Business Policy and Strategy Exam 1

A firm operating on a 70 percent learning curve will achieve lower per-unit costs after doubling its output than a firm operating on an 80 percent learning curve will. a. True b. False

A

A positive relationship between vision statements and firm performance is more likely to exist when a. organizational structures are aligned with the firm's vision statement b. visions are product-oriented c. internal stakeholders are isolated from defining and revising the vision d. vision statements are equivalent to listening to the customers

A

A video-streaming service provider such as Netflix is a complement to a manufacturer of streaming video devices such as Roku. a. True b. False

A

An employee lacking some of the innate abilities to be a top-level manager can still become an effective strategic leader through hard work and experience. a. True b. False

A

Because competitors in oligopolistic industries are so interdependent, it is especially important for managers in those firms to monitor and respond to changes their competitors make. a. True b. False

A

Dynamic strategic activity systems help a firm to maintain a competitive advantage for extended periods of time. a. True b. False

A

Executives whose visions and decisions help their companies achieve competitive advantage can be considered strategic leaders. a. True b. False

A

Golden Harvest is a restaurant located inside a five-star hotel. It caters mainly to customers who are concerned about quality dining rather than the prices. In this scenario, which of the following will be a part of Golden Harvest's strategic group? a. a premium rooftop restaurant in the same city b. a mobile food cart parked opposite to the five star hotel c. a nearby fast food restaurant d. a food kiosk in an adjacent subway station

A

In the third step of the innovation process, a(n) a. invention is commercialized by entrepreneurs b. new idea is presented in terms of abstract concepts c. new idea is expressed as findings derived from basic research d. invention is imitated by competitors

A

In the why, what, who, and how of business models framework, the why dimension asks "why does the business model create value?" a. True b. False

A

Questions asked during the strategy analysis stage of the AFI framework include "How does the firm make money?" and "What effects do forces in the external environment have on the firm's potential to gain and sustain a competitive advantage?" a. True b. False

A

Riya has recently started a restaurant in a commercial area that already has many other established restaurants and popular fast-food chains. Riya 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. Riya 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 Riya's business? a. the building owned by Rita, which reduces cost of operations b. the restaurant's late entry into the market c. the investments made by Riya on the restaurant's interior d. the type of kitchen equipment widely used in her industry

A

The core competencies of a firm are determined by the interplay of its tangible resources and intangible capabilities. a. True b. False

A

Which of the following is a disadvantage faced by first movers in an industry? a. they will have to find distribution channels and complementary assets b. they will have no access to intellectual properties such as critical patents c. they cannot benefit from learning and experience curve effects like the late entrants d. they cannot benefit much from network effects

A

Which of the following is an element of good strategy? a. a set of coherent actions to implement the firm's guiding policy b. a guiding policy to address employee satisfaction c. a summary of the firm's history within its industry d. an approach that underestimates the competition

A

Which of the following statements is typically true of early adopters a. Which of the following statements is typically true of early adopters b. They make up the mass market together with the technology enthusiasts. c. They enter the market in the maturity stage of the industry life cycle. d. They enjoy using beta versions of products and providing free suggestions to companies.

A

A differentiation strategy works best when a a. firm's focus of competition shifts to price, and when increasing differentiation of product features do not create additional value. b. firm has intangible resources, is able to pass on increases in supplier cost to the customer, and its differentiation appeal creates customer loyalty. c. firm has tangible resources, its focus of competition shifts to price, and equivalent substitutes are readily available. d. firm's differentiated products are commoditized, and costs of providing uniqueness do not rise above the customer's willingness to pay.

B

Generally speaking, a firm will create value if its return on invested capital (ROIC) is less than the cost of capital. a. True b. False

B

Given the structure of the automobile industry, entering the auto manufacturing industry seemed risky. Yet Tesla Motors joined the fray. Rather than attempting to compete head-on with internal combustion engines, Tesla Motors entered the all-electric car segment, a much less crowded niche in the overall car industry. Which of the following is Tesla most hoping to benefit from in this market niche? a. customer switching costs b. economies of scale c. network effects d. capital requirements

B

Product-oriented vision statements are better suited than customer-oriented vision statements for helping companies to adapt to changes in the external environment. a. True b. False

B

Rapida Inc. and Click Inc. are two companies that have been manufacturing typewriters for almost 30 years. Due to the reduced demand for typewriters today, both companies' average return on invested capital is approximately -5 percent. The current industry average is 2 percent. In this scenario, Rapida Inc. and Click Inc. most likely have a. economies of scope instead of economies of scale b. competitive parity with each other c. competitive advantage over other firms in their industry d. strategic alliance with each other

B

Silver Screen Cinemas Inc. and Digi Now Inc. are two companies that own and run movie theaters in malls and other commercial areas. While Silver Screen Cinemas Inc. pursues a cost-leadership strategy, Digi Now Inc. adopts a differentiation strategy. Which of the following statements is most likely true of this scenario? a. Silver Screen Cinemas and Digi Now will use a similar approach to create value for customers by attempting to offer everything to everybody. b. Digi Now and Silver Screen Cinemas will not be direct competitors to each other, and their customer segments will overlap very little. c. Digi Now will keep its customer service at an acceptable level, while Silver Screen Cinemas will provide superior customer service. d. Silver Screen Cinemas will charge a premium price for its customers, while Digi Now will implement everyday low pricing.

B

When a firm combines experience based learning and process innovation, the firm a. moves down the existing learning curve b. jumps to a steeper learning curve. c. loses its competitive advantage d. experiences an increase in per unit cost

B

When a firm operates at the minimum efficient scale, there is still opportunity for it to further reduce its cost per unit through economies of scale. a. True b. False

B

When wireless service providers offer free or discounted mobile phones for subscriptions to their wireless voice and data service, the perceived value of the service offering increases. In this case, the value driver would be a. learning-curve effects. b. availability of complements c. experience- curve effects d. economies of scale

B

Which of the following statements about patents is not true? a. a patent is a form of intellectual property b. a patent over a product translates into a permanent monopoly position c. a patent can be enforced in court d. a patent can be obtained when an invention is useful, novel, and nonobvious

B

While the industry for tablet computers is in the growth stage, the laptop industry is in its shakeout stage. What does this imply? a. the number of competitors entering the laptop industry will be more than those entering he tablet computer industry b. while the market demand for tablets will be high, the demand for laptops will be limited c. the tablet industry is ahead of the laptop industry life cycle d. while competition for the tablet industry is primarily based on price, it is not so for the laptop industry

B

Your company, a small software development firm, has attracted many of the top young programmers in your area. As a result, the apps you produce have been praised for their innovative features and intuitive user experience. According to the bathtub metaphor in the dynamic capabilities perspective, what is the best way for you to protect against resource leakage? a. Attempt to undercut the competition by imitating their top-selling product. b. Improve the benefits package to retain key employees and reduce turnover. c. Open a satellite office overseas to support the company culture of taking chances. d. Invest in an online marketing campaign for existing products to retain customers.

B

_____ is best described as a measure of how effectively capital is being used by a firm to generate revenue. a. risk capital b. working capital turnover c. revenue per employee d. return on revenue

B

_______ is best described as the process by which people undertake economic risk to innovate—to create new products, processes, and sometimes new organizations. a. crowdsourcing b. entrepreneurship c. headhunting d. cannibalization

B

Heartbeat Industries has recently introduced a new production method that will make the production of their medical devices more cost-effective. Which of the following will most likely be the result of this innovation? a. stabilizes the existing learning curve b. destabilizes a steeper learning curve c. moves down the existing learning curve d. jumps to a steeper learning curve

D

According to the crossing-the-chasm framework, a firm's transition between the different parts of the industry life cycle is difficult because a. there are frequent changes in the supply and demand sides of the market throughout the industry life cycle b. the firm tends to follow a predictable industry life cycle c. there is a big gulf separating the early adopters from customer segments that make up the mass market d. the number and size of competitors change throughout the industry life cycle

C

Bela is a marketing and sales employee at Hopscotch Foods Inc. She has invented a new way to process and pack the company's food products that would avoid the usage of chemical preservatives. Which of the following terms best describes Bela? a. a franchised dealer b. a category captain c. an intrapreneur d. a venture capitalist

C

If a pharmaceutical company develops a first-of-its-kind vaccine to prevent HIV/AIDS and thus creates a whole new market for the product (non-infected civilians), it would be a(n) a. incremental innovation b. architectural innovation c. radical innovation d. disruptive innovation

C

Pear Tree Electronics is a large conglomerate that operates in 17 different countries. The corporate executives at the headquarters have decided that the company's objective for the next two years will be to increase its customer equity, or the value of potential future revenues generated by all its customers in a lifetime. Based on this guideline received from the top management team, the product leader of the home audio division has decided to adopt a cost-leadership strategy in all his 17 units. Thus, the decision made by the product leader best illustrates a _______ strategy. a. functional b. grand c. business d. corporate

C

Peerless Inc., a large conglomerate, wants to liquidate its business in certain industries to improve its overall profitability. Which of the following industries would Peerless Inc. find it most difficult to exit? a. the corporate training industry in which the company's commitments are mostly short-term b. the management consultancy industry in which the company's fixed costs are low c. the steel industry in which the company has obligations like severance pay toward employees d. the e-commerce industry where the company has no long-term contractual agreements with suppliers

C

Several senior managers recently left Bass Automobile Inc. and went to work at Unicorn Autos Inc., a rival company. What does this imply? a. Bass Automobiles Inc.'s tangible assets decreased b. The resource stock of Bass Automobiles Inc. increased c. Bass Automobiles Inc. faced resource leakage d. The resource flow into Unicorn Autos Inc. was reduced

C

Superlative Productions spent 10 million dollars to buy the rights to a best-selling novel. The company then prepared for production by hiring a screenwriter to adapt the novel, casting the main roles, renting cameras and other equipment, and scouting locations in southern Arizona. Which of the following pairs of resources are both intangible? a. money spent to buy rights to the novel; locations in southern Arizona b. best selling novel; locations in southern arizona c. best selling novel; screenwriter's experience adapting novels d. money spent to buy rights to the novel; screenwriter's experience adapting novels

C

What is the strategic management process? a. The CEO decides who the product managers will be for a company b. The CEO defines the main problems facing a company c. Strategic leaders design a method to formulate and implement strategy d. Strategic leaders focus on creating a vision that reflects the company's strategy

C

Which of the following approaches to assess competitive advantage is based on the view that noneconomic factors can have a significant impact on a firm's financial performance? a. the accounting profitability approach b. the balanced-scorecard c. the triple-bottom-line approach d. the economic value creation framework

C

Which of the following best exemplifies social complexity as an isolating mechanism? a. Kristin's Cosmetics had difficulty competing with Monica's Makeup because it could not access the many makeup factories in Kentucky as easily as its competitor. b. Kristin's Cosmetics did not fully understand the reasons for the success of Monica's Makeup and therefore had difficulty competing with the firm. c. Kristin's Cosmetics attempted to imitate how Monica's Makeup combined its management and product development systems with little success. d. Kristin's Cosmetics failed to acquire the resources for its eyeliner at a low cost and thereby lost its competitive advantage over Monica's Makeup.

C

Which of the following vision statements is most likely to produce a sustainable competitive advantage for an auto dealership? a. to open dealerships all across the country b. to sell only the highest rated luxury vehicles c. to help our customers find the perfect car for their individual needs d. to generate the highest revenues of any dealership in the region

C

Zenya is the founder of an online service that allows users to rent out spare rooms in their homes. She has hired a number of extremely bright employees whose opinions are central to the company's success in the fast-paced online services industry. Which type of strategic management process would be most likely to fully utilize the strengths embodied by her team and position the company to capitalize upon autonomous actions and serendipity? a. strategic planning b. scenario planning c. strategy as planned emergence d. ad-hoc planning

C

_____ are best described as the value of the best forgone alternative use of the resources employed. a. social costs b. switching costs c. opportunity costs d. variable costs

C

A defining characteristic of the pay-as-you-go business model is that the a. users pay for access to a product or service whether they use it during the payment term or not b. initial product is often sold at a loss in order to drive demand for complementary goods. c. the basic features of a service are provided free of charge, but the user must pay for premium services. d. users pay for only the services they consume

D

Body Sync Inc. is a chain of gyms. It offers a fitness package that allows its members to use the gym facilities for 12 months by paying only for 10 months. Included in the package are two health checkups and a gym kit. These add-ons by themselves are not very valuable, but as a package they can enhance the perceived value of the service offerings. In this case, Body Sync's primary value driver is a. economies of scale b. learning-curve effects c. experience curve effects d. availability of complements

D

Cantaloupe Technologies follows a business model in which the performance of the company is not only based on how much profits were generated, but also on how the community in general benefited from its operations. Thus, the company under its "Plant a Life" campaign promises to plant a tree with every customer purchase. Which of the following terms best describes the performance valuation model of Cantaloupe Technologies? a. offshoring b. crowdsourcing c. corporate intrapreneurship d. social entrepreneurship

D

How are the early majority and late majority different in their attitudes toward technology? a. the early majority is concerned that many new technologies will fade away; the late majority is not b. the early majority is strongly influenced by the endorsements of others; the late majority is not c. the early majority is very concerned with what new technology can do for them; the late majority is not d. the early majority is confident in their ability to master the new technology; the late majority is not.

D

In developed countries, the industry for flash drives is in the maturity stage, and the industry for floppy disks is in the decline stage. What does this imply? a. the number of new entrants in the floppy disks industry will be more when compared to the industry for flash drives b. the industry structure for floppy disks is that of perfect competition, whereas the industry structure for flash drives is monopolistically competitive c. while the buyers of floppy disks can be categorized under early majority, the customers of flash drives can be categorized under late majority d. while the flash drive industry has reached its maximum market size, the market size for floppy disks is small and contracting

D

Ironhorse Tools has used $700,000 from its total annual earnings of $1,650,000 to invest in upgrading its manufacturing facilities. Its accounts receivable from customers is estimated to be $130,000 and accounts payable $75,000. In monetary terms, what would Ironhorse's resource flows be? a. 1,650,000 b. 75,000 c. 130,000 d. 700,000

D

Julius bought his laptop and smartphone when these products had just entered their respective growth stages. More than the technological sophistication of these products, it was the idea that these products would allow him to multitask and work when traveling that drove him to make his purchase decision. Which of the following customer segments does Julius best represent? a. laggards b. late majority c. technology enthusiasts d. early adopters

D

Nendry is the owner of a firm that produces sports drinks. Since there are a number of firms in the industry competing on cost, Nendry has decided to pursue a differentiation strategy. In this case, she should a. devote all resources to reducing the value gap b. enforce strict budget controls at all level of the organization c. concentrate on improving process technologies to achieve economies of scale d. focus on adding unique features to her product that customers will value

D

The internet service provider industry in the country of Megalopolis 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 a. entry barriers are most likely nonexistent b. threat of substitutes is most likely high c. bargaining power of buyers is most likely low d. threat of new entrants is most likely low

D

Which of the following is the best example of a platform business? a. coca cola soft drink producer b. McDonald's restaurants c. LL Bean clothing retailers d. Uber ride-hailing services

D

Which of the following statements accurately brings out the difference between monopolistic competition and an oligopoly? a. Sellers in an oligopoly provide highly differentiated products; in monopolistic competition, the products sold are undifferentiated or standardized. b. Firms in an oligopoly have no pricing power; firms in a monopolistically competitive industry have the ability to raise prices. c. In an oligopoly, the number of buyers is large; in monopolistic competition, the number of buyers is limited to three or four. d. In monopolistic competition, many firms compete against each other; in an oligopoly, there are few large firms competing against each other.

D

Which of the following statements is true of the growth stage in the industry life cycle? a. the type of beers during this stage consists of the late majority b. the objective of firms during this stage is to pursue a harvest strategy c. the basis of competition tends to move away from process innovations toward product innovations d. the prices begin to fall during this stage when compared to the introduction stage

D

Which of the following summarizes the difference between corporate strategy and business strategy? a. Corporate strategy deals with how to compete; business strategy deals with when to compete. b. Corporate strategy deals with how to compete; business strategy deals with where to compete. c. Corporate strategy deals with when to compete; business strategy deals with how to compete. d. Corporate strategy deals with where to compete; business strategy deals with how to compete.

D

_____ is a business model in which the manufacturer sets a fixed price on a product, but the retailer is free to set it's own price. a. freemium b. agency c. bundling d. wholesale

D

_____ precisely indicates how much of a firm's sales is converted into profits. a. Break-even price b. Inventory turnover c. Working capital turnover d. Return on revenue

D