MAN 4720 Test 2
23. When it is cheaper for a firm to produce two or more outputs or services together rather than separately through using the same resources and technology, then _________ occur. A. Economies of scope B. Transaction economies C. Economies of scale D. Output economies
A
"Stakeholders" under the stakeholder theory are: A. Only concerned with return on risk. B. Governmental bodies who oversee industry regulations. C. Interested in maximizing profit. D. Anyone who makes contributions to a firm and expects inducement in return.
Anyone who makes contributions to a firm and expects inducement in return.
A firm's _________ captures the historical costs of a firm's assets. A. Market value B. Value created C. Book value D. Economic value
Book value
19. When large, incumbent firms buy up startup companies, the transaction is generally described as a(n) _____. A. Non-equity alliance B. Equity alliance C. Acquisition D. Merger
C
When viewed from an economic value creation perspective, the major strategic objective for a firm is to: A. Distribute the value created to the consumer. B. Maximize the economic value created. C. Improve the qualitative attributes of the product/service. D. Decrease the producer surplus.
Maximize the economic value created.
Suppose that a firm wanted to find profitability information about its rivals. The most likely source of this information would be: A. Publicly available information including 10-K reports. B. Employees who work for the competition. C. Customers who are loyal to the competition. D. Stakeholders of the competition.
Publicly available information including 10-K reports.
The types of assets that are the primary focus of accounting data but are no longer most important to competitive advantage are: A. Intangible. B. Tangible. C. Indefinable. D. Unobserved.
Tangible
"What is our social impact?" is a question most relevant to: A. The balanced scorecard. B. The triple bottom line. C. Value creation. D. Shareholder value.
The triple bottom line.
The return on risk capital that includes stock price appreciation plus dividends received over a specific period is: A. Total return on assets. B. Normalized returns. C. Total return to shareholders. D. Capitalized returns.
Total return to shareholders.
In the economic value creation framework of measuring competitive advantage (VPCs), V - P = __________. A. Profits B. Deadweight loss C. Goodwill D. Consumer surplus
consumer surplus
When the value that a customer attaches to a good or service exceeds the price paid for the good or service, this is a(n): A. Economic surplus. B. Consumer surplus. C. Value surplus. D. Consumer value.
consumer surpuls
Economic value can be viewed as the amount of the total value created that is captured and distributed between ________ and ________. A. Stakeholder; shareholder B. Consumer; producer C. Employees; consumer D. Producer; supplier
consumer; producer
50. Joint venture alliances are where ___________ knowledge is exchanged. A. Explicit B. Tacit C. Implicit D. Tacit and explicit
D
58. The Microsoft-IBM (non-exclusive) licensing agreement for MS-DOS is an example of a(n) ______. A. Joint venture B. Acquisition C. Equity alliance D. Non-equity alliance
D
62. _________ alliances tend to produce stronger ties and greater trust between partners than ________ alliances do. A. Non-equity; joint venture B. Equity; joint venture C. Joint venture; equity D. Equity; non-equity
D
Assets such as innovation and quality are ________ assets that contribute to growth potential but are typically not included in a firm's book value. A. Intangible B. Off-balance sheet C. Tangible D. Historical
intangible
66. Equity alliances allow for the sharing of ______ that cannot be codified. A. Tacit knowledge B. Explicit knowledge C. Implicit knowledge D. Corporate venture capital
A
37. According to _____, critical resources and capabilities frequently are embedded in strategic alliances that span firm boundaries. A. Interorganizational competitive advantage B. The relational view of competitive advantage C. Comparative advantage D. Absolute advantage
B
23. Which of the following is NOT related to horizontal integration? A. It concerns the number of activities a firm participates in up and down the industry value chain. B. A type of strategy that improves a firm's strategic position in a single industry. C. The process of acquiring and merging with competitors. D. HP acquiring Compaq in 2002 is an example.
A
27. Looking through the lens of the structure-conduct-performance (SCP) model, _____ changes in the underlying industry structure favor the surviving firms. A. Horizontal integration B. Vertical integration C. Alliance D. Joint venture
A
30. _____________ such as paying salaries and setting up a shop floor are internal transaction costs. A. Administrative costs B. Process costs C. Explicit costs D. Market costs
A
31. The costs associated with searching for economic agents with whom the firm contracts, negotiates, and enforces contracts with are: A. Transaction costs. B. Fixed costs. C. Procedural costs. D. Implicit costs.
A
33. Adidas acquired Reebok because _____. A. Adidas and Reebok wanted to overcome its competitive disadvantage B. Adidas embarked on an acquisitions-led growth strategy C. There were principal-agent problems D. Adidas and Reebok wanted to pursue unrelated diversification
A
37. A disadvantage to a firm when transacting in the market rather than owning its own production and distribution activities involves the costs associated with searching for and selecting suppliers. These types of costs are referred to as: A. Search costs. B. Investigative costs. C. Resource costs. D. Exploratory costs.
A
41. If a firm wishes to bridge the gap between being fully integrated ("make") and transacting in the marketplace ("buy"), it can enter into a(n) ______________, which is a contractual arrangement to obtain inputs for a time period of generally a year or less. A. Short-term contract B. Joint venture C. Equity alliance D. Licensing agreement
A
41. NUMMI, formed between GM and Toyota, was the first ______ in the U.S. automobile industry. A. Joint venture B. Non-equity alliance C. Acquisition D. Equity alliance
A
42. The most common type of alliance is a(n) ______, which is based on contracts between firms. A. Non-equity alliance B. Equity alliance C. Joint venture D. Merger
A
43. ____________ allow a firm to enter into a voluntary arrangement with another firm with the intent of sharing knowledge and resources to develop processes, products, or services together. A. Strategic alliances B. Short-term contracts C. Fully integrated contracts D. Networked contracts
A
44. In a non-equity alliance, firms tend to share _____________ that can be codified. A. Explicit knowledge B. Implicit knowledge C. Tacit knowledge D. Corporate venture capital
A
45. _______ are contractual alliances in which the participants regularly exchange codified knowledge. A. Licensing agreements B. Distribution agreements C. Joint venture agreements D. Equity alliances
A
48. ___________ is a form of long-term contracting that is generally used in the manufacturing sector and which enables a firm to commercialize intellectual property like patents. A. Licensing B. Franchising C. Contracting D. An equity partnership
A
52. Which of the following is NOT one of the pros in equity alliance? A. It's easy to initiate and terminate. B. It's a strong tie. C. Trust and commitment can emerge. D. It's a window into new technologies
A
53. Which of the following is NOT one of the cons in equity alliance? A. Lack of trust and commitment. B. It's less flexible. C. It's slower. D. It can entail significant investments.
A
54. Each stage of the vertical value chain typically represents: A. A distinct industry. B. A type of product. C. The distinct process being applied. D. The type of material being used.
A
55. When a firm is fully vertically integrated: A. All activities are conducted within the boundaries of the firm. B. It is a single-business organization. C. It is a conglomerate. D. It is still reliant on certain suppliers along the industry value chain.
A
56. Which alliance type is the Renault-Nissan alliance, where Nissan owns 15 percent of Renault? A. Equity alliance B. Integration C. Consortium D. Joint venture
A
57. Hulu, owned by NBC, Fox, and ABC is an example of a(n) _______. A. Joint venture B. Acquisition C. Equity alliance D. Non-equity alliance
A
57. If a firm wants to have more ownership of the activities closer to product inputs or design, then it should: A. Backward vertically integrate. B. Forward vertically integrate. C. Forward horizontally integrate. D. Use a single-business diversification strategy.
A
59. Which of the following is NOT a strategic advantage of backward integration? A. Better access to end users B. Ability to secure critical supplies C. Ability to produce higher-quality products D. The potential to reduce costs
A
59. Which type of alliance is most commonly used? A. A non-equity alliance B. An equity alliance C. A joint venture alliance D. A merger
A
60. _______ describes equity investments by established firms in entrepreneurial ventures. A. Corporate venture capital B. A joint venture C. A strategic alliance D. A non-equity alliance
A
62. __________ assets are assets like special equipment that are required to be co-located and used by a firm, such as mineral extraction equipment and bauxite mines. A. Site specificity B. Channel specificity C. Process specificity D. Firm specificity
A
63. Large firms frequently have dedicated ______ units, such as Johnson & Johnson Development Corporation. A. Corporate venture capital B. Merger C. Alliance management D. Acquisition
A
65. ________, in which one partner takes partial ownership in the other partner, are less common than contractual, non-equity alliances because they often require larger investments. A. Equity alliances B. Consortia C. Mergers D. Joint ventures
A
70. _____ and ______ are frequently stepping stones toward full integration of the partner firms either through a merger or acquisition. A. Equity alliances; joint ventures B. Non-equity alliances; joint ventures C. Equity alliances; non-equity alliances D. Equity alliances; acquisition
A
71. If a firm wishes to expand beyond a single market and grow through being active in several different countries, it is pursuing the _______________ diversification strategy. A. Geographic B. Global C. Multi-country D. Market expansion
A
72. Which of the following is NOT included in the phase of post-formation alliance management? A. Identify partner compatibility B. Relation-specific investments C. Interfirm trust D. Knowledge-sharing routines
A
77. Pharmaceutical company Eli Lilly is a knowledge leader in alliance management, and the alliances are managed by a three-person team. Which of the following is NOT included in the team? A. An alliance planning supervisor B. An alliance manager C. An alliance leader D. An alliance champion
A
78. When a firm uses many links (common resources and competencies) among its businesses, it is engaging in a(n) _________ diversification strategy. A. Related-constrained B. Dominant business C. Linked business D. Single-business
A
83. A tool that helps managers evaluate how the firm's core competencies can support certain diversification strategies is the: A. Core competence-market matrix. B. Diversification matrix. C. Acquisition matrix. D. Competency leverage matrix.
A
84. If a firm is highly visible and prominent in the cluster and has access to many channels of information, it has a high _____. A. Degree of centrality B. Degree of freedom C. Degree of linearity D. Degree of separation
A
87. ___________ firms are often unable to achieve additional value creation. A. Unrelated diversified B. Related-constrained C. Related-linked D. All diversified
A
90. When Anheuser-Busch InBev sold Busch Entertainment (including SeaWorld and Busch Gardens), it was doing all of the following EXCEPT: A. Weakening its position. B. Restructuring the organization. C. Raising capital for more strategically relevant assets. D. Engaging in portfolio planning.
A
Failure to achieve competitive advantage is an indication of: A. Using the incorrect measurement tools. B. A poor economy. C. A failure in strategy. D. Being in the wrong strategic group.
A failure in strategy.
Measuring profitability on a relative rather than absolute basis is important because of all of the following EXCEPT: A. It indicates how much profit a firm earns per dollar of revenue instead of overall profit. B. It helps to compare firms of different sizes. C. Relative profitability is a better reflection of competitive advantage than is absolute profitability. D. A firm that has the greatest overall profit will sustain competitive advantage(s).
A firm that has the greatest overall profit will sustain competitive advantage(s)
Competitive advantage is best assessed by using: A. Accounting data. B. Value creation. C. A relative benchmark. D. The firm's stock price.
A relative benchmark
All of the following statements are TRUE about strategy EXCEPT: A. There is no single best strategy; only strategies that are better than that of rivals. B. A strategy that has provided competitive advantages in the past will most likely do so in the future. C. Strategy must integrate and align each business unit. D. Performance metrics that measure effectiveness must aggregate upward and reflect overall company performance.
A strategy that has provided competitive advantages in the past will most likely do so in the future.
In 2010, Exxon Mobil posted 19.3 billion in profits and was ranked as the top performer by the Fortune 500 list. However, Liberty Media, which is a smaller organization than Exxon, posted the highest return on revenue for the year at 62.1 percent. Using the accounting profitability framework, Exxon outperformed Liberty in ________ terms, and Liberty outperformed Exxon in _________ terms. A. Accounting; shareholder value B. Shareholder value; profitability C. Absolute; relative D. Competitive; absolute
Absolute; relative
Understanding the shareholder's view of value creation under the balanced scorecard leads a firm to: A. Focus on value chain activities. B. Select which product markets to be in. C. Decide how many shares of stock it should sell. D. Adopt a more future-oriented perspective.
Adopt a more future-oriented perspective.
Performance metrics used to assess the effectiveness of a firm's strategy should be: A. Aggregated and viewed from an overall company perspective. B. Aggregated and viewed from a functional-level perspective. C. Focused on quantitative, not qualitative, measurements. D. Broken down by specific parts of the company.
Aggregated and viewed from an overall company perspective.
Ecological concerns such as sustainability can: A. Be a useful tool for differentiation. B. Generate goodwill in the marketplace. C. Foster firm innovation. D. All of these.
All of these
Hyundai's reputation for quality is an asset that: A. Will not be reflected in Hyundai's accounting information. B. Will be reflected in Hyundai's market valuation. C. Will be important to Hyundai's competitive advantage D. All of these.
All of these
The triple bottom line is important to competitive advantage because: A. Social and ecological implications are important to firm performance. B. Achieving the triple bottom line can lead to sustained competitive advantage(s). C. These dimensions are important to stakeholders. D. All of these
All of these
16. A(n) _________ describes the joining of two independent companies to form a combined entity. A. Acquisition B. Merger C. Joint venture D. Equity alliance
B
16. ChapterCase 8 highlights the corporate-level strategy of General Electric. As noted, CEO Jeffrey Immelt decided to refocus GE's portfolio of businesses and leverage the firm's core competencies in industrial engineering while pursuing future-growth industries. The two industries CEO Immelt had decided will provide strategic importance to the firm are ___________ and ____________. A. Home appliances; entertainment B. The green economy; health care C. Capital markets; information technology D. Consumer electronics; education
B
17. Corporate strategy is concerned with determining the boundaries of the firm among geographic, vertical, and product/service dimensions. This is referred to as: A. Economic scope. B. The scope of the firm. C. Multidimensional mapping. D. Boundary spanning.
B
21. Management of a firm must decide what range of products and services the firm should offer. This determines the firm's horizontal integration, or: A. Consolidation. B. Diversification. C. Categorization. D. Implementation.
B
24. Which of the following is NOT an example of a firm benefiting from economies of scope? A. Kleenex Corporation using paper products for both its facial tissue and paper towel businesses B. Anheuser-Busch spreading its fixed costs over millions of gallons of beer produced each year C.Amazon leveraging its core competencies in IT systems into a wide range of online services, from retailing to cloud computing D. Honda using flexible manufacturing systems for quick and low-cost switching from one product to another
B
26. The costs associated with the "make or buy" question when determining the scope of the firm are: A. Investment costs. B. Transaction costs. C. Diversification costs. D. Scale costs.
B
31. Based on Strategy Highlight 9.1, Kraft's hostile takeover of Cadbury was mainly motivated by Kraft's desire for _____. A. Increased differentiation B. Access to new markets and distribution channels C. Reduction in competitive intensity D. Lower costs
B
32. When an employee of a firm follows his or her own interests such as pursuing managerial perks when performing activities on behalf of the owner of the firm, a(n) _______________ problem occurs. A. Delegation excess B. Principal-agent C. Authority-excess D. Agent efficiency
B
33. Advantages to organizing economic activity within the firm ("make") include all of the following EXCEPT: A. The coordination of highly complex tasks. B. The principal-agent problem. C. Creating an internal community of knowledge. D. The ability to make command-and-control decisions.
B
35. Markets often provide higher-powered incentives than firms when it comes to employee motivation for economic transaction because: A. Transacting in the market provides a higher degree of job security. B. Markets provide incentives like IPOs for individual work efforts. C. Transacting in the market requires less time and effort than working for a firm. D. There is typically less economic risk to an individual when they are no longer bound to a firm.
B
85. A small-world phenomenon is a situation in which a network exhibits _____ clusters, each with a high degree of centrality. A. Nonlocal B. Local C. Inter-organization D. Cross
B
38. The reasons firms enter into alliances include all of the following EXCEPT _____. A. To enter new markets B. To increase competitive intensity C. To hedge against uncertainty D. To learn new capabilities
B
39. An alternative perspective to the transaction cost economics framework concerning the make-or-buy decision is the _____________ view of the firm, which focuses the firm less on transaction costs and more on its capabilities and knowledge and what it does well. A. Achievement-based B. Resource-based C. Entrepreneurial-based D. Competitive-based
B
42. A drawback for a firm engaging in a short-term contract is: A. It usually takes at least a year for processes between organizations to get in sync. B.The supplying firm has no incentive to make additional transaction-specific investments to increase performance or quality. C. There is no competitive bidding process with short-term contracts. D. Short-term contracts offer less planning opportunity than individual market transactions.
B
45. As noted in Strategy Highlight 8.1, when Toyota wanted to secure a long-term supply of lithium, it had to create a bond of trust with the Argentinean firm Orocobre before the company would invest several hundred million dollars in specialized equipment to supply the lithium to Toyota. What did Toyota do to instill this trust? A. It offered Orocobre exposure to Toyota's proprietary information. B. It made a credible commitment by taking an equity stake in Orocobre. C. It promised to help Orocobre expand its market presence globally. D. It offered Orocobre franchising opportunities to sell hybrid vehicles.
B
46. Alliances can be governed by all of the following mechanisms EXCEPT _______. A. Contractual agreements for non-equity alliances B. Acquisitions C. Equity alliances D. Joint ventures
B
48. Which of the following is NOT one of the pros of a non-equity alliance? A. It's fast. B. Trust and commitment. C. It's flexible. D. It's easy to initiate and terminate
B
49. If a firm wishes to bridge the gap between being fully integrated ("make") and transacting in the marketplace ("buy"), it can enter into a(n) _________ agreement which grants the right to an individual or group to use the firm's trademark and business processes to sell goods and services that carry the firm's brand name. A. Licensing B. Franchising C. Contracting D. Equity partnership
B
51. A non-equity alliance has a major drawback which is that it has _____. A. A slower pace of execution B. A lack of trust and commitment C. Strong ties between the firms
B
53. Industry value chains consist of all of the processes that transform raw materials into finished goods and services. These value chains are also called: A. Horizontal value chains. B. Vertical value chains. C. Circular value chains. D. Flattened value chains.
B
56. All of the following are fundamental elements of an industry value chain EXCEPT: A. Raw materials. B. Support activities. C. Marketing and sales. D. Final assembly of goods.
B
58. If a firm wants to have more ownership of activities closer to the end product or customer, it should: A. Backward vertically integrate. B. Forward vertically integrate. C. Forward horizontally integrate. D. Use a single-business diversification strategy.
B
60. Which of the following is NOT a strategic advantage of forward integration? A. Better access to end users B. Ability to secure critical supplies C. More control of after-sales service D. Better planning and response to changes in demand
B
63. A type of specific asset that has physical and engineering properties that were specifically created to satisfy a particular customer (for example, the bottles for PepsiCo) are which form of asset specificity? A. Human-asset B. Physical-asset C. Market-asset D. Growth-asset
B
66. The two alternatives to vertical integration that provide similar benefits while reducing the risks to the firm are _________ and ____________. A. Incremental integration; horizontal integration B. Taper integration; strategic outsourcing C. Horizontal integration; outsourcing D. In-house supplying; intermediate integration
B
67. In the first phase of alliance management, _____ captures aspects of cultural fit between different firms. A. Cultural capacity B. Partner compatibility C. Cultural tolerance D. Partner capability
B
68. Partner commitment concerns the willingness to make available necessary resources and to accept _____ sacrifices to ensure _____ rewards. A. Short-term; short-term B. Short-term; long-term C. Long-term; long-term D. Long-term; short-term
B
69. A company is considered to be a single-business firm when at least _________ percent of revenues are generated by the dominant business. A. 50 B. 95 C. 80 D. 99
B
71. Hewlett-Packard is known as having made _____ to create long-term partnerships with several smaller technology firms co-located in Silicon Valley. A. Knowledge-sharing routines B. Relation-specific investments C. Inter-firm trust D. Identify partner compatibility
B
74. ______ has the technical expertise and knowledge needed for the specific technical area. A. An alliance champion B. An alliance leader C. An alliance manager D. An alliance technician
B
75. _____ serves as an alliance process resource and business integrator between the two alliance partners. A. An alliance partner B. An alliance manager C. An alliance leader D. An alliance champion
B
76. To accomplish effective alliance management, it is suggested that firms create a(n) _____, endowed with its own resources and support staff. A. Partner compatibility B. Dedicated alliance function C. Structure-conduct-performance (SCP) model D. Alliance network
B
77. Economies of scope often occur when a firm is using the ______________ diversification strategy because the firm is able to pool resources and leverage competencies. A. Single-business B. Related C. Dominant business D. Unrelated
B
80. Which of the following is a key characteristic of weak ties? A. A trusting relationship buildup through interaction. B. The transfer of explicit knowledge only. C. It may contain an equity-sharing element. D. Rapid decision making.
B
85. When the stock price of highly diversified firms is valued less than the sum of its individual business units, a(n) _________ occurs. A. Competitive discount B. Diversification discount C. Conglomerate efficiency D. Diversification efficiency
B
86. A _____ allows a firm to find novel solutions to thorny problems because she often has access to diverse knowledge, and can link that information to implement solutions in the form of new products or processes. A. Boundary broker B. Knowledge broker C. Knowledge agent D. Legal affairs medium
B
88. Not all networks are successful. In the case of the global network Unisource, which grew to 25 telecom companies, what was the main cause of the demise of the network? A. The global telecom recession of 2001. B. AT&T came to dominate the network and smaller firms exited. C. Vital large knowledge broker firms left the network. D. The network gained a high degree of closure and collapsed on itself.
B
93. Which of the following is the most salient problem with GE losing its AAA bond rating? A. It hurt their reputation. B. The higher cost of money. C. It dragged GE into the financial crisis. D. It had no major impact.
B
96. Political maneuvering by managers to influence resource and capital allocation can result in firm inefficiencies in a related-diversified firm. These costs are called: A. Fixed costs. B. Influence costs. C. Sunk costs. D. Opportunity costs
B
97. In 2009, Oracle, a software company, acquired Sun Microsystems, a hardware company. Around the same time, Dell purchased Perot Systems, and Xerox bought the IT services company ACS. These diversification events could be based on the _____________, which occurs when firms copy the moves of their industry rivals. A. Imitator effect B. Bandwagon effect C. Diversification effect D. Groupthink effect
B
98. Executives determine the scope of the firm in order to enhance the firm's ability to gain and sustain competitive advantage. In that attempt, they formulate and execute corporate-level strategy by using all of the following dimensions EXCEPT: A. Vertical integration. B. Cultural integration. C. Horizontal integration. D. Global scope.
B
According to Chapter 5, which of the following firms could have benefited from the values contained in the triple bottom line? A. BMW B. BP C. Interface, Inc. D. Google
BP
3M requires that 30 percent of revenues come from new-product introductions. It also measures how much external learning and collaboration the firm is engaging in. 3M is clearly implementing a(n) ____________ approach to assessing competitive advantage. A. Triple bottom line B. Balanced scorecard C. Accounting profitability D. Shareholder value creation
Balanced scorecard
Organizational learning, innovation, and financial performance are all ____________ performance metrics. A. Balanced scorecard B. Accounting profitability C. Value scorecard D. Triple profit
Balanced scorecard
The three traditional approaches that are considered fairly one-dimensional when measuring competitive advantage include all of the following EXCEPT: A. Economic value creation B. Shareholder value creation C. Accounting profitability D. Balanced scorecard
Balanced scorecard
Microsoft compares its stock performance annually to two stock indices: NASDAQ and the S&P 500. The NASDAQ covers over 400 high-tech companies, including Apple, Dell, and Intel. The S&P is a broader index and includes stocks from many industries. These stock indices are useful ________ that allow the public to assess whether Microsoft has a competitive advantage. A. Targets B. Benchmarks C. Reports D. Markets
Benchmarks
As noted in ChapterCase 5, as of the third quarter of 2010, Android is the smart phone leader with 43.6 percent of market share. In 2007, Android (Google's mobile operating system) sold 1 million units in six months when it was launched. However, in November 2010, Microsoft started shipping its Windows Phone 7 operating system and had reached 2 million units in 10 weeks. When it comes to performance, Google and Microsoft are compared to each other using several different metrics. Looking at this, competitive advantage can be viewed as being: A. Both relative and transitory. B. Unattainable in the smartphone industry. C. Sustainable for many companies at the same time. D. Dependent on one best strategy.
Both relative and transitory
18. Managers wishing to diversify the firm must remember that: A. A single-business diversification strategy generally works best. B. Forward integration is more successful than is backward integration. C. Successful diversification must be aligned with and strengthen a firm's business strategy. D. It is competitively advantageous to shrink the size and scope of most firms.
C
20. A(n) _____________ is where the transformation of raw materials into finished goods and services occurs along distinct vertical stages. A. Production value chain B. Process value chain C. Industry value chain D. Business value chain
C
22. The following characteristics are all related to acquisitions EXCEPT _____. A. It can be friendly or unfriendly B. Sometimes, it can be hostile C. The combining of firms only of comparable size D. Large firms buying up startup companies
C
22. Which of the following questions is the most relevant for corporate-level strategy? A. How to compete? B. When to compete? C. Where to compete? D. Why to compete?
C
24. Which of the following is NOT considered as the benefit of horizontal integration? A. reduction competitive intensity B. increased differentiation C. improvement of supply chain coordination D. access to new markets and distribution channels
C
27. When it would cost the firm less to pursue an activity in-house than obtaining that activity from a supplier in the external market, then the firm should: A. Enter into a joint venture. B. Execute a short-term contract. C. Vertically integrate. D. Strategically outsource.
C
28. Horizontal integration can affect several of Porter's five forces for the surviving firms. Which of the following would this include? A. Increasing the threat of entry B. Increasing rivalry among existing firms C. Strengthening bargaining power vis-à-vis supplier and buyers D. Increasing the threat of substitute products
C
28. Vertical integration involves all of the following EXCEPT: A. The level of ownership by a firm of production or service inputs. B. The level of ownership by a firm of the channels for the distribution of outputs. C. The expansion by the firm into different product lines and markets. D. Being more efficient internally than the external market.
C
32. The main value of Oracle's acquisition of PeopleSoft is _____. A. Tapping into new distribution channels in international markets B. Reducing their sales forces and lowering the overall cost of distribution C. Optimizing their entire vertical and horizontal value chains D. Lowering competitive intensity in the industry overall
C
34. Despite M&A generally destroying rather than creating shareholder value, reasons for mergers include the following EXCEPT _____. A. The desire to overcome competitive disadvantage B. Superior acquisition and integration capability C. Access to new markets and distribution channels D. Principal-agent problems
C
34. One way to overcome the principal-agent problem is to: A. Flatten the organization. B. Micromanage the management team. C. Make managers owners through stock options. D. Increase the scope of management's responsibilities.
C
36. A liquidity event is all of the following EXCEPT: A. An opportunity for an individual to potentially become financially secure for life. B. An initial public offering (IPO). C. An opportunity for the firm to offer low-powered incentives to employees. D. An incentive for an individual to transact economic activity in the market instead of a firm.
C
36. _____ is a voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services to lead to a competitive advantage. A. A merger B. An acquisition C. A strategic alliance D. A consortium
C
38. Information asymmetries occur when: A. Certain departments within the firm keep information from other departments. B. There are gaps in technological skills between employees of a firm. C. A firm transacts in the market with a seller who has better information about the product or service. D. All of these.
C
40. Under the Transaction Cost Economics framework, when it would cost the firm more to pursue an activity in-house than obtaining that activity in the external market, the firm should: A. Consider horizontally integrating instead. B. Perform the activity in-house anyway in order to gain core competencies. C. Consider options such as short-term contracts or strategic alliances. D. Divest that particular business.
C
46. When one firm makes a credible commitment to another firm, it is doing all of the following EXCEPT: A. Creating trust between the firms. B. Making a long-term strategic decision. C. Offering a promise that it will perform in the future. D. Sharing the risk and costs.
C
47. A distinctive characteristic of equity alliances is _____. A. A focus on short-term contracts B. Creation of new entity by two or more parent firms C. Partners taking an ownership position D. A focus on long-term contracts
C
47. Long-term contracts such as licensing and franchising offer an advantage over short-term contracts because: A. They cost less. B. The competitive bidding process is extended. C. There is more incentive for transaction-specific investments. D. Licensing transfers ownership; short-term contracts do not.
C
49. Which of the following is one of the benefits of an equity alliance? A. It's flexible. B. It's fast. C. Trust and commitment. D. It may be acquired by an institutional setting.
C
51. Dow Corning is owned jointly by Dow Chemical and Corning. Dow and Corning have entered into a __________, which is a special form of strategic alliance whereby two or more partners create and jointly own a new organization. A. Conglomerate venture B. Diversified venture C. Joint venture D. Joint contract
C
52. The ________________ relationship is the closest to a firm being fully integrated. In this relationship, transaction costs typically arise from political turf battles between the corporate office and the standalone business. A. Owner-partner B. Conglomerate-alliance C. Parent-subsidiary D. Business-stakeholder
C
54. Which of the following is NOT one of the pros in a Joint Venture? A. It's the strongest tie. B. Trust and commitment is likely to emerge. C. It's flexible. D. It may be required by an institutional setting.
C
55. In a joint venture, all the following is true EXCEPT _____. A. It can entail long negotiations and significant investments B. It is a long-term solution C. It is mostly weak ties D. Managers have double reporting lines
C
61. Corporate venture capital (CVC) investments are _____ investments by established firms in entrepreneurial ventures. A. Merger and acquisition B. Joint venture C. Equity D. Non-equity
C
61. When a firm vertically integrates along the industry supply chain and invests in specific assets in order to support its activities, it has invested in: A. Fixed assets. B. Firm assets. C. Specialized assets. D. Required assets.
C
65. Which of the following is NOT a risk of vertical integration ("make")? A. Less exposure to market competition leads to higher costs. B. Organizational complexity increases with integration. C. Organizational planning often improves when a firm integrates. D. Less contact with the external market diminishes learning and experience effects.
C
69. The third phase in a firm's alliance management capability concerns _____. A. The choice of an appropriate governance mechanism B. Alliance design C. The ongoing management of the alliance D. Partner selection
C
70. All of the following are reasons why a firm seeks to diversify EXCEPT: A. Shareholder pressure for continuous growth. B. To expand the international markets of the firm. C. To determine how to compete in current markets. D. To leverage core competencies.
C
73. Which of the following acquisitions would be considered the LEAST related? A. A baking company purchasing a sugar company B. A chain of hotels acquiring a golf course C. A toy manufacturer acquiring a coffee company D. A steelmaker acquiring a kitchen utensils company
C
73. _____ is a senior, corporate-level executive responsible for high-level support and oversight. A. An alliance manager B. An alliance leader C. An alliance champion D. An alliance planning supervisor
C
74. PepsiCo sells a wide variety of beverages and food products in 190 countries. It is clearly engaging in ______________ to achieve continuous growth. A. Product diversification B. Geographic diversification C. Product-market diversification D. Multimarket diversification
C
75. Which of the following corporate diversification strategies most closely describes Disney? A. Single-business B. Related-constrained C. Related-linked D. Unrelated diversification
C
76. Firms use related diversification strategies in order to: A. Horizontally integrate the firm's operations and processes. B. Increase revenue from the dominant business of the firm. C. Benefit from economies of scale and scope. D. Improve the chances of being acquired by a similar firm.
C
78. A(n) _____ is a social structure composed of multiple organizations and the links among the nodes. A. Alliance network B. Joint venture network C. Strategic network D. Social network
C
79. The more "constrained" the relatedness of diversification: A. The fewer the linkages between the businesses owned by the firm. B. The wider the variation in the portfolio of businesses owned by the firm. C. The more links there are among the businesses owned by the organization. D. The higher the proportion of total organizational revenue is derived from the dominant business.
C
80. As noted in Strategy Highlight 8.3, in 2008 ExxonMobil reported the highest profits ever recorded by any company. Exxon receives the majority of its profits from petroleum-based products. Due to the political and regulatory climate and the global movement toward cleaner energy sources, Exxon purchased the natural gas company XTO Energy in 2009 as a low-carbon alternative to petroleum. Exxon then became the world's largest producer of natural gas. All of the following are true about Exxon's strategic move EXCEPT: A. Exxon horizontally integrated when it purchased XTO Energy. B. Exxon is using its core competencies for corporate diversification. C. Exxon is pursuing an unrelated diversification strategy. D. Exxon is investing in more ecologically sound resources.
C
81. Which of the following is NOT related to strategic networks? A. It can provide advantages but also constrain individual members. B. It is a social structure composed of multiple organizations and the links among the nodes. C. It has the ability to effectively manage three alliance-related tasks. D. It has powerful vehicles to execute business and corporate-level strategy.
C
82. Star Alliance includes such carriers as Air Canada, Air China, Continental Airlines, Singapore Airlines, and others. Star Alliance is an example of _____. A. A merger B. A joint venture C. Strategic networks D. Consortia
C
83. _____ is a space where two organizations are connected to the same organization, but are not connected to one another. A. An organizational disconnection B. A structural disconnection C. A structural hole D. A structural separation
C
84. Under the core competence-market matrix, the most difficult diversification strategy is combining __________ with ________, because core competencies must be built. However, this creates the potential for "mega opportunities" and significant future growth opportunities for a firm that achieves this. A. New core competencies; existing markets B. Existing core competencies; existing markets C. New core competencies; new markets D. Existing core competencies; new markets
C
87. _________ occurs when a network exhibits local clusters, each with a high degree centrality. A. A market-domain phenomenon B. A market-domain network C. A small-world phenomenon D. A small-world network
C
88. In order for a diversification strategy to enhance firm performance, it must do any of the following EXCEPT: A. Provide economies of scale and reduce costs. B. Exploit economies of scope and increase value. C. Create diversification discounts. D. Reduce costs and increase value.
C
89. Research indicates that when it comes to the diversification-performance relationship: A. Single-business strategies tend to be the highest performing. B. The less related the businesses are, the higher the performance of each. C. Related-constrained and related-linked strategies are associated with higher firm performance. D. No specific level of diversification outperforms another.
C
91. The Boston Consulting Group (BCG) matrix is a tool that helps with: A. Analyzing mergers and acquisitions. B. Quality improvement. C. Corporate portfolio planning and restructuring. D. Cost reduction initiatives.
C
92. Which of the following is NOT part of the BCG matrix? A. Stars B. Dogs C. Strangers D. Cash Cows
C
94. When a firm that follows the unrelated diversification strategy allocates capital from internal sources, it can create value by doing all of the following EXCEPT: A. Using more efficient budgeting processes than the external market. B. Discovering privately which business units provide the highest return to invested capital. C. Disregarding its debt rating and investing large amounts of capital in projected growth areas. D. Accessing capital at a lower cost.
C
95. _____________ are additional costs that are attached to the related-diversification strategy because of managing the number, size, and types of businesses that are linked to one another. A. Opportunity costs B. Specified costs C. Coordination costs D. Sunk costs
C
When a firm has a greater positive difference between cost and value than its rivals, it can achieve competitive advantage by: A. Raising the price and maintaining market share and volumes. B. Increasing production costs while lowering prices. C. Charging the same or even lower prices and selling more goods or services. D. Minimizing the difference between value and cost and lowering prices.
Charging the same or even lower prices and selling more goods or services.
Analyzing accounting profitability is important to managers because: A. This data reflects how much profit the firm will make in the future. B. How the customer views the firm is reflected in accounting data. C. This information tells management how much to invest in intangibles. D. Comparing "hard numbers" against rivals provides competitive insight.
Comparing "hard numbers" against rivals provides competitive insight.
Firm competitive performance can be best judged by: A. Internal performance metrics of the firm. B. Past performance of the firm. C. Comparisons to rivals and the industry. D. External performance metrics of the firm.
Comparisons to rivals and the industry.
One of the main lessons from the Chapter 5 case comparing Google and Microsoft and measuring overall firm performance is that: A. Competitive performance differences should be measured by using a variety of evaluation tools. B. Qualitative measurements are superior to quantitative measurements when evaluating firm differences. C. Management should utilize just a few measurement tools in order to get exact information when evaluating firm differences. D. The type of measurement tool used by management is dependent on which area of the firm is being measured.
Competitive performance differences should be measured by using a variety of evaluation tools.
The basic way that the balanced scorecard provides competitive insight to managers is through the use of: A. Employee feedback. B. Concise reports that track and measure chosen metrics. C. Balance sheets and income statements. D. Stakeholder surveys.
Concise reports that track and measure chosen metrics.
From an economic value creation perspective, competitive advantage is achieved by the firm that does which of the following? A. Creates and captures more economic value than its rivals. B. Ensures that the value captured is evenly divided between producer and consumer. C. Concentrates on tangible assets available as opposed to intangible assets. D. Formulates strategy based primarily on the balanced-scorecard approach.
Creates and captures more economic value than its rivals.
Measuring how a customer views a firm under the balanced-scorecard framework is important because: A. Customer perspective is directly linked to firm revenues and profits. B. The customer viewpoint tells a firm much needed information about rivals. C. Surveying customers makes them feel important to the firm. D. It is a good indicator of future stock price.
Customer perspective is directly linked to firm revenues and profits.
17. A(n) ______________ is the purchase or takeover of one company by another. A. Joint venture B. Equity alliance C. Consortium D. Acquisition
D
18. The combining of two firms of comparable size is often described as a(n) _____. A. Acquisition B. Joint venture C. Equity alliance D. Merger
D
19. All of the following are decisions that managers must make when formulating corporate strategy EXCEPT: A. What stages of the industry value chain to participate in. B. What range of products and services should be offered. C. Where globally the company should compete. D. Whether the company should compete through differentiation or cost leadership.
D
20. Disney's purchase of Pixar is an example of _____, in which both teams believed that joining the two companies was a good idea. A. A friendly joint venture B. A hostile takeover C. A friendly merger D. A friendly acquisition
D
21. _____ is the process of acquiring and merging with competitors, leading to industry consolidation. A. Vertical integration B. Hostile takeover C. Joint venture D. Horizontal integration
D
25. A ______ describes an acquisition in which the target company does not wish to be acquired. A. Horizontal integration B. Merger C. Joint venture D. Hostile takeover
D
25. Applying the ______________ framework helps managers make economic decisions namely; what activities to pursue within the firm and which to obtain from the external market. A. Transformational analysis B. Economic investment analysis C. Appropriation economics D. Transaction cost economics
D
26. _____ is NOT one of the drawbacks in horizontal integration. A. Integration failure B. Reduced flexibility C. The increased potential for legal repercussions D. Higher costs
D
29. The mergers between Delta and Northwest Airlines, United Airlines and Continental, and Southwest and AirTran _____ in the industry overall. A. Increased system capacity B. Increased differentiation C. Helped them gain access to new markets and distribution channels D. Decreased competitive intensity
D
29. Transaction costs: A. Help determine the scope of the firm. B. Are all costs associated with an economic exchange. C. Are both internal and external. D. Are all of these.
D
30. Firms use _____ to lower costs through economies of scale, and thus enhance their economic value creation and, in turn, their performance. A. Joint ventures B. Mergers C. Vertical integration D. Horizontal integration
D
35. _____ is a form of self-delusion in which managers convince themselves of their superior skills in the face of clear evidence to the contrary. A. Managerial pride B. Managerial ego C. Managerial arrogance D. Managerial hubris
D
39. Apple orchestrated a web of strategic alliances with publishing houses to challenge Amazon's early lead in the delivery of e-content. This was due to which of the following reasons listed? A. To hedge against uncertainty B. To access critical complementary assets C. To learn new capabilities D. To strengthen competitive advantage
D
40. Firms would use strategic alliances to _____ in countries such as Saudi Arabia or China. A. Hedge against uncertainty B. Strengthen competitive position C. Learn new capabilities D. Enter new markets
D
43. The most frequent forms of non-equity alliance include the following EXCEPT _______. A. Supply agreements B. Distribution agreements C. Licensing agreements D. Partnership agreements
D
44. All of the following are forms of strategic alliances EXCEPT: A. Long-term contracts. B. Equity alliances. C. Joint ventures. D. Short-term outsourcing.
D
50. Equity alliances are forms of strategic alliances that do all of the following EXCEPT: A. Signal greater commitment to the partnership. B. Allow one partner to take partial ownership of the other partner's company. C. Encourage specialized investments for future performance. D. Temporarily allow one partner to use the other's trademark and business processes.
D
64. Human-asset specificity is the form of an asset that a firm invests in to create the human capital with knowledge about the specific routines and procedures needed to support a firm's vertical integration strategy. These routines and procedures bring competitive value to the firm because: A. They organize the firm's work processes. B. They are not transferable to a different employer. C. They are not easily imitated. D. All of these.
D
64. Toyota is using a(n) ________ with Tesla Motors, a designer and developer of electric cars, to learn new knowledge and gain a window into new technology. A. Non-equity alliance B. Merger C. Joint venture D. Equity alliance
D
67. Both Apple and Nike produce their products and own retail outlets. They also rely on independent distributors to sell their offerings. Apple and Nike are utilizing _________ to partially rely on outside- market firms while supporting their forward vertical integration strategy. A. Strategic alliances B. Strategic outsourcing C. Horizontal integration D. Taper integration
D
68. Today, many companies use PeopleSoft and EDS to manage their human resources. By doing this, these firms: A. Are engaging in strategic outsourcing. B. Are reducing their level of vertical integration. C. Are leveraging their competencies. D. Are doing all of these.
D
72. When a firm is active in several different product markets, it is pursuing a(n) ____________ diversification strategy. A. Market B. Process C. Multipoint D. Product
D
79. Which of the following is NOT related to strong ties? A. A trusting relationship buildup through interaction. B. Rapid decision making. C. It may contain an equity-sharing element. D. The transfer of explicit knowledge only.
D
81. When a firm like GE has few if any linkages among its businesses, it is pursuing a(n) ________ diversification strategy. A. Slightly-related B. Comprehensive C. Broad-based D. Unrelated
D
82. All of the following are true about conglomerates EXCEPT: A. They follow the unrelated diversification strategy. B. They are able to overcome institutional weaknesses such as a lack of capital markets in emerging economies. C. Less than 70 percent of their revenues come from a single business. D. They are likely acquisition targets for large single-business firms.
D
86. Companies that pursue related diversification often receive a diversification premium, leading to a stock price valuation that is higher than the sum of their individual business units. This premium indicates that investors: A. Are hedging their bets that at least a few of the related businesses will experience high performance. B. Believe that firms with related diversification strategies are more likely to be restructured in the future. C. Are experiencing the bandwagon effect when it comes to investment choices. D Understand that firms with related diversification strategies are more likely to improve their . performance than other diversified firms.
D
From an accounting profitability perspective, competitive advantage is achieved by the firm that does which of the following? A. Projects the highest book value for the upcoming year. B. Delivers the most positive profitability metrics. C. Has the highest value of intangible assets. D. Has the highest value of off-balance sheet items.
Delivers the most positive profitability metrics.
The ______________ is the idea that the market price of a firm's stock includes all publicly available information about a firm's performance. A. Efficient-market hypothesis B. Normalized market hypothesis C. Rational-market hypothesis D. Shareholder knowledge hypothesis
Efficient-market hypothesis
When crafting strategy under an economic value context, the goal is to achieve all of the following EXCEPT: A. Capturing as much economic value as possible. B. Making sure that the relationship between value, cost, and price results in a positive economic contribution. C. Creating more economic value than rivals. D. Ensuring that the value captured is equally distributed between producer and consumer.
Ensuring that the value captured is equally distributed between producer and consumer.
Total return to shareholders includes stock price appreciation and is an __________ measurement that reflects how the market views a firm's competitive position. A. Internal B. External C. Intangible D. Integrated
External
Non-economic factors such as _________ and ________ are often the rewards of adopting the triple-bottom-line framework. A. Access to raw materials; supplier relationships B. Firm reputation; goodwill C. Product imitation; substitution D. Diversification; localization
Firm reputation; goodwill
As noted in Chapter 5, Microsoft is many times larger than Google and records higher net income, return on assets, and return on equity in absolute terms when it comes to accounting profitability. However, when looking at normalized stock returns, Google has outperformed both Microsoft and the NASDAQ-100 index by a wide margin over the 2005-2010 time period. Suppose you were a manager for Microsoft. Evaluating this information would tell you that: A. Microsoft has a sustained competitive advantage from a shareholder value creation framework. B. Google has a sustained competitive advantage from a shareholder value creation framework. C. Both Microsoft and Google have sustained competitive advantages from a shareholder value creation framework. D. Google has a competitive disadvantage from a shareholder value creation framework.
Google has a sustained competitive advantage from a shareholder value creation framework.
Macroeconomic factors such as the unemployment rate and economic contraction: A. Minimize stock price volatility. B. Are irrelevant to shareholder value creation. C. Have a direct bearing on a firm's stock price. D. Help shareholders evaluate whether a firm's strategy is working.
Have a direct bearing on a firm's stock price.
The triple bottom line and the balanced scorecard are ____________ frameworks that help a firm evaluate whether its strategy is working. A. Short-term B. Transitory C. Holistic D. Narrow
Holistic
The balanced scorecard is a tool for strategy _________, not ___________. A. Formulation; implementation B. Implementation; formulation C. Analysis; sustainability D. Formulation; sustainability
Implementation; formulation
As noted in Chapter 5, BMW anticipated the need to recycle its automobile parts due to potential industry regulation. It redesigned its manufacturing processes to include quick disassembly and reuse of car components. In addition, BMW sells the used parts in the after-sales market. This is an example of how the triple-bottom-line framework: A. Adds more layers of bureaucracy to a firm. B. Streamlines processes of the firm. C. Shortens product life cycles. D. Improves a firm's social and ecological responsibility.
Improves a firm's social and ecological responsibility.
Under the balanced-scorecard framework, the question "How do we create value?" is relevant to all of the following EXCEPT: A. Increasing the value added to a product along the supply chain. B. Challenging managers to come up with new strategic objectives. C. Focusing on future competitiveness. D. Improving innovation and organizational learning.
Increasing the value added to a product along the supply chain.
As of 2010, ______________ have become more important than tangible assets when it comes to a firm's stock market valuation and competitive advantage. A. Business-level strategic initiatives B. Off-balance sheet obligations C. Intangible assets D. Accounting data projections
Intangible assets
When viewed from a balanced-scorecard approach, a strategic objective for a firm is to: A. Balance the firm's investment portfolio in order to minimize risk. B. Take incremental strategic actions to protect the firm from retaliation. C. Integrate internal and external performance data to assess and strengthen the firm's current position. D. Integrate internal departments and processes and flatten the organization.
Integrate internal and external performance data to assess and strengthen the firm's current position.
Under the accounting profitability framework to competitive advantage, comparing return on revenue (ROR) between companies is important because: A. It adjusts for size differences and provides a relative comparison. B. It reflects the firm's stock price. C. It includes the value of the firm's intangible asset base. D. All of these.
It adjusts for size differences and provides a relative comparison.
Which of the following is TRUE concerning the balanced scorecard? A. It is useful when formulating strategy, not when implementing it. B. It does not provide any insight on how to correct a problem once a firm deviates from its goals. C. It is superior to the triple bottom line when it comes to a holistic approach to competitive advantage(s). D. It monitors and reports how balanced a firm's investment portfolio is.
It does not provide any insight on how to correct a problem once a firm deviates from its goals.
Firms use a balanced scorecard for all of the following reasons EXCEPT: A. It links strategic vision to all responsible parties. B. It helps design and plan business processes. C. It encourages the firm to improve its ecological position. D. It aids in organizational learning.
It encourages the firm to improve its ecological position.
Shareholders include individuals and organizations that are the ___________ of a public company. A. Targeted consumers B. Largest patrons C. Legal owners D. Client base
Legal owners
When comparing Exxon Mobil and Liberty Media using the return on revenue metric, __________ had a relative competitive advantage in 2010. A. Neither firms B. ExxonMobil C. Liberty Media D. Both Exxon and Liberty
Liberty Media
As discussed in Chapter 5, the chemical manufacturer FMC Corporation overcame short-term thinking and underperforming business units by adopting a balanced-scorecard approach. All of the following are true about FMC's successful implementation of a balanced scorecard EXCEPT: A. Managers could focus on new-product introductions. B. Managers were able to formulate new strategies. C. Managers could focus on core competencies within each division D. Managers were able to align different perspectives to create a more overall focus.
Managers were able to formulate new strategies.
A firm's stock market valuation is based on historical accounting data and ___________. A. Off-balance sheet obligations B. Balance sheet obligations C. Market expectations for the future D. Managerial expectations for the future
Market expectations for the future
Under the triple-bottom-line framework, being proactive with __________ dimensions makes good business sense. A. Economic B. Non-economic C. Technological D. Operational
Non-economic
To _________ a stock return means to compare the percentage change of a stock price over the course of a certain time period from a common base year. A. Normalize B. Standardize C. Regulate D. Stabilize
Normalize
One of the drawbacks to the accounting profitability approach to measuring competitive advantage is that it does not consider: A. Tangible assets such as land. B. Off-balance sheet items such as pension obligations. C. Profit earned per dollar. D. How the company performed in the past.
Off-balance sheet items such as pension obligations.
A(n) ______________ is the value lost due to choosing to use resources for one alternative over another. A. Opportunity cost B. Alternative loss C. Resource loss D. Opportunity loss
Opportunity cost
The ___________ is related to the stakeholder theory in that it attempts to fulfill obligations to constituencies, including employees, customers, suppliers, and communities. A. Triple bottom line B. Shareholder bottom line C. Balanced bottom line D. Integrative bottom line
Triple bottom line
Shareholders are most concerned with _____________ when it comes to measuring a firm's competitive advantage. A. Value creation B. Global expansion C. Return on risk capital D. Market share
Return on risk capital
When crafting strategy under a shareholder value creation context, the goal is to achieve all of the following EXCEPT: A. Provide the highest return to shareholders relative to the competition. B. Minimize shareholder risk relative to the competition. C. Sell more stock than the competition. D. Deliver the greatest stock price appreciation relative to the competition.
Sell more stock than the competition.
Under the shareholder value creation framework, ______________ makes it difficult to evaluate firm performance, particularly in the short term. A. Internal volatility B. Stock market volatility C. Value chain volatility D. Supplier volatility
Stock market volatility
Under the balanced-scorecard framework, management concentrates on all of the following areas when it comes to improving how customers view the firm EXCEPT: A. Service. B. Quality. C. Stock price. D. Cost.
Stock price.
If Microsoft continues to outsell all other rivals in the smartphone industry for the next five years, it will have achieved a: A. Parity advantage. B. Sustained competitive advantage. C. Competitive parity. D. Competitive disadvantage.
Sustained competitive advantage
Under the shareholder value creation approach to measuring competitive advantage, profitability and stock price increases indicate: A. That investors are ignoring macroeconomic factors. B. That the firm is most likely at competitive parity with its rivals. C. That investors will get a poor return on their risk capital. D. That a firm is utilizing effective strategies.
That a firm is utilizing effective strategies.
The fact that in its 2010 annual report, Microsoft outperformed the S&P but underperformed in the NASDAQ over the previous five years indicates all of the following EXCEPT: A. Benchmarks are important to consider in competitive advantage. B. Competitive advantage is defined in relative terms. C. The NASDAQ is not a good indicator of competitive advantage. D. Competitive advantage can be difficult to assess.
The NASDAQ is not a good indicator of competitive advantage.
An assessment tool that takes a multidimensional approach to evaluating a firm's competitive position by utilizing specific questions and performance metrics is: A. The comprehensive scorecard B. The shareholder scorecard C. The balanced scorecard D. The strategic scorecard
The balanced scorecard
When a firm assesses its performance by asking questions such as "How do our customers view us?" and "What core competencies do we need?", it is using which tool? A. The strategy map B. The triple bottom line C. The balanced scorecard D. A PESTEL analysis
The balanced scorecard
When a firm attempts to improve its economic, social, and ecological performance, it is taking a(n) ___________ approach to assessing competitive advantage. A. Economic value creation B. Triple-bottom-line C. Balanced scorecard D. Stakeholder valuation
Triple-bottom-line
Under the economic value creation framework, value can be viewed as: A. How much the product improves along the value chain. B. The firm's book value of the product line. C. The consumer's maximum willingness to pay. D. How important the product is to the firm's overall strategy.
The consumer's maximum willingness to pay.
Using either the accounting profitability or shareholder value creation approach to determine whether Microsoft or Google have competitive advantage(s) is complicated by the fact that: A. The key to their performance is based on intangible assets. B. The technology sector is difficult to evaluate. C. One-dimensional approaches reveal the best information. D. They have no tangible assets.
The key to their performance is based on intangible assets.
Value creation is important to competitive advantage because: A. The product or service that is valued the highest by the firm will deliver competitive advantage(s). B. The product or service that is valued the highest by the customer can charge the highest price. C. The company with the highest future value will have highest profits. D. The company with the highest present value will sustain competitive advantage(s).
The product or service that is valued the highest by the customer can charge the highest price.
A drawback to evaluating competitive advantage under the shareholder valuation perspective is: A. The effectiveness of a firm's strategy cannot be reflected in its stock price. B. It is not as effective as the accounting profitability approach to measuring competitive advantage. C. The psychological mood of investors does not necessarily reflect how effective a firm's strategy actually is. D. It is the only "one-dimensional" framework that does not compare the firm to its rivals.
The psychological mood of investors does not necessarily reflect how effective a firm's strategy actually is.
The effectiveness of the balanced scorecard is contingent upon all of the following EXCEPT: A. The type of technology used. B. The skills of the managers using it. C. The metrics chosen. D. Asking the right questions.
The type of technology used.
From an economic value created perspective, the volume of a firm's goods or services sold is generally driven by the relationship between ___________ and __________. A. The value created for customers; the price of the good or service B. How value is created; how customers view the firm C. The firm's core competencies; how shareholders view the firm D. The unemployment rate; shareholder value
The value created for customers; the price of the good or service
A drawback to evaluating competitive advantage under the balanced-scorecard perspective is: A. There is little guidance for management as to which metrics to use. B. The balanced scorecard concentrates too much on financial performance. C. It pays little attention to how customers view the company's products. D. The focus is on internal performance as opposed to external performance.
There is little guidance for management as to which metrics to use.
Under the economic value creation framework, producer surplus is important in the quest for competitive advantage because: A. This is the profit that a firm captures when producing and selling a good or service. B. The firm will have enough inventory to meet higher future demands. C. The value surplus can be transferred to the consumer. D. The greater the amount of producer surplus, the higher the book value of the firm.
This is the profit that a firm captures when producing and selling a good or service.
Strategy Highlight 5.1 discusses how Interface, Inc. has a strategic intent to become the world's first fully sustainable company. This is an example of which of the following? A. Triple bottom line B. Shareholder value C. Intangible resources D. Competitive force analysis
Triple bottom line
__________ is measured by a product's performance characteristics and its attributes for which customers are willing to pay. A. Competitive advantage B. Profit potential C. Contribution D. Value
Value
What is one of the challenges of measuring competitive advantage using the economic value creation approach? A. The value placed on a product or service by the consumer changes according to income and preferences. B. It is difficult to measure the economic value created for all products and services across the organization. C. It is challenging to determine the value of a product or service from a customer's perspective. D. All of these.
all of these
____________ is created when a customer is willing to pay more for a good or service than it costs the firm to produce it. A. Economic value B. Product value C. Consumer value D. Economic advantage
economic value
Return on invested capital, return on equity, return on revenue, and _____________ are the profitability metrics that are commonly used by a firm in the quest for competitive advantage. A. Return on surplus B. Return on assets C. Return on value D. Return on production
return on assets
Which of the following is NOT one of the three critical factors used to evaluate economic value creation and competitive advantage? A. Value B. Price C. Stock price D. Cost
stock price