WPC 480 FINAL
Handy Pro, Inc. is a company that manufactures electric tools like drills, screwdrivers, and saws. Which of the following best illustrates a product-oriented vision for Handy Pro?
"To be the pioneering manufacturer of electric tools" best illustrates a product-oriented vision for Handy Pro, Inc. A product-oriented vision defines a business in terms of a good or service provided.
What is true of the social responsibilities of a business?
A firm's ethical responsibilities go beyond its legal responsibilities. They embody the full scope of expectations, norms, and values of its stakeholders. Managers are called upon to do what society deems just and fair.
________ are best described as equity investments by large established firms making in entrepreneurial ventures to gain access to new, and potentially disruptive, technologies.
A governance mechanism that falls under the broad rubric of equity alliances is corporate venture capital (CVC) investments, which are equity investments by established firms in entrepreneurial ventures.
What will hamper a differentiator's ability to achieve a competitive advantage?
A lower value gap will hamper a differentiator's ability to achieve a competitive advantage. A higher value gap enables a differentiator to achieve a competitive advantage, which allows it to charge a premium price, reflecting its higher value creation.
A ________ is best described as any activity a firm pursues to explore and develop new products and processes, new markets, or new ventures.
A strategic initiative is any activity a firm pursues to explore and develop new products and processes, new markets, or new ventures.
Which of the following strategies must a multinational enterprise (MNE) use when it wants to pursue an integration strategy at the business level by attempting to reconcile product and/or service differentiations at low cost?
A transnational strategy is generally used by multinational companies that pursue an integration strategy at the business level by attempting to reconcile product and/or service differentiations at low cost.
Which of the following lists the stages of the industry life cycle in the correct order?
As an industry evolves over time, five distinct stages occur in the following order: introduction, growth, shakeout, maturity, and decline.
Which of the following customer segments as described in the chasm framework make up the mass market?
As described in the chasm framework, the early and late majority make up the mass market.
The Securities and Exchange Commission (SEC) makes all financial reports filed by public companies available electronically via the ________ database.
As part of its disclosure policy, the SEC makes all financial reports filed by public companies available electronically via the EDGAR database. This database contains more than 7 million financial statements, going back several years.
The German multimedia conglomerate Bertelsmann operates in more than 60 countries throughout the world and owns many regional leaders in their specific product categories, including Random House Publishing in the United States. Bertelsmann operates its more than 500 regional media divisions as more or less autonomous profit-and-loss centers. but attempts to share best practices across units; global learning and human resource strategies for executives are coordinated at the network level. Bertelsmann is an example of following a(n)
Bertelsmann follows a transnational strategy. This type of strategy attempts to combine the benefits of localization and standardization strategies by creating a global matrix structure.
How has the administrative and political distance between Canada, Mexico, and the United States been reduced?
Canada and Mexico partner with the United States in the NAFTA, increasing trade in goods and services between the three countries. An administrative and political distance factor that is significant in predicting the amount of trade between two countries include whether they belong to the same regional trading bloc.
________ is best described as cooperation by competitors to achieve a strategic objective.
Co-opetition is a portmanteau describing cooperation by competitors. It is described as cooperation by competitors to achieve a strategic objective.
Which of the following could most likely have prevented the accounting scandals of the early 2000s and the global financial crisis?
Corporate governance is about checks and balances and about asking the tough questions at the right time. The accounting scandals of the early 2000s and the global financial crisis of 2008 and beyond got so out of hand because the enterprises involved did not practice effective corporate governance.
A drawback involved in using cross-border strategic alliances to enter new foreign markets is that
Cross-border strategic alliances have both benefits and risks. While the foreign firm can benefit from local expertise and contacts, it is exposed to the risk that some of its proprietary know-how may be appropriated by the foreign partner.
Why are differentiation and cost-leadership strategies referred to as generic business strategies?
Differentiation and cost-leadership strategies are called generic strategies because they can be used by any organization—manufacturing or service, large or small, for-profit or nonprofit, public or private, U.S. or non-U.S.—in the quest for competitive advantage, independent of industry context.
According to the ________, competitive advantage is the outflow of a firm's ability to modify and leverage its resource base in a way that enables it to gain and sustain competitive advantage in a constantly changing environment.
Dynamic capabilities describe a firm's ability to create, deploy, modify, reconfigure, upgrade, or leverage its resources over time in its quest for competitive advantage.
What is an accurate expression of the economic value created per unit of a product sold?
Economic value creation equals consumer surplus plus firm profit, or the sum of consumer and producer surplus. It can also be expressed as the difference between the consumers' maximum willingness to pay (reservation price) and the firm's cost (V - C). However, the difference between the price charged and the firm's cost is simply producer surplus.
Fantastica Industries, a U.S.-based large conglomerate, competes in the hospitality, education, telecommunications, entertainment, airlines, and chemical industries. It currently operates in about 30 nations, and is planning to expand its portfolio by investing in rapidly developing countries. Which of the following strategies is Fantastica Industries pursuing?
Fantastica Industries is pursuing a product-market diversification strategy. A company that pursues both a product and a geographic diversification strategy simultaneously follows a product-market diversification strategy.
Which of the following corporate strategies did ExxonMobil pursue by acquiring XTO Energy, a natural gas company?
In 2009, ExxonMobil bought XTO Energy, a natural gas company, for $31 billion. This strategic move into natural gas is an example of related diversification.
In Eli Lilly's Office of Alliance Management, who is responsible for providing alliance training and development?
In Eli Lilly's Office of Alliance Management, the alliance manager, positioned within the Office of Alliance Management, serves as an alliance process resource and business integrator between the two alliance partners, and provides alliance training and development, as well as diagnostic tools.
According to the Level-5 leadership pyramid, a manager in Level 1 typically
In the level-5 leadership pyramid, a level 1 manager is a highly capable individual who makes productive contributions through motivation, talent, knowledge, and skills.
Jane is the CEO of a clothing brand, Diva Rule Inc., which has retail stores and production units in five different countries. The firm's shareholders ensure the proper management of Diva Rule Inc. through their appointed board of directors. In this scenario, Diva Rule Inc. is most likely a
In this scenario, Diva Rule Inc. is most likely a multination enterprise (MNE). The MNE is the engine behind globalization—a firm that deploys resources and capabilities in the procurement, production, and distribution of goods and services in at least two countries.
Incumbent firms favor incremental innovation over radical innovation because
Incumbent firms tend to favor incremental innovations that reinforce the existing organizational structure and power distribution while avoiding radical innovation that could disturb the existing power distribution (e.g., between different functional areas, such as R&D and marketing)
Which group is the primary stakeholder for public-stock companies?
Key stakeholders are the shareholders and other suppliers of capital. If shareholders are not satisfied with returns to investment, they will sell the company's stock, leading to depreciation in the firm's market value.
A(n) ________ strategy arises out of the combination of high pressure for local responsiveness and high pressure for cost reductions.
Multinational companies pursuing a transnational strategy attempt to combine the benefits of a localization strategy (high local-responsiveness) with those of a global-standardization strategy (lowest cost position attainable). This strategy arises out of the combination of high pressure for local-responsiveness and high pressure for cost-reductions.
Which of the following is a common drawback of a non-equity alliance?
Non-equity alliances are weak ties between partners, which can result in a lack of trust and commitment.
Which drivers simultaneously increases value while lowering cost?
Quality, economies of scope, customization, innovation, structure, culture, and routines are drivers that simultaneously increase value while lowering cost (used for integration strategies).
Which of the following statements accurately describes social entrepreneurs?
Social entrepreneurs evaluate the performance of their ventures not only by financial metrics but also by ecological and social contribution. They use a triple-bottom-line approach to assess performance.
With reference to the Strategy Highlight 8.2, the Tata Group's corporate strategy is attempting to
Tata's corporate strategy is attempting to integrate different strategic positions, pursued by different strategic business units, each with its own profit and loss responsibility.
The ________ allows the scanning, monitoring, and evaluating of changes and trends in a firm's macro environment.
The PESTEL framework
After trying on a dress, a consumer assesses it to be worth a maximum of $100 and is willing to pay that amount for the dress. However, the dress was priced at $80. What is the amount, $100, referred to as?
The amount, $100, is referred to as the value (V) the consumer attaches to the dress. Value denotes the dollar amount (V) a consumer would attach to a good or service. Value captures a consumer's willingness to pay and is determined by the perceived benefits a good or service provides to the buyer.
Which of the following best explains why a board of directors may grant stock options as part of a compensation package?
The board of directors determines executive compensation packages. To align incentives between shareholders and management, the board may grant stock options as part of the compensation package.
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.
The decision made by the regional head at Boratania will be considered as a business strategy. General managers in strategic business units must answer business strategy questions relating to how to compete in order to achieve superior performance. Within the guidelines received from corporate headquarters, they formulate an appropriate generic business strategy (cost-leadership, differentiation, or integration) in their quest for competitive advantage.
Futura Inc. introduced an automobile that could run completely on electricity for longer periods of time than any other electronic or hybrid automobile. Also, this vehicle was less expensive than the vehicles of competitors. On the downside, it required more repairs than the competition's automobiles. However, the technology of the Futura vehicle improved rapidly, thereby improving its repair record. This example describes
The dynamic process of disruptive innovation begins when a firm, frequently a start-up, introduces a new product based on a new technology to meet existing customer needs. To be a disruptive force, however, this new product or technology has to have additional characteristics: 1. It begins as a low-cost solution to an existing problem. 2. Initially, its performance is inferior to the existing technology, but its rate of technological improvement over time is faster than the rate of performance increases required by different market segments.
Chao is in an interview for a sales job that requires no experience. He is trying to portray himself as a highly enthusiastic, energetic person with high-level communication and interpersonal skills. The interviewer is convinced that Chao should be hired as a salesperson in the company. However, in his resume, Chao had not mentioned his previous work experience as he was fired from that job because he used illegal drugs. Which of the following does this scenario best illustrate?
The scenario best illustrates information asymmetry. Information asymmetries are situations in which one party is more informed than another, because of the possession of private information.
Who appoints the board of directors in a public stock company?
The shareholders of public stock companies appoint a board of directors to represent their interests. The board of directors is the centerpiece of corporate governance in such companies.
How are cumulative learning and experience effects of a company most likely to affect Michael Porter's five forces?
The threat of entry is low when incumbents possess cumulative learning and experience effects.
The board at TriCom Manufacturing Corp. has decided to allocate 20 percent of the company's shares to its workforce, at a discounted price. Apart from being a valued investment, the plan will allow the employees to take personal responsibility for the firm's performance. Which of the following employee incentive schemes does this best illustrate?
This best illustrates employee stock ownership plans. Companies turn employees into shareholders through employee stock ownership plans (ESOPs). These plans allow employees to purchase stock at a discounted rate or use company stock as an investment vehicle for retirement savings.
John Hammergren, the CEO of McKesson, received an annual compensation of $50 million. The compensation was closely tied to the performance of McKesson's stock, which appreciated considerably during his tenure. This situation best exemplifies
This situation best exemplifies the strong relationship between executive compensation and company performance. In some instances, the relationship between executive pay and firm performance is strong; in others it is nonexistent or even negative.
An intended strategy is best described as
Top-level executives design an intended strategy—the outcome of a rational and structured, top-down strategic plan.
Which of the following is an example of an internal transaction cost?
Transaction costs can occur within a firm. Considered internal transaction costs, these include costs pertaining to organizing an economic exchange within a firm—for example, the costs of recruiting and retaining employees, paying salaries and benefits, maintaining a production unit, setting up a shop floor, providing office space and computers, and organizing, monitoring, and supervising work.
Wholesale
Wholesale ________ is a business model in which the manufacturer sets a fixed price on a product, but the retailer is free to set its own price.
A key feature of an oligopoly is that the competing firms
are interdependent. With only a few competitors in the mix, the actions of one firm influence the behaviors of the others.
Which of the following is an implication of low interest rates?
consumer demand
Intangible assets add great value to a firm primarily because the firm's
culture and knowledge take time to develop and are generally difficult to imitate. Competitive advantage is more likely to spring from intangible rather than tangible resources. A firm's brand name, reputation, culture, knowledge, and intellectual property must be built, often over long periods of time.
Social complexity...
describes situations in which different social and business systems interact with one another. Copying the emerging complex social systems is difficult for competitors because neither direct imitation nor substitution is a valid approach.
Pulse Mobiles Inc. is a cell phone manufacturing company. Its latest range of smartphones bears a straight resemblance 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 to replicate the valuable and rare resource of Talkie Gen Inc. A competing firm can succeed in replicating a firm's valuable and rare resource by directly imitating the resource in question (direct imitation) or through working around it to provide a comparable product or service (substitution).
In the aircraft manufacturing industry, at least for large commercial jets, Boeing and Airbus are the only competitors. There is not a significant threat of entry because
entering the aircraft manufacturing industry requires huge capital investments.
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
gained a competitive advantage by pursuing distinct strategic positions. Cost-leadership and differentiation are distinct strategic positions. The key to successful strategy is to combine a set of activities to stake out a unique position within an industry.
Value drivers contribute to a firm's competitive advantage only if
if their increase in value creation (ΔV) exceeds the increase in costs (ΔC). The condition of ΔV > ΔC must be fulfilled if a differentiation strategy is to strengthen a firm's strategic position and thus enhance its competitive advantage.
Diseconomies of scale refer to
increases in cost per unit when output increases.
When applying the five forces model, the first step should ideally be
industry boundaries are drawn by identifying a group of incumbent companies that face more or less the same suppliers and buyers. This group of competitors is likely to be an industry if it also has the same entry barriers and a similar threat from substitutes. In this model, therefore, an industry is defined by commonality and overlap in the five competitive forces that shape competition.
Pure Carat Inc. is a company that sells 24-carat gold biscuits to companies that manufacture jewelry. Since the company operates in an industry where many other suppliers sell standardized products, it can most likely
only achieve competitive parity. Firms in perfect competition have difficulty achieving even a temporary competitive advantage and can achieve only competitive parity.
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. An entrepreneur faces two types of opportunity costs: (1) forgone wages she could be earning if she were employed elsewhere, and (2) the cost of capital she invested in her business, which could instead be invested in, say, the stock market or U.S. Treasury bonds.
Quick Market Inc. is a food supply company that wants to sell its products directly to consumers through mail order instead of going through supermarkets and other stores. However, supermarket chains want to make this transaction either illegal or more difficult for Quick Market. To accomplish this, they are using ________ to influence the political process.
powerful lobbying forces
Stakeholder impact analysis
provides a decision tool with which managers can recognize, prioritize, and address the needs of different stakeholders. This tool helps the firm achieve a competitive advantage while acting as a good corporate citizen.
A firm's ________ relates to its ability to create value for customers (V) while containing the cost to do so (C).
strategic position. Competitive advantage flows to the firm that is able to create as large a gap as possible between the value the firm's product or service generates and the cost required to produce it (V C).
Free Spirit Communications Inc. is a cellular service provider that charges its customers $1 for three hours of talk time. So, if a customer's talk time for a month is 60 hours, the company charges him or her $20 at the end of the month. Which of the following business models does this best illustrate?
the pay-as-you go business model. In the pay-as-you-go business model, the user pays for only the services he or she consumes. The pay-as-you go model is most widely used by utilities providing power and water and cell phone service plans, but is gaining momentum in other areas such as rental cars and cloud computing.
Why do companies use strategic group models?
to reveal performance differences between clusters of firms in the same industry.
Crystal Tech Inc.'s competency in designing and manufacturing efficient microprocessors has made its laptops the most advanced computers in the market. This competency, along with the just-in-time manufacturing system, has enabled Crystal Tech Inc. to increase its profitability by lowering its production costs. Thus, Crystal's competency in designing and manufacturing microprocessors will be considered a(n) ________ resource in the VRIO framework.
valuable resource A resource is valuable if it helps a firm increase the perceived value of its product or service in the eyes of consumers, either by adding attractive features or by lowering price because the resource helps the firm lower its costs.