Exam 2 Strategic MGMT

When companies developed their own software in the United States they were engaging in backward vertical integration, but when they started using independent companies to develop these software, they were more vertically integrated

False

When thinking about the car industry, we would say that the bargain power of the dealer is

Low

We can say that when the industry competes by cost:

Margins are low

What was the problem of Disney's alliance with Mattel?

Mattel was prioritizing production and marketing of their own product over that of the alliance

According to the opportunism-based explanations of vertical integration, which of the following would be the most appropriate type of compensation to support strategic implementation?

Stock grants for individual performance

Considering the case context (Zara). When analyzing the focal industry rivalry.

Storage and fixed costs are the main drivers to high rivalry

Industry competition ranges from

monopoly to perfect competition

Which of the following is not used to determine a firm's level of vertical integration using the value added as a percentage of sales approach

Gross margin

When analyzing the industry's direct competitors rivalry:

Having a large number of direct competitors increases the rivalry due to the similarity to perfect competition market structures.

Why was Michael Jordan good at basketball but not baseball?

He was specialized towards basketball

What is the primary reason assembly lines are efficient?

Labor at each step can be highly specialized

When considering firms such as Ford, what change in manufacturing may allows a firm to efficiently create goods and services (to obtain economies of scale).

Labor specialization and product lines

In general, first-mover advantages can arise from

The creation of customer switching costs.

Which of these features in Sergio's definition of internal capabilities?

They are the source of potential competitive advantage.

Southwest's functional strategy considers the following options

They are using multiple plane manufacturers to increase their bargaining power

Why do firms pursue mergers and acquisitions even though most fail?

They believe it will unlock some synergy between the two firms that will make them more profitable.

When considering Southwest's value chain

They can create value from their cost leadership business- level strategy, but they need to share part of it with the passengers.

Why does a new entrant to an industry care about switching costs for the industry's customers?

They know that if they are high, it will be expensive for prospective customers to try their product

When considering Inditex's corporate strategy, it seems correct to say that:

They vertically integrated forward to for Zara

By the time the case was written, which of the five forces is not high in the PC industry?

Threat of substitution

What is likely to produce opportunism in regards to vertical integration?

Transaction specific investments

How did Tesla achieve differentiation in its product at its start?

Unique car features and electric engines

In an industry that competes by cost and intensively uses electricity

Using Diesel fuel to generate electricity seems as a bad idea

The set of business activities in which a firm engages to develop, produce, and market its products or services is known as its

Value Chain

What is the typical result of most mergers and acquisitions?

Value Destruction

In terms of cost vs differentiation:

We could say that most PC industry participants compete, where the key to success is to have low operational costs (low cost in general).

Considering the suppliers for the retail fashion industry.

We could say that the suppliers are substantially more fragmented than the focal industry.

When considering the PC industry analysis:

We could say that the suppliers of CPU and OS are substantially less fragmented than the focal industry.

What does it mean if you can perform a step in a value change more efficiently than an outside firm?

You should do it internally

As long as the cost of ________ to enter a new industry is less than the cost of ________, an alliance can be a valuable strategic opportunity.

using an alliance; learning new skills and capabilities

Southwest's strategy considers the following options

A cost leadership business-level strategy.

If Digpics were to agree to spend a significant amount of money to establish a new assembly line for a large client, picpro that has unique needs that would be largely useless for any other customer, the funds Digpics spent in establishing this line would be an example of

A transaction-specific investment.

In terms of new entrants, one could say

Accessing distribution channels would be difficult

In terms of new entrants, one could say:

Accessing distribution channels would be difficult

In terms of recommendations to tesla production and internal capability problems, would you recommend:

Acquiring a small car manufacturing firm that has more experience with production.

Which is not a functional strategy?

All are acceptable. (Technology, operations, size)

Which of these things necessary to make a tortilla is not a commodity?

All are commodities (water, energy, and unskilled labor)

Considering the case (Zara) context. When analyzing threats of new entrants.

All are correct

Firms engage into alliances with...

All are correct

When considering partner selection:

All are correct

When considering the car industry competitive rivalry:

All are correct

When thinking about Hilton

All are correct

Which of the following seems a better alternative: (regarding strategic alliances)

All are correct

Expanding to international markets

All are correct (knowledge, regulations, networks)

Alliances can be used to:

All are correct (access to new markets, access to valuable resources/capabilities...)

From a functional strategy prospective:

All are correct (The idea was to produce small batches with variability in terms of design but not too much variability in colors, the small batches production coordinates with the stores in order to supply the stores with what people are effectible buying)

Which is not a factor of partner selection?

All are factors

Which is not a potential upside of a successful merger or acquisition?

All are potential upsides (Geographic market extension, Increased firm value, Product market extension)

Functional- Level Strategy consistent with cost competition may include

All of the above. Increase firm size, Technology, Efficient operation

How much (minimum) of a firm needs to be bought to be considered an acquisition?

Any percentage

When considering product mix and Apple we can say:

Apple is an infrequent case where its differentiation strategy emerges from a corporate strategy involving integration with other industries

Google creating their own data centers is an example of _________ integration.

Backwards

What is a short selling strategy?

Borrow stocks to buying low after selling high

When comparing vertical integrations with corporate diversifications:

Both can be classified as corporate strategies.

Why might a merger be preferable to an alliance?

Cheating in an Alliance is more likely.

Which of the following statements regarding the resource-based view is accurate?

Competitive advantage is too important to remain the sole property of senior management.

Why is the automobile industry unattractive?

Competitive rivalry due to proximity to perfect competition

When considering cost competition

Cost leadership implies you need to have a minor cost compared to your competitors

What is defined as innovation that drastically changes the economy?

Creative destruction

How do you sustain competitive advantage?

Creativity to keep differentiating

What allows rolex to charge more for a watch that does the same basic function made of the same steel as other brands?

Differentiation

What is the primary benefit the Shark Tank offers entrepreneurs?

Distribution channels

The _______ focus(es) on the relationship between the cumulative volume of production and average unit costs, the _______ focus(es) on the relationship between the volume of production at a given point in time and average unit costs.

Economies of scale; Learning curve

A firm's ability to conceive and implement vertical integration strategies tends to be highly susceptible to direct duplication.

False

A sustained competitive advantage can be competed away by strategic imitation if competing firms face an important cost disadvantage in duplicating a successful firm's valuable resources.

False

Financial resources include only the profits a firm had made earlier in its history and it has reinvested in itself.

False

The threat of direct competition tends to be low when

Firms are able to differentiate their products

Why do mergers and acquisitions fail?

Firms pay more than they should

When Apple Inc. opened retail stores to sell computers this is

Forward vertical integration

Tesla creating their own dealerships is an example of _________ integration.

Forwards

Diseconomies of scale. If production grows a firm starts

Increasing their production cost

When attempting to understand inditex succeeds on their corporate strategy.

Inditex did a vertical integration forward toward the fashion industry. We can see that they were successful to exploit industry limitations such as high storage and fixed costs.

inputs whose quantity of supply is fixed and does not respond to price increases are said to be

Inelastic

Southwest Airlines strong internal culture that helps ensure that employees act in ways consistent with the company's strategy is an example of a(n)

Informal Management Control

When considering firm's internal capabilities:

Internal capabilities are the source of the potential competitive advantage.

A value chain

It contains the elements of a supply chain that the firm decided to have in- house.

When considered corporate diversifications:

It is a corporate strategy

Why would an account not use an ipad for an excel sheet?

It is an inferior substitute

What conclusion can we draw from the PC industry?

It is unattractive because 90% of it competes by cost

What does future of self driving look like?

It will become a standard feature in most cars

Which of these is an equity alliance per se?

Joint ownerships

Fundamentally , a patent is a _______ granted by the government.

Monopoly

Fundamentally, a patent is a _ granted by the government.

Monopoly

In a related acquisition, if there is one target firm and twenty bidding firms, and the value of each of the bidding firms as a stand- alone entity is $40,000 and the value of the target firms as a stand- alone entity is $20,000, the market value of the combined entity is likely to be

More than $60,000

Why is there government strategic stake in the automobile industry?

No politician wants to take blame for letting automotive industry die

When differentiation is based on product complexity, we can say that it will be frequent to observe

Patenting protecting intellectual rights

In general, as long as the number of firms that possess a particularly valuable resource or capability is less than the number of firms needed to generate perfect competition dynamics in an industry, that resource or capability can be considered ________ and a potential source of competitive advantage.

Rare

When referring to Rolex, while nowadays they are linked to an accessory communicating status and luxury, but we can say their differentiation started based on

Reputation

Firms that possess and exploit costly-to-imitate, rare valuable resources in choosing and implementing their strategies may enjoy a period of

Sustained Competitive Advantage

Considering the industry analysis and Tesla . What would be the major concerns in terms of Tesla's future profitability?

Tesla seems to lack the internal capabilities to position in the luxury car segment

What do we mean when we say mergers and acquisitions "fail"?

The acquiring firm's value afterwards its less than the original separate values of the two firms

What needs to be the case for an alliance when entering a new market or technology in order to make sense?

The cost of forming the alliance needs to be lower than the cost of entering alone

The airline industry seems to show

The full-service airlines (delta) are now incorporating some of Southwest's functional strategies.

What is the problem with a commodity for bargain power?

The suppliers can name the price

What is the first rule of alliances?

The synergy the two firms create together must be of greater value than working alone

What is Tesla's primary advantage for self driving?

Their cars are collecting data on roads everyday

When comparing pizza hut and little Ceaser's value chain:

Their primary activities are organized differently, even though they compete in the same industry.

We could say about the PC industry's storage cost:

Their storage cost is high, which increases the rivalry between direct competitors

A firm's formal reporting structure, its formal and informal planning and its controlling and coordinating systems are examples of which type of resources?

organizational resources

If firms that do not possess valuable and rare resources or capabilities face a cost disadvantage in obtaining these resources or capabilities compared to the firms that already possess them, these resources and capabilities are termed

perfectly imitable