BUSN 450 Midterm

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

chief executive officer

Managers use the AFI strategy framework to

explain and predict differences in firm performance.

How does availability of complements act as a value driver?

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

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

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

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

Impervious Plastics reformulated its products to eliminate chemicals that were widely used in the industry but were being investigated for their potential negative effects on the environment.

Which of the following expressions accurately describes market cap?

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

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

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

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

Learning effects occur over time as output accumulates.

How is a firm's task environment different from its general environment?

Managers have some influence over external factors in the task environment; they have little direct effect over external forces in the general environment.

Which of the following statements accurately brings out the difference between tangible and intangible resources?

Tangible assets can be bought on the open market by anyone with the necessary cash, whereas intangible assets cannot be easily purchased.

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

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

How do strong ethical values benefit a firm?

They serve as the guardrails put in place to keep the company on track when pursuing its mission.

Which of the following examples uses a focused differentiation strategy?

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

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

availability of complements

In an industry, the threat of entry is high when

capital requirements are low.

In the five forces model developed by Michael Porter, ________ is not defined narrowly as a firm's closest competitors but rather more broadly to include other factors in an industry like buyers, suppliers, potential new entry of other firms, and the threat of substitutes.

competition

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

core competencies

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

customer experience

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

economies of scale

A strategic group will typically include

firms within the same industry.

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

government agency that regulates the prices of products manufactured at the firm

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

marketing and sales

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

marketing and sales to promote its products and services.

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

move down a given learning curve.

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

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

A positive relationship between vision statements and firm performance is more likely to exist when

organizational structures are aligned with the firm's vision statement.

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

shareholders

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

stakeout a unique position within the industry

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

strategic initiative

A traditional top-down strategic planning process typically begins with

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

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

strategic position

A firm's strategic position is likely to be strong when

the gap between the value the firm's product generates and the cost to produce it is large.

Which of the following best describes a strategic trade-off?

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

For a firm that operates in an industry where competition is high, which of the following practices will result in inferior performance?

trying to be everything to everybody by combining different competitive strategies

The first step in stakeholder impact analysis involves

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

How do low interest rates affect a business?

Firms can easily borrow money to finance future growth.

In the AFI strategy framework, strategy analysis primarily involves

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

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

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

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

functional managers

Due to several black swan events in the past, the

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

Given the accelerated pace of technological change, in combination with deregulation, globalization, and demographic shifts, a firm will be successful today only if its

internal strengths change with its external environment in a dynamic fashion.

Economies of scale are cost advantages that accrue for firms with

larger output

Which of the following is an external performance metric?

total return to shareholders

As manager of a relatively new company, you are tasked with analyzing company resources to identify core competencies capable of supporting a competitive advantage. Which of the following resources is most likely to generate a competitive advantage?

enthusiastic company culture

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

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

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

AFI strategy framework

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

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

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

capabilities

Assume a firm's resources and capabilities are costly to imitate. This is because rival companies do not clearly understand the relationship between the resources and capabilities controlled by the firm. In this case, the firm's competitive advantage is protected against imitation by

causal ambiguity

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

competitive advantage.

Strategic thinking is different from strategic planning in that

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

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

strategic trade-offs.

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

strategy analysis

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

the CEO of the company

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

the composition of the strategic group to which the firm belongs

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

perfect competition exists

Define and elaborate on competitive advantage.

**A competitive advantage is leverage that a company has over its competitors in the industry. This is when that business has a superior product or service compared to businesses that sell the same thing. Customers prefer this product/service and this is evident in the firm's profits as well. A company can determine if they have a competitive advantage and how to obtain one by looking at the VRIO framework. This frameworks asks if the product or service sold by the company is valuable, rare, hard to imitate, and able to be exploited by the organization. If the answer to these questions are yes, the company has a tool that will help them gain a sustainable competitive advantage.

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

**A mission statement essentially builds off of a vision statement. While these two statements are similar, they do have a few key differences. A vision statement is more of a broad statement that includes the company's ultimate goals . This also will help to inspire employees to work towards achieving that ultimate goal. A mission statement is a description of the physical and tangible things that the business actually does. This may include how and where the company competes and the products or services that it sells.

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

**Generally, there is a fairly direct relationship between the state of the economy and the level of employment. Usually, when the economy is doing well, there will be high levels of employment and relatively low unemployment. This statement is true reversed. If the economy is doing poorly, such as during a recession, there are usually low levels of employment or high levels of unemployment.

Explain the role of power in the strategic leadership process

**Power can be distributed between strategic leaders in many different ways, depending on the company's management structure. For instance, in a top-down leadership style, the power in the business will remain mostly with upper level leaders. This would include employees like the CEO and upper level managers. They will then delegate tasks downward, but ultimately all employees will report to them because they hold the power. But power is distributed differently in a bottom-up leadership style. In this case, the power is held mainly amongst the lower level employees. They will then give their ideas and inputs to the managers over them, and then the information travels upward. There are several different ways that power can be distributed, but these are two common structures.

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

**The first key insight of Michael Porter's seminal five forces model is that competition should be defined in a broad view that includes the company's explicit rivals and also other looked over actors. Some of these often looked over actors are new firms in the industry, substitutes, buyers and sellers. They second key insight is that the five forces that make up the model are what shapes the potential for profits. These five forces are buyer power, threat of substitutes, rival companies, supplier power, and threat of entry.

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

producer surplus

Which of the following statements is true of accounting data?

Accounting data are historical data and thus backward-looking.

A firm experiences diseconomies of scale when it

produces at an output level beyond the minimum efficient scale.

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

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

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

PESTEL framework

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

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

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

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

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

Return on revenue

In which of the following situations is the power of suppliers high in an industry?

Suppliers' industry is more concentrated than the industry it sells to.

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

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

The tenet behind the triple-bottom-line is that

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

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

price-cutting

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

produce a good

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

below the industry average

Organizational values help individuals make choices that are

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

A ________ primarily details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market.

business-level strategy

Economic value creation is best expressed as

consumer surplus plus firm profit

Strategic leadership pertains to the use of power and influence by ________ to direct the activities of others when pursuing an organization's goals.

corporate executives

In a focused cost-leadership strategy, a firm

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

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

demographic trends

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

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

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

direct competitors

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

ethical standards and norms

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

exchange relationship

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

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

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

functional

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

gains market share from other firms.

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

how to implement business strategy.

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

identify stakeholders' interests and claims.

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

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

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

understand the profit potential of industries.