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BUAD 497 Quiz Questions
Terms in this set (159)
The annual net profit after taxes for RSL Corp., a multinational conglomerate, is $5.5 billion. As legal owners, which of the following stakeholder groups has the most legitimate claim on this profit?
Which of the following is a philanthropic responsibility of a firm? : corporate citizenship, competitive parity, strategic positioning or
Why are black swan events often bad for business?
They erode the implicit trust between the corporate world and society.
Which of the following statements with regard to determining firm performance is true?
External analysis will help understand the industry effects that determine a firm's performance.
A diagnosis of the competitive challenge, an element of a good strategy, is primarily accomplished through strategy _____.
The metaphor of a black swan best applies to
events that are considered highly unexpected and highly impactful when they do occur.
Which of the following statements will effectively guide a strategist?
The principles of strategic management can be applied universally to all organizations.
The black swan events in the past have demonstrated that
stakeholders can affect or be affected by a firm's actions.
Which of the following statements related to a firm's stakeholders is not true?
While external stakeholders are those who make contributions toward the firm, internal stakeholders are those who reap all the benefits.
A firm is likely to have a competitive advantage when it
provides services that consumers will value more than those of its rivals.
A motorcycle company is the market leader due to its superior engine technology and service orientation. These unique qualities have helped the company generate revenues that are consistently higher than other firms in the same industry. Which of the following can be concluded about Revved Rider Inc. from this scenario?
competitive advantage over the other firms
How has Threadless staked out a unique strategic position?
by providing customers a voice in product design
Which of the following statements is true of strategy?
Actions that allow a firm to address a competitive challenge are strategy.
To support the new vision, the executives decided that the company would first enter the Asian market where its growth potential would be huge. To further support these decisions, the general managers of different SBUs and the functional managers formulated their own strategies. Which of the following approaches to the development of strategy does this best illustrate?
top-down strategic planning
Which of the following statements is true of the Level-5 leadership pyramid?
Each level of leadership builds upon the previous one in the pyramid.
Product-oriented vision statements provide managers with
Which of the following statements accurately brings out the difference between an organization's vision and mission?
Vision defines what the organization wants to accomplish ultimately, whereas the mission defines the means by which vision is accomplished.
Which of the following questions does the values espoused by a company primarily answer?
How do we accomplish our goals?
According to the upper-echelons theory,
organizational outcomes reflect the values of the top management team
Which of the following actions of an automobile firm will be considered as a strategic commitment?
the firm investing eight years and $4 billion to develop a range of hybrid cars with which it will compete in the future
What are characteristics of a strategic commitment?
actions that are costly, long-term oriented, and difficult to reverse
According to the Level-5 leadership pyramid, the Level 2 manager is a(n)
contributing team member
Corporate executives at headquarters formulate ______.
Which of the following questions would a firm's business strategy ideally answer?
How to compete?
When the functional managers at Intel came up with the simple rule of producing whichever product delivered the higher margin, the front-line managers shifted Intel's production capacity away from the lower-margin DRAM business to the higher-margin semiconductor business. This ___________ emerged as a consequence of the firm's resource allocation process.
A bottom-up emergent strategy describes
any unplanned strategic initiative undertaken by mid-level employees of their own volition
Top-down strategic planning is a
rational, top-down process through which executives attempt to program future success.
Incumbent firms can benefit from several important sources of entry barriers. Economies of scale are one such source. Which of the following is an implication of economies of scale for incumbent firms?
They can demand better terms from their suppliers.
Strategic group mapping establishes that
competitive rivalry is strongest between firms that are within the same strategic group.
Which of the following statements about the five forces in the U.S. airline industry is true?
Taken together, the competitive forces are quite unfavorable for generating a profit potential in the airline industry.
Which of the following companies would most likely benefit from an economic recession?
Fast Chow Inc., which specializes in selling low-cost Asian food
How do complements affect a primary product or service?
They increase the demand for the primary product.
Which of the following statements is true of an oligopoly?
An oligopoly is often analyzed using game theory.
Game theory attempts to...
predict strategic behaviors by assuming that the moves and reactions of competitors can be anticipated.
Restrictions imposed by the government, such as export quotas on certain products, are a part of the _______ environment of the PESTEL framework.
a large number of restaurants cater to the similar food-related needs of customers.
However, each restaurant makes its product unique by offering a different cuisine, a different ambience, or different services like home delivery and organic ingredients. This differentiation allows each restaurant to set its own prices. Thus, the restaurant industry best illustrates a(n)
monopolistically competitive structure.
A monopolistically competitive industry is characterized by
many firms, a differentiated product, some obstacles to entry, and the ability to raise prices for a relatively unique product while retaining customers.
The relative bargaining power of suppliers is most likely low when
incumbent firms face low switching costs when changing suppliers.
A consolidated industry turns into a fragmented industry when
restrictive government policies are introduced in the industry.
Red Think Inc. is a company that supplies microprocessors to Osion Inc., a computer hardware company. When Osion Inc. demands lower prices for the microprocessors, Red Think Inc. makes it clear that it would profit more from launching its own brand of laptops and desktops in the market. Fearing the competition it would then face from Red Think Inc., Osion Inc. decides to buy the microprocessors at the quoted price itself. In this scenario, Red Think Inc., as a supplier, has exercised its bargaining power by threatening to______
Which of the following statements best supports the fact that even during a period of low demand in the U.S. automotive industry, excess capacity remained?
GM and Chrysler, despite their bankruptcy, restructured instead of exiting the industry.
What real-world example best supports the statement that strategic commitments to a specific industry may be the result of more political than economic considerations?
Airbus was created by a number of European governments through direct subsidies in order to provide a countervailing power to Boeing.
Which of the following is a feature of a fragmented industry?
A fragmented industry consists of many small firms.
There are many plantation owners supplying to a huge number of companies, and they are typically unable to differentiate their products from each other. They also do not have the power to fix their own prices in the industry. In addition, these suppliers can only achieve competitive parity and not a competitive advantage. Thus, the coffee bean industry in Matterstein best illustrates a(n)___ structure.
During periods of high industry growth
price competition among firms frequently decreases.
Which of the following is the best characterization of sociocultural forces?
a society's culture, norms, and values
Why do companies use strategic group models?
to reveal performance differences between clusters of firms in the same industry
In an industry, the rivalry among existing competitors is high when
incumbent firms are highly committed to the business.
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.
five forces model
When applying the five forces model, the first step should ideally be
defining the relevant industry.
In a firm's external environment, _____ primarily capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class.
Which of the following is a macroeconomic factor that can affect a firm's strategy?
levels of employment
The _____ allows the scanning, monitoring, and evaluating of changes and trends in a firm's macro environment.
Economies of scale are cost advantages that accrue for firms with
Economies of scale are cost advantages that accrue for firms with larger output because...
they can spread fixed costs over more units, can employ technology more efficiently, can benefit from a more specialized division of labor, and can demand better terms from their suppliers.
For an asset or a capability to be included in a firm's resource stock, it should be
built through investments over time.
A firm decides to retain $20,000 from its annual earnings and invest it in developing an advanced manufacturing system. In this scenario, the $20,000 would most likely be referred to as the firm's
Which of the following statements accurately brings out the distinction between a firm's resources and capabilities?
While resources reinforce core competencies, capabilities allow managers to orchestrate their core competencies.
Which of the following will most likely be considered as an automobile company's core competency?
the company's ability to make its cars more fuel efficient than most of its competitors
In the context of the VRIO framework, a resource is said to be valuable if it
allows a firm to take advantage of an external opportunity
It has been able to sustain its competitive advantage primarily because of its highly efficient automobile engines, which competitors have been unable to develop or buy at a reasonable price. In the context of the VRIO framework, which of the following resource attributes most likely underpins Onivo's competitive advantage?
The resource is costly to imitate.
A firm's _______ are best described as distinct and fine-grained business processes such as order taking, physical delivery of products, or invoicing customers.
Using the _______, managers can see how competitive advantage flows from a firm's distinct set of activities.
value chain analysis
In a perfectly competitive industry structure
any competitive advantage that one firm has will be short-lived.
Patents, designs, copyrights, trademarks, and trade secrets are five forms of
If a firm is not effectively organized to exploit the competitive potential of a valuable, rare, and costly to imitate (VRI) resource, the best case scenario is
a temporary competitive advantage.
According to the value chain analysis, which of the following is a support activity?
research and development
Support activities add value _____.
The auditor of a public company is assessing the value of all the intangible assets owned by the company. Which of the following would most likely be included in this assessment?
the company's brand equity
If a company has 25 million shares outstanding, and each share is traded at $400, the ______ is $10 billion.
_______ is best described as the difference between the value a consumer attaches to a good or service and what he or she paid for it.
The payables turnover of Tesva Automobiles Inc. is 8.2, and that of its competitor, Mova Automobiles Inc., is 18.4. What does this financial data indicate?
Tesva Automobiles will be more efficient than Mova Automobiles in generating interest-free loans from suppliers.
A lower payable turnover ratio indicates
more efficient management in paying creditors and generating interest-free loans from suppliers
The idea that all available information about a firm's past, current state, and expected future performance is embedded in the market price of the firm's stock is called the
Which of the following financial ratios typically indicates a company's efficiency in extending credit, as well as collecting debts?
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?
What intangible assets do we need?
Managers using the balanced scorecard develop strategic objectives and appropriate metrics by answering what four key questions?
(1) How do customers view us?
(2) How do we create value?
(3) What core competencies do we need?
(4) How do shareholders view us?
The inventory turnover of Murdock Apparels Inc. is 102.6, and that of Lyons Couture Inc., a competitor, is 15.6. What do you infer from this financial data?
Murdock Apparels has lesser capital tied up in its inventory than Lyons Couture.
Which of the following is a disadvantage of the balanced scorecard approach to measure firm performance?
It provides only limited guidance about which performance metrics to choose.
Univo Corp. is a public company whose shares are currently trading in the market at $150 each. The company manufactures smartphones at the cost of $300 per unit and sells them in the market for $500 each. What is the company's producer surplus?
Economic contribution is created when the
price a customer is willing to pay for a good or service is more than the cost the firm incurs to produce it.
The tenet behind the triple bottom line is that
a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy.
Which of the following is an advantage of accounting data?
Accounting data can be easily transformed into financial ratios to help assess and evaluate the competitive performance of firms.
What three dimensions make up the triple bottom line?
economic, social, and ecological
Which of the following is more of a value driver than a cost driver?
superior customer service
While Cadzia Electronics Inc. incurs $450 to manufacture a laptop, its competitor, Virtue Electronics Inc., incurs $400. However, laptops of both the companies have been able to create the same value among customers. From the given scenario, it can be inferred that
Virtue Electronics and Cadzia Electronics share a differentiation parity.
Rite Shoes competes against the global leaders in the athletic shoes industry by developing and selling acceptable quality shoes at a lower price. This has been possible due to the company's large-scale production that reduces its manufacturing expenses. Which of the following generic business strategies is Rite Shoes applying in this scenario?
Firms pursuing a cost-leadership strategy seek to
deliver products or services at a lower cost than competitors.
As differentiation and cost leadership are distinct strategic positions that require important trade-offs, it is
quite difficult to translate a Blue Ocean strategy into reality.
A Blue Ocean strategy typically allows a firm to
offer a differentiated product or service at low cost.
Tools primarily used to achieve cost-leadership:
learning by doing, controlling the cost of inputs, leveraging economies of scale.
One of the primary cost drivers that can be managed in order to establish a low-cost leadership advantage
combining experience-based learning and process innovation to move onto a steeper learning curve.
ElectroScape Inc. and BestDigital Inc are two competitors in the consumer electronics market. The cost incurred by each company to manufacture laptops is $400 per unit. Although both the companies sell their laptops at the same price, ElectroScape has a larger market share in the laptop industry. What does this imply?
ElectroScape has been able to offer more perceived value than BestDigital.
ItsHere.com has successfully created a higher perceived value in the e-commerce industry though it offers the same products at slightly higher prices than the competitors. This has been mainly attributed to the company's easy-to-navigate website, simple return procedures, fast delivery, and cash on delivery option. Thus, the value driver for ItsHere.com is its
superior customer service.
A firm that follows the differentiation strategy is protected from the threat of new entrants primarily due to its
reputation for quality.
There exist important trade-offs between value creation and low cost because value creation and cost tend to be
In the _____, firms change the underlying technology while holding cumulative output constant.
The viability of a differentiation strategy is severely undermined when the
differentiated products become commoditized throughout the industry.
Difference between economies of scale and learning effects?
Learning effects occur over time, whereas economies of scale are captured at one point in time when output is increased.
When a firm makes choices between a cost or value position to achieve competitive advantage, it is primarily involved in
Value drivers contribute to a firm's competitive advantage only if
the increase in value creation exceeds the increase in costs.
In a focused differentiation strategy, a firm seeks to
deliver products or services with unique features to a specific, narrow part of the market.
In contrast to a differentiator, a cost-leader will
focus its research and development on process technologies to improve efficiency.
Good Earth Coffee Inc. is a premium cafe that is reputed for its superior customer service. The coffee shop also serves gourmet food to its customers, which allows it to charge a premium price. Coffee Basics Inc., in contrast, is a chain of coffee shops that charges the lowest price in the industry due to its self-service policy. However, Coffee Crazy Inc. has found a balance between these two strategic groups by offering acceptable levels of customer service at a price slightly above that of Coffee Basics. In this scenario, Coffee Crazy is following a
Blue ocean strategy
An experience curve attempts to capture both
learning effects and process improvements.
When a Blue Ocean strategy is successfully formulated and implemented, investments in differentiation and low costs are not
substitutes but complements.
A firm's business strategy will lead to a competitive advantage if it allows the firm to
perform different activities than its rivals.
Dr. Shetty is able to drive down the cost of complex medical procedures from $100,000 to $2,000 not by doing one big thing, but rather on doing a thousand small things. This approach focuses on driving down the cost of healthcare through
Costs being equal, when a firm has a higher value gap than its competitor, it can be inferred that the firm
can charge a premium price for its products and services
Which of the following is a disadvantage faced by first movers in an industry?
They will have to find distribution channels and complementary assets.
In developed countries, the industry for flash drives is in the maturity stage, and the industry for floppy disks is in the decline stage. What does this imply?
While the flash drive industry has reached its maximum market size, the market size for floppy disks is small and contracting.
While the industry for tablet computers is in the growth stage, the laptop industry is in its shakeout stage. What does this imply?
While the market demand for tablets will be high, the demand for laptops will be limited.
Which of the following statements is true of the growth stage in the industry life cycle?
The prices begin to fall during this stage when compared to the introduction stage.
How are the early majority and late majority different in their attitudes toward technology?
The early majority is confident in their ability to master the new technology; the late majority is not.
If a pharmaceutical company develops a first-of-its-kind vaccine to prevent HIV AIDS and thus creates a whole new market for the product (noninfected civilians), it would be a(n)
Japanese carmakers first introduced small fuel-efficient cars and then leveraged their low-cost and high-quality advantages into high-end luxury segments, dominated by brands such as Lexus, Infiniti, and Acura. This initiative best illustrates a(n)
While the industry for 3-D televisions is in the introduction stage, the industry for LCD televisions is in the maturity stage. What does this imply?
While the industry for 3-D televisions is in the introduction stage, the industry for LCD televisions is in the maturity stage. What does this imply?
__________ is best described as the process of transformation of an idea into a new product or process, or the modification and recombination of existing ones.
In the third step of the innovation process, a(n)
invention is commercialized by entrepreneurs.
In a typical industry life cycle, an industry immediately moves to the _______ after the introduction stage.
_______ is best described as the process by which people undertake economic risk to innovate—to create new products, processes, and sometimes new organizations
a firm's ability to understand external technology developments, evaluate them, and integrate them into current products or create new ones.
A large conglomerate is deciding on the range of new products and services it can offer to its customers to further expand its operations. This decision determines the firm's
level of diversification.
Corporate strategy determines the boundaries of a firm along what 3 dimensions?
1) industry value chain
2) products and services
3) geography (regional, national, or global markets)
What would most likely limit a firm's growth?
social entrepreneur makes conservation of the environment the primary goal of his firm.
A disadvantage associated with obtaining goods and services externally includes
nontrivial search costs to be borne by the firm
A financial advisor has heard from a relative of NR Industries Inc.'s CEO that the company is planning to shut down its operations in Europe next year. The financial advisor realizes that this decision may cause a decline in the value of the company's shares and decides to sell them off. A buyer, unaware of the company's future plans, sees this as a potential opportunity and invests in the company. What does this scenario best illustrate?
Which of the following best illustrates backward vertical integration?
a chocolate manufacturing company setting up its own cocoa plantations
Backward vertical integration involves
moving ownership of activities upstream to the originating inputs of the value chain
An inverted U-shaped relationship between the type of diversification and overall firm performance indicates that
high and low levels of diversification are generally associated with lower overall performance.
Mega Products Inc., a large multinational conglomerate, has hired an external consultant to process and audit its payroll. This allows the company to focus on manufacturing and marketing activities rather than developing and maintaining its own human resource management systems. Which of the following alternatives to vertical integration has Mega Products adopted?
When Moon Star Products Inc. planned to start its operations in United Cadvia, an emerging nation, it realized that it will have to set up its own distribution channels. This would be a risky and an expensive strategic move. Thus, to gain Gold Logistics's confidence, Moon Star purchased 40 percent of the stock of Gold Logistics. What does this scenario best illustrate?
examples of internal transaction costs?
costs pertaining to organizing an economic exchange within a firm— the costs of recruiting and retaining employees, paying salaries and benefits, setting up a shop floor, providing office space and computers, and organizing, monitoring, and supervising work.
Amazon expanded its single-product business by leveraging spare capacity into cloud computing and by offering its Kindle line of tablet computers. This is an example of
A(n) _____ describes the purchase or takeover of one company by another.
The management at Torque Autos Inc. and RedWing Automobiles Inc. realized that by combining the two entities the stakeholders of both the companies would benefit. Their core competencies would act as complementary assets to each other. Consequently, RedWing Automobiles joined together with Torque Autos to form a combined entity called TorqueWing Autos Inc. Which form of strategic alliance does this scenario best illustrate?
The reasons firms enter strategic alliances:
accessing critical complementary assets, lowering costs, learning new capabilities
A _________ describes the process of joining of two independent companies with their consent to form a combined entity on a permanent basis.
Which of the following is one of the primary reasons behind the merger between Adidas and Reebok?
to overcome a competitive disadvantage
The local real estate companies in a city have joined together and arranged a "Property Fair." The expenses of the event will be shared equally by the sponsors. Though many companies compete against each other, they have joined together because the medium will help the companies market themselves through a dedicated forum at an extremely low cost. This arrangement is best referred to as
A strategic alliance has the potential to help a firm gain and sustain a competitive advantage when it joins together resources and knowledge that are
difficult to imitate.
Which of the following statements is true of the real-options perspective?
The approach allows the incumbent firm to obtain additional information at predetermined stages.
TeleFlight Products Inc., a large conglomerate, took over a small startup company that had made some breakthrough innovations in the field of telecommunications. This purchase would help TeleFlight Products to gain access to the startup company's superior technology and human capital. This transaction is an example of a(n)
The process of merging with a competitor at the same stage of the value chain
A non-equity alliance is the most common type of strategic alliance because
it is easy to initiate and terminate.
What happens in the third phase of alliance management?
the alliance partners make relation-specific investments
Which of the following is an example of explicit knowledge?
the findings of a research published in a scientific journal
_____ is knowledge that can be codified. Patents, user manuals, fact sheets, and scientific publications are all ways to capture this
To secure a strong strategic position in fast-growing emerging markets, which of the following corporate strategies did Kraft Foods primarily pursue by acquiring Cadbury?
Reasons that firms make acquisitions
to gain access to a new capability or competency, and to preempt rivals
voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services.
The starting point of the build-borrow-or-buy framework is management's
identification of a strategic resource gap that will impede future growth.
_________ is best described as a form of self-delusion in which managers convince themselves of their superior skills in the face of clear evidence to the contrary.
T or F: Acquisitions can be friendly or hostile.
A drawback involved in using cross-border strategic alliances to enter new foreign markets is that
some of the firm's proprietary know-how may be appropriated by the foreign partner.
How does horizontal integration within an industry affect the surviving firms?
by strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers
In a strategic alliance, the firm that learns faster
has the incentive to reduce its knowledge sharing.
Which of the following is an advantage of non-equity alliances?
They are flexible and easy to initiate and terminate.
What not a reason why firms enter alliances?
to replace competitive advantage with competitive parity
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