Final Exam

Global Reach Corp. is a public company whose shares are currently trading in the market at $150 each. The company manufactures smartphones at the cost of $300 per unit and sells them in the market for $500 each. What is the company's producer surplus?

$200

Which of the following statements about competitive advantage is not true?

A firm's competitive advantage is always absolute, not relative.

Which of the following real-world examples best supports the statement that strategic commitments to a specific industry may be the result of political rather than economic considerations?

A number of European governments created Airbus through direct subsidies to provide a countervailing power to Boeing.

Which of the following statements is true?

A platform business exists to help make matches among users and facilitate the exchange of goods, services or social currency.

Which of the following is an advantage of accounting data?

Accounting data can be easily transformed into financial ratios to help assess and evaluate the competitive performance of firms.

Bela is a marketing and sales employee at Hopscotch Foods Inc. She has invented a new way to process and pack the company's food products that would avoid the usage of chemical preservatives. Which of the following terms best describes Bela?

Bela is an intrapreneur. When innovating within existing companies, change agents are often called intrapreneurs: those pursuing corporate entrepreneurship.

Which of the following best illustrates horizontal integration?

Denali Electronics Inc. acquires its competitor, Mariana Electronics Inc., to gain access to its core competencies.

Which of the following explains how dynamic capabilities are different from the resource-based view?

Dynamic capabilities deal with applying resources over time.

FL Systems Inc. and Oryxo Systems Inc. are two competing firms. FL Systems Inc. has $300,000 in tangible assets and $200,000 in intangible assets. Oryxo Systems Inc. has $150,000 in tangible assets and $347,000 in intangible assets. In the context of the resource-based view, which of the following is the most likely implication of the asset values of the two companies?

FL Systems Inc. will find it harder than Oryxo Systems Inc. to attain competitive advantage.

Which of the following statements best supports the fact that even during a period of low demand in the U.S. automotive industry, excess capacity remained?

GM and Chrysler, despite their bankruptcy, restructured instead of exiting the industry.

Genie Software Inc. has been operating in the country of Jamtland for almost a decade. The nation is currently experiencing an economic downturn. Which of the following is the most likely benefit of this economic condition for Genie Software Inc.?

Genie will have better access to highly skilled human capital at a lower cost.

Which of the following is a feature of a fragmented industry?

It consists of many small firms.

Which of the following is not a disadvantage of the balanced scorecard approach?

It fails to allow managers to prepare the company for future growth.

Revved Rider Inc., a motorcycle company, is the market leader due to its superior engine technology and service orientation. These unique qualities have helped the company generate revenues that are consistently higher than other firms in the same industry. Which of the following can be concluded about Revved Rider Inc. from this scenario?

It has a competitive advantage over the other firms.

Which of the following statements is true of an oligopoly?

It is often analyzed using game theory.

If a company chooses to keep its vision customer-oriented rather than product-oriented, what will be the implication of that decision?

The company will tend to be more flexible when adapting to changing environments.

Which of the following statements about the five forces in the U.S. airline industry is true?

The competitive forces taken together are quite unfavorable for generating a profit potential in the airline industry.

Best Mobile and Turbo Tech Inc. are two competitors in the mobile phone market. The cost incurred by each company to manufacture smartphones is $200 per unit. Although both the companies sell their smartphones at the same price, Turbo Tech has a larger market share in the smartphone industry. What does this imply?

Turbo Tech has been able to offer more perceived value than Best Mobile.

Which of the following is the best example of a platform business?

Uber ride-hailing services

Which of the following best illustrates a strategic alliance?

Velociraptor Pharma Inc. teaming up with a research company to invent and market breakthrough vaccines

Which of the following statements related to a firm's stakeholders is not true?

While external stakeholders are those who make contributions toward the firm, internal stakeholders are those who reap all the benefits.

Which of the following statements accurately brings out the distinction between a firm's resources and capabilities?

While resources reinforce core competencies, capabilities allow managers to orchestrate their core competencies.

In developed countries, the industry for flash drives is in the maturity stage, and the industry for floppy disks is in the decline stage. What does this imply?

While the flash drive industry has reached its maximum market size, the market size for floppy disks is small and contracting.

Which of the following firms most likely has the lowest bargaining power as a buyer?

a cell phone company that requires highly customized software for its phones

Which of the following best illustrates backward vertical integration?

a chocolate manufacturing company setting up its own cocoa plantations

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.

In order to rejuvenate its floundering product lineup, Disney

acquired Pixar.

Anderson Products Inc., a large conglomerate, took over a small startup company that had made some breakthrough innovations in the field of telecommunications. This purchase would help Anderson Products to gain access to the startup company's superior technology and human capital. This transaction is an example of a(n)

acquisition.

Which of the following is an example of related-constrained diversification?

an automobile company that manufactures petrol cars expanding into the diesel car industry

Generally speaking, which of these situations is likely to lead to greater profits?

an industry with fewer but larger competitors

Downtown Coffee Roasters is a premium cafe that is reputed for its superior customer service. The coffee shop also serves gourmet food to its customers, which allows it to charge a premium price. Budget Beans, in contrast, is a chain of coffee shops that charges the lowest price in the industry due to its self-service policy. However, Perky's Coffee Inc. has found a balance between these two strategic groups by using automated ordering to free up its employees to work as master baristas and bakers, thus focusing on creating excellent products. It charges a price slightly above that of Budget Beans. In this scenario, Perky's Coffee is following a

blue ocean strategy.

How has Walmart staked out a unique strategic position?

by cutting costs to offer lower prices than competitors.

If costs are equal, when a firm has a higher value gap than its competitor, it can be inferred that the firm

can charge a premium price for its products and services.

The local real estate companies in a city have joined together and arranged a "Property Fair." The sponsors will equally share the expenses of the event. Though many companies compete against each other, they have joined together because the medium will help the companies market themselves through a dedicated forum at an extremely low cost. This arrangement is best referred to as

co-opetition.

There are several cost drivers that can be managed in order to establish a low-cost leadership advantage. One of the primary cost drivers is

combining experience-based learning and process innovation to move onto a steeper learning curve.

Strategic group mapping establishes that

competitive rivalry is strongest between firms that are within the same strategic group.

Rey estimated that a pair of NuFit jeans would be worth $60 for its brand and durability. However, at the NuFit store, the pair of jeans he wanted was available for $45. The difference of $15 in this scenario is referred to as the

consumer surplus

In the context of the SWOT matrix, which of the following best exemplifies an external opportunity for a firm?

decreasing government interference in the target market

In a focused differentiation strategy, a firm seeks to

deliver products or services with unique features to a specific, narrow part of the market.

The viability of a differentiation strategy is severely undermined when the

differentiated products become commoditized throughout the industry.

A strategic alliance has the potential to help a firm gain and sustain a competitive advantage when it joins resources and knowledge that are

difficult to imitate.

In the context of SWOT analysis, a firm can develop a defensive strategic option primarily by

eliminating an internal weakness to mitigate an external threat.

Which of these is a way to reconfigure a value chain?

entering an industry by offering sporting events on streaming video when competitors are offering them through cable hookups Correct

When Gilded Products planned to start its operations in Upper Medici, an emerging nation, it realized that it would have to set up its own distribution channels. This would be a risky and expensive strategic move. The company had an option of hiring a small supply chain management company, Canopy Logistics, to reach its ultimate customers. However, this would require Canopy Logistics to make huge investments, which would be of no use to it if Gilded Products decided to exit the market. Thus, to gain Canopy Logistics' confidence, Gilded Products purchased 40 percent of the stock of Canopy Logistics. What does this scenario best illustrate?

equity alliance

Widgets Inc. is a vendor who supplies machine parts to an appliance manufacturing company. In return, Widgets Inc. relies on the company for its revenue and is affected by any decisions taken by the company. In this scenario, Widgets Inc. is a(n) _____ for the appliance manufacturing company.

external stakeholder

Qwik Process Inc. is a company that supplies microprocessors to Nuevono Inc., a computer hardware company. When Nuevono Inc. demands lower prices for the microprocessors, Qwik Process Inc. makes it clear that it would profit more from launching its own brand of laptops and desktops in the market. Fearing the competition it would then face from Qwik Process Inc., Nuevono Inc. decides to buy the microprocessors at the quoted price itself. In this scenario, Qwik Process Inc., as a supplier, has exercised its bargaining power by threatening to

forward integrate.

Quick Connect is an instant messaging mobile application. Users have access to a basic version with limited message recipients for free, but they have to pay a fee to have unlimited message recipients or to use advanced features. Which of the following business models does this best illustrate?

freemium

The greater the difference between value creation and cost, the

greater a firm's economic contribution.

An inverted U-shaped relationship between the type of diversification and overall firm performance indicates that

high and low levels of diversification are generally associated with lower overall performance.

The starting point of the build-borrow-or-buy framework is management's

identification of a strategic resource gap that will impede future growth.

The relative bargaining power of suppliers is most likely low when

incumbent firms face low switching costs when changing suppliers.

EZ Electronics Inc., Neo Digital Inc., and Techno Products Corp. are all companies that manufacture and sell consumer electronics. They procure their component parts from a similar set of suppliers in China and sell the final product to customers with similar needs. Thus, the three companies together are a part of a(n)

industry.

Gerda, a real estate agent, is selling a moderately priced house in a subdivision. She knows from her uncle that the factory being built half a mile from the subdivision will be manufacturing dog food, using a process that creates a very strong odor that permeates the surrounding neighborhood. A buyer, who is unaware of the type of factory under construction, makes an offer on one of the houses Gerda is selling, and within a short time, the deal goes through. What does this scenario best illustrate?

information asymmetries

The annual net profit after taxes for RSL Corp., a multinational conglomerate, is $5.5 billion. As legal owners, which of the following stakeholder groups has the most legitimate claim on this profit?

shareholders

Which of the following is an example of a firm's capabilities?

skills involved in training and managing a workforce

Cantaloupe Technologies follows a business model in which the performance of the company is not only based on how much profits were generated, but also on how the community in general benefited from its operations. Thus, the company under its "Plant a Life" campaign promises to plant a tree with every customer purchase. Which of the following terms best describes the performance valuation model of Cantaloupe Technologies?

social entrepreneurship

Within the context of strategic management it is important to understand that black swan events in the past have demonstrated that

stakeholders can affect or be affected by a firm's actions.

GiftBasket.com has successfully created a higher perceived value in the e-commerce industry, though it offers the same products at slightly higher prices than the competitors. This has been mainly attributed to the company's easy-to-navigate website, simple return procedures, fast delivery, and cash on delivery option. Thus, the value driver for GiftBasket.com is its

superior customer service.

Which of the following groups will not be considered a company's internal stakeholder?

suppliers

Which of the following will most likely be considered as an automobile company's core competency?

the company's ability to make its cars more fuel efficient than most of its competitors

Which of the following is an example of internal transaction costs?

the costs pertaining to setting up a shop floor

Which of the following actions of an automobile firm will be considered as a strategic commitment?

the firm investing eight years and $4 billion to develop a range of hybrid cars with which it will compete in the future

According to the crossing-the-chasm framework, a firm's transition between the different parts of the industry life cycle is difficult because

there is a big gulf separating the early adopters from customer segments that make up the mass market.

While most of Savvy Inc.'s competitors were moving toward developing and emerging markets, Savvy Inc. decided to keep its operations limited to its home country so that it could gain some advantage. A few years later, however, Savvy Inc. lost its footing in the home market due to a sharp fall in demand. It then decided to invest in large-scale operations in the same developing nations as its competitors, within a short period of six months. However, its costs kept increasing, so it could not compete against the already established brands. In this scenario, the failure of Savvy Inc. can be best attributed to

time compression diseconomies.

Which of the following is one of the reasons that firms make acquisitions?

to gain access to a new capability or competency

Which of the following was one of the primary reasons why Adidas acquired Reebok?

to overcome a competitive disadvantage

Evaluating the data collected from environmental analysis, the corporate executives of F&S Pharma Inc. realized that it was the right time to expand the business. The company's vision was accordingly adjusted from "To Be the Best in the Pharmaceutical Industry" to "To Make Good Health Accessible to Everyone around the Globe." To support the new vision, the executives decided that the company would first enter the Asian market where its growth potential would be huge. To further support these decisions, the general managers of different SBUs and the functional managers formulated their own strategies. Which of the following approaches to the development of strategy does this best illustrate?

top-down strategic planning

When a firm integrates the competitive strategies of cost-leadership and differentiation, it will most likely result in

trade-offs that work against each other.

Which of the following best illustrates human-asset specificity?

training employees on how to operate a customized furnace

In which of the following cases was a company put at a major competitive disadvantage?

The Environmental Protection Agency (EPA) banned BP from any new contracts with the U.S. government.

Which of the following statements accurately brings out the difference between economies of scale and learning effects?

Learning effects occur over time, whereas economies of scale are captured at one point in time when output is increased.

Larry has been recently promoted to the position of a team lead at an insurance company. This promotion was based on his boss's assessment that Larry is capable of conveying the company's vision and mission to groups. As a result, he can guide groups to superior performance. From this scenario, we can say that Larry is currently at _____ of the Level-5 leadership pyramid.

Level 4

In the financial year 2016, for every $100 in revenues, Microsoft earned $21.5 in profit, while Apple earned $20.6 in profit. This demonstrates that

Microsoft's return on revenue was higher than that of Apple.

Red Hot Inc. and Maverick Cycles Inc. are two competing motorcycle companies. While Red Hot's Cost of goods sold/Revenue is 63.4 percent, the Cost of goods sold/Revenue of Maverick Cycles is 54.2 percent. What do you infer from this financial data?

Red Hot is less efficient than Maverick Cycles in producing goods.

How are the early majority and late majority different in their attitudes toward technology?

The early majority is confident in their ability to master the new technology; the late majority is not.

Which of the following statements is true of the growth stage in the industry life cycle?

The prices begin to fall during this stage when compared to the introduction stage.

Which of the following statements will effectively guide a strategist?

The principles of strategic management can be applied universally to all organizations.

Onivo Auto Inc. has been the leader in low-cost and fuel-efficient engine technology for many years. It has been able to sustain its competitive advantage primarily because of its highly efficient automobile engines, which competitors have been unable to develop or buy at a reasonable price. In the context of the VRIO framework, which of the following resource attributes most likely underpins Onivo's competitive advantage?

The resource is costly to imitate.

Which of the following statements is typically true of early adopters?

They appreciate new technology that can add value to their personal and professional lives.

Incumbent firms can benefit from several important sources of entry barriers. Economies of scale are one such source. Which of the following is an implication of economies of scale for incumbent firms?

They can demand better terms from their suppliers.

Why are black swan events such as accounting scandals and the global financial crisis perceived as caused by cheap credit and subprime mortgages offered by financial institutions, bad for business?

They erode the implicit trust between the corporate world and society.

How do complements affect a primary product or service?

They increase the demand for the primary product.

The amount that savers are paid for use of their money and the amount that borrowers pay for that use is best described as a(n)

interest rate.

A non-equity alliance is the most common type of strategic alliance because

it is easy to initiate and terminate.

A large conglomerate is deciding on the range of new products and services it can offer to its customers to further expand its operations. This decision determines the firm's

level of diversification.

North Carolina National Bank (NCNB) used its unique core competency of identifying, appraising, and integrating acquisition targets to be rebranded as Bank of America, one of the largest banks in the United States. This is an example of a firm

leveraging existing core competencies to improve current market position.

If a company has 25 million shares outstanding, and each share is traded at $400, the ______ is $10 billion.

market capitalization

In the restaurant industry, a large number of restaurants cater to similar customer needs. However, each restaurant makes its product unique by offering a different cuisine, a different ambience, organic ingredients, or different services like home delivery. This differentiation allows each restaurant to set its own prices. Thus, the restaurant industry best illustrates a(n)

monopolistically competitive structure.

According to the upper-echelons theory,

organizational outcomes reflect the values of the top management team.

Owners of coffee plantations in the country of Jabatina grow their own coffee beans and supply them to various stores and restaurants all over the country. There are many plantation owners supplying to a huge number of companies, and they are typically unable to differentiate their products from one another. They also do not have the power to fix their own prices in the industry. In addition, these suppliers can only achieve competitive parity and not a competitive advantage. Thus, the coffee bean industry in Jabatina best illustrates a(n)___ structure.

perfectly competitive

Restrictions imposed by the government, such as export quotas on certain products, are a part of the _______ environment of the PESTEL framework.

political

There exist important trade-offs between value creation and low cost because value creation and cost tend to be

positively correlated.

Economic contribution is created when the

price a customer is willing to pay for a good or service is more than the cost the firm incurs to produce it.

A firm is likely to have a competitive advantage when it

provides services that consumers will value more than those of its rivals.

If a pharmaceutical company develops a first-of-its-kind vaccine to prevent HIV/AIDS and thus creates a whole new market for the product (non-infected civilians), it would be a(n)

radical innovation.

Which of the following has contributed to Tesla's competitive advantage in terms of stock appreciation?

reinvesting profits to continually design and produce better electric vehicles

Amazon expanded its single-product business by leveraging spare capacity into cloud computing and by offering its Kindle line of tablet computers and Echo line of digital assistants. This is an example of

related-linked diversification.

A firm that follows the differentiation strategy is protected from the threat of new entrants primarily due to its

reputation for quality.

Even though Easy Speak Inc. and KM Com Inc. operate in the same industry—telecommunications—each firm has a different and loyal customer base. While Easy Speak Inc. attracts young students and professionals through its efficient network coverage and pricing, KM Com Inc. attracts elderly customers solely due to its excellent customer service. Thus, both firms draw their strengths from distinct resource bundles. Which of the following assumptions of the resource-based model of competitive advantage does this scenario best illustrate?

resource heterogeneity

A consolidated industry turns into a fragmented industry when

restrictive government policies are introduced in the industry.