MGMT 434 test 2

The negative Effect of innovation ride-sharing services like uber and Lyft on traditional taxi cab companies is an example of.

Creative destruction.

The most important value drivers that managers can use to create a competitive advantage are.....

Customer service, Complements Product features.

When a firm does unfavorably compared to similar firms, its said to.

Underperform.

Which two of the following variables can managers primarily manipulate in order to answer the question "how should we compete?"

Value and Cost

Economic Value Created

is the difference between a buyer's willingness to pay for a product or service and the firm's total cost to produce it

Multidimensional Perspective Key questions.

What is the firm's accounting profitability? How much shareholder value does the firm create? How much economic value does the firm generate?

Reservation Price

Your subjective assessment of the benefits derived from owning Firm A's laptop is $1,000 this is the absolute maximum you'd be willing to pay for it.

Profit/Producer Surplus

The difference between the price charged and the cost produce.

Which of the following is an example of innovation

Apple combining smart phone and wristwatch technologies to create the apple watch.

Which of the following are types of innovation.

Architectural Incremental Disruptive Radical

Introducing a new technology to an existing market to better address consumer needs is known as _________ innovation.

Disruptive

A manufacture of electronic components can use its manufacturing machines to produce many different components such as semiconductors, sensors, and capacities, IN this case, the firm benefits from an economy of ____________, reducing overall production costs by finding multiples uses for its components and facilities.

Scope

The _______ determines whether to pursue a specific narrow part of the market or to go after broader market.

Scope of competition

Competitive Advantage

Superior performance relative to other competitors in the same industry or the industry average

Working Capital turnover example.

This is where Apple outperforms Microsoft by a wide margin (36.0 vs. 1.3). For every dollar that Apple puts to work, it realizes a whopping $36.00 of sales; this rate is more than 28 times higher than the conversion rate for Microsoft, which only realizes $1.30 in sales for each dollar invested.

Which of the following are the four steps of the innovation process?

idea, Innovation, invention, and imitation.

As a rule of thumb,

if a firm's ROIC is greater than its cost of capital, it generates value; if it is less than the cost of capital, the firm destroys value

Managers must make strategic tradeoffs involving choices between cost and values because.

Higher value tends to require higher costs.

Market capitalization Example

If a company has 50 million shares outstanding, and each share is traded at $200, the market capitalization is $10 billion (50,000,000 × $200 = $10,000,000,000, or $10 billion)

Cost of goods sold

Indicates how efficiently a company can produce a good

Shareholders

Individuals or organizations that own one or more shares of stock in a public company are the legal owners of public companies.

The ______ identifies how industries tend to develop and change over time.

Industry life cycle.

Alternatives in the make-or-buy continuum include which of the following?

Joint ventures Equity alliances.

Which of the following characteristics change as the industry life cycle progresses?

Number and size of competitors Type and level of innovation Type of customer.

A differentiation strategy is typically associated with ______Pricing

Premium

In a focused cost-leadership strategy, a firm....

Provides low-cost products to a niche market

What capability is required to create superior product features?

R&D

Which of the following are characteristics of the early majority?

Rely on reviews by reputable magazines. Weigh benefits and costs carefully. Strong sense of practicality.

which of the following are among the most commonly used metrics for comparing the performance of different companies?

Return on assets Return on equity Return on invested capital

What are the main types of business diversification?

Single Dominant Related unrelated

The shakeout stage of the industry life cycle is dominated by

The early majority.

The money a firm spends to set up sales website can be considered a_________ cost.

Fixed

What is a major disadvantage of organizing economic activity within firms?

The principal-agent problem

Working capital turnover

The second component of ROIC. Which is the measure how effectively capital is being used to generate revenue.

Long-term contracts (such as licensing and franchising), equity alliances, and joint ventures are examples of which of the following?

Strategic Alliances

__________refers to moving one or more internal value chain activities outside the firms boundaries to other firms in the industry value chain.

Strategic outsourcing.

A firm's strategic profile based on value creation and cost is called its________

Strategic postion.

The two alternatives to vertical integration are which of the following

Taper integration and Strategic outsourcing

How to compete on a business level is defined by the variables value and cost. Together they define the....

The economic values created.

Efficient Market Hypothesis.

The idea that all available information about a firm's past, current state, and expected future performance is embedded in the market price of the firms stock.

A(n) _______ is a situation in which the stock price go a highly diversified firm is valued as less than the sum of their individual business units.

Diversification discount

Which customer segment dominates the market growth stage of the industry life cycle?

Early adopters.

When a firm creates more ________ value than competing firms, its have a competitive advantage.

Economic

_______ are partnerships in which at least one partner takes partial ownership in the other partner.

Equity alliances

Total Invested Capital:

(1) shareholders' equity through the selling of shares to the public, and (2) interest-bearing debt through borrowing from financial institutions and bondholders.

To measure firm-level competitive advantage, a company must.

Estimate the economic value created for all products and services offered by the firm.

Which of the following are strategic options in the decline stage of the industry life cycle?

Exit Harvest Consolidate Maintain

A blanked scorecard approach helps managers balance________ goals.

Financial and strategic.

High-end pen manufacture Mont Blac pursues a differentiation strategy with a__________ scope of competition, pursuing only those who need or want an expensive writing instrument.

Focused.

_____________________ assets are unique assets that have significantly more value in their intended use than in next best use.

Specialized

Which of the following are considered the two basic business-level strategies?

Cost-leadership and Differentiation.

Return on revenue Break down.

1. Cost of goods sold 2. Research and Development 3. Selling, general and administration

Working Capital Turnover Ratio

1. Fixed asset turnover 2. Inventory turnover 3. receivables turnover Each of these metrics is a measure of how effective a particular item on the balance sheet is contributing to revenue.

Return on invested capital (ROIC)

= Net profits/ Invested Capital.

Which of the following scenarios would result in strengthening a firms strategic position?

A firm adds a new product feature that greatly increases the perceived value of the product at a minimal cost to the firm.

According to the efficient-market hypothesis, information about which of the following is embedded in a stock price.

A firms future performance. A firms current state. A firms past.

When competitive advantaged is assed from an analysis of publicly available date, a firm measures its

Accounting Profitability

During the shakeout stage of the industry life cycle, profits degrade for,

All but the most efficient firms

The __________ is a corporate planning tool in which the corporation is viewed as a portfolio of business units.

BCG Boston Consulting Group

When a manufactures of computers starts to process its own computer components, the manufacturer engages in _____________ vertical integration.

Backward

Advantages of vertical integration include which of the following?

Bettering quality Facilitating Scheduling Reducing cost.

The four quadrants of the core competence-market matrix are which of the following?

Building new core competencies to protect and extend current market position. Building new core competencies to creat and compete in markets of the future. Leveraging core competencies to improve current market position. Redeploying and recombining core competencies to compete in markets of the future.

When a firm goes bankrupt, shareholders

Cannot recover their risk capital.

Opportunity cost

Capture the value of the best forgone alternative use of the resources employed.

A tablet manufacture that includes a free stylus with every purchase is using _______ to enhance users experiences and increase the perceived value of its tablets.

Complement

The explosive growth of the Apple iPhone was due in part to the network effects created by.....

Complementary apps

The four strategic options that managers have in the decline stage are: Exit, Harvest, Maintains, or

Consolidate.

If Tom would have paid $1,000 for a new laptop but was able to purchase one for $800, the $200 he saved is considered his.

Consumer Surplus.

An important requirement for increasing economic value creation under a differentiation strategy is to.

Control cost

__________ costs refer to the costs that arise from managing the linked businesses in related-constrained or related-linked diversification scenario.

Coordination

The firms accounting profitability, ability to create shareholder value, and ability to generate economic value tend to be:

Correlated

Which two customer segment make up the largest percentage of the market potential?

Late majority Early majority

______________ and _________________are two types of long-term contracts.

Licensing and Franchising

Stage four and five of the industry value chain involve.

Marketing Sales After-sales service and support.

Identify the stages of the industry life cycle.

Maturity Decline Introduction Growth Shakeout

SG&A Example.

Microsoft ($20 billion) not only outspent Apple ($18.3 billion) in absolute terms in marketing and sales expenses, but its SG&A intensity was more than 3.5 times as high as Apple's. For every $100 earned in revenues Microsoft spent $23.80 on sales and marketing, while Apple spent $6.60.

In a focused differentiation strategy, the competitive scope is _____ than in a traditional differentiation strategy.

Narrower

The widespread availability of complementary apps for the iPhone created ___________ effects that increased the value of the device for its users.

Network

Most firms consider laggards to be.

Not worth the effort of pursuing.

________ refers to the act of outsourcing some of the firms activities outside of the home country to another nation.

Offshoring

Incorporating technological advancements and innovative ideas from outside agencies into a firm's internal research and development efforts is known as ________ innovation.

Open

Which of the following are considered off-balance sheet items?

Pension obligations Operating leases

Rodney is making decisions about his newly formed business. He wants to focus on producing the highest quality product in the market so he can maximize the products value to customers. This will cause his product to have higher costs than others already in the market, but rodney believes customers will pay more for the higher quality product. Rodney choices to use a differentiation business-level strategy is determining his company strategic_______

Position.

After a standard is established in a industry, firms ten to focus more on ______________ innovations.

Process

GE, a producer of high-end medical devices, disrupted itself by.

Producing inexpensive devices targeted at doctors in developing countries.

Which of the following are the types of general diversification strategies

Product Geographic Product-market

Which of the following are ways in which standards can emerge?

Through market Competition By being imposed by government or other agencies.

Why might a firm want to enter into an equity alliance instead of a short or long term contract?

To get insider information about the partners business To facilitate transaction-specific investments To make a credible commitment.

To formulate and appropriate business-level strategy, managers must answer the "who-what-why-and-how" questions of competition. Which of the following would be the appropriate to answer?

What customer needs will we satisfy? How will we satisfy our customers' needs?

Risk capital

Which is the money they provide in return for an equity share, money that they cannot recover if the firm goes bankrupt.

Total Return to shareholders

Which is the return on risk capital, including stock price appreciation plus dividends received over a specific period. This is an external and forward-looking performance metric.

Market Capitalization

captures the total dollar market value of a company total outstanding shares at any given point in time.

Selling, general and Administration.

indicates how much of each dollar that a firm earns in sales is invested in sales, general, and administrative.

The commercialization of an invention by entrepreneurs is called.

innovation

Which of the following allows a firm to redefine a market in its favor?

innovation

The forms of specialized assets include which of the following?

Site Specificity Physical asset specificity Human Asset specificity

The four underlying strategic management concepts that determine the scope of a firm are which of the following?

Core competencies Economics of scale Economics of scope Transaction costs.

A firm that pursues a differentiation strategy will often find that the added expense of offering new or unique product features offsets the increase in perceived value, and profit margins begin to erode. This underscores the importance of ________ control for firms pursuing a differentiation strategy.

Cost

Achieving competitive advantage means maximizing the difference between which of the following?

Cost to produce the good/service. Consumers willingness

Successfully transitioning from one stage of the industry life cycle to the next is referred to as.

Crossing the Chasm

The Ritz-Carlton provides a personalized customer experience based on sophisticated analysis of data gathered about each guest. This focus on ________allows the hotel to increase its perceived value....

Customer serivce

A firms that offers a liberal return policy and free shipping on goods ordered online hopes it increase its perceived value by focusing on.

Customer service.

In the__________ stage of the industry life cycle, falling demands leads to a reduction i market size.

Decline.

Given that compared to the past the importance of intangibles has increased, the importance of the firms book value has________ as a part of a firms total stock market valuation.

Decreased

The global off-shoring market is expected to _________ in the future.

Grow quickly.

The tendency of customers to enter the market in large numbers during the growth stage of the industry life cycle is known as the ________________effect.

Herding

Innovation can

Provide firms with a competitive advantage. Make existing products or businesses obsolete.

The most significant challenge Jet blue has faced in implementing its business strategy is.

Reconciling the trade-offs between cutting costs and providing superior service.

In which stage of the industry life cycle does competition become more intense, facing weaker firms out of the industry?

Shakeout

Choosing a business-level strategy helps to define a firms_____ in a given product market.

Strategic Postion

A _______ is a situation that requires choosing between a cost or value position.

Strategic Trade-off

In competitive advantage a firm's managers must be able to accomplish two critical Task.

Accurately assess the performance of their firm. Compare and benchmark their firm's performance to other competitors in the same industry or against the industry average.

The BCG growth-share matrix requires managers to view their SBUs in terms of relative market _________ and speed of market _____________

Share Growth

A non diversified company focuses on which of the following?

Single market whereas a diversified company competes in several different markets