Ch 1-5

23) If Zephyr Electronics obtains an 18 percent return on invested capital, which of the following will help determine if it has a competitive advantage over other pharmaceutical companies? A) comparing the return to the return on invested capital obtained by other firms in the industry B) assessing the value based on the shareholders' expectations of return on their capital C) evaluating the liquidity ratios for other pharmaceutical companies D) comparing the value to the history of the firm's return of investment over a number of years

A

25) Mainline 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, Mainline Ltd. has a A) competitive advantage. B) balanced scorecard. C) competitive disadvantage. D) power position.

A

27) The average cost of production for a bottle of vitamin water in the industry is $4 while its average price is $7. StoreAll Inc. manufactures the same product for $3 per bottle and sells it for $7 per bottle. Which of the following statements is most likely true of StoreAll Inc. in this scenario? A) It has a competitive advantage in the industry. B) It has a competitive disadvantage in the industry. C) It has competitive parity with other firms in the industry. D) It has formed a strategic alliance with other firms in the industry.

A

31) A firm always has a competitive disadvantage when its return on invested capital is A) below the industry average. B) 2 percent or lower in a declining industry. C) about the same as its closest competitor. D) declining steadily over two or more years.

A

40) Cobalt Sodas has seen its market share erode in recent years, as consumers increasingly turn toward healthier beverage choices such as unsweetened sparkling water. Hoping to rekindle interest in sugary sodas, Cobalt decides to produce a limited run of "throwback" cans using labeling first introduced in the 1980s. What is wrong with this strategy? A) It fails to face the competitive challenge. B) It does not involve concrete actions. C) It lacks strategic commitments. D) It tries to be everything to everybody.

A

42) The Founder of Teach for America, Wendy Kopp, established a mission by building on her vision, which is "One day, all children in this nation will have the opportunity to attain an excellent education." Considering this, how did Klopp implement the mission of Teach for America? A) by enlisting talented young professionals as teachers B) by offering funds to increase the salaries of low-income teachers C) by starting her own line of private schools D) by starting a fundraising campaign to improve school infrastructure

A

43) The first step to gain and sustain a competitive advantage is to A) define a firm's vision, mission, and values. B) understand the strategies of the competitors. C) put the guiding policies of a firm into practice. D) develop functional and business-level strategies.

A

48) To be effective, firms need to A) back up their visions with strategic commitments that are costly and difficult to reverse. B) increase their strategic flexibility by developing product-oriented vision statements. C) isolate top managers from the organizational values. D) pursue visions that are exclusively financial and not aspirational.

A

51) Which of the following summarizes the difference between a firm's vision and mission? A) A vision states what a firm wants to accomplish; a mission states how a firm plans to accomplish this vision. B) A vision states the ethical values of a firm; a mission states the monetary goals of a firm. C) A vision states how much a firm wants to earn; a mission states how these earnings will be accomplished. D) A vision states the management values of a firm; a mission states the values of the other workers.

A

52) Soil and Sod Gardening Supplies has a vision of helping every American learn how to grow their own food. Its management team recently unveiled the mission statement "A garden at every home." What is wrong with this mission statement? A) It does not indicate how the company will accomplish its goals. B) It does not include a stretch goal. C) It is not inspirational and motivating for employees. D) It is too specific.

A

56) Which of the following statements about product-oriented visions is true? A) They tend to force managers to take a myopic view of the competitive landscape. B) They allow companies to effectively adapt to changing environments. C) They define a business in terms of providing solutions to customers. D) They allow firms to set goals that focus primarily on filling the organization's needs.

A

64) Which of the following is an example of a business acting upon an organizational core value? A) Pegasus Autos reduces engine emissions below federal guidelines to reduce pollution. B) Pegasus Autos lowers its retail prices to gain an advantage over its closest competitor. C) Pegasus Autos finances research for developing more powerful engines. D) Pegasus Autos launches an ad campaign that promotes the company as being environmentally friendly.

A

66) Fuller Apparel's core value statement reads we will ensure our clothing is made with the highest respect toward human rights and environmental protection. Which of the following actions exemplifies how Fuller's core values drive its strategic decision making? A) demanding that textile suppliers pay livable wages and maintain safe production facilities B) introducing an online customer service unit to keep customers happy C) investing in more efficient machinery to reduce costs and lower prices for consumers D) purchasing a full-page advertisement in a major newspaper touting the company's values

A

76) In the AFI strategy framework, strategy analysis primarily involves A) evaluating the effects of internal resources and core competencies on a firm's potential to gain and sustain a competitive advantage. B) designing a business, corporate, and global strategy to gain and sustain a competitive advantage. C) organizing a firm in order to effectively put the formulated strategy into practice. D) deciding the type of corporate governance that would be most effective in the implementation of a strategy.

A

80) During strategy implementation, managers primarily focus on deciding the A) type of corporate governance that is most effective and ways in which it can put the formulated strategy into practice. B) industries and markets the firm should compete in to be able to gain and sustain a competitive advantage. C) relationship between competitive advantage and firm performance. D) role strategic leaders should play in gaining and sustaining a competitive advantage.

A

81) Which of the following provides an example of what AFI strategy framework is used for? A) Using AFI, the Gasquet Motor Company was able to implement a strategy that produced high-quality cars more efficiently and thereby reduced costs. B) Using AFI, the Chen Restaurant Group was able to improve employee benefits and thereby increase employee loyalty. C) Using AFI, the Sanchez Clothing Company was able to implement a strategy that allowed them to give more money to charities and thereby gain good press. D) Using AFI, the Richardson Tea Group was able to reduce the pollution it caused while processing tea and thereby receive an award.

A

A ________ is best described as any activity a firm pursues to explore and develop new products and processes, new markets, or new ventures. A) strategic initiative B) value chain C) supply chain D) corrective action

A

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

A

A firm will fail to create a sustained competitive advantage when the A) fit between its internal strengths and the external environment is static. B) source of its competitive advantage is causally ambiguous. C) source of its competitive advantage is socially complex. D) resource bundles exhibit heterogeneity and immobility.

A

A firm's ________ relates to its ability to create value for customers (V) while containing the cost to do so (C). A) strategic position B) industry effects C) advantage of the marketplace D) industry analysis

A

A high percentage of R&D/Revenue ratio indicates a(n) A) strong focus on innovation to improve current products and services. B) inefficiency in the management to focus on new products. C) strong focus on marketing and sales to promote products and services. D) negligent investment toward research and development.

A

A strategic group will typically include A) firms within the same industry. B) customers belonging to a particular socioeconomic class. C) firms employing similar number of employees, irrespective of their industries. D) employees within a firm earning the same amount in salary.

A

After carefully assessing the market potential for solar-powered mobile devices, the top-level executives of Futuretronics Inc. decided that the company would be launching a line of solar-powered tablets within the next two years. This would mean that the tablet division would need to immediately begin research and development efforts. Which of the following strategies in the planned emergence model does this best illustrate? A) intended strategy B) emergent strategy C) unrealized strategy D) tactical strategy

A

An observer may conclude that the organizational culture of Zappos, an online retailer for shoes and clothing, might be the basis for its competitive advantage. However, reverse social engineering to crack Zappos' code of success might be much more difficult for a company trying to exactly imitate its strategy. Thus, the source of Zappos competitive advantage is said to be A) socially complex. B) inexhaustible. C) non-substitutable. D) nonambiguous.

A

As the CEO of a conglomerate, Eva Morris exhibited her strong commitment toward the company's core value that customers' well-being is more important than profit when she convinced the board of directors to liquidate the company's pesticide subsidiary. The pesticide brand sold by her company was a major revenue earner in lesser-developed nations, but studies indicate that it is a carcinogen. Eva persuaded the board that the company had to be responsible toward society. In this scenario, Eva has demonstrated A) strategic leadership. B) intrapreneurship. C) Machiavellianism. D) individualism.

A

Bryan is a manager at a software firm. The CEO tells him that the industry as a whole has become increasingly profitable over the past five years. Based on this information, Bryan is most likely to expect A) increased competition in the future and therefore he should recommend that the company upgrade its products to slow the entry of rival companies. B) increased profitability in the future and therefore he should recommend that the company remain on its current course. C) a leveling off of profitability in the next few years and therefore he should recommend that the company cooperate with its rivals to stimulate the industry. D) decreased competition in the next few years and therefore he should recommend that the company take advantage of its pricing power.

A

Carlos is the manager of a graphic design firm, and he relies on a top-down strategic management approach to maintain tight control over the activities of his employees. The company has recently started to lose market share to its more innovative competitors, and Carlos wants to encourage his employees to start contributing to the strategy formulation process to make the company more competitive. Which of the following steps should Carlos take? A) Designate Friday afternoons as time for employees to pursue outside interests loosely related to the business. B) Schedule individual meetings with employees and demand that they come prepared with five ideas. C) Take an extended vacation and see how the business naturally reorganizes itself in his absence. D) Allow employees to take whatever approach they feel is appropriate when dealing with customers.

A

Competitive advantage goes to the firm that achieves the A) largest economic value created. B) lowest producer surplus. C) highest payable turnover. D) highest Cost of goods sold/Revenue ratio.

A

Competitive rivalry based solely on ________ is destructive to firms as it transfers most of the value created in the industry to the customers. A) price-cutting B) new product releases C) promotional campaigns D) product differentiation

A

Crystal Tech Inc.'s competency in designing and manufacturing efficient microprocessors has made its laptops the most advanced computers in the market. This competency, along with the just-in-time manufacturing system, has enabled Crystal Tech Inc. to increase its profitability by lowering its production costs. Thus, Crystal's competency in designing and manufacturing microprocessors will be considered a(n) ________ resource in the VRIO framework. A) valuable B) substitute C) imitable D) organized

A

During the process of formulating an effective business model, a firm's managers should first A) transform their strategy of how to compete into a blueprint of actions and initiatives. B) implement their strategy at corporate, strategic business unit, and functional levels. C) implement their blueprint of actions and initiatives through structures, processes, culture, and procedures. D) evaluate the firm's strategy already in effect and take corrective actions if necessary.

A

Dynamic capabilities are especially relevant for surviving and competing in markets that A) shift quickly. B) shift slowly. C) remain constant. D) remain unpredictable.

A

Etsuro is a management consultant. Baker Corp. asks him to evaluate their company, and he finds that the difference between the cost of producing the firm's products and the value of those products is extremely narrow. What should Etsuro suggest that Baker Corp. management do? A) Find a way to widen the gap between cost and value. B) Find a way to pass on as much profit as possible to suppliers and customers. C) Shore up the company's strong position by erecting entry barriers. D) Encourage customers to buy complements to their products.

A

From an investors' or shareholders' perspective, the measure of competitive advantage that matters most is the A) return on risk capital. B) economic value created. C) consumer surplus. D) inventory turnover.

A

Happy Foods and General Grains both produce similar puffed rice breakfast cereals. For both companies, the cost of producing a box of cereal is 45 cents, and it is not possible for either company to lower their production costs any further. How can one company achieve a competitive advantage over the other? A) Increase total perceived consumer benefits through differentiation. B) Raise prices above the current reservation price. C) Lower prices to the break-even price. D) Increase the number of stock market shares available to investors.

A

How are cumulative learning and experience effects of a company most likely to affect Michael Porter's five forces? A) Threat of new entrants will be low. B) Bargaining power of suppliers will be high. C) Availability of complements will be low. D) Threat of substitute products and services will be high.

A

How does causal ambiguity act as an isolating mechanism for organizations? A) It makes it difficult for the competitors to understand why a company has been so successful. B) It creates a situation in which different social and business systems interact with one another. C) It makes it difficult for competitors to deploy their resources by creating ambiguity within their organizational structures. D) It makes it difficult for competitors to imitate core competencies quickly due to time compression diseconomies.

A

How is a firm's task environment different from its general environment? A) Managers have some influence over external factors in the task environment; they have little direct effect over external forces in the general environment. B) Managers have no direct effect over external factors in the task environment; they have some influence over external forces in the general environment. C) Managers have no direct effect over external factors in the task environment; they have influence over all external forces in the general environment. D) Managers have influence over all external factors in the task environment; they have no direct effect over external forces in the general environment.

A

In a large company, who is most responsible for devising the corporate strategy? A) the CEO of the company B) the lower-level employees in the company C) the head of the production department in the company D) the human resource manager in the company

A

In an industry, the threat of entry is high when A) capital requirements are low. B) expected returns are low. C) technological know-how is industry specific. D) switching costs are high.

A

In the aircraft manufacturing industry, at least for large commercial jets, Boeing and Airbus are the only competitors. There is not a significant threat of entry because A) entering the aircraft manufacturing industry requires huge capital investments. B) there is expected to be a huge return on investment within this industry. C) there is no credible threat of retaliation from the incumbents. D) entering the aircraft manufacturing industry means violating government policies.

A

In the context of the SWOT matrix, which of the following best exemplifies a firm's internal strength? A) increase in a firm's customer loyalty B) growth in the size of the market in which a firm operates C) rise in the income of the demographic segment to which a firm caters D) loss of a competitor's reputation

A

In the pyramid of corporate social responsibility, ________ responsibilities are the foundational building block. A) economic B) ethical C) philanthropic D) legal

A

InVue, a consumer electronics company, is the leading manufacturer of high-definition (HD) LED televisions. HD technology has been its core competency and the company holds 60 percent shares in that market. However, InVue's competitors have now begun to produce more-advanced technologies like 4K Ultra HD and Internet-enabled Smart televisions. According to the dynamic capabilities perspective, what should InVue do? A) InVue should start working on Ultra HD and Smart television technologies to adapt its core competency to suit the external environment. B) InVue should stick to its existing core competency, that is HD LED technology, as it is the best in that segment. C) InVue should take steps to reduce the causal ambiguity and socially complexity of its core competency. D) InVue should work on enhancing the mobility of its core competency.

A

Ivan is the founder of a firm producing self-driving vehicles. Because the industry is so new and chaotic, Ivan favors a top-down strategic planning approach in which he exerts strong control over all aspects of the business, from product development and design to manufacturing and marketing. What is wrong with this scenario? A) The self-driving vehicle industry is changing too much for the top-down approach to be effective. B) The top-down approach can only be applied to specific business functions. C) The top-down approach leaves other employees uncertain about their roles in the company. D) The top-down approach is expensive to maintain, leaving the company at a competitive disadvantage.

A

Jamie 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 Jamie most likely face? A) many new competitors B) technological innovation C) the end of globalization D) across-the-board price increases

A

Keeping in mind the five forces in the airline industry, which of the following best explains the difficulty airlines have in generating a profit? A) Substitutes are readily available in the form of trains, buses, and cars, thus reducing the profit potential in the industry. B) Suppliers have weak bargaining power because they offer products that are not differentiated. C) Entry barriers in the industry are high, resulting in hardly any new airlines popping up. D) Consumers in the industry make decisions based on price, thus reducing the intensity of rivalry in the industry.

A

Magical Productions is a large production company that controls a major portion of the television industry's market share along with two other firms. Despite its competitiveness with the two other firms, it is influenced by their actions and often has to consider their strategic actions before acting on its own. In this scenario, Magical Productions is most likely functioning in a(n) ________ industry. A) oligopolistic B) monopolistic C) perfectly competitive D) monopolistically competitive

A

Mega Media sells books by having salespeople set up appointments with potential customers and give them a sales pitch for the product. When a salesperson sells a book, he or she gets a predetermined percentage commission. This type of business model is called A) an agency. B) bundling. C) wholesale. D) a freemium.

A

Mercurial Foods is the parent company of several chain restaurants offering a variety of cuisines. The top management at Mercurial has decided to enter the frozen foods industry based on its assessment of the profit potential in that industry. Which of the following strategies does this best illustrate? A) corporate strategy B) business strategy C) functional strategy D) divisional strategy

A

PowerPills is a highly successful vitamin manufacturer. At the close of its most recent fiscal year, the company's balance sheet showed cash holdings of $110 million. Which of the following actions will provide the most benefit for stakeholders? A) Reinvest profits into expanding the company and creating more jobs. B) Reward the CEO with a significant bonus payment. C) Save the excess cash as a precaution against black swan events. D) Buy out the leading competitor to reduce competition and maintain price stability.

A

Pulse Mobiles Inc. is a cell phone manufacturing company. Its latest range of smartphones are visually similar to the Y-series range of smartphones from Talkie Gen Inc., in terms of its shape and look-and-feel. Which of the following strategies has Pulse Mobiles Inc. used to replicate the valuable and rare resource of Talkie Gen Inc.? A) direct imitation B) strategic equivalence C) substitution D) innovation

A

Return on risk capital primarily includes A) stock price appreciation plus dividends received over a specific period. B) consumer surplus plus firm profit. C) account receivables plus account payables. D) economic value created by a firm plus reservation price.

A

Salubre Pharmaceuticals invested $3.4 billion dollars to develop a new drug for individuals with diabetes. After Salubre receives FDA approval of the drug, its marginal cost to produce the drug for market will be A) low. B) high. C) moderate. D) unpredictable.

A

Samsung and Google cooperate as complementors to compete against Apple's strong position in the mobile device industry, while at the same time Samsung and Google are increasingly becoming competitive with one another. This scenario best illustrates the process of A) co-opetition. B) perfect competition. C) monopolization. D) conglomeration.

A

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, 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? A) resource immobility B) resource heterogeneity C) resource imitation D) resource substitution

A

Strategic thinking is different from strategic planning in that A) strategic thinking includes all types of information sources while strategic planning does not. B) strategic thinking relies more on hard data than strategic planning. C) strategic thinking is regimented and confining, whereas strategic planning is more flexible. D) strategic thinking can create an illusion of control, whereas strategic planning avoids this.

A

The CEO of Chyron Media has decided to enter the markets of emerging nations like China and Brazil. This means that the books, magazines, and websites published under the Chyron Media banner would be made available in these nations. Which of the following strategies does this scenario best illustrate? A) corporate strategy B) functional strategy C) business strategy D) divisional strategy

A

The best example of a firm's external stakeholder is a(n) A) government agency that regulates the prices of products manufactured by the firm. B) board member from a wholly-owned foreign subsidiary of the firm. C) shareholder who has invested money in the firm but is not employed by the firm. D) employee of the firm who is responsible for a contract project.

A

The distribution department at Golden Grains Wheat Company has decided to adopt the FIFO (first in, first out) method of inventory to dispatch its bags of wheat. Which of the following strategies does this scenario best illustrate? A) functional strategy B) corporate strategy C) master strategy D) business strategy

A

The executives at Red Couture Inc. are developing strategic plans to address plausible future situations like rise in the prices of cotton and synthetic fabrics by 20 percent, appreciation in the value of the dollar, increase in the cost of labor by 30 percent, and increase in demand for the company's products. By doing so, the company will be well prepared with its planned responses if any of these situations occurs in the future. Thus, Red Couture is employing ________ as the approach to the development of strategy. A) scenario planning B) top-down strategic planning C) reverse engineering D) pattern recognition

A

The market capitalization of a public company is $5 billion. Each share of the company is traded at $200. What do you infer from this financial data? A) The firm's number of outstanding shares is 25 million. B) The firm pays an annual dividend of 10 percent. C) The firm's total return to shareholder is $5 billion. D) The firm's economic value created is $5 billion.

A

The minimum wage in the country of New Morland is $8 an hour. Odion, a restaurant in New Morland's 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 New Morland, which of the following responsibilities is Odion satisfying? A) legal responsibilities B) philanthropic responsibilities C) ethical responsibilities D) demographic responsibilities

A

The owners of Puff Ball bakery want to open a second retail outlet. Which of the following scenarios is most likely to yield a competitive advantage? A) Open a shop on an inexpensive piece of land near a new mixed-use residential and business district currently under construction. B) Purchase an existing bakery from a business that closed due to declining sales and try to revive it. C) Build a shop in a sparsely populated rural area where the land is inexpensive and few other bakeries exist. D) Open a shop in a crowded downtown location where several other bakeries have been successful over the years.

A

The ratio Cost of goods sold/Revenue indicates how efficiently a company can A) produce a good. B) sell a good. C) advertise a good. D) design a good.

A

To help a firm achieve a competitive advantage, each distinct activity performed in the value chain needs to A) contribute to the firm's strategic position as either low-cost leader or differentiator. B) reduce the immobility and the heterogeneity of the firm's resources. C) create a static fit between the company's internal resources and the external environment. D) reduce the causal ambiguity and the social complexity of the firm's source of success.

A

To reduce the amount of time it takes to apply packaging to its finished products, North Star Foods is implementing new equipment at its production plants. By doing this, North Star is addressing a ________ in the value chain analysis. A) primary activity B) secondary activity C) support activity D) premier activity

A

Trendline Architects' core competency is building multi-family housing in urban areas. This competency is based primarily on the decisions made by the company's top management over several years to focus on building in densely populated cities. This process is called A) path dependence. B) dependence complexity. C) causal dependence. D) path immobility.

A

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 triple-bottom-line approach B) the economic value creation framework C) the accounting profitability approach D) the balanced-scorecard

A

Which of the following best exemplifies social complexity as an isolating mechanism? A) Kristin's Cosmetics attempted to imitate how Monica's Makeup combined its management and product development systems with little success. B) 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) 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. D) Kristin's Cosmetics did not fully understand the reasons for the success of Monica's Makeup and therefore had difficulty competing with the firm.

A

Which of the following describes a situation in which firms acquire resources at a low cost, laying the foundation for a competitive advantage later? A) better expectations of future resource value B) path dependence affecting current decisions C) causal ambiguity D) social complexity

A

Which of the following expressions accurately describes market cap? A) It is the product of the number of outstanding shares and the share price. B) It is the difference between the book value and the market value of a firm's assets. C) It is the ratio of a firm's equity finance and its debt finance. D) It is the difference between a firm's account receivables and account payables.

A

Which of the following external forces is a part of a firm's task environment? A) the composition of the strategic group to which the firm belongs B) the interest rates prevalent in the economy in which the firm operates C) the inflation level in the economy in which the firm operates D) the recent innovations in process technology, including lean manufacturing

A

Which of the following functions do the general managers in strategic business units primarily perform? A) design generic business strategies based on guidelines received from corporate headquarters B) set overarching strategic objectives to unify the entire conglomerate under one mission C) take responsibility for decisions and actions within a single functional area D) allocate scarce resources among different business divisions

A

Which of the following is a disadvantage of measuring firm performance through total return to shareholders and firm market capitalization? A) Market volatility makes it difficult to assess firm performance through these measures, particularly in the short-term. B) These tools fail to indicate how the stock market views all available public information about a firm's expected future performance. C) These tools measure competitive advantage in absolute terms rather than relative terms. D) Only the book value of the share prices is taken into account when applying these measures, and not the market value.

A

Which of the following is an assumption that top-down strategic planning rests on? A) We can predict the future from the past. B) Time cannot be compressed at will. C) Decisions made in the past do not affect our future. D) Change is constant.

A

Which of the following is an implication of high employee turnover in a company? A) It results in a reduction in the company's intangible-resource stocks. B) It makes the source of the company's competitive advantage causally ambiguous. C) It makes the source of the company's competitive advantage socially complex. D) It results in greater immobility and heterogeneity of the company's resources.

A

Which of the following is likely to happen due to horizontal mergers between competitors such as Delta and Northwest airlines? A) The overall industry profitability will increase. B) The threat of strong competitive forces such as supplier power will increase. C) The industry will face excess capacity in the future. D) The structure of the industry will change from consolidated to one that is fragmented.

A

Which of the following statements is true of strategic initiatives? A) Strategic initiatives can be the result of a response to external trends or come from internal sources. B) When lower-level employees are less empowered, the possibility of strategic initiatives is higher. C) Strategic initiatives result from top-down planning by executives and not through a bottom-up process. D) Random events and accidental happenstances reduce the possibility of strategic initiatives in organizations.

A

Which of the following statements is true of the social responsibilities of a business? A) A firm's ethical responsibilities go beyond its legal responsibilities. B) Shareholders mandatorily require a firm to perform its ethical and philanthropic responsibilities. C) Ethical responsibilities are the foundational building block of a firm's social responsibility. D) Legal responsibilities are often subsumed under the idea of corporate citizenship, reflecting the notion of voluntarily giving back to society.

A

While Tender Chicken Inc. operates in a monopolistically competitive industry, Future Wireless Inc. operates in a monopoly. Keeping this information in mind, which of the following statements is most likely true? A) The threat of new entrants will be higher for Tender Chicken than for Future Wireless. B) Tender Chicken will have more pricing power than Future Wireless does. C) Tender Chicken will have more profit potential than Future Wireless. D) The number of buyers will be limited for both Tender Chicken and Future Wireless.

A

While implementing strategic group mapping for the U.S. domestic airline industry, two strategic groups become apparent: low-cost, point-to-point airlines (Virgin Atlantic, Alaska Airlines, JetBlue, and Southwest Airlines) versus differentiated airlines using a hub-and-spoke system (American, Delta, and United). Which of the following statements is true about these two strategic groups? A) Competitive rivalry between Virgin Atlantic and JetBlue is likely to be higher than that between American and Southwest Airlines. B) American, United, and Delta Airlines will be affected differently by Porter's five competitive forces. C) Alaska Airlines and Delta Airlines will be affected by the external environment in very similar ways. D) Competitive rivalry between Virgin Atlantic and Delta Airlines is likely to be higher than that between American, Delta, and United.

A

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? A) industry convergence B) backward integration C) product differentiation D) customer myopia

A

Years ago, the travel industry was controlled by a few large travel companies that booked holidays, air tickets, bus tickets, and hotels for their customers. However, with the emergence of the internet, smaller travel agencies started mushrooming in the industry and customers started making their own reservations. Which of the following can be inferred from this information? A) The travel industry changed from a consolidated structure to a fragmented one. B) The pricing power of the incumbent firms in the travel industry has increased. C) The bargaining power of buyers in the travel industry has decreased. D) The structure of the travel industry changed from monopolistic competition to an oligopolistic one.

A

You are the manager of Impromptu Printing, a leading print shop. Impromptu's resources include a highly experienced staff and state-of-the-art printing presses. However, your closest competition has started to cut into your market share by offering same-day turnaround on most orders. Although your staffing and equipment is not optimized for rapid production, you decide to start offering a same-day guarantee to your customers. According to the resource-based view, what is wrong with this decision? A) You have failed to take into account resource immobility. B) Customers tend to have negative opinions of firms that imitate other firms. C) Employees are often resistant to changes in strategy. D) Your business is not organized to capture value.

A

_______ is best described as the difference between a buyer's willingness to pay for a product or service and a firm's total cost to produce it. A) Economic value created B) Break-even point C) Consumer surplus D) Cost of capital

A

_______, which is the return on risk capital, includes stock price appreciation plus dividends received over a specific period. A) Total return to shareholders B) Earnings per share C) Receivables turnover D) Dividend yield

A

) Unlike the financial ratios based on accounting data, total return to shareholders is A) backward-looking and historic in nature. B) an external performance metric. C) an absolute measure of competitive advantage. D) unaffected by market volatility or macroeconomic factors.

B

11) Which of the following strategies does Tesla need to implement or achieve to gain a competitive advantage? A) imitate the features of the most popular SUVs on the market B) reinvest profits to build successively better electric automobiles C) sell advertising space on their cars' digital displays D) substitute less-expensive components to keep costs low

B

13) ________ is best described as a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors. A) Behavior modification B) Strategy C) Credo D) Competency management

B

16) Through ________, a firm puts its guiding policy into practice by employing a set of coherent actions. A) strategy control B) strategy implementation C) strategy formulation D) strategy analysis

B

18) Green Jeans, Inc. had a mission to become the leading producer of environmentally friendly blue jeans, an emerging and in-demand category in the apparel industry. Its strategy involved leveraging a network of organic cotton farmers and suppliers of environmentally responsible synthetic materials to create a product that is durable, attractive, affordable, and 100% recyclable. However, because it did not upgrade its outdated production facilities, Green Jeans could not assemble its products at a low-enough cost to offer the jeans at a price that was attractive to customers. Green Jeans' strategy failed because A) it failed to consider the competitive challenge. B) it was not backed up with strategic commitments. C) managers did not live by the company's core values. D) the company did not stake out a unique strategy position.

B

26) 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) competitive advantage over other firms in their industry. B) competitive parity with each other. C) strategic alliance with each other. D) economies of scope instead of economies of scale.

B

28) A firm is said to gain a competitive advantage when it can A) exceed its own previous performances. B) provide products similar to its competitors, but at lower prices. C) perform at the same level as that of its competitors. D) minimize the difference between value creation and cost.

B

32) 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 will charge a premium price for its customers, while Digi Now will implement everyday low pricing. 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 and Digi Now will use a similar approach to create value for customers by attempting to offer everything to everybody.

B

44) Free Winds, Inc. is a company that manufactures a variety of generators that run on wind power. The company envisions that wind technology will replace all forms of exhaustible energy sources in the near future. Which of the following statements will make an accurate vision for Free Winds? A) We make products that run on wind energy. B) All nations around the globe should be able to provide energy produced by sustainable sources. C) The company aims to make working fun and pleasurable for its employees. D) We provide energy-efficient sources and services by investing in research and innovation.

B

46) Strategic commitments are actions that are A) inexpensive. B) long-term oriented. C) easy to reverse. D) easy to imitate.

B

47) Visionary companies are able to outperform their competitors because A) their vision statements are more product-oriented. B) they provide more aspirational visions. C) their visions are primarily financial. D) they isolate internal stakeholders in defining their visions.

B

50) Fuentes Electronics is a major manufacturer of microwave ovens. Which of the following statements will best inspire the organization with a shared vision for Fuentes Electronics? A) At Fuentes Electronics, employees know that they will make a competitive wage. B) At Fuentes Electronics, employees at all levels are motivated to make the best microwave ovens on the market. C) At Fuentes Electronics, employees want to create a cheaper microwave oven than our closest competitor does. D) At Fuentes Electronics, employees can trust our managers to steer company.

B

58) Which of the following statements is true of customer-oriented visions? A) Customer-oriented visions identify how a customer need will be met. B) Customer-oriented vision statements are not the same as listening to your customer. C) Customer-oriented visions reduce a company's ability to adapt to a changing environment. D) Customer-oriented visions define a business in terms of goods or services provided.

B

65) How do strong ethical values benefit a firm? A) They lay the groundwork for a quick increase of profits and short-term success. B) They serve as the guardrails put in place to keep the company on track when pursuing its mission. C) They provide strong public relations, which can either benefit or hinder competitive advantage. D) They emphasize benefiting stakeholders by significantly increasing profit.

B

69) Organizational core values are the ________ that govern the behavior of individuals within a firm or organization. A) economic measures B) ethical standards and norms C) political principles and policies D) social beliefs and actions

B

70) When do employees fail to adopt the organizational values of a firm? A) when the internal stakeholders of the firm are involved in designing the values B) when the top managers in the firm are merely paying lip service to the firm's stated values C) when the strategic leaders in the firm propagate and exhibit the same values D) when the organizational structure, such as its strategic decision making, is aligned with its values

B

73) The ________ is a model that links strategy analysis, strategy formulation, and strategy implementation, which together helps managers plan and implement a strategy that can improve performance and result in competitive advantage. A) Ansoff's growth strategy matrix B) AFI strategy framework C) Sarbanes-Oxley Act D) stakeholder impact analysis

B

75) According to AFI strategy framework, in which of the following tasks of strategic management is a firm's vision, mission, and values identified? A) strategy control B) strategy analysis C) strategy formulation D) strategy implementation

B

77) You are the manager in charge of setting the strategy for a new frozen yogurt company. Which of the following questions would be appropriate for you to ask during the analysis phase of the AFI strategy framework? A) Should we open our first location in Los Angeles or New York City? B) How have consumer preferences in frozen yogurt flavors changed in the last five years? C) Should we be competing nationally or internationally? D) Can we secure relationships with enough organic dairy farmers to meet our commitment to using the healthiest ingredients?

B

79) Which of the following tasks in the AFI strategy framework involves putting the formulated strategy into practice through organizational structure, culture, and controls? A) strategy formulation B) strategy implementation C) strategy analysis D) strategy evaluation

B

82) What part of the AFI strategy framework does the question "How does the firm make money?" relate to? A) strategic leadership and the strategy process B) competitive advantage, firm performance, and business models C) external analysis D) internal analysis

B

83) While creating its AFI strategy framework, Valdez Consultants decided what markets the firm should compete in. By doing this, what type of strategy did the company devise? A) business strategy B) corporate strategy C) global strategy D) ethical strategy

B

A defining characteristic of the subscription-based business model is that the A) user pays for only the services he or she consumes. B) user pays for access to a product or service whether he or she uses it during the payment term or not. C) basic features of a product or service are provided free of charge, but the user must pay for premium services such as advanced features or add-ons. D) initial product is often sold at a loss or given away for free in order to drive demand for complementary goods.

B

A resource-based view of a firm provides a model that systematically aids in identifying A) core rigidities. B) core competencies. C) competitive disadvantage. D) competitive parity.

B

According to an evaluation using the VRIO framework, Crocs Shoes was unable to sustain its competitive advantage primarily because its products were A) invaluable and common. B) easy to imitate. C) extremely rare. D) non-substitutable.

B

After a firm has identified its key stakeholders in stakeholder impact analysis, the immediate next step is to A) recognize the opportunities and threats the stakeholders present. B) identify stakeholders' interests and claims. C) formulate a stakeholder strategy. D) address the stakeholders' concerns.

B

Although True Ion Inc. and One Electro Inc. operate in the same consumer electronic industry, True Ion Inc. has better sales and brand equity. This is attributed to True Ion Inc.'s commitment to innovation. The company has adequate financial and human capital to invest in research and development, an area in which One Electro Inc. lags behind. In this scenario, which of the following critical assumptions of the resource-based view of a firm has been illustrated? A) resource value B) resource heterogeneity C) resource immobility D) resource imitation

B

Beats Electronics has been able to outperform Audio-Technica, Bose, JBL, Skullcandy, Sennheiser, and Sony in the high-end, premium headphone market. Which of the following statements accurately explains one of the main reasons for the success of Beats? A) It produced the highest-quality headphones. B) It created a perception that owning its products was cool. C) It emphasized marketing over core competency. D) It focused on sponsoring future athletic superstars.

B

BlueStainless 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 BlueStainless products. This scenario best illustrates the implementation of a A) strategic analysis. B) stakeholder strategy. C) wild card event. D) black swan event.

B

Burke Furnishings is a company that manufactures and sells home furniture. It sources its materials from another country to keep costs low. An assembly line worker in one of its manufacturing centers noticed that there was increasing concern regarding the potential toxicity of the flame-resistant materials used in the furniture. In response, she compiled a list of nontoxic flame-resistant materials that the company could use. When her manager learned about this, he presented the prospect and got it approved from the top management team. This is an example of the A) top-down strategic planning approach. B) planned emergence approach. C) scenario planning process. D) reverse engineering process.

B

By selling a laptop 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 ($1200 - $1000) + $400, is the A) opportunity cost. B) economic value created. C) reservation price. D) consumer surplus.

B

Cloudlink 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? A) subscription-based B) freemium C) pay-as-you-go D) razor-razor-blade

B

Companies in the same strategic group are ________ to each other. A) strategic allies B) direct competitors C) merger partners D) stakeholders or shareholders

B

Corner Market Inc. is a supermarket chain. Due to strong competition from other stores in the industry, Corner Market has aggressively used branding, pricing, and superior customer service to uniquely position itself in the market. As a result, the supermarket chain has been able to differentiate itself from its competitors and sell its products at higher prices. Which of the following industry competitive structures does this scenario best illustrate? A) perfect competition B) monopolistic competition C) monopoly D) oligopoly

B

During an interview for a CEO position, Elena's potential employers ask her, "If you get this job, will you focus more on industry effects or firm effects?" What should her answer be? A) "Neither. I would focus on unexplained variances. They are the most mysterious effects and the most powerful." B) "Firm effects. I will be able to have the most impact on those." C) "Industry effects. They have the most substantial effect on superior firm performance." D) "Neither. I would focus on business cycle effects. These are the most predictable, so they are worth the most effort."

B

Eleanor owns a large portion of Apex Apparel's stock. However, she is not employed by the company. In this scenario, Rachel is the company's A) external stakeholder. B) internal stakeholder. C) creditor. D) customer.

B

Eon Inc., Electravia Inc., and FC Inc., the three largest firms in the consumer electronics industry, hold close to 85 percent of the industry's market share. These companies mainly compete against each other by providing unique features in their products rather than pricing them low. These firms are interdependent, and each firm must consider the strategic actions of its competitors. Which of the following industry competitive structures does this scenario best illustrate? A) monopolistic competition B) oligopoly C) monopoly D) perfect competition

B

Facing stiff competition in the e-reader market, Sumac Industries wants to protect its competitive advantage by increasing the perceived value of its reader. Sumac's best strategy to accomplish this would be to A) increase the cost of production to add innovative new features. B) highlight the number of celebrities who use Sumac e-readers. C) lower the retail price of its e-reader to attract new customers. D) try to imitate some of the features found in competing products.

B

Fadia Ammunition Inc., a firm controlled and managed by the government of Fadia, is the only company that has the license to produce defense arms in the country. Which of the following industry competitive structures does this best illustrate? A) monopolistic competition B) monopoly C) oligopoly D) perfect competition

B

GN Corp. and BC Inc. are two competing firms in the same industry. GN Corp.'s tangible assets are valued at $15 billion and its intangible assets are valued at $35 billion. BC Inc.'s tangible assets are valued at $5 billion and its intangible assets are valued at $45 billion. What can be concluded from this information? A) BC Inc. will be less competitive than GN Corp. because of its smaller investment in tangible assets. B) It is likely that BC Inc. is better enabled than GN Corp. to gain and sustain a competitive advantage. C) Judging from the assets listed, BC Inc. has probably been in the industry a much shorter time than GN Corp. D) There is no resource heterogeneity between the two firms, BC Inc. and GN Corp., as they operate in the same industry.

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) network effects B) economies of scale C) customer switching costs D) capital requirements

B

How do low interest rates affect a business? A) Firms tend to defer investments until rates rise. B) Firms can easily borrow money to finance future growth. C) Consumer demand slows down. D) Business credit is harder to obtain.

B

How does a firm capture its producer surplus for a good or service? A) as cost per unit sold B) as profit per unit sold C) as earnings per share D) as market price per share

B

Ida has been tasked with formulating the business strategy for Contour Cosmetics' new line of lipsticks. Which of the following ideas would Ida be likely to include in her proposal? A) Open kiosks in shopping centers located in developing countries with rising disposable incomes. B) Promote the lipsticks as the longest-lasting on the market. C) Invest in building an online store for Contour products. D) Reorganize the manufacturing division to gain efficiency.

B

Igor's Furniture has seen its profit margins shrink over the past several 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? A) Go against the trend and raise prices. B) Install modern manufacturing equipment to improve efficiency. C) Increase spending on online marketing efforts. D) Focus on imitating the most successful products of competitors.

B

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? A) BlackBerry failed to offer strong security features for its device. B) BlackBerry failed to change its device into one that could perform multiple tasks effectively. C) BlackBerry failed to adapt to a groundswell that involved workers bringing mobile devices to work. D) BlackBerry failed to produce an efficient emailing system using a keyboard.

B

In a firm's external environment, ________ primarily capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class. A) political trends B) demographic trends C) ecological trends D) economic trends

B

In the context of the resource-based model of competitive advantage, if a successful firm exhibits resource immobility it means that the A) rival firms have better accessibility to quality resources, which they will be able to acquire and deploy to their benefit. B) firm will have a sustained competitive advantage because of its unique resources that are difficult for others to replicate that are difficult for others to replicate. C) competitors can easily replicate or copy the firm's resource bundles and capabilities. D) resources of the firm cannot be effectively deployed within its own organization.

B

In the top-down strategic planning approach, all strategic intelligence and decision-making responsibilities rest primarily on the A) functional managers. B) chief executive officer. C) external stakeholders. D) general manager.

B

InTex manufactures medical devices. The firm's profitability depends on several variables that are subject to occasional change, including the cost of parts and labor, changes in medical practices, and the price of oil used in both manufacturing and shipping. To account for the potential impact of changes to any of these variables, InTex managers should implement a(n) ________ approach. A) top-down strategic planning B) scenario planning C) upper-echelon D) strategic business units

B

Invoro is a market leader in consumer electronics. If Finolo and Ethver, companies that manufacture televisions, develop the same customer knowledge base and create products with the same customer appeal as Invoro, then A) Finolo and Ethver will have a VRIO resource. B) Invoro will have a resource that is valuable but no longer rare. C) Invoro will have a sustainable competitive advantage in the industry. D) Invoro will have a resource that is rare but no longer valuable.

B

It is April 2018 and Mark is a novice investor who wants to decide between purchasing shares in EagleCorp or Myna Bird Inc. In fiscal year 2017, EagleCorp's return on invested capital (ROIC) was 15 percent, and its cost of capital was 12 percent. During the same period, Myna Bird Inc.'s ROIC was 22 percent and its cost of capital was 25 percent. What does this information tell Mark? A) Myna Bird Inc. is more likely to create value while EagleCorp is more likely to destroy value. B) EagleCorp is more likely to create value while Myna Bird Inc. is more likely to destroy value. C) Both Myna Bird Inc. and EagleCorp are likely to create value. D) Neither Myna Bird Inc. nor EagleCorp are likely to create value.

B

Kirsten, a manager, is writing an analysis of her employer's current and possible future revenues. Which of the following could she identify as an economic factor in her firm's external general environment? A) the government regulations and laws in the country in which the firm exists B) the stage of the business cycle that the country is in C) the values and norms prevalent in the society in which the firm operates D) the bargaining power of the firm's suppliers and buyers

B

Mara is a management consultant for a soda manufacturer that wants to expand into health drinks such as green tea and after-workout drinks. Based on what you have read, which of these is sensible advice for Mara to offer her client? A) "Pinpoint the best time to enter this new market, and then make a yes-or-no decision quickly." B) "Carefully consider the entry choices over time before making a decision." C) "Your best bet is to undercut competitors' prices and lure them into a price war." D) "Focus on what your company does well rather than trying to expand into untried areas."

B

Marina manages the supply chain for a company that sells diamond watches. 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 Marina recommend to the company's owner? A) Increase supply. During recessions, businesses that focus on low-cost solutions make significant profits. B) Reduce supply. Customers generally reduce their purchases of luxury items when the economy falters. C) Maintain the supply at its current rate. Economic forecasts are rarely accurate. D) Wait six months and see what happens. Recessions rarely affect consumer spending.

B

Mobius Electronics incurs a cost of $350 to produce one unit of a cell phone. The company's management has priced the product at $600 in the market. Considering the technological advancement of the cell phone, customers perceive its value to be around $800. What is the economic value created in this scenario? A) $350 B) $450 C) $800 D) $200

B

National Safety Inc., an insurance firm, replaced its existing project management software with new software from another supplier. Since the new software has different features and abilities, National Safety has had to spend $10,000 on training its employees to use it. In this scenario, $10,000 represents National Safety's A) opportunity cost. B) switching cost. C) octroi charge. D) excise duty.

B

O'Ryan Plastics maintains a manufacturing plant overseas. The local government has just been overthrown by a military group that opposes foreign influence in the country. According to the SWOT analysis, the political situation in this location is considered to be an A) external opportunity. B) external threat. C) internal strength. D) internal weakness.

B

Online retailer NetShop had been drastically losing market share to its competitors. The management hired a reputed consulting firm to advise the company. The experts from the consulting firm pointed out that the company primarily lost out on its competitive advantage due to its poor customer service, including 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. NetShop can best solve its problem by working on its A) immobile assets. B) support activities. C) resource flows. D) resource stocks.

B

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 management consultancy industry in which the company's fixed costs are low B) the steel industry in which the company has obligations like severance pay toward employees C) the corporate training industry in which the company's commitments are mostly short-term D) the e-commerce industry where the company has no long-term contractual agreements with suppliers

B

Polygon sells its e-book readers at the cost price of $15 each. However, the company makes its profits when users have to download or buy books online. Which of the following business models is Polygon implementing? A) subscription-based B) razor-razor-blade C) pay-as-you-go D) direct sales

B

Quick Market Inc. is a food supply company that wants to sell its products directly to consumers through mail order instead of going through supermarkets and other stores. However, supermarket chains want to make this transaction either illegal or more difficult for Quick Market. To accomplish this, they are using ________ to influence the political process. A) ecological factors B) lobbying forces C) interest rates D) demographic research

B

Rock Bottom Tiles 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, Rock Bottom 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 Rock Bottom to ask in order to put its strategy into action? A) Why does the business model create value? B) What activities need to be performed to create and deliver the offerings to consumers? C) How are the offerings to the customers created? D) Who are the main stakeholders who will be performing the activities?

B

Seth's Computer Repair has maintained a competitive advantage based on its thorough and professional service, reasonable pricing, and money-back guarantee. Management at the company is so committed to doing repairs well that they often have rejected employee suggestions to expedite their processes. Recently, the company has begun to lose customers to a new local service offering same day in-home repairs and 24/7 online customer support. According to the dynamic capabilities perspective, Seth's Computer Repair has lost its competitive advantage due to A) value chain disruption. B) core rigidity. C) resource flows. D) resource stocks.

B

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

B

The "Natural Nourishment" granola bars manufactured by Global Good Foods have been the top-selling granola bars in the market. Though the market for granola bars is flooded with competitors, Global Good has been able to maintain its market position for a long time. This is mainly attributed to the pleasant texture of its granola, which comes from a proprietary processing technique used by the company. This competency of Global Good Foods will be considered as a(n) ________ resource in the VRIO framework. A) imitable B) rare C) intangible D) organizational

B

The Lynx Manufacturing Company produces components used in electronic toys. In fiscal year 2017, Lynx earned an accounting profit of $3 million. However, Lynx's production facilities might have also been used to produce components for mobile phones, which would have generated $2 million in revenues and saved the company $500,000 in production costs. Which of the following statements is true? A) Lynx earned an economic profit of $5.5 million. B) Lynx earned an economic profit of $500,000. C) Lynx suffered an economic loss of $500,000. D) Lynx suffered an economic loss of $2.5 million.

B

The amount of xylene that can be used in household paint is legally limited to 0.03 percent. Anything beyond this amount is hazardous to health and the environment, and considered a legal offense. Consequently, CW Paints Corp. has vouched to make its products as safe as possible. Therefore, it manufactures xylene-free paints even though this increases its costs and reduces the dividends paid to its shareholders in the long run. Which of the following responsibilities is CW Paints Corp. primarily compromising in this scenario? A) legal responsibilities toward the government B) economic responsibilities toward its shareholders C) philanthropic responsibilities toward the local community D) ethical responsibilities toward the society

B

The competitive advantage that one firm has will be short-lived in an industry in which A) resource immobility is high. B) perfect competition exists. C) resource heterogeneity is high. D) capabilities of a firm are not easily replicable.

B

The former CEO of Sam's Club, a division with its own profit-and-loss responsibility, Rosalind Brewer, reported to Walmart's CEO, C. Douglas McMillon, who as corporate executive oversees Walmart's entire operations. Sam's Club, therefore, is a ________ of Walmart. A) corporate partner B) strategic business unit C) branch office D) house brand manufacturer

B

The founder of T-Square Construction strongly believes in the notion of corporate social responsibility, so he has proposed a number of philanthropic activities that he expects the company to pursue. In order to accomplish this vision, the managers should first A) review all legal codes in the areas in which T-Square operates and ensure all permits are up-to-date. B) ensure that the company is profitable and has a sustainable competitive advantage. C) make sure it is paying employees wages that allow them to live comfortably. D) ask for public input on issues that the company can help address.

B

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) threat of substitutes is most likely high. B) threat of new entrants is most likely low. C) bargaining power of buyers is most likely low. D) entry barriers are most likely nonexistent.

B

The primary objective of Porter's five forces model is to A) understand valuable, rare, and hard-to-imitate resources. B) understand the profit potential of industries. C) reduce the gap between the value of a firm's product and its cost of production. D) break down a firm's value chain activities into primary and support.

B

The production head at the Omnitone Paint Company would frequently stay back after office hours and experiment with new color combinations even though this was part of the new product development team's job. As a result of these experiments, he came up with two new interior paint colors, foggy morning and mint julep. The new colors proved popular among test groups, and quickly became some of Omnitone's best-selling products. Which of the following strategies does this scenario best illustrate? A) intended strategy B) emergent strategy C) unrealized strategy D) tactical strategy

B

The ratio of SG&A/Revenue is an indicator of a firm's focus on A) researching to produce innovative products and services. B) marketing and sales to promote its products and services. C) producing a good in an efficient manner. D) creating a good that is cost-effective.

B

The value a consumer attaches to a product or service is captured in the A) least price a consumer is willing to pay for it. B) consumer's maximum willingness to pay for it. C) expenses incurred by the firm in manufacturing it. D) difference between the price charged for it and the cost to produce it.

B

Threadless allows customers to submit their own designs and to vote on which designs they would like to see printed on a T-shirt. This business uses a ________ technique. A) offshoring B) crowdsourcing C) peer-to-peer D) binge watching

B

To support the rise of emergent strategies, an organization should A) centralize decision making and all other activities. B) empower lower-level employees to take up autonomous actions. C) limit serendipity that is in the form of random events and accidental happenstances. D) rely solely on hard data to formulate strategies.

B

Tony's Pizza has been trying to directly copy the strategies of Moonlight Pies. Even though it is evident that the success of Moonlight Pies' success comes from the freshness and variety of ingredients it uses, Tony's Pizza has not been able to introduce the same types of produce into its recipes. This is because Moonlight's network of relationships with local growers, as well as its efficient supply chain, are very difficult to emulate. Which of the following barriers to imitation does this scenario best illustrate? A) path dependence B) social complexity C) resource mobility D) resource homogeneity

B

Top-down strategic planning as an approach to the strategic management process will be most effective when the A) environment is constantly changing. B) size of the firm is large. C) probability of black swan events is high. D) top management wants to decentralize decision making.

B

Trung has been an employee with PureEnergy Inc. for 15 years. He started with an entry-level job, and today he is a manager of an entire division. Over the years, Trung has acquired a reputation for doing the right things in the company. Hence, as an efficient leader, he is capable of effectively communicating and motivating his subordinates to work toward the company's vision and mission. According to the Level-5 leadership pyramid, which is the highest level of leadership Trung has reached so far? A) Level 5 B) Level 4 C) Level 3 D) Level 2

B

Which of the following is a drawback of Porter's five forces model? A) The model describes competition narrowly as a firm's closest competitors. B) Managers cannot determine the changing speed of an industry or the rate of innovation. C) It fails to provide a basis for deriving implications for a firm's strategic position within an industry. D) The model fails to consider that threat of substitutes can come from outside a given industry.

B

Which of the following is an advantage of applying the economic value creation perspective to assess a firm's performance? A) When the need for "hard numbers" arises, managers and analysts rely on economic value creation perspective to measure competitive advantage. B) In economic value perspective, analysts not only consider historical costs, but also opportunity costs. C) Arriving at the economic value created is easy because determining the value of a good in the eyes of consumers is a simple task. D) It is the most efficient tool for assessing corporate-level competitive advantage of highly diversified companies with large product portfolios.

B

Which of the following is an advantage of the balanced-scorecard? A) It is a tool for both strategic formulation and strategic implementation. B) It allows managers to translate a firm's vision into measureable operational goals. C) The balanced-scorecard is independent of the skills of the managers responsible for its implementation. D) Its implementation is a one-time effort and does not require continuous tracking of metrics or updating of strategic objectives.

B

Which of the following is the best characterization of sociocultural forces? A) a firm's culture, norms, and values B) a society's culture, norms, and values C) a competitor's culture, norms, and values D) a focus group's culture, norms, and values

B

Which of the following is typically an economic responsibility of a firm? A) sourcing raw materials from highly developed countries B) paying adequate returns to the firm's stockholders on the capital invested by them C) donating resources, in terms of money and time, toward community development D) helping a nation increase its import of goods and services

B

Which of the following provides an example of how a firm's valuable resource can be imitated? A) To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of a generic medieval cathedral. B) To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of the Leaning Tower of Pisa. C) To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of the U.S.S. Enterprise aircraft carrier. D) To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of a castle from a fantasy movie.

B

Which of the following statements accurately brings out the difference between tangible and intangible resources? A) Tangible resources contribute to a company's competitive advantage, whereas intangible resources have little effect on competitive advantage. B) Tangible assets can be bought on the open market by anyone with the necessary cash, whereas intangible assets cannot be easily purchased. C) Tangible resources take a longer time to build, whereas intangible assets can be built comparatively easily. D) Tangible assets are difficult for competitors to imitate, whereas intangible assets can be easily replicated.

B

Which of the following statements correctly compares Apple and Microsoft in 2016? A) Apple had a higher return on revenue than Microsoft. B) Apple had a higher return on invested capital than Microsoft. C) Microsoft had higher total sales than Apple. D) Microsoft had a lower cost structure than Apple.

B

Which of the following statements is true of accounting data? A) Accounting data focus mainly on intangible assets, rather than tangible assets. B) Accounting data are historical data and thus backward-looking. C) Accounting data do not have to be adjusted in any manner to compare companies with different capital structures. D) Accounting data consider off-balance sheet items, such as pension obligations of a firm.

B

Which of the following statements is true of corporate strategy? A) The objective of corporate-level strategy is to ensure that the sum of the values of individual business units is greater than the overall corporate value. B) A corporate strategy must be able to create synergies across business units that are quite different. C) Formulating a corporate strategy involves general managers answering questions relating to how to compete in order to achieve superior performance. D) Deciding whether to adopt a differentiation or a cost-leadership strategy is part of formulating the corporate strategy.

B

Which of the following was a key motivator for participants in the Occupy movement of 2011? A) the need for a capitalist economic system B) the issue of income disparity C) the need to reduce government intervention in businesses D) the desire to dump ecologically dangerous products overseas

B

You are the CEO of a home appliance manufacturing company and have recently undertaken a review of your company's strategy. In comparing your stock market valuation to that of your closest competitor, you note that your firm is currently valued at $50 billion, while your competitor is valued at $40 billion. How should you proceed? A) Consider this evidence of a sustainable competitive advantage and maintain your current strategy. B) Compare the current valuations with past valuations to determine a trend. C) Assume your current strategy has failed and begin to formulate a new one. D) Compare your valuation to firms in another industry.

B

_______ describes a process in which the options one faces in a current situation are limited by decisions made in the past. A) Social complexity B) Path dependence C) Cannibalization D) Causal ambiguity

B

________ are best described as the value of the best forgone alternative use of the resources employed. A) Variable costs B) Opportunity costs C) Social costs D) Switching costs

B

________ are the legal owners of public companies. A) Employees B) Shareholders C) Category captains D) Creditors

B

12) ________ is best described as an integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage. A) Supply chain management B) Integrated technology management C) Strategic management D) Inventory management

C

15) In ________, a firm frames a guiding policy to address the competitive challenge. A) strategy control B) strategy implementation C) strategy formulation D) strategy analysis

C

17) Which of the following is an element of good strategy? A) a summary of the firm's history within its industry B) a guiding policy to address employee satisfaction C) a set of coherent actions to implement the firm's guiding policy D) an approach that underestimates the competition

C

22) Which of the following scenarios illustrates a firm that has a sustainable competitive advantage? A) Jamison Inc. generated revenue of $300,000 this financial year, which is close to the industrial revenue average of $320,000. B) CR 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. C) Zhang Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years. D) Peak Inc. was able to outperform its competitors with its new production system, in terms of revenue, for a brief period of four months.

C

33) For a firm that operates in an industry where competition is high, which of the following practices will result in inferior performance? A) choosing a distinct but different strategic position in the industry B) working toward increasing the difference between value creation and cost C) trying to be everything to everybody by combining different competitive strategies D) focusing on creating value for customers rather than destroying rivals

C

36) Noodles 2 Go and Sal's Trattoria are two restaurants serving Italian cuisine. While Noodles 2 Go focuses on providing quick, affordable pasta dishes for the lunch crowd, Sal's Trattoria focuses on serving home-style dishes in an upscale, romantic setting. Both companies have been able to gain a competitive advantage. This is most likely because the companies have A) benefitted from economies of scale. B) entered into a cartel arrangement. C) pursued distinct strategic positions. D) engaged in direct imitation and substitution.

C

37) Which of the following is an implication of all firms in an industry pursuing a low-cost position through application of competitive benchmarking? A) No firm would face direct competition from others in the industry; hence, profit potential would be high. B) Each firm would be catering to a different customer segment. C) The firms would eventually have no resources to invest in product and process improvements. D) Each firm would be in a better position to gain a competitive advantage.

C

39) Which of the following statements should ideally reflect a firm's strategy for competitive advantage? A) Our strategy is to win at any cost. B) We will be number one in the industry. C) Our aim is to create superior customer value while controlling costs. D) We want to be the market leader by replicating our competitor's strategy.

C

45) True Help is a nonprofit organization that works toward rehabilitating the homeless. The credo of the organization is "help us help you." For an organization like True Help, which of the following statements would make an appropriate mission? A) Help us help you find a home. B) One day, everyone in this nation will have a home to protect themselves. C) We help the homeless gain and sustain financial independence by providing employment opportunities. D) Our mission is to turn this not-for-profit organization into a for-profit organization so that the stakeholders benefit.

C

49) Strategic commitments are actions that are A) inexpensive, long-term oriented, and difficult to reverse. B) inexpensive, short-term oriented, and easy to reverse. C) costly, long-term oriented, and difficult to reverse. D) costly, short-term oriented, and easy to reverse.

C

55) Why is it better for firms to keep their vision statements customer-oriented rather than product-oriented? A) Customer-oriented visions tend to have a more short-range view of changing environments. B) Customer-oriented visions tend to have a more myopic view of changing environments. C) Customer-oriented visions tend to be more flexible when adapting to changing environments. D) Customer-oriented visions tend to be more stable when dealing with changing environments.

C

59) Which of the following is a customer-oriented vision? A) to be the most progressive insurance company B) to be the best automobile company in the world C) to enable businesses to improve their employee communications D) to manufacture innovative products through continuous learning

C

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

C

63) Marigold Servers, a web services firm, has experienced a 7% decline in revenues in consecutive quarters. In an effort to reduce operating costs, managers reduced the customer service staff from 12 employees to 6. Management also enlisted the remaining employees to help produce a new company vision: to give customers of all budgets a customizable, stress-free web hosting experience. What is wrong with this scenario? A) Marigold's vision is not customer-oriented. B) Internal stakeholders were not invested in defining the vision. C) Marigold's organizational structures do not align with the vision. D) Marigold's vision is not aspirational.

C

71) Organizational values help individuals make choices that are A) legal but unethical. B) both illegal and effective. C) both ethical and effective in advancing a company's goals. D) ethical but ineffective in achieving long-term success.

C

72) The pharmaceutical company Merck's new drug Vioxx was a blockbuster, generating revenues of $2.5 billion a year by 2002 and growing fast. When allegations that the drug caused heart attacks and strokes began to appear in the medical community, and that Merck had suppressed evidence about Vioxx's dangerous side effects from early clinical trials, Merck announced the voluntary withdrawal of Vioxx from the market. In this example, Merck provides an example of what can happen if a company deviates from its A) voluntary responsibilities. B) realized strategy. C) core values. D) strategic decisions.

C

85) As manager of a major producer of automobile airbags, you have recently introduced the following vision statement: to protect the health of every driver and passenger. How can you ensure that your employees feel invested in and inspired by the firm's vision? A) Include a "vision adherence assessment" in each employee's annual performance review. B) Hang banners around the production facility touting the new vision statement. C) Ask employees for feedback on the vision statement and revise based on their input. D) Give a speech explaining why everyone should support the new vision.

C

A company uses the planned emergence approach in the development of its strategies. Which of the following is an implication of this? A) The employees will be isolated from the process of setting the company's vision and mission. B) The lower-level employees will be restricted to the tasks involved in strategic implementation. C) The company's organizational structure and systems will be designed to support bottom-up strategic initiatives. D) The top management will create a strategy that is based on hard data alone, rather than an inspiring vision.

C

A firm has 30 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 A) 30,000 shares, that is, 30 million shares/$100. B) $200,000, that is, $2,000 × $100. C) $3 billion, that is, 30 million shares × $100. D) 20:1, that is, $2,000/$100.

C

A firm incurs $100 to manufacture an office table. It fixes the market price of the table as $250, and discounts the price to $200. However, the maximum a person is willing to pay for it is $180. What is the amount of total perceived consumer benefits in this scenario? A) $250 B) $200 C) $180 D) $100

C

A new company named Far Reach Inc. entered the radio retail business, which is a fairly consolidated industry. In response, two large incumbent radio retailers, Smooth Waves and Clear Signal, lowered the price of their radios. Also, they spent more money to improve their radios and on additional marketing. By doing this, Smooth Waves and Clear Signal A) decreased industry exit barriers. B) increased industry exit barriers. C) decreased industry profit potential. D) increased industry profit potential.

C

A traditional top-down strategic planning process typically begins with A) employees at the operational level identifying problems within an organization. B) functional managers formulating functional strategies for their respective departments. C) strategic leaders adjusting a company's vision and mission based on environmental analysis. D) employees who have close contact with customers taking autonomous actions.

C

A watchmaking company has priced one of its wristwatches at $210. Most of its competitors sell similar watches at $180. Selling anything less than $150 would result in a loss for the company. However, the absolute maximum a customer is willing to pay for it is $170. In this scenario, what is the reservation price of the wristwatch? A) $150 B) $180 C) $170 D) $210

C

Addams Coaches Inc. is a bus line with service to several major cities. It has several competitors that each offer service to one or two cities, and based on its current outlays, 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 Addams pursue instead? A) Create a strategic group through mergers. B) Compete based on inter-group rivalry, not intra-group rivalry. C) Pursue a differentiated strategy. D) Close the business until the cost of gas decreases.

C

Amazon.com's network of distribution centers allow it to drastically reduce its delivery times compared to other online retailers. These distribution centers are examples of Amazon's A) core competency. B) intangible resources. C) tangible resources. D) capabilities.

C

Anders is researching sociocultural factors related to his employer, a sporting goods manufacturer. Which of the following would be part of the sociocultural forces in a firm's external environment? A) the interest rates prevalent in an economy B) the laws protecting small enterprises in a nation C) the family size of the firm's target market D) the rate of employee attrition within the firm

C

As a part of strategy formulation, a firm's functional strategy primarily concerns questions relating to A) where to compete. B) when to compete. C) how to implement business strategy. D) how to enter target markets.

C

As the legal owners, ________ have the most legitimate claim on a company's profits. A) creditors B) employees C) shareholders D) board members

C

Assume a firm's resources and capabilities are costly to imitate. This is because rival companies do not clearly understand the relationship between the resources and capabilities controlled by the firm. In this case, the firm's competitive advantage is protected against imitation by A) path dependence. B) dependence complexity. C) causal ambiguity. D) social complexity.

C

Bethany 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? A) Change her menus and décor to appeal to economy-minded consumers. B) Carefully time the opening of her business and focus on underserved niches. C) Use her existing knowledge, equipment, and staff to launch a catering business. D) Expand to new locations in economically struggling areas.

C

Blue Billion Inc. is a large company that sells a variety of products such as cosmetics, jewelry, frozen foods, navigation electronics, and airplanes. Apart from this, the company also has a strong presence in the service industry through its chain of dance studios, casinos, and nightclubs. Each of its product divisions operates as an individual business and is responsible for its own profits and losses. Thus, these product divisions under Blue Billion can be referred to as A) limited liability companies. B) functional departments. C) strategic business units. D) corporations.

C

Both Saturn Technologies and Granite Inc. incur a cost of $200 to manufacture a single unit of a cell phone. However, Saturn Technologies charges a higher price than Granite Inc. does, but it still sells a higher number of phones. What does this imply? A) Saturn Technologies and Granite have achieved a competitive parity. B) Granite Inc. has a competitive advantage over Saturn Technologies. C) Saturn Technologies creates more economic value than Granite Inc. does. D) Granite Inc. is not charging enough for its product.

C

Cartech Inc. is a manufacturer of automobile parts, which it sells to retail auto supply stores. Its core competencies include superior design and engineering capabilities, as well as a highly integrated and efficient supply chain. To sustain its competitive advantage, Cartech should first A) seek to replicate its nearest competitor's competency in innovative marketing. B) attempt to cut costs by replacing assembly line workers with robots. C) upgrade its engineering department and improve its supply chain. D) diversify its product offerings by developing parts for construction equipment.

C

Clear Calls Inc., a telephone service provider, has a large user base mainly because phone calls and messages between all Clear Calls users are free. When a person switches to a Clear Calls network, his or her entire network of family and friends is likely to switch to the same network to receive the benefit of free calls and messages. In addition, an existing user who gets a new user to register with Clear Calls Inc. is given a free wireless connection. This has helped to keep competition away from Clear Calls. In this scenario, which of the following factors is acting as an entry barrier for Clear Calls Inc.? A) economies of scale B) high capital requirement C) network effects D) high fixed costs

C

Competitors have found it extremely difficult to imitate Gene Electronics Inc.'s valuable resources, capabilities, or competencies. This is primarily because the source for the company's success has been unclear. The competitors are uncertain if Gene Electronics Inc.'s success is due to its strong leadership, the skills of its research and development team, or the timing of the company' s product introductions. Gene Electronics Inc. has been protected from losing its competitive advantage as a result of A) time compression diseconomies. B) resource homogeneity. C) causal ambiguity. D) path dependence.

C

Due to economic regression in Freedonia, the profitability of the large corporation Happiness Products Inc. (HPI) was poor. An analysis of the company's business showed that the company could become profitable if it divested a few strategic business units under its banner. From which of the following businesses would HPI find it most easy to exit? A) the automobile industry, where the company has contractual obligations with suppliers B) the airline business, where the company's strategic commitments are long-term C) the e-commerce retail business, where investments on assets are low D) the pharmaceutical business, where the company has a large number of fixed costs

C

Due to resource immobility, a critical assumption in the resource-based model of a firm, the A) competitive advantage of a firm exists for a short period of time. B) resource bundles of a firm can be easily imitated by competitors. C) resource differences between firms last for a long time. D) competencies and capabilities of all firms in an industry are similar.

C

Economic value creation is best expressed as A) producer surplus minus consumer surplus. B) consumer surplus minus cost of production. C) consumer surplus plus firm profit. D) producer surplus plus firm profit.

C

Economies of scale are cost advantages that accrue for firms with A) high fixed costs. B) low employee turnover. C) larger output. D) high capital risks.

C

Elena is the CEO of Geode Technologies, a consumer electronics manufacturer. Last year, Geode's return on invested capital (ROIC) was 11.6 percent, while Geode's closest competitor, NorthWest Tech, had an ROIC of 17 percent. Which of the following factors might Elena use to convince investors to invest in Geode rather than NorthWest Tech? A) Geode had a Research & development (R&D) expense / Revenue ratio of 16 percent, while NorthWest Tech had an R&D / Revenue ratio of 12 percent. B) Geode's working capital to revenue ratio was 75 percent, while NorthWest Tech's was 68 percent. C) Geode's intangible intensity was 6 percent, while NorthWest Tech's was 3 percent. D) Geode's plant, property, and equipment (PPE) over revenue ratio was 19 percent, while NorthWest Tech's was 10 percent.

C

Erin is the manager of gardening supplies wholesaler SpringTime Inc. The company's vision is to become the leading supplier of gardening materials west of the Mississippi River. In assessing the firm's current state, Erin has determined that the firm could differentiate itself from competitors with an easy-to-use online ordering system and a two-day delivery guarantee. To accomplish this, Erin has determined that SpringTime must spend the next two quarters honing its capabilities for sourcing materials quickly and improving its web development competencies. According to the balanced scorecard approach, what is wrong with Erin's thinking? A) She has not considered the opportunity costs associated with launching an online ordering system. B) She has not addressed the question of which core competencies the firm needs. C) She has failed to account for external factors such as customer perceptions and shareholder perceptions. D) She has not addressed the question of how SpringTime will create value.

C

Euan manages product design and development at a toy company. The junior managers who report to him tell him that new complementors for the firm's products are available. What should Euan's reaction be? A) He should consult lawyers about the possibility of suing for copyright infringement. B) If the industry barriers to entry are low, he doesn't need to do anything. C) He needs to find out if his company as well as other companies can provide the complements. D) If the industry barriers to entry are high, he doesn't need to do anything.

C

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 nearby fast-food restaurant B) a food kiosk in an adjacent subway station C) a premium rooftop restaurant in the same city D) a mobile food cart parked opposite to the five-star hotel

C

Hammer and Nails, Local Motion, DIY Palace, and Handy Paradise are all hardware stores that compete against each other through everyday low pricing and discounts on bulk purchases. All four stores cater to the needs of highly price-sensitive customers. Thus, together these stores form a A) focus group. B) command group. C) strategic group. D) cross-functional group.

C

Hannah is the Chief Operating Officer of the startup AppPalace. In which of the following scenarios does Hannah exhibit strategic leadership? A) Hannah directs the company to produce an app for reptile enthusiasts, a community she happens to be a part of. Even though the app ends up losing significant amounts of money, Hannah is proud of the product and uses it every day. B) Citing budget concerns, Hannah ignores the directions from AppPalace's CEO to double the size of the customer support staff. As a result, the company misses its third quarter customer satisfaction target but exceeds its net profit expectations by 5 percent. C) Hannah schedules a meeting with the manager of the marketing department and overcomes his skepticism about a new campaign aimed at customers in the 55+ age group. Over the next three months, AppPalace gains 250,000 new users in that group. D) With a major pitch to potential investors coming up, Hannah works alone for 10 hours a day until she writes the perfect sales pitch. Even though the rest of her team doubts that they can meet the performance goals Hannah has set, she makes the presentation anyway.

C

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? A) In the resource-based model, resources are freely available and mobile, whereas in the perfectly competitive industry structure, resources are highly immobile. B) 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. C) 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. D) 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.

C

In an economic context, strategy for producers is primarily about A) distributing the economic value created equally between consumers and themselves. B) reducing the difference between consumer's willingness to pay for a product and the cost to produce it. C) capturing the economic value created as much as possible. D) lowering producer surplus and increasing consumer surplus.

C

In the context of SWOT analysis, which of the following best exemplifies a firm's external opportunity? A) an increase in its financial resources B) an increase in its brand equity C) an increase in its customers' disposable income D) an increase in its employee productivity

C

In the five forces model developed by Michael Porter, ________ is not defined narrowly as a firm's closest competitors but rather more broadly to include other factors in an industry like buyers, suppliers, potential new entry of other firms, and the threat of substitutes. A) a stakeholder B) regulation C) competition D) a barrier to entry

C

Leading guitar string producer Wound Up Inc. has enjoyed a competitive advantage based on its proprietary coating that gives its strings a clearer sound and longer lifespan than uncoated strings. One of Wound Up's competitors, however, has recently developed a similar coating using less expensive ingredients, which allows it to charge a lower price than Wound Up for similar-quality strings. Wound Up's competitive advantage is in danger due to A) a lack of perceived value. B) a lack of organization. C) direct imitation and substitution. D) resource immobility.

C

Merton's Toothpaste has been the leader of dental care products for about 40 years. However, this company relied too long on its competency of reducing cavities without refining or upgrading other aspects of its product. As a result, other personal hygiene companies that began to offer toothpastes with natural whitening agents gained a competitive advantage over Merton's. This case is an example of A) resource flow. B) dynamic capabilities. C) core rigidity. D) value chain.

C

Molly Hue Apparels Inc. (MHA) had been outsourcing its production to less-developed countries in order to reduce its cost of production. With the emergence of its competitor, Hova Inc., MHA lost its competitive advantage. Hova had its production units in its home country that allowed the company to bring out the latest trends to the market earlier than MHA. Also, MHA frequently suffered due to political instability and lack of intellectual property laws in the outsourced countries. Thus, parts of MHA's strategies became obsolete and it had to relocate its production. What are such obsolete strategies referred to as in the planned emergence model? A) intended strategy B) emergent strategy C) unrealized strategy D) tactical strategy

C

Patriot Tools, 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 Patriot Tools' ________ responsibility. A) economic B) legal C) ethical D) demographic

C

Pure Carat Inc. is a company that sells 24-carat gold biscuits to companies that manufacture jewelry. Since the company operates in an industry where many other suppliers sell standardized products, it can most likely A) easily achieve a temporary competitive advantage. B) easily achieve a sustainable competitive advantage. C) only achieve competitive parity. D) maintain its absolute advantage for long time.

C

Shark Fin Golf Club 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? A) razor-razor-blade B) pay-as-you-go C) subscription-based D) freemium

C

Smooth Fusion Inc. is a software company that has built and acquired numerous assets over the years. According to the resource-based view of a firm, which of the following assets of Smooth Fusion Inc. will best enable it to gain and sustain a competitive advantage? A) the cloud computing service that it uses B) the capital the company raised from its shareholders C) the expertise acquired by the employees in the company D) the headquarters building owned by the company

C

The "diagonal assembly system" was a production system pioneered by the automobile company Gogo. Recently, Gogo was able to sue a competitor and won the suit, thereby receiving $100 million in damages. Which of the following would most likely enable Gogo to win such a lawsuit? A) The competitor ran advertising that criticized Gogo's assembly system. B) The competitor failed to apply for a patent of its own assembly system. C) The competitor infringed on Gogo's patent of the "diagonal assembly system." D) The competitor developed an assembly system that worked on a newer theory than Gogo's system.

C

The CEO of Mabel Automobiles was the child of parents who had difficulty making enough money to support their family. As a result, he and his siblings did not have access to many advantages that children from wealthier families had. This CEO, therefore, emphasized making affordable, low-maintenance vehicles that could be bought by low-income households. Which of the following does this example demonstrate? A) dominant strategic planning B) Level-5 leadership pyramid C) upper-echelons theory D) scenario planning

C

The balanced-scorecard can accommodate A) only short-term performance metrics. B) only long-term performance metrics. C) both short- and long-term performance metrics. D) neither short- or long-term performance metrics.

C

The difference between the price charged for a product and the cost to manufacture it is referred to as the A) consumer surplus. B) break-even price. C) producer surplus. D) reservation price.

C

The interaction between a firm and its diverse internal and external stakeholders is best described as a(n) A) ergonomic relationship. B) cartel arrangement. C) exchange relationship. D) fiduciary responsibility.

C

The management team for Volcanic Batteries came up with the following vision statement: "Volcanic Batteries will conscientiously track its financial performance to ensure profits for its investors, enhance its community through employment and supporting charities, and dispose of waste in a manner that will not harm the environment." This vision statement is most likely based on the A) accounting profitability approach. B) economic value creation approach. C) triple-bottom-line approach. D) balanced-scorecard approach.

C

The tenet behind the triple-bottom-line is that A) a firm should solely focus on increasing the economic value created to/for its customers. B) a firm's primary objective should be increasing the total returns to its shareholders. C) a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy. D) a firm's return on revenue can be broken down into three ratios: COGS/Revenue, R&D/Revenue, and SG&A/Revenue.

C

The top management at Sunshine Vitamins, through rigorous testing, ensures that the company develops and sells vitamins that are free of harmful side effects. Also, the company ensures that the chemical waste generated in the manufacturing process is kept to a bare minimum and is disposed of according to the regulations of the Environmental Protection Agency. The management assesses its overall performance based on these dimensions. Thus, the managers at Sunshine Vitamins are applying the ________ approach to measure firm performance. A) economic value creation B) shareholder value creation C) triple-bottom-line D) accounting profitability

C

The translation of strategy into action primarily takes place in a firm's A) mission statement. B) executive summary. C) business model. D) code of conduct.

C

Unplug Wireless is a cellular service provider that charges its customers $1 for three hours of talk time. So, if a customer's talk time for a month is 60 hours, the company charges him or her $20 at the end of the month. Which of the following business models does this best illustrate? A) razor-razor-blade B) subscription-based C) pay-as-you-go D) freemium

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

When SW International declared a dividend of $20,000,000, its market value increased from $8 billion to $8.5 billion. However, it lost a chance to reinvest $20,000,000 in the research and development of a new product which would have earned a profit of $200 million. Thus, this $200 million is referred to as SW International's A) producer surplus. B) consumer surplus. C) opportunity cost. D) social cost.

C

When companies that manufacture shipping containers want to buy iron ore, the purchase decision is solely based on price. This is because there are a large number of sellers in the iron ore industry, and iron ore is a highly undifferentiated commodity. Which of the following industry competitive structures does the iron ore industry best illustrate? A) monopoly B) oligopoly C) perfect competition D) monopolistic competition

C

When the laptop market overtook the desktop market, Blue Tech Inc., a leader in desktop technology, was left at a competitive disadvantage. Later, Blue Tech Inc.'s management channeled all of the company's efforts and revenue to develop an efficient laptop from scratch in less than a year. However, the company failed because Blue Tech Inc.'s models were inferior to the third- and fourth-generation models its competitors were selling. In this scenario, Blue Tech Inc.'s failure can be best attributed to A) causal ambiguity. B) diseconomies of scope and scale. C) time compression diseconomies. D) social complexity.

C

When the strong dictatorial rule in Backenstein unexpectedly collapsed due to the shocking death of the royal family in an explosion, the nation's economy experienced drastic changes. The laws became more restrictive, the country lost many locally produced resources and products, and the distribution of wealth became inequitable. The unexpected event that led to these changes can best be described as a(n) ________ event. A) extinction B) wild card C) black swan D) miracle

C

Which of the following applies to the Strength-Threats quadrant of the SWOT matrix? A) The local fast-food chain Easy Hot Dogs expanded its limited menu to maintain its advantage against stiff competition. B) The local fast-food chain Easy Hot Dogs added a salad bar to maintain its competitive advantage against stiff competition. C) The local fast-food chain Easy Hot Dogs used its wholesome image to maintain its competitive advantage against stiff competition. D) The local fast-food chain Easy Hot Dogs revised its image of being a cheap-food place to being a wholesome family place to maintain its competitive advantage against stiff competition.

C

Which of the following best qualifies as a firm's internal stakeholder? A) an auditor assigned to the firm by a federal government agency B) a labor union with whom the firm's employees can affiliate C) a manager taking care of the firm's operations in a foreign market D) a competitor manufacturing the same products as that of the firm

C

Which of the following factors most contributes to the U.S. automotive industry being characterized by high entry barriers? A) New auto companies create electric cars powered by simpler motors and gearboxes. B) New entrants in the automotive industry expect that incumbents will not or cannot retaliate. C) Car manufacturers require large-scale production in order to be cost-competitive. D) Few industrial products are as easy to build as cars powered by internal combustion engines.

C

Which of the following fundamental insights was provided by Porter's five forces framework from the completion of the Alta Velocidad Española (AVE)? A) A strong threat of substitutes decreases the rivalry among existing competitors. B) All the five forces must work together to have a meaningful impact. C) Any of the five forces on its own, if sufficiently strong, can extract industry profitability. D) Competition must be defined more narrowly to remain confined to the industry's closest competitors.

C

Which of the following is a drawback of the SWOT analysis? A) The SWOT analysis takes into account only the internal environment of a firm, ignoring the equally important external environment. B) This framework is only applicable to the manufacturing industries; it is ineffective when applied to the service firms. C) A problem with this framework is that a strength can also be a weakness, and that an opportunity can also simultaneously be a threat. D) A drawback of this framework is that it allows managers to evaluate only a firm's current situation and not its future prospects.

C

Which of the following is a macroeconomic factor that can affect a firm's strategy? A) power of buyers B) power of suppliers C) levels of employment D) threat of substitutes

C

Which of the following methods of developing a strategy best illustrates scenario planning? A) Based on the previous year's profits, the CEO of Solva Inc. decided to adopt an expansion strategy in its home market. B) A sales person at MP Foods Inc. suggested that the company should introduce an organic version of its gelato to cater to the needs of the increasingly health-conscious population. C) The managers at Lyon Clothing Inc. formulated a strategy that is able to handle small to medium to large increases in the prices of cotton in the future. D) The CEO of BCT Inc., a large conglomerate, has decided to enter the South American market based on the competitor's success in the same market.

C

Which of the following scenarios best illustrates a good stakeholder strategy? A) VP Inc. follows a strategy in which maximization of the shareholder's wealth is the primary concern of the managers. B) Carrvero Inc. ensures that its employees are paid the least in the industry so that its external stakeholders can get the best price. C) PA Corp. distributes only 40 percent of its annual profit after taxes to shareholders, while the remaining is invested for further research, and distributed among employees and the local community. D) Gen Pharma Corp. ensures that it fully exploits free natural resources, so that most of its profits go to shareholders in the form of dividends.

C

Which of the following scenarios exemplifies a sustainable strategy under the triple bottom line approach? A) Rather than complying with the restrictive recycling laws in the United States, Impervious Plastics outsourced its manufacturing to a country that has fewer environmental restrictions. B) Impervious Plastics developed a chemical additive that doubled the life of its plastics. The additive was currently legal, but environmental groups argued that it harmed the environment. C) Impervious Plastics reformulated its products to eliminate chemicals that were widely used in the industry but were being investigated for their potential negative effects on the environment. D) Impervious Plastics' nearest competitor increased the salaries of its production workers by 30 percent, but Impervious kept its wages the same to gain a cost advantage over its competitor.

C

Which of the following statements accurately describes a firm's resource stock? A) Resource stocks are a firm's level of resources that are common to competitors. B) Resource stocks are a firm's future estimate of both tangible and intangible resources. C) Resource stocks are a firm's current level of intangible resources. D) Resource stocks are a firm's level of investments to maintain or build a resource.

C

Which of the following statements is true about strategic groups? A) It is not possible to have two different strategic groups within the same industry. B) Rivalry within the same strategic group tends to be lower than rivalry between different strategic groups. C) Profitability varies between different strategic groups. D) Companies within the same strategic group are complementors to each other.

C

Which of the following statements with regard to industry structures is true? A) They are stable over time, not dynamic. B) Having a large number of competitors generally equates to higher industry profitability. C) A consolidated industry tends to be more profitable than a fragmented one. D) Having few but large competitors increases the threat of strong competitive forces such as supplier or buyer power.

C

You are the founder of Shadow Skateboards, 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? A) devoting significant resources to researching and developing new products that will be more durable than competitors' B) automating the manufacturing process to reduce production costs C) allowing customers to upload their own image designs and help assemble the finished product at retail locations D) switching to a just-in-time inventory system to reduce inventory costs

C

Zoom Zoom Car Rental follows a cost-leadership strategy. Which of the following firms will most likely be its direct competitor? A) Classic Car Rentals Inc., which follows a cost-increase strategy B) Paul Bunyan Car and Truck Rentals, which follows a differentiation strategy C) Reliable Rental Cars, which follows a low-cost strategy D) Rent-an-Auto LLC, which follows a standardization strategy

C

________ are barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy. A) Embargoes B) Cartel arrangements C) Isolating mechanisms D) Market niches

C

________ is best described as a measure of how effectively capital is being used by a firm to generate revenue. A) Return on revenue B) Risk capital C) Working capital turnover D) Revenue per employee

C

) A firm's strategic position is likely to be strong when A) the entry barriers within the industry it operates in are low and the exit barriers are high. B) its suppliers and vendors can easily forward integrate and buyers can backward integrate. C) all the five forces in Porter's model are strong. D) the gap between the value the firm's product generates and the cost to produce it is large.

D

19) Which of the following is an example of competitive parity? A) A firm manufactures higher-quality wall clocks than its competitors. B) A firm provides wall clocks that its consumers value more than other wall clocks. C) A firm sells wall clocks at a lower price than its competitors. D) A firm produces a similar number of wall clocks at a similar cost as its competitors.

D

21) Powell Lighting was the first company to start selling LED light bulbs in its country—a product that gained popularity among diverse groups. Soon, other companies started to sell their own brands of LED bulbs, thereby giving Powell Lighting ample competition. In response, Powell Lighting decided to limit its LED light bulbs to outdoor models. However, it ensured that these models were the longest-lasting and lowest-priced on the market. With this innovation, Powell Lighting consistently outperformed its competitors for ten years. In this scenario, Powell Lighting maintained a ________ through its innovative strategy. A) balanced scorecard B) fiduciary responsibility C) consistent power position D) sustainable competitive advantage

D

24) Underperformance relative to other firms in the same industry or the industry average results in a(n) ________ for a firm. A) sustainable competitive advantage B) increased power distance C) diseconomies of scope D) competitive disadvantage

D

29) FindFor Inc. is an e-commerce retail firm that sells a variety of merchandise online. Through services like cash on delivery, easy return, and online tracking, the company has created more customer value than its competitors (brick-and-mortar businesses) at the same price. Also, the company's costs are substantially lower than its competitors because of minimal investments in operation and administration. In this scenario, FindFor Inc. has most likely been able to provide superior value and cost control through A) strategic parity. B) strategic profiling. C) strategic liquidation. D) strategic positioning.

D

30) As the strategic manager of CutRite Scissors, you are tasked with producing a strategy for introducing a new line of premium scissors. Your competitor produces a line of similar scissors at a cost of $1 and sells them for $12. Because your company has inferior production capabilities, your scissors will cost $3 each to produce. However, your handle is proven to be more comfortable than your competitors'. Assuming you are guaranteed to sell the same number of units as your competitor, which of the following strategies is most likely to achieve a competitive advantage? A) Reduce the quality of materials used in CutRite scissors to bring unit costs down to $1, then sell the scissors for $12. B) Continue to produce CutRite scissors for $3 but set the price at $10. C) Offer a buy-one-get-one-free sale on CutRite scissors. D) Market CutRite scissors as a higher-quality alternative and sell them for $15.

D

34) If a company wants to gain a competitive advantage in a highly competitive industry, it should ideally A) execute an integrated cost-leadership and differentiation position. B) copy the strategies of other firms through competitive benchmarking. C) provide goods or services similar to its competitors at higher prices. D) stake out a unique position within the industry.

D

35) Jake's Taxi Service is a new entrant to the taxi industry. It has achieved success by staking out a unique position in the industry. How did Jake's Taxi Service mostly likely achieve this position? A) providing long-distance cab fares at a higher rate than competitors; servicing a larger area than competitors B) providing long-distance cab fares at a lower rate than competitors; servicing a smaller area than competitors C) providing long-distance cab fares at a higher rate than competitors; servicing the same area as competitors D) providing long-distance cab fares at a lower rate than competitors; servicing the same area as competitors

D

38) Toy sales have declined by 10 percent each year, forcing many retailers to exit the industry. To eliminate its remaining competition, Bleaker 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? A) Yes. Any strategy that forces competition from the market is by definition successful. B) Yes. Bleaker has achieved a sustainable competitive advantage by selling its toys at a lower price than competitors. C) No. Bleaker has failed to create value for its customers. D) No. Bleaker's strategy and competitive advantage are unsustainable.

D

41) The Founder of Teach for America, Wendy Kopp, wants to make teaching an attractive option for promising young professionals. Identify the phrase that represents the vision she developed for Teach for America. A) to improve standardized test scores across the board B) to cut wasteful spending from education budgets C) to encourage parents to take a more active role in their children's education D) to give all children in the United States the opportunity to attain an excellent education.

D

53) Upper management at Softstep Inc., a manufacturer of insoles for shoes, wants to work on improving the product lines it already has without taking on other challenges at this time. Which of the following vision statements reflects that goal? A) Softstep Inc. wants to adapt their insoles to the changing demands of consumers. B) Softstep Inc. wants to always satisfy the consumers who purchase insoles. C) Softstep Inc. wants to provide the best benefits for employees in the insole industry. D) Softstep Inc. wants to be the best manufacturer of insoles in the industry.

D

54) A customer-oriented vision statement focuses employees to think about how best to A) make a product easier to use. B) increase their efficiency to benefit consumers. C) improve a popular product. D) solve a problem for a consumer.

D

57) Bubble Buddy is a company that manufactures hot tubs. Which of the following best illustrates a product-oriented vision for Bubble Buddy? A) to make people's lives simple and easy B) to demonstrate to customers the health benefits of hot tubs C) to help people improve the value of their homes D) to be the pioneering manufacturer of hot tubs

D

60) Pioneer Pharma Inc. and GH Medicines Corp. are two competing firms in the pharmaceutical industry. While Pioneer Pharma Inc.'s vision is "to be a preeminent drug manufacturer in the industry," GH Medicines Corp.'s vision is "to make good health a reality for everyone around the world." Which of the following is an implication of these different visions? A) GH Medicines' vision is more product-oriented than the vision of Pioneer Pharma. B) Pioneer Pharma is more likely to have a positive relationship between its vision and firm performance than GH Medicines. C) Pioneer Pharma's vision is more long-term and futuristic than GH Medicines' vision. D) GH Medicines will be more flexible than Pioneer Pharma when adapting to changing environments.

D

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

D

67) The management of Toshi Manufacturing showed a commitment to ________ by increasing the salary of many female employees to meet its goal of having equal pay for women and men who perform comparable work. A) scenario planning B) upper-echelons theory C) product-oriented vision D) organizational core values

D

68) ________ are best described as the ethical standards and norms that govern the behavior of individuals within a firm. A) Job descriptions B) Customs duties C) Corrective controls D) Organizational core values

D

74) Managers use the AFI strategy framework to A) help their business achieve and sustain competitive parity. B) minimize the wealth of their shareholders. C) help reduce the economic contribution of their business. D) explain and predict differences in firm performance.

D

78) Which of the following stages in the AFI strategy framework involves designing a business, corporate, and global strategy? A) strategy control B) strategy implementation C) strategy analysis D) strategy formulation

D

84) During an AFI planning session, the managers of the Fukuhara Motorcycle Corporation decided to place various stages of production in different countries in order to implement the strategy of cutting overhead costs. By doing this, what issue did the firm address? A) philanthropic strategy B) business ethics C) corporate governance D) organizational design

D

A firm incurs $400 to manufacture a television. In the market, customers are willing to pay a maximum of $600 for the television priced at $500. The difference of $200 ($600 minus $400) is the A) consumer surplus. B) total return to shareholders. C) customer lifetime value. D) economic value created.

D

A(n) ________ is best described as the strategic option that top managers decide most closely matches the current reality and which is then executed. A) bottom-up emergent strategy B) executive summary C) realized strategy D) dominant strategic plan

D

According to the value chain analysis, which of the following is a primary activity? A) research and development B) human resources management C) accounting and finance D) marketing and sales

D

After conducting a SWOT analysis, your firm has decided to focus on addressing issues located in the Weaknesses-Opportunities quadrant. Which of the following steps are you most likely to take? A) Devote more resources to an extremely popular advertising campaign to promote an exciting new product. B) Shut down struggling retail outlets in an economically depressed region. C) Deploy top sales personnel to prevent buyers from migrating towards lower-priced competition. D) Reorganize the inefficient research and development department to bring innovative products to market more quickly.

D

After trying on a dress, a consumer assesses it to be worth a maximum of $100 and is willing to pay that amount for the dress. However, the dress was priced at $80. What is the amount, $100, referred to as? A) the producer surplus B) the firm's cost (C) in manufacturing the dress C) the consumer surplus D) the value (V) the consumer attaches to the dress

D

Aguilar Industries has produced a new piece of technology that will monitor the soil moisture in a user's garden and send a notification to an app on the user's phone when it is time to water their plants. The goal of this inexpensive technology is to entice users to purchase Aguilar's more expensive automated watering system, so that they can trigger the watering process from the app on their phones. Which business model is most likely to help Aguilar Industries accomplish its goals? A) agency B) wholesale C) pay-as-you-go D) freemium

D

As manager of a relatively new company, you are tasked with analyzing company resources to identify core competencies capable of supporting a competitive advantage. Which of the following resources is most likely to generate a competitive advantage? A) new production facilities B) large cash holdings C) stockpile of supplies D) enthusiastic company culture

D

Brain Boost Inc. is a leading educational toy company. Competitors across the globe have failed to imitate Brain Boost's production models, supply chain systems, knowledge systems, and culture. These attributes have remained unique to Brain Boost Inc. for a long time. Which of the following assumptions of the resource-based model of competitive advantage does this scenario best illustrate? A) resource homogeneity B) resource cost C) resource substitution D) resource immobility

D

Cloud Cones is a fast-growing chain of ice cream shops. It has acquired an edge over its competitors through its ability to provide a wide array of unique flavors and a hip atmosphere in stores. This advantage of Cloud Cones best exemplifies a A) markup. B) resource flow. C) capital gain. D) core competency.

D

Corporate executives at LikeReal, Inc. decide to compete in the remote model airplane industry by making the largest model planes available. By doing this, they completed part of their A) implementation strategy. B) corporate strategy. C) functional strategy. D) business strategy.

D

Curry Rush is a premium Asian restaurant chain that differentiates itself from a large number of competitors by providing exclusively organic Vietnamese cuisine. It has some pricing power because it provides differentiated products and therefore, has some entry barriers in place. In this scenario, Curry Rush is most likely operating in a(n) A) oligopoly. B) monopoly. C) perfectly competitive industry. D) monopolistically competitive industry.

D

Demand for traditional fast-food providers such as McDonald's, Burger King, and Wendy's has been on a decline in recent years. Consumers have become more health conscious and demand has shifted to alternative restaurants like Subway, Chick-fil-A, and Chipotle. Attempts by McDonald's and Wendy's to steal customers from one another include frequent discounting tactics such as dollar menus. Such competitive actions are indicative of A) profitability increases. B) perfect competition. C) natural monopolies. D) cutthroat competition.

D

Due to political instability in the country of East Gerdon, the strategic leaders at the headquarters of Mako Manufacturing have decided to close all production facilities in the country until stability returns. Mako's managers have formulated a ________-level strategy. A) business B) divisional C) functional D) corporate

D

Due to several black swan events in the past, the A) shareholders of public companies have become more confident in investing their resources in businesses. B) need for corporate governance and transparency has decreased within various industries. C) nations around the globe have explicitly appreciated and accepted capitalism as an economic system. D) implicit trust relationship between the corporate world and society at large has deteriorated.

D

During market testing, Sensation Cosmetics (SC) realized that the cosmetics industry was dominated by multiple, well-established brands. These brands mostly sold their products in exclusive outlets and departmental stores. SC management realized that a new entrant would require a different business model to be successful. Thus, SC started selling its products through direct marketing. In this scenario, Sensation Cosmetics accomplished substitution primarily through A) path dependence. B) technology transfer. C) knowledge diffusion. D) strategic equivalence.

D

Fran owns Consolidated Auto Parts, a company that got its start making auto parts related for hybrid vehicles, but her firm has had difficulty establishing itself as a maker of parts for the more-profitable internal combustion engine. What is most likely contributing to Consolidated's problem in this area? A) Newcomers cannot use existing assets or reconfigure their value chains. B) New competitors usually ignore stakeholders who are not stockholders. C) It is difficult for outsiders to gauge which stage of the "life cycle" that industry is in. D) Entry barriers usually protect the incumbent players in a profitable industry.

D

Given the accelerated pace of technological change, in combination with deregulation, globalization, and demographic shifts, a firm will be successful today only if its A) competitive advantage is derived from static resource or market advantages. B) resource advantage is not causally ambiguous or socially complex. C) resource advantage is maintained for a short period of time. D) internal strengths change with its external environment in a dynamic fashion.

D

Gladiator Apparel is the market leader in the sportswear industry. Though most of its resources are common to those of its competitors, a few rare resources have helped the company gain and sustain a competitive advantage. Which of the following assets of Gladiator Apparel is most likely to be considered a rare resource that is contributing to its competitive advantage? A) the company's land and buildings B) the company's plant and machinery C) the company's raw material supplies D) the company's design patents

D

Home Value Inc., Max Cart Inc., and Nice Necessities Inc. are three consumer-product retailing companies. Their products consist primarily of day-to-day items that are easy to imitate and sell. All three companies use the same resources and capabilities in the production and distribution of their products. Judging from the market conditions described in this scenario, which of the following statements is true? A) Resource immobility of the firms will be low. B) The industry structure will be far from perfect competition. C) Barriers to entry within the industry will be high. D) Any advantage that one firm has will be short-lived.

D

How does a sustainable strategy typically help a firm? A) It helps the firm focus solely on its financial goals. B) It reduces the need for corporate social responsibility within the firm. C) It facilitates the firm in effectively isolating its external stakeholders. D) It helps the firm achieve positive results along the social and ecological dimensions.

D

Iceberg Storage, a leading hard drive manufacturer, recently filed for bankruptcy. While most of Iceberg's competitors were shifting away from physical data storage devices toward online cloud storage services, Iceberg invested most of its retained earnings in the effort to improve its hard drives. Once the hard-drive market drastically declined, Iceberg Storage was unable to capitalize on the new technology. Which of the following does this scenario best illustrate? A) causal ambiguity B) knowledge diffusion C) social complexity D) path dependence

D

In Strategy Highlight 2.1, what type of strategy did Diana, the Starbucks store manager in southern California, use to develop the new iced beverage for her store? A) She used a rational planning approach to strategy planning. B) She created a dominant strategy plan. C) She used scenario planning. D) She used an emergent strategy.

D

In the context of SWOT analysis, which of the following best exemplifies a firm's internal weakness? A) fall in the purchasing power of the firm's customers B) increased competition in the industry where the firm operates C) irregularity in the raw materials supply throughout the industry D) decline in the firm's market share

D

In the context of the resource-based model of competitive advantage, which of the following scenarios best exemplifies resource immobility? A) AP Corp. has earned a good reputation among its shareholders by investing more heavily in equipment than in building up brand equity. B) Two Triangle Inc. has lost its market share because its resources are rigid, inflexible, and static. C) Blue Elixir Corp. has been able to gain a competitive advantage because of its ability to efficiently move its resources from one manufacturing unit to another. D) True 3 Inc. has been able to outperform its competitors because the uniqueness of its employee experience is difficult for competitors to replicate.

D

In the final step of the stakeholder impact analysis, a firm A) identifies its stakeholders' interests and claims. B) differentiates its internal stakeholders from its external stakeholders. C) recognizes the opportunities and threats stakeholders present. D) decides a course of action to address the stakeholders' concerns.

D

In which of the following situations is a company that exists in the telecommunications industry most likely to face the highest threat of entry? A) if the company is able to put up a credible threat of retaliation B) if the capital requirements in the industry are high C) if the customer switching costs in the industry are high D) if the industry has recently become deregulated

D

In which of the following situations is the power of suppliers high in an industry? A) Suppliers offer products that are undifferentiated. B) Suppliers can credibly threaten to backward integrate into the industry. C) Suppliers depend heavily on the industry for their revenues. D) Suppliers' industry is more concentrated than the industry it sells to.

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) $130,000 C) $75,000 D) $700,000

D

Juanita, a manager at a multinational organization, is trying to carefully scan and link the firm's internal environment to its external environment. The insights from this analysis will allow her to effectively leverage the company's internal strengths to exploit external opportunities, while mitigating internal weaknesses and external threats. In this scenario, which of the following managerial tools is Juanita employing? A) Blake Mouton managerial grid B) Ansoff's matrix C) BCG analysis D) SWOT analysis

D

Keen Beans, a leading coffee roaster, anticipated that the prices of coffee beans from Costa Rica, where its main suppliers were located, would double in less than three years. This would significantly affect Keen Beans' profit margins. Thus, Keen Beans decided to develop a new partnership with a supplier in Indonesia. As predicted, the price of Costa Rican coffee beans increased twofold. Because the price of Indonesian coffee beans was much lower, Keen Beans was able to maintain its profit margins in turbulent times. Which of the following isolating mechanisms does this scenario best illustrate? A) intellectual property protection B) causal ambiguity C) time compression diseconomies D) better expectations of future resource value

D

Kimba Inc. is a manufacturer of smart watches that track the wearer's heart rate and sleep patterns. Which of the following is most likely an implication of new firms entering this industry? A) The bargaining power of buyers will reduce. B) The industry's overall profit potential and sales will increase. C) The rivalry among existing competitors will reduce. D) The incumbent firms will spend more to satisfy their existing customers.

D

Lu runs a company that manufactures satellites for commercial and government use. It has few rivals. At the moment, the power of buyers, the power of suppliers, and the threat of substitutes are all low. Based on this information, what can Lu conclude? A) The manufacturer is likely to see little profit until the power of buyers improves. B) In this scenario, suppliers are likely to create and sell effective substitutes. C) This firm is an example of near-perfect competition. D) The company is likely to be very profitable as long as the threat to entry is low.

D

Luz manages a chain of bars and restaurants in a tri-county area that has recently experienced an economic boom because of fracking and high oil prices. What is most likely to happen when there is too much money in the tri-county economy? A) too many goods and services B) a drop in interest rates C) high economic growth D) an increase in prices

D

Managers at Sandburg Real Estate 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? A) Cost of capital for firms will be high. B) Firms will invest less in future growth. C) Economic growth rate will fall. D) Consumer demand will increase.

D

Organic Food Inc., a multinational company, relies on its media partner Radio Plus to regularly advertise its offers, sales, and new products. Radio Plus is invested in this relationship because it generates most of its revenue from advertising Organic Food's products. In this scenario, Radio Plus is Organic Food Inc.'s A) stockholder. B) workforce. C) internal stakeholder. D) external stakeholder.

D

Organizational and managerial skills that find their expression in a company's structure, routines, and culture are referred to as A) tangible resources. B) reserves. C) capital gains. D) capabilities.

D

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) corporate B) functional C) grand D) business

D

Perpetual Batteries recently came under criticism when a newspaper article revealed that the company's production plant had leaked a chemical compound into a sensitive wetland ecosystem. Although use of the chemical was not technically prohibited by law, the local government levied a small fine for cleaning up the spill. Environmental groups, however, argued that continued use of the chemical was damaging to the local wildlife and threatened to organize a boycott against Perpetual Batteries. What should Perpetual Batteries do to ensure that it meets its ethical responsibilities? A) Pay the fine levied by the local government and resume operations. B) Move its production facilities to an area that is less concerned with environmental issues. C) Take out an advertisement arguing that use of the chemical is perfectly legal. D) Design batteries without the chemical and market them as environmentally friendly.

D

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 investments made by Riya on the restaurant's interior B) the type of kitchen equipment widely used in her industry C) the restaurant's late entry into the market D) the building owned by Riya, which reduces cost of operations

D

Serena paid $900 for a camera that she thought was worth $1100 for all the features included in it. For the consumer electronics firm selling the camera, however, the cost of producing the camera was only $350. What is the consumer surplus in this scenario? A) $900 B) $1,100 C) $550 D) $200

D

Soapsuds Inc., a manufacturer of cleaning agents, supplies its products to All Needs Inc., a supermarket chain. It demands that All Needs create more shelf space in its stores for Soapsuds' products. However, All Needs Inc. refuses to do this. Instead, it decides to produce its own range of cleaning agents with its own label "All Wash." In this scenario, All Needs Inc. has exercised its bargaining power as a buyer through A) price stability. B) retroactive market share. C) enhanced technology. D) backward integration.

D

Strategic leadership pertains to the use of power and influence by ________ to direct the activities of others when pursuing an organization's goals. A) production workers B) lower-level managers C) external stakeholders D) corporate executives

D

Strategies developed at the departmental level, such as the accounting, human resources, production, and marketing departments, within a strategic business unit are referred to as ________ strategies. A) grand B) corporate C) business D) functional

D

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; screenwriter's experience adapting novels B) money spent to buy rights to the novel; locations in southern Arizona C) best-selling novel; locations in southern Arizona D) best-selling novel; screenwriter's experience adapting novels

D

The ________ allows the scanning, monitoring, and evaluating of changes and trends in a firm's macro environment. A) VRIO framework B) SWOT analysis C) BCG matrix D) PESTEL framework

D

The cost of capital to create a product is a fixed cost because it is A) directly proportional to the output level. B) uniform throughout all firms and industries. C) not a part of the profit calculations. D) unaffected by consumer demand.

D

The first step in stakeholder impact analysis involves A) formulating a stakeholder strategy to balance the different needs of various stakeholders. B) identifying the opportunities and threats the stakeholders present. C) describing the economic, legal, ethical, and philanthropic responsibilities of the firm toward society. D) identifying the stakeholders that currently have, or potentially can have, a material effect on a company.

D

The government of Filvia has mandated that the standard minimum wage in the country be increased to $8,000 per year. Which of the following factors in a firm's general environment does this mandate best indicate? A) ecological factors B) sociocultural factors C) technological factors D) legal factors

D

The management of a company is assessing the value of all the tangible resources the company owns. Which of the following will be included in this assessment? A) a reputation for fast customer service B) a culture of proactive communication C) patents for electronic components D) the punch presses that produce parts

D

The three financial ratios that constitute return on revenue are Cost of goods sold/Revenue, Research & development expense/Revenue, and A) Accounting profitability/Revenue. B) Economic value created/Revenue. C) Total return to shareholders/Revenue. D) Selling, general, & administrative expense/Revenue.

D

The working capital turnover of Tesva Systems Corp. is 6.0. What does this financial data suggest? A) For every $6.00 Tesva Systems puts to work, the company incurs a cost of $1.00. B) For every $6.00 Tesva Systems puts to work, the company realizes sales of $1.00. C) For every dollar Tesva Systems puts to work, the company realizes $6.00 in loss. D) For every dollar Tesva Systems puts to work, the company realizes $6.00 of sales.

D

Threadbare Industries is a new high-end textile company that has raised sufficient capital from multiple sources. It is planning to use its capital to purchase certain assets. Which of the following assets will be the most difficult for Threadbare Industries to acquire using its capital? A) a new CEO B) software C) a lease for a new building D) brand name

D

Three large firms dominate the telecommunication industry of United Canava: AD Telecom Inc., Mystic Telecom Corp., and Total Talk 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? A) monopoly B) perfect competition C) monopolistic competition D) oligopoly

D

To implement specific business strategies, general managers of strategic business units rely on A) external stakeholders. B) corporate executives. C) strategic leaders. D) functional managers.

D

TriCorp is a major financial services corporation. With the CEO of TriCorp preparing to retire, several top managers are vying for the position. Jared considers himself to be a leading candidate. He not only has advanced degrees from business schools and more than a decade of experience working for TriCorp, but he also has personally ensured that his division has exceeded its performance benchmarks over the past three years, even though many of his employees are dissatisfied because they feel they are stagnating in their jobs. According to the level 5 leadership pyramid, why has Jared failed to exhibit the qualities of a level-5 leader? A) His individual skills are not well developed. B) His actions do not match the organization's strategy. C) He lacks the organizational ability to accomplish the organization's goals. D) He is not able to help others reach their full potential.

D

True Moto Corp. (TMC) is a leading automobile company. The company has been able to sustain its competitive advantage primarily due to its high-quality and efficient electric motors. Most of its competitors have failed to develop similar electric motors at a reasonable price. Which of the following resource attributes listed in the VRIO framework has helped TMC sustain its competitive advantage? A) resource mobility B) inexhaustible nature C) intangibility of the company's resource D) high costs involved in imitation

D

Understanding the Resource Allocation Process (RAP) will have large effects on shaping a firm's realized strategy. Which of the following is an example of such an allocation of resources? A) Starbucks' launch of iced drinks B) Teach For America's mission statement C) Merck's voluntary withdrawal of Vioxx from the market D) Intel's rule to "maximize margin-per-wafer-start"

D

Vincente, a retired CEO, invests capital in a start-up company that creates budgeting software. He mentors the entrepreneur and the employees of the company because he wants the company to perform well and survive in the market. Thus, Vincente is the start-up company's A) headhunter. B) category captain. C) employee. D) stakeholder.

D

When fashion magazines face competition from fashion blogs on the web, which of the following forces in Michael Porter's five forces model primarily gets stronger? A) the emergence of entry barriers B) the bargaining power of suppliers C) the availability of complements D) the threat of substitutes

D

Which of following practices of a firm satisfies its ethical responsibilities? A) using plastic as the packaging material though it is harmful to the environment, yet legal B) outsourcing production to a less developed country and paying wages that are below its own country's accepted minimum wages C) using advertising and other forms of promotion to endorse luxurious lifestyles D) selling vaccines at a subsidized price in a less developed country even though this results in reduced shareholder returns

D

Which of the following best describes a Level 5 manager in the Level-5 leadership pyramid? A) Connie is an employee who just started her career at DK Inc.; she has already been appreciated for her knowledge and skills in the new company. B) Dmitri is an employee at Infinite Circle Inc.; he has helped his team achieve their targets by contributing to the team's efforts. C) Luigi is part of the marketing team at RT Corp.; he has been given the charge of managing a team of three, so he will be promoted to a manager's position next month. D) Asoka is the CEO of Green Machines Inc.; he has helped his company in gaining and sustaining a competitive advantage through ethical decision making.

D

Which of the following competitively important assets is typically excluded from a firm's balance sheet? A) land and building B) accounts payable C) patents D) customer experience

D

Which of the following features about a buyer indicates that the buyer has high bargaining power? A) when the buyer cannot credibly threaten to backwardly integrate into the industry B) when the buyer cannot purchase specific products from other sellers C) when the buyer faces high switching costs D) when the buyer operates in an industry where products are undifferentiated

D

Which of the following frameworks used to measure competitive advantage relies on both an internal and an external view of a firm? A) the economic value creation model B) the accounting profitability model C) the shareholder value creation model D) the balanced-scorecard model

D

Which of the following is a disadvantage of the balanced-scorecard approach? A) It fails to link the strategic vision to responsible parties within the organization. B) It fails to translate the vision into measureable operational goals. C) It provides limited guidance for designing and planning business processes. D) It provides limited guidance about which metrics to choose.

D

Which of the following is a primary feature of the five forces model? A) It is concerned exclusively about the intensity of rivalry among direct competitors. B) It takes into account a firm's internal resources, capabilities, and core competencies. C) It helps managers determine the changing speed of an industry or the rate of innovation. D) It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.

D

Which of the following is an external performance metric? A) return on revenue B) fixed assets turnover C) inventory turnover D) total return to shareholders

D

Which of the following scenarios best illustrates bundling? A) Clean Brush Inc. sells its electric toothbrushes for a low cost, but charges a high price for replacement brushes. B) Cumulus Media Inc. sells its cloud computing network by having customers pay for the service as they use it. C) Sharp Cable Inc. sells its basic TV channels for free but charges high prices for any channels that customers add on later. D) Fresh Seeds Inc. sells seed packages, in which a person can buy a package of three types of seeds at a discounted price compared to buying the seeds individually.

D

Which of the following statements about competitive advantage is true? A) Competitive advantage is an absolute measure; it is not relative. B) Competitive advantage is a one-dimensional concept. C) Competitive advantage is permanent and not transitory; once gained by a firm it stays with the firm. D) Competitive advantage can be assessed by measuring accounting profit, shareholder value, or economic value.

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) In an oligopoly, the number of buyers is large; in monopolistic competition, the number of buyers is limited to three or four. C) Firms in an oligopoly have no pricing power; firms in a monopolistically competitive industry have the ability to raise prices. 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 balanced-scorecard? A) It is a more or less a one-dimensional metric of measuring competitive advantages of a firm. B) It is one of the traditional approaches of measuring firm performance. C) Its primary focus is to base a firm's strategic goals entirely on external performance dimensions. D) It attempts to provide a holistic perspective on firm performance.

D

Which of the following strategies best illustrates a generic business strategy? A) a cost-cutting strategy that corporate executives in the headquarters want all business units of a large conglomerate to implement B) a strategy to use monetary incentives to motivate employees working on a project C) a decision to computerize a firm's database in order to improve customer service D) a decision to niche market the jewelry sold by a company while the apparel division under the same company sells its products through mass marketing

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 where to compete. B) Corporate strategy deals with when to compete; business strategy deals with how to compete. C) Corporate strategy deals with how to compete; business strategy deals with when to compete. D) Corporate strategy deals with where to compete; business strategy deals with how to compete.

D

Who among the following is responsible for making business strategies in a large conglomerate? A) the board of directors at the headquarters B) the shareholder of the company C) the lower-level employees in the company D) the general managers of individual business units

D

Windmill Inc., a vendor, regularly supplies capacitors to Inland Electronics for use in its products. Therefore, Windmill Inc. is Inland Electronics' A) internal stakeholder. B) director. C) shareholder. D) external stakeholder.

D

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) Invest in an online marketing campaign for existing products to retain customers. B) Open a satellite office overseas to support the company culture of taking chances. C) Attempt to undercut the competition by imitating their top-selling product. D) Improve the benefits package to retain key employees and reduce turnover.

D

Yuki is part of a sales team. He effectively coordinates his tasks with others in the team and willingly contributes to their efforts in achieving the team's objectives. Thus, Yuki is in ________ of the Level-5 leadership pyramid. A) Level 5 B) Level 4 C) Level 3 D) Level 2

D

Zelda is a recent fashion graduate. She started her own apparel store with an investment of $300,000. In the first year she made a profit of $60,000. If she had taken up a job as a fashion editor for a magazine, she would have earned $50,000 as salary per year. Also, she could have invested her capital, $300,000, in treasury bonds and earned an interest of $12,000. Thus, the amount $62,000 ($50,000 + $12,000) would be Genevieve's A) social cost. B) break-even price. C) reservation price. D) opportunity cost.

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) Agency B) Freemium C) Bundling D) Wholesale

D

A SWOT analysis would provide a definitive answer as to whether a firm's growing footprint in overseas markets is a strength or weakness.

F

A company's total asset base consists of its current assets plus plant, property, and equipment (PPE).

F

A firm is required by society and its shareholders to meet its ethical and philanthropic responsibilities.

F

A firm will always see its stock price appreciate when it demonstrates measurable growth.

F

A firm's resource-allocation process (RAP) has very little effect on its realized strategy.

F

A good strategy is a set of actions that enables a firm to achieve its own internal goals without regard to the external environment.

F

A local manufacturer that wants to be a global manufacturer faces few mobility barriers because it has not yet invested in supply chains, which can become outdated and expensive.

F

A manager's only responsibility is to monitor and assess the performance of his or her firm.

F

A sustainable strategy is one that produces a competitive advantage that can be maintained over time.

F

Accounting, human resources, and research and development (R&D) are examples of primary activities that add value directly to the value chain.

F

Amazon's tendency to reinvest a large share of its profits into new services and capabilities exemplifies a low level of resource flows.

F

Because they are a crucial component of a firm's success, customers are considered internal stakeholders.

F

Competitive advantage goes to the firm that maximizes the difference between the cost of producing a good and the retail price that consumers pay.

F

Federal and regional laws prevent incumbent firms from dramatically lowering prices or otherwise retaliating when a new entrant joins an industry.

F

Firms within the same industry automatically belong to the same strategic group.

F

For-profit businesses operating in long-standing fields such as energy and transportation usually operate in an environment of price stability.

F

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

F

High demand for online video streaming options is one of Netflix's core competencies.

F

Intellectual property (IP) protections such as trademarks or patents are proven methods of establishing permanent barriers to imitation.

F

It is helpful to break down strategy formulation and strategy implementation into five distinct areas.

F

Managers should create two sets of core values, one for employees and one for themselves.

F

Once a firm chooses a business model, it must stick with it for the life of the firm.

F

Once a strategy has been formulated and implemented, it is important that the firm sticks to it no matter what happens.

F

One of Rolex's tangible resources is its well-known brand name and reputation for quality timepieces.

F

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

F

Sleeprite Mattresses Inc. wants to become the largest and most profitable mattress supplier in a three-state area. To do this, Sleeprite should try to create the smallest possible difference between the value that its mattresses create and the expense that the company must spend to produce the mattresses.

F

Strategic leaders spend the majority of their time working alone to devise new strategies.

F

The autocratic strategic management process exhibited by the former head of Apple, Steve Jobs, is best described as an emergent strategy.

F

The following statement by the chief executive of SunStar movie studio is an effective strategy: "We will produce the greatest films of the 21st century."

F

The three tasks of the AFI strategy framework are to Assemble a prototype, Find a buyer, and Incorporate feedback.

F

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?"

T

The efficient market hypothesis suggests that the market price of a firm's stock is an objective indicator of a firm's past, current, and expected future performance.

T

Under the strategy as a planned emergence model, even entry-level employees can help generate strategic initiatives.

T

When smartphone manufacturers began including cameras and voice recorders in their products, that was an example of industry convergence.

T

14) Which of the following stages of the strategic management process involves an evaluation of a firm's external and internal environments? A) strategy analysis B) strategy implementation C) strategy formulation D) strategy control

A

20) A firm that achieves superior performance relative to other firms in the same industry or the industry average has a(n) A) competitive advantage. B) balanced scorecard. C) power position. D) equity leverage.

A

Which of the following is an advantage of a triple-bottom-line approach? A) The approach takes an integrative and holistic view in assessing a company's performance. B) The approach does not rely on an external view of a firm to assess its performance. C) The approach is more of a quantitative performance metric rather than a mere conceptual framework. D) The framework can help managers assess a firm's competitive advantage without taking into account the firm's performance along noneconomic dimensions.

A

______ denotes the dollar amount a consumer would attach to a good or service. A) Utility B) Value C) Consumer surplus D) Economic contribution

B

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

_______ precisely indicates how much of a firm's sales is converted into profits. A) Break-even price B) Working capital turnover C) Return on revenue D) Inventory turnover

C

A company that owns failing movie theaters could leverage existing assets by turning the buildings into performance spaces and conference sites.

T

A mission describes how a firm will accomplish the broad goals set out in a vision statement.

T

A music distributor that decides to launch a proprietary music streaming service to respond to changes in music consumption trends exhibits dynamic capabilities.

T

A small coffee shop faces significant potential competition because of the low capital requirements compared with business environments such as universities and laboratories.

T

A surprise event that leads to a change in strategic initiatives, such as the accidental discovery of a new use for an existing product, is known as serendipity.

T

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

T

A vision describes in broad, inspirational terms what an organization hopes to accomplish in the future.

T

According to the resource-based view, a firm that differentiates itself from its competitors through its personalized approach to customer service is likely to sustain its competitive advantage for a long time.

T

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.

T

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.

T

Core values provide ethical guidelines for how individual employees will behave.

T

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

T

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

T

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

T

Managers must first develop a strategy that is likely to produce a competitive advantage before implementing a balanced scorecard approach.

T

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

T