MGMT 4513 CapStone- Exam 1

ROIC

- Measures how profitable the firm is

Product-Oriented Vision

Defines a business in terms of a product provided

differentiation strategy

Distinguishing an organization's products from the products of competitors on dimensions such as product design, quality, or after-sales service.

scope of competition

the size - narrow or broad - of the market in which a firm chooses to compete

VRIO Framework

The resource-based framework that focuses on the value (V), rarity (R), imitability (I), and organizational (O) aspects of resources and capabilities.

What are the job responsibilities of a CEO?

1. Create a strategy and vision. (Communication of the vision is just as important as the vision itself) 2. Build a team. 3. Implement the plan & be properly financed - Manage the cashflow.

5 forces framework

1. Rivalry Intensity 2. Threat of New Entrants 3. Threat of Substitutes 4. Power of Suppliers 5. Power of Buyers

upper-echelons theory

A conceptual framework that views organizational outcomes—strategic choices and performance levels—as reflections of the values of the members of the top management team.

resource immobility

A firm has resources that tend to be "sticky" and that do not move easily from firm to firm

resource heterogeneity

A firm is bundle of resources and capabilities that differ across firms

What is the limitations to accounting method?

All accounting data are historical data and thus backward-looking

Firms pursuing a differentiation strategy primarily try to a. keep their cost structures lower than that of the cost leader. b. reduce the value gap to gain a competitive advantage. c. provide products that are a direct imitation of the competitors' products. d. create higher customer perceived value than the value that competitors create.

D. create higher customer perceived value than the value that competitors create.

A firm has 30 million shares outstanding, and each share is traded at $100. Also, each shareholder gets a dividend of $2,000 annually. In this case, the market capitalization is a. 30,000 shares, that is, 30 million shares/$100. b. $200,000, that is, $2,000 × $100. c. $3 billion, that is, 30 million shares × $100. d. 20:1, that is, $2,000/$100.

C. $3 billion, that is, 30 million shares × $100.

SCP paradigm was first published by

Edward Chamberlin & Joan Robinson

Resource Analysis

Examining the attributes of resources that a firm possesses

Activity Analysis

Examining the efficiency and coherence of activities of a firm

True or False? To be a good vision statement, it should be short &clear, inspirational, and product-oriented. a. True b. False

False

What is industry?

Industry refers to a set of firms providing a similar product or service.

Four Barriers to Imitation

Legal Protection, Path Dependence, Casual Ambiguity, & Social Complexity,

How do we accomplish our goals?

Mission

To capture dynamic changes we would use the

Pestel Framework

PESTEL Framework

Political Economic Sociocultural Technological Ecological Legal

To be a good vision/mission statement it must be...

Short and clear, inspirational, & flexible

Limitation to shareholder value

Stock prices can be highly volatile, making it difficult to assess firm performance, particularly in the short term

Strategy was derived from the Greek Word

Strategos

S-C-P Paradigm

Structure, Conduct, Performance

What is Strategic Leadership?

The ability to influence and direct the activities of others to achieve organizational goals.

Strategic Leaders

Those who effectively exercise the strategic leadership

o What commitments do we make? o What guardrails do we put in place? o How can we act legally and ethically in pursuit of the vision and mission?

Values

Value chain analysis consists of systematically analyzing a firm's key activities that for analysis purposes are categorized into two groups: a. primary activities and support activities. b. products and service activities. c. customers and suppliers. d. profits and losses.

a. primary activities and support activities

Strategic Management is

a field of business admin that studies the source of competitive advantage.

competitive parity

a firm's strategy of setting prices that are similar to those of major competitors

Strategy is

a set (a system) of goal-directed actionsto gain and sustain superior performance relative to competitors.

Which of the following summarizes the difference between a firm's vision and mission? a. A vision states what a firm wants to accomplish; a mission states how a firm plans to accomplish this vision. b. A vision states the ethical values of a firm; a mission states the monetary goals of a firm. c. A vision states how much a firm wants to earn; a mission states how these earnings will be accomplished. d. A vision states the management values of a firm; a mission states the values of the other workers.

a. A vision states what a firm wants to accomplish; a mission states how a firm plans to accomplish this vision.

Which of the following tends to increase the rivalry intensity of an industry? a. The inability to differentiate products and establish strong brands b. Few competitors in the industry c. Competitors of diverse sizes d. High industry growth

a. The inability to differentiate products and establish strong brands

True or False? Apple is highly profitable primarily because PC industry is structurally profitable. a. True b. False

a. True

True or False? Resource immobility is NOT a pre-condition for sustainable competitive advantage. a. True b. False

a. True

_____ are best described as decreases in cost per unit as output increases. a. Economies of scale b. Economies of scope c. Time compression economies d. Economies of replication

a. economies of scale

The first step of industry analysis should ideally be

defining the relevant industry

Value Chain Framework

allows systematic study of the various value-adding activities of a business.

Strategic Coherence Map

allows you to assess the coherence of activities to achieve competitive advantage

Which of the following statements is true of accounting data? a. Accounting data focus mainly on intangible assets, rather than tangible assets. b. Accounting data are historical data and thus backward-looking. c. Accounting data do not have to be adjusted in any manner to compare companies with different capital structures. d. Accounting data consider off-balance sheet items, such as pension obligations of a firm.

b. Accounting data are historical data and thus backward-looking.

Which of the following about measuring a firm's competitive advantage is NOT true? a. Traditional measures include accounting performance, shareholder value, and economic value creation. b. Conceptually, economic value creation is one of the best ways of measuring a firm's competitive advantage. c. To better assess a firm's competitive advantage, we should triangulate by using multiple measures. d. Balanced scorecards are typically used for strategy formulation.

b. Conceptually, economic value creation is one of the best ways of measuring a firm's competitive advantage.

When a firm attempts to improve its economic, social, and ecological performance, it is taking a(n) ___________ approach to assessing competitive advantage. a. Economic value creation b. Triple-bottom-line c. Balanced scorecard d. Stakeholder valuation

b. Triple-bottom-line

The primary objective of Porter's five forces framework is to: a. replace a firm's competitive advantage with competitive parity. b. explain and predict the potential profitability of an industry. c. reduce the gap between the value of a firm's product and its cost of production. d. break down a firm's value chain activities into primary and support.

b. explain and predict the potential profitability of an industry.

Generally, perfectly competitive industries such as paper and steel (commodities) are deemed to be ________ in profits to more differentiated industries like pharmaceuticals and cosmetics. a. superior b. inferior c. similar d. indeterminate

b. inferior

______________ combines internal and external ideas as well as internal and external paths to market to advance the development of new technologies. a. closed innovation b. open innovation c. technological innovation d. incremental innovation

b. open innovation

Rivalry Intensity relates to the

degree of price competition

Which of the following factors best describes the U.S. automotive industry being characterized by high entry barriers? a. New auto companies create electric cars powered by simpler motors and gearboxes. b. New entrants in the automotive industry expect that incumbents will not or cannot retaliate. c. Car manufacturers require large-scale production in order to be cost-competitive. d. Many industrial products are as easy to build as cars powered by internal combustion engines.

c. Car manufacturers require large-scale production in order to be cost-competitive.

Which of the following scenarios illustrates a firm that has a sustainable competitive advantage? a. Jamison Inc. generated revenue of $300,000 this financial year, which is close to the industrial revenue average of $320,000. b. CR Inc. almost doubled its sales to 9,000 units this year compared to its previous year's sales of 5,000 units, though the industry average is 10,000 units. c. Zhang Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years. d. Peak Inc. was able to outperform its competitors with its new production system, in terms of revenue, for a brief period of four months.

c. Zhang Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years.

Firm's resources and capabilities are costly to imitate. This is largely because rival companies do not clearly understand the cause and effect of the resources and capabilities controlled by the firm. In this case, the firm's competitive advantage is protected against imitation by: a. path dependence. b. legal protection. c. causal ambiguity. d. social complexity.

c. causal ambiguity.

Which of the following is NOT a primary function of firm's vision statement? a. Helps to resolve disputes in resource allocation b. Informs all stakeholders why the company exists c. Helps to avoid costly government-imposed fine d. Motivates employees to give their best work

c. helps to avoid costly government-imposed fine

Which of the following statements about industry analysis is NOT true? a. Industry refers to a set of firms providing a similar product or service. b. Industry is a nested concept. c. Industry analysis is theoretically grounded upon resource-based view. d. Porter's five forces framework is widely used for industry analysis.

c. industry analysis is theoretically grounded upon resource-based view

Economies of scope happens when two business are _____________. a. independent to each other b. producing physically similar products c. sharing common resources and capabilities d. requiring large fixed investments

c. sharing common resources and capabilities

Which of the following is an example of a firm's intangible resources? a. the firm's cash at bank b. the firm's finished goods inventory c. the firm's organizational culture d. the firm's land and building

c. the firm's organizational culture

Activity Based Costing

can help identify cost advantages in the value chain

cost leadership strategy

generic business strategy that seeks to create the same or similar value for customers at a lower cost

Complements

goods and services that are used together

Three forces are weak or moderately weak =

high profitability

Strategic Groups

clusters of firms that share similar strategies in a specific industry

Coral Think Inc. is a new company in the publishing industry. It has raised sufficient capital from multiple sources. It is planning to use its capital to purchase certain assets. Which of the following assets will be the most difficult for Coral Think Inc. to acquire using its capital? a. Inventory b. Tools and equipment c. Land and building d. Brand name

d. Brand name

Which of the following summarizes the difference between corporate strategy and business strategy? a. Corporate strategy deals with how to compete; business strategy deals with where to compete. b. Corporate strategy deals with when to compete; business strategy deals with why to compete. c. Corporate strategy deals with how to compete; business strategy deals with when to compete. d. Corporate strategy deals with where to compete; business strategy deals with how to compete.

d. Corporate strategy deals with where to compete; business strategy deals with how to compete.

What does it mean for a firm to have an 80 percent learning curve? A. Every time the cumulative output increases by 80 percent, the cost per unit will decline by 20 percent. B. Every time the cumulative output is doubled, the cost per unit will decline by 80 percent. C. Every time the cumulative output goes up by 20 percent, the cost per unit will decline by 80 percent. D. Every time the cumulative output is doubled, the cost per unit will decline by 20 percent.

d. Every time the cumulative output is doubled, the cost per unit will decline by 20 percent.

Which of the following statements about product-oriented visions is true? A. They define a business in terms of providing solutions to customers. B. They allow companies to effectively adapt to changing environments. C. They allow firms to set goals that focus primarily on filling the organization's needs. D. They tend to force managers to take a myopic view of the competitive landscape.

d. They tend to force managers to take a myopic view of the landscape.

Which of the following is NOT a role of CEO described by Matt Blumberg? a. To create and communicate strategy and vision b. To build a team c. To make sure the company executes its plan and has cash in bank d. To maximize the compensation of top executives

d. To maximize the compensation of top executives

When applying the five forces model, the first step should ideally be: a. drawing a strategic group map. b. assessing the overall strength of five forces. c. calculating the average margins in the industry. d. defining the relevant industry.

d. defining the relevant industry

Regarding diversification, empirical studies suggest that a strategy of _____ will be most beneficial for a firm to enhance its overall corporate performance. a. unrelated diversification b. single-business c. dominant-business d. related diversification

d. related diversification

Economies of scale

decreases in per unit costs as output increases.

Customer-Oriented Vision

defines a business in terms of providing solutions to customer needs

The industry analysis provides for foundations for various strategic decisions like

entry/exit decisions & strategic positioning

Firm Effect

firm performance attributed to the actions managers take

Industry Effect

firm performance attributed to the structure of the industry in which the firm competes

Strategos means

general's knowledge

Industry concentration is positively related to

industry profitability

Three forces are strong or moderately strong =

low profitability

Balanced Scorecard

measurement of organizational performance in four equally important areas: finances, customers, internal operations, and innovation and learning

Other cases =

moderate profitability

We have vision/mission/values for what reasons?

o Reduce uncertainty of stakeholders o Resolve disputes in the firm o Motivate employees and managers

Triple Bottom Line

people, planet, profit

SWOT analysis

strengths, weaknesses, opportunities, threats

Industry Analysis systematically examines

structural features in an industry.

Imperfect mobility is an important pre-condition for

sustainable competitive advantage

price discrimination

the business practice of selling the same good at different prices to different customers

The stronger the forces

the lower the industry profitability

opportunity cost

the most desirable alternative given up as the result of a decision

What do we want to accomplish?

vision

ROE

· Measures how effectively capital is being used to generate revenue

ROR

· Measures how much of the firm's sales is converted into profits

A firm has a competitive advantage when it creates

· more economic value than rival firms.