Strategic Management Homework Questions
Which of the following statements is NOT true?
the bargaining power of suppliers is likely to be very low when the supplier's products are highly differentiated
BIGSON Industries is a maker of manufacturing equipment used by makers of aircraft, such as Boeing, Airbus, and Lockheed Martin. Their research department has determined that by using some improvements in microchips, they can increase the durability of their equipment significantly. This could be considered a differentiation strategy as long as _______________________.
the customers are willing to pay a higher price for the improvement
Rodney Motors Inc. and Razorback Inc. are two car manufacturers in Fayetteville. Jason is wondering whether these two companies are competitors and asked his friend, Michael to explain this. Michael suggests that his Strategic Management textbook states that dimensions of competition that determine the extent to which two firms are competitors include:
the extent of commonality of markets and similarity of resources
In 2022, it was speculated that Jay Barney Inc. received a takeover bid from Waseda Technics Co, a Japan-based information technology firm, but the takeover attempt was not successful. At only $8 billion market capitalization, Jay Barney Inc. became an attractive takeover target as the company's market capitalization had fallen sharply amidst the scandals. Waseda Technics Co 's takeover attempt shows that _________________ is an important corporate governance mechanism that can discipline poor performing and mismanaged firms.
the market for corporate control
CEO duality refers to
the situation where the CEO is also chairperson of the board of directors
Factor's that impact shareholders' preferences include all of the below except:
top management team's risk propensity
TESLA, which is one of the largest buyer of lithium in the worlds, anticipated that the prices of lithium would triple in less than three years due to increase in global demand for electric cars. This would disrupt the availability of lithium in the industry. Thus, TESLA decided to purchase lithium mines in China and Chile. As predicted, the prices of lithium increased at least twofold. Because of the company-owned lithium mines, TESLA was able to sustain its competitive advantage in turbulent times. Which of the following reasons does this scenario best illustrate?
unique historical conditions
Rolly Tide, an Alabama alumni, works for his family t-shirt business in Hoover, Alabama. They have enjoyed substantial success by manufacturing unique, personalized, Nick Sabin designs. Rolly has convinced his dad they can sell more shirts if they acquire a unique retail location, named Faye Ride, just off campus that used to sell their family t-shirts at significant mark-up. Rolly's company is planning to engage in ______________.
virtual acquisition
All of the below represent agency costs, except:
purchasing costs
Reynolds American is trying to gain market share in a highly competitive market for e-cigarettes. The company is not sure whether Altria Group, producer of highly popular MarkTen e-cigarette will respond to attack if Reynolds would lower prices to its new product. Michael, a consultant of Reynolds American suggests that all of the below are firm characteristics that may impact the likelihood of the response except:
competitive dynamics
United Technologies operates throughout the world, and is organized into three business units: Aircraft supplies, Food packaging, and Pharmaceutical unit. Within each business unit, there are divisions organized by key geographic areas: North America, Europe, Asia, Middle East, and Australia. These businesses are not related to each other, and the firm CEO makes no effort to share activities or to transfer competencies among them. Executives of each division report directly to CEO of United Technologies. This is an example of:
conglomerate business
The Steel Industry had existed for over hundred years in the U.S. and was known for very high quality steel. Its performance started to decline in the 1980s when imports from China and Vietnam started to erode the market share of the U.S. steel manufacturers. Chinese firms had usually been known for poorer quality steel, but a government initiative after World War II had led to the introduction of the new steel manufacturing technology in several larger farms. Over the decades Chinese steel industry has developed competencies in producing high quality steel, and consequently, the export of steel out of Chinese firms (which used the local raw materials) was on par with the products of the U.S. steel industry. Vietnamese manufacturers on the other hand had nipped at the lower end of the steel industry by banking on highly productive manufacturing systems. The Vietnamese steel, though not of the same quality as that of Chinese firms, were good enough that a significant number of U.S. customers started buying the Vietnamese products instead of the U.S. steel. The U.S. steel manufacturers firms had never anticipated competition from these two sources and had not kept up with options to compete with them. Their cost of raw materials and labor, as well as the steel manufacturing process did not allow them to effectively compete with the Chinese and Vietnamese. Also, since the U.S. firms were very small most of them found it hard to invest in significant upgrades to their production technologies that could have lowered their costs. Which of the following was PROBABLY NOT a factor that could have resulted in their strategic decline.
expected retaliation
Zone's office and house cleaning service offers high-quality service from Cleaning University, cleaners who can provide highly customized cleaning of your house, exceptionally fast service and award-winning service members that can respond to your multiple house cleaning needs. They focus on the high quality of their offerings with a slightly higher price and carry a wide range of cleaning services. They are, however, present in only a few states in the country and target affluent population with income level above 100K. Their business-level strategy could best be described as:
focused differentiation
Pinoccio Fresh grows organic potatoes, carrots, and other vegetables and sells their products wholesale to Trader Joe's, a subsidiary of ALDI, Inc. Recently, the management team at Pinoccio Fresh has decided to open their own chain of retail outlets in which to sell their produce. This is an example of:
forward vertical integration
Which of the below does not represent an agency relationship:
government regulating an industry
Rodney Razorback has decided he will focus on cost leadership strategy in manufacturing and selling T-shirts in Fayetteville. He decided that he will use the material with the lowest cost, utilize the least labor to manufacture its T-shirts. Finally, he thinks he can sell T-shirts online to save overhead costs and reach a broad market. While cost leadership strategy may help Rodney Razorback to operate with profit margins greater than those of competitors, all of the below are the risks associated with his chosen strategy except:
he could end up producing highly unique product with no demand in Fayetteville
KLM Corporation is an Amsterdam based satellite repair and service company. It has a strong presence in Europe but none in China. As part of its expansion strategy into China, KLM is in talks with ABS Corp which is a small satellite repair and service company based out of Shanghai. ABS's shares have been trading at about 35 dollars each. KLM informs ABS that it would like to offer each ABS shareholder one KLM share in exchange for ABS share (Equity Swap). KLM's share is trading at 43 dollars. After deliberations, the Board of ABS decides to turn down KLM's offer as not in the best interest of its shareholders. KLM then decides to directly go to the shareholders of ABS and offer to buy their shares directly at 45 dollars per share. KLM is engaging in a:
hostile takeover
Related diversification strategy with high operational relatedness among a firm businesses may create value. However, activity sharing is also risky because:
if demand for one business's products falls, it may not generate sufficient revenues to cover the fixed costs required to operate the shared facilities
Which of the following statements about an industry and its analysis is false?
industry boundaries are always very rigid and well defined
all of the below issues are considered within demographic segment of general environment, except:
inflation
in the value chain analysis, which of the following firm activities is a support functions
information systems
You have been asked to assess whether the composition of the Board of Directors for a major internet based company follows the principles of good corporate governance. You are discussing this issue with a Senior executive of the company who is making the case for a large number of inside directors for the company. She advances several reasons which are listed below. Choose the one that is the best for making her case.
inside directors better understand the contextual information of the company
In the auto industry, Mercedes Benz is an upscale auto manufacturer that focuses on superior customer experience. The firm charges premium prices for its products and services. Kia Inc., in contrast, charges the lowest price in the industry with its no-frills approach. In between these two segments is BMW Inc., which offers a customer experience comparable to that of Mercedes Benz at a price almost as low as that of Kia Motors. What strategy is BMW Inc. trying to pursue in this scenario?
integrated cost leadership/differentiation strategy
Two-tiered board structure
is widely practices governance mechanism in Germany
under the resource based view, which of the following are considered tangible resources:
labor, capital, land
which of the below is not a reason why a firm engages in acquisition
lower cost of capital
All of the below represent internal governance mechanisms except:
market for corporate control
Rodney Pet Inc. produces and sells food products for pets in Fayetteville. The company's mission is "to help enrich and lengthen the special relationship between people and their pets." Thus, Rodney Pet produces three types of pet food: A grade, B grade, and C grade. Although the company uses vegetables of the same quality for all pet food, the best meat in Fayetteville is used to produce A grade pet food. For B grade, the company uses expired leftover meat from local supplier of meat to local restaurants. Finally, it uses bones from meat to produce C grade pet food. Rodney Pet Inc. believes that there is a demand for all three types of pet food in Fayetteville. Based on the above, Rodney Pet Inc. is engaged in
market segmentation
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.
moral hazard
Increasingly Google and Apple are engaged in competitive actions and responses in more than one market. When Apple introduced its first smartphone, iPhone, Google introduced its Nexus phone. Similarly, when Google launched its Google Pay, mobile payment system, Apple quickly introduced its Apple Pay. Similar counter moves happened with Apple's iTune stores and Google Play. The above scenario with Apple and Google best describes the following:
multimarket competition
Rodney Inc., a grocery retailer, moved into grocery delivery business, Razorback Co.'s stronghold; in turn, Razorback Co. bought a store to move into grocery retail business, Rodney Inc.'s stronghold. The above example demonstrates:
multipoint competition
Consider the two statements listed below and then choose the best alternative after that: Statement 1: Firms are classified into strategic groups based on their level of profitability. Statement 2: On average, the profitability of different strategic groups is identical.
neither of the two statements is true
Samsung, a smart phone producer that competes with Apple's IPhone primarily relies on external suppliers for its smart phone's operating system. The quality and user friendliness of operating system, such as of Google's Android, significantly impacts the value of the Samsung smart phone in the eyes of the consumer. Based on this description, Operation system maker, such as Google may be seen as:
offering complements in the smart phone industry
Evaluate the two statements and then choose the correct answer. Statement 1: While mergers and acquisitions can create competitive advantage for the combined firm, in most cases, they do not. Statement 2: Acquisitions made to overcome a competitive disadvantage in the market are always more successful than acquisitions made to gain access to a new capability or competency.
only statement 1 is correct
Evaluate the two statements and then choose the correct answer. Statement 1: While mergers and acquisitions can create competitive advantage for the combined firm, in most cases acquiring firm's stock price falls immediately after the acquisition announced. Statement 2: Acquisitions made to increase market power are always more successful than acquisitions made to overcome entry barriers.
only statement 1 is correct
Statement I: Shareholders prefer riskier strategies than management. Statement II: Shareholders prefer higher diversification than management.
only statement 1 is correct
Statement I: A firm with greater multimarket contact is less likely to initiate an attack, but more likely to respond aggressively when attacked. Statement II: Although competitive rivalry impacts all types of strategies (business-level, corporate, merger and acquisitions, and international), it predominantly influences business-level strategy. Please, choose the best answer below:
only statement 1 is true
Statement I: Competitors are more likely to respond to strategic or tactical actions when they are taken by a market leader. Statement II: Competitors with low market dependence are more likely to respond strongly to attacks threatening their market position. Please, choose the best answer below:
only statement 1 is true
Statement I: Corporate-level strategy is concerned with the issue: in what product markets and businesses the firm should compete. Statement II: Corporate-level strategy is considered successful if "the businesses in the portfolio are worth less under the management of the company than they would be under any other ownership." Please, choose the best answer below:
only statement 1 is true
Statement I: To position itself a firm must decide whether it intends to perform activities differently than rivals or to perform different activates. Statement II: Integrated cost leadership/differentiation is superior to other strategies.
only statement 1 is true
Consider the two statements listed below and then choose the best alternative after that: Statement 1: Firms can both control the general environment's segments and predict each trend's effect on them. Statement 2: The greater a firm's capacity to favorably influence its industry environment, the greater the likelihood it will earn above-average returns. Please choose the best answer.
only statement 2 is true
Statement I: Every industry is composed of a single market only. Statement II: A firm is generally more likely to attack the rival with whom it has low market commonality than the one with whom it competes in multiple markets. Please, choose the best answer below:
only statement 2 is true
Jake is asking his friend Michael, who is a consultant at Razorback Consulting Inc., what to do to be successful in his business. Michael suggests that the general evidence shows that in order to be successful in business, a firm needs to be a first mover, because first movers have greater survival rates than later market entrants. However, he suggests that in order to be a first mover, the firm must have the readily available resources to invest in R&D as well as to rapidly and successfully produce and market a stream of innovative products. According to Michael, in order to be successful a firm must have:
organizational slack
all of the below are considered barriers to entry, except:
slow industry growth
At the time TJ MAX and Ross had started challenging traditional retailers industry. Macy's, JC Penny, and Sears tried to counter the threat it posed by imitating the direct business processes of these stores. They widened their brand inventory, improved their online websites, and even offered customers an option to order online and pick up in stores instantly. While they made headway with their new strategy, they were bleeding money on their stores which all became loss leaders - some of them reported average threefold traffic drop. The capability of Macy's, JC Penny, and Sears to offer high variety of top brands through stores that did not help these companies to successfully imitate TJ MAX and Ross could be attributed to:
social complexity
Considering porter's 5 forces, which of the following would decrease the power of suppliers for firms in a particular industry?
the proportion of suppliers annual revenue that comes from incumbent firms in the industry increases dramatically
Blackberry, a company that was deemed as the Apple of 2000s, failed to capitalize on its superior mobile phone manufacturing and design capability, as evidenced by the company's continued reliance on the touch keyboard smartphone business in both domestic and international markets throughout 2000s. Meanwhile, Samsung emphasized investment into touch screen phone technology, which proved to be the right strategy in successfully positioning the firm for the 21st century. A strategist applying the core competence framework to the Blackberry case will realize that Blackberry failed to generate returns from its mobile phone manufacturing expertise, primarily because the capability did not meet which of following criteria?
valuable
Rodney Dairy makes its' own plastic bottles and fills them in its' own production facility. Rodney Dairy decides to purchase, Razorback Freight, that used to deliver the filled milk containers from Rodney Dairy to its' retail customers. By engaging in purchase of Razorback Freight, Rodney Dairy could be considered to be engaged in _________.
vertical acquisition
which of the below statements is false??
a firm that generates private synergy through acquisition cannot develop a competitive advantage
Which of the following accurately describes a common difference between a merger and an acquisition?
a merger tends to be friendly; an acquisition can be friendly or unfriendly
which of the dimensions of customer relationship is concerned with facilitating useful interactions with customers
affiliation
"Apple's "iSTREAM" went live this week, casting a shadow over the future of original online content streamers - and of two relatively young companies called Netflix and Hulu. Buoyed by strong iPhone and iPad sales as well as 100 billion investment in Hollywood movie studios, Apple iSTREAM allows users to have instant access to thousands of original TV shows as well as movies with their iPhones and iPads online. The company says the new service will make online streaming affordable and highly customized based on consumer's online behavior on their iPhones and iPads. This poses a bit of a challenge for Netflix and Hulu, which also aim to make online streaming more customized and valuable experience-but by consolidating user preferences of past shows. "I'd be very surprised if those guys didn't feel like a tornado just entered their world," said Pinoccio Altzman, chief product officer at WeShow, an online TV programming-design company in Silicon Valley." According to the excerpt above, Netflix and Hulu forgo their temporary competitive advantage, because:
apply has successfully imitated these companies' capabilities in online streaming via substitution
Evaluate the two statements and then choose the correct answer. Statement 1: Compared to downsizing, downscoping generally leads to more positive outcomes in both the short and long term. Statement 2: Private synergy is created when combining and integrating the acquiring and acquired firms' assets yields capabilities and core competencies that could not be developed by combining and integrating either firm's assets with another company.
both statement 1 and statement 2 are correct
"For 110 years Hollywood studios made their money producing full length movies and screening them through movie theatres. Now they must be in the business of producing TV shows with lengthy seasons for online streaming services, such as Netflix and Hulu. They no longer can survive with sole reliance on full length single episode movies screened through traditional movie theatres-they're now calling themselves online "entertainment" creators, just in case all those predictions about the end of traditional movie theatre viewership come true. At stake is an entertainment streaming service market that Hollywood analysts believes is worth $10.2 trillion, a sum that makes you wonder why it took the movie studios so long to go after it." According to the excerpt above, which of the following capabilities of Hollywood studio firms has recently gained significant importance in their pursuit of sustainable competitive advantage in their core business?
capability to produce lengthy shows with multiple seasons
which of the below statements is false
competitive advantage is sustainable in fast-cycle markets
Reynolds American is trying to gain market share in a highly competitive market for e-cigarettes. The company is not sure whether Altria Group, producer of highly popular MarkTen e-cigarette will respond to attack if Reynolds would lower prices to its new product. Michael, a consultant of Reynolds American suggests that being able to accurately predict Altria Group's likely competitive actions and responses helps Reynolds American avoid situations in which it is unaware of competitors' objectives, strategies, assumptions, and capabilities. He argues that lacking the information needed to predict these conditions for competitors creates
competitive blindspots
An industry, where existing players can easily shut down and leave the industry is said to have low exit barriers. When there are low exit barriers the ___________ is likely to be ______________.
competitive intensity, low
all of the below are considered beneficial outcomes of diversification, except:
diversifying managerial employment risk
All of the below are forms of strategy through which a firm changes its set of businesses or its financial structure, except:
downscaling
Rodney Entertainment Media Inc. has five separate but related businesses: media networks, parks and resorts, studio entertainment, consumer products, and interactive media. Within the firm's studio entertainment business, for example, Rodney Entertainment Media Inc. can gain economies by sharing activities among its different movie distribution companies, such as Breakstone Pictures, Bollywood Pictures, and 7Eleven Films. Broad and deep knowledge about its customers is a capability on which Rodney Entertainment media Inc. relies to develop corporate-level core competencies in terms of advertising and marketing. Thus, Rodney Entertainment Media Inc. simultaneously seeks operational and corporate relatedness to create:
economies of scope
for a firm to achieve competitive advantage, capability must meet all of the below characteristics except:
organized to capture value
which of the below statements is false?
prices drop faster in slow-cycle markets than fact-cycle markets
which of the below statements is true of firms with unrelated diversification strategy
external investors have relatively limited access to internal information and can only estimate the performances of individual businesses
