Business Strategy Midterm Exam
_____ 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. Answer:A
A) Market cap B) Total return to shareholders C) Market share D) Return on revenue
How is a firm's receivables turnover best expressed? Answer:B
A) Accounts receivable / Profit B) Revenue / Accounts receivable C) Accounts receivable / Working capital D) Cost of goods sold / Accounts receivable
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? Answer:C
A) An apparel store that sells clothes at a discounted price B) A supermarket that offers everyday low pricing on most of its items C) A travel agency that sells premium cruise holiday packages D) A pharmaceutical company that manufactures drugs for diabetics and hypertension
Which of the following assets will be categorized under resource stocks? Answer: D
A) Apple's headquarters on Infinite Loop in Cupertino B) Google's server farms C) Hyundai's plant and machinery D) Ritz-Carlton's excellence in customer responsiveness
Which of the following sources of differential appeal is most effective in helping a firm sustain its advantage?
A) Availability of complements B) Imitable product features C) Observable service features D) Reputation for innovation Answer:D
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? Answer:A
A) Better expectation of future resource value B) Path dependence C) Causal ambiguity D) Time compression economy
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? Answer:B
A) Cartel B) Co-opetition C) Amalgamation D) Conglomeration
Which of the following statements is NOT true of competitive advantage? Answer: D
A) Competitive advantage is reflected in superior firm performance. B) Competitive advantage is a multifaceted concept. C) Competitive advantage is not an absolute measure. D) Competitive advantage is not related to a firm's triple bottom line.
___ is the value-cost relationship that captures the result of performing best practices at any given time.
A) Demand function B) Experience-curve effect C) Minimum efficient scale D)Productivity frontier Answer: D
The return on revenue (ROR) for Oniyo Electronics Inc. is 28%. What does this financial data suggest? Answer:B
A) For every dollar Oniyo Electronics puts to work, the company realizes $28 of sales. B) For every $100 in revenues, Oniyo Electronics earns $28 in profit. C) For every dollar invested, Oniyo Electronics pays its shareholders an interest of $28. D) For every $28 in revenues, Oniyo Electronics incurs a cost of $1.
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? Answer:D
A) Future Autos has a cost advantage over Fire Autos. B) Future Autos and Fire Autos have achieved a competitive parity within the automobile industry. C) Future Autos has to sell its cars at a lower price than that of Fire Autos. D) 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? Answer:B
A) If the bargaining power of suppliers in the electric car segment is weak. B) If the bargaining power of buyers is strong because they have many choices. C) If Tesla Motors' managers follow a cost-leadership strategy. D) If there is a high rate of turnover among the management in Tesla Motors.
Which of the following is true of the resource-based view of competitive advantage? Answer:B
A) It enables managers to see how competitive advantage flows from the firm's distinct set of activities. B) It systematically aids in identifying core competencies and sees means as key to superior firm performance. C) It allows managers to synthesize insights obtained from an internal analysis of a company with those obtained from an analysis of its external opportunities and threats. D) It allows managers to group business units based on their growth, market share, and assessed value of resources.
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? Answer:C
A) Lack of imitation attempts from rival firms like Continental and Delta B) Perfect competition in the airline industry C) Resource bundles differ across firms D) Competitive advantage based on valuable and rare resources can last forever
Which of the following scenarios best illustrates strategic equivalence as a way to imitate a firm's valuable and rare resource? Answer:D
A) Onyxo Automobiles Inc. duplicates the inventory and distribution system of Mova Autos Inc. so that it becomes more efficient in its operations. B) AZ Phones Inc. copies the exact features and technology of Red Mobiles Inc. and sells its products at a lower cost in less developed countries. C) Mint Pearl Inc. sells its merchandise online to face the competition from ClothesForAll.com. D) Rare Books Inc. duplicates the financial model of Booker Inc. but is the only company that sells its collection of rare books exclusively online.
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?
A) Product diversification strategy B) Direct imitation strategy C) Mass market strategy D)Focused cost-leadership strategy Answer:D
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? Answer:C
A) Resource curse B) Resource depletion C) Resource immobility D) Resource homogeneity
Which of the following is a critical assumption behind the resource-based view of competitive advantage? Answer:B
A) Resources and capabilities are equally available to all firms. B) Resource bundles differ across firms operating in the same industry. C) Resource bundles are easy to replicate and therefore, cannot last for a long time. D) Resources tend to be highly mobile and move freely across firms.
A) Accounts receivable / Profit B) Revenue / Accounts receivable C) Accounts receivable / Working capital D) Cost of goods sold / Accounts receivable Answer:C
A) Royalty fee B) Stock dividend C) Risk capital D) Trade credit
In the context of the SWOT matrix, which of the following best exemplifies an external threat to a firm? Answer:B
A) The amount spent by a company on employee benefits B) An increase in the share prices of a competitor C) The causally ambiguous resources of a company D) A fall in the firm's employee turnover
Which of the following external factors is a part of a firm's general environment? Answer:A
A) The currency exchange rates of the economy in which the firm operates B) The composition of the strategic group to which the firm belongs C) The structure of the industry in which the firm operates D) The knowledge and skills of the firm's employees
Which of the following factors is most likely to break up a consolidated industry structure so that it becomes a more fragmented one? Answer:A
A) The occurrence of external shocks to an industry B) The occurrence of horizontal mergers and acquisitions in the industry C) The existence of fewer competitors in a fragmented industry D) The greater profitability of fragmented industries
Which of the following statements accurately brings out the difference between a perfectly competitive industry and a monopolistically competitive industry? Answer:C
A) While there are a large number of firms in a perfectly competitive industry, a monopolistically competitive industry is dominated by one large firm. B) Firms in a monopolistically competitive industry can only achieve competitive parity, whereas firms in a perfectly competitive industry can easily gain a competitive advantage. C) 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. D) Sellers in a monopolistically competitive industry have no pricing power, whereas sellers in a perfectly competitive industry have the freedom to raise prices.
The _____ approach considers a combination of economic, social, and ecological concerns that can lead to a sustainable strategy. Answer:C
A) balanced scorecard B) economic value creation C) triple bottom line D) shareholder value creation
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.
A) break-even point B) economies of scope C) returns to scale D) network effects Answer:B
A firm that follows a differentiation strategy:
A) can sell its products or services at a premium price. B) has to sell its products or services at its cost price. C) can only sell its products or services below their cost per unit. D) has to have the lowest prices in its strategic group. Answer:A
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 _____. Answer:A
A) core competency B) primary activity C) market liquidity D) capital gain
The _____ is a strategy implementation tool that harnesses multiple internal and external performance metrics in order to balance financial and strategic goals. Answer:B
A) economic value creation framework B) balanced scorecard C) 360 degree performance appraisal D) network externalities model
In a perfectly competitive industry: Answer:D
A) entry barriers are extremely high. B) individual firms have the power to set their own prices. C) individual firms can easily gain and sustain competitive advantage. D) consumers make purchasing decisions solely on price.
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: Answer: A
A) focuses on increasing the perceived value created for customers, which allows it to charge a premium price. B) is primarily focusing on achieving a differentiation parity with its competitors. C) is pursuing a cost-leadership strategy by focusing on increasing the perceived value created for customers. D) focuses on pricing its products lower than its competitors. Answer:A
The goal of a generic differentiation strategy is to:
A) lower the cost of production to have a cost advantage over competitors. B) reduce the value gap created by a firm. C) add unique features to goods and services to increase their perceived value. D) sell products and services at the lowest price in the industry. Answer:C
Higher ratios of _____ indicate inefficiency and are disadvantageous to a firm. Answer:A
A) payables turnover B) inventory turnover C) receivables turnover D) return on revenue
In the context of the value chain analysis, a firm's customer service activities are referred to as its _____ activities. Answer:A
A) primary B) support C) indirect D) ancillary
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 _____. Answer:A
A) producer surplus B) consumer surplus C) break-even price D) reservation price
A(n) _____ is best described as an organizational plan that details a firm's competitive tactics and initiatives. Answer:B
A) promissory note B) business model C) executive summary D) Gantt chart
A cost leader primarily focuses on:
A) reducing the value gap by bringing down its costs. B) offering unique products and services so as to charge a premium price. C) offering lower prices than that of the competitors by reducing production costs. D) using value drivers, like superior customer service, to differentiate itself from competitors. Answer:C
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.
A) scope of competition B) chain of command C) locus of control D) scalar chain Answer:A
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. Answer:A
A) strategic group B) industry mix C) focus group D) stratified sample
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. Answer:B
A) substitute B) complement C) superior good D) augmented product
In an industry, the power of buyers is high when: Answer:D
A) they purchase small quantities. B) the industry's products are highly differentiated and unstandardized. C) they face high switching costs. D) they can threaten to backwardly integrate into the industry.
An integration strategy is quite difficult to translate into reality because it:
A) treats investments in differentiation and low cost as substitutes for each other. B) focuses on achieving the lowest value gap in the industry. C) involves increasing value and lowering cost, which have opposite effects. D) involves making a choice between two generic strategies, differentiation or cost-leadership. Answer:C