PLCY 399 Final Exam

While creating its AFI strategy framework, the Kowalski Candy Company decided what markets the firm should compete in. By doing this, what type of strategy did the company devise?

b. Corporate Strategy

In the United States, the time period for the right to exclude others from the use of a patented technology is _____ from the filing date of a patent application.

A. 20 years

Why must managers use a mechanistic structure to implement a cost-leadership strategy?

A. A mechanistic structure offers a centralized structure with well-defined lines of authority.

Which of the following summarizes the difference between a firm's vision and mission?

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

Which of the following is true of acquisitions?

A. Acquisitions can be friendly or hostile.

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.

A firm always has a competitive disadvantage when its return on invested capital is

A. Below the Industry Average

Which of the following is true of business ethics?

A. Certain notions such as fairness, honesty, and reciprocity are universal norms.

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.

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.

A firm that achieves superior performansce relative to other firms in the same industry or the industry average has a

A. Competitive Advantage

_____ are best described as equity investments by large established firms making in entrepreneurial ventures to gain access to new, and potentially disruptive, technologies.

A. Corporate venture capital investments

_____ 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

_____ is best described as changes in an industry value chain that involve moving ownership of activities closer to the end (customer) point of the value chain.

A. Forward vertical integration

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.

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.

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.

Which of the following is true of a disruptive innovation?

A. It targets existing markets.

Which of the following best exemplifies the use of input controls?

A. McDonald's use of standard operating procedures

_____ are best described as industry-specific factors that separate one strategic group from another.

A. Mobility barriers

_____ indicates how much a firm benefits from interest-free loans extended by its suppliers and creditors.

A. Payables turnover

_____ is best described as a strategy process in which organizational structure and systems allow bottom-up strategic initiatives to emerge and be evaluated and coordinated by top management.

A. Planned emergence

Which of the following scenarios would be characteristic of an entrepreneur?

A. Rachel implemented a new and more efficient way to produce pottery.

While industry forces have been favorable for a long time in the U.S. automotive industry, recent dynamics have lowered the profit potential of competing in this industry and thus reduced its attractiveness. The continued success of Tesla Motors in the industry will depend on other firm and industry factors. Which of the following represents one such factor that directly affects Tesla Motors?

A. Since suppliers of its key sources are few, the bargaining power of suppliers is high.

_____ is best described as moving one or more internal value chain activities outside the firm's boundaries to other firms in the industry value chain.

A. Strategic outsourcing

which of the following stages if strategic management process involves an evaluation of a firm's external and internal environments?

A. Strategy Analysis

A bank, YPC, offers a customer a personal loan. In which of the following circumstances will this decision most likely be considered unethical?

A. The bank knows that the customer will be unable to pay the loan if the interest rate rises.

Which of the following is a feature of the growth stage of the industry life cycle?

A. The consumer demand increases.

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.

Which of the following statements is true of joint ventures?

A. They enable the exchange of both tacit and explicit knowledge.

Which of the following provides an example of what AFI strategy framework is used for?

A. Using AFI, the Gasquet Motor Company was able to implement a strategy that produced high-quality cars more efficiently and thereby reduced costs.

Which of the following is true of the board of directors in a public stock company?

A. Votes at shareholder meetings determine whose representatives are appointed to the board of directors.

Which of the following is an assumption that top-down strategic planning rests on?

A. We can predict the future from the past.

Which of the following scenarios would typically happen in a firm that uses open innovation?

A. a meeting with professors at a university to get ideas for product

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.

To be effective, firms need to

A. back up their visions with strategic commitments that are costly and difficult to reverse.

Which of the following is regarded as the most internal of control mechanisms?

A. business ethics

A(n) _____ leverages new technologies to attack existing markets.

A. disruptive innovation

Which of the following best illustrates site specificity?

A. equipment necessary for mining bauxite and aluminum smelting

A firm that uses a structure that is organized along different business functions such as HR, R&D, Sales, and Marketing and also along different geographical areas such as different countries of the world is most likely using a _____ structure.

A. global matrix

Higher value tends to require

A. higher costs.

Each stage of the vertical value chain typically represents a distinct _____ in which a number of different firms are competing.

A. industry

New United Motor Manufacturing, Inc. (NUMMI), formed between General Motors (GM) and Toyota in 1984 was the first _____ in the U.S. automobile industry.

A. joint venture

Hitoro Inc. developed a superior touch screen technology for tablet computers that enabled multiple users to operate the screen at the same time. The technology was leased to Revox Inc., a consumer electronics company, for five years. Which of the following alternatives to integration does this best illustrate?

A. licensing

Five years ago, Palomino Airline was able to get a strong foothold in the airline industry by hiring a few pilots and crew and renting two airplanes, which flew routes between Denver, Omaha, Pierre, Cheyenne, and Helena. Which of the following summarizes the above factors that enabled Palomino to get started?

A. low entry barriers

Ethics is

A. not synonymous with law.

Competitive rivalry based solely on _____ is destructive to firms as it transfers most of the value created in the industry to the customers.

A. price-cutting

In a generic value chain, a firm's after-sales service will be referred to as its _____.

A. primary activity

In stakeholder impact analysis, identifying the opportunities and threats presented by stakeholders is immediately followed by

A. recognizing the economic, legal, ethical, and philanthropic responsibilities of the firm to its stakeholders.

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

When a firm operates at the minimum efficient scale, the

A. returns to scale are constant.

The process of alliance management begins with

A. selecting the best possible partner.

Due to path dependence

A. strategic decisions have long-term consequences.

A high percentage of R&D/Revenue ratio indicates a(n)

A. strong focus on innovation to improve current products and services.

The key components of organizational design are

A. structure, culture, and control.

What is an invention?

A. the transformation of an idea into a new product or process

Path dependence rests on the notion that

A. time cannot be compressed at will.

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?

B. $10,000

Which of the following is true of W. L. Gore & Associates, which has a lattice organizational form?

B. All employees are empowered to speak to all other employees in the organization.

Food Works Inc. is a multinational fast-food chain that follows a multidomestic strategy. Which of the following statements most likely holds true for the company?

B. Each country unit owned by the company will tend to be highly autonomous.

Which of the following is a key question managers must answer to formulate an appropriate business-level strategy?

B. How will we satisfy our customer needs?

What must a cost-leadership strategy accomplish to be successful?

B. It must reduce the firm's cost below that of its competitors while offering adequate value.

Which of the following best expresses fixed asset turnover?

B. Revenue/Fixed assets

_____ are the legal owners of public companies.

B. Shareholders

In developed economies, the electric car industry is in the introduction stage, and the industry for MP3 players is in the shakeout phase. What does this imply?

B. The industry for electric cars will focus more on product innovation, whereas in the MP3 player industry, the focus will be on process innovation.

W. L. Gore & Associates is organized in such a way that it has no formal job titles, job descriptions, or chains of command. This implies that it has

B. a decentralized structure.

Which of the following is an example of a firm's external stakeholder?

B. customers

What is a value gap?

B. economic value creation

Monica's Cosmetics Inc. has a functional structure that is flexible enough to allow it to leverage its brand name across different products. By doing this, Monica's is reaping ____ from its core competencies.

B. economies of scope

As it takes less and less time to produce the same output, learning curves usually

B. go down.

If a strategic business unit is recognized as a cash cow, it is advisable to

B. invest into the business to hold its current position.

The society and shareholders mandatorily require a firm to perform its _____ responsibilities.

C. Legal

TL & Co. is following a related-linked diversification strategy, and Soar Inc. is following a related-constrained diversification strategy. How do the two firms differ from each other?

C. TL & Co. will share fewer common competencies and resources between its various businesses when compared to Soar Inc.

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.

C. a higher value gap

Economic value creation is best expressed as

C. consumer surplus plus firm profit.

When Japanese carmakers attacked the existing U.S. automobile market by first offering small fuel-efficient cars, and then leveraging their low-cost and high-quality advantages into high-luxury segments, they were engaging in

C. disruptive innovation.

For which of the following types of industries is a multidomestic strategy most common?

C. food industries

In order to achieve a competitive advantage, a firm should be able to

C. increase the difference between the value created and the cost to produce it.

A firm's business strategy will lead to a competitive advantage if it allows the firm to

C. perform different activities than its rivals.

Which of the following is an unintended side effect of a high degree of specialization in an organization?

C. reduced employee satisfaction due to repetition of tasks

Home Savings, Good Deals, Hank's Store, and King Bargains are all departmental stores that compete for advantage against each other through everyday low-pricing and discounts on bulk purchases. All four stores cater to the needs of highly price-sensitive customers. Thus, together Home Savings, Good Deals, Hank's Store, and King Bargains form a

C. strategic group.

Which of the following stakeholders of a company would most likely be responsible for formulating a corporate strategy?

C. the chief executive officer

Which of the following best explains why a board of directors may grant stock options as part of a compensation package?

C. to align incentives between shareholders and management

Which of the following is a customer-oriented vision?

C. to enable people throughout the globe to identify their capabilities

As a part of strategy formulation, corporate strategy concerns questions relating to

C. where to compete.

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?

C. wholesale and bundling

Which of the following is an example of competitive parity?

D. A firm produces wall clocks at the same rate as its competitors

What does it mean for a firm to have an 80 percent learning curve?

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

Which of the following statements is true of strategy in an organization?

D. Organizational structure must follow strategy in order for firms to achieve superior performance.

_____ are best described as the ethical standards and norms that govern the behavior of individuals within a firm.

D. Organizational values

Which of the following statements about W. L. Gore & Associates best supports the fact that it is organized in an informal and decentralized manner?

D. W. L. Gore & Associates refers to its employees as associates rather than employees.

Which of the following is an external performance metric?

D. total return to shareholders

The cost of capital to create a product is a fixed cost because it is

D. unaffected by consumer demand.

How do firms benefit from vertical integration?

Vertical integration allows firms to increase operational efficiencies through improved coordination of adjacent value chain activities.

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.

Which of the conditions prevail when an industry is at the end of its life cycle?

A. The level of process innovation reaches its maximum as firms attempt to lower cost.

Which of the following is most likely an accurate statement?

A. The multinational enterprise PanDigital benefited from advances in communications technology.

Which of the following is a common result of a hostile takeover of a company?

A. The new owner sells the company in pieces.

Which of the following is likely to happen due to horizontal mergers between competitors such as Delta and Northwest airlines?

A. The overall industry profitability will increase.

Which of the following scenarios best exemplifies a leveraged buyout of a telecommunications firm, Telbok Inc.?

A. The owner of another company buys all the outstanding shares of Telbok.

BestDrive Inc. is a large automobile company. The company's petrol cars strategic business unit (SBU) has been recognized as a cash cow, and its hybrid electric cars SBU has been categorized under stars. Which of the following can be inferred from this scenario?

A. The petrol cars SBU operates in a low-growth market, whereas the hybrid electric cars SBU operates in a high-growth market.

While Burger Cult Inc. operates in a monopolistically competitive industry, Citizen Telecom Inc. operates in a monopoly. Keeping this information in mind, which of the following statements is most likely true?

A. The threat of new entrants will be higher for Burger Cult Inc. than Citizen Telecom Inc.

Earlier, the travel industry was controlled by a few large travel companies that booked holidays, air tickets, bus tickets, and hotels for their customers. However, with the emergence of the Internet, smaller travel agencies started mushrooming in the industry and customers started making their own reservations. Which of the following can be inferred from this information?

A. The travel industry changed from a consolidated structure to a fragmented one.

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.

Why is it difficult to imitate the organizational culture of firms like Southwest Airlines and Zappos?

A. Their culture reflects complex relationships with their employees, customers, and suppliers.

The market for 3-D televisions is in the introduction stage of the industry life cycle. What does this imply?

A. There are only a few competitors in the 3-D television market.

Which of the following statements accurately brings out the distinction between the introduction and growth stages of the industry life cycle?

A. There is more strategic variety in the growth stage when compared to the introduction stage.

Which of the following did management at Zappos do to reduce the level of formalization in their organization?

A. They avoided asking their customer service reps in call centers to follow a detailed script.

Which of the following is an advantage of joint ventures?

A. They create strong ties, trust, and commitment between the partners.

Which of the following is true of the codes of conduct of an organization?

A. They detail how the organization expects an employee to behave and to represent the company in business dealings.

Which of the following statements about product-oriented visions is true?

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

How are cumulative learning and experience effects of a company most likely to affect Michael Porter's five forces?

A. Threat of new entrants will be low.

Which of the following is true of the process of organizing for competitive advantage?

A. To maintain competitive advantage, companies need to restructure as they grow and the competitive environment changes.

_____, which is the return on risk capital, includes stock price appreciation plus dividends received over a specific period.

A. Total return to shareholders

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.

Sam is a manager at StyleOne Apparels Inc. and is friends with the company's CEO. This privilege gives Sam the information that StyleOne Apparels is in the midst of talks to take over a leading rival. Sam buys stocks of StyleOne with the expectation that its stocks will appreciate. But the deal falls through and the stocks of StyleOne depreciate in the following months. Are Sam's actions unethical? Why?

A. Yes, because it is unethical to trade stocks based on insider information irrespective of the final outcome.

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

_____ 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.

B. The SWOT analysis

Which of the following companies will be considered as a conglomerate?

B. The Tata Group, active in industries such as tea, steel, IT, power, and automobiles

Which of the following best illustrates a non-equity alliance?

A. a contractual agreement that provides Motor Source Inc. non-exclusive rights to supply component parts to Pristine Autos Inc.

Which of the following is the most accurate description of stakeholder impact analysis?

A. a decision tool with which managers can recognize the needs of different stakeholders

Divina Pharma Inc. and MF Electronics Inc. have together invested and created a new organization, FirstHealth Inc., to focus on developing diagnostic devices. Through this new firm, both companies are attempting to combine their core competencies to innovate and reduce their risks associated with transaction-specific investments. However, the new organization operates independent of Divina Pharma and MF Electronics. Which of the following alternatives to integration does this scenario best illustrate?

A. a joint venture

Evara Cosmetics Inc. is a company that operates in 20 countries around the globe. The company clearly understands that the skin and hair type of customers varies from one country to another. Consequently, its products are customized to suit local needs and preferences of customers, even though the costs incurred while producing these products are exceptionally high. This strategy helps the company behave as a local firm in a foreign market. In this scenario, which of the following strategies does Evara Cosmetics Inc. most likely implement?

A. a multidomestic strategy

Shield Autos Inc. has newly launched a luxury car into the European market. Which of the following would most likely not be a complement to the car?

A. a premium car manufactured and sold by Mova Autos Inc., a rival company

A primary advantage of organizing economic activity within firms is the

A. ability to coordinate highly complex tasks to allow for specialized division of labor.

The U.S. government legitimized claims by thousands of businesses and individuals in the aftermath of the BP oil spill in the Gulf of Mexico, causing the claims to become of great urgency to BP. This best represents the process of

A. addressing stakeholder concerns.

The perfectly competitive industry structure differs from the resource-based model in its view that

A. all firms have access to the same resources.

Competitive industry structure refers to elements and features common to

A. all industries.

The management of Five Square Corp. wants to reduce the separation between ownership (by shareholders) and control of the firm (by professional managers). Which of the following practices would best help the company do this?

A. allowing employees to purchase the stock of the company at a discounted rate

Which of the following reasons led to the launch of Procter & Gamble's "Connect + Develop," a web-based interface that connects the company's internal-innovation capability with the distributed knowledge in the global community?

B. The company was no longer able to generate adequate growth through closed innovation.

After testing its products in foreign markets by pursuing an international strategy, GR Foods Inc. wants to expand by pursuing a multidomestic strategy. How will this most likely affect the company?

B. The company's exposure to exchange rate fluctuations will reduce.

Which of the following best illustrates a strategic business unit (SBU)?

B. The consumer electronics division of a large company that also manufactures automobiles, apparel, and processed food

Which of the following is a benefit of a multinational enterprise (MNE) pursuing a global- standardization strategy?

B. The firm reaps significant economies of scale and location economies.

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

Which of the following is a drawback of using the industry life cycle as a framework to guide strategic choice?

B. The framework does not explain everything about changes in industries.

Which of the following is an implication of high exit barriers in an industry?

B. The industry will face excess capacity.

Which of the following was a key driver in the Occupy movement of 2011?

B. The issue of income disparity

What does the relational view of competitive advantage propose?

B. The locus of competitive advantage is often not found within the individual firm but within a strategic partnership.

Which of the following is a feature of the maturity stage of the industry life cycle?

B. The market reaches its maximum size.

In the United States, which of the following was born out of dissatisfaction with the capitalist system in 2011?

B. The occupy movement

Which of the following is one of the reasons that led to CNN, an innovator, losing its leadership position in the 24-hour cable news industry?

B. The second movers imitated CNN's incremental innovation to continuously improve their offering.

Which of the following statements is not true about the five forces in Porter's competitive analysis model?

B. The stronger the five forces in an industry, the greater the industry's profit potential.

Which of the following is the best definition of a complementary asset?

A. an asset a firm needs to complete the value chain from upstream innovation to downstream commercialization

W. L. Gore & Associates is the inventor of path-breaking new products such as breathable GORE-TEX fabrics, Glide dental floss, and Elixir guitar strings. Which of the following would be most likely to hinder its intention of fostering employee satisfaction, retention, and creativity?

A. an extremely formalized organizational structure

Which of the following is a characteristic of a fragmented industry?

B. There are many small firms.

Which of the following is a result of horizontal integration in terms of Porter's five forces model?

B. There is a reduction of excess capacity in the market.

How will an increase in coordinated economic and political integration between countries affect the world economy?

B. There will be gains in social welfare and living standards across the globe.

Which of the following is an advantage of non-equity alliances?

B. They are flexible and easy to initiate and terminate.

Which of the following statements is true of shareholders in a public stock company?

B. They are granted a charter of incorporation by the state and legally own company stock.

A firm's stakeholder strategy primarily allows the firm to

A. analyze and manage how various external and internal stakeholders interact to jointly create and trade value.

Which of the following is a drawback faced by multinational enterprises (MNEs) pursuing an international strategy?

B. They are highly affected by exchange rate fluctuations.

Which of the following statements accurately describes firm effects?

B. They attribute firm performance to the actions managers take within a chosen industry.

Canon was able to redesign the copying machine so that it didn't need professional service—reliability was built directly into the machine, and the user could replace parts, such as the cartridge. What Xerox had not envisioned was the possibility that the components of the copying machine could be put together in an altogether different way that was more user- friendly. This example describes

A. architectural innovation.

Partner compatibility and partner commitment are necessary conditions for successful alliance formation. Partner compatibility captures

A. aspects of cultural fit between different firms in an alliance.

Why are differentiation and cost-leadership strategies referred to as generic business strategies?

B. They can be used by any organization independent of industry context.

How do strong ethical values benefit a firm?

B. They serve as the guardrails put in place to keep the company on track when pursuing its mission.

Which of the following statements is true of laggards?

B. They tend to enter the market frequently during the decline stage.

Firms that use taper integration also use _____ when they rely on outside-market firms for some of their supplies.

A. backward vertical integration

Why do shareholders of public companies need to appoint a board of directors to represent their interests?

A. because of the separation of ownership and control

Which of the following has been a key driver for firms to expand globally during the Globalization 3.0 stage?

A. benefits from lower labor costs in manufacturing and services

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

Which of the following provides an example of how a firm's valuable resource can be imitated?

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.

In a successful _____ strategy, the trade-offs between differentiation and low cost are reconciled.

A. blue ocean

_____ is best described as a rational process in which executives at a company's headquarters take primary responsibility to program future success of the company they lead.

B. Top-down strategic planning

Marc Works Inc., a reputed brand for fine writing instruments, is implementing an international strategy in its firms. Torque Inc., a laptop brand, is pursuing a global-standardization strategy in its firms. Which of the following statements most likely holds true in this scenario?

B. Torque Inc. focuses more on cost-reductions when compared to Marc Works Inc.

How did Uber conflict with Carnegie Mellon University's National Robotics Engineering Center (NREC)?

B. Uber poached entire NREC research teams with signing bonuses, twice the salaries, and stock options, thereby threatening the future of NREC.

Leila is a graduate student pursuing a course in business. Presented with the case of Uber's unethical behavior, Leila wonders if Uber's board of directors should ask the CEO of Uber, Travis Kalanick, to step down. Having a strong belief in Michael Porter's idea of value creation, Leila is most likely to conclude that

B. Uber's board of directors should ask Kalanick to step down because it has a greater obligation toward society.

Which of the following statements accurately brings out the difference between technology enthusiasts and early adopters?

B. Unlike technology enthusiasts, early adopters' demand is fueled more by intuition and vision rather than technology concerns.

_____ denotes the dollar amount a consumer would attach to a good or service.

B. Value

W. L. Gore has four product divisions: electronic products, industrial products, medical products, and fabrics division. It also has manufacturing facilities in the U.S., China, Germany, Japan, and Scotland, and business activities in 30 countries across the globe. Based on this information, which of the following statements is most accurate?

B. W. L. Gore is using a multidivisional structure.

In the early 1990s, Gatorade dominated the market for sports drinks, a segment in which it had been the original innovator. For decades, Coca-Cola had been a leader in marketing, bottling, and distributing soft drinks. However these drinks did not include a sports drink. Soon after Gatorade appeared, Coca-Cola developed and marketed its own sports drink, Powerade. In this example, Coca-Cola

A. built new core competencies to protect and extend its current market position.

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

The managers at AHL Chemicals Inc. decided that their firm needed to diversify because of falling sales and lower performance in one sector. How does diversifying compensate for the lackluster performance in this sector?

A. by having higher performance in another sector

The Chief Executive Officer (CEO) of Yahoo, Marissa Mayer, established a mission by building on her vision. Considering this, how did Mayer implement the mission of Yahoo?

A. by making the user experience of the mobile Internet easy and fun

How can a firm pursuing a diversification strategy enhance its overall corporate performance by leveraging financial economies?

A. by using internal capital markets as a source of value creation

In an industry, the threat of entry is high when

A. capital requirements are low.

A successfully implemented blue ocean strategy allows a firm to

A. charge a higher price than the cost-leader in the industry.

Samsung and Google cooperate as complementors to compete against Apple's strong position in the mobile device industry, while at the same time Samsung and Google are increasingly becoming competitive with one another. This scenario best illustrates the process of

A. co-opetition.

If SA Pharmaceuticals obtains an 18 percent return on invested capital, which of the following will help determine if it has a competitive advantage over other pharmaceutical companies?

A. comparing the return to the return on invested capital obtained by other firms in the industry

According to the agency theory,

A. conflicts that arise in corporations should be addressed in the legal realm.

A _____ is best defined as a company that combines two or more strategic business units under one overarching corporation and follows an unrelated diversification strategy.

A. conglomerate

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.

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.

Bauer Inc. is a company that manufactures plastics, fertilizers, tractors, and headphones under a single brand. The top management at Bauer has decided to enter the medical equipment industry based on its assessment of the profit potential in that industry. Which of the following strategies does this best illustrate?

A. corporate strategy

The CEO of True West Products Inc. (TWP) is a company that sells a wide range of products. It has decided to enter the markets of emerging nations like China and Brazil. This means that the cars, consumer electronics, and services such as hotels included under the TWP banner would be made available in these nations. Which of the following strategies does this scenario best illustrate?

A. corporate strategy

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

Tangles Costume Jewelry offers slightly lowerquality merchandise than competitors at a much lower price. What strategy is Tangles using?

A. cost-leadership

Michael Porter recommends that managers use the shared value creation framework to focus on

A. creating new regional clusters.

The _____ states that geographic location alone should not lead to firm-level competitive advantage because firms are now, more than ever, able to source inputs globally.

A. death-of- distance hypothesis

The first step in the strategic management process is to

A. define a firm's vision, mission, and values.

Which of the following functions do the general managers in strategic business units primarily perform?

A. design generic business strategies based on guidelines received from corporate headquarters

Which of the following is a feature of a monopolistically competitive industry?

A. differentiated products

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.

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

A firm experiences _____ when there are increases in cost per unit as output increases.

A. diseconomies of scale

Win Goods Inc. is a large multinational conglomerate. As a single business unit, the company's stock price is estimated to be $200. However, by adding the actual market stock prices of each of its individual business units, the stock price of the company as one unit would be $300. What is Win Goods experiencing in this scenario?

A. diversification discount

The final step in industry analysis is to

A. draw a strategic-group map.

The relationship between strategy and structure that directly impacts a firm's performance is

A. dynamic.

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.

Today, many companies use PeopleSoft and EDS to avoid maintaining a human resource management system. By doing this, these firms are

A. engaging in strategic outsourcing.

In the aircraft manufacturing industry, at least for large commercial jets, Boeing and Airbus are the only competitors. There is not a significant threat of entry because

A. entering the aircraft manufacturing industry requires huge capital investments.

As a research scholar, Ricardo had built a helicam as part of his project. The helicam could capture aerial images. Realizing the potential use of this product in movie production and military and rescue operations, he started a new venture where he could customize these helicams to fit the specific needs of the buyers and sell them. Ricardo can be best described as a(n)

A. entrepreneur.

Which alliance type is the Renault-Nissan alliance, where Nissan owns 15 percent of Renault, and Renault owns 44.4 percent in Nissan?

A. equity alliance

In the AFI strategy framework, strategy analysis primarily involves

A. evaluating the effects of internal resources and core competencies on a firm's potential to gain and sustain a competitive advantage.

A strategic group will typically include

A. firms within the same industry.

As the inventor of hypertension medication, OneSure Pharmaceuticals (OSP) Inc. was able to reap the benefits of economies of scale due to a large consumer demand for the drug. Even when competitors later developed similar drugs after the expiry of OSP's patents, regular users did not want to switch because they were concerned about possible side effects. Which of the following benefits does this scenario best illustrate?

A. first-mover advantages

A firm will fail to create a sustained competitive advantage when the

A. fit between its internal strengths and the external environment is static.

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.

For which of the following products is an international strategy most suitable?

A. for luxury goods that can be shipped across the globe

McDonald's uses detailed standard operating procedures throughout the world to ensure product quality. This implies that McDonald's has a high degree of

A. formalization.

Beans Inc. operates in a perfectly competitive agricultural industry. Classica Apparel Inc., in contrast, operates in a monopolistically competitive industry. Keeping this information in mind, which of the following statements is true?

B. While Classica Apparel Inc. will have the power to set the prices for its products, Beans Inc. will have little or no ability to do so.

A positive relationship between vision statements and firm performance is more likely to exist when

C. organizational structures are aligned with the firm's vision statement.

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?

C. pay-as- you-go

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

The production department at Coral Cements that is a subsidiary of the large conglomerate Five East Corp. has decided to adopt the FIFO (first in, first out) method of inventory to dispatch its cement bags. Which of the following strategies does this scenario best illustrate?

A. functional strategy

Stakeholder impact analysis primarily helps a firm

A. gain a competitive advantage while acting as a good corporate citizen.

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.

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.

C. peer-to- peer

When companies that manufacture shipping containers want to buy iron ore, the purchase decision is solely based on price. This is because there are a large number of sellers in the iron ore industry, and iron ore is a highly undifferentiated commodity. Which of the following industry competitive structures does the iron ore industry best illustrate?

C. perfect competition

Toyota is selling its hybrid Prius vehicle, built on global platforms, successfully in 80 countries. This information best supports the assumptions made under the

A. globalization hypothesis.

The best example of a firm's external stakeholder is a(n)

A. government agency that regulates the prices of products manufactured by the firm.

Lucar Steels Inc. has decided to enter into a foreign market by setting up its own production facilities and distribution channels from scratch. This will allow it to have strong control over all of its business activities. What is the foreign entry mode most likely opted by Lucar Steels

A. greenfield operation

Although TechnoWare Electronics Inc. still sells its VCR players, a product in its decline stage, the investments made by the company on improving or marketing the product are very low. The company has allocated the least amount of human and financial capital to this department. Which of the following strategies has TechnoWare Electronics adopted in this scenario?

A. harvest strategy

The global-standardization strategy arises out of the combination of

A. high pressure for cost reductions and low pressure for local responsiveness.

Emirates, Etihad Airlines, and Qatar Airways are a threat to U.S. legacy carriers because they offer

A. higher quality for lower costs for international routes.

A corporation's star SBUs will

A. hold a high market share in a fast-growing market.

To maintain its core competency of providing a superior customer experience in the face of explosive growth, Zappos split the organization into 10 standalone units. Which of the following does this scenario best illustrate?

A. how an organization accommodates strategy implementation through a flexible organizational structure

An effective strategist _____ the formulated strategy through structure, culture, and controls.

A. implements

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

A factor favoring the success of disruptive innovation is that

A. incumbent firms are slow to change.

With the emergence of smartphones, users no longer have to carry a separate music player, a video game, a laptop, or a magazine to keep themselves entertained when traveling. A smartphone is loaded with a variety of applications to satisfy all the customer needs that different industries or products individually satisfied earlier. As a result, the smartphone industry has been posing a threat to a lot of other unrelated industries. What is this phenomenon best known as?

A. industry convergence

Chao is in an interview for a sales job that requires no experience. He is trying to portray himself as a highly enthusiastic, energetic person with high-level communication and interpersonal skills. The interviewer is convinced that Chao should be hired as a salesperson in the company. However, in his resume, Chao had not mentioned his previous work experience as he was fired from that job because he used illegal drugs. Which of the following does this scenario best illustrate?

A. information asymmetry

Adverse selection in a public stock company occurs when

A. information asymmetry increases the likelihood of selecting inferior alternatives.

Jennifer received a tip from a close friend who is an executive manager of a publicly traded company called MegaRed Inc. The manager received some inside information about how to trade MegaRed stock to get a huge profit. He shared this information with his Jennifer. This scenario is an example of

A. information asymmetry.

The root cause of the principal-agent problem between senior executives and lower-level employees can be explained by the

A. informational advantage of the lower-level employees.

Caring Ketchup Inc. makes organic ketchup. To promote its products, this firm decided to make bottles in the shape of tomatoes. To accomplish this, Caring Ketchup worked with its bottle manufacture to create a set of unique molds for its bottles. Which of the following specialized assets does this example demonstrate?

C. physical-asset specificity

After carefully assessing the market potential for hybrid motorcycles, it was decided at the corporate headquarters of HyCycles Inc. that the company would be launching a hybrid version of all its motorcycle models within the next two years. This would mean that each strategic business unit under the company would be involving in its own research and development efforts. Which of the following strategies in the planned emergence model does this best illustrate?

A. intended strategy

Output controls can sometimes discourage collaboration among different strategic business units. However, more and more work requires creativity and innovation, especially in highly- developed economies. One way firms are grappling with this issue is by

A. introducing results-only- work-environments to tap intrinsic motivations.

Which of the following lists the stages of the industry life cycle in the correct order?

A. introduction, growth, shakeout, maturity, and decline

When a firm is successful at pursuing a blue ocean strategy,

A. investments in differentiation are complements.

United Borova Laboratories Inc. has a national competitive advantage in the pharmaceutical industry. This means that the country

A. is a world leader in the pharmaceutical industry.

A firm achieves differentiation parity ideally when

A. it creates the same customer value as its competitors.

Organizational culture can be the basis of a firm's competitive advantage if

A. it is valuable, rare, and difficult to imitate.

Wave Motors Inc., a Kempa-based automobile company, has entered into a partnership with Sphere Autos Inc., headquartered in United Cadvia. The parent companies, together, have established a stand-alone firm called Genuine Autos Inc. This arrangement best exemplifies a

A. joint venture.

Global Frontier Inc. wants to expand into the international market. It does not want to spend a very large amount of money for this process. However, Global Frontier wants to maintain some control in the foreign market. Which of the following would be the best entry mode for this firm?

A. joint ventures

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

When a firm combines experience based learning and process innovation, the firm

A. jumps to a steeper learning curve.

Which of the following will most likely increase geographic distance between two countries?

A. lack of adequate transportation between the two countries

Which of the following is a common drawback of a non-equity alliance?

A. lack of trust between partners

A new product often has a high price when it is launched because of a

A. large investment in designing a product while producing small quantities.

Competitive advantage goes to the firm that achieves the

A. largest economic value created.

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

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

A mortgage-loan officer persuades unsuspecting consumers to sign up for exotic mortgages, such as "option ARMs." These mortgages offer borrowers the choice to pay less than the required interest, which is then added to the principal while the interest rate can adjust upward. Because of this setup, many borrowers are unable to repay the mortgage once the interest rates go up. Which of the following phrases best describes this scenario?

A. legal but not ethical

The minimum wage in the country of New Morland is $8 an hour. Odion, a restaurant in New Morland's capital city, pays its servers $8 per hour. However, the management of the restaurant feels that this amount is excessive for workers whose only job is to clear tables. By continuing to adhere to the rules set by the government of New Morland, which of the following responsibilities is Odion satisfying?

A. legal responsibilities

Decisions relating to the range of products and services a firm will offer determine the firm's

A. level of diversification.

Unilever's new-concept center is situated in downtown Shanghai, China, attracting hundreds of eager volunteers to test the firm's latest product innovations on-site while Unilever researchers monitor consumer reactions. In this example, Unilever is trying to reap the benefits of

A. location economies.

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.

In knowledge-intensive industries, the marginal costs after initial invention are

A. low.

According to the Level-5 leadership pyramid, a manager in Level 1 typically

A. makes productive contributions through motivation, talent, knowledge, and skills.

In Eli Lilly's Office of Alliance Management, the alliance champion is primarily responsible for

A. making sure that an alliance fits within the firm's existing alliance portfolio and corporate- level strategy.

The past black swan events in the United States demonstrate that

A. managerial actions can affect the economic well-being of large numbers of people around the globe.

McDonald's uses mutton instead of beef in India and offers teriyaki burgers in Japan. Which of the following strategies is the fast-food chain pursuing?

A. multidomestic strategy

Swiss-based Nestlé, the largest food company in the world, is well-known for customizing its product offerings to suit local preferences, tastes, and requirements. By doing this, Nestlé is pursuing a(n)

A. multidomestic strategy.

Unrealized strategy is when parts of a firm's intended strategy is

A. nonfunctional due to unexpected events.

Rhino Pictures Inc. is a large production company that controls a major portion of the movie industry's market share along with two other firms. Despite its competitiveness with the two other firms, it is influenced by their actions and often has to consider their strategic actions before acting on its own. In this scenario, Rhino Pictures Inc. is most likely functioning in a(n) _____ industry.

A. oligopolistic

Which type of industry structure is often analyzed using game theory?

A. oligopolistic

If a firm pursues only a differentiation strategy, it is most likely a(n) _____ organization.

A. organic

According to the Level-5 leadership pyramid, a manager at Level 3 has acquired the ability to

A. organize resources effectively to accomplish predetermined goals.

Adidas acquired Reebok primarily to

A. overcome its competitive disadvantage against Nike.

A _____ is best described as a form of intellectual property that gives the inventor exclusive rights to benefit from commercializing a technology for a specified time period in exchange for public disclosure of the underlying idea.

A. patent

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.

The main reason behind Google's decision to acquire the Israeli start-up company Waze for $1 billion was to

A. preempt its competitors from buying Waze.

During periods of high industry growth

A. price competition among firms frequently decreases.

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

The ratio Cost of goods sold/Revenue indicates how efficiently a company can

A. produce a good.

The strategic objective of a first mover during the introduction stage of the industry life cycle is to

A. pursue a harvest strategy.

Which of the following would be considered a weak stakeholder strategy?

A. putting shareholder interests above the interests of other stakeholders

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

When executives of a firm consider business opportunities only where they can leverage their existing competencies and resources, it can be concluded that the firm is using

A. related-constrained diversification.

Disney became the world's leading media company to a large extent by pursuing a corporate strategy of

A. related-linked diversification.

GreenValue Inc. started a chain of organic supermarkets that had initial success. The managers achieved a mastery of the firm's current environment, thereby filling a need in the market. However, GreenValue defined and measured it success by financial metrics, with a focus on short-term performance. As a result, the firm put in place metrics and systems to accommodate and manage increasing firm size due to continued success. As a result of this tightly coupled system, GreenValue developed a

A. resistance to change.

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

From an investors' or shareholders' perspective, the measure of competitive advantage that matters most is the

A. return on risk capital.

The executives at Red Couture Inc. are developing strategic plans to address plausible future situations like rise in the prices of cotton and synthetic fabrics by 20 percent, appreciation in the value of the dollar, increase in the cost of labor by 30 percent, and increase in demand for the company's products. By doing so, the company will be well prepared with its planned responses if any of these situations occurs in the future. Thus, Red Couture is employing _____ as the approach to the development of strategy.

A. scenario planning

Dynamic capabilities are especially relevant for surviving and competing in markets that

A. shift quickly.

In terms of the build-borrow- or-buy framework, a firm's internal resources are considered to be relevant when they are

A. similar to those that need to be developed and superior to those of competitors in the targeted area.

While working a night job at a call center, Carlos creates an app called DineSmart, which can be used to place orders at restaurants, rate the restaurants, and make reservations. Because he receives good responses for his app, he quits his current job to focus his efforts on DineSmart. He creates a start-up called TYOP and hires three people to help him improve DineSmart and maintain the servers that run it. In this scenario, TYOP most likely has a _____ structure.

A. simple

Employees learn about an organization's culture through the process of

A. socialization.

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.

RoboToys, Inc. is involved in the production of robotic toys. This firm produces the raw materials, including metals and oils for plastic; creates the integrated circuits, displays, and batteries; and assembles the toys. Which of the following stages of the industry value chain is RoboToys involved in?

A. stages 1, 2, and 3

A compensatory governance mechanism that allows executives to buy a company's stock at a predetermined price sometime in the future is called a(n)

A. stock option.

Return on risk capital primarily includes

A. stock price appreciation plus dividends received over a specific period.

A _____ is best described as any activity a firm pursues to explore and develop new products and processes, new markets, or new ventures.

A. strategic initiative

As the CEO of a conglomerate, Juana Mark exhibited her strong commitment toward the company's core value that customers' well-being is more important than profit when she decided to liquidate the company's tobacco subsidiary. The tobacco brand sold by her company was a major revenue earner in lesser-developed nations. However, Juana believed that her company had to be responsible toward society. In this scenario, Juana has demonstrated

A. strategic leadership.

A firm's _____ relates to its ability to create value for customers (V) while containing the cost to do so (C).

A. strategic position

Strategic thinking is different from strategic planning in that

A. strategic thinking includes all types of information sources while strategic planning does not.

The management team at Clear Solutions, Inc. decided to build a branch office in Memphis, Tennessee. Which of the following terms correctly describes this action?

A. strategy formulation

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.

Which of the following business models has been traditionally used by the magazine and newspaper industry?

A. subscription-based

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

Which of the following is more of a value driver than a cost driver?

A. superior customer service

Which of the following groups is considered to be the primary stakeholder for public-stock companies?

A. suppliers of capital

The relative bargaining power of suppliers is high when

A. suppliers provide products that are differentiated.

In a large company, who is most responsible for devising the corporate strategy?

A. the CEO of the company

The Hershey Company, the largest U.S. chocolate manufacturer, decided to enter the Chinese market in 2013 because

A. the U.S. population was growing slowly and becoming more health conscious.

A company wants to determine how industry effects have affected its profitability. Which of the following elements should the company focus on?

A. the barriers to entry and exit within the industry

Which of the following external forces is a part of a firm's task environment?

A. the composition of the strategic group to which the firm belongs

What does blue ocean strategy attempt to reconcile?

A. the conflicting requirements of two generic strategies

Which of the following reasons motivated Facebook to acquire Instagram, a photo and video-sharing social media site, for $1 billion in 2012?

A. the desire to gain a new capability

Which of the following customer segments as described in the chasm framework make up the mass market?

A. the early and late majority together

Value drivers contribute to a firm's competitive advantage only if

A. the increase in value creation exceeds the increase in costs.

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.

Allgreva Inc. is located in Movaria near the nation of Clozame. Allgreva is considering expanding into Clozame. Both countries have similar consumer incomes and knowledge bases and share a common language. Also, the transportation networks between the countries are strong. Even so, the two nations have a long-standing dispute concerning the control of an area of land along their common border. Currently, Movaria rules this land. Which of the following would most likely prevent Allgreva from expanding into Clozame?

C. political distance

Which of the following could most likely have prevented the accounting scandals of the early 2000s and the global financial crisis?

C. practicing effective corporate governance

The managers at Movo Automobile Inc. want to diversify their business by acquiring a consumer electronics company. This acquisition would mean increased job security, higher compensation, and greater decision-making authority for the managers. The managers correlate this acquisition to greater power for them rather than to the appreciation in shareholder value. In this scenario, this acquisition by Movo Automobile is most likely a result of

C. principal-agent problems.

The difference between the price charged for a product and the cost to manufacture it is referred to as the

C. producer surplus.

A firm experiences diseconomies of scale when it

C. produces at an output level beyond the minimum efficient scale.

Which of the following is an accurate definition of the customer segment laggards?

A. the last consumer segment to come into the market, entering in the declining stage of the industry life cycle

Which of the following real-world events would act as the most likely deterrent against adopting a purely stakeholder strategy approach to business?

A. the nonsustainable debt levels incurred by sovereign governments to fund social programs

Organizational design is

A. the process of creating, implementing, and modifying the structure of an organization.

In 1990, Roche, a Swiss pharmaceutical company, initially invested $2.1 billion to purchase a controlling interest in the biotech startup Genentech. In 2009, after witnessing the success of Genentech's drug discovery and development projects, Roche spent $47 billion to purchase the remaining minority interest in Genentech, making it a wholly owned subsidiary. In terms of strategic alliances, this scenario best indicates

A. the real-options perspective.

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?

C. product features

John Hammergren, the CEO of McKesson, received an annual compensation of $50 million. The compensation was closely tied to the performance of McKesson's stock, which appreciated considerably during his tenure. This situation best exemplifies

A. the strong relationship between executive compensation and company performance.

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

Which of the following factors is the most important determinant of economic distance?

A. the wealth and per capita income of consumers

In a public stock company, senior executives, such as the CEO, face agency problems when

A. they delegate authority of strategic business units to general managers.

Zappos established its unique organizational culture

A. through explicitly stated values that are connected to its reward system.

Which of the following is not a reason why firms enter alliances?

A. to replace competitive advantage with competitive parity

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.

A(n) _____ strategy arises out of the combination of high pressure for local responsiveness and high pressure for cost reductions.

A. transnational

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

During strategy implementation, managers primarily focus on deciding the

A. type of corporate governance that is most effective and ways in which it can put the formulated strategy into practice.

A defining characteristic of the pay-as- you-go business model is that the

A. users pay for only the services they consume.

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

The most important yet least visible element of organizational culture is

A. values.

Which of the following would most likely not indicate that sellers are a strong competitive force in an industry?

A. when the buyers' cost of switching to substitutes is low

When does a merger between companies typically occur?

A. when two firms of comparable size join to form a combined entity

Fantastica Industries, a U.S.-based large conglomerate, competes in the hospitality, education, telecommunications, entertainment, airlines, and chemical industries. It currently operates in about 30 nations, and is planning to expand its portfolio by investing in rapidly developing countries. Which of the following strategies is Fantastica Industries pursuing?

C. product-market diversification strategy

PepsiCo operates in many countries and sells a wide variety of aerated drinks, other beverages, different types of chips, and Quaker Oats goods to achieve continuous growth. From this data, we can conclude that PepsiCo has been involved in

C. product-market diversification.

Which of the following statements accurately brings out the difference between closed innovation and open innovation?

B. While open innovation focuses on building an effective business model to commercialize R&D, closed innovation focuses on being first to market.

While the industry for 3-D televisions is in the introduction stage of the industry life cycle, the CRT (cathode ray tube) television industry is in its decline stage. Which of the following statements will be true in this scenario?

B. While product innovation will be at its maximum for the 3-D television industry, process innovation will be more crucial for the CRT television industry.

While cell phones with holographic keyboards are currently in the introduction stage of the industry life cycle, tablet computers are in the growth stage. In the context of this scenario, which of the following statements is true?

B. While the industry for cell phones with holographic keyboards will focus on product innovation, the tablet industry will focus on process innovation.

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?

B. Yes, because the new packaging made the product more attractive in the eyes of consumers.

Which of the following positions is an example of an inside director for a firm?

B. a chief financial officer

Which of the following types of groups is most susceptible to groupthink?

B. a cohesive group

For which of the following companies will geographic distance be the most relevant factor in deciding whether or not to trade with a target country?

B. a firm that extracts and exports iron ore

Fierce domestic competition in Lobekistan makes a tough environment for any motorcycle company. Success requires top-notch engineering of chassis and engines, as well as keeping costs and fuel consumption in check. As a result, Lobekistan's motorcycles have a competitive advantage in the global market. According to Porter's diamond framework, this scenario shows the influence of competitive intensity in

B. a focal industry.

Which of the following is an accurate description of a Level 1 manager?

B. a highly capable individual who makes productive contributions through motivation, talent, knowledge, and skills

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

C. quality.

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?

C. reduce the total cost of ownership

Which of the following corporate strategies did ExxonMobil pursue by acquiring XTO Energy, a natural gas company?

C. related diversification strategy

The _____ is a strategic management framework that proposes that critical resources and capabilities frequently are embedded in strategic alliances that span firm boundaries.

C. relational view of competitive advantage

The resource-based view of a firm assumes that the

C. resource bundles of firms competing in the same industry are unique to some extent and thus differ from one another.

Due to resource immobility, a critical assumption in the resource-based model of a firm, the

C. resource differences between firms last for a long time.

WJ Group Inc., a large multinational conglomerate, had begun to experience declining revenues over the years. The top management at the headquarters of the company decided that it was important for the company to avoid deviating from its core competencies. Thus, a few of the company's key businesses like energy, telecommunications, and automobiles were centralized, giving the top management more control over them. Also, relatively newer businesses like beverages and food processing were divested. In this scenario, WJ Group is involved in

C. restructuring.

Which of the following is a top-down approach to the development of strategy that involves asking "what if" questions to anticipate plausible futures?

C. scenario planning

Which of the following characteristics of a public stock company deals with principals and agents?

C. separation of legal ownership and management control

EasyOpen Inc. has entered a stage in which the demand for their innovative electric can openers has declined. Now most customers are buying replacement parts or buying their second can opener from the firm. What stage in the industry life cycle does this scenario describe?

C. shakeout stage

In emerging economies, the LCD television industry is in that phase of the industry life cycle in which the previously increasing market demand becomes limited. The competitive intensity within the industry is high, and inefficient firms have begun to exit the industry. This has allowed only a few major companies to come out as cost-leaders and hold the shrinking market. Which of the following stages of the industry life cycle is the LCD television industry currently in?

C. shakeout stage

Creating economic value for shareholders while also creating social value is known as creating

C. shared value.

Georgia Ray is the founder of the departmental stores chain, Ether Inc. She ensures that the products in her stores are ethically and responsibly sourced. Most products are therefore 100 percent organic and manufactured from recycled material. Also, her company purchases handicrafts from nonprofit organizations supporting the aged. Georgia's belief is that her company should be able to support the community at large. Which of the following terms best describes Georgia Ray?

C. social entrepreneur

Economies of scale do not allow firms to

C. spread their variable costs over a larger output.

Which of the following is an example of a firm's internal stakeholders?

C. stockholders

A _____ is best described as a voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services.

C. strategic alliance

Terranova Autos Inc., a large automobile company, made an initial small investment in a start- up company that was developing a solar-powered car. This gave Terranova Autos controlling interests in the start-up company. However, Terranova Autos had no obligations to make continued investments in the experiments of the start-up company. It could invest in small amounts depending on the new product's success at each stage of its development. If the product proved to be successful, Terranova Autos would have the right to buy out the start-up company. This approach to strategic alliance is referred to as

B. a real-options perspective.

Which of the following is the best characterization of sociocultural forces?

B. a society's culture, norms, and values

Vibgyor Inc., a manufacturer of smartphones, has entered into a 15-year partnership with a software company to develop sophisticated operating systems and innovative mobile applications for its cell phones. This would mean that both the companies will have to mutually share their resources, knowledge, and capabilities to develop a superior product. What is the relationship between Vibgyor and the software company best referred to as in this scenario?

B. a strategic alliance

When North Autos Inc. wanted to sell its cars in the country of Balvia, it lacked access to distribution channels and marketing expertise in the country. Thus, North Autos had to enter into a strategic alliance with a local automobile company to get access to the foreign partner's well-established distribution channels. Which of the following reasons for entering into a strategic alliance is best illustrated in this scenario?

B. accessing critical complementary assets

A traditional top-down strategic planning process typically begins with

C. strategic leaders adjusting a company's vision and mission based on environmental analysis.

At Opnic Corp., a cross-functional team is formed to work on a project for a new client. The team consists of Darius and four other members. At most of the team's presentations to senior management, Darius takes the lead and discusses project specifics with the management, while others chip in with additional information. At the completion of the project, Darius is recommended for promotion, while the other team members receive little recognition for their hard work. The reality is that Darius did very little actual work but spent some time compiling the project report based on different documents submitted by the others. This scenario at Opnic Corp. is a typical consequence of

B. adverse selection.

Raj is a recent graduate who states that he has interned at a major accounting firm so that his value as a candidate for employment increases. A start-up recruits Raj based on his stated credentials without verifying them. Two days into the job, Raj's team lead realizes that Raj does not know much of what he claimed to know during the interview. This scenario best exemplifies

B. adverse selection.

A(n) _____ organization always attempts to balance and harness different activities in trade-off situations.

B. ambidextrous

Which of the following best illustrates a process innovation as opposed to product innovation?

B. an automobile company using computer-aided design in its production

Unlike the financial ratios based on accounting data, total return to shareholders is

B. an external performance metric.

Which of the following would be the result of product innovation?

B. an inexpensive, high-quality refrigerator

How does a firm capture its producer surplus for a good or service?

B. as profit per unit sold

In the step-by- step process of industry analysis, identifying the underlying drivers of each force is followed by

B. assessing the overall industry structure.

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)

B. automobile company that sells high-end, premium cars.

The _____ is the centerpiece of corporate governance and is composed of inside and outside members.

B. board of directors

Which of the following is an important internal corporate-governance mechanism?

B. board of directors

When entering a foreign market, it is advisable for a new venture that has a core competency only in R&D to form a strategic alliance with a local partner because

B. building downstream complementary assets can be expensive and time-consuming.

Which quadrant in the core competence-market matrix is the hardest to pursue?

B. building new core competencies to create and compete in markets of the future

The crossing-the- chasm framework states that _____ need to be adjusted for each customer segment.

B. business strategies

Value is determined by the perceived benefits a good or service provides to a(n)

B. buyer.

How can a firm change its industry structure from monopolistically competitive or oligopolistic to a near monopoly?

B. by developing proprietary technology

PrimoDisk Inc. holds the highest market share in the low-growth compact disk industry. With the introduction of flash drives, the market for compact disks has reduced. However, PrimoDisk has been able to generate sufficient revenues for the parent company by selling its products in less developed countries. In the Boston Consulting Group (BCG) growth-share matrix, PrimoDisk will be categorized under

B. cash cows.

In the top-down strategic planning approach, all strategic intelligence and decision-making responsibilities rest primarily on the

B. chief executive officer.

FTZ Inc. is an electronic appliances manufacturer that has many strategic business units (SBUs), among which, television and computers share a close relationship. These SBUs have to fight each other for R&D funding because there is a combined amount set aside for these two units. However, they share technological findings with each other and work together to ensure that their combined output is better that of the other SBUs. Such a relationship between SBUs in a business is referred to as

B. co-opetition.

Executives whose vision and actions enable their organizations to achieve competitive advantage demonstrate

C. strategic leadership.

Lower-level employees focus mainly on _____ when a firm is using top-down or scenario planning as an approach to the strategic management process.

C. strategy implementation

Successful _____ requires managers to design and shape structure, culture, and control mechanisms.

C. strategy implementation

A firm's _____ determines how the work efforts of individuals and teams are orchestrated and how resources are distributed.

C. structure

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?

C. subscription-based

The 3-D television division of a large consumer electronics company has been recognized as a question mark. The company's LCD television division has been categorized under dogs. Which of the following statements will hold well in this scenario?

C. The 3-D television division operates in a high-growth market, whereas the LCD television division operates in a low-growth market.

GE's board has only one inside director, Jeffrey Immelt, GE's CEO, who also acts as chairman of the board. This is known as duality. Which of the following statements represents the best argument for this duality in GE?

C. The CEO possesses invaluable inside information that can help chair the board effectively.

A company uses the planned emergence approach in the development of its strategies. Which of the following is an implication of this?

C. The company's organizational structure and systems will be designed to support bottom-up strategic initiatives.

The "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?

C. The competitor infringed on Gogo's patent of the "diagonal assembly system."

How does a conglomerate benefit from following an unrelated diversification strategy?

C. The conglomerate can overcome institutional weaknesses, such as a lack of capital markets, in emerging economies.

Globe Source Inc. is a consumer electronics company that follows an open innovation model. Which of the following can be concluded about this firm?

C. The firm will buy others' intellectual property whenever it advances its own business model.

Grace Apparel Inc. has decided to procure fabrics required for its garments from external suppliers instead of maintaining its own dyeing and weaving facilities. How will this decision affect the firm?

C. The firm will have more flexibility in purchasing and comparing prices of goods and services.

Which of the following scenarios would threaten a firm that uses a differentiation strategy?

C. The firm's focus shifts to price rather than value-creating features.

Why do firms operating in a monopolistically competitive industry have the power to raise the prices of their products or services?

C. The firms can differentiate their product offerings.

Which of the following is an implication of all firms in an industry pursuing a low-cost position through application of competitive benchmarking?

C. The firms would eventually have no resources to invest in product and process improvements.

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.

Which of the following statements is true about the use of functional structures with various business strategies?

C. The goal of a differentiation strategy is to create a competitive advantage by controlling costs.

Which of the following applies to the Strength-Threats quadrant of the SWOT matrix?

C. The local fast-food chain Easy Hot Dogs used its wholesome image to maintain its competitive advantage against stiff competition.

Black Mouse Inc., a web development firm, is headed by Rob Dennis, the CEO. Each functional department of the company—marketing, finance, and HR—has a president who reports to the CEO directly. Each department has various managers who manage teams. The managers report to the presidents, and the team leads report to the managers. Finally, the employees at the lowest level report to their team leads. It is rare for a lower-level employee to interact with the CEO of the company. In this scenario, Black Mouse Inc. can be said to have a(n)

C. tall hierarchical structure.

Unplanned strategic initiatives taken by the _____ within an organization will be referred to as an emergent strategy.

C. team leads of project teams in the organization

The MBA oath first developed at Harvard and now signed by students at over 300 business schools is modeled after

C. the Hippocratic oath in medicine.

Which of the following is a major issue at the forefront of CEO compensation in recent years?

C. the absolute size of the CEO pay package compared with the pay of the average employee

Which of the following forces tends to be more important in determining a firm's performance?

C. the actions of managers within the firm

In Eli Lilly's Office of Alliance Management, who is responsible for providing alliance training and development?

C. the alliance manager

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?

C. the change in content delivery from ownership via downloads to streaming on demand

In a non-equity alliance, which of the following types of information would firms most likely share?

C. the documented information about the material composition of a product

Due to economic regression in United Filipia, the profitability of the large conglomerate Blue Wing Products Inc. (BWP) was poor. An analysis of the company's business showed that the company could become profitable if it divested a few strategic business units under its banner. From which of the following businesses would BWP find it most easy to exit?

C. the e-commerce retail business where investments on assets are low

Which of the following methods of developing a strategy best illustrates scenario planning?

C. The managers at Lyon Clothing Inc. formulated a strategy to tackle any increase in the prices of cotton in the future.

What helps notions such as fairness, honesty, and reciprocity to be codified into law?

C. The notions are universal norms.

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?

C. the expertise acquired by the employees in the company

Which of the following do the sociocultural forces in a firm's external environment best represent?

C. the family size of the firm's target market

If a resource is rare or unique to a particular firm, then

C. the firm will be able to maintain a competitive advantage for a long period.

Which of the following is an example of a firm's intangible resources?

C. the firm's organizational culture

It is necessary for government authorities such as the Federal Trade Commission (FTC) and/or the European Commission to approve any large horizontal integration activity because

C. the horizontal integration activity has the potential to reduce competitive intensity in an industry.

An intended strategy is best described as

C. the outcome of a rational and structured, top-down strategic plan.

Diversification premium is a situation in which

C. the stock price of related-diversification firms is valued at greater than the sum of their individual business units.

Which of the following best describes a strategic trade-off?

C. the tension between value creation and the pressure to keep cost in check

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?

C. The resources of Trust Machines Inc. are difficult to replicate or imitate.

Which of the following is true of the parent-subsidiary relationship?

C. The transaction costs that arise are frequently due to transfer prices.

What is the rule of thumb behind Porter's five forces model?

C. The weaker the five forces, the greater the industry's profit potential—making the industry more attractive.

Why are controls like budgets and operating procedures that McDonald's implements known as input controls?

C. They are considered before employees make any decisions.

Which of the following is an advantage of equity alliances when compared to non-equity alliances?

C. They produce stronger ties between partners.

Which of the following is the most likely advantage of using foreign acquisitions or greenfield plants as a foreign entry mode?

C. They reduce a firm's exposure to loss of reputation.

Which of the following statements is true of the early majority section of consumers?

C. They weigh the benefits and costs carefully when adopting a new product.

Which of the following products are generally manufactured by multinational enterprises (MNEs) pursuing a global-standardization strategy?

B. commodity products like computer hardware

Which of the following strategies will be most detrimental to firms that are close rivals operating in an oligopolistic industry structure?

B. competing against each other through price-cutting

What part of the AFI strategy framework does the question "How does the firm make money? relate to?

B. competitive advantage, firm performance, and business models

Stop n' Save Inc., a supermarket chain, is implementing a multidomestic strategy. SunLife Inc., a company that manufactures solar panels for commercial and domestic purposes, is pursuing a global-standardization strategy. How will the two companies most likely differ from each other?

C. Unlike SunLife Inc., Stop n' Save Inc. will be able to pursue a differentiation strategy at the business level.

Why is it easier for new entrants to involve in radical innovations when compared to incumbent firms?

C. Unlike incumbent firms, new entrants do not have formal organizational structures and processes.

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?

C. VK Products collects accounts receivables faster than AP Goods does.

Which of the following management tools will help determine whether a firm's resources, capabilities, and competencies are strengths or weaknesses?

C. VRIO framework

_____ is best described as a firm's ownership of its production of needed inputs or of the channels by which it distributes its outputs.

C. Vertical integration

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?

C. Vibrant Phones sells its products at a better price than Oryxo.

SooGood Inc. produces a dip that goes extremely well with Crunchy Potato Chips Inc. SooGood Inc., therefore, is a _____ of Crunchy.

B. complementor

Which of the following is an example of monopolistic competition?

B. computer hardware industry

The value a consumer attaches to a product or service is captured in the

B. consumer's maximum willingness to pay for it.

A resource-based view of a firm provides a model that systematically aids in identifying

B. core competencies.

Within corporate social responsibility, _____ essentially reflects the notion of a business voluntarily giving back to society.

B. corporate citizenship

One of the ways to foster ethical behavior in employees is to

B. create a control system that encourages desired values.

GreenCure Pharma Inc. wanted its research partner, an R&D company, to develop a cancer vaccine. However, the project required huge capital investments, and its research partner was not ready to solely face the risks involved. Thus, to gain its partner's confidence and to prove its involvement, GreenCure Pharma invested $100 million in the project. This investment made by GreenCure Pharma will result in a

B. credible commitment.

True Help is a nonprofit organization that works toward rehabilitating the homeless. The credo of the organization is "help us help you." For an organization like True Help, which of the following statements would make an appropriate mission?

C. We help the homeless gain and sustain financial independence by providing employment opportunities.

Which of the following statements is true with regard to international trade between countries?

C. Wealthy countries engage in relatively more cross-border trade than poorer ones.

In a firm's external environment, _____ primarily capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class.

B. demographic trends

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?

B. differentiation

Horizontal integration through mergers and acquisitions can help firms strengthen their competitive positions by increasing

B. differentiation.

Companies in the same strategic group are _____ to each other.

B. direct competitors

While the domestic airline industry is in the maturity stage of the industry life cycle, the pet clothing industry is in its growth stage. Which of the following can be inferred from the given data?

C. While the domestic airline industry is free from excess capacity, the pet clothing industry will have new entrants.

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?

B. diseconomies of scale

ESB Group is the parent company of many related businesses under its banner. Each share of the parent company is quoted at $220. However, if this had to be assessed by adding the stock prices of each of its strategic business units, the value would only be $200 per share. In this scenario, what has ESB Group created?

B. diversification premium

Companies that pursue related diversification are more likely to improve their performance than companies that pursue unrelated diversification because they create a

B. diversification premium.

A drawback of joint ventures is that they are characterized by

B. double reporting lines.

With regard to the VRIO framework, Crocs Shoes was unable to sustain its competitive advantage primarily because its products were

B. easy to imitate.

Triple-bottom- line is a combination of economic, social, and _____ concerns that can lead to a sustainable strategy.

B. ecological

Real Goods Inc. is a large conglomerate. The company's beverages strategic business unit (SBU) has been recognized as a cash cow, and its tobacco SBU has been categorized as a dog. Which of the following can be inferred from this scenario?

C. While the market share of the company in the beverages industry will be high, the market share in the tobacco industry will be low.

Which of the following statements about a firm's stakeholders is true?

C. Within stakeholder groups there can be significant variation in the power a stakeholder may exert on a firm.

_____ is best described as a measure of how effectively capital is being used by a firm to generate revenue.

C. Working capital turnover

Which of the following scenarios illustrates a firm that has a sustainable competitive advantage?

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

Which of the following forces is most closely related to industry effects within the automobile industry?

C. the types of products and the services offered within the industry

Multinational enterprises (MNEs) like Harley-Davidson, Rolex, and Starbucks are said to be following an international strategy because

C. they offer the same products or services in all their stores throughout the world.

The amount of xylene that can be used in household paint is legally limited to 0.03 percent. Anything beyond this amount is hazardous to health and the environment, and considered a legal offense. Consequently, CW Paints Corp. has vouched to make its products as safe as possible. Therefore, it manufactures xylene-free paints even though this increases its costs and reduces the dividends paid to its shareholders in the long run. Which of the following responsibilities is CW Paints Corp. primarily compromising in this scenario?

B. economic responsibilities toward its shareholders

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

B. economic value created.

Given the industry structure in the automobile business, entering the auto manufacturing industry doesn't seem advisable. Yet Tesla Motors is joining the fray. Rather than attempting to compete head-on in internal combustion engines, Tesla Motors is entering the all-electric car segment, a much less crowded niche in the overall car industry. Which of the following is Tesla most hoping to benefit from in this market niche?

B. economies of scale

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

B. economies of scale.

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?

B. economies of scope

The production head at the canned juice unit of True Candy Inc. would frequently stay back after office hours and experiment with new organic hard candy flavors even though this was part of the new product development team's job. As a result of these experiments, he came up with two new flavors of organic hard candy, raspberry-apricot and strawberry-apple. After rigorous test marketing, which proved that the market would accept the new candy, the product variants were successfully launched. Which of the following strategies does this scenario best illustrate?

B. emergent strategy

To support the rise of emergent strategies, an organization should

B. empower lower-level employees to take up autonomous actions.

After Jeff Bezos read about how the Internet was growing by 2,000 percent a month, he set out to use the Internet as a new distribution channel and founded Amazon, which is now the world's largest online retailer. This is clearly an example of a(n)

B. entrepreneur who commercialized invention into an innovation.

A candy company called SweetThings Inc. forms an agreement with another candy company called Reverie Inc. Through this agreement, SweetThings owns 30 percent of Reverie. However, Reverie does not own any part of SweetThings. This type of agreement is called a(n)

B. equity alliance.

Organizational values are the _____ that govern the behavior of individuals within a firm or organization.

B. ethical standards and norms

Janet is the CEO of Far Sight Inc., which uses a triple-bottom- line approach. As a result, Janet will tend to

B. expect her company to be socially responsible.

StickOn Inc. is an adhesive manufacturer. After a slight dip in production numbers, it forms a team to find a quick solution to this problem, at least for the shorter term. This scenario best exemplifies

B. exploitation.

Which of the following modes of entering a foreign market allows for the lowest level of control?

B. exporting

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

B. external threat.

In Michael Porter's diamond framework, _____ describe a country's endowments in terms of natural, human, and other resources.

B. factor conditions

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.

Industry convergence is a process whereby

B. formerly unrelated industries begin to satisfy the same customer need.

Which of the following types of organizations comparatively requires the lowest levels of investment and control?

B. franchising

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?

B. freemium

Stakeholder strategy is an integrative approach to managing a diverse set of stakeholders effectively in order to

B. gain and sustain competitive advantage.

When a differentiator charges a similar price as its competitors in the same strategic group but offers more perceived value, it

B. gains market share from other firms.

In which of the following stages of the industry life cycle is a standard first established?

B. growth stage

The leading producer of gardening tools, YourGarden Inc, has achieved great success because they produce high-quality tools that are not too expensive. Even so, another company that produces lower-quality tools at the same price has also achieved some success, but not as much as YourGarden. Also, in general, the price of gardening tools has declined because of economies of scale and learning. In addition, YourGarden has added complementary assets, such as gardening instruction. Considering all of these factors, the gardening tool industry is most likely in the

B. growth stage.

Intel's Celeron chip and Atom chip are initiatives to

B. guard the company against disruptive innovation by protecting the low end of the market.

In the decline stage, which of the following strategies involves a reduction of investments in product support?

B. harvest strategy

A functional structure is recommended when a firm

B. has a low level of diversification.

In a strategic alliance, the firm that learns faster

B. has the incentive to reduce its knowledge sharing.

After a firm has identified its key stakeholders in stakeholder impact analysis, the immediate next step is to

B. identify stakeholders' interests and claims.

Diseconomies of scale refer to

B. increases in cost as output increases.

A greater cultural distance between two trading countries

B. increases the liability of foreignness.

SyncTouch Inc. is a manufacturer of cell phones. It has released an improvised version of its smartphone in markets in which the company already operates. Which of the following types of innovations does this scenario best illustrate?

B. incremental innovation

The board of directors of a public stock company consists of

B. individuals who formally represent the firm's shareholders and oversee the work of executives.

When approaching a bank for a loan, the borrower has better knowledge than the lender about his or her own ability to repay the loan without defaulting. What is this situation referred to as?

B. information asymmetry

The risk of employee opportunism on behalf of agents in a public stock company is exacerbated by

B. information asymmetry.

An intrapreneur is described as a person who

B. innovates within existing companies.

According to the five forces model, which of the following is viewed as a major risk to a business pursuing a cost-leadership strategy?

B. innovation that allows competitors to emerge with more economical replacements

Coda Inc. is an apparel manufacturer. The management at Coda prefers moderate control over the operations of the different departments such as R&D, design, marketing, and sales. It allocates a budget to each function at the beginning of each quarter. This is an example of implementing control through

B. input controls.

With reference to the Strategy Highlight 8.2, the Tata Group's corporate strategy is attempting to

B. integrate different strategic positions, pursued by different strategic business units.

The value chain describes the

B. internal activities a firm engages in when transforming inputs into outputs.

When a firm pursues a(n) _____, it sells the same products or services in both domestic and foreign markets.

B. international strategy

General Electric (GE) disrupted itself in the healthcare industry by

B. introducing inexpensive and smaller diagnostic devices in developing countries.

By introducing Vscan, a small, wireless ultrasound device, GE Healthcare (General Electric) was primarily trying to

B. invade the healthcare market from the bottom up.

McDonald's operates Hamburger University that trains students to ensure consistent food quality across its outlets throughout the world. This indicates that McDonalds's

B. is mechanistic in nature.

A company's strategic business unit

B. is responsible for its own profit and loss.

A firm is said to be pursuing a polycentric innovation strategy when

B. it draws from multiple, equally important research facilities located throughout the world.

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

C. time compression diseconomies.

In the New United Motor Manufacturing, Inc. (NUMMI) joint venture, why did Toyota enter into a strategic alliance with General Motors (GM)?

C. to learn how to implement its lean manufacturing program with an American workforce

Silca Electronics Inc. is a consumer-electronics company based in the country of Pelo. It has approximately 300 stores across the country and is already active in three foreign countries. It attempts to establish itself successfully in the country of Zevar, and uses its low-cost strategy to do so. However, due to the additional costs associated with training, coordinating across geographic distances, and other costs associated with doing business in an unfamiliar cultural and economic environment, Silca Electronics Inc. incurs huge financial losses in Zevar. In this scenario, Silca Electronics Inc.'s failure to establish itself successfully in Zevar occurs most likely because

B. it underestimates its liability of foreignness when entering the Zevar market.

If a resource is common

B. it will result in perfect competition.

The day-to- day operations of a publicly traded company are conducted by

B. its managers and lower-level employees.

When entering new geographic markets, some governments, such as those of Saudi Arabia and China, require that foreign firms have a local

B. joint venture partner.

Intangible assets add great value to a firm primarily because the firm's

B. knowledge and culture take time to develop and are generally difficult to imitate.

Mario founded Tapoz Communications Inc. in 1993. Ten years later, the company went public. Despite Mario's death in 2005, the company reported a 75 percent increase in revenue in 2006. Which of the following characteristics of a publicly traded company does this scenario best exemplify?

B. legal personality

Quick Market Inc. is a food supply company that wants to sell its products directly to consumers through mail order instead of going through supermarkets and other stores. However, supermarket chains want to make this transaction either illegal or more difficult for Quick Market. To accomplish this, they are using _______ to influence the political process.

B. lobbying forces

ChocoNuts Inc. produces an inexpensive candy bar that is well tailored for the tastes of U.S. consumers. However, it has failed to satisfy the consumer preferences of its host country, Japan. Which of the following categories has ChocoNuts performed poorly in?

B. local-responsiveness

Ridemore Autos Inc. has shifted its research and development unit from its home country to Germany. This allows the company to be better informed about the latest developments in the automotive industry by tapping into the highly advanced automotive industry in Germany. In this scenario, Ridemore Autos Inc. is reaping the benefits of

B. location economies.

Strategic commitments are actions that are

B. long-term oriented.

There are many reasons why firms need to grow. Which of the following reasons is strongly influenced by economies of scale?

B. lowering costs

Dream Slope Inc. is a leader in producing winter sports equipment, including skis and skates. Recently, the firm decided to expand into the bobsled market and acquired Sleek Phantom Inc. This company produced bobsleds, but its sales had slowed. The managers of Dream Slope convinced themselves that they were able to manage the business of Sleek Phantom more effectively even though they had no experience in the bobsled market. However, this move backfired and the sale of Sleek Phantom's bobsleds plummeted. Which of the following terms is often used to describe this scenario?

B. managerial hubris

Why did Quaker Oats Company's acquisition of Snapple fail?

B. managerial hubris

The ratio of SG&A/Revenue is an indicator of a firm's focus on

B. marketing to promote its products and services.

Walmart is an example of a(n) _____ organization.

B. mechanistic

Corner Market Inc. is a supermarket chain. Due to strong competition from other stores in the industry, Corner Market has aggressively used branding, pricing, and superior customer service to uniquely position itself in the market. As a result, the supermarket chain has been able to differentiate itself from its competitors and sell its products at higher prices. Which of the following industry competitive structures does this scenario best illustrate?

B. monopolistic competition

Fadia Ammunition Inc., a firm controlled and managed by the government of Fadia, is the only company that has the license to produce defense arms in the country. Which of the following industry competitive structures does this best illustrate?

B. monopoly

Combining economies of learning with the existing production technology allows a firm to

B. move down a given learning curve.

The _____ structure consists of several distinct strategic business units (SBUs), each with its own profit-and- loss responsibility.

B. multidivisional

Which of the following global strategies best matches with a multidivisional structure?

B. multidomestic

A trend observed during the Globalization 3.0 stage involves

B. multinational companies organizing as global-collaboration networks.

Supply, distribution, and licensing contractual agreements between firms, which result in vertical strategic alliances, are all examples of

B. non-equity alliances.

Organizational culture can help a firm gain and sustain competitive advantage only if the culture makes a positive contribution to the firm's economic value creation and

B. obeys the VRIO principles.

Eon Inc., Electravia Inc., and FC Inc., the three largest firms in the consumer electronics industry, hold close to 85 percent of the industry's market share. These companies mainly compete against each other by providing unique features in their products rather than pricing them low. These firms are interdependent, and each firm must consider the strategic actions of its competitors. Which of the following industry competitive structures does this scenario best illustrate?

B. oligopoly

Travis, the CEO of Riplon Corp., used company funds to buy a car worth $1 million and a house for $6 million in Santa Fe. This is an example of

B. on-the- job consumption.

Norce Autos Inc. allows its customers, suppliers, researchers, and the community in general to contribute their ideas toward new product developments. Customers and other interested stakeholders can let the company know what new features they want to see in their next car. If the company faces any technical complexities that its internal R&D team cannot solve, it posts the problem on its website and allows people from the external community to provide solutions. In this scenario, Norce Autos Inc. is primarily leveraging its

B. open innovation model.

To be cost-competitive, a firm should

B. operate at the minimum efficient scale.

An organization is characterized as having a flexible division of labor, distributed decision making, and generalized knowledge of how to accomplish strategic goals valued. This organization is most likely _____ in nature.

B. organic

Plow Inc. is a greeting card manufacturing company. Plow's market dominance exists primarily because of the innovative designs of its greeting cards when compared to those of its competitors. In this scenario, Plow Inc.'s managers must ideally rely on a functional structure that resembles a(n) _____ organization.

B. organic

Zappos' 10 core values that define what it means for employees to be working at Zappos also define the _____ of Zappos.

B. organizational culture

What causes the winner's curse?

B. overpaying for an acquisition

When TrueHeal Pharma Inc. released a new drug to treat insomnia, its chemical composition was disclosed at the back of the drug's cover. However, any attempts by competitors to copy the chemical composition would result in infringement of TrueHeal Pharma's intellectual property rights. Thus, the drug is protected by a

B. patent.

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

B. pay-as- you-go.

Which of the following is typically an economic responsibility of a firm?

B. paying adequate returns to the firm's stockholders on the capital invested by them

The competitive advantage that one firm has will be short-lived in an industry where

B. perfect competition exists.

Teddiez Inc. is a company that manufactures and sells stuffed toys. It sources its materials from another country to keep costs low. A sales personnel in one of its retail stores noticed that there was increasing concern regarding the potential toxicity of the materials in the dolls. In response, she found an economical, organic, and nontoxic cloth filling that the company could use. When her manager learned about this, he presented the prospect and got it approved from the top management team. This is an example of the

B. planned emergence approach.

Managers in a firm hired to improve the firm's profitability and ultimately the shareholders' value will add to the overall costs if they pursue their own self-interests. What does this best illustrate?

B. principal-agent problem

GLD Inc. is a publicly traded company. The stockholders of this company delegate the authority to make decisions for the company to a CEO named George. The stockholders expect George to make decisions that will benefit the company. However, George begins to find ways to maximize his total compensation, which at times hinders GLD's performance. This scenario reflects

B. principal-agent problems.

Which of the following firms will most likely not be a complementor to a firm that manufactures computers?

C. a company that manufactures its own brand of desktops and laptops

BM Goods Inc. is a large conglomerate that operates only in its home country. The company competes in industries like the consumer electronics, health care, hotel, airlines, education, and steel industries. Which of the following diversification strategies does this best illustrate?

B. product diversification

Which of the following firms is most prone to experiencing a diversification discount?

C. a company that pursues unrelated diversification

Amazon.com has decided to enter the college bookstore market. The goal of "Amazon Campus" is to offer co-branded university-specific web sites that offer textbooks and paraphernalia, such as logo sweaters and baseball hats. This development shows Amazon's relentless pursuit of

B. product diversification.

A firm is said to have a competitive advantage when it can _____

B. provide products similar to its competitors, but at lower prices.

The most efficient way to overcome the principal-agent problem in a firm is to

B. provide stock options to managers.

MainLine Inc. is a public stock company that provides natural gas for businesses. Although this company generates a large profit, its methods of obtaining gas have at times broken down, thereby causing environmental problems. As a result, the company's value creation has suffered. This scenario supports Michael Porter's warning that

B. public companies have defined value creation too narrowly in terms of financial performance, thereby contributing to black swan events.

White Leo Motors (WLM) Inc. generates a major portion of its revenues by manufacturing luxury sports cars. However, the company also derives an insignificant percent of its annual revenues by selling its sports merchandise that includes apparel, shoes, and other accessories under the same brand name. Which of the following terms best describes WLM?

C. a dominant-business firm

Assume that the market for print book publishing has entered the maturity stage. Which of the following would most likely exist during this stage?

C. a few large publishers

The tenet behind the triple-bottom- line is that

C. a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy.

Veronica sets up a business consulting firm in which the employees are motivated because they find their work interesting and creative. She carefully hires workers who fit well with their assigned tasks. Also, she clearly defines the results expected of each worker, but allows the workers to determine the means to these results. Which of the following best describes Veronica's business?

C. a firm that relies on high output controls to tap into intrinsic motivation

The solar-powered car division of a large automobile company has been experiencing negative cash flows though the market growth for such cars is predicted to be high. If the company invests further resources into this division, it can increase its relative market share in the future. However, if due to technological changes the car cannot create sufficient consumer demand, then the division can prove to be unprofitable. In the Boston Consulting Group (BCG) growth-share matrix, the solar-powered car division will be categorized under

B. question marks.

Incumbent firms favor incremental innovation over radical innovation because

B. radical innovation will disturb the existing power distribution within the firms.

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.

B. rare

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.

B. razor-razor- blade

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?

B. razor-razor- blade

The core competency of MotorCraft Inc. is its fuel-efficient engine found in its cars. These engines are developed and built in-house. The company realizes that there is a new market opportunity to diversify. Thus, it produces the car engines on a large scale and sells them to other automobile companies. In this scenario, MotorCraft is

B. redeploying and recombining existing core competencies to compete in future markets.

A firm that engages in strategic outsourcing typically

B. reduces its level of vertical integration.

The Boston Consulting Group (BCG) growth-share matrix locates a firm's individual strategic business units (SBUs) in which two dimensions?

B. relative market share and speed of market growth

Which of the following resources is a firm's resource stock?

B. reputation for quality

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?

B. resource heterogeneity

Strategic flexibility is achieved when managers

B. respond to reality changes by activating alternate dominant plans or modifying the old plan.

When a firm is said to be pursuing a geographic diversification strategy, it means that the firm will

B. sell its products in several different regional, national, and international markets.

Who appoints the board of directors in a public stock company?

B. shareholders

According to the perspective of shareholder capitalism,

B. shareholders in public stock companies have the most legitimate claim on profits.

Dynamic capabilities are essential for moving beyond a(n) _____ advantage.

B. short-lived

Which of the following statements accurately explains the primary reason behind Walmart's failure in Germany?

B. significant differences between its U.S. personnel policies and Germany's culture

Nick just graduated from law school and wants to start his own law firm. It is best for Nick to use a _____ organizational structure.

B. simple

A core tenet of stakeholder strategy is that a

B. single-minded focus on shareholders alone exposes a firm to undue risks that can threaten the very survival of the enterprise.

Top-down strategic planning as an approach to the strategic management process will be most effective when the

B. size of the firm is large.

Which of the following best qualifies as a firm's internal stakeholder?

C. a manager taking care of the firm's operations in a foreign market

A high degree of formalization in an organization is most likely to

B. slow down decision making.

Golden Harvest is a restaurant located inside a five-star hotel. It caters mainly to customers who are concerned about quality dining rather than the prices. In this scenario, which of the following will be a part of Golden Harvest's strategic group?

C. a premium rooftop restaurant in the same city

What is a unicorn?

C. a private start-up company valued at a billion dollars or more

Which of the following is an element of good strategy?

C. a set of coherent actions to implement the firm's guiding policy

A firm's ability to understand external technology developments, evaluate them, and integrate them into current products or create new ones is called

C. absorptive capacity.

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?

B. social complexity

A drawback involved in using cross-border strategic alliances to enter new foreign markets is that

B. some of the firm's proprietary know-how may be appropriated by the foreign partner.

The key objective for firms during the growth phase is to

B. stake out a strong strategic position not easily imitated by rivals.

BlueStainless Corp. has been able to gain and sustain a competitive advantage due to its strong relationship with its employees, customers, suppliers, and local communities. The company believes in lifetime employment and ensures that its employees grow along with the company. Investors are more than satisfied with the returns on their investments. Also, 3 percent of the company's profit is spent on community development. With initiatives like these, customers feel privileged to associate themselves with BlueStainless products. This scenario best illustrates the implementation of a

B. stakeholder strategy

Octa Autos Inc. wants to globally expand its market. It intends to ensure that its mode of foreign entry allows it to have strong control over its operations and protect its intellectual property, though it may mean investing a significant amount of capital and other resources. In this scenario, which of the following foreign entry modes would best suit Octa Autos Inc.?

C. acquisition

When large, incumbent firms buy start-up companies, the transaction is generally described as a(n)

C. acquisition.

Which of the following is not included within the types of strategic alliances?

C. acquisitions

In publicly traded companies, individuals who are delegated to perform duties on behalf of company owners are known as

C. agents.

Which of the following aspects of alliance management capability is paired with partner selection?

C. alliance formation

Curve Inc. is a software development firm based in California. It strives to provide highly differentiated software at cheaper prices when compared to its competitors. Which of the following organizational designs should Curve Inc. implement to ensure the maximum success of its business strategies?

C. ambidextrous

The smartphone division of the large consumer electronics company, True Electra Inc., has a significant market share in the fast-growing cell phone market. If the company invests further into this division, it will be able to reap increased cash flows. In the Boston Consulting Group (BCG) growth-share matrix, the smartphone division of True Electra will be categorized under

B. stars.

A(n) _____ is best described as a stand-alone division of a larger conglomerate, with its own profit-and- loss responsibility.

B. strategic business unit

The CEO of Sam's Club, Rosalind Brewer, reports to Walmart's CEO, C. Douglas McMillon, who as corporate executive oversees Walmart's entire operations. Sam's Club, therefore, is a _____ of Walmart.

B. strategic business unit

Strong organizational cultures that are strategically relevant align employees'; behaviors more fully with the organization's

B. strategic goals.

When a firm makes choices between a cost or value position to achieve competitive advantage, it is primarily involved in

B. strategic trade-offs.

According to AFI strategy framework, in which of the following tasks of strategic management is a firm's vision, mission, and values identified?

B. strategy analysis

Which of the following tasks in the AFI strategy framework involves putting the formulated strategy into practice through organizational structure, culture, and controls?

B. strategy implementation

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.

B. subscription-based

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

B. support activities.

The strategic objective of businesses during the shakeout phase of the industry life cycle will primarily be to

B. survive by drawing on deep pockets.

The Mansion Hotel Group purchased Red Brick Hotels for an estimated value of $120 billion. All the hotels previously owned by Red Brick Hotels are now managed by the Mansion Hotel Group and are known as Mansion hotels. What does this scenario best illustrate?

C. an acquisition

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

C. an apparel company popular among price-conscious customers.

In the context of SWOT analysis, which of the following best exemplifies a firm's external opportunity?

C. an increase in its customers' disposable income

First Ledger Inc., an auditing company, replaced its existing accounting software with new accounting software from another supplier. Since the new software has different features and abilities, First Ledger Inc. has had to spend $10,000 on training its employees to use it. In this scenario, $10,000 represents First Ledger Inc.'s

B. switching cost.

Cynthia works as a front-line employee for a nationwide retail store. She reports to a floor manager, who reports to a departmental manager, who reports to a regional supervisor, who reports to a vice president, who reports to the CEO. Which of the following best describes this retail store?

B. tall structure

Virtue Products Inc., a large conglomerate, procures a few component parts from external suppliers and also manufactures some of the key raw materials in its own subsidiaries. This apart, the company does not solely depend on outside distributors to reach its customers. In fact, it has its own retail stores to distribute its products. In this scenario, which of the following alternatives to vertical integration is Virtue Products applying?

B. taper integration

Under the CAGE distance framework, the administrative and political distance between two countries primarily increases with

B. the absence of a trading bloc.

In Eli Lilly's Office of Alliance Management, who is responsible for providing the technical expertise and knowledge needed for the specific technical area and the day-to- day management of the alliance?

B. the alliance leader

The downside of equity alliances is

B. the amount of investment that can be involved.

Which of the following is an example of an external transaction cost?

B. the cost of searching for a contract manufacturer

One of the first new business apps resulting from the alliance of Apple and IBM will help airline pilots determine the right amount of fuel to carry on a particular flight. This task not only requires significant data analytics but also the need to display the information in an easily understandable way so that pilots can digest it quickly when glancing on their iPad in a cockpit prior to departure. Which of the following parts of this example will Apple be responsible for?

B. the display of information in an easy-to- understand way

Toyota's President, Akio Toyoda, hopes that a transfer of tacit knowledge will take place through its equity alliance with Tesla Motors. He is referring to

B. the entrepreneurial spirit in Tesla.

What is strategic leadership?

B. the executives' use of power and influence to direct the activities of others when pursuing an organization's goals

Which of the following factors pertaining to national competitive advantage enabled Nokia, a multinational company from Finland, to become an early leader in cell phones?

B. the huge demand for high-quality wireless services in Finland

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?

B. the loyalty of its customers

Which of the following statements best describes local responsiveness?

B. the need to tailor product and service offerings to fit native consumer preferences and host-country requirements

What are network effects?

B. the positive effect that one user of a product or service has on the value of that product or service for other users

The typical four-step innovation process begins with

B. the presentation of an idea as findings derived from basic research.

What is horizontal integration?

B. the process of merging with a competitor at the same stage of the value chain

What is strategic entrepreneurship?

B. the pursuit of an innovation that uses concepts from strategic management

Which of the following is the source of the principal-agent problem in publicly traded companies?

B. the separation of ownership and control

Which of the following represents an economic factor in a firm's external general environment?

B. the stage of the business cycle that the country is in

Peerless Inc., a large conglomerate, wants to liquidate its business in certain industries to improve its overall profitability. Which of the following industries would Peerless Inc. find it most difficult to exit?

B. the steel industry in which the company has obligations like severance pay toward employees

A drawback of short-term contracting as an alternative to making a component in-house is that

B. the supplying firm has no incentive to make any transaction-specific investments to increase performance or quality.

The success of the Pixar-Disney strategic alliance demonstrated that

B. the two entities' complementary assets matched.

Buyers are highly price sensitive when

B. they earn low profits or are strapped for cash.

Visionary companies are able to outperform their competitors because

B. they provide more aspirational visions.

The telecom industry in the country of New Taria is an industry characterized by the presence of strong network effects, high brand loyalty, high economies of scale, and proprietary technology among incumbent firms. Thus, in the telecom industry, the

B. threat of new entrants is most likely low.

Investments

B. threat of one of the partners pursuing his or her self-interest is high.

When firms innovate by leveraging existing technologies into new markets, they are said to be involved in

C. architectural innovations.

Companies that pursue related diversification are able to create a diversification premium because they

C. are able to increase value due to economies of scope.

A key feature of an oligopoly is that the competing firms

C. are interdependent.

Which of the following is an example of a firm's resources?

C. assets such as land and buildings owned by a firm

A multinational enterprise (MNE) is said to be pursuing a multidomestic strategy when it

C. attempts to maximize local responsiveness, hoping that the host country consumers will perceive it to be a local company.

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

C. availability of complements.

Neon Electronics Inc. sourced touch screens required for its tablet computers, cell phones, and televisions from a manufacturer in China. But the demand for such components was high globally, and the supplier could not meet the quality standards of Neon Electronics. Thus, Neon Electronics decided to set up its own unit to develop and manufacture the required touch screens. What does this scenario best illustrate?

C. backward vertical integration

Why did the American MTV network cable channel fail when pursuing a global-standardization strategy?

C. because cultural distance most affects products with high linguistic content

Which of the following statements best explains why Walmart is finding it difficult to replicate its existing business model in India?

C. because of the large economic distance between U.S. and India

A firm pursuing a transnational strategy would believe that

C. best practices, ideas, and innovations should be diffused throughout the world.

Which of the following do not serve as additional external-governance mechanisms?

C. board of directors

Organizational values help individuals make choices that are

C. both ethical and effective in advancing a company's goals.

The balanced-scorecard can accommodate

C. both short- and long-term performance metrics.

Which of the following globalization strategies requires managers working in multinational enterprises (MNEs) to remember to think globally, but act locally?

C. transnational strategy

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.

C. triple-bottom- line

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

C. triple-bottom- line approach.

For a firm that operates in an industry where competition is high, which of the following practices will result in inferior performance?

C. trying to be everything to everybody by combining different competitive strategies

Molly Hue Apparels Inc. (MHA) had been outsourcing its production to less-developed countries in order to reduce its cost of production. With the emergence of its competitor, Hova Inc., MHA lost its competitive advantage. Hova had its production units in its home country that allowed the company to bring out the latest trends to the market earlier than MHA. Also, MHA frequently suffered due to political instability and lack of intellectual property laws in the outsourced countries. Thus, parts of MHA's strategies became obsolete and it had to relocate its production. What are such obsolete strategies referred to as in the planned emergence model?

C. unrealized strategy

Which of the following is a primary reason why firms pursue a global strategy?

B. to enhance their competitive advantage

With regard to New United Motor Manufacturing, Inc. (NUMMI), why did General Motors (GM) enter into a strategic alliance with Toyota?

B. to learn the lean manufacturing system pioneered by Toyota

Why did incumbent pharmaceutical firms enter into hundreds of strategic alliances with biotech start-ups?

B. to make small-scale investments in ventures poised to disrupt existing market economics

Researchers at Games First Inc. spent several months coming up with a fun game for toddlers that incorporates a new idea in preschool education. This scenario describes step _____ of the innovation process.

B. two

The primary objective of Porter's five forces model is to

B. understand the profit potential of different industries.

A firm follows a(n) _____ when less than 70 percent of its revenues come from a single business and there are few, if any, linkages among its businesses.

B. unrelated diversification strategy

A defining characteristic of the subscription-based business model is that the

B. user pays for access to a product or service whether he or she uses it during the payment term or not.

A firm's resource is most likely to be an internal strength and a core competency when the resource is

B. valuable and costly to imitate.

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.

B. value innovation

When is the rivalry among existing competitors in an industry likely to be more intense?

B. when firms make strategic commitments to compete in an industry

When do employees fail to adopt the organizational values of a firm?

B. when the top managers in the firm are merely paying lip service to the firm's stated values

A value curve indicates a lack of effectiveness in a firm's strategic profile when it

B. zigzags.

GreenThings Inc., a company popular for its dairy products, successfully follows a multidomestic strategy. TransGold Inc., a large conglomerate, pursues a transnational strategy. Which of the following statements is most likely true of this scenario?

Both GreenThings Inc. and TransGold Inc. will have to duplicate key business functions in multiple host countries.

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?

C. $170

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?

C. $180

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

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

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.

C. 315

Which of the following describes a peer-to- peer technique?

C. A company matches an individual with a cleaning service.

Which of the following statements with regard to industry structures is true?

C. A consolidated industry tends to be more profitable than a fragmented one.

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?

C. A firm must be effectively organized to capture value.

For a strategist, which of the following is not an implication of effective strategic management?

C. A firm's performance is determined by a set of independent factors, which includes firm and industry effects.

Dollar Shave Club is an ecommerce start-up that delivers razors by mail. By doing this, Dollar Shave Club is using a(n) _____ to disrupt an existing market.

C. business model innovation

The translation of strategy into action primarily takes place in a firm's

C. business model.

How has the administrative and political distance between Canada, Mexico, and the United States been reduced?

C. by establishing the North American Free Trade Agreement (NAFTA)

How did the recent horizontal integration in the U.S. airline industry provide benefits to the surviving carriers?

C. by lowering competitive intensity in the industry overall

In an economic context, strategy for producers is primarily about

C. capturing the economic value created as much as possible.

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

C. 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

C. causal ambiguity.

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

C. causal ambiguity.

Maurice sent in a complaint about a rude salesperson he dealt with at FirstElectronics Inc. He didn't get a response for about three months. Also, when the response finally came, it was just a formal, cursory letter. Based on this scenario, FirstElectronics most likely has an extremely _____ organizational structure.

C. centralized

FR Pharmaceuticals Inc., BioCure Pharma Inc., and Regime Pharma Inc. are three rival firms who have set up an alliance to conduct research and find a cure for cancer. They have made almost equal contributions to the research, and they also share their expertise with each other. However, the three firms will continue to behave as competitors in markets for other drugs and vaccines. What is this arrangement best referred to as?

C. co-opetition

A company is best described as a _____ to an existing company if customers value the existing company's product or service offering more when they are able to combine it with the other company's product or service.

C. complementor

When the market for photo film negatives declined with the arrival of digital cameras, Momento Films Inc., a manufacturer of film negatives, bought out most of its rivals that were planning to exit. This allowed the company to get rid of all the excess capacity and acquire a monopolistic market power in the declining industry. Which of the following strategies has Momento Films adopted in this scenario?

C. consolidated strategy

When a firm pursues a maintain strategy, it

C. continues to support marketing efforts even if the demand for the product is declining.

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

C. core competency.

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

C. core rigidity.

The pharmaceutical company Merck's new drug Vioxx was a blockbuster, generating revenues of $2.5 billion a year by 2002 and growing fast. When allegations began to appear in the medical community, Merck announced the voluntary withdrawal of Vioxx from the market. In this example, Merck provides an example of what can happen if a company deviates from its

C. core values.

Because of poor management, the stock prices of DigiKing Inc. falls and many investors sell their shares. Soon DigiKing becomes the target of a hostile takeover, during which Charles buys enough shares to exert control over the firm. In this scenario, Charles performs the role of a(n)

C. corporate raider.

The CEO of Juliet Computers was the child of parents who had difficulty making enough money to support their family. As a result, he and his siblings did not have access to many advantages that children from wealthier families had. This CEO, therefore, emphasized making affordable computers that could be bought by low-income households. Which of the following does this example demonstrate?

C. upper-echelons theory

Strategic commitments are actions that are

C. costly, long-term oriented, and difficult to reverse.

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

C. create greater perceived economic value than CLR.

The demand for video recorders has drastically reduced, and there are only a few consumer electronics companies selling them at extremely low prices. Also, the current buyers of video recorders are mainly categorized under laggards. Which of the following stages of the industry life cycle is the video recorder industry in currently?

C. decline stage

The _____ is a conceptual framework that views organizational outcomes—strategic choices and performance levels—as reflections of the values of the members of the top management team, who interpret situations through the lens of their unique perspectives.

C. upper-echelons theory

In the freemium business model, the

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.

In 1984, GM and Toyota formed a joint venture called New United Motor Manufacturing Inc. Each partner was motivated to learn new capabilities. This joint venture is an example of

C. using co-opetition.

According to the VRIO framework, a firm can gain a competitive advantage if it has resources that are _____ and captured by an organized firm.

C. valuable, rare, costly to imitate

A new company named Far Reach Inc. entered the radio retail business. In response, two incumbent radio retailers, Smooth Waves and Clear Signal, lowered the cost of their travel alarm radios and long-distance radios. Also, they spent more money to improve these radios. By doing this, Smooth Waves and Clear Signal

C. decreased industry profit potential.

Customer-oriented visions do not

C. define how a customer need will be met.

In a focused cost-leadership strategy, a firm

C. delivers low-cost products and services to a specific, narrow part of the market.

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

C. disruption.

Which of the following would hinder firm performance?

C. diversification raising costs

Decisions relating to "what stages of the industry value chain to participate in" determine a firm's

C. vertical integration.

When does a firm fall into the large competitive chasm between early adopters and early majority?

C. when it fails to successfully launch a mass-market version of its product

Which of the following situations will have greater effects from economies of scale than from learning effects?

C. when mass manufacturing pens

Which of the following is not a condition that can help a firm sustain its competitive advantage?

C. when past decisions act as constraints for the current dynamic capabilities

ElectraSync Inc., a large consumer electronics company, has divided each product in its portfolio into a separate strategic business unit (SBU). The desktop SBU has been experiencing drastic decline in its cash flow, and its market share has also reduced to an insignificant 10 percent. This has been attributed to the low growth in the desktop market after the arrival of tablet computers and laptops. In the context of the Boston Consulting Group (BCG) growth-share matrix, the desktop SBU will be categorized under

C. dogs.

The customers entering the market in the growth stage are primarily

C. early adopters.

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.

A cost-leader is protected from the threat of new entrants primarily due to its

C. economies 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

C. economies of scale.

Any unplanned strategic initiative undertaken by mid-level employees of their own volition is a(n)

C. emergent strategy.

The board at TriCom Manufacturing Corp. has decided to allocate 20 percent of the company's shares to its workforce, at a discounted price. Apart from being a valued investment, the plan will allow the employees to take personal responsibility for the firm's performance. Which of the following employee incentive schemes does this best illustrate?

C. employee stock ownership plan

It is important for a firm to win over the early majority section of the market to ensure the commercial success of an innovation because they

C. enter into the market in large numbers, creating a herding effect.

Blue Billion Inc. is a large company that sells a variety of products such as cosmetics, jewelry, frozen foods, navigation electronics, and airplanes. Apart from this, the company also has a strong presence in the service industry through its chain of dance studios, casinos, and nightclubs. Each of its product divisions operates as an individual business and is responsible for its own profits and losses. Thus, these product divisions under Blue Billion can be referred to as

C.strategic business units.

In 2010, an explosion of a BP oil drill resulted in the deaths of 11 workers and the largest environmental disaster in U.S. history. The BP CEO was fired because of his ineffective handling of the crisis. The CEO lost his job because he failed to uphold _____ responsibilities.

C. ethical

Van Dyke's Fashion Inc., a company that manufactures clothing, incurs higher costs because of its refusal to build factories in countries where child labor is prevalent. This reflects Van Dyke's Fashion's _____ responsibility.

C. ethical

The interaction between a firm and its diverse internal and external stakeholders is best described as a(n)

C. exchange relationship.

The concept of a(n) _____ attempts to capture both learning effects and process improvements at firms.

C. experience curve

Which of the following foreign entry modes primarily involves producing goods in one country to sell in another?

C. exporting

A firm following a multidomestic strategy

C. faces a greater risk of intellectual property (IP) appropriation.

Google, the leader in online search and advertisement, engaged in a number of smaller acquisitions of tech ventures. It did this in order to

C. fill gaps in its competency lineup.

In the _____ developed by Michael Porter, competition is not defined narrowly as a firm's closest competitors but rather more broadly to include other factors in an industry like buyers, suppliers, potential new entry of other firms, and the threat of substitutes.

C. five forces model

In contrast to a differentiator, a cost-leader will

C. focus its research and development on process technologies to improve efficiency.

Silver Weave Inc., an apparel company, operates through a business model in which individuals can buy the rights to set up Silver Weave stores and sell the company's merchandise in return for a lump sum fee at the beginning of the contract and a percentage of revenues every month. The owners of the stores have to stock the collection approved from the company's headquarters and also maintain consistent customer service as expected in its flagship store. Which of the following alternatives to integration does this best illustrate?

C. franchising

Green Rabbit Products Inc. (GRP) is a large conglomerate. The human resources department of its telecom division has decided to reduce its employee turnover by encouraging internal promotions. Which of the following strategies does this scenario best illustrate?

C. functional strategy

To be successful and to survive the shakeout stage of the industry life cycle, a firm should

C. gain economies of scale.

Symphon Times Inc., a Swiss-based premium watch brand, has recently started selling its watches through company-owned retail outlets in major cities of the emerging nations. Which of the following types of diversification strategies is the firm pursuing?

C. geographic diversification strategy

Some multinational enterprises (MNEs) attempt to reap significant economies of scale and location economies by pursuing an international division of labor based on wherever best-of- class capabilities reside at the lowest cost. This is known as a(n) _____ strategy.

C. global-standardization

Jade Mobiles Inc., a cell phone manufacturing company, has its product development centers located in the U.S. and South Korea. The manufacturing units are located in China and Philippines to benefit from low-labor costs and access to original equipment manufacturers. This allows the company to competitively price its cell phones. Also, the various phone models sold by the company are uniform in all the foreign markets it operates in. In this scenario, which of the following strategies does Jade Mobiles Inc. most likely pursue?

C. global-standardization strategy

Olympia Autos Inc. merged with its competitor Vaca Autos Inc. This allowed Olympia Autos to use its technological competencies along with Vaca Autos' marketing capabilities to capture a larger market share than what the two entities individually held. What does this scenario best illustrate?

C. horizontal integration

As a part of strategy formulation, a firm's functional strategy primarily concerns questions relating to

C. how to implement business strategy.

Which of the following happens during the analysis stage of scenario planning?

C. identification of possible future scenarios

Which of the following is step 3 in the five-step process of stakeholder impact analysis?

C. identifying the opportunities and threats the stakeholders present

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.

Each activity a firm performs along the horizontal value chain adds _____ value.

C. incremental

In an industry, the rivalry among existing competitors is high when

C. incumbent firms are highly committed to the business.

A(n) _____ is best used to depict the transformation of raw materials into finished goods and services along distinct vertical stages.

C. industry value chain

The informational advantage that agents possess over principals is often based on the fact that

C. insiders are the first to learn about important developments before the information is released to the public.

A. G. Lafley at Procter & Gamble (P&G), had implemented an open-innovation model, which had greatly benefitted the company. In the light of this information, we can conclude that A. G. Lafley is a(n)

C. intrapreneur.

Fakhir is a board member at Garfield Motors Inc. He is also a senior executive of the firm. The board is chaired by Ernest Jones, the CEO of Blixt Electronics. According to this scenario, Fakhir

C. is an inside director of Garfield Motors.

While the personal computer industry is flooded and growing with laptops and tablets, Ivan recently bought a desktop, his first personal computer. He realized that a computer at home would be helpful for his children for their school projects, and he could use it to maintain the simple accounts of his plumbing business. Which of the following customer segments does Ivan best represent?

C. laggards

Economies of scale are cost advantages that accrue for firms with

C. larger output.

Comfort Shoes Inc. and InStep Shoes Inc., two competing shoe brands, entered into a strategic alliance to study and acquire each other competencies. Comfort Shoes entered the strategic alliance to acquire the production system pioneered by InStep Shoes. Similarly, InStep Shoes agreed to the strategic alliance to study the designing process of Comfort Shoes. However, Comfort Shoes was more successful and faster than InStep Shoes in accomplishing its alliance goal. What does this scenario best illustrate?

C. learning races

Which of the following is a macroeconomic factor that can affect a firm's strategy?

C. levels of employment

Kaito is the CEO of Henson and Fukui Consulting Inc. Kaito's efforts to persuade the board of directors to pursue a new business strategy fail. He borrows money from different sources and purchases all the outstanding shares of Henson and Fukui Consulting. What does this scenario best exemplify?

C. leveraged buyout

Which of the following will hamper a differentiator's ability to achieve a competitive advantage?

C. lower value gap

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

C. lowering cost and increasing perceived customer benefits.

Since an organic structure helps a firm build core competencies in areas such as R&D and marketing, this structure is employed by firms that

B.

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?

B. $450

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?

B. 11,000 units

If a firm's market capitalization is $1 billion and the share price is $50, how many shares outstanding does the firm have?

B. 20 million

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?

B. 3,000-4,000 units

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)

B. 90 percent learning curve.

Which of the following statements is true of corporate strategy?

B. A corporate strategy must be able to create synergies across business units that are quite different.

Which of the following is an example of fulfilling philanthropic responsibilities?

B. A legal firm donates large amounts of money to charities.

Which of the following statements about an organization's culture is not true?

B. A strong monitoring and supervision mechanism is needed to enforce the culture.

The _____ is a model that links strategy analysis, strategy formulation, and strategy implementation, which together helps managers plan and implement a strategy that can improve performance and result in competitive advantage.

B. AFI strategy framework

Which of the following statements is true of accounting data?

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

_____ is illustrated by a situation in which the principal cannot determine the value created by individual members of a team.

B. Adverse selection

Free Winds, Inc. is a company that manufactures a variety of generators that run on wind power. The company wants to ensure that wind technology replaces all forms of exhaustible energy sources in the near future. Which of the following statements will make an accurate vision for Free Winds?

B. All nations around the globe should have access to a sustainable energy source.

Which of the following is a drawback of the SWOT analysis?

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.

Why did W. L. Gore reorganize itself into a functional structure from a simple structure?

C. A simple structure could not provide the effective division, coordination, and integration of work required to accommodate future growth.

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?

C. AccuroDisk creates a greater economic value than TD Storage.

JetStream Airway's decision to acquire Rex Fuels Inc. proved to be ill-fated because its managers had overestimated their abilities and skills. They believed that they had the skills to manage such diversified businesses and create additional shareholder value. However, the acquisition failed to create the anticipated synergies because the managers' capabilities were restricted to the airlines industry. What does this scenario best illustrate?

C. managerial hubris

_____ suggests that the firm can be viewed as a nexus of legal contracts (loosely defined) between resource holders.

C. Agency theory

How is the early majority section of consumers different from the late majority section?

C. Although the early majority is confident in their ability to master a new technology, the late majority is not.

Which of the following best illustrates a firm operating in a monopolistically competitive industry?

C. An automobile manufacturer uses branding, pricing, and superior advertising to differentiate itself from a large number of other automobile manufacturers.

Which of the following fundamental insights was provided by Porter's five forces framework from the completion of the Alta Velocidad Española (AVE) in 2008?

C. Any of the five forces on its own, if sufficiently strong, can extract industry profitability.

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?

C. Archer Cycles has created a greater economic value than Evia Cycles.

Which of the following countries has a high geographic distance but a low cultural distance from the United States?

C. Australia

Which of the following is an observable feature in the Globalization 3.0 stage?

C. Based on an optimal mix of costs, skills, and PESTEL factors, companies now freely locate business functions anywhere in the world.

When the strong dictatorial rule in Backenstein unexpectedly collapsed due to the shocking death of the royal family in an explosion, the nation's economy experienced drastic changes. The laws became more restrictive, the country lost many locally produced resources and products, and the distribution of wealth became inequitable. The unexpected event that led to these changes can best be described as a(n) _____ event.

C. Black Swan

_____ are incidents that describe highly improbable but highly impactful events.

C. Black Swan Events

Go West Airlines Inc. follows a cost-leadership strategy. Which of the following firms will most likely be its direct competitor?

C. Blue Skies Airlines Inc., which follows a low-cost strategy

Which of the following statements correctly describes resource heterogeneity?

C. Bundles of resources, capabilities, and competencies differ across firms.

For a multinational enterprise (MNE), applying the globalization hypothesis would mean

C. manufacturing products on international platforms and slightly modifying them to meet local tastes and standards.

Which of the following is an important external corporate-governance mechanism?

C. market for corporate control

White Leo Autos manufactures and markets four different cars: Leo Sport, Leo Prestige, Leo Spark, and Leo Ease. These four product variants are operated as individual business units. While the product leaders of Leo Sport, Leo Prestige, and Leo Spark have adopted a differentiation strategy to attract the niche market: the product leader of Leo Ease follows a cost-leadership strategy to suit the mass market. This decision of the product leader of Leo Ease can be ideally categorized as a _____ strategy.

C. Business

Which of the following statements accurately describes corporate social responsibility (CSR)?

C. CSR provides a conceptual model that more completely describes a society's expectations.

An organization that is organized according to strategic business units (SBUs) and also along organizational structures is most likely using a _____ structure.

C. matrix

A few efficient and strong firms in the laptop industry have remained and emerged successful from the shakeout stage. Which of the following stages of the industry life cycle will they move to next?

C. maturity stage

Which of the following factors best contributes to the U.S. automotive industry being characterized by high entry barriers?

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

_____ are strategic business units that compete in a low-growth market but hold considerable market share.

C. Cash cows

_____ is best described as cooperation by competitors to achieve a strategic objective.

C. Co-opetition

Which of the following statements about Porter's five forces model is accurate?

C. Competition must be defined in a broad way to incorporate all of the key factors that influence profit potential.

Which of the following statements is not true of competitive advantage?

C. Competitive advantage is an absolute measure.

Which of the following is a feature of the shakeout phase of the industry life cycle?

C. Competitive intensity within the industry increases.

_____ is a mechanism to direct and control an enterprise in order to ensure that it pursues its strategic goals successfully and legally.

C. Corporate governance

Why is it better for firms to keep their vision statements customer-oriented rather than product- oriented?

C. Customer-oriented visions tend to be more flexible when adapting to changing environments.

Which of the following best explains why Disney showed superior post-merger integration capabilities?

C. Disney managed its new subsidiaries more like alliances rather than attempting full integration.

_____ is best described as an increase in the variety of products and services a firm offers or markets and the geographic regions in which it competes.

C. Diversification

The Securities and Exchange Commission (SEC) makes all financial reports filed by public companies available electronically via the _____ database.

C. EDGAR

Which of the following statements accurately brings out the difference between economies of scale and economies of scope?

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.

Which of the following is not one of the three interdependent tasks of strategic management?

C. Estimate

During an assessment of employees and leaders in a company, Ethan Browne was categorized as a Level 5 manager in the Level-5 leadership pyramid. Which of the following can be inferred from this information?

C. Ethan is a top management executive in the company.

Which of the following statements is true of explicit knowledge?

C. Explicit knowledge is shared in non-equity alliance firms.

Frank is a board member at Lofloy Greens Inc., a publicly traded company. In addition to his duties on the board, Frank is also a full-time employee as a senior manager at Spinson Locomotives Inc. Which of the following is most likely to be true of Frank?

C. Frank is an outside director on Lofloy's board of directors.

Which of the following facts proves that GE's board is fairly diverse compared to other Fortune 500 companies?

C. GE's board is composed of 28 percent women, compared to less than 16 percent for the others.

In which of the following stages of globalization did firms organize as networks to pursue a global-standardization strategy?

C. Globalization 3.0

Hank's Hot Dogs is a nationwide fast-food chain. Decision power resides at the top of the organization. Each job is documented in minute detail. The firm has many levels of supervision, including vice presidents and regional managers. Hank's headquarters provides detailed instructions to each of its franchisees so that they provide comparable quality and service across the board. Based on this scenario, which of the following is an accurate statement about Hank's?

C. Hank's has a high degree of specialization, formalization, and centralization and relies on a tall hierarchy.

_____ of receivables turnover imply more efficient management in collecting accounts receivable and shorter durations of interest-free loans to customers.

C. Higher ratios

Janis is the CEO of a firm. She has an opportunity to increase the competitive advantage of her company but is not sure if accepting the opportunity is ethical. Which of the following questions would help her decide if accepting the opportunity is ethical?

C. How would the media report her decision to accept the opportunity if it were to become public?

Which of the following statements is strongly influenced by the not-invented- here syndrome?

C. If a product was not created and developed at our company, it could not be good enough.

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?

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.

Which of the following most accurately describes a difference between incremental innovation and radical innovation?

C. Incremental innovation builds on an established knowledge base; radical innovation uses an entirely different knowledge base.

_____ is best described as the commercialization of any new product, process, or the modification and recombination of existing ones.

C. Innovation

Which of the following statements is not true about innovation?

C. Innovation has to be high-tech in order to be a potent competitive weapon.

_____ are the board members who are part of a company's senior management team appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance.

C. Inside directors

Which of the following statements is true of internal transaction costs?

C. Internal transaction costs tend to increase with organizational size and complexity.

_____ are barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy.

C. Isolating mechanisms

Which of the following is an advantage offered by a functional structure?

C. It allows for a higher degree of specialization and deeper domain expertise.

Why does a functional structure rely on a flat organizational structure?

C. It allows for efficient bottom-up and top-down communication.

Why does a firm use an organic organization combined with a functional structure when implementing a differentiation strategy?

C. It allows the firm to constantly upgrade core competencies in R&D, innovation, and marketing.

How does taking a real-options perspective by entering strategic alliances help incumbent firms?

C. It allows the incumbent firms to buy time and wait for the uncertainty surrounding the market and technology to fade.

Why does Zappos offer its new recruits $2,000 to quit at the end of the first week of their job?

C. It believes that individuals who choose to stay on will fit in with the Zappos culture.

Which of the following is a disadvantage of a functional strategy?

C. It cannot effectively address a higher level of diversification.

Which of the following statements is true of taper integration?

C. It exposes in-house suppliers and distributors to market competition to make performance comparisons possible.

How does Kraft Foods benefit from its hostile takeover of Cadbury PLC in 2010?

C. It has access to convenience stores and a new distribution channel.

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?

C. It has exploited external opportunities.

Which of the following is a drawback of vertical integration?

C. It increases the potential of legal repercussions.

Which of the following statements best explains how the presence of top-notch complementors within a firm's industry affects the focal firm's business?

C. It increases the value of the focal firm's offering from a customer's perspective.

Which of the following statements is not true of tacit knowledge?

C. It is regularly shared between partners in a non-equity alliance.

Which of the following best supports the fact that Goldman Sachs was unethical in the Abacus deal?

C. It knew that Paulson & Co. had bundled high-risk mortgages into the collateralized debt obligation.

Which of the following is a drawback of pursuing a transnational strategy?

C. It requires a global matrix structure, which is difficult to implement.

Which of the following statements is true about managing alliances-related tasks?

B. Alliance management capability is based on three alliance-related tasks.

Which of the following is the result of a leveraged buyout (LBO)?

B. An LBO changes a public company into a private company.

How is an equity alliance different from a joint venture?

B. An equity alliance involves taking ownership in a partner; a joint venture involves two or more people owning a firm.

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?

B. Apple was able to charge a much higher margin for its products and services than Microsoft.

In the context of industrial growth, which of the following statements is true of standards?

B. As the size of a market expands, a standard signals the market's agreement on a common set of engineering features and design choices.

Which of the following examples reflects the strongest vision?

B. At Fuentes Electronics, all employees are motivated to make the best microwave ovens on the market.

Several senior managers recently left Bass Automobile Inc. and went to work at Unicorn Autos Inc., a rival company. What does this imply?

B. Bass Automobiles Inc. faced resource leakage.

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?

C. JL Electronics can charge a premium price on its televisions.

What was one of the reasons for Jerry Yang's failure at Yahoo?

C. Jerry's preference for obtaining consensus among his managers led to bickering and infighting.

Which of the following corresponds to the use of tacit knowledge?

C. John assembles the motorcycle from memory.

Which of the following describes an airline that is most likely stuck in the middle?

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.

Which of the following is a characteristic of a public stock company?

C. Legal personality allows a firm's continuation beyond the founder or the founder's family.

Jason is a manager. His colleagues and subordinates look up to him as a man who always does the right things. Along with other skills, his ability to effectively organize and deploy resources like man power, material, and money has been appreciated by his seniors. According to the Level-5 leadership pyramid, which of the following levels would be the immediate next step for Jason?

C. Level 4

_____ organizations are characterized by a high degree of specialization and formalization, and tall hierarchies that rely on centralized decision making.

C. Mechanistic

Which of the following is an accurate statement about near monopolies?

C. Near monopolies are firms that have accrued significant market power and thereby are changing the industry structure in their favor.

_____ is when a firm moves activities and jobs outside its home country.

C. Off-shore outsourcing

_____ organizations have a low degree of specialization and formalization as well as a flat organizational structure.

C. Organic

_____ describes the collectively shared values and norms of an organization's members.

C. Organizational culture

_____ refers to a firm's resistance to change the status quo that can set the stage for the firm's subsequent failure.

C. Organizational inertia

Which of the following statements should ideally reflect a firm's strategy for competitive advantage?

C. Our aim is to create superior customer value while controlling costs.

In 2008, BlackBerry's market cap peaked at $75 billion. By 2015 this valuation had fallen more than 90 percent, to less than $7 billion. BlackBerry fell victim to two important PESTEL factors in its external environment: sociocultural and technological. How did technology contribute to BlackBerry's decline?

B. BlackBerry failed to change its device into one that could perform multiple tasks effectively.

Which of the following summarizes the benefit of the strategic alliance between HP and DreamWorks?

B. Both HP and DreamWorks were able to enter a new market that they would not have been able to pursue alone.

Which of the following accurately describes what the integration-responsiveness framework does?

B. By juxtaposing the pressures a multinational company faces for cost-reductions and local- responsiveness, it devises four strategies to gain and sustain competitive advantage.

According to the upper-echelons theory, the organizational outcomes of a company primarily reflect the values of the

B. CEO of the company.

Which of the following scenarios best illustrates a good stakeholder strategy?

C. PA Corp. distributes only 70 percent of its annual profit after taxes to shareholders, while the remaining is distributed among employees and the local community, and invested for further research.

_____ describes a situation in which the cause and effect of a phenomenon are not readily apparent.

B. Causal ambiguity

Rapida Inc. and Click Inc. are two companies that have been manufacturing typewriters for almost 30 years. Due to the reduced demand for typewriters today, both companies' average return on invested capital is approximately -5 percent. The current industry average is 2 percent. In this scenario, Rapida Inc. and Click Inc. most likely have

B. Competitive Parity with each other

_____ 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.

B. Core competencies

Which of the following statements is true of customer-oriented visions?

B. Customer-oriented vision statements are not the same as listening to your customer.

Silver Screen Cinemas Inc. and Digi Now Inc. are two companies that own and run movie theaters in malls and other commercial areas. While Silver Screen Cinemas Inc. pursues a cost-leadership strategy, Digi Now Inc. adopts a differentiation strategy. Which of the following statements is most likely true of this scenario?

B. Digi Now and Silver Screen Cinemas will not be direct competitors to each other, and their customer segments will overlap very little.

On which of the following tenets is the crossing-the- chasm framework, suggested by Geoffrey Moore, based?

B. Each stage of the industry life cycle is dominated by a different customer group.

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?

B. EasyOpen's patent expired after 20 years.

Industry effects describe the underyling _____ structure of the industry

B. Economic

Paying taxes to local government authorities from the annual revenues generated by a firm represents the firm's ______ responsibilities

B. Economic

Which of the following is an implication for the strategist in the context of corporate governance and a company's success?

B. Effective corporate governance and solid business ethics are critical to gaining and sustaining competitive advantage.

Which of the following is an accurate statement about the relationship between firm effects and industry effects?

B. Firm effects deal with a manager's actions; industry effects deal with external

How do low interest rates affect a business?

B. Firms can easily borrow money to finance future growth.

Which of the following statements is true of firms pursuing a closed innovation?

B. Firms in the closed innovation model are extremely protective of their intellectual property.

_____ most precisely measures how well a company leverages its fixed assets, particularly property, plant, and equipment (PPE).

B. Fixed asset turnover

Flight Stream Inc., a toy manufacturing company, encourages its employees to enjoy their work by taking on additional responsibilities or switching jobs with each other. It allows its employees immense flexibility in charting their own career path within the organization. Chris has worked at Flight Stream for eight years, but has never had a boss or supervised an employee. Which of the following is most likely true in this scenario?

B. Flight Stream Inc. has a flat organizational structure.

Which of the following reasons justifies the view that functional managers should be allowed to initiate strategic initiatives based on autonomous actions?

B. Functional managers are much closer to the final products, services, and customers than corporate- or business-level managers.

_____ is a process of closer integration and exchange between different countries and peoples worldwide.

B. Globalization

A company scientist at a biotechnology company decides to work on his own research project, hoping to eventually start his own firm, rather than on the project he was assigned. However, the company's stockholders are unaware of this situation. This is an example of a(n) _____ in the context of a principle-agent problem.

C. moral hazard

Which of the following statements is true about strategic groups?

C. Profitability varies between different strategic groups.

Pink Couture Inc. and Pink Blush Inc. are two companies in the apparel industry. While Pink Couture Inc. focuses on providing unique product features and superior customer service, Pink Blush Inc. focuses on low prices and minimal customer service. Both companies have been able to gain a competitive advantage. This is most likely because the companies have

C. Pursued distinct strategic positions

How are the two approaches, strategic planning and scenario planning, different from the strategy-as- planned-emergence approach?

C. Relative to strategic planning and scenario planning, strategy as a planned emergence model is a less formal and less stylized approach to the development of strategy.

Which of the following statements accurately describes a firm's resource stock?

C. Resource stocks are a firm's current level of intangible resources.

Which of the following accurately summarizes the difference between the resources and capabilities of a firm?

C. Resources are tangible and intangible; capabilities are intangible.

_____ precisely indicates how much of a firm's sales is converted into profits.

C. Return on revenue

_____ is the money shareholders provide in return for an equity share, which they cannot recover if the firm goes bankrupt.

C. Risk capital

Which of the following questions challenges managers to come up with strategic objectives that ensure future competitiveness?

B. How do we create value?

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?

B. How do we reduce the economic value created?

Although demand for IKEA's low-cost furnishings has increased, its annual store growth has slowed to fewer than ten new stores a year. Why has this happened?

B. IKEA's global supply chain has become bottlenecked.

In the smartphone industry, Google is a complementor to Samsung. Which of the following statements best explains why this is true?

C. Samsung's smartphones increase in value when they are preinstalled with Google's Android system.

Kolt Inc., a large and successful retail chain on the West Coast, decides to expand its operations across the U.S. Which of the following organizational structures should Kolt Inc. use?

C. multidivisional

When evaluating the sustainability of a firm's competitive advantage, which of the following statements is not true?

B. If managed effectively, existing core competencies can help sustain the competitive advantage indefinitely.

When a firm diversifies into different product lines and geographies, a _____ structure is preferred.

C. multidivisional

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.

Which of the following statements is true of top-down strategic planning?

B. In this process, the formulation of strategy is separate from implementation.

Which of the following starteies does twitter need to implement to increase competitive advantage?

B. Increase User base

Some of the best engineering and car companies are in Germany. Thus, it can be concluded that Germany has a _____ in the automobile industry.

C. national competitive advantage

_____ are best described as costs that occur due to political maneuvering by managers to control capital and resource allocation and the resulting inefficiencies stemming from suboptimal allocation of scarce resources.

B. Influence costs

_____ is best described as a situation in which one party is more informed than another, because of the possession of private information.

B. Information asymmetry

Rachel owns a large portion of GM Cube Inc.'s stocks. However, she is not employed by the company. In this scenario, Rachel is the company's

B. Internal Stakeholder

What best describes transferability of investor ownership in a public stock company?

B. Investors are allowed to trade shares of stocks.

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

B. Invoro will have a resource that is valuable but no longer rare.

Michael Porter's diamond framework is used to explain

C. national competitive advantage.

Which of the following is an advantage of the balanced-scorecard?

B. It allows managers to translate a firm's vision into measureable operational goals.

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?

B. It created a perception that owning its products was cool.

How did the strategic alliance between HP and DreamWorks Animation SKG affect HP?

B. It enabled HP to compete head on with Cisco's videoconferencing solution.

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?

B. It failed to refine its strategic position over time.

Which of the following is a disadvantage of a horizontal integration corporate strategy?

B. It increases the potential for legal repercussions.

Which of the following statements is true of organizational culture?

B. It is better for founder CEOs to create a relevant culture, structure, and strategy in the early stages.

In Rozinia Republic, the federal government owns and manages all the nuclear power plants. This is because the business would not be profitable if there was more than one supplier in the nuclear power industry. Which of the following industry competitive structures does the scenario best illustrate?

C. natural monopoly

Coca-Cola was primarily known for its core competencies in marketing, bottling, and distributing aerated drinks. However, with the success of Gatorade, Coca-Cola developed competencies in the development and marketing of its own sports drink, Powerade. Which of the following is true of Coca-Cola?

B. It is building new core competencies to protect and extend its current market position.

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?

B. It is likely that BC Inc. is better enabled than GN Corp. to gain and sustain a competitive advantage.

When Toyota wanted to secure a long-term supply of lithium, it had to create a bond of trust with an Australian company, Orocobre Ltd. Orocobre wanted to establish the bond of trust before making huge investments in specialized equipment required to extract the high-quality lithium. What did Toyota do to instill this trust?

B. It made a credible commitment by taking an equity stake in Orocobre.

What is the result of managers' pursuit of strategies that define value creation too narrowly in public stock companies?

B. It reduces the trust of shareholders in the organization as a vehicle for value creation.

Which of the following is true of a functional structure?

B. It relies on a relatively flat organizational structure.

Which of the following best explains why a blue ocean strategy is difficult to implement?

B. It requires the reconciliation of fundamentally different strategic positions—differentiation and low cost.

Which of the following is a feature of a multinational company pursuing a global- standardization strategy?

B. Its business-level strategy tends to be cost-leadership.

Which of the following statements is true of learning curves?

B. Learning curves can be observed in manufacturing processes and professional services.

Which of the following is an accurate statement about learning effects?

B. Learning effects involve the accumulation of output over time.

Zeda is a country of English-speaking people and has a very profitable economy. Which of the following countries is most likely to be the closest to Zeda in terms of cultural distance?

C. Segar, where people speak English and have a low standard of living

As the legal owners, _____ have the most legitimate claim on a company's profits.

C. Shareholders

Jamiro Inc. is a public stock company. Which of the following statements about the company best illustrates the fact that its investors have limited liability?

C. Shareholders of Jamiro are responsible to the company only for the capital they have invested.

Which of the following statements best supports the separation of ownership and control in publicly traded companies?

C. Shareholders own stocks but do not run the company.

Which of the following proves that GE's board of directors is significantly independent?

C. Sixteen of the 17 board directors are from outside the organization.

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?

C. Smart Feet will gain market share.

Which of the following real-world scenarios best exemplifies the use of organizational culture to build competitive advantage?

C. Southwest Airlines pilots sometimes help load baggage, which results in quick turnaround time.

_____ are best described as unique assets with high opportunity costs that have significantly more value in their intended use than in their next-best use.

C. Specialized assets

In ____, a firm frames a guiding policy to address the competitive challenge

C. Staretgy Formulation

_____ are best described as voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services to lead to competitive advantage.

C. Strategic alliances

What is the strategic management process?

C. Strategic leaders design a method to formulate and implement strategy.

_____ is described as an integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage

C. Strategic management

Trung has been an employee with PureEnergy Inc. for 15 years. He started with an entry-level job, and today he is a manager of an entire division. Over the years, Trung has acquired a reputation for doing the right things in the company. Hence, as an efficient leader, he is capable of effectively communicating and motivating his subordinates to work toward the company's vision and mission. According to the Level-5 leadership pyramid, which is the highest level of leadership Trung has reached so far?

B. Level 4

_____ is best described as a form of long-term contracting in the manufacturing sector that enables firms to commercialize intellectual property.

B. Licensing

_____ are best described as contractual alliances in which the participants regularly exchange codified knowledge.

B. Licensing agreements

Which of the following is a drawback of Porter's five forces model?

B. Managers cannot determine the changing speed of an industry or the rate of innovation.

According to Michael Porter, which of the following is a problem with many publicly traded companies?

B. Many publicly traded companies have defined value creation too narrowly in terms of financial performance.

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

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

Which of the following shows founder imprinting?

A. A company's founder defines and shapes her organization; the founder dies; the influence of the founder on the organization's culture persists for decades.

Which of the following best illustrates forward vertical integration?

A. A firm that manufactures and sells car engines to major automobile companies launches its own line of cars.

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.

Which of the following statements is true of the social responsibilities of a business?

A. A firm's ethical responsibilities go beyond its legal responsibilities.

Which of the following best defines duality in a board of directors?

A. A person holds both the role of CEO and chairperson of the board.

Although long-standing enemies, Apple and IBM formed an alliance partnership. How did this partnership benefit both Apple and IBM?

A. Apple's core competency with consumer services and IBM's core competency with business services complemented each other.

Which of the following real-world scenarios best exemplifies information asymmetry in a public stock company?

A. Based on a tip-off by a Goldman Sachs employee, the Galleon Group was able to sell its holdings in Goldman Sachs' stocks prior to the announcement.

Which of the following provides an example of a common drawback of a functional strategy?

A. Bert had a difficult time communicating efficiently with the manager of another department.

Which of the following real-world scenarios best exemplifies formalization?

B. McDonald's use of standard operating procedures across the world

Shortly after the small island of Balamia experienced multiple unexpected high-intensity earthquakes that caused massive destruction, many banks and insurance companies filed for bankruptcy. This left the economy of the country in a poor state. The natural calamity in Balamia best exemplifies

A. Black swan Event

Which of the following is an example of an organizational value?

A. Burtell Oil, Inc. increases the inspection of pipelines above the legal requirement to prevent oil spills.

Vijay is a firm believer in Milton Friedman's view of a firm's social obligations. With which of the following statements is Vijay most likely to agree?

A. Businesses can use their resources to create profit as long as they do so within the rules of the game.

Grey Designs Inc., a graphic design firm, has offices in New York, Texas, California, New Mexico, and New Jersey. Each of these offices is headed by a president who reports directly to Charles Grey, the CEO. The heads of the centralized HR, Finance, and Marketing teams report to Charles Grey as well. Managers in the various offices also report to the CEO directly. Based on this information, which of the following statements is most likely to be true?

A. Charles Grey has a wide span of control.

_____ is best described as cooperation by competitors to achieve a strategic objective.

A. Co-opetition

Which of the following key assumptions are innovations like Procter & Gamble's Connect + Develop based on?

A. Combining the best of internal and external R&D will more likely lead to a competitive advantage.

The Scoop, Ltd. is a magazine publishing company whose average return on invested capital is approximately 5 percent. Because magazine publishing is a declining industry, the industry average has been negative (-5 percent) for the last few years. In this scenario, The Scoop Ltd. has a

A. Competitive Advantage

Which of the following accurately describes how Netflix used innovation to gain a competitive advantage?

B. Netflix applied big data analytics to its user preferences to provide highly personalized viewing recommendations.

If the board of directors at GE decides to pursue a stakeholder strategy, should they change the ecomagination strategy?

B. No, they should not change the strategy because the strategy already helps them save costs while generating huge revenues.

While implementing strategic group mapping for the U.S. domestic airline industry, two strategic groups become apparent: low-cost, point-to- point airlines (Virgin Atlantic, Alaska Airlines, JetBlue, and Southwest Airlines) versus differentiated airlines using a hub-and- spoke system (American, Delta, and United). Which of the following statements is true about these two strategic groups?

A. Competitive rivalry between Virgin Atlantic and JetBlue is likely to be higher than that between American and Southwest Airlines.

In the luxury cruise industry, the small cruise lines Tropics Inc. and Sunset Inc. merged to form TropicalSunset Inc. After the merge, the competition between TropicalSunset Inc. and the two mega cruise lines, Pacifico and West Winds, has increased significantly. Which of the following statements best explains why this happened?

A. Competitive rivalry is strongest between firms that are within the same strategic group.

_____, which are incurred when pursuing a related-diversification strategy, are a function of the number, size, and types of businesses that are linked to one another.

A. Coordination costs

_____ is best described as a framework that helps firms recognize and address the economic, legal, social, and philanthropic expectations that society has of the business enterprise at a given point in time.

A. Corporate social responsibility

Susan is a strategist for the firm, DigiVision Inc., which produces high-quality HD movie cameras. This company needs a specific material for a new camera they are developing, which is manufactured in large quantities by a competitor called Tech Resources Inc. However, this material is difficult to trade for. Because of this, which of the following is most likely the best strategy for Susan to suggest?

A. DigiVision should acquire Tech Resources.

Why does Michael Porter recommend expanding the customer base of an organization in terms of the shared value creation framework?

A. Doing so could yield significant business opportunities that could improve the standard of living of the poor.

In the pyramid of corporate social responsibility, _____ responsibilities are the foundational building block.

A. Economic

_____ 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

_____ is best described as decreases in cost per unit as output increases.

A. Economies of scale

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.

_____ are best described as the value of the best forgone alternative use of the resources employed.

B. Opportunity costs

_____ are board members who are not employees of the firm, but frequently are senior executives from other firms or full-time professionals.

B. Outside directors

Which of the following management tools will help determine the external opportunities and threats that affect a firm?

B. PESTEL analysis

_____ describes a process in which the options one faces in a current situation are limited by decisions made in the past.

B. Path dependence

_____ indicates how fast a firm is collecting the credit amount extended by a firm to its customers.

B. Receivables turnover

_____ is best described as the process of reorganizing and divesting business units and activities to refocus a company in order to leverage its core competencies more fully.

B. Restructuring

Which of the following is not true of risk capital?

B. 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 top-down strategic planning and scenario planning?

B. Scenario planning helps create strategic plans that are more flexible, and thus more effective, than those created through the more static strategic planning approach.

All public companies listed on the U.S. stock exchanges must file a number of financial statements with the

B. Securities and Exchange Commission (SEC).

What does "limited liability for investors" imply in a public stock company?

B. Shareholders who provide the risk capital are liable only to the capital specifically invested.

Clear Calls Inc., a telephone service provider, has a large user base mainly because phone calls and messages between all Clear Calls users are free. When a person switches to a Clear Calls network, his or her entire network of family and friends is likely to switch to the same network to avail the benefit of free calls and messages. In addition, an existing user who gets a new user to register with Clear Calls Inc. is given a free wireless connection. This has helped to keep competition away from Clear Calls. In this scenario, which of the following factors is acting as an entry barrier for Clear Calls Inc.?

C. network effects

Which of the following statements is true of a multidomestic strategy?

A. Firms frequently use a multidomestic strategy when entering host countries with large and/or idiosyncratic local markets.

Fragra Inc., a company that manufactures and sells premium perfumes, is pursuing an international strategy. SaveMart Inc., a supermarket chain, follows a multidomestic strategy. Which of the following statements is most likely true of this scenario?

A. Fragra Inc. will sell the same products and services in both domestic and foreign markets, whereas SaveMarket Inc. will customize its product offerings to suit local requirements.

_____ are primarily responsible for decisions and actions within their respective departments like finance, human resources, marketing, and production in a strategic business unit.

A. Functional managers

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.

Hans is a strategist who wants to decide on the appropriate strategy to help his firm "go global." Which of the following should Hans consider while choosing his strategy?

A. He must be aware of the fact that despite globalization and the emergence of the Internet, firm geographic location has actually maintained its importance.

Which of the following is an advantage of using a functional structure when pursuing a cost- leadership strategy?

A. It allows a cost-leader to upgrade core competencies in manufacturing and logistics.

Why should managers using the M-form organizational structure to support a related- diversification strategy ideally concentrate decision making at the top of the organization?

A. It allows a high level of integration.

Why is following an unrelated diversification strategy especially advantageous in an emerging economy?

A. It allows the conglomerate to overcome institutional weaknesses in emerging economies.

Which of the following statements is true of an international strategy?

A. It enables firms to leverage their home-based core competencies in foreign markets.

Which of the following is a benefit of the transnational strategy?

A. It facilitates global learning and harnesses economies of location.

The average cost of production for a bottle of vitamin water in the industry is $4 while its average price is $7. StoreAll Inc. manufactures the same product for $3 per bottle and sells it for $7 per bottle. Which of the following statements is most likely true of StoreAll Inc. in this scenario?

A. It has competitve advantage in the industry

Which of the following is one of the features of an international strategy?

A. It is characterized by limited local responsiveness.

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.

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.

Which of the following expressions accurately describes market cap?

A. It is the product of the number of outstanding shares and the share price.

What was Goldman Sachs's rebuttal to SEC's claim that it defrauded investors?

A. It is up to the clients to assess the risks involved in any investments.

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.

What most likely happens when a firm optimizes its organizational structure to its current situation?

A. It plants the seed of subsequent failure: the tightly coupled system can break apart when internal or external pressures occur.

Plethora Inc., a well-established and reputed multinational enterprise (MNE), is headquartered in a highly developed economy. It wants to start its operations in United Bejukistan, which has been recognized as one of the less-developed nations in the world. How will this strategic move most likely affect Plethora Inc.?

A. It will be able to benefit from economic arbitrage.

Which of the following factors most effectively contributed to the success of Threadless in comparison to other companies with T-shirt designs, including American Eagle, Old Navy, and Urban Outfitters?

A. It's reliance on crowdsourcing

Why is the optimal organizational structure a multidivisional structure?

A. Its focus is on driving down costs.

While KFC focuses on international markets, its competitor, Chick-fil- A, focuses on the domestic U.S. market. What is the reason behind this strategic difference?

A. KFC has more financial resources than Chick-fil- A since it is a publicly traded stock company.

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.

_____ are best described as situations in which both partners in a strategic alliance are motivated to form an alliance for learning, but the rate at which the firms learn may vary.

A. Learning races

According to the Level-5 leadership pyramid, a manager turns into an executive who is capable of building lasting greatness into the organization through a combination of willpower and humility when he or she reaches

A. Level 5.

How is a firm's task environment different from its general environment?

A. Managers have some influence over external factors in the task environment; they have little direct effect over external forces in the general environment.

_____ 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

Opal, a recent fashion design school graduate, has received praise for her clothing designs from her peers and friends on social networking sites; this has inspired her to set up a store where she can design and sell apparel. After experiencing some success with sales, she recruits two employees to handle customers at the store. However, she handles other day-to- day affairs herself, while continuing to design clothes. Which of the following is likely to be a pitfall of this organizational structure established by Opal?

A. Once the firm starts growing and attracting more customers she is likely to feel overloaded.

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.

First movers often have several competitive benefits including

C. network effects.

In a radical innovation, a firm targets

C. new markets by using new technologies.

A(n) _____ occurs when firms enter into a partnership based on contractual agreements, which results in vertical strategic alliances that connect different parts of the industry value chain.

C. non-equity alliance

Amiware Inc., a manufacturer of ceramic cookware, has entered into a contractual agreement with Micoware Inc. The agreement involves vertical strategic alliances connecting different parts of the industry value chain. This arrangement between the two companies best illustrates a(n)

C. non-equity alliance.

The primary goal of a firm pursuing a blue ocean strategy should be to

C. offer a differentiated product or service at a low cost.

Pure Carat Inc. is a company that sells 24-carat gold biscuits to companies that manufacture jewelry. Since the company operates in an industry where many other suppliers sell standardized products, it can most likely

C. only achieve competitive parity.

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.

Which of the following types of organizations best helps match a differentiation strategy to a functional structure?

C. organic organization

To effectively implement a differentiation strategy, managers rely on a functional structure that resembles an organization that is highly

C. organic.

A firm's resistance to changes in the status quo is referred to as

C. organizational inertia.

Sara can be categorized under the late majority customer segment. Which of the following behaviors is she most likely to exhibit?

B. She will prefer to buy from well-established brands rather than unknown new ventures.

_____ provides a decision tool that enables a firm to act as a good corporate citizen by allowing its managers to recognize, prioritize, and address the needs of different groups of individuals who take personal interest in the firm's performance and survival.

B. Stakeholder impact analysis

Which of the following is an advantage that a private company enjoys over a public company?

A. Private companies are not required to disclose financial statements.

PureSource Pharma Inc. recently acquired BioChem Pharmaceuticals Inc. It now sells its own products along with the products originally sold by BioChem Pharmaceuticals. As a result, PureSource Pharma's sales force will also be marketing the acquired company's products. How will this horizontal integration most likely affect PureSource Pharma?

A. PureSource Pharma will lower its costs through economies of scale.

Which of the following statements is true of strategic initiatives?

A. Strategic initiatives can be the result of a response to external trends or come from internal sources.

About 20 years ago, Sturdy Light, Inc., produced a sturdy, lightweight backpack in a market that was rapidly growing. Sturdy Light became a leader in this market. Eventually, the backpack market reached the maturity stage and slowed down. However, by this time, Sturdy Light had developed a strong brand name and continued to steadily lead the market. Which of the following describes this scenario?

A. Sturdy Light was a star that developed into a cash cow.

Keeping in mind the five forces in the airline industry, which of the following best explains the situation in the industry?

A. Substitutes are readily available in the form of trains and buses, thus reducing the profit potential in the industry.

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.

____ is described as a set of goal directed actions a firm takes to gain and sustain.

B. Strategy

Through _____, a firm puts its guiding policy into practice by employing a set of coherent actions

B. Strategy Implementation

Why does strategy implementation often require changes within an organization?

B. Strategy implementation transforms strategy into actions and business models.

Which of the following statements accurately brings out the difference between tangible and intangible resources?

B. Tangible assets can be bought on the open market, whereas intangible assets cannot be easily purchased.

Which of the following statements is true of an equity alliance?

In an equity alliance, the partners frequently exchange personnel to make the acquisition of tacit knowledge possible.

Which of the following is a disadvantage of measuring firm performance through total return to shareholders and firm market capitalization?

Market volatility makes it difficult to assess firm performance through these measures, particularly in the short-term.

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?

D. $200

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?

D. $350,000

De Bruyne Inc., a publicly traded company, has ten members on its board. Of the ten members, six members are employees of the company and includes the CEO, who also chairs the board. The board has been failing in its responsibilities toward the shareholders who now want a new board. Assuming that the total number of board members remains constant, how many outside directors should the shareholders appoint to De Bruyne's board to achieve board independence?

D. 7

Which of the following strategies best illustrates a generic business strategy?

D. A decision to niche market the jewelry sold by a company while the apparel division under the same company sells its products through mass marketing

Which of the following accurately describes a common difference between a merger and an acquisition?

D. A merger tends to be friendly; an acquisition can be friendly or unfriendly.

Which of the following will most likely harm a MNE's reputation?

D. A sweatshop owned by a MNE has an explosion that kills hundreds of workers.

Which of the following does not explain why activist investors have more power over a firm than individual investors?

D. Activist investors have more legitimacy than individual investors.

Which of the following is an example of a product-oriented vision statement?

D. Andrea, Ltd. wants to be the best manufacturer of picture frames in the industry.

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?

D. Any advantage that one firm has will be short-lived.

Which of the following best describes a Level 5 manager in the Level-5 leadership pyramid?

D. Asoka is the CEO of Green Machines Inc.; he has helped his company in gaining and sustaining a competitive advantage through ethical decision making.

_____ are an agreed-upon code of conduct in business, based on societal norms.

D. Business ethics

_____ refers to the degree to which decision making is concentrated at the top of the organization.

D. Centralization

Underperformance relative to other firms in the same industry or the industry average results in a(n) _____ for a firm.

D. Competitive Disadvantage

Which of the following statements about competitive advantage is true?

D. Competitive advantage can be assessed by measuring accounting profit, shareholder value, or economic value.

How does availability of complements act as a value driver?

D. Complements add value to a product when they are consumed in tandem with it.

Which of the following is an implication of low interest rates?

D. Consumer demand will increase.

Which of the following is not true of corporate governance in public stock companies?

D. Corporate governance seeks to create a separation between ownership and control.

Which of the following summarizes the difference between corporate strategy and business strategy?

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

Which of the following ratios best expresses inventory turnover?

D. Cost of goods sold/Inventory

How is differentiation parity different from cost parity?

D. Differentiation parity deals with value not pricing.

Which of the following accurately describes GE's ecomagination initiative?

D. Ecomagination increases the perceived value it creates for its customers while lowering costs to produce and deliver "green" products and services.

Which of the following is an open innovation principle?

D. External R&D can create significant value.

State-level government agencies that check whether firms are meeting statutory safety measures in their production units are considered to be the firms'

D. External Stakeholders

Which of the following perspectives best supports the shared value creation framework?

D. Externalities such as pollution, wasted energy, and costly accidents actually create internal costs.

The working capital turnover of Tesva Systems Corp. is 6.0. What does this financial data suggest?

D. For every dollar Tesva Systems puts to work, the company realizes $6.00 of sales.

Frappe operates as a strategic business unit (SBU) under More or Less Inc., a home- furnishings manufacturer. From this information, it may be reasonable to infer that

D. Frappe is led by its own CEO (or equivalent general manager).

Which of the following scenarios best illustrates bundling?

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 examples describes the task of an alliance manager?

D. Fyodor trained the employees of his alliance partner in the skills needed to create a display for an e-notebook.

Which of the following best illustrates a merger between the two companies GD Inc. and VS Inc.

D. GD Inc. and VS Inc. join together to form a single new company called GDVS Inc.

Pioneer Pharma Inc. and GH Medicines Corp. are two competing firms in the pharmaceutical industry. While Pioneer Pharma Inc.'s vision is "to be a preeminent drug manufacturer in the industry," GH Medicines Corp.'s vision is "to make good health a reality for everyone around the world." Which of the following is an implication of these different visions?

D. GH Medicines will be more flexible than Pioneer Pharma when adapting to changing environments.

Which of the following statements accurately brings out the difference between monopolistic competition and an oligopoly?

D. In monopolistic competition, many firms compete against each other; in an oligopoly, there are few large firms competing against each other.

Understanding the Resource Allocation Process (RAP) will have large effects on shaping a firm's realized strategy. Which of the following is an example of such an allocation of resources?

D. Intel's rule to "maximize margin-per- wafer-start"

Which of the following statements is true of the balanced-scorecard?

D. It attempts to provide a holistic perspective on firm performance.

In which of the following ways does Zappos achieve organizational control?

D. It enforces that each group member's compensation depends in part on the group's overall productivity.

How does a sustainable strategy typically help a firm?

D. It helps the firm achieve positive results along the social and ecological dimensions.

Which of the following statements is true of a disruptive innovation?

D. It invades the market from the bottom up, by first capturing the low end.

Which of the following statements best describes groupthink?

D. It is a situation in which opinions coalesce around a leader without individuals critically challenging and evaluating that leader's opinions and assumptions.

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.

Which of the following is a disadvantage of the balanced-scorecard approach?

D. It provides limited guidance about which metrics to choose.

Which of the following is a primary feature of the five forces model?

D. It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.

Which of the following characteristics of McDonald's best supports the fact that it is a mechanistic organization?

D. Its job descriptions are very descriptive.

Hoptin Inc. is a public stock company. Which of the following best exemplifies the legal personality of the company?

D. Jessi Hoptin, the company's founder, died a few years ago, yet the company is doing well.

Jorge is part of a sales team. He effectively coordinates his tasks with others in the team and willingly contributes to their efforts in achieving the team's objectives. Thus, Jorge is in _____ of the Level-5 leadership pyramid.

D. Level 2

Which of the following managers in the Level-5 leadership pyramid are most capable of leading their organizations into great success by guiding the organizations toward building a sustainable competitive advantage?

D. Level 5

How did Marriott use economies of scope to achieve greater economic value than its competitors?

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.

During the period of Globalization 1.0, the mode of entry into foreign markets primarily involved

D. Multinational enterprises (MNEs) began to create smaller, self-contained replicas of themselves in a few key countries.

_____ define appropriate employee attitudes and behaviors.

D. Norms

Which of the following statements about strategy is not true?

D. Operational effectiveness and competitive benchmarking should be treated as strategy.

The _____ allows the scanning, monitoring, and evaluating of changes and trends in a firm's macro environment.

D. PESTEL framework

Which of the following acts in the Goldman Sachs-Galleon Group insider trading scandal is an egregious exploitation of information asymmetry?

D. Rajat Gupta providing information regarding Warren Buffet's impending multibillion-dollar injection into Goldman Sachs

Which of the following scenarios best illustrates horizontal integration?

D. Regal Autos Inc. joins with Marcus Motors Inc., one of its direct competitors.

Which of the following describes a firm in the Globalization 1.0 stage?

D. Robinson Inc. has a base office in New York and distributes some of its products overseas.

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?

D. SWOT analysis

The three financial ratios that constitute return on revenue are Cost of goods sold/Revenue, Research & Development expense/Revenue, and

D. Selling, general, administrative expense/Revenue.

In Strategy Highlight 2.2, what type of strategy did Diana, the Starbucks store manager in southern California, use to develop the new iced beverage for her store?

D. She used an emergent strategy.

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?

D. Shoes Cult has a competitive advantage over Aros.

Which of the following statements accurately describes social entrepreneurs?

D. Social entrepreneurs are those who consider financial, ecological, and social metrics to evaluate their firm's performance.

_____ describes the degree to which a task is divided into separate jobs.

D. Specialization

Javier, a retired CEO, invests capital in a start-up company that creates budgeting software. He mentors the entrepreneur and the employees of the company because he wants the company to perform well and survive in the market. Thus, Javier is the start-up company's

D. Stakeholder

FindFor Inc. is an e-commerce retail firm that sells a variety of merchandise online. Through services like cash on delivery, easy return, and online tracking, the company has created more customer value than its competitors (brick-and- mortar businesses) at the same price. Also, the company's costs are substantially low due to minimal investment in operation and administration. In this scenario, FindFor Inc. has most likely been able to provide superior value and cost control through

D. Strategic Positioning

Why is strategy considered to be the science of success and failure?

D. Strategies use principles that can be applied universally to all organizations.

In which of the following situations is the power of suppliers high in an industry?

D. Suppliers' industry is more concentrated than the industry it sells to.

patterson foods was the first company to start selling energy bars in its country - A product that gained popularity among diverse groups. Soon, other companies started to sell their own brands of energy bars, thereby giving patterson foods ample competition. In response, Patteson foods decided to limit its variety of energy bars to only four. However it ensured that these four varieties were low in calories and low in cost. With this innovation, Patterson foods consitstently outperformed its competitiors for ten years. In this scenario, Patterson Foods maintained a _____

D. Sustainable Competitive Advantage

Which of the following is an example of social entrepreneurship?

D. The committee approved the new formula for an all-purpose cleaner because it cleaned as well as other cleaners and used organic ingredients.

How has China been affected by its one-child- per-family policy and appreciation of its currency?

D. The country's advantage in low-cost manufacturing has reduced.

Which of the following statements best supports the view that GE's ecomagination strategy is in line with the shared value creation framework?

D. The ecomagination strategy allows GE to produce "green" products while increasing revenue and competitive advantage.

What is most likely to happen if a firm relies too long on a competency without honing, refining, and upgrading as the firm and the environment change?

D. The firm's culture can turn from a core competency into a core rigidity.

Which of the following is a competitive benefit experienced by the first mover firm in an industry?

D. The first mover will be able to reduce costs through economies of scale.

How does W. L. Gore exemplify founder imprinting?

D. The four core values articulated by Bill Gore guide the company and its associates to this day.

Which of the following is most likely an implication of new firms entering an industry?

D. The incumbent firms will spend more to satisfy their existing customers.

The compact disk (CD) industry is in the maturity phase of its industry life cycle. What conditions prevail for an industry in this stage?

D. The industry structure is an oligopoly with only a few large firms.

While the industry for e-book readers is in its growth stage, the industry for landline telephones is in the decline stage of the industry life cycle. Which of the following can be inferred from this?

D. The number of competitors in the e-book reader industry will be larger when compared to the landline telephone industry.

Which of the following strategies best illustrates a functional strategy?

D. The production manager at the apparel division of Wilder Style Co. has decided that the department will hire contract workers for three months to meet the temporary demand.

Which of the following is a drawback of pursuing a multidomestic strategy?

D. The strategy is costly and inefficient because it requires the duplication of key business functions across several countries.

Which of the following is an accurate statement about value chain analysis?

D. The value chain concept can be applied to all firms, including service firms.

Why is the phase after the growth stage of the industry life cycle referred to as the shakeout stage?

D. The weaker firms are forced out of the industry in this stage.

What is most likely to happen when there is too much money in an economy?

D. There is an increase in prices.

What are poison pills?

D. They are defensive provisions that kick in should a buyer reach a certain level of share ownership.

Which of the following statements is true of strategic alliances?

D. They are most beneficial when they join together resources and knowledge in a combination that obeys the VRIO principles.

Which of the following is not true about the members of the board of directors in a public stock company?

D. They are not responsible to shareholders.

Which of the following is a disadvantage of equity alliances?

D. They can entail significant investments.

Which of the following statements is true of technology enthusiasts?

D. They enjoy using beta versions of products and providing feedback to companies.

Which of the following is a drawback of joint ventures?

D. They necessitate the sharing of rewards between the partners.

Which of the following statements is true of the triple-bottom- line?

D. Three dimensions, economic, social, and ecological, make up the triple-bottom- line.

TopDrawer Inc. has a board of directors that consists of seven members. Which of the following is most likely an accurate statement about TopDrawer's board of directors?

D. TopDrawer's board of directors evaluates the firm's strategic initiatives but does not include any employees of the firm.

Which of the following statements is true of transaction costs?

D. Transaction costs are necessary to explain and predict the boundaries of a firm.

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.

In late 2014, Uber senior executive Emil Michael was heard to say that Uber should spend a million dollars to hire private investigators to dig up dirt on journalists who wrote damaging pieces on Uber. When the remarks became public, he apologized. How did Uber's CEO deal with Michael?

D. Uber's CEO refused to discipline Michael.

How did Virgin America enter the airline industry despite the industry's notoriously low profitability?

D. Virgin America offered low-cost service between major metropolitan cities on the American East and West coasts.

_____ 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.

D. Wholesale

Red Empire Inc., a large multinational company owned by two partners, is active in the petroleum, capital market, chemicals, steel, beverages, hospitality, airlines, education, automobiles, and consumer electronics industries. The company has multiple brands and a large product portfolio under its banner. Which of the following terms would best describe this company?

D. a conglomerate

Which of the following examples uses a focused differentiation strategy?

D. a cosmetics brand that offers superior-quality skin lotion priced at 100 dollars per bottle

Which of the following firms is least integrated?

D. a firm that buys all the required raw materials from multiple external vendors

Which of the following accurately describes an organic organization?

D. a flexible organization that fosters fast decision making and high employee motivation

To keep track of the latest developments in computing, Lenovo's research centers are located in China, U.S.A., and Japan. Also, to benefit from low-cost labor and reduced shipping costs, the company's manufacturing facilities are in Mexico, India, and China. Which of the following strategies would require Lenovo to organize its operations worldwide in order to develop uniform products for its domestic and foreign markets?

D. a global-standardization strategy

Which of the following best illustrates physical-asset specificity?

D. a machine solely designed to give a candy its trademarked shape

Which of the following best illustrates an equity alliance?

D. a partnership in which RedGate Insurance Inc. has a 40 percent ownership claim in TwinTrust Finance Inc.

Which of the following is an example of explicit knowledge?

D. a research summary

Which of the following is not a stakeholder attribute that managers consider during stakeholder impact analysis?

D. a stakeholder's liquidity

Process innovation is more important than product innovation during the growth stage because

D. a standard, in terms of engineering features and design choices, has been set across the industry.

Shine Enterprises Inc. is a large financial conglomerate that operates in more than 50 countries and employs over 80,000 people across the world. It operates through multiple regional product divisions, which tend to function as autonomous profit-and- loss centers. This allows the company to reap significant economies of scale. Though each division acts as an autonomous firm with its individual regional leaders, frequent sharing of knowledge between the divisions allows for global learning. These factors help the company reconcile product and service differentiations at low cost. Which of the following strategies does Shine Enterprises Inc. most likely use?

D. a transnational strategy

Which of the following strategies must a multinational enterprise (MNE) use when it wants to pursue an integration strategy at the business level by attempting to reconcile product and/or service differentiations at low cost?

D. a transnational strategy

In Eli Lilly's Office of Alliance Management, the _____ is a senior, corporate-level executive responsible for high-level support and oversight.

D. alliance champion

Broadview Company integrated certain important functions of Widget.com with Widget, while keeping other functions independent. To support this integration, the president of Widget shifted compensation incentives for both senior teams to accomplish joint goals rather than to focus solely on each business unit's performance. This scenario best exemplifies a(n)

D. ambidextrous organization.

The Beacon is a newspaper that sold print copies of its paper in a medium-sized town in Kansas for more than 100 years. Recently, the Beacon signed a deal with IntelNews Inc. to present the paper digitally to homes and businesses. This example shows

D. an industry convergence.

Opula Inc., a luxury car company, sells the same cars and offers the same superior services in both its home country and foreign markets. The market it operates in faces low pressures for both local responsiveness and cost reductions. Which of the following strategies within the integration-responsiveness framework does Opula Inc. most likely pursue?

D. an international strategy

DigitalHealth Electronics Inc. is a company that builds diagnostic devices. It was the first company to develop a compact MRI scanner by reconfiguring the components of the MRI technology. This smaller and user-friendly version of the huge MRI scanner created demand from small hospitals, nursing homes, and private practice doctors who were earlier dependent on the scanning machines in large hospitals. Which of the following types of innovations does this scenario best illustrate?

D. architectural innovation

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

D. availability of complements.

Soapsuds Inc., a manufacturer of cleaning agents, supplies its products to All Needs Inc., a supermarket chain. It demands that All Needs create more shelf space in its stores for Soapsuds' products. However, All Needs Inc. refuses to do this. Instead, it decides to produce its own range of cleaning agents with its own label "All Wash." In this scenario, All Needs Inc. has exercised its bargaining power as a buyer through

D. backward integration.

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?

D. best-selling novel; screenwriter's experience adapting novels

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?

D. better expectations of future resource value

The transnational strategy is similar to a(n) _____ strategy because they both focus on product differentiation and low costs.

D. blue ocean

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?

D. blue ocean strategy

Scenario planning typically begins with managers

D. brainstorming to identify multiple plausible futures.

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?

D. brand name

In 2007, Salesforce.com recognized an emerging market for platform as a service (PaaS) offerings and developed a new competency in delivering software development and deployment tools. This allowed its customers to either extend their existing CRM offering or build completely new types of software. This is an example of

D. building new core competencies to create and compete in markets of the future.

Vehmo Inc. is an automobile company whose core competency lies in manufacturing petrol- and diesel-based cars. The company realizes that more of its potential customers are switching to electric cars. The R&D department of the company acquires competencies in developing electric cars and launches its first hybrid car. In this scenario, Vehmo is primarily

D. building new core competencies to protect and extend current market position.

T & R Autos Inc. is a large conglomerate that operates in 12 different countries. The corporate executives at the headquarters have decided that the company's objective for the next two years will be to increase its customer equity. Based on this guideline received from the top management team, the product leader of the home appliances division has decided to adopt a cost-leadership strategy in all his 12 units. Thus, the decision made by the product leader best illustrates a _______ strategy.

D. business

The regional head for Creative Design Inc. in Boratania has decided to sell the company' products directly through company-owned stores because the distribution system in the market is primitive. In six other markets, however, the company will continue to operate through a franchise system. Thus, this decision made by the regional head at Boratania will be considered as a _____ strategy.

D. business

The translation of strategy into action takes place in the firm's _____, which details the firm's competitive tactics and initiatives.

D. business model

Corporate executives at LikeReal, Inc. decide to compete in the remote model airplane industry by making the largest model planes available. By doing this, they completed part of their

D. business strategy.

How was Netflix able to outperform both Hulu and Amazon?

D. by focusing its resources on producing high-quality content for content streaming

How has Apple been able to sustain its competitive advantage in the smartphone industry?

D. by regularly introducing incremental improvements in its products

How does horizontal integration within an industry affect the surviving firms?

D. by strengthening the bargaining power of the surviving firms vis-à- vis suppliers and buyers

Neville and Andre are customer care employees at JPN Care. In between calls, Neville and Andre spend time on Facebook and YouTube. The relaxed guidelines at JPN allow them to do that. However, sometimes, they knowingly avoid answering calls or keep customers on hold, while they check their social networking accounts. Such behavior

D. can be stopped by implementing performance incentives and strict control mechanisms.

Organizational and managerial skills that find their expression in a company's structure, routines, and culture are referred to as

D. capabilities.

The increasing availability of external options to commercialize ideas that were previously shelved is one of the factors that led to the shift from the

D. closed innovation to open innovation.

Which of the following is primarily a value driver?

D. complements

When a firm does not have the resource required for pursuing a growth strategy, and if the resource in question is not easily tradable, the implication for the strategist is most likely to

D. consider an outright acquisition.

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

D. core competency.

GM's insistence on sticking to a bureaucratic culture combined with its M-form structure and its subsequent failure to adapt to changing customer preferences for more fuel-efficient cars, produce higher quality, and create innovative designs best exemplifies

D. core rigidity.

Strategic leadership pertains to the use of power and influence by _____ to direct the activities of others when pursuing an organization's goals.

D. corporate executives

Due to political instability in the country of United Mapa, the strategic leaders at the headquarters of FT Supplies Inc. have decided to divest the company's business from the foreign market in United Mapa. This decision would be applicable to all the business units of FT Supplies Inc. operating in United Mapa. Thus, this is a

D. corporate strategy.

Firms pursuing a differentiation strategy primarily seek to

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

When two neighboring, democratic countries that are part of a trading bloc follow different religions and social norms, they most likely have high ______ distance.

D. cultural

Which of the following competitively important assets is typically excluded from a firm's balance sheet?

D. customer experience

Demand for traditional fast-food providers such as McDonald's, Burger King, and Wendy's has been on a decline in recent years. Consumers have become more health conscious and demand has shifted to alternative restaurants like Subway, Chick-fil- A, and Chipotle. Attempts by McDonald's and Wendy's to steal customers from one another include frequent discounting tactics such as dollar menus. Such competitive actions are indicative of

D. cutthroat competition.

In the final step of the stakeholder impact analysis, a firm

D. decides a course of action to address the stakeholders' concerns.

In the context of SWOT analysis, which of the following best exemplifies a firm's internal weakness?

D. decline in the firm's market share

When applying the five forces model, the first step should ideally be

D. defining the relevant industry.

Due to dense urban living conditions, hot and humid summers, and high energy costs, it is not surprising that Japanese customers want small, quiet, and energy-efficient air conditioners. Which feature of Porter's diamond framework does this scenario best exemplify?

D. demand conditions

As a start-up company, Virtue Mobiles Inc. entered the low end of the highly competitive cell phone industry with its low-cost smartphones. Initially, the company was able to sell its inferior technology due to its low prices. Over the years, however, its rate of technology improvements increased above the industry standards. This helped the company to create a strong strategic position for its smartphones in the high-end segment and claim a premium price. Which of the following types of innovation does this scenario best illustrate?

D. disruptive innovation

Digital photography replacing film photography would be an example of a(n)

D. disruptive innovation.

Futura Inc. introduced an automobile that could run completely on electricity for longer periods of time than any other electronic or hybrid automobile. Also, this vehicle was less expensive than the vehicles of competitors. On the downside, it required more repairs than the competition's automobiles. However, the technology of the Futura vehicle improved rapidly, thereby improving its repair record. This example describes

D. disruptive innovation.

In the context of the Boston Consulting Group (BCG) growth-share matrix, if one of the strategic business units of a conglomerate is categorized under dogs, the management should

D. divest the strategic business unit.

A(n) _____ is best described as the strategic option that top managers decide most closely matches the current reality and which is then executed.

D. dominant strategic plan

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.

D. dynamic capabilities perspective

At the time when Kevin decided to purchase a tablet computer, the product had just become accessible to the mass market. He purchased the tablet only after he was completely convinced that the benefits it would offer him would far exceed its price. Also, he waited for his friends to try the product and popular gadget television shows to endorse it. Which of the following customer segments does Kevin best represent?

D. early majority

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

D. economic value created.

Which of the following is primarily a cost driver?

D. economies of scale

Hewlett-Packard was not able to maintain its competitive advantage because it did not

D. effectively address the challenges of mobile computing.

Which of the following is not an example of a black swan event?

D. election of President Reagan

Top-down strategic planning works best when the

D. environment does not change much.

A(n) _____ is best described as a partnership in which at least one partner takes partial ownership in the other partner.

D. equity alliance

The partnership between Toyota and Tesla Motors, in which Toyota has made a $50 million investment in the California startup company to learn new knowledge and gain a window into new technology, is an example of a(n)

D. equity alliance.

Managers use the AFI strategy framework primarily to

D. explain and predict differences in firm performance.

Which of the following entry modes was used extensively in Globalization 1.0 stage?

D. exports

Organic Food Inc., a multinational company, relies on its media partner Radio Plus to regularly advertise its offers, sales, and new products. Radio Plus is invested in this relationship because it generates most of its revenue from advertising Organic Food's products. In this scenario, Radio Plus is Organic Food Inc.'s

D. external stakeholder.

Sun Inc., a vendor, regularly supplies pallets to Octangle Corp. for its shipping business. Therefore, Sun Inc. is Octangle Corp.'s

D. external stakeholder.

Which of the following terms or phrases best characterizes Zappos' organizational structure?

D. extremely flat

Which of the following contributed the most to JCPenny's failed blue ocean strategy?

D. failure to combine a cost-leadership position with a differentiation position

A differentiation strategy works best when a

D. firm has intangible resources, is able to pass on increases in supplier cost to the customer, and its differentiation appeal creates customer loyalty.

According to Alfred Chandler in his book Strategy and Structure, implementing a successful strategy depends on having an organizational structure that is _____ enough to accommodate the formulated strategy and future growth and expansion.

D. flexible

Which of the following features helps match a cost-leadership strategy to a functional structure?

D. focus on economies of scale

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

D. focused differentiation strategy.

Which of the following is an ineffective practice in alliance management?

D. focusing on developing an alliance-management capability in isolation

A typical college of business (or school of management) has several areas such as management, marketing, finance, accounting, MIS, and so on. This is an example of a(n) _____ structure.

D. functional

Strategies developed at the departmental level, such as the accounting, human resources, production, and marketing departments, within a strategic business unit are referred to as _____ strategies.

D. functional

Which of the following organizational structures matches best with an international strategy?

D. functional

To implement specific business strategies, general managers of strategic business units rely on

D. functional managers.

A firm's economic responsibilities are primarily directed toward

D. gaining and sustaining competitive advantage.

Creating resources that meet the VRIO criteria is strategically important to a firm because it

D. helps the firm to gain and sustain a competitive advantage.

What element of organizational structure deals with positioned-based reporting lines?

D. hierarchy

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?

D. high costs involved in imitation

Which of the following is a feature of an oligopolistic industry structure?

D. high entry barriers

Which of the following is a feature of an organic organization?

D. high span of control

In the Boston Consulting Group (BCG) growth-share matrix, strategic business units categorized under dogs

D. hold a small market share in a low-growth market.

A fragmented industry is made into a consolidated industry through

D. horizontal mergers and acquisitions.

The first step in stakeholder impact analysis involves

D. identifying the stakeholders that currently have, or potentially can have, a material effect on a company.

In which of the following situations is a company that exists in the telecommunications industry most likely to face the highest threat of entry?

D. if the industry has recently become deregulated

The four-step innovation process ends with

D. imitation.

Due to several black swan events in the past, the

D. implicit trust relationship between the corporate world and society at large has deteriorated.

Large companies, such as AT&T, IBM, and GE, have been shifting their knowledge landscape from closed innovation to open innovation because of the

D. increasing supply and mobility of skilled workers.

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?

D. inferior results

In the market for used cars, which of the following is a reason behind the crowding out of desirable cars by lemons or inferior ones?

D. information asymmetry

What is the term used to describe a situation in which a manager of a company has more inside information than an investor of the company?

D. information asymmetry

Which of the following drivers simultaneously increases value while lowering cost?

D. innovation

Dmitri is a senior manager for the firm Kopney Inc. Because of his experience, he has been appointed to the board of HKS Inc., even though he doesn't work for this firm. He also serves on the boards of several other companies. Dmitri is a(n) _____ for Kopney and a(n) _____ for HKS.

D. inside director; outside director

Japanese and European engineering companies entered China to participate in building the world's largest network of high-speed trains worth billions of dollars. Companies such as Kawasaki Heavy Industries (Japan), Siemens (Germany), and Alstom (France) were joint- venture partners with domestic Chinese companies. These firms now allege that the Chinese partners built on the Japanese and European partners' advanced technology to create their own, next-generation high-speed trains. This example best highlights the _____ that firms can experience when expanding overseas.

D. intellectual property exposure

Given the accelerated pace of technological change, in combination with deregulation, globalization, and demographic shifts, a firm will only be successful today if its

D. internal strengths change with its external environment in a dynamic fashion.

Because keeping cost low is critical to IKEA's value innovation, it switched from a(n)

D. international strategy to a global-standardization strategy.

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.

D. inventory turnover

Serena is the CEO of Pedalo Inc., a publicly traded company. The shareholders want Serena on the board of directors despite her recent appointment as the CEO. This decision of the shareholders is most likely because Serena

D. is likely to provide the board with valuable inside information.

EveningStar Inc. and The Luxur Group have together established The Luxur Star Group of hotels. EveningStar owns 49 percent and The Luxur Group has a 51 percent share in The Luxur Star Group of hotels. However, the management of The Luxur Star Group of hotels is separate from its parent companies. What alliance type does this scenario best illustrate?

D. joint venture

Dow Corning is a company owned by Dow Chemical and Corning. This is most likely an example of a(n)

D. joint venture.

When a stand-alone organization is created and owned by two or more parent companies together, the strategic alliance is referred to as a(n)

D. joint venture.

Which of the following types of strategic alliances is the least common in terms of frequency?

D. joint ventures

The government of Filvia has mandated that the standard minimum wage in the country be increased to $8,000 per year. This has ensured that all firms in the country pay their employees at least $8,000 per year, which has brought about a higher standard of living for the people of Filvia. Which of the following factors in a firm's general environment does this mandate best indicate?

D. legal factors

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?

D. low-cost input factors

United Nerumbia and Fernsland are two neighboring countries with strong economic disparities. However, both the countries share a common national language and the same political ideologies. The relationship between these two countries will most likely affect the trade of

D. luxury items manufactured in United Nerumbia.

The risk of intellectual property appropriation increases when companies follow a multidomestic strategy because products are

D. manufactured locally.

According to the value chain analysis, which of the following is a primary activity?

D. marketing and sales

Remote Inc. is a notebook manufacturing company based in Ohio. Remote's main market is Ohio. It aims at providing its products at better prices than its competitors. Which of the following structures is Remote Inc. likely to use if it has functional setup?

D. mechanistic

An industry has many firms that compete in it. While products between competitors tend to be similar, they are by no means identical. As a consequence, managers selling a product with unique features tend to have some ability to raise prices. This type of industry is an example of

D. monopolistic competition.

Curry Rush is a premium Asian restaurant chain that differentiates itself from a large number of competitors by providing exclusively organic Vietnamese cuisine. It has some pricing power because it provides differentiated products and therefore, has some entry barriers in place. In this scenario, Curry Rush is most likely operating in a(n)

D. monopolistically competitive industry.

In principal-agent relationships, _____ describes the difficulty of principals to ascertain whether agents have really put forth their best efforts.

D. moral hazard

Rajat Gupta's role in providing inside information to Galleon Group for the benefit of Galleon Group's stockholders and himself is an example of

D. moral hazard.

Which of the following motivations for business growth involves principal-agent problems?

D. motivating managers

DigiGames Inc. established itself as the foremost producer of computer games. However, as the market for these games moved from laptop computers to cell phones based on cloud applications, DigiGames failed to adapt its games enough to this new environment. As result, the firm soon lost its competitive advantage. Which of the following best describes this scenario?

D. movement from core competency to core rigidity

A(n) _____ arises out of the combination of high pressure for local responsiveness and low pressure for cost reductions.

D. multidomestic strategy

Jane is the CEO of a clothing brand, Diva Rule Inc., which has retail stores and production units in five different countries. The firm's shareholders ensure the proper management of Diva Rule Inc. through their appointed board of directors. In this scenario, Diva Rule Inc. is most likely a

D. multinational enterprise.

NextDoor is an instant messaging application for smartphones. New smartphone users find it easier to connect with friends and relatives through this mobile app when compared to other similar instant messaging applications. Hence, it has the largest user base in the industry. Thus, NextDoor app's value has increased primarily due to its

D. network effects.

Which of the following sources of differential appeal is least effective in helping a firm sustain its advantage?

D. observable product features

India has been able to carve out a competitive advantage in business process outsourcing (BPO) primarily because

D. of an abundance of well-educated, English-speaking young people.

Equity alliances are less common than non-equity alliances because they

D. often require larger investments.

The telecommunication industry of United Canava is primarily dominated by three large firms: AD Telecom Inc., Mystic Telecom Corp., and Total Talk Inc. Instead of cutting prices competitively, these firms have resorted to non-price competition through branding and product differentiation. Which of the following industry competitive structures are these companies most likely in?

D. oligopoly

Which of the following is not competitive strategy?

D. operational effectiveness

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

D. opportunity cost.

Fast Call Inc. is a pharmaceutical company that has many breakthroughs in medicine to its credit. Unlike many other pharmaceutical companies, Fast Call has a relaxed work environment where employees are free to discuss projects with each other. Employees are encouraged to choose the projects that interest them; communication between team members and their supervisors is open and easy. Because of the company's work culture, its employees feel motivated to work harder and display more entrepreneurial behaviors. In this scenario, Fast Call Inc. is most likely an organization that is

D. organic.

During an AFI planning session, the managers of the Fukuhara Motorcyle Corporation decided to place various stages of production in different countries. By doing this, what issue did the firm address?

D. organizational design

The management of Wong Industries showed a commitment to ______ by increasing the salary of many female employees to meet its goal of having equal pay for women and men who perform comparable work.

D. organizational values

Stellar Products Inc. is a U.S.-based consumer electronics company. It owns smaller firms in Japan and Taiwan where most of its cell phone technology is developed and manufactured before being released worldwide. Which of the following alternatives to integration does this best illustrate?

D. parent-subsidiary relationship

Which of the following alternatives on the make-or- buy continuum allows for most integration?

D. parent-subsidiary relationship

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

The society and the shareholders just expect, and do not mandatorily require, a firm to

D. pay its workers more than the minimum living wage.

In which of the following industry competitive structures do selling firms have the lowest pricing power?

D. perfect competition

Which of the following responsibilities results from a society's mere expectations of a business and not because the society and the shareholders mandatorily require the business to demonstrate it?

D. philanthropic responsibilities

Which of the following is part of Geert Hofstede's cultural dimensions?

D. power distance

For a firm pursuing a global-standardization strategy, which of the following bases of competition becomes its primary weapon?

D. price

Clare, the CEO of Femica Inc., reports to the board of directors appointed by the shareholders of Femica. Based on shareholder suggestions, the board ties Clare's compensation to the performance of Femica. Due to this pressure, Clare begins devoting extra time to projects and undertakes other activities to ensure that she has job security and that she receives adequate compensation. This conflict between Clare's interests and the board's interests best illustrates a(n)

D. principal-agent problem.

An individual who is part owner of a company and hires another individual to act on his or her behalf is referred to as a(n)

D. principal.

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?

D. production systems that reduce costs by 30 percent below the current industry standards

Which of the following is not an example of a software company's external stakeholder?

D. project managers

Jake's Taxi Service is a new entrant to the taxi industry. It has achieved success by staking out a unique position in the industry. How did Jake's Taxi Service mostly likely achieve this position?

D. providing long-distance cab fares at a lower rate than competitors; servicing the same area as competitors

TimeEnough Inc. entered the low-priced digital watch market several years ago. This firm's earnings have been unsteady, but might be growing. According to the BCG growth matrix, TimeEnough is a

D. question mark.

Strategic business units that have a relatively low market share but have the potential to grow are best categorized under _____ in the Boston Consulting Group (BCG) growth-share matrix.

D. question marks

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.

D. rare

A _____ is best described as an approach to strategic decision making that breaks down a larger investment decision into a set of smaller decisions that are staged sequentially over time.

D. real-options perspective

Luxura Inc. is a large cosmetics company that made an initial small investment in a start-up company, GreenDream, that was developing an organic face lotion. This gave Luxura controlling interests in the start-up company. However, GreenDream soon began to have financial difficulties because of principal-agent problems. As a result, Luxura did not invest in the next stage of development and pulled out of the company. This approach to strategic alliance is referred to as a

D. real-options perspective.

SmallWorld Inc. is a global Internet company that offers country-specific variations of its sites, keeping in mind the linguistic and religious differences between the countries. SmallWorld Inc. is most likely doing this to

D. reduce its cultural distance from the other countries.

When a firm pursues a harvest strategy, it

D. reduces investments in product support.

Toyota's global success in the 1990s and early 2000s was based to a large extent on a network of world-class suppliers in Japan. This tightly knit network allowed for fast two-way knowledge sharing—this in turn improved Toyota's quality and lowered its cost, which it leveraged into a successful blue ocean strategy at the business level. This example shows the effectiveness of

D. related and supporting industries/complementors.

In 2009, ExxonMobil bought XTO Energy, a natural gas company, for $31 billion. XTO Energy is known for its core competency to extract natural gas from unconventional places such as shale rock—the type of deposits currently being exploited in the United States. ExxonMobil hopes to leverage its core competency in the exploration and commercialization of oil into natural gas extraction. Based on this example, ExxonMobil is engaging in

D. related-constrained diversification.

A strategy of _____ will be most beneficial for a firm to enhance its overall corporate performance.

D. related-linked diversification

Evara Inc. started as a luxury brand for designer apparel. Soon, the company expanded by launching its own line of premium perfumes, watches, bags, and home furnishings. This expansion allowed the businesses under the company to share a few, if not all, of the common competencies in products, services, technology, and distribution. Which of the following corporate strategies is Evara pursuing in this scenario?

D. related-linked strategy

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?

D. resource immobility

To make the SWOT analysis an effective management tool, a strategist must first

D. scan a firm's internal and external environments.

Which of following practices of a firm satisfies its ethical responsibilities?

D. selling vaccines at a subsidized price in a less developed country even though this results in reduced shareholder returns

Medetect Inc. is a large firm involved in the highly competitive market of high-tech medical equipment. In this market, smaller firms that focus on research are constantly making new technological developments. Which of the following approaches would best serve the needs of Medetect?

D. serial acquisitions

Larry's Auto Repair is a small business in which the founder, Larry, makes most of the important strategic decisions as well as runs the day-to- day operations. He has three mechanics and a financial secretary working for him. Based on this scenario, Larry's Auto Repair has a(n) _____ structure.

D. simple

A customer-oriented vision statement focuses employees to think about how best to

D. solve a problem for a consumer.

If a company wants to gain a competitive advantage in a highly competitive industry, it should ideally

D. stake out a unique position within the industry.

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

D. strategic equivalence.

Which of the following forces was not originally a part of Michael Porter's fives forces model?

D. strategic role of complements

A _____ is a graphical depiction of a company's relative performance vis-à- vis its competitors across the industry's key success factors.

D. strategy canvas

Which of the following stages in the AFI strategy framework involves designing a business, corporate, and global strategy?

D. strategy formulation

A firm sources intermediate goods and components from in-house suppliers as well as outside suppliers. In a similar fashion, another firm sells its products through company-owned retail outlets and through independent retailers. Both of these examples demonstrate

D. taper integration.

Apple and Nike have their own retail outlets and also use other independent retailers, both the brick-and- mortar type and online, to sell their products. This is an example of

D. taper integration.

A consumer electronics company is in the process of evaluating whether it should pursue an internal development strategy or an external growth strategy. To make this decision, the management needs to assess whether the company's internal resources are superior to those of competitors in the targeted area. Which of the following strategic management models would be most useful in this assessment?

D. the VRIO framework

Which of the following frameworks used to measure competitive advantage relies on both an internal and an external view of a firm?

D. the balanced-scorecard model

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?

D. the company's machinery

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?

D. the company's chemical patents

Which of the following is an example of an internal transaction cost?

D. the cost of maintaining a production unit

Which of the following is not an accurate expression of the economic value created per unit of a product sold?

D. the difference between the price charged and the firm's cost

In public stock companies, which of the following expectations of principals is most likely to lead to principal-agent problems?

D. the expectation that the agent will act in the principal's best interest

A firm's strategic position is likely to be strong when

D. the gap between the value the firm's product generates and the cost to produce it is large.

Who among the following is responsible for making business strategies in a large conglomerate?

D. the general managers of individual business units

The conflict in a principal-agent relationship arises when

D. the goals of the principals and agents are not aligned with each other.

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?

D. the land owned by Riya, which reduces cost of operations

Grameen Bank in Bangladesh was founded to provide microcredit to impoverished farmers who wanted to start their own entrepreneurial ventures that would help themselves climb out of poverty. This best exemplifies Michael Porter's suggestion that

D. the largest but poorest socioeconomic group can yield significant business opportunities.

When fashion magazines face competition from fashion blogs on the web, which of the following forces in Michael Porter's five forces model primarily gets stronger?

D. the threat of substitutes

Which of the following is not a factor that makes total return to shareholders and market capitalization unreliable measures of company performance?

D. the unpredictability of return on revenue

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?

D. the value (V) the consumer attaches to the dress

Which of the following is a firm effect that has an impact on the competitive advantage of a firm?

D. the value and the cost position of the firm relative to its competitors

The administrative and political distance between two trading countries reduces when

D. there is a well-functioning capital market in the host country.

The critics of top-down strategic planning and scenario planning argue that

D. these approaches do not allow for the necessary strategic thinking.

Outside directors are more likely to watch out for the interests of shareholders of their firm because

D. they have more independence than inside directors.

Poison pills have become rare because

D. they retard an effective function of equity markets.

A company that is using extrinsic motivation as an output control mechanism will most likely

D. threaten to lay off employees if they do not achieve targets.

Handy Pro, Inc. is a company that manufactures electric tools like drills, screwdrivers, and saws. Which of the following best illustrates a product-oriented vision for Handy Pro?

D. to be the pioneering manufacturer of electric tools

Why did Pixar enter into a strategic alliance with Disney?

D. to finance and distribute its newly created computer-animated movies

The Chief Executive Officer (CEO) of Yahoo, Marissa Mayer, maintains that if a company builds the best product possible, profits will come. Identify the phrase that represents the new vision she developed for Yahoo.

D. to make the world's daily habits more inspiring and entertaining

Why do companies use strategic group models?

D. to reveal performance differences between clusters of firms in the same industry

European aircraft maker Airbus is investing $600 million in Mobile, Alabama, to build jetliners. Which of the following statements best explains why it is employing this strategy?

D. to take advantage of lower taxes in the southern United States

Warren owns shares in a company called Gerarch Communications Inc. The company's financial performance has been declining over the past few months, and the value of its stock has been decreasing. Warren wants to proactively cut his losses and therefore sells his shares. Lawrence, a trading enthusiast, buys shares in Gerarch Communications because he believes that the share prices cannot go anywhere but up. Which of the following characteristics of a public stock company does this scenario best exemplify?

D. transferability of investor ownership

The German multimedia conglomerate Bertelsmann operates in more than 60 countries throughout the world and owns many regional leaders in their specific product categories, including Random House Publishing in the United States. Bertelsmann operates its more than 500 regional media divisions as more or less autonomous profit-and- loss centers. but attempts to share best practices across units; global learning and human resource strategies for executives are coordinated at the network level. Bertelsmann is an example of following a(n)

D. transnational strategy.

In a firm, a strategist's job should be to

D. understand the complex web of exchange relationships among different stakeholders.

When parts of a firm's intended strategy fall by the wayside due to unpredictable events, it turns into a(n) _____ strategy.

D. unrealized

In the context of SWOT analysis, a firm can develop an offensive strategic option primarily by

D. using its internal strengths to exploit external opportunities.

Product features, customer service, and complements are all examples of important

D. value drivers.

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

D. value innovation.

In which of the following situations is pursuing an international strategy advisable?

D. when a firm enjoys a large domestic market, strong reputation, and brand name

When should mergers and acquisitions (M&A) be considered the "buy" option for a strategist trying to determine which corporate strategy to implement?

D. when extreme closeness to the resource partner is necessary to understand and obtain its underlying knowledge

Which of the following features about a buyer indicates that the buyer has high bargaining power?

D. when the buyer operates in an industry where products are undifferentiated

As a result of globalization, the

D. world's market economies are becoming more integrated.

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