Exam 1 - problems
45.) Which of the following would serve as a feasible option when deciding who are the players in an established industry? a. Focus on customers who can extract value. b. Find ways to take down a monopoly. c. Align the incentives of only internal stakeholders. d. Avoid industries with direct competitors.
a. Focus on customers who can extract value.
36.) In the aircraft manufacturing industry, at least for large commercial jets, Boeing and Airbus are the only competitors. There is not a significant threat of entry because a. entering the aircraft manufacturing industry requires huge capital investments. b. there is expected to be a huge return on investment within this industry. c. entering the aircraft manufacturing industry means violating government policies. d. there is no credible threat of retaliation from the incumbents.
a. entering the aircraft manufacturing industry requires huge capital investments.
58.) A wearable technology company has priced one of its wristwatches at $210. Most of its competitors sell similar watches at $180. Selling at any price less than $150 would result in a loss for the company. However, the absolute maximum a customer is willing to pay for it is $170. In this scenario, what is the reservation price of the wristwatch? a. $180 b. $170 c. $210 d. $150
b. $170 --> the absolute maximum is the reservation price
32.)________ factors capture a society's cultures, norms, and values. a. Demographic b. Sociocultural c. Economic d. Political
b. Sociocultural
14.) Wolfe Herd differentiated Bumble from other dating sites, thus achieving a competitive advantage by all of the following EXCEPT a. by creating a safe space to develop long last relationships. b. by allowing the man to make the first move to initiate conversations. c. by embedding a women-centric focus into the Bumble app. d. by allowing the woman to make the first move to initiate conversations.
b. by allowing the man to make the first move to initiate conversations.
1.) Which of the following stages of the strategic management process involves an evaluation of a firm's external and internal environments? a. strategy formulation b. strategy analysis c. strategy control d. strategy implementation
b. strategy analysis
64.) When Mycoskie combined capitalism with a focus on helping needy children, he created a. producer surplus. b. cost advantage. c. shared value. d. firm profit. e. consumer surplus.
c. shared value.
42.) Fruit of the Sea is a company that sells lobster, shrimp, and scallops to seafood restaurants. Because the company operates in an industry where many other suppliers sell standardized products, it can most likely a. only achieve competitive parity. b. easily achieve a temporary competitive advantage. c. maintain its absolute advantage for long time. d. easily achieve a sustainable competitive advantage.
a. only achieve competitive parity.
47.) Firms that compete within the same strategic group generally experience a. no competitive rivalry because they are substitutes. b. more competitive rivalry than firms outside their strategic group. c. less competitive rivalry than firms outside their strategic group. d. the same competitive rivalry than firms outside their strategic group.
b. more competitive rivalry than firms outside their strategic group.
One of Satya Nadella's strategic initiatives after gaining the reins of Microsoft was to abandon the Windows-centric strategy and move toward cooperation within Microsoft and across companies. He focused on cutting-edge technologies and acquisitions. These initiatives reflect a focus on which type of strategy? a. cost leadership b. blue ocean c. industry effect d. strategic tradeoff e. differentiation
Cost leadership is incorrect.. do not choose
27.) In 2000, Steve Ballmer was named CEO of Microsoft. He began to focus on the Windows-centric strategy that had become so profitable. Their monopolistic position that shut out other application providers resulted in the U.S. Department of Justice winning an anti-trust litigation against Microsoft in 1998. As a result, this effort diluted its core culture, resulting in competitive disadvantage because the Microsoft application software that was its core competency was no longer a. imitable. b. organized to capture value. c. tangible. d. valuable. e. rare.
Valuable is incorrect...do not choose
17.)Which of the following summarizes the difference between corporate strategy and business strategy? a. Corporate strategy deals with where to compete; business strategy deals with how to compete. b. Corporate strategy deals with when to compete; business strategy deals with how to compete c. .Corporate strategy deals with how to compete; business strategy deals with where to compete. d. Corporate strategy deals with how to compete; business strategy deals with when to compete.
a. Corporate strategy deals with where to compete; business strategy deals with how to compete.
55.) Great Sound Inc. is a publicly traded company that specializes in manufacturing consumer electronics. Which of the following best exemplifies the implementation of a shared value creation framework at Great Sound Inc.? a. Great Sound uses recycled materials to create its commercially successful products. b. Great Sound has a customer reward program for its most loyal customers. c. Great Sound's employees work in shifts to adhere to the eight-hour workday rule. d. Great Sound's products are developed in a high-tech R&D facility based in Florida
a. Great Sound uses recycled materials to create its commercially successful products.
33.) Which of the following is a primary feature of the five forces model? a. It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes. b. It takes into account a firm's internal resources, capabilities, and core competencies. c. It helps managers determine the changing speed of an industry or the rate of innovation. d. It is concerned exclusively about the intensity of rivalry among direct competitors.
a. It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.
31.)Lin manages the supply chain for a company that sells designer bags. She learns that economists are predicting a moderate to severe recession in the next six to eight months. Based on that information, what action should Lin recommend to the company's owner? a. Reduce supply. Customers generally reduce their purchases of luxury items when the economy falters. b. Increase supply. During recessions, businesses that focus on low-cost solutions make significant profits. c. Maintain the supply at its current rate. Economic forecasts are rarely accurate. d. Wait six months and see what happens. Recessions rarely affect consumer spending.
a. Reduce supply. Customers generally reduce their purchases of luxury items when the economy falters.
46.) Which of the following is likely to happen due to horizontal mergers between competitors such as Delta and Northwest airlines? a. The overall industry profitability will increase. b. The structure of the industry will change from consolidated to one that is fragmented. c. The industry will face excess capacity in the future. d. The threat of strong competitive forces such as supplier power will increase.
a. The overall industry profitability will increase.
26.) Microsoft created a strong strategic and profitable position by using which type of business model? a. bundling b. pay as you go c. subscription model d. wholesale e. agency
a. bundling
5.)Green and Good Inc., a multinational company, relies on its media partner OmniSignal to regularly advertise its offers, sales, and new products. OmniSignal is invested in this relationship because it generates most of its revenue from advertising Green and Good's products. In this scenario, OmniSignal is Green and Good Inc.'s a. external stakeholder. b. internal stakeholder. c. stockholder. d. workforce.
a. external stakeholder.
43.) Farm to Table Inc. is a supermarket chain. Due to strong competition from other stores in the industry, Farm to Table has aggressively used branding, pricing, and superior customer service to uniquely position itself in the market. As a result, the supermarket chain has been able to differentiate itself from its competitors and sell its products at higher prices. Which of the following industry competitive structures does this scenario best illustrate? a. monopolistic competition b. oligopoly c. monopoly d. perfect competition
a. monopolistic competition
41.) Jatteland Jets Inc., a firm controlled and managed by the government of Jatteland, is the only company that has the license to manufacture private jets in the country. Which of the following industry competitive structures does this best illustrate? a. monopoly b. oligopoly c. perfect competition d. monopolistic competition
a. monopoly
35.) WeBreak4Bikes Inc. has a new U.S.-based client in the bicycle industry. The client's company produces only bicycles for riding on the road. The bicycles are used for reliable general-purpose transportation. When asked to identify a potential substitute for the bicycle industry from the five forces perspective, you would select a. motorcycles. b.hot air balloons. c.None of these are substitutes. d. tractors.
a. motorcycles.
63.) Mycoskie believed that companies are better at providing societal needs than governments or charities. He founded Toms as a for-profit company to provide children in less developed countries with shoes. He created a new business model called a. one-for-one. b. freemium. c. pay as you go. d. subscription model. e. bundling.
a. one-for-one.
12.)How did Tinder use innovation to disrupt the online dating market? a. simplified the application process b. focused on a broad target audience c. required new users to fill out personality questionnaires d. allowed unlimited profiles for the user to view e. did not use geolocation as other dating sites did.
a. simplified the application process
9.) Which of the following stages in the AFI strategy framework involves designing a business, corporate, and global strategy? a. strategy formulation b. strategy implementation c. strategy analysis d. strategy control
a. strategy formulation
49.) Using the PESTEL framework, which factors were the most powerful in influencing the rise of Robinhood? a. technological and sociocultural b. political and ecological c. legal and technological d. sociocultural and economic e. political and sociocultural
a. technological and sociocultural
39.) Which of the following factors most contributes to the U.S. automotive industry being characterized by high entry barriers? a. New auto companies create electric cars powered by simpler motors and gearboxes. b. Car manufacturers require large-scale production in order to be cost-competitive. c. Few industrial products are as easy to build as cars powered by internal combustion engines. d. New entrants in the automotive industry expect that incumbents will not or cannot retaliate.
b. Car manufacturers require large-scale production in order to be cost-competitive.
29.) Managers at SunTrustUs Properties are surprised to hear that interest rates are likely to remain low for the next six months. Which of the following is an implication of low interest rates? a. Economic growth rate will fall. b. Consumer demand will increase. c. Firms will invest less in future growth. d. Cost of capital for firms will be high.
b. Consumer demand will increase.
15.) MoreCash Inc. is a major financial services corporation. With the CEO of MoreCash Inc. preparing to retire, several top managers are vying for the position. Jared considers himself to be a leading candidate. He not only has advanced degrees from business schools and more than a decade of experience working for MoreCash Inc., but he also has personally ensured that his division has exceeded its performance benchmarks over the past three years, even though many of his employees are dissatisfied because they feel they are stagnating in their jobs. According to the Level-5 leadership pyramid, why has Jared failed to exhibit the qualities of a Level-5 leader? a. His actions do not match the organization's strategy. b. He is not able to help others reach their full potential. c. He lacks the organizational ability to accomplish the organization's goals. d. His individual skills are not well developed.
b. He is not able to help others reach their full potential.
2.) Golden Age Cinemas Inc. and HiDef Inc. are two companies that own and run movie theaters in malls and other commercial areas. Both are trying to coax consumers back into movie theaters after the COVID-19 pandemic shutdowns. While Golden Age Cinemas Inc. pursues a cost-leadership strategy, HiDef Inc. adopts a differentiation strategy. Which of the following statements is most likely true of this scenario? a. Golden Age Cinemas and HiDef will use a similar approach to create value for customers by attempting to offer everything to everybody. b. HiDef and Golden Age Cinemas will not be direct competitors to each other, and their customer segments will overlap very little. c. Golden Age Cinemas will charge a premium price for its customers, while HiDef will implement everyday low pricing. d. HiDef will keep its customer service at an acceptable level, while Golden Age Cinemas will provide superior customer service.
b. HiDef and Golden Age Cinemas will not be direct competitors to each other, and their customer segments will overlap very little.
61.) FMC Corp., a chemical manufacturer, has over 5,000 employees spread across several SBUs that collectively generate more than $3 billion in annual revenues. FMC's strategic leaders initially focused solely on financial metrics as their key performance measure, but the company is failing to achieve competitive advantage in its industry. Which of the following questions should FMC's senior leadership consider while implementing the balanced-scorecard framework? a. Where should we compete in terms of industry, markets, and geography? b. How do we become the customer's most valued supplier, and how can we create this value for the customer? c. When should we decide to divest assets and prepare for an exit strategy? d. What corporate strategy will enhance our firm's chances of gaining and sustaining a competitive advantage?
b. How do we become the customer's most valued supplier, and how can we create this value for the customer?
23.) Which of the following answers best explains why addressing strategic inflection points is a difficult leadership challenge? a. It calls for a blended strategy in which organizational structure and systems allow both top-down and bottom-up strategic initiatives to emerge for evaluation and coordination. b. It requires fundamental changes to the firm's strategy, and leaders are often late in comprehending that their belief system is no longer a good fit with the new circumstances. c. Top-management opinions have coalesced around a leader without individuals critically evaluating and challenging the leader's opinions and assumptions. d. It requires an approach derived from military strategy in which all strategic intelligence and decision-making responsibilities are concentrated in the office of the CEO.
b. It requires fundamental changes to the firm's strategy, and leaders are often late in comprehending that their belief system is no longer a good fit with the new circumstances.
57.) Nalani is trying to determine if her company has a competitive advantage. She must be able to accomplish two critical tasks before she can substantiate this claim. First, she must assess the performance of her company accurately; second, she must a. ensure the right strategic leaders are in place that can execute her strategy. b. compare and benchmark her firm's performance to other competitors in the same industry. c. assess her capital and liquid position to ensure funding for future projects. d. focus on creating value by utilizing operational effectiveness such as Six Sigma and lean manufacturing.
b. compare and benchmark her firm's performance to other competitors in the same industry.
66.) Because Toms could not maintain their commitment to creating shared value (CSV), Toms abandoned their buy-one, give-one business model in favor of a. providing eye surgery in developing countries. b. buy one, give one for sunglasses. c. providing safe drinking water in developing countries. d. buy one give one for Toms Roasting Coffee. e. donating a portion of their profits to social causes.
e. donating a portion of their profits to social causes.
59.) Abdul and Laticia both love hot coffee. Abdul likes to keep his coffee hot during the day, while Laetitia doesn't mind drinking room temperature coffee. Abdul is willing to spend more money on a thermos than Laticia is willing to spend. This example illustrates the following major limitation of employing the economic value creation framework because a. accounting data focus mainly on tangible assets, which are no longer the most important. b. determining the value of a good/service through the perspective of consumers is not a simple task because consumers have different spending habits. c. overall macroeconomic factors such as the unemployment rate, and interest and exchange rates all have a direct bearing on stock prices. d. accounting data are historical and thus backward-looking.
b. determining the value of a good/service through the perspective of consumers is not a simple task because consumers have different spending habits.
60.) A firm incurs $600 to manufacture a computer. In the market, customers are willing to pay a maximum of $800 for the computer priced at $700. The difference of $200 ($800 - $600) is the a. customer lifetime value. b. economic value created. c. total return to shareholders. d. consumer surplus.
b. economic value created.
8.) Industrial Drills, a company that manufactures industrial tools, incurs higher costs because of its refusal to outsource its manufacturing to countries where labor costs are lower. This reflects Industrial Drills' ________responsibility. a. legal b. ethical c. economic d. demographic
b. ethical
10.) In the AFI strategy framework, strategy analysis primarily involves a. deciding the type of corporate governance that would be most effective in the implementation of a strategy. b. evaluating the effects of internal resources and core competencies on a firm's potential to gain and sustain a competitive advantage. c. organizing a firm in order to effectively put the formulated strategy into practice. d. designing a business, corporate, and global strategy to gain and sustain a competitive advantage
b. evaluating the effects of internal resources and core competencies on a firm's potential to gain and sustain a competitive advantage.
13.) Wolfe Herd achieved enormous success in growing Bumble's user base by using the same marketing strategy she used at Tinder. The business model she used was called a. subscription model. b. freemium. c. pay as you go.added d. value.bundling.
b. freemium.
16.)EverMart Inc. is a large company that sells a variety of products such as cosmetics, jewelry, frozen foods, navigation electronics, and airplanes. Apart from this, the company also has a strong presence in the service industry through its chain of dance studios, casinos, and nightclubs. Each of its product divisions operates as an individual business and is responsible for its own profits and losses. Thus, these product divisions under EverMart can be referred to as a. corporations. b. strategic business units. c. functional departments. d. limited liability companies.
b. strategic business units.
22.) Strategic thinking is different from strategic planning in that a. strategic thinking relies more on hard data and statistical analysis than strategic planning. b. strategic thinking includes all types of information sources while strategic planning does not. c. strategic thinking is regimented and confining, whereas strategic planning is more flexible. d. strategic thinking can create an illusion of control, whereas strategic planning avoids this.
b. strategic thinking includes all types of information sources while strategic planning does not.
40.) Which of the following is not captured when examining a competitive industry structure? a. the type of product or service (commodity or differentiated product) b. the ability to engage in forward vertical integration c. the number and size of an industry's competitors d. the firm's degree of pricing power
b. the ability to engage in forward vertical integration
19.) Which of the following vision statements is most likely to produce a sustainable competitive advantage for a boat dealership? a. to generate the highest revenues of any dealership in the region b. to help our customers find the perfect boat for their individual needs c. to sell only the highest-rated luxury boats d. to open dealerships across the country
b. to help our customers find the perfect boat for their individual needs
62.) The top management at Konex Vitamins, through rigorous testing, ensures that the company develops and sells vitamins that are free of harmful side effects. Also, the company ensures that the chemical waste generated in the manufacturing process is kept to a bare minimum and is disposed of according to the regulations of the Environmental Protection Agency. The management assesses its overall performance based on these dimensions. Thus, the managers at Konex Vitamins are applying the ________approach to measure firm performance. a. economic value creation b. triple-bottom-line c. shareholder value creation d. accounting profitability
b. triple-bottom-line
7.)Which of the following statements about the social responsibilities of a business is accurate? a. Shareholders mandatorily require a firm to perform its ethical, but not its philanthropic responsibilities. b. Economic responsibilities are often subsumed under the idea of corporate citizenship, reflecting the notion of voluntarily giving back to society. c. A firm's ethical responsibilities go beyond its legal responsibilities. d. Legal responsibilities are the foundational building block of a firm's social responsibility.
c. A firm's ethical responsibilities go beyond its legal responsibilities.
20.) Which of the following is an example of a business acting upon an organizational core value? a. Emerald Autos lowers its retail prices to gain an advantage over its closest competitor. b. Emerald Autos finances research for developing more powerful engines. c. Emerald Autos reduces engine emissions below federal guidelines to reduce pollution. d. Emerald Autos launches an ad campaign that promotes the company as being environmentally friendly.
c. Emerald Autos reduces engine emissions below federal guidelines to reduce pollution.
48.) Breeze Car Rental follows a cost-leadership strategy. Which of the following firms will most likely be its direct competitor? a. Auto Rent Inc., which follows a cost-increase strategy b. Rent and Buy Corp., which follows a standardization strategy c. Quicker Rental Cars, which follows a low-cost strategy d. Samson Truck Rentals, which follows a differentiation strategy
c. Quicker Rental Cars, which follows a low-cost strategy
56.) Which of the following statements correctly describes the actions of a company applying a CSV perspective? a. The company is externally focused to address pressures that arise. b. The company maintains focus on its citizenship and philanthropic activities. c. The company is internally focused, and its actions derive from deeply held beliefs. d. The company maintains a competitive advantage that allows it to "do good."
c. The company is internally focused, and its actions derive from deeply held beliefs.
34.) 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, such as buyers, suppliers, the potential new entry of other firms, and the threat of substitutes. a. regulation b. a stakeholder c. competition d. a barrier to entry
c. competition
18.) Visionary companies differ from their competition in that a. a visionary company focuses on scenario planning and future competitive threats. b. visionary companies typically emphasize measuring financial performance. c. employees in visionary organizations find meaning in their work and are motivated. d. in a visionary company it is the CEO's managerial style that gives the company its emergent strategy.
c. employees in visionary organizations find meaning in their work and are motivated.
30.) Food Shipp Inc. is a food supply company that wants to sell its products directly to consumers through mail order instead of going through supermarkets and other stores. However, supermarket chains want to make this transaction either illegal or more difficult for Food Shipp. To accomplish this, they are using ________to influence the political process. a. ecological factors b. interest rates c. lobbying forces d. demographic research
c. lobbying forces
11.)Online dating is a fragmented and highly competitive market space because of a. strong brand preference. b. high capital requirements. c. low barriers to entry. d. low switching costs. e. unrestrictive regulations.
c. low barriers to entry.
65.) Toms was one of the fastest growing shoe companies in the world. The economic value created determines how much customers value a product. In this case, Toms failed to achieve a. consumer surplus. b. wholesale distribution. c. matching demand with supply. d. retail distribution. e. cost advantage.
c. matching demand with supply.
38.)All Signal Inc., a telephone service provider, has a large user base mainly because phone calls and messages between All Signal users are free. When people switch to an All Signals network, their entire network of family and friends is likely to switch to the same network to receive the benefit of free calls and messages. In addition, an existing user who gets a new user to register with All Signal Inc. is given a free wireless connection. This has helped to keep competition away from All Signal. In this scenario, which of the following factors is acting as an entry barrier for All Signal Inc.? a. high capital requirement b. economies of scale c. network effects d. high fixed costs
c. network effects
6.)To better achieve a competitive advantage, firms must now adopt a holistic approach towards satisfying multiple stakeholders opposed to focusing on the needs of their shareholders. What term is used for this approach? a. internal shareholder strategy b. value creation strategy c. stakeholder strategy d. shareholder relationship strategy
c. stakeholder strategy
54.) Grameen Bank in Bangladesh was founded to provide microcredit to impoverished farmers who wanted to start their own entrepreneurial ventures that would help them climb out of poverty. This best exemplifies Michael Porter's suggestion that a. managers need to keep economic needs and societal needs disconnected from each other. b. businesses should focus on creating regional clusters such as Silicon Valley in the United States. c. the largest but lowest income socioeconomic group can provide significant business opportunities. d. a firm should expand its internal value chain to include nontraditional partners.
c. the largest but lowest income socioeconomic group can provide significant business opportunities.
4.) Sugar & Sweet Sodas has seen its market share erode in recent years, as consumers increasingly turn toward healthier beverage choices such as unsweetened sparkling water. Hoping to rekindle interest in sugary sodas, Sugar & Sweet decides to produce a limited run of "throwback" cans using labeling first introduced in the 1980s. What is wrong with this strategy? a. It does not involve concrete actions. b. It lacks strategic commitments. c. It tries to be everything to everybody. d. It fails to face the competitive challenge.
d. It fails to face the competitive challenge.
44.) Amelja manages product design and development at a toy company. The junior managers who report to her tell her that new complementors for the firm's products are available. What should Amelja's reaction be? a. If the industry barriers to entry are high, she doesn't need to do anything. b. She should consult lawyers about the possibility of suing for copyright infringement. c .If the industry barriers to entry are low, she doesn't need to do anything. d. She needs to find out if her company and other companies can provide the complements.
d. She needs to find out if her company and other companies can provide the complements.
24.) Constraints such as time or the brain's inability to process large amounts of data that prevent us from appropriately processing and evaluating each piece of information we encounter are known as a. strategic limitations. b. confirmation biases. c. cognitive biases. d. cognitive limitations.
d. cognitive limitations.
3.) Underperformance relative to other firms in the same industry or the industry average results in a(n) ________ for a firm. a. diseconomies of scope b. sustainable competitive advantage c. increased power distance d. competitive disadvantage
d. competitive disadvantage
25.)The early success of Microsoft was due to their application software which integrated seamlessly with their Windows operating system on which 90% of all PCs ran. This unique product is also known as Microsoft's a. tangible resource. b. path dependence. c. resource heterogeneity. d. core competency. e. value chain.
d. core competency.
21.) After carefully assessing the market potential for solar-powered mobile devices, the top-level executives of We Know Inc. decided that the company would be launching a line of solar-powered tablets within the next two years. This would mean that the tablet division would need to immediately begin research and development efforts. Which of the following strategies in the planned emergence model does this best illustrate? a. tactical strategy b. emergent strategy c. unrealized strategy d. intended strategy
d. intended strategy
53.) Grace founded First Plainfield Bank in 2003. Ten years later, the company went public. Despite Grace's death in 2021, the company reported a 75 percent increase in revenue in 2022. Which of the following characteristics of a publicly traded company does this scenario best exemplify? a. transferability of investor ownership b. separation of legal ownership and management control c. limited liability for investors d. legal personality
d. legal personality
51.) The Robinhood business model operates an online brokerage that offers commission-free trading by allowing users to buy and sell assets such as stocks, exchange-traded funds (ETFs), options, American depositary receipts (ADRs), and even cryptocurrencies. This business model is called a. wholesale. b. freemium. c. pay as you go. d. payments for order flow. e. agency.
d. payments for order flow.
37.) When automobile magazines face competition from automobile blogs on the web, which of the following forces in Michael Porter's five forces model primarily gets stronger? a. the availability of complements b. the bargaining power of suppliers c. the emergence of entry barriers d. the threat of substitutes
d. the threat of substitutes
50.) Which of Porter's five forces was likely the most powerful factor influencing the initial success of Robinhood? a. rivalry among existing competitors b. threat of suppliers c. threat of substitute products or services d. threat of new entrants e. threat of buyers
d. threat of new entrants
52.) Which of Porter's five forces was likely the most powerful factor influencing the decline of Robinhood? a. threat of suppliers b. threat of new entrants c. threat of buyers d. threat of substitute products or services e. rivalry among existing competitors
d. threat of substitute products or services
