CIS 321 Chapter 2

Which of the following is a source of bargaining power of buyers? a. Greater choice of products b. High switching costs c. Loyalty programs d. Network effects e. Unique and highly differentiated products

a. Greater choice of products

Businesses benefit from economies of scale when the cost of an investment can be: a. spread across increasing units of production. b. used in serving a niche and loyal customer base. c. used to build a brand image for products through advertising. d. leveraged to recruit consumers to promote a product or service. e. diverted to implementing technology upgrades in the business model.

a. spread across increasing units of production.

Benefits related to a firm's size are referred to as _____. a. network effects b. brand recall c. scale advantages d. vertical integration e. disintermediation

c. scale advantages

A(n) _____ is the symbolic embodiment of all the information connected with a product or service. a. trademark b. copyright c. patent d. brand e. advertisement

d. brand

Leveraging consumers to promote a product or service is known as _____. a. straddling b. affiliating c. long tailing d. crowdsourcing e. viral marketing

e. viral marketing

A firm's financial performance that consistently outperforms its industry's peers is known as operational effectiveness.

False

A salesperson's ability to effectively bargain with his/her consumers is called viral marketing.

False

A trademark is the symbolic embodiment of all the information connected with a product or service of a firm.

False

According to Michael Porter, the reason many firms suffer margin-eroding competition is because they have defined themselves according to strategic positioning rather than operational effectiveness.

False

According to the resource-based view of competitive advantage, if a firm is to maintain sustainable competitive advantage, it must control a set of exploitable resources that are valuable and can be substituted easily.

False

Businesses benefit from economies of scale when the cost of an investment can be used in serving a niche customer base.

False

Commodities are products or services that vary across multiple vendors.

False

Fast growing Groupon was able to dissuade rivals from entering its market because the firm's technology was so difficult to replicate.

False

If a firm's goods are highly differentiated, the Internet typically lessens the firm's bargaining power as a supplier.

False

Market entry is the same as building a sustainable business.

False

Metcalfe's Law is used to explain the concept of switching costs.

False

Network externalities exist when a product or service becomes less expensive as more people use it.

False

A firm can benefit from high switching costs, even when rivals offer free products.

True

Cisco's acquisition of Pur Digital, makers of the Flip video camera line, was largely considered a flop because comparable technology soon became a feature in other popular consumer electronics products.

True

Firms that build an imitation-resistant value chain develop a way of doing business that others struggle to replicate.

True

If there is the availability of a wide variety of undifferentiated commodity goods in a given market, and these products are available online, then bargaining power typically shifts to the buyer.

True

Many firms choose not to implement operational components of ERP software and instead elect to create their own propriety solutions in part because they see their uniqueness in certain operations areas as key to creating difficult-to-imitate competitive advantages.

True

The internet is largely seen as lowering the entry barrier for new entrants, but firms that enter may have little chance of success unless they have a competitive advantage over existing rivals.

True

The scale of technology investment required to run a business can act as a barrier to entry by discouraging new, smaller competitors.

True

Timing and technology alone will not yield sustainable competitive advantage.

True

Uber is an example of a business model that has strengthened the bargaining power of suppliers (cab drivers) with respect to middlemen who took a cut of their services (e.g. cab companies).

True

When technology can be matched quickly, it is rarely a source of competitive advantage.

True

How did Apple trump Google to become the dominant mapping platform on iOS? a. Apple's control of iOS gave it control of the distribution channel to reach its users, kicking Google out as the default mapping app and capturing the majority of user engagement. b. Apple sued Google for copyright infringement related to the look and feel of Apple Maps. c. Apple sued Google for privacy violations related to the collection of map data. d. Apple hasn't trumped Google Maps. Google's Map app is used by the majority of iOS customers, whereas most users ignore Apple Maps.

a. Apple's control of iOS gave it control of the distribution channel to reach its users, kicking Google out as the default mapping app and capturing the majority of user engagement.

Which of the following represents one of the primary components of the value chain? a. Outbound logistics b. Firm infrastructure c. Human resource management d. Research and development e. Procurement

a. Outbound logistics

According to Porter, strategy is fundamentally about being _____. a. different b. efficient c. superior d. scalable e. profitable

a. different

Many telecom firms began digging up the ground and laying webs of fiberglass to meet the growing demand for Internet connectivity. However, rivals and startups began to imitate these firms and soon these new assets were not so rare and each day they seemed to be less valuable. It can be inferred from this example that: a. resource-based thinking can help avoid the trap of carelessly entering markets simply because growth is spotted. b. the telecommunications market is only big enough to support one or two major players. c. the immense scale advantages enjoyed by major firms can help them fight off competition from newer entrants. d. technology assets that require high investment and maintenance are liable to becoming obsolete much quicker than others. e. the scale of technology investment required to run a business is not a huge enough factor to act as a barrier to entry for new, smaller competitors.

a. resource-based thinking can help avoid the trap of carelessly entering markets simply because growth is spotted.

If a new entrant hopes to attract customers from an established incumbent, the new entrant must ensure that the value they offer exceeds the incumbents' value in addition to any perceived _____. a. switching costs b. market depreciation c. brand benefits d. advertising expenses e. scale advantages

a. switching costs

Dell, previously the world's number one PC manufacturer, has seen its market share shrink because of rivals copying its value chain and reducing the price advantage it enjoyed over rivals. Dell's present struggles: a. underscore the importance of continually assessing a firm's strategic position among changing market conditions. b. are a result of rivals adopting supply chain management of software products that have yielded competitive advantages. c. imply that publicly traded firms are at a disadvantage in the technology sector. d. highlight the fact that scale advantages of an established firm are a huge factor in discouraging newer entrants to a market. e. demonstrate that resource-based thinking can help firms avoid the trap of carelessly entering markets simply because growth is spotted.

a. underscore the importance of continually assessing a firm's strategic position among changing market conditions.

_____ exist when consumers incur an expense to move from one product or service to another. a. Network effects b. Switching costs c. Economies of scale d. Competitive advantages e. Profit margins

b. Switching costs

Sometimes technology can sound geeky and so technical that executives might think that it doesn't require managerial or investor attention. However many investing in the telecom sector suffered from a lack of insight on how a key technology was impacting their industry. Telecom firms failed to anticipate the impact of a technology known as ____________, which enabled existing fiber to carry more transmissions than ever before. a. radio frequency identification (RFID) b. dense wave division multiplexing (DWDM) c. cloud computing d. open source software

b. dense wave division multiplexing (DWDM)

Operational effectiveness refers to: a. the implementation of technology in a business context. b. performing the same tasks better than rivals perform them. c. the number of times inventory is sold or used during the course of a year. d. performing different tasks or the same tasks in different ways. e. matching the benefits of a successful position while maintaining an existing position.

b. performing the same tasks better than rivals perform them.

Consumers buying commodities are highly _____ since they have so many similar choices. a. quality-conscious b. price-focused c. brand-driven d. technologically discriminating e. loyal

b. price-focused

A firm is said to be _____ when it attempts to match the benefits of a successful position while maintaining its existing position. a. switching b. straddling c. dovetailing d. streamlining e. vertically integrating

b. straddling

The set of activities through which a product or service is created and delivered to customers is known as a(n) _____. a. marketing plan b. value chain c. inventory turnover d. strategic position e. pure play

b. value chain

How does the Internet typically impact price transparency and information asymmetry? a. Both price transparency and information asymmetry increase b. Both price transparency and information asymmetry decrease c. Price transparency increases while information asymmetry decreases d. Price transparency decreases while information asymmetry increases.

c. Price transparency increases while information asymmetry decreases

_____ refers to performing different tasks than rivals or the same tasks in a different way. a. Straddling b. Operational effectiveness c. Strategic positioning d. Vertical integration e. Scale advantage

c. Strategic positioning

Moving first pays off when the time lead is used to create: a. the latest technology at a firm's production plant. b. operational effectiveness to harness maximum profitability. c. critical resources for competitive advantage. d. high stock value to generate funds for expansion. e. market entry to ensure sustainable competitive advantage.

c. critical resources for competitive advantage.

The paths through which products or services get to customers are known as _____. a. information pathways b. vertical markets c. distribution channels d. proxy networks e. horizontal markets

c. distribution channels

The resource-based view of competitive advantage states that for a firm to maintain sustainable competitive advantage it must control a set of exploitable resources that have four critical characteristics. What are these characteristics? a. inventory turns, high margins, long account payable periods, brand building relationships b. operational effectiveness, strategic positioning, scale, distribution channels c. rareness, value, imperfect imitability, non substitutability d. a web site, an app, cloud-based systems, a savvy technology staff

c. rareness, value, imperfect imitability, non substitutability

A firm's financial performance that consistently outperforms its industry's peers is known as _____. a. comparative advantage b. absolute advantage c. sustainable competitive advantage d. first mover advantage e. operational efficiency advantage

c. sustainable competitive advantage

Startup firms can struggle to gain lower prices from rivals, but FreshDirect seems to have found several ways to gain lower supplier prices. FreshDirect buys direct from suppliers, eliminating any markup from a middleman. In addition to this, the firm employs other methods to get lower prices from suppliers. Which of the following is not a way FreshDirect helps suppliers in exchange for supplier agreement to offer it better pricing terms? a. FreshDirect carries a greater selection of supplier products b. FreshDirect will cobrand products from suppliers c. FreshDirect pays suppliers faster than rivals d. FreshDirect shares warehouse space with farmers and livestock producers e. FreshDirect shares data on customer insights with suppliers

d. FreshDirect shares warehouse space with farmers and livestock producers

_____ Law is said to be at play when the value of a product or service increases as its number of users expands. a. Amdahl's b. Turing's c. Zuckerberg's d. Metcalfe's e. Moore's

d. Metcalfe's

Which of the following statements about technology is true? a. Technology alone is enough to provide sustainable competitive advantage to a firm. b. Technology plays a marginal role in creating strategic differences. c. Technological improvements are not important in strengthening a firm's strategic advantages. d. Technological improvements can often be copied by rivals, leading to a profit-eroding arms race. e. Technology cannot be used by late entrants to gain a share of the industry.

d. Technological improvements can often be copied by rivals, leading to a profit-eroding arms race.

Which of the following is one of Porter's five forces? a. Availability of coopetitors in the market b. Total cost of ownership c. Purchasing power parity of consumers d. Threat of new entrants e. Strength of intellectual property laws

d. Threat of new entrants

Which of the following is not highlighted as a source of switching costs? a. Learning costs b. Information and data c. Search costs d. Viral marketing e. Loyalty programs

d. Viral marketing

Apple's dominance of smartphone and tablet markets has allowed the firm to lock up 60 percent of the world's supply of advanced touch-screen displays, and to do so with better pricing than would be available to smaller rivals. This is an example of: a. network externalities that make Apple valuable. b. high switching costs for suppliers. c. a complex tech product establishing itself as a killer brand. d. a growing firm gaining bargaining power with its suppliers. e. low search costs associated with a famous brand.

d. a growing firm gaining bargaining power with its suppliers.

The patent system is often considered to be unfairly stacked against start-ups because: a. bigger multinational firms enjoy patent protection in all countries as opposed to start-ups, which are domestic firms that do not get such protection for the most part. b. the intellectual property laws are not adequate to protect the interests of smaller firms from infringements. c. the patent system grants patents for innovations on a differential basis, with bigger firms getting precedence over start-ups. d. high litigation costs coupled with a few months of litigation can sink an early stage firm. e. patents are granted by the patent system on an ad hoc basis wherein firms that have been in business longer get patent protection for longer periods of time.

d. high litigation costs coupled with a few months of litigation can sink an early stage firm.

The degree to which complete information is available is known as _____. a. information assurance b. data proximity c. operational alertness d. price transparency e. data consolidation

d. price transparency

A strong brand can be an exceptionally powerful resource for competitive advantage by lowering ________, proxying _____ and inspiring _____. a. price; strategy; innovation b. switching costs; quantity; performance c. expenses; marketing; respect d. search costs; quality; trust e. customer concern; investment; profits

d. search costs; quality; trust

In _____, the light inside fiber is split into different signal-carrying wavelengths in a way similar to how a prism splits light into different colors. a. polarization b. time-division multiplexing c. space-division multiplexing d. frequency hopping spread spectrum e. dense wave division multiplexing

e. dense wave division multiplexing

The _____ problem exists when rivals watch a pioneer's efforts, learn from their successes and missteps, and then enter the market quickly with a comparable or superior product at a lower cost. a. late entrant b. early starter c. first mover d. intellectual property e. fast follower

e. fast follower

Netscape, which once controlled more than 80 percent of the market share in Web browsers, lost its dominant position when customers migrated to Internet Explorer, Microsoft's Web browser. Internet Explorer was easy to install and had no significant differences in terms of usability. This example serves to illustrate that: a. fast-following smaller firms are always ready with newer and possibly superior products. b. customers of technology companies are becoming increasingly savvy and more demanding. c. the open source nature of technology ensures that no firm can expect to monopolize a market. d. firms need to employ increasingly stringent intellectual property norms to guard against infringements from smaller, competitive rivals. e. firms with low switching costs can sometimes be rapidly overtaken by strong rivals with additional competitive advantages.

e. firms with low switching costs can sometimes be rapidly overtaken by strong rivals with additional competitive advantages.