MBA 505 Quiz Questions

Calculate ROIC based on the following information: NOPLAT = $8, Total Assets = $88, WACC = 10%, Total Equity = $75, Net Income = $7, Cash = $15, Vendor Accounts Payable = $23, Short Term Loan with nominal interest rate of 9% = $8, Paid-in-Capital = $60 (Paid-in-Capital is a line item from the equity portion of the balance sheet).

16%

True or False: A laundromat and a pool hall together invest in a new store, where customers can wash their clothes and play pool while waiting. This new business is an example of an internal new venture.

False

True or False: Computer software products typically have high marginal costs.

False

True or False: Global standardization strategy emphasizes customization and product differentiation.

False

True or False: Phil is an employee at Global Tech Inc. He is considered an external stakeholder.

False

True or False: The main advantage of unrelated diversification is that competencies can be shared and leveraged throughout value chain activities.

False

True or False: The price a company charges for a good or service is typically more than the utility placed on that good or service by the customer

False

True or False: When a company outsources its noncore activities to specialists, it loses its capabilities to differentiate its final products.

False

True or False: A low-cost company is often best positioned to survive price rivalry in its industry.

True

True or False: Based on our in-class discussion, an excellent mission statement will help people throughout a company understand what a company does, who it does things for, and why it does those things so that employees will be able to make decisions in a similar way as top management would.

True

True or False: Governance mechanisms help align the incentives between principals and agents, and help monitor and control agents.

True

True or False: Successfully consolidating an industry through horizontal integration allows companies that remain to to obtain bargaining power over suppliers or buyers and increase their profitability at the expense of suppliers or buyers.

True

True or False: The values of a company reveal how managers and employees should conduct themselves

True

True or False: When Amber first started working at a car manufacturing plant assembling car doors, she was slower at the task than her co-workers. As time passed, her speed at assembling the doors increased and she even taught others how to perform the task more quickly. As a result of increased employee productivity, this particular plant experienced cost savings. These cost savings can be attributed to learning effects.

True

Which of the following statements is FALSE? a. Having the positions of CEO and Chairman held by the same individual is generally considerd a very strong form of corporate governance. b. A balanced scorecard approach to assessing performance supplements financial information with performance measures related to criteria such as: efficiency, quality, innovation, and responsiveness to customers. c. Management stock-based compensation reduces the scope of agency problems by linking the pay of mangers to the performance of the stock price. d. Having a compensation committee that is comprised entirely, or at least primarily, of outside directors is a strong form of corporate governance.

a. Having the positions of CEO and Chairman held by the same individual is generally considerd a very strong form of corporate governance.

Which of the following statements is TRUE? a. Imitating a company's capabilities tends to be more difficult than imitating its resources. b. The Icarus paradox suggests that those factors that led to a company's success will continue in the future because competitors cannot easily imitate them. c. Tangible resources include experiential knowledge and technological know-how. d. Internal analysis is primarily concerned with identifying a company's opportunities and threats. e. The ability of established competitors to imitate the competitive advantage of a rival is not limited by factors such as existing strategic commitments and low absorptive capacity.

a. Imitating a company's capabilities tends to be more difficult than imitating its resources.

Which of the following statements about strategic groups is FALSE? a. Members of one strategic group compete only with members of other strategic groups. b. Two companies in the same strategic group follow similar strategies. c. Members of one strategic group generally cannot move very easily into other strategic groups. d. Members of one strategic group are not always affected by external forces in the same way and to the same degree as members of other strategic groups.

a. Members of one strategic group compete only with members of other strategic groups.

Consider a cost curve with production volume on the horizontal axis and marginal costs on the vertical axis. What shape would the marginal cost curve most resemble in a high-tech industry with an information-based product (e.g. software, music file downloads, video games, etc.)? a. Straight and horizontal b. Upward at a 45-degree angle c. U-shape d. J-shape e. Straight and vertical

a. Straight and horizontal

Which of the following is NOT part of Porter's "generic business-level strategies"? (remember, Porter only recognizes four business strategies) a. blue ocean strategy b. broad low-cost strategy c. focused differentiation strategy d. broad differentiation strategy

a. blue ocean strategy

One company making investments in specific (specialized) assets to better meet the needs of another company is risky due to potential ________________. a. holdup b. parallel sourcing c. cross-selling d. hostage taking

a. holdup

___________________________ is/are designed to economize on inventory holding costs (lower costs associated with financing and storing inventory) by increasing inventory turnover (reducing the inventory on the balance sheet). a. just-in-time systems b. pay for performance c. mass customization d. research and development

a. just-in-time systems

The concept of economies of scope refers to: a. sharing resources by business units. b. acquiring resources from outside a company. c. acquiring resources from another business unit in a company. d. utilizing resources to develop a new business unit. e. utilizing resources in limited quantities by specific business units.

a. sharing resources by business units.

Members of the Board of Directors are supposed to be agents, or representatives, who primarily work on behalf of: a. stockholders. b. executive officers. c. employees. d. customers. e. suppliers.

a. stockholders.

Network effects arise in an industry where: a. the size of the network of complementary products is a primary determinant of demand for the industry's product. b. a large network of companies in an industry use the same business model and strategies. c. a company is able to adhere to the same technical standards across its network of outlets. (...seems like a good answer, but it is NOT the right answer!) d. companies network together and lobby for establishing certain technical standards. e. companies that are not in favor of a technical standard network together.

a. the size of the network of complementary products is a primary determinant of demand for the industry's product.

Despite Porter's argument about choosing one generic-business level strategy, some firms have successfully offered more value (through superior differentiation) at a lower cost than rivals (at least temporarily); this is referred to as _____________________. a. value innovation b. market segmentation c. standardization strategy d. none of the above

a. value innovation

Which of the following statements about the three approaches to market segmentation is FALSE? a. A segmentation strategy refers to when a company decides to serve many segments, or even the entire market, producing different offerings for different segments. b. Companies that decide to focus on the higher-income of higher-value end of the market tend to have lower cost structures. c.A segmentation strategy can help companies capture incremental revenues by customizing offerings to the needs of different groups. d. A focus strategy refers to when a company decides to serve a limited number of segments, or even just one segment. e. A standardization strategy is typically associated with lower costs than a segmentation strategy.

b. Companies that decide to focus on the higher-income of higher-value end of the market tend to have lower cost structures.

Even without any other information, ______________________ indicates that a company that has a competitive advantage. a. Positive ROIC b. Higher than normal (expected) returns c. Higher-than-average sales d. Positive net income

b. Higher than normal (expected) returns

Which of the following statements is TRUE about fragmented industries? a. They are usually dominated by one or two large companies that enjoy the power to influence industry prices. b. They usually require companies to use focus strategies to meet specialized customer needs/wants. c. They are usually characterized by large mass-production operations. d. They usually are comprised of large companies that typically have national brand loyalty. e. They do not attract new entrants as they have extremely high entry barriers due to economies of scale..

b. They usually require companies to use focus strategies to meet specialized customer needs/wants

The term value chain refers to the idea that a company is _________________________. a. one of a series of units that comprise and industry segment b. a series of activities that transform inputs into products/services that customers value. c. a collection of various products and their attributes. d. always the producer of several customer-valued products that are linked together.

b. a series of activities that transform inputs into products/services that customers value.

The experience curve phenomenon is based primarily on ______________ and ________________. a. market share, economies of scale b. economies of scale, learning effects c. economies of scale, product life cycles d. none of the above

b. economies of scale, learning effects

For a company based in final assembly, moving into retail and distribution means: a. backward vertical integration. b. forward vertical integration. c. horizontal integration. d. related diversification. e. unrelated diversification.

b. forward vertical integration

____________________is the process of acquiring or merging with industry competitors (focusing only on one industry) in pursuit of competitive advantage. a. diversification b. horizontal integration c. tapered integration d. vertical integration e. strategic alliances

b. horizontal integration

Based on the VRIO framework, a resource can be considered a source of competitive advantage if it is: a. the foundation of a company's strategy. b. rare, valuable, costly/difficult to imitate, and organized or managed by the company. c. increases the cost of producing the product and therefore the price charged to customers. d. shared by most companies in an industry. e. kept as a trade secret rather than as a patent.

b. rare, valuable, costly/difficult to imitate, and organized or managed by the company.

Which of the following is NOT true? a. Differentiation can allow the company to charge a premium price for its good or service. b. Differentiation can help the company grow overall demand and capture market share from its rivals, sometimes leading to economies of scale and, therefore, lowering costs. c. Differentiation tends to result in the company having lower inventory turnover. d. none of the above

c. Differentiation tends to result in the company having lower inventory turnover.

____________ are the common features that are used on many technology products. a. First movers (...doesn't even make sense!) b. Public domains (...not this one!) c. Technical standards d. Paradigm shifts e. Network effects (...not this one either!)

c. Technical standards

Suppose that a cellular phone service provider decides to sell phones at very low prices and then charge a relatively high price for usage. This illustrates: a. a first-move strategy b. competitive collusion c. a razor and blade strategy d. competitive positioning e. none of the above

c. a razor and blade strategy

Which of the following is generally not considered a primary activity in the value-chain? a. marketing b. research and development c. human resources d. production e. production

c. human resources

According to Jay Barney (who Professor Mattingly agrees with), a competetive advantage can be labeled as truly "sustained" if ___________________. a. it endures for three years. b.no one else tries to duplicate it (not because of barriers to entry; no others want to try and duplicate it). ***don't pick this one*** c. it endures even after efforts to duplicate it. d. none of the above

c. it endures even after efforts to duplicate it.

Due to a recent relaxation in the pollution control laws by the government, Alpha Motors has reduced the production of its electric-powered cars. The company is responding to a change in which of the following macroenvironmental categories? a. global b. demographic c. political and legal d. macroeconomic e. social (do not pick this one!)

c. political and legal

Which of the following is NOT one of the four generic competencies (or "building blocks of competitive advantage") listed in the textbook? a. superior quality b. superior customer responsiveness c. superior company infrastructure d. superior efficiency e. superior innovation

c. superior company infrastructure

Boring Business Company, Inc. (BBC) has a WACC of 8% and the following financials: NOPLAT = $4M, Net Income = $2.5M, Positive Cash Flow = $1.9M, Total Assets = $75M, Cash = $15M, Book Equity = $30M, and Accounts Payable (non-interest bearing) = $10M. Based on this information alone, how would you categorize BBC's economic profit? a. BBC's economic profit is 2.5%. b. BBC's economic profit is 4%. c. BBC's economic profit is negative. d. BBC's economic profit is near or at zero. e. BBC's economic profit is positive.

d. BBC's economic profit is near or at zero.

Which of the following is NOT a macroeconomic force? a. Currency exchange rates b. Economic growth rate c. Interest rates d. Changes in age distribution e. Inflation

d. Changes in age distribution

Which of the following is NOT true regarding a company's distinctive competencies that successfully lead to competitive advantage? a. They refer to company strengths that competitors cannot easily match or immitate. b. They can be based in any of the value creation functions of the company. c. They shape the strategies that companies pursue, and are the basis of competitive advantage and superior performance. d. They are shared by many firms in an industry. e. They represent the unique strengths of the company.

d. They are shared by many firms in an industry.

A consolidated industry structure: a. is characterized by low-entry barriers and commodity-type products. b. can be seen in agriculture, dry cleaning, health clubs, and real estate brokerage. c. provides no scope for oligopoly to exist. d. consists of few companies that are in a position to determine industry price. e. consists of a large number of small companies.

d. consists of few companies that are in a position to determine industry price.

SparklingLeaves is one of the major suppliers of automobile tools to StanMotors, a leading automobile company. Many of the tools are customized to meet the specific needs of StanMotors and hence have little other value. In return, StanMotors has agreed to make SparklingLeaves its sole supplier of automobile equiment for a period of 15 years. This scenario illustrates the concept: _____________________. a. horizontal integration b. vertical integration c. competitive bidding d. credible commitment e. parallel sourcing

d. credible commitment

According to the text, the ability of companies producing in large volumes to acheive greater division of labor and specialization is a source of ________________. a. diseconomies of scale b. learning effects c. mass customization d. economies of scale

d. economies of scale

Microsoft's recent efforts to sell hardware containing its software directly to consumers (similar to Apple) is an example of __________________________. a. credible commitment b. backward vertical integration c. horizontal integration d. forward vertical integration

d. forward vertical integration

_____ arise when a customer invests time, energy, and money shifting from the products offered by one established company to the products offered by a different company, such as a new entrant. a. Overhead costs b. Incremental costs c. Marginal costs d. Opportunity costs e. Switching costs

e. Switching costs