Org Strategy Exam 1
High demand for online video streaming options is one of Netflix's core competencies.
False
Intellectual property (IP) protections such as trademarks or patents are proven methods of establishing permanent barriers to imitation.
False
Tony's Pizza Shop is able to net $10,000 a week; this makes his shop profitable. His number one competitor, Leo's Pies is also profitable, netting $12,000 a week. Lil Anthony's Pizza Palace nets $13,000 a week. Since Tony's Pizza Shop is profitable, we can conclude that he has a competitive advantage in the industry.
False—competitive advantage is only achieved by generating above average returns, relative to competition.
When the value that a customer attaches to a good or service exceeds the price paid for the good or service, this is a consumer surplus
True
The first step to gain and sustain a competitive advantage is to
define a firm's vision, mission, and values.
A firm's resource-allocation process (RAP) has very little effect on its realized strategy.
False
A good strategy is a set of actions that enables a firm to achieve its own internal goals without regard to the external environment.
False
Managers should create two sets of core values: one for employees and one for themselves. Group starts
False
Corporate executives at Fly High Inc. decide to compete in the remote model airplane industry by making the largest model planes available. By doing this, they completed part of their ________ strategy.
Business
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 valuable but no longer rare.
The goal of a good strategy is focused primarily on
creating superior value while containing costs.
Customer Surplus
getting value over amount you spent on the product
Business Strategy
identifies how a division or strategic business unit will compete in its product or service domain
AFI- Formulation
1.Business Strategy 2.Corporate Strategy 3.Global Strategy
AFI strategy - Analysis
1.Strategic Leadership and the Strategy Process 2.External analysis 3.Internal analysis 4.Competitive advantage, firm performance, and business modules
Business Models
A conceptual framework that expresses the underlying economic logic and system that prove how a business can deliver value to customers at an appropriate cost and make money. Specifies what value to offer customers, and which customers to provide this value to using which products and services at what prices. Specifies how the business will organize and operate Focuses attention on how all the essential components fit into a complete system
Five Forces Model
A framework that identifies five forces that determine the profit potential of an industry and shape a firm's competitive strategy.
Monopoly
A market in which there are many buyers but only one seller.
Oligopoly
A market structure in which a few large firms dominate a market
Corporate Strategy
A strategy that determines the means for utilizing resources in the various functional areas to reach the organization's goals
Which of the following summarizes the difference between a firm's vision and mission?
A vision states what a firm wants to accomplish; a mission states how a firm plans to accomplish this vision.
Which of the following tasks in the AFI strategy framework involves evaluating the internal and external environments in which a firm operates?
Analysis
Isolating Mechanisms
Barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy.
While creating its AFI strategy framework, Gordon's Consultants decided what markets the firm should compete in. By doing this, what type of strategy did the company devise?
Corporate Strategy
Which of the following summarizes the difference between corporate strategy and business strategy?
Corporate strategy deals with where to compete; business strategy deals with how to compete.
C in the Economic Value Creation
Cost
Why is it better for firms to keep their vision statements customer-oriented rather than product-oriented?
Customer-oriented visions tend to be more flexible when adapting to changing environments.
Maria and Tom both serve as SBU managers of their divisions. They have both been asked by the CEO to generate two different courses of action for a new product launch. This strategic decision-making technique can be described as
Dialectic Inquiry
The ___________________ suggest(s) that because the external environment changes, strategic leaders must choose their current and future investments carefully over time in order to best maintain their firm's competitive advantage.
Dynamic capabilities perspective
Industrial Drills, a company that manufactures industrial tools, incurs higher costs because of its refusal to outsource its manufacturing to countries where labor costs are lower. This reflects Industrial Drills' ________ responsibility.
Economic
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.
The interaction between a firm and its diverse internal and external stakeholders is best described as a(n)
Exchange Relationship
A firm is required by society and its shareholders to meet its ethical and philanthropic responsibilities.
False
Accounting, human resources, and research and development (R&D) are examples of primary activities that add value directly to the value chain.
False
As a rule of thumb, the stronger the five forces, the higher the industry's profit potential, which causes the industry to become less attractive for competitors.
False
Firms within the same industry automatically belong to the same strategic group.
False
Product-oriented vision statements are better suited than customer-oriented vision statements for helping companies to adapt to changes in the external environment.
False
Strategic leaders spend the majority of their time working alone to devise new strategies.
False
How do low interest rates affect a business?
Firms can easily borrow money to finance future growth.
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.
Which of the following is an advantage of applying the economic value creation perspective to assess a firm's performance?
In economic value perspective, analysts not only consider historical costs, but also opportunity costs.
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.
How does a sustainable strategy typically help a firm?
It helps the firm achieve positive results along the social and ecological dimensions.
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.
Which of the following best describes a Level 5 manager in the Level-5 leadership pyramid?
Jim is the CEO of Eco Inc.; he has helped his company in gaining and sustaining a competitive advantage through ethical decision making.
Brandon 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, Brandon is in ________ of the Level-5 leadership pyramid.
Level 2
How is a firm's task environment different from its general environment?
Managers have some influence over external factors in the task environment; they have little direct effect over external forces in the general environment.
In nearly every case, which of the Five Forces is the most important in determining the relative power structure in an industry?
No single force is dominant in most every case.
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.
total return to shareholders
Stock price appreciation + dividends
________ are considered the ethical standards and norms that govern the behavior of individuals within a firm.
Organizational Core Values
PESTEL Framework
Political Economic Sociocultural Technological Ecological Legal
________ precisely indicates how much of a firm's sales is converted into profits.
Return on revenue
When conducting a _______________, it's best to examine both PESTEL and Porter's five forces analyses because these tools focus on the external environment.
SWOT analysis
Bob is exploring multiple suppliers in order to find the best price. However, instead of calling all eight potential suppliers, he only reaches out to the first three and bases his selection on those instead of contacting all suppliers. Bob's action best describes the concept of
Satisficing
Competencies
Set of behaviors encompassing skills, knowledge, abilities, and personal attributes that are critical to successful work accomplishment.
________ is best described as an integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage.
Strategic Management
________ is best described as a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors.
Strategy
Through ________, a firm puts its guiding policy into practice by employing a set of coherent actions.
Strategy Implementation
Keeping in mind the five forces in the airline industry, which of the following best explains the difficulty airlines have in generating a profit?
Substitutes are readily available in the form of trains, buses, and cars, thus reducing the profit potential in the industry.
The types of assets that are the primary focus of accounting data but are no longer most important to competitive advantage are
Tangible
Which of the following statements accurately brings out the difference between tangible and intangible resources?
Tangible assets can be bought on the open market by anyone with the necessary cash, whereas intangible assets cannot be easily purchased.
Return on invested capital (ROIC)
The ratio of after-tax operating income to total invested capital; it measures the total return that the company has provided for its investors.
A strategy that has provided competitive advantages in the past will most likely do so in the future.
True
The core competencies of a firm are determined by the interplay of its tangible resources and intangible capabilities.
True
When smartphone manufacturers began including cameras and voice recorders in their products, that was an example of industry convergence.
True
Both UTech Inc. and Mirco Corp. incur a cost of $200 to manufacture a single unit of a cell phone. However, UTech Inc. charges a higher price than Mirco Corp. does, but it still sells a higher number of phones. What does this imply?
UTech Inc. creates more economic value than Mirco Corp. does.
________ is a business model in which the manufacturer sets a fixed price on a product, but the retailer is free to set its own price.
Wholesale
________ is best described as a measure of how effectively capital is being used by a firm to generate revenue.
Working Capital turnover
Competitive Parity
a firm's strategy of setting prices that are similar to those of major competitors
Competitive Advantage
a set of unique features of a company and its products that are perceived by the target market as significant and superior to those of the competition
Sustainable Competitive Advantage
an advantage that cannot be copied by the competition
Emergent Strategy
any unplanned strategic initiative bubbling up from the bottom of the organization
resource heterogeneity
assumption in the resource-based view that a firm is a bundle of resources and capabilities that differ across firms
In a firm's external environment, ________ trends primarily capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class.
demographic
As manager of a relatively new company, you are tasked with analyzing company resources to identify core competencies capable of supporting a competitive advantage. Which of the following resources is most likely to generate a competitive advantage?
enthusiastic company culture
Functional Strategy
guides activities within one specific area of operations
The balanced-scorecard framework is a tool for strategy ________, not ________.
implementation; formulation
Black Swan Event
incidents that describe highly improbable but high-impact events
Return on Revenue
indicates how much of the firm's sales is converted into profits
Given the accelerated pace of technological change, in combination with deregulation, globalization, and demographic shifts, a firm will be successful today only if its
internal strengths change with its external environment in a dynamic fashion
Economies of scale are cost advantages that accrue for firms with
larger output
Which of the following is a macroeconomic factor that can affect a firm's strategy?
levels of employment
Strategic commitments are actions that are
long-term-oriented
Firms that compete within the same strategic group generally experience
more competitive rivalry than firms outside their strategic group.
According to Porter's Five Forces approach, the overall goal of applying the Five Forces analysis to an industry is to make a judgment about its
overall attractiveness.
Subscription based
pay for access
Managers can justify using the balanced-scorecard framework because research show that both ________ and ________ performance dimensions are important when examining the effectiveness of a firm's strategy.
quantitative, qualitative
Southwest Airlines (SWA) and Alaska Airlines both compete as point-to-point airlines, but they draw upon different resource bundles. This example best illustrates which of the following assumptions regarding the resource-based view?
resource heterogeneity
Intangible Resources
resources that do not have physical attributes and thus are invisible
Working Capital Turnover
sales / average working capital
Which of the following strategy plans might work best in an industry that is considered a fast-changing environment with new laws going into effect regularly?
scenario planning
In recent years a growing number of U.S. consumers have become more health-conscious about what they eat. According to the PESTEL Framework this trend could best be classified as a ________ trend.
sociocultural
John is a bit confused about the difference between stakeholders and stockholders. You meet with John and inform him that the main difference is that
stakeholders can be both internal and external while stockholders own shares of a firm and are classified as internal to the firm.
Freemium
subscriptions that provide some content for free but require a monthly subscription to take advantage of all the site has to offer
Which of the following will most likely be considered as an airlines core competency?
the airline's ability to make its fleet more fuel efficient than their competitors
Economic Value Creation
the difference between a buyer's willingness to pay for a product/service and the firm's total cost to produce it
Resource Stocks
the firm's current level of intangible resources
Resource Flows
the firm's level of investments to maintain or build a resource
A firm's strategic position is likely to be strong when
the gap between the value the firm's product generates and the cost to produce it is large.
Groupthink
the mode of thinking that occurs when the desire for harmony in a decision-making group overrides a realistic appraisal of alternatives
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?
the punch presses that produce parts
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?
the value (V) the consumer attaches to the dress
Competitive Disadvantage
underperformance relative to other competitors in the same industry or the industry average
Core Values
unique strengths embedded deep within a firm
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
Disadvantages of Balanced Scorecard
-Focused on implementation, not formulation -Given the number of metrics, it's difficult to know what needs improving if competitive advantage is not achieved -How do you know if you are measuring the most important things
Bill's Auto & Airplane Repair shop is able to generate a positive net income of $10,000 a week; this is the industry average. We can conclude that since he has a positive net income, he also has a competitive parity in the industry.
Correct—competitive parity is achieved by generating average returns, relative to competition in a given industry.
Soft Mattresses Inc. wants to become the largest and most profitable mattress supplier in a three-state area. To do this, Soft should try to create the smallest possible difference between the value that its mattresses creates and the expense that the company must spend to produce the mattresses.
False
The following statement by the chief executive of GoFlix movie studio is an effective strategy: "We will produce the greatest films of the 21st century."
False
The three tasks of the AFI strategy framework are to Assemble a prototype, Find a buyer, and Incorporate feedback. Group startsTrue or False
False
V in the Economic Value Creation
Value
intended strategy
Outcome of rational and structured top down plan
In which of the following situations is the power of suppliers high in an industry?
Suppliers' industry is more concentrated than the industry it sells to.
Perfect Competition
a market structure in which a large number of firms all produce the same product
Susan is trying to determine if her company has a competitive advantage. She must be able to accomplish two critical tasks before she can substantiate this claim. First, she must assess the performance of her company accurately; second, she must
compare and benchmark her firm's performance to other competitors in her same industry.
If Modern Furniture LLC obtains an 18 percent return on invested capital, which of the following will help determine if it has a competitive advantage over other pharmaceutical companies?
comparing the return to the return on invested capital obtained by other firms in the industry
Under the ________ framework, producer surplus is important in the quest for competitive advantage because this is the profit that a firm captures when producing and selling a good or service.
economic value creation
Realized Strategy
formulated through a combination of its top down strategic intentions and bottom up emergent strategy
Dontechi 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?
freemium
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.
Tangible Resources
resources that have physical attributes and thus are visible
Amazon.com's network of distribution centers allow it to drastically reduce its delivery times compared to other online retailers. These distribution centers are examples of Amazon's
tangible resources
Dialectic Inquiry
technique that can help to improve strategic decision making; Key element is that two teams each generate a detailed but alternative plan of action (Thesis and anti-thesis). The goal, if feasible, is to achieve a synthesis between the two plans.
The internet service provider industry in the country of Wakanda is an industry characterized by the presence of strong network effects, high brand loyalty, high economies of scale, and proprietary technology among incumbent firms. Thus, in the internet service provider industry, the
threat of new entrants is most likely low.
A manager's only responsibility is to monitor and assess the performance of his or her firm.
False
Once a strategy has been formulated and implemented, it is important that the firm sticks to it no matter what happens.
False
Resource - Based View
a model that sees certain types of resources as key to superior firm performance
Economic Value Creation Advantages
-Not Completely historical -Considers opportunity costs
AFI- Implementation
-Organizational Design -Corporate Governance and Business Ethics
Economic Value Creation Disadvantages
-Perceived customer value (V) is difficult to determine, depends on... Who the consumer is Income Technological advances Economy Timing Changes in preferences -Measuring firm-level (business-level) competitive advantage, we must estimate economic value created for all products and services offered by the firm
Balanced Scorecard Advantages
-Takes short and long-term performance metrics into consideration -Allows strategic leader to assess the following: Past performance Identify areas for improvement Position the company for future growth
Cartzy Inc., Cartific Inc., and Clustercart 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. Judging from the market conditions described in this scenario, which of the following statements is true?
Any advantage that one firm has will be short-lived
Contour Inc., a vendor, regularly supplies capacitors to All Purpose Electronics for use in its products. Therefore, Contour Inc. is All Purpose Electronics'
External Stakeholder
Green and Good Inc., a multinational company, relies on its media partner OmniSignal to regularly advertise its offers, sales, and new products. OmniSignal is invested in this relationship because it generates most of its revenue from advertising Green and Good's products. In this scenario, OmniSignal is Green and Good Inc.'s
External Stakeholder
Once a firm chooses a business model, it must stick with it for the life of the firm.
False
One of Tiffany & Co's tangible resources is its well-known brand name and reputation for quality timepieces.
False
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?
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.
The ________ allows the scanning, monitoring, and evaluating of changes and trends in a firm's macro environment.
PESTEL framework
_____ describes a process in which the options one faces in a current situation are limited by decisions made in the past.
Path Dependence
As the legal owners, ________ have the most legitimate claim on a company's profits.
Shareholders
An employee lacking some of the innate abilities to be a top-level manager can still become an effective strategic leader through hard work and experience.
True
Because competitors in oligopolistic industries are so interdependent, it is especially important for managers in those firms to monitor and respond to changes their competitors make.
True
Monopolistic competition
a market structure in which many companies sell products that are similar but not identical
Pyramid of Social Responsibility
a model that suggests corporate social responsibility is composed of economic, legal, ethical, and philanthropic responsibilities and that the firm's economic performance supports the entire structure
devil's advocate
a person who has the job of criticizing ideas to ensure that their downsides are fully explored
Which of the following is NOT considered an important macro-environmental influence on businesses (that is, a potential influence beyond that of the industry alone)?
bargaining power of suppliers
Capabilities
organizational and managerial skills necessary to orchestrate a diverse set of resources and deploy them strategically
A positive relationship between vision statements and firm performance is more likely to exist when
organizational structures are aligned with the firm's vision statement.
Efficient Market Hypothesis
the idea that all available information about a firm's past, current state, and expected future performance is embedded in the market price of the firm's stock.