BSAD 4780 - Class assignments Exam 1
The bar chart shown here provides the following information: cost to produce a pizza, price charged to the customer for the pizza, and the maximum price the consumer would be willing to pay for the pizza. Match each question to its correct cost response by clicking on each question and dragging it to the correct drop space beside each cost.
$2 - How much is the consumer surplus? $3 - How much is the producer surplus or profit? $5 - How much is the economic value created? $7 - How much is the cost to produce the product or service? $12 - What is the amount of the reservation price?
Global Reach Corp. is a public company whose shares are currently trading in the market at $150 each. The company manufactures smartphones at the cost of $300 per unit and sells them in the market for $500 each. What is the company's producer surplus? $300 $200 $650 $150
$200
By selling a television at $1,200 for which consumers are willing to pay up to $1,300, a consumer electronics firm makes a profit of $500 per unit. What is the economic value created in this scenario? $1,300 $600 $700 $1,200
$600 In this scenario, the economic value created is $600. Economic value creation equals consumer surplus plus firm profit, or the sum of consumer surplus and producer surplus. In this case, the economic value created will be ($1,300 $1,200) + ($500).
The textbook notes that a resource is valuable if it helps the firm exploit an external opportunity. This will typically result in enhanced economic value. Which of the following is an example of economic value? Apple and Beats together provide a strong synergy. Beats weathered the economic downturn from earlier this decade very well. Beats sells headsets for more than $150 when the cost is approximately $15. Beats resource immobility resulted in the firm being purchased by Apple. Beats designs provide the user an air of coolness.
Beats sells headsets for more than $150 when the cost is approximately $15. Economic value considers both the worth of the item (its value) and the cost of the item. Value must be higher than price for a transaction to occur. Thus the large gap between the price and cost is an example of economic value at Beats.
According to the video, which of the following is an example of a threat of substitute product or service? Driving instead of flying between two nearby cities Buying instead of renting airplanes and gate space at airports Using social media instead of newspaper advertisements for marketing Using artificial sweeteners instead of corn syrup in soft drinks
Driving instead of flying between two nearby cities The power of substitutes examines the ability of products from nearby industries to substitute for the industry's products, reducing sales and impacting profits. As the Transportation Security Administration (TSA) has increased the inconvenience in time associated with flying, driving has become the more effective substitute for some shorter flights that could be driven in about 5 to 6 hours. In the soft drink industry, strong brand positions reduce the value of potential products in the eyes of customers.
Which of the following explains how dynamic capabilities are different from the resource-based view? Dynamic capabilities deal with resource heterogeneity. Dynamic capabilities deal with applying resources over time. Dynamic capabilities deal with intangible resources. Dynamic capabilities deal with tangible resources.
Dynamic capabilities deal with applying resources over time.
Though the microwaves manufactured by Emergo Inc. and Sensation Electronics Inc. sell at the same price of $600 per unit, the economic value created by Emergo Inc. is more than that of Sensation Electronics Inc. In the context of this scenario, which of the following statements is true? Emergo and Sensation Electronics have achieved a competitive parity. Sensation Electronics has differentiated its products more than Emergo Inc. has. Sensation Electronics has been able to create more producer surplus for itself than Emergo. Emergo has a relative cost advantage over Sensation Electronics.
Emergo has a relative cost advantage over Sensation Electronics.
Which of the following is Nike's core competency? creating heroes building customer loyalty manufacturing high-end athletic gear inspiring athletes at all levels retailing
creating heroes Core competency is a unique strength embedded deep within a firm. Nike "developed a deep expertise in creating heroes."
FL Systems Inc. and Oryxo Systems Inc. are two competing firms. FL Systems Inc. has $300,000 in tangible assets and $200,000 in intangible assets. Oryxo Systems Inc. has $150,000 in tangible assets and $347,000 in intangible assets. In the context of the resource-based view, which of the following is the most likely implication of the asset values of the two companies? FL Systems Inc. will find it harder than Oryxo Systems Inc. to attain competitive advantage. FL Systems Inc. will find it easier than Oryxo Systems Inc. to sustain competitive advantage. Oryxo Systems Inc. has less valuable resources than FL Systems Inc. Oryxo Systems Inc. has less invisible assets than FL Systems Inc.
FL Systems Inc. will find it harder than Oryxo Systems Inc. to attain competitive advantage.
Total costs include fixed and variable costs. ________________________ costs are independent of consumer demand, whereas __________________ costs change with the level of consumer demand. Fixed; variable Variable; fixed Fixed; stable Varying; stable Solid; variable
Fixed; variable Total costs include fixed and variable costs. Fixed costs are independent of consumer demand, whereas variable costs change with the level of consumer demand.
The video explains the military origins of the term strategy, but then goes on to explain how Michael Porter closed the gap between military and business thinking with his definition of business strategy. Select the option that best defines strategy in the context of business. Generals win wars by degrading the enemy's ability and willingness to fight. Businesses win market share by degrading a competitor's ability and willingness to compete. Generals make battle plans based upon the forces available to them and their understanding of the enemy's forces. Business leaders create strategies based upon their firm's capabilities and their understanding of their competitor's capabilities. Generals are trying to win battles, against enemy combatants. Business leaders are trying to win market share against competitors. Generals can be so removed from the front lines that they lose touch with the common soldiers. Senior executives can be so insulated by the organization hierarchy that they don't understand the realities of the common worker. Battle plans often need to be changed by field commanders due to shifting battlefield realities. Business strategies often have to adapt to changing competitive conditions.
Generals make battle plans based upon the forces available to them and their understanding of the enemy's forces. Business leaders create strategies based upon their firm's capabilities and their understanding of their competitor's capabilities. Businesses do not compete directly against each other as armies do, degrading each other's ability to fight. Instead, they compete indirectly, for customers also called market share, by offering a more compelling value proposition.
Genie Software Inc. has been operating in the country of Jamtland for almost a decade. The nation is currently experiencing an economic downturn. Which of the following is the most likely benefit of this economic condition for Genie Software Inc.? Genie will have better access to highly skilled human capital at a lower cost. Genie will experience less competition from rival companies. Genie will find it easier to raise prices to increase profits. Genie will have to expand its operations to meet the increasing consumer demand.
Genie will have better access to highly skilled human capital at a lower cost.
Nintendo and Groupon (Strategy Highlight 4.1 in the text) have both had a rise and fall in their respective industries. However, the reason for each of their falls is different. Which of the following statements best captures this difference? Both Nintendo and Groupon have suffered due to the rapid change from PC to mobile technology. Groupon's model was easy to imitate, while Nintendo has not responded to the shift to mobile games. Nintendo devices were easily cloned, while Groupon lost sales with the move from PC to mobile devices. Groupon was not properly capitalized, while Nintendo shifted its focus to hardcore gamers. Groupon has not responded to the shift to mobile devices, while Nintendo's console was easy to imitate.
Groupon's model was easy to imitate, while Nintendo has not responded to the shift to mobile games. Nintendo has struggled to revamp its business model to leverage the massive movement of games onto mobile devices. The move to mobile devices was a small factor for Groupon; the larger issue was that their competency in online coupons was not hard to imitate and several better-positioned competitors (i.e., Amazon and Google) easily moved into the market space.
According to the video, which of the following is true of price-based competition? It is intense in the soft drink industry due to low brand preference among consumers. It is intense in the airline industry because it is confusing for customers to compare flight ticket prices using Internet travel websites. It is intense in the soft drink industry because price is the main competitive factor. It is intense in the airline industry due to high information transparence and low marginal costs.
It is intense in the airline industry due to high information transparence and low marginal costs. Price-based competition is intense in the airline industry due to high information transparence, low switching costs, low marginal costs, etc. In the soft drink industry, price is not the main competitive factor, but brand and marketing is. Strong brand preference keeps consumers from switching between products. So, price-based rivalry is much stronger in the airline industry than it is in the soft drink industry.
What differentiates Nike from other firms in the athletic shoe and apparel industry and allows it to maintain a competitive advantage over other firms? Phil Knight's leadership Its strategic fit with its environment Its globally recognized brand Waffle design of the running shoe Its dynamic capabilities
Its globally recognized brand Nike's brand—expressed in its distinctive "swoosh," its advertising, and its endorsement by prominent athletes—reflects its differentiation as a premium product.
According to the video, which of the following is an example of a buyer who will be able to successfully negotiate for lower prices? Large corporate customers with extensive service requirements Individual consumers with strong brand preference Individual consumers who buy in small quantities Large corporate customers who can increase industry profitability
Large corporate customers with extensive service requirements Buyer power considers the ability of the buyers of the industry's products to successfully negotiate lower prices, reducing industry profitability. In the air travel industry, large corporate customers with extensive business travel earn a good position to negotiate flight discounts from airlines wanting to serve all the firms' flight needs. In the soft drink industry, individual consumers buy in such small quantities that they are not able to negotiate price discounts.
In the financial year 2016, for every $100 in revenues, Microsoft earned $21.5 in profit, while Apple earned $20.6 in profit. This demonstrates that Microsoft was using its capital more efficiently to generate revenue than Apple. Apple's inventory turnover was more than that of Microsoft's. Microsoft was more efficient than Apple in producing its goods. Microsoft's return on revenue was higher than that of Apple.
Microsoft's return on revenue was higher than that of Apple.
________costs capture the value of the _______ alternative use of the resources employed. Opportunity; worst Opportunity; average Threat; best Threat; worst Opportunity; best
Opportunity; best Opportunity costs capture the value of the best forgone alternative use of the resources employed.
Red Hot Inc. and Maverick Cycles Inc. are two competing motorcycle companies. While Red Hot's Cost of goods sold/Revenue is 63.4 percent, the Cost of goods sold/Revenue of Maverick Cycles is 54.2 percent. What do you infer from this financial data? Red Hot and Maverick Cycles have achieved a competitive parity. Red Hot has a higher profit margin than Maverick Cycles. Red Hot is able to command a greater price premium for its products than Maverick Cycles. Red Hot is less efficient than Maverick Cycles in producing goods.
Red Hot is less efficient than Maverick Cycles in producing goods.
The impact of baby boomers getting older on an industry would be classified in which PESTEL factor? Economic Sociocultural Legal Political Technological
Sociocultural Demographic changes in the population are generally categorized within this Sociocultural factor of the PESTEL.
Which characteristic of strategic leadership might support Mayer's decision to end Yahoo's work-at-home policy? Strategic leaders are a prime determinant of the firm's ability to gain competitive advantage. Strategic leaders wield position power. Strategic leaders are responsible for top-down strategy planning. Strategic leaders spend 67% of their time in face-to-face meetings. Strategic leaders effectively organize resources to accomplish strategic goals.
Strategic leaders spend 67% of their time in face-to-face meetings. Strategic leaders spend much of their time working face to face with others. Mayer believed having employees similarly work in the office rather than at home would encourage collaboration, teamwork, and creativity.
In the video, business strategy was identified as a decision to choose "a different set of activities to deliver a unique mix of value." Which of the automotive firms follows this proposition most closely? Ford Tesla Toyota General Motors Hyundai
Tesla While Tesla is doing many things differently, an important difference is their direct sales model. Tesla's automobiles are sold directly to consumers instead of through dealerships. This sales model requires a very different set of activities to be successful such as locations in retail malls instead of dealerships in areas where land costs are low.
In the 'Art of War' Sun Tzu emphasized the fluid nature of competitive situations and the need for the strategist to recognize and incorporate that reality into their strategic planning. Which of the following has created the greatest uncertainty in the business environment across industries over the last 20 years? Tax policy The U.S. government The Internet The European Union The Federal Reserve
The Internet While all of the answers have shaped how business is done, only the internet (and its continuing evolution) has radically re-shaped the traditional business models of many industries across the world.
Onivo Auto Inc. has been the leader in low-cost and fuel-efficient engine technology for many years. It has been able to sustain its competitive advantage primarily because of its highly efficient automobile engines, which competitors have been unable to develop or buy at a reasonable price. In the context of the VRIO framework, which of the following resource attributes most likely underpins Onivo's competitive advantage? The resource is easy to replicate. The resource is costly to imitate. The resource neutralizes external opportunities. The resource decreases the perceived value of its products.
The resource is costly to imitate.
Incumbent firms can benefit from several important sources of entry barriers. Economies of scale are one such source. Which of the following is an implication of economies of scale for incumbent firms? They can spread fixed costs over lesser units. They can demand better terms from their suppliers. They benefit from a less specialized division of labor. They cannot employ technology efficiently.
They can demand better terms from their suppliers.
How do complements affect a primary product or service? They act as the strategic equivalent of the primary product. They lower the utility of the primary product. They reduce the value of the primary product. They increase the demand for the primary product.
They increase the demand for the primary product.
__________ denotes the dollar amount a consumer would attach to a good or service (that is, willingness to pay). Value Economic value created Price Profit Cost
Value Value denotes the dollar amount a consumer is willing to pay for a good or service. It is also called the reservation price. The difference between a buyer's willingness to pay for a product or service and a firm's cost to produce it is the economic value created.
The tenet behind the triple bottom line is that a firm's primary objective should be increasing the total returns to its shareholders. a firm should solely focus on increasing the economic value created for its customers. 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.
If a firm is not effectively organized to exploit the competitive potential of a valuable, rare, and costly to imitate (VRI) resource, the best case scenario is a temporary competitive advantage. strategic equivalence. direct imitation. a state of perfect competition.
a temporary competitive advantage.
In a perfectly competitive industry structure resource immobility is high. resource heterogeneity is high. any competitive advantage that one firm has will be short-lived. competitors cannot quickly acquire resources used by the current market leader.
any competitive advantage that one firm has will be short-lived.
Although Google and Microsoft compete in similar spaces, they apply very different ___________ to generate revenue. profitability analyses business models business plans business forecasts revenue models
business models As the minicase notes, "Google and Microsoft compete with one another for market share in several different product categories through quite different business models."
The kinds of factors that might be reviewed when considering the 'Economic' aspect of the PESTEL include judicial outcomes that impact product liability within an industry. changes in the speed of internet communication capabilities. changes in the average age of different consumer groups. the election of a conservative congress. changes in disposable income per capita.
changes in disposable income per capita. Changes in disposable income per capita is an economic—rather than a sociocultural, political or technological—factor.
Strategic group mapping establishes that product features and prices are irrelevant to a strategic group. competitive pressures within an industry are similar among all strategic groups. competitive rivalry is strongest between firms that are within the same strategic group. rivals inside a strategic group serve different customers.
competitive rivalry is strongest between firms that are within the same strategic group.
Rey estimated that a pair of NuFit jeans would be worth $60 for its brand and durability. However, at the NuFit store, the pair of jeans he wanted was available for $45. The difference of $15 in this scenario is referred to as the producer surplus consumer surplus break-even price reservation price
consumer surplus
In the context of the SWOT matrix, which of the following best exemplifies an external opportunity for a firm? decreasing employee attrition within the firm increasing productivity of the employees decreasing government interference in the target market increasing inflation rates in the target market
decreasing government interference in the target market
Effective use of the PESTEL framework can help us identify only a few effective trends. how a trend is changing buyer behavior in an industry. emerging substitute products. emerging opportunities and threats within an industry. new competitors.
emerging opportunities and threats within an industry. Correctly used the PESTEL can help us understand emerging opportunities and threats in an industry.
Qwik Process Inc. is a company that supplies microprocessors to Nuevono Inc., a computer hardware company. When Nuevono Inc. demands lower prices for the microprocessors, Qwik Process Inc. makes it clear that it would profit more from launching its own brand of laptops and desktops in the market. Fearing the competition it would then face from Qwik Process Inc., Nuevono Inc. decides to buy the microprocessors at the quoted price itself. In this scenario, Qwik Process Inc., as a supplier, has exercised its bargaining power by threatening to backward integrate. crowdsource. forward integrate. outsource.
forward integrate.
Quick Connect is an instant messaging mobile application. Users have access to a basic version with limited message recipients for free, but they have to pay a fee to have unlimited message recipients or to use advanced features. Which of the following business models does this best illustrate? freemium razor-razor-blade subscription-based pay-as-you-go
freemium
The relative bargaining power of suppliers is most likely low when the suppliers' industry is more concentrated than the industry it sells to. incumbent firms face low switching costs when changing suppliers. the suppliers provide products that are differentiated. there are no readily available substitutes for the products and services they offer.
incumbent firms face low switching costs when changing suppliers.
EZ Electronics Inc., Neo Digital Inc., and Techno Products Corp. are all companies that manufacture and sell consumer electronics. They procure their component parts from a similar set of suppliers in China and sell the final product to customers with similar needs. Thus, the three companies together are a part of a(n) industry. plant. focus group. occupational group.
industry.
If a company has 25 million shares outstanding, and each share is traded at $400, the ______ is $10 billion. market capitalization total return to shareholders return on revenue customer lifetime value
market capitalization
Capital intensity is higher for firms that recognize revenue on an accrual basis. measures operating expenses as a percentage of revenue. measures the amount of capital machinery in the business for every dollar of revenue generated. measures the amount of revenue generated for every dollar of invested capital. is higher for firms that keep a lot of extra capital available, in case of emergencies.
measures the amount of revenue generated for every dollar of invested capital. The more revenue generated per dollar of invested capital, the more intensely the capital is being used to generate revenue.
Tax efficiency measures the effectiveness of the firm to keep its profits on an after-tax basis. measures the amount of revenue that is taxable for every dollar of invested capital. is higher for firms with a strong research and development team. is higher for firms with a high tax rate. measures the ability of the firm to reduce taxes by internationalizing their operations.
measures the effectiveness of the firm to keep its profits on an after-tax basis. Firms with a higher tax efficiency are able to keep more of their profitability on an after-tax basis.
Operating profit margin measures operating expenses as a percentage of revenue. measures the percentage of revenue left over after operating expenses to cover other expenses. measures the amount of revenue generated for every dollar of invested capital. is higher for firms with a low tax rate. is higher for firms with a high cost of goods sold.
measures the percentage of revenue left over after operating expenses to cover other expenses. Operating profit margin measures the effect of operating expenses such as the cost of goods sold on the firm's profitability. After paying operating expenses the remaining funds are available to pay other expenses and contribute to profitability.
In the restaurant industry, a large number of restaurants cater to similar customer needs. However, each restaurant makes its product unique by offering a different cuisine, a different ambience, organic ingredients, or different services like home delivery. This differentiation allows each restaurant to set its own prices. Thus, the restaurant industry best illustrates a(n) monogopoly. oligopoly. perfectly competitive structure. monopolistically competitive structure.
monopolistically competitive structure.
Which best describes the competitive industry structure in which Yahoo found itself? monopoly oligopoly monopolistic competition perfect competition natural monopoly
oligopoly An oligopoly is a competitive market structure in which there are a few large firms, some pricing power, high barriers to entry, and differentiated products.
Owners of coffee plantations in the country of Jabatina grow their own coffee beans and supply them to various stores and restaurants all over the country. There are many plantation owners supplying to a huge number of companies, and they are typically unable to differentiate their products from one another. They also do not have the power to fix their own prices in the industry. In addition, these suppliers can only achieve competitive parity and not a competitive advantage. Thus, the coffee bean industry in Jabatina best illustrates a(n)___ structure. perfectly competitive monopolistic monopolistically competitive oligopolistic
perfectly competitive
A characteristic Google and Microsoft have in common is that they are both ____________ businesses. platform radical architectural pipeline incremental
platform Platforms are business model innovations that use technology (such as the internet, cloud computing, etc.) to connect organizations, resources, information, and people in an interactive ecosystem where value-generating transactions can be created and exchanged.
Economic contribution is created when the price a customer is willing to pay for a good or service is more than the cost the firm incurs to produce it. price a customer is willing to pay for a good is less than what it costs the firm to manufacture it. revenue generated by selling a unit of a product is equal to the cost incurred by the firm in producing it. value a consumer attaches to a good or service is lesser than what he or she paid for it.
price a customer is willing to pay for a good or service is more than the cost the firm incurs to produce it.
Microsoft used profits from sales of its operating system to subsidize Bing in online search. This is consistent with which popular business model used today? subscription model freemium bundling razor--razor blades pay-as-you-go
razor--razor blades The razor—razor blades model is based on the idea that a product is sold at a loss or given away for free. It allows a company to make its money on a replacement part that the customer needs and for which it pays. As reflected in Exhibit MC 15.1, Microsoft used the profits from its application software business to subsidize its search engine Bing, which, like Google, is free for the end user.
Even though Easy Speak Inc. and KM Com Inc. operate in the same industry—telecommunications—each firm has a different and loyal customer base. While Easy Speak Inc. attracts young students and professionals through its efficient network coverage and pricing, KM Com Inc. attracts elderly customers solely due to its excellent customer service. Thus, both firms draw their strengths from distinct resource bundles. Which of the following assumptions of the resource-based model of competitive advantage does this scenario best illustrate? resource mobility resource substitution resource heterogeneity resource imitation
resource heterogeneity
A consolidated industry turns into a fragmented industry when restrictive government policies are introduced in the industry. network effects enjoyed by incumbent firms within the industry become stronger. technological advances lead to industry convergence. firms reduce competition within the industry through mergers and acquisitions.
restrictive government policies are introduced in the industry.
Which of Porter's five forces was likely the most powerful factor influencing the failure of Yahoo's turnaround attempt? suppliers' bargaining power threat of new entrants rivalry among existing competitors buyers' bargaining power threat of substitute products or services
rivalry among existing competitors Rivalry among existing competitors describes the way Google and Facebook took advantage of industry growth and moved much more quickly than Yahoo to gain profitable market share in mobile advertising.
The relationship between Phil Knight and Bill Bowerman and their contributions to Nike's success exemplify which aspect of competitive advantage? social complexity isolating mechanisms resource heterogeneity tangible resources path dependence
social complexity Social complexity describes a situation in which different social and business systems interact with each other. Bill Bowerman was Phil Knight's former running coach (a reflection of the social system), and they eventually partnered to found Nike (the business system).
Microsoft's move from sales of its office programs to "rentals" on the cloud reflects a shift to a(n) ___________ business model. razor—razor blade subscription advertising bundling freemium
subscription A cloud rental is a service for which customers pay over a fixed period of time; this defines a subscription business model.
According to the PESTEL model, the environmental factor most relevant to Yahoo's turnaround efforts was political. social. economic. technological. ecological.
technological. Technological factors capture the application of knowledge to create new processes and products. Changes in the technological environment, such as the rapid growth of mobile advertising, bring both opportunities and threats for companies.
Which of the following will most likely be considered as an automobile company's core competency? the company's ability to start distributing its cars in areas where a competitor is the market leader the company's ability to make its cars more fuel efficient than most of its competitors the company's ability to follow federal laws just like its competitors the company's ability to manufacture cars at a cost that is average in the industry
the company's ability to make its cars more fuel efficient than most of its competitors
The auditor of a public company is assessing the value of all the intangible assets owned by the company. Which of the following would most likely be included in this assessment? the company's brand equity the company's cash reserves the company's plant and equipment the company's headquarters
the company's brand equity
While most of Savvy Inc.'s competitors were moving toward developing and emerging markets, Savvy Inc. decided to keep its operations limited to its home country so that it could gain some advantage. A few years later, however, Savvy Inc. lost its footing in the home market due to a sharp fall in demand. It then decided to invest in large-scale operations in the same developing nations as its competitors, within a short period of six months. However, its costs kept increasing, so it could not compete against the already established brands. In this scenario, the failure of Savvy Inc. can be best attributed to economies of scale. resource mobility. better expectations of future resource value. time compression diseconomies.
time compression diseconomies.
In the preceding case about Nintendo, their original entry into the video-gaming market was built upon a resource that became VRIO relative to their main competitors Sony and Microsoft. What was the main focus of this resource? to build the best technology into its hardware to partner with cable providers for easier access to T devices to exploit a lead in kinetic motion devices for first-person-shooter games to build and exploit a knowledge of casual gamers to deploy imersive technology for hard-core gamers
to build and exploit a knowledge of casual gamers Nintendo successfully launched handheld and Wii consoles that were targeted at the casual gamer, while the competition was primarily focused on hardcore gamers.
The different activities that Nike uses to create heroes improve its differentiation and costs relative to its competitors. Which internal analysis tool allows us to make this evaluation? dynamic capabilities PESTEL framework value chain analysis SWOT analysis Porter's five competitive forces model
value chain analysis The value chain analysis is the only internal analysis tool used to evaluate differentiation and cost.
