MGMT449 Test Prep
Why might a manager who uses simple analogies to explain complex issues create problems in the decision-making process?
The analogy might not be valid.
Why would a firm that is a potential competitor in an industry choose not to become a rival?
The barrier to entry is too high.
An employee suggests that pricing should reflect the absolute maximum the customer is willing to pay for a similar product. Why are they incorrect?
The company is competing against rivals for customers.
How do general managers ensure their business units support the overall goals of the company?
by developing strategies that support corporate objectives
How can a supplier increase their power over their customers when they have the same knowledge and experience as firms in their customers' industry?
by threatening to become a competitor
How is Costco able to reduce its working capital needs and compete effectively against Walmart?
by turning over inventory more rapidly
Aluminum Corporation of China (Chalco) is the world's largest aluminum company by production volume. How is Chalco competing in the aluminum market?
by using a low-cost strategy
When a strategic group has a strong position in relation to buyers because there are no substitutes for their product, what does that say about that strategic group?
competitive forces are weak
Why might an aging population create a threat to an organization?
fewer people in the workforce
A manager was asked to do value chain analysis for their company. Why would upper management ask them to do this?
to pinpoint where valuable, rare, and inimitable resources reside within the company
Why should managers use the growth stage of a new market to prepare for the shakeout stage of the industry life cycle?
to position themselves as leaders during shakeout
Why should maximizing shareholder value be the primary goal of profit-making companies?
to provide risk capital to shareholders
How do strategic leaders use a business model to create competitive advantage?
to see how strategies will work together to achieve goals
How can managers most effectively implement strategies in a way that maximizes profitability ethically and legally?
use governance systems that focus on culture and control systems
Which system best allows managers to evaluate the quality of their resources?
value, rarity, imitability, and organization (VRIO)
When would the ability for lower-level managers to formulate and alter strategic priorities be especially important?
when radical new technology is introduced in the industry
Based on the efficiency frontier provided, which companies are operationally efficient?
1 and 2
What can the airlines do strategically to avoid future price wars?
Take over smaller airlines to reduce competition
Why is a customer-oriented approach to formulating a mission more effective than a product-oriented business definition?
A customer-oriented approach helps safeguard the company from shifts in demand.
What is the relationship between industry structure and profits across companies?
A firm's resources and capabilities determine profitability.
How have barriers to entry in the U.S. airline industry changed over time?
Air travel has continued to expand for all carriers.
Why should firms take a customer-oriented view of their industry rather than a product-oriented view?
Basic customer needs define the industry's boundaries.
What does this case tell you about the role of strategy in enterprise success and failure?
Business models should be based on new positioning strategies.
How can leaders provide an organization with a sense of direction?
Communicate and make their vision part of the organization's culture.
Why is the profitability and profit growth of a company based on its relative success in its industry and not on how much profit is made?
Different industries are characterized by different competitive conditions.
In what way is a company's performance affected by the industry in which it competes?
Different industries have different competitive conditions.
Why is competitive advantage an important part of creating profitability in a firm?
It allows the firm to outperform rivals.
What happens when the forces that shape competition in an industry, as outlined in Porter's Five Forces, grow stronger?
It becomes more difficult to make a profit.
Why is the use of devil's advocacy helpful in the decision-making process?
It can counteract cognitive biases.
What makes a company a competitor?
It has a product that can be used as a substitute for that of the firm.
Why is the ivory tower concept of planning less effective than a decentralized approach?
It ignores the importance of autonomous action.
Why is a high degree of motivation important in leaders?
It persuades others to join together in pursuit of a common goal.
Why is it important that managers monitor the feedback loop?
It provides information for future strategy formulation.
Why is it impossible to price products according to each customer's reservation price?
It's too hard to segment the market to a high enough degree.
What is one of the biggest advantages to scenario planning in terms of strategic management?
Managers are forced to think outside the box.
According to Henry Mintzberg's model of strategy development, why do many planned strategies fail to be implemented?
Managers did not anticipate changes in the environment.
What does this case tell you about the role of strategy in changing the competitive structure of an industry?
Managers must tailor strategies to changing industry conditions.
During times of punctuated equilibrium, why is an industry structure likely to become more fragmented?
More companies enter the industry because of lower barriers to entry.
In what way did the flood of new entrants into the airline industry that followed deregulation in 1978 negatively affect the airline industry?
New strategies had to be formulated to counter emerging threats.
A company wants to increase its prices to improve profitability. Which piece of advice would be most relevant?
Strengthen the value of the firm's products in the eyes of customers.
Apple's successful differentiation of the iPhone has what impact on its cost structure?
The iPhone has a lower cost structure because of higher demand and subsequent economies of scale.
Why do critics claim that formal planning systems are not effective?
The world is unpredictable
What is the hallmark of a great strategic leader?
Their impact lasts beyond their years at the organization.
Why are functional-level managers in a unique position to generate ideas for major strategies of a company?
They are closest to the customer.
Why are strategies important in an organization?
They have a major impact on performance relative to competitors.
Cost leadership and focused differentiation are examples of which level of strategy?
business
How can a manager counter biases such as illusion of control, reasoning by analogy, or representativeness when evaluating plans?
Use the outside view to evaluate alternative plans.
How might a consultant analyze a company's process knowledge?
by analyzing the rules, routines, and procedures of an organization
Which factors of production are most important to a company's competitive advantage?
advanced and basic factors of production
What events triggered price wars in this industry?
airline travel became viewed as a commodity
Which of the following would be characteristic of a firm pursuing a low-risk, low-return strategy?
an emphasis on price
How can firms respond to changes in the market as the industry reaches the maturity stage of the life-cycle?
by building brand loyalty
How can marketing increase the value of the cars sold by a company?
convince customers that its cars are faster and more reliable than competitors' cars
A bank wants to apply R & D to increase the value of products. Which of the following fulfills that goal?
creating a banking app that makes it easier than ever to bank online
The airline industry has several companies that fly similar routes, often at similar prices. What long-term effect does this type of competitive rivalry have on the industry?
decreased profitability
A company claims that it has valuable resources. How might another firm determine whether their claim is accurate?
determine whether the resources make it possible to exploit opportunities and counter threats
Why is the life-cycle model a useful tool for analyzing industry evolution?
differences and similarities become more pronounced over time
The Kellogg Company is a multinational food manufacturer offering products ranging from breakfast foods to snacks. What is the first step Kellogg likely took to ensure products were targeting the right customers?
divided the market into subsets of customers who shared common characteristics
Which term best describes the relationship among value, pricing, demand, and costs?
dynamic
Which value or attribute can lead to higher performance and more success?
encouraging entrepreneurial behavior
With no one specific strategy being the best, it is important that managers take all of the following actions except for which one?
ensure marketing can support the strategy
Alhambra, based in Spain, specializes in crafting handmade flamenco guitars. Its flamenco guitar line includes five models made in collaboration with flamenco guitarist Carlos Piñana. Which market segmentation would work best for Alhambra's flamenco guitars?
focus
Retailer Nordstrom follows which type of strategy?
focus differentiation strategy
What do shareholders expect managers to deliver through strategic leadership?
high profitability and sustainable profit growth
Why is it important that a competitive resource be rare?
if it's not rare, competitors can access it.
How can top-level managers develop more effective strategic plans?
include formal planning and emergent strategies
A company wants to emulate one of Apple's most important distinctive competencies. Which of the following would achieve that goal?
making beautiful products
What is the relationship between innovation and competition?
innovation drives competition
What should be a manager's focus when setting up goals to increase the long-term performance and competitiveness of the organization?
issues such as customer satisfaction and efficiency
Why may some strategic groups face different threats and opportunities than other strategic groups in the same industry?
it can relate to the competitive positioning approach
How can innovation transform the nature of industry competition?
it reduces barriers to entry
Why did the legacy airlines take so long to adjust to the entry of low-cost carriers such as Southwest and JetBlue?
it was a mature industry
Who is responsible for managing the strategy-making process and its implementation?
leadership
Which is the primary channel by which process knowledge is shared?
learning by doing
Why can the industry life-cycle model be considered only a generalization?
life cycles do not always follow a pattern
In the U.S. market, the multinational fast food chain McDonald's favors which generic strategy?
low cost
How might a consultant effectively go about measuring efficiency?
measure employee productivity
Which of the following will support a company in its quest to lower its cost structure?
more efficient production
Coca-Cola segments its markets by which characteristic?
needs
What risk do managers incur when they consider whether it is worth working to overcome mobility barriers and pursue a new strategic group?
new competition
Which is an example of responsiveness to customers?
providing a wide range of different flavors to appeal to different groups
Which of the following would serve as a complementor to the electric vehicle industry?
solar panels for car roofs
How do managers identify and determine the process they want to use to create competitive advantage?
strategy-making
Apart from government regulations, what are the other barriers to entry into the U.S. airline industry?
the cost of labor
Why would price inflation make investment planning hazardous for firms?
the future is less predictable
A consultant tells a shoe manufacturer that it can charge more for its shoes if it improves just one thing. What would that one thing most likely be?
the quality of the shoes
What would a review of the building blocks of competitive advantage reveal?
the result of the way the various value-chain activities within an enterprise are performed
Why is space travel considered an embryonic industry?
there are no economies of scale
Why can technological changes be considered both an opportunity and a threat for organization?
they can radically reshape industry structure
How would changes in the macroenvironment impact the forces in Porter's model?
they change the attractiveness of an industry
In what way was the flood of new entrants into the airline industry that followed deregulation in 1978 good for customers?
they created price wars
How do political and legal processes shape the opportunities and threats experienced in an industry?
they shape laws the industry must follow
How might a firm in an unrelated industry become a competitor to firms in another industry?
through the use of new technology
To what degree does a patent protect a company's intellectual property for the long term?
to a limited degree
How should a manager use the industry life-cycle model in evolving industry environments?
to formulate strategies that counter emerging threats
Why is it important to do an analysis of the forces that affect a firm before formulating a strategy?
to identify strategies that will allow the firm to outperform rivals
Why should firms pay attention to conditions in the industry environment that lead to opportunities?
to increase profitability
What is the role of the CEO as a corporate-level manager?
to oversee strategies for the entire organization
When a company has a product that is very similar to that of their competitors, how can they differentiate it from others?
with strategic positioning
How does the strategy-making process typically end?
with the design of control systems to implement the strategy