BA Final

Horizontal mergers often lead to industry fragmentation.

F

Product proliferation often results in lowering of entry barriers in a mature industry.

F

32. An organization with a centralized structure has a potential for creating high bureaucracy. (A) True (B) False

(A)

44. The degree to which a company specifies how decisions are to be made so that employees' behavior becomes predictable is referred to as: (A) uniformity of output. (B) conformity. (C) organizational processes. (D) maximization of effort. (E) behavioral control.

(C)

Suppliers are most powerful when the products that they sell have many substitutes. a. True b. False

False

Subgoal

An objective, the achievement of which helps the organization attain or exceed its major goals

Flat hierarchies

An organizational structure with very few layers of management

A segmentation strategy requires that a company: a. standardize its products. b. offer its products at low costs. c. customize its products. d. produce one basic offering. e. attain high economies of scale by achieving a high volume of sales.

Customize its products

A strategy aims at growing in a declining industry by picking up the market share of companies that are leaving the industry. a. divestment b. harvest c. price signaling d. leadership e. capacity control

D

A leading software company merged with its competitor to form a new company. Which of the following is likely to be the result of this merger?

Decreased cost per unit output

The intellectual property of an organization is a(n): a. tangible resource. b. strategic commitment. c. tangible capability. d. barrier to change. e. intangible resource.

Intangible resource

A company can pursue relative diversification to enhance the competitive position of its core business. (T/F)

T

Companies with a strong track record of internal new venturing generally excel at research and development. (T/F)

T

Market development strategy involves fmding new market segments for a company's products.

T

Vertical integration is undertaken to support the competitive position of a company's core business. (T/F)

T

One strategy for success in high-tech industries is to keep prices low and thus increase sales volume.

t

Adam's boss tells him that their company is pursuing the strategy of horizontal integration. Which of the following is evident from the scenario?

The company will buy or merge with one of its rivals.

Delayering

The process of reducing the number of levels in a management hierarchy

If a company fails to take stakeholder claims into account, stakeholders may withdraw their support.

True

Leveraging competencies involves taking a distinctive competency developed by a business unit in one industry to create:

a new business unit in a different industry.

Battles to set and control technical standards in a market are referred to as product positioning. a. True b. False

b. False

broad low-cost strategy

when a company lowers costs so that it can lower prices and still make a profit

To compete in the fragmented restaurant industry, Starbucks built, and now operates, hundreds of restaurants across the United States and Canada. Which of the following strategies is Starbucks using?

chaining

The final part of the strategy formulation process is:

choosing corporate-level strategies.

Most embryonic industries arise from:

d. a technological breakthrough.

Digital music downloads have high marginal costs.

f

4. An important purpose of control systems is to motivate employees to work toward increasing efficiency, quality, innovation, and responsiveness to customers. (A) True (B) False

(A)

6. Span of control refers to the number of subordinates who report directly to one supervisor. (A) True (B) False

(A)

13. The organizational hierarchy is flatter in a multidivisional structure than in a product or functional structure. (A) True (B) False

(B)

63. When a company engages in delayering, it may be necessary to: (A) increase its basic business operations. (B) increase the number of organizational levels. (C) lay off employees. (D) add to the operating costs. (E) retain the functional processes.

(C)

Which of the following is not a general organizational competency?

Product bundling

A differentiated product is a product that: a. has a greater resale value than rival products. b. provides greater reliability than rival products. c. is offered free of cost on purchase of a company's standard product. d. always costs more than rival products. e. always costs less than rival products.

Provides greater reliability than rival products

Companies invest in specialized assets because these assets allow them to:

lower their cost stmcture.

Which of the following may be true for a company pursuing a strategy of unrelated diversification rather than a strategy of related diversification?

The company has superior strategic management and organizational design.

Incentives

The devices used to encourage desired employee behavior

Values

The ideas or shared assumptions about what a group believes to be good, right and desirable

Organizational processes

The manner in which decisions are made and work is performed within the organization

Controls

The metrics used to measure the performance of subunits and make judgments about how well managers are running them

Span of Control

The number of a manager's direct reports

Agency theory offers a way of understanding why managers do not always act in the best interests of stakeholders.

True

The CEO is a company's principal general manager. a. True b. False

True

Gamma Corp. has recently bought stocks in an under performing company that has failed to maximize stockholder wealth. Gamma Corp. has made changes to the top management structure of the company and has persuaded the management to pursue strategies that maximize the wealth of stockholders. Gamma Corp. has been able to earn millions by doing so. Which of the following concepts is illustrated in this scenario? a. Greenmail b. Agency theory c. Information asymmetry d. Self-dealing e. On-the-job consumption

a. Greenmail

Which of the following is not a characteristic of a fragmented industry?

a. Large mass-production operation

Who among the following is most likely to fall under the category of laggards in the context of customer groups?

a. Phillip is ignorant about the newest uses of technology and buys new products only when they become an absolute necessity.

Microsoft Word, the word-processing software, is so easy to use and has so many useful features that no other software can compete with it. Therefore, Microsoft Word can be described as a killer application. a. True b. False

a. True

Microsoft's near monopoly substantially reduces the risks facing the makers of complementary products and the costs of those products. a. True b. False

a. True

A firm may pursue a chaining strategy to:

obtain the advantages of economies of scale

Joint ventures:

are an alternative to new ventures.

Antitrust authorities:

are concerned with the abuse of market power.

New ventures:

are often preferred by technology-based companies.

36. Which of the following statements is true about establishing technical standards? a. Companies in an industry cannot lobby the government to mandate an industry standard. b. Technical standards are often set by cooperation among businesses, without government help. c. Companies cannot adopt technical standards that are in the public domain. d. Market demand is not taken into consideration when it comes to establishing technical standards. e. The strategy and business model a company has developed for promoting its technological standard holds little importance when it comes to establishing standards.

b

If a company's competitive advantage derives from its control of proprietary technological know-how, it should either license its technology to others or pursue a joint venture. a. True b. False

b. False

Which of the following statements is true in the context of stock-based compensation? a. Stock options usually result in information asymmetry. b. Stock-based compensation schemes for executives can align management and stockholder interests. c. A particular cause for concern is that stock options are often granted at extremely high strike prices. d. Critics deny that stock-based compensations motivate managers to improve company performance. e. Granting more stock options often results in an increase in stockholder equity.

b. Stock-based compensation schemes for executives can align management and stockholder interests.

Which of the following governance mechanisms is regarded as the option of last resort? a. Strategic control system b. Takeover constraint c. Board of directors d. Stock-based compensation system e. Financial statements and auditors

b. Takeover constraint

Which of the following statements is true about fragmented industries?

b. They require companies to use focus strategies to meet specialized customer needs.

Aggressive marketing in the context of format wars: a. deters early adopters. b. helps a company jump-start demand. c. results in lower emphasis on killer applications. d. does not encompass point-of-sales promotion techniques. e. usually triggers a negative feedback loop.

b. helps a company jump-start demand.

Nutrimax, a sports foods manufacturer, has recently expanded its operations to different countries. The company has realized that customers in different countries have different tastes and preferences. So, the company customizes its products based on the country where it's selling. In this scenario, Nutrimax is most likely to be using strategy. a. global standardization b. localization c. Achilles heel d. centralization e. transnational

b. localization

Standardization is a form of:

behavior control.

41. In order to work towards winning a format war, a company should: a. refrain from aggressive marketing and advertising. b. ensure that there is a limited supply of complementary products. c. develop its own killer applications. d. keep the prices high even if the customer demand is extremely low. e. refrain from cooperating with competitors under any circumstances.

c

67. Which of the following statements is true about new entrants in the context of a technological paradigm shift? a. New entrant often face the risks of product cannibalization. b. Pressures to continue the existing out-of-date business model hamstring new entrants. c. New entrants do not need to worry about their established customer base. d. It is difficult for new entrants to focus all their energies on the opportunities offered by the new disruptive technology. e. New entrants are not constrained by lack of capital.

c

Which of the following factors increases pressures for local responsiveness? a. Powerful buyers b. Uniformity in distribution channels c. Host government demands d. Similarities in customer tastes and preferences e. Competitors that are based in high-cost locations

c. Host government demands

Which of the following strategies helps companies with high cost structures, allowing them to survive without having to implement strategies to become more productive and efficient?

c. Price leadership

Which of the following statements is true about technological paradigm shifts? a. They often do not change the nature of competition in an industry. b. They occur when government regulations restrict the use of certain technologies. c. They have the potential to threaten the survival of established industries. d. They can often be handled by established companies without adopting new strategies. e. They strongly deter new entrants.

c. They have the potential to threaten the survival of established industries.

With reference to technical standards, a dominant design refers to: a. a set of design standards that are extremely complicated to adhere to. b. a network of complementary products as a primary determinant of the demand for an industry's product. c. a common set of features or design characteristics. d. a product design that requires extremely high production costs. e. a product design that requires extensive advertising.

c. a common set of features or design characteristics.

Mature industries are generally characterized by:

c. a small number of large firms.

One strategy used to consolidate fragmented industries is:

c. chaining.

Competitive intensity in a declining industry is greatest when:

c. exit barriers are high.

Most manufacturing companies begin their global expansion by: a. licensing. b. franchising. c. exporting. d. forming a joint venture. e. setting up a wholly owned subsidiary in the host country.

c. exporting.

Marginal cost refers to the costs of: a. switching to a new technology. b. adhering to technical standards. c. producing one extra unit of product. d. product promotions. e. licensing new technology.

c. producing one extra unit of product.

Libra Electronics has invented a new technology to make laptops that are extremely lightweight and unbreakable. The company is advertising aggressively and wishes to create demand for its new range of laptops. To attract customers, the company has priced the laptops attractively. However, in order to make profits, the company has priced the batteries required for the laptops extremely high. Which of the following is illustrated in this scenario? a. downsizing strategy. b. harvest strategy. c. razor and blade strategy. d. divestment strategy. e. switching costs.

c. razor and blade strategy.

Nicole is a salesperson at a local Ford dealership. Her bonus pay is dependent upon surpassing sales targets, thus increasing the profitability of the company. Which of the following governance mechanisms is illustrated in this scenario? a. Stock options b. Self-dealing c. The takeover constraint d. Employee incentives e. Greenmail

d. Employee incentives

An embryonic industry is one that:

d. is just beginning to develop and customer demand is initially limited.

Black and Decker, Capitol One, Gillette, and Unilever are all companies that conduct business in two or more national markets. These companies are known as a. bi market companies. b. national companies. c. domestic companies. d. multinational companies. e. localized companies.

d. multinational companies.

A market growth factor that explains customers' perceptions of a new product as better at satisfying their needs than the product it replaces is called:

d. relative advantage

John's surfboard shop has a long-term relationship with two surfboard makers. John is usiog:

parallel sourciog.

Competitive advantage is based on: a. distinctive competencies. b. the Icarus paradox. c. higher cost structure. d. prior strategic commitments. e. barriers to change in a company.

distinctive competencies

55. Consider a cost curve with production volume on the horizontal axis and marginal costs on the vertical axis. What shape would the marginal cost curve most resemble in a high-tech industry? a. Upward at a 45-degree angle b. U-shape c. Straight and vertical d. J-shape e. Straight and flat

e

Which of the following factors in an industry is most likely to cause excess capacity?

e. A company's investments in newer production technology

___________ is a market growth factor that refers to the degree to which the results of using and enjoying a new product can be seen and appreciated by other people.

e. Observability

15. A razor-and-blade strategy refers to lowering a company's cost structure.

f

Antibody Solutions is an American company that specializes in cell bank storage and finding and producing antibodies for bacterial and viral infections. Antibody Solutions would not be considered a high-tech company since it is not in the computer industry which is considered high-tech.

f

Matrix structures:

group activities vertically by function and horizontally by product or project.

Control through organizational culture is so powerful because:

it makes employees follow organizational values, after they've internalized them, without thinking about them.

A company should pursue unrelated diversification instead of related diversification when:

its core skills are highly specialized and have few applications outside its core business.

In 1999, two pharmaceutical companies that shared an equal market share decided to pool their operations to create a new firm that was known by a different name. This is an example of a(n):

merger.

To a large degree, any organization's tasks are a function of its:

strategies.

Consumers will bear the costs of switching technologies when

the benefits of adopting the new technology outweigh the costs of switching.

Donna can make a chair for about $100, she charges customers $150 to buy the chair, and customers perceive that the chair is worth $225. In this case, the consumer surplus is: a. $50. b. $75. c. $125. d. $150. e. $225.

$75

45. In a successful company, the purpose of a control system is to: (A) provide managers with a set of incentives to motivate employees to work toward company goals. (B) allow the managers to use punishments as a tool to ensure that the employees meet the company targets. (C) collect values, norms, beliefs, and attitudes and share them with people and groups in an organization. (D) decide how a company should create, use, and combine organizational structure and culture. (E) assign employees to specific value creation tasks and roles and specify how these tasks and roles should work together.

(A)

14. In a related multidivisional structure, the concept of corporate culture is meaningless. (A) True (B) False

(B)

50. At LittleHippo, an online retail company, the work environment is playful. Employees often get their pictures taken wearing silly wigs and masks. This atmosphere is part of the company's: (A) organizational density. (B) organizational structure. (C) organizational culture. (D) strategic control systems.

(C)

43. To a large degree, any organization's tasks are a function of its: (A) market area. (B) labor supply. (C) supervisors. (D) strategies. (E) compensation plan.

(D)

The term value chain refers to the idea that a company is: a. one of a series of units that comprise an industry segment. b. the producer of a series of customer-valued products that are linked together. c. a series of activities that transform inputs into products that customers value. d. one of a series of economic functions. e. a collection of various products and their attributes.

A series of activities that transform inputs into products that customers value

Compared to a differentiator, the company that follows a low-cost strategy: a. distinguishes its products from those of rivals by offering something that they find hard to match. b. absorbs cost increases by powerful suppliers while keeping to their lower pricing. c. allows the company to charge a premium price for its good or service. d. uses perceived superior value to generate growth in demand among customers. e. creates entry barriers for rivals with greater brand loyalty to the specific products offered.

Absorbs cost increases by powerful suppliers while keeping to their lower pricing

A company considering entering an industry that is in the mature stage of its life cycle would generally prefer which of the following entry strategies?

Acquisitions

Personal control

Control by personal contact with and direct supervision of subordinates

Horizontal integration almost always increases rivalry in an industry. (T/F)

F

Bureaucratic Control

Control through a formal system of written rules and procedures

Common exit barriers include: a. minimal investment in assets like specific machines. b. emotional attachments to an industry. c. low fixed costs associated with leaving an industry. d. the lack of bankruptcy regulations. e. economic independence of a company

Emotional attachments to an industry

Companies with a differentiation advantage tend to charge a lower price for their prodncts.

F

Fortunately, whenever different functions work together, bureaucratic costs inevitably declines. (T/F)

F

Horizontal integration can lead to low cost advantages but rarely to differentiation advantages. (T/F)

F

Strong brand loyalty and high customer switching costs are low barriers to entering an industry. a. True b. False

False

A technological paradigm shift is most likely to occur in which stage of the industry life cycle?

Maturity

The price that one division of a company charges another division for its products, which are the inputs the other division requires to manufacture its own products is known as: a. vertical disintegration. b. related pricing. c. transfer pricing. d. related diversification. e. tapered pricing.

Transfer pricing

A firm obtains competitive advantage when its strategy results in superior performance compared to its competitors. a. True b. False

True

A strategy can be defined as a set of related actions that managers take to increase their company's performance. a. True b. False

True

A technological change, such as the rise of the Internet, can represent either an opportunity or a threat. a. True b. False

True

Attaining future profit growth may require investments that reduce the current rate of profitability.

True

Well-constructed goals provide a means by which the performance of managers can be evaluated. a. True b. False

True

Which of the following entry modes allows a company to engage in global strategic coordination? a. Exporting b. Licensing c. Joint ventures d. Wholly owned subsidiaries e. Franchising

Wholly owned subsidaries

Vertical disintegration is said to occur when:

a company takes advantage of another company it does business with after the other company has made an substantial investment in assets to meet the needs of the company.

Product bundling refers to:

a complete package of related products.

A fragmented industry is one composed of:

a large number of small and medium-sized firms

A technical standard helps to guarantee compatibility between products and their complements. a. True b. False

a. True

A company should pursue related diversification instead of unrelated diversification when the company's:

core skills are applicable to a wide variety of industrial and commercial situations.

Which of the following statements is true of embryonic industries

e. They face the challenge of educating customers who are not familiar with their product benefits.

A typical matrix organizational structure:

groups employees in two ways simultaneously to maximize the rate at which different kinds of products can be developed.

Outsourcing occurs when a firm:

hires another firm to perform value creation activities.

A strategy based on diversification may fail to add value because companies:

incur bureaucratic costs that exceed the value created by the strategy.

Outsourcing:

moves some value chain activities outside the firm.

Technical standards in high-technology industries are

specifications that all producers adhere to when making a product or product component.

The works of Shakespeare and Beethoven and the English language are all examples of standards within the public domain.

t

An industry is considered to be high technology, or high tech, when

the underlying scientific knowledge that companies in the industry use is advancing rapidly.

Decentralization

Structure in which decision-making authority is distributed to low-level managers or other employees

A joint venture allows a company to share the risks and costs associated with establishing a new business unit with another company. (T/F)

T

An organization with a centralized structure has a potential for creating higher bureaucratic costs. (T/F)

T

Innovators and early adopters have very different customer needs from the early majority.

T

Horizontal Differentiation

The formal division of the organization into subunits

In growth industries: a. the intensity of rivalry is very high. b. technological expertise is the most important entry barrier. c. threat from potential competitors is typically highest. d. distribution channels are poorly developed. e. buyers are not familiar with the industry's products.

Threat from potential competitors is typically highest

Flat organizational structures are characterized by:

a relatively wide span of control.

Most manufacturing companies begin their global expansion by exporting. a. True b. False

a. True

A company uses _____ when it focuses on pockets of demand that are declining more slowly than the industry as a whole to maintain profitability.

a. niche strategy

Often, the industry standard is selected competitively by

market demand.

What percentage of the world's PCs adhere to the Wintel standard?

95%

Autonomous subunit

A subunit that has all the resources and decision-making power required to run the operation on a day-to-day basis

Matrix Structure

An organizational structure in which managers try to achieve tight coordination between functions, particularly R&D, production and marketing

Tall hierarchies

An organizational structure with many layers of management

56. Which of the following is NOT true of high-technology industries? a. First movers have an advantage because their customers avoid switching costs. b. First movers have higher pioneering costs than later entrants. c. Later entrants can avoid the mistakes made by first movers. d. First movers that create a revolutionary product are in a monopoly position. e. First movers run the risk of building the wrong resources and capabilities.

a

business-level strategy

a business's overall competitive theme; the way it positions itself in the marketplace to gain a competitive advantage and the different positioning strategies that it can use in different industry settings

Restructuring is:

a radical readjustment of the organization's staffing and hierarchy.

Which of the following factors of a particular product tends to accelerate customer demand for it?

a. High observability

A company, Pluto Inc., employs the franchising strategy to enter a new national market. Which of the following statements is more likely to be true of Pluto? a. It is more likely to be a service company. b. It is more likely to have a greater control over the quality the products manufactured in the foreign country. c. It is less likely to impose strict rules regarding how a franchisee does business. d. It is less likely to receive royalty payment from the franchisee. e. It is more likely to bear the development costs associated with opening a foreign market on its own.

a. It is more likely to be a service company.

A company may create value if it can leverage the skills created within subsidiaries and apply them to other operations within the firm's global network. a. True b. False

a. True

Alliances can be designed to make it difficult (if not impossible) to transfer technology not meant to be transferred. a. True b. False

a. True

Factor endowments, the cost and quality of factors of production, are a prime determinant of the competitive advantage that certain countries have in certain industries. a. True b. False

a. True

In many high-tech industries, the fixed costs of developing a product are very high, but the costs of producing one extra unit of the product are very low. a. True b. False

a. True

Location economies refer to the economic benefits that arise from performing a value creation activity at an optimal location. a. True b. False

a. True

Network effects arise in an industry where: a. the size of the network of complementary products is a primary determinant of demand for an industry's product. b. a large network of companies in an industry use the same business model and strategies. c. a company is able to adhere to the same technical standards across its network of outlets. d. companies network together and lobby for establishing certain technical standards. e. companies that are not in favor of a technical standard network together.

a. the size of the network of complementary products is a primary determinant of demand for an industry's product.

Vertical integration is based on a company entering only those industries that:

add value to its core products.

Ownership of retail outlets may be important for a manufacturer if:

after-sales service is required for complex products.

64. Cell phone technology is replacing traditional wired phone technology. This is an example of a(n): a. first-mover advantage. b. technological paradigm shift. c. format war. d. complementary product. e. embryonic industry.

b

The real estate industry is comprised of different firms in several locations. Some are independent and popular locally, while others are affiliated to national chains. The real estate industry is most likely to be a(n):

b. fragmented industry.

A_____ strategy aims to help a company grow in a declining industry by picking up the market share of companies that are leaving the industry.

b. leadership

Managers using company funds for their own personal consumption is called a. information manipulation b. self-dealing c. takeover constraint d. greenmail e. information asymmetry

b. self-dealing

The growth stage of an industry's life cycle is the:

b. time when companies attempt to secure their grip over customers in existing market segments.

Relish is a large fast food chain that operates in many countries. As there are several competitors in the fast food sector, the company has been facing intense pressures for achieving low cost structures. The company also faces the task of customizing its product line as there are significant differences in tastes and preferences among customers in different geographic locations. In order to achieve both low costs and product differentiation, the company should aim to pursue a strategy. a. global standardization b. transnational c. localization d. downsizing e. divestment

b. transnational

A company pursuing a strategy of vertical integration may expand its operations:

backward into an industry that produces inputs for the company's products.

45. What advice would you give to a firm that wants to exploit network effects? a. Charge heavy license fee for new technology. b. Refrain from using technical standards. c. Create incentives for other firms to develop complementary products. d. Do not use aggressive marketing strategies for killer applications. e. Increase switching costs.

c

What advice would you give to a firm that wants to exploit network effects? a. Charge heavy license fee for new technology. b. Refrain from using technical standards. c. Create incentives for other firms to develop complementary products. d. Do not use aggressive marketing strategies for killer applications. e. Increase switching costs.

c. Create incentives for other firms to develop complementary products.

Which of the following statements is true of growing industries?

c. Innovators and early adopters are typically reached through specialized distribution channels.

Which of the following is an advantage of franchising? a. It ensures tight control over quality. b. It enables companies to engage in global strategic coordination. c. It involves low development costs and risks. d. It enables the company to collect all the profits made by the franchisees. e. It frees companies from the task of monitoring and assisting operations at franchisees.

c. It involves low development costs and risks.

Which of the following is true of stakeholders? a. Creditors are examples of internal stakeholders. b. Stakeholders do not engage in an exchange relationship with their company. c. Stockholders are internal stakeholders that provide an enterprise with risk capital. d. The goals of different stakeholder groups within a company are the same, and therefore do not lead to any conflicts. e. It is mandatory for a company to satisfy the claims of all stakeholders.

c. Stockholders are internal stakeholders that provide an enterprise with risk capital.

Which of the following statements is true about marginal costs in high-technology industries? a. They are invariably higher than fixed costs. b. They are the costs that customers need to bear in order to adopt a new technology. c. They include the costs of packaging and product distribution. d. They are extremely high in software-making companies. e. They do not exist if the product is sold by a sales force directly to end-users.

c. They include the costs of packaging and product distribution.

Which of the following statements is true about corporate raiders? a. They are underperforming corporations that have been acquired by other companies. b. They are government-funded organizations that help underperforming companies recover. c. They may purchase stock in a company to take over the business and run it more efficiently. d. They lack power to interfere with the top management decisions. e. They discourage companies from pursuing strategies that help maximize stockholder wealth.

c. They may purchase stock in a company to take over the business and run it more efficiently.

In case of emergence of a disruptive technology, established companies should: a. avoid investing in newly emerging technologies that may ultimately become disruptive technologies. b. ask customers "Are you interested in this new technology?" c. acquire newly emerging companies that are pioneering potentially disruptive technologies. d. reduce costs on research and development activities. e. avoid commercializing new technologies.

c. acquire newly emerging companies that are pioneering potentially disruptive technologies.

The purpose of governance mechanisms in corporations is to: a. centralize company resources to the top management. b. reduce the scope and frequency of the agency problems. c. satisfy the requirements of the Securities and Exchange Commission (SEC). d. limit corporate growth to manageable rates. e. monitor the performance of the board of directors.

c. satisfy the requirements of the Securities and Exchange Commission (SEC).

Cellular phone service providers often sell the phone itself at very low prices and then charge a relatively high fee for usage. This illustrates: a. the first-mover strategy. b. competitive cooperation. c. the razor and blade strategy. d. competitive positioning. e. format licensing.

c. the razor and blade strategy.

For a strategic alliance, firms should seek partners that are: a. different in terms of vision and agendas. b. known for being opportunistic. c. willing to share costs and risks of product development. d. radically different when it comes to strategic goals. e. similar when it comes to capabilities.

c. willing to share costs and risks of product development.

5. A division is a way of grouping functions to allow an organization to better produce and dispose of its goods and services. (A) True (B) False

(A)

17. In the multidivisional structure, each division typically contains only a partial set of value chain activities. (A) True

(B)

26. One of the main differences between a product team and a team in a matrix structure is that a matrix team is more permanent than a team in a product structure. (A) True (B) False

(B)

29. Research finds that centralization of authority is never advantageous, not even in times of crisis. (A) True (B) False

(B)

3. The purpose of organizational structure is to provide managers with specific feedback on how well an organization and its members are performing. (A) True (B) False

(B)

33. Flat organizational structures are less flexible and tend to resist change. (A) True (B) False

(B)

39. Control through organizational culture is so powerful because: (A) it eliminates the need for managers in large companies. (B) it enables employees to follow organizational values, after they've internalized them, without thinking about them. (C) it results in maximum decentralization and the elimination of bureaucracy. (D) it achieves increased performance through the alignment of organizational goals with external societal expectations. (E) it achieves external control through motivated coworkers.

(B)

41. Which form of control would you most likely find in a voluntary or charity organization? (A) Bureaucratic control through rules and procedures (B) Control through norms and values (C) Financial control through accurate financial statements (D) Output control, since it is the cheapest (E) Incentive systems to motivate employees

(B)

Companies choose the number of hierarchical levels they need on the basis of their strategies and the functional tasks necessary to:

create distinctive competencies.

To be commercially successful, new products must be developed with in mind.

customer requirements

59. Which of the following is NOT a basic strategy for a first mover? a. Develop and market the innovation itself b. Develop and market the innovation jointly with other companies through a strategic alliance or joint venture c. License the innovation to others d. Discourage development of complementary assets e. Increase height of imitation barriers

d

A focused differentiator has the advantage of: a. selling on non-price factors, such as design or customer service. b. producing a large product variety without a large cost penalty. c. producing a basic offering that is relatively inexpensive to produce and deliver. d. being able to respond to demands for deep price discounts. e. being able to initiate a price war in order to grow volume and drive its weaker rivals out of the industry.

A

Companies that successfully differentiate a product often charge *blank* prices for them. a. prermum b. exorbitant c. low d. average e. steep

A

The growth stage of an industry's life cycle is the: a. time when companies attempt to secure their grip over customers in existing market segments. b. time when customers start exiting the markets. c. time to plan an exit strategy. d. opportunity to reduce investment in a product. e. phase when the demand for products is low because of customers not being familiar with the product.

A

Which of the following factors that affect market growth rates refers to the degree to which a new product is perceived as difficult to understand and use? a. Complexity b. Relative advantage c. Compatibility d. Trialability e. Observability

A

A matrix structure would be the most appropriate for which of the following fmus?

A company which is dependent on rapid mobilization of resources for competitive success

Which of the following is an example of a technical standard?

All of these

The concept of efficiency as a building block of competitive advantage applies to: a. all products produced by a firm. b. products consumers believe to be high-quality; not low-quality. c. only those products of a firm popular among a large customer base. d. custom-made products only. e. only those products that have been redesigned.

All products produced by a firm

In which of the following industry envirornnents are acquisitions most likely to be favored over new ventures?

An embryonic industry

New ventures: a. should be killed if they don't make a profit within three years. b. are often preferred by technology-based companies. c. are more attractive compared to acquisitions when entry barriers are high. d. are less risky than acquisitions. e. are best when the company is entering the industry on a small scale.

Are often preferred by technology-based companies

Which of the following is not a necessity for leveraging the competencies of global subsidiaries? a. Incentives for local managers to share knowledge and ideas b. Awareness among managers that competencies can develop anywhere c. Assertion of monopoly of the corporate center over subsidiaries d. Transfer of competencies around the company e. Incentives that encourage employees to take necessary risks

Assertion of monopoly of the corporate center over subsidies

More people seem to fear a snake bite than a dog bite, and yet statistically one is more likely to be bitten by a dog than by a snake. This is because people tend to estimate the probability of an outcome based on how easy the outcome is to imagine. This represents which of the following cognitive biases? a. Escalating commitment b. Hypothesis bias c. Availability error d. Representativeness e. Illusion of control

Availability error

In a harvest strategy, a company: a. significantly increases its investment in a business. b. extracts maximum profits from its investments. c. ventures into new market segments with new products. d. expands the number of stores or properties. e. significantly increases advertising expenditure.

B

When a company decides to exit an industry by selling off its business assets to another company, it is said to be using a(n) strategy. a. market penetration b. divestment c. niche d. downsizing e. outsourcing

B

When a company produces a wide range of products for various customer groups, it is following a strategy. a. cost leadership b. differentiation c. customer retention d. market concentration e. share building

B

Which of the following customer groups represents the leading wave or edge of the mass market? a. Early adopters b. Early majority c. Innovators d. Late majority e. Laggards

B

Which of the following is NOT a basic strategy for a first mover? a. Develop and market the innovation itself b. Develop and market the innovation jointly with other companies through a strategic alliance or joint venture c. License the innovation to others d. Discourage development of complementary assets e. Increase height of imitation barriers

d. Discourage development of complementary assets

Factors that make it difficult for a competitor to copy a company's distinctive competencies are known as: a. barriers to imitation. b. marketing know-how. c. technological know-how. d. support activities. e. capabilities.

Barriers to imitation

Delta Airlines used to advertise its high-quality air travel service by saying it flew "anywhere, anytime." What generic strategy is represented by this advertisement? a. Broad low-cost b. Broad differentiation c. Vertical integration d. Right-time marketing e. Rapid growth

Broad differentiation

Which of the following factors in an industry is most likely to cause excess capacity? a. Technologically outdated production units b. High customer demand c. Increasing age of a company's physical assets d. Lack of competition from new entrants e. Limited number of outlets in certain locations

C

Which of the following statements is true about customer categories in the context of growing industries? a. Laggards frequently adopt new products even when the benefits are not obvious. b. Innovators are the customers who are the last ones to adopt a new product. c. A typical late majority customer group is a behaviorally conservative set of customers. d. Customers in the early majority generally do not understand the value of new technology. e. Laggards form the leading wave or edge of the mass market.

C

Which of the following statements is true about localization strategy? a. It focuses on marketing a standardized product worldwide to achieve cost reductions. b. It makes most sense when cost pressures are extremely intense. c. It is most appropriate when there are similarities across nations with regard to consumer tastes and preferences. d. It involves some duplication of functions and smaller production runs. e. It usually relieves companies of the task of closely monitoring their costs.

d. It involves some duplication of functions and smaller production runs.

Resources: a. are only the tangible assets available to a company. b. can be both tangible and intangible. c. are harder for a company to copy than capabilities are. d. do not include patents, copyrights, and trademarks. e. are considered valuable only if they increase a company's costs.

Can be both tangible and intangible

In a bid to expand its business and gain cost advantages, Omega Inc. has established several merchandising outlets in different locations. All the outlets share a good network and are interconnected by information technology. The entire network of outlets operates in the industry as one large company. Which of the following strategies has Omega Inc. most likely used?

Chaining

Differentiation allows a company to: a. respond to demands of deep price demands from powerful buyers and still make money. b. lower its cost structure. c. charge a premium price for its good or service. d. charge low prices and still make profits. e. initiate a price war in order to grow volume and drive its weaker rivals out of the industry.

Charge a premium price for its good or service

Systematic errors in the decision-making process are most often caused by: a. inadequate information. b. information overload. c. cognitive biases of decision makers. d. poor data collection procedures. e. the devil's advocacy method.

Cognitive biases of decision makers

Cost accountants are responsible for gathering and monitoring data used for controlling the organization's costs. In which value chain activity do cost accountants work? a. Research and development b. Human resources c. Materials management d. Marketing and sales e. Company infrastructure

Company infrastructure

Which form of control would you most likely find in a voluntary or charity organization?

Control through norms and values

SparklingLeaves is one of the major suppliers of automobile tools to StanMotors, a leading automobile company. Many of the tools are customized to meet the specific needs of StanMotors and hence have little other value. In return, StanMotors has agreed to make SparklingLeaves its sole supplier of automobile equipment for a period of 15 years. This scenario illustrates: a. horizontal integration. b. credible commitment. c. competitive bidding. d. vertical integration. e. parallel sourcing.

Credible commitment

The extent of rivalry among established companies is lowest when: a. the industry's product is a commodity. b. demand is growing rapidly. c. exit barriers are substantial. d. the industry is entering a decline stage. e. the fixed costs are high.

Demand is growing rapidly

Kodak possesses the leading imaging technology. This technology has allowed the company to differentiate its products from those offered by rivals. Imaging technology is Kodak's: a. distinctive competence. b. profit. c. support activity. d. value chain. e. retired product.

Distinctive competence

Which of the following will not help an established company in addressing the potential challenge of a disruptive technology?

Distinctive competencies in the current business model

Stanley's services finn wants to enter an embryonic market, but it doesn't have enough cash to purchase the required assets. Which of the following strategies would you recommend to Stanley?

DiversifY with a joint venture

The managers of most companies often consider _____ when they are generating free cash flow. a. taper integration b. full integration c. diversification d. long-term contracts e. strategic alliances

Diversification

Which of the following reasons can make a diversification strategy an unwise course of action for a company to pursue? a. Steady industry conditions b. Varying firm-specific conditions c. Diversification for pooling risks d. Decreasing bureaucratic costs e. Greater differentiation of products

Diversification for pooling risks

Which of the following reasons can make a diversification strategy an unwise course of action for a company to pursue?

Diversification for pooling risks

Lucy's Swirnwear Boutique offers swirnwear that is targeted at affluent people who can afford to buy expensive, handmade swimsuits. Which of the following approaches to market segmentation is Lucy's Swimwear Boutique using? a. Broad differentiation strategy b. Low market segmentation c. Medium market segmentation strategy d. Broad high-cost strategy e. Focus differentiation strategy

E

Beta Corp., a gaming software company, recently launched a new game. The target audience identified by the company was the age group of 12-18 years. The advertising and marketing strategies were designed exclusively to target this age group. However, sales data revealed individuals who belong to the age bracket 18-25 years were the ones who actually bought the game. The managers at Beta Corp. decided to redesign their marketing strategies to position the game as something that people of all ages would enjoy. The company's decision to modify its product positioning demonstrates: a. downsizing strategy. b. emergent strategy. c. deliberate strategy. d. concurrency control

Emergent strategy

Karen, a manager at Libra Inc, had noticed that her subordinates were experiencing a lot of stress. After conducting a meeting with her subordinates, Karen realized that they were extremely overworked and intimidated by close deadlines. Determined to reduce their stress, she introduced a new process that eliminated time-consuming activities and gave them more flexibility for work timelines. This action taken by Karen demonstrates which of the following aspects of emotional intelligence? a. Availability error b. Self-awareness c. Self-regulation d. Motivation e. Empathy

Empathy

Which of the following cognitive biases occurs when decision-makers allocate even more resources to a project after they receive feedback that the project is failing? a. Prior hypothesis bias b. Reasoning by analogy c. Illusion of control d. Escalating commitment e. Representativeness

Escalating commitment

Which of the following statements concerning research and development is correct? a. Exploratory research is more important than development research. b. Development research is more important than exploratory research. c. Exploratory research is directed toward commercialization of a new technology. d. Development research advances basic science. e. Exploratory research and development research are needed for internal new venturing.

Exploratory research and development research are needed for internal new venturing

Which of the following statements concerning research and development is correct?

Exploratory research and development research are needed for internal new venturing.

Most manufacturing companies begin their global expansion by: a. licensing. b. franchising. c. exporting. d. forming a joint venture. e. setting up a wholly owned subsidiary in the host country.

Exporting

A company has a competitive advantage if it can increase costs relative to rivals.

F

When a company outsources its noncore activities to specialists, it looses its capabilities to differentiate its fmal products. (T/F)

F

When a company targets a certain segment or niche, and tries to be the low-cost player in that niche, it is pursuing a broad low-cost strategy.

F

A group of firms all make tools for baking—pots, pans, measuring cups, and utensils. This group should be referred to as a market segment. a. True b. False

False

The primary challenge for a company's human resource function is to find ways to lower wage and benefits costs. a. True b. False

False

The punctuated equilibrium view can be described as a freezing, but not unfreezing, process in an industry's life-cycle. a. True b. False

False

There is a negative relationship between the length of time that a customer stays with a company and profit per customer. a. True b. False

False

To determine its opportunities and threats, a firm should focus on internal processes and capabilities. a. True b. False

False

To increase shareholder value, managers must try to venture into new markets whether the results are profitable or not. a. True b. False

False

When buyers are in a weak bargaining position, companies in the industry must lower their prices to increase profits. a. True b. False

False

While Information Systems have greatly improved productivity, they have had little impact on lowering costs. a. True b. False

False

The Mountain Ski Lodge spent $100,000 marketing and advertising its new ski trails and on-site spa. The money used for marketing and advertising can be referred to as: a. variable costs. b. fixed costs. c. ratio costs. d. diseconomies of scale. e. economies of scale.

Fixed costs

Which of the following does restructuring involve?

Flattening the organizational hierarchy

Research suggests that the adoption of _____ may increase efficiency and lower unit costs relative to what can be achieved by the mass production of a standardized output. a. just-in-time manufacturing b. quick technology c. flexible production technology d. stable production e. unscheduled manufacturing

Flexible production technology

When a company targets a certain segment or niche, and customizes its offering to the needs of that particular segment through the addition of features and functions, the company is pursuing a _____ strategy. a. broad low-cost b. broad differentiation c. product substitution d. focus low-cost e. focus differentiation

Focus differentiation

Lucy's Swimwear Boutique offers swimwear that is targeted at affluent people who can afford to buy expensive, handmade swimsuits. Which of the following approaches to market segmentation is Lucy's Swimwear Boutique using? a. Broad differentiation strategy b. Low market segmentation c. Medium market segmentation strategy d. Broad high-cost strategy e. Focus differentiation strategy

Focus differentiation strategy

Jordan's Ice Creams is strategically located near a university. After realizing that most of its customers, who are mostly students, prefer a wide range of flavors, it started offering different combinations of premium flavors, cones, and toppings to create hundreds of extravagant, customized products. Which generic strategy is Jordan pursuing? a. Broad low-cost strategy b. Broad differentiation strategy c. Focused low-cost strategy d. Focused differentiation strategy e. Product substitution strategy

Focused differentiation strategy

Nick, a professional magician, is often invited to perform magic tricks at birthday parties and other social gatherings from across the country. However, he offers his services only to clients who stay in the same city as him. He is also known to charge less than other magicians in the city. Nick is pursuing which generic business strategy? a. Improved services b. Right-time marketing c. Focused low-cost d. Broad low-cost e. Deterrence strategy

Focused low-cost

The threat from potential competitors is greatest in the _____ stage of the industry life cycle. a. embryonic b. growth c. shakeout d. maturity e. decline

Growth

When conducting an internal analysis, strategic managers should: a. identify its internal resources and evaluate the quality of those resources. b. only count something as a resource if the company is actively managing it. c. always file for patents and trademarks on intellectual property. d. exclude any resource as a source of competitive advantage if it isn't rare. e. identify as many resources as possible, regardless of their value or rarity.

Identify its internal resources and evaluate the quality of those resources

One of the primary roles of human resources in achieving superior efficiency is: a. scheduling meetings among various value creation functions. b. adopting aggressive marketing to ride down the experience curve. c. designing products for ease of manufacture. d. using information systems to automate processes. e. implementing self-managing teams.

Implementing self-managing teams

Pay for performance based on individual accomplishment of goals tends to: a. increase per-unit costs. b. decrease employee productivity. c. increase employee output. d. have little effect on employee output. e. facilitate teamwork.

Increase employee output

Differences in tastes and preferences: a. increase pressures for cost reductions. b. do not affect service-based firms. c. increase pressures for local responsiveness. d. reduce pressures from the host government. e. significantly decrease R&D costs of a company.

Increase pressures for local responsiveness

The experience curve concept: a. helps a company realize both learning effects and diseconomies of scale. b. suggests that unit manufacturing costs increase by a certain amount each time output is increased. c. is very important in industries that mass-produce a standardized output. d. suggests that achieving low costs allows a firm to charge a premium price. e. is least likely to bottom out as long as the company does not stop production.

Is very important in industries that mass-produce a standardized output

Which of the following statements is true about international strategy? a. It is usually adopted by companies that face intense cost pressures due to competition. b. It makes most sense when the pressures for local responsiveness are very intense. c. It often involves the head office retaining tight control over marketing and product strategy. d. It often involves decentralizing product development functions such as R&D to different subsidiaries. e. It involves extensive scope for localization and product differentiation.

It often involves the head office retaining tight control over marketing and product strategy

Which of the following statements is false? a. Joint ventures are preferable to acquisitions when the new business is related to the existing business. b. Acquisitions are preferable to new ventures when speed is important. c. Joint ventures are generally preferable to acquisitions when entry barriers are high. d. Acquisitions can be both a reason for corporate decline and part of a turnaround strategy. e. New ventures are preferable to acquisitions in the embryonic stage of the industry life cycle.

Joint ventures are generally preferable to acquisitions when entry barriers are high

Which of the following statements is false?

Joint ventures are generally preferable to acquisitions when entry barriers are high.

Cool Looks, Inc. is a local fashion design company that actively solicits comments from its customers about the quality of its clothing and the kind of merchandise they want it to supply. Which of the following mechanisms for focusing on the customer is Cool Looks utilizing? a. Managing materials b. Improving response time c. Demonstrating leadership d. Shaping employee attitudes e. Knowing customer needs

Knowing customer needs

Learning effects are a result of: a. automation. b. knowledge acquired by doing. c. sound product planning tactics. d. diseconomies of scale. e. outsourcing.

Knowledge acquired by doing

Aries Travels is a company that offers holiday and travel packages. The company realizes that customer preferences vary and thus extensively customizes its packages. As there are not many competitors in the market in which Aries Travels operates, there are minimal pressures to reduce costs. Aries Travels is most likely to have adopted a _____ strategy. a. global standardization b. international c. localization d. transnational e. harvest

Localization

Nutrimax, a sports foods manufacturer, has recently expanded its operations to different countries. The company has realized that customers in different countries have different tastes and preferences. So, the company customizes its products based on the country where it's selling. In this scenario, Nutrimax is most likely to be using _____ strategy. a. global standardization b. localization c. Achilles heel d. centralization e. transnational

Localization

Which of the following support activities in the value chain refers to the transmission of physical materials from procurement through production and into distribution? a. Human resources b. Information systems c. Research and Development d. Logistics e. Operations

Logistics

To build trust in a cooperative relationship, both firms can: a. rely on competitive bidding. b. make mutual investments in specialized assets. c. write short-term contracts that must be renewed frequently. d. increase their vertical integration. e. use outsourcing of noncore activities.

Make mutual investments in specialized assets

Which of the following is NOT a main approach to market segmentation? a. Marketing a product targeted toward average or typical customers b. Marketing a product to a group of people who are more likely to purchase it c. Making customized products to suit the unique requirements of customers d. Making products to meet the specific needs of a narrow group of customers e. Making one product aimed toward a general, rather than a specific subset of customers

Making one product aimed toward a general, rather specific subset of customers

In a typical scenario planning exercise: a. managers entirely depend on employee feedback. b. managers try to come up with alternative plans after a business model has failed. c. managers formulate plans based on 'what-if' situations about the future. d. managers do a 'postmortem' to understand what went wrong with a strategy. e. the corporate-level management sets targets for functional-level managers.

Managers formulate plans based on 'what-if" situations about the future

Ford Motors developed the Explorer sports utility vehicle in 1990, and it is still in the top ten best-selling sports utility vehicles in the United States, based on an extensive study of customer preferences. Which value chain activity of Ford conducted those studies? a. Research and development b. Human resources c. Materials management d. Marketing and sales e. Company infrastructure

Marketing and sales

Production of a large product variety without a large cost penalty is known as: a. market concentration. b. market segmentation. c. focused differentiation. d. mass production. e. mass customization.

Mass customization

Which of the following statements about declining industries is true?

Not all segments of an industry typically decline at the same rate.

In which of the following is a firm most likely to lose direct control over value creation activities?

Outsourcing

Due to a recent relaxation in the pollution control laws by the government, Alpha Motors has reduced the production of its electric-powered cars. The company is responding to a change in which of the following macroenvironmental forces? a. Macroeconomic b. Demographic c. Political and legal d. Social e. Global

Political and legal

At its simplest level, a joint venture may be thought of as: a. a merger of two companies. b. an acquisition of a smaller company by a larger company. c. a form of strategic outsourcing. d. a sign of weakness on the part of one of the companies. e. pooling of resources by two or more firms to create new business.

Pooling of resources by two or more firms to create new business

Which of the following is not a product attribute? a. Form b. Features c. Style d. Price e. Reliability

Price

When a company offers a wide variety of products at lower prices than its rivals, it is most likely: a. pursuing a low-cost strategy. b. pursuing a differentiation strategy. c. pursuing a focus strategy. d. pursuing an exit strategy. e. pursuing a divestment strategy.

Pursuing a low-cost strategy

Which of the following is not a necessity for a successful acquisition?

Quick completion of the acquisition

Which of the following is not necessary for a successful acquisition? a. A good bidding strategy b. A clear strategic rationale for making the acquisition c. Quick completion of the acquisition d. Thorough pre-acquisition screening e. Post-acquisition audit to review the process and discuss ways to improve it

Quick completion of the acquisition

When one or more components of a company's value chain are applicable to a wide variety of industrial and commercial situations, which of the following strategies should a company pursue? a. Unrelated diversification b. Related diversification c. A focus strategy d. Taper integration e. Backward integration

Related diversification

Self-managing teams: a. are limited to only very large organizations. b. require members to coordinate their own activities and make decisions. c. typically increase the need for supervisors. d. create a tall organizational structure. e. show negligible increase in productivity and substantial decrease in product quality.

Require members to coordinate their own activities and make decisions

Using the value chain model, which of the following primary activities is performed first, as inputs are transformed into outputs? a. Research and development b. Marketing and sales c. Logistics d. Production e. Service and support

Research and development

If a company is to increase the probability of a new product's commercial success, the company must foster close links between: a. marketing and sales. b. engineering and advertising. c. quality assurance and inventory management. d. research and development (R&D) and marketing. e. accounting and industrial engineering.

Research and development (R&D) and marketing

If a product is to be properly commercialized, there must be integration between: a. research and development and marketing. b. R&D and materials management. c. marketing and materials management. d. finance and marketing. e. marketing and after-sales support.

Research and development and marketing

The ratio of net profit to invested capital is known as: a. return on invested capital. b. return on sales. c. capital turnover. d. cost of goods sold. e. sales, general, and administrative expenses.

Return on invested capital

Competitive advantage typically leads to: a. a defective business model. b. average profitability within an industry. c. superior profitability. d. the Icarus paradox. e. barriers to changes in the organization.

Superior profitability

The experience curve refers to the: a. learning by doing technique. b. company's overall experience in a particular industry. c. systematic lowering of the cost structure and unit cost reductions. d. diseconomies of scale caused by inexperienced workers. e. increases in unit costs experienced over time.

Systematic lowering of the cost structure and unit cost reductions

A differentiated company is protected from intense price rivalry within its industry by its brand loyalty.

T

Ambrosia Inc. is organized into Consumer, Medical, and Pharmaceutical units to serve the needs of its different customer groups. Ambrosia is using a market structure. (T/F)

T

An advantage of horizontal integration is that it can lower a company's cost structure by creating increasing economies of scale. (T/F)

T

An efficiency frontier shows all of the different positions that a company can adopt with regard to differentiation and cost.

T

An important purpose of control systems is to motivate employees to work toward increasing efficiency, quality, innovation, and responsiveness to customers. (T/F)

T

Differentiation can help a company to grow overall demand and capture market share from its rivals.

T

Differentiation leads to high brand loyalty, which in tum significantly increases the threat of new firms entering the industry

T

Diversification is the process of a company entering new industries distinct from its core industry, using a multibusiness model. (T/F)

T

Economies of scope arise when one or more of a diversified company's business units are able to realize cost-saving or differentiation advantages because they can more effectively pool, share, and utilize resources or capabilities. (T/F)

T

In commodity markets, competitive advantage goes to the company that has the lowest costs.

T

Product bundling occurs when a finn offers a range of products that are sold together at a single price. (T/F)

T

The coordination required to realize value from a diversification strategy based on transferring, sharing, or leveraging competencies is a major source of bureaucratic costs. (T/F)

T

The efficiency frontier is not static; it is continually being pushed outwards by the efforts of managers to improve their firm's performance through innovation.

T

The goal for companies in the growth stage of the industry life cycle is to maintain its relative competitive position in a rapidly expanding market.

T

The need for integrating mechanisms is greater when a company's structure is more complex. (T/F)

T

The way a product is differentiated from other products of its type and the price of the product determine which product a customer chooses to satisfy his or her needs.

T

Through chaining, companies increase their buying power, which allows them to negotiate large price reductions with their suppliers, which in tum promotes their competitive advantage.

T

Transferring competencies across industries involves taking a distinctive competency developed in one industry and implanting it in an existing business unit in another industry. (T/F)

T

Vertical integration can be risky when demand is unpredictable because it is hard to manage the volume or flow of products along the value-added chain. (T/F)

T

Vertical integration can raise costs if, over time, a company continues to purchase inputs from company-owned suppliers when independent suppliers can supply the same inputs at lower cost. (T/F)

T

Vertical integration can strengthen a company's differentiation advantage. (T/F)

T

When a company already has a low-cost structure, it has to give up a lot of differentiation in its product offering to get additional cost reductions.

T

Entry barriers in embryonic industries tend to be based on: a. brand loyalty. b. economies of scale. c. absolute cost advantages. d. regulatory advantage. e. technological knowhow.

Technological knowhow

Self-managing work teams: a. increase per-unit costs of manufactured items. b. perform all workplace tasks except the making of hiring decisions. c. increase the cycle time of manufacturing items. d. require team members to learn only one task and specialize in that alone. e. tend to increase productivity and product quality.

Tend to increase productivity and product quality

Which of the following is a disadvantage of first movers? a. They cannot establish significant brand loyalty due to high costs. b. They cannot create switching costs for their customers, thus making it difficult to enter the market. c. They decrease sales volume compared to their rivals, and thus operate at a loss. d. They run the risk of building the wrong resources and capabilities. e. They do not have the power to exploit network effects and positive feedback loops.

d. They run the risk of building the wrong resources and capabilities.

Which of the following entry modes allows a company to engage in global strategic coordination? a. Exporting b. Licensing c. Joint ventures d. Wholly owned subsidiaries e. Franchising

d. Wholly owned subsidiaries

To ensure that basic ethical principles are adhered to in the organization, managers should: a. build an organizational culture that places a high value on economic aspects. b. make sure that leaders within the business only articulate the rhetoric of ethical behavior. c. put minimal governance processes in place. d. check with prior employees regarding someone's reputation before hiring. e. foster and encourage on-the-job consumption.

d. check with prior employees regarding someone's reputation before hiring.

Technological disruption: a. is typically a temporary phase lasting a few months. b. occurs when the manufacturing plants of a company fail. c. mostly affects the new entrants. d. compels firms to adopt new business models. e. is a problem primarily in embryonic industries.

d. compels firms to adopt new business models.

A criticism of stock-based compensation plans is that: a. they discourage empire building. b. they reduce motivation among agents. c. they do not align management and stockholder interests d. they dilute stockholders' equity. e. they adversely affect the earnings of principals.

d. they dilute stockholders' equity.

Which of the following may be true for a company pursuing a strategy of unrelated diversification rather than a strategy of related diversification? a. The company has to achieve coordination between business units. b. The company has narrow organizational competencies. c. The company has superior strategic management and organizational design. d. The company has no bureaucratic costs that arise from the number of businesses in its portfolio. e. The company has no difficulty in keeping its corporate managers informed about the complexities of each business.

The company has superior strategic management and organizational design

A company, at its inception, states that its goal is "to provide the best customer service possible." Which of the following best describes this objective? a. The company's emergent strategy b. The company's corporate structure c. The company's HR strategy d. The company's mission statement e. The company's damage control plan

The company's mission statement

People

The employees of an organization, as well as the strategy used to recruit, compensate, motivate, and retain those individuals; also refers to employees skills, values and orientation

Vertical Differentiation

The location of decision-making responsibilities within a structure, referring to centralization or decentralization, and also the number of layers in a hierarchy, referring to whether to organizational structure is tall or flat

Functional structure

The organizational structure is built upon the division of labor within the firm, with different functions focusing on different tasks

Which of the following is NOT a determinant of the extent of rivalry among established companies? a. Industry competitive structure b. Demand conditions c. The cost structure of firms in an industry d. Exit barriers e. The power of buyers

The power of buyers

Peer Control

The pressure that employees exert on others within their team or work group to perform up to or in excess of the expectations of the organization

Which of the following is not an attribute of a national or country-specific environment that has an impact on global competitiveness of companies located in that nation? a. Factor endowments b. Local demand conditions c. Related and supporting industries d. Strategy, structure, and rivalry of firms within the nation e. Advertising expenses

e. Advertising expenses

______ are internal stakeholders in a company a. Customers b. Goverrnnent regulators c. Board members d. Suppliers e. Creditors

e. Creditors

Which of the following statements is not generally true of a diversification strategy based on the realization of economies of scope? a. The strategy requires the head office to evaluate each business unit as a stand-alone operation. b. The strategy allows a company to realize cost economies among business units. c. The strategy may allow a company to use shared resources more intensively, thereby realizing economies of scale. d. The strategy requires managers to be aware of the costs of coordination. e. The strategy requires close coordination among different business units.

The strategy requires the head office to evaluate each business unit as a standard-alone operation

2. Organizational structure is at the core of an organizations architecture. (A) True (B) False

(B)

54. A drawback of the functional structure is: (A) that each worker must report to more than one superior. (B) the difficulty in communicating and coordinating across functions. (C) too much decentralization of decision-making authority. (D) its lack of flexibility in decision-making. (E) the need to downsize before implementing this structure.

(B)

64. What would be the result if a company were to successfully align its organizational structure with its business-level strategy? (A) Performance will decline (B) Performance will improve (C) Flexibility will improve (D) Stability will decline (E) Improvements in bureaucratic controls

(B)

49. Organizations strive to control employees' behavior by linking ____ systems to their control systems. (A) disciplinary (B) disincentive (C) reporting (D) administrative (E) incentive

(E)

In which of the following cases are bureaucratic costs likely to be lowest?

A company with five divisions that pursues unrelated diversification based on acquisitions and restructuring

Product bundling refers to: a. preparation of products for shipment. b. a complete package of related products. c. a method of stocking products efficiently. d. an inventory procedure for ensuring effective counting of products. e. a package of unrelated products.

A complete package of related products

Standard

A performance requirement that the organization is meant to attain on an ongoing basis

Which of the following factors that affect market growth rates refers to the degree to which a new product is perceived as better at satisfying customer needs than the product it supersedes? a. Complexity b. Relative advantage c. Compatibility d. Trialability e. Observability

B

Thomas tends to be ignorant about technological advancements. He was reluctant to own a smartphone even when they were well-established and familiar in the market. However, Thomas slowly got used to the idea of a smartphone when his job demanded him to be connected to the office network all the time. Thomas is most likely to fall under which of the following categories of customers? a. Early majority b. Late majority c. Laggards d. Early adopters e. Innovators

C

One of the primary roles of research and development in achieving superior efficiency is: a. facilitating cooperation among functions. b. limiting customer defection rates by building brand loyalty. c. designing products for ease of manufacture. d. instituting training programs to build skills. e. implementing pay for performance.

Designing products for ease of manufacture

Acquisitions often fail because of: a. poor commercialization. b. pre-acquisition screening that increases the time it takes to enter a market. c. large-scale entry. d. differences in corporate culture. e. slowness in establishing significant market presence.

Differences in corporate culture

Yankee Candle Company offers customers candles that burn for 50-60 hours, much longer than most department store candle brands. Therefore, customers are willing to pay a higher price for these candles. Which of the following strategies is Yankee Candle Company following? a. Cost leadership b. Rapid growth c. Market segmentation d. Differentiation e. Stuck in the middle

Differentiation

John, a technology enthusiast, is often willing to pay premium prices to be one among those who have new versions of software packages. John most likely belongs to the group of customers. a. laggard b. early majority c. early adopter d. late majority e. innovator

E

Which of the following is not a characteristic of a fragmented industry? a. Low barriers to entry b. Diseconomies of scale c. Brand loyalty in the industry that may primarily be local d. Very specialized customer needs e. Large mass-production operation

E

Feelings of personal responsibility for a project are most likely to lead to: a. prior hypothesis biases. b. escalating commitment. c. reasoning by analogy. d. representativeness. e. ivory tower planning.

Escalating commitment

Alpha corporation owns and controls several retail outlets and is thus pursuing a strategy called franchising.

F

Free cash flow refers to additional funds from a government stimulus program. (T/F)

F

A resource is inimitable if competitors are able to copy it easily. a. True b. False

False

Which of the following is NOT a barrier to entry? a. Economies of scale b. Brand loyalty c. Absolute cost advantages d. High customer bargaining power e. High customer switching costs

High customer bargaining power

Which of the following is not a risk of exporting? a. Tariff barriers b. Transportation costs c. Location diseconomies d. High manufacturing costs e. Delegation of marketing activities to a local agent

High manufacturing costs

_____ consists of the electronic systems for managing inventory, tracking sales, pricing products, selling products, and dealing with customer service inquiries. a. Information systems b. Logistics c. Barriers to imitation d. Benchmark e. Materials management

Information systems

Mobility barriers: a. allow industries to change their strategy and compete in that strategic group. b. inhibit the movement of companies between strategic groups in an industry. c. inhibit companies from shifting between suppliers for the raw materials. d. are factors that operate outside of an industry. e. exclude the barriers to entry into a group and the barriers to exit from a company's existing group.

Inhibit the movement of companies between strategic groups in an industry

Mass customization: a. limits a company's ability to customize products. b. reduces the use of individual machines and hinders quality control at all stages of the manufacturing process. c. increases the setup times for complex equipment. d. is the use of technology to produce large quantities of a standardized output. e. is a company's ability to reconcile low cost and differentiation that were once thought incompatible.

Is a company's ability to reconcile low cost and differentiation that were once thought incompatible

Which of the following statements about customer focus is false? a. It should be modeled by company leaders. b. It is a central part of TQM. c. It can be facilitated by soliciting feedback from the customer. d. It requires that all employees see the customer as the focus of their activity. e. It can be achieved solely by demonstrating leadership .

It can be achieved solely by demonstrating leadership

Tom tends to be ignorant about technological advancements. He was reluctant to own a smartphone even when they were well established and familiar in the market. However, Thomas slowly got used to the idea of a smartphone when his job demanded him to be connected to the office network all the time. Thomas is most likely to fall under which of the following categories of customers?

Laggards

Which of the following seems to be a major determinant of a new venture's success?

Large-scale entry into the target industry designed to build market share, even when such entry involves significant short-term losses

Which of the following statements is true about the board of directors? a. The board members are directly elected by the employees of the company. b. The board has no legal authority to hire, fire, and compensate the CEO. c. Some of the board members hold positions on the boards of several companies. d. The board has no power to nominate people for positions in the management. e. Divisional and functional managers usually form the board.

e. Divisional and functional managers usually form the board.

Which of the following is NOT a role played by infrastructure leadership in implementing reliability improvement methodologies? a. Providing leadership and commitment quality b. Finding ways to manage quality c. Setting goals and creating incentives d. Soliciting input from employees e. Lengthening production runs

Lengthening production runs

Strategic alliances are: a. short-term agreements between two companies to jointly develop new products. b. short-term agreements between two companies to jointly market new products that benefit all companies involved in creating the product. c. short-term partnerships between two companies. d. long-term commitments between two companies to share research and development activities. e. long-term agreements between two or more companies to jointly develop products that benefit all companies involved in the alliance.

Long-term agreements between two or more companies to jointly develop products that benefit all companies involved in the alliance

Which of the following is not one of the benefits that first movers enjoy?

Lower pioneering costs

When credit card companies such as Visa and Mastercard allow an individual to put one of their own photos on their account credit card, they are utilizing: a. mass customization. b. a flexible manufacturing system. c. quality as reliability mantra. d. supply-chain management. e. a just-in-time inventory system.

Mass customization

All employees part of a project team within a structure are known as two-boss employees.

Matrix

Which primary activity in the value chain is concerned with the design of products and production processes? a. Research and development b. Marketing and sales c. Materials management d. Production e. Company infrastructure

Research and development

Centralization

Structure in which decision-making authority is concentrated at a high level in the management hierarchy

Influence costs

The loss of efficiency that arises from deliberate information distortions for personal gain within an organization

Which of the following factors increases pressures for cost reductions? a. Meaningful differentiation between products b. Reduced international competition c. Competitors that are based in high-cost locations d. High switching costs e. Persistent excess capacity

e. Persistent excess capacity

Which entry mode gives a multinational the tightest control over foreign operations? a. Exporting from the home country and letting a foreign agent organize local marketing b. Licensing c. Franchising d. Entering into a joint venture with a foreign company to set up overseas operations e. Setting up a wholly owned subsidiary

e. Setting up a wholly owned subsidiary

Consider a cost curve with production volume on the horizontal axis and marginal costs on the vertical axis. What shape would the marginal cost curve most resemble in a high-tech industry? a. Upward at a 45-degree angle b. U-shape c. Straight and vertical d. J-shape e. Straight and flat

e. Straight and flat

Which of the following statements about fragmented industries is true?

They require companies to use focus strategies to meet specialized customer needs.

At Adam's bicycle repair shop, the primary value chain activity of production occurs each time a customer's bicycle is repaired. a. True b. False

True

While many agency relationships work well, problems arise when agents and principals have different goals.

True

Mature industries are generally characterized by:

a small number of large firms.

Which of the following is NOT true of high-technology industries? a. First movers cannot create switching costs for their customers. b. First movers have higher pioneering costs than later entrants. c. Later entrants can avoid the mistakes made by first movers. d. First movers that create a revolutionary product are in a monopoly position. e. First movers run the risk of building the wrong resources and capabilities.

a. First movers cannot create switching costs for their customers.

Marginal costs in high-technology industries tend to stay very low as production rises. a. True b. False

a. True

One strategy for success in high-tech industries is to keep prices low in order to increase sales volume. a. True b. False

a. True

Digital music downloads have high marginal costs. a. True b. False

b. False

Highest market demand and industry profits arise when:

b. early and late majority users enter the market.

In order to reduce its production costs, Delta LLC. has moved its manufacturing units to an underdeveloped country where there are few labor laws. The employees at the manufacturing units are children and teenagers, and they receive minimal wages. Which of the following ethical issues is illustrated in this scenario? a. On-the-job consumption b. Opportunistic exploitation c. Self-dealing d. Information manipulation e. Substandard working conditions

e. Substandard working conditions

Music CDs and newspaper sales have been falling as users turn to the Internet for their music and news. Which of the following is NOT a strategy for companies in these declining industries?

d. Chaining

Which of the following statements is true of declining industries?

d. Typically, not all segments of an industry decline at the same rate.

Price signaling in mature industries happens when:

d. companies increase or decrease product prices to convey their intentions to other companies.

When managers pay bribes to gain access to lucrative business contracts, they are engaging in: a. information asymmetry b. utilitarianism. c. self-dealing. d. greenmail. e. corruption.

e. corruption.

An embryonic industry is one that:

is just beginning to develop.

Which of the following is an advantage of first movers? a. They are not prone to mistakes. b. They bear lower pioneering costs than later entrants do. c. They only invest in the latest technology. d. They do not run the risk of building the wrong resources as they are highly customer-focused. e. They have an opportunity to exploit network effects and positive feedback loops.

e. They have an opportunity to exploit network effects and positive feedback loops.

When a company expands its sales volume through international expansion, it can realize cost savings from economies of scale through all of the following except: a. spreading fixed costs over its global sales volume. b. utilizing its production facilities more intensely. c. increased bargaining power with its suppliers. d. learning effects associated with higher volume. e. adopting high cost structures.

e. adopting high cost structures.

Mathernatica 1.0 was one of the most distinctive applications for the short-lived NeXT Computer. It still sets the standard for symbolic math and visualization on Windows, Mac, Linux, and Unix. Mathernatica 1.0 can be described as a(n) application. a. dominant b. analogous c. hardware d. strategic e. killer

e. killer

An industry moves from embryonic to growth stage when:

e. ongoing technological progress makes its product easier to use.

Global economies of scale can be realized by: a. restricting the expansion of overseas sales. b. limiting the utilization of production facilities. c. curbing bargaining power with suppliers. d. decreasing cost savings through learning effects. e. spreading the fixed costs associated with developing.

e. spreading the fixed costs associated with developing.

​The strategy in a mature industry to invest in infrastructure that would be cost-prohibitive for new entrants to deter new competition from entering the market is known as:

e. ​technology upgrading.

The highest market demand and industry profits arise when:

early and late majority users enter the market

Which of the following customer groups represents the leading wave or edge of the mass market?

early majority

When decision-making responsibilities are decentralized, benefits include all of the following except:

easier coordination of functions.

An effective organizational design:

economizes on bureaucratic costs.

If a first mover does not have complementary assets, barriers to imitation are high, and there are several capable competitors, the first mover should

enter into a joint venture to protect the product.

Ownership of an industry standard that is protected from imitation by patents and copyrights is a weak organizational resource.

f

The real estate industry is comprised of different firms in several locations. Some are independent and popular locally, whereas others are affiliated to national chains. The real estate industry is most likely to be a(n):

fragmented industry

General organizational competencies are found:

in the skills of a company's top managers and functional experts.

Horizontal integration in an industry tends to:

increase product differentiation.

An impact that the changing industry boundaries have had is that: a. owners of companies can now define boundaries. b. there is an increase in the number of competitors for companies. c. technological changes do not affect companies anymore. d. the pattern of customer needs does not affect companies anymore. e. the number of product substitutes available for customers has reduced.

There is an increase in the number of competitors for companies

Mathematica 1.0 was one of the most distinctive applications for the short-lived NeXT Computer. It still sets the standard for symbolic math and visualization on Windows, Mac, Linux, and Unix. Mathematica 1.0 can be described as a(n) _____ application.

killer

When automobiles first became available to the public, it was difficult for buyers to find products such as tires, gasoline, and light bulbs for their cars. Early automobile owners

lacked complementary products.

When a company engages in restructuring, it may be necessary to:

lay off employees.

A__________ strategy aims to help a company grow in a declining industry by picking up the market share of companies that are leaving the industry.

leadership

Which of the following is not true regarding a company's distinctive competencies? a. They represent the unique strengths of the company. b. They refer to company strengths that competitors cannot easily match or imitate. c. They form the bedrock of a company's strategy. d. They can be based in any of the value creation functions of the company. e. They are shared by many firms in an industry.

They are shared by many firms in an industry

Essentially, centralization or decentralization are concepts that refer to the:

levels where decisions are made in the hierarchy of an organization.

Strategic alliances are:

long-term agreements between two or more companies to jointly develop products that benefit all companies involved in the alliance.

involves taking a distinctive competency developed by a business unit in one industry and implanting it in a business unit operating in another industry.

Transferring competencies

Absorptive capacity refers to the ability of an enterprise to identify, value, assimilate, and use new knowledge. a. True b. False

True

An agency relationship continues down a hierarchy within a company.

True

Close integration between research and development (R&D), production and marketing can help a company avoid innovation failures. a. True b. False

True

Companies facing greater exit barriers find it harder to reduce capacity, and face a greater threat of severe price competition. a. True b. False

True

Companies operating in high-technology industries are dependent on complementary products for their mutual success. a. True b. False

True

Cost reductions gained through mass-producing a standardized output are a source of scale economies. a. True b. False

True

Deregulation of the mortgage industry is an example of how political and legal forces can impact an industry. a. True b. False

True

Diseconomies of scale are the unit cost increases associated with a large scale of output. a. True b. False

True

Distinctive competencies are firm-specific strengths that allow a company to differentiate its products and achieve substantially lower costs than its rivals. a. True b. False

True

Emergent strategies are the unplanned responses to unforeseen circumstances. a. True b. False

True

Flexible production technologies allow a company to produce a wider variety of end products at a unit cost that at one time could be achieved only through the mass production of a standardized output a. True b. False

True

General managers bear responsibility for the overall performance of the company or for one of its major selfcontained subunits or divisions. a. True b. False

True

Governance mechanisms help align the incentives between principals and agents, and help monitor and control agents.

True

Government deregulation of telephone service lowered the barriers to entry and lowered industry profit rates. a. True b. False

True

Growing demand tends to reduce rivalry because all companies can sell more without taking market share away from each other. a. True b. False

True

If a company's profitability is higher than the industry average, it has a competitive advantage. a. True b. False

True

In Porter's competitive forces framework, the stronger the five forces, the ability of established companies to raise prices and earn greater profits becomes more limited. a. True b. False

True

In corporations, agency theory is used to explain the relationship between stockholders and corporate managers, and between upper-level managers and the lower-level managers they supervise.

True

In the fashion industry, the time required to take a new product from design inception to placement in a retail store is known as customer response time. a. True b. False

True

Intellectual property protections, including patents, trademarks and copyrights, typically provide a barrier to imitation. a. True b. False

True

Poor commercialization occurs when there is definite customer demand for a new product, but the product is not well adapted to customer needs because of factors such as poor design and poor quality. a. True b. False

True

Stock-based compensation schemes for senior executives are designed to align the interests of managers with those of stockholders.

True

The "sigma" in the Six Sigma name refers to the Greek letter meaning standard deviation from the mean. a. True b. False

True

The VRIO model is designed to help companies assess the quality of their resources and identify sources of competitive advantage. a. True b. False

True

The values of a company state how managers and employees should conduct themselves. a. True b. False

True

Threats arise when conditions in the external environment endanger the integrity and profitability of a company's business. a. True b. False

True

Through efficient logistics at Grasshopper Grocers, the stock in the stores is automatically replenished when the company receives an alert from customers that their stock is low. Management at Grasshopper Grocers uses a justin- time inventory system. a. True b. False

True

A strategy of vertical integration may be a risky strategy for a company to pursue when demand is: a. predictable. b. stable. c. unpredictable. d. steadily increasing. e. rapidly increasing.

Unpredictable

At LittleHippo, an online retail company, the work environment is playful. Employees often get their pictures taken wearing silly wigs and masks. This atmosphere is part of the company's:

organizational culture.

The process of deciding how a company should create, use, and combine organizational structure, control systems, and culture to pursue a business model successfully is referred to as:

organizational design.

To reduce costs, cost leaders prefer to use to closely monitor and evaluate functional performance.

output controls

At its simplest level, a joint venture may be thought of as:

pool of resources by two or more firms to create new business.

In a successful company, the purpose of a control system is to:

provide managers with a set of incentives to motivate employees to work toward company goals.

Companies that base their diversification strategy on transferring competencies tend to acquire new businesses that are to their existing business activities.

related

For a strategic alliance, firms should seek partners that are: a. different in terms of vision and agendas. b. known for being opportunistic. c. willing to share costs and risks of product development. d. radically different when it comes to strategic goals. e. similar when it comes to capabilities.

Willing to share costs and risks of product development

The degree to which a company specifies how decisions are to be made so that employees' behavior becomes predictable is referred to as:

standardization.

A drawback of the functional structure is:

the difficulty in communicating and coordinating across functions.

Standardization strategy

when a company decides to ignore different segments and produces a standardized product for the average consumer

focus low-cost strategy

when a company targets a certain segment or niche and tries to be the low cost player in that niche

Different strategies are often required to support and strengthen a company's business model as a market develops over time.

T

For each function, a cost leader adopts output controls that allow it to monitor and evaluate functional performance closely. (T/F)

T

Formal price leadership, or when companies jointly set prices, is illegal under antitrust laws.

T

Horizontal integration allows companies to obtain bargaining power over suppliers or buyers and increase their profitability at the expense of suppliers or buyers. (T/F)

T

Horizontal integration can help lower costs when it allows a company to reduce the duplication of resources. (T/F)

T

If a company generates free cash flow, that money technically belongs to shareholders. (T/F)

T

In manufacturing, functional strategy usually centers on improving efficiency and quality. (T/F)

T

Managers use corporate-level strategy to identify which industries a company should compete in to maximize long run profitability. (T/F)

T

One way a diversified company can increase its profitability is by acquiring inefficient or poorly managed companies and then restructuring them to improve their performance. (T/F)

T

Oracle Corp., based in Reno, Nevada, has purchased several other companies to become the world's largest maker of database software. This strategy is known as the strategy of acquisition. (T/F)

T

Relish Inc. created the first national chain of fast-food restaurants in a previously fragmented industry. This is called divestment.

T

Restructuring always involves flattening the organizational hierarchy and downsizing the work force. (T/F)

T

Sara Lee Corp., a clothing firm, purchased Platex Apparel Inc. This purchase helped to make Sara Lee Corp. one of the largest makers of women's apparel in the United States. Sara Lee Corp. utilized an acquisition strategy. (T/F)

T

Silica Dustcloud Inc. is a decentralized organization. This means that the organization promotes flexibility and reduces bureaucratic costs because lower-level managers are authorized to make on-the-spot decisions. (T/F)

T

Span of control refers to the number of subordinates who report directly to one supervisor. (T/F)

T

Strategic outsourcing is the decision to allow one or more of a company's value chain activities or functions to be performed by independent companies. (T/F)

T

The challenge in a fragmented industry is to figure out the best set of strategies to overcome a fragmented market so that the competitive advantages associated with pursuing one of the different business models can be realized.

T

When a company is able to pioneer process innovations that lead to value innovation, it effectively changes the game in an industry and may be able to outperform its rivals for a long period of time.

T

When a company stays inside one industry, the problems of sustaining a successful business model and strategies over time can be difficult because of changing conditions in the envirornnent. (T/F)

T

When a finn does not pay out its free cash flow to its shareholders, the shareholders bear an opportunity cost equal to their next best use of those funds. (T/F)

T

When companies become too tall and the chain of command too long, strategic managers tend to lose control over the hierarchy and, subsequently, their strategies. (T/F)

T

The Internet is an example of a: a. technological force. b. social force. c. macroeconomic force. d. demographic force. e. global force.

Technological forces

When managers of a firm seek to unilaterally rewrite the terms of a contract with suppliers, buyers, or complement providers in a way that is more favorable to their firm, they are engaging in: a. opportunistic exploitation. b. information manipulation. c. downsizing. d. greenmail. e. self-dealing.

a. opportunistic exploitation

Members of the board of directors are supposed to be agents for: a. stockholders. b. employees. c. executive officers. d. customers. e. suppliers.

a. stockholders.

Which of the following factors that affect market growth rates refers to the degree to which a new product is perceived as difficult to understand and use?

a. Complexity

Which of the following customer groups represents the leading wave or edge of the mass market?

a. Early majority

Which of the following is a disadvantage of franchising?

a. It results in the delegation of authority to franchisees, and the franchisor may not enjoy complete control.

________ are applications or uses of a new technology or product that are so compelling that customers adopt them in droves, curbing the demand for competing formats. a. Killer applications b. Razor and blade applications c. Technical standards d. Network effects e. Concurrency control applications

a. Killer applications

Gemini Corp. is a large automobile manufacturer that has contracts with several suppliers. To gain more benefits from an upholstery supplier, Gemini Corp. unilaterally changed the contract and pressurized the supplier to lower its prices. Which of the following concepts is illustrated in this scenario? a. Opportunistic exploitation b. On-the-job consumption c. Agency strategy d. Greenmail e. Self-dealing

a. Opportunistic exploitation

Which of the following statements is true in the context of financial statements and auditors? a. The information contained in the financial statements can enable a stockholder to calculate the ROIC of a company in which he or she invests. b. Publicly traded companies in the United States are not required to file quarterly or annual reports with the SEC. c. So far, there have been no cases in which the auditors were found complying with the companies to misrepresent financial information. d. The SEC requires that the accounts be audited by a committee formed by the board members and senior employees of the company. e. Sarbanes-Oxley Act in 2002 barred CEOs and CFOs from endorsing their company's financial statements.

a. The information contained in the financial statements can enable a stockholder to calculate the ROIC of a company in which he or she invests.

Which of the following is disadvantage of strategic alliances? a. They give competitors a low-cost route to new technology and markets. b. They do not facilitate entry into a foreign market. c. They do not allow for sharing of risks and fixed costs. d. They mandate that the companies do not share complementary skills and assets. e. They cause problems when it comes to establishing technological standards for the industry.

a. They give competitors a low-cost route to new technology and markets.

A company can increase its growth rate by taking goods or services developed at home and selling them internationally. a. True b. False

a. True

A localization strategy is most appropriate when there are substantial differences across nations with regard to consumer tastes and preferences and when cost pressures are not too intense. a. True b. False

a. True

A set of related technical standards that specify the common set of features or design characteristics of a product is called a dominant design. a. True b. False

a. True

Aggressive marketing is a key factor in jump-starting demand to get potential early adopters to bear the switching costs associated with adopting a new innovation. a. True b. False

a. True

An international strategy may not be viable in the long term and to survive, companies that can pursue it need to shift toward a global standardization strategy. a. True b. False

a. True

Companies that are locked out of a market are those in which consumers are unwilling to bear the switching costs required for them to abandon the established standard and adopt the new one. a. True b. False

a. True

Despite the globalization of production and markets, many of the most successful companies in certain industries are still clustered in a small number of countries. a. True b. False

a. True

It is important for a company to make sure that, in addition to the product itself, there is an adequate supply of complements to win a format war. a. True b. False

a. True

Local responsiveness may be driven by economic and political demands placed on companies by host country governments. a. True b. False

a. True

Network effects arise in industries where the size of the "network" of complementary products is a primary determinant of demand for an industry's product. a. True b. False

a. True

Southwest Airlines, Sony, and Costco conduct business in two or more countries. These companies can be referred to as multinational companies. a. True b. False

a. True

Technical standards are often set by cooperation among businesses, without government help. a. True b. False

a. True

Technological paradigm shifts occur when new technologies revolutionize the structure of the industry, dramatically alter the nature of competition, and require companies to adopt new strategies to survive. a. True b. False

a. True

The layout of the keys on a computer keyboard is an example of a technical standard. a. True b. False

a. True

When a company is trying to win a format war, it should license its format for a low fee rather than a high fee. a. True b. False

a. True

When two or more companies are competing with each other to get their technology adopted as a standard in an industry, and when network effects and positive feedback loops are important, the company that wins the format war will be the one whose strategy best exploits positive feedback loops. a. True b. False

a. True

Which of the following statements concerning stock-based compensation schemes for executives is NOT true? a. Under accounting regulations that were enforced until 2005, stock options, like wages and salaries, were expensed. b. Huge stock-option grants can align the interests of management and stockholders. c. Stock-based compensation schemes can dilute the equity of stockholders. d. Huge stock-option grants increase the outstanding number of shares in a company. e. Top managers can earn huge bonuses from stock options that were granted several years prior.

a. Under accounting regulations that were enforced until 2005, stock options, like wages and salaries, were expensed.

Format wars, in the context of high-technology industries, refer to: a. battles to control the source of differentiation, and thus the value that the differentiation can create for the customer. b. the confusion among customers that arises as a result of several choices of formats for PCs and other gadgets. c. the price-based battles in the network of complementary products, which is a primary determinant of the demand for an industry's product. d. conflicts within an organization about which format to adopt for their products. e. price-based battles among companies producing similar products.

a. battles to control the source of differentiation, and thus the value that the differentiation can create for the customer.

When a company decides to exit an industry by selling off its business assets to another company, it is said to be using a(n) _____ strategy.

a. divestment

Customers who have a practical interest in using a new technology in the future and who are willing to experiment and envision new uses for the technology are called:

a. early adopters.

Host government demands generally: a. increase pressures for local responsiveness. b. decrease pressures for cost reductions. c. do not encompass local content rules. d. compel companies to abandon localization strategies. e. impede a company's ability to differentiate its product offering across national borders.

a. increase pressures for local responsiveness.

The first group of customers to enter the market for a new product are called:

a. innovators.

An adequate supply of complements to a product results in: a. more customers opting for the product. b. higher switching costs. c. a significant decrease in the sales of the product. d. a significant decrease in customer demand for the product. e. the company failing to win a format war.

a. more customers opting for the product.

Battles to set and control technical standards in a market are referred to as product positioning.

f

The law of diminishing returns states that marginal costs fall as a company tries to expand output.

f

For a company based in frnal assembly, moving into retail and distribution means:

forward integration.

The real estate industry is comprised of different firms in several locations. Some are independent and popular locally, whereas others are affiliated to national chains. The real estate industry is most likely to be a(n)

fragmented industry

When standards are part of the public domain, they can be used

freely by any company.

Aggressive marketing to jump-start demand for a product often involves all of these except:

high introductory prices.

Vertical integration can be disadvantageous when:

industry technology is changing rapidly.

Control through organizational culture:

involves employees internalizing the norms and values of the organization.

To build trust io a cooperative relationship, both fmns can:

make mutual iovestrnents in specialized assets.

The various strategies that companies should adopt to win format wars revolve around

making network effects work in their favor and against their competitors.

The greater the number of business units in a company's portfolio, the it is for corporate managers to understand the complexities of each business.

more difficult

In any organization, for-profit or not-for-profit, span of control refers to the:

number of subordinates who report directly to one manager.

The specific collection of values, norms, beliefs, and attitudes shared by people and groups in a company is commonly referred to as:

organizational culture.

Marginal cost refers to the cost of

producing one extra unit of product.

The organization structure that organizations most commonly adopt to solve control problems that result from producing many different kinds of products for many different market segments is the:

product structure.

A market growth factor that explains customers' perceptions of a new product as better at satisfying their needs than the product it supersedes is called:

relative advantage

Diversification may dissipate value if it is wrongly based on:

rescuing core business.

If a company is to increase the probability of a new product's commercial success, the company must foster close links between:

research and development (R&D) and marketing.

Economies of scope typically involve:

sharing resources by business units.

Microsoft released its latest operating system, Windows Vista, and intended it to replace earlier versions of Windows. Buyers of Vista had to learn how to use the features of the new software; thus, buyers were facing

switching costs.

A possible strategy for winning a format war is for a company to make sure that, in addition to the product itself, there is an adequate supply of complements.

t

A set of related technical standards that specify the common set of features or design characteristics of a product is called a dominant design.

t

Technological paradigm shifts occur when new technologies come along that revolutionize the structure of the industry, dramatically alter the nature of competition, and require companies to adopt new strategies to survive.

t

The layout of the keys on a computer keyboard is an example of a technical standard.

t

When a company is trying to win a format war it should license its format for a low fee rather than a high fee.

t

In the 1870s, Christopher Sholes invented the layout of keys on a typewriter keyboard, sometimes called the QWERTY layout. This invention is a(n)

technical standard.

There are guidelines for turbine blades for jet engines. These guidelines define the exact material and performance requirements of these engines and can be referred to as

technical standards.

1. Organization architecture is the interaction of structure, controls & incentives, people, processes, and culture within the organization. (A) True (B) False

(A)

10. Organizational structure contributes to strategy formulation by providing the framework of tasks and roles that reduce transaction difficulties and allows employees to think and behave in ways that enable a company to achieve superior performance. (A) True (B) False

(A)

11. Bradley is a new employee in the sales department at a local car dealership. In his first few months on the job, he will be learning the norms and values of the organization. This refers to organizational socialization. (A) True (B) False

(A)

12. In a firm with a multidivisional structure, corporate managers oversee the actions of divisional managers. (A) True (B) False

(A)

15. In a multidivisional structure, corporate managers can compare the performance of one division to another in terms of its cost structure or the profit it generates. (A) True (B) False

(A)

20. Control systems at higher levels of management should provide the basis for lower-level managers to design their control systems. (A) True (B) False

(A)

22. For each function, a cost leader adopts output controls that allow it to monitor and evaluate functional performance closely. (A) True (B) False

(A)

24. To build capabilities in organizational design that would allow a company to develop a competitive advantage, strategic managers must start at the functional level. (A) True (B) False

(A)

25. In manufacturing, functional strategy usually centers on improving efficiency and quality. (A) True (B) False

(A)

27. Delayering always involves flattening the organizational hierarchy and downsizing the work force. (A) True (B) False

(A)

30. The need for integrating mechanisms is greater when a company's structure is more complex. (A) True (B) False

(A)

36. The purpose of a(n) _____ is to provide managers with incentives for motivating employees as well as feedback on how the company performs. (A) control system (B) adaptive culture (C) organizational design (D) span of control (E) hierarchy of authority

(A)

37. Organizational structure can be defined as: (A) the combination of the location of decision-making responsibilities, the formal division of the organization into subunits, and the establishment of integrating mechanisms to coordinate the activities of the subunits. (B) the blueprint that states how managers intend to use organizational resources to most efficiently achieve organizational goals. (C) the specific collection of values, norms, beliefs, and attitudes that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization. (D) the degree to which a company specifies how decisions are to be made so that employees' behavior becomes predictable. (E) the process of redesigning business processes to achieve dramatic improvements in performance, such as cost, quality, service, and speed.

(A)

62. A typical matrix organizational structure: (A) groups employees in two ways simultaneously to maximize the rate at which different kinds of products can be developed. (B) breaks up a company's growing product line into a number of smaller, more manageable subunits. (C) groups people on the basis of their common expertise and experience or because they use the same resources. (D) is a way of grouping employees into separate customer groups so that each group can focus on satisfying the needs of a particular customer group. (E) is a way of grouping employees to best satisfy the needs of customers within different regions.

(A)

68. Essentially, centralization or decentralization are concepts that refer to the: (A) levels where decisions are made in the hierarchy of an organization. (B) number of hierarchical levels existing in an organization. (C) tools that allow an organization to monitor and evaluate whether or not its strategies and structure are working as intended. (D) business models designed to help a company expand nationally and manage a wide range of products. (E) strategies implemented by an organization to create, market and distribute its products.

(A)

18. Effective organizational design can allow a company to obtain a competitive advantage, but it has no impact on profitability. (A) True (B) False

(B)

21. Effective strategy implementation is very important for cost leaders, but it is of less importance to differentiators. (A) True (B) False

(B)

23. Silica Dustcloud Inc. plans to change its organization structure from a market structure to a functional structure and create separate divisions. This change will better serve its different groups of customers. (A) True (B) False

(B)

47. The specific collection of values, norms, beliefs, and attitudes shared by people and groups in a company is commonly referred to as: (A) organizational fit. (B) organizational culture. (C) organizational development. (D) organizational positioning. (E) organizational design.

(B)

61. Delayering is: (A) a rethinking and radical redesign of a firm's business processes. (B) a radical readjustment of the organization's staffing and hierarchy. (C) a philosophy that states that mistakes, defects, and poor-quality materials are not acceptable and should be eliminated. (D) the shift that firms make from a functional to a more complex structure as the firm grows in complexity and size. (E) employed when a firm needs help in improving its functional strategies.

(B)

7. Different divisions in a firm with a multidivisional structure are not given authority to adopt their own organizational structures. (A) True (B) False

(B)

8. The reward system affects motivation; however, the type of organizational culture that develops in a company is primarily affected by the founder's values and not the reward system. (A) True (B) False

(B)

9. Control through culture is ineffective because employees do not internalize values. (A) True (B) False

(B)

35. The totality of a firm's organizational arrangements including its formal organizational structure, control systems, incentive systems, organizational culture, organization processes, and human capital is referred to as: (A) organizational behavior. (B) organizational norm. (C) organizational architecture. (D) organizational ecology. (E) organizational density.

(C)

40. Control through organizational culture: (A) is less expensive than output control. (B) reduces mutual adjustment. (C) involves employees internalizing the norms and values of the organization. (D) includes setting individual goals. (E) includes obtaining specific feedback to help managers evaluate performance.

(C)

42. Companies that are innovative and able to deal with environmental change with new strategies and structures probably have: (A) weak cultures. (B) strong functional cultures. (C) adaptive cultures. (D) prescriptive cultures. (E) cost-conscious culture.

(C)

58. Matrix structures: (A) have many hierarchical levels. (B) are appropriate for companies with many low-skilled workers. (C) group activities vertically by function and horizontally by product or project. (D) are appropriate for a firm pursuing a low-cost strategy. (E) have several product group hierarchies and two forms of horizontal differentiation.

(C)

59. A matrix structure would be the most appropriate for which of the following firms? (A) A company in which each employee is required to have only one boss (B) A company operating in the maturity stage of the industry life cycle (C) A company that is dependent on rapid mobilization of resources for competitive success (D) A company with a high level of vertical differentiation (E) A company in which the speed of product development is not crucial

(C)

One of the main differences between a product team and a team in a matrix structure is that a matrix team is more permanent than a team in a product structure. (T/F)

F

Research evidence suggests that srnall-scale entry into a new business is the best way for an internal venture to succeed. (T/F)

F

Research finds that centralization of authority is never advantageous, not even in time of crisis. (T/F)

F

Strategic alliance is a type oflong-terrn contract that involves one company taking over another company. (T/F)

F

The franchisor typically owns and funds each of its franchisees.

F

The reward system affects motivation, however, the type of organizational culture that develops in a company is primarily affected by the founder's values and not the reward system. (T/F)

F

The term bureaucratic costs refers to costs associated with the creation and maintenance of the administrative function in a company. (T/F)

F

An effective governance arrangement exists when the CEO is also the chairman of the board of directors.

False

Benchmarking is a practice in which a company's performance is compared against that of other companies in different industries. a. True b. False

False

Customer focus in a function of only the lower levels of an organization. a. True b. False

False

Emphasizing on current profitability at the expense of future profitability and profit growth makes an enterprise more attractive to shareholders.

False

Internal analysis is concerned with identifying a company's opportunities and threats. a. True b. False

False

Learning effects tend to be more significant when a technologically complex task is performed only occasionally. a. True b. False

False

Lucy is an entrepreneur who is interested in opening her own bakery. She is concerned with obtaining money for equipment for the bakery such as ovens, pots and pans, and display cabinets. Lucy is trying to obtain intangible resources for her business. a. True b. False

False

Principals almost always have more information about the resources that agents are managing than the agents themselves.

False

Production and materials-management functions need not be changed in response to unanticipated customer demands as they do not affect response time. a. True b. False

False

Quality-as-excellence and quality-as-reliability are concepts that apply to goods but not services. a. True b. False

False

Sherree works at Dustcloud Manufacturing where she is part of a seven member team. Her team coordinates its own activities as well as makes its own hiring, training, work, and reward decisions. This type of team is referred to as a virtual team. a. True b. False

False

Six Sigma encompasses the activities necessary to get inputs and components to a production facility, through the production process, and out through a distribution system to the end user. a. True b. False

False

Starbucks and an independent local café are different in terms of their business techniques. They both sell coffee, and therefore belong to the same strategic group. a. True b. False

False

Substitute products are not a threat if a company is the market leader. a. True b. False

False

Successful innovation cannot transform the nature of industry competition. a. True b. False

False

The bottled water industry created new competitors for Coca-Cola, but it did not change the basic industry boundaries. a. True b. False

False

The concept of economies of scale suggests that unit costs continue to fall indefinitely as output volume increases. a. True b. False

False

The concepts vision and mission can be used interchangeably. a. True b. False

False

The final component of the strategic management process is crafting the organization's mission statement, which provides the framework or context within which strategies are formulated. a. True b. False

False

The mission of a company lays out some desired future state and articulates what the company would like to achieve. a. True b. False

False

The price a company charges for a good or service is typically more than the utility placed on that good or service by the customer. a. True b. False

False

When a company has differentiated products, they have less pricing options. a. True b. False

False

A company that follows the _____ strategy customizes its offering to a particular niche in order to outsell its rivals. a. focused differentiation b. broad low-cost c. market standardization d. rapid growth e. stuck in the middle

Focused differentiation

Which of the following is NOT a generic business-level strategy? a. Broad differentiation strategy b. Broad low-cost strategy c. Focused low-cost strategy d. Focused differentiation strategy e. Focused innovation strategy

Focused innovation strategy

A generic business-level strategy is a strategy that gives a company a specific form of competitive position and advantage over its rivals that results in above-average profitability.

T

A limit price strategy involves charging a price that is lower than that required to maximize profits in the short run, but is above the cost structure of potential entrants.

T

A low-cost company is often best positioned to survive price rivalry in its industry.

T

A new product's relative advantage refers to the degree to which a new product is perceived as better at satisfying customer needs than the product that it supersedes.

T

Actions taken at the functional level should support the business-level strategy, as should the organizational arrangements of the enterprise.

T

Both innovators and early adopters enter the market while the industry is in its embryonic stage.

T

Bradley is a new employee in the sales department at a local car dealership. In his first few months on the job, he will be learning the norms and values of the organization. This refers to organizational socialization. (T/F)

T

Building capabilities in organizational design that allow a company to develop a competitive advantage starts at the functional level. (T/F)

T

By focusing on a niche, and customizing the offering to that segment, a differentiated company can often outsell differentiated rivals that target a broader market

T

Companies that outsource most or all of their value creation activities are often referred to as virtual corporations. (T/F)

T

Competitive bidding makes suppliers reluctant to make investments that tie them closely to their trading partners (T/F)

T

Control systems can help managers evaluate how efficiently they are producing goods and services. (T/F)

T

Controls at each level should provide the basis on which managers at the levels below design their control systems. (T/F)

T

Which of the following factors that affect market growth rates refers to the degree to which the results of using and enjoying a new product can be seen and appreciated by other people? a. Complexity b. Relative advantage c. Compatibility d. Trialability e. Observability

E

Which of the following is NOT a generic business-level strategy? a. Broad differentiation strategy b. Broad low-cost strategy c. Focused low-cost strategy d. Focused differentiation strategy e. Focused innovation strategy

E

Standardization describes what happens when innovation pushes out the efficiency frontier in an industry, allowing for greater value to be offered through superior differentiation at a lower cost than was previously thought possible.

F

The "late majority" are typically reached through specialized distribution channels, and products are often sold by word of mouth.

F

Although important, unfortunately, innovation plays a minor role in achieving competitive advantage. a. True b. False

False

Functional strategies play only a small role in organizational success because they occur at a low level in the firm. a. True b. False

False

Inside directors are not full-time employees of the company.

False

Maximizing long-run profitability and profit growth is the best way to satisfy the claims of several key stakeholder groups irrespective of how the company does so.

False

One of the factors that distinguish organizations in the nonprofit sector from profit-making businesses is the lack of a need for strategic management. a. True b. False

False

Customer defection rates are: a. not directly related to unit cost. b. an indication of a company's ability to satisfy its customers. c. irrelevant as they are unlikely to impact advertising and marketing costs. d. unlikely to affect sales volumes. e. not affected by cost of products.

An indication of a company's ability to satisfy its customers

A company that follows a low-cost strategy could reasonably be expected to reduce costs by: a. broadening the business processes. b. adopting lean production and flexible manufacturing technologies. c. implementing first-in-first-out inventory control systems. d. taking steps to increase customer chum. e. abandoning economies of scale and learning effects.

B

Cost reduction pressures can be particularly intense in industries producing: a. commodity-type products. b. highly differential products. c. highly customized services. d. goods that have no close substitutes. e. goods that need minimal advertising.

Commodity-type products

Mintzberg maintains that emergent strategies are often successful and may be more appropriate than intended strategies. a. True b. False

True

Nene works in a factory where she picks crab meat from crabs. She is paid per day based upon the number of pounds of crab meat that she picks. Nene's daily number of pounds of crab meat can be referred to as her productivity. a. True b. False

True

Poor positioning strategy arises when a company introduces a potentially attractive new product but sales fail to materialize in the marketplace. a. True b. False

True

Product attributes that collectively define product excellence include the form, features, performance, durability, and styling of the product. a. True b. False

True

Resources can be considered valuable if they enable a company to create a strong demand for its products or if it reduces the costs of producing its products. a. True b. False

True

Six Sigma is a quality and efficiency program derived from the concept of Total Quality Management, and was widely used in Japan before acceptance in the U.S. a. True b. False

True

Strategic leadership is concerned with how to most effectively manage a company's strategy-making process to create competitive advantage. a. True b. False

True

Strike price is the price at which the stock was trading when the option was originally granted.

True

The ability of established competitors to imitate the competitive advantage of a rival is limited by factors such as existing strategic commitments and low absorptive capacity. a. True b. False

True

The great virtue of scenario planning is that managers must think outside of the box to anticipate what they might do in different situations. a. True b. False

True

The importance of reliability in building competitive advantage has increased dramatically over the past several decades. a. True b. False

True

The more a resource is firm-specific and difficult to imitate, the more likely a company holding that resource is said to have a distinctive competency. a. True b. False

True

The planning model suggests that a company's strategies are the result of a plan from a highly structured process orchestrated by top management. a. True b. False

True

The primary activities of the value chain include the design, creation, and delivery of the product, the product's marketing, and its support and after-sales service. a. True b. False

True

Switching costs are the costs that consumers must bear to switch from a product based on one technological standard to a product based on another technological standard. a. True b. False

a. True

Using the value chain model, which of the following primary activities is performed last, as inputs are transformed into outputs? a. Research and development b. Marketing and sales c. Service and support d. Production e. Human resources

Service and support

Firms can create profitable new business units by leveraging their competencies. (T/F)

T

One of the great advantages of successful value innovation is that it can catch rivals off guard and make it difficult for them to catch up.

T

Performance Ambiguity

The difficulty of identifying with precision the reason for the high (or low) performance of a subunit such as a function or team

21. An example of an important complementary asset is a state-of-the-art manufacturing facility.

t

Aggressive marketing is a key factor in jump-starting demand to get potential early adopters to bear the switching costs associated with adopting a new innovation.

t

By exploiting a positive feedback loop, Dolby Laboratories, became the standard for sound quality.

t

Digitalization has made it more difficult to protect some intellectual property rights.

t

Cell phone technology is replacing traditional wired phone technology. This is an example of a(n)

technological paradigm shift.

The purpose of organizational structure is to provide managers with specific feedback on how well an organization and its members are performing and building competitive advantage. (T/F)

F

Changes in the characteristics of a population, such as age or race, are irrelevant to the analysis of an industry's macroenvironment. a. True b. False

False

Horizontal integration in an industry tends to: a. increase the cost structure. b. increase product differentiation. c. undermine the company's competitive advantage. d. increase rivalry within the industry. e. reduce bargaining power over suppliers and buyers.

Increase product differentiation

A company that follows the strategy customizes its offering to a particular niche in order to outsell its rivals. a. focused differentiation b. broad low-cost c. market standardization d. rapid growth e. stuck in the middle

A

Demand reaches total saturation in the ____ stage of the industry life-cycle. a. embryonic b. growth c. shakeout d. maturity e. decline

Maturity

Which of the following dimensions is encompassed by a company's business model? a. Configuring resources b. Avoiding focus on acquiring new customers c. Reducing emphasis on product quality d. Maintaining high costs e. Restricting growth

Configuring resources

Which of the following ideas is a localization strategy is based on? a. There is a convergence in the tastes of consumers in different nations of the world. b. There are substantial economies of scale to be realized from centralizing global production. c. Consumer tastes and preferences differ among national markets. d. There are cost advantages associated with manufacturing a standard product for global consumption. e. Competitive strategy should be centralized at the world head office.

Consumer tastes and preferences differ among national markets

Interest rates have an impact on the sale of automobiles, appliances, and capital equipment. This represents a macroeconomic force. a. True b. False

True

Stockholders receive a return on their investment in a company's stock from dividend payments and capital appreciation.

True

Strong brand loyalty leads to more sales and the ability to charge higher prices. a. True b. False

True

30. Consumers will bear the costs of switching technologies if: a. the benefits of adopting the new technology outweigh the costs of switching. b. switching costs are substantial. c. the new products are packaged attractively. d. there is a lack of complementary products. e. the new technology is advertised subtly.

a

One advantage of a joint venture is that a company may benefit from a local partner's knowledge of the many dimensions of a host country. a. True b. False

a. True

When a company licenses its technology it can quickly lose control over it. a. True b. False

a. True

Which of the following is a major function of the board of directors of a company? a. Approving decisions made by divisional managers b. Monitoring line managers c. Aligning corporate strategy with stockholder interests d. Creating contracts with suppliers e. Designing marketing strategies for the company

c. Aligning corporate strategy with stockholder interests

Factors leading to the slow growth of demand in embryonic industries include all of the following except the:

d. customer passion for the products.

When standards are part of the public domain, they can be used: a. only by companies in a particular industry. b. only by federal contractors. c. by paying a fee to the Federal Communications Commission. d. freely by any company. e. only once without payment of a fee.

d. freely by any company.

focus strategy

when a company decides to serve a limited number of segments, or just one segment

Economies of scope can be defmed as:

the synergies that arise when one or more of a diversified company's business units are able to lower costs or increase differentiation because they can more effectively pool, share, and utilize expensive resources or capabilities.

market segmentation

the way a company decides to group customers based on important differences in their needs, in order to gain a competitive advantage

16. Competition for resources is one of the drawbacks of the multidivisional structure. (A) True (B) False

(A)

19. Control systems can help managers evaluate how efficiently a company is producing goods and providing services. (A) True (B) False

(A)

Knowledge Network

A network for transmitting information within an organization that is based not on formal organizational structure but on informal contacts between managers within an enterprise and an distributed-information systems

Factors leading to the slow growth of demand for products in embryonic industries include all of the following .... :

A) poor quality of the first products. B) lack of complementary products. D) high production costs of the products. E) lack of distribution channels for the products.

Which of the following is not a disadvantage to being a first mover?

Accumulation of market knowledge

Which of the following economic benefits result from the use of standards?

All of these

GM typically solicits bids from global suppliers to produce a particular component and awards a 1-year contract to the supplier that submits the lowest bid. At the end of the year, a contract is once again put out for bid, and once again the lowest cost supplier is most likely to win the bid. Which of the following is GM using? a. Strategic outsourcing b. Competitive bidding c. Strategic bidding d. Long-term alliance e. Hostage taking

Competitive bidding

When there is a minimal need for close long-term cooperation between a company and its suppliers, which of the following strategies is the most appropriate?

Competitive bidding

A company pursuing a focus strategy: a. attempts to serve all market segments. b. concentrates on building market share in one market segment. c. typically has more resources at its disposal than a differentiator does. d. has a greater impact on costs and revenues. e. produce different offerings for different segments.

Concentrates on building market share in one market segment

Which of the following entry strategies should be used when speed is an important consideration?

Joint venture

Company leaders that base their diversification strategy on transferring competencies tend to acquire new businesses that are ____ to their existing business activities. a. unrelated b. not comparable c. opposed d. related e. identical

Related

Norms

Social rules and guidelines that prescribe the appropriate behavior in particular situations

A harvest strategy requires the company to halt all new investments in capital equipment, advertising, research and development, and so forth.

T

Efficiency is: a. defined as the time it takes to produce a product. b. the quantity of inputs required to produce an output. c. independent of customers' perception of a product's value. d. measured by looking at a product's price. e. lower when the output is high-quality.

The quantity of inputs required to produce an output

Which of the following problems is associated with the strategy of vertical integration? a. Decrease in cost structure b. Increase in industry competition c. Vulnerability to unpredictable demand d. Assured conflict with the antitrust authorities e. Lack of bureaucratic costs

Vulnerability to unpredictable demand

An example of an important complementary asset is a state-of-the-art manufacturing facility. a. True b. False

a. True

Companies should form strategic alliances with firms that have a reputation for being opportunistic. a. True b. False

b. False

40. Switching costs, in the context of technology industries, refer to the costs that: a. industries have to incur in order to adhere to technical standards. b. companies have to incur to switch from one business model to another. c. customers need to bear to abandon an established standard and adopt a new standard. d. industries need to bear in order to abandon old technology and get license for a new technology. e. companies need to bear to create product differentiation when they are locked inside an industry.

c

Free cash flow is defined as:

cash in excess of that required to fund investments in the company's industry and to meet any debt commitments.

63. A technological paradigm shift is most likely to occur in which stage of the industry life cycle? a. Embryonic b. Growth c. Shakeout d. Maturity e. Decline

d

The managers of most companies often consider when they are generating free cash flow.

diversification

Which of the following strategies allows interdependent firms indirectly to coordinate their actions?

e. Price signaling

In a declining industry, a company may utilize a harvest strategy and:

e. extract maximum profits from its investments.

First movers are the first to recover the costs of a new technology.

f

An internal new venture is the most appropriate strategic choice when:

the firm has competencies that can be leveraged.

28. When companies become too tall and the chain of command too long, strategic managers tend to lose control over the hierarchy and, subsequently, their strategies. (A) True (B) False

(A)

31. PeopleFinder, a start-up social media network, is a decentralized organization. This means that the organization promotes flexibility and reduces bureaucratic costs; lower-level managers are authorized to make on-the-spot decisions. (A) True (B) False

(A)

34. Which of the following is not an element of organizational architecture? (A) Location (B) Culture (C) Processes (D) Structure (E) People

(A)

46. In any organization, for-profit or not-for-profit, span of control refers to the: (A) number of managers at the highest levels in the organization. (B) CEO and his or her management team. (C) number of subordinates who report directly to one manager. (D) number of supervisors in a specific segment of a manufacturing activity. (E) number of members elected or appointed to be the board of directors.

(C)

51. Natalie and Shay are both employees at RightTool, Inc., the marketing manager, often meets with Shay, the production manager, in order to solve specific mutual problems. This is an example of: (A) Organizational culture. (B) Liaison roles. (C) Direct contact. (D) Diverging mechanisms. (E) Strategic control.

(C)

52. At FastFries, a fast food restaurant, rules are published in all employee areas, explaining expectations regarding arrival time, lunch breaks, when to take shorter breaks, and when to socialize. This is an example of: (A) Output control. (B) Personal control. (C) Bureaucratic control. (D) Conversion activities. (E) Strategic competencies.

(C)

56. Which of the following advantages does a functional organizational structure offer a company? (A) Diversification of activities leading to greater productivity (B) Lesser communication problems (C) Reduction in manufacturing costs and increase in operational flexibility (D) Ease in gauging the contribution of products to overall profitability (E) Faster servicing of customers

(C)

Vertical disintegration occurs when: a. a company decides to exit industries to its core industry. b. a company takes advantage of another company it does business with after the other company has made an substantial investment in assets to meet the needs of the company. c. a company decides to acquire its suppliers and distributors. d. a company uses its capital resources to purchase its competitor. e. a company decides to sell its business model to another company.

A company takes advantage of another company it does business with after the other company has made an substantial investment in assets to meet the needs of the company

Which of the following statements is true in the context of local demand conditions? a. Companies are typically least sensitive to the needs of their closest customers. b. Home demand plays little role in helping companies upgrade their national competitive advantage. c. A nation's companies gain competitive advantage if their domestic customers are sophisticated and demanding. d. The characteristics of international demand alone shape the attributes of a company's products; not local demand. e. Local demand characteristics have little role to play in creating pressure for innovation and quality.

A nation's companies gain competitive advantage if their domestic customers are sophisticated and demanding

The final part of the strategy formulation process is: a. choosing business-level strategies. b. choosing functional-level strategies. c. choosing corporate-level strategies. d. choosing functional-level goals. e. choosing business-level goals.

Choosing corporate-level strategies

A sector refers to a group of: a. government regulators. b. closely related industries. c. manufacturing plants of a company based in the same location. d. business units owned by a single firm. e. companies that manufacture similar products under different brand names.

Closely related industries

Which of the following is not a characteristic of emotional intelligence? a. Self-awareness b. Self-regulation c. Escalating commitment d. Empathy e. Social skills

Escalating commitment

Dietizza is a fast food network that makes low-calorie pizzas. As the firm wishes to expand its operations in different locations, it has licensed a few entrepreneurs to open Dietizza outlets under the company's trademark. The entrepreneurs will take up the responsibility of costs, while Dietizza will assist them in running operations. The company will receive royalty payments and a percentage of profits from the entrepreneurs. Which of the following concepts is illustrated here? a. Exporting b. Franchising c. Setting up of a wholly owned subsidiary d. Strategic alliance e. Joint venture

Franchising

Output controls

Goals that are set for units or individuals and monitoring performance against those goals

The failure rate of innovative products is: a. high. b. low. c. nil. d. moderate. e. too difficult to assess.

High

_____ is the process of acquiring or merging with industry competitors to achieve the competitive advantages. a. Tapered integration b. Vertical integration c. Horizontal integration d. Franchising e. Diversification

Horizontal integration

is the process of acquiring or merging with industry competitors to achieve the competitive advantages.

Horizontal integration

General organizational competencies are found: a. in the skills of a company's top managers and functional experts. b. at low levels among workers and other employees in the organization. c. exclusively among technology professionals. d. in feedback given by customers. e. in changes occurring within an industry.

In the skills of a company's top managers and functional experts

Which of the following is an advantage of international licensing? a. It enables the company realize scale economies and location economies through manufacturing products in a centralized location. b. It allows the company to collect profits from one licensee and use it to support others. c. It eliminates the risk of losing control over a technology that the company owns. d. It enables the company to coordinate its strategy efficiently to achieve competitive advantage. e. It takes away the pressure of development costs and risks associated with opening up a foreign market from the company.

It takes away the pressure of development costs and risks associated with opening up a foreign market from the company

Which of the following is not a reason for the failure of an acquisition to generate the gains originally expected of it?

Overestimation of the potential costs of realizing synergies

The advantage that focused companies have over their broad market rivals is that they: a. can sells on non-price factors, such as design or customer service. b. can respond to demands for deep price discounts. c. sell fewer products in bulk to outsell their rivals. d. can initiate a price war in order to grow volume and drive its weaker rivals out of the industry. e. can absorb cost increases that may be passed on downstream by powerful suppliers.

Sell fewer products in bulk to outsell their rivals

Global economies of scale can be realized by: a. restricting the expansion of overseas sales. b. limiting the utilization of production facilities. c. curbing bargaining power with suppliers. d. decreasing cost savings through learning effects. e. spreading the fixed costs associated with developing.

Spreading the fixed costs associated with developing

Lilly's Beauty Company sells haircare products such as shampoo, conditioner, and hairspray. The company does not sell new or customized products in order to meet the specific needs of certain groups of people. Which of the following approaches is illustrated in this scenario? a. Standardization strategy b. Focus strategy c. Medium market segmentation d. High market segmentation e. Focused market segmentation

Standardization strategy

Consider a cost curve, with production volume on the horizontal axis and marginal costs on the vertical axis. What shape would the marginal cost curve most resemble in a high-tech industry?

Straight and flat

Which of the following has occurred in international trade over the past half-century? a. There has been a dramatic increase in the barriers to international trade. b. Tariff rates on manufactured goods traded by advanced nations have fallen. c. Regulations prohibiting foreign companies from entering domestic markets and establishing production facilities have increased. d. The volume of world trade has decreased dramatically. e. There has been a decline in the value of foreign direct investment.

Tariff rates on manufactured good traded by advanced nations have fallen

Control

The process through which managers regulate the activities of individuals and units so that they are consistent with the goals and standards of the organization

Which of the following structures requires centralization of value chain support activities?

The product structure

Cellular phone service providers often sell the phone itself at very low prices and then charge a relatively high fee for usage. This illustrates

The razor-and-blade strategy.

Market Controls

The regulation of the behavior of individuals and units within an enterprise be setting up an internal market for valuable resource such as capital

Which of the following statements is not generally true of a diversification strategy based on the realization of economies of scope?

The strategy requires the head office to evaluate each business unit as a stand-alone operation.

Which of the following is a tactical step for getting down the experience curve ahead of competitors? a. Premium pricing to create an image of uniqueness in consumers' minds b. Pursuing a distinctive competence in focused marketing c. Constructing a manufacturing plant of less than minimum efficient scale d. Using aggressive pricing and promotions to expand sales volume as rapidly as possible e. Making the assembly of the product as complex as possible because this results in greater learning effects

Using aggressive pricing and promotions to expand sales volume as rapidly as possible

value innovation

When innovations push out the efficiency frontier in an industry, allowing for greater value to be offered through superior differentiation at a lower cost than was previously thought possible

Under which of the following circumstances is vertical integration considered hazardous?

When the demand for the product fluctuates frequently

generic business level strategy

a strategy that gives a company a specific form of competitive position and advantage vis-a-vis its rivals, resulting in above-average profitability.

When corporate CEOs and top managers use their power and control over funds to satisfy their personal desires for wealth or status, it is called: a. on-the-job consumption b. greenmail. c. information asymmetry. d. self-dealing. e. risk capital.

a. on-the-job consumption

28. Which of the following statements is true of technology in industries? a. Technology in industries is accounting for only a minimal share of economic activity. b. Technology in industries is revolutionizing aspects of the product even in those not typically considered high-tech. c. High-technology industries do not require to adhere to technical standards to achieve product differentiation. d. The lack of complementary products does not affect the success of a high-technology industry. e. High-technology industries are usually not faced with the challenge of developing business models to achieve a competitive advantage like low-technology industries.

b

31. Technical standards in high-technology industries are: a. specifications developed by each producing company for its own products and product components. b. specifications that producers adhere to when making a product or a component. c. product specifications imposed by the federal government. d. product features desired by consumers. e. general guidelines proposed by industry leaders.

b

39. There is a set of fixed specifications for turbine blades for jet engines. The specifications include the material that needs to be used to manufacture the blades and also the specific dimensions that they need to have; the same specifications are used by all manufacturers. In this scenario, the specifications for jet blades can be referred to as: a. format wars. b. technical standards. c. technological paradigm shifts. d. first movers e. razor and blade strategies.

b

51. Aggressive marketing in the context of format wars: a. deters early adopters. b. helps a company jump-start demand. c. results in lower emphasis on killer applications. d. does not encompass point-of-sales promotion techniques. e. usually triggers a negative feedback loop.

b

Dietizza is a fast food network that makes low-calorie pizzas. As the firm wishes to expand its operations in different locations, it has licensed a few entrepreneurs to open Dietizza outlets under the company's trademark. The entrepreneurs will take up the responsibility of costs while Dietizza will assist them in running operations. The company will receive royalty payments and a percentage of profits from the entrepreneurs. Which of the following concepts is illustrated here? a. Exporting b. Franchising c. Setting up of a wholly owned subsidiary d. Strategic alliance e. Joint venture

b. Franchising

______ is a source of gaining wealth by corporate raiders who benefit by pushing companies to either change their corporate strategy to one that will benefit stockholders, or by charging a premium for these stocks when the company wants to buy them back. a. Stock option b. Greenmail c. Self dealing d. On-the-job consumption e. Risk capital

b. Greenmail

Which of the following shakeout strategies requires a company to limit or decrease its investment in a business and to extract, or milk, the proceeds of its investment as much as it can?

b. Harvest strategy

42. Libra Electronics has invented a new technology to make laptops that are extremely lightweight and unbreakable. The company is advertising aggressively and wishes to create demand for its new range of laptops. To attract customers, the company has priced the laptops attractively. However, in order to make profits, the company has priced the batteries required for the laptops extremely high. Which of the following is illustrated in this scenario? a. downsizing strategy. b. harvest strategy. c. razor and blade strategy. d. divestment strategy. e. switching costs.

c

43. Venus Corp. a high-technology, gadget-making company has introduced a gaming console with attractive features. Even though the console is priced modestly and has better features than the existing ones, it has failed as many customers are apprehensive about buying it. In order to create demand, Venus Corp. should: a. price the console extremely high. b. create its own set of technical standards. c. ensure that there are adequate complementary products. d. use minimalistic and subtle advertising and marketing strategies. e. avoid licensing the format to other companies.

c

______ is a situation where an agent has more knowledge about resources he or she is managing than the principal has. a. Information manipulation b. On-the-job consumption c. Information asymmetry d. Greenmail e. Self-dealing

c. Information asymmetry

Switching costs, in the context of technology industries, refer to the costs that: a. industries have to incur in order to adhere to technical standards. b. companies have to incur to switch from one business model to another. c. customers need to bear to abandon an established standard and adopt a new standard. d. industries need to bear in order to abandon old technology and get license for a new technology. e. companies need to bear to create product differentiation when they are locked inside an industry.

c. customers need to bear to abandon an established standard and adopt a new standard.

Aries Travels is a company that offers holiday and travel packages. The company realizes that customer preferences vary and thus extensively customizes its packages. As there are not many competitors in the market in which Aries Travels operates, there are minimal pressures to reduce costs. Aries Travels is most likely to have adopted a strategy. a. global standardization b. international c. localization d. transnational e. harvest

c. localization

SparklingLeaves is one of the major suppliers of automobile tools to StanMotors, a leading automobile company. Many of the tools are customized to meet the specific needs of StanMotors and hence have little other value. In return, StanMotors has agreed to make SparklingLeaves its sole supplier of automobile equipment for a period of 15 years. This scenario illustrates:

credible commitment.

When a company decides to expand into new industries, it must:

develop "multibusiness model" that justifies its entry into different businesses.

When a company decides to expand into new industries, it must: a. develop "multibusiness model" that justifies its entry into different businesses. b. halt marketing activities in the current industry to avoid being associated with one specific industry. c. select a new CEO and reappoint the board of directors. d. create one common business model for all the industries rather than each business unit. e. avoid talking about ways of increasing profitability in the business model.

develop 'multibusiness model" that justifies its entry into different businesses

When an industry's products rely on a common set of features, these features are called a

dominant design.

29. _____ refers to a common set of features in a computer or other machines. a. Paradigm shift b. First mover c. Public domain d. Technical standard e. Dominant design

e

46. Which of the following strategies should a company NOT adopt if it wants to win a format war? a. Developing killer applications b. Developing complementary products c. Joining forces with other companies to develop new technologies d. Aggressively marketing to jump-start demand e. Charging extremely high license fee for the technology

e

57. Which of the following is an advantage of first movers? a. They are not prone to mistakes. b. They bear lower pioneering costs than later entrants do. c. They only invest in the latest technology. d. They do not run the risk of building the wrong resources as they are highly customer-focused. e. They have an opportunity to exploit network effects and positive feedback loops.

e

61. An advantage of being a first mover is that: a. the pioneering costs are minimal. b. there are well-defined distribution channels. c. there is no risk of building the wrong resources. d. the focus is always on the mass market. e. there is an opportunity to increase sales volume ahead of rivals.

e

Which of the following statements is true in the context of globalization of production and markets? a. Globalization of production has significantly increased the costs for many industries. b. The globalization of markets and production has failed to threaten companies' home markets. c. Consolidated oligopolies continue to be dominated by a small number of companies despite globalization. d. The shift from national to global markets has curbed competitive rivalry in many industries. e. Globalization has significantly increased the threat of entry.

e. Globalization has significantly increased the threat of entry.

Which of the following statements is true in the context of attributes of national competitive advantage? a. Factor endowments do not encompass aspects such as managerial sophistication. b. Companies are typically least sensitive to the needs of their closest customers. c. The benefits of investments in advanced factors of production by related and supporting industries are confined to those industries. d. Domestic rivalry creates pressures to increase costs and avoid investing in upgrading advanced factors. e. The nature of home demand shapes the attributes of domestically made products.

e. The nature of home demand shapes the attributes of domestically made products.

A fragmented industry is one composed of a:

e. large number of small and medium-sized firms.

Even if they are constrained by a lack of capital, research shows that new entrants should avoid partnering with a larger company and go it alone.

f

Fortunately, technical standards always exist in the public domain so that any company can use them.

f

Interestingly, technical standards create benefits primarily for those firms that do not adhere to them.

f

One important advantage of being a first mover is that it guarantees success.

f

If a first mover does not have complementary assets, barriers to imitation are low, and there are many capable competitors, the first mover should

license the innovation to others.

The strategy in a mature industry to invest in infrastructure that would be cost-prohibitive for new entrants to deter new competition from entering the market is known as:

technology upgrading

The term used to describe how people learn an organization's culture and way of behaving in the organization is:

organizational socialization.

If a firm finds that its functional structure is becoming too complex as the firm grows in size, the firm can turn to:

outsourcing.

When two or more companies are competing with each other to get their technology adopted as a standard in an industry, and when network effects and positive feedback loops are important, the company that wins the format war will be the one whose strategy best exploits positive feedback loops.

t

Gadgetbug, an electronic gadgets company, has established itself as one of the industry leaders. The company has been facing competition from new entrants. The new entrants offer gadgets in different colors, with compelling artwork embossed on the cases. Seeing the interest in this market, Gadgetbug introduced its own range of uniquely designed gadgets. In this scenario, Gadgetbug's attempt to cater to the different segments of customers to deter competition demonstrates:

product proliferation

Horizontal integration may be thought of as:

staying inside the industry in which the company currently operates.

Long-term agreements between two or more companies to jointly develop new products or processes that benefit all companies that are a part of the agreement are known as:

strategic alliance.

Organizational structure can be defined as:

the means through which a company assigns employees to specific tasks and roles and specifies how these tasks and roles are to be linked together to increase efficiency, quality, innovation, and responsiveness to customers.

Organizational culture is:

the specific collection of values, norms, beliefs, and attitudes that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization.

The price that one division of a company charges another division for its products, which are the inputs the other division requires to manufacture its own products is known as:

transfer pricing.

Strategy formulation refers to the: a. task of executing corporate- and business-level plans. b. process by which strategies are put into action. c. design of organizational structures and control systems. d. implementation of emergent strategies. e. analyzing an organization's external and internal environment and then the process of selecting an appropriate strategy.

Analyzing an organization's external and internal environment and then the process of selecting an appropriate strategy

The risk of entry by potential competitors is a function of the height of the barriers to entry. a. True b. False

True

Anna bakes cookies for about $10 per batch, she charges customers $15 to a batch, and customers perceive that the cookies are worth $25 per batch. Anna's profit margin is: a. $5. b. $7.5. c. $10. d. $15. e. $25.

$5

38. Organizational culture is: (A) the norms and value systems that are shared among the employees of an organization. (B) the means through which a company assigns employees to specific tasks and roles and specifies how these tasks and roles are to be linked together to increase efficiency, quality, innovation, and responsiveness to customers. (C) the process of deciding how a company should create, use, and combine organizational structure, control systems, and culture to pursue a business model successfully. (D) the clear and unambiguous chain of command that defines each manager's relative authority from the CEO down through top, middle, to first-line managers. (E) the principle that a company should design its hierarchy with the fewest levels of authority necessary to use organizational resources effectively.

(A)

53. To reduce costs, companies pursuing a cost leadership strategy prefer to use _____ to closely monitor and evaluate functional performance. (A) output controls (B) personal controls (C) behavioral controls (D) cultural controls (E) input controls

(A)

55. If a firm's leaders are using a functional structure but feel it is becoming too complex as the company grows in size, the leaders can turn to: (A) a simple structure. (B) downsizing. (C) reengineering. (D) restructuring. (E) a multidivisional structure.

(E)

Mike's Eatery, a fast food chain, neither customizes its product offerings nor sells new products based on market segments. Mike's Eatery is pursuing standardization strategy.

T

Research fmds that the higher the number of business units in a company's portfolio, the easier it is for corporate managers to remain informed about the complexities of each business. (T/F)

F

One characteristic of embryonic industries is poorly developed distribution channels.

T

The basic proposition of the blue ocean strategy is that many successful companies have built their competitive advantage by initiating price wars and driving weaker rivals out of the industry.

F

The brand loyalty enjoyed by the differentiated company does not protect it from substitute goods and services.

F

The generic business-level strategies are cost leadership, differentiation, and mass marketing

F

The more commodity-like that an industry's product is, the lower the intensity of any price war that may develop. a. True b. False

False

Google bought Clever Sense, a mobile app company. This is an example of a(n): a. parallel sourcing policy. b. strategic outsource. c. strategic alliance. d. merger. e. acquisition.

Acquisition

In 2007, Google bought YouTube. This is an example of which of the following?

Acquisition

In 2007, Google bought YouTube. This is an example of which of the following? a. Partnership b. Strategic alliance c. Joint venture d. Acquisition e. Merger

Acquisition

A company that follows a low-cost strategy could reasonably be expected to reduce costs by: a. increasing the number of business processes. b. adopting lean production and flexible manufacturing technologies. c. implementing first-in-first-out inventory control systems. d. taking steps to increase customer churn. e. abandoning economies of scale and learning effects.

Adopting lean production and flexible manufacturing technologies

Which of the following is not an attribute of a national or country-specific environment that has an impact on global competitiveness of companies located in that nation? a. Factor endowments b. Local demand conditions c. Related and supporting industries d. Strategy, structure, and rivalry of firms within the nation e. Advertising expenses

Advertising expenses

Ownership of retail outlets may be important for a manufacturer if: a. the products produced by the manufacturer are not complex. b. after-sales service is required for complex products. c. products are expended in consumption. d. products are intended for one-time use. e. products are inexpensive.

After-sales service is required for complex products

Julian was asked to examine the demographic forces facing his employer, a clothing manufacturer. Which of the following factors is Julian most likely to examine? a. Government regulations b. Inflation c. Manufacturing technology d. Age of the population e. Society's growing interest in exercise

Age of the population

Economies of scale can arise from: a. cost reductions gained through decreased production. b. high prices on bulk purchases of raw material inputs and component parts. c. an advantage gained by spreading fixed production costs over a large production volume. d. increased spending on marketing and advertising activities. e. poor production operations.

An advantage gained by spreading fixed production costs over a large production volume

In which of the following industry environments are acquisitions most likely to be favored over new ventures? a. An embryonic industry b. An industry in its later stages of growth c. An industry passing through the shakeout stage d. A mature industry e. A declining industry

An embryonic industry

A market segment consists of a group of: a. similar products. b. customers who have similar needs. c. products that are considered obsolete. d. diverse products produced by the same manufacturer. e. customers who have diverse needs.

B

A segmentation strategy requires that a company: a. standardize its products. b. offer its products at low costs. c. customize its products. d. produce one basic offering. e. attain high economies of scale by achieving a high volume of sales.

C

Which of the following is a disadvantage of franchising? a. It restricts the franchisor from expanding. b. It results in the franchisor taking all the financial burden of the franchisees. c. It results in the delegation of authority to franchisees and thus, the franchisor may not enjoy complete control. d. It does not provide sufficient incentive to the franchisees to run operations effectively as the franchisees are not entrepreneurs. e. It requires the franchisees to create a new business model and plan strategies.

C

GM typically solicits bids from global suppliers to produce a particular component and awards a !-year contract to the supplier that submits the lowest bid. At the end of the year, a contract is once again put out for bid, and once again the lowest cost supplier is most likely to win the bid. Which of the following is GM using?

Competitive bidding

Which of the following is not a factor of production? a. Land b. Labor c. Raw materials d. Competitive forces e. Managerial sophistication

Competitive forces

The Achilles heel of international strategy is that: a. economies of scale cannot be achieved. b. customization of products makes the company lose its credibility. c. competitors inevitably emerge. d. non-price differences among products hold little importance. e. customer preferences eventually become identical.

Competitors inevitably emerge

Which of the following generic competitive strategies is a producer of commodity steel most likely to pursue? a. Exclusive dealing b. Broad differentiation c. Focus differentiation d. Broad low-cost e. Horizontal integration

D

Silica Dustcloud Inc. plans to change its organization structure from a market structure to a functional structure and create separate divisions. This change will better serve its different groups of customers. (T/F)

F

What advice would you give to a firm that wants to exploit network effects?

Create incentives for other firms to develop complementary products.

Innovation refers to the act of: a. seeking patent protection for new products. b. creating new products and processes. c. measuring time taken for a service to be provided. d. measuring the output produced by an employee. e. identifying and satisfying the needs of a customer.

Creating new products and processes

Which of the following statements is true in the context of embryonic industries? a. They are characterized by very a high initial customer demand. b. They are characterized by well-developed distribution channels. c. They involve low production costs because of large volumes of production. d. They face the challenge of customers not being familiar with product benefits. e. They enjoy the abundance of complementary products that help increase sales.

D

Yankee Candle Company offers customers candles that burn for 50-60 hours, much longer than most department store candle brands. Therefore, customers are willing to pay a higher price for these candles. Which of the following strategies is Yankee Candle Company following? a. Cost leadership b. Rapid growth c. Market segmentation d. Differentiation e. Stuck in the middle

D

A leading software company merged with its competitor to form a new company. Which of the following is likely to be the result of this merger? a. Decreased cost per unit output b. Decreased bargaining power over suppliers and customers c. Increased industry rivalry d. Decreased profitability e. Decreased product differentiation

Decreased cost per unit output

Roza Munoz oversees the overall operations of Maxwell Coffee House which is one of the divisions of Kraft Foods Company. Roza is also responsible for the overall performance of the business division. Which of the following is not likely to be one of Roza's responsibilities? a. Turning corporate-level strategy into action b. Defining Kraft Food's mission statement c. Deciding how to compete in the coffee industry d. Supervising functional-level managers e. Developing a business-level strategy

Defining Kraft Food's mission statement

The scenario approach to strategic planning involves: a. devising plans for coping with a number of different possible future states of the world. b. designing the best organization structure and the best culture and control systems to put a chosen strategy into action. c. functional managers setting key corporate objectives. d. anticipating the reoccurrence of problems that were previously encountered and designing solutions accordingly. e. designing plans for problems that the company believes it will most certainly face in the near future.

Devising plans for coping with a number of different possible future states of the world

At The Luxury Hotel in Miami, Florida, three hotel employees serve the needs of each guest. In every room, a guest can summon a chef, a maid, or a valet by pressing a button at his/her bedside. Which generic business-level strategy is The Luxury Hotel utilizing? a. Cost leadership b. Differentiation c. Vertical integration d. Razor and blade e. Brand loyalty

Differentiation

When a company produces a wide range of products for various customer groups, it is following a _____ strategy. a. cost leadership b. differentiation c. customer retention d. market concentration e. share building

Differentiation

In the embryonic stage of the industry life cycle, a company's investment needs and production costs are low.

F

Stanley's services firm wants to enter an embryonic market, but it doesn't have enough cash to purchase the required assets. Which of the following strategies would you recommend to Stanley? a. Diversify through acquisition b. Do not diversify at all c. Diversify with an internal new venture d. Diversify with a joint venture e. Diversify through vertical integration

Diversify with a joint venture

Production of a large product variety without a large cost penalty is known as: a. market concentration. b. market segmentation. c. focused differentiation. d. mass production. e. mass customization.

E

To compete in the fragmented restaurant industry, Red Lobster Corporation built, and now operates hundreds of stores across the United States and Canada. Which of the following strategies is Red Lobster using ? a. Acquisitions b. Horizontal mergers c. Franchising d. Licensing e. Chaining

E

When a company targets a certain segment or niche, and customizes its offering to the needs of that particular segment through the addition of features and functions, the company is pursuing a strategy. a. broad low-cost b. broad differentiation c. product substitution d. focus low-cost e. focus differentiation

E

In the late 1800s, when the automobile was first manufactured, the automobile industry would have been considered a(n): a. mature industry. b. stakeout industry. c. embryonic industry. d. growth industry. e. declining industry.

Embryonic industry

Flat organizational structures are less flexible and tend to resist change. (T/F)

F

Tina's Technologies is expanding its operations backward into an industry that produces inputs for the company's products. Tina's Technologies is utilizing horizontal integration. (T/F)

F

Transfer pricing refers when a company is taken advantage of by another company it does business with after it has made an investment in expensive specialized assets to better meet the needs of the other company. (T/F)

F

Unfortunately, horizontal integration can not be accomplished by acquisitions or mergers. (T/F)

F

When a bank offers horne mortgages and credit cards to its checking account customers, it is using horizontal integration strategy. (T/F)

F

When a company decides to serve a limited number of segments, or just one segment, it is pursuing a segmentation strategy.

F

Which of the following statements is true about government regulations in the context of entry barriers of an industry? a. Government deregulation in an industry results in significant reduction in competition. b. Government regulation is not a major entry barrier for any industries. c. Falling entry barriers due to government deregulation results in higher competition and lower industry profit rates. d. The threat of new entrants reduces when the government deregulates an industry. e. Companies that enjoy brand loyalty and have significant scale economies are the ones who face major threat of competition due to government deregulation.

Falling entry barriers due to government deregulation results in higher competition and lower industry profit rates.

A union and the general public are examples of internal stakeholders.

False

Members of a strategic group: a. compete only with members of other strategic groups. b. are affected by Porter's five competitive forces in the same way and to the same degree as the members of other strategic groups. c. follow a business model that is similar to that pursued by other companies in the group. d. face no threat of product substitutes from other members. e. move easily between groups without barriers.

Follow a business model that is similar to that pursued by other companies in the group

Which of the following is not a way that companies can avoid failure? a. Benchmarking b. Continuous learning c. Developing distinctive competencies d. Exploiting luck e. Following rigid business processes

Following rigid business processes

For a company concentrating on final assembly, adding retail and distribution into it's value chain will require: a. backward integration. b. forward integration. c. taper integration. d. related diversification. e. unrelated diversification.

Forward integration

Which of the following industry structures consists of a large number of small or medium-sized companies, none of which is in a position to determine industry price? a. Fragmented industry b. Consolidated industry c. Oligopoly d. Monopoly e. Sector

Fragmented industry

Which of the following allows a company to lower cost through functional strategy and organization? a. Implementing just-in-time inventory control systems b. Customizing the product offering and marketing mix to different market segments c. Focusing marketing efforts on brand building and perceived differentiation from rivals d. Designing strategies to ensure that employees act in a manner that is consistent with the image that the company is trying to project to the world e. Adopting rigid manufacturing technologies

Implementing just-in-time inventory control systems

Host government demands generally: a. increase pressures for local responsiveness. b. decrease pressures for cost reductions. c. do not encompass local content rules. d. compel companies to abandon localization strategies. e. impede a company's ability to differentiate its product offering across national borders.

Increase pressure for local responsiveness

A group of firms manufactures writing implements such as pens, pencils, and markers. This group should be referred to as a(n): a. substitute. b. market segment. c. service provider. d. regulator. e. industry.

Industry

A low-cost position is most appropriate when: a. the power of buyers is low and barriers to entry are high. b. economies of scale are relatively unimportant in manufacturing products. c. customers have very different needs and uses for the industry's products. d. product innovation is the key competitive factor. e. industry rivalry is high and customers are very sensitive to prices.

Industry rivalry is high and customers are very sinsitive to prices

Devil's advocacy: a. involves generating a plan and a counter-plan that reflects plausible conflicting courses of action. b. is an example of ivory tower planning. c. hides the possible perils of a recommended course of action. d. involves generating a plan, and a critical analysis of that plan. e. includes downplaying the problems that could result from implementing a particular plan .

Involves generating a plan and a critical analysis of that plan

Which of the following statements is true about transnational strategy? a. It gives little emphasis to cost reduction and achieving scale economies. b. It makes little sense when the pressures for local responsiveness are intense. c. It is an easy one to pursue because it places minimal demands on the company. d. It fosters a flow of competencies between different subsidiaries in the company's global network of operations. e. It is adopted by companies that produce standardized goods that do not require product differentiation.

It fosters a flow of competencies between different subsidiaries in the company's global network of operations

Which of the following is an advantage of franchising? a. It ensures tight control over quality. b. It enables companies to engage in global strategic coordination. c. It involves low development costs and risks. d. It enables the company to collect all the profits made by the franchisees. e. It frees companies from the task of monitoring and assisting operations at franchisees.

It involves low development costs and risks

Which of the following statements is true about localization strategy? a. It focuses on marketing a standardized product worldwide to achieve cost reductions. b. It makes most sense when cost pressures are extremely intense. c. It is most appropriate when there are similarities across nations with regard to consumer tastes and preferences. d. It involves some duplication of functions and smaller production runs. e. It usually relieves companies of the task of closely monitoring their costs.

It involves some duplication of functions and smaller production runs

A company, Pluto Inc., employs the franchising strategy to enter a new national market. Which of the following statements is more likely to be true of Pluto? a. It is more likely to be a service company. b. It is more likely to have a greater control over the quality the products manufactured in the foreign country. c. It is less likely to impose strict rules regarding how a franchisee does business. d. It is less likely to receive royalty payment from the franchisee. e. It is more likely to bear the development costs associated with opening a foreign market on its own.

It is more likely to be a service company

Which of the following is a disadvantage of franchising?

It results in the delegation of authority to franchisees, and the franchisor may not enjoy complete control.

Which of the following statements is true about rivalry in the context of established companies? a. It significantly reduces the costs of established companies. b. It squeezes profits out of an industry. c. It enables companies to lower their spending on non-price-competitive strategies. d. It forces companies to reduce prices when it is less intense. e. It is unaffected by the demand conditions of an industry.

It squeezes profits out of an industry

A company should pursue unrelated diversification instead of related diversification when: a. its core skills are highly specialized and have few applications outside its core business. b. the company's top managers are skilled at acquiring and turning around poorly run enterprises. c. its core technological skills are applicable to a wide variety of industrial and commercial situations. d. it wants to maximize growth. e. the bureaucratic costs of implementation do not exceed the value that can be created by realizing economies of scope.

Its core skills are highly specialized and have few applications outside its core business

Which of the following is not a benefit of vertical integration?

Lowered cost structure

Ted is an accountant at ABC Company. He calculates the difference between total revenues and total costs before tax. Ted calculates the: a. net profit. b. capital turnover. c. cost of goods sold. d. return on sales. e. invested capital.

Net profit

The competitive structure of an industry refers to the: a. number of market segments in the industry. b. number and size distribution of companies in the industry. c. number of consumers in the industry. d. number of manufacturing plants in the industry. e. number of products produced in the industry.

Number and size distribution of companies in the industry

Dale's methods of fitting horseshoes save time and money for his employer at the local ranch. However, when Dale suggests that everyone use his method, his boss, Cedric, says, "No. That's not the way we've always done it around here." Cedric's resistance to change illustrates: a. organizational inertia. b. prior strategic commitments. c. barriers to mobility. d. lack of distinctive competencies. e. the Icarus paradox.

Organizational inertia

Holly owns a landscape company and is thinking about expanding her services to include outdoor water features (waterfalls, streams, ponds). If, before making this decision, she looks at the experience of similar firms that have added outdoor water features, she is employing: a. cognitive bias. b. illusion of control. c. devil's advocacy. d. outside view. e. dialectic inquiry.

Outside view

Which of the following is not a reason for the failure of an acquisition to generate the gains originally expected of it? a. Poor post-acquisition integration b. Overestimation of the potential gains to be derived from synergy c. The high cost of making acquisitions d. Lack of pre-acquisition screening e. Overestimation of the potential costs of realizing synergies

Overestimation of the potential costs of realizing synergies

An automobile company enters into a long-term contract with two suppliers for the same automobile tool. This is to ensure the company is protected in the event one of the suppliers adopts an uncooperative attitude. Which of the following concepts is illustrated in this scenario? a. Outsourcing b. Vertical integration c. Horizontal integration d. Parallel sourcing e. Full integration

Parallel sourcing

An automobile company enters into a long-term contract with two suppliers for the same automobile tool. This is to ensure the company is protected in the event of one of the suppliers adopting an uncooperative attitude. Which of the following concepts is illustrated in this scenario?

Parallel sourcing

John's surfboard shop has a long-term relationship with two surfboard makers. John is using: a. parallel sourcing. b. cross-selling. c. product bundling. d. vertical integration. e. horizontal integration.

Parallel sourcing

Intel's invention of the microprocessor in the early 1970s, Cisco's development of the router for routing data over the Internet in the mid-1980s, and Apple's development of the iPod, iPhone, and iPad in the 2000s can be referred to as _____ innovations. a. process b. product c. customer d. sector e. absorptive

Product

Rachel, a new mom, is shopping for baby products. She notices that one of the manufacturers, Lucy's, is offering a wide range of products such as baby shampoo, baby lotion, and baby wipes, together, at a better price as one combined product. Which of the following concepts is the company utilizing to meet the customer's needs? a. Product bundling b. Cross-selling c. Hostage taking d. Strategic outsourcing e. Parallel sourcing

Product bundling

Rachel, a new morn, is shopping for baby products. She notices that one of the manufacturers, Lucy's, is offering a wide range of products such as baby shampoo, baby lotion, and baby wipes, together, as one combined product. Which of the following concepts is illustrated in the scenario?

Product bundling

All of the following are benefits of horizontal integration except:

Reduced risk of corning into conflict with the FTC

All of the followingconsidered high-technology industries except:

Retail clothing

One of the most widely used measures of financial performance in an internal analysis is: a. return on invested capital. b. net profit margin. c. share value. d. net sales. e. productivity.

Return on invested capital

Organizations strive to control employees' behavior by linking systems to their control systems.

Reward

_____ refers to the investment that shareholders make in a company that cannot be recovered if the company fails and goes bankrupt. a. Profitability b. Shareholder value c. Debt d. Risk capital e. Dividend payments

Risk capital

By their choices of competitive actions and decisions about product attributes, managers can speed up or slow down the rate of progress of an industry through the stages of the industry life cycle.

T

Companies that focus on the higher-income or higher-value end of the market will tend to have a higher cost structure.

T

Companies that follow a standardization strategy ignore the many different market segments in an industry and position their products to appeal to the average customer.

T

Long-term agreements between two or more companies to jointly develop new products or processes that benefit all of the companies involved in the agreement are known as: a. horizontal integration. b. outsourcing. c. strategic alliance. d. joint venture. e. vertical integration.

Strategic alliance

_____ arise when a customer invests time, energy, and money shifting from the products offered by one established company to the products offered by a new entrant. a. Overhead costs b. Incremental costs c. Marginal costs d. Opportunity costs e. Switching costs

Switching costs

A divestment strategy aims at growing in a declining industry by picking up the market share of companies that are leaving the industry.

T

Organizational structure contributes to the strategy formulation by providing the framework of tasks and roles that reduces transaction difficulties and allows employees to think and behave in ways that allow a company to achieve superior performance. (T/F)

T

Product proliferation refers to the strategy of filling the niches by catering to the needs of customers in all market segments.

T

Research suggests that companies that acquire many businesses over time become expert in this process and so can generate significant value from their acquisitions. (T/F)

T

An internal new venture is the most appropriate strategic choice when: a. an industry is mature. b. the firm will enter on a small scale. c. the firm has competencies that can be leveraged. d. speed of entry is the most important consideration. e. there is strong pressure for quick profitability.

The firms has competencies that can be leveraged

Which of the following reports includes the cost of goods sold? a. The balance sheet b. The financial position statement c. The cash budget d. The income statement e. The overhead expense statement

The income statement

In which of the following situations is a differentiation strategy used? a. The industry is fragmented into customer groups based on needs. b. Customer needs are primarily satisfied by the price of the product. c. A company's cost structure needs to be reduced. d. There is a demand for deep price discounts from powerful buyers. e. The industry is not allowed to charge a premium price for its products.

The industry is fragmented into cutomer groups based on needs

Which of the following statements is true in the context of attributes of national competitive advantage? a. Factor endowments do not encompass aspects such as managerial sophistication. b. Companies are typically least sensitive to the needs of their closest customers. c. The benefits of investments in advanced factors of production by related and supporting industries are confined to those industries. d. Domestic rivalry creates pressures to increase costs and avoid investing in upgrading advanced factors. e. The nature of home demand shapes the attributes of domestically made products .

The nature of home demand shapes the attributes of domestically made products

Customer response time is: a. the time taken for value to be placed on a company's products by customers. b. the time taken for development of a new process for producing products and delivering them to customers. c. the time taken for given inputs to be converted into an output. d. the time taken for development of products that have superior attributes to existing products. e. the time taken for a good to be delivered or a service to be performed.

The time taken for a good to be delivered or a service to be performed

Suppliers in an industry are most powerful when: a. there are few substitutes for the products that they sell. b. switching costs are low. c. companies in the industry threaten to enter the suppliers' industry. d. their profitability is significantly affected by the purchases of companies in a particular industry. e. they refrain from entering their customers' industry because of lack of resources.

There are few substitutes for the products that they sell

Which of the following statements is true about emergent strategies? a. They are essentially the strategies that arise from the feedback loops. b. They are also influenced by the kind of culture that the organization's structure and control systems foster. c. They are the strategies that require the least amount of evaluation and strategic thinking from the managers. d. They cannot be combined with the intended strategies of an organization. e. They are the product of formal top-down planning mechanisms.

They are also influenced by the kind of culture that the organization's structure and control systems foster

Miller Brewing was related to Philip Morris's tobacco business because it was possible to create important marketing commonalities: both beer and tobacco are mass market consumer goods in which brand positioning, advertising, and product development skills are crucial to create successful new products. This is an example of which of the following?

Transferring competencies

Scenario planning is a technique for coping with the problem of: a. uncertainty. b. planning equilibrium. c. bottom-up planning. d. strategic fit. e. cognitive bias.

Uncertainty

Recently, the U.S. Food and Drug Administration began to require more descriptive labeling of food products. This is an example of standards developed

by government mandate.

Under a competitive bidding strategy, independent component suppliers compete with each other to be the company that will be chosen to supply:

a particular part for a particular manufacturer.

Matthew is a divisional manager at Venus Inc. and reports to the CEO of the company. The CEO delegates resources and authority to Matthew so that he can ensure good performance from the division. Matthew has more employees working under him than required and he has not told the CEO about this, even though there are other departments that are in need of more employees. Which of the following concepts is illustrated here? a. Information asymmetry b. On-the-job consumption c. Greenmail d. Glass-ceiling effect e. Takeover constraint

a. Information asymmetry

The internal research department of Libra Inc. has found that the packaging of health supplements produced by the company is faulty, and is resulting in poor quality. Despite this knowledge, the company has not improved the packaging and instead has advertised to its customers that their packaging is foolproof. Which of the following concepts is illustrated in this scenario? a. Information manipulation b. Anticompetitive behavior c. Agency strategy d. Information symmetry e. On-the-job consumption

a. Information manipulation

Which of the following is NOT a governance mechanism used to align the interests of managers and stockholders? a. Self-dealing b. The board of directors c. Stock-based compensation schemes d. Strategic control systems e. Takeover constraints

a. Self-dealing

With reference to high-technology industries, which of the following statements is true about technical standards? a. They emerge because there are economic benefits associated with them. b. They cause compatibility problems between products and their complements. c. They can create a lot of confusion in the minds of consumers. d. They often result in higher production costs. e. They increase the risks associated with supplying complementary products.

a. They emerge because there are economic benefits associated with them.

Cost reduction pressures can be particularly intense in industries producing: a. commodity-type products. b. highly differential products. c. highly customized services. d. goods that have no close substitutes. e. goods that need minimal advertising.

a. commodity-type products.

Armando, a technology enthusiast, is often willing to pay premium prices to always have the newest tech gadgets. Armando most likely belongs to the _____ group of customers.

a. innovator

An app development firm is working on a new product to identify and consolidate a smartphone users' favorite and most used apps into one place on the phone. If the new product will be sold to existing customers, the firm is pursuing a strategy of:

a. product development.

Cooperating with competitors: a. reduces competition in the market. b. creates confusion among customers and often lead them to delay their purchases. c. helps lower the entry barriers of the industry, thus allowing new entrants to bring in their own formats. d. curbs network effects by discouraging complementary products. e. results in the creation of several new formats, thus intensifying format wars.

a. reduces competition in the market.

Consumers will bear the costs of switching technologies if: a. the benefits of adopting the new technology outweigh the costs of switching. b. switching costs are substantial. c. the new products are packaged attractively. d. there is a lack of complementary products. e. the new technology is advertised subtly.

a. the benefits of adopting the new technology outweigh the costs of switching.

Companies that are innovative and able to deal with environmental change with new strategies and structures probably have:

adaptive cultures.

Which of the following statements is true in the context of principal-agent relationships? a. The agency relationship is confirmed to the top management and does not continue down the hierarchy within the company. b. Agents almost always have more information about the resources they are managing than the principal does. c. Information asymmetry can make it easier for principals to measure how well an agent is performing. d. In a principal-agent relationship, the decision making power rests entirely with the principals. e. The relationship between the company and the suppliers is an example of a principal-agent relationship.

b. Agents almost always have more information about the resources they are managing than the principal does.

Antibody Solutions is a company that specializes in cell-bank storage, and producing antibodies for bacterial and viral infections. It is not considered a high-tech company since it is not technically in the computer or software industry, which is typically considered high-tech. a. True b. False

b. False

Global standardization strategy emphasizes customization and product differentiation. a. True b. False

b. False

One important advantage of being a first mover is that it guarantees success. a. True b. False

b. False

Ownership of an industry standard that is protected from imitation by patents and copyrights is a weak organizational resource. a. True b. False

b. False

The globalization of production has been decreasing as companies have been facing lower barriers to international trade and location economies. a. True b. False

b. False

The law of diminishing returns states that marginal costs fall as a company tries to expand output. a. True b. False

b. False

Which of the following is an advantage of franchising?

b. It can help the franchisor expand his or her business rapidly.

Arnold is a CEO at Gamma LLC. He has control over the corporate funds of the company. Arnold has often taken funds from the company to pay for his travel and hotel expenses. The funds could otherwise have increased stockholder returns. Which of the following concepts is illustrated in this scenario? a. Corporate governance b. On-the-job consumption c. Greenmail d. Information asymmetry e. Information manipulation

b. On-the-job consumption

Jacob is a senior manager at Aries LLC. Jacob has been earning a lot of money in addition to his salary. He often misrepresents the financial information about the operations he handles; he acquires more financial resources than he actually needs to run operations. Which of the following concepts is illustrated in this scenario? a. Glass-ceiling effect b. Self-dealing c. Agency strategy d. Takeover constraints e. Stock options

b. Self-dealing

Which of the following has occurred in international trade over the past half-century? a. There has been a dramatic increase in the barriers to international trade. b. Tariff rates on manufactured goods traded by advanced nations have fallen. c. Regulations prohibiting foreign companies from entering domestic markets and establishing production facilities have increased. d. The volume of world trade has decreased dramatically. e. There has been a decline in the value of foreign direct investment.

b. Tariff rates on manufactured goods traded by advanced nations have fallen.

Global expansion: a. is feasible only for non-technology based companies. b. can enable companies to increase their profitability and grow their profits more rapidly. c. has significantly decreased in the recent years as the industry barriers are now higher. d. does not involve selling existing products to new markets in different countries. e. is not feasible for service-based firms.

b. can enable companies to increase their profitability and grow their profits more rapidly.

When a first mover does not have complementary assets, barriers to imitation are high, and there are several capable competitors, the first mover should: a. license the innovation to others. b. enter into a joint venture to protect the product. c. lower the barriers for imitation. d. sell the technology outright to another firm. e. wait until competitors develop an alternative product.

b. enter into a joint venture to protect the product.

The globalization of production has caused firms to: a. lower their market share. b. lower their cost structure. c. centralize their production process. d. curb international competition. e. limit the number of market segments.

b. lower their cost structure.

Gadgetbug, an electronic gadgets company, has established itself as one of the industry leaders. The company has been facing competition from new entrants. The new entrants offer gadgets in different colors, with compelling artwork embossed on the cases. Seeing the interest in this market, Gadgetbug introduced its own range of uniquely designed gadgets. In this scenario, Gadgetbug's attempt to cater to the different segments of customers to deter competition demonstrates:

b. product proliferation

Technical standards in high-technology industries are: a. specifications developed by each producing company for its own products and product components. b. specifications that producers adhere to when making a product or a component. c. product specifications imposed by the federal government. d. product features desired by consumers. e. general guidelines proposed by industry leaders

b. specifications that producers adhere to when making a product or a component.

There is a set of fixed specifications for turbine blades for jet engines. The specifications include the material that needs to be used to manufacture the blades and also the specific dimensions that they need to have; the same specifications are used by all manufacturers. In this scenario, the specifications for jet blades can be referred to as: a. format wars. b. technical standards. c. technological paradigm shifts. d. first movers e. razor and blade strategies.

b. technical standards.

Credible commitments refer to:

believable promises that support the development of a long-term relationship between companies.

Which of the following statements is true in the context of local demand conditions? a. Companies are typically least sensitive to the needs of their closest customers. b. Home demand plays little role in helping companies upgrade their national competitive advantage. c. A nation's companies gain competitive advantage if their domestic customers are sophisticated and demanding. d. The characteristics of international demand alone shape the attributes of a company's products; not local demand. e. Local demand characteristics have little role to play in creating pressure for innovation and quality.

c. A nation's companies gain competitive advantage if their domestic customers are sophisticated and demanding.

Which of the following statements is true in the context of unethical behavior? a. Business ethics significantly differ from personal ethics. b. An individual with a strong sense of personal ethics is more likely to engage in self-dealing. c. A personal ethical code will exert a profound influence on the way individuals behave as businesspeople. d. Focusing only on applying straightforward business calculus can completely eliminate ethical concerns. e. An organizational culture that fosters decision making on purely economic terms eliminates unethical practices.

c. A personal ethical code will exert a profound influence on the way individuals behave as businesspeople.

Which of the following is not a necessity for leveraging the skills of global subsidiaries? a. Incentives for local managers to share knowledge and ideas b. Awareness among managers that competencies can develop anywhere c. Assertion of monopoly of the corporate center over subsidiaries d. Transfer of competencies around the company e. Incentives that encourage employees to take necessary risks

c. Assertion of monopoly of the corporate center over subsidiaries

Which of the following is NOT an accurate statement about current levels of pay for CEOs ofU.S.-based firms? a. CEOs also earn from the stock options that they grant to managers. b. Empire building helps CEOs increase their earnings. c. CEO compensation is closely tied to corporate performance in most firms. d. CEO pay is rising more rapidly than pay for other workers. e. The level of CEO compensation is determined by the corporate board of directors.

c. CEO compensation is closely tied to corporate performance in most firms.

In a bid to expand its business and gain cost advantages, Omega Inc. has established several merchandising outlets in different locations. All the outlets share a good network and are interconnected by information technology. The entire network of outlets operates in the industry as one large company. Which of the following strategies has Omega Inc. most likely used ?

c. Chaining

Which of the following statements is true about global standardization strategy? a. It emphasizes product customization to specifically meet customer needs. b. It involves the spreading of production, marketing, and research and development activities of companies to all the location it operates in. c. It makes most sense when there are strong pressures for cost reductions. d. It makes most sense when the pressures for local responsiveness are maximum. . It fails to focus on achieving location and scale economies.

c. It makes most sense when there are strong pressures for cost reductions.

Which of the following statements is true about international strategy? a. It is usually adopted by companies that face intense cost pressures due to competition. b. It makes most sense when the pressures for local responsiveness are very intense. c. It often involves the head office retaining tight control over marketing and product strategy. d. It often involves decentralizing product development functions such as R&D to different subsidiaries. e. It involves extensive scope for localization and product differentiation.

c. It often involves the head office retaining tight control over marketing and product strategy.

KL Entertainment Inc. is a service-based firm with very few competitors. The company is looking to sell its services in different nations with substantial differences in consumer preferences and where cost pressures are not too intense. Which of the following strategies should WKL Entertainment lnc. managers pursue? a. Global standardization b. Transnational c. Localization d. International e. Multinational

c. Localization

Which of the following statements is true about new entrants in the context of a technological paradigm shift? a. New entrant often face the risks of product cannibalization. b. Pressures to continue the existing out-of-date business model hamstring new entrants. c. New entrants do not need to worry about their established customer base. d. It is difficult for new entrants to focus all their energies on the opportunities offered by the new disruptive technology. e. New entrants are not constrained by lack of capital.

c. New entrants do not need to worry about their established customer base.

The Achilles heel of international strategy is that: a. economies of scale cannot be achieved. b. customization of products makes the company lose its credibility. c. competitors inevitably emerge. d. non-price differences among products hold little importance. e. customer preferences eventually become identical.

c. competitors inevitably emerge.

Differences in tastes and preferences: a. increase pressures for cost reductions. b. do not affect service-based firms. c. increase pressures for local responsiveness. d. reduce pressures from the host government. e. significantly decrease R&D costs of a company.

c. increase pressures for local responsiveness.

A stock option is a right to buy: a. shares of the company's stock at the stock's current price. b. shares of the company's stock at half the stock's current price. c. shares of the company's stock at a predetermined price at some point in the future. d. bonds issued by the company. e. stock in an under performing company.

c. shares of the company's stock at a predetermined price at some point in the future.

To make sure that ethical issues are considered in business decisions: a. companies should eliminate the principal-agent approach. b. companies should have a no-layoff policy. c. top managers should articulate and model ethical behaviors. d. top managers should generously grant stock options. e. companies should hire and promote employees with a strong focus on economic gains.

c. top managers should articulate and model ethical behaviors.

Which of the following statements about the board of directors is NOT true? a. Board members are elected by stockholders. b. The board can be held legally accountable for a company's actions. c. The board has the legal authority to hire, fire, and compensate the CEO. d. All the directors are full-time employees of the company. e. Outside directors help perform the monitoring function of the board.

d. All the directors are full-time employees of the company.

Venus LLC. is a large monopolistic electronic firm. The firm has been putting a lot of pressure on some of the complementor companies, asking them to bundle their products along with the products made by Venus LLC, which will make it mandatory for customers to buy Venus LLC. products along with the complementary products, even if they are unrelated. In this scenario, Which of the following does Venus LLC's actions demonstrate? a. Agency strategy b. Dumping strategy c. Price limiting d. Anticompetitive behavior e. On-the-job consumption

d. Anticompetitive behavior

Which of the following will NOT help an established company in addressing the potential challenge of a disruptive technology? a. Access to knowledge about how disruptive technologies can revolutionize markets b. Investing in newly emerging technologies that may ultimately become disruptive technologies c. Separating out the disruptive technology and creating an autonomous operating division solely for this new technology d. Asking customers if they are interested in the new technology e. Understanding that a disruptive technology will require a radically different value chain with a different cost structure

d. Asking customers if they are interested in the new technology

Which of the following is not a factor of production? a. Land b. Labor c. Raw materials d. Competitive forces e. Managerial sophistication

d. Competitive forces

Which of the following statements is true about transnational strategy? a. It gives little emphasis to cost reduction and achieving scale economies. b. It makes little sense when the pressures for local responsiveness are intense. c. It is an easy one to pursue because it places minimal demands on the company. d. It fosters a flow of skills between different subsidiaries in the company's global network of operations. e. It is adopted by companies that produce standardized goods that do not require product differentiation.

d. It fosters a flow of skills between different subsidiaries in the company's global network of operations.

Nutrimax Corp., a breakfast cereal company, has designed extensive and elaborate advertising campaigns for its existing products. The campaigns mainly focus on the features and benefits of the products that differentiate the cereals from the competition. The massive advertising and marketing initiatives are also intended to intimidate new entrants and rivals. Nutrimax Corp. is most likely to be using which of the following strategies?

d. Market penetration

Which of the following statements concerning profitability and profit growth is NOT true? a. Attaining future profit growth may require investments that reduce the current rate of profitability. b. Managers must find the right balance between profitability and profit growth. c. Too much emphasis on current profitability at the expense of profit growth can make an enterprise less attractive to shareholders. d. Satisfying the claims of other key stakeholder groups happens at the risk of decreased profitability and profit growth. e. Too much emphasis on profit growth can reduce profitability and make an enterprise less attractive to shareholders.

d. Satisfying the claims of other key stakeholder groups happens at the risk of decreased profitability and profit growth.

Which of the following is true of first movers? a. The first mover cannot be able to establish brand loyalty. b. The first mover has no opportunity to exploit network effects and positive feedback loops. c. The first mover cannot create switching costs for its customers to deter rivals. d. The first mover that creates a revolutionary product is in a monopoly position. e. Being a first mover guarantees instant success.

d. The first mover that creates a revolutionary product is in a monopoly position.

With reference to high-technology industries, which of the following is an example of a technical standard? a. The prices of complementary products b. The medium of advertising used for technology products c. The color of gadgets produced d. The layout of keys on a keyboard e. The number of manufacturing units per industry

d. The layout of keys on a keyboard

When a company performs a value creation activity in a region that is optimal for that activity, wherever in the world that might be, it is trying to capitalize on: a. negative feedback loops. b. economies of scope. c. the transnational strategy. d. location economies. e. its localization strategy.

d. location economies.

In the wireless telecommunications industry, different technical standards are found in different parts of the world. A technical standard known as GSM is common in Europe, and an alternative standard, CDMA, is more common in the United States and parts of Asia. Equipment designed for GSM will not work on a CDMA network and vice versa. Which of the following pressures for local responsiveness does this represent? a. Global environmental demands b. Host government demands c. Differences in distribution channels d. Differences in customer tastes and preferences e. Differences in infrastructure

e. Differences in infrastructure

When technology in an industry is changing rapidly, a company pursuing a strategy of vertical integration may fmd itself:

locked into an old, inefficient technology.

A hospital examines its processes closely and then changes them radically to become more patient-centered. Among the changes are new ways of doing tasks and new groupings of workers. This is an example of:

reengineering

Companies that are locked out of a market are those in which consumers are unwilling to bear the switching costs required for them to abandon the established standard and adopt the new one.

t

It can be argued that Microsoft's near monopoly of PC operating systems helped raise the level of industry profitability.

t

Marginal costs in high-technology industries tend to stay very low as production rises.

t

Microsoft Word, the word-processing software, is so easy to use and has so many useful features that no other software can compete with it. Therefore, Microsoft Word can be described as a killer application.

t

Switching costs are the costs that consumers must bear to switch from a product based on one technological standard to a product based on another.

t

A strategy of vertical integration may be a risky strategy for a company to pursue when demand is:

unpredictable.

Ralph is a well-liked manager at Aries Inc. He eloquently communicates the goals of the organization and has been successful in making the organization's vision part of its culture. Which of the following characteristics of good strategic leaders can be observed in Ralph? a. Authoritarian leadership b. Devil's advocacy c. Eloquence d. Inconsistency e. Empathy

Eloquence

Emergent strategies arise from within the company as a result of prior planning. a. True b. False

False

Research finds that leaders who exhibit a high degree of emotional intelligence tend to be significantly less effective than those who do not. a. True b. False

False

Rules of thumb, or heuristics, always help to avoid severe and systematic errors in the decision-making process. a. True b. False

False

Which of the following statements is true about competitive advantage? a. It is unaffected by the strategies taken by the company. b. It is considered to be sustained when it lasts for three months. c. It exists only when the company's profitability is greater than the ten highest grossing firms in the world. d. It exists only when the company's profitability is greater than the average profitability and profit growth of its rivals. e. It is seldom affected by the business model of the company.

It exists only when the company's profitability is greater than the average profitability and profit growth of its rivals

Between 2005 and 2011, Blue Drinks, a multinational beverage corporation, increased its return on investment from $5 million to $25 million. The company was able to do this by expanding its product line to include a wider variety of flavors. The $20 million increase in its return on investment between 2005 and 2011 can be referred to as which of the following? a. Shareholder value b. Dividend payment c. Profit growth d. Profitability turnover e. Risk capital

Profit growth

Within a diversified company, the responsibilities of corporate-level strategic managers include: a. supervising production at the manufacturing units of the company. b. compiling sales reports, company costs, employee productivity and calculating the employee turnover rate. c. responding to employee complaints on a daily basis. d. providing leadership for the entire organization and allocating resources among its different business areas. e. maintaining records of transactions with suppliers.

Providing leadership for the entire organization and allocating resources among its different business areas

Rebecca, a manager, was very annoyed after noticing several negligent errors in a critical report. However, while talking to the subordinate who created the report, Rebecca was calm and composed; she did not act impulsively and lose her temper. Which of the following aspects of emotional intelligence is illustrated in this scenario? a. Self-awareness b. Self-regulation c. Motivation d. Empathy e. Social skills

Self-regulation

Which of the following statements is true about functional-level managers? a. They oversee the operation of an entire company or division. b. Their sphere of responsibility is generally confined to one organizational activity. c. Their activities and roles have no importance in realizing the strategic goals of an organization. d. They provide a link between the people who oversee the strategic development of a firm and those who own the firm. e. They occupy the apex of decision-making within an organization.

Their sphere of responsibility is generally confined to one organizational activity

Which of the following is not a characteristic of well-constructed goals? a. They provide a means by which the performance of managers can be evaluated. b. They are lengthy and wordy. c. They specify a time period. d. They are challenging but realistic. e. They address critical issues.

They are lengthy and wordy

Which of the following statements is true about nonprofit organizations? a. They compete with each other for resources. b. Their ultimate aim is to maximize shareholder value in order to attract risk capital. c. Their managers do not need to develop careful strategies, because making a profit is not the organization's goal. d. They do not have to worry about exceeding budgets. e. They seldom set any performance goals like profit-making organizations do.

They compete with each other for resources

A SWOT analysis is implemented to fine-tune strategies. a. True b. False

True

A business model is managers' conception of how the set of strategies their company pursues should mesh together into a congruent whole, thus enabling the company to gain a competitive advantage and achieve superior profitability and profit growth. a. True b. False

True

In practice, the strategies of most organizations are probably a combination of the intended and emergent strategies. a. True b. False

True

Intense rivalry lowers prices and raises costs. a. True b. False

True

Acquisitions often fail because of:

differences in corporate culture.

Market penetration involves the creation of new and innovative products to replace existing ones.

F

There is a certain amount of performance ambiguity inherent in the relationship between a principal and agent.

True

Together with an analysis of the company's external environment, internal analysis gives managers the information they need to choose the business model and strategies that will enable their company to attain a sustained competitive advantage. a. True b. False

True

When Amber first started working at a car manufacturing plant assembling car doors, she was slower at the task than her co-workers. As time passed, her speed at assembling the doors increased and she even taught others how to perform the task more quickly. As a result of increased employee productivity, this particular plant experienced cost savings. These cost savings can be attributed to learning effects. a. True b. False

True

When the value of the dollar is low compared to the value of other currencies, products made in the United States are relatively inexpensive and products made overseas are relatively expensive. a. True b. False

True

A finn's business model should contain three components: what is to be satisfied, who is to be satisfied, and how they will be satisfied

T

A fragmented industry is composed of a large number of small and medium-sized companies.

T

The comparison of strengths, weaknesses, opportunities, and threats is normally referred to as a SWOT analysis. a. True b. False

True

65. Which is an example where a low integration control system would work best? (A) A high-tech firm that needs to change to meet customer demands (B) A chemical company looking to diversify its existing product line with products that are similar (C) A construction company looking to diversify its existing service line with services that are unrelated (D) An apparel company pursuing a differentiation strategy (E) A manufacturing company looking to expand into other markets

(C)

66. Flat organizational structures are characterized by: (A) many levels of management compared to the size of the company. (B) slower response to changes in the competitive environment. (C) a relatively wide span of control. (D) reduced flexibility in decision-making strategies. (E) an increase in bureaucratic costs.

(C)

57. All employees participate in a project team within a _____ structure. They are known as two-boss employees. (A) functional (B) geographic (C) market (D) matrix (E) product

(D)

60. Which of the following does delayering involve? (A) Eliminating business units (B) Rethinking business processes (C) Creating more business units (D) Flattening the organizational hierarchy (E) Broadening the span of control

(D)

67. When decision-making responsibilities are decentralized, benefits include all of the following except: (A) increased motivation and accountability. (B) lower bureaucratic costs from flattened hierarchy. (C) reduced information overload. (D) easier coordination of functions. (E) flexibility in decision-making.

(D)

48. The term used to describe how people learn an organization's culture and way of behaving in the organization is: (A) organizational structure. (B) organizational development. (C) organizational design. (D) organizational behavior. (E) organizational socialization.

(E)

A disadvantage of pursuing a low-cost strategy is that: a. it makes it difficult for fmns to customize their product offerings . b. price wars make it hard to compete with differentiators. c. it costs more than a differentiation strategy because of the necessity of high capital investments. d. powerful buyers are a major threat. e. it reduces customer retention.

A

A telecommunications firm is working on new product concept of built-in routers in mobile phones. If the new product will be sold to existing customers, the finn is pursuing a strategy of: a. product development. b. market penetration. c. product proliferation. d. market signaling. e. market development

A

Customers who have a practical interest in using a new technology in the future and who are willing to experiment and envision new uses for the technology are called: a. early adopters. b. the early majority. c. innovators. d. laggards. e. the late majority.

A

Firms sometimes pursue a chaining strategy to: a. obtain the advantages of cost leadership. b. create product diversity. c. generate revenue by licensing the patents it owns. d. spread overhead costs. e. establish a number of unrelated business units.

A

In a bid to expand its business and gain cost advantages, Omega Inc. has established several merchandising outlets in different locations. All the outlets share a good network and are interconnected by information technology. The entire network of outlets operates in the industry as one large company. Which of the following strategies has Omega Inc. most likely used ? a. Chaining b. Franchising c. Horizontal merger d. Niche strategy e. Divestment strategy

A

In deciding on a strategy, a company in a declining industry must do all of the following except a. lower prices. b. manage industry capacity. c. evaluate its strengths relative to the remaining pockets of demand. d. evaluate the severity of decline. e. monitor its cash flow.

A

In which of the following situations is a differentiation strategy used? a. The industry is fragmented into customer groups based on needs. b. Customer needs are primarily satisfied by the price of the product. c. A company's cost structure needs to be reduced. d. There is a demand for deep price discounts from powerful buyers. e. The industry is not allowed to charge a premium price for its products.

A

Lilly's Beauty Company sells haircare products such as shampoo, conditioner, and hairspray. The company does not sell new or customized products in order to meet the specific needs of certain groups of people. Which of the following approaches is illustrated in this scenario? a. Standardization strategy b. Focus strategy c. Medium market segmentation d. High market segmentation e. Focused market segmentation

A

Most embryonic industries arise from: a. a technological breakthrough. b. product proliferation. c. lack of high entry barriers. d. chaining. e. franchising.

A

Nutrimax Corp., a breakfast cereal company, has designed extensive and elaborate advertising campaigns for its existing products. The campaigns mainly focus on the aspects and benefits of the products that make them better than other products. The massive advertising and marketing initiatives are also intended to intimidate new entrants and rivals. Nutrimax Corp. is most likely to be using which of the following strategies? a. Market penetration b. Product development c. Product proliferation d. Market development e. Capacity control

A

The basic proposition of the blue ocean strategy is that many successful companies have built their competitive advantage by: a. redefming their product offering through value innovation and creating a new market space. b. initiating a price war in order to grow volume and drive its weaker rivals out of the industry. c. developing brand loyalty to protect them from intense price rivalry within their industry. d. charging premium prices for their goods or services. e. adopting lean production and flexible manufacturing technologies.

A

The real estate industry comprises different kinds of firms in several locations. Some are independent and popular locally while the others are affiliated to national chains. The real estate industry is most likely to be a(n): a. fragmented industry. b. oligopolies industry. c. pure competition industry. d. consolidated industry. e. monopoly.

A

When a company offers a wide variety of products at lower prices than its rivals, it is most likely: a. pursuing a low-cost strategy. b. pursuing a differentiation strategy. c. pursuing a focus strategy. d. pursuing an exit strategy. e. pursuing a rapid growth strategy.

A

Which of the following allows a company to lower cost through functional strategy and organization? a. hnplernentingjust-in-tirne inventory control systems b. Customizing the product offering and marketing mix to different market segments c. Focusing marketing efforts on brand building and perceived differentiation from rivals d. Designing strategies to ensure that employees act in a manner that is consistent with the image that the company is trying to project to the world e. Adopting rigid manufacturing technologies

A

Which of the following factors of a particular product tends to accelerate customer demand for it? a. High observability b. Minimum relative advantage c. High complexity d. Minimal value e. Low trialability

A

Which of the following generic business-level strategies is based on the intent to lower costs so that a company can lower prices and still make a profit? a. Broad low-cost strategy b. Price differentiation strategy c. Broad differentiation strategy d. Focused differentiation strategy e. Focused low-cost strategy

A

Which of the following is NOT a principal danger of a low-cost position approach? a. Powerful buyers b. Technological change c. hnitation of production techniques d. Changes in consumer tastes e. Rivals lowering their costs

A

Which of the following statements is true about horizontal mergers? a. Horizontal mergers result from an intention to achieve economies of scale. b. Horizontal mergers result in the fragmentation of the industry. c. Horizontal mergers has been a very successful concept so far with zero cases of failure. d. Companies that establish a network of linked merchandising outlets to obtain advantages of cost leadership are known as horizontal mergers. e. Companies that adopt the strategy of centralization to gain control over all business units are known as horizontal mergers.

A

Which of the following statements is true in the context of declining industries? a. Not all segments of an industry typically decline at the same rate. b. A declining industry should ideally use the leadership strategy when it does not have any strengths and the competition is low. c. Divestment strategy is by which a declining industry seeks to improve sales by improving product quality. d. Greater the exit barriers of a declining industry, lesser is the intensity of competition. e. Intensity of competition is less in declining industries that sell commodity-like products.

A

Which of the following statements is true of differentiation and cost structure? a. Differentiation and cost structure decisions affect one another. b. Differentiation and cost structure decisions do not affect one another. c. Companies that focus on the higher-value end of the market have a lower cost structure. d. Differentiation decisions do not affect a company's profitability. e. Cost structure decisions do not affect a company's profitability.

A

In which of the following cases are bureaucratic costs likely to be lowest? a. A vertically integrated company with five divisions that pursues full integration b. A company with five divisions that pursues related diversification based on economies of scope c. A company with five divisions that pursues related diversification based on transferring competencies d. A company with five divisions that pursues unrelated diversification based on acquisitions and restructuring e. A company with twenty divisions that pursues taper integration

A company with five divisions that pursues unrelated diversification based on acquisitions and restructuring

New ventures are a more attractive strategy than acquisitions when: a. entry barriers are high. b. exit barriers are high. c. a company's business model is based on using its technology to innovate new kinds of products for related markets. d. it needs to move fast to establish a presence in an industry, commonly an embryonic or growth industry. e. the company must make the huge investment necessary to develop the set of value-chain activities required to make and sell products in the new industry.

A company's business model is based on using its technology to innovate new kinds of products for related markets

Goal

A desired future state that an organization attempts to realize

Leveraging competencies involves taking a distinctive competency developed by a business unit in one industry to create: a. a new business unit in the same industry. b. a new business unit in a different industry. c. lower costs in various business units. d. differentiation in various business units. e. new customers in the same industry.

A new business unit in a different industry

Under a competitive bidding strategy, independent component suppliers compete with each other to be the company that will be chosen to supply: a. a particular part for a particular manufacturer. b. all of the parts for a particular manufacturer. c. a particular part for all manufacturers in the industry. d. all parts for all products a manufacturer needs in the industry. e. all parts for a particular product a manufacturer needs in the industry.

A particular part for a particular manufacturer

Industry dynamism refers to: a. the gradual erosion of a company's customer base over time. b. shifts in product profitability. c. a rapidly changing industry environment. d. increasing per-unit costs. e. a company's difficulty in changing its strategies and structure.

A rapidly changing industry environment

A video game console manufacturer hired scientists and engineers to work on ways to improve the video cards used in their game systems. The main aim of the manufacturer was to enhance the utility of the products, as perceived by the customers, above that of its rivals. This company aims to: a. achieve superior innovation. b. maintain a low cost position. c. increase response time. d. achieve a greater division of labor. e. minimize the time to market.

Achieve superior innovation

Which of the following entry strategies should be used when speed is an important consideration? a. Internal new venture b. Acquisition c. Joint venture d. Unrelated diversification e. Related diversification

Acquisition

A company considering entering an industry that is in the mature stage of its life cycle would generally prefer which of the following entry strategies? a. Joint ventures b. New ventures c. Acquisitions d. Long-term contracting e. Taper integration

Acquisitions

The three main types of diversification strategies are: a. acquisitions, joint ventures, and divestments. b. acquisitions, mergers, and buy outs. c. acquisitions, internal new ventures, and joint ventures. d. related acquisitions, unrelated acquisitions, and mergers. e. joint ventures, strategic alliances, and long-term contracts.

Acquisitions, internal new ventures, and joint ventures

The three main types of diversification strategies are:

Acquisitions, internal new ventures, and joint ventures.

Edward Wrapp's ideas about the astuteness of power suggest that successful strategic managers: a. act as members of a coalition or as its democratic leaders rather than as dictators. b. usually have little control over resources that are important to the organization. c. maintain tight control over as many decisions as possible by demanding complete obedience. d. publicly commit themselves to bold strategic agendas whether or not they are rational. e. recognize the futility of pursuing planned strategies.

Act as members of a coalition or as its democratic leaders rather than as dictators

Vertical integration is based on a company entering only those industries that: a. are involved in the distribution of products. b. are considered as potential competitors. c. are involved in sourcing raw materials. d. are not in any way related to the company's current business operation. e. add value to its core products.

Add value to its core products

When a company grows its sales volume through international expansion, it can realize cost savings from economies of scale through all of the following except: a. spreading fixed costs over its global sales volume. b. utilizing its production facilities more intensely. c. increased bargaining power with its suppliers. d. learning effects associated with higher volume. e. adopting high cost structures.

Adopting high cost structures

Which of the following is the probable consequence of a company's inability to integrate two divergent corporate cultures after an acquisition? a. Low management turnover b. Poor commercialization of the product c. An inability to realize potential gains from synergies d. The stock of highly diversified companies is valued lower e. Risks are shared by all

An inability to realize potential gains from synergies

Which of the following is the probable consequence of an inability to integrate two divergent corporate cultures after an acquisition?

An inability to realize potential gains from synergies

Multidivisional structure

An organizational structure in which a firm is divided into divisions, each of which is responsible for a distinct business area

Cool Looks produces a variety of clothing for various customer groups. Which of the following strategies is the firm most likely pursuing? a. Cost leadership b. Differentiation c. Product substitution d. Focus e. Share building

Differentiation

If a company's core skills are highly specialized and have few applications outside the core business, then a company should pursue a related diversification strategy. (T/F)

F

In a strategic alliance, one of the companies that's part of the agreement benefits more than the other. (T/F)

F

Information technology (IT) is playing an increasing role in strategy formulation. However, strategy implementation is not affected by IT in general. (T/F)

F

Long-term contracts: a. are preferable to short-term contracts when there is a minimal need for cooperation. b. are preferable to vertical integration when it is not feasible to exchange hostages. c. generally result in lower prices than competitive bidding. d. achieve exactly the same outcomes as vertical integration, but they incur higher bureaucratic costs. e. are a low-cost alternative to vertical integration when it is possible to build cooperative relationships with suppliers.

Are a low-cost alternative to vertical integration when it is possible to build cooperative relationships with suppliers

Joint ventures: a. are an alternative to new ventures. b. are attractive when speed is important. c. are attractive when entry barriers are high. d. should be done on a small scale. e. reduce the risk of loss of proprietary knowledge.

Are an alternative to new ventures

Antitrust authorities: a. favor large companies. b. reduce industry competition. c. are concerned with the abuse of market power. d. tend to raise prices of products for consumers. e. enable the achievement of market power.

Are concerned with the abuse of market power

Learning effects: a. result in unit manufacturing costs increasing by a certain amount each time output is increased. b. suggest that production costs increase because of increasing labor productivity. c. are more significant when simple steps in an assembly process are performed over and over again. d. are more significant when a technologically complex task is repeated. e. lead to diseconomies of scale.

Are more significant when a technologically complex task is repeated

Just-in-time inventory systems: a. are used only by manufacturing firms. b. provide a buffer stock of inventory for a company. c. are used to reduce inventory holding costs. d. save costs by outsourcing inventory management to other companies. e. always keep extra inventory on hand for emergencies.

Are used to reduce inventory holding costs

A company pursuing a focus strategy: a. attempts to serve all market segments. b. concentrates on building market share in one market segment. c. typically has more resources at its disposal than a differentiator does. d. has a greater impact on costs and revenues. e. produce different offerings for different segments.

B

A company pursuing a low-cost strategy: a. Improves non-price factors such as design and customer service b. Produces a basic offering to reduce cost structures c. Keeps advertising expenses at a maximum d. Relies on patent protections to keep costs low e. Customizes marketing mix to different market segments

B

A differentiated product is a product that: a. has a greater resale value than rival products. b. provides greater reliability than rival products. c. is offered free of cost on purchase of a company's standard product. d. always costs more than rival products. e. always costs less than rival products.

B

A differentiation strategy is based on creating a product that customers perceive as being: a. the same as other available products. b. distinct from other available products. c. the least costly product in the industry. d. the most costly product in the industry. e. cheaper, but inferior to the available products

B

An embryonic industry is one that: a. a number of small and medium sized companies. b. is just beginning to develop. c. has sufficiently developed so that early industry leaders have already been identified. d. has initial government backing because of its importance to the general populace. e. is characterized by intense rivalry among established companies.

B

At The Luxury Hotel in Miami, Florida, three hotel employees serve the needs of each guest. In every room, a guest can summon a chef, a maid, or a valet by pressing a button at his/her bedside. Which generic business-level strategy is The Luxury Hotel utilizing? a. Cost leadership b. Differentiation c. Vertical integration d. Razor and blade e. Brand loyalty

B

Compared to a differentiator, the company that follows a low-cost strategy has the advantage of: a. distinguishing its products from those of rivals by offering something that they fmd hard to match. b. absorbing cost increases by powerful suppliers while keeping to their lower pricing. c. allowing the company to charge a premium price for its good or service. d. using perceived superior value to generate growth in demand among customers. e. creating entry barriers for rivals with greater brand loyalty to the specific products offered.

B

Cool Looks produces a variety of clothing for various customer groups. Which of the following strategies is the finn most likely pursuing? a. Cost leadership b. Differentiation c. Product substitution d. Focus e. Share building

B

Delta Airlines used to advertise its high-quality air travel service by saying it flew "anywhere, anytime." What generic strategy is represented by this advertisement? a. Broad low-cost b. Broad differentiation c. Vertical integration d. Right-time marketing e. Rapid growth

B

Gadgetbug, an electronic gadgets company, has established itself as one of the industry leaders. The company recently has been facing some amount of competition from certain new entrants. The new entrants offer gadgets in different colors and with interesting artwork embossed. Recognizing that there is a special market for gadgets that are designed uniquely, Gadgetbug has now introduced its own range of uniquely designed gadgets. In this scenario, Gadgetbug's attempt to cater to all the different segments of customers to deter competition demonstrates: a. price signaling b. product proliferation c. harvest strategy d. limit price strategy e. diseconomies of scale

B

Info Tech, Inc. makes complex telecommunications products, such as cellular telephones. Since this company has a distinctive competency in research and development, it should try to differentiate its product through: a. reliability. b. innovation. c. advertising. d. service. e. low pricing.

B

Music CDs and newspaper sales have been falling as users tum to the Internet for their music and news. Which of the following is NOT a strategy for companies in these declining industries? a. Leadership b. Chaining c. Niche d. Divestment e. Harvest

B

One strategy used to consolidate fragmented industries is: a. vertical mergers. b. chaining. c. product proliferation. d. price signaling. e. nonprice competition.

B

Which of the following statements is true in the context of growing industries? a. Innovators and early adopters have the same customer needs as the early majority. b. Innovators and early adopters are typically reached through specialized distribution channels. c. Reaching the early majority seldom requires advertising and is usually achieved through word of mouth. d. Companies serving innovators need to have large-scale mass production and very low prices. e. Companies competing in an embryonic market typically pay more attention to increasing the reliability of a product than to its performance.

B

Internal new ventures can generally be executed far more quickly than acquisitions. (T/F)

F

Laggards are technologically sophisticated customers willing to tolerate the limitations of the product.

F

A company pursuing a strategy of vertical integration may expand its operations: a. backward into an industry that produces inputs for the company's products. b. by making specialized investments jointly with its competitor. c. laterally into an industry that competes with the company's products. d. by merging with industry competitors. e. by using its capital resources to purchase another company within the industry.

Backward into an industry that produces inputs for the company's products

A company's competitive advantage is more durable when: a. barriers to imitation are low and there are few capable competitors. b. barriers to imitation are high and there are many capable competitors. c. barriers to imitation are high and the industry is stable. d. the industry is stable and there are many capable competitors. e. the industry is stable and barriers to imitation are low.

Barriers to imitation are high and the industry is stable

At Silica Dustcloud Inc., rules are published at the cubicle of all employees stating what is expected of them regarding time to arrive, time for lunch, when to take breaks, and when to socialize. Which of the following is this an example of?

Behavior control

Credible commitments refer to: a. believable promises that support the development of a long-term relationship between companies. b. the merging of two companies that have an equal market share. c. to obtaining of goods, services or works from an external source. d. the acquisition of one company by another company. e. the outsourcing of after-sale services to a different company.

Believable promises that support the development of a long-term relationship between companies

When Rollie's car wash began to lose business to rivals, Rollie read publications for car wash owners to learn the best practices in the industry. Then she implemented the best practices. Rollie is using ____ to improve her car wash. a. specialized assets b. benchmarking c. strategic commitments d. inertia e. the Icarus paradox

Benchmarking

Which of the following does the philosophy underlying TQM include? a. Greater quantity results in cost decreases. b. Better quality leads to higher market share. c. Greater quantity increases a company's profitability. d. Opinions of employees are irrelevant in manufacturing products. e. Work standards should only be defined as numbers or quotas.

Better quality leads to higher market share

Which of the following is a benefit that firms should expect to gain from the use of horizontal integration? a. Reduced risk of coming into conflict with the FTC b. Better realization of economies of scale c. Greater control over the entire supply chain d. Reduced risk of holdup e. Reduced need for investment in core activities

Better realization of economies of scale

Which of the following is a benefit that fmns should expect to gain from the use of horizontal integration?

Better realization of economies of scale

When shopping for clothing such as shirts and jeans, Tyrone only buys products from Eastern Clothing Company even if there are several other companies that offer similar products at lower prices. Tyrone's preference for Eastern Clothing Company demonstrates: a. lack of demand. b. bargaining power. c. risk of entry. d. brand loyalty. e. lack of economies of scale

Brand loyalty

Which of the following generic competitive strategies is a producer of commodity steel most likely to pursue? a. Exclusive dealing b. Broad differentiation c. Focus differentiation d. Broad low-cost e. Horizontal integration

Broad low-cost

Laggards are the customers who are the first ones to try and adopt a new technology.

F

Which of the following generic business-level strategies is based on the intent to lower costs so that a company can lower prices and still make a profit? a. Broad low-cost strategy b. Price differentiation strategy c. Broad differentiation strategy d. Focused differentiation strategy e. Focused low-cost strategy

Broad low-cost strategy

A fragmented industry is one composed of a: a. single large company that has the power to determine prices. b. large companies and their subsidiaries. c. large number of small and medium-sized fmns. d. companies that operate in different locations across the world. e. a small number of single proprietorships.

C

Competitive intensity in a declining industry is greatest when: a. the industry is declining slowly instead of rapidly. b. the product is easy to differentiate. c. exit barriers are high. d. entry barriers are high. e. technology is stable.

C

Differentiation allows a company to: a. respond to demands of deep price demands from powerful buyers and still make money. b. lower its cost structure. c. charge a premium price for its good or service. d. charge low prices and still make profits. e. initiate a price war in order to grow volume and drive its weaker rivals out of the industry

C

Factors leading to the slow growth of demand in embryonic industries include all of the following except the: a. poor quality of the first products. b. lack of complementary products. c. customer familiarity with products. d. high production costs of the products. e. lack of distribution channels for the products.

C

Focus strategy can be defined as: a. the strategy of merging with an established company in order to gain monopoly over the market. b. the strategy a company uses when it decides to allocate the company resources equally among all the marketing segments c. the strategy a company uses when it decides to serve a limited number of segments, or just one segment of the market. d. the strategy a company uses when it decides to iguore the different needs of different market segments, and produce one standardized product for all the customers. e. the strategy of closing down one or more business units in order to minimize the losses.

C

Functional strategies to improve differentiation should include: a. product offerings designed to be can be produced and delivered at as low a cost as possible b. standardization of the product offering and marketing mix to different market segments. c. hiring and employee development strategies designed to ensure that employees act in a manner that is consistent with the image that the company is trying to project to the world. d. initiation of a price war in order to grow volume and drive its weaker rivals out of the industry. e. products that have lower prices to allow a company to erect an economic moat around its business that keeps higher-cost rivals out.

C

Nick, a professional magician, is often invited to perform magic tricks at birthday parties and other social gatherings from across the country. However, he offers his services only to clients who stay in the same city as him. He is also known to charge less than other magicians in the city. Nick is pursuing which generic business strategy? a. Improved services b. Right-time marketing c. Focused low-cost d. Broad low-cost e. Deterrence strategy

C

The advantage that focused companies have over their broad market rivals is that they: a. can sells on non-price factors, such as design or customer service. b. can respond to demands for deep price discounts. c. sell fewer products in bulk to outsell their rivals. d. can initiate a price war in order to grow volume and drive its weaker rivals out of the industry. e. can absorb cost increases that may be passed on downstream by powerful suppliers.

C

The first group of customers to enter the market for a new product are called: a. laggards. b. late majority. c. innovators. d. early majority. e. passive shoppers.

C

The main difference between companies following a broad low-cost strategy and those following a focus low-cost strategy is in the: a. standardized market price. b. industry life cycle stage. c. degree of market segmentation. d. age of the market. e. market trajectory.

C

Swedish strength in fabricated steel products (such as ball bearings and cutting tools) has drawn on strengths in Sweden's specialty steel industry. This is an example of which of the following attributes that impact national competitive advantage? a. Local demand conditions b. Competitiveness of related and supporting industries c. Intensity of rivalry in an industry d. Factor endowments e. Differences in distribution channels

Competitiveness of related and supporting industries

The term value innovation is used to describe: a. the way a company decides to group customers based on important differences in their needs to gain a competitive advantage. b. a business's overall competitive theme, the way it positions itself in the marketplace to gain a competitive advantage, and the different positioning strategies that can be used in different industry settings. c. what happens when innovation pushes out the efficiency frontier in an industry, allowing for greater value to be offered through superior differentiation at a lower cost than was previously thought possible. d. what happens when a company decides to ignore different segments, and produce a standardized product for the average consumer. e. what happens when a company decides to serve many segments, or even the entire market, producing different offerings for different segments.

C

When a company recognizes that the needs of one market segment is not the same as another and accordingly customizes its product offerings, it is said to be pursuing: a. stuck-in-the-middle strategy. b. rapid-growth strategy. c. differentiation strategy. d. focus strategy. e. low-cost strategy

C

Which of the following statements is true about fragmented industries? a. They are usually characterized by large mass-production operations. b. They essentially enjoy a national brand loyalty. c. They require companies to use focus strategies because of specialized customer needs. d. They do not attract new entrants as they have extremely high entry barriers due to economies of scale. e. They are usually dominated by one or two large companies that enjoy the power to influence industry prices.

C

Who among the following is most likely to fall under the category of laggards in the context of customer groups? a. Martha is tech-savvy and tends to actively seek out for new and innovative products in the market. b. Philip appreciates technology but tends to refrain from trying products that are extremely new. c. Allan is ignorant about the newest uses of technology and buys new products only when they become an absolute necessity. d. Rebecca is aware about the value that technology offers; she tends to weigh costs and benefits of a product before making a buying decision. e. Arnold tends to be a little apprehensive about buying new technology but buys nevertheless when he observes that a lot of people are using the new technology.

C

Which of the following is the organization's principal general manager? a. Line manager b. Marketing division head c. CFO d. CEO e. Sales manager

CEO

Global expansion: a. is feasible only for non-technology based companies. b. can enable companies to increase their profitability and grow their profits more rapidly. c. has significantly decreased in the recent years as the industry barriers are now higher. d. does not involve selling existing products to new markets in different countries. e. is not feasible for service-based firms.

Can enable companies to increase their profitability and grow their profits more rapidly

Free cash flow is defined as: a. money in a company's bank account. b. government funds given to a company for meeting Environmental Protection Agency (EPA) regulations. c. additional funds donated by stockholders. d. cash in excess of that required to fund investments in the company's industry and to meet any debt commitments. e. cash borrowed by the company that requires no interest payments.

Cash in excess of that required to fund investments in the company's industry and to meet any debt commitments

Mike, the CEO of a retail chain, wanted to keep costs low. To set an example for others, he drove his own car and furnished his office with plain, metal desks. In this case, Mike was displaying: a. commitment. b. ego. c. astute use of power. d. devil's advocacy. e. autocratic leadership.

Commitment

Price signaling in mature industries happens when:

Companies increase or decrease product prices to convey their intentions to other companies.

An industry can be defined as a group of: a. companies offering products or services that are close substitutes for each other. b. manufacturing plants of a single company. c. different kinds of companies that are based in the same geographic location. d. companies that are different but generate similar amounts of revenues. e. brands that offer different products but are owned by a single firm.

Companies offering products or services that are close substitutes for each other

Which of the following strategies allows interdependent fmns indirectly to coordinate their actions? a. Market development b. Harvest strategy c. Divestment strategy d. Price signaling e. Market penetration

D

A consolidated industry structure: a. consists of a large number of small companies. b. can be seen in agriculture, dry cleaning, health clubs, and real estate brokerage. c. consists of few companies that are in a position to determine industry price. d. provides no scope for oligopoly to exist. e. is characterized by low-entry barriers and commodity-type products.

Consists of few companies that are in a position to determine industry price

A company should pursue related diversification instead of unrelated diversification when the company's: a. core skills are applicable to a wide variety of industrial and commercial situations. b. core skills are highly specialized and have few applications outside the core business. c. top managers are skilled at acquiring and turning around poorly run enterprises. d. main objective is to maximize its growth. e. free cash flow is high enough that it has funds available for investment.

Core skills are applicable to a wide variety of industrial and commercial situations

The first component of the strategic management process is: a. crafting the organization's mission statement. b. coming up with a damage control plan. c. analyzing the macroenvironment. d. determining the firm's employee turnover rate. e. deciding on a fit between the organization's strengths and weaknesses and the environment's opportunities and threats.

Crafting the organization's mission statement

Which of the following best describes product innovation? a. Transforming a quantity of inputs into a given output b. Identifying and satisfying a customer's needs c. Creating products that have superior attributes than existing products. d. Developing a new process that focuses on quantity rather than quality. e. Measuring the quantity of outputs produced per employee

Creating products that have superior attributes than existing products

Which of the following is the final result of the five-step chain reaction on which the philosophy of the TQM is based? a. Better use of time and materials b. Increase in profitability c. Creation of more jobs d. Higher market share e. Improvement in productivity

Creation of more jobs

Which of the following is NOT one of the factors in the economic forces of the macroenvironment? a. Interest rates b. Inflation c. Cultural changes d. Currency exchange rates e. Economic growth rate

Cultural changes

To be commercially successful, new products must be developed with ____ in mind. a. manufacturing requirements b. engineering technology c. customer requirements d. sales techniques e. technical requirements

Customer requirements

A market segment consists of a group of: a. similar products. b. customers who have similar needs. c. products that are considered obsolete. d. diverse products produced by the same manufacturer. e. customers who have diverse needs.

Customers who have similar needs

Market segments are groups of: a. customers within a market that can be different from each other on the basis of their distinct attributes and specific demands. b. companies within a market that produce similar goods or services which are close substitutes of each other. c. companies that follow a similar business model and cater to the needs of similar customers. d. closely related industries. e. large companies that are in a position to determine industry price.

Customers within a market that can be different from each other on the basis of their distinct attributes and specific demands

Which of the following trends has led to the fragmentation of many consumer markets? a. Self-managing teams b. Project management c. TQM d. Customization e. Increased response time

Customization

A company uses when it focuses on pockets of demand that are declining more slowly than the industry as a whole to maintain profitability. a. acquisition strategy b. chaining c. divestment strategy d. niche strategy e. franchising

D

An industry moves from embryonic to growth stage when: a. the sales of complementary products decline. b. the production costs increase. c. companies manufacture products in very small quantities. d. ongoing technological progress makes its product easier to use. e. mass markets for its products decline.

D

Highest market demand and industry profits arise when: a. early adopters leave the market. b. innovators and early adopters enter the market. c. when laggards and late majority leave the market. d. early and late majority users enter the market. e. when the production costs become high.

D

Hydralicious, a juice parlor, has been looking to expand its business. The company has given a few entrepreneurs in different locations the license to operate under its name.The entrepreneurs are given the permission to use the company's reputation and the business model to run operations. The entrepreneurs will be charged a fee but will also get a percentage of the profits made. Which of the following strategies is Hydralicious most likely to be using ? a. Chaining b. Horizontal merger c. Vertical merger d. Franchising e. Centralization

D

Jordan's Ice Creams is strategically located near a university. After realizing that most of its customers, who are mostly students, prefer a wide range of flavors, it started offering different combinations of premium flavors, cones, and toppings to create hundreds of extravagant, customized products. Which generic strategy is Jordan pursuing? a. Broad low-cost strategy b. Broad differentiation strategy c. Focused low-cost strategy d. Focused differentiation strategy e. Product substitution strategy

D

Mature industries are generally characterized by: a. low entry barriers. b. diseconomies of scale. c. absence oflarge-scale production. d. a small number of large firms. e. very low customer demand.

D

Price signaling in the context of mature industries happens when: a. the government intervenes to regnlate prices of products. b. companies decide to invest in slow-growing markets. c. companies decide to sell its patents to generate revenue. d. companies increase or decrease product prices to convey their intentions to other companies. e. a company concentrates on expanding market share in its existing product markets.

D

Which of the following is not one of the principles commonly found in companies that have successfully embraced the TQM philosophy? a. Building an organizational commitment to quality b. Finding ways to measure quality c. Giving more time for supervisors to work with employees d. Training new employees e. Defining work standards only in terms of numbers or quotas

Defining work standards only in term of numbers or quotas

The main difference between companies following a broad low-cost strategy and those following a focus low-cost strategy is in the: a. standardized market price. b. industry life cycle stage. c. degree of market segmentation. d. age of the market. e. market trajectory.

Degree of market segmentation

Americans are currently living longer now than in the past because of advances in medicine. As a result, the sale of products that meet the needs of older individuals, such as devices that assist in walking and movement, have increased. In the context of an industry's macroenvironment, age is considered a: a. technological force. b. demographic force. c. social force. d. political force. e. legal force.

Demographic forces

A company's mission: a. describes the marketing strategies the company intends to use to sell its products. b. outlines the manner in which employees and managers should conduct themselves. c. defines the manner in which strategies will be developed and goals achieved. d. describes what the company does. e. describes the benefits offered to the shareholders.

Describes what the company does

Research and development activities are concerned with: a. design of products. b. distribution of goods. c. customer services. d. analyzing financial performance. e. marketing of products.

Design of products

Research and development (R&D) can help a company improve quality by: a. designing products that are easy to manufacture. b. pursuing economies of scale. c. developing strategies on how to market products. d. upgrading employee skill levels. e. creating teams whose members coordinate their own activities.

Designing products that are easy to manufacture

A component of strategy implementation is: a. designing the best organization structure, culture, and control systems to put a strategy into action. b. providing the number and kind of periodic reports that must be submitted by functional-level managers. c. defining the goals and objectives of the organizations. d. answering the question, "What is our business?" e. eliminating the feedback loop.

Designing the best organization structure, culture and control systems to put a strategy into action

In the wireless telecommunications industry, different technical standards are found in different parts of the world. A technical standard known as GSM is common in Europe, and an alternative standard, CDMA, is more common in the United States and parts of Asia. Equipment designed for GSM will not work on a CDMA network and vice versa. Which of the following pressures for local responsiveness does this represent? a. Global environmental demands b. Host government demands c. Differences in distribution channels d. Differences in customer tastes and preferences e. Differences in infrastructure

Differences in infrastructure

Which of the following statements is true of differentiation and cost structure? a. Differentiation and cost structure decisions affect one another. b. Differentiation and cost structure decisions do not affect one another. c. Companies that focus on the higher-value end of the market have a lower cost structure. d. Differentiation decisions do not affect a company's profitability. e. Cost structure decisions do not affect a company's profitability.

Differentiation and cost structure decision affect one another

When a company recognizes that the needs of one market segment is not the same as another and accordingly customizes its product offerings, it is said to be pursuing: a. stuck-in-the-middle strategy. b. rapid-growth strategy. c. differentiation strategy. d. focus strategy. e. low-cost strategy.

Differentiation strategy

Natalie and Shay are both employees at Silica Dustcloud Inc. Natalie, the marketing manager, often meets with Shay, the production manager, in order to solve specific mutual problems. Which of the following is this an example of?

Direct contact

A company's hiring strategy: a. directly affects employee productivity. b. has little effect on employee productivity. c. does not relate to profitability. d. is not part of the company's overall human resource strategy. e. upgrades an employee's skill level.

Directly affects employee productivity

Which of the following is not a basic strategy for a first mover?

Discourage development of complementary assets

____ refers to unit cost increases associated with a large scale of output. a. Economies of scale b. Learning effects c. Diseconomies of scale d. Flexible manufacturing e. Mass customization

Diseconomies of scale

A differentiation strategy is based on creating a product that customers perceive as being: a. the same as other available products. b. distinct from other available products. c. the least costly product in the industry. d. the most costly product in the industry. e. cheaper, but inferior to the available products.

Distinct from other available products

When McDonald's introduced the McCafe, it began offering a new product that was not available in traditional McDonald's stores. The introduction of the McCafe is an example of which of the following?

Diversification

When McDonald's introduced the McCafe, it began offering a new product that was not available in traditional McDonald's stores. The introduction of the McCafe is an example of which of the following? a. Transferring competencies b. Diversification c. Commonality d. Economies of scope e. Bureaucratic costs

Diversification

A low-cost position is most appropriate when: a. the power of buyers is low and barriers to entry are high. b. economies of scale are relatively unimportant in manufacturing products. c. customers have very different needs and uses for the industry's products. d. product innovation is the key competitive factor. e. industry rivalry is high and customers are very sensitive to prices

E

Which of the following is NOT a main approach to market segmentation? a. Marketing a product targeted toward average or typical customers b. Marketing a product to a group of people who are more likely to purchase it c. Making customized products to suit the unique requirements of customers d. Making products to meet the specific needs of a narrow group of customers e. Making one product aimed toward a general, rather than a specific subset of customers

E

Which of the following is an advantage of franchising? a. It gives the franchisor the same level of tight control over franchisees as does chaining. b. It allows the franchisor to obtain the entire profits made by franchisees. c. It is beneficial for franchisees as they do not have to face the challenge of higher capital costs. d. It helps the franchisees by relieving them of the responsibility of running operations. e. It can help the franchisor expand his or her business rapidly.

E

Which of the following shakeout strategies requires a company to limit or decrease its investment in a business and to extract, or milk, the investment as much as it can? a. Market concentration strategy b. Share-increasing strategy c. Cost-leadership strategy d. Hold-and-maintain strategy e. Harvest strategy

E

Which of the following strategies helps companies with high cost strnctures, allowing them to survive without having to implement strategies to become more productive and efficient? a. Price signaling b. Nonprice competition c. Capacity control d. Market development e. Price leadership

E

Which of the following actions would you expect to see in a company that is undergoing a reengineering?

Examining activities from a customer's point of view

As an industry enters the shakeout stage: a. rivalry among companies declines. b. demand grows at a high rate. c. prices of products increase. d. excess productive capacity emerges. e. new entrants come into the market.

Excess productive capacity emerges

Brand loyalty can be created by: a. minimal advertising. b. not using patents to protect products. c. cutting the costs for research and development. d. emphasizing high product quality. e. minimizing after-sales service

Emphasizing high product quality

A company should first choose a corporate-level strategy and then look at how changes will affect a company's current business model and strategies. (T/F)

F

A company's top managers need not have entrepreneurial capabilities for diversification to increase profitability. (T/F)

F

A laundromat and a pool hall together invest in a new store, where customers can wash their clothes and play pool while waiting. This is an example of an internal new venture. (T/F)

F

A merger occurs when one company uses its capital resources, such as stock, debt, or cash, to purchase another company. (T/F)

F

A product structure requires that support activities from a company's value chain be decentralized so that independent specialists in support activities exist within each product group. (T/F)

F

A product's appeal to customers' desires cannot be considered a source of differentiation.

F

All focus strategies entail serving a specific market segment using a differentiation approach.

F

An advantage of a joint venture is that it allows a company to quickly gain entry into a new industry where barriers are high. (T/F)

F

An advantage of unrelated diversification is that competencies can be shared and leveraged throughout the value chain activities. (T/F)

F

An appropriate reason to diversify is to pool the risk from several business ventures in order to create a more stable income stream. (T/F)

F

At Burger King, multiple items such as a cheeseburger, french fries, and a drink are combined together to create a complete meal. This is an example of diversification. (T/F)

F

Control through culture is ineffective because employees do not internalize values. (T/F)

F

Development of a mass market is the stimulus for an industry to change from growth to embryonic.

F

Differentiation leads to high brand loyalty, which in tum significantly increases the threat of new firms entering the industry

F

Early adopters are customers who purchase a new technology or product only when they are convinced that it will be around for a long time.

F

Effective organizational design can allow a company to obtain a competitive advantage but it has no impact on profitability. (T/F)

F

Effective strategy implementation is very important for cost leaders, but it is of less importance to differentiators. (T/F)

F

Even though companies may invest in specialized assets to build competitive advantage, it is seldom necessary that suppliers do so. (T/F)

F

Flat structures can lead to information distortion when data are being sent either up or down the hierarchy. (T/F)

F

Fragmented industries typically have high barriers to entry.

F

Franchisees essentially pursue independent strategies and do not use the business model of the franchisor.

F

Hydralicious, a juice bar, has been looking to expand its business. The company has given a few entrepreneurs in different locations the license to operate under its name. The entrepreneurs have permission to use the company's reputation and the business model to run operations. The entrepreneurs will be charged a fee, but they will also get a percentage of the profits. Which of the following strategies is Hydralicious most likely to be using?

Franchising

Philip oversees the processes of the research and development department of his company. He is responsible for all of the activities and tasks undertaken by the department. In the context of strategic management, Philip is most likely to be a _____. a. corporate-level general manager b. functional manager c. managing director d. CEO e. business development manager

Functional manager

Distinctive competencies shape the _____ strategies that a company can pursue. a. business-level b. functional-level c. corporate-level d. global-level e. industry-level

Functional-level

Daryl works for Delta Corp. He is involved in all of the important decision-making processes of the company and is also responsible for the overall performance of the company. In the context of strategic management, Daryl is most likely to be a _____. a. line manager b. functional manager c. general manager d. production supervisor e. project manager

General manager

In the context of strategic management of a company, _____ have profit-and-loss responsibility for a product, a business, or the company as a whole. a. line managers b. functional managers c. general managers d. government regulators e. marketing managers

General managers

The razor-and-blade strategy was pioneered by

Gillette.

Which of the following statements is true in the context of globalization of production and markets? a. Globalization of production has significantly increased the costs for many industries. b. The globalization of markets and production has failed to threaten companies' home markets. c. Consolidated oligopolies continue to be dominated by a small number of companies despite globalization. d. The shift from national to global markets has curbed competitive rivalry in many industries. e. Globalization has significantly increased the threat of entry.

Globalization has significantly increased the threat of entry

As an industry enters the decline stage: a. growth becomes negative. b. rivalry among established companies usually decreases. c. competitive pressures abate. d. capacity reduces. e. demand remains the same.

Growth becomes negative

When a resource is said to be organized, this means that the company: a. identified the resource as a resource. b. built a department to execute its operations using the resource. c. takes the resource for granted and assumes its value. d. has made it difficult to copy or imitate. e. has developed a method for making sure it gets the most out of its unique strengths.

Has developed a method for making sure it gets the most out of its unique strengths

Which of the following factors of a particular product tends to accelerate customer demand for it?

High observability

Outsourcing occurs when a firm: a. buys one of its rivals. b. merges with one of its suppliers. c. enters into a joint venture with a rival. d. hires another firm to perform value creation activities. e. enters into contracts with two suppliers simultaneously.

Hires another firm to perform value creation activities

Functional strategies to improve differentiation should include: a. product offerings designed to be can be produced and delivered at as low a cost as possible b. standardization of the product offering and marketing mix to different market segments. c. hiring and employee development strategies designed to ensure that employees act in a manner that is consistent with the image that the company is trying to project to the world. d. initiation of a price war in order to grow volume and drive its weaker rivals out of the industry. e. products that have lower prices to allow a company to erect an economic moat around its business that keeps higher-cost rivals out.

Hiring and employee development strategies designed to ensure that employees act in a manner that is consistent with the image that the company is trying to project to the world.

Which of the following factors increases pressures for local responsiveness? a. Powerful buyers b. Uniformity in distribution channels c. Host government demands d. Similarities in customer tastes and preferences e. Competitors that are based in high-cost locations

Host government demands

Mike works as a corporate trainer, teaching new employees how to perform manufacturing tasks. In which value chain activity does Mike work? a. Research and development b. Human resources c. Materials management d. Production e. Company infrastructure

Human resource

The level of industry demand: a. has little effect on competition in the industry. b. is one of the determinants of the intensity of rivalry in the industry. c. increases when customers exit a marketplace. d. does not impact the market share that established companies hold. e. decreases the rivalry among established companies, when in decline.

Is one of the determinants of the intensity of rivalry in the industry

Which of the following statements is true about a SWOT analysis? a. It does not encompass the analysis of an organization's external environment. b. It essentially results in the generation of a single strategy that deals with one particular internal function of an organization. c. It does not encompass functional-level strategies directed at improving the effectiveness of operations within a company. d. It essentially produces strategies that are incongruent with each other. e. It is a methodology for choosing between competing business models.

It is a methodology for choosing between competing business models

A company can increase the probability of success of an internal venture by constructing efficient scale manufacturing facilities ahead of demand. (T/F)

T

A divestment strategy's success is often dependent upon good timing.

T

A strategy based on diversification may fail to add value because companies: a. seek to achieve differentiation instead of low cost. b. diversify into areas in which they have some knowledge and miss out on profitable opportunities in other areas. c. make acquisitions rather than develop new technologies on their own. d. incur bureaucratic costs that exceed the value created by the strategy. e. seek to achieve a low-cost position instead of differentiation.

Incur bureaucratic costs that exceed the value created by the strategy

Vertical integration can be disadvantageous when: a. competitors are vertically integrated. b. demand is stable. c. industry technology is changing rapidly. d. the company is operating in the home country. e. costs of company decreases.

Industry technology is challenging rapidly

According to the text, one of the basic building blocks of competitive advantage is: a. quantity. b. logistics. c. variety. d. distribution. e. innovation.

Innovation

Info Tech, Inc. makes complex telecommunications products, such as cellular telephones. Since this company has a distinctive competency in research and development, it should try to differentiate its product through: a. reliability. b. innovation. c. advertising. d. service. e. low pricing.

Innovation

The first group of customers to enter the market for a new product are called:

Innovators

Which of the following statements about growing industries is true?

Innovators and early adopters are typically reached through specialized distribution channels.

What is the process of transferring resources to and creating a new business unit in a new industry called?

Internal new venturing

What is the process of transferring resources to and creating a new business unit in a new industry called? a. External new venturing b. Exportation of resources c. Intrapreneuring d. Risk avoidance e. Internal new venturing

Internal new venturing

Which of the following statements is true about strategic leadership? a. It is the primary responsibility of the functional managers of an organization. b. It does not take into account the task of maximizing shareholder value. c. It is involved with making decisions regarding how to create a competitive advantage. d. It is a concept that does not apply to multidivisional companies with several business units. e. It is essentially about supervising workers at a manufacturing unit of an organization.

It is involved with making decisions regarding how to create a competitive advantage

Which of the following is true of the impact of high product quality on competitive advantage? a. It decreases the utility of the products. b. It lowers unit costs of the products. c. It adversely affects employee productivity. d. It limits the company's ability to differentiate its products. e. It increases the need for after sales services.

It lowers unit costs of the products

A disadvantage of pursuing a low-cost strategy is that: a. it makes it difficult for firms to customize their product offerings . b. price wars make it hard to compete with differentiators. c. it costs more than a differentiation strategy because of the necessity of high capital investments. d. powerful buyers are a major threat. e. it reduces customer retention.

It makes it difficult for firms to customize their product offerings

Which of the following statements is true about global standardization strategy? a. It emphasizes product customization to specifically meet customer needs. b. It involves the spreading of production, marketing, and research and development activities of companies to all the location it operates in. c. It makes most sense when there are strong pressures for cost reductions. d. It makes most sense when the pressures for local responsiveness are maximum. e. It fails to focus on achieving location and scale economies.

It makes most sense when there are strong pressures for cost reductions

Which of the following statements is true about the feedback loop in the context of strategy implementation? a. It provides managers with input for the next round of strategy formulation and implementation. b. It emerges within an organization without prior planning, and in response to unforeseen circumstances. c. It cannot reveal whether or not a business model is working. d. It carries information from corporate level managers to functional level managers. e. It indicates that the strategy implementation process has ended.

It provides managers with input for the next round of strategy formulation and implementation

Which of the following best defines shareholder value? a. It refers to the returns that shareholders earn from purchasing shares in a company. b. It refers to the capital invested in a company by the shareholders. c. It refers to the efforts taken by a company to sell its shares to prospective shareholders. d. It refers to the efforts taken by a company to buy back its shares from its shareholders. e. It refers to the non-monetary benefits that a company provides to its shareholders.

It refers to the returns that shareholders earn from purchasing shares in a company

If economies of scale are an industry's primary entry barrier, a new entrant's major concern is: a. its inability to counter brand loyalty that customers have for established companies in the industry. b. the inferior quality of its products. c. its inability to match the innovation of the established firm. d. its inability to produce in sufficient volume to match the cost advantages of established producers. e. its inability to get buyers to switch to its product.

Its inability to produce in sufficient volume to match the cost advantages of established producers

When a company performs a value creation activity in a region that is optimal for that activity, wherever in the world that might be, it is trying to capitalize on: a. negative feedback loops. b. economies of scope. c. the transnational strategy. d. location economies. e. its localization strategy.

Its localization strategy

Which of the following is not a cognitive bias? a. Escalating commitment b. Reasoning by analogy c. Ivory tower thinking d. Representativeness e. Illusion of control

Ivory tower thinking

Which of the following cognitive biases refers to the fact that decision makers who have strong pre-existing beliefs about the relationship between two variables tend to make decisions on the basis of these beliefs, even when presented with evidence that their beliefs are wrong? a. Prior hypothesis bias b. Reasoning by analogy c. Illusion of control d. Escalating commitment e. Representativeness

Prior hypothesis bias

Integrating mechanisms

Processes and procedures used for coordination of subunits

Which of the following seems to be a major determinant of a new venture's success? a. Large-scale entry into the target industry is designed to build market share, even when entry involves significant short-term losses b. Cautious small-scale entry into the target industry is used so that the company can assess the probable outcome of the venture without losing too much money c. A low level of integration between the marketing and the research and development functions of the venturing company d. Supporting many new venture projects in the hope that one will succeed e. Killing the new venture if it does not show a profit after the end of the third year

Large-scale entry into the target industry is designed to build market share, even when entry involves significant short-term losses

WKL Entertainment Inc. is a service-based firm with very few competitors. The company is looking to sell its services in different nations with substantial differences in consumer preferences and where cost pressures are not too intense. Which of the following strategies should WKL Entertainment Inc. managers pursue? a. Global standardization b. Transnational c. Localization d. International e. Multinational

Localization

When technology in an industry is changing rapidly, a company pursuing a strategy of vertical integration may find itself: a. locked into an old, inefficient technology. b. able to sell its products at continually lower prices. c. increasing returns on its assets. d. establishing a monopoly in the industry. e. lowering its cost structure.

Locked into an old, inefficient technology

Companies invest in specialized assets because these assets allow them to: a. lower their cost structure. b. charge excessive prices for their products. c. the materials required are unique. d. develop customized products. e. charge premium prices for their products.

Lower their cost structure

The globalization of production has caused firms to: a. lower their market share. b. lower their cost structure. c. centralize their production process. d. curb international competition. e. limit the number of market segments.

Lower their cost structure

Which of the following is not a benefit of vertical integration? a. Facilitated investments in specialized assets b. Enhanced product quality c. Improved scheduling d. Lowered cost structure e. Strengthened differentiation advantage

Lowered cost structure

Unlike traditional manufacturing, flexible manufacturing: a. decreases efficiency. b. lowers unit costs. c. limits an organization's ability to customize products. d. allows the production of only standardized products. e. limits an organization's ability to offer greater product variety.

Lowers unit cost

Benchmarking can be defined as the practice of: a. monitoring activities related to the design, creation, and delivery of a product, its marketing, and its support and after-sales service. b. developing products that are new to the world or have superior attributes to existing products in the market. c. measuring the time that it takes for a good to be delivered or a service to be performed. d. measuring a company against the products, practices, and services of some of its most efficient global competitors. e. analyzing the financial position of a company and creating the income statements and the balance sheets.

Measuring a company against the products, practices and services of some of its most efficient global competitors

In 1999, two pharmaceutical companies that held an equal market share decided to pool their operations to create a new firm that was known by a different name. This is an example of a(n): a. merger. b. acquisition. c. procurement. d. take over. e. dissolution.

Merger

A baking company has different product ranges like whole-wheat pizzas for the diet-conscious and rich cookies for children and youngsters. The company is catering to different groups of customers known as: a. investors. b. entrants. c. sectors. d. market segments. e. substitutes.

Market segments

Cream Cups bakes cakes in several varieties dedicated to special occasions. It also allows its customers to personalize the cakes according to their personal preferences. This is an example of: a. learning effects. b. just-in-time inventory. c. customer defection. d. mass customization. e. diseconomies of scale.

Mass customization

The greater the number of business units in a company's portfolio, the ____ it is for corporate managers to understand the complexities of each business. a. easier b. more difficult c. less important d. less expensive e. more meaningless

More difficult

Outsourcing: a. eliminates the need for a value chain. b. reduces the firm's dependence on its value chain. c. reorders the steps in a firm's value chain. d. moves some value chain activities outside the firm. e. strengthens the firm's capabilities in each value chain function.

Moves some value chain activities outside the firm

Black and Decker, Capitol One, Gillette, and Unilever are all companies that conduct business in two or more national markets. These companies are known as: a. bimarket companies. b. national companies. c. domestic companies. d. multinational companies. e. localized companies.

Multinational companies

Which of the following is currently an embryonic industry? a. Personal computers b. Biotechnology c. Internet retailing d. Nanotechnology e. Wireless communications

Nanotechnology

Employee productivity is: a. a function of management delegation. b. one of the key determinants of a company's efficiency. c. not subject to measurement. d. typically not sustainable in the long run. e. a function that does not affect a company's profitability.

One of the key determinants of a company's efficiency

In which of the following is a firm most likely to lose direct control over value creation activities? a. Merger b. Acquisition c. Vertical integration d. Strategic alliance e. Outsourcing

Outsourcing

Which of the following is an important attribute for a product from a quality-as-reliability perspective? a. Styling b. Aesthetic appeal c. Wait time at the point of sale d. Features e. Performance

Performance

Companies that successfully differentiate a product often charge _____ prices for them. a. premium b. exorbitant c. low d. average e. escalating

Permium

Which of the following factors increases pressures for cost reductions? a. Meaningful differentiation between products b. Reduced international competition c. Competitors that are based in high-cost locations d. High switching costs e. Persistent excess capacity

Persistent excess capacity

Which of the following strategic control systems do managers use to shape and influence the behavior of employees in face-to-face interactions?

Personal control

In spite of definite customer demand, new products often fail due to: a. faster cycle time. b. low customer defection rate. c. poor commercialization. d. increased response time. e. scramble to gain first-mover advantage.

Poor commercialization

Good strategic leaders: a. possess a willingness to delegate and empower subordinates. b. control all facets of decision-making. c. make decisions without consulting others. d. ensure uniformity of purpose through the authoritarian exercise of power. e. are usually inconsistent in their approach.

Possess a willingness to delegate and empower subordinates

Which of the following is NOT a principal danger of a low-cost position approach? a. Powerful buyers b. Technological change c. Imitation of production techniques d. Changes in consumer tastes e. Rivals lowering their costs

Powerful buyers

42. Which of the following strategies should a company not adopt if it wants to win a format war?

Price the product high to recover steep upfront costs.

A division is a way of grouping functions to allow an organization to better produce and dispose of its goods and services (T/F)

T

A company pursuing a low-cost strategy: a. Improves non-price factors such as design and customer service b. Produces a basic offering to reduce cost structures c. Keeps advertising expenses at a maximum d. Relies on patent protections to keep costs low e. Customizes marketing mix to different market segments

Produces a basic offering to reduce cost structures

Eva Studio, an audio company, manufactures a wide range of sound systems such as noise-canceling headsets, loudspeakers, and amplifiers. Employees in EvaStudio are grouped such that each group works only on one type of sound system. Which of the following structures is EvaStudio is most likely to have employed?

Product

Which of the following is not a general organizational competency? a. Entrepreneurial capabilities b. Capabilities in organizational design c. Superior strategic capabilities d. Product bundling e. Commonality

Product bundling

Which of the following is not a benefit of tight cross-functional integration among research and development (R&D), production, and marketing? a. New products are designed for ease of manufacture. b. Development costs are kept in check. c. Product development projects are driven by company innovations. d. Time to market is minimized. e. Customer needs are considered in the product development process.

Product development projects are driven by company innovations

Ray, a toymaker, knits a stuffed unicorn for Belle. Which function of the value chain is illustrated in this scenario? a. Marketing b. Distribution c. Research d. Production e. Sales

Production

Which of these principal factors helps increase shareholder value? a. profitability. b. risk factors. c. low brand awareness. d. government regulations. e. high production costs.

Profitability

Which of the following is not one of the advantages of a geographic structure?

Promotion of innovation and product development due to intensive cross-functional integration

A company's competitive advantage will not endure for long when that competitive advantage can be: a. quickly or easily duplicated by other companies. b. protected by patents. c. protected by significant barriers to imitation. d. shared with other companies in the industry. e. shielded by copyrights.

Quickly or easily duplicated by other companies

Based on the VRIO framework, a resource can be considered a source of competitive advantage if it is: a. shared by most companies in an industry. b. rare, valuable, difficult to imitate and organized or managed by the company. c. the foundation of a company's strategy. d. kept as a trade secret rather than as a patent. e. increases the cost of producing the product and therefore the price charged to customers.

Rare, valuable, difficult to imitate and organized or managed by the company

The basic proposition of the blue ocean strategy is that many successful companies have built their competitive advantage by: a. redefining their product offering through value innovation and creating a new market space. b. initiating a price war in order to grow volume and drive its weaker rivals out of the industry. c. developing brand loyalty to protect them from intense price rivalry within their industry. d. charging premium prices for their goods or services. e. adopting lean production and flexible manufacturing technologies.

Redefining their product offering through value innovation and creating a new market space

All of the following are benefits of horizontal integration except: a. Reduced risk of coming into conflict with the FTC b. Increased product differentiation c. Reduced industry rivalry d. Increased bargaining power over suppliers e. Reduced cost structure

Reduce risk of coming into conflict with the FTC

Which of the following advantages does a functional organizational structure offer a company?

Reduction in manufacturing costs and increase in operational flexibility

Which of the following is the first step in the five-step chain reaction, as articulated by Deming, with regard to the philosophy underlying TQM ? a. Improvement in productivity b. Increase in a company's profitability c. Higher market share due to superior quality of products d. Reduction of costs due to improved quality e. Creation of more jobs

Reduction of costs due to improved quality

The marketing strategy that a company adopts: a. has little impact on the company's efficiency and cost structure. b. aims at attaining superior efficiency of the company's operations. c. should not take into account the impact the strategy has on the company's cost structure. d. aims at automating much of the work in the production process. e. refers to the position that the company takes with regard to a product's pricing and distribution.

Refers to the position that the company takes with regard to a product's pricing and distribution

Strong pressures for convergence due to a shared history and culture, or the establishment of a trading block where there are deliberate attempts to harmonize trade policies, infrastructure, and regulations have contributed to the rise in what trend? a. Regionalism b. Globalization c. Monopolies d. Nationalism e. Traditional Practices

Regionalism

When one or more components of a company's value chain are applicable to a wide variety of industrial and commercial situations, which of the following strategies should a company pursue?

Related diversification

Which diversification strategy is based on the idea that the company creates value by applying the distinctive competencies it developed in one line of business to another business activity?

Related diversification

Which diversification strategy is based on the idea that the company creates value by applying the distinctive competencies it developed in one line of business to another business activity? a. A technology acquisition strategy b. Related diversification c. A restructuring strategy d. Total diversification e. A taper diversification strategy

Related diversification

Diversification may dissipate value if it is wrongly based on: a. realizing economies of scope. b. rescuing core business. c. transferring competencies. d. acquisitions and restructuring. e. leveraging existing competencies.

Rescuing core business

A focused differentiator has the advantage of: a. selling on non-price factors, such as design or customer service. b. producing a large product variety without a large cost penalty. c. producing a basic offering that is relatively inexpensive to produce and deliver. d. being able to respond to demands for deep price discounts. e. being able to initiate a price war in order to grow volume and drive its weaker rivals out of the industry.

Selling on non-price factors, such as design or customer service

Which entry mode gives a multinational the tightest control over foreign operations? a. Exporting from the home country and letting a foreign agent organize local marketing b. Licensing c. Franchising d. Entering into a joint venture with a foreign company to set up overseas operations e. Setting up a wholly owned subsidiary

Setting up a wholly owned subsidiary

Economies of scope typically involve: a. sharing resources by business units. b. acquiring resources from outside a company. c. utilizing resources in limited quantities by specific business units. d. acquiring resources from another business unit in a company. e. utilizing resources to develop a new business unit.

Sharing resources by business units

Philip Morris capitalized on the growing health consciousness trend when it acquired Miller Brewing Company, and then redefined competition in the beer industry with its introduction of low-calorie beer (Miller Lite). This health trend represents a _____force. a. social b. political c. legal d. technological e. demographic

Social

Many beverage manufacturers are noticing that sales for packaged water and fruit-based beverages is increasing compared to carbonated drinks because customers are increasingly becoming health conscious. This change in customer preferences can be attributed to which of the following factors of the macroenvironment? a. Economic forces b. Demographic forces c. Technological forces d. Political forces e. Social forces

Social forces

Horizontal integration may be thought of as: a. moving into a new unrelated industry. b. giving control to suppliers. c. gaining control of distributors. d. staying inside the industry in which the company currently operates. e. combining functional units within the company.

Staying inside the industry in which the company currently operates

Which of the following is NOT a strategy used by mature industries to manage industry rivalry?

Strategic commitments

As a barrier to new entry, absolute cost advantages can be based on: a. continuous advertising of brand and company names, and product innovation achieved through research and development. b. high product quality, service-oriented innovations, and good after-sales service. c. cost reductions that arise from the mass production of standardized output. d. the unique ability of established companies to spread fixed costs over a large volume. e. superior production operations and processes due to accumulated experience, patents, or trade secrets.

Superior production operations and processes due to accumulated experience, patents or trade secrets

An industry's buyers have high bargaining power when: a. they purchase in small quantities. b. switching costs are low. c. it is economically impossible for them to purchase an input from several companies at once. d. the supply industry depends upon buyers for a very small percentage of its total orders. e. the industry is a monopoly.

Switching costs are low

Quality can best be thought of as: a. a competency in investigating and identifying needs of customers. b. the attributes that customers perceive as superior in a product. c. product development projects driven by customer needs. d. the quantity of inputs that it takes to produce a given output. e. unit cost reductions associated with a large scale of output.

The attributes that customers perceive as superior in a product

Organizational Structure

The combination of the location of decision making responsibilities, the formal division of the organization into subunits and the establishment of integrating mechanisms to coordinate the activities of the subunits

Adam's boss tells him that their company is pursuing the strategy of horizontal integration. Which of the following is true of this scenario? a. The company will acquire one of its suppliers. b. The company will buy or merge with one of its rivals. c. The company will begin to distribute its own products. d. The company will change the organizational structure to make it more flat. e. The company will merge with another company that belongs to a different industry.

The company will buy or merge with one of its rivals

What is perhaps the most important reason why acquisitions fail? a. The expense of the acquisition b. The timing of the acquisition c. Management's unwillingness to make the necessary effort to make the acquisition work effectively d. Incompetence on the part of workers in the acquired firm e. Difficulties in coordinating manufacturing activities

The expense of the acquisition

What is perhaps the most important reason why acquisitions made by a company fail?

The expense of the acquisition

Managers should not become complacent about efficiency-based cost advantages because: a. both learning effects and economics of scale go on forever. b. the experience curve is likely to bottom out at some point. c. cost advantages gained from experience effects are not affected by the development of new technologies. d. unit costs keep reducing as output increases. e. the experience curve steadily rises after a certain threshold is reached indicating an increase in unit costs.

The experience curve is likely to bottom out at some point

The simplest measure of efficiency is: a. the amount of money the company has to work with in the short term. b. the ratio of revenues divided by invested capital. c. the net profit expressed as a percentage of sales. d. the total costs of producing products. e. the quantity of inputs that it takes to produce a given output.

The quantity of inputs that it takes to produce a given output

The feedback loop in the model of the strategic management process indicates that the process is ongoing; it never ends. a. True b. False

True

The more utility a company creates for its customers, the more flexibility it has in determining prices. a. True b. False

True

The most successful firms are those that constantly learn and adjust their distinctive competencies. a. True b. False

True

The profit growth of a company can be measured by the increase in net profit over time. a. True b. False

True

The bargaining power of an industry's suppliers is greater when: a. the supply industry is fragmented. b. switching costs are minimal for companies because of little difference among products offered by different suppliers. c. the industry buys in large quantities. d. the product that suppliers sell has many substitutes and is not vital to the companies. e. the industry is not an important customer to the suppliers.

The industry is not an important customer to the suppliers

With regard to customer defection, which of the following statements is incorrect? a. Defection rates are determined by customer loyalty. b. The longer a company holds on to a customer, the greater is the volume of customer-generated unit sales. c. Lowering customer defection rates creates a higher cost structure. d. The longer a company retains a customer the higher the average unit cost of each sale. e. There is a positive relationship between the length of time that a customer stays with the company and profit per customer.

The longer a company retains a customer the higher the average unit cost of each sale

Organizational culture

The norms and value systems that are shared among the employees of an organization

Porter's Five Forces model did not recognize one force, which is: a. the power of complement providers. b. the risk of entry by potential competitors. c. the intensity of rivalry among established companies within an industry. d. the bargaining power of suppliers. e. the threat of substitutes.

The power of complement providers

Rapid growth in demand enables companies to expand their revenues and profits without taking market share away from competitors. a. True b. False

True

Focus strategy can be defined as: a. the strategy of merging with an established company in order to gain monopoly over the market. b. the strategy a company uses when it decides to allocate the company resources equally among all the marketing segments c. the strategy a company uses when it decides to serve a limited number of segments, or just one segment of the market. d. the strategy a company uses when it decides to ignore the different needs of different market segments, and produce one standardized product for all the customers. e. the strategy of closing down one or more business units in order to minimize the losses.

The strategy a company uses when it decides to serve a limited number of segments, or just one segment of the market

Economies of scope can be defined as: a. competencies that result from the skills of a company's top managers that help every business unit within a company perform at a higher level than it could if it operated as a separate or independent company. b. some kind of skill or competency that when shared by two or more business units allows them to operate more effectively and create more value for customers. c. the process of taking a distinctive competency developed by a business unit in one industry and implanting it in a business unit operating in another industry. d. the process of taking a distinctive competency developed by a business unit in one industry and using it to create a new business unit in a different industry. e. the synergies that arise when one or more of a diversified company's business units are able to lower costs or increase differentiation because they can more effectively pool, share, and utilize expensive resources or capabilities.

The synergies that arise when one or more of a diversified company's business units are able to lower costs or increase differentiation because they can more effectively pool, share, and utilize expensive resources or capabilities.

Organizational architecture

The totality of a firm's organizational arrangements, including its formal organizational structure, control systems, incentive systems, organizational culture, organizational processes and human capital

Which of the following is disadvantage of strategic alliances? a. They give competitors a low-cost route to new technology and markets. b. They do not facilitate entry into a foreign market. c. They do not allow for sharing of risks and fixed costs. d. They mandate that the companies do not share complementary competencies and assets. e. They cause problems when it comes to establishing technological standards for the industry.

They give competitors a low-cost route to new technology and markets

Which of the following statements is true about complementors? a. Their impact on industries was first recognized by Porter's five forces model. b. They have little importance in high-technology industries. c. They have the power to impact the sales of the industry to which they supply complement products. d. They tend to increase the sales of the industry they are supplying complements to by producing fewer lowquality complement products. e. They cannot gain enough power to extract profits from the industry to which they supply complement products.

They have the power to impact the sales of the industry to which they supply complement products

Which of the following is true of growth industries? a. They typically have high barriers to entry. b. They tend to be characterized by weak rivalry. c. They are characterized by low demands. d. They increase prices because customers are more aware of the industry's product. e. They inhibit the development of distribution channels.

They tend to be characterized by weak rivalry

Which of the following statements is true about potential competitors in an industry? a. They threaten the profitability of established companies. b. They are usually encouraged by established companies. c. They find it easier to enter an industry when the entry barriers are high. d. They find it easier to enter an industry when established companies have economies of scale. e. They usually have an absolute cost advantage over established companies.

They threaten the profitability of established companies

Strategic control systems are the primary governance mechanisms established within a company to reduce the scope of the agency problem between levels of management.

True

The building blocks of competitive advantage are efficiency, quality, innovation and customer responsiveness. a. True b. False

True

Miller Brewing, which was acquired by Philip Morris, was related to the parent company's tobacco business because it was possible to create important marketing commonalities: both beer and tobacco are mass market consumer goods in which brand positioning, advertising, and product development skills are crucial to create successful new products. This is an example of which of the following? a. Transferring competencies b. Leveraging competencies c. General organizational competencies d. Economies of scope e. Organizational design skills

Transferring competencies

_____ involves taking a distinctive competency developed by a business unit in one industry and implanting it in a business unit operating in another industry. a. Sharing resources and capabilities b. Leveraging competencies c. Transferring competencies d. Product bundling e. Strategic management capabilities

Transferring competencies

Companies that pursue a _____ strategy are trying to develop a business model that simultaneously achieves low costs, differentiates the product offering across geographic markets, and fosters a flow of skills between different subsidiaries in the company's global network of operations. a. transnational b. downsizing c. centralization d. localization e. global standardization

Transnational

Relish is a large fast food chain that operates in many countries. As there are several competitors in the fast food sector, the company has been facing intense pressures for achieving low cost structures. The company also faces the task of customizing its product line as there are significant differences in tastes and preferences among customers in different geographic locations. In order to achieve both low costs and product differentiation, the company should aim to pursue a _____ strategy. a. global standardization b. transnational c. localization d. downsizing e. divestment

Transnational

A benefit of long-time customer loyalty is the free advertising that customers provide for a company through referrals. a. True b. False

True

A company's closest competitors are those in its strategic group. a. True b. False

True

A company's profitability depends on the value customers place on the company's products and a company's ability to reduce its production costs. a. True b. False

True

A value chain is a sequence of activities for transforming inputs into outputs that are valued by customers. a. True b. False

True

A vital source of information about the causes of poor quality is the firm's own employees. a. True b. False

True

According to an SEC investigation, Computer Associates, one of the world's largest software companies, backdated contracts to boost the company's reported revenues. This is not prescribed as an ethical business practice.

True

All else being equal, if a company moves down the experience curve faster than its rivals, it should realize a lower cost structure. a. True b. False

True

All stakeholders have an exchange relationship with the company.

True

At the heart of any company's business model is the combination of congruent strategies aimed at creating distinctive competencies that differentiate its products and result in a lower cost structure. a. True b. False

True

Distinctive competencies shape the functional-level strategies that a company can pursue. a. True b. False

True

Employee productivity is a common measure of efficiency. a. True b. False

True

Ethical dilemmas are situations where there is no agreement over exactly what the accepted principles of right and wrong are.

True

Financial statements can be a tool of effective governance only if they provide consistent, detailed, and accurate information.

True

IBM's investment in mainframe computers, that proved disadvantageous when the market shifted to smaller personal computers, is an example of a prior strategic commitment. a. True b. False

True

Imitating a company's capabilities tends to be more difficult than imitating its basic and advanced factors of production. a. True b. False

True

Market segments are distinct groups of customers within a market that can be distinguished from each other based on their individual attributes and specific demands. a. True b. False

True

Mass customization describes the ability of companies to use flexible manufacturing technology to reconcile the two goals of low cost and differentiation through product customization. a. True b. False

True

No matter how complex the task is, learning effects typically die out after a limited period of time. a. True b. False

True

One of the defining characteristics of the mature stage of the industry life-cycle is that growth is low or zero. a. True b. False

True

Opportunities arise when a company can take advantage of conditions in its environment to formulate and implement strategies that allow it to become more profitable. a. True b. False

True

ROIC is a measure of how efficiently and effectively managers use the capital at their disposal to produce profitability. a. True b. False

True

Economies of scale are: a. unit cost increases associated with learning effects. b. unit cost reductions due to inferior quality of products. c. realized when output is reduced to a minimum. d. realized when the selling price is equal to the cost price of the products. e. unit cost reductions associated with a large-scale output.

Unit cost reductions associated with a large-scale output

Which of the following problems is associated with the strategy of vertical integration?

Vulnerability to unpredictable demand

The term value innovation is used to describe: a. the way a company decides to group customers based on important differences in their needs to gain a competitive advantage. b. a business's overall competitive theme, the way it positions itself in the marketplace to gain a competitive advantage, and the different positioning strategies that can be used in different industry settings. c. what happens when innovation pushes out the efficiency frontier in an industry, allowing for greater value to be offered through superior differentiation at a lower cost than was previously thought possible. d. what happens when a company decides to ignore different segments, and produce a standardized product for the average consumer. e. what happens when a company decides to serve many segments, or even the entire market, producing different offerings for different segments.

What happens when innovation pushes out the efficiency frontier in an industry, allowing for greater value to be offered through superior differentiation at a lower cost than was previously through possible

An important first step in the process of formulating a company's mission is to answer the question: a. What is our budget for advertising? b. What are the government regulations that are most likely to impact our business? c. What is our business? d. How do we persuade shareholders to provide risk capital? e. How many employees should we hire?

What is our business?

Under which of the following circumstances is vertical integration considered hazardous? a. When the demand for the product fluctuates frequently b. When vertical integration involves moving downstream into retailing c. When the value added by successive stages of production is declining d. When the industries involved are undergoing rapid expansion e. When the company's competitors are also following a strategy of vertical integration

When the demand for the product fluctuates frequently

34. With reference to high-technology industries, which of the following statements is true about technical standards? a. They emerge because there are economic benefits associated with them. b. They cause compatibility problems between products and their complements. c. They can create a lot of confusion in the minds of consumers. d. They often result in higher production costs. e. They increase the risks associated with supplying complementary products.

a

New ventures are likely to be preferred compared to acquisitions when:

a company's business model is based on using its technology to innovate new kinds of products for related markets.

37. Format wars, in the context of high-technology industries, refer to: a. battles to control the source of differentiation, and thus the value that the differentiation can create for the customer. b. the confusion among customers that arises as a result of several choices of formats for PCs and other gadgets. c. the price-based battles in the network of complementary products, which is a primary determinant of the demand for an industry's product. d. conflicts within an organization about which format to adopt for their products. e. price-based battles among companies producing similar products.

a

38. Network effects arise in an industry where: a. the size of the network of complementary products is a primary determinant of demand for an industry's product. b. a large network of companies in an industry use the same business model and strategies. c. a company is able to adhere to the same technical standards across its network of outlets. d. companies network together and lobby for establishing certain technical standards. e. companies that are not in favor of a technical standard network together.

a

44. _____ are applications or uses of a new technology or product that are so compelling that customers adopt them in droves, curbing the demand for competing formats. a. Killer applications b. Razor and blade applications c. Technical standards d. Network effects e. Concurrency control applications

a

47. An adequate supply of complements to a product results in: a. more customers opting for the product. b. higher switching costs. c. a significant decrease in the sales of the product. d. a significant decrease in customer demand for the product. e. the company failing to win a format war.

a

48. Cooperating with competitors: a. reduces competition in the market. b. creates confusion among customers and often lead them to delay their purchases. c. helps lower the entry barriers of the industry, thus allowing new entrants to bring in their own formats. d. curbs network effects by discouraging complementary products. e. results in the creation of several new formats, thus intensifying format wars.

a

Companies that pursue a strategy are trying to develop a business model that simultaneously achieves low costs, differentiates the product offering across geographic markets, and fosters a flow of skills between different subsidiaries in the company's global network of operations. a. transnational b. downsizing c. centralization d. localization e. global standardization

a. transnational

Google bought Clever Sense, a mobile app company. This is an example of a(n):

acquisition.

In high-technology industries, the underlying scientific knowledge companies use is

advancing rapidly.

Long-term contracts:

are a low-cost alternative to vertical integration when it is possible to build cooperative relationships with suppliers.

Killer applications are applications or uses of a new technology or product that

are so compelling they persuade customers to adopt or use the new technology in droves.

49. The various strategies that companies should adopt to win format wars revolve around: a. getting the federal government to intercede. b. making network effects work in their favor and against their competitors. c. avoiding aggressive marketing and advertising strategies. d. curbing the supply of complementary products. e. charging high license fees.

b

60. When a first mover does not have complementary assets, barriers to imitation are high, and there are several capable competitors, the first mover should: a. license the innovation to others. b. enter into a joint venture to protect the product. c. lower the barriers for imitation. d. sell the technology outright to another firm. e. wait until competitors develop an alternative product.

b

Which of the following is not a risk of exporting? a. Tariff barriers b. Transportation costs c. Location diseconomies d. High manufacturing costs e. Delegation of marketing activities to a local agent

d. High manufacturing costs

Which of the following statements is true about customer categories in growing industries?

b. A typical late majority customer group is a behaviorally conservative set of customers.

To compete in the fragmented restaurant industry, Starbucks built, and now operates hundreds of restaurants across the United States and Canada. Which of the following strategies is Starbucks using ?

b. Chaining

Swedish strength in fabricated steel products (such as ball bearings and cutting tools) has drawn on strengths in Sweden's specialty steel industry. This is an example of which of the following attributes that impact national competitive advantage? a. Local demand conditions b. Competitiveness of related and supporting industries c. Intensity of rivalry in an industry d. Factor endowments e. Differences in distribution channels

b. Competitiveness of related and supporting industries

A razor-and-blade strategy refers to lowering a company's cost structure. a. True b. False

b. False

A transnational strategy makes the most sense when demand for local responsiveness is minimal. a. True b. False

b. False

By offering a standardized product to the global marketplace and manufacturing that product in each nation in which it does business irrespective of production costs, a multinational company can realize substantial scale economies. a. True b. False

b. False

Companies that pursue a global standardization strategy are trying to develop a business model that simultaneously achieves low costs and differentiates the product offering across geographic markets. a. True b. False

b. False

Even if they are constrained by a lack of capital, research shows that new entrants should avoid partnering with a larger company. a. True b. False

b. False

Technical standards do not play any role in product differentiation. a. True b. False

b. False

Alpha LLC. is large paint manufacturing company. Despite government regulations, the company has been illegally disposing its chemical wastes in a lake, which is an important habitat for several fish and birds. Which of the following ethical concerns is illustrated in this scenario? a. On-the-job consumption b. Opportunistic exploitation c. Environmental degradation d. Self-dealing e. Substandard working conditions

c. Environmental degradation

Which of the following statements is true about establishing technical standards? a. Companies in an industry cannot lobby the government to mandate an industry standard. b. Technical standards are often set by cooperation among businesses, without government help. c. Companies cannot adopt technical standards that are in the public domain. d. Market demand is not taken into consideration when it comes to establishing technical standards. e. The strategy and business model a company has developed for promoting its technological standard holds little importance when it comes to establishing standards.

b. Technical standards are often set by cooperation among businesses, without government help.

Which of the following statements is true of technology in industries? a. Technology in industries is accounting for only a minimal share of economic activity. b. Technology in industries is revolutionizing aspects of the product even in those not typically considered high- tech. c. High-technology industries do not require to adhere to technical standards to achieve product differentiation. d. The lack of complementary products does not affect the success of a high-technology industry. e. High-technology industries are usually not faced with the challenge of developing business models to achieve a competitive advantage like low-technology industries.

b. Technology in industries is revolutionizing aspects of the product even in those not typically considered high- tech.

To foster ethical behavior through organizational culture, businesses should: a. avoid explicitly articulating values that place a strong emphasis on ethical behavior. b. draft a formal statement of the ethical priorities to which a business adheres. c. encourage self-dealing among managers. d. eliminate the need of a moral compass. e. avoid putting strong governance processes in place.

b. draft a formal statement of the ethical priorities to which a business adheres.

In deciding on a strategy, a company in a declining industry must do all of the following except

b. lower prices.

The various strategies that companies should adopt to win format wars revolve around: a. getting the federal government to intercede. b. making network effects work in their favor and against their competitors. c. avoiding aggressive marketing and advertising strategies. d. curbing the supply of complementary products. e. charging high license fees.

b. making network effects work in their favor and against their competitors.

Firms sometimes pursue a chaining strategy to:

b. obtain the advantages of economies of scale.

Cell phone technology is replacing traditional wired phone technology. This is an example of a(n): a. first-mover advantage. b. technological paradigm shift. c. format war. d. complementary product. e. embryonic industry.

b. technological paradigm shift.

35. With reference to technical standards, a dominant design refers to: a. a set of design standards that are extremely complicated to adhere to. b. a network of complementary products as a primary determinant of the demand for an industry's product. c. a common set of features or design characteristics. d. a product design that requires extremely high production costs. e. a product design that requires extensive advertising.

c

52. Cellular phone service providers often sell the phone itself at very low prices and then charge a relatively high fee for usage. This illustrates: a. the first-mover strategy. b. competitive cooperation. c. the razor and blade strategy. d. competitive positioning. e. format licensing.

c

53. Marginal cost refers to the costs of: a. switching to a new technology. b. adhering to technical standards. c. producing one extra unit of product. d. product promotions. e. licensing new technology.

c

54. Which of the following statements is true about marginal costs in high-technology industries? a. They are invariably higher than fixed costs. b. They are the costs that customers need to bear in order to adopt a new technology. c. They include the costs of packaging and product distribution. d. They are extremely high in software-making companies. e. They do not exist if the product is sold by a sales force directly to end-users.

c

68. In case of emergence of a disruptive technology, established companies should: a. avoid investing in newly emerging technologies that may ultimately become disruptive technologies. b. ask customers "Are you interested in this new technology?" c. acquire newly emerging companies that are pioneering potentially disruptive technologies. d. reduce costs on research and development activities. e. avoid commercializing new technologies.

c

69. Which of the following statements is true about technological paradigm shifts? a. They often do not change the nature of competition in an industry. b. They occur when government regulations restrict the use of certain technologies. c. They have the potential to threaten the survival of established industries. d. They can often be handled by established companies without adopting new strategies. e. They strongly deter new entrants.

c

Tom tends to be ignorant about technological advancements. He was reluctant to own a smartphone even when they were well-established and familiar in the market. However, Thomas slowly got used to the idea of a smartphone when his job demanded him to be connected to the office network all the time. Thomas is most likely to fall under which of the following categories of customers?

c. Laggards

Which of the following statements is true about horizontal mergers?

d. Horizontal mergers enable companies to achieve economies of scale.

Which of the following ideas is a localization strategy is based on? a. There is a convergence in the tastes of consumers in different nations of the world. b. There are substantial economies of scale to be realized from centralizing global production. c. Consumer tastes and preferences differ among national markets. d. There are cost advantages associated with manufacturing a standard product for global consumption. e. Competitive strategy should be centralized at the world head office.

c. Consumer tastes and preferences differ among national markets.

Which of the following statements is true about strategic control systems? a. They are usually set by government regulators that top management is required to follow. b. Their primary purpose is to foster on-the-job consumption. c. Their purpose is to ensure that the wealth of stockholders is maximized. d. They relieve employees and management of legal and ethical constraints. e. They are designed to encourage information asymmetry.

c. Their purpose is to ensure that the wealth of stockholders is maximized.

In order to work towards winning a format war, a company should: a. refrain from aggressive marketing and advertising. b. ensure that there is a limited supply of complementary products. c. develop its own killer applications. d. keep the prices high even if the customer demand is extremely low. e. refrain from cooperating with competitors under any circumstances.

c. develop its own killer applications.

Venus Corp. a high-technology, gadget-making company has introduced a gaming console with attractive features. Even though the console is priced modestly and has better features than the existing ones, it has failed as many customers are apprehensive about buying it. In order to create demand, Venus Corp. should: a. price the console extremely high. b. create its own set of technical standards. c. ensure that there are adequate complementary products. d. use minimalistic and subtle advertising and marketing strategies. e. avoid licensing the format to other companies

c. ensure that there are adequate complementary products.

Technological disruption

causes firms to adopt a new business model.

Jeffrey Pfeffer believes that a manager's power comes from his or her: a. ability to prioritize the well-being of the company over personal well-being. b. ability to be emphatic and understanding of the feelings and emotions of subordinates. c. control over important organizational resources. d. ability to cut overhead costs. e. personal rapport with the senior management.

control over important organizational resources

The purpose of a(n) is to provide managers with incentives for employees as well as feedback on how the company performs.

control system

32. With reference to high-technology industries, which of the following is an example of a technical standard? a. The prices of complementary products b. The medium of advertising used for technology products c. The color of gadgets produced d. The layout of keys on a keyboard e. The number of manufacturing units per industry

d

33. When standards are part of the public domain, they can be used: a. only by companies in a particular industry. b. only by federal contractors. c. by paying a fee to the Federal Communications Commission. d. freely by any company. e. only once without payment of a fee.

d

58. Which of the following is a disadvantage of first movers? a. They cannot establish significant brand loyalty due to high costs. b. They cannot create switching costs for their customers, thus making it difficult to enter the market. c. They decrease sales volume compared to their rivals, and thus operate at a loss. d. They run the risk of building the wrong resources and capabilities. e. They do not have the power to exploit network effects and positive feedback loops.

d

62. Which of the following is true of first movers? a. The first mover cannot be able to establish brand loyalty. b. The first mover has no opportunity to exploit network effects and positive feedback loops. c. The first mover cannot create switching costs for its customers to deter rivals. d. The first mover that creates a revolutionary product is in a monopoly position. e. Being a first mover guarantees instant success.

d

65. Which of the following will NOT help an established company in addressing the potential challenge of a disruptive technology? a. Access to knowledge about how disruptive technologies can revolutionize markets b. Investing in newly emerging technologies that may ultimately become disruptive technologies c. Separating out the disruptive technology and creating an autonomous operating division solely for this new technology d. Asking customers if they are interested in the new technology e. Understanding that a disruptive technology will require a radically different value chain with a different cost structure

d

66. Technological disruption: a. is typically a temporary phase lasting a few months. b. occurs when the manufacturing plants of a company fail. c. mostly affects the new entrants. d. compels firms to adopt new business models. e. is a problem primarily in embryonic industries.

d

________ are external stakeholders in a company. a. Stockholders b. Managers c. Employees d. Customers e. Board members

d. Customers

A technological paradigm shift is most likely to occur in which stage of the industry life cycle? a. Embryonic b. Growth c. Shakeout d. Maturity e. Decline

d. Maturity

Which of the following is NOT a responsibility of the board of directors? a. Monitor corporate strategy decisions and ensure that they are consistent with stockholder interests b. Apply sanctions on management when appropriate c. Hire, fire, and compensate the CEO d. Develop targets for divisional managers e. Make sure the audited financial statements present a true picture of the company's financial situation

d. Develop targets for divisional managers

50. Mathematica 1.0 was one of the most distinctive applications for the short-lived NeXT Computer. It still sets the standard for symbolic math and visualization on Windows, Mac, Linux, and Unix. Mathematica 1.0 can be described as a(n) _____ application. a. dominant b. analogous c. hardware d. strategic e. killer

e

An advantage of being a first mover is that: a. the pioneering costs are minimal. b. there are well-defined distribution channels. c. there is no risk of building the wrong resources. d. the focus is always on the mass market. e. there is an opportunity to increase sales volume ahead of rivals.

e. there is an opportunity to increase sales volume ahead of rivals.

Which of the following strategies should a company NOT adopt if it wants to win a format war? a. Developing killer applications b. Developing complementary products c. Joining forces with other companies to develop new technologies d. Aggressively marketing to jump-start demand e. Charging extremely high license fee for the technology

e. Charging extremely high license fee for the technology

_________ refers to a common set of features in a computer or other machines. a. Paradigm shift b. First mover c. Public domain d. Technical standard e. Dominant design

e. Dominant design

Hydralicious, a juice bar, has been looking to expand its business. The company has given a few entrepreneurs in different locations the license to operate under its name.The entrepreneurs have permission to use the company's reputation and the business model to run operations. The entrepreneurs will be charged a fee, but they will also get a percentage of the profits. Which of the following strategies is Hydralicious most likely to be using ?

e. Franchising

Which of the following statements is true about takeover constraint? a. It encourages managers to put their own interests above those of stockholders. b. It usually occurs when the management has maximized the wealth of the stockholders. c. It often gives senior managers more independence when it comes to granting stock options. d. It has ceased to exist in companies since the late 1990s. e. It is the governance mechanism of last resort invoked only when the others have failed.

e. It is the governance mechanism of last resort invoked only when the others have failed.

Which of the following is an advantage of international licensing? a. It enables the company realize scale economies and location economies through manufacturing products in a centralized location. b. It allows the company to collect profits from one licensee and use it to support others. c. It eliminates the risk of losing control over a technology that the company owns. d. It enables the company to coordinate its strategy efficiently to achieve competitive advantage. e. It takes away the pressure of development costs and risks associated with opening up a foreign market from the company.

e. It takes away the pressure of development costs and risks associated with opening up a foreign market from the company.

segmentation strategy

when a company decides to serve many segments, or even the entire market, producing different offerings for different segments

broad differentiation strategy

when a company differentiates its product in some way, such as by recognizing different segments or offering different products to each segment

focus differentiation strategy

when a company targets a certain segment or niche and customizes its offering to the needs of that particular segment through the addition of features and functions

An adequate supply of complements to a product helps ensure that consumers

will buy the company's product.

Matsushita licensed its VHS technology to rivals, while Sony kept its Beta technology proprietary. This action allowed Matsushita to

win the format war.