BUS 445 Midterm Exam

Increase presence in regional, national, or international markets

geographic diversification

determines formal, position-based reporting lines

hierarchy

________ define appropriate employee attitudes and behaviors. A. Values B. Artifacts C. Appraisals D. Norms

norms

the risk that potential competitors will enter an industry

threat of new entrants

If the market costs are more than the in-house costs, then buy the product

False

codified rules and formal procedures that guide employee behavior

formalization

people with similar occupational specialties are put together in formal groups

functional structure

disadvantages for the firm in corporate level strategy

- Administrative costs - Low-powered incentives - Principle-agent problem

advantages for the firm in corporate level strategy

- Command and control - Coordination - Transaction-specific investments - Community of knowledge

advantages to buy from the market in corporate level strategy

- High-powered incentives - Flexibility

According to the Toyota case study, what is the Fuel Efficiency rate for Gas Hybrid Vehicle powertrain? A. 3.75 miles/liter B. 2.30 miles/liter C. 1.50 miles/liter D. 3.00 miles/liter

2.30 miles/liter

What is an industry?

A group of incumbent companies that face more or less the same set of suppliers and buyers

Which of the following statements is true of accounting data? A. Accounting data focuses mainly on intangible assets, rather than tangible assets. B. Accounting data are historical data and thus backward-looking. C. Accounting data consider off-balance sheet items, such as pension obligations of a firm. D. Accounting data do not have to be adjusted in any manner to compare companies with different capital structures.

Accounting data are historical data and thus backward-looking.

A-F-I framework - helps managers craft and execute strategy

Analysis, Formulation, Implementation

- Simultaneously pursuing differentiation and cost-leadership activities - Uses value innovation to reconcile trade-offs - Untapped market space

Blue Ocean Strategy

Who is Gail Klintworth? A. Chief Marketing Officer B. Chief Executive Officer C. Speaker at World Economic Forum at Davos D. Chief Sustainability Officer

Chief Sustainability Officer

- Is an intergovernmental economic organization - Founded in 1961 - 36 member countries which are mostly high-income countries

OECD (Organization for Economic Co-operation and Development)

- Is an intergovernmental organization - Coordinates petroleum policies - Founded in 1960 - 14 member countries

OPEC (Organization of the Petroleum Exporting Countries)

The ________ allows the scanning, monitoring, and evaluating of changes and trends in a firm's macro environment.

PESTEL Framework

factors within the external environment that managers have little control over

PESTEL framework

the "low-fare" airline - they streamline their activities to maintain profitability

Southwest Airlines

5 stages to vertical integration

Stage 1. Raw materials Stage 2. Components & intermediate goods Stage 3. Final assembly & manufacturing Stage 4. Marketing & sales Stage 5. After sales service & support

VRIO framework

To be the basis of a competitive advantage, resources must be: - Valuable - Rare - Costly to Imitate - Firms must be Organized to capture the value of the resource

What does USLP stands for? A. Unilever Sustaining Life Program B. Universal Sustainable Life Plan C. Unilever Sustainable Living Plan D. Universal Sustainable Living Plan

Unilever Sustainable Living Plan

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 decentralized structure. B. a top-down management style. C. organizational inertia. D. a formalized structure.

a decentralized structure

Distinct and fine-grained business processes that enable firms to add incremental value by transforming inputs into goods and services

activities

How does a firm capture its producer surplus for a good or service? A. as cost per unit sold B. as profit per unit sold C. as earnings per share D. as market price per share

as a profit per unit sold

The goal-directed actions managers take in their quest for competitive advantage when competing in a single product market

business-level strategy

Organizational and managerial skills necessary to orchestrate a diverse set of resources and to deploy them strategically

capabilities

Organizational and managerial skills that find their expression in a company's structure, routines, and culture are referred to as A. reserves. B. capital gains. C. capabilities. D. tangible resources.

capabilities

A plan that indicates in which industries and national markets an organization intends to compete - comprises the decisions that leaders make and the goal-directed actions they take in the quest for competitive advantage in several industries and markets

corporate level strategy

- Seeks to create similar value vs. competitors - Charges lower prices

cost leadership

2 fundamentally different business strategies

cost leadership and differentiation

Cost of input factors - raw materials, labor, capital, It services Economies of scale - decrease in cost per unit as output increases Learning-curve effects - less time to produce output with experience Experience-curve effects - improvements to technology and production processes

cost leadership strategy

bottom-up approach

decentralized organizations

- Seeks to create higher value vs. competitors - Offers unique features - Charges higher prices

differentiation

What makes up the triple bottom line approach?

economic, social, and ecological dimensions

________ is best described as decreases in cost per unit as output increases. A. Economies of scope B. Economies of replication C. Time compression economies D. Economies of scale

economies of scale

In the context of the SWOT matrix, which of the following best exemplifies a firm's internal strength? A. rise in the income of the demographic segment to which a firm caters B. increase in a firm's customer loyalty C. loss of a competitor's reputation D. growth in the size of the market in which a firm operates

increase in a firm's customer loyalty

Each stage of the vertical value chain typically represents a distinct ________ in which a number of different firms are competing. A. economy B. customer segment C. functional department D. industry

industry

Economies of scale are cost advantages that accrue for firms with A. high fixed costs. B. high capital risks. C. low employee turnover. D. larger output.

larger output

- rules and expectations by which a society guides the behavior of its members - appropriate attitudes and behaviors

norms

Decisions relating to the range of products and services a firm will offer determine the firm's A. geographic scope. B. absorptive capacity. C. level of diversification. D. vertical integration.

level of diversification

There are many reasons why firms need to grow. Which of the following reasons is strongly influenced by economies of scale? A. reducing risk B. increasing profits C. motivating managers D. lowering costs

lowering costs

- Low degree of specialization and formalization - Flat structure - Decentralized decision making

organic organizations

defines how jobs and tasks are divided

organizational structure

the ways in which power and authority are distributed within an organization

organizational structure

it must have in place an effective organizational structure and coordinating systems

organized to capture value

Which one of the following is not a product line of Clearwater Seafoods? A. Clams B. Oyster C. Lobster D. Crab

oyster

many small firms, firms are price takers, commodity product, low entry barriers

perfect competition

the maximum price a consumer is willing to pay for a product or service based on the total perceived consumer benefits

reservation price

number of employees reporting to a manager

span of control

degree to which a task is divided into separate jobs

specialization

Gladiator Apparel is the market leader in the sportswear 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 Gladiator Apparel is most likely to be considered a rare resource that is contributing to its competitive advantage? A. the company's land and buildings B. the company's design patents C. the company's raw material supplies D. the company's plant and machinery

the company's design patents

Which of the following is an example of an internal transaction cost? A. the cost of maintaining a production unit B. the cost of signing a contract with a supplier C. the cost of buying raw materials D. the cost of searching for a contract manufacturer

the cost of maintaining a production unit

________ are the legal owners of public companies.

shareholders

who is involved in or affected by the course of action by a business

stakeholder

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. cash cows. B. question marks. C. stars. D. dogs.

stars

A high percentage of R&D/Revenue ratio indicates a(n) A. strong focus on innovation to improve current products and services. B. inefficiency in the management to focus on new products. C. strong focus on marketing and sales to promote products and services. D. negligent investment toward research and development.

strong focus on innovation to improve current products and services.

A firm's ________ determines how the work efforts of individuals and teams are orchestrated and how resources are distributed. A. culture B. control C. structure D. norm

structure

one that enables the firm to exploit an external opportunity or offset an external threat

valuable

what commitments do we make, and what guardrails do we put in place

values

what is considered important

values

the firm's ownership of its production of needed inputs or of the channels by which it distributes its outputs

vertical integration

what do we ultimately want to accomplish

vision

When a firm diversifies into different product lines and geographies, a ________ structure is preferred. A. network B. multidivisional C. simple D. functional

multidivisional

an organizational form in which employees are grouped by product, geography, or client

multi-divisional structure

Benefit: protected from competitors if price war Risk: new entrant arrives and new capabilities needed

benefits and risk of cost-leadership

Benefit: reduced rivalry and high cost of imitation Risk: might overshoot features needed and vulnerable to price-sensitive customers

benefits and risks of differentiation

where the decision is made

centralization

top-down strategic planning

centralized organizations

superior performance relative to other competitors in the same industry of the industry average

competitive advantage

- Unique strengths of the firm allowing it to differentiate its products/service by creating more value for the customers - What makes them superior

core competencies

if firms that do not possess the resource are unable to develop or buy the resource at a reasonable price

costly to imitate

how do we accomplish our goals

mission

a pattern in a stream of actions

strategy

benefits of vertical integration

- Lowering costs - Improving quality - Facilitating scheduling and planning - Facilitating investments - Securing critical supplies

disadvantages to buy from the market in corporate level strategy

- Search costs - Opportunism - Incomplete contracting - Enforcement of contracts

Why do firms diversify?

- To get into a new market - To exploit existing core competencies for competitive advantage

What does PESTEL stand for?

- political - economical - socio-cultural - technological - ecological - legal

Porter's Five Forces Model

- rivalry among existing competitors - threats of new entrants - bargaining power of buyers - bargaining power of suppliers - threat of substitute products or services

4 main types of business diversification

1. Single business 2. Dominant business 3. Related diversification a. Related-constrained - all business share competencies in products, services, technology, or distribution b. Related-linked - only some business share. Competencies in products, services, technology, or distribution 4. Unrelated diversification: the conglomerate

What year does Unilever target for achieving its goals? A. 2015 B. 2020 C. 2018 D. 2025

2020

Which of the following best illustrates forward vertical integration? A. A chain of ice cream parlors launches a brand of toys and accessories for children. B. A multinational coffee chain sources its coffee beans from plantations in Brazil and Vietnam. C. A designer shoe company that previously purchased leather from external suppliers establishes its own leather tannery. D. A firm that manufactures and sells car engines to major automobile companies launches its own line of cars.

A firm that manufactures and sells car engines to major automobile companies launches its own line of cars.

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

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

According to the Toyota case study, what does CAFE stand for? A. The law required for safety standards B. Corporate Average Fuel Economy C. Corporate Average Freight Efficiency D. The meeting place for the auto industry

Corporate Average Fuel Economy (CAFE)

According to the Toyota case study, who are the big three automakers in the US automobile industry?

Gm, Ford and Chrysler

Invoro is a market leader in consumer electronics. If Finolo and Ethver, companies that manufacture televisions, develop the same customer knowledge base and create products with the same customer appeal as Invoro, then A. Invoro will have a resource that is valuable but no longer rare. B. Invoro will have a sustainable competitive advantage in the industry. C. Invoro will have a resource that is rare but no longer valuable. D. Finolo and Ethver will have a VRIO resource.

Invoro will have a resource that is valuable but no longer rare.

Which of the following is an advantage offered by a functional structure? A. It allows for an efficient top-down communication chain and thus relies on a relatively tall structure. B. It allows for a higher degree of specialization and deeper domain expertise. C. It facilitates a lower division of labor, which is linked to higher productivity. D. It facilitates a lower level of specialization.

It allows for a higher degree of specialization and deeper domain expertise.

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

It attempts to provide a holistic perspective on firm performance.

How does a sustainable strategy typically help a firm? A. It helps the firm focus solely on its financial goals. B. It reduces the need for corporate social responsibility within the firm. C. It facilitates the firm in effectively isolating its external stakeholders. D. It helps the firm achieve positive results along the social and ecological dimensions.

It helps the firm achieve positive results along the social and ecological dimensions.

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.

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

How is a cost-leader protected from threats from powerful suppliers? A. It is more able to absorb price increases through generating higher profit margins. B. It is able to create a significant difference between actual value and future market prices. C. It is more able to absorb price increases through accepting lower profit margins. D. It is able to create a significant difference between perceived value and current market prices.

It is more able to absorb price increases through accepting lower profit margins.

What must a cost-leadership strategy accomplish to be successful? A. It must increase the firm's cost above that of its competitors while offering adequate value. B. It must reduce the firm's cost below that of its competitors while offering adequate value. C. It must increase the firm's cost above that of its competitors while offering superior value. D. It must reduce the firm's cost below that of its competitors while offering superior value.

It must reduce the firm's cost below that of its competitors while offering adequate value.

Which of the following is a primary feature of the five forces model? A. It takes into account a firm's internal resources, capabilities, and core competencies. B. It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes. C. It is concerned exclusively about the intensity of rivalry among direct competitors. D. It helps managers determine the changing speed of an industry or the rate of innovation.

It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.

How did Marriott use economies of scope to achieve greater economic value than its competitors? A. Marriott sees decreases in cost per hotel unit as number of customers increases. B. Marriott sees increases in cost per hotel unit as number of customers increases. C. Marriott lowered its cost structure by sharing its production assets over several types of hotels, which increased the diversity of its hotel line and thus its differentiated appeal. D. Marriott lowered its cost structure by focusing its production assets on one type of hotel, which increased the diversity of its hotel line and thus its differentiated appeal.

Marriott lowered its cost structure by sharing its production assets over several types of hotels, which increased the diversity of its hotel line and thus its differentiated appeal.

Which of the following real-world scenarios best exemplifies formalization? A. Zappos' focus on allowing its customer service employees to use their own approach rather than depend on scripts B. Yahoo's decision to fire its CEO after incurring huge losses C. W. L. Gore's associates organizing themselves in project-based teams that are led by sponsors, not bosses D. McDonald's use of standard operating procedures across the world

McDonald's use of standard operating procedures across the world

Starfish Sodas has successfully achieved a competitive advantage in the soft drink industry as a differentiator. Which of the following scenarios would undermine Starfish's position? A. Starfish's customers start to consider soda a commodity. B. Starfish improves the recipe for its most popular soda without increasing the price. C. Starfish's product has not established an acceptable standard of quality. D. Starfish introduces a new biodegradable bottle that raises cost and perceived value.

Starfish's customers start to consider soda a commodity.

In which of the following situations is the power of suppliers high in an industry? A. Suppliers' industry is more concentrated than the industry it sells to. B. Suppliers depend heavily on the industry for their revenues. C. Suppliers offer products that are undifferentiated. D. Suppliers can credibly threaten to backward integrate into the industry.

Suppliers' industry is more concentrated than the industry it sells to.

Which of the following statements accurately brings out the difference between tangible and intangible resources? A. Tangible resources take a longer time to build, whereas intangible assets can be built comparatively easily. B. Tangible resources contribute to a company's competitive advantage, whereas intangible resources have little effect on competitive advantage. C. Tangible assets can be bought on the open market by anyone with the necessary cash, whereas intangible assets cannot be easily purchased. D. Tangible assets are difficult for competitors to imitate, whereas intangible assets can be easily replicated.

Tangible assets can be bought on the open market by anyone with the necessary cash, whereas intangible assets cannot be easily purchased.

What does TAC stand for in the case of Clearwater Seafoods? A. Transportation Advisory Committee B. Technical Advisory Catch Liability C. Total Allowable Catch Limits D. Total Acceptable Cod Limits

Total Allowable Catch Limits

The collapse of cod fisheries is a common example of ___________? A. Tragedy B. Tragedy of the fisheries C. Public common problem D. Tragedy of the commons

Tragedy of the commons

True or False: If in house costs are less than market costs, then make the product on your own

True

The balanced-scorecard can accommodate A. only short-term performance metrics. B. only long-term performance metrics. C. both short and long-term performance metrics. D. neither short or long-term performance metrics.

both short and long-term performance metrics

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

a dominant-business firm

The tenet behind the triple-bottom-line is that - a firm's primary objective should be increasing the total returns to its shareholders. - a firm should solely focus on increasing the economic value created to/for its customers. - a firm's return on revenue can be broken down into three ratios: COGS/Revenue, R&D/Revenue, and SG&A/Revenue. - a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy.

a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy.

Threadbare Industries is a new high-end textile company that 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 Threadbare Industries to acquire using its capital? A. software B. brand name C. a lease for a new building D. a new CEO

brand name

Cloud Cones is a fast-growing chain of ice cream shops. It has acquired an edge over its competitors through its ability to provide a wide array of unique flavors and a hip atmosphere in stores. This advantage of Cloud Cones best exemplifies a A. markup. B. resource flow. C. capital gain. D. core competency.

core competency

A firm incurs $400 to manufacture a television. In the market, customers are willing to pay a maximum of $600 for the television priced at $500. The difference of $200 ($600 minus $400) is the A. economic value created. B. total return to shareholders. C. consumer surplus. D. customer lifetime value.

economic value created

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

entering the aircraft manufacturing industry requires huge capital investments

O'Ryan Plastics maintains a manufacturing plant overseas. The local government has just been overthrown by a military group that opposes foreign influence in the country. According to the SWOT analysis, the political situation in this location is considered to be an A. external threat. B. internal strength. C. external opportunity. D. internal weakness.

external threat

A differentiation strategy works best when a A. firm's differentiated products are commoditized, and costs of providing uniqueness do not rise above the customer's willingness to pay. B. firm has intangible resources, is able to pass on increases in supplier cost to the customer, and its differentiation appeal creates customer loyalty. C. firm's focus of competition shifts to price, and when increasing differentiation of product features do not create additional value. D. firm has tangible resources, its focus of competition shifts to price, and equivalent substitutes are readily available.

firm has intangible resources, is able to pass on increases in supplier cost to the customer, and its differentiation appeal creates customer loyalty.

A strategic group will typically include A. firms employing similar number of employees, irrespective of their industries. B. employees within a firm earning the same amount in salary. C. customers belonging to a particular socioeconomic class. D. firms within the same industry.

firms within the same industry

True Moto Corp. (TMC) is a leading automobile company. The company has been able to sustain its competitive advantage primarily due to its high-quality and efficient electric motors. Most of its competitors have failed to develop similar electric motors at a reasonable price. Which of the following resource attributes listed in the VRIO framework has helped TMC sustain its competitive advantage? A. resource mobility B. inexhaustible nature C. high costs involved in imitation D. intangibility of the company's resource

high costs involved in imitation

- an organization combines functional and divisional chains of command in a grid so that there are two command structures-vertical and horizontal - organizational structure that combines the functional structure with the M-form

matrix structure

authority is centralized, tasks and rules are clearly specified, and employees are closely supervised

mechanistic organization

many firms, some pricing power, differentiated product, medium entry barriers

monopolistic competition

one firm, considerable pricing power, unique product, very high entry barrier

monopoly

Eon Inc., Electravia Inc., and FC Inc., the three largest firms in the consumer electronics industry, hold close to 85 percent of the industry's market share. These companies mainly compete against each other by providing unique features in their products rather than pricing them low. These firms are interdependent, and each firm must consider the strategic actions of its competitors. Which of the following industry competitive structures does this scenario best illustrate? A. oligopoly B. monopolistic competition C. perfect competition D. monopoly

oligopoly

few (large) firms, some pricing power, differentiated product, high entry barriers

oligopoly

BioCure Inc. is a pharmaceutical company that has many breakthroughs in medicine to its credit. Unlike many other pharmaceutical companies, BioCure has a relaxed work environment where employees are free to discuss projects with each other. Employees are encouraged to choose the projects that interest them; communication between team members and their supervisors is open and easy. Because of the company's work culture, its employees feel motivated to work harder and display more entrepreneurial behaviors. In this scenario, BioCure Inc. is most likely an organization that is A. mechanistic. B. organic. C. centralized. D. formalized.

organic

Pressure customers put on an industry Lowers industry profit potential if: - Buyers obtain price discount - Buyers demand higher quality and service

power of buyers

Pressures that industry suppliers can exert on an industry's profit potential Lowers industry profit potential if: - Suppliers demand higher prices for their inputs - Suppliers reduce quality

power of suppliers

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. A. secondary activity B. support activity C. premier activity D. primary activity

primary activity

A manager may pursue his or her own interests such as job security and managerial perks in lieu of principal's interests

principal agent strategy

Increase in number of product categories

product diversification

if only one or few firms possess it

rare

When executives of a firm consider business opportunities only where they can leverage their existing competencies and resources, it can be concluded that the firm is using A. related-linked diversification. B. offshore outsourcing. C. strategic outsourcing. D. related-constrained diversification.

related-constrained diversification

a systematic way to understand firm performance through its resources and capabilities

resource based view (RBV)

An assumption that a firm is a bundle of resources and capabilities; these resources and capabilities differ across firms

resource heterogeneity

an assumption that a firm has resources that tend to be sticky and that do not move easily form firm to firm

resource immobility

Tangible and intangible assets that the firm can utilize in formulating and implementing strategy

resources

refers to how companies attain competitive advantage

strategic positioning

Choices between a cost or value position. Such choices are necessary because higher value creation tends to generate higher cost

strategic trade-offs

a set of goal-directed actions a firm intends to take in order to gain and sustain competitive advantage relative to competitors

strategy

outperforming over a prolong period of time

sustainable competitive advantage

A blue ocean strategy differs from a low-cost strategy in that A. a blue ocean's research and development focus is on process technologies, and a cost-leader's focus is on product technologies. B. 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. C. economies of scale are more important to a blue ocean strategy, while economies of scope are more important to a cost-leader. D. 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.

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.

products/services that meet the same customer need. They are available from outside of the given industry

threat of substitutes

the costs associated with economic change

transaction costs

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

what range of products the firm should offer