BUS STRAT AND POLICY EXAM 2

Amanda is a management consultant for a soda manufacturer that wants to expand into health drinks such as green tea and after-workout drinks. Based on what you have read, which of these is sensible advice for Amanda to offer her client?

"Carefully consider the entry choices over time before making a decision."

During an interview for a CEO position, Jennifer's potential employers ask her, "If you get this job, will you focus more on industry effects or firm effects?" What should her answer be?

"Firm effects. I will be able to have the most impact on those."

A firm has 10 million shares outstanding, and each share is traded at $100. Also, each shareholder gets a dividend of $2,000 annually. In this case, the market capitalization is

$1 billion, that is, 10 million shares × $100

TalkaLot Corp. incurs a cost of $350 to produce one unit of a cell phone. The company's management has priced the product at $600 in the market. Considering the technological advancement of the cell phone, customers perceive its value to be around $800. What is the economic value created in this scenario?

$450

Which of the following is a drawback of the SWOT analysis?

A problem with this framework is that a strength can also be a weakness, and that an opportunity can also simultaneously be a threat.

Which of the following statements is true of accounting data?

Accounting data are historical data and thus backward-looking.

When performing internal analysis of firms, how would you answer the question, "why do companies exist?"

Companies exist because they create value for customers in ways that customers are unable to replicate on their own.

You are the CEO of a tech company and have recently undertaken a review of your company's strategy. In comparing your stock market valuation to that of your closest competitor, you note that your firm is currently valued at $50 billion, while your competitor is valued at $40 billion. How should you proceed?

Compare the current valuations with past valuations to determine a trend.

While implementing strategic group mapping for the U.S. domestic airline industry, two strategic groups become apparent: low-cost, point-to-point airlines (Virgin Atlantic, Alaska Airlines, JetBlue, and Southwest Airlines) versus differentiated airlines using a hub-and-spoke system (American, Delta, and United). Which of the following statements is true about these two strategic groups?

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

Sasha is the CEO of Enterprise Technologies, a consumer electronics manufacturer. Last year, Enterprise's return on invested capital (ROIC) was 11.6 percent, while Enterprise's closest competitor, Federation Tech, had an ROIC of 17 percent. Which of the following factors might Sasha use to convince investors to invest in Enterprise rather than Federation Tech?

Enterprise's intangible intensity was 6 percent, while Federation Tech's was 3 percent.

How do low interest rates affect a business?

Firms can easily borrow money to finance future growth.

The working capital turnover of Complete Systems Corp. is 6.0. What does this financial data suggest?

For every dollar Complete Systems Corp. puts to work, the company realizes $6.00 of sales.

Which of the following scenarios exemplifies a sustainable strategy under the triple-bottom-line approach?

Gogozoom reformulated its products to eliminate chemicals that were widely used in the industry but were being investigated for their potential negative effects on the environment.

Steve manages product design and development at a toy company. The junior managers who report to him tell him that new complementors for the firm's products are available. What should Steve's reaction be?

He needs to find out if his company as well as other companies can provide the complements.

Which of the following statements accurately brings out the difference between monopolistic competition and an oligopoly?

In monopolistic competition, many firms compete against each other; in an oligopoly, there are few large firms competing against each other.

Sugar Flakes and Cinnamon Texas Toast both produce similar puffed rice breakfast cereals. For both companies, the cost of producing a box of cereal is 45 cents, and it is not possible for either company to lower their production costs any further. How can one company achieve a competitive advantage over the other?

Increase total perceived consumer benefits through differentiation.

Have A Seat Furniture has seen its profit margins shrink over the past several years as increased competition has driven down furniture prices. You have been tasked with improving the company's margins. Which of the following approaches makes the most sense within the context of strategic activity systems?

Install modern manufacturing equipment to improve efficiency

Shippity and ShipING Inc. are two competing firms in the same industry. Shippity's tangible assets are valued at $15 billion and its intangible assets are valued at $35 billion. ShipING Inc.'s tangible assets are valued at $5 billion and its intangible assets are valued at $45 billion. What can be concluded from this information?

It is likely that ShipING Inc. is better enabled than Shippity to gain and sustain a competitive advantage.

How does causal ambiguity act as an isolating mechanism for organizations?

It makes it difficult for the competitors to understand why a company has been so successful.

Which of the following is a drawback of Porter's five forces model?

Managers cannot determine the changing speed of an industry or the rate of innovation.

How is a firm's task environment different from its general environment?

Managers have some influence over external factors in the task environment; they have little direct effect over external forces in the general environment.

Which of the following is a disadvantage of measuring firm performance through total return to shareholders and firm market capitalization?

Market volatility makes it difficult to assess firm performance through these measures, particularly in the short term.

Which of the following best exemplifies the use of input controls?

McDonald's use of standard operating procedures

The owners of Always Baked bakery want to open a second retail outlet. Which of the following scenarios is most likely to yield a competitive advantage?

Open a shop on an inexpensive piece of land near a new mixed-use residential and business district currently under construction.

Sally 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 Sally recommend to the company's owner?

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

After conducting a SWOT analysis, your firm has decided to focus on addressing issues located in the Weaknesses-Opportunities quadrant. Which of the following steps are you most likely to take?

Reorganize the inefficient research and development department to bring innovative products to market more quickly.

Which of the following statements accurately describes a firm's resource stock?

Resource stocks are a firm's current level of intangible resources.

Amber is the manager of gardening supplies wholesaler DigIt Inc. The company's vision is to become the leading supplier of gardening materials in the northeast. In assessing the firm's current state, Amber has determined that the firm could differentiate itself from competitors with an easy-to-use online ordering system and a two-day delivery guarantee. To accomplish this, Amber has determined that DigIt must spend the next two quarters honing its capabilities for sourcing materials quickly and improving its web development competencies. According to the balanced-scorecard approach, what is wrong with Amber's thinking?

She has failed to account for external factors such as customer perceptions and shareholder perceptions.

In which of the following situations is the power of suppliers high in an industry?

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

Hank runs a company that manufactures satellites for commercial and government use. It has few rivals. At the moment, the power of buyers, the power of suppliers, and the threat of substitutes are all low. Based on this information, what can Hank conclude?

The company is likely to be very profitable as long as the threat to entry is low.

Years ago, the travel industry was controlled by a few large travel companies that booked holidays, air tickets, bus tickets, and hotels for their customers. However, with the emergence of the internet, smaller travel agencies started mushrooming in the industry and customers started making their own reservations. Which of the following can be inferred from this information?

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

Both UTech Inc. and Mirco Corp. incur a cost of $200 to manufacture a single unit of a cell phone. However, UTech Inc. charges a higher price than Mirco Corp. does, but it still sells a higher number of phones. What does this imply?

UTech Inc. creates more economic value than Mirco Corp. does.

Siham is a chef who owns three moderately successful restaurants with innovative menus. Based on what you have read, which of these approaches could help her improve her profits?

Use her existing knowledge, equipment, and staff to launch a catering business.

The tenet behind the triple-bottom-line is that

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

Nerissa sets up a business consulting firm in which the employees are motivated because they find their work interesting and creative. She carefully hires workers who fit well with their assigned tasks. Also, she clearly defines the results expected of each worker, but allows the workers to determine the means to these results. Which of the following best describes Nerissa's business?

a firm that relies on high output controls to tap into intrinsic motivation

Wheat and Steak is a restaurant located inside a five-star hotel. It caters mainly to customers who are concerned about quality dining rather than the prices. In this scenario, which of the following will be a part of Wheat and Steak's strategic group?

a premium rooftop resteraunt in the same city

A "perfectly competitive" industry is one that

all of the answers are competitive perfectly competitive

How does a firm capture its producer surplus for a good or service?

as profit per unit sold

Which of the following is NOT considered an important macro-environmental influence on businesses (that is, a potential influence beyond that of the industry alone)?

bargaining power of suppliers

The balanced-scorecard can accommodate

both long and short-term metrics

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?

brand name

Organizational and managerial skills that find their expression in a company's structure, routines, and culture are referred to as

capabilities

In an industry, the threat of entry is high when

capital requirements are low.

Assume a firm's resources and capabilities are costly to imitate. This is because rival companies do not clearly understand the relationship between the resources and capabilities controlled by the firm. In this case, the firm's competitive advantage is protected against imitation by

casual ambiguity

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

In the five forces model developed by Michael Porter, ________ is not defined narrowly as a firm's closest competitors but rather more broadly to include other factors in an industry like buyers, suppliers, potential new entry of other firms, and the threat of substitutes.

competition

To help a firm achieve a competitive advantage, each distinct activity performed in the value chain needs to

contribute to the firm's strategic position as either low-cost leader or differentiator.

________________ allow(s) 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.

core competencies

SJobs's Computer Repair has maintained a competitive advantage based on its thorough and professional service, reasonable pricing, and money-back guarantee. Management at the company is so committed to doing repairs well that they often have rejected employee suggestions to expedite their processes. Recently, the company has begun to lose customers to a new local service offering same day in-home repairs and 24/7 online customer support. According to the dynamic capabilities perspective, SJobs's Computer Repair has lost its competitive advantage due to

core rigidity

Threadless allows customers to submit their own designs and to vote on which designs they would like to see printed on a T-shirt. This business uses a ________ technique.

crowdsourcing

Which of the following competitively important assets is typically excluded from a firm's balance sheet?

customer experience

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

decreased industry profit potential

In a firm's external environment, ________trends primarily capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class.

demographic trends

Companies in the same strategic group are ________ to each other.

direct competitors

Which of the following is an advantage of applying the economic value creation perspective to assess a firm's performance?

economic value perspective, analysts not only consider historical costs, but also opportunity costs

Given the structure of the automobile industry, entering the auto manufacturing industry seemed risky. Yet Tesla Motors joined the fray. Rather than attempting to compete head-on with internal combustion engines, Tesla Motors entered the all-electric car segment, a much less crowded niche in the overall car industry. Which of the following is Tesla most hoping to benefit from in this market niche?

economies of scale

As manager of a relatively new company, you are tasked with analyzing company resources to identify core competencies capable of supporting a competitive advantage. Which of the following resources is most likely to generate a competitive advantage?

enthusiastic company culture

ezTV, 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, ezTV'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 ezTV do?

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

In the context of the resource-based model of competitive advantage, if a successful firm exhibits resource immobility it means that the

firm will have a sustained competitive advantage because of its unique resources.

Facing stiff competition in the e-reader market, Smart Reads wants to protect its competitive advantage by increasing the perceived value of its reader. Smart Reads' best strategy to accomplish this would be to

highlight the number of celebrities who use Smart Reads e-readers.

Your company, a small software development firm, has attracted many of the top young programmers in your area. As a result, the apps you produce have been praised for their innovative features and intuitive user experience. According to the bathtub metaphor in the dynamic capabilities perspective, what is the best way for you to protect against resource leakage?

improve the benefits package to retain key employees and reduce turnover.

Delos Inc. is an apparel manufacturer. The management at Delos Inc. prefers moderate control over the operations of the different departments such as R&D, design, marketing, and sales. It allocates a budget to each function at the beginning of each quarter. This is an example of implementing control through

input controls

According to the resource-based view, a firm's competitive advantage often stems from its

intangible resources

_____ are barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy.

isolating mechanisms

Core competencies are derived from the combination of

key strategic resources and a firm's capabilities.

Which of the following is a macroeconomic factor that can affect a firm's strategy?

levels of employment

According to the value chain analysis, which of the following is a primary activity?

marketing and sales

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

marketing and sales to promote its products and services.

WeBreak4Bikes Inc. has a new U.S.-based client in the bicycle industry. The client's company produces only bicycles for riding on the road. The bicycles are used for reliable general purpose transportation. When asked to identify a potential substitute for the bicycle industry from the Five Forces perspective, you would select

motorcycles

All Signal Inc., a telephone service provider, has a large user base mainly because phone calls and messages between all All Signal users are free. When a person switches to an All Signals network, his or her entire network of family and friends is likely to switch to the same network to receive the benefit of free calls and messages. In addition, an existing user who gets a new user to register with All Signal Inc. is given a free wireless connection. This has helped to keep competition away from All Signal. In this scenario, which of the following factors is acting as an entry barrier for All Signal Inc.?

network effects

Which of the following below are not one of the three dimensions that make up the Triple Bottom Line framework?

none of the answers are correct.

When company managers formulate strategy decisions resulting from their internal analysis, they are primarily making decisions about how to

obtain and allocate critical and scarce resources

Nye Studios 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, Nye Studios is most likely functioning in a(n) ________ industry.

oligopolistic

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

path dependence

Competitive rivalry based solely on ________ is destructive to firms as it transfers most of the value created in the industry to the customers.

price-cutting

Value chain analysis consists of systematically analyzing a firm's key activities that for analysis purposes are categorized into two groups:

primary activities and support activities

The difference between the price charged for a product and the cost to manufacture it is referred to as the

producer surplus

Ride N Style Inc. is a bus line with service to several major cities. It has several competitors that each offer service to one or two cities, and based on its current outlays, it cannot match or beat those competitors on price. Because of long-term contracts and an increase in the cost of gasoline, it is not possible to reduce expenditures at this time. Which of these strategies should Ride N Styles pursue instead?

pursue a differentiated strategy

Managers can justify using the balanced-scorecard framework because research show that both ________ and ________ performance dimensions are important when examining the effectiveness of a firm's strategy.

quantitative, qualitative

Due to resource immobility, a critical assumption in the resource-based model of a firm, the

resource differences between firms last for a long time.

________ precisely indicates how much of a firm's sales is converted into profits.

return on revenue

Dynamic capabilities are especially relevant for surviving and competing in markets that

shift quickly

Which of the following is the best characterization of sociocultural forces?

society's culture, norms, and values

A firm's ________ relates to its ability to create value for customers (V) while containing the cost to do so (C).

strategic position

Successful ________ requires managers to design and shape structure, culture, and control mechanisms.

strategy implementation

A high percentage of R&D/Revenue ratio indicates a(n)

strong focus on innovation to improve current products and services.

Which of the following statements accurately brings out the difference between tangible and intangible resources?

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

Which of the following will most likely be considered as an airlines core competency?

the airline's ability to make its fleet more fuel efficient than their competitors

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

Amelia has recently started a restaurant in a commercial area that already has many other established restaurants and popular fast-food chains. Amelia owns the building in which her restaurant is located, rather than leasing premises as her competitors do. This factor allows her to offer her products at a more competitive price. Amelia has also invested a huge amount in designing the restaurant's interior and in equipping the kitchen with the appliances that are most widely used in her industry. In this scenario, which of the following is the most valuable resource for Amelia's business?

the building owned by Amelia, which reduces cost of operations

Viral 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 Viral Apparel is most likely to be considered a rare resource that is contributing to its competitive advantage?

the company's design patents

When the laptop market overtook the desktop market, Blue Tech Inc., a leader in desktop technology, was left at a competitive disadvantage. Later, Blue Tech Inc.'s management channeled all of the company's efforts and revenue to develop an efficient laptop from scratch in less than a year. However, the company failed because Blue Tech Inc.'s models were inferior to the third- and fourth-generation models its competitors were selling. In this scenario, Blue Tech Inc.'s failure can be best attributed to

time compression diseconomies

Which of the following is an external performance metric?

total return to shareholders

Which of the following features about a buyer indicates that the buyer has high bargaining power?

when the buyer operates in an industry where products are undifferentiated

You are the manager of Value Printing, a leading print shop. Value's resources include a highly experienced staff and state-of-the-art printing presses. However, your closest competition has started to cut into your market share by offering same-day turnaround on most orders. Although your staffing and equipment is not optimized for rapid production, you decide to start offering a same-day guarantee to your customers. According to the resource-based view, what is wrong with this decision?

you have failed to take into account resource immobility