MGT 593 Midterm
Mobius Electronics incurs a cost of $350 to produce one unit of a cell phone. The company's management has priced the product at $600 in the market. Considering the technological advancement of the cell phone, customers perceive its value to be around $800. What is the economic value created in this scenario?
$450
Which of the following statements about competitive advantage is true?
Competitive advantage can be assessed by measuring accounting profit, shareholder value, or economic value.
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 Sandburg Real Estate 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.
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.
Mara is a management consultant for a soda manufacturer that wants to expand into health drinks such as green tea and after-workout drinks. Based on what you have read, which of these is sensible advice for Mara to offer her client?
"Carefully consider the entry choices over time before making a decision."
Which of the following scenarios best illustrates bundling?
Fresh Seeds Inc. sells seed packages, in which a person can buy a package of three types of seeds at a discounted price compared to buying the seeds individually.
Which of the following reasons justifies the view that functional managers should be allowed to initiate strategic initiatives based on autonomous actions?
Functional managers are much closer to the final products, services, and customers than corporate- or business-level managers.
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.
Which of the following is a disadvantage of the balanced-scorecard approach?
It provides limited guidance about which metrics to choose.
Which of the following best explains why a blue ocean strategy is difficult to implement?
It requires the reconciliation of fundamentally different strategic positions—differentiation and low cost.
Which of the following is an implication of high employee turnover in a company?
It results in a reduction in the company's intangible-resource stocks.
Which of the following best exemplifies social complexity as an isolating mechanism?
Kristin's Cosmetics attempted to imitate how Monica's Makeup combined its management and product development systems with little success.
Yuki is part of a sales team. He effectively coordinates his tasks with others in the team and willingly contributes to their efforts in achieving the team's objectives. Thus, Yuki is in ________ of the Level-5 leadership pyramid.
Level 2
Trung has been an employee with PureEnergy Inc. for 15 years. He started with an entry-level job, and today he is a manager of an entire division. Over the years, Trung 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 Trung has reached so far?
Level 4
________ are the legal owners of public companies.
Shareholders
While Aros Inc. incurs a cost of $20 for a pair of shoes, Shoes Cult Inc., its competitor, manufactures a pair of shoes at $22. Both the companies are able to sell their shoes for a maximum of $30 per pair. Which of the following statements is true in this scenario?
Shoes Cult has a competitive advantage over Aros.
Why do firms operating in a monopolistically competitive industry have the power to raise the prices of their products or services?
The firms can differentiate their product offerings.
Which of the following is not a limitation of the economic value creation framework?
The framework fails to provide the foundation that will help firms decide between cost-leadership or differentiation strategies.
Which of the following methods of developing a strategy best illustrates scenario planning?
The managers at Lyon Clothing Inc. formulated a strategy that is able to handle small to medium to large increases in the prices of cotton in the future.
Which of the following statements is not true about the five forces in Porter's competitive analysis model?
The stronger the five forces in an industry, the greater the industry's profit potential.
Which of the following statements accurately brings out the difference between economies of scale and learning effects?
While there are no diseconomies to learning, there are diseconomies to scale.
_______ is best described as a measure of how effectively capital is being used by a firm to generate revenue.
Working capital turnover
The U.S. government legitimized claims by thousands of businesses and individuals in the aftermath of the BP oil spill in the Gulf of Mexico, causing the claims to become of great urgency to BP. This best represents the process of
addressing stakeholder concerns
The perfectly competitive industry structure differs from the resource-based model in its view that
all firms have access to the same resources.
Competitive industry structure refers to elements and features common to
all industries.
The management of Five Square Corp. wants to reduce the separation between ownership (by shareholders) and control of the firm (by professional managers). Which of the following practices would best help the company do this?
allowing employees to purchase the stock of the company at a discounted rate
Home Savings, Good Deals, Hank's Store, and King Bargains are all departmental stores that compete for advantage 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 Home Savings, Good Deals, Hank's Store, and King Bargains form a
strategic group.
A ________ is best described as any activity a firm pursues to explore and develop new products and processes, new markets, or new ventures.
strategic initiative
A traditional top-down strategic planning process typically begins with
strategic leaders adjusting a company's vision and mission based on environmental analysis.
What are network effects?
the positive effect that one user of a product or service has on the value of that product or service for other users
In the freemium business model, the
users are not charged for the basic features of a product or service, but the user must pay for premium advanced features or add-ons.
In the context of SWOT analysis, a firm can develop an offensive strategic option primarily by
using its internal strengths to exploit external opportunities.
The pursuit of both differentiation and low cost at the same time in a way that creates a leap in value for both the firm and consumers is called
value innovation.
Which of the following features about a buyer indicates that the buyer has high bargaining power?
when the buyer operates in an industry where products are undifferentiated
In the ________ developed by Michael Porter, competition is not defined narrowly as a firm's closest competitors but rather more broadly to include other factors in an industry like buyers, suppliers, potential new entry of other firms, and the threat of substitutes.
five forces model
A firm pursuing a differentiation strategy as opposed to a low-cost strategy will
focus its research and development on product technologies to add uniqueness.
Stakeholder strategy is an integrative approach to managing a diverse set of stakeholders effectively in order to
gain and sustain competitive advantage.
As it takes less and less time to produce the same output, learning curves usually
go down.
A fragmented industry is made into a consolidated industry through
horizontal mergers and acquisitions.
As a part of strategy formulation, a firm's functional strategy primarily concerns questions relating to
how to implement business strategy.
After a firm has identified its key stakeholders in stakeholder impact analysis, the immediate next step is to
identify stakeholders' interests and claims.
Which of the following is step 3 in the five-step process of stakeholder impact analysis?
identifying the opportunities and threats the stakeholders present
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
A value curve indicates a lack of effectiveness in a firm's strategic profile when it
zigzags.
If a firm's market capitalization is $1 billion and the share price is $50, how many shares outstanding does the firm have? Correct!
20 million
The working capital of a small home-based business is $200,000. The revenues generated account to $600,000, and the profits incurred are $300,000. What would be the company's working capital turnover?
3, that is, $600,000/$200,000
Which of the following describes a peer-to-peer technique?
A company matches an individual with a cleaning service.
Which of the following statements with regard to industry structures is true?
A consolidated industry tends to be more profitable than a fragmented one.
Which of the following statements is true of corporate strategy?
A corporate strategy must be able to create synergies across business units that are quite different.
The ________ is a model that links strategy analysis, strategy formulation, and strategy implementation, which together helps managers plan and implement a strategy that can improve performance and result in competitive advantage.
AFI strategy framework
Which of the following statements is true of accounting data?
Accounting data are historical data and thus backward-looking.
AccuroDisk Inc. manufactures external hard disks for $32 per unit, and the maximum price customers are willing to pay is $47 per unit. TD Storage Inc. is a competitor of AccuroDisk Inc. that produces external hard disks for $37 per unit, and customers are willing to pay a maximum price of $50 per unit. What does this imply?
AccuroDisk creates a greater economic value than TD Storage.
Which of the following statements correctly compares Apple and Microsoft in 2016?
Apple had a higher return on invested capital than Microsoft.
What is strategic leadership?
the executives' use of power and influence to direct the activities of others when pursuing an organization's goals
In 2008, BlackBerry's market cap peaked at $75 billion. By 2017 this valuation had fallen more than 90 percent, to $3.9 billion. BlackBerry fell victim to two important PESTEL factors in its external environment: sociocultural and technological. How did technology contribute to BlackBerry's decline?
BlackBerry failed to change its device into one that could perform multiple tasks effectively.
Which of the following is an example of an organizational value?
Burtell Oil, Inc. increases the inspection of pipelines above the legal requirement to prevent oil spills.
It is April 2018 and Mark is a novice investor who wants to decide between purchasing shares in EagleCorp or Myna Bird Inc. In fiscal year 2017, EagleCorp's return on invested capital (ROIC) was 15 percent, and its cost of capital was 12 percent. During the same period, Myna Bird Inc.'s ROIC was 22 percent and its cost of capital was 25 percent. What does this information tell Mark?
EagleCorp is more likely to create value while Myna Bird Inc. is more likely to destroy value.
EasyOpen Inc. gained a patent for an electronic corkscrew. Soon the company made a huge profit on this device. Recently, however, other firms have produced electronic corkscrews. As a result, EasyOpen lost its competitive advantage. Which of the following would most likely be the reason for this development?
EasyOpen's patent expired after 20 years.
The fixed asset turnover of a company is 8.3. What do you infer from this?
Every dollar spent on the company's fixed assets generates $8.30 of revenue.
What does it mean for a firm to have an 80 percent learning curve?
Every time the cumulative output is doubled, the cost per unit will decline by 20 percent.
Pioneer Pharma Inc. and GH Medicines Corp. are two competing firms in the pharmaceutical industry. While Pioneer Pharma Inc.'s vision is "to be a preeminent drug manufacturer in the industry," GH Medicines Corp.'s vision is "to make good health a reality for everyone around the world." Which of the following is an implication of these different visions?
GH Medicines will be more flexible than Pioneer Pharma when adapting to changing environments.
Which of the following best explains why IBM has been able to maintain its competitive advantage?
IBM successfully transformed itself multiple times in the data information industry over a period of more than 100 years.
Which of the following statements accurately brings out the difference between monopolistic competition and an oligopoly?
In monopolistic competition, many firms compete against each other; in an oligopoly, there are few large firms competing against each other.
Which of the following is an advantage of the balanced-scorecard?
It allows managers to translate a firm's vision into measureable operational goals.
How is a cost-leader protected from threats from powerful suppliers?
It is more able to absorb price increases through accepting lower profit margins.
Marigold Servers, a web services firm, has experienced a 7% decline in revenues in consecutive quarters. In an effort to reduce operating costs, managers reduced the customer service staff from 12 employees to 6. Management also enlisted the remaining employees to help produce a new company vision: to give customers of all budgets a customizable, stress-free web hosting experience. What is wrong with this scenario?
Marigold's organizational structures do not align with the vision.
As the strategic manager of CutRite Scissors, you are tasked with producing a strategy for introducing a new line of premium scissors. Your competitor produces a line of similar scissors at a cost of $1 and sells them for $12. Because your company has inferior production capabilities, your scissors will cost $3 each to produce. However, your handle is proven to be more comfortable than your competitors'. Assuming you are guaranteed to sell the same number of units as your competitor, which of the following strategies is most likely to achieve a competitive advantage?
Market CutRite scissors as a higher-quality alternative and sell them for $15.
________ is best described as the output range needed to bring down the cost per unit as much as possible, allowing a firm to stake out the lowest-cost position that is achievable through economies of scale.
Minimum efficient scale
Which of the following statements about strategy is not true?
Operational effectiveness and competitive benchmarking should be treated as strategy.
________ are best described as the ethical standards and norms that govern the behavior of individuals within a firm.
Organizational values
The ________ allows the scanning, monitoring, and evaluating of changes and trends in a firm's macro environment.
PESTEL framework
________ describes a process in which the options one faces in a current situation are limited by decisions made in the past.
Path dependence
________ indicates how much a firm benefits from interest-free loans extended by its suppliers and creditors.
Payables turnover
Which of the following statements is true about strategic groups?
Profitability varies between different strategic groups.
Marina manages the supply chain for a company that sells diamond watches. She learns that economists are predicting a moderate to severe recession in the next six to eight months. Based on that information, what action should Marina recommend to the company's owner?
Reduce supply. Customers generally reduce their purchases of luxury items when the economy falters.
After conducting a SWOT analysis, your firm has decided to focus on addressing issues located in the Weaknesses-Opportunities quadrant. Which of the following steps are you most likely to take?
Reorganize the inefficient research and development department to bring innovative products to market more quickly.
________ precisely indicates how much of a firm's sales is converted into profits.
Return on revenue
Which of the following statements accurately brings out the difference between top-down strategic planning and scenario planning?
Scenario planning helps create strategic plans that are more flexible, and thus more effective, than those created through the more static strategic planning approach.
While industry forces have been favorable for a long time in the U.S. automotive industry, recent dynamics have lowered the profit potential of competing in this industry and thus reduced its attractiveness. The continued success of Tesla Motors in the industry will depend on other firm and industry factors. Which of the following represents one such factor that directly affects Tesla Motors?
Since suppliers of its key sources are few, the bargaining power of suppliers is high.
Smart Feet Inc. produces shoes that are better quality and cost more to make than the shoes of its competitors. Smart Feet realizes that there will be a large difference between the cost to produce the shoes and the consumer's willingness to pay for them. Even so, Smart Feet decides to charge the same price as its competitors. Which of the following will most likely be the result of this action?
Smart Feet will gain market share.
Both Bison Autos and Sparrow Inc. incur a cost of $9,000 to manufacture a vehicle. However, the economic value created by Sparrow Inc. is more than that created by Bison Autos. What does this indicate?
Sparrow Inc. can charge a premium price on its automobiles.
Keeping in mind the five forces in the airline industry, which of the following best explains the situation in the industry?
Substitutes are readily available in the form of trains and buses, thus reducing the profit potential in the industry.
Which of the following statements accurately brings out the difference between tangible and intangible resources?
Tangible assets can be bought on the open market by anyone with the necessary cash, whereas intangible assets cannot be easily purchased.
The market capitalization of a public company is $5 billion. Each share of the company is traded at $200. What do you infer from this financial data?
The firm's number of outstanding shares is 25 million.
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.
Which of the following statements about product-oriented visions is true?
They tend to force managers to take a myopic view of the landscape
In the context of the resource-based model of competitive advantage, which of the following scenarios best exemplifies resource immobility?
True 3 Inc. has been able to outperform its competitors because the uniqueness of its employee experience is difficult for competitors to replicate.
Beans Inc. operates in a perfectly competitive agricultural industry. Classica Apparel Inc., in contrast, operates in a monopolistically competitive industry. Keeping this information in mind, which of the following statements is true?
While Classica Apparel Inc. will have the power to set the prices for its products, Beans Inc. will have little or no ability to do so.
You are the manager of Impromptu Printing, a leading print shop. Impromptu'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 the most accurate description of stakeholder impact analysis?
a decision tool with which managers can recognize the needs of different stakeholders
brainstorming to identify multiple plausible futures.
a highly capable individual who makes productive contributions through motivation, talent, knowledge, and skills
Which of the following is the best characterization of sociocultural forces?
a society's culture, norms, and values
How does a firm capture its producer surplus for a good or service?
as profit per unit sold
To be effective, firms need to
back up their visions with strategic commitments that are costly and difficult to reverse
Scenario planning typically begins with managers
brainstorming to identify multiple plausible futures.
Coral Think Inc. is a new company in the publishing industry. It has raised sufficient capital from multiple sources. It is planning to use its capital to purchase certain assets. Which of the following assets will be the most difficult for Coral Think Inc. to acquire using its capital?
brand name
T & R Autos Inc. is a large conglomerate that operates in 12 different countries. The corporate executives at the headquarters have decided that the company's objective for the next two years will be to increase its customer equity. Based on this guideline received from the top management team, the product leader of the home appliances division has decided to adopt a cost-leadership strategy in all his 12 units. Thus, the decision made by the product leader best illustrates a ________ strategy.
business
The regional head for Creative Design Inc. in Boratania has decided to sell the company's products directly through company-owned stores because the distribution system in the market is primitive. In six other markets, however, the company will continue to operate through a franchise system. Thus, this decision made by the regional head at Boratania will be considered as a ________ strategy.
business
In an economic context, strategy for producers is primarily about
capturing the economic value created as much as possible.
In the top-down strategic planning approach, all strategic intelligence and decision-making responsibilities rest primarily on the
chief executive officer.
In the five forces model developed by Michael Porter, ________ is not defined narrowly as a firm's closest competitors but rather more broadly to include other factors in an industry like buyers, suppliers, potential new entry of other firms, and the threat of substitutes.
competition
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.
A resource-based view of a firm provides a model that systematically aids in identifying
core competencies.
Merton's Toothpaste 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 Merton's. This case is an example of
core rigidity.
Within corporate social responsibility, ________ essentially reflects the notion of a business voluntarily giving back to society.
corporate citizenship
Strategic leadership pertains to the use of power and influence by ________ to direct the activities of others when pursuing an organization's goals.
corporate executives
While creating its AFI strategy framework, Valdez Consultants decided what markets the firm should compete in. By doing this, what type of strategy did the company devise?
corporate strategy
While creating its AFI strategy framework, the Kowalski Candy Company decided what markets the firm should compete in. By doing this, what type of strategy did the company devise?
corporate strategy
Which of the following competitively important assets is typically excluded from a firm's balance sheet?
customer experience
A new company named Far Reach Inc. entered the radio retail business. In response, two incumbent radio retailers, Smooth Waves and Clear Signal, lowered the cost of their travel alarm radios and long-distance radios. Also, they spent more money to improve these radios. By doing this, Smooth Waves and Clear Signal
decreased industry profit potential.
In a firm's external environment, ________ primarily capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class.
demographic trends
Which of the following is a feature of a monopolistically competitive industry?
differentiated products
A differentiator is least likely to be threatened by increases in input prices due to powerful suppliers when the
differentiator is able to create a significant difference between perceived value and current market prices.
Pulse Mobiles Inc. is a cell phone manufacturing company. Its latest range of smartphones are visually similar to the Y-series range of smartphones from Talkie Gen Inc., in terms of its shape and look-and-feel. Which of the following strategies has Pulse Mobiles Inc. used to replicate the valuable and rare resource of Talkie Gen Inc.?
direct imitation
In the pyramid of corporate social responsibility, ________ responsibilities are the foundational building block.
economic
Industry effects describe the underlying ________ structure of the industry.
economic
By selling a laptop at $1,000 for which consumers are willing to pay up to $1,200, a consumer electronics firm makes a profit of $400 per unit. In this scenario, the amount $600, that is ($1200 - $1000) + $400, is the
economic value created.
Given the industry structure in the automobile business, entering the auto manufacturing industry doesn't seem advisable. Yet Tesla Motors is joining the fray. Rather than attempting to compete head-on in internal combustion engines, Tesla Motors is entering the all-electric car segment, a much less crowded niche in the overall car industry. Which of the following is Tesla most hoping to benefit from in this market niche?
economies of scale
Hewlett-Packard was not able to maintain its competitive advantage because it did not
effectively address the challenges of mobile computing.
The production head at the Omnitone Paint Company would frequently stay back after office hours and experiment with new color combinations even though this was part of the new product development team's job. As a result of these experiments, he came up with two new interior paint colors, foggy morning and mint julep. The new colors proved popular among test groups, and quickly became some of Omnitone's best-selling products. Which of the following strategies does this scenario best illustrate?
emergent strategy
The production head at the canned juice unit of True Candy Inc. would frequently stay back after office hours and experiment with new organic hard candy flavors even though this was part of the new product development team's job. As a result of these experiments, he came up with two new flavors of organic hard candy, raspberry-apricot and strawberry-apple. After rigorous test marketing, which proved that the market would accept the new candy, the product variants were successfully launched. Which of the following strategies does this scenario best illustrate?
emergent strategy
Which of the following is not one of the three interdependent tasks of strategic management?
estimate
Managers use the AFI strategy framework primarily to
explain and predict differences in firm performance.
Managers use the AFI strategy framework to
explain and predict differences in firm performance.
Sun Inc., a vendor, regularly supplies pallets to Octangle Corp. for its shipping business. Therefore, Sun Inc. is Octangle Corp.'s
external stakeholder.
A differentiation strategy works best when a
firm has intangible resources, is able to pass on increases in supplier cost to the customer, and its differentiation appeal creates customer loyalty.
In the context of the resource-based model of competitive advantage, if a successful firm exhibits resource immobility it means that the
firm will have a sustained competitive advantage because of its unique resources that are difficult for others to replicate that are difficult for others to replicate
A firm will fail to create a sustained competitive advantage when the
fit between its internal strengths and the external environment is static.
With the emergence of smartphones, users no longer have to carry a separate music player, a video game, a laptop, or a magazine to keep themselves entertained when traveling. A smartphone is loaded with a variety of applications to satisfy all the customer needs that different industries or products individually satisfied earlier. As a result, the smartphone industry has been posing a threat to a lot of other unrelated industries. What is this phenomenon best known as?
industry convergence
To gain a competitive advantage, Lopez Industries obtained financing and then used this extra capital to produce the same amount of gaskets in a one-month period that it normally produces in a two-month period. Which of the following is the most likely outcome of this endeavor?
inferior results
Kerry the Kangaroo Inc. specializes in producing and selling a stuffed kangaroo named Kerry. Although the stuffed kangaroo has sold well, the clothes that can be bought to dress the kangaroo have not sold as well as expected. As a result, Kerry the Kangaroo has warehouses full of hats, pants, sweaters, and shoes to dress Kerry. This firm used a ________ to determine how much of its capital is tied up in these accessory items.
inventory turnover
Green Jeans, Inc. had a mission to become the leading producer of environmentally friendly blue jeans, an emerging and in-demand category in the apparel industry. Its strategy involved leveraging a network of organic cotton farmers and suppliers of environmentally responsible synthetic materials to create a product that is durable, attractive, affordable, and 100% recyclable. However, because it did not upgrade its outdated production facilities, Green Jeans could not assemble its products at a low-enough cost to offer the jeans at a price that was attractive to customers. Green Jeans' strategy failed because
it was not backed up with strategic commitments.
Heartbeat Industries has recently introduced a new production method that will make the production of their medical devices more cost-effective. Which of the following will most likely be the result of this innovation?
jumps to a steeper learning curve
When a firm combines experience based learning and process innovation, the firm
jumps to a steeper learning curve.
Competitive advantage goes to the firm that achieves the
largest economic value created.
The minimum wage in the country of New Morland is $8 an hour. Odion, a restaurant in New Morland's capital city, pays its servers $8 per hour. However, the management of the restaurant feels that this amount is excessive for workers whose only job is to clear tables. By continuing to adhere to the rules set by the government of New Morland, which of the following responsibilities is Odion satisfying?
legal responsibilities
Salubre Pharmaceuticals invested $3.4 billion dollars to develop a new drug for individuals with diabetes. After Salubre receives FDA approval of the drug, its marginal cost to produce the drug for market will be
low
Both BioThink Inc. and GD Pharma Inc. have discovered similar vaccines to prevent cancer. While GD Pharma's vaccine sells at $100 per unit, BioThink sells its vaccine at $90 per unit. This price differentiation has mainly been attributed to the companies' capital decisions. While BioThink used its retained earnings to develop the vaccine, GD Pharma borrowed funds from banks to develop the vaccine. Thus, GD Pharma pays a higher interest on its capital, which makes it necessary to price its vaccine higher. Thus, the key driver for BioThink's competitive advantage is
low-cost input factors.
In knowledge-intensive industries, the marginal costs after initial invention are
low.
An industry has many firms that compete in it. While products between competitors tend to be similar, they are by no means identical. As a consequence, managers selling a product with unique features tend to have some ability to raise prices. This type of industry is an example of
monopolistic competition.
Curry Rush is a premium Asian restaurant chain that differentiates itself from a large number of competitors by providing exclusively organic Vietnamese cuisine. It has some pricing power because it provides differentiated products and therefore, has some entry barriers in place. In this scenario, Curry Rush is most likely operating in a(n)
monopolistically competitive industry.
Combining economies of learning with the existing production technology allows a firm to
move down a given learning curve.
The primary goal of a firm pursuing a blue ocean strategy should be to
offer a differentiated product or service at a low cost.
Three large firms dominate the telecommunication industry of United Canava: AD Telecom Inc., Mystic Telecom Corp., and Total Talk 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
Genevieve is a recent fashion graduate. She started her own apparel store with an investment of $300,000. In the first year she made a profit of $60,000. If she had taken up a job as a fashion editor for a magazine, she would have earned $50,000 as salary per year. Also, she could have invested her capital, $300,000, in treasury bonds and earned an interest of $12,000. Thus, the amount $62,000 ($50,000 + $12,000) would be Genevieve's
opportunity cost.
VRD Systems Inc. took many decades to build its core competencies, and these competencies were based primarily on the decisions made by the company's top management in the past. This process is called
path dependence.
The society and the shareholders just expect, and do not mandatorily require, a firm to
pay its workers more than the minimum living wage.
A firm's business strategy can lead to a competitive advantage if it allows the firm to
perform different activities than its rivals.
Which of the following responsibilities results from a society's mere expectations of a business and not because the society and the shareholders mandatorily require the business to demonstrate it?
philanthropic responsibilities
In a generic value chain, a firm's after-sales service will be referred to as its ________.
primary activity
To reduce the amount of time it takes to apply packaging to its finished products, North Star Foods is implementing new equipment at its production plants. By doing this, North Star is addressing a ________ in the value chain analysis.
primary activity
Pink Couture Inc. and Pink Blush Inc. are two companies in the apparel industry. While Pink Couture Inc. focuses on providing unique product features and superior customer service, Pink Blush Inc. focuses on low prices and minimal customer service. Both companies have been able to gain a competitive advantage. This is most likely because the companies have
pursued distinct strategic positions.
The "Gold Crisps" potato wafers manufactured by True Foods Inc. have been the highest selling wafers in the market. Though the market for wafers is flooded with competitors, True Foods Inc. has been able to maintain its market position for a long time. This is mainly attributed to the unique taste of the wafers that comes from the unique natural flavoring used by the company. This competency of True Foods Inc. will be considered as a(n) ________ resource in the VRIO framework.
rare
Polygon sells its e-book readers at the cost price of $15 each. However, the company makes its profits when users have to download or buy books online. Which of the following business models is Polygon implementing?
razor-razor-blade
Which of the following resources is a firm's resource stock?
reputation for quality
Although True Ion Inc. and One Electro Inc. operate in the same consumer electronic industry, True Ion Inc. has better sales and brand equity. This is attributed to True Ion Inc.'s commitment to innovation. The company has adequate financial and human capital to invest in research and development, an area in which One Electro Inc. lacks. In this scenario, which of the following critical assumptions of the resource-based view of a firm has been illustrated?
resource heterogeneity
Brain Boost Inc. is a leading educational toy company. Competitors across the globe have failed to imitate Brain Boost's production models, supply chain systems, knowledge systems, and culture. These attributes have remained unique to Brain Boost 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
As the legal owners, ________ have the most legitimate claim on a company's profits.
shareholders
Dynamic capabilities are especially relevant for surviving and competing in markets that
shift quickly.
Dynamic capabilities are essential for moving beyond a(n) ________ advantage.
short-lived
Top-down strategic planning as an approach to the strategic management process will be most effective when the
size of the firm is large.
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 said to be
socially complex.
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
As the CEO of a conglomerate, Juana Mark exhibited her strong commitment toward the company's core value that customers' well-being is more important than profit when she decided to liquidate the company's tobacco subsidiary. The tobacco brand sold by her company was a major revenue earner in lesser-developed nations. However, Juana believed that her company had to be responsible toward society. In this scenario, Juana has demonstrated
strategic leadership.
A firm's ________ relates to its ability to create value for customers (V) while containing the cost to do so (C).
strategic position
Strategic thinking is different from strategic planning in that
strategic thinking includes all types of information sources while strategic planning does not.
When a blue ocean strategy goes bad, a firm has neither a clear differentiation nor a clear cost-leadership profile. This situation is referred to as
stuck in the middle.
Shark Fin Golf Club requires its members to pay a quarterly or an annual fee to use its services. Irrespective of whether they frequently use the services during the payment period or not, members have to pay in advance. Which of the following business models does this best illustrate?
subscription-based
Chat Zone Inc., a telecommunication company, had been drastically losing its market share due to tough competition in the industry. The management hired a reputed consulting firm to advice the company. The experts from the consulting firm pointed out that the company primarily lost out on its competitive advantage due to its tedious internal policies and procedures. These ineffective policies and procedures made the company operations, marketing, and after-sales service inefficient. Chat Zone Inc. can best solve its problem by working on its
support activities.
Patterson Foods Inc. was the first company to start selling energy bars in its country—a product that gained popularity among diverse groups. Soon, other companies started to sell their own brands of energy bars, thereby giving Patterson Foods ample competition. In response, Patterson Foods decided to limit its variety of energy bars to only four. However, it ensured that these four varieties were low in calories and low in cost. With this innovation, Patterson Foods Inc. consistently outperformed its competitors for ten years. In this scenario, Patterson Foods Inc. maintained a ________ through its innovative strategy.
sustainable competitive advantage
Which of the following frameworks used to measure competitive advantage relies on both an internal and an external view of a firm?
the balanced-scorecard model
Gene Craft Inc. is the market leader in the pharmaceutical industry. Though most of its resources are common to those of its competitors, a few rare resources have helped the company gain and sustain a competitive advantage. Which of the following assets of Gene Craft Inc. is most likely to be considered a rare resource that is best contributing to its competitive advantage?
the company's chemical patents
Visionary companies are able to outperform their competitors because
they provide more aspirational visions.
The internet service provider industry in the country of Megalopolis 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.
The telecom industry in the country of New Taria 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 telecom industry, the
threat of new entrants is most likely low.
Bubble Buddy is a company that manufactures hot tubs. Which of the following best illustrates a product-oriented vision for Bubble Buddy?
to be the pioneering manufacturer of hot tubs
The Founder of Teach for America, Wendy Kopp, wants to make teaching an attractive option for promising young professionals. Identify the phrase that represents the vision she developed for Teach for America
to give all children in the United States the opportunity to attain an excellent education
During strategy implementation, managers primarily focus on deciding the
type of corporate governance that is most effective and ways in which it can put the formulated strategy into practice.
When parts of a firm's intended strategy fall by the wayside due to unpredictable events, it turns into a(n) ________ strategy.
unrealized
Molly Hue Apparels Inc. (MHA) had been outsourcing its production to less-developed countries in order to reduce its cost of production. With the emergence of its competitor, Hova Inc., MHA lost its competitive advantage. Hova had its production units in its home country that allowed the company to bring out the latest trends to the market earlier than MHA. Also, MHA frequently suffered due to political instability and lack of intellectual property laws in the outsourced countries. Thus, parts of MHA's strategies became obsolete and it had to relocate its production. What are such obsolete strategies referred to as in the planned emergence model?
unrealized strategy
The CEO of Mabel Automobiles was the child of parents who had difficulty making enough money to support their family. As a result, he and his siblings did not have access to many advantages that children from wealthier families had. This CEO, therefore, emphasized making affordable, low-maintenance vehicles that could be bought by low-income households. Which of the following does this example demonstrate?
upper-echelons theory
