midterm 495

The ultimate objective of the strategic management process is to enable a firm to choose and implement a strategy that leads to a competitive advantage.

True

Which of the following is the best example of forward vertical integration?

an auto manufacturer opening its own dealerships to sell its products directly to customers

In the airline industry, consolidation among fuel providers serving airport facilities would be considered as ____ factor in the five forces model of competition.

an increase in the bargaining power of suppliers of a critical input.

With regards to substituted products or services, a substitute meets ________ customer needs by competing in ________ industry than the firm itself.

approximately the same; a different

The typical risks of a cost leadership strategy include:

new innovations that make its production and distribution processes obsolete.

Which of the following statements about cost leadership and the threat of buyers is accurate?

Cost leaders are not able to absorb costs associated with buyers' demands for increased quality or service.

With regard to the threat of suppliers, product differentiation

reduces the threat of suppliers because a firm with a highly differentiated product can pass increased costs on to customers

Strategic objectives

relate to target outcomes that indicate a company is strengthening its market standing, competitive position, and future business prospects

The industrial organization (I/O) model argues that

the key factor in achieving above average returns is choosing a profitable industry in which to compete.

One benefit of a flexible manufacturing system is that:

the lot size needed to manufacture a firm's product efficiently is reduced.

The strategic management process is

the process of conducting strategic analysis, making decisions about strategies, implementing those decisions and then re-assessing results in order to create and sustain a competitive advantage

All of the following are implications of strategic groups EXCEPT:

the strength of the five forces is the same across strategic groups.

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

A company's mission statement addresses which of the following?

"Who are we, what do we do, and why are we here?"

Which of the following is an example of competitive parity?

A firm produces a similar number of wall clocks at a similar cost as its competitors

Which of these describes a company that has delivered above-average returns to its investors?

A tool manufacturer that announced it will increase its dividend payment because it had the highest Return on Equity amongst all of its industry competitors - for the upcoming quarter due to market share gains in overseas markets.

*All of the following are characteristic of the global economy EXCEPT

All of the following are characteristic of the global economy EXCEPT

A positive relationship between vision statements and firm performance is more likely to exist when

Employees find the vision meaningful and inspiring.

What is the primary impact of a disruptive technology?

It can create a new industry and harm existing industries

Which of the following is an accurate statement about learning effects?

Learning effects occur over time as output accumulates.

A certain marble quarry provides a unique type of marble that is richly colored and strikingly veined. It has been used for churches and public buildings throughout the world. The architect of a new headquarters for a prestigious Fortune 500 firm has specified the use of this marble, and this marble only, for the project. Which of the following statements is MOST likely to be true?

The cost of the marble will be expensive because of the bargaining power of the supplier.

How do strong ethical values benefit a firm?

They serve as the guardrails put in place to keep the company on track when pursuing its mission.

If the average ROE in the heating and cooling industry is 10.1%, and Thermacorp's ROE is 17.3%, Thermacorp is said to have

above average accounting performance

All of the following are aspects of the political/legal segment of the general environment EXCEPT:

attitudes and values.

Firms use the five forces model of competition to identify the __________ of an industry, as measured by its __________.

attractiveness; profitability potential

The likelihood of entry of new competitors is affected by ____ and ____.

barriers to entry, expected retaliation of current industry organizations

In a perfectly competitive industry,

consumers have more choice about the firm they buy from.

The managerial purpose of setting objectives is to

convert the strategic vision into specific performance targets--results and outcomes that management wants the organization to achieve

Actions firms take to gain competitive advantages by operating in multiple markets or industries simultaneously are known as

corporate-level strategies.

In analyzing the demographic segment of the general environment, one typically examines all of the following factors EXCEPT:

cultural values.

The existence of price wars in the airline industry indicates that

customers are relatively weak because of the high switching costs created by frequent flyer programs.

When Total Semiconductors was operating at the minimum efficient scale of 10,000-12,000 units per month, the firm's cost per unit was $45. However, when the output level was increased beyond 12,000 units, the cost per unit increased to $47. This increase was attributed to the wear-and-tear of the machinery, and complexities of managing and coordinating. What is this phenomenon known as?

diseconomies of scale

In contrast to the vision of an organization, its mission should

encompass both the purpose of the company as well as the basis of competition.

A balanced scorecard for measuring company performance

entails creating a set of objectives that is "balanced" in the sense of including both financial and strategic objectives

Firms must be aware of goals other than short-term profit maximization. One area of concern should be social responsibility, which is the

expectation that business will strive to improve the overall welfare of society.

All of the following are forces that create high rivalry within an industry EXCEPT

fast industry growth.

According to the reading, the triple bottom line approach to corporate accounting includes which three components?

financial, environmental, and social

Globalization has led to

higher product quality.

Frequent flyer miles offered by airlines are an attempt to

increase customers' switching costs.

Stakeholders are

individuals, groups, and organizations who have a stake in the success of the organization.

By linking companies with their suppliers, distributors, and customers, __________ provide a company with flexibility.

information networks

Two types of strategic control that firms must exercise for good strategy implementation are

informational and behavioral.

Target's brand promise "Expect More. Pay Less" and appeal to higher-income, fashion-conscious discount shoppers illustrates the __________ strategy.

integrated cost leadership/differentiation

The term "value innovation strategy," focuses on innovations that address four key issues. These issues involve

lowering cost and increasing perceived customer benefits

The term "stuck in the middle":

means that the firm's cost structure is not low enough to allow it to attractively price its products and that its products are not sufficiently differentiated to create value for its target customer.

A cost leadership strategy targets the industry's __________ customers.

most typical

The term "best-cost provider strategy" refers to firms seeking to

offer more value-adding features than the industry's low-cost providers and lower prices than those pursuing differentiation.

A firm can achieve differentiation through all the following means except

offering lower prices to frequent customers

There are several perspectives on the competing interests of stakeholders. One perspective is zero-sum thinking. Zero-sum thinking means that

one can only gain at the expense of someone else

Primark, a fashion retailer, has found a way to keep its coststructure lower than its rivals by leveraging streamlined logistics, a low marketing budget, and negotiating bargain prices from its suppliers. They are using a(n) ______________ strategy

overall cost leadership

Which of the following is not one of the pitfalls of a low-cost provider strategy?

overly aggressive price cutting

Diverse energy sources and energy consumption trends are aspects of the __________ segment of the general environment that firms should monitor.

physical

New entrants to an industry are more likely when

product differentiation and brand loyalty in the industry is low.

Procter and Gamble has perfected a technique for compacting cleaning powder into a liquid concentration. Consumers, retailers, shipping and wholesalers, and environmentalists all have benefited from the resulting change in consumer shopping habits and the revolution in industry supply-chain economics. According to the text, this is an example of

stakeholder symbiosis

A firm's ________ is defined as its theory about how to gain competitive advantages.

strategy

Buyers are powerful when

switching costs are low

The case for sustainability projects needs to be made on the basis of a more holistic and comprehensive understanding of all the _____________ benefits.

tangible and intangible

Rivalry between fast food restaurants is intense due in part to

the existence of many, non-differentiated competitors.

Suppliers are powerful when

they pose a credible threat of forward integration

A firm successfully implementing a differentiation strategy would expect:

to charge premium prices.

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 maximum economies of scale?

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?

3,000-4,000 units

The greatest disadvantage of accounting measures of competitive performance is that they are relatively difficult to compute

False

Ever-improving levels of efficiency enhance profit margins for a cost leader. This affects which of the following forces of industry structure most directly?

Potential entrants

Which of the following statements is true about strategic groups

Profitability varies between different strategic groups

__________ may be considered the advance work that must be done in order to effectively formulate and implement strategies.

Strategy analysis

The innovation and learning perspective of the balanced scorecard is most concerned with which of the following questions?

What do we need in order to continue to improve and create value

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?

Which of the following statements regarding the learning curve and economies of scale is accurate?

Where diseconomies of scale are presumed to exist if a firm gets too large, there is no corresponding increase in costs in the learning-curve model as the cumulative volume of production grows.

Which of the following is a strategic objective that best meets criteria outlined by the SMART goal criteria?

Within three years, increase quality such that our top three industry ratings services (Leap Frog Group, CCH, and MGMA) rank us as #1 in the industry on the basis of quality.

The risks of a focus strategy include:

a competitor's ability to use its core competencies to out-focus the focuser by serving an even more narrowly defined segment.

A firm's ________ is a measure of its competitive advantage calculated using information from a firm's published profit and loss and balance sheet statements.

accounting performance

A company needs financial objectives

because without adequate profitability and financial strength, the company's ultimate survival is jeopardized.

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

business-level strategy

Underperformance relative to other firms in the same industry or the industry average results in a(n) _____ for a firm

competitive disadvantage

Three important sources of flexibility are particularly useful for firms using the integrated strategy. These are:

flexible manufacturing systems, total quality management, and information networks.

Hypercompetition describes a competitive landscape where:

the industry is constantly changing with global competition and innovative competitors.

A pitfall to avoid in pursuing a differentiation strategy is

trying to differentiate on the basis of attributes or features that are easily copied