MGT 491- exam 1
Which of the following statements is true of the social responsibilities of a business?
A firm's ethical responsibilities go beyond its legal responsibilities.
As manager of a major producer of automobile airbags, you have recently introduced the following vision statement: to protect the health of every driver and passenger. How can you ensure that your employees feel invested in and inspired by the firm's vision?
Ask employees for feedback on the vision statement and revise based on their input.
Nuke It is a major manufacturer of microwave ovens. Which of the following statements will best inspire the organization with a shared vision for Nuke It?
At Nuke It, employees at all levels are motivated to make the best microwave ovens on the market.
Why is it better for firms to keep their vision statements customer-oriented rather than product-oriented?
Customer-oriented visions tend to be more flexible when adapting to changing environments.
Pam owns Discount Auto Zone, a company that got its start making auto parts related for hybrid vehicles, but her firm has had difficulty establishing itself as a maker of parts for the more profitable internal combustion engine. What is most likely contributing to Discount Auto Zone's problem in this area?
Entry barriers usually protect the incumbent players in a profitable industry.
Which of the following statements is true about strategic groups?
Profitability varies between different strategic groups.
Asher has been tasked with formulating the business strategy for Calm Cosmetics' new line of lipsticks. Which of the following ideas would Ida be likely to include in her proposal?
Promote the lipsticks as the longest-lasting on the market.
In an industry, the threat of entry is high when
capital requirements are low.
Assume a firm's resources and capabilities are costly to imitate. This is because rival companies do not clearly understand the relationship between the resources and capabilities controlled by the firm. In this case, the firm's competitive advantage is protected against imitation by
casual ambiguity
A firm that achieves superior performance relative to other firms in the same industry or the industry average has a(n)
competitive advantage
What part of the AFI strategy framework does the question " How does the firm make money?" relate to?
competitive advantage, firm performance, and business models
Firms that can employ and establish _________________, are more likely to protect their competitive advantage from being copied and/or eroding away.
isolating mechanisms
Core competencies are derived from the combination of
key strategic resources and a firm's capabilities.
Although eHook Inc. and eFury Inc. operate in the same consumer electronic industry, eHook Inc. has better sales and brand equity. This is attributed to eHook Inc.'s commitment to innovation. The company has adequate financial and human capital to invest in research and development, an area in which eFuryInc. lags behind. In this scenario, which of the following critical assumptions of the resource-based view of a firm has been illustrated?
resource heterogeneity
Toyago Inc. is a leading educational toy company. Competitors across the globe have failed to imitate Toyago's production models, supply chain systems, knowledge systems, and culture. These attributes have remained unique to Toyago Inc. for a long time. Which of the following assumptions of the resource-based model of competitive advantage does this scenario best illustrate?
resource immobility
Which of the following statements with regard to industry structures is true?
A consolidated industry tends to be more profitable than a fragmented one.
While implementing strategic group mapping for the U.S. domestic airline industry, two strategic groups become apparent: low-cost, point-to-point airlines (Virgin Atlantic, Alaska Airlines, JetBlue, and Southwest Airlines) versus differentiated airlines using a hub-and-spoke system (American, Delta, and United). Which of the following statements is true about these two strategic groups?
Competitive rivalry between Virgin Atlantic and JetBlue is likely to be higher than that between American and Southwest Airlines.
Managers at SunTrustUs Properties are surprised to hear that interest rates are likely to remain low for the next six months. Which of the following is an implication of low interest rates?
Consumer demand will increase.
Have A Seat Furniture has seen its profit margins shrink over the past several years as increased competition has driven down furniture prices. You have been tasked with improving the company's margins. Which of the following approaches makes the most sense within the context of strategic activity systems?
Install modern manufacturing equipment to improve efficiency.
Which of the following methods of developing a strategy best illustrates scenario planning?
The managers at North Clothing Inc. formulated a strategy that can handle small to medium to large increases in the prices of cotton in the future.
Which of the following is likely to happen due to horizontal mergers between competitors such as Delta and Northwest airlines?
The overall industry profitability will increase.
Wheat and Steak is a restaurant located inside a five-star hotel. It caters mainly to customers who are concerned about quality dining rather than the prices. In this scenario, which of the following will be a part of Wheat and Steak's strategic group?
a premium rooftop restaurant in the same city
In the context of SWOT analysis, which of the following best exemplifies a firm's external opportunity?
an increase in its customers' disposable income
Organizational values help individuals make choices that are
both ethical and effective in advancing a company's goals.
Organizational and managerial skills that find their expression in a company's structure, routines, and culture are referred to as
capabilities
Samsung and Google cooperate as complementors to compete against Apple's strong position in the mobile device industry, while at the same time Samsung and Google are increasingly becoming competitive with one another. This scenario best illustrates the process of
co-opetition.
Industrial Drills, a company that manufactures industrial tools, incurs higher costs because of its refusal to outsource its manufacturing to countries where labor costs are lower. This reflects Industrial Drills' ________ responsibility.
ethical
Organizational core values are the ________ that govern the behavior of individuals within a firm or organization.
ethical standards and norms
Strategic commitments are actions that are
long-term oriented
According to the value chain analysis, which of the following is a primary activity?
marketing and sales
Nye Studios is a large production company that controls a major portion of the television industry's market share along with two other firms. Despite its competitiveness with the two other firms, it is influenced by their actions and often has to consider their strategic actions before acting on its own. In this scenario, Nye Studios is most likely functioning in a(n) ________ industry.
oligopoliostic
Competitive rivalry based solely on ________ is destructive to firms as it transfers most of the value created in the industry to the customers.
price-cutting
Who among the following is responsible for making business strategies in a large conglomerate?
the general managers of individual business units
Tommy, a manager, is writing an analysis of his employer's current and possible future revenues. Which of the following could he identify as an economic factor in his firm's external general environment?
the stage of the business cycle that the country is in
Visionary companies are able to outperform their competitors because
they provide more aspirational visions.
The primary objective of Porter's five forces model is to
understand the profit potential of industries.
How are the critical assumptions of the resource-based model of a firm fundamentally different from the way in which a firm is viewed in the perfectly competitive industry structure?
In perfect competition, all firms have access to the same capabilities, whereas in the resource-based model, resource differences exist between firms in the same industry.
Bill Lewis wants to become a business strategy consultant and doesn't understand how emerging consultants get started. Bill should familiarize himself with the ________ framework that outlines the important process when examining the concept of strategic management.
AFI: Analyze-Formulate-Implement
Which of the following fundamental insights was provided by Porter's five forces framework from the completion of the Alta Velocidad Española (AVE)?
Any of the five forces on its own, if sufficiently strong, can extract industry profitability.
Which of the following summarizes the difference between corporate strategy and business strategy?
Corporate strategy deals with where to compete; business strategy deals with how to compete.
Maria and Tom both serve as SBU managers of their divisions. They have both been asked by the CEO to generate two different courses of action for a new product launch. This strategic decision-making technique can be described as
dialectic inquiry.
Alan has been an employee with StartsInc. for 15 years. He started with an entry-level job, and today he is a manager of an entire division. Over the years, Alan has acquired a reputation for doing the right things in the company. Hence, as an efficient leader, he is capable of effectively communicating and motivating his subordinates to work toward the company's vision and mission. According to the Level-5 leadership pyramid, which is the highest level of leadership Alan has reached so far?
Level 4
Toy sales have declined by 10 percent each year, forcing many retailers to exit the industry. To eliminate its remaining competition, Bargain Toys sells all of its product at a loss and relies on its significant cash holdings to cover costs until its competition is forced to exit the industry. Is this an example of a successful strategy? Why or why not?
No. Bargain's strategy and competitive advantage are unsustainable.
In the context of the resource-based model of competitive advantage, which of the following scenarios best exemplifies resource immobility?
PaluniInc. has been able to outperform its competitors because the uniqueness of its employee experience is difficult for competitors to replicate.
Breeze Car Rental follows a cost-leadership strategy. Which of the following firms will most likely be its direct competitor?
Quicker Rental Cars, which follows a low-cost strategy
Years ago, the travel industry was controlled by a few large travel companies that booked holidays, air tickets, bus tickets, and hotels for their customers. However, with the emergence of the internet, smaller travel agencies started mushrooming in the industry and customers started making their own reservations. Which of the following can be inferred from this information?
The travel industry changed from a consolidated structure to a fragmented one.
HomeAgain is a nonprofit organization that works toward rehabilitating the homeless. The credo of the organization is "help us help you." For an organization like HomeAgain, which of the following statements would make an appropriate mission?
We help the homeless gain and sustain financial independence by providing employment opportunities.
You are the manager of Value Printing, a leading print shop. Value's resources include a highly experienced staff and state-of-the-art printing presses. However, your closest competition has started to cut into your market share by offering same-day turnaround on most orders. Although your staffing and equipment is not optimized for rapid production, you decide to start offering a same-day guarantee to your customers. According to the resource-based view, what is wrong with this decision?
You have failed to take into account resource immobility.
Which of the following is an element of good strategy?
a set of coherent actions to implement the firm's guiding policy
HardLine Ltd. is a landline telephone manufacturer whose average return on invested capital is approximately 2 percent. Because demand for landline telephones has declined significantly, the industry average return on invested capital has been negative (-5 percent) for the last few years. In this scenario, HardLine Ltd. has a
competitive advantage
Underperformance relative to other firms in the same industry or the industry average results in a(n) ________ for a firm.
competitive disadvantage
All of the following are external stakeholders except which of the following?
competitors
To help a firm achieve a competitive advantage, each distinct activity performed in the value chain needs to
contribute to the firm's strategic position as either low-cost leader or differentiator.
Frozen Gold is a fast-growing chain of ice cream shops. It has acquired an edge over its competitors through its ability to provide a wide array of unique flavors and a hip atmosphere in stores. This advantage of Frozen Gold best exemplifies a
core competency
Tim's ToothCream has been the leader of dental care products for about 40 years. However, this company relied too long on its competency of reducing cavities without refining or upgrading other aspects of its product. As a result, other personal hygiene companies that began to offer toothpastes with natural whitening agents gained a competitive advantage over Tim's ToothCream. This case is an example of
core ridigity
The ___________________ suggest(s) that because the external environment changes, strategic leaders must choose their current and future investments carefully over time in order to best maintain their firm's competitive advantage.
dynamic capabilities perspective
A strategic group will typically include
firms within the same industry.
After a firm has identified its key stakeholders in stakeholder impact analysis, the immediate next step is to
identify stakeholders' interests and claims.
Due to several black swan events in the past, the
implicit trust relationship between the corporate world and society at large has deteriorated.
Yellow Ride Service is a new entrant to the taxi industry. It has achieved success by staking out a unique position in the industry. How did Yellow Ride Service mostly likely achieve this position?
providing long-distance cab fares at a lower rate than competitors; servicing the same area as competitors
When young start-up entrepreneurs make claims like, "We will be the Uber of X, where X is any other category than ride hailing" or "We will be the Airbnb of Y, where Y is any other category than hospitality services" they are best illustrating which of the following cognitive biases?
representativeness bias
Southwest Airlines (SWA) and Alaska Airlines both compete as point-to-point airlines, but they draw upon different resource bundles. This example best illustrates which of the following assumptions regarding the resource-based view?
resource heterogeneity
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.
sociocultural
If a company wants to gain a competitive advantage in a highly competitive industry, it should ideally
stake out a unique position within the industry.
Sean, a retired CEO, invests capital in a start-up company that creates budgeting software. He mentors the entrepreneur and the employees of the company because he wants the company to perform well and survive in the market. Thus, Vincente is the start-up company's
stakeholder
Makita, DuPont, Builder's Square, and Nut's & Bolts are all hardware stores that compete against each other through everyday low pricing and discounts on bulk purchases. All four stores cater to the needs of highly price-sensitive customers. Thus, together these stores form a ________ group.
strategic
EverMart Inc. is a large company that sells a variety of products such as cosmetics, jewelry, frozen foods, navigation electronics, and airplanes. Apart from this, the company also has a strong presence in the service industry through its chain of dance studios, casinos, and nightclubs. Each of its product divisions operates as an individual business and is responsible for its own profits and losses. Thus, these product divisions under EverMart can be referred to as
strategic business units.
Strategic thinking is different from strategic planning in that
strategic thinking includes all types of information sources while strategic planning does not.
Which of the following was a key motivator for participants in the Occupy movement of 2011?
the issue of income disparity
When the laptop market overtook the desktop market, Blue Tech Inc., a leader in desktop technology, was left at a competitive disadvantage. Later, Blue Tech Inc.'s management channeled all of the company's efforts and revenue to develop an efficient laptop from scratch in less than a year. However, the company failed because Blue Tech Inc.'s models were inferior to the third- and fourth-generation models its competitors were selling. In this scenario, Blue Tech Inc.'s failure can be best attributed to
time compression diseconomies
Rub A Dub is a company that manufactures hot tubs. Which of the following best illustrates a product-oriented vision for Rub A Dub?
to be the pioneering manufacturer of hot tubs
For a firm that operates in an industry where competition is high, which of the following practices will result in inferior performance?
trying to be everything to everybody by combining different competitive strategies
The "diagonal assembly system" was a production system pioneered by the automobile company Gogo. Recently, Gogo was able to sue a competitor and won the suit, thereby receiving $100 million in damages. Which of the following would most likely enable Gogo to win such a lawsuit?
The competitor infringed on Gogo's patent of the "diagonal assembly system."
Siham is a chef who owns three moderately successful restaurants with innovative menus. Based on what you have read, which of these approaches could help her improve her profits?
Use her existing knowledge, equipment, and staff to launch a catering business.
If Modern Furniture LLC obtains an 18 percent return on invested capital, which of the following will help determine if it has a competitive advantage over other pharmaceutical companies?
comparing the return to the return on invested capital obtained by other firms in the industry
A successful strategy details a set of goal-directed actions that managers make to gain and sustain a competitive advantage; in order to create this strategy, managers must focus on three pillars. Which of the following below is not one of these pillars?
execution
ezTV, a consumer electronics company, is the leading manufacturer of high-definition (HD) LED televisions. HD technology has been its core competency and the company holds 60 percent shares in that market. However, ezTV's competitors have now begun to produce more-advanced technologies like 4K Ultra HD and Internet-enabled Smart televisions. According to the dynamic capabilities perspective, what should ezTV do?
ezTV should start working on Ultra HD and Smart television technologies to adapt its core competency to suit the external environment.
In the context of the SWOT matrix, which of the following best exemplifies a firm's internal strength?
increase in a firm's customer loyalty
Dora's Supplies manufactures medical devices. The firm's profitability depends on several variables that are subject to occasional change, including the cost of parts and labor, changes in medical practices, and the price of oil used in both manufacturing and shipping. To account for the potential impact of changes to any of these variables, Dora's Supplies managers should implement a(n) ________ approach.
scenario planning
An observer may conclude that the organizational culture of Zappos, an online retailer for shoes and clothing, might be the basis for its competitive advantage. However, reverse social engineering to crack Zappos' code of success might be much more difficult for a company trying to exactly imitate its strategy. Thus, the source of Zappos competitive advantage is
socially complex
During market testing, Rembrandt Cosmetics realized that the cosmetics industry was dominated by multiple, well-established brands. These brands mostly sold their products in exclusive outlets and departmental stores. Rembrandt Cosmetics management realized that a new entrant would require a different business model to be successful. Thus, Rembrandt Cosmetics started selling its products through direct marketing. In this scenario, Rembrandt Cosmetics accomplished substitution primarily through
strategic equivalence.
We Ensure Inc., an insurance firm, replaced its existing project management software with new software from another supplier. Since the new software has different features and abilities, We Ensure has had to spend $10,000 on training its employees to use it. In this scenario, $10,000 represents We Ensure's
switching costs
Due to economic regression in Jabu, the profitability of the large corporation Honey Comb Inc. was poor. An analysis of the company's business showed that the company could become profitable if it divested a few strategic business units under its banner. From which of the following businesses would Honey Comb Inc. find it most easy to exit?
the e-commerce retail business, where investments on assets are low
Which of the following is an example of a business acting upon an organizational core value?
Emerald Autos reduces engine emissions below federal guidelines to reduce pollution.
Keeping in mind the five forces in the airline industry, which of the following best explains the difficulty airlines have in generating a profit?
Substitutes are readily available in the form of trains, buses, and cars, thus reducing the profit potential in the industry.
A company uses the planned emergence approach in the development of its strategies. Which of the following is an implication of this?
The company's organizational structure and systems will be designed to support bottom-up strategic initiatives.
A "perfectly competitive" industry is one that A) has commodity product offerings. B) usually exhibits low profitability. C) have difficulty achieving even a temporary competitive advantage. D) all answers
all of the answers are correct
Most consumers and investors today want the firms they do business with to look beyond just the profit motive. In fact, they want firms that behave legally and ethically while also giving back to their communities via philanthropic activities. The framework that attempts to reconcile these wants is known as
corporate social responsibility
A new company named Waves Inc. entered the radio retail business, which is a fairly consolidated industry. In response, two large incumbent radio retailers, SMS Radio and TruRadio, lowered the price of their radios. Also, they spent more money to improve their radios and on additional marketing. By doing this, SMS Radio and TruRadio
decreased industry profit potential.
Good Ole Cinemas Inc. and HD Inc. are two companies that own and run movie theaters in malls and other commercial areas. While Good Ole Cinemas Inc. pursues a cost-leadership strategy, HD Inc. adopts a differentiation strategy. Which of the following statements is most likely true of this scenario?
HD and Good Ole Cinemas will not be direct competitors to each other, and their customer segments will overlap very little.
You are the manager in charge of setting the strategy for a new fast-casual restaurant. Which of the following questions would be appropriate for you to ask during the analysis phase of the AFI strategy framework?
How have consumer preferences in the fast-casual restaurant industry changed in the last five years?
The average cost of production for a bottle of vitamin water in the industry is $5 while its average price is $8. Facuet H20 Inc. manufactures the same product for $3 per bottle and sells it for $8 per bottle. Which of the following statements is most likely true of Facuet H20 Inc. in this scenario?
It has a competitive advantage in the industry.
How does causal ambiguity act as an isolating mechanism for organizations?
It makes it difficult for the competitors to understand why a company has been so successful.
Jennifer, a manager at a multinational organization, is trying to carefully scan and link the firm's internal environment to its external environment. The insights from this analysis will allow her to effectively leverage the company's internal strengths to exploit external opportunities, while mitigating internal weaknesses and external threats. In this scenario, which of the following managerial tools is Jennifer employing?
SWOT Analysis
Which of the following provides an example of how a firm's valuable resource can be imitated?
To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of the Leaning Tower of Pisa.
In the top-down strategic planning approach, all strategic intelligence and decision-making responsibilities rest primarily on the
chief executive officer
The CEO of All Star Corp. has decided to enter the markets of emerging nations like China and Brazil. This means that the books, magazines, and websites published under the Chyron Media banner would be made available in these nations. Which of the following strategies does this scenario best illustrate?
corporate strategy
Which of the following is a macroeconomic factor that can affect a firm's strategy?
levels of employment
Three large firms dominate the telecommunication industry of CallsRUs: TeleFone Inc., Cell Comm Corp., and Talk Now Inc. Instead of cutting prices competitively, these firms have resorted to non-price competition through branding and product differentiation. Which of the following industry competitive structures are these companies most likely in?
oligopoly
The management of Venture Manufacturing showed a commitment to ________ by increasing the salary of many female employees to meet its goal of having equal pay for women and men who perform comparable work.
organizational core values
As the CEO of a conglomerate, Sarah Cane exhibited her strong commitment toward the company's core value that customers' well-being is more important than profit when she convinced the board of directors to liquidate the company's pesticide subsidiary. The pesticide brand sold by her company was a major revenue earner in lesser-developed nations, but studies indicate that it is a carcinogen. Eva persuaded the board that the company had to be responsible toward society. In this scenario, Sarah has demonstrated
strategic leadership
Bright Lighting was the first company to start selling LED light bulbs in its country—a product that gained popularity among diverse groups. Soon, other companies started to sell their own brands of LED bulbs, thereby giving Bright Lighting ample competition. In response, Bright Lighting decided to limit its LED light bulbs to outdoor models. However, it ensured that these models were the longest-lasting and lowest-priced on the market. With this innovation, Bright Lighting consistently outperformed its competitors for ten years. In this scenario, Bright Lighting maintained a ________ through its innovative strategy.
sustainable competitive advantage
The internet service provider industry in the country of Wakanda is an industry characterized by the presence of strong network effects, high brand loyalty, high economies of scale, and proprietary technology among incumbent firms. Thus, in the internet service provider industry, the
threat of new entrants is most likely low.
Which of the following best represents a customer-oriented vision statement?
"We provide solutions to professional communication needs."
Which of the following is a primary feature of the five forces model?
It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.
In Strategy Highlight 2.2, what type of strategy did Diana, the Starbucks store manager in southern California, use to develop the new iced beverage for her store?
She used an emergent strategy.