BUS 496 Test 1

A strategy can be described as

- intended - emergent - realized

Dissatisfied capital market stakeholders may:

- sell their stock - tighten loan covenants - seek to increase their power

The relative bargaining power of buyers depends on:

- the size and concentration of buyers relative to suppliers - buyer's access to information about products and costs - the ability or threat to integrate vertically

Calculate CR4 Com. A= 40% Com. B= 20% Com. C = 20% Com. D= 10%

90%

Unplanned decisions that emerge from the complex processes in which managers adapt to changing external circumstances are

Emergent strategy

Economies of scale refers that "cost of producing a joint set of products is less than cost of producing separately in separate firms".

False

The five forces model expands the arena of competitive analysis beyond direct competitors (i.e., rivals) to include buyers and suppliers who may also be a source of competition

True

( ) is the right to buy a certain number of the corporation's shares at a specified future date for a specified price.

a stock option

________ is the elected representatives of shareholders in order to represent their interests. They have a fiduciary duty for shareholder's long-term interests.

board of directors

. ________ is the relationship among various participants in determining the direction and performance of corporations. The primary participants are (1) shareholders, (2) managers and (3) the board of directors.

corporate governance

Rended Inc., a publishing house, launches a unique initiative that involves educating children from poor economic backgrounds. For every product that a customer purchases, Rended would contribute $10 toward this cause. Which of the following best exemplifies Rended's initiative?

corporate social responsibility

Firms try to develop resources and capabilities to:

create sustainable competitive advantage

The deregulation for certain industry usually (increase / decrease) the entry barriers, so the threats of potential entrants will be (increased / decreased).

decrease, increased

Organizational stakeholders include

employees

Amelia Smith is the sole owner of the successful restaurant chain, Amelia's Café. Ms. Smith has taken a no-interest loan from the company in order to build a luxurious seaside house for herself in Carmel, California. This constitutes a classic agency problem

false

An attractive industry is characterized by high entry barriers, suppliers and buyers with strong bargaining power, low threats from substitute products, and low rivalry among firms.

false

Bargaining power of supplier is one of the building blocks of entry barrier for potential entrants

false

Complementary products are products that typically have a negative impact on the value of a firm's own products or services.

false

Corporate level strategy is concerned with how the firm competes within a particular industry or market (i.e., how to compete?):

false

Executive compensation is considered an external corporate governance mechanism because it determined in part by market forces.

false

Generally, the board of directors can be classified as insiders, unrelated insiders, outsiders, and unrelated outsiders.

false

Generally, the stronger the competitive forces (i.e. all five forces have strong bargaining power), the higher the profit potential of an industry.

false

If the number of your buyers decreased, your firm's relative bargaining power over buyers will be increased.

false

In general, the Internet and digital technologies suppress the bargaining power of buyers (i.e. individual customers) by providing them with more information to make buying decisions.True or False?

false

In the U.S., the members of the board of directors are a firm's key stakeholders and a company's legal owners.

false

Industry analysis (5-Force Analysis) will determine the performance of the specific individual firm within the industry.

false

Low entry barrier and high exit barrier are best for incumbents (i.e., firms already operating in the industry).

false

Once established, competitive advantage tends to be sustained over time.

false

Profitable industry is always attractive for potential entrants.

false

Rivalry is most intense when there are high exit barriers and high industry growth. True or False?

false

Strategic groups are firms in different industries following the same or similar strategies (e.g. low-cost strategy).

false

Suppliers are powerful when there are satisfactory substitutes available.

false

Tangible resources are often more valuable than intangible resources in conferring competitive advantage.

false

The I/O (industrial organization) model assumes that the uniqueness of a firm's resources and capabilities are its main source of above-average returns.

false

The higher CR ratio indicates that the market is more close to perfect competition (i.e., severe competition).

false

The resource-based model assumes that if firms have resources that are rare or costly to imitate, this is sufficient to form a basis for competitive advantage.

false

The separation of ownership and control is the most effective means used by firms to prevent managerial opportunism.

false

The uniqueness of a firm's resources and capabilities is the basis for a firm's strategy and determines its ability to earn above-average returns under the I/O (industrial organization) view. True or False?

false

There are 'zero sum view' and 'symbiosis view'. Zero sum view emphasizes the responsibility over profitability.

false

If the buyers are financially strong and buy a large portion of the manufacturing firm's outputs, the bargaining power of buyers is ____.

high

If the function, availability, and cost of substitutes are better than those of the core firms, the threat of substitutes is ____.

high

If the price of complement or increases, the threat from this price effect is ____.

high

If the suppliers' CR is larger than that of buyer firms, the bargaining power of suppliers is ____.

high

Organization's role as a taxpayer is most important to ____ as stakeholders

host communities

Resources and capabilities can generate higher profits

if the competitive advantage they generate is sustained for some years

Frequent-guest rates offered by hotel chains are an attempt to

increase customer's switching costs

One party to a transaction has more or better information than the other in agency relationships. This is the idea of:

information asymmetry

Which of the following statements is true of the agency problem facing the modern public corporation?

it arises as a consequence of the separation of ownership and control in the corporation

If the CR4 (concentration ratio) of an industry is high, the level of rivalry is ____,

low

If the degree of differentiation of an industry is high, the level of rivalry among existing competitors is ____.

low

If the growth rate of an industry is high, the level of rivalry is ____.

low

If the price of substitutes increases, the threat from this price effect is ____.

low

If the capital requirement of entering an industry is low, the entry barrier is ____, and the threat from the potential entrants is____.

low, high

If the level of specialized assets or fixed cost to exit is low, the exit barrier is ____, and the level of rivalry is ____.

low, low

If the consumer loyalty of an industry is low (thus, switching cost is ____) the entry barrier is ____, and the threat of the potential entrant is____.

low, low, high

_______ are group-specific entry barriers that restrict shifting strategic position from one strategic group to another.

mobility barriers

The competition within each strategic group is:

more intense than is the competition between strategic groups

According to ( ) perspective, motivation for engaging in CSR should be ethical consideration

normative

There are several perspectives of stakeholder model. One perspective is zero-sum thinking. Zero-sum thinking means that

one can only gain at the expense of someone else

New entrants to an industry are more likely when (all other things being equal) (a) it is difficult to gain access to distribution channels.

product differentiation is low

A firm's primary customers, suppliers, host communities, and unions representing the workforce are examples of ( ) stakeholders.

product market

John, the founder of a multinational corporation, believes that his business should mainly focus on the benefit of those people who own its stock. In this scenario, he most likely follows ( ), a model of business management.

shareholder primacy

Outback Steakhouse has developed a sophisticated quantitative model and found that there were positive relationships between employee satisfaction, customer satisfaction, and financial results. According to the text, this is an example of ( ).

stakeholder symbiosis

The resource-based view of the firm can be described as:

the inside-out approach

A firm can create competitive advantage by responding better than rivals to changes in its environment or by maintaining strategic differences from its rivals that customers accept. True or False?

true

A high concentration ratio (CR) is typical of oligopolistic industries, dominated by a few large players.

true

A sound strategy relies on four factors: measurable goals or targets; sound understanding of the competitive environment; objective appraisal of resources; and effective implementation of strategic decisions.

true

According to agency theory, the primary role of the board of directors is to monitor and control top-level executives to protect owners' interests.

true

According to resource-based view, the resources and capabilities of the firm are immobile across firms.

true

An agency relationship exists when one or more persons (the principal or principals) hire another person or persons (the agent or agents) as decision-making specialists to perform a service.

true

Buyers tend have greater power if suppliers provide undifferentiated or standard products. True or False?

true

Competition tends to be more intense among firms within a strategic group than between strategic groups.

true

Economies of scale, absolute cost advantages, high capital start-up costs, and access to channels of distribution are all examples of "barriers to entry".

true

Five forces analysis implicitly assumes a zero sum game.

true

High exit barriers are factors that cause a company to remain in an industry even though the profitability of doing so is questionable.

true

In modern corporations-especially those in the U.S., a primary objective of corporate governance is to ensure that the interests of top-level managers are aligned with the interests of shareholders.

true

Industries characterized by high economies of scale typically attract fewer new entrants. True or False?

true

Industry environment, rather than general environment, have more direct influences on firms.

true

Large block shareholders typically own at least 5% of a corporation's issued shares.

true

Low entry barrier and low exist barrier is good for new (or potential) entrants. True or False?

true

Organizational mission statements typically do not include statements about profitability and earning above-average returns.

true

Relative power is an important criteria for prioritizing the demands of stakeholders

true

Resources are a firm's productive assets; capabilities are what a firm can do.

true

Resources are the source of capabilities, some of which lead to the development of core competencies and competitive advantage.

true

Shareholder activism refers to actions by large shareholders, both institutions and individuals, to protect their interests when they feel that managerial actions diverge from shareholder value maximization

true

Successful social entrepreneurship usually works against market mechanism.

true

Suppliers are more powerful when there are high switching costs (i.e., moving from one supplier to another).

true

Suppliers are powerful when no satisfactory substitutes are available, the selling industry is relatively more concentrated than the purchasing industry, and buyer's switching costs are high. True or False?

true

The culture of an organization is a key intangible resource

true

Triple bottom line is a measure of corporate social responsibility that includes financial, social and environmental performance measures.

true

Value chain analysis separates the activities of the firm into a sequential chain and explores the linkages between activities.

true

When buyers are more price-sensitive, the buyer firms have greater bargaining power.

true

Porter's 5 Forces model is intended to be:

used in conjunction with PEST and other models

There are different ethical views. ( ) perspective suggests that a "good society creates the greatest good for the greatest number of people"

utilitarianism