Bus 495 Midterm

1.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

1._____ is a business model in which the manufacturer sets a fixed price on a product, but the retailer is free to set it's own price.

wholesale

Ethics

is not synonymous with law

Strategic commitments are actions that are

costly, long-term oriented, and difficult to reverse.

1.Win Goods Inc. is a large multinational conglomerate. As a single business unit, the company's stock price is estimated to be $200. However, by adding the actual market stock prices of each of its individual business units, the stock price of the company as one unit would be $300. What is Win Goods experiencing in this scenario?

diversification discount

1.Etsuro is a management consultant. Baker Corp. asks him to evaluate their company, and he finds that the difference between the cost of producing the firm's products and the value of those products is extremely narrow. What should Etsuro suggest that Baker Corp. management do?

find a way to widen the gap between cost and value

1.Which of the following organizational structures matches best with an international strategy?

functional

The informational advantage that agents possess over principals is often based on the fact that

insiders are the first to learn about important developments before the information is released to the public.

1.Which of the following is a common drawback of a non-equity alliance?

lack of trust between partners

1.Angelica is the CEO of Sandhaven Ltd., a publicly traded company. The shareholders want Angelica on the board of directors despite her recent appointment as the CEO. This decision of the shareholders is most likely because Angelica is

likely to provide the board with valuable inside information.

1.Magical Productions is a large production company that controls a major portion of the television industry's market share along with two other firms. Despite its competitiveness with the two other firms, it is influenced by their actions and often has to consider their strategic actions before acting on its own. In this scenario, Magical Productions is most likely functioning in a(n) _____ industry.

oligopolistic

1.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

1.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

A defining characteristic of the pay-as-you-go business model is that the

users pay for only the services they consume.

Strategic commitments are actions that are

. long-term oriented.

At a certain output level, the per-unit cost incurred by a firm to manufacture a product was $70. Once the cumulative output doubled, the cost per unit reduced to $63. All other factors remaining constant, the firm has been able to achieve

90 percent learning curve

Organizational design is

a.the process of creating, implementing, and modifying the structure of an organization.

Which of the following statements about product-oriented visions is true?

A. They tend to force managers to take a myopic view of the landscape.

Which of the following is true of acquisitions?

Acquisitions can be friendly or hostile.

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.

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.

_____ describes a process in which the options one faces in a current situation are limited by decisions made in the past.

Path dependence

1.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?

Starfish's customers start to consider soda a commodity.

Which of the following is a common result of a hostile takeover of a company?

The new owner sells the company in pieces.

Which of the following external forces is a part of a firm's task environment?

a.the composition of the strategic group to which the firm belongs

1.Two leading home appliance companies, Redwood Inc. and Boxer Technologies, are in competition for market share. In their quest for exciting new products, Redwood employs an open innovation model, while Boxer pursues a closed innovation model. Which of the following statements is most likely true?

a.Boxer will protect its intellectual property with patents and trade secrets.

1.Sirhan is president of a medium-sized bank. What can he do to lessen the chances of employees or board members taking part in insider trading?

a.Create a strict code of ethics and explain that inside traders will be fired.

1.Which of the following scenarios best illustrates bundling?

a.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.

If Zephyr Electronics obtains an 18 percent return on invested capital, which of the following will help determine if it has a competitive advantage over other pharmaceutical companies?

comparing the return to the return on invested capital obtained by other firms in the industry

Rapida Inc. and Click Inc. are two companies that have been manufacturing typewriters for almost 30 years. Due to the reduced demand for typewriters today, both companies' average return on invested capital is approximately -5 percent. The current industry average is 2 percent. In this scenario, Rapida Inc. and Click Inc. most likely have

competitive parity with each other.

Icarus Airway's decision to acquire Midas Fuels Inc. proved to be ill-fated because the Icarus managers overestimated their abilities and skills. They believed that they had the skills to manage such diversified businesses and create additional shareholder value. However, the acquisition failed to create the anticipated synergies because the managers' capabilities were restricted to the airline industry. What does this scenario best illustrate?

managerial hubris

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.

1.Several senior managers recently left Bass Automobile Inc. and went to work at Unicorn Autos Inc., a rival company. What does this imply?

resource leakage

Anders is researching sociocultural factors related to his employer, a sporting goods manufacturer. Which of the following would be part of the sociocultural forces in a firm's external environment?

the family size of the firm's target market

1.The management team for Volcanic Batteries came up with the following vision statement: "Volcanic Batteries will conscientiously track its financial performance to ensure profits for its investors, enhance its community through employment and supporting charities, and dispose of waste in a manner that will not harm the environment." This vision statement is most likely based on the

triple-bottom-line approach.

For a firm that operates in an industry where competition is high, which of the following practices will result in inferior performance?

trying to be everything to everybody by combining different competitive strategies

Gold Leaf Computers sources the components for its laptops from various suppliers on the market. The firm pays $100 for processors, $35 for disk drives, $50 for screens, $10 for memory, and $40 for graphics and wireless internet cards. Gold Leaf has determined that it would cost $200 per unit to produce all of the necessary components in its in-house manufacturing facility. In this scenario, Gold Leaf should

vertically integrate.

Cobalt Sodas has seen its market share erode in recent years, as consumers increasingly turn toward healthier beverage choices such as unsweetened sparkling water. Hoping to rekindle interest in sugary sodas, Cobalt decides to produce a limited run of "throwback" cans using labeling first introduced in the 1980s. What is wrong with this strategy?

It fails to face the competitive challenge

Which of the following examples uses a focused differentiation strategy?

a cosmetics brand that offers superior skin lotion for sensitive skin priced at 100 dollars per bottle

1.Body Sync Inc. is a chain of gyms. It offers a fitness package that allows its members to use the gym facilities for 12 months by paying only for 10 months. Included in the package are two health checkups and a gym kit. These add-ons by themselves are not very valuable, but as a package they can enhance the perceived value of the service offerings. In this case, Body Sync's primary value driver is

availability of complements

The ratio of SG&A/Revenue is an indicator of a firm's focus on

marketing and sales to promote its products and services.

Corner Market Inc. is a supermarket chain. Due to strong competition from other stores in the industry, Corner Market has aggressively used branding, pricing, and superior customer service to uniquely position itself in the market. As a result, the supermarket chain has been able to differentiate itself from its competitors and sell its products at higher prices. Which of the following industry competitive structures does this scenario best illustrate?

monopolistic competition

A value curve indicates a lack of effectiveness in a firm's strategic profile when it

zigzags.

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 strategey

What must a cost-leadership strategy accomplish to be successful?

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

1.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 statements is true about strategic groups?

Profitability varies between different strategic groups.

How do strong ethical values benefit a firm?

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

Which of the following vision statements is most likely to produce a sustainable competitive advantage for an auto dealership?

To help customers find a job for their individual needs

1.Which of the following could most likely have prevented the accounting scandals of the early 2000s and the global financial crisis?

a.practicing effective corporate governance

The Founder of Teach for America, Wendy Kopp, established a mission by building on her vision, which is "One day, all children in this nation will have the opportunity to attain an excellent education." Considering this, how did Klopp implement the mission of Teach for America?

by enlisting talented young professionals as teachers

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

economic value created.

1.Swan Song is a spa that caters to the needs of a small percentage of highly health-conscious consumers. It offers state-of-the-art treatments in a luxurious setting. Since there are very few spas that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Swan Song is following a

focused differentiation strategy.

Which of the following organizational structures matches best with an international strategy?

functional

1.Sanibel Autos Inc. merged with its competitor Vroom Autos Inc. This allowed Sanibel Autos to use its technological competencies along with Vroom Autos' marketing capabilities to capture a larger market share than what the two entities individually held. What type of integration does this scenario best illustrate?

horizontal

1.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

1.When companies that manufacture shipping containers want to buy iron ore, the purchase decision is solely based on price. This is because there are a large number of sellers in the iron ore industry, and iron ore is a highly undifferentiated commodity. Which of the following industry competitive structures does the iron ore industry best illustrate?

perfect competition

Managers in a firm hired to improve the firm's profitability and ultimately the shareholders' value will add to the overall costs if they pursue their own self-interests. What does this best illustrate?

principal agent problem

Which of the following is an unintended side effect of a high degree of specialization in an organization?

reduced employee satisfaction due to repetition of tasks

1.During market testing, Sensation Cosmetics (SC) realized that the cosmetics industry was dominated by multiple, well-established brands. These brands mostly sold their products in exclusive outlets and departmental stores. SC management realized that a new entrant would require a different business model to be successful. Thus, SC started selling its products through direct marketing. In this scenario, Sensation Cosmetics accomplished substitution primarily through

strategic equivalense

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

1.While KFC focuses on international markets, its competitor, Chick-fil-A, focuses on the domestic U.S. market. What is the reason behind this strategic difference?

a.KFC has more financial resources than Chick-fil-A since it is a publicly traded stock company.

Which of the following examples describes the task of an alliance manager?

a.Hussein trained the employees of his alliance partner in the skills needed to create a display for an e-notebook.

InVue, a consumer electronics company, is the leading manufacturer of high-definition (HD) LED televisions. HD technology has been its core competency and the company holds 60 percent shares in that market. However, InVue's competitors have now begun to produce more-advanced technologies like 4K Ultra HD and Internet-enabled Smart televisions. According to the dynamic capabilities perspective, what should InVue do?

a.InVue should start working on Ultra HD and Smart television technologies to adapt its core competency to suit the external environment.

Which of the following is a drawback of vertical integration?

a.It increases the potential of legal repercussions.

1.Toy sales have declined by 10 percent each year, forcing many retailers to exit the industry. To eliminate its remaining competition, Bleaker Toys sells all of its product at a loss and relies on its significant cash holdings to cover costs until its competition is forced to exit the industry. Is this an example of a successful strategy? Why or why not?

a.No. Bleaker's strategy and competitive advantage are unsustainable.

1.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?

a.Reduce supply. Customers generally reduce their purchases of luxury items when the economy falters.

1.What is most likely to happen if a firm relies too long on a competency without honing, refining, and upgrading as the firm and the environment change?

a.The firm's culture can turn from a core competency into a core rigidity.

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.

Which quadrant in the core competence-market matrix is the hardest to pursue?

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

In the AFI strategy framework, strategy analysis primarily involves

a.evaluating the effects of internal resources and core competencies on a firm's potential to gain and sustain a competitive advantage.

1.Nendry is the owner of a firm that produces sports drinks. Since there are a number of firms in the industry competing on cost, Nendry has decided to pursue a differentiation strategy. In this case, she should

a.focus on adding unique features to her product that customers will value.

1.Which of the following features helps match a cost-leadership strategy to a functional structure?

a.focus on economies of scale

1.Which of the following is an ineffective practice in alliance management?

a.focusing on developing an alliance-management capability in isolation

1.Grameen Bank in Bangladesh was founded to provide microcredit to impoverished farmers who wanted to start their own entrepreneurial ventures that would help themselves climb out of poverty. This best exemplifies Michael Porter's suggestion that

a.the largest but poorest socioeconomic group can yield significant business opportunities.

When does a merger between companies typically occur?

a.when two firms of comparable size join to form a combined entity

Nate is a recent graduate who states that he has interned at a major accounting firm so that his value as a candidate for employment increases. A start-up recruits Nate based on his stated credentials without verifying them. Two days into the job, Nate's team lead realizes that Nate does not know much of what he claimed to know during the interview. This scenario best exemplifies

adverse selection.

1.Samsung and Google cooperate as complementors to compete against Apple's strong position in the mobile device industry, while at the same time Samsung and Google are increasingly becoming competitive with one another. This scenario best illustrates the process of

co-opetition

1.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

A new company named Far Reach Inc. entered the radio retail business, which is a fairly consolidated industry. In response, two large incumbent radio retailers, Smooth Waves and Clear Signal, lowered the price of their radios. Also, they spent more money to improve their radios and on additional marketing. By doing this, Smooth Waves and Clear Signal

decreased industry profit potential

1.Aguilar Industries has produced a new piece of technology that will monitor the soil moisture in a user's garden and send a notification to an app on the user's phone when it is time to water their plants. The goal of this inexpensive technology is to entice users to purchase Aguilar's more expensive automated watering system, so that they can trigger the watering process from the app on their phones. Which business model is most likely to help Aguilar Industries accomplish its goals?

freemium

Noodles 2 Go and Sal's Trattoria are two restaurants serving Italian cuisine. While Noodles 2 Go focuses on providing quick, affordable pasta dishes for the lunch crowd, Sal's Trattoria focuses on serving home-style dishes in an upscale, romantic setting. Both companies have been able to gain a competitive advantage. This is most likely because the companies have

pursued distinct strategic positions.