MGMT 481 Test 2

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One of the main lessons from the Chapter 5 case comparing Google and Microsoft and measuring overall firm performance is that: A. Competitive performance differences should be measured by using a variety of evaluation tools. B. Qualitative measurements are superior to quantitative measurements when evaluating firm differences. C. Management should utilize just a few measurement tools in order to get exact information when evaluating firm differences. D. The type of measurement tool used by management is dependent on which area of the firm is being measured.

Under the economic value creation framework, producer surplus is important in the quest for competitive advantage because: A. This is the profit that a firm captures when producing and selling a good or service. B. The firm will have enough inventory to meet higher future demands. C. The value surplus can be transferred to the consumer. D. The greater the amount of producer surplus, the higher the book value of the firm.

A disadvantage to a firm when transacting in the market rather than owning its own production and distribution activities involves the costs associated with searching for and selecting suppliers. These types of costs are referred to as: A. Search costs. B. Investigative costs. C. Resource costs. D. Exploratory costs.

A drawback to evaluating competitive advantage under the balanced-scorecard perspective is: A. There is little guidance for management as to which metrics to use. B. The balanced scorecard concentrates too much on financial performance. C. It pays little attention to how customers view the company's products. D. The focus is on internal performance as opposed to external performance.

A firm's strategic position reflects: A. Whether it is competing on differentiation or cost. B. Whether it is competing within a targeted strategic group or not. C. Whether is has a competitive advantage or not. D. Whether it has first-mover advantages or not.

A generic business strategy is more likely to help a cost-leadership firm achieve competitive advantage when it does which one of the following? A. Allows a firm to perform similar activities differently than its rivals with resulting lower costs B. Allows a firm to perform different activities than its rivals with greater value creation C. Allows a firm to perform similar activities than its rivals with greater costs or lower value creation D. Helps a firm create as large a gap as possible between the differential value created and the cost required

A positive implication of the disruptive force of the Internet for a firm is: A. That there is almost a limitless low-cost shelf-life for product offerings. B. That the digitization of products leads to market confusion. C. That target markets can no longer be segmented. D. That "going digital" makes a firm's product easier to imitate.

A tool that helps managers evaluate how the firm's core competencies can support certain diversification strategies is the: A. Core competence-market matrix. B. Diversification matrix. C. Acquisition matrix. D. Competency leverage matrix.

A(n) ______________ is the value lost due to choosing to use resources for one alternative over another. A. Opportunity cost B. Alternative loss C. Resource loss D. Opportunity loss

According to Michael Porter, firms face hypercompetition because they rely too much on _______________, which leads to a failure of distinct strategic positioning for the individual firm. A. Imitating one another B. Reaching technological limitations C. Joint destruction D. Creative competition

According to Strategy Highlight 7.4, GE's success with portable ultrasound devices is attributed to which type of innovation? A. Reverse B. Backward C. Internal D. Diversified

Achieving differentiation parity can be difficult for a cost leader firm because: A. Creating value generally means higher costs. B. Achieving parity in the market is always hard. C. Cost leaders typically add too much value to their products. D. Value chain activities should not be altered.

Although there are "first-mover advantages" when it comes to bringing a new innovation to the market, there are also disadvantages. Which of the following is NOT one of these disadvantages? A. The firm builds a reputation as an innovator. B. Potential customers must be educated about the product. C. Distribution channels must be found. D. Complementary assets need to be located.

An integration strategy differs from a low-cost strategy in that: A. The intent of an integration strategy is not to be the absolute lowest-cost provider because of the added costs of increased value in its products/service. B. A successful integration strategy requires that the business be the lowest-cost provider in order to drive higher value creation than the competition. C. Economy of scale is more important to an integrator, while economy of scope is more important to a low-cost strategy. D. An integration strategy requires first that the business be stuck in the middle, while a low-cost strategy avoids this condition.

As noted in ChapterCase 5, as of the third quarter of 2010, Android is the smart phone leader with 43.6 percent of market share. In 2007, Android (Google's mobile operating system) sold 1 million units in six months when it was launched. However, in November 2010, Microsoft started shipping its Windows Phone 7 operating system and had reached 2 million units in 10 weeks. When it comes to performance, Google and Microsoft are compared to each other using several different metrics. Looking at this, competitive advantage can be viewed as being: A. Both relative and transitory. B. Unattainable in the smartphone industry. C. Sustainable for many companies at the same time. D. Dependent on one best strategy.

Assets such as innovation and quality are ________ assets that contribute to growth potential but are typically not included in a firm's book value. A. Intangible B. Off-balance sheet C. Tangible D. Historical

Digital photography replacing film photography is an example of which type of innovation? A. Disruptive B. Incremental C. Progressive D. Alternative

Discontinuities generally favor ___________ because they don't have entrenched processes and technologies. A. New entrants B. Incumbents C. Conglomerates D. Diversified firms

During the growth phase of an industry life cycle, demand is strong and: A. Both inefficient and efficient firms thrive. B. A firm should "harvest" its products. C. Only a cost leadership strategy should be pursued. D. Market demand starts to decrease.

During the later part of the growth stage, many firms turn to ____________ to bring more customers into the market. A. Lower prices B. Diversification C. Imitation D. Radical innovation

Each stage of the vertical value chain typically represents: A. A distinct industry. B. A type of product. C. The distinct process being applied. D. The type of material being used.

Entrepreneurs generally produce which type of innovation? A. Radical B. Speculative C. Reverse D. Incremental

From an economic value created perspective, the volume of a firm's goods or services sold is generally driven by the relationship between ___________ and __________. A. The value created for customers; the price of the good or service B. How value is created; how customers view the firm C. The firm's core competencies; how shareholders view the firm D. The unemployment rate; shareholder value

From an economic value creation perspective, competitive advantage is achieved by the firm that does which of the following? A. Creates and captures more economic value than its rivals. B. Ensures that the value captured is evenly divided between producer and consumer. C. Concentrates on tangible assets available as opposed to intangible assets. D. Formulates strategy based primarily on the balanced-scorecard approach.

Generally, as the level of _________ innovation declines, the level of _________ innovation increases. A. Product; process B. Process; procedural C. Incremental; drastic D. Efficient; inefficient

IBM still offers typewriters even though it does not invest much in future innovations of its typewriter line. Instead, it has chosen a _________ strategy to maximize cash flow from the remaining demand for typewriters. A. Harvest B. Divest C. Exit D. Consolidate

If a firm wants to have more ownership of the activities closer to product inputs or design, then it should: A. Backward vertically integrate. B. Forward vertically integrate. C. Forward horizontally integrate. D. Use a single-business diversification strategy.

If a firm wishes to bridge the gap between being fully integrated ("make") and transacting in the marketplace ("buy"), it can enter into a(n) ______________, which is a contractual arrangement to obtain inputs for a time period of generally a year or less. A. Short-term contract B. Joint venture C. Equity alliance D. Licensing agreement

If a firm wishes to expand beyond a single market and grow through being active in several different countries, it is pursuing the _______________ diversification strategy. A. Geographic B. Global C. Multi-country D. Market expansion

Innovation is important when pursuing an integration strategy because: A. It helps a firm resolve existing trade-offs between price and quality. B. Without innovation a firm can get "stuck in the middle." C. Innovation is the most important component regardless of strategy. D. It is the only way that a firm can improve its value chain activities.

Measuring how a customer views a firm under the balanced-scorecard framework is important because: A. Customer perspective is directly linked to firm revenues and profits. B. The customer viewpoint tells a firm much needed information about rivals. C. Surveying customers makes them feel important to the firm. D. It is a good indicator of future stock price.

Organizational learning, innovation, and financial performance are all ____________ performance metrics. A. Balanced scorecard B. Accounting profitability C. Value scorecard D. Triple profit

Performance metrics used to assess the effectiveness of a firm's strategy should be: A. Aggregated and viewed from an overall company perspective. B. Aggregated and viewed from a functional-level perspective. C. Focused on quantitative, not qualitative, measurements. D. Broken down by specific parts of the company.

Strategic initiatives that a firm can use to counter disruptive innovations in the industry include all of the following EXCEPT: A. Improve the product or service value perception by increasing prices. B. Stay "ahead of curve" by incremental innovation. C. Protect the low end of the market by introducing low-end innovations. D. Use the needs of emerging markets to reverse innovate.

Strategy Highlight 5.1 discusses how Interface, Inc. has a strategic intent to become the world's first fully sustainable company. This is an example of which of the following? A. Triple bottom line B. Shareholder value C. Intangible resources D. Competitive force analysis

Suppose that a firm wanted to find profitability information about its rivals. The most likely source of this information would be: A. Publicly available information including 10-K reports. B. Employees who work for the competition. C. Customers who are loyal to the competition. D. Stakeholders of the competition.

The X-ray is an example of a(n) ___________ innovation. A. Radical B. Incremental C. Drastic D. Fundamental

The ZIP drive for data storage is an example of a(n) ___________ innovation that began as a low-cost solution to an existing problem. A. Disruptive B. Technical C. Radical D. Advanced

The ___________ is related to the stakeholder theory in that it attempts to fulfill obligations to constituencies, including employees, customers, suppliers, and communities. A. Triple bottom line B. Shareholder bottom line C. Balanced bottom line D. Integrative bottom line

The ______________ is the idea that the market price of a firm's stock includes all publicly available information about a firm's performance. A. Efficient-market hypothesis B. Normalized market hypothesis C. Rational-market hypothesis D. Shareholder knowledge hypothesis

The costs associated with searching for economic agents with whom the firm contracts, negotiates, and enforces contracts with are: A. Transaction costs. B. Fixed costs. C. Procedural costs. D. Implicit costs.

The effectiveness of the balanced scorecard is contingent upon all of the following EXCEPT: A. The type of technology used. B. The skills of the managers using it. C. The metrics chosen. D. Asking the right questions.

The fact that both Rolex and Timex have a competitive advantage selling wristwatches is an indication that: A. Following a different generic business strategy within the same industry can lead to a competitive advantage for more than one organization. B. Following the same generic business strategy can allow for two firms competing in the same industry to have a competitive advantage at the same time. C. In order to evaluate whether Rolex has a sustained competitive advantage it is useful to compare it to Timex from a cost perspective. D. In order to evaluate whether Timex has a sustained competitive advantage, it is useful to compare it to Rolex from a differentiation perspective.

The vast majority of innovations in an industry are ____________ because they build on a firm's existing knowledge base and reinforce the existing organizational structure and network relationships. A. Incremental B. Radical C. Relational D. Moderate

To _________ a stock return means to compare the percentage change of a stock price over the course of a certain time period from a common base year. A. Normalize B. Standardize C. Regulate D. Stabilize

Under the accounting profitability framework to competitive advantage, comparing return on revenue (ROR) between companies is important because: A. It adjusts for size differences and provides a relative comparison. B. It reflects the firm's stock price. C. It includes the value of the firm's intangible asset base. D. All of these.

Under the balanced-scorecard framework, the question "How do we create value?" is relevant to all of the following EXCEPT: A. Increasing the value added to a product along the supply chain. B. Challenging managers to come up with new strategic objectives. C. Focusing on future competitiveness. D. Improving innovation and organizational learning.

Under the five forces model, a risk to a firm with a differentiation strategy is: A. When the focus of competition switches to price rather than features and new acceptable levels of quality have emerged due to innovation. B. When the focus of competition switches to price rather than features and the substitute products are considered below acceptable levels of quality. C. When the focus of competition switches to features rather than price, the substitute products are considered below acceptable levels of quality. D. When the focus of competition switches to features rather than price and new acceptable levels of quality have emerged due to innovation.

Using either the accounting profitability or shareholder value creation approach to determine whether Microsoft or Google have competitive advantage(s) is complicated by the fact that: A. The key to their performance is based on intangible assets. B. The technology sector is difficult to evaluate. C. One-dimensional approaches reveal the best information. D. They have no tangible assets.

Value drivers are tools that help managers: A. Increase perceived value and decrease costs. B. Improve value chain activities and increase costs. C. Achieve a low-cost position and maintain perceived value. D. Achieve cost parity and maintain perceived value.

When Anheuser-Busch InBev sold Busch Entertainment (including SeaWorld and Busch Gardens), it was doing all of the following EXCEPT: A. Weakening its position. B. Restructuring the organization. C. Raising capital for more strategically relevant assets. D. Engaging in portfolio planning.

When a business drives costs down as its cumulative output increases, it is referred to as: A. A learning curve. B. An output curve. C. A demand curve. D. A distribution curve.

When a firm applies its current knowledge in order to enhance short-term performance, it is using _________. A. Exploitation B. Learning-curve effects C. Economies of scope D. Strategic trade-offs

When a firm is fully vertically integrated: A. All activities are conducted within the boundaries of the firm. B. It is a single-business organization. C. It is a conglomerate. D. It is still reliant on certain suppliers along the industry value chain.

When a firm successfully commercializes a new product or service, it is able to extract temporary ______________ but must continue to innovate to sustain competitive advantage(s). A. Monopoly profits B. Industry acknowledgements C. Lower costs of capital D. Competitive parity

When a firm uses many links (common resources and competencies) among its businesses, it is engaging in a(n) _________ diversification strategy. A. Related-constrained B. Dominant business C. Linked business D. Single-business

When an existing firm uses the tools and concepts learned from strategic management in order to pursue innovation, it is said to be engaging in: A. Strategic entrepreneurship. B. Strategic invention. C. A strategic venture. D. A short-term strategy.

When it comes to pursuing an integration strategy, managers manipulate both _____ and ________ drivers. A. Cost; value B. Cost; core capability C. Value; core capability D. Market; economic

When it is cheaper for a firm to produce two or more outputs or services together rather than separately through using the same resources and technology, then _________ occur. A. Economies of scope B. Transaction economies C. Economies of scale D. Output economies

When management modifies strategic objectives based on which stage an industry is in they are responding to a(n): A. Industry life cycle. B. Growth life cycle. C. Economic life cycle. D. Entrepreneurial life cycle.

When pursuing a cost-leadership strategy, a business must remember that: A. Buyers will be reluctant to pay for a product unless the quality is acceptable. B. Buyers will be reluctant to pay for a product unless the quality is superior. C. Buyers will be reluctant to pay for the product unless it is customized. D. Product quality is more important in a broad market than in a narrow one.

When the CEO of Whole Foods, John Mackey, had to make decisions about the company's cost structure and value position he was: A. Making strategic trade-offs. B. Conducting a strategic group map evaluation. C. Trying to improve the firm's economies of scope. D. Leveraging the low-cost position of the company.

When the Japanese company Canon was able to redesign the copier and take market share away from Xerox, it was using which type of innovation? A. Architectural B. Groundbreaking C. Radical D. Intentional

Which of the following is NOT a strategic advantage of backward integration? A. Better access to end users B. Ability to secure critical supplies C. Ability to produce higher-quality products D. The potential to reduce costs

__________ assets are assets like special equipment that are required to be co-located and used by a firm, such as mineral extraction equipment and bauxite mines. A. Site specificity B. Channel specificity C. Process specificity D. Firm specificity

___________ and ____________ are the two focused generic business strategies. A. Focused differentiation; focused low-cost B. Integration; focused low-cost C. Integration; focused differentiation D. Cost leadership; differentiation

___________ firms are often unable to achieve additional value creation. A. Unrelated diversified B. Related-constrained C. Related-linked D. All diversified

___________ is a form of long-term contracting that is generally used in the manufacturing sector and which enables a firm to commercialize intellectual property like patents. A. Licensing B. Franchising C. Contracting D. An equity partnership

____________ allow a firm to enter into a voluntary arrangement with another firm with the intent of sharing knowledge and resources to develop processes, products, or services together. A. Strategic alliances B. Short-term contracts C. Fully integrated contracts D. Networked contracts

____________ is created when a customer is willing to pay more for a good or service than it costs the firm to produce it. A. Economic value B. Product value C. Consumer value D. Economic advantage

_____________ such as paying salaries and setting up a shop floor are internal transaction costs. A. Administrative costs B. Process costs C. Explicit costs D. Market costs

"What is our social impact?" is a question most relevant to: A. The balanced scorecard. B. The triple bottom line. C. Value creation. D. Shareholder value.

3M requires that 30 percent of revenues come from new-product introductions. It also measures how much external learning and collaboration the firm is engaging in. 3M is clearly implementing a(n) ____________ approach to assessing competitive advantage. A. Triple bottom line B. Balanced scorecard C. Accounting profitability D. Shareholder value creation

A company is considered to be a single-business firm when at least _________ percent of revenues are generated by the dominant business. A. 50 B. 95 C. 80 D. 99

A company that uses a differentiation strategy achieves a competitive advantage as long as: A. The economic value that the firm creates is equal to that of the competition. B. The economic value that the firm creates is greater than that of the competition. C. The economic value that is created is less than that of the competition. D. The economic value that is created is dependent on strategic parity.

A core competency which is capital-intensive but critical for a firm creating and launching a new innovation is: A. Process improvement. B. Research and Development (R&D). C. Supply-chain management. D. Customer relation management.

A disruptive innovator attacks from the "bottom up" because of all of the following EXCEPT: A. Incumbent firms often fail to defend the low end of the market. B. The industry is generally in the maturity stage by the time a disruptive innovation is introduced. C. The gaps in quality at the time of introduction necessitate lower prices. D. Competing in the low end gives a firm time to gain market expertise.

A drawback for a firm engaging in a short-term contract is: A. It usually takes at least a year for processes between organizations to get in sync. B. The supplying firm has no incentive to make additional transaction-specific investments to increase performance or quality. C. There is no competitive bidding process with short-term contracts. D. Short-term contracts offer less planning opportunity than individual market transactions.

A type of specific asset that has physical and engineering properties that were specifically created to satisfy a particular customer (for example, the bottles for PepsiCo) are which form of asset specificity? A. Human-asset B. Physical-asset C. Market-asset D. Growth-asset

A(n) ________ occurs during the time when existing technologies reach their limitations and several new technologies enter the fray. A. Industry slow-down B. Swarm of technology C. Loss of industry profits D. Innovation breakdown

Absorptive capacity is important for a firm to have because: A. It must be able to absorb losses during the growth stage. B. Without new knowledge the firm could face a "technological lock-out." C. Profits will increase if there is excess capacity in the industry. D. Lean manufacturing is no longer a strategic weapon.

According to Chapter 5, which of the following firms could have benefited from the values contained in the triple bottom line? A. BMW B. BP C. Interface, Inc. D. Google

According to the text, which event played a role in the innovator CNN losing its leadership position in the 24-hour cable news industry? A. The downturn in the economy impacting media firms B. "Second movers" using incremental innovation to continuously improve their offering C. Not investing enough resources into R&D and satellite technology D. Becoming too diversified and losing strategic focus

Achieving differentiation parity along with lower costs is important to a low-cost leader because: A. The firm is then able to target a less price-sensitive customer market. B. Creating the same value as the competition, combined with lower costs, gives the firm a competitive advantage. C. The firm is then able to incorporate differentiating features that cause buyers to prefer its products. D. All of these.

Achieving economies of scale is an important cost driver for certain low-cost leaders. However, there is a saying that "sometimes bigger is worse" because at some point costs increase as output increases. This is referred to as: A. External economies B. Diseconomies of scale C. Economic inefficiencies D. Integration diseconomies

Advantages to organizing economic activity within the firm ("make") include all of the following EXCEPT: A. The coordination of highly complex tasks. B. The principal-agent problem. C. Creating an internal community of knowledge. D. The ability to make command-and-control decisions.

After Jeff Bezos read about how the Internet was growing by 2,000 percent a month, he set out to use the Internet as a new distribution channel and created Amazon, which is now the world's largest online retailer. This is clearly an example of: A. A firm with a strong core competency in R&D. B. An entrepreneur who transformed invention into an innovation. C. An entrepreneur who tried to harvest the remaining demand on the Internet. D. Someone who focused on the "short head" of the Internet.

After long periods of competition and innovation, a(n) ____________ is required to "restart" an industry. A. Government intervention B. Radical innovation C. Imitation process D. Reverse process

After the Internet was introduced, its value increased exponentially as the number of users increased. This is the positive effect of a(n): A. Adopter force. B. Network effect. C. User effect. D. Internet force.

All of the following are fundamental elements of an industry value chain EXCEPT: A. Raw materials. B. Support activities. C. Marketing and sales. D. Final assembly of goods.

All of the following are questions that managers answer when selecting a business-level strategy EXCEPT: A. Who will we serve? B. How many product markets will we be in? C. What customer needs and desires will we satisfy? D. Why do we want to satisfy these needs?

All of the following statements are TRUE about strategy EXCEPT: A. There is no single best strategy; only strategies that are better than that of rivals. B. A strategy that has provided competitive advantages in the past will most likely do so in the future. C. Strategy must integrate and align each business unit. D. Performance metrics that measure effectiveness must aggregate upward and reflect overall company performance.

An alternative perspective to the transaction cost economics framework concerning the make-or-buy decision is the _____________ view of the firm, which focuses the firm less on transaction costs and more on its capabilities and knowledge and what it does well. A. Achievement-based B. Resource-based C. Entrepreneurial-based D. Competitive-based

Apple, Dell, and HP are used as examples in the text for the dynamics of competitive positioning. What does this analysis tell us about these firms? A. There has been relatively little change in the positions of these firms from 2005 to 2010. B. Apple is the only one of the three to remain on the productivity frontier from 2005 to 2010. C. HP's position has declined on the frontier from 2005 to 2010. D. Dell has improved its position on the frontier from 2005 to 2010.

As discussed in Chapter 5, the chemical manufacturer FMC Corporation overcame short-term thinking and underperforming business units by adopting a balanced-scorecard approach. All of the following are true about FMC's successful implementation of a balanced scorecard EXCEPT: A. Managers could focus on new-product introductions. B. Managers were able to formulate new strategies. C. Managers could focus on core competencies within each division. D. Managers were able to align different perspectives to create a more overall focus.

As evidenced by the European Union determining that GSM should be the industry standard for cell phones, dominant designs can be driven by top-down decisions made by: A. Consumer agencies. B. Government bodies. C. Local activists. D. Cultural groups.

As noted in Chapter 5, Microsoft is many times larger than Google and records higher net income, return on assets, and return on equity in absolute terms when it comes to accounting profitability. However, when looking at normalized stock returns, Google has outperformed both Microsoft and the NASDAQ-100 index by a wide margin over the 2005-2010 time period. Suppose you were a manager for Microsoft. Evaluating this information would tell you that: A. Microsoft has a sustained competitive advantage from a shareholder value creation framework. B. Google has a sustained competitive advantage from a shareholder value creation framework. C. Both Microsoft and Google have sustained competitive advantages from a shareholder value creation framework. D. Google has a competitive disadvantage from a shareholder value creation framework.

As noted in Strategy Highlight 8.1, when Toyota wanted to secure a long-term supply of lithium, it had to create a bond of trust with the Argentinean firm Orocobre before the company would invest several hundred million dollars in specialized equipment to supply the lithium to Toyota. What did Toyota do to instill this trust? A. It offered Orocobre exposure to Toyota's proprietary information. B. It made a credible commitment by taking an equity stake in Orocobre. C. It promised to help Orocobre expand its market presence globally. D. It offered Orocobre franchising opportunities to sell hybrid vehicles.

Between 2007 and 2009, Microsoft spent close to $25 billion on R&D, the majority of which went to its new Windows 7 operating system. These costs were fixed. However, after Windows 7 hit the market, the marginal costs were basically zero. Since Microsoft expects to sell several hundred million copies of Windows 7, it can be said that: A. Microsoft has a competitive advantage because it has already spent the capital required for its new offering. B. Microsoft has a competitive advantage because it will be able to drive down per-unit costs of Windows 7 with each additional copy it sells. C. Since Microsoft will sell so many units of Windows 7, it has attained competitive parity within its strategic group. D. Microsoft will be at a competitive disadvantage unless it exceeds its sales forecasts because its marginal costs will change.

Buy Us is a big box retailer who is in direct competition with Walmart and Target. Buy Us initially tried to respond to Walmart by cutting its prices and reducing costs. Walmart has greater buying power and a more efficient supply chain, therefore Buy Us was not able to compete on costs. The company then tried to differentiate itself by signing a celebrity to create an in-house line of clothing. However, Target has a celebrity clothing line that has a more differentiated appeal. The economic value created by Buy Us is currently less than Target and Walmart. It can be said that: A. Buy Us is successful in creating an integration strategy positioned between Walmart and Target. B. Buy Us is "stuck in the middle" and has a competitive disadvantage. C. Buy Us is still creating an integration strategy positioned between Walmart and Target and is on the right track. It should continue this business strategy. D. Buy Us is "stuck in the middle" and has a competitive advantage.

ChapterCase 8 highlights the corporate-level strategy of General Electric. As noted, CEO Jeffrey Immelt decided to refocus GE's portfolio of businesses and leverage the firm's core competencies in industrial engineering while pursuing future-growth industries. The two industries CEO Immelt had decided will provide strategic importance to the firm are ___________ and ____________. A. Home appliances; entertainment B. The green economy; health care C. Capital markets; information technology D. Consumer electronics; education

Corporate strategy is concerned with determining the boundaries of the firm among geographic, vertical, and product/service dimensions. This is referred to as: A. Economic scope. B. The scope of the firm. C. Multidimensional mapping. D. Boundary spanning.

Each of the following are important reasons to understand the strategic implications of an industry life cycle EXCEPT: A. Each stage attracts different customer groups with unique needs. B. The firm should copy the industry leader in each distinct stage. C. Different competencies are required in each stage that must be created if not existent. D. The firm needs to know when changes in demand require changes in strategy.

Economic value can be viewed as the amount of the total value created that is captured and distributed between ________ and ________. A. Stakeholder; shareholder B. Consumer; producer C. Employees; consumer D. Producer; supplier

Economies of scope often occur when a firm is using the ______________ diversification strategy because the firm is able to pool resources and leverage competencies. A. Single-business B. Related C. Dominant business D. Unrelated

Executives determine the scope of the firm in order to enhance the firm's ability to gain and sustain competitive advantage. In that attempt, they formulate and execute corporate-level strategy by using all of the following dimensions EXCEPT: A. Vertical integration. B. Cultural integration. C. Horizontal integration. D. Global scope.

Experience curves attempt to capture both _______________ and learning effects. A. Customization B. Economies of scale C. Economies of scope D. Competitive position

From an accounting profitability perspective, competitive advantage is achieved by the firm that does which of the following? A. Projects the highest book value for the upcoming year. B. Delivers the most positive profitability metrics. C. Has the highest value of intangible assets. D. Has the highest value of off-balance sheet items.

GE disrupted itself by: A. Replacing the top levels of the executive hierarchy. B. Using the needs of developing countries to replace older and more expensive products with newer and more adaptive ones. C. Saturating the global market by having too many products in each market. D. Losing strategic focus and not protecting its market share in health care technology.

If Microsoft continues to outsell all other rivals in the smartphone industry for the next five years, it will have achieved a: A. Parity advantage. B. Sustained competitive advantage. C. Competitive parity. D. Competitive disadvantage.

If a firm wants to have more ownership of activities closer to the end product or customer, it should: A. Backward vertically integrate. B. Forward vertically integrate. C. Forward horizontally integrate. D. Use a single-business diversification strategy.

If a firm wishes to bridge the gap between being fully integrated ("make") and transacting in the marketplace ("buy"), it can enter into a(n) _________ agreement which grants the right to an individual or group to use the firm's trademark and business processes to sell goods and services that carry the firm's brand name. A. Licensing B. Franchising C. Contracting D. Equity partnership

In 2009, Oracle, a software company, acquired Sun Microsystems, a hardware company. Around the same time, Dell purchased Perot Systems, and Xerox bought the IT services company ACS. These diversification events could be based on the _____________, which occurs when firms copy the moves of their industry rivals. A. Imitator effect B. Bandwagon effect C. Diversification effect D. Groupthink effect

In 2010, Levi Strauss & Co introduced a new line of jeans called Levi's Curve ID. Levi's launched this product based on research that found that 80 percent of women fall into three distinct body shapes. Customers can now go to Levi's website and use a product configurator in order to determine their "Curve ID" and purchase jeans most appropriate for their body type. Levi's is using what tool to improve their strategic position? A. A product differentiation strategy with complements as a value driver. B. A product differentiation strategy with customization as a value driver. C. A focused cost leadership with economies of scale as a cost driver. D. A focused cost leadership with economies of learning as a cost driver.

In Strategy Highlight 6.2, Ryanair is aggressively pursuing a cost-leadership position in Europe. Which of the following cost drivers are primarily used by Ryanair in the text? A. Economies of scale B. Cost of input factors C. Experience-curve effects D. Learning-curve effects

Industry value chains consist of all of the processes that transform raw materials into finished goods and services. These value chains are also called: A. Horizontal value chains. B. Vertical value chains. C. Circular value chains. D. Flattened value chains.

Management of a firm must decide what range of products and services the firm should offer. This determines the firm's horizontal integration, or: A. Consolidation. B. Diversification. C. Categorization. D. Implementation.

Markets often provide higher-powered incentives than firms when it comes to employee motivation for economic transaction because: A. Transacting in the market provides a higher degree of job security. B.Markets provide incentives like IPOs for individual work efforts. C. Transacting in the market requires less time and effort than working for a firm. D. There is typically less economic risk to an individual when they are no longer bound to a firm.

Microsoft compares its stock performance annually to two stock indices: NASDAQ and the S&P 500. The NASDAQ covers over 400 high-tech companies, including Apple, Dell, and Intel. The S&P is a broader index and includes stocks from many industries. These stock indices are useful ________ that allow the public to assess whether Microsoft has a competitive advantage. A. Targets B. Benchmarks C. Reports D. Markets

Non-economic factors such as _________ and ________ are often the rewards of adopting the triple-bottom-line framework. A. Access to raw materials; supplier relationships B. Firm reputation; goodwill C. Product imitation; substitution D. Diversification; localization

One of the drawbacks to the accounting profitability approach to measuring competitive advantage is that it does not consider: A. Tangible assets such as land. B. Off-balance sheet items such as pension obligations. C. Profit earned per dollar. D. How the company performed in the past.

One of the reasons that big box retailers like Home Depot are able to achieve economies of scale is that: A. They have both broad and narrow economies of scope. B. They are able to take advantage of physical properties and maximize their scale efficiencies by stocking more merchandise and handling inventory more efficiently. C. They are able to take advantage of market size and spread investment losses over many locations. D. They have been able to protect themselves from the threat of buyer power by increasing input prices.

Political maneuvering by managers to influence resource and capital allocation can result in firm inefficiencies in a related-diversified firm. These costs are called: A. Fixed costs. B. Influence costs. C. Sunk costs. D. Opportunity costs.

Return on invested capital, return on equity, return on revenue, and _____________ are the profitability metrics that are commonly used by a firm in the quest for competitive advantage. A. Return on surplus B. Return on assets C. Return on value D. Return on production

Silicon chip technology will eventually reach its physical limit and will not be able to be improved upon. As that day grows closer: A. Companies like Intel increase investments in R&D. B. Companies like Intel place "strategic bets" on emerging technologies. C. No new technology emerges as the best replacement until a paradigm shift occurs. D. All of these.

Six Sigma, lean manufacturing, and genetic engineering are examples of ___________ that deliver new ways to produce or deliver existing products or services. A. Procedural changes B. Process innovations C. Entrenched standards D. Trial innovations

Tesla Motors, maker of electric cars, is an example of a firm using what type of generic business strategy? A. broad low-cost B. focused differentiation C. focused low-cost D. broad differentiation

The Wright Brothers creating the airplane is a(n) ______________; Boeing commercializing the airplane is a(n) _____________. A. Breakthrough; invention B. Invention; innovation C. Innovation; invention D. Product; process

The balanced scorecard is a tool for strategy _________, not ___________. A. Formulation; implementation B. Implementation; formulation C. Analysis; sustainability D. Formulation; sustainability

The basic way that the balanced scorecard provides competitive insight to managers is through the use of: A. Employee feedback. B. Concise reports that track and measure chosen metrics. C. Balance sheets and income statements. D. Stakeholder surveys.

The commercialization of new ideas and inventions often does all of the following EXCEPT: A. Creates value for society. B. Protects older industries. C. Disrupts an industry. D. Creates employment opportunities.

The costs associated with the "make or buy" question when determining the scope of the firm are: A. Investment costs. B. Transaction costs. C. Diversification costs. D. Scale costs.

The disruptive force of the Internet provides opportunities due to the ____________ phenomenon, which allows for customer and product niches to come together online. A. Proportion tail B. Long tail C. Incremental market D. Bottom-up

The likelihood of a discontinuity occurring in an industry: A. Is very strong if the industry produces simplified products. B. Is very strong if the existing technology is close to its physical limit. C. Is very weak unless the new technology is cheaper. D. Cannot be predicted.

The process of __________ turns an invention into an innovation. A. Integration B. Commercialization C. Diversification D. Exploitation

The productivity frontier provides a theoretical reflection of the possible best practices at any given time. Why is this an important tool for managers? A. Because any strategic tool that a manager has at their disposal is useful. B. Because strategic positioning is dynamic and firms have to refine their positions over time. C. Because a firm always wants to stay behind the productivity frontier. D. Because a firm wants to make sure it is ahead of best practices.

The two alternatives to vertical integration that provide similar benefits while reducing the risks to the firm are _________ and ____________. A. Incremental integration; horizontal integration B. Taper integration; strategic outsourcing C. Horizontal integration; outsourcing D. In-house supplying; intermediate integration

The two primary competitive levers that managers can use in order to answer the question of how to compete are: A. Cost and core competencies. B. Value and cost. C. Value and core competencies. D. Cost and revenues.

The type of customers vital to a firm introducing a new innovation are the _________, who are willing to pay higher prices and like to tinker with new products. A. Late adopters B. Early adopters C. Early laggards D. Late majority

The types of assets that are the primary focus of accounting data but are no longer most important to competitive advantage are: A. Intangible. B. Tangible. C. Indefinable. D. Unobserved.

There are several cost drivers that can be managed in order to establish a low-cost leadership advantage. One of the basic cost drivers is: A. Access to unique features that turn commodities into differentiated products. B. Access to lower-cost input factors including raw materials and labor. C. Creating personalized customer service in order to minimize price-sensitivity. D. Shifting to small-scale production processes in order to create customized products.

Total return to shareholders includes stock price appreciation and is an __________ measurement that reflects how the market views a firm's competitive position. A. Internal B. External C. Intangible D. Integrated

Under the five forces model, a risk to a business with a cost-leadership strategy is: A. Competition switches from customer service to pricing. B. When technological innovations open up cost reductions for substitutes or competitors. C. New entrants are all start-up firms with low volumes. D. Suppliers request a 2% price increase across the industry.

Under the shareholder value creation framework, ______________ makes it difficult to evaluate firm performance, particularly in the short term. A. Internal volatility B. Stock market volatility C. Value chain volatility D. Supplier volatility

Under the triple-bottom-line framework, being proactive with __________ dimensions makes good business sense. A. Economic B. Non-economic C. Technological D. Operational

Value creation is important to competitive advantage because: A. The product or service that is valued the highest by the firm will deliver competitive advantage(s). B. The product or service that is valued the highest by the customer can charge the highest price. C. The company with the highest future value will have highest profits. D. The company with the highest present value will sustain competitive advantage(s).

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

When a firm has been able to perform best practices combined with a positive value-cost relationship, it has reached the: A. Value-cost frontier. B. Productivity frontier. C. Economies of scope. D. Strategic intent.

When a firm is able to achieve higher economic value creation than its competition through differentiation, the competitive advantage is reflected by: A. The firm's ability to move into a new strategic group. B. The firm's ability to charge higher prices. C. The firm's ability to charge lower prices. D. The firm's ability to leverage complements.

When a firm offers products with unique features and higher value for customers than that of the competition, it is implementing a: A. Product-broad strategy. B. Differentiation strategy. C. Cost-leadership strategy. D. Product-focused strategy.

When a firm steadily improves its offerings by building on its knowledge base, it is engaging in: A. Architectural entrepreneurship. B. Incremental innovation. C. Disruptive entrepreneurship. D. Radical innovation.

When a new product, process, or idea is introduced into the market, it has been: A. Extracted. B. Commercialized. C. Invented. D. Executed.

When an employee of a firm follows his or her own interests such as pursuing managerial perks when performing activities on behalf of the owner of the firm, a(n) _______________ problem occurs. A. Delegation excess B. Principal-agent C. Authority-excess D. Agent efficiency

When engaging in strategic entrepreneurship an existing firm is often able to: A. Introduce radical innovations into the market. B. Exploit new or existing opportunities through innovation. C. Ignore its known core competencies. D. Keep costs low.

When it comes to strategic positioning and generic business strategies, which of the following is TRUE: A. All of the business strategies are equally difficult to adopt. B. Only a few exceptional firms are able to balance the value-cost strategic trade-offs and adopt an integration strategy successfully. C. Once a firm has established itself with a strategy, it should stick with what it knows. D. Strategic positioning is not as critical to competitive advantage as is the firm's resources and economic environment.

When new technologies emerge, old ones: A. Get eliminated. B. May improve due to the competitive pressure. C. Remain the same for established firms. D. Are no longer useful.

When pursuing a differentiation strategy, a firm must remember that: A. Buyers will be willing to pay for value that is not perceived. B. Buyers will be reluctant to pay for value that is not perceived. C. Perceived value is not as important as the price of the product. D. Perceived value is more important in a broad market than in a narrow one.

When pursuing an integration strategy, managers use levers to help them simultaneously increase perceived value and lower costs. Which of the following is NOT one of these levers? A. Quality B. Complements C. Economies of scope D. Structure, culture, and routines

When the focus of competition is on differentiation, a firm tends to use all of these levers EXCEPT: A. New product launches. B. Cost input factors. C. Marketing and promotion. D. Unique product features.

When the stock price of highly diversified firms is valued less than the sum of its individual business units, a(n) _________ occurs. A. Competitive discount B. Diversification discount C. Conglomerate efficiency D. Diversification efficiency

When the value that a customer attaches to a good or service exceeds the price paid for the good or service, this is a(n): A. Economic surplus. B. Consumer surplus. C. Value surplus. D. Consumer value.

When viewed from an economic value creation perspective, the major strategic objective for a firm is to: A. Distribute the value created to the consumer. B. Maximize the economic value created. C. Improve the qualitative attributes of the product/service. D. Decrease the producer surplus.

Which of the following is NOT a strategic advantage of forward integration? A. Better access to end users B. Ability to secure critical supplies C. More control of after-sales service D. Better planning and response to changes in demand

Which of the following is NOT an example of a firm benefiting from economies of scope? A. Kleenex Corporation using paper products for both its facial tissue and paper towel businesses B. Anheuser-Busch spreading its fixed costs over millions of gallons of beer produced each year C. Amazon leveraging its core competencies in IT systems into a wide range of online services, from retailing to cloud computing D. Honda using flexible manufacturing systems for quick and low-cost switching from one product to another

Which of the following is TRUE concerning the balanced scorecard? A. It is useful when formulating strategy, not when implementing it. B. It does not provide any insight on how to correct a problem once a firm deviates from its goals. C. It is superior to the triple bottom line when it comes to a holistic approach to competitive advantage(s). D. It monitors and reports how balanced a firm's investment portfolio is.

Which of the following is an example of a discontinuity that has happened in the past? A. McDonald's introducing the Happy Meal B. Propeller airplanes being replaced by supersonic jets C. The Apple iPhone 2G being replaced by the 3GS D. Starbucks selling its goods in China

Which of the following is most successfully innovating to overcome the problem of "thin markets"? A. Macy's B. eBay C. Gillette D. Walmart

Which of the following is the most salient problem with GE losing its AAA bond rating? A. It hurt their reputation. B. The higher cost of money. C. It dragged GE into the financial crisis. D. It had no major impact.

Which of the following strategies do firms typically employ as competitive intensity increases and the market matures? A. Turning to radical innovation in order to introduce a new product B. Employing manufacturing and process engineering capabilities to drive costs down C. Charging high prices in order to capture as much revenue as possible D. Adding additional features to the offering to increase perceived value

___________ makes the process of "creative destruction" happen by replacing existing goods, services, and processes with newly created ones. A. Engagement B. Entrepreneurship C. Venturing D. Speculation

Discontinuities are periods of time when all of the following occur EXCEPT: A. Many firms experience upheaval. B. Traditional technology is challenged by updated technology. C. Incumbent firms are protected. D. New opportunities exist.

A company that uses a cost-leadership strategy achieves a competitive advantage as long as: A. The economic value that is created is less than that of the competition. B. The economic value that the firm creates is equal to that of the competition. C. The economic value that the firm creates is greater than that of the competition. D. The economic value that is created is dependent on strategic parity.

A disruptive innovation leverages _______ technologies, while architectural innovations are based on ________ technologies. A. Existing; new B. Essential; drastic C. New; existing D. Drastic; essential

A drawback to evaluating competitive advantage under the shareholder valuation perspective is: A. The effectiveness of a firm's strategy cannot be reflected in its stock price. B. It is not as effective as the accounting profitability approach to measuring competitive advantage. C. The psychological mood of investors does not necessarily reflect how effective a firm's strategy actually is. D. It is the only "one-dimensional" framework that does not compare the firm to its rivals.

A firm's _________ captures the historical costs of a firm's assets. A. Market value B. Value created C. Book value D. Economic value

A firm's stock market valuation is based on historical accounting data and ___________. A. Off-balance sheet obligations B. Balance sheet obligations C. Market expectations for the future D. Managerial expectations for the future

A firm's structure, culture, and routines are very important when pursuing an integration strategy because organizations have to control costs and allow for creativity that can lead to differentiation. Therefore, managers should try to build an organization that is _________. A. Hierarchical B. Bureaucratic C. Ambidextrous D. Dynamic

A liquidity event is all of the following EXCEPT: A. An opportunity for an individual to potentially become financially secure for life. B. An initial public offering (IPO). C. An opportunity for the firm to offer low-powered incentives to employees. D. An incentive for an individual to transact economic activity in the market instead of a firm.

A low-cost firm can still gain a competitive advantage even without differentiation parity as long as: A. Its differentiation appeal is in parity with the competition. B. Its costs are higher than the competition. C. Its economic value creation exceeds that of the competition. D. Its economic value creation is the same as the competition.

A low-cost leader optimizes all of its ___________ in order to achieve a low-cost position. A. Five forces activities B. Strategic group activities C. Value chain activities D. Economic chain activities

A(n) _____________ is where the transformation of raw materials into finished goods and services occurs along distinct vertical stages. A. Production value chain B. Process value chain C. Industry value chain D. Business value chain

After an industry has established a dominant design and the industry is in the growth stage, the basis of competition turns to: A. "Price skimming" the market. B. Reducing processes and procedures. C. How to better produce a product or deliver a service. D. How to diversify the firm.

After an innovator launches a radical innovation, it must follow-up with ___________ innovations in order to protect its original advantage(s) and pre-empt potential rivals. A. Proactive B. Defensive C. Incremental D. Institutional

All of the following are features of hypercompetition EXCEPT: A. "Creative destruction" and innovation have made competition intense. B. Time periods of competitive advantage have shortened. C. Revenue making potential has increased. D. A firm must have a "sequence" of innovations in order to remain viable.

All of the following are reasons why a firm seeks to diversify EXCEPT: A. Shareholder pressure for continuous growth. B. To expand the international markets of the firm. C. To determine how to compete in current markets. D. To leverage core competencies.

All of the following are tools typically used to achieve cost-leadership EXCEPT: A. Controlling the cost of inputs. B. Leveraging economies of scale. C. Offering products that have superior value. D. Learning by doing.

An assessment tool that takes a multidimensional approach to evaluating a firm's competitive position by utilizing specific questions and performance metrics is: A. The comprehensive scorecard B. The shareholder scorecard C. The balanced scorecard D. The strategic scorecard

As noted in ChapterCase 7, the success of Wikipedia is attributed to all of the following EXCEPT: A. Leveraging innovations enabled by the Internet. B. Utilizing crowdsourcing. C. Ignoring the "long tail." D. Maintaining a reputation for accuracy.

As noted in Strategy Highlight 7.1, _______________ has created part of the growth of the Apple iPhone due to the apps that are available to users. These apps increase the value of the iPhone and thus more people want to own an iPhone with apps. A. Ignoring the role of complements B. Apple's low-cost strategy C. The leveraging of network effects D. The targeting of "laggards"

As noted in Strategy Highlight 8.3, in 2008 ExxonMobil reported the highest profits ever recorded by any company. Exxon receives the majority of its profits from petroleum-based products. Due to the political and regulatory climate and the global movement toward cleaner energy sources, Exxon purchased the natural gas company XTO Energy in 2009 as a low-carbon alternative to petroleum. Exxon then became the world's largest producer of natural gas. All of the following are true about Exxon's strategic move EXCEPT: A. Exxon horizontally integrated when it purchased XTO Energy. B. Exxon is using its core competencies for corporate diversification. C. Exxon is pursuing an unrelated diversification strategy. D. Exxon is investing in more ecologically sound resources.

As of 2010, ______________ have become more important than tangible assets when it comes to a firm's stock market valuation and competitive advantage. A. Business-level strategic initiatives B. Off-balance sheet obligations C. Intangible assets D. Accounting data projections

Avon has been able to raise the perceived value of its products while lowering production costs. It has also been able to create more value in relationship to its costs over rivals Revlon and L'Oreal. It can be said that: A. Avon has successfully moved from a differentiation to a cost-leadership strategy. B. Avon has a competitive advantage because it has the features customers value most in the cosmetics industry. C. Avon has successfully achieved an integration strategy and has a competitive advantage because it has higher value creation. D. Avon is the low cost leader of the cosmetics industry with their "sell at home" sales approach.

Competitive advantage is best assessed by using: A. Accounting data. B. Value creation. C. A relative benchmark. D. The firm's stock price.

Continuous innovation, rapid technological changes, and intense competition create: A. Consistency in an industry. B. Product repetition. C. Hypercompetition. D. Sustained competitive advantages.

Disruptive innovations such as the $200 netbook computer do all of the following EXCEPT: A. Target existing markets. B. Incorporate new technology. C. Introduce a radical idea and create a new industry. D. Attack the market from the "bottom up."

Dow Corning is owned jointly by Dow Chemical and Corning. Dow and Corning have entered into a __________, which is a special form of strategic alliance whereby two or more partners create and jointly own a new organization. A. Conglomerate venture B. Diversified venture C. Joint venture D. Joint contract

During the _______ stage of an industry life cycle, market demand is at a minimum and competitive intensity increases. A. Introduction B. Innovative C. Maturity D. Disruptive

Each of the following are a distinct phase in an industry life cycle EXCEPT: A. Growth B. Introduction C. Plateau D. Maturity

Entrepreneurial opportunities exist because of all of the following EXCEPT: A. At a certain point, technology and processes reach their limit. B. The market has unmet needs. C. The firm does not believe in risk-taking. D. A new invention can be commercialized.

Entrepreneurs do all of the following EXCEPT: A. Undertake economic risk. B. Act as change agents. C. Decrease value for society. D. Innovate in products and processes.

Failure to achieve competitive advantage is an indication of: A. Using the incorrect measurement tools. B. A poor economy. C. A failure in strategy. D. Being in the wrong strategic group.

Firm competitive performance can be best judged by: A. Internal performance metrics of the firm. B. Past performance of the firm. C. Comparisons to rivals and the industry. D. External performance metrics of the firm.

Firms that exhibit _________ and ________ reach the productivity frontier. A. Determination; strategic intent B. Economies; flexibility C. Effectiveness; efficiency D. Innovation; culture

Firms use a balanced scorecard for all of the following reasons EXCEPT: A. It links strategic vision to all responsible parties. B. It helps design and plan business processes. C. It encourages the firm to improve its ecological position. D. It aids in organizational learning.

Firms use related diversification strategies in order to: A. Horizontally integrate the firm's operations and processes. B. Increase revenue from the dominant business of the firm. C. Benefit from economies of scale and scope. D. Improve the chances of being acquired by a similar firm.

GM and Hyundai offer certain car models that directly compete with each other. Hyundai is able to produce their models at a lower cost while providing similar value at the same time. It can be said that: A. GM and Hyundai have both achieved differentiation parity and competitive advantages. B. GM has achieved differentiation parity and a competitive advantage over Hyundai. C. Hyundai has achieved differentiation parity and a competitive advantage over GM. D. Neither GM nor Hyundai have achieved differentiation parity since they are not in the same strategic group.

Generally, a firm that ___________ is able to achieve competitive advantages for the longest time period because this type of innovation is novel and not easily duplicated at first. A. Architecturally innovates B. Focuses on costs C. Radically innovates D. Hyper-innovates

Generic business-level strategies that a firm can adopt include all of the following EXCEPT: A. Focused cost-leadership strategy. B. Focused differentiation strategy. C. Market differentiation strategy. D. Broad cost-leadership strategy.

In 2010, Exxon Mobil posted 19.3 billion in profits and was ranked as the top performer by the Fortune 500 list. However, Liberty Media, which is a smaller organization than Exxon, posted the highest return on revenue for the year at 62.1 percent. Using the accounting profitability framework, Exxon outperformed Liberty in ________ terms, and Liberty outperformed Exxon in _________ terms. A. Accounting; shareholder value B. Shareholder value; profitability C. Absolute; relative D. Competitive; absolute

In order for a diversification strategy to enhance firm performance, it must do any of the following EXCEPT: A. Provide economies of scale and reduce costs. B. Exploit economies of scope and increase value. C. Create diversification discounts. D. Reduce costs and increase value.

In order for a firm to formulate an effective business-level strategy, it is important to remember that competitive advantage is determined by: A. The characteristics of the industry in which a firm competes. B. The characteristics of the firm itself. C. The characteristics of both the industry and the firm. D. The absolute positioning of the firm.

Information asymmetries occur when: A. Certain departments within the firm keep information from other departments. B. There are gaps in technological skills between employees of a firm. C. A firm transacts in the market with a seller who has better information about the product or service. D. All of these.

Intel and Apple are innovators who entered the market during the introduction stage of an industry life cycle. All of the following are characteristics of this stage EXCEPT: A. Differentiation is the basis of competition. B. Network effects increase the value of the offering. C. Keeping costs low is the main objective. D. Achieving market acceptance is critical.

Interface is a leader in sustainable and innovative carpeting, as evidenced by its Cool Carpet product, the world's first carbon-neutral floor covering. Its product is unique and has appealing customer attributes. If Interface raw material costs increased by 12% this year, what would be the likely outcome? A. Interface would lower profit margins to absorb this cost increase. B. The company would launch an all-out effort to reduce other costs by 12%. C. Interface would pass a major portion of this increase along as a price increase to its customers. D. Interface would seek to find other materials with lower costs, even if it meant losing the carbon-neutral label on the product.

It can be said that the Tata Group is pursuing a(n) _____________ strategy at the corporate level when it comes to automobiles. A. Undiversified B. Unrelated C. Integration D. Linked integrative

Long-term contracts such as licensing and franchising offer an advantage over short-term contracts because: A. They cost less. B. The competitive bidding process is extended. C. There is more incentive for transaction-specific investments. D. Licensing transfers ownership; short-term contracts do not.

Macroeconomic factors such as the unemployment rate and economic contraction: A. Minimize stock price volatility. B. Are irrelevant to shareholder value creation. C. Have a direct bearing on a firm's stock price. D. Help shareholders evaluate whether a firm's strategy is working.

Managers wishing to diversify the firm must remember that: A. A single-business diversification strategy generally works best. B. Forward integration is more successful than is backward integration. C. Successful diversification must be aligned with and strengthen a firm's business strategy. D. It is competitively advantageous to shrink the size and scope of most firms.

One of the risks of pursuing an integration strategy is: A. That a firm could lose sight of its mission. B. That this strategy is easy for rivals to imitate. C. That the firm may get "stuck in the middle." D. That it is ineffective when competing on a global scale.

One way to overcome the principal-agent problem is to: A. Flatten the organization. B. Micromanage the management team. C. Make managers owners through stock options. D. Increase the scope of management's responsibilities.

PepsiCo sells a wide variety of beverages and food products in 190 countries. It is clearly engaging in ______________ to achieve continuous growth. A. Product diversification B. Geographic diversification C. Product-market diversification D. Multimarket diversification

Relative to the five-forces model, a low-cost strategy is beneficial when: A. Competition is based on product features, suppliers may increase costs, and buyers have bargaining power. B. Competition is based on product features, suppliers have very limited power, and buyers have bargaining power. C. Price competition is vigorous, suppliers may increase costs, and buyers have bargaining power. D. Price competition is vigorous, suppliers have very limited power, and buyers have bargaining power.

Research indicates that when it comes to the diversification-performance relationship: A. Single-business strategies tend to be the highest performing. B. The less related the businesses are, the higher the performance of each. C. Related-constrained and related-linked strategies are associated with higher firm performance. D. No specific level of diversification outperforms another.

Rolex focuses on a small market segment, affluent consumers who want to present a certain image. What is the appropriate name for Rolex's scope of competition? A. Broad B. Market segmented C. Narrow D. Targeted

Shareholders are most concerned with _____________ when it comes to measuring a firm's competitive advantage. A. Value creation B. Global expansion C. Return on risk capital D. Market share

Shareholders include individuals and organizations that are the ___________ of a public company. A. Targeted consumers B. Largest patrons C. Legal owners D. Client base

Spreading fixed costs over larger output, employing specialized systems and equipment, and ________________ are three primary ways that achieving economies of scale can help a business. A. Increasing capital investments in input factors B. Producing two or more outputs using common resources C. Taking advantage of certain physical properties D. Spreading marginal costs over smaller units

The Boston Consulting Group (BCG) matrix is a tool that helps with: A. Analyzing mergers and acquisitions. B. Quality improvement. C. Corporate portfolio planning and restructuring. D. Cost reduction initiatives.

The Tata Group of India is a widely diversified multinational company. In 2008, it bought Jaguar and Land Rover from Ford. It is hoping to leverage the prestige of these brands due to their global reputation. Then, in 2009 Tata introduced the Nano car, which is the lowest-priced car in the world. The rear hatch of the Nano can't be opened, and it has no radio or even a glove compartment. It can be said that the Tata Group of India is: A. Planning to move the Jaguar business unit from differentiated to an integration strategy. B. Pursuing the Chinese market with the Land Rover acquisition. C. Pursuing both a focused differentiation strategy and a focused cost-leadership strategy. D. Planning to move the Nano business unit from low-cost to an integration strategy.

The ___________ is the difference between value creation and cost. A. Profit gap B. Net profit C. Value gap D. Revenue gap

The ________________ relationship is the closest to a firm being fully integrated. In this relationship, transaction costs typically arise from political turf battles between the corporate office and the standalone business. A. Owner-partner B. Conglomerate-alliance C. Parent-subsidiary D. Business-stakeholder

The agents who create change in an industry by introducing new ideas and products are: A. Executives. B. Speculators. C. Entrepreneurs. D. Investors.

The disruptive innovation of the Internet and the "long tail" phenomenon in the retail industry would be in which category for a SWOT matrix for Barnes & Noble? A. Risks B. Weaknesses C. Threats D. Opportunities

The fact that in its 2010 annual report, Microsoft outperformed the S&P but underperformed in the NASDAQ over the previous five years indicates all of the following EXCEPT: A. Benchmarks are important to consider in competitive advantage. B. Competitive advantage is defined in relative terms. C. The NASDAQ is not a good indicator of competitive advantage. D. Competitive advantage can be difficult to assess.

The four best strategic choices available to management during the decline stage of an industry include all of the following EXCEPT: A. Exit the industry. B. Consolidate by buying rivals. C. Persist by increasing investments in the product. D. Harvest by reducing investments and maximizing cash flow.

The group of customers referred to as the ___________ lead the wave of increased demand as the industry moves from the introduction stage to the growth stage. A. Laggards B. Experimenters C. Early majority D. Innovators

The main intention of a firm engaging in architectural innovation is to: A. Utilize new technology to create a new industry. B. Utilize existing technology to steadily improve existing products. C. Utilize existing technology to reconfigure products and create new markets. D. Utilize new technology to disrupt the market with existing products.

The more "constrained" the relatedness of diversification: A. The fewer the linkages between the businesses owned by the firm. B. The wider the variation in the portfolio of businesses owned by the firm. C. The more links there are among the businesses owned by the organization. D. The higher the proportion of total organizational revenue is derived from the dominant business.

The opening case of Chapter 6 highlights the business-level strategy of Whole Foods. All of the following are part of this strategy EXCEPT: A. Adopting a new strategic intent to become the champion of healthy eating. B. Reducing costs through initiatives such as expanding its private-label offerings. C. Emphasizing its organic food offerings as the tool to compete on price. D. Improving its logistics system in order to improve efficiencies.

The return on risk capital that includes stock price appreciation plus dividends received over a specific period is: A. Total return on assets. B. Normalized returns. C. Total return to shareholders. D. Capitalized returns.

The triple bottom line and the balanced scorecard are ____________ frameworks that help a firm evaluate whether its strategy is working. A. Short-term B. Transitory C. Holistic D. Narrow

The use of new materials with a new knowledge base to target new markets is a: A. Groundbreaking innovation. B. Trail innovation. C. Radical innovation. D. Modern innovation.

The word processor brought more perceived value to the market and replaced the typewriter as the industry standard. Later, the word processor industry was undone by the computer industry which created even more value. This is an example of: A. The "ups and downs" of an economic cycle. B. A view of industry life cycles getting longer C. The positive and negative aspects of creative destruction. D. The effects of diversification.

Under the Transaction Cost Economics framework, when it would cost the firm more to pursue an activity in-house than obtaining that activity in the external market, the firm should: A. Consider horizontally integrating instead. B. Perform the activity in-house anyway in order to gain core competencies. C. Consider options such as short-term contracts or strategic alliances. D. Divest that particular business.

Under the balanced-scorecard framework, management concentrates on all of the following areas when it comes to improving how customers view the firm EXCEPT: A. Service. B. Quality. C. Stock price. D. Cost.

Under the core competence-market matrix, the most difficult diversification strategy is combining __________ with ________, because core competencies must be built. However, this creates the potential for "mega opportunities" and significant future growth opportunities for a firm that achieves this. A. New core competencies; existing markets B. Existing core competencies; existing markets C. New core competencies; new markets D. Existing core competencies; new markets

Under the economic value creation framework, value can be viewed as: A. How much the product improves along the value chain. B. The firm's book value of the product line. C. The consumer's maximum willingness to pay. D. How important the product is to the firm's overall strategy.

Vertical integration involves all of the following EXCEPT: A. The level of ownership by a firm of production or service inputs. B. The level of ownership by a firm of the channels for the distribution of outputs. C. The expansion by the firm into different product lines and markets. D. Being more efficient internally than the external market.

When Japanese carmakers attacked the existing U.S. automobile market by offering low-cost, fuel-efficient cars based on new technology, they were engaging in ___________ innovation. A. Distinctive B. Radical C. Disruptive D. Stealth

When a firm assesses its performance by asking questions such as "How do our customers view us?" and "What core competencies do we need?", it is using which tool? A. The strategy map B. The triple bottom line C. The balanced scorecard D. A PESTEL analysis

When a firm has a greater positive difference between cost and value than its rivals, it can achieve competitive advantage by: A. Raising the price and maintaining market share and volumes. B. Increasing production costs while lowering prices. C. Charging the same or even lower prices and selling more goods or services. D. Minimizing the difference between value and cost and lowering prices.

When a firm that follows the unrelated diversification strategy allocates capital from internal sources, it can create value by doing all of the following EXCEPT: A. Using more efficient budgeting processes than the external market. B. Discovering privately which business units provide the highest return to invested capital. C. Disregarding its debt rating and investing large amounts of capital in projected growth areas. D. Accessing capital at a lower cost.

When a firm vertically integrates along the industry supply chain and invests in specific assets in order to support its activities, it has invested in: A. Fixed assets. B. Firm assets. C. Specialized assets. D. Required assets.

When comparing Exxon Mobil and Liberty Media using the return on revenue metric, __________ had a relative competitive advantage in 2010. A. Neither firms B. ExxonMobil C. Liberty Media D. Both Exxon and Liberty

When crafting strategy under a shareholder value creation context, the goal is to achieve all of the following EXCEPT: A. Provide the highest return to shareholders relative to the competition. B. Minimize shareholder risk relative to the competition. C. Sell more stock than the competition. D. Deliver the greatest stock price appreciation relative to the competition.

When it would cost the firm less to pursue an activity in-house than obtaining that activity from a supplier in the external market, then the firm should: A. Enter into a joint venture. B. Execute a short-term contract. C. Vertically integrate. D. Strategically outsource.

When management decides whether to pursue a broad market position or a narrow market position, they are defining the: A. Economies of scale. B. Economies of scope. C. Scope of competition. D. Scope of core capabilities.

When one firm makes a credible commitment to another firm, it is doing all of the following EXCEPT: A. Creating trust between the firms. B. Making a long-term strategic decision. C.Offering a promise that it will perform in the future. D. Sharing the risk and costs.

When viewed from a balanced-scorecard approach, a strategic objective for a firm is to: A. Balance the firm's investment portfolio in order to minimize risk. B. Take incremental strategic actions to protect the firm from retaliation. C. Integrate internal and external performance data to assess and strengthen the firm's current position. D. Integrate internal departments and processes and flatten the organization.

Which of the following acquisitions would be considered the LEAST related? A. A baking company purchasing a sugar company B. A chain of hotels acquiring a golf course C. A toy manufacturer acquiring a coffee company D. A steelmaker acquiring a kitchen utensils company

Which of the following corporate diversification strategies most closely describes Disney? A. Single-business B. Related-constrained C. Related-linked D. Unrelated diversification

Which of the following is NOT a risk of vertical integration ("make")? A. Less exposure to market competition leads to higher costs. B. Organizational complexity increases with integration. C. Organizational planning often improves when a firm integrates. D. Less contact with the external market diminishes learning and experience effects.

Which of the following is NOT one of the three critical factors used to evaluate economic value creation and competitive advantage? A. Value B. Price C. Stock price D. Cost

Which of the following is NOT part of the BCG matrix? A. Stars B. Dogs C. Strangers D. Cash Cows

Which of the following is NOT true about the decline stage of an industry life cycle? A. Inefficient firms exit the industry. B. "Laggards" are the last consumer segment to enter the market. C. Firms that consolidate and buy their rivals are typically at a disadvantage. D. There is generally excess industry capacity.

Which of the following questions is the most relevant for corporate-level strategy? A. How to compete? B. When to compete? C. Where to compete? D. Why to compete?

Wikipedia's "open source" approach to competitive advantage will be sustainable as long as: A. The market isn't saturated with book-based encyclopedias. B. Another firm doesn't introduce a CD-based encyclopedia. C. People are willing to volunteer to contribute content. D. All of these.

_____ drivers are as important to a differentiation strategy as ________ drivers are to a cost-leadership strategy. A. Scope; quality B. Quality; learning C. Value; cost D. Learning; experience

_________ and __________ are two of the value drivers that managers can utilize when trying to improve a firm's differentiation strategic position. A. Co-opetition; complements B. Learning-curve effects; co-opetition C. Customer service; complements D. Economies of scale; co-opetition

__________ occur when transactions are not likely to take place because it is difficult to bring niche buyers and niche sellers together. A. Blended markets B. Wide markets C. Thin markets D. Diluted markets

_____________ are additional costs that are attached to the related-diversification strategy because of managing the number, size, and types of businesses that are linked to one another. A. Opportunity costs B. Specified costs C. Coordination costs D. Sunk costs

"Stakeholders" under the stakeholder theory are: A. Only concerned with return on risk. B. Governmental bodies who oversee industry regulations. C. Interested in maximizing profit. D. Anyone who makes contributions to a firm and expects inducement in return.

A firm's strategic position is: A. Determined by its business-level strategy. B. Created through strategic trade-offs. C. An attempt to create a large gap between value creation and costs. D. All of these.

A(n) ____________ is the dominant design established during the growth stage of an industry life cycle once the market comes to agreement about the prevailing set of engineering features and design choices. A. Compliment B. Trial design C. Prototype D. Standard

All of the following are decisions that managers must make when formulating corporate strategy EXCEPT: A. What stages of the industry value chain to participate in. B. What range of products and services should be offered. C. Where globally the company should compete. D. Whether the company should compete through differentiation or cost leadership.

All of the following are forms of strategic alliances EXCEPT: A. Long-term contracts. B. Equity alliances. C. Joint ventures. D. Short-term outsourcing.

All of the following are true about conglomerates EXCEPT: A. They follow the unrelated diversification strategy. B. They are able to overcome institutional weaknesses such as a lack of capital markets in emerging economies. C. Less than 70 percent of their revenues come from a single business. D. They are likely acquisition targets for large single-business firms.

Analyzing accounting profitability is important to managers because: A. This data reflects how much profit the firm will make in the future. B. How the customer views the firm is reflected in accounting data. C. This information tells management how much to invest in intangibles. D. Comparing "hard numbers" against rivals provides competitive insight.

Applying the ______________ framework helps managers make economic decisions namely; what activities to pursue within the firm and which to obtain from the external market. A. Transformational analysis B. Economic investment analysis C. Appropriation economics D. Transaction cost economics

As noted in Chapter 5, BMW anticipated the need to recycle its automobile parts due to potential industry regulation. It redesigned its manufacturing processes to include quick disassembly and reuse of car components. In addition, BMW sells the used parts in the after-sales market. This is an example of how the triple-bottom-line framework: A. Adds more layers of bureaucracy to a firm. B. Streamlines processes of the firm. C. Shortens product life cycles. D. Improves a firm's social and ecological responsibility.

Both Apple and Nike produce their products and own retail outlets. They also rely on independent distributors to sell their offerings. Apple and Nike are utilizing _________ to partially rely on outside-market firms while supporting their forward vertical integration strategy. A. Strategic alliances B. Strategic outsourcing C. Horizontal integration D. Taper integration

Combining the dimensions of a firm's __________ and __________ tells us which generic business strategy the firm will pursue. A. Economies of scope; economies of scale B. Five forces; economies of scope C. Scope of competition; core capabilities D. Strategic position; scope of competition

Companies that pursue related diversification often receive a diversification premium, leading to a stock price valuation that is higher than the sum of their individual business units. This premium indicates that investors: A. Are hedging their bets that at least a few of the related businesses will experience high performance. B. Believe that firms with related diversification strategies are more likely to be restructured in the future. C. Are experiencing the bandwagon effect when it comes to investment choices. D. Understand that firms with related diversification strategies are more likely to improve their performance than other diversified firms.

Due to hypercompetition, a firm must engage in incremental innovation to remain competitive and gain advantage(s). However, the duration of these advantages: A. Are shorter in duration and magnitude with each subsequent innovation. B. Will eventually leave a firm vulnerable to radical innovations. C. Depend on when discontinuities occur in the industry. D. All of these.

During the time of a(n) ____________, an existing industry is transformed due to revolutionary technology, becoming the new standard. A. Industry shift B. Market shift C. Innovative shift D. Paradigm shift

Ecological concerns such as sustainability can: A. Be a useful tool for differentiation. B. Generate goodwill in the marketplace. C. Foster firm innovation. D. All of these.

Equity alliances are forms of strategic alliances that do all of the following EXCEPT: A. Signal greater commitment to the partnership. B. Allow one partner to take partial ownership of the other partner's company. C. Encourage specialized investments for future performance. D. Temporarily allow one partner to use the other's trademark and business processes.

Essentially, a successful integration strategy: A. Gives customers more perceived value while exceeding their price expectation. B. Allows a firm to make strategic trade-offs effectively. C. Enables a firm to increase value creation while keeping costs in check. D. All of these.

Gillette introducing updated versions of its razor is an example of which type of innovation? A. Essential B. Disruptive C. Radical D. Incremental

Higher product value tends to go along with which of the following items? A. Higher prices B. A higher willingness to pay C. Higher costs D. All of these

Human-asset specificity is the form of an asset that a firm invests in to create the human capital with knowledge about the specific routines and procedures needed to support a firm's vertical integration strategy. These routines and procedures bring competitive value to the firm because: A. They organize the firm's work processes. B. They are not transferable to a different employer. C. They are not easily imitated. D. All of these.

Hyundai's reputation for quality is an asset that: A. Will not be reflected in Hyundai's accounting information. B. Will be reflected in Hyundai's market valuation. C. Will be important to Hyundai's competitive advantage. D. All of these.

In the economic value creation framework of measuring competitive advantage (VPCs), V - P = __________. A. Profits B. Deadweight loss C. Goodwill D. Consumer surplus

Innovation used as a sustained competitive weapon must be: A. Radical and low cost. B. Architectural and high cost. C. Short-term and efficient. D. Continuous and commercialized.

Learning curves were first used by aircraft manufacturers in the 1930s. Companies found a predictable relationship between increasing production output and cost per unit. What does it mean for a firm to have an 80% learning curve? A. Every time the cumulative output increases by 80%, the cost per unit will decrease by 20%. B. Every time the cumulative output is doubled, the cost per unit will decline by 80%. C. Every time the cumulative output goes up 20%, the cost per unit will decline by 80%. D. Every time the cumulative output is doubled, the cost per unit will decline by 20%.

Measuring profitability on a relative rather than absolute basis is important because of all of the following EXCEPT: A. It indicates how much profit a firm earns per dollar of revenue instead of overall profit. B. It helps to compare firms of different sizes. C. Relative profitability is a better reflection of competitive advantage than is absolute profitability. D. A firm that has the greatest overall profit will sustain competitive advantage(s).

OXO differentiates kitchen utensils by using a patent-protected, ergonomically designed rubber grip. By adding unique product features, OXO can: A. Turn differentiated products into standardized products with price parity. B. Turn differentiated products into standardized products with price disadvantages. C. Turn commodity products into differentiated products with price disadvantages. D. Turn commodity products into differentiated products with premium pricing.

Strategy Highlight 6.1 discusses Toyota's recall challenges with its Lexus brand. All of the following are true EXCEPT: A. Toyota used the value driver of customer service when it called each owner individually for recommended repairs. B. By exceeding customer expectations, Toyota turned a serious threat into an opportunity by establishing brand reputation for superior customer service. C. Toyota's customer responsiveness enabled the firm to influence early adopters who became opinion leaders for influencing others to purchase a Lexus. D. Since the Lexus recall of the 1990s, Toyota leveraged firm experience effects and has successfully maintained quality leadership in the automobile industry with no major challenges.

The ability of an existing firm to understand, evaluate, and integrate external technological developments is dependent on its: A. Own technology. B. Longevity in the industry. C. Strategic intent. D. Absorptive capacity.

The three traditional approaches that are considered fairly one-dimensional when measuring competitive advantage include all of the following EXCEPT: A. Economic value creation B. Shareholder value creation C. Accounting profitability D. Balanced scorecard

The triple bottom line is important to competitive advantage because: A. Social and ecological implications are important to firm performance. B. Achieving the triple bottom line can lead to sustained competitive advantage(s). C. These dimensions are important to stakeholders. D. All of these

There are two generic strategic positions that require managers to make trade-offs between, in order to achieve success at an integration strategy. They are: A. Service-oriented and low cost. B. Product-oriented and high cost. C. High cost and commodity. D. Low cost and differentiation.

Today, many companies use PeopleSoft and EDS to manage their human resources. By doing this, these firms: A. Are engaging in strategic outsourcing. B. Are reducing their level of vertical integration. C. Are leveraging their competencies. D. Are doing all of these.

Transaction costs: A. Help determine the scope of the firm. B. Are all costs associated with an economic exchange. C. Are both internal and external. D. Are all of these.

Under the "long tail" phenomenon, the short head represents: A. The smallest segment of the market. B. Where customer demand levels off. C. The maturity stage of the industry life cycle. D. The largest segment of the market.

Under the five forces model, a differentiation strategy works best when: A. The firm has intangible resources, supplier cost increases can be passed on to the customer, and equivalent substitutes are readily available. B. The firm has tangible resources, supplier cost increases can be passed on to the customer, and equivalent substitutes are readily available. C. The firm has tangible resources, supplier cost increases can be passed on to the customer, and the differentiation appeal creates customer loyalty. D. The firm has intangible resources, supplier cost increases can be passed on to the customer, and the differentiation appeal creates customer loyalty.

Under the shareholder value creation approach to measuring competitive advantage, profitability and stock price increases indicate: A. That investors are ignoring macroeconomic factors. B. That the firm is most likely at competitive parity with its rivals. C. That investors will get a poor return on their risk capital. D. That a firm is utilizing effective strategies.

Understanding how the "80-20" rule can be applied to the disruptive force of the Internet allows a firm to do all of the following EXCEPT: A. "Sell less of more" to customers with heterogeneous tastes. B. Target the remaining 20 percent of potential sales. C. Leverage the Internet to reduce transaction costs. D. Charge 20 percent more for online purchases.

Understanding the productivity frontier is useful because of all of the following EXCEPT: A. It represents possible strategic positions a firm can take. B. It reflects the relationship between strategic positions, value creation, and costs. C. It helps a firm determine cost-differentiation trade-offs. D. It reflects which global markets will be the most productive to pursue in the future.

Understanding the shareholder's view of value creation under the balanced scorecard leads a firm to: A. Focus on value chain activities. B. Select which product markets to be in. C. Decide how many shares of stock it should sell. D. Adopt a more future-oriented perspective.

What is one of the challenges of measuring competitive advantage using the economic value creation approach? A. The value placed on a product or service by the consumer changes according to income and preferences. B. It is difficult to measure the economic value created for all products and services across the organization. C. It is challenging to determine the value of a product or service from a customer's perspective. D. All of these.

When a firm is able to successfully employ an integration strategy, it will create a competitive advantage by: A. Combining high quality and product features to provide service that customers truly value. B. Using a first-mover advantage to be the lowest price in the market. C. Winning market share with a highly differentiated product. D. Beating rivals on product attributes while offering a better price.

When a firm is active in several different product markets, it is pursuing a(n) ____________ diversification strategy. A. Market B. Process C. Multipoint D. Product

When a firm like GE has few if any linkages among its businesses, it is pursuing a(n) ________ diversification strategy. A. Slightly-related B. Comprehensive C. Broad-based D. Unrelated

When competing on the basis of low-cost leadership, a primary objective is to: A. Lower manufacturing costs. B. Lower production costs. C. Lower supplier costs. D. Lower overall costs.

When costs per unit fall as output increases, _________________ occur. A. Economies of scope B. Diseconomies of scale C. Economies of efficiency D. Economies of scale

When crafting strategy under an economic value context, the goal is to achieve all of the following EXCEPT: A. Capturing as much economic value as possible. B. Making sure that the relationship between value, cost, and price results in a positive economic contribution. C. Creating more economic value than rivals. D. Ensuring that the value captured is equally distributed between producer and consumer.

Which of the following is NOT an example of an industry standard or dominant design? A. Blu-ray media storage B. Barcode scanners C. Wintel operating systems D. The Dvorak (DSK) keyboard

Which of the following is NOT an important aspect of innovation? A. Useful B. Novel C. Implemented D. Tangible

Which of the following is most notably benefitting from the "long tail"? A. Walmart B. Disney C. Intel D. Netflix

_________ is when a firm is searching for new knowledge that could enhance future performance. A. Boundary spanning B. Channel communication C. Exploitation D. Exploration

__________ is measured by a product's performance characteristics and its attributes for which customers are willing to pay. A. Competitive advantage B. Profit potential C. Contribution D. Value

T/F: A firm that is "stuck in the middle" has a competitive advantage

False

T/F: A firm's business-level strategy answers the question "Where should we compete?"

False

T/F: A firm's stock price is one of the best indicators of overall performance.

False

T/F: According to Chapter Case 5, Microsoft outperforms Google when it comes to performance per employee.

False

T/F: Although Google is active in many different businesses, more than 95 percent of its revenues come from online advertising. Therefore, Google can be considered a firm pursuing a related-linked strategy.

False

T/F: Cost drivers that are out of managerial control include the cost of input factors, economies of scale, and experience-curve effects.

False

T/F: Due to the dynamic nature of business competition, a firm's strategic position should remain fixed over time.

False

T/F: Economies of scale generally weaken a firm's ability to move down a given learning curve.

False

T/F: General Electric is an example of a firm that is following the dominant business diversification strategy.

False

T/F: Gradually moving an activity from internal to an outside firm is called taper integration.

False

T/F: In general, product innovation is more strategically important than process innovation while a firm is in the growth stage of the industry life cycle.

False

T/F: In order for a firm to perform well in each stage of an industry life cycle, it should consistently use the same competencies.

False

T/F: Inventing is the same thing as innovating

False

T/F: Investment in specialized assets is a huge risk of vertical integration.

False

T/F: It is impossible to predict when a new innovation will actually lead to updated technological standards.

False

T/F: It is strategically wise for an established firm to solicit feedback only from existing customers since they are loyal to the firm.

False

T/F: Qualitative dimensions such as a firm's environmental reputation matter more than quantitative dimensions like accounting profitability when evaluating whether or not a firm's strategy is working.

False

T/F: Research indicates that low levels of diversification are generally associated with higher overall firm performance

False

T/F: Reverse innovation occurs when a rival reengineers one of the firm's product offerings.

False

T/F: Succeeding at an integration strategy is typically easy for a firm.

False

T/F: The Boston Consulting Group (BCG) growth-share matrix is a tool used by firms to determine the costs and quality of its offerings.

False

T/F: The vast majority of innovations come from radical breakthroughs.

False

T/F: Value drivers are considered to contribute to competitive advantage even if the increase in cost exceeds their value creation.

False

T/F: Value drivers that managers can use include input factors, economies of scale, and learning-curve effects.

False

T/F: When it comes to accessing capital and value creation, a diversified firm should always choose its internal capital market over external capital markets.

False

T/F: When measuring competitive advantage under the economic value creation approach, it can be easy to determine what the consumer's maximum willingness to pay will be.

False

T/F: When pursuing a cost-leadership strategy, the focus of competition is on cost parity, while offering acceptable value.

False

T/F: When using accounting profitability data to assess competitive advantage, it is important to make comparisons across different industries.

False

T/F:The balanced scorecard helps a firm formulate strategy.

False

T/F It is important to measure competitive advantage at the firm level by looking at the economic value created for all products and services offered by the firm.

True

T/F: A firm can protect itself from hypercompetition by NOT imitating its rivals.

True

T/F: A firm's overall corporate strategy is most concerned with determining levels of vertical integration as well as levels of diversification.

True

T/F: A key component to formulating corporate-level strategy is the "make" or "buy" decisions.

True

T/F: An important feature of the triple-bottom-line approach to creating a firm's competitive advantage is that it increases the chances that the strategy chosen will be sustainable.

True

T/F: An important question to ask when looking at differences in firm performance and competitive advantage is how to best measure these differences.

True

T/F: Applying the five forces model to business-level strategy allows managers to assess the benefits and risks of both cost-leadership and differentiation strategies.

True

T/F: As a general rule, only 20 percent of product offerings in a given product category make up 80 percent of total sales.

True

T/F: As noted in ChapterCase 7, Microsoft destroyed about half the value created by Encyclopedia Britannica by introducing the Encarta CD in 1993. In turn, the online Wikipedia destroyed Encarta's business, which was shut down in 2009. This is an example of how discontinuities can impact the sustainability of a firm.

True

T/F: Competitive advantage and firm strategy are best assessed using a variety of approaches.

True

T/F: Corporate diversification strategy leads to superior performance only if the individual businesses are worth more under the company's management than if managed individually.

True

T/F: Corporate-level strategy involves the decisions made and actions taken while deciding which industries and markets to pursue simultaneously.

True

T/F: Hypercompetition has made it more difficult for a firm to sustain a competitive advantage.

True

T/F: In ChapterCase 8, CEO Jeffrey Immelt restructured GE's portfolio partly because its future performance potential was too reliant on the GE Capital division.

True

T/F: Industry value chains are also called vertical value chains.

True

T/F: Macroeconomic factors such as unemployment levels can influence a stock price and make it difficult to measure a firm's competitive advantage under the shareholder value creation framework.

True

T/F: Paradigm shifts lead to new technological industry standards.

True

T/F: Radical innovation can occur when an existing firm recombines its existing knowledge base with a new stream of knowledge for new markets.

True

T/F: Successfully implementing an integration strategy is particularly important in globalized industries.

True

T/F: The Indian Tata Group and the Asian software company TCS are firms that make less than 70 percent of revenues from a single business unit and have few, if any, linkages among their businesses. These firms are clearly following an unrelated diversification strategy.

True

T/F: The balanced-scorecard approach to assessing competitive advantage is useful because it identifies areas for improvement and positions the company for future growth.

True

T/F: The most challenging diversification strategy is one in which the firm must create new core competencies while pursuing new market opportunities.

True

T/F: When Procter & Gamble releases a new type of detergent, an innovation has occurred.

True

T/F: When a disruptive innovation is first introduced to the market, it is generally inferior in performance relative to what currently exists

True

T/F: When a firm evaluates its performance utilizing metrics such as the balanced-scorecard approach or accounting measurements, it should interpret the results relative to its competitors, not against its own past performance.

True

T/F: When pursing a differentiation strategy, the focus of competition is to add unique features in order to create a level of value creation that competitors cannot easily imitate.

True

T/F:As shown in the Chapter 6 opening case, Whole Foods Market had to seek new strategic initiatives such as enhancing its differentiated appeal and improving its cost structure because it was losing its competitive advantage.

True

T/F:Intangibles such as a firm's reputation for innovation and quality increase a firm's stock market valuation.

True

T/F:The accounting profitability approach to measuring competitive advantage relies on data that is backward-looking.

True

T/F:The goal of a strategic position is to create the largest gap possible between the value that a firm creates through its offerings and the cost required to create these offerings.

MGMT 481 Test 2

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