MGMT 4900 - Quiz 2

Building new core competencies to protect and extend current market position

26) Ancho Corp. is an automobile company whose core competency lies in manufacturing petrol- and diesel based cars. The company realizes that more of its potential customers are switching to electric cars. The R&D department of the company acquires competencies in developing electric cars and launches its first hybrid car, which uses both gas and electricity. In this scenario, Ancho is primarily A. leveraging new core competencies to improve current market position. B. redeploying existing core competencies to compete in future markets. C. unlearning existing core competencies to create and compete in markets of the future. D. building new core competencies to protect and extend current market position.

Taper Integration

28) Fortress International, a large conglomerate, procures a few component parts from external suppliers and also manufactures some of the key raw materials in its own subsidiaries. Aside from this, the company does not solely depend on outside distributors to reach its customers. In fact, it has its own retail stores to distribute its products. In this scenario, which of the following alternatives to vertical integration is Fortress International applying? A. concentric integration B. taper integration C. horizontal integration D. conglomerate integration

Related-constrained

30) Beagle Autos is known for its affordable and reliable brand of consumer vehicles. Because its shareholders expect to see an improved rate of growth in the coming years, Beagle's executives have decided to diversify the company's range of products so that at least 40 percent of the firm's revenue is generated by new business units. However, the company's resources, capabilities, and competencies are limited to producing other forms of motorized vehicles, such as motorcycles and all-terrain vehicles (ATVs). Which type of corporate diversification strategy should Beagle pursue? A. dominant business B. related-constrained C. related-linked D. unrelated

Some of the firm's proprietary know-how may be appropriated by the foreign partner

A drawback involved in using cross-border strategic alliances to enter new foreign markets is that A. the foreign firm will need to make larger investments when compared to entering the new market on its own. B. some of the firm's proprietary know-how may be appropriated by the foreign partner. C. all potential business risks in the new market will have to be faced alone by the foreign firm. D. the shareholder value of the foreign partner will decline drastically.

The supplying firm has no incentive to make any transaction-specific investment to increase performance or quality

A drawback of short-term contracting as an alternative to making a component in-house is that A. it is the most-integrated alternative to performing an activity so the principal company has no control over the agent. B. the supplying firm has no incentive to make any transaction-specific investments to increase performance or quality. C. it fails to allow a long planning period that individual market transactions provide. D. the buying firm cannot demand lower prices due to the lack of a competitive bidding process.

Ability to coordinate highly complex tasks to allow for specialized division of labor

A primary advantage of organizing economic activity within firms is the A. ability to coordinate highly complex tasks to allow for specialized division of labor. B. low administrative costs because of reduced bureaucracy. C. eradication of the principal-agent problem. D. high-powered incentive to work as salaried employees for an existing firm.

Sturdy light was a star that developed into a cash cow

About 20 years ago, Sturdy Light, Inc., produced a sturdy, lightweight backpack in a market that was rapidly growing. Sturdy Light became a leader in this market. Eventually, the backpack market reached the maturity stage and slowed down. However, by this time, Sturdy Light had developed a strong brand name and continued to steadily lead the market. Which of the following describes this scenario? A. Sturdy Light was a star that developed into a cash cow. B. Sturdy Light was a question mark that developed into a star. C. Sturdy Light was a dog that developed into a question mark. D. Sturdy Light was a cash cow that developed into a star.

Entrepreneur who commercialized invention into an innovation

After Jeff Bezos read about how the Internet was growing by 2,000 percent a month, he set out to use the Internet as a new distribution channel and founded Amazon, which is now the world's largest online retailer. This is clearly an example of a(n) A. firm that uses closed innovation. B. entrepreneur who commercialized invention into an innovation. C. business that entered the industry during its maturity D. exception to the long tail business model.

Product diversification

Amazon.com has decided to enter the college bookstore market. The goal of "Amazon Campus" is to offer co-branded university-specific web sites that offer textbooks and paraphernalia, such as logo sweaters and baseball hats. This development shows Amazon's relentless pursuit of: A. geographic diversification. B. product diversification. C. vertical integration. D. horizontal integration.

Which customer segments to target

Anita has been named CEO of a popular sports apparel company. As CEO, she is tasked with setting the firm's corporate strategy. Which of the following decisions is Anita most likely to make? A) whether to pursue a differentiation or cost leadership strategy B) which customer segments to target C) how to achieve the highest levels of customer satisfaction D) what range of products the firm should offer

First-mover advantage

As the inventor of hypertension medication, OneSure Pharmaceuticals (OSP) Inc. was able to reap the benefits of economies of scale due to a large consumer demand for the drug. Even when competitors later developed similar drugs after the expiry of OSP's patents, regular users did not want to switch because they were concerned about possible side effects. Which of the following benefits does this scenario best illustrate? A. first-mover advantages B. social benefits C. network externalities D. fringe benefits

Decline stage

As you have noticed, the demand for flip phones has drastically reduced, and there are only a few consumer electronics companies selling them at extremely low prices. Also, the current buyers of flip phones are mainly categorized under laggards. Which of the following stages of the industry life cycle is the flip phone industry in currently? A. growth stage B. maturity stage C. decline stage D. commercialization stage

Optics should acquire Expert Technology

Ayesha is a strategist for the firm Optiks Inc., which produces high-quality HD movie cameras. This company needs a specific material for a new camera they are developing, which is manufactured in large quantities by a competitor called Expert Technology Inc. However, this material is difficult to trade. Because of this, which of the following is most likely the best strategy for Ayesha to suggest? A) Optiks should acquire Expert Technology. B) Optiks should form a short-term agreement with Expert Technology. C) Optiks should form a long-term agreement with Expert Technology. D) Optiks should enter into co-opetition with Expert Technology.

The firm will have more flexibility in purchasing and comparing prices of goods and services

Banana Computers has decided to procure processing chips required for its laptops from external suppliers instead of manufacturing them in their own facilities. How will this decision affect the firm? A. The firm will be protected against the principal-agent problem. B. The firm's administrative costs will be low because of necessary bureaucracy. C. The firm will have more flexibility in purchasing and comparing prices of goods and services. D. The firm will have high-powered incentives, such as hourly wages and salaries.

Implementing automated burger-making machinery

Best Burger is a major fast food chain. Its managers are motivated to grow the firm in order to increase their market power and change the industry structure in their favor. Which of the following strategies is most associated with their motive for growth? A. employing celebrity spokespeople B. implementing automated burger-making machinery C. purchasing competitors D. increasing executive salaries

Parent-subsidiary relationship

Bulldog Holdings is a U.S.-based consumer electronics company. It owns smaller firms in Japan and Taiwan where most of its cell phone technology is developed and manufactured before being released worldwide. Which of the following alternatives to integration does this best illustrate? A. venture capitalism B. franchising C. joint venture D. parent-subsidiary relationship

Disruptive

Digital photography replacing film photography is an example of which type of innovation? A. Disruptive. B. Incremental. C. Progressive. D. Alternative.

A joint venture

Coastal Pharma and Brainwave Technologies have together invested and created a new organization, InnerView, to focus on developing diagnostic devices. Through this new firm, both companies are attempting to combine their core competencies to innovate and reduce their risks associated with transaction-specific investments. However, the new organization operates independent of Coastal Pharma and Brainwave Technologies. Which of the following alternatives to integration does this scenario best illustrate? A. a joint venture B. a franchisee C. a licensing contract D. a corporate acquisition

It is building new core competencies to protect and extend its current market position

Coca-Cola was primarily known for its core competencies in marketing, bottling, and distributing aerated drinks. However, with the success of Gatorade, Coca-Cola developed competencies in the development and marketing of its own sports drink, Powerade. Which of the following is true of Coca-Cola? A. It is leveraging existing core competencies to improve current market position. B. It is building new core competencies to protect and extend its current market position. C. It is redeploying and recombining existing core competencies to compete in markets of the future. D. It is targeting the chasm between the early adopter and early majority market segment.

Architectural innovation

DigitalHealth Electronics Inc. is a company that builds diagnostic devices. It was the first company to develop a compact MRI scanner by reconfiguring the components of the MRI technology. This smaller and user-friendly version of the huge MRI scanner created demand from small hospitals, nursing homes, and private practice doctors who were earlier dependent on the scanning machines in large hospitals. Which of the following types of innovations does this scenario best illustrate? (study types of innovation) A. disruptive innovation B. incremental innovation C. radical innovation D. architectural innovation

Business model innovation

Dollar Shave Club is an ecommerce start-up that delivers razors to its subscribers by mail. By doing this, Dollar Shave Club is using a(n) _____ to disrupt an existing market. A. innovation ecosystem B. architectural innovation C. business model innovation D. incremental innovation

Related

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

Social entrepreneur

Edna Gomez is the founder of the restaurant chain Good and Green. She ensures that the products in her stores are ethically and responsibly sourced. Most products are therefore 100 percent organic and all packaging is manufactured from recycled material. Also, her company sources ingredients from farms within 100 miles from her locations. Edna's belief is that her restaurants should be able to support the community at large. Which of the following terms best describes Edna Gomez? A. headhunter B. category captain C. social entrepreneur D. trade creditor

Do nothing; the two companies cannot combine without Samm Hardware's explicit consent

Garrett is an executive vice president at Samm Hardware. He researches a proposal by a larger company,Maximum Hardware, to combine the two companies. By analyzing past performance, conducting focus groups, and interviewing Maximum employees, Garrett concludes that Maximum has poor profit margins, sells shoddy merchandise, and treats customers poorly. What actions should Garrett and Samm Hardware take? A. Turn down the acquisition offer and prepare to resist a hostile takeover. B. Attempt a friendly merger and use managerial hubris to improve results at Maximum. C. Welcome the acquisition and use knowledge transfer to impart Sam Hardware's management practices. D. Do nothing; the two companies cannot combine without Samm Hardware's explicit consent.

Product; process

Generally, as the level of _________ innovation declines, the level of _________ innovation increases. A. Product; process B. Process; procedural C. Incremental; drastic D. Efficient; inefficient

It is valued at greater than the sum of individual business units

Greenway Industries is a major multinational conglomerate. Its business units compete in a range of industries, including home appliances, pharmaceuticals, commercial real estate, and plastics manufacturing. Although its largest business unit, which produces kitchen appliances, is among the most profitable in the industry, it generates only 35 percent of the company's revenues. Which of the following is most likely true of Greenway's stock price? A. It is valued at less than the sum of its individual business units. B. It is valued at greater than the sum of individual business units. C. It is valued at the exact sum of individual business units. D. It is consistently lower than the industry average.

By regularly introducing incremental improvements in products

How has Apple been able to sustain its competitive advantage in the smartphone industry? A. by reducing its network effects B. by targeting its new products and services toward laggards C. by driving the price for the end user to zero D. by regularly introducing incremental improvements in its products

crowdsourcing

Threadless allows customers to submit their own designs and to vote on which designs they would like to see printed on a T-shirt. This business uses a ________ technique. A. offshoring B. crowdsourcing C. peer-to-peer D. binge watching

The industry for electric cars will focus more on product innovation, whereas in the MP3 player industry, the focus will be on process innovation.

In developed economies, the electric car industry is in the introduction stage, and the industry for MP3 players is in the shakeout phase. What does this imply? A. The mode of competition in the electric car industry will be based on price, whereas in the MP3 player industry, the mode of competition will be non-price based. B. The industry for electric cars will focus more on product innovation, whereas in the MP3 player industry, the focus will be on process innovation. C. The electric car industry will move to the growth stage, whereas the industry for MP3 players will enter the growth stage next. D. The industry for electric cars will primarily pursue an integration strategy, whereas in the MP3 players industry, the focus will be on differentiation.

As the size of a market expands, a standard signals the market's agreement on a common set of engineering features and design choices

In the context of industrial growth, which of the following statements is true of standards? A. Standards emerge exclusively from bottom-up through competition in the marketplace. B. As the size of a market expands, a standard signals the market's agreement on a common set of engineering features and design choices. C. Standards are exclusively imposed top-down by government or other standard-setting agencies such as the Institute of Electrical and Electronics Engineers. D. After a standard is established in an industry, the basis of competition tends to move away from process innovations toward product innovations.

As the size of the market expands, a standard signals the market's agreement on a common set of engineering features and design choices

In the context of industrial growth, which of the following statements is true of standards? A. Standards emerge exclusively from bottom-up through competition in the marketplace. B. As the size of a market expands, a standard signals the market's agreement on a common set of engineering features and design choices. C. Standards are exclusively imposed top-down by government or other standard-setting agencies such as the Institute of Electrical and Electronics Engineers. D. After a standard is established in an industry, the basis of competition tends to move away from process innovations toward product innovations.

Forward vertical integration

Incline Electronics relied on a large chain of consumer electronics stores to sell its tablet computers, cell phones, and televisions and also to provide customer service and technical support. However, that retailer outsourced its service departments, and customers began to complain that they could not get reliable tech support for Incline products. In response, Incline Electronics decided to set up its own tech support department, and it also began to investigate opening its own brand-based retail stores. What does this scenario best illustrate? A. crowdsourcing B. new product development C. forward vertical integration D. conglomerate diversification

Increased competition from imitators

Lillypad Toys is a manufacturer of educational toys for children. Six months ago, the company's research and development division came up with an idea for a unique touchscreen device that can be used to introduce children to a number of foreign languages. Three months ago, the company produced a working prototype, and last month the company successfully launched its new device on the commercial market. What should Lillypad's managers prepare for next? A. increased competition from imitators B. a prolonged period of uncontested success C. a sharp decline in demand for the product D. a difficult struggle to move from invention to innovation

Principal-agent problem

Managers in a firm hired to improve the firm's profitability and ultimately the shareholders' value will add to the overall costs if they pursue their own self-interests. What does this best illustrate? A. diseconomies of scale B. principal-agent problem C. experience-curve effects D. information asymmetries

Network effects

NextDoor is an instant messaging application for smartphones. New smartphone users find it easier to connect with friends and relatives through this mobile app when compared to other similar instant messaging applications. Hence, it has the largest user base in the industry. Thus, NextDoor app's value has increased primarily due to its A. learning curve effects. B. economies of scale. C. economies of scope. D. network effects.

Related-linked strategy

Nocturnal Products started as a luxury brand for designer apparel. Soon, the company expanded by launching its own line of premium perfumes, watches, bags, and home furnishings. This expansion allowed the businesses under the company to share a few of the common competencies in products, services, technology, and distribution. Which of the following corporate strategies is Nocturnal pursuing in this scenario? A. taper integration strategy B. niche marketing strategy C. related-constrained strategy D. related-linked strategy

While the market share of the company in the beverages industry will be high, the market share in the tobacco industry will be low

Real Goods Inc. is a large conglomerate. The company's beverages strategic business unit (SBU) has been recognized as a cash cow, and its tobacco SBU has been categorized as a dog. Which of the following can be inferred from this scenario? A. While the tobacco SBU operates in a low-growth market, the beverages SBU operates in a high-growth market. B. The management of the company should use the cash inflow from the beverages SBU and invest it in the tobacco SBU. C. While the market share of the company in the beverages industry will be high, the market share in the tobacco industry will be low. D. The tobacco SBU should follow a backward integration strategy, and the beverages SBU should pursue a forward integration strategy.

Related-constrained and related-linked strategies are associated with higher firm performance

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

A dominant-business firm

Royal Motor Corp. generates a major portion of its revenues by manufacturing luxury sports cars. However, the company also derives an insignificant percent of its annual revenues by selling its sports merchandise that includes apparel, shoes, and other accessories under the same brand name. Which of the following terms best describes Royal Motor Corp.? A. a conglomerate B. a subsidiary C. a dominant-business firm D. a single-business firm

Horizontal

Sanibel Autos Inc. merged with its competitor Vroom Autos Inc. This allowed Sanibel Autos to use its technological competencies along with Vroom Autos' marketing capabilities to capture a larger market share than what the two entities individually held. What type of integration does this scenario best illustrate? A. vertical B. technological C. horizontal D. perfect

Horiztonal

Sanibel Autos Inc. merged with its competitor Vroom Autos Inc. This allowed Sanibel Autos to use its technological competencies along with Vroom Autos' marketing capabilities to capture a larger market share than what the two entities individually held. What type of integration does this scenario best illustrate? A. vertical B. technological C. horizontal D. specific

Redeploy and recombine existing core competencies to compete in markets of the future

Skylark Sodas has been a market leader in the soft drink industry for several decades. However, its market research shows that consumer tastes have begun to shift to sugar-free flavored seltzer waters, a product that Skylark is capable of producing with minimal changes to its facilities and production processes. Based on your knowledge of the core competence-market matrix, which diversification strategy should Skylark pursue? A. Leverage existing core competencies to improve current market position. B. Build new core competencies to protect and extend current market position. C. Redeploy and recombine existing core competencies to compete in markets of the future. D. Build new core competencies to create and compete in markets of the future.

TL & Co will share fewer common competencies and resources between its various businesses when compared to Soar Inc.

TL & Co. is following a related-linked diversification strategy, and Soar Inc. is following a related-constrained diversification strategy. How do the two firms differ from each other? A. Soar Inc. generates 70 percent of its revenues from its primary business, while TL & Co. generates only 10 percent of its revenues from its primary business. B. Soar Inc. pursues a backward diversification strategy, while TL & Co. pursues a forward diversification strategy. C. TL & Co. will share fewer common competencies and resources between its various businesses when compared to Soar Inc. D. TL & Co. pursues a differentiation strategy, and Soar Inc. pursues a cost-leadership strategy, to gain a competitive advantage.

Increase

The Martinez Legal Firm (MLF) recently acquired a smaller competitor, Miller and Associates, which specializes in issues not previously covered by MLF, such as land use and intellectual property cases. Given the increase in the firm's size and complexity, it is likely that its internal transaction costs will A. decrease. B. increase. C. become external transaction costs. D. be eliminated.

Invention; innovation

The Wright Brothers creating the airplane is a(n) ______________; Boeing commercializing the airplane is a(n) _____________. A. Breakthrough; invention B. Invention; innovation C. Innovation; invention D. Product; process

Preempt its competitors from buying Waze

The main reason behind Alphabet's decision to acquire the Israeli start-up company Waze for $1 billion was probably to A. preempt its competitors from buying Waze. B. share its capabilities with Waze. C. support start-up companies with venture capital. D. gain access to technology that is alien to it.

Particle Inc. developed a transportation technology that can transport physical materials instantaneously across great distances

Which of the following businesses is most likely to disrupt an existing industry? A. Closer Connex developed an earphone that receives emails and text messages and converts them to voice messages. The first models had poor reception, but they rapidly improved over time. B. Mega Technologies reconfigured the components used in its touchscreen tablets to create a new type of wearable device for use in restaurants and other service industries. C. Particle Inc. developed a teleportation technology that can transport physical materials instantaneously across great distances. D. Altrea added advanced camera technology to its premium line of smartphones so that they would take the highest-quality photos of all phones on the market.

The first mover will be able to reduce costs through economies of scale

Which of the following is a competitive benefit experienced by the first mover firm in an industry? A. The first mover will be able to achieve a less steep learning curve. B. The first mover will be able to reduce the switching costs. C. The first mover will not have to patent its products or technology. D. The first mover will be able to reduce costs through economies of scale.

It provides limited guidance about which metrics to choose

Which of the following is a disadvantage of the balanced-scorecard approach? A. It fails to link the strategic vision to responsible parties within the organization. B. It fails to translate the vision into measurable operational goals. C. It provides limited guidance for designing and planning business processes. D. It provides limited guidance about which metrics to choose.

It impedes scheduling and planning

Which of the following is a drawback of vertical integration? A. It increases the difficulty of securing critical supplies. B. It impedes scheduling and planning. C. It increases the potential of legal repercussions. D. It impedes investments in special assets.

There is a reduction of excess capacity in the market

Which of the following is a potential result of horizontal integration in terms of Porter's five forces model? A. The industry structure becomes less consolidated. B. There is a reduction of excess capacity in the market. C. The industry structure becomes potentially less profitable. D. There is an increase in rivalry among existing firms.

The cost of searching for a contract manufacturer

Which of the following is an example of an external transaction cost? A. the cost of setting up a production unit B. the cost of searching for a contract manufacturer C. the cost of recruiting and retaining employees D. the cost of maintaining plant and machinery

The desire to gain a capability in a new customer market

Which of the following reasons motivated Facebook to acquire Instagram, a photo and video-sharing social media site, for $1 billion? A) the desire to gain a capability in a new customer market B) the need to reduce its level of horizontal integration C) the need to enter a new geographical market D) the desire to pursue an unrelated diversification strategy

It attempts to provide a holistic perspective on firm performance

Which of the following statements is true of the balanced-scorecard? A. It is a more or less a one-dimensional metric of measuring competitive advantages of a firm. B. It is one of the traditional approaches of measuring firm performance. C. Its primary focus is to base a firm's strategic goals entirely on external performance dimensions. D. It attempts to provide a holistic perspective on firm performance.

While the industry for cell phones with holographic keyboards will focus more on product innovation, the tablet industry will focus more on process innovation

While cell phones with holographic keyboards are currently in the introduction stage of the industry life cycle, tablet computers are in the growth stage. In the context of this scenario, which of the following statements is true? A. The industry for cell phones with holographic keyboards will face greater competition than the tablet industry. B. While the industry for cell phones with holographic keyboards will focus more on product innovation, the tablet industry will focus more on process innovation. C. While the industry for cell phones with holographic keyboards can reap the benefits of economies of scale, the tablet industry will experience no such benefits.

It allows the conglomerate to take advantage of strong capital markets in emerging companies

Why is following an unrelated diversification strategy especially advantageous in an emerging economy? A. It allows the conglomerate to overcome institutional weaknesses in emerging economies. B. It allows the conglomerate to form a monopoly in emerging economies. C. It allows the conglomerate to use well-defined legal systems in emerging economies. D. It allows the conglomerate to take advantage of strong capital markets in emerging economies.

Unlike incumbent firms, new entrants do not have formal organizational structures and processes

Why is it easier for new entrants to get involved in radical innovations when compared to incumbent firms? A. Unlike incumbent firms, new entrants do not have to face the high entry barriers, initially. B. New entrants are embedded in an innovation ecosystem, while incumbent firms are not. C. Unlike incumbent firms, new entrants do not have formal organizational structures and processes. D. Incumbent firms do not have the advantages of network effects that new entrants have.

Diversification discount

Win Goods Inc. is a large multinational conglomerate. As a single business unit, the company's stock price is estimated to be $200. However, by adding the actual market stock prices of each of its individual business units, the stock price of the company as one unit would be $300. What is Win Goods experiencing in this scenario? A. diversification discount B. learning-curve effects C. experience-curve effects D. economies of scale

Diversification discount

Win Goods Inc. is a large multinational conglomerate. The company's stock price is $200. However, by adding the estimated market value of each of its individual business units, the stock price of the company would be $300. What is Win Goods experiencing in this scenario? A. diversification discount B. learning-curve effects C. experience-curve effects D. economies of scale

Coordination costs

_____________ 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. Network costs C. Coordination costs D. Sunk costs