MGT 449 Exam 2
From an investors' or shareholders' perspective, the measure of competitive advantage that matters most is the ________.
) return on risk capital
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.
) triple-bottom-line
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?
) 3, that is, $600,000/$200,000
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?
) Differentiation
________ 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.
) Economic value created
) 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?
) Integration strategy
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?
) Learning effects
) Bass Watches Inc. initially spent eight man-hours to assemble a wrist watch. 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?
) Learning-curve effect
________ describes a process in which the options one faces in a current situation are limited by decisions made in the past.
) Path dependence
________ precisely indicates how much of a firm's sales is converted into profits.
) Return on revenue
28) Unlike the financial ratios based on accounting data, total return to shareholders is:
) an external performance metric.
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 ________.
) causal ambiguity
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 ________.
) economic value created
The concept of a(n) ________ attempts to capture both learning effects and process improvements at firms.
) experience curve
In a successful ________, the trade-offs between differentiation and low cost are reconciled.
) integration strategy
Vior 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:
) path dependence.
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?
3,000-4,000 units
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) $10,000
Which of the following statements is true of accounting data?
A) Accounting data are historical data and thus backward-looking.
True Home Inc., Super Cart Inc., and Daily Things 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) Any advantage that one firm has will be short-lived.
How does a firm capture its producer surplus for a good or service?
A) As profit per unit sold
Which of the following ratios best expresses inventory turnover?
A) Cost of goods sold/Inventory
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 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.
Nike has come a long way from its humble beginnings. It has been able to outperform 1) adidas in sales and become the undisputed leader in the athletic shoe and apparel industry. Which of the following statements accurately explains one of the main reasons for Nike's success?
A) It made the unorthodox move to spend basically its entire budget for a specific sport on a single star athlete.
) Both Viten Electronics Inc. and JL Electronics Inc. incur a cost of $400 to manufacture an LED television. However, the economic value created by JL Electronics is more than that created by Viten Electronics. What does this indicate?
A) JL Electronics can charge a premium price on its televisions.
Which of the following is NOT true of risk capital?
A) Risk capital invested in a firm can be legally recovered if the firm goes bankrupt.
Which of the following statements accurately brings out the difference between tangible and intangible resources?
A) Tangible assets can be bought on the open market, whereas intangible assets cannot be easily purchased.
20) 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 chemical patents
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 machinery
42) Which of the following is NOT an accurate expression of the economic value created per unit of a product sold?
A) The difference between the price charged and the firm's cost
11) True Sync 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 True Sync Inc. will best enable it to gain and sustain a competitive advantage?
A) The expertise acquired by the employees in the company
10) Which of the following is an example of a firm's intangible resources?
A) The firm's organizational culture
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 resources of Trust Machine Inc. are difficult to replicate or imitate.
Which of the following is a firm effect that has an impact on the competitive advantage of a firm?A) The value and the cost position of the firm relative to its competitors B) The exit barriers within the industry in which the firm operates C) The intensity of rivalry among existing companies in the firm's chosen industry D) The number of companies operating in the industry in which the firm operates
A) The value and the cost position of the firm relative to its competitors
Why are differentiation and cost-leadership strategies referred to as generic business strategies?
A) They can be used by any organization independent of industry context.
The perfectly competitive industry structure differs from the resource-based model in its view that:
A) all firms have access to the same resources.
48) It is difficult even for Apple's managers to pinpoint the underlying cause of the 48) company's phenomenal success. The term that best applies to this difficulty is known as ________.
A) causal ambiguity
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) causal ambiguity
The value a consumer attaches to a product or service is captured in the
A) consumer's maximum willingness to pay for it.
3) 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) core competency
Both Myoco Electronics Inc. and Electra Series Inc. have achieved cost parity in the television market. To gain and sustain a competitive advantage against Electra Series, Myoco Electronics should:
A) create greater perceived economic value than Electra Series.
In a focused cost-leadership strategy, a firm:
A) delivers low-cost products and services to a specific, narrow part of the market.
In contrast to a differentiator, a cost leader will:
A) focus its research and development on process technologies to improve efficiency.
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.
When a differentiator charges a similar price as its competitors in the same strategic group but offers more perceived value, it:
A) gains market share from other firms.
Creating resources that meet the VRIO criteria is strategically important to a firm because it:
A) helps the firm to gain and sustain a competitive advantage.
The competitive advantage that one firm has will be short-lived in an industry where:
A) perfect competition exists.
The difference between the price charged for a product and the cost to manufacture it is referred to as the ________.
A) producer surplus
13) The resource-based view of a firm assumes that the:
A) resource bundles of firms competing in the same industry are unique to some extent and thus differ from one another.
38) Gina 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?
B) $200
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?
B) A firm must be effectively organized to capture value.
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?
B) Archer Cycles has created a greater economic value than Evia Cycles.
describes a situation in which the cause and effect of a phenomenon are not readily apparent
B) Causal ambiguity
The fixed asset turnover of a company is 8.3. What do you infer from this?
B) Every dollar spent on the company's fixed assets generates $8.30 of revenue.
most precisely measures how well a company leverages its fixed assets, particularly property, plant, and equipment (PPE).
B) Fixed asset turnover
The working capital turnover of Tesva Systems Corp. is 6.0. What does this financial data suggest?
B) For every dollar Tesva Systems puts to work, the company realizes $6.00 of sales.
Which of the following is an advantage of applying the economic value creation perspective to assess a firm's performance?
B) In economic value perspective, analysts not only consider historical costs, but also opportunity costs.
27) Which of the following is a disadvantage of measuring firm performance through total return to shareholders and firm market capitalization?
B) Market volatility makes it difficult to assess firm performance through these measures, particularly in the short term.
indicates how much a firm benefits from interest-free loans extended by its suppliers and creditors.
B) Payables turnover
33) 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?
B) Production systems that reduce costs by 30 percent below the current industry standards
) The translation of strategy into action primarily takes place in a firm's ________.
B) business model
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 NOT true in this scenario?
B) Shoes Cult has a competitive advantage over Aros.
True Autos Inc. has been trying to directly copy the strategies of Red Autos Inc. Even though it is evident that Red Auto's Inc.'s success comes from its just-in-time inventory system, True Auto's 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?
B) Social complexity
56) 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?
B) The triple-bottom-line approach
) 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?
B) The value (V) the consumer attaches to the dress
Economic value creation is best expressed as ________.
B) consumer surplus plus firm profit
________ denotes the dollar amount a consumer would attach to a good or service.
B) Value
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 what Oryxo does. What does this imply?
B) Vibrant Phones sells its products at a better price than Oryxo.
The primary goal of a firm pursuing an integration strategy should be to:
B) achieve a larger economic value created than that of rivals in the industry.
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:
B) an apparel company popular among price-conscious customers.
When a firm operates at the minimum efficient scale, the:
B) returns to scale are constant.
25) In the context of the resource-based model of competitive advantage, if a successful firm exhibits resource immobility it means that the
B) firm will have a sustained competitive advantage because of its unique resources.
) Green Curry 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, Green Curry is following a ________.
B) focused differentiation strategy
26) A firm achieves differentiation parity ideally when:
B) it successfully sells its products and services at a higher price than its competitors.
TrueCandy Inc., a confectionery manufacturing company, lost its competitive advantage when its strategy of placing kiosks at prominent locations throughout the state was followed by most of its competitors. In this scenario, TrueCandy Inc.'s loss of competitive advantage can be primarily attributed to ________.
B) knowledge diffusion
49) An observer may conclude that the organizational culture of Zappos, an online retailer 49) 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 ________.
B) socially complex
A high percentage of R&D/Revenue ratio indicates a(n):
B) strong focus on innovation to improve current products and services.
Value drivers contribute to a firm's competitive advantage only if:
B) the increase in value creation exceeds the increase in costs.
The top management at BioTrue 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 Bio True Pharma are applying the ________ approach to measure firm performance.
B) triple bottom line
Onyx 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 Onyx Tech Inc. to increase its profitability by lowering its production costs. Thus, Onyx's competency in designing and manufacturing microprocessors will be considered a(n) ________ resource in the VRIO framework.
B) valuable
Even without differentiation parity, a firm pursuing a cost-leadership strategy can still gain a competitive advantage as long as its:
C) economic value creation exceeds that of its competitors.
24) A firm has 30 million shares outstanding, and each share is traded at $100. Also, each shareholder gets a dividend of $2000 annually. In this case, the market capitalization is ________.
C) $3 billion, that is, 30 million shares × $100
Which of the following is an example of a firm's resources?
C) Assets such as land and building owned by a firm
Brown Foods 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, Brown Foods Inc. decided to purchase cocoa plantations in Ghana. As predicted, the prices of cocoa increased twofold. Because of the company-owned cocoa plantations, Brown Foods Inc. was able to sustain its competitive advantage in turbulent times. Which of the following isolating mechanisms does this scenario best illustrate?
C) 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?
C) Brand name
Free Color 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 Free Color applying?
C) Cost-leadership
) 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 shareholders view us?
C) How do we reduce the economic value created?
________ are barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy.
C) Isolating mechanisms
Which of the following statements is true of the balanced scorecard?
C) It attempts to provide a holistic perspective on firm performance.
Which of the following expressions accurately describes market cap?
C) It is the product of the number of outstanding shares and the share price.
Which of the following statements is true of learning curves?
C) Learning curves can be observed in manufacturing processes and professional services.
________ is best described as the process of manufacturing a large variety of tailor-made products or services at a relatively low unit cost.
C) Mass customization
________ are best described as the value of the best forgone alternative use of the resources employed.
C) Opportunity costs
________ are the legal owners of public companies.
C) Shareholders
According to the five forces model, which of the following is viewed as a major risk to a business pursuing a cost-leadership strategy?
C) Suppliers requesting a 2% price increase across the industry
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 total return to shareholder is $5 billion.
C) The firm's number of outstanding shares is 25 million.
) Which of the following is NOT a limitation of the economic value creation framework?
C) The framework fails to provide the foundation that will help firms decide between cost-leadership or differentiation strategies.
57) Which of the following statements is true of the triple bottom line?
C) Three dimensions, economic, social, and ecological, make up the triple bottom line.
True Machine Inc. and One Electrona Inc. are two competing consumer electronics companies. While True Machine's COGS/Revenue is 66%, One Electrona's is 74%. What do you infer from this financial data?
C) True Machine's profit margin is higher than that of One Electrona.
A successfully implemented integration strategy allows a firm to:
C) charge a higher price than the cost leader in the industry.
Firms pursuing a differentiation strategy primarily seek to:
C) create higher customer perceived value than the value that competitors create.
In the fiscal year 2012, BlackBerry's Cost of goods sold (COGS)/Revenue ratio was higher than that of its competitor, Apple. This implies that BlackBerry needs to work toward:
C) driving down its costs.
A differentiation strategy works best when a:
C) firm has intangible resources, is able to pass on increases in supplier cost to the customer, and its differentiation appeal creates customer loyalty.
When the knowledge of a valuable and rare resource diffuses throughout an industry, the:
C) firms in the industry will be better positioned to achieve competitive parity
Whole Foods differentiates itself from competitors by offering top-quality foods obtained through sustainable agriculture. This business strategy implies that Whole Foods focuses on:
C) increasing the perceived value created for customers, which allows it to charge a premium price.
When a firm combines experience based learning and process innovation, the firm:
C) jumps to a steeper learning curve.
To be cost-competitive, a firm should
C) operate at the minimum efficient scale.
47) Samantha is a recent fashion graduate. She started her own apparel store with an 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 Samantha's ________.
C) opportunity cost
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 ________.
C) opportunity cost
A firm experiences diseconomies of scale when it:
C) produces at an output level beyond the minimum efficient scale.
________ 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.
Core competencies
Which of the following competitively important assets is typically excluded from a firm's balance sheet?
Customer experience
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?
D) $180
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?
D) $450
The payable turnover for Apple and BlackBerry (as of fiscal year 2012) was 7.4 and 24.8 respectively. From this data we can conclude that:
D) Apple has been more efficient than Blackberry in paying creditors and generating interest-free loans from suppliers.
35) Which of the following statements accurately brings out the difference between 35) economies of scale and economies of scope?
D) 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.
18) The receivables turnover of GD Products Inc. is 13.6 and that of its competitor, AP Goods Inc., is 6.0. What does this financial data primarily imply?
D) GD Products collects accounts receivables faster than what AP Goods does.
38) 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?
D) Groupon's competency was not hard to imitate.
Which of the following is an advantage of the balanced scorecard?
D) It allows managers to translate a firm's vision into measureable operational goals.
GlamorRace is a cosmetic brand that pursues a cost-leader strategy. Which of the following statements is true of the cosmetic brand?
D) It appeals to the price-conscious buyers.
Which of the following is NOT an advantage of the balanced scorecard approach to assess firm performance?
D) It is a tool which can be effectively used by managers for both strategic implementation and strategic formulation.
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?
D) It is likely that BC Inc. is better enabled than GN Corp. to gain and sustain a competitive advantage.
44) How does causal ambiguity act as an isolating mechanism for organizations?
D) It makes it difficult for the competitors to understand why a company has been so successful.
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?
D) Path dependence
Which of the following best expresses fixed asset turnover?
D) Revenue/Fixed assets
) Sarah has recently started a restaurant in a commercial area where there are many other established restaurants and popular fast food chains. Sarah 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. Sarah 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 Sarah's business?
D) The land owned by Sarah, which reduces cost of operations
23) In the context of the resource-based model of competitive advantage, which of the following scenarios best exemplifies resource immobility?
D) True 3 Inc. has been able to outperform its competitors because the uniqueness of its resources is difficult to replicate.
Which of the following statements accurately brings out the difference between economies of scale and learning effects?
D) While there are no diseconomies to learning, there are diseconomies to scale.
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) ________.
D) automobile company that sells high-end, premium cars
A differentiator is least likely to be threatened by increases in input prices due to powerful suppliers when the:
D) differentiator is able to create a significant difference between perceived value and current market prices.
A company that uses a differentiation strategy can achieve a competitive advantage as long as its:
D) economic value created is greater than that of its competitors.
In order to achieve a competitive advantage, a firm should be able to:
D) increase the difference between the value created and the cost to produce it.
Diseconomies of scale refer to:
D) increases in cost as output increases.
A firm's business strategy will lead to a competitive advantage if it allows the firm to:reduce the value gap. B) position itself below the productivity frontier. C) execute the same activities performed by the rivals in a similar manner. D) perform different activities than its rivals.
D) perform different activities than its rivals.
) 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.
D) rare
17) Connect Plus Cellular is a leading mobile network operator. Since most of the resources used by Connect Plus Cellular is 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 Connect Plus Cellular. This unique asset that has helped the company gain a competitive advantage will be considered as a(n) ________ resource in the VRIO framework.
D) rare
Economies of scale do NOT allow firms to:
D) spread their variable costs over a larger output
Return on risk capital primarily includes:
D) stock price appreciation plus dividends received over a specific period.
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?
Diseconomies of scale
) 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.?
Direct imitation
is best described as decreases in cost per unit as output increases.
Economies of scale
Which of the following will hamper a differentiator's ability to achieve a competitive advantage?
Lower value gap
Rosa 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 Rosa Apparel's strategic position?
Low-cost input factors
________ 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.
Minimum efficient scale
Which of the following equations best expresses return on revenue?
Net profits/Revenue
Which of the following sources of differential appeal is least effective in helping a firm sustain its advantage?
Observable product features
________ indicates how fast a firm is collecting the credit amount extended by a firm to its customers.
Receivables turnover
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 where One Electro Inc. lacks. In this scenario, which of the following critical assumptions of the resource-based view of a firm has been illustrated?
Resource heterogeneity
Maroon Inc. is a leading international apparel company. Competitors across the globe have failed to imitate Maroon Inc.'s production models, supply chain systems, knowledge systems, and culture. These attributes have remained unique to Maroon Inc. for a long time. Which of the following assumptions of the resource-based model of competitive advantage does this scenario best illustrate?
Resource immobility
Which of the following factors contributes to the success of the cost-leadership strategy of Ryanair airlines?
The rock-bottom air fares
Which of the following is an external performance metric?
Total return to shareholders
) TrueDisk Inc. manufactures external hard disks for $32 per unit, and the maximum price customers are willing to pay is $47 per unit. SW Storage Inc. is a competitor of TrueDisk 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?
TrueDisk creates a greater economic value than SW Storage.
Which of the following situations will have greater effects from economies of scale than from learning effects?
When mass manufacturing pens
________ is best described as a measure of how effectively capital is being used by a firm to generate revenue.
Working capital turnover
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 check-ups 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:
availability of complements
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:
availability of complements.
In an economic context, strategy for producers is primarily about:
capturing the economic value created as much as possible.
A firm experiences ________ when there are increases in cost per unit as output increases.
diseconomies of scale
With regard to the VRIO framework, Crocs Shoes was unable to sustain its competitive advantage primarily because its products were:
easy to imitate.
43) By selling a laptop at $1000 for which consumers are willing to pay up to $1200, a consumer electronics firm makes a profit of $400 per unit. In this scenario, the amount $600, that is ($1200 - $1000) + $400, is the ________.
economic value created
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' strategic position is ________.
economies of scale
A cost-leader is protected from the threat of new entrants primarily due to its:
economies of scale.
BuyMart 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 BuyMart's low prices. Thus, BuyMart has a competitive advantage due to its:
economies of scale.
6) Intangible assets add great value to a firm primarily because the firm's:
knowledge and culture take time to develop and are generally difficult to imitate.
Competitive advantage goes to the firm that achieves the:
largest economic value created.
34) Both BioThink Inc. and GD Pharma Inc. have discovered similar vaccines to prevent 34) 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:
low-cost input factors
) 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.
resource immobility
) When a firm makes choices between a cost or value position to achieve competitive advantage, it is primarily involved in ________.
strategic trade-offs
) If a resource is rare or unique to a particular firm, then:
the firm will be able to maintain a competitive advantage for a long period.
A firm's resource is most likely to be an internal strength and a core competency when the resource is:
valuable and costly to imitate.
