Exam 1
A "perfectly competitive" industry is one that
All of the answers are correct
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?
B) Reduce supply. Customers generally reduce their purchases of luxury items when the economy falters.
A firm is said to gain a competitive advantage when it can
B) provide products similar to its competitors, but at lower prices.
Which of the following scenarios illustrates a firm that has a sustainable competitive advantage?
Bill and Ted Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years.
Chris is the manager of a graphic design firm, and he relies on a top-down strategic management approach to maintain tight control over the activities of his employees. The company has recently started to lose market share to its more innovative competitors, and Chris wants to encourage his employees to start contributing to the strategy formulation process to make the company more competitive. Which of the following steps should Chris take?
Designate Friday afternoons as time for employees to pursue outside interests loosely related to the business.
MoreCash Inc. is a major financial services corporation. With the CEO of MoreCash Inc. preparing to retire, several top managers are vying for the position. Jared considers himself to be a leading candidate. He not only has advanced degrees from business schools and more than a decade of experience working for MoreCash Inc., but he also has personally ensured that his division has exceeded its performance benchmarks over the past three years, even though many of his employees are dissatisfied because they feel they are stagnating in their jobs. According to the Level-5 leadership pyramid, why has Jared failed to exhibit the qualities of a Level-5 leader?
He is not able to help others reach their full potential.
As the strategic manager of ShRPer Scissors, you are tasked with producing a strategy for introducing a new line of premium scissors. Your competitor produces a line of similar scissors at a cost of $1 and sells them for $12. Because your company has inferior production capabilities, your scissors will cost $3 each to produce. However, your handle is proven to be more comfortable than your competitors'. Assuming you are guaranteed to sell the same number of units as your competitor, which of the following strategies is most likely to achieve a competitive advantage?
Market ShRPer scissors as a higher-quality alternative and sell them for $15.
In nearly every case, which of the Five Forces is the most important in determining the relative power structure in an industry?
No single force is dominant in most every case.
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?
ShipING Inc. will be less competitive than Shippity because of its smaller investment in tangible assets.
The "diagonal assembly system" was a production system pioneered by the automobile company Gogo. Recently, Gogo was able to sue a competitor and won the suit, thereby receiving $100 million in damages. Which of the following would most likely enable Gogo to win such a lawsuit?
The competitor infringed on Gogo's patent of the "diagonal assembly system."
Which of the following best represents a customer-oriented vision statement?
We provide solutions to professional communication needs."
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?
Your business is not organized to capture value.
BestReads spent 10 million dollars to buy the rights to a best-selling novel. The company then prepared for production by hiring a screenwriter to adapt the novel, casting the main roles, renting cameras and other equipment, and scouting locations in southern Montana. Which of the following pairs of resources areboth intangible?
best-selling novel; screenwriter's experience adapting novels
Writer Button Inc. and Horner Inc. are two companies that have been manufacturing typewriters for almost 30 years. Due to the reduced demand for typewriters today, both companies' average return on invested capital is approximately -5 percent. The current industry average is 2 percent. In this scenario, Writer Button Inc. and Horner Inc. most likely have
competitive parity with each other
In the final step of the stakeholder impact analysis, a firm
decides a course of action to address the stakeholders' concerns.
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
diseconomies of scope and scale.
Tesla is addressing environmental concerns regarding the carbon emissions of gasoline-powered cars by building zero-emission battery-powered vehicles. This best represents which of the following PESTEL categories?
ecological
Visionary companies differ from their competition in that
employees in visionary organizations find meaning in their work and are motivated.
To support the rise of emergent strategies, an organization should
empower lower-level employees to take up autonomous actions.
LightningDrive is a leading automobile company. The company has been able to sustain its competitive advantage primarily due to its high-quality and efficient electric motors. Most of its competitors have failed to develop similar electric motors at a reasonable price. Which of the following resource attributes listed in the VRIO framework has helped LightningDrive sustain its competitive advantage?
high costs involved in imitation
ECO Jeans, Inc. had a mission to become the leading producer of environmentally friendly blue jeans, an emerging and in-demand category in the apparel industry. Its strategy involved leveraging a network of organic cotton farmers and suppliers of environmentally responsible synthetic materials to create a product that is durable, attractive, affordable, and 100% recyclable. However, because it did not upgrade its outdated production facilities, ECO Jeans could not assemble its products at a low-enough cost to offer the jeans at a price that was attractive to customers. ECO Jeans' strategy failed because
it failed to consider the competitive challenge.
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.
Lil Anthony's and Amelia's are two restaurants serving Italian cuisine. While Lil Anthony's focuses on providing quick, affordable pasta dishes for the lunch crowd, Amelia's focuses on serving home-style dishes in an upscale, romantic setting. Both companies have been able to gain a competitive advantage. This is most likely because the companies have
pursued distinct strategic positions.
Bob is exploring multiple suppliers in order to find the best price. However, instead of calling all eight potential suppliers, he only reaches out to the first three and bases his selection on those instead of contacting all suppliers. Bob's action best describes the concept of
satisficing.
Dora's Supplies manufactures medical devices. The firm's profitability depends on several variables that are subject to occasional change, including the cost of parts and labor, changes in medical practices, and the price of oil used in both manufacturing and shipping. To account for the potential impact of changes to any of these variables, Dora's Supplies managers should implement a(n) ________ approach.
scenario planning
Which of the following stages of the strategic management process involves an evaluation of a firm's external and internal environments?
strategy analysis
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 raw material supplies
Jalen Corp., a large conglomerate, wants to liquidate its business in certain industries to improve its overall profitability. Which of the following industries would Jalen Corp. find it most difficult to exit?
the steel industry in which the company has obligations like severance pay toward employees
Rub A Dub is a company that manufactures hot tubs. Which of the following best illustrates a product-oriented vision for Rub A Dub?
to be the pioneering manufacturer of hot tubs
The CEO of EveryCar was the child of parents who had difficulty making enough money to support their family. As a result, he and his siblings did not have access to many advantages that children from wealthier families had. This CEO, therefore, emphasized making affordable, low-maintenance vehicles that could be bought by low-income households. Which of the following does this example demonstrate?
upper-echelons theory
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.
When the strong dictatorial rule in Arlington unexpectedly collapsed due to the shocking death of the royal family in an explosion, the nation's economy experienced drastic changes. The laws became more restrictive, the country lost many locally produced resources and products, and the distribution of wealth became inequitable. The unexpected event that led to these changes can best be described as a(n) ________ event.
black swan
Tim's ToothCream has been the leader of dental care products for about 40 years. However, this company relied too long on its competency of reducing cavities without refining or upgrading other aspects of its product. As a result, other personal hygiene companies that began to offer toothpastes with natural whitening agents gained a competitive advantage over Tim's ToothCream. This case is an example of
dynamic capabilities
In the context of the SWOT matrix, which of the following best exemplifies a firm's internal strength?
increase in a firm's customer loyalty
Silvio is a manager at a software firm. The CEO tells him that the industry as a whole has become increasingly profitable over the past five years. Based on this information, Silvio is most likely to expect
increased competition in the future and therefore he should recommend that the company upgrade its products to slow the entry of rival companies.
With the emergence of smartphones, users no longer have to carry a separate music player, a video game, a laptop, or a magazine to keep themselves entertained when traveling. A smartphone is loaded with a variety of applications to satisfy all the customer needs that different industries or products individually satisfied earlier. As a result, the smartphone industry has been posing a threat to a lot of other unrelated industries. What is this phenomenon best known as?
industry convergence
Leslie owns a large portion of Hue Apparel's stock. However, she is not employed by the company. In this scenario, Leslie is the company's
internal stakeholder.
Which of the following is an implication of high employee turnover in a company?
it results in a reduction in the company's intangible-resource stocks.
Core competencies are derived from the combination of
key strategic resources and a firm's capabilities.
36) The government of Pentsu has mandated that the standard minimum wage in the country be increased to $8,000 per year. Which of the following factors in a firm's general environment does this mandate best indicate?
legal factors
Hot Wok Cuisine is a premium Asian restaurant chain that differentiates itself from a large number of competitors by providing exclusively organic Chinese cuisine. It has some pricing power because it provides differentiated products and therefore, has some entry barriers in place. In this scenario, Hot Wok Cuisine is most likely operating in a(n)
monopolistically competitive industry.
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.
three large firms dominate the telecommunication industry of CallsRUs: TeleFone Inc., Cell Comm Corp., and Talk Now Inc. Instead of cutting prices competitively, these firms have resorted to non-price competition through branding and product differentiation. Which of the following industry competitive structures are these companies most likely in?
oligopoly
In the AFI strategy framework, strategy analysis primarily involves
organizing a firm in order to effectively put the formulated strategy into practice.
During an AFI planning session, the managers of the Bronco Motorcycle Corporation decided to place various stages of production in different countries in order to implement the strategy of cutting overhead costs. By doing this, what issue did the firm address?
philanthropic strategy
Homestyle is a company that manufactures and sells home furniture. It sources its materials from another country to keep costs low. An assembly line worker in one of its manufacturing centers noticed that there was increasing concern regarding the potential toxicity of the flame-resistant materials used in the furniture. In response, she compiled a list of nontoxic flame-resistant materials that the company could use. When her manager learned about this, he presented the prospect and got it approved from the top management team. This is an example of the
planned emergence approach.
Which of the following three important stakeholder attributes should managers pay special close attention to in order to better understand stakeholder impact analysis?
power, legitimacy, and urgency
Which of the following statements is true about strategic groups?
profitability varies between different strategic groups.
The executives at Dizzy & Sons Corp. are developing strategic plans to address plausible future situations like rise in the prices of cotton and synthetic fabrics by 20 percent, appreciation in the value of the dollar, increase in the cost of labor by 30 percent, and increase in demand for the company's products. By doing so, the company will be well prepared with its planned responses if any of these situations occurs in the future. Thus, Dizzy & Sons Corp. is employing ________ as the approach to the development of strategy.
scenario planning
An observer may conclude that the organizational culture of Zappos, an online retailer for shoes and clothing, might be the basis for its competitive advantage. However, reverse social engineering to crack Zappos' code of success might be much more difficult for a company trying to exactly imitate its strategy. Thus, the source of Zappos competitive advantage is
socially complex.