BUSA 4995 Exam 1 Sample Exam

true

Firms that operate in industries that are informationally complex, require customers to know a great deal in order to use the industry's products, require a great deal of R&D, and have a significant economies of scale are more likely to have sustained competitive advantage than those firms in industries without those characteristics

substitute

In this example, composite wood furniture would be an example of

external stakeholder

Pure Food Inc., a multinational company, relies on its media partners Radio Ex to regularly advertise its offers, sales, and new products. Radio Ex is invested in this relationships because it generates most of its revenue from advertising Pure Food's products. In this scenario, Radio Ex is Pure Food Inc.'s

understand the profit potential of different industries

The primary object of Porter's five forces model is to

False; the ability of managers to control and operate the firm efficiently is limited and therefore costs do substantially increase

As a firm increases in size, it often increases in complexity; however, the ability of managers to control and operate the firm efficiently are virtually unlimited and therefore costs do not substantially increase

False; business level strategies consider how to position a business in the market. Two Generic Business Level Strategies are cost leadership and product differentiation

Business level strategies are actions firms take to gain competitive advantages by operating in multiple markets or industries simultaneously

external analysis

Green Frog is an environmentally friendly firm in the cosmetics industry. If during the strategic planning process Green Frog tried to determine the critical threats and opportunities in its competitive environment, it would be performing a

fragmented

Hickory Divine is one of the leading manufacturers in the hardwood furniture industry. Hickory Divine has many small competitors, none of which controls a significant portion of the industry. Hickory, like most of the furniture manufacturers, sells its products to a broad variety of small furniture stores throughout the country, none of which represents a large percentage of Hickory's sales. When purchasing the products it uses for manufacturing its furniture, Hickory is able to choose from many suppliers since the wood it uses is an undifferentiated commodity, and Hickory is able to easily switch to any supplier that has the best price and delivery times. While growth in the hardwood furniture industry has historically been in the double digits, the industry growth rate has slowed considerably into the single digits, to approximately 5% in recent years; consumers have been purchasing less expensive furniture made of composite wood that is considerably less expensive than hardwood furniture but that looks and functions very similarly once it is painted. Based on the above description, the hardwood furniutre industry can best be described as a _____ industry

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

If SA Pharmaceuticals 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?

rare

In general, as long as the number of firms that possess a particular valuable resource or capability is less than the number of firms needed to generate perfect competition dynamics in an industry, that resource or capability can be considered _____ and a potential source of competitive advantage

False; if suppliers are threatened by substitutes, the focal firm can choose to buy from multiple suppliers who provide the products in a different way but filling the same need. It suggests that the threat from suppliers will be lower

Suppliers are a greater threat to firms in an industry when suppliers are threatened by substitutes

Ryanair

The best example of a firm following a cost-leadership strategy is

Groupon's competency was not hard to imitate

The share price of Groupon, a daily-deal website, fell by 90 percent just a year after its successful initial public offering. The firm was not able to sustain its competitive advantage because of the emergence of other daily-deal sites that were able to better serve the needs of local markets and specific population groups. Which of the following is the most accurate inference from this example?

threat of new entrants is most likely low

The telecom industry in the country of Andalus is an industry characterized by the presence of strong network effects, high brand loyalty, high economies of scale, and proprietary technology among incumbent firms. Thus, in the telecom industry, the

low because there are a large number of suppliers selling an undifferentiated product

The threat of suppliers in the hardwood furniture can best be described as

Digi Future and True Cinemas will not be direct competitors to each other and their customer segments will overlap very little

True Cinemas Inc. and Digi Future Inc. are two companies that own and run movie theaters in malls and other commercial areas. While True Cinemas Inc. pursues a cost-leadership strategy, Digi Future Inc. adopts a differentiation strategy. Which of the following statements is most likely true of this scenario?

the expertise acquired by the employees in the company

True Sync Inc. is a software company, which has built and acquired numerous assets over the years. According to the resource-based view of a firm, which of the following assets of True Sync Inc. will best enable it to gain and sustain a competitive advantage?

3,000-4,000 units

When a firm manufactures 2,000-3,000 units of a product, it incurs an average cost of $10 per unit. When it manufactures 3,000-4,000 units of the same product, the average cost per unit reduces to $7. However, manufacturing beyond 4,000 units will raise the average cost per unit to $9. Which of the following is the firm's minimum efficient scale?

the threat of substitutes

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

car manufacturers require large-scale production in order to be cost-competitive

Which of the following factors best contributes to the U.S. automotive industry being characterized by high entry barriers?

the firms would eventually have no resources to invest in product and process improvements

Which of the following is an implication of all firms in an industry pursuing low-cost position through application of competitive benchmarking?

overall industry profitability will increase

Which of the following is likely to happen due to horizontal mergers between competitors such as Delta and Northwest airlines?

No, you would not want to lend your friend the money. The claimed resources of competitive advantage do not meet the VRIO criteria. The sawdust might not even be valuable and the imported beers and late-night delivery are not rare. There should be no expectation that the new pizza restaurant would earn any better than a normal return. In fact, unless your friend is at least as good as the other restaurants, below normal returns would be expected.

Your former college roommate calls you and asks to borrow $10,000 so that he can open a pizza restaurant in his hometown. He acknowledges that there is a high degree of direct competition in this market, that the cost of entry is low, and that there are numerous substitutes for pizza, but he believes that his pizza restaurant will have some sustained competitive advantages. For example, he is going to have sawdust on his floor, a variety of imported beers, and a late-night delivery service. What are the risks in lending him the money?

diseconomies of scale

______ exist when a firm's costs rise as a function of its volume of production

internal analysis

_______ helps a firm understand which of its resources and capabilities are likely to be sources of competitive advantage