Exam 1 MGMT 352

Canon was able to redesign the copying machine so that it didn't need professional service—reliability was built directly into the machine, and the user could replace parts, such as the cartridge. What Xerox had not envisioned was the possibility that the components of the copying machine could be put together in an altogether different way that was more user-friendly. This example describes A. incremental innovation. B. architectural innovation. C. disruptive innovation. D. radical innovation.

B. architectural innovation.

In the context of industrial growth, which of the following statements is true of standards? A. Standards emerge exclusively from bottom-up through competition in the marketplace. B. As the size of a market expands, a standard signals the market's agreement on a common set of engineering features and design choices. C. Standards are exclusively imposed top-down by government or other standard-setting agencies such as the Institute of Electrical and Electronics Engineers. D. After a standard is established in an industry, the basis of competition tends to move away from process innovations toward product innovations.

B. As the size of a market expands, a standard signals the market's agreement on a common set of engineering features and design choices.

In an economic context, strategy for producers is primarily about B. distributing the economic value created equally between consumers and themselves. C. reducing the difference between consumer's willingness to pay for a product and the cost to produce it. A. capturing the economic value created as much as possible. D. lowering producer surplus and increasing consumer surplus.

A. Capturing the economic value created as much as possible

A firm incurs $100 to manufacture an office table. It fixes the market price of the table as $250, and discounts the price to $200. However, the maximum a person is willing to pay for it is $180. What is the amount of total perceived consumer benefits in this scenario? A. $100 B. $200 C. $180 D. $250

C) $180

Tony's Pizza has been trying to directly copy the strategies of Moonlight Pies. Even though its evident that the success of moonlight pies success comes from the freshness and variety of ingredients it uses, Tonys Pizza has not been able to introduce the same types of produce into its recipes. This is because Moonlight's network of relationships with the local growers, as well as its efficient supply chain, are very difficult to emulate. Which of the following barriers to imitation does this scenario best illustrate? a) resource mobility b) resource homogeneity c) path dependence d) social complexity

D) social complexity

T/F: A cost leader is the firm most likely to survive a price war.

True

Economies of scale are cost advantages that accrue for firms with: a) larger cumulative output b) larger output c) high average costs d) high fixed costs

b) larger output

Which of the following is the best characterization of sociocultural forces? a) a strategic group's culture, norms, and values. b) a competitor's culture, norms, and values c) a society's culture, norms, and values d) a firm's culture, norms, and values

c) a society's culture, norms, and values

which of the following is primarily a value driver? a) experience-curve effects b) economies of scope c) complements d) cost of input factors

c) complements

A ___ primarily details the goal-direct actions managers take in their quest for competitive advantage when competing in a single product marker. a) corporate-level strategy b) causal ambiguity c) path dependence d) business-level strategy

d) business-level strategy

The primary object of Porter's five forces model is to: a) reduce the gap between the value of a firm's product and its cost of production. b) understand macroeconomic factors. c) understand valuable, rare, and hard-to-imitate resources. d) understand the profit potential of industries.

d) understand the profit potential of industries

In an industry, the threat of entry is high when: A. capital requirements are low. B) network effects are strong C) switching costs are high D) expected returns are low

A) capital requirements are low

which of the following features about a buyer indicated that the buyer has high bargaining power? A) when the buyer operates in an industry where products are undifferentiated b) when the buyer cannot purchase specific products from other sellers c) when the buyer cannot credibly threaten to backwardly integrate into the industry d) when the buyer faces high switching costs

A) when the buyer operates in an industry where products are undifferentiated

When companies that manufacture shipping containers want to buy iron ore, the purchase decision is solely base on price. This is because there are a large # of sellers in the iron ore industry, and iron ore is a highly undifferentiated commodity. Which of the following industry competitive structures does the iron ore industry best illustrate? A) monopolistic competition B) perfect competition C) oligopoly D) monopoly

B) perfect competition

Combining economies of learning with the existing production technology allows a firm to: A. jump to a less steeper learning curve. B. move down a given learning curve C. move up a given experience curve. D. jump to a flatter experience curve.

B. move down a given learning curve

Clear Calls Inc., a telephone service provider, has a large user base mainly because phone calls and messages between all Clear Calls users are free. When a person switches to a Clear Calls network, his or her entire network of family and friends is likely to switch to the same network to avail the benefit of free calls and messages. In addition, an existing user who gets a new user to register with Clear Calls Inc. is given a free wireless connection. This has helped to keep competition away from Clear Calls. In this scenario, which of the following factors is acting as an entry barrier for Clear Calls Inc.? A. high fixed costs B. network effects C. economies of scale D. high capital requirements

B. network effects

Which of the following statements is accurately brings out the difference between monopolistic competition and an oligopoly? a) firm in an oligopoly have no pricing power; firms in a monopolistically competitive industry have the ability to raise prices b) In an oligopoly, the # of buyers is large; in monopolistic competition, the # of buyers is limited to three or four. c) in a monopolistic competition, many firms compete against each other; in an oligopoly, there are few large firms competing against each other. d) sellers in an oligopoly provide highly differentiated products; in monopolistic competition, the products sold are undifferentiated or standardized.

C) in a monopolistic competition, many firms compete against each other; in an oligopoly, there are few large firms competing against each other.

To be successful and to survive the shakeout stage of the industry life cycle, a firm should: a) shift from price to non-price competition b) gain economies of scale c) focus on product innovation rather than process innovation d) chase higher prices than its competitors

b) gain economies of scale

Which of the following is an accurate statement about learning effects? a) learning effects are captured at one point in time. b) learning effects occur over time as output accumulates. c) learning effects can produce diseconomies d) learning effects are significant in all production processes.

b) learning effects occur over time as output accumulates.

In which of the following situations is the power of suppliers high in an industry? a) suppliers depend heavily on the industry for their revenues b) suppliers' industry is more concentrated than the industry it sells to c) suppliers offer products that are undifferentiated d) suppliers can credibly threaten to backward integrate into the industry

b) suppliers' industry is more concentrated than the industry it sells to

Which of the following most accurately describes a difference between incremental innovation and radical innovation? a) incremental innovation researches new materials; radical innovation researches new processes. b) incremental innovation draws on novel methods; radical innovation draws on proven methods. c) incremental innovation builds on an established knowledge base; radical innovation uses an entirely different knowledge base. d) incremental innovation targets new markets and technologies; radical innovation reinvents markets and technologies.

c) incremental innovation builds on an established knowledge base; radical innovation uses an entirely different knowledge base.

Which of the following is a macroeconomic factor that can affect a firm's strategy? a) threat of substitutes b) power of buyers c) levels of employment d) power of suppliers

c) levels of employment

From an investors' or shareholders' perspective, the measure of competitive advantage that matters most is the A) consumer surplus b) economic value created c) return on risk capital d) returns on revenue

c) return on risk capital

Both Bison Autos and Sparrow Inc. incur a cost of $9,000 to manufacture a vehicle. however, the economic value created by Sparrow Inc. is more than that created by Bison Autos. What does this indicate? a) bison autos has created a higher value gap than sparrow inc. b ) both bison auto and sparrow inc. have achieved competitive parity c) sparrow inc can charge a premium price on it automobiles d) bison autos has a competitive advantage over sparrow inc

c) sparrow inc can charge a premium price on it automobiles

Trendline Architects' core competency is building multi-family housing in urban areas. This competency is based primarily on the decisions made by the company's top management over several years to focus on building in densely populated cities. This process is called: A) causal ambiguity b) social complexity c) better expectations of future value of resources d) path dependence

d) path dependence

How does causal ambiguity act as an isolating mechanism for organizations? A. It makes it difficult for the competitors to understand why a company has been so successful. B. It creates a situation in which different social and business systems interact with one another. C. It makes it difficult for competitors to deploy their resources by creating ambiguity within their organizational structures. D. It makes it difficult for competitors to imitate core competencies quickly due to time compression diseconomies.

A. It makes it difficult for the competitors to understand why a company has been so successful.

Anders is researching sociocultural factors related to his employer, a sporting goods manufacturer. Which of the following would be part of the sociocultural forces in a firm's external environment? A) the rate of employee attrition within the firm. B) the laws protecting small enterprises in a nation C) the family size of the firm's target market D) the interest rates prevalent in an economy

C) the family size of the firm's target market

Which of the following is a feature of the maturity stage of the industry life cycle? a) the industry structure is more monopolistically competitive b) the competitive intensity within the industry is at its peak c) the market reaches its maximum size d) the focus on product innovation is higher than that on process innovation

C) the market reaches its maximin size

Due to resource immobility, a critical assumption in the resource-based model of a firm, the A. competitive advantage of a firm exists for a short period of time. B. resource bundles of a firm can be easily imitated by competitors. C. resource differences between firms last for a long time. D. competencies and capabilities of all firms in an industry are similar.

C. resource differences between firms last for a long time.

Serena paid $900 for a camera that she though was worth $1100 for all the features included in it. For the comer electronics firm selling the camera, however, the cost of producing the camera was only $350. What is the consumer surplus in this scenario? a) $200 b) $900 c) $1,100 d) $550

a) $200

As a start-up company, DigiWrist entered the low end of the highly competitive smartwatch industry with its low-cost smartwatches. Initially, the company was able to sell its inferior technology due to its low prices. Over the years, however, its rate of technology improvements increased above the industry standards. This helped the company to create a strong strategic position for its smartwatches in the high-end segment and claim a premium price. Which of the following types of innovation does this scenario best illustrate? A. architectural innovation B. radical innovation C. incremental innovation D. disruptive innovation

D) disruptive innovation

Managers at Sandburg Real Estate are surprised to hear that interest rates are likely to remain low for the next six months. Which of the following is an implication of low interest rates? a) consumer demand will increase b) consumer demand will decrease c) Cost of capital for firms will be high d) firms will invest less in future growth

a) consumer demand will increase

Which of the following statements with the regard to industry structures is true? a) a consolidated industry tends to be more profitable than a fragmented one. b) they are stable over time, not dynamic. c) having a large number of competitors generally equates to a higher industry profitability d) having few but large competitors increases the threat of strong competitive forces such as supplier or buyer power

a) a consolidated industry tends to be more profitable than a fragmented one.

In the five forces model developed by Michale Porter, ____ is not defined narrowly as a firm's closest competitors but rather more broadly to include other factors in an industry like buyers, suppliers, potential new entry of other firms, and the threat of substitutes. a) competition b) a strategic group c) a barrier to entry d) a firm's resource

a) competition

T/F: Competitive advantage goes to the firm that maximizes the difference between the cost of producing a good and the retail price that consumers pay.

False

T/F: One of Rolex's tangible resources is its well-known brand name and reputation for quality timepieces.

False

T/F: When pursuing a Blue Ocean strategy, a firm in a crowded marketplace attempts to out-compete rivals on both cost and product features with the goal of gaining market share at the expense of other competitors in the same industry.

False

T/F; Firms within the same industry automatically belong to the same strategic group.

False

T/F: A firm operating on a 70 percent learning curve will achieve lower per-unit costs after doubling its output than operating on an 80 percent learning curve will.

true

T/F: When smartphone manufactures began including cameras and voice recorders in their products, that was an example of industry convergence.

true

It is important for a firm to win over the early majority section o the market to ensure the commercial success of an innovation because they: a) enter into the market in larger #'s, creating a herding effect b) are driven by technology concerns rather than the practicality of a new product c) influence the purchase decisions of early adopters d) have the highest purchasing power when compared to the other customer segments.

a) enter into the market in larger #'s, creating a herding effect

Cloudlink is a file hosting service that allows users to store up to 5GB of data with no restrictions or chargers. However, users have to pay a fee for advanced features the cloud storage system and additional storage space. which of the following business models does this best illustrate? a) freemium b) razor-razor-blade c) subscription-base D) pay-as-you-g0

a) freemium

Which of the following customer segments as described in the chasm framework make up the most of mass market? a) the early and late majority together b) the early adopters alone c) the late majority alone d) the technology enthusiast and laggards together

a) the early and late majority together

After trying on a dress, a consumer assesses it to be worth a maximum of $100 and is willing to pay that amount for the dress. However, the dress was priced at $80. What is the amount, $100, referred to as? a) the value (V) the consumer attaches to the dress b) the firm's cost (C) in manufacturing the dress c) the producer surplus d) the consumer surplus

a) the value (V) the consumer attaches to the dress

AccuroDisk Inc. manufactures external hard disks for $32 per unit, and the maximum price customers are willing to pay is $47 per unit. TD Storage Inc. is a competitor of AccuroDisk Inc. that produces external hard disks for $37 per unit, and customers are willing to pay a maximum price of $50 per unit. What does this imply? a) TD Storage has a competitive advantage over AccuroDisk in terms of the perceived value. b) AccuroDisk creates a greater economic value than TD storage. c) TD Storage is a cost-leader when compared to AccuroDisk d) AccuroDisk and TD Storage share differentiation parity.

b) AccuroDisk creates a greater economic value than TD storage.

Soapsuds Inc., a manufacturer of cleaning agents, supplies its products to All Needs Inc., a supermarket chain. It demands that All Needs create more shelf space in its stores for Soapsuds' products. However, All Needs Inc. refuses to do this. Instead, it decides to produce its own range of cleaning agents with its own label "All Wash." In this scenario, All Needs Inc. has exercised its bargaining power as a buyer through: a) social complexity b) backward integration c) causal ambiguity d) forward integration

b) backward integration

Economic value creation is best expressed as: a) consumer surplus minus cost of production b) consumer surplus plus firm profit c) producer surplus plus firm profit d) producer surplus minus consumer surplus

b) consumer surplus plus firm profit

In a focused cost-leadership strategy, a firm: a) provides high-priced products for many different segments of the mass market b) delivers low-cost products and services to a specific, narrow part of the market c) focuses on reducing the economic value created to drive down costs. d) caters to the segment of the market that is least cost-sensitive

b) delivers low-cost products and services to a specific, narrow part of the market

DiscountHaven Inc. is a large chain of hypermarkets. It has cost benefits due to its extensive operation. The company's marketing and sales, logistics, administrative, and other such related costs get divided between a large number of product units stocked in its stores. This makes it difficult for smaller retail stores and supermarkets to compete against DiscountHaven's low prices. Thus, DiscountHaven has a competitive advantage due to its a) superior customer service b) economies of scale c) diseconomies of scale d) learning-curve effects

b) economies of scale

Which of the following statements accurately brings out the difference between tangible and intangible resources? a) Tangible resources contribute to a company's competitive advantage, whereas intangible resources have little effect on competitive advantage. b) tangible assets can be bought on the open market by anyone with the necessary cash, whereas intangible assets cannot be easily purchased. c) Tangible assets are difficult for the competitors to imitate whereas intangible assets can be easily replicated. d) tangible resources take a longer time to build, whereas intangible assets can be built comparatively easily.

b) tangible assets can be bought on the open market by anyone with the necessary cash, whereas intangible assets cannot be easily purchased.

A blue ocean strategy differs from a low-cost strategy in that: a) a blue ocean's research and development focus is on process technologies, and a cost-leader's focus is on product technologies. b) the intent of a blue ocean strategy is not to be the absolute lowest-cost provider because a blue ocean must also increase perceived value c) economies of scale are more important to a blue ocean strategy, while economies of scope are more important to a cost-leader d) the focus of a blue ocean strategy is on lowering the economic value created, whereas a cost-leader focuses on increasing the economic value created.

b) the intent of a blue ocean strategy is not to be the absolute lowest-cost provider because a blue ocean must also increase perceived value

Bargain Styles Inc. is an apparel company that caters to the highly price-conscious customers. Through its simple apparel designs, acceptable quality levels, and minimal customer service, the company has been able to sell its merchandise at the lowest prices in the industry. Which of the following generic business strategies is Bargain Styles applying? a) blue ocean b) competitive disadvantage c) cost-leadership d) differentiation

c) cost-leadership

Companies in the same strategic group are _____ to each other. A. indirect competitors B. different competitive forces C. direct competitors D. irrelevant

c) direct competitors

Invoro is a market leader in consumer electronics. If Finolo and Ethver, companies that manufacture televisions, develop the same customer knowledge base and create products with the same customer appeal as invoro, then, a) invoro will have a resources that is rare but no longer valuable b) Finolo and Ethver will have a WRIO resource c) Invoro will have sustainable competitive advantage in the industry d) Invoro will have a resource that is valuable but no longer rare.

d) Invoro will have a resource that is valuable but no longer rare.

Which of the following is a primary feature of the five forces model? a) it takes into account a firm's internal resources, capabilities, and core competencies. b) it helps managers determine the changing speed of an industry or the rate of innovation c) it is concerned exclusively about the intensity of rivalry among direct competitors. d) it views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.

d) it views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.

The internet service provider industry in the country of Megalopolis 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 internet provider industry, the: a) entry barriers are most likely nonexistent b) threat of substitutes is most likely high c) bargaining power of buyers is most likely low d) threat of new entrants is most likely low

d) threat of new entrants is most likely low

T/F: A differentiator will always benefit when the products have come commoditized

false