Strategy

How does availability of complements act as a value driver?

Complements add value to a product when they are consumed in tandem with it.

________ is best described as decreases in cost per unit as output increases.

Economies of scale

Describe the relationship between the state of an economy and its level of employment.

Generally speaking, the economy is healthy and able to grow when unemployment is low. High unemployment signals an economy headed for recession. The target unemployment rate is typically between 2-4%. The rate should be low, but a zero unemployment rate would indicate that workers and employers may not have the jobs and employees they desire.

Which of the following scenarios exemplifies a sustainable strategy under the triple bottom line approach?

Impervious Plastics 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 expressions accurately describes market cap?

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

________ precisely indicates how much of a firm's sales is converted into profits.

Return on revenue

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.

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.

The tenet behind the triple-bottom-line is that

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

When wireless service providers offer free or discounted mobile phones for subscriptions to their wireless voice and data service, the perceived value of the service offering increases. In this case, the value driver would be

availability of complements.

Organizational values help individuals make choices that are

both ethical and effective in advancing a company's goals.

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

Organizational and managerial skills that find their expression in a company's structure, routines, and culture are referred to as

capabilities.

Economic value creation is best expressed as

consumer surplus plus firm profit.

A resource-based view of a firm provides a model that systematically aids in identifying

core competencies.

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

Which of the following competitively important assets is typically excluded from a firm's balance sheet?

customer experience

In a firm's external environment, ________ primarily capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class.

demographic trends

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

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

Companies in the same strategic group are ________ to each other.

direct competitors

The best example of a firm's external stakeholder is a(n)

government agency that regulates the prices of products manufactured by the firm.

As a part of strategy formulation, a firm's functional strategy primarily concerns questions relating to

how to implement business strategy.

Which of the following is an advantage of the balanced-scorecard?

it allows managers to translate a firm's vision into measurable operational goals

Competitive rivalry based solely on ________ is destructive to firms as it transfers most of the value created in the industry to the customers.

price-cutting

As the legal owners, ________ have the most legitimate claim on a company's profits.

shareholders

If a company wants to gain a competitive advantage in a highly competitive industry, it should ideally

stakeout a unique position within the industry

A ________ is best described as any activity a firm pursues to explore and develop new products and processes, new markets, or new ventures.

strategic initiative

A traditional top-down strategic planning process typically begins with

strategic leaders adjusting a company's vision and mission based on environmental analysis.

A firm's ________ relates to its ability to create value for customers (V) while containing the cost to do so (C).

strategic position

Strategic thinking is different from strategic planning in that

strategic thinking includes all types of information sources while strategic planning does not

When a firm makes choices between a cost or value position to achieve competitive advantage, it is primarily involved in

strategic trade-offs.

In a large company, who is most responsible for devising the corporate strategy?

the CEO of the company

Which of the following external forces is a part of a firm's task environment?

the composition of the strategic group to which the firm belongs

Which of the following is an external performance metric?

total return to shareholders

During the process of formulating an effective business model, a firm's managers should first

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

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

During strategy implementation, managers primarily focus on deciding the

type of corporate governance that is most effective and ways in which it can put the formulated strategy into practice.

The primary objective of Porter's five forces model is to

understand the profit potential of industries.

What does it mean for a firm to have an 80 percent learning curve?

Every time the cumulative output is doubled, the cost per unit will decline by 20 percent.

How do low interest rates affect a business?

Firms can easily borrow money to finance future growth.

What are the two key insights that form the basis of Michael Porter's seminal five forces model?

First, competition must be viewed more broadly to encompass other forces in the industry. Second, the profit potential for an industry is neither random nor is it entirely determined by industry-specific factors.

How does causal ambiguity act as an isolating mechanism for organizations?

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

In the AFI strategy framework, strategy analysis primarily involves

evaluating the effects of internal resources and core competencies on a firm's potential to gain and sustain a competitive advantage.

The interaction between a firm and its diverse internal and external stakeholders is best described as a(n)

exchange relationship.

Managers use the AFI strategy framework to

explain and predict differences in firm performance.

In the context of the resource-based model of competitive advantage, if a successful firm exhibits resource immobility it means that the

firm will have a sustained competitive advantage because of its unique resources that are difficult for others to replicate that are difficult for others to replicate.

A strategic group will typically include

firms within the same industry.

A firm will fail to create a sustained competitive advantage when the

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

Strategies developed at the departmental level, such as the accounting, human resources, production, and marketing departments, within a strategic business unit are referred to as ________ strategies.

functional

To implement specific business strategies, general managers of strategic business units rely on

functional managers.

When a differentiator charges a similar price as its competitors in the same strategic group but offers more perceived value, it

gains market share from other firms.

After a firm has identified its key stakeholders in stakeholder impact analysis, the immediate next step is to

identify stakeholders' interests and claims.

The first step in stakeholder impact analysis involves

identifying the stakeholders that currently have, or potentially can have, a material effect on a company.

Due to several black swan events in the past, the

implicit trust relationship between the corporate world and society at large has deteriorated.

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 best describes a strategic trade-off?

the tension between value creation and the pressure to keep costs in check

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

Organizational core values are the ________ that govern the behavior of individuals within a firm or organization.

ethical standards and norms

What are the three financial ratios that constitute return on revenue, and what do they tell us?

-cost of goods sold: how efficiently goods can be produced -R&D expense/revenue: how much of each dollar the firm earns is from research and development -selling general & administrative: how much that the firm earns in sales is allocated towards administrative expenses

How does a mission statement differ from a firm's vision?

A mission statement defines a firm's objectives and the approach that it will take to accomplish those objectives. A vision statement however, describes the desired future position of the firm.

The ________ is a model that links strategy analysis, strategy formulation, and strategy implementation, which together helps managers plan and implement a strategy that can improve performance and result in competitive advantage.

AFI strategy framework

Which of the following statements is true of accounting data?

Accounting data are historical data and thus backward-looking.

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

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

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

Learning effects occur over time as output accumulates.

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.

Which of the following is a disadvantage of measuring firm performance through total return to shareholders and firm market capitalization?

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

The ________ allows the scanning, monitoring, and evaluating of changes and trends in a firm's macro environment.

PESTEL framework

After conducting a SWOT analysis, your firm has decided to focus on addressing issues located in the Weaknesses-Opportunities quadrant. Which of the following steps are you most likely to take?

Reorganize the inefficient research and development department to bring innovative products to market more quickly.

Which of the following statements accurately describes a firm's resource stock?

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

Explain the role of power in the strategic leadership process

Strategic leadership entails the ability of a leader to increase profit and achieve the long-term goals of the organization. A strategic leader should also be able to formulate a strategy and use his or her power to implement said strategy through accomplishing both long-term and short-term goals. The leader should be able to ensure a sustained strategic improvement.

Which of the following is an advantage of a triple-bottom-line approach?

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

List the dimensions on which a firm can create greater economic value.

The dimensions which can help a firm to create greater economic value are the economic dimension, the social dimension, and the ecological dimension, aka profits, people, plantet. Achieving positive results in all three categories is representative of a sustainable strategy.

Which of the following applies to the Strength-Threats quadrant of the SWOT matrix?

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

Elaborate on the resource-based view of competitive advantage.

The resource-based view of competitive advantage supports the idea that resources of the firm, whether tangible or intangible, are the key to the superiority or success of the firm.

What are the two different generic business strategies available to firms?

The two fundamentally different business strategies are differentiation strategy and cost-leadership strategy. Managers who implement differentiation strategy seek to create a higher value for consumers than competitors while containing costs. On the other hand, those who adhere to a cost-leadership strategy seek to create the same or similar value for consumers as their competitors, at a lower cost.

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.

Define and elaborate on competitive advantage.

a competitive advantage could be any resource, technological advancement, intellectual property, etc. which gives a firm the strength to stay ahead of its competition. A firm can gain a competitive advantage by identifying its core competencies and applying them in the best possible way, that is hard for the competition to imitate.

Which of the following examples uses a focused differentiation strategy?

a cosmetics brand that offers superior skin lotion for sensitive skin priced at 100 dollars per bottle

A firm always has a competitive disadvantage when its return on invested capital is

below the industry average.

In an industry, the threat of entry is high when

capital requirements are low.

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.

In the top-down strategic planning approach, all strategic intelligence and decision-making responsibilities rest primarily on the

chief executive officer.

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

A firm that achieves superior performance relative to other firms in the same industry or the industry average has a(n)

competitive advantage.

The first step to gain and sustain a competitive advantage is to

define a firm's vision, mission, and values.

In a focused cost-leadership strategy, a firm

delivers low-cost products and services to a specific, narrow part of the market.

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.

According to the value chain analysis, which of the following is a primary activity?

marketing and sales

The ratio of SG&A/Revenue is an indicator of a firm's focus on

marketing and sales to promote its products and services.

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

move down a given learning curve.

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.

The competitive advantage that one firm has will be short-lived in an industry in which

perfect competition exists.

The ratio Cost of goods sold/Revenue indicates how efficiently a company can

produce a good.

The difference between the price charged for a product and the cost to manufacture it is referred to as the

producer surplus.

A firm experiences diseconomies of scale when it

produces at an output level beyond the minimum efficient scale.

A firm is said to gain a competitive advantage when it can

provide products similar to its competitors, but at lower prices.

According to AFI strategy framework, in which of the following tasks of strategic management is a firm's vision, mission, and values identified?

strategy analysis