Exam 2

While the domestic airline industry is in the maturity stage of the industry life cycle, the internet-enabled appliance industry is in its growth stage. Which of the following can be inferred from the given data?

While the domestic airline industry is mostly free from excess capacity, the internet-enabled appliance industry will have new entrants.

Which of the following business models in the landscaping industry is likely to scale most efficiently?

a company that allows users of its website to schedule appointments with landscapers who specialize in the exact service required

Tablette Corp. is a consumer electronics company known for its affordable mobile devices that follows a cost-leadership strategy. In this scenario, Tablette Corp. should ideally compare its strategic position with

a consumer electronics company popular among price-conscious customers.

Jack and Jill both love hot coffee. Jack likes to keep his coffee hot during the day while Jill doesn't mind drinking room temperature coffee. Jack is willing to spend more money on a thermos than Jill is willing to spend. This example illustrates the following major limitation of employing the Economic Value Creation framework because

accounting data are historical and thus backward-looking.

Adaptive Biotechnologies Inc. is a company that builds diagnostic devices. It was the first company to develop a compact MRI scanner by reconfiguring the components of the MRI technology. This smaller and user-friendly version of the huge MRI scanner created demand from small hospitals, nursing homes, and private practice doctors who were earlier dependent on the scanning machines in large hospitals. Which of the following types of innovations does this scenario best illustrate?

architectural innovation

How does a firm capture its producer surplus for a good or service?

as profit per unit sold

Tough Guy's Inc. is a chain of gyms. It offers a fitness package that allows its members to use the gym facilities for 12 months by paying only for 10 months. Included in the package are two health check-ups and a gym kit. These add-ons by themselves are not very valuable, but as a package they can enhance the perceived value of the service offerings. In this case, Tough Guy's primary value driver is

availability of complements.

While the personal computer industry is flooded and growing with laptops and tablets, Javier recently bought a desktop, his first personal computer. He realized that a computer at home would be helpful for his children for their school projects, and he could use it to maintain the simple accounts of his plumbing business. Which of the following customer segments does Javier best represent?

category captains

Susan 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

compare and benchmark her firm's performance to other competitors in her same industry.

Benny's Closet Inc. is an apparel company that caters to highly price-conscious customers. Through its simple apparel designs, acceptable quality levels, and minimal customer service, the company has been able to sell its merchandise at the lowest prices in the industry. Which of the following generic business strategies is Benny's Closet applying?

cost-leadership

Bath & Chill is a spa that caters to the needs of a small percentage of highly health-conscious consumers. It offers state-of-the-art treatments in a luxurious setting. Since there are very few spas that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Bath & Chill is following a

focused differentiation strategy.

The fact that both Whole Foods (a high-end grocery store) and Aldi (an inexpensive grocery store) have a competitive advantage in the grocery store industry is an indication that

following a different generic business strategy within the same industry can lead to a competitive advantage for more than one organization.

Dontechi is a file hosting service that allows users to store up to 5GB of data with no restrictions or charges. However, users have to pay a fee for advanced features on the cloud storage system and additional storage space. Which of the following business models does thisbest illustrate?

freemium

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.

When examining all the generic strategies, which of the following below is inherently superior in every industry?

here is no single superior business-level strategy.

the strategy canvas for movie theaters includes factors such as prices, comfort, customer service, concessions variety, and hours of operation. Which of the following value curves is most likely to represent a theater that successfully positions itself as a differentiator?

high price, high comfort, high customer service, high concessions variety, low hours of operation

Trader Joe's differentiates itself from competitors by offering top-quality foods obtained through sustainable agriculture. This business strategy implies that Trader Joe's focuses on

increasing the perceived value created for customers, which allows it to charge a premium price.

Fulcrum Feet is a manufacturer of athletic shoes. It has released an improved version of its premier running shoe in markets in which the company already operates. Which of the following types of innovations does this scenario best illustrate?

incremental innovation

A factor favoring the success of disruptive innovation is that

incumbent firms are slow to change.

Which of the following is an advantage of the balanced-scorecard?

itt allows managers to translate a firm's vision into measureable operational goals.

Which of the following scenarios would be characteristic of an entrepreneur?

john implemented a new and more efficient way to produce pottery.

After the creation of social networking websites were introduced, their value increased exponentially as the number of users increased. This is the positive effect of a(n)

network effect.

Due to its large sales volume and low-cost structure, Bunny's Lo-Cost enjoys a cost-leadership position. Which of the following scenarios might threaten Bunny's competitive advantage?

new competitor is perceived to provide similar value, but in addition offers innovative self-checkout that Bunny's doesn't offer.

Diana is a recent fashion graduate. She started her own apparel store with an investment of $300,000. In the first year she made a profit of $60,000. If she had taken up a job as a fashion editor for a magazine, she would have earned $50,000 as salary per year. Also, she could have invested her capital, $300,000, in treasury bonds and earned an interest of $12,000. Thus, the amount $62,000 ($50,000 + $12,000) would be Diana's

opportunity cost.

When Monopar Therapeutics released a new drug to treat insomnia, its chemical composition was disclosed at the back of the drug's cover. However, any attempts by competitors to copy the chemical composition would result in infringement of Monopar Therapeutics' intellectual property rights. Thus, the drug is protected by a

patent.

Susan wants to create a networking site that would connect local artists to homeowners who are looking for unique and original art. She knows that network effects will play a big role in her success and doesn't want to build her business using a linear value chain. Susan would best be served by employing a(n)

platform business model.

Facebook has become one of the largest media companies in the world, valued at nearly 50 billion in 2019, but hasn't produced a single piece of content. Facebook is an example of a

platform business.

Connell Inc. has been successful at differentiating itself from competitors by claiming a premium price for its digital cameras based on superior image quality and advanced technology. In this scenario, which of the following is the key value driver?

product features

Generally, as the level of ________ innovation declines, the level of ________ innovation increases.

product; process

Managers can justify using the balanced-scorecard framework because research show that both ________ and ________ performance dimensions are important when examining the effectiveness of a firm's strategy.

quantitative, qualitative

Nam-zim sells its e-book readers at the cost price of $15 each. However, the company makes its profits when users have to download or buy books online. Which of the following business models is Nam-zim implementing?

razor-razor-blade

By selling a tablet at $1,000 for which consumers are willing to pay up to $1,200, a consumer electronics firm makes a profit of $400 per unit. In this scenario, the amount $600, that is ($1200 - $1000) + $400, is the

reservation price.

Fresher Corp. produces electric bathroom fragrance diffusers and sells the electric outer device at a market rate price. However, they lock their clients into a two-year agreement to purchase the perfume refills solely from them on a monthly basis. Which of the following business models does this best illustrate?

subscription-based

in order for a firm to formulate an effective business-level strategy, it is important to remember that competitive advantage is determined by

the characteristics of both the industry and the firm.

Tom is attempting to measure how his customers views his firm. To do this, he uses the balanced-scorecard framework because he knows that

the customer perspective is directly linked to firm revenues and profits.

Which of the following is a firm effect that has an impact on the competitive advantage of a firm?

the value and the cost position of the firm relative to its competitors

Which of the following statements accurately brings out the distinction between the introduction and growth stages of the industry life cycle?

there is more strategic variety in the growth stage when compared to the introduction stage.

One of the reasons that big box retailers like Home Depot are able to achieve economies of scale is that

they are able to take advantage of physical properties and maximize their scale efficiencies by stocking more merchandise and handling inventory more efficiently.

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.

triple-bottom-line

The management team for Forever Power came up with the following vision statement: "Forever Power will conscientiously track its financial performance to ensure profits for its investors, enhance its community through employment and supporting charities, and dispose of waste in a manner that will not harm the environment." This vision statement is most likely based on the

triple-bottom-line approach.

When does a firm fall into the large competitive chasm between early adopters and early majority?

when it fails to successfully launch a mass-market version of its product

One of the risks of pursuing a blue ocean strategy is that a firm can find itself

"stuck in the middle."

A wearable technology company has priced one of its wristwatches at $210. Most of its competitors sell similar watches at $180. Selling anything 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?

$170

Sarah paid $900 for a camera that she thought was worth $1100 for all the features included in it. For the consumer electronics firm selling the camera, however, the cost of producing the camera was only $350. What is the consumer surplus in this scenario?

$200 (1100-900)

When a firm manufactures 2,000-3,000 units of a product, it incurs an average cost of $10 per unit. When it manufactures 3,000-4,000 units of the same product, the average cost per unit reduces to $7. However, manufacturing beyond 4,000 units will raise the average cost per unit to $9. Which of the following is the firm's minimum efficient scale?

3,000-4,000 units

After trying on a dress, a consumer assesses it to be worth a maximum of $100 and is willing to pay that amount for the dress. However, the dress was priced at $80 and cost $50 to produce. -What is the amount, $100, referred to as? What is the amount, $50, referred to as? -Find: A) the producer surplus B) economic value C) the consumer surplus

A- Producer surplus: P-C = $30 (80-50) B- Economic value: V-C = $50 (100-50) *producer + consumer surplus* C- The consumer surplus: V-P = $20 )100-20)

AcerWare Inc. manufactures external hard disks for $32 per unit, and the maximum price customers are willing to pay is $47 per unit. Data Driver Inc. is a competitor of AcerWare Inc. that produces external hard disks for $37 per unit, and customers are willing to pay a maximum price of $50 per unit. What does this imply?

AcerWare creates a greater economic value than Data Driver

Which of the following statements correctly compares Apple and Microsoft in 2016?

Apple had a higher return on invested capital than Microsoft.

Bigger & Better Inc. is a big box retailer who is in direct competition with Walmart and Target. Bigger & Better Inc. initially tried to respond to Walmart by cutting its prices and reducing costs. Walmart has greater buying power and a more efficient supply chain, therefore, Bigger & Better Inc. was not able to compete on costs. The company then tried to differentiate itself by signing a celebrity to create an in-house line of clothing. However, Target has a celebrity clothing line that has a more differentiated appeal. The economic value created by Bigger & Better Inc. is currently less than Target and Walmart. It can be said that

Bigger & Better Inc. is "stuck in the middle" and has a competitive advantage.

which of the following provides an example of a firm in ared ocean?

Cool Apparel offered clothing at a low price but failed to differentiate its product as being exclusive.

Assume that the market for print book publishing has entered the maturity stage. Which of the following wouldmost likely exist during this stage?

a few large publishers

Sasha is the CEO of Enterprise Technologies, a consumer electronics manufacturer. Last year, Enterprise's return on invested capital (ROIC) was 11.6 percent, while Enterprise's closest competitor, Federation Tech, had an ROIC of 17 percent. Which of the following factors might Sasha use to convince investors to invest in Enterprise rather than Federation Tech?

Enterprise's working capital to revenue ratio was 75 percent, while Federation Tech's was 68 percent.

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.

The working capital turnover of Complete Systems Corp. is 6.0. What does this financial data suggest?

For every dollar Complete Systems puts to work, the company realizes $6.00 of sales

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

Gogozoom 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.

Jimmy can be categorized under the late majority customer segment. Which of the following behaviors is hemost likely to exhibit?

He will prefer to buy from well-established brands rather than unknown new ventures.

peloton Interactive is a manufacturer of high-definition televisions. The industry has gone through a period of rapid growth and expansion and has started to experience a decline in the rate of growth. Several smaller firms have been bought out by larger competitors, and competition for market share is intensifying. Which of the following strategies is most likely to give Peloton Interactive a competitive advantage?

Implement process innovations that lower per-unit costs.

Which of the following most accurately describes a difference between incremental innovation and radical innovation?

Incremental innovation builds on an established knowledge base; radical innovation uses an entirely different knowledge base.

Lauren is the CEO of TimeEx Inc. and is competing in an industry that is shifting due to disruptive innovation. Which of the following strategies should she consider to most appropriately respond to this disruptive innovation?

Lauren should guard against the disruptive innovation by protecting the low end of the market.

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

Learning effects occur over time as output accumulates.

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.

How did Marriott use economies of scope to achieve greater economic value than its competitors?

Marriott lowered its cost structure by sharing its production assets over several types of hotels, which increased the diversity of its hotel line and thus its differentiated appeal.

Jonathan is the owner of a landscaping company that caters to a very wealthy clientele. His company has struggled to differentiate itself from the other high-end landscapers in the area, but because he has hired several expensive but highly qualified team members, Jonathan is unable to shift to a cost-leadership strategy. Which strategy is most likely to achieve a competitive advantage?

Narrow the scope of competition and focus on unique features such as the use of organic materials.

Feran is the founder of an innovative "impromptu catering" business that provides elegant, healthy party food and decorations on less than 24 hours' notice. The company has grown by over 150 percent in the past year. Feran credits some of the company's success to studying the strategies of prominent social entrepreneurs, such as Wikipedia's Jimmy Wales. What can Feran do to exemplify the social entrepreneurship model?

Provide free weekly catered meals for the homeless.

Which of the following businesses is most susceptible to negative network effects?

Rite Pics is a social media platform where users upload photos to the site and are matched with other users who have taken similar photos.

Amber is the manager of gardening supplies wholesaler DigIt Inc. The company's vision is to become the leading supplier of gardening materials in the northeast. In assessing the firm's current state, Amber has determined that the firm could differentiate itself from competitors with an easy-to-use online ordering system and a two-day delivery guarantee. To accomplish this, Amber has determined that DigIt must spend the next two quarters honing its capabilities for sourcing materials quickly and improving its web development competencies. According to the balanced-scorecard approach, what is wrong with Amber's thinking?

She has failed to account for external factors such as customer perceptions and shareholder perceptions.

The market capitalization of a public company is $5 billion. Each share of the company is traded at $200. What do you infer from this financial data?

The firm pays an annual dividend of 10 percent.

Swedish furniture giant IKEA reported sales of $44 billion in 2019. The company turned a profit by recycling waste into some of its best-selling products. Before, this waste had cost the company more than $1 million per year. And the company is well on its way to "zero waste to landfill" worldwide. According to Joanna Yarrow, IKEA's head of sustainability for the United Kingdom, "We don't do this because we're tree huggers, we do this because it's very cost-effective." This passage best represents which of the following frameworks below?

Triple bottom line

Both UTech Inc. and Mirco Corp. incur a cost of $200 to manufacture a single unit of a cell phone. However, UTech Inc. charges a higher price than Mirco Corp. does, but it still sells a higher number of phones. What does this imply?

UTech Inc. creates more economic value than Mirco Corp. does.

FMC Corp., a chemical manufacturer, has over 5,000 employees spread across several SBUs which collectively generate over $3 billion in annual revenues. FMC's strategic leaders initially focused solely on financial metrics as their key performance measure but is failing to achieve competitive advantage in their industry. Which of the following questions below should their senior leadership not consider while implementing the balanced score card framework?

What are my division's core competencies and contributions to the company goals?

In the multiplex industry, Home Again Movies Inc. is an upscale multiplex that focuses on superior customer experience. The firm charges premium prices for its movie tickets and services. Movies-for-less Inc., in contrast, charges the lowest price in the industry with its no-frills approach. In between these two segments is Just Right Films Inc., which offers a customer experience comparable to that of Home Again Movies at a price almost as low as that of Movies-for-less. What strategy is Just Right Films pursuing in this scenario?

blue ocean strategy

When the market for standalone Global Positioning System (GPS) devices declined with the arrival of GPS-enabled mobile phones, InMode Ltd., a manufacturer of GPS devices, bought out most of its rivals that were planning to exit. This allowed the company to get rid of all the excess capacity and acquire a monopolistic market power in the declining industry. Which of the following strategies has InMode Ltd. adopted in this scenario?

consolidation strategy

The type of customers vital to a firm introducing a new innovation are the ________, who are willing to pay higher prices and like to tinker with new products.

early adopters

A firm incurs $400 to manufacture a computer. In the market, customers are willing to pay a maximum of $600 for the computer priced at $500. The difference of $200 ($600 minus $400) is the

economic value created.

Food Tiger Inc. is a large chain of hypermarkets. It has cost benefits due to its extensive operation. The company's marketing and sales, logistics, administrative, and other such related costs get divided between a large number of product units stocked in its stores. This makes it difficult for smaller retail stores and supermarkets to compete against Food Tiger's low prices. Thus, Food Tiger has a competitive advantage due to its

economies of scale.

As a research scholar, Linda had built a helicam as part of her project. The helicam could capture aerial images. Realizing the potential use of this product in movie production and military and rescue operations, she started a new venture where she could customize these helicams to fit the specific needs of the buyers and sell them. Linda can be best described as a(n)

entrepreneur.

Power Juice is the owner of a firm that produces sports drinks. Since there are a number of firms in the industry competing on cost, Power Juice has decided to pursue a differentiation strategy. In this case, she should

focus on adding unique features to her product that customers will value.

Whole Foods focuses on a small market segment, affluent consumers who want to buy high-end, organic groceries. What is the appropriate name for Whole Foods's scope of competition?

focused

All of the following are generic business-level strategiesexcept

focused marketing strategy.

The balanced-scorecard framework is a tool for strategy ________, not ________.

implementation; formulation

Which of the following is an advantage of applying the economic value creation perspective to assess a firm's performance?

in economic value perspective, analysts not only consider historical costs, but also opportunity costs.

Karat Packaging has entered a stage in which the demand for their innovative fax machines has declined. Now most customers are buying replacement parts or buying their second fax machine from the firm. What stage in the industry life cycle does this scenario describe?

maturity stage

A disruptive innovation leverages ________ technologies, while architectural innovations are based on ________ technologies.

new; existing

Customer service and ________ are two of the value drivers that managers can utilize when trying to improve a firm's differentiation strategic position.

product uniqueness

When a firm uses the tools and concepts learned from strategic management in order to achieve competitive advantage by pursuing innovation, it is said to be engaging in

strategic entrepreneurship.

A high percentage of R&D/Revenue ratio indicates a(n)

strong focus on innovation to improve current products and services.

In order to achieve a competitive advantage, the Heavenly Hotels, a chain of luxury beach resorts, wants to increase its market share. Which of the following strategies is most likely to do so?

take advantage of economies of scale and scope by opening a chain of lower-priced economy hotels that leverage the Heavenly Hotels brand image.

The types of assets that are the primary focus of accounting data but are no longer most important to competitive advantage are

tangible.

Which of the following best describes a strategic tradeoff?

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

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.

Which of the following scenarios best illustrates bundling?

warephase Inc. sells seed packages, in which a person can buy a package of three types of seeds at a discounted price compared to buying the seeds individually.