BUS 345 Midterm

# Which of the following shows founder imprinting? A. A company's founder defines and shapes her organization; the founder dies; the influence of the founder on the organization's culture persists for decades. B. A company's founder defines and shapes her organization; the founder dies; the influence of the founder on the organization's culture changes after a few years. C. A company's founder strongly influences her organization; the founder sells the company; the organization's culture changes despite resistance from some employees. D. A company's founder strongly influences her organization; the founder sells the company; the organization's culture changes after it is sold again in five years.

A. A company's founder defines and shapes her organization; the founder dies; the influence of the founder on the organization's culture persists for decades.

# Which of the following is true of business ethics? A. Certain notions such as fairness, honesty, and reciprocity are universal norms. B. Business ethics is an agreed-upon code of conduct in business, based on laws. C. The perception of what is ethical and what is not is similar across different cultures. D. Business ethics needs to be codified into law in order to be followed.

A. Certain notions such as fairness, honesty, and reciprocity are universal norms.

# 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? A. Competitive rivalry between Virgin Atlantic and JetBlue is likely to be higher than that between American and Southwest Airlines. B. American, United, and Delta Airlines will be affected differently by Porter's five competitive forces. C. Alaska Airlines and Delta Airlines will be affected by the external environment in very similar ways. D. Competitive rivalry between Virgin Atlantic and Delta Airlines is likely to be higher than that between American, Delta, and United.

A. Competitive rivalry between Virgin Atlantic and JetBlue is likely to be higher than that between American and Southwest Airlines.

# Earlier, 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? A. The travel industry changed from a consolidated structure to a fragmented one. B. The pricing power of the incumbent firms in the travel industry has increased. C. The bargaining power of buyers in the travel industry has decreased. D. The structure of the travel industry changed from monopolistic competition to an oligopolistic one.

A. The travel industry changed from a consolidated structure to a fragmented one.

# Why is it difficult to imitate the organizational culture of firms like Southwest Airlines and Zappos? A. Their culture reflects complex relationships with their employees, customers, and suppliers. B. They produce products that cannot be copied easily because of their complex designs. C. The employees in the organization themselves are unaware of the factors contributing to their organizational culture. D. It is not commercially viable for other companies to implement the same culture.

A. Their culture reflects complex relationships with their employees, customers, and suppliers.

# Which of the following provides an example of what AFI strategy framework is used for? A. Using AFI, the Gasquet Motor Company was able to implement a strategy that produced high-quality cars more efficiently and thereby reduced costs. B. Using AFI, the Chen Restaurant Group was able to improve employee benefits and thereby increase employee loyalty. C. Using AFI, the Sanchez Clothing Company was able to implement a strategy that allowed them to give more money to charities and thereby gain good press. D. Using AFI, the Richardson Tea Group was able to reduce the pollution it caused while processing tea and thereby receive an award.

A. Using AFI, the Gasquet Motor Company was able to implement a strategy that produced high-quality cars more efficiently and thereby reduced costs.

# Partner compatibility and partner commitment are necessary conditions for successful alliance formation. Partner compatibility captures A. aspects of cultural fit between different firms in an alliance. B. features of the financial health of the different alliance partners. C. the readiness to accept short-term sacrifices to ensure long-term awards. D. the willingness to make available necessary resources.

A. aspects of cultural fit between different firms in an alliance.

# 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 A. entering the aircraft manufacturing industry requires huge capital investments. B. there is expected to be a huge return on investment within this industry. C. there is no credible threat of retaliation from the incumbents. D. entering the aircraft manufacturing industry means violating government policies.

A. entering the aircraft manufacturing industry requires huge capital investments.

# Trader Joe's successfully used a blue ocean strategy by offering lower cost food than Whole Foods for the same market of patrons. By doing this, Trader Joe's was able to A. gain a market share and make up the loss in margin through increased sales. B. create higher value creation and thus generate greater profit margins. C. gain a market share and make up the loss in margin through increased pricing. D. create higher value creation and thus generate greater sales.

A. gain a market share and make up the loss in margin through increased sales.

# Emirates, Etihad Airlines, and Qatar Airways are a threat to U.S. legacy carriers because they offer A. higher quality for lower costs for international routes. B. higher quality for similar costs for U.S domestic routes. C. similar quality for lower costs for international routes. D. similar quality for lower costs for U.S domestic routes.

A. higher quality for lower costs for international routes.

# To maintain its core competency of providing a superior customer experience in the face of explosive growth, Zappos split the organization into 10 standalone units. Which of the following does this scenario best illustrate? A. how an organization accommodates strategy implementation through a flexible organizational structure B. how strategy implementation has an effect on resource allocation and power distribution C. how an organization demonstrates organizational inertia, and therefore sets the stage for the firm's subsequent failure D. how an organization optimizes its organizational structure to the current situation

A. how an organization accommodates strategy implementation through a flexible organizational structure

# Which of the following lists the stages of the industry life cycle in the correct order? A. introduction, growth, shakeout, maturity, and decline B. introduction, shakeout, growth, maturity, and decline C. introduction, growth, maturity, shakeout, and decline D. introduction, shakeout, maturity, growth, and decline

A. introduction, growth, shakeout, maturity, and decline

# Which of the following factors most effectively contributed to the success of Threadless in comparison to other companies with T-shirt designs, including American Eagle, Old Navy, and Urban Outfitters? A. its reliance on crowdsourcing B. its point-to-point business model C. its hub-and-spoke system D. its shorter distances

A. its reliance on crowdsourcing

# 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 A. stuck in the middle. B. buried at the bottom. C. burned at the top. D. caught in the transition.

A. stuck in the middle.

# Which of the following reasons motivated Facebook to acquire Instagram, a photo and video-sharing social media site, for $1 billion in 2012? A. the desire to gain a new capability B. the need to enter a new geographical market C. the need to reduce its level of horizontal integration D. the desire to pursue an unrelated diversification strategy

A. the desire to gain a new capability

# A blue ocean strategy differs from a low-cost strategy in that A. the intent of a blue ocean strategy is not to be the absolute lowest-cost provider because a blue ocean must also increase perceived value. B. the focus of a blue ocean strategy is on lowering the economic value created, whereas a cost-leader focuses on increasing the economic value created. C. economies of scale are more important to a blue ocean strategy, while economies of scope are more important to a cost-leader. D. a blue ocean's research and development focus is on process technologies, and a cost-leader's focus is on product technologies.

A. the intent of a blue ocean strategy is not to be the absolute lowest-cost provider because a blue ocean must also increase perceived value.

# In 2014, Apple had a return on revenue of 29.3 percent, and Microsoft had a return on revenue of 32 percent. Even so, Apple had a higher return on invested capital than Microsoft. Why did this happen? A. Apple had a higher cost structure than Microsoft. B. Apple was able to charge a much higher margin for its products and services than Microsoft. C. Apple spent more on research and development and marketing and sales than Microsoft. D. Apple had a much higher selling, general, and administrative expense that Microsoft.

B. Apple was able to charge a much higher margin for its products and services than Microsoft.

# _____ are best described as unique strengths, embedded deep within a firm, that allow a firm to differentiate its products and services from those of its rivals, creating higher value for the customer or offering products and services of comparable value at lower cost. A. Resource leverages B. Core competencies C. Capital gains D. Equity reserves

B. Core competencies

# Silver Screen Cinemas Inc. and Digi Now Inc. are two companies that own and run movie theaters in malls and other commercial areas. While Silver Screen Cinemas Inc. pursues a cost-leadership strategy, Digi Now Inc. adopts a differentiation strategy. Which of the following statements is most likely true of this scenario? A. Silver Screen Cinemas will charge a premium price for its customers, while Digi Now will implement everyday low pricing. B. Digi Now and Silver Screen Cinemas will not be direct competitors to each other, and their customer segments will overlap very little. C. Digi Now will keep its customer service at an acceptable level, while Silver Screen Cinemas will provide superior customer service. D. Silver Screen Cinemas and Digi Now will use a similar approach to create value for customers by attempting to offer everything to everybody.

B. Digi Now and Silver Screen Cinemas will not be direct competitors to each other, and their customer segments will overlap very little.

# Beats Electronics has been able to outperform Audio-Technica, Bose, JBL, Skullcandy, Sennheiser, and Sony in the high-end, premium headphone market. Which of the following statements accurately explains one of the main reasons for the success of Beat? A. It produced the highest-quality headphones. B. It created a perception that owning its products was cool. C. It emphasized marketing over core competency. D. It focused on sponsoring future athletic superstars.

B. It created a perception that owning its products was cool.

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

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

# Which of the following best explains why a blue ocean strategy is difficult to implement? A. It requires the combination of fundamentally similar strategic positions—differentiation and low cost. B. It requires the reconciliation of fundamentally different strategic positions—differentiation and low cost. C. It requires the combination of fundamentally similar strategic positions—differentiation and strategic trade-offs. D. It requires the reconciliation of fundamentally different strategic positions—differentiation and strategic trade-offs.

B. It requires the reconciliation of fundamentally different strategic positions—differentiation and low cost.

# Which of the following accurately describes how Netflix used innovation to gain a competitive advantage? A. Netflix moved from content development to upgrading its data analytics to provide faster online streaming. B. Netflix applied big data analytics to its user preferences to provide highly personalized viewing recommendations. C. Netflix moved from online streaming to online DVD rentals via the Internet. D. Netflix applied first mover advantages to lock up talent needed to produce original content for DVD rentals and online streaming.

B. Netflix applied big data analytics to its user preferences to provide highly personalized viewing recommendations.

# Which of the following statements accurately brings out the difference between tangible and intangible resources? A. Tangible resources contribute to a company's competitive advantage, whereas intangible resources fail to do the same. B. Tangible assets can be bought on the open market, whereas intangible assets cannot be easily purchased. C. Tangible resources take a longer time to build, whereas intangible assets can be built comparatively easily. D. Tangible assets are difficult to imitate, whereas intangible assets can be easily replicated.

B. Tangible assets can be bought on the open market, whereas intangible assets cannot be easily purchased.

# How do strong ethical values benefit a firm? A. They lay the groundwork for a quick increase of profits and short-term success. B. They serve as the guardrails put in place to keep the company on track when pursuing its mission. C. They provide strong public relations, which can either benefit or hinder competitive advantage. D. They emphasize benefiting employees by significantly increasing profit.

B. They serve as the guardrails put in place to keep the company on track when pursuing its mission.

# W. L. Gore & Associates is organized in such a way that it has no formal job titles, job descriptions, or chains of command. This implies that it has A. a formalized structure. B. a decentralized structure. C. organizational inertia. D. a top-down management style.

B. a decentralized structure.

# Which of the following best illustrates a process innovation as opposed to product innovation? A. a consumer electronics company developing a new generation of tablet computers B. an automobile company using computer-aided design in its production C. a consumer electronics company launching 3-D televisions D. an automobile company commercializing electric cars

B. an automobile company using computer-aided design in its production

# Which quadrant in the core competence-market matrix is the hardest to pursue? A. building new core competencies to protect and extend current market position B. building new core competencies to create and compete in markets of the future C. leveraging core competencies to improve current market position D. redeploying and recombining core competencies to compete in markets of the future

B. building new core competencies to create and compete in markets of the future

# PrimoDisk Inc. holds the highest market share in the low-growth compact disk industry. With the introduction of flash drives, the market for compact disks has reduced. However, PrimoDisk has been able to generate sufficient revenues for the parent company by selling its products in less developed countries. In the Boston Consulting Group (BCG) growth-share matrix, PrimoDisk will be categorized under A. dogs. B. cash cows. C. stars. D. question marks.

B. cash cows.

# One of the ways to foster ethical behavior in employees is to A. avoid codifying organizational culture. B. create a control system that encourages desired values. C. view clients as counter parties to transactions. D. align the vision statement of the organization with its informal culture.

B. create a control system that encourages desired values.

# Home Smart Inc. is a chain of supermarkets that sells its products at higher prices than its competitors. Yet, the supermarket chain has a large customer base due to its wide product portfolio and superior customer service. Which of the following generic business strategies has Home Smart adopted in this scenario? A. cost-leadership B. differentiation C. market penetration D. product diversification

B. differentiation

# Organizational values are the _____ that govern the behavior of individuals within a firm or organization. A. economic measures B. ethical standards and norms C. political principles and policies D. social beliefs and actions

B. ethical standards and norms

# Intangible assets add great value to a firm primarily because the firm's A. reputation and brand equity are accumulated quickly and can be leveraged easily. B. knowledge and culture take time to develop and are generally difficult to imitate. C. tangible assets require a higher degree of capital than its intangible assets. D. capabilities are by nature typically tangible.

B. knowledge and culture take time to develop and are generally difficult to imitate.

# Zappos' 10 core values that define what it means for employees to be working at Zappos also define the _____ of Zappos. A. organizational structure B. organizational culture C. organizational strategy D. organizational controls

B. organizational culture

# True Vibgyor Inc. 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 True Vibgyor implementing? A. subscription-based B. razor-razor-blade C. pay-as-you-go D. direct sales

B. razor-razor-blade

#Which of the following statements accurately explains the primary reason behind Walmart's failure in Germany? A. inability to implement its trademark focused-differentiation strategy in the German market B. significant differences between its U.S. personnel policies and Germany's culture C. Germany's unfamiliarity with retail discount powerhouses D. Metro's hostile takeover of Walmart in Germany

B. significant differences between its U.S. personnel policies and Germany's culture

# The smartphone division of the large consumer electronics company, True Electra Inc., has a significant market share in the fast-growing cell phone market. If the company invests further into this division, it will be able to reap increased cash flows. In the Boston Consulting Group (BCG) growth-share matrix, the smartphone division of True Electra will be categorized under A. question marks. B. stars. C. cash cows. D. dogs.

B. stars.

# The typical four-step innovation process begins with A. the modification and recombination of an existing product or process. B. the presentation of an idea as findings derived from basic research. C. the commercialization of an invention by entrepreneurs. D. a competitor's attempt to imitate an innovation.

B. the presentation of an idea as findings derived from basic research.

# What is horizontal integration? A. the process of merging with a competitor at a different stage of the value chain B. the process of merging with a competitor at the same stage of the value chain C. the process of acquiring a competitor at a higher stage of the value chain D. the process of acquiring a competitor at a lower stage of the value chain

B. the process of merging with a competitor at the same stage of the value chain

# The success of the Pixar-Disney strategic alliance demonstrated that A. Disney was in desperate need of Pixar's graphic display systems. B. the two entities' complementary assets matched. C. it was easier for the alliance partners to reduce the value gap created. D. the companies were effectively managing an unrelated diversification strategy.

B. the two entities' complementary assets matched.

# Visionary companies are able to outperform their competitors because A. their vision statements are more product-oriented. B. they provide more aspirational visions. C. their visions are exclusively financial. D. they isolate internal stakeholders in defining their visions.

B. they provide more aspirational visions.

# Even though many valuable, rare, and inimitable resources were generated at Xerox's Palo Alto Research Center (PARC), the management at Xerox's headquarters failed to gain a competitive advantage by exploiting the breakthroughs in computing software and hardware. What is the most likely implication of this example? A. It is advisable to outsource research and development functions. B. Competitive advantage cannot be gained through unrelated diversification. C. A firm must be effectively organized to capture value. D. It is better to build competitive advantage on tangible assets rather than intangible assets.

C. A firm must be effectively organized to capture value.

# Which of the following statements is NOT true of competitive advantage? A. Competitive advantage is reflected in superior firm performance. B. Competitive advantage is a multifaceted concept. C. Competitive advantage is an absolute measure. D. Competitive advantage has been linked to a firm's triple-bottom-line.

C. Competitive advantage is an absolute measure.

# Why is it better for firms to keep their vision statements customer-oriented rather than product-oriented? A. Customer-oriented visions tend to have a more short-range view of changing environments. B. Customer-oriented visions tend to have a more myopic view of changing environments. C. Customer-oriented visions tend to be more flexible when adapting to changing environments. D. Customer-oriented visions tend to be more stable when dealing with changing environments.

C. Customer-oriented visions tend to be more flexible when adapting to changing environments.

# Which of the following applies to the Strength-Threats quadrant of the SWOT matrix? A. The local fast-food chain Easy Hot Dogs expanded its limited menu to maintain its advantage against stiff competition. B. The local fast-food chain Easy Hot Dogs added a salad bar to maintain its competitive advantage against stiff competition. C. The local fast-food chain Easy Hot Dogs used its wholesome image to maintain its competitive advantage against stiff competition. D. The local fast-food chain Easy Hot Dogs revised its image of being a cheap-food place to being a wholesome family place in order to maintain its competitive advantage against stiff competition.

C. The local fast-food chain Easy Hot Dogs used its wholesome image to maintain its competitive advantage against stiff competition.

# In order to achieve a competitive advantage, a firm should be able to A. increase its payable turnover. B. keep its producer surplus low. C. increase the difference between the value created and the cost to produce it. D. increase the difference between consumer surplus and its profits.

C. increase the difference between the value created and the cost to produce it.

# Which of the following is a major issue at the forefront of CEO compensation in recent years? A. a comparison of the performance of the organization before and after the CEO's tenure B. the performance of the CEO as an employee versus the performance as a board member C. the absolute size of the CEO pay package compared with the pay of the average employee D. a comparison of the compensation of senior management hired during and before the CEO's tenure

C. the absolute size of the CEO pay package compared with the pay of the average employee

# The top management at Parallela Pharma Inc., through rigorous testing, ensures that the company develops and sells drugs that are free of harmful side effects. Also, the company ensures that the chemical waste generated in the manufacturing process is kept to a bare minimum and is disposed of according to the regulations of the Environmental Protection Agency. The management assesses its overall performance based on these dimensions. Thus, the managers at Parallela Pharma are applying the _____ approach to measure firm performance. A. economic value creation B. shareholder value creation C. triple-bottom-line D. accounting profitability

C. triple-bottom-line

# _____ are an agreed-upon code of conduct in business, based on societal norms. A. Fiduciary responsibilities B. Poison pills C. Strategic business points D. Business ethics

D. Business ethics

# Which of the following statements about competitive advantage is true? A. Competitive advantage is an absolute measure; it is not relative. B. Competitive advantage is a one-dimensional concept. C. Competitive advantage is permanent and not transitory; once gained by a firm it stays with the firm. D. Competitive advantage can be assessed by measuring accounting profit, shareholder value, or economic value.

D. Competitive advantage can be assessed by measuring accounting profit, shareholder value, or economic value.

# Which of the following summarizes the difference between corporate strategy and business strategy? A. Corporate strategy deals with how to compete; business strategy deals with where to compete. B. Corporate strategy deals with when to compete; business strategy deals with how to compete. C. Corporate strategy deals with how to compete; business strategy deals with when to compete. D. Corporate strategy deals with where to compete; business strategy deals with how to compete.

D. Corporate strategy deals with where to compete; business strategy deals with how to compete.

# Which of the following perspectives best supports the shared value creation framework? A. Markets are more often than not defined by societal needs rather than economic needs. B. Failing to create value for society almost always reflects on the bottom line. C. A firm's competitive advantage depends on pitting economic and societal needs in a trade-off. D. Externalities such as pollution, wasted energy, and costly accidents actually create internal costs.

D. Externalities such as pollution, wasted energy, and costly accidents actually create internal costs.

# The _____ allows the scanning, monitoring, and evaluating of changes and trends in a firm's macro environment. A. VRIO framework B. SWOT analysis C. BCG matrix D. PESTEL framework

D. PESTEL framework

# 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? A. She used a rational planning approach to strategy planning. B. She created a dominant strategy plan. C. She used scenario planning. D. She used an emergent strategy.

D. She used an emergent strategy.

# Which of the following statements accurately describes social entrepreneurs? A. Social entrepreneurs are individuals who invest in start-up businesses in order to earn huge returns. B. Social entrepreneurs are individuals who rely primarily on social networking sites to generate revenues. C. Social entrepreneurs are employees within organizations who are responsible for carrying out lean production. D. Social entrepreneurs are those who consider financial, ecological, and social metrics to evaluate their firm's performance.

D. Social entrepreneurs are those who consider financial, ecological, and social metrics to evaluate their firm's performance.

# How does W. L. Gore exemplify founder imprinting? A. Gore consistently ranks among the top 25 of Fortune's "100 Best Companies to Work For" list. B. W. L. Gore & Associates is organized in a formal and centralized manner. C. The compensation of Gore associates is decided through a peer review system. D. The four core values articulated by Bill Gore guide the company and its associates to this day.

D. The four core values articulated by Bill Gore guide the company and its associates to this day.

# Why did Pixar enter into a strategic alliance with Disney? A. to develop into a live-action feature film company B. to finance and distribute high-end graphic display systems for theaters C. to develop into a computer hardware company D. to finance and distribute its newly created computer-animated movies

D. to finance and distribute its newly created computer-animated movies

# In late 2014, Uber senior executive Emil Michael was heard to say that Uber should spend a million dollars to hire private investigators to dig up dirt on journalists who wrote damaging pieces on Uber. When the remarks became public, he apologized. How did Uber's CEO deal with Michael? A. Uber's CEO demoted Michael. B. Uber's CEO fired Michael. C. Uber's CEO promoted Michael. D. Uber's CEO refused to discipline Michael.

D. Uber's CEO refused to discipline Michael.

# Firms pursuing a differentiation strategy primarily seek to A. keep their cost structures lower than that of the cost leader. B. reduce the value gap to gain a competitive advantage. C. provide products that are a direct imitation of the competitors' products. D. create higher customer perceived value than the value that competitors create.

D. create higher customer perceived value than the value that competitors create.

# Which of following practices of a firm satisfies its ethical responsibilities? A. using plastic as the packaging material though it is harmful to the environment, yet legal B. outsourcing production to a less developed country and paying wages that are below its own country's accepted minimum wages C. using advertising and other forms of promotion to endorse luxurious lifestyles D. selling vaccines at a subsidized price in a less developed country even though this results in reduced shareholder returns

D. selling vaccines at a subsidized price in a less developed country even though this results in reduced shareholder returns

# If a company wants to gain a competitive advantage in a highly competitive industry, it should ideally A. execute an integrated cost-leadership and differentiation position. B. copy the strategies of other firms through competitive benchmarking. C. provide goods or services similar to its competitors at higher prices. D. stake out a unique position within the industry.

D. stake out a unique position within the industry.

# Apple and Nike have their own retail outlets and also use other independent retailers, both the brick-and-mortar type and online, to sell their products. This is an example of A. monopsony. B. geographic diversification. C. crowdsourcing. D. taper integration.

D. taper integration.

# When fashion magazines face competition from fashion blogs on the web, which of the following forces in Michael Porter's five forces model primarily gets stronger? A. the emergence of entry barriers B. the bargaining power of suppliers C. the availability of complements D. the threat of substitutes

D. the threat of substitutes

# European aircraft maker Airbus is investing $600 million in Mobile, Alabama, to build jetliners. Which of the following statements best explains why it is employing this strategy? A. to take advantage of the high labor costs in the southern United States B. to take advantage of the high cost of living in the southern United States C. to take advantage of the low impact of globalization in the United States D. to take advantage of lower taxes in the southern United States

D. to take advantage of lower taxes in the southern United States

# As a result of globalization, the A. economies around the world are becoming more independent. B. cultural distance between countries is increasing. C. cost of doing business around the world is increasing. D. world's market economies are becoming more integrated.

D. world's market economies are becoming more integrated.