EXAM 2 IBPS

Sugar Flakes and Cinnamon Texas Toast both produce similar puffed rice breakfast cereals. For both companies, the cost of producing a box of cereal is 45 cents, and it is not possible for either company to lower their production costs any further. How can one company achieve a competitive advantage over the other? A)Increase total perceived consumer benefits through differentiation. B)Raise prices above the current reservation price. C)Lower prices to the break-even price. D)Increase the number of stock market shares available to investors.

A)Increase total perceived consumer benefits through differentiation.

A firm incurs $100 to manufacture an office table. It fixes the market price of the table as $250, and discounts the price to $200. However, the maximum a person is willing to pay for it is $180. What is the amount of total perceived consumer benefits in this scenario? A)$250 B)$200 C)$180 D)$100

C)$180

How does availability of complements act as a value driver? A) Complements add value to a product by offering an inferior substitute to it. B) Complements add value to a product by competing with it. C) Complements add value to a product when they imitate it. D) Complements add value to a product when they are consumed in tandem with it.

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

How does a sustainable strategy typically help a firm? A)It helps the firm focus solely on its financial goals. B)It reduces the need for corporate social responsibility within the firm. C)It facilitates the firm in effectively isolating its external stakeholders. D)It helps the firm achieve positive results along the social and ecological dimensions.

D)It helps the firm achieve positive results along the social and ecological dimensions.

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 A)economies of scale. B)learning-curve effects. C)experience-curve effects. D)availability of complements.

D)availability of complements.

NuLiver Corp. has recently introduced a new production method that will make the production of their medical devices more cost-effective. Which of the following will most likely be the result of this innovation? A)jumps to a steeper learning curve B)destabilizes a steeper learning curve C)stabilizes the existing learning curve D)moves down the existing learning curve

A)jumps to a steeper learning curve

What must a cost-leadership strategy accomplish to be successful? A)It must increase the firm's cost above that of its competitors while offering adequate value. B)It must reduce the firm's cost below that of its competitors while offering adequate value. C)It must increase the firm's cost above that of its competitors while offering superior value. D)It must reduce the firm's cost below that of its competitors while offering superior value.

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

Bioplex requires its members to pay a quarterly or an annual fee to use its services. Irrespective of whether they frequently use the services during the payment period or not, members have to pay in advance. Which of the following business models does this best illustrate? A)razor-razor-blade B)pay-as-you-go C)subscription-based D)freemium

C)subscription-based

SonronMedia sells books by having salespeople set up appointments with potential customers and give them a sales pitch for the product. When a salesperson sells a book, he or she gets a predetermined percentage commission. This type of business model is called A) an agency. B) bundling. C) wholesale. D) a freemium.

A) an agency.

James is a novice investor who wants to decide between purchasing shares in Captial-UP or Mainframe Inc. Captial-UP's return on invested capital (ROIC) was 15 percent, and its cost of capital was 12 percent. During the same period, Mainframe Inc.'s ROIC was 22 percent and its cost of capital was 25 percent. What does this information tell James? A) Mainframe Inc. is more likely to create value while Captial-UP is more likely to destroy value. B) Captial-UP is more likely to create value while Mainframe Inc. is more likely to destroy value. C) Both Mainframe Inc. and Captial-UP are likely to create value. D) Neither Mainframe Inc. nor Captial-UP are likely to create value.

B) Captial-UP is more likely to create value while Mainframe Inc. is more likely to destroy value.

You are the CEO of a tech company and have recently undertaken a review of your company's strategy. In comparing your stock market valuation to that of your closest competitor, you note that your firm is currently valued at $50 billion, while your competitor is valued at $40 billion. How should you proceed? A) Consider this evidence of a sustainable competitive advantage and maintain your current strategy. B) Compare the current valuations with past valuations to determine a trend. C) Assume your current strategy has failed and begin to formulate a new one. D) Compare your valuation to firms in another industry.

B) Compare the current valuations with past valuations to determine a trend.

Hottechi Laminate has developed a new customer-oriented business model. Rather than maintain a network of showrooms across the country, the business will now let customers choose several styles that interest them from an online site, and will ship samples of each of the styles to the customer to test in their home free of charge. Once they have settled on a tile choice, Hottechi Laminate will send a representative to their home to schedule installation. The company has determined that busy middle-class customers will value the convenience of the new model, which allow them to upgrade the look of their homes without spending time browsing showrooms. The new model will be created by selling the old showrooms and shifting resources to the new online site and regional offices for sales personnel. What question remains for Hottechi Laminate to ask in order to put its strategy into action? A) Why does the business model create value? B) What activities need to be performed to create and deliver the offerings to consumers? C) How are the offerings to the customers created? D) Who are the main stakeholders who will be performing the activities?

B) What activities need to be performed to create and deliver the offerings to consumers?

Threadless allows customers to submit their own designs and to vote on which designs they would like to see printed on a T-shirt. This business uses a ________ technique. A) offshoring B) crowdsourcing C) peer-to-peer D) binge watching

B) crowdsourcing

TalkaLot Corp. incurs a cost of $350 to produce one unit of a cell phone. The company's management has priced the product at $600 in the market. Considering the technological advancement of the cell phone, customers perceive its value to be around $800. What is the economic value created in this scenario? A)$350 B)$450 C)$800 D)$200

B)$450

At a certain output level, the per-unit cost incurred by a firm to manufacture a product was $70. Once the cumulative output doubled, the cost per unit reduced to $63. All other factors remaining constant, the firm has been able to achieve a(n) A)80 percent learning curve. B)90 percent learning curve. C)60 percent learning curve. D)54 percent learning curve.

B)90 percent learning curve.

Finger Lickin' BBQ is a chain of casual restaurants that promises affordable barbecue using top-quality local ingredients. However, the company has struggled to achieve a competitive advantage because of its high overhead costs. Which of the following scenarios is most likely to result in a competitive advantage? A)lowering the quality of ingredients below what customers expect to control costs B)eliminating brick-and-mortar locations and offering delivery from a central kitchen C)raising prices without improving on the quality of food D)marketing itself as a high-end restaurant and competing with more refined restaurants in the area

B)eliminating brick-and-mortar locations and offering delivery from a central kitchen

Ticker Inc. is a wristwatch company known for its luxury watches, and it follows a differentiation strategy. In this scenario, Ticker Inc. should ideally compare its strategic position with a A)watch retailer that sells pre-owned watches. B)watch maker that sells high-end, premium watches. C)watch maker that manufactures low-priced watches. D)watch maker that follows a differentiation strategy.

B)watch maker that sells high-end, premium watches.

Pete's Bikes enjoys a competitive advantage as a cost-leader because high demand for its products has allowed it to operate at the minimum efficient scale. Which of the following scenarios would be most concerning to the managers of Pete's Bikes? A) Pete's leading competitor develops a new low-sodium product. B) Pete's most reliable production worker takes a job in another industry. C) A major winter storm shuts down Pete's production for several days. D) A wheat shortage raises input costs across the industry.

C) A major winter storm shuts down Pete's production for several days.

In a focused cost-leadership strategy, a firm A) caters to the segment of the market that is least cost sensitive. B) provides high-priced products for many different segments of the mass market. C) delivers low-cost products and services to a specific, narrow part of the market. D) focuses on reducing the economic value created to drive down costs.

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

Blackzim Wireless is a cellular service provider that charges its customers $1 for three hours of talk time. So, if a customer's talk time for a month is 60 hours, the company charges him or her $20 at the end of the month. Which of the following business models does this best illustrate? A) razor-razor-blade B) subscription-based C) pay-as-you-go D) freemium

C) pay-as-you-go

Which of the following examples uses a focused differentiation strategy? A) a tennis pro shop that sells low-quality racquets priced at 150 dollars per racquet B) a coffee shop that offers mediocre lattes at a price of five dollars for a small latte C) a hotel chain that offers high-quality furnishings and service with room rates of under 75 dollars per night D) a cosmetics brand that offers superior skin lotion for sensitive skin priced at 100 dollars per bottle

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

When a firm is able to successfully employ a blue ocean strategy, it will create a competitive advantage by A) combining high quality and product features to provide service that customers truly value. B) using a first-mover advantage to be the lowest price in the market. C) winning market share with a highly differentiated product. D) beating rivals on product attributes while offering a better price.

D) beating rivals on product attributes while offering a better price.

LinkedIn, a professional social media website, allows its users to create their profiles for free, but charges a premium price for additional services. This is an example of a ________ business model. A)subscription-based B)peer-to-peer C)crowdsourcing D)freemium

D)freemium

The question that business-level strategy answers is ________ the firm will compete. A)when B)where C)who D)how

D)how