Strategic Managment Final Review Quizzes Module 1-7
Managers at SunTrustUs Properties are surprised to hear that interest rates are likely to remain low for the next six months. Which of the following is an implication of low interest rates? Cost of capital for firms will be high. Firms will invest less in future growth. Economic growth rate will fall. Consumer demand will increase.
Consumer demand will increase.
Industrial Drills, a company that manufactures industrial tools, incurs higher costs because of its refusal to outsource its manufacturing to countries where labor costs are lower. This reflects Industrial Drills'________ responsibility. economic legal ethical demographic
ethical
The concept of a(n)________ attempts to capture both learning effects and process improvements at firms. managerial grid growth matrix experience curve diminishing utility curve
experience curve
Economic value creation is best expressed as producer surplus minus consumer surplus. consumer surplus minus cost of production. consumer surplus plus firm profit. producer surplus plus firm profit.
consumer surplus plus firm profit.
Managers use the AFI strategy framework to help their business achieve and sustain competitive parity. minimize the wealth of their shareholders. help reduce the economic contribution of their business. Explain and predict differences in firm performance.
explain and predict differences in firm performance.
The primary objective of the________ model is to understand the profit potential of different industries. PESTEL five forces strategic group structure-conduct-performance
five forces
Which of the following terms describes the guiding policy to address the competitive challenge, and uses corporate- and business-level strategy? analysis formulation implementation competitive advantage
formulation
A new product often has a high price when it is launched because of a large investment in designing a product while producing small quantities. large investment in marketing a product while producing small quantities. large investment in designing a product while producing large quantities. large investment in marketing a product while producing large quantities
large investment in designing a product while producing small quantities.
Due to its large sales volume and low-cost structure, Bunny's Lo-Cost enjoys a cost-leadership position. Which of the following scenarios might threaten Bunny's competitive advantage? Existing competitors in the same industry lower their prices to match those of Bunny's. Industry suppliers raise their prices. Competitors engage in an all-out price war. A new competitor is perceived to provide similar value while offering better service than Bunny's.
A new competitor is perceived to provide similar value while offering better service than Bunny's.
Which of the following scenarios illustrates a firm that has a sustainable competitive advantage? Samson LLC generated revenue of $300,000 this financial year, which is close to the industrial revenue average of $320,000. GoNow Inc. almost doubled its sales to 9,000 units this year compared to its previous year's sales of 5,000 units, though the industry average is 10,000 units. Bill and Ted Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years. Johnson Inc. was able to outperform its competitors with its new production system, in terms of revenue, for a brief period of four months.
Bill and Ted Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years.
In 2008, BlackBerry's market cap peaked at $75 billion. By 2017 this valuation had fallen more than 90 percent, to $3.9 billion. BlackBerry fell victim to two important PESTEL factors in its external environment: sociocultural and technological. How did technology contribute to BlackBerry's decline? BlackBerry failed to offer strong security features for its device. BlackBerry failed to change its device into one that could perform multiple tasks effectively. BlackBerry failed to adapt to a groundswell that involved workers bringing mobile devices to work. BlackBerry failed to produce an efficient emailing system using a keyboard.
BlackBerry failed to change its device into one that could perform multiple tasks effectively.
Which of the following factors most contributes to the U.S. automotive industry being characterized by high entry barriers? New auto companies create electric cars powered by simpler motors and gearboxes. New entrants in the automotive industry expect that incumbents will not or cannot retaliate. Car manufacturers require large-scale production in order to be cost-competitive. Few industrial products are as easy to build as cars powered by internal combustion engines.
Car manufacturers require large-scale production in order to be cost-competitive.
Managers at SunTrustUs Properties are surprised to hear that interest rates are likely to remain low for the next six months. Which of the following is an implication of low interest rates? Cost of capital for firms will be high. Firms will invest less in future growth. Economic growth rate will fall. Consumer demand will increase
Consumer demand will increase
You are the manager in charge of setting the strategy for a new fast-casual restaurant. Which of the following questions would be appropriate for you to ask during the analysis phase of the AFI strategy framework? Should we open our first location in Los Angeles or New York City? How have consumer preferences in the fast-casual restaurant industry changed in the last five years? Should we be competing nationally or internationally? Can we secure relationships with enough organic farmers to meet our commitment to using the healthiest ingredients?
How have consumer preferences in the fast-casual restaurant industry changed in the last five years?
________ are barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy. Embargoes Cartel arrangements Isolating mechanisms Market niches
Isolating mechanisms
Five Guys has become successful in a highly competitive industry dominated by fast-food giants like McDonald's and Burger King, as well as direct competitors claiming to be "better burger" joints such as Smashburger, Burgerfi, and Shake Shack. Which of the following statements accurately explains the main reason for the success of Five Guys? It created customized, made-to-order food using the highest-quality ingredients. It created a perception that eating its products was cool. It emphasized marketing over core competency. It focused keeping prices as low as possible.
It created customized, made-to-order food using the highest-quality ingredients
Coca-Cola was primarily known for its core competencies in marketing, bottling, and distributing aerated drinks. However, with the success of Gatorade, Coca-Cola developed competencies in the development and marketing of its own sports drink, Powerade. Which of the following is true of Coca-Cola? It is leveraging existing core competencies to improve current market position. It is building new core competencies to protect and extend its current market position. It is redeploying and recombining existing core competencies to compete in markets of the future. It is targeting the chasm between the early adopter and early majority market segment.
It is building new core competencies to protect and extend its current market position.
What do strategy scholars believe is the result of executives' pursuit of strategies that define value creation too narrowly in public stock companies? It gives the managers greater control of the performance of the organization in the long term. It reduces the trust of shareholders in the organization as a vehicle for value creation and societal welfare. It helps companies increase firm profits by creating shared value while benefitting society. It enables companies to create social value by addressing society's needs but prevents them from creating economic value for shareholders.
It reduces the trust of shareholders in the organization as a vehicle for value creation and societal welfare.
Limozine Inc. is a car service firm that provides high-end transportation in a major metropolitan area. It has several competitors that each offer similar services, and based on its current structure, it cannot match or beat those competitors on price. Because of long-term contracts and an increase in the cost of gasoline, it is not possible to reduce expenditures at this time. Which of these strategies should Limozine pursue instead? Create a strategic group through mergers. Compete based on inter-group rivalry, not intra-group rivalry. Pursue a differentiated strategy. Close the business until the cost of gas decreases.
Pursue a differentiated strategy
Plexzap Sodas has been a market leader in the soft drink industry for several decades. However, its market research shows that consumer tastes have begun to shift to sugar-free flavored seltzer waters, a product that Plexzap is capable of producing with minimal changes to its facilities and production processes. Based on your knowledge of the core competence-market matrix, which diversification strategy should Plexzap pursue? Leverage existing core competencies to improve current market position. Build new core competencies to protect and extend current market position. Redeploy and recombine existing core competencies to compete in markets of the future. Build new core competencies to create and compete in markets of the future.
Redeploy and recombine existing core competencies to compete in markets of the future.
Competitive advantage goes to the firm that achieves the largest economic value created. lowest producer surplus. highest payable turnover. highest Cost of goods sold/Revenue ratio.
largest economic value created.
In a radical innovation, a firm targets existing markets by using new technologies. new markets by using existing technologies. new markets by using new technologies. existing markets by using existing technologies.
new markets by using new technologies.
A(n)________ industry is one that is characterized by many small firms, a commodity product, and little or no ability for each firm to raise its prices. monopolistically competitive oligopolistic naturally monopolistic perfectly competitive
perfectly competitive
As the legal owners,________ have the most legitimate claim on a company's profits. creditors employees shareholders board members
shareholders
Bioplex requires its members to pay a quarterly or an annual fee to use its services. Irrespective of whether they frequently use the services during the payment period or not, members have to pay in advance. Which of the following business models does this best illustrate? razor-razor blade pay-as-you-go subscription-based freemium
subscription-based
Which of the following sources of differential appeal is most effective in helping a firm sustain its advantage? a cost-leadership strategy an updated package design superior customer experience observable product features
superior customer experience
In 1990, Roche, a Swiss pharmaceutical company, initially invested $2.1 billion to purchase a controlling interest in the biotech startup Genentech. In 2009, after witnessing the success of Genentech's drug discovery and development projects, Roche spent $47 billion to purchase the remaining minority interest in Genentech, making it a wholly owned subsidiary. In terms of strategic alliances, this scenario best indicates the real-options perspective. co-opetition. explicit knowledge. the stakeholder strategy.
the real-options perspective
When does a merger between companies typically occur? when two firms of comparable size join to form a combined entity when large, incumbent firms buy startup companies when a target firm does not want to be acquired when two or more firms enter a temporary vertical strategic alliance
when two firms of comparable size join to form a combined entity
A firm has 10 million shares outstanding, and each share is traded at $100. Also, each shareholder gets a dividend of $2,000 annually. In this case, the market capitalization is 10,000 shares; that is,10 million shares/$100. $200,000; that is, $2,000 × $100. $1 billion; that is, 10 million shares × $100. 20:1; that is, $2,000/$100.
$1 billion; that is, 10 million shares × $100
Which of the following statements is true of explicit knowledge? Explicit knowledge is about knowing how to do a certain task. Explicit knowledge is knowledge that cannot be codified. Explicit knowledge is shared in non-equity alliance firms. Equity knowledge is acquired only through actively participating in a process.
Explicit knowledge is shared in non-equity alliance firms.
Which of the following perspectives best supports the shared value creation framework? Markets are more often than not defined by societal needs rather than economic needs. Failing to create value for society almost always reflects on the bottom line. A firm's competitive advantage depends on pitting economic and societal needs in a trade-off. Externalities such as pollution, wasted energy, and costly accidents actually create internal costs.
Externalities such as pollution, wasted energy, and costly accidents actually create internal costs.
Evaluate the following statement: Strategic leaders should always try to pursue a blue ocean strategy because it is the most complex, coveted, and most desirable strategy that exists. I agree; firms should always pursue a blue ocean strategy because the benefits outweigh the cost. I agree; firms should pursue a blue ocean strategy because it's harder for competitors to replicate. I disagree; firms should never pursue a blue ocean strategy because it's much too complex. I disagree; firms should only pursue this strategy if they are able to reconcile the tradeoffs of each generic strategy.
I disagree; firms should only pursue this strategy if they are able to reconcile the tradeoffs of each generic strategy.
How are the critical assumptions of the resource-based model of a firm fundamentally different from the way in which a firm is viewed in the perfectly competitive industry structure? In the resource-based model, resources are freely available and mobile, whereas in the perfectly competitive industry structure, resources are highly immobile. In perfect competition, it is extremely difficult to replicate the resource bundles of a firm, whereas in the resource-based model, it is extremely easy to imitate them. In perfect competition, all firms have access to the same capabilities, whereas in the resource-based model, resource differences exist between firms in the same industry. In the resource-based model, only physical assets of a firm are considered as resources, whereas in perfect competition, a firm's capabilities and competencies are also considered as resources.
In perfect competition, all firms have access to the same capabilities, whereas in the resource-based model, resource differences exist between firms in the same industry.
Simply Furniture has seen its profit margins shrink over the past few years as increased competition has driven down furniture prices. You have been tasked with improving the company's margins. Which of the following approaches makes the most sense within the context of strategic activity systems? Focus efforts on imitating competitors' most successful products. Boost spending on marketing. Install modern manufacturing equipment to improve efficiency. Go against current trends and raise prices.
Install modern manufacturing equipment to improve efficiency.
TechTime is a market leader in smartwatches. If Horloge and Tempo, companies that manufacture digital watches, develop the same customer knowledge base and create products with the same customer appeal as TechTime, then Horloge and Tempo will have a VRIO resource. TechTime will have a resource that is valuable but no longer rare. TechTime will have a sustainable competitive advantage in the industry. TechTime will have a resource that is rare but no longer valuable.
TechTime will have a resource that is valuable but no longer rare.
Which of the following describes a firm pursuing a harvest strategy? The firm exits the industry by bankruptcy, liquidation, or divestments. The firm reduces investments in product support and allocates only a minimum of human and other resources. The firm continues to support marketing efforts at a given level despite the fact that consumption for its product has been declining. The firm buys out industry rivals to stake out a strong position.
The firm reduces investments in product support and allocates only a minimum of human and other resources.
If all firms in an industry pursued a low-cost position through application of competitive benchmarking, which of the following would happen? No firm would face direct competition from others in the industry; hence, profit potential would be high. Each firm would have high value creation. The firms would eventually have no resources to invest in product and process improvements. Each firm would have different cost structures.
The firms would eventually have no resources to invest in product and process improvements.
In which of the following situations is the power of suppliers high in an industry? Suppliers offer products that are undifferentiated. Suppliers can credibly threaten to backward integrate into the industry. Suppliers depend heavily on the industry for their revenues. The suppliers' industry is more concentrated than the industry it sells to.
The suppliers' industry is more concentrated than the industry it sells to.
Which of the following statements accurately describes the distinction between the introduction and growth stages of the industry life cycle? There is more strategic variety in the growth stage when compared to the introduction stage. The number of competitors is more in the introduction stage than the growth stage. The market size for a new product or service is larger in the introduction stage when compared to the growth stage. While achieving market acceptance is the strategic objective during the introduction stage, the objective in the growth stage is to pursue a harvest strategy.
There is more strategic variety in the growth stage when compared to the introduction stage.
Siham is a chef who owns three moderately successful restaurants with innovative menus. Based on what you have read, which of these approaches could help her improve her profits? Change her menus and décor to appeal to economy-minded consumers. Carefully time the opening of her business and focus on underserved niches. Use her existing knowledge, equipment, and staff to launch a catering business. Expand to new locations in economically struggling areas.
Use her existing knowledge, equipment, and staff to launch a catering business.
Hottechi Laminate has developed a new customer-oriented business model. Rather than maintain a network of showrooms across the country, the business will now let customers choose several styles that interest them from an online site, and will ship samples of each of the styles to the customer to test in their home free of charge. Once they have settled on a tile choice, Hottechi Laminate will send a representative to their home to schedule installation. The company has determined that busy middle-class customers will value the convenience of the new model, which allow them to upgrade the look of their homes without spending time browsing showrooms. The new model will be created by selling the old showrooms and shifting resources to the new online site and regional offices for sales personnel. What question remains for Hottechi Laminate to ask in order to put its strategy into action? Why does the business model create value? What activities need to be performed to create and deliver the offerings to consumers? How are the offerings to the customers created? Who are the main stakeholders who will be performing the activities?
What activities need to be performed to create and deliver the offerings to consumers?
Which of the following best illustrates a hostile takeover between the two companies Windfield Inc. and Zyco Inc.? Windfield Inc. purchases Zyco Inc. for $95 billion despite Zyco Inc. being against the purchase. Windfield Inc. and Zyco Inc. join together to form a third new entity, while they also operate separately. Windfield Inc. outsources a few of its business activities to Zyco Inc. for competitive advantage. Windfield Inc. and Zyco Inc. join together to form a single new company called WindfieldZyco Inc.
Windfield Inc. purchases Zyco Inc. for $95 billion despite Zyco Inc. being against the purchase.
Tablette Corp. is a consumer electronics company known for its affordable mobile devices that follows a cost-leadership strategy. In this scenario, Tablette Corp. should ideally compare its strategic position with a company that sells small kitchen appliances at affordable prices. a consumer electronics company that sells high-end devices. consumer electronics company popular among price-conscious customers. an online company that sells customized electronics accessories.
a consumer electronics company popular among price-conscious customers.
he tenet behind the triple-bottom-line is that a firm should solely focus on increasing the economic value created to/for its customers. a firm's primary objective should be increasing the total returns to its shareholders. a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy. a firm's return on revenue can be broken down into three ratios: COGS/Revenue, R&D/Revenue, and SG&A/Revenue.
a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy.
You are the founder of Newex Surfboards, and you are considering methods of gaining and sustaining a competitive advantage. Which of the following changes has the best chance of quickly creating a sustainable advantage? devoting significant resources to researching and developing new products that will be more durable than competitors' products automating the manufacturing process to reduce production costs allowing customers to upload their own image designs and help assemble the finished product at retail locations switching to a just-in-time inventory system to reduce inventory costs
allowing customers to upload their own image designs and help assemble the finished product at retail locations
The Konex Hotel Group purchased Green-Plus Hotels for an estimated value of $120 billion. All the hotels previously owned by Green-Plus Hotels are now managed by the Konex Hotel Group and are known as Konex hotels. What does this scenario best illustrate? a merger a joint venture an acquisition an equity alliance
an acquisition
Roxana manages a chain of workout facilities in a tri-county area that has recently experienced an economic boom because of the development of a new high-speed train line. What is most likely to happen when there is too much money in the tri-county economy? too many goods and services a drop in interest rates high economic growth an increase in prices
an increase in prices
A firm always has a competitive disadvantage when its return on invested capital is below the industry average. 2 percent or lower in a declining industry. about the same as its closest competitor. declining steadily over two or more years.
below the industry average.
If French Provincial Decor LLC obtains an 18 percent return on invested capital, which of the following will help determine if it has a competitive advantage over other furniture companies? Comparing the return to the return on invested capital obtained by other firms in the industry assessing the value based on the shareholders' expectations of return on their capital evaluating the liquidity ratios for other pharmaceutical companies comparing the value to the history of the firm's return of investment over a number of years
comparing the return to the return on invested capital obtained by other firms in the industry
OpenUrToys Inc. is a consulting firm that opens your toys for you and then films your emotional response. They have many clients and are able to generate above average returns relative to their competitors. In this scenario, we would conclude that OpenUrToys Inc. probably has a competitive advantage. sustainable competitive advantage. a competitive parity. a competitive disadvantage.
competitive advantage
Sophie's sandwich shop offers burgers and sandwiches similar to national competitors in the fast-food market but at a much lower price. What strategy is Sophie's using? cost-leadership differentiation niche marketing product diversification
cost-leadership
In the final step of the stakeholder impact analysis, a firm identifies its stakeholders' interests and claims. differentiates its internal stakeholders from its external stakeholders. recognizes the opportunities and threats stakeholders present. decides a course of action to address the stakeholders' concerns.
decides a course of action to address the stakeholders' concerns.
When a firm does not continually upgrade or improve core competencies, its competitors are likely to grow their company at any cost. across the board. develop equivalent or superior skills. expand their product line.
develop equivalent or superior skills.
Horizontal integration through mergers and acquisitions can help firms strengthen their competitive positions by increasing perfect competition. differentiation. oligarchy. natural monopoly.
differentiation.
As a startup company, Lumiere Industries entered the low end of the highly competitive smart television industry with its low-cost televisions. Initially, the company was able to sell its inferior technology due to its low prices. Over the years, however, its rate of technology improvements increased above the industry standards. This helped the company to create a strong strategic position for its smart TVs in the high-end segment and claim a premium price. Which of the following types of innovation does this scenario best illustrate? radical innovation incremental innovation architectural innovation disruptive innovation
disruptive innovation
At the time when Farrah decided to purchase a GPS system for her car, the product had just become accessible to the mass market. She did not purchase the GPS until after she was convinced that the benefits it would offer her would far exceed its price. Also, she waited for her friends to try the product and prominent magazines and websites such as Consumer Reports to endorse it. Which of the following customer segments does Farrah best represent? laggards technology enthusiasts early adopters early majority
early majority
A firm incurs $600 to manufacture a computer. In the market, customers are willing to pay a maximum of $800 for the computer priced at $700. The difference of $200 ($800 - $600) is the consumer surplus. total return to shareholders. customer lifetime value. economic value created.
economic value created.
By selling a tablet at $1,000 for which consumers are willing to pay up to $1,200, a consumer electronics firm makes a profit of $400 per unit. In this scenario, the amount $600, that is ($1,200 - $1000) + $400, is the opportunity cost. economic value created. reservation price. consumer surplus.
economic value created.
Dontechi is a file hosting service that allows users to store up to 5GB of data with no restrictions or charges. However, users have to pay a fee for advanced features on the cloud storage system and additional storage space. Which of the following business models does this best illustrate? subscription-based freemium pay-as-you-go razor-razor blade
freemium
The professional social media website LinkedIn allows its users to create their profiles for free, but it charges a premium price for additional services. This is an example of a________ business model. subscription-based peer-to-peer crowdsourcing freemium
freemium
To be successful and to survive the shakeout stage of the industry life cycle, a firm should charge higher prices than its competitors. focus on product innovation rather than process innovation. gain economies of scale. shift from price to nonprice competition.
gain economies of scale
In which of the following stages of the industry life cycle is a standard first established? maturity stage growth stage shakeout stage introduction stage
growth stage
With the emergence of smartphones, users no longer have to carry a separate music player, a video game, a laptop, or a magazine to keep themselves entertained when traveling. A smartphone is loaded with a variety of applications to satisfy all the customer needs that different industries or products individually satisfied earlier. As a result, the smartphone industry has been posing a threat to a lot of other unrelated industries. What is this phenomenon best known as? industry convergence backward integration product differentiation customer myopia
industry convergence
In the context of the resource-based model of competitive advantage, if a successful firm exhibits resource immobility it means that the rival firms have better accessibility to quality resources, which they will be able to acquire and deploy to their benefit. firm will have a sustained competitive advantage because of unique resources that are difficult for others to replicate. competitors can easily replicate or copy the firm's resource bundles and capabilities. resources of the firm cannot be effectively deployed within its own organization.
irm will have a sustained competitive advantage because of unique resources that are difficult for others to replicate.
Vita Nova Inc. has recently introduced a new production method that will make the manufacture of its patient-monitoring devices more cost-effective. Which of the following will most likely be the result of this innovation? jumps to a steeper learning curve destabilizes a steeper learning curve stabilizes the existing learning curve moves down the existing learning curve
jumps to a steeper learning curve
Three large firms dominate the telecommunication industry of CallsRUs: TeleFone Inc., Cell Comm Corp., and Talk Now Inc. Instead of cutting prices competitively, these firms have resorted to non-price competition through branding and product differentiation. Which of the following industry competitive structures are these companies most likely in? monopoly perfect competition monopolistic competition oligopoly
oligopoly
Capabilities are the________ and managerial skills necessary to orchestrate a diverse set of resources to deploy them strategically. financial strategic organizational competitive
organizational
During an AFI planning session, the strategic leaders of the Buckaroo Trucks Corporation cut overhead costs by placing various stages of production in different countries. By doing this, the firm addressed which of the following issues? philanthropic strategy business ethics corporate governance organizational design
organizational design
A firm is said to gain a competitive advantage when it accomplishes which of the following? matches its highest previous performances provides products similar to its competitors, but at lower prices performs at the same level as that of its competitors provides goods or services similar to the competitors' at a higher price
provides products similar to its competitors, but at lower prices
Soylent Corporation is a major nutritional supplement chain. Its managers are motivated to grow the firm in order to increase their market power and change the industry structure in their favor. Which of the following strategies is most associated with their motive for growth? employing celebrity spokespeople implementing automated soy-making machinery purchasing competitors increasing executive salaries
purchasing competitors
Southwest Airlines (SWA) has enjoyed a sustained competitive advantage, allowing it to outperform its competitors over several decades. Continental and Delta attempted to copy SWA with their offerings of Continental Lite and Song airlines, respectively. Neither Continental nor Delta, however, was able to successfully imitate the resource bundles and firm capabilities that make SWA unique. Which of the following is this case an example of? resource immobility resource heterogeneity resource imitation resource substitution
resource immobility
To better achieve a competitive advantage, firms must now adopt a holistic approach towards satisfying multiple stakeholders opposed to focusing on the needs of their shareholders. What term is used for this approach? stakeholder strategy internal shareholder strategy value creation strategy shareholder relationship strategy
stakeholder strategy
During market testing, Rembrandt Cosmetics realized that the cosmetics industry was dominated by multiple, well-established brands. These brands mostly sold their products in exclusive outlets and department stores. Rembrandt Cosmetics management realized that a new entrant would require a different business model to be successful. Thus, Rembrandt Cosmetics started selling its products through direct marketing. In this scenario, Rembrandt Cosmetics accomplished substitution primarily through path dependence. technology transfer. knowledge diffusion. strategic equivalence.
strategic equivalence.
A firm's________ is based on creating value for customers (V) while containing the cost (C). strategic position growth strategy industry analysis co-operative strategy
strategic position
In a non-equity alliance, which of the following types of information would firms most likely share? a manager's knowledge related to solving nonroutine problems a top-level manager's experience related to making strategic decisions the documented information about the material composition of a product the employees' entrepreneurial skills
the documented information about the material composition of a product
A drawback of short-term contracting as an alternative to making a component in-house is that it is the most-integrated alternative to performing an activity so the principal company has no control over the agent. the supplying firm has no incentive to make any transaction-specific investments to increase performance or quality. it fails to allow a long planning period that individual market transactions provide. the buying firm cannot demand lower prices due to the lack of a competitive bidding process.
the supplying firm has no incentive to make any transaction-specific investments to increase performance or quality
A firm that is producing at an output level beyond the minimum efficient scale experiences diseconomies of scale. a constant return to scale. decreases in cost per unit. a steep learning curve.
diseconomies of scale
When Total Semiconductors was operating at the minimum efficient scale of 10,000-12,000 units per month, the firm's cost per unit was $45. However, when the output level was increased beyond 12,000 units, the cost per unit increased to $47. This increase was attributed to the wear-and-tear of the machinery, and complexities of managing and coordinating. What is this phenomenon known as? minimum efficient scale diseconomies of scale experience-curve effect learning-curve effect
diseconomies of scale
A strategic group will typically include firms within the same industry. customers belonging to a particular socioeconomic class. firms employing similar number of employees, irrespective of their industries. employees within a firm earning the same amount in salary.
firms within the same industry.
Jimmy prefers to buy from well-established brands rather than unknown new ventures. Which customer segment does he fall under? technology enthusiast early adopter early majority late majority
late majority
Dimitre Corp. has been able to gain and sustain a competitive advantage due to its strong relationship with its employees, customers, suppliers, and local communities. The company believes in lifetime employment and ensures that its employees grow along with the company. Investors are more than satisfied with the returns on their investments. Also, 3 percent of the company's profit is spent on community development. With initiatives like these, customers feel privileged to associate themselves with Dimitre products. This scenario best illustrates the implementation of a strategic analysis. stakeholder strategy. wild card event. black swan event.
stakeholder strategy.
Online retailer eBuy had been drastically losing market share to its competitors, so management hired a consulting firm to help figure out the reasons why sales were dipping. The consultants found that the company primarily lost its competitive advantage because of its poor customer service, which included slow response times to customer inquiries and unclear return policies. These ineffective policies and procedures led to many disgruntled customers and a steady migration to more customer-friendly retailers. eBuy can best solve its problem by working on its immobile assets. support activities. resource flows. resource stocks.
support activities.
Which of the following is an example of an internal transaction cost? the cost of searching for a contract manufacturer the cost of signing a contract with a supplier the cost of buying raw materials the cost of maintaining a production unit
the cost of maintaining a production unit
Which of the following provides an example of what AFI strategy framework is used for? Using AFI, the Quest Auto firm was able to implement a strategy that produced high-quality cars more efficiently and thereby reduced costs. Using AFI, the Fine Dine Restaurant Group was able to improve employee benefits and thereby increase employee loyalty. Using AFI, the Mossimo Apparel Company was able to implement a strategy that allowed them to give more money to charities and thereby gain good press. Using AFI, the Pure Tea Group was able to reduce the pollution it caused while processing tea and thereby receive an award.
Using AFI, the Quest Auto firm was able to implement a strategy that produced high-quality cars more efficiently and thereby reduced costs.
Laia is the creator and owner of 60MinuteWorkout.com but wants a physical presence to record workout videos and hold regular classes. To accomplish this, Laia formed a joint venture with a local real estate developer who has significant influence in the commercial property sector. This venture will require exchanging more than just codified information; as such, Laia should expect to share her knowledge of weight-loss techniques. her email list of prospective customers. both tacit and explicit knowledge. only explicit knowledge.
both tacit and explicit knowledge.
In 2007, Salesforce.com recognized an emerging market for platform as a service (PaaS) offerings and developed a new competency in delivering software development and deployment tools. This allowed its customers to either extend their existing customer relationship management (CRM) offering or build completely new types of software. This is an example of leveraging existing core competencies to improve current market position. building new core competencies to achieve vertical integration. redeploying and recombining existing core competencies to compete in markets of the future. building new core competencies to create and compete in markets of the future.
building new core competencies to create and compete in markets of the future
Cumberland Computers will be buying processing chips needed for its laptops and tablets from external suppliers instead of manufacturing them in its own facilities. How will this decision affect the firm? The firm will have more flexibility in purchasing and comparing prices of goods and services. The firm's administrative costs will be low because of necessary bureaucracy. The firm will be protected against the principal-agent problem. The firm will have high-powered incentives, such as hourly wages and salaries.
The firm will have more flexibility in purchasing and comparing prices of goods and services.
Which of the following describes a situation in which firms acquire resources at a low cost, laying the foundation for a competitive advantage later? better expectations of future resource value path dependence affecting current decisions causal ambiguity social complexity
better expectations of future resource value
In a successful________ strategy, the trade-offs between differentiation and low cost are reconciled. blue ocean focused differentiation liquidation divestment
blue ocean
How is an equity alliance different from a joint venture? An equity alliance involves ownership that facilitates transaction-specific ventures; a joint venture involves taking ownership by buying stock. An equity alliance involves taking ownership in a partner; a joint venture involves two or more entities owning a firm. An equity alliance involves taking ownership in a partner; a joint venture involves taking ownership by buying stock. An equity alliance involves partners contributing equity to a joint venture; a joint venture involves two or more entities owning a firm.
An equity alliance involves taking ownership in a partner; a joint venture involves two or more entities owning a firm.
________ is the benefit that is missed or given up when an investor, individual or business chooses one alternative over another. Value creation Opportunity cost Accounting profitability Reservation price
Opportunity cost
Daniela wishes to strengthen her firm's marketing department by partnering with a large marketing firm that can complement her existing value chain. However, she fears potential legal repercussions, including potential lawsuits filed by U.S. federal agencies such as the Federal Trade Commission. Which of the following strategic options should Daniela pursue? Daniela should implement green field operations with the marketing firm to strengthen her international reach. Daniela should consider forming a strategic alliance with the marketing firm. Daniela should move forward with a hostile takeover of the marketing firm. Daniela should purchase the marketing firm outright via an acquisition.
Daniela should consider forming a strategic alliance with the marketing firm.
The average cost of production for a bottle of mineral water in the industry is $5 while its average price is $8. Forever Spring Inc. manufactures the same product for $3 per bottle and sells it for $8 per bottle. Which of the following statements is most likely true of ForeverSpring Inc. in this scenario? It has a competitive advantage in the industry. It has a competitive disadvantage in the industry. It has competitive parity with other firms in the industry. It has formed a strategic alliance with other firms in the industry.
It has a competitive advantage in the industry.
How is a cost leader protected from threats from powerful suppliers? It is more able to absorb price increases through accepting lower profit margins. It is more able to absorb price increases through generating higher profit margins. It is able to create a significant difference between perceived value and current market prices. It is able to create a significant difference between actual value and future market prices.
It is more able to absorb price increases through accepting lower profit margins.
What must a cost-leadership strategy accomplish to be successful? It must increase the firm's cost above that of its competitors while offering adequate value. It must reduce the firm's cost below that of its competitors while offering adequate value. It must increase the firm's cost above that of its competitors while offering superior value. It must reduce the firm's cost below that of its competitors while offering superior value.
It must reduce the firm's cost below that of its competitors while offering adequate value.
________ is best described as the output range needed to bring down the cost per unit as much as possible, allowing a firm to stake out the lowest-cost position that is achievable through economies of scale. Minimum efficient scale Break-even output Maximum output capacity Optimum sustainable yield
Minimum efficient scale
Mohawk is a leader in sustainable and innovative carpeting and floorings, as evidenced by its signature product, the world's first organic cotton carpet. Its product is unique and has appealing customer attributes. If Mohawk's raw material costs increased by 12 percent this year, what would be the likely outcome? Mohawk would lower profit margins to absorb this cost increase. The company would launch an all-out effort to reduce other costs by 12 percent. Mohawk would pass a major portion of this increase along as a price increase to its customers. Mohawk would seek lower-cost materials, even if it meant losing the carbon-neutral label on the product.
Mohawk would pass a major portion of this increase along as a price increase to its customers.
Toy sales have declined by 10 percent each year, forcing many retailers to exit the industry. To eliminate its remaining competition, Terrific Toys sells all of its product at a loss and relies on its significant cash holdings to cover costs until its competition is forced to exit the industry. Is this an example of a successful strategy? Why or why not? Yes. Any strategy that forces competition from the market is by definition successful. Yes. Bargain has achieved a sustainable competitive advantage by selling its toys at a lower price than competitors. No. Bargain has failed to create value for its customers. No. Bargain's strategy and competitive advantage are unsustainable.
No. Bargain's strategy and competitive advantage are unsustainable.
The owners of Always Baked bakery want to open a second retail outlet. Which of the following scenarios is most likely to yield a competitive advantage? Open a shop on an inexpensive piece of land near a new mixed-use residential and business district currently under construction. Purchase an existing bakery from a business that closed due to declining sales and try to revive it. Build a shop in a sparsely populated rural area where the land is inexpensive and few other bakeries exist. Open a shop in a crowded downtown location where several other bakeries have been successful over the years.
Open a shop on an inexpensive piece of land near a new mixed-use residential and business district currently under construction.
Lin manages the supply chain for a company that sells designer bags. She learns that economists are predicting a moderate to severe recession in the next six to eight months. Based on that information, what action should Lin recommend to the company's owner? Increase supply. During recessions, businesses that focus on low-cost solutions make significant profits. Reduce supply. Customers generally reduce their purchases of luxury items when the economy falters. Maintain the supply at its current rate. Economic forecasts are rarely accurate. Wait six months and see what happens. Recessions rarely affect consumer spending.
Reduce supply. Customers generally reduce their purchases of luxury items when the economy falters.
Which of the following is a drawback of Porter's five forces model? The model describes competition narrowly as a firm's closest competitors. Strategic leaders cannot determine the changing speed of an industry or the rate of innovation. It fails to provide a basis for deriving implications for a firm's strategic position within an industry. The model fails to consider that threat of substitutes can come from outside a given industry.
Strategic leaders cannot determine the changing speed of an industry or the rate of innovation.
How is a firm's task environment different from its general environment? Strategic leaders have some influence over external factors in the task environment; they have little direct effect over external forces in the general environment. Strategic leaders have no direct effect over external factors in the task environment; they have some influence over external forces in the general environment. Strategic leaders have no direct effect over external factors in the task environment; they have influence over all external forces in the general environment. Strategic leaders have influence over all external factors in the task environment; they have no direct effect over external forces in the general environment.
Strategic leaders have some influence over external factors in the task environment; they have little direct effect over external forces in the general environment.
Which of the following is likely to happen due to horizontal mergers between competitors such as Delta and Northwest airlines? The overall industry profitability will increase. The threat of strong competitive forces such as supplier power will increase. The industry will face excess capacity in the future. The structure of the industry will change from consolidated to one that is fragmented.
The overall industry profitability will increase.
Which of the following describes the group of customers referred to as the early majority? They come into the market during the shakeout stage. They are the last to come into the market. They enter the market during the maturity stage. They enter the market during the growth stage.
They come into the market during the shakeout stage.
DuraLine Ltd. is a landline telephone manufacturer whose average return on invested capital is approximately 2 percent. Because demand for landline telephones has declined significantly, the industry average return on invested capital has been negative (-5 percent) for the last few years. In this scenario, DuraLine Ltd. has a competitive advantage. balanced scorecard. competitive disadvantage. power position.
competitive advantage.
The minimum wage in the country of Hanns is $8 an hour. Delish, a restaurant in Hanns' capital city, pays its servers $8 per hour. However, the management of the restaurant feels that this amount is excessive for workers whose only job is to clear tables. By continuing to adhere to the rules set by the government of Hanns, which of the following responsibilities is Delish satisfying? legal responsibilities philanthropic responsibilities ethical responsibilities demographic responsibilities
legal responsibilities
Todd is a manager in an industry that has a few large players and that has remained relatively stable over the past few years. He finds out that legislators are proposing new laws to deregulate the industry. If the laws pass, which of these scenarios will Todd most likely face? many new competitors technological innovation the end of globalization across-the-board price increases
many new competitors
Mindful Baking is a gourmet bakery chain that differentiates itself from a large number of competitors by providing baked goods for people who have various food allergies. It has some pricing power because it provides differentiated products and, therefore, has some entry barriers in place. In this scenario, Mindful Baking is most likely operating in a(n) oligopoly. monopoly. perfectly competitive industry. monopolistically competitive industry.
monopolistically competitive industry.
BookWizard, a large online and offline book-selling company, decides to enter the college textbook market. Its goal is to create cobranded. university-specific websites that offer textbooks; clothing and accessories such as logo T-shirts and sweaters, baseball hats, and mugs; and a full range of peripheral items like notebooks, pens, art supplies, and the like. This scenario shows product diversification. vertical integration. horizontal integration.
product diversification.
Which of the following is considered a limitation of employing the balance-scorecard framework? providing guidance about the right metrics to use accommodating both short- and long-term metrics designing and planning business processes translating the company vision into measurable goals
providing guidance about the right metrics to use
Mejor Maíz tortilla chips, manufactured by Tampico Alimentos, have been the top-selling tortilla chips in the market. Though the market for chips is flooded with competitors, Tampico Alimentos has been able to maintain its market position for a long time. This is mainly attributed to the fact that its chips have all the flavor of competing brands but only half the fat, the result of a proprietary cooking method used by the company. This competency of Tampico Alimentos will be considered as a(n)________ resource in the VRIO framework. imitable rare intangible organizational
rare
Putting the formulated strategy into practice through organizational structure, culture, and controls is accomplished in which stage in the AFI strategy framework? strategy formulation strategy implementation strategy examination strategy appraisal
strategy implementation
Marketo Inc., a marketing firm, replaced its existing data analysis software with new software from another supplier. Since the new software has different features and abilities, Marketo has had to spend $15,000 on training its employees to use it. In this scenario, $15,000 represents Marketo's opportunity cost. switching cost. octroi charge. excise duty.
switching cost.
Amelia has recently started a restaurant in a commercial area that already has many other established restaurants and popular fast-food chains. Amelia owns the building in which her restaurant is located, rather than leasing premises as her competitors do. This factor allows her to offer her products at a more competitive price. Amelia has also invested a huge amount in designing the restaurant's interior and in equipping the kitchen with the appliances that are most widely used in her industry. In this scenario, which of the following is the most valuable resource for Amelia's business? the investments made by Amelia on the restaurant's interior the type of kitchen equipment widely used in her industry the restaurant's late entry into the market the building owned by Amelia, which reduces cost of operations
the building owned by Amelia, which reduces cost of operations
Grameen Bank in Bangladesh was founded to provide microcredit to impoverished farmers who wanted to start their own entrepreneurial ventures that would help them climb out of poverty. This best exemplifies Michael Porter's suggestion that managers need to keep economic needs and societal needs disconnected from each other. a firm should expand its internal value chain to include nontraditional partners. businesses should focus on creating regional clusters such as Silicon Valley in the United States. the largest but lowest income socioeconomic group can provide significant business opportunities.
the largest but lowest income socioeconomic group can provide significant business opportunities.
The internet service provider industry in the country of Wakanda is an industry characterized by the presence of strong network effects, high brand loyalty, high economies of scale, and proprietary technology among incumbent firms. Thus, in the internet service provider industry, the threat of substitutes is most likely high. threat of new entrants is most likely low. bargaining power of buyers is most likely low. entry barriers are most likely nonexistent.
threat of new entrants is most likely low.