing. D. offshore outsourcing.

A. related-constrained diversification.

GreenValue Inc. started a chain of organic supermarkets that had initial success. The managers achieved a mastery of the firm's current environment, thereby filling a need in the market. However, GreenValue defined and measured it success by financial metrics, with a focus on short-term performance. As a result, the firm put in place metrics and systems to accommodate and manage increasing firm size due to continued success. As a result of this tightly coupled system, GreenValue developed a A. resistance to change. B. innovative approach. C. significant value gap. D. holacratic system.

A. resistance to change.

As a result of _____, a critical assumption in the resource-based model of a firm, the resource differences that exist between firms are difficult to replicate. A. resource immobility B. resource homogeneity C. resource perishability D. resource equality

A. resource immobility

From an investors' or shareholders' perspective, the measure of competitive advantage that matters most is the A. return on risk capital. B. economic value created. C. consumer surplus. D. inventory turnover.

A. return on risk capital.

The process of alliance management begins with A. selecting the best possible partner. B. choosing an appropriate governance mechanism. C. designing the alliance. D. creating resource combinations that obey the VRIO criteria.

A. selecting the best possible partner.

In terms of the build-borrow-or-buy framework, a firm's internal resources are considered to be relevant when they are A. similar to those that need to be developed and superior to those of competitors in the targeted area. B. similar to those that need to be developed and inferior to those of competitors in the targeted area. C. different from those that need to be developed and superior to those of competitors in the targeted area. D. different from those that need to be developed and inferior to those of competitors in the targeted area.

A. similar to those that need to be developed and superior to those of competitors in the targeted area

While working a night job at a call center, Carlos creates an app called DineSmart, which can be used to place orders at restaurants, rate the restaurants, and make reservations. Because he receives good responses for his app, he quits his current job to focus his efforts on DineSmart. He creates a start-up called TYOP and hires three people to help him improve DineSmart and maintain the servers that run it. In this scenario, TYOP most likely has a _____ structure. A. simple B. matrix C. mechanistic D. functional

A. simple

An observer may conclude that the organizational culture of Zappos, an online retailer for shoes and clothing, might be the basis for its competitive advantage. However, reverse social engineering to crack Zappos' code of success might be much more difficult for a company trying to exactly imitate its strategy. Thus, the source of Zappos competitive advantage is said to be A. socially complex. B. inexhaustible. C. non-substitutable. D. nonambiguous.

A. socially complex.

RoboToys, Inc. is involved in the production of robotic toys. This firm produces the raw materials, including metals and oils for plastic; creates the integrated circuits, displays, and batteries; and assembles the toys. Which of the following stages of the industry value chain is RoboToys involved in? A. stages 1, 2, and 3 B. stages 1, 2, and 4 C. stages 2, 3, and 4 D. stages 2, 3, and 5

A. stages 1, 2, and 3

A compensatory governance mechanism that allows executives to buy a company's stock at a predetermined price sometime in the future is called a(n) A. stock option. B. commission. C. stock exchange. D. bonus.

A. stock option.

Return on risk capital primarily includes A. stock price appreciation plus dividends received over a specific period. B. consumer surplus plus firm profit. C. account receivables plus account payables. D. economic value created by a firm plus reservation price.

A. stock price appreciation plus dividends received over a specific period.

Due to path dependence A. strategic decisions have long-term consequences. B. the occurrence of time compression diseconomies becomes rare. C. competitors can easily imitate or create core competencies quickly. D. past decisions of a firm do not affect its current situation.

A. strategic decisions have long-term consequences.

A high percentage of R&D/Revenue ratio indicates a(n) A. strong focus on innovation to improve current products and services. B. inefficiency in the management to focus on new products. C. strong focus on marketing and sales to promote products and services. D. negligent investment toward research and development.

A. strong focus on innovation to improve current products and services.

The key components of organizational design are A. structure, culture, and control. B. structure, efficiency, and control. C. innovation, efficiency, and culture. D. innovation, culture, and control.

A. structure, culture, and control.

Which of the following business models has been traditionally used by the magazine and newspaper industry? A. subscription-based B. razor-razor-blade C. pay-as-you-go D. freemium

A. subscription-based

The Hershey Company, the largest U.S. chocolate manufacturer, decided to enter the Chinese market in 2013 because A. the U.S. population was growing slowly and becoming more health conscious. B. its strategic position in the U.S. market was well protected through high entry barriers. C. this would help the company gain access to large cocoa plantations in China. D. Hershey's main strategic focus was on product and market diversification and not on the domestic market.

A. the U.S. population was growing slowly and becoming more health conscious.

Which of the following reasons motivated Facebook to acquire Instagram, a photo and video-sharing social media site, for $1 billion in 2012? A. the desire to gain a new capability B. the need to enter a new geographical market C. the need to reduce its level of horizontal integration D. the desire to pursue an unrelated diversification strategy

A. the desire to gain a new capability

Which of the following customer segments as described in the chasm framework make up the mass market? A. the early and late majority together B. the early adopters alone C. the technology enthusiasts and laggards together D. the technology enthusiasts alone

A. the early and late majority together

Which of the following is an accurate definition of the customer segment "laggards"? A. the last consumer segment to come into the market, entering in the declining stage of the industry life cycle B. the last consumer segment to come into the market during the growth stage of the industry life cycle C. the last consumer segment to come into the market during the shakeout stage of the industry life cycle D. the last consumer segment to come into the market, entering in the maturity stage of the industry life cycle

A. the last consumer segment to come into the market, entering in the declining stage of the industry life cycle

Which of the following real-world events would act as the most likely deterrent against adopting a purely stakeholder strategy approach to business? A. the nonsustainable debt levels incurred by sovereign governments to fund social programs B. the financial crisis in Europe brought about by money lenders seeking to make quick money C. the collapse of the economy in the U.S. brought about by the housing crisis D. the rise of GDP in countries that do not believe in Milton Friedman's philosophy

A. the nonsustainable debt levels incurred by sovereign governments to fund social programs

Organizational design is A. the process of creating, implementing, and modifying the structure of an organization. B. primarily focused on replacing a firm's competitive advantage with competitive parity. C. a process that always functions independently of strategy formulation. D. primarily focused on formulating effective strategies, not implementing them.

A. the process of creating, implementing, and modifying the structure of an organization.

In 1990, Roche, a Swiss pharmaceutical company, initially invested $2.1 billion to purchase a controlling interest in the biotech startup Genentech. In 2009, after witnessing the success of Genentech's drug discovery and development projects, Roche spent $47 billion to purchase the remaining minority interest in Genentech, making it a wholly owned subsidiary. In terms of strategic alliances, this scenario best indicates A. the real-options perspective. B. co-opetition. C. explicit knowledge. D. the stakeholder strategy.

A. the real-options perspective.

John Hammergren, the CEO of McKesson, received an annual compensation of $50 million. The compensation was closely tied to the performance of McKesson's stock, which appreciated considerably during his tenure. This situation best exemplifies A. the strong relationship between executive compensation and company performance. B. the public's perception of a company's stock value based on executive compensation figures. C. the avoidance of control mechanisms to guide performance. D. the inversely proportional relationship between CEO compensation and the pay of the average employee.

A. the strong relationship between executive compensation and company performance.

What is an invention? A. the transformation of an idea into a new product or process B. a unique idea that has not been thought of before C. the transformation of an idea into a successful product D. a unique idea that has been patented

A. the transformation of an idea into a new product or process

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? A. the triple-bottom-line approach B. the economic value creation framework C. the accounting profitability approach D. the balanced-scorecard

A. the triple-bottom-line approach

Which of the following factors is the most important determinant of economic distance? A. the wealth and per capita income of consumers B. the ethnicity and religion of consumers C. the presence of legal institutions in a country D. the topography of a country

A. the wealth and per capita income of consumers

In a public stock company, senior executives, such as the CEO, face agency problems when A. they delegate authority of strategic business units to general managers. B. they decide to get involved in the day-to-day operations of a company. C. the board of directors possesses more information about the company than they do. D. the firm designs work tasks, incentives, and employments that minimize opportunism.

A. they delegate authority of strategic business units to general managers.

Zappos established its unique organizational culture A. through explicitly stated values that are connected to its reward system. B. through input control systems that mandated adherence to organizational values. C. by closely monitoring employees calls with customers. D. by giving employees gift cards to shop at Zappos and Amazon.

A. through explicitly stated values that are connected to its reward system.

Path dependence rests on the notion that A. time cannot be compressed at will. B. strategic decisions are easily reversible. C. rare resources can be built in a short period of time. D. competitive advantage can be sustained indefinitely.

A. time cannot be compressed at will.

Which of the following is not a reason why firms enter alliances? A. to replace competitive advantage with competitive parity B. to strengthen competitive position C. to enter new markets, either in terms of geography or products and services D. to learn new capabilities

A. to replace competitive advantage with competitive parity

A(n) _____ strategy arises out of the combination of high pressure for local responsiveness and high pressure for cost reductions. A. transnational B. multidomestic C. international D. global-standardization

A. transnational

Using the _____ approach, managers audit their company's fulfillment of its social and ecological obligations to stakeholders such as employees, customers, suppliers, and communities as conscientiously as they track its financial performance. A. triple-bottom-line B. economic value creation C. accounting profitability D. shareholder value creation

A. triple-bottom-line

A defining characteristic of the pay-as-you-go business model is that the A. users pay for only the services they consume. B. users pay for access to a product or service whether they use it during the payment term or not. C. initial product is often sold at a loss in order to drive demand for complementary goods. D. the basic features of a service are provided free of charge, but the user must pay for premium services.

A. users pay for only the services they consume.

A _____ primarily details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market.

A. business-level strategy

Bargain Styles Inc. is an apparel company that caters to the highly price-conscious customers. Through its simple apparel designs, acceptable quality levels, and minimal customer service, the company has been able to sell its merchandise at the lowest prices in the industry. Which of the following generic business strategies is Bargain Styles applying?

A. cost-leadership

A differentiator is least likely to be threatened by increases in input prices due to powerful suppliers when the

A. differentiator is able to create a significant difference between perceived value and current market prices.

A company that uses a differentiation strategy can achieve a competitive advantage as long as its

A. economic value created is greater than that of its competitors.

A firm pursuing a differentiation strategy as opposed to a low-cost strategy will

A. focus its research and development on product technologies to add uniqueness.

Trader Joe's successfully used a blue ocean strategy by offering lower cost food than Whole Foods for the same market of patrons. By doing this, Trader Joe's was able to

A. gain a market share and make up the loss in margin through increased sales.

Higher value tends to require

A. higher costs.

Both BioThink Inc. and GD Pharma Inc. have discovered similar vaccines to prevent cancer. While GD Pharma's vaccine sells at $100 per unit, BioThink sells its vaccine at $90 per unit. This price differentiation has mainly been attributed to the companies' capital decisions. While BioThink used its retained earnings to develop the vaccine, GD Pharma borrowed funds from banks to develop the vaccine. Thus, GD Pharma pays a higher interest on its capital, which makes it necessary to price its vaccine higher. Thus, the key driver for BioThink's competitive advantage is

A. low-cost input factors.

Lush Roses is a chain of premium hotels around the globe that charges higher prices for its rooms and suites when compared to the average industry standards. Yet, the hotel enjoys the largest market share in the industry. This is mainly due its highly responsive staff that has a strong commitment toward achieving a 100 percent guest satisfaction. In this scenario, which of the following is the key value driver?

A. superior customer service

Value drivers contribute to a firm's competitive advantage only if

A. the increase in value creation exceeds the increase in costs.

Andrew invested $200,000 in the shares of a company. At the end of a year, he had earned $7,000 as dividends on his shares along with a $1,000 appreciation in the overall value of his shares. However, if Andrew had invested the same amount on an asset, like gold, the appreciation in its value would have earned him $10,000 at the end of the year. In this scenario, which of the following is Andrew's opportunity cost? A. $7,000 B. $10,000 C. $2,000 D. $200,000

B. $10,000

Which of the following statements is true about managing alliances-related tasks? A. Forming an alliance with another firm prohibits that firm from forming other alliances. B. Alliance management capability is based on three alliance-related tasks. C. A merger is one of the three options for alliance design and governance. D. In post-formation alliance management, none of the firms in an alliance is permitted to gain a competitive advantage.

B. Alliance management capability is based on three alliance-related tasks.

Which of the following is the result of a leveraged buyout (LBO)? A. An LBO changes the CEO of a public company. B. An LBO changes a public company into a private company. C. An LBO changes a private company into a public company. D. An LBO changes the board of directors of a private company.

B. An LBO changes a public company into a private company.

How is an equity alliance different from a joint venture? A. An equity alliance involves ownership that facilitates transaction-specific ventures; a joint venture involves taking ownership by buying stock. B. An equity alliance involves taking ownership in a partner; a joint venture involves two or more people owning a firm. C. An equity alliance involves taking ownership in a partner; a joint venture involves taking ownership by buying stock. D. An equity alliance involves partners contributing equity to a joint venture; a joint venture involves two or more people owning a firm.

B. An equity alliance involves taking ownership in a partner; a joint venture involves two or more people owning a firm.

In 2014, Apple had a return on revenue of 29.3 percent, and Microsoft had a return on revenue of 32 percent. Even so, Apple had a higher return on invested capital than Microsoft. Why did this happen? A. Apple had a higher cost structure than Microsoft. B. Apple was able to charge a much higher margin for its products and services than Microsoft. C. Apple spent more on research and development and marketing and sales than Microsoft. D. Apple had a much higher selling, general, and administrative expense that Microsoft. Apple was able to charge a much higher margin for its products and services than Microsoft. One reason for this is that Microsoft had a higher cost structure than Apple

B. Apple was able to charge a much higher margin for its products and services than Microsoft.

In the context of industrial growth, which of the following statements is true of standards? A. Standards emerge exclusively from bottom-up through competition in the marketplace. B. As the size of a market expands, a standard signals the market's agreement on a common set of engineering features and design choices. C. Standards are exclusively imposed top-down by government or other standard-setting agencies such as the Institute of Electrical and Electronics Engineers. D. After a standard is established in an industry, the basis of competition tends to move away from process innovations toward product innovations.

B. As the size of a market expands, a standard signals the market's agreement on a common set of engineering features and design choices.

Several senior managers recently left Bass Automobile Inc. and went to work at Unicorn Autos Inc., a rival company. What does this imply? A. The resource stock of Bass Automobiles Inc. increased. B. Bass Automobiles Inc. faced resource leakage. C. The resource flow into Unicorn Autos Inc. reduced. D. Bass Automobiles Inc.'s tangible assets decreased.

B. Bass Automobiles Inc. faced resource leakage.

Which of the following summarizes the benefit of the strategic alliance between HP and DreamWorks? A. HP and DreamWorks each strengthened their separate markets without impinging on each other's markets. B. Both HP and DreamWorks were able to enter a new market that they would not have been able to pursue alone. C. HP was able to enter a new market, and DreamWorks was able to strengthen its old market. D. DreamWorks was able to enter a new market, and HP was able to strengthen its old market.

B. Both HP and DreamWorks were able to enter a new market that they would not have been able to pursue alone.

Which of the following accurately describes what the integration-responsiveness framework does? A. By juxtaposing the pressures a multinational company faces for export tariffs and foreign responsiveness, it devises four strategies to gain and sustain competitive advantage. B. By juxtaposing the pressures a multinational company faces for cost-reductions and local-responsiveness, it devises four strategies to gain and sustain competitive advantage. C. By juxtaposing the pressures a multinational company faces for export tariffs and local-responsiveness, it devises two strategies to gain and sustain competitive advantage. D. By juxtaposing the pressures a multinational company faces for cost-reduction and foreign responsiveness, it devises two strategies to gain and sustain competitive advantage.

B. By juxtaposing the pressures a multinational company faces for cost-reductions and local-responsiveness, it devises four strategies to gain and sustain competitive advantage.

_____ describes a situation in which the cause and effect of a phenomenon are not readily apparent. A. Resource immobility B. Causal ambiguity C. Resource heterogeneity D. Social complexity

B. Causal ambiguity

_____ are best described as unique strengths, embedded deep within a firm, that allow a firm to differentiate its products and services from those of its rivals, creating higher value for the customer or offering products and services of comparable value at lower cost. A. Resource leverages B. Core competencies C. Capital gains D. Equity reserves

B. Core competencies

Food Works Inc. is a multinational fast-food chain that follows a multidomestic strategy. Which of the following statements most likely holds true for the company? A. The company's competitive advantage lies in leveraging its home-based core competencies in foreign markets. B. Each country unit owned by the company will tend to be highly autonomous. C. Majority of the value creation for the company will take place in its home country. D. The company will not face any operational inefficiency as the key business functions do not have to be duplicated.

B. Each country unit owned by the company will tend to be highly autonomous.

On which of the following tenets is the crossing-the-chasm framework, suggested by Geoffrey Moore, based? A. The number and size of competitors remain constant throughout the industry life cycle. B. Each stage of the industry life cycle is dominated by a different customer group. C. Industries tend to follow an unpredictable industry life cycle. D. The supply and demand sides of the market remain constant irrespective of the phase of the industry life cycle.

B. Each stage of the industry life cycle is dominated by a different customer group.

EasyOpen Inc. gained a patent for an electronic corkscrew. Soon the company made a huge profit on this device. Recently, however, other firms have produced electronic corkscrews. As a result, EasyOpen lost its competitive advantage. Which of the following would most likely be the reason for this development? A. EasyOpen failed to renew the patent after 10 years. B. EasyOpen's patent expired after 20 years. C. EasyOpen failed to copyright the corkscrew. D. EasyOpen's copyright expired after 30 years.

B. EasyOpen's patent expired after 20 years

Which of the following is an implication for the strategist in the context of corporate governance and a company's success? A. Very few and specific corporate-governance mechanisms can be effective in addressing the principal-agent problem. B. Effective corporate governance and solid business ethics are critical to gaining and sustaining competitive advantage. C. Leading by ethical example often has a less strong effect on employee behavior than words. D. A firm that restricts its responsiveness to stockholders (and no other stakeholders) and keeps them committed to its vision will be successful.

B. Effective corporate governance and solid business ethics are critical to gaining and sustaining competitive advantage.

Which of the following statements is true of firms pursuing a closed innovation? A. Firms following the closed innovation model are less likely to be prone to the not-invented-here syndrome. B. Firms in the closed innovation model are extremely protective of their intellectual property. C. Firms in the closed innovation model focus on building a more effective business model to commercialize R&D, rather than focusing on being first to market. D. Firms following the closed innovation model will find activities such as spin-out ventures or strategic alliances crucial to commercialize their internally developed R&D.

B. Firms in the closed innovation model are extremely protective of their intellectual property.

_____ most precisely measures how well a company leverages its fixed assets, particularly property, plant, and equipment (PPE). A. Working capital turnover B. Fixed asset turnover C. Fixed assets to equity ratio D. Capital leverage ratio

B. Fixed asset turnover

Flight Stream Inc., a toy manufacturing company, encourages its employees to enjoy their work by taking on additional responsibilities or switching jobs with each other. It allows its employees immense flexibility in charting their own career path within the organization. Chris has worked at Flight Stream for eight years, but has never had a boss or supervised an employee. Which of the following is most likely true in this scenario? A. Flight Stream Inc. is a mechanistic organization. B. Flight Stream Inc. has a flat organizational structure. C. Flight Stream Inc. has a high degree of centralization. D. Flight Stream's organizational culture is governed by codified rules.

B. Flight Stream Inc. has a flat organizational structure.

_____ is a process of closer integration and exchange between different countries and peoples worldwide. A. Diversification B. Globalization C. Standardization D. Modification

B. Globalization

When using the balanced-scorecard approach to assess a firm's performance, which of the following is not a key question that managers need to answer? A. How do customers view us? B. How do we reduce the economic value created? C. What core competencies do we need? D. How do shareholders view us?

B. How do we reduce the economic value created?

Although demand for IKEA's low-cost furnishings has increased, its annual store growth has slowed to fewer than ten new stores a year. Why has this happened? A. IKEA has failed to hire top designers for its furniture. B. IKEA's global supply chain has become bottlenecked. C. IKEA has had a revolving door of CEOs for the past 20 years. D. IKEA's holding companies are all located in Sweden.

B. IKEA's global supply chain has become bottlenecked.

When evaluating the sustainability of a firm's competitive advantage, which of the following statements is not true? A. The competitive advantage will not be sustainable if there are substitutes for the firm's core competence. B. If managed effectively, existing core competencies can help sustain the competitive advantage indefinitely. C. Social complexity often leads to a competitive advantage that is sustainable. D. When expectations of future resource value turn out to be accurate and can be repeated, then a sustained competitive advantage is realized.

B. If managed effectively, existing core competencies can help sustain the competitive advantage indefinitely.

Which of the following statements is true of an equity alliance? A. An equity alliance is based on contractual agreements rather than partial ownership. B. In an equity alliance, the partners frequently exchange personnel to make the acquisition of tacit knowledge possible. C. In an equity alliance, a standalone organization is created that is jointly owned by two or more parent companies. D. An equity alliance creates weaker ties between the alliance partners when compared to a non-equity alliance.

B. In an equity alliance, the partners frequently exchange personnel to make the acquisition of tacit knowledge possible.

Which of the following is an advantage of applying the economic value creation perspective to assess a firm's performance? A. When the need for "hard numbers" arises, managers and analysts rely on economic value creation perspective to measure competitive advantage. B. In economic value perspective, analysts not only consider historical costs, but also opportunity costs. C. Arriving at the economic value created is easy because determining the value of a good in the eyes of consumers is a simple task. D. It is the most efficient tool for assessing corporate-level competitive advantage of highly diversified companies with large product portfolios.

B. In economic value perspective, analysts not only consider historical costs, but also opportunity costs.

_____ are best described as costs that occur due to political maneuvering by managers to control capital and resource allocation and the resulting inefficiencies stemming from suboptimal allocation of scarce resources. A. Fixed costs B. Influence costs C. Coordination costs D. Opportunity costs

B. Influence costs

_____ is best described as a situation in which one party is more informed than another, because of the possession of private information. A. Information governance B. Information asymmetry C. Information deregulation D. Information piracy

B. Information asymmetry

If Finolo and Ethver, companies that manufacture televisions, develop the same customer knowledge base and create products that provide the same customer appeal as Invoro, a market leader in consumer electronics, then A. Finolo and Ethver will have a VRIO resource. B. Invoro will have a resource that is valuable but no longer rare. C. Invoro will have a sustainable competitive advantage in the industry. D. Invoro will have a resource that is rare but no longer valuable.

B. Invoro will have a resource that is valuable but no longer rare.

Which of the following is an advantage of the balanced-scorecard? A. It is a tool for both strategic formulation and strategic implementation. B. It allows managers to translate a firm's vision into measureable operational goals. C. The balanced-scorecard is independent of the skills of the managers responsible for its implementation. D. Its implementation is a one-time effort and does not require continuous tracking of metrics or updating of strategic objectives.

B. It allows managers to translate a firm's vision into measureable operational goals.

Beats Electronics has been able to outperform Audio-Technica, Bose, JBL, Skullcandy, Sennheiser, and Sony in the high-end, premium headphone market. Which of the following statements accurately explains one of the main reasons for the success of Beat? A. It produced the highest-quality headphones. B. It created a perception that owning its products was cool. C. It emphasized marketing over core competency. D. It focused on sponsoring future athletic superstars.

B. It created a perception that owning its products was cool.

How did the strategic alliance between HP and DreamWorks Animation SKG affect HP? A. It helped HP pursue a taper integration strategy. B. It enabled HP to compete head on with Cisco's videoconferencing solution. C. It resulted in depreciation of HP's shareholder value. D. It failed because HP lacked the expertise in selecting and integrating technology acquisitions.

B. It enabled HP to compete head on with Cisco's videoconferencing solution.

Which of the following is a disadvantage of a horizontal integration corporate strategy? A. It increases competitive intensity within an industry. B. It increases the potential for legal repercussions. C. It increases the costs associated with increasing value. D. It increases the threat of new entrants in an industry.

B. It increases the potential for legal repercussions.

Which of the following statements is true of organizational culture? A. Changes in culture are too frequent to have any impact on strategic implementation. B. It is better for founder CEOs to create a relevant culture, structure, and strategy in the early stages. C. It is always better to focus on output control and performance than on organizational culture. D. According to research, more than 50 percent of firms change culture successfully.

B. It is better for founder CEOs to create a relevant culture, structure, and strategy in the early stages.

Coca-Cola was primarily known for its core competencies in marketing, bottling, and distributing aerated drinks. However, with the success of Gatorade, Coca-Cola developed competencies in the development and marketing of its own sports drink, Powerade. Which of the following is true of Coca-Cola? A. It is leveraging existing core competencies to improve current market position. B. It is building new core competencies to protect and extend its current market position. C. It is redeploying and recombining existing core competencies to compete in markets of the future. D. It is targeting the chasm between the early adopter and early majority market segment.

B. It is building new core competencies to protect and extend its current market position.

GN Corp. and BC Inc. are two competing firms in the same industry. GN Corp.'s tangible assets are valued at $15 billion and its intangible assets are valued at $35 billion. BC Inc.'s tangible assets are valued at $5 billion and its intangible assets are valued at $45 billion. What can be concluded from this information? A. It is easier to buy intangible assets with cash than tangible assets. B. It is likely that BC Inc. is better enabled than GN Corp. to gain and sustain a competitive advantage. C. It takes longer time to build tangible assets than intangible assets. D. There is no resource heterogeneity between the two firms, BC Inc. and GN Corp., as they operate in the same industry.

B. It is likely that BC Inc. is better enabled than GN Corp. to gain and sustain a competitive advantage

When Toyota wanted to secure a long-term supply of lithium, it had to create a bond of trust with an Australian company, Orocobre Ltd. Orocobre wanted to establish the bond of trust before making huge investments in specialized equipment required to extract the high-quality lithium. What did Toyota do to instill this trust? A. It offered Orocobre exposure to Toyota's proprietary information. B. It made a credible commitment by taking an equity stake in Orocobre. C. It acquired Orocobre as part of its backward vertical integration plans. D. It offered Orocobre franchising opportunities to sell hybrid vehicles.

B. It made a credible commitment by taking an equity stake in Orocobre.

What is the result of managers' pursuit of strategies that define value creation too narrowly in public stock companies? A. It gives the managers greater control of the performance of the organization in the long term. B. It reduces the trust of shareholders in the organization as a vehicle for value creation. C. It helps companies increase firm profits by creating shared value. D. It enables companies to create social value by addressing society's needs but prevents them from creating economic value for shareholders.

B. It reduces the trust of shareholders in the organization as a vehicle for value creation.

Which of the following is true of a functional structure? A. It offers a lower degree of specialization than a simple structure. B. It relies on a relatively flat organizational structure. C. It offers decentralized management. D. It relies on bottom-up communication rather than top-down communication.

B. It relies on a relatively flat organizational structure.

_____ is best described as a form of long-term contracting in the manufacturing sector that enables firms to commercialize intellectual property. A. Lean manufacturing B. Licensing C. Crowdsourcing D. Bootlegging

B. Licensing

_____ are best described as contractual alliances in which the participants regularly exchange codified knowledge. A. Cartels B. Licensing agreements C. Equity alliances D. Acquisitions

B. Licensing agreements

According to Michael Porter, which of the following is a problem with many publicly traded companies? A. Shareholders of publicly traded companies do not have a legitimate claim on profits. B. Many publicly traded companies have defined value creation too narrowly in terms of financial performance. C. There is no transferability of stock ownership in publicly traded companies. D. The legal owners of publicly traded companies also make management decisions for the company.

B. Many publicly traded companies have defined value creation too narrowly in terms of financial performance.

Which of the following real-world scenarios best exemplifies formalization? A. Zappos' focus on allowing its customer service employees to use their own approach rather than depend on scripts B. McDonald's use of standard operating procedures across the world C. W. L. Gore's associates organizing themselves in project-based teams that are led by sponsors, not bosses D. Yahoo's decision to fire its CEO after incurring huge losses

B. McDonald's use of standard operating procedures across the world

Which of the following accurately describes how Netflix used innovation to gain a competitive advantage? A. Netflix moved from content development to upgrading its data analytics to provide faster online streaming. B. Netflix applied big data analytics to its user preferences to provide highly personalized viewing recommendations. C. Netflix moved from online streaming to online DVD rentals via the Internet. D. Netflix applied first mover advantages to lock up talent needed to produce original content for DVD rentals and online streaming.

B. Netflix applied big data analytics to its user preferences to provide highly personalized viewing recommendations.

If the board of directors at GE decides to pursue a stakeholder strategy, should they change the ecomagination strategy? A. Yes, they should change the strategy because it provides benefits to the society. B. No, they should not change the strategy because the strategy already helps them save costs while generating huge revenues. C. No, they should not change the strategy because the change would necessitate making tough ethical decisions. D. Yes, they should change the strategy because creating value for society is against the principles of stakeholder strategy.

B. No, they should not change the strategy because the strategy already helps them save costs while generating huge revenues.

_____ are best described as the value of the best forgone alternative use of the resources employed. A. Variable costs B. Opportunity costs C. Social costs D. Switching costs

B. Opportunity costs

_____ are board members who are not employees of the firm, but frequently are senior executives from other firms or full-time professionals. A. Inside directors B. Outside directors C. CEOs D. Auditors

B. Outside directors

_____ describes a process in which the options one faces in a current situation are limited by decisions made in the past. A. Social complexity B. Path dependence C. Cannibalization D. Causal ambiguity

B. Path dependence

_____ indicates how fast a firm is collecting the credit amount extended by a firm to its customers. A. Payables turnover B. Receivables turnover C. Assets turnover D. Inventory turnover

B. Receivables turnover

_____ is best described as the process of reorganizing and divesting business units and activities to refocus a company in order to leverage its core competencies more fully. A. Reverse engineering B. Restructuring C. Rebooting D. Reverse brainstorming

B. Restructuring

All public companies listed on the U.S. stock exchanges must file a number of financial statements with the A. GovernanceMetrics International (GMI). B. Securities and Exchange Commission (SEC). C. EDGAR database. D. The Wall Street Journal.

B. Securities and Exchange Commission (SEC).

What does "limited liability for investors" imply in a public stock company? A. Shareholders are liable for their invested capital and personal wealth and not for any other investments made. B. Shareholders who provide the risk capital are liable only to the capital specifically invested. C. Shareholders are liable for all the decisions made by the board of directors of the company. D. Shareholders have financial but not legal responsibilities toward the public stock company.

B. Shareholders who provide the risk capital are liable only to the capital specifically invested.

Sara can be categorized under the late majority customer segment. Which of the following behaviors is she most likely to exhibit? A. She will be confident in her ability to master any new technology. B. She will prefer to buy from well-established brands rather than unknown new ventures. C. She will not rely on endorsements by the early majority or early adopters. D. She will buy beta versions of new products and technology.

B. She will prefer to buy from well-established brands rather than unknown new ventures.

Why does strategy implementation often require changes within an organization? A. Strategy implementation is less important than strategy formulation. B. Strategy implementation transforms strategy into actions and business models. C. Strategy always follows structure. D. Strategy implementation does not affect resource allocation and power distribution within an organization.

B. Strategy implementation transforms strategy into actions and business models.

Which of the following statements accurately brings out the difference between tangible and intangible resources? A. Tangible resources contribute to a company's competitive advantage, whereas intangible resources fail to do the same. B. Tangible assets can be bought on the open market, whereas intangible assets cannot be easily purchased. C. Tangible resources take a longer time to build, whereas intangible assets can be built comparatively easily. D. Tangible assets are difficult to imitate, whereas intangible assets can be easily replicated.

B. Tangible assets can be bought on the open market, whereas intangible assets cannot be easily purchased.

_____ allows managers to synthesize insights obtained from an internal analysis of a company's strengths and weaknesses with those from an analysis of external opportunities and threats. A. The VRIO framework B. The SWOT analysis C. The break-even analysis D. Ansoff's matrix

B. The SWOT analysis

Which of the following companies will be considered as a conglomerate? A. ExxonMobil, after it acquired XTO Energy—a natural gas company B. The Tata Group, active in industries such as tea, steel, IT, power, and automobiles C. Harley-Davidson, with its Harley-Davidson branded motorcycle clothing and attire D. Coca-Cola, which solely focuses on soft drinks but operates in many countries

B. The Tata Group, active in industries such as tea, steel, IT, power, and automobiles

Which of the following reasons led to the launch of Procter & Gamble's "Connect + Develop," a web-based interface that connects the company's internal-innovation capability with the distributed knowledge in the global community? A. The company wanted to focus on process innovation rather than product innovation. B. The company was no longer able to generate adequate growth through closed innovation. C. The company wanted to carefully protect its intellectual property. D. The supply and mobility of unskilled workers within the industry had increased drastically.

B. The company was no longer able to generate adequate growth through closed innovation.

After testing its products in foreign markets by pursuing an international strategy, GR Foods Inc. wants to expand by pursuing a multidomestic strategy. How will this most likely affect the company? A. The company's operations will become more cost-efficient. B. The company's exposure to exchange rate fluctuations will reduce. C. The company will be able to reap greater benefits from economies of scale. D. The company will be exposed to a lower risk of intellectual property appropriation.

B. The company's exposure to exchange rate fluctuations will reduce.

Which of the following is a benefit of a multinational enterprise (MNE) pursuing a global-standardization strategy? A. The firm customizes products and services to better suit local requirements. B. The firm reaps significant economies of scale and location economies. C. The firm follows a differentiation strategy at the business level. D. The firm has all its key business functions located in the home country.

B. The firm reaps significant economies of scale and location economies.

Which of the following is a drawback of using the industry life cycle as a framework to guide strategic choice? A. The framework believes that the life cycle of industries is unpredictable. B. The framework does not explain everything about changes in industries. C. The framework is based on the tenet that industries can be rejuvenated even in the declining stage. D. The framework believes that the number and size of competitors remain constant throughout the life cycle.

B. The framework does not explain everything about changes in industries.

In developed economies, the electric car industry is in the introduction stage, and the industry for MP3 players is in the shakeout phase. What does this imply? A. The mode of competition in the electric car industry will be based on price, whereas in the MP3 player industry, the mode of competition will be non-price based. B. The industry for electric cars will focus more on product innovation, whereas in the MP3 player industry, the focus will be on process innovation. C. The electric car industry will move to the maturity stage, whereas the industry for MP3 players will enter the growth stage next. D. The industry for electric cars will primarily pursue an integration strategy, whereas in the MP3 players industry, the focus will be on differentiation.

B. The industry for electric cars will focus more on product innovation, whereas in the MP3 player industry, the focus will be on process innovation.

What does the relational view of competitive advantage propose? A. A strategic alliance has the potential to help a firm gain a competitive advantage when it joins together resources that are common, inexpensive, and easy to imitate. B. The locus of competitive advantage is often not found within the individual firm but within a strategic partnership. C. Strategic alliances fail to provide competitive advantage when they involve joining different parts of a firm's value chain, such as R&D and marketing. D. A firm has a competitive advantage over its rivals when it can provide goods or services similar to the competitors' at a higher price.

B. The locus of competitive advantage is often not found within the individual firm but within a strategic partnership.

Which of the following is a feature of the maturity stage of the industry life cycle? A. The competitive intensity within the industry is at its peak. B. The market reaches its maximum size. C. The industry structure is more monopolistically competitive. D. The focus on product innovation is higher than that on process innovation.

B. The market reaches its maximum size.

Which of the following is one of the reasons that led to CNN, an innovator, losing its leadership position in the 24-hour cable news industry? A. The cable news industry was in the maturity stage of the industry life cycle. B. The second movers imitated CNN's incremental innovation to continuously improve their offering. C. It failed to cross the large competitive chasm between the early adopters and early majority. D. Its business model relied heavily on crowdsourcing for its user-generated content.

B. The second movers imitated CNN's incremental innovation to continuously improve their offering.

Which of the following is a result of horizontal integration in terms of Porter's five forces model? A. The industry structure becomes less consolidated. B. There is a reduction of excess capacity in the market. C. The industry structure becomes potentially less profitable. D. There is an increase in rivalry among existing firms.

B. There is a reduction of excess capacity in the market.

How will an increase in coordinated economic and political integration between countries affect the world economy? A. The world's market economies will become self-sufficient and independent. B. There will be gains in social welfare and living standards across the globe. C. The cost of labor will further decline in emerging economies. D. There will be a movement away from global-collaboration networks among multinational enterprises (MNEs).

B. There will be gains in social welfare and living standards across the globe

Which of the following is an advantage of non-equity alliances? A. They produce strong ties between alliance partners as they are permanent in nature. B. They are flexible and easy to initiate and terminate. C. They facilitate the sharing of tacit knowledge between the alliance partners. D. They are based on ownership rather than contracts.

B. They are flexible and easy to initiate and terminate.

Which of the following statements is true of shareholders in a public stock company? A. They directly supervise and coordinate the manufacture of products and delivery of services. B. They are granted a charter of incorporation by the state and legally own company stock. C. They are the centerpiece of corporate governance. D. They are appointed by a board of directors to oversee the company's management.

B. They are granted a charter of incorporation by the state and legally own company stock.

Which of the following is a drawback faced by multinational enterprises (MNEs) pursuing an international strategy? A. They cannot leverage their home-based core competencies in foreign markets. B. They are highly affected by exchange rate fluctuations. C. They have to be highly responsive to local needs and preferences. D. They cannot reap the benefits of economies of scale due to their highly customized products.

B. They are highly affected by exchange rate fluctuations.

Which of the following statements is true of laggards? A. They make up the largest customer segment for any business. B. They tend to enter the market frequently during the decline stage. C. They do not like waiting too long for new technology to release. D. They are customers who adopt a new product even if it is not necessary.

B. They tend to enter the market frequently during the decline stage.

Which of the following provides an example of how a firm's valuable resource can be imitated? A. To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of a sports car. B. To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of the Leaning Tower of Pisa. C. To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of the U.S.S. Enterprise aircraft carrier. D. To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of a grizzly bear.

B. To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of the Leaning Tower of Pisa.

Marc Works Inc., a reputed brand for fine writing instruments, is implementing an international strategy in its firms. Torque Inc., a laptop brand, is pursuing a global-standardization strategy in its firms. Which of the following statements most likely holds true in this scenario? A. While Marc Works Inc.'s competitive advantage lies in its high local responsiveness, Torque Inc. will lack such capabilities. B. Torque Inc. focuses more on cost-reductions when compared to Marc Works Inc. C. Torque Inc.'s business functions are highly centralized, whereas Marc Works Inc. organizes its activities worldwide. D. Torque Inc. is exposed to greater risks of exchange rate fluctuations.

B. Torque Inc. focuses more on cost-reductions when compared to Marc Works Inc.

How did Uber conflict with Carnegie Mellon University's National Robotics Engineering Center (NREC)? A. Uber promised a large donation to NREC but then reneged on the offer when NREC would not provide Uber with researchers. B. Uber poached entire NREC research teams with signing bonuses, twice the salaries, and stock options, thereby threatening the future of NREC. C. Uber allegedly stole ideas from the NREC research team and then claimed that these ideas were generated by their own researchers. D. Uber bribed NREC officials to give permission for building an extension to the NREC facility that focuses solely on Uber research.

B. Uber poached entire NREC research teams with signing bonuses, twice the salaries, and stock options, thereby threatening the future of NREC.

Leila is a graduate student pursuing a course in business. Presented with the case of Uber's unethical behavior, Leila wonders if Uber's board of directors should ask the CEO of Uber, Travis Kalanick, to step down. Having a strong belief in Michael Porter's idea of value creation, Leila is most likely to conclude that A. Uber's board of directors should not ask Kalanick to step down because doing so would cause a profit dip that would affect its shareholders. B. Uber's board of directors should ask Kalanick to step down because it has a greater obligation toward society. C. Uber's board of directors should not ask Kalanick to step down because he was responsible for an almost 90 percent appreciation of the company's stock. D. Uber's board of directors should ask Kalanick to step down because agents, unlike principals, are disposable.

B. Uber's board of directors should ask Kalanick to step down because it has a greater obligation toward society.

Which of the following statements accurately brings out the difference between technology enthusiasts and early adopters? A. While the customer segment in the introduction stage consists of early adopters, the customers entering the market in the growth stage are technology enthusiasts. B. Unlike technology enthusiasts, early adopters' demand is fueled more by intuition and vision rather than technology concerns. C. While early adopters make up the smallest market segment, technology enthusiasts make up the mass market. D. Firms need to communicate products' potential applications in a more direct way when attracting technology enthusiasts rather than early adopters.

B. Unlike technology enthusiasts, early adopters' demand is fueled more by intuition and vision rather than technology concerns.

_____ denotes the dollar amount a consumer would attach to a good or service. A. Utility B. Value C. Consumer surplus D. Economic contribution

B. Value

W. L. Gore has four product divisions: electronic products, industrial products, medical products, and fabrics division. It also has manufacturing facilities in the U.S., China, Germany, Japan, and Scotland, and business activities in 30 countries across the globe. Based on this information, which of the following statements is most accurate? A. W. L. Gore is pursuing a cost-leadership strategy. B. W. L. Gore is using a multidivisional structure. C. W. L. Gore is using a simple structure. D. W. L. Gore is pursuing an integration strategy.

B. W. L. Gore is using a multidivisional structure.

Which of the following statements accurately brings out the difference between closed innovation and open innovation? A. Firms following the open innovation model are much more likely to be prone to the not-invented-here syndrome than firms pursuing a closed innovation model. B. While open innovation focuses on building an effective business model to commercialize R&D, closed innovation focuses on being first to market. C. Firms following the open innovation model are more protective about their intellectual property than firms pursuing a closed innovation model. D. While open innovation means introducing new technologies to new markets, closed innovation refers to introducing new technologies to existing markets.

B. While open innovation focuses on building an effective business model to commercialize R&D, closed innovation focuses on being first to market.

While the industry for 3-D televisions is in the introduction stage of the industry life cycle, the CRT (cathode ray tube) television industry is in its decline stage. Which of the following statements will be true in this scenario? A. The market size for 3-D televisions is extremely large, while the market size for CRT televisions is moderate. B. While product innovation will be at its maximum for the 3-D television industry, process innovation will be more crucial for the CRT television industry. C. The focus in the 3-D television industry will be on cost-leadership, whereas in the CRT television industry, the focus will be on differentiation. D. While the strategic objective of the CRT television industry will be achieving market acceptance, the strategic objective of the 3-D television industry will be pursuing a harvest strategy.

B. While product innovation will be at its maximum for the 3-D television industry, process innovation will be more crucial for the CRT television industry.

While cell phones with holographic keyboards are currently in the introduction stage of the industry life cycle, tablet computers are in the growth stage. In the context of this scenario, which of the following statements is true? A. The industry for cell phones with holographic keyboards will face greater competition than the tablet industry. B. While the industry for cell phones with holographic keyboards will focus on product innovation, the tablet industry will focus on process innovation. C. While the industry for cell phones with holographic keyboards can reap the benefits of economies of scale, the tablet industry will experience no such benefits. D. The industry for cell phones with holographic keyboards will face price competition, whereas, in the tablet industry, the mode of competition will be non-price.

B. While the industry for cell phones with holographic keyboards will focus on product innovation, the tablet industry will focus on process innovation.

Rice Dazzle Inc. has been making the same breakfast cereal for 50 years. Recently, sales have plummeted. To counteract this, the company created a new package that included an endorsement by a celebrity. As a result, sales increased close to previous highs. However, the cereal itself remained the same. According the VRIO framework, is the new packaging a valuable resource for Rice Dazzle? A. Yes, because the new packaging has an endorsement by a celebrity. B. Yes, because the new packaging made the product more attractive in the eyes of consumers. C. No, because the new packaging did not improve the product itself. D. No, because the new packaging did help to not increase sales past the previous high for sales.

B. Yes, because the new packaging made the product more attractive in the eyes of consumers.

Which of the following positions is an example of an inside director for a firm? A. a senior consultant who is not an employee B. a chief financial officer C. a board member who is not an employee D. a middle manager

B. a chief financial officer

Which of the following types of groups is most susceptible to groupthink? A. a diverse group B. a cohesive group C. a heterogeneous group D. a decentralized group

B. a cohesive group

W. L. Gore & Associates is organized in such a way that it has no formal job titles, job descriptions, or chains of command. This implies that it has A. a formalized structure. B. a decentralized structure. C. organizational inertia. D. a top-down management style.

B. a decentralized structure.

For which of the following companies will geographic distance be the most relevant factor in deciding whether or not to trade with a target country? A. a firm that manufactures cell phone batteries B. a firm that extracts and exports iron ore C. a firm that produces movies D. a firm that sells wristwatches

B. a firm that extracts and exports iron ore

Fierce domestic competition in Lobekistan makes a tough environment for any motorcycle company. Success requires top-notch engineering of chassis and engines, as well as keeping costs and fuel consumption in check. As a result, Lobekistan's motorcycles have a competitive advantage in the global market. According to Porter's diamond framework, this scenario shows the influence of competitive intensity in A. a peripheral industry. B. a focal industry. C. supportive complementors. D. related complementors.

B. a focal industry.

Vibgyor Inc., a manufacturer of smartphones, has entered into a 15-year partnership with a software company to develop sophisticated operating systems and innovative mobile applications for its cell phones. This would mean that both the companies will have to mutually share their resources, knowledge, and capabilities to develop a superior product. What is the relationship between Vibgyor and the software company best referred to as in this scenario? A. an acquisition B. a strategic alliance C. a leveraged buyout D. a proprietorship

B. a strategic alliance

When North Autos Inc. wanted to sell its cars in the country of Balvia, it lacked access to distribution channels and marketing expertise in the country. Thus, North Autos had to enter into a strategic alliance with a local automobile company to get access to the foreign partner's well-established distribution channels. Which of the following reasons for entering into a strategic alliance is best illustrated in this scenario? A. increasing competitive intensity B. accessing critical complementary assets C. procuring additional capital investments D. reducing differentiation of product and service offerings

B. accessing critical complementary assets

At Opnic Corp., a cross-functional team is formed to work on a project for a new client. The team consists of Darius and four other members. At most of the team's presentations to senior management, Darius takes the lead and discusses project specifics with the management, while others chip in with additional information. At the completion of the project, Darius is recommended for promotion, while the other team members receive little recognition for their hard work. The reality is that Darius did very little actual work but spent some time compiling the project report based on different documents submitted by the others. This scenario at Opnic Corp. is a typical consequence of A. moral hazard. B. adverse selection. C. shared value creation. D. corporate governance.

B. adverse selection.

When entering a foreign market, it is advisable for a new venture that has a core competency only in R&D to form a strategic alliance with a local partner because A. the local partner can better protect its proprietary know-how. B. building downstream complementary assets can be expensive and time-consuming. C. the strategic alliance will reduce the differentiation of its product and service offerings. D. the value gap created by the firm can be easily lowered in an alliance.

B. building downstream complementary assets can be expensive and time-consuming.

Which quadrant in the core competence-market matrix is the hardest to pursue? A. building new core competencies to protect and extend current market position B. building new core competencies to create and compete in markets of the future C. leveraging core competencies to improve current market position D. redeploying and recombining core competencies to compete in markets of the future

B. building new core competencies to create and compete in markets of the future

The crossing-the-chasm framework states that _____ need to be adjusted for each customer segment. A. incremental contributions B. business strategies C. innovations D. competitors

B. business strategies

Value is determined by the perceived benefits a good or service provides to a(n) A. manufacturer. B. buyer. C. investor. D. retailer.

B. buyer.

PrimoDisk Inc. holds the highest market share in the low-growth compact disk industry. With the introduction of flash drives, the market for compact disks has reduced. However, PrimoDisk has been able to generate sufficient revenues for the parent company by selling its products in less developed countries. In the Boston Consulting Group (BCG) growth-share matrix, PrimoDisk will be categorized under A. dogs. B. cash cows. C. stars. D. question marks.

B. cash cows.

FTZ Inc. is an electronic appliances manufacturer that has many strategic business units (SBUs), among which, television and computers share a close relationship. These SBUs have to fight each other for R&D funding because there is a combined amount set aside for these two units. However, they share technological findings with each other and work together to ensure that their combined output is better that of the other SBUs. Such a relationship between SBUs in a business is referred to as A. competition. B. co-opetition. C. exploitation. D. exploration.

B. co-opetition.

Which of the following products are generally manufactured by multinational enterprises (MNEs) pursuing a global-standardization strategy? A. products with a high value-to-weight ratios like luxury goods B. commodity products like computer hardware C. consumer products related to national and/or religious identity like food D. products that carry country-specific quality associations like wine

B. commodity products like computer hardware

One of the ways to foster ethical behavior in employees is to A. avoid codifying organizational culture. B. create a control system that encourages desired values. C. view clients as counter parties to transactions. D. align the vision statement of the organization with its informal culture.

B. create a control system that encourages desired values.

GreenCure Pharma Inc. wanted its research partner, an R&D company, to develop a cancer vaccine. However, the project required huge capital investments, and its research partner was not ready to solely face the risks involved. Thus, to gain its partner's confidence and to prove its involvement, GreenCure Pharma invested $100 million in the project. This investment made by GreenCure Pharma will result in a A. cartel. B. credible commitment. C. corrective action. D. parent-subsidiary relationship.

B. credible commitment.

Horizontal integration through mergers and acquisitions can help firms strengthen their competitive positions by increasing A. competitive intensity. B. differentiation. C. costs. D. managerial efficiency.

B. differentiation

ESB Group is the parent company of many related businesses under its banner. Each share of the parent company is quoted at $220. However, if this had to be assessed by adding the stock prices of each of its strategic business units, the value would only be $200 per share. In this scenario, what has ESB Group created? A. capital liquidity B. diversification premium C. diversification discount D. demand-pull inflation

B. diversification premium

Companies that pursue related diversification are more likely to improve their performance than companies that pursue unrelated diversification because they create a A. diversification discount. B. diversification premium. C. conglomerate discount. D. conglomerate premium.

B. diversification premium.

A drawback of joint ventures is that they are characterized by A. involuntary mergers. B. double reporting lines. C. contractual agreements rather than ownership. D. weak ties between alliance partners.

B. double reporting lines.

With regard to the VRIO framework, Crocs Shoes was unable to sustain its competitive advantage primarily because its products were A. invaluable and common. B. easy to imitate. C. extremely expensive. D. non-substitutable.

B. easy to imitate.

Triple-bottom-line is a combination of economic, social, and _____ concerns that can lead to a sustainable strategy. A. cultural B. ecological C. investment D. aesthetic

B. ecological

After Jeff Bezos read about how the Internet was growing by 2,000 percent a month, he set out to use the Internet as a new distribution channel and founded Amazon, which is now the world's largest online retailer. This is clearly an example of a(n) A. firm that uses closed innovation. B. entrepreneur who commercialized invention into an innovation. C. business that entered the industry during its maturity stage. D. exception to the long tail business model.

B. entrepreneur who commercialized invention into an innovation.

A candy company called SweetThings Inc. forms an agreement with another candy company called Reverie Inc. Through this agreement, SweetThings owns 30 percent of Reverie. However, Reverie does not own any part of SweetThings. This type of agreement is called a(n) A. non-equity alliance. B. equity alliance. C. joint venture. D. capital venture.

B. equity alliance.

Janet is the CEO of Far Sight Inc., which uses a triple-bottom-line approach. As a result, Janet will tend to A. view superior financial performance as the sole objective of her firm. B. expect her company to be socially responsible. C. use fossil fuels to run her company's production plants. D. ignore the ecological dimension for her company.

B. expect her company to be socially responsible.

StickOn Inc. is an adhesive manufacturer. After a slight dip in production numbers, it forms a team to find a quick solution to this problem, at least for the shorter term. This scenario best exemplifies A. exploration. B. exploitation. C. co-opetition. D. competition.

B. exploitation.

Which of the following modes of entering a foreign market allows for the lowest level of control? A. greenfield ventures B. exporting C. joint ventures D. acquisitions

B. exporting

In Michael Porter's diamond framework, _____ describe a country's endowments in terms of natural, human, and other resources. A. market conditions B. factor conditions C. demand conditions D. supply conditions

B. factor conditions

In the context of the resource-based model of competitive advantage, if a successful firm exhibits resource immobility it means that the A. rival firms have better accessibility to quality resources. B. firm will have a sustained competitive advantage because of its unique resources. C. competitors can easily replicate or copy the firm's resource bundles and capabilities. D. resources of the firm cannot be effectively deployed within its own organization.

B. firm will have a sustained competitive advantage because of its unique resources.

Which of the following types of organizations comparatively requires the lowest levels of investment and control? A. joint ventures B. franchising C. acquisition D. greenfield operations

B. franchising

Photohome 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? A. subscription-based B. freemium C. pay-as-you-go D. razor-razor-blade

B. freemium

In which of the following stages of the industry life cycle is a standard first established? A. maturity stage B. growth stage C. shakeout stage D. introduction stage

B. growth stage

In the decline stage, which of the following strategies involves a reduction of investments in product support? A. exit strategy B. harvest strategy C. maintain strategy D. consolidate strategy

B. harvest strategy

A functional structure is recommended when a firm A. has a broad focus in terms of its product/service offerings. B. has a low level of diversification. C. has a low degree of specialization. D. diversifies into different product lines and geographies.

B. has a low level of diversification

In a strategic alliance, the firm that learns faster A. has the tendency to lose its competitive advantage. B. has the incentive to reduce its knowledge sharing. C. has the tendency to move up a learning curve. D. has the incentive to invest further in the alliance.

B. has the incentive to reduce its knowledge sharing.

A greater cultural distance between two trading countries A. increases linguistic similarities between the two countries. B. increases the liability of foreignness. C. reduces the uncertainty of doing business. D. reduces the transaction costs associated with business.

B. increases the liability of foreignness.

SyncTouch Inc. is a manufacturer of cell phones. It has released an improvised version of its smartphone in markets in which the company already operates. Which of the following types of innovations does this scenario best illustrate? A. radical innovation B. incremental innovation C. architectural innovation D. disruptive innovation

B. incremental innovation

The board of directors of a public stock company consists of A. managers appointed by the owners of a company to run its day-to-day operations. B. individuals who formally represent the firm's shareholders and oversee the work of executives. C. the legal owners of a publicly traded company that was purchased in a leveraged buyout. D. employees of a company who belong to the senior management and directly report to the CEO of the firm.

B. individuals who formally represent the firm's shareholders and oversee the work of executives.

When approaching a bank for a loan, the borrower has better knowledge than the lender about his or her own ability to repay the loan without defaulting. What is this situation referred to as? A. principal-agent problem B. information asymmetry C. experience-curve effect D. learning-curve effect

B. information asymmetry

The risk of employee opportunism on behalf of agents in a public stock company is exacerbated by A. stakeholder strategy. B. information asymmetry. C. corporate governance. D. groupthink.

B. information asymmetry.

An intrapreneur is described as a person who A. restricts changes within an organization. B. innovates within existing companies. C. introduces new products or services by starting his or her own ventures. D. invests funds in the ideas of another person in the same organization.

B. innovates within existing companies.

Coda Inc. is an apparel manufacturer. The management at Coda prefers moderate control over the operations of the different departments such as R&D, design, marketing, and sales. It allocates a budget to each function at the beginning of each quarter. This is an example of implementing control through A. output controls. B. input controls. C. multidivisional strategy. D. centralization.

B. input controls.

With reference to the Strategy Highlight 8.2, the Tata Group's corporate strategy is attempting to A. move from unrelated diversification to related-constrained diversification. B. integrate different strategic positions, pursued by different strategic business units. C. pursue a focused differentiation strategy over a focused cost-leadership strategy. D. depend on a single product market to generate most of its revenues.

B. integrate different strategic positions, pursued by different strategic business units.

The value chain describes the A. competitive challenges a firm faces in a highly dynamic external environment. B. internal activities a firm engages in when transforming inputs into outputs. C. current consequences a firm experiences due to its decisions in the past. D. strategic advantages a firm experiences when its resources lack causal ambiguity.

B. internal activities a firm engages in when transforming inputs into outputs.

When a firm pursues a(n) _____, it sells the same products or services in both domestic and foreign markets. A. domestic strategy B. international strategy C. differentiation strategy D. localization strategy

B. international strategy

By introducing Vscan, a small, wireless ultrasound device, GE Healthcare (General Electric) was primarily trying to A. cater to the healthcare needs of the developed countries over developing countries. B. invade the healthcare market from the bottom up. C. leverage existing technologies to attack new markets. D. find a market for high-end, high-price diagnostic devices.

B. invade the healthcare market from the bottom up.

If a strategic business unit is recognized as a cash cow, it is advisable to A. harvest the business. B. invest into the business to hold its current position. C. divest the business due to its low market share. D. maintain it till it turns into a dog.

B. invest into the business to hold its current position.

Silca Electronics Inc. is a consumer-electronics company based in the country of Pelo. It has approximately 300 stores across the country and is already active in three foreign countries. It attempts to establish itself successfully in the country of Zevar, and uses its low-cost strategy to do so. However, due to the additional costs associated with training, coordinating across geographic distances, and other costs associated with doing business in an unfamiliar cultural and economic environment, Silca Electronics Inc. incurs huge financial losses in Zevar. In this scenario, Silca Electronics Inc.'s failure to establish itself successfully in Zevar occurs most likely because A. it overestimates its need to protect its intellectual property. B. it underestimates its liability of foreignness when entering the Zevar market. C. it underestimates its dwindling reputation before it enters the Zevar market. D. it overestimates the geographic and cultural distance between Pelo and Zevar.

B. it underestimates its liability of foreignness when entering the Zevar market.

If a resource is common A. competitive advantage will persist with one firm for a long period of time. B. it will result in perfect competition. C. it will result in greater resource immobility. D. competitive parity will cease to exist.

B. it will result in perfect competition.

Intangible assets add great value to a firm primarily because the firm's A. reputation and brand equity are accumulated quickly and can be leveraged easily. B. knowledge and culture take time to develop and are generally difficult to imitate. C. tangible assets require a higher degree of capital than its intangible assets. D. capabilities are by nature typically tangible.

B. knowledge and culture take time to develop and are generally difficult to imitate.

Mario founded Tapoz Communications Inc. in 1993. Ten years later, the company went public. Despite Mario's death in 2005, the company reported a 75 percent increase in revenue in 2006. Which of the following characteristics of a publicly traded company does this scenario best exemplify? A. transferability of investor ownership B. legal personality C. limited liability for investors D. separation of legal ownership and management control

B. legal personality

ChocoNuts Inc. produces an inexpensive candy bar that is well tailored for the tastes of U.S. consumers. However, it has failed to satisfy the consumer preferences of its host country, Japan. Which of the following categories has ChocoNuts performed poorly in? A. cost-reduction B. local-responsiveness C. global-standardization D. transnational strategy

B. local-responsiveness

The ratio of SG&A/Revenue is an indicator of a firm's focus on A. researching to produce innovative products and services. B. marketing to promote its products and services. C. producing a good in an efficient manner. D. creating a good that is cost-effective.

B. marketing to promote its products and services.

Walmart is an example of a(n) _____ organization. A. organic B. mechanistic C. decentralized D. informal

B. mechanistic

The _____ structure consists of several distinct strategic business units (SBUs), each with its own profit-and-loss responsibility. A. ambidextrous B. multidivisional C. functional D. organic

B. multidivisional

Which of the following global strategies best matches with a multidivisional structure? A. international B. multidomestic C. global-standardization D. transnational

B. multidomestic

A trend observed during the Globalization 3.0 stage involves A. countries around the globe becoming more self-sufficient and independent. B. multinational companies organizing as global-collaboration networks. C. privately-owned firms getting nationalized. D. world's market economies becoming less integrated.

B. multinational companies organizing as global-collaboration networks.

Supply, distribution, and licensing contractual agreements between firms, which result in vertical strategic alliances, are all examples of A. cartel arrangements. B. non-equity alliances. C. joint ventures. D. equity alliances.

B. non-equity alliances.

Organizational culture can help a firm gain and sustain competitive advantage only if the culture makes a positive contribution to the firm's economic value creation and A. eventually gives way to core rigidity. B. obeys the VRIO principles. C. does not demonstrate causal ambiguity. D. displays an absence of social complexity.

B. obeys the VRIO principles.

Travis, the CEO of Riplon Corp., used company funds to buy a car worth $1 million and a house for $6 million in Santa Fe. This is an example of A. corporate governance. B. on-the-job consumption. C. adverse selection. D. shared value creation.

B. on-the-job consumption.

Norce Autos Inc. allows its customers, suppliers, researchers, and the community in general to contribute their ideas toward new product developments. Customers and other interested stakeholders can let the company know what new features they want to see in their next car. If the company faces any technical complexities that its internal R&D team cannot solve, it posts the problem on its website and allows people from the external community to provide solutions. In this scenario, Norce Autos Inc. is primarily leveraging its A. economies of scope. B. open innovation model. C. razor-razor-blade business model. D. experience-curve effects.

B. open innovation model.

An organization is characterized as having a flexible division of labor, distributed decision making, and generalized knowledge of how to accomplish strategic goals valued. This organization is most likely _____ in nature. A. specialized B. organic C. mechanistic D. formalized

B. organic

Plow Inc. is a greeting card manufacturing company. Plow's market dominance exists primarily because of the innovative designs of its greeting cards when compared to those of its competitors. In this scenario, Plow Inc.'s managers must ideally rely on a functional structure that resembles a(n) _____ organization. A. simple B. organic C. mechanistic D. integrated

B. organic

Zappos' 10 core values that define what it means for employees to be working at Zappos also define the _____ of Zappos. A. organizational structure B. organizational culture C. organizational strategy D. organizational controls

B. organizational culture

What causes the winner's curse? A. buying a firm with principal-agent problems B. overpaying for an acquisition C. buying a firm with a competitive disadvantage D. underpaying for an acquisition

B. overpaying for an acquisition

When TrueHeal Pharma Inc. released a new drug to treat insomnia, its chemical composition was disclosed at the back of the drug's cover. However, any attempts by competitors to copy the chemical composition would result in infringement of TrueHeal Pharma's intellectual property rights. Thus, the drug is protected by a A. promissory bill. B. patent. C. franchise. D. royalty.

B. patent.

TravelCheap Inc. is a car rental business that charges customers based on how many miles they put on a car on a daily basis. As result, a person who uses a car to travel from Chicago to Denver during a week is charged much more than a person who uses a car only to travel one mile to the grocery store six times a week. TravelCheap uses a business model called A. freemium. B. pay-as-you-go. C. agency. D. bundling.

B. pay-as-you-go.

The competitive advantage that one firm has will be short-lived in an industry where A. resource immobility is high. B. perfect competition exists. C. resource heterogeneity is high. D. capabilities of a firm are not easily replicable.

B. perfect competition exists.

Managers in a firm hired to improve the firm's profitability and ultimately the shareholders' value will add to the overall costs if they pursue their own self-interests. What does this best illustrate? A. diseconomies of scale B. principal-agent problem C. experience-curve effects D. information asymmetries

B. principal-agent problem

GLD Inc. is a publicly traded company. The stockholders of this company delegate the authority to make decisions for the company to a CEO named George. The stockholders expect George to make decisions that will benefit the company. However, George begins to find ways to maximize his total compensation, which at times hinders GLD's performance. This scenario reflects A. value creation problems. B. principal-agent problems. C. inside director-outside director problems. D. fiduciary responsibility problems.

B. principal-agent problems

BM Goods Inc. is a large conglomerate that operates only in its home country. The company competes in industries like the consumer electronics, health care, hotel, airlines, education, and steel industries. Which of the following diversification strategies does this best illustrate? A. process diversification B. product diversification C. geographic diversification D. market diversification

B. product diversification

Amazon.com has decided to enter the college bookstore market. The goal of "Amazon Campus" is to offer co-branded university-specific web sites that offer textbooks and paraphernalia, such as logo sweaters and baseball hats. This development shows Amazon's relentless pursuit of A. geographic diversification. B. product diversification. C. vertical integration. D. horizontal integration.

B. product diversification.

The most efficient way to overcome the principal-agent problem in a firm is to A. increase the level of vertical integration within the firm. B. provide stock options to managers. C. downsize the existing workforce. D. organize economic activities within the firm.

B. provide stock options to managers

MainLine Inc. is a public stock company that provides natural gas for businesses. Although this company generates a large profit, its methods of obtaining gas have at times broken down, thereby causing environmental problems. As a result, the company's value creation has suffered. This scenario supports Michael Porter's warning that A. public companies often do not keep economic needs and societal needs separate from each other, thereby contributing to low value creation. B. public companies have defined value creation too narrowly in terms of financial performance, thereby contributing to black swan events. C. public companies do not focus enough on increasing firm profits, thereby contributing to low value creation. D. public companies have defined value creation too narrowly and as a result have ignored political lobbying, thereby contributing to black swan events.

B. public companies have defined value creation too narrowly in terms of financial performance, thereby contributing to black swan events.

Since an organic structure helps a firm build core competencies in areas such as R&D and marketing, this structure is employed by firms that A. have a tall hierarchical structure. B. pursue a differentiation strategy at the business level. C. have a high degree of specialization and centralization. D. focus on standardizing operating procedures.

B. pursue a differentiation strategy at the business level.

The solar-powered car division of a large automobile company has been experiencing negative cash flows though the market growth for such cars is predicted to be high. If the company invests further resources into this division, it can increase its relative market share in the future. However, if due to technological changes the car cannot create sufficient consumer demand, then the division can prove to be unprofitable. In the Boston Consulting Group (BCG) growth-share matrix, the solar-powered car division will be categorized under A. dogs. B. question marks. C. stars. D. underdogs.

B. question marks.

Incumbent firms favor incremental innovation over radical innovation because A. their business decisions are independent of the other parties in their innovation ecosystem. B. radical innovation will disturb the existing power distribution within the firms. C. incumbent firms do not have formal organizational structures and processes like the way new entrants do. D. incremental innovations help firms sustain a permanent competitive advantage, whereas radical innovations only help gain a temporary advantage.

B. radical innovation will disturb the existing power distribution within the firms.

The "Gold Crisps" potato wafers manufactured by True Foods Inc. have been the highest selling wafers in the market. Though the market for wafers is flooded with competitors, True Foods Inc. has been able to maintain its market position for a long time. This is mainly attributed to the unique taste of the wafers that comes from the unique natural flavoring used by the company. This competency of True Foods Inc. will be considered as a(n) _____ resource in the VRIO framework. A. inexhaustible B. rare C. intangible D. virtual

B. rare

In the _____ business model, the initial product is often sold at a loss or given away for free in order to drive demand for complementary goods. A. subscription-based B. razor-razor-blade C. pay-as-you-go D. direct sales

B. razor-razor-blade

True Vibgyor Inc. 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 True Vibgyor implementing? A. subscription-based B. razor-razor-blade C. pay-as-you-go D. direct sales

B. razor-razor-blade

The core competency of MotorCraft Inc. is its fuel-efficient engine found in its cars. These engines are developed and built in-house. The company realizes that there is a new market opportunity to diversify. Thus, it produces the car engines on a large scale and sells them to other automobile companies. In this scenario, MotorCraft is A. leveraging existing core competencies to target the chasm between the early adopter and early majority market segment. B. redeploying and recombining existing core competencies to compete in future markets. C. building new core competencies to create and compete in future markets. D. building new core competencies to protect and extend current market position.

B. redeploying and recombining existing core competencies to compete in future markets.

A firm that engages in strategic outsourcing typically A. increases its internal transaction costs. B. reduces its level of vertical integration. C. reduces its level of external transaction costs. D. increases its level of horizontal integration.

B. reduces its level of vertical integration.

The Boston Consulting Group (BCG) growth-share matrix locates a firm's individual strategic business units (SBUs) in which two dimensions? A. start-up capital required and stage of industry life cycle B. relative market share and speed of market growth C. economic value created and costs incurred D. amount of debt financing and equity financing

B. relative market share and speed of market growth

Which of the following resources is a firm's resource stock? A. cash in the bank B. reputation for quality C. land and building D. plant and machinery

B. reputation for quality

Although True Ion Inc. and One Electro Inc. operate in the same consumer electronic industry, True Ion Inc. has better sales and brand equity. This is attributed to True Ion Inc.'s commitment to innovation. The company has adequate financial and human capital to invest in research and development, an area in which One Electro Inc. lacks. In this scenario, which of the following critical assumptions of the resource-based view of a firm has been illustrated? A. resource equality B. resource heterogeneity C. resource mobility D. resource maturity

B. resource heterogeneity

When a firm is said to be pursuing a geographic diversification strategy, it means that the firm will A. introduce different products and services in an existing single market. B. sell its products in several different regional, national, and international markets. C. operate from multiple headquarters across the globe. D. depend solely on its in-house facilities for all its production purposes.

B. sell its products in several different regional, national, and international markets.

According to the perspective of shareholder capitalism, A. shareholders in public stock companies are restricted from buying shares of two competing companies. B. shareholders in public stock companies have the most legitimate claim on profits. C. shareholders in public stock companies have significant decision-making power. D. shareholders in public stock companies have unlimited financial liability.

B. shareholders in public stock companies have the most legitimate claim on profits.

Which of the following statements accurately explains the primary reason behind Walmart's failure in Germany? A. inability to implement its trademark focused-differentiation strategy in the German market B. significant differences between its U.S. personnel policies and Germany's culture C. Germany's unfamiliarity with retail discount powerhouses D. Metro's hostile takeover of Walmart in Germany

B. significant differences between its U.S. personnel policies and Germany's culture

Nick just graduated from law school and wants to start his own law firm. It is best for Nick to use a _____ organizational structure. A. functional B. simple C. mechanistic D. matrix

B. simple

Value Autos Inc. has been trying to directly copy the strategies of Honk Autos Inc. Even though it is evident that Honk Autos Inc.'s success comes from its just-in-time inventory system, Value Autos Inc. has not been able to effectively apply the system in the same way. This is because the organizational structures, employees, cultures, and the overall business systems of both the companies vary from each other. Which of the following barriers to imitation does this scenario best illustrate? A. path dependence B. social complexity C. resource mobility D. resource homogeneity

B. social complexity

A drawback involved in using cross-border strategic alliances to enter new foreign markets is that A. the foreign firm will need to make larger investments when compared to entering the new market on its own. B. some of the firm's proprietary know-how may be appropriated by the foreign partner. C. all potential business risks in the new market will have to be faced alone by the foreign firm. D. the shareholder value of the foreign partner will decline drastically.

B. some of the firm's proprietary know-how may be appropriated by the foreign partner.

The smartphone division of the large consumer electronics company, True Electra Inc., has a significant market share in the fast-growing cell phone market. If the company invests further into this division, it will be able to reap increased cash flows. In the Boston Consulting Group (BCG) growth-share matrix, the smartphone division of True Electra will be categorized under A. question marks. B. stars. C. cash cows. D. dogs.

B. stars.

Strong organizational cultures that are strategically relevant align employees' behaviors more fully with the organization's A. hierarchical rigidity. B. strategic goals. C. hierarchical structure. D. strategic flexibility.

B. strategic goals.

Mia has purchased an Internet package for three months, in which she can use 30 mbps Internet speed. However, for the service, she needs to pay a fee of $50 in advance irrespective of whether she uses the Internet during the service period or not. This arrangement best illustrates the _____ strategy. A. razor-razor-blade B. subscription-based C. pay-as-you-go D. freemium

B. subscription-based

Chat Zone Inc., a telecommunication company, had been drastically losing its market share due to tough competition in the industry. The management hired a reputed consulting firm to advice the company. The experts from the consulting firm pointed out that the company primarily lost out on its competitive advantage due to its tedious internal policies and procedures. These ineffective policies and procedures made the company operations, marketing, and after-sales service inefficient. Chat Zone Inc. can best solve its problem by working on its A. immobile assets. B. support activities. C. resource flows. D. resource stocks.

B. support activities.

The strategic objective of businesses during the shakeout phase of the industry life cycle will primarily be to A. move toward product innovations and away from process innovations. B. survive by drawing on "deep pockets." C. achieve market acceptance. D. reduce the barriers to entry in the industry.

B. survive by drawing on "deep pockets."

Cynthia works as a front-line employee for a nationwide retail store. She reports to a floor manager, who reports to a departmental manager, who reports to a regional supervisor, who reports to a vice president, who reports to the CEO. Which of the following best describes this retail store? A. flat structure B. tall structure C. centralized structure D. decentralize structure

B. tall structure

Virtue Products Inc., a large conglomerate, procures a few component parts from external suppliers and also manufactures some of the key raw materials in its own subsidiaries. This apart, the company does not solely depend on outside distributors to reach its customers. In fact, it has its own retail stores to distribute its products. In this scenario, which of the following alternatives to vertical integration is Virtue Products applying? A. concentric integration B. taper integration C. horizontal integration D. conglomerate integration

B. taper integration

Under the CAGE distance framework, the administrative and political distance between two countries primarily increases with A. differences in climates and time zones. B. the absence of a trading bloc. C. physical remoteness. D. the lack of connective ethnic and social networks.

B. the absence of a trading bloc.

In Eli Lilly's Office of Alliance Management, who is responsible for providing the technical expertise and knowledge needed for the specific technical area and the day-to-day management of the alliance? A. the alliance champion B. the alliance leader C. the alliance manager D. the alliance boss

B. the alliance leader

One of the first new business apps resulting from the alliance of Apple and IBM will help airline pilots determine the right amount of fuel to carry on a particular flight. This task not only requires significant data analytics but also the need to display the information in an easily understandable way so that pilots can digest it quickly when glancing on their iPad in a cockpit prior to departure. Which of the following parts of this example will Apple be responsible for? A. the organization and analysis of data analytics B. the display of information in an easy-to-understand way C. the determination of the amount of fuel to carry on a flight D. the arrangement of the cockpit to facilitate the use of the iPad

B. the display of information in an easy-to-understand way

Toyota's President, Akio Toyoda, hopes that a transfer of tacit knowledge will take place through its equity alliance with Tesla Motors. He is referring to A. the lean manufacturing process pioneered by Tesla. B. the entrepreneurial spirit in Tesla. C. the safety measures followed in Tesla, recorded in its user manuals. D. the product information documented in Tesla's database.

B. the entrepreneurial spirit in Tesla.

Which of the following factors pertaining to national competitive advantage enabled Nokia, a multinational company from Finland, to become an early leader in cell phones? A. the competitive intensity in the cell phone industry of Finland B. the huge demand for high-quality wireless services in Finland C. the abundance of natural resources in Finland D. the related and supporting industries present in Finland

B. the huge demand for high-quality wireless services in Finland

Which of the following statements best describes local responsiveness? A. the process of producing goods in one country and selling them in another B. the need to tailor product and service offerings to fit native consumer preferences and host-country requirements C. the belief that consumer needs and preferences throughout the world are converging and thus becoming increasingly homogenous D. the additional costs of doing business in an unfamiliar culture and economic environment, and of coordinating across geographic distances

B. the need to tailor product and service offerings to fit native consumer preferences and host-country requirements

The typical four-step innovation process begins with A. the modification and recombination of an existing product or process. B. the presentation of an idea as findings derived from basic research. C. the commercialization of an invention by entrepreneurs. D. a competitor's attempt to imitate an innovation.

B. the presentation of an idea as findings derived from basic research.

What is horizontal integration? A. the process of merging with a competitor at a different stage of the value chain B. the process of merging with a competitor at the same stage of the value chain C. the process of acquiring a competitor at a higher stage of the value chain D. the process of acquiring a competitor at a lower stage of the value chain

B. the process of merging with a competitor at the same stage of the value chain

What is strategic entrepreneurship? A. the pursuit of an innovation that uses concepts from the triple-bottom-line approach B. the pursuit of an innovation that uses concepts from strategic management C. the pursuit of an innovation that benefits the ecosystem D. the pursuit of an innovation that benefits society

B. the pursuit of an innovation that uses concepts from strategic management

Which of the following is the source of the principal-agent problem in publicly traded companies? A. the law of legal personality B. the separation of ownership and control C. limited liability for investors D. transferability of investor ownership

B. the separation of ownership and control

A drawback of short-term contracting as an alternative to making a component in-house is that A. it is the most-integrated alternative to performing an activity so the principal company has no control over the agent. B. the supplying firm has no incentive to make any transaction-specific investments to increase performance or quality. C. it fails to allow a long planning period that individual market transactions provide. D. the buying firm cannot demand lower prices due to the lack of a competitive bidding process.

B. the supplying firm has no incentive to make any transaction-specific investments to increase performance or quality.

The success of the Pixar-Disney strategic alliance demonstrated that A. Disney was in desperate need of Pixar's graphic display systems. B. the two entities' complementary assets matched. C. it was easier for the alliance partners to reduce the value gap created. D. the companies were effectively managing an unrelated diversification strategy.

B. the two entities' complementary assets matched.

With regard to New United Motor Manufacturing, Inc. (NUMMI), why did General Motors (GM) enter into a strategic alliance with Toyota? A. to transfer its knowledge of a completely new production system B. to learn the lean manufacturing system pioneered by Toyota C. to better understand the American workforce D. to get access to Toyota's distribution system and marketing expertise

B. to learn the lean manufacturing system pioneered by Toyota

Why did incumbent pharmaceutical firms enter into hundreds of strategic alliances with biotech start-ups? A. to pursue an unrelated-options perspective without disrupting existing market economics B. to make small-scale investments in ventures poised to disrupt existing market economics C. to invest their excess cash flow in the superior technology of the biotech start-ups D. to share their continuously updated research technology with the biotech start-ups

B. to make small-scale investments in ventures poised to disrupt existing market economics

A firm follows a(n) _____ when less than 70 percent of its revenues come from a single business and there are few, if any, linkages among its businesses. A. related-constrained strategy B. unrelated diversification strategy C. differentiation strategy D. dominant-business strategy

B. unrelated diversification strategy

A defining characteristic of the subscription-based business model is that the A. user pays for only the services he or she consumes. B. user pays for access to a product or service whether he or she uses it during the payment term or not. C. basic features of a product or service are provided free of charge, but the user must pay for premium services such as advanced features or add-ons. D. initial product is often sold at a loss or given away for free in order to drive demand for complementary goods.

B. user pays for access to a product or service whether he or she uses it during the payment term or not.

When a firm operates at an output level of 9,000 units, the per-unit cost is $5. When the production is between 10,000-12,000 units, the per-unit cost is $4. At a production level of 13,000 units, the production cost is again $5 per unit. At 14,000 units and above, the production cost increases further. At what output level does the firm experience economies of scale?

B. 11,000 units

When a firm manufactures 2,000-3,000 units of a product, it incurs an average cost of $10 per unit. When it manufactures 3,000-4,000 units of the same product, the average cost per unit reduces to $7. However, manufacturing beyond 4,000 units will raise the average cost per unit to $9. Which of the following is the firm's minimum efficient scale?

B. 3,000-4,000 units

At a certain output level, the per-unit cost incurred by a firm to manufacture a product was $60. Once the cumulative output doubled, the cost per unit reduced to $54. All other factors remaining constant, the firm has been able to achieve a(n)

B. 90 percent learning curve.

What must a cost-leadership strategy accomplish to be successful?

B. It must reduce the firm's cost below that of its competitors while offering adequate value.

PureRinse Inc. is a brand reputed for its wide variants of body wash that introduced its range of shampoos and skin moisturizers a few years ago. Since most of its products could be produced using the same resources and technology, the company's cost structure lowered, while its product portfolio widened. In this scenario, which of the following value and cost drivers is PureRinse applying?

B. economies of scope

Combining economies of learning with the existing production technology allows a firm to

B. move down a given learning curve.

A value curve indicates a lack of effectiveness in a firm's strategic profile when it

B. zigzags.

A firm has 30 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 A. 30,000 shares, that is, 30 million shares/$100. B. $200,000, that is, $2,000 × $100. C. $3 billion, that is, 30 million shares × $100. D. 20:1, that is, $2,000/$100.

C. $3 billion, that is, 30 million shares × $100.

Apple Watch retailed for $349 in 2015, and the firm was predicted to sell millions of units. The firm's total cost in terms of materials and labor for the Apple Watch was no more than $84. Thus, Apple's profit for each watch sold is an estimated $265, with a profit margin of _____ percent. A. 215 B. 265 C. 315 D. 365

C. 315

Which of the following describes a peer-to-peer technique? A. A company offers a cleaning service free of charge on a first-time trial basis. B. A company offers a package of cleaning supplies at a discount. C. A company matches an individual with a cleaning service. D. A company places a low retail price on low-selling cleaning supplies.

C. A company matches an individual with a cleaning service.

Even though many valuable, rare, and inimitable resources were generated at Xerox's Palo Alto Research Center (PARC), the management at Xerox's headquarters failed to gain a competitive advantage by exploiting the breakthroughs in computing software and hardware. What is the most likely implication of this example? A. It is advisable to outsource research and development functions. B. Competitive advantage cannot be gained through unrelated diversification. C. A firm must be effectively organized to capture value. D. It is better to build competitive advantage on tangible assets rather than intangible assets.

C. A firm must be effectively organized to capture value.

Which of the following is a drawback of the SWOT analysis? A. The SWOT analysis takes into account only the internal environment of a firm, ignoring the equally important external environment. B. This framework is only applicable to the manufacturing industries; it is ineffective when applied to the service firms. C. A problem with this framework is that a strength can also be a weakness, and that an opportunity can also simultaneously be a threat. D. A drawback of this framework is that it allows managers to merely evaluate a firm's current situation, and not its future prospects.

C. A problem with this framework is that a strength can also be a weakness, and that an opportunity can also simultaneously be a threat.

Why did W. L. Gore reorganize itself into a functional structure from a simple structure? A. A simple structure was too formalized, specialized, and centralized to really facilitate any kind of productivity. B. A functional structure is more decentralized. C. A simple structure could not provide the effective division, coordination, and integration of work required to accommodate future growth. D. A functional structure has a tall hierarchical structure that relies on bottom-up communication.

C. A simple structure could not provide the effective division, coordination, and integration of work required to accommodate future growth.

_____ suggests that the firm can be viewed as a nexus of legal contracts (loosely defined) between resource holders. A. Shareholder capitalism B. Stakeholder strategy C. Agency theory D. Corporate governance

C. Agency theory

How is the early majority section of consumers different from the late majority section? A. While the early majority makes up the mass market, the late majority is the smallest market segment. B. The late majority enters the market in the decline stage, whereas the early majority enters the market during the maturity stage. C. Although the early majority is confident in their ability to master a new technology, the late majority is not. D. While the late majority prefers buying from unknown new ventures, the early majority relies only on well-established brands.

C. Although the early majority is confident in their ability to master a new technology, the late majority is not.

Which of the following countries has a high geographic distance but a low cultural distance from the United States? A. Canada B. Mexico C. Australia D. France

C. Australia

Which of the following is an observable feature in the Globalization 3.0 stage? A. Knowledge flow between the local replicas of the multinational enterprises and their U.S. headquarters is limited. B. Only sales and distribution functions of a multinational enterprise are located in a few key countries. C. Based on an optimal mix of costs, skills, and PESTEL factors, companies now freely locate business functions anywhere in the world. D. Firms have reorganized from a global enterprise with different centers of expertise to a multinational company with self-contained operations in a few selected countries.

C. Based on an optimal mix of costs, skills, and PESTEL factors, companies now freely locate business functions anywhere in the world.

GreenThings Inc., a company popular for its dairy products, successfully follows a multidomestic strategy. TransGold Inc., a large conglomerate, pursues a transnational strategy. Which of the following statements is most likely true of this scenario? A. While TransGold Inc.'s competitive advantage will lie in its high local responsiveness, GreenThings Inc. will lack such competencies. B. GreenThings Inc. will face greater pressure for cost-reductions than TransGold Inc. due to its strategy choice. C. Both GreenThings Inc. and TransGold Inc. will have to duplicate key business functions in multiple host countries. D. While GreenThings Inc. will require a global matrix structure, TransGold Inc. will require a traditional headquarters model.

C. Both GreenThings Inc. and TransGold Inc. will have to duplicate key business functions in multiple host countries.

Which of the following statements correctly describes resource heterogeneity? A. Bundles of resources, capabilities, and competencies differ temporarily across firms. B. Bundles of resources, capabilities, and competencies are mostly the same across firms. C. Bundles of resources, capabilities, and competencies differ across firms. D. Bundles of resources, capabilities and competencies are all the same across firms.

C. Bundles of resources, capabilities, and competencies differ across firms.

_____ are strategic business units that compete in a low-growth market but hold considerable market share. A. Dogs B. Question marks C. Cash cows D. Stars

C. Cash cows

_____ is best described as cooperation by competitors to achieve a strategic objective. A. Limited liability B. Proprietorship C. Co-opetition D. Commerce

C. Co-opetition

Which of the following statements is not true of competitive advantage? A. Competitive advantage is reflected in superior firm performance. B. Competitive advantage is a multifaceted concept. C. Competitive advantage is an absolute measure. D. Competitive advantage has been linked to a firm's triple-bottom-line.

C. Competitive advantage is an absolute measure

Which of the following is a feature of the shakeout phase of the industry life cycle? A. There is rapid industry growth during this stage. B. Market demand in this stage primarily consists of first-time adopters. C. Competitive intensity within the industry increases. D. The mode of competition shifts from price to non-price in this stage.

C. Competitive intensity within the industry increases.

_____ is a mechanism to direct and control an enterprise in order to ensure that it pursues its strategic goals successfully and legally. A. Corporate social responsibility B. Stakeholder impact analysis C. Corporate governance D. Shareholder capitalism

C. Corporate governance

Which of the following best explains why Disney showed superior post-merger integration capabilities? A. Disney pursued a combination of horizontal and vertical integration through its acquisitions. B. Disney did a thorough job in eliminating principal-agent problems in the firms it acquired. C. Disney managed its new subsidiaries more like alliances rather than attempting full integration. D. Disney used a corporate strategy based on a build-borrow-or-buy framework for its acquisitions.

C. Disney managed its new subsidiaries more like alliances rather than attempting full integration.

_____ is best described as an increase in the variety of products and services a firm offers or markets and the geographic regions in which it competes. A. Taper integration B. Open innovation C. Diversification D. Differentiation

C. Diversification

Which of the following statements is true of explicit knowledge? A. Explicit knowledge is about knowing how to do a certain task. B. Explicit knowledge is knowledge that cannot be codified. C. Explicit knowledge is shared in non-equity alliance firms. D. Equity knowledge is acquired only through actively participating in a process.

C. Explicit knowledge is shared in non-equity alliance firms.

Frank is a board member at Lofloy Greens Inc., a publicly traded company. In addition to his duties on the board, Frank is also a full-time employee as a senior manager at Spinson Locomotives Inc. Which of the following is most likely to be true of Frank? A. Frank is a part-time employee at Lofloy Greens. B. Frank cannot serve as a director on Spinson Locomotives' board. C. Frank is an outside director on Lofloy's board of directors. D. Frank is a stockholder of Lofloy Greens.

C. Frank is an outside director on Lofloy's board of directors.

Which of the following facts proves that GE's board is fairly diverse compared to other Fortune 500 companies? A. GE's board is composed of 94 percent outside directors, compared to less than 70 percent for the others. B. GE's board is chaired by its CEO while other companies have outside directors. C. GE's board is composed of 28 percent women, compared to less than 16 percent for the others. D. GE's board has five committees, each with its own chair, compared with less than three for the others.

C. GE's board is composed of 28 percent women, compared to less than 16 percent for the others.

In which of the following stages of globalization did firms organize as networks to pursue a global-standardization strategy? A. Globalization 1.0 B. Globalization 2.0 C. Globalization 3.0 D. Globalization 4.0

C. Globalization 3.0

Hank's Hot Dogs is a nationwide fast-food chain. Decision power resides at the top of the organization. Each job is documented in minute detail. The firm has many levels of supervision, including vice presidents and regional managers. Hank's headquarters provides detailed instructions to each of its franchisees so that they provide comparable quality and service across the board. Based on this scenario, which of the following is an accurate statement about Hank's? A. Hank's has a low degree of specialization and formalization, a high degree of centralization, and relies on a flat hierarchy. B. Hank's has a high degree of specialization and formalization, a low degree of centralization, and relies on a tall hierarchy. C. Hank's has a high degree of specialization, formalization, and centralization and relies on a tall hierarchy. D. Hank's has a low degree of specialization, formalization, and centralization and relies on a flat hierarchy.

C. Hank's has a high degree of specialization, formalization, and centralization and relies on a tall hierarchy.

_____ of receivables turnover imply more efficient management in collecting accounts receivable and shorter durations of interest-free loans to customers. A. Unsteady ratios B. Steady ratios C. Higher ratios D. Lower ratios

C. Higher ratios

Janis is the CEO of a firm. She has an opportunity to increase the competitive advantage of her company but is not sure if accepting the opportunity is ethical. Which of the following questions would help her decide if accepting the opportunity is ethical? A. What are the chances that her decision to accept the opportunity will be made public? B. How much profit would be made if she decided to accept the opportunity? C. How would the media report her decision to accept the opportunity if it were to become public? D. How long lasting would the competitive advantage be if she decided to accept the opportunity?

C. How would the media report her decision to accept the opportunity if it were to become public?

Which of the following statements is strongly influenced by the not-invented-here syndrome? A. If a product was created and developed at our company, it probably is good enough. B. If a product was not created and developed at our company, it probably is good enough. C. If a product was not created and developed at our company, it could not be good enough. D. If a product was created and developed at our company, it could not be good enough.

C. If a product was not created and developed at our company, it could not be good enough.

How are the critical assumptions of the resource-based model of a firm fundamentally different from the way in which a firm is viewed in the perfectly competitive industry structure? A. In the resource-based model, resources are freely available and mobile, whereas in the perfectly competitive industry structure, resources are highly immobile. B. In perfect competition, it is extremely difficult to replicate the resource bundles of a firm, whereas in the resource-based model, it is extremely easy to imitate them. C. In perfect competition, all firms have access to the same capabilities, whereas in the resource-based model, resource differences exist between firms in the same industry. D. In the resource-based model, only physical assets of a firm are considered as resources, whereas in perfect competition, a firm's capabilities and competencies are also considered as resources.

C. In perfect competition, all firms have access to the same capabilities, whereas in the resource-based model, resource differences exist between firms in the same industry.

Which of the following most accurately describes a difference between incremental innovation and radical innovation? A. Incremental innovation researches new materials; radical innovation researches new processes. B. Incremental innovation targets new markets and technologies; radical innovation reinvents markets and technologies. C. Incremental innovation builds on an established knowledge base; radical innovation uses an entirely different knowledge base. D. Incremental innovation draws on novel methods; radical innovation draws on proven methods.

C. Incremental innovation builds on an established knowledge base; radical innovation uses an entirely different knowledge base.

_____ is best described as the commercialization of any new product, process, or the modification and recombination of existing ones. A. Direct imitation B. Mass customization C. Innovation D. Headhunting

C. Innovation

Which of the following statements is not true about innovation? A. Innovation as a competitive weapon can simultaneously create and destroy value. B. Successful innovation allows a firm to extract temporary monopoly profits. C. Innovation has to be high-tech in order to be a potent competitive weapon. D. Process innovations are made possible through advances such as the Internet.

C. Innovation has to be high-tech in order to be a potent competitive weapon.

_____ are the board members who are part of a company's senior management team appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance. A. Investors B. Outside directors C. Inside directors D. Auditors

C. Inside directors

Which of the following statements is true of internal transaction costs? A. Internal transaction costs arise when companies transact in the open market. B. When the internal costs involved in pursuing an activity in-house are more than the costs of transacting, then the concerned firm should vertically integrate. C. Internal transaction costs tend to increase with organizational size and complexity. D. It is beneficial to "buy" goods or services rather than "make" when internal transaction costs are low.

C. Internal transaction costs tend to increase with organizational size and complexity.

_____ are barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy. A. Embargoes B. Cartel arrangements C. Isolating mechanisms D. Market niches

C. Isolating mechanisms

Which of the following is an advantage offered by a functional structure? A. It allows for an efficient top-down communication chain and thus relies on a relatively tall structure. B. It facilitates a lower division of labor, which is linked to higher productivity. C. It allows for a higher degree of specialization and deeper domain expertise. D. It facilitates a lower level of specialization.

C. It allows for a higher degree of specialization and deeper domain expertise.

Why does a functional structure rely on a flat organizational structure? A. The work in the organization is centrally coordinated by the CEO. B. It allows for a higher degree of specialization and domain expertise. C. It allows for efficient bottom-up and top-down communication. D. It allows for the implementation of a differentiation strategy.

C. It allows for efficient bottom-up and top-down communication.

Why does a firm use an organic organization combined with a functional structure when implementing a differentiation strategy? A. It allows the firm to create incentives to foster process innovation in order to drive down cost. B. It allows the firm to reduce its cost below that of competitors while offering acceptable value. C. It allows the firm to constantly upgrade core competencies in R&D, innovation, and marketing. D. It allows the firm to nurture and constantly upgrade necessary core competencies in manufacturing and logistics.

C. It allows the firm to constantly upgrade core competencies in R&D, innovation, and marketing.

How does taking a real-options perspective by entering strategic alliances help incumbent firms? A. It helps the incumbent firms gain the confidence of the partnering company by making credible commitments. B. It helps the incumbent firms reduce the value gap they create through their product and service offerings. C. It allows the incumbent firms to buy time and wait for the uncertainty surrounding the market and technology to fade. D. It reduces the incumbent firms' cost of acquisition by enabling them to make the entire investment decision in the beginning itself.

C. It allows the incumbent firms to buy time and wait for the uncertainty surrounding the market and technology to fade.

Why does Zappos offer its new recruits $2,000 to quit at the end of the first week of their job? A. It is confident that employees will be impressed with the company's creativity and will stay on for a longer term. B. It does not believe that a firm's culture can flow from its values when they are linked to the company's reward system. C. It believes that individuals who choose to stay on will fit in with the Zappos culture. D. It is certain that a firm's culture flows only from founder imprinting.

C. It believes that individuals who choose to stay on will fit in with the Zappos culture.

Which of the following is a disadvantage of a functional strategy? A. It frequently lacks the tools required to pursue a cost-leadership strategy. B. It does not facilitate rich communication between members of the same department. C. It cannot effectively address a higher level of diversification. D. It does not allow organizations to be flexible or innovative.

C. It cannot effectively address a higher level of diversification.

Which of the following statements is true of taper integration? A. It is the most integrated alternative to performing an activity within one's own corporate family. B. It refers to a situation in which firms narrow their focus on downstream value chain activities and ignore the upstream value chain activities. C. It exposes in-house suppliers and distributors to market competition to make performance comparisons possible. D. It does not rely on outside-market firms for its supplies.

C. It exposes in-house suppliers and distributors to market competition to make performance comparisons possible.

How does Kraft Foods benefit from its hostile takeover of Cadbury PLC in 2010? A. Its main strategic focus is now on the domestic market. B. It opens a market for it that is growing slowly but has high profit margins. C. It has access to convenience stores and a new distribution channel. D. It automatically gains monopoly in the chocolate-manufacturing industry.

C. It has access to convenience stores and a new distribution channel.

Which of the following is a drawback of vertical integration? A. It increases the difficulty of securing critical supplies. B. It impedes scheduling and planning. C. It increases the potential of legal repercussions. D. It impedes investments in special assets.

C. It increases the potential of legal repercussions.

Which of the following statements best explains how the presence of top-notch complementors within a firm's industry affects the focal firm's business? A. It weakens the national competitive advantage enjoyed by the focal firm. B. It improves the factor conditions in the focal firm's domestic market. C. It increases the value of the focal firm's offering from a customer's perspective. D. It reduces the economic contribution created by the focal firm.

C. It increases the value of the focal firm's offering from a customer's perspective.

Which of the following statements is not true of tacit knowledge? A. It is concerned with knowing how to do a certain task. B. It is knowledge that cannot be easily codified. C. It is regularly shared between partners in a non-equity alliance. D. It is acquired only through actively participating in the process.

C. It is regularly shared between partners in a non-equity alliance.

Which of the following best supports the fact that Goldman Sachs was unethical in the Abacus deal? A. It was given a "triple A" rating for Abacus. B. It made no effort to ascertain the stability of the real estate market. C. It knew that Paulson & Co. had bundled high-risk mortgages into the collateralized debt obligation. D. It lost $100 million in the Abacus fiasco.

C. It knew that Paulson & Co. had bundled high-risk mortgages into the collateralized debt obligation.

Which of the following is a drawback of pursuing a transnational strategy? A. It creates bottlenecks for global learning. B. It exposes a firm to diseconomies of scale and location. C. It requires a global matrix structure, which is difficult to implement. D. It involves locating all key business activities in the home country headquarters.

C. It requires a global matrix structure, which is difficult to implement.

Which of the following is a feature of a multinational company pursuing a global-standardization strategy? A. Its key business functions are located at the home country headquarters. B. Its business-level strategy tends to be cost-leadership. C. Its competitive advantage lies in its high local responsiveness. D. Its core competency lies in its strong product differentiation.

C. Its competitive advantage lies in its high local responsiveness.

What was one of the reasons for Jerry Yang's failure at Yahoo? A. Jerry made many necessary changes to the company's organizational structure. B. Jerry established a successful organizational structure and culture, but could not assert control. C. Jerry's preference for obtaining consensus among his managers led to bickering and infighting. D. Jerry focused most strategic changes on improving user experience and increasing advertising revenues.

C. Jerry's preference for obtaining consensus among his managers led to bickering and infighting.

Which of the following corresponds to the use of tacit knowledge? A. Pedro studies a fact sheet about France. B. Heather reads a demographic report about minorities in Texas. C. John assembles the motorcycle from memory. D. Henrietta uses a scientific article to defend her thesis about global warming.

C. John assembles the motorcycle from memory.

Which of the following is a characteristic of a public stock company? A. Shareholders who provide risk capital are liable for all losses incurred by the company. B. Investor ownership cannot be transferred easily between investors. C. Legal personality allows a firm's continuation beyond the founder or the founder's family. D. In publicly traded companies, professional managers are the legal owners of the company.

C. Legal personality allows a firm's continuation beyond the founder or the founder's family.

_____ organizations are characterized by a high degree of specialization and formalization, and tall hierarchies that rely on centralized decision making. A. Organic B. Virtual C. Mechanistic D. Flat

C. Mechanistic

_____ is when a firm moves activities and jobs outside its home country. A. Conglomerate outsourcing B. Alliance outsourcing C. Off-shore outsourcing D. External outsourcing

C. Off-shore outsourcing

_____ organizations have a low degree of specialization and formalization as well as a flat organizational structure. A. Mechanistic B. Centralized C. Organic D. Top-down

C. Organic

Which of the following statements accurately describes a firm's resource stock? A. Resource stocks are a firm's level of resources that are common to competitors. B. Resource stocks are a firm's future estimate of both tangible and intangible resources. C. Resource stocks are a firm's current level of intangible resources. D. Resource stocks are a firm's level of investments to maintain or build a resource.

C. Resource stocks are a firm's current level of intangible resources.

Which of the following accurately summarizes the difference between the resources and capabilities of a firm? A. Resources are tangible; capabilities are tangible and intangible. B. Resources are intangible; capabilities are tangible. C. Resources are tangible and intangible; capabilities are intangible. D. Resources are tangible; capabilities are intangible.

C. Resources are tangible and intangible; capabilities are intangible.

_____ precisely indicates how much of a firm's sales is converted into profits. A. Break-even price B. Working capital turnover C. Return on revenue D. Inventory turnover

C. Return on revenue

_____ is the money shareholders provide in return for an equity share, which they cannot recover if the firm goes bankrupt. A. Tangible assets B. Value creation C. Risk capital D. Market capitalization

C. Risk capital

Zeda is a country of English-speaking people and has a very profitable economy. Which of the following countries is most likely to be the closest to Zeda in terms of cultural distance? A. Olax, which has the same wealth and per capita income as Zeda B. Jordax, which has a very profitable economy and where people speak Jordaxian C. Segar, where people speak English and have a low standard of living D. Terra, which is located close to Zeda and is easily accessible by road

C. Segar, where people speak English and have a low standard of living

Jamiro Inc. is a public stock company. Which of the following statements about the company best illustrates the fact that its investors have limited liability? A. Employees of Jamiro are legally permitted to invest their capital in the company's stock. B. Employees of Jamiro are also the owners of the company. C. Shareholders of Jamiro are responsible to the company only for the capital they have invested. D. Shareholders of Jamiro are not permitted to trade their company stock at the New York Stock Exchange (NYSE).

C. Shareholders of Jamiro are responsible to the company only for the capital they have invested.

Which of the following statements best supports the separation of ownership and control in publicly traded companies? A. Shareholders are liable only for the capital they invest and not for their personal wealth. B. Shareholders can freely trade the company stocks. C. Shareholders own stocks but do not run the company. D. Managers control the company but may also have stock ownership.

C. Shareholders own stocks but do not run the company.

Which of the following proves that GE's board of directors is significantly independent? A. Twenty-six percent of the board members at GE are female. B. The CEO of GE is also the chairman of the board. C. Sixteen of the 17 board directors are from outside the organization. D. GE's board has five committees, each with its own chair.

C. Sixteen of the 17 board directors are from outside the organization.

Smart Feet Inc. produces shoes that are better quality and cost more to make than the shoes of its competitors. Smart Feet realizes that there will be a large difference between the cost to produce the shoes and the consumer's willingness to pay for them. Even so, Smart Feet decides to charge the same price as its competitors. Which of the following will most likely be the result of this action? A. Smart Feet will go out of business. B. Smart Feet will increase its marketability. C. Smart Feet will gain market share. D. Smart Feet will be bought by a competitor.

C. Smart Feet will gain market share.

Which of the following real-world scenarios best exemplifies the use of organizational culture to build competitive advantage? A. W. L. Gore & Associates organizes its employees into project-based teams. B. Apple develops high-tech products that are preferred by consumers across the world. C. Southwest Airlines pilots sometimes help load baggage, which results in quick turnaround time. D. GM offers compensation if its products do not meet a consumer's expectations.

C. Southwest Airlines pilots sometimes help load baggage, which results in quick turnaround time.

_____ are best described as unique assets with high opportunity costs that have significantly more value in their intended use than in their next-best use. A. Cost drivers B. Value drivers C. Specialized assets D. Liquid assets

C. Specialized assets

_____ are best described as voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services to lead to competitive advantage. A. Embargos B. Cartel agreements C. Strategic alliances D. Corporate acquisitions

C. Strategic alliances

TL & Co. is following a related-linked diversification strategy, and Soar Inc. is following a related-constrained diversification strategy. How do the two firms differ from each other? A. Soar Inc. generates 70 percent of its revenues from its primary business, while TL & Co. generates only 10 percent of its revenues from its primary business. B. Soar Inc. pursues a backward diversification strategy, while TL & Co. pursues a forward diversification strategy. C. TL & Co. will share fewer common competencies and resources between its various businesses when compared to Soar Inc. D. TL & Co. pursues a differentiation strategy, and Soar Inc. pursues a cost-leadership strategy, to gain a competitive advantage.

C. TL & Co. will share fewer common competencies and resources between its various businesses when compared to Soar Inc.

The 3-D television division of a large consumer electronics company has been recognized as a question mark. The company's LCD television division has been categorized under dogs. Which of the following statements will hold well in this scenario? A. The strategic recommendation for the 3-D television division is to harvest it, and the strategic recommendation for the LCD television division is to invest further in it. B. The 3-D television division will have a high market share in its industry, whereas the LCD television division will have a low-market share in its industry. C. The 3-D television division operates in a high-growth market, whereas the LCD television division operates in a low-growth market. D. The LCD television division will benefit by pursuing a differentiation strategy, and the 3-D television division will benefit by following a cost-leadership strategy.

C. The 3-D television division operates in a high-growth market, whereas the LCD television division operates in a low-growth market.

GE's board has only one inside director, Jeffrey Immelt, GE's CEO, who also acts as chairman of the board. This is known as duality. Which of the following statements represents the best argument for this duality in GE? A. The CEO is likely to be more responsible because he is setting his own performance targets. B. The CEO might be able to influence the board through setting the meeting agendas. C. The CEO possesses invaluable inside information that can help chair the board effectively. D. The CEO will suggest board appointees who are friendly toward him or her.

C. The CEO possesses invaluable inside information that can help chair the board effectively.

The "diagonal assembly system" was a production system pioneered by the automobile company Gogo. Recently, Gogo was able to sue a competitor and won the suit, thereby receiving $100 million in damages. Which of the following would most likely enable Gogo to win such a lawsuit? A. The competitor used a title for its assembly system that was similar to the title of Gogo's system. B. The competitor failed to apply for a patent of its assembly system. C. The competitor infringed on Gogo's patent of the "diagonal assembly system." D. The competitor produced an assembly system that was somewhat similar to Gogo's system.

C. The competitor infringed on Gogo's patent of the "diagonal assembly system."

How does a conglomerate benefit from following an unrelated diversification strategy? A. The conglomerate can solely depend on its primary business activity for a major portion of its revenues. B. The conglomerate can share most of its competencies in products, services, technology, or distribution between all its businesses. C. The conglomerate can overcome institutional weaknesses, such as a lack of capital markets, in emerging economies. D. The conglomerate can limit the learning- and experience-curve effects it faces.

C. The conglomerate can overcome institutional weaknesses, such as a lack of capital markets, in emerging economies.

Globe Source Inc. is a consumer electronics company that follows an open innovation model. Which of the following can be concluded about this firm? A. The firm will suffer from the not-invented-here syndrome. B. The firm is less likely to commercialize researches from other firms. C. The firm will buy others' intellectual property whenever it advances its own business model. D. The firm will equate R&D with a high likelihood of benefitting from first-mover advantages.

C. The firm will buy others' intellectual property whenever it advances its own business model.

Grace Apparel Inc. has decided to procure fabrics required for its garments from external suppliers instead of maintaining its own dyeing and weaving facilities. How will this decision affect the firm? A. The firm will be protected against the principal-agent problem. B. The firm's administrative costs will be low because of necessary bureaucracy. C. The firm will have more flexibility in purchasing and comparing prices of goods and services. D. The firm will have high-powered incentives, such as hourly wages and salaries.

C. The firm will have more flexibility in purchasing and comparing prices of goods and services.

Which of the following is not a limitation of the economic value creation framework? A. The framework falls short when managers are called upon to operationalize competitive advantage. B. The framework is not as effective as accounting profitability or shareholder value creation when the need for "hard numbers" arises. C. The framework fails to provide the foundation that will help firms decide between cost-leadership or differentiation strategies. D. The framework cannot be effectively applied for assessing corporate-level performance of diversified conglomerates.

C. The framework fails to provide the foundation that will help firms decide between cost-leadership or differentiation strategies.

Which of the following statements is true about the use of functional structures with various business strategies? A. The goal of a differentiation strategy is to create competitive parity. B. The goal of a cost-leadership strategy is to create competitive parity. C. The goal of a differentiation strategy is to create a competitive advantage by controlling costs. D. A cost-leadership strategy can be effectively implemented with the help of an organic structure.

C. The goal of a differentiation strategy is to create a competitive advantage by controlling costs.

Which of the following applies to the Strength-Threats quadrant of the SWOT matrix? A. The local fast-food chain Easy Hot Dogs expanded its limited menu to maintain its advantage against stiff competition. B. The local fast-food chain Easy Hot Dogs added a salad bar to maintain its competitive advantage against stiff competition. C. The local fast-food chain Easy Hot Dogs used its wholesome image to maintain its competitive advantage against stiff competition. D. The local fast-food chain Easy Hot Dogs revised its image of being a cheap-food place to being a wholesome family place in order to maintain its competitive advantage against stiff competition.

C. The local fast-food chain Easy Hot Dogs used its wholesome image to maintain its competitive advantage against stiff competition.

What helps notions such as fairness, honesty, and reciprocity to be codified into law? A. The notions are synonymous with law. B. The notions differ to some degree in different cultures around the globe. C. The notions are universal norms. D. The notions are characteristics inherited by each person irrespective of the culture.

C. The notions are universal norms.

Trust Machines Inc. is a company that manufactures and markets consumer electronics. The unique microprocessors developed by the company contribute to its high resource immobility. According to the resource-based view of competitive advantage, which of the following is an implication of this situation? A. The competitive advantage of Trust Machines Inc. will soon be lost. B. The resource heterogeneity of Trust Machines Inc. is low within the industry. C. The resources of Trust Machines Inc. are difficult to replicate or imitate. D. The environment in which Trust Machines Inc. operates is closest to perfect competition.

C. The resources of Trust Machines Inc. are difficult to replicate or imitate.

Which of the following is true of the parent-subsidiary relationship? A. The ability to create a community of knowledge is low. B. The parent firm has no control and command over the subsidiary. C. The transaction costs that arise are frequently due to transfer prices. D. The parent firm will lack specialization and division of labor.

C. The transaction costs that arise are frequently due to transfer prices.

Which of the following is the most likely advantage of using foreign acquisitions or greenfield plants as a foreign entry mode? A. They are easy to initiate and terminate. B. They require low amounts of investments in terms of capital. C. They reduce a firm's exposure to loss of reputation. D. They are based on contracts rather than ownership.

C. They reduce a firm's exposure to loss of reputation.

Which of the following statements is true of the early majority section of consumers? A. They come into the market during the introduction stage. B. They are unaware that many hyped new product introductions will fade away. C. They weigh the benefits and costs carefully when adopting a new product. D. They make up the smallest market segment.

C. They weigh the benefits and costs carefully when adopting a new product.

Stop n' Save Inc., a supermarket chain, is implementing a multidomestic strategy. SunLife Inc., a company that manufactures solar panels for commercial and domestic purposes, is pursuing a global-standardization strategy. How will the two companies most likely differ from each other? A. Stop n' Save Inc. will focus more on cost-reduction than SunLife Inc. B. Stop n' Save Inc. will have its business functions spread across the world; SunLife Inc.'s business functions will be highly centralized. C. Unlike SunLife Inc., Stop n' Save Inc. will be able to pursue a differentiation strategy at the business level. D. Unlike SunLife Inc., Stop n' Save Inc. will be able to reap significant economies of scale and location economies.

C. Unlike SunLife Inc., Stop n' Save Inc. will be able to pursue a differentiation strategy at the business level.

Why is it easier for new entrants to involve in radical innovations when compared to incumbent firms? A. Unlike incumbent firms, new entrants do not have to face the high entry barriers, initially. B. New entrants are embedded in an innovation ecosystem, while incumbent firms are not. C. Unlike incumbent firms, new entrants do not have formal organizational structures and processes. D. Incumbent firms do not have the advantages of network effects that new entrants have.

C. Unlike incumbent firms, new entrants do not have formal organizational structures and processes.

The receivables turnover of VK Products Inc. is 13.6 and that of its competitor DL Goods Inc. is 6.0. What does this financial data primarily imply? A. VK Products is less efficient than DL Goods in collecting accounts receivables. B. DL Goods pays its creditors more quickly as compared to VK Products. C. VK Products collects accounts receivables faster than AP Goods does. D. DL Goods has a larger value gap as compared to VK Products.

C. VK Products collects accounts receivables faster than AP Goods does.

Which of the following management tools will help determine whether a firm's resources, capabilities, and competencies are strengths or weaknesses? A. Porter's five forces analysis B. PESTEL analysis C. VRIO framework D. Ansoff's matrix

C. VRIO framework

_____ is best described as a firm's ownership of its production of needed inputs or of the channels by which it distributes its outputs. A. Venture capitalism B. Bootlegging C. Vertical integration D. Crowdsourcing

C. Vertical integration

Both Vibrant Phones Inc. and Oryxo Inc. incur a cost of $200 to manufacture a single unit of a cell phone. However, Vibrant Phones creates more economic value than Oryxo does. What does this imply? A. Vibrant Phones and Oryxo have achieved a competitive parity. B. Oryxo has a competitive advantage over Vibrant Phones. C. Vibrant Phones sells its products at a better price than Oryxo. D. Oryxo's offering has greater total perceived consumer benefits than Vibrant Phones's offering.

C. Vibrant Phones sells its products at a better price than Oryxo.

Which of the following statements is true with regard to international trade between countries? A. Greater cultural distance between the home and host countries decreases the liability of foreignness to multinational companies. B. Colony-colonizer relationships have a strong negative effect on bilateral trade between countries. C. Wealthy countries engage in relatively more cross-border trade than poorer ones. D. Political integrations decrease the expected trade intensity between two countries.

C. Wealthy countries engage in relatively more cross-border trade than poorer ones.

While the domestic airline industry is in the maturity stage of the industry life cycle, the pet clothing industry is in its growth stage. Which of the following can be inferred from the given data? A. Competitive intensity will be higher in the domestic airline industry than the pet clothing industry. B. The pet clothing industry is ahead of the domestic airline industry in the industry life cycle. C. While the domestic airline industry is free from excess capacity, the pet clothing industry will have new entrants. D. The mode of competition will be price-based in the pet clothing industry and will be non-price-based in the domestic airline industry.

C. While the domestic airline industry is free from excess capacity, the pet clothing industry will have new entrants.

Real Goods Inc. is a large conglomerate. The company's beverages strategic business unit (SBU) has been recognized as a cash cow, and its tobacco SBU has been categorized as a dog. Which of the following can be inferred from this scenario? A. While the tobacco SBU operates in a low-growth market, the beverages SBU operates in a high-growth market. B. The management of the company should use the cash inflow from the beverages SBU and invest it in the tobacco SBU. C. While the market share of the company in the beverages industry will be high, the market share in the tobacco industry will be low. D. The tobacco SBU should follow a backward integration strategy, and the beverages SBU should pursue a forward integration strategy.

C. While the market share of the company in the beverages industry will be high, the market share in the tobacco industry will be low.

_____ is best described as a measure of how effectively capital is being used by a firm to generate revenue. A. Return on revenue B. Risk capital C. Working capital turnover D. Revenue per employee

C. Working capital turnover

Which of the following firms is most prone to experiencing a diversification discount? A. a company that deals in petroleum as well as natural gas B. a company that derives its revenues from selling aerated drinks and health drinks C. a company that pursues unrelated diversification D. a company that pursues related-constrained diversification

C. a company that pursues unrelated diversification

White Leo Motors (WLM) Inc. generates a major portion of its revenues by manufacturing luxury sports cars. However, the company also derives an insignificant percent of its annual revenues by selling its sports merchandise that includes apparel, shoes, and other accessories under the same brand name. Which of the following terms best describes WLM? A. a conglomerate B. a subsidiary C. a dominant-business firm D. a single-business firm

C. a dominant-business firm

Assume that the market for print book publishing has entered the maturity stage. Which of the following would most likely exist during this stage? A. a few start-up publishers B. many small to midsized publishers C. a few large publishers D. one large publisher

C. a few large publishers

The tenet behind the triple-bottom-line is that A. a firm should solely focus on increasing the economic value created to/for its customers. B. a firm's primary objective should be increasing the total returns to its shareholders. C. a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy. D. a firm's return on revenue can be broken down into three ratios: COGS/Revenue, R&D/Revenue, and SG&A/Revenue.

C. a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy.

Veronica sets up a business consulting firm in which the employees are motivated because they find their work interesting and creative. She carefully hires workers who fit well with their assigned tasks. Also, she clearly defines the results expected of each worker, but allows the workers to determine the means to these results. Which of the following best describes Veronica's business? A. a firm that relies on high input controls to tap into intrinsic motivation B. a firm that relies on high input controls to tap into extrinsic motivation C. a firm that relies on high output controls to tap into intrinsic motivation D. a firm that relies on high output controls to tap into extrinsic motivation

C. a firm that relies on high output controls to tap into intrinsic motivation

What is a unicorn? A. a public stock company valued at a billion dollars or more B. a public stock company valued at a million dollars or more C. a private start-up company valued at a billion dollars or more D. a private start-up company valued at a million dollars or more

C. a private start-up company valued at a billion dollars or more

A firm's ability to understand external technology developments, evaluate them, and integrate them into current products or create new ones is called A. disruptive innovation. B. reverse innovation. C. absorptive capacity. D. open capacity.

C. absorptive capacity.

Octa Autos Inc. wants to globally expand its market. It intends to ensure that its mode of foreign entry allows it to have strong control over its operations and protect its intellectual property, though it may mean investing a significant amount of capital and other resources. In this scenario, which of the following foreign entry modes would best suit Octa Autos Inc.? A. exporting B. franchise agreement C. acquisition D. licensing

C. acquisition

When large, incumbent firms buy start-up companies, the transaction is generally described as a(n) A. joint venture. B. partnership. C. acquisition. D. alliance.

C. acquisition.

Which of the following is not included within the types of strategic alliances? A. joint ventures B. franchising C. acquisitions D. licensing

C. acquisitions

In publicly traded companies, individuals who are delegated to perform duties on behalf of company owners are known as A. principals. B. shareholders. C. agents. D. clients.

C. agents.

Which of the following aspects of alliance management capability is paired with partner selection? A. alliance governance B. alliance design C. alliance formation D. post-formation alliance management

C. alliance formation

Curve Inc. is a software development firm based in California. It strives to provide highly differentiated software at cheaper prices when compared to its competitors. Which of the following organizational designs should Curve Inc. implement to ensure the maximum success of its business strategies? A. organic B. simple C. ambidextrous D. mechanistic

C. ambidextrous

The Mansion Hotel Group purchased Red Brick Hotels for an estimated value of $120 billion. All the hotels previously owned by Red Brick Hotels are now managed by the Mansion Hotel Group and are known as Mansion hotels. What does this scenario best illustrate? A. a merger B. a joint venture C. an acquisition D. an equity alliance

C. an acquisition

In the context of SWOT analysis, which of the following best exemplifies a firm's external opportunity? A. an increase in its financial resources B. an increase in its brand equity C. an increase in its customers' disposable income D. an increase in its employee productivity

C. an increase in its customers' disposable income

When firms innovate by leveraging existing technologies into new markets, they are said to be involved in A. incremental innovations. B. radical innovations. C. architectural innovations. D. disruptive innovations.

C. architectural innovations.

Companies that pursue related diversification are able to create a diversification premium because they A. are able to leverage time compression economies. B. can operate beyond the minimum efficient scale. C. are able to increase value due to economies of scope. D. can reduce the value gap created by its products.

C. are able to increase value due to economies of scope.

Which of the following is an example of a firm's resources? A. routine activities like order taking and invoicing customers, performed in a firm B. assistance available from the government in the form of rules and regulations C. assets such as land and buildings owned by a firm D. liabilities such as bills payables and short-term debts

C. assets such as land and buildings owned by a firm

Neon Electronics Inc. sourced touch screens required for its tablet computers, cell phones, and televisions from a manufacturer in China. But the demand for such components was high globally, and the supplier could not meet the quality standards of Neon Electronics. Thus, Neon Electronics decided to set up its own unit to develop and manufacture the required touch screens. What does this scenario best illustrate? A. crowdsourcing B. new product development C. backward vertical integration D. conglomerate diversification

C. backward vertical integration

Why did the American MTV network cable channel fail when pursuing a global-standardization strategy? A. because MTV failed to understand that music videos were a commodity product B. because the globalization hypothesis holds true for the music industry C. because cultural distance most affects products with high linguistic content D. because an international strategy was more suitable for the music industry

C. because cultural distance most affects products with high linguistic content

Which of the following statements best explains why Walmart is finding it difficult to replicate its existing business model in India? A. because of the political differences between India and U.S. B. because NAFTA prohibits Walmart from investing in countries outside North America C. because of the large economic distance between U.S. and India D. because Walmart's low-cost strategy has not been accepted by Indian consumers

C. because of the large economic distance between U.S. and India

A firm pursuing a transnational strategy would believe that A. key business functions should be located in its home country headquarters. B. local-responsiveness is more important than cost-reductions for competitive advantage. C. best practices, ideas, and innovations should be diffused throughout the world. D. the majority of the value creation should take place in the home country.

C. best practices, ideas, and innovations should be diffused throughout the world.

Which of the following do not serve as additional external-governance mechanisms? A. auditors B. government regulators C. board of directors D. industry analysts

C. board of directors

The balanced-scorecard can accommodate A. only short-term performance metrics. B. only long-term performance metrics. C. both short- and long-term performance metrics. D. neither short- or long-term performance metrics.

C. both short- and long-term performance metrics

Dollar Shave Club is an ecommerce start-up that delivers razors by mail. By doing this, Dollar Shave Club is using a(n) _____ to disrupt an existing market. A. innovation ecosystem B. architectural innovation C. business model innovation D. incremental innovation

C. business model innovation

The translation of strategy into action primarily takes place in a firm's A. mission statement. B. executive summary. C. business model. D. code of conduct.

C. business model.

How has the administrative and political distance between Canada, Mexico, and the United States been reduced? A. by adopting similar national cultures B. by lowering the disparities between their per capita incomes C. by establishing the North American Free Trade Agreement (NAFTA) D. by reducing their linguistic differences

C. by establishing the North American Free Trade Agreement (NAFTA)

How did the recent horizontal integration in the U.S. airline industry provide benefits to the surviving carriers? A. by facilitating excess capacity in the industry B. by preventing mergers from taking place C. by lowering competitive intensity in the industry overall D. by increasing the threat of entry in the industry

C. by lowering competitive intensity in the industry overall

In an economic context, strategy for producers is primarily about A. distributing the economic value created equally between consumers and themselves. B. reducing the difference between consumer's willingness to pay for a product and the cost to produce it. C. capturing the economic value created as much as possible. D. lowering producer surplus and increasing consumer surplus.

C. capturing the economic value created as much as possible.

A firm's resources and capabilities are costly to imitate. This is because rival companies do not clearly understand the relationship between the resources and capabilities controlled by the firm. In this case, the firm's competitive advantage is protected against imitation by A. path dependence. B. dependence complexity. C. causal ambiguity. D. social complexity.

C. causal ambiguity.

Competitors have found it extremely difficult to imitate Gene Electronics Inc.'s valuable resources, capabilities, or competencies. This is primarily because the source for the company's success has been unclear. The competitors are uncertain if Gene Electronics Inc.'s success is due to its strong leadership, the skills of its research and development team, or the timing of the company' s product introductions. Gene Electronics Inc. has been protected from losing its competitive advantage as a result of A. time compression diseconomies. B. resource homogeneity. C. causal ambiguity. D. path dependence.

C. causal ambiguity.

It is difficult even for Apple's managers to pinpoint the underlying cause of the company's phenomenal success. The term that best applies to this difficulty is known as A. competitive dependence. B. resource mobility. C. causal ambiguity. D. path dependence.

C. causal ambiguity.

Maurice sent in a complaint about a rude salesperson he dealt with at FirstElectronics Inc. He didn't get a response for about three months. Also, when the response finally came, it was just a formal, cursory letter. Based on this scenario, FirstElectronics most likely has an extremely _____ organizational structure. A. specialized B. formalized C. centralized D. hierarchical

C. centralized

FR Pharmaceuticals Inc., BioCure Pharma Inc., and Regime Pharma Inc. are three rival firms who have set up an alliance to conduct research and find a cure for cancer. They have made almost equal contributions to the research, and they also share their expertise with each other. However, the three firms will continue to behave as competitors in markets for other drugs and vaccines. What is this arrangement best referred to as? A. takeover B. buyout C. co-opetition D. acquisition

C. co-opetition

When the market for photo film negatives declined with the arrival of digital cameras, Momento Films Inc., a manufacturer of film negatives, bought out most of its rivals that were planning to exit. This allowed the company to get rid of all the excess capacity and acquire a monopolistic market power in the declining industry. Which of the following strategies has Momento Films adopted in this scenario? A. harvest strategy B. maintain strategy C. consolidated strategy D. differentiation strategy

C. consolidated strategy

Economic value creation is best expressed as A. producer surplus minus consumer surplus. B. consumer surplus minus cost of production. C. consumer surplus plus firm profit. D. producer surplus plus firm profit.

C. consumer surplus plus firm profit.

When a firm pursues a maintain strategy, it A. exits a declining industry to maintain the goodwill of its overall brand name. B. reduces investments in product support and allocates only a minimum of human and other resources. C. continues to support marketing efforts even if the demand for the product is declining. D. chooses to consolidate the industry by buying rival firms, those who plan to exit.

C. continues to support marketing efforts even if the demand for the product is declining.

Amazon.com's ability to provide the largest selection of items online, combined with superior IT systems and customer service, can be referred to as its A. equity reserve. B. economic equity. C. core competency. D. capital gain.

C. core competency.

Because of poor management, the stock prices of DigiKing Inc. falls and many investors sell their shares. Soon DigiKing becomes the target of a hostile takeover, during which Charles buys enough shares to exert control over the firm. In this scenario, Charles performs the role of a(n) A. inside director. B. outside director. C. corporate raider. D. corporate consultant.

C. corporate raider.

The demand for video recorders has drastically reduced, and there are only a few consumer electronics companies selling them at extremely low prices. Also, the current buyers of video recorders are mainly categorized under laggards. Which of the following stages of the industry life cycle is the video recorder industry in currently? A. growth stage B. maturity stage C. decline stage D. commercialization stage

C. decline stage

Taking advantage of the pricing flexibility inherent in the wholesale model, Amazon offered many books (especially e-books) below the cost that other retailers had to pay to publishers. By doing this, Amazon showed how business models can be affected through A. combination. B. evolution. C. disruption. D. combustion.

C. disruption.

When Japanese carmakers attacked the existing U.S. automobile market by first offering small fuel-efficient cars, and then leveraging their low-cost and high-quality advantages into high-end luxury segments, they were engaging in A. regressive innovation. B. radical innovation. C. disruptive innovation. D. architectural innovation.

C. disruptive innovation.

Which of the following would hinder firm performance? A. diversification providing economies of scale B. diversification exploiting economies of scope C. diversification raising costs D. diversification raising value

C. diversification raising costs

ElectraSync Inc., a large consumer electronics company, has divided each product in its portfolio into a separate strategic business unit (SBU). The desktop SBU has been experiencing drastic decline in its cash flow, and its market share has also reduced to an insignificant 10 percent. This has been attributed to the low growth in the desktop market after the arrival of tablet computers and laptops. In the context of the Boston Consulting Group (BCG) growth-share matrix, the desktop SBU will be categorized under A. stars. B. question marks. C. dogs. D. cash cows.

C. dogs.

The customers entering the market in the growth stage are primarily A. technology enthusiasts. B. laggards. C. early adopters. D. late majority.

C. early adopters.

It is important for a firm to win over the early majority section of the market to ensure the commercial success of an innovation because they A. are driven by technology concerns rather than the practicality of a new product. B. influence the purchase decisions of early adopters. C. enter into the market in large numbers, creating a herding effect. D. have the highest purchasing power when compared to the other customer segments.

C. enter into the market in large numbers, creating a herding effect.

Which of the following foreign entry modes primarily involves producing goods in one country to sell in another? A. greenfield operations B. brownfield operations C. exporting D. crowdsourcing

C. exporting

A firm following a multidomestic strategy A. is highly efficient. B. lacks local responsiveness. C. faces a greater risk of intellectual property (IP) appropriation. D. requires exposing explicit knowledge because products are manufactured locally.

C. faces a greater risk of intellectual property (IP) appropriation.

Google, the leader in online search and advertisement, engaged in a number of smaller acquisitions of tech ventures. It did this in order to A. imitate the actions of its competitors like Apple and Facebook. B. solve its principal-agent problems. C. fill gaps in its competency lineup. D. expand through unrelated diversification.

C. fill gaps in its competency lineup.

For which of the following types of industries is a multidomestic strategy most common? A. machine-tool industries B. genetic industries C. food industries D. capital goods industries

C. food industries

Silver Weave Inc., an apparel company, operates through a business model in which individuals can buy the rights to set up Silver Weave stores and sell the company's merchandise in return for a lump sum fee at the beginning of the contract and a percentage of revenues every month. The owners of the stores have to stock the collection approved from the company's headquarters and also maintain consistent customer service as expected in its flagship store. Which of the following alternatives to integration does this best illustrate? A. crowdsourcing B. credit rationing C. franchising D. bootstrapping

C. franchising

To be successful and to survive the shakeout stage of the industry life cycle, a firm should A. charge higher prices than its competitors. B. focus on product innovation rather than process innovation. C. gain economies of scale. D. shift from price to non-price competition.

C. gain economies of scale

Symphon Times Inc., a Swiss-based premium watch brand, has recently started selling its watches through company-owned retail outlets in major cities of the emerging nations. Which of the following types of diversification strategies is the firm pursuing? A. product diversification strategy B. process diversification strategy C. geographic diversification strategy D. product-market diversification strategy

C. geographic diversification strategy

Some multinational enterprises (MNEs) attempt to reap significant economies of scale and location economies by pursuing an international division of labor based on wherever best-of-class capabilities reside at the lowest cost. This is known as a(n) _____ strategy. A. international B. multidomestic C. global-standardization D. localization

C. global-standardization

Jade Mobiles Inc., a cell phone manufacturing company, has its product development centers located in the U.S. and South Korea. The manufacturing units are located in China and Philippines to benefit from low-labor costs and access to original equipment manufacturers. This allows the company to competitively price its cell phones. Also, the various phone models sold by the company are uniform in all the foreign markets it operates in. In this scenario, which of the following strategies does Jade Mobiles Inc. most likely pursue? A. international strategy B. multidomestic strategy C. global-standardization strategy D. localization strategy

C. global-standardization strategy

Olympia Autos Inc. merged with its competitor Vaca Autos Inc. This allowed Olympia Autos to use its technological competencies along with Vaca Autos' marketing capabilities to capture a larger market share than what the two entities individually held. What does this scenario best illustrate? A. backward integration B. forward integration C. horizontal integration D. vertical integration

C. horizontal integration

In order to achieve a competitive advantage, a firm should be able to A. increase its payable turnover. B. keep its producer surplus low. C. increase the difference between the value created and the cost to produce it. D. increase the difference between consumer surplus and its profits.

C. increase the difference between the value created and the cost to produce it.

A(n) _____ is best used to depict the transformation of raw materials into finished goods and services along distinct vertical stages. A. encrypt B. chain of command C. industry value chain D. scatter chart

C. industry value chain

The informational advantage that agents possess over principals is often based on the fact that A. the information is extremely secure and protected from exposure to anyone outside the company. B. public stock companies are characterized by information symmetry. C. insiders are the first to learn about important developments before the information is released to the public. D. agents are legally permitted to freely trade the information in exchange for benefits, unlike principals.

C. insiders are the first to learn about important developments before the information is released to the public.

A. G. Lafley at Procter & Gamble (P&G), had implemented an open-innovation model, which had greatly benefitted the company. In the light of this information, we can conclude that A. G. Lafley is a(n) A. venture capitalist. B. category captain. C. intrapreneur. D. early adopter.

C. intrapreneur.

Fakhir is a board member at Garfield Motors Inc. He is also a senior executive of the firm. The board is chaired by Ernest Jones, the CEO of Blixt Electronics. According to this scenario, Fakhir A. cannot serve on the board of any other organization. B. is more likely than Ernest to take care of stockholder interests. C. is an inside director of Garfield Motors. D. can use information from board meetings to trade stocks of Garfield Motors.

C. is an inside director of Garfield Motors.

While the personal computer industry is flooded and growing with laptops and tablets, Ivan recently bought a desktop, his first personal computer. He realized that a computer at home would be helpful for his children for their school projects, and he could use it to maintain the simple accounts of his plumbing business. Which of the following customer segments does Ivan best represent? A. early adopters B. category captains C. laggards D. early majority

C. laggards

Comfort Shoes Inc. and InStep Shoes Inc., two competing shoe brands, entered into a strategic alliance to study and acquire each other competencies. Comfort Shoes entered the strategic alliance to acquire the production system pioneered by InStep Shoes. Similarly, InStep Shoes agreed to the strategic alliance to study the designing process of Comfort Shoes. However, Comfort Shoes was more successful and faster than InStep Shoes in accomplishing its alliance goal. What does this scenario best illustrate? A. network effects B. economies of scope C. learning races D. time compression diseconomies

C. learning races

Kaito is the CEO of Henson and Fukui Consulting Inc. Kaito's efforts to persuade the board of directors to pursue a new business strategy fail. He borrows money from different sources and purchases all the outstanding shares of Henson and Fukui Consulting. What does this scenario best exemplify? A. buyback B. merger C. leveraged buyout D. initial public offering

C. leveraged buyout

JetStream Airway's decision to acquire Rex Fuels Inc. proved to be ill-fated because its managers had overestimated their abilities and skills. They believed that they had the skills to manage such diversified businesses and create additional shareholder value. However, the acquisition failed to create the anticipated synergies because the managers' capabilities were restricted to the airlines industry. What does this scenario best illustrate? A. managerial empathy B. managerial feasibility C. managerial hubris D. managerial capitalism

C. managerial hubris

For a multinational enterprise (MNE), applying the globalization hypothesis would mean A. being highly responsive to the heterogeneous needs and preferences of consumers globally, without focusing on cost reduction. B. customizing each product sold by an enterprise to differentiate it from its competitors. C. manufacturing products on international platforms and slightly modifying them to meet local tastes and standards. D. pursuing a focused differentiation strategy instead of a cost-leadership strategy to gain a competitive advantage.

C. manufacturing products on international platforms and slightly modifying them to meet local tastes and standards.

Which of the following is an important external corporate-governance mechanism? A. shareholder capitalism B. board of directors C. market for corporate control D. executive compensation

C. market for corporate control

An organization that is organized according to strategic business units (SBUs) and also along organizational structures is most likely using a _____ structure. A. functional B. multidivisional C. matrix D. simple

C. matrix

A few efficient and strong firms in the laptop industry have remained and emerged successful from the shakeout stage. Which of the following stages of the industry life cycle will they move to next? A. growth stage B. introduction stage C. maturity stage D. decline stage

C. maturity stage

A company scientist at a biotechnology company decides to work on his own research project, hoping to eventually start his own firm, rather than on the project he was assigned. However, the company's stockholders are unaware of this situation. This is an example of a(n) _____ in the context of a principle-agent problem. A. adverse selection B. stakeholder strategy C. moral hazard D. shared value creation

C. moral hazard

Kolt Inc., a large and successful retail chain on the West Coast, decides to expand its operations across the U.S. Which of the following organizational structures should Kolt Inc. use? A. basic B. simple C. multidivisional D. functional

C. multidivisional

When a firm diversifies into different product lines and geographies, a _____ structure is preferred. A. simple B. functional C. multidivisional D. network

C. multidivisional

Some of the best engineering and car companies are in Germany. Thus, it can be concluded that Germany has a _____ in the automobile industry. A. capital gain B. trade surplus C. national competitive advantage D. liability of foreignness

C. national competitive advantage

Michael Porter's diamond framework is used to explain A. national value creation. B. domestic value creation. C. national competitive advantage. D. domestic competitive advantage.

C. national competitive advantage.

First movers often have several competitive benefits including A. incremental effects. B. shakeout effects. C. network effects. D. experience effects.

C. network effects.

In a radical innovation, a firm targets A. existing markets by using new technologies. B. new markets by using existing technologies. C. new markets by using new technologies. D. existing markets by using existing technologies.

C. new markets by using new technologies.

A(n) _____ occurs when firms enter into a partnership based on contractual agreements, which results in vertical strategic alliances that connect different parts of the industry value chain. A. equity alliance B. joint venture C. non-equity alliance D. greenfield venture

C. non-equity alliance

Amiware Inc., a manufacturer of ceramic cookware, has entered into a contractual agreement with Micoware Inc. The agreement involves vertical strategic alliances connecting different parts of the industry value chain. This arrangement between the two companies best illustrates a(n) A. joint venture. B. acquisition. C. non-equity alliance. D. greenfield venture.

C. non-equity alliance.

When GD 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 GD Inc.'s A. producer surplus. B. consumer surplus. C. opportunity cost. D. social cost.

C. opportunity cost.

Which of the following types of organizations best helps match a differentiation strategy to a functional structure? A. ambidextrous organization B. mechanistic organization C. organic organization D. rigid organization

C. organic organization

To effectively implement a differentiation strategy, managers rely on a functional structure that resembles an organization that is highly A. formalized. B. specialized. C. organic. D. mechanistic.

C. organic.

A firm's resistance to changes in the status quo is referred to as A. organizational parity. B. organizational liquidity. C. organizational inertia. D. organizational efficacy.

C. organizational inertia.

Free Spirit Communications Inc. 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? A. razor-razor-blade B. subscription-based C. pay-as-you-go D. freemium

C. pay-as-you-go

Airbnb rents spaces that previously would have been unused to generate revenue, while also dramatically increasing the potential amount of accommodation space in the 191 countries. This business uses a _____ technique. A. offshoring B. crowdsourcing C. peer-to-peer D. binge watching

C. peer-to-peer

Caring Ketchup Inc. makes organic ketchup. To promote its products, this firm decided to make bottles in the shape of tomatoes. To accomplish this, Caring Ketchup worked with its bottle manufacture to create a set of unique molds for its bottles. Which of the following specialized assets does this example demonstrate? A. site specificity B. research specificity C. physical-asset specificity D. human-asset specificity

C. physical-asset specificity

Allgreva Inc. is located in Movaria near the nation of Clozame. Allgreva is considering expanding into Clozame. Both countries have similar consumer incomes and knowledge bases and share a common language. Also, the transportation networks between the countries are strong. Even so, the two nations have a long-standing dispute concerning the control of an area of land along their common border. Currently, Movaria rules this land. Which of the following would most likely prevent Allgreva from expanding into Clozame? A. geographic distance B. economic distance C. political distance D. cultural distance

C. political distance

Which of the following could most likely have prevented the accounting scandals of the early 2000s and the global financial crisis? A. adopting a narrow shareholder perspective B. separating economic interests and social needs C. practicing effective corporate governance D. adopting the principles of shareholder capitalism

C. practicing effective corporate governance

The managers at Movo Automobile Inc. want to diversify their business by acquiring a consumer electronics company. This acquisition would mean increased job security, higher compensation, and greater decision-making authority for the managers. The managers correlate this acquisition to greater power for them rather than to the appreciation in shareholder value. In this scenario, this acquisition by Movo Automobile is most likely a result of A. time compression diseconomies. B. experience-curve effects. C. principal-agent problems. D. resource ambiguity.

C. principal-agent problems.

The difference between the price charged for a product and the cost to manufacture it is referred to as the A. consumer surplus. B. break-even price. C. producer surplus. D. reservation price.

C. producer surplus.

Fantastica Industries, a U.S.-based large conglomerate, competes in the hospitality, education, telecommunications, entertainment, airlines, and chemical industries. It currently operates in about 30 nations, and is planning to expand its portfolio by investing in rapidly developing countries. Which of the following strategies is Fantastica Industries pursuing? A. zone pricing B. niche marketing C. product-market diversification strategy D. process diversification strategy

C. product-market diversification strategy

PepsiCo operates in many countries and sells a wide variety of aerated drinks, other beverages, different types of chips, and Quaker Oats goods to achieve continuous growth. From this data, we can conclude that PepsiCo has been involved in A. strategic outsourcing. B. lean manufacturing. C. product-market diversification. D. process diversification.

C. product-market diversification.

Which of the following is an unintended side effect of a high degree of specialization in an organization? A. decreased trade-off between breadth and depth of knowledge B. decreased opportunities for the division of labor C. reduced employee satisfaction due to repetition of tasks D. reduced productivity

C. reduced employee satisfaction due to repetition of tasks

Which of the following corporate strategies did ExxonMobil pursue by acquiring XTO Energy, a natural gas company? A. taper integration strategy B. differentiation strategy C. related diversification strategy D. cost-leadership strategy

C. related diversification strategy

The _____ is a strategic management framework that proposes that critical resources and capabilities frequently are embedded in strategic alliances that span firm boundaries. A. real-options perspective B. stakeholder strategy C. relational view of competitive advantage D. non-differentiation strategy

C. relational view of competitive advantage

The resource-based view of a firm assumes that the A. resources of firms are highly scarce and hence the government interferes to ensure equal distribution. B. resources of firms are highly exhaustible and hence they cannot contribute to their competitive advantage. C. resource bundles of firms competing in the same industry are unique to some extent and thus differ from one another. D. resource bundles of firms competing in the same industry tend to be highly mobile, moving easily from firm to firm.

C. resource bundles of firms competing in the same industry are unique to some extent and thus differ from one another.

Due to resource immobility, a critical assumption in the resource-based model of a firm, the A. competitive advantage of a firm exists for a short period of time. B. resource bundles of a firm can be easily imitated by competitors. C. resource differences between firms last for a long time. D. competencies and capabilities of all firms in an industry are similar.

C. resource differences between firms last for a long time.

WJ Group Inc., a large multinational conglomerate, had begun to experience declining revenues over the years. The top management at the headquarters of the company decided that it was important for the company to avoid deviating from its core competencies. Thus, a few of the company's key businesses like energy, telecommunications, and automobiles were centralized, giving the top management more control over them. Also, relatively newer businesses like beverages and food processing were divested. In this scenario, WJ Group is involved in A. reverse engineering. B. benchmarking. C. restructuring. D. crowdsourcing.

C. restructuring.

EasyOpen Inc. has entered a stage in which the demand for their innovative electric can openers has declined. Now most customers are buying replacement parts or buying their second can opener from the firm. What stage in the industry life cycle does this scenario describe? A. growth stage B. maturity stage C. shakeout stage D. decline stage

C. shakeout stage

In emerging economies, the LCD television industry is in that phase of the industry life cycle in which the previously increasing market demand becomes limited. The competitive intensity within the industry is high, and inefficient firms have begun to exit the industry. This has allowed only a few major companies to come out as cost-leaders and hold the shrinking market. Which of the following stages of the industry life cycle is the LCD television industry currently in? A. growth stage B. introduction stage C. shakeout stage D. decline stage

C. shakeout stage

Georgia Ray is the founder of the departmental stores chain, Ether Inc. She ensures that the products in her stores are ethically and responsibly sourced. Most products are therefore 100 percent organic and manufactured from recycled material. Also, her company purchases handicrafts from nonprofit organizations supporting the aged. Georgia's belief is that her company should be able to support the community at large. Which of the following terms best describes Georgia Ray? A. headhunter B. category captain C. social entrepreneur D. trade creditor

C. social entrepreneur

Best Fit Club, a chain of gyms and spas, requires its customers 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? A. razor-razor-blade B. pay-as-you-go C. subscription-based D. freemium

C. subscription-based

Black Mouse Inc., a web development firm, is headed by Rob Dennis, the CEO. Each functional department of the company—marketing, finance, and HR—has a president who reports to the CEO directly. Each department has various managers who manage teams. The managers report to the presidents, and the team leads report to the managers. Finally, the employees at the lowest level report to their team leads. It is rare for a lower-level employee to interact with the CEO of the company. In this scenario, Black Mouse Inc. can be said to have a(n) A. organic organizational structure. B. decentralized organizational structure. C. tall hierarchical structure. D. flat hierarchical structure.

C. tall hierarchical structure.

The MBA oath first developed at Harvard and now signed by students at over 300 business schools is modeled after A. Level-5 leadership. B. the Sarbanes-Oxley pledge. C. the Hippocratic oath in medicine. D. Goldman Sach's code.

C. the Hippocratic oath in medicine.

Which of the following is a major issue at the forefront of CEO compensation in recent years? A. a comparison of the performance of the organization before and after the CEO's tenure B. the performance of the CEO as an employee versus the performance as a board member C. the absolute size of the CEO pay package compared with the pay of the average employee D. a comparison of the compensation of senior management hired during and before the CEO's tenure

C. the absolute size of the CEO pay package compared with the pay of the average employee

In Eli Lilly's Office of Alliance Management, who is responsible for providing alliance training and development? A. the alliance champion B. the alliance leader C. the alliance manager D. the alliance boss

C. the alliance manager

Apple paid $3 billion dollars to acquire Beats. This is the largest acquisition in Apple's history. Which of the following provides a reason for this acquisition? A. the movement in the music industry from renting works to buying works to own B. the need for Apple to create an image as a leader in technical audio research C. the change in content delivery from ownership via downloads to streaming on demand D. the demand for the extremely high-quality headphones that Beat produced

C. the change in content delivery from ownership via downloads to streaming on demand

Which of the following stakeholders of a company would most likely be responsible for formulating a corporate strategy? A. the first-line employees B. the creditors C. the chief executive officer D. the middle manager

C. the chief executive officer

In a non-equity alliance, which of the following types of information would firms most likely share? A. a manager's knowledge related to solving non-routine problems B. a top-level manager's experience related to making strategic decisions C. the documented information about the material composition of a product D. the employees' entrepreneurial skills

C. the documented information about the material composition of a product

Smooth Fusion Inc. is a software company, which has built and acquired numerous assets over the years. According to the resource-based view of a firm, which of the following assets of Smooth Fusion Inc. will best enable it to gain and sustain a competitive advantage? A. the resources of the company that are mobile B. the capital raised by the company from its shareholders C. the expertise acquired by the employees in the company D. the headquarters owned by the company

C. the expertise acquired by the employees in the company

If a resource is rare or unique to a particular firm, then A. the industry in which the firm operates will experience perfect competition. B. the mobility of the resource will be high. C. the firm will be able to maintain a competitive advantage for a long period. D. it will be less costly for rivals to imitate the resource.

C. the firm will be able to maintain a competitive advantage for a long period.

Which of the following is an example of a firm's intangible resources? A. the firm's cash at bank B. the firm's finished goods inventory C. the firm's organizational culture D. the firm's land and building

C. the firm's organizational culture

It is necessary for government authorities such as the Federal Trade Commission (FTC) and/or the European Commission to approve any large horizontal integration activity because A. the horizontal integration activity changes the industry structure from oligopolistic to monopolistically competitive. B. the surviving firms will need to be protected against the increasing bargaining power of the suppliers. C. the horizontal integration activity has the potential to reduce competitive intensity in an industry. D. the surviving firms will need protection against the relaxed entry barriers.

C. the horizontal integration activity has the potential to reduce competitive intensity in an industry.

Diversification premium is a situation in which A. customers have to pay premium prices on products manufactured by firms pursuing unrelated diversification due to the lack of economies of scope. B. the overall value creation of highly diversified firms is more than the sum of the value created by individual business units. C. the stock price of related-diversification firms is valued at greater than the sum of their individual business units. D. shareholders are benefitted from the market capitalization of a highly diversified firm because of its economies of scale.

C. the stock price of related-diversification firms is valued at greater than the sum of their individual business units.

Multinational enterprises (MNEs) like Harley-Davidson, Rolex, and Starbucks are said to be following an international strategy because A. they pursue a cost-leadership strategy in their respective industries. B. they are highly responsive to the local needs and preferences of customers in the host countries. C. they offer the same products or services in all their stores throughout the world. D. they attempt to combine benefits of localization and standardization strategies simultaneously.

C. they offer the same products or services in all their stores throughout the world

When the laptop market overtook the desktop market, Blue Tech Inc., a leader in desktop technology, was left at a competitive disadvantage. Later, Blue Tech Inc.'s management channeled all of the company's efforts and revenue to develop an efficient laptop from scratch in less than a year. However, the company failed because most of its competitors had already been in the laptop market for five years. Blue Tech Inc.'s models were inferior to the ones in the market. In this scenario, Blue Tech Inc.'s failure can be best attributed to A. causal ambiguity. B. diseconomies of scope and scale. C. time compression diseconomies. D. social complexity.

C. time compression diseconomies.

Which of the following best explains why a board of directors may grant stock options as part of a compensation package? A. to reduce the transferability of stocks between stockholders B. to bring about a separation of CEO/chair duality C. to align incentives between shareholders and management D. to change the liability of shareholders from limited to unlimited

C. to align incentives between shareholders and management

In the New United Motor Manufacturing, Inc. (NUMMI) joint venture, why did Toyota enter into a strategic alliance with General Motors (GM)? A. to access GM's completely new production system B. to learn and implement the just-in-time inventory system pioneered by GM C. to learn how to implement its lean manufacturing program with an American workforce D. to access GM's distribution system and marketing expertise

C. to learn how to implement its lean manufacturing program with an American workforce

Which of the following globalization strategies requires managers working in multinational enterprises (MNEs) to remember to think globally, but act locally? A. international strategy B. global-standardization strategy C. transnational strategy D. focused-differentiation strategy

C. transnational strategy

The top management at Parallela Pharma Inc., through rigorous testing, ensures that the company develops and sells drugs 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 Parallela Pharma are applying the _____ approach to measure firm performance. A. economic value creation B. shareholder value creation C. triple-bottom-line D. accounting profitability

C. triple-bottom-line

The management team for SafeCare Chemicals Inc. came up with the following vision statement: "SafeCare Chemicals 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 A. accounting profitability approach. B. economic value creation approach. C. triple-bottom-line approach. D. balanced-scorecard approach.

C. triple-bottom-line approach.

In the freemium business model, the A. initial product is sold at a premium price and the complementary goods are given free. B. users are free to pay for the services in advance or after using the services. C. users are not charged for the basic features of a product or service, but the user must pay for premium advanced features or add-ons. D. users pay for access to a product or service whether they use it during the payment term or not.

C. users are not charged for the basic features of a product or service, but the user must pay for premium advanced features or add-ons.

In 1984, GM and Toyota formed a joint venture called New United Motor Manufacturing Inc. Each partner was motivated to learn new capabilities. This joint venture is an example of A. creating a real-options perspective. B. accessing complimentary assets. C. using co-opetition. D. forming a conglomerate.

C. using co-opetition.

According to the VRIO framework, a firm can gain a competitive advantage if it has resources that are _____ and captured by an organized firm. A. varied, refined, costly to introduce B. valuable, refined, costly to introduce C. valuable, rare, costly to imitate D. varied, rare, costly to imitate

C. valuable, rare, costly to imitate

Decisions relating to "what stages of the industry value chain to participate in" determine a firm's A. level of diversification. B. geographic scope. C. vertical integration. D. absorptive capacity.

C. vertical integration.

Which of the following describes an airline that is most likely stuck in the middle?

C. Just Right Airline offers high-quality beverages and meals, plush airport lounges, only a few connections via hubs domestically, poor customer service, and low prices.

Both Blue Horizons Electronics Inc. and CLR Inc. have achieved cost parity in the television

C. create greater perceived economic value than CLR.

In a focused cost-leadership strategy, a firm

C. delivers low-cost products and services to a specific, narrow part of the market.

Which of the following will hamper a differentiator's ability to achieve a competitive advantage?

C. lower value gap

To initiate a strategic move that allows a firm to open up new and uncontested market space through value innovation, managers must address four key questions when formulating a blue ocean business strategy. These questions focus on

C. lowering cost and increasing perceived customer benefits.

Oviyo Inc. has been successful at differentiating itself from competitors by claiming a premium price for its digital cameras based on superior image quality and advanced technology. In this scenario, which of the following is the key value driver?

C. product features

Nicki 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? A. $900 B. $1,100 C. $550 D. $200

D. $200

GreenHarvest Inc. has used $350,000 from its total annual earnings of $1,250,000 to invest in the research and development of a multi-purpose vaccine. Its account receivable from customers is estimated to be $150,000 and accounts payable $80,000. In monetary terms, what would GreenHarvest Inc.'s resource flows be? A. $1,250,000 B. $150,000 C. $80,000 D. $350,000

D. $350,000

De Bruyne Inc., a publicly traded company, has ten members on its board. Of the ten members, six members are employees of the company and includes the CEO, who also chairs the board. The board has been failing in its responsibilities toward the shareholders who now want a new board. Assuming that the total number of board members remains constant, how many outside directors should the shareholders appoint to De Bruyne's board to achieve board independence? A. 1 B. 3 C. 5 D. 7

D. 7

Which of the following accurately describes a common difference between a merger and an acquisition? A. A merger tends to include mostly small firms; an acquisition can often involve large firms. B. A merger involves the combination of three or more firms; an acquisition involved the combination of two firms. C. A merger involves firms of different size; an acquisition involved firms of the same size. D. A merger tends to be friendly; an acquisition can be friendly or unfriendly.

D. A merger tends to be friendly; an acquisition can be friendly or unfriendly.

Which of the following will most likely harm a MNE's reputation? A. Principal-agent problems cause a MNE to merge with another MNE. B. Increased competition causes a MNE to close a factory in a developing country. C. Wages for workers in a factory owned by a MNE increase, causing profits to decline. D. A sweatshop owned by a MNE has an explosion that kills hundreds of workers.

D. A sweatshop owned by a MNE has an explosion that kills hundreds of workers.

Home Value Inc., Max Cart Inc., and Nice Necessities Inc. are three consumer-product retailing companies. Their products consist primarily of day-to-day items that are easy to imitate and sell. All three companies use the same resources and capabilities in the production and distribution of their products. Which of the following is an implication of the market condition indicated in this scenario? A. Resource immobility of the firms will be low. B. The industry structure will be far from perfect competition. C. Barriers to entry within the industry will be high. D. Any advantage that one firm has will be short-lived.

D. Any advantage that one firm has will be short-lived.

_____ are an agreed-upon code of conduct in business, based on societal norms. A. Fiduciary responsibilities B. Poison pills C. Strategic business points D. Business ethics

D. Business ethics

_____ refers to the degree to which decision making is concentrated at the top of the organization. A. Specialization B. Formalization C. Naturalization D. Centralization

D. Centralization

Which of the following statements about competitive advantage is true? A. Competitive advantage is an absolute measure; it is not relative. B. Competitive advantage is a one-dimensional concept. C. Competitive advantage is permanent and not transitory; once gained by a firm it stays with the firm. D. Competitive advantage can be assessed by measuring accounting profit, shareholder value, or economic value.

D. Competitive advantage can be assessed by measuring accounting profit, shareholder value, or economic value.

Which of the following is not true of corporate governance in public stock companies? A. Corporate governance seeks to benefit multiple stakeholders, not just shareholders. B. Corporate governance provides rules for making decisions on corporate affairs. C. Corporate governance attempts to address the principal-agent problem. D. Corporate governance seeks to create a separation between ownership and control.

D. Corporate governance seeks to create a separation between ownership and control.

Which of the following ratios best expresses inventory turnover? A. Inventory/Working capital B. Annul profits/Inventory C. Inventory/Per unit cost of production D. Cost of goods sold/Inventory

D. Cost of goods sold/Inventory

Which of the following accurately describes GE's ecomagination initiative? A. Ecomagination decreases the perceived value it creates for its customers while raising costs to produce and deliver "green" products and services. B. Ecomagination decreases the perceived value it creates for its customers while lowering costs to produce and deliver "green" products and services. C. Ecomagination increases the perceived value it creates for its customers while raising costs to produce and deliver "green" products and services. D. Ecomagination increases the perceived value it creates for its customers while lowering costs to produce and deliver "green" products and services.

D. Ecomagination increases the perceived value it creates for its customers while lowering costs to produce and deliver "green" products and services.

Which of the following is an open innovation principle? A. The smart people in our field work for us. B. To profit from R&D, we must discover it, develop it, and ship it ourselves. C. If we discover it ourselves, we will get it to market first. D. External R&D can create significant value.

D. External R&D can create significant value

Which of the following perspectives best supports the shared value creation framework? A. Markets are more often than not defined by societal needs rather than economic needs. B. Failing to create value for society almost always reflects on the bottom line. C. A firm's competitive advantage depends on pitting economic and societal needs in a trade-off. D. Externalities such as pollution, wasted energy, and costly accidents actually create internal costs.

D. Externalities such as pollution, wasted energy, and costly accidents actually create internal costs.

The working capital turnover of Tesva Systems Corp. is 6.0. What does this financial data suggest? A. For every $6.00 Tesva Systems puts to work, the company incurs a cost of $1.00. B. For every $6.00 Tesva Systems puts to work, the company realizes sales of $1.00. C. For every dollar Tesva Systems puts to work, the company realizes $6.00 in loss. D. For every dollar Tesva Systems puts to work, the company realizes $6.00 of sales.

D. For every dollar Tesva Systems puts to work, the company realizes $6.00 of sales.

Frappe operates as a strategic business unit (SBU) under More or Less Inc., a home-furnishings manufacturer. From this information, it may be reasonable to infer that A. Frappe does not have its own profit and loss responsibility. B. Frappe is dependent on the other SBUs in More or Less Inc. C. Frappe has a matrix organizational structure. D. Frappe is led by its own CEO (or equivalent general manager).

D. Frappe is led by its own CEO (or equivalent general manager).

Which of the following scenarios best illustrates bundling? A. Clean Brush Inc. sells its electric toothbrushes for a low cost, but charges a high price for replacement brushes. B. Cumulus Media Inc. sells its cloud computing network by having customers pay for the service as they use it. C. Sharp Cable Inc. sells its basic TV channels for free but charges high prices for any channels that customers add on later. D. Fresh Seeds 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.

D. Fresh Seeds 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 examples describes the task of an alliance manager? A. Sophia oversaw the agreement between her company and the potential alliance partner and offered support when needed. B. Ira used his knowledge of digital watches to help him to manage the day-to-day operations of the alliance. C. Natasha reviewed the alliance portfolio to make sure it fit with the corporate strategy of her firm. D. Fyodor trained the employees of his alliance partner in the skills needed to create a display for an e-notebook.

D. Fyodor trained the employees of his alliance partner in the skills needed to create a display for an e-notebook.

Which of the following best illustrates a merger between the two companies GD Inc. and VS Inc.? A. GD Inc. purchases VS Inc. for $80 billion despite VS Inc. being against the purchase. B. GD Inc. and VS Inc. join together to form a third new entity, while they also operate separately. C. GD Inc. outsources a few of its business activities to VS Inc. for competitive advantage. D. GD Inc. and VS Inc. join together to form a single new company called GDVS Inc.

D. GD Inc. and VS Inc. join together to form a single new company called GDVS Inc.

Which of the following statements is true of the balanced-scorecard? A. It is a more or less a one-dimensional metric of measuring competitive advantages of a firm. B. It is one of the traditional approaches of measuring firm performance. C. Its primary focus is to base a firm's strategic goals entirely on external performance dimensions. D. It attempts to provide a holistic perspective on firm performance.

D. It attempts to provide a holistic perspective on firm performance.

In which of the following ways does Zappos achieve organizational control? A. It continually changes the organizational values that guide its employees. B. It refrains from monitoring its employees' calls. C. It encourages employees to be creative and innovate and to go the extra mile to deliver a wonderful customer experience. D. It enforces that each group member's compensation depends in part on the group's overall productivity.

D. It enforces that each group member's compensation depends in part on the group's overall productivity.

How does a sustainable strategy typically help a firm? A. It helps the firm focus solely on its financial goals. B. It reduces the need for corporate social responsibility within the firm. C. It facilitates the firm in effectively isolating its external stakeholders. D. It helps the firm achieve positive results along the social and ecological dimensions.

D. It helps the firm achieve positive results along the social and ecological dimensions.

Which of the following statements is true of a disruptive innovation? A. It begins as a low-cost solution to a new problem. B. It initially performs better than the existing technology. C. It involves leveraging existing technologies in new markets. D. It invades the market from the bottom up, by first capturing the low end.

D. It invades the market from the bottom up, by first capturing the low end.

Which of the following statements best describes groupthink? A. It is a process by which the founder defines and shapes an organization's culture, which can persist for decades after his or her departure. B. It is a situation in which organizations compete with one another for resources, but they also need to cooperate to share competencies. C. It is a process whereby employees internalize an organization's values and norms through immersion in its day-to-day operations. D. It is a situation in which opinions coalesce around a leader without individuals critically challenging and evaluating that leader's opinions and assumptions.

D. It is a situation in which opinions coalesce around a leader without individuals critically challenging and evaluating that leader's opinions and assumptions.

Which of the following is not an advantage of the balanced-scorecard approach to assess firm performance? A. It allows managers to communicate and link the strategic vision to responsible parties within an organization. B. It helps managers to implement feedback and organizational learning in order to modify and adapt strategic goals when indicated. C. It provides a concise report that tracks chosen metrics and measures and compares them to target values. D. It is a tool which can be effectively used by managers for both strategic implementation and strategic formulation.

D. It is a tool which can be effectively used by managers for both strategic implementation and strategic formulation.

Which of the following is a disadvantage of the balanced-scorecard approach? A. It fails to link the strategic vision to responsible parties within the organization. B. It fails to translate the vision into measureable operational goals. C. It provides limited guidance for designing and planning business processes. D. It provides limited guidance about which metrics to choose.

D. It provides limited guidance about which metrics to choose.

Which of the following characteristics of McDonald's best supports the fact that it is a mechanistic organization? A. It frequently ranks among the top 500 companies to work for. B. Its communication lines are bottom-up and well-defined. C. Its decision power is spread across the organization. D. Its job descriptions are very descriptive.

D. Its job descriptions are very descriptive.

Hoptin Inc. is a public stock company. Which of the following best exemplifies the legal personality of the company? A. Rosa can legally sell shares of Hoptin in the stock market. B. John is a shareholder of Hoptin but does not have any managerial duties. C. Kevin, an employee at Hoptin, is not responsible for any losses that Hoptin incurs. D. Jessi Hoptin, the company's founder, died a few years ago, yet the company is doing well.

D. Jessi Hoptin, the company's founder, died a few years ago, yet the company is doing well.

Which of the following is a feature of the Globalization 2.0 stage? A. Huge investments in fiber-optic cable networks around the world enabled companies to operate as global-collaboration networks. B. Only sales and distribution operations took place overseas, while all the important business functions were located in the home country. C. Two-way knowledge flow between the local subsidiaries and their U.S. headquarters was strong. D. Multinational enterprises (MNEs) began to create smaller, self-contained replicas of themselves in a few key countries.

D. Multinational enterprises (MNEs) began to create smaller, self-contained replicas of themselves in a few key countries.

_____ define appropriate employee attitudes and behaviors. A. Values B. Artifacts C. Appraisals D. Norms

D. Norms

Which of the following statements is true of strategy in an organization? A. Strategy implementation is considered unsuccessful if it requires changes within an organization. B. To implement a strategy successfully, an organization's structure must be rigid. C. Strategy implementation does not affect resource allocation and power distribution within an organization. D. Organizational structure must follow strategy in order for firms to achieve superior performance.

D. Organizational structure must follow strategy in order for firms to achieve superior performance.

Which of the following acts in the Goldman Sachs-Galleon Group insider trading scandal is an egregious exploitation of information asymmetry? A. Galleon Group's decision to trust Rajat Gupta's information as accurate B. Rajaratnam receiving information regarding Warren Buffet's impending multibillion-dollar injection into Goldman Sachs C. Warren Buffet's decision to inject a huge amount of money into Goldman Sachs based on its financial reports D. Rajat Gupta providing information regarding Warren Buffet's impending multibillion-dollar injection into Goldman Sachs

D. Rajat Gupta providing information regarding Warren Buffet's impending multibillion-dollar injection into Goldman Sachs

Which of the following scenarios best illustrates horizontal integration? A. Regal Autos Inc. enters into a licensing contract with a distributor in a new international market. B. Regal Autos Inc. acquires a component parts manufacturer who previously supplied to Regal Autos' competitor. C. Regal Autos Inc. sets up its own distribution channel and retail stores. D. Regal Autos Inc. joins with Marcus Motors Inc., one of its direct competitors.

D. Regal Autos Inc. joins with Marcus Motors Inc., one of its direct competitors.

Which of the following describes a firm in the Globalization 1.0 stage? A. Robinson Inc. has a large office in New York, which is one cog in a global network. B. Robinson Inc. has a large office in New York, which functions with other large offices in Europe and Asia. C. Robinson Inc. has a base office in New York and a replica office in Amsterdam. D. Robinson Inc. has a base office in New York and distributes some of its products overseas.

D. Robinson Inc. has a base office in New York and distributes some of its products overseas.

Juanita, a manager at a multinational organization, is trying to carefully scan and link the firm's internal environment to its external environment. The insights from this analysis will allow her to effectively leverage the company's internal strengths to exploit external opportunities, while mitigating internal weaknesses and external threats. In this scenario, which of the following managerial tools is Juanita employing? A. Blake Mouton managerial grid B. Ansoff's matrix C. BCG analysis D. SWOT analysis

D. SWOT analysis

The three financial ratios that constitute return on revenue are Cost of goods sold/Revenue, Research & Development expense/Revenue, and A. Accounting profitability/Revenue. B. Economic value created/Revenue. C. Total return to shareholders/Revenue. D. Selling, general, & administrative expense/Revenue.

D. Selling, general, & administrative expense/Revenue.

Which of the following statements accurately describes social entrepreneurs? A. Social entrepreneurs are individuals who invest in start-up businesses in order to earn huge returns. B. Social entrepreneurs are individuals who rely primarily on social networking sites to generate revenues. C. Social entrepreneurs are employees within organizations who are responsible for carrying out lean production. D. Social entrepreneurs are those who consider financial, ecological, and social metrics to evaluate their firm's performance.

D. Social entrepreneurs are those who consider financial, ecological, and social metrics to evaluate their firm's performance.

Which of the following is an example of social entrepreneurship? A. The committee approved the new formula for an all-purpose cleaner because it cleaned better than other cleaners and used easy-to-obtain ingredients. B. The committee approved the new formula for an all-purpose cleaner because it cleaned better than other cleaners and did not cost more to produce. C. The committee approved the new formula for an all-purpose cleaner because it cleaned as well as other cleaners and could be produced more efficiently. D. The committee approved the new formula for an all-purpose cleaner because it cleaned as well as other cleaners and used organic ingredients.

D. The committee approved the new formula for an all-purpose cleaner because it cleaned as well as other cleaners and used organic ingredients.

How has China been affected by its one-child-per-family policy and appreciation of its currency? A. The purchasing power of its workforce has reduced. B. The value added to production has reduced. C. The standard of living within the economy has lowered. D. The country's advantage in low-cost manufacturing has reduced.

D. The country's advantage in low-cost manufacturing has reduced.

Which of the following statements best supports the view that GE's ecomagination strategy is in line with the shared value creation framework? A. The ecomagination strategy is the brainchild of the founder of the company. B. The ecomagination strategy helps GE spend more on research and development than other similar companies. C. The ecomagination strategy generated $3 billion in revenues for GE during 2012. D. The ecomagination strategy allows GE to produce "green" products while increasing revenue and competitive advantage.

D. The ecomagination strategy allows GE to produce "green" products while increasing revenue and competitive advantage.

What is most likely to happen if a firm relies too long on a competency without honing, refining, and upgrading as the firm and the environment change? A. The firm's original core competency can turn from a liability into an asset. B. The firm's organizational inertia can turn into its core rigidity. C. The firm's competitive parity can turn into its competitive advantage. D. The firm's culture can turn from a core competency into a core rigidity.

D. The firm's culture can turn from a core competency into a core rigidity.

Which of the following is a competitive benefit experienced by the first mover firm in an industry? A. The first mover will be able to achieve a less steep learning curve. B. The first mover will be able to reduce the switching costs. C. The first mover will not have to patent its products or technology. D. The first mover will be able to reduce costs through economies of scale.

D. The first mover will be able to reduce costs through economies of scale.

How does W. L. Gore exemplify founder imprinting? A. Gore consistently ranks among the top 25 of Fortune's "100 Best Companies to Work For" list. B. W. L. Gore & Associates is organized in a formal and centralized manner. C. The compensation of Gore associates is decided through a peer review system. D. The four core values articulated by Bill Gore guide the company and its associates to this day.

D. The four core values articulated by Bill Gore guide the company and its associates to this day.

The compact disk (CD) industry is in the maturity phase of its industry life cycle. What conditions prevail for an industry in this stage? A. The type of buyers at this stage will be early adopters. B. The mode of competition at this stage will be based on non-price factors. C. The market growth is positive or high at this stage. D. The industry structure is an oligopoly with only a few large firms.

D. The industry structure is an oligopoly with only a few large firms.

While the industry for e-book readers is in its growth stage, the industry for landline telephones is in the decline stage of the industry life cycle. Which of the following can be inferred from this? A. While firms in the e-book reader industry will focus on pursuing a harvest strategy, firms in the landline telephone industry will focus on product innovations. B. The e-book reader industry is at a more advanced stage than the landline industry of the industry life cycle. C. While firms in the e-book reader industry will attract customers categorized under late majority, firms in the landline telephone industry will attract the early majority customers. D. The number of competitors in the e-book reader industry will be larger when compared to the landline telephone industry.

D. The number of competitors in the e-book reader industry will be larger when compared to the landline telephone industry.

Which of the following is a drawback of pursuing a multidomestic strategy? A. The strategy allows for the lowest possible local responsiveness. B. The strategy lowers the differentiation of a firm's product and service offerings. C. The strategy exposes a firm to greater exchange rate fluctuation when compared to an international strategy. D. The strategy is costly and inefficient because it requires the duplication of key business functions across several countries.

D. The strategy is costly and inefficient because it requires the duplication of key business functions across several countries.

Why is the phase after the growth stage of the industry life cycle referred to as the shakeout stage? A. The barriers to entry increase during this stage. B. The firms in the industry yield the highest profits during this phase. C. Rivalry among competitors decreases in this stage. D. The weaker firms are forced out of the industry in this stage.

D. The weaker firms are forced out of the industry in this stage.

What are poison pills? A. They are used by shareholders to prevent the founder of a company from taking the company private through a leveraged buyout. B. They are unspecified conditions in the contract between stakeholders in an organization. C. They are used by companies in a bid to perform a hostile takeover of competing firms. D. They are defensive provisions that kick in should a buyer reach a certain level of share ownership.

D. They are defensive provisions that kick in should a buyer reach a certain level of share ownership.

Which of the following statements is true of strategic alliances? A. They are always focused on joining the same value chain activities. B. They enable firms to achieve goals faster, but at higher costs. C. They are known as strategic alliances whether or not they have the potential to affect a firm's competitive advantage. D. They are most beneficial when they join together resources and knowledge in a combination that obeys the VRIO principles.

D. They are most beneficial when they join together resources and knowledge in a combination that obeys the VRIO principles.

Which of the following is not true about the members of the board of directors in a public stock company? A. They represent the shareholders' interests. B. They may hire and fire top management. C. They oversee the firm's operations. D. They are not responsible to shareholders.

D. They are not responsible to shareholders.

Which of the following is a disadvantage of equity alliances? A. They are reflective of weaker ties between firms. B. They do not permit the exchange of explicit knowledge. C. They can bring about a lack of commitment. D. They can entail significant investments.

D. They can entail significant investments.

Which of the following statements is true of technology enthusiasts? A. They make up the largest market segment. B. They are the customer segment in the maturity stage of the industry life cycle. C. They are highly price conscious buyers. D. They enjoy using beta versions of products and providing feedback to companies.

D. They enjoy using beta versions of products and providing feedback to companies.

Which of the following is a drawback of joint ventures? A. They produce weak ties, trust, and commitment between the partners. B. They are based on contractual agreements rather than partial ownership. C. They do not enable the transfer and sharing of tacit knowledge. D. They necessitate the sharing of rewards between the partners.

D. They necessitate the sharing of rewards between the partners.

Which of the following statements is true of the triple-bottom-line? A. It is more or less a one-dimensional metric of measuring competitive advantage of a firm. B. Its primary focus is to base a firm's strategic goals entirely on external performance dimensions. C. According to this approach, achieving positive results in any one of the dimensions, economic, social, and ecological, can lead to a sustainable strategy. D. Three dimensions, economic, social, and ecological, make up the triple-bottom-line.

D. Three dimensions, economic, social, and ecological, make up the triple-bottom-line.

TopDrawer Inc. has a board of directors that consists of seven members. Which of the following is most likely an accurate statement about TopDrawer's board of directors? A. TopDrawer's board of directors ensures the firm's compliance with laws and regulations but does not conduct risk assessments. B. TopDrawer's board of directors provides guidance for the firm's CEO but does not monitor the firm's corporate actions. C. TopDrawer's board of directors oversees the firm's succession plan but does not evaluate the firm's CEO. D. TopDrawer's board of directors evaluates the firm's strategic initiatives but does not include any employees of the firm.

D. TopDrawer's board of directors evaluates the firm's strategic initiatives but does not include any employees of the firm.

Which of the following statements is true of transaction costs? A. When the costs of pursuing an activity in-house are more than the costs of transacting for that activity in the market, then the concerned firm should vertically integrate. B. When companies transact in the open market, they incur internal transaction costs. C. Transaction costs exclusively consist of external costs associated with economic exchanges. D. Transaction costs are necessary to explain and predict the boundaries of a firm.

D. Transaction costs are necessary to explain and predict the boundaries of a firm

In the context of the resource-based model of competitive advantage, which of the following scenarios best exemplifies resource immobility? A. AP Corp. has earned a good reputation among its shareholders by investing more in tangible assets over intangible assets. B. Two Triangle Inc. has lost its market share because its resources are not mobile, that is rigid, inflexible, and static. C. Blue Elixir Corp. has been able to gain a competitive advantage because of its ability to efficiently move its resources from one manufacturing unit to another. D. True 3 Inc. has been able to outperform its competitors because the uniqueness of its resources is difficult to replicate.

D. True 3 Inc. has been able to outperform its competitors because the uniqueness of its resources is difficult to replicate.

In late 2014, Uber senior executive Emil Michael was heard to say that Uber should spend a million dollars to hire private investigators to dig up dirt on journalists who wrote damaging pieces on Uber. When the remarks became public, he apologized. How did Uber's CEO deal with Michael? A. Uber's CEO demoted Michael. B. Uber's CEO fired Michael. C. Uber's CEO promoted Michael. D. Uber's CEO refused to discipline Michael.

D. Uber's CEO refused to discipline Michael.

How do firms benefit from vertical integration? A. Vertical integration allows firms to reduce organizational complexity and administrative costs. B. Firms that vertically integrate will have increased strategic flexibility when faced with technological changes. C. Firms that vertically integrate do not have to make transaction-specific investments. D. Vertical integration allows firms to increase operational efficiencies through improved coordination of adjacent value chain activities.

D. Vertical integration allows firms to increase operational efficiencies through improved coordination of adjacent value chain activities.

Which of the following statements about W. L. Gore & Associates best supports the fact that it is organized in an informal and decentralized manner? A. W. L. Gore & Associates' employees are organized by their seniors into teams that are led by sponsors, not bosses. B. W. L. Gore & Associates prefers e-mail communication to face-to-face communication. C. W. L. Gore & Associates is characterized by a vertical organizational form. D. W. L. Gore & Associates refers to its employees as associates rather than employees.

D. W. L. Gore & Associates refers to its employees as associates rather than employees.

_____ is a business model in which the manufacturer sets a fixed price on a product, but the retailer is to free set its own price. A. Agency B. Freemium C. Bundling D. Wholesale

D. Wholesale

Red Empire Inc., a large multinational company owned by two partners, is active in the petroleum, capital market, chemicals, steel, beverages, hospitality, airlines, education, automobiles, and consumer electronics industries. The company has multiple brands and a large product portfolio under its banner. Which of the following terms would best describe this company? A. a flagship brand B. a single-business firm C. a dominant-business firm D. a conglomerate

D. a conglomerate

Which of the following firms is least integrated? A. a firm that enters a joint venture with another company to develop a new technology B. a firm that owns production subsidiaries across the globe C. a firm that makes equity investments in its supplier's company D. a firm that buys all the required raw materials from multiple external vendors

D. a firm that buys all the required raw materials from multiple external vendors

Which of the following accurately describes an organic organization? A. an inflexible organization that fosters slow decision making and high employee motivation B. an inflexible organization that fosters fast decision making and high employee motivation C. a flexible organization that fosters slow decision making and high employee motivation D. a flexible organization that fosters fast decision making and high employee motivation

D. a flexible organization that fosters fast decision making and high employee motivation

To keep track of the latest developments in computing, Lenovo's research centers are located in China, U.S.A., and Japan. Also, to benefit from low-cost labor and reduced shipping costs, the company's manufacturing facilities are in Mexico, India, and China. Which of the following strategies would require Lenovo to organize its operations worldwide in order to develop uniform products for its domestic and foreign markets? A. a transnational strategy B. a multidomestic strategy C. a localization strategy D. a global-standardization strategy

D. a global-standardization strategy

Which of the following best illustrates physical-asset specificity? A. a unique training program developed in an organization B. a ship container designed to carry more than the average load of iron ore C. a generic machine that can be used to churn different mixtures D. a machine solely designed to give a candy its trademarked shape

D. a machine solely designed to give a candy its trademarked shape

Which of the following best illustrates an equity alliance? A. a contractual agreement that provides Ocia Pharma Inc. the exclusive rights to distribute the drugs of Marvel Pharma Inc. in the Asian market B. an alliance between GoldWing Systems Inc. and GM Computers Inc. that results in GM Wing Inc., an independent third company C. a collusion between two competitors, Torque Steels Inc. and Vizor Metals Inc., to fix prices D. a partnership in which RedGate Insurance Inc. has a 40 percent ownership claim in TwinTrust Finance Inc.

D. a partnership in which RedGate Insurance Inc. has a 40 percent ownership claim in TwinTrust Finance Inc.

Which of the following is an example of explicit knowledge? A. knowing how to create surveys B. a research skill C. knowing how to assemble semiconductors D. a research summary

D. a research summary

Process innovation is more important than product innovation during the growth stage because A. companies produce very few products during the growth stage, often just prototypes or beta versions. B. technological and commercial uncertainties about a new product still exist during this stage. C. it is more crucial to adopt the integration strategy during this stage. D. a standard, in terms of engineering features and design choices, has been set across the industry.

D. a standard, in terms of engineering features and design choices, has been set across the industry.

Shine Enterprises Inc. is a large financial conglomerate that operates in more than 50 countries and employs over 80,000 people across the world. It operates through multiple regional product divisions, which tend to function as autonomous profit-and-loss centers. This allows the company to reap significant economies of scale. Though each division acts as an autonomous firm with its individual regional leaders, frequent sharing of knowledge between the divisions allows for global learning. These factors help the company reconcile product and service differentiations at low cost. Which of the following strategies does Shine Enterprises Inc. most likely use? A. an international strategy B. a focused-differentiation strategy C. a multidomestic strategy D. a transnational strategy

D. a transnational strategy

Which of the following strategies must a multinational enterprise (MNE) use when it wants to pursue an integration strategy at the business level by attempting to reconcile product and/or service differentiations at low cost? A. a multidomestic strategy B. an international strategy C. a global-standardization strategy D. a transnational strategy

D. a transnational strategy

In Eli Lilly's Office of Alliance Management, the _____ is a senior, corporate-level executive responsible for high-level support and oversight. A. alliance manager B. alliance leader C. alliance regulator D. alliance champion

D. alliance champion

Broadview Company integrated certain important functions of Widget.com with Widget, while keeping other functions independent. To support this integration, the president of Widget shifted compensation incentives for both senior teams to accomplish joint goals rather than to focus solely on each business unit's performance. This scenario best exemplifies a(n) A. multidivisional structure. B. organic organization. C. simple structure. D. ambidextrous organization.

D. ambidextrous organization.

Opula Inc., a luxury car company, sells the same cars and offers the same superior services in both its home country and foreign markets. The market it operates in faces low pressures for both local responsiveness and cost reductions. Which of the following strategies within the integration-responsiveness framework does Opula Inc. most likely pursue? A. a multidomestic strategy B. a transnational strategy C. a global-standardization strategy D. an international strategy

D. an international strategy

DigitalHealth Electronics Inc. is a company that builds diagnostic devices. It was the first company to develop a compact MRI scanner by reconfiguring the components of the MRI technology. This smaller and user-friendly version of the huge MRI scanner created demand from small hospitals, nursing homes, and private practice doctors who were earlier dependent on the scanning machines in large hospitals. Which of the following types of innovations does this scenario best illustrate? A. disruptive innovation B. incremental innovation C. radical innovation D. architectural innovation

D. architectural innovation

Superlative Productions spent 10 million dollars to buy the rights to a best-selling novel. The company then prepared for production by hiring a screenwriter to adapt the novel, casting the main roles, renting cameras and other equipment, and scouting locations in southern Arizona. Which of the following pairs of resources are both intangible? A. money spent to buy rights of novel; screenwriter's experience adapting novels B. money spent to buy rights for the novel; locations in southern Arizona C. best-selling novel; locations in southern Arizona D. best-selling novel; screenwriter's experience adapting novels

D. best-selling novel; screenwriter's experience adapting novels

Ambrosia Inc., a leading chocolate producer, anticipated that the prices of cocoa beans would double in less than three years. This would disrupt the availability of cocoa in the industry. Thus, Ambrosia Inc. decided to purchase cocoa plantations in Ghana. As predicted, the prices of cocoa increased twofold. Because of the company-owned cocoa plantations, Ambrosia Inc. was able to sustain its competitive advantage in turbulent times. Which of the following isolating mechanisms does this scenario best illustrate? A. social complexity B. causal ambiguity C. time compression diseconomies D. better expectations of future resource value

D. better expectations of future resource value

The transnational strategy is similar to a(n) _____ strategy because they both focus on product differentiation and low costs. A. liquidation B. product diversification C. international D. blue ocean

D. blue ocean

Coral Think Inc. is a new company in the publishing industry. It has raised sufficient capital from multiple sources. It is planning to use its capital to purchase certain assets. Which of the following assets will be the most difficult for Coral Think Inc. to acquire using its capital? A. inventory B. tools and equipment C. land and building D. brand name

D. brand name

In 2007, Salesforce.com recognized an emerging market for platform as a service (PaaS) offerings and developed a new competency in delivering software development and deployment tools. This allowed its customers to either extend their existing CRM offering or build completely new types of software. This is an example of A. leveraging existing core competencies to improve current market position. B. building new core competencies to achieve vertical integration. C. redeploying and recombining existing core competencies to compete in markets of the future. D. building new core competencies to create and compete in markets of the future.

D. building new core competencies to create and compete in markets of the future.

Vehmo Inc. is an automobile company whose core competency lies in manufacturing petrol- and diesel-based cars. The company realizes that more of its potential customers are switching to electric cars. The R&D department of the company acquires competencies in developing electric cars and launches its first hybrid car. In this scenario, Vehmo is primarily A. leveraging new core competencies to improve current market position. B. redeploying existing core competencies to compete in future markets. C. unlearning existing core competencies to create and compete in markets of the future. D. building new core competencies to protect and extend current market position.

D. building new core competencies to protect and extend current market position.

The translation of strategy into action takes place in the firm's _____, which details the firm's competitive tactics and initiatives. A. scorecard model B. economic value creation C. shareholder's value creation D. business model

D. business model

How was Netflix able to outperform both Hulu and Amazon? A. by focusing its resources on buying classic blockbusters movies B. by expanding its content streaming to include foreign markets C. by expanding from content streaming to theatrical releases and cable content D. by focusing its resources on producing high-quality content for content streaming

D. by focusing its resources on producing high-quality content for content streaming

How does horizontal integration within an industry affect the surviving firms? A. by increasing the threat the surviving firms will face from new entrants B. by strengthening the rivalry among existing firms C. by requiring the surviving firms to shift their focus from non-price to price competition D. by strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers

D. by strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers

Neville and Andre are customer care employees at JPN Care. In between calls, Neville and Andre spend time on Facebook and YouTube. The relaxed guidelines at JPN allow them to do that. However, sometimes, they knowingly avoid answering calls or keep customers on hold, while they check their social networking accounts. Such behavior A. is neither unlawful nor unethical; hence, Neville and Andre cannot be reprimanded. B. typically exemplifies the agency problem of adverse selection. C. goes against the principles of shareholder capitalism. D. can be stopped by implementing performance incentives and strict control mechanisms.

D. can be stopped by implementing performance incentives and strict control mechanisms.

Organizational and managerial skills that find their expression in a company's structure, routines, and culture are referred to as A. tangible resources. B. reserves. C. capital gains. D. capabilities.

D. capabilities.

The increasing availability of external options to commercialize ideas that were previously shelved is one of the factors that led to the shift from the A. maturity stage to the shakeout stage. B. shakeout stage to the maturity stage. C. open innovation to closed innovation. D. closed innovation to open innovation.

D. closed innovation to open innovation

When a firm does not have the resource required for pursuing a growth strategy, and if the resource in question is not easily tradable, the implication for the strategist is most likely to A. borrow via a contractual agreement. B. pursue internal development. C. enter into a licensing agreement. D. consider an outright acquisition.

D. consider an outright acquisition.

Dandelions Max is a consumer electronics company. It has acquired an edge over its competitors through its ability to provide breakthrough technology at the lowest price in the market. This advantage of Dandelions Max best exemplifies a A. markup. B. resource flow. C. capital gain. D. core competency.

D. core competency.

GM's insistence on sticking to a bureaucratic culture combined with its M-form structure and its subsequent failure to adapt to changing customer preferences for more fuel-efficient cars, produce higher quality, and create innovative designs best exemplifies A. decentralization. B. founder imprinting. C. groupthink. D. core rigidity.

D. core rigidity.

When two neighboring, democratic countries that are part of a trading bloc follow different religions and social norms, they most likely have high ______ distance. A. political B. geographic C. administrative D. cultural

D. cultural

Which of the following competitively important assets is typically excluded from a firm's balance sheet? A. land and building B. accounts payable C. patents D. customer experience

D. customer experience

In the context of SWOT analysis, which of the following best exemplifies a firm's internal weakness? A. fall in the purchasing power of the firm's customers B. increased competition in the industry where the firm operates C. irregularity in the raw materials supply throughout the industry D. decline in the firm's market share

D. decline in the firm's market share

Due to dense urban living conditions, hot and humid summers, and high energy costs, it is not surprising that Japanese customers want small, quiet, and energy-efficient air conditioners. Which feature of Porter's diamond framework does this scenario best exemplify? A. factor conditions B. complementor availability C. competitive intensity D. demand conditions

D. demand conditions

As a start-up company, Virtue Mobiles Inc. entered the low end of the highly competitive cell phone industry with its low-cost smartphones. Initially, the company was able to sell its inferior technology due to its low prices. Over the years, however, its rate of technology improvements increased above the industry standards. This helped the company to create a strong strategic position for its smartphones in the high-end segment and claim a premium price. Which of the following types of innovation does this scenario best illustrate? A. radical innovation B. incremental innovation C. architectural innovation D. disruptive innovation

D. disruptive innovation

Digital photography replacing film photography would be an example of a(n) A. regressive innovation. B. radical innovation. C. architectural innovation. D. disruptive innovation.

D. disruptive innovation.

Futura Inc. introduced an automobile that could run completely on electricity for longer periods of time than any other electronic or hybrid automobile. Also, this vehicle was less expensive than the vehicles of competitors. On the downside, it required more repairs than the competition's automobiles. However, the technology of the Futura vehicle improved rapidly, thereby improving its repair record. This example describes A. architectural innovation. B. incremental innovation. C. radical innovation. D. disruptive innovation.

D. disruptive innovation.

In the context of the Boston Consulting Group (BCG) growth-share matrix, if one of the strategic business units of a conglomerate is categorized under dogs, the management should A. infuse more capital into the strategic business unit. B. provide more human resources to the business. C. hold the business till it turns into a star. D. divest the strategic business unit.

D. divest the strategic business unit.

According to the _____, competitive advantage is the outflow of a firm's ability to modify and leverage its resource base in a way that enables it to gain and sustain competitive advantage in a constantly changing environment. A. value chain perspective B. two-factor theory C. expectancy theory D. dynamic capabilities perspective

D. dynamic capabilities perspective

At the time when Kevin decided to purchase a tablet computer, the product had just become accessible to the mass market. He purchased the tablet only after he was completely convinced that the benefits it would offer him would far exceed its price. Also, he waited for his friends to try the product and popular gadget television shows to endorse it. Which of the following customer segments does Kevin best represent? A. laggards B. technology enthusiasts C. early adopters D. early majority

D. early majority

A firm incurs $400 to manufacture a television. In the market, customers are willing to pay a maximum of $600 for the television priced at $500. The difference of $200 ($600 minus $400) is the A. consumer surplus. B. total return to shareholders. C. customer lifetime value. D. economic value created.

D. economic value created.

A(n) _____ is best described as a partnership in which at least one partner takes partial ownership in the other partner. A. acquisition B. non-equity alliance C. joint venture D. equity alliance

D. equity alliance

The partnership between Toyota and Tesla Motors, in which Toyota has made a $50 million investment in the California startup company to learn new knowledge and gain a window into new technology, is an example of a(n) A. acquisition. B. joint venture. C. non-equity alliance. D. equity alliance.

D. equity alliance.

Which of the following entry modes was used extensively in Globalization 1.0 stage? A. strategic alliances B. acquisitions C. greenfield operations D. exports

D. exports

Which of the following terms or phrases best characterizes Zappos' organizational structure? A. centralized B. mechanistic C. extremely tall D. extremely flat

D. extremely flat

According to Alfred Chandler in his book Strategy and Structure, implementing a successful strategy depends on having an organizational structure that is _____ enough to accommodate the formulated strategy and future growth and expansion. A. insightful B. strong C. complex D. flexible

D. flexible

Which of the following features helps match a cost-leadership strategy to a functional structure? A. decentralization B. process and product innovations C. flexibility and mutual adjustment D. focus on economies of scale

D. focus on economies of scale

Which of the following is an ineffective practice in alliance management? A. coordinating a firm's portfolio of alliances B. establishing knowledge-sharing routines between alliance partners C. developing relational capabilities to manage mergers and acquisitions D. focusing on developing an alliance-management capability in isolation

D. focusing on developing an alliance-management capability in isolation

A typical college of business (or school of management) has several areas such as management, marketing, finance, accounting, MIS, and so on. This is an example of a(n) _____ structure. A. simple B. M-form C. matrix D. functional

D. functional

Which of the following organizational structures matches best with an international strategy? A. simple B. matrix C. multidivisional D. functional

D. functional

Creating resources that meet the VRIO criteria is strategically important to a firm because it A. helps the firm curb its resource heterogeneity and resource immobility. B. facilitates greater knowledge diffusion in the industry. C. leads to competitive parity within the industry. D. helps the firm to gain and sustain a competitive advantage.

D. helps the firm to gain and sustain a competitive advantage.

What element of organizational structure deals with positioned-based reporting lines? A. specialization B. formalization C. centralization D. hierarchy

D. hierarchy

True Moto Corp. (TMC) is a leading automobile company. The company has been able to sustain its competitive advantage primarily due to its high-quality and efficient electric motors. Most of its competitors have failed to develop similar electric motors at a reasonable price. Which of the following resource attributes listed in the VRIO framework has helped TMC sustain its competitive advantage? A. resource mobility B. inexhaustible nature C. intangibility of the company's resource D. high costs involved in imitation

D. high costs involved in imitation

Which of the following is a feature of an organic organization? A. high degree of specialization B. rigid division of labor C. clear lines of authority D. high span of control

D. high span of control

In the Boston Consulting Group (BCG) growth-share matrix, strategic business units categorized under dogs A. compete in a low-growth market but hold considerable market share. B. hold a high market share in a fast-growing market. C. compete in a high-growth market but have low and unstable earnings. D. hold a small market share in a low-growth market.

D. hold a small market share in a low-growth market.

The four-step innovation process ends with A. idea generation. B. invention. C. idea testing. D. imitation.

D. imitation.

Large companies, such as AT&T, IBM, and GE, have been shifting their knowledge landscape from closed innovation to open innovation because of the A. decreasing capability of external suppliers and vendors. B. lack of reliability on venture capital. C. increasing need to internally control research and development. D. increasing supply and mobility of skilled workers.

D. increasing supply and mobility of skilled workers.

To gain a competitive advantage, Lopez Industries obtained financing and then used this extra capital to produce the same amount of gaskets in a one-month period that it normally produces in a two-month period. Which of the following is the most likely outcome of this endeavor? A. inconsistent results B. same results C. better results D. inferior results

D. inferior results

In the market for used cars, which of the following is a reason behind the crowding out of desirable cars by lemons or inferior ones? A. experience-curve effects B. time compression diseconomies C. principal-agent problem D. information asymmetry

D. information asymmetry

Dmitri is a senior manager for the firm Kopney Inc. Because of his experience, he has been appointed to the board of HKS Inc., even though he doesn't work for this firm. He also serves on the boards of several other companies. Dmitri is a(n) _____ for Kopney and a(n) _____ for HKS. A. CEO; COO B. COO; CEO C. outside director; inside director D. inside director; outside director

D. inside director; outside director

Japanese and European engineering companies entered China to participate in building the world's largest network of high-speed trains worth billions of dollars. Companies such as Kawasaki Heavy Industries (Japan), Siemens (Germany), and Alstom (France) were joint-venture partners with domestic Chinese companies. These firms now allege that the Chinese partners built on the Japanese and European partners' advanced technology to create their own, next-generation high-speed trains. This example best highlights the _____ that firms can experience when expanding overseas. A. threat of new entrants B. liability of foreignness C. loss of reputation D. intellectual property exposure

D. intellectual property exposure

Given the accelerated pace of technological change, in combination with deregulation, globalization, and demographic shifts, a firm will only be successful today if its A. competitive advantage is derived from static resource or market advantages. B. resource advantage is not causally ambiguous or socially complex. C. resource advantage is maintained for a short period of time. D. internal strengths change with its external environment in a dynamic fashion.

D. internal strengths change with its external environment in a dynamic fashion.

Because keeping cost low is critical to IKEA's value innovation, it switched from a(n) A. transnational strategy to a multidomestic strategy. B. transnational strategy to a global-standardization strategy. C. international strategy to a multidomestic strategy. D. international strategy to a global-standardization strategy.

D. international strategy to a global-standardization strategy.

Kerry the Kangaroo Inc. specializes in producing and selling a stuffed kangaroo named Kerry. Although the stuffed kangaroo has sold well, the clothes that can be bought to dress the kangaroo have not sold as well as expected. As a result, Kerry the Kangaroo has warehouses full of hats, pants, sweaters, and shoes to dress Kerry. This firm used a _____ to determine how much of its capital is tied up in these accessory items. A. payables turnover B. receivables turnover C. fixed asset turnover D. inventory turnover

D. inventory turnover

Serena is the CEO of Pedalo Inc., a publicly traded company. The shareholders want Serena on the board of directors despite her recent appointment as the CEO. This decision of the shareholders is most likely because Serena A. is a board member of a major client. B. is more likely than other board members to take care of the stockholders. C. is also the CEO of other companies. D. is likely to provide the board with valuable inside information.

D. is likely to provide the board with valuable inside information.

EveningStar Inc. and The Luxur Group have together established The Luxur Star Group of hotels. EveningStar owns 49 percent and The Luxur Group has a 51 percent share in The Luxur Star Group of hotels. However, the management of The Luxur Star Group of hotels is separate from its parent companies. What alliance type does this scenario best illustrate? A. sole proprietorship B. non-equity alliance C. equity alliance D. joint venture

D. joint venture

Dow Corning is a company owned by Dow Chemical and Corning. This is most likely an example of a(n) A. equity alliance. B. sole proprietorship. C. non-equity alliance. D. joint venture.

D. joint venture.

When a stand-alone organization is created and owned by two or more parent companies together, the strategic alliance is referred to as a(n) A. non-equity alliance. B. equity alliance. C. proprietorship. D. joint venture.

D. joint venture.

Which of the following types of strategic alliances is the least common in terms of frequency? A. mergers B. acquisitions C. equity alliances D. joint ventures

D. joint ventures

United Nerumbia and Fernsland are two neighboring countries with strong economic disparities. However, both the countries share a common national language and the same political ideologies. The relationship between these two countries will most likely affect the trade of A. food processed in Fernsland. B. movies and TV shows produced in United Nerumbia. C. iron ore extracted in Fernsland. D. luxury items manufactured in United Nerumbia.

D. luxury items manufactured in United Nerumbia.

The risk of intellectual property appropriation increases when companies follow a multidomestic strategy because products are A. difficult to differentiate. B. complex to produce. C. exported long distances. D. manufactured locally.

D. manufactured locally.

According to the value chain analysis, which of the following is a primary activity? A. research and development B. human resources management C. accounting and finance D. marketing and sales

D. marketing and sales

Remote Inc. is a notebook manufacturing company based in Ohio. Remote's main market is Ohio. It aims at providing its products at better prices than its competitors. Which of the following structures is Remote Inc. likely to use if it has functional setup? A. organic B. simple C. matrix D. mechanistic

D. mechanistic

In principal-agent relationships, _____ describes the difficulty of principals to ascertain whether agents have really put forth their best efforts. A. the agency problem B. adverse selection C. on-the-job consumption D. moral hazard

D. moral hazard

Rajat Gupta's role in providing inside information to Galleon Group for the benefit of Galleon Group's stockholders and himself is an example of A. shareholder capitalism. B. adverse selection. C. shared value creation. D. moral hazard.

D. moral hazard.

Which of the following motivations for business growth involves principal-agent problems? A. increasing profits B. increasing market power C. reducing risk D. motivating managers

D. motivating managers

DigiGames Inc. established itself as the foremost producer of computer games. However, as the market for these games moved from laptop computers to cell phones based on cloud applications, DigiGames failed to adapt its games enough to this new environment. As result, the firm soon lost its competitive advantage. Which of the following best describes this scenario? A. movement from core rigidity to core competency B. movement from core rigidity to founder imprinting C. movement from founder imprinting to core competency D. movement from core competency to core rigidity

D. movement from core competency to core rigidity

A(n) _____ arises out of the combination of high pressure for local responsiveness and low pressure for cost reductions. A. international strategy B. transnational strategy C. global-standardization strategy D. multidomestic strategy

D. multidomestic strategy

Jane is the CEO of a clothing brand, Diva Rule Inc., which has retail stores and production units in five different countries. The firm's shareholders ensure the proper management of Diva Rule Inc. through their appointed board of directors. In this scenario, Diva Rule Inc. is most likely a A. nonprofit organization. B. nationalized firm. C. sole proprietorship. D. multinational enterprise.

D. multinational enterprise.

NextDoor is an instant messaging application for smartphones. New smartphone users find it easier to connect with friends and relatives through this mobile app when compared to other similar instant messaging applications. Hence, it has the largest user base in the industry. Thus, NextDoor app's value has increased primarily due to its A. learning curve effects. B. economies of scale. C. economies of scope. D. network effects.

D. network effects

India has been able to carve out a competitive advantage in business process outsourcing (BPO) primarily because A. it has emerged as a manufacturing powerhouse. B. of an efficient infrastructure and high labor costs. C. it has an abundance of uneducated workers who are highly trainable. D. of an abundance of well-educated, English-speaking young people.

D. of an abundance of well-educated, English-speaking young people.

Equity alliances are less common than non-equity alliances because they A. depend on contractual agreements. B. produce weaker ties between partners. C. fail to facilitate the transfer of tacit knowledge. D. often require larger investments.

D. often require larger investments.

Genevieve 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 Genevieve's A. social cost. B. break-even price. C. reservation price. D. opportunity cost.

D. opportunity cost.

Fast Call Inc. is a pharmaceutical company that has many breakthroughs in medicine to its credit. Unlike many other pharmaceutical companies, Fast Call has a relaxed work environment where employees are free to discuss projects with each other. Employees are encouraged to choose the projects that interest them; communication between team members and their supervisors is open and easy. Because of the company's work culture, its employees feel motivated to work harder and display more entrepreneurial behaviors. In this scenario, Fast Call Inc. is most likely an organization that is A. formalized. B. mechanistic. C. centralized. D. organic.

D. organic.

Stellar Products Inc. is a U.S.-based consumer electronics company. It owns smaller firms in Japan and Taiwan where most of its cell phone technology is developed and manufactured before being released worldwide. Which of the following alternatives to integration does this best illustrate? A. venture capitalism B. franchising C. joint venture D. parent-subsidiary relationship

D. parent-subsidiary relationship

Which of the following alternatives on the make-or-buy continuum allows for most integration? A. short-term contracting B. joint ventures C. licensing D. parent-subsidiary relationship

D. parent-subsidiary relationship

Mova Electronics, a leading pager manufacturer, recently declared itself bankrupt. This was attributed to a decision the company made in the past. While most of Mova's competitors were shifting their research focus toward cell phones, Mova invested most of its retained earnings on improvising its pagers. Once the pager market drastically declined, Mova Electronics was unable to capitalize on the new technology. Which of the following does this scenario best illustrate? A. causal ambiguity B. knowledge diffusion C. social complexity D. path dependence

D. path dependence

Which of the following is part of Geert Hofstede's cultural dimensions? A. locus of control B. self-efficacy C. span of control D. power distance

D. power distance

For a firm pursuing a global-standardization strategy, which of the following bases of competition becomes its primary weapon? A. product differentiation B. superior customer service C. local responsiveness D. price

D. price

Clare, the CEO of Femica Inc., reports to the board of directors appointed by the shareholders of Femica. Based on shareholder suggestions, the board ties Clare's compensation to the performance of Femica. Due to this pressure, Clare begins devoting extra time to projects and undertakes other activities to ensure that she has job security and that she receives adequate compensation. This conflict between Clare's interests and the board's interests best illustrates a(n) A. shareholder capitalism scenario. B. inside director-outside director conflict. C. fiduciary responsibility oversight. D. principal-agent problem.

D. principal-agent problem.

An individual who is part owner of a company and hires another individual to act on his or her behalf is referred to as a(n) A. agent. B. manager. C. employee. D. principal.

D. principal.

Otion Inc. is a relatively new firm in the consumer electronics industry. The company's primary objective is to become the market leader in less than 5 years, for which it has to gain and sustain a competitive advantage. In the context of the VRIO framework, which of the following resources should Otion Inc. primarily focus on to achieve its objective? A. quality standards, which are common and mandatory throughout the industry B. inexpensive unskilled labor that is easily accessible by all companies C. component parts that are sourced from competitors' suppliers D. production systems that reduce costs by 30 percent below the current industry standards

D. production systems that reduce costs by 30 percent below the current industry standards

TimeEnough Inc. entered the low-priced digital watch market several years ago. This firm's earnings have been unsteady, but might be growing. According to the BCG growth matrix, TimeEnough is a A. cash cow. B. star. C. dog. D. question mark.

D. question mark.

Strategic business units that have a relatively low market share but have the potential to grow are best categorized under _____ in the Boston Consulting Group (BCG) growth-share matrix. A. dogs B. stars C. cash cows D. question marks

D. question marks

Next Door Cellular is a leading mobile network operator. Since most of the resources used by Next Door Cellular are easily available, the company's brand name is the only resource that distinguishes it from the other operators. No other competitor in the industry has a strong brand name like that of Next Door Cellular. This unique asset that has helped the company gain a competitive advantage will be considered as a(n) _____ resource in the VRIO framework. A. tangible B. mobile C. imperishable D. rare

D. rare

A _____ is best described as an approach to strategic decision making that breaks down a larger investment decision into a set of smaller decisions that are staged sequentially over time. A. cost-leadership approach B. break-even analysis C. market risk framework D. real-options perspective

D. real-options perspective

Luxura Inc. is a large cosmetics company that made an initial small investment in a start-up company, GreenDream, that was developing an organic face lotion. This gave Luxura controlling interests in the start-up company. However, GreenDream soon began to have financial difficulties because of principal-agent problems. As a result, Luxura did not invest in the next stage of development and pulled out of the company. This approach to strategic alliance is referred to as a A. break-even analysis. B. partial joint venture. C. credible commitment. D. real-options perspective.

D. real-options perspective.

SmallWorld Inc. is a global Internet company that offers country-specific variations of its sites, keeping in mind the linguistic and religious differences between the countries. SmallWorld Inc. is most likely doing this to A. reduce its geographical distance from the other countries. B. increase its administrative distance from the other countries. C. increase its economic distance from the other countries. D. reduce its cultural distance from the other countries.

D. reduce its cultural distance from the other countries.

When a firm pursues a harvest strategy, it A. exits the industry by bankruptcy or liquidation. B. invests significant resources in product innovations. C. buys out its rivals to strengthen its strategic position. D. reduces investments in product support.

D. reduces investments in product support.

Toyota's global success in the 1990s and early 2000s was based to a large extent on a network of world-class suppliers in Japan. This tightly knit network allowed for fast two-way knowledge sharing—this in turn improved Toyota's quality and lowered its cost, which it leveraged into a successful blue ocean strategy at the business level. This example shows the effectiveness of A. factor conditions. B. competitive intensity in a focal industry. C. demand conditions. D. related and supporting industries/complementors.

D. related and supporting industries/complementors.

In 2009, ExxonMobil bought XTO Energy, a natural gas company, for $31 billion. XTO Energy is known for its core competency to extract natural gas from unconventional places such as shale rock—the type of deposits currently being exploited in the United States. ExxonMobil hopes to leverage its core competency in the exploration and commercialization of oil into natural gas extraction. Based on this example, ExxonMobil is engaging in A. unrelated-linked diversification. B. unrelated-constrained diversification. C. related-linked diversification. D. related-constrained diversification.

D. related-constrained diversification

A strategy of _____ will be most beneficial for a firm to enhance its overall corporate performance. A. unrelated level of diversification B. single-business level of diversification C. dominant-business level of diversification D. related-linked diversification

D. related-linked diversification

Evara Inc. started as a luxury brand for designer apparel. Soon, the company expanded by launching its own line of premium perfumes, watches, bags, and home furnishings. This expansion allowed the businesses under the company to share a few, if not all, of the common competencies in products, services, technology, and distribution. Which of the following corporate strategies is Evara pursuing in this scenario? A. taper integration strategy B. niche marketing strategy C. related-constrained strategy D. related-linked strategy

D. related-linked strategy

Kaleidoscope Inc. is a leading international apparel company. Competitors across the globe have failed to imitate Kaleidoscope Inc.'s production models, supply chain systems, knowledge systems, and culture. These attributes have remained unique to Kaleidoscope Inc. for a long time. Which of the following assumptions of the resource-based model of competitive advantage does this scenario best illustrate? A. resource homogeneity B. resource perishability C. resource equality D. resource immobility

D. resource immobility

To make the SWOT analysis an effective management tool, a strategist must first A. distinguish a firm's resources, competencies, and capabilities from each other. B. separate a firm's primary activities from support activities. C. analyze the pros and cons of strategic options. D. scan a firm's internal and external environments.

D. scan a firm's internal and external environments.

Medetect Inc. is a large firm involved in the highly competitive market of high-tech medical equipment. In this market, smaller firms that focus on research are constantly making new technological developments. Which of the following approaches would best serve the needs of Medetect? A. mergers B. serial mergers C. acquisitions D. serial acquisitions

D. serial acquisitions

Larry's Auto Repair is a small business in which the founder, Larry, makes most of the important strategic decisions as well as runs the day-to-day operations. He has three mechanics and a financial secretary working for him. Based on this scenario, Larry's Auto Repair has a(n) _____ structure. A. ambidextrous B. organic C. functional D. simple

D. simple

During market testing, Sensation Cosmetics (SC) realized that the cosmetics industry was dominated with multiple, well-established brands. These brands mostly sold their products in exclusive outlets and departmental stores. A new entrant like SC would require a different business model to be successful. Thus, SC started selling its products through direct marketing. In this scenario, Sensation Cosmetics accomplished substitution primarily through A. path dependence. B. technology transfer. C. knowledge diffusion. D. strategic equivalence.

D. strategic equivalence.

A firm sources intermediate goods and components from in-house suppliers as well as outside suppliers. In a similar fashion, another firm sells its products through company-owned retail outlets and through independent retailers. Both of these examples demonstrate A. strategic outsourcing. B. strategic insourcing. C. backward horizontal integration. D. taper integration.

D. taper integration.

Apple and Nike have their own retail outlets and also use other independent retailers, both the brick-and-mortar type and online, to sell their products. This is an example of A. monopsony. B. geographic diversification. C. crowdsourcing. D. taper integration.

D. taper integration.

A consumer electronics company is in the process of evaluating whether it should pursue an internal development strategy or an external growth strategy. To make this decision, the management needs to assess whether the company's internal resources are superior to those of competitors in the targeted area. Which of the following strategic management models would be most useful in this assessment? A. the core competence matrix B. the Boston Consulting Group (BCG) matrix C. the transaction-cost economics model D. the VRIO framework

D. the VRIO framework

Which of the following frameworks used to measure competitive advantage relies on both an internal and an external view of a firm? A. the economic value creation model B. the accounting profitability model C. the shareholder value creation model D. the balanced-scorecard model

D. the balanced-scorecard model

Gene Craft Inc. is the market leader in the pharmaceutical industry. Though most of its resources are common to those of its competitors, a few rare resources have helped the company gain and sustain a competitive advantage. Which of the following assets of Gene Craft Inc. is most likely to be considered a rare resource that is best contributing to its competitive advantage? A. the company's land and buildings B. the company's plant and machinery C. the company's raw material supplies D. the company's chemical patents

D. the company's chemical patents

The management of a company is assessing the value of all the tangible resources the company owns. Which of the following will be included in this assessment? A. the company's copyrights B. the company's brand equity C. the company's patents D. the company's machinery

D. the company's machinery

Which of the following is an example of an internal transaction cost? A. the cost of searching for a contract manufacturer B. the cost of signing a contract with a supplier C. the cost of buying raw materials D. the cost of maintaining a production unit

D. the cost of maintaining a production unit

Which of the following is not an accurate expression of the economic value created per unit of a product sold? A. the sum of consumer surplus and producer surplus B. the difference between consumer's reservation price and firm's cost C. the sum of consumer surplus and firm profit D. the difference between the price charged and the firm's cost

D. the difference between the price charged and the firm's cost

In public stock companies, which of the following expectations of principals is most likely to lead to principal-agent problems? A. the expectation that the agent will follow the country's laws and regulations B. the expectation that the agent will go above and beyond the call of duty C. the expectation that the agent will reconnect economic and social needs D. the expectation that the agent will act in the principal's best interest

D. the expectation that the agent will act in the principal's best interest

The conflict in a principal-agent relationship arises when A. the company has more outside directors than inside directors. B. the strategy adopted by the company's agents tries to emulate the mission statement created by the principals. C. stockholders and agents are involved in the day-to-day operations of the company. D. the goals of the principals and agents are not aligned with each other.

D. the goals of the principals and agents are not aligned with each other.

Riya has recently started a restaurant in a commercial area where there are many other established restaurants and popular fast-food chains. Riya owns the plot on which her restaurant is located and this makes her cost of operations lower than the competitors. This factor allows her to offer her products at a competitive price. Riya has also invested a huge amount on the interiors of the restaurant and in equipping the kitchen with the latest appliances used by her competitors. In this scenario, which of the following is the most valuable resource for Riya's business? A. the investments made by Riya on the restaurant's interiors B. the latest kitchen equipment that is at par with the restaurant's competitors C. the restaurant's late entry into the market D. the land owned by Riya, which reduces cost of operations

D. the land owned by Riya, which reduces cost of operations

Grameen Bank in Bangladesh was founded to provide microcredit to impoverished farmers who wanted to start their own entrepreneurial ventures that would help themselves climb out of poverty. This best exemplifies Michael Porter's suggestion that A. managers need to keep economic needs and societal needs disconnected from each other. B. a firm should expand its internal value chain to include nontraditional partners. C. businesses should focus on creating regional clusters such as Silicon Valley in the U.S. D. the largest but poorest socioeconomic group can yield significant business opportunities.

D. the largest but poorest socioeconomic group can yield significant business opportunities.

Which of the following is not a factor that makes total return to shareholders and market capitalization unreliable measures of company performance? A. the volatility of stock prices B. the effects of the unemployment rate C. variations in interest and exchange rates D. the unpredictability of return on revenue

D. the unpredictability of return on revenue

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? A. the producer surplus B. the firm's cost (C) in manufacturing the dress C. the consumer surplus D. the value (V) the consumer attaches to the dress

D. the value (V) the consumer attaches to the dress

The administrative and political distance between two trading countries reduces when A. there are FDI restrictions in the host country. B. there is no independent central bank in the host country. C. there are tariffs and trade quotas in the host country. D. there is a well-functioning capital market in the host country.

D. there is a well-functioning capital market in the host country.

Outside directors are more likely to watch out for the interests of shareholders of their firm because A. they are more likely to benefit from using inside information to trade stocks. B. they do not have the safety of serving on the boards of other firms. C. they are part-time employees of the firm. D. they have more independence than inside directors.

D. they have more independence than inside directors

Poison pills have become rare because A. leveraged buyouts can effectively skirt the measures put in place by poison pills. B. the market for corporate control is dead. C. federal laws prevent hostile takeovers. D. they retard an effective function of equity markets.

D. they retard an effective function of equity markets.

A company that is using extrinsic motivation as an output control mechanism will most likely A. organize training sessions for employees. B. cut budgets during recessions. C. implement a peer review system. D. threaten to lay off employees if they do not achieve targets.

D. threaten to lay off employees if they do not achieve targets.

Why did Pixar enter into a strategic alliance with Disney? A. to develop into a live-action feature film company B. to finance and distribute high-end graphic display systems for theaters C. to develop into a computer hardware company D. to finance and distribute its newly created computer-animated movies

D. to finance and distribute its newly created computer-animated movies

European aircraft maker Airbus is investing $600 million in Mobile, Alabama, to build jetliners. Which of the following statements best explains why it is employing this strategy? A. to take advantage of the high labor costs in the southern United States B. to take advantage of the high cost of living in the southern United States C. to take advantage of the low impact of globalization in the United States D. to take advantage of lower taxes in the southern United States

D. to take advantage of lower taxes in the southern United States

Which of the following is an external performance metric? A. return on revenue B. fixed assets turnover C. inventory turnover D. total return to shareholders

D. total return to shareholders

Warren owns shares in a company called Gerarch Communications Inc. The company's financial performance has been declining over the past few months, and the value of its stock has been decreasing. Warren wants to proactively cut his losses and therefore sells his shares. Lawrence, a trading enthusiast, buys shares in Gerarch Communications because he believes that the share prices cannot go anywhere but up. Which of the following characteristics of a public stock company does this scenario best exemplify? A. separation of legal ownership and management control B. legal personality C. limited liability for investors D. transferability of investor ownership

D. transferability of investor ownership

The German multimedia conglomerate Bertelsmann operates in more than 60 countries throughout the world and owns many regional leaders in their specific product categories, including Random House Publishing in the United States. Bertelsmann operates its more than 500 regional media divisions as more or less autonomous profit-and-loss centers. but attempts to share best practices across units; global learning and human resource strategies for executives are coordinated at the network level. Bertelsmann is an example of following a(n) A. multidomestic strategy. B. international strategy. C. global-standardization strategy. D. transnational strategy.

D. transnational strategy.

The cost of capital to create a product is a fixed cost because it is A. directly proportional to the output level. B. uniform throughout all firms and industries. C. not a part of the profit calculations. D. unaffected by consumer demand.

D. unaffected by consumer demand.

In the context of SWOT analysis, a firm can develop an offensive strategic option primarily by A. combining an internal weakness with an external threat. B. leveraging its internal strengths to minimize external threats. C. leveraging an external opportunity to overcome an internal threat. D. using its internal strengths to exploit external opportunities.

D. using its internal strengths to exploit external opportunities.

In which of the following situations is pursuing an international strategy advisable? A. when a firm manufactures products related to national and religious identity B. when a firm operates in an industry where the pressure to keep the costs low is extremely high C. when a firm wants to be perceived as a domestic company by the host-country consumers D. when a firm enjoys a large domestic market, strong reputation, and brand name

D. when a firm enjoys a large domestic market, strong reputation, and brand name

As a result of globalization, the A. economies around the world are becoming more independent. B. cultural distance between countries is increasing. C. cost of doing business around the world is increasing. D. world's market economies are becoming more integrated.

D. world's market economies are becoming more integrated.

Which of the following is primarily a cost driver?

D. economies of scale

Which of the following contributed the most to JCPenny's failed blue ocean strategy?

D. failure to combine a cost-leadership position with a differentiation position

A differentiation strategy works best when a

D. firm has intangible resources, is able to pass on increases in supplier cost to the customer, and its differentiation appeal creates customer loyalty.

Organic Eats is a restaurant that caters to the needs of a small percentage of highly health-conscious consumers. It has an all-organic, vegan menu. Since there are very few restaurants that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Organic Eats is following a

D. focused differentiation strategy.

Which of the following is a firm effect that has an impact on the competitive advantage of a firm?

D. the value and the cost position of the firm relative to its competitors

Product features, customer service, and complements are all examples of important

D. value drivers.

The pursuit of both differentiation and low cost at the same time in a way that creates a leap in value for both the firm and consumers is called

D. value innovation.

30. A company wants to determine how industry effects have affected its profitability. Which of the following elements should the company focus on? A. The barriers to entry and exit within the industry B. The pricing method opted by the managers to face competition within the industry C. The brand strategy the managers adopt to establish the firm in the industry D. The strategic position the firm pursues within the industry

a

A _____ is best described as any activity a firm pursues to explore and develop new products and processes, new markets, or new ventures. A. strategic initiative B. value chain C. supply chain D. corrective action

a

A firm that achieves superior performance relative to other firms in the same industry or the industry average has a(n) _____. A. competitive advantage B. balanced scorecard C. power position D. equity leverage

a

A firm's stakeholder strategy primarily allows the firm to: A. analyze and manage how various external and internal stakeholders interact to jointly create and trade value. B. effectively isolate its internal stakeholders (like shareholders and employees) from its external stakeholders (like customers and media). C. transfer the contributions external stakeholders make into benefits for the internal stakeholders. D. facilitate the development of a competitive relationship between its internal and external stakeholders.

a

A strategic group will typically include: A. firms within the same industry. B. customers belonging to a particular socioeconomic class. C. firms employing similar number of employees, irrespective of their industries. D. employees within a firm earning the same amount of salaries.

a

According to the Level-5 leadership pyramid, a manager at Level 3 has acquired the ability to: A. organize resources effectively to accomplish predetermined goals. B. build enduring greatness into the organizations he or she leads. C. identify the vision and the mission of the company. D. justify unethical activities as legal and ethical.

a

According to the Level-5 leadership pyramid, a manager in Level 1 typically: A. makes productive contributions through motivation, talent, knowledge, and skills. B. works effectively with others to achieve synergies and team objectives. C. presents compelling vision and mission to guide groups toward superior performance. D. builds enduring greatness into the organizations he or she leads.

a

According to the Level-5 leadership pyramid, a manager turns into an executive who is capable of building lasting greatness into the organization through a combination of will power and humility when he or she reaches _____. A. Level 5 B. Level 3 C. Level 2 D. Level 1

a

After carefully assessing the market potential for hybrid cars, it was decided at the corporate headquarters of Unidawn Autos Inc. that the company would be launching a hybrid version of all its car models within the next two years. This would mean that each strategic business unit under the company would be involving in its own research and development efforts. Which of the following strategies in the planned emergence model does this best illustrate? A. Intended strategy B. Emergent strategy C. Unrealized strategy D. Tactical strategy

a

As the CEO of a conglomerate, Juana Mark exhibited her strong commitment toward the company's core value that customer's well-being is more important than profit when she decided to liquidate the company's tobacco subsidiary. The tobacco brand sold by her company was a major revenue earner in lesser-developed nations. However, Juana believed that her company had to be responsible toward the society. In this scenario, Juana has demonstrated _____. A. strategic leadership B. intrapreneurship C. Machiavellianism D. individualism

a

Carrvour Inc. is a company that manufactures steel, cement, cars, and consumer electronics under a single brand. The top management at Carrvour has decided to enter the banking and insurance industry based on its assessment of the profit potential in that industry. Which of the following strategies does this best illustrate? A. Corporate strategy B. Business strategy C. Functional strategy D. Divisional strategy

a

Competitive rivalry based solely on _____ is destructive to firms as it transfers most of the value created in the industry to the customers. A. price-cutting B. new product releases C. promotional campaigns D. product differentiation

a

During periods of high industry growth: A. price competition among firms frequently decreases. B. rivals are focused on taking market share away from one another. C. firms indulge in intense promotional campaigns. D. new product releases with minor modifications become common.

a

During strategy implementation, managers primarily focus on deciding the: A. type of corporate governance that is most effective and ways in which it can put the formulated strategy into practice. B. industries and markets the firm should compete in to be able to gain and sustain a competitive advantage. C. relationship between competitive advantage and firm performance. D. role strategic leaders should play in gaining and sustaining a competitive advantage.

a

Earlier, 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? A. The travel industry changed from a consolidated structure to a fragmented one. B. The pricing power of the incumbent firms in the travel industry has increased. C. The bargaining power of buyers in the travel industry has decreased. D. The structure of the travel industry changed from monopolistic competition to an oligopolistic one.

a

How are cumulative learning and experience effects of a company most likely to affect Michael Porter's five forces? A. Threat of new entrants will be low B. Bargaining power of suppliers will be high C. Availability of complements will be low D. Threat of substitute products and services will be high

a

If SA Pharmaceuticals 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? A. Comparing the return to the return on invested capital obtained by other firms in the industry B. Assessing the value based on the shareholders' expectations of return on their capital C. Evaluating the liquidity ratios for other pharmaceutical companies D. Comparing the value to the history of the firm's return of investment over a number of years

a

In a large company, who is most responsible for devising the corporate strategy? A. The CEO of the company B. The lower-level employees in the company C. The head of the production department in the company D. The human resource manager in the company

a

In an industry, the threat of entry is high when: A. capital requirements are low. B. expected returns are high. C. technological know-how is industry specific. D. switching costs are high.

a

In stakeholder impact analysis, identifying the opportunities and threats presented by stakeholders is immediately followed by: A. recognizing the economic, legal, ethical, and philanthropic responsibilities of the firm to its stakeholders. B. formulating the stakeholder strategy to address and effectively balance the different needs of various stakeholders. C. identifying the interests and the claims of the stakeholders. D. isolating the external stakeholders from the internal stakeholders.

a

In the AFI strategy framework, strategy analysis primarily involves: A. evaluating the effects of internal resources and core competencies on a firm's potential to gain and sustain a competitive advantage. B. designing a business, corporate, and global strategy to gain and sustain a competitive advantage. C. organizing a firm in order to effectively put the formulated strategy into practice. D. deciding the type of corporate governance that would be most effective in the implementation of a strategy.

a

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: A. entering the aircraft manufacturing industry requires huge capital investments. B. there is expected to be a huge return on investment within this industry. C. there is no credible threat of retaliation from the incumbents. D. entering the aircraft manufacturing industry means violating government policies.

a

In the pyramid of corporate social responsibility, _____ are the foundational building block. A. economic responsibilities B. ethical responsibilities C. philanthropic responsibilities D. legal responsibilities

a

Institutional investors have more sway in public companies than individual investors because of the size of their _____. A. assets under management (AUM) B. non-performing assets (NPA) C. current liabilities D. fixed liabilities

a

Keeping in mind the five forces in the airline industry, which of the following best explains the situation in the industry? A. Substitutes are readily available in the form of trains and buses, thus reducing the profit potential in the industry. B. Suppliers have weak bargaining power because they offer products that are not differentiated. C. Entry barriers in the industry are high resulting in hardly any new airlines popping up. D. Consumers in the industry make decisions based on price, thus reducing the intensity of rivalry in the industry.

a

New Communications Inc. is a newspaper publishing company whose average return on invested capital is approximately 5 percent. Because newspaper publishing is a declining industry, the industry average has been negative (-5 percent) for the last few years. In this scenario, New Communications Inc. has a _____. A. competitive advantage B. balanced scorecard C. competitive disadvantage D. power position

a

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: A. co-opetition B. perfect competition C. monopolization D. conglomeration

a

Shield Autos Inc. has newly launched a luxury car into the European market. Which of the following would most likely NOT be a complement to the car? A. A premium car manufactured and sold by Mova Autos Inc., a rival company B. A bank that insures cars against theft and accidents C. A car service station managed and run by Shield Autos Inc. D. A stereo system that can be used as a GPS system in cars

a

Shortly after the small island of Balamia experienced multiple unexpected high-intensity earthquakes that caused massive destruction, many banks and insurance companies filed for bankruptcy. This left the economy of the country in a poor state. The natural calamity in Balamia best exemplifies _____. A. a black swan event B. a wild card event C. skewness risk D. kurtosis risk

a

Stakeholder impact analysis primarily helps a firm: A. gain a competitive advantage while acting as a good corporate citizen. B. lower the difference between its value creation and costs. C. single-mindedly focus on shareholders alone. D. exploit external stakeholders to benefit internal stakeholders.

a

Strategic thinking is different from strategic planning in that: A. strategic thinking includes all types of information sources while strategic planning does not. B. strategic thinking relies more on hard data than strategic planning. C. strategic thinking is regimented and confining, whereas strategic planning is more flexible. D. strategic thinking can create an illusion of control, whereas strategic planning avoids this.

a

The CEO of True West Products Inc. (TWC) is a company that sells a wide range of products. It has decided to enter the markets of emerging nations like China and Brazil. This means that the cars, consumer electronics, and services such as hotels included under the TWC banner would be made available in these nations. Which of the following strategies does this scenario best illustrate? A. Corporate strategy-where to compete -W-W B. Functional strategy C. Business strategy D. Divisional strategy

a

The Chief Executive Officer (CEO) of PepsiCo, Indra Nooyi, subscribes to a triple-bottom-line approach to competitive advantage—considering not only economic, but also social and environmental performance. Based on this, which of the following is a mission of PepsiCo? A. Including healthy choices in its lineup B. Performing with a purpose C. Focusing on only the nonalcoholic beverages line of business D. Splitting PepsiCo into two standalone companies each focusing on beverages and snack foods respectively

a

The U.S. government legitimized claims by thousands of businesses and individuals in the aftermath of the BP oil spill in the Gulf of Mexico, causing the claims to become of great urgency to BP. This best represents the process of _____. A. addressing stakeholder concerns B. identifying stakeholders C. establishing competitive parity D. implementing a cost-leadership strategy

a

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? A. It has a competitive advantage in the industry. B. It has a competitive disadvantage in the industry. C. It has competitive parity with other firms in the industry. D. It has formed a strategic alliance with other firms in the industry.

a

The executives at Red Couture Inc. 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 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, Red Couture is employing _____ as the approach to the development of strategy. A. scenario planning B. top-down strategic planning C. reverse engineering D. pattern recognition

a

The final step in industry analysis is to: A. draw a strategic group map. B. identify the underlying drivers of the five forces. C. identify the key players in each of the five forces. D. define the relevant industry.

a

The first step in the strategic management process is to: A. define a firm's vision, mission, and values. B. understand the strategies of the competitors. C. put the guiding policies of a firm into practice. D. develop functional and business level strategies.

a

The management of Five Square Corp. wants to reduce the separation between ownership (by shareholders) and control of the firm (by professional managers). Which of the following practices would best help the company do this? A. Allowing employees to purchase the stock of the company at a discounted rate B. Reinvesting the annual profits of the company into research and development C. Issuing new additional shares to the existing stockholders in proportion to their current holdings D. Declaring the annual profits as bonus dividends to the existing stockholders

a

The minimum wage in the country of New Morland is $8 an hour. Odion, a restaurant in the New Morland's 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 New Morland, which of the following responsibilities is Odion satisfying? A. Legal responsibilities B. Philanthropic responsibilities C. Ethical responsibilities D. Demographic responsibilities

a

The past black swan events in the United States demonstrate that: A. managerial actions can affect the economic well-being of large numbers of people around the globe. B. decisions and strategies implemented within a firm will only affect the firm and not the entire industry. C. corporate governance is unnecessary as firms are becoming socially responsible. D. industry effects are more important than firm effects in determining firm performance.

a

The production department at Coral Cements that is a subsidiary of the large conglomerate Five East Corp. has decided to adopt the FIFO (first in, first out) method of inventory to dispatch its cement bags. Which of the following strategies does this scenario best illustrate? A. Functional strategy B. Corporate strategy C. Master strategy D. Business strategy

a

The relative bargaining power of suppliers is high when: A. suppliers provide products that are differentiated. B. incumbent firms face low supplier switching costs. C. incumbent firms can credibly threaten to backward integrate into the industry. D. suppliers depend heavily on the industry for a large portion of their revenues.

a

To be effective, firms need to: A. back up their visions with strategic commitments that are costly and difficult to reverse. B. increase their strategic flexibility by developing product-oriented vision statements. C. isolate top managers from the organizational values. D. pursue visions that are exclusively financial and not aspirational.

a

Unrealized strategy is when parts of a firm's intended strategy is: A. nonfunctional due to unexpected events. B. not revealed to the lower-level employees. C. implemented and controlled by front-line employees. D. planned to tackle some unforeseen events.

a

Vibgyor TV Inc. is a large production company that controls a major portion of the movie industry's market share along with two other firms. Despite its competitiveness with the two other firms, it is influenced by their actions and often has to consider their strategic actions before acting on its own. In this scenario, Vibgyor TV Inc. is most likely functioning in a(n) _____ industry. A. oligopolistic B. monopolistic C. perfectly competitive D. monopolistically competitive

a

When a firm adopts a differentiation strategy to attain competitive advantage, it focuses on: A. delivering unique features to its customers. B. providing the lowest prices to its customers. C. maximizing its profits by providing minimal customer service. D. lowering costs by employing low-skill employees.

a

Which of the following external forces is a part of a firm's task environment? A. The composition of the strategic group to which the firm belongs B. The interest rates prevalent in the economy in which the firm operates C. The inflation level in the economy in which the firm operates D. The recent innovations in process technology, including lean manufacturing

a

Which of the following factors most effectively contributed to the success of JetBlue airlines in comparison to other airlines like Delta, United, or American? A. Its point-to-point business model B. Its reliance on outsourcing C. Its hub-and-spoke system D. Its shorter distances

a

Which of the following functions do the general managers in strategic business units primarily perform? A. Design generic business strategies based on guidelines received from corporate headquarters B. Set overarching strategic objectives to unify the entire conglomerate under one mission C. Take responsibility for decisions and actions within a single functional area D. Allocate scarce resources among different business divisions

a

Which of the following groups is considered to be the primary stakeholder for public-stock companies? A. Suppliers of capital B. Employees C. Suppliers D. Potential customers

a

Which of the following is NOT a stakeholder attribute that managers consider during stakeholder impact analysis? A. A stakeholder's power B. A stakeholder's legitimate claim C. A stakeholder's urgent claim D. A stakeholder's liquidity

a

Which of the following is a feature of a monopolistically competitive industry? A. Differentiated products B. High entry barriers C. No pricing power D. A single firm

a

Which of the following is an assumption that top-down strategic planning rests on? A. We can predict the future from the past. B. Time cannot be compressed at will. C. Decisions made in the past do not affect our future. D. Change is constant.

a

Which of the following is likely to happen due to horizontal mergers between competitors such as Delta and Northwest airlines? A. The overall industry profitability will increase. B. The threat of strong competitive forces such as supplier power will increase. C. The industry will face excess capacity in the future. D. The structure of the industry will change from consolidated to one that is fragmented.

a

Which of the following statements about product-oriented visions is true? A. They tend to force managers to take a myopic view of the landscape. B. They allow companies to effectively adapt to changing environments. C. They define a business in terms of providing solutions to customers. D. They allow firms to take a need-based approach to their goals.

a

Which of the following statements is true of strategic initiatives? A. Strategic initiatives can be the result of a response to external trends or come from internal sources. B. When lower-level employees are less empowered, the possibility of strategic initiatives is higher. C. Strategic initiatives result from top-down planning by executives and not through a bottom-up process. D. Random events and accidental happenstances reduce the possibility of strategic initiatives in organizations.

a

Which of the following statements is true of the social responsibilities of a business? A. A firm's ethical responsibilities go beyond its legal responsibilities. B. Shareholders mandatorily require a firm to perform its ethical and philanthropic responsibilities. C. Ethical responsibilities are the foundational building block of a firm's social responsibility. D. Legal responsibilities are often subsumed under the idea of corporate citizenship, reflecting the notion of voluntarily giving back to society.

a

Which of the following would most likely NOT indicate that sellers are a strong competitive force in an industry? A. When the buyers' cost of switching to substitutes is low B. When the products and services they provide can be differentiated C. When the buyers of their products are customers who buy in small quantities D. When the components they supply affect buyers' product quality

a

Which type of industry structure is often analyzed using game theory? A. Oligopolistic B. Monopolistic C. Perfectly competitive D. Monopolistically competitive

a

While Burger Cult Inc. operates in a monopolistically competitive industry, Citizen Telecom Inc. operates in a monopoly. Keeping this information in mind, which of the following statements is most likely true? A. The threat of new entrants will be higher for Burger Cult Inc. than Citizen Telecom Inc. B. Burger Cult Inc. will have more pricing power than Citizen Telecom Inc. C. Burger Cult Inc. will have more profit potential than Citizen Telecom Inc. D. The number of buyers will be limited for both Burger Cult Inc. and Citizen Telecom Inc.

a

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? A. Competitive rivalry between Virgin Atlantic and JetBlue is likely to be higher than that between American and Southwest airlines. B. American, United, and Delta airlines will be affected differently by Porter's five competitive forces. C. Alaska Airlines and Delta airlines will be affected by the external environment in very similar ways. D. Competitive rivalry between Virgin Atlantic and Delta airlines is likely to be higher than that between American, Delta, and United.

a

While industry forces have been favorable for a long time in the U.S. automotive industry, recent dynamics have lowered the profit potential of competing in this industry and thus reduced its attractiveness. The continued success of Tesla Motors in the industry will depend on other firm and industry factors. Which of the following represents one such factor that directly affects Tesla Motors? A. Since suppliers of its key sources are few, the bargaining power of suppliers is high. B. Since individual buyers do not have many choices, their bargaining power is low. C. There is a lack of balance in demand and supply: demand far exceeds capacity within the industry. D. There is a noticeable absence of complementary products and services for the industry.

a

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? A. Industry convergence B. Backward integration C. Product differentiation D. Customer myopia

a

_____ are best described as industry-specific factors that separate one strategic group from another. A. Mobility barriers B. Excise duties C. Embargoes D. Learning effects

a

_____ are primarily responsible for decisions and actions within their respective departments like finance, human resources, marketing, and production in a strategic business unit. A. Functional managers B. Corporate executives C. Strategic leaders D. General managers

a

_____ is best described as a framework that helps firms recognize and address the economic, legal, social, and philanthropic expectations that society has of the business enterprise at a given point in time. A. Corporate social responsibility B. Integrated social network C. Strategic positioning D. Strategy formulation

a

_____ is best described as a strategy process in which organizational structure and systems allow bottom-up strategic initiatives to emerge and be evaluated and coordinated by top management. A. Planned emergence B. Scenario planning C. Top-down strategic planning D. Reverse engineering

a

A core tenet of stakeholder strategy is that a: A. firm should isolate its internal stakeholders from its external stakeholders. B. single-minded focus on shareholders alone exposes a firm to undue risks that can threaten the very survival of the enterprise. C. multifaceted exchange relationship with internal and external stakeholders can lead to a firm's competitive disadvantage. D. firm should work toward competitive parity rather than gaining and sustaining a competitive advantage.

b

A firm is said to gain a competitive advantage when it can: A. exceed its own previous performances. B. provide products similar to its competitors, but at lower prices. C. perform at the same level as that of its competitors. D. minimize the difference between value creation and cost.

b

A(n) _____ is best described as a standalone division of a larger conglomerate, with its own profit-and-loss responsibility. A. corporation B. strategic business unit C. affiliate company D. functional department

b

A(n) _____ is best described as the strategic option that top managers decide most closely matches the current reality and which is then executed. A. bottom-up emergent strategy B. executive summary C. realized strategy D. dominant strategic plan

b

According to AFI strategy framework, in which of the following tasks of strategic management is a firm's vision, mission, and values identified? A. Strategy control B. Strategy analysis C. Strategy formulation D. Strategy implementation

b

According to the upper-echelons theory, the organizational outcomes of a company primarily reflect the values of the _____. A. production workers in the company B. CEO of the company C. housekeeping staff in the company D. external stakeholders of the company

b

After a firm has identified its key stakeholders in stakeholder impact analysis, the immediate next step is to: A. recognize the opportunities and threats the stakeholders present. B. identify stakeholders' interests and claims. C. formulate a stakeholder strategy. D. address the stakeholders' concerns.

b

Balmia Ammunition Inc., a firm controlled and managed by the government of Balmia, 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? A. Monopolistic competition B. Monopoly C. Oligopoly D. Perfect competition

b

Beans Inc. operates in a perfectly competitive agricultural industry. Classica Apparel Inc., in contrast, operates in a monopolistically competitive industry. Keeping this information in mind, which of the following statements is true? A. Beans Inc. will face competition from many sellers, whereas Classica Apparel Inc. will be the only seller in the market. B. While Classica Apparel Inc. will have the power to set the prices for its products, Beans Inc. will have little or no ability to do so. C. Beans Inc. will have many buyers for its products, whereas Classica Apparel Inc. will have very few buyers for its products. D. While Beans Inc. will communicate the degree of product differentiation through advertising, Classica Apparel Inc. will need no advertising.

b

Bright Billion Inc., a large conglomerate, wants to liquidate its business in certain industries to improve its overall profitability. Which of the following industries would Bright Billion Inc. find it most difficult to exit? A. The management consultancy industry in which the company's fixed costs are low B. The steel industry in which the company has obligations like severance pay toward employees C. The corporate training industry in which the company's commitments are mostly short-term D. The e-commerce industry where the company has no long-term contractual agreements with suppliers

b

Buyers are highly price sensitive when: A. their purchase represents a small fraction of their procurement budget. B. they earn low profits or are strapped for cash. C. the quality of their products and services are highly affected by the quality of the inputs. D. the industry's products are highly characterized with non-price competition.

b

Companies in the same strategic group are _____ to each other. A. complementors B. direct competitors C. strategic partners D. shareholders

b

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? A. Monopolistic competition B. Oligopoly C. Monopoly D. Perfect competition

b

Exis Inc. and Stelma 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, Exis Inc. and Stelma Inc. most likely have: A. competitive advantage over other firms in their industry. B. competitive parity with each other. C. strategic alliance with each other. D. economies of scope instead of economies of scale.

b

Family Needs Inc. is a supermarket chain. Due to strong competition from other stores in the industry, Family Needs 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? A. Perfect competition B. Monopolistic competition C. Monopoly D. Oligopoly

b

First Ledger Inc., an auditing company, replaced its existing accounting software with new accounting software from another supplier. Since the new software has different features and abilities, First Ledger Inc. has had to spend $10,000 on training its employees to use it. In this scenario, $10,000 represents First Ledger Inc.'s _____. A. opportunity cost B. switching cost C. octroi charge D. excise duty

b

Gerald has been an employee with GeoFuture Inc. for 15 years. He started with an entry-level job, and today he is a manager of an entire division. Over the years, Gerald 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 Gerald has reached so far? A. Level 5 B. Level 4 C. Level 3 D. Level 2

b

Given the industry structure in the automobile business, entering the auto manufacturing industry doesn't seem advisable. Yet Tesla Motors is joining the fray. Rather than attempting to compete head-on in internal combustion engines, Tesla Motors is entering 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? A. Network effects B. Economies of scale C. Customer switching costs D. Capital requirements

b

How can a firm change its industry structure from monopolistically competitive or oligopolistic to a near monopoly? A. By reducing the entry barriers in its industry B. By developing proprietary technology C. By implementing frequent price-cuts D. By decreasing its pricing power

b

In a firm's external environment, _____ primarily capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class. A. political trends B. demographic trends C. ecological trends D. economic trends

b

In the 1950s, in response to extreme forms of nationalism and the resulting world wars that had devastated Europe, the first steps were taken to create a supra-national EU. In 1992, after almost 40 years of continued economic integration, peace, and prosperity, the European leaders initiated further steps toward political economic integration. Which of the following represents one of the steps the European leaders initiated? A. Creating a country called the United States of Europe B. Introducing a common currency C. Providing budgetary authority to all states of the EU D. Separating heavy industries such as coal and steel

b

In the United States, which of the following was born out of dissatisfaction with the capitalist system in 2011? A. The Sarbanes-Oxley Act B. The Occupy movement C. The Tea Party movement D. The Taft-Hartley Act

b

In the top-down strategic planning approach, all strategic intelligence and decision-making responsibilities rest primarily on the _____. A. functional managers B. chief executive officer C. external stakeholders D. general manager

b

Industry convergence is a process whereby: A. firms within the same industry start to satisfy different customer needs. B. formerly unrelated industries begin to satisfy the same customer need. C. excess capacity within an industry is reduced through horizontal mergers. D. firms within an industry start to target a narrow market segment.

b

Industry effects describe the underlying _____ structure of the industry. A. demographic B. economic C. psychographic D. ethnographic

b

Keeping in mind Apple's competitive advantage, which of the following products was introduced by Apple in 2007? A. iPad B. iPhone C. iPod D. iTunes

b

Orange Synergy Inc. is a company that manufactures a variety of products that run on solar power. The company wants to ensure that solar technology replaces all forms of exhaustible energy sources in the near future. Which of the following statements will make an accurate vision for Orange Synergy? A. We make products that run on solar energy. B. All nations around the globe should have access to a sustainable energy source. C. The company aims to make working fun and pleasurable for its employees. D. We provide energy-efficient sources and services by investing in research and innovation.

b

Organizational values are the _____ that govern the behavior of individuals within a firm or organization. A. economic measures B. ethical standards and norms C. political principles and policies D. social beliefs and actions

b

Paying taxes to local government authorities from the annual revenues generated by a firm represents the firm's _____. A. philanthropic responsibilities B. economic responsibilities C. psychographic responsibilities D. political responsibilities

b

Rachel owns a large portion of GM Cube Inc.'s stocks. However, she is not employed by the company. In this scenario, Rachel is the company's _____. A. external stakeholder B. internal stakeholder C. creditor D. customer

b

RedSteel 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 RedSteel products. This scenario best illustrates the implementation of a _____. A. strategic analysis B. stakeholder strategy C. wild card event D. black swan event

b

Stakeholder strategy is an integrative approach to managing a diverse set of stakeholders effectively in order to _____. A. single-mindedly focus on the stockholders alone B. gain and sustain competitive advantage C. minimize the joint value created D. minimize the difference between value creation and cost

b

Strategic commitments are actions that are: A. inexpensive. B. long-term oriented. C. easy to reverse. D. easy to imitate.

b

Teddiez Inc. is a company that manufactures and sells stuffed toys. It sources its materials from another country to keep costs low. A sales personnel in one of its retail stores noticed that there was increasing concern regarding the potential toxicity of the materials in the dolls. In response, she found an economical, organic, and non-toxic cloth filling 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: A. top-down strategic planning approach. B. planned emergence approach. C. scenario planning process. D. reverse engineering process.

b

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, DM 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 DM Paints Corp. primarily compromising in this scenario? A. Legal responsibilities toward the government B. Economic responsibilities toward its shareholders C. Philanthropic responsibilities toward the local community D. Ethical responsibilities toward the society

b

The primary objective of Porter's five forces model is to: A. replace a firm's competitive advantage with competitive parity. B. understand the profit potential of different industries. C. reduce the gap between the value of a firm's product and its cost of production. D. break down a firm's value chain activities into primary and support.

b

The production head at the canned juice unit of True Foods Inc. would frequently stay back after office hours and experiment with new fruit juice flavors though this was part of the new product development team's job. As a result of these experiments, he came up with two new flavors of fruit juices, cherry-melon and melon-mint. After rigorous test marketing, which proved that the market would accept the new drinks, the product variants were successfully launched. Which of the following strategies does this scenario best illustrate? A. Intended strategy B. Emergent strategy C. Unrealized strategy D. Tactical strategy

b

The telecom industry in the country of Andalus is an industry characterized by the presence of strong network effects, high brand loyalty, high economies of scale, and proprietary technology among incumbent firms. Thus, in the telecom industry, the: A. threat of substitutes is most likely high. B. threat of new entrants is most likely low. C. bargaining power of buyers is most likely low. D. entry barriers are most likely non-existent.

b

To support the rise of emergent strategies, an organization should: A. centralize decision-making and all other activities. B. empower lower-level employees to take up autonomous actions. C. limit serendipity that is in the form of random events and accidental happenstances. D. rely solely on hard data to formulate strategies.

b

Top-down strategic planning as an approach to the strategic management process will be most effective when the: A. environment is constantly changing. B. size of the firm is large. C. probability of black swan events is high. D. top management wants to decentralize decision making.

b

True Cinemas Inc. and Digi Future Inc. are two companies that own and run movie theaters in malls and other commercial areas. While True Cinemas Inc. pursues a cost-leadership strategy, Digi Future Inc. adopts a differentiation strategy. Which of the following statements is most likely true of this scenario? A. True Cinemas will charge a premium price for its customers while Digi Future will implement everyday low pricing. B. Digi Future and True Cinemas will not be direct competitors to each other and their customer segments will overlap very little. C. Digi Future will keep its customer service at an acceptable level while True Cinemas will provide superior customer service. D. True Cinemas and Digi Future will use a similar approach to create value for customers by attempting to offer everything to everybody.

b

Visionary companies are able to outperform their competitors because: A. their vision statements are more product-oriented. B. they provide more aspirational visions. C. their visions are exclusively financial. D. they isolate internal stakeholders in defining their visions.

b

When do employees fail to adopt the organizational values of a firm? A. When the internal stakeholders of the firm are involved in designing the values B. When the top managers in the firm are merely paying lip service to the firm's stated values C. When the strategic leaders in the firm propagate and exhibit the same values D. When the organizational structure, such as its strategic decision making, is aligned with its values

b

When is the rivalry among existing competitors in an industry likely to be more intense? A. When the industry growth rate is high B. When firms make strategic commitments to compete in an industry C. When firms engage in non-price competition as opposed to price-cutting D. When the industry has low exit barriers

b

Which of the following best illustrates a strategic business unit (SBU)? A. The human resource department of a large company that is responsible for hiring employees for all its divisional branches B. The consumer electronics division of a large company that also manufactures automobiles, apparel, and processed food C. The product development team at the headquarters of a fast-food chain D. The market segment which can be categorized between the income levels $10,000 and $25,000

b

Which of the following is a drawback of Porter's five forces model? A. The model describes competition narrowly as a firm's closest competitors. B. Managers cannot determine the changing speed of an industry or the rate of innovation. C. It fails to provide a basis for deriving implications for a firm's strategic position within an industry. D. The model fails to consider that threat of substitutes can come from outside a given industry.

b

Which of the following is an example of a firm's external stakeholder? A. Employees B. Customers C. Shareholders D. Board members

b

Which of the following is an example of monopolistic competition? A. Iron ore industry B. Computer hardware industry C. Express delivery industry D. Beverages industry

b

Which of the following is an implication of high exit barriers in an industry? A. The number of underperforming firms in the industry will be low. B. The industry will face excess capacity. C. The competitive pressure among existing firms will be low. D. The industry will be more attractive for new entrants.

b

Which of the following is typically an economic responsibility of a firm? A. Sourcing raw materials from highly developed countries B. Paying adequate returns to the firm's stockholders on the capital invested by them C. Donating resources, in terms of money and time, toward community development D. Helping a nation increase its import of goods and services

b

Which of the following reasons justifies the view that functional managers should be allowed to initiate strategic initiatives based on autonomous actions? A. Functional managers have more control and power in the organization than corporate executives. B. Functional managers are much closer to the final products, services, and customers than corporate-or business-level managers. C. Functional managers have a bigger role in identifying a company's vision and mission than the strategic leaders. D. Functional managers are Level-5 managers in the Level-5 leadership pyramid when compared to the executives who are at Level-4.

b

Which of the following represents an economic factor in a firm's external general environment? A. The government regulations and laws in the country in which the firm exists B. The stage of the business cycle that the country is in C. The values and norms prevalent in the society in which the firm operates D. The bargaining power of the firm's suppliers and buyers

b

Which of the following statements accurately brings out the difference between top-down strategic planning and scenario planning? A. While in top-down strategic planning a top-down approach is used to develop strategies, in scenario planning a bottom-up approach is used. B. Scenario planning helps create strategic plans that are more flexible, and thus more effective, than those created through the more static strategic planning approach. C. While top-down strategic planning takes place at both the corporate and business levels of strategy, scenario planning takes place only at the corporate level. D. Top-down strategic planning addresses only pessimistic futures, whereas scenario planning addresses only optimistic futures.

b

Which of the following statements accurately describes firm effects? A. They attribute firm performance to the industry in which the firm competes. B. They attribute firm performance to the actions managers take within a chosen industry. C. They refer to the value-creation potential of a large, diversified enterprise. D. They refer to the external circumstances surrounding all the firms in an industry.

b

Which of the following statements is NOT true about the five forces in Porter's competitive analysis model? A. The relative strengths of the five forces that shape competition are context-dependent. B. The stronger the five forces in an industry, the greater the industry's profit potential. C. Competition in the model is described as the tug-of-war between the five forces to capture as much as possible of the economic value created in an industry. D. An analysis of the five forces provides the basis for how a firm should position itself to gain and sustain a competitive advantage.

b

Which of the following statements is true of corporate strategy? A. The objective of corporate-level strategy is to ensure that the sum of the values of individual business units is greater than the overall corporate value. B. A corporate strategy must be able to create synergies across business units that are quite different. C. Formulating a corporate strategy involves general managers answering questions relating to how to compete in order to achieve superior performance. D. Deciding whether to adopt a differentiation or a cost-leadership strategy is part of formulating the corporate strategy.

b

Which of the following statements is true of customer-oriented visions? A. Customer-oriented visions identify how a customer need will be met. B. Customer-oriented vision statements are not the same as listening to your customer. C. Customer-oriented visions reduce a company's ability to adapt to a changing environment. D. Customer-oriented visions define a business in terms of goods or services provided.

b

Which of the following statements is true of top-down strategic planning? A. Information flows both ways in the process, from the upper management to the lower management and also the other way around. B. In this process, the formulation of strategy is separate from implementation. C. Employees at the operation level have major responsibility in strategizing for competitive advantage. D. The process is based on the assumption that the past cannot be used to predict the future.

b

Which of the following strategies will be most detrimental to firms that are close rivals operating in an oligopolistic industry structure? A. Competing against each other through product differentiation B. Competing against each other through price-cutting C. Competing against each other through new-product introductions D. Competing against each other through lifestyle advertisements

b

Which of the following tasks in the AFI strategy framework involves putting the formulated strategy into practice through organizational structure, culture, and controls? A. Strategy formulation B. Strategy implementation C. Strategy analysis D. Strategy evaluation

b

Which of the following was a key driver in the Occupy movement of 2011? A. The need for a capitalist economic system B. The issue of income disparity C. The need to reduce government intervention in businesses D. The issue related to dumping of cheap foreign products

b

Within corporate social responsibility, _____ essentially reflects the notion of a business voluntarily giving back to society. A. social networking B. corporate citizenship C. corporate governance D. social bookmarking

b

_____ is best described as a rational process in which executives at a company's headquarters take primary responsibility to program future success of the company they lead. A. Bottom-up strategic approach B. Top-down strategic planning C. Reverse mentoring D. Emergent strategic plan

b

_____ is best described as a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors. A. Behavior modification B. Strategy C. Credo D. Competency management

b

_____ provides a decision tool that enables a firm to act as a good corporate citizen by allowing its managers to recognize, prioritize, and address the needs of different groups of individuals who take personal interest in the firm's performance and survival. A. Strategy analysis B. Stakeholder impact analysis C. The SWOT analysis D. Strategic positioning

b

2. _____ is best described as an integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage. A. Supply chain management B. Integrated technology management C. Strategic management D. Inventory management

c

3T Inc., a telephone service provider, has a large user base mainly because phone calls and messages between all 3T users are free. When a person switches to a 3T network, his or her entire network of family and friends is likely to switch to the same network to avail the benefit of free calls and messages. In addition, an existing user who gets a new user to register with 3T Inc. is given a free wireless connection. This has helped to keep competition away from 3T. In this scenario, which of the following factors is acting as an entry barrier for 3T Inc.? A. Economies of scale B. High capital requirement C. Network effects D. High fixed costs

c

48. The interaction between a firm and its diverse internal and external stakeholders is best described as a(n): A. ergonomic relationship. B. cartel arrangement. C. exchange relationship. D. fiduciary responsibility.

c

A company is best described as a _____ to an existing company if customers value the existing company's product or service offering more when they are able to combine it with the other company's product or service. A. competitor B. shareholder C. complementor D. strategic equivalent

c

A company uses the planned emergence approach in the development of its strategies. Which of the following is an implication of this? A. The employees will be isolated from the process of setting the company's vision and mission. B. The lower-level employees will be restricted to the tasks involved in strategic implementation. C. The company's organizational structure and systems will be designed to support bottom-up strategic initiatives. D. The top management will create a strategy that is based on hard data alone, rather than an inspiring vision.

c

A key feature of an oligopoly is that the competing firms _____. A. are independent B. have no pricing power C. are interdependent D. have no barriers to entry

c

A positive relationship between vision statements and firm performance is more likely to exist when: A. visions are product-oriented. B. internal stakeholders are isolated from defining and revising the visions. C. organizational structures are aligned with the firm's vision statement. D. vision statements are equivalent to listening to the customers.

c

A traditional top-down strategic planning process typically begins with: A. employees at the operational level identifying problems within an organization. B. functional managers formulating functional strategies for their respective departments. C. strategic leaders adjusting a company's vision and mission based on environmental analysis. D. employees who have close contact with customers taking autonomous actions.

c

An intended strategy is best described as: A. a combination of its top-down strategic intentions and bottom-up emergent strategy. B. any unplanned strategic initiative undertaken by mid-level employees of their own volition. C. the outcome of a rational and structured, top-down strategic plan. D. a strategy developed at the lower levels of management to tackle unpredictable events.

c

Any unplanned strategic initiative undertaken by mid-level employees of their own volition is a(n) _____. A. dominant strategic plan B. unrealized strategy C. emergent strategy D. intended strategy

c

As a part of strategy formulation, a firm's functional strategy primarily concerns questions relating to: A. where to compete. B. when to compete. C. how to implement business strategy. D. how to enter target markets.

c

As a part of strategy formulation, corporate strategy concerns questions relating to: A. why we should compete. B. how to compete. C. where to compete. D. how to implement the business strategy.

c

As the legal owners, _____ have the most legitimate claim on a company's profits. A. creditors B. employees C. shareholders D. board members

c

Blue Bird Products Inc. (BBP) is a large conglomerate. The human resources department of its telecom division has decided to reduce its employee turnover by encouraging internal promotions. Which of the following strategies does this scenario best illustrate? A. Corporate strategy B. Business strategy C. Functional strategy D. Grand strategy

c

Due to economic regression in United Filipia, the profitability of the large conglomerate Blue Wing Products Inc. (BWP) 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 BWP find it most easy to exit? A. The automobile business where the company has contractual obligations with suppliers B. The airline business where the company's strategic commitments are long-term C. The e-commerce retail business where investments on assets are low D. The pharmaceutical business where the company has a large number of fixed costs

c

During an assessment of employees and leaders in a company, Ethan Browne was categorized as a Level-5 manager in the Level-5 leadership pyramid. Which of the following can be inferred from this information? A. Ethan is currently a team lead in the company. B. Ethan shows no signs of being a good leader. C. Ethan is a top management executive in the company. D. Ethan has just started his career as a member of a team in the company.

c

How are the two approaches namely strategic planning and scenario planning different from strategy-as-planned-emergence approach? A. Strategy as a planned emergence model was introduced before strategic planning and scenario planning. B. Unlike strategic planning and scenario planning, strategy as a planned emergence model does not begin with a strategic plan. C. Relative to strategic planning and scenario planning, strategy as a planned emergence model is a less formal and less stylized approach to the development of strategy. D. Unlike strategic planning and scenario planning, strategy as a planned emergence model is a rational top-down planning approach.

c

In Galvania Republic, the federal government owns and manages all the nuclear power plants. This is because the business would not be profitable if there was more than one supplier in the nuclear power industry. Which of the following industry competitive structures does the scenario best illustrate? A. Monopolistic competition B. Oligopoly C. Natural monopoly D. Perfect competition

c

In _____, a firm frames a guiding policy to address the competitive challenge. A. strategy control B. strategy implementation C. strategy formulation D. strategy analysis

c

In an industry, the rivalry among existing competitors is high when: A. fixed costs are low and marginal costs are high. B. exit barriers are low. C. incumbent firms are highly committed to the business. D. industry growth is high.

c

In the _____ developed by Michael Porter, competition 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. A. PESTEL framework B. VRIO framework C. five forces model D. value chain analysis

c

In the smartphone industry, Google is a complementor to Samsung. Which of the following statements best explains why this is true? A. Samsung apps are tailored exclusively for Google smartphones and tablets. B. Google's smartphones increase in value because they face strong buying power from Samsung. C. Samsung's smartphones increase in value when they are pre-installed with Google's Android system. D. Google accounts for a large quantity of Samsung's overall sales.

c

Lower-level employees focus mainly on _____ when a firm is using top-down or scenario planning as an approach to the strategic management process. A. strategy formulation B. strategy analysis C. strategy implementation D. strategy initiation

c

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? A. Intended strategy B. Emergent strategy C. Unrealized strategy D. Tactical strategy

c

Organizational values help individuals make choices that are: A. legal but unethical. B. both illegal. C. both ethical and effective in advancing a company's goals. D. ethical but ineffective in achieving long-term success.

c

Pink Couture Inc. and Pink Blush Inc. are two companies in the apparel industry. While Pink Couture Inc. focuses on providing unique product features and superior customer service, Pink Blush Inc. focuses on low prices and minimal customer service. Both companies have been able to gain a competitive advantage. This is most likely because: A. the companies have executed integrated strategies. B. the companies have entered into a cartel arrangement. C. the companies have pursued distinct strategic positions. D. the companies have engaged in direct imitation and substitution.

c

Red Million Inc. is a large company that sells a variety of products such as apparel, jewelry, canned foods, consumer electronics, and automobiles. Apart from this, the company also has a strong presence in the service industry through its chain of hotels, fast food restaurants, and amusement parks. Each of its product divisions operates as an individual business and is responsible for its own profits and losses. Thus, these product divisions under Red Million can be referred to as _____. A. limited liability companies B. functional departments C. strategic business units D. corporations

c

Richard is a manager. His colleagues and subordinates look up to him as a man who always does the right things. Along with other skills, his ability to effectively organize and deploy resources like manpower, material, and money has been appreciated by his seniors. According to the Level-5 leadership pyramid, which of the following levels would be the immediate next step for Richard? A. Level 2 B. Level 3 C. Level 4 D. Level 5

c

The _____ is a conceptual framework that views organizational outcomes—strategic choices and performance levels—as reflections of the values of the members of the top management team, who interpret situations through the lens of their unique perspectives. A. two-factor theory B. expectancy theory C. upper-echelons theory D. value orientation theory

c

The best example of a firm's external stakeholder is a(n): A. government agency that regulates the prices of products manufactured by the firm. B. board member from a wholly owned foreign subsidiary of the firm. C. shareholder who has invested money in the firm but is not employed by the firm. D. employee of the firm who is responsible for a contract project.

c

The board at Unicore Systems Corp. has decided to allocate 20 percent of the company's shares to its workforce, at a discounted price. Apart from being a valued investment, the plan will allow the employees to take personal responsibility for the firm's performance. Which of the following employee incentive schemes does this best illustrate? A. Employee provident fund B. Employee gratuity fund C. Employee stock ownership plan D. Employee emergency loan program

c

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 began to appear in the medical community, 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 _____. A. voluntary responsibilities B. realized strategy C. core values D. strategic decisions

c

The society and shareholders mandatorily require a firm to perform its _____. A. ethical responsibilities B. philanthropic responsibilities C. legal responsibilities D. political responsibilities

c

True Help is a non-profit organization that works toward rehabilitating the homeless. The credo of the organization is "help us help you." For an organization like True Help, which of the following statements would make an appropriate mission? A. Help us help you find a home. B. One day, everyone in this nation will have a home to protect themselves. C. We help the homeless gain and sustain financial independence by providing employment opportunities. D. Our mission is to turn this not-for-profit organization into a for-profit organization so that the stakeholders are benefited.

c

True West Airlines Inc. follows a cost-leadership strategy. Which of the following firms will most likely be its direct competitor? A. Pioneer Airlines Inc., which follows a cost-increase strategy B. West Railways, which follows a differentiation strategy C. Jet King Airlines Inc., which follows a low-cost strategy D. Blue Cabs Inc., which follows a cost-leadership strategy

c

Unplanned strategic initiatives taken by the _____ within an organization will be referred to as an emergent strategy. A. suppliers and vendors of the organization B. shareholders of the organization C. team leads of project teams in the organization D. corporate executives in the organization's headquarters

c

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? A. Monopoly B. Oligopoly C. Perfect competition D. Monopolistic competition

c

When the strong dictatorial rule in Canria unexpectedly collapsed due to the shocking mass murder of the royal family, 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. A. extinction B. wild card C. black swan D. miracle

c

Which of the following best illustrates a firm operating in a monopolistically competitive industry? A. A foreign exchange company sells currencies of different countries at market prices as it cannot differentiate its products from its competitors'. B. A chain of multiplex theaters, along with its competitor, owns 80 percent of the multiplex market share. C. An automobile manufacturer uses branding, pricing, and superior advertising to differentiate itself from a large number of other automobile manufacturers. D. A railway company owned by the government of New Darvland, owns 100 percent of the railway transport in the country.

c

Which of the following best qualifies as a firm's internal stakeholder? A. An auditor assigned to the firm by a federal government agency B. A labor union with whom the firm's employees can affiliate C. A manager taking care of the firm's operations in a foreign market D. A competitor manufacturing the same products as that of the firm

c

Which of the following do the sociocultural forces in a firm's external environment best represent? A. The interest rates prevalent in an economy B. The laws protecting small enterprises in a nation C. The family size of the firm's target market D. The rate of employee attrition within the firm

c

Which of the following factors best contributes to the U.S. automotive industry being characterized by high entry barriers? A. New auto companies create electric cars powered by simpler motors and gearboxes. B. New entrants in the automotive industry expect that incumbents will not or cannot retaliate. C. Car manufacturers require large-scale production in order to be cost-competitive. D. Few industrial products are as easy to build as cars powered by internal combustion engines.

c

Which of the following firms will most likely NOT be a complementor to a firm that manufactures computers? A. A company that develops operating software B. A company that develops application software C. A company that manufactures its own brand of desktops and laptops D. A company that manufactures portable external disks

c

Which of the following forces is most closely related to industry effects within the automobile industry? A. The actions taken to improve employee productivity within a firm B. The human resource strategy managers adopt to acquire the best talent from the industry C. The types of products and the services offered within the industry D. The decisions made within a firm regarding pricing of a product in the market

c

Which of the following forces tends to be more important in determining a firm's performance? A. The underlying economic structure B. The entry barriers in the industry C. The actions of managers within the firm D. The number and size of other firms in the industry

c

Which of the following fundamental insights was provided by Porter's five forces framework from the completion of the Alta Velocidad Espa-ola (AVE) in 2008? A. A strong threat of substitutes decreases the rivalry among existing competitors. B. All the five forces must work together to have a meaningful impact. C. Any of the five forces on its own, if sufficiently strong, can extract industry profitability. D. Competition must be defined more narrowly to remain confined to the industry's closest competitors.

c

Which of the following is a customer-oriented vision? A. To be the most progressive insurance company B. To be the best automobile company in the world C. To enable people throughout the globe to identify their capabilities D. To manufacture innovative products through continuous learning

c

Which of the following is a top-down approach to the development of strategy that involves asking "what if" questions to anticipate plausible futures? A. Top-down strategic planning B. Bottom-up strategic thinking C. Scenario planning D. Reverse mentoring

c

Which of the following is step 3 in the five-step process of stakeholder impact analysis? A. Identifying the most powerful stakeholders (both internal and external) and their needs B. Identifying the stakeholders' interests and claims C. Identifying the opportunities and threats the stakeholders present D. Identifying the social responsibilities of the firm toward its stakeholders

c

Which of the following methods of developing a strategy best illustrates scenario planning? A. Based on the previous year's profits, the CEO of Kelvon Inc. decided to adopt an expansion strategy in its home market. B. A sales personnel of GL Foods Inc. suggested that the company should introduce a baked version of its potato wafers to cater to the needs of the increasing health-conscious population. C. The managers at Vion Autos Inc. formulated a strategy to tackle any increase in the prices of aluminum sheets in the future. D. The CEO of DHP Inc., a large conglomerate, has decided to enter the Asian market based on the competitor's success in the same market.

c

Which of the following scenarios best illustrates a good stakeholder strategy? A. VP Inc. follows a strategy in which maximization of the shareholders wealth is the primary concern of the managers. B. Carrvero Inc. ensures that its employees are paid the least in the industry so that its external stakeholders can get the best price. C. PA Corp. distributes only 70 percent of its annual profit after tax to shareholders, while the remaining is distributed among employees and the local community, and invested for further research. D. Gen Pharma Corp. ensures that it fully exploits free natural resources, so that most of its profits go to shareholders in the form of dividends.

c

Which of the following scenarios illustrates a firm that has a sustainable competitive advantage? A. Newon Inc. generated a revenue of $300,000 this financial year, which is close to the industrial revenue average of $320,000. B. SM Inc. almost doubled its sales to 8500 units this year compared to its previous year's sales of 5000 units, though the industry average is 10,000 units. C. TrueLink Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years. D. Max Electrova Inc. was able to outperform its competitors with its new production system, in terms of revenue, for a brief period of four months.

c

Which of the following statements about a firm's stakeholders is true? A. Irrespective of whether the stakeholders are internal or external, the claims and interests of all stakeholders are the same. B. As the legal owners, employees in a public-stock company have the most legitimate claim on a company's profits. C. Within stakeholder groups there can be significant variation in the power a stakeholder may exert on a firm. D. Only internal stakeholders make specific contributions to a firm, which in turn provides different types of benefits to the external stakeholders.

c

Which of the following statements accurately describes corporate social responsibility (CSR)? A. CSR promotes the view that companies should single-mindedly focus on shareholders alone. B. CSR is limited to the notion of encouraging businesses to "just be nice" to society. C. CSR provides a conceptual model that more completely describes a society's expectations. D. CSR is based on the tenet that the needs of both internal and external stakeholders are the same.

c

Which of the following statements is true about strategic groups? A. It is not possible to have two different strategic groups within the same industry. B. Rivalry within the same strategic group tends to be lower than rivalry between different strategic groups. C. Profitability varies between different strategic groups. D. Companies within the same strategic group are complementors to each other.

c

Which of the following statements should ideally reflect a firm's strategy for competitive advantage? A. Our strategy is to win at any cost. B. We will be number one in the industry. C. Our aim is to create superior customer value while controlling costs. D. We want to be the market leader by exactly replicating our competitor's strategy.

c

Which of the following statements with regard to industry structures is true? A. They are stable over time, not dynamic. B. Having a large number of competitors generally equates to higher industry profitability. C. A consolidated industry tends to be more profitable than a fragmented one. D. Having few but large competitors increases the threat of strong competitive forces such as supplier or buyer power.

c

White Leo Autos manufactures and markets four different cars, Leo Sport, Leo Prestige, Leo Spark, and Leo Ease. These four product variants are operated as individual business units. While the product leaders of Leo Sport, Leo Prestige, and Leo Spark have adopted a differentiation strategy to attract the niche market, the product leader of Leo Ease follows a cost-leadership strategy to suit the mass market. This decision of the product leader of Leo Ease can be ideally categorized as a _____. A. corporate strategy B. functional strategy C. business strategy-how to compete D. tactical strategy

c

Why do firms operating in a monopolistically competitive industry have the power to raise the prices of their products or services? A. The competition in the industry is insignificant. B. The number of buyers in the industry is small. C. The firms can differentiate their product offerings. D. The entry barriers in the industry are extremely high.

c

_____ are incidents that describe highly improbable but high impact events. A. Miracle events B. Wild card events C. Black swan events D. Fat tail risk events

c

A firm's strategic position is likely to be strong when: A. the entry barriers within the industry it operates in are low and the exit barriers are high. B. its suppliers and vendors can easily forward integrate and buyers can backward integrate. C. all the five forces in Porter's model are strong. D. the gap between the value the firm's product generates and the cost to produce it is large.

d

Cadia Foods Inc. was the first company to start selling energy drinks in its country—a product that gained popularity among diverse groups. Soon, other companies started to sell their own brands of energy drinks, thereby giving Cadia Foods ample competition. In response, Cadia Foods decided to limit its variety of energy drinks to only two. However, it ensured that these two flavors were free of calories and low in cost. With this innovation, Cadia Foods Inc. consistently outperformed its competitors for ten years. In this scenario, Cadia Foods Inc. has maintained a _____ through its innovative strategy. A. balanced scorecard B. fiduciary responsibility C. consistent power position D. sustainable competitive advantage

d

Cuisine Pro Inc. is a company that manufactures consumer electronics like refrigerators, washing machines, and dishwashers. Which of the following best illustrates a product-oriented vision for Cuisine Pro? A. To make people's life simple and easy B. To allow everyone to have the luxury of domestic technology C. To help people save time and energy spent on household chores D. To be the pioneering manufacturer of home and kitchen appliances

d

Curry Rush is a premium Asian restaurant chain that differentiates itself from a large number of competitors by providing exclusively organic Vietnamese cuisine. It has some pricing power because it provides differentiated products and therefore, has some entry barriers in place. In this scenario, Curry Rush is most likely operating in a(n) _____. A. oligopoly B. monopoly C. perfectly competitive industry D. monopolistically competitive industry

d

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 _____. A. profitability increases B. perfect competition C. natural monopolies D. cut-throat competition

d

Derek, a retired CEO, invests capital in a start-up company that creates mobile applications. He mentors the entrepreneur and the employees of the company because he wants the company to perform well and survive in the market. Thus, Derek is the start-up company's _____. A. headhunter B. category captain C. employee D. stakeholder

d

Due to political instability in the country of United Mapa, the strategic leaders at the headquarters of FT Supplies Inc. have decided to divest the company's business from the foreign market in United Mapa. This decision would be applicable to all the business units of FT Supplies Inc. operating in United Mapa. Thus, this is a _____. A. business strategy B. divisional strategy C. functional strategy D. corporate strategy

d

Due to several black swan events in the past, the: A. shareholders of public companies have become more confident in investing their resources in businesses. B. need for corporate governance and transparency has reduced within various industries. C. nations around the globe have explicitly appreciated and accepted capitalism as an economic system. D. implicit trust relationship between the corporate world and society at large has deteriorated.

d

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 low due to minimal investment in operation and administration. In this scenario, FindFor Inc. has most likely been able to provide superior value and cost control through _____. A. strategic parity B. strategic profiling C. strategic liquidation D. strategic positioning

d

If a company wants to gain a competitive advantage in a highly competitive industry, it should ideally: A. execute an integrated cost-leadership and differentiation position. B. copy the strategies of other firms through competitive benchmarking. C. provide goods or services similar to its competitors' at higher prices. D. stake out a unique position within the industry.

d

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? A. She used a rational planning approach to strategy planning. B. She created a dominant strategy plan. C. She used scenario planning. D. She used an emergent strategy.

d

In the final step of the stakeholder impact analysis, a firm: A. identifies its stakeholders' interests and claims. B. differentiates its internal stakeholders from its external stakeholders. C. recognizes the opportunities and threats stakeholders present. D. decides a course of action to address the stakeholders' concerns.

d

In which of the following industry competitive structures do selling firms have the lowest pricing power? A. Monopolistic competition B. Monopoly C. Oligopoly D. Perfect competition

d

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? A. GH Medicines's vision is more product-oriented than the vision of Pioneer Pharma. B. Pioneer Pharma is more likely to have a positive relationship between its vision and firm performance than GH Medicines. C. Pioneer Pharma's vision is more long-term and futuristic than GH Medicines's vision. D. GH Medicines will be more flexible than Pioneer Pharma when adapting to changing environments.

d

Pure Food Inc., a multinational company, relies on its media partner Radio Ex to regularly advertise its offers, sales, and new products. Radio Ex is invested in this relationship because it generates most of its revenue from advertising Pure Food's products. In this scenario, Radio Ex is Pure Food Inc.'s _____. A. stockholder B. workforce C. internal stakeholder D. external stakeholder

d

Scenario planning typically begins with managers: A. developing different strategic plans to address possible future scenarios. B. building a portfolio of future strategic options. C. executing a dominant strategic plan. D. brainstorming to identify multiple plausible futures.

d

Soapsuds Inc., a manufacturer of cleaning agents, supplies its products to All Needs Inc., a supermarket chain. It demands that All Needs create more shelf space in its stores for Soapsuds' products. However, All Needs Inc. refuses to do this. Instead, it decides to produce its own range of cleaning agents with its own label "All Wash." In this scenario, All Needs Inc. has exercised its bargaining power as a buyer through _____. A. forward integration B. product differentiation C. crowdsourcing D. backward integration

d

State-level government agencies that check whether firms are meeting statutory safety measures in their production units are considered to be the firms' _____. A. stockholders B. shareholders C. internal stakeholders D. external stakeholders

d

Strategic flexibility is achieved when managers: A. choose to keep their vision statements more product-oriented rather than customer-oriented. B. respond to reality changes by activating alternate dominant plans or modifying the old plan. C. implement static top-down strategic planning approach to the development of strategy. D. overlook pessimistic future scenarios and only prepare for optimistic futures.

d

Strategic leadership pertains to the use of power and influence by _____ to direct the activities of others when pursuing an organization's goals. A. production workers B. lower-level managers C. external stakeholders D. corporate executives

d

Strategies developed at the departmental level, such as the accounting human resource, production, and marketing departments, within a strategic business unit are referred to as _____. A. grand strategies B. corporate strategies C. business strategies D. functional strategies

d

Sun Inc., a vendor, regularly supplies pallets to Octangle Corp. for its shipping business. Therefore, Sun Inc. is Octangle Corp.'s _____. A. internal stakeholder B. stockholder C. shareholder D. external stakeholder

d

T & R Autos Inc. is a large conglomerate that operates in 12 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. Based on this guideline received from the top management team, the product leader of the home appliances division has decided to adopt a cost leadership strategy in all his 12 units. Thus, the decision made by the product leader best illustrates a _____. A. corporate strategy B. functional strategy C. grand strategy D. business strategy

d

TakeFlight Airways is a new entrant to the airline industry. While most of its competitors are pursuing a cost-leadership strategy, TakeFlight Airways has decided to execute a differentiation strategy. Which of the following is the most likely implication of this decision? A. TakeFlight Airways will not gain a competitive advantage in the airline industry. B. TakeFlight Airways will gain a competitive advantage by reducing its prices. C. TakeFlight Airways will face low profit potential by pursuing a different strategy. D. TakeFlight Airways will create value for customers by delivering unique features.

d

The Chief Executive Officer (CEO) of PepsiCo, Indra Nooyi, subscribes to a triple-bottom-line approach to competitive advantage—considering not only economic, but also social and environmental performance. Identify the phrase that represents the vision of PepsiCo as described by Ms. Nooyi. A. Human sustainability B. Environmental sustainability C. The whole person at work D. Performance with a Purpose

d

The _____ allows the scanning, monitoring, and evaluating of changes and trends in a firm's macro environment. A. VRIO framework B. SWOT analysis C. BCG matrix D. PESTEL framework

d

The critics of top-down strategic planning and scenario planning argue that: A. the strategies developed through these approaches are primarily based on an inspirational vision and not on hard data. B. these approaches do not believe that we can predict the future from the past. C. the development of strategies through these approaches is highly dependent on experience of front-line employees. D. these approaches do not allow for the necessary strategic thinking.

d

The first step in stakeholder impact analysis involves: A. formulating a stakeholder strategy to balance the different needs of various stakeholders. B. identifying the opportunities and threats the stakeholders present. C. describing the economic, legal, ethical, and philanthropic responsibilities of the firm toward the society. D. identifying the stakeholders that currently have, or potentially can have, a material effect on a company.

d

The government of Filvia has mandated that the standard minimum wage in the country be increased to $8,000 per year. This has ensured that all firms in the country pay their employees at least $8,000 per year, which has brought about a higher standard of living for the people of Filvia. Which of the following factors in a firm's general environment does this mandate best indicate? A. Ecological factors B. Sociocultural factors C. Technological factors D. Legal factors

d

The regional head for First Electronics Inc. in New Dalvia has decided to sell the company's products directly through company-owned stores because the distribution system in the market is primitive. In six other markets, however, the company will continue to operate through a franchise system. Thus, this decision made by the regional head at New Dalvia will be considered as a _____. A. corporate strategy B. tactical strategy C. functional strategy D. business strategy

d

The society and the shareholders just expect, and not mandatorily require a firm to: A. pay fair dividends and returns to the investors. B. follow the employment laws of a country. C. provide safe and quality products to the customers. D. pay its workers more than the minimum living wages.

d

The telecommunication industry of United Canava is primarily dominated by three large firms, 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? A. Monopoly B. Perfect competition C. Monopolistic competition D. Oligopoly

d

To implement specific business strategies, general managers of strategic business units rely on: A. external stakeholders. B. corporate executives. C. strategic leaders. D. functional managers.

d

Top-down strategic planning works best when the: A. events in the future are highly unpredictable. B. past cannot be used to predict the future. C. lower-level employees in an organization are highly empowered. D. environment does not change much.

d

Underperformance relative to other firms in the same industry or the industry average results in a(n) _____ for a firm. A. sustainable competitive advantage B. increased power distance C. diseconomies of scope D. competitive disadvantage

d

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? A. Starbucks' launch of iced drinks B. Teach For America's mission statement C. Merck's voluntary withdrawal of Vioxx from the market D. Intel's rule to "maximize margin-per-wafer-start"

d

When applying the five forces model, the first step should ideally be: A. drawing a strategic group map. B. identify the underlying drivers of each force. C. assessing the overall industry structure. D. defining the relevant industry.

d

When fashion magazines face competition from fashion blogs on the web, which of the following forces in Michael Porter's five forces model primarily gets stronger? A. The emergence of entry barriers B. The bargaining power of suppliers C. The availability of complements D. The threat of substitutes

d

When parts of a firm's intended strategy fall by the wayside due to unpredictable events, it turns into a(n) _____. A. tactical strategy B. dominant strategy C. emergent strategy D. unrealized strategy

d

Which of following practices of a firm satisfies its ethical responsibilities? A. Using plastic as the packaging material though it is harmful to the environment, yet legal B. Outsourcing production to a less developed country and paying wages that are below its own country's accepted minimum wages C. Using advertising and other forms of promotion to endorse luxurious lifestyles D. Selling vaccines at a subsidized price in a less developed country even though this results in reduced shareholder returns

d

Which of the following best describes a Level-5 manager in the Level-5 leadership pyramid? A. Gina is an employee who just started her career GL Inc.; she has already been appreciated for her knowledge and skills in the new company. B. Derek is an employee at One Triangle Inc.; he has helped his team achieve their targets by contributing to the team's efforts. C. Harry is part of the marketing team at JB Corp.; he has been given the charge of managing a team of three based on which he will be promoted to a manager's position next month. D. Walter is the CEO of Red Autos Inc.; he has helped his company in gaining and sustaining a competitive advantage through ethical decision making.

d

Which of the following does NOT accurately explain why institutional investors are much more potent stakeholders than individual investors? A. Institutional investors can buy and sell a large number of shares at once. B. The size of institutional investors' assets under management is larger relative to the investment made by individual investors. C. Institutional investors can exercise block-voting rights in the corporate-governance process. D. While institutional investors are external stakeholders of a firm, individual investors are internal stakeholders.

d

Which of the following features about a buyer indicates that the buyer has high bargaining power? A. When the buyer cannot credibly threaten to backwardly integrate into the industry. B. When the buyer cannot purchase specific products from other sellers. C. When the buyer faces high switching costs. D. When the buyer operates in an industry where products are undifferentiated.

d

Which of the following forces was NOT originally a part of Michael Porter's fives forces model? A. Threat of substitute products or services B. Bargaining power of buyers C. Rivalry among existing competitors D. Strategic role of complements

d

Which of the following is NOT an example of a software company's external stakeholder? A. Creditors B. Customers C. Alliance partners D. Project managers

d

Which of the following is a feature of an oligopolistic industry structure? A. Many small sellers B. Standardized or undifferentiated products C. Limited pricing power D. High entry barriers

d

Which of the following is a primary feature of the five forces model? A. It is concerned exclusively about the intensity of rivalry among direct competitors. B. It takes into account a firm's internal resources, capabilities, and core competencies. C. It helps managers determine the changing speed of an industry or the rate of innovation. D. It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.

d

Which of the following is an implication of low interest rates? A. Cost of capital for firms will be high. B. Firms will invest less in future growth. C. Economic growth rate will fall. D. Consumer demand will increase.

d

Which of the following is most likely an implication of new firms entering an industry? A. The bargaining power of buyers will reduce. B. The industry's overall profit potential and sales will increase. C. The rivalry among existing competitors will reduce. D. The incumbent firms will spend more to satisfy their existing customers.

d

Which of the following managers in the Level-5 leadership pyramid are most capable of leading their organizations into great success by guiding the organizations toward building a sustainable competitive advantage? A. Level 1 B. Level 2 C. Level 3 D. Level 5

d

Which of the following responsibilities results from a society's mere expectations of a business and not because the society and the shareholders mandatorily require the business to demonstrate it? A. Economic responsibilities B. Legal responsibilities C. Contract responsibilities D. Philanthropic responsibilities

d

Which of the following stages in the AFI strategy framework involves designing a business, corporate, and global strategy? A. Strategy control B. Strategy implementation C. Strategy analysis D. Strategy formulation

d

Which of the following statements about strategy is NOT true? A. Grandiose statements of desire, on their own, are not strategy. B. Strategy is as much about deciding what not to do, as it is about deciding what to do. C. Strategy is about creating superior value, while containing the cost to create it. D. Operational effectiveness and competitive benchmarking should be treated as strategy.

d

Which of the following statements accurately brings out the difference between monopolistic competition and an oligopoly? A. Sellers in an oligopoly provide highly differentiated products; in monopolistic competition, the products sold are undifferentiated or standardized. B. In an oligopoly, the number of buyers is large; in monopolistic competition, the number of buyers is limited to three or four. C. Firms in an oligopoly have no pricing power; firms in a monopolistically competitive industry have the ability to raise prices. D. In monopolistic competition, many firms compete against each other; in an oligopoly, there are few large firms competing against each other.

d

Which of the following strategies best illustrates a functional strategy? A. The CEO of Dawn Companies Inc. has decided that the company will be entering the Asian market. B. The general manager of a product division of Aster Products Inc. has decided that 30 percent of the division's annual profits will be invested in research and development. C. The regional manager for the consumer electronics division of Dawson & Co. has decided that the division will pursue backward integration to save costs. D. The production manager at the apparel division of Style Culture Co. has decided that the department will hire contract workers for three months to meet the temporary demand.

d

Which of the following strategies best illustrates a generic business strategy? A. A cost-cutting strategy that corporate executives in the headquarters want all business units of a large conglomerate to implement B. A strategy to use monetary incentives to motivate employees working on a project C. A decision to computerize a firm's database in order to improve customer service D. 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

d

Who among the following is responsible for making business strategies in a large conglomerate? A. The board of directors at the headquarters B. The shareholder of the company C. The lower-level employees in the company D. The general managers of individual business units

d

_____ are best described as the ethical standards and norms that govern the behavior of individuals within a firm. A. Job descriptions B. Customs duties C. Corrective controls D. Organizational values

d

When should mergers and acquisitions (M&A) be considered the "buy" option for a strategist trying to determine which corporate strategy to implement? A. when the resource in question is highly tradable B. before the strategist has considered borrowing the necessary resources through integrated strategic alliances C. after it has been established that the firm's internal resources are sufficient to build D. when extreme closeness to the resource partner is necessary to understand and obtain its underlying knowledge

when extreme closeness to the resource partner is necessary to understand and obtain its underlying knowledge

Why should managers using the M-form organizational structure to support a related-diversification strategy ideally concentrate decision making at the top of the organization? A. It allows a high level of integration. B. It helps contain the core competencies within a strategic business unit (SBU). C. It leads to competition between SBUs. D. It helps evaluate each SBU as a stand-alone profit-and-loss center.

A. It allows a high level of integration.

VRD Systems Inc. took many decades to build its core competencies, and these competencies were based primarily on the decisions made by the company's top management in the past. This process is called A. path dependence. B. dependence complexity. C. causal dependence. D. path immobility.

A. path dependence.

In a generic value chain, a firm's after-sales service will be referred to as its _____. A. primary activity B. support activity C. static resource D. resource flow

A. primary activity

A firm's learning curve is steeper than that of its competitor. What does this imply?

A. The firm is at an advantage when compared to its competitor.

In a successful _____ strategy, the trade-offs between differentiation and low cost are reconciled.

A. blue ocean

A successfully implemented blue ocean strategy allows a firm to

A. charge a higher price than the cost-leader in the industry.

As the cumulative output in a firm increases, managers learn how to optimize the production process and improve workers' performance through repetition. This drives down the per-unit cost. Which of the following phenomena is best described here?

A. learning effects

Bass Watches Inc. initially spent eight man-hours to assemble a wristwatch. But as the production doubled, the number of hours spent on assembling a watch reduced by 20 percent. This increase in productivity reduced the company's cost per unit. What is this phenomenon referred to as?

A. learning-curve effect

When a firm operates at the minimum efficient scale, the

A. returns to scale are constant.

_____ describes the collectively shared values and norms of an organization's members. A. Competitive advantage B. Organizational structure C. Organizational culture D. Core competency

C. Organizational culture

_____ refers to a firm's resistance to change the status quo that can set the stage for the firm's subsequent failure. A. PESTEL factors B. Formalization C. Organizational inertia D. Centralization

C. Organizational inertia

Why are controls like budgets and operating procedures that McDonald's implements known as input controls? A. They are independent of an organization's culture. B. They are implemented by corporate headquarters. C. They are considered before employees make any decisions. D. They are ad hoc and not codified.

C. They are considered before employees make any decisions.

Which of the following is an advantage of equity alliances when compared to non-equity alliances? A. They are more flexible and easy to initiate and terminate. B. They require smaller capital investments. C. They produce stronger ties between partners. D. They are based on contracts rather than ownership.

C. They produce stronger ties between partners.

Which of the following characteristics of a public stock company deals with principals and agents? A. limited liability of investors B. transferability of investor ownership C. separation of legal ownership and management control D. legal personality

C. separation of legal ownership and management control

Creating economic value for shareholders while also creating social value is known as creating A. a social market economy. B. shareholder capitalism. C. shared value. D. stakeholder strategy.

C. shared value.

A _____ is best described as a voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services. A. proprietorship B. cooperative C. strategic alliance D. leveraged buyout

C. strategic alliance

Successful _____ requires managers to design and shape structure, culture, and control mechanisms. A. strategy innovation B. strategy formulation C. strategy implementation D. strategy diversification

C. strategy implementation

A firm's _____ determines how the work efforts of individuals and teams are orchestrated and how resources are distributed. A. norm B. culture C. structure D. control

C. structure

Why are differentiation and cost-leadership strategies referred to as generic business strategies?

B. They can be used by any organization independent of industry context.

When a differentiator charges a similar price as its competitors in the same strategic group but offers more perceived value, it

B. gains market share from other firms.

As it takes less and less time to produce the same output, learning curves usually

B. go down.

Diseconomies of scale refer to

B. increases in cost as output increases.

According to the five forces model, which of the following is viewed as a major risk to a business pursuing a cost-leadership strategy?

B. innovation that allows competitors to emerge with more economical replacements

Whole Foods differentiates itself from competitors by offering top-quality foods obtained through sustainable agriculture. This business strategy implies that Whole Foods focuses on

C. increasing the perceived value created for customers, which allows it to charge a premium price.

The primary goal of a firm pursuing a blue ocean strategy should be to

C. offer a differentiated product or service at a low cost.

A firm's business strategy will lead to a competitive advantage if it allows the firm to

C. perform different activities than its rivals.

A firm experiences diseconomies of scale when it

C. produces at an output level beyond the minimum efficient scale.

DFS Electronics Inc. ensures that all its products are highly durable and reliable by using techniques like zero-defect and lean manufacturing systems. These efforts not only add to the products' differential appeal, but also help the company save costs during production and avoid expenses due to after-sales services. Thus, the common value and cost driver responsible for DFS Electronics' strategic position as an integrator is the

C. quality.

Clean Machine Inc. produces a high-quality dishwashing machine that is reliable and durable. How would this product most likely act as a cost driver?

C. reduce the total cost of ownership

Which of the following best describes a strategic trade-off?

C. the tension between value creation and the pressure to keep cost in check

Which of the following situations will have greater effects from economies of scale than from learning effects?

C. when mass manufacturing pens

Which of the following examples uses a focused differentiation strategy?

D. a cosmetics brand that offers superior-quality skin lotion priced at 100 dollars per bottle

When Internet service providers offer free routers for subscriptions to their wireless Internet packs, the perceived value of the service offering increases. In this case, the value driver would be

D. availability of complements.

In the multiplex industry, Vibrant Movies Inc. is an upscale multiplex that focuses on superior customer experience. The firm charges premium prices for its movie tickets and services. Global Cine Inc., in contrast, charges the lowest price in the industry with its no-frills approach. In between these two segments is True Movies Inc., which offers a customer experience comparable to that of Vibrant Movies at a price almost as low as that of Global Cine. What strategy is True Movies pursuing in this scenario?

D. blue ocean strategy

Which of the following drivers simultaneously increases value while lowering cost?

D. innovation

A _____ is a graphical depiction of a company's relative performance vis-à-vis its competitors across the industry's key success factors.

D. strategy canvas

Economies of scale are cost advantages that accrue for firms with: A. high fixed costs. B. low employee turnover. C. larger output. D. high capital risks.

c

For a firm that operates in an industry where competition is high, which of the following practices will result in inferior performance? A. Choosing a distinct but different strategic position in the industry B. Working toward increasing the difference between value creation and cost C. Trying to be everything to everybody by combining different competitive strategies D. Focusing on creating value for customers rather than destroying rivals

c

For a strategist, which of the following is NOT an implication of effective strategic management? A. The difference between a firm's success and failure lies in its strategy. B. The principles of strategic management can be applied universally to all organizations. C. A firm's performance is determined by a set of independent factors, which includes firm and industry effects. D. It is necessary to maintain an awareness of key stakeholders and how they can affect or be affected by managerial actions.

c

Golden Harvest 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 Golden Harvest's strategic group? A. A nearby fast food restaurant B. A food kiosk in an adjacent subway station C. A premium rooftop restaurant in the same city D. A mobile food cart parked opposite to the five-star hotel

c

Home Cart, Home Essentials, Good Store, and Price King are all departmental stores that compete for advantage against each other through everyday low-pricing and discounts on bulk purchases. All the four stores cater to the needs of highly price-sensitive customers. Thus, together Home Cart, Home Essentials, Good Store, and Price King form a _____. A. focus group B. command group C. strategic group D. cross-functional group

c

In a firm, a strategist's job should be to: A. limit the participation of external stakeholders—customers and suppliers—in value creation. B. isolate the firm's internal stakeholders from its external stakeholders. C. focus solely, in a single-minded manner, on maximizing shareholder wealth. D. understand the complex web of exchange relationships among different stakeholders.

d

In which of the following situations is the power of suppliers high in an industry? A. Suppliers offer products that are undifferentiated. B. Suppliers can credibly threaten to backward integrate into the industry. C. Suppliers depend heavily on the industry for their revenues. D. Suppliers' industry is more concentrated than the industry it sells to.

d

Managers use the AFI strategy framework primarily to: A. help their business achieve and sustain competitive parity. B. minimize the wealth of their shareholders. C. help reduce the economic contribution of their business. D. explain and predict differences in firm performance.

d

Nathan 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, Nathan is in _____ of the Level-5 leadership pyramid. A. Level 5 B. Level 4 C. Level 3 D. Level 2

d

There are many reasons why firms need to grow. Which of the following reasons is strongly influenced by economies of scale? A. increasing profits B. lowering costs C. reducing risk D. motivating managers

lowering costs

Which of the following is an accurate statement about learning effects?

B. Learning effects involve the accumulation of output over time.

Disney became the world's leading media company to a large extent by pursuing a corporate strategy of A. related-linked diversification. B. cost-leadership. C. unrelated diversification. D. hostile takeovers.

A. related-linked diversification.

Crystal Tech Inc.'s competency in designing and manufacturing efficient microprocessors has made its laptops the most advanced computers in the market. This competency, along with the just-in-time manufacturing system, has enabled Crystal Tech Inc. to increase its profitability by lowering its production costs. Thus, Crystal's competency in designing and manufacturing microprocessors will be considered a(n) _____ resource in the VRIO framework. A. valuable B. inexhaustible C. tangible D. perishable

A. valuable

The most important yet least visible element of organizational culture is A. values. B. norms. C. laws. D. artifacts.

A. values.

When does a merger between companies typically occur? A. when two firms of comparable size join to form a combined entity B. when large, incumbent firms buy start-up companies C. when a target firm does not want to be acquired D. when two or more firms enter a temporary vertical strategic alliance

A. when two firms of comparable size join to form a combined entity

At a certain output level, the per-unit cost incurred by a firm to manufacture a product is $5. Other factors remaining constant, what will be the new per-unit cost if the cumulative output is doubled, and the firm is able to achieve an 80 percent learning curve?

A. $4

Which of the following provides an example of a firm in a red ocean?

A. Chique Apparel offered clothing at a low price but failed to differentiate its product as being exclusive.

Which of the following statements is true of a strategic position?

A. Choosing a strategic position requires making important trade-offs between value and cost positions.

_____ is best described as decreases in cost per unit as output increases.

A. Economies of scale

Allure is a cosmetic brand that pursues a cost-leader strategy. Which of the following statements is true of the cosmetic brand?

A. It appeals to the price-conscious buyers.

How is a cost-leader protected from threats from powerful buyers?

A. It is more able to absorb price increases through accepting lower profit margins.

_____ is best described as the output range needed to bring down the cost per unit as much as possible, allowing a firm to stake out the lowest-cost position that is achievable through economies of scale.

A. Minimum efficient scale

Which of the following statements accurately brings out the difference between economies of scale and learning effects?

A. While there are no diseconomies to learning, there are diseconomies to scale.

When a firm is successful at pursuing a blue ocean strategy,

A. investments in differentiation are complements.

A firm achieves differentiation parity ideally when

A. it creates the same customer value as its competitors.

Gotta Get Chocolates, Inc. has recently introduced a new production method that will make the production of their chocolates more cost-effective. Which of the following will most likely be the result of this innovation?

A. jumps to a steeper learning curve

When a firm combines experience based learning and process innovation, the firm

A. jumps to a steeper learning curve.

When a blue ocean strategy goes bad, a firm has neither a clear differentiation nor a clear cost-leadership profile. This situation is referred to as

A. stuck in the middle.

Which of the following is more of a value driver than a cost driver?

A. superior customer service

What does blue ocean strategy attempt to reconcile?

A. the conflicting requirements of two generic strategies

Which of the following best expresses fixed asset turnover? A. Current assets/Fixed assets B. Revenue/Fixed assets C. Fixed assets/Total return to shareholders D. Fixed assets/Current liabilities

B. Revenue/Fixed assets

_____ are the legal owners of public companies. A. Employees B. Shareholders C. Category captains D. Creditors

B. Shareholders

Osion Electronics Inc. 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? A. $350 B. $450 C. $800 D. $200

B. $450

If a firm's market capitalization is $1 billion and the share price is $50, how many shares outstanding does the firm have? A. 20 thousand B. 20 million C. 500 thousand D. 50 million

B. 20 million

Which of the following statements about an organization's culture is not true? A. A positive culture motivates employees by appealing to high ideals. B. A strong monitoring and supervision mechanism is needed to enforce the culture. C. A positive culture encourages employees to make decisions not only with their heads, but also with their hearts. D. Employees feel that they are part of a larger community by internalizing the firm's values and norms.

B. A strong monitoring and supervision mechanism is needed to enforce the culture.

Which of the following statements is true of accounting data? A. Accounting data focus mainly on intangible assets, rather than tangible assets. B. Accounting data are historical data and thus backward-looking. C. Accounting data do not have to be adjusted in any manner to compare companies with different capital structures. D. Accounting data consider off-balance sheet items, such as pension obligations of a firm.

B. Accounting data are historical data and thus backward-looking.

_____ is illustrated by a situation in which the principal cannot determine the value created by individual members of a team. A. Moral hazard B. Adverse selection C. Information asymmetry D. Shareholder capitalism

B. Adverse selection

Which of the following is true of W. L. Gore & Associates, which has a lattice organizational form? A. It has a high degree of centralization. B. All employees are empowered to speak to all other employees in the organization. C. Its culture has been linked to lower employee satisfaction and retention. D. The degree to which a task is divided into separate jobs is high.

B. All employees are empowered to speak to all other employees in the organization.

Which of the following questions challenges managers to come up with strategic objectives that ensure future competitiveness? A. How do customers view us? B. How do we create value? C. What core competencies do we need? D. How do shareholders view us?

B. How do we create value?

Investments in specialized assets tend to incur high opportunity costs because the A. assets can be profitably used for multiple purposes. B. threat of one of the partners pursuing his or her self-interest is high. C. social costs associated with these assets are high. D. firms can avoid backward integration by investing in these assets.

B. threat of one of the partners pursuing his or her self-interest is high.

Which of the following is a primary reason why firms pursue a global strategy? A. to improve their reputation B. to enhance their competitive advantage C. to expand their research capabilities D. to gain more political influence

B. to enhance their competitive advantage

Researchers at Games First Inc. spent several months coming up with a fun game for toddlers that incorporates a new idea in preschool education. This scenario describes step _____ of the innovation process. A. one B. two C. three D. four

B. two

Which of the following best explains why a blue ocean strategy is difficult to implement?

B. It requires the reconciliation of fundamentally different strategic positions—differentiation and low cost.

Which of the following statements is true of learning curves?

B. Learning curves can be observed in manufacturing processes and professional services.

Although JetBlue used a blue ocean strategy to achieve an initial competitive advantage, it failed to maintain this advantage. Which of the following provides the best reason for this development?

B. It failed to refine its strategic position over time.

True Empire Autos Inc. is an automobile company known for its luxury cars and follows a differentiation strategy. In this scenario, True Empire Autos should ideally compare its strategic position with a(n)

B. automobile company that sells high-end, premium cars.

Home Smart Inc. is a chain of supermarkets that sells its products at higher prices than its competitors. Yet, the supermarket chain has a large customer base due to its wide product portfolio and superior customer service. Which of the following generic business strategies has Home Smart adopted in this scenario?

B. differentiation

When Jean Cult Inc. was operating at the minimum efficient scale of 10,000-12,000 units per month, the firm's cost per unit was $20. However, when the output level was increased beyond 12,000 units, the cost per unit increased to $22. This increase was attributed to the wear-and-tear of the machinery, and complexities of managing and coordinating. What is this phenomenon known as?

B. diseconomies of scale

What is a value gap?

B. economic value creation

KitchenThings Inc. is a company that manufactures plastic kitchenware. It operates at an output level that allows it to keep its unit cost per output to the lowest in the industry. This in turn allows KitchenThings to be the price leader. Other competing companies cannot operate at the same level due to a lack of consumer demand for their products. This puts them at a competitive disadvantage. In this scenario, the cost driver behind KitchenThings's strategic position is

B. economies of scale.

To be cost-competitive, a firm should

B. operate at the minimum efficient scale.

When a firm makes choices between a cost or value position to achieve competitive advantage, it is primarily involved in

B. strategic trade-offs.

Cool Cat Inc. has dominated the high-end refrigerator market by producing a reliable refrigerator with many bonus features that appeal to customers. Recently, a competitor has developed a refrigerator that offers many of the same features as Cool Cat's refrigerator. Which of the following will most likely help Cool Cat to keep its competitive advantage?

B. the loyalty of its customers

A blue ocean strategy tends to be successful only if a firm is able to rely on a _____ that allows it to reconcile trade-offs.

B. value innovation

When does a firm fall into the large competitive chasm between early adopters and early majority? A. when it cannot attract technological enthusiasts to try the beta versions of its products B. when it creates strong network effects during the growth stage C. when it fails to successfully launch a mass-market version of its product D. when the early majority create herding effects for its products

C. when it fails to successfully launch a mass-market version of its product

Which of the following is not a condition that can help a firm sustain its competitive advantage? A. when managers have consistently better expectations about the future value of resources B. when the resource advantage can only be imitated after a long period of time C. when past decisions act as constraints for the current dynamic capabilities D. when the source of the competitive advantage is causally ambiguous

C. when past decisions act as constraints for the current dynamic capabilities

Hugo Books Inc. is a retailer that buys books at a fixed price from publishers. Recently, Hugo offered a deal in which customers could buy a package of three mystery books at a discounted rate. Which of the following business models has Hugo Books combined? A. agency and freemium B. wholesale and agency C. wholesale and bundling D. agency and bundling

C. wholesale and bundling

AccuroDisk Inc. manufactures external hard disks for $32 per unit, and the maximum price customers are willing to pay is $47 per unit. TD Storage Inc. is a competitor of AccuroDisk Inc. that produces external hard disks for $37 per unit, and customers are willing to pay a maximum price of $50 per unit. What does this imply?

C. AccuroDisk creates a greater economic value than TD Storage.

Evia Cycles Inc. incurs $400 to manufacture a bicycle, and the maximum price customers are willing to pay is $550 per unit. Archer Cycles Inc., its competitor, incurs $450 to manufacture a similar bicycle, and customers are willing to pay a maximum price of $620 for it. What does this indicate?

C. Archer Cycles has created a greater economic value than Evia Cycles.

Even without differentiation parity, a firm pursuing a cost-leadership strategy can still gain a competitive advantage as long as its

C. economic value creation exceeds that of its competitors.

Which of the following statements accurately brings out the difference between economies of scale and economies of scope?

C. Economies of scope are the savings that come from producing two or more outputs from the same resources, whereas economies of scale are decreases in per-unit cost with increases in output.

Help Yourself Inc. publishes many types self-help books. Recently, the consumer demand for winter gardening books has increased significantly. Although Help Yourself has limited production facilities, it has increased the production of these books to meet this demand. It hopes to get books to the market faster than its closest competitor, who is also increasing the production of winter gardening books. Which of the following aspects of business-level strategy has Help Yourself accomplished?

C. It has exploited external opportunities.

Both Viten Electronics Inc. and JL Electronics Inc. incur a cost of $400 to manufacture a LED television. However, the economic value created by JL Electronics is more than that created by Viten Electronics. What does this indicate?

C. JL Electronics can charge a premium price on its televisions.

Which of the following scenarios would threaten a firm that uses a differentiation strategy?

C. The firm's focus shifts to price rather than value-creating features.

Handy Helper, Inc. produces decent-quality woodworking tools at a mid-range price. Master Tools, Inc. produces high-quality tools also at a mid-range price. Master Tools gained a competitive advantage because it has ______ than Handy Helper.

C. a higher value gap

Wear Crush Inc. is an apparel company known for its affordable clothes that follows a cost-leadership strategy. In this scenario, Wear Crush should ideally compare its strategic position with

C. an apparel company popular among price-conscious customers.

Body Sync Inc. is a chain of gyms. It offers a fitness package that allows its members to use the gym facilities for 12 months by paying only for 10 months. Included in the package are two health checkups and a gym kit. These add-ons by themselves are not very valuable, but as a package they can enhance the perceived value of the service offerings. In this case, Body Sync's primary value driver is

C. availability of complements.

A cost-leader is protected from the threat of new entrants primarily due to its

C. economies of scale.

DiscountHaven Inc. is a large chain of hypermarkets. It has cost benefits due to its extensive operation. The company's marketing and sales, logistics, administrative, and other such related costs get divided between a large number of product units stocked in its stores. This makes it difficult for smaller retail stores and supermarkets to compete against DiscountHaven's low prices. Thus, DiscountHaven has a competitive advantage due to its

C. economies of scale.

The concept of a(n) _____ attempts to capture both learning effects and process improvements at firms.

C. experience curve

In contrast to a differentiator, a cost-leader will

C. focus its research and development on process technologies to improve efficiency.

Economies of scale do not allow firms to

C. spread their variable costs over a larger output.

How does availability of complements act as a value driver?

D. Complements add value to a product when they are consumed in tandem with it.

How is differentiation parity different from cost parity?

D. Differentiation parity deals with value not pricing.

What does it mean for a firm to have an 80 percent learning curve?

D. Every time the cumulative output is doubled, the cost per unit will decline by 20 percent.

How did Marriott use economies of scope to achieve greater economic value than its competitors?

D. Marriott lowered its cost structure by sharing its production assets over a several types of hotels, which increased its menu and thus its differentiated appeal.

While Aros Inc. incurs a cost of $20 for a pair of shoes, Shoes Cult Inc., its competitor, manufactures a pair of shoes at $22. Both the companies are able to sell their shoes for a maximum of $30 per pair. Which of the following statements is true in this scenario?

D. Shoes Cult has a competitive advantage over Aros.

Firms pursuing a differentiation strategy primarily seek to

D. create higher customer perceived value than the value that competitors create.

Juanita Apparels Inc. outsources its production to contract manufacturers located in underdeveloped nations where unskilled labor is available in plenty for very low wages. This has helped the apparel brand become a price leader in the industry. Which of the following is the key driver behind Juanita Apparel's strategic position?

D. low-cost input factors

Which of the following sources of differential appeal is least effective in helping a firm sustain its advantage?

D. observable product features

A firm's _____ relates to its ability to create value for customers (V) while containing the cost to do so (C). A. strategic position B. incumbency C. threat of entry D. attrition rate

a

A company's strategic business unit: A. does not need to adopt the overall corporate strategy. B. is responsible for its own profit and loss. C. is a division solely created to design strategies during turbulent times. D. decides which industries and markets to compete in for an entire conglomerate.

b

The _____ is a model that links strategy analysis, strategy formulation, and strategy implementation, which together help managers plan and implement a strategy that can improve performance and result in competitive advantage. A. Ansoff's growth strategy matrix B. AFI strategy framework C. Sarbanes-Oxley Act D. stakeholder impact analysis

b

Through _____, a firm puts its guiding policy into practice by employing a set of coherent actions. A. strategy control B. strategy implementation C. strategy formulation D. strategy analysis

b

A firm's economic responsibilities are primarily directed toward: A. minimizing shareholders' wealth. B. acting as a good corporate citizen. C. doing what is right, just, and fair. D. gaining and sustaining competitive advantage.

d