MGT 487 Final

How is an equity alliance different from a joint venture?

An equity alliance involves taking ownership in a partner; a joint venture involves two or more entities owning a firm

According to the five forces model, which of the following is viewed as a major risk to a business pursuing a cost-leadership strategy?

Innovation that allows competitors to emerge with more economical replacements

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

Introduction, growth, shakeout, maturity, and decline

________ are barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy

Isolating mechanisms

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

Stuck in the middle without a clear strategic position

DreamHome operates in a number of countries and sells a wide variety of home goods, from garden furniture to kitchenware, to achieve continuous growth. From this data, we can conclude that DreamHome has been involved in

Product-market diversification

Plexzap Products started as a luxury brand for designer apparel. Soon, the company expanded by launching its own line of premium perfumes, watches, bags, and home furnishings. This expansion allowed the businesses under the company to share a few of the common competencies in products, services, technology, and distribution. Which of the following corporate strategies is Plexzap pursuing in this scenario?

Related-linked strategy

Which of the following scenarios best illustrates horizontal integration?

Silis Inc. joins with Cancity Inc., one of its direct competitors

BuyNow Inc. is an e-commerce retail firm that sells a variety of merchandise online. Through services like cash on delivery, easy return, and online tracking, the company has created more customer value than its competitors (brick-and-mortar businesses) at the same price. Also, the company's costs are substantially lower than its competitors because of minimal investments in operation and administration. In this scenario, BuyNow Inc. has most likely been able to provide superior value and cost control through

strategic positioning

It is necessary for government authorities such as the Federal Trade Commission (FTC) and/or the European Commission to approve any large horizontal integration activity because

the horizontal integration activity has the potential to reduce competitive intensity in an industry

Which of the following is true of acquisitions?

they can be friendly or hostile

Which of the following is an example of competitive parity?

A firm produces a similar number of wall clocks at a similar cost as its competitors

Which of the following best illustrates forward vertical integration?

A firm that manufactures and sells car engines to major automobile companies launches its own line of cars

Which of the following examples uses a focused differentiation strategy?

A tennis pro shop that sells high-quality, custom racquets priced at $350 per racquet

Which of the following statements is true about managing alliance-related tasks?

Alliance management capability is based on three alliance-related tasks

When wireless service providers offer free or discounted mobile phones for subscribers to their wireless voice and data service, the perceived value of the service offering increases. In this case, the value driver would be

Availability of complements

In a successful________ strategy, the trade-offs between differentiation and low cost are reconciled

Blue Ocean

Center Street Supply Co. has successfully achieved a competitive advantage in the detergent and cleaning solution industry as a differentiator. Which of the following scenarios would undermine Center Street's position?

Center Street's customers start to consider cleaning solutions a commodity

One of the reasons that Circuit City filed for bankruptcy was due to its inability to reinvest, hone, and upgrade its once-impressive resource base. Ultimately, Circuit City's core competences became

Core rigidities

The demand for flip phones has drastically reduced, and there are only a few consumer electronics companies selling them at extremely low prices. Also, the current buyers of flip phones are mainly categorized as laggards. Which of the following stages of the industry life cycle is the flip phone industry in currently?

Decline stage

Finjob is following a related-linked diversification strategy, and Rangreen is following a related-constrained diversification strategy. How do the two firms differ from each other?

Finjob will share fewer common competencies and resources between its various businesses when compared with Rangreen

Which of the following is a feature of the shakeout phase of the industry life cycle?

Firms begin to compete directly against each other

To be successful and to survive the shakeout stage of the industry life cycle, a firm should

Gain economies of scale

Evaluate the following statement: Strategic leaders should always try to pursue a blue ocean strategy because it is the most complex, coveted, and most desirable strategy that exists

I disagree; firms should only pursue this strategy if they are able to reconcile the tradeoffs of each generic strategy

Each stage of the vertical value chain typically represents a distinct________ in which a number of different firms are competing

Industry

Decisions relating to the range of products and services a firm will offer determine the firm's

Level of diversification

When a firm pursues a(n)________ strategy, it continues to support marketing efforts even if the demand for the product is declining

Maintain

The primary goal of a firm pursuing a blue ocean strategy should be to

Offer a differentiated product or service at a low cost

Which of the following examples describes the task of an alliance manager?

Omar trained the employees of his alliance partner in the skills needed to create a display for a wide-screen television

Which of the following is considered a limitation of employing the balance-scorecard framework?

Providing guidance about the right metrics to use

Which of the following is a feature of the growth stage of the industry life cycle?

The consumer demand increases

Crocs, inventor of the iconic plastic clog, was unable to sustain its competitive advantage over its rivals because its key strategic resource was

Simple to imitate

Because Facebook receives almost all of its revenues from online advertising, we would conclude that it would be characterized as a(n)________ firm, which has the lowest levels of corporate diversification

Single business

Which of the following describes an airline that is most likely stuck in the middle?

Skypath offers high-quality beverages and meals, plush airport lounges, only a few connections via domestic hubs, poor customer service, and low prices

Which of the following describes a firm pursuing a harvest strategy?

The firm reduces investments in product support and allocates only a minimum of human and other resources

Why is the phase after the growth stage of the industry life cycle referred to as the shakeout stage?

The weaker firms are forced out of the industry in this stage.

Which of the following statements accurately describes the distinction between the introduction and growth stages of the industry life cycle?

There is more strategic variety in the growth stage when compared to the introduction stage

A company that engages in strategic outsourcing reduces its level of

Vertical integration

In a focused cost-leadership strategy, a firm

delivers low-cost products and services to a specific, narrow part of the market

Decisions relating to the question of what stages of the industry value chain to participate in determine a firm's

Vertical integration

Which of the following is an element of good strategy?

a set of coherent actions to implement the firm's guiding policy

Alphabet's Google made a string of acquisitions of new ventures, such as DeepMind, in order to

preempt rivals

DalTech Inc., a publicly traded company, designs and manufactures wearable technology. What approach should DalTech take after a long period of horizontal integration in its industry? Assume that the industry is now stable and competitors have not made any major changes in price or marketing recently

Focus on research and development as a form of non-price competition

Bath & Chill is a spa that caters to the needs of a small percentage of highly health-conscious consumers. It offers state-of-the-art treatments in a luxurious setting. Since there are very few spas that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Bath & Chill is following a

Focused differentiation strategy

Jill is the CEO of Notes Etc., a stationery manufacturer. She decides to open up a retail store to sell her products directly to consumers instead of just selling wholesale to retailers. To do this, Jill will need to engage in

Forward vertical integration

Spotless Inc. outsources its production to contract manufacturers located in underdeveloped nations where unskilled labor is at very low wages is plentiful. This has helped the company become a price leader in the chemicals industry. Which of the following is the key driver behind Spotless Inc.'s strategic position?

Low-cost input factors

Greener Cleener is a leading maker of environmentally friendly household cleaning products. Competitors across the globe have failed to imitate Greener Cleener's production models, supply chain systems, knowledge systems, and culture. These attributes have remained unique to Greener Cleener for a long time. Which of the following assumptions of the resource-based model of competitive advantage does this scenario best illustrate?

Resource immobility

When a blue ocean strategy goes bad, a firm has neither a clear differentiation nor a clear cost-leadership profile. This situation is referred to as

Stuck in the middle

In order to achieve a competitive advantage, the Heavenly Hotels, a chain of luxury beach resorts, wants to increase its market share. Which of the following strategies is most likely to do so?

Take advantage of economies of scale and scope by opening a chain of lower-priced economy hotels that leverage the Heavenly Hotels brand image

Which of the following describes the group of customers referred to as the early majority?

They come into the market during the shakeout stage

Why is it easier for new entrants to get involved in radical innovations when compared to incumbent firms?

Unlike incumbent firms, new entrants do not have formal organizational structures and processes

Sonron Corporation generates 85 percent of its annual revenues by manufacturing luxury cars. The company derives 15 percent of its annual revenues by selling sports merchandise such as apparel, shoes, and other accessories under the same brand name. Which of the following terms best describes Sonron Corporation?

a dominant-business firm

Which of the following best illustrates physical-asset specificity?

a machine solely designed to give a candy its trademarked shape

Several notable firms, including Eli Lilly, HP, Procter & Gamble, and IBM, each wish to become the alliance "partner of choice" for small technology ventures, colleges, and inventors. They each know that________ is a necessary and critical element for an alliance to be a success

building inter-organizational trust

How did the recent horizontal integration in the U.S. airline industry provide benefits to the surviving carriers?

by lowering competitive intensity in the industry overall

How does horizontal integration within an industry affect the surviving firms?

by strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers

What is the main reason that most mergers and acquisitions negatively affect shareholder value?

promised synergies never take place

The managers at Statholdings Mobile Inc. want to diversify the business by acquiring a consumer electronics company. This acquisition would mean increased job security, higher compensation, and greater decision-making authority for the managers. The managers correlate this acquisition to greater power for them rather than to the appreciation in shareholder value. In this scenario, this acquisition by Statholdings Mobile Inc. is most likely a result of

principal-agent problems

Five Guys has become successful in a highly competitive industry dominated by fast-food giants like McDonald's and Burger King, as well as direct competitors claiming to be "better burger" joints such as Smashburger, Burgerfi, and Shake Shack. Which of the following statements accurately explains the main reason for the success of Five Guys?

It created customized, made-to-order food using the highest-quality ingredients

Massive Dynamic Computers sources the components for its laptops from various suppliers on the market. The firm pays $100 for processors, $35 for disk drives, $50 for screens, $10 for memory, and $40 for graphics and wireless internet cards. Massive Dynamic has determined that it would cost $200 per unit to produce all of the necessary components in its in-house manufacturing facility. In this scenario, Massive Dynamic should

Vertically integrate

Which of the following is a disadvantage of a horizontal integration corporate strategy?

It increases the potential for integration failure

Southwest Airlines (SWA) and Alaska Airlines (ASA) both compete in the same strategic group as low-cost, point-to-point airlines, but they draw upon different resource bundles. SWA's employee productivity tends to be higher than ASA's because the two companies differ in their human and organizational resources. This example best illustrates which of the following assumptions regarding the resource-based view?

Resource heterogeneity

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

Tangible assets

Sanjay, owner of WashTubs, a washing machine company, is looking for an alternative to vertical integration. He decides to manufacture some of his own machine parts while keeping a few key suppliers in his industry value chain. This is known as

Taper integration

Which of the following frameworks used to measure competitive advantage relies on both an internal and an external view of a firm?

The balanced-scorecard model

Shapiro-Rennart is a large conglomerate. In the context of the Boston Consulting Group (BCG) growth-share matrix, the company's healthy-living strategic business unit (SBU) has been categorized as a "cash cow," and its tobacco SBU has been categorized as a "dog." Which of the following can be inferred from this scenario?

While the market share of the company in the healthy-living industry will be high, the market share in the tobacco industry will be low

Which of the following best illustrates a hostile takeover between the two companies Windfield Inc. and Zyco Inc.?

Windfield Inc. purchases Zyco Inc. for $95 billion despite Zyco Inc. being against the purchase

Funholding is a large multinational company active in the petroleum, capital market, chemicals, steel, beverages, hospitality, airlines, automobiles, and consumer electronics industries. The company has multiple brands and a large product portfolio under its banner. Which of the following terms would best describe this company?

a conglomerate

Deluxe Yachts Inc., a large luxury yacht manufacturer, made an initial small investment in a startup company that was developing an ecologically friendly waste-water recycling system. This gave Deluxe Yachts controlling interests in the startup company. However, Deluxe Yachts had no obligations to make continued investments in the experiments of the startup company. It could invest small amounts depending on the new product's success at each stage of its development. If the product proved to be successful, Deluxe Yachts would have the right to buy out the startup company. This approach to strategic alliance is referred to as

a real-options perspective

When Aviato Inc. wanted to sell its cars in the country of Serbia, it lacked access to distribution channels and marketing expertise in the country. Thus, Aviato Autos had to enter into a strategic alliance with a local automobile company to get access to the foreign partner's well-established distribution channels. Which of the following reasons for entering into a strategic alliance is best illustrated in this scenario?

accessing critical complementary assets

The Konex Hotel Group purchased Green-Plus Hotels for an estimated value of $120 billion. All the hotels previously owned by Green-Plus Hotels are now managed by the Konex Hotel Group and are known as Konex hotels. What does this scenario best illustrate?

an acquisition

Solaramus Inc., Sun Energy Inc., and SkyHigh Solar Inc. are three rival firms that have set up an alliance to conduct research and find a way to run vehicles with solar power. They have made almost equal contributions to the research, and they also share their expertise with one another. However, the three firms will continue to behave as competitors in markets for other solar products. What is this arrangement best referred to as?

co-operation

The Tata group of India, Warren Buffet's Berkshire Hathaway, and the Japanese Yamaha group have several strategic business units under one corporate umbrella and are pursuing an unrelated diversification strategy. We would refer to these businesses as

conglomerates

Horizontal integration through mergers and acquisitions can help firms strengthen their competitive positions by increasing

differentiation

Which of the following best illustrates site specificity?

equipment necessary for mining bauxite and aluminum smelting

What is the term for the process of merging with a competitor at the same stage of the industry value chain?

horizontal integration

NoRu Inc. is a publicly traded firm that does not wish to be acquired by FRESHPoP Corporation, a much larger publicly traded firm, who is planning an acquisition of NoRu Inc. This is an example of a

hostile takeover

Which of the following is a drawback of vertical integration?

increases the potential of legal repercussions

University Home Goods is a home furnishings company that caters to college students and other highly price-conscious customers. Through its simple designs, acceptable quality levels, and minimal customer service, the company has been able to sell its merchandise at the lowest prices in the industry. Which of the following generic business strategies is University Home Goods applying?

Cost-leadership

Wenonah Capital Partners asked one of its partners, a research and development (R&D) firm, to concentrate on developing new medications for Parkinson's disease. But the project requires a huge capital investment, and the R&D partner has some reservations about Wenonah's long-term commitment to the project. To prove its commitment, Wenonah pledges an investment of $200 million over five years. This investment by Wenonah in the project will result in a

Credible commitment

When a firm does not continually upgrade or improve core competencies, its competitors are likely to

Develop equivalent or superior skills

According to an evaluation using the VRIO framework, Crocs, inventor of the iconic plastic clog, was unable to sustain its competitive advantage primarily because its products were

Easy to imitate

Tony's Pizza Shop is able to net $10,000 a week; this makes the shop profitable. Its number one competitor, Leo's Pies, is also profitable, netting $12,000 a week. Lil Anthony's Pizza Palace nets $13,000 a week. Since Tony's Pizza Shop is profitable, we can conclude that it has a competitive advantage in its industry

False—competitive advantage is only achieved by generating above average returns, relative to competition

Ganjaflex Industries is a major multinational conglomerate. Its business units compete in a range of industries, including home appliances, pharmaceuticals, commercial real estate, and plastics manufacturing. Although its largest business unit, which produces kitchen appliances, is among the most profitable in the industry, it generates only 35 percent of the company's revenues. Which of the following is most likely true of Ganjaflex's stock price?

It is valued at less than the sum of its individual business units

Initech developed a superior touch screen technology for tablet computers that enabled multiple users to operate the screen at the same time. The technology was leased to Accent Technologies, a consumer electronics company, for five years. Which of the following alternatives to integration does this best illustrate?

Licensing

Capabilities are the ___________ and managerial skills necessary to orchestrate a diverse set of resources to deploy them strategically.

Organizational

U.S.-based consumer electronics corporation DGM owns a smaller company in Taiwan where most of DGM's cell phone technology is made before being released worldwide. Which of the following alternatives to integration does this best illustrate?

Parent-subsidiary relationship

________ describes a process in which the options one faces in a current situation are limited by decisions made in the past

Path dependence

Which of the following below is considered an advantage of using a platform business model?

Platforms unlock new sources of value creation and supply

A value chain analysis consists of systematically analyzing a firm's key activities that for analysis purposes are categorized into two groups:

Primary activities and support activities

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

Product uniqueness

Johnson is an executive vice president at Conecom Hardware. He researches a proposal by a larger company, Openlane Hardware, to combine the two companies. By analyzing past performance, conducting focus groups, and interviewing Openlane employees, Johnson concludes that Openlane has poor profit margins, sells shoddy merchandise, and treats customers poorly. What actions should Johnson and Conecom Hardware take?

Turn down the acquisition offer, and prepare to resist a hostile takeover

When does a merger between companies typically occur?

when two firms of comparable size join to form a combined entity