Business Policy and strategy Exam #1

The economy of Cadvia is going through a recessionary period. Keeping in mind the macroeconomic factors that can affect firms, which of the following businesses would most likely be the first to get adversely affected during this period?

A travel agency that sells premium cruise holiday packages

In the context of the SWOT matrix, which of the following best exemplifies an external threat to a firm?

An increase in the share prices of a competitor

Cars Alot Inc. proactively ordered several thousand tons of steel a few years ago because the price per ton was exceptionally low, at $700. Currently, the price of steel is nearly double. This has allowed Cars Alot Inc. to manufacture and sell cars at a price lower than its competitors without affecting its profits. In this scenario, which of the following isolating mechanisms has primarily helped Cars Alot Inc. gain competitive advantage?

Better expectation of future resource value

Aimex Inc., a pioneer manufacturer of computer microprocessors, supplies its microprocessors to Omexo Hardware Inc. Together, Aimex and Omexo Hardware compete against Zavex Inc.'s strong position in the laptop market. However, Aimex has recently acquired a small computer hardware company to launch its own line of laptops. This will now make Aimex a supplier as well as a direct competitor to Omexo Hardware. What is this arrangement in business best known as?

Co-opetition

Which of the following statements is NOT true of competitive advantage?

Competitive advantage is not related to a firm's triple bottom line.

Which of the following is primarily a framework to guide managerial decisions in the context of diversification strategies?

Core competence-market matrix

_____ comprises the decisions that senior management makes and the goal-directed actions it takes in the quest for competitive advantage in several industries and markets simultaneously.

Corporate strategy

AllRun Inc. is a sports shoe manufacturing company that solely concentrates on developing highly affordable shoes for those who wear prosthetic legs. The company aims to bring out the athletic spirit in them through its innovative and low-priced shoes. Which of the following business strategies does this best exemplify?

Focused cost-leadership strategy

The return on revenue (ROR) for Oniyo Electronics Inc. is 28%. What does this financial data suggest?

For every $100 in revenues, Oniyo Electronics earns $28 in profit.

First Foods Inc., a company that produces a variety of processed foods, sold its canned baked beans to major food companies who then sold the product to customers under their own brand names. Thus, First Foods only acted as a manufacturer in the industry value chain. However, the company soon realized that it would earn more profits by selling its canned baked beans directly to customers. Hence, it launched its own brand "Bean Cult" and distribution channel to directly sell its canned baked beans to the customers. What does this scenario best illustrate?

Forward vertical integration

Both Future Autos Inc. and Fire Autos Inc. incur a cost of $12,000 to manufacture a single unit of a car. However, Future Autos creates more economic value than Fire Autos. Which of the following statements is true in this scenario?

Future Autos has an advantage over Fire Autos based on superior product differentiation.

Although Tesla Motors has been successful in entering the U.S. automotive market using innovative new technology, its continued success will depend on other firms and industry factors. Which of the following, if true, is an industry factor that will play a role in Tesla Motors' future success?

If the bargaining power of buyers is strong because they have many choices.

Which of the following is true of the resource-based view of competitive advantage?

It systematically aids in identifying core competencies and sees means as key to superior firm performance.

_____ is best described as a firm's performance metric that captures the total dollar market value of all of a company's outstanding shares at any given point in time.

Market capitalization (or market cap)

_____ is the value-cost relationship that captures the result of performing best practices at any given time.

Productivity frontier

Which of the following scenarios best illustrates strategic equivalence as a way to imitate a firm's valuable and rare resource?

Rare Books Inc. duplicates the financial model of Booker Inc. but is the only company that sells its collection of rare books exclusively online.

How is a firm's receivables turnover best expressed?

Receivables turnover (Revenue / Accounts receivable)

Which of the following sources of differential appeal is most effective in helping a firm sustain its advantage?

Reputation for innovation

With regard to the resource-based model, one of the assumptions made about Southwest Airlines (SWA) is that SWA has been able to sustain a competitive advantage because its resources and capabilities are difficult to imitate and do not easily leave the firm. Which of the following is a reason for this resource immobility?

Resource bundles differ across firms

Which of the following is a critical assumption behind the resource-based view of competitive advantage?

Resource bundles differ across firms operating in the same industry.

Home&More is a specialty store that sells home and office furniture, upholstery, and other decorative accessories. The company's strong brand equity, loyal customer base, and highly efficient sales staff have helped make it the market leader. Competitor companies have unsuccessfully tried imitating the resource bundles and firm capabilities that make Home&More unique. However, Home&More remains the market leader. Which of the following assumptions of the resource-based model of competitive advantage does this scenario best illustrate?

Resource immobility

_____ is best described as the money provided by shareholders in exchange for an equity share in a company.

Risk capital

Which of the following assets will be categorized under resource stocks?

Ritz-Carlton's excellence in customer responsiveness

Which of the following external factors is a part of a firm's general environment?

The currency exchange rates of the economy in which the firm operates

Which of the following is a risk associated with a firm vertically integrating along its value chain?

The firm will face legal repercussions if it tries to create a monopoly industry structure.

Which of the following factors is most likely to break up a consolidated industry structure so that it becomes a more fragmented one?

The occurrence of external shocks to an industry

Which of the following statements accurately brings out the difference between a perfectly competitive industry and a monopolistically competitive industry?

While all firms in a perfectly competitive industry sell more or less identical products, firms in a monopolistically competitive industry offer products with unique features.

The goal of a generic differentiation strategy is to:

add unique features to goods and services to increase their perceived value.

The _____ is a strategy implementation tool that harnesses multiple internal and external performance metrics in order to balance financial and strategic goals.

balanced scorecard

A(n) _____ is best described as an organizational plan that details a firm's competitive tactics and initiatives.

business model

A firm that follows a differentiation strategy:

can sell its products or services at a premium price.

A(n) _____ is best described as a product, service, or competency that adds value to the original product offering when the two are used in tandem.

complement

In a perfectly competitive industry:

consumers make purchasing decisions solely on price.

Ketone Inc. has been a market leader in the pharmaceutical industry for more than 10 years. Due to its breakthrough research activities and groundbreaking development, Ketone Inc. has consistently been able to stay ahead of the other pharmaceutical companies. Ketone Inc.'s unique strength in research and development can be referred to as its _____.

core competency

The concept _____ best describes the savings that come from producing two (or more) outputs at less cost than producing each output individually, despite using the same resources and technology.

economies of scope

P&G differentiates itself from its competitors by offering branded consumer product goods with distinct features and attributes. This business strategy implies that P&G:

focuses on increasing the perceived value created for customers, which allows it to charge a premium price.

The Boston Consulting Group (BCG) growth-share matrix is a tool primarily used to:

guide corporate portfolio planning.

An integration strategy is quite difficult to translate into reality because it:

involves increasing value and lowering cost, which have opposite effects.

Google hires programmers to write software code in-house because:

its costs associated with maintaining computer programmers are less than what they would be in the open market.

A cost leader primarily focuses on:

offering lower prices than that of the competitors by reducing production costs.

Higher ratios of _____ indicate inefficiency and are disadvantageous to a firm.

payables turnover

In the context of the value chain analysis, a firm's customer service activities are referred to as its _____ activities.

primary

Univer Electonics Inc. charges $900 for a television for which it incurs a total cost of $400. The difference amount, $500, is referred to as the _____.

producer surplus

Viosa, a luxury brand, earns 70 percent of its revenues from its shoe line and the rest of its revenues from its line of leather bags. On the basis of this information, we can conclude that the firm is pursuing the:

related diversification strategy.

General Electric (GE) was engaging in _____ when it divested business units like NBC Universal and split its energy business into three standalone strategic business units.

restructuring

When a company defines its _____, it is primarily determining whether to pursue a specific, narrow part of the market or go after the broader market.

scope of competition

A diversification discount is a situation in which the:

stock price of highly diversified firms is valued at less than the sum of their individual business units.

A(n) _____ is best described as a set of companies that pursue a similar strategy within a specific industry in their quest for competitive advantage.

strategic group

In _____, the firm sources intermediate goods and components from in-house suppliers as well as outside suppliers.

taper integration

In an industry, the power of buyers is high when:

they can threaten to backwardly integrate into the industry.

The _____ approach considers a combination of economic, social, and ecological concerns that can lead to a sustainable strategy.

triple bottom line