Policies Practice Exam 2
Revolve Group is a mobile platform that matches independent fashion designers with consumers who want a personalized wardrobe. Which of the following initiatives would best allow Revolve Group to fine-tune its offerings to better meet the needs of its consumers? A) allowing users to provide feedback to producers on the style and fit of clothing B) conducting anonymous phone surveys about consumers' fashion preferences C) hiring an outside consultant to evaluate the offerings of Revolve Group's producers D) studying the financial records of various fashion design companies to determine trends
A) Allowing users to provide feedback to producers on the style and fit of clothing
The Fact that both Whole Foods (a high-end-grocery store) and Aldi (an inexpensive grocery store) have a competitive advantage in the grocery store industry is an indication that A) Following a different generic business strategy within the same industry can lead to a competitive advantage for more than one organization . B) Following the same generic business strategy can allow for two firms competing in the same industry to have a competitive advantage C) in order to evaluate whether Whole Foods has sustained competitive advantage it is useful to compare it to Aldi from a cost Perspective. D) in order to evaluate whether Aldi has a sustained competitive advantage, it is useful to compare it to Whole Foods from a differentiation perspective.
A) Following a different generic business strategy within the same industry can lead to a competitive advantage for more than one organization .
When a blue ocean strategy goes bad, a firm has neither a clear differentiation nor a clear cost-leadership profile. This situation is referred to as A) stuck in the middle. B) buried at the bottom. C) burned at the top. D) caught in the transition
A) Stuck in the middle.
When a firm manufactures 2,000-3,000 units of a product, it incurs an average cost of $10 per unit. When it manufactures 3,000-4,000 units of the same product, the average cost per unit reduces to $7. However, manufacturing beyond 4,000 units will raise the average cost per unit to $9. Which of the following is the firm's minimum efficient scale? A) 2.000-3,000 units B) 3,000-4,000 units C) below 2,000 units D) above 4,000 units
B) 3,000-4,000 units
In the decline stage, which of the following strategies involves a reduction of investments in product support? A) exit strategy B) harvest strategy C) maintain strategy D) consolidate strategy
B) harvest strategy
Susan is trying to determine if her company has a competitive advantage, she must be able to accomplish two critical tasks before she can substantiate this claim. First, she must assess the performance of her accurately; second, she must A) Asses her capital and liquid position to ensure funding for future Projects . B) Focus on creating value by utilizing operational effectiveness such as six sigma and lean manufacturing C) compare and benchmark her firm's performance to other competitors in her same industry. D) ensure the right strategic leaders are in place that can execute her strategy.
C) Compare and benchmark her firm's performance to other competitors in her same industry.
Sasha is the CEO of Enterprise Technologies, a consumer electronics manufacturer. Last year, Enterprise's return on invested capital (ROIC) was 11.6 percent, while Enterprise's closest competitor, Federation Tech, had an ROIC of 17 percent. Which of the following factors might Sasha use to convince investors to invest in Enterprise rather than Federation Tech? A) Enterprise had a Research and Development (R&D) expense/Revenue ratio of 16%, while Federation Tech had an R&D/Revenue ratio of 12%. B) Enterprise's working capital to revenue ratio was 75%, while Federation Tech was 3%. C) Enterprise's intangible intensity was 6%, while Federations Tech's was 3 % . D) Enterprise's plant, property , and equipment (PPE0 over revenue ratio was 19%, while Federations Tech's was 10%
C) Enterprise's intangible intensity was 6%, while Federations Tech's was 3 % .
Sarah paid $900 for a camera that she thought was worth $1100 for all the features included in it. For the consumer electronics firm selling the camera, however, the cost of producing the camera was only $350. What is the consumer surplus in this scenario? A) $900 B) $1,100 C) $550 D) 200
D) 200
The working capital turnover of complete system Corp. id 6.0. What does this Financial data suggest? A) For every $6.00 Complete System puts to work , the company incurs a cost of $1.00 B) For Every $6.00 Complete Systems puts to work, the company realizes sales of $1.00 C) For every every dollar Complete System puts to work, the company realizes $6.00 in loss D) For every dollar Complete Systems puts to work, the company realizes $6.00 of sales.
D) For every dollar Complete Systems puts to work, the company realizes $6.00 of sales.
Which of the following statements is true of the balanced-scorecard? A) It is more or less a one-dimensional metric of measuring competitive advantage of a firm . B) It is one of the traditional approaches of measuring firm performance C) Its primary focus is to base a firms's strategic goal entirely on external performance dimensions. D) It attempts to provide a holistic perspective on firm performance
D) It attempts to provide a holistic perspective on firm performance
Which of the following below is not considered an advantage of utilizing a platform busines:model? A) Platforms scale more efficiently than pipelines by eliminating gatekeepers. B) Platforms unlock new sources of value creation and supply like Airbnb. C) Platforms benefit from community feedback, allowing for more fine-tuning, D) Platforms push firms to constantly engage in radical innovation in order to produce goods and services for the market.
D) Platforms push firms to constantly engage in radical innovation in order to produce goods and services for the market.
Why is the phase after the growth stage of the industry life cycle referred to as the shakeout A) The barriers to entry increase during this stage. B) The firms in the industry yield the highest profits during this phase. C) Rivalry among competitors decreases in this stage. D) The weaker firms are forced out of the industry in this stage.
D) The weaker firms are forced out of the industry in this stage.
Product features, customer service, and complements are all examples of important A) cost curves. B) cost drivers. C) value curves. D) value drivers.
D) Value drivers.
After trying on a dress, a consumer assesses it to be worth a maximum of $100 and is willing to pay that amount for the dress. However, the dress was priced at $80. What is the amount, $100, referred to as? A) The Producer surplus B) the firms cost (C) in manufacturing the dress C) the consumer surplus D) the value (V) the consumer attaches to the dress
D) the value (V) the consumer attaches to the dress
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. B) incremental innovation. C) radical innovation. D) disruptive innovation.
A) Architectural innovation.
Which of the following businesses is most likely to disrupt an existing industry? A) Black Rock developed an earphone that receives emails and text messages and converts them to voice messages. The first models had poor reception, but they rapidly improved over time. B) Touch Tech Inc. reconfigured the components used in its touchscreen tablets to create a new type of wearable device for use in restaurants and other service industries. C) Stark and Son's developed a teleportation technology that can transport physical materials. instantaneously across great distances. D) GSX Techedu added advanced camera technology to its premium line of smartphones so that they would take the highest-quality photos of all phones on the market.
A) Black Rock developed an earphone that receives emails and text messages and converts them to voice messages. The first models had poor reception, but they rapidly improved over time.
Louis's Secondhand Store offers slightly lower quality merchandise than competitors at a much lower price. What strategy is Louis's Secondhand Store using? A) cost-leadership B) differentiation C) niche marketing D) product diversification
A) Cost-leadership
Under the ________ framework, producer surplus is important in the quest for competitive advantage because this is the profit that a firm captures when producing and selling a good or service. A) Economic value creation B) accounting profitability C) shareholder value creation D) PESTEL
A) Economic value creation
______ is best described as decreases in cost per unit as output increases. A) Economies of scale B) Economies of scope C) Time compression economies D) Economies of replication
A) Economies of scale
Which of the following is not true about the decline stage of an industry life cycle? A) Firms that consolidate by purchasing their rivals will find themselves at a disadvantage. B) There is generally excess industry capacity during the decline stage. C) The last consumer segment called "laggards" will finally enter the market. D) Inefficient firms will usually exit the industry.
A) Firms that consolidate by purchasing their rivals will find themselves at a disadvantage.
Denise is the CEO of a profitable business called 4-Ever-Sun Inc . Which harness solar power, a renewable energy source that is sustainable over time. Instead of perusing a sustainable competitive advantage, Denise decides to focus on minimizing detrimental effect soon society and the planet. This strategy is known as A) sustainable energy B) the balance scorecard C) corporate diversification strategy D) cost leadership strategy
A) Sustainable energy
Which of the following is an advantage of a triple-bottom-line approach? A) The approach takes an integrative and holistic view in assessing a company's performance. B) The approach does not rely on an external view of a firm to assess its performance. C) The approach is more of a quantitative performance metric rather than a mere conceptual framework. D) the framework can help mangers assess a firms's competitive advantage without taking into the account the firm's performance along noneconomic dimensions.
A) The approach takes an integrative and holistic view in assessing a company's performance.
All of the following are questions that managers should ask before crafting a business- level strategy except A) when should we introduce our product/ service in the market ? B) What customers needs, wishes, and desires will we satisfy? C) why do we want to satisfy them? D) Who- which customers segments-- will we serve ?
A) When should we introduce our product/ service in the market ?
When pursuing a cost-leadership strategy, a business must remember that A) buyers will be reluctant to pay for a product unless the quality is acceptable. B) buyers will be reluctant to pay for a product unless the quality is superior. C) buyers will be reluctant to pay for the product unless it is customized. D) product quality is more important in a broad market than in a narrow one.
A) buyers will be reluctant to pay for a product unless the quality is acceptable.
Belling Brands is a manufacturer of educational toys for children. Six months ago, the company's research and development division came up with an idea for a unique touchscreen device that can be used to introduce children to a number of foreign languages. Three months ago, the company produced a working prototype, and last month the company successfully launched its new device on the commercial market. What should Belling Brands's managers prepare for next? A) increased competition from imitators B) a prolonged period of uncontested success C) a sharp decline in demand for the product D) a difficult struggle to move from invention to innovation
A) increased competition from imitators
Which of the following statements is true of the accounting data? A) accounting data only focus mainly on intangible assets, rather than tangible assets. B)Accounting data are historical data and thus backward-looking C) Accounting data does not have to be adjusted in any manner to compare companies with different capital structures D) Accounting data consider off-balance sheet items, such as pension obligations of a firm.
B) Accounting data are historical data and thus backward-looking
Bigger & Better Inc. is a big box retailer who is in direct competition with Walmart and Target. Bigger & Better Inc. initially tried to respond to Walmart by cutting its prices and reducing costs. Walmart has greater buying power and a more efficient supply chain, therefore, Bigger & Better Inc. was not able to compete on costs. The company then tried to differentiate itself by signing a celebrity to create an in-house line of clothing. However, Target has a celebrity clothing line that has a more differentiated appeal. The economic value created by Bigger & Better Inc. is currently less than Target and Walmart. It can be said that A) Bigger & Better Inc. is successful in creating an integration strategy positioned between Walmart and Target. B) Bigger & Better Inc. is "stuck in the middle" and has a competitive disadvantage. C) Bigger & Better Inc. is still creating an integration strategy positioned between Walmart and Target and is on the right track. It should continue this business strategy D) Bigger & Better Inc. is "stuck in the middle" and has a competitive advantage.
B) Bigger & Better Inc. is "stuck in the middle" and has a competitive disadvantage.
Which of the following is a drawback of using the industry life cycle as a framework to guide strategic choice? A) The framework believes that the life cycle of industries is unpredictable. B) The framework does not explain everything about changes in industries. C) The framework is based on the tenet that industries can be rejuvenated even in the declining stage D) The framework believes that the number and size of competitors remain constant throughout the life cycle.
B) The framework does not explain everything about changes in industries.
Fun Robotics produces components used in electronic toys. In fiscal year 2017, Fun Robotics earned an accounting profit of $3 million. However, Fun Robotics' production facilities might have also been used to produce components for mobile phones, which would have generated $2 million in revenues and saved the company $500,000 in production costs. Which of the following statements is true? A) Fun Robotics earned an economic profit of $5.5 million B) Fun Robotics earned an Economic profit of $500,000 C) Fun Robotics suffered an Economic loss of $500,000 D) Fun Robotics suffered an economic loss of $2.5 million
B) Fun Robotics earned an Economic profit of $500,000
Intel's Celeron chip and Atom chip are initiatives to A) introduce a new product in a new market to extend its leadership. B) guard the company against disruptive innovation by protecting the low end of the market. C) stall its own disruption strategies and wait for its rivals to introduce disruptive forces. D) target that section of the market that is not particularly price sensitive.
B) Guard the company against disruptive innovation by protecting the low end of the market.
_____ is the benefit that is missed or given up when an investor, individual or business chooses one alternative over another. A) Value Creation B) Opportunity Cost C) Accounting Profitability D) Reservation Price
B) Opportunity Costs
Which of the following scenarios best exemplifies a platform business? A) Jill purchases electronic parts from a variety of vendors and assembles them into inexpensive MP3 players that he sells to consumers. B) Samantha operates an industrial test kitchen in which local growers bring their produce to local chefs, who use the kitchen to try new recipes and determine which produce to buy. C) Tony operates a consulting firm in which businesses hire him to assess deficiencies in their organizational culture. D) Allison founded a bike-based transportation company that offers environmentally-friendly rides to customers within a 25-mile radius.
B) Samantha operates an industrial test kitchen in which local growers bring their produce to local chefs, who use the kitchen to try new recipes and determine which produce to buy.
Which of the following statements accurately brings out the difference between technology enthusiasts and early adopters? A) While the customer segment in the introduction stage consists of early adopters, the customers entering the market in the growth stage are technology enthusiasts. B) Unlike technology enthusiasts, early adopters' demand is fueled more by intuition and vision rather than technology concerns. C) While early adopters make up the smallest market segment, technology enthusiasts make up the mass market. D) Firms need to communicate products' potential applications in a more direct way when attracting technology enthusiasts rather than early adopters.
B) Unlike technology enthusiasts, early adopters' demand is fueled more by intuition and vision rather than technology concerns.
Gr&t Food is a chain of "fast casual" restaurants that sells its menu items at higher prices than its competitors. The restaurant has a large customer base due to its wide product portfolio and superior customer service. Which of the following generic business strategies has Gr&t Food adopted in this scenario? A) cost-leadership B) differentiation C) market penetration D) product diversification
B) differentiation
When Total Semiconductors was operating at the minimum efficient scale of 10,000-12.000 units per month, the firm's cost per unit was $45. However, when the output level was increased beyond 12.000 units, the cost per unit increased to $47. This increase was attributed to the wear-and-tear of the machinery, and complexities of managing and coordinating. What is this phenomenon known as? A) minimum efficient scale B) diseconomies of scale C) experience-curve effect D) learning-curve effect
B) diseconomies of scale
Marriott is able to create greater economic value than its competitors due to their ability to take advantage of which describe the savings that come from producing two (or more) outputs at less cost than producing one output individually, while utilizing the same amount of resources and technology. A) diseconomies of scale B) economies of scope C) economies of scale D) cost of input factors
B) economies of scope
Combining economies of learning with the existing production technology allows a firm to A) move up a given experience curve. B) move down a given learning curve. C) jump to a less steeper learning curve. D) jump to a flatter experience curve.
B) move down a given learning curve.
A firm has 10 Million shares outstanding, and each share is traded at $100. Also, each shareholders gets a dividend of $2,000 annually. In this case, the market capitalization is A) 10,000 shares, that is, 10 million shares/ $100 B) $200,000, that is, $2,000 x $100. C) $1 billion , that is, 10 million shares x $100 D) 20:1, that is, $2,000/$100
C) $1 billion , that is, 10 million shares x $100
The Tenet behind the triple-bottom-line is that A) A firm should solely focus on increasing the economic value created to/for its customers. B) A firm's primary objective should be increasing the total returns to its shareholders. C) a firm should achieve positive results along economic, social, and elegiacal dimensions to gain a sustainable strategy. D) A firms return on revenue can be broken down into three ratios: COGS/Revenue, R&D/Revenue, and SG&A/Revenue
C) A firm should achieve positive results along economic, social, and elegiacal dimensions to gain a sustainable strategy.
AcerWare Inc. manufactures external hard disks for $32 per unit, and the maximum price customers are willing to pay is $47 per unit. Data Driver Inc. is a competitor of AcerWare Inc. that produces external hard disks for $37 per unit, and customers are willing to pay a maximum price of $50 per unit. What does this imply? A) AcerWare and Data Driver share differentiation parity. B) Data Driver has a competitive advantage over AcerWare in terms of perceived value. C) AcerWare creates a greater economic value than Data Driver. D) Data Driver is a cost-leader when compared to AcerWare.
C) AcerWare creates a greater economic value than Data Driver.
You are the founder of NewexSurfboards, and you are considering methods of gaining and sustaining a competitive advantage. Which of the following changes has the best chance of quickly creating a sustainable advantage? A) devoting significant resources to researching and developing new products that will be more durable than competitors products B) automating the manufacturing process to reduce production costs C) allowing customers to upload their own image designs and help assemble the finished product at retail locations. D) switching to a just-in-time inventory system reduce inventory costs
C) Allowing customers to upload their own image designs and help assemble the finished product at retail locations.
Under the ____ framework, the question "How do we create value ?" is relevant when trying t improve innovation and organizational Learning. A) Triple-bottom-line B) Economic value creation C) Balanced Scorecards D)Operational Effectiveness
C) Balanced Scorecards
The primary goal of a firm pursuing a blue ocean strategy should be to A) create the highest perceived value in its respective industry. B) build a reputation of being the lowest-cost producer in its chosen industry. C) offer a differentiated product or service at a low cost. D) achieve a less steep learning curve.
C) Offer a differentiated product or service at a low cost.
When ASI 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 ASI Inc.'s A) Producer Surplus B) Consumer Surplus C) Opportunity Cost D) Social cost
C) Opportunity Cost
A firm's business strategy can lead to a competitive advantage if it allows the firm to A) execute the same activities performed by the rivals in a similar manner. B) reduce the value gap. C) perform different activities than its rivals. D) position itself below the productivity frontier.
C) Perform different activities than its rivals.
Both UTech Inc. and Mirco Corp. incur a cost of $200 to manufacture a single unit of a cell phone. However, UTech Inc. charges a higher price than Mirco Corp. does, but it still sells a higher number of phones. What does this imply? A) UTech Inc. and Mirco Corp. Have achieved a competitive parity B) Mirco Corp . has a competitive advantage over UTech Inc. C) UTech Inc. creates more economic value than Micr Corp. does D) Micro Corp. is not charging enough for its product .
C) UTech Inc. creates more economic value than Micr Corp. does
Golden Soles has been successful at differentiating itself from competitors by claiming a premium price for its athletic footwear based on superior design and high-quality materials. In this scenario, which of the following is the key value driver? A) economies of scale B) low-cost input factors C) product features D) premium prices
C) product features
Swedish furniture giant IKEA reported sales of $44 billion in 2019. The company turned a profit by recycling waste into some of its best-selling products. Before, this waste had cost the company more than $1 million per year. And the company is well on its way to "zero waste to landfill" worldwide. According to Joanna Yarrow, IKEA's head of sustainability for the United Kingdom, "We don't do this because we're tree huggers, we do this because it's very cost-effective." This passage best represents which of the following frameworks below? A) The Balance scorecard framework B) the PESTEL Framework C) the Triple-Bottom-line Framework D) the economic value framework
C) the Triple-Bottom-line Framework
Which of the following is an example of social entrepreneurship? The committee approved the new formula for an all-purpose cleaner because it A) cleaned better than other cleaners and used easy-to-obtain ingredients. B) cleaned better than other cleaners and did not cost more to produce. C) cleaned as well as other cleaners and could be produced more efficiently. D) cleaned as well as other cleaners and used organic ingredients.
D) cleaned as well as other cleaners and used organic ingredients.
The vast majority of innovations in an industry are ____ because they build on a firm's existing knowledge base and reinforce the existing organizational structure and network relationships. A) disruptive B) architectural C) radical D) incremental
D) incremental
