Quiz 3 Strategic Management

Diseconomies of Scale

an increase in cost of units as output increases

When firms innovate by leveraging existing technologies into new markets, they are said to be involved in:

Architectural Innovations

When a firm is able to successfully employ a blue ocean strategy, it will create a competitive advantage by:

beating rivals on product attributes while offering a better price

ABC Hotels purchased Hyatt for $120 billion. All of Hyatt's hotels are now owned by ABC Hotels and are known as ABC Hotels. What does this scenario describe?

Acquisition

When large, incumbent firms buy start-up companies, the transaction is generally described as a(n)

Acquisition

There are several mechanisms in which strategic alliances can be governed. What is NOT an example of this:

Acquisitions

In a successful ___________ strategy, the trade-offs between differentiation and low cost are reconciled

Blue Ocean

Several notable firms like Eli Lilly, HP, Procter & Gamble, and IBM each wish to become the alliance "partner of choice" for small technology ventures, colleges, and inventors. They each know that ________ is a necessary and critical element for an alliance to be a success.

Building Inter-organizational Trust

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

InGen Pharmaceuticals Inc., Desktop Pharma Inc., and WEN 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 one another. 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?

Co-opetition

Gr8t Food is a chain of "fast casual" restaurants that sells its menu items at higher prices than its competitors. The restaurant has a large customer base due to its wide product portfolio and superior customer service. Which of the following generic business strategies has Gr8t Food adopted in this scenario?

Differentiation

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

Jill is the CEO of Note's Etc, a stationary manufacturer. She decides to open up a retail store to sell her products directly to consumers instead of just selling to retailers. In order to do this, Jill will need to engage in ________, which is a corporate level, strategy.

Horizontal Integration

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

Horizontal Integration

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

Learning effects occur overtime as output accumulates

Decisions relating to the range of products and services a firm will offer determine the firms

Level of Diversification

Facebook has become one of the largest media companies in the world, valued at nearly $50 billion in 2019, but hasn't produced a single piece of content. Facebook is an example of a:

Platform Business

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?

Principal-agent problem

Connell 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?

Product Features

What is the main reason that most mergers and acquisitions negatively effect shareholder value?

Promised synergies never take place

In terms of the build-borrow-or-buy framework, a firm's internal resources are considered to be relevant if they are:

SIMILAR to those that need to be developed and SUPERIOR to those of competitors ion the targeted area

Because Facebook receives almost all of its revenues from online advertising, we would conclude that Facebook would be characterized as a(n) ________ firm, which has the lowest levels of corporate diversification. A) single business B) dominate business C) related diversification D) unrelated diversification

Single Business

Since Coke only focuses on soft drinks, a low degree of product diversification, you could say they compete in what kind of market? As opposed to their competitor Pepsi that sells a wide variety of products?

Single Product

A voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing products or services:

Strategic Alliance

Mark owns Drones 'R' Us, Inc. and is looking for an alternative to vertical integration. He decides to manufacture some of his own parts while keeping a few key suppliers in his industry value chain as well. This is known as

Taper Integration

What is true about joint ventures?

They enable the exchange of both tactic and explicit knowledge

Decisions referring to "what stages of the industry value chain to participate in" determine a firm's:

Vertical Integration

Economies of scale

a decrease in cost of units as output increases

Blue Ocean

a market for a product where there is no competition or very less competition. This strategy revolves around searching for a business in which very few firms operate and where there is no pricing pressure

The strategic objective of a first mover during the introduction stage of the industry life cycle is to:

achieve market acceptance

Jennifer is the strategic business unit (SBU) CEO in charge of manufacturing stereo speakers for computers and laptops. Her SBU earnings and cash flow are both low and unstable. Which of the following strategies should Jennifer enact if examining her SBU through the Boston Consulting Group (BCG) matrix lens?

harvest and/or divest

A disruptive innovation leverages _________ technologies, while architectural innovations are based on __________ technologies.

new; existing

The goal of strategic position is to create the largest gap possible between the _________ that a firm creates through its offerings and the ____________ required to create these offerings.

value; cost

When does a merger between companies typically occur?

when two firms of comparable size join to form a combined entity

Economies of Scope

savings that come from producing two (or more) outputs at less cost than producing each output individually

One of the reasons that big box retailers like Home Depot are able to achieve economies of scale is that:

they are able to take advantage of physical properties and maximize their scale efficiencies by stocking more merchandise and handling inventory more efficiently

One of the risks of pursuing a blue ocean strategy is that a firm can find itself

"stuck in the middle"

Joe wants to restructure the portfolio of all of her firm's strategic business units. Janet will more than likely employ what tool?

BCG Matrix

Bob is the strategic business unit (SBU) CEO in charge of manufacturing suits. While the market he competes in is low in growth, Bob's SBU earnings and cash flow are both ranked high and stable. When examining BOB's SBU through the BCG matrix lens, we can conclude that his SBU would be classified as a:

Cash Cow

This group of customers lead the wave of increased demand as the industry moves from the introduction stage to the growth stage.

Early Majority

What is best described as decreases in cost per unit as output increases?

Economies of Scale

Marriott is able to create greater economic value than its competitors due to their ability to take advantage of ________, which describe the savings that come from producing two (or more) outputs at less cost than producing one output individually, while utilizing the same amount of resources and technology.

Economies of Scope

Delos 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 Delos Autos controlling interests in the start-up company. However, Delos Autos had no obligations to make continued investments in the experiments of the start-up company. It could invest small amounts depending on the new product's success at each stage of its development. If the product proved to be successful, Delos Autos would have the right to buy out the start-up company. This approach to strategic alliance is referred to as

a real-options perspective

Stages of Industry Life Cycle

introduction, growth, shakeout, maturity, decline

Grace wants to form a voluntary arrangement with another firm in order to gain more flexibility in her supply chain, complementary to a few of her support activities via her value chain, and strengthened her firm's overall competitive position. Grace is looking for a simple and common type of alliances, like:

non-duty alliance

The primary goal of a firm pursuing a blue ocean strategy should be to:

offer a differentiated product/service at a low cost

Bill's Hockey Pucks Inc. wishes to pursue international markets like China and Russia. In order to do this, they may wish to consider a possible

strategic alliance with another firm already established in those markets

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

Billy is the CEO of Billy's Kicks, a soccer ball retailer. He decides to purchase the synthetic rubber manufacturing firm so he can create his own soccer balls and sell them, nationally, in his retail stores. In order to do this, Billy will need to engage in ________, which is a corporate level strategy.

Backward Vertical Integration

Digital photography replacing film photography is an example of which type of innovation?

Disruptive

Pete sells Harley Davidson choppers. His business makes 80% of his revenues selling bikes and 20% from repairing bikes. Pete's business would be classified as what type of firm?

Dominate Business