MGT4000- Strategic Exam 1
Which of the following statements correctly compares Apple and Microsoft in 2016?
Apple had a higher return on invested capital than Microsoft.
When the strong dictatorial rule in Arlington unexpectedly collapsed due to the shocking death of the royal family in an explosion, the nation's economy experienced drastic changes. The laws became more restrictive, the country lost many locally produced resources and products, and the distribution of wealth became inequitable. The unexpected event that led to these changes can best be described as a(n) ________ event.
Black Swan
Buzztronic is a market leader in consumer electronics. If Ficolee and Ficola, companies that manufacture televisions, develop the same customer knowledge base and create products with the same customer appeal as Buzztronic, then
Buzztronic will have a resource that is valubale but no longer rare
Which of the following factors most contributes to the U.S. automotive industry being characterized by high entry barriers?
Car manufacturers require large-scale production in order to be cost-competitive
Assume a firm's resources and capabilities are costly to imitate. This is because rival companies do not clearly understand the relationship between the resources and capabilities controlled by the firm. In this case, the firm's competitive advantage is protected against imitation by
Causal Ambiguity
When performing internal analysis of firms, how would you answer the question, "why do companies exist?"
Companies exist because they create value for customers in ways that customers are unable to replicate on their own.
In the five forces model developed by Michael Porter, ________ is not defined narrowly as a firm's closest competitors but rather more broadly to include other factors in an industry like buyers, suppliers, potential new entry of other firms, and the threat of substitutes.
Competition
Managers at SunTrustUs Properties are surprised to hear that interest rates are likely to remain low for the next six months. Which of the following is an implication of low interest rates?
Consumer demand will increase
Strategic leadership pertains to the use of power and influence by ________ to direct the activities of others when pursuing an organization's goals.
Corporate Executives
In the context of SWOT analysis, which of the following best exemplifies a firm's internal weakness?
Decline in the firms market share
Chris is the manager of a graphic design firm, and he relies on a top-down strategic management approach to maintain tight control over the activities of his employees. The company has recently started to lose market share to its more innovative competitors, and Chris wants to encourage his employees to start contributing to the strategy formulation process to make the company more competitive. Which of the following steps should Chris take?
Designate Friday afternoons as time for employees to pursue outside interests loosely related to the business.
According to an evaluation using the VRIO framework, Crocs Shoes was unable to sustain its competitive advantage primarily because its products were
Easy to imitate
________ is best described as decreases in cost per unit as output increases.
Economies of scale
Finger Lickin' BBQ is a chain of casual restaurants that promises affordable barbecue using top-quality local ingredients. However, the company has struggled to achieve a competitive advantage because of its high overhead costs. Which of the following scenarios is most likely to result in a competitive advantage?
Eliminated brick and mortar locations and offering delivery from a central kitchen
Which of the following is an example of a business acting upon an organizational core value?
Emerald Autos reduces engine emissions below federal guidelines to reduce pollution
Andrew is a management consultant. Hard Supplies Inc. asks him to evaluate their company, and he finds that the difference between the cost of producing the firm's products and the value of those products is extremely narrow. What should Andrew suggest that Hard Supplies Inc. management do?
Find a way to widen the gap between cost and value
The working capital turnover of Complete Systems Corp. is 6.0. What does this financial data suggest?
For every dollar complete systems puts to work, the company realizes $6.00 of sales
Several senior managers recently left Fred's Autos Inc. and went to work at Better Autos Inc., a rival company. What does this imply?
Fred's Autos Inc. Faced resource leakage
Treequote Industries has produced a new piece of technology that will monitor the soil moisture in a user's garden and send a notification to an app on the user's phone when it is time to water their plants. The goal of this inexpensive technology is to entice users to purchase Treequote's more expensive automated watering system, so that they can trigger the watering process from the app on their phones. Which business model is most likely to help Treequote Industries accomplish its goals?
Freemium
Fun Robotics produces components used in electronic toys. In fiscal year 2017, Fun Robotics earned an accounting profit of $3 million. However, Fun Robotics' production facilities might have also been used to produce components for mobile phones, which would have generated $2 million in revenues and saved the company $500,000 in production costs. Which of the following statements is true?
Fun robotics earned an economic profit of $500,000
Which of the following scenarios exemplifies a sustainable strategy under the triple-bottom-line approach?
Gogozoom reformulated its products to eliminate chemicals that were widely used in the industry but were being investigated for their potential negative effects on the environment.
Sugar Flakes and Cinnamon Texas Toast both produce similar puffed rice breakfast cereals. For both companies, the cost of producing a box of cereal is 45 cents, and it is not possible for either company to lower their production costs any further. How can one company achieve a competitive advantage over the other?
Increase total perceived consumer benefits through differentiation
Have A Seat Furniture has seen its profit margins shrink over the past several years as increased competition has driven down furniture prices. You have been tasked with improving the company's margins. Which of the following approaches makes the most sense within the context of strategic activity systems?
Install modern manufacturing equipment to improve efficiency
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?
Intels rule to "maximize margin-per-wafer-start"
Leslie owns a large portion of Hue Apparel's stock. However, she is not employed by the company. In this scenario, Leslie is the company's
Internal Stakeholder
_____ are barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy.
Isolating mechanisms
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?
It failed to refine its strategic position over time
The average cost of production for a bottle of vitamin water in the industry is $5 while its average price is $8. Facuet H20 Inc. manufactures the same product for $3 per bottle and sells it for $8 per bottle. Which of the following statements is most likely true of Facuet H20 Inc. in this scenario?
It has a competitive advantage in the industry
Shippity and ShipING Inc. are two competing firms in the same industry. Shippity's tangible assets are valued at $15 billion and its intangible assets are valued at $35 billion. ShipING 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?
It is likely that ShipING inc. is better enabled than Shippity to gain and sustain a competitive advantage
Jill is interested in the concept of strategy and decides to create her own. As a result, Jill says that her strategy is to focus on growth and marketing to achieve competitive advantage. How would you evaluate Jill's statement?
Jill should reevaluate her statement because it fails to meet the principles of what a strategy should be
When a firm combines experience-based learning and process innovation, the firm
Jumps to a steeper learning curve
Which of the following is a macroeconomic factor that can affect a firm's strategy?
Levels of employment
Spotless Inc. outsources its production to contract manufacturers located in underdeveloped nations where unskilled labor is at very low wages is plentiful. This has helped the company become a price leader in the chemicals industry. Which of the following is the key driver behind Spotless Inc.'s strategic position?
Low-cost input factors
Urst Ammunition Inc., a firm controlled and managed by the government of Urst, is the only company that has the license to produce defense arms in the country. Which of the following industry competitive structures does this best illustrate?
Monopoly
Which of the following below are not one of the three dimensions that make up the Triple Bottom Line framework?
None of the answers are correct
When company managers formulate strategy decisions resulting from their internal analysis, they are primarily making decisions about how to
Obtain and allocate critical and scarce resources
New Diamond Inc. is a company that sells 24-carat gold biscuits to companies that manufacture jewelry. Because the company operates in an industry where many other suppliers sell standardized products, it can most likely
Only achieve competitive parity
When ASI Inc. declared a dividend of $20,000,000, its market value increased from $8 billion to $8.5 billion. However, it lost a chance to reinvest $20,000,000 in the research and development of a new product which would have earned a profit of $200 million. Thus, this $200 million is referred to as ASI Inc.'s
Opportunity cost
________ is the benefit that is missed or given up when an investor, individual or business chooses one alternative over another.
Opportunity cost
Chips & Motherboards Inc., a leading hard drive manufacturer, recently filed for bankruptcy. While most of Chips & Motherboards Inc.'s competitors were shifting away from physical data storage devices toward online cloud storage services, Chips & Motherboards Inc. invested most of its retained earnings in the effort to improve its hard drives. Once the hard-drive market drastically declined, Chips & Motherboards Inc. was unable to capitalize on the new technology. Which of the following does this scenario best illustrate?
Path dependence
Which of the following is typically an economic responsibility of a firm?
Paying adequate returns to the firm's stockholders on the capital invested by them
When companies that manufacture shipping containers want to buy iron ore, the purchase decision is solely based on price. This is because there are a large number of sellers in the iron ore industry, and iron ore is a highly undifferentiated commodity. Which of the following industry competitive structures does the iron ore industry best illustrate?
Perfect competition
The competitive advantage that one firm has will be short-lived in an industry in which
Perfect competition exists
Which of the following three important stakeholder attributes should managers pay special close attention to in order to better understand stakeholder impact analysis?
Power, legitimacy, and urgency
The ratio Cost of goods sold/Revenue indicates how efficiently a company can
Produce a good
A firm is said to gain a competitive advantage when it can
Provide products similar to its competitors, but at lower prices
Ride N Style Inc. is a bus line with service to several major cities. It has several competitors that each offer service to one or two cities, and based on its current outlays, it cannot match or beat those competitors on price. Because of long-term contracts and an increase in the cost of gasoline, it is not possible to reduce expenditures at this time. Which of these strategies should Ride N Styles pursue instead?
Pursue a differentiated strategy
Nam-zim sells its e-book readers at the cost price of $15 each. However, the company makes its profits when users have to download or buy books online. Which of the following business models is Nam-zim implementing?
Razor-razor-blade
Sally manages the supply chain for a company that sells diamond watches. She learns that economists are predicting a moderate to severe recession in the next six to eight months. Based on that information, what action should Sally recommend to the company's owner?
Reduce supply. Customers generally reduce their purchases of luxury items when the economy falters.
Which of the following strategies does Tesla need to implement or achieve to gain a competitive advantage?
Reinvest profits to build successively better electric automobiles
When young start-up entrepreneurs make claims like, "We will be the Uber of X, where X is any other category than ride hailing" or "We will be the Airbnb of Y, where Y is any other category than hospitality services" they are best illustrating which of the following cognitive biases?
Representativeness bias
Due to resource immobility, a critical assumption in the resource-based model of a firm, the
Resource differences between firms last for a long time
Maroon Inc. is a leading international apparel company. Competitors across the globe have failed to imitate Maroon Inc.'s production models, supply chain systems, knowledge systems, and culture. These attributes have remained unique to Maroon Inc. for a long time. Which of the following assumptions of the resource-based model of competitive advantage does this scenario best illustrate?
Resource immobility
Jennifer, 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 Jennifer employing?
SWOT Analysis
Dora's Supplies manufactures medical devices. The firm's profitability depends on several variables that are subject to occasional change, including the cost of parts and labor, changes in medical practices, and the price of oil used in both manufacturing and shipping. To account for the potential impact of changes to any of these variables, Dora's Supplies managers should implement a(n) ________ approach.
Scenario planning
The three dimensions that make up the Triple Bottom Line framework?
Shareholder wealth creation, economic value creation, and accounting profitability are all dimensions of triple bottom line
A customer-oriented vision statement focuses employees to think about how best to
Solve a problem for a consumer
If a company wants to gain a competitive advantage in a highly competitive industry, it should ideally
Stake out a unique position within the industry
Sean, a retired CEO, invests capital in a start-up company that creates budgeting software. He mentors the entrepreneur and the employees of the company because he wants the company to perform well and survive in the market. Thus, Vincente is the start-up company's
Stakeholder
Through ________, a firm puts its guiding policy into practice by employing a set of coherent actions.
Strategic Implementation
EverMart Inc. is a large company that sells a variety of products such as cosmetics, jewelry, frozen foods, navigation electronics, and airplanes. Apart from this, the company also has a strong presence in the service industry through its chain of dance studios, casinos, and nightclubs. Each of its product divisions operates as an individual business and is responsible for its own profits and losses. Thus, these product divisions under EverMart can be referred to as
Strategic business units
During market testing, Rembrandt Cosmetics realized that the cosmetics industry was dominated by multiple, well-established brands. These brands mostly sold their products in exclusive outlets and departmental stores. Rembrandt Cosmetics management realized that a new entrant would require a different business model to be successful. Thus, Rembrandt Cosmetics started selling its products through direct marketing. In this scenario, Rembrandt Cosmetics accomplished substitution primarily through
Strategic equivalence
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 _____.
Strategic group
A firm's ________ relates to its ability to create value for customers (V) while containing the cost to do so (C).
Strategic position
_______ is best described as a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors.
Strategy
Which of the following stages in the AFI strategy framework involves designing a business, corporate, and global strategy?
Strategy Formulation
We Ensure Inc., an insurance firm, replaced its existing project management software with new software from another supplier. Since the new software has different features and abilities, We Ensure has had to spend $10,000 on training its employees to use it. In this scenario, $10,000 represents We Ensure's
Switching cost
TopHat & Scarfs Inc., an apparel company, recently moved locations to be closer to their main manufacturer in Ohio. The move required that they upgrade their legacy ordering system with their manufactures ordering system which should facilitate their supply chain to gain future efficiencies and reap future savings. However, the new system costs $75,000.00 and will require a significant amount of time to train their employees. This best represents a significant increase in their
Switching costs
In order to achieve a competitive advantage, the Heavenly Hotels, a chain of luxury beach resorts, wants to increase its market share. Which of the following strategies is most likely to do so?
Take advantage of economies of scale and scope by opening a chain of lower-prices economy hotels that leverage the heavenly hotels brand image
Which of the following is not captured when examining a competitive industry structure?
The ability to engage in forward vertical integration
Which of the following will most likely be considered as an airlines core competency?
The airlines ability to make its fleet more fuel efficient than their competitors
In order for a firm to formulate an effective business-level strategy, it is important to remember that competitive advantage is determined by
The characteristics of both the industry and the firm
Bill is researching sociocultural factors related to his employer, a sporting goods manufacturer. Which of the following would be part of the sociocultural forces in a firm's external environment?
The family size of the firm's target market
Which of the following is likely to happen due to horizontal mergers between competitors such as Delta and Northwest airlines?
The overall industry profitability will increase
While Sesmic Inc. operates in a monopolistically competitive industry, Energy 4 All Inc. operates in a monopoly. Keeping this information in mind, which of the following statements is most likely true?
The threat of new entrants will be higher for Sesmic than for Energy 4 All.
When automobile magazines face competition from automobile blogs on the web, which of the following forces in Michael Porter's five forces model primarily gets stronger?
The threat of substitutes
Which of the following is a firm effect that has an impact on the competitive advantage of a firm?
The value and the cost position of the firm relative to its competitors
Visionary companies are able to outperform their competitors because
They provide more aspirational visions
Which of the following statements about product-oriented visions is true?
They tend to force managers to take a myopic view of the competitive landscape
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:
Time compression diseconomies.
Which of the following provides an example of how a firm's valuable resource can be imitated?
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.
Top-down strategic planning as an approach to the strategic management process will be most effective when the
Top management wants to decentralize decision making
For a firm that operates in an industry where competition is high, which of the following practices will result in inferior performance?
Trying to be everything to everybody by combining different competitive strategies
Suzi Lau Apparels Inc. (SLA) had been outsourcing its production to less-developed countries in order to reduce its cost of production. With the emergence of its competitor, Linda Inc., SLA lost its competitive advantage. Linda had its production units in its home country that allowed the company to bring out the latest trends to the market earlier than SLA. Also, SLA frequently suffered due to political instability and lack of intellectual property laws in the outsourced countries. Thus, parts of SLA's strategies became obsolete and it had to relocate its production. What are such obsolete strategies referred to as in the planned emergence model?
Unrealized Strategy
A defining characteristic of the pay-as-you-go business model is that the
Users pay for only the services they consume
Which of the following provides an example of what AFI strategy framework is used for?
Using AFI, the quest Auto firm was able to implement a strategy that produced high-quality cars more efficiently and thereby reduced costs
A "perfectly competitive" industry is one that
Usually exhibits low profitability Have difficulty achieving even temporary competitive advantages Has commodity product offerings
WeComput 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 WeComput Inc. to increase its profitability by lowering its production costs. Thus, WeComput's competency in designing and manufacturing microprocessors will be considered a(n) _____ resource in the VRIO framework.
Valuable
________ denotes the dollar amount a consumer would attach to a good or service.
Value
Product features, customer service, and complements are all examples of important
Value drivers
Which of the following scenarios best illustrates bundling?
Warephase inc. sells seed packages, in which a person can buy a package of three types of seeds at a discounted price compared to buying the seeds individually
Hottechi Laminate has developed a new customer-oriented business model. Rather than maintain a network of showrooms across the country, the business will now let customers choose several styles that interest them from an online site, and will ship samples of each of the styles to the customer to test in their home free of charge. Once they have settled on a tile choice, Hottechi Laminate will send a representative to their home to schedule installation. The company has determined that busy middle-class customers will value the convenience of the new model, which allow them to upgrade the look of their homes without spending time browsing showrooms. The new model will be created by selling the old showrooms and shifting resources to the new online site and regional offices for sales personnel. What question remains for Hottechi Laminate to ask in order to put its strategy into action?
What activities need to be performed to create and deliver the offerings to consumers?
All of the following are questions that managers should ask before crafting a business-level strategy except
When should we introduce our product/service in the market
You are the manager of Value Printing, a leading print shop. Value's resources include a highly experienced staff and state-of-the-art printing presses. However, your closest competition has started to cut into your market share by offering same-day turnaround on most orders. Although your staffing and equipment is not optimized for rapid production, you decide to start offering a same-day guarantee to your customers. According to the resource-based view, what is wrong with this decision?
You have failed to take into account resource immobility
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 _____.
casual ambiguity
Facing stiff competition in the e-reader market, Smart Reads wants to protect its competitive advantage by increasing the perceived value of its reader. Smart Reads' best strategy to accomplish this would be to
highlight the number of celebrities who use Smart Reads e-readers.
Due to the economic recession in Jabu, the profitability of the large corporation Honey Comb Inc. was poor. An analysis of the company's business showed that the company could become profitable if it divested a few strategic business units under its banner. From which of the following businesses would Honey Comb Inc. find it most easy to exit?
the e-commerce retail business, where investments on assets are low
When do employees fail to adopt the organizational values of a firm?
when the top managers in the firm are merely paying lip service to the firm's stated values
Which of the following strategies best illustrates a generic business strategy?
A decision to niche market the jewelry sold by a company while the apparel division under the same company sells its products through mass marketing
