midterm exam
By selling a laptop at $1,500 for which consumers are willing to pay up to $1,750, a consumer electronics firm makes a profit of $500 per unit. What is the economic value created in this scenario?
$750
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 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 explains how dynamic capabilities are different from the resource-based view?
Dynamic capabilities deal with applying resources over time.
While Smart Guard Inc. incurs $500 to manufacture a home security system, its competitor, EverSafe Systems, incurs $450. However, the security systems produced by both the companies have been able to create the same value among customers. From the given scenario, it can be inferred that
EverSafe Systems and Smart Guard share a differentiation parity.
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.
When using the balanced scorecard approach to assess a firm's performance, which of the following is a key question that strategic leaders need to answer?
How do shareholders view us?
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.
Shiny Kitchen Inc. and Juicello Corp. are two competitors in the electric juicer market. The cost incurred by each company to manufacture juicers is $75 per unit. Although both the companies sell their juicers at the same price, Juicello has a larger market share in the electric juicer industry. What does this imply?
Juicello offers more perceived value than Shiny Kitchen.
When asked to explore the strengths and weaknesses of a firm, which of the following would be the best framework to employ?
SWOT Analysis
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.
Which of the following examples shows economic value created?
The price a customer is willing to pay for a good or service is more than the cost the firm incurs to produce it.
Onivo Auto 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 comparable 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 true of a monopoly?
There is only one, often large firm supplying the market.
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.
How do complements affect a primary product or service?
They increase the demand for the primary product.
Although the doorbell cameras manufactured by Vision Solutions and MySight sell at the same price of $100 per unit, the economic value created by Vision Solutions is more than that of MySight. In the context of this scenario, which of the following statements is true?
Vision Solutions has a relative cost advantage over MySight.
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.
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
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.
A firm's _______Blank are best described as distinct and fine-grained business processes such as taking orders, delivering 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.
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.
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.
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.
In the dynamic capabilities perspective, ________Blank flows from a firm's capacity to modify and leverage its resource base in a way that helps it gain and sustain a competitive advantage.
competitive advantage
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, ________Blank, is believed to add value to the original product offering (or service) when the two are used in tandem.
complement
Fatima estimated that a pair of Odyssey boots would be worth $100 for its brand and durability. However, at the Odyssey outlet the boots she wanted were available for $75. The difference of $25 in this scenario is referred to as the
consumer surplus
________Blank is best described as the difference between the value a consumer attaches to a good or service and what they paid for it.
consumer surplus
Which of the following describes the concept of co-opetition?
cooperation by competitors who want to achieve a strategic objective
Firms seeking to deliver products or services at a lower cost than competitors are pursuing which strategy?
cost leadership
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
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.
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
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 not 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 performance perspectives?
economic value creation
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 a SWOT analysis, one way a firm can develop a defensive strategic alternative is by
eliminating or minimizing an internal weakness to mitigate an external threat.
In the ________Blank, firms change the underlying technology while holding cumulative output constant.
experience curve
Because a consolidated industry tends to be more profitable than a fragmented one, firms have a tendency to change the industry structure in their favor, making it more consolidated through
horizontal mergers and acquisitions.
The relative bargaining power of suppliers is most likely low when
incumbent firms face low switching costs when changing suppliers.
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
According to the resource-based view, a firm's competitive advantage is more likely to stem from its ________Blank as opposed to its ________Blank.
intangible resources; tangible resources
The amount that creditors earn for lending their money and the amount that debtors pay to use that money, adjusted for inflation, 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.
If a company has 50 million shares outstanding, and each share is traded at $200, the ________Blank is $10 billion.
market capitalization
____Blank are industry-specific factors that separate one strategic group from another.
mobility barriers
________Blank are industry-specific factors that separate one strategic group from another.
mobility barriers
A blue ocean strategy typically allows a firm to
offer a differentiated product or service at low cost.
Which of the following is a form of intellectual property?
patents
_____Blank factors in the PESTEL framework result from the pressure that various groups, such as government bodies, nongovernmental organizations, and social movements, can exert to influence the decisions and behaviors of firms.
poltical
There exist important trade-offs between value creation and low cost because value creation and cost tend to be
positively correlated.
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
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 is a key criterion in the VRIO framework?
rare
A firm that follows the differentiation strategy is protected from the threat of new entrants primarily due to its
reputation for quality
According to the value chain analysis, which of the following is a support activity?
research and devolpment
According to the SWOT analysis, which of the following choices concerns a firm's internal strengths and weakness?
resources, capabilities, and competencies
A consolidated industry turns into a fragmented industry when
restrictive government policies are introduced in the industry.
Which of the following is an example of a firm's capabilities?
skills involved in training and managing a workforce
When a blue ocean strategy is successfully formulated and implemented, investments in differentiation and low costs are not
substitutes but complements.
The online retailer SW19 Inc. has successfully created a higher perceived value in the tennis equipment and apparel industry, even though it offers the same products at slightly higher prices than its competitors. This has been mainly attributed to the company's easy-to-navigate website, simple return procedures, and fast delivery. Thus, the value driver for SW19 is its
superior customer service
One major limitation of using accounting profitability as a measure for competitive advantage is its focus on
tangible assets versus intangible assets.
When a company makes improvements in its social, economic, and ecological performance, it is adopting a ________Blank approach to assessing competitive advantage.
triple-bottom-line
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 ________Blank, strategic leaders can see how competitive advantage flows from a firm's distinct set of activities.
value chain analysis
