mgmt 411 exam quiz questions

Customer service and ________ are two of the value drivers that managers can utilize when trying to improve a firm's differentiation strategic position. A) product uniqueness B) experience curve C) cost of input factors D) economies of scale

A The most salient value drivers that managers have at their disposal when executing a differentiation strategy are product features, customer service, customization, and complements.

Martha received a tip from a close friend who is an executive manager of a publicly traded company called TelAmeriCorp Inc. The manager received some inside information about how to trade TelAmeriCorp stock to get a huge profit. He shared this information with Martha. This scenario is an example of A) information asymmetry. B) adverse selection. C) stakeholder strategy. D) shared value creation.

A This scenario is an example of information asymmetry. Information asymmetry occurs when managers, executives, and board members have access to private information concerning important company developments that outsiders, especially investors, are not privy to. Although possessing insider information is not illegal and indeed is part of an executive's job, what is illegal is acting upon it through trading stocks or passing on the information to others who might do so.

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

A A strategic group is a set of companies that pursue a similar strategy within a specific industry in their quest for competitive advantage.

Bob is the strategic business unit (SBU) CEO in charge of manufacturing cufflinks for men's clothing. While the market he competes in is low growth, Bob's SBU's earnings and cash flow are both ranked at high and stable. When examining Bob's SBU through the Boston Consulting Group (BCG) matrix lens, we can conclude that his SBU would be classified as a A) cash cow. B) dog. C) star. D) question mark.

A Cash cows are SBUs that compete in a low-growth market but hold considerable market share. Their earnings and cash flows are high and stable.

________________ allow(s) a firm to differentiate its products and services from those of its rivals, creating higher value for the customer or offering products and services of comparable value at lower cost. A) Core competencies B) Strengths C) A value chain D) Competition

A Core competencies are the resources and/or strategic advantages of a business, including the combination of pooled knowledge and technical capacities, that allow it to be competitive in the marketplace.

Core competencies are derived from the combination of A) key strategic resources and a firm's capabilities. B) export barriers, trade barriers, and credit barriers faced recently by the company. C) tax policy changes driven by federal programs and R&D grants at the state level. D) knowledge brought in by new graduates and the mentoring they receive from existing employees.

A It takes the combination of a firm's strategic resources and their capabilities in order to build core competencies.

John owns John's Trucking Corporation and is trying to determine if his firm should engage in vertical integration and diversify the range of services his business sells. Before John goes through with these decisions, he'll need to consider what is his A) corporate level strategy. B) business level strategy. C) functional level strategy. D) geographic scope.

A John is trying to make a decision based on the three principles of corporate-level strategy; vertical integration along the industry value chain, diversification of products and services, and geographic scope.

When pursuing a cost-leadership strategy, a business must remember that A) buyers will be reluctant to pay for a product unless the quality is acceptable. B) buyers will be reluctant to pay for a product unless the quality is superior. C) buyers will be reluctant to pay for the product unless it is customized. D) product quality is more important in a broad market than in a narrow one.

A Low-cost leaders still need to offer products and services that have acceptable value to the customer.

According to Porter's Five Forces approach, the overall goal of applying the Five Forces analysis to an industry is to make a judgment about its A) overall attractiveness. B) revenue streams. C) future volatility. D) market share.

A Porters Five Forces is meant to examine the overall attractiveness of an industry vs. looking at specific financial metrics which are relative.

Jill is the CEO of Note's Etc, a stationary manufacturer. She decides to open up a retail store to sell her products directly to consumers instead of just selling to retailers. In order to do this, Jill will need to engage in ________, which is a corporate level, strategy. A) forward vertical integration B) backward vertical integration C) horizontal integration D) differentiation

A Since Jill is moving downstream in her industry value chain and want's to have contact with the end user this example best represents forward vertical integration.

Which of the following is true of business ethics? A) Certain notions such as fairness, honesty, and reciprocity are universal norms. B) Business ethics is an agreed-upon code of conduct in business, based on laws. C) The perception of what is ethical and what is not is similar across different cultures. D) Business ethics needs to be codified into law in order to be followed.

A The principles, norms, and standards of business practice differ to some degree in different cultures around the globe. But a large number of research studies have found that some notions—such as fairness, honesty, and reciprocity—are universal norms.

Which of the following real-world scenarios best exemplifies information asymmetry in a public stock company? A) Based on a tip-off by a Goldman Sachs employee, the Galleon Group sold its holdings in Goldman Sachs' stocks prior to the announcement of missed earnings estimates. B) GE knew that it could create a profitable venture out of producing green products, so it rolled out the Ecomagination strategy. C) Mark Hurd, CEO of HP, was unaware of the sexual-harassment allegations, and the board's demand for him to resign caught him by surprise. D) Goldman Sachs followed through with the Abacus deal despite knowing its shortcomings.

A The real-world scenario that best exemplifies information symmetry in a public stock company is that based on a tip-off by a Goldman Sachs employee, the Galleon Group was able to sell its holdings in Goldman Sachs' stocks prior to the announcement of missed earnings estimates. Insider-trading cases provide an example of egregious exploitation of information asymmetry.

In nearly every case, which of the Five Forces is the most important in determining the relative power structure in an industry? A) No single force is dominant in most every case. B) current competitors C) potential entrants D) past participants

A There is never a single dominating force that reigns supreme in every industry—it's relative.

To help increase and maintain ethical values for future managers, a group of Harvard Business School students developed A) a voluntary MBA oath that explicitly recognizes the role of business in society and its responsibilities beyond shareholders. B) the triple bottom line framework to guide managers ethical decisions. C) an ethical value chain that attempts to promote societal benefits. D) a new way to examine business processes that meet the needs of the community.

A To anchor future managers in professional values and to move management closer to a truly professional status, a group of Harvard Business School students developed an MBA oath.

All of the following are questions that managers should ask before crafting a business- level strategy except A) When should we introduce our product/service in the market? B) What customer needs, wishes, and desires will we satisfy? C) Why do we want to satisfy them? D) Who—which customer segments—will we serve?

A To formulate an appropriate business-level strategy, managers must answer the who, what, why, and how questions of competition: Who are the customer segments we will serve?; What customer needs, wishes, and desires will we satisfy?; Why do we want to satisfy them?; How will we satisfy them?

Which of the following is true of the codes of conduct of an organization? A) They detail how the organization expects an employee to behave and to represent the company in business dealings. B) They are a reiteration of the laws pertaining to business dealings in a corporate environment. C) They are a guide to determine what is lawful and what is unlawful. D) They help the board of directors and the CEO implement shareholder capitalism.

A To go beyond the minimum acceptable standard codified in law, many organizations have explicit codes of conduct. These codes go above and beyond the law in detailing how the organization expects an employee to behave and to represent the company in business dealings. Codes of conduct allow an organization to overcome moral hazards and adverse selections as they attempt to resonate with employees' deeper values of justice, fairness, honesty, integrity, and reciprocity.

In recent years a growing number of U.S. consumers have become more health-conscious about what they eat. According to the PESTEL Framework this trend could best be classified as a ________ trend. A) sociocultural B) healthy eating C) political D) legal

A) SOCIOCULTURAL The socio-cultural factor refers to broad changes in consumer tastes and preferences.

Billy is the CEO of Billy's Kicks, a soccer ball retailer. He decides to purchase the synthetic rubber manufacturing firm so he can create his own soccer balls and sell them, nationally, in his retail stores. In order to do this, Billy will need to engage in ________, which is a corporate level strategy. A) forward vertical integration B) backward vertical integration C) horizontal integration D) differentiation

B Since Billy is moving upstream in his industry value chain and purchasing one of his suppliers, he is engaging in backward vertical integration.

Pete E' Gee sell's Big Dog Choppers, a special type of motorcycle. His business generates roughly 80 percent of his revenues from selling these motorcycles and about 20 percent on motorcycle repair and service. Pete E' Gee would be classified as a ________ firm. A) single business B) dominate business C) related diversification D) unrelated diversification

B A dominant-business firm derives between 70 and 95 percent of its revenues from a single business, but it pursues at least one other business activity that accounts for the remainder of revenue.

One of the reasons that big-box retailers like Home Depot are able to achieve economies of scale is that A) they have both broad and narrow economies of scope. B) they are able to take advantage of physical properties and maximize their scale efficiencies by stocking more merchandise and handling inventory more efficiently. C) they are able to take advantage of market size and spread investment losses over many locations. D) they have been able to protect themselves from the threat of buyer power by increasing input prices.

B Big box retailers like Home Depot are able to reap economies of scale by taking advantage of physical size ("big box"), stock more inventory, and manage it more efficiently.

There are many reasons why firms need to grow. Which of the following reasons is strongly influenced by economies of scale? A) increasing profits B) lowering costs C) reducing risk D) motivating managers

B Firms are motivated to grow in order to lower their cost. A larger firm may benefit from economies of scale, thus driving down average costs as their output increases.

Which of the following is the source of the principal-agent problem in publicly traded companies? A) the law of legal personality Version 1 2 B) the separation of ownership and control C) limited liability for investors D) transferability of investor ownership

B The separation of ownership and control is one of the major advantages of the public stock companies. This benefit, however, is also the source of the principal-agent problem.

When a differentiator charges a similar price as its competitors in the same strategic group but offers more perceived value, it A) loses its competitive advantage. B) gains market share from other firms. C) lowers the economic value created. D) results in diseconomies of scale.

B When a firm is able to offer a differentiated product or service and can control its costs at the same time, it is able to gain market share from other firms by charging a similar price but offering more perceived value.

What do we call the board members who are part of a company's senior management team appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance? A) investors B) outside directors C) inside directors D) auditors

C Inside directors are generally part of the company's senior management team, such as the chief financial officer (CFO) and the chief operating officer (COO). They are appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance.

In a focused cost-leadership strategy, a firm A) caters to the segment of the market that is least cost sensitive. B) provides high-priced products for many different segments of the mass market. C) delivers low-cost products and services to a specific, narrow part of the market. D) focuses on reducing the economic value created to drive down costs.

C A focused cost-leadership strategy is the same as the cost-leadership strategy except with a narrow focus on a niche market.

Which of the following will most likely be considered as an airlines core competency? A) the airline's ability to navigate federal laws just like its competitors B) the airline's ability to partner at the same airports as their competitors C) the airline's ability to make its fleet more fuel efficient than their competitors D) the airline's ability to manufacture planes at a cost that is average in the industry

C Core competencies are unique strengths that are sometimes deeply embedded in a firm and should help that firm creating higher value for their customers.

Decisions relating to "what stages of the industry value chain to participate in" determine a firm's A) level of diversification. B) geographic scope. C) vertical integration. D) competitive strategy.

C The industry value chain describes the transformation of raw materials into finished goods and services along distinct vertical stages. This decision determines the firm's vertical integration.

Susan owns a firm that is considered fully integrated. Which of the following statements below would best describe a firm that is fully integrated? A) Susan's firm is a single-business organization. B) Susan's firm is more than likely a conglomerate. C) Susan's firm is still reliant on certain key suppliers in the industry value chain. D) All of Susan's business activities are conducted within the boundaries of the firm.

D Because Susan's firm is fully integrated, her firm conducts all activities within the boundaries of her firm.

How does availability of complements act as a value driver? A) Complements add value to a product by offering an inferior substitute to it. B) Complements add value to a product by competing with it. Version 1 3 C) Complements add value to a product when they imitate it. D) Complements add value to a product when they are consumed in tandem with it.

D Complements add value to a product or service when they are consumed in tandem. Finding complements, therefore, is an important task for managers in their quest to enhance the value of their offerings.

The question that business-level strategy answers is ________ the firm will compete. A) when B) where C) who D) how

D The question of "how" to compete relates to what relative position a firm will take - namely, differentiation or cost-leadership.

Jordan is president of a medium-sized bank. What can he do to lessen the chance of employees or board members taking part in insider trading? A) forbid managers and executives from having access to private information B) forbid board members from having access to private information C) work with analysts and customer-facing employees to root out information asymmetry D) create a strict code of ethics and explain that inside traders will be fired

D The risk of opportunism on behalf of agents is worsened by information asymmetry: The agents are generally better informed than the principals. Managers, executives, and board members tend to have access to private information concerning important company developments that outsiders, especially investors, are not privy to. Often this informational advantage is based on timing—insiders are the first to learn about important developments before the information is released to the public. Although possessing insider information is not illegal and indeed is part of an executive's job, what is illegal is acting upon it through trading stocks or passing on the information to others who might do so. Insider-trading cases, therefore, provide an example of egregious exploitation of information asymmetry.

Due to the dynamic nature of business competition, a firm's strategic position should remain fixed over time. ⊚ true ⊚ false

FALSE Due to the dynamics of competitive positioning, firms must constantly refine and improve their strategic position over time.

In general, it is short-sighted to acquire companies as a defensive move to prevent rival organizations from gaining access to certain patents, technology, or customer bases. ⊚ true ⊚ false

FALSE Sometimes firms may acquire promising start-ups not only to gain access to a new capability or competency, but also to preempt rivals from doing so. For example, Google bought Motorola's cell phone unit for $12.5 billion in 2011. This was done to gain access to Motorola's valuable patent holdings in mobile technology. Google later sold the cell phone unit to Lenovo, while retaining Motorola's patents.

Differentiation and cost-leadership strategies are only effective in manufacturing industries. ⊚ true ⊚ false

FALSE These two business strategies are called generic strategies because they can be used by any organization—manufacturing or service, large or small, for-profit or nonprofit, public or private, domestic or foreign—in the quest for competitive advantage, independent of industry context.

One of the most challenging aspects of principal—agent problems is that firms have almost no defenses against them. ⊚ true ⊚ false

FALSE To overcome principal-agent problems, firms put several governance mechanisms in place, such as the board of directors.

As a rule of thumb, the stronger the five forces, the higher the industry's profit potential, which causes the industry to become less attractive for competitors. true or false

FALSE As the competitive forces increase in an industry, profit decreases due to lower bargaining power for the competing firm.

Horizontal integration through M&A can help firms strengthen their competitive position by increasing the differentiation of their product and service offerings. ⊚ true ⊚ false

TRUE Horizontal integration can help firms enhance differentiation.

Corporate codes of conduct go beyond what the law requires, imposing higher standards of honesty and fairness. ⊚ true ⊚ false

TRUE To go beyond the minimum acceptable standard codified in law, many organizations have explicit codes of conduct. These codes go above and beyond the law in detailing how the organization expects an employee to behave and to represent the company in business dealings. Codes of conduct allow an organization to overcome moral hazards and adverse selections as they attempt to resonate with employees' deeper values of justice, fairness, honesty, integrity, and reciprocity.

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

TRUE Core competencies emerge when managers skillfully combine tangible resources such as machinery and cash with capabilities such as an efficient company culture.

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

TRUE Resource immobility, or the idea that differences in resources and capabilities are difficult to replicate and can last a long time, is one of the two critical assumptions of the resource-based view of the firm.