Exam 1 Prep
________________ allow(s) a firm to differentiate its products and services from those of its rivals, creating higher value for the customer or offering products and services of comparable value at lower cost. A) Core competencies B) Strengths C) A value chain D) Competition
A) Core competencies
Deep Earth Gardening 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) It does not indicate how the company will accomplish its goals.
Suger & Sweet 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, Suger & Sweet 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) It fails to face the competitive challenge.
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) It makes it difficult for the competitors to understand why a company has been so successful.
The owners of Always Baked bakery want to open a second retail outlet. Which of the following scenarios is most likely to yield a competitive advantage? 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) Open a shop on an inexpensive piece of land near a new mixed-use residential and business district currently under construction.
Jill is exploring multiple suppliers in order to find the best price. However, instead of calling all eight potential suppliers, she only reaches out to the first three and bases her selection on those instead of contacting all suppliers. Jill's action best describes the concept of A) cognitive limitations. B) optimal decision making. C) the illusion of control. D) escalating commitment.
A) cognitive limitations.
One of the reasons that Circuit City filed for bankruptcy was due to its inability to reinvest, hone, and upgrade its once impressive resource base. Ultimately, Circuit City's core competences became A) core rigidities. B) value chain activities. C) strategic resources. D) costly to imitate.
A) core rigidities.
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) evaluating the effects of internal resources and core competencies on a firm's potential to gain and sustain a competitive advantage.
After carefully assessing the market potential for solar-powered mobile devices, the top-level executives of We Know 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) intended strategy
Firms that compete within the same strategic group generally experience A) more competitive rivalry than firms outside their strategic group. B) less competitive rivalry than firms outside their strategic group. C) the same competitive rivalry than firms outside their strategic group. D) no competitive rivalry because they are substitutes.
A) more competitive rivalry than firms outside their strategic group.
Firms that are classified as operating in an oligopoly tend to have some pricing power if they are able to differentiate their product or service offerings from those of their competitors, so the recommended mode of competition is A) non-price-based competition. B) price-based competition. C) hypercompetition. D) service-based competition.
A) non-price-based competition.
Which of the following strategy plans might work best in an industry that is considered a fast-changing environment with new laws going into effect regularly? A) scenario planning B) top-down planning C) bottom-up planning D) dominant planning
A) scenario planning
In recent years a growing number of U.S. consumers have become more health-conscious about what they eat. According to the PESTEL Framework this trend could best be classified as a ________ trend. A) sociocultural B) healthy eating C) political D) legal
A) sociocultural
As the CEO of a conglomerate, Sarah Cane 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, Sarah has demonstrated A) strategic leadership. B) intrapreneurship. C) Machiavellianism. D) individualism.
A) strategic leadership.
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) growth strategy C) industry analysis D) co-operative strategy
A) strategic position
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) the composition of the strategic group to which the firm belongs
Amanda 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 Amanda 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) "Carefully consider the entry choices over time before making a decision."
Which of the following examples reflects the strongest vision? A) At Desks.com, many employees get paid well but do not feel their work is important. B) At Desks.com, all employees are motivated to make the best desks on the market. C) At Desks.com, most employees want to create a better desk than their closest competitor. D) At Desks.com, some employees do not understand the main goal of the company.
B) At Desks.com, all employees are motivated to make the best desks on the market.
Writer Button Inc. and Horner 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, Writer Button Inc. and Horner 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) competitive parity with each other.
SJobs'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, SJobs's Computer Repair has lost its competitive advantage due to A) value chain disruption. B) core rigidity. C) resource flows. D) resource stocks.
B) core rigidity.
The production head at the All Paints and Surface Corp. 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) emergent strategy
Facing stiff competition in the e-reader market, Smart Reads wants to protect its competitive advantage by increasing the perceived value of its reader. Smart Reads' 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 Smart Reads 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) highlight the number of celebrities who use Smart Reads e-readers.
Leslie owns a large portion of Hue Apparel's stock. However, she is not employed by the company. In this scenario, Leslie is the company's A) external stakeholder. B) internal stakeholder. C) creditor. D) customer.
B) internal stakeholder.
ECO 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, ECO Jeans could not assemble its products at a low-enough cost to offer the jeans at a price that was attractive to customers. ECO 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) it was not backed up with strategic commitments.
Crocs Shoes was unable to sustain its competitive advantage over their rivals because its key strategic resource was A) valuable in the eyes of the consumer. B) not costly to imitate by competitors. C) too inexpensive. D) not comfortable or waterproof.
B) not costly to imitate by competitors.
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) strategic business unit
Tony's Pizza Shop is able to net $10,000 a week; this makes his shop profitable. His number one competitor, Leo's Pies is also profitable, netting $12,000 a week. Lil Anthony's Pizza Palace nets $13,000 a week. Since Tony's Pizza Shop is profitable, we can conclude that he has a competitive advantage in the industry. A) True—competitive advantage is achieved through profitability alone. B) True—competitive advantage is achieved since Tony has a positive net income. C) False—competitive advantage is only achieved by generating above average returns, relative to competition. D) False—Tony more than likely has a sustained competitive advantage since he's been in business longer.
C) False—competitive advantage is only achieved by generating above average returns, relative to competition.
Steve 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 Steve'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) He needs to find out if his company as well as other companies can provide the complements.
Maria is the Chief Operating Officer of the start-up Apps4U. In which of the following scenarios does Maria exhibit strategic leadership? A) Maria 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, Maria is proud of the product and uses it every day. B) Citing budget concerns, Maria ignores the directions from Apps4U'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) Maria 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, Maria 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 Maria has set, she makes the presentation anyway.
C) Maria 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.
All Signal Inc., a telephone service provider, has a large user base mainly because phone calls and messages between all All Signal users are free. When a person switches to an All Signals 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 All Signal Inc. is given a free wireless connection. This has helped to keep competition away from All Signal. In this scenario, which of the following factors is acting as an entry barrier for All Signal Inc.? A) economies of scale B) high capital requirement C) network effects D) high fixed costs
C) network effects
Lil Anthony's and Amelia's are two restaurants serving Italian cuisine. While Lil Anthony's focuses on providing quick, affordable pasta dishes for the lunch crowd, Amelia's 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) pursued distinct strategic positions.
When young start-up entrepreneurs make claims like, "We will be the Uber of X, where X is any other category than ride hailing" or "We will be the Airbnb of Y, where Y is any other category than hospitality services" they are best illustrating which of the following cognitive biases? A) groupthink B) escalation of commitment C) representativeness bias D) confirmation bias
C) representativeness bias
John is a bit confused about the difference between stakeholders and stockholders. You meet with John and inform him that the main difference is that A) stakeholders are both internal and external to the firm while stockholders are considered external to the firm. B) stakeholders are considered internal to the firm while stockholders are external to the firm. C) stakeholders can be both internal and external while stockholders own shares of a firm and are classified as internal to the firm. D) stakeholders are external to the firm while stockholders are considered internal to the firm.
C) stakeholders can be both internal and external while stockholders own shares of a firm and are classified as internal to the firm.
Makita, DuPont, Builder's Square, and Nut's & Bolts 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 ________ group. A) focus B) command C) strategic D) cross-functional
C) strategic
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) strategic leaders adjusting a company's vision and mission based on environmental analysis.
CarTsar 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, CarTsar 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) upgrade its engineering department and improve its supply chain.
Pam owns Discount Auto Zone, 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 Discount Auto Zone'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) Entry barriers usually protect the incumbent players in a profitable industry.
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) Improve the benefits package to retain key employees and reduce turnover.
As the strategic manager of ShRPer 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 ShRPer scissors to bring unit costs down to $1, then sell the scissors for $12. B) Continue to produce ShRPer scissors for $3 but set the price at $10. C) Offer a buy-one-get-one-free sale on ShRPer scissors. D) Market ShRPer scissors as a higher-quality alternative and sell them for $15.
D) Market ShRPer scissors as a higher-quality alternative and sell them for $15.
In the context of the resource-based model of competitive advantage, which of the following scenarios best exemplifies resource immobility? A) Acme Corp. has earned a good reputation among its shareholders by investing more heavily in equipment than in building up brand equity. B) TooFirm Inc. has lost its market share because its resources are rigid, inflexible, and static. C) Purple Dreams 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) PaluniInc. has been able to outperform its competitors because the uniqueness of its employee experience is difficult for competitors to replicate.
D) PaluniInc. has been able to outperform its competitors because the uniqueness of its employee experience is difficult for competitors to replicate.
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) Reorganize the inefficient research and development department to bring innovative products to market more quickly.
Jennifer 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) an increase in prices
WeClean Inc., a manufacturer of cleaning agents, supplies its products to Goodings Inc., a supermarket chain. It demands that Goodings create more shelf space in its stores for WeClean s' products. However, Goodings 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, Goodings Inc. has exercised its bargaining power as a buyer through A) price stability. B) retroactive market share. C) enhanced technology. D) backward integration.
D) backward integration.
TransNational Inc. 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 of his 17 units. Thus, the decision made by the product leader best illustrates a ________ strategy. A) corporate B) functional C) grand D) business
D) business
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) enthusiastic company culture
During an AFI planning session, the managers of the Bronco 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) organizational design
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) stake out a unique position within the industry.
In strategic management, strategists engage in three pillars. Which of the following is not one of these three pillars? A) the implementation of major goals and objectives B) the analysis of major goals and objectives C) the formulation of major goals and objectives D) the unification of major goals and objectives
D) the unification of major goals and objectives