Integrated business Policy and Strategy

32) When a firm operates at an output level of 9,000 units, the per-unit cost is $5. When the production is between 10,000-12,000 units, the per-unit cost is $4. At a production level of 13,000 units, the production cost is again $5 per unit. At 14,000 units and above, the production cost increases further. At what output level does the firm experience economies of scale? 1

11000

16) 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

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

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

30) While Eye Windows incurs a cost of $12 for a pair of eyeglasses, Dura Frames, its competitor, manufactures a pair of glasses at $10. Both the companies are able to sell their glasses for a maximum of $30 per pair. Which of the following statements is true in this scenario?

A) Eye Windows and Dura Frames have achieved differentiation parity.

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

A) John implemented a new and more efficient way to produce pottery.

14) Which of the following is a disadvantage of measuring firm performance through total return to shareholders and firm market capitalization?

A) Market volatility makes it difficult to assess firm performance through these measures, particularly in the short term.

6) 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?

A) The firm's number of outstanding shares is 25 million.

52) 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?

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

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

A) implementation; formulation

42) Which of the following lists the stages of the industry life cycle in the correct order?

A) introduction, growth, shakeout, maturity, and decline

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

A) new; existing

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

A) product uniqueness

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

A) the characteristics of both the industry and the firm.

12) During the process of formulating an effective business model, a firm's managers should first

A) transform their strategy of how to compete into a blueprint of actions and initiatives

24) The goal of a strategic position is to create the largest gap possible between the ________ that a firm creates through its offerings and the ________ required to create these offerings.

A) value; cost

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

B) In economic value perspective, analysts not only consider historical costs, but also opportunity costs.

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

B) It allows managers to translate a firm's vision into measureable operational goals.

53) Although JetBlue used a blue ocean strategy to achieve an initial competitive advantage, it failed to maintain this advantage. Which of the following provides the best reason for this development?

B) It failed to refine its strategic position over time.

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

B) as profit per unit sold

3) 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.

B) quantitative, qualitative

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

C) "stuck in the middle."

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

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

29) 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

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

45) 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?

C) laggards

A firm experiences diseconomies

C) produces at an output level beyond the minimum efficient scale.

27) Which of the following best describes a strategic tradeoff?

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

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

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

7) 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

D) economic value created.

8) 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

D) economic value created.

Which of the following about competitive advantage is true?

D) Competitive advantage can be assessed by measuring accounting profit, shareholder value, or economic value.

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

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

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

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

54) The pursuit of both differentiation and low cost at the same time in a way that creates a leap in value for both the firm and consumers is called

D) value innovation.

2) Which of the following below are not one of the three dimensions that make up the Triple Bottom Line framework?

None

35) In a successful ________ strategy, the trade-offs between differentiation and low cost are reconciled.

blue ocean

43) 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

49) Bright PAD introduced a tablet that could run completely on solar energy and was less expensive than competitors' tablets. On the downside, it required more frequent charging than the competition's tablets. However, the technology of the Bright PAD tablet improved rapidly, thereby improving its recharge frequency. This example describes ________ innovation.

disruptive

34) The concept of a(n) ________ attempts to capture both learning effects and process improvements at firms.

experience

40) As the inventor of hypertension medication, BioNTech SE Inc. was able to reap the benefits of economies of scale due to a large consumer demand for the drug. Even when competitors later developed similar drugs after the expiry of BioNTech SE's patents, regular users did not want to switch because they were concerned about possible side effects. Which of the following benefits does this scenario best illustrate?

first-mover advantages

21) 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

28) When a differentiator charges a similar price as its competitors in the same strategic group but offers more perceived value, it

gains a market share

36) Which of the following drivers simultaneously increases value while lowering cost?

innovation

31) ________ is best described as the output range needed to bring down the cost per unit as much as possible, allowing a firm to stake out the lowest-cost position that is achievable through economies of scale.

minimum efficient scale

18) 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

39) 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

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

product proccess

50) 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

26) When a firm makes choices between a cost or value position to achieve competitive advantage, it is primarily involved in

strategic trade offs

13) 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

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

tangible

19) 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

11) 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