Strategic management test 2
Which of the following best exemplifies social complexity as an isolating mechanism? A) Amanda's Cosmetics attempted to imitate how Michele's Makeup combined its management and product development systems with little success. B) Amanda's Cosmetics failed to acquire the resources for its eyeliner at a low cost and thereby lost its competitive advantage over Michele's Makeup. C) Amanda's Cosmetics had difficulty competing with Michele's Makeup because it could not access the many makeup factories in Ohio as easily as its competitor. D) Amanda's Cosmetics did not fully understand the reasons for the success of Michele's Makeup and therefore had difficulty competing with the firm.
A) Amanda's Cosmetics attempted to imitate how Michele's Makeup combined its management and product development systems with little success.
While Eye Windows incurs a cost of $12 for a pair of eyeglasses, Dura Frames, its competitor, manufactures a pair of glasses at $10. Both the companies are able to sell their glasses for a maximum of $30 per pair. Which of the following statements is true in this scenario? A) Eye Windows and Dura Frames have achieved differentiation parity. B) Eye Windows is a cost-leader when compared to Dura Frames C) Eye Windows has created a greater economic value than Dura Frames. D) Dura Frames has a higher opportunity cost than Eye Windows.
A) Eye Windows and Dura Frames have achieved differentiation parity.
SonronMedia sells books by having salespeople set up appointments with potential customers and give them a sales pitch for the product. When a salesperson sells a book, he or she gets a predetermined percentage commission. This type of business model is called A) an agency B) bundling C) wholesale D) a freemium
A) an agency
ezTV, a consumer electronics company, is the leading manufacturer of high-definition (HD) LED televisions. HD technology has been its core competency and the company holds 60 percent shares in that market. However, ezTV's competitors have now begun to produce more-advanced technologies like 4K Ultra HD and Internet-enabled Smart televisions. According to the dynamic capabilities perspective, what should ezTV do? A) ezTV should start working on Ultra HD and Smart television technologies to adapt its core competency to suit the external environment. B) ezTV should stick to its existing core competency, that is HD LED technology, as it is the best in that segment. C) ezTV should take steps to reduce the causal ambiguity and socially complexity of its core competency. D) ezTV should work on enhancing the mobility of its core competency.
A) ezTV should start working on Ultra HD and Smart television technologies to adapt its core competency to suit the external environment.
Connell 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? A) product features B) economies of scale C) low-cost input factors D) customer service
A) product features
A defining characteristic of the pay-as-you-go business model is that the A) users pay for only the services they consume. B) users pay for access to a product or service whether they use it during the payment term or not. C) initial product is often sold at a loss in order to drive demand for complementary goods. D) the basic features of a service are provided free of charge, but the user must pay for premium services.
A) users pay for only the services they consume.
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? A) 9,000 B) 11,000 C) 13,000 D) 15,00
B) 11,000
Threadless allows customers to submit their own designs and to vote on which designs they would like to see printed on a T-shirt. This business uses a ________ technique. A) offshoring B) crowdsourcing C) peer-to-peer D) binge watching
B) crowdsourcing
A firm has 10 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 A) 10,000 shares, that is, 10 million shares/$100. B) $200,000, that is, $2,000 × $100 C) $1 billion, that is, 10 million shares × $100. D) 20:1, that is, $2,000/$100.
C) $1 billion, that is, 10 million shares × $100.
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.
Which of the following scenarios exemplifies a sustainable strategy under the triple-bottom-line approach? A) Rather than complying with the restrictive recycling laws in the United States, Gogozoom outsourced its manufacturing to a country that has fewer environmental restrictions. B) Gogozoom developed a chemical additive that doubled the life of its plastics. The additive was currently legal, but environmental groups argued that it harmed the environment. C) Gogozoom reformulated its products to eliminate chemicals that were widely used in the industry but were being investigated for their potential negative effects on the environment. D) Gogozoom's nearest competitor increased the salaries of its production workers by 30 percent, but Impervious kept its wages the same to gain a cost advantage over its competitor.
C) Gogozoom reformulated its products to eliminate chemicals that were widely used in the industry but were being investigated for their potential negative effects on the environment.
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? A) The competitor ran advertising that criticized Gogo's assembly system. B) The competitor failed to apply for a patent of its own assembly system. C) The competitor infringed on Gogo's patent of the "diagonal assembly system." D) The competitor developed an assembly system that worked on a newer theory than Gogo's system.
C) The competitor infringed on Gogo's patent of the "diagonal assembly system."
Which of the following applies to the Strength-Threats quadrant of the SWOT matrix? A) The local fast-food chain Easy Hot Dogs expanded its limited menu to maintain its advantage against stiff competition. B) The local fast-food chain Easy Hot Dogs added a salad bar to maintain its competitive advantage against stiff competition. C) The local fast-food chain Easy Hot Dogs used its wholesome image to maintain its competitive advantage against stiff competition. D) The local fast-food chain Easy Hot Dogs revised its image of being a cheap-food place to being a wholesome family place to maintain its competitive advantage against stiff competition.
C) The local fast-food chain Easy Hot Dogs used its wholesome image to maintain its competitive advantage against stiff competition.
Leading guitar string producer Highly Strung Inc. has enjoyed a competitive advantage based on its proprietary coating that gives its strings a clearer sound and longer lifespan than uncoated strings. One of Highly Strung's competitors, however, has recently developed a similar coating using less expensive ingredients, which allows it to charge a lower price than Highly Strung for similar-quality strings. Highly Strung's competitive advantage is in danger due to A) a lack of perceived value. B) a lack of organization. C) direct imitation and substitution. D) resource immobility.
C) direct imitation and substitution.
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
Which of the following scenarios best illustrates bundling? A) Yearin Inc. sells its electric toothbrushes for a low cost, but charges a high price for replacement brushes. B) CondaxMedia Inc. sells its cloud computing network by having customers pay for the service as they use it. C) Isdom Inc. sells its basic TV channels for free but charges high prices for any channels that customers add on later. D) Warephase 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.
D) Warephase 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.
In the multiplex industry, Home Again Movies Inc. is an upscale multiplex that focuses on superior customer experience. The firm charges premium prices for its movie tickets and services. Movies-for-less Inc., in contrast, charges the lowest price in the industry with its no-frills approach. In between these two segments is Just Right Films Inc., which offers a customer experience comparable to that of Home Again Movies at a price almost as low as that of Movies-for-less. What strategy is Just Right Films pursuing in this scenario? A) liquidation strategy B) product diversification strategy C) market penetration strategy D) Blue ocean strategy
D) blue ocean strategy
Which of the following frameworks used to measure competitive advantage relies on both an internal and an external view of a firm? A) the economic value creation model B) the accounting profitability model C) the shareholder value creation model D) the balanced-scorecard model
D) the balanced-scorecard model
Amelia has recently started a restaurant in a commercial area that already has many other established restaurants and popular fast-food chains. Amelia owns the building in which her restaurant is located, rather than leasing premises as her competitors do. This factor allows her to offer her products at a more competitive price. Amelia has also invested a huge amount in designing the restaurant's interior and in equipping the kitchen with the appliances that are most widely used in her industry. In this scenario, which of the following is the most valuable resource for Amelia's business? A) the investments made by Amelia on the restaurant's interior B) the type of kitchen equipment widely used in her industry C) the restaurant's late entry into the market D) the building owned by Amelia, which reduces cost of operations
D) the building owned by Amelia, which reduces cost of operations
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 at the same time. C) in order to evaluate whether Whole Foods has a 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.
In order for a firm to formulate an effective business-level strategy, it is important to remember that competitive advantage is determined by A) the characteristics of both the industry and the firm. B) the characteristics of the firm alone. C) the characteristics of the industry in which a firm competes. D) the amount of market share a firm can gain.
A) the characteristics of both the industry and the firm
Shippity and ShipING Inc. are two competing firms in the same industry. Shippity's tangible assets are valued at $15 billion and its intangible assets are valued at $35 billion. ShipING 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? A) ShipING Inc. will be less competitive than Shippity because of its smaller investment in tangible assets. B) It is likely that ShipING Inc. is better enabled than Shippity to gain and sustain a competitive advantage. C) Judging from the assets listed, ShipING Inc. has probably been in the industry a much shorter time than Shippity. D) There is no resource heterogeneity between the two firms, ShipING Inc. and Shippity, as they operate in the same industry.
B) It is likely that ShipING Inc. is better enabled than Shippity to gain and sustain a competitive advantage.
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
ComfySeat Furniture is a brand reputed for its wide variants of sofas that introduced a new range of mattresses and bed frames 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 ComfySeat applying? A) mass customization B) economies of scope C) learning curve effect D) network effect
B) economies of scale
Trader Joe's differentiates itself from competitors by offering top-quality foods obtained through sustainable agriculture. This business strategy implies that Trader Joe's focuses on A) decreasing the existing value gap by providing luxury goods to customers. B) maintaining a less steeper learning curve as compared to its competitors. C) increasing the perceived value created for customers, which allows it to charge a premium price. D) lowering its costs compared to its competitors, while offering adequate value for its products and services.
C) increasing the perceived value created for customers, which allows it to charge a premium price.
Threadbare Industries is a new high-end textile company that 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 Threadbare Industries to acquire using its capital? A) a new CEO B) software C) a lease for a new building D) brand name
D) brand name
In the context of the resource-based model of competitive advantage, which of the following scenarios best exemplifies resource immobility? A) Acme Corp. has earned a good reputation among its shareholders by investing more heavily in equipment than in building up brand equity. B) TooFirm Inc. has lost its market share because its resources are rigid, inflexible, and static. C) Purple Dreams Corp. has been able to gain a competitive advantage because of its ability to efficiently move its resources from one manufacturing unit to another. D) PaluniInc. has been able to outperform its competitors because the uniqueness of its employee experience is difficult for competitors to replicate.
PaluniInc. has been able to outperform its competitors because the uniqueness of its employee experience is difficult for competitors to replicate.
Hottechi Laminate has developed a new customer-oriented business model. Rather than maintain a network of showrooms across the country, the business will now let customers choose several styles that interest them from an online site, and will ship samples of each of the styles to the customer to test in their home free of charge. Once they have settled on a tile choice, Hottechi Laminate will send a representative to their home to schedule installation. The company has determined that busy middle-class customers will value the convenience of the new model, which allow them to upgrade the look of their homes without spending time browsing showrooms. The new model will be created by selling the old showrooms and shifting resources to the new online site and regional offices for sales personnel. What question remains for Hottechi Laminate to ask in order to put its strategy into action? A) Why does the business model create value? B) What activities need to be performed to create and deliver the offerings to consumers? C) How are the offerings to the customers created? D) Who are the main stakeholders who will be performing the activities?
B) What activities need to be performed to create and deliver the offerings to consumers?
You are the manager of Value Printing, a leading print shop. Value's resources include a highly experienced staff and state-of-the-art printing presses. However, your closest competition has started to cut into your market share by offering same-day turnaround on most orders. Although your staffing and equipment is not optimized for rapid production, you decide to start offering a same-day guarantee to your customers. According to the resource-based view, what is wrong with this decision? A) You have failed to take into account resource immobility. B) Customers tend to have negative opinions of firms that imitate other firms C) Employees are often resistant to changes in strategy. D) Your business is not organized to capture value.
You have failed to take into account resource immobility.
Nam-zim 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 Nam-zim implementing? A) Subscription- based B) Razor-razor blade C) Pay-as-you-go D) Direct sales
b) razor-razor blade
