EXAM 1 strategy(practice exam and ch quizzes)
________________ 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
Core competencies
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) oligopoly B) monopolistic competition C) perfect competition D) monopoly
monopoly
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.
non-price-based competition.
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) Teach For America's mission statement B) Intel's rule to "maximize margin-per-wafer-start" C) Starbucks' launch of iced drinks D) Merck's voluntary withdrawal of Vioxx from the market
Intel's rule to "maximize margin-per-wafer-start"
________ are barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy. A) Cartel arrangements B) Isolating mechanisms C) Embargoes D) Market niches
Isolating mechanisms
________ describes a process in which the options one faces in a current situation are limited by decisions made in the past. A) Causal ambiguity B) Path dependence C) Cannibalization D) Social complexity
Path dependence
In the pyramid of corporate social responsibility, ________ responsibilities are the foundational building block. A) philanthropic B) ethical C) legal D) economic
economic
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) functional B) grand C) corporate D) business
functional
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) New competitors usually ignore stakeholders who are not stockholders. B) Entry barriers usually protect the incumbent players in a profitable industry. C) It is difficult for outsiders to gauge which stage of the "life cycle" that industry is in. D) Newcomers cannot use existing assets or reconfigure their value chains.
Entry barriers usually protect the incumbent players in a profitable industry.
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.
False—competitive advantage is only achieved by generating above average returns, relative to competition.
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) Business credit is harder to obtain. D) Consumer demand slows down.
Firms can easily borrow money to finance future growth.
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 in a crowded downtown location where several other bakeries have been successful over the years. B) Open a shop on an inexpensive piece of land near a new mixed-use residential and business district currently under construction. C) Build a shop in a sparsely populated rural area where the land is inexpensive and few other bakeries exist. D) Purchase an existing bakery from a business that closed due to declining sales and try to revive it.
Open a shop on an inexpensive piece of land near a new mixed-use residential and business district currently under construction.
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) Reorganize the inefficient research and development department to bring innovative products to market more quickly. B) Devote more resources to an extremely popular advertising campaign to promote an exciting new product. C) Deploy top sales personnel to prevent buyers from migrating towards lower-priced competition. D) Shut down struggling retail outlets in an economically depressed region.
Reorganize the inefficient research and development department to bring innovative products to market more quickly.
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 always satisfy the consumers who purchase insoles. B) Softstep Inc. wants to provide the best benefits for employees in the insole industry. C) Softstep Inc. wants to be the best manufacturer of insoles in the industry. D) Softstep Inc. wants to adapt their insoles to the changing demands of consumers.
Softstep Inc. wants to be the best manufacturer of insoles in the industry.
Which of the following best qualifies as a firm's internal stakeholder? A) a manager taking care of the firm's operations in a foreign market B) a labor union with whom the firm's employees can affiliate C) an auditor assigned to the firm by a federal government agency D) a competitor manufacturing the same products as that of the firm
a manager taking care of the firm's operations in a foreign market
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
an increase in prices
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) conglomeration. B) monopolization. C) co-opetition. D) perfect competition.
co-opetition.
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.
cognitive limitations.
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) promotional campaigns C) product differentiation D) new product releases
price-cutting
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.
It does not indicate how the company will accomplish its goals.
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
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."
"Carefully consider the entry choices over time before making a decision."
Which of the following summarizes the difference between a firm's vision and mission? A) A vision states the management values of a firm; a mission states the values of the other workers. B) A vision states what a firm wants to accomplish; a mission states how a firm plans to accomplish this vision. 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 ethical values of a firm; a mission states the monetary goals of a firm.
A vision states what a firm wants to accomplish; a mission states how a firm plans to accomplish this vision.
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.
At Desks.com, all employees are motivated to make the best desks on the market.
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.
He needs to find out if his company as well as other companies can provide the complements.
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.
Improve the benefits package to retain key employees and reduce turnover.
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 stick to its existing core competency, that is HD LED technology, as it is the best in that segment. B) InVue should start working on Ultra HD and Smart television technologies to adapt its core competency to suit the external environment. C) InVue should work on enhancing the mobility of its core competency. D) InVue should take steps to reduce the causal ambiguity and socially complexity of its core competency.
InVue should start working on Ultra HD and Smart television technologies to adapt its core competency to suit the external environment.
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) Focus on imitating the most successful products of competitors. C) Increase spending on online marketing efforts. D) Install modern manufacturing equipment to improve efficiency.
Install modern manufacturing equipment to improve efficiency
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 imitate core competencies quickly due to time compression diseconomies. D) It makes it difficult for competitors to deploy their resources by creating ambiguity within their organizational structures.
It makes it difficult for the competitors to understand why a company has been so successful.
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.
It makes it difficult for the competitors to understand why a company has been so successful.
Which of the following is a primary feature of the five forces model? A) It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes. B) It is concerned exclusively about the intensity of rivalry among direct competitors. C) It takes into account a firm's internal resources, capabilities, and core competencies. D) It helps managers determine the changing speed of an industry or the rate of innovation.
It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.
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.
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.
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.
Market ShRPer scissors as a higher-quality alternative and sell them for $15.
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.
Open a shop on an inexpensive piece of land near a new mixed-use residential and business district currently under construction
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) Pursue a differentiated strategy. B) Create a strategic group through mergers. C) Compete based on inter-group rivalry, not intra-group rivalry. D) Close the business until the cost of gas decreases.
Pursue a differentiated strategy.
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.
Reorganize the inefficient research and development department to bring innovative products to market more quickly.
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) Entry barriers in the industry are high, resulting in hardly any new airlines popping up. B) Suppliers have weak bargaining power because they offer products that are not differentiated. C) Consumers in the industry make decisions based on price, thus reducing the intensity of rivalry in the industry. D) Substitutes are readily available in the form of trains, buses, and cars, thus reducing the profit potential in the industry.
Substitutes are readily available in the form of trains, buses, and cars, thus reducing the profit potential in the industry.
Which of the following methods of developing a strategy best illustrates scenario planning? A) 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. B) 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) 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) Based on the previous year's profits, the CEO of Solva Inc. decided to adopt an expansion strategy in its home market.
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.
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) We help the homeless gain and sustain financial independence by providing employment opportunities. B) One day, everyone in this nation will have a home to protect themselves. C) Our mission is to turn this not-for-profit organization into a for-profit organization so that the stakeholders benefit. D) Help us help you find a home.
We help the homeless gain and sustain financial independence by providing employment opportunities.
2. Which of the following is an element of good strategy? A) a summary of the firm's history within its industry B) an approach that underestimates the competition C) a set of coherent actions to implement the firm's guiding policy D) a guiding policy to address employee satisfaction
a set of coherent actions to implement the firm's guiding policy
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) assessing the value based on the shareholders' expectations of return on their capital B) evaluating the liquidity ratios for other pharmaceutical companies C) comparing the value to the history of the firm's return of investment over a number of years D) comparing the return to the return on invested capital obtained by other firms in the industry
comparing the return to the return on invested capital obtained by other firms in the industry
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.
competitive parity with each other.
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.
core rigidities
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) value chain. B) resource flow. C) dynamic capabilities. D) core rigidity.
core rigidity.
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
core rigidity.
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) resource flows. B) core rigidity. C) value chain disruption. D) resource stocks.
core rigidity.
A strategic group will typically include A) firms employing similar number of employees, irrespective of their industries. B) firms within the same industry. C) customers belonging to a particular socioeconomic class. D) employees within a firm earning the same amount in salary.
firms within the same industry.
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.
internal stakeholder.
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
network effects
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
organizational design
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) reverse engineering process. B) scenario planning process. C) planned emergence approach. D) top-down strategic planning approach.
planned emergence approach.
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.
pursued distinct strategic positions.
1. 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) sell advertising space on their cars' digital displays C) substitute less-expensive components to keep costs low D) reinvest profits to build successively better electric automobiles
reinvest profits to build successively better electric automobiles
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
scenario planning
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.
stake out a unique position within the industry.
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.
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
strategic
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
strategic business unit
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.
strategic leaders adjusting a company's vision and mission based on environmental analysis.
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 liquidation. B) strategic profiling. C) strategic parity. D) strategic positioning.
strategic positioning
3. 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) fiduciary responsibility B) balanced scorecard C) consistent power position D) sustainable competitive advantage
sustainable competitive advantage
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
the building owned by Riya, which reduces cost of operations
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 plant and machinery B) the company's land and buildings C) the company's raw material supplies D) the company's design patents
the company's design patents
Which of the following features about a buyer indicates that the buyer has high bargaining power? A) when the buyer faces high switching costs B) when the buyer operates in an industry where products are undifferentiated C) when the buyer cannot purchase specific products from other sellers D) when the buyer cannot credibly threaten to backwardly integrate into the industry
when the buyer operates in an industry where products are undifferentiated
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.
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) Attempt to undercut the competition by imitating their top-selling product. C) Improve the benefits package to retain key employees and reduce turnover. D) Open a satellite office overseas to support the company culture of taking chances.
Improve the benefits package to retain key employees and reduce turnover.
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.
It fails to face the competitive challenge.
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 competitive parity with other firms in the industry. B) It has formed a strategic alliance with other firms in the industry. C) It has a competitive disadvantage in the industry. D) It has a competitive advantage in the industry.
It has a competitive advantage in the industry
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.
PaluniInc. has been able to outperform its competitors because the uniqueness of its employee experience is difficult for competitors to replicate.
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 failed to apply for a patent of its own assembly system. B) The competitor developed an assembly system that worked on a newer theory than Gogo's system. C) The competitor ran advertising that criticized Gogo's assembly system. D) The competitor infringed on Gogo's patent of the "diagonal assembly system."
The competitor infringed on Gogo's patent of the "diagonal assembly system."
Which of the following is an implication of all firms in an industry pursuing a low-cost position through application of competitive benchmarking? A) The firms would eventually have no resources to invest in product and process improvements. B) Each firm would be in a better position to gain a competitive advantage. C) No firm would face direct competition from others in the industry; hence, profit potential would be high. D) Each firm would be catering to a different customer segment.
The firms would eventually have no resources to invest in product and process improvements.
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 structure of the travel industry changed from monopolistic competition to an oligopolistic one. B) The bargaining power of buyers in the travel industry has decreased. C) The travel industry changed from a consolidated structure to a fragmented one. D) The pricing power of the incumbent firms in the travel industry has increased.
The travel industry changed from a consolidated structure to a fragmented one.
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.
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
business
In an industry, the threat of entry is high when A) switching costs are high. B) capital requirements are low. C) technological know-how is industry specific. D) expected returns are low.
capital requirements are low.
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
emergent strategy
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
enthusiastic company culture
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.
evaluating the effects of internal resources and core competencies on a firm's potential to gain and sustain a competitive advantage.
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.
highlight the number of celebrities who use Smart Reads e-readers
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) tactical strategy C) unrealized strategy D) emergent strategy
intended strategy
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
intended strategy
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.
it was not backed up with strategic commitments.
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) ethical responsibilities B) demographic responsibilities C) philanthropic responsibilities D) legal responsibilities
legal responsibilities
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.
more competitive rivalry than firms outside their strategic group.
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.
not costly to imitate by competitors.
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) oligopoly B) monopolistic competition C) monopoly D) perfect competition
oligopoly
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) oligopoly B) monopoly C) monopolistic competition D) perfect competition
perfect competition
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
representativeness bias
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 substitution B) resource heterogeneity C) resource immobility D) resource imitation
resource immobility
Dynamic capabilities are especially relevant for surviving and competing in markets that A) shift quickly. B) shift slowly. C) remain constant. D) remain unpredictable.
shift quickly.
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
sociocultural
A traditional top-down strategic planning process typically begins with: A) functional managers formulating functional strategies for their respective departments. B) strategic leaders adjusting a company's vision and mission based on environmental analysis. C) employees who have close contact with customers taking autonomous actions. D) employees at the operational level identifying problems within an organization.
strategic leaders adjusting a company's vision and mission based on environmental analysis
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.
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
strategic position
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
the unification of major goals and objectives
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 give all children in the United States the opportunity to attain an excellent education. C) to encourage parents to take a more active role in their children's education D) to cut wasteful spending from education budgets
to give all children in the United States the opportunity to attain an excellent education.
For a firm that operates in an industry where competition is high, which of the following practices will result in inferior performance? A) working toward increasing the difference between value creation and cost B) focusing on creating value for customers rather than destroying rivals C) trying to be everything to everybody by combining different competitive strategies D) choosing a distinct but different strategic position in the industry
trying to be everything to everybody by combining different competitive strategies
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.
upgrade its engineering department and improve its supply chain.