MIS 2

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_____ exist when consumers incur an expense to move from one product or service to another. a. Network effects b. Switching costs c. Economies of scale d. Competitive advantages e. Profit margins

1. Which of the following is one of Porter's five forces? a. Availability of coopetitors in the market b. Total cost of ownership c. Purchasing power parity of consumers d. Threat of new entrants e. Strength of intellectual property laws

1. _____ Law is said to be at play when the value of a product or service increases as its number of users expands. a. Amdahl's b. Turing's c. Zuckerberg's d. Metcalfe's e. Moore's

1. A salesperson's ability to effectively bargain with his/her consumers is called viral marketing.

False

Network externalities exist when a product or service becomes less expensive as more people use it.

False

Tech-fueled operations cannot yield greater profits than off-line players.

False

cash conversion cycle

Period between distributing cash and collecting funds associated with a given operation (e.g., sales).

web services

Small pieces of code that are accessed via the application server which permit interoperable machine-to-machine interaction over a network.

firmware

Software stored on nonvolatile memory chips (as opposed to being stored on devices such as hard drives or removable discs). Despite the seemingly permanent nature, many products allow for it to be upgraded online or by connecting to another device.

The 3 pillars of Amazon's business are large selection, convenience and lower prices.

True

1. Outsourcing production to third-party firms is called _____.

contract manufacturing

logistics

coordinating and enabling the flow of goods, people, information, and other resources among locations

marginal cost

cost of producing one more unit of a product

Moving first pays off when the time lead is used to create:

critical resources for competitive advantage.

Netflix offers its subscribers a selection of over one hundred thousand titles, while other video rental firms can only offer as much as three thousand. This presents a significant _____ for Netflix over its rivals. A. marginal cost B. price advantage C. variable cost D. studio preference E. scale advantage

scale advantage

For traditional retailers selling physical goods, _______ is the biggest constraint limiting a firm's ability to offer customers what they want and when they want it.

shelf space

open source software (OSS)

software that is free and where anyone can look at or potentially modify the code

transaction

some kind of business exchange

supply chain management (SCM)

Systems that can help a firm manage aspects of its value chain, from the flow of raw materials into the firm, through delivery of finished products and services at the point-of-consumption.

loyalty card

Systems that provide rewards and usage incentives, typically in exchange for a method that provides a more detailed tracking and recording of customer activity. In addition to enhancing data collection, loyalty cards can represent a significant switching cost.

transaction processing systems (TPS)

Systems that record a transaction (some form of business-related exchange), such as a cash register sale, ATM withdrawal, or product return.

user interface (UI)

The mechanism through which users interact with a computing device. The UI includes elements of the graphical user interface (or GUI, pronounced "gooey"), such as windows, scroll bars, buttons, menus, and dialogue boxes; and can also include other forms of interaction, such as touch screens, motion sensing controllers, or tactile devices used by the visually impaired.

relational database

The most common standard for expressing databases, whereby tables (files) are related based on common keys.

operations

The organizational activities that are required to produce goods or services. Can involve the development, execution, control, maintenance, and improvement of an organization's service and manufacturing procedures.

The internet is largely seen as lowering the entry barrier for new entrants, but firms that enter may have little chance of success unless they have a competitive advantage over existing rivals

True

The scale of technology investment required to run a business can act as a barrier to entry by discouraging new, smaller competitors.

True

Timing and technology alone will not yield sustainable competitive advantage.

True

Uber is an example of a business model that has strengthened the bargaining power of suppliers (cab drivers) with respect to middlemen who took a cut of their services (e.g. cab companies).

True

When technology can be matched quickly, it is rarely a source of competitive advantage.

True

While so many managers focus on what's changing in tech-fueled industries, Bezos feels that building strategy based on factors that are not going to change is critically important.

True

black swans

Unpredicted, but highly impactful events. Scalable computing resources can help a firm deal with spiking impact from these events. The phrase entered the managerial lexicon from the 2007 book of the same name by Nassim Taleb.

virtual desktop

When a firm runs an instance of a PC's software on another machine and simply delivers the image of what's executing to the remote device. Using virtualization, a single server can run dozens of PCs, simplifying backup, upgrade, security, and administration.

10. According to an independent study, Zara books some 85 percent of its products at full price compared to the industry average markdown ratio of 50 percent. This is made possible by: a. keeping a major part of the production processes under direct proprietary control. b. coordinating the outbound shipments of all Inditex brands with return legs loaded with return materials and half-finished items. c. applying data analytics to purchase trends. d. the practice of having limited production runs of its designs. e. leveraging contract manufacturers to produce only staple items with longer shelf-lives, which account for one-eighth of dollar volume.

15. ROI is a term used to represent the: a. return on information b. rate of information-generated c. regular order intake d. return on investment e. relay-ordered inventory

A firm's financial performance that consistently outperforms its industry's peers is known as operational effectiveness.

true

Cisco's acquisition of Pur Digital, makers of the Flip video camera line, was largely considered a flop because comparable technology soon became a feature in other popular consumer electronics products.

true

Firms that build an imitation-resistant value chain develop a way of doing business that others struggle to replicate.

true

If there is the availability of a wide variety of undifferentiated commodity goods in a given market, and these products are available online, then bargaining power typically shifts to the buyer.

true

Uber is an example of a business model that has strengthened the bargaining power of suppliers (cab drivers) with respect to middlemen who took a cut of their services (e.g. cab companies).

true

4. When a single firm owns several layers in its value chain, it is said to be _______________.

vertically integrated

Which of the following is not highlighted as a source of switching costs?

viral marketing

vertical integration

when a single firm owns several layers in its value chain

The phrase _____ refers to the media industry practice of making content available through a given distribution channel for a specified time period, usually under a different revenue model.

windowing

4. Zara's IT expenditure, measured by IT workers as a percentage of total employees, is only slightly higher than the industry average.

False

4. Zara's dominance in the fashion industry is due to its horizontally integrated structure accompanied by a globally dispersed production model.

False

4. Zara's vertically integrated model is easier for rivals to copy compared to Dell's, as computing is more complex than clothing in terms of number of new models offered.

False

6. Most fashion retailers place orders for a seasonal collection a few days before these lines make an appearance in stores.

False

7. Maintaining large inventories is highly essential for the viability of the fashion industry.

False

7. RFID tags allow Zara staff to take in-store inventory less frequently than rivals, saving money on staffing.

False

A firm's financial performance that consistently outperforms its industry's peers is known as operational effectiveness.

False

A trademark is the symbolic embodiment of all the information connected with a product or service of a firm.

False

According to Michael Porter, the reason many firms suffer margin-eroding competition is because they have defined themselves according to strategic positioning rather than operational effectiveness.

False

According to the resource-based view of competitive advantage, if a firm is to maintain sustainable competitive advantage, it must control a set of exploitable resources that are valuable and can be substituted easily.

False

Accounts payable periods do not vary.

False

Amazon Echo refers to Amazon's audiobook division, an especially lucrative business because of the company's text-to-speech expertise.

False

Amazon PrimeAir is the name of Jeff Bezos' commercial rocketry and aviation firm.

False

Amazon Web Services came out of Amazon's desire to make money from the firm's excess computing capacity.

False

Amazon does not open its website up to third-party sellers.

False

Amazon got its start selling games online.

False

Amazon owns the inventory that third-party sellers provide via the "Fulfillment by Amazon" service.

False

Amazon today sells fewer electronic books overall than their print counterparts.

False

Amazon will not have to worry about government antitrust concerns in eBook publishing since there are so many real-world bookstores, both chains and independents.

False

Amazon's success strategy is based on the focus on its quarterly results.

False

Commodities are products or services that vary across multiple vendors.

False

Fast growing Groupon was able to dissuade rivals from entering its market because the firm's technology was so difficult to replicate.

False

If a firm's goods are highly differentiated, the Internet typically lessens the firm's bargaining power as a supplier.

False

If an author uses Amazon as a publisher, his titles will only be available through Kindle.

False

In order to ensure security, Amazon Web Services allows only pre-approved, technically sophisticated firms to rent the firm's industrial-strength computing capacity on an as-needed basis.

False

Initially, Amazon adopted the domain of a non-profit organization.

False

Market entry is the same as building a sustainable business.

False

Metcalfe's Law is used to explain the concept of switching costs

False

One of the reasons Amazon has struggled to achieve profitability is because the firm has a negative cash conversion cycle.

False

The use of Kiva robots has allowed Amazon to radically reduce headcount, saving the firm additional money by cutting its workforce.

False

U.S. courts have ruled that it is illegal for Apple to charge app developers a 30% fee for digital products sold through apps.

False

2. Elaborate customer surveys help Zara designers predict fashion trends months into the future and design products accordingly.

False

a; Easy

1. Many pundits assumed Amazon would fail. Why? a. the firm was losing money and competing against established, well known, offline brands who were going online. b. Amazon was too short-term focused. c. the firm was based in Seattle, rather than Silicon Valley. d. Amazon sales were not increasing. e. all of the above.

a; Easy

1. Which of the following is considered one of the three 'pillars' critical to Amazon's business success? a. Large selection b. Niche customers c. Inimitable technology d. Dynamic pricing e. Firm-owned brands

e; Easy

1. Which of the following is true of Amazon Web Services (AWS)? a. It only allows firms and not individual customers to rent industrial-strength computing capacity. b. It does not offer corporate-quality computing as a service. c. It doesn't provide services such as programming environments. d. It is a fool-proof system. e. It is just a single-digit percentage of Amazon's overall revenue.

d; Moderate

1. Which of the following is true of the Kindle? a. An individual, who owns a Kindle, cannot purchase books provided by non-Amazon publishers. b. The Kindle is only about digitally reading books and not about linking customers to other physical products offered by Amazon. c. By the holiday season of the product's second year, the number of Kindles sold began to decline steadily. d. Amazon doesn't look to make money directly from Kindle hardware sales. e. Amazon today sells fewer electronic books overall than their print counterparts.

e; Moderate

10. The phrase inventory turns refers to: a. the stock of inventory returned to a manufacturer due to poor quality. b. also known as gross-profit margin turnover. c. the number of times an inventory item moves within a warehouse. d. the time it takes a product to be replaced by a newer model or upgraded product. e. the number of times inventory is sold or used during a specific period.

a; Moderate

11. In order to achieve a negative cash conversion cycle a firm would want to: a. increase its account payable period and its inventory turns. b. decrease its account payable period and its inventory turns. c. increase its account payable terms and decrease its inventory turns. d. decrease its account payable terms and increase its inventory turns. e. analyze systems and stop whatever processes are causing this, since a negative cash conversion cycle is associated with losses, not profits.

3. Zara also saves money by simplifying pricing. An item sold in Bangkok is likely to cost the same as a similar item sold in Barcelona.

False

a; Moderate

12. Dynamic pricing: a. refers to pricing that shifts over time based on conditions associated with product supply and demand. b. refers to pricing that is always a notch higher than competition. c. refers to pricing strategies that focuses on consistency even if environmental conditions fluctuate wildly. d. is also known as the bargaining power of customers. e. refers to pricing that is always a notch below competition.

e; Moderate

13. What advantage does Amazon get by creating its own branded products? a. Allows the firm to cut out some of the costs that would otherwise go to a branded supplier. b. Gives Amazon even more negotiating leverage with suppliers. c. Allows Amazon products revealed on site and in the firm's product search results to eliminate costly advertising and other awareness-building spending that many rival products invest in. d. Reduces reliance on well-known suppliers that otherwise sell commodity products. e. All of the above

a; Easy

14. Amazon's moves are largely motivated by: a. customer focus. b. cost cutting. c. the focus on making immediate supplier payments. d. internal leadership. e. technology advancements.

c; Easy

15. _____ is a randomized group of experiments used to collect data and compare performance among two options studied. a. Bucket testing b. Multivariate testing c. A/B testing d. Choice modelling e. Web usability testing

d; Easy

16. What is the purpose of Amazon Dash? a. To speed items throughout Amazon's warehouse. b. To rapidly restock Amazon's fulfillment center shelves. c. To speed delivery to consumers using drones. d. To allow consumers to rapidly place orders with Amazon. e. To deliver products using autonomous, driverless cars.

d; Easy

17. A(n) _____ is a line of identifying text, assigned and retrieved by a given web server, and stored by your browser. f. domain g. session bean h. header i. cookie j. URL

e; Moderate

2. Amazon Web Services (AWS): a. was introduced after rival efforts from leading computing giants Microsoft and Google. b. forms a majority percentage of Amazon's overall revenue. c. doesn't provide services such as programming environments. d. is a fool-proof system. e. offer several advantages, including increased scalability, reliability, and security.

b; Moderate

2. Identify the true statement. a. Agency pricing is illegal. b. Rivals colluding to set prices is illegal. c. Wholesale pricing is illegal. d. In agency pricing, the seller pays publishers for titles and then sells those titles at whatever price it wished. e. Wholesale pricing is also known as agency pricing.

c; Moderate

2. Which of the following is true of Amazon? a. Amazon's early warehousing was a model of efficiency and was critical to the firm being profitable from the start. b. Amazon is the last place most consumers shop online. c. The three pillars of Amazon's business are large selection, convenience, and lower prices. d. Amazon, only recently has started selling directly to customers. e. Amazon concentrates on niche customers, low brand assortment, and higher prices to gain competitive advantage.

b; Moderate

2. Which of the following strategies was followed by Amazon's founder? a. He focused more on Amazon's quarterly results. b. He postponed profit harvesting. c. He reduced warehousing capacity. d. He consciously ignored cloud computing platforms. e. He built e-commerce operations only for Amazon's customers in the United States.

e; Moderate

3. Allowing third-party sellers to list their products on Amazon is controversial. Why would Amazon allow products sold by others to appear on its site? a. Selection attracts consumers. b. A network effect competitive advantage is created where more buyers attract more sellers, giving Amazon an advantage over any rival attempting to create a similar marketplace. c. Although products are sold by third parties, Amazon gains valuable data on things such as customer browsing habits and sales. d. Amazon's brand is reinforced as a first-choice shopping destination. e. All of the above.

a; Easy

3. The fast food restaurant Chipotle pulled its app from Apple's app store when customer demand caused the firm's servers to crash. Which Amazon product could have provided Chipotle's technology staff with the computing resources needed to handle the massive, unprecedented demand? a. AWS b. The Kindle app store c. Simple Storage Solution d. BlueOrigin e. Azure

a; Moderate

3. Which of the following is an example of agency pricing? a. A department store gets a cut on the selling price of a product, which is set by the product's manufacturer. b. A retail store purchases merchandise from a manufacturer and sells the merchandise at whatever prices it wishes to charge. c. The government of a country sets the minimum price for certain agricultural products to cover the costs incurred by the farmers. d. A manufacturer and a retailer work in a collaborative manner to decide the price of the final product. e. The government of a country sets the maximum price for a certain product that retailers cannot exceed.

c; Moderate

3. Which of the following is true of Amazon? a. Amazon made profits from the first year of its operation. b. It has limited its products to only electronic devices. c. Its cloud computing business is one of the largest players in that category. d. Its profitability has remained constant over the years and analysts continue to predict profits for the firm's future. e. Amazon concentrates more on its quarterly results and is inflexible on details about its vision.

e; Easy

4. Which of the following is not a firm that has received an investment from Jeff Bezos? a. Uber b. Twitter c. BlueOrigin d. The Washington Post e. Bezos has invested in all of the above businesses.

d; Easy

4. Which of the following is true of Amazon's warehousing process? a. Autonomous robots are in charge of building an order from a warehouse's inventory without any human intervention. b. Amazon's items that produce the most sales volume are stocked on shelves, alphabetically, to speed selection and packing. c. Amazon's systems stamp names and addresses on boxes so they can be filled by pickers directly from shelves. d. When stacking shelves in its warehouses, Amazon ensures that no two similar products sit next to each other. e. Amazon's items that are heavily discounted and about to be written off as 'unsellable inventory' are dropped in an area called 'mass land' in one last-ditch effort to move under-performing warehouse stock.

a; Easy

5. Money owed for products and services purchased on credit to be paid at a later date is known as _____. a. accounts payable b. net profit c. pre-paid expense d. gross profit e. earnings before depreciation and tax

b; Moderate

5. Why would a customer choose the Amazon Workspaces product? a. They are good for firms seeking an alternative to expensive end-user software such as Microsoft Word and Adobe Photoshop. b. They are good choices for clients that want securely locked down PCs. c. They are helpful in bringing the efficiency Amazon developed in the layout of offices at its headquarters to other office environments. d. They are effective as a collaborative, team platform for co-creating professional documents. e. They allow third-party sellers to use Amazon's expertise for warehousing and shipping products.

b; Easy

6. The firm's period between paying suppliers for products and collecting funds from customers who purchase these products is referred to as the _____. a. earnings cycle b. cash conversion cycle c. inventory turnover cycle d. liquidity period cycle e. trade cycle

a; Easy

7. Firms that can't generate cash quickly enough are referred to as having _____. a. liquidity problems b. sagging problems c. high inventory turns d. stock-outs e. vertical integration problems

d; Easy

8. Which of the following is the most liquid asset? a. Plant machinery b. Retail locations c. Goodwill d. Cash e. Office furniture

e; Moderate

9. Which of the following statements is true? a. The concept of accounts payable is applicable only when a customer buys from a retailer. b. The Amazon Associates program is the second largest affiliate marketing program in the world. c. Amazon does not allow third-party sellers to sell products through its website. d. Amazon has always sold products to customers using middlemen. e. It is not uncommon for a big retailer like Amazon to be able to hold products for a month or longer without having to pay for them.

1. How did Apple trump Google to become the dominant mapping platform on iOS? a. Apple's control of iOS gave it control of the distribution channel to reach its users, kicking Google out as the default mapping app and capturing the majority of user engagement. b. Apple sued Google for copyright infringement related to the look and feel of Apple Maps. c. Apple sued Google for privacy violations related to the collection of map data. d. Apple hasn't trumped Google Maps. Google's Map app is used by the majority of iOS customers, whereas most users ignore Apple Maps.

1. Many telecom firms began digging up the ground and laying webs of fiberglass to meet the growing demand for Internet connectivity. However, rivals and startups began to imitate these firms and soon these new assets were not so rare and each day they seemed to be less valuable. It can be inferred from this example that: a. resource-based thinking can help avoid the trap of carelessly entering markets simply because growth is spotted. b. the telecommunications market is only big enough to support one or two major players. c. the immense scale advantages enjoyed by major firms can help them fight off competition from newer entrants. d. technology assets that require high investment and maintenance are liable to becoming obsolete much quicker than others. e. the scale of technology investment required to run a business is not a huge enough factor to act as a barrier to entry for new, smaller competitors.

1. Which of the following represents one of the primary components of the value chain? a. Outbound logistics b. Firm infrastructure c. Human resource management d. Research and development e. Procurement

According to Porter, strategy is fundamentally about being _____. a. different b. efficient c. superior d. scalable e. profitable

Businesses benefit from economies of scale when the cost of an investment can be: a. spread across increasing units of production. b. used in serving a niche and loyal customer base. c. used to build a brand image for products through advertising. d. leveraged to recruit consumers to promote a product or service. e. diverted to implementing technology upgrades in the business model.

3. Limited production runs ensure customers do not have to visit Zara's stores as often as they visit other stores, allowing the firm to save money through staff reductions when compared to peers.

False

Dell, previously the world's number one PC manufacturer, has seen its market share shrink because of rivals copying its value chain and reducing the price advantage it enjoyed over rivals. Dell's present struggles: a. underscore the importance of continually assessing a firm's strategic position among changing market conditions. b. are a result of rivals adopting supply chain management of software products that have yielded competitive advantages. c. imply that publicly traded firms are at a disadvantage in the technology sector. d. highlight the fact that scale advantages of an established firm are a huge factor in discouraging newer entrants to a market. e. demonstrate that resource-based thinking can help firms avoid the trap of carelessly entering markets simply because growth is spotted.

If a new entrant hopes to attract customers from an established incumbent, the new entrant must ensure that the value they offer exceeds the incumbents' value in addition to any perceived _____. a. switching costs b. market depreciation c. brand benefits d. advertising expenses e. scale advantages

Which of the following is a source of bargaining power of buyers? a. Greater choice of products b. High switching costs c. Loyalty programs d. Network effects e. Unique and highly differentiated products

collaborative filtering

A classification of software that monitors trends among customers and uses this data to personalize an individual customer's experience.

Netflix has used the long tail in the DVD-by-mail business to its advantage, crafting a business model that creates close ties with firm studios. What do film studios stand to gain from taking advantage of the Netflix model targeted at increasing the firm's long-tail offerings?

A cut of the subscription revenue from every disk sent out by Netflix.

data mart

A database or databases focused on addressing the concerns of a specific problem (e.g., increasing customer retention, improving product quality) or business unit (e.g., marketing, engineering).

utility computing

A form of cloud computing where a firm develops its own software, and then runs it over the Internet on a service provider's computers.

software as a service (SaaS)

A form of cloud computing where a firm subscribes to a third-party software and receives a service that is delivered online.

distributed computing

A form of computing where systems in different locations communicate and collaborate to complete a task.

dashboards

A heads-up display of critical indicators that allow managers to get a graphical glance at key performance metrics.

server farm

A massive network of computer servers running software to coordinate their collective use. provide the infrastructure backbone to SaaS and hardware cloud efforts, as well as many large-scale Internet services.

online analytical processing (OLAP)

A method of querying and reporting that takes data from standard relational databases, calculates and summarizes the data, and then stores the data in a special database called a data cube.

service level agreement (SLA)

A negotiated agreement between the customer and the vendor. The SLA may specify the levels of availability, serviceability, performance, operation, or other commitment requirements.

capability maturity model integration (CMMI)

A process-improvement approach (useful for but not limited to software engineering projects) that can assist in assessing the maturity, quality, and development of certain organizational business processes, and suggest steps for their improvement.

Java

A programming language, initially developed by Sun Microsystems, designed to provide true platform independence ("write once, run anywhere") for application developers.

A/B testing

A randomized group of experiments used to collect data and compare performance among two options studied (A and B). Often used in refining the design of technology products, and these tests are particularly easy to run over the Internet on a firm's Web site. Amazon, Google, and Facebook are among the firms that aggressively leverage hundreds of tests a year in order to improve their product offerings.

data warehouse

A set of databases designed to support decision making in an organization.

EDI (electronic data interchange)

A set of standards for exchanging messages containing formatted data between computer applications.

extensible markup language (XML)

A tagging language that can be used to identify data fields made available for use by other applications. Most APIs and Web services send messages where the data exchanged is wrapped in identifying XML tags.

business intelligence (BI)

A term combining aspects of reporting, data exploration and ad hoc queries, and sophisticated data modeling and analysis.

analytics

A term describing the extensive use of data, statistical and quantitative analysis, explanatory and predictive models, and fact-based management to drive decisions and actions.

virtualization

A type of software that allows a single computer (or cluster of connected computers) to function as if it were several different computers, each running its own operating system and software. underpins most cloud computing efforts, and can make computing more efficient, cost-effective, and scalable.

containers

A type of virtualization that allows for shared operating systems for more resource savings and faster execution. However _____ still isolate applications so they execute and moved to different computing hardware, just like conventional virtualization.

The practice of windowing involves: A. making content available to a distribution channel for a specified time period under a different revenue model. B. scheduling movies to be streamed online at primetime periods to pull in more revenue from advertising. C. relaying advertisements for limited time periods during online movie steaming, as opposed to frequent ad breaks D. delaying the sending of DVDs to customers until 28 days after titles go on sale. E. streaming movies to customers computers beforehand and then relaying them on television.

A. making content available to a distribution channel for a specified time period under a different revenue model

expert systems

AI systems that leverage rules or examples to perform a task in a way that mimics applied human expertise.

scalability

Ability to either handle increasing workloads or to be easily expanded to manage workload increases. In a software context, systems that aren't ______ often require significant rewrites or the purchase or development of entirely new systems.

total cost of ownership (TCO)

All of the costs associated with the design, development, testing, implementation, documentation, training and maintenance of a software system.

security-focused

Also known as "hardened." Term used to describe technology products that contain particularly strong security features.

neural networks

An AI system that examines data and hunts down and exposes patterns, in order to build models to exploit findings.

Marginal costs... A. are minor, insignificant costs. B. are associated with each additional unit produced. C. are the costs incurred as a result of choosing one option over another. D. are constant and do not vary according to production volume. E. are also known as overheads.

Are associated with each additional unit produced

1. Consumers buying commodities are highly _____ since they have so many similar choices. a. quality-conscious b. price-focused c. brand-driven d. technologically discriminating

A firm is said to be _____ when it attempts to match the benefits of a successful position while maintaining its existing position. a. switching b. straddling c. dovetailing d. streamlining e. vertically integrating

Operational effectiveness refers to: a. the implementation of technology in a business context. b. performing the same tasks better than rivals perform them. c. the number of times inventory is sold or used during the course of a year. d. performing different tasks or the same tasks in different ways. e. matching the benefits of a successful position while maintaining an existing position.

over-engineer

Build a model with so many variables that the solution arrived at might only work on the subset of data you've used to create it.

By going public, Netflix encountered competition from the large, established firms Wal-Mart and Blockbuster. What aspect of Netflix going public lured these firms into the market?

By going public, Netflix was required to disclose its financial position.

1. Benefits related to a firm's size are referred to as _____. a. network effects b. brand recall c. scale advantages d. vertical integration e. disintermediation

1. The paths through which products or services get to customers are known as _____. a. information pathways b. vertical markets c. distribution channels d. proxy networks e. horizontal markets

A firm can benefit from high switching costs, even when rivals offer free products.

true

A firm's financial performance that consistently outperforms its industry's peers is known as _____. a. comparative advantage b. absolute advantage c. sustainable competitive advantage d. first mover advantage e. operational efficiency advantage

How does the Internet typically impact price transparency and information asymmetry? a. Both price transparency and information asymmetry increase b. Both price transparency and information asymmetry decrease c. Price transparency increases while information asymmetry decreases d. Price transparency decreases while information asymmetry increases.

Moving first pays off when the time lead is used to create: a. the latest technology at a firm's production plant. b. operational effectiveness to harness maximum profitability. c. critical resources for competitive advantage. d. high stock value to generate funds for expansion. e. market entry to ensure sustainable competitive advantage.

The resource-based view of competitive advantage states that for a firm to maintain sustainable competitive advantage it must control a set of exploitable resources that have four critical characteristics. What are these characteristics? a. inventory turns, high margins, long account payable periods, brand building relationships b. operational effectiveness, strategic positioning, scale, distribution channels c. rareness, value, imperfect imitability, non substitutability d. a web site, an app, cloud-based systems, a savvy technology staff

_____ refers to performing different tasks than rivals or the same tasks in a different way. a. Straddling b. Operational effectiveness c. Strategic positioning d. Vertical integration e. Scale advantage

Which of the following represents an advantage enjoyed by the Netflix DVD-by-mail business over traditional video stores? A. Lower technology overhead B. Lower shipping expenses C. Larger entertainment selection D. Higher energy costs E. Higher churn rates

C. Larger entertainment selection

How does Cinematch offer Netflix additional operational advantages for the DVD-by-mail business?

Cinematch is linked to warehouses and recommends movies that are likely to be in stock.

How does Cinematch offer Netflix additional operational advantages? A. Cinematch offers alternate recommendations of movies based on critical acclaim and box office performance parameters. B. Cinematch is linked to warehouses and recommends movies that are likely to be in stock. C. Cinematch is often used by movie studios to plan movie scripts based on user preferences. D. Cinematch is a source of additional revenue to Netflix as a marketing tool for recommending newly-released movies. E. Netflix leases the Cinematch collaborative filtering software to smaller firms at a fee, withholding the valuable user ratings.

Cinematch is linked to warehouses and recommends movies that are likely to be in stock.

artificial intelligence

Computer software that seeks to reproduce or mimic (perhaps with improvements) human thought, decision making, or brain functions.

2. What is contract manufacturing? What advantages can a firm expect to gain from contract manufacturing? What are the downsides associated with this practice?

Contract manufacturing refers to outsourcing production to third-party firms. Firms that use contract manufacturers do not own the plants or directly employ the workers who produce the requested goods. Conventional wisdom suggests that leveraging cheap contract manufacturing in developing countries can keep the cost of goods low and allow firms to leverage specialized manufacturing expertise if production is not seen as core to competitive advantage. Firms can lower prices and sell more products or maintain higher profit margins. Many firms have also experienced the ugly downside to this practice. Global competition among contract firms has led to race-to-the-bottom cost-cutting measures. Too often, this means that in order to have the low-cost bid, contract firms skimp on safety, ignore environmental concerns, employ child labor, and engage in other ghastly practices. Big firms are big targets and those that fail to adequately ensure their products are made under acceptable labor conditions risk a brand-damaging backlash that may turn off customers, repel new hires, and leave current staff feeling betrayed.

1. A strong brand can be an exceptionally powerful resource for competitive advantage by lowering ________, proxying _____ and inspiring _____. a. price; strategy; innovation b. switching costs; quantity; performance c. expenses; marketing; respect d. search costs; quality; trust e. customer concern; investment; profits

1. A(n) _____ is the symbolic embodiment of all the information connected with a product or service. a. trademark b. copyright c. patent d. brand e. advertisement

1. Apple's dominance of smartphone and tablet markets has allowed the firm to lock up 60 percent of the world's supply of advanced touch-screen displays, and to do so with better pricing than would be available to smaller rivals. This is an example of: a. network externalities that make Apple valuable. b. high switching costs for suppliers. c. a complex tech product establishing itself as a killer brand. d. a growing firm gaining bargaining power with its suppliers. e. low search costs associated with a famous brand.

1. The degree to which complete information is available is known as _____. a. information assurance b. data proximity c. operational alertness d. price transparency e. data consolidation

1. The patent system is often considered to be unfairly stacked against start-ups because: a. bigger multinational firms enjoy patent protection in all countries as opposed to start-ups, which are domestic firms that do not get such protection for the most part. b. the intellectual property laws are not adequate to protect the interests of smaller firms from infringements. c. the patent system grants patents for innovations on a differential basis, with bigger firms getting precedence over start-ups. d. high litigation costs coupled with a few months of litigation can sink an early stage firm. e. patents are granted by the patent system on an ad hoc basis wherein firms that have been in business longer get patent protection for longer periods of time.

1. Which of the following is not highlighted as a source of switching costs? a. Learning costs b. Information and data c. Search costs d. Viral marketing e. Loyalty programs

1. Which of the following statements about technology is true? a. Technology alone is enough to provide sustainable competitive advantage to a firm. b. Technology plays a marginal role in creating strategic differences. c. Technological improvements are not important in strengthening a firm's strategic advantages. d. Technological improvements can often be copied by rivals, leading to a profit-eroding arms race. e. Technology cannot be used by late entrants to gain a share of the industry.

Sometimes technology can sound geeky and so technical that executives might think that it doesn't require managerial or investor attention. However many investing in the telecom sector suffered from a lack of insight on how a key technology was impacting their industry. Telecom firms failed to anticipate the impact of a technology known as ____________, which enabled existing fiber to carry more transmissions than ever before. a. radio frequency identification (RFID) b. dense wave division multiplexing (DWDM) c. cloud computing d. open source software

Startup firms can struggle to gain lower prices from rivals, but FreshDirect seems to have found several ways to gain lower supplier prices. FreshDirect buys direct from suppliers, eliminating any markup from a middleman. In addition to this, the firm employs other methods to get lower prices from suppliers. Which of the following is not a way FreshDirect helps suppliers in exchange for supplier agreement to offer it better pricing terms? a. FreshDirect carries a greater selection of supplier products b. FreshDirect will cobrand products from suppliers c. FreshDirect pays suppliers faster than rivals d. FreshDirect shares warehouse space with farmers and livestock producers e. FreshDirect shares data on customer insights with suppliers

1. The strengthening of the euro relative to the dollar has insulated Zara against financial vulnerabilities.

False

In exchange for a percentage of the DVD-by-mail subscription revenue for every disk sent out by Netflix, movie studios offer Netflix:

DVD titles at a discounted or wholesale price.

information

Data presented in a context so that it can answer a question or support decision making.

cloudbursting

Describes the use of cloud computing to provide excess capacity during periods of spiking demand. a scalability solution that is usually provided as an overflow service, kicking in as needed.

_____ refers to removing an organization from a firm's distribution channel.

Disintermediation

_____ refers to removing an organization from a firm's distribution channel? A. Disbarment B. Repudiation C. Annulment D. Disintermediation E. Revocation

Disintermediation

1. In _____, the light inside fiber is split into different signal-carrying wavelengths in a way similar to how a prism splits light into different colors. a. polarization b. time-division multiplexing c. space-division multiplexing d. frequency hopping spread spectrum e. dense wave division multiplexing

1. The set of activities through which a product or service is created and delivered to customers is known as a(n) _____. a. marketing plan b. value chain c. inventory turnover d. strategic position e. pure play

Leveraging consumers to promote a product or service is known as _____. a. straddling b. affiliating c. long tailing d. crowdsourcing e. viral marketing

Netscape, which once controlled more than 80 percent of the market share in Web browsers, lost its dominant position when customers migrated to Internet Explorer, Microsoft's Web browser. Internet Explorer was easy to install and had no significant differences in terms of usability. This example serves to illustrate that: a. fast-following smaller firms are always ready with newer and possibly superior products. b. customers of technology companies are becoming increasingly savvy and more demanding. c. the open source nature of technology ensures that no firm can expect to monopolize a market. d. firms need to employ increasingly stringent intellectual property norms to guard against infringements from smaller, competitive rivals. e. firms with low switching costs can sometimes be rapidly overtaken by strong rivals with additional competitive advantages.

The _____ problem exists when rivals watch a pioneer's efforts, learn from their successes and missteps, and then enter the market quickly with a comparable or superior product at a lower cost. a. late entrant b. early starter c. first mover d. intellectual property e. fast follower

compliance

Ensuring that an organization's systems operate within required legal constraints, and industry and organizational obligations.

1. Businesses benefit from economies of scale when the cost of an investment can be used in serving a niche customer base.

False

1. Walmart is a large firm, but some suggest that Zara has had more success implementing effective RFID. Why?

Firms from Walmart to JCPenny have struggled to effectively implement RFID, but Zara's vertical integration is an advantage here, as well. Since the entire supply chain is under Zara control and all items flow through one of two warehouses, Zara can affix tags to all products before sending them out to stores (a challenge for other retailers that have third-party suppliers ship to multiple warehouses or directly to stores). Stores then send tags back to Zara warehouses for reuse (reassigning a tag's unique item to a new clothing item). Although tags only cost ten cents, with hundreds of millions of items sold each year, these costs would easily add up, so the reusable tag system makes solid financial sense (Zara bought so many tags at launch that it actually consumed one in every six tags produced for the entire apparel industry that year).

Netflix can send out any DVD it buys because of a Supreme Court ruling known as the _____.

First Sale Doctrine

Costs that do not vary according to production volume are called _____ A. total costs B. marginal cost C. switching costs D. variable costs E. fixed costs

Fixed costs

1. What were the problems encountered by Gap in the early part of the decade following the 1990s? What were the measures taken to overcome these problems?

Gap was an industry leader for much of the 1990s in apparel retail, with over $1 billion in profits. However, sales declined in the early part of the following decade, prompting the firm to try revitalizing the brand. Chasing the youth market, Gap filled its stores with miniskirts, low-rise jeans, and other offerings. But the throngs of teenagers they sought to attract never showed up, and the shift in offerings sent Gap's mainstay customers to retailers that easily copied the styles that Gap had made classic. Gap's same-store sales declined for twenty-nine months straight and profits vanished. The firm's debt was downgraded to junk status. Closing down hundreds of stores did not work either and Gap was forced to write off much of its inventory. The marketing model used by Gap to draw customers in via big-budget television promotion also collapsed. The firm has since ceded its position as the market leader.

Which of the following is a source of bargaining power of buyers?

Greater choice of products

Choose the correct answer: Why is the "First-Sale Doctrine," including understanding when it does and doesn't apply, relevant to Netflix? A. It means content acquisition costs for DVDs are more predictable than streaming costs. B. It means that content acquisition costs for streaming are more predictable than DVDs. C. In cases of streaming media, it facilitates a shift of bargaining power to content suppliers. D. In cases of streaming media, it facilitates a shift of bargaining power to firms paying to license content from suppliers. E. None of the above. F. a & d G. b & c H. a & c I. b & d

H. a & c

1. What are the operational and financial challenges that Zara faces?

In spite of its effectiveness, Zara's Spain-centric, just-in-time manufacturing model has certain defects. By moving all of the firm's deliveries through just two locations, both in Spain, the firm remains hostage to any disruption in the region, such as weather, natural disaster, terrorism, labor strife, or political unrest. Firms often hedge risks that could shut down operations by spreading facilities throughout the globe. If problems occur in northern Spain, Zara has no such fall back. Moreover, this model also leaves the firm potentially more susceptible to financial vulnerabilities as the Euro has strengthened relative to the dollar. Many low-cost manufacturing regions have currencies that are either pegged to the dollar or have otherwise fallen against the Euro. This situation means Zara's Spain-centric costs rise at higher rates compared to competitors, presenting a challenge in keeping profit margins in check. Rising transportation costs are another concern. If fuel costs rise, the model of twice-weekly deliveries that has been key to defining the Zara experience becomes more expensive to maintain. Zara is liable to be overtaken by rivals who might, in time, succeed in copying its vertically integrated value chain, despite the difficulty involved. Dell's loss of market share due to the same reason can be cited a precedent for Zara's potential vulnerability in this regard. Finally, the firm's financial performance can also be impacted by broader economic conditions. When the economy falters, consumers simply buy less and may move a greater share of their wallet to less-stylish and lower-cost offerings from deep discounters like Wal-Mart. Zara is particularly susceptible to conditions in Spain, in particular, and Western Europe, in general.

JSON

JavaScript Object Notation (JSON) - a popular data interchange format, JSON is a technology standard often used to format data when being sent or received via APIs.

database administrator (DBA)

Job title focused on directing, performing, or overseeing activities associated with a database or set of databases. These may include (but not necessarily be limited to): database design, creation, implementation, maintenance, backup and recovery, policy setting and enforcement, and security.

interpreted

Languages where each line of written code is converted (by a software program, called an "interpreter") for execution at run-time. Most scripting languages are interpreted languages. Many programmers also write Java applications to be interpreted by the Java Virtual Machine.

Which of the following represents an advantage enjoyed by the Netflix DVD-by-mail business over traditional video stores:

Larger entertainment selection.

machine learning

Leverages massive amounts of data so that computers can act and improve on their own without additional programming.

LAMP

Linux, Apache, MySQL, Perl/Python/PHP

compile

Step in which program code written in a language that humans can more easily understand, is then converted into a form (expressed in patterns of ones and zeros) that can be understood and executed by a microprocessor.

7. Many firms have developed innovative information systems, only to find that employees fail to adopt these tools. How does Zara encourage store managers to effectively use the systems deployed in stores?

Managers have 'skin in the game,' with compensation tied to overall store performance. Store performance is improved through manager's use of information systems that help ensure that fashions arrive in store tailored to customer feedback, requests, and preferences.

affiliate marketing program

Marketing practice where a firm rewards partners who bring in new business, often with a percentage of any resulting sales.

_____ Law is said to be at play when the value of a product or service increases as its number of users expands.

Metcalfe's

genetic algorithms

Model building techniques where computers examine many potential solutions to a problem, iteratively modifying (mutating) various mathematical models, and comparing the mutated models to search for a best alternative.

How does the Cinematch recommendation system work?

NOT: Cinematch requests users to create profiles detailing their interests and preferences.

A low _______ is usually key to a firm's profitability because acquiring a customer is more expensive than keeping one.

NOT: switching cost

Netflix enjoys the triple scale advantage of the largest customer base, the largest selection, and the largest network of distribution centers. This can be attributed to:

Netflix's first-mover advantage

The acronym NPE stands for:

Non-Practicing Entities

flash-sales

Offering deep discounts of a limited quantity of inventory. Often run for a fixed period or until inventory is completely depleted. Players include Guilt Groupe and Amazon's MyHabit in fashion, and OneKingsLane in home décor.

legacy system

Older information systems that are often incompatible with other systems, technologies, and ways of conducting business. can be a major roadblock to turning data into information, and they can inhibit firm agility, holding back operational and strategic initiatives.

Which of the following represents one of the primary components of the value chain?

Outbound logistics

contract manufacturing

Outsourcing production to third-party firms. Firms that use contract manufacturers don't own the plants or directly employ the workers who produce the requested goods.

1. Our analysis of Inditex's Zara stores showed the power of data to fuel competitive advantage. List the two acronyms for technologies that Zara uses to collect data in stores, and describe what the data from each of these respective systems 'tells' the firm.

POS - what the store is selling; PDA - what customers want to see on shelves.

1. The U.S. Justice Department initially reviewed the Fair Factories Clearinghouse but eventually approved the effort as described in readings and class. What was the government initially concerned about?

Price-fixing/price collusion

liquidity problems

Problems that arise when organizations cannot easily convert assets to cash. Cash is considered the most liquid asset—that is, the most widely accepted with a value understood by all.

platform

Products and services that allow for the development and integration of software products and other complementary goods. Windows, iOS, Android, and the standards that allow users to create Facebook apps are all examples

platforms

Products and services that allow for the development and integration of software products and other complementary goods. Windows, the iPhone, the Wii, and the standards that allow users to create Facebook apps are all platforms.

two-sided network effects

Products or services that get more valuable as two distinct categories of participants expand (e.g., buyers and sellers).

API

Programming hooks, or guidelines, published by firms that tell other programs how to get a service to perform a task such as send or receive data. For example, Amazon provides these to let developers write their own applications and Web sites that can send the firm orders.

scripting languages

Programming tool that executes within an application. _____ are interpreted within their applications, rather than compiled to run directly by a microprocessor.

programming language

Provides the standards, syntax, statements, and instructions for writing computer software.

omnichannel

Providing customers with a unified experience across customer channels, which may include online, mobile, catalog, phone, and retail. Pricing, recommendations, and incentives should reflect a data-driven, accurate, single view of the customer.

2. How does RFID improve in-store customer service?

RFID lets Zara know where products are, so if a customer asks for an item in a store (perhaps in a different size or color), staff using custom apps on an iPod Touch can immediately tell if a product is in store, in a nearby store, or if it can be ordered from the distribution center or Zara.com.

cloud computing

Replacing computing resources—either an organization's or individual's hardware or software—with services provided over the Internet.

RFID

Small chip-based tags that wirelessly emit a unique identifying code for the item that they are attached to. Think of these systems as a next-generation bar code.

application server

Software that houses and serves business logic for use (and reuse) by multiple applications.

vertical niches

Sometimes referred to as vertical markets. Products and services designed to target a specific industry (e.g., pharmaceutical, legal, apparel retail).

embedded systems

Special-purpose software designed and included inside physical products (often on firmware). Help make devices "smarter," sharing usage information, helping diagnose problems, indicating maintenance schedules, providing alerts, or enabling devices to take orders from other systems.

computer hardware

The physical components of information technology, which can include the computer itself plus peripherals such as storage devices, input devices like the mouse and keyboard, output devices like monitors and printers, networking equipment, and so on.

e-discovery

The process of identifying and retrieving relevant electronic information to support litigation efforts.

data mining

The process of using computers to identify hidden patterns in, and to build models from, large data sets.

Which of the following is one of Porter's five forces?

Threat of new entrants

ad hoc reporting tools

Tools that put users in control so that they can create custom reports on an as-needed basis by selecting fields, ranges, summary conditions, and other parameters.

point-of-sale (POS) system

Transaction processing systems that capture customer purchases. These systems are critical for capturing sales data and are usually linked to inventory systems to subtract out any sold items.

1. Firms that build an imitation-resistant value chain develop a way of doing business that others struggle to replicate.

True

1. The U.S. Department of Justice needed to provide a special exemption to the Fair Factories Clearinghouse, and before doing so, had to be convinced that the effort wouldn't be used by buyers to collude and further squeeze prices from competitors.

True

1. Zara's high fashion styles are inspired by customer tastes, with technology used to gather data on preferences at given store locations.

True

2. Rising fuel costs are likely to make Zara's model of twice-weekly deliveries more expensive to maintain.

True

2. The Fair Factories Clearinghouse is subject to network effects.

True

3. Making seasonal apparel decisions is a challenge because it often involves making predictions on what customers will be interested in, months in advance of clothing appearing on store shelves.

True

5. Zara's clothing look like high fashion, but are comparatively inexpensive.

True

5. Zara's use of technology across the value chain allows the firm to manufacture more unique items than rivals H&M and Gap.

True

6. Zara encourages employee use of technology by tying employee salaries to sales performance.

True

8. An information system consists of hardware, software, data, procedures, and the people who interact with and are impacted by the system.

True

A firm can benefit from high switching costs, even when rivals offer free products.

True

AWS is acting as an entrepreneurship catalyst, enabling startups to host and scale their efforts without the added cost associated with buying and maintaining large quantities of computing hardware.

True

Amazon has significantly changed the cost-structure of the publishing industry.

True

Amazon shelves are specifically stocked so that similar items are not placed next to each other.

True

Amazon went 7 whole years without turning a profit.

True

Amazon's Kindle and Fire businesses are meant to create a channel for media sales as that segment rapidly shifts from atoms to bits.

True

Amazon's Kindle is described as an e-reader, but these devices are also effectively storefronts, directly linking consumers to purchase opportunities for Amazon products.

True

Amazon's digital publishing ambitions have extended beyond the printed word to include video content and video games.

True

Amazon, as a company, is susceptible to channel conflicts, but less so if it can deliver suppliers a greater revenue than all other channels combined.

True

By allowing third parties to make products available through Amazon, the firm strengthens network effects for competitive advantage.

True

If there is the availability of a wide variety of undifferentiated commodity goods in a given market, and these products are available online, then bargaining power typically shifts to the buyer.

True

In order to automate profit-pushing hyper-efficiency, Amazon warehouses are powered by at least as much code as the firm's website.

True

Many firms choose not to implement operational components of ERP software and instead elect to create their own propriety solutions in part because they see their uniqueness in certain operations areas as key to creating difficult-to-imitate competitive advantages.

True

The Amazon Prime service provides consumers with unlimited 2-day shipping and ultimately encourages more purchases from the site, and reinforces Amazon as a first-choice shopping destination for Prime members.

True

infrastructure as a service (IaaS)

Where cloud providers offer services that include running the remote hardware, storage, and networking (i.e., the infrastructure), but client firms can choose software used (which may include operating systems, programming languages, databases, and other software packages). In this scenario the cloud firm usually manages the infrastructure (keeping the hardware and networking running), while the client has control over most other things (operating systems, storage, deployed applications, and perhaps even security and networking features like firewalls and security systems).

platform as a service (PaaS)

Where cloud providers offer services that include the hardware, operating system, development tools, testing and hosting (i.e., the platform) that its customers use to build their own applications on the provider's infrastructure. In this scenario the cloud firm usually manages the platform (hosting, hardware, and supporting software), while the client has control over the creation and deployment of their application.

6. Why has Zara been more effective in leveraging technology to enhance its operating strategies than its rivals? Provide an example to contrast Zara's handling of technology in its operations.

Whether measured by IT workers as a percentage of total employees or total spending as a percentage of sales, Zara's IT expenditure is less than one-fourth the fashion industry average. Zara excels by targeting technology investment at the points in its value chain where it will have the most significant impact, making sure that every dollar spent on tech has a payoff. High-end fashion house Prada's efforts at its flagship Manhattan store contrast Zara's efforts. The firm used radio frequency identification (RFID) tags on clothes in its store. By wirelessly reading the tags on each garment, dressing rooms would recognize what was brought in and make recommendations of matching accessories as well as similar products that patrons might consider. Customers could check inventory, and staff sporting PDAs could do the same. A dressing room camera would allow clients to see their front and back view side-by-side as they tried on clothes. However, as slick as it sounded, the effort had disastrous consequences and the investment in Prada's in-store technology was simply too high, with estimates suggesting the location took in just one-third the sales needed to justify expenses. At Prada's Manhattan flagship store, the effort looked like tech chosen because it seemed fashionable rather than functional.

4. Describe how Zara's counterintuitive practice of making limited production runs is profitable and effective in maintaining a competitive advantage over the firm's rivals.

While running out of bestsellers might be seen as a disaster at most retailers, at Zara the practice delivers several benefits. Limited runs allow the firm to cultivate the exclusivity of its offerings. Each Zara store is stocked with items tailored to the tastes of its local clientele. Limited runs encourage customers to buy right away and at full price. Customers realize that waiting for items to go on sale means the products have almost certainly been sold or moved to make room for newer stock. Zara rarely runs discount sales and this is evidenced in data which suggests that Zara books some 85 percent of its products at full price, compared to the industry average of just 50 percent. The constant parade of new, limited-run items also encourages customers to visit often. The average Zara customer visits the store seventeen times per year, compared with only three annual visits made to competitors. This ensures that Zara spends almost nothing on advertising. Finally, limited production runs allows the firm to reduce to a minimum the risk of making mistakes, such as stocking up on inventory with items customers would not buy and incurring losses.

During Netflix's high-growth period, the DVD-by mail business enjoyed lower marketing costs due to the: A. word-of-mouth publicity generated by its users. B. high switching costs for its users. C. improved advertising campaigns for its services. D. switch from a per-disc rental fee to a flat rate scheme. E. introduction of its online streaming model.

Word of mouth publicity generated by its users

3. Briefly explain the intelligence-gathering exercises carried out by Zara in its stores and the role of technology in such efforts.

Zara's designs are based on the evidence of customer demand. Zara's store managers lead the intelligence-gathering effort that ultimately determines what ends up on each store's racks. Armed with personal digital assistants (PDAs) to gather customer input, staff members regularly chat up customers to gain feedback on what they'd like to see more of. Once stores are closed, the staff looks for trends in the piles of unsold items that customers tried on but didn't buy to spot any preferences in cloth, color, or styles offered among the products in stock. PDAs are also linked to the store's point-of-sale (POS) system showing how garments rank by sales. Managers send updates that combine the hard data captured at the cash register with insights on what customers would like to see. All of this valuable data allows the firm to plan styles and issue rebuy orders based on feedback rather than hunches and guesswork. The goal is to improve the frequency and quality of decisions made by the design and planning teams.

5. What role does Zara's headquarters play in the running of its stores?

Zara's store managers, armed with personal digital assistants (PDAs), gather customer input. Staff members regularly chat up customers to gain feedback on what they'd like to see more of. The staff looks for trends in the piles of unsold items that customers tried on but didn't buy to spot any preferences in cloth, color, or styles offered among the products in stock. Managers send this valuable data to Zara's headquarters which allows the firm to plan styles and issue rebuy orders based on feedback rather than hunches and guesswork. The goal is to improve the frequency and quality of decisions made by the design and planning teams. While stores provide valuable front-line data, headquarters plays a major role in directing in-store operations. Software is used to schedule staff based on each store's forecasted sales volume, with locations staffing up at peak times such as lunch or early evening. This constant refinement of operations throughout the firm's value chain has helped reverse a prior trend of costs rising faster than sales. Even the store displays are directed from the firm's headquarters outside, where a basement staging area known as "Fashion Street" houses a Potemkin village of bogus storefronts meant to mimic some of the chain's most exclusive locations throughout the world. It is here that workers test and fine-tune the chain's award-winning window displays, merchandise layout, even determine the in-store soundtrack. Every two weeks, new store layout marching orders are forwarded to managers at each location.

10. Zara is susceptible to any disruption in northern Spain because: a. it moves all of its deliveries through just two locations, both in Spain. b. it conducts its trade operations based on the American dollar rather than the stronger euro. c. most of Zara's products are sold in markets outside Spain and Europe. d. Zara's products are sold at much lower costs around the world than in Spain, and this harms profitability. e. Zara's production facilities in Asia and Central America are threatening employment in Spain.

11. Zara's IT expenditure is low by fashion industry standards and is also highly effective. Which of the following makes this possible? a. Targeting technology investment at points in the value chain where it has the most significant impact. b. Utilizing the money spent on IT infrastructure to improve the IT skills of its employees through training programs. c. Using the best and most expensive software and hardware in the market, as it lowers any maintenance costs later. d. Outsourcing IT management to third-party firms which provide IT services at lower costs. e. Investing IT funding in improving the infrastructure and cutting down employee overhead costs.

11. Zara's production costs could rise at higher rates than its competitors because many of the firm's costs are tied to the _____. a. euro b. dollar c. yen d. pound e. franc

3. _____ are critical for capturing sales data, and are usually linked to systems which manager a firm's inventory. a. Point-of-sale systems b. Legacy systems c. CRM systems d. Server farms e. Data aggregators

5. In retail in general and fashion in particular, having _____ is considered the kiss of death. a. excess inventory b. storefronts in expensive districts with costly rents c. a large labor force d. limited production runs e. dispersed production facilities

6. How does Zara differ from its competitors in converting ideas into products? a. Zara concepts appear in stores in fifteen days on average compared to rivals who receive new styles once or twice a season. b. Zara's ideas are inspired by social media, compared to the intrinsic design processes followed by its competitors. c. Zara's design and concept teams use data from customers to predict fashion trends many months into the future and stock up inventory accordingly, as opposed to its rivals. d. Collaborations with celebrities help Zara churn out a limited, yet profitable, volume of items every year, while rivals produce a higher volume of less fashionable items. e. By focusing on a smaller number of products than rivals like Gap, Zara manages to limit exposure to wrong guesses.

7. _____ is a non-profit organization that shares audit information on contract manufacturers among members of the apparel industry and other industries. a. Fair Factories Clearinghouse b. Pricewaterhouse Coopers c. Amnesty International d. Klynveld Main Goerdeler e. Transparency International

software

a computer program or a collection of programs. it is a precise set of instructions that tells hardware what to do.

big data

a general term used to describe the massive amount of data available to today's managers. often unstructured and too big and costly to easily work through use of conventional databases, but new tools are making these massive datasets available for analysis and insight.

structured query language (SQL)

a language used to create and manipulate databases

a line of identifying text assigned and retrieved by a given web server and stored by your browser.

server

a program that fulfills the requests of a client

service-oriented architecture

a robust set of web services built around an organization's processes and procedures

database

a single table or collection of related tables

enterprise resource planning (ERP)

a software package that integrates the many functions (accounting, finance, inventory management, human resources, etc) of a business.

software package

a software product offered commercially by a third party

client

a software program that makes requests of a server program

data cube

a special database used to store data in OLAP reporting

_____ involves outsourcing production to third-party firms a. contract manufacturing b. long tailing c. peer production d. vertical integration e. viral production

a. contract manufacturing

which of the following is true of amazon? a. its cloud computing business is one of the largest players in that category b. amazon concentrates more on its quarterly results and is inflexible on details about its vision c. it has limited its products to only electronic devices d. its profitability has remained constant over the years and analysts continue to predict profits for the firm's future e. amazon made profits from the first year of its operation

a. its cloud computing is one of the largest players in that category

Which of the following is an example of a user interface? a. touch screen b. USB port c. printer d. hard disk e. random access memory

a. touch screen

integrated development environment (IDE)

an application that includes an editor, debugger, and a compiler, among other tools

information systems (IS)

an integrated solution that combines five components; 1. hardware 2. software 3. data 4. procedures 5. the people who interact with and are impacted by the system

Linux

an open source software operating system

desktop software

applications installed on a personal computer, typically supporting tasks performed by a single user.

enterprise software

applications that address the needs of multiple users throughout an organization or work group

Marginal costs:

are associated with each additional unit produced.

1. In an industry where nearly every major player outsources manufacturing to low-cost countries, Zara is highly _____, keeping huge swaths of its production process in-house. a. privatized b. vertically integrated c. publicly traded d. subsidized e. autonomous

13. High-end fashion house Prada's experiment of implementing the latest technology in its flagship store failed because: a. Prada targeted technology investment only at points in its value chain where it would have the most significant impact. b. Prada managers were enamored with technology and failed to consider implications across all components of the new information systems. c. the effort was unlike Prada's signature style, being more functional than fashionable. d. Prada skimped on spending with its IT expenditure being lesser than one-fourth the fashion industry average. e. the RFID technology used on items in the store were not state of the art and suffered from legacy system problems.

16. At Zara, clothes are ironed in advance and packed on hangers, with security and price tags affixed. This system means that employees in Zara stores simply move items from shipping box to store racks, spending most of their time on: a. outsourcing their sales activities. b. value-added functions like helping customers find what they want. c. wrestling with inventory during busy periods. d. packing unsold merchandise that need to be returned to the distribution center. e. whisking items from their stores to the staging areas.

8. Which of the following is not a benefit achieved through Zara's integration of technology throughout the firm? a. limited product runs of many unique products b. higher markdowns c. fewer write-offs d. less need for advertising

9. Due to limited production runs, Zara's customers: a. tend to delay their shopping until the products go on sale. b. visit the stores more often. c. buy products at discounted rates after a few weeks. d. visit stores less often. e. create a greater opportunity for increased markdowns and writeoffs.

9. Factors such as weather, natural disaster, terrorism, labor strife, or political unrest can shut down a firm's operations. Which of the following is one of the measures taken by firms to hedge such risks? a. Driving up profitability by increasing prices of market goods b. Spreading productions facilities across the globe c. Requesting government intervention in the form of subsidies or nationalization d. Sourcing raw materials from countries with low labor costs e. Diverting marketing and advertising budgets to accommodate greater production

chipotle pulled its app from the app store when customer demand caused the firm's servers to crash. what amazon product could've helped provide the computing resources needed to handle the massive, unprecedented demand? a. azure b. AWS c. simple storage solution d. blue origin e. the kindle app store

b. AWS

small chip-based tags that wirelessly emit a unique identifying code for the item that they are attached to are called _______. a. personal digital assistants b. RFID tags c. smart adaptors d. trackbacks e. legacy labels

b. RFID tags

which of the following is considered one of the three 'pillars' critical to Amazon's business success? a. dynamic pricing b. large selection c. niche customers d. firm-owned brands e. inimitable technology

b. large selection

_____ are critical for capturing sales data, and are usually linked to systems which manage a firm's inventory a. server farms b. point-of-sale systems c. legacy systems d. CRM systems e. data aggregators

b. point-of-sale systems

in retail in general and fashion in particular, having ______ is considered the kiss of death. a. a large labor force b. excess inventory c. limited production runs d. dispersed production facilities e. too many storefronts

b.excess inventory

12. The Zara experience involves a regular supply of new stock on the shelves, because of which customers tend to visit Zara's stores more often than they visit other retailers' stores. However, such a policy will become more expensive to maintain if: a. star designers demand a higher fee for its designs. b. PDAs are not used. c. fuel costs rise. d. Zara's horizontal integration fails. e. Zara outsources its production process.

14. _____ represents an integrated solution that combines hardware, software, data, procedures, and the people who interact with and are impacted by the system. a. A neural network b. Artificial intelligence c. An information system d. Supercomputing e. Cloud computing

2. What was considered the source of Mickey Drexler's inventory problems at Gap? a. He personally approved sweatshop-affiliated contract manufacturers b. He wrote the code for Gap's disastrously broken inventory system c. The firm guessed wrong about fashion, placing big bets on trends that consumers didn't want d. He led a botched merger with Disney in the hopes that combining technology with the Disney Store would create a super-efficient set of shopping mall destination stores.

2. Zara's staff members regularly collect data from customers at its stores. This data is used to: a. decide the designs and styles of Zara's products for the next few seasons. b. determine the in-store soundtrack and layout. c. inform designers on customer preferences and staff on store sales results. d. determine where future Zara stores should be located. e. identify the products that customers would like to buy through discounted sales.

4. Many firms have developed and deployed innovative information systems, only to see these systems go unused by key staff members. How has Zara helped ensure its systems will be used by staff? a. employees are monitored by in-store cameras b. employee time on information systems is recorded each time the system is engaged c. system use drives store success and as much as 70 percent of salaries are tied to sales performance d. all employees must have a Fair Factories Clearinghouse account, which is used to log and report employee activity e. systems were designed by employees, who feel a sense of ownership in the technology deployed

5. Zara's clothing lines are designed: a. by star designers like Stella McCartney. b. in collaboration with celebrities and pop artists. c. by design school graduates to suit customer demand. d. by designers who win talent shows sponsored by Zara. e. mostly by foreign designers in European design hotspots of Paris and Milan.

8. Zara store staff gain as much as three hours in prime selling time to assist customers at stores. Which of Zara's practices is instrumental in these time savings? a. Concepts going from ideas to appearances in stores in fifteen days on an average. b. Three hundred member-strong design teams churning out up to thirty thousand items a year. c. Distribution centers ironing clothes in advance and packing them on hangers, with security and price tags affixed. d. Collecting data from customers on what kind of clothes to stock in stores, using PDAs. e. Tweaking shipping models through Air France-KLM Cargo to coordinate outbound shipments with return legs loaded with raw materials.

value chain is a set of: a. similarly profitable firms competing against each other in any given industry. b. large firms that are vertically integrated. c. activities through which a product or service is created and delivered to customers. d. a large number of small firms that dominate a given market. e. robotically controlled conveyor belts that deliver product quickly from manufacturing stations to shipping containers.

How does the Internet typically impact price transparency and information asymmetry?

c. Price transparency increases while information asymmetry decreases.

zara's staff members regularly collect data from customers at its stores. this data is used to a. determine the in-store soundtrack and layout b. identify the products that customers would like to buy through discounted sales c. inform designers on customer preferences and staff on store sales results d. decide the designs and styles of zara's products for the next few seasons e. determine where future zara stores should be located

c. inform designers on customer preferences and staff on store sales results

zara holds a competitive advantage over its rivals in a. operating through fewer stores across the world than its closest rivals b. its globally distributed contract manufacturing model c. keeping large portions of its production process in-house d. conducting business only through online storefronts e. refusing to implement technology in its operational model

c. keeping large portions of its production process in-house

due to limited production runs, zara's customers a. buy products at discounted rates after a few weeks b. tend to delay their shopping until the products go on sale c. visit the stores more often d. create a greater opportunity for increased markdowns and write-offs e. visit stores less often

c. visit the stores more often

Studios have granted Blockbuster distribution terms that enable it to distribute DVDs the day they release. The objective behind this move is to: A. cut down the increasing power Netflix has over product distribution. B. ease fears over piracy that could potentially eat into the studios? profits. C. improve the penetration of movies in areas without adequate screening facilities. D. ensure that independent movies gain equal opportunity to compete with studio releases. E. replace the loss-making screening model with a sustainable and profitable model

cut down the increasing power netflix has over product distribution

With the entry of Wal-Mart and Blockbuster into the DVD-by-mail market, Netflix was forced to: A. cut spending on advertising and marketing campaigns. B. issue an initial public stock offering to generate funds for expansion C. raise the prices of its services to generate more revenue. D. switch from flat-rate subscription to a per-disc rental fee model. E. cut prices and increase spending on advertising.

cut prices and increase spending on advertising

1. Personal digital assistants are: a. transaction processing systems that capture customer purchases. b. small chip-based tags that wirelessly emit a unique identifying code for the item that they are attached to. c. systems that provide rewards and usage incentives, typically in exchange for a method that provides a more detailed tracking and recording of customer activity. d. handheld computing devices meant largely for mobile use outside an office setting. e. artificial intelligence systems that leverage rules or examples to perform a task in a way that mimics applied human expertise.

When firms enjoy economies of scale they:

leverage the cost of an investment across increasing united of production.

4. _____ involves outsourcing production to third-party firms. a. Vertical integration b. Long tailing c. Peer production d. Contract manufacturing e. Viral production

which of the following is an example of computer hardware? a. operating system b. database c. malware d. a video game console e. application

d. a video game console

this process of converting a code into machine-readable form is known as: a. assimilating b. debugging c. sequencing d. compiling e. integrating

d. compiling

which of the following is one of the sources of revenue for open source vendors? a. licensing OSS for incorporation into subsequent open source products b. marketing versions of open source software masked as proprietary software c. claiming royalties on software based on open source code d. selling support and consulting services e. selling open source products at prices well below commercial products

d. selling support and consulting services

In _____, the light inside fiber is split into different signal-carrying wavelengths in a way similar to how a prism splits light into different colors.

dense wave division multiplexing

According to Porter, strategy is fundamentally about being _____.

different

inventory turns

the number of times an inventory is sold or used during a specific period (ex: year or quarter). a higher figure means a firm is selling products more quickly

inventory turnover ratio

the ratio of a company's annual sales to its inventory

12. Small chip-based tags that wirelessly emit a unique identifying code for the item that they are attached to are called _____. a. Personal Digital Assistants b. Smart adaptors c. Trackbacks d. Legacy labels e. RFID tags

3. Zara holds a competitive advantage over its rivals in spite of: a. refusing to implement technology in its operational model. b. conducting business only through online storefronts. c. its globally distributed contract manufacturing model. d. operating through fewer stores across the world than its closest rivals. e. Keeping large portions of its production processes in-house.

value chain

the set of activities through which a product or service is created and delivered to customers

operating system

the software that controls the computer hardware and establishes standards for developing and executing applications

6. Contract manufacturers used by the apparel industry are often criticized because: a. they hike up the costs of producing goods. b. firms cannot maintain high profit margins by employing them. c. they charge exorbitant labor costs that drive down sales. d. they are known to grossly overprice their services. e. of poor working conditions.

which of the following sets of software represents the constituents of the LAMP stack? a. lingo, afnix, moby, PPL b. linux, android, mac OS X, PHP c. limewire, applescript, MATLAB, photoshop d. limewire, acrobat reader, mozilla, python e. linux, apache, mySQL, perl

e. linux, apache, mySQL, perl

Amazon Web Services (AWS) a. forms a majority percentage of amazon's overall revenue b. doesn't provide services such as programming environments c. was introduced after rival efforts from leading computing giants microsoft and google d. is a fool-proof system e. offer several advantages, including increased scalability, reliability, and security

e. offer several advantages, including increased scalability, reliability, and security

A salesperson's ability to effectively bargain with his/her consumers is called viral marketing.

false

According to Michael Porter, the reason many firms suffer margin-eroding competition is because they have defined themselves according to strategic positioning rather than operational effectiveness.

false

Businesses benefit from economies of scale when the cost of an investment can be used in serving a niche customer base.

false

Fast-growing Groupon was able to dissuade rivals from entering its market because the firm's technology was so difficult to replicate.

false

If a firm's goods are highly differentiated, the Internet typically lessens the firm's bargaining power as a supplier.

false

Metcalfe's Law is used to explain the concept of switching costs.

false

Network externalities exist when a product or service becomes less expensive as more people use it.

false

By going public, Netflix encountered stiff competition from firms such as Wal-Mart and Blockbuster. What aspect of Netflix going public lured these firms into the market? A. Financial disclosure laws revealed the profitability of Netflixs business model. B. By going public, Netflix was forced to reveal the Cinematch algorithm used to classify user ratings. C. Netflixs model of flat-rate monthly subscriptions was found to be more profitable than a per-disc rental fee model. D. Netflixs plan to enter the online movie streaming market alerted rivals to the possibility of losing their market share. E. The migration of Netflix services to cover the Blu-ray disc market opened up opportunities for rivals.

financial disclosure laws revealed the profitability of netflix's business model

data aggregators

firms that collect and resell data

firms with low switching costs can sometimes be rapidly overtaken by strong rivals with additional competitive advantages.

Netflix can send out any DVD it buys because of a Supreme Court ruling known as the ____? A. clickwrap agreement B. Betamax ruling C. fair use law D. First Sale Doctrine E. Copyright Directive

first sale doctrine

applications

includes desktop applications, enterprise software, utilities, and other programs that perform specific tasks for users and organizations

knowledge

insight derived from experience and expertise

a firm is said to be vertically integrated if

it owns several layers in its value chain

When firms enjoy economies of scale they: A. have a greater share of liquid assets than rivals B. have bigger production facilities than their competitors. C. have a wider employee base than their competitors D. leverage the cost of an investment across increasing units of production. E. leverage investment costs to decrease their subscriber acquisition costs.

leverage the cost of an investment across increasing units of production

table or file

list of data, arranged in columns (fields) and rows (records).

2. Coordinating and enabling the flow of goods, people, information, and other resources among locations is known as _____.

logistics

account payable

money owed for products and services purchased on credit

Collaborative filtering is a classification of software that:

monitors trends among customers to personalize an individual customer's experience.

Offering a nearly limitless selection results in an interesting phenomenon where: A. customers are willing to pay more for inferior goods. B. more money is made selling obscure goods than popular ones. C. firms with physical storefronts are more profitable than pure-plays. D. it is less profitable to sell physical products than otherwise. E. maintenance overheads are slashed contrary to conventional wisdom.

more money is made selling obscure goods than popular ones

An internal team at Netflix developed a prototype set top box to enable the direct streaming of content to customers' television sets. However, the idea of offering it to Netflix customers was dropped because:

of the brutally competitive nature of the consumer electronics business.

The long tail is a phenomenon whereby firms can make money by:

offering a selection of products or services vastly greater than conventional retailers.

android is a software product developed by Google that allows cell phone manufacturers to control hardware and establishes standards for developing and executing applications on its platform. android is thus an example of a(n) _______.

operating system

1. The organizational activities that are required to produce goods or services are known as _____.

operation

1. A(n) _____ is a transaction process that captures customer purchase information.

point of sales

The degree to which complete information is available is known as _____.

price transparency

dynamic pricing

pricing that changes over time, usually based on conditions that shift demand. (ex: charging more for scarce items)

3. An information system is an integrated solution that combines five components: hardware, software, data, _____, and the people who interact with and are impacted by the system.

procedures

Churn rate is a term that refers to the:

rate at which customers leave a product or service.

data

raw facts and figures

canned reports

reports that provide regular summaries of information in a predetermined format

Internet retailers serve a larger geographic area with comparably smaller infrastructure and staff. This fact suggests that Internet businesses are more _____. A. centralized B. decentralized C. capitalized D. vertically integrated E. scalable

scalable

Netflix offered its subscribers a selection of over one hundred thousand DVD-by-mail titles, while other video rental firms can only offer as much as three thousand. This presents a significant _____ for Netflix over its rivals.

scale advantage.

While the size of the tail in the long tail phenomenon is disputable, one fact that is critical to remain above this debate is that:

selection attracts customers, and the Internet allows large-selection inventory efficiencies that offline firms can't match.

database management system (DBMS)

sometimes referred to as database software; software for creating, maintaining, and manipulating data

Businesses benefit from economies of scale when the cost of an investment can be:

spread across increasing units of production

If a new entrant hopes to attract customers from an established incumbent, the new entrant must ensure that the value they offer exceeds the incumbents' value in addition to any perceived _____.

switching cost

User ratings act as _____ for Netflix's customers.

switching costs

User ratings act as _____ for Netflix's customers: A. marginal costs B. fixed costs C. switching costs D. variable costs E. barriers to entry

switching costs

business intelligence (BI) systems

systems that use data created by other systems to provide reporting and analysis for organizational decision making

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