BUSMHR 4490 - Exam 2 Learnsmart

Furniture retailer IKEA has used the value innovation framework of ____ to successfully implement a blue ocean strategy

eliminate-reduce-raise-create

Alternatives in the mark-or-buy continuum include which of the following?

equity alliances and joint ventures

When a manufacturer of computers starts to produce its own computer components, the manufacturer engages in ____ vertical integration

backward

Diseconomies of scale often appear when a firm

becomes too large and complex to manage efficiently

____ strategy involves the decisions that senior management makes and the goal-directed actions it takes to gain and sustain competitive advantage in several industries and markets simultaneously

corporate

According to the crossing-the-chasm framework, the largest difference in consumer expectations is between

early adopters and the early majority

In the maturity stage of the industry life cycle, industry growth

flattens or even declines

A firm's competitive advantage is determined jointly by ___ effects and firm effects

industry

The commercialization of an invention by entrepreneurs is called

innovation

At which stage of the industry life cycle does the size of the market expand rapidly?

growth

A firm's strategic profile based on value creation and cost is called its

strategic position

A ____ is a situation that requires choosing between a cost or value position

strategic trade-off

In a focused differentiation strategy, the competitive scope is ____ than in a traditional differentiation strategy

narrower

The lemons problem suggests that information asymmetries cause

superior goods to be replaced by inferior ones

An advantage of ____ is that it helps ensure that needed materials and distribution channels are available when needed

vertical integration

To formulate an appropriate business-level strategy, managers must answer the ____ questions of competition

who, what, why, and how

Which of the following is an example of innovation?

Apple combining smart phone and wristwarch technologies to create the Apple Watch

In which stage of the industry life cycle does competition become more intense, forcing weaker firms out of the industry?

Shakeout

Specialized assets have

high opportunity cost

A tablet manufacturer than includes a free stylus with every purchase is using ___ (use noun) to enhance users' experience and increase the perceived value of its tablets.

complements

Value drivers known as ____ add value to a product or service when they are consumed in tandem with the focal product

complements

The four underlying strategic management concepts that determine the scope of a firm are which of the following?

core competencies, economies of scale, economies of scope, and transaction costs

Which two of the following variables can managers primarily manipulate in order to answer the questions "how should we compete? -price -style -cost -size -value

cost and value

A firm that hopes to achieve a competitive advantage by maintaining an efficient supply chain and taking advantage of economies of scale and a well-trained staff in focusing on

cost drivers

A ____ strategy requires achieving the lowest costs in the industry while maintaining a level of value that is acceptable to customers

cost-leadership

True of False: The chasm separating the early adopters from the early majority is the biggest one

True

True of false: Innovation can create value for one firm while destroying value for another

True

The four strategic options that managers have in the decline stage are:

exit, harvest, maintain, or consolidate

The most common type of innovation is

incremental innovation

____ refers to the act of outsourcing some of the firm's activities outside of the home country to another nation

offshoring

A ____ diversification strategy refers to a firm that pursues both product and geographic diversification

product-market

The benefits of a cost-leadership strategy regarding the threat of entry in an industry are

protection against entry due to economies of scale

It is common for firms to start by introducing a(n) ____ innovation

radical

Innovation helps firms to achieve a competitive advantage by

redefining the market in their favor

The development of most industries follows an:

s-curve

The ____ determines whether to pursue a specific narrow part of the market of to go after the broader market

scope of competition

It is challenging for firms to "cross the chasm" because

each stage of the industry life cycle features a different group of customers with different preferences and demands

A significant difference between technology enthusiasts and early adopters is that

early adopters are interested in how a new technology will improve their lives, rather than in the details of the technology itself

Entrepreneurs innovate by

commercializing new ideas and inventions

In the ____ stage of the industry life cycle, falling demand leads to a reduction in market size

decline

A disadvantage of using a short-term contract for the supplying firm is that they

have little reason to perform transaction-specific investments

____ refers to the assets whose physical and engineering properties are designed to satisfy a particular customer

physical-asset specificity

Positive adjustments in product features, customer service, and complements may enable managers to

improve the firm's strategic position

Which customer segment will only adopt a new product when it becomes absolutely necessary?

laggards

Economies of ___ are the savings that come from producing two or more different outputs at a lower cost than producing each output individually

scope

Which of the following are characteristics of the early majority?

-rely on review by reputable magazines -strong sense of practicality -weigh benefits and costs carefully

Stages four and five of the industry value chain involve

-after-sales service and support -marketing -sales

What can incumbent firms do to counter disruptive innovations

-continue to innovate -protect the low end of the market -disrupt themselves

The most important cost drivers are

-experience curve effects -learning curve effects -economies of scale -cost of input factors

What is a major disadvantage of organizing economic activity within firms?

the principal-agent problem

Which of the following is most likely to produce a radical innovation? -a leading toy manufacturer with a significant interest in maintaining the status quo -a new sportswear company with a handful of employees that perform a number of loosely-defined roles -an established restaurant chain with a clean organization structure and strictly defined roles for employees -a financial services firm that has been in business for 75 years and has longstanding customer relationships

a NEW sportswear company with a handful of employees that perform a number of loosely-defined roles

A differentiation strategy strategy can be threatened when

a product becomes commoditized and the focus of the competition shifts to price

Why might a firm want to enter into an equity alliance instead of a short- of long-term contract?

-to facilitate transaction-specific investments -to get insider information about the partner's business -to make a credible commitment

True of false: the industry value chain is also called the horizontal value chain

False - the vertical value chain

An innovation that targets existing markets with new technologies, is called

a disruptive innovation

What is licensing?

a form of long-term contracting that enables firms to commercialize intellectual property

Kava Botanicals, a boutique retailer than sells high-end makeup and accessories, is owned by two makeup manufacturers. Kava Botanicals is an example of which strategic alliance?

a joint venture

Transaction cost economics help managers do which of the following?

choose which activities to do within the firm

A firm that pursues a differentiation strategy will often find that the added expense of offering new or unique product features offsets the increase in perceived value, and profit margins begin to erode. This underscores the importance of ____ control for firms pursuing a differentiation strategy

cost

The goal of a ____-____ strategy is to achieve costs below those of competitors while maintaining similar value. A firm with this strategy could or could not achieve differentiation parity

cost-leadership

The Ritz-Carlton provides a personalized customer experience based on sophisticated analysis of data gathering about each guest. This focus on ____ allows the hotel to increase its perceived value.

customer service

Economies of scale are

decreases in cost per unit as output increases

A ____ strategy aims to create higher value for customers by offering products with unique features but a similar level of costs to those of competing products

differentiation

____ refers to an increase in the variety of products and services a firm offers or markets and the geographic regions in which is competes

diversification

Which are the four steps of the innovation process?

idea, invention, innovation, imitation

The ____ identifies how industries tend to develop and change over time

industry life cycle

Which of the following are strategic options in the decline stage of the industry life cycle?

maintain, exit, harvest, consolidate

In the ____ stage of the industry life cycle, a moderate amount of large firms compete for a share of a market that has reached its maximum size

maturity

In the taper integration system, a firm has ____ reliance on outside markets

partial

Innovations that target NEW markets and represent a major break from existing technologies or ways of thinking, such as the digital camera, the touch-screen smart phone, or the decoding of the human genome, are examples of

radical innovations

Products in the affordable "business-casual" clothing market have largely become commoditized, and most retailers have begun to compete mainly on price rather than product features. In this environment, it is impossible for one retailer to gain market share without another losing it. This is an example of a ____ ocean.

red

To figure out if a firm's type of diversification is ____ or ____, one can ask questions about the degree to which the corporation's business units share core competencies

related; unrelated

An agreed-upon solution about a common set of engineering features and design choices is known as a

standard

A(n) ____ is a voluntary arrangement between firms that involve sharing of resources and capabilities with the intent of developing processes, products, or services

strategic alliance

The fundamental question of ____ is how to combine entrepreneurship with the concepts of strategic management in order to achieve a competitive advantage

strategic entrepreneurship

The shakeout stage of the industry life cycle is dominated by

the early majority

Different value drivers contribute to competitive advantage if

the increase in perceived value exceeds the corresponding cost increase

Transaction costs include ____ costs associated with an economic exchange

the internal and external

a significant difference between the early majority and the late majority is that

the late majority is not confident in using new technologies

Why do some firms choose alternatives to vertical integration?

to avoid the risks associated with vertical integration

Unlike short-term contracts, long-term contracts encourage firms to make ____ investments

transaction-specific

A ____ strategy attempts to create products with unique and attractive features in order to increase the price that consumers are willing to pay

differentiation

A ____ strategy attempts to increase the perceived value of a production while controlling costs

differentiation

Educational organizations such as Coursera are ____ (use verb) traditional universities by offering massive open online courses on the web

disruptive