MGNT 428 Exam 1
Which of the following is not true concerning a customer-oriented mission?
It defines the means of how a customer need will be met.
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.
Too Fast 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 Too Fast 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.
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.
Fones Inc. and Speed Dial Corp. 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, Speed Dial Corp. has a larger market share in the laptop industry. What does this imply?
Speed Dial Corp. has been able to offer more perceived value than Fones Inc.
________ is an important tool because it allows a manager to recognize, prioritize and address the needs of various stakeholders.
Stakeholder impact analysis
________ is best described as executives' use of power and influence to direct the activities of others when pursuing organizational competitive advantage.
Strategic leadership
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.
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.
Organizational core values are the answer to which of the following questions?
What commitments do we make to act both legally and ethically?
Let's Talk 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 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.
Which of the following statements is true of strategy?
Actions that allow a firm to address a competitive challenge are strategy.
________ tends to be more fierce when exit barriers in the industry are high, resulting in some firms being locked into the industry.
Competitive rivalry
Which of the following explains how dynamic capabilities are different from the resource-based view?
Dynamic capabilities deal with applying resources over time.
Which of the following statements does the upper-echelons theory support?
Executives interpret situations through the lens of their unique perspectives, shaped by personal circumstances, values, and experiences.
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.
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 firms most likely has the lowest bargaining power as a buyer?
a cell phone company that requires highly customized software for its phones
A firm's _______ are best described as distinct and fine-grained business processes such as order taking, physical delivery of products, or invoicing customers.
activities
In the context of the VRIO framework, a resource is said to be valuable if it
allows a firm to take advantage of an external opportunity.
2 A diagnosis of the competitive challenge, an element of a good strategy, is primarily accomplished through strategy
analysis.
In a perfectly competitive industry structure
any competitive advantage that one firm has will be short-lived.
Supreme 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. Cheap Beans, in contrast, is a chain of coffee shops that charges the lowest price in the industry due to its self-service policy. However, Vale'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 Cheap Beans. In this scenario, Vale's Coffee is following a
blue ocean strategy.
Which of the following groups is most likely to be considered a firm's internal stakeholder?
board members
In the 1980s, Japanese competitors brought better-quality chips to the market at lower cost, threatening Intel Corporation's position and strategic plan regarding the production of DRAM (dynamic random-access memory) chips. When the functional managers at Intel came up with the simple rule of producing whichever product delivered the higher margin, the front-line managers shifted Intel's production capacity away from the lower-margin DRAM business to the higher-margin semiconductor business. This ________ emerged as a consequence of the firm's resource allocation process.
bottom-up strategy
In the dynamic capabilities perspective, for an asset or a capability to be included in a firm's resource stock, it should be
built through investments over time.
How has Walmart staked out a unique strategic position?
by cutting costs to offer lower prices than competitors
What term is used to describe cooperation by competitors who want to achieve a strategic objective?
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.
Firms pursuing a cost-leadership strategy seek to
deliver products or services at a lower cost than competitors.
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.
For a firm to sustain its competitive advantage, any fit between its internal strengths and the external environment must be
dynamic.
The sum of consumer surplus and producer surplus for a good or service equals the
economic value created.
The value of goods/services in the eyes of consumers is static which makes it difficult to accurately assess what someone is willing to pay for that product and service. This limitation is most directly tied to which of the following multi-dimensional perspective below?
economic value creation
In the ________, firms change the underlying technology while holding cumulative output constant.
experience curve
Gadgets n' Stuff Inc. is a vendor who supplies machine parts to an appliance manufacturing company. In return, Gadgets n' Stuff 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
A fragmented industry turns into a consolidated industry when
firms reduce competition within the industry through mergers and acquisitions.
Hit Me Up 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 Correct
The pattern of faulty and biased decision making that occurs in groups whose members strive for argument at the expense of good decision making is called
groupthink.
The relative bargaining power of suppliers is most likely low when
incumbent firms face low switching costs when changing suppliers.
Which of the following is a stakeholder attribute that managers should consider at every step in a stakeholder impact analysis?
legitimacy
If a company has 25 million shares outstanding, and each share is traded at $400, the ________ is $10 billion.
market capitalization
An organization's ________ describes what the organization actually does—the products and services it plans to provide, and the markets in which it will compete.
mission
When an organization briefly describes what they do and how they do it, they have more than likely articulated their
mission statement.
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.
All of the following are tools primarily used to achieve cost-leadership except
offering products at a premium price.
According to the upper-echelons theory,
organizational outcomes reflect the values of the top management team.
Restrictions imposed by the government, such as export quotas on certain products, are a part of the ________ environment of the PESTEL framework.
political
Dr. Shetty is able to drive down the cost of complex medical procedures from $100,000 to $2,000 not by doing one big thing, but rather by doing a thousand small things. This approach focuses on driving down the cost of health care through
process innovation.
A firm that follows the differentiation strategy is protected from the threat of new entrants primarily due to its
reputation for quality.
When a blue ocean strategy is successfully formulated and implemented, investments in differentiation and low costs are not
substitutes but complements.
Which of the following does a firm possess when it can outperform other firms in the same industry or the industry average over a prolonged period of time?
sustainable competitive advantage
One major limitation of using accounting profitability as a measure for competitive advantage is its focus on ________ versus ________.
tangible assets; intangible assets
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
The two primary competitive levers that managers can use in order to answer the question of how to compete are
value and cost.
Using the _______, managers can see how competitive advantage flows from a firm's distinct set of activities.
value chain analysis
A good strategy should be able to provide products and services to customers at an attractive price point while maintaining internal costs, resulting in
value creation.
Which of the following is not one of the VRIO characteristics of competitive advantage?
variable
A company's vision primarily states
what the company wants to ultimately accomplish.
By selling a laptop at $1,200 for which consumers are willing to pay up to $1,300, a consumer electronics firm makes a profit of $500 per unit. What is the economic value created in this scenario?
$600
While SMART Tech Inc. incurs $350 to manufacture a laptop, its competitor, Better Electronics Inc., incurs $300. However, laptops of both the companies have been able to create the same value among customers. From the given scenario, it can be inferred that
Better Electronics and SMART Tech share a differentiation parity.
Delish Corp is a chain of supermarkets that sells its fruits and vegetables at higher prices than its competitors. Yet, the supermarket chain has a large customer base due to its wide product portfolio and superior customer service. Which of the following generic business strategies has Delish Corp adopted in this scenario?
Delish Corp is probably pursuing a differentiation strategy.
Which of the following statements is true of the Level-5 leadership pyramid?
Each level of leadership builds upon the previous one in the pyramid.
EatNow is a fast-food restaurant that has recently entered the hospitality industry. Since most of its competitors are pursuing a low-cost position and doing well, EatNow also wants to adopt the same strategy. Which of the following will be a likely implication of this decision?
EatNow will face low profit potential.
Ez Solutions 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 Ez Solutions Inc.?
Ez Solutions Inc. will have better access to highly skilled human capital at a lower cost.
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 questions would a firm's business strategy ideally answer?
How should we compete?
Which of the following is a feature of a fragmented industry?
It consists of many small firms.
Which of the following is a disadvantage of the balanced scorecard approach to measure firm performance?
It provides only limited guidance about which performance metrics to choose.
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.
Let's Roll Inc. and Ride 4 Ever Cycles Inc. are two competing motorcycle companies. While Let's Roll's Cost of goods sold/Revenue is 63.4 percent, the Cost of goods sold/Revenue of Ride 4 Ever Cycles is 54.2 percent. What do you infer from this financial data?
Let's Roll is less efficient than Ride 4 Ever Cycles in producing goods.
Stan 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 Stan 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 Stan 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.
_________ are industry-specific factors that separate one strategic group from another.
Mobility barriers
When asked to explore the strengths and weaknesses of a firm, which of the following would be the best framework to employ?
None of these are correct (SWOT)
Though the microwaves manufactured by Nuked Inc. and Hot Box Inc. sell at the same price of $600 per unit, the economic value created by Nuked Inc. is more than that of Hot Box Inc. In the context of this scenario, which of the following statements is true?
Nuked has a relative cost advantage over Hot Box Inc..
When the Alta Velocidad Española (AVE) was completed, it impacted Spain's local airline industry. Which of the following statements about the five forces does this reflect?
Substitutes made it difficult for generating a profit potential in Spain's airline industry.
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.
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.
Which of the following statements is true of customer-oriented visions?
They define a business in terms of providing solutions to people's needs.
Which of the following statements accurately brings out the difference between an organization's vision and mission?
Vision defines what the organization wants to accomplish ultimately, whereas the mission defines the means by which vision is accomplished.
When using the balanced scorecard approach to assess a firm's performance, which of the following is not a key question that managers need to answer?
What intangible assets do we need?
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 which of the following cases was a company at a major competitive disadvantage?
Without a clear strategic position, Sears tried to be too many things for too many types of customers.
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.
If a firm is not effectively organized to exploit the competitive potential of a valuable, rare, and costly to imitate (VRI) resource, the best case scenario is
a temporary competitive advantage.
Generally speaking, which of these situations is likely to lead to greater profits?
an industry with fewer but larger 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.
Strategic-group mapping establishes that
competitive rivalry is strongest between firms that are within the same strategic group.
Some scholars have added a sixth force to Porter's Five Forces model. This sixth force, ________, is believed to add value to the original product offering (or service) when the two are used in tandem.
complement
William estimated that a pair of Perfect Fit jeans would be worth $60 for its brand and durability. However, at the Perfect Fit 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.
According to the Level-5 leadership pyramid, the Level 2 manager is a(n)
contributing team member.
The board of directors of Qwik Inc., a company that has a large product mix, has decided to get actively involved in research and development for the next three financial years. Budget for each business unit under the company will be allocated from the headquarters in proportion to its previous performance. The board has also decided to liquidate those units that have failed to perform so far. Which of the following strategies does this scenario best illustrate?
corporate strategy
Oberlo Autos competes against the global leaders in the automobile industry by developing and selling acceptable quality vehicles at a lower price. This has been possible due to the company's large-scale production that reduces its manufacturing expenses. Which of the following generic business strategies is Oberlo Autos applying in this scenario?
cost-leadership strategy
Measuring how a customer views a firm under the balanced scorecard framework is important because
customer perspective is directly linked to a firm's revenue and profit.
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
ACME Inc. has retained you to review their low-cost strategy for their company. Based on several consultations with the client, you realize that their per unit costs are actually increasing as their business grows and expands. You conclude that this firm is experiencing
diseconomies of scale.
The idea that all available information about a firm's past, current state, and expected future performance is embedded in the market price of the firm's stock is called the
efficient-market hypothesis.
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.
All of the following below are examples of external stakeholders except
employees.
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
The metaphor of a black swan best applies to
events that are considered highly unexpected and highly impactful when they do occur.
Which of the following is a philanthropic responsibility of a firm?
exhibiting corporate citizenship
MicroChips Corp. is a company that supplies microprocessors to 2020 Processors Inc., a computer hardware company. When 2020 Processors Inc. demands lower prices for the microprocessors, MicroChips Corp. 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 MicroChips Corp., 2020 Processors Inc. decides to buy the microprocessors at the quoted price itself. In this scenario, MicroChips Corp., as a supplier, has exercised its bargaining power by threatening to
forward integrate.
Product-oriented vision statements provide managers with
goals to improve service.
The greater the difference between value creation and cost, the
greater a firm's economic contribution.
ABC Hardrives Inc., All Digital Inc., and FastFax 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
Patents, designs, copyrights, trademarks, and trade secrets are five forms of
intellectual property.
A firm's ________ strategy is likely to fall by the wayside because of unpredictable events and turn into unrealized strategy.
intended
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.
One major limitation of using shareholder value appreciation as a measure for assessing competitive advantage is that stock prices often times reflect the irrational and psychological mood and behaviors of investors. Alan Greenspan, former head of the Federal Reserve referred to this as
irrational exuberance.
An experience curve attempts to capture both
learning effects and process improvements.
A blue ocean strategy typically allows a firm to
offer a differentiated product or service at low cost.
Owners of coffee plantations in the country of Cantonica 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 Cantonica best illustrates a(n) ________ structure.
perfectly competitive
The cost-leadership strategy helps a firm achieve competitive advantage when it does which one of the following?
permits a firm to perform similar activities differently than its rivals with resulting lower costs
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.
As differentiation and cost-leadership are distinct strategic positions that require important trade-offs, it is
quite difficult to translate a blue ocean strategy into reality.
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
According to the value chain analysis, which of the following is a support activity?
research and development
A firm decides to retain $20,000 from its annual earnings and invest it in developing an advanced manufacturing system. According to the dynamic capabilities perspective, the $20,000 would most likely be referred to as the firm's
resource flow.
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.
The annual net profit after taxes for Tele 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
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.
Which of the following SWOT factors are internal to the firm?
strengths and weaknesses
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
All of the following are examples of internal stakeholders except.
suppliers.
According to the resource-based view, a firm's competitive advantage often stems from its ___________ opposed to its ___________.
tangible resources; intangible resources
The auditor of a public company is assessing the value of all the intangible assets owned by the company. Which of the following would most likely be included in this assessment?
the company's brand equity
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.
Evaluating the data collected from environmental analysis, the corporate executives of BigPharma 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.
When a company makes improvements in its social, economic, and ecological performance, it is adopting a ________ approach to assessing competitive advantage.
triple-bottom-line
The _______ describes the internal activities a firm engages in when transforming inputs into outputs.
value chain view
_________ is best described as the difference between the value a consumer attaches to a good or service and what he or she paid for it.
Consumer surplus
