Strategy, Innovation, & Global comp midterm 1

The more buyers there are, the more power they have. True False

False

examples of ________ resources: - Walgreen's locations - Apple's product design team - UPS transportation network - Elon Musk at Tesla

VISOR

•Valuable (must create value) •Difficult or expensive to Imitate •No Substitutes for the resource •The firm is Organized to leverage the resource. (e.g., org. structure, compensation, culture) •Rare among competitors

VISOR

maximum price at which a customer will buy

WTP (willingness to pay)

Assume that TORO uses the same factories to make snow blowers and lawn mowers and the same sales staff to sell both products. Of what are these combinations an example? a. economies of scope b. economies of integration c. economies of scale d. economies of learning & experience

a

Rivalry is more intense when: A. Products are similar or standardized, e.g., paper clips and staples B. Companies do not own specialized assets such as oil rigs. C. The industry is growing quickly. D. There are few competitors.

a

The higher the rate of industry growth, ... A. The less intense rivalry will be. B. The more intense rivalry will be. C. The lower industry profits will be. D. None of the above

a

The owners of the pizza restaurant and the video rental store discover that pizza sales and movie rentals both increase after they start operating in the same space. To what do you attribute this increase? A. Cross-selling B. Reduced threat of substitutes C. Effective branding D. Economies of scope

a

What is the economic logic behind bundling several products or services as Amazon does with Amazon Prime? a. It maximizes revenue by maximizing sales at the price each customer is willing to pay. b. Each customer's WTP is high for all products in a bundle c. Customers are willing to pay a premium price for the convenience of a bundle of products d. More sales increase network effects

a

What is the objective of external analysis? a. To respond to threats and opportunities outside the firm. b. To determine how to exploit strengths of the firm. c. To determine how to shore up weaknesses of the firm. d. To analyze the firm's competition.

a

Which of the following is an example of vertical integration by a firm that makes bicycles? A. The firm makes its own tires. B. The firm sells its products through only one retailer. C. The firm reduces the number of levels in its organizational structure. D. The firm merges with a larger company.

a

Which of the following is not an example of economies of scale? A. Disney uses the same characters in movies, theme parks, and hotels. B. A pharmaceutical company with expensive research and development sells a million doses of its drug per year. C. A beer company spends much money on advertising and sells many cans and bottles of beer

a

How might the rationale of coordination explain why Apple decided to design its own processors for its Macintosh computers? a. Apple can make a better computer by coordinating processor design and operating system development. b. Apple can coordinate purchasing of processors from Intel with its assembly operations. c. Apple can coordinate marketing activities and sales activities. d. Apple has the capabilities required to design processors.

a (?)

Please select all the reasons why we should study the five forces. a. To understand why the average profit in an industry is high or low b. To determine how a firm might improve its position within the industry c. To identify internal strengths and weaknesses d. To determine how much debt to assume and how much stock to issue e. To determine how to expand geographically

a, b

Please select all the reasons why producing its own shows is important for Netflix. a. Netflix achieves differentiation and gives customers a reason to subscribe. b. Netflix gets complete control over scheduling, future seasons, and internationalization of its shows. c. Netflix maximizes its flexibility in sourcing shows. d. Netflix can coordinate production and marketing activities easily.

a, b, d

According to Porter's theory of the five forces, the profitability of an industry is determined by the balance of power among which of the following actors? (select all that apply) a. Industry incumbents b. Buyers c. Regulators d. Possible new entrants e. Investors f. Suppliers

a, b, d, f

Assume that Starbucks' rationale for selling tea in addition to coffee was that selling both products in the same stores would increase revenue for both products. Which test did Starbucks use? a. The synergy test b. The better-off test c. The ownership test d. The organization test

b

Imagine that Starbucks buys a coffee plantation in Colombia and grows its own coffee beans instead of buying them. What is this kind of move called? A. Value chain management B. Backward vertical integration C. Horizontal diversification D. Forward vertical integration

b

One reason that the degree of concentration or fragmentation in an industry is important is: A. It indicates where competitors should expand geographically. B. It helps determine relative power among suppliers and buyers. C. It indicates whether or not a company should diversify its products and services

b

The bargaining power of suppliers influences ... a. The attractiveness of substitutes b. The expenses of focal industry rivals c. The bargaining power of buyers d. The availability of complements

b

The owners of the pizza restaurant are wondering if more value would be created if they bought the video rental store instead of having a contractual relationship with the video rental store. Which test are they applying? A. The profitability test B. The ownership test C. The better-off test D. The synergy test

b

Which of the following does not involve switching costs A. Transferring contacts and photographs to a phone with a different operating system and apps B. Advertising to get customers to buy a new product C. Southwest Airlines buying planes from Airbus instead of Boeing

b

Which of the following items is/are not an example of cross-selling? a. Expedia sells airline flights and hotel reservations b. One firm that Berkshire Hathaway owns sells batteries and another firm that it owns sells ice cream c. GEICO sells home-owners and car insurance d. Barnes & Noble sells electronic books and e-readers

b

Why is understanding the firm's business model an important early step in external analysis? a. It helps identify the firm's strengths and weaknesses. b. It helps identify external factors that are important to the firm. c. It helps identify and evaluate competitors. d. Models are useful in forecasting demand and revenue.

b

in which situation does the buyer have more power, if all other factors are equal? a. One large buyer and two rivals (incumbents in the industry) b. One large buyer and many small rivals (incumbents in the industry)

b

which test asks if the presence of the corporation in a given market improve the competitive advantage of other business units over and above what they could achieve on their own?

better-off test

A firm conducts detailed financial analyses of 1) contracting with a supplier and 2) acquiring that supplier. Which test is the firm using? a. The organizational test b. The synergy test c. The ownership test d. The better-off test

c

How would you characterize these two products — pizza and movies? A. Unrelated products B. Competing products C. Complements D. Substitutes

c

In general, the intensity of rivalry among competitors is greater when: A. There are few competitors because they often compete for the same customers and they know each other's products and tactics well. B. There are many competitors because there is more contention for the same customers. C. There are two competitors of equal size or there are many competitors.

c

Iowa City Brews, a craft brewery, has been making beer for sale in liquor stores and grocery stores for several years. Now it opens its own brewpub and store for selling its beer directly to consumers. Of what is this activity an example? a. Backward vertical integration b. Horizontal diversification c. Forward vertical integration d. Cross-selling

c

Owners of a pizza restaurant are wondering if they would sell more pizzas or be able to charge a higher price for their pizza if they also rented movies in their restaurant. Which test are they applying? A. The ownership test B. The profitability test C. The better-off test D. The synergy test

c

The pizza restaurant buys the video rental store and now offers a 20% discount for a pizza and a movie if they are bought together. Of what is this deal an example? A. Vertical integration B. The paradox of choice C. Bundling D. Social proof

c

Where is the best place to look for strengths and weaknesses? a. STEEP factors b. The firm's activity-system map c. The firm's value chain d. The resource-based view of the firm

c

Which of the following actions is *not* one that a firm might take based on internal analysis? a. Acquiring a firm that makes supplies b. Improving safety and efficiency in a plant c. Complying with a new government regulation d. Hiring experts in a new area of information technology

c

Which of the following is not a reason to study the five forces in a given industry? A. To help determine appropriate strategies of incumbents B. To explain or predict the overall profitability of the industry C. To evaluate the comparative advantages of nations D. To decide whether or not to enter an industry

c

A firm earns more profit than the industry average because: -Its costs are lower than the industry average, or -It earns more revenue than the industry average, or -A combination of the two

competitive advantage

How to create a __________ ___________ 1.Strategy-Generic strategies 2.Resources and capabilities-Resource-based view of the firm-VISOR criteria 3.Activities-The value chain-Activities and their fit

competitive advantage

Two goods that are used together •One good may have little value without its ______________ •If demand forA rises, so does demand for B. •If the price of A rises, the demand for B falls.

complement

generic strategy for competitive advantage. Narrow scope, low cost source

cost focus

At one time, Apple relied exclusively on retailers such as Best Buy to sell its products. Then it opened its own stores. What is this kind of move called? A. Backward vertical integration B. Horizontal diversification C. Value chain management D. Forward vertical integration

d

How might the concern of less flexibility apply to Apple's decision to design its own processors? a. It will be difficult for Apple to be good at designing processors in addition to being good at its other activities. b. Apple will be tied to a single contract manufacturer of its chips. c. It is more difficult for Apple to change its chip designs than it is to have Intel make design changes for Apple. d. Apple will have difficulty switching back to Intel chips if Intel starts making chips that are better than Apple's.

d

Owners of the pizza restaurant and the video rental store save money by operating in the same rental space. Of what is this savings an example? A. Economies of scale B. Diversification C. Cost leadership D. Economies of scope

d

Starbucks started by selling coffee. Then they sold tea as well. Of what is the decision to sell tea an example? a. backward vertical integration b. forward vertical integration c. conglomerate diversification d. horizontal diversification

d

Toro made and sold snow blowers. Then they started making and selling lawnmowers. Of what is this change an example? A. Vertical integration B. Economies of scale C. Value chain management D. Horizontal diversification

d

A new, career-oriented social media network would have difficulty competing against LinkedIn because of: A. Restrictive government policy B. Unequal access to distribution channels C. The threat of Facebook integrating backward D. Demand-side benefits of scale

d (network effects)

generic strategy for competitive advantage. Narrow scope, differentiation source

differentiation focus

Which of the following is not a substitute for a conventional wrist watch? A. A mobile phone B. A fitness band C. Not using any time-keeper D. A pocket watch E. A wrist watch from a different brand

e

cost reductions due to high output. The cost per unit of output generally decreases with increasing size of operations because fixed costs are spread out over more units of output. 2 requirements for this are high fixed costs and produces and sells many units to spread those fixed costs

economies of scale

Increases in efficiency (cost reductions) due to sharing of activities across products •One factory produces two similar products with the same staff and equipment (vs. starting a new factory). •Sales staff can sell a new product during the same sales call (vs. hiring new sales staff or making two calls).

economies of scope

The stronger this force is, the more profitable the industry should be (if all other things are equal): A. Threat of new entrants B. Bargaining power of suppliers C. Bargaining power of buyers D. Threat of substitute products or services E. Rivalry among existing competitors F. None of the above.

f

generic strategy for competitive advantage. Broad scope, differentiation source

overall differentiation

generic strategy for competitive advantage. Broad scope, low cost source

overall focus

which test asks if ownership of the business unit produce a greater competitive advantage than an alternative arrangement would produce?

ownership test

A company's resources and capabilities can produce a sustained competitive advantage by creating value for customers by -lowering costs -providing something of unique value -or some combination of the two

resource based view

These are types of what? - physical - financial - human - organizational - intangible - NOT products, strategies, or ideas

resources

The following are examples of what? •Knowledge of relationship psychology •Knowledge of designing psychological surveys •Data analytics •Software development •Money •Marketing •Understanding of customers' needs and preferences •Large number of customers

resources and capabilities

The following are indicators of what? Advertising •Price discounts •New product introductions •Product improvements •Service improvements

rivalry

products from outside the industry that do the same job as the industry's products.

substitutes

The ability to retain a competitive advantage despite rivals' attempts to beat it.

sustainable competitive advantage

costs incurred to discontinue buying a product/service from one supplier and start buying that product/service from a different supplier (not the cost of the product or service from the new supplier) (a factor in all 5 forces)

switching costs