mgmt - test II

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How is the triple-bottom-line approach different from the traditional approaches to measuring competitive advantage? A. The triple-bottom-line takes a more integrative and holistic view in assessing a company's performance than traditional approaches do. B. The triple-bottom-line places less emphasis on financial success in assessing a company's performance than traditional approaches do. C. The triple-bottom-line uses a more one-dimensional approach in assessing a company's performance than traditional approaches do. D. The triple-bottom-line relies more on internal factors in assessing a company's performance than traditional approaches do.

In 2014, Apple turned over its inventory more than 53 times. In stark contrast, Microsoft turned over its inventory only about 10 times during the year. Which of the following best explains this difference? A. Apple had a more effective management of its global supply chain than Microsoft. B. Microsoft had a stronger demand for its tablet computer than Apple did for its tablet computer. C. Apple operated its own production facilities and therefore had lower production costs than Microsoft. D. Microsoft had production facilities in countries with lower production costs than Apple.

In a generic value chain, a firm's after-sales service will be referred to as its _____. A. primary activity B. support activity C. static resource D. resource flow

In a successful _____ strategy, the trade-offs between differentiation and low cost are reconciled. A. blue ocean B. focused differentiation C. liquidation D. divestment

In knowledge-intensive industries, the marginal costs after initial invention are A. low. B. high. C. moderate. D. unpredictable.

In the context of the SWOT matrix, which of the following best exemplifies a firm's internal strength? A. increase in a firm's customer loyalty B. growth in the size of the market in which a firm operates C. rise in the income of the demographic segment to which a firm caters D. loss of a competitor's reputation

Jenny liked a pair of sapphire earrings and thought they would cost around $1,000. She was surprised to find that the price of the earrings was $1,500. However, she decided to buy the earrings anyway. This scenario describes A. consumer surplus. B. producer surplus. C. consumer profit. D. producer profit.

Lush Roses is a chain of premium hotels around the globe that charges higher prices for its rooms and suites when compared to the average industry standards. Yet, the hotel enjoys the largest market share in the industry. This is mainly due its highly responsive staff that has a strong commitment toward achieving a 100 percent guest satisfaction. In this scenario, which of the following is the key value driver? A. superior customer service B. low cost of input factors C. availability of complements D. economies of scale

Manufacturers of electric fragrance diffusers sell the electric outer device at an extremely low price, sometimes even at a loss. However, they make their money on the product by charging a premium on the perfume refills that have to be replaced regularly. Which of the following business models does this best illustrate? A. razor-razor-blade B. subscription-based C. freemium D. pay-as-you-go

A _____ primarily details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market. A. business-level strategy B. code of ethics C. mission statement D. functional-level strategy

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

A company that uses a differentiation strategy can achieve a competitive advantage as long as its A. economic value created is greater than that of its competitors. B. value gap is lower than that of its competitors. C. strategic position is below the productivity frontier. D. products and services create a lower consumer surplus than that of its competitors.

A defining characteristic of the pay-as-you-go business model is that the A. users pay for only the services they consume. B. users pay for access to a product or service whether they use it during the payment term or not. C. initial product is often sold at a loss in order to drive demand for complementary goods. D. the basic features of a service are provided free of charge, but the user must pay for premium services.

A differentiator is least likely to be threatened by increases in input prices due to powerful suppliers when the A. differentiator is able to create a significant difference between perceived value and current market prices. B. differentiator is able to significantly reduce the value gap. C. source of a competitor's differential appeal is tangible rather than intangible. D. new product features added raise costs but not the perceived value in the minds of consumers.

A firm achieves differentiation parity ideally when A. it creates the same customer value as its competitors. B. its cost of production is higher than that of its competitors. C. it successfully sells its products and services at a higher price than its competitors. D. its product features and services are better than that of its competitors.

A firm experiences _____ when there are increases in cost per unit as output increases. A. diseconomies of scale B. economies of scope C. time compression diseconomies D. economies of flow

A firm pursuing a differentiation strategy as opposed to a low-cost strategy will A. focus its research and development on product technologies to add uniqueness. B. concentrate on leveraging its economies of scale through process technologies. C. build an organization structure that relies on strict budget controls. D. create a lower economic value as compared to its competitors.

A firm will fail to create a sustained competitive advantage when the A. fit between its internal strengths and the external environment is static. B. source of its competitive advantage is causally ambiguous. C. source of its competitive advantage is socially complex. D. resource bundles exhibit heterogeneity and immobility.

A firm's learning curve is steeper than that of its competitor. What does this imply? A. The firm is at an advantage when compared to its competitor. B. The firm and its competitor have achieved cost parity. C. The firm experiences negative returns to scale. D. The firm experiences diseconomies of scale when compared to the competitor.

A high percentage of R&D/Revenue ratio indicates a(n) A. strong focus on innovation to improve current products and services. B. inefficiency in the management to focus on new products. C. strong focus on marketing and sales to promote products and services. D. negligent investment toward research and development.

A successfully implemented blue ocean strategy allows a firm to A. charge a higher price than the cost-leader in the industry. B. create lesser economic value than the differentiator in the industry. C. reduce its value gap beyond that created by the cost-leader in the industry. D. increase its price above that of the differentiator in the industry.

Allure is a cosmetic brand that pursues a cost-leader strategy. Which of the following statements is true of the cosmetic brand? A. It appeals to the price-conscious buyers. B. Its primary value driver is product uniqueness. C. It charges a premium price for its products. D. It directly competes against luxury cosmetic brands that charge premium prices.

An observer may conclude that the organizational culture of Zappos, an online retailer for shoes and clothing, might be the basis for its competitive advantage. However, reverse social engineering to crack Zappos' code of success might be much more difficult for a company trying to exactly imitate its strategy. Thus, the source of Zappos competitive advantage is said to be A. socially complex. B. inexhaustible. C. non-substitutable. D. nonambiguous.

As a result of _____, a critical assumption in the resource-based model of a firm, the resource differences that exist between firms are difficult to replicate. A. resource immobility B. resource homogeneity C. resource perishability D. resource equality

At a certain output level, the per-unit cost incurred by a firm to manufacture a product is $5. Other factors remaining constant, what will be the new per-unit cost if the cumulative output is doubled, and the firm is able to achieve an 80 percent learning curve? A. $4 B. $5 C. $3 D. $6

Bargain Styles Inc. is an apparel company that caters to the highly price-conscious customers. Through its simple apparel designs, acceptable quality levels, and minimal customer service, the company has been able to sell its merchandise at the lowest prices in the industry. Which of the following generic business strategies is Bargain Styles applying? A. cost-leadership B. differentiation C. niche marketing D. product diversification

Bass Watches Inc. initially spent eight man-hours to assemble a wristwatch. But as the production doubled, the number of hours spent on assembling a watch reduced by 20 percent. This increase in productivity reduced the company's cost per unit. What is this phenomenon referred to as? A. learning-curve effect B. network effect C. black-swan event D. time compression diseconomies

Best Cut Inc. sells cutlery by having salespeople set up appointments with potential customers and give them a sales pitch for the product. When a salesperson sells cutlery, he or she gets a predetermined percentage commission. This type of business model is called A. an agency. B. bundling. C. wholesale. D. a freemium.

Both BioThink Inc. and GD Pharma Inc. have discovered similar vaccines to prevent cancer. While GD Pharma's vaccine sells at $100 per unit, BioThink sells its vaccine at $90 per unit. This price differentiation has mainly been attributed to the companies' capital decisions. While BioThink used its retained earnings to develop the vaccine, GD Pharma borrowed funds from banks to develop the vaccine. Thus, GD Pharma pays a higher interest on its capital, which makes it necessary to price its vaccine higher. Thus, the key driver for BioThink's competitive advantage is A. low-cost input factors. B. economies of scale. C. superior customer service. D. availability of complements.

Competitive advantage goes to the firm that achieves the A. largest economic value created. B. lowest producer surplus. C. highest payable turnover. D. highest Cost of goods sold/Revenue ratio.

Crystal Tech Inc.'s competency in designing and manufacturing efficient microprocessors has made its laptops the most advanced computers in the market. This competency, along with the just-in-time manufacturing system, has enabled Crystal Tech Inc. to increase its profitability by lowering its production costs. Thus, Crystal's competency in designing and manufacturing microprocessors will be considered a(n) _____ resource in the VRIO framework. A. valuable B. inexhaustible C. tangible D. perishable

Due to path dependence A. strategic decisions have long-term consequences. B. the occurrence of time compression diseconomies becomes rare. C. competitors can easily imitate or create core competencies quickly. D. past decisions of a firm do not affect its current situation.

During the process of formulating an effective business model, a firm's managers should first A. transform their strategy of how to compete into a blueprint of actions and initiatives. B. implement their strategy at corporate, strategic business unit, and functional levels. C. implement their blueprint of actions and initiatives through structures, processes, culture, and procedures. D. evaluate the firm's strategy already in effect and take corrective actions if necessary.

Dynamic capabilities are especially relevant for surviving and competing in markets that A. shift quickly. B. shift slowly. C. remain constant. D. remain unpredictable.

From an investors' or shareholders' perspective, the measure of competitive advantage that matters most is the A. return on risk capital. B. economic value created. C. consumer surplus. D. inventory turnover.

GlobalCom Inc. is an Internet service provider. It provides a router free of charge when users sign up for a two-year wireless service plan. In this plan, users pay in advance irrespective of whether they use the Internet package during the two-year period or not. Which of the following business models does this scenario best illustrate? A. a combination of the razor-razor-blade model and the subscription-based business model B. the pay-as-you-go business model C. a combination of the freemium business model and the pay-as-you-go business model D. the direct sales business model

Gotta Get Chocolates, Inc. has recently introduced a new production method that will make the production of their chocolates more cost-effective. Which of the following will most likely be the result of this innovation? A. jumps to a steeper learning curve B. destabilizes a steeper learning curve C. stabilizes the existing learning curve D. moves down the existing learning curve

Higher value tends to require A. higher costs. B. higher quantities. C. more complements. D. more trade-offs.

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

How is a cost-leader protected from threats from powerful buyers? A. It is more able to absorb price increases through accepting lower profit margins. B. It is more able to absorb price increase through generating higher profit margins. C. It is able to create a significant difference between perceived value and current market prices. D. It is able to create a significant difference between actual value and future market prices.

Onyxo Inc., a consumer electronics company, is the leading manufacturer of LCD televisions. LCD technology has been its core competency and the company holds 80 percent shares in that market. However, Onyxo Inc.'s competitors have now moved on to advance technologies like LED and 3-D televisions. According to the dynamic capabilities perspective, what should Onyxo Inc. do? A. Onyxo Inc. should start working on LED and 3-D television technologies to adapt its core competency to suit the external environment. B. Onyxo Inc. should stick to its existing core competency, that is LCD technology, as it is the best in that segment. C. Onyxo Inc. should take proactive steps to reduce the causal ambiguity and socially complexity of its core competency. D. Onyxo Inc. should work on enhancing the mobility of its core competency.

Path dependence rests on the notion that A. time cannot be compressed at will. B. strategic decisions are easily reversible. C. rare resources can be built in a short period of time. D. competitive advantage can be sustained indefinitely.

Pilot Games Inc. allows users to play the trial versions of its games without any charge. However, users have to purchase the games to access the upgraded version of the games with advanced features. Which of the following business models is Pilot Games using in this scenario? A. freemium B. subscription-based C. pay-as-you-go D. razor-razor-blade

Pulse Mobiles Inc. is a cell phone manufacturing company. Its latest range of smartphones bears a straight resemblance to the Y-series range of smartphones from Talkie Gen Inc., in terms of its shape and look-and-feel. Which of the following strategies has Pulse Mobiles Inc. used to replicate the valuable and rare resource of Talkie Gen Inc.? A. direct imitation B. strategic equivalence C. substitution D. innovation

Return on risk capital primarily includes A. stock price appreciation plus dividends received over a specific period. B. consumer surplus plus firm profit. C. account receivables plus account payables. D. economic value created by a firm plus reservation price.

SWA has enjoyed a sustained competitive advantage, allowing it to outperform its competitors over several decades. Continental and Delta attempted to copy SWA with their offerings of Continental Lite and Song, respectively. Neither Continental nor Delta, however, was able to successfully imitate the resource bundles and firm capabilities that make SWA unique. Which of the following is this case an example of? A. resource immobility B. resource heterogeneity C. resource mobility D. resource homogeneity

Tangles Costume Jewelry offers slightly lowerquality merchandise than competitors at a much lower price. What strategy is Tangles using? A. cost-leadership B. differentiation C. niche marketing D. product diversification

The fixed asset turnover of a company is 8.3. What do you infer from this? A. Every dollar spent on the company's fixed assets generates $8.30 of revenue. B. 8.3% of the company's revenue is invested in fixed assets. C. The return on fixed assets will break even in 8.3 years. D. The cost of capital invested on fixed assets is 8.3% of the total profit.

The market capitalization of a public company is $5 billion. Each share of the company is traded at $200. What do you infer from this financial data? A. The firm's number of outstanding shares is 25 million. B. The firm pays an annual dividend of 10 percent. C. The firm's total return to shareholder is $5 billion. D. The firm's economic value created is $5 billion.

The perfectly competitive industry structure differs from the resource-based model in its view that A. all firms have access to the same resources. B. accessibility to bundles of resources differ across firms. C. resources tend to be "sticky." D. competencies differ across firms working in the same industry.

The ratio Cost of goods sold/Revenue indicates how efficiently a company can A. produce a good. B. sell a good. C. advertise a good. D. design a good.

The share price of Groupon, a daily-deal website, fell by 90 percent just a year after its successful initial public offering. The firm was not able to sustain its competitive advantage because of the emergence of other daily-deal sites that were able to better serve the needs of local markets and specific population groups. Which of the following is the most accurate inference from this example? A. Groupon's competency was not hard to imitate. B. Groupon's competency was built more on an intangible resource than on a tangible one. C. Groupon operated in an industry where the barriers to entry were high. D. Groupon invested in resources that were invaluable and common.

The working capital of a small home-based business is $200,000. The revenues generated account to $600,000, and the profits incurred are $300,000. What would be the company's working capital turnover? A. 3, that is, $600,000/$200,000 B. $300,000, that is, $600,000 - $300,000 C. 2, that is, $600,000/$300,000 D. $100,000, that is, $300,000 - $200,000

To help a firm achieve a competitive advantage, each distinct activity performed in the value chain needs to A. contribute to the firm's strategic position as either low-cost leader or differentiator. B. reduce the immobility and the heterogeneity of the firm's resources. C. create a static fit between the company's internal resources and the external environment. D. reduce the causal ambiguity and the social complexity of the firm's source of success.

To increase its competitive advantage, HRV Automobiles seeks to improve the efficiency of its production plants. By doing this, HRV is addressing a _____ in the value chain analysis. A. primary activity B. secondary activity C. support activity D. premier activity

Trader Joe's successfully used a blue ocean strategy by offering lower cost food than Whole Foods for the same market of patrons. By doing this, Trader Joe's was able to A. gain a market share and make up the loss in margin through increased sales. B. create higher value creation and thus generate greater profit margins. C. gain a market share and make up the loss in margin through increased pricing. D. create higher value creation and thus generate greater sales.

Using the _____ approach, managers audit their company's fulfillment of its social and ecological obligations to stakeholders such as employees, customers, suppliers, and communities as conscientiously as they track its financial performance. A. triple-bottom-line B. economic value creation C. accounting profitability D. shareholder value creation

VRD Systems Inc. took many decades to build its core competencies, and these competencies were based primarily on the decisions made by the company's top management in the past. This process is called A. path dependence. B. dependence complexity. C. causal dependence. D. path immobility.

Value drivers contribute to a firm's competitive advantage only if A. the increase in value creation exceeds the increase in costs. B. they can shrink the firm's value gap. C. they can restrict the firm from claiming a premium price for its products. D. the decrease in perceived value leads to an increase in costs.

What does blue ocean strategy attempt to reconcile? A. the conflicting requirements of two generic strategies B. the conflicting requirements of two value drivers C. the conflicting requirements of two cost drivers D. the conflicting requirements of two or more unique strategies

When a blue ocean strategy goes bad, a firm has neither a clear differentiation nor a clear cost-leadership profile. This situation is referred to as A. stuck in the middle. B. buried at the bottom. C. burned at the top. D. caught in the transition.

When a firm combines experience based learning and process innovation, the firm A. jumps to a steeper learning curve. B. experiences an increase in per-unit cost. C. loses its competitive advantage. D. moves down the existing learning curve.

When a firm is successful at pursuing a blue ocean strategy, A. investments in differentiation are complements. B. value and cost exhibit a positive correlation. C. low cost acts as a substitute. D. investments in process and product technologies are substitutes.

When a firm operates at the minimum efficient scale, the A. returns to scale are constant. B. cost per unit is the highest. C. firm experiences diseconomies of scale. D. firm attains the highest cost position.

Which of the following approaches to assess competitive advantage is based on the view that noneconomic factors can have a significant impact on a firm's financial performance? A. the triple-bottom-line approach B. the economic value creation framework C. the accounting profitability approach D. the balanced-scorecard

Which of the following best exemplifies social complexity as an isolating mechanism? A. Kristin's Cosmetics attempted to imitate how Monica's Makeup combined its management and product development systems with little success. B. Kristin's Cosmetics failed to acquire the resources for its eyeliner at a low cost and thereby lost its competitive advantage over Monica's Makeup. C. Kristin's Cosmetics had difficulty competing with Monica's Makeup because it could not access the many makeup factories in Kentucky as easily as its competitor. D. Kristin's Cosmetics did not fully understand the reasons for the success of Monica's Makeup and therefore had difficulty competing with the firm.

Which of the following best explains why IBM has been able to maintain its competitive advantage? A. IBM successfully transformed itself multiple times in the data information industry over a period of more than 100 years. B. IBM hired a new CEO to refocus the company on satisfying market needs, which demanded IT services. C. IBM focused on producing mainframe and mini-computers that would be produced by fully integrated companies. D. IBM helped kick-start the PC revolution in 1981 by setting an open standard in the computer industry with the introduction of the IBM PC.

Which of the following business models has been traditionally used by the magazine and newspaper industry? A. subscription-based B. razor-razor-blade C. pay-as-you-go D. freemium

Which of the following describes a situation in which firms acquire resources at a low cost, laying the foundation for a competitive advantage later? A. better expectations of future resource value B. path dependence limiting current decisions C. causal ambiguity D. social complexity

Which of the following expressions accurately describes market cap? A. It is the product of the number of outstanding shares and the share price. B. It is the difference between the book value and the market value of a firm's assets. C. It is the ratio of a firm's equity finance and its debt finance. D. It is the difference between a firm's account receivables and account payables.

Which of the following is a disadvantage of measuring firm performance through total return to shareholders and firm market capitalization? A. Market volatility makes it difficult to assess firm performance through these measures, particularly in the short-term. B. These tools fail to indicate how the stock market views all available public information about a firm's expected future performance. C. These tools measure competitive advantage in absolute terms rather than relative terms. D. Only the book value of the share prices is taken into account when applying these measures, and not the market value.

Which of the following is an advantage of a triple-bottom-line approach? A. The approach takes an integrative and holistic view in assessing a company's performance. B. The approach does not rely on an external view of a firm to assess its performance. C. The approach is more of a quantitative performance metric rather than a mere conceptual framework. D. The framework can help managers assess a firm's competitive advantage without taking into account the firm's performance along noneconomic dimensions.

Which of the following is an implication of high employee turnover in a company? A. It results in a reduction in the company's intangible-resource stocks. B. It makes the source of the company's competitive advantage causally ambiguous. C. It makes the source of the company's competitive advantage socially complex. D. It results in greater immobility and heterogeneity of the company's resources.

Which of the following is more of a value driver than a cost driver? A. superior customer service B. economies of scale C. learning-curve effects D. experience-curve effects

Which of the following is the most accurate characterization of stakeholder theory? A. an approach to understanding a firm as embedded in a network of internal and external constituencies that each make contributions and expect consideration in return B. an approach to understanding a firm as being in a highly competitive industry, which requires the use of effective market capitalization to gain a competitive advantage C. an approach to understanding a firm, which involves balancing tangible assets and intangible assets to achieve high accounting profitability D. an approach to understanding a firm, which involves balancing multiple internal and external performance metrics in order to gain a competitive advantage

Which of the following provides an example of a firm in a red ocean? A. Chique Apparel offered clothing at a low price but failed to differentiate its product as being exclusive. B. Cheap Apparel offered clothing at a price matching that of its competitors and, as a result, it had lower profit margins. C. Goode Apparel offered clothing at a mid-range price but failed to differentiate its product as being of decent quality. D. Top Drawer Apparel offered clothing at a higher price than competitors and, as a result, failed to make a profit.

Which of the following statements accurately brings out the difference between economies of scale and learning effects? A. While there are no diseconomies to learning, there are diseconomies to scale. B. Economies of scale occur over time, whereas learning effects are captured at one point in time. C. Firms experience economies of scale when output increases, and learning effects when output decreases. D. Economies of scale reduce cost per unit, learning effects increase cost per unit.

Which of the following statements accurately describes a firm's resource flow? A. It is the firm's level of investments to maintain or build a resource. B. It is the firm's current level of intangible resources. C. It is the firm's current level of tangible resources that are common to other firms. D. It is the firm's level of expertise to efficiently deploy a valuable resource.

Which of the following statements fails to bring out the essence of the dynamic capabilities perspective? A. A firm's competitive advantage is derived from static resource or market advantages. B. A firm must be able to change its resource base as the external environment changes in order to sustain its competitive advantage. C. A firm should modify its core competencies to effectively compete in dynamic markets. D. A firm's external environment is rarely stable, and in many industries, change is fast and ferocious.

Which of the following statements is true of a strategic position? A. Choosing a strategic position requires making important trade-offs between value and cost positions. B. Strategic positions are fixed; they do not change like the environment. C. Differentiation and cost leadership require similar strategic positions. D. A firm is said to have a competitive advantage when it ends up with strategic positions below the productivity frontier.

_____ describes a firm's ability to create, deploy, modify, reconfigure, upgrade, or leverage its resources over time in its quest for competitive advantage. A. Dynamic capability B. Resource immobility C. Resource heterogeneity D. Time compressed diseconomy

_____ indicates how much a firm benefits from interest-free loans extended by its suppliers and creditors. A. Payables turnover B. Receivables turnover C. Assets turnover D. Inventory turnover

_____ is best described as decreases in cost per unit as output increases. A. Economies of scale B. Economies of scope C. Time compression economies D. Economies of replication

_____ is best described as the difference between a buyer's willingness to pay for a product or service and a firm's total cost to produce it. A. Economic value created B. Break-even point C. Consumer surplus D. Cost of capital

_____ is best described as the output range needed to bring down the cost per unit as much as possible, allowing a firm to stake out the lowest-cost position that is achievable through economies of scale. A. Minimum efficient scale B. Break-even output C. Maximum output capacity D. Optimum sustainable yield

_____, which is the return on risk capital, includes stock price appreciation plus dividends received over a specific period. A. Total return to shareholders B. Earnings per share C. Receivables turnover D. Dividend yield

A blue ocean strategy tends to be successful only if a firm is able to rely on a _____ that allows it to reconcile trade-offs. A. value driver B. value innovation C. product feature D. product complement

A defining characteristic of the subscription-based business model is that the A. user pays for only the services he or she consumes. B. user pays for access to a product or service whether he or she uses it during the payment term or not. C. basic features of a product or service are provided free of charge, but the user must pay for premium services such as advanced features or add-ons. D. initial product is often sold at a loss or given away for free in order to drive demand for complementary goods.

A firm's resource is most likely to be an internal strength and a core competency when the resource is A. valuable but common. B. valuable and costly to imitate. C. easily accessible and mobile. D. easy to substitute.

A resource-based view of a firm provides a model that systematically aids in identifying A. related competencies. B. core competencies. C. competitive disadvantage. D. competitive parity.

A value curve indicates a lack of effectiveness in a firm's strategic profile when it A. stays level. B. zigzags. C. trends downward. D. trends upward.

According to the five forces model, which of the following is viewed as a major risk to a business pursuing a cost-leadership strategy? A. competition switching from non-price attributes to pricing B. innovation that allows competitors to emerge with more economical replacements C. new entrants with small production scale D. suppliers requesting a 2% price increase across the industry The risk of replacement for a firm pursuing a low-cost strategy is particularly pertinent if a potent substitute emerges due to an innovation.

All Purpose Tires, Inc. is planning to build a manufacturing plant in Tornado Alley—an area that often gets hit by tornados. According to the SWOT analysis, this location is considered to be an A. external opportunity. B. external threat. C. internal opportunity. D. internal threat.

Although JetBlue used a blue ocean strategy to achieve an initial competitive advantage, it failed to maintain this advantage. Which of the following provides the best reason for this development? A. It failed to drive up the perceived customer value. B. It failed to refine its strategic position over time. C. It failed to move into a non-contested market space. D. It failed to offer enough strategic trade-offs.

Although True Ion Inc. and One Electro Inc. operate in the same consumer electronic industry, True Ion Inc. has better sales and brand equity. This is attributed to True Ion Inc.'s commitment to innovation. The company has adequate financial and human capital to invest in research and development, an area in which One Electro Inc. lacks. In this scenario, which of the following critical assumptions of the resource-based view of a firm has been illustrated? A. resource equality B. resource heterogeneity C. resource mobility D. resource maturity

Andrew invested $200,000 in the shares of a company. At the end of a year, he had earned $7,000 as dividends on his shares along with a $1,000 appreciation in the overall value of his shares. However, if Andrew had invested the same amount on an asset, like gold, the appreciation in its value would have earned him $10,000 at the end of the year. In this scenario, which of the following is Andrew's opportunity cost? A. $7,000 B. $10,000 C. $2,000 D. $200,000

As it takes less and less time to produce the same output, learning curves usually A. go up. B. go down. C. stay the same. D. fluctuate.

At a certain output level, the per-unit cost incurred by a firm to manufacture a product was $60. Once the cumulative output doubled, the cost per unit reduced to $54. All other factors remaining constant, the firm has been able to achieve a(n) A. 80 percent learning curve. B. 90 percent learning curve. C. 60 percent learning curve. D. 54 percent learning curve.

Beats Electronics has been able to outperform Audio-Technica, Bose, JBL, Skullcandy, Sennheiser, and Sony in the high-end, premium headphone market. Which of the following statements accurately explains one of the main reasons for the success of Beat? A. It produced the highest-quality headphones. B. It created a perception that owning its products was cool. C. It emphasized marketing over core competency. D. It focused on sponsoring future athletic superstars.

By selling a laptop at $1,000 for which consumers are willing to pay up to $1,200, a consumer electronics firm makes a profit of $400 per unit. In this scenario, the amount $600, that is ($1200 - $1000) + $400, is the A. opportunity cost. B. economic value created. C. reservation price. D. consumer surplus.

Chat Zone Inc., a telecommunication company, had been drastically losing its market share due to tough competition in the industry. The management hired a reputed consulting firm to advice the company. The experts from the consulting firm pointed out that the company primarily lost out on its competitive advantage due to its tedious internal policies and procedures. These ineffective policies and procedures made the company operations, marketing, and after-sales service inefficient. Chat Zone Inc. can best solve its problem by working on its A. immobile assets. B. support activities. C. resource flows. D. resource stocks.

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

Cool Cat Inc. has dominated the high-end refrigerator market by producing a reliable refrigerator with many bonus features that appeal to customers. Recently, a competitor has developed a refrigerator that offers many of the same features as Cool Cat's refrigerator. Which of the following will most likely help Cool Cat to keep its competitive advantage? A. a reduction of price B. the loyalty of its customers C. an increase of price D. the loyalty of its retail stores

Diseconomies of scale refer to A. decreases in cost as profit increases. B. increases in cost as output increases. C. increases in economic value as per-unit cost decreases. D. decreases in profit when consumer demand decreases.

Dynamic capabilities are essential for moving beyond a(n) _____ advantage. A. long-lived B. short-lived C. competitive D. inconsistent

EasyOpen Inc. gained a patent for an electronic corkscrew. Soon the company made a huge profit on this device. Recently, however, other firms have produced electronic corkscrews. As a result, EasyOpen lost its competitive advantage. Which of the following would most likely be the reason for this development? A. EasyOpen failed to renew the patent after 10 years. B. EasyOpen's patent expired after 20 years. C. EasyOpen failed to copyright the corkscrew. D. EasyOpen's copyright expired after 30 years.

GN Corp. and BC Inc. are two competing firms in the same industry. GN Corp.'s tangible assets are valued at $15 billion and its intangible assets are valued at $35 billion. BC Inc.'s tangible assets are valued at $5 billion and its intangible assets are valued at $45 billion. What can be concluded from this information? A. It is easier to buy intangible assets with cash than tangible assets. B. It is likely that BC Inc. is better enabled than GN Corp. to gain and sustain a competitive advantage. C. It takes longer time to build tangible assets than intangible assets. D. There is no resource heterogeneity between the two firms, BC Inc. and GN Corp., as they operate in the same industry.

Home Smart Inc. is a chain of supermarkets that sells its products at higher prices than its competitors. Yet, the supermarket chain has a large customer base due to its wide product portfolio and superior customer service. Which of the following generic business strategies has Home Smart adopted in this scenario? A. cost-leadership B. differentiation C. market penetration D. product diversification

How does a firm capture its producer surplus for a good or service? A. as cost per unit sold B. as profit per unit sold C. as earnings per share D. as market price per share

If Finolo and Ethver, companies that manufacture televisions, develop the same customer knowledge base and create products that provide the same customer appeal as Invoro, a market leader in consumer electronics, then A. Finolo and Ethver will have a VRIO resource. B. Invoro will have a resource that is valuable but no longer rare. C. Invoro will have a sustainable competitive advantage in the industry. D. Invoro will have a resource that is rare but no longer valuable.

If a firm's market capitalization is $1 billion and the share price is $50, how many shares outstanding does the firm have? A. 20 thousand B. 20 million C. 500 thousand D. 50 million

If a resource is common A. competitive advantage will persist with one firm for a long period of time. B. it will result in perfect competition. C. it will result in greater resource immobility. D. competitive parity will cease to exist.

In 2014, Apple had a return on revenue of 29.3 percent, and Microsoft had a return on revenue of 32 percent. Even so, Apple had a higher return on invested capital than Microsoft. Why did this happen? A. Apple had a higher cost structure than Microsoft. B. Apple was able to charge a much higher margin for its products and services than Microsoft. C. Apple spent more on research and development and marketing and sales than Microsoft. D. Apple had a much higher selling, general, and administrative expense that Microsoft.

In the _____ business model, the initial product is often sold at a loss or given away for free in order to drive demand for complementary goods. A. subscription-based B. razor-razor-blade C. pay-as-you-go D. direct sales

In the context of the resource-based model of competitive advantage, if a successful firm exhibits resource immobility it means that the A. rival firms have better accessibility to quality resources. B. firm will have a sustained competitive advantage because of its unique resources. C. competitors can easily replicate or copy the firm's resource bundles and capabilities. D. resources of the firm cannot be effectively deployed within its own organization.

Intangible assets add great value to a firm primarily because the firm's A. reputation and brand equity are accumulated quickly and can be leveraged easily. B. knowledge and culture take time to develop and are generally difficult to imitate. C. tangible assets require a higher degree of capital than its intangible assets. D. capabilities are by nature typically tangible.

Janet is the CEO of Far Sight Inc., which uses a triple-bottom-line approach. As a result, Janet will tend to A. view superior financial performance as the sole objective of her firm. B. expect her company to be socially responsible. C. use fossil fuels to run her company's production plants. D. ignore the ecological dimension for her company.

KitchenThings Inc. is a company that manufactures plastic kitchenware. It operates at an output level that allows it to keep its unit cost per output to the lowest in the industry. This in turn allows KitchenThings to be the price leader. Other competing companies cannot operate at the same level due to a lack of consumer demand for their products. This puts them at a competitive disadvantage. In this scenario, the cost driver behind KitchenThings's strategic position is A. superior customer service. B. economies of scale. C. availability of complements. D. learning-curve effects.

Mia has purchased an Internet package for three months, in which she can use 30 mbps Internet speed. However, for the service, she needs to pay a fee of $50 in advance irrespective of whether she uses the Internet during the service period or not. This arrangement best illustrates the _____ strategy. A. razor-razor-blade B. subscription-based C. pay-as-you-go D. freemium

Osion Electronics Inc. incurs a cost of $350 to produce one unit of a cell phone. The company's management has priced the product at $600 in the market. Considering the technological advancement of the cell phone, customers perceive its value to be around $800. What is the economic value created in this scenario? A. $350 B. $450 C. $800 D. $200

Photohome is a file hosting service that allows users to store up to 5GB of data with no restrictions or charges. However, users have to pay a fee for advanced features on the cloud storage system and additional storage space. Which of the following business models does this best illustrate? A. subscription-based B. freemium C. pay-as-you-go D. razor-razor-blade

PureRinse Inc. is a brand reputed for its wide variants of body wash that introduced its range of shampoos and skin moisturizers a few years ago. Since most of its products could be produced using the same resources and technology, the company's cost structure lowered, while its product portfolio widened. In this scenario, which of the following value and cost drivers is PureRinse applying? A. mass customization B. economies of scope C. learning-curve effect D. network effect

Rice Dazzle Inc. has been making the same breakfast cereal for 50 years. Recently, sales have plummeted. To counteract this, the company created a new package that included an endorsement by a celebrity. As a result, sales increased close to previous highs. However, the cereal itself remained the same. According the VRIO framework, is the new packaging a valuable resource for Rice Dazzle? A. Yes, because the new packaging has an endorsement by a celebrity. B. Yes, because the new packaging made the product more attractive in the eyes of consumers. C. No, because the new packaging did not improve the product itself. D. No, because the new packaging did help to not increase sales past the previous high for sales.

Several senior managers recently left Bass Automobile Inc. and went to work at Unicorn Autos Inc., a rival company. What does this imply? A. The resource stock of Bass Automobiles Inc. increased. B. Bass Automobiles Inc. faced resource leakage. C. The resource flow into Unicorn Autos Inc. reduced. D. Bass Automobiles Inc.'s tangible assets decreased.

The "Gold Crisps" potato wafers manufactured by True Foods Inc. have been the highest selling wafers in the market. Though the market for wafers is flooded with competitors, True Foods Inc. has been able to maintain its market position for a long time. This is mainly attributed to the unique taste of the wafers that comes from the unique natural flavoring used by the company. This competency of True Foods Inc. will be considered as a(n) _____ resource in the VRIO framework. A. inexhaustible B. rare C. intangible D. virtual

The competitive advantage that one firm has will be short-lived in an industry where A. resource immobility is high. B. perfect competition exists. C. resource heterogeneity is high. D. capabilities of a firm are not easily replicable.

The ratio of SG&A/Revenue is an indicator of a firm's focus on A. researching to produce innovative products and services. B. marketing to promote its products and services. C. producing a good in an efficient manner. D. creating a good that is cost-effective.

The value a consumer attaches to a product or service is captured in the A. least price a consumer is willing to pay for it. B. consumer's maximum willingness to pay for it. C. expenses incurred by the firm in manufacturing it. D. difference between the price charged for it and the cost to produce it.

The value chain describes the A. competitive challenges a firm faces in a highly dynamic external environment. B. internal activities a firm engages in when transforming inputs into outputs. C. current consequences a firm experiences due to its decisions in the past. D. strategic advantages a firm experiences when its resources lack causal ambiguity.

To be cost-competitive, a firm should A. position itself below the productivity frontier. B. operate at the minimum efficient scale. C. attain the highest cost position. D. avoid moving on to a steeper experience curve.

TravelCheap Inc. is a car rental business that charges customers based on how many miles they put on a car on a daily basis. As result, a person who uses a car to travel from Chicago to Denver during a week is charged much more than a person who uses a car only to travel one mile to the grocery store six times a week. TravelCheap uses a business model called A. freemium. B. pay-as-you-go. C. agency. D. bundling.

Triple-bottom-line is a combination of economic, social, and _____ concerns that can lead to a sustainable strategy. A. cultural B. ecological C. investment D. aesthetic

True Empire Autos Inc. is an automobile company known for its luxury cars and follows a differentiation strategy. In this scenario, True Empire Autos should ideally compare its strategic position with a(n) A. automobile company that sells pre-owned cars. B. automobile company that sells high-end, premium cars. C. automobile company that manufactures economy cars. D. pen manufacturing company that follows a differentiation strategy.

True Vibgyor Inc. sells its e-book readers at the cost price of $15 each. However, the company makes its profits when users have to download or buy books online. Which of the following business models is True Vibgyor implementing? A. subscription-based B. razor-razor-blade C. pay-as-you-go D. direct sales

Unlike the financial ratios based on accounting data, total return to shareholders is A. backward-looking and historic in nature. B. an external performance metric. C. an absolute measure of competitive advantage. D. unaffected by market volatility or macroeconomic factors.

Value Autos Inc. has been trying to directly copy the strategies of Honk Autos Inc. Even though it is evident that Honk Autos Inc.'s success comes from its just-in-time inventory system, Value Autos Inc. has not been able to effectively apply the system in the same way. This is because the organizational structures, employees, cultures, and the overall business systems of both the companies vary from each other. Which of the following barriers to imitation does this scenario best illustrate? A. path dependence B. social complexity C. resource mobility D. resource homogeneity

Value is determined by the perceived benefits a good or service provides to a(n) A. manufacturer. B. buyer. C. investor. D. retailer.

What is a value gap? A. real versus perceived value B. economic value creation C. lack of perceived value D. economic value differentiation

What must a cost-leadership strategy accomplish to be successful? A. It must increase the firm's cost above that of its competitors while offering adequate value. B. It must reduce the firm's cost below that of its competitors while offering adequate value. C. It must increase the firm's cost above that of its competitors while offering superior value. D. It must reduce the firm's cost below that of its competitors while offering superior value.

When Jean Cult Inc. was operating at the minimum efficient scale of 10,000-12,000 units per month, the firm's cost per unit was $20. However, when the output level was increased beyond 12,000 units, the cost per unit increased to $22. This increase was attributed to the wear-and-tear of the machinery, and complexities of managing and coordinating. What is this phenomenon known as? A. resource ambiguity B. diseconomies of scale C. network effect D. learning-curve effect

When a differentiator charges a similar price as its competitors in the same strategic group but offers more perceived value, it A. loses its competitive advantage. B. gains market share from other firms. C. lowers the economic value created. D. results in diseconomies of scale.

When a firm makes choices between a cost or value position to achieve competitive advantage, it is primarily involved in A. collective bargaining. B. strategic trade-offs. C. arbitration. D. mediation.

When a firm manufactures 2,000-3,000 units of a product, it incurs an average cost of $10 per unit. When it manufactures 3,000-4,000 units of the same product, the average cost per unit reduces to $7. However, manufacturing beyond 4,000 units will raise the average cost per unit to $9. Which of the following is the firm's minimum efficient scale? A. 2,000-3,000 units B. 3,000-4,000 units C. below 2,000 units D. above 4,000 units

When a firm operates at an output level of 9,000 units, the per-unit cost is $5. When the production is between 10,000-12,000 units, the per-unit cost is $4. At a production level of 13,000 units, the production cost is again $5 per unit. At 14,000 units and above, the production cost increases further. At what output level does the firm experience economies of scale? A. 9,000 units B. 11,000 units C. 13,000 units D. 15,000 units

When evaluating the sustainability of a firm's competitive advantage, which of the following statements is not true? A. The competitive advantage will not be sustainable if there are substitutes for the firm's core competence. B. If managed effectively, existing core competencies can help sustain the competitive advantage indefinitely. C. Social complexity often leads to a competitive advantage that is sustainable. D. When expectations of future resource value turn out to be accurate and can be repeated, then a sustained competitive advantage is realized.

When using the balanced-scorecard approach to assess a firm's performance, which of the following is not a key question that managers need to answer? A. How do customers view us? B. How do we reduce the economic value created? C. What core competencies do we need? D. How do shareholders view us?

Which of the following best explains why a blue ocean strategy is difficult to implement? A. It requires the combination of fundamentally similar strategic positions—differentiation and low cost. B. It requires the reconciliation of fundamentally different strategic positions—differentiation and low cost. C. It requires the combination of fundamentally similar strategic positions—differentiation and strategic trade-offs. D. It requires the reconciliation of fundamentally different strategic positions—differentiation and strategic trade-offs.

Which of the following best expresses fixed asset turnover? A. Current assets/Fixed assets B. Revenue/Fixed assets C. Fixed assets/Total return to shareholders D. Fixed assets/Current liabilities

Which of the following is a key question managers must answer to formulate an appropriate business-level strategy? A. When will we satisfy our customer needs? B. How will we satisfy our customer needs? C. Where will we satisfy our customer needs? D. Can we satisfy our customer needs?

Which of the following is an accurate statement about learning effects? A. Learning effects involve the dilution of output over time. B. Learning effects involve the accumulation of output over time. C. Learning effects involve the increase of output at a point in time. D. Learning effects involve the decrease of output at a point in time.

Which of the following is an advantage of applying the economic value creation perspective to assess a firm's performance? A. When the need for "hard numbers" arises, managers and analysts rely on economic value creation perspective to measure competitive advantage. B. In economic value perspective, analysts not only consider historical costs, but also opportunity costs. C. Arriving at the economic value created is easy because determining the value of a good in the eyes of consumers is a simple task. D. It is the most efficient tool for assessing corporate-level competitive advantage of highly diversified companies with large product portfolios.

Which of the following is an advantage of the balanced-scorecard? A. It is a tool for both strategic formulation and strategic implementation. B. It allows managers to translate a firm's vision into measureable operational goals. C. The balanced-scorecard is independent of the skills of the managers responsible for its implementation. D. Its implementation is a one-time effort and does not require continuous tracking of metrics or updating of strategic objectives.

Which of the following is not true of risk capital? A. From the shareholders' perspective, the measure of competitive advantage is primarily based on return on their risk capital. B. Risk capital invested in a firm can be legally recovered if the firm goes bankrupt. C. A person who provides capital to a firm gets equity shares in return. D. Return on risk capital includes stock price appreciation plus dividends received over a specific period.

Which of the following management tools will help determine the external opportunities and threats that affect a firm? A. Porter's five forces analysis B. PESTEL analysis C. VRIO framework D. Ansoff's matrix

Which of the following provides an example of how a firm's valuable resource can be imitated? A. To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of a sports car. B. To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of the Leaning Tower of Pisa. C. To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of the U.S.S. Enterprise aircraft carrier. D. To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of a grizzly bear.

Which of the following questions challenges managers to come up with strategic objectives that ensure future competitiveness? A. How do customers view us? B. How do we create value? C. What core competencies do we need? D. How do shareholders view us?

Which of the following resources is a firm's resource stock? A. cash in the bank B. reputation for quality C. land and building D. plant and machinery

Which of the following statements accurately brings out the difference between tangible and intangible resources? A. Tangible resources contribute to a company's competitive advantage, whereas intangible resources fail to do the same. B. Tangible assets can be bought on the open market, whereas intangible assets cannot be easily purchased. C. Tangible resources take a longer time to build, whereas intangible assets can be built comparatively easily. D. Tangible assets are difficult to imitate, whereas intangible assets can be easily replicated.

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

Which of the following statements is true of learning curves? A. Learning curves are captured at one point in time when output is increased. B. Learning curves can be observed in manufacturing processes and professional services. C. As cumulative output increases, the learning curve becomes less steep. D. The steeper the learning curve, the lesser the learning effects.

Why are differentiation and cost-leadership strategies referred to as generic business strategies? A. They can be simultaneously pursued by a firm without any trade-offs. B. They can be used by any organization independent of industry context. C. They require similar strategic positions in order to increase a firm's chances to gain competitive advantage. D. They can be applied only by businesses, which have a competitive advantage.

With regard to the VRIO framework, Crocs Shoes was unable to sustain its competitive advantage primarily because its products were A. invaluable and common. B. easy to imitate. C. extremely expensive. D. non-substitutable.

_____ allows managers to synthesize insights obtained from an internal analysis of a company's strengths and weaknesses with those from an analysis of external opportunities and threats. A. The VRIO framework B. The SWOT analysis C. The break-even analysis D. Ansoff's matrix

_____ are best described as the value of the best forgone alternative use of the resources employed. A. Variable costs B. Opportunity costs C. Social costs D. Switching costs

_____ are best described as unique strengths, embedded deep within a firm, that allow a firm to differentiate its products and services from those of its rivals, creating higher value for the customer or offering products and services of comparable value at lower cost. A. Resource leverages B. Core competencies C. Capital gains D. Equity reserves

_____ are the legal owners of public companies. A. Employees B. Shareholders C. Category captains D. Creditors

_____ denotes the dollar amount a consumer would attach to a good or service. A. Utility B. Value C. Consumer surplus D. Economic contribution

_____ describes a process in which the options one faces in a current situation are limited by decisions made in the past. A. Social complexity B. Path dependence C. Cannibalization D. Causal ambiguity

_____ describes a situation in which the cause and effect of a phenomenon are not readily apparent. A. Resource immobility B. Causal ambiguity C. Resource heterogeneity D. Social complexity

_____ indicates how fast a firm is collecting the credit amount extended by a firm to its customers. A. Payables turnover B. Receivables turnover C. Assets turnover D. Inventory turnover

_____ most precisely measures how well a company leverages its fixed assets, particularly property, plant, and equipment (PPE). A. Working capital turnover B. Fixed asset turnover C. Fixed assets to equity ratio D. Capital leverage ratio

A cost-leader is protected from the threat of new entrants primarily due to its A. superior customer service. B. luxury goods. C. economies of scale. D. premium pricing.

A firm experiences diseconomies of scale when it A. has a constant return to scale. B. moves down the experience curve. C. produces at an output level beyond the minimum efficient scale. D. has a steep learning curve when compared to its competitors.

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

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

A firm's business strategy will lead to a competitive advantage if it allows the firm to A. execute the same activities performed by the rivals in a similar manner. B. reduce the value gap. C. perform different activities than its rivals. D. position itself below the productivity frontier.

A firm's resources and capabilities are costly to imitate. This is because rival companies do not clearly understand the relationship between the resources and capabilities controlled by the firm. In this case, the firm's competitive advantage is protected against imitation by A. path dependence. B. dependence complexity. C. causal ambiguity. D. social complexity.

A watchmaking company has priced one of its wristwatches at $210. Most of its competitors sell similar watches at $180. Selling anything less than $150 would result in a loss for the company. However, the absolute maximum a customer is willing to pay for it is $170. In this scenario, what is the reservation price of the wristwatch? A. $150 B. $180 C. $170 D. $210

According to the VRIO framework, a firm can gain a competitive advantage if it has resources that are _____ and captured by an organized firm. A. varied, refined, costly to introduce B. valuable, refined, costly to introduce C. valuable, rare, costly to imitate D. varied, rare, costly to imitate

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

Airbnb rents spaces that previously would have been unused to generate revenue, while also dramatically increasing the potential amount of accommodation space in the 191 countries. This business uses a _____ technique. A. offshoring B. crowdsourcing C. peer-to-peer D. binge watching

Amazon.com's ability to provide the largest selection of items online, combined with superior IT systems and customer service, can be referred to as its A. equity reserve. B. economic equity. C. core competency. D. capital gain.

Apple Watch retailed for $349 in 2015, and the firm was predicted to sell millions of units. The firm's total cost in terms of materials and labor for the Apple Watch was no more than $84. Thus, Apple's profit for each watch sold is an estimated $265, with a profit margin of _____ percent. A. 215 B. 265 C. 315 D. 365

Apple paid $3 billion dollars to acquire Beats. This is the largest acquisition in Apple's history. Which of the following provides a reason for this acquisition? A. the movement in the music industry from renting works to buying works to own B. the need for Apple to create an image as a leader in technical audio research C. the change in content delivery from ownership via downloads to streaming on demand D. the demand for the extremely high-quality headphones that Beat produced

As the cumulative output in a firm increases, managers learn how to optimize the production process and improve workers' performance through repetition. This drives down the per-unit cost. Which of the following phenomena is best described here? A. learning effects B. network effects C. diseconomies of scale D. productivity frontier

Best Fit Club, a chain of gyms and spas, requires its customers to pay a quarterly or an annual fee to use its services. Irrespective of whether they frequently use the services during the payment period or not, members have to pay in advance. Which of the following business models does this best illustrate? A. razor-razor-blade B. pay-as-you-go C. subscription-based D. freemium

Body Sync Inc. is a chain of gyms. It offers a fitness package that allows its members to use the gym facilities for 12 months by paying only for 10 months. Included in the package are two health checkups and a gym kit. These add-ons by themselves are not very valuable, but as a package they can enhance the perceived value of the service offerings. In this case, Body Sync's primary value driver is A. economies of scale. B. learning-curve effects. C. availability of complements. D. experience-curve effects.

Both Blue Horizons Electronics Inc. and CLR Inc. have achieved cost parity in the television market. To gain and sustain a competitive advantage against CLR, Blue Horizons Electronics should A. achieve differentiation parity with CLR. B. keep its value gap lower than that of CLR. C. create greater perceived economic value than CLR. D. increase its cost of production to more than that of CLR.

Both Vibrant Phones Inc. and Oryxo Inc. incur a cost of $200 to manufacture a single unit of a cell phone. However, Vibrant Phones creates more economic value than Oryxo does. What does this imply? A. Vibrant Phones and Oryxo have achieved a competitive parity. B. Oryxo has a competitive advantage over Vibrant Phones. C. Vibrant Phones sells its products at a better price than Oryxo. D. Oryxo's offering has greater total perceived consumer benefits than Vibrant Phones's offering.

Both Viten Electronics Inc. and JL Electronics Inc. incur a cost of $400 to manufacture a LED television. However, the economic value created by JL Electronics is more than that created by Viten Electronics. What does this indicate? A. Viten Electronics has a competitive advantage over JL Electronics. B. Both Viten Electronics and JL Electronics have achieved competitive parity. C. JL Electronics can charge a premium price on its televisions. D. Viten Electronics has created a higher value gap than JL Electronics.

Clean Machine Inc. produces a high-quality dishwashing machine that is reliable and durable. How would this product most likely act as a cost driver? A. reduce purchase cost B. increase after-sales service cost C. reduce the total cost of ownership D. increase shipping cost

Clean Rinse Shampoo has been the leader of hair-cleaning products for about 40 years. However, this company relied too long on its competency without refining or upgrading its product. As a result, other shampoo companies that began to offer organic shampoo gained a competitive advantage over Clean Rinse. This case is an example of A. resource flow. B. dynamic capabilities. C. core rigidity. D. value chain.

Competitors have found it extremely difficult to imitate Gene Electronics Inc.'s valuable resources, capabilities, or competencies. This is primarily because the source for the company's success has been unclear. The competitors are uncertain if Gene Electronics Inc.'s success is due to its strong leadership, the skills of its research and development team, or the timing of the company' s product introductions. Gene Electronics Inc. has been protected from losing its competitive advantage as a result of A. time compression diseconomies. B. resource homogeneity. C. causal ambiguity. D. path dependence.

DFS Electronics Inc. ensures that all its products are highly durable and reliable by using techniques like zero-defect and lean manufacturing systems. These efforts not only add to the products' differential appeal, but also help the company save costs during production and avoid expenses due to after-sales services. Thus, the common value and cost driver responsible for DFS Electronics' strategic position as an integrator is the A. network effect. B. availability of complements. C. quality. D. diseconomies of scale.

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

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

Each activity a firm performs along the horizontal value chain adds _____ value. A. temporary B. little C. incremental D. absolute

Economic value creation is best expressed as A. producer surplus minus consumer surplus. B. consumer surplus minus cost of production. C. consumer surplus plus firm profit. D. producer surplus plus firm profit.

Economies of scale do not allow firms to A. spread their fixed costs over a larger output. B. employ specialized systems and equipment. C. spread their variable costs over a larger output. D. take advantage of certain physical properties.

Even though many valuable, rare, and inimitable resources were generated at Xerox's Palo Alto Research Center (PARC), the management at Xerox's headquarters failed to gain a competitive advantage by exploiting the breakthroughs in computing software and hardware. What is the most likely implication of this example? A. It is advisable to outsource research and development functions. B. Competitive advantage cannot be gained through unrelated diversification. C. A firm must be effectively organized to capture value. D. It is better to build competitive advantage on tangible assets rather than intangible assets.

Even without differentiation parity, a firm pursuing a cost-leadership strategy can still gain a competitive advantage as long as its A. learning curve is not steeper than that of its competitors. B. per-unit costs are higher than that of its competitors. C. economic value creation exceeds that of its competitors. D. value gap is lower than that of its competitors.

Evia Cycles Inc. incurs $400 to manufacture a bicycle, and the maximum price customers are willing to pay is $550 per unit. Archer Cycles Inc., its competitor, incurs $450 to manufacture a similar bicycle, and customers are willing to pay a maximum price of $620 for it. What does this indicate? A. Both Evia Cycles and Archer Cycles have achieved differentiation parity. B. Evia Cycles has a competitive advantage over Archer Cycles. C. Archer Cycles has created a greater economic value than Evia Cycles. D. Both Evia Cycles and Archer Cycles have achieved cost parity.

Free Spirit Communications Inc. is a cellular service provider that charges its customers $1 for three hours of talk time. So, if a customer's talk time for a month is 60 hours, the company charges him or her $20 at the end of the month. Which of the following business models does this best illustrate? A. razor-razor-blade B. subscription-based C. pay-as-you-go D. freemium

Handy Helper, Inc. produces decent-quality woodworking tools at a mid-range price. Master Tools, Inc. produces high-quality tools also at a mid-range price. Master Tools gained a competitive advantage because it has ______ than Handy Helper. A. higher economies of scope B. lower economies of scope C. a higher value gap D. a lower value gap

Help Yourself Inc. publishes many types self-help books. Recently, the consumer demand for winter gardening books has increased significantly. Although Help Yourself has limited production facilities, it has increased the production of these books to meet this demand. It hopes to get books to the market faster than its closest competitor, who is also increasing the production of winter gardening books. Which of the following aspects of business-level strategy has Help Yourself accomplished? A. It has enhanced its internal strengths. B. It has eliminated its weaknesses. C. It has exploited external opportunities. D. It has avoided external threats.

How are the critical assumptions of the resource-based model of a firm fundamentally different from the way in which a firm is viewed in the perfectly competitive industry structure? A. In the resource-based model, resources are freely available and mobile, whereas in the perfectly competitive industry structure, resources are highly immobile. B. In perfect competition, it is extremely difficult to replicate the resource bundles of a firm, whereas in the resource-based model, it is extremely easy to imitate them. C. In perfect competition, all firms have access to the same capabilities, whereas in the resource-based model, resource differences exist between firms in the same industry. D. In the resource-based model, only physical assets of a firm are considered as resources, whereas in perfect competition, a firm's capabilities and competencies are also considered as resources.

Hugo Books Inc. is a retailer that buys books at a fixed price from publishers. Recently, Hugo offered a deal in which customers could buy a package of three mystery books at a discounted rate. Which of the following business models has Hugo Books combined? A. agency and freemium B. wholesale and agency C. wholesale and bundling D. agency and bundling

If a resource is rare or unique to a particular firm, then A. the industry in which the firm operates will experience perfect competition. B. the mobility of the resource will be high. C. the firm will be able to maintain a competitive advantage for a long period. D. it will be less costly for rivals to imitate the resource.

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

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

In contrast to a differentiator, a cost-leader will A. charge a premium price for its products and services. B. build an organizational culture where creativity and customer responsiveness thrive. C. focus its research and development on process technologies to improve efficiency. D. avoid an organizational structure that relies on strict budget controls.

In order to achieve a competitive advantage, a firm should be able to A. increase its payable turnover. B. keep its producer surplus low. C. increase the difference between the value created and the cost to produce it. D. increase the difference between consumer surplus and its profits.

In the context of SWOT analysis, which of the following best exemplifies a firm's external opportunity? A. an increase in its financial resources B. an increase in its brand equity C. an increase in its customers' disposable income D. an increase in its employee productivity

In the freemium business model, the A. initial product is sold at a premium price and the complementary goods are given free. B. users are free to pay for the services in advance or after using the services. C. users are not charged for the basic features of a product or service, but the user must pay for premium advanced features or add-ons. D. users pay for access to a product or service whether they use it during the payment term or not.

It is difficult even for Apple's managers to pinpoint the underlying cause of the company's phenomenal success. The term that best applies to this difficulty is known as A. competitive dependence. B. resource mobility. C. causal ambiguity. D. path dependence.

Oviyo Inc. has been successful at differentiating itself from competitors by claiming a premium price for its digital cameras based on superior image quality and advanced technology. In this scenario, which of the following is the key value driver? A. economies of scale B. low-cost input factors C. product features D. premium prices

Smart Feet Inc. produces shoes that are better quality and cost more to make than the shoes of its competitors. Smart Feet realizes that there will be a large difference between the cost to produce the shoes and the consumer's willingness to pay for them. Even so, Smart Feet decides to charge the same price as its competitors. Which of the following will most likely be the result of this action? A. Smart Feet will go out of business. B. Smart Feet will increase its marketability. C. Smart Feet will gain market share. D. Smart Feet will be bought by a competitor.

Smooth Fusion Inc. is a software company, which has built and acquired numerous assets over the years. According to the resource-based view of a firm, which of the following assets of Smooth Fusion Inc. will best enable it to gain and sustain a competitive advantage? A. the resources of the company that are mobile B. the capital raised by the company from its shareholders C. the expertise acquired by the employees in the company D. the headquarters owned by the company

Taking advantage of the pricing flexibility inherent in the wholesale model, Amazon offered many books (especially e-books) below the cost that other retailers had to pay to publishers. By doing this, Amazon showed how business models can be affected through A. combination. B. evolution. C. disruption. D. combustion.

The balanced-scorecard can accommodate A. only short-term performance metrics. B. only long-term performance metrics. C. both short- and long-term performance metrics. D. neither short- or long-term performance metrics.

The concept of a(n) _____ attempts to capture both learning effects and process improvements at firms. A. managerial grid B. growth matrix C. experience curve D. diminishing utility curve

The difference between the price charged for a product and the cost to manufacture it is referred to as the A. consumer surplus. B. break-even price. C. producer surplus. D. reservation price.

The management team for SafeCare Chemicals Inc. came up with the following vision statement: "SafeCare Chemicals will conscientiously track its financial performance to ensure profits for its investors, enhance its community through employment and supporting charities, and dispose of waste in a manner that will not harm the environment." This vision statement is most likely based on the A. accounting profitability approach. B. economic value creation approach. C. triple-bottom-line approach. D. balanced-scorecard approach.

The primary goal of a firm pursuing a blue ocean strategy should be to A. create the highest perceived value in its respective industry. B. build a reputation of being the lowest-cost producer in its chosen industry. C. offer a differentiated product or service at a low cost. D. achieve a less steeper learning curve.

The receivables turnover of VK Products Inc. is 13.6 and that of its competitor DL Goods Inc. is 6.0. What does this financial data primarily imply? A. VK Products is less efficient than DL Goods in collecting accounts receivables. B. DL Goods pays its creditors more quickly as compared to VK Products. C. VK Products collects accounts receivables faster than AP Goods does. D. DL Goods has a larger value gap as compared to VK Products.

The resource-based view of a firm assumes that the A. resources of firms are highly scarce and hence the government interferes to ensure equal distribution. B. resources of firms are highly exhaustible and hence they cannot contribute to their competitive advantage. C. resource bundles of firms competing in the same industry are unique to some extent and thus differ from one another. D. resource bundles of firms competing in the same industry tend to be highly mobile, moving easily from firm to firm.

The tenet behind the triple-bottom-line is that A. a firm should solely focus on increasing the economic value created to/for its customers. B. a firm's primary objective should be increasing the total returns to its shareholders. C. a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy. D. a firm's return on revenue can be broken down into three ratios: COGS/Revenue, R&D/Revenue, and SG&A/Revenue.

The top management at Parallela Pharma Inc., through rigorous testing, ensures that the company develops and sells drugs that are free of harmful side effects. Also, the company ensures that the chemical waste generated in the manufacturing process is kept to a bare minimum and is disposed of according to the regulations of the Environmental Protection Agency. The management assesses its overall performance based on these dimensions. Thus, the managers at Parallela Pharma are applying the _____ approach to measure firm performance. A. economic value creation B. shareholder value creation C. triple-bottom-line D. accounting profitability

The translation of strategy into action primarily takes place in a firm's A. mission statement. B. executive summary. C. business model. D. code of conduct.

To initiate a strategic move that allows a firm to open up new and uncontested market space through value innovation, managers must address four key questions when formulating a blue ocean business strategy. These questions focus on A. increasing cost and maintaining perceived customer benefits. B. lowering cost and maintaining perceived customer benefits. C. lowering cost and increasing perceived customer benefits. D. increasing cost and increasing perceived customer benefits.

Trust Machines Inc. is a company that manufactures and markets consumer electronics. The unique microprocessors developed by the company contribute to its high resource immobility. According to the resource-based view of competitive advantage, which of the following is an implication of this situation? A. The competitive advantage of Trust Machines Inc. will soon be lost. B. The resource heterogeneity of Trust Machines Inc. is low within the industry. C. The resources of Trust Machines Inc. are difficult to replicate or imitate. D. The environment in which Trust Machines Inc. operates is closest to perfect competition.

Wear Crush Inc. is an apparel company known for its affordable clothes that follows a cost-leadership strategy. In this scenario, Wear Crush should ideally compare its strategic position with A. a company that sells wristwatches at affordable prices. B. a luxury apparel company that sells designer clothes. C. an apparel company popular among price-conscious customers. D. an online company that sells customized pet clothing.

When GD Inc. declared a dividend of $20,000,000, its market value increased from $8 billion to $8.5 billion. However, it lost a chance to reinvest $20,000,000 in the research and development of a new product which would have earned a profit of $200 million. Thus, this $200 million is referred to as GD Inc.'s A. producer surplus. B. consumer surplus. C. opportunity cost. D. social cost.

When the laptop market overtook the desktop market, Blue Tech Inc., a leader in desktop technology, was left at a competitive disadvantage. Later, Blue Tech Inc.'s management channeled all of the company's efforts and revenue to develop an efficient laptop from scratch in less than a year. However, the company failed because most of its competitors had already been in the laptop market for five years. Blue Tech Inc.'s models were inferior to the ones in the market. In this scenario, Blue Tech Inc.'s failure can be best attributed to A. causal ambiguity. B. diseconomies of scope and scale. C. time compression diseconomies. D. social complexity.

Which of the following accurately summarizes the difference between the resources and capabilities of a firm? A. Resources are tangible; capabilities are tangible and intangible. B. Resources are intangible; capabilities are tangible. C. Resources are tangible and intangible; capabilities are intangible. D. Resources are tangible; capabilities are intangible.

Which of the following applies to the Strength-Threats quadrant of the SWOT matrix? A. The local fast-food chain Easy Hot Dogs expanded its limited menu to maintain its advantage against stiff competition. B. The local fast-food chain Easy Hot Dogs added a salad bar to maintain its competitive advantage against stiff competition. C. The local fast-food chain Easy Hot Dogs used its wholesome image to maintain its competitive advantage against stiff competition. D. The local fast-food chain Easy Hot Dogs revised its image of being a cheap-food place to being a wholesome family place in order to maintain its competitive advantage against stiff competition.

Which of the following best describes a strategic trade-off? A. the tension between innovation and keeping manufacturing costs down B. the tension between maintaining both high-quality products and service C. the tension between value creation and the pressure to keep cost in check D. the tension between raising prices and keeping a loyal clientele

Which of the following describes a peer-to-peer technique? A. A company offers a cleaning service free of charge on a first-time trial basis. B. A company offers a package of cleaning supplies at a discount. C. A company matches an individual with a cleaning service. D. A company places a low retail price on low-selling cleaning supplies.

Which of the following describes an airline that is most likely stuck in the middle? A. Red Carpet Airline that offers complimentary drinks and meals, coast-to-coast coverage via connecting hubs, plush airport lounges, and high prices. B. Plush Airline that offers international routes and global coverage, high customer service, high reliability, and high prices. C. Just Right Airline offers high-quality beverages and meals, plush airport lounges, only a few connections via hubs domestically, poor customer service, and low prices. D. Bottom Line Airline that offers no assigned seating, no in-flight amenities, no drinks or meals, no airport lounges, and low prices.

Which of the following is a drawback of the SWOT analysis? A. The SWOT analysis takes into account only the internal environment of a firm, ignoring the equally important external environment. B. This framework is only applicable to the manufacturing industries; it is ineffective when applied to the service firms. C. A problem with this framework is that a strength can also be a weakness, and that an opportunity can also simultaneously be a threat. D. A drawback of this framework is that it allows managers to merely evaluate a firm's current situation, and not its future prospects.

Which of the following is an example of a firm's intangible resources? A. the firm's cash at bank B. the firm's finished goods inventory C. the firm's organizational culture D. the firm's land and building

Which of the following is an example of a firm's resources? A. routine activities like order taking and invoicing customers, performed in a firm B. assistance available from the government in the form of rules and regulations C. assets such as land and buildings owned by a firm D. liabilities such as bills payables and short-term debts

Which of the following is not a condition that can help a firm sustain its competitive advantage? A. when managers have consistently better expectations about the future value of resources B. when the resource advantage can only be imitated after a long period of time C. when past decisions act as constraints for the current dynamic capabilities D. when the source of the competitive advantage is causally ambiguous

Which of the following is not a limitation of the economic value creation framework? A. The framework falls short when managers are called upon to operationalize competitive advantage. B. The framework is not as effective as accounting profitability or shareholder value creation when the need for "hard numbers" arises. C. The framework fails to provide the foundation that will help firms decide between cost-leadership or differentiation strategies. D. The framework cannot be effectively applied for assessing corporate-level performance of diversified conglomerates.

Which of the following management tools will help determine whether a firm's resources, capabilities, and competencies are strengths or weaknesses? A. Porter's five forces analysis B. PESTEL analysis C. VRIO framework D. Ansoff's matrix

Which of the following scenarios would threaten a firm that uses a differentiation strategy? A. The firm increases the uniqueness of its product without increasing its price. B. The firm adds product features that raise cost and perceived value. C. The firm's focus shifts to price rather than value-creating features. D. The firm's product has not established an acceptable standard of quality.

Which of the following situations will have greater effects from economies of scale than from learning effects? A. when conducting surgeries B. when practicing corporate law C. when mass manufacturing pens D. when making business decisions

Which of the following statements accurately brings out the difference between economies of scale and economies of scope? A. Economies of scale refer to the decreases in per-unit cost with decreases in output, whereas economies of scope refer to the increases in per-unit cost with increases in output. B. Economies of scale result in decreasing returns to scale, and economies of scope result in constant returns to scale. C. Economies of scope are the savings that come from producing two or more outputs from the same resources, whereas economies of scale are decreases in per-unit cost with increases in output. D. Economies of scope are realized when a firm operates at the minimum efficient scale, whereas economies of scale are realized when the firm operates beyond the minimum efficient scale.

Which of the following statements accurately describes a firm's resource stock? A. Resource stocks are a firm's level of resources that are common to competitors. B. Resource stocks are a firm's future estimate of both tangible and intangible resources. C. Resource stocks are a firm's current level of intangible resources. D. Resource stocks are a firm's level of investments to maintain or build a resource.

Which of the following statements correctly describes resource heterogeneity? A. Bundles of resources, capabilities, and competencies differ temporarily across firms. B. Bundles of resources, capabilities, and competencies are mostly the same across firms. C. Bundles of resources, capabilities, and competencies differ across firms. D. Bundles of resources, capabilities and competencies are all the same across firms.

Which of the following statements is not true of competitive advantage? A. Competitive advantage is reflected in superior firm performance. B. Competitive advantage is a multifaceted concept. C. Competitive advantage is an absolute measure. D. Competitive advantage has been linked to a firm's triple-bottom-line.

Which of the following will hamper a differentiator's ability to achieve a competitive advantage? A. lower production costs B. premium prices C. lower value gap D. customized goods

Whole Foods differentiates itself from competitors by offering top-quality foods obtained through sustainable agriculture. This business strategy implies that Whole Foods focuses on A. decreasing the existing value gap by providing luxury goods to customers. B. maintaining a less steeper learning curve as compared to its competitors. C. increasing the perceived value created for customers, which allows it to charge a premium price. D. lowering its costs compared to its competitors,' while offering adequate value for its products and services.

_____ are barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy. A. Embargoes B. Cartel arrangements C. Isolating mechanisms D. Market niches

_____ is best described as a measure of how effectively capital is being used by a firm to generate revenue. A. Return on revenue B. Risk capital C. Working capital turnover D. Revenue per employee

_____ is the money shareholders provide in return for an equity share, which they cannot recover if the firm goes bankrupt. A. Tangible assets B. Value creation C. Risk capital D. Market capitalization

_____ of receivables turnover imply more efficient management in collecting accounts receivable and shorter durations of interest-free loans to customers. A. Unsteady ratios B. Steady ratios C. Higher ratios D. Lower ratios

_____ precisely indicates how much of a firm's sales is converted into profits. A. Break-even price B. Working capital turnover C. Return on revenue D. Inventory turnover

he "diagonal assembly system" was a production system pioneered by the automobile company Gogo. Recently, Gogo was able to sue a competitor and won the suit, thereby receiving $100 million in damages. Which of the following would most likely enable Gogo to win such a lawsuit? A. The competitor used a title for its assembly system that was similar to the title of Gogo's system. B. The competitor failed to apply for a patent of its assembly system. C. The competitor infringed on Gogo's patent of the "diagonal assembly system." D. The competitor produced an assembly system that was somewhat similar to Gogo's system.

A _____ is a graphical depiction of a company's relative performance vis-à-vis its competitors across the industry's key success factors. A. value curve B. value canvas C. strategy curve D. strategy canvas

A differentiation strategy works best when a A. firm has tangible resources, its focus of competition shifts to price, and equivalent substitutes are readily available. B. firm's focus of competition shifts to price, and when increasing differentiation of product features do not create additional value. C. firm's differentiated products are commoditized, and costs of providing uniqueness do not rise above the customer's willingness to pay. D. firm has intangible resources, is able to pass on increases in supplier cost to the customer, and its differentiation appeal creates customer loyalty.

A firm incurs $400 to manufacture a television. In the market, customers are willing to pay a maximum of $600 for the television priced at $500. The difference of $200 ($600 minus $400) is the A. consumer surplus. B. total return to shareholders. C. customer lifetime value. D. economic value created.

According to the _____, competitive advantage is the outflow of a firm's ability to modify and leverage its resource base in a way that enables it to gain and sustain competitive advantage in a constantly changing environment. A. value chain perspective B. two-factor theory C. expectancy theory D. dynamic capabilities perspective

According to the value chain analysis, which of the following is a primary activity? A. research and development B. human resources management C. accounting and finance D. marketing and sales

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

Ambrosia Inc., a leading chocolate producer, anticipated that the prices of cocoa beans would double in less than three years. This would disrupt the availability of cocoa in the industry. Thus, Ambrosia Inc. decided to purchase cocoa plantations in Ghana. As predicted, the prices of cocoa increased twofold. Because of the company-owned cocoa plantations, Ambrosia Inc. was able to sustain its competitive advantage in turbulent times. Which of the following isolating mechanisms does this scenario best illustrate? A. social complexity B. causal ambiguity C. time compression diseconomies D. better expectations of future resource value

Coral Think Inc. is a new company in the publishing industry. It has raised sufficient capital from multiple sources. It is planning to use its capital to purchase certain assets. Which of the following assets will be the most difficult for Coral Think Inc. to acquire using its capital? A. inventory B. tools and equipment C. land and building D. brand name

Creating resources that meet the VRIO criteria is strategically important to a firm because it A. helps the firm curb its resource heterogeneity and resource immobility. B. facilitates greater knowledge diffusion in the industry. C. leads to competitive parity within the industry. D. helps the firm to gain and sustain a competitive advantage.

Dandelions Max is a consumer electronics company. It has acquired an edge over its competitors through its ability to provide breakthrough technology at the lowest price in the market. This advantage of Dandelions Max best exemplifies a A. markup. B. resource flow. C. capital gain. D. core competency.

During market testing, Sensation Cosmetics (SC) realized that the cosmetics industry was dominated with multiple, well-established brands. These brands mostly sold their products in exclusive outlets and departmental stores. A new entrant like SC would require a different business model to be successful. Thus, SC started selling its products through direct marketing. In this scenario, Sensation Cosmetics accomplished substitution primarily through A. path dependence. B. technology transfer. C. knowledge diffusion. D. strategic equivalence.

Firms pursuing a differentiation strategy primarily seek to A. keep their cost structures lower than that of the cost leader. B. reduce the value gap to gain a competitive advantage. C. provide products that are a direct imitation of the competitors' products. D. create higher customer perceived value than the value that competitors create.

Gene Craft Inc. is the market leader in the pharmaceutical industry. Though most of its resources are common to those of its competitors, a few rare resources have helped the company gain and sustain a competitive advantage. Which of the following assets of Gene Craft Inc. is most likely to be considered a rare resource that is best contributing to its competitive advantage? A. the company's land and buildings B. the company's plant and machinery C. the company's raw material supplies D. the company's chemical patents

Genevieve is a recent fashion graduate. She started her own apparel store with an investment of $300,000. In the first year she made a profit of $60,000. If she had taken up a job as a fashion editor for a magazine, she would have earned $50,000 as salary per year. Also, she could have invested her capital, $300,000, in treasury bonds and earned an interest of $12,000. Thus, the amount $62,000 ($50,000 + $12,000) would be Genevieve's A. social cost. B. break-even price. C. reservation price. D. opportunity cost.

Given the accelerated pace of technological change, in combination with deregulation, globalization, and demographic shifts, a firm will only be successful today if its A. competitive advantage is derived from static resource or market advantages. B. resource advantage is not causally ambiguous or socially complex. C. resource advantage is maintained for a short period of time. D. internal strengths change with its external environment in a dynamic fashion.

GreenHarvest Inc. has used $350,000 from its total annual earnings of $1,250,000 to invest in the research and development of a multi-purpose vaccine. Its account receivable from customers is estimated to be $150,000 and accounts payable $80,000. In monetary terms, what would GreenHarvest Inc.'s resource flows be? A. $1,250,000 B. $150,000 C. $80,000 D. $350,000

Home Value Inc., Max Cart Inc., and Nice Necessities Inc. are three consumer-product retailing companies. Their products consist primarily of day-to-day items that are easy to imitate and sell. All three companies use the same resources and capabilities in the production and distribution of their products. Which of the following is an implication of the market condition indicated in this scenario? A. Resource immobility of the firms will be low. B. The industry structure will be far from perfect competition. C. Barriers to entry within the industry will be high. D. Any advantage that one firm has will be short-lived.

How did Marriott use economies of scope to achieve greater economic value than its competitors? A. Marriott increases in cost per hotel unit as number of customers increases. B. Marriott decreases in cost per hotel unit as number of customers increases. C. Marriott lowered its cost structure by focusing its production assets on one type of hotel, which increased its menu and thus its differentiated appeal. D. Marriott lowered its cost structure by sharing its production assets over a several types of hotels, which increased its menu and thus its differentiated appeal.

How does a sustainable strategy typically help a firm? A. It helps the firm focus solely on its financial goals. B. It reduces the need for corporate social responsibility within the firm. C. It facilitates the firm in effectively isolating its external stakeholders. D. It helps the firm achieve positive results along the social and ecological dimensions.

How does availability of complements act as a value driver? A. Complements add value to a product by offering an inferior substitute to it. B. Complements add value to a product by competing with it. C. Complements add value to a product when they imitate it. D. Complements add value to a product when they are consumed in tandem with it.

How is differentiation parity different from cost parity? A. Differentiation parity deals with pricing not innovation. B. Differentiation parity deals with innovation not value. C. Differentiation parity deals with pricing not value. D. Differentiation parity deals with value not pricing.

In the context of SWOT analysis, a firm can develop an offensive strategic option primarily by A. combining an internal weakness with an external threat. B. leveraging its internal strengths to minimize external threats. C. leveraging an external opportunity to overcome an internal threat. D. using its internal strengths to exploit external opportunities.

In the context of SWOT analysis, which of the following best exemplifies a firm's internal weakness? A. fall in the purchasing power of the firm's customers B. increased competition in the industry where the firm operates C. irregularity in the raw materials supply throughout the industry D. decline in the firm's market share

In the context of the resource-based model of competitive advantage, which of the following scenarios best exemplifies resource immobility? A. AP Corp. has earned a good reputation among its shareholders by investing more in tangible assets over intangible assets. B. Two Triangle Inc. has lost its market share because its resources are not mobile, that is rigid, inflexible, and static. C. Blue Elixir Corp. has been able to gain a competitive advantage because of its ability to efficiently move its resources from one manufacturing unit to another. D. True 3 Inc. has been able to outperform its competitors because the uniqueness of its resources is difficult to replicate.

In the multiplex industry, Vibrant Movies Inc. is an upscale multiplex that focuses on superior customer experience. The firm charges premium prices for its movie tickets and services. Global Cine Inc., in contrast, charges the lowest price in the industry with its no-frills approach. In between these two segments is True Movies Inc., which offers a customer experience comparable to that of Vibrant Movies at a price almost as low as that of Global Cine. What strategy is True Movies pursuing in this scenario? A. liquidation strategy B. product diversification strategy C. market penetration strategy D. blue ocean strategy

Juanita Apparels Inc. outsources its production to contract manufacturers located in underdeveloped nations where unskilled labor is available in plenty for very low wages. This has helped the apparel brand become a price leader in the industry. Which of the following is the key driver behind Juanita Apparel's strategic position? A. network effects B. superior customer service C. availability of complements D. low-cost input factors

Juanita, a manager at a multinational organization, is trying to carefully scan and link the firm's internal environment to its external environment. The insights from this analysis will allow her to effectively leverage the company's internal strengths to exploit external opportunities, while mitigating internal weaknesses and external threats. In this scenario, which of the following managerial tools is Juanita employing? A. Blake Mouton managerial grid B. Ansoff's matrix C. BCG analysis D. SWOT analysis

Kaleidoscope Inc. is a leading international apparel company. Competitors across the globe have failed to imitate Kaleidoscope Inc.'s production models, supply chain systems, knowledge systems, and culture. These attributes have remained unique to Kaleidoscope Inc. for a long time. Which of the following assumptions of the resource-based model of competitive advantage does this scenario best illustrate? A. resource homogeneity B. resource perishability C. resource equality D. resource immobility

Kerry the Kangaroo Inc. specializes in producing and selling a stuffed kangaroo named Kerry. Although the stuffed kangaroo has sold well, the clothes that can be bought to dress the kangaroo have not sold as well as expected. As a result, Kerry the Kangaroo has warehouses full of hats, pants, sweaters, and shoes to dress Kerry. This firm used a _____ to determine how much of its capital is tied up in these accessory items. A. payables turnover B. receivables turnover C. fixed asset turnover D. inventory turnover

Mova Electronics, a leading pager manufacturer, recently declared itself bankrupt. This was attributed to a decision the company made in the past. While most of Mova's competitors were shifting their research focus toward cell phones, Mova invested most of its retained earnings on improvising its pagers. Once the pager market drastically declined, Mova Electronics was unable to capitalize on the new technology. Which of the following does this scenario best illustrate? A. causal ambiguity B. knowledge diffusion C. social complexity D. path dependence

Next Door Cellular is a leading mobile network operator. Since most of the resources used by Next Door Cellular are easily available, the company's brand name is the only resource that distinguishes it from the other operators. No other competitor in the industry has a strong brand name like that of Next Door Cellular. This unique asset that has helped the company gain a competitive advantage will be considered as a(n) _____ resource in the VRIO framework. A. tangible B. mobile C. imperishable D. rare

Nicki paid $900 for a camera that she thought was worth $1100 for all the features included in it. For the consumer electronics firm selling the camera, however, the cost of producing the camera was only $350. What is the consumer surplus in this scenario? A. $900 B. $1,100 C. $550 D. $200

Organic Eats is a restaurant that caters to the needs of a small percentage of highly health-conscious consumers. It has an all-organic, vegan menu. Since there are very few restaurants that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Organic Eats is following a A. product diversification strategy. B. liquidation strategy. C. mass market strategy. D. focused differentiation strategy.

Organizational and managerial skills that find their expression in a company's structure, routines, and culture are referred to as A. tangible resources. B. reserves. C. capital gains. D. capabilities.

Otion Inc. is a relatively new firm in the consumer electronics industry. The company's primary objective is to become the market leader in less than 5 years, for which it has to gain and sustain a competitive advantage. In the context of the VRIO framework, which of the following resources should Otion Inc. primarily focus on to achieve its objective? A. quality standards, which are common and mandatory throughout the industry B. inexpensive unskilled labor that is easily accessible by all companies C. component parts that are sourced from competitors' suppliers D. production systems that reduce costs by 30 percent below the current industry standards

Product features, customer service, and complements are all examples of important A. cost curves. B. cost drivers. C. value curves. D. value drivers.

Riya has recently started a restaurant in a commercial area where there are many other established restaurants and popular fast-food chains. Riya owns the plot on which her restaurant is located and this makes her cost of operations lower than the competitors. This factor allows her to offer her products at a competitive price. Riya has also invested a huge amount on the interiors of the restaurant and in equipping the kitchen with the latest appliances used by her competitors. In this scenario, which of the following is the most valuable resource for Riya's business? A. the investments made by Riya on the restaurant's interiors B. the latest kitchen equipment that is at par with the restaurant's competitors C. the restaurant's late entry into the market D. the land owned by Riya, which reduces cost of operations

Superlative Productions spent 10 million dollars to buy the rights to a best-selling novel. The company then prepared for production by hiring a screenwriter to adapt the novel, casting the main roles, renting cameras and other equipment, and scouting locations in southern Arizona. Which of the following pairs of resources are both intangible? A. money spent to buy rights of novel; screenwriter's experience adapting novels B. money spent to buy rights for the novel; locations in southern Arizona C. best-selling novel; locations in southern Arizona D. best-selling novel; screenwriter's experience adapting novels

The cost of capital to create a product is a fixed cost because it is A. directly proportional to the output level. B. uniform throughout all firms and industries. C. not a part of the profit calculations. D. unaffected by consumer demand.

The management of a company is assessing the value of all the tangible resources the company owns. Which of the following will be included in this assessment? A. the company's copyrights B. the company's brand equity C. the company's patents D. the company's machinery

The pursuit of both differentiation and low cost at the same time in a way that creates a leap in value for both the firm and consumers is called A. cost driving. B. cost innovation. C. value driving. D. value innovation.

The three financial ratios that constitute return on revenue are Cost of goods sold/Revenue, Research & Development expense/Revenue, and A. Accounting profitability/Revenue. B. Economic value created/Revenue. C. Total return to shareholders/Revenue. D. Selling, general, & administrative expense/Revenue.

The translation of strategy into action takes place in the firm's _____, which details the firm's competitive tactics and initiatives. A. scorecard model B. economic value creation C. shareholder's value creation D. business model

The working capital turnover of Tesva Systems Corp. is 6.0. What does this financial data suggest? A. For every $6.00 Tesva Systems puts to work, the company incurs a cost of $1.00. B. For every $6.00 Tesva Systems puts to work, the company realizes sales of $1.00. C. For every dollar Tesva Systems puts to work, the company realizes $6.00 in loss. D. For every dollar Tesva Systems puts to work, the company realizes $6.00 of sales.

To gain a competitive advantage, Lopez Industries obtained financing and then used this extra capital to produce the same amount of gaskets in a one-month period that it normally produces in a two-month period. Which of the following is the most likely outcome of this endeavor? A. inconsistent results B. same results C. better results D. inferior results

To make the SWOT analysis an effective management tool, a strategist must first A. distinguish a firm's resources, competencies, and capabilities from each other. B. separate a firm's primary activities from support activities. C. analyze the pros and cons of strategic options. D. scan a firm's internal and external environments.

True Moto Corp. (TMC) is a leading automobile company. The company has been able to sustain its competitive advantage primarily due to its high-quality and efficient electric motors. Most of its competitors have failed to develop similar electric motors at a reasonable price. Which of the following resource attributes listed in the VRIO framework has helped TMC sustain its competitive advantage? A. resource mobility B. inexhaustible nature C. intangibility of the company's resource D. high costs involved in imitation

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

When Internet service providers offer free routers for subscriptions to their wireless Internet packs, the perceived value of the service offering increases. In this case, the value driver would be A. economies of scale. B. learning-curve effects. C. experience-curve effects. D. availability of complements.

Which of the following competitively important assets is typically excluded from a firm's balance sheet? A. land and building B. accounts payable C. patents D. customer experience

Which of the following contributed the most to JCPenny's failed blue ocean strategy? A. failure to win legal battles against its closest competitors B. failure to conduct an accurate pretest in the market C. failure to apply the strategy to enough stores at the same time D. failure to combine a cost-leadership position with a differentiation position

Which of the following drivers simultaneously increases value while lowering cost? A. economies of scale B. superior customer service C. availability of complements D. innovation

Which of the following examples uses a focused differentiation strategy? A. a tennis pro shop that sells low-quality racquets priced at 150 dollars per racquet B. a coffee shop that offers mediocre lattes at a price of five dollars for a small latte C. a hotel chain that offers high-quality service with room rates of under 75 dollars per night D. a cosmetics brand that offers superior-quality skin lotion priced at 100 dollars per bottle

Which of the following frameworks used to measure competitive advantage relies on both an internal and an external view of a firm? A. the economic value creation model B. the accounting profitability model C. the shareholder value creation model D. the balanced-scorecard model

Which of the following is a disadvantage of the balanced-scorecard approach? A. It fails to link the strategic vision to responsible parties within the organization. B. It fails to translate the vision into measureable operational goals. C. It provides limited guidance for designing and planning business processes. D. It provides limited guidance about which metrics to choose.

Which of the following is a firm effect that has an impact on the competitive advantage of a firm? A. the exit barriers within the industry in which the firm operates B. the number of companies operating in the industry in which the firm operates C. the intensity of rivalry among existing companies in the firm's chosen industry D. the value and the cost position of the firm relative to its competitors

Which of the following is an accurate statement about value chain analysis? A. The value chain concept can be applied only to manufacturing firms. B. The value chain concept can be applied only to high-tech firms. C. The value chain concept can be applied only to manufacturing and high-tech firms. D. The value chain concept can be applied to all firms, including service firms.

Which of the following is an external performance metric? A. return on revenue B. fixed assets turnover C. inventory turnover D. total return to shareholders

Which of the following is not a factor that makes total return to shareholders and market capitalization unreliable measures of company performance? A. the volatility of stock prices B. the effects of the unemployment rate C. variations in interest and exchange rates D. the unpredictability of return on revenue

Which of the following is not an accurate expression of the economic value created per unit of a product sold? A. the sum of consumer surplus and producer surplus B. the difference between consumer's reservation price and firm's cost C. the sum of consumer surplus and firm profit D. the difference between the price charged and the firm's cost

Which of the following is not an advantage of the balanced-scorecard approach to assess firm performance? A. It allows managers to communicate and link the strategic vision to responsible parties within an organization. B. It helps managers to implement feedback and organizational learning in order to modify and adapt strategic goals when indicated. C. It provides a concise report that tracks chosen metrics and measures and compares them to target values. D. It is a tool which can be effectively used by managers for both strategic implementation and strategic formulation.

Which of the following is primarily a cost driver? A. product features B. customer service C. complements D. economies of scale

Which of the following is primarily a value driver? A. cost of input factors B. economies of scope C. experience-curve effects D. complements

Which of the following ratios best expresses inventory turnover? A. Inventory/Working capital B. Annul profits/Inventory C. Inventory/Per unit cost of production D. Cost of goods sold/Inventory

Which of the following scenarios best illustrates bundling? A. Clean Brush Inc. sells its electric toothbrushes for a low cost, but charges a high price for replacement brushes. B. Cumulus Media Inc. sells its cloud computing network by having customers pay for the service as they use it. C. Sharp Cable Inc. sells its basic TV channels for free but charges high prices for any channels that customers add on later. D. Fresh Seeds Inc. sells seed packages, in which a person can buy a package of three types of seeds at a discounted price compared to buying the seeds individually.

Which of the following sources of differential appeal is least effective in helping a firm sustain its advantage? A. reputation for innovation B. reputation for quality C. superior customer experience D. observable product features

Which of the following statements about competitive advantage is true? A. Competitive advantage is an absolute measure; it is not relative. B. Competitive advantage is a one-dimensional concept. C. Competitive advantage is permanent and not transitory; once gained by a firm it stays with the firm. D. Competitive advantage can be assessed by measuring accounting profit, shareholder value, or economic value.

Which of the following statements is true of the balanced-scorecard? A. It is a more or less a one-dimensional metric of measuring competitive advantages of a firm. B. It is one of the traditional approaches of measuring firm performance. C. Its primary focus is to base a firm's strategic goals entirely on external performance dimensions. D. It attempts to provide a holistic perspective on firm performance.

Which of the following statements is true of the triple-bottom-line? A. It is more or less a one-dimensional metric of measuring competitive advantage of a firm. B. Its primary focus is to base a firm's strategic goals entirely on external performance dimensions. C. According to this approach, achieving positive results in any one of the dimensions, economic, social, and ecological, can lead to a sustainable strategy. D. Three dimensions, economic, social, and ecological, make up the triple-bottom-line.

While Aros Inc. incurs a cost of $20 for a pair of shoes, Shoes Cult Inc., its competitor, manufactures a pair of shoes at $22. Both the companies are able to sell their shoes for a maximum of $30 per pair. Which of the following statements is true in this scenario? A. Both Aros and Shoes Cult have achieved differentiation parity. B. Aros is a cost-leader when compared to Shoes Cult. C. Aros has created a greater economic value than Shoes Cult. D. Shoes Cult has a competitive advantage over Aros.

_____ is a business model in which the manufacturer sets a fixed price on a product, but the retailer is to free set its own price. A. Agency B. Freemium C. Bundling D. Wholesale

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