Strategic Management 6th Rothaermel Edition Test Bank by Ace Test Banks

Strategic Management 6th Edition Rothaermel Test Bank

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Student name:__________ 1) If a company wants to gain a competitive advantage in a highly competitive industry, it

should ideally A) execute an integrated cost-leadership and differentiation position. B) provide goods or services similar to its competitors at higher prices. C) stake out a unique position within the industry. D) copy the strategies of other firms through competitive benchmarking. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 01 Test Bank > MC Qu. 73 If a company wants to gain a competitive adv...

2) While creating its AFI strategy framework, Bethany Consultants decided what markets the

firm should compete in. By doing this, what type of strategy did the company devise? A) ethical strategy B) corporate strategy C) global strategy D) business strategy Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-05 Apply the Analysis, Formulation, Implementation (AFI) Strategy Framework. Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 01 Test Bank > MC Qu. 90 While creating its AFI strategy framework...

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3) Most consumers and investors today want the firms they do business with to look beyond just

the profit motive. In fact, they want firms that behave legally and ethically while also giving back to their communities via philanthropic activities. The framework that attempts to reconcile these wants is known as A) business model analysis. B) value chain driven decision making. C) stakeholder impact analysis. D) corporate social responsibility. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-04 Conduct a stakeholder impact analysis. Topic : Define Stakeholders and Know How to Conduct a Stakeholder Analysis Source : Chapter 01 Test Bank > MC Qu. 17 Most consumers and investors today want the ...

4) The amount of polyethanal that can be used in household paint is legally limited to 0.03

percent. Anything beyond this amount is hazardous to health and the environment and is considered a legal offense. Consequently, PrismPaints Corp. has vouched to make its products as safe as possible. Therefore, it manufactures polyethanal-free paints even though this increases its costs and reduces the dividends paid to its shareholders in the long run. Which of the following responsibilities is Prism Paints Corp. primarily compromising in this scenario? A) legal responsibilities toward the government B) economic responsibilities toward its shareholders C) philanthropic responsibilities toward the local community D) ethical responsibilities toward the society Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 01-04 Conduct a stakeholder impact analysis. Topic : Corporate Social Responsibility and Sustainability Source : Chapter 01 Test Bank > MC Qu. 42 The amount of polyethanal that can be used i...

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5) Batt Packs recently came under criticism when a newspaper article revealed that the

company’s production plant had leaked a chemical compound into a sensitive wetland ecosystem. Although use of the chemical was not technically prohibited by law, the local government levied a small fine for cleaning up the spill. Environmental groups, however, argued that continued use of the chemical was damaging to the local wildlife and threatened to organize a boycott against Batt Packs. What should Batt Packs do to ensure that it meets its ethical responsibilities? A) design batteries without the chemical and market them as environmentally friendly B) pay the fine levied by the local government and resume operations C) take out an advertisement arguing that use of the chemical is perfectly legal D) move its production facilities to an area that is less concerned with environmental issues Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 01-04 Conduct a stakeholder impact analysis. Topic : Corporate Social Responsibility and Sustainability Source : Chapter 01 Test Bank > MC Qu. 44 Batt Packs recently came under criticism whe...

6) The interaction between a firm and its diverse internal and external stakeholders is best

described as a(n) A) cartel arrangement. B) ergonomic relationship. C) fiduciary responsibility. D) exchange relationship. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 01-03 Assess the relationship between stakeholder strategy and sustainable compe Topic : Stakeholders and Stakeholder Analysis Source : Chapter 01 Test Bank > MC Qu. 33 The interaction between a firm and its diver...

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7) What is the relationship between economic contribution and competitive advantage?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Competitive Advantage Source : Chapter 01 Test Bank > SA Qu. 96 What is the relationship between economic co...

8) Hewlett-Packard was not able to address the competitive challenges of cloud and mobile

computing. The company therefore destroyed shareholder value by failing to create A) value for society. B) foreign contacts. C) a need for printers. D) a strong infrastructure. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 01-03 Assess the relationship between stakeholder strategy and sustainable compe Topic : Top-Down Strategic Planning and Scenario Planning Source : Chapter 01 Test Bank > MC Qu. 26 Hewlett-Packard was not able to address...

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9) Which of the following provides an example of what AFI strategy framework is used for? A) Using AFI, the Pure Tea Group was able to reduce the pollution it caused while

processing tea and thereby receive an award. B) Using AFI, the Mossimo Apparel Company was able to implement a strategy that allowed them to give more money to charities and thereby gain good press. C) Using AFI, the Quest Auto firm was able to implement a strategy that produced highquality cars more efficiently and thereby reduced costs. D) Using AFI, the Fine Dine Restaurant Group was able to improve employee benefits and thereby increase employee loyalty. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Evaluate Difficulty : 2 Medium Learning Objective : 01-05 Apply the Analysis, Formulation, Implementation (AFI) Strategy Framework. Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 01 Test Bank > MC Qu. 88 Which of the following provides an example o...

10) Which of the following scenarios best illustrates a good stakeholder strategy? A) Nowadays Corp. distributes only 40 percent of its annual profit after taxes to

shareholders, while the remaining is invested for further research and distributed among employees and the local community. B) Knights for Lights Corp. ensures that it fully exploits free natural resources, so that most of its profits go to shareholders in the form of dividends. C) Ben’s Buttons Inc. ensures that its employees are paid the least in the industry so that its external stakeholders can get the best price. D) ASI Inc. follows a strategy in which maximization of the shareholder’s wealth is the primary concern of the managers. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-03 Assess the relationship between stakeholder strategy and sustainable compe Topic : Stakeholders and Stakeholder Analysis Source : Chapter 01 Test Bank > MC Qu. 35 Which of the following scenarios best illust...

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11) The first step in stakeholder impact analysis involves which of the following? A) identifying the interests of the stakeholders B) identifying the opportunities that stakeholders present C) identifying who the stakeholders are D) identifying the social responsibilities to stakeholders Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-04 Conduct a stakeholder impact analysis. Topic : Stakeholders and Stakeholder Analysis Source : Chapter 01 Test Bank > MC Qu. 37 The first step in stakeholder impact analysi...

12) A firm always has a competitive disadvantage when its return on invested capital is A) below the industry average. B) declining steadily over two or more years. C) about the same as its closest competitor. D) 2 percent or lower in a declining industry. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Competitive Advantage Source : Chapter 01 Test Bank > MC Qu. 70 A firm always has a competitive disadvantage...

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13) The best example of a firm’s external stakeholder is a(n) A) shareholder who has invested money in the firm but is not employed by the firm. B) government agency that regulates the prices of products manufactured by the firm. C) board member from a wholly-owned foreign subsidiary of the firm. D) employee of the firm who is responsible for a contract project. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-03 Assess the relationship between stakeholder strategy and sustainable compe Topic : Stakeholders and Stakeholder Analysis Source : Chapter 01 Test Bank > MC Qu. 32 The best example of a firm&#8217;s external ...

14) Ayesha, the founder of Solid Foundation Construction, strongly believes in the notion of

corporate social responsibility, so she proposed several philanthropic activities that she expects the company to pursue. In order to accomplish this vision, the managers should first A) ask for public input on issues that the company can help address. B) make sure it is paying employees’ wages that allow them to live comfortably. C) review all legal codes in the areas in which Solid Foundation operates and ensure all permits are up-to-date. D) ensure that the company is profitable and has a sustainable competitive advantage. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-04 Conduct a stakeholder impact analysis. Topic : Corporate Social Responsibility and Sustainability Source : Chapter 01 Test Bank > MC Qu. 48 Ayesha, the founder of Solid Foundation...

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15) In strategic management, strategists engage in three pillars. These three pillars include

the________ of major goals and objectives. A) objectification B) implementation C) unification D) presentation Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-05 Apply the Analysis, Formulation, Implementation (AFI) Strategy Framework. Topic : The AFI Strategy Framework Source : Chapter 01 Test Bank > MC Qu. 19 In strategic management, strategists engage ...

16) Which of the following is typically an economic responsibility of a firm? A) paying adequate returns to the firm’s stockholders on the capital invested by them B) helping a nation increase its import of goods and services C) sourcing raw materials from highly developed countries D) donating resources, in terms of money and time, toward community development Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-04 Conduct a stakeholder impact analysis. Topic : Corporate Social Responsibility and Sustainability Source : Chapter 01 Test Bank > MC Qu. 40 Which of the following is typically an econo...

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17) In the AFI strategy framework, strategy analysis primarily involves A) deciding the type of corporate governance that would be most effective in the

implementation of a strategy. B) evaluating the effects of internal resources and core competencies on a firm’s potential to gain and sustain a competitive advantage. C) organizing a firm in order to effectively put the formulated strategy into practice. D) designing a business, corporate, and global strategy to gain and sustain a competitive advantage. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-05 Apply the Analysis, Formulation, Implementation (AFI) Strategy Framework. Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 01 Test Bank > MC Qu. 83 In the AFI strategy framework, strategy anal...

18) Tony’s Pizza Shop is able to net $10,000 a week; this makes the shop profitable. Its number

one competitor, Leo’s Pies, is also profitable, netting $12,000 a week. Lil Anthony’s Pizza Palace nets $13,000 a week. Since Tony’s Pizza Shop is profitable, we can conclude that it has a competitive advantage in its industry. A) True—competitive advantage is achieved through profitability alone. B) False—Tony more than likely has a sustained competitive advantage since he’s been in business longer. C) False—competitive advantage is only achieved by generating above average returns, relative to competition. D) True—competitive advantage is achieved since Tony has a positive net income. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Sustaining a Competitive Advantage Source : Chapter 01 Test Bank > MC Qu. 11 Tony&#8217;s Pizza Shop is able to net $10,0...

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19) Underperformance relative to other firms in the same industry or the industry average results

in a(n)________ for a firm. A) sustainable competitive advantage B) increased power distance C) competitive disadvantage D) diseconomies of scope Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Competitive Advantage Source : Chapter 01 Test Bank > MC Qu. 63 Underperformance relative to other firms in ...

20) Why should firms in the same industry choose distinct but different strategic positions?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 01 Test Bank > SA Qu. 97 Why should firms in the same industry...

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21) Yellow Ride Service is a new entrant to the taxi industry. It has achieved success by staking

out a unique position in the industry. How did Yellow Ride Service mostly likely achieve this position? A) providing long-distance cab fares at a lower rate than competitors; servicing the same area as competitors B) providing long-distance cab fares at a higher rate than competitors; servicing the same area as competitors C) providing long-distance cab fares at a higher rate than competitors; servicing a larger area than competitors D) providing long-distance cab fares at a lower rate than competitors; servicing a smaller area than competitors Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 01 Test Bank > MC Qu. 74 Yellow Ride Service is a new entrant to the ...

22) A firm is embedded in a multifaceted exchange relationship with a number of diverse internal

and external stakeholders. Elaborate on this statement and provide multiple examples of the exchange relationship between a firm and its stakeholders, including what each party contributes.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 01-03 Assess the relationship between stakeholder strategy and sustainable compe Topic : Stakeholders and Stakeholder Analysis Source : Chapter 01 Test Bank > SA Qu. 103 A firm is embedded in a multifaceted exchang...

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23) Which of the following terms describes the guiding policy to address the competitive

challenge, and uses corporate- and business-level strategy? A) competitive advantage B) formulation C) analysis D) implementation Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-05 Apply the Analysis, Formulation, Implementation (AFI) Strategy Framework. Topic : The AFI Strategy Framework Source : Chapter 01 Test Bank > MC Qu. 18 Which of the following terms describes the g...

24) A successful strategy details a set of goal-directed actions that managers make to gain and

sustain a competitive advantage; in order to create this strategy, managers must focus on three pillars. Which of the following below is not one of these pillars? A) analysis B) execution C) formulation D) implementation Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-05 Apply the Analysis, Formulation, Implementation (AFI) Strategy Framework. Topic : The AFI Strategy Framework Source : Chapter 01 Test Bank > MC Qu. 23 A successful strategy details a set of goal-...

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25) Roberta is interested in the concept of strategy and decides to create her own. As a result,

Roberta says that her strategy is to focus on competitive benchmarking to achieve competitive advantage. Which is the best evaluation of Roberta’s statement? A) Roberta’s strategy reveals a clear strategic position and tradeoff, so she should proceed. B) Roberta’s strategy is clear, but she should provide more detail. C) Roberta should reevaluate her statement because it fails to meet the principles of what a strategy should be. D) Roberta should reevaluate her statement because it fails to mention more than one strategy. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Evaluate Difficulty : 2 Medium Learning Objective : 01-01 Explain the role of strategy in a firm's quest for competitive advantage. Topic : Sustaining a Competitive Advantage Source : Chapter 01 Test Bank > MC Qu. 10 Roberta is interested in the concept...

26) Which of the following three important stakeholder attributes should managers pay special

close attention to in order to better understand stakeholder impact analysis? A) grace under pressure, financial control, and reward power B) power, legitimacy, and urgency C) competitive advantage, economic value, and time D) shareholder rights plan, board representation and CEO influence Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 01-04 Conduct a stakeholder impact analysis. Topic : Stakeholders and Stakeholder Analysis Source : Chapter 01 Test Bank > MC Qu. 16 Which of the following three important stake...

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27) Writer Button Inc. and Horner Inc. are two companies that have been manufacturing

typewriters for almost 30 years. Due to the reduced demand for typewriters today, both companies’ average return on invested capital is approximately –5 percent. The current industry average is 2 percent. In this scenario, Writer Button Inc. and Horner Inc. most likely have A) strategic alliance with each other. B) competitive advantage over other firms in their industry. C) competitive parity with each other. D) economies of scope instead of economies of scale. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Competitive Advantage Source : Chapter 01 Test Bank > MC Qu. 65 Writer Button Inc. and Horner Inc. are two c...

28) Sean, a retired CEO, invests capital in a start-up company that creates budgeting software.

He mentors the entrepreneur and the employees of the company because he wants the company to perform well and survive in the market. Thus, Sean is the start-up company’s A) stakeholder. B) category captain. C) employee. D) headhunter. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-03 Assess the relationship between stakeholder strategy and sustainable compe Topic : Stakeholders and Stakeholder Analysis Source : Chapter 01 Test Bank > MC Qu. 27 Sean, a retired CEO, invests capital in a st...

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29) Louise owns a large portion of Sturdy Appliance’s stock. However, she is not employed by

the company. In this scenario, Louise is the company’s A) customer. B) external stakeholder. C) creditor. D) internal stakeholder. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 01-03 Assess the relationship between stakeholder strategy and sustainable compe Topic : Stakeholders and Stakeholder Analysis Source : Chapter 01 Test Bank > MC Qu. 29 Louise owns a large portion of Sturdy...

30) The three tasks of the AFI strategy framework are to Assemble a prototype, Find a buyer, and

Incorporate feedback. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-05 Apply the Analysis, Formulation, Implementation (AFI) Strategy Framework. Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 01 Test Bank > TF Qu. 03 The three tasks of the AFI strategy framewor...

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31) Which of the following statements about the social responsibilities of a business is accurate? A) Legal responsibilities are the foundational building block of a firm’s social

responsibility. B) Economic responsibilities are often subsumed under the idea of corporate citizenship, reflecting the notion of voluntarily giving back to society. C) Shareholders mandatorily require a firm to perform its ethical, but not its philanthropic responsibilities. D) A firm’s ethical responsibilities go beyond its legal responsibilities. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-04 Conduct a stakeholder impact analysis. Topic : Corporate Social Responsibility and Sustainability Source : Chapter 01 Test Bank > MC Qu. 47 Which of the following statements about the...

32) The average cost of production for a bottle of mineral water in the industry is $5 while its

average price is $8. Forever Spring Inc. manufactures the same product for $3 per bottle and sells it for $8 per bottle. Which of the following statements is most likely true of ForeverSpring Inc. in this scenario? A) It has formed a strategic alliance with other firms in the industry. B) It has a competitive advantage in the industry. C) It has a competitive disadvantage in the industry. D) It has competitive parity with other firms in the industry. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Competitive Advantage Source : Chapter 01 Test Bank > MC Qu. 66 The average cost of production for a bottle ...

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33) Briefly discuss how not to define strategy and the main mistakes that managers make when

creating their strategy.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 2 Medium Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Competitive Advantage Source : Chapter 01 Test Bank > SA Qu. 99 Briefly discuss how not to define strategy and...

34) A firm is required by society and its shareholders to meet its ethical and philanthropic

responsibilities. ⊚ true ⊚ false Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-03 Assess the relationship between stakeholder strategy and sustainable compe Topic : Value of Strategic Leadership Source : Chapter 01 Test Bank > TF Qu. 07 A firm is required by society and its shareh...

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35) You are the manager in charge of setting the strategy for a new fast-casual restaurant. Which

of the following questions would be appropriate for you to ask during the analysis phase of the AFI strategy framework? A) How have consumer preferences in the fast-casual restaurant industry changed in the last five years? B) Should we be competing nationally or internationally? C) Should we open our first location in Los Angeles or New York City? D) Can we secure relationships with enough organic farmers to meet our commitment to using the healthiest ingredients? Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 01-05 Apply the Analysis, Formulation, Implementation (AFI) Strategy Framework. Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 01 Test Bank > MC Qu. 84 You are the manager in charge of setting the...

36) All of the following are external stakeholders except which of the following? A) creditors B) customers C) alliance partners D) competitors Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-03 Assess the relationship between stakeholder strategy and sustainable compe Topic : Stakeholders and Stakeholder Analysis Source : Chapter 01 Test Bank > MC Qu. 14 All of the following are external stakeholde...

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37) Superior performance allows a company to benefit society by implementing which of the

following strategies? A) sell more advertising space B) substitute less-expensive components to keep costs low C) imitate the features of the most popular products of competitors on the market D) reinvest some of its profits and grow, providing more employment and career opportunities Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 01-01 Explain the role of strategy in a firm's quest for competitive advantage. Topic : Strategy and the Strategic Management Process Source : Chapter 01 Test Bank > MC Qu. 50 Superior performance allows a company to...

38) Which of the following is an example of competitive parity? A) A firm provides wall clocks that its consumers value more than other wall clocks. B) A firm produces a similar number of wall clocks at a similar cost as its competitors. C) A firm sells wall clocks at a lower price than its competitors. D) A firm manufactures higher-quality wall clocks than its competitors. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Competitive Advantage Source : Chapter 01 Test Bank > MC Qu. 58 Which of the following is an example of comp...

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39) Which is a model that links strategy analysis, strategy formulation, and strategy

implementation, thereby helping managers plan and implement a good strategy? A) stakeholder impact analysis B) the Four Ps C) AFI strategy framework D) corporate social responsibility Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 01-05 Apply the Analysis, Formulation, Implementation (AFI) Strategy Framework. Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 01 Test Bank > MC Qu. 80 Which is a model that links strategy...

40) A firm is said to gain a competitive advantage when it accomplishes which of the following? A) matches its highest previous performances B) provides goods or services similar to the competitors’ at a higher price C) performs at the same level as that of its competitors D) provides products similar to its competitors, but at lower prices Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Competitive Advantage Source : Chapter 01 Test Bank > MC Qu. 67 A firm is said to gain a competitive advanta...

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41) Which of the following is an element of good strategy? A) an approach that underestimates the competition B) a summary of the firm’s history within its industry C) a guiding policy to address employee satisfaction D) a set of coherent actions to implement the firm’s guiding policy Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-01 Explain the role of strategy in a firm's quest for competitive advantage. Topic : Strategy and the Strategic Management Process Source : Chapter 01 Test Bank > MC Qu. 56 Which of the following is an element of good...

42) Managers use the AFI strategy framework to A) help their business achieve and sustain competitive parity. B) help reduce the economic contribution of their business. C) minimize the wealth of their shareholders. D) explain and predict differences in firm performance. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-05 Apply the Analysis, Formulation, Implementation (AFI) Strategy Framework. Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 01 Test Bank > MC Qu. 81 Managers use the AFI strategy framework to

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43) Stakeholder impact analysis provides a decision tool that helps strategic leaders recognize the

needs of different stakeholders. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-04 Conduct a stakeholder impact analysis. Topic : Value of Strategic Leadership Source : Chapter 01 Test Bank > TF Qu. 08 Stakeholder impact analysis provides a...

44) During strategy implementation, managers primarily focus on deciding the A) type of corporate governance that is most effective and ways in which it can put the

formulated strategy into practice. B) industries and markets the firm should compete in to be able to gain and sustain a competitive advantage. C) role strategic leaders should play in gaining and sustaining a competitive advantage. D) relationship between competitive advantage and firm performance. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 01-05 Apply the Analysis, Formulation, Implementation (AFI) Strategy Framework. Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 01 Test Bank > MC Qu. 87 During strategy implementation, managers pri...

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45) Who are a firm’s stakeholders?

Question Details AACSB : Reflective Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 01-03 Assess the relationship between stakeholder strategy and sustainable compe Topic : Stakeholders and Stakeholder Analysis Source : Chapter 01 Test Bank > SA Qu. 102 Who are a firm&#8217;s stakeholders?

46) Through a strategy’s________, a firm puts its guiding policy into practice by employing a set

of coherent actions. A) control B) formulation C) analysis D) implementation Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 01-01 Explain the role of strategy in a firm's quest for competitive advantage. Topic : Strategy and the Strategic Management Process Source : Chapter 01 Test Bank > MC Qu. 55 Through a strategy&#8217;s ________, a firm puts its guiding polic...

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47) Which of following practices of a firm satisfies its ethical responsibilities? A) using plastic as the packaging material, even though it is harmful to the environment,

yet legal B) outsourcing production to a less developed country and paying wages that are below its own country’s accepted minimum wages C) selling vaccines at a subsidized price in a less developed country even though this results in reduced shareholder returns D) using advertising and other forms of promotion to endorse luxurious lifestyles Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-04 Conduct a stakeholder impact analysis. Topic : Corporate Social Responsibility and Sustainability Source : Chapter 01 Test Bank > MC Qu. 45 Which of following practices of a firm satis...

48) For a firm that operates in an industry where competition is high, which of the following

practices will result in inferior performance? A) choosing a distinct but different strategic position in the industry B) focusing on creating value for customers rather than destroying rivals C) trying to be everything to everybody by combining different competitive strategies D) working toward increasing the difference between value creation and cost Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 01 Test Bank > MC Qu. 72 For a firm that operates in an industry wher...

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49) Toy sales have declined by 10 percent each year, forcing many retailers to exit the industry.

To eliminate its remaining competition, Terrific Toys sells all of its product at a loss and relies on its significant cash holdings to cover costs until its competition is forced to exit the industry. Is this an example of a successful strategy? Why or why not? A) No. Bargain’s strategy and competitive advantage are unsustainable. B) No. Bargain has failed to create value for its customers. C) Yes. Any strategy that forces competition from the market is by definition successful. D) Yes. Bargain has achieved a sustainable competitive advantage by selling its toys at a lower price than competitors. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 01 Test Bank > MC Qu. 77 Toy sales have declined by 10 percent each y...

50) Juan wants to open his own hot dog restaurant but doesn’t know anything about business. He

needs help determining who his competition is, how he should craft his strategy to compete and how he’ll implement his strategy to achieve a competitive advantage. He’s hired you to help him get started. As a result, you will probably use which of the following? A) competitive benchmarking B) Red Queen effect C) Stakeholder Impact analysis D) AFI strategy framework Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 01-01 Explain the role of strategy in a firm's quest for competitive advantage. Topic : Sustaining a Competitive Advantage Source : Chapter 01 Test Bank > MC Qu. 09 Juan wants to open his own hot dog restaurant...

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51) Earth Mother Leisure Wear had a mission to become the leading producer of

environmentally friendly leggings, an emerging and in-demand category in the apparel industry. Its strategy involved leveraging a network of organic cotton farmers and suppliers of environmentally responsible synthetic materials to create a product that is durable, attractive, affordable, and 100% recyclable. However, because it did not upgrade its outdated production facilities, Earth Mother Leisure Wear could not assemble its products at a lowenough cost to offer the leggings at a price that was attractive to customers. Earth Mother Leisure Wear's strategy failed because A) it failed to consider the competitive challenge. B) the company did not stake out a unique strategy position. C) managers did not live by the company’s core values. D) it was not backed up with strategic commitments. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 01-01 Explain the role of strategy in a firm's quest for competitive advantage. Topic : Strategy and the Strategic Management Process Source : Chapter 01 Test Bank > MC Qu. 57 Earth Mother Leisure Wear had a mission...

52) Sugar & Sweet Sodas has seen its market share erode in recent years, as consumers

increasingly turn toward healthier beverage choices such as unsweetened sparkling water. Hoping to rekindle interest in sugary sodas, Sugar & Sweet decides to produce a limited run of “throwback” cans using labeling first introduced in the 1980s. What is wrong with this strategy? A) It does not involve concrete actions. B) It tries to be everything to everybody. C) It lacks strategic commitments. D) It fails to face the competitive challenge. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 2 Medium Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 01 Test Bank > MC Qu. 79 Sugar &amp; Sweet Sodas has seen its market ...

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53) DuraLine Ltd. is a landline telephone manufacturer whose average return on invested capital

is approximately 2 percent. Because demand for landline telephones has declined significantly, the industry average return on invested capital has been negative (–5 percent) for the last few years. In this scenario, DuraLine Ltd. has a A) power position. B) competitive advantage. C) balanced scorecard. D) competitive disadvantage. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Competitive Advantage Source : Chapter 01 Test Bank > MC Qu. 64 DuraLine Ltd. is a landline telephone manufa...

54) The minimum wage in the country of Hanns is $8 an hour. Delish, a restaurant in Hanns’

capital city, pays its servers $8 per hour. However, the management of the restaurant feels that this amount is excessive for workers whose only job is to clear tables. By continuing to adhere to the rules set by the government of Hanns, which of the following responsibilities is Delish satisfying? A) philanthropic responsibilities B) legal responsibilities C) ethical responsibilities D) demographic responsibilities Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-04 Conduct a stakeholder impact analysis. Topic : Corporate Social Responsibility and Sustainability Source : Chapter 01 Test Bank > MC Qu. 41 The minimum wage in the country of Hanns is ...

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55) As the strategic manager of AlwaysSharp art knives, you are tasked with producing a

strategy for introducing a new line of premium knives. Your competitor produces a line of similar art knives at a cost of $1 and sells them for $5. Because your company has inferior production capabilities, your knives will cost $2 each to produce. However, your handle is proven to be more comfortable than your competitors’. Assuming you are guaranteed to sell the same number of units as your competitor, which of the following strategies is most likely to achieve a competitive advantage? A) Market AlwaysSharp art knives as a higher-quality alternative and sell them for $7. B) Reduce the quality of materials used in AlwaysSharp art knives to bring unit costs down to $1, then sell the knives for $5. C) Offer a buy-one-get-one-free sale on AlwaysSharp art knives. D) Continue to produce AlwaysSharp art knives for $2 but set the price at $4. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Competitive Advantage Source : Chapter 01 Test Bank > MC Qu. 69 As the strategic manager of AlwaysSharp...

56) Which of the following best qualifies as a firm’s internal stakeholder? A) an auditor assigned to the firm by a federal government agency B) a manager taking care of the firm’s operations in a foreign market C) a competitor manufacturing the same products as that of the firm D) a labor union with whom the firm’s employees can affiliate Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-03 Assess the relationship between stakeholder strategy and sustainable compe Topic : Stakeholders and Stakeholder Analysis Source : Chapter 01 Test Bank > MC Qu. 31 Which of the following best qualifies as a f...

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57) Discuss the importance of creating an overall stakeholder strategy opposed to just catering to

stockholders.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-03 Assess the relationship between stakeholder strategy and sustainable compe Topic : Competitive Advantage Source : Chapter 01 Test Bank > SA Qu. 100 Discuss the importance of creating an overal...

58) ________ is best described as an integrative management field that combines analysis,

formulation, and implementation in the quest for competitive advantage. A) Integrated technology management B) Inventory management C) Supply chain management D) Strategic management Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 01-01 Explain the role of strategy in a firm's quest for competitive advantage. Topic : Strategy and the Strategic Management Process Source : Chapter 01 Test Bank > MC Qu. 51 ________ is best described as an integrative ma...

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59) Which of the following tasks in the AFI strategy framework involves evaluating the internal

and external environments in which a firm operates? A) implementation B) analysis C) formulation D) competitive advantage Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-05 Apply the Analysis, Formulation, Implementation (AFI) Strategy Framework. Topic : The AFI Strategy Framework Source : Chapter 01 Test Bank > MC Qu. 20 Which of the following tasks in the AFI stra...

60) During an AFI planning session, the strategic leaders of the Buckaroo Trucks Corporation cut

overhead costs by placing various stages of production in different countries. By doing this, the firm addressed which of the following issues? A) corporate governance B) organizational design C) business ethics D) philanthropic strategy Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 01-05 Apply the Analysis, Formulation, Implementation (AFI) Strategy Framework. Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 01 Test Bank > MC Qu. 91 During an AFI planning session, the...

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61) In________, a firm frames a guiding policy to address the competitive challenge. A) strategy control B) strategy analysis C) strategy formulation D) strategy implementation Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 01-01 Explain the role of strategy in a firm's quest for competitive advantage. Topic : Strategy and the Strategic Management Process Source : Chapter 01 Test Bank > MC Qu. 54 In ________, a firm frames a guiding policy to ...

62) A good strategy allows a firm to achieve superior performance and sustainable competitive

advantage without regard to the external environment. ⊚ true ⊚ false Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-01 Explain the role of strategy in a firm's quest for competitive advantage. Topic : Strategy and the Strategic Management Process Source : Chapter 01 Test Bank > TF Qu. 01 A good strategy allows a firm to achieve superior...

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63) What is meant by corporate social responsibility (CSR)?

Question Details AACSB : Reflective Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 01-04 Conduct a stakeholder impact analysis. Topic : Corporate Social Responsibility and Sustainability Source : Chapter 01 Test Bank > SA Qu. 104 What is meant by corporate social responsibi...

64) ________ is best described as a set of goal-directed actions a firm takes to gain and sustain

superior performance relative to competitors. A) Credo B) Strategy C) Competency management D) Behavior modification Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 01-01 Explain the role of strategy in a firm's quest for competitive advantage. Topic : Strategy and the Strategic Management Process Source : Chapter 01 Test Bank > MC Qu. 52 ________ is best described as a set of goal-dir...

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65) Which of the following statements should ideally reflect a firm’s strategy for competitive

advantage? A) We will be number one in the industry. B) We want to be the market leader by replicating our competitor’s strategy. C) Our strategy is to win at any cost. D) Our aim is to create superior customer value while controlling costs. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 01 Test Bank > MC Qu. 78 Which of the following statements should ide...

66) What are the three crucial stakeholder attributes? Briefly describe each one.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 2 Medium Learning Objective : 01-04 Conduct a stakeholder impact analysis. Topic : Competitive Advantage Source : Chapter 01 Test Bank > SA Qu. 101 What are the three crucial stakeholder...

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67) The________ effect involves studying and copying the competition, which results in

unsuccessful efforts to gain a competitive advantage. A) Mad Hatter B) Red Queen C) Black Swan D) Wizard of Oz Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Understanding a Firm's External Environment Source : Chapter 01 Test Bank > MC Qu. 24 The ________ effect involves studying and...

68) What are the elements of a good strategy? Briefly explain how they are accomplished.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-01 Explain the role of strategy in a firm's quest for competitive advantage. Topic : Strategy and the Strategic Management Process Source : Chapter 01 Test Bank > SA Qu. 93 What are the elements of a good strategy...

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69) Because they are a crucial component of a firm’s success, customers are considered internal

stakeholders. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-03 Assess the relationship between stakeholder strategy and sustainable compe Topic : Stakeholders and Stakeholder Analysis Source : Chapter 01 Test Bank > TF Qu. 06 Because they are a crucial component of a fi...

70) Lawrence decided to copy the competition to gain a competitive advantage for his company.

After a year, he realized his company failed to gain such an advantage. Lawrence most likely failed because of the________ effect. A) Green Pawn B) globalization C) Red Queen D) grandiose Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-03 Assess the relationship between stakeholder strategy and sustainable compe Topic : Top-Down Strategic Planning and Scenario Planning Source : Chapter 01 Test Bank > MC Qu. 25 Lawrence decided to copy the competition...

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71) According to AFI strategy framework, in which of the following tasks of strategic

management does a firm identify the roles strategic leaders play? A) strategy analysis B) strategy design C) strategy implementation D) strategy management Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-05 Apply the Analysis, Formulation, Implementation (AFI) Strategy Framework. Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 01 Test Bank > MC Qu. 82 According to AFI strategy framework, in whic...

72) Questions asked during the strategy analysis stage of the AFI framework should include

“What effects do forces in the external environment have on the firm’s potential to gain and sustain a competitive advantage?” ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 01-05 Apply the Analysis, Formulation, Implementation (AFI) Strategy Framework. Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 01 Test Bank > TF Qu. 04 Questions asked during the strategy analysis...

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73) In the final step of the stakeholder impact analysis, a firm A) differentiates its internal stakeholders from its external stakeholders. B) decides a course of action to address the stakeholders’ concerns. C) recognizes the opportunities and threats stakeholders present. D) identifies its stakeholders’ interests and claims. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-04 Conduct a stakeholder impact analysis. Topic : Stakeholders and Stakeholder Analysis Source : Chapter 01 Test Bank > MC Qu. 49 In the final step of the stakeholder impact ...

74) The following statement by the chief executive of MegaFilms movie studio should not be

used as a strategy: “We will produce the greatest films of the 21st century.” ⊚ true ⊚ false Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Strategy and the Strategic Management Process Source : Chapter 01 Test Bank > TF Qu. 02 The following statement by the chief executi...

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75) To better achieve a competitive advantage, firms must now adopt a holistic approach towards

satisfying multiple stakeholders opposed to focusing on the needs of their shareholders. What term is used for this approach? A) stakeholder strategy B) internal shareholder strategy C) value creation strategy D) shareholder relationship strategy Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-03 Assess the relationship between stakeholder strategy and sustainable compe Topic : Stakeholders and Stakeholder Analysis Source : Chapter 01 Test Bank > MC Qu. 13 To better achieve a competitive advantage...

76) Golden Age Cinemas Inc. and HiDef Inc. are two companies that own and run movie theaters

in malls and other commercial areas. Both are trying to coax consumers back into movie theaters after the COVID-19 pandemic shutdowns. While Golden Age Cinemas Inc. pursues a cost-leadership strategy, HiDef Inc. adopts a differentiation strategy. Which of the following statements is most likely true of this scenario? A) HiDef will keep its customer service at an acceptable level, while Golden Age Cinemas will provide superior customer service. B) Golden Age Cinemas will charge a premium price for its customers, while HiDef will implement everyday low pricing. C) HiDef and Golden Age Cinemas will not be direct competitors to each other, and their customer segments will overlap very little. D) Golden Age Cinemas and HiDef will use a similar approach to create value for customers by attempting to offer everything to everybody. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 01 Test Bank > MC Qu. 71 Golden Age Cinemas Inc. and HiDef Inc. are...

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77) Which of the following stages of the strategic management process involves an evaluation of

a firm’s external and internal environments? A) strategy analysis B) strategy control C) strategy formulation D) strategy implementation Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 01-01 Explain the role of strategy in a firm's quest for competitive advantage. Topic : Strategy and the Strategic Management Process Source : Chapter 01 Test Bank > MC Qu. 53 Which of the following stages of the strateg...

78) If French Provincial Decor LLC obtains an 18 percent return on invested capital, which of

the following will help determine if it has a competitive advantage over other furniture companies? A) evaluating the liquidity ratios for other pharmaceutical companies B) comparing the return to the return on invested capital obtained by other firms in the industry C) comparing the value to the history of the firm’s return of investment over a number of years D) assessing the value based on the shareholders’ expectations of return on their capital Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Competitive Advantage Source : Chapter 01 Test Bank > MC Qu. 62 If French Provincial Decor LLC obtains...

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79) Green and Good Inc., a multinational company, relies on its media partner OmniSignal to

regularly advertise its offers, sales, and new products. OmniSignal is invested in this relationship because it generates most of its revenue from advertising Green and Good’s products. In this scenario, OmniSignal is Green and Good Inc.’s A) workforce. B) internal stakeholder. C) stockholder. D) external stakeholder. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-03 Assess the relationship between stakeholder strategy and sustainable compe Topic : Stakeholders and Stakeholder Analysis Source : Chapter 01 Test Bank > MC Qu. 28 Green and Good Inc., a multinational company...

80) Dazzle Lighting was the first company to start selling LED light bulbs in its country—a

product that gained popularity among diverse groups. Soon, other companies started to sell their own brands of LED bulbs, thereby giving Dazzle Lighting ample competition. In response, Dazzle Lighting decided to limit its LED light bulbs to outdoor models. However, it ensured that these models were the longest-lasting and lowest-priced on the market. With this innovation, Dazzle Lighting consistently outperformed its competitors for ten years. In this scenario, Dazzle Lighting maintained a________ through its innovative strategy. A) consistent power position B) fiduciary responsibility C) sustainable competitive advantage D) balanced scorecard Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 01 Test Bank > MC Qu. 60 Dazzle Lighting was the first company to start...

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81) Industrial Drills, a company that manufactures industrial tools, incurs higher costs because of

its refusal to outsource its manufacturing to countries where labor costs are lower. This reflects Industrial Drills’________ responsibility. A) economic B) legal C) ethical D) demographic Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-04 Conduct a stakeholder impact analysis. Topic : Corporate Social Responsibility and Sustainability Source : Chapter 01 Test Bank > MC Qu. 43 Industrial Drills, a company that manufactur...

82) Bill’s Auto & Airplane Repair shop is able to generate a positive net income of $10,000 a

week, which is about the same as the income of a close competitor. As a result, we can conclude that the two businesses also have a competitive parity in the industry. A) Correct—competitive parity is a performance of two or more firms at the same level. B) Incorrect—Bill’s Auto & Airplane Repair shop more than likely has a sustained competitive advantage because the business is diversified. C) Correct—competitive advantage is achieved through profitability alone. D) Correct—competitive advantage is achieved since Bill’s Auto & Airplane Repair shop has a positive net income. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Sustaining a Competitive Advantage Source : Chapter 01 Test Bank > MC Qu. 12 Bill&#8217;s Auto &amp; Airplane Repair shop...

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83) Giorgia’s and Florentine’s are two restaurants serving Italian cuisine. While Giorgia’s focuses

on providing quick, affordable pasta dishes for the lunch crowd, Florentine’s focuses on serving home-style dishes in an upscale, romantic setting. Why have both companies been able to gain a competitive advantage? A) They entered into a cartel arrangement. B) They benefited from economies of scale. C) They each engaged in direct imitation and substitution. D) They each pursued distinct strategic positions. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 01 Test Bank > MC Qu. 75 Giorgia&#8217;s and Florentine&#8217;s are two...

84) Define and elaborate on competitive advantage.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 01 Test Bank > SA Qu. 94 Define and elaborate on competitive advantag...

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85) For a corporate strategy, which question is often asked? A) How do we create shared value? B) How should the firm compete: cost leadership, differentiation, or value innovation? C) How do strategic leaders help shape a firm’s vision, mission, and values? D) Where should the firm compete in terms of industry, markets, and geography? Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-05 Apply the Analysis, Formulation, Implementation (AFI) Strategy Framework. Topic : The AFI Strategy Framework Source : Chapter 01 Test Bank > MC Qu. 22 For a corporate strategy, which question...

86) How is competitive advantage different from competitive parity?

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87) Which is an accurate statement about the tasks of the AFI strategy framework? A) Analysis and formulation often overlap, but implementation is usually done

separately. B) They are distinct phases of the strategy process that happen separately. C) They are highly interdependent and frequently occur simultaneously. D) Formulation and implementation often overlap, but analysis is usually done separately. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 01-05 Apply the Analysis, Formulation, Implementation (AFI) Strategy Framework. Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 01 Test Bank > MC Qu. 92 Which is an accurate statement about the...

88) John is a bit confused about the difference between stakeholders and stockholders. You meet

with John and inform him that the main difference is that A) stakeholders are considered internal to the firm while stockholders are external to the firm. B) stakeholders are both internal and external to the firm while stockholders are considered external to the firm. C) stakeholders can be both internal and external while stockholders own shares of a firm and are classified as internal to the firm. D) stakeholders are external to the firm while stockholders are considered internal to the firm. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 01-03 Assess the relationship between stakeholder strategy and sustainable compe Topic : Stakeholders and Stakeholder Analysis Source : Chapter 01 Test Bank > MC Qu. 15 John is a bit confused about the difference ...

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89) Once a strategy has been formulated and implemented, it is important that the firm sticks to it

no matter what happens. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 01-05 Apply the Analysis, Formulation, Implementation (AFI) Strategy Framework. Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 01 Test Bank > TF Qu. 05 Once a strategy has been formulated and impl...

90) Better Capsules is a highly successful vitamin manufacturer. At the close of its most recent

fiscal year, the company’s balance sheet showed cash holdings of $110 million. Which of the following actions will provide the most benefit for stakeholders? A) Buy out the leading competitor to reduce competition and maintain price stability. B) Reinvest profits into expanding the company and creating more jobs. C) Save the excess cash as a precaution against black swan events. D) Reward the CEO with a significant bonus payment. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 01-03 Assess the relationship between stakeholder strategy and sustainable compe Topic : Stakeholders and Stakeholder Analysis Source : Chapter 01 Test Bank > MC Qu. 36 Better Capsules is a highly successful vitam...

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91) Putting the formulated strategy into practice through organizational structure, culture, and

controls is accomplished in which stage in the AFI strategy framework? A) strategy implementation B) strategy appraisal C) strategy formulation D) strategy examination Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-05 Apply the Analysis, Formulation, Implementation (AFI) Strategy Framework. Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 01 Test Bank > MC Qu. 86 Putting the formulated strategy into...

92) The goal of a good strategy is focused primarily on A) creating superior value while containing costs. B) making as much money as possible. C) encouraging investors to buy more shares of the firm. D) employing lean manufacturing and Six Sigma. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-01 Explain the role of strategy in a firm's quest for competitive advantage. Topic : Sustaining a Competitive Advantage Source : Chapter 01 Test Bank > MC Qu. 21 The goal of a good strategy is focused prima...

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93) A firm that achieves superior performance relative to other firms in the same industry or the

industry average has a(n) A) balanced scorecard. B) competitive advantage. C) power position. D) equity leverage. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Competitive Advantage Source : Chapter 01 Test Bank > MC Qu. 59 A firm that achieves superior performance re...

94) After a firm has recognized its key stakeholders in stakeholder impact analysis, the

immediate next step is to A) identify stakeholders’ interests and claims. B) recognize the opportunities and threats the stakeholders present. C) address the stakeholders’ concerns. D) formulate a stakeholder strategy. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 01-04 Conduct a stakeholder impact analysis. Topic : Stakeholders and Stakeholder Analysis Source : Chapter 01 Test Bank > MC Qu. 38 After a firm has recognized its key stakehol...

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95) Contour Inc., a vendor, regularly supplies capacitors to All Purpose Electronics for use in its

products. Therefore, Contour Inc. is All Purpose Electronics’ A) director. B) internal stakeholder. C) shareholder. D) external stakeholder. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-03 Assess the relationship between stakeholder strategy and sustainable compe Topic : Stakeholders and Stakeholder Analysis Source : Chapter 01 Test Bank > MC Qu. 30 Contour Inc., a vendor, regularly supplies c...

96) What are the three broad tasks of the AFI strategy framework? Explain each task.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 01-05 Apply the Analysis, Formulation, Implementation (AFI) Strategy Framework. Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 01 Test Bank > SA Qu. 98 What are the three broad tasks of the...

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97) Which of the following stages in the AFI strategy framework involves designing a business,

corporate, and global strategy? A) strategy implementation B) strategy formulation C) strategy analysis D) strategy control Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 01-05 Apply the Analysis, Formulation, Implementation (AFI) Strategy Framework. Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 01 Test Bank > MC Qu. 85 Which of the following stages in the AFI str...

98) Which question is asked during the implementation stage of the AFI strategy framework? A) How does the firm anchor strategic decisions in business ethics? B) How do we create share value? C) Where should the firm compete in terms of geography? D) Should the firm use cost leadership? Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-05 Apply the Analysis, Formulation, Implementation (AFI) Strategy Framework. Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 01 Test Bank > MC Qu. 89 Which question is asked during the...

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99) BuyNow Inc. is an e-commerce retail firm that sells a variety of merchandise online.

Through services like cash on delivery, easy return, and online tracking, the company has created more customer value than its competitors (brick-and-mortar businesses) at the same price. Also, the company’s costs are substantially lower than its competitors because of minimal investments in operation and administration. In this scenario, BuyNow Inc. has most likely been able to provide superior value and cost control through A) strategic liquidation. B) strategic profiling. C) strategic positioning. D) strategic parity. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 01 Test Bank > MC Qu. 68 BuyNow Inc. is an e-commerce retail firm tha...

100)

________ responsibilities are the foundational building block in the pyramid of corporate social responsibility. A) Economic B) Environmental C) Ethical D) Legal

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 01-04 Conduct a stakeholder impact analysis. Topic : Corporate Social Responsibility and Sustainability Source : Chapter 01 Test Bank > MC Qu. 46 ________ responsibilities are the foundational...

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101)

Which of the following scenarios illustrates a firm that has a sustainable competitive advantage? A) GoNow Inc. almost doubled its sales to 9,000 units this year compared to its previous year’s sales of 5,000 units, though the industry average is 10,000 units. B) Bill and Ted Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years. C) Samson LLC generated revenue of $300,000 this financial year, which is close to the industrial revenue average of $320,000. D) Johnson Inc. was able to outperform its competitors with its new production system, in terms of revenue, for a brief period of four months.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-02 Define competitive advantage, sustainable competitive advantage, competiti Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 01 Test Bank > MC Qu. 61 Which of the following scenarios illustrates...

102)

Discuss the pyramid of corporate social responsibility (CSR).

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 01-04 Conduct a stakeholder impact analysis. Topic : Corporate Social Responsibility and Sustainability Source : Chapter 01 Test Bank > SA Qu. 105 Discuss the pyramid of corporate social resp...

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103)

Dimitre Corp. has been able to gain and sustain a competitive advantage due to its strong relationship with its employees, customers, suppliers, and local communities. The company believes in lifetime employment and ensures that its employees grow along with the company. Investors are more than satisfied with the returns on their investments. Also, 3 percent of the company’s profit is spent on community development. With initiatives like these, customers feel privileged to associate themselves with Dimitre products. This scenario best illustrates the implementation of a A) wild card event. B) black swan event. C) strategic analysis. D) stakeholder strategy.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 01-03 Assess the relationship between stakeholder strategy and sustainable compe Topic : Stakeholders and Stakeholder Analysis Source : Chapter 01 Test Bank > MC Qu. 34 Dimitre Corp. has been able to gain and sust...

104)

As the legal owners,________ have the most legitimate claim on a company’s profits. A) creditors B) employees C) board members D) shareholders

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 01-04 Conduct a stakeholder impact analysis. Topic : Stakeholders and Stakeholder Analysis Source : Chapter 01 Test Bank > MC Qu. 39 As the legal owners, ________ have the most leg...

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105)

If all firms in an industry pursued a low-cost position through application of competitive benchmarking, which of the following would happen? A) No firm would face direct competition from others in the industry; hence, profit potential would be high. B) The firms would eventually have no resources to invest in product and process improvements. C) Each firm would have different cost structures. D) Each firm would have high value creation.

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Answer Key Test name: Chapter 01 Test Bank 1) C

The key to successful strategy is to combine a set of activities to stake out a unique position within an industry. Competitive advantage has to come from performing different activities or performing the same activities differently than rivals are doing. 2) B

Corporate strategy involves deciding where a firm should compete, which includes industry, markets, and geography. 3) D

Corporate social responsibility is a framework that helps firms recognize and address the economic, legal, ethical, and philanthropic expectations that society has of the business enterprise at a given point in time. 4) B

Prism Paints Corp. is primarily compromising its economic responsibilities toward its shareholders. The business enterprise is first and foremost an economic institution. Investors expect an adequate return for their risk capital. Firms must obey the law and act ethically in their quest to gain and sustain competitive advantage. 5) A

A firm’s ethical responsibilities go beyond its legal responsibilities. In this case, Batt Packs had a legal responsibility to pay the fine, but its ethical responsibilities to its stakeholders required the firm to eliminate use of the controversial chemical entirely. By doing so, the firm was motivated to produce a new line of environmentally friendly products and turned a threat into an opportunity. 6) D

All stakeholders make specific contributions to a firm, which in turn provides different types of benefits to different stakeholders. The firm, therefore, is embedded in a multifaceted exchange relationship with a number of diverse internal and external stakeholders. 7) Short Answer

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Strategy is about creating superior value, while containing the cost to create it. Managers achieve this combination of value and cost through strategic positioning. That is, they stake out a unique position within an industry that allows the firm to provide value to customers, while controlling costs. The greater the difference between value creation and cost, the greater the firm’s economic contribution and the more likely it will gain competitive advantage. 8) A

By failing to address the competitive challenges of cloud and mobile computing, HewlettPackard was unable to create value for society. 9) C

Managers use the AFI framework to do two things: (1) to explain and predict differences in firm performance, and (2) to help managers formulate and implement a strategy that results in superior performance. By producing high-quality cars at a low price and thereby increasing sales, the Quest Auto firm implemented a strategy that resulted in superior performance. 10) A

Nowadays Corp. demonstrates a good stakeholder strategy because it distributes only 40 percent of its annual profit after taxes to its shareholders, while the remaining is invested for further research, and distributed among employees and the local community. A core tenet of stakeholder strategy is that a single-minded focus on shareholders alone exposes a firm to undue risks. 11) C

In the first step of stakeholder impact analysis, is to identify the stakeholders. 12) A

A firm always has a competitive disadvantage when its return on invested capital is below the industry average. 13) B

The best example of a firm’s external stakeholder is a government agency that regulates the prices of products manufactured by the firm. External stakeholders of a firm include customers, suppliers, alliance partners, creditors, unions, communities, media, and governments at various levels. 14) D

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As illustrated in Exhibit 1.3, the firm is first and foremost an economic institution. Without first gaining and sustaining a competitive advantage, Solid Foundation would not have the resources to meet the rest of its legal, ethical, and philanthropic responsibilities and achieve the founder’s vision of giving back to society. 15) B

The strategic management process follows the AFI framework; analysis, formulation and implementation. 16) A

The business enterprise is first and foremost an economic institution. Investors expect an adequate return for their risk capital. Consumers expect safe products and services at appropriate prices and quality. Suppliers expect to be paid in full and on time. 17) B

Strategy analysis involves internal analysis, that is, what effects do internal resources, capabilities, and core competencies have on the firm’s potential to gain and sustain a competitive advantage? 18) C

Profitability does not necessarily equate to competitive advantage. A firm has competitive advantage when it has superior performance to other competitors in the same field. 19) C

If a firm underperforms relative to its rivals or the industry average, it has a competitive disadvantage. 20) Short Answer

In strategic positioning, firms stake out a unique position within an industry that allows the firm to provide value to customers, while controlling costs. Competition focuses on creating value for customers (through lower prices or better service and selection) rather than destroying rivals. Even though two firms compete in the same industry, both can win if they have a distinct and well-executed competitive strategy. 21) A

Yellow Ride Service achieved a unique position in the industry by providing long-distance cab fares at a lower rate than competitors while servicing the same area as competitors. To stake out a unique position, a company must either perform the same activities as competitors in a way that is better for customers or perform different activities. 22) Short Answer

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All stakeholders make specific contributions to a firm, which in turn provides different types of benefits to different stakeholders. Employees contribute their time and talents to the firm, receiving wages and salaries in exchange. Shareholders contribute capital in the hope that the stock will rise and the firm will pay dividends. Communities provide real estate, infrastructure, and public safety. In return, they expect that companies will pay taxes, provide employment, and not pollute the environment. The firm, therefore, is embedded in a multifaceted exchange relationship with a number of diverse internal and external stakeholders. If any of the stakeholders withholds participation in the firm’s exchange relationships, it can have severe negative performance implications. 23) B

During the formulation stage, managers must identify the business and corporate level strategies to address all competitive challenges they face. 24) B

The three pillars of strategy are Analysis, Formulation, and Implementation. 25) C

Focusing on competitive benchmarking is not a strategy. Instead, it is a tactic that may help the overall strategy, but is not a strategy by itself. Strategies are a firm’s overall effort to gain and sustain a competitive advantage. 26) B

Stakeholder impact analysis provides a decision tool with which strategic leaders can recognize, prioritize, and address the needs of different stakeholders—during each step managers must pay attention to three important stakeholder attributes: power, legitimacy, and urgency. 27) C

In this scenario, Writer Button Inc. and Horner Inc. most likely have competitive parity with each other. Competitive parity refers to the performance of two or more firms at the same level. 28) A

Sean is the start-up company’s stakeholder. Stakeholders have a vested claim or interest in the performance and continued survival of the firm. They can be organizations, groups, or individuals who can affect or be affected by a firm’s actions. 29) D

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In this scenario, Louise is the company’s internal stakeholder. Internal stakeholders of a firm include stockholders, employees (including executives, managers, and workers), and board members. 30) FALSE

The three tasks of the AFI strategy framework are Analysis, Formulation, and Implementation. This framework (1) explains and predicts differences in firm performance, and (2) helps managers formulate and implement a strategy that can result in superior performance. 31) D

A firm’s ethical responsibilities go beyond its legal responsibilities. They embody the full scope of expectations, norms, and values of its stakeholders. Strategic leaders are called upon to do what society deems just and fair. 32) B

ForeverSpring Inc. most likely has a competitive advantage in the industry. A firm that achieves superior performance relative to other competitors in the same industry or the industry average has a competitive advantage. 33) Short Answer

Student answers may vary. Strategy is not just communicating grandiose statements like, “We are going to be the best in the industry.” Audacious statements, on their own, are not linked to the AFI framework nor do they provide any managerial guidance on how a firm can achieve a competitive advantage. Operational effectiveness, competitive benchmarking and other tactics are also not strategies. While these elements may be necessary to main efficient and effective processes, they are not sufficient in achieving competitive advantage. 34) FALSE

Ethical and philanthropic responsibilities are expected by society, but not required. Society and shareholders require economic and legal responsibilities. 35) A

During the strategy analysis phase of the AFI strategy framework, managers consider the internal and external environment, as well as the role of strategic leaders and how the firm can assess and achieve a competitive advantage. By considering recent changes in consumer tastes, you are analyzing the external environment and the effect that it will have on company performance.

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36) D

Competitors are not considered internal or external stakeholders in the firm. 37) D

Superior performance allows a firm to reinvest some of its profits and grow, providing more employment and career opportunities to the workforce. As a result, society is benefited. 38) B

Two or more firms performing at the same level have competitive parity. Therefore, a firm has competitive parity if it produces wall clocks at the same rate as its competitors. 39) C

The AFI strategy framework is a model that links three interdependent strategic management tasks—analyze, formulate, and implement—that, together, help managers plan and implement a good strategy that can improve performance and result in competitive advantage. 40) D

To gain a competitive advantage, a firm needs to provide either goods or services consumers value more highly than those of its competitors, or goods or services similar to the competitors’ at a lower price. 41) D

A good strategy consists of a diagnosis of the competitive challenge, a guiding policy to address the competitive challenge, and a set of coherent actions to implement the firm’s guiding policy. 42) D

Managers use the AFI strategy framework to do two things: (1) to explain and predict differences in firm performance, and (2) to help managers formulate and implement a strategy that results in superior performance. 43) TRUE

Stakeholder impact analysis provides a decision tool that helps strategic leaders recognize, prioritize, and address the needs of different stakeholders. 44) A

During strategy implementation, managers focus on the following questions: How should the firm organize to put the formulated strategy into practice? What type of corporate governance is most effective? How does the firm anchor strategic decisions in business ethics? 45) Short Answer

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Stakeholders are organizations, groups, and individuals who can affect or be affected by a firm’s actions. Stakeholders have a vested claim or interest in the performance and continued survival of the firm. Stakeholders can be grouped by whether they are internal or external to a firm. All stakeholders make specific contributions to a firm, which in turn provides different types of benefits to different stakeholders. 46) D

A good strategy includes a set of coherent actions to implement the firm’s guiding policy. This element is accomplished through implementation. 47) C

Selling vaccines at a subsidized price in a less developed country even though this results in reduced shareholder returns satisfies a firm’s ethical responsibilities. A firm’s ethical responsibilities go beyond its legal responsibilities. They embody the full scope of expectations, norms, and values of its stakeholders. Strategic leaders are called upon to do what society deems just and fair. 48) C

Because resources are limited, managers must carefully consider their strategic choices in the quest for competitive advantage. Trying to be everything to everybody will likely result in inferior performance. 49) A

Strategy is not a zero-sum game. Competition focuses on creating value for customers rather than destroying rivals. Although Terrific Toys has created temporary value for its customers by offering its goods below cost, the advantage it achieved is unsustainable. When Terrific Toys runs out of cash to cover its operating expenses, it will no longer be able to offer its toys at such a low cost and will either be forced to raise prices or exit the industry. 50) D

The AFI framework combines analysis, formulation, and implementation in the quest for competitive advantage. 51) D

A formulated strategy must be backed up with strategic commitments, or actions to achieve the mission that are costly, long-term oriented, and difficult to reverse. Earth Mother Leisure Wear failed to invest in upgrading its production facilities, leaving it unable to produce its leggings at a low-enough cost to achieve a competitive advantage. 52) D

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Sugar & Sweet’s strategy fails to face the competitive challenge of changing consumer tastes. Instead of trying to give customers what they want by producing its own line of sparkling waters, Sugar & Sweet simply continues to produce the same sugary sodas and is likely to see its market share continue to decline. 53) B

If a firm’s return on invested capital is 2 percent in a declining industry such as telephone manufacturing, where the industry average has been negative (–5 percent) for the last few years, then the firm has a competitive advantage. 54) B

By adhering to the rules set by the government of Hanns, Delish is satisfying its legal responsibilities. Laws and regulations are a society’s notions of right and wrong. They also establish the rules of the game. 55) A

By emphasizing the quality and comfort of AlwaysSharp art knives, you differentiate the product and create superior value for customers. Although your knives are more expensive to make at $2 each, the increased perceived value of your product allows you to sell them for $7, making the difference between value creation and cost greater than your competitor’s. The greater the difference between value creation and cost, the greater the firm’s economic contribution and the more likely it will gain competitive advantage. 56) B

A manager taking care of the firm’s operations in a foreign market best qualifies as the firm’s internal stakeholder. A firm’s internal stakeholders include stockholders, employees (including executives, managers, and workers), and board members. 57) Short Answer

Student answers may vary. Stakeholders include both internal groups (employees, executives, managers, stockholders, board members) and external groups (customers, suppliers, alliance partners, creditors, unions, communities, governments at various levels, and the media). It’s important to create alignment between all stakeholders because of the web of exchange relationships; all of these groups have a vested interest in the success of the firm and by sacrificing their needs over the needs of only stockholders, firms may not be able to achieve competitive advantage. Stakeholder strategy allows firms to manage how both external and internal stakeholders interact to jointly create value.

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58) D

Strategic management is the integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage. Mastery of strategic management enables an individual to view a firm in its entirety. It also enables an individual to think like a general manager to help position their firm for superior performance. 59) B

Strategic analysis, the “A” in the AFI strategy framework, includes analyzing the internal and external environments of a firm. 60) B

Organizational design involves deciding how the firm should organize to turn the formulated strategy into action. 61) C

A good strategy includes a guiding policy to address the competitive challenge. This element is accomplished through strategy formulation, resulting in the firm’s corporate, business, and functional strategies. 62) FALSE

A good strategy enables a firm to achieve superior performance and sustainable competitive advantage relative to its external environment, namely its competitors in any competitive situation. 63) Short Answer

To identify a firm’s responsibilities toward its stakeholders, scholars have advanced the notion of corporate social responsibility (CSR). This framework helps firms recognize and address the economic, legal, ethical, and philanthropic expectations that society has of the business enterprise at a given point in time. According to the CSR perspective, strategic leaders need to realize that society grants shareholders the right and privilege to create a publicly traded company. Therefore, the firm owes something to the community. CSR provides strategic leaders with a conceptual model that helps them identify society’s expectations and guides strategic decision making. 64) B

Strategy is a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors. 65) D

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The statement that should ideally reflect a firm’s strategy for competitive advantage is “Our aim is to create superior customer value while controlling costs.” Strategy is about creating superior value, while containing the cost to create it. Grandiose statements are not strategy; they provide little managerial guidance and frequently fail to address the economic fundamentals. 66) Short Answer 2. Power: A stakeholder has power over a company when it can get the firm to do

something that it would not otherwise do. 3. Legitimate claim: When a stakeholder’s claim is perceived as legally valid or otherwise appropriate, that stakeholder has a legitimate claim. 4. Urgent claim: A stakeholder has an urgent claim when it requires a company’s immediate attention and response. 67) B

The Red Queen effect involves studying and copying the competition, which results in unsuccessful efforts to gain a competitive advantage. 68) Short Answer

A good strategy consists of three elements: 5. A diagnosis of the competitive challenge. This element is accomplished through strategy analysis of the firm’s external and internal environments. 6. A guiding policy to address the competitive challenge. This element is accomplished through strategy formulation, resulting in the firm’s corporate, business, and functional strategies. 7. A set of coherent actions to implement the firm’s guiding policy. This element is accomplished through strategy implementation. 69) FALSE

Internal stakeholders include employees (including executives, managers, and workers), stockholders, and board members. External stakeholders include customers, suppliers, alliance partners, creditors, unions, communities, governments at various levels, and the media. 70) C

The Red Queen effect refers to a situation in which companies copy each other, but there are no changes in relative strategic positions. 71) A

In strategy analysis the following question is asked: What roles do strategic leaders play, and how do they help shape a firm’s vision, mission, and values?

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72) TRUE

Strategy analysis involves consideration of both the firm’s internal and external environments, and the role that strategic managers play in establishing and maintaining a competitive advantage. 73) B

In the final step of the stakeholder impact analysis, the firm asks, “What should we do to effectively address any stakeholder concerns?” 74) TRUE

Grandiose statements, such as the one made by the MegaFilms CEO, are not a strategy and should not be used as such. Rather, they are statements of desire. They provide little managerial guidance and often lead to goal conflict and confusion. 75) A

Stakeholder strategy is an approach to strategy formulation that considers all of the company’s stakeholders, not just its shareholders. 76) C

Although these companies are in the same industry, their customer segments will most likely overlap very little, and they will not be direct competitors. That is because each firm has chosen a distinct but different strategic position; both can win if they have a distinct and well-executed competitive strategy. 77) A

A good strategy consists of a diagnosis of the competitive challenge. This element is accomplished through strategy analysis of the firm’s external and internal environments. 78) B

Comparing the return to the return on invested capital obtained by other firms in the industry will help determine if French Provincial Decor LLC has a competitive advantage. Competitive advantage is always relative, not absolute. 79) D

In this scenario, OmniSignal is Green and Good Inc.’s external stakeholder. External stakeholders include customers, suppliers, alliance partners, creditors, unions, communities, media, and governments at various levels. 80) C

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In this scenario, Dazzle Lighting maintained a sustainable competitive advantage through its innovative strategy. A firm that is able to outperform its competitors or the industry average over a prolonged period of time has a sustainable competitive advantage. 81) C

This reflects Industrial Drills’ ethical responsibility. A firm’s ethical responsibilities go beyond its legal responsibilities. They embody the full scope of expectations, norms, and values of its stakeholders. Strategic leaders are called upon to do what society deems just and fair. 82) A

A competitive parity is a performance of two or more firms at the same level. 83) D

In this scenario, the two firms have gained a competitive advantage by pursuing distinct strategic positions. Cost-leadership and differentiation are distinct strategic positions. The key to successful strategy is to combine a set of activities to stake out a unique position within an industry. 84) Short Answer

Competitive advantage is superior performance relative to other competitors in the same industry or the industry average. To gain a competitive advantage, a firm needs to provide either goods or services consumers value more highly than those of its competitors while keeping its costs comparable to competitors, or goods or services similar in value to the competitors’ at a lower cost. The rewards of superior value creation and capture are profitability and market share. Managers achieve this combination of value and cost through strategic positioning. They stake out a unique position within an industry that allows the firm to provide value to customers, while controlling costs. 85) D

For a corporate strategy, the following question is often asked: Where should the firm compete in terms of industry, markets, and geography? 86) Short Answer

A firm that achieves superior performance relative to other competitors in the same industry or the industry average has a competitive advantage. To gain a competitive advantage, a firm needs to provide either goods or services consumers value more highly than those of its competitors at a comparable cost, or goods or services similar to the competitors’ at a lower cost. Should two or more firms perform at the same level, they have competitive parity. 87) C

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The tasks of the AFI framework are highly interdependent and frequently occur simultaneously. Effective managers do not formulate a strategy without thinking about how to implement it. Likewise, while managers implement strategy, they also adjust to changing circumstances. 88) C

Stakeholder strategy is an approach to strategy formulation that considers all of the company’s stakeholders, not just its shareholders. Internal stakeholders include; employees (executives, managers, and workers), stockholders, and board members. External stakeholders include customers, suppliers, alliance partners, creditors, unions, communities, governments at various levels, and the media. 89) FALSE

Strategic leaders make decisions under conditions of uncertainty and complexity. They must carefully monitor and evaluate the progress toward key strategic objectives and make adjustments by fine-tuning any strategy as necessary. 90) B

Stakeholders are any organizations, groups, or individuals that can affect or be affected by a firm’s actions. By reinvesting profits in growing the company, Better Capsules can provide more opportunities for employment and create value for society. This is turn lays the foundation for the benefits that successful economies can provide: education, infrastructure, public safety, health care, clean water and air, among others. 91) A

Strategic implementation, the “I” in the AFI strategy framework, includes organizing the firm (its structure, culture, and controls) to put the formulated strategy into practice. 92) A

A good strategy is about creating superior value while managing the costs of creating it or by offering similar value at a lower cost. 93) B

A firm that achieves superior performance relative to other competitors in the same industry or the industry average has a competitive advantage. 94) A

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In step 1 of stakeholder impact analysis, the firm focuses on stakeholders that currently have, or potentially can have, a material effect on a company. In step 2, the firm asks, “What are our stakeholders’ interests and claims?” Managers need to specify and assess the interests and claims of the pertinent stakeholders using the power, legitimacy, and urgency criteria. 95) D

Contour Inc. is All Purpose’s external stakeholder. External stakeholders include customers, suppliers, alliance partners, creditors, unions, communities, media, and governments at various levels. 96) Short Answer

Student examples will vary. A sample answer follows: The three broad tasks of the AFI strategy framework are: (1) strategy analysis, (2) strategy formulation, and (3) strategy implementations. During strategy analysis, managers consider both the internal and external environment and how the firm’s performance can produce a sustainable competitive advantage. During strategy formulation, managers devise a functional, business, and corporate strategy, determining how and where the firm should compete. During strategy implementation, managers consider how the firm should be organized to turn the formulated strategy into action, as well as how the firm’s corporate governance and ethical values affect strategy implementation. 97) B

Strategy formulation involves formulating a business strategy: How should the firm compete (cost-leadership, differentiation, or integration)?; Corporate strategy: Where should the firm compete (industry, markets, and geography)?; and Global strategy: How and where (local, regional, national, and international) should the firm compete around the world? 98) A

In the implementation stage, the following question is asked: How does the firm anchor strategic decisions in business ethics? 99) C

In this scenario, BuyNow Inc. has been able to provide superior value and control its costs through strategic positioning. Strategy is about creating superior value, while containing the cost to create it. Managers achieve this combination of value and cost through strategic positioning. That is, they stake out a unique position within an industry that allows the firm to provide value to customers, while controlling costs. 100)

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Economic responsibilities are the foundational building block, followed by legal, ethical, and philanthropic responsibilities. The business enterprise is first and foremost an economic institution. 101)

B A firm that is able to outperform its competitors or the industry average over a prolonged period of time has a sustainable competitive advantage. Thus, Bill and Ted Corp. has a sustainable competitive advantage because it has been able to hold its market share of 68 percent in the social networking industry for more than three years. 102)

Short Answer The pyramid summarizes the four components of corporate social responsibility. Economic responsibilities are the foundational building block, followed by legal, ethical, and philanthropic responsibilities. Society and shareholders require economic and legal responsibilities. Ethical and philanthropic responsibilities result from a society’s expectations toward business. The pyramid of CSR symbolizes the need for firms to carefully balance their social responsibilities. Doing so ensures not only effective strategy implementation but also long-term viability. 103)

D The scenario best illustrates the implementation of a stakeholder strategy. Stakeholder strategy is an approach to strategy formulation that considers all of the company’s stakeholders, not just its shareholders. 104)

D As the legal owners, shareholders have the most legitimate claim on a company’s profits. 105)

B If all firms in the same industry pursued a low-cost position through application of competitive benchmarking, all firms would have identical cost structures. None could gain a competitive advantage. There would be little if any value creation for customers because companies would have no resources to invest in product and process improvements.

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Student name:__________ 1) The Founder of Teach for America, Wendy Kopp, wants to make teaching an attractive

option for promising young professionals. Identify the phrase that represents the vision she developed for Teach for America. A) to give all children in the United States the opportunity to attain an excellent education B) to improve standardized test scores across the board C) to encourage parents to take a more active role in their children’s education D) to cut wasteful spending from education budgets Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-04 Describe the roles of vision, mission, and values in a firm's strategy. Topic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 29 The Founder of Teach for America, Wendy Kopp...

2) When are employees likely to fail to adopt the organizational values of a firm? A) when the internal stakeholders of the firm are involved in designing the values B) when the strategic leaders in the firm propagate and exhibit the same values C) when the organizational structure, such as its strategic decision making, is aligned

with its values D) when the top managers in the firm are merely paying lip service to the firm’s stated values Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-06 Justify why anchoring a firm in ethical core values is essential for longTopic : Leader&#8217;s Role in Establishing a Firm&#8217;s Ethical Climate Source : Chapter 02 Test Bank > MC Qu. 52 When do employees fail to adopt the organiza...

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3) Which of the following strategy plans might work best in an industry that is considered a

fast-changing environment with new laws going into effect regularly? A) scenario planning B) dominant planning C) bottom-up planning D) top-down planning Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-07 Evaluate top-down strategic planning, scenario planning, and strategy as p Topic : Strategy and the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 19 Which of the following strategy plans might ...

4) Which of the following is an assumption that top-down strategic planning rests on? A) Time cannot be compressed at will. B) Decisions made in the past do not affect our future. C) We can predict the future from the past. D) Change is constant. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-07 Evaluate top-down strategic planning, scenario planning, and strategy as p Topic : Top-Down Strategic Planning and Scenario Planning Source : Chapter 02 Test Bank > MC Qu. 82 Which of the following is an assumption that...

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5) Constraints such as time or the brain’s inability to process large amounts of data that prevent

us from appropriately processing and evaluating each piece of information we encounter are known as A) cognitive limitations. B) strategic limitations. C) confirmation biases. D) cognitive biases. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-09 Describe and evaluate the two distinct modes of decision making. Topic : Decision Making Source : Chapter 02 Test Bank > MC Qu. 105 Constraints such as time or the brain&#8217;s...

6) A mission describes how a firm will accomplish the broad goals set out in a vision statement. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-04 Describe the roles of vision, mission, and values in a firm's strategy. Topic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > TF Qu. 13 A mission describes how a firm will accompli...

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7) Gina is the founder and CEO of a successful technology firm. In a memo, she informs the

company’s employees that remote workers will be required to attend onsite teambuilding events at least once per quarter. In this example, Gina’s authority to institute a policy change is based on A) position power. B) informal power. C) strategic initiative. D) strategic leadership. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 02-01 Explain the role of strategic leaders and what they do. Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 02 Test Bank > MC Qu. 15 Gina is the founder and CEO of a successful...

8) System 2 thinking is fast, unconscious, and automatic; it is the brain’s default mode. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-09 Describe and evaluate the two distinct modes of decision making. Topic : Decision Making Source : Chapter 02 Test Bank > TF Qu. 10 System 2 thinking is fast, unconscious, and...

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9) EverMart Inc. is a large company that sells a variety of products such as cosmetics, jewelry,

frozen foods, navigation electronics, and airplanes. Apart from this, the company also has a strong presence in the service industry through its chain of dance studios, casinos, and nightclubs. Each of its product divisions operates as an individual business and is responsible for its own profits and losses. Thus, these product divisions under EverMart can be referred to as A) limited liability companies. B) corporations. C) functional departments. D) strategic business units. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-03 Compare and contrast the roles of corporate, business, and functional lead Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 02 Test Bank > MC Qu. 73 EverMart Inc. is a large company that...

10) Understanding the Resource Allocation Process (RAP) will have large effects on shaping a

firm’s realized strategy. Which of the following is an example of such an allocation of resources? A) Teach for America’s mission statement B) Intel’s rule to “maximize margin-per-wafer-start” C) Starbucks’ launch of iced drinks D) 3M's discovery that led to Post-it Notes Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-07 Evaluate top-down strategic planning, scenario planning, and strategy as p Topic : Methods of Strategy Implementation Source : Chapter 02 Test Bank > MC Qu. 95 Understanding the Resource Allocation Proces...

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11) Strategies developed at the departmental level, such as the customer service, human

resources, procurement, and sales departments, within a strategic business unit are referred to as________ strategies. A) business B) corporate C) professional D) functional Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-03 Compare and contrast the roles of corporate, business, and functional lead Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 02 Test Bank > MC Qu. 77 Strategies developed at the departmental...

12) Which of the following is a decision framework in which two teams each generate a detailed

but alternate plan of action, with a goal, if feasible, of achieving a synthesis between the two plans? A) dialectic inquiry B) decision tree C) DACI model D) devil’s advocacy Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-10 Compare and contrast devil&#8217;s advocacy and dialectic inquiry as frame Topic : Decision Making Source : Chapter 02 Test Bank > MC Qu. 109 Which of the following is a decision...

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13) Why is it better for firms to keep their vision statements customer-oriented rather than

product-oriented? A) Customer-oriented visions tend to be more flexible when adapting to changing environments. B) Customer-oriented visions tend to have a more myopic view of changing environments. C) Customer-oriented visions tend to be more stable when dealing with changing environments. D) Customer-oriented visions tend to have a more short-range view of changing environments. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-05 Evaluate the strategic implications of product-oriented and customer-orien Topic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 41 Why is it better for firms to keep their vis...

14) To support the rise of emergent strategies, an organization should A) centralize decision making and all other activities. B) empower lower-level employees to take up autonomous actions. C) limit serendipity that is in the form of random events and accidental happenstances. D) rely solely on hard data to formulate strategies. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-07 Evaluate top-down strategic planning, scenario planning, and strategy as p Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 02 Test Bank > MC Qu. 93 To support the rise of emergent strategies, ...

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15) Briefly describe the Level-5 leadership pyramid.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-02 Outline how you can become a strategic leader. Topic : Top Management Teams Source : Chapter 02 Test Bank > SA Qu. 113 Briefly describe the Level-5 leadership pyra...

16) Corporate executives at OverFlight Inc. decide to compete in the remote-control drone

industry by equipping their drones with the best video cameras available. By doing this, they completed part of their________ strategy. A) corporate B) business C) implementation D) functional Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-03 Compare and contrast the roles of corporate, business, and functional lead Topic : Strategy and the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 63 Corporate executives at OverFlight Inc. decide...

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17) Describe devil’s advocacy and dialectic inquiry as frameworks for strategic decision making.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-10 Compare and contrast devil&#8217;s advocacy and dialectic inquiry as frame Topic : Decision Making Source : Chapter 02 Test Bank > SA Qu. 130 Describe devil&#8217;s advocacy and dialectic...

18) Why is it important for top management of a company to show commitment and involvement

toward organizational values?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-06 Justify why anchoring a firm in ethical core values is essential for longTopic : Leaders Role in Establishing a Firm's Ethical Climate Source : Chapter 02 Test Bank > SA Qu. 126 Why is it important for top management of a ...

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19) What is the strategic management process? A) The CEO defines the main problems facing a company. B) Strategic leaders design a method to formulate and implement strategy. C) The CEO decides who the product managers will be for a company. D) Strategic leaders focus on creating a vision that reflects the company’s strategy. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-07 Evaluate top-down strategic planning, scenario planning, and strategy as p Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 02 Test Bank > MC Qu. 79 What is the strategic management process?

20) Explain the role of power in the strategic leadership process.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 02-01 Explain the role of strategic leaders and what they do. Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 02 Test Bank > SA Qu. 111 Explain the role of power in the strategic l...

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21) When start-up entrepreneurs make claims like, “We will be the Uber of X, where X is any

other category than ride hailing” or “We will be the Airbnb of Y, where Y is any other category than hospitality services” they are best illustrating which of the following cognitive biases? A) groupthink B) representativeness bias C) confirmation bias D) escalation of commitment Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-09 Describe and evaluate the two distinct modes of decision making. Topic : Decision Making Source : Chapter 02 Test Bank > MC Qu. 25 When start-up entrepreneurs make claim...

22) Which of the following answers best explains why addressing strategic inflection points is a

difficult leadership challenge? A) It calls for a blended strategy in which organizational structure and systems allow both top-down and bottom-up strategic initiatives to emerge for evaluation and coordination. B) It requires an approach derived from military strategy in which all strategic intelligence and decision-making responsibilities are concentrated in the office of the CEO. C) It requires fundamental changes to the firm’s strategy, and leaders are often late in comprehending that their belief system is no longer a good fit with the new circumstances. D) Top-management opinions have coalesced around a leader without individuals critically evaluating and challenging the leader’s opinions and assumptions. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-08 Explain the causes of strategic dissonance and how to navigate strategic i Topic : Strategy and the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 102 Which of the following answers best...

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23) Strategy formulation concerns where and how to compete, whereas strategy implementation

concerns organizing, coordinating, and integrating how work gets done. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-03 Compare and contrast the roles of corporate, business, and functional lead Topic : Strategic Formulation and Implementation Source : Chapter 02 Test Bank > TF Qu. 11 Strategy formulation concerns where...

24) Which of the following examples reflects the most effective vision? A) All employees at Enterprise Flooring are motivated to make the best flooring products

on the market. B) Many employees at Enterprise Flooring get paid well but do not feel their work is important. C) Some employees at Enterprise Flooring do not understand the main goal of the company. D) Most employees at Enterprise Flooring want to create better flooring products than the firm's closest competitor. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-04 Describe the roles of vision, mission, and values in a firm's strategy. Topic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 28 Which of the following examples reflects the...

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25) Strategic leaders spend the majority of their time working alone to devise new strategies. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-01 Explain the role of strategic leaders and what they do. Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 02 Test Bank > TF Qu. 02 Strategic leaders spend the majority of thei...

26) Which of the following frameworks correctly identifies the three steps in the strategic

management process? A) API: Analyze-Plan-Implement B) AFE: Analyze-Formulate-Execute C) AFI: Analyze-Formulate-Implement D) APE: Analyze-Plan-Execute Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Bloom's : Apply Difficulty : 1 Easy Learning Objective : 02-07 Evaluate top-down strategic planning, scenario planning, and strategy as p Topic : The AFI Strategy Framework Source : Chapter 02 Test Bank > MC Qu. 24 Which of the following frameworks correctly...

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27) What happens when a firm fails to successfully navigate a strategic inflection point? A) self-reinforcing failure B) dialectic inquiry C) illusion of control D) planned emergence Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-08 Explain the causes of strategic dissonance and how to navigate strategic i Topic : Strategy and the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 99 What happens when a firm fails to...

28) The former CEO of Sam’s Club, a division with its own profit-and-loss responsibility,

Rosalind Brewer, reported to Walmart’s CEO, C. Douglas McMillon, who as corporate executive oversees Walmart’s entire operations. Sam’s Club, therefore, is a________ of Walmart. A) house brand manufacturer B) strategic business unit C) corporate partner D) branch office Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 02-03 Compare and contrast the roles of corporate, business, and functional lead Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 02 Test Bank > MC Qu. 64 The former CEO of Sam&#8217;s Club, a...

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29) Strategic thinking is different from strategic planning in that A) strategic thinking relies more on hard data and statistical analysis than strategic

planning. B) strategic thinking is regimented and confining, whereas strategic planning is more flexible. C) strategic thinking can create an illusion of control, whereas strategic planning avoids this. D) strategic thinking includes all types of information sources while strategic planning does not. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-07 Evaluate top-down strategic planning, scenario planning, and strategy as p Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 02 Test Bank > MC Qu. 86 Strategic thinking is different from strateg...

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30) Maria is the chief operating officer of the start-up Apps4U. In which of the following

scenarios does Maria exhibit strategic leadership? A) Citing budget concerns, Maria ignores the directions from Apps4U’s CEO to double the size of the customer support staff. As a result, the company misses its third quarter customer satisfaction target but exceeds its net profit expectations by 5 percent. B) Maria directs the company to produce an app for reptile enthusiasts, a community she happens to be a part of. Even though the app ends up losing significant amounts of money, Maria is proud of the product and uses it every day. C) With a major pitch to potential investors coming up, Maria works alone for 10 hours a day until she writes the perfect sales pitch. Even though the rest of her team doubts that they can meet the performance goals Maria has set, she makes the presentation anyway. D) Maria schedules a meeting with the manager of the marketing department and overcomes his skepticism about a new campaign aimed at customers in the 55+ age group. Over the next three months, Apps4U gains 250,000 new users in that group. Question Details AACSB : Knowledge Application AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 02-01 Explain the role of strategic leaders and what they do. Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 02 Test Bank > MC Qu. 56 Maria is the chief operating officer...

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31) Two product development teams at NextTech Inc. are using a devil’s advocacy decision

framework to make strategic decisions regarding rollout of the company’s new products. Team 1 favors introducing new products only in the spring and fall. Team 2 questions the assumptions behind the timing of product rollout and points out things that might go wrong. What will happen in the final step of the process? A) A synthesis of the two plans will be adopted. B) The teams will agree on a course of action. C) Each team will pursue one of the options. D) The teams will critique each other’s plans. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 02-10 Compare and contrast devil&#8217;s advocacy and dialectic inquiry as frame Topic : Decision Making Source : Chapter 02 Test Bank > MC Qu. 107 Two product development teams at...

32) In a large company, who is most responsible for devising the corporate strategy? A) the CEO of the company B) the head of the production department in the company C) the lower-level employees in the company D) the human resource manager in the company Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-03 Compare and contrast the roles of corporate, business, and functional lead Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 02 Test Bank > MC Qu. 67 In a large company, who is most...

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33) What is the drawback in top-down strategic planning?

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-07 Evaluate top-down strategic planning, scenario planning, and strategy as p Topic : Top-Down Strategic Planning and Scenario Planning Source : Chapter 02 Test Bank > SA Qu. 116 What is the drawback in top-down strategic p...

34) The CEO of an app company encourages the firm's employees to suggest possible apps that

could be useful in their favorite activities. One of the firm's software designers is inspired by her love of knitting to propose an app that will allow users to photograph an item of clothing, enter their measurements, and then receive a customized knitting pattern. The firm's policy of asking for employee product ideas is best described as a A) corrective action. B) supply chain. C) strategic initiative. D) value chain. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 02-07 Evaluate top-down strategic planning, scenario planning, and strategy as p Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 02 Test Bank > MC Qu. 90 The CEO of an app company encourages...

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35) What are customer-oriented vision statements? Explain with the help of an example.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-05 Evaluate the strategic implications of product-oriented and customer-orien Topic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > SA Qu. 122 What are customer-oriented vision statements...

36) Core values provide ethical guidelines for how individual employees will behave. ⊚ true ⊚ false Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 02-06 Justify why anchoring a firm in ethical core values is essential for longTopic : Leaders Role in Establishing a Firm's Ethical Climate Source : Chapter 02 Test Bank > TF Qu. 08 Core values provide ethical guidelines for h...

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37) Which of the following strategies best illustrates a generic business strategy? A) a cost-cutting strategy that corporate executives in the headquarters want all business

units of a large conglomerate to implement B) a decision to niche market the jewelry sold by a company while the apparel division under the same company sells its products through mass marketing C) a strategy to use monetary incentives to motivate employees working on a project D) a decision to computerize a firm’s database in order to improve customer service Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-03 Compare and contrast the roles of corporate, business, and functional lead Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 02 Test Bank > MC Qu. 74 Which of the following strategies best...

38) Home for Good is a nonprofit organization that works to place shelter animals in safe, loving

homes. The credo of the organization is “help us help vulnerable animals.” For an organization like Home for Good, which of the following statements would make an appropriate mission? A) We help place vulnerable animals in safe, loving homes by connecting shelter and rescue agencies with vetted adopters. B) Our mission is to turn this not-for-profit organization into a for-profit organization so that the stakeholders benefit. C) One day, all animals will have the protection of a safe and loving home. D) Help us place vulnerable animals in secure and loving homes. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 02-04 Describe the roles of vision, mission, and values in a firm's strategy. Topic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 32 Home for Good is a nonprofit organization...

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39) Differentiate between a firm’s intended, realized, and emergent strategies.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 02-07 Evaluate top-down strategic planning, scenario planning, and strategy as p Topic : Methods of Strategy Implementation Source : Chapter 02 Test Bank > SA Qu. 119 Differentiate between a firm&#8217;s intende...

40) Why is addressing strategic inflection points a difficult leadership challenge? Describe two

difficulties faced by leaders confronted with this challenge.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-08 Explain the causes of strategic dissonance and how to navigate strategic i Topic : Strategy and the Strategic Management Process Source : Chapter 02 Test Bank > SA Qu. 127 Why is addressing strategic inflection...

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41) Define cognitive biases, and then give an example of a cognitive bias and how it can affect

decision making.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-09 Describe and evaluate the two distinct modes of decision making. Topic : Decision Making Source : Chapter 02 Test Bank > SA Qu. 128 Define cognitive biases, and then give...

42) Suzi Lau Apparels Inc. (SLA) had been outsourcing its production to less-developed

countries in order to reduce its cost of production. With the emergence of its competitor, Linda Inc., SLA lost its competitive advantage. Linda had its production units in its home country that allowed the company to bring out the latest trends to the market earlier than SLA. Also, SLA frequently suffered due to political instability and lack of intellectual property laws in the outsourced countries. Thus, parts of SLA’s strategies became obsolete, and it had to relocate its production. What are such obsolete strategies referred to as in the planned emergence model? A) unrealized strategy B) tactical strategy C) emergent strategy D) intended strategy Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 02-07 Evaluate top-down strategic planning, scenario planning, and strategy as p Topic : Methods of Strategy Implementation Source : Chapter 02 Test Bank > MC Qu. 88 Suzi Lau Apparels Inc. (SLA) had been outsou...

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43) The process that describes the method by which managers conceive of and implement a

strategy that can lead to a sustainable competitive advantage is called A) strategic technology. B) strategic process. C) strategic management. D) strategic planning. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-03 Compare and contrast the roles of corporate, business, and functional lead Topic : Strategy and the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 21 The process that describes the method by whi...

44) How does a mission statement differ from a firm’s vision?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-04 Describe the roles of vision, mission, and values in a firm's strategy. Topic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > SA Qu. 121 How does a mission statement differ from a f...

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45) All Foods is the parent company of several chain restaurants offering a variety of cuisines.

The top management at All Foods has decided to enter the frozen foods industry based on its assessment of the profit potential in that industry. Which of the following strategies does this best illustrate? A) business strategy B) divisional strategy C) functional strategy D) corporate strategy Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-03 Compare and contrast the roles of corporate, business, and functional lead Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 02 Test Bank > MC Qu. 69 All Foods is the parent company of...

46) Top-down strategic planning as an approach to the strategic management process will be

most effective when the A) size of the firm is large. B) environment is constantly changing. C) top management wants to decentralize decision making. D) probability of black swan events is high. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-07 Evaluate top-down strategic planning, scenario planning, and strategy as p Topic : Top-Down Strategic Planning and Scenario Planning Source : Chapter 02 Test Bank > MC Qu. 96 Top-down strategic planning as an approach t...

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47) Leary’s Shoes has sold and repaired shoes and leather goods in a shop in the mall since 1963.

For decades, the shop flourished, particularly during holiday shopping seasons when the mall was crowded with shoppers. Ros Leary, the founder’s daughter, assumed management of the store when her father retired in the late 1990s. Unphased by the introduction of online shopping and shoe services, Ros believed her customers preferred personal service and would continue buying their shoes in person. However, year by year, the store’s sales and profits fell, even when Ros lowered prices, expanded her offerings, and held special sales promotions. What situation describes the contradiction between Ros’s beliefs about the shoe business and the evidence she is experiencing? A) devil’s advocacy B) strategic dissonance C) dialectic inquiry D) serendipity Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 02-08 Explain the causes of strategic dissonance and how to navigate strategic i Topic : Strategy and the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 98 Leary&#8217;s Shoes has sold and repaired shoes...

48) Strategic commitments are actions that are A) inexpensive, short-term-oriented, and easy to reverse. B) inexpensive, long-term-oriented, and difficult to reverse. C) costly, short-term-oriented, and easy to reverse. D) costly, long-term-oriented, and difficult to reverse. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-04 Describe the roles of vision, mission, and values in a firm's strategy. Topic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 35 Strategic commitments are actions that are

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49) Managers should create two sets of core values: one for employees and one for themselves. ⊚ true ⊚ false Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 1 Easy Learning Objective : 02-06 Justify why anchoring a firm in ethical core values is essential for longTopic : Leaders Role in Establishing a Firm's Ethical Climate Source : Chapter 02 Test Bank > TF Qu. 09 Managers should create two sets of core valu...

50) Which of the following summarizes the difference between corporate strategy and business

strategy? A) Corporate strategy deals with when to compete; business strategy deals with how to compete. B) Corporate strategy deals with how to compete; business strategy deals with where to compete. C) Corporate strategy deals with where to compete; business strategy deals with how to compete. D) Corporate strategy deals with how to compete; business strategy deals with when to compete. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-03 Compare and contrast the roles of corporate, business, and functional lead Topic : Strategy and the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 62 Which of the following summarizes...

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51) Which of the following statements is true of strategic initiatives? A) Random events and accidental happenstances reduce the possibility of strategic

initiatives in organizations. B) Strategic initiatives result from top-down planning by executives and not through a bottom-up process. C) When lower-level employees are less empowered, the possibility of strategic initiatives is higher. D) Strategic initiatives can be the result of a response to external trends or come from internal sources. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-07 Evaluate top-down strategic planning, scenario planning, and strategy as p Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 02 Test Bank > MC Qu. 91 Which of the following statements is true of...

52) Which of the following statements best represents a customer-oriented vision? A) “We provide solutions to streamline payroll and tax processing.” B) “To be the top-rated dental practice in the state.” C) “We are in the entertainment and hospitality typewriter business.” D) “We aim to build the best child safety seats in the world.” Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 02-05 Evaluate the strategic implications of product-oriented and customer-orien Topic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 20 Which of the following statements best...

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53) Describe the key characteristics of System 1 and System 2 thinking and briefly discuss how

these two systems affect decision making.

54) What is a strategic inflection point? A) the step at which two alternate plans of action are synthesized and a new plan adopted B) the recognition that a firm’s current strategy no longer provides the expected

outcomes C) a random event or pleasant surprise that has a profound impact on a firm’s strategic plan D) the moment when the fundamentals of a business and its industry are about to change Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-08 Explain the causes of strategic dissonance and how to navigate strategic i Topic : Strategy and the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 101 What is a strategic inflection point?

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55) A vision describes in broad, inspirational terms what an organization hopes to accomplish in

the future. ⊚ true ⊚ false Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 1 Easy Learning Objective : 02-04 Describe the roles of vision, mission, and values in a firm's strategy. Topic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > TF Qu. 12 A vision describes in broad, inspirational t...

56) Chandani is the founder of a firm producing self-driving vehicles. Because the industry is so

new and chaotic, Chandani favors a top-down strategic planning approach in which she exerts strong control over all aspects of the business, from product development and design to manufacturing and marketing. What is wrong with this scenario? A) The top-down approach can only be applied to specific business functions. B) The top-down approach leaves other employees uncertain about their roles in the company. C) The top-down approach is expensive to maintain, leaving the company at a competitive disadvantage. D) The self-driving vehicle industry is changing too much for the top-down approach to be effective. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 2 Medium Learning Objective : 02-07 Evaluate top-down strategic planning, scenario planning, and strategy as p Topic : Top-Down Strategic Planning and Scenario Planning Source : Chapter 02 Test Bank > MC Qu. 83 Chadani is the founder of a firm producing self...

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57) Who among the following is responsible for making business strategies in a large

conglomerate? A) the shareholder of the company B) the lower-level employees in the company C) the board of directors at the headquarters D) the general managers of strategic business units Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-03 Compare and contrast the roles of corporate, business, and functional lead Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 02 Test Bank > MC Qu. 71 Who among the following is responsible...

58) Which of the following is an example of a business acting upon an organizational core value? A) Emerald Autos finances research for developing more powerful engines. B) Emerald Autos launches an ad campaign that promotes the company as being

environmentally friendly. C) Emerald Autos reduces engine emissions below federal guidelines to reduce pollution. D) Emerald Autos lowers its retail prices to gain an advantage over its closest competitor. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-06 Justify why anchoring a firm in ethical core values is essential for longTopic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 47 Which of the following is an example of a bu...

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59) First Pharma Inc. and GeoVax Inc. are two competing firms in the pharmaceutical industry.

While First Pharma Inc.’s vision is “to be a preeminent drug manufacturer in the industry,” GeoVax Inc.’s vision is “to make good health a reality for everyone around the world.” Which of the following is an implication of these different visions? A) First Pharma Inc. is more likely to have a positive relationship between its vision and firm performance than GeoVax Inc. B) GeoVax Inc. will be more flexible than First Pharma Inc. when adapting to changing environments. C) GeoVax Inc.’s vision is more product-oriented than the vision of First Pharma Inc. D) First Pharma Inc.’s vision is more long-term and futuristic than GeoVax Inc.’s vision. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 02-05 Evaluate the strategic implications of product-oriented and customer-orien Topic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 43 First Pharma Inc. and GeoVax Inc. are two co...

60) Which of the following summarizes the difference between a firm’s vision and mission? A) A vision states the ethical values of a firm; a mission states the monetary goals of a

firm. B) A vision states what a firm wants to accomplish; a mission states how a firm plans to accomplish this vision. C) A vision states the management values of a firm; a mission states the values of the other workers. D) A vision states how much a firm wants to earn; a mission states how these earnings will be accomplished. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-04 Describe the roles of vision, mission, and values in a firm's strategy. Topic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 37 Which of the following summarizes the differ...

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61) It is helpful to break down strategy formulation and strategy implementation into five distinct

areas. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-03 Compare and contrast the roles of corporate, business, and functional lead Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 02 Test Bank > TF Qu. 04 It is helpful to break down strategy formula...

62) MoreCash Inc. is a major financial services corporation. With the CEO of MoreCash Inc.

preparing to retire, several top managers are vying for the position. Jared considers himself to be a leading candidate. He not only has advanced degrees from business schools and more than a decade of experience working for MoreCash Inc., but he also has personally ensured that his division has exceeded its performance benchmarks over the past three years, even though many of his employees are dissatisfied because they feel they are stagnating in their jobs. According to the Level-5 leadership pyramid, why has Jared failed to exhibit the qualities of a Level-5 leader? A) He is not able to help others reach their full potential. B) His individual skills are not well developed. C) His actions do not match the organization’s strategy. D) He lacks the organizational ability to accomplish the organization’s goals. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 02-02 Outline how you can become a strategic leader. Topic : Top Management Teams Source : Chapter 02 Test Bank > MC Qu. 61 MoreCash Inc. is a major financial...

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63) The executives at Dizzy Corp. are developing strategic plans to address plausible future

situations like an increase in the prices of cotton and synthetic fabrics by 20 percent, appreciation in the value of the dollar, increase in the cost of labor by 30 percent, and increase in demand for the company’s products. By doing so, the company will be well prepared with its planned responses if any of these situations occurs in the future. Thus, Dizzy Corp. is employing________ as the approach to the development of strategy. A) pattern recognition B) top-down strategic planning C) reverse engineering D) scenario planning Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 02-07 Evaluate top-down strategic planning, scenario planning, and strategy as p Topic : Top-Down Strategic Planning and Scenario Planning Source : Chapter 02 Test Bank > MC Qu. 84 The executives at Dizzy Corp. are...

64) A traditional top-down strategic planning process typically begins with A) functional managers formulating functional strategies for their respective

departments. B) employees at the operational level identifying problems within an organization. C) employees who have close contact with customers taking autonomous actions. D) strategic leaders adjusting a company’s vision and mission based on environmental analysis. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-07 Evaluate top-down strategic planning, scenario planning, and strategy as p Topic : Top-Down Strategic Planning and Scenario Planning Source : Chapter 02 Test Bank > MC Qu. 81 A traditional top-down strategic planning pr...

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65) A firm’s resource-allocation process (RAP) has very little effect on its realized strategy. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-07 Evaluate top-down strategic planning, scenario planning, and strategy as p Topic : Methods of Strategy Implementation Source : Chapter 02 Test Bank > TF Qu. 07 A firm&#8217;s resource-allocation process (...

66) As the CEO of a conglomerate, Sarah exhibited her strong commitment toward the

company’s core value that customers’ well-being is more important than profit when she convinced the board of directors to liquidate the company’s pesticide subsidiary. The pesticide brand sold by her company was a major revenue earner in lesser-developed nations, but studies indicate that it is a carcinogen. Sarah persuaded the board that the company had to be responsible toward society. In this scenario, Sarah has demonstrated A) strategic leadership. B) intrapreneurship. C) Machiavellianism. D) individualism. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 02-01 Explain the role of strategic leaders and what they do. Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 02 Test Bank > MC Qu. 54 As the CEO of a conglomerate, Sarah...

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67) What makes scenario planning more flexible than top-down strategic planning?

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-07 Evaluate top-down strategic planning, scenario planning, and strategy as p Topic : Top-Down Strategic Planning and Scenario Planning Source : Chapter 02 Test Bank > SA Qu. 117 What makes scenario planning more flexible t...

68) Due to political instability in the country of Bajukistan, the strategic leaders at the

headquarters of Maxim Industries have decided to close all production facilities in the country until stability returns. Maxim’s managers have formulated a________ strategy. A) divisional-level B) corporate-level C) business-level D) functional-level Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-03 Compare and contrast the roles of corporate, business, and functional lead Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 02 Test Bank > MC Qu. 70 Due to political instability in the...

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69) Friendly’s was a popular restaurant chain that served breakfast all day and specialized in

classic, homestyle meals. This menu attracted customers of all ages, from retirees to families with young children. Greta Friend, the CEO of the company, wanted to increase profits, so she instructed her executive team to update the menu, refashion the décor, and appeal to upscale professionals. Knowing her success at building the Friendly’s brand, the team trusted her ability to define Friendly’s strategy and praised her innovative concepts for updating the brand. Among the changes, the new menu replaced the all-day breakfast with alcoholic drink specials, and metal bistro tables replaced the cozy, high-backed booths. Sales decreased dramatically after the innovations were introduced, and many longtime customers stopped coming to the restaurant. What cognitive bias led the management team into making these decision-making errors? A) escalation of commitment B) groupthink C) reason by analogy D) confirmation bias Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 02-09 Describe and evaluate the two distinct modes of decision making. Topic : Decision Making Source : Chapter 02 Test Bank > MC Qu. 106 Friendly&#8217;s was a popular restaurant chain...

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70) Jennifer was just named the CEO of a pen company called National Pens Inc. She

immediately changed the name to “Jenn’s Pens.” When asked why she made this change by the board of directors, who showed research that there was no correlation between success and CEO names, she responded by saying, “my previous company had the name of their CEO in the title, and they were very successful.” This fallacy on Jenifer’s part reveals her A) groupthink. B) escalation of commitment. C) confirmation bias. D) optimal decision making. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-09 Describe and evaluate the two distinct modes of decision making. Topic : Decision Making Source : Chapter 02 Test Bank > MC Qu. 18 Jennifer was just named the CEO of a pen com...

71) What is the importance of the dissonance gap when a firm encounters a strategic inflection

point? A) It measures the lag between the strategic inflection point and its negative financial

impact. B) It measures the length of time organizational leaders have to respond to the strategic inflection point. C) The smaller the dissonance gap, the more likely the firm will experience selfreinforcing failure. D) The greater the dissonance gap, the more difficult it is for the organization to change course. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-08 Explain the causes of strategic dissonance and how to navigate strategic i Topic : Strategy and the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 100 What is the importance of the dissonance...

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72) Malik has been an employee with Terrific Tools for 17 years. He started with an entry-level

job, and today he is a manager of an entire product division. Over the years, Malik has acquired a reputation for doing the right things in the company. Hence, as an efficient leader, he is capable of effectively communicating and motivating his subordinates to work toward the company’s vision and mission. According to the Level-5 leadership pyramid, which is the highest level of leadership Malik has reached so far? A) Level 2 B) Level 4 C) Level 3 D) Level 5 Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 02-02 Outline how you can become a strategic leader. Topic : Top Management Teams Source : Chapter 02 Test Bank > MC Qu. 59 Malik has been an employee with Terrific...

73) A surprise event that leads to a change in strategic initiatives, such as the accidental

discovery of a new use for an existing product, is known as serendipity. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-07 Evaluate top-down strategic planning, scenario planning, and strategy as p Topic : Sustaining a Competitive Advantage Source : Chapter 02 Test Bank > TF Qu. 06 A surprise event that leads to a change in s...

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74) A positive relationship between vision statements and firm performance is more likely to

exist when A) vision statements are equivalent to listening to the customers. B) visions are product-oriented. C) organizational structures are aligned with the firm’s vision statement. D) internal stakeholders are isolated from defining and revising the visions. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-05 Evaluate the strategic implications of product-oriented and customer-orien Topic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 45 A positive relationship between vision state...

75) The CEO of All Star Corp. has decided to enter the markets of emerging nations like China

and Brazil. This means that the books, magazines, and websites published under the Chyron Media banner would be made available in these nations. Which of the following strategies does this scenario best illustrate? A) corporate strategy B) divisional strategy C) functional strategy D) business strategy Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-03 Compare and contrast the roles of corporate, business, and functional lead Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 02 Test Bank > MC Qu. 65 The CEO of All Star Corp. has decided...

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76) Nuke It is a major manufacturer of microwave ovens. Which of the following statements will

best inspire the organization with a shared vision for Nuke It? A) At Nuke It, employees can trust our managers to steer the company. B) At Nuke It, employees at all levels are motivated to make the best microwave ovens on the market. C) At Nuke It, employees know that they will make a competitive wage. D) At Nuke It, employees want to create a cheaper microwave oven than our closest competitor does. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 02-04 Describe the roles of vision, mission, and values in a firm's strategy. Topic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 36 Nuke It is a major manufacturer of microwave...

77) Agro Ecology Inc. is a company that manufactures mechanical and biological products to

support sustainable farming methods. The company envisions that sustainable farming will replace industrial agricultural practices in the near future. Which of the following statements would make an accurate vision for Agro Ecology? A) We make products that support environmentally conscious agriculture. B) Agro Ecology aims to make working fun and pleasurable for its employees. C) All people should have access to food and fibers produced using sustainable farming methods. D) We provide environmentally safe agricultural products by investing in research and innovation. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 02-04 Describe the roles of vision, mission, and values in a firm's strategy. Topic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 31 Agro Ecology Inc. is a company that...

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78) What does the upper-echelons theory propagate?

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-02 Outline how you can become a strategic leader. Topic : Top Management Teams Source : Chapter 02 Test Bank > SA Qu. 112 What does the upper-echelons theory propagat...

79) Visionary companies are able to outperform their competitors because A) they isolate internal stakeholders in defining their visions. B) their visions are primarily financial. C) their vision statements are more product-oriented. D) they provide more aspirational visions. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-04 Describe the roles of vision, mission, and values in a firm's strategy. Topic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 33 Visionary companies are able to outperform t...

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80) ________ are best described as the ethical standards and norms that govern the behavior of

individuals within a firm. A) Job descriptions B) Customs duties C) Corrective controls D) Organizational core values Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-06 Justify why anchoring a firm in ethical core values is essential for longTopic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 51 ________ are best described as the ethical stan...

81) The management of Venture Manufacturing showed a commitment to________ by

increasing the salary of many female employees to meet its goal of having equal pay for comparable work regardless of gender. A) product-oriented vision B) scenario planning C) upper-echelons theory D) organizational core values Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-06 Justify why anchoring a firm in ethical core values is essential for longTopic : Leader&#8217;s Role in Establishing a Firm&#8217;s Ethical Climate Source : Chapter 02 Test Bank > MC Qu. 50 The management of Venture Manufacturing show...

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82) Define organizational core values with the help of an example.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-06 Justify why anchoring a firm in ethical core values is essential for longTopic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > SA Qu. 124 Define organizational core values with the h...

83) Chris is the manager of a graphic design firm, and he relies on a top-down strategic

management approach to maintain tight control over the activities of his employees. The company has recently started to lose market share to its more innovative competitors, and Chris wants to encourage his employees to start contributing to the strategy formulation process to make the company more competitive. Which of the following steps should Chris take? A) Schedule individual meetings with employees and demand that they come prepared with five ideas. B) Allow employees to take whatever approach they feel is appropriate when dealing with customers. C) Designate Friday afternoons as time for employees to pursue outside interests loosely related to the business. D) Take an extended vacation and see how the business naturally reorganizes itself in his absence. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 02-07 Evaluate top-down strategic planning, scenario planning, and strategy as p Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 02 Test Bank > MC Qu. 94 Chris is the manager of a graphic design fir...

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84) Who formulates a company’s corporate strategy? What is the objective of this strategy?

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-03 Compare and contrast the roles of corporate, business, and functional lead Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 02 Test Bank > SA Qu. 114 Who formulates a company&#8217;s corporate s...

85) Which of the following vision statements is most likely to produce a sustainable competitive

advantage for a boat dealership? A) to sell only the highest-rated luxury boats B) to generate the highest revenues of any dealership in the region C) to open dealerships across the country D) to help our customers find the perfect boat for their individual needs Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 02-05 Evaluate the strategic implications of product-oriented and customer-orien Topic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 44 Which of the following vision statements is ...

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86) Homestyle is a company that manufactures and sells home furniture. It sources its materials

from another country to keep costs low. An assembly line worker in one of its manufacturing centers noticed that there was increasing concern regarding the potential toxicity of the flame-resistant materials used in the furniture. In response, she compiled a list of nontoxic flame-resistant materials that the company could use. When her manager learned about this, he presented the prospect and got it approved from the top management team. This is an example of the A) top-down strategic planning approach. B) scenario planning process. C) reverse engineering process. D) planned emergence approach. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 02-07 Evaluate top-down strategic planning, scenario planning, and strategy as p Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 02 Test Bank > MC Qu. 92 Homestyle is a company that manufactures and...

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87) TransNational Inc. is a large conglomerate that operates in 17 different countries. The

corporate executives at the headquarters have decided that the company’s objective for the next two years will be to increase its customer equity, or the value of potential future revenues generated by all its customers in a lifetime. Based on this guideline received from the top management team, the product leader of the home audio division has decided to adopt a cost-leadership strategy in all of his 17 units. Thus, the decision made by the product leader best illustrates a________ strategy. A) functional B) grand C) business D) corporate Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 02-03 Compare and contrast the roles of corporate, business, and functional lead Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 02 Test Bank > MC Qu. 75 TransNational Inc. is a large conglomerate...

88) Why is it important for a business to have a vision?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-04 Describe the roles of vision, mission, and values in a firm's strategy. Topic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > SA Qu. 120 Why is it important for a business to have a...

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89) The production head at the All Paints Corp. would frequently stay back after office hours and

experiment with new color combinations even though this was part of the new product development team’s job. As a result of these experiments, he came up with two new interior paint colors, foggy morning and mint julep. The new colors proved popular among test groups, and quickly became some of All Paints best-selling products. Which of the following strategies does this scenario best illustrate? A) tactical strategy B) intended strategy C) emergent strategy D) unrealized strategy Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 02-07 Evaluate top-down strategic planning, scenario planning, and strategy as p Topic : Methods of Strategy Implementation Source : Chapter 02 Test Bank > MC Qu. 89 The production head at the All Paints...

90) A(n)________ is best described as the strategic option that top managers decide most closely

matches the current reality and which is then executed. A) bottom-up emergent strategy B) realized strategy C) dominant strategic plan D) executive summary Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-07 Evaluate top-down strategic planning, scenario planning, and strategy as p Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 02 Test Bank > MC Qu. 85 A(n) ________ is best described as the strategi...

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91) Define strategic leadership.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-01 Explain the role of strategic leaders and what they do. Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 02 Test Bank > SA Qu. 110 Define strategic leadership.

92) Marta and Qing both serve as SBU managers of their divisions. They have both been asked

by the CEO to generate two different courses of action for a new product launch. This strategic decision-making technique can be described as A) group think. B) strategic intent. C) dialectic inquiry. D) devil’s advocacy decision framework. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-09 Describe and evaluate the two distinct modes of decision making. Topic : Decision Making Source : Chapter 02 Test Bank > MC Qu. 26 Marta and Qing both serve as SBU managers of ...

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93) The distribution department at Wheat, Barley and Whey Corp. has decided to adopt the FIFO

(first in, first out) method of inventory to dispatch its bags of wheat. Which of the following strategies does this scenario best illustrate? A) master strategy B) corporate strategy C) business strategy D) functional strategy Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-03 Compare and contrast the roles of corporate, business, and functional lead Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 02 Test Bank > MC Qu. 78 The distribution department at Wheat...

94) As a part of strategy formulation, a firm’s functional strategy primarily concerns questions

relating to A) when to compete. B) how to implement business strategy. C) how to enter target markets. D) where to compete. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-03 Compare and contrast the roles of corporate, business, and functional lead Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 02 Test Bank > MC Qu. 66 As a part of strategy formulation, a...

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95) The CEO of EveryCar was the child of parents who had difficulty making enough money to

support their family. As a result, he and his siblings did not have access to many advantages that children from wealthier families had. This CEO, therefore, emphasized making affordable, low-maintenance vehicles that could be bought by low-income households. Which of the following does this example demonstrate? A) upper-echelons theory B) dominant strategic planning C) scenario planning D) Level-5 leadership pyramid Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 02-02 Outline how you can become a strategic leader. Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 02 Test Bank > MC Qu. 57 The CEO of EveryCar was the child...

96) Why is it better for firms to keep their vision statements customer-oriented rather than

product-oriented?

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97) The two detailed courses of action generated in Step 1 of the dialectic inquiry decision

framework are known as A) assonance and dissonance. B) System 1 and System 2. C) thesis and antithesis. D) point and counterpoint Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-10 Compare and contrast devil&#8217;s advocacy and dialectic inquiry as frame Topic : Decision Making Source : Chapter 02 Test Bank > MC Qu. 108 The two detailed courses of action generated...

98) Because environments are always dynamic, all organizations will encounter a strategic

inflection point. ⊚ true ⊚ false Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-08 Explain the causes of strategic dissonance and how to navigate strategic i Topic : Strategy and the Strategic Management Process Source : Chapter 02 Test Bank > TF Qu. 05 Because environments are always dynamic...

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99) Organizational values help people make choices that are ethical and company-goal-oriented.

These values answer which strategic management question? A) How do we accomplish our goals in the organization? B) What are we about as a firm compared to our competitors? C) What is the best way to compete in the industry? D) What do we want to accomplish as a company? Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-04 Describe the roles of vision, mission, and values in a firm's strategy. Topic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 23 Organizational values help people make choic...

100)

Hanna, the owner of GT Trading Inc., is engaged in the strategy formulation stage. She has already allocated a significant sum of money to upgrade the company’s communication network (sunk costs) but has failed to see any positive outcomes. Given the money she has already spent, she feels she needs to recover those costs and moves forward with the communications upgrade even though the outcome does not seem promising. This best illustrates the concept of A) optimal decision making. B) the illusion of control. C) escalating commitment. D) cognitive limitations.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-09 Describe and evaluate the two distinct modes of decision making. Topic : Decision Making Source : Chapter 02 Test Bank > MC Qu. 17 Hanna, the owner of GT Trading Inc., is...

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101)

What is a strategic business unit (SBU)? Explain with an example.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-03 Compare and contrast the roles of corporate, business, and functional lead Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 02 Test Bank > SA Qu. 115 What is a strategic business unit (SBU)? Exp...

102)

After carefully assessing the market potential for solar-powered mobile devices, the toplevel executives of We Know Inc. decided that the company would be launching a line of solar-powered tablets within the next two years. This would mean that the tablet division would need to immediately begin research and development efforts. Which of the following strategies in the planned emergence model does this best illustrate? A) emergent strategy B) unrealized strategy C) intended strategy D) tactical strategy

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 02-07 Evaluate top-down strategic planning, scenario planning, and strategy as p Topic : Methods of Strategy Implementation Source : Chapter 02 Test Bank > MC Qu. 87 After carefully assessing the market potenti...

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103)

The COVID-19 pandemic, the BP oil spill, and the 9/11 terrorist attacks are examples of A) purple squirrel discoveries. B) camel’s nose opportunities. C) boiling frog scenarios. D) black swan events.

104)

The first step to gain and sustain a competitive advantage is to A) understand the strategies of the competitors. B) define an organization’s vision, mission, and values. C) put the guiding policies of an organization into practice. D) develop functional and business-level strategies.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-04 Describe the roles of vision, mission, and values in a firm's strategy. Topic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 30 The first step to gain and sustain a competi...

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105)

At a strategic inflection point, the more the convictions of strategic leaders deviate from reality, A) the more likely it is the firm will be successful. B) the smaller the dissonance gap. C) the easier it is to capitalize on the opportunity. D) the more difficult it is to change course.

106)

Customer-oriented vision statements are better suited than product-oriented vision statements for helping companies to adapt to changing environments. ⊚ true ⊚ false

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 02-05 Evaluate the strategic implications of product-oriented and customer-orien Topic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > TF Qu. 14 Customer-oriented vision statements are...

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107)

Rayya is exploring multiple suppliers in order to find the best price. However, instead of calling all seven potential suppliers, he only reaches out to the first four and bases his selection on those instead of contacting all suppliers. Rayya’s action best describes the concept of A) satisficing. B) the illusion of control. C) optimal decision making. D) escalating commitment.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-09 Describe and evaluate the two distinct modes of decision making. Topic : Decision Making Source : Chapter 02 Test Bank > MC Qu. 16 Rayya is exploring multiple suppliers in order...

108)

What functions do strong ethical values serve?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-06 Justify why anchoring a firm in ethical core values is essential for longTopic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > SA Qu. 125 What functions do strong ethical values serv...

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109)

Meiko has been tasked with formulating the business strategy for LaFrance Beauty’s new line of skin rejuvenating cream. Which of the following ideas would Meiko be likely to include in her proposal? A) Promote the cream as the only one on the market with a new miracle enzyme. B) Invest in increasing social media posts about LaFrance products. C) Open kiosks in shopping centers located in developing countries with rising disposable incomes. D) Reorganize the manufacturing division to gain efficiency.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 02-03 Compare and contrast the roles of corporate, business, and functional lead Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 02 Test Bank > MC Qu. 72 Meiko has been tasked with formulating...

110)

Which of the following statements is true of business strategy? A) Its objective is to increase the overall company value to make it higher than the sum of the individual business units’ value. B) It is implemented within the standalone business units of a larger conglomerate. C) It must be able to create synergies across business units that are quite different. D) Corporate executives at headquarters formulate it.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-03 Compare and contrast the roles of corporate, business, and functional lead Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 02 Test Bank > MC Qu. 68 Which of the following statements...

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111)

To implement specific business strategies, general managers of strategic business units rely on A) functional managers. B) corporate executives. C) external stakeholders. D) strategic leaders.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-03 Compare and contrast the roles of corporate, business, and functional lead Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 02 Test Bank > MC Qu. 76 To implement specific business strategies...

112)

Deep Earth Gardening has a vision of helping every American learn how to grow their own food. Its management team recently unveiled the mission statement “A garden at every home.” What is wrong with this mission statement? A) It does not indicate how the company will accomplish its goals. B) It is too specific. C) It does not include a stretch goal. D) It is not inspirational and motivating for employees.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 02-04 Describe the roles of vision, mission, and values in a firm's strategy. Topic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 38 Deep Earth Gardening has a vision of helping...

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113)

To be effective, firms need to A) back up their visions with strategic commitments that are costly and difficult to reverse. B) isolate top managers from the organizational values. C) increase their strategic flexibility by developing product-oriented vision statements. D) pursue visions that are exclusively financial and not aspirational.

114)

Upper management at ComfyShoe Inc., a manufacturer of insoles for shoes, wants to work on improving the product lines it already has without taking on other challenges at this time. Which of the following vision statements reflects that goal? A) ComfyShoe Inc. wants to provide the best benefits for employees in the insole industry. B) ComfyShoe Inc. wants to always satisfy the consumers who purchase insoles. C) ComfyShoe Inc. wants to be the best manufacturer of insoles in the industry. D) ComfyShoe Inc. wants to adapt their insoles to the changing demands of consumers.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 02-05 Evaluate the strategic implications of product-oriented and customer-orien Topic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 39 Upper management at ComfyShoe Inc., a manufa...

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115)

Do vision statements help firms gain and sustain competitive advantage? A) No, vision statements do not, but mission statements do. B) Yes, but only if the vision statements are short, concise and are well written. C) It depends, because the effectiveness of vision statements differs by type. D) They do only if the vision statement follows the strategic management process.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-05 Evaluate the strategic implications of product-oriented and customer-orien Topic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 27 Do vision statements help firms gain and sus...

116)

Visionary companies differ from their competition in that A) visionary companies typically emphasize measuring financial performance. B) a visionary company focuses on scenario planning and future competitive threats. C) in a visionary company it is the CEO’s managerial style that gives the company its emergent strategy. D) employees in visionary organizations find meaning in their work and are motivated.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-04 Describe the roles of vision, mission, and values in a firm's strategy. Topic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 22 Visionary companies differ from their compet...

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117)

The upper-echelons theory favors the idea that effective strategic leadership results from innate abilities rather than learning. ⊚ true ⊚ false

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-02 Outline how you can become a strategic leader. Topic : Managerial Succession Process Source : Chapter 02 Test Bank > TF Qu. 03 The upper-echelons theory favors the idea that...

118)

How do strong ethical values benefit a firm? A) They lay the groundwork for a quick increase of profits and short-term success. B) They provide strong public relations, which can either benefit or hinder competitive advantage. C) They emphasize benefiting stakeholders by significantly increasing profit. D) They serve as the guardrails put in place to keep the company on track when pursuing its mission.

Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-06 Justify why anchoring a firm in ethical core values is essential for longTopic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 48 How do strong ethical values benefit a firm?

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119)

Executives whose visions and decisions help their companies achieve competitive advantage can be considered strategic leaders. ⊚ true ⊚ false

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-01 Explain the role of strategic leaders and what they do. Topic : Strategic Approaches to Winning a Sustainable Competitive Advantage Source : Chapter 02 Test Bank > TF Qu. 01 Executives whose visions and decisions help ...

120)

Progress Apparel’s core value statement reads we will ensure our clothing is made with the highest respect toward human rights and environmental protection. Which of the following actions exemplifies how Progress’s core values drive its strategic decision making? A) demanding that textile suppliers pay livable wages and maintain safe production facilities B) purchasing a full-page advertisement in a major newspaper touting the company’s values C) investing in more efficient machinery to reduce costs and lower prices for consumers D) introducing an online customer service unit to keep customers happy

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-06 Justify why anchoring a firm in ethical core values is essential for longTopic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 49 Progress Apparel&#8217;s core value statemen...

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121)

What are the arguments against top-down strategic planning and scenario planning?

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Total Coverage, an insurance brokerage firm, has experienced a 6 percent decline in revenues in consecutive quarters. To lower operating costs, managers reduced the customer service staff from 20 employees to 13. Management also enlisted the remaining employees to help produce a new company vision: to give customers of all budgets a customized package of policies to meet all their insurance needs. What is wrong with this scenario? A) Total Coverage’s vision is not customer-oriented. B) Total Coverage’s organizational structures do not align with the vision. C) Internal stakeholders were not invested in defining the vision. D) Total Coverage’s vision is not aspirational.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 02-05 Evaluate the strategic implications of product-oriented and customer-orien Topic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 46 Total Coverage, an insurance brokerage firm...

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A customer-oriented vision statement focuses employees to think about how best to A) increase their efficiency to benefit consumers. B) improve a popular product. C) make a product easier to use. D) solve a problem for a consumer.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-05 Evaluate the strategic implications of product-oriented and customer-orien Topic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 40 A customer-oriented vision statement focuses...

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In the top-down strategic planning approach, all strategic intelligence and decisionmaking responsibilities rest primarily on the A) general manager. B) chief executive officer. C) external stakeholders. D) functional managers.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-07 Evaluate top-down strategic planning, scenario planning, and strategy as p Topic : Top-Down Strategic Planning and Scenario Planning Source : Chapter 02 Test Bank > MC Qu. 80 In the top-down strategic planning approach,...

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Which of the following statements about product-oriented visions is true? A) They tend to force managers to take a myopic view of the competitive landscape. B) They allow companies to effectively adapt to changing environments. C) They define a business in terms of providing solutions to customers. D) They allow firms to set goals that focus primarily on filling the organization’s needs.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 1 Easy Learning Objective : 02-05 Evaluate the strategic implications of product-oriented and customer-orien Topic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 42 Which of the following statements about prod...

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Organizational values help individuals make choices that are A) ethical but ineffective in achieving long-term success. B) legal but unethical. C) both ethical and effective in advancing a company’s goals. D) both illegal and effective.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-06 Justify why anchoring a firm in ethical core values is essential for longTopic : The Roles of Vision, Mission, and Values in the Strategic Management Process Source : Chapter 02 Test Bank > MC Qu. 53 Organizational values help individuals make ...

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127)

Colton is exploring multiple suppliers in order to find the best price. However, instead of calling all eight potential suppliers, he only reaches out to the first three and bases his selection on those instead of contacting all suppliers. Colton's action best describes the concept of A) optimal decision making. B) the illusion of control. C) satisficing. D) escalating commitment.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-09 Describe and evaluate the two distinct modes of decision making. Topic : Decision Making Source : Chapter 02 Test Bank > MC Qu. 104 Colton is exploring multiple suppliers...

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Strategic leadership refers to the use of power and influence by________ to direct the activities of others when pursuing an organization’s goals. A) external stakeholders B) lower-level managers C) corporate executives D) production workers

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 02-01 Explain the role of strategic leaders and what they do. Topic : The Strategic Role of Managers in Strategy Formulation and Implementation Source : Chapter 02 Test Bank > MC Qu. 55 Strategic leadership refers to the use...

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129)

Which of the following best describes a Level 5 manager in the Level-5 leadership pyramid? A) Desiree is the CEO of Pelletier LLC.; she has helped her company gain and sustain a competitive advantage through ethical decision making. B) Billie is part of the marketing team at Beacon & Perez.; she has been given the charge of managing a team of five, so she will be promoted to a manager’s position next month. C) Parvati is an employee who just started her career at TechnoApp Inc.; she has already been appreciated in the company for her knowledge and skills. D) Jory is an employee at Futuro Inc.; they have helped their team achieve its targets by contributing to the team’s efforts.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-02 Outline how you can become a strategic leader. Topic : Value of Strategic Leadership Source : Chapter 02 Test Bank > MC Qu. 60 Which of the following best describes a...

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Pablo is part of a sales team. He effectively coordinates his tasks with others in the team and willingly contributes to their efforts in achieving the team’s objectives. Thus, Pablo is in________ of the Level-5 leadership pyramid. A) Level 5 B) Level 4 C) Level 3 D) Level 2

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 02-02 Outline how you can become a strategic leader. Topic : Top Management Teams Source : Chapter 02 Test Bank > MC Qu. 58 Pablo is part of a sales team. He effectively...

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Answer Key Test name: Chapter 02 Test Bank 1) A

A vision is a statement about what an organization ultimately wants to accomplish; it captures the company’s aspiration. Wendy Kopp, founder of Teach for America, declared the organization’s vision to be “One day, all children in this nation will have the opportunity to attain an excellent education.” By developing this vision, she helped to attract promising college graduates and get them interested in teaching. Klopp’s vision attempts to inspire the best and brightest young professionals to contribute to society by becoming teachers. 2) D

Without the commitment and involvement of strategic leaders, any statement of values is merely a public relations exercise. Employees tend to follow the values practiced by their leaders. They closely observe top managers' day-to-day decisions and quickly decide whether those leaders are merely paying lip service to the company’s stated values. 3) A

In scenario planning, managers envision what-if scenarios and prepare contingency plans that can be called upon when necessary. 4) C

Top-down strategic planning rests on the assumption that the future can be predicted from the past. This approach works reasonably well when the environment does not change much. 5) A

Constraints such as time or the brain’s inability to process large amounts of data that prevent us from appropriately processing and evaluating each piece of information we encounter are known as cognitive limitations. 6) TRUE

A mission describes what an organization does and how it proposes to accomplish its vision. The mission is often introduced with the preposition by. 7) A

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Strategic leaders can draw on position power based on their authority—for example, as chief executive officer (CEO) or draw on informal power, such as persuasion, to influence others when implementing strategy. As the CEO of the company she founded, Gina holds position power, which she used to establish a new policy affecting remote workers. 8) FALSE

System 1 is the brain’s default mode. It is fast, which leads to “snap judgments.” It is efficient and automatic. 9) D

These product divisions under EverMart can be referred to as strategic business units (SBUs). Business strategy occurs within strategic business units, the standalone divisions of a larger conglomerate, each with its own profit-and-loss responsibility. General managers in SBUs must answer business strategy questions relating to how to compete to achieve superior performance. 10) B

By changing the tasks the resources in the firm were working on at the middle and lower levels, Intel’s decision to set up guidelines for production priorities yielded an emergent strategic shift into microprocessors and out of DRAM (dynamic random-access memory) chips. Intel was able to pursue a strategic transformation due to the way it set up its resource allocation process. In a sense, Intel was using functional-level managers to drive business and corporate strategies in a bottom-up fashion. 11) D

Within each strategic business unit are various business functions, such as accounting, human resources, procurement, product development, manufacturing, marketing, sales, and customer service. Each functional manager is responsible for decisions and actions within a single functional area. 12) A

The decision framework in which two teams each generate a detailed but alternate plan of action, with a goal, if feasible, of achieving a synthesis between the two plans is called dialectic inquiry. 13) A

Customer-oriented visions tend to be more flexible when adapting to changing environments. 14) B

Successful emergent strategies are sometimes the result of autonomous actions by lower-level employees.

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15) Short Answer

According to the Level-5 leadership pyramid, effective strategic leaders go through a natural progression of five different levels. Each level builds on the previous one; the manager can move on to the next level of leadership only when the current level has been mastered. The five levels are: highly capable individual, contributing team member, competent manager, effective leader, and executive. 16) B

Business strategy concerns the question of how to compete, either through cost leadership, differentiation, or value innovation. By using the best video cameras available, OverFlight, Inc. is differentiating its product from the products made by its competitors. 17) Short Answer

Devils’ advocacy involves a separate team or individual carefully scrutinizing a proposed course of action by questioning and critiquing underlying assumptions and highlighting potential downsides. In this framework, a proposal is revised and then critiqued again with both teams ultimately agreeing on a course of action under the supervision of a higher-level executive. In contrast, dialectic inquiry involves two teams each generating a detailed course of action— known as the thesis and anti-thesis. These proposed courses of action are then debated and presented to higher-level decision makers who may take one of three courses of action: adopt neither proposal, adopt one of the proposals, or adopt a synthesis that includes aspects of both proposals. 18) Short Answer

Organizational core values must be lived with integrity, especially by the top management team. Without the commitment and involvement of strategic leaders, any statement of values is merely a public relations exercise. Employees tend to follow the values practiced by their leaders. They closely observe top managers’ day-to-day decisions and quickly decide whether those leaders are merely paying lip service to the company’s stated values. Unethical behavior by strategic leaders is like a virus that spreads quickly throughout an entire organization. It is imperative that strategic leaders set the example of ethical behavior by living their firm’s core values. 19) B

The strategic management process is a method put in place by strategic leaders to formulate and implement a strategy. 20) Short Answer

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Power is defined as the strategic leader’s ability to influence other organizational members to do things, including things they would not do otherwise. Strategic leaders can draw on position power based on their authority, for example, as chief executive officer (CEO), as well as informal power, such as persuasion to influence others when implementing strategy. 21) B

Representativeness refers to the cognitive bias of drawing conclusions based on small samples, or even from one memorable case or anecdote. 22) C

Addressing strategic inflection points is a difficult leadership challenge because they require fundamental changes to the firm’s strategy. Formulating and implementing a new strategy at a strategic inflection point is made even more challenging by the fact that company leaders are often late in comprehending that their cognitive dissonance is not due to faulty information about reality. Instead, it results because their belief system is no longer a good fit with the new circumstances. 23) TRUE

Strategy formulation concerns the choice of strategy in terms of where and how to compete. In contrast, strategy implementation concerns the organization, coordination, and integration of how work gets done. 24) A

An effective vision suffuses the organization with a sense of purpose and motivates employees at all levels to aim for the same target. 25) FALSE

Strategic leaders spend 67% of their time in face-to-face meetings. They consider face-to-face meetings most effective in getting their message across and obtaining the information they need. 26) C

There are three steps in the strategic management process: analysis, formulation, and implementation. 27) A

If the firm fails to navigate a strategic inflection point, the result will be self-reinforcing failure. 28) B

Strategic business units, or SBUs, are the standalone divisions of a larger conglomerate, each with its own profit-and-loss responsibility. Sam’s Club is an SBU of Walmart.

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29) D

Critics of top-down and scenario planning argue that strategic planning is not the same as strategic thinking. In fact, they argue that strategic planning processes are often too regimented and confining, and the processes lack the flexibility needed for quick and effective response. 30) D

Strategic leadership pertains to executives’ use of power and influence to direct the activities of others when pursuing an organization’s goals. Power is defined as the strategic leader’s ability to influence other organizational members to do things, including things they would not do otherwise. Maria’s ability to influence the behavior of the marketing department to target a new, underserved customer segment enables Apps4U to achieve a competitive advantage. 31) B

In the final step of the devil’s advocacy framework, both teams agree on a course of action. The entire process frequently takes place under the supervision of a higher-level executive or executive team. 32) A

Corporate executives at headquarters formulate corporate strategy. Corporate executives need to decide in which industries, markets, and geographies their companies should compete. 33) Short Answer

Top-down strategic planning rests on the assumption that we can predict the future from the past. The approach works reasonably well when the environment does not change much. One major shortcoming of the strategic planning approach is that we simply cannot know the future. Strategic leaders’ visions of the future can be downright wrong; unforeseen events can make even the most scientifically developed and formalized plans obsolete. Thus, many companies are now using a more flexible approach in their strategic management process. 34) C

A strategic initiative is any activity a firm pursues to explore and develop new products and processes, new markets, or new ventures. 35) Short Answer

Student answers may vary. A customer-oriented vision defines a business in terms of providing solutions to customer needs. For example, “We are in the business of providing solutions to professional communication needs.”

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36) TRUE

Organizational core values are the ethical standards and norms that govern the behavior of individuals within a firm or organization. 37) B

A decision to niche market the jewelry sold by a company while the apparel division under the same company sells its products through mass marketing is an example of a generic business strategy. Business strategy occurs within strategic business units, or SBUs, the standalone divisions of a larger conglomerate, each with its own profit-and-loss responsibility. Within the guidelines received from corporate headquarters, they formulate an appropriate generic business strategy (cost-leadership, differentiation, or innovation) in their quest for competitive advantage. 38) A

Building on the vision, organizations establish a mission, which describes what an organization actually does—that is, the products and services it plans to provide, and the markets in which it will compete. “We help place vulnerable animals in safe, loving homes by connecting shelter and rescue agencies with vetted adopters” would make an appropriate mission for Home for Good. 39) Short Answer

Top-level executives design an intended strategy—the outcome of a rational and structured, topdown strategic plan. An emergent strategy describes any unplanned strategic initiative bubbling up from the bottom of the organization. If successful, emergent strategies have the potential to influence and shape a firm’s strategy. A firm’s realized strategy is generally a combination of its top-down strategic intentions and bottom-up emergent strategy. 40) Short Answer

Addressing strategic inflection points is a difficult leadership challenge because they require fundamental changes to the firm’s strategy. Formulating and implementing a new strategy at a strategic inflection point is made even more challenging because company leaders are often late in comprehending that their cognitive dissonance is not due to faulty information about reality. Another difficulty is that financial results often lag, and the company does not feel a negative impact until much after a strategic inflection point. 41) Short Answer

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Student answers may vary. Cognitive biases are obstacles in thinking that lead to systematic errors in decision making and interfere with rational thinking. One such bias is escalating commitment, a cognitive error that occurs when decision makers continue to support and invest in a project despite receiving feedback that it is unlikely to succeed. In these situations, significant time and financial resources have already been committed to the project. Rather than ignoring the prior resources already spent (that is, the sunk costs) and shut the project down, which would be the rational decision, the strategic decision makers commit more resources to a failing course of action. The most rational approach would be to ignore the sunk costs and consider any future decisions with a clean-slate approach. Although this approach may seem counterintuitive, it is the most rational approach when making strategic decisions. Nonetheless, managers may be reluctant to use this approach because of loss aversion; they feel that they need to recover the investments already made. 42) A

At times, parts of a firm’s intended strategy fall by the wayside because of unpredictable events and turn into unrealized strategy. 43) C

This defines strategic management is. 44) Short Answer

Although the terms vision and mission are often used interchangeably, they are different: A vision defines what an organization wants to be, and what it wants to accomplish ultimately. A vision begins with the infinitive form of a verb (starting with to). In contrast, a mission describes what an organization does and how it proposes to accomplish its vision. The mission is often introduced with the preposition by. 45) D

Corporate executives at headquarters formulate corporate strategy. They need to formulate a strategy that can create synergies across business units that may be quite different, and they determine the firm’s boundaries by deciding whether to enter specific industries and markets and sell certain divisions. 46) A

In a slow-moving and stable environment, top-down strategic planning might be the most effective approach. Besides the rate of change, a second dimension is firm size. Larger firms tend to use either a top-down strategic planning process or scenario planning. 47) B

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When a firm’s static fit no longer matches competitive realities, strategic dissonance emerges. Strategic dissonance is present when a firm’s current strategy no longer provides the expected outcomes. Here, as in Ros Leary’s attempts to boost sales, old models of competing for advantage no longer work. 48) D

Strategic commitments are actions that are costly, long-term-oriented, and difficult to reverse. 49) FALSE

Employees tend to follow values practiced by their leaders. They closely observe top managers’ day-to-day decisions and quickly decide whether those leaders are merely paying lip service to the company’s stated values. Organizational core values must be lived with integrity, especially by the top management team. 50) C

Corporate strategy concerns questions relating to where to compete in terms of industry, markets, and geography. Business strategy concerns the question of how to compete. 51) D

Strategic initiatives can come from anywhere. They can emerge as a response to external trends or come from internal sources. In other words, strategic initiatives can be the result of top-down planning by executives, or they can emerge through a bottom-up process (or both). 52) A

Customer-oriented vision statements allow companies to adapt to changing environments and are not limited to specific products. 53) Short Answer

System 1 is the brain’s default mode. It is fast, unconscious, and automatic. System 2 is logical, analytical, and deliberate. It is slow, conscious, and effortful. System 1 decisions are often “snap judgments” that are error prone with a higher likelihood of biases. System 2 decision making is used for complex, analytical decisions. These decisions are more reliable, with a lower likelihood of biases. 54) D

A strategic inflection point is a turning point in determining the future of company; the moment when the fundamentals of a business and its industry are about to change. 55) TRUE

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A vision captures an organization’s purpose and aspiration and spells out what the organization ultimately wants to accomplish. An effective vision suffuses the organization with a sense of purpose and motivates employees at all levels to aim for the same target, while leaving room for individual and team contributions. 56) D

Top-down strategic planning rests on the assumption that we can predict the future from the past. The approach works reasonably well when the environment does not change much. Because the self-driving vehicle industry is new and constantly changing, the top-down approach might leave the company unable to quickly and effectively respond to new developments and challenges. 57) C

General managers in strategic business units (SBUs) must answer business strategy questions relating to how to compete to achieve superior performance. 58) C

Organizational core values are the ethical standards and norms that govern the behavior of individuals within a firm or organization. By lowering engine emissions below what federal laws require, Emerald Autos is acting on an ethical standard and thus an organizational value. 59) B

A vision defines what an organization wants to accomplish ultimately. A mission describes how the vision is accomplished. 61) FALSE

It is helpful to break down strategy formulation and implementation into three distinct areas— corporate, business, and functional. 62) A

At Level 5, the strategic leader builds enduring greatness by combining willpower and humility. This implies that a Level-5 executive works to help the organization succeed and others to reach their full potential. Even though Jared’s division has exceeded expectations over the past three years, the fact that some of his employees feel that they are stagnating suggests that he has not mastered the capabilities necessary to be a Level-5 executive.

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63) D

Scenario planning asks “what if” questions. Like top-down strategic planning, scenario planning starts with a top-down approach to the strategy process. Top management envisions different scenarios to anticipate plausible futures and to derive strategic responses. 64) D

In a traditional top-down strategic planning process, strategic planners provide detailed analyses of internal and external data and apply them to all quantifiable areas: prices, costs, margins, market demand, head count, and production runs. Based on a careful analysis of these data, top managers reconfirm or adjust the company’s vision, mission, and values before formulating corporate, business, and functional strategies. 65) FALSE

A firm’s resource-allocation process (RAP) determines the way it allocates its resources and can be critical in shaping its realized strategy. Emergent strategies can result from a firm’s resourceallocation process (RAP). 66) A

In this scenario, Sarah has demonstrated strategic leadership. Strategic leadership pertains to executives’ use of power and influence to direct the activities of others when pursuing an organization’s goals. 67) Short Answer

Like top-down strategic planning, scenario planning is a top-down approach to the strategy process. In addition, in scenario planning top management envisions different scenarios, to anticipate plausible futures and to derive strategic responses. The goal is to create a number of detailed and executable strategic plans. These plans allow the strategic management process to be more flexible and more effective than the more static strategic planning approach with one master plan. The circular nature of the scenario-planning model allows for continuous interaction among analysis, formulation, and implementation. Through this interactive process, managers can adjust and modify their actions as new realities emerge. The interdependence among analysis, formulation, and implementation also enhances organizational learning and flexibility. 68) B

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Corporate executives at headquarters formulate corporate strategy. They need to formulate a strategy that can create synergies across business units that may be quite different, and they determine the firm's boundaries by deciding whether to enter specific industries and markets and sell certain divisions. 69) B

Groupthink is a situation in which opinions coalesce around a leader without individuals critically evaluating and challenging that leader’s opinions and assumptions. The Friendly’s management team did not challenge the CEO’s mistaken assumption that changing the menu, décor, and target market of the restaurant would increase its profitability. 70) C

Confirmation bias is the tendency of individuals to search for information that confirms their existing beliefs. When confronted with evidence that contradicts these beliefs, they either ignore the evidence or interpret it such that it supports their beliefs. 71) D

The greater the dissonance gap, the more difficult it is to change course. 72) B

Malik has reached Level 4 of the Level-5 leadership pyramid so far. At Level 4, the effective Level 3 manager becomes a leader who determines what the right decisions are. The Level 4 manager effectively communicates a compelling vision and mission to guide the group toward superior performance. They “do the right things.” 73) TRUE

Serendipity describes random events, pleasant surprises, and accidental happenstances that can have a profound impact on a firm’s strategic initiatives. 74) C

A positive relationship between vision statements and firm performance is more likely to exist when: the vision is customer oriented, internal stakeholders are invested in defining a purposedriven vision, and organizational structures such as compensation systems align with the firm’s vision. 75) A

The given scenario of All Star Corp. describes a corporate strategy. Corporate strategy concerns questions relating to where to compete (industry, markets, and geography). Corporate executives at headquarters formulate corporate strategy.

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76) B

An effective vision suffuses the organization with a sense of purpose and motivates employees at all levels to aim for the same target while leaving room for individual and team contributions. Therefore, all employees at Nuke It being motivated to make the best microwaves ovens on the market reflects a strong vision. Also, a vision captures an organization’s aspiration and spells out what it ultimately wants to accomplish. In addition, it helps employees find meaning in their work. 77) C

“All people should have access to food and fibers produced using sustainable farming methods” would make an appropriate vision statement for Agro Ecology, Inc. An effective vision talks about what an organization ultimately wants to accomplish; it captures the company’s aspiration. 78) Short Answer

According to the upper-echelons theory, organizational outcomes, including strategic choices and performance levels, reflect the values of the top management team (the individuals at the upper levels of an organization). According to the theory, strategic leaders interpret situations through the lens of their unique perspectives, which are shaped by their personal circumstances, values, and experiences. Their leadership actions reflect characteristics of their education and career experiences, as filtered through personal interpretations of the situations they face. The upper-echelons theory favors the idea that effective strategic leadership results from innate abilities and learning. 79) D

An inspiring vision provides a greater sense of purpose and helps employees find meaning in their work beyond mere monetary rewards. People have an intrinsic motivation to make the world a better place through their contributions. In turn, this motivation, which inspires individual purpose, can lead to higher organizational performance. 80) D

Organizational core values are the ethical standards and norms that govern the behavior of individuals within a firm or organization. 81) D

Equal pay for comparable work for all employees, regardless of gender, is an organizational value. The management of Venture Manufacturing showed a commitment to this value by increasing the salary of many female employees. 82) Short Answer

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Student examples will vary. A sample answer follows. Organizational core values are the ethical standards and norms that govern individuals’ behavior within a firm or organization. The values espoused by a company provide answers to the question, “how do we accomplish our goals?” They help individuals make choices that are both ethical and effective in advancing the company’s goals. For instance, Teach for America (TFA) has a set of core values that focus on transformational change through team-based leadership, diversity, respect, and humility. These values guide TFA corps members in their day-to-day decision making, aiding each corps member in making ethical and value-based decisions in teaching environments that can often be challenging and stressful. 83) C

Strategic leaders that want to create a work environment in which autonomous actions and serendipity can flourish often provide time and resources for employees to pursue other interests. In the strategy-as-planned-emergence approach, however, executives still need to decide which of the bottom-up initiatives to pursue and which to shut down. 84) Short Answer

Corporate executives at headquarters formulate corporate strategy. Corporate executives need to decide in which industries, markets, and geographies their companies should compete. They need to formulate a strategy that can create synergies across business units that may be quite different, and they determine the firm’s boundaries by deciding whether to enter specific industries and markets and sell certain divisions. They are responsible for setting overarching strategic objectives and allocating scarce resources among different business divisions, monitoring performance, and making adjustments to the overall portfolio of businesses as needed. The objective of corporate-level strategy is to increase overall company value to make it higher than the sum of the individual business units’ value. 85) D

Customer-oriented vision statements allow companies to adapt to changing environments. Product-oriented vision statements often constrain this ability. A vision based on helping address customer needs is thus more likely to produce a sustainable competitive advantage. 86) D

This scenario exemplifies a planned emergence approach. A planned emergence is a strategy process in which organizational structure and systems allow bottom-up strategic initiatives to emerge and be evaluated and coordinated by top management. In the strategy-as-plannedemergence approach, strategic initiatives can come from anywhere within a firm. 87) C

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The given decision made by the product leader best illustrates a business strategy. General managers in strategic business units must answer business strategy questions relating to how to compete in order to achieve superior performance. Within the guidelines received from corporate headquarters, they formulate an appropriate generic business strategy (cost-leadership, differentiation, or innovation) in their quest for competitive advantage. 88) Short Answer

A company’s vision captures its aspirations. An effective vision suffuses the organization with a sense of purpose and motivates employees at all levels to aim for the same target while leaving room for individual and team contributions. Employees in visionary companies tend to feel that they are part of something bigger than themselves. An inspiring vision provides a greater sense of purpose and helps employees find meaning in their work beyond mere monetary rewards. People have an intrinsic motivation to make the world a better place through their contributions. In turn, this motivation, which inspires individual purpose, can lead to higher organizational performance. To provide meaning for employees in pursuit of the organization’s ultimate goals, vision statements should be forward-looking and inspiring. 89) C

This scenario best illustrates an emergent strategy. An emergent strategy describes any unplanned strategic initiative bubbling up from deep within the organization. If successful, emergent strategies have the potential to influence and shape a firm’s strategy. 90) C

The dominant strategic plan is the strategic option that top managers decide most closely matches the current reality and which is then executed. 91) Short Answer

Strategic leadership refers to executives’ use of power and influence to direct the activities of others when pursuing an organization’s goals. 92) C

Technique that can help to improve strategic decision making; key element is that two teams each generate a detailed but alternate plan of action (thesis and anti-thesis). The goal, if feasible, is to achieve a synthesis between the two plans. 93) D

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The distribution department of Wheat, Barley and Whey Corp. has decided to implement a functional strategy. Within each strategic business unit are various business functions, such as accounting, human resources, procurement, product development, manufacturing, marketing, sales, and customer service. Each functional manager is responsible for decisions and actions within a single functional area. 94) B

As a part of strategy formulation, functional strategy concerns the question of how to implement business strategy. 95) A

Upper-echelons theory is a conceptual framework that views organizational outcomes, including strategic choices and performance levels, as reflections of the values of the top management team, who interpret situations through the lens of their unique perspectives. The values of the CEO of EveryCar influenced organizational outcomes, specifically making affordable vehicles that could be bought by low-income households. 96) Short Answer

Companies that have customer-oriented visions tend to be more flexible when adapting to changing environments. In contrast, companies that define themselves based on product-oriented statements tend to be less flexible and thus more likely to fail. The lack of an inspiring needbased vision can cause the long-range problem of failing to adapt to a changing environment. 97) C

The two detailed courses of action generated in Step 1 of the dialectic inquiry decision framework are known as thesis and antithesis. 98) TRUE

Under its co-founder and longtime CEO, Steve Jobs, Apple was one of the few successful tech companies using a top-down strategic planning process. Jobs felt that he knew best what the next big thing should be. In contrast, an emergent strategy describes any unplanned strategic initiative bubbling up from deep within the organization. 99) A

The values espoused should guide employees on how to behave in accomplishing the goals of the firm. 100)

C Escalating commitment occurs when decision makers continue to support and invest in a project despite receiving feedback that it is unlikely to succeed.

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101)

Short Answer Student answers may vary. Business strategy occurs within strategic business units, or SBUs, the standalone divisions of a larger conglomerate, each with profit-and-loss responsibility. Companies can be organized on a geographic or a product basis to form SBUs. An example of an SBU would be the automobile division of a large conglomerate that also manufactures and sells pharmaceuticals, apparel, consumer electronics, and other such products. 102)

C Top-level executives design an intended strategy—the outcome of a rational and structured, topdown strategic plan. 103)

D The COVID-19 pandemic, the BP oil spill in the Gulf of Mexico, and the 9/11 terrorist attacks are examples of black swan events. Black swan events are considered to be highly improbable and thus unexpected, but when they do occur, each has a profound impact. 104)

B The first step to gain and sustain a competitive advantage is to define an organization’s vision, mission, and values. With these principles in place, strategic leaders consider how to formulate strategy across different levels: corporate, business, and functional. 105)

D At a strategic inflection point, the more the convictions of strategic leaders deviate from reality, the larger the dissonance gap. The greater the dissonance gap, the more difficult it is to change course. 106)

TRUE Customer-oriented vision statements allow companies to adapt to changing environments because they focus employees on thinking about how best to solve a problem for consumers. In contrast, product-oriented vision statements often constrain this ability. 107)

A Cognitive limitations tend to lead us to choose the “good enough option” that satisfies our immediate needs, rather than to search for an optimal solution. 108)

Short Answer

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Strong ethical values have two important functions. First, they underlie the vision statement and provide stability to the strategy, laying the groundwork for long-term success. Second, once the company is pursuing its vision and mission in its quest for competitive advantage, they serve as guardrails to keep the company on track. 109)

A Business strategy concerns the question of how to compete. Three generic business strategies are available: cost-leadership, differentiation, and value innovation. By suggesting that LaFrance market its new products as having the latest discovery, Meiko is pursuing a differentiation strategy. 110)

B Business strategy occurs within strategic business units (SBUs), the standalone divisions of a larger conglomerate, each with profit-and-loss responsibility. General managers in SBUs must answer business strategy questions relating to how to compete to achieve superior performance. Within the guidelines from corporate headquarters, they formulate an appropriate generic business strategy—cost leadership, differentiation, or value innovation—in their quest for competitive advantage. 111)

A To implement specific business strategies, general managers rely on functional managers, who are responsible for decisions and actions within a single functional area. Each strategic business unit has various business functions, such as accounting, human resources, procurement, product development, manu-facturing, marketing, sales, and customer service. 112)

A A mission describes what an organization does; it defines how the vision is accomplished and is often introduced with the preposition by. Deep Earth Gardening’s mission statement does not indicate how the company will achieve its goal of helping to place a garden at every home, and is thus more suited as a vision statement. 113)

A To be effective, firms need to back up their visions and missions with strategic commitments; that is, credible actions that are costly, long-term-oriented, and difficult to reverse. 114)

C Because of its goals, ComfyShoe would choose a product-oriented vision statement, which focuses employees on improving existing products and services without consideration of underlying customer problems to be solved.

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115)

C It depends. The effectiveness of vision statements differs by type. Customer-oriented vision statements allow companies to adapt to changing environments. Product-oriented vision statements often constrain this ability. This is because customer-oriented vision statements focus employees to think about how best to solve a problem for a consumer. 116)

D Employees in visionary companies tend to feel that they are part of something bigger than themselves. An inspiring vision provides a greater sense of purpose and helps employees find meaning in their work beyond mere monetary rewards. 117)

FALSE The upper-echelons theory favors the idea that effective strategic leadership results from innate abilities and learning. By mastering each level of the Level-5 leadership pyramid, an employee can learn to become an effective strategic leader. 118)

D Strong ethical values and norms have two important functions. First, they underlie the vision statement and provide stability to the strategy, laying the groundwork for long-term success. Second, once the company is pursuing its vision and mission in its quest for competitive advantage, they serve as guardrails to keep the company on track. 119)

TRUE Executives whose vision and decisions enable their organizations to achieve competitive advantage demonstrate strategic leadership. 120)

A Progress’s core values are best reflected in the decision to demand that all members of the supply chain exhibit a similar concern with the environment and human rights. If the company did not enforce these standards among its suppliers, its products would not comply with the company’s stated values, and Progress would be vulnerable to other ethical lapses and negative public attention. 121)

Short Answer

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Critics of top-down and scenario planning argue that strategic planning is not the same as strategic thinking. In fact, they argue the strategic planning processes are often too regimented and confining, and the processes lack the flexibility needed for quick and effective response. Leaders engaged in a more formalized approach to the strategy process may succumb to an illusion of control, which refers to managers’ inclination to overestimate their ability to control events. Hard numbers in a strategic plan can convey a false sense of security. According to critics of strategic planning, in order to be successful, a strategy should be based on an inspiring vision and not on hard data alone. They advise strategic leaders to focus on all types of information sources, including soft sources that can generate new insights, such as personal experience, deep domain expertise, or the insights of front-line employees. 122)

B A positive relationship between vision statements and firm performance is more likely to exist when: the vision is customer oriented, internal stakeholders are invested in defining a purposedriven vision, and organizational structures such as compensation systems align with the firm’s vision. By eliminating half of its customer service staff, Total Coverage has severely reduced its capacity to address customer needs. This new organizational structure does not align with the vision to help customers build a customized package of policies to cover all their needs. 123)

D A customer-oriented vision statement focuses employees to think about how best to solve a problem for consumers. 124)

B Top-down strategic planning is a rational, top-down process through which executives attempt to program future success. In this approach, all strategic intelligence and decision-making responsibilities are concentrated in the office of the CEO. 125)

A A product-oriented vision defines a business in terms of a good or service provided. Productoriented visions tend to force managers to take a myopic view of the competitive landscape. 126)

C Organizational values help individuals make choices that are both ethical and effective in advancing the company’s goals. 127)

C The theory of bounded rationality posits that rather than optimizing when we are faced with decisions, we tend to “satisfice”—a portmanteau of the two words satisfy and suffice.

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128)

C Strategic leadership refers to executives’ use of power and influence to direct the activities of others when pursuing an organization’s goals. 129)

A Desiree, the CEO of Pelletier LLC., is a Level 5 manager in the Level-5 leadership pyramid. In the Level-5 leadership pyramid, the Level 5 manager reaches a leadership pinnacle, turning into a strategic leader. An effective strategic leader is an executive who builds enduring greatness through a combination of willpower and humility. 130)

D Pablo is currently at Level 2 of the Level-5 leadership pyramid. The Level 2 manager masters the skills required at Level 1 but is also a contributing team member who works effectively with others to achieve team objectives.

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Student name:__________ 1) What is meant by switching costs? Explain with the help of a real-world example.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 03-07 Appraise the role of industry dynamics and industry convergence in shaping Topic : Effect of Technology on Industry Structure and Competition Source : Chapter 03 Test Bank > SA Qu. 115 What is meant by switching costs? Explain...

2) While Sesmic Inc. operates in a monopolistically competitive industry, Energy 4 All Inc.

operates in a monopoly. Keeping this information in mind, which of the following statements is most likely true? A) Sesmic will have more profit potential than Energy 4 All. B) Sesmic will have more pricing power than Energy 4 All does. C) The threat of new entrants will be higher for Sesmic than for Energy 4 All. D) The number of buyers will be limited for both Sesmic and Energy 4 All. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > MC Qu. 74 While Sesmic Inc. operates in a monopolistic...

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3) The PESTEL framework allows the scanning, monitoring, and evaluating of________ in a

firm’s macro environment. A) internal and external forces B) changes and trends C) manufacturing and distribution D) price setting and marketing Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t Topic : PESTEL Framework Source : Chapter 03 Test Bank > MC Qu. 26 The PESTEL framework allows the scanning...

4) In the aircraft manufacturing industry, at least for large commercial jets, Boeing and Airbus

are the only competitors. There is not a significant threat of entry because A) there is no credible threat of retaliation from the incumbents. B) entering the aircraft manufacturing industry requires huge capital investments. C) there is expected to be a huge return on investment within this industry. D) entering the aircraft manufacturing industry means violating government policies. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > MC Qu. 57 In the aircraft manufacturing industry, at l...

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5) Which of the following fundamental insights was provided by Porter’s five forces framework

from the completion of the Alta Velocidad Española (AVE)? A) Any of the five forces on its own, if sufficiently strong, can extract industry profitability. B) All of the five forces must work together to have a meaningful impact. C) Competition must be defined more narrowly to remain confined to the industry’s closest competitors. D) A strong threat of substitutes decreases the rivalry among existing competitors. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > MC Qu. 64 Which of the following fundamental insights ...

6) A new company named ZipZip Inc. entered the motorized scooter retail business, which is a

fairly consolidated industry. In response, two large incumbent motorized scooter retailers, Vespa and Apollo, lowered the price of their scooters. Also, they spent more money to improve the features on their scooter and on additional marketing. By doing this Vespa and Apollo A) decreased industry profit potential. B) decreased industry exit barriers. C) increased industry exit barriers. D) increased industry profit potential. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > MC Qu. 50 A new company named ZipZip Inc. entered...

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7) What are the five stages of the industry life cycle? Name them and provide a real-life

example of a company or an industry that has gone through all five stages.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 03-06 Explain the five choices required for market entry. Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 03 Test Bank > SA Qu. 112 What are the five stages of the industry lif...

8) According to Michael Porter’s five forces model,________ must be viewed broadly to

encompass other forces in an industry. A) market share B) revenue streams C) competition D) future volatility Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-02 Differentiate between firm effects and industry effects in determining fir Topic : Industry Structure and Firm Strategy: The Five Forces Model Source : Chapter 03 Test Bank > MC Qu. 16 According to Michael Porter&#8217;s five...

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9) Wheat and Steak is a restaurant located inside a five-star hotel. It caters mainly to customers

who are concerned about quality dining rather than the prices. In this scenario, which of the following will be a part of Wheat and Steak’s strategic group? A) a premium rooftop restaurant in the same city B) a mobile food cart parked opposite to the five-star hotel C) a food kiosk in an adjacent subway station D) a nearby fast-food restaurant Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 03-08 Generate a strategic group model to reveal performance differences between Topic : Strategic Group Models for Understanding Industry Rivals Source : Chapter 03 Test Bank > MC Qu. 97 Wheat and Steak is a restaurant located insi...

10) Managers at SunTrustUs Properties are surprised to hear that interest rates are likely to

remain low for the next six months. Which of the following is an implication of low interest rates? A) Cost of capital for firms will be high. B) Economic growth rate will fall. C) Consumer demand will increase. D) Firms will invest less in future growth. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t Topic : PESTEL Framework Source : Chapter 03 Test Bank > MC Qu. 30 Managers at SunTrustUs Properties are surpri...

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11) Which of the following statements accurately illustrates the difference between monopolistic

competition and an oligopoly? A) In monopolistic competition, many firms compete against each other; in an oligopoly, there are few large firms competing against each other. B) Sellers in an oligopoly provide highly differentiated products; in monopolistic competition, the products sold are undifferentiated or standardized. C) In an oligopoly, the number of buyers is large; in monopolistic competition, the number of buyers is limited to three or four. D) Firms in an oligopoly have no pricing power; firms in a monopolistically competitive industry have the ability to raise prices. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > MC Qu. 71 Which of the following statements accurately...

12) How do real interest rates affect a business?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 2 Medium Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t Topic : PESTEL Framework Source : Chapter 03 Test Bank > SA Qu. 105 How do real interest rates affect a business?

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13) The primary objective of the________ model is to understand the profit potential of different

industries. A) strategic group B) five forces C) structure-conduct-performance D) PESTEL Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-02 Differentiate between firm effects and industry effects in determining fir Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > MC Qu. 42 The primary objective of the ________ model...

14) Which of the following is a primary feature of the five forces model? A) It is concerned exclusively about the intensity of rivalry among direct competitors. B) It helps managers determine the changing speed of an industry or the rate of

innovation. C) It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes. D) It takes into account a firm’s internal resources, capabilities, and core competencies. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-02 Differentiate between firm effects and industry effects in determining fir Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > MC Qu. 44 Which of the following is a primary feature ...

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15) In 2008, BlackBerry’s market cap peaked at $75 billion. By 2017 this valuation had fallen

more than 90 percent, to $3.9 billion. BlackBerry fell victim to two important PESTEL factors in its external environment: sociocultural and technological. How did technology contribute to BlackBerry’s decline? A) BlackBerry failed to offer strong security features for its device. B) BlackBerry failed to produce an efficient emailing system using a keyboard. C) BlackBerry failed to change its device into one that could perform multiple tasks effectively. D) BlackBerry failed to adapt to a groundswell that involved workers bringing mobile devices to work. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t Topic : PESTEL Framework Source : Chapter 03 Test Bank > MC Qu. 35 In 2008, BlackBerry&#8217;s market cap peake...

16) Which of the following factors most contributes to the U.S. automotive industry being

characterized by high entry barriers? A) New entrants in the automotive industry expect that incumbents will not or cannot retaliate. B) Few industrial products are as easy to build as cars powered by internal combustion engines. C) New auto companies create electric cars powered by simpler motors and gearboxes. D) Car manufacturers require large-scale production in order to be cost-competitive. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > MC Qu. 65 Which of the following factors most contribu...

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17) Samsung and Google cooperate as complementors to compete against Apple’s strong

position in the mobile device industry, while at the same time Samsung and Google are becoming increasingly competitive with one another. This scenario best illustrates the process of A) co-opetition. B) conglomeration. C) perfect competition. D) monopolization. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-05 Describe the strategic role of complements in creating positive-sum co-ope Topic : Organizational Design and Competitive Advantage Source : Chapter 03 Test Bank > MC Qu. 82 Samsung and Google cooperate as complementor...

18) Which of the following is a drawback of Porter’s five forces model? A) It fails to provide a basis for deriving implications for a firm’s strategic position

within an industry. B) The model describes competition narrowly as a firm’s closest competitors. C) Strategic leaders cannot determine the changing speed of an industry or the rate of innovation. D) The model fails to consider that threat of substitutes can come from outside a given industry. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-07 Appraise the role of industry dynamics and industry convergence in shaping Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > MC Qu. 87 Which of the following is a drawback of Port...

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19) Silvio is a manager at a software firm. The chief executive officer tells him that the industry

as a whole has become increasingly profitable over the past five years. Based on this information, Silvio is most likely to expect A) increased profitability in the future, and therefore he should recommend that the company remain on its current course. B) a leveling off of profitability in the next few years, and therefore he should recommend that the company cooperate with its rivals to stimulate the industry. C) decreased competition in the next few years, and therefore he should recommend that the company take advantage of its pricing power. D) increased competition in the future, and therefore he should recommend that the company upgrade its products to slow the entry of rival companies. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 03-06 Explain the five choices required for market entry. Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > MC Qu. 84 Silvio is a manager at a software firm. The ...

20) Mindful Baking is a gourmet bakery chain that differentiates itself from a large number of

competitors by providing baked goods for people who have various food allergies. It has some pricing power because it provides differentiated products and, therefore, has some entry barriers in place. In this scenario, Mindful Baking is most likely operating in a(n) A) perfectly competitive industry. B) oligopoly. C) monopoly. D) monopolistically competitive industry. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > MC Qu. 76 Mindful Baking is a gourmet bakery...

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21) WeBreak4Bikes Inc. has a new U.S.-based client in the bicycle industry. The client’s

company produces only bicycles for riding on the road. The bicycles are used for reliable general-purpose transportation. When asked to identify a potential substitute for the bicycle industry from the five forces perspective, you would select A) None of these are substitutes. B) motorcycles. C) tractors. D) hot air balloons. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 03-02 Differentiate between firm effects and industry effects in determining fir Topic : Industry Structure and Firm Strategy: The Five Forces Model Source : Chapter 03 Test Bank > MC Qu. 20 WeBreak4Bikes Inc. has a new U.S.-based clie...

22) Which of the following statements with regard to industry structures is true? A) Having few but large competitors increases the threat of strong competitive forces

such as supplier or buyer power. B) Having a large number of competitors generally equates to higher industry profitability. C) Industry structures are not static but can change over time. D) A consolidated industry tends to be less profitable than a fragmented one. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 03-07 Appraise the role of industry dynamics and industry convergence in shaping Topic : Fragmented Industries Source : Chapter 03 Test Bank > MC Qu. 88 Which of the following statements with regar...

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23) Which of the five forces is Starbucks answering when it repeatedly upgrades and refreshes its

stores and offerings? A) competitive rivalry B) threat of substitute products C) power of supplier D) threat of entry Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-02 Differentiate between firm effects and industry effects in determining fir Topic : Industry Structure and Firm Strategy: The Five Forces Model Source : Chapter 03 Test Bank > MC Qu. 19 Which of the five forces is Starbucks...

24) How is a firm’s task environment different from its general environment? A) Strategic leaders have no direct effect over external factors in the task environment;

they have influence over all external forces in the general environment. B) Strategic leaders have no direct effect over external factors in the task environment; they have some influence over external forces in the general environment. C) Strategic leaders have some influence over external factors in the task environment; they have little direct effect over external forces in the general environment. D) Strategic leaders have influence over all external factors in the task environment; they have no direct effect over external forces in the general environment. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t Topic : PESTEL Framework Source : Chapter 03 Test Bank > MC Qu. 36 How is a firm&#8217;s task environment diffe...

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25) Syed owns Discount Auto Zone, a company that got its start making auto parts for hybrid

vehicles, but her firm has had difficulty establishing itself as a maker of parts for the more profitable internal combustion engine. What is most likely contributing to Discount Auto Zone’s problem in this area? A) Entry barriers usually protect the incumbent players in a profitable industry. B) Newcomers cannot use existing assets or reconfigure their value chains. C) It is difficult for outsiders to gauge which stage of the “life cycle” that industry is in. D) New competitors usually ignore stakeholders who are not stockholders. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 03-06 Explain the five choices required for market entry. Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > MC Qu. 85 Syed owns Discount Auto Zone, a company that ...

26) Which of the following external forces is a part of a firm’s task environment? A) the composition of the strategic group to which the firm belongs B) the interest rates prevalent in the economy in which the firm operates C) the recent innovations in process technology, including lean manufacturing D) the inflation level in the economy in which the firm operates Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t Topic : PESTEL Framework Source : Chapter 03 Test Bank > MC Qu. 27 Which of the following external forces is a ...

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27) Matteo is a management consultant. The leaders of Office Outfitters asks him to evaluate

their company, and he finds that the difference between the cost of producing the firm’s products and the value of those products is extremely narrow. What should Matteo suggest that Office Outfitters management do? A) Shore up the company’s strong position by erecting entry barriers. B) Encourage customers to buy complements to their products. C) Find a way to widen the gap between cost and value. D) Find a way to pass on as much profit as possible to suppliers and customers. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > MC Qu. 48 Matteo is a management consultant. The...

28) Due to economic regression in Jabu, the profitability of the large corporation Honey Comb

Inc. was poor. An analysis of the company’s business showed that the company could become profitable if it divested a few strategic business units under its banner. From which of the following businesses would Honey Comb Inc. find it most easy to exit? A) the e-commerce retail business, where investments on assets are low B) the automobile industry, where the company has contractual obligations with suppliers C) the airline business, where the company’s strategic commitments are long term D) the pharmaceutical business, where the company has a large number of fixed costs Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor Topic : Organizational Design and Competitive Advantage Source : Chapter 03 Test Bank > MC Qu. 79 Due to economic regression in Jabu, the prof...

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29) GoGadget Inc., a manufacturer of multiuse tools, supplies its products to Hardware Harry’s, a

home improvement retail chain. GoGadget demands that Hardware Harry’s create more shelf space in its stores for its products. However, Hardware Harry’s refuses to do this. Instead, it decides to produce its own range of multiuse tools with its own label “Harry’s Helpful Tools.” In this scenario, Harry’s Hardware has exercised its bargaining power as a buyer through A) enhanced technology. B) backward integration. C) price stability. D) retroactive market share. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > MC Qu. 61 GoGadget Inc., a manufacturer of multiuse...

30) When companies that manufacture shipping containers want to buy iron ore, the purchase

decision is solely based on price. This is because there are a large number of sellers in the iron ore industry, and iron ore is a highly undifferentiated commodity. Which of the following industry competitive structures does the iron ore industry best illustrate? A) monopolistic competition B) perfect competition C) oligopoly D) monopoly Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > MC Qu. 66 When companies that manufacture shipping con...

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31) Limozine Inc. is a car service firm that provides high-end transportation in a major

metropolitan area. It has several competitors that each offer similar services, and based on its current structure, it cannot match or beat those competitors on price. Because of long-term contracts and an increase in the cost of gasoline, it is not possible to reduce expenditures at this time. Which of these strategies should Limozine pursue instead? A) Create a strategic group through mergers. B) Compete based on inter-group rivalry, not intra-group rivalry. C) Pursue a differentiated strategy. D) Close the business until the cost of gas decreases. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 03-08 Generate a strategic group model to reveal performance differences between Topic : Gaining Competitive Advantage Through Differentiation Source : Chapter 03 Test Bank > MC Qu. 96 Limozine Inc. is a car service firm that...

32) All Signal Inc., a telephone service provider, has a large user base mainly because phone

calls and messages between All Signal users are free. When people switch to an All Signals network, their entire network of family and friends is likely to switch to the same network to receive the benefit of free calls and messages. In addition, an existing user who gets a new user to register with All Signal Inc. is given a free wireless connection. This has helped to keep competition away from All Signal. In this scenario, which of the following factors is acting as an entry barrier for All Signal Inc.? A) economies of scale B) high fixed costs C) network effects D) high capital requirement Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > MC Qu. 55 All Signal Inc., a telephone service provide...

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33) ABC Inc., It’s Electric Inc., and Wares Inc., the three largest firms in the consumer

electronics industry, hold close to 85 percent of the industry’s market share. These companies mainly compete against each other by providing unique features in their products rather than pricing them low. These firms are interdependent, and each firm must consider the strategic actions of its competitors. Which of the following industry competitive structures does this scenario best illustrate? A) monopolistic competition B) monopoly C) perfect competition D) oligopoly Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > MC Qu. 70 ABC Inc., It&#8217;s Electric Inc., and Ware...

34) With the emergence of smartphones, users no longer have to carry a separate music player, a

video game, a laptop, or a magazine to keep themselves entertained when traveling. A smartphone is loaded with a variety of applications to satisfy all the customer needs that different industries or products individually satisfied earlier. As a result, the smartphone industry has been posing a threat to a lot of other unrelated industries. What is this phenomenon best known as? A) customer myopia B) industry convergence C) backward integration D) product differentiation Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-07 Appraise the role of industry dynamics and industry convergence in shaping Topic : Effect of Technology on Industry Structure and Competition Source : Chapter 03 Test Bank > MC Qu. 92 With the emergence of smartphones, users no ...

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35) Firms that compete within the same strategic group generally experience A) no competitive rivalry because they are substitutes. B) less competitive rivalry than firms outside their strategic group. C) the same competitive rivalry than firms outside their strategic group. D) more competitive rivalry than firms outside their strategic group. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-08 Generate a strategic group model to reveal performance differences between Topic : Performance Differences within the Same Industry: Strategic Groups Source : Chapter 03 Test Bank > MC Qu. 25 Firms that compete within the same strategic...

36) In recent years a growing number of U.S. consumers have become more health conscious

about what they eat. According to the PESTEL Framework this trend could best be classified as a________ trend. A) sociocultural B) legal C) healthy eating D) political Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t Topic : The PESTEL Framework Source : Chapter 03 Test Bank > MC Qu. 13 In recent years a growing number of U.S. con...

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37) Competitive rivalry based solely on________ is destructive to firms, as it transfers most of

the value created in the industry to the customers. A) price cutting B) product differentiation C) promotional campaigns D) new product releases Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > MC Qu. 78 Competitive rivalry based solely on ________ is...

38) Why are entry barriers in the U.S. airline industry relatively low?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 2 Medium Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > SA Qu. 110 Why are entry barriers in the U.S. airline i...

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39) Defend or refute the statement: “Strategic groups do not impact competitive rivalry within an

industry.”

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-08 Generate a strategic group model to reveal performance differences between Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > SA Qu. 117 Defend or refute the statement: &#8220;Strat...

40) Which of the following would serve as a feasible option when deciding who are the players

in an established industry? A) Find ways to take down a monopoly. B) Avoid industries with direct competitors. C) Focus on customers who can extract value. D) Align the incentives of only internal stakeholders. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 03-06 Explain the five choices required for market entry. Topic : Changes over Time: Entry Choices and Industry Dynamics Source : Chapter 03 Test Bank > MC Qu. 24 Which of the following would serve as a...

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41) Jalen Corp., a large conglomerate, wants to liquidate its business in certain industries to

improve its overall profitability. Which of the following industries would Jalen Corp. find it most difficult to exit? A) the e-commerce industry, in which the company has no long-term contractual agreements with suppliers B) the steel industry, in which the company has obligations such as severance pay toward employees C) the management consultancy industry, in which the company’s fixed costs are low D) the corporate training industry, in which the company’s commitments are mostly short-term Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor Topic : Organizational Design and Competitive Advantage Source : Chapter 03 Test Bank > MC Qu. 80 Jalen Corp., a large conglomerate, wants to ...

42) How do high interest rates affect a business? A) Business credit is easier to obtain. B) Consumer demand slows down. C) Firms tend to invest while the rates remain up. D) Firms can easily borrow money to finance growth. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t Topic : PESTEL Framework Source : Chapter 03 Test Bank > MC Qu. 38 How do high interest rates affect a business?

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43) A firm’s________ is based on creating value for customers (V) while containing the cost (C). A) strategic position B) advantage of the marketplace C) industry effects D) industry analysis Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 03-02 Differentiate between firm effects and industry effects in determining fir Topic : Organizational Design and Competitive Advantage Source : Chapter 03 Test Bank > MC Qu. 41 A firm&#8217;s ________ is based on creating...

44) During an interview for a chief executive officer position, Fatma’s potential employers ask

her, “If you get this job, will you focus more on industry effects or firm effects?” What should her answer be? A) “Firm effects. I will be able to have the most impact on those.” B) “Neither. I would focus on unexplained variances. They are the most mysterious effects and the most powerful.” C) “Neither. I would focus on business cycle effects. These are the most predictable, so they are worth the most effort.” D) “Industry effects. They have the most substantial effect on superior firm performance.” Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 03-02 Differentiate between firm effects and industry effects in determining fir Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > MC Qu. 46 During an interview for a chief executive officer position...

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45) Fruit of the Sea is a company that sells lobster, shrimp, and scallops to seafood restaurants.

Because the company operates in an industry where many other suppliers sell standardized products, it can most likely A) only achieve competitive parity. B) easily achieve a sustainable competitive advantage. C) maintain its absolute advantage for long time. D) easily achieve a temporary competitive advantage. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > MC Qu. 67 Fruit of the Sea is a company that sells...

46) Companies in the same strategic group are________ to each other. A) stakeholders or shareholders B) merger partners C) strategic allies D) direct competitors Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 03-08 Generate a strategic group model to reveal performance differences between Topic : Strategic Group Models for Understanding Industry Rivals Source : Chapter 03 Test Bank > MC Qu. 94 Companies in the same strategic group are ________...

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47) When automobile magazines face competition from automobile blogs on the web, which of

the following forces in Michael Porter’s five forces model primarily gets stronger? A) the emergence of entry barriers B) the availability of complements C) the bargaining power of suppliers D) the threat of substitutes Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > MC Qu. 63 When automobile magazines face competition f...

48) ________ factors capture a society’s cultures, norms, and values. A) Political B) Demographic C) Sociocultural D) Economic Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t Topic : PESTEL Framework Source : Chapter 03 Test Bank > MC Qu. 39 ________ factors capture a society&#8217;s cultures...

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49) In an industry, the threat of entry is high when A) technological know-how is industry-specific. B) switching costs are high. C) capital requirements are low. D) expected returns are low. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > MC Qu. 58 In an industry, the threat of entry is high ...

50) Years ago, the travel industry was controlled by a few large travel companies that booked

holidays, air tickets, bus tickets, and hotels for their customers. However, with the emergence of the internet, smaller travel agencies started mushrooming in the industry and customers started making their own reservations. Which of the following can be inferred from this information? A) The pricing power of the incumbent firms in the travel industry has increased. B) The travel industry changed from a consolidated structure to a fragmented one. C) The bargaining power of buyers in the travel industry has decreased. D) The structure of the travel industry changed from monopolistic competition to an oligopolistic one. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 03-07 Appraise the role of industry dynamics and industry convergence in shaping Topic : Fragmented Industries Source : Chapter 03 Test Bank > MC Qu. 90 Years ago, the travel industry was controlle...

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51) How are cumulative learning and experience effects of a company most likely to affect

Michael Porter’s five forces? A) Bargaining power of suppliers will be high. B) Threat of new entrants will be low. C) Availability of complements will be low. D) Threat of substitute products and services will be high. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > MC Qu. 59 How are cumulative learning and experience e...

52) According to the five forces model, the stronger the five forces, the lower the industry’s A) economic risk. B) profit potential. C) monopolistic potential. D) bargaining power. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-02 Differentiate between firm effects and industry effects in determining fir Topic : Industry Structure and Firm Strategy: The Five Forces Model Source : Chapter 03 Test Bank > MC Qu. 17 According to the five forces model...

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53) Office Homie Inc. wants to become the largest and most profitable office chair supplier in a

three-state area. To do this, Office Homie should try to create the largest possible difference between the value that its office chairs create and the expense that the company must spend to produce the chairs. ⊚ true ⊚ false Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 03-02 Differentiate between firm effects and industry effects in determining fir Topic : PESTEL Framework Source : Chapter 03 Test Bank > TF Qu. 04 Office Homie Inc. wants to become the...

54) Firms within the same industry automatically belong to the same strategic group. ⊚ true ⊚ false Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-08 Generate a strategic group model to reveal performance differences between Topic : Strategic Group Models for Understanding Industry Rivals Source : Chapter 03 Test Bank > TF Qu. 12 Firms within the same industry automatically...

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55) Three large firms dominate the telecommunication industry of CallsRUs: TeleFone Inc., Cell

Comm Corp., and Talk Now Inc. Instead of cutting prices competitively, these firms have resorted to non-price competition through branding and product differentiation. Which of the following industry competitive structures are these companies most likely in? A) monopolistic competition B) monopoly C) perfect competition D) oligopoly Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > MC Qu. 72 Three large firms dominate the telecommunica...

56) Discuss the sixth force in Porter’s five forces model. Give a real-life example of this sixth

force.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 03-05 Describe the strategic role of complements in creating positive-sum co-ope Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > SA Qu. 111 Discuss the sixth force in Porter&#8217;s fi...

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57) Makita, DuPont, Builder’s Square, and Nut’s & Bolts are all hardware stores that compete

against each other through everyday low pricing and discounts on bulk purchases. All four stores cater to the needs of highly price-sensitive customers. Thus, together these stores form a________ group. A) cross-functional B) focus C) command D) strategic Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-08 Generate a strategic group model to reveal performance differences between Topic : Strategic Group Models for Understanding Industry Rivals Source : Chapter 03 Test Bank > MC Qu. 95 Makita, DuPont, Builder&#8217;s Square, and ...

58) In nearly every case, which of the five forces is the most important in determining the

relative power structure in an industry? A) No single force is dominant in most every case. B) current competitors C) potential entrants D) past participants Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-02 Differentiate between firm effects and industry effects in determining fir Topic : Industry Structure and Firm Strategy: The Five Forces Model Source : Chapter 03 Test Bank > MC Qu. 18 In nearly every case, which of the...

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59) In regard to any of the five forces that shape competition, it is important to note that their

relative strengths are context-dependent. Elaborate on this statement with the help of a realworld example.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > SA Qu. 108 In regard to any of the five forces that sha...

60) A(n)________ industry is one that is characterized by many small firms, a commodity

product, and little or no ability for each firm to raise its prices. A) oligopolistic B) monopolistically competitive C) naturally monopolistic D) perfectly competitive Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor Topic : Competitive Industry Structure Source : Chapter 03 Test Bank > MC Qu. 22 A(n) ________ industry is one that is...

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61) Because competitors in oligopolistic industries are so independent, it is not very important

for strategic leaders in those firms to monitor and respond to changes their competitors make. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > TF Qu. 07 Because competitors in oligopolistic industr...

62) A firm’s strategic position is likely to be strong when A) all the five forces in Porter’s model are strong. B) the gap between the value the firm’s product generates and the cost to produce it is

large. C) its suppliers and vendors can easily forward-integrate and buyers can backwardintegrate. D) the entry barriers within the industry it operates in are low and the exit barriers are high. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-02 Differentiate between firm effects and industry effects in determining fir Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > MC Qu. 45 A firm&#8217;s strategic position is likely ...

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63) Which of the following statements is true about strategic groups? A) Rivalry within the same strategic group tends to be lower than rivalry between

different strategic groups. B) Companies within the same strategic group are complementors to each other. C) Profitability varies between different strategic groups. D) It is not possible to have two different strategic groups within the same industry. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-08 Generate a strategic group model to reveal performance differences between Topic : Strategic Group Models for Understanding Industry Rivals Source : Chapter 03 Test Bank > MC Qu. 98 Which of the following statements is true ab...

64) Siham is a chef who owns three moderately successful restaurants with innovative menus.

Based on what you have read, which of these approaches could help her improve her profits? A) Change her menus and décor to appeal to economy-minded consumers. B) Carefully time the opening of her business and focus on underserved niches. C) Use her existing knowledge, equipment, and staff to launch a catering business. D) Expand to new locations in economically struggling areas. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 03-06 Explain the five choices required for market entry. Topic : Strategy and the Strategic Management Process Source : Chapter 03 Test Bank > MC Qu. 86 Siham is a chef who owns three moderately su...

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65) A strategic group will typically include A) firms employing similar number of employees, irrespective of their industries. B) employees within a firm earning the same amount in salary. C) firms within the same industry. D) customers belonging to a particular socioeconomic class. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-08 Generate a strategic group model to reveal performance differences between Topic : Strategic Group Models for Understanding Industry Rivals Source : Chapter 03 Test Bank > MC Qu. 93 A strategic group will typically include

66) Amelja manages product design and development at a toy company. The junior managers

who report to her tell her that new complementors for the firm’s products are available. What should Amelja’s reaction be? A) She should consult lawyers about the possibility of suing for copyright infringement. B) She needs to find out if her company and other companies can provide the complements. C) If the industry barriers to entry are low, she doesn’t need to do anything. D) If the industry barriers to entry are high, she doesn’t need to do anything. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 03-05 Describe the strategic role of complements in creating positive-sum co-ope Topic : Organizational Design and Competitive Advantage Source : Chapter 03 Test Bank > MC Qu. 81 Amelja manages product design and...

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67) Which of the following features about a buyer indicates that the buyer has high bargaining

power? A) when the buyer cannot purchase specific products from other sellers B) when the buyer faces high switching costs C) when the buyer purchases inputs that are standardized or undifferentiated

commodities D) when the buyer cannot credibly threaten to backwardly integrate into the industry Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > MC Qu. 62 Which of the following features about a buye...

68) Describe the relationship between growth rates and the employment level.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t Topic : PESTEL Framework Source : Chapter 03 Test Bank > SA Qu. 103 Describe the relationship between growth...

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69) What does it mean when a company leverages existing assets? Include a real-life example in

your answer. Your example can be from the reading or from your own experience.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 03-06 Explain the five choices required for market entry. Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > SA Qu. 113 What does it mean when a company leverages e...

70) In which of the following situations is a company that exists in the telecommunications

industry most likely to face the highest threat of entry? A) if the capital requirements in the industry are high B) if the company is able to put up a credible threat of retaliation C) if the customer switching costs in the industry are high D) if the industry has recently become deregulated Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > MC Qu. 60 In which of the following situations is a co...

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71) When smartphone manufacturers began including cameras and voice recorders in their

products, that was an example of switching costs. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-07 Appraise the role of industry dynamics and industry convergence in shaping Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > TF Qu. 10 When smartphone manufacturers began includin...

72) A firm’s________ is based on creating value for customers (V) while containing the cost (C). A) strategic position B) growth strategy C) industry analysis D) co-operative strategy Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-02 Differentiate between firm effects and industry effects in determining fir Topic : Industry Structure and Firm Strategy: The Five Forces Model Source : Chapter 03 Test Bank > MC Qu. 15 A firm&#8217;s ________ is based on creating...

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73) LuxWear Inc., an apparel company, recently moved locations to be closer to their main

manufacturer in South Carolina. The move required the firm to upgrade its legacy ordering system with its manufactures ordering system, which should facilitate its supply chain to gain future efficiencies and reap future savings. However, the new system costs $75,000 and will require a significant amount of time to train employees. This best represents a significant increase in the company’s A) arbitrage. B) power of buyers. C) strategic positioning. D) switching cost. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > MC Qu. 102 LuxWear Inc., an apparel company, recently...

74) Explain how the availability of substitutes affects business strategy. Include an example of a

company or an industry in which many substitutes are available and one in which few or none are available.

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75) Compare and contrast the roles of industry effects versus firm effects when determining firm

performance.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Evaluate Difficulty : 3 Hard Learning Objective : 03-02 Differentiate between firm effects and industry effects in determining fir Topic : The Roles of Firm Effects and Industry Effects on Firm Performance and Competitive Advantage Source : Chapter 03 Test Bank > SA Qu. 121 Compare and contrast the roles of industry...

76) Jatteland Jets Inc., a firm controlled and managed by the government of Jatteland, is the only

company that has the license to manufacture private jets in the country. Which of the following industry competitive structures does this best illustrate? A) monopoly B) perfect competition C) monopolistic competition D) oligopoly Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > MC Qu. 73 Jatteland Jets Inc., a firm controlled and...

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77) Demand for traditional fast-food providers such as McDonald’s, Burger King, and Wendy’s

has been on a decline in recent years. Consumers have become more health-conscious, and demand has shifted to alternative restaurants such as Subway, Chick-fil-A, and Chipotle. Attempts by McDonald’s and Wendy’s to steal customers from one another include frequent discounting tactics such as dollar menus. Such competitive actions are indicative of A) cutthroat competition. B) perfect competition. C) profitability increases. D) natural monopolies. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > MC Qu. 77 Demand for traditional fast-food providers s...

78) Firms that are classified as operating in an oligopoly tend to have some pricing power if they

are able to differentiate their product or service offerings from those of their competitors, so the recommended mode of competition is A) hypercompetition. B) price-based competition. C) service-based competition. D) non-price competition. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor Topic : Competitive Industry Structure Source : Chapter 03 Test Bank > MC Qu. 23 Firms that are classified as operating in an...

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79) How do scholars explain differences in firm performance within the same industry?

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 03-08 Generate a strategic group model to reveal performance differences between Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > SA Qu. 116 How do scholars explain differences in firm ...

80) Nye Studios is a large production company that controls a major portion of the television

industry’s market share along with two other firms. Despite its competitiveness with the two other firms, it is influenced by their actions and often has to consider their strategic actions before acting on its own. In this scenario, Nye Studios is most likely functioning in a(n)________ industry. A) perfectly competitive B) monopolistically competitive C) oligopolistic D) monopolistic Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > MC Qu. 75 Nye Studios is a large production company th...

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81) Lucas runs a company that manufactures satellites for commercial and government use. It has

few rivals. At the moment, the power of buyers, the power of suppliers, and the threat of substitutes are all low. Based on this information, what can Lucas conclude? A) In this scenario, suppliers are likely to create and sell effective substitutes. B) The company is likely to be very profitable as long as the threat to entry is low. C) This firm is an example of near-perfect competition. D) The manufacturer is likely to see little profit until the power of buyers improves. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > MC Qu. 68 Lucas runs a company that manufactures satell...

82) The stronger the five forces, the lower the industry’s ability to earn above-average profits and

gain and sustain a competitive advantage. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of Topic : Industry Structure and Firm Strategy: The Five Forces Model Source : Chapter 03 Test Bank > TF Qu. 01 The stronger the five forces, the lower...

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83) Bill is researching sociocultural factors related to his employer, a sporting goods

manufacturer. Which of the following would be part of the sociocultural forces in a firm’s external environment? A) the family size of the firm’s target market B) the laws protecting small enterprises in a nation C) the interest rates prevalent in an economy D) the rate of employee attrition within the firm Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t Topic : PESTEL Framework Source : Chapter 03 Test Bank > MC Qu. 34 Bill is researching sociocultural factors re...

84) Lin manages the supply chain for a company that sells designer bags. She learns that

economists are predicting a moderate to severe recession in the next six to eight months. Based on that information, what action should Lin recommend to the company’s owner? A) Reduce supply. Customers generally reduce their purchases of luxury items when the economy falters. B) Wait six months and see what happens. Recessions rarely affect consumer spending. C) Increase supply. During recessions, businesses that focus on low-cost solutions make significant profits. D) Maintain the supply at its current rate. Economic forecasts are rarely accurate. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t Topic : PESTEL Framework Source : Chapter 03 Test Bank > MC Qu. 32 Lin manages the supply chain for...

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85) What is the drawback of the five forces model? Provide an example that shows this

drawback. The example can be from your reading or from your own experience.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 03-07 Appraise the role of industry dynamics and industry convergence in shaping Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > SA Qu. 114 What is the drawback of the five forces mode...

86) A key feature of an oligopoly is that competing firms are interdependent. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor Topic : Industry Structure and Firm Strategy: The Five Forces Model Source : Chapter 03 Test Bank > TF Qu. 02 A key feature of an oligopoly is that compet...

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87) Keeping in mind the five forces in the airline industry, which of the following best explains

the difficulty airlines have in generating a profit? A) Substitutes are readily available in the form of trains, buses, and cars, thus reducing the profit potential in the industry. B) Consumers in the industry make decisions based on price, thus reducing the intensity of rivalry in the industry. C) Suppliers have weak bargaining power because they offer products that are not differentiated. D) Entry barriers in the industry are high, resulting in hardly any new airlines popping up. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > MC Qu. 47 Keeping in mind the five forces in the airli...

88) In the five forces model developed by Michael Porter,________ is not defined narrowly as a

firm’s closest competitors but rather more broadly to include other factors in an industry, such as buyers, suppliers, the potential new entry of other firms, and the threat of substitutes. A) a barrier to entry B) competition C) a stakeholder D) regulation Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 03-02 Differentiate between firm effects and industry effects in determining fir Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > MC Qu. 43 In the five forces model developed by Michae...

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89) What is a natural monopoly? Provide a real-world example.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > SA Qu. 109 What is a natural monopoly? Provide a real-w...

90) Federal and regional laws prevent incumbent firms from dramatically lowering prices or

otherwise retaliating when a new entrant joins an industry. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > TF Qu. 06 Federal and regional laws prevent incumbent ...

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91) OpenUrToys Inc. is a consulting firm that opens your toys for you and then films your

emotional response. They have many clients and are able to generate above average returns relative to their competitors. In this scenario, we would conclude that OpenUrToys Inc. probably has a A) a competitive parity. B) competitive advantage. C) a competitive disadvantage. D) sustainable competitive advantage. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > MC Qu. 101 OpenUrToys Inc. is a consulting firm that op...

92) The internet service provider industry in the country of Wakanda is an industry characterized

by the presence of strong network effects, high brand loyalty, high economies of scale, and proprietary technology among incumbent firms. Thus, in the internet service provider industry, the A) threat of new entrants is most likely low. B) threat of substitutes is most likely high. C) bargaining power of buyers is most likely low. D) entry barriers are most likely nonexistent. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > MC Qu. 49 The internet service provider industry in th...

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93) While implementing strategic group mapping for the U.S. domestic airline industry, two

strategic groups become apparent: low-cost, point-to-point airlines (Virgin Atlantic, Alaska Airlines, JetBlue, and Southwest Airlines) versus differentiated airlines using a hub-andspoke system (American, Delta, and United). Which of the following statements is true about these two strategic groups? A) Competitive rivalry between Virgin Atlantic and Delta Airlines is likely to be higher than that between American, Delta, and United. B) Competitive rivalry between Virgin Atlantic and JetBlue is likely to be higher than that between American and Southwest Airlines. C) Alaska Airlines and Delta Airlines will be affected by the external environment in very similar ways. D) American, United, and Delta Airlines will be affected differently by Porter’s five competitive forces. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-08 Generate a strategic group model to reveal performance differences between Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > MC Qu. 100 While implementing strategic group mapping f...

94) Breeze Car Rental follows a cost-leadership strategy. Which of the following firms will most

likely be its direct competitor? A) Rent and Buy Corp., which follows a standardization strategy B) Auto Rent Inc., which follows a cost-increase strategy C) Quicker Rental Cars, which follows a low-cost strategy D) Samson Truck Rentals, which follows a differentiation strategy Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-08 Generate a strategic group model to reveal performance differences between Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > MC Qu. 99 Breeze Car Rental follows a cost-leadership ...

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95) Todd is a manager in an industry that has a few large players and that has remained relatively

stable over the past few years. He finds out that legislators are proposing new laws to deregulate the industry. If the laws pass, which of these scenarios will Todd most likely face? A) the end of globalization B) many new competitors C) across-the-board price increases D) technological innovation Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 03-07 Appraise the role of industry dynamics and industry convergence in shaping Topic : Fragmented Industries Source : Chapter 03 Test Bank > MC Qu. 91 Todd is a manager in an industry that has a ...

96) TicToc Corp. is a manufacturer of smart watches that track the wearer’s heart rate and sleep

patterns. Which of the following is most likely an implication of new firms entering this industry? A) The rivalry among existing competitors will reduce. B) The industry’s overall profit potential and sales will increase. C) The bargaining power of buyers will reduce. D) The incumbent firms will spend more to satisfy their existing customers. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > MC Qu. 51 TicToc Corp. is a manufacturer of smart watc...

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97) Describe in detail Porters five forces model and categorize this tool as external or internal to

the firm.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > SA Qu. 120 Describe in detail Porters five forces model...

98) A company that owns failing movie theaters could leverage existing assets by turning the

buildings into private schools. ⊚ true ⊚ false Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 03-06 Explain the five choices required for market entry. Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > TF Qu. 09 A company that owns failing movie theaters c...

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99) Which of the following is likely to happen due to horizontal mergers between competitors

such as Delta and Northwest airlines? A) The threat of strong competitive forces such as supplier power will increase. B) The structure of the industry will change from consolidated to one that is fragmented. C) The industry will face excess capacity in the future. D) The overall industry profitability will increase. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-07 Appraise the role of industry dynamics and industry convergence in shaping Topic : Acquisitions and Mergers Source : Chapter 03 Test Bank > MC Qu. 89 Which of the following is likely to happen d...

100)

Danish manufacturer Vestas is addressing environmental concerns regarding the burning of fossil fuels to generate energy by building wind turbines. This best represents which of the following PESTEL categories? A) ecological B) political C) economic D) technological

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t Topic : The PESTEL Framework Source : Chapter 03 Test Bank > MC Qu. 14 Danish manufacturer Vestas is addressing...

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101)

Which of the following is not captured when examining a competitive industry structure? A) the firm’s degree of pricing power B) the type of product or service (commodity or differentiated product) C) the ability to engage in forward vertical integration D) the number and size of an industry’s competitors

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor Topic : Competitive Industry Structure Source : Chapter 03 Test Bank > MC Qu. 21 Which of the following is not captured when ...

102)

The government of Monterro has mandated that all companies with 25 or more employees must provide group health insurance. Which of the following factors in a firm’s general environment does this mandate best indicate? A) ecological factors B) legal factors C) sociocultural factors D) technological factors

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > MC Qu. 28 The government of Monterro has mandated...

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103)

Given the structure of the automobile industry, entering the auto manufacturing industry seemed risky. Yet Tesla Motors joined the fray. Rather than attempting to compete head-on with internal combustion engines, Tesla Motors entered the all-electric car segment, a much less crowded niche in the overall car industry. Which of the following is Tesla most hoping to benefit from in this market niche? A) economies of scale B) capital requirements C) network effects D) customer switching costs

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of Topic : Economies and Diseconomies of Scale Source : Chapter 03 Test Bank > MC Qu. 53 Given the structure of the automobile indust...

104)

Lucia is a management consultant for a snack manufacturer that wants to expand into healthy snacks such as whole-grain cookies and quinoa-based crackers. Which of the following is sensible advice for Lucia to offer her client? A) “Carefully consider the entry choices over time before making a decision.” B) “Focus on what your company does well rather than trying to expand into untried areas.” C) “Pinpoint the best time to enter this new market, and then make a yes-or-no decision quickly.” D) “Your best bet is to undercut competitors’ prices and lure them into a price war.”

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 03-06 Explain the five choices required for market entry. Topic : Strategy and the Strategic Management Process Source : Chapter 03 Test Bank > MC Qu. 83 Lucia is a management consultant for...

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105)

Describe the PESTEL framework as a strategic tool and categorize it as either external or internal to the firm.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t Topic : PESTEL Framework Source : Chapter 03 Test Bank > SA Qu. 119 Describe the PESTEL framework as a strategic...

106)

How is a firm’s task environment different from its general environment? Provide examples of both types of environments.

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107)

Food Shipp Inc. is a food supply company that wants to sell its products directly to consumers through mail order instead of going through supermarkets and other stores. However, supermarket chains want to make this transaction either illegal or more difficult for Food Shipp. To accomplish this, they are using________ to influence the political process. A) demographic research B) ecological factors C) interest rates D) lobbying forces

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t Topic : PESTEL Framework Source : Chapter 03 Test Bank > MC Qu. 40 Food Shipp Inc. is a food supply company tha...

108)

In a firm’s external environment,________ factors to consider are growth rates, interest rates, the employment level, price stability, and currency exchange rates. A) demographic B) economic C) ecological D) political

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t Topic : PESTEL Framework Source : Chapter 03 Test Bank > MC Qu. 33 In a firm&#8217;s external environment, ________...

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109)

Economies of scale are cost advantages that accrue for firms with A) larger output. B) high fixed costs. C) low employee turnover. D) high capital risks.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of Topic : Economies and Diseconomies of Scale Source : Chapter 03 Test Bank > MC Qu. 52 Economies of scale are cost advantages that ...

110)

Roxana manages a chain of workout facilities in a tri-county area that has recently experienced an economic boom because of the development of a new high-speed train line. What is most likely to happen when there is too much money in the tri-county economy? A) a drop in interest rates B) high economic growth C) too many goods and services D) an increase in prices

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t Topic : PESTEL Framework Source : Chapter 03 Test Bank > MC Qu. 31 Roxana manages a chain of workout...

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111)

Khaled, a manager, is writing an analysis of his employer’s current and possible future revenues. Which of the following could he identify as an economic factor in his firm’s external general environment? A) the stage of the business cycle that the country is in B) the government regulations and laws in the country in which the firm exists C) the values and norms prevalent in the society in which the firm operates D) the bargaining power of the firm’s suppliers and buyers

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t Topic : PESTEL Framework Source : Chapter 03 Test Bank > MC Qu. 29 Khaled, a manager, is writing an analysis of ...

112)

Explain brand loyalty and how it helps incumbent firms maintain their position in the industry. Provide a real-world example.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Evaluate Difficulty : 3 Hard Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > SA Qu. 118 Explain brand loyalty and how it helps...

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113)

Which of the following is a macroeconomic factor that can affect a firm’s strategy? A) levels of employment B) power of buyers C) threat of substitutes D) power of suppliers

114)

A video-streaming service provider such as Amazon Prime is a complement to a manufacturer of streaming video devices such as Roku and the Amazon Firestick. ⊚ true ⊚ false

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-05 Describe the strategic role of complements in creating positive-sum co-ope Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > TF Qu. 08 A video-streaming service provider such as A...

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115)

For-profit businesses operating in long-standing fields such as energy and transportation usually operate in an environment of price stability. ⊚ true ⊚ false

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-01 Generate a PESTEL analysis to evaluate the impact of external factors on t Topic : PESTEL Framework Source : Chapter 03 Test Bank > TF Qu. 03 For-profit businesses operating in long-stan...

116)

A small used tire shop faces significant potential competition because of the low capital requirements compared with business environments such as universities and laboratories. ⊚ true ⊚ false

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of Topic : PESTEL Framework Source : Chapter 03 Test Bank > TF Qu. 05 A small used tire shop faces significant pot...

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117)

Marketo Inc., a marketing firm, replaced its existing data analysis software with new software from another supplier. Since the new software has different features and abilities, Marketo has had to spend $15,000 on training its employees to use it. In this scenario, $15,000 represents Marketo’s A) octroi charge. B) opportunity cost. C) excise duty. D) switching cost.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > MC Qu. 56 Marketo Inc., a marketing firm, replaced...

118)

What are the two key insights that form the basis of Michael Porter’s seminal five forces model?

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-02 Differentiate between firm effects and industry effects in determining fir Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > SA Qu. 106 What are the two key insights that form the ...

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119)

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

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-04 Examine how competitive industry structure shapes rivalry among competitor Topic : Analyzing Industry Competition Source : Chapter 03 Test Bank > MC Qu. 69 Farm to Table Inc. is a supermarket chain. D...

120)

A local manufacturer that wants to be a global manufacturer faces few mobility barriers because it has not yet invested in supply chains, which can become outdated and expensive. ⊚ true ⊚ false

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 03-08 Generate a strategic group model to reveal performance differences between Topic : The Advantages and Disadvantages of a Global Strategy Source : Chapter 03 Test Bank > TF Qu. 11 A local manufacturer that wants to be a glob...

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121)

In which of the following situations is the power of suppliers high in an industry? A) Suppliers can credibly threaten to backward integrate into the industry. B) The suppliers’ industry is more concentrated than the industry it sells to. C) Suppliers offer products that are undifferentiated. D) Suppliers depend heavily on the industry for their revenues.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 03-03 Apply Porter's five competitive forces to explain the profit potential of Topic : Porter's Five Competitive Forces Source : Chapter 03 Test Bank > MC Qu. 54 In which of the following situations is the ...

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Answer Key Test name: Chapter 03 Test Bank 1) Short Answer

Student answers will vary. A sample answer follows: Switching costs are the costs that a customer incurs when changing to the products, services, and/or brands offered by a different vendor. Customer switching costs are primarily monetary— for example, retraining employees costs money—but they can also be psychological, as when a customer is attached to a certain brand but changes reluctantly to a new brand. Although switching costs are one-time sunk costs, they can be significant and thus they present a formidable barrier to entry. For example, a firm that has used a customer relationship management (CRM) system from Salesforce.com for many years will incur high switching costs if it implements a new CRM system from a new entrant into the industry. Potential new entrants are aware of any significant switching costs and are less likely to enter the industry because existing customers will switch only if they expect to receive positive net benefits. 2) C

The threat of new entrants is higher for Sesmic than for Energy 4 All. A monopolistically competitive industry has many firms, a differentiated product, some obstacles to entry, and the ability to raise prices for a relatively unique product while retaining customers. An industry is a monopoly when there is only one, often large firm supplying the market. 3) B

The PESTEL framework allows the scanning, monitoring, and evaluating of changes and trends in a firm’s macro environment. 4) B

There is not a significant threat of entry because entering the aircraft manufacturing industry requires huge capital investments. 5) A

The AVE example highlights the two fundamental insights provided by Porter’s five forces framework. First, competition must be defined more broadly to go beyond direct industry competitors. Second, any of the five forces on its own, if sufficiently strong, can extract industry profitability. 6) A

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Potential new entries in an industry decrease profit potential in two major ways. Incumbent firms may lower prices to make entry appear less attractive to the potential new competitors. Incumbent firms may spend more to satisfy their existing customers. 7) Short Answer

Student answers will vary. A sample answer follows: The five stages of an industry life cycle are introduction, growth, shakeout, maturity, and decline. AT&T is a company that has gone through all five cycles: it brought phones to people’s homes and businesses; grew to have an enormous market share; faced legislation from the federal government; reestablished itself as a provider of landlines, cell phones, and television; and has lost significant business as people switch from landlines to smartphones. 8) C

Rather than defining competition narrowly as the firm’s closest competitors, Porter emphasized that competition must be viewed more broadly to encompass the other forces in an industry: buyers, suppliers, the potential new entry of other firms, and the threat of substitutes. 9) A

A premium rooftop restaurant in the same city will be a part of Wheat’s and Steak’s strategic group. A strategic group is a set of companies that pursue a similar strategy within a specific industry in the quest for competitive advantage. Companies in the same strategic group are direct competitors. 10) C

Low interest rates have a direct bearing on consumer demand. When credit is cheap because interest rates are low, consumers buy homes, condos, automobiles, computers, smartphones, and vacations on credit; in turn, all of this demand fuels economic growth. When interest rates are low, firms can easily borrow money to finance growth. Borrowing at lower rates reduces the cost of capital and enhances a firm’s competitiveness. 11) A

A monopolistically competitive industry has many firms competing against each other, and an oligopolistic industry is consolidated with a few large firms. 12) Short Answer

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A key macroeconomic variable that strategic leaders track is real interest rates—the amount that creditors earn for lending their money and the amount that debtors pay to use that money, adjusted for inflation. When credit is cheap because interest rates are low, consumers buy homes, condos, automobiles, computers, smartphones, and vacations on credit; in turn, all of this demand fuels economic growth. When interest rates are low, firms can easily borrow money to finance growth. Borrowing at lower rates reduces the cost of capital and enhances a firm’s competitiveness. These effects reverse when real interest rates are rising. Consumer demand slows down, credit is harder to come by, and firms find it more difficult to borrow money to support operations, deferring some investments they would have made if cheaper financing were available. 13) B

Michael Porter developed the highly influential five forces model to help managers understand the profit potential of different industries and position their respective firms to gain and sustain competitive advantage. 14) C

In Porter’s five forces model, competition is not defined narrowly as the firm’s closest competitors but rather more broadly to include other forces in an industry: buyers, suppliers, the potential new entry of other firms, and the threat of substitutes. 15) C

Although BlackBerry devices were great in productivity applications, such as receiving and responding to email via typing on its iconic physical keyboard, they did not provide effective access to texting, surfing the web, taking pictures, or playing games. Because of this, BlackBerry declined because it could not compete with iPhone, which performed multiple tasks effectively. 16) D

Even with relatively recent competitors like Tesla in the marketplace, the U.S. automotive industry is characterized by high entry barriers. Car manufacturers require large-scale production in order to be cost-competitive. 17) A

This scenario best illustrates the process of co-opetition. Co-opetition is cooperation by competitors to achieve a strategic objective. 18) C

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With the five forces plus complements model, one cannot determine the changing speed of an industry or the rate of innovation. This drawback implies that strategic leaders must repeat their analysis over time to create a more accurate picture of their industry. 19) D

One of the key insights of the five forces model is that the more profitable an industry, the more attractive it becomes to competitors. Faced with the threat of additional capacity coming into an industry, incumbent firms may lower prices to make entry appear less attractive to the potential new competitors, or they may spend more to satisfy their existing customers. 20) D

In this scenario, Mindful Baking is most likely operating in a monopolistically competitive industry. A monopolistically competitive industry has many firms, a differentiated product, some obstacles to entry, and the ability to raise prices for a relatively unique product while retaining customers. 21) B

Substitutes must exist outside the given industry but still offer an attractive price/performance tradeoff. 22) C

Industry structures are not static but can change over time. 23) D

The threat of entry by additional competitors may force an incumbent firm like Starbucks to spend more to satisfy its existing customers. 24) C

Strategic leaders have some influence over external factors in the task environment, such as the industry’s structure and the composition of their strategic groups (a set of close rivals); they have little direct influence over external forces in the firm’s general environment. 25) A

One of the challenges that strategic leaders face is that often the most attractive industries in terms of profitability are also the hardest to break into because they are protected by entry barriers. 26) A

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Strategic leaders have some influence over external factors in the firm’s task environment, such as the industry’s structure and the composition of their strategic groups (a set of close rivals). 27) C

Firms create economic value by expanding as much as possible the gap between the perceived value (V) of the firm’s product or service and the cost (C) to produce it. 28) A

Honey Comb Inc. would find it most easy to exit the e-commerce retail business where investments on assets are low. Exit barriers are created by both economic and social factors. They include fixed costs that must be paid regardless of whether the company is operating in the industry or not. A company exiting an industry may still have contractual obligations to employees, such as health care, retirement benefits, and severance pay. Social factors include elements such as emotional attachments to certain geographic locations. 29) B

In this scenario, Harry’s Hardware Inc. has exercised its bargaining power as a buyer through backward integration. Buyers are powerful when they can credibly threaten backward integration. Backward integration occurs when a buyer moves upstream in the industry value chain into the seller’s business. 30) B

The iron ore industry best illustrates a perfect competition. A perfectly competitive industry is fragmented. It is characterized by many small firms, a commodity product, ease of entry, and little or no ability for each firm to raise its prices. 31) C

A differentiated competitor usually has higher cost structures and therefore charges higher prices. Differentiated competitors usually offer customers more convenience, luxury, or options. 32) C

In this scenario, network effects are acting as an entry barrier for All Signal Inc. Network effects refer to the positive impacts that one user of a product or service has on other users of that product or service. When network effects are present, the value of the product or service increases with the number of users. 33) D

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This scenario best illustrates an oligopoly. An oligopolistic industry is consolidated. It has a few large firms, differentiated products, high barriers to entry, and some degree of pricing power. In an oligopoly, all of the competing firms are interdependent. With only a few large competitors in the mix, the actions of one firm influence the behaviors of the others. 34) B

This phenomenon is best known as industry convergence. Industry convergence is a process whereby formerly unrelated industries begin to satisfy the same customer need. Industry convergence is often brought on by technological advances. 35) D

The rivalry among firms within the same strategic group is generally more intense than the rivalry among strategic groups. 36) A

Sociocultural factors capture a society’s cultures, norms, and values. 37) A

Competitive rivalry based solely on cutting prices is extremely destructive to profitability because it transfers most, and perhaps even all, of the value created in the industry to the customers—leaving little, if anything, for the firms in the industry. 38) Short Answer

Entry barriers in the U.S. airline industry are relatively low, resulting in a number of new airlines popping up occasionally. To enter the industry on a small scale and serve a few select cities, a prospective new entrant needs only a couple of airplanes, which can be rented; a few pilots and crew members; some routes connecting city pairs; and gate access in airports. 39) Short Answer

This statement is incorrect. Firms in the same strategic group tend to follow a similar strategy. Companies in the same strategic group, therefore, are direct competitors. The rivalry among firms within the same strategic group is generally more intense than the rivalry among strategic groups: Intra-group rivalry exceeds inter-group rivalry. The number of different business strategies pursued within an industry determines the number of strategic groups in that industry. 40) C

Strategic leaders not only need to identify direct competitors but also to focus on customers and suppliers that can extract some of the value created in the industry. Strategic leaders also need to align the incentives of other external and internal stakeholders such as employees, regulators, and communities to improve their chances of successful entry.

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41) B

Jalen Corp. would find it most difficult to exit the steel industry, in which the company has obligations such as severance pay toward employees. Exit barriers are created by both economic and social factors. A company exiting an industry may still have contractual obligations to employees, such as health care, retirement benefits, and severance pay. 42) B

When interest rates are high, consumer demand slows, credit is harder to come by, and firms find it more costly to borrow money to support operations, deferring some investments they would have made if cheaper financing were available. 43) A

A firm’s strategic position is based on creating value for customers (V) while containing the cost (C). Competitive advantage flows to the firm that is able to create as large a gap as possible between the value of its product or service and the cost required to produce it ( V– C). 44) A

While all of these effects can change a firm’s performance, firm effects have the biggest impact—about 55 percent. Because firm effects come from the actions that managers take, Fatma would be able to have the most impact on those. 45) A

Because the company operates in an industry where many other suppliers sell standardized products, it can most likely only achieve competitive parity. Firms under perfect competition have difficulty achieving even a temporary competitive advantage and can at best achieve only competitive parity. 46) D

Companies in the same strategic group are direct competitors. The rivalry among firms within the same strategic group is generally more intense than the rivalry among strategic groups: Intragroup rivalry exceeds inter-group rivalry. 47) D

When automobile magazines face competition from automobile blogs on the web, the threat of substitutes gets stronger. The threat of substitutes is the idea that products or services available from outside the given industry will come close to meeting the needs of current customers. The threat of substitutes is high when the substitute offers an attractive price/performance tradeoff or when the buyer’s cost of switching to the substitute is low. 48) C

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Sociocultural factors capture a society’s cultures, norms, and values. Because sociocultural forces are constantly in flux and differ across groups, strategic leaders need to closely monitor such trends and consider the implications for firm strategy. 49) C

The threat of entry is high when capital requirements are low in comparison to the expected returns. If an industry is attractive enough, efficient capital markets are likely to provide the necessary funding to enter an industry. Unlike proprietary technology and industry-specific know-how, capital is a fungible resource that can be relatively easily acquired when attractive returns seem likely. 50) B

The threat of entry is low when incumbents possess cumulative learning and experience effects. 52) B

The stronger the five forces, the lower the industry’s profit potential, making the industry less attractive for competitors. 53) TRUE

A firm’s strategic position is based on creating value for customers while containing the cost. Competitive advantage flows to the firm that creates as large a gap as possible between the value of its product or service generates and the cost required to produce it. 54) FALSE

Even within the same industry, firm performance differs depending on strategic group membership. Some strategic groups tend to be more profitable than others. This difference implies that firm performance is determined not only by the industry to which the firm belongs but also by its strategic group membership. 55) D

These companies are most likely in an oligopolistic industry, which is consolidated with few large firms, differentiated products, high barriers to entry, and some degree of pricing power. In an oligopoly, non-price competition is the preferred mode of competition. 56) Short Answer

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Student answers will vary. A sample answer follows: The value of the five forces model for explaining the profit potential of an industry can be further enhanced if one also considers the availability of complements. A complement is a product, service, or competency that adds value to the original product offering when the two are used in tandem. Complements increase demand for the primary product, thereby enhancing the profit potential for the industry and the firm. A company is a complementor to an existing company if customers value the existing company’s product or service offering more when they are able to combine it with the other company’s product or service. Firms may choose to provide the complements themselves or work with another company to accomplish this. For example, streaming video services such as mlb.com, HBO Now, and FilmStruck are complements to a Roku streaming video player. 57) D

Together the four stores form a strategic group. A strategic group is a set of companies that pursue a similar strategy within a specific industry in their quest for competitive advantage. Companies in the same strategic group are direct competitors. 58) A

In the five forces model, all of the forces are viewed as potential competition attempting to extract value from the industry. 59) Short Answer

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Student answers will vary. A sample answer follows: In regard to any of the five forces that shape competition, it is essential to note that their relative strengths are context-dependent. For example, the Mexican multinational CEMEX, one of the world’s leading cement producers, faces different buyer power in the United States than it does domestically. Cement is an undifferentiated commodity product. In the United States, cement buyers consist of a few large and powerful construction companies that account for a significant percentage of CEMEX’s revenue. The result in razor-thin margins for CEMEX on its U.S. sales. In contrast, the vast majority of CEMEX’s customers in its Mexican home market are small, individual customers facing a few large suppliers, with CEMEX being the biggest. CEMEX earns high profit margins in its home market. This example provides the context to show that CEMEX actually competes in two different industry conditions (albeit offering the same product), because it faces two different competitive forces in the United States and Mexico. 60) D

A perfectly competitive industry is characterized by many small firms, a commodity product, ease of entry, and little or no ability for each firm to raise its prices. 61) FALSE

In an oligopoly, all of the competing firms are interdependent. With only a few large competitors in the mix, the actions of one firm influence the behaviors of the others. Therefore, each competitor in an oligopoly must consider the others competitors’ strategic actions. 62) B

A firm’s strategic position is based on creating value for customers (V) while containing the cost (C). Competitive advantage flows to the firm that creates as large a gap as possible between the value of its product or service and the cost required to produce it ( V – C). 63) C

Some strategic groups tend to be more profitable than others. This difference implies that firm performance is determined not only by the industry to which the firm belongs but also by its strategic group membership. 64) C

To increase the probability of a successful entry into a new market, one option is to leverage existing assets—that is, to combine the resources and capabilities that the firm already possesses. Siham’s knowledge, her innovative cooking and serving equipment, and her staff are likely to be valuable assets if she decides to go into the catering business. 65) C

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A strategic group is a set of companies that pursue a similar strategy within a specific industry in the quest for competitive advantage. 66) B

Complements increase demand for the primary product, thereby enhancing the profit potential for the industry and the firm. Firms may choose to provide the complements themselves or work with another company to accomplish this. 67) C

The power of buyers is high when the industry’s products are standardized or undifferentiated commodities. 68) Short Answer

Growth rates directly affect the employment level. In boom times, unemployment tends to be low, and skilled human capital becomes a scarce and more expensive. As the price of labor rises, firms are incentivized to invest more in capital goods such as cutting-edge equipment or artificial intelligence. In economic downturns, unemployment rises. As more people search for employment, skilled human capital is more abundant and wages usually fall. 69) Short Answer

Student answers will vary. A sample answer follows: When an organization leverages existing assets, it combines the resources and capabilities it already possesses. Partnering with an ally that has resources that the organization lacks can be part of leveraging existing assets. During the low-carb and paleo diet crazes, the doughnut shop near me nearly went out of business. It rallied by promoting its superb coffee, which was in demand and had proven health benefits. 70) D

A company will most likely face the highest threat of entry if the telecommunications industry has recently become deregulated. 71) FALSE

Industry convergence is the process whereby formerly unrelated industries begin to satisfy the same customer need. Industry convergence is often brought on by technological advances. 72) A

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Switching costs were dramatically increased because of LuxWear’s required upgrade to its current technology system and the training that comes with it. 74) Short Answer

Student answers will vary. A sample answer follows: If substitutes are readily available, then customers have more power, and profitability probably suffers. For example, a domestic airline such as Southwest faces the challenge of having many substitutes for its short-distance flights. If people believe Southwest’s prices are too high, then they can drive, take a bus, or “visit” virtually through teleconference. If substitutes are rare or nonexistent, then customers have less power, and profitability most likely declines. For instance, an international airline such as British Airways has few substitutes for its transoceanic flights. Customers who believe that British Airways’ prices are too high may choose from one or two other airlines, travel by ship, or stay home. 75) Short Answer

Industry effects account are the result of the underlying economic structure of the industry and its impact on firm performance, whereas firm effects attribute firm performance directly to strategic leaders' actions . Firm effects account for the majority of the variation (about 55 percent), while industry effects account for approximately 20 percent of firm performance. Therefore, it’s important to consider both areas when addressing firm performance. 76) A

This best illustrates a monopoly. An industry is a monopoly when there is only one, often large firm supplying the market. 77) A

Such competitive actions indicate cutthroat competition and a low profit potential in the traditional fast-food industry. 78) D

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Companies in an oligopoly tend to have some pricing power based on differentiating their product or service offerings from those of their competitors. Non-price competition is therefore the preferred mode of competition. 79) Short Answer

To explain differences in firm performance within the same industry, scholars offer the strategic group model, which clusters different firms into groups based on a few key strategic dimensions. They find that, even within the same industry, firm performance differs depending on strategic group membership. Some strategic groups tend to be more profitable than others. This difference implies that firm performance is determined not only by the industry to which the firm belongs, but also by its strategic group membership. The distinct differences across strategic groups reflect the business strategies that firms pursue. Firms in the same strategic group tend to follow a similar strategy. Companies in the same strategic group, therefore, are direct competitors. 80) C

In this scenario, Nye Studios is most likely functioning in an oligopolistic industry. An oligopolistic industry is consolidated with a few large firms, differentiated products, high barriers to entry, and some degree of pricing power. 81) B

The stronger the forces (threat of entry, power of buyers and suppliers, and threat of substitutes), the stronger the expected competitive intensity, limiting the industry’s profit potential. Therefore, the weaker these forces are, the more profitable a firm in this industry is likely to be. 82) TRUE

The key takeaway from the five forces model is that the stronger the forces, the lower the industry’s ability to earn above-average profits and the lower the firm’s ability to gain and sustain a competitive advantage. 83) A

Sociocultural factors capture a society’s cultures, norms, and values. Demographic trends are also critical sociocultural forces. These trends capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class. 84) A

While it is true that businesses that focus on low-cost solutions can make significant profits during a recession, most other businesses do not. For customers, expenditures on luxury products (such as designer bags) are often the first to be cut during recessionary periods. 85) Short Answer

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Student answers will vary. A sample answer follows: Although the five forces plus complements model is useful in understanding an industry’s profit potential, it provides only a point-in-time snapshot of an everchanging industry. With this model (as with other static models), one cannot determine the changing speed of an industry or the rate of innovation. This drawback implies that strategic leaders must repeat their analysis over time to create a more accurate picture of their industry. Industry structures are not stable over time. Rather, they are dynamic. Because a consolidated industry tends to be more profitable than a fragmented one, firms have a tendency to change the industry structure in their favor, making it more consolidated through horizontal mergers and acquisitions. Having fewer competitors generally equates to higher industry profitability. Industry incumbents, therefore, have an incentive to reduce the number of competitors in the industry. The U.S. domestic airline industry has witnessed several large horizontal mergers between competitors, including Delta and Northwest, United and Continental, Southwest and AirTran, and American and U.S. Airways. A more consolidated airline industry is likely to lead to higher ticket prices and fewer choices for customers but more profit for the airlines. 86) TRUE

In an oligopoly, all of the competing firms are interdependent. With only a few large competitors in the mix, the actions of one firm influence the behaviors of the others. 87) A

The competitive forces are quite unfavorable for generating a profit potential in the domestic airline industry. Substitutes are readily available: If customers believe prices are too high, they can drive their cars or use the train or bus. 88) B

In Porter’s five forces model, competition is not defined narrowly as a firm’s closest competitors but rather more broadly to include other forces in an industry: buyers, suppliers, the potential new entry of other firms, and the threat of substitutes. 89) Short Answer

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Student answers will vary. A sample answer follows: In some instances, the government grants one firm the right to be the sole supplier of a product or service. Governments grant monopoly rights to incentivize a company to engage in a venture that would not be profitable if the industry had more than one supplier. For example, public utilities incur huge fixed costs to build plants and to supply a particular geographic area. Thus, public utilities supplying water, gas, and electricity to businesses and homes are frequently monopolists. Georgia Power is the only supplier of electricity for over 2.5 million customers in the southeastern United States. Philadelphia Gas Works is the sole supplier of natural gas in the city of Philadelphia, Pennsylvania, serving some 500,000 customers. The governments involved believe the market would not supply these products or services without these natural monopolies. 90) FALSE

Incumbents with deeper pockets than new entrants can withstand price competition for a longer time and wait for the new entrants to exit the industry—then raise prices again. Other ways to retaliate include increased product and service innovation, advertising, sales promotions, and litigation. 91) B

Because the firm is able to generate above average returns, they have a competitive advantage. 92) A

In this scenario, the threat of new entrants is most likely low. The threat of entry describes the risk of potential competitors entering the industry. Entry barriers, which are advantageous for incumbent firms, are obstacles that discourage or prevent entry into an industry. Network effects, economies of scale, and advantages independent of size such as brand loyalty and proprietary technology are entry barriers. 93) B

Competitive rivalry between Virgin Atlantic and JetBlue is likely to be higher than that between American and Southwest Airlines. Competitive rivalry is strongest between firms that are within the same strategic group. The closer firms are on the strategic group map, the more directly and intensely they are in competition with one another. 94) C

Quicker Rental Cars, which follows a low-cost strategy, will be Breeze’s direct competitor. Companies in the same strategic group are direct competitors. 95) B

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Sometimes consolidated industry structures break up and become more fragmented. This fragmentation generally happens when there are external shocks to an industry such as deregulation, new legislation, technological innovation, or globalization. For example, the widespread use of the internet moved the stock brokerage business from an oligopoly controlled by full-service firms to monopolistic competition with many generic online brokers. 96) D

The threat of entry by additional competitors may force incumbent firms to spend more to satisfy their existing customers. This spending reduces an industry’s profit potential primarily if firms cannot raise prices. 97) Short Answer

Porter’s five forces model reveals whether an industry is attractive to enter. This is an external tool. The five forces that shape competition are the following: Threat of Entry: describes the risk of potential competitors entering the industry Power of Buyers: captures the pressure that buyers can put on the margins of producers in the industry Power of Suppliers: captures the pressure that industry suppliers can exert on an industry or firm’s profitability Threat of Substitutes: describes how the profit potential is reduced by limiting the price that industry competitors can charge for their products or services Rivalry among Existing Firms: describes the intensity with which companies industry compete for market share and profitability 98) FALSE

To leverage existing assets means to combine the resources and capabilities that firms already possess and, if necessary, blend them with partner resources through strategic alliances. In this case, the company would have to reconfigure existing buildings to accommodate the needs of a private school. 99) D

Having fewer competitors generally equates to higher industry profitability. According to the text, the U.S. domestic airline industry has witnessed several large horizontal mergers between competitors, including Delta and Northwest, United and Continental, Southwest and AirTran, as well as American and U.S. Airways. These mergers have allowed the remaining carriers to enjoy a more benign industry structure. 100)

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Ecological factors concern broad environmental issues, such as the natural environment, climate change, and sustainable economic growth. 101)

C The ability to engage in horizontal integration would capture elements in a competitive structure, not forward vertical integration. 102)

B This mandate best indicates legal factors in a firm’s general environment. The Legal factors capture the official outcomes of political processes as manifested in laws, mandates, regulations, and court decisions—all of which can directly impact a firm’s profit potential. 103)

A Tesla is hoping to benefit from economies of scale in this market niche. Economies of scale are cost advantages that accrue for firms with larger output because they can spread fixed costs over more units, employ technology more efficiently, benefit from a more specialized division of labor, and demand better terms from their suppliers. 104)

A Rather than considering firm entry as a discrete event (i.e., simple yes-or-no decision) or a discrete event composed of five parts, the entry choices firms make constitute a strategic process unfolding over time. 105)

Short Answer PESTEL analysis is an external tool used to describe external environmental forces. Understanding the role these forces play allows firms to mitigate threats and leverage opportunities. The acronym stands for Political, Economic, Sociocultural, Technological, Environmental, and Legal. 106)

Short Answer Student answers will vary. A sample answer follows: One common approach to understanding how external forces influence a firm is to consider the source or proximity of these forces. For example, strategic leaders have little direct influence over external forces in the firm’s general environment, including macroeconomic factors such as interest rates and currency exchange rates. In contrast, strategic leaders do have some influence over external factors in the firm’s task environment, such as the industry’s structure and the composition of their strategic groups (a set of close rivals). 107)

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Lobbying is one of the nonmarket strategies a firm may use to obtain more favorable outcomes. 108)

B Economic factors to consider are growth rates, interest rates, the employment level, price stability (inflation and deflation), and currency exchange rates. 109)

A Economies of scale are cost advantages that accrue for firms with larger output because they can spread fixed costs over more units, employ technology more efficiently, benefit from a more specialized division of labor, and demand better terms from their suppliers. 110)

D Too much money in an economy is characterized by rising prices—inflation. Inflation tends to go along with higher interest rates and lower economic growth. 111)

A The overall economic growth rate measures the change in the value of goods and services produced by a nation’s economy. Strategic leaders look to the real growth rate, which adjusts for inflation. This real growth rate indicates whether business activity is expanding or contracting— that is, the economy’s position in the business cycle. 112)

Short Answer Student answers will vary. A sample answer follows: Brand loyalty captures a consumer’s emotional attachment and feelings toward a specific brand. Brand loyalty translates into repeat purchases of the brand’s products and services. Brand-loyal customers are often the company’s best advertising, talking up the brand through “word of mouth” on social media. For example, Tesla’s loyal customers strengthen the firm’s competitive position and reduce the threat of entry into the all-electric car segment, at least by other startup companies. Unlike GM or Ford, which spend billions each year on advertising, Tesla doesn’t have a large marketing budget. Instead, it relies on word of mouth. 113)

A Levels of employment are a macroeconomic factor that can affect a firm’s strategy. In boom times, unemployment tends to be low, and skilled human capital becomes scarce and more expensive. In economic downturns, unemployment rises. As more people search for employment, skilled human capital is more abundant, and wages usually fall.

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114)

TRUE A complement is a product, service, or competency that adds value to the original product offering when the two are used in tandem. Complements increase demand for the primary product, thereby enhancing the profit potential for the industry and the firm. 115)

FALSE Price stability—little or no change in the price of goods and services—is rare because economic growth is dynamic and needs to be matched with adequate monetary supply. Therefore, companies will often have to deal with changing price levels. 116)

TRUE Capital requirements are the “entry ticket price” into a new industry. To open a used tire shop, a person must rent a small storefront; buy furnishings, equipment, and supplies; and hire one or two people to work at the store. Capital requirements for a university or laboratory include highly trained personnel and expensive equipment. 117)

D In this scenario, $15,000 represents Marketo’s switching cost. Switching costs are the costs that a customer incurs when changing to the products, services, and/or brands offered by a different vendor. Changing vendors may require the buyer to alter product specifications and modify existing processes. 118)

Short Answer By combining theory from industrial organization economics with detailed case studies, Michael Porter derived two key insights that form the basis of the five forces model: 2. Rather than defining competition narrowly as the firm’s closest competitors, Porter emphasized that competition must be viewed more broadly to encompass the other forces in an industry: buyers, suppliers, the potential new entry of other firms, and the threat of substitutes. 3. An industry’s profit potential is neither random nor entirely determined by industryspecific factors. Instead, it is a function of the five forces that shape competition: threat of entry, power of suppliers, power of buyers, threat of substitutes, and rivalry among existing firms. 119)

B This scenario best illustrates a monopolistically competitive structure. A monopolistically competitive industry has many firms, a differentiated product, some obstacles to entry, and the ability to raise prices for a relatively unique product while retaining customers. 120)

FALSE

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Mobility barriers restrict movement between groups. Creating a supply chain is expensive, risky, and time consuming, so the existing global manufacturers have at least a temporary advantage over a local manufacturer. 121)

B The power of suppliers is high when the suppliers’ industry is more concentrated than the industry they sell to.

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Student name:__________ 1) NovaNote's competency in designing and manufacturing efficient, long-lasting batteries has

made its tablets the fastest-growing brand of computers in the market. This competency, along with highly responsive tech support, has enabled NovaNote to increase its customer base and strengthen customer loyalty. Thus, NovaNote's competency in designing and manufacturing batteries will be considered a(n)________ resource in the VRIO framework. A) substitute B) valuable C) imitable D) organized Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-05 Apply the VRIO framework to assess the competitive implications of a firm' Topic : VRIO Framework Source : Chapter 04 Test Bank > MC Qu. 49 NovaNote&#39;s competency in designing...

2) A value chain analysis consists of systematically analyzing a firm’s key activities that for

analysis purposes are categorized into two groups: A) profits and losses. B) products and service activities. C) customers and suppliers. D) primary activities and support activities. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-08 Apply a value chain analysis to understand which of the firm's activities Topic : Value Chain Analysis Source : Chapter 04 Test Bank > MC Qu. 18 A value chain analysis consists of systematica...

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3) One of Apple’s core competencies is establishing and maintaining a digital ecosystem. ⊚ true ⊚ false Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-02 Differentiate among a firm's core competencies, resources, capabilities, a Topic : Understanding the Importance of a Company's Resources Source : Chapter 04 Test Bank > TF Qu. 01 One of Apple&#8217;s core competencies is...

4) During market testing, Rembrandt Cosmetics realized that the cosmetics industry was

dominated by multiple, well-established brands. These brands mostly sold their products in exclusive outlets and department stores. Rembrandt Cosmetics management realized that a new entrant would require a different business model to be successful. Thus, Rembrandt Cosmetics started selling its products through direct marketing. In this scenario, Rembrandt Cosmetics accomplished substitution primarily through A) knowledge diffusion. B) technology transfer. C) path dependence. D) strategic equivalence. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-04 Evaluate the two critical assumptions about the nature of resources in the Topic : VRIO Framework Source : Chapter 04 Test Bank > MC Qu. 59 During market testing, Rembrandt Cosmetics r...

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5) The________ suggest(s) that because the external environment changes, strategic leaders

must choose their current and future investments carefully over time in order to best maintain their firm’s competitive advantage. A) law of diminishing returns B) SWOT analysis framework C) dynamic capabilities perspective D) VRIO framework Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 04-04 Evaluate the two critical assumptions about the nature of resources in the Topic : The Dynamic Capabilities Perspective Source : Chapter 04 Test Bank > MC Qu. 24 The ________ suggest(s) that beca...

6) A SWOT analysis would provide a definitive answer as to whether a firm’s growing footprint

in overseas markets is a strength or weakness. ⊚ true ⊚ false Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-10 Conduct a SWOT analysis to generate insights from external and internal an Topic : SWOT Analysis Source : Chapter 04 Test Bank > TF Qu. 10 A SWOT analysis would provide a definitive a...

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7) TalkaLot is a cell phone manufacturing company. Its latest range of smartphones are visually

similar to the Y-series range of smartphones from Talkie Gen, in terms of shape, look, and feel. Which of the following strategies has TalkaLot used to replicate the valuable and rare resource of Talkie Gen? A) direct imitation B) strategic equivalence C) substitution D) innovation Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-05 Apply the VRIO framework to assess the competitive implications of a firm' Topic : VRIO Framework Source : Chapter 04 Test Bank > MC Qu. 60 TalkaLot is a cell phone manufacturing...

8) In the context of the VRIO framework, what is a valuable resource, and how does it allow a

firm to increase its economic value creation??

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-05 Apply the VRIO framework to assess the competitive implications of a firm' Topic : VRIO Framework Source : Chapter 04 Test Bank > SA Qu. 110 In the context of the VRIO framework, what...

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9) One of the reasons that Circuit City filed for bankruptcy was due to its inability to reinvest,

hone, and upgrade its once-impressive resource base. Ultimately, Circuit City’s core competences became A) costly to imitate. B) value chain activities. C) core rigidities. D) strategic resources. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-04 Evaluate the two critical assumptions about the nature of resources in the Topic : The Dynamic Capabilities Perspective Source : Chapter 04 Test Bank > MC Qu. 23 One of the reasons that Circuit City filed f...

10) As the manager of a relatively new company assessing what could give your business a

competitive advantage, you are analyzing company resources to identify core competencies. Which of the following resources is most likely to generate a competitive advantage? A) large cash holdings B) enthusiastic company culture C) stockpile of supplies D) new production facilities Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 04-03 Compare and contrast tangible and intangible resources. Topic : Resource-Based View Source : Chapter 04 Test Bank > MC Qu. 35 As the manager of a relatively new...

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11) ________ allow(s) a firm to differentiate its products and services from those of its rivals,

creating higher value for the customer or offering products and services of comparable value at lower cost. A) Strengths B) Core competencies C) A value chain D) Competition Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 04-02 Differentiate among a firm's core competencies, resources, capabilities, a Topic : Understanding the Importance of a Company's Resources Source : Chapter 04 Test Bank > MC Qu. 15 ________ allow(s) a firm to differen...

12) A music distributor that decides to launch a proprietary music streaming service to respond to

changes in music consumption trends exhibits dynamic capabilities. ⊚ true ⊚ false Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-07 Outline how dynamic capabilities can help a firm sustain a competitive adv Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > TF Qu. 06 A music distributor that decides to launch a...

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13) Shippity and ShipING 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’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 will be less competitive than Shippity because of its smaller investment in tangible assets. B) There is no resource heterogeneity between the two firms as they operate in the same industry. C) It is likely that ShipING is better enabled than Shippity to gain and sustain a competitive advantage. D) Judging from the assets listed, ShipING has probably been in the industry a much shorter time than Shippity. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 04-03 Compare and contrast tangible and intangible resources. Topic : Resource-Based View Source : Chapter 04 Test Bank > MC Qu. 38 Shippity and ShipING are two competing ...

14) According to an evaluation using the VRIO framework, Crocs, inventor of the iconic plastic

clog, was unable to sustain its competitive advantage primarily because its products were A) easy to imitate. B) extremely rare. C) non-substitutable. D) invaluable and common. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-05 Apply the VRIO framework to assess the competitive implications of a firm' Topic : VRIO Framework Source : Chapter 04 Test Bank > MC Qu. 55 According to an evaluation using the VRIO fr...

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15) Managing a supply chain, running the computer system, and providing customer support are

examples of which of the following? A) operations B) value chain C) marketing and sales D) activities Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-08 Apply a value chain analysis to understand which of the firm's activities Topic : Value Chain Analysis Source : Chapter 04 Test Bank > MC Qu. 20 Managing a supply chain, running the computer...

16) Leo’s Magic Rails maintains a manufacturing plant overseas. The local government has just

been overthrown by a military group that opposes foreign influence in the country. According to the SWOT analysis, the political situation in this location is considered to be an A) internal strength. B) internal weakness. C) external threat. D) external opportunity. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-10 Conduct a SWOT analysis to generate insights from external and internal an Topic : SWOT Analysis Source : Chapter 04 Test Bank > MC Qu. 102 Leo&#8217;s Magic Rails maintains a manufact...

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17) Explain what a strategic activity system is and how it can lead to a competitive advantage.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-09 Identify competitive advantage as residing in a network of distinct activi Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > SA Qu. 124 Explain what a strategic activity system...

18) The management of a company is assessing the value of all the tangible resources the

company owns. Which of the following will be included in this assessment? A) the punch presses that produce parts B) its reputation for fast customer service C) the patents for electronic components D) its culture of proactive communication Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-03 Compare and contrast tangible and intangible resources. Topic : Understanding the Importance of a Company's Resources Source : Chapter 04 Test Bank > MC Qu. 34 The management of a company is assessing the...

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19) Although eHook and eFury operate in the same consumer electronic industry, eHook has

better sales and brand equity. This is attributed to eHook’s commitment to innovation. The company has adequate financial and human capital to invest in research and development, an area in which eFury lags behind. In this scenario, which of the following critical assumptions of the resource-based view of a firm has been illustrated? A) resource immobility B) resource heterogeneity C) resource imitation D) resource value Question Details AACSB : Reflective Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-04 Evaluate the two critical assumptions about the nature of resources in the Topic : Resource-Based View Source : Chapter 04 Test Bank > MC Qu. 41 Although eHook and eFury operate in the...

20) Several senior managers recently left Fred’s Autos and went to work at Better Autos, a rival

company. What does this imply? A) The resource flow into Better Autos was reduced. B) Fred’s Autos faced resource leakage. C) The resource stock of Fred’s Autos increased. D) Fred’s Autos’ tangible assets decreased. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-07 Outline how dynamic capabilities can help a firm sustain a competitive adv Topic : The Dynamic Capabilities Perspective Source : Chapter 04 Test Bank > MC Qu. 81 Several senior managers recently left Fred...

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21) Which of the following is an implication of high employee turnover in a company? A) It makes the source of the company’s competitive advantage causally ambiguous. B) It results in greater immobility and heterogeneity of the company’s resources. C) It results in a reduction in the company’s intangible-resource stocks. D) It makes the source of the company’s competitive advantage socially complex. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-07 Outline how dynamic capabilities can help a firm sustain a competitive adv Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > MC Qu. 80 Which of the following is an implication of ...

22) Simply Furniture has seen its profit margins shrink over the past few years as increased

competition has driven down furniture prices. You have been tasked with improving the company’s margins. Which of the following approaches makes the most sense within the context of strategic activity systems? A) Go against current trends and raise prices. B) Focus efforts on imitating competitors’ most successful products. C) Install modern manufacturing equipment to improve efficiency. D) Boost spending on marketing. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 04-09 Identify competitive advantage as residing in a network of distinct activi Topic : Value Chain Analysis Source : Chapter 04 Test Bank > MC Qu. 86 Simply Furniture has seen its profit...

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23) OpenBook is a new online bookseller’s market that has raised capital from multiple sources.

It is planning to use its capital to acquire certain assets. Which of the following assets will be the most difficult for OpenBook to acquire using its capital? A) computer equipment B) physical headquarters C) labor D) brand equity Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 04-03 Compare and contrast tangible and intangible resources. Topic : Resource-Based View Source : Chapter 04 Test Bank > MC Qu. 39 OpenBook is a new online bookseller&#8217;s...

24) Dynamic strategic activity systems help a firm to maintain a competitive advantage for

extended periods of time. ⊚ true ⊚ false Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-09 Identify competitive advantage as residing in a network of distinct activi Topic : Value Chain Analysis Source : Chapter 04 Test Bank > TF Qu. 09 Dynamic strategic activity systems help a fi...

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25) Which of the following applies to the Strength-Threats quadrant of the SWOT matrix? A) A local coffee shop had to reduce its hours of operation to maintain its competitive

advantage against its competition. B) A local coffee shop took advantage of having loyal, hardworking, and enthusiastic employees to maintain its competitive advantage against its competition. C) A local coffee shop added a salad bar to maintain its competitive advantage against its competition. D) A local coffee shop expanded its limited menu to maintain its competitive advantage against its competition. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 04-10 Conduct a SWOT analysis to generate insights from external and internal an Topic : SWOT Analysis Source : Chapter 04 Test Bank > MC Qu. 92 Which of the following applies to the Streng...

26) Mejor Maíz tortilla chips, manufactured by Tampico Alimentos, have been the top-selling

tortilla chips in the market. Though the market for chips is flooded with competitors, Tampico Alimentos has been able to maintain its market position for a long time. This is mainly attributed to the fact that its chips have all the flavor of competing brands but only half the fat, the result of a proprietary cooking method used by the company. This competency of Tampico Alimentos will be considered as a(n)________ resource in the VRIO framework. A) rare B) organizational C) imitable D) intangible Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-05 Apply the VRIO framework to assess the competitive implications of a firm' Topic : VRIO Framework Source : Chapter 04 Test Bank > MC Qu. 52 Mejor Ma&#237;z tortilla chips, manufactured...

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27) Bright-White has been the leader in denture-cleaning products for almost 40 years. However,

the company has relied too long on its competency of cleaning dentures without refining or upgrading other aspects of its product. As a result, other denture-cleaning companies began to offer denture-cleaning products with all-natural whitening agents and anti-bacterial agents, which helped them gained a competitive advantage over Bright-White. This case is an example of A) core rigidity. B) dynamic capabilities. C) core competency. D) resource flow. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-07 Outline how dynamic capabilities can help a firm sustain a competitive adv Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > MC Qu. 100 Bright-White has been the leader in denture...

28) Capabilities are the________ and managerial skills necessary to orchestrate a diverse set of

resources to deploy them strategically. A) organizational B) competitive C) financial D) strategic Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 04-02 Differentiate among a firm's core competencies, resources, capabilities, a Topic : Understanding the Importance of a Company's Resources Source : Chapter 04 Test Bank > MC Qu. 14 Capabilities are the ________ and managerial...

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29) LightningDrive is a leading automobile company. The company has been able to sustain its

competitive advantage primarily due to its high-quality and efficient electric motors. Most of its competitors have failed to develop similar electric motors at a reasonable price. Which of the following resource attributes listed in the VRIO framework has helped LightningDrive sustain its competitive advantage? A) intangibility of the company’s resource B) high costs involved in imitation C) resource mobility D) inexhaustible nature Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-05 Apply the VRIO framework to assess the competitive implications of a firm' Topic : VRIO Framework Source : Chapter 04 Test Bank > MC Qu. 58 LightningDrive is a leading automobile compa...

30) Online retailer eBuy had been drastically losing market share to its competitors, so

management hired a consulting firm to help figure out the reasons why sales were dipping. The consultants found that the company primarily lost its competitive advantage because of its poor customer service, which included slow response times to customer inquiries and unclear return policies. These ineffective policies and procedures led to many disgruntled customers and a steady migration to more customer-friendly retailers. eBuy can best solve its problem by working on its A) support activities. B) resource stocks. C) resource flows. D) immobile assets. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-08 Apply a value chain analysis to understand which of the firm's activities Topic : Value Chain Analysis Source : Chapter 04 Test Bank > MC Qu. 84 Online retailer eBuy had been drastically...

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31) Explain the value chain perspective of a firm’s competitive advantage.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-08 Apply a value chain analysis to understand which of the firm's activities Topic : Value Chain Analysis Source : Chapter 04 Test Bank > SA Qu. 119 Explain the value chain perspective of a fir...

32) According to the resource immobility assumption, resources tend to be “sticky” and don’t

move easily from firm to firm. ⊚ true ⊚ false Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-04 Evaluate the two critical assumptions about the nature of resources in the Topic : Resource-Based View Source : Chapter 04 Test Bank > TF Qu. 04 According to the resource immobility assumption...

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33) Facing stiff competition in the e-reader market, SmartReads wants to protect its competitive

advantage by increasing the perceived value of its reader. SmartReads’s best strategy to accomplish this would be to A) lower the retail price of its e-reader to attract new customers. B) highlight the number of celebrities who use SmartReads e-readers. C) try to imitate some of the features found in competing products. D) increase the cost of production to add innovative new features. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 04-05 Apply the VRIO framework to assess the competitive implications of a firm' Topic : VRIO Framework Source : Chapter 04 Test Bank > MC Qu. 51 Facing stiff competition in the e-reader mar...

34) Due to resource immobility, a critical assumption in the resource-based model of a firm, the A) resource bundles of a firm can be easily imitated by competitors. B) competencies and capabilities of all firms in an industry are similar. C) resource differences between firms last for a long time. D) competitive advantage of a firm exists for a short period of time. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 04-04 Evaluate the two critical assumptions about the nature of resources in the Topic : Resource-Based View Source : Chapter 04 Test Bank > MC Qu. 44 Due to resource immobility, a critical assum...

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35) 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, 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 developed an assembly system that worked on a newer theory than Gogo’s system. C) The competitor failed to apply for a patent of its own assembly system. D) The competitor infringed on Gogo’s patent of the diagonal assembly system. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 2 Medium Learning Objective : 04-05 Apply the VRIO framework to assess the competitive implications of a firm' Topic : VRIO Framework Source : Chapter 04 Test Bank > MC Qu. 54 The diagonal assembly system was a production...

36) Chips & Motherboards, a leading hard drive manufacturer, recently filed for bankruptcy.

While most of Chips & Motherboards’ competitors were shifting away from physical data storage devices toward online cloud storage services, Chips & Motherboards invested most of its retained earnings in the effort to improve its hard drives. Once the hard-drive market drastically declined, Chips & Motherboards was unable to capitalize on the new technology. Which of the following does this scenario best illustrate? A) causal ambiguity B) path dependence C) social complexity D) knowledge diffusion Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-06 Evaluate different conditions that allow a firm to sustain a competitive a Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > MC Qu. 65 Chips &amp; Motherboards, a leading har...

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37) According to the value chain analysis, which of the following is a primary activity? A) marketing and sales B) human resources management C) accounting and finance D) research and development Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 04-08 Apply a value chain analysis to understand which of the firm's activities Topic : Value Chain Analysis Source : Chapter 04 Test Bank > MC Qu. 82 According to the value chain analysis, which...

38) Given the accelerated pace of technological change, in combination with deregulation,

globalization, and demographic shifts, a firm will be successful today only if its A) competitive advantage is derived from static resource or market advantages. B) resource advantage is not causally ambiguous or socially complex. C) internal strengths change with its external environment in a dynamic fashion. D) resource advantage is maintained for a short period of time. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-07 Outline how dynamic capabilities can help a firm sustain a competitive adv Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > MC Qu. 75 Given the accelerated pace of technological ...

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39) Define resource stocks and resource flows, and differentiate them with the help of the

bathtub metaphor.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-07 Outline how dynamic capabilities can help a firm sustain a competitive adv Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > SA Qu. 116 Define resource stocks and resource flows...

40) ________ describes a process in which the options one faces in a current situation are limited

by decisions made in the past. A) Social complexity B) Causal ambiguity C) Cannibalization D) Path dependence Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 04-06 Evaluate different conditions that allow a firm to sustain a competitive a Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > MC Qu. 64 ________ describes a process in which the optio...

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41) One key aspect of strategy is choosing not to do certain things at all. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 04-02 Differentiate among a firm's core competencies, resources, capabilities, a Topic : Understanding the Importance of a Company's Resources Source : Chapter 04 Test Bank > TF Qu. 12 One key aspect of strategy is choosing...

42) Business managers are often concerned that just one of their company’s activities will make

or break their company’s competitive advantage. However, you know that A) their company’s success depends on an array of many key activities, not just one activity. B) they are right; it is usually just one single activity that makes or breaks their competitive advantage. C) they should worry more about their competitor’s activities than their own company’s activities. D) it depends on the industry—sometimes this is true, sometimes it is not true. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-08 Apply a value chain analysis to understand which of the firm's activities Topic : Value Chain Analysis Source : Chapter 04 Test Bank > MC Qu. 22 Business managers are often concerned that j...

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43) Describe causal ambiguity and provide an example of how it can act as a barrier against

imitation of a firm’s valuable resources.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 04-06 Evaluate different conditions that allow a firm to sustain a competitive a Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > SA Qu. 113 Describe causal ambiguity and provide an exa...

44) The Marauders professional football team, which has a long history of emphasizing the run,

has been doing poorly in the current quarterback-dominated league, so its sales of tickets and ancillary products such as jerseys have declined. Fan discontent finally caused the team's general manager to draft a highly rated quarterback in the first round of the draft. However, the team still lacked competent receivers, so the quarterback was unsuccessful at turning the team around. The general manager's decision to move to a pass-oriented offence was hampered by A) dependence complexity. B) path immobility. C) path dependence. D) causal dependence. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 04-06 Evaluate different conditions that allow a firm to sustain a competitive a Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > MC Qu. 66 The Marauders professional football team...

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45) Chocolicious, a leading gourmet chocolate producer, anticipated that the prices of cocoa

beans from Ghana, where its main suppliers were located, would double in less than three years. This would significantly affect Chocolicious’s profit margins. Thus, Chocolicious decided to develop a new partnership with a supplier in Colombia. As predicted, the price of Ghanaian cocoa beans increased twofold. Because the price of Colombian cocoa beans was much lower, Chocolicious was able to maintain its profit margins in turbulent times. Which of the following isolating mechanisms does this scenario best illustrate? A) better expectations of future resource value B) causal ambiguity C) time compression diseconomies D) intellectual property protection Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-06 Evaluate different conditions that allow a firm to sustain a competitive a Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > MC Qu. 62 Chocolicious, a leading gourmet chocolate...

46) Which of the following provides an example of how a firm’s valuable resource can be

imitated? A) To compete with Build Your Own’s model of the Eiffel Tower, Best Replica came out with a model of the Leaning Tower of Pisa. B) To compete with Build Your Own’s model of the Eiffel Tower, Best Replica came out with a model of the U.S.S. Enterprise aircraft carrier. C) To compete with Build Your Own’s model of the Eiffel Tower, Best Replica came out with a model of a castle from a fantasy movie. D) To compete with Build Your Own’s model of the Eiffel Tower, Best Replica came out with a model of a generic medieval cathedral. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-05 Apply the VRIO framework to assess the competitive implications of a firm' Topic : Resource-Based View Source : Chapter 04 Test Bank > MC Qu. 96 Which of the following provides an example o...

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47) After conducting a SWOT analysis, your firm has decided to focus on addressing issues

located in the Weaknesses–Opportunities quadrant. Which of the following steps are you most likely to take? A) Devote more resources to an extremely popular advertising campaign to promote an exciting new product. B) Shut down struggling retail outlets in an economically depressed region. C) Deploy top sales personnel to prevent buyers from migrating towards lower-priced competition. D) Reorganize the inefficient research and development department to bring innovative products to market more quickly. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 04-10 Conduct a SWOT analysis to generate insights from external and internal an Topic : SWOT Analysis Source : Chapter 04 Test Bank > MC Qu. 103 After conducting a SWOT analysis, your firm ...

48) Describe the core competencies of any three successful companies in today’s business

environment and give an example of one core competency for each company.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 04-02 Differentiate among a firm's core competencies, resources, capabilities, a Topic : Resource-Based View Source : Chapter 04 Test Bank > SA Qu. 105 Describe the core competencies of any three ...

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49) Elaborate on the resource-based view of competitive advantage.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 04-03 Compare and contrast tangible and intangible resources. Topic : Resource-Based View Source : Chapter 04 Test Bank > SA Qu. 106 Elaborate on the resource-based view of comp...

50) Which of the following best exemplifies social complexity as an isolating mechanism? A) 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. B) 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. C) Amanda’s Cosmetics attempted to imitate how Michele’s Makeup combined its management and product development systems, with little success. 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. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 04-06 Evaluate different conditions that allow a firm to sustain a competitive a Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > MC Qu. 98 Which of the following best exemplifies soci...

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51) ________ are barriers to imitation that prevent rivals from competing away the advantage a

firm may enjoy. A) Market niches B) Cartel arrangements C) Isolating mechanisms D) Embargoes Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 04-06 Evaluate different conditions that allow a firm to sustain a competitive a Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > MC Qu. 61 ________ are barriers to imitation that prevent...

52) When a firm does not continually upgrade or improve core competencies, its competitors are

likely to A) across the board. B) grow their company at any cost. C) expand their product line. D) develop equivalent or superior skills. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-02 Differentiate among a firm's core competencies, resources, capabilities, a Topic : Understanding the Importance of a Company's Resources Source : Chapter 04 Test Bank > MC Qu. 16 When a firm does not continually upgrade...

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53) Elaborate on a drawback of SWOT analysis with the help of an example.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 04-10 Conduct a SWOT analysis to generate insights from external and internal an Topic : SWOT Analysis Source : Chapter 04 Test Bank > SA Qu. 123 Elaborate on a drawback of SWOT analysis w...

54) In the context of the resource-based model of competitive advantage, which of the following

scenarios best exemplifies resource immobility? A) Havermill Communications has lost market share because it was slow to change to digital publishing. B) Rev-Em Motorcycles has been able to gain a competitive advantage because of its ability to efficiently move its resources from one manufacturing unit to another. C) Tuffy Gaskets Inc has earned a good reputation among its shareholders by investing heavily inup-to-date production equipment that increases productivity. D) Avenir Inc. has been able to outperform its competitors because its method of training cross-department teams is difficult for competitors to replicate. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 04-04 Evaluate the two critical assumptions about the nature of resources in the Topic : Resource-Based View Source : Chapter 04 Test Bank > MC Qu. 45 In the context of the resource-based model o...

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55) How do strategic leaders benefit from conducting a SWOT analysis?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-10 Conduct a SWOT analysis to generate insights from external and internal an Topic : SWOT Analysis Source : Chapter 04 Test Bank > SA Qu. 122 How do strategic leaders benefit from conducting a SW...

56) In the context of the resource-based model of competitive advantage, if a successful firm

exhibits resource immobility it means that the A) rival firms have better accessibility to quality resources, which they will be able to acquire and deploy to their benefit. B) resources of the firm cannot be effectively deployed within its own organization. C) firm will have a sustained competitive advantage because of unique resources that are difficult for others to replicate. D) competitors can easily replicate or copy the firm’s resource bundles and capabilities. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-04 Evaluate the two critical assumptions about the nature of resources in the Topic : Resource-Based View Source : Chapter 04 Test Bank > MC Qu. 43 In the context of the resource-based model o...

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57) According to the resource-based view, a firm’s competitive advantage often stems from its A) external environment. B) dynamic strengths. C) intangible resources. D) tangible resources. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 04-03 Compare and contrast tangible and intangible resources. Topic : The Resource-Based View Source : Chapter 04 Test Bank > MC Qu. 17 According to the resource-based view, a firm...

58) Suppose that several senior managers leave Home Depot and go to work at rival Lowe’s.

What aspect of resource stocks and resource flows does this represent for Home Depot? A) resource leakage B) intangible resources C) dynamic capabilities D) human capital Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-07 Outline how dynamic capabilities can help a firm sustain a competitive adv Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > MC Qu. 28 Suppose that several senior managers...

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59) One of holding company Alphabet’s tangible resources is Google, its most prominent

subsidiary. ⊚ true ⊚ false Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-03 Compare and contrast tangible and intangible resources. Topic : Resource-Based View Source : Chapter 04 Test Bank > TF Qu. 03 One of holding company Alphabet&#8217;s...

60) Define the value chain.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 04-08 Apply a value chain analysis to understand which of the firm's activities Topic : Value Chain Analysis Source : Chapter 04 Test Bank > SA Qu. 117 Define the value chain.

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61) To reduce the amount of time it takes to apply packaging to its finished products, North Star

Foods is implementing new equipment at its production plants. By doing this, North Star is addressing a________ in the value chain analysis. A) premier activity B) support activity C) primary activity D) secondary activity Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-08 Apply a value chain analysis to understand which of the firm's activities Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > MC Qu. 101 To reduce the amount of time it takes to app...

62) 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 stick to its existing core competency, that is HD LED technology, as it is the best in that segment. B) ezTV should take steps to reduce the causal ambiguity and socially complexity of its core competency. C) ezTV should work on enhancing the mobility of its core competency. D) ezTV should start working on Ultra HD and Smart television technologies to adapt its core competency to suit the external environment. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 04-07 Outline how dynamic capabilities can help a firm sustain a competitive adv Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > MC Qu. 76 ezTV, a consumer electronics company, is the...

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63) CarTsar Inc. is a manufacturer of automobile parts, which it sells to retail auto supply stores.

Its core competencies include superior design and engineering capabilities, as well as a highly integrated and efficient supply chain. To sustain its competitive advantage, CarTsar should first A) seek to replicate its nearest competitor’s competency in innovative marketing. B) diversify its product offerings by developing parts for construction equipment. C) upgrade its engineering department and improve its supply chain. D) attempt to cut costs by replacing assembly line workers with robots. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 04-01 Explain why and how internal firm differences are the root of competitive Topic : Understanding the Importance of a Company's Resources Source : Chapter 04 Test Bank > MC Qu. 29 CarTsar Inc. is a manufacturer of automobile...

64) TechTime is a market leader in smartwatches. If Horloge and Tempo, companies that

manufacture digital watches, develop the same customer knowledge base and create products with the same customer appeal as TechTime, then A) TechTime will have a resource that is rare but no longer valuable. B) TechTime will have a sustainable competitive advantage in the industry. C) TechTime will have a resource that is valuable but no longer rare. D) Horloge and Tempo will have a VRIO resource. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-05 Apply the VRIO framework to assess the competitive implications of a firm' Topic : VRIO Framework Source : Chapter 04 Test Bank > MC Qu. 56 TechTime is a market leader in smartwatches...

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65) Explain how the distinct activities of a firm help in achieving a competitive advantage.

66) Frozen Gold is a fast-growing chain of ice cream shops. It has developed an edge over its

competitors by providing customers with a wide array of unique flavors and fostering a hip atmosphere in its stores. This advantage of Frozen Gold best exemplifies a A) capital gain. B) markup. C) core competency. D) resource flow. Question Details AACSB : Reflective Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-01 Explain why and how internal firm differences are the root of competitive Topic : Resource-Based View Source : Chapter 04 Test Bank > MC Qu. 31 Frozen Gold is a fast-growing chain of...

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67) 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 Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 04-05 Apply the VRIO framework to assess the competitive implications of a firm' Topic : VRIO Framework Source : Chapter 04 Test Bank > MC Qu. 57 Amelia has recently started a restaurant in ...

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68) How are the critical assumptions of the resource-based model of a firm fundamentally

different from the way in which a firm is viewed in the perfectly competitive industry structure? A) In perfect competition, all firms have access to the same capabilities, whereas in the resource-based model, resource differences exist between firms in the same industry. B) In perfect competition, it is extremely difficult to replicate the resource bundles of a firm, whereas in the resource-based model, it is extremely easy to imitate them. C) In the resource-based model, resources are freely available and mobile, whereas in the perfectly competitive industry structure, resources are highly immobile. D) In the resource-based model, only physical assets of a firm are considered as resources, whereas in perfect competition, a firm’s capabilities and competencies are also considered as resources. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-04 Evaluate the two critical assumptions about the nature of resources in the Topic : Resource-Based View Source : Chapter 04 Test Bank > MC Qu. 46 How are the critical assumptions of the reso...

69) Greener Cleener is a leading maker of environmentally friendly household cleaning products.

Competitors across the globe have failed to imitate Greener Cleener’s production models, supply chain systems, knowledge systems, and culture. These attributes have remained unique to Greener Cleener for a long time. Which of the following assumptions of the resource-based model of competitive advantage does this scenario best illustrate? A) resource immobility B) resource substitution C) resource homogeneity D) resource cost Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-04 Evaluate the two critical assumptions about the nature of resources in the Topic : Resource-Based View Source : Chapter 04 Test Bank > MC Qu. 42 Greener Cleener is a leading maker of environmentally...

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70) Flectronics has used $700,000 from its total annual earnings of $1,650,000 to invest in

upgrading its manufacturing facilities. Its accounts receivable from customers is estimated to be $130,000 and accounts payable $75,000. In monetary terms, what would Flectronics’s resource flows be? A) $1,650,000 B) $700,000 C) $75,000 D) $130,000 Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-07 Outline how dynamic capabilities can help a firm sustain a competitive adv Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > MC Qu. 78 Flectronics has used $700,000 from its total...

71) Which of the following describes a situation in which firms acquire resources at a low cost,

laying the foundation for a competitive advantage later? A) causal ambiguity B) better expectations of future resource value C) path dependence affecting current decisions D) social complexity Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 04-06 Evaluate different conditions that allow a firm to sustain a competitive a Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > MC Qu. 97 Which of the following describes a situation...

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72) Amazon’s tendency to reinvest a large share of its profits into new services and capabilities

exemplifies a low level of resource flows. ⊚ true ⊚ false Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-07 Outline how dynamic capabilities can help a firm sustain a competitive adv Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > TF Qu. 07 Amazon&#8217;s tendency to reinvest a large share of its prof...

73) Define isolating mechanisms and explain how they work to help firms strengthen their

competitive advantage.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 04-06 Evaluate different conditions that allow a firm to sustain a competitive a Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > SA Qu. 125 Define isolating mechanisms and explain...

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74) Competitors have found it extremely difficult to imitate Gene Electronics’ valuable

resources, capabilities, or competencies. This is primarily because the source for the company’s success has been unclear. The competitors are uncertain if Gene Electronics’ success is due to its strong leadership, the skills of its research and development team, or the timing of the company’s product introductions. Gene Electronics has been protected from losing its competitive advantage as a result of A) resource homogeneity. B) causal ambiguity. C) time compression diseconomies. D) path dependence. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-06 Evaluate different conditions that allow a firm to sustain a competitive a Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > MC Qu. 70 Competitors have found it extremely difficul...

75) Crocs, inventor of the iconic plastic clog, was unable to sustain its competitive advantage

over its rivals because its key strategic resource was A) not patented in a timely manner. B) valuable in the eyes of the consumer. C) overly sophisticated marketing. D) simple to imitate. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-04 Evaluate the two critical assumptions about the nature of resources in the Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > MC Qu. 27 Crocs, inventor of the iconic plastic clog...

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76) Which of the following statements accurately brings out the difference between tangible and

intangible resources? A) Tangible assets are difficult for competitors to imitate, whereas intangible assets can be easily replicated. B) Tangible resources take a longer time to build, whereas intangible assets can be built comparatively easily. C) Tangible assets can be bought on the open market by anyone with the necessary cash, whereas intangible assets cannot be easily purchased. D) Tangible resources contribute to a company’s competitive advantage, whereas intangible resources have little effect on competitive advantage. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-03 Compare and contrast tangible and intangible resources. Topic : Resource-Based View Source : Chapter 04 Test Bank > MC Qu. 37 Which of the following statements accurately...

77) Southwest Airlines (SWA) and Alaska Airlines (ASA) both compete in the same strategic

group as low-cost, point-to-point airlines, but they draw upon different resource bundles. SWA’s employee productivity tends to be higher than ASA’s because the two companies differ in their human and organizational resources. This example best illustrates which of the following assumptions regarding the resource-based view? A) resource allocation B) resource immobility C) resource heterogeneity D) resource homogeneity Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-04 Evaluate the two critical assumptions about the nature of resources in the Topic : The Resource-Based View Source : Chapter 04 Test Bank > MC Qu. 19 Southwest Airlines (SWA) and Alaska Airlines...

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78) Intellectual property (IP) protections such as trademarks or patents are proven methods of

establishing permanent barriers to imitation. ⊚ true ⊚ false Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-06 Evaluate different conditions that allow a firm to sustain a competitive a Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > TF Qu. 05 Intellectual property (IP) protections such ...

79) Organizational and managerial skills that find their expression in a company’s structure,

routines, and culture are referred to as A) capital gains. B) capabilities. C) reserves. D) tangible resources. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 04-01 Explain why and how internal firm differences are the root of competitive Topic : Resource-Based View Source : Chapter 04 Test Bank > MC Qu. 32 Organizational and managerial skills that fi...

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80) Amazon’s network of distribution centers allows it to drastically reduce its delivery times

compared with most other online retailers. These distribution centers are examples of Amazon’s A) capabilities. B) intangible resources. C) core competency. D) tangible resources. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-03 Compare and contrast tangible and intangible resources. Topic : Understanding the Importance of a Company's Resources Source : Chapter 04 Test Bank > MC Qu. 33 Amazon&#8217;s network of distribution centers allow it...

81) Essex Pictures spent $5 million to buy the rights to a best-selling novel. During

preproduction, the film company hired an experienced screenwriter to adapt the novel for the screen; engaged a director, cinematographer, and crew; cast both the starring and supporting roles; rented cameras and other equipment; and scouted houses and other locations in New Orleans. Which of the following pairs of resources are both intangible? A) money spent to buy rights to the novel; houses and other locations in New Orleans B) rights to the best-selling novel; screenwriter’s experience adapting novels for the screen C) rights to the best-selling novel; houses and other locations in New Orleans D) cameras and other equipment; screenwriter’s experience adapting novels Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 04-03 Compare and contrast tangible and intangible resources. Topic : Resource-Based View Source : Chapter 04 Test Bank > MC Qu. 94 Essex Pictures spent $5 million to buy...

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82) A firm will fail to create a sustained competitive advantage when the A) resource bundles exhibit heterogeneity and immobility. B) source of its competitive advantage is causally ambiguous. C) source of its competitive advantage is socially complex. D) fit between its internal strengths and the external environment is static. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-07 Outline how dynamic capabilities can help a firm sustain a competitive adv Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > MC Qu. 74 A firm will fail to create a sustained compe...

83) Your company, a small software development firm, has attracted many top young

programmers in your area. As a result, the apps you produce have been praised for their innovative features and intuitive user experience. According to the bathtub metaphor in the dynamic capabilities perspective, what is the best way for you to protect against resource leakage? A) Improve the benefits package to retain key employees and reduce turnover. B) Open a satellite office overseas to support the company culture of taking chances. C) Invest in an online marketing campaign for existing products to retain customers. D) Attempt to undercut the competition by imitating their top-selling product. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 04-07 Outline how dynamic capabilities can help a firm sustain a competitive adv Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > MC Qu. 83 Your company, a small software development f...

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84) 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) Employees are often resistant to changes in strategy. C) Customers tend to have negative opinions of firms that imitate other firms. D) Your business is not organized to capture value. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 04-04 Evaluate the two critical assumptions about the nature of resources in the Topic : Resource-Based View Source : Chapter 04 Test Bank > MC Qu. 48 You are the manager of Value Printing, a lea...

85) In the context of SWOT analysis, which of the following best exemplifies a firm’s external

opportunity? A) an increase in its customers’ disposable income B) an increase in its brand equity C) an increase in its employee productivity D) an increase in its financial resources Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-10 Conduct a SWOT analysis to generate insights from external and internal an Topic : SWOT Analysis Source : Chapter 04 Test Bank > MC Qu. 90 In the context of SWOT analysis, which of th...

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86) In the context of SWOT analysis, which of the following best exemplifies a firm’s internal

weakness? A) decline in the firm’s market share B) irregularity in the raw materials supply throughout the industry C) fall in the purchasing power of the firm’s customers D) increased competition in the industry where the firm operates Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-10 Conduct a SWOT analysis to generate insights from external and internal an Topic : SWOT Analysis Source : Chapter 04 Test Bank > MC Qu. 89 In the context of SWOT analysis, which of th...

87) A resource-based view of a firm provides a model that systematically aids in identifying A) competitive disadvantage. B) competitive parity. C) core rigidities. D) core competencies. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 04-02 Differentiate among a firm's core competencies, resources, capabilities, a Topic : Resource-Based View Source : Chapter 04 Test Bank > MC Qu. 93 A resource-based view of a firm provides a m...

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88) SJobs’s Computer Repair has maintained a competitive advantage based on its thorough and

professional service, reasonable pricing, and money-back guarantee. Management at the company is so committed to doing repairs well that they often have rejected employee suggestions to expedite their processes. Recently, the company has begun to lose customers to a new local service offering same day in-home repairs and 24/7 online customer support. According to the dynamic capabilities perspective, SJobs’s Computer Repair has lost its competitive advantage due to A) core rigidity. B) resource flows. C) resource stocks. D) value chain disruption. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 04-07 Outline how dynamic capabilities can help a firm sustain a competitive adv Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > MC Qu. 79 SJobs&#8217;s Computer Repair has maintained...

89) Provide examples of the support activities in a firm’s value chain.

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90) Support activities, according to the value chain, are the actions a firm takes to directly

provide a product or service to the end user. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-08 Apply a value chain analysis to understand which of the firm's activities Topic : Value Chain Analysis Source : Chapter 04 Test Bank > TF Qu. 11 Support activities, according to the value c...

91) Describe the two critical assumptions of the resource-based view.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-04 Evaluate the two critical assumptions about the nature of resources in the Topic : The Resource-Based View Source : Chapter 04 Test Bank > SA Qu. 126 Describe the two critical assumptions...

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92) Viral Apparel is the market leader in the sportswear industry. Though most of its resources

are common to those of its competitors, a few rare resources have helped the company gain and sustain a competitive advantage. Which of the following assets of Viral Apparel is most likely to be considered a rare resource that is contributing to its competitive advantage? A) the company’s plant and machinery B) the company’s design patents C) the company’s land and buildings D) the company’s raw material supplies Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 04-05 Apply the VRIO framework to assess the competitive implications of a firm' Topic : VRIO Framework Source : Chapter 04 Test Bank > MC Qu. 50 Viral Apparel is the market leader in the sp...

93) The owners of Always Baked bakery want to open a second retail outlet. Which of the

following scenarios is most likely to yield a competitive advantage? A) Open a shop in a crowded downtown location where several other bakeries have been successful over the years. B) Purchase an existing bakery from a business that closed due to declining sales and try to revive it. C) Open a shop on an inexpensive piece of land near a new mixed-use residential and business district currently under construction. D) Build a shop in a sparsely populated rural area where the land is inexpensive and few other bakeries exist. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 04-06 Evaluate different conditions that allow a firm to sustain a competitive a Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > MC Qu. 73 The owners of Always Baked bakery want to op...

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94) In the context of the SWOT matrix, which of the following best exemplifies a firm’s internal

strength? A) rise in the income of the demographic segment to which a firm caters B) increase in a firm’s customer loyalty C) loss of a competitor’s reputation D) growth in the size of the market in which a firm operates Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-10 Conduct a SWOT analysis to generate insights from external and internal an Topic : SWOT Analysis Source : Chapter 04 Test Bank > MC Qu. 88 In the context of the SWOT matrix, which of ...

95) Assume a firm’s resources and capabilities are costly to imitate. This is because rival

companies do not clearly understand the relationship between the resources and capabilities controlled by the firm. In this case, the firm’s competitive advantage is protected against imitation by A) path dependence. B) causal ambiguity. C) dependence complexity. D) social complexity. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-06 Evaluate different conditions that allow a firm to sustain a competitive a Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > MC Qu. 67 Assume a firm&#8217;s resources and capabilities are costly...

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96) Provide a concrete example of how dynamic capabilities can benefit firms.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 04-07 Outline how dynamic capabilities can help a firm sustain a competitive adv Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > SA Qu. 115 Provide a concrete example of how dynamic capabiliti...

97) Accounting, human resources, and research and development (R&D) are examples of

primary activities that add value directly to the value chain. ⊚ true ⊚ false Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-08 Apply a value chain analysis to understand which of the firm's activities Topic : Value Chain Analysis Source : Chapter 04 Test Bank > TF Qu. 08 Accounting, human resources, and research an...

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98) How does causal ambiguity act as an isolating mechanism for organizations? A) It creates a situation in which different social and business systems interact with one

another. B) It makes it difficult for competitors to imitate core competencies quickly due to time compression diseconomies. C) It makes it difficult for the competitors to understand why a company has been so successful. D) It makes it difficult for competitors to deploy their resources by creating ambiguity within their organizational structures. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-05 Apply the VRIO framework to assess the competitive implications of a firm' Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > MC Qu. 69 How does causal ambiguity act as an isolatin...

99) Southwest Airlines (SWA) has enjoyed a sustained competitive advantage, allowing it to

outperform its competitors over several decades. Continental and Delta attempted to copy SWA with their offerings of Continental Lite and Song airlines, respectively. Neither Continental nor Delta, however, was able to successfully imitate the resource bundles and firm capabilities that make SWA unique. Which of the following is this case an example of? A) resource heterogeneity B) resource imitation C) resource immobility D) resource substitution Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-04 Evaluate the two critical assumptions about the nature of resources in the Topic : Understanding the Importance of a Company's Resources Source : Chapter 04 Test Bank > MC Qu. 95 Southwest Airlines (SWA) has enjoyed a susta...

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When performing internal analysis of firms, how would you answer the question, “Why do companies exist?” A) Companies exist because they give college professors something to teach about. B) Companies exist because they create value for customers in ways that customers are unable to replicate on their own. C) Companies exist because they provide a tax base for government to draw upon in creating and maintaining public works projects. D) Companies exist because they provide a means of investment income for shareholders, who otherwise would be able to invest only in government securities.

100)

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-02 Differentiate among a firm's core competencies, resources, capabilities, a Topic : Understanding the Importance of a Company's Resources Source : Chapter 04 Test Bank > MC Qu. 13 When performing internal analysis of firms, ...

101)

To help a firm achieve a competitive advantage, each distinct activity performed in the value chain needs to A) create a static fit between the company’s internal resources and the external environment. B) reduce the immobility and the heterogeneity of the firm’s resources. C) contribute to the firm’s strategic position as either a low-cost leader or differentiator. D) reduce the causal ambiguity and the social complexity of the firm’s source of success.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-08 Apply a value chain analysis to understand which of the firm's activities Topic : Value Chain Analysis Source : Chapter 04 Test Bank > MC Qu. 85 To help a firm achieve a competitive advanta...

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102)

Which of the following is a drawback of the SWOT analysis? A) This framework allows managers to evaluate only a firm’s current situation and not its future prospects. B) The SWOT analysis takes into account only the internal environment of a firm, ignoring the equally important external environment. C) With this framework, a strength can also be a weakness and an opportunity can also be a threat. D) This framework is only applicable to the manufacturing industries; it is ineffective when applied to the service firms.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-10 Conduct a SWOT analysis to generate insights from external and internal an Topic : SWOT Analysis Source : Chapter 04 Test Bank > MC Qu. 91 Which of the following is a drawback of the ...

103)

STRIKEBYTE is a software company that has created and acquired numerous assets over the years. According to the resource-based view of a firm, which of the following assets of STRIKEBYTE will best enable it to gain and sustain a competitive advantage? A) the capital the company raised from its shareholders B) the expertise acquired by the employees in the company C) the impressive headquarters owned by the company D) the cloud computing service that it uses

Question Details AACSB : Reflective Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-03 Compare and contrast tangible and intangible resources. Topic : Resource-Based View Source : Chapter 04 Test Bank > MC Qu. 36 STRIKEBYTE is a software company that...

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104)

When the laptop market overtook the desktop market, Blue Tech, a leader in desktop technology, was left at a competitive disadvantage. Later, Blue Tech’s management channeled all of the company’s efforts and revenue to develop an efficient laptop from scratch in less than a year. However, the company failed because Blue Tech’s models were inferior to the third- and fourth-generation models its competitors were selling. In this scenario, Blue Tech’s failure can be best attributed to A) diseconomies of scope and scale. B) time compression diseconomies. C) social complexity. D) causal ambiguity.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 04-06 Evaluate different conditions that allow a firm to sustain a competitive a Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > MC Qu. 68 When the laptop market overtook the desktop ...

105)

Leading guitar string producer Highly Strung has enjoyed a competitive advantage based on its proprietary coating that gives its strings a clearer sound and longer life span than uncoated strings. One of Highly Strung’s competitors, however, has recently developed a similar coating using less expensive ingredients; this 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.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 04-06 Evaluate different conditions that allow a firm to sustain a competitive a Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > MC Qu. 63 Leading guitar string producer Highly Strung...

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106)

Five Guys has become successful in a highly competitive industry dominated by fastfood giants like McDonald’s and Burger King, as well as direct competitors claiming to be “better burger” joints such as Smashburger, Burgerfi, and Shake Shack. Which of the following statements accurately explains the main reason for the success of Five Guys? A) It created a perception that eating its products was cool. B) It created customized, made-to-order food using the highest-quality ingredients. C) It focused keeping prices as low as possible. D) It emphasized marketing over core competency.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-01 Explain why and how internal firm differences are the root of competitive Topic : Understanding the Importance of a Company's Resources Source : Chapter 04 Test Bank > MC Qu. 30 Five Guys has become successful in...

107)

Mama Mia’s’ Pizza & Calzone has been trying to directly copy the strategies of Fuhgeddaboudit Pies. Even though it is evident that the success of Fuhgeddaboudit Pies comes from the freshness and variety of ingredients it uses, Mama Mia’s has not been able to introduce the same types of produce into its recipes. This is because Fuhgeddaboudit’s network of relationships with local growers, as well as its efficient supply chain, are very difficult to emulate. Which of the following barriers to imitation does this scenario best illustrate? A) path dependence B) resource homogeneity C) social complexity D) resource mobility

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-06 Evaluate different conditions that allow a firm to sustain a competitive a Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > MC Qu. 71 Mama Mia&#8217;s&#8217; Pizza &amp; Calzone ...

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108)

When conducting a________ it’s best to examine both PESTEL and Porter’s five forces analyses because these tools focus on the external environment. A) VRIO framework B) SWOT analysis C) value chain analysis D) resource-based analysis

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-10 Conduct a SWOT analysis to generate insights from external and internal an Topic : Implications for Strategic Leaders Source : Chapter 04 Test Bank > MC Qu. 25 When conducting a ________ it&#8217;...

109)

Which of the following will most likely be considered as an airline’s core competency? A) the airline’s ability to partner at the same airports as its competitors B) the airline’s ability to manufacture planes at a cost that is average in the industry C) the airline’s ability to navigate federal laws just like its competitors D) the airline’s ability to make its fleet more fuel efficient than its competitors

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110)

Briefly describe the VRIO framework.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 04-05 Apply the VRIO framework to assess the competitive implications of a firm' Topic : VRIO Framework Source : Chapter 04 Test Bank > SA Qu. 109 Briefly describe the VRIO framework.

111)

Pharmacat Pharmaceuticals invested $3.4 billion dollars to develop a new drug for individuals with diabetes. After Pharmacat receives FDA approval of the drug, its marginal cost to produce the drug for market will be A) unpredictable. B) low. C) moderate. D) high.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-05 Apply the VRIO framework to assess the competitive implications of a firm' Topic : VRIO Framework Source : Chapter 04 Test Bank > MC Qu. 53 Pharmacat Pharmaceuticals invested $3.4 bill...

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112)

Differentiate between a firm’s resources and capabilities.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-02 Differentiate among a firm's core competencies, resources, capabilities, a Topic : Understanding the Importance of a Company's Resources Source : Chapter 04 Test Bank > SA Qu. 104 Differentiate between a firm&#8217;s resources and capabilities.

113)

Discuss resource immobility as a critical assumption in the resource-based model of a firm.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-04 Evaluate the two critical assumptions about the nature of resources in the Topic : Resource-Based View Source : Chapter 04 Test Bank > SA Qu. 108 Discuss resource immobility as a critical as...

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114)

Juana, a manager at a multinational organization, is trying to carefully scan and link the firm’s internal environment to its external environment. The insights from this analysis will allow her to effectively leverage the company’s internal strengths to exploit external opportunities, while mitigating internal weaknesses and external threats. In this scenario, which of the following managerial tools is Juana employing? A) BCG analysis B) Blake Mouton managerial grid C) SWOT analysis D) Ansoff’s matrix

115)

The competitive advantage that one firm has will be short-lived in an industry in which A) capabilities of a firm are not easily replicable. B) resource heterogeneity is high. C) resource immobility is high. D) perfect competition exists.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 04-04 Evaluate the two critical assumptions about the nature of resources in the Topic : VRIO Framework Topic : Resource-Based View Source : Chapter 04 Test Bank > MC Qu. 47 The competitive advantage that one firm has ...

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116)

Which of the following statements accurately describes a firm’s resource stock? A) Resource stocks are a firm’s current level of intangible resources. B) Resource stocks are a firm’s level of resources that are common to competitors. C) Resource stocks are a firm’s future estimate of both tangible and intangible resources. D) Resource stocks are a firm’s level of investments to maintain or build a resource.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 04-07 Outline how dynamic capabilities can help a firm sustain a competitive adv Topic : Understanding the Importance of a Company's Resources Source : Chapter 04 Test Bank > MC Qu. 77 Which of the following statements accurately...

117)

The core competencies of a firm are determined by the interplay of its tangible resources and intangible capabilities. ⊚ true ⊚ false

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 1 Easy Learning Objective : 04-02 Differentiate among a firm's core competencies, resources, capabilities, a Topic : Understanding the Importance of a Company's Resources Source : Chapter 04 Test Bank > TF Qu. 02 The core competencies of a firm are determin...

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118)

Explain dynamic capabilities and how these capabilities can help a firm sustain its competitive advantage.

119)

Firms that can employ and establish________ are more likely to protect their competitive advantage from being copied and/or eroding away. A) key human capital B) a strong competitor response C) isolating mechanisms D) cash equivalents

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-06 Evaluate different conditions that allow a firm to sustain a competitive a Topic : The Resource-Based View Source : Chapter 04 Test Bank > MC Qu. 21 Firms that can employ and establish ________...

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120)

Provide examples of the primary activities in a firm’s value chain.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 1 Easy Learning Objective : 04-08 Apply a value chain analysis to understand which of the firm's activities Topic : Value Chain Analysis Source : Chapter 04 Test Bank > SA Qu. 120 Provide examples of the primary activities i...

121)

Compare and contrast tangible and intangible resources, and give examples for each..

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-03 Compare and contrast tangible and intangible resources. Topic : Resource-Based View Source : Chapter 04 Test Bank > SA Qu. 107 Compare and contrast tangible and intangible...

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122)

Cartzy, Cartific, and Clustercart, are three consumer-product retailing companies. Their products consist primarily of day-to-day items that are easy to imitate and sell. All three companies use the same resources and capabilities in the production and distribution of their products. Judging from the market conditions described in this scenario, which of the following statements is true? A) Barriers to entry within the industry will be high. B) Any advantage that one firm has will be short-lived. C) The industry structure will be far from perfect competition. D) Resource immobility of the firms will be low.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 04-04 Evaluate the two critical assumptions about the nature of resources in the Topic : VRIO Framework Source : Chapter 04 Test Bank > MC Qu. 40 Cartzy, Cartific, and Clustercart, are three...

123)

An observer may conclude that the organizational culture of Zappos, an online retailer for shoes and clothing, might be the basis for its competitive advantage. However, reverse social engineering to crack Zappos’ code of success might be much more difficult for a company trying to exactly imitate its strategy. Thus, the source of Zappos’ competitive advantage is A) isolating mechanisms. B) causal ambiguity. C) path dependence. D) social complexity.

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124)

Elaborate on time compression diseconomiesand how this affects strategic decisions.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-06 Evaluate different conditions that allow a firm to sustain a competitive a Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > SA Qu. 112 Elaborate on time compression diseconomies.

125)

Dynamic capabilities are especially important for surviving and competing in markets that A) remain unpredictable. B) shift slowly and intermittently. C) shift quickly and constantly. D) remain constant.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 04-07 Outline how dynamic capabilities can help a firm sustain a competitive adv Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > MC Qu. 99 Dynamic capabilities are especially important...

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In the context of the VRIO framework, what is meant by “organized to capture value,” and how can a firm fully exploit the competitive potential of its resources, capabilities, and competencies?

126)

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 04-05 Apply the VRIO framework to assess the competitive implications of a firm' Topic : Sustaining a Competitive Advantage Source : Chapter 04 Test Bank > SA Qu. 111 How can a firm fully exploit the competitive...

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Answer Key Test name: Chapter 04 Test Bank 1) B

NovaNote’s competency in designing and manufacturing batteries will be considered a valuable resource in the VRIO framework. A resource is valuable if it helps a firm increase the perceived value of its product or service in the eyes of consumers, either by adding attractive features or by lowering price because the resource helps the firm lower its costs. 2) D

A value chain represents all the internal activities a firm engages in to produce goods and services. The value chain is formed of primary activities that add value to the final product directly and support activities that add value indirectly. 3) TRUE

Core competencies are unique strengths possessed by a firm that allow it to differentiate its products and services from those of its rivals. For example, Apple has built a global ecosystem of 2 billion users of its products and services, including the iPhone, iPad, Apple Watch, App Store, Apple Care, Apple Pay, and iCloud Services, which reinforce one another. 4) D

In this scenario, Rembrandt Cosmetics accomplished substitution primarily through strategic equivalence. An avenue of imitation for a firm’s valuable and rare resource is through substitution. This is often accomplished through strategic equivalence. 5) C

Dynamic capabilities allow a firm to integrate, build, and reconfigure internal and external competences to address rapidly changing environments. 6) FALSE

The results of a SWOT analysis are sometimes ambiguous, with certain features serving simultaneously as both opportunities and threats. A growing presence overseas can be seen both as a strength (increased brand exposure and a more diverse revenue stream) and a weakness (higher shipping costs, increased exposure to external threats such as economic downturns in foreign economies). 7) A

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TalkaLot has used direct imitation to replicate the valuable and rare resource of Talkie Gen A competing firm can succeed in replicating a firm’s valuable and rare resource by directly imitating the resource in question (direct imitation) or through working around it to provide a comparable product or service (substitution). 8) Short Answer

A valuable resource is one of the four key criteria in the VRIO framework. A resource is valuable if it helps a firm exploit an external opportunity or offset an external threat and positively affects the firm’s competitive advantage. In particular, a valuable resource allows a firm to increase its economic value creation. Revenues rise if a firm can increase the perceived value of its product or service in the eyes of consumers by offering superior design and adding attractive features (assuming costs are not increasing). Production costs fall if the firm can put in place an efficient manufacturing process and tight supply chain management (assuming the perceived value is not decreasing). 9) C

Core rigidities occur when a firm fails to reinvest its core competencies and thus lose its competitive advantage. 10) B

Competitive advantage is more likely to spring from intangible resources, such as an energetic and enthusiastic company culture, than from tangible resources, such as buildings, capital, or supplies. 11) B

Core competencies are the resources and/or strategic advantages of a business, including the combination of pooled knowledge and technical capacities, that allow it to be competitive in the marketplace. 12) TRUE

Dynamic capabilities allow a firm to change its internal resources and capabilities to adapt to changes in the external environment. 13) C

It can be concluded that ShipING is better positioned than Shippity to gain and sustain a competitive advantage. Competitive advantage is more likely to spring from intangible rather than tangible resources. Tangible assets, like buildings or computer servers, can be bought on the open market by anyone who has the necessary cash. However, a brand name must be built, often over long periods of time. 14) A

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Competitive advantage cannot be sustained if the underlying capability can easily be replicated and can thus be directly imitated. Despite Crocs’ patents and celebrity endorsements, other firms copied the shoe and bit strongly into Crocs’ its profits. 15) D

A firm’s core competencies are deployed through its activities, distinct actions that enable firms to add incremental value at each step in the value chain by transforming inputs into goods and services. Managing a supply chain, running the computer system, and providing customer support are examples of specific firm activities. 16) C

An external threat is a danger in a firm’s general environment. 17) Short Answer

A strategic activity system views a firm as a network of interconnected activities that can be the foundation of its competitive advantage. A network of primary and supporting firm activities can create a strategic fit that can lead to a competitive advantage. To sustain a competitive advantage, firms need to hone, fine-tune, and upgrade their strategic activity systems over time, in response to changes in the external environment and to competitors’ moves. 18) A

The company’s plant and machinery will be included in the assessment of the value of all the tangible resources the company owns. Tangible resources have physical attributes and are visible. Examples of tangible resources are labor, capital, land, buildings, plant, equipment, and supplies. 19) B

The scenario illustrates resource heterogeneity. In the resource-based view, a firm is a unique bundle of resources, capabilities, and competencies. Resource heterogeneity comes from the insight that bundles of resources differ across firms. 20) B

Resource leakage might occur through employee turnover, especially if key employees leave. Significant resource leakage can erode a firm’s competitive advantage. 21) C

An implication of high turnover in a company is that it results in a reduction in the company’s intangible-resource stocks. The outflows of resources represent a reduction in a firm’s intangibleresource stocks. Significant resource leakage can erode a firm’s competitive advantage.

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22) C

A strategic activity system views a firm as a network of interconnected activities that can be the foundation of its competitive advantage. Strategic leaders need to adapt their firm’s activity system by upgrading value-creating activities in response to changing environments. 23) D

Brand equity will be the most difficult for OpenBook to build merely using its capital. Tangible assets, such as buildings or computer servers, can be bought on the open market by anyone who has the necessary cash. However, a brand name and brand equity must be built, often over long periods of time. 24) TRUE

Strategic activity systems, or the idea of the firm as a set of interconnected activities, are socially complex and causally ambiguous, making them difficult to replicate elsewhere. As long as managers ensure that activities evolve over time in response to changes in the external environment, strategic activity systems can help establish and maintain a competitive advantage. 25) B

The Strength-Threats quadrant of the SWOT matrix uses an internal strength, such as having loyal, hardworking, and enthusiastic employees, to minimize the effect of an external threat, such as competition. 26) A

This competency of Tampico Alimentos will be considered as a rare resource in the VRIO framework. A resource is rare if the number of firms that possess it is less than the number of firms it would require to reach a state of perfect competition. 27) A

A core competency can turn into a core rigidity if a firm relies too long on the competency without honing, refining, and upgrading as the environment changes. 28) A

Capabilities are the organizational and managerial skills necessary to orchestrate a diverse set of resources to deploy them strategically. 29) B

A resource is costly to imitate if firms that do not possess the resource cannot develop or buy the resource at a reasonable price. If the resource in question is valuable, rare, and costly to imitate, then it is an internal strength and a core competency. 30) A

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Support activities are firm activities that add value indirectly, but are necessary to sustain primary activities. Thus, eBuy could solve its problem by working on its support activities. 31) Short Answer

The value chain perspective enables strategic leaders to see how competitive advantage flows from the firm’s distinct set of activities. This is because a firm’s core competency is generally found in a network linking different but distinct activities, each contributing to the firm’s strategic position as either a low-cost leader or differentiator. 32) TRUE

The resource-based view has two critical assumptions: resource heterogeneity and resource immobility. Resource immobility rests on the insight that resources tend to be “sticky” and don’t move easily from firm to firm. 33) B

A valuable product enables a firm to improve its profit margin by increasing sales without raising production costs. By touting the use of SmartReads e-readers by celebrities, SmartReads can differentiate itself from competitors and improve its perceived value, leading to higher sales. Adding expensive new features or lowering the retail price, on the other hand, will erode SmartReads’s profit margins, while imitating competitors will make it difficult for SmartReads to differentiate itself. 34) C

According to resource immobility, a critical assumption in the resource-based model, the resource differences between firms are difficult to replicate and last for a long time. 35) D

A company can often win a lawsuit against a competitor when the court finds that the competitor infringed on patents owned by the company. 36) B

The scenario best illustrates path dependence. Path dependence is a situation in which the options one faces in the current situation are limited by decisions made in the past. 37) A

The primary activities add value directly as the firm transforms inputs into outputs—from raw materials through production phases to sales and marketing, and finally customer service. Primary activities are supply chain management, operations, distribution, marketing and sales, and after-sales service.

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38) C

Given the accelerated pace of technological change, in combination with deregulation, globalization, and demographic shifts, dynamic markets today are the rule rather than the exception. As a response, a firm may create, deploy, modify, reconfigure, or upgrade resources to provide value to customers and/or lower costs in a dynamic environment. 39) Short Answer

Resource stocks refer to the firm’s current level of intangible resources. Resource flows are the firm’s level of investments to maintain or build a resource. A helpful metaphor to explain the differences between resource stocks and resource flows is a bathtub filled with water. The amount of water in the bathtub indicates a company’s level of specific intangible resource stocks—such as its dynamic capabilities, new product development, engineering expertise, innovation capability, or reputation for quality. Intangible resource stocks are built through investments over time. These investments are represented in the bathtub (Exhibit 4.7) by the four faucets from which water flows into the tub. Each faucet represents a different investment flow. Investments in building an innovation capability, for example, differ from investments made in marketing expertise. Each investment decision carries an opportunity cost that captures the loss of the next-best investment option. How fast a firm can build its intangible resources—how fast the tub fills—depends on how much water comes out of the faucets and how long the faucets are left open. Intangible resources are built through continuous investments and experience over time. Organizational learning interacts in a feedback loop with investment decisions to build intangible resource stocks over time. How fast the bathtub fills also depends on how much water leaks out of it. The outflows represent a reduction in the firm’s intangible resource stocks. Resource leakage might occur through employee turnover, especially if key employees leave. Significant resource leakage an erode a firm’s competitive advantage. 40) D

Path dependence is a situation in which the options one faces in the current situation are limited by decisions made in the past. 41) TRUE

Strategy is as much about deciding to do things differently from competitors as it is about choosing not to do certain things at all. 42) A

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In order to maintain competitiveness, a firm should utilize many value chain activities, and not just focus on one. 43) Short Answer

Student examples will vary. A sample answer follows: Causal ambiguity describes a situation in which the cause and effect of a phenomenon are not readily apparent. For example, everyone can see that Apple has launched several hugely successful innovative products, including the iPhone and Apple Watch. However, gaining a deep understanding of exactly why Apple has been so successful is difficult. Even Apple’s strategic leaders may not be able to pinpoint the source of their success. If the link between cause and effect is ambiguous for Apple’s strategic leaders, then it is that much more difficult for others seeking to copy a valuable resource, capability, or competency. 44) C

Path dependence is a process in which the options that one faces in a current situation are affected by decisions made in the past. Because the team was built for a run-dominated offense, acquiring just one key player did not change the overall skill set of the team. 45) A

The scenario illustrates better expectations of future resource value. Sometimes firms can acquire resources at a low cost, which lays the foundation for a competitive advantage later when expectations about the future of the resource turn out to be more accurate. 46) A

A competing firm can succeed in imitating another firm’s valuable resource by directly imitating the resource in question (direct imitation) or through working around it to provide a comparable product or service (substitution). So Best Replica imitated Build Your Own’s model of the Eiffel Tower by coming out with a comparable product, namely a model of another European landmark—the Leaning Tower of Pisa. 47) D

The lack of research and development productivity is an internal weakness that prevents your firm from taking advantage of external opportunities by being the first to offering new products and services. By addressing the lack of productivity with a departmental reorganization, the firm has produced a strategic alternative based on the weaknesses–opportunities quadrant of the SWOT matrix. 48) Short Answer

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Student answers will vary. Here are three examples: Amazon: Superior IT and AI capabilities; superior customer service; diversification across different industries. Example: Amazon has the largest selection of retail items online, with full integration from warehouse to delivery. Coca-Cola: Superior marketing and distribution. Example: Coca-Cola leverages one of the world’s most recognized brands (based on its original “secret formula”). Apple: Superior industrial design in the integration of hardware and software; superior marketing and retail experience; establishment and maintenance of a digital ecosystem. Example: Innovative and category-defining mobile devices and software services that take the user’s experience to a new level. 49) Short Answer

The resource-based view of a firm provides a model that systematically aids in identifying core competencies. It is a model that sees certain types of resources as key to superior firm performance. If a resource exhibits VRIO attributes, the resource enables the firm to gain and sustain a competitive advantage. The resource-based view (RBV) defines resources broadly. According to the RBV, a resource is any asset, capability, or competency that a firm can draw upon when formulating and implementing strategy. 50) C

Social complexity describes situations in which different social and business systems interact with one another. Copying the emerging complex social systems is difficult for competitors because neither direct imitation nor substitution is a valid approach. Therefore, Amanda’s Cosmetics attempt to imitate how Michele’s Makeup combined its management and product development systems with little success is an example of social complexity as an isolating mechanism. 51) C

Isolating mechanisms are barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy. 52) D

When a firm does not continually upgrade or improve core competencies, its competitors are more likely to develop equivalent or superior skills. This insight allows us to explain differences between firms in the same industry and competitive dynamics over time. 53) Short Answer

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Student answers will vary. Although the SWOT analysis is a widely used management framework, a word of caution is in order. A problem with this framework is that a strength can also be a weakness and opportunity can also be a threat. For example, the location of Alphabet’s headquarters in Silicon Valley and near several universities is a key resource for the firm. Most people would consider this a strength for the firm. However, California has a high cost of living and is routinely ranked among the worst of the states in terms of “ease of doing business.” In addition, this area of California is along major earthquake fault lines and is more prone to natural disasters than many other parts of the country. So Alphabet’s location can be a strength or a weakness. 54) D

In the resource-based model of competitive advantage, resource immobility refers to the assumption that resources of a firm tend to be “sticky” and do not move easily from firm to firm. Because of that stickiness, the resource differences that exist between firms are difficult to replicate and, therefore, can last for a long time. 55) Short Answer

A SWOT analysis allows strategic leaders to evaluate a firm’s current situation and future prospects by simultaneously considering internal and external factors. The SWOT analysis encourages strategic leaders to scan the internal and external environments, looking for any relevant factors that might affect the firm’s current or future competitive advantage. The focus is on internal and external factors that can affect—in a positive or negative way—the firm’s ability to gain and sustain a competitive advantage. 56) C

In the context of the resource-based model of competitive advantage, if a successful firm exhibits resource immobility it means that the firm will have a sustained competitive advantage due to its unique resources. In the resource-based view, resource immobility is an assumption that resources of a firm tend to be “sticky” and do not move easily from firm to firm. Because of that stickiness, the resource differences that exist between firms are difficult to replicate and therefore can last for a long time. 57) C

Brand reputation, trademarks, intellectual property are all intangible assets. Unlike physical resources, brand reputation is built over a long time and is something that other companies cannot buy from the market. Intangible resources usually stay within a company and are the main source of sustainable competitive advantage. 58) A

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Resource leakage can occur through employee turnover, especially if key employees leave. Significant resource leakage can erode a firm’s competitive advantage. 59) FALSE

Alphabet’s tangible resources, valued at $85 billion, include its vast headquarters in California and numerous clusters of computer servers across the globe. The Google brand is one of Alphabet’s intangible resources. 60) Short Answer

The value chain describes the internal activities a firm engages in when transforming inputs into outputs. Each action the firm performs along the horizontal chain adds incremental value as raw materials and other inputs are transformed into components that are assembled into finished products or services for the end consumer. Each activity the firm performs along the horizontal value chain also adds incremental costs. 61) C

Production plants are part of a firm’s operations. Operations are primary activities in the value chain analysis. 62) D

According to the dynamic capabilities perspective, ezTV should start working on Ultra HD and Smart television technologies to adapt its core competency to suit the external environment. The essence of dynamic capabilities perspective is that competitive advantage is not derived from static resource or market advantages but rather from a dynamic reconfiguration of a firm’s resource base. 63) C

Core competencies that are not continuously nourished will lose their ability to yield a competitive advantage. CarTsar should prioritize upgrading or improving its core competencies to ensure that competitors do not develop superior skills in those areas. 64) C

If Horloge and Tempo develop the same customer knowledge base and create products that provide the same appeal, then TechTime will have a resource that is still valuable but no longer rare. 65) Short Answer

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A firm’s core competencies are deployed through its activities. Therefore, a firm’s activities are one of the vital internal drivers of performance differences across firms. Activities are distinct actions that enable firms to add incremental value at each step in the value chain by transforming input into goods and services. Managing a supply chain, running the company’s computer system, and providing customer support are examples of specific firm activities. To help a firm achieve a competitive advantage, each distinct activity performed needs to either add incremental value to the product or service offering or lower its relative cost. Discrete and specific firm activities are therefore the basic units of developing a competitive advantage. They are the drivers of the firm’s relative costs and level of differentiation that the firm can provide to its customers. 66) C

Core competencies allow a firm to differentiate its products and services from those of its rivals, creating higher value for the customer or offering products and services of comparable value at lower cost. 67) D

A resource is valuable if it helps a firm increase the perceived value of its product or service in the eyes of consumers, either by adding attractive features or by lowering price because the resource helps the firm lower its costs. 68) A

In the resource-based view, a firm is assumed to be a bundle of resources, capabilities, and competencies. The first critical assumption—resource heterogeneity—is that bundles of resources, capabilities, and competencies differ across firms. In perfect competition, all firms have access to the same resources and capabilities, ensuring that any advantage that one firm has will be short-lived. 69) A

The scenario best illustrates resource immobility. A critical assumption of the resource-based model—resource immobility—is that resources tend to be “sticky” and don’t move easily from firm to firm. Because of that stickiness, the resource differences that exist between firms are difficult to replicate and therefore can last for a long time. 70) B

In monetary terms, Flectronics’ resource flows would be $700,000. Resource flows are a firm’s level of investments to maintain or build a resource. 71) B

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Better expectations of future resource value describes a situation in which firms acquire resources at a low cost, which lays the foundation for a competitive advantage later. 72) FALSE

Resource flows are the firm’s level of investments to maintain or build a resource. By reinvesting much of its profits into improving its intangible resources, Amazon exhibits a high level of resource flows. 73) Short Answer

Isolating mechanisms are barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy. In the business world, isolating mechanisms are often referred to as a moat to protect competitive advantage. They include better expectations of future resource value, path dependence, causal ambiguity, social complexity, and intellectual property protection. If one, or any combination, of these isolating mechanisms is present, a firm may strengthen its basis for competitive advantage, increasing a chance of sustaining that advantage over a longer period. 74) B

Gene Electronics has been protected from losing its competitive advantage as a result of causal ambiguity. Causal ambiguity describes a situation in which the cause and effect of a phenomenon are not readily apparent. 75) D

Crocs fell victim to direct imitation. Despite its patents and celebrity endorsements, other firms were able to more or less directly copy the shoe, taking a big bite out of Crocs’ profits. 76) C

Tangible assets, such as buildings or computer servers, can be bought on the open market by anyone who has the necessary cash. However, an intangible asset such as a brand name or corporate culture must be built, often over long periods of time. 77) C

Resource heterogeneity suggests that not all firms have access to the same bundles of resources. For example, at SWA, job descriptions are informal, and employees pitch in to “get the job done.” Pilots may help load luggage and flight attendants may help clean airplanes to ensure an on-time departure. 78) FALSE

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Intellectual property protections are temporary barriers to imitation. Once the protections expire, imitation becomes common. 79) B

Organizational and managerial skills that find their expression in a company’s structure, routines, and culture are referred to as capabilities. Capabilities are the organizational and managerial skills necessary to orchestrate a diverse set of resources and to deploy them strategically. Capabilities are by nature intangible. 80) D

Physical infrastructure, such as Amazon’s vast network of distributions centers, is a tangible resource. 81) B

Both the rights to the best-selling novel and the screenwriter’s experience are intangible resources. 82) D

A firm must be able to change its resource base as the external environment changes. Rather than creating a static fit, the firm’s internal strengths should change with its external environment in a dynamic fashion. 83) A

According to the bathtub metaphor, resource leakage occurs when employee turnover is high or when the firm does not engage in certain activities for some time and forgets how to do them well. Since your employees are the primary drivers of your reputation for innovation, the best way to protect your stock of intangible resources against resource leakage is to ensure that employees are not recruited away by other firms. 84) A

One of the critical assumptions of the resource-based view is resource immobility, or the idea that resources are “sticky” and hard to replicate. By offering a service that you do not have the resources to provide, you risk disappointing and alienating your customers, which could lead to further losses of market share. 85) A

In the context of SWOT analysis, an increase in its customers’ disposable income best exemplifies a firm’s external opportunity. Strengths and weaknesses are internal to an organization, whereas opportunities and threats are external to the organization.

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86) A

In the context of SWOT analysis, a decline in a firm’s market share best exemplifies a firm’s internal weakness. Strengths and weaknesses are internal to an organization, whereas opportunities and threats are external to the organization. 87) D

A resource-based view of a firm provides a model that systematically aids in identifying core competencies. 88) A

When a firm relies on a core competency for too long and fails to adapt to changes in the external environment, its core competency becomes a core rigidity. SJobs’s failure to upgrade its service model to compete with the features offered by its competitors is a core rigidity that has led to a competitive disadvantage. 89) Short Answer

Support activities of a firm add value indirectly. These activities—such as research and development (R&D), information systems, human resources, accounting and finance, and firm infrastructure including processes, policies, and procedures—support each of the primary activities. 90) FALSE

Primary activities are the actions that a firm takes to directly provide a product or service to the end user. 91) Short Answer

The two assumptions critical to the resource-based model are: resource heterogeneity and resource immobility. Resource heterogeneity posits that bundles of resources, capabilities, and competencies differ across firms. The resource bundles of firms competing in the same industry (or even in the same strategic group) are unique to some extent and thus differ from one another. Resource immobility suggests that resources tend to be “sticky” and don’t move easily from firm to firm. Because of that stickiness, the resource differences that exist between firms are difficult to replicate and therefore can last a long time. 92) B

Viral’s design patents would be considered a rare resource that is best contributing to its competitive advantage. A resource is rare if only one or a few firms possess it. 93) C

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By opening a shop near the future location of many new homes and businesses, Always Baked bakery’s managers are able to secure a valuable future resource (a location in a high-density area with no competition and many future customers) at a low price. 94) B

The increase in a firm’s customer loyalty best exemplifies a firm’s internal strength. Strengths and weaknesses are internal to an organization, whereas opportunities and threats are external to the organization. 95) B

Causal ambiguity describes a situation in which the cause and effect of a phenomenon are not readily apparent. In the given scenario, the firm’s competitive advantage is protected against imitation by causal ambiguity. 96) Short Answer

Student examples will vary. A sample answer follows: Apple’s dynamic capabilities allowed it to redefine the markets for mobile devices, computing, music, smartphone, and media content. Through its iPod and App Store, Apple generated environmental change in the music market to which Sony and others had to respond. With its iPhone, Apple redefined the smartphone market, creating environmental change that forced a response by competitors such as Samsung, BlackBerry, and Nokia. The Apple Watch is shaping the market for computer wearables. Dynamic capabilities are especially important for surviving and competing in markets that shift quickly and constantly, such as the high-tech space in which Amazon, Apple, Alphabet, and Microsoft compete. 97) FALSE

Accounting, human resources, and research and development (R&D) are examples of support activities that add value indirectly. 98) C

Causal ambiguity describes a situation in which the cause and effect of a phenomenon are not readily apparent. To formulate and implement a strategy that enhances a firm’s chances of gaining and sustaining a competitive advantage, strategic leaders need to have a hypothesis or theory of how to compete. However, comprehending and explaining the underlying reasons for observed phenomena is far from trivial. 99) C

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This case is an example of resource immobility. Resources tend to be “sticky” and don’t move easily from firm to firm. As a result, Continental and Delta were both unable to successfully copy Southwest. 100)

B This fundamental question about strategy attempts to illustrate the importance of why firms exist in the first place. 101)

C To help a firm achieve a competitive advantage, each distinct activity performed in the value chain needs to contribute to the firm’s strategic position as either a low-cost leader or differentiator. Each distinct activity enables firms to add incremental value by transforming inputs into goods and services. 102)

C Although the SWOT analysis is a widely used management framework, a word of caution is in order. A problem with this framework is that a strength can also be a weakness and an opportunity can also be a threat. 103)

B The expertise acquired by the employees in the company, an intangible resource, is the asset that will best enable STRIKEBYTE to gain and sustain a competitive advantage. Competitive advantage is more likely to spring from intangible rather than tangible resources. 104)

B In this scenario, Blue Tech’s failure can be attributed to time compression diseconomies. When attempting to compress lots of effort and resources such as R&D into a short time period, it will not be as effective as when a firm spreads out its effort and investments over a longer period. Trying to achieve the same outcome in a short time period, even with higher investments, tends to lead to inferior results. 105)

C Highly Strung’s competitor has found a way to directly imitate the benefits of the string coating while substituting cheaper ingredients. This combination of direct imitation and substitution undercuts Highly Strung’s competitive advantage and threatens to reduce its market share. 106)

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By some estimates, Five Guys has captured 50% of the “better burger” segment and has achieved a loyal following despite its higher menu prices and longer wait times. How? The answer is found in Five Guys’ core competency: delivering a customized, made-to-order burger and hand-cut fries using on the highest-quality ingredients. 107)

C Social complexity describes situations in which different social and business systems interact with one another. It emerges when two or more individual systems are combined. Copying the emerging complex social systems is difficult for competitors because neither direct imitation nor substitution is a valid approach. 108)

B The “O” and “T” in SWOT are used to identify external factors, while the other answer options are all internal to the firm. 109)

D Core competencies are unique, deeply embedded, firm-specific strengths that allow companies to differentiate their products and services and thus create more value for customers than their rivals do. 110)

Short Answer The VRIO framework is a theoretical framework that explains and predicts firm-level competitive advantage. A firm can gain a competitive advantage if it has resources that are valuable (V), rare (R), and costly to imitate (I); the firm also must organize (O) to capture the value of the resources. For the resource in question to be a core competency that underpins a firm’s sustainable competitive advantage, you must be able to answer “yes” to all four of the attributes listed in the decision tree (Exhibit 4.6). 111)

B Although the initial investments to create the first version of a new product or service is quite high in many knowledge-intensive industries, the marginal cost (the cost to produce the next unit) after the initial investment is quite low. 112)

Short Answer Resources are any assets that a firm can draw on when formulating and implementing strategy. They can be tangible or intangible. Capabilities are organizational and managerial skills necessary to orchestrate a diverse set of resources and to deploy them strategically. They are by nature intangible. 113)

Short Answer

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A critical assumption in the resource-based view—resource immobility—rests on the insight that resources tend to be “sticky” and don’t move easily from firm to firm. Because of that stickiness, the resource differences that exist between firms are difficult to replicate and therefore can last for a long time. 114)

C In this scenario, Juana is using the SWOT analysis. SWOT analysis is a framework that allows managers to synthesize insights obtained from an internal analysis of the company’s strengths and weaknesses (S and W) with those from an analysis of external opportunities and threats (O and T). 115)

D In perfect competition, all firms have access to the same resources and capabilities, ensuring that any advantage that one firm has will be short-lived. 116)

A Resource stocks are a firm’s current level of intangible resources. A company’s intangible resource stock includes its dynamic capabilities, new-product development, engineering expertise, innovation capability, reputation for quality, and so on. 117)

TRUE Core competencies emerge when managers skillfully combine tangible resources such as machinery and cash with capabilities such as an efficient company culture. 118)

Short Answer Dynamic capabilities are a firm’s ability to create, deploy, modify, reconfigure, upgrade, and leverage its resources over time in its quest for competitive advantage. For a firm to maintain its competitive edge, the fit between its internal strength and the external environment must be dynamic. Rather than focusing on a static fit at one point in time, a firm must change its internal resource base as the external environment changes. Dynamic capabilities are essential for moving beyond a short-lived advantage and creating sustained competitive advantage. 119)

C Isolating mechanisms are barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy. 120)

Short Answer

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The primary activities of a firm add value directly as the firm transforms inputs into outputs— from raw materials through production phases to sales and marketing and finally customer service. Primary activities are supply chain management, operations, distribution, marketing and sales, and after-sales service. 121)

Short Answer Tangible resources have physical attributes and are visible. Examples of tangible resources are labor, capital, land, buildings, plant, equipment, and supplies. Intangible resources have no physical attributes and thus are invisible. Examples of intangible resources include a firm’s culture, knowledge, brand equity, reputation, and intellectual property. Competitive advantage is more likely to spring from intangible rather than tangible resources. Tangible assets, like buildings or computer servers, can be bought on the open market by anyone who has the necessary cash. However, a brand name must be built, often over long periods of time. 122)

B If a resource is common, it will result in perfect competition where no firm is able to maintain a competitive advantage. In perfect competition, all firms have access to the same resources and capabilities, ensuring that any advantage that one firm has will be short-lived. 123)

C Although an observer may conclude that Zappos’ culture, which focuses on autonomous teams in a flat hierarchy to provide superior customer service, might be the basis for its competitive advantage, engaging in reverse social engineering to crack Zappos’ code of success might be much more difficult. A firm may be able to protect its competitive advantage (even for long periods of time) when the source of its competitive advantage is causally ambiguous or socially complex. 124)

Short Answer

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Path dependence rests on the notion that time cannot be compressed at will. Although management can compress resources such as labor and R&D into a shorter period, the push will not be as effective as when a firm spreads out its effort and investments over a longer period. Trying to achieve the same outcome in less time, even with higher investments, tends to lead to inferior results due to time compression diseconomies. Strategic decisions generate long-term consequences. Due to path dependence and time compression diseconomies, they are not easily reversible. A competitor cannot imitate or create core competencies quickly, nor can they go out and buy a reputation for quality or innovation on the open market. These types of valuable, rare, and costly-to-imitate resources, capabilities, and competencies must be built and organized effectively over time, often through a painstaking process that frequently includes learning from failure. 125)

C Dynamic capabilities are especially relevant for surviving and competing in markets that shift quickly and constantly. 126)

Short Answer The final criterion of whether a rare, valuable, and costly-to-imitate resource can form the basis of a sustained competitive advantage depends on the firm’s internal structure. To fully exploit the competitive potential of its resources, capabilities, and competencies, a firm must be organized to capture value—that is, it must have in place an effective organizational structure and coordinating systems.

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Student name:__________ 1) Which of the following is an external performance metric? A) total return to shareholders B) fixed assets turnover C) return on revenue D) inventory turnover Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-03 Appraise accounting metrics and shareholder value creation as measures of Topic : Shareholder Value Creation and Competitive Advantage Source : Chapter 05 Test Bank > MC Qu. 65 Which of the following is an external perfor...

2) Which of the following statements correctly describes the actions of a company applying a

CSV perspective? A) The company maintains a competitive advantage that allows it to “do good.” B) The company maintains focus on its citizenship and philanthropic activities. C) The company is internally focused, and its actions derive from deeply held beliefs. D) The company is externally focused to address pressures that arise. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-02 Explain the shift in emphasis from corporate social responsibility (CSR) t Topic : Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 40 Which of the following statements correctly...

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3) The management team for Forever Power came up with the following vision statement:

“Forever Power will conscientiously track its financial performance to ensure profits for its investors, enhance its community through employment and supporting charities, and dispose of waste in a manner that will not harm the environment.” This vision statement is most likely based on the A) triple-bottom-line approach. B) accounting profitability approach. C) economic value creation approach. D) balanced-scorecard approach. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 2 Medium Learning Objective : 05-06 Apply a triple bottom line to assess and evaluate competitive advantage. Topic : Financial Analysis Tools for Appraising Firm Performance Source : Chapter 05 Test Bank > MC Qu. 108 The management team for Forever Power came u...

4) Discuss the four key questions managers need to answer when using the balanced scorecard

to develop strategic objectives.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-05 Apply a balanced scorecard to assess and evaluate competitive advantage. Topic : The Roles of Firm Effects and Industry Effects on Firm Performance and Competitive Advantage Source : Chapter 05 Test Bank > SA Qu. 128 Discuss the four key questions managers need...

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5) In determining the competitive advantage of a firm, the NASDAQ Computer Index and the

S&P 500 are examples of A) accounting metrics. B) benchmarks. C) reporting standards. D) valuations. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-03 Appraise accounting metrics and shareholder value creation as measures of Topic : Shareholder Value Creation and Competitive Advantage Source : Chapter 05 Test Bank > MC Qu. 75 In determining the competitive advantage...

6) The tenet behind the triple-bottom-line is that A) a firm’s return on revenue can be broken down into three ratios: COGS/Revenue,

R&D/Revenue, and SG&A/Revenue. B) a firm’s primary objective should be increasing the total returns to its shareholders. C) a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy. D) a firm should solely focus on increasing the economic value created to/for its customers. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-06 Apply a triple bottom line to assess and evaluate competitive advantage. Topic : Financial Analysis Tools for Appraising Firm Performance Source : Chapter 05 Test Bank > MC Qu. 107 The tenet behind the triple-bottom-line is t...

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7) Intangible assets that have become much more important to a firm’s competitive advantage

include A) return on revenue. B) real estate holdings. C) intellectual property. D) return on equity. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-03 Appraise accounting metrics and shareholder value creation as measures of Topic : Shareholder Value Creation and Competitive Advantage Source : Chapter 05 Test Bank > MC Qu. 63 Intangible assets that have become...

8) Wellness Data Corp. focuses on its competitive advantage as its fundamental and top

priority; it uses some of its profits to do good in its community. This demonstrates A) creating shared value. B) corporate social responsibility. C) a sustained competitive advantage. D) a balanced scorecard. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-02 Explain the shift in emphasis from corporate social responsibility (CSR) t Topic : Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 41 Wellness Data Corp. focuses on its competitive...

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9) What do strategy scholars believe is the result of executives’ pursuit of strategies that define

value creation too narrowly in public stock companies? A) It reduces the trust of shareholders in the organization as a vehicle for value creation and societal welfare. B) It gives the managers greater control of the performance of the organization in the long term. C) It enables companies to create social value by addressing society’s needs but prevents them from creating economic value for shareholders. D) It helps companies increase firm profits by creating shared value while benefitting society. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : Shared Value Creation Framework Source : Chapter 05 Test Bank > MC Qu. 30 What do strategy scholars believe is...

10) Return on risk capital primarily includes A) account receivables plus account payables. B) economic value created by a firm plus reservation price. C) consumer surplus plus firm profit. D) stock price appreciation plus dividends received over a specific period. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-03 Appraise accounting metrics and shareholder value creation as measures of Topic : Shareholder Value Creation and Competitive Advantage Source : Chapter 05 Test Bank > MC Qu. 67 Return on risk capital primarily includes

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11) What pricing options does a firm have when the difference between V, the consumer’s

willingness to pay, and C, the cost to produce the good or service, is large?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-04 Link economic value creation to different sources of competitive advantage Topic : Economic Value Creation Source : Chapter 05 Test Bank > SA Qu. 124 What pricing options does a firm have when t...

12) Which of the following statements best supports the view that GE’s Ecomagination strategy

is in line with the shared value creation framework? A) The Ecomagination strategy helps GE spend more on research and development than other similar companies. B) The Ecomagination strategy is the brainchild of the founder of the company. C) The Ecomagination strategy allows GE to produce “green” products while increasing revenue and competitive advantage. D) The Ecomagination strategy generated $16 billion in revenues for GE during 2020. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : Shared Value Creation Framework Source : Chapter 05 Test Bank > MC Qu. 36 Which of the following statements best...

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13) What are opportunity costs in general? What are the opportunity costs for entrepreneurs?

14) Unlike the financial ratios based on accounting data, total return to shareholders is A) backward-looking and historic in nature. B) an absolute measure of competitive advantage. C) unaffected by market volatility or macroeconomic factors. D) an external and forward-looking performance metric. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-03 Appraise accounting metrics and shareholder value creation as measures of Topic : Shareholder Value Creation and Competitive Advantage Source : Chapter 05 Test Bank > MC Qu. 72 Unlike the financial ratios based on account...

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15) You are the CEO of a tech company and have recently undertaken a review of your

company’s strategy. In comparing your stock market valuation to that of your closest competitor, you note that your firm is currently valued at $50 billion, while your competitor is valued at $40 billion. How should you proceed? A) Compare the current valuations with past valuations to determine a trend. B) Consider this evidence of a sustainable competitive advantage and maintain your current strategy. C) Assume your current strategy has failed and begin to formulate a new one. D) Compare your valuation to firms in another industry. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 05-03 Appraise accounting metrics and shareholder value creation as measures of Topic : Shareholder Value Creation and Competitive Advantage Source : Chapter 05 Test Bank > MC Qu. 73 You are the CEO of a tech company and have r...

16) ________ are best described as the value of the best forgone alternative use of the resources

employed. A) Social costs B) Variable costs C) Opportunity costs D) Switching costs Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-04 Link economic value creation to different sources of competitive advantage Topic : Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 94 ________ are best described as the value of the...

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17) Define the CSV and CSR perspectives, and give an example of how each may affect a

company’s actions.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-02 Explain the shift in emphasis from corporate social responsibility (CSR) t Topic : Economic Value Creation Source : Chapter 05 Test Bank > SA Qu. 116 Define the CSV and CSR perspectives, and...

18) Discuss the limitations associated with using accounting data to measure competitive

performance.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-03 Appraise accounting metrics and shareholder value creation as measures of Topic : Financial Analysis Tools for Appraising Firm Performance Source : Chapter 05 Test Bank > SA Qu. 117 Discuss the limitations associated with usin...

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19) Accounting data focus mainly on tangible assets, which are no longer a company’s most

important assets. Elaborate on this statement.

20) A wearable technology company has priced one of its wristwatches at $210. Most of its

competitors sell similar watches at $180. Selling at any price less than $150 would result in a loss for the company. However, the absolute maximum a customer is willing to pay for it is $170. In this scenario, what is the reservation price of the wristwatch? A) $170 B) $180 C) $210 D) $150 Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 2 Medium Learning Objective : 05-04 Link economic value creation to different sources of competitive advantage Topic : Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 79 A wearable technology company has priced one...

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21) Skyward Robotics produces electronic components used in drones. In fiscal year 2022,

Skyward Robotics earned an accounting profit of $3 million. However, Skyward’s production facilities might have also been used to produce components for smartphones, 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) Skyward Robotics earned an economic profit of $5.5 million. B) Skyward Robotics earned an economic profit of $500,000. C) Skyward Robotics suffered an economic loss of $500,000. D) Skyward Robotics suffered an economic loss of $2.5 million. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 05-04 Link economic value creation to different sources of competitive advantage Topic : Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 98 Skyward Robotics produces electronic...

22) Nalani 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 company accurately; second, she must A) compare and benchmark her firm’s performance to other competitors in the same industry. B) focus on creating value by utilizing operational effectiveness such as Six Sigma and lean manufacturing. C) assess her capital and liquid position to ensure funding for future projects. D) ensure the right strategic leaders are in place that can execute her strategy. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-03 Appraise accounting metrics and shareholder value creation as measures of Topic : Accounting Profitability Source : Chapter 05 Test Bank > MC Qu. 58 Nalani is trying to determine if her company ...

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23) Superior Screen Corp. incurs a cost of $750 to produce one unit of an OLED television. The

company’s management has priced the product at $1,000 in the market. Considering the technological advancement of the television, customers perceive its value to be around $1,200. What is the economic value created in this scenario? A) $550 B) $350 C) $250 D) $450 Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 05-04 Link economic value creation to different sources of competitive advantage Topic : Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 88 Superior Screen Corp. incurs a cost...

24) Creating shared value (CSV) differs markedly from corporate social responsibility (CSR). ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-02 Explain the shift in emphasis from corporate social responsibility (CSR) t Topic : Economic Value Creation Source : Chapter 05 Test Bank > TF Qu. 04 Creating shared value (CSV)...

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25) What is the relationship between producer surplus and consumer surplus?

26) Which of the following descriptions correctly characterizes a CSV perspective? A) The company’s budget includes philanthropic contributions designed to “do good.” B) The company’s budget can easily be modified in response to shifting preferences. C) The company identity and budget are entirely aligned around creating shared value. D) The company commitment to social responsibility is subject to external pressures. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-02 Explain the shift in emphasis from corporate social responsibility (CSR) t Topic : Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 43 Which of the following descriptions...

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27) ________ denotes the dollar amount a consumer would attach to a good or service. A) Utility B) Value C) Consumer surplus D) Economic contribution Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-04 Link economic value creation to different sources of competitive advantage Topic : Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 82 ________ denotes the dollar amount a consumer w...

28) An example of a classic tragedy of the commons problem is A) the Enron accounting scandal. B) the 9/11 terror attacks. C) Hurricane Katrina. D) climate change. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : Organizational Structure and Controls Source : Chapter 05 Test Bank > MC Qu. 26 An example of a classic tragedy of the...

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29) What are the advantages of the balanced scorecard?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-05 Apply a balanced scorecard to assess and evaluate competitive advantage. Topic : Balanced-Scorecard Approach Source : Chapter 05 Test Bank > SA Qu. 127 What are the advantages of the balanced scor...

30) Which of the following perspectives best supports the shared value creation framework? A) Externalities such as pollution, wasted energy, and costly accidents actually create

internal costs. B) Markets are more often than not defined by societal needs rather than economic needs. C) A firm’s competitive advantage depends on pitting economic and societal needs in a trade-off. D) Failing to create value for society almost always reflects on the bottom line. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : Shared Value Creation Framework Source : Chapter 05 Test Bank > MC Qu. 34 Which of the following perspectives best...

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31) 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) $1 billion; that is, 10 million shares × $100. C) 20:1; that is, $2,000/$100. D) $200,000; that is, $2,000 × $100. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 2 Medium Learning Objective : 05-03 Appraise accounting metrics and shareholder value creation as measures of Topic : Shareholder Value Creation and Competitive Advantage Source : Chapter 05 Test Bank > MC Qu. 69 A firm has 10 million shares outstanding, an...

32) How does a sustainable strategy typically help a firm? A) It facilitates the firm in effectively isolating its external stakeholders. B) It reduces the need for corporate social responsibility within the firm. C) It helps the firm achieve positive results along the social and ecological dimensions. D) It helps the firm focus solely on its financial goals. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-06 Apply a triple bottom line to assess and evaluate competitive advantage. Topic : Financial Analysis Tools for Appraising Firm Performance Source : Chapter 05 Test Bank > MC Qu. 109 How does a sustainable strategy typically he...

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33) A company employing a CSV perspective focuses on A) citizenship, philanthropy, and fair-trade purchasing. B) joint company, community, and societal value creation. C) the external public relations benefits of “doing good.” D) creating value through its competitive advantage. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-02 Explain the shift in emphasis from corporate social responsibility (CSR) t Topic : Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 39 A company employing a CSV perspective...

34) Which of the following statements is true of shareholders in a public stock company? A) They directly supervise and coordinate the manufacture of products and delivery of

services. B) They are granted a charter of incorporation by the state and legally own company stock. C) They are appointed by a board of directors to oversee the company’s management. D) They are the centerpiece of corporate governance. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : Organizational Structure and Controls Source : Chapter 05 Test Bank > MC Qu. 20 Which of the following statements is true...

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35) What is captured in a firm’s book value? A) intangible assets B) competitive advantage C) future expectations D) tangible assets Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-03 Appraise accounting metrics and shareholder value creation as measures of Topic : Shareholder Value Creation and Competitive Advantage Source : Chapter 05 Test Bank > MC Qu. 62 What is captured in a firm&#8217;s book...

36) In an economic context, strategy for producers is primarily about A) reducing the difference between consumer’s willingness to pay for a product and the

cost to produce it. B) distributing the economic value created equally between consumers and themselves. C) lowering producer surplus and increasing consumer surplus. D) capturing the economic value created as much as possible. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-04 Link economic value creation to different sources of competitive advantage Topic : Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 90 In an economic context, strategy for produce...

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37) The strategic decision to design a supply chain to provide higher quality products at a lower

cost while also reducing environmental impact represents A) a CSV approach. B) shareholder capitalism. C) a competitive advantage. D) fair-trade purchasing. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-02 Explain the shift in emphasis from corporate social responsibility (CSR) t Topic : The Shared Value Creation Framework Source : Chapter 05 Test Bank > MC Qu. 45 The strategic decision to design a supply...

38) Competitive advantage goes to the firm that maximizes the difference between the cost of

producing a good and the retail price that consumers pay. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-04 Link economic value creation to different sources of competitive advantage Topic : Economic Value Creation Source : Chapter 05 Test Bank > TF Qu. 10 Competitive advantage goes to the firm that ...

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39) Lourdes owns Benefice Corporation and wants to maintain a dual focus on creating

shareholder value while at the same time increasing value for society as a whole. Lourdes is following the A) balanced scorecard framework. B) shared value creation framework. C) shareholder capitalism framework. D) philosophy of Milton Friedman. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : The Shared Value Creation Framework Source : Chapter 05 Test Bank > MC Qu. 18 Lourdes owns Benefice Corporation...

40) Which of the following goals relates to the G dimension of ESG criteria for evaluating

company performance? A) We will reduce our carbon footprint by 50 percent or more in five years. B) We will guarantee fair wages and human rights throughout out supply chain. C) We will oppose all forms of racial, gender, and sexual discrimination. D) We will adhere to universally accepted and accurate accounting principles. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : The Shared Value Creation Framework Source : Chapter 05 Test Bank > MC Qu. 17 Which of the following goals relates to the...

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41) Economic value creation is best expressed as A) producer surplus plus firm profit. B) consumer surplus plus firm profit. C) consumer surplus minus cost of production. D) producer surplus minus consumer surplus. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-04 Link economic value creation to different sources of competitive advantage Topic : Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 87 Economic value creation is best expressed as

42) According to Michael Porter and Mark Kramer, which of the following is a problem with

many publicly traded companies? A) Publicly traded companies have no legal standing and are not responsible for their debts. B) Shareholders of publicly traded companies do not have a legitimate claim on profits. C) They have defined value creation too narrowly in terms of financial performance. D) There is no transferability of stock ownership in publicly traded companies. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : Shared Value Creation Framework Source : Chapter 05 Test Bank > MC Qu. 28 According to Michael Porter and...

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43) FMC Corp., a chemical manufacturer, has over 5,000 employees spread across several SBUs

that collectively generate more than $3 billion in annual revenues. FMC’s strategic leaders initially focused solely on financial metrics as their key performance measure, but the company is failing to achieve competitive advantage in its industry. Which of the following questions should FMC’s senior leadership consider while implementing the balancedscorecard framework? A) When should we decide to divest assets and prepare for an exit strategy? B) What corporate strategy will enhance our firm’s chances of gaining and sustaining a competitive advantage? C) Where should we compete in terms of industry, markets, and geography? D) How do we become the customer’s most valued supplier, and how can we create this value for the customer? Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 05-05 Apply a balanced scorecard to assess and evaluate competitive advantage. Topic : The Balanced Scorecard Source : Chapter 05 Test Bank > MC Qu. 53 FMC Corp., a chemical manufacturer, has...

44) Denise is the CEO of a profitable business called 4-Ever-Sun Inc. which harnesses solar

power, a renewable energy source that is sustainable over time. Instead of pursuing a sustainable competitive advantage, Denise decides to focus on minimizing detrimental effects on society and the planet. This strategy is known as A) sustainable strategy. B) corporate diversification strategy. C) cost leadership strategy. D) the balanced scorecard. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-06 Apply a triple bottom line to assess and evaluate competitive advantage. Topic : The Triple Bottom Line Source : Chapter 05 Test Bank > MC Qu. 55 Denise is the CEO of a profitable business c...

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45) Axe Capital is a public stock company. Which of the following best exemplifies the legal

personality of the company? A) Axel, the company’s founder, died a few years ago, yet the company is doing well. B) Jennifer is a shareholder of Axe Capital but does not have any managerial duties. C) Will, an employee at Axe Capital, is not responsible for any losses that Axe Capital incurs. D) Luis, a shareholder, can legally sell shares of Axe Capital in the stock market. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : Organizational Structure and Controls Source : Chapter 05 Test Bank > MC Qu. 23 Axe Capital is a public stock company...

46) Which of the following is an advantage of a triple-bottom-line approach? A) The approach does not rely on an external view of a firm to assess its performance. B) The approach takes an integrative and holistic view in assessing a company’s

performance. C) The approach is more of a quantitative performance metric rather than a mere conceptual framework. D) The framework can help managers assess a firm’s competitive advantage without taking into account the firm’s performance along noneconomic dimensions. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-06 Apply a triple bottom line to assess and evaluate competitive advantage. Topic : Financial Analysis Tools for Appraising Firm Performance Source : Chapter 05 Test Bank > MC Qu. 111 Which of the following is an advantage of a ...

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47) Sarah paid $900 for a camera that she thought was worth $1,100 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) $550 C) $1,100 D) $200 Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 2 Medium Learning Objective : 05-04 Link economic value creation to different sources of competitive advantage Topic : Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 86 Sarah paid $900 for a camera that she though...

48) Managers must first develop a strategy that is likely to produce a competitive advantage

before implementing a balanced-scorecard approach. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-05 Apply a balanced scorecard to assess and evaluate competitive advantage. Topic : Balanced-Scorecard Approach Source : Chapter 05 Test Bank > TF Qu. 11 Managers must first develop a strategy that ...

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49) The term “competitive advantage” is difficult to measure. However, you recall that strategists

use a multidimensional perspective when measuring competitive advantage. Label and describe the three standard dimensions used when measuring a firm’s competitive advantage.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 05-03 Appraise accounting metrics and shareholder value creation as measures of Topic : Competitive Advantage and Firm Performance Source : Chapter 05 Test Bank > SA Qu. 130 The term &#8220;competitive advantage&#8221;...

50) Which of the following frameworks used to measure competitive advantage relies on both an

internal and an external view of a firm? A) the accounting profitability model B) the shareholder value creation model C) the balanced-scorecard model D) the economic value creation model Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-05 Apply a balanced scorecard to assess and evaluate competitive advantage. Topic : Balanced-Scorecard Approach Source : Chapter 05 Test Bank > MC Qu. 99 Which of the following frameworks used to me...

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51) ________ are the legal owners of public companies. A) Employees B) Category captains C) Shareholders D) Creditors Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-03 Appraise accounting metrics and shareholder value creation as measures of Topic : Shareholder Value Creation and Competitive Advantage Source : Chapter 05 Test Bank > MC Qu. 64 ________ are the legal owners of public compani...

52) Which of the following is an advantage of applying the economic value creation perspective

to assess a firm’s performance? A) When the need for “hard numbers” arises, managers and analysts rely on economic value creation perspective to measure competitive advantage. B) It is the most efficient tool for assessing corporate-level competitive advantage of highly diversified companies with large product portfolios. C) Arriving at the economic value created is easy because determining the value of a good in the eyes of consumers is a simple task. D) In the economic value creation perspective, analysts not only consider historical costs, but also opportunity costs. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-04 Link economic value creation to different sources of competitive advantage Topic : Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 97 Which of the following is an advantage of ap...

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53) Ari is a firm believer in Milton Friedman’s view of a firm’s social obligations. With which of

the following statements is Ari most likely to agree? A) Firms must go beyond their economic responsibility and act in socially responsible ways. B) Businesses can use their resources to create profit as long as they do so within the rules of the game. C) Firms should define value creation broadly in terms of environmental impact. D) Businesses should engage in open and free competition without deception or fraud, only as long as their competitors do so. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 2 Medium Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : Organizational Structure and Controls Source : Chapter 05 Test Bank > MC Qu. 32 Ari is a firm believer in Milton Friedman...

54) A detergent manufacturer decides to clean up the waterways it uses even though no federal,

state, or local laws require the firm to do this. The firm’s managers believe that the cleanup will improve the company’s image and benefit the environment. This scenario is an example of shareholder capitalism. ⊚ true ⊚ false Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : Organizational Design and Competitive Advantage Source : Chapter 05 Test Bank > TF Qu. 02 A detergent manufacturer decides to clean...

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55) The balanced-scorecard framework is a tool for strategy A) analysis, not sustainability. B) formulation, not implementation. C) implementation, not formulation. D) sustainability, not economic value creation. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-05 Apply a balanced scorecard to assess and evaluate competitive advantage. Topic : The Balanced Scorecard Source : Chapter 05 Test Bank > MC Qu. 57 The balanced-scorecard framework is a tool f...

56) Grace founded First Plainfield Bank in 2003. Ten years later, the company went public.

Despite Grace’s death in 2021, the company reported a 75 percent increase in revenue in 2022. Which of the following characteristics of a publicly traded company does this scenario best exemplify? A) limited liability for investors B) transferability of investor ownership C) legal personality D) separation of legal ownership and management control Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 2 Medium Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : Organizational Structure and Controls Source : Chapter 05 Test Bank > MC Qu. 24 Grace founded First Plainfield Bank in...

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57) A strategy that has provided competitive advantages in the past will most likely do so in the

future. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-06 Apply a triple bottom line to assess and evaluate competitive advantage. Topic : Implications for Strategic Leaders Source : Chapter 05 Test Bank > TF Qu. 14 A strategy that has provided competitive adv...

58) Competitive advantage is assessed relative to a benchmark, either competitors or the industry

average. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-05 Apply a balanced scorecard to assess and evaluate competitive advantage. Topic : Balanced-Scorecard Approach Source : Chapter 05 Test Bank > TF Qu. 12 Competitive advantage is assessed relative...

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59) The value a consumer attaches to a product or service is captured in the A) consumer’s maximum willingness to pay for it. B) least price a consumer is willing to pay for it. C) difference between the price charged for it and the cost to produce it. D) expenses incurred by the firm in manufacturing it. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-04 Link economic value creation to different sources of competitive advantage Topic : Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 83 The value a consumer attaches to a product o...

60) How does GE exemplify the creation of a shared value creation framework?

Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : Shared Value Creation Framework Source : Chapter 05 Test Bank > SA Qu. 115 How does GE exemplify the creation of...

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61) Both Watchdog Inc. and Device Corp. incur a cost of $200 to manufacture a single unit of a

smart home pet monitor. However, Watchdog Inc. charges a higher price than Device Corp. does, but it still sells a higher number of monitors. What does this imply? A) Watchdog and Device Corp. have achieved a competitive parity. B) Watchdog creates more economic value than Device Corp. does. C) Device Corp. is not charging enough for its product. D) Device Corp. has a competitive advantage over Watchdog Inc. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 05-04 Link economic value creation to different sources of competitive advantage Topic : Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 78 Both Watchdog Inc. and Device Corp...

62) How does a firm capture its producer surplus for a good or service? A) as profit per unit sold B) as market price per share C) as earnings per share D) as cost per unit sold Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-04 Link economic value creation to different sources of competitive advantage Topic : Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 85 How does a firm capture its producer surplus...

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63) The top management at Konex Vitamins, through rigorous testing, ensures that the company

develops and sells vitamins that are free of harmful side effects. Also, the company ensures that the chemical waste generated in the manufacturing process is kept to a bare minimum and is disposed of according to the regulations of the Environmental Protection Agency. The management assesses its overall performance based on these dimensions. Thus, the managers at Konex Vitamins are applying the________ approach to measure firm performance. A) shareholder value creation B) triple-bottom-line C) accounting profitability D) economic value creation Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-06 Apply a triple bottom line to assess and evaluate competitive advantage. Topic : Financial Analysis Tools for Appraising Firm Performance Source : Chapter 05 Test Bank > MC Qu. 112 The top management at Konex Vitamins, throug...

64) Which of the following strategies represents a CSR perspective? A) Northern Lights Industries uses only locally sourced, recycled materials to

manufacture its products. B) Westminster Law Associates donates professional services to an organization

providing legal aid to recent immigrants. C) Dream Co. financed a water-purification plant that helped its suppliers increase output for a lower cost while providing clean water to a rural community. D) Crane’s considers its technical support of organic soybean farmers in its supply chain to be an investment rather an expense. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 05-02 Explain the shift in emphasis from corporate social responsibility (CSR) t Topic : The Shared Value Creation Framework Source : Chapter 05 Test Bank > MC Qu. 44 Which of the following strategies...

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65) From a shareholder’s perspective, the measure of competitive advantage that matters most is

the A) consumer surplus. B) return on risk capital. C) economic value created. D) inventory turnover. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-03 Appraise accounting metrics and shareholder value creation as measures of Topic : Shareholder Value Creation and Competitive Advantage Source : Chapter 05 Test Bank > MC Qu. 66 From a shareholder...

66) 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) social cost. B) opportunity cost. C) producer surplus. D) consumer surplus. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-04 Link economic value creation to different sources of competitive advantage Topic : Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 96 When ASI Inc. declared a dividend of $20,000...

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67) Good Grains Inc. and Village Bread Co. both produce similar whole grain loaves of bread.

For both companies, the cost of producing a loaf of bread is 45 cents, and it is not possible for either company to lower their production costs any further. How can one company achieve a competitive advantage over the other? A) Raise prices above the current reservation price. B) Lower prices to the break-even price. C) Increase the number of stock market shares available to investors. D) Increase total perceived consumer benefits through differentiation. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 05-04 Link economic value creation to different sources of competitive advantage Topic : Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 92 Good Grains Inc. and Village Bread...

68) The balanced scorecard can accommodate A) neither short- or long-term performance metrics. B) both short- and long-term performance metrics. C) only long-term performance metrics. D) only short-term performance metrics. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-05 Apply a balanced scorecard to assess and evaluate competitive advantage. Topic : Balanced-Scorecard Approach Source : Chapter 05 Test Bank > MC Qu. 102 The balanced scorecard can accommodate

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69) In the CSV framework, value creation is A) an afterthought to citizenship and philanthropy. B) focused on both economic benefits and societal benefits. C) determined using a balanced scorecard. D) secondary to maintaining a competitive advantage. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-02 Explain the shift in emphasis from corporate social responsibility (CSR) t Topic : Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 42 In the CSV framework, value creation is...

70) Great Sound Inc. is a publicly traded company that specializes in manufacturing consumer

electronics. Which of the following best exemplifies the implementation of a shared value creation framework at Great Sound Inc.? A) Great Sound’s products are developed in a high-tech R&D facility based in Florida. B) Great Sound’s employees work in shifts to adhere to the eight-hour workday rule. C) Great Sound has a customer reward program for its most loyal customers. D) Great Sound uses recycled materials to create its commercially successful products. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : Shared Value Creation Framework Source : Chapter 05 Test Bank > MC Qu. 35 Great Sound Inc. is a publicly traded...

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71) How does consumer demand affect fixed costs and variable costs?

72) Which of the following competitively important assets is typically excluded from a firm’s

balance sheet? A) customer experience B) land and building C) accounts payable D) patents Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-03 Appraise accounting metrics and shareholder value creation as measures of Topic : Financial Analysis Tools for Appraising Firm Performance Source : Chapter 05 Test Bank > MC Qu. 60 Which of the following competitively importa...

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73) Which of the following characteristics of a public stock company deals with principals and

agents? A) transferability of investor ownership B) separation of legal ownership and management control C) legal personality D) limited liability of investors Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : Organizational Structure and Controls Source : Chapter 05 Test Bank > MC Qu. 29 Which of the following characteristics...

74) A firm incurs $100 to manufacture an office table. It fixes the market price of the table as

$250 and discounts the price to $200. However, the maximum a person is willing to pay for it is $180. What is the amount of total perceived consumer benefits in this scenario? A) $180 B) $100 C) $200 D) $250 Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 2 Medium Learning Objective : 05-04 Link economic value creation to different sources of competitive advantage Topic : Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 80 A firm incurs $100 to manufacture an office ...

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75) The efficient-market hypothesis suggests that the market price of a firm’s stock is an

objective indicator of a firm’s past, current, and expected future performance. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 05-03 Appraise accounting metrics and shareholder value creation as measures of Topic : Shareholder Value Creation and Competitive Advantage Source : Chapter 05 Test Bank > TF Qu. 08 The efficient-market hypothesis suggests tha...

76) Competitive advantage goes to the firm that achieves the A) lowest producer surplus. B) highest payable turnover. C) highest Cost of goods sold/Revenue ratio. D) largest economic value created. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-04 Link economic value creation to different sources of competitive advantage Topic : Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 91 Competitive advantage goes to the firm that ...

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77) What is risk capital?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-03 Appraise accounting metrics and shareholder value creation as measures of Topic : The Roles of Firm Effects and Industry Effects on Firm Performance and Competitive Advantage Source : Chapter 05 Test Bank > SA Qu. 119 What is risk capital?

78) Which of the following expressions accurately describes market cap? A) It is the product of the number of outstanding shares and the share price. B) It is the ratio of a firm’s equity finance and its debt finance. C) It is the difference between a firm’s account receivables and account payables. D) It is the difference between the book value and the market value of a firm’s assets. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-03 Appraise accounting metrics and shareholder value creation as measures of Topic : Shareholder Value Creation and Competitive Advantage Source : Chapter 05 Test Bank > MC Qu. 71 Which of the following expressions accuratel...

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79) Which of the following goals relates to the E dimension of ESG criteria for evaluating

company performance? A) We will oppose all forms of racial, gender, and sexual discrimination. B) We will guarantee fair wages and human rights throughout out supply chain. C) We will reduce our carbon footprint by 50 percent or more in five years. D) We will adhere to universally accepted and accurate accounting principles. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : The Shared Value Creation Framework Source : Chapter 05 Test Bank > MC Qu. 16 Which of the following goals relates to...

80) Describe a challenge facing capitalism and how it has affected our shifting understanding of

the firm from a primary focus on profit maximization to a focus on creating shared value.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Evaluate Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : Shared Value Creation Framework Source : Chapter 05 Test Bank > SA Qu. 113 Describe a challenge facing capitalism and...

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81) The term “tragedy of the commons” refers to a problem that affects a company’s

shareholders but not its management or board of directors. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : Implications for Strategic Leaders Source : Chapter 05 Test Bank > TF Qu. 03 The term &#8220;tragedy of the commons&#8221; refers...

82) Which of the following is a disadvantage of the balanced-scorecard approach? A) It provides limited guidance about which metrics to choose. B) It provides limited guidance for designing and planning business processes. C) It fails to link the strategic vision to responsible parties within the organization. D) It fails to translate the vision into measurable operational goals. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-05 Apply a balanced scorecard to assess and evaluate competitive advantage. Topic : Balanced-Scorecard Approach Source : Chapter 05 Test Bank > MC Qu. 104 Which of the following is a disadvantage of ...

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83) By selling a tablet at $1,000 for which consumers are willing to pay up to $1,200, a consumer

electronics firm makes a profit of $400 per unit. In this scenario, the amount $600, that is ($1,200 – $1000) + $400, is the A) reservation price. B) economic value created. C) consumer surplus. D) opportunity cost. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 05-04 Link economic value creation to different sources of competitive advantage Topic : Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 89 By selling a tablet at $1,000 for which cons...

84) Which of the following answers is one of the three dimensions that make up the triple-

bottom-line framework? A) price B) principles C) profits D) producer Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-06 Apply a triple bottom line to assess and evaluate competitive advantage. Topic : The Triple Bottom Line Source : Chapter 05 Test Bank > MC Qu. 52 Which of the following answers is one...

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85) Under the________ framework, the question “How do we create value?” is relevant when

trying to improve innovation and organizational learning. A) economic value creation B) balanced scorecard C) triple-bottom-line D) operational effectiveness Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-05 Apply a balanced scorecard to assess and evaluate competitive advantage. Topic : The Balanced Scorecard Source : Chapter 05 Test Bank > MC Qu. 50 Under the ________ framework, the questi...

86) Dante is a recent fashion graduate. He started his own apparel store with an investment of

$300,000. In the first year he made a profit of $60,000. If he had taken up a job as a fashion editor for a magazine, he would have earned $50,000 as salary per year. Also, he could have invested his capital, $300,000, in treasury bonds and earned an interest of $12,000. Thus, the amount $62,000 ($50,000 + $12,000) would be Dante’s A) break-even price. B) reservation price. C) opportunity cost. D) social cost. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-04 Link economic value creation to different sources of competitive advantage Topic : Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 95 Dante is a recent fashion graduate. He...

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87) ________ is the benefit that is missed or given up when an investor, individual or business

chooses one alternative over another. A) Value creation B) Reservation price C) Accounting profitability D) Opportunity cost Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-04 Link economic value creation to different sources of competitive advantage Topic : Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 46 ________ is the benefit that is missed o...

88) Which of the following reports is a publicly traded firm required to file each year with the

U.S. Securities and Exchange Commission? A) Form 990-N B) Form 10-K C) Form 1120-S D) Form 40-F Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-03 Appraise accounting metrics and shareholder value creation as measures of Topic : Shareholder Value Creation and Competitive Advantage Source : Chapter 05 Test Bank > MC Qu. 61 Which of the following reports is a...

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89) How does the triple-bottom line approach help managers? Explain with the help of an

example.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 05-06 Apply a triple bottom line to assess and evaluate competitive advantage. Topic : Financial Analysis Tools for Appraising Firm Performance Source : Chapter 05 Test Bank > SA Qu. 129 How does the triple-bottom line approach hel...

90) Amber is the manager of gardening supplies wholesaler DigIt Inc. The company’s vision is to

become the leading supplier of gardening materials in the New England. In assessing the firm’s current state, Amber has determined that the firm could differentiate itself from competitors with an easy-to-use online ordering system and a two-day delivery guarantee. To accomplish this, Amber has determined that DigIt must spend the next two quarters honing its capabilities for sourcing materials quickly and improving its web development competencies. According to the balanced-scorecard approach, what is wrong with Amber’s thinking? A) She has not considered the opportunity costs associated with launching an online ordering system. B) She has not addressed the question of which core competencies the firm needs. C) She has not addressed the question of how DigIt will create value. D) She has failed to account for external factors such as customer perceptions and shareholder perceptions. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 05-05 Apply a balanced scorecard to assess and evaluate competitive advantage. Topic : Balanced-Scorecard Approach Source : Chapter 05 Test Bank > MC Qu. 103 Amber is the manager of gardening supplies w...

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91) Stark Industries is a public stock company. Which of the following statements about the

company best illustrates the fact that its investors have limited liability? A) Shareholders of Stark Industries are responsible to the company only to the capital they have invested. B) Employees of Stark Industries are also the owners of the company. C) Shareholders of Stark Industries are not permitted to trade their company stock at the New York Stock Exchange (NYSE). D) Employees of Stark Industries are legally permitted to invest their capital in the company’s stock. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : Organizational Structure and Controls Source : Chapter 05 Test Bank > MC Qu. 21 Stark Industries is a public stock company...

92) List the dimensions on which a firm can create greater economic value.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-04 Link economic value creation to different sources of competitive advantage Topic : The Roles of Firm Effects and Industry Effects on Firm Performance and Competitive Advantage Source : Chapter 05 Test Bank > SA Qu. 123 List the dimensions on which a firm can crea...

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93) Which of the following is an advantage of the balanced scorecard? A) It is a tool for both strategic formulation and strategic implementation. B) It allows managers to translate a firm’s vision into measurable operational goals. C) The balanced scorecard is independent of the skills of the managers responsible for its

implementation. D) Its implementation is a one-time effort and does not require continuous tracking of metrics or updating of strategic objectives. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-05 Apply a balanced scorecard to assess and evaluate competitive advantage. Topic : Balanced-Scorecard Approach Source : Chapter 05 Test Bank > MC Qu. 101 Which of the following is an advantage of th...

94) According to the perspective of shareholder capitalism, shareholders in public stock

companies A) have the most legitimate claim on profits. B) are restricted from buying shares of two competing companies. C) have significant decision-making power. D) have unlimited financial liability. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : Shareholder Value Creation and Competitive Advantage Source : Chapter 05 Test Bank > MC Qu. 33 According to the perspective of shareholder...

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95) The cost of capital to create a product is a fixed cost because it is A) directly proportional to the output level. B) not a part of the profit calculations. C) uniform throughout all firms and industries. D) unaffected by consumer demand. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-04 Link economic value creation to different sources of competitive advantage Topic : Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 93 The cost of capital to create a product is a...

96) A CSV perspective leads to tinkering with isolated components as needed; in contrast, the

CSR approach is an integral part of a firm’s competitive strategy from the beginning. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-02 Explain the shift in emphasis from corporate social responsibility (CSR) t Topic : Economic Value Creation Source : Chapter 05 Test Bank > TF Qu. 05 A CSV perspective leads to tinkering...

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97) Which of the following approaches to assess competitive advantage is based on the view that

noneconomic factors can have a significant impact on a firm’s financial performance? A) the balanced-scorecard approach B) the economic value creation framework C) the triple-bottom-line approach D) the accounting profitability approach Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-06 Apply a triple bottom line to assess and evaluate competitive advantage. Topic : Financial Analysis Tools for Appraising Firm Performance Source : Chapter 05 Test Bank > MC Qu. 106 Which of the following approaches to assess ...

98) Which of the following is considered a limitation of employing the balance-scorecard

framework? A) translating the company vision into measurable goals B) designing and planning business processes C) providing guidance about the right metrics to use D) accommodating both short- and long-term metrics Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-05 Apply a balanced scorecard to assess and evaluate competitive advantage. Topic : The Balanced Scorecard Source : Chapter 05 Test Bank > MC Qu. 52 Which of the following is considered a...

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99) One aspect of ESG criteria focuses on areas such as diversity, equity, inclusion, health and

safety, and human rights. ⊚ true ⊚ false Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : Organizational Design and Competitive Advantage Source : Chapter 05 Test Bank > TF Qu. 01 One aspect of ESG criteria focuses...

100)

Which one of the following statements below can best be linked to the Nobel laureate Milton Friedman? A) The social responsibility of a business is to increase its profits. B) Corporate social responsibility is absolutely vital to a firm’s long-term success. C) Corporate social responsibility should be incorporate in MNEs. D) Corporate social responsibility is a universally accepted and practiced principle.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : The Shared Value Creation Framework Source : Chapter 05 Test Bank > MC Qu. 31 Which one of the following statements...

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101)

How does Nobel laureate Milton Friedman’s view of the firm’s social obligations tie in with shareholder capitalism?

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : Shared Value Creation Framework Source : Chapter 05 Test Bank > SA Qu. 114 How does Nobel laureate Milton Friedman...

102)

Which of the following scenarios exemplifies a sustainable strategy under the triplebottom-line approach? A) Rather than complying with restrictive recycling laws in the United States, Chemicor outsourced its manufacturing to a country with fewer environmental restrictions. B) Chemicor’s nearest competitor increased the salaries of its production workers by 30 percent, but Chemicor kept its wages the same to gain a cost advantage over its competitor. C) Chemicor developed an additive that doubled the life of its plastics. The chemical was legal, but environmental groups argued that it harmed the environment. D) Chemicor 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.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 05-06 Apply a triple bottom line to assess and evaluate competitive advantage. Topic : Financial Analysis Tools for Appraising Firm Performance Source : Chapter 05 Test Bank > MC Qu. 110 Which of the following scenarios exemplifies...

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103)

A firm will always see its stock price appreciate when it demonstrates measurable growth. ⊚ true ⊚ false

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 05-03 Appraise accounting metrics and shareholder value creation as measures of Topic : Shareholder Value Creation and Competitive Advantage Source : Chapter 05 Test Bank > TF Qu. 09 A firm will always see its stock price appre...

104)

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) PESTEL B) accounting profitability C) economic value creation D) shareholder value creation

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-04 Link economic value creation to different sources of competitive advantage Topic : Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 48 Under the ________ framework, producer s...

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105)

Which of the following statements is true of the balanced scorecard? A) It is one of the traditional approaches of measuring firm performance. B) It attempts to provide a holistic perspective on firm performance. C) Its primary focus is to base a firm’s strategic goals entirely on external performance dimensions. D) It is a more or less a one-dimensional metric of measuring competitive advantages of a firm.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-05 Apply a balanced scorecard to assess and evaluate competitive advantage. Topic : Balanced-Scorecard Approach Source : Chapter 05 Test Bank > MC Qu. 100 Which of the following statements is true of...

106)

Which of the following statements is true of accounting data? A) Accounting data do not have to be adjusted to compare companies with different capital structures. B) Accounting data focus mainly on intangible assets, rather than tangible assets. C) Accounting data are historical data and thus backward-looking. D) Accounting data consider off-balance-sheet items, such as pension obligations of a firm.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-03 Appraise accounting metrics and shareholder value creation as measures of Topic : Financial Analysis Tools for Appraising Firm Performance Source : Chapter 05 Test Bank > MC Qu. 59 Which of the following statements is true of...

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107)

PolyCon Inc. is a public stock company that provides natural gas for businesses. Although this company generates a large profit, management’s focus on reducing costs caused the maintenance budget to be trimmed. Its pipelines have at times leaked, which created significant environmental problems. As a result, the company’s value creation has suffered. This scenario supports strategy scholars’ warning that public companies A) have defined value creation too narrowly and as a result have ignored political lobbying, thereby contributing to black swan events. B) have defined value creation too narrowly in terms of financial performance, thereby contributing to black swan events. C) do not focus enough on increasing firm profits, thereby contributing to low value creation. D) often do not keep economic needs and societal needs separate from each other, thereby contributing to low value creation.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : Shared Value Creation Framework Source : Chapter 05 Test Bank > MC Qu. 27 PolyCon Inc. is a public stock company...

108)

When the value that a customer attaches to a good or service exceeds the price paid for the good or service, this is a consumer surplus. ⊚ true ⊚ false

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-04 Link economic value creation to different sources of competitive advantage Topic : Economic Value Creation Source : Chapter 05 Test Bank > TF Qu. 06 When the value that a customer attaches to a...

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109)

A firm incurs $600 to manufacture a computer. In the market, customers are willing to pay a maximum of $800 for the computer priced at $700. The difference of $200 ($800 – $600) is the A) customer lifetime value. B) total return to shareholders. C) consumer surplus. D) economic value created.

110)

Abdul and Laticia both love hot coffee. Abdul likes to keep his coffee hot during the day, while Laetitia doesn’t mind drinking room temperature coffee. Abdul is willing to spend more money on a thermos than Laticia is willing to spend. This example illustrates the following major limitation of employing the economic value creation framework because A) accounting data are historical and thus backward-looking. B) accounting data focus mainly on tangible assets, which are no longer the most important. C) determining the value of a good/service through the perspective of consumers is not a simple task because consumers have different spending habits. D) overall macroeconomic factors such as the unemployment rate, and interest and exchange rates all have a direct bearing on stock prices.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 05-04 Link economic value creation to different sources of competitive advantage Topic : Limitations of Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 47 Abdul and Laticia both love hot coffee...

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111)

After trying on a jacket, a consumer assesses it to be worth a maximum of $100 and is willing to pay that amount to buy it. However, the jacket is priced at $80. What is the amount, $100, referred to as? A) the firm’s cost ( C) in manufacturing the jacket B) the value ( V) the consumer attaches to the jacket C) the consumer surplus D) the producer surplus

112)

________ is best described as the difference between a buyer’s willingness to pay for a product or service and a firm’s total cost to produce it. A) Cost of capital B) Consumer surplus C) Break-even point D) Economic value created

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-04 Link economic value creation to different sources of competitive advantage Topic : Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 76 ________ is best described as the difference be...

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113)

The market capitalization of a public company is $5 billion. Each share of the company is traded at $200. What do you infer from this financial data? A) The firm’s total return to shareholder is $5 billion. B) The firm pays an annual dividend of 10 percent. C) The firm’s economic value created is $5 billion. D) The firm’s number of outstanding shares is 25 million.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 2 Medium Learning Objective : 05-03 Appraise accounting metrics and shareholder value creation as measures of Topic : Shareholder Value Creation and Competitive Advantage Source : Chapter 05 Test Bank > MC Qu. 70 The market capitalization of a public compan...

114)

A sustainable strategy is one that produces a competitive advantage that can be maintained over time. ⊚ true ⊚ false

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-06 Apply a triple bottom line to assess and evaluate competitive advantage. Topic : Financial Analysis Tools for Appraising Firm Performance Source : Chapter 05 Test Bank > TF Qu. 13 A sustainable strategy is one that produces ...

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115)

A problem that arises when individuals, companies, or nations pursue their own selfinterest without considering the well-being of society or the global community is known as a A) Nash equilibrium. B) competitive disadvantage. C) black swan event. D) tragedy of the commons.

Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : Organizational Structure and Controls Source : Chapter 05 Test Bank > MC Qu. 25 A problem that arises when individuals...

116)

Yoon-gi is attempting to measure how his customers view his firm. To do this, he uses the balanced-scorecard framework because he knows that A) the customer perspective is directly linked to firm revenues and profits. B) customer surveys will help him determine future industry attractiveness. C) this will guarantee his company a sustainable competitive advantage. D) the framework will help him increase his stock price.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-05 Apply a balanced scorecard to assess and evaluate competitive advantage. Topic : The Balanced Scorecard Source : Chapter 05 Test Bank > MC Qu. 51 Yoon-gi is attempting to measure how his custome...

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117)

Grameen Bank in Bangladesh was founded to provide microcredit to impoverished farmers who wanted to start their own entrepreneurial ventures that would help them climb out of poverty. This best exemplifies Michael Porter’s suggestion that A) businesses should focus on creating regional clusters such as Silicon Valley in the United States. B) a firm should expand its internal value chain to include nontraditional partners. C) the largest but lowest income socioeconomic group can provide significant business opportunities. D) managers need to keep economic needs and societal needs disconnected from each other.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : Competing in Various Markets Source : Chapter 05 Test Bank > MC Qu. 38 Grameen Bank in Bangladesh was founded...

118)

Why does Michael Porter recommend expanding the customer base of an organization in terms of the shared value creation framework? A) Doing so could yield significant business opportunities that could improve the living standard of people living below the poverty line around the world. B) Doing so could be the only way to meet stockholder expectations in a highly competitive market. C) Doing so will help to prevent the inclusion of more nontraditional partners into internal firm value chains. D) Doing so is the best way to ensure that shareholders have the most legitimate claim on profits made by the organization.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : Shared Value Creation Framework Source : Chapter 05 Test Bank > MC Qu. 37 Why does Michael Porter recommend...

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119)

The types of assets that are the primary focus of accounting data but are no longer most important to competitive advantage are A) market brand value. B) intangible. C) tangible. D) organizational culture.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-03 Appraise accounting metrics and shareholder value creation as measures of Topic : Economic Value Creation Source : Chapter 05 Test Bank > MC Qu. 49 The types of assets that are the primary foc...

120)

What are the drawbacks of using total return to shareholders and firm market capitalization to measure firm performance?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-03 Appraise accounting metrics and shareholder value creation as measures of Topic : Shareholder Value Creation and Competitive Advantage Source : Chapter 05 Test Bank > SA Qu. 121 What are the drawbacks of using total return...

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121)

Which of the following statements about competitive advantage is true? A) Competitive advantage has been linked to a firm’s triple bottom line. B) Competitive advantage cannot be assessed relative to a benchmark. C) Shareholder value is the best measure of competitive advantage. D) Superior firm performance is unrelated to competitive advantage.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-06 Apply a triple bottom line to assess and evaluate competitive advantage. Topic : Financial Analysis Tools for Appraising Firm Performance Source : Chapter 05 Test Bank > MC Qu. 105 Which of the following statements about...

122)

Managers can justify using the balanced-scorecard framework because research shows that both________ performance dimensions are important when examining the effectiveness of a firm’s strategy. A) financial and accounting B) economic and stock market C) quantitative and qualitative D) customer survey and peer evaluation

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-05 Apply a balanced scorecard to assess and evaluate competitive advantage. Topic : The Balanced Scorecard Source : Chapter 05 Test Bank > MC Qu. 56 Managers can justify using the balanced-scor...

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123)

What does ESG stand for in corporate strategy? A) environmental, social, governance B) ethical, sustainable, global C) environmental sustainability goals D) economic and societal goals

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : The Shared Value Creation Framework Source : Chapter 05 Test Bank > MC Qu. 15 What does ESG stand for in corporate...

124)

Which of the following is a disadvantage of measuring firm performance through total return to shareholders and firm market capitalization? A) Market volatility makes it difficult to assess firm performance through these measures, particularly in the short term. B) Only the book value of the share prices is taken into account when applying these measures, and not the market value. C) These tools measure competitive advantage in absolute terms rather than relative terms. D) These tools fail to indicate how the stock market views all available public information about a firm’s expected future performance.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-03 Appraise accounting metrics and shareholder value creation as measures of Topic : Shareholder Value Creation and Competitive Advantage Source : Chapter 05 Test Bank > MC Qu. 74 Which of the following is a disadvantage of ...

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125)

What does “total return to shareholders” mean?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-03 Appraise accounting metrics and shareholder value creation as measures of Topic : Shareholder Value Creation and Competitive Advantage Source : Chapter 05 Test Bank > SA Qu. 120 What does &#8220;total return to shareholder...

126)

________, which is the return on risk capital, includes stock price appreciation plus dividends received over a specific period. A) Receivables turnover B) Earnings per share C) Dividend yield D) Total return to shareholders

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 05-03 Appraise accounting metrics and shareholder value creation as measures of Topic : Shareholder Value Creation and Competitive Advantage Source : Chapter 05 Test Bank > MC Qu. 68 ________, which is the return on risk capital, ...

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127)

Joaquin owns shares in a company called Maxapro Inc. The company’s financial performance has been declining over the past few months, and the value of its stock has been decreasing. Joaquin wants to proactively cut his losses and therefore sells his shares. Miriam, a trading enthusiast, buys shares in Maxapro Inc. because she believes that the share prices cannot go anywhere but up. Which of the following characteristics of a public stock company does this scenario best exemplify? A) separation of legal ownership and management control B) limited liability for investors C) transferability of investor ownership D) legal personality

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 05-01 Compare and contrast shareholder capitalism and stakeholder capitalism whi Topic : Organizational Structure and Controls Source : Chapter 05 Test Bank > MC Qu. 22 Joaquin owns shares in a company called...

128)

A strategic leader’s only responsibility is to monitor and assess the performance of their firm. ⊚ true ⊚ false

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 05-03 Appraise accounting metrics and shareholder value creation as measures of Topic : Financial Analysis Tools for Appraising Firm Performance Source : Chapter 05 Test Bank > TF Qu. 07 A strategic leader&#8217;s only responsibility is to ...

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129)

The difference between the price charged for a product and the cost to manufacture it is referred to as the A) reservation price. B) producer surplus. C) consumer surplus. D) break-even price.

130)

Josie wants to invest in the stock market but is afraid of losing more money than what she invests. Josie need not worry because of A) legal personality. B) separation of legal ownership and management control. C) limited liability for investors. D) transferability of investor ownership.

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Answer Key Test name: Chapter 05 Test Bank 1) A

Total return to shareholders is an external performance metric. It indicates how the stock market views all available public information about a firm’s past, current state, and expected future performance. 2) C

While CSR is externally focused to address pressures that arise, such as addressing child labor in the supply chain, CSV is internally focused and derives from deeply held beliefs such as Patagonia’s purpose “to save our home planet.” 3) A

Triple-bottom-line stresses a combination of economic, social, and ecological concerns that can lead to a sustainable strategy, which are reflected in the vision statement for Forever Power. 4) Short Answer

The four key questions are: 2. How do customers view us? The customer’s perspective concerning the company’s products and services links directly to its revenues and profits. Consumers decide their reservation price for a product or service based on how they view it. If customers view the company’s offering favorably, they are willing to pay more for it, enhancing its competitive advantage (assuming production costs are well below the asking price). Managers track customer perception to identify areas for improvement, with a focus on speed, quality, service, and cost. 3. How do we create value? Answering this question challenges managers to develop strategic objectives that ensure future competitiveness, innovation, and organizational learning. It focuses on the business processes and structures that allow a firm to create economic value. 4. What core competencies do we need? This question focuses strategic leaders to identify the internal core competencies needed to achieve their objectives, and the accompanying business processes that support, hone, and leverage those competencies. 5. How do shareholders view us? The final perspective in the balanced scorecard is the shareholders’ view of financial performance. Understanding the shareholders’ view of value creation leads managers to a more future-oriented evaluation. 5) B

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Public companies in the United States must provide benchmarks, usually one comparison to the industry average and another to a broader market index that is relevant for more diversified firms. Because competitive advantage is defined in relative terms, these benchmarks allow us to assess whether a firm has a competitive advantage. In its annual reports, Microsoft, for example, compares its performance to two stock indices: the NASDAQ Computer Index and the S&P 500. 6) C

Three dimensions—economic, social, and ecological—make up the triple-bottom-line. According to this approach, achieving positive results in all three areas can lead to a sustainable strategy—a strategy that can be pursued over time without detrimental effects on people or the planet. 7) C

Intangibles such as intellectual property and brand value that are not captured in firms’ accounting data have become much more important to a firm’s competitive advantage. Intangibles need to take center stage when formulating strategy. 8) B

Corporate social responsibility (CSR) suggests that firms that do well (“make profits”) should also do good by engaging in corporate philanthropy (“doing good,” “giving back,” and “being a good citizen”). 9) A

Strategy scholars believe executives’ exclusive pursuit of profit maximization can have negative consequences for society at large and that the focus on shareholder primacy has contributed to the loss of trust in corporations as a vehicle for value creation and societal welfare. They believe that stakeholder capitalism with a focus on creating shared value can remedy some of the shortcomings inherent in shareholder capitalism. 10) D

Investors are primarily interested in a company’s total return to shareholders, which is the return on risk capital, including stock price appreciation plus dividends received over a specific period. 11) Short Answer

A large difference between V, the consumer’s willingness to pay, and C, the cost to produce the good or service, gives the firm two distinct pricing options: (1) It can charge higher prices to reflect the higher product value and thus increase its profitability, or (2) it can charge the same price as competitors and thus gain market share. 12) C

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Ecomagination solutions and products allow GE to increase the perceived value it creates for its customers while lowering costs to produce and deliver “green” products and services. This indicates that GE’s Ecomagination strategy is in line with the shared value creation framework. 13) Short Answer

Opportunity costs capture the value of the best forgone alternative use of the resources employed. Entrepreneurs face two types of opportunity costs: (1) forgone wages they could be earning if they were employed elsewhere and (2) the cost of capital they invested in their businesses, which could instead be invested in, say, the stock market or U.S. Treasury bonds. 14) D

Unlike accounting data, total return to shareholders is an external and forward-looking performance metric. It indicates how the stock market views all available public information about a firm’s past, current state, and expected future performance. 15) A

When assessing and evaluating competitive advantage, a comparison of rival firms’ share price development or market capitalization provides a helpful yardstick when used over the long term. In order for this comparison of market capitalization to yield useful information, you must consider how it has changed over time. If your competitor has seen significant growth in market cap over the preceding year while your firm has seen its valuation decline slightly, for example, you would have evidence that your firm has begun to lose its competitive advantage. 16) C

Opportunity costs capture the value of the best forgone alternative use of the resources employed. 17) Short Answer

Student answers will vary. A sample answer follows: Creating shared value (CSV) means value creation is focused from the beginning on both economic benefits and societal benefits, whereas corporate social responsibility (CSR) focuses on profit maximization, with good citizenship and philanthropy developing from economic success. For example, a purpose-driven company attempting to create shared value will align the entire company budget around creating shared value; the budget of a company using a CSR perspective will be limited in its impact and subject to shifting preferences over time as external pressures vary. 18) Short Answer

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Although accounting data tend to be readily available and we can easily transform them into financial ratios to assess and evaluate competitive performance, they also have some important limitations: Accounting data are historical data and thus backward-looking. Accounting profitability ratios show us only the outcomes from past decisions, and the past is no guarantee of future performance. Also, there is a significant time delay before accounting data become publicly available. Accounting data do not consider off-balance sheet items. Off-balance sheet items, such as pension obligations (quite large in some U.S. companies) or operating leases in the retail industry, can be significant factors. Accounting data focus mainly on tangible assets, which are no longer a company’s most important assets. 19) Short Answer

This limitation of accounting data is nicely captured in the adage: “Not everything that can be counted counts. Not everything that counts can be counted.” Although accounting data capture some intangible assets, such as the value of intellectual property (patents, trademarks, and so on) and customer goodwill, many key intangible assets are not captured.The most competitively important assets in today’s knowledge-based economies tend to be intangibles such as innovation, quality, and customer experience, which are not included in a firm’s balance sheet. 20) A

The absolute maximum a customer would be willing to pay for a product is referred to as its reservation price, which in this case is $170. 21) B

Opportunity costs capture the value of the best forgone alternative use of the resources employed. Skyward’s opportunity costs are the $2 million in revenues it would have earned and the $500,000 in costs it would have saved if it would have chosen to produce smartphone components rather than drones. Thus, the total opportunity cost was $2.5 million. After subtracting the $2.5 million in opportunity costs from the $3 million accounting profit, Skyward earned an economic profit of $500,000. 22) A

Because competitive advantage is defined as superior performance relative to other competitors in the same industry or to the industry average, a firm’s strategic leaders must be able to accomplish two critical tasks: assess the performance of their firm accurately and compare and benchmark their firm’s performance to other competitors in the same industry or against the industry average.

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23) D

Economic value creation equals consumer surplus plus firm profit, or the sum of consumer and producer surplus. In this case, the economic value created is ($1,200 – $1,000) + ($1,000 – $750) = $450. 24) TRUE

Rather than adding a CSR component as an afterthought, which often comes across as a publicrelations exercise, companies that follow the CSV approach think about how to create shared value as an integral part of the firm’s competitive strategy from the beginning, as informed by a purpose-driven mission. 25) Short Answer

The difference between the price charged (P) for a product or service, and the cost to produce it (C), is the profit, or producer surplus. A firm captures this amount as profit per unit sold. Consumer surplus is the difference between the value a consumer attaches to a good or service (V) and what he or she pays for it (P), or (V – P). The relationship between consumer and producer surplus is the reason trade happens; both transacting parties capture some of the overall value created. 26) C

A CSV framework motivates internal and external stakeholders by realigning the entire company budget around creating shared value. A CSV approach is identity defining for an organization. 27) B

Value denotes the dollar amount ( V) a consumer would attach to a good or service. Value captures a consumer’s willingness to pay and is determined by the perceived benefits a good or service provides to the buyer. 28) D

A problem that arises when individuals, companies, or nations pursue their own self-interest without considering the well-being of society or the global community is known as a tragedy of the commons. Climate change is a global problem, and addressing it requires global coordination. Because the interests of individual nation-states are not aligned, a tragedy of the commons problem complicates the mitigation of climate change. 29) Short Answer

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The balanced-scorecard approach is popular in managerial practice because it has several advantages. In particular, the balanced scorecard allows strategic leaders to: Communicate and link the strategic vision to responsible parties within the organization. Translate the vision into measurable operational goals. Design and plan business processes. Implement feedback and organizational learning in order to modify and adapt strategic goals when necessary. The balanced scorecard can accommodate both short- term and long-term performance metrics. It provides a concise report that tracks chosen metrics and measures and compares them to target values. This approach allows strategic leaders to assess past performance, identify areas for improvement, and position the company for future growth. Including a broader perspective than financials allows managers and executives a more balanced view of organizational performance—hence its name. 30) A

The shared value creation framework proposes that strategic leaders maintain a dual focus on shareholder value creation and value creation for society. It recognizes that markets are defined not only by economic needs but also by societal needs. It advances the perspective that negative externalities such as pollution, wasted energy, and costly accidents can have negative internal effects, not only in lost reputation but also on the bottom line. 31) B

Market capitalization (or market cap) captures the total dollar market value of a company’s outstanding shares at any given point in time ( Market cap = Number of outstanding shares × Share price). Therefore, market cap is equal to $1 billion, that is, 10 million shares × $100. 32) C

A sustainable strategy is a strategy that can be pursued over time without detrimental effects on people or the planet. A sustainable strategy produces not only positive financial results, but also positive results along the social and ecological dimensions. 33) B

Rather than focusing on good citizenship and philanthropy as advocated in the CSR approach, leaders who are committed to CSV think holistically about joint economic and societal value creation when crafting strategy. 34) B

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The state (or society) grants a charter of incorporation to the company’s shareholders—its owners, who legally own stock in the company. The shareholders appoint a board of directors to govern and oversee the firm’s management. The managers in turn hire, supervise, and coordinate employees to manufacture products and provide services. 35) D

The firm’s book value captures the historical cost of a firm’s assets (i.e., tangible assets). 36) D

In an economic context, strategy is about (1) creating economic value, and (2) capturing as much of it as possible. 37) A

A CSV approach is identity defining for an organization. The CSV approach is baked in from the beginning, as when a company designs its supply chain to provide higher quality products at a lower cost while also reducing its environmental impact. 38) FALSE

Competitive advantage goes to the firm that achieves the largest economic value created, which is the difference between V, the maximum amount a customer is willing to pay (rather than the price they end up paying in the store), and C, the cost to produce the good or service. The reason is that a large difference between V and C gives the firm two distinct pricing options: (1) It can charge higher prices to reflect the higher value and thus increase its profitability, or (2) it can charge the same price as competitors and thus gain market share. Given this, the strategic objective is to maximize V – C, or the economic value created. 39) B

The governance characteristic of ESG captures board independence, transparency, shareholder democracy, business ethics, and legal compliance, such as adherence to accurate, transparent, and accepted accounting practices. 41) B

Economic value creation equals consumer surplus plus firm profit, or the sum of consumer and producer surplus.

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42) C

The public stock company has been a major contributor to value creation since its inception as a new organizational form over 100 years ago. Michael Porter, Mark Kramer, and others, however, argue that many public companies have defined value creation too narrowly in terms of financial performance. 43) D

The balanced scorecard is a tool for strategy implementation, not for strategy formulation. Implementing a balanced scorecard should allow FMC’s strategic leaders to align their different perspectives to create a more focused corporation overall; the four key questions senior leadership should ask themselves are: how do shareholders view us, what core competencies do we need, how do we create value, how do customers view us? 44) A

Rather than emphasizing sustaining a competitive advantage over time, sustainable strategy means a strategy that can be pursued over time without detrimental effects on people or the planet. 45) A

The continuation of Axe Capital despite Axel’s death best exemplifies legal personality. Legal personality allows a firm’s continuation beyond the founder or the founder’s family. 46) B

Like the balanced-scorecard, the triple-bottom-line takes an integrative and holistic view in assessing a company’s performance. 47) D

Consumer surplus is the difference between the value a consumer attaches to a good or service (V), and what they pay for it (P), or (V – P), that is, $1,100 – $900 = $200. 48) TRUE

The balanced scorecard is a tool for strategy implementation, not for strategy formulation. It is up to a firm’s managers to formulate a strategy that will enhance the chances of gaining and sustaining a competitive advantage. When implementing a balanced scorecard, managers need to be aware that a failure to achieve competitive advantage is not so much a reflection of a poor framework but of a strategic failure. The balanced scorecard is only as good as the skills of the managers who use it: they first must devise a strategy that enhances the odds of achieving competitive advantage. 49) Short Answer

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The three standard dimensions that are used when measuring competitive advantage are economic value created, accounting profitability, and shareholder value created. When determining how much economic value is created, we must first determine the value, price, and cost of our product and/or service. The formula V – C shows the difference between value and cost. Accounting profitability is data derived from publicly available accounting data such as income statements and balance sheets. Some of the profitability ratios most commonly used in strategic management are return on invested capital (ROIC), return on equity (ROE), return on assets (ROA), and return on revenue (ROR). It should be noted that all accounting data are historical and thus are considered as backward-looking and do not consider off-balance sheet items. Shareholder value created attempts to measure competitive advantage from the shareholders’ perspective, whose primary concern is the return on risk capital. However, this measure may mirror volatile fluctuations in the stock market and irrational investor behavior. 50) C

By relying on both an internal and an external view of a firm, the balanced scorecard combines the strengths provided by the individual approaches to assessing competitive advantage: economic value creation, accounting profitability, and shareholder value creation. 51) C

Shareholders—individuals or organizations who own one or more shares of stock in a public company—are the legal owners of public companies. 52) D

Rather than merely relying on historical costs (a limitation of taking the perspective of accounting profitability), in the economic value creation perspective all costs, including opportunity costs, must be considered. 53) B

Ari is most likely to agree with Milton Friedman’s view that a business can use its resources anyhow to create value as long as it does so within the rules of the game. Friedman stated his view of the firm’s social obligations: “There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” 54) TRUE

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The shared value creation framework proposes that managers maintain a dual focus on shareholder value creation and value creation for society. It recognizes that markets are defined not only by economic needs but also by societal needs. It advances the perspective that negative externalities such as pollution, wasted energy, and costly accidents can have negative internal effects, not only in lost reputation but also on the bottom line. Nobel laureate Milton Friedman stated his view of the firm’s social obligations: “There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” This notion is often captured by the term shareholder capitalism. 55) C

The scenario best exemplifies the law of legal personality. Legal personality regards a nonliving entity such as a for-profit firm as similar to a person, with legal rights and obligations. Legal personality allows a firm’s continuation beyond the founder or the founder’s family. 57) FALSE

No best strategy exists—only better ones (better in comparison with others). We must interpret any performance metric relative to those of competitors and the industry average. Actual performance can be judged only in comparison to other contenders in the field or the industry average, not on an absolute basis. 58) TRUE

Competitive advantage is assessed relative to a benchmark, either competitors or the industry average. 59) A

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The shared value creation framework proposes that strategic leaders maintain a dual focus on shareholder value creation and value creation for society. GE, for example, has strengthened its competitiveness by creating a profitable business with its “green” Ecomagination initiative. Ecomagination is GE’s strategic initiative to provide cleaner and more efficient energy sources, provide abundant sources of clean water anywhere in the world, and reduce emissions. Ecomagination solutions and products allow GE to increase the perceived value it creates for its customers while lowering costs to produce and deliver the “green” products and services. Ecomagination allows GE to solve the trade-off between increasing value creation and lower costs at the same time, enhancing GE’s contribution to shared value creation. GE’s Ecomagination products and services create value for society in terms of reducing emissions and lowering energy consumption, among other benefits. 61) B

Economic value created is the difference between a buyer’s willingness to pay for a product or service and the firm’s total cost to produce it. Because the cost of production is same for both the companies, the difference in economic value can only be possible when one company has been able to create a more valuable product for which buyers are willing to pay a higher price. 62) A

The difference between the price charged for a product ( P), and the cost to produce it ( C), is the producer surplus. Firms capture this amount as profit per unit sold. 63) B

In this scenario, the managers at Konex Vitamins are applying the triple-bottom-line approach to measure firm performance. Using a triple-bottom-line approach, managers audit their company’s fulfillment of its social and ecological obligations to stakeholders such as employees, customers, suppliers, and communities as conscientiously as they track its financial performance. 64) B

Corporate social responsibility suggests that firms that do well (“make profits”) should also do good by engaging in corporate philanthropy (“doing good,” “giving back,” and “being a good citizen”; this approach is best represented by Westminster’s pro bono work with immigrants. 65) B

From the shareholders’ perspective, the measure of competitive advantage that matters most is the return on their risk capital, which is the money they provide in return for an equity share, money that they cannot recover if the firm goes bankrupt. 66) B

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ASI Inc.’s opportunity cost is $200 million. Opportunity costs capture the value of the best forgone alternative use of the resources employed. 67) D

When costs are the same, the only option to increase the amount of economic value created and achieve a competitive advantage is to increase the maximum willingness to pay, or total perceived consumer benefits, through differentiation. 68) B

The balanced scorecard can accommodate both short- and long-term performance metrics. It provides a concise report that tracks chosen metrics and measures and compares them to target values. This approach allows strategic leaders to assess past performance, identify areas for improvement, and position the company for future growth. 69) B

In the CSV framework, value creation is focused from the beginning on both economic benefits and societal benefits. 70) D

The scenario that best exemplifies the implementation of a shared value creation framework at Great Sound Inc. is that Great Sound uses recycled materials to create its commercially successful products. The shared value creation framework proposes that strategic leaders maintain a dual focus on shareholder value creation and value creation for society. It recognizes that markets are defined not only by economic needs but also by societal needs. 71) Short Answer

Fixed costs are independent of consumer demand—for example, the cost of capital to build computer manufacturing plants or an online retail presence to take direct orders. Variable costs change with the level of consumer demand—for instance, components such as microprocessors, hard drives,display screens, and keyboards. 72) A

The most competitively important assets tend to be intangibles such as innovation, quality, and customer experience, which are not included in a firm’s balance sheets. Intangibles that are not captured in accounting data have become much more important in firms’ stock market valuations over the last few decades. 73) B

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Separation of legal ownership and management control deals with principals and agents. In publicly traded companies, the stockholders (the principals, represented by the board of directors) are the legal owners of the company, and they delegate decision-making authority to professional managers (the agents). 74) A

The amount of total perceived consumer benefits equals the maximum willingness to pay, which in this case is $180. 75) TRUE

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 efficient-market hypothesis. From this perspective, a firm’s share price provides an objective performance indicator. 76) D

Competitive advantage goes to the firm that achieves the largest economic value created, which is the difference between V, the consumer’s willingness to pay, and C, the cost to produce the good or service. 77) Short Answer

Risk capital is the money provided by shareholders in exchange for an equity share in a company; it cannot be recovered if the firm goes bankrupt. 78) A

Helping to address climate change by reducing carbon emissions is part of the environmental dimension of ESG. 80) Short Answer

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Student answers will vary. A sample answer follows. One of the challenges facing capitalism is economic inequality. The 50 richest people in the world own more wealth than the poorer half of humanity combined. Billions of people are not having their basic needs met in terms of access to education, health, and a decent job, and robotic technologies threaten to replace millions of workers. Firms that focus solely on profit maximization contribute to wealth distribution becoming more skewed. To address this challenge, the notion of creating shared value connects profits with societal progress, so that as the company prospers, so does its community. 81) FALSE

The term “tragedy of the commons” refers to a problem that arises when individuals, companies, or nations pursue their own self-interest without considering the well-being of society or the global community. 82) A

The balanced-scorecard approach provides only limited guidance about which metrics to choose. Different situations call for different metrics. 83) B

Economic value creation equals consumer surplus plus firm profit, or the sum of consumer and producer surplus. 84) C

The three dimensions of the triple bottom line are profits, people, and planet. 85) B

The question “How do we create value under the balanced-scorecard framework?” challenges managers to come up with new strategic objectives and future competitiveness, as well as innovation and organizational learning. 86) C

In the scenario, the amount $62,000 ($50,000 + $12,000) would be Dante’s opportunity cost. An entrepreneur faces two types of opportunity costs: (1) forgone wages they could be earning if they were employed elsewhere, and (2) the cost of capital they invested in their business, which could instead be invested in, say, the stock market or U.S. Treasury bonds. 87) D

Opportunity costs capture the value of the best forgone alternative use of the resources employed.

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88) B

Publicly traded firms are required to file a Form 10-K (or “annual report”) each year with the U.S. Securities and Exchange Commission (SEC), a federal regulatory agency. The 10-K reports are the primary source of companies’ accounting data available to the public. 89) Short Answer

Student examples will vary. A sample response follows: Like the balanced scorecard, the triple bottom line takes a more integrative and holistic view in assessing a company’s performance. Using a triple-bottom-line approach, strategic leaders audit their company’s fulfillment of its social and ecological obligations to stakeholders such as employees, customers, suppliers, and communities as conscientiously as they track its financial performance. Achieving positive results in all three areas can lead to a sustainable strategy, or a strategy that produces not only positive financial results but also positive results along the social and ecological dimensions. Sustainable strategies can also be good for profits. GE created a standalone division called Renewable Energy, which had $16 billion in revenues in 2020. 90) D

In the balanced-scorecard approach, the four questions asked by managers are (1) “How do customers view us?” (2) “How do we create value” (3) “What core competencies do we need?” and (4) “How do shareholders view us?” Amber has determined that DigIt will create value through its online ordering system and needs core competencies related to sourcing supplies and web development. However, she has not addressed how customers and shareholders view the company’s products or services and where they should be improved (e.g., quality, speed…) and how customers and shareholders might perceive and value this new service. 91) A

Limited liability means that the shareholders who provide the risk capital are liable only to the capital specifically invested, and not for other investments they may have made or for their personal wealth. Limited liability encourages investments by the wider public and entrepreneurial risk-taking. 92) Short Answer

A firm’s advantage can be based on superior product differentiation leading to higher perceived value. Competitive advantage can also result from a relative cost advantage over rivals, assuming all firms can create the same total perceived consumer benefits. Hence, the source of the competitive advantage is a relative cost advantage over rivals. 93) B

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The balanced-scorecard approach is popular in managerial practice because it has several advantages. For example, the balanced scorecard allows managers to translate the vision into measurable operational goals. 94) A

According to the perspective of shareholder capitalism, shareholders—the providers of the necessary risk capital and the company’s legal owners—are the stakeholder group with the most legitimate and dominant claim on the company’s profits. 95) D

Fixed costs are independent of consumer demand—for example, the cost of capital to build computer manufacturing plants or an online retail presence to take direct orders. 96) FALSE

A CSR perspective leads to tinkering with isolated components as needed, such as starting a fairtrade initiative. In contrast, the CSV approach is baked in from the beginning, as when a company designs a closed-loop supply chain to provide higher quality products at a lower cost while also reducing its environmental impact. 97) C

The triple-bottom-line approach considers a combination of economic, social, and ecological concerns that can lead to a sustainable strategy. 98) C

The balanced-scorecard approach provides only limited guidance about which metrics to choose. Different situations call for different metrics. 99) TRUE

The social aspect of ESG criteria focuses on areas such as diversity, equity, inclusion, health and safety, and human rights. 100)

A Friedman sees the firm’s economic responsibility as its primary objective, as captured in his famous quote: “There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” 101)

Short Answer

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Nobel laureate Milton Friedman stated his view of the firm’s social obligations: “There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” This notion is often captured by the term shareholder capitalism. According to this perspective, shareholders—the providers of the necessary risk capital and the company’s legal owners—have the most legitimate and dominant claim on the company’s profits. 102)

D Rather than emphasizing sustaining a competitive advantage over time, sustainable strategy means a strategy that can be pursued over time without detrimental effects on people or the planet. By voluntarily eliminating the harmful chemicals, Chemicor not only achieved a positive result in the people and planet dimensions of the triple bottom line, but potentially gave itself a profit advantage by avoiding a shutdown if the government ultimately decided to ban the chemicals. 103)

FALSE A firm’s stock price generally increases only if the firm’s rate of growth exceeds investors’ expectations. This is because investors discount into the present value of the firm’s stock price whatever growth rate they foresee in the future. If a low-growth business like Comcast (in cable TV) is expected to grow 2 percent each year but realizes 4 percent growth, its stock price will appreciate. In contrast, if a fast-growing business such as Apple in mobile computing is expected to grow by 10 percent annually but delivers “only” 8 percent growth, its stock price will fall. 104)

C Economic value creation is created when a customer is willing to pay more for a good or service than it costs the firm to produce it. 105)

B The three standard dimensions for measuring competitive advantage—economic value, accounting profitability, and shareholder value—each provide unique insights for assessing competitive advantage, but all of them are more or less one-dimensional metrics. However, conceptual frameworks like the balanced-scorecard and the triple-bottom-line attempt to provide a more holistic perspective on firm performance. 106)

C All accounting data are historical data and thus backward-looking. Accounting profitability ratios show us only the outcomes from past decisions, and the past is no guarantee of future performance.

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107)

B Strategy scholars argue that many public companies have defined value creation too narrowly in terms of financial performance, which has contributed to black swan events. 108)

TRUE A consumer surplus is the difference between the value a consumer attaches to a good or service and what they paid for it. 109)

D In this scenario, the difference of $200 ($800 – $600) is the economic value created. Economic value created is the difference between a buyer’s willingness to pay for a product or service and the firm’s total cost to produce it. 110)

C Determining the value of a good in the eyes of consumers is not a simple task. Abdul is willing to spend more money on a thermos than Laetitia; we must examine their purchasing habits to reveal their preferences, which should indicate how much each consumer is willing to pay for a product/service. 111)

B The amount, $100, is referred to as the value ( V) the consumer attaches to the jacket. Value denotes the dollar amount ( V) a consumer would attach to a good or service. Value captures a consumer’s willingness to pay and is determined by the perceived benefits a good or service provides to the buyer. 112)

D Economic value created is the difference between a buyer’s willingness to pay for a product or service and the firm’s total cost to produce it. 113)

D Market capitalization (or market cap) captures the total dollar market value of a company’s outstanding shares at any given point in time ( Market cap = Number of outstanding shares × Share price). 114)

FALSE A sustainable strategy is a strategy along the social, economic, and ecological dimensions that can be pursued over time without detrimental effects on people or the planet. 115)

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A Customer perspective is directly linked to firm revenues and profits, and this is why it is included in the balanced-scorecard framework. 117)

C Michael Porter suggests expanding the customer base to bring in nonconsumers such as those at the bottom of the pyramid—the largest but lowest income socioeconomic group of the world’s population. Muhammad Yunus, Nobel Peace Prize winner, founded Grameen Bank in Bangladesh to provide small loans (termed microcredit) to impoverished villagers, who used the funding for entrepreneurial ventures that would help them climb out of poverty. 118)

A Michael Porter suggests expanding the customer base to bring in nonconsumers such as those at the bottom of the pyramid—the largest but lowest income socioeconomic group of the world’s population. The base of the pyramid in the global economy can provide significant business opportunities, which—if satisfied—could improve the living standard of the people living below the poverty line around the world. 119)

C Tangible assets are the primary focus of accounting data even though intangibles are most important to competitive advantage. 120)

Short Answer Although measuring firm performance through total return to shareholders and firm market capitalization has many advantages, it has its shortcomings: Stock prices can be highly volatile, making it difficult to assess firm performance, particularly in the short term. Overall macroeconomic factors such as the unemployment rate, economic growth or contraction, and interest and exchange rates all have a direct bearing on stock prices. Stock prices frequently reflect the psychological mood of investors, which can at times be irrational. 121)

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Competitive advantage has been linked to a firm’s triple bottom line, the ability to maintain performance in the economic, social, and ecological contexts (profits, people, planet) to achieve a sustainable strategy. 122)

C Both quantitative and qualitative performance dimensions matter in judging the effectiveness of a firm’s strategy. Those who focus on only one metric will risk being blindsided by poor performance on another. Rather, strategic leaders need to rely on a more holistic perspective when assessing firm performance, measuring different dimensions over different time periods. 123)

A Environmental, social, and governance (ESG) refers to a set of standards beyond mere financial results on which companies are evaluated. 124)

A Stock prices can be highly volatile, making it difficult to assess firm performance, particularly in the short term. This volatility, combined with external factors and investor sentiment, implies that total return to shareholders is a better measure of firm performance and competitive advantage over the long term. 125)

Short Answer Investors are primarily interested in a company’s total return to shareholders, which is the return on risk capital, including stock price appreciation plus dividends received over a specific period. Unlike accounting data, total return to shareholders is an external and forward-looking performance metric. It indicates how the stock market views all available public information about a firm’s past, current state, and expected future performance, with most of the weight on future growth expectations. 126)

D Investors are primarily interested in a company’s total return to shareholders, which is the return on risk capital, including stock price appreciation plus dividends received over a specific period. 127)

C This scenario best exemplifies transferability of investor ownership. Investors are allowed to trade shares of stock freely in the stock market on exchanges such as the New York Stock Exchange (NYSE) and NASDAQ. 128)

FALSE

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Because competitive advantage is defined as superior performance relative to other competitors in the same industry or the industry average, a firm’s strategic leaders must be able to accurately assess the performance of their firm and compare and benchmark their firm’s performance to other competitors in the same industry or against the industry average. 129)

B The difference between the price charged for a product ( P), and the cost to produce it ( C), is the profit, or producer surplus. 130)

C This characteristic means the shareholders who provide the risk capital are liable only for the capital specifically invested, and not for other investments they may have made or for their personal wealth.

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Student name:__________ 1) Which of the following sources of differential appeal is most effective in helping a firm

sustain its advantage? A) observable product features B) an updated package design C) a cost-leadership strategy D) superior customer experience Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 06-04 Assess the benefits and risks of differentiation and cost-leadership strat Topic : Gaining Competitive Advantage Through Differentiation Source : Chapter 06 Test Bank > MC Qu. 82 Which of the following sources of differenti...

2) 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) blue ocean strategy B) market penetration strategy C) liquidation strategy D) product diversification strategy Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 06-05 Evaluate value and cost drivers that may allow a firm to pursue a blue oce Topic : Blue Ocean Strategy Source : Chapter 06 Test Bank > MC Qu. 90 In the multiplex industry, Home Again Movies...

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3) Center Street Supply Co. has successfully achieved a competitive advantage in the detergent

and cleaning solution industry as a differentiator. Which of the following scenarios would undermine Center Street’s position? A) Center Street’s customers start to consider cleaning solutions a commodity. B) Center Street’s product has not established an acceptable standard of quality. C) Center Street improves the formula for its most popular cleaner without increasing the price. D) Center Street introduces a new biodegradable bottle that raises cost and perceived value. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 06-04 Assess the benefits and risks of differentiation and cost-leadership strat Topic : Gaining Competitive Advantage Through Differentiation Source : Chapter 06 Test Bank > MC Qu. 84 Center Street Supply Co. has successfully...

4) Which of the following best describes a strategic tradeoff? A) the tension between raising prices and keeping a loyal clientele B) the tension between value creation and the pressure to keep costs in check C) the tension between innovation and keeping manufacturing costs down D) the tension between maintaining both high-quality products and service Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-01 Define business-level strategy and describe how it determines a firm's str Topic : Understanding Business-Level Strategies Source : Chapter 06 Test Bank > MC Qu. 40 Which of the following best describes a stra...

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5) When pursuing a blue ocean strategy, a firm in a crowded marketplace attempts to out-

compete rivals by providing a leap in value creation, thereby opening new and uncontested market spaces. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-05 Evaluate value and cost drivers that may allow a firm to pursue a blue oce Topic : Blue Ocean Strategy Source : Chapter 06 Test Bank > TF Qu. 10 When pursuing a blue ocean strategy, a firm ...

6) Product features, customer service, and complements are all examples of important A) value curves. B) cost drivers. C) value drivers. D) cost curves. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-02 Examine the relationship between value drivers and differentiation strateg Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > MC Qu. 47 Product features, customer service, and comp...

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7) Trader Joe’s successfully used a blue ocean strategy by offering lower-cost food than Whole

Foods for the same market of patrons. By doing this, Trader Joe’s was able to A) create higher value creation and thus generate greater sales. B) gain a market share and make up the loss in margin through increased sales. C) gain a market share and make up the loss in margin through increased pricing. D) create higher value creation and thus generate greater profit margins. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-06 Assess the risks of a blue ocean strategy, and explain why it is difficult Topic : Blue Ocean Strategy Source : Chapter 06 Test Bank > MC Qu. 105 Trader Joe&#8217;s successfully used a blue ...

8) ________ is best described as the output range needed to bring down the cost per unit as

much as possible, allowing a firm to stake out the lowest-cost position that is achievable through economies of scale. A) Minimum efficient scale B) Maximum output capacity C) Break-even output D) Optimum sustainable yield Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Economies and Diseconomies of Scale Source : Chapter 06 Test Bank > MC Qu. 66 ________ is best described as the output range ...

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9) Spotless Inc. outsources its production to contract manufacturers located in underdeveloped

nations where unskilled labor is at very low wages is plentiful. This has helped the company become a price leader in the chemicals industry. Which of the following is the key driver behind Spotless Inc.’s strategic position? A) low-cost input factors B) availability of complements C) network effects D) superior customer service Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > MC Qu. 58 Spotless Inc. outsources its production to c...

10) 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) product features C) premium prices D) low-cost input factors Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-02 Examine the relationship between value drivers and differentiation strateg Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > MC Qu. 51 Golden Soles has been successful at differen...

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11) Due to its large sales volume and low-cost structure, Bunny’s Lo-Cost enjoys a cost-

leadership position. Which of the following scenarios might threaten Bunny’s competitive advantage? A) Existing competitors in the same industry lower their prices to match those of Bunny’s. B) Industry suppliers raise their prices. C) Competitors engage in an all-out price war. D) A new competitor is perceived to provide similar value while offering better service than Bunny’s. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 06-04 Assess the benefits and risks of differentiation and cost-leadership strat Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > MC Qu. 86 Due to its large sales volume and low-cost s...

12) One of the risks of pursuing a blue ocean strategy is that a firm can find itself A) ineffective when competing on an international scale. B) competing with only a differentiation strategy. C) stuck in the middle without a clear strategic position. D) losing sight of its mission and vision. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-05 Evaluate value and cost drivers that may allow a firm to pursue a blue oce Topic : Blue Ocean Strategy Source : Chapter 06 Test Bank > MC Qu. 24 One of the risks of pursuing a blue ocean st...

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13) 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) caught in the transition. D) burned at the top. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 06-05 Evaluate value and cost drivers that may allow a firm to pursue a blue oce Topic : Blue Ocean Strategy Source : Chapter 06 Test Bank > MC Qu. 97 When a blue ocean strategy goes bad, a firm ...

14) What is higher value associated with?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 06-02 Examine the relationship between value drivers and differentiation strateg Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > SA Qu. 111 What is higher value associated with?

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15) Wang Services competes on cost with Kinsler McCloskey in the estate planning industry.

Both firms operate on a 90 percent learning curve, and neither firm is capable of increasing its cumulative output any further. How might Wang Services achieve a cost-leadership position while maintaining customer satisfaction? A) by reducing its client base and lowering output while keeping staff and service levels the same B) by incorporating specialized document software to take advantage of experiencecurve effects C) by increasing the time the company spends on each client plan by 25 percent without raising prices D) by eliminating customer service features such as quarterly client consultations and newsletters Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Economies and Diseconomies of Scale Source : Chapter 06 Test Bank > MC Qu. 80 Wang Services competes on cost with...

16) The goal of a strategic position is to create the largest gap possible between the________ that

a firm creates through its offerings and the________ required to create these offerings. A) marketing; innovation process B) market share; defensive strategy C) gap; ROIC D) value; cost Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-01 Define business-level strategy and describe how it determines a firm's str Topic : Understanding Business-Level Strategies Source : Chapter 06 Test Bank > MC Qu. 28 The goal of a strategic position is to creat...

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17) A blue ocean strategy differs from a low-cost strategy in that A) the intent of a blue ocean strategy is not to be the absolute lowest-cost provider

because a blue ocean must also increase perceived value. B) the focus of a blue ocean strategy is on lowering the economic value created, whereas a cost-leader focuses on increasing the economic value created. C) economies of scale are more important to a blue ocean strategy, while economies of scope are more important to a cost-leader. D) a blue ocean’s research and development focus is on process technologies, and a costleader’s focus is on product technologies. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-06 Assess the risks of a blue ocean strategy, and explain why it is difficult Topic : Blue Ocean Strategy Source : Chapter 06 Test Bank > MC Qu. 98 A blue ocean strategy differs from a low-cos...

18) Which of the following best explains why a blue ocean strategy is difficult to implement? A) It requires the reconciliation of fundamentally different strategic positions—

differentiation and low cost. B) It requires the reconciliation of fundamentally different strategic positions— differentiation and strategic innovation. C) It requires the combination of fundamentally similar strategic positions— differentiation and strategic innovation. D) It combines the benefits of similar strategic positions—differentiation and low cost. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-05 Evaluate value and cost drivers that may allow a firm to pursue a blue oce Topic : Blue Ocean Strategy Source : Chapter 06 Test Bank > MC Qu. 93 Which of the following best explains why a b...

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19) What is a value gap?

20) CSL Fixtures enjoys a competitive advantage as a cost leader in the faucet manufacturing

industry because high demand for its products has allowed it to operate at the minimum efficient scale. Which of the following scenarios would be most concerning to the managers of CSL Fixtures? A) A major winter storm shuts down CSL’s production for several days. B) CSL’s most reliable production worker takes a job in another industry. C) A stainless steel shortage raises input costs across the faucet industry. D) CSL’s leading competitor develops a new leak-resistant product. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Evaluate Difficulty : 3 Hard Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Economies and Diseconomies of Scale Source : Chapter 06 Test Bank > MC Qu. 69 CSL Fixtures enjoys a competitive advantage...

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21) In a focused cost-leadership strategy, a firm A) focuses on reducing the economic value created to drive down costs. B) provides high-priced products for many different segments of the mass market. C) delivers low-cost products and services to a specific, narrow part of the market. D) caters to the segment of the market that is least cost sensitive. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-01 Define business-level strategy and describe how it determines a firm's str Topic : Understanding Business-Level Strategies Source : Chapter 06 Test Bank > MC Qu. 43 In a focused cost-leadership strategy, a fir...

22) How does availability of complements act as a value driver? A) Complements add value to a product by offering an inferior substitute to it. B) Complements add value to a product by competing with it. C) Complements add value to a product when they are consumed in tandem with it. D) Complements add value to a product when they imitate it. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-02 Examine the relationship between value drivers and differentiation strateg Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > MC Qu. 49 How does availability of complements act as ...

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23) Differentiation, focused differentiation, cost leadership, and focused cost leadership are A) performance metrics. B) value innovations. C) business strategies. D) competitive advantages. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 06-01 Define business-level strategy and describe how it determines a firm's str Topic : Understanding Business-Level Strategies Source : Chapter 06 Test Bank > MC Qu. 16 Differentiation, focused differentiation...

24) Antonia’s is a chain of casual restaurants that promises affordable Italian meals using top-

quality local ingredients. However, the company has struggled to achieve a competitive advantage because of its high overhead costs. Which of the following scenarios is most likely to result in a competitive advantage? A) marketing itself as an upscale eatery to compete with more refined restaurants B) eliminating brick-and-mortar locations and offering delivery from a central kitchen C) raising prices without improving on the quality of its food or customer service D) lowering the quality of ingredients below what customers expect to control costs Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 06-05 Evaluate value and cost drivers that may allow a firm to pursue a blue oce Topic : Value Innovation Source : Chapter 06 Test Bank > MC Qu. 91 Antonia&#8217;s is a chain of casua...

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25) Which of the following describes an airline that is most likely stuck in the middle? A) Stratosphere offers complimentary drinks and meals, coast-to-coast coverage via

connecting hubs, plush airport lounges, and high prices. B) Cloud Rider offers international routes and global coverage, high customer service, high reliability, and high prices. C) Skypath offers high-quality beverages and meals, plush airport lounges, only a few connections via domestic hubs, poor customer service, and low prices. D) Wingspan offers no assigned seating, no in-flight amenities, no drinks or meals, no airport lounges, and low prices. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-06 Assess the risks of a blue ocean strategy, and explain why it is difficult Topic : Value Innovation Source : Chapter 06 Test Bank > MC Qu. 101 Which of the following describes an airline ...

26) Tablette Corp. is a consumer electronics company known for its affordable mobile devices

that follows a cost-leadership strategy. In this scenario, Tablette Corp. should ideally compare its strategic position with A) a consumer electronics company popular among price-conscious customers. B) an online company that sells customized electronics accessories. C) a consumer electronics company that sells high-end devices. D) a company that sells small kitchen appliances at affordable prices. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 06-01 Define business-level strategy and describe how it determines a firm's str Topic : Understanding Business-Level Strategies Source : Chapter 06 Test Bank > MC Qu. 42 Tablette Corp. is a consumer electronics com...

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27) A cost leader is the firm least likely to survive a price war. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 06-04 Assess the benefits and risks of differentiation and cost-leadership strat Topic : Gaining Competitive Advantage Through Differentiation Source : Chapter 06 Test Bank > TF Qu. 09 A cost leader is the firm least likely...

28) What are the two different generic business strategies available to firms?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 06-01 Define business-level strategy and describe how it determines a firm's str Topic : Understanding Business-Level Strategies Source : Chapter 06 Test Bank > SA Qu. 107 What are the two different generic business ...

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29) Trail Ready Tents faces stiff competition from Appalachian Equipment, a rival firm with

which Trail Ready has achieved differentiation parity. Both firms have invested in state-ofthe art production facilities and have similar learning curves of 85 percent. Assuming neither firm can reduce the cost of its input factors, how can Trail Ready achieve a competitive advantage as a cost-leader? A) Reduce the manufacturing staff by half to save on labor costs. B) Cut costs by eliminating several features that customers value. C) Increase spending to develop additional product features. D) Have a cumulative output that is greater than Appalachian’s. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > MC Qu. 76 Trail Ready Tents faces stiff competition...

30) Which of the following questions should strategic leaders ask while formulating a business-

level strategy? A) Which corporate governance mechanisms should we use? B) When should we introduce our product/service in the market? C) How do the employees, shareholders, and customers view us? D) What customer needs, wishes, and desires will we satisfy? Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-01 Define business-level strategy and describe how it determines a firm's str Topic : Business-Level Strategy: How to Compete for Advantage Source : Chapter 06 Test Bank > MC Qu. 13 Which of the following questions should...

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31) A firm operating on an 80 percent learning curve will achieve lower per-unit costs after

doubling its output than a firm operating on a 70 percent learning curve will. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 3 Hard Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > TF Qu. 07 A firm operating on an 80 percent...

32) Which of the following provides an example of a firm in a red ocean? A) Blue Desk Company matched the price of its closest competitors and had lower profit

margins as a result. B) Printers Inc. offered printers at a mid-range price but failed to differentiate its product as being of decent quality. C) Village Electronics offered printers at a higher price than competitors and, as a result, failed to make a profit. D) Foley Office Supply offered printers at a low price but failed to differentiate its product as being exclusive. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 06-05 Evaluate value and cost drivers that may allow a firm to pursue a blue oce Topic : Blue Ocean Strategy Source : Chapter 06 Test Bank > MC Qu. 94 Which of the following provides an example o...

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33) Which of the following is primarily a value driver? A) cost of input factors B) product features C) economies of scope D) experience-curve effects Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 06-02 Examine the relationship between value drivers and differentiation strateg Topic : Value Innovation Source : Chapter 06 Test Bank > MC Qu. 48 Which of the following is primarily a value ...

34) Whole Foods focuses on a small market segment, affluent consumers who want to buy high-

end, organic groceries. What is the appropriate name for Whole Foods’s scope of competition? A) general B) focused C) broad D) specific Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-01 Define business-level strategy and describe how it determines a firm's str Topic : Understanding Business-Level Strategies Source : Chapter 06 Test Bank > MC Qu. 18 Whole Foods focuses on a small market segmen...

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35) Addell recently started a specialty baking business and proudly boasts that none of her

competitors can replicate her unique flavor combinations and complicated, original cake designs. Her cakes are in high demand for weddings, birthdays, and other large events. As a result of her success, she’s considering expanding her operations and increasing production by 50 percent, but her accountant tells her that this expansion will substantially increase the per-unit cost of every cake. This news worries Addell because the price of her cakes is already very high, and she’s afraid of charging more. Addell asks you the following questions:

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-02 Examine the relationship between value drivers and differentiation strateg Topic : Gaining Competitive Advantage Through Differentiation Source : Chapter 06 Test Bank > SA Qu. 126 Addell recently started a specialty baking...

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36) Mohawk is a leader in sustainable and innovative carpeting and floorings, as evidenced by its

signature product, the world’s first organic cotton carpet. Its product is unique and has appealing customer attributes. If Mohawk’s raw material costs increased by 12 percent this year, what would be the likely outcome? A) The company would launch an all-out effort to reduce other costs by 12 percent. B) Mohawk would pass a major portion of this increase along as a price increase to its customers. C) Mohawk would lower profit margins to absorb this cost increase. D) Mohawk would seek lower-cost materials, even if it meant losing the carbon-neutral label on the product. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-02 Examine the relationship between value drivers and differentiation strateg Topic : Gaining Competitive Advantage Through Differentiation Source : Chapter 06 Test Bank > MC Qu. 19 Mohawk is a leader in sustainable and innova...

37) According to the five forces model, which of the following is viewed as a major risk to a

business pursuing a cost-leadership strategy? A) suppliers requesting a 2 percent price increase across the industry B) innovation that allows competitors to emerge with more economical replacements C) competition switching from non-price attributes to pricing D) new entrants with small production scale Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-04 Assess the benefits and risks of differentiation and cost-leadership strat Topic : Five Forces Model of Industry Attractiveness Source : Chapter 06 Test Bank > MC Qu. 81 According to the five forces model, which of...

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38) At a certain output level, the per-unit cost incurred by a firm to manufacture a product was

$70. Once the cumulative output doubled, the cost per unit reduced to $63. All other factors remaining constant, the firm has been able to achieve a(n) A) 90 percent learning curve. B) 60 percent learning curve. C) 80 percent learning curve. D) 54 percent learning curve. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > MC Qu. 75 At a certain output level, the per-unit cost...

39) Finish Line Athletics Inc. is a chain of gyms. It offers a fitness package that allows its

members to use the gym facilities for 15 months by paying only for a year. Included in the package are two free yoga classes and a gym kit. These add-ons by themselves are not very valuable, but as a package they can enhance the perceived value of the service offerings. In this case, Finish Line’s primary value driver is A) availability of complements. B) experience-curve effects. C) learning-curve effects. D) economies of scale. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-02 Examine the relationship between value drivers and differentiation strateg Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > MC Qu. 54 Finish Line Athletics Inc. is a chain...

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40) How do experience-curve and learning-curve effects help a business gain competitive

advantage?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > SA Qu. 117 How do experience-curve and learning-curve e...

41) Value drivers contribute to a firm’s competitive advantage only if A) they can restrict the firm from claiming a premium price for its products. B) they can shrink the firm’s value gap. C) the increase in value creation exceeds the increase in costs. D) the decrease in perceived value leads to an increase in costs. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 06-02 Examine the relationship between value drivers and differentiation strateg Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > MC Qu. 55 Value drivers contribute to a firm&#8217;s c...

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42) 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 the product unless it is customized. C) product quality is more important in a broad market than in a narrow one. D) buyers will be reluctant to pay for a product unless the quality is superior. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > MC Qu. 21 When pursuing a cost-leadership strategy, a ...

43) Firms with greater market share might be in a position to reap economies of scale, which are A) decreases in output in a generic cost-leadership strategy. B) increases in cost per unit as output decreases. C) decreases in cost per unit as output increases. D) increases in price in a focused cost-leadership strategy. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Economies and Diseconomies of Scale Source : Chapter 06 Test Bank > MC Qu. 65 Firms with greater market share might...

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44) When a firm makes choices between a cost or value position to achieve competitive

advantage, it is primarily involved in A) arbitration. B) mediation. C) strategic tradeoffs. D) collective bargaining. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 06-01 Define business-level strategy and describe how it determines a firm's str Topic : Understanding Business-Level Strategies Source : Chapter 06 Test Bank > MC Qu. 34 When a firm makes choices between a cost or ...

45) The goal of the differentiator is to have a smaller value gap than competitors. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 06-02 Examine the relationship between value drivers and differentiation strateg Topic : Gaining Competitive Advantage Through Differentiation Source : Chapter 06 Test Bank > TF Qu. 04 The goal of the differentiator is to have a ...

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46) Activate Equipment Inc. has been successful at differentiating itself from competitors by

claiming a premium price for its treadmills based on integrated HD displays, workout tracking capabilities, and advanced technology. In this scenario, which of the following is the key value driver? A) customer service B) economies of scale C) product features D) low-cost input factors Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-02 Examine the relationship between value drivers and differentiation strateg Topic : Gaining Competitive Advantage Through Differentiation Source : Chapter 06 Test Bank > MC Qu. 26 Activate Equipment Inc. has been successful...

47) Evaluate the following statement: Strategic leaders should always try to pursue a blue ocean

strategy because it is the most complex, coveted, and most desirable strategy that exists. A) I disagree; firms should only pursue this strategy if they are able to reconcile the tradeoffs of each generic strategy. B) I disagree; firms should never pursue a blue ocean strategy because it’s much too complex. C) I agree; firms should always pursue a blue ocean strategy because the benefits outweigh the cost. D) I agree; firms should pursue a blue ocean strategy because it’s harder for competitors to replicate. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-05 Evaluate value and cost drivers that may allow a firm to pursue a blue oce Topic : Blue Ocean Strategy Source : Chapter 06 Test Bank > MC Qu. 29 Evaluate the following statement: Strategic ...

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48) What is required for a blue ocean strategy to succeed?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-04 Assess the benefits and risks of differentiation and cost-leadership strat Topic : Blue Ocean Strategy Source : Chapter 06 Test Bank > SA Qu. 123 What is required for a blue ocean strategy t...

49) Greenfield Apparel differentiates itself from competitors by offering high-fashion clothing

items created using only certified sustainable fabrics and manufactured in environmentally friendly facilities. This business strategy implies that Greenfield Apparel focuses on A) increasing the perceived value created for customers, which allows it to charge a premium price. B) decreasing the existing value gap by providing luxury goods to customers. C) maintaining a less steeper learning curve as compared to its competitors. D) lowering its costs compared to its competitors, while offering adequate value for its products. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-02 Examine the relationship between value drivers and differentiation strateg Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > MC Qu. 50 Greenfield Apparel differentiates itself from...

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50) Sophie’s sandwich shop offers burgers and sandwiches similar to national competitors in the

fast-food market but at a much lower price. What strategy is Sophie’s using? A) cost-leadership B) product diversification C) differentiation D) niche marketing Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-01 Define business-level strategy and describe how it determines a firm's str Topic : Understanding Business-Level Strategies Source : Chapter 06 Test Bank > MC Qu. 39 Sophie&#8217;s sandwich shop offers burgers...

51) What does it mean for a firm to have an 80 percent learning curve? A) Every time the cumulative output is doubled, the cost per unit will decline by 80

percent. B) Every time the cumulative output is doubled, the cost per unit will decline by 20 percent. C) Every time the cumulative output increases by 80 percent, the cost per unit will decline by 20 percent. D) Every time the cumulative output goes up by 20 percent, the cost per unit will decline by 80 percent. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > MC Qu. 74 What does it mean for a firm to have an 80 p...

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52) Marriott is able to create greater economic value than its competitors due to its 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 scale C) cost of input factors D) economies of scope Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-02 Examine the relationship between value drivers and differentiation strateg Topic : Economy of Scope Source : Chapter 06 Test Bank > MC Qu. 27 Marriott is able to create greater economic ...

53) When wireless service providers offer free or discounted mobile phones for subscribers to

their wireless voice and data service, the perceived value of the service offering increases. In this case, the value driver would be A) experience-curve effects. B) economies of scale. C) availability of complements. D) learning-curve effects. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-02 Examine the relationship between value drivers and differentiation strateg Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > MC Qu. 53 When wireless service providers offer free o...

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54) Both Lorenzo’s Engines and Water King incur a cost of $5,000 to manufacture a boat engine.

However, the economic value created by Water King is more than that created by Lorenzo’s Engines. What does this indicate? A) Water King can charge a premium price on its boat engines. B) Both Lorenzo’s and Water King have achieved competitive parity. C) Lorenzo’s has a competitive advantage over Water King. D) Lorenzo’s has created a higher value gap than Water King. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 06-02 Examine the relationship between value drivers and differentiation strateg Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > MC Qu. 45 Both Lorenzo&#8217;s Engines and Water King...

55) Differentiation and cost-leadership strategies are only effective in manufacturing industries. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 06-01 Define business-level strategy and describe how it determines a firm's str Topic : Understanding Business-Level Strategies Source : Chapter 06 Test Bank > TF Qu. 03 Differentiation and cost-leadership strategi...

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56) 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 the firm alone. B) the characteristics of the industry in which a firm competes. C) the characteristics of both the industry and the firm. D) the amount of market share a firm can gain. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-01 Define business-level strategy and describe how it determines a firm's str Topic : Understanding Business-Level Strategies Source : Chapter 06 Test Bank > MC Qu. 14 In order for a firm to formulate an effectiv...

57) Applying the five forces model to business-level strategy allows managers to assess the

benefits and risks of both cost-leadership and differentiation strategies. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-04 Assess the benefits and risks of differentiation and cost-leadership strat Topic : Understanding Business-Level Strategies Source : Chapter 06 Test Bank > TF Qu. 01 Applying the five forces model to business-l...

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58) What does the success of business-level strategies depend on?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-04 Assess the benefits and risks of differentiation and cost-leadership strat Topic : Understanding Business-Level Strategies Source : Chapter 06 Test Bank > SA Qu. 121 What does the success of business-level stra...

59) List how economies of scale contribute to a firm.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Economies and Diseconomies of Scale Source : Chapter 06 Test Bank > SA Qu. 115 List how economies of scale contribute to a ...

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60) A differentiation strategy works best when a A) firm has tangible resources, its focus of competition shifts to price, and equivalent

substitutes are readily available. B) firm has intangible resources, is able to pass on increases in supplier cost to the customer, and its differentiation appeal creates customer loyalty. C) firm’s differentiated products are commoditized, and costs of providing uniqueness do not rise above the customer’s willingness to pay. D) firm’s focus of competition shifts to price, and when increasing differentiation of product features do not create additional value. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-04 Assess the benefits and risks of differentiation and cost-leadership strat Topic : Gaining Competitive Advantage Through Differentiation Source : Chapter 06 Test Bank > MC Qu. 87 A differentiation strategy works best when a

61) A differentiator will always benefit when products have become commoditized. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 06-04 Assess the benefits and risks of differentiation and cost-leadership strat Topic : Gaining Competitive Advantage Through Differentiation Source : Chapter 06 Test Bank > TF Qu. 08 A differentiator will always benefit when pr...

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62) Define scope of competition and its importance to business strategy in the context of the

automobile industry.

63) Describe complements as value drivers and give an example.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-02 Examine the relationship between value drivers and differentiation strateg Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > SA Qu. 109 Describe complements as value drivers...

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64) 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) below 2,000 units B) above 4,000 units C) 2,000–3,000 units D) 3,000–4,000 units Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Economies and Diseconomies of Scale Source : Chapter 06 Test Bank > MC Qu. 67 When a firm manufactures 2,000&#8211;3,000 u...

65) When a firm combines experience-based learning and process innovation, the firm A) jumps to a steeper learning curve. B) experiences an increase in per-unit cost. C) moves down the existing learning curve. D) loses its competitive advantage. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > MC Qu. 79 When a firm combines experience-based learni...

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66) The broad question that business-level strategy answers is________ the firm will compete. A) how B) where C) when D) who Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-01 Define business-level strategy and describe how it determines a firm's str Topic : Understanding Business-Level Strategies Source : Chapter 06 Test Bank > MC Qu. 15 The broad question that business-level strategy an...

67) The major value drivers that managers have at their disposal include product features,

customer service, and complements. ⊚ true ⊚ false Question Details AACSB : Reflective Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 06-02 Examine the relationship between value drivers and differentiation strateg Topic : Gaining Competitive Advantage Through Differentiation Source : Chapter 06 Test Bank > TF Qu. 05 The major value drivers that managers have a...

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68) Combining economies of learning with the existing production technology allows a firm to A) jump to a flatter experience curve. B) move up a given experience curve. C) move down a given learning curve. D) jump to a less steeper learning curve. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > MC Qu. 77 Combining economies of learning with the exi...

69) Customer service and________ are two of the value drivers that managers can utilize when

trying to improve a firm’s differentiation strategic position. A) economies of scale B) product uniqueness C) experience curve D) cost of input factors Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-02 Examine the relationship between value drivers and differentiation strateg Topic : Gaining Competitive Advantage Through Differentiation Source : Chapter 06 Test Bank > MC Qu. 20 Customer service and ________ are two of t...

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70) Both Medical Manufacturing and R&D Health Inc. have developed advanced hearing aid

technologies. R&D’s hearing aids sell at $4,000 per pair, whereas Medical Manufacturing sells its hearing aids at $3,500 per pair. This price differentiation has mainly been attributed to the companies’ capital decisions. While Medical Manufacturing used its retained earnings to develop its technology, R&D Health borrowed funds from banks to develop its hearing aids. Thus, R&D pays a higher interest on its capital, which makes it necessary to price its product higher. Therefore, the key driver for Medical Manufacturing’s competitive advantage is A) availability of complements. B) economies of scale. C) superior customer service. D) low-cost input factors. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > MC Qu. 63 Both Medical Manufacturing and R&amp;D Health...

71) Why is keeping its costs the lowest in the industry not the only focus of a firm pursuing cost-

leadership strategy?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-04 Assess the benefits and risks of differentiation and cost-leadership strat Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > SA Qu. 119 Why is keeping its costs the lowest in the i...

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72) Open Window, a brand well known for producing vinyl and aluminum window blinds,

introduced a new range of faux-wood shutters and vertical blinds a few years ago. Because 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 Open Window applying? A) mass customization B) economies of scope C) learning-curve effect D) network effect Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 06-05 Evaluate value and cost drivers that may allow a firm to pursue a blue oce Topic : Value Innovation Source : Chapter 06 Test Bank > MC Qu. 95 Open Window, a brand well known...

73) 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) in order to evaluate whether Aldi has a sustained competitive advantage, it is useful to compare it to Whole Foods from a differentiation perspective. B) following a different generic business strategy within the same industry can lead to a competitive advantage for more than one organization. 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) 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. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-01 Define business-level strategy and describe how it determines a firm's str Topic : Understanding Business-Level Strategies Source : Chapter 06 Test Bank > MC Qu. 17 The fact that both Whole Foods (a high-end g...

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74) How is a cost leader protected from threats from powerful suppliers? A) It is able to create a significant difference between perceived value and current

market prices. B) It is more able to absorb price increases through generating higher profit margins. C) It is able to create a significant difference between actual value and future market prices. D) It is more able to absorb price increases through accepting lower profit margins. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-04 Assess the benefits and risks of differentiation and cost-leadership strat Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > MC Qu. 85 How is a cost leader protected from threats ...

75) Skin Science Inc. produces a line of skincare products that it sells at higher prices than its

competitors. The company has a large and loyal customer base due to its unique formulations, high-quality ingredients, and superior customer service. Which of the following generic business strategies has Skin Science adopted in this scenario? A) market penetration B) product diversification C) differentiation D) cost-leadership Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-01 Define business-level strategy and describe how it determines a firm's str Topic : Understanding Business-Level Strategies Source : Chapter 06 Test Bank > MC Qu. 35 Skin Science Inc. produces a line of...

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76) What are the key questions managers must answer to formulate an appropriate business-level

strategy?

77) Explain blue ocean strategy with the help of an example.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-05 Evaluate value and cost drivers that may allow a firm to pursue a blue oce Topic : Blue Ocean Strategy Source : Chapter 06 Test Bank > SA Qu. 122 Explain blue ocean strategy with the help of...

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78) Discuss the important differences between economies of scale and learning effects.

79) Durk’s Depot is a large chain of home improvement stores. It has cost benefits due to its

extensive operation. The company’s marketing and sales, logistics, administrative, and other such related costs get divided between a large number of product units stocked in its stores. This makes it difficult for smaller hardware stores, flooring retailers, and specialty paint stores to compete against Durk’s low prices. Thus, Durk’s Depot has a competitive advantage due to its A) time compression economies. B) learning-curve effects. C) economies of scale. D) superior customer service. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Economies and Diseconomies of Scale Source : Chapter 06 Test Bank > MC Qu. 70 Durk&#8217;s Depot is a large chain of home...

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80) Power Juice is a firm that produces sports drinks. Because a number of firms in the industry

are competing on cost, Power Juice executives have decided to pursue a differentiation strategy. In this case, the company should A) concentrate on improving process technologies to achieve economies of scale. B) enforce strict budget controls at all levels of the organization. C) focus on adding unique product or packaging features that customers will value. D) devote research-and-development resources to reducing the value gap. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 06-02 Examine the relationship between value drivers and differentiation strateg Topic : Gaining Competitive Advantage Through Differentiation Source : Chapter 06 Test Bank > MC Qu. 52 Power Juice is a firm that produces sports...

81) 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) perform different activities than its rivals. C) position itself below the productivity frontier. D) reduce the value gap. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 06-01 Define business-level strategy and describe how it determines a firm's str Topic : Understanding Business-Level Strategies Source : Chapter 06 Test Bank > MC Qu. 33 A firm&#8217;s business strategy can lead to...

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82) Summit Technology Inc. manufactures soundbars for $100 per unit, and the maximum price

customers are willing to pay is $475 per unit. Sound Gold Inc. is a competitor of Summit Technology that produces soundbars for $150 per unit, and customers are willing to pay a maximum price of $500 per unit. What does this imply? A) Summit Technology and Sound Gold share differentiation parity. B) Sound Gold is a cost leader when compared to Summit Technology. C) Summit Technology creates a greater economic value than Sound Gold. D) Sound Gold has a competitive advantage over Summit Technology in terms of perceived value. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > MC Qu. 57 Summit Technology Inc. manufactures...

83) The pursuit of both differentiation and low cost at the same time in a way that creates a leap

in value for both the firm and consumers is called A) value driving. B) value innovation. C) cost innovation. D) cost driving. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 06-06 Assess the risks of a blue ocean strategy, and explain why it is difficult Topic : Value Innovation Source : Chapter 06 Test Bank > MC Qu. 104 The pursuit of both differentiation and low ...

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84) A differentiator is least likely to be threatened by increases in input prices due to powerful

suppliers when the A) differentiator is able to create a significant difference between perceived value and current market prices. B) new product features added raise costs but not the perceived value in the minds of consumers. C) source of a competitor’s differential appeal is tangible rather than intangible. D) differentiator is able to significantly reduce the value gap. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-04 Assess the benefits and risks of differentiation and cost-leadership strat Topic : Gaining Competitive Advantage Through Differentiation Source : Chapter 06 Test Bank > MC Qu. 83 A differentiator is least likely to be threa...

85) Snow Beast Equipment initially spent 10 worker hours to assemble each snow blower.

However, as unit production doubled, the number of hours spent on assembling a snow blower decreased by 20 percent. This increase in productivity reduced the company’s cost per unit. What is this phenomenon referred to as? A) network effect B) time compression diseconomies C) black-swan event D) learning-curve effect Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > MC Qu. 73 Snow Beast Equipment initially spent...

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86) Due to the dynamic nature of business competition, firms must constantly evaluate and adjust

their strategic position over time. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-04 Assess the benefits and risks of differentiation and cost-leadership strat Topic : Understanding Business-Level Strategies Source : Chapter 06 Test Bank > TF Qu. 02 Due to the dynamic nature of business compet...

87) Vita Nova Inc. has recently introduced a new production method that will make the

manufacture of its patient-monitoring devices more cost-effective. Which of the following will most likely be the result of this innovation? A) stabilizes the existing learning curve B) jumps to a steeper learning curve C) destabilizes a steeper learning curve D) moves down the existing learning curve Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > MC Qu. 61 Vita Nova Inc. has recently introduced...

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88) In order to achieve a competitive advantage, the Heavenly Hotels, a chain of luxury beach

resorts, wants to increase its market share. Which of the following strategies is most likely to do so? A) Maintain prices but significantly increase spending on customer service and other amenities. B) Take advantage of economies of scale and scope by opening a chain of lower-priced economy hotels that leverage the Heavenly Hotels brand image. C) Lower prices but eliminate several of the features that have come to define Heavenly Hotels properties for consumers, such as complimentary meals and in-room massages. D) Raise prices without increasing spending on customer service or resort features. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Economies and Diseconomies of Scale Source : Chapter 06 Test Bank > MC Qu. 64 In order to achieve a competitive advantage,...

89) When a differentiator charges a similar price as its competitors in the same strategic group

but offers more perceived value, it A) results in diseconomies of scale. B) loses its competitive advantage. C) lowers the economic value created. D) gains market share from other firms. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-02 Examine the relationship between value drivers and differentiation strateg Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > MC Qu. 46 When a differentiator charges a similar pric...

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90) Fatima is the owner of a remodeling company that caters to a very wealthy clientele. Her

company has struggled to differentiate itself from the other high-end remodelers in the area, but because she has hired several expensive but highly qualified team members, Fatima is unable to shift to a cost-leadership strategy. Which strategy is most likely to achieve a competitive advantage? A) Offer similar remodeling services as competitors but raise prices to increase profits. B) Lower prices but continue employing high-paid expert designers and tradespeople. C) Narrow the scope of competition and focus on unique features such as using premium materials. D) Maintain prices but replace all the expert employees with less-skilled workers to control costs. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 06-01 Define business-level strategy and describe how it determines a firm's str Topic : Understanding Business-Level Strategies Source : Chapter 06 Test Bank > MC Qu. 38 Fatima is the owner of a remodeling...

91) To initiate a strategic move that allows a firm to open up new and uncontested market space

through value innovation, managers must address four key questions when formulating a blue ocean business strategy. These questions focus on A) increasing cost and increasing perceived customer benefits. B) lowering cost and maintaining perceived customer benefits. C) increasing cost and maintaining perceived customer benefits. D) lowering cost and increasing perceived customer benefits. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 06-06 Assess the risks of a blue ocean strategy, and explain why it is difficult Topic : Blue Ocean Strategy Source : Chapter 06 Test Bank > MC Qu. 103 To initiate a strategic move that allows a f...

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92) Bath & Chill is a spa that caters to the needs of a small percentage of highly health-conscious

consumers. It offers state-of-the-art treatments in a luxurious setting. Since there are very few spas that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Bath & Chill is following a A) focused differentiation strategy. B) product diversification strategy. C) broad differentiation strategy. D) liquidation strategy. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 06-01 Define business-level strategy and describe how it determines a firm's str Topic : Understanding Business-Level Strategies Source : Chapter 06 Test Bank > MC Qu. 44 Bath &amp; Chill is a spa that caters to the...

93) 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 units B) 11,000 units C) 13,000 units D) 15,000 units Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Economies and Diseconomies of Scale Source : Chapter 06 Test Bank > MC Qu. 68 When a firm operates at an output level of 9...

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94) University Home Goods is a home furnishings company that caters to college students and

other highly price-conscious customers. Through its simple designs, acceptable quality levels, and minimal customer service, the company has been able to sell its merchandise at the lowest prices in the industry. Which of the following generic business strategies is University Home Goods applying? A) differentiation B) product diversification C) cost-leadership D) niche marketing Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-01 Define business-level strategy and describe how it determines a firm's str Topic : Understanding Business-Level Strategies Source : Chapter 06 Test Bank > MC Qu. 36 University Home Goods is a home furnishings...

95) In a successful________ strategy, the trade-offs between differentiation and low cost are

reconciled. A) blue ocean B) divestment C) liquidation D) focused differentiation Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 06-05 Evaluate value and cost drivers that may allow a firm to pursue a blue oce Topic : Blue Ocean Strategy Source : Chapter 06 Test Bank > MC Qu. 88 In a successful ________ strategy, the trade-of...

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96) One of the reasons that big box retailers like Home Depot are able to achieve economies of

scale is that A) they are able to take advantage of market size and spread investment losses over many locations. B) they have been able to protect themselves from the threat of buyer power by increasing input prices. C) they have both broad and narrow economies of scope. D) they maximize their scale efficiencies by stocking more inventory and handling it more efficiently. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > MC Qu. 22 One of the reasons that big box retailers li...

97) When a firm operates at the minimum efficient scale, there is still opportunity for it to further

reduce its cost per unit through economies of scale. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Economies and Diseconomies of Scale Source : Chapter 06 Test Bank > TF Qu. 06 When a firm operates at the minimum efficien...

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98) How did Marriott use economies of scope to achieve greater economic value than its

competitors? A) Marriott sees decreases in cost per hotel unit as number of customers increases. B) Marriott lowered its cost structure by focusing its production assets on one type of hotel, which increased the diversity of its hotel line and thus its differentiated appeal. C) Marriott lowered its cost structure by sharing its production assets over several types of hotels, which increased the diversity of its hotel line and thus its differentiated appeal. D) Marriott sees increases in cost per hotel unit as number of customers increases. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-05 Evaluate value and cost drivers that may allow a firm to pursue a blue oce Topic : Value Innovation Source : Chapter 06 Test Bank > MC Qu. 92 How did Marriott use economies of scope to a...

99) A value curve that zig zags across the strategy canvas indicates a lack of effectiveness in a

firm’s strategic profile, suggesting the firm has experienced inferior performance and a sustained competitive disadvantage. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 1 Easy Learning Objective : 06-06 Assess the risks of a blue ocean strategy, and explain why it is difficult Topic : Value Innovation Source : Chapter 06 Test Bank > TF Qu. 12 A value curve that zig zags across the strat...

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100)

Which of the following drivers simultaneously increases value while lowering cost? A) superior customer service B) innovation C) availability of complements D) economies of scale

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 06-04 Assess the benefits and risks of differentiation and cost-leadership strat Topic : Value Innovation Source : Chapter 06 Test Bank > MC Qu. 96 Which of the following drivers simultaneousl...

101)

Differentiators tend to score highly on most competitive elements on a strategy canvas, while cost leaders tend to hover near the bottom of the strategy canvas. ⊚ true ⊚ false

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-06 Assess the risks of a blue ocean strategy, and explain why it is difficult Topic : Value Innovation Source : Chapter 06 Test Bank > TF Qu. 11 Differentiators tend to score highly on most...

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102)

Which of the following is a firm effect that has an impact on the competitive advantage of a firm? A) the number of companies operating in the industry in which the firm operates B) the value and the cost position of the firm relative to its competitors C) the exit barriers within the industry in which the firm operates D) the intensity of rivalry among existing companies in the firm’s chosen industry

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-01 Define business-level strategy and describe how it determines a firm's str Topic : Understanding Business-Level Strategies Source : Chapter 06 Test Bank > MC Qu. 32 Which of the following is a firm effect that...

103)

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) experience-curve effect B) learning-curve effect C) minimum efficient scale D) diseconomies of scale

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Economies and Diseconomies of Scale Source : Chapter 06 Test Bank > MC Qu. 71 When Total Semiconductors was operating at t...

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104)

Five Star Inc. is a knife manufacturer known for its high-quality steel chef’s knives, and it follows a differentiation strategy. In this scenario, Five Star Inc. should ideally compare its strategic position with a A) knife maker that manufactures low-priced knives. B) knife retailer that sells high-end, premium knives. C) knife company that sells refurbished steel knives. D) knife maker that produces high-end chef’s knives.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 06-01 Define business-level strategy and describe how it determines a firm's str Topic : Understanding Business-Level Strategies Source : Chapter 06 Test Bank > MC Qu. 41 Five Star Inc. is a knife manufacturer known...

105)

How does process innovation benefit a firm?

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > SA Qu. 118 How does process innovation benefit a firm?

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106)

Which of the following is an accurate statement about learning effects? A) Learning effects are captured at one point in time. B) Learning effects are significant in all production processes. C) Learning effects can produce diseconomies. D) Learning effects occur over time as output accumulates.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > MC Qu. 62 Which of the following is an accurate statem...

107)

How is differentiation parity different from cost parity? A) Differentiation parity deals with pricing not value. B) Differentiation parity deals with innovation not value. C) Differentiation parity deals with pricing not innovation. D) Differentiation parity deals with value not cost.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > MC Qu. 60 How is differentiation parity different from...

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108)

A firm that is producing at an output level beyond the minimum efficient scale experiences A) decreases in cost per unit. B) diseconomies of scale. C) a constant return to scale. D) a steep learning curve.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Economies and Diseconomies of Scale Source : Chapter 06 Test Bank > MC Qu. 72 A firm that is producing at an output...

109)

A value curve indicates a lack of effectiveness in a firm’s strategic profile when it A) zig zags. B) trends upward. C) stays level. D) trends downward.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 06-06 Assess the risks of a blue ocean strategy, and explain why it is difficult Topic : Value Innovation Source : Chapter 06 Test Bank > MC Qu. 99 A value curve indicates a lack of effectiven...

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110)

Discuss the threats firms face when they pursue a differentiation strategy.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-04 Assess the benefits and risks of differentiation and cost-leadership strat Topic : Gaining Competitive Advantage Through Differentiation Source : Chapter 06 Test Bank > SA Qu. 120 Discuss the threats firms face when they pur...

111)

Zeppelin has been working as a pizza maker for over ten years and has gained substantial knowledge of how the pizza business works. He wants to open up his own pizzeria and believes that he can drive his costs down lower than any competitor without sacrificing quality. What business-level strategy is he most likely to pursue and which key cost driver will most likely help him achieve success?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Cost Drivers Source : Chapter 06 Test Bank > SA Qu. 127 Zeppelin has been working as a pizza maker...

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112)

Which of the following statements about business-level strategies is true? A) A focused differentiation strategy offers broader market opportunities. B) After choosing a strategy, firms must define the scope of competition. C) Manufacturing firms should pursue a cost-leadership strategy. D) None of the business-level strategies is inherently superior.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-04 Assess the benefits and risks of differentiation and cost-leadership strat Topic : Understanding Business-Level Strategies Source : Chapter 06 Test Bank > MC Qu. 30 Which of the following statements...

113)

Which of the following examples uses a focused differentiation strategy? A) a coffee shop that offers mediocre lattes and brewed coffee at a price of $5 per small cup B) a tennis pro shop that sells high-quality, custom racquets priced at $350 dollars per racquet C) a clothing brand that offers gender-neutral hoodies and sweatpants priced at $20 per item D) a hotel chain that offers high-quality furnishings and service with room rates under $75 per night

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114)

Briefly explain the difficulties in pursuing a blue ocean strategy.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-06 Assess the risks of a blue ocean strategy, and explain why it is difficult Topic : Blue Ocean Strategy Source : Chapter 06 Test Bank > SA Qu. 125 Briefly explain the difficulties in pursuing...

115)

Explain two ways to accomplish value innovation through either lowering costs or increasing perceived consumer benefits. Give an example of each of the two ways.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-05 Evaluate value and cost drivers that may allow a firm to pursue a blue oce Topic : Value Innovation Source : Chapter 06 Test Bank > SA Qu. 124 Explain two ways to accomplish value...

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116)

What does a firm that pursues a cost-leadership strategy primarily focus on?

117)

What are the pricing options available to a firm following a differentiation strategy?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-02 Examine the relationship between value drivers and differentiation strateg Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > SA Qu. 113 What are the pricing options available to a ...

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118)

When a firm is able to successfully employ a blue ocean strategy, it will create a competitive advantage by A) winning market share with a highly differentiated product. B) beating rivals on product attributes while offering a better price. C) using a first-mover advantage to be the lowest price in the market. D) combining high quality and product features to provide service that customers truly value.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-05 Evaluate value and cost drivers that may allow a firm to pursue a blue oce Topic : Blue Ocean Strategy Source : Chapter 06 Test Bank > MC Qu. 23 When a firm is able to successfully employ a...

119)

The concept of a(n)________ attempts to capture both learning effects and process improvements at firms. A) growth matrix B) managerial grid C) experience curve D) diminishing utility curve

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > MC Qu. 78 The concept of a(n) ________ attempts to captur...

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120)

When a firm pursues differentiation strategy, what does it focus on?

121)

A________ primarily details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market. A) functional-level strategy B) code of ethics C) business-level strategy D) mission statement

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 06-01 Define business-level strategy and describe how it determines a firm's str Topic : Understanding Business-Level Strategies Source : Chapter 06 Test Bank > MC Qu. 31 A ________ primarily details the goal-directed ...

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122)

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) offer a differentiated product or service at a low cost. C) achieve a less steep learning curve. D) build a reputation of being the lowest-cost producer in its chosen industry.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 06-05 Evaluate value and cost drivers that may allow a firm to pursue a blue oce Topic : Blue Ocean Strategy Source : Chapter 06 Test Bank > MC Qu. 89 The primary goal of a firm pursuing a blue o...

123)

The strategy canvas for movie theaters includes factors such as prices, comfort, customer service, concessions variety, and hours of operation. Which of the following value curves is most likely to represent a theater that successfully positions itself as a differentiator? A) high price, low comfort, low customer service, high concessions variety, low hours of operation B) low price, low comfort, low customer service, low concessions variety, low hours of operation C) low price, high comfort, high customer service, high concessions variety, low hours of operation D) high price, high comfort, high customer service, high concessions variety, low hours of operation

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 06-06 Assess the risks of a blue ocean strategy, and explain why it is difficult Topic : Value Innovation Source : Chapter 06 Test Bank > MC Qu. 100 The strategy canvas for movie theaters inclu...

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124)

Although JetBlue used a blue ocean strategy to achieve an initial competitive advantage, it failed to maintain this advantage. Which of the following provides the best reason for this development? A) It failed to move into a contested market space. B) It failed to drive up the perceived customer value. C) It failed to refine its strategic position over time. D) It failed to offer enough strategic trade-offs.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 06-06 Assess the risks of a blue ocean strategy, and explain why it is difficult Topic : Blue Ocean Strategy Source : Chapter 06 Test Bank > MC Qu. 102 Although JetBlue used a blue ocean strategy ...

125)

What must a cost-leadership strategy accomplish to be successful? A) It must reduce the firm’s cost below that of its competitors while offering adequate value. B) It must reduce the firm’s cost below that of its competitors while offering superior value. C) It must increase the firm’s cost above that of its competitors while offering adequate value. D) It must increase the firm’s cost above that of its competitors while offering superior value.

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126)

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) Dura Frames has a higher opportunity cost than Eye Windows. C) Eye Windows is a cost-leader when compared to Dura Frames. D) Eye Windows has created a greater economic value than Dura Frames.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 06-03 Examine the relationship between cost drivers and cost-leadership strategy Topic : Relationship Between Cost Drivers and Cost-Leadership and Differentiation Strategies Source : Chapter 06 Test Bank > MC Qu. 56 While Eye Windows incurs a cost of $12 for a...

127)

Bigger & Better Inc. is a big-box retailer 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 “stuck in the middle” and has a competitive advantage. 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 successful in creating an integration strategy positioned between Walmart and Target.

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Answer Key Test name: Chapter 06 Test Bank 1) D

If the source of the differential appeal is intangible rather than tangible (e.g., reputation rather than observable product and service features), a differentiator is even more likely to sustain its advantage. Competitors will find such intangible advantages time consuming and costly, and maybe impossible, to imitate. 2) A

Just Right Films is pursuing the blue ocean strategy. A successful blue ocean strategy requires that trade-offs between differentiation and low cost are reconciled. A blue ocean strategy allows a firm to offer a differentiated product or service at low cost. 3) A

To achieve a desired strategic position, executives must make strategic tradeoffs—choices between a cost position or value position. They must address the tension between value creation and the pressure to keep cost in check so as not to erode the firm’s economic value creation and profit margin. 5) TRUE

Instead of attempting to out-compete rivals by offering better features or lower costs, successful value innovation makes competition irrelevant by providing a leap in value creation, thereby opening new and uncontested market spaces. 6) C

Product features, customer service, and complements are all examples of important value drivers. 7) B

Trader Joe’s was able to gain a market share and make up the loss in margin through increased sales. 8) A

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Minimum efficient scale (MES) is the output range needed to bring down the cost per unit as much as possible, allowing a firm to stake out the lowest-cost position that is achievable through economies of scale. 9) A

The key driver behind Spotless Inc.’s strategic position is low-cost input factors. One of the most basic advantages a firm can have over its rivals is access to lower-cost input factors such as raw materials, capital, labor, and IT services. 10) B

In this scenario, the key value driver is product features. One of the obvious but most important levers that strategic leaders can adjust is product features, thereby increasing the perceived value of the product or service offering. Adding unique product attributes allows firms to turn commodity products into differentiated products commanding a premium price. 11) D

Although a cost-leadership strategy provides some protection against the five forces, it also carries some risks. If a new entrant with new and relevant expertise enters the market, the lowcost leader’s margins may erode due to loss in market share while it attempts to learn new capabilities. 12) C

Many firms fail at achieving a blue ocean strategy because they end up getting stuck in the middle and are not able to differentiate or establish a cost-leadership position. 13) A

If a blue ocean strategy has gone bad, the firm ends up being stuck in the middle, meaning the firm has neither a clear differentiation nor a clear cost-leadership profile. Being stuck in the middle leads to inferior performance and a resulting competitive disadvantage. 14) Short Answer

Higher value tends to require higher cost. It tends to go along with higher costs in terms of higher-quality raw materials, research and development, employee training to provide superior customer service, and so on. Higher value gap, which allows a firm to charge a premium price, reflects its higher value creation. 15) B

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In general, technology and production processes do not stay constant. Process innovation—a new method or technology to produce an existing product—may initiate a new and steeper curve. By introducing specialized document software Wang Services may jump to a steeper learning curve, allowing it to achieve greater cost reductions at the same level of output. 16) D

A strategic position is a strategic profile based on value creation and cost. The goal is to create as large a gap as possible between ( V – C). 17) A

A blue ocean strategy differs from a low-cost strategy in that the intent of a blue ocean strategy is not to be the absolute lowest-cost provider because a blue ocean must also increase perceived value. A blue ocean strategy is difficult to implement because it requires the reconciliation of fundamentally different strategic positions—differentiation and low cost—which in turn require distinct internal value chain activities that allow the firm to increase value and lower cost at the same time. 18) A

Blue ocean strategy requires the reconciliation of fundamentally different strategic positions— differentiation and low cost. 19) Short Answer

Economic value creation, V – C, is also called the value gap. A firm achieves a competitive advantage when it has a higher value gap than its competitors, which allows it to charge a premium price, reflecting its higher value creation. 20) A

Operating at the minimum efficient scale means that CSL’s level of output allows it to stake out the lowest-cost position that is achievable through economies of scale. If a firm’s cost advantage is due to economies of scale, a manager should worry about drops in production runs. Shutting down production for several days due to a storm may cause CSL’s output to fall to the point where per-unit costs start to rise. 21) C

A focused cost-leadership strategy is the same as the cost-leadership strategy except with a narrow focus on a niche market. 22) C

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Complements add value to a product or service when they are consumed in tandem. Finding complements, therefore, is an important task for strategic leaders in their quest to enhance the value of their offerings. 23) C

By combining the dimensions describing a firm’s strategic position ( differentiation versus cost) with the scope of competition ( narrow versus broad), we get the two major broad business strategies ( cost leadership and differentiation), and the focused version of each. The focused versions of the two business strategies focused cost-leadership strategy and focused differentiation strategy—are essentially the same as the broad generic strategies except that the competitive scope is narrower. 24) B

Successful value innovation requires that a firm’s strategic moves lower its costs and increase the perceived value for buyers. Lowering costs is achieved primarily by eliminating and reducing the taken-for-granted factors one which the firm’s industry rivals compete. Perceived buyer value is increased by raising existing key success factors and by creating new elements that the industry has not offered previously. By eliminating its costly brick-and-mortar locations and offering delivery from a central kitchen, Antonia’s lowers its costs and increases value for customers seeking both convenience and quality. 25) C

Skypath is most likely stuck in the middle because it is attempting to reconcile fundamentally different strategic positions—high-quality features with low price. The other airlines consistently follow either a differentiation or low-cost strategy. 26) A

In this scenario, Tablette Corp. should ideally compare its strategic position with a consumer electronics popular company among price-conscious customers. A cost-leadership strategy seeks to create the same or similar value for customers by delivering products or services at a lower cost than competitors, enabling the firm to offer lower prices to its customers. The idea is to compare Tablette Corp.’s strategic position with another cost-leader. In this case, it will be an electronics company popular among price-conscious customers. 27) FALSE

A cost-leadership strategy is defined by obtaining the lowest-cost position in the industry while offering acceptable value. The cost leader is protected from other competitors because it has the lowest cost. If a price war ensues, the low-cost leader will be the last firm standing; all other firms will be driven out as margins evaporate.

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28) Short Answer

There are two fundamentally different generic business strategies—differentiation and costleadership. A differentiation strategy seeks to create higher value for customers than the value that competitors create, by delivering products or services with unique features while keeping costs at the same or similar levels, allowing them to charge higher prices to their customers. A cost-leadership strategy, in contrast, seeks to create the same or similar value for customers by delivering products or services at a lower cost than competitors, enabling the firm to offer lower prices to its customers. 29) D

By increasing its cumulative output, Trail Ready Tents will move down the learning curve more quickly than Appalachian Equipment, reducing its per-unit costs and achieving a cost-leadership position. 30) D

To formulate an appropriate business-level strategy, strategic leaders must answer the who, what, why, and how questions of competition: Who are the customer segments we will serve?; What customer needs, wishes, and desires will we satisfy? Why do we want to satisfy them? How will we satisfy them? 31) FALSE

In an 80 percent learning curve, per-unit cost drops 20 percent every time output is doubled. The steeper 70 percent learning curve indicates a 30 percent drop every time output is doubled. 32) D

Red oceans comprise the known market space of existing industries, where the rivalry among existing firms is cutthroat because the market space is crowded and competition is a zero-sum game. 33) B

Product features are an important value driver. Other value drivers include complements and customer service. 34) B

In the generic business model, the two choices for scope of competition are broad and focused. Whole Foods has clearly defined its scope narrowly at affluent consumers who want to buy highend, organic groceries. 35) Short Answer

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What guarantee can you offer her company for a competitive advantage? What term would you use to describe the cost increase per cake due to her expansion? Which business-level strategy should she pursue? She asks you to name and describe the one that you would recommend. She also would like you to identify at least one driver for your recommended business-level strategy. (1) We cannot guarantee any company a competitive advantage, no matter how profitable they may be in the short term. (2) The problem that Addell’s firm is facing is known as diseconomies of scale. This refers to the increase in costs per unit when output increases. This also provides evidence that “bigger is not always better.” (3) The business-level strategy that I would recommend is differentiation, given that Addell’s designs are unique. A value driver that supports a differentiation position is product features, such as Addell’s unique flavor combinations and complicated, original designs. 36) B

Mohawk’s customers reward it with a willingness to pay a higher price for its environmentally friendly products, so the likely impact would be to raise the price to the consumers to cover most of this cost increase. 37) B

The risk of replacement for a firm pursuing a low-cost strategy is particularly pertinent if a potent substitute emerges due to an innovation. 38) A

A 90 percent learning curve indicates that per-unit cost drops 10 percent every time output is doubled. In this case, the per-unit cost is reduced by 10 percent of $70; therefore, the new perunit cost is $63. 39) A

Finish Line’s primary value driver is availability of complements. Complements add value to a product or service when they are consumed in tandem. Finding complements, therefore, is an important task for strategic leaders in their quest to enhance the value of their offerings. 40) Short Answer

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Learning by doing can drive down cost. As individuals and teams engage repeatedly in an activity, whether writing computer code, developing new medicines, or building submarines, they learn from their cumulative experience. In the experience curve, in contrast, we change the underlying technology while holding cumulative output constant. Process innovation is the use of a new method or technology to produce an existing product. The concept of an experience curve attempts to capture both learning effects and process improvements. In this perspective, economies of learning allow movement down a given learning curve based on current production technology. By moving further down a given learning curve than competitors, a firm can gain a competitive advantage. 41) C

Managers must remember that the different value drivers contribute to competitive advantage only if their increase in value creation (ΔV) exceeds the increase in costs (ΔC). The condition of ΔV > ΔC must be fulfilled if a differentiation strategy is to strengthen a firm’s strategic position and thus enhance its competitive advantage. 42) A

Low-cost leaders still need to offer products and services that have acceptable value to the customer. 43) C

Firms with greater market share might be in a position to reap economies of scale, which are decreases in cost per unit as output increases. 44) C

To achieve a desired strategic position, executives must make strategic tradeoffs—choices between a cost position or value position. 45) FALSE

A higher value gap enables a differentiator to achieve a competitive advantage, which allows it to charge a premium price, reflecting its higher value creation. A lower value gap, however, will hamper anyone’s ability to achieve a competitive advantage. 46) C

Some of the unique value drivers that support a differentiation strategy are product features, customer service, customization, and complements. 47) A

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Should strategic leaders try to do both at the same time? In general, the answer is no. To do so, they would need to integrate two different strategic positions: differentiation and low cost. Unless they are able to reconcile the conflicting requirements of each generic strategy, managers should not pursue this complex strategy because of the inherent trade-offs in different strategic positions. 48) Short Answer

For a blue ocean strategy to succeed, managers must resolve trade-offs between the two generic strategic positions—low cost and differentiation. They do so through value innovation, aligning innovation with total perceived consumer benefits, price, and cost. Instead of attempting to outcompete your rivals by offering better features or lower costs, successful value innovation makes competition irrelevant by providing a leap in value creation, thereby opening new and uncontested market spaces. 49) A

Greenfield Apparel differentiates itself from competitors by offering high-fashion clothing items created using only certified sustainable fabrics and manufactured in environmentally friendly facilities. This business strategy implies that Greenfield Apparel focuses on increasing the perceived value created for customers, which allows it to charge a premium price. 50) A

Sophie’s sandwich shop is applying the cost-leadership strategy. A cost-leadership strategy seeks to create the same or similar value for customers by delivering products or services at a lower cost than competitors, enabling the firm to offer lower prices to its customers. 51) B

An 80 percent learning curve indicates that every time the cumulative output is doubled, the cost per unit will decline by 20 percent. Similarly, a 90 percent learning curve indicates that per-unit cost drops 10 percent every time output is doubled. A 70 percent learning curve indicates a 30 percent drop every time output is doubled. 52) D

Economy of scope describes the savings that come from producing two (or more) outputs at less cost than producing each output individually, despite using the same resources and technology. A larger difference between cost and value allows Marriott to achieve greater economic value than its competitors, and to gain market share and achieve superior performance. 53) C

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Water King can charge a premium price on its boat engines. A company that uses a differentiation strategy can achieve a competitive advantage as long as its economic value created ( V – C) is greater than that of its competitors. This allows the firm to charge a premium price, reflecting its higher value creation. Because Water King creates more economic value while facing the same cost as Lorenzo’s Engines, it means its value (V) is higher. 55) FALSE

These two business strategies are called generic strategies because they can be used by any organization—manufacturing or service, large or small, for-profit or nonprofit, public or private, domestic or foreign—in the quest for competitive advantage, independent of industry context. 56) C

To formulate an effective business strategy, executives need to keep in mind that competitive advantage is determined jointly by industry effects and firm effects. It is also important to note that industry and firm effects are not independent, but rather they are interdependent. 57) TRUE

The five forces model helps strategic leaders decide which of the generic business-level strategies to use in order to protect themselves against the forces that drive down profitability. 58) Short Answer

Note that none of the business-level strategies (cost-leadership, differentiation, and focused variations thereof) is inherently superior. The success of each depends on context and relies on two factors: How well the strategy leverages the firm’s internal strengths while mitigating its weaknesses; and How well the strategy helps the firm exploit external opportunities while avoiding external threats. There is no single correct generic strategy for a specific industry. The best strategy is one that attempts to maximize economic value creation and is effectively implemented. 59) Short Answer

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Economies of scale allow firms to: Spread their fixed costs over a larger output. Employ specialized systems and equipment. Take advantage of certain physical properties. One such property is known as the cubesquare rule: The volume of a body such as a pipe or a tank increases disproportionately more than its surface. This principle makes big-box retail stores such as Walmart or Home Depot cheaper to build and run. They can also stock much more merchandise and handle inventory more efficiently, making it difficult for department stores and small retailers to compete on cost and selection. 60) B

When a firm differentiates itself through intangible resources that increase its differentiation appeal and provide for customer loyalty, it will be able to pass on cost increases to the customer. 61) FALSE

Scope of competition refers to the size—narrow or broad—of the market in which a firm chooses to compete. When considering different business strategies, strategic leaders must define the scope of competition—whether to pursue a specific, narrow part of the market or go after the broader market. In the automobile industry, an example is provided by contrasting GM with Tesla. GM seeks to provide a car for every purse and purpose, and to that end the company implements a multidivisional structure to separate its brands into strategic business units that each creates a unique strategic position, such as the cost-leadership positioning of Chevrolet and the differentiation strategy of the Cadillac luxury division. In contrast, Tesla offers a highly differentiated product and pursues only a small market segment—environmentally conscious consumers who want to drive a high-performance electric vehicle and are willing to pay a premium price for it. 63) Short Answer

Finding complements is an important task for strategic leaders in their quest to enhance the value of their offerings because complements add value when they are consumed in tandem with a product or service. A prime example of complements is smart-phones and cellular services. A smartphone without a service plan is much less useful than one with a data plan. 64) D

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In this scenario, the firm’s minimum efficient scale is 3,000–4,000 units. Minimum efficient scale (MES) is the output range needed to bring down the cost per unit as much as possible, allowing a firm to stake out the lowest-cost position that is achievable through economies of scale. 65) A

Learning by doing allows a firm to move down a given learning curve and thereby lower its perunit costs, while experience-cure effects based on process innovation allow a firm to drive down its per-unit costs by leapfrogging to a steeper learning curve. 66) A

The question of “how” to compete relates to what relative position a firm will take – namely, differentiation or cost-leadership. 67) TRUE

Managers can adjust a number of different levers to improve a firm’s strategic position. These levers either increase perceived value or decrease costs. The most salient value drivers are product features, customer service, and complements. 68) C

Economies of learning allow movement down a given learning curve based on current production technology.Learning by doing allows a firm to move down a given learning curve and thereby lower its per-unit costs, while experience-curve effects based on process innovation allow a firm to drive down its per-unit costs by leapfrogging to a steeper learning curve. 69) B

The most salient value drivers that strategic leaders have at their disposal when executing a differentiation strategy are product features, customer service, and complements. 70) D

The key driver for Medical Manufacturing’s competitive advantage is low-cost input factors, in this case capital. One of the most basic advantages a firm can have over its rivals is access to lower-cost input factors such as raw materials, capital, labor, and IT services. 71) Short Answer

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The low-cost leader needs to stay vigilant to keep its cost the lowest in the industry. Over time, competitors can beat the cost leader by more effectively implementing the same business strategy. Although keeping its cost the lowest in the industry is imperative, the cost leader must not forget that it needs to create an acceptable level of value. If continuously lowering costs leads to a value proposition that falls below an acceptable threshold, the low-cost leader’s market share will evaporate. 72) B

Open Window is applying the strategy of economies of scope in this scenario. The concept of economies of scope describes the savings that come from producing two (or more) outputs at less cost than producing each output individually, despite using the same resources and technology. 73) B

Whole Foods uses a differentiation strategy; Aldi uses a cost-leadership strategy. Both have a competitive advantage even though they are in the same industry. Each firm should be compared to others that are direct competitors rather than comparing Whole Foods to Aldi directly. 74) D

A cost leader is fairly well isolated from powerful suppliers’ threats to increase input prices because it is more able to absorb price increases by accepting lower profit margins. 75) C

Skin Science Inc. has adopted the differentiation strategy. A differentiation strategy seeks to create higher value for customers than the value that competitors create, by delivering products or services with unique features while keeping costs at the same or similar levels. 76) Short Answer

Business-level strategy details the goal-directed actions that managers take in their quest for competitive advantage when competing in a single product market. It may involve a single product or a group of similar products that use the same distribution channel. It concerns the broad question, “How should we compete?” To formulate an appropriate business-level strategy, strategic leaders must answer the who, what, why, and, how questions of competition: Who—are the customer segments we will serve? What customer needs, wishes, and desires will we satisfy? Why do we want to satisfy them? How will we satisfy them? 77) Short Answer

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Student examples will vary. A sample answer follows: Blue oceans represent untapped market space, the creation of additional demand, and the resulting opportunities for highly profitable growth. A blue ocean strategy allows a firm to offer a differentiated product or service at low cost. As one example of a blue ocean strategy, consider Trader Joe’s. Trader Joe’s had much lower costs than Whole Foods (prior to the latter’s 2017 acquisition by Amazon) for the same market of shoppers desiring high-value and healthconscious foods. In addition, Trader Joe’s scores exceptionally well in customer service and other areas. A successfully implemented blue ocean strategy gives firms two pricing options: First, the firm can charge a higher price than the cost leader, reflecting its higher value creation and thus generating greater profit margins. Second, the firm can lower prices below that of the differentiator because of its lower-cost structure. If the firm offers lower prices than the differentiator, it can gain market share and make up the loss in margin through increased sales. 78) Short Answer

There are some important differences between economies of scale and learning effects: Learning effects occur over time as output is accumulated, while economies of scale are captured at one point in time when output increases. Although learning can decline or flatten, there are no diseconomies to learning (unlike diseconomies to scale). In some production processes (e.g., the manufacture of steel rods), effects from economies of scale can be quite significant, while learning effects are minimal. In contrast, in some professions (brain surgery or the practice of estate law), learning effects can be substantial, while economies of scale are minimal. 79) C

Durk’s Depot has a competitive advantage due to its economies of scale. Economies of scale allow firms to spread their fixed costs over a larger output, employ specialized systems and equipment, and take advantage of certain physical properties. 80) C

The focus of competition in a differentiation strategy tends to be on unique product features, service and new product launches, or and marketing and promotion rather than price. A differentiator would focus research and development on product features or packaging in order to add uniqueness. 81) B

A business strategy is more likely to lead to a competitive advantage if it allows a firm to either perform similar activities differently than its rivals or perform different activities that result in creating more value or offering similar products or services at lower cost. 82) C

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Summit Technology creates a greater economic value than Sound Gold. A cost leader can achieve a competitive advantage as long as its economic value created is greater than its competitors’ economic value. 83) B

The simultaneous pursuit of differentiation and low cost in a way that creates a leap in value for both the firm and the consumers is called value innovation. 84) A

If the differentiator is able to create a significant difference between perceived value and current market prices, the differentiator will not be so threatened by increases in input prices due to powerful suppliers. Although an increase in input factors could erode margins, a differentiator is likely able to pass on price increases to its customers as long as its value creation exceeds the price charged. 85) D

The phenomenon seen in this scenario is referred to as learning-curve effect. As individuals and teams engage repeatedly in an activity, whether writing computer code, developing new medicines, or building snow blowers, they learn from their cumulative experience. This in turn can drive down costs. 86) TRUE

Due to the dynamics of competitive positioning, firms must constantly refine and improve their strategic position over time. 87) B

Vita Nova has engaged in process innovation. Process innovation is a new method or technology to produce an existing product that may initiate a new and steeper learning curve. 88) B

Economies of scale denote decreases in cost per unit as output increases. Economies of scope describe the savings that come from producing two (or more) outputs at less cost than producing each output individually, despite using the same resources and technology. By opening another chain of hotels that leverage the Heavenly Hotels brand image, the company can increase the perceived value of its products and improve market share while controlling costs. 89) D

When a firm is able to offer a differentiated product or service and can control its costs at the same time, it is able to gain market share from other firms by charging a similar price but offering more perceived value.

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90) C

When considering different business strategies, strategic leaders must define the scope of competition—whether to pursue a specific, narrow part of the market or go after the broader market. To achieve a competitive advantage in the crowded high-end remodeling industry, Fatima should focus on a smaller market segment, such as homeowners who are willing to pay a premium price for design expertise, high-quality work, and premium materials. 91) D

When formulating a blue ocean business strategy, strategic leaders address questions that focus on lowering cost and increasing perceived customer benefits. 92) A

Bath & Chill is following a focused differentiation strategy. The focused differentiation strategy is the same as the differentiation strategy except with a narrow focus on a niche market, in this case highly health-conscious consumers. A differentiation strategy seeks to create higher value for customers than the value that competitors create, by delivering products or services with unique features while containing costs. 93) B

The firm experiences economies of scale at an output level of 11,000 units. When a firm operates at the minimum efficient scale, the returns to scale are constant. Minimum efficient scale (MES) is the output range needed to bring down the cost per unit as much as possible, allowing a firm to stake out the lowest-cost position that is achievable through economies of scale. 94) C

University Home Goods is applying the cost-leadership strategy. A cost-leadership strategy seeks to create the same or similar value for customers by delivering products or services at a lower cost than competitors, enabling the firm to offer lower prices to its customers. 95) A

A successful blue ocean strategy requires that trade-offs between differentiation and low cost are reconciled. 96) D

Big-box retailers like Home Depot are able to reap economies of scale by taking advantage of physical size (“big box”), stock more inventory, and manage it more efficiently. 97) FALSE

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When a firm operates at the minimum efficient scale, the returns to scale are constant and the cost per unit cannot be reduced any further. Minimum efficient scale (MES) is the output range needed to bring down the cost per unit as much as possible, allowing a firm to stake out the lowest-cost position that is achievable through economies of scale. 98) C

Marriott lowered its cost structure by sharing its production assets over several types of hotels, which increased its menu and thus its differentiated appeal. Economies of scope refers to the savings that come from producing two or more outputs at less cost than producing each output individually. 99) TRUE

A value curve that zig zags across the strategy canvas indicates a lack of effectiveness in a firm’s strategic profile. The curve visually represents a firm that is stuck in the middle between generic business strategies and, as consequence, has experienced inferior performance and thus a sustained competitive disadvantage. 100)

B Quality, economies of scope, customization, innovation, structure, culture, and routines are drivers that simultaneously increase value while lowering cost (used for integration strategies). Availability of complements, superior customer service, and economies of scale are drivers that uniquely affect either value creation or low cost (used for differentiation or cost-leadership strategies). 101)

TRUE When a firm is pursuing a generic differentiation strategy, its value curve tends to reflect a relatively higher cost structure and consists of higher scores on competitive elements such as price, product features, and customer service. In contrast, the low-cost firms tend to hover near the bottom of the strategy canvas, with low scores for a number of competitive factors in their industry. A relatively lower-cost structure goes along with a generic low-cost leadership strategy. 102)

B To formulate an effective business strategy, executives need to keep in mind that competitive advantage is determined jointly by industry effects and firm effects. At the firm level, performance is determined by value and cost positions relative to competitors. This is the firm’s strategic position. 103)

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The phenomenon seen in this scenario is referred to as diseconomies of scale. Diseconomies of scale can be described as increases in cost per unit when output increases. As firms get too big, the complexity of managing and coordinating the production process raises costs, negating any benefits to scale. Large firms also tend to become overly bureaucratic, with too many layers of hierarchy. They grow inflexible and slow in decision making. 104)

D Five Star Inc. should ideally compare its strategic position with a knife maker that produces high-end chef’s knives. A differentiation strategy seeks to create higher value for customers than the value that competitors create, by delivering products or services with unique features while containing costs. The idea is to compare Five Star’s strategic position with the next-best differentiator. In this case, it will be a knife maker that produces high-end chef’s knives. 105)

Short Answer Process innovation is a new method or technology to produce an existing product that may initiate a new and steeper learning curve. If a firm is able to implement a new production process (such as lean manufacturing), it initiates an entirely new and steeper learning curve. 106)

D Learning effects occur over time as output accumulates. There are no diseconomies to learning. In some production processes, learning effects are minimal. 107)

D Differentiation parity occurs when a firm creates the same value as its competitor. Cost parity means having the same costs as a competitor. 108)

B Diseconomies of scale can be described as increases in cost per unit when output increases. A firm experiences diseconomies of scale when it produces at an output level beyond the minimum efficient scale. Benefits to scale cannot go on indefinitely. 109)

A A value curve that zig zags across the strategy canvas indicates a lack of effectiveness in a firm’s strategic profile. 110)

Short Answer

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The viability of a differentiation strategy is severely undermined when the focus of competition shifts to price rather than value-creating features. This can happen when differentiated products become commoditized, and an acceptable standard of quality has emerged across rival firms. A differentiator also needs to be careful not to overshoot its differentiated appeal by adding product features that raise costs but not perceived value in the minds of consumers. Finally, a differentiator needs to be vigilant that its costs of providing uniqueness do not rise above the customer’s willingness to pay. 111)

Short Answer Zeppelin will implement a cost-leadership strategy, and given his experience in the industry, he will utilize the knowledge he has gained working in the industry for over ten years thus taking advantage of the learning-curve effect. 112)

D None of the business-level strategies is inherently superior. The success of each depends on context and relies on two factors: (1) how well the strategy leverages the firm’s internal strengths while mitigating its weaknesses and (2) how well the strategy helps the firm exploit external opportunities while avoiding external threats. There is no single correct business strategy for a specific industry. 113)

B In a focused differentiation strategy, a firm seeks to create higher value for customers than the value that competitors create, by delivering products or services with high-quality features at a high price. This description applies to the tennis pro shop. 114)

Short Answer A blue ocean strategy is difficult to implement because of the trade-offs between the two distinct strategic positions—low-cost leadership and differentiation—unless the firm is successful in value innovation that allows it to reconcile these inherent trade-offs. Many firms that attempt to pursue a blue ocean strategy fail because they end up being stuck in the middle: They succeed at neither a differentiation nor a cost-leadership strategy. In a world of strategic trade-offs, increasing value and lowering cost have opposite effects. Improved product features, customer services, and customization all result in higher cost, while offering a no-frills product reduces perceived value. It happens quite often that a firm can’t do both but must choose to be either a differentiator or a cost-leader. 115)

Short Answer

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Student examples will vary. A sample answer follows: To accomplish value innovation through lower costs managers must determine which of the factors that the industry takes for granted should be eliminated and which of the factors should be reduced well below the industry’s standard. Lowering a firm’s costs is primarily achieved by eliminating and reducing the taken-for-granted factors that the firm’s industry rivals compete on. For example, IKEA eliminated several takenfor-granted competitive elements, including salespeople and expensive but small retail outlets in prime urban locations and shopping malls. For IKEA, factors that were reduced below the industry’s standard included reductions in staff by using a self-serve retail model, reductions in warranties on high-end custom furniture, and reductions in customization product options. 116)

Short Answer The goal of a cost-leadership strategy is to reduce the firm’s cost below that of its competitors while offering adequate value. The cost leader, as its name implies, focuses its attention and resources on reducing the cost to manufacture a product and on lowering the operating cost to deliver a service in order to offer lower prices to its customers. The cost leader attempts to optimize all of its value chain activities to achieve a low-cost position. Although staking out the lowest-cost position in the industry is the overriding strategic objective, a cost leader still needs to offer products and services of acceptable value. 117)

Short Answer A company that uses a differentiation strategy can achieve a competitive advantage as long as its economic value created is greater than that of its competitors. This allows the company to (1) charge a premium price, reflecting its higher value creation or (2) to gain market share from other firms by charging a similar price but offering more perceived value. 118)

B A successful blue ocean strategy will provide a firm with a competitive advantage by integrating low cost and some level of differentiation. 119)

C The concept of an experience curve attempts to capture both learning effects and process improvements. 120)

Short Answer

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The goal of a generic differentiation strategy is to add unique features that will increase the perceived value of goods and services in the minds of the consumers, so they are willing to pay a higher price. Ideally, a firm following a differentiation strategy aims to achieve in the minds of consumers a level of value creation that its competitors cannot easily match. The focus of competition in a differentiation strategy tends to be on unique product features, services, new product launches, and on marketing and promotion rather than price. By choosing the differentiation strategy as the strategic position for a product, managers focus their attention on adding value to the product through unique features that respond to customer preferences, customer service during and after the sale, and effective marketing that communicates the value of the product’s features. Although this positioning involves increased costs (for example, higher quality inputs or innovative research and development activities), customers are generally willing to pay a premium price for the product or service that satisfies their needs and preferences. 121)

C Business-level strategy details the goal-directed actions that managers take in their quest for competitive advantage when competing in a single product market. It may involve a single product or a group of similar products that use the same distribution channel. 122)

B Being successful at a blue ocean strategy doesn’t imply that the firm must be the highest value creator and the lowest-cost producer in its respective industry. The goal of an integration strategy is therefore to offer a differentiated product or service at a low cost. 123)

D The value curve is the basic component of the strategy canvas. It graphically depicts a firm’s relative performance across different competitive factors in an industry. When a firm is pursuing a generic differentiation strategy, all these scores along the different competitive elements in an industry correspond to a relative higher cost structure. A theater pursuing differentiation, then, would have higher prices to go along with higher levels of comfort, service, and concessions variety, but may score lower in hours of operation to reflect its position as a more exclusive destination for moviegoers. 124)

C Strategic positions are not fixed but can—and need to—change as the environment changes. Although JetBlue was able to create an initial competitive advantage, it was unable to refine its strategic position over time. 125)

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The goal of a cost-leadership strategy is to reduce the firm’s cost below that of its competitors while offering adequate value. The cost-leader, as its name implies, focuses its attention and resources on reducing the cost to manufacture a product and on lowering the operating cost to deliver a service in order to offer lower prices to its customers. 126)

A A firm achieves differentiation parity when it creates the same perceived value as its rival firm. 127)

B Bigger & Better Inc. failed in its pursuit of a blue ocean strategy and got stuck in the middle as it was unable to differentiate or establish cost leadership. Its created value gap ( V – C) is lower than the competition, placing it at a disadvantage.

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Student name:__________ 1) While the personal computer industry is flooded and growing with laptops and tablets, Javier

recently bought a desktop, his first personal computer. He realized that a computer at home would be helpful for his children for their school projects, and he could use it to maintain the simple accounts of his plumbing business. Which of the following customer segments does Javier best represent? A) laggards B) early adopters C) category captains D) early majority Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-04 Derive strategic implications of the crossing-the-chasm framework. Topic : Strategic Implications of Crossing-the-Chasm Source : Chapter 07 Test Bank > MC Qu. 80 While the personal computer industry is...

2) Which of the following is a strategy of incumbent firms to counter disruptive innovations? A) Invest all of the firm’s time and resources into its top product or service. B) Target a section of the market that is not particularly price sensitive. C) Stall its own disruption strategies and wait for its rivals to introduce disruptive forces. D) Protect the low end of the market. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 07-05 Categorize different types of innovations in the markets-and-technology fr Topic : Strategies for Innovation Source : Chapter 07 Test Bank > MC Qu. 95 Which of the following is a strategy of...

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3) There are four types of innovation in the markets and technologies framework. Which of the

four types is the most preferred? Why is it the most preferred?

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-05 Categorize different types of innovations in the markets-and-technology fr Topic : Innovation Source : Chapter 07 Test Bank > SA Qu. 119 There are four types of innovation in the...

4) Lauren is the CEO of TimeEx Inc. and is competing in an industry that is shifting due to

disruptive innovation. Which of the following strategies should she consider to most appropriately respond to this disruptive innovation? A) Lauren should focus on procuring the “laggards” in her industry. B) Lauren should guard against the disruptive innovation by protecting the low end of the market. C) Lauren should exit the industry before her firm files for bankruptcy. D) Lauren should stop allocating her firm’s resources toward continually trying to innovate. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-05 Categorize different types of innovations in the markets-and-technology fr Topic : Innovation Source : Chapter 07 Test Bank > MC Qu. 24 Lauren is the CEO of TimeEx Inc...

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5) The type of customers vital to a firm introducing a new innovation are the________, who are

willing to buy early into new technology or product concept. A) early majority B) early adopters C) laggards D) late majority Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Innovation and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 14 The type of customers vital to a firm...

6) The demand for flip phones has drastically reduced, and there are only a few consumer

electronics companies selling them at extremely low prices. Also, the current buyers of flip phones are mainly categorized under laggards. Which of the following stages of the industry life cycle is the flip phone industry in currently? A) growth stage B) commercialization stage C) maturity stage D) decline stage Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 66 The demand for flip phones has drastically...

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7) After social networking websites were introduced, their value increased exponentially as the

number of users increased. This is the positive effect of a(n) A) confirmation effect. B) impression management effect. C) network effect. D) user effect. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-01 Outline the four-step innovation process from idea to imitation. Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > MC Qu. 16 After social networking websites were introduced...

8) Describe network effects and their potential to help or hurt a platform business.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 07-06 Explain why and how platform businesses can outperform pipeline businesses Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > SA Qu. 117 Describe network effects and their potential...

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9) Bellissima Beauty is a cosmetics manufacturer. It has released an improved version of its

wrinkle-reducing night cream in markets in which the company already operates. Which of the following types of innovations does this scenario best illustrate? A) disruptive innovation B) radical innovation C) architectural innovation D) incremental innovation Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-05 Categorize different types of innovations in the markets-and-technology fr Topic : Strategies for Innovation Source : Chapter 07 Test Bank > MC Qu. 82 Bellissima Beauty is a cosmetics manufacturer...

10) How has Apple been able to sustain its competitive advantage in the smartphone industry? A) by regularly introducing incremental improvements in its products B) by reducing its network effects C) by targeting its new products and services toward laggards D) by driving the price for the end user to zero Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-01 Outline the four-step innovation process from idea to imitation. Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > MC Qu. 36 How has Apple been able to sustain...

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11) Platform business models are not organized as traditional linear pipeline business models. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-06 Explain why and how platform businesses can outperform pipeline businesses Topic : Platform Strategy Source : Chapter 07 Test Bank > TF Qu. 02 Platform business models are not...

12) What are the competitive benefits that first movers in an industry experience?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 07-01 Outline the four-step innovation process from idea to imitation. Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > SA Qu. 104 What are the competitive benefits...

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13) Which of the following lists the stages of the industry life cycle in the correct order? A) introduction, shakeout, maturity, growth, and decline B) introduction, growth, shakeout, maturity, and decline C) introduction, growth, maturity, shakeout, and decline D) introduction, shakeout, growth, maturity, and decline Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 46 Which of the following lists the stages...

14) In the United States, the time period for the right to exclude others from the use of a patented

technology is________ from the filing date of a patent application. A) 15 months B) 25 years C) 20 years D) 25 months Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 07-01 Outline the four-step innovation process from idea to imitation. Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > MC Qu. 33 In the United States, the time period...

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15) Which of the following scenarios would be characteristic of an entrepreneur? A) Hugo scaled back the production of pottery because it wasn’t cost effective. B) John implemented a new and more efficient way to produce pottery. C) Kaia imitated a new, more efficient method of producing pottery. D) Juana used a proven marketing method to advertise her pottery. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-02 Apply strategic management concepts to entrepreneurship and innovation. Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > MC Qu. 42 Which of the following scenarios would...

16) Which of the following statements accurately describes the distinction between the

introduction and growth stages of the industry life cycle? A) The market size for a new product or service is larger in the introduction stage when compared to the growth stage. B) While achieving market acceptance is the strategic objective during the introduction stage, the objective in the growth stage is to pursue a harvest strategy. C) There is more strategic variety in the growth stage when compared to the introduction stage. D) The number of competitors is more in the introduction stage than the growth stage. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 56 Which of the following statements accurately...

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17) Generally, as the level of________ innovation declines, the level of________ innovation

increases. A) process; product B) product; radical C) product; process D) process; incremental Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Innovation and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 18 Generally, as the level of ________ innovation...

18) The pace of innovation has slowed in the 21st century. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 07-01 Outline the four-step innovation process from idea to imitation. Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > TF Qu. 03 The pace of innovation has slowed in...

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19) In a radical innovation, a firm targets A) existing markets by using new technologies. B) new markets by using new technologies. C) new markets by using existing technologies. D) existing markets by using existing technologies. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 07-05 Categorize different types of innovations in the markets-and-technology fr Topic : Strategies for Innovation Source : Chapter 07 Test Bank > MC Qu. 83 In a radical innovation, a firm targets

20) Uber has become one of the largest transportation companies in the world, valued at more

than $100 billion in 2021, without owning a single car. Uber is an example of a A) strategic business unit. B) a typical value chain driven business. C) platform business. D) pipeline business. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-06 Explain why and how platform businesses can outperform pipeline businesses Topic : Platform Strategy Source : Chapter 07 Test Bank > MC Qu. 26 Uber has become one of the largest...

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21) Which of the following statements is true of the early majority section of consumers? A) They weigh the benefits and costs carefully when adopting a new product. B) They are unaware that many hyped new product introductions will fade away. C) They come into the market during the introduction stage. D) They make up the smallest market segment. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 07-04 Derive strategic implications of the crossing-the-chasm framework. Topic : Strategic Implications of Crossing-the-Chasm Source : Chapter 07 Test Bank > MC Qu. 74 Which of the following statements is...

22) Which of the following is a feature of the growth stage of the industry life cycle? A) The prices of goods begin to rise. B) The number of competitors decreases. C) The basis of competition moves away from process innovation. D) The consumer demand increases. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 1 Easy Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 54 Which of the following is a feature...

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23) In the decline stage, innovation efforts along both product and process dimensions cease.

Elaborate.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > SA Qu. 109 In the decline stage, innovation efforts...

24) Which of the following describes organizational inertia? A) an innovation that leverages new technologies to attack existing markets from the

bottom up B) a network of suppliers, buyers, and complementors C) a firm’s resistance to changes in the status quo D) when the market leader captures almost all of the market share Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 07-05 Categorize different types of innovations in the markets-and-technology fr Topic : Strategies for Innovation Source : Chapter 07 Test Bank > MC Qu. 84 Which of the following describes...

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25) Innovation that targets new markets with existing technologies is known as disruptive

innovation. ⊚ true ⊚ false Question Details AACSB : Reflective Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 07-05 Categorize different types of innovations in the markets-and-technology fr Topic : Strategies for Innovation Source : Chapter 07 Test Bank > TF Qu. 10 Innovation that targets new markets with...

26) When does a firm fall into the large competitive chasm between early adopters and early

majority? A) when it cannot attract technological enthusiasts to try the beta versions of its products B) when it creates strong network effects during the growth stage C) when the early majority create herding effects for its products D) when it fails to successfully launch a mass-market version of its product Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-04 Derive strategic implications of the crossing-the-chasm framework. Topic : Strategic Implications of Crossing-the-Chasm Source : Chapter 07 Test Bank > MC Qu. 76 When does a firm fall into the large...

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27) Why is it easier for new entrants to get involved in radical innovations when compared to

incumbent firms? A) Unlike incumbent firms, new entrants do not have formal organizational structures and processes. B) New entrants are embedded in an innovation ecosystem, while incumbent firms are not. C) Unlike incumbent firms, new entrants do not have to initially face the high entry barriers. D) Incumbent firms do not have the advantages of network effects that new entrants have. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-05 Categorize different types of innovations in the markets-and-technology fr Topic : Strategies for Innovation Source : Chapter 07 Test Bank > MC Qu. 86 Why is it easier for new entrants to get...

28) Digital photography replacing film photography is an example of which type of innovation? A) disruptive B) radical C) architectural D) incremental Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-05 Categorize different types of innovations in the markets-and-technology fr Topic : Innovation Source : Chapter 07 Test Bank > MC Qu. 23 Digital photography replacing film...

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29) A radical innovation leverages________ markets, while incremental innovations are based

on________ markets. A) drastic; new B) required; established C) new; existing D) existing; novel Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-05 Categorize different types of innovations in the markets-and-technology fr Topic : Innovation Source : Chapter 07 Test Bank > MC Qu. 22 A radical innovation leverages ________ markets...

30) Why do firms have more strategic variety in the growth stage of the industry life cycle?

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31) Which of the following describes a firm pursuing a harvest strategy? A) The firm buys out industry rivals to stake out a strong position. B) The firm exits the industry by bankruptcy, liquidation, or divestments. C) The firm reduces investments in product support and allocates only a minimum of

human and other resources. D) The firm continues to support marketing efforts at a given level despite the fact that consumption for its product has been declining. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 49 Which of the following describes a firm...

32) The leading producer of cell phone backup batteries, Progyny, has achieved great success

because it produces high-quality battery backups that are not too expensive. Even so, another company that produces lower-quality batteries at the same price has also achieved some success, but not as much as Progyny. Also, in general, the price of backup batteries has declined because of economies of scale and learning. In addition, Progyny has added complementary assets, such as a carrying case. Considering all of these factors, the backup battery industry is most likely in the________ stage. A) maturity B) introduction C) shakeout D) growth Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 51 The leading producer of cell phone backup...

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33) The strategic objective of a first mover during the introduction stage of the industry life cycle

is to A) survive by drawing on deep pockets. B) pursue a harvest strategy. C) lower entry barriers. D) achieve market acceptance. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 45 The strategic objective of a first mover during...

34) To be successful and to survive the shakeout stage of the industry life cycle, a firm should A) shift from price to nonprice competition. B) charge higher prices than its competitors. C) focus on product innovation rather than process innovation. D) gain economies of scale. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 1 Easy Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 59 To be successful and to survive the...

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35) Which of the following is a competitive benefit experienced by the first-mover firm in an

industry? A) The first mover will not have to patent its products or technology. B) The first mover will be able to achieve a less steep learning curve. C) The first mover will be able to reduce the switching costs. D) The first mover will be able to reduce costs through economies of scale. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-01 Outline the four-step innovation process from idea to imitation. Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > MC Qu. 37 Which of the following is a competitive benefit...

36) UShredIt! has entered a stage in which the demand for their innovative document shredding

machines has declined. Now most customers are buying replacement parts or buying their second shredding machine from the firm. What stage in the industry life cycle does this scenario describe? A) growth stage B) shakeout stage C) decline stage D) maturity stage Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 48 UShredIt! has entered a stage in which...

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37) Which of the following describes the group of customers referred to as the early majority? A) They come into the market during the shakeout stage. B) They enter the market during the maturity stage. C) They are the last to come into the market. D) They enter the market during the growth stage. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Innovation and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 17 Which of the following describes...

38) Which of the following is a feature of the shakeout phase of the industry life cycle? A) Market demand in this stage primarily consists of first-time adopters. B) The mode of competition shifts from price to nonprice in this stage. C) Standards begin to emerge in the industry. D) Firms begin to compete directly against each other. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 58 Which of the following is a feature...

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39) For ideas and inventions to be innovative, they must avoid being commercialized. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 07-01 Outline the four-step innovation process from idea to imitation. Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > TF Qu. 05 For ideas and inventions to be innovative...

40) When a firm uses the tools and concepts learned from strategic management in order to

achieve competitive advantage by pursuing innovation, it is said to be engaging in A) a short-term strategy. B) strategic invention. C) strategic entrepreneurship. D) a strategic venture. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-02 Apply strategic management concepts to entrepreneurship and innovation. Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > MC Qu. 20 When a firm uses the tools and concepts...

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41) Amina wants to create a networking site that would connect local artists to homeowners who

are looking for unique and original art. She knows that network effects will play a big role in her success and doesn’t want to build her business using a linear value chain. Amina would best be served by employing a(n) A) platform business model. B) razor-razor blade business model. C) innovative social networking website. D) pipeline business model. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-06 Explain why and how platform businesses can outperform pipeline businesses Topic : Platform Strategy Source : Chapter 07 Test Bank > MC Qu. 28 Amina wants to create a networking site...

42) 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) studying the financial records of various fashion design companies to determine trends B) hiring an outside consultant to evaluate the offerings of Revolve Group’s producers C) conducting anonymous phone surveys about consumers’ fashion preferences D) allowing users to provide feedback to producers on the style and fit of clothing Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 07-06 Explain why and how platform businesses can outperform pipeline businesses Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > MC Qu. 101 Revolve Group is a mobile platform...

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43) Which of the following business models in the landscaping industry is likely to scale most

efficiently? A) a company that charges the same hourly rate for landscaping services no matter what the situation requires B) a company that allows users of its website to schedule appointments with landscapers who specialize in the exact service required C) a company that deploys a team of both skilled and unskilled landscapers to each customer’s location regardless of their needs D) a company that offers three different bundles of services at a low, medium, and high price point depending on the level of care required by the customer Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 07-06 Explain why and how platform businesses can outperform pipeline businesses Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > MC Qu. 100 Which of the following business models...

44) The market reaching its maximum size is a feature of the________ stage of the industry life

cycle. A) decline B) maturity C) growth D) shakeout Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 63 The market reaching its maximum size...

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45) Imitation is the________ step in the innovation process. A) third B) fourth C) first D) second Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 07-01 Outline the four-step innovation process from idea to imitation. Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > MC Qu. 38 Imitation is the ________ step in the innovation...

46) Network effects always lead to a virtuous cycle in which an increasing number of customers

improves the quality of a product or service, thereby attracting more customers and continuing the cycle. ⊚ true ⊚ false Question Details AACSB : Reflective Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 07-06 Explain why and how platform businesses can outperform pipeline businesses Topic : Effect of Technology on Industry Structure and Competition Source : Chapter 07 Test Bank > TF Qu. 12 Network effects always lead to a virtuous...

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47) Prisha is the founder of the baby product manufacturer True Blue and Pink. She ensures that

the products offered by her company are manufactured with ethically and responsibly sourced materials. Most products are therefore 100 percent organic, and all packaging is manufactured from recycled material. Also, her company sources materials from other companies within 100 miles of her manufacturing plant. Prisha’s belief is that her company should be able to support the community at large. Which of the following terms best describes Prisha? A) social entrepreneur B) category captain C) headhunter D) trade creditor Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-02 Apply strategic management concepts to entrepreneurship and innovation. Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > MC Qu. 41 Prisha is the founder of the baby product...

48) Platform businesses are typically better than pipeline businesses at incorporating user

feedback and taking advantage of network effects. ⊚ true ⊚ false Question Details AACSB : Reflective Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 07-06 Explain why and how platform businesses can outperform pipeline businesses Topic : Effect of Technology on Industry Structure and Competition Source : Chapter 07 Test Bank > TF Qu. 11 Platform businesses are typically better...

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49) In developed economies, the electric car industry is in the introduction stage, and the industry

for MP3 players is in the shakeout phase. What does this imply? A) The industry for electric cars will primarily pursue an integration strategy, whereas in the MP3 players industry, the focus will be on differentiation. B) The mode of competition in the electric car industry will be based on price, whereas in the MP3 player industry, the mode of competition will be nonprice-based. C) The electric car industry will move to the growth stage, whereas the industry for MP3 players will enter the growth stage next. D) The industry for electric cars will focus more on product innovation, whereas in the MP3 player industry, the focus will be on process innovation. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 60 In developed economies, the electric car...

50) How is process innovation different from product innovation?

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51) Streaming video services replacing brick-and-mortar video rental stores would be an example

of a(n) A) radical innovation. B) disruptive innovation. C) regressive innovation. D) architectural innovation. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 07-05 Categorize different types of innovations in the markets-and-technology fr Topic : Strategies for Innovation Source : Chapter 07 Test Bank > MC Qu. 92 Streaming video services replacing brick...

52) Bright PAD introduced a tablet that could run completely on solar energy and was less

expensive than competitors’ tablets. On the downside, it required more frequent charging than the competition’s tablets. However, the technology of the Bright PAD tablet improved rapidly, thereby improving its recharge frequency. This example describes________ innovation. A) architectural B) incremental C) radical D) disruptive Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 07-05 Categorize different types of innovations in the markets-and-technology fr Topic : Strategies for Innovation Source : Chapter 07 Test Bank > MC Qu. 98 Bright PAD introduced a tablet that could...

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53) Peloton Interactive is a manufacturer of high-definition televisions. The industry has gone

through a period of rapid growth and expansion and has started to experience a decline in the rate of growth. Several smaller firms have been bought out by larger competitors, and competition for market share is intensifying. Which of the following strategies is most likely to give Peloton Interactive a competitive advantage? A) Imitate the features of the highest-selling television on the market. B) Increase spending on marketing and attempt to acquire a high-profile celebrity spokesperson. C) Implement process innovations that lower per-unit costs. D) Introduce product innovations that differentiate Peloton televisions from the competition. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 62 Peloton Interactive is a manufacturer of high...

54) A new product often has a high price when it is launched because of a A) large investment in designing a product while producing large quantities. B) large investment in marketing a product while producing large quantities. C) large investment in designing a product while producing small quantities. D) large investment in marketing a product while producing small quantities. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 47 A new product often has a high price...

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55) When a firm pursues a(n)________ strategy, it continues to support marketing efforts even if

the demand for the product is declining. A) exit B) maintain C) harvest D) consolidate Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 1 Easy Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 69 When a firm pursues a(n) ________ strategy...

56) While the domestic airline industry is in the maturity stage of the industry life cycle, the

internet-enabled appliance industry is in its growth stage. Which of the following can be inferred from the given data? A) The internet-enabled appliance industry is ahead of the domestic airline industry in the industry life cycle. B) While the domestic airline industry is mostly free from excess capacity, the internetenabled appliance industry will have new entrants. C) The mode of competition will be price based in the internet-enabled appliance industry and will be nonprice based in the domestic airline industry. D) The number of competitors will be greater in the domestic airline industry than the internet-enabled appliance industry. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 64 While the domestic airline industry is in the...

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57) Incumbent firms prefer to focus on incremental innovations, which reinforce their established

organizational structure and power distribution and avoid radical innovation that could disrupt their existing balance of power. This is known as A) organization culture. B) organization complexity. C) organizational inertia. D) organizational design. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-05 Categorize different types of innovations in the markets-and-technology fr Topic : Innovation Source : Chapter 07 Test Bank > MC Qu. 25 Incumbent firms prefer to focus on...

58) As a startup company, Lumiere Industries entered the low end of the highly competitive

smart television industry with its low-cost televisions. Initially, the company was able to sell its inferior technology due to its low prices. Over the years, however, its rate of technology improvements increased above the industry standards. This helped the company to create a strong strategic position for its smart TVs in the high-end segment and claim a premium price. Which of the following types of innovation does this scenario best illustrate? A) incremental innovation B) disruptive innovation C) architectural innovation D) radical innovation Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 07-05 Categorize different types of innovations in the markets-and-technology fr Topic : Strategies for Innovation Source : Chapter 07 Test Bank > MC Qu. 90 As a startup company, Lumiere Industries...

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59) While cell phones with holographic keyboards are currently in the introduction stage of the

industry life cycle, tablet computers are in the growth stage. In the context of this scenario, which of the following statements is true? A) While the industry for cell phones with holographic keyboards can reap the benefits of economies of scale, the tablet industry will experience no such benefits. B) While the industry for cell phones with holographic keyboards will focus more on product innovation, the tablet industry will focus more on process innovation. C) The industry for cell phones with holographic keyboards will face price competition, whereas, in the tablet industry, the mode of competition will be nonprice. D) The industry for cell phones with holographic keyboards will face greater competition than the tablet industry. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 55 While cell phones with holographic keyboards...

60) 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) Firms need to communicate products’ potential applications in a more direct way when attracting technology enthusiasts rather than early adopters. C) While early adopters make up the smallest market segment, technology enthusiasts make up the mass market. D) Unlike technology enthusiasts, early adopters’ demand is fueled more by intuition and vision rather than technology concerns. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-04 Derive strategic implications of the crossing-the-chasm framework. Topic : Strategic Implications of Crossing-the-Chasm Source : Chapter 07 Test Bank > MC Qu. 73 Which of the following statements accurately....

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61) It is important for a firm to win over the early majority section of the market to ensure the

commercial success of an innovation because they A) enter into the market in large numbers, creating a herding effect. B) have the highest purchasing power when compared to the other customer segments. C) are driven by technology concerns rather than the practicality of a new product. D) influence the purchase decisions of early adopters. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-04 Derive strategic implications of the crossing-the-chasm framework. Topic : Strategic Implications of Crossing-the-Chasm Source : Chapter 07 Test Bank > MC Qu. 75 It is important for a firm to win...

62) Which of the following is not an advantage when it comes to “first-mover advantages”? A) First movers may benefit from network effects. B) First movers may be able to lock in key suppliers. C) First movers must educate potential customers about the product. D) First movers may hold important intellectual property such as critical patents. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-01 Outline the four-step innovation process from idea to imitation. Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > MC Qu. 15 Which of the following is not an advantage...

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63) Explain the reasons for increasingly rapid technological diffusion and adoption.

64) Social entrepreneurs evaluate the performance of their ventures by ecological and social

contribution. ⊚ true ⊚ false Question Details AACSB : Reflective Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 3 Hard Learning Objective : 07-02 Apply strategic management concepts to entrepreneurship and innovation. Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > TF Qu. 07 Social entrepreneurs evaluate the performance...

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65) According to the crossing-the-chasm framework, the biggest chasm between customer

segments is between early adopters and the mass market made up of the early majority and the late majority. ⊚ true ⊚ false Question Details AACSB : Reflective Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 07-04 Derive strategic implications of the crossing-the-chasm framework. Topic : Strategic Implications of Crossing-the-Chasm Source : Chapter 07 Test Bank > TF Qu. 09 According to the crossing-the-chasm framework...

66) Which of the following describes an architectural innovation? A) an innovation that was developed for emerging economies before being introduced in

developed economies B) an innovation that draws on novel methods or materials, is derived either from an entirely different knowledge base, comes from a recombination of existing knowledge bases with a new stream of knowledge C) a new product in which known components, based on existing technologies, are reconfigured in a novel way to create new markets D) an innovation that leverages new technologies to attack existing markets from the bottom up Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 07-05 Categorize different types of innovations in the markets-and-technology fr Topic : Strategies for Innovation Source : Chapter 07 Test Bank > MC Qu. 87 Which of the following describes...

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67) The best way for a firm to keep its proprietary technologies, recipes, or formulas secret is to

obtain a patent. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 07-01 Outline the four-step innovation process from idea to imitation. Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > TF Qu. 04 The best way for a firm to keep its proprietary...

68) Feran is the founder of an innovative “impromptu catering” business that provides elegant,

healthy party food and decorations on less than 24 hours’ notice. The company has grown by over 150 percent in the past year. Feran credits some of the company’s success to studying the strategies of prominent social entrepreneurs, such as Wikipedia’s Jimmy Wales. What can Feran do to exemplify the social entrepreneurship model? A) Buy out his closest competitors to ensure a competitive advantage. B) Seek investments from venture capitalists. C) Provide free weekly catered meals for the unhoused. D) Launch a social media platform for food lovers. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 07-02 Apply strategic management concepts to entrepreneurship and innovation. Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > MC Qu. 44 Feran is the founder of an innovative &#8220;impromptu...

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69) In which of the following stages of the industry life cycle is a standard first established? A) maturity stage B) introduction stage C) shakeout stage D) growth stage Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 53 In which of the following stages of the...

70) Which of the following most accurately describes a difference between incremental

innovation and radical innovation? A) Incremental innovation researches new materials; radical innovation researches new processes. B) Incremental innovation draws on novel methods; radical innovation draws on proven methods. C) Incremental innovation builds on an established knowledge base; radical innovation uses an entirely different knowledge base. D) Incremental innovation targets new markets and technologies; radical innovation reinvents markets and technologies. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-05 Categorize different types of innovations in the markets-and-technology fr Topic : Strategies for Innovation Source : Chapter 07 Test Bank > MC Qu. 96 Which of the following most accurately...

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71) Which of the following below is considered an advantage of using a platform business

model? A) Platforms scale efficiently by implementing gatekeepers. B) Platforms work within an existing industry based on physical assets. C) Platforms unlock new sources of value creation and supply. D) Platforms benefit from a traditional system of horizontal business organization. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-06 Explain why and how platform businesses can outperform pipeline businesses Topic : Platform Strategy Source : Chapter 07 Test Bank > MC Qu. 27 Which of the following below is considered...

72) Why do incumbent firms favor incremental innovation over radical innovation?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-05 Categorize different types of innovations in the markets-and-technology fr Topic : Strategies for Innovation Source : Chapter 07 Test Bank > SA Qu. 115 Why do incumbent firms favor incremental...

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73) Which of the following businesses is most likely to disrupt an existing industry? A) Stark and Son’s developed a teleportation technology that can transport physical

materials instantaneously across great distances. B) 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. C) 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. D) 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. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 07-05 Categorize different types of innovations in the markets-and-technology fr Topic : Strategies for Innovation Source : Chapter 07 Test Bank > MC Qu. 93 Which of the following businesses is...

74) Briefly discuss the steps in the innovation process.

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75) On which of the following tenets is the crossing-the-chasm framework, suggested by

Geoffrey Moore, based? A) The number and size of competitors remain constant throughout the industry life cycle. B) Each stage of the industry life cycle is dominated by a different customer group. C) The supply and demand sides of the market remain constant irrespective of the phase of the industry life cycle. D) Industries tend to follow an unpredictable industry life cycle. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-04 Derive strategic implications of the crossing-the-chasm framework. Topic : Strategic Implications of Crossing-the-Chasm Source : Chapter 07 Test Bank > MC Qu. 70 On which of the following tenets is the...

76) When Japanese carmakers entered the existing U.S. automobile market by first offering small

fuel-efficient cars and then leveraging their low-cost and high-quality advantages into highend luxury segments, they were engaging in A) architectural innovation. B) regressive innovation. C) disruptive innovation. D) radical innovation. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 07-05 Categorize different types of innovations in the markets-and-technology fr Topic : Strategies for Innovation Source : Chapter 07 Test Bank > MC Qu. 91 When Japanese carmakers entered...

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77) Why is the phase after the growth stage of the industry life cycle referred to as the shakeout

stage? A) The firms in the industry yield the highest profits during this phase. B) The barriers to entry increase during this stage. C) Rivalry among competitors decreases in this stage. D) The weaker firms are forced out of the industry in this stage. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 61 Why is the phase after the growth stage...

78) Which of the following customer segments as described in the chasm framework make up the

mass market? A) the technology enthusiasts alone B) the early and late majority together C) the technology enthusiasts and laggards together D) the early adopters alone Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 07-04 Derive strategic implications of the crossing-the-chasm framework. Topic : Strategic Implications of Crossing-the-Chasm Source : Chapter 07 Test Bank > MC Qu. 71 Which of the following customer...

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79) When a firm is in the decline phase of an industry life cycle, it has four strategic options.

Describe a harvest strategy and provide an example.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > SA Qu. 120 When a firm is in the decline phase...

80) Briefly discuss the four strategic options firms have during the decline stage of the industry

life cycle.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > SA Qu. 112 Briefly discuss the four strategic options...

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81) Product innovation is more strategically important than process innovation while a firm is in

the growth stage of the industry life cycle. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Innovation and the Industry Life Cycle Source : Chapter 07 Test Bank > TF Qu. 01 Product innovation is more strategically...

82) What is an invention? A) a unique idea that has been patented B) a unique idea that has not been thought of before C) the transformation of an idea into a new product or process D) the transformation of an idea into a successful product Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 07-01 Outline the four-step innovation process from idea to imitation. Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > MC Qu. 31 What is an invention?

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83) When Monopar Therapeutics released a new drug to treat insomnia, its chemical composition

was disclosed at the back of the drug’s cover. However, any attempts by competitors to copy the chemical composition would result in infringement of Monopar Therapeutics’ intellectual property rights. Thus, the drug is protected by a A) patent. B) royalty. C) promissory bill. D) franchise. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-01 Outline the four-step innovation process from idea to imitation. Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > MC Qu. 32 When Monopar Therapeutics released a new...

84) Discuss the differences between pipeline businesses and platform businesses in terms of the

value chain.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 07-06 Explain why and how platform businesses can outperform pipeline businesses Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > SA Qu. 116 Discuss the differences between pipeline...

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85) Discuss the drawbacks of the industry life cycle.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-04 Derive strategic implications of the crossing-the-chasm framework. Topic : Strategic Implications of Crossing-the-Chasm Source : Chapter 07 Test Bank > SA Qu. 114 Discuss the drawbacks of the...

86) Incumbent firms favor incremental innovation over radical innovation because A) incumbent firms do not have formal organizational structures and processes like the

way new entrants do. B) radical innovation will disturb the existing power distribution within the firms. C) incremental innovations help firms sustain a permanent competitive advantage, whereas radical innovations only help gain a temporary advantage. D) their business decisions are independent of the other parties in their innovation ecosystem. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-05 Categorize different types of innovations in the markets-and-technology fr Topic : Strategies for Innovation Source : Chapter 07 Test Bank > MC Qu. 85 Incumbent firms favor incremental innovation...

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87) Monopar Therapeutics at McKesson implemented an open-innovation model, which greatly

benefited the company. Knowing this information, we can conclude that Monopar Therapeutics is a(n) A) category captain. B) early adopter. C) venture capitalist. D) intrapreneur. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 1 Easy Learning Objective : 07-01 Outline the four-step innovation process from idea to imitation. Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > MC Qu. 35 Monopar Therapeutics at McKesson implemented...

88) Jimmy prefers to buy from well-established brands rather than unknown new ventures.

Which customer segment does he fall under? A) technology enthusiast B) early majority C) early adopter D) late majority Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-04 Derive strategic implications of the crossing-the-chasm framework. Topic : Strategic Implications of Crossing-the-Chasm Source : Chapter 07 Test Bank > MC Qu. 78 Jimmy prefers to buy from well-established...

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89) Mateo is the owner of Auto-Garage Opener Inc. and has recently modified his firm’s

strategic objective based on a shift in his industry. Mateo is responding to a(n)________ life cycle. A) economic B) industry C) entrepreneurial D) growth Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Innovation and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 13 Mateo is the owner of Auto-Garage Opener...

90) Which of the following accurately describes how Netflix used innovation to gain a

competitive advantage? A) Netflix applied first-mover advantages to lock up talent needed to produce original content for DVD rentals and online streaming. B) Netflix moved from content development to upgrading its data analytics to provide faster online streaming. C) Netflix moved from online streaming to online DVD rentals via the Internet. D) Netflix applied big data analytics to its user preferences to provide highly personalized viewing recommendations. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 07-01 Outline the four-step innovation process from idea to imitation. Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > MC Qu. 29 Which of the following accurately describes...

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91) In the context of industrial growth, which of the following statements is true of standards? A) Standards emerge exclusively from the bottom up through competition in the

marketplace. B) Standards are exclusively imposed top down by government or other standard-setting agencies such as the Institute of Electrical and Electronics Engineers. C) After a standard is established in an industry, the basis of competition tends to move away from process innovations toward product innovations. D) As the size of a market expands, a standard signals the market’s agreement on a common set of engineering features and design choices. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 52 In the context of industrial growth...

92) What happens during the shakeout stage of the industry life cycle?

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93) Assume that the market for print book publishing has entered the maturity stage. Which of

the following would most likely exist during this stage? A) one large publisher B) a few start-up publishers C) many small to midsized publishers D) a few large publishers Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 50 Assume that the market for print book...

94) Which of the following is a drawback of using the industry life cycle as a framework to guide

strategic choice? A) The framework does not explain everything about changes in industries. B) The framework believes that the life cycle of industries is unpredictable. C) The framework believes that the number and size of competitors remain constant throughout the life cycle. D) The framework is based on the tenet that industries can be rejuvenated even in the declining stage. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-04 Derive strategic implications of the crossing-the-chasm framework. Topic : Strategic Implications of Crossing-the-Chasm Source : Chapter 07 Test Bank > MC Qu. 81 Which of the following is a drawback...

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95) Early adopters typically enter the market during the________ stage. A) growth B) maturity C) shakeout D) introduction Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 07-04 Derive strategic implications of the crossing-the-chasm framework. Topic : Strategic Implications of Crossing-the-Chasm Source : Chapter 07 Test Bank > MC Qu. 72 Early adopters typically enter the market...

96) Xerox long dominated the high-end copier industry, but Canon captured the small and

medium-sized businesses by redesigning the copying machine so that it did not 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) radical innovation. B) disruptive innovation. C) incremental innovation. D) architectural innovation. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 07-05 Categorize different types of innovations in the markets-and-technology fr Topic : Strategies for Innovation Source : Chapter 07 Test Bank > MC Qu. 97 Xerox long dominated the high-end copier...

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97) When the market for standalone Global Positioning System (GPS) devices declined with the

arrival of GPS-enabled mobile phones, InMode Ltd., a manufacturer of GPS devices, bought out most of its rivals that were planning to exit. This allowed the company to get rid of all the excess capacity and acquire a monopolistic market power in the declining industry. Which of the following strategies has InMode Ltd. adopted in this scenario? A) harvest strategy B) consolidation strategy C) differentiation strategy D) maintain strategy Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 68 When the market for standalone Global...

98) The key objective for firms during the________ phase is to stake out a strong strategic

position not easily imitated by rivals. A) introduction B) growth C) maturity D) shakeout Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 1 Easy Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 57 The key objective for firms during the...

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99) The typical four-step innovation process begins with A) the presentation of an idea as findings derived from basic research. B) the modification and recombination of an existing product or process. C) the commercialization of an invention by entrepreneurs. D) a competitor’s attempt to imitate an innovation. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 07-01 Outline the four-step innovation process from idea to imitation. Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > MC Qu. 30 The typical four-step innovation process...

100)

At the time when Farrah decided to purchase a GPS system for her car, the product had just become accessible to the mass market. She did not purchase the GPS until after she was convinced that the benefits it would offer her would far exceed its price. Also, she waited for her friends to try the product and prominent magazines and websites such as Consumer Reports to endorse it. Which of the following customer segments does Farrah best represent? A) technology enthusiasts B) early adopters C) laggards D) early majority

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 07-04 Derive strategic implications of the crossing-the-chasm framework. Topic : Strategic Implications of Crossing-the-Chasm Source : Chapter 07 Test Bank > MC Qu. 77 At the time when Farrah decided to purchase...

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101)

A(n)________ leverages new technologies to attack existing markets. A) radical innovation B) incremental innovation C) architectural innovation D) disruptive innovation

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 07-05 Categorize different types of innovations in the markets-and-technology fr Topic : Strategies for Innovation Source : Chapter 07 Test Bank > MC Qu. 89 A(n) ________ leverages new technologies..

102)

Adaptive Biotechnologies Inc. is a company that builds diagnostic devices. It was the first company to develop a compact MRI scanner by reconfiguring the components of the MRI technology. This smaller and user-friendly version of the huge MRI scanner created demand from small hospitals, nursing homes, and private practice doctors who were earlier dependent on the scanning machines in large hospitals. Which of the following types of innovations does this scenario best illustrate? A) architectural innovation B) incremental innovation C) radical innovation D) disruptive innovation

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 07-05 Categorize different types of innovations in the markets-and-technology fr Topic : Strategies for Innovation Source : Chapter 07 Test Bank > MC Qu. 88 Adaptive Biotechnologies Inc. is a...

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103)

As the inventor of hypertension medication, BioNTech SE Inc. was able to reap the benefits of economies of scale due to a large consumer demand for the drug. Even when competitors later developed similar drugs after the expiry of BioNTech SE’s patents, regular users did not want to switch because they were concerned about possible side effects. Which of the following benefits does this scenario best illustrate? A) fringe benefits B) first-mover advantages C) network externalities D) social benefits

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 07-01 Outline the four-step innovation process from idea to imitation. Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > MC Qu. 40 As the inventor of hypertension medication...

104)

Identify the first stage in a typical industry life cycle and explain why early adopters are attracted to this stage.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Innovation and the Industry Life Cycle Source : Chapter 07 Test Bank > SA Qu. 118 Identify the first stage in a typical industry...

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105)

Which of the following scenarios best exemplifies a platform business? A) Tereza 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. C) Leo operates a consulting firm in which businesses hire him to assess deficiencies in their organizational culture. D) Ayesha purchases electronic parts from a variety of vendors and assembles them into inexpensive drones that she sells to consumers.

106)

Briefly discuss the strategic implications of the crossing-the-chasm framework.

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107)

Define entrepreneurship. Provide one example of a successful entrepreneur and include the product or service for which they are known.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 07-02 Apply strategic management concepts to entrepreneurship and innovation. Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > SA Qu. 106 Define entrepreneurship. Provide one example...

108)

A factor favoring the success of disruptive innovation is that A) new entrants have highly formal organizational structures and processes. B) incumbent firms often are slow to change. C) the low end of the market is highly guarded. D) incumbent firms focus on radical innovation rather than incremental innovation.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-05 Categorize different types of innovations in the markets-and-technology fr Topic : Strategies for Innovation Source : Chapter 07 Test Bank > MC Qu. 94 A factor favoring the success of disruptive...

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109)

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 did not cost more to produce. B) cleaned as well as other cleaners and used organic ingredients. C) cleaned as well as other cleaners and could be produced more efficiently. D) cleaned better than other cleaners and used easy-to-obtain ingredients.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-02 Apply strategic management concepts to entrepreneurship and innovation. Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > MC Qu. 43 Which of the following is an example of...

110)

Which of the following is true about the decline stage of an industry life cycle? A) Market growth is at its highest. B) Product and process innovation efforts end. C) Product innovation ends, but process innovation continues. D) Market size is at its smallest.

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111)

Which of the following conditions prevail when an industry is at the end of its life cycle? A) The strategic objectives of businesses will involve gaining market acceptance. B) Innovation efforts along both product and process dimensions cease. C) The industry structure is perfectly competitive with a large number of buyers and sellers. D) The size of the market contracts further as demand increases.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 65 Which of the following conditions...

112)

Afya Limited is a new firm that entered the smartwatch industry during the growth stage of the industry life cycle. It managed to become one of the top-three smartwatch manufacturers during the shakeout stage due to its low-cost structure. What features should Afya Limited emphasize in its product marketing to ensure it successfully crosses the chasm into the maturity stage? A) ease of use B) advanced capabilities C) the company’s outsider status D) sleek and trendy design

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 07-04 Derive strategic implications of the crossing-the-chasm framework. Topic : Strategic Implications of Crossing-the-Chasm Source : Chapter 07 Test Bank > MC Qu. 79 Afya Limited is a new firm that entered...

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113)

Innovation and strategic entrepreneurship can only occur within new businesses. ⊚ true ⊚ false

Question Details AACSB : Reflective Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 07-02 Apply strategic management concepts to entrepreneurship and innovation. Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > TF Qu. 06 Innovation and strategic entrepreneurship...

114)

Which of the following businesses is most susceptible to negative network effects? A) Lite Shoes produces a line of lightweight running shoes that are endorsed by an Olympic gold medalist. B) Rite Pics is a social media platform where users upload photos to the site and are matched with other users who have taken similar photos. C) Chips & Boards Technologies produces computer processing chips and sells them to a variety of manufacturers for use in smartphones and other devices. D) ECO Tools manufactures solar powered gardening implements and sells them online.

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115)

The vast majority of innovations in an industry are________, because they build on a firm’s established knowledge base and steadily improve an existing product or service offering. A) architectural B) radical C) incremental D) disruptive

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-05 Categorize different types of innovations in the markets-and-technology fr Topic : Innovation Source : Chapter 07 Test Bank > MC Qu. 21 The vast majority of innovations in an...

116)

BellRing 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 the managers of BellRing Brands prepare for next? A) a prolonged period of uncontested success B) a difficult struggle to move from invention to innovation C) a sharp decline in demand for the product D) increased competition from imitators

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 07-01 Outline the four-step innovation process from idea to imitation. Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > MC Qu. 39 BellRing Brands is a manufacturer of educational...

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117)

Explain some of the features of the introduction stage of the industry life cycle.

118)

As a research scholar, Danna researched and developed her idea of solar roof shingles. Realizing the potential use of this product in both residential and commercial building development, she started a new venture where she could customize these shingles to fit the specific needs of the buyers and sell them. Danna can be best described as a(n) A) franchisor. B) early adopter. C) category captain. D) entrepreneur.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-01 Outline the four-step innovation process from idea to imitation. Topic : Entrepreneurship and Innovation Source : Chapter 07 Test Bank > MC Qu. 34 As a research scholar, Danna researched...

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119)

Although Dynatrace Holdings still sells its DVD players, a product in its decline stage, the investments made by the company on improving or marketing the product are very low. The company has allocated the least amount of human and financial capital to this department. Which of the following strategies has Dynatrace Holdings adopted in this scenario? A) differentiation strategy B) harvest strategy C) consolidation strategy D) maintain strategy

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > MC Qu. 67 Although Dynatrace Holdings still sells...

120)

During the shakeout stage of the industry life cycle, the importance of process innovation further increases while the importance of product innovation further declines. ⊚ true ⊚ false

Question Details AACSB : Reflective Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 07-03 Describe the competitive implications of different stages in the industry Topic : Competitive Implications and the Industry Life Cycle Source : Chapter 07 Test Bank > TF Qu. 08 During the shakeout stage of the industry...

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Answer Key Test name: Chapter 07 Test Bank 1) A

Javier best represents the laggards segment. Laggards are customers who adopt a new product only if it is absolutely necessary. They tend to enter the market after it is completely mature and frequently during the decline stage. 2) D

One strategy that firms can employ to guard against disruptive innovation is to protect the low end of the market with low-cost innovations to preempt stealth competitors. 3) Short Answer

Incremental innovation is by far the most common type. This type of innovation squarely builds on an established knowledge base and steadily improves an existing product or service offering. Thus, both large incumbent firms and startups will contribute to this type of innovation. Economic incentives and organizational inertia are both strong reasons for incumbents to use incremental innovation. Also, continuous small improvements reinforce the existing network of the industry value chain. 4) B

Lauren should guard against the low end of her market by introducing low-cost innovations to preempt stealth competitors. 5) B

Early adopters are important to a firm introducing a new innovation because they are willing to buy early into new technology or product concept. 6) D

Flip phones are in the decline stage of the industry life cycle. Changes in the external environment often move industries from maturity to decline. In this final stage of the industry life cycle, the size of the market contracts further as demand falls, often rapidly. 7) C

Network effects occur when the value of a product or service increases, often exponentially, with the number of users, as evidenced by social networking sites. 8) Short Answer

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Network effects occur when the value of a product or service increases, often exponentially, with the number of users. The ability of a platform to evince and manage positive network effects is critical to producing value for each participant. Achieving positive returns to scale allows a firm to gain and sustain a competitive advantage. A social media site, for example, is more attractive to users when there are a large number of other users. In contrast, negative network effects occur when more and more users exit a platform and the value that each remaining user receives from the platform declines. The social network Myspace, for example, experienced negative network effects as more and more users abandoned it for Facebook. 9) D

The scenario best illustrates an incremental innovation. An incremental innovation squarely builds on an established knowledge base and steadily improves an existing product or service offering. It targets existing markets using existing technology. 10) A

To sustain a competitive advantage, a firm must continuously innovate—that is, it must produce a string of successful new products or services over time. In this spirit, Apple has not only introduced incrementally improved iPhones but also launched other innovative mobile devices such as the iPad line of products, multimedia tablet computers created with the intent to drive convergence in computing, telecommunications, and media content. 11) TRUE

Pipeline business models use a firm’s linear value chain, whereas a platform business model uses technology (such as the internet, cloud computing, artificial intelligence, etc.) to connect organizations, resources, information, and people in an interactive ecosystem where valuegenerating transactions can be created and exchanged. 12) Short Answer

Successful innovators can benefit from a number of first-mover advantages, including economies of scale and experience and learning-curve effects. First movers may also benefit from network effects. Moreover, first movers may hold important intellectual property such as critical patents. They may also be able to lock in key suppliers, and by increasing switching costs they may lock in customers as well. 13) B

As an industry evolves over time, it tends to follow a predictable industry life cycle with five distinct stages in the following order: introduction, growth, shakeout, maturity, and decline. 14) C

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In the United States, the time period for the right to exclude others from the use of a patented technology is 20 years from the filing date of a patent application. 15) B

Entrepreneurs are the agents that introduce change into the competitive system. They do this not only by figuring out how to use inventions but also by introducing new products or services, new production processes, and new forms of organization. Entrepreneurs innovate by commercializing ideas and inventions. By implementing a new and more efficient way to produce pottery, John is introducing a new production process and is therefore practicing entrepreneurship. 16) C

Because market demand is robust in the growth stage and more competitors have entered the market, there tends to be more strategic variety: Some competitors will continue to follow a differentiation strategy, emphasizing unique features, product functionality, and reliability. Other firms employ a cost-leadership strategy in order to offer an acceptable level of value but lower prices to consumers. 17) C

When product innovation declines, the level of process innovation increases. 18) FALSE

As the adage goes, change is the only constant—and the rate of technological change has accelerated dramatically over the past hundred years. One determinant is that earlier innovations such as the car, airplane, telephone, and use of electricity provided the necessary infrastructure for newer innovations to diffuse more rapidly. Another reason is the emergence of new business models that make innovations more accessible. The speed of technology diffusion has accelerated further with the emergence of the internet, social networking sites, and viral messaging. 19) B

A radical innovation draws on novel methods or materials. It is derived either from an entirely different knowledge base or from a recombination of existing knowledge bases with a new stream of knowledge. It targets new markets by using new technologies. 20) C

A platform business enables value-creating interactions between external producers and consumers. 21) A

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The customers coming into the market in the shakeout stage are called the early majority. They are pragmatists and are most concerned with the question of what the new technology can do for them. Before adopting a new product or service, they weigh the benefits and costs carefully. 22) D

Market expansion accelerates in the growth stage of the industry life cycle. After the initial innovation has gained market acceptance, demand increases rapidly as first-time buyers rush to enter the market, convinced by the proof of concept demonstrated in the introductory stage. 23) Short Answer

In this final stage of the industry life cycle, the size of the market contracts further as demand falls, often rapidly. Innovation efforts along both product and process dimensions cease. During the decline stage, leaders generally have four strategic options: 1) exit, 2) harvest, 3) maintain, or 4) consolidate. 24) C

Organizational inertia is a firm’s resistance to changes in the status quo. 25) FALSE

An architectural innovation is a new product in which known components, based on existing technologies, are reconfigured in a novel way to create new markets. 26) D

The significant differences in the attitudes toward technology of the early majority when compared to the early adopters’ attitudes signify the wide competitive gulf—the chasm—between these two consumer segments. Without adequate demand from the early majority, most innovative products wither away. 27) A

New entrants do not have formal organizational structures and processes, giving them more freedom to launch an initial breakthrough. 28) A

Disruptive innovation leverages new technologies to attack existing markets such as the digital camera in what was once a film-driven industry. 29) C

A radical innovation leverages new markets, while incremental innovations are based on existing ones. 30) Short Answer

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Competitive rivalry is somewhat muted in the growth stage because the market is growing fast. Because market demand is robust in this stage and more competitors have entered the market, there tends to be more strategic variety. Some competitors will continue to follow a differentiation strategy, emphasizing unique features, product functionality, and reliability. Other firms employ a cost-leadership strategy in order to offer an acceptable level of value but lower prices to consumers. They realize that lower cost is likely a key success factor in the future because lower cost allows the firm to decrease prices and attract more consumers into the market. 31) C

In pursuing a harvest strategy, a firm reduces investments in product support and allocates only a minimum of human and other resources. 32) D

The backup battery industry is most likely in the growth stage. Because demand is strong during the growth phase, both efficient and inefficient firms thrive; the rising tide lifts all boats. Moreover, production costs begin to fall, often rapidly, as standard business processes are put in place and firms begin to reap economies of scale and learning. Distribution channels are expanded, and complementary assets in the form of products and services become widely available. 33) D

The strategic objective during the introductory stage is to achieve market acceptance and seed future growth. 34) D

Key success factors during the shakeout stage are the manufacturing and process engineering capabilities that can be used to drive costs down. Generally, the firms that survive the shakeout stage tend to enjoy economies of scale, as the industry consolidated and most excess capacity was removed. 35) D

Economies of scale refer to the decreases in cost per unit as output increases. First movers may hold important intellectual property such as critical patents. They may also be able to lock in key suppliers as well as customers through increasing switching costs. 36) D

UShredIt! has entered the maturity stage. Demand was largely satisfied in the prior shakeout stage. Demand now consists of replacement or repeat purchases only. 37) A

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The customers coming into the market in the shakeout stage are called the early majority. 38) D

Limited market demand in the shakeout phase increases competitive intensity within the industry. Firms begin to compete directly against one another for market share rather than trying to capture a share of an increasing pie. 39) FALSE

Innovation concerns the commercialization of an invention. Innovation is the competitive way entrepreneurs use to exploit opportunities created by change, or to create change themselves, in order to commercialize new products, services, or business models. 40) C

Strategic entrepreneurship is the pursuit of innovation using tools and concepts from strategic management. 41) A

Amina needs to focus on a platform business model because she needs value-creating interactions between external producers and consumers. 42) D

Platforms benefit from community feedback. Feedback loops from consumers back to the producers allow platforms to fine-tune their offerings and to benefit from big data analytics. 43) B

Platform businesses leveraging digital technology can grow much faster—that is, they scale efficiently—because platforms create value by orchestrating resources that reside in the ecosystem. The platform business does not own or control these resources, facilitating rapid and often exponential growth. 44) B

During the fourth stage of the industry life cycle, the industry structure morphs into an oligopoly with only a few large firms. The market has reached its maximum size, and industry demand is likely to be zero or even negative going forward. 45) B

The innovation process ends with imitation. If an innovation is successful in the marketplace, competitors will attempt to imitate it. 46) FALSE

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Negative network effects occur when more and more users exit a platform and the value that each remaining user receives from the platform declines. The social network Myspace experienced negative network effects as more and more users abandoned it for Facebook. 47) A

Prisha can be best described as a social entrepreneur. Social entrepreneurs evaluate the performance of their ventures not only by financial metrics but also by ecological and social contribution. They use a triple-bottom-line approach to assess performance. 48) TRUE

Platform businesses help facilitate exchanges between producers and consumers, and this position allows them to gather data from both sides of the interaction. In contrast, pipelines tend to be inefficient in managing the flow of information from producer to consumer. Feedback loops from consumers back to the producers allow platforms to fine-tune their offerings and benefit from AI. These feedback loops also facilitate network effects, which occur when the value of a product or service increases, often exponentially, with the number of users, allowing the firm to continue improving its offerings. 49) D

The industry for electric cars will focus more on product innovation, whereas in the MP3 player industry, the focus will be on process innovation. Following the emergence of a standard during the growth stage, the importance of process innovation increases rapidly, and the importance of product innovation diminishes quickly. 50) Short Answer

Product innovations, as the name suggests, are new or recombined knowledge embodied in new products—for example, the jet airplane, electric vehicle, smartphone, and wearable devices. On the other hand, process innovations are new ways to produce existing products or to deliver existing services. Process innovations are made possible through advances such as artificial intelligence, the internet, lean manufacturing, Six Sigma, biotechnology, nanotechnology, and so on. 51) B

A disruptive innovation leverages new technologies to attack existing markets. It invades an existing market from the bottom up. 52) D

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The dynamic process of disruptive innovation begins when a firm, frequently a startup, introduces a new product based on a new technology to meet existing customer needs. To be a disruptive force, however, this new product or technology has to have additional characteristics: 1. It begins as a low-cost solution to an existing problem. 2. Initially, its performance is inferior to the existing technology, but its rate of technological improvement over time is faster than the rate of performance increases required by different market segments. 53) C

The high-definition television industry has entered the shakeout stage of the industry life cycle. The winners in this increasingly competitive environment are typically firms that stake out a strong position as cost leaders. Key success factors at this stage are the manufacturing and process engineering capabilities that can be used to drive down costs. The importance of process innovation further increases (albeit at diminishing marginal returns), while the importance of product innovation further declines. 54) C

A new product often has a high price when it is launched because of a large investment in designing a product while producing small quantities. 55) B

If a firm has been following a maintain strategy, it will continue to support marketing efforts at a given level despite the fact that the industry has been declining. 56) B

Generally, the larger firms enjoying economies of scale are the ones that survived the shakeout phase. After the shakeout is completed and a few firms remain, the industry enters the maturity stage. The number of competitors is fewer at this stage when compared to the growth stage. 57) C

Incumbent firms tend to favor incremental innovations that reinforce the existing organizational structure and power distribution while avoiding radical innovation that could disturb the existing balance of power. 58) B

The scenario best illustrates a disruptive innovation. The dynamic process of disruptive innovation begins when a firm, frequently a startup, introduces a new product based on a new technology to meet existing customer needs. It invades an existing market from the bottom up. 59) B

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In the given scenario, while the industry for cell phones with holographic keyboards will focus on product innovation, the tablet industry will focus on process innovation. In the introductory stage, the level of product innovation is at a maximum because new features increasing perceived consumer value are critical to gaining traction in the market. During the growth stage, process innovation ramps up as firms attempt to keep up with rapidly rising demand while attempting to bring costs down. 60) D

Unlike technology enthusiasts, early adopters’ demand is driven by their imagination and creativity rather than solely by the new technology per se. They recognize and appreciate the possibilities the new technology can bring them in their professional and personal lives. 61) A

As the early majority section of the market makes up roughly one-third of the entire market potential, winning them over is critical to the commercial success of the innovation. They are on the cusp of the mass market. Bringing the early majority on board is the key to catching the growth wave of the industry life cycle. 62) C

Having to educate potential customers would be considered a disadvantage. 63) Short Answer

One determinant is that earlier innovations such as the car, airplane, telephone, and the use of electricity provided the necessary infrastructure for newer innovations to diffuse more rapidly. Another reason is the emergence of new business models that make innovations more accessible. The speed of technological diffusion has accelerated further with the emergence of the internet, social networking sites, and viral messaging. 64) TRUE

Social entrepreneurship is the pursuit of social goals while creating profitable businesses. Social entrepreneurs evaluate the performance of their ventures not only by financial metrics but also by ecological and social contribution (profits, planet, and people). They use a triple-bottom-line approach to assess performance. 65) TRUE

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According to the crossing-the-chasm framework, each stage of the industry life cycle is dominated by a different customer group. Different customer groups with distinctly different preferences enter the industry at each stage of the industry life cycle. Such differences between customer groups lead to a big gulf, or chasm, into which companies and their innovations frequently fall. The largest chasm separates the early adopters from the early and late majority that make up the mass market. 66) C

Firms can innovate by leveraging existing technologies into new markets. An architectural innovation is a new product in which known components, based on existing technologies, are reconfigured in a novel way to create new markets. 67) FALSE

Because patents require full disclosure of the underlying technology and know-how so that others can use it freely once the patent protection has expired, many firms find it strategically beneficial not to patent their technology. Instead they use trade secrets, valuable proprietary information that is not in the public domain and that the firm makes every effort to keep secret. 68) C

Social entrepreneurship describes the pursuit of social goals while creating profitable businesses. Social entrepreneurs evaluate the performance of their ventures not only by financial metrics but also by ecological and social contribution (profits, planet, and people). They use a triple-bottomline approach to assess performance. Feran can pursue social entrepreneurship by donating some of the company’s time and resources to helping unhoused individuals in the community. 69) D

As the size of a market expands and the industry enters the growth stage, a standard signals the market’s agreement on a common set of engineering features and design choices. Standards can emerge from the bottom up through competition in the marketplace or be imposed top down by government or other standard-setting agencies. 70) C

An incremental innovation squarely builds on an established knowledge base and steadily improves an existing product or service offering. It targets existing markets using existing technology. In contrast, radical innovation draws on novel methods or materials. It is derived either from an entirely different knowledge base or from a recombination of existing knowledge bases with a new stream of knowledge. It targets new markets by using new technologies. 71) C

Platforms unlock new sources of value creation and supply.

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72) Short Answer

Incumbent firms favor incremental innovation over radical innovation for the following reasons. Once an innovator has become an established incumbent firm, it has strong incentives to defend its strategic position and market power. An emphasis on incremental innovation is particularly attractive once the industry standard has emerged and technological uncertainty is reduced. From an organizational perspective, as firms become established and grow, they rely more heavily on formalized business processes and structures. In some cases, the firm may experience organizational inertia—resistance to changes in the status quo. Incumbent firms, therefore, tend to favor incremental innovations that reinforce the existing organizational structure and power distribution while avoiding radical innovation that could disturb the existing balance of power. A final reason incumbent firms tend to be a source of incremental rather than radical innovations is that they become embedded in an innovation ecosystem: a network of suppliers, buyers, complementors, and so on. They no longer make independent decisions but must consider the ramifications on other parties in their innovation ecosystem. 73) D

A disruptive innovation leverages new technologies to attack existing markets. It invades an existing market from the bottom up, beginning as a low-cost solution to an existing problem. Initially, its performance is inferior to the existing technology, but its rate of technological improvement over time is faster than the rate of performance increases required by different market segments. 74) Short Answer

Innovation describes the discovery, development, and transformation of new knowledge in a four-step process captured in the four I’s: idea, invention, innovation, and imitation. 3. The innovation process begins with an idea. The idea is often presented in terms of abstract concepts or as findings derived from basic research. 4. In a next step, invention transforms an idea into a new product or process, or it modifies and recombines existing products or processes. 5. Innovation concerns the commercialization of an invention. 6. The innovation process ends with imitation. If an innovation is successful in the marketplace, competitors will attempt to imitate it. 75) B

Based on empirical observations, Geoffrey Moore’s core argument is that each stage of the industry life cycle is dominated by a different customer group. Different customer groups with distinctly different preferences enter the industry at each stage of the industry life cycle.

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76) C

Japanese carmakers successfully followed a strategy of disruptive innovation by first introducing small fuel-efficient cars and then leveraging their low-cost and high-quality advantages into high-end luxury segments, captured by brands such as Lexus (Toyota), Infiniti (Nissan), and Acura (Honda). 77) D

In the shakeout stage, as competitive intensity increases, the weaker firms are forced out of the industry. 78) B

As described in the chasm framework, the early and late majority make up the mass market. 79) Short Answer

In pursuing a harvest strategy, a firm reduces investments in product support and allocates only a minimum of human and other resources. For example, several firms still make fax machines, but they don’t invest much in future innovation. Instead, they are maximizing cash flow from an existing fax machine product line to invest in other businesses of the firm. 80) Short Answer

At the decline stage, managers generally have four strategic options: Exit: Some firms are forced to exit the industry by bankruptcy, liquidation, or divestments. Harvest: In pursuing a harvest strategy, the firm reduces investments in product support and allocates only a minimum of human and other resources. Maintain: When following a maintain strategy, firms continue to support marketing efforts at a given level despite the fact that demand has been declining. Consolidate: Although market size shrinks in a declining industry, some firms may choose to consolidate the industry by buying rivals. These purchases allow the consolidating firm to stake out a strong position—possibly approaching monopolistic market power, albeit in a declining industry. 81) FALSE

Generally, in the growth stage an industry standard emerges, and process innovation rapidly becomes more important than product innovation. 82) C

Invention is the transformation of an idea into a new product or process. If an invention is useful, novel, and nonobvious, it can be patented. 83) A

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In the given scenario, Monopar Therapeutics’ drug is protected by a patent. A patent, which is a form of intellectual property, gives the inventor exclusive rights to benefit from commercializing a technology for a specified time period in exchange for public disclosure of the underlying idea. 84) Short Answer

A firm’s value chain captures the internal activities a firm engages in, beginning with the acquisition of raw materials and ending with retailing and after-sales service and support. This traditional system of horizontal business organization has been described as a pipeline because it captures a linear transformation with producers at one end and consumers at the other. Platforms are business model innovations that use technology (such as the internet, cloud computing, and artificial intelligence) to connect organizations, resources, information, and people in an interactive ecosystem where value-generating transactions can be created and exchanged. From a value chain perspective, producers create or make a product or service that consumers use. The owner of the platform controls the platform IP address and controls who may participate and in what ways. The providers offer the interfaces for the platform, enabling its accessibility online. 85) Short Answer

Although the industry life cycle is a useful framework to guide strategic choice, industries do not necessarily evolve through these stages. Moreover, innovations can emerge at any stage of the industry life cycle, which in turn can initiate a new cycle. Industries can also be rejuvenated, often in the declining stage. In addition, although the industry life cycle is a practical tool, it does not explain everything about changes in industries. Some industries may never go through the entire life cycle, while others are continually renewed through innovation. Other external factors, such as fads in fashion, changes in demographics, or deregulation, can affect the dynamics of industry life cycles at any stage. 86) B

Innovators like Monopar Therapeutics at McKesson, innovating within existing firms, are referred to as intrapreneurs. 88) D

Jimmy is part of the late majority customer segment. The late majority prefers to buy from wellestablished firms with a strong brand image rather than from unknown new ventures. 89) B

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Mateo has modified his firm’s strategic objective in response to which stage of the industry life cycle his firm is competing in. 90) D

What helped Netflix gain a competitive advantage was the application of big data analytics to its user preferences to not only predict future demand but also to provide highly personalized viewing recommendations. 91) D

As the size of a market expands, a standard signals the market’s agreement on a common set of engineering features and design choices. Standards can emerge from the bottom up through competition in the marketplace or be imposed top down by government or other standard-setting agencies. 92) Short Answer

As the industry moves into the shakeout stage of the industry life cycle, the rate of growth declines. Rather than trying to capture a share of an increasing pie, firms begin to compete directly against one another for market share. As competitive intensity increases, the weaker firms are forced out of the industry. This is the reason why this phase of the industry life cycle is called the shakeout stage: Only the strongest competitors survive increasing rivalry as firms begin to cut prices and offer more services, all in an attempt to capture more of a market that grows slowly, if at all. The winners in this increasingly competitive environment are generally firms that stake out a strong position as cost leaders. 93) D

During the fourth stage of the industry life cycle, the industry structure morphs into an oligopoly with only a few large firms. 94) A

Although the industry life cycle is a useful tool, it does not explain everything about changes in industries. Some industries may never go through the entire life cycle, while others are continually renewed through innovation. 95) A

The customers entering the market in the growth stage are early adopters. They make up roughly 13.5 percent of the total market potential. 96) D

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This example describes architectural innovation. Firms can innovate by leveraging existing technologies into new markets. Doing so generally requires them to reconfigure the components of a technology, meaning they alter the overall architecture of the product. An architectural innovation, therefore, is a new product in which known components, based on existing technologies, are reconfigured in a novel way to create new markets. 97) B

In the scenario, InMode Ltd. has adopted the consolidation strategy. Although market size shrinks in a declining industry, some firms may choose to consolidate the industry by buying rivals. These purchases allow the consolidating firm to stake out a strong position—possibly approaching monopolistic market power, albeit in a declining industry. 98) B

The key objective for firms during the growth phase is to stake out a strong strategic position not easily imitated by rivals. 99) A

The innovation process begins with an idea. The idea is often presented in terms of abstract concepts or as findings derived from basic research. 100)

D Farrah represents the early majority section of the market. The customers coming into the market in the shakeout stage belong to the early majority group. Early majority customers rely on endorsements by others. They seek out reputable references such as reviews in prominent trade journals or in magazines. Because the early majority makes up roughly one-third of the entire market potential, winning them over is critical to the commercial success of the innovation. 101)

D A disruptive innovation leverages new technologies to attack existing markets. It invades an existing market from the bottom up. 102)

A This scenario best illustrates architectural innovation. Firms can innovate by leveraging existing technologies into new markets. An architectural innovation is a new product in which known components, based on existing technologies, are reconfigured in a novel way to create new markets. 103)

B In this scenario, BioNTech SE enjoys first-mover advantages. First-mover advantages are competitive benefits that accrue to the successful innovator.

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104)

Short Answer The first stage of the industry life cycle is the introduction stage. The emphasis is on unique products and new features that often come with higher prices. The products may still have some imperfections, which technology enthusiasts enjoy tinkering with to discover and help resolve. The performance is often quickly improved, and early adopters end up buying newer versions of the product to “stay in the lead,” particularly on technology. 105)

B A platform is a business that enables value-creating interactions between external producers and consumers. The platform’s overarching purpose is to consummate matches among users and facilitate the exchange of goods, services, or social currency, thereby enabling value creation for all participants. The platform provides an infrastructure for these interactions and sets governance conditions for them. Samantha’s test kitchen is a platform which facilitates exchanges between producers (local growers) and consumers (local chefs) and creates value for both parties by giving them a central location to interact. 106)

Short Answer Based on empirical observations, Geoffrey Moore’s core argument is that each stage of the industry life cycle is dominated by a different customer group. That is, different customer groups with distinctly different preferences enter the industry at each stage of the industry life cycle. Each customer group responds differently to technological innovation. These differences result from the psychological, demographic, and social attributes observed in each unique customer segment. According to Moore, the significant differences between the early customer groups— who enter during the introductory stage of the industry life cycle—and the later customers—who enter during the growth stage—can make for a difficult transition between the different parts of the industry life cycle. Such differences between customer groups lead to a big gulf, or chasm, into which companies and their innovations frequently fall. Only companies that recognize these differences and apply the appropriate competencies at each stage of the industry life cycle will have a chance to transition successfully from stage to stage. 107)

Short Answer Entrepreneurship is the process by which change agents (entrepreneurs) undertake economic risk to innovate—that is, to create new products, processes, and sometimes new organizations. If successful, entrepreneurship not only drives the competitive process but also creates value for the individual entrepreneurs and society at large. An example of a successful entrepreneur is Dr. Dre. He first become successful as a rapper and music and movie producer before starting the headphone company Beats Electronics. He eventually sold the company to Apple for $3 billion. 108)

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A factor favoring the success of disruptive innovation is that incumbent firms often are slow to change. Incumbent firms tend to listen closely to their current customers and respond by continuing to invest in the existing technology and in incremental changes to the existing products. 109)

B Social entrepreneurs evaluate the performance of their ventures not only by financial metrics but also by ecological and social contribution. Therefore, the committee that approved the new formula for an all-purpose cleaner because it cleaned as well as other cleaners and used organic ingredients is practicing social entrepreneurship. 110)

B During the decline stage of an industry life cycle, product and process innovation efforts end. 111)

B At the end of a life cycle, innovation efforts along both product and process dimensions cease, while the level of incremental product innovation reaches its minimum. 112)

A The customer segment associated with the maturity stage of the industry life cycle is known as the late majority. Although members of the early majority are confident in their ability to master the new technology, the late majority is not. They prefer to wait until standards have emerged and are firmly entrenched, so as to ensure a reduction in uncertainty. The late majority also prefers to buy from well-established firms with a strong brand image rather than from unknown new ventures. By emphasizing the ease of use associated with Afya Limited smartwatches, the company may attract late majority customers who are uncertain of their ability to use the new technology. 113)

FALSE The fundamental question of strategic entrepreneurship is how to combine entrepreneurial actions, create new opportunities, or exploit existing opportunities with strategic actions taken in the pursuit of competitive advantage. This can take place within new ventures such as Tesla or within established firms such as Apple. Apple’s continued innovation in mobile devices and user experience is an example of strategic entrepreneurship. 114)

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The ability of a platform to evince and manage positive network effects is critical to producing value for each participant. Achieving positive returns to scale allows a firm to gain and sustain a competitive advantage. In contrast, negative network effects occur when more and more users exit a platform and the value that each remaining user receives from the platform declines. Because Rite Pics relies on having a high number of users to create value for its customers, it stands to suffer the most from negative network effects if users abandon the platform. 115)

C An incremental innovation squarely builds on an established knowledge base and steadily improves an existing product or service offering. It targets existing markets using existing technology. 116)

D The innovation process begins with an idea, followed by an invention, then innovation, and finally imitation. BellRing Brands’ product has already moved through the first three stages of the innovation process and is entering the fourth and final stage. The company’s managers should prepare for increased competition from competitors offering imitation products. 117)

Short Answer When an entrepreneur or a company is able to transform an invention into an innovation, a new industry may emerge. In this introductory stage, the innovator’s core competency is R&D, which is necessary to creating a new product category that will attract customers. Creating a new product category is often a capital-intensive process in which the innovator is investing in designing a unique product, trying new ideas to attract customers, and producing small quantities. All of these contribute to a high cost for the innovator and typically result in a high price to the consumer when the product is launched. The initial market size is small, and growth is slow. In the introductory stage, barriers to entry tend to be high, and typically only a few firms are active in the market. In their competitive struggle for market share, they emphasize unique product features and performance rather than price. 118)

D In the context of this scenario, Danna can be best described as an entrepreneur. Entrepreneurs are the agents who introduce change into the competitive system. They do this not only by figuring out how to use inventions but also by introducing new products or services, new production processes, and new forms of organization. Entrepreneurs can introduce change by starting new ventures. 119)

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Dynatrace Holdings is employing the harvest strategy in the given scenario. In pursuing a harvest strategy, the firm reduces investments in product support and allocates only a minimum of human and other resources. 120)

TRUE In the introductory stage, the level of product innovation is at a maximum because new features increasing perceived consumer value are critical to gaining traction in the market. In contrast, process innovation is at a minimum in the introductory stage because companies produce only a small number of products, often just prototypes or beta versions. During the growth stage, process innovation ramps up (at increasing marginal returns) as firms attempt to keep up with rapidly rising demand. Finally, during the shakeout stage of the industry life cycle, the importance of process innovation further increases while the importance of product innovation further declines.

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Student name:__________ 1) What must executives decide when formulating a corporate strategy?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-01 Define corporate strategy and describe the three dimensions along which it Topic : Corporate Strategy Source : Chapter 08 Test Bank > SA Qu. 106 What must executives decide when formulating...

2) Corporate strategy is focused solely on determining the geographic locations in which the

firm should compete. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-01 Define corporate strategy and describe the three dimensions along which it Topic : Corporate Strategy Source : Chapter 08 Test Bank > TF Qu. 01 Corporate strategy is focused solely on dete...

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3) Spain-based Coche Azul, a high-end automaker, has recently started selling its cars through

company-owned outlets in major cities in Eastern Europe. Which of the following types of diversification strategies is Coche Azul pursuing? A) process diversification strategy B) product-market diversification strategy C) product diversification strategy D) geographic diversification strategy Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-07 Describe and evaluate different types of corporate diversification. Topic : Corporate Diversification, Types of Corporate Diversification, and Understanding How It Can E Source : Chapter 08 Test Bank > MC Qu. 72 Spain-based Coche Azul, a high-end...

4) Why are generic industry value chains called vertical value chains?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 2 Medium Learning Objective : 08-02 Explain why firms need to grow, and evaluate different growth motives. Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration Source : Chapter 08 Test Bank > SA Qu. 108 Why are generic industry value chains called...

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5) Massive Dynamic Computers sources the components for its laptops from various suppliers

on the market. The firm pays $100 for processors, $35 for disk drives, $50 for screens, $10 for memory, and $40 for graphics and wireless internet cards. Massive Dynamic has determined that it would cost $200 per unit to produce all of the necessary components in its in-house manufacturing facility. In this scenario, Massive Dynamic should A) exit the laptop industry. B) vertically integrate. C) continue to outsource production. D) diversify its activities. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration Source : Chapter 08 Test Bank > MC Qu. 48 Massive Dynamic Computers sources the compon...

6) Danke is a diversified firm that creates more value than the cost that it incurs. As a result, it

is experiencing a diversification premium in its stock price. Danke is able to accomplish all of the following except A) provide economies of scale, which reduces Danke’s costs. B) increase its costs but maintain its current stock price. C) reduce Danke’s costs and increase value. D) exploit economies of scope, which increases Danke’s value. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an Topic : Corporate Diversification and Firm Performance Source : Chapter 08 Test Bank > MC Qu. 26 Danke is a diversified firm that creates more...

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7) Which of the following is a drawback of vertical integration? A) It increases the potential of legal repercussions. B) It impedes scheduling and planning. C) It impedes investments in special assets. D) It increases the difficulty of securing critical supplies. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 08-05 Identify and evaluate the benefits and risks of vertical integration. Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration Source : Chapter 08 Test Bank > MC Qu. 64 Which of the following is a drawback of vert...

8) ________, which are incurred when pursuing a related-diversification strategy, are a function

of the number, size, and types of businesses that are linked to one another. A) Coordination costs B) Fixed costs C) Agency costs D) Network costs Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an Topic : Related Diversification vs. Unrelated Diversification Source : Chapter 08 Test Bank > MC Qu. 103 ________, which are incurred when pursuing a re...

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9) Discuss the benefits of taper integration.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-06 Describe and examine alternatives to vertical integration. Topic : Vertical Integration along the Industry Value Chain Source : Chapter 08 Test Bank > SA Qu. 114 Discuss the benefits of taper integration.

10) Describe the two types of vertical integration along the industry value chain.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 08-04 Describe the two types of vertical integration along the industry value ch Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration Source : Chapter 08 Test Bank > SA Qu. 112 Describe the two types of vertical integrati...

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11) Coca-Cola was primarily known for its core competencies in marketing, bottling, and

distributing aerated drinks. However, with the success of Gatorade, Coca-Cola developed competencies in the development and marketing of its own sports drink, Powerade. Which of the following is true of Coca-Cola? A) It is redeploying and recombining existing core competencies to compete in markets of the future. B) It is building new core competencies to protect and extend its current market position. C) It is leveraging existing core competencies to improve current market position. D) It is targeting the chasm between the early adopter and early majority market segment. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-08 Apply the core competence&#8211;market matrix to derive different diversif Topic : Corporate Diversification and Competitive Advantage Source : Chapter 08 Test Bank > MC Qu. 87 Coca-Cola was primarily known for its core c...

12) Why is following an unrelated diversification strategy especially advantageous in an

emerging economy? A) It allows the conglomerate to take advantage of strong capital markets in emerging economies. B) It allows the conglomerate to overcome institutional weaknesses in emerging economies. C) It allows the conglomerate to use well-defined legal systems in emerging economies. D) It allows the conglomerate to form a monopoly in emerging economies. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-07 Describe and evaluate different types of corporate diversification. Topic : Corporate Diversification and Competitive Advantage Source : Chapter 08 Test Bank > MC Qu. 83 Why is following an unrelated diversificatio...

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13) Tree Corporation recently acquired a smaller competitor, Branch and Associates, which

specializes in issues not previously covered by Tree Corporation, such as intellectual property cases. Given the increase in the firm’s size and complexity, it is likely that its internal transaction costs will A) increase. B) be eliminated. C) decrease. D) transition to external transaction costs. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom Topic : Corporate Strategy Source : Chapter 08 Test Bank > MC Qu. 42 Tree Corporation recently acquired a...

14) Decisions relating to the question of what stages of the industry value chain to participate in

determine a firm’s A) vertical integration. B) geographic scope. C) competitive strategy. D) level of diversification. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 08-01 Define corporate strategy and describe the three dimensions along which it Topic : Corporate Strategy Source : Chapter 08 Test Bank > MC Qu. 32 Decisions relating to the question of...

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15) Billy is the founder and CEO of Billy’s Kicks, a soccer ball retailer. He decides to purchase a

synthetic rubber manufacturing firm so he can create his own soccer balls and sell them nationally in his retail stores. Billy will engage in A) differentiation. B) backward vertical integration. C) forward vertical integration. D) horizontal integration. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 08-04 Describe the two types of vertical integration along the industry value ch Topic : Types of Vertical Integration Source : Chapter 08 Test Bank > MC Qu. 15 Billy is the founder and CEO of Billy&#8217;s...

16) Nguyen Autos currently sources components such as airbags, upholstery, and brake pads

from various suppliers in the industry value chain. In order to lower costs and reduce the risk of interruptions in the supply of components, Nguyen should pursue A) backward integration. B) forward integration. C) geographic diversification. D) product diversification. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 08-05 Identify and evaluate the benefits and risks of vertical integration. Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration Source : Chapter 08 Test Bank > MC Qu. 61 Nguyen Autos currently sources components s...

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17) J-Texon Manufacturing is a large conglomerate that operates only in its home country. The

company competes in industries like the consumer electronics, health care, hotel, airlines, education, and steel industries. Which of the following diversification strategies does this best illustrate? A) product diversification B) process diversification C) geographic diversification D) market diversification Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-07 Describe and evaluate different types of corporate diversification. Topic : Corporate Diversification, Types of Corporate Diversification, and Understanding How It Can E Source : Chapter 08 Test Bank > MC Qu. 71 J-Texon Manufacturing is a large conglomerat...

18) The core competency of Newex Motors is the fuel-efficient engine found in its cars. These

engines are developed and built in-house. The company realizes that the growing demand for “green” vehicles has created a new market opportunity. Thus, it uses its existing technology to develop an engine that improves the fuel efficiency of recreational motorhomes. In this scenario, Newex Motors is A) redeploying and recombining existing core competencies to compete in future markets. B) building new core competencies to protect and extend current market position. C) leveraging existing core competencies to target the chasm between the early adopter and early majority market segment. D) building new core competencies to create and compete in future markets. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 08-08 Apply the core competence&#8211;market matrix to derive different diversif Topic : Corporate Diversification and Competitive Advantage Source : Chapter 08 Test Bank > MC Qu. 85 The core competency of Newex Motors is...

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19) Which of the following best illustrates physical-asset specificity? A) a ship container designed to carry more than the average load of iron ore B) a generic machine that can be used to churn different mixtures C) a machine solely designed to give a candy its trademarked shape D) a unique training program developed in an organization Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-05 Identify and evaluate the benefits and risks of vertical integration. Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration Source : Chapter 08 Test Bank > MC Qu. 62 Which of the following best illustrates phys...

20) Sanjay, owner of WashTubs, a washing machine company, is looking for an alternative to

vertical integration. He decides to manufacture some of his own machine parts while keeping a few key suppliers in his industry value chain. This is known as A) a balanced scorecard. B) strategic offshoring. C) taper integration. D) forward vertical integration. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-06 Describe and examine alternatives to vertical integration. Topic : Alternatives to Vertical Integration Source : Chapter 08 Test Bank > MC Qu. 17 Sanjay, owner of WashTubs, a washing...

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21) Isaac has been named CEO of a start-up online educational company. Isaac and other

strategic leaders of the company will be setting the firm’s corporate strategy. Out of the following decisions, which will Isaac and his associates most likely make first? A) which customer segments to target B) whether to pursue a differentiation or cost-leadership strategy C) what range of products to offer D) how to achieve the highest levels of customer satisfaction Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 08-01 Define corporate strategy and describe the three dimensions along which it Topic : Corporate Strategy Source : Chapter 08 Test Bank > MC Qu. 35 Isaac has been named CEO of a start...

22) Initech developed a superior touch screen technology for tablet computers that enabled

multiple users to operate the screen at the same time. The technology was leased to Accent Technologies, a consumer electronics company, for five years. Which of the following alternatives to integration does this best illustrate? A) crowdsourcing B) bootlegging C) licensing D) franchising Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom Topic : Alternatives to Vertical Integration Source : Chapter 08 Test Bank > MC Qu. 51 Initech developed a superior touch scre...

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23) Ganjaflex Industries is a major multinational conglomerate. Its business units compete in a

range of industries, including home appliances, pharmaceuticals, commercial real estate, and plastics manufacturing. Although its largest business unit, which produces kitchen appliances, is among the most profitable in the industry, it generates only 35 percent of the company’s revenues. Which of the following is most likely true of Ganjaflex’s stock price? A) It is consistently lower than the industry average. B) It is valued at less than the sum of its individual business units. C) It is valued at the exact sum of individual business units. D) It is valued at greater than the sum of individual business units. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an Topic : Corporate Diversification and Competitive Advantage Source : Chapter 08 Test Bank > MC Qu. 91 Ganjaflex Industries is a major multinationa...

24) A firm follows a related diversification strategy when it derives less than 25 percent of its

revenues from a single business activity and obtains revenues from other lines of business linked to the primary business activity. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-07 Describe and evaluate different types of corporate diversification. Topic : Corporate Diversification, Types of Corporate Diversification, and Understanding How It Can E Source : Chapter 08 Test Bank > TF Qu. 08 A firm follows a related diversification strategy...

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25) Managers in a firm hired to improve the firm’s profitability and ultimately the shareholders’

value will add to the overall costs if they pursue their own self-interests. What does this best illustrate? A) experience-curve effects B) diseconomies of scale C) information asymmetries D) principal-agent problem Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom Topic : Corporate Strategy Source : Chapter 08 Test Bank > MC Qu. 45 Managers in a firm hired to improve the firm...

26) Plexzap Products started as a luxury brand for designer apparel. Soon, the company

expanded by launching its own line of premium perfumes, watches, bags, and home furnishings. This expansion allowed the businesses under the company to share a few of the common competencies in products, services, technology, and distribution. Which of the following corporate strategies is Plexzap pursuing in this scenario? A) niche marketing strategy B) related-linked strategy C) related-constrained strategy D) taper integration strategy Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 08-07 Describe and evaluate different types of corporate diversification. Topic : Corporate Diversification, Types of Corporate Diversification, and Understanding How It Can E Source : Chapter 08 Test Bank > MC Qu. 77 Plexzap Products started as a luxury brand f...

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27) All businesses are motivated by a need to grow. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 08-02 Explain why firms need to grow, and evaluate different growth motives. Topic : Corporate Strategy Source : Chapter 08 Test Bank > TF Qu. 02 All businesses are motivated by a need...

28) There are many reasons why firms need to grow. Which of the following reasons is strongly

influenced by economies of scale? A) lowering costs B) reducing risk C) increasing profits D) motivating managers Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 08-02 Explain why firms need to grow, and evaluate different growth motives. Topic : Corporate Strategy Source : Chapter 08 Test Bank > MC Qu. 37 There are many reasons why firms need to gro...

29) A firm that pursues unrelated diversification is often unable to create additional value. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an Topic : Corporate Diversification and Firm Performance Source : Chapter 08 Test Bank > TF Qu. 12 A firm that pursues unrelated diversification...

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30) Which of the following is an example of an internal transaction cost? A) the cost of searching for a contract manufacturer B) the cost of buying raw materials C) the cost of maintaining a production unit D) the cost of signing a contract with a supplier Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom Topic : Corporate Strategy Source : Chapter 08 Test Bank > MC Qu. 41 Which of the following is an example of an i...

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

that A) the supplying firm has no incentive to make any transaction-specific investments to

increase performance or quality. B) the buying firm cannot demand lower prices due to the lack of a competitive bidding process. C) it is the most-integrated alternative to performing an activity so the principal company has no control over the agent. D) it fails to allow a long planning period that individual market transactions provide. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom Topic : Corporate Strategy Source : Chapter 08 Test Bank > MC Qu. 49 A drawback of short-term contracting as an a...

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32) Fast-food chain Taco Trio operates through a business model in which individuals can buy

the rights to set up Taco Trio restaurants and sell the company’s food in return for a lump sum fee at the beginning of the contract and a percentage of revenues every month. The owners of the individual restaurants have to offer a menu approved at Taco Trio headquarters, use the same interior color scheme and layout as the flagship restaurant, and maintain high-level customer service. Which of the following alternatives to integration does this best illustrate? A) bootstrapping B) franchising C) credit rationing D) crowdsourcing Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom Topic : Alternatives to Vertical Integration Source : Chapter 08 Test Bank > MC Qu. 52 Fast-food chain Taco Trio operates through...

33) Many financial service firms, IT firms, and health-care companies are among the most active

when it comes to________, which occurs when value chain activities are taken care of outside the home country of the firm. A) diversification B) strategic outsourcing C) procurement D) offshore outsourcing Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-06 Describe and examine alternatives to vertical integration. Topic : Alternatives to Vertical Integration Source : Chapter 08 Test Bank > MC Qu. 19 Many financial service firms, IT firms, and ...

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34) Sonron Corporation generates 85 percent of its annual revenues by manufacturing luxury

cars. The company derives 15 percent of its annual revenues by selling sports merchandise such as apparel, shoes, and other accessories under the same brand name. Which of the following terms best describes Sonron Corporation? A) a conglomerate B) a subsidiary C) a single-business firm D) a dominant-business firm Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-07 Describe and evaluate different types of corporate diversification. Topic : Corporate Diversification, Types of Corporate Diversification, and Understanding How It Can E Source : Chapter 08 Test Bank > MC Qu. 74 Sonron Corporation generates 85 percent...

35) Thirty years ago, Raleigh Outdoors created a lightweight, easy-to-erect tent that became a

runaway bestseller. Fifteen years later, the tent market reached the maturity stage and sales slowed down. However, by this time, Raleigh Outdoors had developed a strong brand name and continued to lead the market. In the context of the Boston Consulting Group (BCG) growth-share matrix, which of the following describes this scenario? A) Raleigh was a star that developed into a cash cow. B) Raleigh was a cash cow that developed into a star. C) Raleigh was a dog that developed into a question mark. D) Raleigh was a question mark that developed into a star. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an Topic : Tools for Analyzing Diversification Strategies Source : Chapter 08 Test Bank > MC Qu. 104 Thirty years ago, Raleigh Outdoors created...

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36) What are the advantages and disadvantages of organizing economic activity within firms?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom Topic : Corporate Strategy Source : Chapter 08 Test Bank > SA Qu. 110 What are the advantages and disadvantages of...

37) Anheuser-Busch InBev sold Busch Entertainment, its theme park unit that owns SeaWorld

and Busch Gardens, to a group of private investors. This strategic move allows InBev to focus more fully on its core business of brewing and distributing beer across the world. This is an example of A) the core competence–market matrix. B) a business level strategy. C) restructuring. D) corporate diversification. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an Topic : Corporate Diversification and Firm Performance Source : Chapter 08 Test Bank > MC Qu. 27 Anheuser-Busch InBev sold Busch Entertainmen...

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38) Churchill-Perez International is a large conglomerate that procures a few component parts

from external suppliers; it also owns subsidiaries that manufacture key raw materials. The firm does not solely depend on outside distributors to reach its customers. In fact, it has retail stores in the United States, Canada, and the United Kingdom that feature its products. In this scenario, which of the following alternatives to vertical integration is Churchill-Perez applying? A) taper integration B) horizontal integration C) concentric integration D) conglomerate integration Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-06 Describe and examine alternatives to vertical integration. Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration Source : Chapter 08 Test Bank > MC Qu. 68 Churchill-Perez International is a large...

39) Which of the following stakeholders of a company would most likely be responsible for

formulating a corporate strategy? A) first-line employees B) chief executive officer C) middle manager D) creditors Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 08-02 Explain why firms need to grow, and evaluate different growth motives. Topic : Corporate Strategy Source : Chapter 08 Test Bank > MC Qu. 34 Which of the following stakeholders of a com...

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40) Firms that use taper integration also use________ integration when they rely on outside-

market firms for some of their supplies. A) forward horizontal B) forward vertical C) backward vertical D) backward horizontal Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 08-06 Describe and examine alternatives to vertical integration. Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration Source : Chapter 08 Test Bank > MC Qu. 66 Firms that use taper integration also use ________...

41) Because Facebook receives almost all of its revenues from online advertising, we would

conclude that it would be characterized as a(n)________ firm, which has the lowest levels of corporate diversification. A) related diversification B) unrelated diversification C) dominate business D) single business Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-07 Describe and evaluate different types of corporate diversification. Topic : Types of Corporate Diversification Source : Chapter 08 Test Bank > MC Qu. 21 Because Facebook receives almost all of its ...

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42) Briefly discuss the application of the Boston Consulting Group (BCG) growth-share matrix.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an Topic : Tools for Analyzing Diversification Strategies Source : Chapter 08 Test Bank > SA Qu. 120 Briefly discuss the application of the Bosto...

43) ________ are best described as voluntary arrangements between firms that involve the

sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services to lead to competitive advantage. A) Strategic alliances B) Embargos C) Corporate acquisitions D) Cartel agreements Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom Topic : Strategic Alliances Source : Chapter 08 Test Bank > MC Qu. 50 ________ are best described as voluntary arrang...

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44) Discuss the underlying concepts that help executives make corporate strategic decisions.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 08-02 Explain why firms need to grow, and evaluate different growth motives. Topic : Corporate Strategy Source : Chapter 08 Test Bank > SA Qu. 109 Discuss the underlying concepts that help ex...

45) When examining the core competence–market matrix, the most challenging diversification

strategy occurs when firms attempt to combine________ with________. If done successfully, the firm could have the potential for “mega-opportunities” that may lead to competitive advantage. A) existing core competencies; new markets B) new core competencies; new markets C) new core competencies; existing markets D) existing core competencies; existing markets Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-08 Apply the core competence&#8211;market matrix to derive different diversif Topic : Types of Corporate Diversification Source : Chapter 08 Test Bank > MC Qu. 23 When examining the core competence&#8211;mar...

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46) Konmatfix Inc., a large consumer electronics company, has divided each product in its

portfolio into a separate strategic business unit (SBU). The desktop computer SBU has been experiencing drastic decline in its cash flow, and its market share has also reduced to an insignificant 10 percent. This has been attributed to low growth in the desktop market and the popularity of tablets and laptops. In the context of the Boston Consulting Group (BCG) growth-share matrix, the desktop computer SBU will be categorized under A) star. B) cash cow. C) question mark. D) dog. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an Topic : Tools for Analyzing Diversification Strategies Source : Chapter 08 Test Bank > MC Qu. 96 Konmatfix Inc., a large consumer electronics...

47) The Tata group of India, Warren Buffet’s Berkshire Hathaway, and the Japanese Yamaha

group have several strategic business units under one corporate umbrella and are pursuing an unrelated diversification strategy. We would refer to these businesses as A) conglomerates. B) vertically integrated. C) internal competitors. D) differentiators. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 08-07 Describe and evaluate different types of corporate diversification. Topic : Corporate Diversification and Competitive Advantage Source : Chapter 08 Test Bank > MC Qu. 82 The Tata group of India, Warren Buffet&#8217;s...

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48) Shapiro-Rennart is a large conglomerate. In the context of the Boston Consulting Group

(BCG) growth-share matrix, the company’s healthy-living strategic business unit (SBU) has been categorized as a “cash cow,” and its tobacco SBU has been categorized as a “dog.” Which of the following can be inferred from this scenario? A) The management of the company should use the cash inflow from the healthy-living SBU and invest it in the tobacco SBU. B) While the tobacco SBU operates in a low-growth market, the healthy-living SBU operates in a high-growth market. C) While the market share of the company in the healthy-living industry will be high, the market share in the tobacco industry will be low. D) The tobacco SBU should follow a backward integration strategy, and the healthyliving SBU should pursue a forward integration strategy. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an Topic : Tools for Analyzing Diversification Strategies Source : Chapter 08 Test Bank > MC Qu. 97 Shapiro-Rennart is a large conglomerate...

49) Firms that pursue extremely high or extremely low levels of diversification perform better

than those that pursue moderate levels of diversification. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an Topic : Corporate Diversification, Types of Corporate Diversification, and Understanding How It Can E Source : Chapter 08 Test Bank > TF Qu. 10 Firms that pursue extremely high or extremel...

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50) Haoyu plans to restructure the portfolio of all his firm’s strategic business units, similar to

how an investor might change a portfolio of stocks. To do this, Haoyu will more than likely employ which corporate planning tool? A) VRIO B) value chain analysis C) Boston Consulting Group (BCG) growth-share matrix D) diversification premium Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an Topic : Boston Consulting Group (BCG) Growth&#8211;Share Matrix Source : Chapter 08 Test Bank > MC Qu. 28 Haoyu plans to restructure the portfolio...

51) Discuss the application of the core competence–market matrix.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 1 Easy Learning Objective : 08-08 Apply the core competence&#8211;market matrix to derive different diversif Topic : Tools for Analyzing Diversification Strategies Source : Chapter 08 Test Bank > SA Qu. 119 Discuss the application of the core competen...

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52) Plexzap Sodas has been a market leader in the soft drink industry for several decades.

However, its market research shows that consumer tastes have begun to shift to sugar-free flavored seltzer waters, a product that Plexzap is capable of producing with minimal changes to its facilities and production processes. Based on your knowledge of the core competence– market matrix, which diversification strategy should Plexzap pursue? A) Build new core competencies to protect and extend current market position. B) Leverage existing core competencies to improve current market position. C) Build new core competencies to create and compete in markets of the future. D) Redeploy and recombine existing core competencies to compete in markets of the future. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 08-08 Apply the core competence&#8211;market matrix to derive different diversif Topic : Corporate Diversification and Competitive Advantage Source : Chapter 08 Test Bank > MC Qu. 84 Plexzap Sodas has been a market leader in th...

53) Which area of the core competence–market matrix is the most challenging diversification

strategy, and why?

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-08 Apply the core competence&#8211;market matrix to derive different diversif Topic : Core Competencies Source : Chapter 08 Test Bank > SA Qu. 122 Which area of the core competence&#8211;market...

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54) Doncon Guitars is interested in pursuing backward integration to take greater ownership of

the extraction of raw materials and production of components used in its signature line of guitars. Although this approach would lower the overall cost of producing a guitar, the costs associated with producing electronic pickups for sound amplification are far greater than those associated with sourcing pickups from a reliable supplier. Which of the following approaches is likely to produce superior results? A) Pursue taper integration. B) Introduce a budget line of guitars to diversify the firm’s offerings. C) Abandon the idea of vertical integration entirely. D) Invest in vertical integration despite the cost of producing pickups. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 08-06 Describe and examine alternatives to vertical integration. Topic : Alternatives to Vertical Integration Source : Chapter 08 Test Bank > MC Qu. 67 Doncon Guitars is interested in pursuing bac...

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55) Hatfan Inc. is a large automobile company. In the context of the Boston Consulting Group

(BCG) growth-share matrix, the company’s petrol cars strategic business unit (SBU) has been recognized as a “cash cow,” and its hybrid electric cars SBU has been categorized under “star.” Which of the following can be inferred from this scenario? A) The strategic recommendation for the hybrid electric cars SBU will be to harvest it, whereas for the petrol cars SBU, the company should just maintain it. B) The petrol cars SBU is more important than the hybrid electric cars SBU in terms of future growth for the company. C) The petrol cars SBU operates in a low-growth market, whereas the hybrid electric cars SBU operates in a high-growth market. D) The petrol cars SBU will have a relatively low market share in its industry, whereas the hybrid electric cars SBU will have the least market share in its industry. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an Topic : Tools for Analyzing Diversification Strategies Source : Chapter 08 Test Bank > MC Qu. 99 Hatfan Inc. is a large automobile company...

56) VineRipe Tomato makes organic ketchup. To promote its products, this firm decided to make

bottles in the shape of tomatoes. To accomplish this, VineRipe worked with its bottle manufacturer to create a set of unique molds for its bottles. Which of the following specialized assets does this example demonstrate? A) physical-asset specificity B) research specificity C) site specificity D) human-asset specificity Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-05 Identify and evaluate the benefits and risks of vertical integration. Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration Source : Chapter 08 Test Bank > MC Qu. 65 VineRipe Tomato makes organic ketchup. ...

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57) Condax Electronics relied on a large chain of consumer electronics stores to sell its tablet

computers, cell phones, and televisions and also to provide customer service and technical support. However, that retailer outsourced its service departments, and customers began to complain that they could not get reliable tech support for Condax products. In response, Condax Electronics set up its own tech support department, and it also began to investigate opening its own brand-based retail stores. What does this scenario best illustrate? A) crowdsourcing B) new product development C) forward vertical integration D) conglomerate diversification Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 08-04 Describe the two types of vertical integration along the industry value ch Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration Source : Chapter 08 Test Bank > MC Qu. 59 Condax Electronics relied on a large chain o...

58) Explain the two types of related diversification strategy with the help of examples.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 08-07 Describe and evaluate different types of corporate diversification. Topic : Related Diversification vs. Unrelated Diversification Source : Chapter 08 Test Bank > SA Qu. 117 Explain the two types of related diversifica...

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59) Singletechno Industries, a large U.S.-based conglomerate, competes in the hospitality,

education, telecommunications, entertainment, airlines, and chemical industries. It currently operates in about 30 nations, and is planning to expand its portfolio by investing in rapidly developing countries. Which of the following strategies is Singletechno Industries pursuing? A) niche marketing B) zone pricing C) process diversification strategy D) product-market diversification strategy Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-07 Describe and evaluate different types of corporate diversification. Topic : Corporate Diversification, Types of Corporate Diversification, and Understanding How It Can E Source : Chapter 08 Test Bank > MC Qu. 73 Singletechno Industries, a large U.S.-based...

60) When outsourced activities take place outside the home country, it is known as offshoring. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 08-06 Describe and examine alternatives to vertical integration. Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration Source : Chapter 08 Test Bank > TF Qu. 07 When outsourced activities take place...

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61) A firm stops purchasing components from suppliers and starts producing them in-house. This

is known as forward vertical integration. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 08-04 Describe the two types of vertical integration along the industry value ch Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration Source : Chapter 08 Test Bank > TF Qu. 06 A firm stops purchasing components...

62) Cumberland Computers will be buying processing chips needed for its laptops and tablets

from external suppliers instead of manufacturing them in its own facilities. How will this decision affect the firm? A) The firm’s administrative costs will be low because of necessary bureaucracy. B) The firm will have more flexibility in purchasing and comparing prices of goods and services. C) The firm will be protected against the principal-agent problem. D) The firm will have high-powered incentives, such as hourly wages and salaries. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom Topic : Corporate Strategy Source : Chapter 08 Test Bank > MC Qu. 44 Cumberland Computers will be buying...

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63) What options do strategic leaders have to formulate corporate strategy once they have a clear

understanding of their firm’s core competencies?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-08 Apply the core competence&#8211;market matrix to derive different diversif Topic : Corporate Diversification and Competitive Advantage Source : Chapter 08 Test Bank > SA Qu. 118 What options do strategic leaders have to formulate c...

64) What is the name of the situation that can arise when strategic leaders pursue their own

interests in conflict with the firm’s goals? A) opportunism B) enforcement of contracts C) risk assessment D) principal-agent problem Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom Topic : Corporate Strategy Source : Chapter 08 Test Bank > MC Qu. 38 What is the name of the situation that...

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65) The managers at Acme Corporation decided that their firm needed to diversify because of

overall falling sales and lower performance in one sector. How does diversifying compensate for the declining performance in this sector? A) by motivating managers B) by having higher performance in another sector C) by increasing the firm’s risk in another sector D) by sharing their market power Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-02 Explain why firms need to grow, and evaluate different growth motives. Topic : Corporate Strategy Source : Chapter 08 Test Bank > MC Qu. 36 The managers at Acme Corporation decided tha...

66) In 2007, Salesforce.com recognized an emerging market for platform as a service (PaaS)

offerings and developed a new competency in delivering software development and deployment tools. This allowed its customers to either extend their existing customer relationship management (CRM) offering or build completely new types of software. This is an example of A) redeploying and recombining existing core competencies to compete in markets of the future. B) building new core competencies to create and compete in markets of the future. C) building new core competencies to achieve vertical integration. D) leveraging existing core competencies to improve current market position. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-08 Apply the core competence&#8211;market matrix to derive different diversif Topic : Corporate Diversification and Competitive Advantage Source : Chapter 08 Test Bank > MC Qu. 88 In 2007, Salesforce.com recognized an emergi...

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67) HydraOne is a large multinational conglomerate. As a single business unit, the company’s

stock price is estimated to be $250. However, by adding the actual market stock prices of each of its individual business units, the stock price of the company as one unit would be $350. In this scenario, what is HydraOne experiencing? A) learning-curve effects B) economies of scale C) diversification discount D) experience curve effects Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an Topic : Corporate Diversification and Competitive Advantage Source : Chapter 08 Test Bank > MC Qu. 90 HydraOne is a large multinational conglomerate...

68) Silis Autos is known for its affordable and reliable brand of consumer vehicles. Because its

shareholders expect to see an improved rate of growth in the coming years, Silis’s executives have decided to diversify the company’s range of products so that at least 40 percent of the firm’s revenue is generated by new business units. However, the company’s resources, capabilities, and competencies are limited to producing other forms of motorized vehicles, such as motorcycles and all-terrain vehicles (ATVs). Which type of corporate diversification strategy should Silis pursue? A) related-constrained B) related-linked C) unrelated D) dominant business Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 08-07 Describe and evaluate different types of corporate diversification. Topic : Corporate Diversification, Types of Corporate Diversification, and Understanding How It Can E Source : Chapter 08 Test Bank > MC Qu. 76 Silis Autos is known for its affordable and ...

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69) Discuss the various general diversification strategies available to a firm.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 08-06 Describe and examine alternatives to vertical integration. Topic : Define Corporate Diversification, Evaluate the Types of Corporate Diversification, and Unders Source : Chapter 08 Test Bank > SA Qu. 115 Discuss the various general diversification ...

70) Firms are more capable than markets at coordinating highly complex tasks, while markets are

more capable of providing high-powered incentives for entrepreneurship. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom Topic : Corporate Strategy Source : Chapter 08 Test Bank > TF Qu. 04 Firms are more capable than markets at coord...

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71) ________ is best described as a situation in which one party possesses private information

and is therefore better informed than another party. A) Information piracy B) Information deregulation C) Information asymmetry D) Information governance Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom Topic : Corporate Strategy Source : Chapter 08 Test Bank > MC Qu. 46 ________ is best described as a situation in wh...

72) Salesforce is one of the leading providers of platform as a service (PaaS) tools and services.

It developed a new competency in delivering software development that allows its customers to better customize their future needs. Viewing this through the lens of the core competence– market matrix, which of the following four options below does Salesforce best exemplify? A) Salesforce leveraged existing core competencies to improve its current market position. B) Salesforce built new core competencies to create and compete in markets of the future. C) Salesforce redeployed and recombined existing core competencies to compete in markets of the future. D) Salesforce built new core competencies to protect and extend its current market position. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 08-08 Apply the core competence&#8211;market matrix to derive different diversif Topic : Core Competencies Source : Chapter 08 Test Bank > MC Qu. 24 Salesforce is one of the leading providers...

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73) Managers have exactly two choices when determining the boundaries of the firm: produce

goods and services in-house (“make”) or purchase them externally (“buy”). ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom Topic : Strategic Alliances Source : Chapter 08 Test Bank > TF Qu. 05 Managers have exactly two choices when deter...

74) Funholding is a large multinational company active in the petroleum, capital market,

chemicals, steel, beverages, hospitality, airlines, automobiles, and consumer electronics industries. The company has multiple brands and a large product portfolio under its banner. Which of the following terms would best describe this company? A) a conglomerate B) a single-business firm C) a dominant-business firm D) a flagship brand Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-07 Describe and evaluate different types of corporate diversification. Topic : Corporate Diversification, Types of Corporate Diversification, and Understanding How It Can E Source : Chapter 08 Test Bank > MC Qu. 80 Funholding is a large multinational com...

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75) How are information asymmetries created? What are the implications?

76) A company that engages in strategic outsourcing reduces its level of A) vertical market failure. B) vertical integration. C) taper integration. D) credible commitment. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-06 Describe and examine alternatives to vertical integration. Topic : Alternatives to Vertical Integration Source : Chapter 08 Test Bank > MC Qu. 18 A company that engages in strategic...

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77) ________ are best described as costs that occur due to political maneuvering by managers to

control capital and resource allocation and the resulting inefficiencies stemming from suboptimal allocation of scarce resources. A) Influence costs B) Fixed costs C) Opportunity costs D) Coordination costs Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an Topic : Related Diversification vs. Unrelated Diversification Source : Chapter 08 Test Bank > MC Qu. 102 ________ are best described as costs that occur...

78) BookWizard, a large online and offline book-selling company, decides to enter the college

textbook market. Its goal is to create cobranded. university-specific websites that offer textbooks; clothing and accessories such as logo T-shirts and sweaters, baseball hats, and mugs; and a full range of peripheral items like notebooks, pens, art supplies, and the like. This scenario shows BookWizard’s pursuit of A) vertical integration. B) horizontal integration. C) geographic diversification. D) product diversification. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-01 Define corporate strategy and describe the three dimensions along which it Topic : Corporate Strategy Source : Chapter 08 Test Bank > MC Qu. 31 BookWizard, a large online and offline...

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79) The Boston Consulting Group (BCG) growth-share matrix locates a firm’s individual

strategic business units (SBUs) in which two dimensions? A) start-up capital required and stage of industry life cycle B) amount of debt financing and equity financing C) relative market share and speed of market growth D) economic value created and costs incurred Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an Topic : Tools for Analyzing Diversification Strategies Source : Chapter 08 Test Bank > MC Qu. 94 The Boston Consulting Group (BCG) growth...

80) Soylent Corporation is a major nutritional supplement chain. Its managers are motivated to

grow the firm in order to increase their market power and change the industry structure in their favor. Which of the following strategies is most associated with their motive for growth? A) employing celebrity spokespeople B) increasing executive salaries C) implementing automated soy-making machinery D) purchasing competitors Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 08-02 Explain why firms need to grow, and evaluate different growth motives. Topic : Corporate Strategy Source : Chapter 08 Test Bank > MC Qu. 39 Soylent Corporation is a major nutritional s...

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81) How is an equity alliance different from a joint venture? A) An equity alliance involves taking ownership in a partner; a joint venture involves

taking ownership by buying stock. B) An equity alliance involves partners contributing equity to a joint venture; a joint venture involves two or more entities owning a firm. C) An equity alliance involves taking ownership in a partner; a joint venture involves two or more entities owning a firm. D) An equity alliance involves ownership that facilitates transaction-specific ventures; a joint venture involves taking ownership by buying stock. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom Topic : Strategic Alliances Source : Chapter 08 Test Bank > MC Qu. 55 How is an equity alliance different from a j...

82) A firm follows a(n)________ when less than 70 percent of its revenues come from a single

business and there are few, if any, linkages among its businesses. A) unrelated diversification strategy B) dominant-business strategy C) related-constrained strategy D) differentiation strategy Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 08-07 Describe and evaluate different types of corporate diversification. Topic : Corporate Diversification, Types of Corporate Diversification, and Understanding How It Can E Source : Chapter 08 Test Bank > MC Qu. 79 A firm follows a(n) ________ when less than...

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83) Which of the following best illustrates site specificity? A) investment made to train employees to operate computers B) bottling machinery to manufacture bottles with trademarked shapes C) investment made in human capital to master procedures of a specific organization D) equipment necessary for mining bauxite and aluminum smelting Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-05 Identify and evaluate the benefits and risks of vertical integration. Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration Source : Chapter 08 Test Bank > MC Qu. 63 Which of the following best illustrates site...

84) Each stage of the vertical value chain typically represents a distinct________ in which a

number of different firms are competing. A) economy B) industry C) customer segment D) functional department Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 08-04 Describe the two types of vertical integration along the industry value ch Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration Source : Chapter 08 Test Bank > MC Qu. 58 Each stage of the vertical value chain typic...

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85) What is a conglomerate? How does it benefit from a diversification strategy?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-07 Describe and evaluate different types of corporate diversification. Topic : Corporate Diversification and Competitive Advantage Source : Chapter 08 Test Bank > SA Qu. 116 What is a conglomerate? How does it benefit ...

86) Finjob is following a related-linked diversification strategy, and Rangreen is following a

related-constrained diversification strategy. How do the two firms differ from each other? A) Rangreen Inc. generates 70 percent of its revenues from its primary business, while Finjob generates only 10 percent of its revenues from its primary business. B) Finjob pursues a differentiation strategy, and Rangreen pursues a cost-leadership strategy, to gain a competitive advantage. C) Finjob will share fewer common competencies and resources between its various businesses when compared with Rangreen D) Rangreen pursues a backward diversification strategy, while Finjob pursues a forward diversification strategy. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 2 Medium Learning Objective : 08-07 Describe and evaluate different types of corporate diversification. Topic : Corporate Diversification, Types of Corporate Diversification, and Understanding How It Can E Source : Chapter 08 Test Bank > MC Qu. 78 Finjob is following a related-linked di...

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87) The most challenging diversification strategy is likely to be one that combines new core

competencies with new and emerging markets. ⊚ true ⊚ false Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 1 Easy Learning Objective : 08-08 Apply the core competence&#8211;market matrix to derive different diversif Topic : Corporate Diversification, Types of Corporate Diversification, and Understanding How It Can E Source : Chapter 08 Test Bank > TF Qu. 09 The most challenging diversification strateg...

88) Real estate agent Jensen sold first-time homebuyer Mitch a house. On the surface, the house

appeared to be in good shape, but it turns out it has hidden structural issues that will cost a lot to fix. Mitch is angry that Jensen withheld this key information. Which of the following does this scenario best illustrate? A) experience-curve effect B) principal-agent problem C) learning-curve effect D) information asymmetry Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom Topic : Corporate Strategy Source : Chapter 08 Test Bank > MC Qu. 47 Real estate agent Jensen sold first-time...

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89) To gain and sustain competitive advantage, any corporate strategy must extend far beyond a

firm’s business strategy. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-01 Define corporate strategy and describe the three dimensions along which it Topic : What Is Corporate Strategy? Source : Chapter 08 Test Bank > TF Qu. 11 To gain and sustain competitive advantage...

90) What is one key risk of vertical integration?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-05 Identify and evaluate the benefits and risks of vertical integration. Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration Source : Chapter 08 Test Bank > SA Qu. 113 What is one key risk of vertical integration?

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91) Hector, owner of Hector’s Trucking, wants to figure out if his business should diversify its

range of services to gain an advantage over competitors. Business consultants have advised Hector to focus on the key question of where to compete. He would therefore be considering which of the following? A) his transaction costs strategy B) his functional strategy C) his external transaction costs strategy D) his corporate strategy Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-04 Describe the two types of vertical integration along the industry value ch Topic : Types of Vertical Integration Source : Chapter 08 Test Bank > MC Qu. 14 Hector, owner of Hector&#8217;s Trucking, wants...

92) Projecta is a publicly traded company and a highly diversified firm. But Projecta’s most

recent stock price is valued less than the sum of all its individual business units. Projecta is most likely experiencing a A) diversification premium. B) shareholder rights plan. C) diversification discount. D) two for one split. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an Topic : Types of Corporate Diversification Source : Chapter 08 Test Bank > MC Qu. 25 Projecta is a publicly traded company and...

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93) The smartphone division of the large consumer electronics company Streethex has a

significant market share in the always-growing cell phone market. If the company invests further into this division, it will be able to reap increased cash flows. In the context of the Boston Consulting Group (BCG) growth-share matrix, the smartphone division of Streethex will be categorized under A) star. B) cash cow. C) dog. D) question mark. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an Topic : Tools for Analyzing Diversification Strategies Source : Chapter 08 Test Bank > MC Qu. 98 The smartphone division of the large consume...

94) When executives of a firm consider business opportunities only where they can leverage their

existing competencies and resources, we can conclude that the firm is using A) strategic outsourcing. B) related-constrained diversification. C) related-linked diversification. D) offshore outsourcing. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 08-07 Describe and evaluate different types of corporate diversification. Topic : Corporate Diversification, Types of Corporate Diversification, and Understanding How It Can E Source : Chapter 08 Test Bank > MC Qu. 75 When executives of a firm consider business ...

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95) Decisions relating to the range of products and services a firm will offer determine the firm’s A) geographic scope. B) vertical integration. C) level of diversification. D) absorptive capacity. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 08-01 Define corporate strategy and describe the three dimensions along which it Topic : Corporate Strategy Source : Chapter 08 Test Bank > MC Qu. 33 Decisions relating to the range of products ...

96) Which of the following is an example of an external transaction cost? A) the cost of recruiting and retaining employees B) the cost of maintaining plant and machinery C) the cost of setting up a production unit D) the cost of searching for a contract manufacturer Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom Topic : Corporate Strategy Source : Chapter 08 Test Bank > MC Qu. 40 Which of the following is an example of an e...

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97) A primary advantage of organizing economic activity within firms is the A) eradication of the principal-agent problem. B) ability to coordinate highly complex tasks to allow for specialized division of labor. C) low administrative costs because of reduced bureaucracy. D) high-powered incentive to work as salaried employees for an existing firm. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom Topic : Corporate Strategy Source : Chapter 08 Test Bank > MC Qu. 43 A primary advantage of organizing economic a...

98) Rashad is the strategic business unit (SBU) CEO in charge of manufacturing stereo speakers

for computers and laptops. His SBU earnings and cash flow are both low and unstable. Which of the following strategies should Rashad enact if examining his SBU through the Boston Consulting Group (BCG) growth-share matrix lens? A) hold B) invest for growth C) allocate more resources for manufacturing D) harvest and/or divest Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an Topic : Boston Consulting Group (BCG) Growth&#8211;Share Matrix Source : Chapter 08 Test Bank > MC Qu. 30 Rashad is the strategic business unit...

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99) Blackzim entered the low-priced digital watch market several years ago. This firm’s earnings

have been unsteady but might be growing. In the context of the Boston Consulting Group (BCG) growth-share matrix, Blackzim is a A) question mark. B) star. C) dog. D) cash cow. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an Topic : Tools for Analyzing Diversification Strategies Source : Chapter 08 Test Bank > MC Qu. 105 Blackzim entered the low-priced digital...

100)

A strategy of________ will be most beneficial for a firm to enhance its overall corporate performance. A) related-linked diversification B) unrelated level of diversification C) dominant-business level of diversification D) single-business level of diversification

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an Topic : Related Diversification vs. Unrelated Diversification Source : Chapter 08 Test Bank > MC Qu. 101 A strategy of ________ will be most beneficial ...

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101)

Jermaine’s Choppers sells Chandler Dogies, a special type of motorcycle. The business generates roughly 80 percent of its revenues from selling these motorcycles and about 20 percent on motorcycle repair and service. Jermaine’s Choppers would be classified as a________ firm. A) single business B) related diversification C) unrelated diversification D) dominant business

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-07 Describe and evaluate different types of corporate diversification. Topic : Types of Corporate Diversification Source : Chapter 08 Test Bank > MC Qu. 22 Jermaine&#8217;s Choppers sells Chandler Dogies...

102)

Describe the major differences between taper integration and strategic outsourcing.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-06 Describe and examine alternatives to vertical integration. Topic : Alternatives to Vertical Integration Source : Chapter 08 Test Bank > SA Qu. 121 Describe the major differences between taper...

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103)

Wenonah Capital Partners asked one of its partners, a research and development (R&D) firm, to concentrate on developing new medications for Parkinson’s disease. But the project requires a huge capital investment, and the R&D partner has some reservations about Wenonah’s long-term commitment to the project. To prove its commitment, Wenonah pledges an investment of $200 million over five years. This investment by Wenonah in the project will result in a A) credible commitment. B) parent–subsidiary relationship. C) corrective action. D) cartel.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom Topic : Strategic Alliances Source : Chapter 08 Test Bank > MC Qu. 53 Wenonah Capital Partners asked one of...

104)

________ is best described as a firm’s ownership of its production of needed inputs or of the channels by which it distributes its outputs. A) Vertical integration B) Venture capitalism C) Bootlegging D) Crowdsourcing

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 08-04 Describe the two types of vertical integration along the industry value ch Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration Source : Chapter 08 Test Bank > MC Qu. 57 ________ is best described as a firm&#8217;s ow...

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105)

What is a diversification-performance relationship, and how do different diversification levels affect firm performance?

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an Topic : Core Competencies Source : Chapter 08 Test Bank > SA Qu. 123 What is a diversification-performance...

106)

Hottechi Inc., a large multinational conglomerate, had begun to experience declining revenues. The top management decided it was important for the company to avoid deviating from its core competencies. Thus, a few of the company’s key businesses like energy, telecommunications, and automobiles were centralized, giving the top management more control over them. Also, relatively newer businesses like beverages and food processing were divested. In this scenario, Hottechi is involved in A) benchmarking. B) reverse engineering. C) crowdsourcing. D) restructuring.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an Topic : Restructuring Strategies Source : Chapter 08 Test Bank > MC Qu. 93 Hottechi Inc., a large multinational conglom...

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107)

The internal and external costs associated with an economic exchange are known as interaction costs. ⊚ true ⊚ false

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom Topic : Corporate Strategy Source : Chapter 08 Test Bank > TF Qu. 03 The internal and external costs associated w...

108)

Betatech Group is the parent company of many related businesses under its banner. Each share of the parent company is quoted at $220. However, if this had to be assessed by adding the stock prices of each of its strategic business units, the value would only be $200 per share. In this scenario, what has Betatech Group created? A) demand-pull inflation B) diversification premium C) diversification discount D) capital liquidity

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an Topic : Corporate Diversification and Competitive Advantage Source : Chapter 08 Test Bank > MC Qu. 92 Betatech Group is the parent company of many...

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109)

Since Coca-Cola focuses on selling only non-alcoholic beverages, a low degree of product diversification, we would conclude that it competes in a(n)________ market versus its main competitor PepsiCo, which sells a wide variety of products. A) unrelated diversification B) single product C) multiple product D) related diversification

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-06 Describe and examine alternatives to vertical integration. Topic : Corporate Diversification: Expanding Beyond a Single Market Source : Chapter 08 Test Bank > MC Qu. 20 Since Coca-Cola focuses on selling only...

110)

List the five reasons why firms need to grow.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-02 Explain why firms need to grow, and evaluate different growth motives. Topic : Corporate Strategy Source : Chapter 08 Test Bank > SA Qu. 107 List the five reasons why firms need to grow...

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111)

While KFC focuses on international markets, its competitor, Chick-fil-A, focuses on the domestic U.S. market. What is the reason behind this strategic difference? A) KFC wants to follow a differentiation strategy, and Chick-fil-A wants to pursue a cost-leadership strategy. B) Chick-fil-A has a larger customer base and number of outlets in the U.S. market than its competitor KFC. C) Chick-fil-A is part of a large conglomerate, whereas KFC has more flexibility to pursue a geographic diversification strategy. D) KFC has more financial resources than Chick-fil-A since it is a publicly traded stock company.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-07 Describe and evaluate different types of corporate diversification. Topic : Corporate Diversification, Types of Corporate Diversification, and Understanding How It Can E Source : Chapter 08 Test Bank > MC Qu. 70 While KFC focuses on international markets, ...

112)

In the context of the Boston Consulting Group (BCG) growth-share matrix, if one of the strategic business units of a conglomerate is categorized under “dog,” the management should consider A) infusing more capital into the strategic business unit. B) holding the business until it turns into a “star.” C) providing more human resources to the business. D) divesting the strategic business unit.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an Topic : Tools for Analyzing Diversification Strategies Source : Chapter 08 Test Bank > MC Qu. 95 In the context of the Boston Consulting Grou...

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113)

Which quadrant in the core competence–market matrix is the hardest to pursue? A) building new core competencies to create and compete in markets of the future B) redeploying and recombining core competencies to compete in markets of the future C) leveraging core competencies to improve current market position D) building new core competencies to protect and extend current market position

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-08 Apply the core competence&#8211;market matrix to derive different diversif Topic : Tools for Analyzing Diversification Strategies Source : Chapter 08 Test Bank > MC Qu. 89 Which quadrant in the core competence&#8211;...

114)

U.S.-based consumer electronics corporation DGM owns a smaller company in Taiwan where most of DGM’s cell phone technology is made before being released worldwide. Which of the following alternatives to integration does this best illustrate? A) venture capitalism B) joint venture C) parent–subsidiary relationship D) franchising

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom Topic : Alternatives to Vertical Integration Source : Chapter 08 Test Bank > MC Qu. 56 U.S.-based consumer electronics corporation...

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115)

Using the Boston Consulting Group growth-share matrix, the managers of Fasehatice International determined that their business unit devoted to personal health monitoring devices was a “star.” Based on this finding, which of the following strategies is likely to produce the best results? A) Harvest as much cash flow as possible before shutting the business down. B) Immediately divest from the personal health monitoring industry. C) Increase investment in the personal health monitoring unit to encourage future growth. D) Seek to lower costs in the personal health monitoring unit to increase market share.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an Topic : Tools for Analyzing Diversification Strategies Source : Chapter 08 Test Bank > MC Qu. 100 Using the Boston Consulting Group growth...

116)

Betasoloin Corp. is an automobile company whose core competency lies in manufacturing petrol- and diesel-based cars. The company realizes that more of its potential customers are switching to electric cars. The R&D department of the company acquires competencies in developing electric cars and launches its first hybrid car, which uses both gas and electricity. In this scenario, Betasoloin is primarily A) unlearning existing core competencies to create and compete in markets of the future. B) redeploying existing core competencies to compete in future markets. C) building new core competencies to protect and extend current market position. D) leveraging new core competencies to improve current market position.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 08-08 Apply the core competence&#8211;market matrix to derive different diversif Topic : Corporate Diversification and Competitive Advantage Source : Chapter 08 Test Bank > MC Qu. 86 Betasoloin Corp. is an automobile company wh...

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117)

Siobhan’s firm focuses only on design, marketing, and retailing, and it outsources all its other value chain activities. This firm has A) achieved economies of scale. B) a low degree of vertical integration. C) fully integrated all aspects of its value chain. D) a high degree of vertical integration.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-04 Describe the two types of vertical integration along the industry value ch Topic : Types of Vertical Integration Source : Chapter 08 Test Bank > MC Qu. 14 Siobhan&#8217;s firm focuses only on design...

118)

Which of the following best illustrates forward vertical integration? A) A firm that manufactures and sells car engines to major automobile companies launches its own line of cars. B) A designer shoe company that previously purchased leather from external suppliers establishes its own leather tannery. C) A chain of ice cream parlors launches a brand of toys and accessories for children. D) A multinational coffee chain sources its coffee beans from plantations in Brazil and Vietnam.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-04 Describe the two types of vertical integration along the industry value ch Topic : Vertical Integration, Forward Vertical Integration and Backward Vertical Integration Source : Chapter 08 Test Bank > MC Qu. 60 Which of the following best illustrates forw...

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119)

DreamHome operates in a number of countries and sells a wide variety of home goods, from garden furniture to kitchenware, to achieve continuous growth. From this data, we can conclude that DreamHome has been involved in A) product-market diversification. B) process diversification. C) strategic outsourcing. D) lean manufacturing.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 08-07 Describe and evaluate different types of corporate diversification. Topic : Corporate Diversification, Types of Corporate Diversification, and Understanding How It Can E Source : Chapter 08 Test Bank > MC Qu. 69 DreamHome operates in a number of countries...

120)

Amerie is the strategic business unit (SBU) leader in charge of manufacturing men’s bow ties. While the market Amerie’s firm competes in is low growth, its SBU’s earnings and cash flow are both ranked high and stable. When examining Amerie’s SBU through the Boston Consulting Group (BCG) growth-share matrix lens, we can conclude that her SBU would be classified as a A) question mark. B) dog. C) cash cow. D) star.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-09 Explain when a diversification strategy creates a competitive advantage an Topic : Boston Consulting Group (BCG) Growth&#8211;Share Matrix Source : Chapter 08 Test Bank > MC Qu. 29 Amerie is the strategic business unit...

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121)

Jill is the CEO of Notes Etc., a stationery manufacturer. She decides to open up a retail store to sell her products directly to consumers instead of just selling wholesale to retailers. To do this, Jill will need to engage in A) forward vertical integration. B) differentiation. C) horizontal integration. D) backward vertical integration.

122)

Openlane and Yearin Technologies have together invested and created a new organization, Globex Corporation, to focus on developing diagnostic devices. Through this new firm, both companies are attempting to combine their core competencies to innovate and reduce their risks associated with transaction-specific investments. However, the new organization operates independent of Openlane and Yearin Technologies. Which of the following alternatives to integration does this scenario best illustrate? A) a franchisee B) a corporate acquisition C) a licensing contract D) a joint venture

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-03 Describe and evaluate different options that firms have to organize econom Topic : Alternatives to Vertical Integration Source : Chapter 08 Test Bank > MC Qu. 54 Openlane and Yearin Technologies have togeth...

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123)

How does a conglomerate benefit from following an unrelated diversification strategy? A) The conglomerate can overcome institutional weaknesses, such as a lack of capital markets, in emerging economies. B) The conglomerate can share most of its competencies in products, services, technology, or distribution between all its businesses. C) The conglomerate can limit the learning- and experience-curve effects it faces. D) The conglomerate can solely depend on its primary business activity for a major portion of its revenues.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 08-07 Describe and evaluate different types of corporate diversification. Topic : Corporate Diversification and Competitive Advantage Source : Chapter 08 Test Bank > MC Qu. 81 How does a conglomerate benefit from followi...

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Answer Key Test name: Chapter 08 Test Bank 1) Short Answer

Executives must decide: 2. In what stages of the industry value chain to participate. The industry value chain refers to the transformation of raw materials into finished goods and services along distinct vertical stages. This determines the firm’s vertical integration. 3. What range of products and services to offer. This decision determines the firm’s level of horizontal diversification. 4. Where to compete in terms of regional, national, or international markets. This decision determines the firm’s geographic scope. 2) FALSE

Although corporate strategy provides answers to the key question of where to compete, strategic leaders must answer three related questions: In what stages of the industry value chain should the company participate? What range of products and services should the company offer? Where should the company compete geographically in terms of regional, national, or international markets? 3) D

Coche Azul is pursuing a geographic diversification strategy. A firm that is active in several different countries is pursuing a geographic diversification strategy. 4) Short Answer

Industry value chains are also called vertical value chains because they depict the transformation of raw materials into finished goods and services along distinct stages. Each stage of the vertical value chain typically represents a distinct industry in which a number of different firms are competing. A firm’s expansion up or down the vertical industry value chain is called vertical integration. 5) B

When the costs of pursuing an activity in-house are less than the costs of transacting for that activity in the market, then the firm should vertically integrate by owning production of the needed inputs or the channels for the distribution of outputs. In other words, when firms are more efficient in organizing economic activity than are markets, which rely on contracts among many independent actors, firms should vertically integrate. 6) B

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For diversification to enhance Danke’s Inc. performance, it must do at least one of the following: provide economies of scale, which reduces costs; exploit economies of scope, which increases value; reduce costs and increase value. 7) A

Vertical integration increases the potential of legal repercussions. Due to monopoly concerns, vertical integration has not gone completely unchallenged by the Federal Trade Commission and the Justice Department. 8) A

A related-diversification strategy entails coordination costs, which are a function of the number, size, and types of businesses that are linked to one another. 9) Short Answer

Taper integration has several benefits: It exposes in-house suppliers and distributors to market competition so that performance comparisons are possible. Rather than hollowing out its competencies by relying too much on outsourcing, taper integration allows a firm to retain and fine-tune its competencies in upstream and downstream value chain activities. Taper integration also enhances a firm’s flexibility. For example, when adjusting to fluctuations in demand, a firm could cut back on the finished goods it delivers to external retailers while continuing to stock its own stores. Using taper integration, firms can combine internal and external knowledge, possibly paving the path for innovation. 10) Short Answer

Backward vertical integration: Changes in an industry value chain that involve moving ownership of activities upstream to the originating (inputs) of the value chain. Forward vertical integration: Changes in an industry value chain that involve moving ownership of activities closer to the end (customer) point of the value chain. 11) B

By developing competencies in the development and marketing of its own sports drink, Powerade, Coco-Cola was trying to build new core competencies to protect and extend its current market position. 12) B

An unrelated diversification strategy helps firms gain and sustain competitive advantage because it allows the conglomerate to overcome institutional weaknesses in emerging economies, such as a lack of capital markets and well-defined legal systems and property rights.

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13) A

Internal transaction costs include administrative costs associated with coordinating economic activity between different business units of the same corporation such as transfer pricing for input factors, and between business units and corporate headquarters including important decisions pertaining to resource allocation, among others. Internal transaction costs tend to increase with organizational size and complexity. 14) A

The industry value chain refers to the transformation of raw materials into finished goods and services along distinct vertical stages. This decision determines the firm’s vertical integration. 15) B

Since Billy is moving upstream in his industry value chain and purchasing one of his suppliers, he is engaging in backward vertical integration. 16) A

Backward integration is moving ownership of activities upstream to the originating inputs of the value chain. By pursuing backward integration, Nguyen would produce all necessary components for its automobiles in-house, reducing the costs and potential for interruptions associated with sourcing components from external suppliers. 17) A

J-Texon Manufacturing is pursuing a product diversification strategy. A firm that is active in several different product markets is pursuing a product diversification strategy. 18) A

In this scenario, Newex Motors is redeploying and recombining existing core competencies to compete in markets of the future. Here, managers must strategize about how to redeploy and recombine existing core competencies to compete in future markets. 19) C

A machine solely designed to give a candy its trademarked shape best illustrates physical-asset specificity. Physical-asset specificity is a form of specialized assets that refers to assets whose physical and engineering properties are designed to satisfy a particular customer. 20) C

This is an example of taper integration, a way of orchestrating value activities. Sanjay is using industry suppliers and has decided to manufacture his own parts as well. 21) C

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Strategic leaders must determine corporate strategy along three dimensions: vertical integration (in what stages of the industry value chain should the company participate?); diversification (what range of products and services should the company offer?); and geographic scope (where should the company compete geographically in terms of regional, national, or international markets?). 22) C

This scenario best illustrates licensing. Licensing is a form of long-term contracting in the manufacturing sector that enables firms to commercialize intellectual property such as a patent. 23) B

Ganjaflex Industries has pursued an unrelated diversification strategy. Firms that pursue unrelated diversification are often unable to create additional value. They experience a diversification discount: The stock price of such highly diversified firms is valued at less than the sum of their individual business units. 24) FALSE

A firm follows a related diversification strategy when it derives less than 70 percent—not 25 percent—of its revenues from a single business activity and obtains revenues from other lines of business linked to the primary business activity. 25) D

The principal-agent problem is a major disadvantage of organizing economic activity within firms, as opposed to within markets. It can arise when agents such as managers, performing activities on behalf of the principal (the owner of the firm), pursues their own interests. 26) B

Plexzap is pursuing a related-linked strategy. If executives consider new business activities that share only a limited number of linkages, the firm is using related-linked diversification. 27) FALSE

Not all businesses want to grow. For example, some small-business owners operate a business for convenience, stability, and lifestyle; growth could threaten those goals. 28) A

Firms are motivated to grow in order to lower their cost. A larger firm may benefit from economies of scale, thus driving down average costs as their output increases. 29) TRUE

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Firms that pursue unrelated diversification are often unable to create additional value. They experience a diversification discount: The stock price of unrelated-diversified firms is generally valued at less than the sum of their individual business units. 30) C

Transaction costs can occur within a firm. Considered internal transaction costs, these include costs pertaining to organizing an economic exchange within a firm—for example, the costs of recruiting and retaining employees, paying salaries and benefits, maintaining a production unit, setting up a shop floor, providing office space and computers, and organizing, monitoring, and supervising work. 31) A

The drawback of short-term contracts is that firms responding to the requests for proposals (RFPs) have no incentive to make any transaction-specific investments (e.g., buy new machinery to improve product quality) due to the short duration of the contract. 32) B

This scenario best illustrates franchising. Franchising is a long-term contract in which a franchisor grants a franchisee the right to use the franchisor’s trademark and business processes to offer goods and services that carry the franchisor’s brand name; the franchisee in turn pays an up front (buy-in) lump sum to the franchisor plus a percentage of revenues. 33) D

When outsourced activities take place outside the home country, the correct term is offshoring (or offshore outsourcing). For example, Infosys, one of the world’s largest technology companies and providers of IT services to many Fortune 100 companies, is located in Bangalore, India. 34) D

Sonron Corporation is a dominant-business firm. A dominant-business firm derives between 70 percent and 95 percent of its revenues from a single business, but it pursues at least one other business activity. The dominant business shares competencies in products, services, technology, or distribution. 35) A

Raleigh was a star that developed into a cash cow. A star holds a high market share in a fastgrowing market. A cash cow holds a high market share in a low-growth market. 36) Short Answer

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The advantages of organizing economic activity within firms include: The ability to make command-and-control decisions by fiat along clear hierarchical lines of authority. Coordination of highly complex tasks to allow for specialized division of labor. Transaction-specific investments, such as in AI or specialized robotics equipment that is highly valuable within the firm but of little or no use in the external market. Creation of a community of knowledge, meaning employees within firms have ongoing relationships, exchanging ideas and working closely together to solve problems. 37) C

Restructuring is the process of reorganizing and divesting business units and activities to refocus a company to leverage its core competencies more fully. 38) A

Churchill-Perez is applying taper integration. Taper integration is a way of orchestrating value activities in which a firm is backwardly integrated, but it also relies on outside-market firms for some of its supplies, and/or is forwardly integrated but also relies on outside-market firms for some if its distribution. 39) B

Although many managers have input to this important decision-making process, the responsibility for corporate strategy ultimately rests with the CEO. 40) C

Taper integration is a way of orchestrating value activities in which a firm is backwardly integrated, but it also relies on outside-market firms for some of its supplies. 41) D

A single-business firm is characterized by a low level of diversification, if any, because it derives more than 95 percent of its revenues from one business. 42) Short Answer

Corporate executives can restructure the portfolio of their firm’s businesses, much like an investor can change a portfolio of stocks. One helpful tool to guide corporate portfolio planning is the Boston Consulting Group (BCG) growth-share matrix. This matrix locates the firm’s individual SBUs in two dimensions: relative market share (horizontal axis) and speed of market growth (vertical axis). The firm plots its SBUs into one of four categories in the matrix: dog, cash cow, star, and question mark. Each category warrants a different investment strategy. All four categories shape the firm’s corporate strategy.

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43) A

Strategic alliances are voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services to lead to competitive advantage. 44) Short Answer

The underlying strategic management concepts that guide corporate strategic decisions are: Core competencies: Unique strengths embedded deep within a firm that allow it to differentiate its products or services from those of its rivals. Economies of scale: Occur when a firm’s average cost per unit decreases as its output increases. Economies of scope: The cost savings that come from producing two (or more) outputs or providing different services at less cost than producing each individually with the same resources and technology. Transaction costs: All the costs associated with an economic exchange. Understanding transaction costs enables strategic leaders to answer the question of whether it is costeffective for their firm to expand its boundaries through vertical integration or horizontal diversification. 45) B

Combining new core competencies with new market opportunities creates what some call “mega-opportunities,” but it is the likely the most challenging diversification strategy because it requires building new competencies to create and compete in future markets. 46) D

The desktop computer SBU will be categorized under “dog” in the Boston Consulting Group (BCG) growth-share matrix. “Dogs” hold a small market share in a low-growth market; they have low and unstable earnings, combined with neutral or negative cash flows. 47) A

The Tata group of India, Warren Buffet’s Berkshire Hathaway, and the Japanese Yamaha group are all considered conglomerates due to their unrelated diversification strategy. 48) C

It can be inferred that while the market share of the company in the healthy-living industry will be high, the market share in the tobacco industry will be low. “Cash cows” are strategic business units that compete in a low-growth market but hold considerable market share. “Dogs” hold a small market share in a low-growth market; they have low and unstable earnings, combined with neutral or negative cash flows.

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49) FALSE

A cumulative body of research indicates an inverted U-shaped relationship between the type of diversification and overall firm performance. High and low levels of diversification are generally associated with lower overall performance, while moderate levels of diversification are associated with higher firm performance. This implies that companies that focus on a single business, as well as companies that pursue unrelated diversification, often fail to achieve additional value creation. 50) C

To survive and prosper, companies need to grow. This mantra holds especially true for publicly owned companies because they create shareholder value through profitable growth. Strategic leaders respond to this relentless growth imperative by leveraging their existing core competencies to find future growth opportunities. Gary Hamel and C. K. Prahalad advanced the core competence–market matrix as a way to guide managerial decisions in regard to diversification strategies. The first task for managers is to identify their existing core competencies and understand the firm’s current market situation. When applying an existing or new dimension to core competencies and markets, four quadrants emerge, each with distinct strategic implications. 52) D

Plexzap Sodas wants to use its existing resources and capabilities (the ability to produce sugary carbonated beverages) to attack an emerging market (unsweetened carbonated beverages). This corresponds with the lower-right quadrant of the core competence–market matrix, in which firms redeploy and recombine existing core competencies to compete in markets of the future. 53) Short Answer

The upper-right quadrant of the core competence–market matrix combines new core competencies with new market opportunities. Hamel and Prahalad call this combination megaopportunities that hold significant future growth opportunities. It is likely the most challenging diversification strategy because it requires building new core competencies to create and compete in future markets. 54) A

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Taper integration is a way of orchestrating value activities in which a firm is backwardly integrated, but it also relies on outside-market firms for some of its supplies, and/or is forwardly integrated but also relies on outside-market firms for some if its distribution. By pursuing a taper integration strategy, Doncon Guitars could take ownership of most of the upstream value chain activities while sourcing pickups from a lower-cost supplier. Firms that pursue taper integration achieve superior performance in both innovation and financial performance when compared with firms that rely more on vertical integration or strategic outsourcing. 55) C

From this scenario, it can be inferred that the petrol cars SBU operates in a low-growth market, whereas the hybrid electric cars SBU operates in a high-growth market. “Cash cows” are strategic business units that compete in a low-growth market but hold considerable market share. A corporation’s “star” strategic business units (SBUs) hold a high market share in a fast-growing market. Their earnings are high and either stable or growing. 56) A

This example demonstrates physical-asset specificity, which includes assets whose physical and engineering properties are designed to satisfy a particular customer. In this case, the physicalasset specificity is bottling machinery. 57) C

This scenario best illustrates forward vertical integration. Forward vertical integration involves moving ownership of activities closer to the end customer. 58) Short Answer

Students’ answers may vary. There are two types of related diversification strategy: related-constrained diversification and related-linked diversification. A firm follows a related-constrained diversification strategy when it derives less than 70 percent of its revenues from a single business activity and obtains revenues from other lines of business related to the primary business activity. ExxonMobil’s strategic move into natural gas is an example of related-constrained diversification. A firm follows a related-linked diversification strategy when less than 70 percent of its revenues come from a single business and some other business activities share linkages to the main business focus while others do not. Amazon began business by selling only one product: books. Over time, it expanded its offerings and is now the world’s largest online retailer. Amazon follows a related-linked diversification strategy. 59) D

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Singletechno Industries is pursuing a product-market diversification strategy. A company that pursues both a product and a geographic diversification strategy simultaneously follows a product-market diversification strategy. 60) TRUE

Outsourcing involves moving one or more internal value chain activities outside the firm’s boundaries to other firms in the industry value chain. When outsourced activities take place outside the home country, the correct term is offshoring (or offshore outsourcing). 61) FALSE

Moving ownership of activities upstream to the originating (inputs) point of the value chain is known as backward vertical integration. 62) B

Cumberland will have more flexibility in purchasing and comparing prices of goods and services. The advantages of obtaining goods and services externally include increased flexibility. 63) Short Answer

Once strategic leaders have a clear understanding of their firm’s core competencies, they have four options to formulate corporate strategy: 5. Leverage existing core competencies to improve current market position. 6. Build new core competencies to protect and extend current market position. 7. Redeploy and recombine existing core competencies to compete in markets of the future. 8. Build new core competencies to create and compete in markets of the future. 64) D

One potential way to overcome the principal-agent problem is to give stock options to strategic leaders, thus making them owners. The idea is that when managers are also shareholders, the incentives between agents and principals are aligned. 65) B

Firms often attempt to reduce risk by diversifying their product and service portfolio through competing in a number of different industries. The rationale behind these diversification moves is that falling sales and lower performance in one sector might be compensated by higher performance in another. 66) B

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Hamel and Prahalad call the combination of new core competencies with new market opportunities as “mega-opportunities”—those that hold significant future-growth opportunities. Salesforce.com is a company that employs this diversification strategy well. 67) C

HydraOne is experiencing a diversification discount in this scenario. Diversification discount is a situation in which the stock price of highly diversified firms is valued at less than the sum of their individual business units. 68) A

Silis Autos should pursue a related-constrained diversification strategy. A firm follows a relatedconstrained diversification strategy when it derives less than 70 percent of its revenues from a single business activity and obtains revenues from other lines of business related to the primary business activity. Executives engage in a new business opportunity only when they can leverage their existing competencies and resources. The choices of alternative business activities are limited—constrained—by the fact that they need to be related to the primary business activity through common resources, capabilities, and competencies. 69) Short Answer

There are various general diversification strategies available to a firm: A firm that is active in several different product markets is pursuing a product diversification strategy. A firm that is active in several different countries is pursuing a geographic diversification strategy. A company that pursues both a product and a geographic diversification strategy simultaneously follows a product–market diversification strategy. 70) TRUE

Firms and markets, as different institutional arrangements for organizing economic activity, have their own distinct advantages and disadvantages. The advantages of a firm include the ability to make command-and-control decisions and coordinate highly complex tasks, while the advantages of the market include high-powered incentives and increased flexibility. 71) C

Frequently, sellers have better information about products and services than buyers, which creates information asymmetry, a situation in which one party is more informed than another party. 72) B

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Salesforce’s product distinguished itself from the competition by providing software as a service via cloud computing: Clients did not need to install software or manage any servers but could easily access the CRM through a web browser (a business model called software as a service, or SaaS). Salesforce recognized an emerging market for platform as a service (PaaS) offerings, which would enable clients to build their own software solutions that are accessed the same way as the Salesforce CRM. 73) FALSE

The “make” and “buy” choices anchor each end of a continuum from markets to firms. Several alternative hybrid arrangements are available between these two extremes. Moving from transacting in the market (“buy”) to full integration (“make”), alternatives include short-term contracts as well as various forms of strategic alliances (long-term contracts, equity alliances, and joint ventures) and parent–subsidiary relationships. 74) A

Funholding is a conglomerate. A company that combines two or more strategic business units under one overarching corporation and follows an unrelated diversification strategy is called a conglomerate. 75) Short Answer

Frequently, sellers have better information about products and services than buyers, which creates information asymmetry, a situation in which one party possesses private information and is therefore more informed than another party. When firms transact in the market, such unequal information can lead to a lemons problem. The important take-away here is “caveat emptor”—buyer beware. Information asymmetries can result in the crowding out of desirable goods and services by inferior ones. 76) B

Strategic outsourcing involves moving one or more internal value chain activities outside the firm’s boundaries to other firms in the industry value chain. A firm that engages in strategic outsourcing reduces its level of vertical integration. 77) A

Influence costs occur due to political maneuvering by managers to influence capital and resource allocation and the resulting inefficiencies stemming from suboptimal allocation of scarce resources. 78) D

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A product diversification strategy is a corporate strategy in which a firm is active in several different product markets. 79) C

One helpful tool to guide corporate portfolio planning is the Boston Consulting Group (BCG) growth-share matrix. This matrix locates the firm’s individual SBUs in two dimensions: relative market share (horizontal axis) and speed of market growth (vertical axis). 80) D

Soylent Corporation’s managers are motivated to achieve growth to increase their market share and with it their market power. To do so, firms often consolidate industries through horizontal mergers and acquisitions (buying competitors), thereby changing the industry structure in their favor. Fewer competitors generally equates to higher industry profitability. Moreover, larger firms have more bargaining power with suppliers and buyers. 81) C

An equity alliance involves taking ownership in a partner; a joint venture involves two or more people owning a firm. 82) A

A firm follows an unrelated diversification strategy when less than 70 percent of its revenues come from a single business and there are few, if any, linkages among its businesses. 83) D

Equipment necessary for mining bauxite and aluminum smelting best illustrates site specificity. Site specificity, a form of specialized assets, refers to assets that are required to be jointly located in the same specific place (co-locating). 84) B

Industry value chains are also called vertical value chains, because they depict the transformation of raw materials into finished goods and services along distinct vertical stages. Each stage of the vertical value chain typically represents a distinct industry in which a number of different firms are competing. 85) Short Answer

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A company that combines two or more strategic business units under one overarching corporation and follows an unrelated diversification strategy is called a conglomerate. Unrelated diversification helps firms gain and sustain competitive advantage because it allows the conglomerate to overcome institutional weaknesses in emerging economies, such as a lack of capital markets and well-defined legal systems and property rights. Companies such as Samsung and LG, Berkshire Hathaway, and the Tata group of India are all considered conglomerates due to their unrelated diversification strategy. 86) C

Finjob will share fewer common competencies and resources between its various businesses when compared with Rangreen. In related-linked diversification, only some businesses share competencies in products, services, technology, or distribution. In related-constrained diversification, all businesses share competencies in products, services, technology, or distribution. 87) TRUE

The scenario best illustrates information asymmetry. Information asymmetries are situations in which one party is more informed than another. Jensen failed to inform Mitch about the structural issues before Mitch bought his new home. 89) FALSE

To gain and sustain competitive advantage, any corporate strategy must align with and strengthen a firm’s business strategy, whether it is a differentiation, cost-leadership, or blue ocean strategy. 90) Short Answer

Student answers may vary. Vertical market failure occurs when transactions within the industry value chain are too risky, and alternatives to integration are too costly or difficult to administer. 91) D

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Hector will be making a decision based on the three principles of corporate strategy: vertical integration along the industry value chain, horizontal diversification of products and services, and geographic scope. 92) C

A diversification discount occurs when the stock price of a highly diversified firm is valued less than the sum of all its SBUs. 93) A

In the Boston Consulting Group (BCG) growth-share matrix, the smartphone division of Streethex will be categorized under “star.” A corporation’s star strategic business units (SBUs) hold a high market share in a fast-growing market. Their earnings are high and either stable or growing. 94) B

When executives of a firm consider business opportunities only where they can leverage their existing competencies and resources, it can be concluded that the firm is using relatedconstrained diversification. The choices of alternative business activities are limited— constrained—by the fact that they need to be related to the primary business activity through common resources, capabilities, and competencies. 95) C

The range of products and services that a firm decides to offer determines its level of diversification. 96) D

When companies transact in the open market, they incur external transaction costs: the costs of searching for a firm or an individual with whom to contract, and then negotiating, monitoring, and enforcing the contract. 97) B

The advantages of organizing economic activity within firms include coordination of highly complex tasks to allow for specialized division of labor. Internal transaction costs include administrative costs associated with coordinating economic activity between different business units of the same corporation such as transfer pricing for input factors, and between business units and corporate headquarters including important decisions pertaining to resource allocation, among others. 98) D

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Rashad’s SBU would fall into the “dog” category of the BCG matrix. His firm should consider either divesting the business or harvesting it. This implies stopping investment in the business and squeezing out as much cash flow as possible before shutting or selling it. 99) A

According to the BCG growth-share matrix, Blackzim is a question mark. Question marks have low, unstable earnings that might be growing. 100)

A A strategy of related-constrained or related-linked diversification is more likely to enhance corporate performance than either a single or dominant level of diversification or an unrelated level of diversification. The reason is that the sources of value creation include not only restructuring, but more fundamentally, the potential benefits of economies of scope and scale. 101)

D A dominant-business firm derives between 70 percent and 95 percent of its revenues from a single business, but it pursues at least one other business activity that accounts for the remainder of revenue. 102)

Short Answer Taper integration is a strategy in which a firm is backwardly integrated but also relies on outsidemarket firms for some of its supplies, and/or is forwardly integrated but also relies on outsidemarket firms for some of its distribution. Strategic outsourcing involves moving one or more internal value chain activities outside the firm’s boundaries to other firms in the industry value chain. 103)

A Wenonah’s decision would be referred to as a credible commitment. A credible commitment is a long-term strategic decision that is both difficult and costly to reverse. 104)

A Vertical integration is a firm’s ownership of its production of needed inputs or of the channels by which it distributes its outputs. 105)

Short Answer

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The diversification-performance relationship is a function of the underlying type of diversification. A cumulative body of research indicates an inverted U-shaped relationship between the type of diversification and overall firm performance. High and low levels of diversification are generally associated with lower overall performance, while moderate levels of diversification are associated with higher firm performance. 106)

D In this scenario, Hottechi is involved in restructuring. Restructuring describes the process of reorganizing and divesting business units and activities to refocus a company in order to leverage its core competencies more fully. 107)

FALSE All the costs associated with an economic exchange are known as transaction costs. Understanding transaction costs enables strategic leaders to answer the question of whether it is cost-effective for their firm to expand its boundaries through vertical integration or horizontal diversification. 108)

B In this scenario, Betatech Group has created a diversification premium. Companies that pursue related diversification are more likely to improve their performance. They create a diversification premium: the stock price of related-diversification firms is valued at greater than the sum of their individual business units. 109)

B Coca-Cola Co. focuses on non-alcoholic beverages and thus on a single product market. Its archrival PepsiCo competes directly with Coca-Cola by selling a wide variety of soft drinks and other beverages and offering different types of chips such as Lay’s, Doritos, and Cheetos, as well as Quaker Oats products such as oatmeal and granola bars. 110)

Short Answer Firms need to grow to: 9. Increase profitability. 10. Lower costs. 11. Increase market power. 12. Reduce risk. 13. Motivate management and employees. 111)

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KFC is a publicly traded stock company, as part of Yum Brands; Chick-fil-A is privately owned. Public companies are often expected by shareholders to achieve profitable growth as fast as possible to result in an appreciation of the stock price and thus an increase in shareholder value. In contrast, private companies generally grow slower than public companies because their growth is mostly financed through retained earnings and debt rather than equity. 112)

D The strategic recommendations for SBUs identified as “dogs” are either to divest the business or to harvest it. This implies stopping investment in the business and squeezing out as much cash flow as possible before shutting it or selling it. 113)

A The quadrant in the core competence–market matrix that is the hardest to pursue is building new core competencies to create and compete in markets of the future. 114)

C The parent–subsidiary relationship describes the most-integrated alternative to performing an activity within one’s own corporate family. The corporate parent owns the subsidiary and can direct it via command and control. 115)

C A corporation’s “star” SBUs hold a high market share in a fast-growing market. Their earnings are high and either stable or growing. The recommendation for the corporate strategist is to invest sufficient resources to hold the star’s position or even increase investments for future growth. 116)

C In this scenario, Betasoloin is primarily building new core competencies to protect and extend current market position. Here, managers must come up with strategic initiatives to build new core competencies to protect and extend the company’s current market position. 117)

B Firms that focus on only one or a few stages of the industry value chain are more or less vertically disintegrated, with a low degree of vertical integration. Apple is one example of a firm with a low degree of vertical integration. 118)

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A firm that manufactures car engines and sells it to major automobile companies launching its own line of cars best illustrates forward vertical integration. Forward vertical integration involves moving ownership of activities closer to the end customer. 119)

A From this data, we can conclude that DreamHome has been involved in product-market diversification. A company that pursues both a product and a geographic diversification strategy simultaneously follows a product-market diversification strategy. 120)

C Cash cows are SBUs that compete in a low-growth market but hold considerable market share. Their earnings and cash flows are high and stable. 121)

A Since Jill is moving downstream in her industry value chain and wants to have contact with the end user, this example best represents forward vertical integration. 122)

D The scenario best illustrates a joint venture. In a joint venture, which is another special form of strategic alliance, two or more partners create and jointly own a new organization. Since the partners contribute equity to a joint venture, they make a long-term commitment, which in turn facilitates transaction-specific investments. 123)

A Unrelated diversification strategy helps firms gain and sustain competitive advantage because it allows the conglomerate to overcome institutional weaknesses in emerging economies, such as a lack of capital markets and well-defined legal systems and property rights.

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Student name:__________ 1) When Aviato Inc. wanted to sell its cars in the country of Serbia, it lacked access to

distribution channels and marketing expertise in the country. Thus, Aviato Autos had to enter into a strategic alliance with a local automobile company to get access to the foreign partner’s well-established distribution channels. Which of the following reasons for entering into a strategic alliance is best illustrated in this scenario? A) accessing critical complementary assets B) procuring additional capital investments C) reducing differentiation of product and service offerings D) increasing competitive intensity Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 09-02 Define strategic alliances, explain why firms enter into them, and summari Topic : Analyzing Industry Competition Source : Chapter 09 Test Bank > MC Qu. 42 When Aviato Inc. wanted to sell its cars in ...

2) The Hershey Company, the largest U.S. chocolate manufacturer, decided to enter the Chinese

market because A) this would help the company gain access to large cocoa plantations in China. B) Hershey’s main strategic focus was on product and market diversification and not on the domestic market. C) its strategic position in the U.S. market was well protected through high entry barriers. D) the U.S. population was growing slowly and becoming more health conscious. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-07 Explain why firms engage in acquisitions. Topic : The Advantages and Disadvantages of a Global Strategy Source : Chapter 09 Test Bank > MC Qu. 87 The Hershey Company, the largest U.S. chocol...

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3) Which of the following is an example of explicit knowledge? A) knowing how to create surveys B) knowing how to assemble semiconductors C) a research summary D) a research skill Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-03 Describe three alliance governance mechanisms and evaluate their pros and Topic : Analyzing Industry Competition Source : Chapter 09 Test Bank > MC Qu. 56 Which of the following is an example of expl...

4) Why did Quaker Oats Company’s acquisition of Snapple fail? A) managerial hubris B) unstable market conditions C) stockholder revolt D) intercompany competitiveness Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 09-08 Evaluate whether mergers and acquisitions lead to competitive advantage. Topic : How Managers Execute Strategy Successfully Source : Chapter 09 Test Bank > MC Qu. 101 Why did Quaker Oats Company&#8217;s acquisit...

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5) Organizations seeking strategic alliances often pursue non-equity alliances because they are

the easiest to create and to sever. However, the short duration of these alliances often means there is little trust or commitment on either side. ⊚ true ⊚ false Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-03 Describe three alliance governance mechanisms and evaluate their pros and Topic : Strategic Alliances Source : Chapter 09 Test Bank > TF Qu. 04 Organizations seeking strategic alliances of...

6) How can strategists decide between borrowing and buying the resource in question?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-01 Apply the Build-Borrow-Buy framework to guide corporate strategy. Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > SA Qu. 103 How can strategists decide between borrowing...

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7) Which of the following is a disadvantage of a horizontal integration corporate strategy? A) It increases the potential for integration failure. B) It increases the threat of new entrants in an industry. C) It increases the potential for flexibility. D) It increases competitive intensity within an industry. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-06 Define horizontal integration and evaluate the advantages and disadvantage Topic : Horizontal Integration Source : Chapter 09 Test Bank > MC Qu. 84 Which of the following is a disadvantage of ...

8) Laia is the creator and owner of 60MinuteWorkout.com but wants a physical presence to

record workout videos and hold regular classes. To accomplish this, Laia formed a joint venture with a local real estate developer who has significant influence in the commercial property sector. This venture will require exchanging more than just codified information; as such, Laia should expect to share A) both tacit and explicit knowledge. B) her email list of prospective customers. C) her knowledge of weight-loss techniques. D) only explicit knowledge. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-03 Describe three alliance governance mechanisms and evaluate their pros and Topic : Strategic Alliances Source : Chapter 09 Test Bank > MC Qu. 21 Laia is the creator and owner of 60Minute...

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9) Despite the fact that mergers and acquisitions, on average, destroy rather than create

shareholder value, why do we see so many mergers?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 09-08 Evaluate whether mergers and acquisitions lead to competitive advantage. Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > SA Qu. 116 Despite the fact that mergers and acquisitions...

10) Which of the following best explains why Disney showed superior post-merger integration

capabilities? A) Disney used a corporate strategy based on a Build-Borrow-Buy framework for its acquisitions. B) Disney did a thorough job in eliminating principal-agent problems in the firms it acquired. C) Disney pursued a combination of horizontal and vertical integration through its acquisitions. D) Disney managed its new subsidiaries more like alliances than attempting full integration. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-08 Evaluate whether mergers and acquisitions lead to competitive advantage. Topic : Challenges of Post-Merger Integration Source : Chapter 09 Test Bank > MC Qu. 100 Which of the following best explains why Dis...

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11) In general, it is short-sighted to acquire companies as a defensive move to prevent rival

organizations from gaining access to certain patents, technology, or customer bases. ⊚ true ⊚ false Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-07 Explain why firms engage in acquisitions. Topic : Analyzing Industry Competition Source : Chapter 09 Test Bank > TF Qu. 09 In general, it is short-sighted to acquire c...

12) Which of the following is an ineffective practice in alliance management? A) coordinating a firm’s portfolio of alliances B) focusing on developing an alliance management capability in isolation C) developing relational capabilities to manage mergers and acquisitions D) establishing knowledge-sharing routines between alliance partners Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-04 Describe the three phases of alliance management and explain how an allian Topic : Strategic Alliances Source : Chapter 09 Test Bank > MC Qu. 64 Which of the following is an ineffective pra...

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13) Warephase Airway’s decision to acquire Konex Fuels Inc. proved to be ill-fated because the

Warephase managers overestimated their abilities and skills. They believed that they had the skills to manage such diversified businesses and create additional shareholder value. However, the acquisition failed to create the anticipated synergies because the managers’ capabilities were restricted to the airline industry. What does this scenario best illustrate? A) managerial hubris B) unfettered free market C) competitive feasibility D) knowledge race Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 09-08 Evaluate whether mergers and acquisitions lead to competitive advantage. Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > MC Qu. 93 Warephase Airway&#8217;s decision to acquire...

14) The Konex Hotel Group purchased Green-Plus Hotels for an estimated value of $120 billion.

All the hotels previously owned by Green-Plus Hotels are now managed by the Konex Hotel Group and are known as Konex hotels. What does this scenario best illustrate? A) an acquisition B) a joint venture C) an equity alliance D) a merger Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-05 Differentiate between mergers and acquisitions, and explain why firms use Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > MC Qu. 69 The Konex Hotel Group purchased Green-Plus H...

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15) What does the relational view of competitive advantage propose?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-02 Define strategic alliances, explain why firms enter into them, and summari Topic : Strategic Alliances Source : Chapter 09 Test Bank > SA Qu. 104 What does the relational view of competitive...

16) ________ tend to produce stronger ties between partners. A) Joint ventures B) Non-equity alliances C) Equity alliances D) Manufacturing alliances Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-03 Describe three alliance governance mechanisms and evaluate their pros and Topic : Analyzing Industry Competition Source : Chapter 09 Test Bank > MC Qu. 50 ________ tend to produce stronger ties...

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17) How have strategic alliances helped big pharmaceutical firms hedge against uncertainty?

18) None of Your Beeswax dominates the beeswax candle market and wants to expand into

beeswax lip balm. How can the firm’s strategic leaders determine whether the company should develop a lip balm division internally, ally with a lip balm manufacturer, or acquire a lip balm manufacturer? A) Unless the market for lip balm is booming, None of Your Beeswax should stick to what it knows and focus on creating the best beeswax candles in the industry. B) To protect themselves, the strategic leaders should choose the option that leads to the largest company with the most managerial positions. C) The strategic leaders must determine whether candle making and lip balm making require substantially different skills. If so, the company should pursue internal development. D) The strategic leaders need to determine whether the skills needed to create candles and lip balm are similar and whether None of Your Beeswax creates better beeswax products than its competitors do. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 09-01 Apply the Build-Borrow-Buy framework to guide corporate strategy. Topic : Corporate Strategy Source : Chapter 09 Test Bank > MC Qu. 28 None of Your Beeswax dominates the....

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19) What is the term for the process of merging with a competitor at the same stage of the

industry value chain? A) vertical integration B) horizontal integration C) cross integration D) hierarchical integration Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 09-06 Define horizontal integration and evaluate the advantages and disadvantage Topic : Horizontal Integration Source : Chapter 09 Test Bank > MC Qu. 74 What is the term for the process of merging...

20) Rosa is a senior manager at Veridian Dynamics, a motorcycle manufacturer. Veridian

Dynamics has entered an equity alliance with Parker Industries, a moped manufacturer. “Don’t worry, Rosa,” her counterpart at Parker Industries tells her. “I’m going to send you all our guidelines and documentation for manufacturing catalytic converters, and then you’ll be all set.” What else should Rosa request from Parker Industries? A) nothing, because the information transfer described is complete and appropriate B) personnel exchanges to share tacit knowledge C) a gradual change from an equity alliance to a non-equity alliance to show greater commitment D) a licensing agreement so that Veridian Dynamics can exchange codified knowledge with Supremo Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 09-03 Describe three alliance governance mechanisms and evaluate their pros and Topic : Analyzing Industry Competition Source : Chapter 09 Test Bank > MC Qu. 52 Rosa is a senior manager at Veridian Dynamic...

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21) Solaramus Inc., Sun Energy Inc., and SkyHigh Solar Inc. are three rival firms who have set

up an alliance to conduct research and find a way to run vehicles with solar power. They have made almost equal contributions to the research, and they also share their expertise with one another. However, the three firms will continue to behave as competitors in markets for other solar products. What is this arrangement best referred to as? A) buyout B) co-opetition C) acquisition D) takeover Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 09-02 Define strategic alliances, explain why firms enter into them, and summari Topic : Analyzing Industry Competition Source : Chapter 09 Test Bank > MC Qu. 44 Solaramus Inc., Sun Energy Inc., and...

22) American Snacks Inc., a conglomerate, has a strategic alliance with Très Bien Limité, a

French snack-maker. However, Très Bien managers are concerned that the different business units of American Snacks will set up partnerships with direct competitors of Très Bien in France. What can owners and managers at American Snacks do to respond to Très Bien’s concern? A) Encourage business units at American Snacks to act independently. B) Arrange for the alliance to be managed at the corporate level. C) Require business units at American Snacks and Très Bien to sign loyalty pledges. D) Sever the relationship with Très Bien and find a more trusting corporate partner. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 09-04 Describe the three phases of alliance management and explain how an allian Topic : Strategies for Global Competition Source : Chapter 09 Test Bank > MC Qu. 61 American Snacks Inc., a conglomerate, has a ...

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23) How has Kraft Foods benefited from its hostile takeover of Cadbury PLC? A) It gained a monopoly in the chocolate-manufacturing industry. B) It has access to convenience stores and a new distribution channel. C) It has opened a market that is growing slowly but has high profit margins. D) Its main strategic focus is now on the domestic market. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-07 Explain why firms engage in acquisitions. Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > MC Qu. 86 How has Kraft Foods benefited from its hosti...

24) Which of the following statements about equity alliances is true? A) Equity alliances allow for the sharing of tacit knowledge. B) Equity alliances are more common than non-equity alliances. C) Equity alliances are based on contractual agreements. D) Equity alliances allow for the sharing of explicit knowledge. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-03 Describe three alliance governance mechanisms and evaluate their pros and Topic : Strategic Alliances Source : Chapter 09 Test Bank > MC Qu. 20 Which of the following statements about...

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25) Which of the following reasons motivated Meta Platforms to acquire Instagram, a photo and

video-sharing social media site, for $1 billion? A) the need to reduce its level of horizontal integration B) the desire to pursue an unrelated diversification strategy C) the need to enter a new geographical market D) the desire to preempt rivals Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 09-07 Explain why firms engage in acquisitions. Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > MC Qu. 90 Which of the following reasons motivated...

26) Which of the following statements about managing alliance-related tasks is true? A) A merger is one of the three options for alliance design and governance. B) Forming an alliance with another firm prohibits that firm from forming other

alliances. C) In post-formation alliance management, none of the firms in an alliance is permitted to gain a competitive advantage. D) Alliance management capability is based on three alliance-related tasks. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 09-04 Describe the three phases of alliance management and explain how an allian Topic : Analyzing Industry Competition Source : Chapter 09 Test Bank > MC Qu. 60 Which of the following statements about mana...

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27) Luca is the proud owner of American BBQ Eateries LLC. It currently operates in the

southeast and has recently entered into a non-equity alliance with Big Bills BBQ Grills Inc., with a promise of sharing codified information via a licensing agreement. Which of the following best represents this level of sharing knowledge? A) core competency knowledge B) explicit knowledge C) tacit knowledge D) strategic alliance knowledge Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-03 Describe three alliance governance mechanisms and evaluate their pros and Topic : Strategic Alliances Source : Chapter 09 Test Bank > MC Qu. 19 Luca is the proud owner of American BBQ...

28) Overall, was the Adidas acquisition of Reebok for $3.8 billion in 2006 a success? A) No. Adidas sold Reebok to a private equity firm for a mere $100 million in 2017. B) The acquisition was a success for Reebok but not for Adidas. C) The acquisition was a success for Adidas but not for Reebok. D) Yes. By acquiring Reebok, Adidas improved its market share and made sure that

Nike could not acquire it. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-08 Evaluate whether mergers and acquisitions lead to competitive advantage. Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > MC Qu. 94 Overall, was the Adidas acquisition of...

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29) Which of the following statements is true about managing alliance-related tasks? A) Forming an alliance with another firm prohibits that firm from forming other

alliances. B) A merger is one of the three options for alliance design and governance. C) In post-formation alliance management, none of the firms in an alliance is permitted to gain a competitive advantage. D) Alliance management capability is based on three alliance-related tasks. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 09-04 Describe the three phases of alliance management and explain how an allian Topic : Strategic Alliances Source : Chapter 09 Test Bank > MC Qu. 65 Which of the following statements is true ab...

30) How does horizontal integration within an industry affect the surviving firms? A) by strengthening the rivalry among existing firms B) by increasing the threat the surviving firms will face from new entrants C) by requiring the surviving firms to shift their focus from non-price to price

competition D) by strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-06 Define horizontal integration and evaluate the advantages and disadvantage Topic : Horizontal Integration Source : Chapter 09 Test Bank > MC Qu. 77 How does horizontal integration within an in...

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31) Johnson is an executive vice president at Conecom Hardware. He researches a proposal by a

larger company, Openlane Hardware, to combine the two companies. By analyzing past performance, conducting focus groups, and interviewing Openlane employees, Johnson concludes that Openlane has poor profit margins, sells shoddy merchandise, and treats customers poorly. What actions should Johnson and Conecom Hardware take? A) Do nothing; the two companies cannot combine without Conecom Hardware’s explicit consent. B) Attempt a friendly merger, and use managerial hubris to improve results at Openlane. C) Turn down the acquisition offer, and prepare to resist a hostile takeover. D) Welcome the acquisition, and use knowledge transfer to impart Conecom Hardware’s management practices. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 3 Hard Learning Objective : 09-05 Differentiate between mergers and acquisitions, and explain why firms use Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > MC Qu. 68 Johnson is an executive vice president at Co...

32) Grace wants to form a voluntary arrangement with another firm in order to gain more

flexibility in her supply chain, complement to a few of her support activities via her value chain, and strengthen her firm’s overall competitive position. Grace is looking for a simple and common type of strategic alliance such as A) a joint venture. B) an equity alliance. C) a merger. D) a non-equity alliance. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-02 Define strategic alliances, explain why firms enter into them, and summari Topic : Strategic Alliances Source : Chapter 09 Test Bank > MC Qu. 18 Grace wants to form a voluntary arrangement ...

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33) A drawback of using cross-border strategic alliances to enter new foreign markets is that A) some of the firm’s proprietary know-how may be appropriated by the foreign partner. B) the shareholder value of the foreign partner will decline drastically. C) the foreign firm will need to make larger investments when compared to entering the

new market on its own. D) all potential business risks in the new market will have to be faced alone by the foreign firm. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-02 Define strategic alliances, explain why firms enter into them, and summari Topic : Analyzing Industry Competition Source : Chapter 09 Test Bank > MC Qu. 37 A drawback of using cross-border st...

34) Elaborate on the real-options perspective.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 09-02 Define strategic alliances, explain why firms enter into them, and summari Topic : Corporate Strategy Source : Chapter 09 Test Bank > SA Qu. 107 Elaborate on the real-options perspective.

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35) Northeast Insurance Group is one of the largest property and casualty insurance firms in the

United States. It wants to acquire Sylvestri Mutual, a smaller rival. After the merger, Northeast Insurance Group will be one of the two largest property and casualty insurance firms in the U.S. market. What should Northeast Insurance Group include in its acquisition plans? A) In addition to acquiring Sylvestri Mutual, Northeast Insurance Group should determine the best way to drive independent “mom and pop” tax preparers out of business. B) Northeast Insurance Group will need to explain to the Federal Trade Commission (FTC) how the acquisition will not result in an increase in prices for consumers. C) Northeast Insurance Group should enter a price-based competition with its other major competitor to force it out of business and become a monopoly. D) Northeast Insurance Group should refocus its attention from the national to the international market. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 09-06 Define horizontal integration and evaluate the advantages and disadvantage Topic : Horizontal Integration Source : Chapter 09 Test Bank > MC Qu. 81 Northeast Insurance Group is one of the...

36) What are the necessary conditions for selecting a partner for successful alliance formation?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-04 Describe the three phases of alliance management and explain how an allian Topic : Strategic Alliances Source : Chapter 09 Test Bank > SA Qu. 110 What are the necessary conditions for select...

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37) In terms of the Build-Borrow-Buy framework, a firm’s internal resources are considered to

be relevant when they are A) different from those that need to be developed and superior to those of competitors in the targeted area. B) different from those that need to be developed and inferior to those of competitors in the targeted area. C) similar to those that need to be developed and superior to those of competitors in the targeted area. D) similar to those that need to be developed and inferior to those of competitors in the targeted area. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-01 Apply the Build-Borrow-Buy framework to guide corporate strategy. Topic : Corporate Strategy Source : Chapter 09 Test Bank > MC Qu. 31 In terms of the Build-Borrow-Buy framework...

38) A company that wants to enter a new geographic market within China or Saudi Arabia

should avoid joint ventures with companies that are based in that country. Partnering with a foreign entity props up that entity’s business rather than weakening it through competition. ⊚ true ⊚ false Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-02 Define strategic alliances, explain why firms enter into them, and summari Topic : The Advantages and Disadvantages of a Global Strategy Source : Chapter 09 Test Bank > TF Qu. 03 A company that wants to enter a new geograph...

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39) What is meant by managerial hubris? In what forms does it appear?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-08 Evaluate whether mergers and acquisitions lead to competitive advantage. Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > SA Qu. 117 What is meant by managerial hubris? In what ...

40) If two large movie theater chains decide to merge, the result is likely a vertical integration

that creates a more favorable industry structure by decreasing competition. ⊚ true ⊚ false Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-06 Define horizontal integration and evaluate the advantages and disadvantage Topic : Horizontal Integration Source : Chapter 09 Test Bank > TF Qu. 07 If two large movie theater chains decide to ...

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41) Which of the following summarizes the benefit of the strategic alliance between HP and

DreamWorks? A) Both HP and DreamWorks were able to enter a new market that they would not have been able to pursue alone. B) HP and DreamWorks each strengthened their separate markets without impinging on each other’s markets. C) HP was able to enter a new market, and DreamWorks was able to strengthen its old market. D) DreamWorks was able to enter a new market, and HP was able to strengthen its old market. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-02 Define strategic alliances, explain why firms enter into them, and summari Topic : Analyzing Industry Competition Source : Chapter 09 Test Bank > MC Qu. 38 Which of the following summarizes the benefi...

42) What is the main reason that most mergers and acquisitions negatively affect shareholder

value? A) Companies that resist acquisitions are subject to the “winner’s curse.” B) Market conditions change too quickly. C) The entire market becomes an oligopoly or a monopoly. D) Promised synergies never take place. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 09-08 Evaluate whether mergers and acquisitions lead to competitive advantage. Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > MC Qu. 102 What is the main reason that most mergers an...

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43) Which term describes the process of merging with a competitor at the same stage of industry

value chain? A) hostile takeover B) merger C) horizontal integration D) acquisition Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 09-06 Define horizontal integration and evaluate the advantages and disadvantage Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > MC Qu. 15 Which term describes the process of...

44) What are the two necessary conditions for a successful alliance partner?

Question Details Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-04 Describe the three phases of alliance management and explain how an allian Topic : Strategic Alliances Source : Chapter 09 Test Bank > SA Qu. 120 What are the two necessary conditions...

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45) Donware Inc. is a leader in producing winter sports equipment, including skis and skates.

Recently, the firm decided to expand into the bobsled market and acquired Sleds by Gogozoom LLC This company produced bobsleds, but its sales had slowed. The managers of Donware convinced themselves that they were able to manage the business of Sleds by Gogozoom LLC more effectively even though they had no experience in the bobsled market. However, this move backfired, and the sale of Sleds by Gogozoom LLC’s bobsleds plummeted. Which of the following terms is often used to describe this scenario? A) winner’s curse B) interdepartmental apathy C) winner’s disadvantage D) managerial hubris Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-08 Evaluate whether mergers and acquisitions lead to competitive advantage. Topic : How Managers Execute Strategy Successfully Source : Chapter 09 Test Bank > MC Qu. 98 Donware Inc. is a leader in producing winter...

46) Konmatfix Inc. recently acquired Finhigh Pharmaceuticals Inc. It now sells its own products

along with the products originally sold by Finhigh Pharmaceuticals. As a result, Konmatfix’s sales force will also be marketing the acquired company’s products. How will this horizontal integration most likely affect Konmatfix? A) Konmatfix will reduce the size of its product line. B) It will diminish its economic value creation. C) Konmatfix will increase its cost of distribution. D) It will lower its costs through economies of scale. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 09-06 Define horizontal integration and evaluate the advantages and disadvantage Topic : Economies and Diseconomies of Scale Source : Chapter 09 Test Bank > MC Qu. 82 Konmatfix Inc. recently acquired Finhigh Pha...

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47) Mars Tennis Equipment, Inc. wishes to pursue international markets such as Spain and

France. In order to do this, it may wish to consider a possible A) government partnership that may lead to lobbying. B) joint venture with another firm already established in those markets. C) hostile takeover with a firm operating in the United States. D) marketing strategy that strengthens the international value chain. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 09-02 Define strategic alliances, explain why firms enter into them, and summari Topic : Strategic Alliances Source : Chapter 09 Test Bank > MC Qu. 17 Mars Tennis Equipment, Inc. wishes...

48) Describe the two dimensions that help explain the distinction between mergers and

acquisitions. Then give a real-life example of one merger and one acquisition.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 09-05 Differentiate between mergers and acquisitions, and explain why firms use Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > SA Qu. 111 Describe the two dimensions that help explai...

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49) Explain how firms use strategic alliances to change the industry structure in their favor.

50) Lana Dubois Inc. is a large skincare company that made an initial small investment in a

startup company, Greener Tan, which was developing an organic sunscreen. This gave Lana Dubois controlling interests in the startup company. However, Greener Tan soon began to have financial difficulties because of principal-agent problems. As a result, Lana Dubois did not invest in the next stage of development and pulled out of the company. This approach to strategic alliance is referred to as a A) break-even analysis. B) real-options perspective. C) partial joint venture. D) credible commitment. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-02 Define strategic alliances, explain why firms enter into them, and summari Topic : Corporate Strategy Source : Chapter 09 Test Bank > MC Qu. 46 Lana Dubois Inc. is a large skincare company...

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51) Which type of strategic alliance enables the exchange of both tacit and explicit knowledge? A) joint ventures B) non-equity alliances C) equity alliances D) nonbinding contracts Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-03 Describe three alliance governance mechanisms and evaluate their pros and Topic : Analyzing Industry Competition Source : Chapter 09 Test Bank > MC Qu. 54 Which type of strategic alliance enables...

52) Iselectrics, a medium-sized medical technology company, has been successful in its research

and development but needs improvement in its European sales. Which of these actions would most likely lead to long-term success for Iselectrics’s European sales? A) Alert the European Union that conditions in the European medical technology market are approaching oligopoly. B) Initiate a hostile takeover of a European rival. C) Acquire a company that has a successful medical technology sales force in Europe so that Iselectrics can gain access to new distribution channels. D) Contact its congressional representative to request higher tariffs on European technology products. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 09-07 Explain why firms engage in acquisitions. Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > MC Qu. 89 Iselectrics, a medium-sized medical technolo...

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53) Judging from the Disney-Pixar merger, which of these is an effective way to create

shareholder value from a merger? A) Integrate the acquired company as fully as possible, merging staffs and locations, so that all employees have as similar an on-the-job experience as possible. B) Cut prices at the acquired company but not the acquiring company so that the acquisition covers all consumer price points. C) Raise consumer prices at the acquiring company and the acquired company to reflect the fact that the market is now less competitive. D) If the acquired company creates high-quality products or services, don’t force it to mirror the management style of the acquiring company. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-08 Evaluate whether mergers and acquisitions lead to competitive advantage. Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > MC Qu. 99 Judging from the Disney-Pixar merger, which ...

54) Firms tend to share only explicit knowledge in a non-equity alliance. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-03 Describe three alliance governance mechanisms and evaluate their pros and Topic : Issues Affecting Strategic Alliances Source : Chapter 09 Test Bank > TF Qu. 11 Firms tend to share only explicit knowledge ...

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55) Which of the following accurately describes a common difference between a merger and an

acquisition? A) A merger tends to include mostly small firms; an acquisition can often involve large firms. B) A merger tends to be friendly; an acquisition can be friendly or hostile. C) A merger involves firms of different size; an acquisition involved firms of the same size. D) A merger involves the combination of three or more firms; an acquisition involved the combination of two firms. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-05 Differentiate between mergers and acquisitions, and explain why firms use Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > MC Qu. 72 Which of the following accurately describes ...

56) Which of the following is the best way for firms to assess whether their internal resources are

superior to those of competitors in the targeted area? A) Firms can use an international framework to determine global relevancy. B) Firms can apply the VRIO framework. C) Firms can employ an external analysis tool such as PESTEL or Porter’s Five Forces. D) Firms can implement various financial metrics, such as NPV and IRR. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 09-01 Apply the Build-Borrow-Buy framework to guide corporate strategy. Topic : VRIO Framework Source : Chapter 09 Test Bank > MC Qu. 25 Which of the following is the best way for...

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57) When does a merger between companies typically occur? A) when two or more firms enter a temporary vertical strategic alliance B) when a target firm does not want to be acquired C) when two firms of comparable size join to form a combined entity D) when large, incumbent firms buy startup companies Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 09-05 Differentiate between mergers and acquisitions, and explain why firms use Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > MC Qu. 67 When does a merger between companies typical...

58) Daniela wishes to strengthen her firm’s marketing department by partnering with a large

marketing firm that can complement her existing value chain. However, she fears potential legal repercussions, including potential lawsuits filed by U.S. federal agencies such as the Federal Trade Commission. Which of the following strategic options should Daniela pursue? A) Daniela should implement green field operations with the marketing firm to strengthen her international reach. B) Daniela should consider forming a strategic alliance with the marketing firm. C) Daniela should purchase the marketing firm outright via an acquisition. D) Daniela should move forward with a hostile takeover of the marketing firm. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 09-02 Define strategic alliances, explain why firms enter into them, and summari Topic : Strategic Alliances Source : Chapter 09 Test Bank > MC Qu. 26 Daniela wishes to strengthen her firm&#8217;s m...

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59) A software firm is interested in acquiring an app development company that is small but

highly profitable. The app developer also has a widely admired management structure and much lower attrition rates than are common in the industry. Which of these problems should the software firm anticipate? A) A rival software firm may imitate this approach by acquiring a similar app developer. B) Because most acquisitions are profitable, there is little to worry about in this scenario. C) The software firm may underpay for the app developer, cheating the app developer’s shareholders of profit. D) The software firm may overpay for the app developer, poorly serving the software firm’s shareholders. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 09-08 Evaluate whether mergers and acquisitions lead to competitive advantage. Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > MC Qu. 97 A software firm is interested in acquiring a...

60) Horizontal integration through M&A can help firms strengthen their competitive position by

increasing the differentiation of their product and service offerings. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-06 Define horizontal integration and evaluate the advantages and disadvantage Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > TF Qu. 12 Horizontal integration through M&amp;A can h...

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61) Which of the following is a common drawback of a non-equity alliance? A) lack of trust between partners B) difficulty initiating the contract C) lack of flexibility for the partners D) difficulty terminating the contract Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 09-03 Describe three alliance governance mechanisms and evaluate their pros and Topic : Strategic Alliances Source : Chapter 09 Test Bank > MC Qu. 55 Which of the following is a common drawback ...

62) Lupita is the CEO of JustFixIt Inc., a firm that merges technology with commercial

hardware. She has been struggling with the decision to allocate her resources for the development of a new system or go to the market and search for an already established system. The board of directors for JustFixIt Inc. suggested that the firm enter a contractual agreement with a partner. This scenario best illustrates the concept of A) buy-sell-or-trade framework. B) the horizontal and vertical integration frameworks. C) the strategic alliance framework. D) the Build-Borrow-Buy framework. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-01 Apply the Build-Borrow-Buy framework to guide corporate strategy. Topic : Build-Borrow-or-Buy Framework Source : Chapter 09 Test Bank > MC Qu. 24 Lupita is the CEO of JustFixIt Inc., a...

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63) A microchip company wants a computer company to produce more powerful tablets and

therefore use more of its chips. That same computer company wants the microchip maker to create chips with faster processing power. Which approach could these companies take so that both can serve stockholders well? A) Whichever company is larger should acquire the smaller one and impose its management system on the acquired company. B) Both companies should reduce prices to force out competitors and make entering the market less appealing to potential rivals. C) The two companies should enter a strategic alliance to bring about a win-win situation for them and to limit their rivals’ power. D) For data security reasons, both companies should remain separate and refrain from sharing information. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 09-02 Define strategic alliances, explain why firms enter into them, and summari Topic : Analyzing Industry Competition Source : Chapter 09 Test Bank > MC Qu. 33 A microchip company wants a computer company...

64) DalTech Inc., a publicly traded company, designs and manufactures wearable technology.

What approach should DalTech take after a long period of horizontal integration in its industry? Assume that the industry is now stable and competitors have not made any major changes in price or marketing recently. A) Prepare to resist a hostile takeover by buying back as much stock as possible. B) Focus on research and development as a form of non-price competition. C) Compete based on price in order to drive out remaining competitors and create a monopoly. D) Encourage new competitors to enter the market to improve competition. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 09-06 Define horizontal integration and evaluate the advantages and disadvantage Topic : Horizontal Integration Source : Chapter 09 Test Bank > MC Qu. 73 DalTech Inc., a publicly traded company, des...

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65) Better Pill LLC is a small, new pharmaceutical company that is developing a valuable new

drug. Which of these strategies would it be wise for Better Pill’s owners or managers to take? A) Seek an alliance with a company or companies that will complete the value chain. B) Quickly build downstream complementary assets. C) Pursue managerial hubris at all levels of development. D) Enter multiple learning races within strategic alliances. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 09-02 Define strategic alliances, explain why firms enter into them, and summari Topic : Analyzing Industry Competition Source : Chapter 09 Test Bank > MC Qu. 35 Better Pill LLC is a small, new pharmaceutic...

66) Describe an equity alliance with the help of an example.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 09-03 Describe three alliance governance mechanisms and evaluate their pros and Topic : Strategic Alliances Source : Chapter 09 Test Bank > SA Qu. 109 Describe an equity alliance with the help of...

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67) When entering a foreign market, it is advisable for a new venture that has a core competency

only in R&D to form a strategic alliance with a local partner because A) building downstream complementary assets can be expensive and time-consuming. B) the value gap created by the firm can be easily lowered in an alliance. C) the strategic alliance will reduce the differentiation of its product and service offerings. D) the local partner can better protect its proprietary know-how. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-02 Define strategic alliances, explain why firms enter into them, and summari Topic : Analyzing Industry Competition Source : Chapter 09 Test Bank > MC Qu. 43 When entering a foreign market, it is advisa...

68) It is necessary for government authorities such as the Federal Trade Commission (FTC)

and/or the European Commission to approve any large horizontal integration activity because A) the horizontal integration activity has the potential to reduce competitive intensity in an industry. B) the horizontal integration activity changes the industry structure from oligopolistic to monopolistically competitive. C) the surviving firms will need protection against the relaxed entry barriers. D) the surviving firms will need to be protected against the increasing bargaining power of the suppliers. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-06 Define horizontal integration and evaluate the advantages and disadvantage Topic : Horizontal Integration Source : Chapter 09 Test Bank > MC Qu. 80 It is necessary for government authorities s...

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69) Define horizontal integration and provide a successful or unsuccessful example.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 09-06 Define horizontal integration and evaluate the advantages and disadvantage Topic : Horizontal Integration Source : Chapter 09 Test Bank > SA Qu. 112 Define horizontal integration and provide a ...

70) ________, which captures the cultural fit between different firms, is one key element needed

when selecting an alliance partner. A) Joint ventures B) Partner competency C) Partner commitment D) Partner compatibility Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-04 Describe the three phases of alliance management and explain how an allian Topic : Strategic Alliances Source : Chapter 09 Test Bank > MC Qu. 22 ________, which captures the cultural ...

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71) Horizontal integration through mergers and acquisitions can help firms strengthen their

competitive positions by increasing A) natural monopoly. B) differentiation. C) perfect competition. D) oligarchy. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 09-06 Define horizontal integration and evaluate the advantages and disadvantage Topic : Horizontal Integration Source : Chapter 09 Test Bank > MC Qu. 83 Horizontal integration through mergers and a...

72) Alphabet’s Google made a string of acquisitions of new ventures, such as DeepMind, in order

to A) expand through unrelated diversification. B) preempt rivals. C) solve its principal-agent problems. D) imitate the actions of its competitors such as Apple and Facebook. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 09-07 Explain why firms engage in acquisitions. Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > MC Qu. 88 Alphabet&#8217;s Google made a string of acquisitions...

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73) When large, incumbent firms buy startup companies, the transaction is generally described as

a(n) A) partnership. B) acquisition. C) joint venture. D) alliance. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 09-05 Differentiate between mergers and acquisitions, and explain why firms use Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > MC Qu. 71 When large, incumbent firms buy startup com...

74) How does horizontal integration favorably affect several of Porter’s five forces for the

surviving firms??

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-06 Define horizontal integration and evaluate the advantages and disadvantage Topic : Horizontal Integration Source : Chapter 09 Test Bank > SA Qu. 114 How does horizontal integration favorably...

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75) The main reason behind Google’s decision to acquire the Israeli start-up company Waze for

$1 billion was probably to A) close down a major rival. B) gain access to a new capability. C) acquire it to immediately sell it to a competitor. D) share its capabilities with Waze. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-07 Explain why firms engage in acquisitions. Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > MC Qu. 91 The main reason behind Google&#8217;s deci...

76) Geovax Inc., a biotechnology company, was established to develop an effective vaccine

against a deadly virus. As such, a large investment firm formed an equity alliance with Geovax that resulted in a significant financial investment that followed a string of smaller investments so long as Geovax continued to make headway toward its vaccine. This “wait and see approach” can best be described as A) a real-options perspective. B) horizontal integration. C) a quick way to generate revenues. D) a strategic bet. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-02 Define strategic alliances, explain why firms enter into them, and summari Topic : Strategic Alliances Source : Chapter 09 Test Bank > MC Qu. 27 Geovax Inc., a biotechnology company, was es...

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77) How do strategic alliances help firms gain access to complementary assets?

78) The alliance________ is responsible for making sure that an alliance fits within the firm’s

existing alliance portfolio and corporate-level strategy. A) champion B) leader C) manager D) liaison Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-04 Describe the three phases of alliance management and explain how an allian Topic : Strategic Alliances Source : Chapter 09 Test Bank > MC Qu. 63 The alliance ________ is responsible for making...

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79) The acquisition by Disney of such firms as Marvel, Pixar, and Lucasfilm strengthened its

competitive position by A) increasing the differentiation of its product and service offerings. B) sharing only tacit knowledge about its existing products. C) immediately selling its recent acquisitions to more suitable firms. D) developing a nonbinding contract. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 09-01 Apply the Build-Borrow-Buy framework to guide corporate strategy. Topic : Corporate Strategy Source : Chapter 09 Test Bank > MC Qu. 29 The acquisition by Disney of such firms...

80) What are the three main reasons firms make acquisitions? Provide an example of how a

successful acquisition increased or protected shareholder value.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 09-07 Explain why firms engage in acquisitions. Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > SA Qu. 115 What are the three main reasons firms make...

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81) Which of the following statements is true of an equity alliance? A) An equity alliance is based on contractual agreements rather than partial ownership. B) In an equity alliance, the partners frequently exchange personnel to make the

acquisition of tacit knowledge possible. C) An equity alliance creates weaker ties between the alliance partners when compared to a non-equity alliance. D) In an equity alliance, a standalone organization is created that is jointly owned by two or more parent companies. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-03 Describe three alliance governance mechanisms and evaluate their pros and Topic : Strategic Alliances Source : Chapter 09 Test Bank > MC Qu. 49 Which of the following statements is true of...

82) Which of the following is true of acquisitions? A) Acquisitions increase the competitive intensity in an industry. B) They occur only when the involved entities are of comparable size. C) An acquisition occurs when two independent companies join to form a separate third

entity. D) They can be friendly or hostile. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-05 Differentiate between mergers and acquisitions, and explain why firms use Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > MC Qu. 70 Which of the following is true of acquisitio...

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83) In 1990, Roche, a Swiss pharmaceutical company, initially invested $2.1 billion to purchase

a controlling interest in the biotech startup Genentech. In 2009, after witnessing the success of Genentech’s drug discovery and development projects, Roche spent $47 billion to purchase the remaining minority interest in Genentech, making it a wholly owned subsidiary. In terms of strategic alliances, this scenario best indicates A) explicit knowledge. B) the real-options perspective. C) the stakeholder strategy. D) co-opetition. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-02 Define strategic alliances, explain why firms enter into them, and summari Topic : Analyzing Industry Competition Source : Chapter 09 Test Bank > MC Qu. 41 In 1990, Roche, a Swiss pharmaceutical compa...

84) Several notable firms, including Eli Lilly, HP, Procter & Gamble, and IBM, each wish to

become the alliance “partner of choice” for small technology ventures, colleges, and inventors. They each know that________ is a necessary and critical element for an alliance to be a success. A) sharing explicit knowledge B) building interorganizational trust C) partner implementation D) a hostile takeover Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-04 Describe the three phases of alliance management and explain how an allian Topic : Strategic Alliances Source : Chapter 09 Test Bank > MC Qu. 23 Several notable firms, including Eli Lilly...

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85) Which of the following best describes a strategic alliance? A) an approach to strategic decision making that breaks down a larger investment

decision into a set of smaller decisions that are staged sequentially over time B) a voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services C) a conceptual model that aids strategic leaders in deciding whether to pursue internal development, enter a contractual arrangement or strategic alliance, or acquire new resources, capabilities, and competencies D) cooperation by competitors to achieve a strategic objective Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-01 Apply the Build-Borrow-Buy framework to guide corporate strategy. Topic : Corporate Strategy Source : Chapter 09 Test Bank > MC Qu. 32 Which of the following best describes a...

86) Managers who are eager to forge business alliances often forget that the expected benefits of

the partnership must represent only a small percentage of its monetary and time-related costs. ⊚ true ⊚ false Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-04 Describe the three phases of alliance management and explain how an allian Topic : Strategic Alliances Source : Chapter 09 Test Bank > TF Qu. 05 Managers who are eager to forge business all...

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87) Define and describe what a strategic alliance is and provide two reasons why a firm would

enter into one.

Question Details Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-02 Define strategic alliances, explain why firms enter into them, and summari Topic : Strategic Alliances Source : Chapter 09 Test Bank > SA Qu. 119 Define and describe what a strategic allianc...

88) Although Disney acquired Pixar through a hostile takeover, the merger has proven extremely

profitable for both entities. ⊚ true ⊚ false Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-05 Differentiate between mergers and acquisitions, and explain why firms use Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > TF Qu. 06 Although Disney acquired Pixar through a hos...

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89) Condax Autos Inc. merged with its competitor NOW Autos Inc. This allowed Condax Autos

to use its technological competencies along with NOW Autos’ marketing capabilities to capture a larger market share than what the two entities individually held. What type of integration does this scenario best illustrate? A) supply chain B) horizontal C) perfect D) technological Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-06 Define horizontal integration and evaluate the advantages and disadvantage Topic : Horizontal Integration Source : Chapter 09 Test Bank > MC Qu. 75 Condax Autos Inc. merged with its competitor...

90) Provide a real-world example of how recent horizontal integration has brought about

reduction in competitive intensity.

Question Details AACSB : Reflective Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 09-06 Define horizontal integration and evaluate the advantages and disadvantage Topic : Horizontal Integration Source : Chapter 09 Test Bank > SA Qu. 113 Provide a real-world example of how recent h...

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91) The downside of equity alliances is A) that they are not useful stepping stones toward full integration of the partner firms. B) that the alliances cannot be abandoned if not promising. C) the amount of investment that can be involved. D) the weaker ties and reduced trust between partners. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-03 Describe three alliance governance mechanisms and evaluate their pros and Topic : Strategic Alliances Source : Chapter 09 Test Bank > MC Qu. 51 The downside of equity alliances is

92) Which of the following is one of the benefits of horizontal integration? A) decreased differentiation B) gain of a cheaper supplier C) lower costs D) increase in competitive intensity Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-06 Define horizontal integration and evaluate the advantages and disadvantage Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > MC Qu. 14 Which of the following is one of the...

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93) Which of the following is a result of horizontal integration in terms of Porter’s five forces

model? A) The industry structure becomes potentially less profitable. B) There is an increase in rivalry among existing firms. C) The industry structure becomes less consolidated. D) There is a reduction of excess capacity in the market. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-06 Define horizontal integration and evaluate the advantages and disadvantage Topic : Horizontal Integration Source : Chapter 09 Test Bank > MC Qu. 78 Which of the following is a result of horizo...

94) NoRu Inc. is a publicly traded firm that does not wish to be acquired by FRESHPoP

Corporation, a much larger publicly traded firm, who is planning an acquisition of NoRu Inc. This is an example of a A) joint venture. B) strategic alliance. C) friendly takeover. D) hostile takeover. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-05 Differentiate between mergers and acquisitions, and explain why firms use Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > MC Qu. 13 NoRu Inc. is a publicly traded firm that doe...

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95) How did the recent horizontal integration in the U.S. airline industry provide benefits to the

surviving carriers? A) by preventing mergers from taking place B) by increasing the threat of entry in the industry C) by facilitating excess capacity in the industry D) by lowering competitive intensity in the industry overall Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-06 Define horizontal integration and evaluate the advantages and disadvantage Topic : Horizontal Integration Source : Chapter 09 Test Bank > MC Qu. 79 How did the recent horizontal integration in...

96) Why did incumbent pharmaceutical firms enter into hundreds of strategic alliances with

biotech start ups? A) to make small-scale investments in ventures poised to disrupt existing market economics B) to invest their excess cash flow in the superior technology of the biotech start-ups C) to share their continuously updated research technology with the biotech start-ups D) to pursue an unrelated-options perspective without disrupting existing market economics Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-02 Define strategic alliances, explain why firms enter into them, and summari Topic : Analyzing Industry Competition Source : Chapter 09 Test Bank > MC Qu. 39 Why did incumbent pharmaceutical firms enter...

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

share? A) the employees’ entrepreneurial skills B) the documented information about the material composition of a product C) a top-level manager’s experience related to making strategic decisions D) a manager’s knowledge related to solving nonroutine problems Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-03 Describe three alliance governance mechanisms and evaluate their pros and Topic : Analyzing Industry Competition Source : Chapter 09 Test Bank > MC Qu. 47 In a non-equity alliance, which of the follow...

98) Which of the following corresponds to the use of tacit knowledge? A) Ahmed reads a demographic report about religions in Canada. B) Leyla reassembles a small engine from memory. C) Antonio uses a book review to defend his thesis about female writers in eighteenth-

century England. D) Ema studies a fact sheet about the Amazon rainforest. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-03 Describe three alliance governance mechanisms and evaluate their pros and Topic : Analyzing Industry Competition Source : Chapter 09 Test Bank > MC Qu. 57 Which of the following corresponds to the us...

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99) Sterling Cooper Footwear and NERV Shoes Inc., two competing shoe brands, entered into a

strategic alliance to study and acquire each other’s competencies. Sterling Cooper Footwear entered the strategic alliance to acquire the production system pioneered by NERV Shoes. Similarly, NERV Shoes agreed to the strategic alliance to study the design process of Sterling Cooper Footwear. However, Sterling Cooper Footwear was more successful and faster than NERV Shoes in accomplishing its alliance goal. What does this scenario best illustrate? A) economies of scope B) network effects C) time compression diseconomies D) learning races Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 09-02 Define strategic alliances, explain why firms enter into them, and summari Topic : Analyzing Industry Competition Source : Chapter 09 Test Bank > MC Qu. 45 Sterling Cooper Footwear and NERV Shoes...

100)

Tyrell Corporation, a manufacturer of smartphones, has entered into a 15-year partnership with a software company to develop sophisticated operating systems and innovative mobile applications for its phones. This would mean that both companies will have to mutually share their resources, knowledge, and capabilities to develop a superior product. What is the relationship between Tyrell Corporation and the software company best referred to as in this scenario? A) an acquisition B) a strategic alliance C) a leveraged buyout D) a proprietorship

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 09-02 Define strategic alliances, explain why firms enter into them, and summari Topic : Analyzing Industry Competition Source : Chapter 09 Test Bank > MC Qu. 34 Tyrell Corporation, a manufacturer of smartp...

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101)

Which of the following statements is true of explicit knowledge? A) Explicit knowledge is shared in non-equity alliance firms. B) Explicit knowledge is knowledge that cannot be codified. C) Equity knowledge is acquired only through actively participating in a process. D) Explicit knowledge is about knowing how to do a certain task.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-03 Describe three alliance governance mechanisms and evaluate their pros and Topic : Analyzing Industry Competition Source : Chapter 09 Test Bank > MC Qu. 48 Which of the following statements is true of...

102)

Which of the following scenarios best illustrates horizontal integration? A) Silis Inc. enters into a licensing contract with a distributor in a new international market. B) Silis Inc. acquires a component parts manufacturer that previously supplied to Silis’ competitor. C) Silis Inc. joins with Cancity Inc., one of its direct competitors. D) Silis Inc. sets up its own distribution channel and retail stores.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-06 Define horizontal integration and evaluate the advantages and disadvantage Topic : Horizontal Integration Source : Chapter 09 Test Bank > MC Qu. 76 Which of the following scenarios best illust...

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103)

Tom is the CEO of Endless Possibilities Inc. and proudly boasts his firm’s slogan, We Guarantee Success! However, Tom’s constituents presented him with data on their latest project that suggests they should not move forward. Tom, undeterred with this data, decides that he will still accept the project because he believes that he can’t lose. This is a classic example of A) strategic intent. B) CEO dedication. C) cost benefit analysis. D) managerial hubris.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 09-08 Evaluate whether mergers and acquisitions lead to competitive advantage. Topic : How Managers Execute Strategy Successfully Source : Chapter 09 Test Bank > MC Qu. 16 Tom is the CEO of Endless Possibilities Inc....

104)

A video game company called Stratego Inc. forms an agreement with another video game company called Affronted Inc. Through this agreement, Stratego owns 25 percent of Affronted. However, Affronted does not own any part of Stratego. This type of agreement is called a(n) A) non-equity alliance. B) capital venture. C) joint venture. D) equity alliance.

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105)

In recent years strategic alliances have grown significantly due in part to the speed of technological change and innovation. ⊚ true ⊚ false

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 09-02 Define strategic alliances, explain why firms enter into them, and summari Topic : Corporate Strategy Source : Chapter 09 Test Bank > TF Qu. 02 In recent years strategic alliances have grown...

106)

The process of alliance management begins with A) selecting the best possible partner. B) designing the alliance. C) choosing an appropriate governance mechanism. D) creating resource combinations that obey the VRIO criteria.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 09-04 Describe the three phases of alliance management and explain how an allian Topic : Analyzing Industry Competition Source : Chapter 09 Test Bank > MC Qu. 59 The process of alliance management begins wi...

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107)

Because strategic alliances rarely work as well as managers expect they will, why do companies continue to go through with them? A) Recent advances in management science have greatly improved the success rate of strategic alliances. B) Many owners, managers, and business analysts believe they are essential to survive in an industry. C) Government entities such as the Federal Trade Commission or the European Union sometimes force companies into strategic alliances. D) These alliances have an excellent record of success if managers have enough confidence in the outcome.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 09-04 Describe the three phases of alliance management and explain how an allian Topic : Strategic Alliances Source : Chapter 09 Test Bank > MC Qu. 53 Because strategic alliances rarely work as w...

108)

Victoria’s Jewelry Inc. is considering a takeover of its competitor, Ace Diamond LLC. In general, Victoria’s should go ahead with the acquisition as long as Ace Diamond is more valuable as a continued standalone company than it would be inside Victoria’s. ⊚ true ⊚ false

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 09-06 Define horizontal integration and evaluate the advantages and disadvantage Topic : Analyzing Industry Competition Source : Chapter 09 Test Bank > TF Qu. 08 Victoria&#8217;s Jewelry Inc. is considering...

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109)

Which of the following examples describes the task of an alliance manager? A) Nargis reviewed the alliance portfolio to make sure it fit with the corporate strategy of her firm. B) Harry used his knowledge of drone technology to help him manage the day-to-day operations of his firm’s alliance. C) Omar trained the employees of his alliance partner in the skills needed to create a display for a wide-screen television. D) Reem oversaw the agreement between her company and a potential alliance partner and offered support when needed.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-04 Describe the three phases of alliance management and explain how an allian Topic : Strategic Alliances Source : Chapter 09 Test Bank > MC Qu. 62 Which of the following examples describes th...

110)

Deluxe Yachts Inc., a large luxury yacht manufacturer, made an initial small investment in a startup company that was developing an ecologically friendly waste-water recycling system. This gave Deluxe Yachts controlling interests in the startup company. However, Deluxe Yachts had no obligations to make continued investments in the experiments of the startup company. It could invest small amounts depending on the new product’s success at each stage of its development. If the product proved to be successful, Deluxe Yachts would have the right to buy out the startup company. This approach to strategic alliance is referred to as A) transaction cost economics. B) a break-even analysis. C) a real-options perspective. D) credible commitment.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 2 Medium Learning Objective : 09-02 Define strategic alliances, explain why firms enter into them, and summari Topic : Analyzing Industry Competition Source : Chapter 09 Test Bank > MC Qu. 40 Deluxe Yachts Inc., a large luxury yacht...

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111)

The managers at Statholdings Mobile Inc. want to diversify the business by acquiring a consumer electronics company. This acquisition would mean increased job security, higher compensation, and greater decision-making authority for the managers. The managers correlate this acquisition to greater power for them rather than to the appreciation in shareholder value. In this scenario, this acquisition by Statholdings Mobile Inc. is most likely a result of A) resource ambiguity. B) experience-curve effects. C) principal-agent problems. D) time compression diseconomies.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 09-08 Evaluate whether mergers and acquisitions lead to competitive advantage. Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > MC Qu. 92 The managers at Statholdings Mobile Inc. wan...

112)

Explain and describe the distinctions between a merger and an acquisition.

Question Details Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-05 Differentiate between mergers and acquisitions, and explain why firms use Topic : Mergers and Acquisitions Source : Chapter 09 Test Bank > SA Qu. 118 Explain and describe the distinctions betwee...

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113)

When deciding whether to build, borrow, or buy as a means of growth, firms no longer need to consider the need for physical closeness to their resource partners. ⊚ true ⊚ false

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-01 Apply the Build-Borrow-Buy framework to guide corporate strategy. Topic : The Advantages and Disadvantages of a Global Strategy Source : Chapter 09 Test Bank > TF Qu. 01 When deciding whether to build, borrow, or b...

114)

Even if a merger may not increase shareholder value as planned, it is often a wise idea to champion it so that managers will have the greater opportunities of working at an expanding company. ⊚ true ⊚ false

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-05 Differentiate between mergers and acquisitions, and explain why firms use Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > TF Qu. 10 Even if a merger may not increase shareholde...

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115)

Adidas acquired Reebok primarily to A) pursue an unrelated diversification strategy. B) get access to the superior technology of Reebok. C) overcome its competitive disadvantage against Nike. D) overcome its principal-agent problems.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-08 Evaluate whether mergers and acquisitions lead to competitive advantage. Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > MC Qu. 95 Adidas acquired Reebok primarily to

116)

How did the strategic alliance between HP and DreamWorks Animation SKG affect HP? A) It helped HP pursue a taper integration strategy. B) It enabled HP to compete head on with Cisco’s videoconferencing solution. C) It resulted in depreciation of HP’s shareholder value. D) It failed because HP lacked the expertise in selecting and integrating technology acquisitions.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-02 Define strategic alliances, explain why firms enter into them, and summari Topic : Strategic Alliances Source : Chapter 09 Test Bank > MC Qu. 36 How did the strategic alliance between HP an...

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117)

Which of the following best illustrates a hostile takeover between the two companies Windfield Inc. and Zyco Inc.? A) Windfield Inc. outsources a few of its business activities to Zyco Inc. for competitive advantage. B) Windfield Inc. purchases Zyco Inc. for $95 billion despite Zyco Inc. being against the purchase. C) Windfield Inc. and Zyco Inc. join together to form a third new entity, while they also operate separately. D) Windfield Inc. and Zyco Inc. join together to form a single new company called WindfieldZyco Inc.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 09-05 Differentiate between mergers and acquisitions, and explain why firms use Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > MC Qu. 66 Which of the following best illustrates a...

118)

What causes the winner’s curse? A) buying a firm with a competitive disadvantage B) buying a firm with principal-agent problems C) underpaying for an acquisition D) overpaying for an acquisition

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 09-08 Evaluate whether mergers and acquisitions lead to competitive advantage. Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > MC Qu. 96 What causes the winner&#8217;s curse?

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119)

Dev is a strategist for the firm Stark Industries, which produces high-quality HD movie cameras. His company needs a specific material for a new camera it is developing, which is manufactured in large quantities by a competitor called LENS Inc. However, the material is difficult to trade. Because of this, which of the following is most likely the best strategy for Dev to suggest? A) Stark Industries should acquire LENS. B) Stark Industries should form a long-term agreement with LENS. C) Stark Industries should form a short-term agreement with LENS. D) Stark Industries should enter into co-opetition with LENS.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 09-01 Apply the Build-Borrow-Buy framework to guide corporate strategy. Topic : Analyzing Industry Competition Source : Chapter 09 Test Bank > MC Qu. 30 Dev is a strategist for the firm Stark...

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Codehow Inc. is a large firm involved in the highly competitive market of high-tech medical equipment. In this market, promising startups that focus on research are constantly entering the market with new technological developments. Which of the following approaches would best serve the needs of Codehow? A) acquisitions B) strategic preemption C) mergers D) serial mergers

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 09-07 Explain why firms engage in acquisitions. Topic : Acquisitions and Mergers Source : Chapter 09 Test Bank > MC Qu. 85 Codehow Inc. is a large firm involved in the...

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Answer Key Test name: Chapter 09 Test Bank 1) A

In this scenario, Aviato’s decision to enter into an alliance can be best attributed to the need for accessing critical complementary assets. Building downstream complementary assets such as marketing and regulatory expertise or a sales force is often prohibitively expensive and timeconsuming, and thus frequently not an option for new ventures. Strategic alliances allow firms to match complementary skills and resources to complete the value chain. 2) D

With the U.S. population growing slowly and becoming more health conscious, Hershey decided to enter the Chinese market, the world’s fastest-growing candy market. 3) C

Explicit knowledge can be codified. Research summaries, patents, user manuals, fact sheets, and scientific publications are all ways to capture explicit knowledge. 4) A

Quaker Oats Company’s acquisition of Snapple failed because of managerial hubris. Snapple relied on a decentralized network of independent distributors and retailers that did not want Snapple to be taken over and made it difficult and costly for Quaker Oats to integrate Snapple. 5) TRUE

Because of their contractual nature, non-equity alliances are flexible and easy to initiate and terminate. However, because they can be temporary in nature, they also sometimes produce weak ties between the alliance partners, which can result in a lack of trust and commitment. 6) Short Answer

When building the new resource through internal development is not an option, the strategist then needs to consider external—borrow or buy—options. A tradable resource is one that the firm is able to source externally through a contract that allows for the transfer of ownership or use of the resource. Short-term as well as long-term contracts, such as licensing or franchising, are ways to borrow resources from another company. For the strategist, the implication is that if a resource is highly tradable, then the resource should be borrowed via a licensing agreement or other contractual agreement. If the resource in question is not easily tradable, then the strategist needs to consider either a deeper strategic alliance through an equity alliance or a joint venture, or an outright acquisition. 7) A

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Disadvantages of horizontal integration include reduced flexibility, increased potential for legal repercussions, and integration failure. 8) A

Due to the level of commitment that is inherent with a joint venture, Laia can expect to exchange both tacit and explicit knowledge. 9) Short Answer

The reasons we see so many mergers include the following: Principal-agent problems The desire to overcome competitive disadvantage Superior acquisition and integration capability 10) D

Disney managed its new subsidiaries more like alliances than attempting full integration, which could have destroyed the unique value of the acquisitions. 11) FALSE

In strategic preemption, incumbent firms acquire promising startups that have the potential to be a competitive threat before this potential is fully realized. For example, Google bought Motorola’s cell phone unit for $12.5 billion in 2011. This was done to gain access to Motorola’s valuable patent holdings in mobile technology. Google later sold the cell phone unit to Lenovo while retaining Motorola’s patents. 12) B

Corporate-level managers should not only coordinate the firm’s portfolio of alliances but also leverage their relationships to successfully engage in mergers and acquisitions (M&As). That is, rather than focusing on developing an alliance management capability in isolation, firms should develop a relational capability that allows for the successful management of both strategic alliances and M&As. 13) A

The scenario best illustrates managerial hubris. Warephase managers convinced themselves that they were able to manage the business of Konex Fuels more effectively and, therefore, create additional shareholder value. This belief is often used for an unrelated diversification strategy. 14) A

The scenario best illustrates an acquisition. An acquisition is the purchase or takeover of one company by another. Acquisitions can be friendly or hostile.

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15) Short Answer

A strategic alliance has the potential to help a firm gain and sustain a competitive advantage when it joins together resources and knowledge in a combination that obeys the VRIO principles. Applying the VRIO framework, we know that the basis for competitive advantage is formed when a strategic alliance creates resource combinations that are valuable, rare, and difficult to imitate, and the alliance is organized appropriately to allow for value capture. The locus of competitive advantage is often not found within the individual firm but within a strategic partnership. According to this relational view of competitive advantage, critical resources and capabilities frequently are embedded in strategic alliances that span firm boundaries. 16) C

Because equity alliances are based on partial ownership rather than contracts, they are used to signal stronger commitments. 17) Short Answer

In dynamic markets, strategic alliances allow firms to limit their exposure to uncertainty in the market. For instance, in the wake of the biotechnology revolution, incumbent pharmaceutical firms such as Pfizer, Novartis, and Roche entered into hundreds of strategic alliances with biotech startups. These alliances allowed the big pharma firms to make small-scale investments in many of the new biotechnology ventures that were poised to disrupt existing market economics. In some sense, the pharma companies were taking real options in these biotechnology experiments, providing them with the right but not the obligation to make further investments when the biotech companies introduced new drugs. 18) D

If the firm’s internal resources are highly relevant to closing the identified gap, then the firm should build the new resources needed through internal development. Firms evaluate the relevance of internal resources in two ways. They test whether resources are (1) similar to those the firm needs to develop and (2) superior to those of competitors in the targeted area. If both conditions are met, then the firm should pursue internal development. 19) B

Horizontal integration is the process of merging with a competitor at the same stage of the industry value chain. 20) B

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In an equity alliance, at least one partner takes partial ownership in the other partner. Because they are based on partial ownership rather than contracts, equity alliances are used to signal stronger commitments. Moreover, equity alliances allow for the sharing of tacit knowledge— knowledge that cannot be codified. Tacit knowledge concerns knowing how to do a certain task. It can be acquired only through actively participating in the process. In an equity alliance, therefore, the partners frequently exchange personnel to make the acquisition of tacit knowledge possible. 21) B

This arrangement is best referred to as co-opetition. Co-opetition is a portmanteau word describing cooperation by competitors. It is described as cooperation by competitors to achieve a strategic objective. 22) B

Some conglomerates are engaged in hundreds of alliances simultaneously. If alliances are not managed from a portfolio perspective at the corporate level, serious negative repercussions can emerge. 23) B

In the U.S. market, the Cadbury acquisition allowed Kraft (now Mondelez) greater access to convenience stores, gave it a new distribution channel, and opened a fast-growing market that tends to have high profit margins. 24) A

Equity alliances allow for the sharing of tacit knowledge. 25) D

To preempt rivals, Meta has spent more than $25 billion since 2012 buying promising startups. It acquired, among others, Instagram, a photo and video-sharing social media site, for $1 billion. 26) D

Alliance management capability is a firm’s ability to effectively manage three alliance-related tasks concurrently, often across a portfolio of many different alliances. The firms in an alliance must choose an appropriate governance mechanism from among the three options: non-equity contractual agreement, equity alliances, or joint venture. To be a source of competitive advantage, the partnership needs to create resource combinations that obey the VRIO criteria. 27) B

Explicit knowledge is shared in non-equity alliances and is knowledge that is codified. Licensing agreements are contractual alliances that also share codified knowledge.

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28) A

To compete more successfully with Nike, (the worldwide leader in sports shoes and apparel), Adidas (number two) acquired Reebok (number three) for $3.8 billion. This acquisition allowed the now-larger Adidas Group to benefit from economies of scale and scope that were unachievable when Adidas and Reebok operated independently. The hope was that this would help in overcoming Adidas’ competitive disadvantage vis-à-vis Nike. However, the Reebok acquisition failed, and Adidas sold Reebok to a private equity firm for a mere $100 million. 29) D

Alliance management capability is a firm’s ability to effectively manage three alliance-related tasks concurrently, often across a portfolio of many different alliances. The firms in an alliance must choose an appropriate governance mechanism from among the three options: non-equity contractual agreement, equity alliance, or joint venture. To be a source of competitive advantage, the partnership needs to create resource combinations that obey the VRIO criteria. 30) D

An acquisition is the purchase or takeover of one company by another. It can be friendly or hostile. When a target firm does not want to be acquired, the acquisition is considered a hostile takeover. 32) D

The most common type of strategic alliance is a non-equity alliance, which is based on contracts between firms 33) A

Cross-border strategic alliances have both benefits and risks. While the foreign firm can benefit from local expertise and contacts, it is exposed to the risk that some of its proprietary know-how may be appropriated by the foreign partner. 34) Short Answer

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A real-options perspective to strategic decision making breaks down a larger investment decision into a set of smaller decisions that are staged sequentially over time. This approach allows the firm to obtain additional information at predetermined stages. At each stage, after new information is revealed, the firm evaluates whether or not to make further investments. In a sense, a real option—which is the right, but not the obligation, to continue making investments— allows the firm to buy time until sufficient information for a go versus no-go decision is revealed. 35) B

Because of the potential to reduce competitive intensity in an industry, government authorities such as the FTC and/or the European Commission usually must approve any large horizontal integration activity. 36) Short Answer

Partner compatibility and partner commitment are necessary conditions for successful alliance formation. Partner compatibility captures aspects of cultural fit between different firms. Partner commitment concerns the willingness to make available necessary resources and to accept shortterm sacrifices to ensure long-term rewards. 37) C

A firm’s internal resources are relevant if they are: (1) similar to those that need to be developed, and (2) superior to those of competitors in the targeted area. If both conditions are met, then the firm’s internal resources are relevant and the strategist should pursue internal development. 38) FALSE

When entering new geographic markets, governments of countries such as Saudi Arabia or China may require that foreign firms have a local joint venture partner before doing business in their country. While the foreign firm can benefit from local expertise and contacts, it is exposed to the risk that some of its proprietary know-how and intellectual capital may be appropriated by the foreign partner. 39) Short Answer

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Managerial hubris is a form of self-delusion in which managers convince themselves of their superior skills in the face of clear evidence to the contrary. Managerial hubris comes in two forms: 2. Managers of the acquiring company convince themselves that they are able to manage the business of the target company more effectively and, therefore, that they are able to create additional shareholder value. This belief is often used to justify an unrelated diversification strategy. 3. Although most top-level managers are aware that the majority of acquisitions destroy rather than create shareholder value, they consider themselves the exceptions to the rule. 40) FALSE

In contrast to vertical integration, which refers to the number of activities in which a firm participates up and down the industry value chain, horizontal integration is the process of merging with a competitor at the same stage of the industry value chain. Horizontal integration is a type of corporate strategy that can improve a firm’s strategic position in a single industry. As a rule, firms should go ahead with horizontal integration (i.e., acquiring a competitor) if the target firm is more valuable inside the acquiring firm than as a continued standalone company. In other words, the net value creation of a horizontal acquisition must be positive and aid the acquiring firm in gaining and sustaining a competitive advantage. 41) A

Both HP and DreamWorks were able to enter a new market that they would not have been able to pursue alone. 42) D

Do mergers and acquisitions create competitive advantage? Despite their popularity, the answer, surprisingly, is that in most cases they do not. In fact, the M&A performance track record is rather mixed. Many mergers destroy shareholder value because the anticipated synergies never materialize. 43) C

Horizontal integration is the process of merging with a competitor at the same stage of industry value chain. 44) Short Answer

Partner compatibility and partner commitment are necessary conditions for successful alliance formation. Partner compatibility captures aspects of cultural fit between different firms. Partner commitment concerns the willingness to make the necessary resources available and to accept short-term sacrifices to ensure long-term rewards. 45) D

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The term managerial hubris is often used to describe this type of scenario. Managerial hubris is a form of self-delusion in which managers convince themselves of their superior skills in the face of clear evidence to the contrary. 46) D

This horizontal integration will help Konmatfix lower its costs through economies of scale. Firms use horizontal integration to lower costs through economies of scale and to enhance their economic value creation, and in turn their performance. In industries that have high fixed costs, achieving economies of scale through large output is critical in lowering costs. 47) B

Joint ventures are frequently used to enter international markets. 48) Short Answer

Student examples will vary. A sample answer follows: A merger describes the joining of two independent companies to form a combined entity. One dimension on which mergers and acquisitions differ is friendliness. Mergers tend to be friendly; in mergers, the two firms agree to join in order to create a combined entity. Acquisitions can be friendly or unfriendly. When a target firm does not want to be acquired, the acquisition is considered a hostile takeover. Size can matter as well. The combining of two companies of comparable size is often described as a merger. In contrast, when large, incumbent firms buy startup companies, the transaction is generally described as an acquisition. One example of a merger is the combination of Live Nation and Ticketmaster. One example of an acquisition is Daimler’s acquisition of Chrysler (which Daimler later sold). 49) Short Answer

Firms can use strategic alliances to change the industry structure in their favor by reducing competitive rivalry. Moreover, firms frequently use strategic alliances when competing to set an industry standard. 50) B

Joint ventures involve the creation of new entities by two or more parent firms. They allow for the exchange of both tacit and explicit knowledge. 52) C

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Firms may resort to acquisitions when they need to overcome entry barriers into markets in which they are currently not competing or to access new distribution channels. 53) D

Disney has shown superior post-merger integration capabilities after acquiring Pixar, Marvel, Lucasfilm, and 21st Century Fox. Disney managed its new subsidiaries more like alliances than attempting full integration, which could have destroyed the unique value of the acquisitions. In Pixar’s case, Disney kept the entire creative team in place and allowed its members to continue to work in Pixar’s headquarters near San Francisco with minimal interference. The hands-off approach has paid huge dividends: Although Disney paid a steep $7.4 billion for Pixar, it made some $10 billion on Pixar’s Toy Story 3 franchise revenues alone. As a consequence, Disney has gained a competitive advantage over its rivals such as Sony (with Columbia Pictures), Comcast (with NBCUniversal), and Warner Bros. Discovery. 54) TRUE

In a non-equity alliance, firms tend to share explicit knowledge—knowledge that can be codified. On the other hand, equity alliances allow for the sharing of tacit knowledge—knowledge that cannot be codified. 55) B

A merger tends to be friendly; an acquisition can be friendly or hostile. When a target firm does not want to be acquired, the acquisition is considered a hostile takeover. 56) B

Firms evaluate the relevance of internal resources in two ways: they test whether resources are (1) similar to those the firm needs to develop and (2) superior to those of competitors in the targeted area. The second test can best be assessed by applying the VRIO framework. 57) C

In defining mergers and acquisitions, size can matter as well. The combining of two firms of comparable size is often described as a merger, even though it might in fact be an acquisition. 58) B

Strategic alliances may join complementary parts of a firm’s value chain, such as R&D and marketing, or they may focus on joining the same value chain activities. In contrast to mergers and acquisitions, strategic alliances also allow firms to circumvent potential legal repercussions, including potential lawsuits filed by U.S. federal agencies or the European Union. 59) D

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The mergers and acquisitions performance track record is rather mixed. Many mergers destroy shareholder value because the anticipated synergies never materialize. If shareholder value is created, it generally accrues to the shareholders of the firm that was taken over (the acquiree), because acquirers often pay a premium when buying the target company. Indeed, sometimes companies get involved in a bidding war for an acquisition; the winner may end up with the prize but may have overpaid for the acquisition—thus falling victim to the “winner’s curse.” 60) TRUE

Horizontal integration can help firms enhance differentiation. 61) A

Non-equity alliances are weak ties between partners, which can result in a lack of trust and commitment. 62) D

The Build-Borrow-Buy framework provides a conceptual model that aids strategists in deciding whether to pursue internal development (build), enter a contractual arrangement or strategic alliance (borrow), or acquire new resources, capabilities, and competencies (buy). 63) C

One reason why firms enter strategic alliances is because they are motivated by the desire to learn new capabilities from their partners. 64) B

Horizontal integration changes the underlying industry structure in favor of the surviving firms. Excess capacity is taken out of the market, and competition tends to decrease as a consequence of horizontal integration, assuming no new entrants. As a whole, the industry structure becomes more consolidated and potentially more profitable. If the surviving firms find themselves in an oligopolistic industry structure and maintain a focus on non-price competition (e.g., focus on R&D spending, customer service, or advertising), the industry can indeed be quite profitable, and rivalry would likely decrease among existing firms. 65) A

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New firms are in need of complementary assets to complete the value chain from upstream innovation to downstream commercialization. This implies that a new venture that has a core competency in R&D, for example, will need to access distribution channels and marketing expertise to complete the value chain. Building downstream complementary assets such as marketing and regulatory expertise or a sales force is often prohibitively expensive and timeconsuming, and thus frequently not an option for new ventures. Strategic alliances allow firms to match complementary skills and resources to complete the value chain. Moreover, licensing agreements of this sort allow the partners to benefit from a division of labor, allowing each to efficiently focus on its core competency. 66) Short Answer

Student examples will vary. A sample answer follows. In an equity alliance, at least one partner takes partial ownership in the other partner. Equity alliances are less common than contractual, non-equity alliances because they often require larger investments. Because they are based on partial ownership rather than contracts, equity alliances are used to signal stronger commitments. One example of an equity alliance is the Renault-Nissan alliance. The Renault-Nissan alliance is based on cross equity holdings, with Renault owning 44.4 percent in Nissan and Nissan owning 15 percent in Renault. 67) A

Building downstream complementary assets such as marketing and regulatory expertise or a sales force is often prohibitively expensive and time-consuming, and thus frequently not an option for new ventures. Strategic alliances allow firms to match complementary skills and resources to complete the value chain. 68) A

Student examples will vary. A sample answer follows. Horizontal integration is the process of merging with a competitor at the same stage of the industry value chain. It is a type of corporate strategy that can improve a firm’s strategic position in a single industry. An industry-wide trend toward horizontal integration leads to industry consolidation. One example of a successful merger happened between the entertainment companies Disney and Marvel. 70) D

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Partner compatibility and partner commitment are necessary conditions for successful alliance formation. Partner compatibility captures aspects of cultural fit between different firms. 71) B

Horizontal integration through mergers and acquisitions can help firms strengthen their competitive positions by increasing the differentiation of their product and service offerings. 72) B

Alphabet’s Google made a string of acquisitions of new ventures, such as DeepMind, to preempt rivals. In strategic preemption, incumbent firms acquire promising startups that have the potential to be a competitive threat before this potential is fully realized. 73) B

In defining mergers and acquisitions, size can matter. When large, incumbent firms such as GE or Microsoft buy startup companies, the transaction is generally described as an acquisition. 74) Short Answer

Horizontal integration can favorably affect several of Porter’s five forces for the surviving firms: strengthening bargaining power vis-à-vis suppliers and buyers, reducing the threat of entry, and reducing rivalry among existing firms. Because of the potential to reduce the competitive intensity in an industry, government authorities such as the Federal Trade Commission in the United States or the European Commission usually must approve any large horizontal integration activity. 75) B

Google acquired Waze to gain access to a new capability and to prevent rivals from gaining access. 76) A

A real-options perspective to strategic decision making breaks down a larger investment decision (such as whether to enter biotechnology or not) into a set of smaller decisions that are staged sequentially over time. 77) Short Answer

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The successful commercialization of a new product or service often requires complementary assets such as marketing, manufacturing, and after-sale service. In particular, new firms are in need of complementary assets to complete the value chain from upstream innovation to downstream commercialization. This implies that a new venture that has a core competency in R&D, for example, will need to access distribution channels and marketing expertise to complete the value chain. Building downstream complementary assets such as marketing and regulatory expertise or a sales force is often prohibitively expensive and time-consuming, and thus frequently not an option for new ventures. Strategic alliances allow firms to match complementary skills and resources to complete the value chain. Moreover, licensing agreements of this sort allow the partners to benefit from a division of labor, allowing each to efficiently focus on its core competency. 78) A

The alliance champion is a senior, corporate-level executive responsible for high-level support and oversight. This senior manager is also responsible for making sure that the alliance fits within the firm’s existing alliance portfolio and corporate-level strategy. 79) A

Horizontal integration through M&A can help firms strengthen their competitive positions by increasing the differentiation of their product and service offerings. 80) Short Answer

Student examples will vary. A sample answer follows. Firms make acquisitions for three main reasons: Access to new markets and distribution channels Access to a new capability or competency Strategic preemption Strategic preemption refers to a desired reduction in competitive intensity as a motivation to acquire. While the motivation to reduce competitive intensity leads to the integration of existing competitors through mergers, the motivation of strategic preemption—as its name suggests—is to integrate potential competitors through acquisitions. Facebook’s parent, Meta Platforms, has been a serial acquirer over the past few years, buying some 80 tech startups. To preempt rivals, Meta has spent more than $25 billion since 2012 buying promising startups. It acquired, among others, Instagram, a photo- and video-sharing site, for $1 billion in 2012. 81) B

Equity alliances allow for the sharing of tacit knowledge. Therefore, the partners in an equity alliance frequently exchange personnel to make the acquisition of tacit knowledge possible.

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82) D

Acquisitions can be friendly or hostile. When a target firm does not want to be acquired, the acquisition is considered a hostile takeover. 83) B

In terms of strategic alliances, this scenario best indicates the real-options perspective. Taking a wait-and-see approach by entering strategic alliances allows incumbent firms to buy time and wait for the uncertainty surrounding the market and technology to fade. 84) B

Trust is a critical aspect of any alliance. Interfirm trust entails the expectation that each alliance partner will behave in good faith and develop norms of reciprocity and fairness. 85) B

When strategic managers are making the business case for an alliance, the expected benefits of the alliance must exceed its cost. 87) Short Answer

A strategic alliance is a voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services to lead to competitive advantage. Strategic alliances are attractive for a number of reasons. They enable firms to achieve goals faster and at lower costs than going it alone. Strategic alliances may join complementary parts of a firm’s value chain, such as R&D and marketing, or they may focus on joining the same value chain activities. In contrast to mergers and acquisitions, strategic alliances also allow firms to circumvent potential legal repercussions, including potential lawsuits filed by U.S. federal agencies or the European Union. 88) FALSE

A merger is the joining of two independent companies to form a combined entity. Mergers tend to be friendly; in mergers, the two firms agree to join in order to create a combined entity. An acquisition is the purchase or takeover of one company by another. Acquisitions can be friendly or unfriendly. For example, Disney’s acquisition of Pixar was a friendly one, in which both strategic leadership teams believed that joining the two companies was a good idea. When a target firm does not want to be acquired, the acquisition is considered a hostile takeover. 89) B

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The scenario best illustrates horizontal integration. Horizontal integration is the process of merging with a competitor at the same stage of the industry value chain. 90) Short Answer

Student examples will vary. A sample answer follows. Recent horizontal integration in the U.S. airline industry provided several benefits to the surviving carriers. By reducing excess capacity, the mergers between Delta and Northwest Airlines, United Airlines and Continental, Southwest and AirTran, and American and U.S. Airways lowered competitive intensity in the industry overall. 91) C

The downside of equity alliances is the amount of investment that can be involved, as well as a possible lack of flexibility and speed in putting together and reaping benefits from the partnership. 92) C

Lower costs is a benefit of horizontal integration. 93) D

When a target firm does not want to be acquired, the acquisition is considered a hostile takeover. 95) D

Recent horizontal integration in the U.S. airline industry provided several benefits to the surviving carriers. By reducing excess capacity, the mergers between Delta and Northwest Airlines, United Airlines and Continental, Southwest and AirTran, and American and U.S. Airways lowered competitive intensity in the industry overall. 96) A

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The firms would most likely share the documented information about the material composition of a product. Explicit knowledge is knowledge that can be codified. Patents, user manuals, fact sheets, and scientific publications are all ways to capture explicit knowledge, which concerns the notion of knowing about a certain process or product. 98) B

Leyla reassembling the small engine from memory is an example of tacit knowledge. Tacit knowledge concerns knowing how to do a certain task. It can be acquired only through actively participating in the process. It does not involve a codified form of knowledge. 99) D

This scenario best illustrates learning races. Co-opetition can lead to learning races in strategic alliances, a situation in which both partners are motivated to form an alliance for learning, but the rate at which the firms learn may vary. The firm that learns faster and accomplishes its goal more quickly has an incentive to exit the alliance or, at a minimum, to reduce its knowledge sharing. 100)

B The relationship between Tyrell Corporation and the software company is best referred to as a strategic alliance. Strategic alliances are voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services. 101)

A In a non-equity alliance, firms tend to share explicit knowledge—knowledge that can be codified. Patents, user manuals, fact sheets, and scientific publications are all ways to capture explicit knowledge, which concerns the notion of knowing about a certain process or product. 102)

C The scenario that best illustrates horizontal integration is Silis Inc. joining with Cancity Inc., one of its direct competitors. Horizontal integration is the process of merging with a competitor at the same stage of the industry value chain. 103)

D Managerial hubris is a form of self-delusion in which managers convince themselves of their superior skills in the face of clear evidence to the contrary. 104)

D This type of agreement is called an equity alliance. In an equity alliance, at least one partner takes partial ownership in the other partner.

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105)

TRUE The use of strategic alliances to implement corporate strategy has grown significantly in the past few decades, with thousands forming each year. As the speed of technological change and innovation has increased, firms have responded by entering more alliances. Globalization has also contributed to an increase in cross-border strategic alliances. 106)

A When one or more of the five reasons for alliance formation are present—to strengthen competitive position, enter new markets, hedge against uncertainty, access critical complementary resources, or learn new capabilities—the firm must select the best possible alliance partner. 107)

B Strategic alliances create a paradox for managers. Although alliances appear to be necessary to compete in many industries, between 30 and 70 percent of all strategic alliances do not deliver the expected benefits, and are considered failures by at least one alliance partner. Given the high failure rate, effective alliance management is critical to gaining and sustaining a competitive advantage, especially in high-technology industries. 108)

FALSE As a rule, firms should go ahead with horizontal integration (i.e., acquiring a competitor) if the target firm is more valuable inside the acquiring firm than as a continued standalone company. In other words, the net value creation of a horizontal acquisition must be positive and aid in gaining and sustaining a competitive advantage. 109)

C The alliance manager, positioned within the Office of Alliance Management, serves as an alliance process resource and business integrator between the two alliance partners and provides alliance training and development, as well as diagnostic tools. Therefore, by training the employees of his alliance partner, Omar is doing the job of an alliance manager. 110)

C This approach to strategic alliance is referred to as a real-options perspective. The real-options perspective allows a firm to obtain additional information at predetermined stages. At each stage, after new information is revealed, the firm evaluates whether to make further investments. In a sense, a real option—which is the right, but not the obligation, to continue making investments— allows the firm to buy time until sufficient information for a go versus no-go decision is revealed. 111)

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In this scenario, this acquisition by Statholdings Mobile Inc. is most likely a result of principalagent problems. Managers, as agents, are supposed to act in the best interest of the principals, the shareholders. However, managers may have incentives to grow their firms through acquisitions—not for anticipated shareholder value appreciation, but to build a larger empire, which is positively correlated with prestige, power, and pay. 112)

Short Answer Acquisitions can be friendly or unfriendly. When a target firm does not want to be acquired, the acquisition is considered a hostile takeover. Size can matter as well. The combining of two companies of comparable size is often described as a merger, even though it might in fact be an acquisition. In contrast, when large, incumbent firms buy startup companies, the transaction is generally described as an acquisition. Mergers tend to be friendly. Friendliness and firm size are used to differentiate between mergers from acquisitions. 113)

FALSE Physical closeness is still an issue when considering external resource partners. Many times, firms are able to obtain the required resources to fill the strategic gap through more integrated strategic alliances such as equity alliances or joint ventures rather than through outright acquisition. Mergers and acquisitions (M&A) are the most costly, complex, and difficult to reverse strategic option. Only if extreme closeness to the resource partner is necessary for understanding and obtaining its underlying knowledge should M&A be considered the buy option. The firm should always consider borrowing the necessary resources through integrated strategic alliances before looking at M&A. 114)

FALSE Managers, as agents, are supposed to act in the best interest of the principals, the shareholders. 115)

C To compete more successfully with Nike (the worldwide leader in sports shoes and apparel), Adidas (number two) acquired Reebok (number three) for $3.8 billion. This acquisition allowed the now-larger Adidas Group to benefit from economies of scale and scope that were unachievable when Adidas and Reebok operated independently. The hope was that this would help in overcoming Adidas’ competitive disadvantage vis-à-vis Nike. However, the Reebok acquisition failed, and Adidas sold Reebok to a private equity firm for a mere $100 million. 116)

B HP’s alliance with DreamWorks Animation SKG enabled HP to compete head on with Cisco’s high-end videoconferencing solution, TelePresence. 117)

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Windfield Inc. purchasing Zyco Inc. despite Zyco Inc. being against the purchase best illustrates a hostile takeover. When a target firm does not want to be acquired, the acquisition is considered a hostile takeover. 118)

D Sometimes companies get involved in a bidding war for an acquisition; the winner may end up with the prize but may have overpaid for the acquisition—thus falling victim to the winner’s curse. 119)

A Stark Industries should acquire LENS. If the resource in question is not easily tradable, then the strategist needs to consider either a deeper strategic alliance through an equity alliance or a joint venture or an outright acquisition. 120)

B Strategic preemption would best serve Codehow. The motivation of strategic preemption—as its name suggests—is to integrate potential competitors through acquisitions.

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Student name:__________ 1) Blue Wave Industries Inc. manufactures swimming pool pump parts. It wants to globalize but

is unable to spend a considerable amount of money until it’s sure foreign markets would be interested in its products. Which of these business ventures makes the most sense for Blue Wave Industries? A) exporting swimming pool pump parts to many other countries B) acquiring a swimming pool pump parts manufacturer in another country C) beginning a brownfield project in its home country D) licensing some of its newest pump designs to overseas competitors Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 10-04 Compare and contrast the different options MNEs have for entering foreign Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 78 Blue Wave Industries Inc. manufactures swimming...

2) Explain how the distance between two countries increases with cultural and administrative

and political distance.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 1 Easy Learning Objective : 10-03 Apply the CAGE distance framework to guide MNE decisions on which countrie Topic : The Advantages and Disadvantages of a Global Strategy Source : Chapter 10 Test Bank > SA Qu. 107 Explain how the distance between two countries...

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3) Hooper’s Store, a luxury motorcycle company, sells the same motorcycles and offers the

same superior services in both its home country and foreign markets. The market in which it operates faces low pressures for both local responsiveness and cost reductions. Which of the following strategies within the cost-responsiveness framework does Hooper’s Store most likely pursue? A) a transnational strategy B) an international strategy C) a multidomestic strategy D) a global-standardization strategy Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 10-05 Apply the cost-responsiveness framework to evaluate the four different str Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 80 Hooper&#8217;s Store, a luxury motorcycle co...

4) What are the two opposing forces that multinational companies have to face when competing

around the globe?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-05 Apply the cost-responsiveness framework to evaluate the four different str Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > SA Qu. 112 What are the two opposing forces that multin...

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5) Michael Porter developed the diamond framework to explain why some nations outperform

others in specific industries. This is referred to as A) death-of-distance hypothesis. B) national competitive advantage. C) international competitive advantage. D) local responsiveness. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-06 Apply Porter's diamond framework to explain why certain industries are mor Topic : Porter's Diamond Framework Source : Chapter 10 Test Bank > MC Qu. 22 Michael Porter developed the diamond...

6) Duke & Duke Autos Inc. has shifted its research and development unit from its home country

to Germany. This allows the company to be better informed about the latest developments in the automotive industry by tapping into the highly advanced automotive industry in Germany. In this scenario, Duke & Duke Autos Inc. is reaping the benefits of A) location economies. B) resource immobility. C) economies of scope. D) resource ambiguity. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-02 Explain why companies expand internationally, and evaluate the advantages Topic : The Advantages and Disadvantages of a Global Strategy Source : Chapter 10 Test Bank > MC Qu. 47 Duke &amp; Duke Autos Inc. has shifted its r...

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7) What is the engine behind globalization? Provide a real-world example.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-01 Define globalization, multinational enterprise (MNE), foreign direct inves Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > SA Qu. 103 What is the engine behind globalization? Pro...

8) How has China been affected by its one-child-per-family policy and appreciation of its

currency? A) The country’s advantage in low-cost manufacturing is now reduced. B) The standard of living within the economy has become lower. C) The purchasing power of its workforce has declined. D) The government no longer cares about capturing more of the value added. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-01 Define globalization, multinational enterprise (MNE), foreign direct inves Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 39 How has China been affected by its one-child...

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9) During which period of globalization did the mode of entry into foreign markets primarily

involve exporting goods? A) Globalization 3.0 B) Globalization 2.0 C) Globalization 4.0 D) Globalization 1.0 Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 10-01 Define globalization, multinational enterprise (MNE), foreign direct inves Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 32 During which period of globalization did...

10) One of the major benefits gained by a firm entering the international market is the ability to

benefit from locating value chain activities in optimal geographies for a specific activity. ⊚ true ⊚ false Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-02 Explain why companies expand internationally, and evaluate the advantages Topic : The Advantages and Disadvantages of a Global Strategy Source : Chapter 10 Test Bank > TF Qu. 11 One of the major benefits gained by a firm e...

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11) Which of the following types of organizations comparatively requires the highest levels of

investment and control? A) joint venture B) acquisition C) franchising D) licensing Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 10-04 Compare and contrast the different options MNEs have for entering foreign Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 77 Which of the following types of organization...

12) Gregarious Simulation Systems Inc. wants to globally expand its market. It intends to ensure

that its mode of foreign entry allows it to have strong control over its operations and protect its intellectual property, although that may mean investing a significant amount of capital and other resources. In this scenario, which of the following foreign-entry modes would best suit Gregarious Simulation Systems? A) licensing B) exporting C) acquisition D) franchise agreement Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 10-04 Compare and contrast the different options MNEs have for entering foreign Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 74 Gregarious Simulation Systems Inc. wants to ...

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13) Michael Porter’s diamond framework explains A) national competitive advantage. B) national value creation. C) domestic value creation. D) domestic competitive advantage. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 10-06 Apply Porter's diamond framework to explain why certain industries are mor Topic : Analyzing Industry Competition Source : Chapter 10 Test Bank > MC Qu. 99 Michael Porter&#8217;s diamond framework exp...

14) How will an increase in coordinated economic and political integration between countries

affect the world economy? A) There will be gains in social welfare and living standards across the globe. B) The cost of labor will further decline in emerging economies. C) The world’s market economies will become self-sufficient and independent. D) There will be a movement away from global collaboration networks among multinational enterprises. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-01 Define globalization, multinational enterprise (MNE), foreign direct inves Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 38 How will an increase in coordinated economic...

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15) Walmart sells live animals (snakes, eels, toads, etc.) for food preparation in China, whereas

IKEA sells kimchi refrigerators and metal chopsticks in South Korea. These examples illustrate the need for________, which often requires the competing firm to tailor their products and services to meet the needs of the market in which they are competing. A) local responsiveness B) international strategy C) cost-leadership D) globalization hypothesis Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-05 Apply the cost-responsiveness framework to evaluate the four different str Topic : Integration-Responsiveness Framework Source : Chapter 10 Test Bank > MC Qu. 18 Walmart sells live animals (snakes, eels, to...

16) How do Canada, Mexico, and the United States reduce the administrative and political

distance between them? A) by adopting similar national cultures B) by partnering in the USMCA treaty C) by reducing their linguistic differences D) by lowering the disparities between their per capita incomes Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 10-03 Apply the CAGE distance framework to guide MNE decisions on which countrie Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 60 How do Canada, Mexico, and the United State...

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17) What are some of the disadvantages of a multidomestic strategy?

18) Raul is the chief operating officer (COO) of Black Mesa Inc., a firm that produces

handcrafted kitchen tables for both the residential and commercial markets. Raul believes that his domestic market is saturated and now wishes to go global. Which of the following would serve as an advantage for Raul if he chose to pursue international markets? A) Raul may benefit from learning about Hofstede’s cultural dimensions that could be leveraged on his current employees in his domestic market. B) Raul could gain access to cheaper raw materials in a foreign country, thus lowering the cost of his input factors. C) Raul could share his intellectual properties with another firm that operates in a foreign country in hopes of achieving collaboration. D) Raul’s brand might suffer a loss in reputation if he goes global but could increase his market share. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 10-02 Explain why companies expand internationally, and evaluate the advantages Topic : The Advantages and Disadvantages of a Global Strategy Source : Chapter 10 Test Bank > MC Qu. 13 Raul is the chief operating officer (COO)...

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19) The German multimedia conglomerate Bertelsmann operates in more than 60 countries

throughout the world and owns many regional leaders in their specific product categories, including Random House Publishing in the United States. Bertelsmann operates its more than 500 regional media divisions as more or less autonomous profit-and-loss centers, but it attempts to share best practices across units. Global learning and human resource strategies for executives are coordinated at the network level. Bertelsmann is following a(n) A) global-standardization strategy. B) multidomestic strategy. C) transnational strategy. D) international strategy. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-05 Apply the cost-responsiveness framework to evaluate the four different str Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 97 The German multimedia conglomerate Bertelsma...

20) In Michael Porter’s diamond framework,________ conditions describe a country’s

endowments in terms of natural, human, and other resources. A) factor B) market C) demand D) supply Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 10-06 Apply Porter's diamond framework to explain why certain industries are mor Topic : Analyzing Industry Competition Source : Chapter 10 Test Bank > MC Qu. 100 In Michael Porter&#8217;s diamond framework,...

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21) Managers at Umbrella Corporation, a firm in East Asia, want to make their company a global

leader in business process outsourcing (BPO). What should the Umbrella managers look for as they decide where to locate their BPO facilities? A) plentiful natural resources B) large, undeveloped plots of land for greenfield projects C) many uneducated workers who are highly trainable D) an abundance of well-educated English speakers Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 10-02 Explain why companies expand internationally, and evaluate the advantages Topic : The Advantages and Disadvantages of a Global Strategy Source : Chapter 10 Test Bank > MC Qu. 45 Managers at Umbrella Corporation, a firm in ...

22) Globex Inc., a company popular for its dairy products, successfully follows a multidomestic

strategy. Omni Consumer Products, a large conglomerate, pursues a transnational strategy. Which of the following statements is most likely true of this scenario? A) While Globex Inc. will require a global matrix structure, Omni Consumer Products Inc. will require a traditional headquarters model. B) While Omni Consumer Products’ competitive advantage will lie in its high local responsiveness, Globex Inc. will lack such competencies. C) Omni Consumer Products will face greater pressure for cost reductions than Globex Inc. due to strategy choice. D) Both Globex Inc. and Omni Consumer Products will have to duplicate key business functions in multiple host countries. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 10-05 Apply the cost-responsiveness framework to evaluate the four different str Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 91 Globex Inc., a company popular for its dairy...

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23) European aircraft maker Airbus invested $600 million in Mobile, Alabama, to build jetliners.

Which of the following statements best explains why it used this strategy? A) to take advantage of the high labor costs in the southern United States B) to take advantage of the low impact of globalization in the United States C) to take advantage of the high cost of living in the southern United States D) to take advantage of lower taxes in the southern United States Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-01 Define globalization, multinational enterprise (MNE), foreign direct inves Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 31 European aircraft maker Airbus invested $600...

24) Multinational enterprises (MNEs) such as Harley-Davidson, Rolex, and Starbucks are said to

be following an international strategy because A) they pursue a cost-leadership strategy in their respective industries. B) they offer the same products or services in all their stores throughout the world. C) they attempt to combine benefits of localization and standardization strategies simultaneously. D) they are highly responsive to the local needs and preferences of customers in the host countries. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-05 Apply the cost-responsiveness framework to evaluate the four different str Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 81 Multinational enterprises (MNEs) such as Harley...

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25) A greater________ distance between two trading countries increases the liability of

foreignness. A) political B) administrative C) economic D) cultural Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-03 Apply the CAGE distance framework to guide MNE decisions on which countrie Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 58 A greater ________ distance between two...

26) Porter’s diamond framework helps explain why some MNEs are able to promote a lower cost

structure for their specific industry. ⊚ true ⊚ false Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-06 Apply Porter's diamond framework to explain why certain industries are mor Topic : Porter's Diamond Framework Source : Chapter 10 Test Bank > TF Qu. 12 Porter&#8217;s diamond framework helps explain...

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27) Which of the following describes a firm in the Globalization 1.0 stage? A) Asha Inc. had a large office in New York, which was one cog in a global network. B) Asha Inc. had a large office in New York, which functioned with other large offices

in Europe and Asia. C) Asha Inc. had a base office in New York and a replica office in Amsterdam. D) Asha Inc. had a base office in New York and distributed some of its products overseas. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-01 Define globalization, multinational enterprise (MNE), foreign direct inves Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 41 Which of the following describes a firm in t...

28) Yubaba Inc., a company that manufactures and sells premium perfumes, is pursuing an

international strategy. Axe Inc., a supermarket chain, follows a multidomestic strategy. Which of the following statements is most likely true of this scenario? A) Yubaba Inc. will pursue a differentiation strategy at the business level, whereas Axe Inc. will pursue a cost-leadership strategy at the business level. B) Yubaba Inc. will sell the same products in both domestic and foreign markets, whereas Axe Inc. will customize its product offerings to suit local requirements. C) Yubaba Inc. will be better protected from exchange rate fluctuations when compared to Axe Inc. D) Yubaba Inc. will not be able to use its home-based core competencies in foreign markets as much as Axe Inc. will. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 10-05 Apply the cost-responsiveness framework to evaluate the four different str Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 83 Yubaba Inc., a company that manufactures and...

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29) When two neighboring democratic countries that are part of a trading bloc follow different

religions and social norms, they most likely have high________ distance. A) administrative B) geographic C) political D) cultural Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-03 Apply the CAGE distance framework to guide MNE decisions on which countrie Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 56 When two neighboring democratic countries th...

30) Delos Inc. sells the same sparkplugs in more than 30 locations throughout Brazil. Delos is an

example of a firm that helps to support the globalization hypothesis. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 10-05 Apply the cost-responsiveness framework to evaluate the four different str Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > TF Qu. 08 Delos Inc. sells the same sparkplugs in more...

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31) Which of the following statements accurately explains the primary reason behind Walmart’s

failure in Germany? A) Metro’s hostile takeover of Walmart in Germany B) transfusion of American corporate values into a German location C) inability to implement its trademark focused differentiation strategy in the German market D) Germany’s unfamiliarity with retail discount powerhouses Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-02 Explain why companies expand internationally, and evaluate the advantages Topic : The Advantages and Disadvantages of a Global Strategy Source : Chapter 10 Test Bank > MC Qu. 49 Which of the following statements accurately...

32) Which of the following is the most likely advantage of using foreign acquisitions as a

foreign-entry mode? A) They reduce a firm’s exposure to loss of reputation. B) They are easy to initiate and terminate. C) They require low amounts of investments in terms of capital. D) They are based on contracts rather than ownership. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-04 Compare and contrast the different options MNEs have for entering foreign Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 73 Which of the following is the most likely ad...

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33) Blue Cat Inc., a manufacturer of high-technology medical devices, has its product

development centers located in the United States and South Korea. The manufacturing units are located in China and the Philippines to benefit from low labor costs and access to original equipment manufacturers. This allows the company to competitively price its devices. Also, the various phone models sold by the company are uniform in all the foreign markets it operates in. In this scenario, which of the following strategies does Blue Cat most likely pursue? A) global-standardization strategy B) multidomestic strategy C) international strategy D) transnational strategy Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 10-05 Apply the cost-responsiveness framework to evaluate the four different str Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 84 Blue Cat Inc., a manufacturer of high-techno...

34) Which of the following entry modes was used extensively in Globalization 1.0 stage? A) strategic alliances B) acquisitions C) greenfield operations D) exports Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 10-04 Compare and contrast the different options MNEs have for entering foreign Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 70 Which of the following entry modes was used ...

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35) Teresa wants to take her firm internationally but is concerned with the________, which

refers to the possibility of higher costs of doing business in an unfamiliar cultural and economic environment. A) transactional strategy B) geopolitical climate C) foreign direct investment D) liability of foreignness Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-02 Explain why companies expand internationally, and evaluate the advantages Topic : The Advantages and Disadvantages of a Global Strategy Source : Chapter 10 Test Bank > MC Qu. 25 Teresa wants to take her firm internationall...

36) The term demand conditions refers to how high the volume of demand is for a particular

product in a particular country. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-06 Apply Porter's diamond framework to explain why certain industries are mor Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > TF Qu. 10 The term demand conditions refers to how hig...

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37) When should a firm choose acquisition or greenfield operation as a foreign-entry mode?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-04 Compare and contrast the different options MNEs have for entering foreign Topic : The Advantages and Disadvantages of a Global Strategy Source : Chapter 10 Test Bank > SA Qu. 110 When should a firm choose acquisition or gre...

38) Using the automotive industry in Germany as an example, explain how competitive intensity

in a focal industry affects national competitive advantage.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-06 Apply Porter's diamond framework to explain why certain industries are mor Topic : Analyzing Industry Competition Source : Chapter 10 Test Bank > SA Qu. 117 Using the automotive industry in Germany as ...

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39) Bayside Inc., a reputed brand for fine art supplies, is implementing an international strategy.

Cyberdyne Corp., a maker of mini-computer tablets, is pursuing a global-standardization strategy. Which of the following statements most likely holds true in this scenario? A) Cyberdyne’s business functions are highly centralized, whereas Bayside organizes its activities worldwide. B) While Bayside Inc.’s competitive advantage lies in its high local responsiveness, Cyberdyne Corp. will lack such capabilities. C) Cyberdyne is exposed to greater risks of exchange rate fluctuations. D) Cyberdyne Corp. focuses more on cost reductions when compared to Bayside Inc. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 10-05 Apply the cost-responsiveness framework to evaluate the four different str Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 87 Bayside Inc., a reputed brand for fine art s...

40) Which of the following is an observable feature in the Globalization 3.0 stage? A) While the U.S. corporate headquarters set overarching strategic goals and allocated

resources through the capital budgeting process, local mini-MNE replicas had considerable leeway in day-to-day operations. B) Strategy formulation and implementation, as well as knowledge flows, followed a one-way path—from domestic headquarters to international outposts. C) MNEs began to create smaller, self-contained copies of themselves, with all business functions intact, in a few key countries. D) Based on an optimal mix of costs, skills, and PESTEL factors, companies now freely locate business functions anywhere in the world. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-01 Define globalization, multinational enterprise (MNE), foreign direct inves Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 34 Which of the following is an observable feat...

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41) When multinational enterprises (MNEs) enter host countries such as Saudi Arabia and Japan,

the most logical option is usually to pursue a multidomestic strategy even though that strategy rarely leads to significant cost reductions. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 10-05 Apply the cost-responsiveness framework to evaluate the four different str Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > TF Qu. 09 When multinational enterprises (MNEs) enter host co...

42) Which of the following is a drawback of pursuing a transnational strategy? A) It creates bottlenecks for global learning. B) It requires a global matrix structure, which is difficult to implement. C) It exposes a firm to diseconomies of scale and location. D) It involves locating all key business activities in the home country headquarters. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-05 Apply the cost-responsiveness framework to evaluate the four different str Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 90 Which of the following is a drawback of purs...

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43) Mikhail is a strategist for a power tool manufacturer that has a large presence in the United

States and Germany. By checking economic and political reports, he knows that trade and investment barriers are falling among wealthy nations. He also knows that the price of oil has dropped 50 percent in the previous two years. Based on this information, what action should Mikhail and his company take? A) Mikhail and his employer should wait out this period of uncertainty and act when market forces are more stable. B) They should seriously consider globalization because of the falling trade and investment barriers. C) Mikhail and his employer need to prepare for the cost of doing business to increase. D) They should anticipate market corrections because investment barriers and the price of oil inevitably rise. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 10-01 Define globalization, multinational enterprise (MNE), foreign direct inves Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 29 Mikhail is a strategist for a power tool...

44) When a firm is facing high pressure for local responsiveness and low pressure for cost

reductions, the firm is likely to adopt a(n)________ strategy, according to the costresponsiveness framework. A) multidomestic B) international C) transnational D) global-standardization Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-05 Apply the cost-responsiveness framework to evaluate the four different str Topic : Integration-Responsiveness Framework Source : Chapter 10 Test Bank > MC Qu. 26 When a firm is facing high pressure for loca...

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45) Jean Gene Inc. produces an inexpensive frozen croissant that is well tailored for the tastes of

U.S. consumers. However, it has failed to satisfy the consumer preferences of its host country, France. In which of the following categories has Jean Gene performed poorly? A) local responsiveness B) transnational strategy C) cost-reduction D) global standardization Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 10-05 Apply the cost-responsiveness framework to evaluate the four different str Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 95 Jean Gene Inc. produces an inexpensive...

46) What products and industries does geographic distance affect the most?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-03 Apply the CAGE distance framework to guide MNE decisions on which countrie Topic : The Advantages and Disadvantages of a Global Strategy Source : Chapter 10 Test Bank > SA Qu. 109 What products and industries does geographic...

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47) Hadiza wishes to have more control with her international strategy and is willing to increase

her firms’ investments in this foreign market. She considers creating a subsidiary but also wishes to build a manufacturing plant from the ground up. Hadiza is most likely interested in pursuing a(n)________ strategy. A) black swan B) red ocean C) exporting and importing D) greenfield operations Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-04 Compare and contrast the different options MNEs have for entering foreign Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 17 Hadiza wishes to have more control with her in...

48) PolyCon Corp., a tool and die maker, is considering where to locate its new factories and

offices. According to the CAGE distance model, which of these countries is statistically most attractive to PolyCon? A) the country that is the greatest physical distance from existing PolyCon’s facilities B) a country that does not share the same currency as PolyCon’s home country C) one that is in the same trading bloc as PolyCon’s home country D) one that is much poorer than the country where PolyCon has its headquarters Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 10-03 Apply the CAGE distance framework to guide MNE decisions on which countrie Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 54 PolyCon Corp., a tool and die maker, is cons...

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49) Which of the following factors are the most important determinants of economic distance? A) the ethnicity and religion of consumers B) the topography and climate of a country C) the wealth and per capita income of consumers D) the presence and influence of legal institutions in a country Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 10-03 Apply the CAGE distance framework to guide MNE decisions on which countrie Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 64 Which of the following factors are the most i...

50) How can expanding globally become a threat to the reputation of a multinational enterprise?

Explain with the help of a real-world example.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 10-02 Explain why companies expand internationally, and evaluate the advantages Topic : The Advantages and Disadvantages of a Global Strategy Source : Chapter 10 Test Bank > SA Qu. 106 How can expanding globally become a threat t...

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51) Entertainment 720 Inc. operates in 20 countries around the globe. The company clearly

understands that the skin and hair type of customers varies from one country to another. Consequently, its products are customized to suit local needs and preferences of customers, even though the costs incurred while making these products are exceptionally high. This strategy helps the company behave as a local firm in a foreign market. In this scenario, which of the following strategies does Entertainment 720 most likely implement? A) a sole provider strategy B) a multidomestic strategy C) a local-as-global strategy D) a transnational strategy Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 10-05 Apply the cost-responsiveness framework to evaluate the four different str Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 82 Entertainment 720 Inc. operates in 20 countr...

52) Which of the following statements best explains why Walmart is finding it difficult to

replicate its existing business model in China? A) because of the political differences between China and the United States B) because the USMCA treaty prohibits Walmart from investing in countries outside North America C) because Chinese consumers have not accepted Walmart’s low-cost strategy D) because of the large economic distance between the United States and China Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-03 Apply the CAGE distance framework to guide MNE decisions on which countrie Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 66 Which of the following statements best expla...

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53) Stratton Oakmont Inc., a well-established and reputed multinational enterprise, is

headquartered in a highly developed economy. It wants to start its operations in Old Hebrides, considered one of the less developed nations in the world. How will this strategic move most likely affect Stratton Oakmont Inc.? A) It will be able to easily sell products for which demand varies by income. B) Stratton Oakmont will replicate its existing business model easily. C) Stratton Oakmont will use its competitive advantage from economies of standardization. D) It will benefit from economic arbitrage. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 10-03 Apply the CAGE distance framework to guide MNE decisions on which countrie Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 67 Stratton Oakmont Inc., a well-established an...

54) Foreign-entry modes such as acquisitions and greenfield projects are usually disadvantageous

because they require a high level of capital and resource investment but allow for a low level of control. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-04 Compare and contrast the different options MNEs have for entering foreign Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > TF Qu. 07 Foreign-entry modes such as acquisitions and...

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55) A firm pursuing a________ strategy would believe that best practices, ideas, and innovations

should be diffused throughout the world. A) localization B) multidomestic C) global-standardization D) transnational Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-05 Apply the cost-responsiveness framework to evaluate the four different str Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 89 A firm pursuing a ________ strategy would...

56) Siobhan, the chief financial officer at an office furniture manufacturer in Canada, wants to

build new plants in Canada rather than overseas. Which of these points should she make as she argues her case to the board of directors? A) “Keeping our factories in Canada means facing up to the liability of foreignness.” B) “As the rest of the world globalizes, we will lead the way in strengthening our home nation.” C) “It will be much more difficult to protect our intellectual property if we build factories overseas.” D) “Canada’s wages and benefits are so low compared with the rest of the world that it makes the most sense to build factories here.” Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 10-02 Explain why companies expand internationally, and evaluate the advantages Topic : The Advantages and Disadvantages of a Global Strategy Source : Chapter 10 Test Bank > MC Qu. 51 Siobhan, the chief financial officer at an o...

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57) Unilever’s new-concept center is situated in downtown Shanghai, China, attracting hundreds

of eager volunteers to test the firm’s latest product innovations on-site while Unilever researchers monitor consumer reactions. In this example, Unilever is trying to reap the benefits of A) learning races. B) location economies. C) network effects. D) economies of scope. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-02 Explain why companies expand internationally, and evaluate the advantages Topic : The Advantages and Disadvantages of a Global Strategy Source : Chapter 10 Test Bank > MC Qu. 46 Unilever&#8217;s new-concept center is situa...

58) Which of the following defines the term globalization? A) part of a firm’s corporate strategy to gain and sustain a competitive advantage when

competing against other foreign and domestic companies around the world B) the process of closer integration and exchange between different countries, businesses, and peoples worldwide C) a firm’s investments in value chain activities abroad D) the process of reaping benefits from locating value chain activities in the world’s optimal geographies for a specific activity Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 10-01 Define globalization, multinational enterprise (MNE), foreign direct inves Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 37 Which of the following defines the...

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59) Vinny, the CEO of Rainholm Industries, is looking to employ a________ strategy, which

would take advantage of economies of scale and location economies. He wishes to pursue and establish a global division of labor based on wherever best-of-class capabilities reside at the lowest possible cost for Rainholm Industries. A) international B) global-standardization C) transnational D) multidomestic Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-05 Apply the cost-responsiveness framework to evaluate the four different str Topic : Integration-Responsiveness Framework Source : Chapter 10 Test Bank > MC Qu. 19 Vinny, the CEO of Rainholm Industries, is loo...

60) Oceanic, a venture capital firm, has the opportunity to invest in one of two firms that are in

the process of globalizing. Macmillan, an air-conditioner manufacturer, faces intense pressure from its home market. Rent a Swag, a dog-toy manufacturer, has encountered little competition in its country of origin. In which company should Oceanic invest? A) Macmillan, because firms that face stiff competition at home tend to do better abroad B) Rent a Swag, because dog toys cost less to ship than air conditioners do C) Macmillan, because air conditioners cost more to ship than dog toys do D) Rent a Swag, because firms that face little or no competition at home tend to do better abroad Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 10-06 Apply Porter's diamond framework to explain why certain industries are mor Topic : Analyzing Industry Competition Source : Chapter 10 Test Bank > MC Qu. 93 Oceanic, a venture capital firm, has the opp...

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61) Which of the following statements about multinational enterprises (MNEs) is true? A) MNEs benefit from advances in telecommunications technology. B) MNEs are hindered by falling investment barriers. C) MNEs benefit from rising trade barriers. D) MNEs are hindered by reduced transportation costs. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-01 Define globalization, multinational enterprise (MNE), foreign direct inves Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 40 Which of the following statements about...

62) Fruits de Mer Company, a seafood cannery, has established itself as a strong differentiator in

its respective strategic business units but now wishes to explore international strategies. It is prepared to fully customize its product offerings to meet the needs of the foreign country that it is entering; having conducted many surveys on local preferences, tastes, and requirements, the Fruits de Mer Company will more than likely pursue a________ strategy. A) multidomestic B) transnational C) cost-leadership D) global-standardization Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-05 Apply the cost-responsiveness framework to evaluate the four different str Topic : Integration-Responsiveness Framework Source : Chapter 10 Test Bank > MC Qu. 21 Fruits de Mer Company, a seafood cannery...

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63) Aldorria and Estoccia are neighboring countries with strong economic disparities. However,

both the countries share a common national language and the same political ideologies. The relationship between these two countries will most likely affect the trade of A) movies and TV shows produced in Aldorria. B) luxury items manufactured in Aldorria. C) iron ore extracted in Estoccia. D) food processed in Estoccia. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 10-03 Apply the CAGE distance framework to guide MNE decisions on which countrie Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 55 Aldorria and Estoccia are neighboring countr...

64) Macmillan Toys Inc. is looking to expand internationally and wishes to develop a new

product line that is highly localized while keeping their cost structure below that of their rivals. Macmillan Toys Inc. has been successful with implementing a blue ocean strategy in their main strategic business units and as such wishes to pursue a________ strategy for their international operations. A) multidomestic B) global-standardization C) transnational D) international Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-05 Apply the cost-responsiveness framework to evaluate the four different str Topic : Integration-Responsiveness Framework Source : Chapter 10 Test Bank > MC Qu. 20 Macmillan Toys Inc. is looking to expand int...

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65) For which of the following companies will geographic distance be the most relevant factor in

deciding whether to trade with a target country? A) a firm that extracts and exports iron ore B) a firm that produces movies C) a firm that sells wristwatches D) a firm that manufactures cell phone batteries Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-03 Apply the CAGE distance framework to guide MNE decisions on which countrie Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 63 For which of the following companies will ge...

66) Which of the following contributed to the failure of Walmart in Germany? A) Germans were suspicious of Walmart’s “always low” prices. B) German customers were expecting cheerful Walmart greeters but instead experienced

gruff customer service. C) Germany’s protective labor laws drove up costs. D) The first Walmart boss in the country was German and failed to appropriately translate the U.S.-based company’s values. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 10-02 Explain why companies expand internationally, and evaluate the advantages Topic : The Advantages and Disadvantages of a Global Strategy Source : Chapter 10 Test Bank > MC Qu. 43 Which of the following contributed...

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67) Dinotopia is a country of English-speaking people and has a very profitable economy. Which

of the following countries is most likely to be the closest to Dinotopia in terms of cultural distance? A) Khemed, which has the same wealth and per capita income as Dinotopia B) Moloni Republic, which is located close to Dinotopia and is easily accessible by road C) Maldonia, where people speak English and have a low standard of living D) Luftnarp, which has a very profitable economy and where people speak Luftnarpian Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 10-03 Apply the CAGE distance framework to guide MNE decisions on which countrie Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 59 Dinotopia is a country of English-speaking p...

68) Most businesses around the world are more than 50 percent globalized, meaning that more

than half of their revenues are from outside the home country. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-01 Define globalization, multinational enterprise (MNE), foreign direct inves Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > TF Qu. 01 Most businesses around the world are more th...

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69) In which industries is a multidomestic strategy common? Give an example.

70) Which of the following modes of entering a foreign market allows for the lowest level of

control? A) joint ventures B) greenfield ventures C) exporting D) acquisitions Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 10-04 Compare and contrast the different options MNEs have for entering foreign Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 72 Which of the following modes of entering a f...

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71) Which of the following is part of Geert Hofstede’s cultural dimensions? A) risk taking B) groupthink C) power distance D) short-term orientation Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 10-03 Apply the CAGE distance framework to guide MNE decisions on which countrie Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 52 Which of the following is part of Geert Hofs...

72) Macmillan Toys Inc. is located in the nation of Ruffino near the nation of East Fenwick.

Macmillan Toys is considering expanding into Rusalka. Both countries have similar consumer incomes and knowledge bases and share a common language. Also, the transportation networks between the countries are strong. Even so, the two nations have a long-standing dispute concerning the control of an area of land along their common border. Currently, Ruffino rules this land. Which of the following would most likely prevent Macmillan Toys from expanding into Rusalka? A) geographic distance B) political distance C) cultural distance D) economic distance Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 10-03 Apply the CAGE distance framework to guide MNE decisions on which countrie Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 68 Macmillan Toys Inc. is located in the nation...

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73) Fang and Bone Inc. is a snack manufacturer that wants to expand globally. Few people

abroad are familiar with Fang and Bone snacks. The countries into which the company wants to expand require a high degree of local responsiveness when it comes to food, and the citizens of those countries already spend plenty of money on snacks. Which action should the leaders of Fang and Bone take? A) Achieve economies of scale by using the global standardization approach. B) Pursue a multidomestic strategy that includes new “local” brands. C) Appease pressures for cost reductions by following the transnational approach. D) Keep costs low with undifferentiated product in the international strategy. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 10-05 Apply the cost-responsiveness framework to evaluate the four different str Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 79 Fang and Bone Inc. is a snack manufacturer t...

74) Perfect Paws Inc., a pet supply chain, is implementing a multidomestic strategy. Heartland

Express, a company that manufactures small engines for the agricultural industry, is pursuing a global-standardization strategy. How will the two companies most likely differ from each other? A) Unlike Heartland Express, Perfect Paws Inc. will be able to reap significant economies of scale and location economies. B) Unlike Heartland Express, Perfect Paws Inc. will be able to pursue a differentiation strategy at the business level. C) Perfect Paws Inc. will focus more on cost-reduction than Heartland Express. D) Perfect Paws Inc. will have its business functions spread across the world; Heartland Express’s business functions will be highly centralized. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 10-05 Apply the cost-responsiveness framework to evaluate the four different str Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 86 Perfect Paws Inc., a pet supply chain...

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75) What is meant by cultural distance? How does it affect a firm? Use a real-life example of a

business affected by cultural difference. The example can be from your everyday life, or it can be something you have read or heard about.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 10-03 Apply the CAGE distance framework to guide MNE decisions on which countrie Topic : The Advantages and Disadvantages of a Global Strategy Source : Chapter 10 Test Bank > SA Qu. 108 What is meant by cultural distance? How does...

76) Discuss the disadvantages of international expansion for firms, particularly in regard to

intellectual property. Substantiate with an example from your reading assignment or from your own experience.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 10-05 Apply the cost-responsiveness framework to evaluate the four different str Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > SA Qu. 114 Discuss the disadvantages of international e...

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77) The administrative and political distance between two trading countries decreases when A) the host country lacks an independent central bank. B) tariffs and trade quotas exist in the host country. C) there is a well-functioning capital market in the host country. D) there are Foreign Direct Investment restrictions in the host country. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-03 Apply the CAGE distance framework to guide MNE decisions on which countrie Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 62 The administrative and political distance be...

78) Toyota’s global success in the 1990s and early 2000s was based to a large extent on a

network of world-class suppliers in Japan. This tightly knit network allowed for fast two-way knowledge sharing—which in turn improved Toyota’s quality and lowered its cost, which it leveraged into a successful blue ocean strategy at the business level. This example shows the effectiveness of A) demand conditions. B) factor conditions. C) competitive intensity in a focal industry. D) related and supporting industries/complementors. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-06 Apply Porter's diamond framework to explain why certain industries are mor Topic : Analyzing Industry Competition Source : Chapter 10 Test Bank > MC Qu. 102 Toyota&#8217;s global success in the 1990s a...

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79) Livia is the CEO of a line of luxury bedding, Livia Let Lie Inc., which has an online presence

and production units in nine countries. In this scenario, Livia Let Lie Inc. is most likely a A) multinational enterprise. B) nationalized firm. C) nonprofit organization. D) sole proprietorship. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-01 Define globalization, multinational enterprise (MNE), foreign direct inves Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 30 Livia is the CEO of a line of luxury bedding...

80) Which of the following statements is true with regard to international trade between

countries? A) Greater cultural distance between the home and host countries decreases the liability of foreignness to multinational companies. B) Wealthy countries engage in relatively more cross-border trade than poorer ones. C) Political integrations decrease the expected trade intensity between two countries. D) Colony–colonizer relationships have a strong negative effect on bilateral trade between countries. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-03 Apply the CAGE distance framework to guide MNE decisions on which countrie Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 65 Which of the following statements is true wi...

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81) Under the CAGE distance framework, the administrative and political distance between two

countries primarily increases with A) the absence of colonial ties. B) differences in consumer incomes. C) physical remoteness. D) the lack of trust and mutual respect. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 10-03 Apply the CAGE distance framework to guide MNE decisions on which countrie Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 53 Under the CAGE distance framework, the admin...

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82) Thomás works in a rare metals industry and wants to open a business in a foreign country

that is rich with natural resources. He believes that natural resources are the one and only mechanism that can help him achieve an international competitive advantage. After all, countries like Afghanistan, Iran, and Venezuela are home to the world’s richest natural recourses, so in theory they too should be able to leverage those resources in order to create a national competitive advantage. Which of the statements below best represents an appropriate response to Thomás and his theory? A) Natural resources almost always help countries achieve a national competitive advantage. B) Natural resources are often not needed to generate world-leading companies because competitive advantage is often based on other factor endowments such as human capital and know-how. C) Natural resources can help create world-leading companies but only if they pursue a differentiation strategy. D) Having access to natural resources never helps firms achieve a national competitive advantage. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-06 Apply Porter's diamond framework to explain why certain industries are mor Topic : Porter's Diamond Framework Source : Chapter 10 Test Bank > MC Qu. 23 Thom&#225;s works in a rare metals industry ...

83) A trend observed during the Globalization 3.0 stage involves A) multinational enterprises (MNEs) organizing as global collaboration networks. B) countries around the globe becoming more self-sufficient and independent. C) world’s market economies becoming less integrated. D) privately owned firms getting nationalized. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-01 Define globalization, multinational enterprise (MNE), foreign direct inves Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 35 A trend observed during the Globalization 3....

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84) The transnational strategy is similar to a(n)________ strategy because they both focus on

product and/or service differentiation and low costs. A) international B) product diversification C) blue ocean D) liquidation Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 10-05 Apply the cost-responsiveness framework to evaluate the four different str Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 98 The transnational strategy is similar to a(n...

85) The cultural distance between Australia and the United States is relatively high because of

the physical distance between the two nations. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-03 Apply the CAGE distance framework to guide MNE decisions on which countrie Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > TF Qu. 06 The cultural distance between Australia and ...

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86) Businesses located in countries that have relatively weak domestic demand often make the

leap to multinational enterprises in order to achieve growth or to gain and sustain economic advantage. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-02 Explain why companies expand internationally, and evaluate the advantages Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > TF Qu. 03 Businesses located in countries that have re...

87) When Amal, the CEO of Explore Complexity Simulation Systems, expanded her operations

to a different international market, she was surprised to see how little competition she faced. In her home country, the competition for simulation systems is incredibly fierce. As a result of her international expansion, Explore Complexity has been able to easily position themselves as a major player. Which of the four categories of Porter’s diamond framework best explains this advantage? A) demand conditions B) factor conditions C) related and supporting industries/complementors D) competitive intensity in the focal industry Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-06 Apply Porter's diamond framework to explain why certain industries are mor Topic : Porter's Diamond Framework Source : Chapter 10 Test Bank > MC Qu. 24 When Amal, the CEO of Explore Complexity...

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88) A payroll company in the nation of Osterlich is seeking to expand beyond its borders while

limiting administrative and political distance in the new country. Which potential site is the best one for this type of expansion? A) one that used to have a colonizer or colonized relationship with Osterlich B) one that is outside of any trading blocs that Osterlich participates in C) one that considers payroll companies essential to national security D) one that has extensive tariffs and trade quotas to protect businesses Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 10-03 Apply the CAGE distance framework to guide MNE decisions on which countrie Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 61 A payroll company in the nation of Osterlich...

89) What are the main reasons a firm expands internationally? List them, and then give details on

the benefits of one reason.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-02 Explain why companies expand internationally, and evaluate the advantages Topic : The Advantages and Disadvantages of a Global Strategy Source : Chapter 10 Test Bank > SA Qu. 105 What are the main reasons a firm expands...

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90) Identify the three major advantages to a firm that wishes to expand their operations in

international markets.

91) Explain what is meant with the term coined by Geert Hofstede known as national culture.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-03 Apply the CAGE distance framework to guide MNE decisions on which countrie Topic : Strategies for Global Competition Source : Chapter 10 Test Bank > SA Qu. 119 Explain what is meant with the term coined b...

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92) To keep track of the latest developments in computing, Lenovo’s research centers are located

in China, the United States, and Japan. Also, to benefit from low-cost labor and reduced shipping costs, the company’s manufacturing facilities are in Mexico, India, and China. Lenovo’s products are the same for its domestic and foreign markets. Which strategy does Lenovo follow? A) a localization strategy B) a multidomestic strategy C) a transnational strategy D) a global-standardization strategy Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-05 Apply the cost-responsiveness framework to evaluate the four different str Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 85 To keep track of the latest developments in ...

93) Discuss how demand conditions within Porter’s diamond framework affect national

competitive advantage.

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94) Which of the following will most likely harm the reputation of a multinational enterprise

(MNE)? A) A sweatshop owned by an MNE has an explosion that kills hundreds of workers. B) Principal-agent problems cause an MNE to merge with another MNE. C) Wages for workers in a factory owned by an MNE increase, causing profits to decline. D) Increased competition causes an MNE to close a factory in a developing country. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-02 Explain why companies expand internationally, and evaluate the advantages Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 42 Which of the following will most likely harm...

95) When firms sell their products overseas with little or no change to the products, they may

increase the expropriation of intellectual property and increase the risk of piracy. This is considered a serious disadvantage when pursuing a(n)________ strategy. A) functional-level B) cost-leadership C) differentiation D) international Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-02 Explain why companies expand internationally, and evaluate the advantages Topic : The Advantages and Disadvantages of a Global Strategy Source : Chapter 10 Test Bank > MC Qu. 27 When firms sell their products overseas with...

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96) Maria wants to pursue an international strategy but is concerned that foreign markets aren’t

ready for her products and services. You recommend that she engage in________, which would be contract based and would limit risk and exposure of her investments. A) equity alliance B) greenfield operations C) exporting D) licensing Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-04 Compare and contrast the different options MNEs have for entering foreign Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 16 Maria wants to pursue an international strat...

97) Cyberdyne Systems Corp. manufactures cooking and baking equipment and has its base in

the country of Handled. It has approximately 300 stores across the country and is already active in three foreign countries. It attempts to establish itself in the country of Balalaika and uses its low-cost strategy to do so. However, due to the additional costs associated with training, coordinating across geographic distances, and other costs associated with doing business in an unfamiliar cultural and economic environment, Cyberdyne Systems Corp. incurs huge financial losses in Balalaika. In this scenario, Cyberdyne Systems Corp.’s failure to establish itself successfully in Balalaika occurs most likely because A) it underestimated its liability of foreignness when entering the Balalaika market. B) it overestimated the geographic and cultural distance between Handled and Balalaika. C) it overestimated its need to protect its intellectual property. D) it underestimated its dwindling reputation before it enters the Balalaika market. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 10-02 Explain why companies expand internationally, and evaluate the advantages Topic : The Advantages and Disadvantages of a Global Strategy Source : Chapter 10 Test Bank > MC Qu. 50 Cyberdyne Systems Corp. manufactures cooking...

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98) Because keeping cost low is critical to IKEA’s value innovation, it switched from a(n) A) international strategy to a global-standardization strategy. B) transnational strategy to a global-standardization strategy. C) transnational strategy to a multidomestic strategy. D) international strategy to a multidomestic strategy. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 10-01 Define globalization, multinational enterprise (MNE), foreign direct inves Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 28 Because keeping cost low is critical to IKEA...

99) Aperture Science Inc. has decided to enter into a foreign market by setting up its own

production facilities and distribution channels from scratch. This will give it strong control over all its business activities. Which of these foreign-entry modes will Maddox most likely choose? A) acquisition B) export C) greenfield operation D) joint venture Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 10-04 Compare and contrast the different options MNEs have for entering foreign Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 76 Aperture Science Inc. has decided to enter i...

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100)

What are the implications of continued economic development across the globe for multinational enterprises (MNEs)? Explain using China as an example.

101)

When should a firm choose exporting as a foreign-entry mode?

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102)

Dolores is the CEO of Quantum Electronics LLC and wishes to develop additional competencies for her business. She is mostly interested in taking advantage of the________, which are clustered firms that have unique skill sets located in specific geographic regions. A) transnational strategies B) CAGE distance framework C) advantages of foreignness D) communities of learning

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-02 Explain why companies expand internationally, and evaluate the advantages Topic : The Advantages and Disadvantages of a Global Strategy Source : Chapter 10 Test Bank > MC Qu. 14 Dolores is the CEO of Quantum Electronics...

103)

In recent years as economic forces have changed, many governments and multinational enterprises have been more interested in negotiating bilateral trade agreements between countries rather than multinational agreements through international agencies. ⊚ true ⊚ false

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-01 Define globalization, multinational enterprise (MNE), foreign direct inves Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > TF Qu. 02 In recent years as economic forces have chan...

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104)

Fierce domestic competition in Globex makes a tough environment for any motorcycle company. Success requires top-notch engineering of chassis and engines, as well as keeping costs and fuel consumption in check. As a result, Globex’s motorcycles have a competitive advantage in the global market. According to Porter’s diamond framework, this scenario shows the influence of competitive intensity in A) a peripheral industry. B) related complementors. C) supportive complementors. D) a focal industry.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 10-06 Apply Porter's diamond framework to explain why certain industries are mor Topic : Analyzing Industry Competition Source : Chapter 10 Test Bank > MC Qu. 101 Fierce domestic competition in Globex makes ...

Jeremy is a strategist who wants to decide on the appropriate strategy to help his firm “go global.” Which of the following should he consider while choosing his strategy? A) He should remember that he has only one framework at his disposal to make global strategy decisions. B) He should rely on his firm’s business-level strategy as a clue to possible strategies pursued globally. C) He must be aware of the fact that despite globalization and the emergence of the internet, firm geographic location has actually maintained its importance. D) He must remember that higher levels of control and a lower likelihood of any loss in reputation go along with less investment-intensive foreign-entry modes.

105)

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-06 Apply Porter's diamond framework to explain why certain industries are mor Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 94 Jeremy is a strategist who wants to decide o...

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106)

Which of the following countries has a high geographic distance but a low cultural distance from the United States? A) Canada B) Mexico C) Portugal D) Ireland

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-03 Apply the CAGE distance framework to guide MNE decisions on which countrie Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 69 Which of the following countries has a high ...

107)

Exporting is best described as A) producing goods in one country to sell in another. B) building new, fully owned plants and facilities from scratch. C) purchasing an existing facility to launch a new production activity. D) bringing goods or services into a country from abroad for sale.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 10-04 Compare and contrast the different options MNEs have for entering foreign Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 75 Exporting is best described as

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108)

Which of the following is a feature of the Globalization 2.0 stage? A) Two-way knowledge flowed between the local subsidiaries and their U.S. headquarters. B) Only sales and distribution operations took place overseas, while all the important business functions were located in the home country. C) Huge investments in fiber-optic cable networks around the world enabled companies to operate as global-collaboration networks. D) Multinational enterprises (MNEs) began to create smaller, self-contained replicas of themselves in a few key countries.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-01 Define globalization, multinational enterprise (MNE), foreign direct inves Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 33 Which of the following is a feature of the G...

109)

A firm that draws on multiple, equally important innovation hubs throughout the world is using A) a polycentric innovation strategy. B) intellectual property exposure. C) the CAGE distance framework. D) location economies.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-02 Explain why companies expand internationally, and evaluate the advantages Topic : The Advantages and Disadvantages of a Global Strategy Source : Chapter 10 Test Bank > MC Qu. 48 A firm that draws on multiple, equally...

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110)

According to the cost-responsiveness framework, what strategy do you believe Lenovo has used and why?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-05 Apply the cost-responsiveness framework to evaluate the four different str Topic : Integration-Responsiveness Framework Source : Chapter 10 Test Bank > SA Qu. 120 According to the cost-responsiveness ...

111)

Los Pollos Hermanos is a company that makes frozen lunch and dinner entrées. Based on what you know about companies like Nestlé, what action should Los Pollos Hermanos take as it strives to become multinational? A) Try a global-standardization strategy, which creates standardized products and competes mainly on price. B) Attempt an international strategy, controlling costs and taking advantage of economies of scale by selling the same (or very similar) products around the globe. C) Consider a transnational strategy by creating a blue ocean market. D) Pursue a multidomestic strategy, customizing product offerings to suit local preferences.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 10-05 Apply the cost-responsiveness framework to evaluate the four different str Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 96 Los Pollos Hermanos is a company that makes ...

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112)

Pearson Specter Litt is a global internet company that offers country-specific variations of its sites, keeping in mind the linguistic and religious differences between the countries it serves. Pearson Specter Litt is most likely doing this to________ distance from the other countries. A) reduce its cultural B) reduce its geographical C) increase its economic D) increase its administrative

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 10-03 Apply the CAGE distance framework to guide MNE decisions on which countrie Topic : Global Product Strategies Source : Chapter 10 Test Bank > MC Qu. 57 Pearson Specter Litt is a global internet co...

113)

Sirius Cybernetics Inc. has a national competitive advantage in the pharmaceutical industry. This means that the country A) is a potential foreign market for multinational pharmaceutical companies to sell their products. B) has low levels of competition, providing other multinational companies with an opportunity to take over the pharmaceutical industry. C) is a world leader in the pharmaceutical industry. D) has nationalized the pharmaceutical industry.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-05 Apply the cost-responsiveness framework to evaluate the four different str Topic : Analyzing Industry Competition Source : Chapter 10 Test Bank > MC Qu. 92 Sirius Cybernetics Inc. has a national compe...

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114)

Which of the following has been a key driver for firms to expand globally during the Globalization 3.0 stage? A) increasing trade barriers that protect businesses B) free use of formerly protected intellectual property C) exporting newly available raw materials, such as rubber and coal D) benefits from lower labor costs in manufacturing and services

115)

Administrative and political distances, such as the presence or absence of colonial ties, are part of the cost-responsiveness framework. ⊚ true ⊚ false

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-03 Apply the CAGE distance framework to guide MNE decisions on which countrie Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > TF Qu. 05 Administrative and political distances...

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116)

Rainholm Industries is a large snack-food conglomerate that operates in more than 50 countries and employs more than 80,000 people across the world. It operates through multiple regional product divisions, which tend to function as autonomous profit-and-loss centers. This allows the company to reap significant economies of scale. Though each division acts as an autonomous firm with its individual regional leaders, frequent sharing of knowledge between the divisions allows for global learning. These factors help the company reconcile product and service differentiations at low cost. Which of the following strategies does Rainholm Industries most likely use? A) a transnational strategy B) a multidomestic strategy C) an international strategy D) a focused-differentiation strategy

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 10-05 Apply the cost-responsiveness framework to evaluate the four different str Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 88 Rainholm Industries is a large snack-food co...

117)

Firms that consider international expansion will often examine absolute metrics on which countries to pursue investments in but also consider relative distance. To help firms decide where to compete,________ was developed to help firms make this decision. A) the polycentric strategic framework B) Porter’s diamond framework C) the MNE decision-making model D) the CAGE distance framework

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-03 Apply the CAGE distance framework to guide MNE decisions on which countrie Topic : The Advantages and Disadvantages of a Global Strategy Source : Chapter 10 Test Bank > MC Qu. 15 Firms that consider international expansion ...

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118)

Communities of learning are metropolitan areas that have large numbers of high school graduates who are ready for a university education. ⊚ true ⊚ false

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 10-02 Explain why companies expand internationally, and evaluate the advantages Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > TF Qu. 04 Communities of learning are metropolitan are...

119)

Black Mesa Minerals Inc. wants to expand into the international market. It does not want to spend a very large amount of money for this process. However, Black Mesa Minerals wants to maintain some control in the foreign market. Which of the following would be the best entry mode for this firm? A) acquisitions B) exports C) joint ventures D) greenfield operations

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 10-04 Compare and contrast the different options MNEs have for entering foreign Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 71 Black Mesa Minerals Inc. wants to expand int...

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120)

Peter is a senior vice president at a textile manufacturer that wants to move from being 20 percent globalized to 70 percent globalized in the next 10 years. What are some possible drawbacks that Peter’s company must anticipate? A) Improved communication technology may lead to longer production cycles. B) Governments may lower barriers to international trade. C) None. All political and economic factors point to the rise of globalization. D) Rising wages may cancel out cost savings of access to low-cost input factors.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 10-01 Define globalization, multinational enterprise (MNE), foreign direct inves Topic : Globalization, Multinational Enterprise, Foreign Direct Investment, and Global Strategy Source : Chapter 10 Test Bank > MC Qu. 36 Peter is a senior vice president at a textil...

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Answer Key Test name: Chapter 10 Test Bank 1) B

Foreign-entry modes with a high level of control, such as foreign acquisitions or greenfield plants built abroad, reduce a firm’s exposure to two particular downsides of global business: loss of reputation and loss of intellectual property. 2) Short Answer

Cultural distance between two countries increases with different languages, ethnicities, religions, social norms, and dispositions; lack of connective ethnic or social networks; and lack of trust and mutual respect. Administrative and political distance between two countries increases with absence of a trading bloc, shared currency (monetary association) or political association, and/or colonial ties; political hostilities; and weak legal and financial institutions. 3) B

Hooper’s Store most likely pursues an international strategy. In this strategy, a firm sells the same products or services in both domestic and foreign markets. This strategy is advantageous when the multinational enterprise faces low pressures for both local responsiveness and cost reductions. 4) Short Answer

Multinational companies face two opposing forces when competing around the globe: cost reductions versus local responsiveness. One of the core drivers for globalization is the expansion of a firm’s total market to achieve economies of scale and drive down costs. Cost reductions achieved through a globalstandardization strategy often reinforce a cost-leadership strategy at the business level. Local responsiveness increases the differentiation of products and services, reinforcing a differentiation strategy at the business level. Although there seems to be some convergence of consumer preferences across the globe, national differences remain, due to distinct institutions and cultures. 5) B

Michael Porter advanced a framework to explain national competitive advantage—why some nations outperform others in specific industries. This framework is called Porter’s diamond of national competitive advantage and consist of the following four factors: factor conditions, competitive intensity in a focal industry, demand conditions, related and supporting industries/complementors.

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6) A

In this scenario, Duke & Duke Autos Inc. is reaping the benefits of location economies. Location economies are benefits from locating value chain activities in the world’s optimal geographies for a specific activity. 7) Short Answer

Student examples will vary. A sample answer follows. The engine behind globalization is the multinational enterprise (MNE)—a company that deploys resources and capabilities in the procurement, production, and distribution of goods and services in at least two countries. MNEs need an effective global strategy that enables them to gain and sustain a competitive advantage when competing against other foreign and domestic companies around the world. By making investments in value chain activities abroad, MNEs engage in foreign direct investment. For example, the European aircraft maker Airbus invested more than $1 billion in the Gulf Coast area in Alabama to build jetliners. 8) A

Rising wages, fewer workers due to the effects of China’s one-child-per-family policy, and appreciation of the Chinese currency now combine to lessen the country’s advantage in low-cost manufacturing. 9) D

During Globalization 1.0, basically all the important business functions were located in the home country. Typically, only sales and distribution operations took place overseas—essentially, U.S. companies exported goods to other markets. 10) TRUE

MNEs reap location economies—benefits from locating value chain activities in optimal geographies for a specific activity. 11) B

The type of organization that comparatively requires the highest levels of investment and control is acquisition. 12) C

Acquisition is the foreign-entry mode that would best suit Gregarious Simulation Systems Inc. Greenfield operations and acquisitions are foreign-entry modes that require a high level of investment in terms of capital and other resources but also allow for a high level of control. 13) A

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Michael Porter’s diamond framework is used to explain national competitive advantage. It analyzes why some nations outperform others in specific industries. 14) A

More gains in social welfare and living standards can be had through further globalization if future integration is managed effectively through coordinated efforts by governments. 15) A

Local responsiveness is the need for a firm to tailor product and service offerings to fit local consumer preferences and host-country requirements. 16) B

Canada and Mexico partner with the United States in the USMCA treaty, facilitating trade in goods and services among the three countries. An administrative and political distance factor that is significant in predicting the amount of trade between two countries include whether they belong to the same regional trading bloc. 17) Short Answer

A multidomestic strategy can be costly and inefficient because it requires the duplication of key business functions across multiple countries. Each country unit tends to be highly autonomous, and the multinational enterprise is unable to reap economies of scale or learning across regions. Moreover, the risk of intellectual property appropriation increases when companies follow a multidomestic strategy. 18) B

There are several advantages of “going global.” In this case, Raul could benefit from gaining access to low-cost input factors that could drive his production costs down. 19) C

Bertelsmann follows a transnational strategy. This type of strategy attempts to combine the benefits of localization and standardization strategies by creating a global matrix structure. 20) A

In Michael Porter’s diamond framework, factor conditions describe a country’s endowments in terms of natural, human, and other resources. 21) D

India has carved out a competitive advantage in BPO, not only because of low-cost labor but also because of an abundance of well-educated, English-speaking young people. 22) D

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A multidomestic strategy is costly and inefficient because it requires the duplication of key business functions across multiple countries. Each country unit tends to be highly autonomous. Similarly, for a transnational strategy, high local responsiveness typically requires that key business functions are frequently duplicated in each host country. 23) D

Airbus made a significant strategic commitment to the U.S. market, the destination of the majority of its new jetliners. Being located in Alabama allows Airbus to be much closer to its customers and thus to receive and incorporate feedback, as individual airlines request specific customizations. It allows Airbus to take advantage of business-friendly conditions such as lower taxes, labor cost, and cost of living, plus other incentives provided by host states in the southern United States. Making Airbus planes in the United States also prevents the European company from being forced to accept import restrictions or being exposed to tariffs levied on the companies by a U.S. administration. 24) B

Harley-Davidson, Rolex, and Starbucks are said to be following an international strategy because they offer the same products or services in all their stores throughout the world. An international strategy is essentially a strategy in which a company sells the same products or services in both domestic and foreign markets. It enables MNEs to leverage their home-based core competencies in foreign markets. 25) D

A greater cultural distance can increase the cost and uncertainty of conducting business abroad. In short, greater cultural distance increases the liability of foreignness. 26) FALSE

Porter’s diamond framework helps explain why some nations outperform others in specific industries. 27) D

In Globalization 1.0 stage, basically all the important business functions were located in the home country. Typically, only sales and distribution operations took place overseas—essentially, U.S. companies exported goods to other countries. 28) B

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Yubaba Inc. will sell the same products and services in both domestic and foreign markets, whereas Axe Inc. will customize its product offerings to suit local requirements. An international strategy is essentially a strategy in which a company sells the same products or services in both domestic and foreign markets. Firms pursuing a multidomestic strategy attempt to maximize local responsiveness, hoping that local consumers will perceive their products and services as local. 29) D

When two neighboring democratic countries that are part of a trading bloc follow different religions and social norms, they most likely have high cultural distance. Cultural differences find their expression in language, ethnicity, religion, and social norms. 30) FALSE

One of the core drivers for globalization is to expand the total market of firms in order to achieve economies of scale and drive down costs. For many business executives, the move toward globalization is based on the globalization hypothesis, which states that consumer needs and preferences throughout the world are converging and thus becoming increasingly homogenous. If Delos Inc. were an example of a firm that helps to support the globalization hypothesis, it would sell its sparkplugs in more than 30 countries, not 30 locations throughout the same country. 31) B

Walmart attempted to implement its U.S. personnel policies and procedures: the Walmart cheer, a door greeter, smiling associates always available to customers and offering help, bagging groceries at the checkout, and so on. German employees, however, resisted the transfusion of American corporate values. Worse, the first Walmart boss in Germany—installed directly from the Arkansas headquarters—spoke no German. He decreed that English would be the official inhouse language. 32) A

Foreign-entry modes with a high level of control such as foreign acquisitions reduce the firm’s exposure to two particular downsides of global business: loss of reputation and loss of intellectual property. 33) A

In this scenario, Blue Cat Inc. most likely pursues a global-standardization strategy. Multinational companies following a global-standardization strategy attempt to reap significant economies of scale and location economies by pursuing a global division of labor based on wherever best-of-class capabilities reside at the lowest cost. 34) D

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Exporting is one of the oldest forms of internationalization. It was used extensively in the Globalization 1.0 stage. 35) D

This liability consists of the additional costs of doing business in an unfamiliar cultural and economic environment and of coordinating across geographic distances. 36) FALSE

Demand conditions are the specific characteristics of demand in a firm’s domestic market. A home market made up of sophisticated customers who hold companies to a high standard of value creation and cost containment contributes to national competitive advantage. Moreover, demanding customers may also clue firms into the latest developments in specific fields and may push firms to move research from basic findings to commercial applications for the marketplace. For example, due to dense urban living conditions, hot and humid summers, and high energy costs, it is not surprising that Japanese customers demand small, quiet, and energy-efficient air conditioners. 37) Short Answer

Acquisitions and greenfield operations are foreign-entry modes that require a high level of investments in terms of capital and other resources, but they also allow for a high level of control. In some instances, the host country requires foreign companies to form joint ventures in order to conduct business there, but some firms prefer greenfield operations—building new plants and facilities from scratch. 38) Short Answer

Companies that face a highly competitive environment at home tend to outperform global competitors that lack such intense domestic competition. For example, fierce domestic competition in Germany, combined with demanding customers and the no-speed-limit Autobahn, create a tough environment for any car company. Success requires top-notch engineering of chassis and engines, as well as keeping costs and fuel consumption in check. The extremely tough home environment amply prepared German car companies such as Volkswagen (which also owns Audi and Porsche), BMW, and Daimler for global competition. 39) D

Cyberdyne most likely focuses more on cost reductions when compared to Bayside Inc. The global-standardization strategy arises out of the combination of high pressure for cost reductions and low pressure for local responsiveness. An international strategy is advantageous when the multinational enterprise faces low pressures for both local responsiveness and cost reductions. 40) D

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Companies now freely locate business functions anywhere in the world based on an optimal mix of costs, capabilities, and PESTEL factors. Multinational enterprises have reorganized from selfcontained operations in a few selected countries to a more seamless global enterprise with centers of expertise. 41) TRUE

MNEs pursuing a multidomestic strategy attempt to maximize local responsiveness, hoping that local consumers will perceive their products or services as local. This strategy arises out of the combination of high pressure for local responsiveness and low pressure for cost reductions. Many MNEs use a multidomestic strategy when entering host countries with large and/or idiosyncratic domestic markets, such as Japan or Saudi Arabia. 42) B

Although a transnational strategy is quite appealing, the required matrix structure is rather difficult to implement because of the organizational complexities involved. High local responsiveness typically requires that key business functions to be duplicated in each host country, leading to higher costs. 43) B

Globalization is a process of closer integration and exchange between different countries and peoples worldwide, made possible by falling trade and investment barriers, advances in telecommunications, and reductions in transportation costs. Combined, these factors reduce the costs of doing business around the world, opening the doors to a much larger market than any one home country. Globalization also allows companies to source supplies at lower costs, to learn new competencies, and to further differentiate products. 44) A

In a multidomestic strategy, a firm attempts to maximize local responsiveness, hoping that local consumers will perceive its products and services as local. 45) A

Local responsiveness is the need to tailor product and service offerings to fit local consumer preferences and host-country requirements. Jean Gene has performed poorly in this regard because it has failed to satisfy the consumer preferences of its host country, France. 46) Short Answer

Geographic distance most affects industries or products with low value-to-weight ratio (cement); that are fragile or perishable (glass, meats); or in which communications are vital (financial services).

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47) D

A greenfield investment is a form of foreign direct investment in which a multinational enterprise sets up a foreign subsidiary or foreign operations, building new, fully owned plants and facilities from scratch. 48) C

Most of the costs and risks involved in expanding beyond the domestic market are created by distance. Distance not only denotes geographic distance (in miles or kilometers) but also includes, per the CAGE acronym, cultural distance, administrative and political distance, and economic distance. 49) C

The wealth and per capita income of consumers are the most important determinants of economic distance. 50) Short Answer

Student examples will vary. A sample answer follows. One of the most valuable resources that a firm may possess is its reputation. A firm’s reputation can have several dimensions, including a reputation for innovation, customer service, or brand reputation. Apple’s brand, for example, stands for innovation and superior customer experience. Apple’s reputation is also one of its most important resources. Apple’s brand is valued at $600 billion, making it (with Amazon and Google) one of the three most valuable brands in the world. Globalizing a supply chain can have unintended side effects. These can lead to a loss of reputation and diminish the multinational enterprise’s competitiveness. A possible loss in reputation can be a considerable risk and cost for doing business abroad. Low wages, long hours, and poor working and living conditions contributed to a spate of suicides in 2010 at Foxconn, Apple’s main supplier in China. The backlash against alleged sweatshop conditions in Foxconn prompted Apple to work with its main supplier to improve working conditions and wages. Apple also started to diversify its supplier base. 51) B

In this scenario, Entertainment 720 Inc. most likely implements a multidomestic strategy. Firms pursuing a multidomestic strategy attempt to maximize local responsiveness, hoping that local consumers will perceive their products and services as local. 52) D

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Although Walmart in Canada is a virtual carbon copy of Walmart in the United States, Walmart in China is quite different. This is because replication of an existing business model is much easier in a country where the incomes are relatively similar and resources, complements, and infrastructure are of roughly equal quality. 53) D

Stratton Oakmont Inc. will most likely be able to benefit from economic arbitrage. Companies from wealthy countries trade with companies from low-wealth countries to benefit from economic arbitrage, which is one of the main benefits of going global. The textile industry is a prime example. In going global, it has successfully accessed low-cost input factors. 54) FALSE

Higher levels of control, and thus greater protection of intellection property and a lower likelihood of any loss in reputation, go along with more investment-intensive foreign-entry modes such as acquisitions or greenfield plants. 55) D

Multinational enterprises typically implement a transnational strategy through a global matrix structure. This organizational structure combines economies of scale along specific product divisions with economies of learning attainable in specific geographic regions. The idea is that best practices, ideas, and innovations will be diffused throughout the world, regardless of their point of origin. 56) C

The issue of protecting intellectual property in foreign markets looms large. The software, movie, and music industries have long lamented large-scale copyright infringements in many foreign markets. In addition, when required to partner with a foreign host firm, companies may find their intellectual property being siphoned off and reverse engineered. For example, Japanese and European engineering companies entered China to participate in building the world’s largest network of high-speed trains worth billions of dollars. Companies such as Kawasaki Heavy Industries (Japan), Siemens (Germany), and Alstom (France) were joint venture partners with domestic Chinese companies. These firms now allege that the Chinese partners built on the Japanese and European partners’ advanced technology to create their own, next-generation highspeed trains. To make matters worse, the Japanese and European firms also claim that the Chinese companies now compete against them in other lucrative markets, such as Saudi Arabia, Brazil, and even California, with trains of equal or better capabilities but at much lower prices. 57) B

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In this example, Unilever is trying to reap the benefits of location economies, which are benefits from locating value chain activities in the world’s optimal geographies for a specific activity. 58) B

Globalization is a process of closer integration and exchange between different countries, businesses, and peoples worldwide. 59) B

Rainholm Industries is following a global-standardization strategy, which seeks to reap economies of scale and location economies by pursuing a global division of labor based on wherever best-of-class capabilities reside at the lowest cost. 60) A

Companies that face a highly competitive environment at home tend to outperform global competitors that lack such intense domestic competition. For example, fierce domestic competition in Germany, combined with demanding customers and the no-speed-limit autobahn, make a tough environment for any car company. Success requires top-notch engineering of chassis and engines, as well as keeping costs and fuel consumption ($8-per-gallon gas) in check. The extremely tough home environment amply prepared German car companies such as Volkswagen (which also owns Audi and Porsche), BMW, and Daimler for global competition. 61) A

MNEs are closely involved with the globalization process. This process benefits from advances in telecommunications, falling trade and investment barriers, and reduced transportation costs. 62) A

Fruits de Mer Company should pursue a multidomestic strategy to maximize local responsiveness, hoping that local consumers will perceive its products or services as local. 63) B

Between the two countries, trade of luxury items manufactured in Aldorria will be most affected. Economic distance most affects industries or products for which demand varies by income (such as cars). 64) C

Macmillan Toys Inc. is pursuing a transnational strategy in an attempt to combine the high local responsiveness of a localization strategy with the lowest-cost position attainable from a globalstandardization strategy. 65) A

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Geographic distance is particularly relevant when trading products with low value-to-weight ratios such as steel, cement, or other bulk products, and fragile and perishable products such as glass or fresh meats and fruits. 66) C

German labor laws—more protective than labor laws in the United States—drove up costs. 67) C

The country that is most likely to be the closest to Dinotopia in terms of cultural distance is Maldonia, where people speak English and have a low standard of living. Cultural differences find their expression in language, ethnicity, religion, and social norms. 68) FALSE

Although many large firms are more than 50 percent globalized—meaning that more than half of their revenues are from outside the home country—the world itself is far less global. If we look at a number of different indicators, the level of globalization is no more than 10 to 25 percent. 69) Short Answer

Student examples will vary. A sample answer follows. A multidomestic strategy is common in the consumer products and food industries. For example, Swiss-based food manufacturer Nestlé is known for customizing its product offerings to suit local preferences, tastes, and requirements. Given the quality in the consumer products and food industries, along with the strong brand names and core competencies in research and development, it is not surprising that multinational enterprises in these industries generally pursue a differentiation strategy at the business level. 70) C

Exporting, licensing, and franchising are vehicles of foreign expansion that require low investments but also allow for a low level of control. 71) C

Four main dimensions of culture have emerged: power distance, individualism, masculinityfemininity, and uncertainty avoidance. More recently, Hofstede added two more cultural dimensions: long-term orientation and indulgence. 72) B

This scenario shows a situation with extreme political distance between two countries, caused by a dispute over an area of land. Such political distance could prevent Macmillan Toys from expanding into Rusalka.

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73) B

Multinational enterprises (MNEs) pursuing a multidomestic strategy attempt to maximize local responsiveness, hoping that local consumers will perceive their products or services as local. This strategy arises out of the combination of high pressure for local responsiveness and low pressure for cost-reductions. Many MNEs use a multidomestic strategy when entering host countries with large and/or idiosyncratic domestic markets, such as Japan or Saudi Arabia. A multidomestic strategy is common in the consumer products and food industries. For example, Swiss-based Nestlé, the largest food company in the world, is known for customizing its product offerings to suit local preferences, tastes, and requirements. 74) B

Unlike Heartland Express, Perfect Paws Inc. will be able to pursue a differentiation strategy at the business level. For firms following a global-standardization strategy, their business-level strategy tends to be cost leadership. Firms following a multidomestic strategy generally pursue a differentiation strategy at the business level. 75) Short Answer

Student examples will vary. A sample answer follows. Cultural distance is the cultural disparity between the internationally expanding firm’s home country and its targeted host country. A firm’s decision to enter certain international markets is influenced by cultural differences. A greater cultural distance can increase the cost and uncertainty of conducting business abroad. In short, greater cultural distance increases the liability of foreignness. One firm that is affected is McDonald’s, which does not sell its signature beef hamburgers in India because many Indians are vegetarians for religious reasons. 76) Short Answer

Student examples will vary. A sample answer follows. The issue of protecting intellectual property in foreign markets looms large. The software, movie, and music industries have long lamented large-scale copyright infringements in many international markets. In addition, when required to partner with an international host firm, companies may find their intellectual property being siphoned off of reverse engineered. For example, when a multinational enterprise sells its products in foreign markets with little or no change, it leaves itself open to the expropriation of intellectual property. Looking at the MNE’s products and services, pirates can reverse-engineer the products to discover the intellectual property embedded in them. In Thailand, for example, a flourishing market for knockoff luxury sports cars (e.g., Ferraris, Lamborghinis, and Porsches) has sprung up. 77) C

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Strong legal and ethical pillars in addition to well-functioning economic institutions such as capital markets and an independent central bank reduce administrative and political distance. Strong institutions, both formal and informal, reduce uncertainty and thus reduce transaction costs. 78) D

This example shows the effectiveness of related and supporting industries/complementors. The availability of top-notch complementors, such as the suppliers in Japan, further strengthens a firm’s national competitive advantage. 79) A

In this scenario, Livia Let Lie is most likely a multinational enterprise (MNE). The engine behind globalization is the MNE—a company that deploys resources and capabilities in the procurement, production, and distribution of goods and services in at least two countries. 80) B

Wealthy countries engage in relatively more cross-border trade than poorer ones. Rich countries tend to trade with other rich countries; poor countries also trade more frequently with rich countries than with other poor countries. 81) A

Administrative and political distance between two countries increases with absence of colonial ties. 82) B

Interestingly, natural resources are often not needed to generate world-leading companies because competitive advantage is often based on other factor endowments such as human capital and know-how. 83) A

MNEs in the Globalization 3.0 stage freely locate business functions anywhere in the world based on an optimal mix of costs, skills, and PESTEL factors. This has caused MNEs to become global collaboration networks that perform business functions throughout the world. 84) C

The transnational strategy is similar to a blue ocean strategy because they both focus on product and/or service differentiation and low costs. 85) FALSE

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Hofstede’s national-culture research combines the distinct dimensions of culture into an aggregate measure for each country. Multinational enterprises then can compare the nationalculture measures for any two country pairings to inform their entry decisions. The difference between scores indicates cultural distance, the cultural disparity between the internationally expanding firm’s home country and its targeted host country. If we calculate the cultural distance from the United States to various countries, for example, we find that some countries are culturally very close to the United States. Australia, for example, has an overall cultural distance score of 0.02, a very low number. Other countries are culturally quite distant. Russia has an overall cultural distance score of 4.42. 86) TRUE

Some countries, such as China, Germany, South Korea, and Japan, focus on export-led economic growth, which drives many of their domestic businesses to become multinational enterprises (MNEs). For companies based in smaller economies, becoming an MNE may be necessary to achieve growth or to gain and sustain competitive advantage. Examples include Acer (Taiwan), Casella Wines (Australia), and Nestlé (Switzerland). 87) D

Companies that face a highly competitive environment at home tend to outperform global competitors that lack such intense domestic competition. This example best illustrates the concept of the competitive intensity in the focal industry in which Gregarious Simulation Systems started in. 88) A

Colony–colonizer relationships have a strong positive effect on bilateral trade between countries. British companies continue to trade heavily with businesses from its former colonies in the commonwealth; Spanish companies trade heavily with Latin American countries; and French businesses trade with the franc zone of West Africa. 89) Short Answer

The main reasons firms decide to expand internationally are to 1) Gain access to a larger market; 2) Gain access to low-cost input factors; and/or 3) Develop new competencies. Answers about benefits will vary. A sample answer follows: Firms that base their competitive advantage on a low-cost leadership strategy are particularly motivated to go overseas to gain access to low-cost input factors. Access to low-cost raw materials such as lumber, iron ore, oil, and coal was a key driver behind Globalization 1.0 and 2.0. During Globalization 3.0, firms expanded globally to benefit from lower labor costs in manufacturing and services. 90) Short Answer

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There are three major advantages to competing globally: gaining access to new markets, gaining access to low-cost inputs, and developing new competencies. Becoming an MNE provides significant opportunities for companies, given economies of scale and scope that can be reaped by participating in a much larger market. MNEs that base their competitive advantage on a lowcost leadership strategy are particularly motivated to go overseas to gain access to low-cost input factors. Finally, some MNEs pursue a global strategy to develop new competencies. This motivation is particularly strong for firms that base their competitive advantage on a differentiation strategy. 91) Short Answer

According to Geert Hofstede, national culture is the collective mental and emotional “programming of the mind” that differentiates human groups. Culture is made up of a collection of social norms and mores, beliefs, and values. Culture captures the often unwritten and implicitly understood rules of the game. 92) D

The global-standardization strategy would require Lenovo to organize its operations worldwide to develop uniform products for its domestic and foreign markets. Firms following a globalstandardization strategy attempt to reap significant economies of scale and location economies by pursuing a global division of labor based on wherever best-of-class capabilities reside at the lowest cost. 93) Short Answer

The explosion in a sweatshop will most likely harm an MNE’s reputation because sweatshops are known for having poor, often dangerous working conditions and low wages. Therefore, an MNE that opts to use a sweatshop lowers its reputation. Having an explosion that kills hundreds of workers in the sweatshop will harm the MNE’s reputation even more. 95) D

The expropriation of intellectual property by foreign competitors is a major disadvantage of pursuing an international strategy.

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96) C

Exporting is used to test whether a foreign market is ready for a firm’s products and requires the smallest investments. Generally, exporting is contract based. 97) A

In this scenario, Cyberdyne Systems Corp.’s failure to establish itself successfully in Balalaika occurs most likely because it underestimated its liability of foreignness when entering the Balalaika market. Liability of foreignness consists of the additional costs of doing business in an unfamiliar cultural and economic environment and of coordinating across geographic distances. 98) A

Because of its focus on low cost, IKEA shifted from an international strategy to a globalstandardization strategy. It attempts to achieve economies of scale through effectively managing a global supply chain. 99) C

Greenfield operations involve building new, fully owned plants and facilities from scratch. 100)

Short Answer Continued economic development across the globe has two consequences for MNEs. First, rising wages and other costs are likely to negate any benefits of access to low-cost input factors. Second, as the standard of living rises in emerging economies, MNEs are hoping that increased purchasing power will enable workers to purchase the products they used to make for export only. China’s labor costs, for example, are steadily rising in tandem with an improved standard of living. In the decade between 2011 and 2022, China’s labor costs nearly doubled. Rising wages, fewer workers due to the effects of China’s one-child-per-family policy, and appreciation of the Chinese currency now combine to lessen the country’s advantage in low-cost manufacturing. This shift aligns with the Chinese government’s economic policy, which wants to see a move from “Made in China” to “Designed in China,” to capture more of the value added. For instance, the value added of manufacturing an iPhone by Foxconn in China is only about 5 percent. 101)

Short Answer Exporting as a foreign-entry mode requires low investments but also allows for a low level of control. Exporting involves producing goods in one country to sell in another. It is one of the oldest forms of internationalization (part of Globalization 1.0). It is often used to test whether a foreign market is ready for a firm’s products. 102)

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Firms participate in foreign direct investments to be part of communities of learning, which are often contained in specific geographic regions. These communities of learning will often lead to the development of additional competencies. 103)

TRUE Several black swan events (that is, highly improbable but high-impact events) have buffeted the world economy in recent years. The global financial crisis between 2008 and 2010 led to a deep recession and high unemployment in many parts of the world, including the United States. At the same time, the European sovereign debt crisis unfolded, and several countries teetered on the verge of insolvency, with very high unemployment. All of these macro events contributed to rise of nationalism in the United States and Western Europe. In the United States, the Trump administration pursued an “America first” policy, which resulted in a stronger focus on nationalism and a retrenchment of globalization. Bilateral treaties are now favored over multinational trade deals negotiated by international bodies such as the World Trade Organization. 104)

D Companies that face a highly competitive environment at home tend to outperform global competitors that lack such intense domestic competition. 105)

C The strategist must be aware of the fact that despite, globalization and the emergence of the internet, a firm’s geographic location has maintained its importance. Critical masses of worldclass firms are clearly apparent in regional geographic clusters. 106)

D Ireland has a high geographic distance from the United States. They are more than 4,000 miles apart. However, they have a low cultural distance because they share a common language. 107)

A Exporting—producing goods in one country to sell in another—is one of the oldest forms of internationalization. It is often used to test whether a foreign market is ready for a firm’s products. 108)

D From 1945 to the end of the 20th century, in the Globalization 2.0 stage, MNEs began to create smaller, self-contained copies of themselves, with all business functions intact, in a few key countries: notably, Western European countries, Japan, and Australia. 109)

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Many multinational enterprises (MNEs) now are replacing the one-way innovation flow from Western economies to developing markets with a polycentric innovation strategy—a strategy in which MNEs now draw on multiple, equally important innovation hubs throughout the world. 110)

Short Answer Lenovo uses a global-standardization strategy with low pressure for local responsiveness and high pressure for cost reductions. To keep track of the latest developments in computing, Lenovo’s research centers are located in Beijing and Shanghai in China; in Raleigh, North Carolina; and in Japan. To benefit from low-cost labor and to be close to its main markets to reduce shipping costs, Lenovo’s manufacturing facilities are in Mexico, India, and China. The company describes the benefits of its global-standardization strategy this way: “By forgoing a traditional headquarters model and focusing on centers of excellence around the world, Lenovo makes the maximum use of its resources to create the best products in the most efficient and effective way possible.” 111)

D Nestlé and many other food manufacturers have found success pursuing a multidomestic strategy. 112)

A Pearson Specter Litt is most likely doing this to reduce its cultural distance from the other countries. Cultural differences find their expression in language, ethnicity, religion, and social norms. 113)

C National competitive advantage refers to a country’s world leadership in specific industries. Companies from home countries that are world leaders in specific industries tend to be the strongest competitors globally. 114)

D Access to low-cost raw materials such as lumber, iron ore, oil, and coal was a key driver behind Globalization 1.0 and 2.0. During Globalization 3.0, firms have expanded globally to benefit from lower labor costs in manufacturing and services. 115)

FALSE Administrative and political distances are part of the CAGE framework. Administrative and political distances can include the presence or absence of colonial ties, trading bloc, and shared currency (monetary) or political association. It can also include political hostilities and weak legal and financial institutions.

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116)

A Rainholm Industries most likely uses a transnational strategy. Multinational enterprises pursuing a transnational strategy attempt to combine the benefits of a localization strategy (high local responsiveness) with those of a global-standardization strategy (lowest-cost position attainable). 117)

D The CAGE distance framework is used to help firms understand the relative distance between home and a foreign target country along four dimensions. 118)

FALSE Some companies are making foreign direct investments to be part of communities of learning, which are often contained in specific geographic regions. For example, AstraZeneca, a Swissbased pharmaceutical company, relocated its research facility to Cambridge, Massachusetts, to be part of the Boston biotech cluster, in hopes of developing new R&D competencies in biotechnology. Cisco invested more than $1.6 billion to create Asian headquarters in Bangalore to support other locations in India and to be located in the middle of India’s top information technology location. 119)

C Joint ventures would be the best entry mode for Black Mesa Minerals because it is not as expensive as acquisitions or greenfield operations, but it allows for more control than exports do. 120)

D Once consequence for multinational enterprises of continued economic development across the globe is that rising wages and other costs are likely to negate any benefits of access to low-cost input factors. China’s labor costs, for example, are steadily rising in tandem with an improved standard of living. In the decade between 2011 and 2022, China’s labor cost nearly doubled.

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Student name:__________ 1) Discuss the "not-invented-here" syndrome with the help of an example.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-06 Evaluate closed and open innovation, and derive implications for organizat Topic : Organizational Design and Competitive Advantage Source : Chapter 11 Test Bank > SA Qu. 114 Discuss the &#34;not-invented-here&#34; syndrome with ...

2) An open innovation model reduces a firm’s absorptive capacity. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-06 Evaluate closed and open innovation, and derive implications for organizat Topic : Strategies for Innovation Source : Chapter 11 Test Bank > TF Qu. 08 An open innovation model reduces a firm...

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3) Yubaba Inc., a fidget spinner manufacturing company, encourages its employees to enjoy

their work by taking on additional responsibilities or switching jobs with each other. It allows its employees immense flexibility in charting their own career path within the organization. Bill has worked at Yubaba for eight years, but has never had a boss or supervised an employee. Which of the following is most likely true in this scenario? A) Yubaba Inc. has a high degree of centralization. B) Yubaba’s organizational culture is governed by codified rules. C) Yubaba Inc. is a mechanistic organization. D) Yubaba Inc. has a flat organizational structure. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 11-03 Define organizational structure and describe its four elements. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 44 Yubaba Inc., a fidget spinner manufacturing ...

4) Vanessa, a few years out of law school, and wants to open her own small law firm. Vanessa

should probably adopt a(n)________ structure for the firm. A) matrix B) functional C) simple D) M-form Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 15 Vanessa, a few years out of law school, and...

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5) When and how do companies pursue an international strategy?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-07 Describe the elements of organizational culture, and explain where organiz Topic : Organizational Culture Source : Chapter 11 Test Bank > SA Qu. 116 When and how do companies pursue...

6) What is founder imprinting, and what is its impact on a company? Give examples of founder

imprinting.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-07 Describe the elements of organizational culture, and explain where organiz Topic : How to Organize for Competitive Advantage Source : Chapter 11 Test Bank > SA Qu. 104 What is founder imprinting, and what is its...

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7) Duke & Duke is the parent company of GetItDone.com and NownNever Inc. To cut costs,

Duke & Duke integrated GetItDone.com’s and NownNever Inc.’s management functions with Duke & Duke’s management, while keeping other functions such as product development independent. Duke & Duke has encouraged the senior teams at both GetItDone and NownNever to exploit the success of their existing products while exploring new products for the future. This scenario best exemplifies a(n) A) multidivisional structure. B) simple structure. C) organic organization. D) ambidextrous organization. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 64 Duke &amp; Duke is the parent company of Get...

8) The goal of a differentiation strategy is to create a competitive advantage by offering

products or services A) at a higher perceived value while controlling costs. B) that reduce the firm’s cost below that of competitors while offering acceptable value to customers. C) that combine the advantages of the functional-structure variations used for cost leadership. D) that reconcile the trade-offs between differentiation and low cost. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 57 The goal of a differentiation strategy is to...

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9) Which of the following is an advantage of using a functional structure when pursuing a cost-

leadership strategy? A) It enables a cost-leader to increase costs above that of its competitors. B) It enables a cost-leader to build products that are different from its competitors’ offerings. C) It allows a cost-leader to upgrade core competencies in manufacturing and logistics. D) It allows a cost-leader to operate in a decentralized organizational structure. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 59 Which of the following is an advantage of us...

10) A firm that uses a functional structure will typically have efficient top-down and bottom-up

communication, but A) dual reporting relationships typically blur lines of authority. B) communication may be hampered among the horizontal, distinct organizational functions. C) career paths and professional development are limited. D) the top management team may fail in their coordination and control efforts of functional-level employees. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-03 Define organizational structure and describe its four elements. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 18 A firm that uses a functional structure will...

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11) Discuss how a cost-leadership strategy is used with a functional structure.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > SA Qu. 109 Discuss how a cost-leadership strategy is us...

12) Which of the following is true of the process of organizing for competitive advantage? A) Formulating an effective strategy is a necessary and sufficient condition for gaining

and sustaining competitive advantage. B) Organizing for competitive advantage is a static and not a dynamic process. C) To maintain competitive advantage, companies need to restructure as they grow and the competitive environment changes. D) Strategy formulation and strategy implementation are independent activities. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-08 Compare and contrast different strategic control-and-reward systems. Topic : Organizational Design and Competitive Advantage Source : Chapter 11 Test Bank > MC Qu. 99 Which of the following is true of the proces...

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13) Which of the following statements is true of strategy in an organization? A) To implement a strategy successfully, an organization’s structure must be rigid. B) Organizational structure must follow strategy in order for firms to achieve superior

performance. C) Strategy implementation is considered unsuccessful if it requires changes within an organization. D) Strategy implementation does not affect resource allocation and power distribution within an organization. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-01 Define organizational design and list its three components. Topic : Organizational Design and Competitive Advantage Source : Chapter 11 Test Bank > MC Qu. 30 Which of the following statements is true of...

14) Compare and contrast the difference between input and output control mechanisms that a

firm can employ.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-08 Compare and contrast different strategic control-and-reward systems. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > SA Qu. 119 Compare and contrast the difference between ...

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15) Organizational culture can help a firm gain and sustain competitive advantage only if the

culture makes a positive contribution to the firm’s economic value creation and A) displays an absence of social complexity. B) does not demonstrate causal ambiguity. C) eventually gives way to core rigidity. D) obeys the VRIO principles. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-07 Describe the elements of organizational culture, and explain where organiz Topic : Organizational Culture Source : Chapter 11 Test Bank > MC Qu. 91 Organizational culture can help a firm gain ...

16) Discuss how a differentiation strategy is used with a functional structure.

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17) The Bulwark Tea & Coffee chain recently reorganized, laying off some managers and

employees. The remaining managers were told they would each have an increased span of control. What does this mean? A) The remaining employees will have decreased power and autonomy. B) All employees will be expected to take on more specialized roles. C) Internal communications and decision-making processes will be monitored by top management. D) Each manager will have more employees to supervise and monitor. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 11-03 Define organizational structure and describe its four elements. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 46 The Bulwark Tea &amp; Coffee chain recently...

18) What is most likely to happen if a firm relies too long on a competency without honing,

refining, and upgrading as the firm and the environment change? A) The firm’s organizational inertia can turn into its core rigidity. B) The firm’s original core competency can turn from a liability into an asset. C) The firm’s culture can turn from a core competency into a core rigidity. D) The firm’s competitive parity can turn into its competitive advantage. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-07 Describe the elements of organizational culture, and explain where organiz Topic : Organizational Culture Source : Chapter 11 Test Bank > MC Qu. 86 What is most likely to happen if a firm reli...

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19) San Francisco–based Shrimpton & Co. sells seafood products to natural foods markets across

the country. The company has core values that define what its leaders consider important and guide employees in achieving and fulfilling its mission. It also has norms that define appropriate employee attitudes and behaviors. Collectively, these shared values and norms make up Shrimpton & Co.’s A) domestic strategy. B) organizational culture. C) functional structure. D) open innovation. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 11-07 Describe the elements of organizational culture, and explain where organiz Topic : Organizational Culture Source : Chapter 11 Test Bank > MC Qu. 70 San Francisco&#8211;based Shrimpton &amp; Co. sells...

20) McDonald’s operates Hamburger University, which trains students to ensure consistent food

quality across its outlets throughout the world. This indicates that McDonalds’s A) is mechanistic in nature. B) has a decentralized structure. C) has an informal structure. D) is organic in nature. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-04 Compare and contrast mechanistic organizations and organic organizations. Topic : Organizational Design and Competitive Advantage Source : Chapter 11 Test Bank > MC Qu. 48 McDonald&#8217;s operates Hamburger Universi...

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21) A firm’s________ determines how the work efforts of individuals and teams are orchestrated

and how resources are distributed. A) norms B) control C) culture D) structure Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 11-03 Define organizational structure and describe its four elements. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 36 A firm&#8217;s ________ determines how the work...

22) Fang and Bone Meds is a successful manufacturer of pet medications. Because the

pharmaceutical industry features a high rate of change and the threat of disruption is high, Fang and Bone Meds should A) switch to whichever structure is most common in the industry. B) attempt to implement an unstructured organization. C) stick with the structure that brought it success no matter what happens. D) be prepared to restructure as the landscape changes. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 11-02 Explain how organizational inertia can lead established firms to failure. Topic : Organizational Inertia and Avoiding Core Rigidities Source : Chapter 11 Test Bank > MC Qu. 35 Fang and Bone Meds is a successful...

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23) Jerry is one of the SBU managers for a firm that has been in business for over 50 years. The

external environment in which the firm has operated has changed significantly in the past decade, but it is still operating under a “business as usual” mantra. Jerry can’t seem to convince the upper-level executives to reorganize the firm’s structure and formal reporting relationships. This firm is probably experiencing A) a failed strategy. B) a change in leadership. C) organizational inertia. D) increased morale due to their organizational culture. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-02 Explain how organizational inertia can lead established firms to failure. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 13 Jerry is one of the SBU managers for...

24) Why should managers using the M-form organizational structure to support a related-

diversification strategy ideally concentrate decision making at the top of the organization? A) It leads to competition between SBUs. B) It helps contain the core competencies within a strategic business unit (SBU). C) It helps evaluate each SBU as a stand-alone profit-and-loss center. D) It allows a high level of integration. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 69 Why should managers using the M-form organiz...

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25) Successful________ requires managers to design and shape structure, culture, and control

mechanisms. A) strategy formulation B) strategy implementation C) strategy diversification D) strategy innovation Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 11-08 Compare and contrast different strategic control-and-reward systems. Topic : Organizational Design and Competitive Advantage Source : Chapter 11 Test Bank > MC Qu. 102 Successful ________ requires managers to design...

26) Umbrella Corp is a notebook manufacturing company based in Ohio. Umbrella Corps’ main

market is Texas. Its aim is to provide products at better prices than its competitors. Which of the following structures is Umbrella Corp likely to use if it has a functional setup? A) simple B) organic C) matrix D) mechanistic Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 56 Umbrella Corp is a notebook manufacturing co...

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27) Managerial decisions about a firm’s strategy and organizational structure should not be

interrelated. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > TF Qu. 11 Managerial decisions about a firm&#8217;s st...

28) Which of the following real-world scenarios best exemplifies the use of organizational

culture to build competitive advantage? A) Apple develops high-tech products that are preferred by consumers across the world. B) W. L. Gore & Associates organizes its employees into project-based teams. C) Southwest Airlines pilots sometimes help load baggage, which results in quick turnaround time. D) GM offers compensation if its products do not meet a consumer’s expectations. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 11-07 Describe the elements of organizational culture, and explain where organiz Topic : Organizational Culture Source : Chapter 11 Test Bank > MC Qu. 88 Which of the following real-world scenarios ...

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29) Employees learn about an organization’s culture through the process of A) exploitation. B) acculturation. C) co-opetition. D) socialization. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 11-07 Describe the elements of organizational culture, and explain where organiz Topic : Organizational Culture Source : Chapter 11 Test Bank > MC Qu. 82 Employees learn about an organization&#8217;...

30) What are multidivisional structures? How are they implemented?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : The Use of Multidivisional (or M-Form) Structure to Implement Corporate Diversification Strat Source : Chapter 11 Test Bank > SA Qu. 111 What are multidivisional structures? How are...

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31) The four key elements of a firm’s organizational structure are specialization, centralization,

formalization, and generalization. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-03 Define organizational structure and describe its four elements. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > TF Qu. 12 The four key elements of a firm&#8217;s orga...

32) A firm that successfully balances exploitation of current opportunities and exploration of

future possibilities is considered ambidextrous. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > TF Qu. 05 A firm that successfully balances exploitati...

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33) Why does a functional structure rely on a flat organizational structure? A) It allows for efficient bottom-up and top-down communication. B) It allows for the implementation of a differentiation strategy. C) It allows for a higher degree of specialization and domain expertise. D) The work in the organization is centrally coordinated by the CEO. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Organizational Hierarchy Source : Chapter 11 Test Bank > MC Qu. 55 Why does a functional structure rely on a fl...

34) The University of Central Florida has a typical College of Business that houses several

specific mini-departments such as management, marketing, finance, accounting, economics, and real estate. This College of Business best resembles a(n)________ structure. A) simple B) holarchy C) functional D) multidivisional Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-03 Define organizational structure and describe its four elements. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 17 The University of Central Florida has a typi...

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35) Angelika is the CEO of One Spice Inc., a firm that grows and processes the Naga Viper

pepper, one of the world’s hottest peppers. Angelika wants to better understand the relationship between her firm’s organizational culture and the ability to achieve competitive advantage. The relationship between these two states that A) a firm can achieve competitive advantage if their organizational culture follows the VRIO principles. B) a firm can achieve and sustain competitive advantage if their balanced scorecard is implemented correctly. C) a firm is unable to achieve a competitive advantage if they are pursuing a differentiation strategy. D) a firm cannot achieve a competitive advantage when they have an effective organizational culture. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-07 Describe the elements of organizational culture, and explain where organiz Topic : Organizational Culture Source : Chapter 11 Test Bank > MC Qu. 24 Angelika is the CEO of One Spice Inc., a firm...

36) Sirius Cybernetics Corp. produces touch-enabled wearable devices. Its research and

development team recently became aware of a new, open-source technology produced by a firm overseas that would improve the processing speed and battery life of all Sirius Cybernetics devices. In this scenario, Sirius Cybernetics would be best served to embrace A) disruptive innovation. B) closed innovation. C) radical innovation. D) open innovation. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 11-06 Evaluate closed and open innovation, and derive implications for organizat Topic : Strategy and Success Source : Chapter 11 Test Bank > MC Qu. 78 Sirius Cybernetics Corp. produces touch-enab...

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37) Why does business historian Alfred Chandler in his seminal book Strategy and Structure say

that organizational structure must follow strategy? And why, in reality, does a firm’s strategy often follow its structure?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-01 Define organizational design and list its three components. Topic : Organizational Design and Competitive Advantage Source : Chapter 11 Test Bank > SA Qu. 103 Why does business historian Alfred Chandler...

38) The most important yet least visible element of organizational culture is A) laws. B) values. C) norms. D) artifacts. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 11-07 Describe the elements of organizational culture, and explain where organiz Topic : Organizational Culture Source : Chapter 11 Test Bank > MC Qu. 83 The most important yet least visible element...

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39) While working a night job at a call center, John creates an app called iFood, which can be

used to place orders at restaurants, rate the restaurants, and make reservations. Because he receives good responses for his app, he quits his current job to focus his efforts on iFood. He creates a start-up called JohnBuilt1 and hires three people to help him improve iFood and maintain the servers that run it. In this scenario, JohnBuilt1 most likely has a________ structure. A) matrix B) simple C) mechanistic D) functional Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 52 While working a night job at a call center, ...

40) Massey’s regional chain of hardware stores were successful. The stores filled a need in a

particular market at a particular time. Managers defined and measured success by financial metrics, focusing on short-term performance. They put in place structures, measures, and systems to accommodate and manage the firm’s increasing size due to its continuing success. It’s hard to argue with a formula for success, but as a result of such success, Massey’s executive team became resistant to change. What was the team displaying? A) an innovative approach to organizational design B) organizational design C) organizational inertia D) a significant value gap Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 11-02 Explain how organizational inertia can lead established firms to failure. Topic : Organizational Inertia and Avoiding Core Rigidities Source : Chapter 11 Test Bank > MC Qu. 34 Massey&#8217;s regional chain of hardware stores...

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41) A functional structure is recommended when a firm A) has a low level of diversification. B) diversifies into different product lines and geographies. C) has a broad focus in terms of its product/service offerings. D) has a low degree of specialization. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 58 A functional structure is recommended when a...

42) To effectively implement a blue ocean strategy, a firm must balance centralization to control

costs with A) decentralization to foster creativity and innovation. B) specialization and formalization. C) a hierarchical organization. D) a functional structure that resembles an organic organization. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 63 To effectively implement a blue ocean strategy...

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43) One of Black Mesa’s core values is to provide unbeatable customer service, a commitment

introduced to the company by its founder more than 10 years ago. This value is expressed in the company’s “Always You” campaign, which promises a no-questions-asked returns policy and an offer to stitch the customer’s initials onto any item for free using a patented sewing technique, two features that are not offered by any of Black Mesa’s competitors. Although the campaign has resulted in a 10 percent decline in profits, Black Mesa has decided to continue to pursue its founder’s vision to reward customers and maintain employees’ sense of purpose. Why does Black Mesa’s culture, exemplified by the “Always You” campaign, fail to support a competitive advantage? A) It does not increase economic value creation for the firm. B) The culture is not difficult to imitate. C) It is not a rare resource. D) Always lacks founder imprinting. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 11-07 Describe the elements of organizational culture, and explain where organiz Topic : Organizational Culture Source : Chapter 11 Test Bank > MC Qu. 92 One of Black Mesa&#8217;s core values is to ...

44) Paul runs an organization that implements a cost-leadership strategy. This business-level

strategy supports both a________ and________ structure. A) matrix; organic B) functional; mechanistic C) M-form; vertical D) simple; organic Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 11-03 Define organizational structure and describe its four elements. Topic : Mechanistic vs. Organic Organizations Source : Chapter 11 Test Bank > MC Qu. 19 Paul runs an organization that implements a ...

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45) Denise wants to clearly communicate and create a________, a key input control, before her

team tackles business activities. This way the team will be able to better allocate her firm’s scarce resources to accomplish the tasks at hand. A) carrot-and-stick approach B) mission statement C) results-only-work-environment (ROWE) D) budget Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-08 Compare and contrast different strategic control-and-reward systems. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 25 Denise wants to clearly communicate and crea...

46) Contrast closed and open innovation.

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47) ________ determines the formal, position-based reporting lines and thus stipulates who

reports to whom. A) Specialization B) Formalization C) Hierarchy D) Centralization Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 11-03 Define organizational structure and describe its four elements. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 41 ________ determines the formal, position-based...

48) Which type of organizational structure is recommended when a firm has a narrow focus in

terms of product or service offerings and a small geographic footprint? A) multidivisional structure B) functional structure C) matrix structure D) simple structure Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Types of Functional Strategies Source : Chapter 11 Test Bank > MC Qu. 21 Which type of organizational structure is...

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49) Which of the following real-world scenarios best exemplifies formalization? A) Zappos’ focus on allowing its customer service employees to use their own approach

rather than depend on scripts B) McDonald’s use of standard operating procedures across the world C) Yahoo’s decision to fire its CEO after incurring huge losses D) W. L. Gore’s associates organizing themselves in project-based teams that are led by sponsors, not bosses Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 11-03 Define organizational structure and describe its four elements. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 37 Which of the following real-world scenarios ...

50) Why is the optimal organizational structure a multidivisional structure? A) Its focus is on establishing a flat hierarchy operated in a decentralized fashion. B) Its focus is on retaining activities within a single geographic area. C) Its focus is on producing differentiated products. D) Its focus is on driving down costs. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 75 Why is the optimal organizational structure ...

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51) Hooli, a web development firm, wants to implement an organic structure to foster innovation

and attract the most talented creative minds. Which of the following features will make it difficult to do so? A) flexible job descriptions for employees B) decision-making power distributed throughout the organization C) a wide span of control for managers D) dedication to a cost-leadership business strategy Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 11-04 Compare and contrast mechanistic organizations and organic organizations. Topic : Organizational Design and Competitive Advantage Source : Chapter 11 Test Bank > MC Qu. 51 Hooli, a web development firm, wants to impl...

52) Which of the following organizational structures matches best with an international strategy? A) functional B) multidivisional C) matrix D) simple Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 74 Which of the following organizational struct...

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53) Which of the following types of groups is most susceptible to groupthink? A) a cohesive group B) a decentralized group C) a heterogeneous group D) a diverse group Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-07 Describe the elements of organizational culture, and explain where organiz Topic : Organizational Culture Source : Chapter 11 Test Bank > MC Qu. 85 Which of the following types of groups is mo...

54) What is organizational culture? What are the key elements of organizational culture?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 11-07 Describe the elements of organizational culture, and explain where organiz Topic : Organizational Culture Source : Chapter 11 Test Bank > SA Qu. 115 What is organizational culture? What are the...

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55) Blue Cat Restaurant Group relies on a highly centralized functional structure to ensure

consistency in the quality and taste of its products and to drive down costs via process innovations. However, as a consequence of its highly compartmentalized structure, the firm has found it difficult to transfer information and ideas from one department to the next. With the launch of its new line of breakfast foods coming up, how can the Blue Cat Restaurant Group improve its ability to collaborate without sacrificing the benefits of its current structure? A) by decreasing managers’ span of control B) by establishing cross-functional teams C) by switching to a competitive M-form structure D) by switching to a simple structure Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 62 Blue Cat Restaurant Group relies on a highly...

56) Which of the following best exemplifies the use of input controls? A) GM’s use of the multidivisional strategy B) Zappos’ use of monitoring-free customer service calls C) Southwest Airlines’ use of employee friendliness D) McDonald’s use of standard operating procedures Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-08 Compare and contrast different strategic control-and-reward systems. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 94 Which of the following best exemplifies the ...

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57) In 2013, then-CEO Tony Hsieh announced that Zappos would implement a reorganization in

which, as Hsieh said, “employees … act more like entrepreneurs and self-direct their work … .” At that point, Hsieh changed Zappos from A) a holacracy to a hierarchy. B) a hierarchy to a holacracy. C) a decentralized structure to a formalized structure. D) a bottom-up to a top-down style. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-03 Define organizational structure and describe its four elements. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 40 In 2013, then-CEO Tony Hsieh announced...

58) Which of the following is a disadvantage of a functional strategy? A) It frequently lacks the tools required to pursue a cost-leadership strategy. B) It does not facilitate rich communication between members of the same department. C) It cannot effectively address a higher level of diversification. D) It does not allow organizations to be flexible or innovative. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 65 Which of the following is a disadvantage of ...

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59) Freeport Bagel & Deli is a family-owned business with eight employees. Brother and sister

Elise and Simon run the day-to-day operations and make all the key decisions, including what to include on the menu, which vendors to use, and how much to pay their staff. In this scenario, Freeport Bagel & Deli has adopted a________ structure. A) functional B) tall hierarchical C) simple D) decentralized organizational Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 11-03 Define organizational structure and describe its four elements. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 42 Freeport Bagel &amp; Deli is a family-owned business...

60) At 3M, employees are encouraged to spend up to 15 percent of their time on projects of their

own choosing. If any of these projects look promising, 3M provides financing to further develop their commercial potential. This is an example of A) relying on extrinsic motivation. B) using OKRs (Objectives and Key Results) to monitor objectives and outcomes. C) taking advantage of strategy implementation. D) using the ROWE framework to tap intrinsic employee motivation. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 11-08 Compare and contrast different strategic control-and-reward systems. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 101 At 3M, employees are encouraged to spend...

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61) Rodin Art Supplies operates as a strategic business unit (SBU) under Achieva Chemical Inc.

From this information, it may be reasonable to infer that A) Rodin Art Supplies has a matrix organizational structure. B) Rodin Art Supplies does not have its own profit-and-loss responsibility. C) Rodin Art Supplies is dependent on the other SBUs in Achieva Chemical Inc. D) Rodin Art Supplies is led by its own CEO (or equivalent general manager). Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 68 Rodin Art Supplies operates as a strategic...

62) What are strategic control-and-reward systems and how are they used?

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63) Output controls can sometimes discourage collaboration among different strategic business

units. However, more and more work requires creativity and innovation, especially in highly developed economies. One way firms are grappling with this issue is by A) using output controls only when the goal is to ensure a predictable outcome. B) refining the budgeting process to encourage more department collaboration. C) introducing results-only-work-environments to tap intrinsic motivations. D) updating standard operating procedures to allow more process flexibility. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-08 Compare and contrast different strategic control-and-reward systems. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 98 Output controls can sometimes discourage col...

64) Which of the following statements is true of organizational culture? A) It is better for founder CEOs to create a relevant culture, structure, and strategy in the

early stages. B) Changes in culture are too frequent to have any impact on strategic implementation. C) It is always better to focus on output control and performance than on organizational culture. D) According to research, more than 50 percent of firms change culture successfully. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-07 Describe the elements of organizational culture, and explain where organiz Topic : Organizational Culture Source : Chapter 11 Test Bank > MC Qu. 90 Which of the following statements is true of...

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65) Firms that pursue a closed approach to innovation typically enjoy first-mover advantages. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-06 Evaluate closed and open innovation, and derive implications for organizat Topic : Strategies for Innovation Source : Chapter 11 Test Bank > TF Qu. 07 Firms that pursue a closed approach to innov...

66) Which of the following statements best describes groupthink? A) Employees internalize an organization’s values and norms through immersion in its

day-to-day operations. B) Opinions coalesce around a leader without individuals critically challenging and evaluating that leader’s opinions and assumptions. C) Organizations compete with one another for resources, but they also need to cooperate to share competencies. D) The founder defines and shapes an organization’s culture, which can persist for decades after his or her departure. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-07 Describe the elements of organizational culture, and explain where organiz Topic : Organizational Culture Source : Chapter 11 Test Bank > MC Qu. 84 Which of the following statements best descr...

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67) Organic organizations typically exhibit a lower rate of entrepreneurial behaviors and

innovation. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-04 Compare and contrast mechanistic organizations and organic organizations. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > TF Qu. 04 Organic organizations typically exhibit...

68) Jared works as a frontline employee for a nationwide retail store. He reports to a floor

manager, who reports to a departmental manager, who reports to a regional supervisor, who reports to a vice president, who reports to the CEO. Which of the following best describes this retail store? A) tall structure B) flat structure C) decentralize structure D) centralized structure Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 11-03 Define organizational structure and describe its four elements. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 45 Jared works as a frontline employee for a n...

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69) When a firm diversifies into different product lines and geographies, a________ structure is

preferred. A) functional B) network C) simple D) multidivisional Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 66 When a firm diversifies into different produ...

70) Simple organizational structures often exhibit low levels of formalization and specialization.

Which of the following is not a benefit of employing a simple organizational structure? A) being able to converse with the CEO and other upper level executives B) not having the need for sophisticated information technology/management systems C) employing specialists that can develop deep knowledge/expertise in their field D) being able to easily and quickly coordinate and communicate within the firm Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-03 Define organizational structure and describe its four elements. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 16 Simple organizational structures often exhib...

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71) A primary advantage of the matrix organizational structure is that it simplifies decision

making and communication in geographically diverse organizations. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > TF Qu. 06 A primary advantage of the matrix organizati...

72) Delos Inc. is an apparel manufacturer. The management at Delos Inc. prefers moderate

control over the operations of the different departments such as R&D, design, marketing, and sales. It allocates a budget to each function at the beginning of each quarter. This is an example of implementing control through A) centralization. B) output controls. C) input controls. D) multidivisional strategy. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 11-08 Compare and contrast different strategic control-and-reward systems. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 95 Delos Inc. is an apparel manufacturer. The m...

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73) Which of the following features helps match a cost-leadership strategy to a functional

structure? A) process and product innovations B) focus on economies of scale C) flexibility and mutual adjustment D) decentralization Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 61 Which of the following features helps match ...

74) Elvira is the CEO of All Things Inc. Her company employs a matrix structure, which is the

combination of the________ and________ structure. A) functional; M-form B) M-form; simple C) network; functional D) simple; functional Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Types of Functional Strategies and The Use of Multidivisional (or M-Form) Structure to Implem Source : Chapter 11 Test Bank > MC Qu. 22 Elvira is the CEO of All Things Inc...

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75) Results-only-work-environments (ROWEs) are characterized by their use of extrinsic

motivations such as promotions or the threat of layoffs. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 11-08 Compare and contrast different strategic control-and-reward systems. Topic : The Role of Incentives and Rewards in Promoting Strategy Execution Source : Chapter 11 Test Bank > TF Qu. 10 Results-only-work-environments (ROWEs) are c...

76) AT&T, IBM, Siemens, and Pfizer have been shifting their innovation strategy toward a

model designed to blend internal knowledge with external knowledge by sourcing strategic alliances. This example best represents the A) open innovation framework. B) absorptive capacity model. C) closed innovation framework. D) not-invented-here syndrome. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-06 Evaluate closed and open innovation, and derive implications for organizat Topic : Strategies for Innovation Source : Chapter 11 Test Bank > MC Qu. 27 AT&amp;T, IBM, Siemens, and Pfizer have bee...

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77) What are the characteristics of organic organizations?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-04 Compare and contrast mechanistic organizations and organic organizations. Topic : Organizational Hierarchy Source : Chapter 11 Test Bank > SA Qu. 107 What are the characteristics of organic orga...

78) Which of the following statements is accurate regarding specialization? A) It refers to the degree to which decision making is concentrated at the top. B) It captures the extent to which employee behavior is steered by explicit and codified

rules and procedures. C) It describes the degree to which a task is divided into separate jobs. D) It determines the formal, position-based reporting lines and stipulates who reports to

whom. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-03 Define organizational structure and describe its four elements. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 38 Which of the following statements is...

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79) Why is it difficult to imitate the organizational culture of firms like Southwest Airlines and

Zappos? A) It is not commercially viable for other companies to implement the same culture. B) Their culture reflects complex relationships with their employees, customers, and suppliers. C) The employees in the organization themselves are unaware of the factors contributing to their organizational culture. D) They produce products that cannot be copied easily because of their complex designs. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-07 Describe the elements of organizational culture, and explain where organiz Topic : Organizational Culture Source : Chapter 11 Test Bank > MC Qu. 89 Why is it difficult to imitate the organizat...

80) ________ define appropriate employee attitudes and behaviors. A) Norms B) Artifacts C) Appraisals D) Values Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 11-07 Describe the elements of organizational culture, and explain where organiz Topic : Organizational Culture Source : Chapter 11 Test Bank > MC Qu. 81 ________ define appropriate employee attitudes ...

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81) What are the key elements of organizational structure? Define each element.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 11-03 Define organizational structure and describe its four elements. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > SA Qu. 105 What are the key elements of organizational ...

82) Knitwear designer Ebony has decided to open a storefront where she can sell her products.

Sales are encouraging, so Ebony hires a part-time employee to wait on customers and a parttime knitter to help create her designs. Meanwhile, Ebony is busy designing more knitted fashions and making as many as she can, all while handling the day-to-day responsibilities of running a store. Which of the following is likely to be a pitfall for Ebony as she experiences growth and runs her store in this way? A) Ebony will likely have to increase prices on her knitwear. B) Hiring employees could possibly dilute her brand and infringe on her intellectual property (her designs). C) As the store grows, Ebony is likely to feel overloaded and experience burnout. D) Ebony will likely be pressured to expand her business before she is ready. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 53 Knitwear designer Ebony has decided...

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83) Los Pollos Hermanos is a nationwide fast-food chain. Decision power resides at the top of

the organization. Each job is documented in minute detail. The firm has many levels of supervision, including vice presidents and regional managers. The firm’s headquarters provides detailed instructions to each of its franchisees so that they provide comparable quality and service across the board. Based on this scenario, which of the following is an accurate statement about Tony’s? A) Los Pollos Hermanos has a high degree of specialization and formalization, a low degree of centralization, and relies on a tall hierarchy. B) Los Pollos Hermanos has a low degree of specialization, formalization, and centralization and relies on a flat hierarchy. C) Los Pollos Hermanos has a high degree of specialization, formalization, and centralization and relies on a tall hierarchy. D) Los Pollos Hermanos has a low degree of specialization and formalization, a high degree of centralization, and relies on a flat hierarchy. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 11-04 Compare and contrast mechanistic organizations and organic organizations. Topic : Organizational Design and Competitive Advantage Source : Chapter 11 Test Bank > MC Qu. 49 Los Pollos Hermanos is a nationwide fast-foo...

84) ________ describes the collectively shared values and norms of an organization’s members. A) Core competency B) Competitive advantage C) Organizational culture D) Organizational structure Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 11-07 Describe the elements of organizational culture, and explain where organiz Topic : Organizational Culture Source : Chapter 11 Test Bank > MC Qu. 80 ________ describes the collectively shared valu...

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85) Why are controls like budgets and operating procedures that McDonald’s implements known

as input controls? A) They are implemented by corporate headquarters. B) They are considered before employees make any decisions. C) They are independent of an organization’s culture. D) They are ad hoc and not codified. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-08 Compare and contrast different strategic control-and-reward systems. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 96 Why are controls like budgets and operating ...

86) Inertia, defined as a firm’s resistance to changing the status quo, can lead to the firm’s

eventual failure. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-02 Explain how organizational inertia can lead established firms to failure. Topic : Organizational Inertia and Avoiding Core Rigidities Source : Chapter 11 Test Bank > TF Qu. 02 Inertia, defined as a firm&#8217;s resistance to...

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87) Kenyatta’s main competitor is known for its strong organizational culture, which gives it a

competitive advantage in a tight market. Kenyatta is eager to duplicate his competitor’s culture but is finding it difficult. Two reasons why are likely the successful competitor’s________ and________. A) organizational socialization; input controls B) tangible budgets; intangible budgets C) historical conditions; external opportunities D) causal ambiguity; social complexity Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-07 Describe the elements of organizational culture, and explain where organiz Topic : Organizational Culture Source : Chapter 11 Test Bank > MC Qu. 26 Kenyatta&#8217;s main competitor is known for...

88) An organization that is organized according to strategic business units (SBUs) and also along

organizational structures is most likely using a________ structure. A) multidivisional B) matrix C) functional D) simple Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 71 An organization that is organized according ...

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89) Strategic control-and-reward systems are internal-governance mechanisms to align

the________ of principals (shareholders) and agents (employees). A) values B) behavior C) incentives D) productivity Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-08 Compare and contrast different strategic control-and-reward systems. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 93 Strategic control-and-reward systems are...

90) What are the characteristics of mechanistic organizations? Explain with the help of an

example.

Question Details AACSB : Reflective Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 11-04 Compare and contrast mechanistic organizations and organic organizations. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > SA Qu. 108 What are the characteristics of mechanistic ...

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91) What most likely happens when a firm optimizes its organizational structure to its current

situation? A) It transforms strategy into actions and business models. B) It achieves superior performance. C) It makes it difficult for managers to make the necessary changes due to its effects on resource allocation and power distribution. D) It plants the seed of subsequent failure: the tightly coupled system can break apart when internal or external pressures occur. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-02 Explain how organizational inertia can lead established firms to failure. Topic : Organizational Inertia and Avoiding Core Rigidities Source : Chapter 11 Test Bank > MC Qu. 32 What most likely happens when a firm optimiz...

92) Sales for Company B have slowed, and profits are way down. Its executive team is

threatening managers with demotions and employees with layoffs unless sales pick up considerably in the next six months. This is an example of A) attempting to tap intrinsic employee motivation. B) using input controls to boost sales. C) using extrinsic motivation as an output control mechanism. D) defining and directing employee behavior through explicit rules and standard operation procedures. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 11-08 Compare and contrast different strategic control-and-reward systems. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 97 Sales for Company B have slowed, and...

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93) A high degree of formalization in an organization is most likely to A) slow down decision making. B) produce inconsistent results. C) increase creativity and innovation. D) improve customer service. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-03 Define organizational structure and describe its four elements. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 39 A high degree of formalization in an organiz...

94) West Coast–based Dr. Suds Soap Company has offices in Los Angeles, San Francisco,

Portland, and Seattle. Each office is headed by a vice-president who reports directly to CEO Ravi Satterjee. The heads of the HR, finance, and marketing teams also report to Satterjee. Based on this scenario, which of the following statements is most likely to be true? A) Dr. Suds Soap Company is run as a formalized organization. B) Ravi Satterjee is head of a decentralized organization. C) Dr. Suds Soap Company is a mechanistic organization. D) Ravi Satterjee has a wide span of control. Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 11-03 Define organizational structure and describe its four elements. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 43 West Coast&#8211;based Dr. Suds Soap Company...

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95) Nerissa sets up a business consulting firm in which the employees are motivated because

they find their work interesting and creative. She carefully hires workers who fit well with their assigned tasks. She also clearly defines the results expected of each worker, but allows the workers to determine the means to these results. Which of the following best describes Nerissa’s business? A) a firm that relies on high output controls to tap into extrinsic motivation B) a firm that relies on high output controls to tap into intrinsic motivation C) a firm that relies on high input controls to tap into extrinsic motivation D) a firm that relies on high input controls to tap into intrinsic motivation Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 11-08 Compare and contrast different strategic control-and-reward systems. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 100 Nerissa sets up a business consulting firm i...

96) Changing corporate culture typically involves mass layoffs. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 11-07 Describe the elements of organizational culture, and explain where organiz Topic : Organizational Culture Source : Chapter 11 Test Bank > TF Qu. 09 Changing corporate culture typically...

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97) A firm that uses a structure organized along different business functions such as HR, R&D,

sales, and marketing and also along different geographical areas of the world is most likely using a________ structure. A) functional B) simple C) multidivisional D) global matrix Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 72 A firm that uses a structure organized along...

98) Raphael’s team meets to discuss and improve “how things get done around here.” The team

is talking about its A) formal operating procedures. B) organizational culture. C) matrix structure. D) open innovation framework. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-07 Describe the elements of organizational culture, and explain where organiz Topic : Organizational Culture Source : Chapter 11 Test Bank > MC Qu. 23 Raphael&#8217;s team meets to discuss and...

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99) A planned emergence approach to strategic planning is most likely to be found in a highly

centralized firm. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-03 Define organizational structure and describe its four elements. Topic : Organizational Design and Competitive Advantage Source : Chapter 11 Test Bank > TF Qu. 03 A planned emergence approach to strategic pl...

100)

Rosemont-Cambridge pursues a related diversification strategy. It derives less than 70 percent of revenues from its original business unit, Rosemont- Baskin, and maintains several related units including Rosemont-Ortega and Rosemont-Elm. Which of the following structures is most likely to support this strategy? A) functional with decentralized decision-making power B) functional with centralized decision-making power C) M-Form with decentralized decision-making power (competitive multidivisional) D) M-Form with centralized decision-making power (cooperative multidivisional)

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Strategy and Success Source : Chapter 11 Test Bank > MC Qu. 77 Rosemont-Cambridge pursues a related diversification...

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101)

Saddiq’s company has a high degrees of centralization in its organizational structure. Saddiq has learned that a main drawback of working in a firm with centralized decision making is that it can often result in which of the following? A) reduced creativity and innovation B) less employee job satisfaction due to the repetition of tasks C) slow response time and reduced customer satisfaction D) increased levels of hierarchy

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-03 Define organizational structure and describe its four elements. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 14 Saddiq&#8217;s company has a high degrees...

102)

The strategic leaders of Stafford Cookware, a large, successful retail chain based in the Midwest, want to expand its operations across the United States. Which of the following organizational structures should Stafford Cookware use? A) functional B) multidivisional C) simple D) basic

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 67 The strategic leaders of Stafford Cookware...

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103)

Which of the following accurately describes a mechanistic organization? A) It has a low degree of specialization and formalization and decentralized decision making. B) It typically exhibits a higher rate of entrepreneurial behaviors and innovation. C) It has a high degree of specialization and formalization and a tall hierarchy that relies on centralized decision making. D) It is a highly flexible organization that encourages slow decision making and boasts high employee motivation.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-04 Compare and contrast mechanistic organizations and organic organizations. Topic : Organizational Design and Competitive Advantage Source : Chapter 11 Test Bank > MC Qu. 50 Which of the following accurately describes...

104)

As firms grow in size and complexity, they have a tendency and an incentive to focus on________, which can lead to inertia and even failure. A) organizational structure B) internal shifts C) incremental innovation D) specialization

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 11-02 Explain how organizational inertia can lead established firms to failure. Topic : Organizational Inertia and Avoiding Core Rigidities Source : Chapter 11 Test Bank > MC Qu. 31 As firms grow in size and complexity...

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105)

GM’s insistence on sticking to a bureaucratic culture combined with its M-form structure and its subsequent failure to adapt to changing customer preferences for more fuel-efficient cars, produce higher quality, and create innovative designs best exemplifies A) decentralization. B) groupthink. C) founder imprinting. D) core rigidity.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-07 Describe the elements of organizational culture, and explain where organiz Topic : Organizational Culture Source : Chapter 11 Test Bank > MC Qu. 87 GM&#8217;s insistence on sticking to a burea...

106)

E Corp is a pharmaceutical company that has many breakthroughs in medicine to its credit. Unlike most other pharmaceutical companies, E Corp has a relaxed work environment. Employees are encouraged to choose the projects that interest them; communication between team members and their supervisors is open and easy. Because of the company’s work culture, its employees feel motivated to work harder and display more entrepreneurial behaviors. In this scenario, E Corp Inc. is most likely an organization that is A) formalized. B) mechanistic. C) organic. D) centralized.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 11-04 Compare and contrast mechanistic organizations and organic organizations. Topic : Organizational Design and Competitive Advantage Source : Chapter 11 Test Bank > MC Qu. 47 E Corp is a pharmaceutical company that has ...

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107)

Two leading home appliance companies, Globex and Pug Tech, are in competition for market share. In their quest for exciting new products, Globex employs an open innovation model, while Pug Tech pursues a closed innovation model. Which of the following statements is most likely true? A) Pug Tech has a superior absorptive capacity. B) Globex has a greater chance of capturing market share. C) Globex is most concerned with securing first-mover advantages. D) Pug Tech will protect its intellectual property with patents and trade secrets.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 11-06 Evaluate closed and open innovation, and derive implications for organizat Topic : Strategy and Success Source : Chapter 11 Test Bank > MC Qu. 79 Two leading home appliance companies, Globex...

108)

Describe a global matrix structure. Why do firms use it?

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109)

Organizational design is A) a process that always functions independently of strategy formulation. B) the process of creating, implementing, and modifying the structure of an organization. C) primarily focused on replacing a firm’s competitive advantage with competitive parity. D) primarily focused on formulating effective strategies, not implementing them.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 11-01 Define organizational design and list its three components. Topic : Organizational Design and Competitive Advantage Source : Chapter 11 Test Bank > MC Qu. 28 Organizational design is

110)

How do results-only-work-environments differ from output controls that depend on extrinsic motivation?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-08 Compare and contrast different strategic control-and-reward systems. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > SA Qu. 117 How do results-only-work-environments differ...

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111)

Li runs a firm that has diversified into different product lines and geographies. She should probably use a(n)________ organizational structure. A) network B) simple C) functional D) M-form

112)

What are the implications of centralization on strategic management processes in an organization?

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-03 Define organizational structure and describe its four elements. Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > SA Qu. 106 What are the implications of centralization ...

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113)

Why does strategy implementation often require changes within an organization? A) Strategy implementation transforms strategy into actions and business models. B) Strategy always follows structure. C) Strategy implementation is less important than strategy formulation. D) Strategy implementation does not affect resource allocation and power distribution within an organization.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-01 Define organizational design and list its three components. Topic : Organizational Design and Competitive Advantage Source : Chapter 11 Test Bank > MC Qu. 29 Why does strategy implementation often requi...

114)

Which of the following is an advantage offered by a functional structure? A) It allows for a higher degree of specialization and deeper domain expertise. B) It facilitates a lower division of labor, which is linked to higher productivity. C) It facilitates a lower level of specialization. D) It allows for an efficient top-down communication chain and thus relies on a relatively tall structure.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 54 Which of the following is an advantage offer...

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115)

Describe the organizational structure used for firms that are pursuing a globalstandardization strategy.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > SA Qu. 118 Describe the organizational structure used f...

116)

Which of the following global strategies best matches with a multidivisional structure? A) international B) global-standardization C) multidomestic D) transnational

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Organizational Structure and Controls Source : Chapter 11 Test Bank > MC Qu. 73 Which of the following global strategies bes...

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117)

Why does a firm use an organic organization combined with a functional structure when implementing a differentiation strategy? A) It allows the firm to constantly upgrade core competencies in R&D, innovation, and marketing. B) It allows the firm to nurture and constantly upgrade necessary core competencies in manufacturing and logistics. C) It allows the firm to create incentives to foster process innovation in order to drive down cost. D) It allows the firm to reduce its cost below that of competitors while offering acceptable value.

118)

Organizational design involves establishing a firm’s structure, culture, and control mechanisms. ⊚ true ⊚ false

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 11-01 Define organizational design and list its three components. Learning Objective : 11-02 Explain how organizational inertia can lead established firms to failure. Topic : Organizational Design and Competitive Advantage Source : Chapter 11 Test Bank > TF Qu. 01 Organizational design involves establishing ...

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119)

________ refers to a firm’s resistance to change the status quo that can set the stage for the firm’s subsequent failure. A) Formalization B) Organizational inertia C) Centralization D) PESTEL factors

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 11-02 Explain how organizational inertia can lead established firms to failure. Topic : Organizational Inertia and Avoiding Core Rigidities Source : Chapter 11 Test Bank > MC Qu. 33 ________ refers to a firm&#8217;s resistance to...

120)

Which of the following provides an example of a common drawback of a functional strategy? A) Chris’s manager dismissed his idea because it was too innovative. B) Leslie was surprised about the inflexibility of her firm when it rejected her marketing plan. C) Denise did not accept the position with the firm because it has an ineffective costleadership strategy. D) Jack had a difficult time communicating efficiently with the manager of another department.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 11-05 Describe different organizational structures and match them with appropria Topic : Strategy and Success Source : Chapter 11 Test Bank > MC Qu. 76 Which of the following provides an example o...

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Answer Key Test name: Chapter 11 Test Bank 1) Short Answer

Student examples will vary. A sample answer follows:Firms following the closed innovation model are much more likely to fall prone to the not-invented-here syndrome: “If the R&D leading to a discovery and a new development project was not conducted in-house, it cannot be good.” The pharmaceutical company Merck suffers from the not-invented-here syndrome. That is, if a product was not created and developed at Merck, then Merck assumes it cannot be good enough. Merck’s culture and organizational systems perpetuate this belief, which assumes that because Merck hired the best people, the smartest people in the industry must work for Merck, and so the best discoveries must be made at Merck. The company leads the industry in terms of R&D spending because Merck believes that if it is the first to discover and develop a new drug, then that drug will be the first to market. 2) FALSE

One key assumption underlying the open innovation model is that combining the best of internal and external R&D will more likely lead to a competitive advantage. This requires that the company must continuously upgrade its internal R&D capabilities to enhance its absorptive capacity—its ability to understand external technology developments, evaluate them, and integrate them into current products or create new ones. 3) D

The statement that is most likely true is that Yubaba Inc. has a flat organizational structure. Hierarchy determines the formal, position-based reporting lines and thus stipulates who reports to whom. If many levels of hierarchy exist between the frontline employee and the CEO in a firm, it has a tall structure. In contrast, if there are few levels of hierarchy in a firm, it has a flat structure. 4) C

Simple structures exhibit low formalization and specialization, which is suitable for new startups and small professional firms. 5) Short Answer

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In an international strategy, the company leverages its home-based core competency by moving into foreign markets. An international strategy is advantageous when the company faces low pressure for both local responsiveness and cost reductions. Companies pursue an international strategy through a differentiation strategy at the business level. The best match for an international strategy is a functional organizational structure, which allows the company to leverage its core competency most effectively. 6) Short Answer

Student examples may vary. Often, company founders define and shape an organization’s culture, which can persist for many decades after their departure. This phenomenon is called founder imprinting. Founders set the initial strategy, structure, and culture of an organization by transforming their vision into reality. For example, these famous founders left a strong imprint on their organizations: Walt Disney (Disney), Bill Gates (Microsoft), Steve Jobs (Apple), and Oprah Winfrey (Harpo and OWN, the Oprah Winfrey Network). 7) D

The goal for managers who want to pursue a blue ocean strategy is to build an ambidextrous organization, one that enables managers to balance and harness different activities in trade-off situations. Here, the trade-offs to be addressed involve the simultaneous pursuit of low-cost and differentiation strategies. Ambidexterity describes a firm’s ability to address trade-offs not only at one point but also over time. It encourages managers to balance exploitation—applying current knowledge to enhance firm performance in the short term—with exploration—searching for new knowledge that may enhance a firm’s future performance. 8) A

The goal of a differentiation strategy is to create a competitive advantage by offering products or service at a higher perceived value while controlling costs. The differentiator, therefore, sells a non-standardized product or service to specific market segments in which customers are willing to pay a higher price. 9) C

To effectively implement a cost-leadership strategy, managers must create a functional structure that contains the organizational elements of a mechanistic structure—one that is centralized, with well-defined lines of authority up and down the hierarchy. Using a functional structure allows the cost-leader to nurture and constantly upgrade necessary core competencies in manufacturing and logistics. 10) B

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Functional areas allows for an efficient top-down and bottom-up communication, but not horizontal cross-functional communication. 11) Short Answer

The goal of a cost-leadership strategy is to create a competitive advantage by reducing the firm’s cost below that of competitors while offering acceptable value. The cost-leader sells a no-frills, standardized product or service to the mainstream customer. To effectively implement a costleadership strategy, therefore, managers must create a functional structure that contains the organizational elements of a mechanistic structure—one that is centralized, with well-defined lines of authority up and down the hierarchy. Using a functional structure allows the cost-leader to nurture and constantly upgrade necessary core competencies in manufacturing and logistics. Moreover, the cost leader needs to create incentives to foster process innovation in order to drive down cost. Finally, because the firm services the average customer, and thus targets the largest market segment possible, it should focus on leveraging economies of scale to further drive down costs. 12) C

Organizing for competitive advantage is a dynamic and not a static process. As seen in the Zappos example, to maintain competitive advantage, companies need to restructure as they grow and the competitive environment changes. 13) B

Organizational structure must follow strategy in order for firms to achieve superior performance. This tenet implies that to implement a strategy successfully, organizational design must be flexible enough to accommodate the formulated strategy and future growth and expansion. 14) Short Answer

Input controls define and direct employee behavior through a set of explicit and codified rules and standardized operating procedures. Firms use input controls when the goal is to define the ways and means to reach a strategic goal and to ensure a predictable outcome. Output controls guide employee behavior by defining expected results, but they leave the means to those results open to individual employees, groups, or SBUs. Firms often tie employee compensation and rewards to predetermined goals, such as a specific sales target or return on invested capital. 15) D

Organizational culture can help a firm gain and sustain competitive advantage if the culture makes a positive contribution to the firm’s economic value creation and obeys the VRIO principles. Organizational culture is an especially effective lever for new ventures due to its malleability.

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16) Short Answer

The goal of a differentiation strategy is to create a competitive advantage by offering products or services at a higher perceived value while controlling costs. The differentiator, therefore, sells a non-standardized product or service to specific market segments in which customers are willing to pay a higher price. To effectively implement a differentiation strategy, managers rely on a functional structure that resembles an organic organization.In particular, decision making tends to be decentralized to foster and incentivize continuous innovation and creativity as well as flexibility and mutual adjustment across areas. Using a functional structure with an organic organization allows the differentiator to nurture and constantly upgrade necessary core competencies in R&D, innovation, and marketing. Finally, the functional structure should be set up to allow the firm to reap economies of scope from its core competencies—for example, by leveraging its brand name across different products or its technology across different devices. 17) D

In recent years, firms have de-layered by reducing the headcount (often middle managers), making the organization flatter and more nimble. However, this move to a flatter structure puts more pressure on the remaining managers, who have to supervise and monitor more direct reports due to an increased span of control. 18) C

An organization’s culture can be one of its strongest assets, but also its greatest liability. An organization’s culture can turn from a core competency into a core rigidity if a firm relies too long on the competency without honing, refining, and upgrading as the firm and the environment change. 19) B

Organizational culture is the collectively shared values and norms of an organization’s members and a key building block of organizational design. 20) A

Mechanistic organizations are characterized by a high degree of specialization and formalization, and a tall hierarchy that relies on centralized decision making. To ensure standardized operating procedures and consistent food quality throughout the world, McDonald’s operates Hamburger University, a state-of-the-art teaching facility in a Chicago suburb, where 50 full-time instructors teach courses in chemistry, food preparation, and marketing. 21) D

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Some of the key decisions that managers must make when designing effective organizations pertain to the firm’s organizational structure. That structure determines how the work efforts of individuals and teams are orchestrated and how resources are distributed. 22) D

To avoid inertia and possible organizational failure, the firm needs a flexible and adaptive structure to effectively translate the formulated strategy into action. Ideally the firm would maintain a virtuous cycle of reconsidering organization, particularly in industries where the rate of change is high and potential disruption frequent. 23) C

Organizational inertia is a firm’s resistance to change in the status quo. 24) D

Managers using the M-form organizational structure to support a related-diversification strategy should ideally concentrate decision making at the top of the organization. Doing so allows a high level of integration. It also helps corporate headquarters leverage and transfer across different SBUs the core competencies that form the basis for a related diversification. 25) B

Successful strategy implementation requires managers to design and shape structure, culture, and control mechanisms. In doing so, they execute a firm’s strategy as they put its accompanying business model into action. 26) D

Umbrella Corp is most likely to use a mechanistic structure if it has a functional setup. A functional structure is recommended when a firm has a fairly narrow focus in terms of product/service offerings (i.e., low level of diversification) combined with a small geographic footprint. To effectively implement a cost-leadership strategy, managers must create a functional structure that contains the organizational elements of a mechanistic structure. 27) FALSE

A firm’s organizational structure should always follow the firm’s strategy. 28) C

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Southwest Airline’s (SWA’s) business strategy—being a cost-leader in point-to-point air travel— is fairly simple, and SWA’s competitive advantage actually comes from its unique culture. Friendly and highly energized employees work across functional and hierarchical levels. Even Southwest’s pilots pitch in to help load baggage quickly when needed. As a result, SWA’s turn time between flights is only 15 minutes, whereas competitors frequently take two to three times as long. 29) D

Employees learn about an organization’s culture through socialization, a process whereby employees internalize an organization’s values and norms through immersion in its day-to-day operations. Successful socialization, in turn, allows employees to function productively and to take on specific roles within the organization. 30) Short Answer

Over time, as a firm diversifies into different product lines and geographies, it generally implements a multidivisional or a matrix structure. The multidivisional structure (or M-form) consists of several distinct strategic business units (SBUs), each with its own profit-and-loss (P&L) responsibility. Each SBU is operated independently from one another, and each is led by a CEO who is responsible for the unit’s business strategy and its day-to-day operations. The CEOs of each division in turn report to the corporate office, which is led by the company’s highest-ranking executive. 31) FALSE

The key elements of organizational structure are specialization, centralization, formalization, and hierarchy (not generalization). 32) TRUE

Ambidexterity describes a firm’s ability to address trade-offs not only at one point but also over time. It encourages managers to balance exploitation—applying current knowledge to enhance firm performance in the short term—with exploration—searching for new knowledge that may enhance a firm’s future performance. 33) A

A functional structure allows for an efficient top-down and bottom-up communication chain between the CEO and the functional departments, and thus relies on a relatively flat structure. 34) C

Any typical College of Business employs a functional structure to represent its diverse expertise. 35) A

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The organizational culture must be valuable, rare, difficult to imitate, and the firm must be organized to capture the value created (VRIO principles) if they are to achieve a competitive advantage. 36) D

Companies using an open innovation approach realize that great ideas can come from both inside and outside the company. Significant value can be had by commercializing external R&D and letting others commercialize internal R&D that does not fit with the firm’s strategy. 37) Short Answer

Alfred Chandler believed that organizational structure must follow strategy in order for firms to achieve superior performance. This tenet implies that to implement a strategy successfully, organizational design must be flexible enough to accommodate the formulated strategy and future growth and expansion. In reality, however, a firm’s strategy often follows its structure. This reversal implies that some managers consider only strategies that do not change existing organizational structures; they do not want to confront the inertia that often exists in established organizations. 38) B

The most important yet least visible element—values—is in the center of any diagram depicting organizational culture. 39) B

In this scenario, JohnBuilt1 most likely has a simple structure. A simple structure generally is used by small firms with low organizational complexity. In such firms, the founders tend to make all the important strategic decisions and run the day-to-day operations. 40) C

Inertia, a firm’s resistance to changing the status quo, can set the stage for the firm’s subsequent failure. Successful firms often plant the seed of subsequent failure by optimizing their organizational structure to the current situation. As a result of a tightly coupled but successful system, organizational inertia sets in—and with it, resistance to change. 41) A

A functional structure is recommended when a firm has a fairly narrow focus in terms of product/service offerings (i.e., low level of diversification) combined with a small geographic footprint. 42) A

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A successful blue ocean strategy requires the reconciliation of the trade-offs between differentiation and low cost. To effectively implement a blue ocean strategy, the firm must be both efficient and flexible. It must balance centralization to control costs with decentralization to foster creativity and innovation. 43) A

For organizational culture to be the basis of a firm’s competitive advantage, the firm’s unique culture must help it in some way to increase its economic value creation (V – C). That is, it must either help in increasing the perceived value of the product/service and/or lower its cost of production/delivery. Moreover, according to the resource-based view of the firm, the resource— in this case, organizational culture—must be valuable, rare, difficult to imitate, and the firm must be organized to capture the value created. Black Mesa’s culture fails to support a competitive advantage because it does not increase economic value creation for the firm, as evidenced by the 10 percent decline in profits. 44) B

A cost-leadership strategy usually focuses on offering standardized products to mainstream customers. Usually a functional and mechanistic organizational structure is preferred here to promote scale economies. 45) D

The use of budgets is key to input controls. Managers set budgets before employees define and undertake the actual business activities. 46) Short Answer

In the closed innovation model, the firm is conducting all research and development in-house, using a traditional funnel approach. Outside ideas and projects cannot enter, nor does the firm allow its own research ideas and development projects to leave the firm. This not only allows the firm to capture all the benefits from its own R&D, but also prevents competitors from benefiting from it. Open innovation is a framework for R& D that proposes permeable firm boundaries to allow a firm to benefit not only from internal ideas and inventions, but also from ideas and innovation from external sources. External sources of knowledge can be customers, suppliers, universities, start-up companies, and even competitors. 47) C

Hierarchy is an organizational element that determines the formal, position-based reporting lines and thus stipulates who reports to whom. 48) B

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In a functional structure, employees are grouped into distinct functional areas based on domain expertise. In terms of business strategy, a functional structure is recommended when a firm has a fairly narrow focus in terms of product/service offerings (i.e., low levels of diversification) combined with a small geographic footprint. 49) B

McDonald’s use of standard operating procedures across the world best exemplifies formalization. Formalization captures the extent to which employee behavior is controlled by explicit and codified rules and procedures. 50) D

The optimal organizational structure match is a multidivisional structure. Rather than focusing on geographic differences as in the multidomestic strategy, the focus is on driving down costs due to consolidation of activities across different geographic areas. 51) D

A cost-leadership strategy is typically associated with mechanistic structures, which allow for standardization and economies of scale. A differentiation strategy is more commonly used by organic firms. 52) A

The functional structure matches best with an international strategy. In an international strategy, the company leverages its home-based core competency by moving into foreign markets. 53) A

Cohesive, nondiverse groups are highly susceptible to groupthink, which in turn can lead to flawed decision making with potentially disastrous consequences. 54) Short Answer

Organizational culture describes the collectively shared values and norms of a firm’s members. Values define what is considered important. Norms define appropriate employee attitudes and behaviors. Although invisible, corporate culture finds its expression in artifacts. Artifacts include elements like the design and layout of physical space (e.g., cubicles or private offices), symbols (e.g., the type of clothing worn by employees), vocabulary, what stories are told, what events are celebrated and highlighted, and how they are celebrated (e.g., a formal dinner versus a company BBQ when the firm reaches its sales target). 55) B

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To overcome the lack of cross-departmental collaboration in a functional structure, a firm can set up cross-functional teams. In these temporary teams, members come from different functional areas to work together on a specific project or product, usually from start to completion. Each team member reports to two supervisors: the team leader and the respective functional department head. 56) D

Standard operating procedures, or policies and rules, are a frequently used mechanism when relying on input controls. McDonald’s relies on detailed operating procedures to ensure consistent quality and service worldwide. 57) B

As mentioned in Strategy Highlight 11.1, Zappos’ then-CEO Hsieh changed the organization to a holacracy in 2013 to combat a slow bureaucracy. But as is often the case, a new concept sounds great in theory but proves hard to implement. Zappos’ implementation of holacracy is not going well. Employee morale plummeted, and more recently Zappos failed to place in Fortune’s “100 Best Companies to Work For” list. 58) C

One of the drawbacks of the functional structure is that it cannot effectively address a higher level of diversification, which often stems from further growth. 59) C

A simple structure generally is used by small firms with low organizational complexity. In such firms, the founders tend to make all the important strategic decisions and run the day-to-day operations. Typically, neither professional managers nor sophisticated systems are in place. 60) D

Over time, 3M has relied on the ROWE (results-only work environment) framework. ROWEs are output controls that attempt to tap intrinsic (rather than extrinsic) employee motivation. Employees are encouraged to spend 15 percent of their time on projects of their own choosing. If any look promising, 3M provides financing to further develop their potential. 61) D

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From this information, it may be reasonable to infer that Rodin Art Supplies is led by its own CEO (or equivalent general manager). The multidivisional structure (or M-form) consists of several distinct strategic business units (SBUs), each with its own profit-and-loss (P&L) responsibility. Each SBU is operated by Snowfall independently from one another, and each is led by a CEO (or equivalent general manager) who is responsible for the unit’s business strategy and its day-to-day operations. 62) Short Answer

Strategic control-and-reward systems are the third and final key building block in designing organizations for competitive advantage. They are internal governance mechanisms put in place to align the incentives of principals (shareholders) and agents (employees). These formal systems allow managers to specify goals, measure progress, and provide performance feedback. 63) C

Results-only-work-environments (ROWEs) have attracted significant attention. ROWEs are output controls that attempt to tap intrinsic (rather than extrinsic) employee motivation. 64) A

It is best to develop a strong and strategically relevant culture in the first few years of a firm’s existence. It has been documented that the initial structure, culture, and control mechanisms established in a new firm can be a significant predictor of later success. 65) TRUE

Firms in the closed innovation model are extremely protective of their intellectual property. This not only allows the firm to capture all the benefits from its own R&D, but also prevents competitors from benefiting from it. The mind-set of firms in the closed innovation model is that to profit from R&D, the firm must come up with its own discoveries, develop them on its own, and control the distribution channels. Strength in R&D is equated with a high likelihood of benefiting from first-mover advantages. 66) B

Groupthink is defined as a situation in which opinions coalesce around a leader without individuals critically challenging and evaluating that leader’s opinions and assumptions. Cohesive, nondiverse groups are highly susceptible to groupthink, which in turn can lead to flawed decision making with potentially disastrous consequences. 67) FALSE

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Organic organizations typically exhibit a higher rate of entrepreneurial behaviors and innovation. They have a low degree of specialization and formalization, a flat organizational structure, and decentralized decision making. 68) A

Jared works for a retail store with a tall structure. If many levels of hierarchy exist between the frontline employee and the CEO, the firm has a tall structure. 69) D

Over time, as a firm diversifies into different product lines and geographies, it implements a multidivisional or a matrix structure. The multidivisional structure (or M-form) consists of several distinct strategic business units (SBUs), each with its own profit-and-loss (P&L) responsibility. 70) C

Simple structures exhibit low levels formalization and specialization, thus prohibiting the development of deep expertise. 71) FALSE

Though it is appealing in theory, the matrix structure does have shortcomings. It is usually difficult to implement: Implementing two layers of organizational structure creates significant organizational complexity and increases administrative costs. Also, reporting structures in a matrix are often not clear. In particular, employees can have trouble reconciling goals presented by their two (or more) supervisors. Adding an additional layer of hierarchy can also slow decision making and increase bureaucratic costs. 72) C

This is an example of implementing control through input controls. Input controls seek to define and direct employee behavior through a set of explicit, codified rules and standard operating procedures. Firms use input controls when the goal is to define the ways and means to reach a strategic goal and to ensure a predictable outcome. The use of budgets is a key to input controls. 73) B

Focus on economies of scale helps match a cost-leadership strategy to a functional structure. Because a functional structure services the average customer, and thus targets the largest market segment possible, it should focus on leveraging economies of scale to further drive down costs. 74) A

A matrix structure is the combination of the functional and M-form structure. 75) FALSE

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ROWEs are output controls that attempt to tap intrinsic (rather than extrinsic) employee motivation, which is driven by the employee’s interest in and the meaning of the work itself. In contrast, extrinsic motivation is driven by external factors such as awards and higher compensation, or punishments like demotions and layoffs (the carrot-and-stick approach). 76) A

Open innovation is a framework for R&D that proposes permeable firm boundaries to allow a firm to benefit not only from internal ideas and inventions, but also from ideas and innovation from external sources. Even the largest companies, such as AT&T, IBM, Siemens, and Pfizer, are shifting their innovation strategy toward a model that blends internal with external knowledge sourcing via licensing agreements, strategic alliances, joint ventures, and acquisitions. 77) Short Answer

Organic organizations have a low degree of specialization and formalization, a flat organizational structure, and decentralized decision making. Organic structures tend to be correlated with flexible information flow, faster decision making, and higher employee motivation and creativity. Therefore, organic structure usually exhibits higher rates of innovation due to the fact that it allows firms to foster R&D and/or marketing. Organic structures tend to be correlated with the following: a fluid and flexible information flow among employees in both horizontal and vertical directions; faster decision making; and higher employee motivation, retention, satisfaction, and creativity. Thus, firms that pursue a differentiation strategy at the business level frequently employ an organic structure. 78) C

Specialization is an organizational element that describes the degree to which a task is divided into separate jobs (that is, the division of labor). 79) B

Once it becomes clear that a firm’s culture is a source of competitive advantage, some competitors will attempt to imitate that culture. Therefore, only a culture that cannot be easily copied can provide a competitive advantage. However, it can be difficult, at best, to imitate the cultures of successful firms, for two reasons: causal ambiguity and social complexity. 80) A

Organizational culture describes the collectively shared values and norms of an organization’s members. Values define what is considered important. Norms define appropriate employee attitudes and behaviors. 81) Short Answer

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The key elements are specialization, formalization, centralization, and hierarchy. Specialization describes the degree to which a task is divided into separate jobs (division of labor); formalization captures the extent to which employee behavior is controlled by explicit and codified rules and procedures; centralization refers to the degree to which decision making is concentrated at the top of the organization; and hierarchy determines the formal, position-based reporting lines and thus stipulates who reports to whom. 82) C

A likely pitfall of this organizational structure is that Ebony is likely to feel overloaded. A simple structure generally is used by small firms with low organizational complexity. In such firms, the founders tend to make all the important strategic decisions and run the day-to-day operations. Typically, neither professional managers nor sophisticated systems are in place, which often leads to an overload for the founder and/or CEO when the firms experience growth. 83) C

Los Pollos Hermanos has a high degree of specialization (employees are assigned specific tasks such as food prep, cook, cashier), formalization (each job documented in minute detail; detailed instructions to each of its franchisees), and centralization (decision power resides at the top) and relies on a tall hierarchy (many levels of supervision). 84) C

Just as people have distinctive personalities, organizations also have unique cultures that capture “how things get done around here.” Organizational culture describes the collectively shared values and norms of an organization’s members. 85) B

Firms use input controls when the goal is to define the ways and means to reach a strategic goal and to ensure a predictable outcome. They are called input controls because management designs these mechanisms so they are considered before employees make any business decisions. 86) TRUE

Inertia, a firm’s resistance to changing the status quo, can set the stage for the firm’s subsequent failure. To avoid inertia and possible organizational failure, the firm needs a flexible and adaptive structure to effectively translate the formulated strategy into action. 87) D

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Two reasons explain why it can be difficult to imitate the culture of successful firms: causal ambiguity and social complexity. The causal relationships among values, norms, artifacts, and the firm’s performance may be hard to establish. Moreover, organizational culture is socially complex. It encompasses not only interactions among employees but also the firm’s outside relationships with its customers and suppliers. Such a wide range of factors is difficult for any competing firm to imitate. 88) B

To reap the benefits of both the M-form and the functional structure, many firms employ a mix of these two organizational forms, called a matrix structure. The idea behind the matrix structure is to combine the benefits of the M-form (domain expertise, economies of scale, and the efficient processing of information), with those of the functional structure (responsiveness and decentralized focus). 89) C

Strategic control-and-reward systems are internal-governance mechanisms put in place to align the incentives of principals (shareholders) and agents (employees). These formal systems allow managers to specify goals, measure progress, and provide performance feedback. 90) Short Answer

Students’ answers will vary. Mechanistic organizations are characterized by a high degree of specialization and formalization, and a tall hierarchy that relies on centralized decision making. The fast-food chain McDonald’s fits this description quite well. Each step of every job (such as deep frying fries) is documented in minute detail (e.g., what kind of vat, the quantity of oil, how many fries, and so on). Decision power is centralized at the top of the organization: McDonald’s headquarters provides detailed instructions to each of its franchisees so that they provide comparable quality and service across the board. To ensure standardized operating procedures and consistent food quality throughout the world, McDonald’s operates a state-of-the-art teaching facility in a Chicago suburb. 91) D

Inertia, a firm’s resistance to changing the status quo, can set the stage for the firm’s subsequent failure. Successful firms often plant the seed of subsequent failure: They optimize their organizational structure to the current situation. That tightly coupled system can break apart when internal or external pressures occur. 92) C

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A company that is using extrinsic motivation as an output control mechanism will most likely threaten to lay off employees if they do not achieve targets. Extrinsic motivation is driven by external factors such as awards and higher compensation, or punishments like demotions and layoffs (the carrot-and-stick approach). 93) A

The drawbacks of formalization are that it might hinder a firm’s innovation and customer service, and its ability to make a quick decision. It can also reduce creativity and innovation. 94) D

Based on this information, CEO Ravi Satterjee has a wide span of control, which is defined as the number of employees who directly report to a manager. 95) B

Nerissa has set up a firm that relies on high output controls to tap into intrinsic motivation. Output controls seek to guide employee behavior by defining expected results (outputs) but leave the means to those results open to individual employees. Intrinsic motivation is driven by the employee’s interest in and the meaning of the work itself. 96) FALSE

The primary means of cultural change is for the corporate board of directors to bring in new leadership at the top, which is then charged to make changes in strategy and structure. After all, executives shape corporate culture in their decisions on how to structure the organization and its activities, allocate its resources, and develop its system of rewards. 97) D

A matrix structure combines both the M-form and the functional structure. For example, a firm can be organized according to SBUs (along a horizontal axis, like in the M-form), and also have a second dimension of organizational structure (along a vertical axis). In this case, the second dimension could consist of different geographic areas, each of which generally would house a full set of functional activities. This exemplifies a global matrix structure. 98) B

Organizational culture is the collectively shared valued and norms of an organization’s members and a key building block of organizational design. 99) FALSE

Top-down strategic planning takes place in highly centralized organizations. Planned emergence is found in more decentralized organizations.

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100)

D For firms that pursue either related or unrelated diversification, the M-form is the preferred organizational structure. Firms using the M-form organizational structure to support a relateddiversification strategy tend to concentrate decision making at the top of the organization. Doing so allows a high level of integration. It also helps corporate headquarters leverage and transfer across different SBUs the core competencies that form the basis for a related diversification. 101)

C Centralization refers to the degree to which decision making is concentrated at the top of the organization. Centralized decision making often correlates with slow response time and reduced customer satisfaction. 102)

B Stafford Cookware should use a multidivisional organizational structure. Over time, as a firm diversifies into different product lines and geographies, it implements a multidivisional or a matrix structure. The multidivisional structure (or M-form) consists of several distinct strategic business units (SBUs), each with its own profit-and-loss (P&L) responsibility. 103)

C Mechanistic organizations are characterized by a high degree of specialization and formalization and a tall hierarchy that relies on centralized decision making. McDonald’s fits this description quite well. 104)

C To avoid inertia and possible organizational failure, firms need a flexible and adaptive structure to effectively translate the formulated strategy into action. Ideally, the firm will maintain a virtual cycle of reorganizing. However, firms that grow in size and complexity have a tendency and an incentive to focus on incremental innovation, which can lead to inertia and subsequent failure. 105)

D An organization’s culture can be one of its strongest assets, but also its greatest liability. GM’s strong culture led to organizational inertia. This resulted in a failure to adapt to changing customer preferences for more fuel-efficient cars, and prevented higher quality and more innovative designs. 106)

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In this scenario, E Corp is most likely an organic organization. Organic structures tend to be correlated with a fluid and flexible information flow among employees in both horizontal and vertical directions; faster decision making; and higher employee motivation, retention, satisfaction, and creativity. Organic organizations also typically exhibit a higher rate of entrepreneurial behaviors and innovation. 107)

D Pug Tech is likely to protect its research and development findings with patents and trade secrets. Firms in the closed innovation model are extremely protective of their intellectual property. This not only allows the firm to capture all the benefits from its own R&D, but also prevents competitors from benefiting from it. 108)

Short Answer A global matrix structure is formed by combining two dimensions, strategic business units along a horizontal axis and geographical areas along a vertical axis. The horizontal and vertical reporting lines between strategic business units (SBUs) and geographic areas intersect, creating nodes in the matrix. Firms tend to use it to pursue a transnational strategy, in which the firm combines the benefits of a multidomestic strategy (high local responsiveness) with those of a global-standardization strategy (lowest cost position attainable). In a global matrix structure, the geographic divisions are charged with local responsiveness and learning. At the same time, each SBU is charged with driving down costs through economies of scale and other efficiencies. 109)

B Organizational design is the process of creating, implementing, monitoring, and modifying the structure, processes, and procedures of an organization. The key components of organizational design are structure, culture, and control. 110)

Short Answer These days, more and more work requires creativity and innovation, especially in highly developed economies. As a consequence, so-called results-only-work-environments (ROWEs) have attracted significant attention. ROWEs are output controls that attempt to tap intrinsic (rather than extrinsic) employee motivation, which is driven by the employee’s interest in and the meaning of the work itself. In contrast, extrinsic motivation is driven by external factors such as awards and higher compensation, or punishments like demotions and layoffs. 111)

D An M-form structure is adopted when a firm diversifies into different geographic areas with differentiated product lines. 112)

Short Answer

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Centralization refers to the degree to which decision making is concentrated at the top of the organization. Centralized decision making often correlates with slow response time and reduced customer satisfaction. In decentralized organizations such as W. L. Gore or Zappos, decisions are made and problems solved by empowered lower-level employees who are closer to the sources of issues. Different strategic management processes match with different degrees of centralization. Top-down strategic planning takes place in highly centralized organizations, whereas planned emergence is found in more decentralized organizations. 113)

A Because strategy implementation transforms strategy into actions and business models, it often requires changes within the organization. However, strategy implementation often fails because managers are unable to make the necessary changes due to the effects on resource allocation and power distribution within an organization. 114)

A A functional structure allows for a higher degree of specialization and deeper domain expertise than a simple structure. Higher specialization also allows for a greater division of labor, which is linked to higher productivity. 115)

Short Answer MNEs attempt to achieve scale economies as well as location economies by pursuing a global division of labor based on locational advantage with the lowest cost. Since the product/service offered is more or less an undifferentiated commodity, MNEs will pursue a cost-leadership strategy. In such cases, the optimal organizational structure match is an M-form structure. Rather than focusing on geographic differences, the focus is on driving the cost down due to consolidation of activities across different geographic areas. 116)

C The multidomestic strategy matches with a multidivisional structure. The multidivisional structure (or M-form) consists of several distinct strategic business units (SBUs), each with its own profit-and-loss (P&L) responsibility. 117)

A Using a functional structure with an organic organization allows the differentiator to nurture and constantly upgrade necessary core competencies in R&D, innovation, and marketing. The functional structure should be set up to allow the firm to reap economies of scope from its core competencies, such as by leveraging its brand name across different products or its technology across different devices. 118)

TRUE

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Organizational design is the process of creating, implementing, monitoring, and modifying the structure, processes, and procedures of an organization. The key components of organizational design are structure, culture, and control. 119)

B Organizational inertia refers to a firm’s resistance to change the status quo, which can set the stage for the firm’s subsequent failure. 120)

D Although the functional strategy facilitates rich and extensive communication between members of the same department, it frequently lacks effective communication channels across departments.

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Student name:__________ 1) Corporate governance needs to address the issue of moral hazard, which describes the

principal’s difficulty in ascertaining whether agents have put forth their best efforts. ⊚ true ⊚ false Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-02 Apply agency theory to explain why and how companies use governance mechan Topic : Moral Hazard Source : Chapter 12 Test Bank > TF Qu. 09 Corporate governance needs to address the...

2) Kate is the CEO of a firm. She has an opportunity to increase the competitive advantage of

her company but is not sure if accepting the opportunity is ethical. Which of the following questions would help her decide if accepting the opportunity is ethical? A) How would the media report her decision to accept the opportunity if it were to become public? B) How long lasting would the competitive advantage be if she decided to accept the opportunity? C) How much profit would be made if she decided to accept the opportunity? D) What are the chances that her decision to accept the opportunity will be made public? Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 12-05 Explain the relationship between strategy and business ethics. Topic : Ethical Behavior in Business Strategies Source : Chapter 12 Test Bank > MC Qu. 74 Kate is the CEO of a firm. She has an opport...

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3) Explain the difference between a business strategy and a business model.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-06 Use the business model framework to put strategy into action. Topic : Business Models: Putting Strategy into Action Source : Chapter 12 Test Bank > SA Qu. 125 Explain the difference between a business...

4) It is up to auditors and board members to make certain that the financial statements that their

firms release are correct and not misleading. ⊚ true ⊚ false Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-03 Evaluate the board of directors as the central governance mechanism for pu Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > TF Qu. 05 It is up to auditors and board members to make certain tha...

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5) How can top management foster ethical behavior in employees? Provide an example that you

have read about or that comes from your own experience.

Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-05 Explain the relationship between strategy and business ethics. Topic : Ethical Behavior in Business Strategies Source : Chapter 12 Test Bank > SA Qu. 118 How can top management foster ethical behavi...

6) Jack is a board member of firm A but is not an employee of firm A; Jack is a senior executive

from firm B. Jack can best be described as a(n) A) philanthropist. B) shareholder. C) outside director. D) inside director. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-03 Evaluate the board of directors as the central governance mechanism for pu Topic : The Role of the Board of Directors in Corporate Governance Source : Chapter 12 Test Bank > MC Qu. 19 Jack is a board member of firm A but is not ...

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7) Martha received a tip from a close friend who is an executive manager of a publicly traded

company called TelAmeriCorp Inc. The manager received some inside information about how to trade TelAmeriCorp stock to get a huge profit. He shared this information with Martha. This scenario is an example of A) shared value creation. B) adverse selection. C) information asymmetry. D) stakeholder strategy. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-01 Explain the role of corporate governance. Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 30 Martha received a tip from a close friend wh...

8) It can be difficult for shareholders of publicly traded companies to determine how much

money those companies are making or losing because these companies use different accounting firms, and each accounting firm follows different rules. ⊚ true ⊚ false Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-04 Evaluate other governance mechanisms. Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > TF Qu. 06 It can be difficult for shareholders of publ...

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9) Jordan is president of a medium-sized bank. What can Jordan do to lessen the chance of

employees or board members taking part in insider trading? A) forbid board members from having access to private information B) forbid managers and executives from having access to private information C) create a strict code of ethics and explain that inside traders will be fired D) work with analysts and customer-facing employees to root out information asymmetry Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 12-01 Explain the role of corporate governance. Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 32 Jordan is president of a medium-sized bank. ...

10) Discuss the agency problem of adverse selection.

Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-02 Apply agency theory to explain why and how companies use governance mechan Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > SA Qu. 106 Discuss the agency problem of adverse select...

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11) The name for an agreed-upon code of conduct in business, based on societal norms, is A) fiduciary responsibilities. B) business ethics. C) strategic business points. D) poison pills. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 12-05 Explain the relationship between strategy and business ethics. Topic : Ethical Behavior in Business Strategies Source : Chapter 12 Test Bank > MC Qu. 76 The name for an agreed-upon code of conduct ...

12) Which of the following is a major issue at the forefront of CEO compensation in recent

years? A) a comparison of the performance of the organization before and after the CEO’s

tenure B) the performance of the CEO as an employee versus the performance as a board member C) a comparison of the compensation of senior management hired during and before the CEO’s tenure D) the absolute size of the CEO pay package compared with the pay of the average employee Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-04 Evaluate other governance mechanisms. Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 62 Which of the following is a major issue at t...

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13) Which of the following real-world scenarios best exemplifies information asymmetry in a

public stock company? A) Goldman Sachs followed through with the Abacus deal despite knowing its shortcomings. B) GE knew that it could create a profitable venture out of producing green products, so it rolled out the Ecomagination strategy. C) Mark Hurd, CEO of HP, was unaware of the sexual-harassment allegations, and the board’s demand for him to resign caught him by surprise. D) Based on a tip-off by a Goldman Sachs employee, the Galleon Group sold its holdings in Goldman Sachs’ stocks prior to the announcement of missed earnings estimates. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-01 Explain the role of corporate governance. Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 35 Which of the following real-world scenarios ...

14) Carla recently became a board member of a firm that has a history of reckless actions by

senior employees. Which task would be appropriate for Carla to undertake to help safeguard the company’s financial health? A) Take part in the annual reviews of employees in the financial department. B) Request and review a copy of the firm’s risk assessment plan, if such a plan exists. C) Determine how to postpone or evade the firm’s compliance with local, regional, and national regulations. D) Draft and circulate a statement that the firm’s board members serve at the pleasure of the CEO. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 12-03 Evaluate the board of directors as the central governance mechanism for pu Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 50 Carla recently became a board member of a fi...

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15) Which of the following is true of the board of directors in a public stock company? A) Votes at shareholder meetings determine whose representatives are appointed to the

board of directors. B) The functions of the board of directors are limited to ensuring the hiring and firing of CEOs. C) Because shareholders generally have uniform interests, the composition of the board is generally a unanimous decision. D) The board of directors acts as a facilitator to convey interests of the stockholders to the management without any real authority. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-03 Evaluate the board of directors as the central governance mechanism for pu Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 49 Which of the following is true of the board ...

16) Gary is a senior manager at a large, publicly traded corporation. He has access to insider

information about the company profits, losses, mergers, and acquisitions. It is legally and ethically acceptable for him to have this information as long as he does not use it to buy or sell stocks and does not tell others to buy or sell stocks. ⊚ true ⊚ false Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-01 Explain the role of corporate governance. Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > TF Qu. 01 Gary is a senior manager at a large, publicl...

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17) Treequote Industries has produced a new technology that will monitor the soil moisture in a

user’s garden and send a notification to an app on the user’s phone when it is time to water their plants. The goal of this inexpensive technology is to entice users to purchase Treequote’s more expensive automated watering system, so that they can trigger the watering process from the app on their phones. Which business model is most likely to help Treequote Industries accomplish its goals? A) pay-as-you-go B) wholesale C) agency D) freemium Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 12-06 Use the business model framework to put strategy into action. Topic : The Importance of a Viable Business Model Source : Chapter 12 Test Bank > MC Qu. 87 Treequote Industries has produced a new...

18) How does the separation of ownership and control in public stock companies present a

problem? Provide an example of this problem from your reading in this class, your reading outside of class, or your own experience.

Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-01 Explain the role of corporate governance. Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > SA Qu. 103 How does the separation of ownership and con...

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19) The professional social media website LinkedIn allows its users to create their profiles for

free, but it charges a premium price for additional services. This is an example of a________ business model. A) crowdsourcing B) subscription-based C) freemium D) peer-to-peer Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-06 Use the business model framework to put strategy into action. Topic : Business Models: Putting Strategy into Action Source : Chapter 12 Test Bank > MC Qu. 77 The professional social media website LinkedIn...

20) Jamila, the CEO of Yakyshyn Enterprises, reports to the board of directors appointed by the

shareholders of Yakyshyn Enterprises. Based on shareholder suggestions, the board ties Jamila’s compensation to the performance of Yakyshyn Enterprises. Due to this pressure, Jamila begins devoting extra time to projects and undertakes other activities to ensure that she has job security and that she receives adequate compensation. The reasons why the board ties Jamila’s compensation to firm performance is to overcome A) shareholder capitalism scenario. B) the principal-agent problem. C) inside director-outside director conflict. D) fiduciary responsibility oversight. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 12-01 Explain the role of corporate governance. Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 31 Jamila, the CEO of Yakyshyn Enterprises...

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21) Which of the following best supports the fact that Dieselgate was unethical when entering the

U.S. market? A) The VW CEO misled investors by spending $50 million on lavish, corporate parties. B) Dieselgate manipulated “triple A” bond ratings to entice investors. C) The engineers installed “defeat devices” that altered the concentration of harmful emissions when EPA regulators tested the vehicles. D) VW made no effort to ascertain the stability of the automobile market, even though it had the resources and time to do so. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-05 Explain the relationship between strategy and business ethics. Topic : Ethical Behavior in Business Strategies Source : Chapter 12 Test Bank > MC Qu. 69 Which of the following best supports the fac...

22) Which of the following problems can be overcome by leveraging the long tail? A) buyer inertia B) rising costs C) thin markets D) poison pills Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-07 Explain the long-tail concept and how it can be used as a business model i Topic : The Importance of a Viable Business Model Source : Chapter 12 Test Bank > MC Qu. 99 Which of the following problems...

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23) In the why, what, who, and how of business models framework, the why dimension asks,

“why does the business model create value?” ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 12-06 Use the business model framework to put strategy into action. Topic : Strategic Group Models for Understanding Industry Rivals Source : Chapter 12 Test Bank > TF Qu. 11 In the why, what, who, and how of business...

24) The translation of strategy into action primarily takes place in a firm’s A) executive summary. B) code of conduct. C) business model. D) mission statement. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 12-06 Use the business model framework to put strategy into action. Topic : The Importance of a Viable Business Model Source : Chapter 12 Test Bank > MC Qu. 79 The translation of strategy into action...

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25) What do we call the board members who are part of a company’s senior management team

appointed by shareholders to provide the board with necessary information pertaining to the company’s internal workings and performance? A) auditors B) investors C) outside directors D) inside directors Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 12-03 Evaluate the board of directors as the central governance mechanism for pu Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 54 What do we call the board members who are pa...

26) Khalil is interested in building the centerpiece of his firm’s corporate governance, and so

hires a________ that is made up of individuals from both inside and outside the firm. A) C-level suite team B) strategy consultant C) board of directors D) shareholders Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-03 Evaluate the board of directors as the central governance mechanism for pu Topic : The Role of the Board of Directors in Corporate Governance Source : Chapter 12 Test Bank > MC Qu. 16 Khalil is interested in building the cente...

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27) Describe the arguments for and against the CEO of a company serving as the chair of the

board of directors.

Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-03 Evaluate the board of directors as the central governance mechanism for pu Topic : The Role of the Board of Directors in Corporate Governance Source : Chapter 12 Test Bank > SA Qu. 112 Describe the arguments for and against the C...

28) In a distribution curve, where are all the bestsellers, popular titles, and hits to be found? A) short head B) long tail C) mid slope D) Pareto point Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-07 Explain the long-tail concept and how it can be used as a business model i Topic : The Importance of a Viable Business Model Source : Chapter 12 Test Bank > MC Qu. 96 In a distribution curve, where are...

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29) Domenick is a recent graduate who states that he has interned at a major accounting firm so

that his value as a candidate for employment increases. A start-up recruits Domenick based on his stated credentials without verifying them. Two days into the job, Domenick’s team lead realizes that Domenick does not know much of what he claimed to know during the interview. This scenario best exemplifies A) moral hazard. B) shared value creation. C) adverse selection. D) corporate governance. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-02 Apply agency theory to explain why and how companies use governance mechan Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 63 Domenick is a recent graduate who states that...

30) During the process of formulating an effective business model, a firm’s managers should first A) implement their strategy at corporate, strategic business unit, and functional levels. B) evaluate the firm’s strategy already in effect and take corrective actions if necessary. C) transform their strategy of how to compete into a blueprint of actions and initiatives. D) implement their blueprint of actions and initiatives through structures, processes,

culture, and procedures. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-06 Use the business model framework to put strategy into action. Topic : The Importance of a Viable Business Model Source : Chapter 12 Test Bank > MC Qu. 80 During the process of formulating an...

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31) In public stock companies, which of the following expectations of principals is most likely to

lead to principal-agent problems? A) the expectation that the agent will follow the country’s laws and regulations B) the expectation that the agent will reconnect economic and social needs C) the expectation that the agent will go above and beyond the call of duty D) the expectation that the agent will act in the principal’s best interest Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-01 Explain the role of corporate governance. Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 27 In public stock companies, which of the foll...

32) How does the market for corporate control work? Provide at least one example. The example

can be from your reading in this class, your reading in other classes, or your own experience.

Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-04 Evaluate other governance mechanisms. Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > SA Qu. 114 How does the market for corporate control wo...

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33) One way to foster ethical behavior in employees is to A) align the vision statement of the organization with its informal culture. B) avoid codifying organizational culture. C) create a control system that encourages desired values. D) view clients as counter parties to transactions. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-05 Explain the relationship between strategy and business ethics. Topic : Ethical Behavior in Business Strategies Source : Chapter 12 Test Bank > MC Qu. 72 One way to foster ethical behavior in employ...

34) How do principal–agent problems cascade down the hierarchy in an organization? Describe

an example of principal–agent problems. The example can be from your reading in this class, your reading outside of class, or your own experience.

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35) Which of the following scenarios best illustrates bundling? A) Isdom Inc. sells its basic TV channels for free but charges high prices for any

channels that customers add on later. B) CondaxMedia Inc. sells its cloud computing network by having customers pay for the service as they use it. C) Yearin Inc. sells its electric toothbrushes for a low cost, but charges a high price for replacement brushes. 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. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 12-06 Use the business model framework to put strategy into action. Topic : The Importance of a Viable Business Model Source : Chapter 12 Test Bank > MC Qu. 84 Which of the following scenarios...

36) Dontechi is a file hosting service that allows users to store up to 5GB of data with no

restrictions or charges. However, users have to pay a fee for advanced features on the cloud storage system and additional storage space. Which of the following business models does this best illustrate? A) freemium B) subscription-based C) razor–razor blade D) pay-as-you-go Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-06 Use the business model framework to put strategy into action. Topic : The Importance of a Viable Business Model Source : Chapter 12 Test Bank > MC Qu. 91 Dontechi is a file hosting service...

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37) Industry analysts, auditors, and government regulators are examples of A) internal governance mechanisms. B) outside board members. C) external governance mechanisms. D) inside board members. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-04 Evaluate other governance mechanisms. Topic : Governance Mechanisms Source : Chapter 12 Test Bank > MC Qu. 20 Industry analysts, auditors, and government...

38) Netflix is an example of a company that A) combines the long-tail concept with crowdsourcing, leveraging user input from idea

generation and design to marketing and distribution. B) focuses on the short head, producing a few high-impact blockbuster movies and then leveraging them into billion-dollar franchises. C) merges the razor–razor blade model with the subscription model, subsidizing a highend device when you sign up for a lengthy service plan. D) leverages the long tail, with its personalized recommendation algorithm combined with producing a large quantity of low-budget content. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-07 Explain the long-tail concept and how it can be used as a business model i Topic : The Importance of a Viable Business Model Source : Chapter 12 Test Bank > MC Qu. 101 Netflix is an example of a company...

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39) Kendall, a loan officer, advises Vaughn to sign up for an exotic mortgage that turns out to be

very expensive for him and probably not the best financial choice. This is an example of an action that A) is illegal but meets most ethical norms. B) is legal but ethically questionable. C) is illegal and damaging for the company. D) is legal and beneficial for Vaughn. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-05 Explain the relationship between strategy and business ethics. Topic : Ethical Behavior in Business Strategies Source : Chapter 12 Test Bank > MC Qu. 22 Kendall, a loan officer, advises Vaughn...

40) Describe moral hazard with an example.

Question Details AACSB : Reflective Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 12-02 Apply agency theory to explain why and how companies use governance mechan Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > SA Qu. 107 Describe moral hazard with an example.

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41) Which of the following is the source of the principal-agent problem in publicly traded

companies? A) limited liability for investors B) the separation of ownership and control C) transferability of investor ownership D) the law of legal personality Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-01 Explain the role of corporate governance. Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 28 Which of the following is the source of the ...

42) Discuss the implications for strategic leaders in the context of corporate governance and

sustained competitive advantage.

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43) Describe what corporate governance is and the benefits it provides organizations.

Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 12-01 Explain the role of corporate governance. Topic : Corporate Governance Source : Chapter 12 Test Bank > SA Qu. 122 Describe what corporate governance is and th...

44) Fresher Corp. produces electric bathroom fragrance diffusers and sells the electric device at a

market rate price. However, they lock their clients into a two-year agreement to purchase the perfume refills solely from them on a monthly basis. Which of the following business models does this best illustrate? A) subscription-based B) crowdsourcing C) peer-to-peer D) freemium Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-06 Use the business model framework to put strategy into action. Topic : Business Models: Putting Strategy into Action Source : Chapter 12 Test Bank > MC Qu. 78 Fresher Corp. produces electric bathroom...

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45) Janelle hires Vanessa to perform a critical task in her organization. However, Vanessa has

misrepresented her knowledge, skills, and abilities, and Janelle has no way of knowing whether Vanessa can indeed perform well. This is an example of A) agency theory. B) disparate treatment. C) adverse selection. D) ineffective corporate governance. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-02 Apply agency theory to explain why and how companies use governance mechan Topic : Agency Theory in Corporate Governance Source : Chapter 12 Test Bank > MC Qu. 24 Janelle hires Vanessa to perform a critical...

46) Beasea is a senior manager for the Wildwood Furniture Company. Because of her

experience, she has been appointed to the board of Woodworks Inc., even though she does not work for this firm. She also serves on the boards of several other companies. Beasea is a(n)________ for Wildwood Furniture and a(n)________ for Woodworks Inc. A) inside director; outside director B) outside director; inside director C) CEO; COO D) COO; CEO Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-03 Evaluate the board of directors as the central governance mechanism for pu Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 52 Beasea is a senior manager for the...

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47) General Electric’s board has only one inside director, John Flannery, GE’s CEO, who also

acts as chairperson of the board. This is known as duality. Which of the following statements represents the best argument for this duality in GE? A) Any CEO will suggest board appointees who will function as strategic allies. B) The CEO might be able to influence the board through setting the meeting agendas. C) The CEO possesses invaluable inside information that can help them lead the board effectively. D) A CEO is likely to be more responsible because they are setting their own performance targets. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-03 Evaluate the board of directors as the central governance mechanism for pu Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 58 General Electric&#8217;s board has only one ...

48) Describe the role of outside directors as part of a company’s board of directors.

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49) A defining characteristic of the pay-as-you-go business model is that the A) initial product is often sold at a loss in order to drive demand for complementary

goods. B) users pay for only the services they consume. C) the basic features of a service are provided free of charge, but the user must pay for premium services. D) users pay for access to a product or service whether they use it during the payment term or not. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 12-06 Use the business model framework to put strategy into action. Topic : The Importance of a Viable Business Model Source : Chapter 12 Test Bank > MC Qu. 89 A defining characteristic of the pay...

50) You are the founder of Newex Surfboards, 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) automating the manufacturing process to reduce production costs B) switching to a just-in-time inventory system to reduce inventory costs C) devoting significant resources to researching and developing new products that will be more durable than competitors’ products D) allowing customers to upload their own image designs and help assemble the finished product at retail locations Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 12-06 Use the business model framework to put strategy into action. Topic : The Importance of a Viable Business Model Source : Chapter 12 Test Bank > MC Qu. 81 You are the founder of Newex Surfboards...

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51) Morgan accepts a job as head of human resources at an engineering firm and learns that the

company believes teamwork is so important that it awards all raises and bonuses by splitting them equally within a team rather than presenting them to individual employees. What action should Morgan take regarding this program? A) Make sure the plan goes into place only after the company has corrected information asymmetry. B) Make sure information asymmetry is corrected before the next round of raises. C) Expand the program to allow teams to make all hiring and firing decisions. D) End the program because it encourages opportunistic employees to do little or no work. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 12-02 Apply agency theory to explain why and how companies use governance mechan Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 62 Morgan accepts a job as head of human...

52) Rascal Interactive produces a few high-impact blockbuster video games and then leverages

them through spinoffs, merchandise, and licensing. Rascal is focused on A) the long tail. B) disruption. C) bundling D) the short head. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-07 Explain the long-tail concept and how it can be used as a business model i Topic : The Importance of a Viable Business Model Source : Chapter 12 Test Bank > MC Qu. 102 Rascal Interactive produces a few high...

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53) Which of the following strategies might result in the long-tail phenomenon? A) selling a product at a loss to drive demand for complementary goods B) combining unlimited selection with algorithmic recommendations C) blending the razor-razor blade model with the subscription model D) discounting bundled products with negatively correlated demand Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-07 Explain the long-tail concept and how it can be used as a business model i Topic : The Importance of a Viable Business Model Source : Chapter 12 Test Bank > MC Qu. 94 Which of the following strategies might...

54) Because of poor management, the stock price of Rearden Steel Inc. falls, and many investors

sell their shares. Soon Rearden Steel becomes the target of a hostile takeover, during which Dildred buys enough shares to exert control over the firm. In this scenario, Dildred performs the role of a(n) A) outside director. B) corporate raider. C) corporate consultant. D) inside director. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-04 Evaluate other governance mechanisms. Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 61 Because of poor management, the stock price ...

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55) Why is board independence critical to effectively fulfilling a board’s governance

responsibilities?

56) What is the important strategic trade-off that the long-tail business model solves? A) It increases the number of users paying for access even if they do not use the product

or service during the payment term. B) It lowers space, inventory, and distribution costs while enabling firms to match unique consumer preferences to supply. C) It provides an opportunity to capture consumers who value one of the products but who have little interest in the second. D) It allows companies to create demand for replacement parts while taking only a small loss on the sale of the initial product. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-07 Explain the long-tail concept and how it can be used as a business model i Topic : The Importance of a Viable Business Model Source : Chapter 12 Test Bank > MC Qu. 100 What is the important strategic trade...

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57) Executive compensation is an important element of corporate governance. Research has

found that the rate of executive pay to average employee pay has been relatively stable over the last couple of decades. ⊚ true ⊚ false Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-04 Evaluate other governance mechanisms. Topic : Governance Mechanisms Source : Chapter 12 Test Bank > TF Qu. 10 Executive compensation is an important eleme...

58) The board of directors of a public stock company consists of A) employees of a company who belong to the senior management and directly report to

the CEO of the firm. B) individuals who formally represent the firm’s shareholders and oversee the work of executives. C) managers appointed by the owners of a company to run its day-to-day operations. D) the legal owners of a publicly traded company that was purchased in a leveraged buyout. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-03 Evaluate the board of directors as the central governance mechanism for pu Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 53 The board of directors of a public stock com...

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59) The root cause of the principal-agent problem between senior executives and lower-level

employees can be explained by the A) operational expertise of lower-level employees in concentrated areas of a particular field. B) higher number of lower-level employees than senior executives. C) informational advantage of the lower-level employees. D) knowledge of employees regarding day-to-day tasks. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-02 Apply agency theory to explain why and how companies use governance mechan Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 39 The root cause of the principal-agent ...

60) Alexi was a manager at Inquiry Inc. Instead of working full-time on Inquiry’s projects, she

used Inquiry’s tools, employees, computers, and other resources to work on a research project that she hopes might help her start her own firm. This is an example of adverse selection. ⊚ true ⊚ false Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-02 Apply agency theory to explain why and how companies use governance mechan Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > TF Qu. 02 Alexi was a manager at Inquiry Inc. Instead ...

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61) In a public stock company, senior executives, such as the CEO, face agency problems when A) the board of directors possesses more information about the company than they do. B) the firm designs work tasks, incentives, and employments that minimize opportunism. C) they decide to get involved in the day-to-day operations of a company. D) they delegate authority of strategic business units to general managers. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-02 Apply agency theory to explain why and how companies use governance mechan Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 38 In a public stock company, senior executives...

62) Aperture Science is a publicly traded manufacturer of home electronics. Based on what you

have read, which of these actions would be wisest for Aperture Science’s board of directors to take to be sure that the company’s new CEO is as motivated as possible? A) Link the CEO’s pay to her performance but avoid high-powered incentives that may cause reckless behavior. B) Offer the largest bonus possible to prevent the CEO from leaving to go a rival firm. C) Encourage the CEO to take all of her compensations in stock options, which will motivate her to keep the stock price high. D) Encourage her to emulate Warren Buffett and to take a lower salary than she might command elsewhere. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 12-04 Evaluate other governance mechanisms. Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 59 Aperture Science is a publicly traded manufa...

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63) Research indicates that most corporate ethics problems are caused by a few “bad apples”

rather than an unethical culture. ⊚ true ⊚ false Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 12-05 Explain the relationship between strategy and business ethics. Topic : Organizational Culture Source : Chapter 12 Test Bank > TF Qu. 08 Research indicates that most corporate ethic...

64) A bank, Seaside, offers a customer a personal loan. In which of the following circumstances

will this decision most likely be considered unethical? A) The bank has the financial statements of the customer, but it is not aware of each source of income. B) The bank knows that the customer will be unable to pay the loan if the interest rate rises. C) The bank is depending on the customer to pay back the loan before term completion. D) The bank is not aware of the investments made by the customer. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-05 Explain the relationship between strategy and business ethics. Topic : Ethical Behavior in Business Strategies Source : Chapter 12 Test Bank > MC Qu. 67 A bank, Seaside, offers a customer a persona...

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65) Which of the following descriptions best exemplifies adverse selection? A) An interview candidate lists his qualifications in chronological order. B) An employee spends time on social networking sites during work hours. C) A manager cannot ascertain the contributions of individual team members in team

production. D) A research scientist uses the organization’s resources to conduct personal research. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-02 Apply agency theory to explain why and how companies use governance mechan Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 25 Which of the following descriptions best exe...

66) According to the agency theory, A) corporations are more than a set of contracts between parties. B) companies should focus on generating profits for stockholders. C) conflicts that arise in corporations should be addressed in the legal realm. D) principals and agents have interchangeable roles. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 12-02 Apply agency theory to explain why and how companies use governance mechan Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 37 According to the agency theory,

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67) Describe the role of inside directors as part of a company’s board of directors.

Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-03 Evaluate the board of directors as the central governance mechanism for pu Topic : Corporate Governance Source : Chapter 12 Test Bank > SA Qu. 109 Describe the role of inside directors as par...

68) Gordon’s role in providing inside information to Pearson Specter Litt for the benefit of

Pearson Specter Litt’s stockholders and himself is an example of A) shared value creation. B) moral hazard. C) adverse selection. D) shareholder capitalism. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-02 Apply agency theory to explain why and how companies use governance mechan Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 47 Gordon&#8217;s role in providing inside info...

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69) Shareholders of public companies need to appoint a board of directors to represent their

interests because A) ownership and control are separated in a public company. B) the board of directors itself is made up of shareholders. C) the shareholders want to control day-to-day operations. D) they want to limit the amount of money they can lose. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-03 Evaluate the board of directors as the central governance mechanism for pu Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 51 Shareholders of public companies need to app...

70) Which of the following is an implication for the strategist in the context of corporate

governance and a company’s success? A) A firm that restricts its responsiveness to stockholders (and no other stakeholders) and keeps them committed to its vision will be successful. B) Leading by ethical example often has a lesser effect on employee behavior than words do. C) Effective corporate governance and solid business ethics are critical to gaining and sustaining competitive advantage. D) Very few corporate-governance mechanisms can be effective in addressing the principal-agent problem. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-05 Explain the relationship between strategy and business ethics. Topic : Strategic Implications of Crossing-the-Chasm Source : Chapter 12 Test Bank > MC Qu. 73 Which of the following is an implication for...

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71) What helps notions such as fairness, honesty, and reciprocity to be codified into law? A) The notions are synonymous with law. B) The notions differ to some degree in different cultures around the globe. C) The notions are characteristics inherited by each person irrespective of the culture. D) The notions are universal norms. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-05 Explain the relationship between strategy and business ethics. Topic : Ethical Behavior in Business Strategies Source : Chapter 12 Test Bank > MC Qu. 65 What helps notions such as fairness, honesty...

72) Bioplex requires its members to pay a quarterly or an annual fee to use its services.

Irrespective of whether they frequently use the services during the payment period or not, members have to pay in advance. Which of the following business models does this best illustrate? A) freemium B) razor–razor blade C) pay-as-you-go D) subscription-based Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-06 Use the business model framework to put strategy into action. Topic : The Importance of a Viable Business Model Source : Chapter 12 Test Bank > MC Qu. 88 Bioplex requires its members to pay...

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73) Karena owns a mid-priced clothing store that offers seasonal tops, bottoms, outerwear, and

shoes in the most popular sizes and styles. The products in Karena’s store represent the________ of the distribution curve. A) long tail B) short head C) mid slope D) Pareto point Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 12-07 Explain the long-tail concept and how it can be used as a business model i Topic : The Importance of a Viable Business Model Source : Chapter 12 Test Bank > MC Qu. 97 Karena owns a mid-priced clothing store...

74) ________ are the board members who are part of the company’s senior management team

appointed by shareholders to provide the board with necessary information pertaining to the company’s internal workings and performance. A) Philanthropists B) Outside directors C) Inside directors D) Stockholders Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-03 Evaluate the board of directors as the central governance mechanism for pu Topic : The Role of the Board of Directors in Corporate Governance Source : Chapter 12 Test Bank > MC Qu. 18 ________ are the board members who are part ...

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75) Which of the following scenarios best exemplifies a leveraged buyout of a microchip

manufacturer, Sirius Cybernetics Corp.? A) A private equity firm, All Things Inc., buys a large number of shares of Sirius Cybernetics Corp.in order to publicly trade it under a new name. B) Sirius Cybernetics Corp. sells all its shares and declares bankruptcy. C) Sirius Cybernetics Corp. buys back a large amount of its own shares from the stock market. D) The owner of another company buys all the outstanding shares of Sirius Cybernetics Corp. in order to take it private. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-04 Evaluate other governance mechanisms. Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 63 Which of the following scenarios best exempl...

76) At Gregarious Simulation Systems, a cross-functional team is formed to work on a project

for a new client. The team consists of David and four other members. At most of the team’s presentations to senior management, David takes the lead and discusses project specifics with the management, while others chip in with additional information. At the completion of the project, David is recommended for promotion, while the other team members receive little recognition for their hard work. The reality is that David did very little actual work but spent some time compiling the project report based on different documents submitted by the others. This scenario at Gregarious Simulation Systems is a typical consequence of A) shared value creation. B) adverse selection. C) corporate governance. D) moral hazard. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-02 Apply agency theory to explain why and how companies use governance mechan Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 44 At Gregarious Simulation Systems, a cross-fu...

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77) Explain how business models put strategy into action.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 1 Easy Learning Objective : 12-06 Use the business model framework to put strategy into action. Topic : The Importance of a Viable Business Model Source : Chapter 12 Test Bank > SA Qu. 123 Explain how business models put strategy...

78) ________ is a business model in which the manufacturer sets a fixed price on a product, but

the retailer is free to set its own price. A) Freemium B) Bundling C) Agency D) Wholesale Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 12-06 Use the business model framework to put strategy into action. Topic : The Importance of a Viable Business Model Source : Chapter 12 Test Bank > MC Qu. 82 ________ is a business model in which...

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79) How does a leveraged buyout affect a public company?

80) A mortgage loan officer persuades unsuspecting consumers to sign up for exotic mortgages,

such as option ARMs. These mortgages offer borrowers the choice to pay less than the required interest, which is then added to the principal while the interest rate can adjust upward. Because of this setup, many borrowers are unable to repay the mortgage once the interest rates go up. Which of the following phrases best describes this scenario? A) ethical but not legal B) legal but not ethical C) neither legal nor ethical D) legal and ethical Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-05 Explain the relationship between strategy and business ethics. Topic : Ethical Behavior in Business Strategies Source : Chapter 12 Test Bank > MC Qu. 75 A mortgage loan officer persuades unsuspecti...

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81) Which of the following is true of the codes of conduct of an organization? A) They help the board of directors and the CEO implement shareholder capitalism. B) They detail how the organization expects an employee to behave and to represent the

company in business dealings. C) They are a guide to determine what is lawful and what is unlawful. D) They are a reiteration of the laws pertaining to business dealings in a corporate environment. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-05 Explain the relationship between strategy and business ethics. Topic : Ethical Behavior in Business Strategies Source : Chapter 12 Test Bank > MC Qu. 68 Which of the following is true of the codes ...

82) 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) pay-as-you-go B) razor–razor blade C) direct sales D) subscription-based Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-06 Use the business model framework to put strategy into action. Topic : The Importance of a Viable Business Model Source : Chapter 12 Test Bank > MC Qu. 86 Nam-zim sells its e-book readers at the...

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83) Sergei is a manager at MasterBuilder Tools Inc. and is friends with the company’s CEO. This

privilege gives Sergei the information that MasterBuilder Tools is in talks to take over a leading rival. Sergei buys stocks of MasterBuilder Tools with the expectation that its stocks will appreciate. But the deal falls through, and the stocks of MasterBuilder Tools depreciate in the following months. Are Sergei’s actions unethical? Why or why not? A) Yes. It is unethical to trade stocks based on insider information, irrespective of the final outcome. B) No. Sergei did not ask the CEO to disclose such information to him. C) Yes. It is illegal and unethical for Sergei to possess any kind of insider information. D) No. Sergei did not make any profits from trading stocks using this information. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 12-01 Explain the role of corporate governance. Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 34 Sergei is a manager at MasterBuilder...

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84) 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) What activities need to be performed to create and deliver the offerings to consumers? B) Who are the main stakeholders who will be performing the activities? C) How are the offerings to the customers created? D) Why does the business model create value? Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 12-06 Use the business model framework to put strategy into action. Topic : The Importance of a Viable Business Model Source : Chapter 12 Test Bank > MC Qu. 92 Hottechi Laminate has developed a new...

85) Law and ethics are not synonymous. Elaborate on this statement with the help of an example.

Question Details AACSB : Analytical Thinking Accessibility : Keyboard Navigation Bloom's : Evaluate Difficulty : 3 Hard Learning Objective : 12-05 Explain the relationship between strategy and business ethics. Topic : Ethical Behavior in Business Strategies Source : Chapter 12 Test Bank > SA Qu. 117 Law and ethics are not synonymous. Elaborate...

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86) What is the connection between Rajat Gupta and insider trading?

87) Explain how the razor–razor blade business model works and provide an example of a firm

that uses this model.

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 12-06 Use the business model framework to put strategy into action. Topic : Business Models: Putting Strategy into Action Source : Chapter 12 Test Bank > SA Qu. 124 Explain how the razor&#8211;razor blade...

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88) Which of the following is a common result of a hostile takeover of a company? A) The new owner keeps the company intact. B) The new owner sells the company in pieces. C) The new owner keeps the board of directors of the company the same. D) The new owner enhances the reputations of the company’s management. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-04 Evaluate other governance mechanisms. Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 60 Which of the following is a common result of...

89) What is the benefit of granting stock options as part of a compensation package in a public

stock company?

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90) Shi-Hae is the ethics officer at Voltz Autos, a publicly traded company. She wants to make

sure that on-the-job consumption at Voltz Autos stays within legal and ethical bounds. Which action should Shi-Hae and the Voltz Autos board of directors take? A) Permit on-the-job consumption but cancel executive bonuses. B) Set strict limits on what executives can spend on office redecoration or work-related celebrations. C) Do nothing. On-the-job consumption is a necessary part of hiring and retaining key executives. D) Forbid high-cost items such as executive office decoration but permit lavish parties and celebrations because they are essential for morale. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-01 Explain the role of corporate governance. Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 57 Shi-Hae is the ethics officer at Voltz Autos...

91) Greg is the president of a technology firm that has recently gone public. What action, if any,

should Greg take to build the confidence of his new shareholders? A) He should discourage pension funds from investing because they are interested in safety at the expense of growth. B) He should make the company stock available only to hedge funds so he will have the freedom to take risks as the firm expands. C) He should find out whether the majority of his shareholders want long-term steady growth or short-term spikes in the stock price. D) Greg needs to focus on the company’s earnings because that is what shareholders care about. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 12-03 Evaluate the board of directors as the central governance mechanism for pu Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 48 Greg is the president of a technology firm t...

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92) Describe moral hazard in the context of the principal–agent relationship. Use an example.

93) Which of the following companies has leveraged the long-tail concept? A) Boo-tique is a pop-up retailer that operates each fall in an otherwise empty mall space

selling Halloween costumes and accessories. B) Second Street is a thrift store that creates a special Halloween-themed section in October highlighting items suitable for costume use. C) Suburban Square is a big box retailer that features Halloween decorations, candy, and costumes in a seasonal department each fall. D) Howloween World is an online marketplace selling most of its items from a vast inventory of specialty costumes, wigs, and props. Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 12-07 Explain the long-tail concept and how it can be used as a business model i Topic : The Importance of a Viable Business Model Source : Chapter 12 Test Bank > MC Qu. 98 Which of the following companies has...

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94) To help increase and maintain ethical values for future managers, a group of Harvard

Business School students developed A) the triple-bottom-line framework to guide managers ethical decisions. B) an MBA oath that recognizes the role of business in society and its responsibilities beyond shareholders. C) a new way to examine business processes that meet the needs of the community. D) an ethical value chain that attempts to promote societal benefits. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-05 Explain the relationship between strategy and business ethics. Topic : Ethical Behavior in Business Strategies Source : Chapter 12 Test Bank > MC Qu. 14 To help increase and maintain ethical values...

95) Traditionally, 80 percent of sales in a given product category come from what part of the

distribution curve? A) short head B) Pareto point C) mid slope D) long tail Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 12-07 Explain the long-tail concept and how it can be used as a business model i Topic : The Importance of a Viable Business Model Source : Chapter 12 Test Bank > MC Qu. 95 Traditionally, 80 percent of sales in...

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96) ________ is the term that describes the difficulty of the principal to ascertain whether the

agent has really put forth a best effort. A) Moral hazard B) Disparate treatment C) The agent issue D) Adverse selection Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-02 Apply agency theory to explain why and how companies use governance mechan Topic : Moral Hazard Source : Chapter 12 Test Bank > MC Qu. 23 ________ is the term that describes the diffi...

97) Some argue that the global financial crisis of 2008 was worsened because large Fortune 500

companies did not practice effective A) balanced scorecard techniques. B) corporate governance. C) co-opetition. D) external analysis. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-01 Explain the role of corporate governance. Topic : Corporate Governance Source : Chapter 12 Test Bank > MC Qu. 15 Some argue that the global financial crisis ...

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98) Larry is a board member at Entertainment 720 Inc. He is also a senior executive of the firm.

The board is chaired by Denise Carrows, the CEO of Umbrella Corp. According to this scenario, Larry A) is an inside director of Entertainment 720. B) can use information from board meetings to trade stocks of Entertainment 720. C) cannot serve on the board of any other organization. D) is more likely than Denise to take care of stockholder interests. Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-03 Evaluate the board of directors as the central governance mechanism for pu Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 56 Larry is a board member at Entertainment 720...

99) Even though a firm chooses a business model at its founding, it may change that model later

in the life of the firm. ⊚ true ⊚ false Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 2 Medium Learning Objective : 12-06 Use the business model framework to put strategy into action. Topic : Strategic Group Models for Understanding Industry Rivals Source : Chapter 12 Test Bank > TF Qu. 12 Even though a firm chooses a business...

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100)

Adverse selection in a public stock company occurs when A) information asymmetry increases the likelihood of selecting inferior alternatives. B) a firm’s work tasks, incentives, and employment contracts minimize opportunism by agents. C) an agent manipulates information to benefit stockholders. D) a principal is not aware of the context from which information from an agent is derived.

Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-02 Apply agency theory to explain why and how companies use governance mechan Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 45 Adverse selection in a public stock company ...

101)

Stratton Oakmont Inc. is a publicly traded company. The stockholders of this company delegate the authority to make decisions for the company to a CEO named Terry. The stockholders expect Terry to make decisions that will benefit the company. However, Terry begins to find ways to maximize his total compensation, which hinders Stratton Oakmont Inc.’s performance. This scenario reflects A) inside director-outside director problems. B) adverse selection problems. C) value creation problems. D) principal-agent problems.

Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-01 Explain the role of corporate governance. Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 29 Stratton Oakmont Inc. is a publicly traded c...

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102)

Globex Inc. has a board of directors that consists of seven members. Which of the following is most likely an accurate statement about Globex’s board of directors? A) Globex’s board of directors ensures the firm’s compliance with laws and regulations but does not conduct risk assessments. B) Globex’s board of directors has a minority number of inside directors, and it evaluates the firm’s strategic initiatives. C) Globex’s board of directors oversees the firm’s succession plan but does not evaluate the firm’s CEO. D) Globex’s board of directors provides guidance for the firm’s CEO but does not monitor the firm’s corporate actions.

Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-03 Evaluate the board of directors as the central governance mechanism for pu Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 55 Globex Inc. has a board of directors that co...

103)

One of the most challenging aspects of principal-agent problems is that firms have almost no defenses against them. ⊚ true ⊚ false

Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-02 Apply agency theory to explain why and how companies use governance mechan Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > TF Qu. 03 One of the most challenging aspects of princ...

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104)

Layla is the CEO of a financial services firm. What action should she take to be sure the firm avoids moral hazards? A) Layla should define undue risk-taking, institute strict auditing of loans, and make it clear that the company will fire employees who lend recklessly. B) Layla must increase hiring and develop influential relationships with government officials so that the firm will be considered “too big to fail.” C) She should closely monitor the behavior and performance of new employees to be certain that they have the skills they claimed to have in interviews. D) She must create a plan in which government agencies or a consortium of other financial services firms will assume any future debts of the company.

Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 12-02 Apply agency theory to explain why and how companies use governance mechan Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 46 Layla is the CEO of a financial services....

105)

West State Utilities is an energy provider that charges its customers $0.05 per kilowatt hour for electricity use. So, if a customer uses 500 kilowatt hours during the billing period, the company charges them $25.00. Which of the following business models does this best illustrate? A) subscription-based B) pay-as-you-go C) razor–razor blade D) freemium

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-06 Use the business model framework to put strategy into action. Topic : The Importance of a Viable Business Model Source : Chapter 12 Test Bank > MC Qu. 90 West State Utilities is an energy...

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106)

The informational advantage that agents possess over principals is often based on the fact that A) agents are legally permitted to freely trade the information in exchange for benefits, unlike principals. B) the information is extremely secure and protected from exposure to anyone outside the company. C) insiders are the first to learn about important developments before the information is released to the public. D) public stock companies are characterized by information symmetry.

Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-01 Explain the role of corporate governance. Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 33 The informational advantage that agents poss...

107)

Maritza is trying to understand the relationship between what is legal and what is ethical. Tiffany explains that both of these terms are often synonymous in business. Your response is A) Tiffany is correct; law and ethics are synonymous and should be used interchangeably in business. B) Tiffany is incorrect; there is no relationship between laws and ethics except when the board of directors approve an action. C) Tiffany is incorrect; a manager’s actions can be legal but ethically questionable. D) Tiffany is correct; whatever is legal is always ethical in business.

Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-05 Explain the relationship between strategy and business ethics. Topic : Ethical Behavior in Business Strategies Source : Chapter 12 Test Bank > MC Qu. 13 Maritza is trying to understand the relation...

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108)

Three months ago, Colin became a board member at Hooli, a publicly traded company. Two weeks ago, the board members discovered that Hooli’s CEO is facing a lawsuit from a family member who accuses the CEO of theft. Based on what you have read, to what ethical standard should Colin and the other board members hold the CEO? A) If the board members determine that the CEO is not a “bad apple,” then they should give her their full support. B) They must hold her to the highest ethical standards because the leaders of publicly traded companies must withstand intense public scrutiny. C) They should hold her to the same ethical standards that they would expect of any Hooli employee—no more, no less. D) The board members must wait until the lawsuit results in a settlement or a guilty verdict.

Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 3 Hard Learning Objective : 12-05 Explain the relationship between strategy and business ethics. Topic : Ethical Behavior in Business Strategies Source : Chapter 12 Test Bank > MC Qu. 71 Three months ago, Colin became a board membe...

109)

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(n)________ technique. A) peer-to-peer B) crowdsourcing C) ultra-low cost D) offshoring

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 12-06 Use the business model framework to put strategy into action. Topic : The Importance of a Viable Business Model Source : Chapter 12 Test Bank > MC Qu. 85 Threadless allows customers to submit...

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110)

What are poison pills? A) Shareholders use them to prevent the founder of a company from taking the company private through a leveraged buyout. B) Companies use them in a bid to perform a hostile takeover of competing firms. C) They are unspecified conditions in the contract between stakeholders in an organization. D) They are defensive provisions that kick in should a buyer reach a certain level of share ownership.

111)

Which of the following could most likely have prevented the accounting scandals of the early 2000s and the global financial crisis? A) adopting the principles of shareholder capitalism B) separating economic interests and social needs C) practicing effective corporate governance D) adopting a narrow shareholder perspective

Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-01 Explain the role of corporate governance. Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 26 Which of the following could most likely ...

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112)

The________ is a business-model innovation in which companies can obtain a large(r) part of their revenues by selling a small number of units from among almost unlimited choices. A) Pareto principle B) crowdsourcing process C) razor-razor blade model D) long-tail concept

Question Details AACSB : Knowledge Application Accessibility : Keyboard Navigation Bloom's : Remember Difficulty : 1 Easy Learning Objective : 12-07 Explain the long-tail concept and how it can be used as a business model i Topic : The Importance of a Viable Business Model Source : Chapter 12 Test Bank > MC Qu. 93 The ________ is a business-model innovation...

113)

Stephen is a mid-level manager for a high-tech start-up. His boss has just been asked him to perform an activity that may be unethical. To improve his ethical decision making, Stephen should A) imagine whether he would feel comfortable explaining and defending the decision in public. B) consider the ethical dilemma but base his actions on his short-term career goals. C) call his previous employer or college instructor and ask for advice. D) go forward with the decision without considering the ethical ramifications.

Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 12-05 Explain the relationship between strategy and business ethics. Topic : Ethical Behavior in Business Strategies Source : Chapter 12 Test Bank > MC Qu. 21 Stephen is a mid-level manager for a high-te...

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114)

How can a manager decide whether a decision is ethical?

115)

Ethics is A) universal and cannot differ between cultures. B) impossible to codify into law. C) not synonymous with law. D) the minimum acceptable standard in business practice.

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116)

Subrat and James are customer service employees at National Digital Corp. In between calls, they spend time on TikTok and Instagram. The relaxed guidelines at National Digital allow them to do that. However, sometimes, they knowingly avoid answering calls or keep customers on hold, while they view content on their personal phones. Such behavior A) is neither unlawful nor unethical; hence, Subrat and James cannot be reprimanded. B) can be stopped by implementing performance incentives and strict control mechanisms. C) typically exemplifies the agency problem of adverse selection. D) demonstrates the dangers of information asymmetry.

117)

Sean was recently hired at an up-and-coming firm that has a history of ethics violations. Which action is best for him to take if he wants to determine whether the firm is now acting ethically? A) Research the results of the ethics violations. If the perpetrators were fired or jailed, then the rest of the company is sound. B) Ignore the alleged ethics violations because there is no one standard of ethical behavior. C) Check the company’s mission statement to make sure that it guarantees respect and integrity. D) Observe executives at the company and see whether they model ethical behavior and demand it of others.

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118)

Ruth owns and runs her own firm. She also serves on the boards of several companies. Although she does not work for these companies, she attends board meetings, analyzes information, and tries to act in the best interests of their shareholders. Ruth is an example of an outside director. ⊚ true ⊚ false

Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-03 Evaluate the board of directors as the central governance mechanism for pu Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > TF Qu. 04 Ruth owns and runs her own firm. She also se...

119)

Explain what is meant with the concept of bad apples versus bad barrels as it relates to organizational ethics in a firm.

Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 3 Hard Learning Objective : 12-05 Explain the relationship between strategy and business ethics. Topic : Ethical Behavior in Business Strategies Source : Chapter 12 Test Bank > SA Qu. 121 Explain what is meant with the concept of ba...

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120)

What usually happens if a hostile takeover attempt is successful?

121)

Blake is a newly elected board member of ABC Inc., a publicly traded stock. As a newly elected board member, Blake has a(n)________, which is a legal duty to act solely in another party’s interests. A) fiduciary responsibility B) ethical obligation C) competitive advantage D) moral code

Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-03 Evaluate the board of directors as the central governance mechanism for pu Topic : The Role of the Board of Directors in Corporate Governance Source : Chapter 12 Test Bank > MC Qu. 17 Blake is a newly elected board member of...

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122)

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 principal–agent problem. A) stakeholder strategy B) adverse selection C) shared value creation D) moral hazard

Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Analyze Difficulty : 3 Hard Learning Objective : 12-02 Apply agency theory to explain why and how companies use governance mechan Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 43 A company scientist at a biotechnology compa...

123)

Ghada is the CEO of Black Mesa Inc., a publicly traded company. The shareholders want Ghada on the board of directors despite her recent appointment as the CEO. This decision of the shareholders is most likely because Ghada is A) likely to provide the board with valuable inside information. B) more likely than other board members to take care of the stockholders. C) a board member of a major client. D) also the CEO of other companies.

Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Apply Difficulty : 2 Medium Learning Objective : 12-03 Evaluate the board of directors as the central governance mechanism for pu Topic : Organizational Design and Competitive Advantage Source : Chapter 12 Test Bank > MC Qu. 57 Ghada is the CEO of Black Mesa Inc., a public...

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124)

Corporate codes of conduct go beyond what the law requires, imposing higher standards of honesty and fairness. ⊚ true ⊚ false

Question Details AACSB : Ethics Accessibility : Keyboard Navigation Bloom's : Understand Difficulty : 2 Medium Learning Objective : 12-05 Explain the relationship between strategy and business ethics. Topic : Organizational Culture Source : Chapter 12 Test Bank > TF Qu. 07 Corporate codes of conduct go beyond what th...

125)

Sonron Media sells books to libraries by having salespeople meet with potential customers to give them a sales pitch for the company’s product line. When a salesperson makes a sale, they get a predetermined percentage commission based on the value of the books sold. This type of business model is called A) bundling. B) wholesale. C) a freemium. D) an agency.

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Answer Key Test name: Chapter 12 Test Bank 1) TRUE

Moral hazard describes how difficult it is for the principal to know whether the agent has really put forth the best efforts. 2) A

Asking the question “How would the media report her decision to accept the opportunity if it were to become public?” would help her decide if accepting the opportunity is ethical. Because business decisions are not made in a vacuum but are embedded within a societal context that expects ethical behavior, managers can improve their decision making by also considering this question. 3) Short Answer

Strategy is a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors or the industry average. The translation of strategy into action takes place in the firm’s business model. Getting the business model right is required for effective strategy implementation and thus critical to gaining and sustaining a competitive advantage. A business model stipulates how the firm conducts its business with its buyers, suppliers, and partners. In particular, a business model details the firm’s competitive tactics and initiatives to deliver value to its customers. A business model identifies the firm’s target market, customer needs, and how the firm’s products or services will meet those needs. Simply put, the firm’s business model explains how the firm intends to make money. 4) TRUE

Auditors and board members are responsible for this task. 5) Short Answer

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Student examples will vary. A sample answer follows. To foster ethical behavior in employees, boards must be clear in their ethical expectations, and top management must create an organizational structure, culture, and control system that values and encourages desired behavior. Furthermore, a company’s formal and informal cultures must be aligned, and executive behavior must be in sync with the formally stated vision and values. Employees will quickly see through any duplicity. Actions by executives speak louder than words in vision statements. The companies that I have worked for have fostered ethical behavior by making it clear what the firm expects from employees in terms of time off, break time, internet use, and reimbursement of business expenses. 6) C

Outside directors are not employees of the firm. They frequently are senior executives from other firms or full-time professionals who are appointed to a board and who serve on several boards simultaneously. 7) C

This scenario is an example of information asymmetry. Information asymmetry occurs when managers, executives, and board members have access to private information concerning important company developments that outsiders, especially investors, are not privy to. Although possessing insider information is not illegal and indeed is part of an executive’s job, what is illegal is acting on it by trading stocks or passing on the information to others who might do so. 8) FALSE

Auditors, government regulators, and industry analysts serve as additional external-governance mechanisms. All public companies listed on the U.S. stock exchanges must file a number of financial statements with the Securities and Exchange Commission (SEC), a federal regulatory agency that oversees stock trading and enforce federal securities laws. To avoid the misrepresentation of financial results, all public financial statements must follow generally accepted accounting principles (GAAP) and be audited by certified public accountants. 9) C

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The risk of opportunism on behalf of agents is worsened by information asymmetry: The agents are generally better informed than the principals. Managers, executives, and board members tend to have access to private information concerning important company developments to which outsiders, especially investors, are not privy. Often this informational advantage is based on timing—insiders are the first to learn about important developments before the information is released to the public. Although possessing insider information is not illegal and indeed is part of an executive’s job, what is illegal is acting on it by trading stocks or passing on the information to others who might do so. Insider-trading cases, therefore, provide good examples of the egregious exploitation of information asymmetry. 10) Short Answer

Adverse selection occurs when information asymmetry increases the likelihood of selecting inferior alternatives. In principal–agent relationships, adverse selection describes a situation in which agents misrepresent their ability to do the job. Such misrepresentation is common during the recruiting process. Once hired, the principal may not be able to accurately assess whether the agents can do the work for which they are being paid. 11) B

Business ethics are an agreed-upon code of conduct in business, based on societal norms. 12) D

Executive compensation—CEO pay, in particular—has attracted significant attention in recent years. Two issues are at the forefront: the absolute size of the CEO pay package compared with the pay of the average employee and the relationship between CEO pay and firm performance. 13) D

The real-world scenario that best exemplifies information symmetry in a public stock company is that based on a tip-off by a Goldman Sachs employee, the Galleon Group was able to sell its holdings in Goldman Sachs’ stocks prior to the announcement of missed earnings estimates. Insider-trading cases provide good examples of the egregious exploitation of information asymmetry. 14) B

In addition to general strategic oversight and guidance, the board of directors has other, more specific functions. These include conducting a thorough risk assessment, proposing options to mitigate risk, and ensuring the firm’s compliance with laws and regulations. 15) A

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The shareholders of public stock companies appoint a board of directors to represent their interests. The board of directors is at the center of corporate governance in such companies. Votes at shareholder meetings, generally in proportion to the amount of ownership, determine whose representatives are appointed to the board of directors. 16) TRUE

Managers, executives, and board members tend to have access to private information concerning important company developments to which outsiders, especially investors, are not privy. Often this informational advantage is based on timing—insiders are the first to learn about important developments before the information is released to the public. Although possessing insider information is not illegal and indeed is part of an executive’s job, what is illegal is acting on it by trading stocks or passing on the information to others who might do so. 17) D

The freemium (free + premium) business model provides the basic features of a product or service free of charge, but it charges the user for premium services such as advanced features or add-ons. If Treequote Industries wants to entice users into purchasing its automated watering system (a premium service), it could first give away the inexpensive soil monitoring technology and then charge a higher price for the premium upgrade. 18) Short Answer

Student examples will vary. A sample answer follows. The separation of ownership and control is one of the major advantages of the public stock companies. This benefit, however, is also the source of the principal–agent problem. In publicly traded companies, the stockholders are the legal owners of the company, but they delegate decision-making authority to professional managers. The conflict arises if the agents pursue their own personal interests, which can be at odds with the principals’ goals. For their part, agents may be more interested in maximizing their total compensation, including benefits, job security, status, and power. An example of the problems related to the separation of ownership and control in public stock companies is Raj Rajaratnam’s insider trading, which resulted in his being sentenced to 11 years in prison. 19) C

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This conflict represents a principal-agent problem. In publicly traded companies, the stockholders are the legal owners of the company, but they delegate decision-making authority to professional managers. The conflict arises if the agents pursue their own personal interests, which can be at odds with the principals’ goals. For their part, agents may be more interested in maximizing their total compensation, including benefits, job security, status, and power. Principals desire maximization of total returns to shareholders. 21) C

As discussed in Strategy Highlight 12.1, VW’s Dieselgate: School of Hard NOx. VW engineers installed so-called defeat devices in all its smaller (2.0 liter) TDI engines. These defeat devices were software codes contained in the car’s onboard computer. The computer was programmed to detect when the car was being tested for emissions by assessing a host of variables, including whether the car was moving or stationary, whether the steering wheel was being touched, and the speed and duration of the engine run. This sophisticated defeat device allowed the vehicles to pass the required and rigid U.S. emissions tests. In reality, however, the vehicles equipped with TDI engines actually exceeded the limits for pollutants by up to 40 times during use. 22) C

Leveraging the long tail allows firms to overcome the problem of thin markets in the physical world, in which transactions are unlikely to take place because there are only a few buyers and a few sellers, and they have difficulty finding each other. 23) TRUE

The why dimension considers the reasons why a proposed business model would create value for both customers and stockholders. 24) C

The translation of strategy into action takes place in the firm’s business model, which details the firm’s competitive tactics and initiatives to deliver value to its customers. 25) D

The board of directors is the centerpiece of corporate governance in such companies. 27) Short Answer

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In roughly one-half of U.S. public firms, the CEO of the company also serves as chair of the board of directors. This practice of duality—holding both the role of CEO and chairperson of the board—has been declining somewhat in recent years. Arguments can be made both for and against splitting the roles of CEO and chairperson of the board. On the one hand, the CEO has invaluable inside information that can help in chairing the board effectively. On the other hand, the chairperson may influence the board unduly through setting the meeting agendas or suggesting board appointees who are friendly toward the CEO. Because one of the key roles of the board is to monitor and evaluate the CEO’s performance, there can be a conflict of interest when the CEO actually chairs the board. 28) A

The short head represents the mainstream, where all the popular titles, bestsellers, and hits are to be found. 29) C

This scenario best exemplifies adverse selection. In general, adverse selection occurs when information asymmetry increases the likelihood of selecting inferior alternatives. In principalagent relationships, adverse selection describes a situation in which agents misrepresent their ability to do the job. 30) C

To come up with an effective business model, a firm’s strategic leaders need to transform their strategy of how to compete into a blueprint of actions and initiatives that support the overarching goals. Next, managers implement this blueprint through structures, processes, culture, and procedures. 31) D

Corporate governance attempts to address the principal-agent problem, which can occur any time an agent performs activities on behalf of a principal. This problem can arise whenever a principal delegates decision making and control over resources to agents, with the expectation that they will act in the principal’s best interest. 32) Short Answer

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Student examples will vary. A sample answer follows. If a company is poorly managed, its performance suffers and its stock price falls as more and more investors sell their shares. Once shares fall to a low enough level, the firm may become the target of a hostile takeover when new bidders believe they can fix the internal problems that are causing the performance decline. For example, Kraft completed a hostile takeover of Cadbury. In addition to competitors, so-called corporate raiders (e.g., Carl Icahn and Daniel Loeb) or private equity firms and hedge funds (e.g., The Blackstone Group and Pershing Square Capital Management) may buy enough shares to exert control over a company. 33) C

To foster ethical behavior in employees, boards must be clear in their ethical expectations, and top management must create an organizational structure, culture, and control system that values and encourages desired behavior. Furthermore, a company’s formal and informal cultures must be aligned, and executive behavior must be in sync with the formally stated vision and values. 34) Short Answer

Student examples will vary. A sample answer follows. Senior executives, such as the CEO, face agency problems when they delegate authority of strategic business units to general managers. Employees who perform the actual operational labor are agents who work on behalf of the managers. Such frontline employees often enjoy an informational advantage over management. They may tell their supervisor that it took longer to complete a project or serve a customer than it actually did, for example. Some employees may be tempted to use such informational advantage for their own self-interest. An example of the principal–agent problem allegedly happened when Anthony Levandowski set up his own autonomous-vehicle company, Otto, while working at Waymo. 35) D

The bundling business model sells products or services for which demand is negatively correlated at a discount. For example, in the Microsoft Office Suite, a user might value Word more than Excel and vice versa. Instead of selling both products for $120 each, Microsoft bundles them in a suite and sells them combined at a discount, say $150. 36) A

This scenario best illustrates the freemium business model. The freemium (free + premium) business model provides the basic features of a product or service free of charge, but it charges the user for premium services such as advanced features or add-ons. 37) C

Auditors, government regulators, and industry analysts serve as additional external-governance mechanisms.

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38) D

Netflix leverages the long tail with its personalized recommendation algorithm combined with producing a large quantity of low-budget content. Netflix views each of its original productions as an experiment that lives in the long tail. And, given the large number of experiments Netflix runs, some are destined to break out as mega-hits, such as Tiger King. 39) B

Exotic loans such as option ARMs may be legal and profitable for the mortgage loan officer but are ethically questionable. 40) Short Answer

Student examples will vary. A sample answer follows. Moral hazard describes a situation in which information asymmetry increases one party’s incentive to take undue risks or shirk responsibilities because the costs incur to the other party. For example, bailing out banks from the consequences of undue risk-taking in lending is an example of moral hazard. 41) B

The separation of ownership and control is one of the major advantages of the public stock companies. This benefit, however, is also the source of the principal-agent problem. 42) Short Answer

An important implication for strategic leaders is the recognition that effective corporate governance and solid business ethics are critical to sustaining competitive advantage over time. A variety of corporate-governance mechanisms can be effective in addressing the principal– agent problem. These mechanisms tend to focus on monitoring, controlling, and providing incentives, and they must be complemented by a strong code of conduct and strategic leaders who act with integrity. The effective strategic leader must help employees to “walk the talk”; leading by ethical example often has a stronger effect on employee behavior than words alone. The strategist needs to look beyond shareholders and apply a stakeholder perspective to ensure the long-term survival and success of the firm. A firm that does not respond to stakeholders beyond stockholders in a way that keeps them committed to its vision will not be successful. Stakeholders want fair treatment even if not all of their demands can be met. Fairness and transparency are critical to maintaining good relationships within the network of stakeholders the firm is embedded in. A large number of glaring ethical lapses in recent decades makes it clear that organizational core values and a code of conduct are key to the continued professionalization of management.

43) Short Answer

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Corporate governance is the system by which organizations are directed and controlled by their owners. It is the means and mechanisms used to ensure that managers act in accordance with investors’ best interests. Corporate governance addresses the distribution of rights and responsibilities among different participants in the organizations—such as the board, managers, shareholders, and other stakeholders—and spells out the rules and procedures for making decisions about corporate affairs. By doing so, governance also provides the structure through which the company’s objectives are set and the means of attaining those objectives and monitoring performance. 44) A

Users pay for the perfume refills monthly whether or not they use the product during the payment term. 45) C

In principal-agent relationships, adverse selection describes a situation in which agents misrepresent their ability to do the job. 46) A

Beasea is an inside director for Wildwood Furniture Company and an outside director for Woodworks Inc. Inside directors are generally part of the company’s senior management team. Outside directors, unlike inside directors, are not employees of the firm. They frequently are senior executives from other firms or full-time professionals, who are appointed to a board and who serve on several boards simultaneously. 47) C

Arguments can be made both for and against splitting the roles of CEO and chairman of the board. On the one hand, the CEO has invaluable inside information that can help in chairing the board effectively. On the other hand, the chairperson may influence the board unduly through setting the meeting agendas or suggesting board appointees who are friendly toward the CEO. 48) Short Answer

Outside directors, unlike inside directors, are not employees of the firm. They frequently are senior executives from other firms or full-time professionals who are appointed to a board and who serve on several boards simultaneously. Given their independence, they are more likely to watch out for the interests of shareholders. 49) B

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In the pay-as-you-go business model, users pay for only the services they consume. The pay-asyou-go model is most widely used by utilities providing power and water and cell phone service plans but is gaining momentum in other areas such as rental cars and cloud computing. 50) D

Newex has the best chance of creating a sustainable advantage by adjusting the business model to allow crowdsourcing of design ideas and some of the production process. Many executives consider business model innovation to be more important than process or product innovation. This is because product and process innovation is often more costly, is higher risk, and takes longer to come up with in the first place and to then implement. Business model innovation is often an area that is overlooked in a firm’s quest for competitive advantage, and thus much value can be unlocked by focusing on business model innovation. 51) D

In general, adverse selection occurs when information asymmetry increases the likelihood of selecting inferior alternatives. The problem is especially pronounced in team production, in which the principal often cannot ascertain the contributions of individual team members. This situation creates an incentive for opportunistic employees to take advantage of others’ efforts (“free-rider problem”). 52) D

Like Disney, Rascal Interactive focuses on the short head, producing a few high-impact blockbusters. Disney then leverages each mega-hit success into billion-dollar franchises through movie sequels and prequels (e.g., Star Wars), theme-park attractions, merchandise, and licensing. 53) B

Combining unlimited selection with algorithmic or even organic recommendations can result in the long-tail phenomenon. 54) B

In this scenario, Dildred performs the role of a corporate raider. Corporate raiders or private equity firms and hedge funds may buy enough shares to exert control over a company. 55) Short Answer

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Board independence is critical to effectively fulfilling a board’s governance responsibilities. Given that board members are directly responsible to shareholders, they have an incentive to ensure that the shareholders’ interests are pursued. If they do not fulfill that responsibility, they can experience a loss in reputation or can be removed outright. More and more directors are also exposed to legal repercussions should they fail in their fiduciary responsibility. To perform their strategic oversight tasks, board members apply strategic management theories and concepts, along with other more specialized finance and accounting tools. 56) B

The long-tail business model solves an important strategic trade-off. It lowers the costs of shelf space, inventory, and distribution to near zero and enables firms to aggregate nonhits and match unique consumer preferences to supply. 57) FALSE

The ratio of executive pay to average worker pay was about 30 to 1 in 1980 and has grown markedly to 350 to 1 in recent years. 58) B

The board of directors of a public stock company consists of individuals who formally represent the firm’s shareholders and oversee the work of executives. The board is elected by the shareholders to represent their interests. All directors have a fiduciary responsibility—a legal duty to act solely in another party’s interests—toward the shareholders because of the trust placed in them. 59) C

Senior executives, such as the CEO, face agency problems when they delegate authority of strategic business units to general managers. Employees who perform the actual operational labor are agents who work on behalf of the managers. Such frontline employees often enjoy an informational advantage over management. 60) FALSE

This is an example of moral hazard, which is the principals’ difficulty in ascertaining whether the agent has really put forth a best effort. In this situation, the agent is able to do the work but may decide not to do so. For example, Alexi uses the company resources to set up her own business rather than being fully dedicated to do the work she was being paid to do. 61) D

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Survey results show that two-thirds of CEO pay is linked to firm performance. However, although the relationship between pay and performance is positive, the link is weak at best. Although agency theory predicts a positive link between pay and performance, some recent experiments in behavioral economics caution that incentives that are too high-powered (e.g., outsized bonuses) may have a negative effect on job performance. That is, when the incentive level is very high, an individual may get distracted from strategic activities because too much attention is devoted to the outsized bonus to be enjoyed in the near future. This situation can increase job stress and negatively impact job performance. 63) FALSE

Research indicates it is not just the few “bad apples” but entire organizations that can create a climate in which unethical, even illegal behavior is tolerated. 64) B

In this scenario, if the bank knows that the customer will be unable to pay the loan and still offers them a loan, it is an unethical decision. Law and ethics, however, are not synonymous. This distinction is important. Staying within the law is a minimum acceptable standard. A manager’s actions can be completely legal, but ethically questionable. 65) C

The description that best exemplifies adverse selection is that a manager cannot ascertain the contributions of individual team members in team production. In principal–agent relationships, adverse selection describes a situation in which agents misrepresent their ability to do the job. The problem is especially pronounced in team production, in which the principal often cannot ascertain the contributions of individual team members. 66) C

The principal-agent problem is a core part of agency theory, which views the firm as a nexus of legal contracts. In this perspective, corporations are viewed merely as a set of legal contracts between different parties. Conflicts that may arise are to be addressed in the legal realm. 67) Short Answer

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Inside directors are generally part of the company’s senior management team, such as the chief financial officer (CFO) and the chief operating officer (COO). They are appointed by shareholders to provide the board with necessary information pertaining to the company’s internal workings and performance. Without this valuable inside information, the board would not be able to effectively monitor the firm. As senior executives, however, inside board members’ interests tend to align with management and the CEO rather than the shareholders. 68) B

Gordon’s role in providing inside information to Pearson Specter Litt for the benefit of Pearson Specter Litt’s stockholders and himself is an example of moral hazard. Moral hazard describes a situation in which information asymmetry increases one party’s incentive to take undue risks or shirk responsibilities because the costs incur to the other party. 69) A

Since all shareholders cannot possibly be directly involved in the running of a company, they appoint representatives. The shareholders of public stock companies appoint a board of directors to represent their interests. The board of directors is at the center of corporate governance in such companies. However, even though the board has a fiduciary responsibility to all shareholders, it has no influence on how much of the shareholder’s money is at risk because legally they are liable only for the amount they invested. 70) C

The principles, norms, and standards of business practice differ to some degree in different cultures around the globe. Nonetheless, many research studies have found that some notions— such as fairness, honesty, and reciprocity—are universal norms. 72) D

Bioplex uses the subscription-based business model in this scenario. In the subscription-based model, users pay for access to a product or service regardless of whether they use the product or service during the payment term. Industries that use this model are cable television, cellular service providers, satellite radio, internet service providers, and health clubs. Netflix and other streaming services also use the subscription model. 73) B

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The products in Karena’s store are those in the short head that tend to appeal to the largest segment of the mass market with tastes that are more or less homogenous (manufactured) through big marketing budgets combined with limited selection. In the physical world of bricksand-mortar retail stores, these product selections are often the only choice on display because there are significant costs to carrying broader inventory to meet a wider variety of consumer needs. 74) C

Inside directors are the board members who are part of the company’s senior management team appointed by shareholders to provide the board with necessary information pertaining to the company’s internal workings and performance. 75) D

The scenario that best exemplifies a leveraged buyout of Sirius Cybernetics Corp. Inc. is that the owner of another company buys all outstanding shares of Sirius Cybernetics Corp. In a leveraged buyout (LBO), a single investor or group of investors buys, with the help of borrowed money (leveraged against the company’s assets), the outstanding shares of a publicly traded company in order to take it private. 76) B

This scenario at Gregarious Simulation Systems is a typical consequence of adverse selection. In general, adverse selection occurs when information asymmetry increases the likelihood of selecting inferior alternatives. In principal-agent relationships, adverse selection describes a situation in which agents misrepresent their ability to do the job. Such misrepresentation is common during the recruiting process. The problem is especially pronounced in team production, in which the principal often cannot ascertain the contributions of individual team members. This situation creates an incentive for opportunistic employees to take advantage of others’ efforts (“free-rider problem”). 77) Short Answer

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Wholesale is a business model in which the manufacturer sets a fixed price on a product, but the retailer is free to set its own price. 79) Short Answer

In a leveraged buyout (LBO), a single investor or group of investors buys, with the help of borrowed money (leveraged against the company’s assets), the outstanding shares of a publicly traded company in order to take it private. In short, an LBO changes the ownership structure of a company from public to private. The expectation is often that the private owners will restructure the company and eventually take it public again through an initial public offering (IPO). 80) B

The officer’s actions are legal but ethically questionable. 81) B

To go beyond the minimum acceptable standard codified in law, many organizations have explicit codes of conduct. These codes go above and beyond the law in detailing how the organization expects an employee to behave and to represent the company in business dealings. Codes of conduct allow an organization to overcome moral hazards and adverse selections as they attempt to resonate with employees’ deeper values of justice, fairness, honesty, integrity, and reciprocity. 82) B

Nam-zim is implementing the razor–razor blade business model. In the razor–razor blade business model, the initial product is often sold at a loss or given away to drive demand for complementary goods. The company makes its money on the replacement part needed.

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83) A

Sergei’s actions are unethical because it is illegal and unethical to trade stocks based on insider information, irrespective of the final outcome. Although possessing insider information is not illegal and indeed is part of an executive’s job, what is illegal is acting on it by trading stocks or passing on the information to others who might do so. Insider-trading cases provide examples of the egregious exploitation of information asymmetry. 84) A

Hottechi Laminate still needs to consider what activities need to be performed to create and deliver the offerings to customers. It has already answered why the new model creates value (convenience), how to create the new offerings (liquidate showrooms and shift resources), and who are the main stakeholders (busy middle-class homeowners). It has not yet considered the steps involved in establishing the new website or hiring and training its new in-home sales force. 85) Short Answer

Student examples will vary. A sample answer follows. Law and ethics are not synonymous. This distinction is important. Staying within the law is a minimum acceptable standard. A note of caution is therefore in order, A manager’s actions can be completely legal, but ethically questionable. For example, consider the actions of mortgageloan officers who—being incentivized by commissions—persuaded unsuspecting consumers to sign up for exotic mortgages, such as option ARMs. These mortgages offer borrowers the choice to pay less than the required interest, which is then added to the principal while the interest rate can adjust upward. Such arrangements may be legal, but they are unethical, especially if there are indications that the borrower might be unable to repay the mortgage once the interest rate moves up. 86) Short Answer

Rajat Gupta, a former McKinsey chief executive who served on Goldman Sachs’ board, provided Raj Rajaratnam with important insider tips. Often within seconds after a Goldman Sachs board meeting ended, Gupta called Rajaratnam. In one of these phone calls, Gupta revealed the impending multibillion-dollar liquidity injection by Warren Buffett into Goldman Sachs during the midst of the global financial crisis. This information allowed the Galleon Group to buy Goldman Sachs shares before the official announcement about Buffett’s investment was made, profiting from the subsequent stock appreciation. In another call, Gupta informed Rajaratnam that the investment bank would miss earnings estimates. Based on this insider information, the Galleon Group was able to sell its holdings in Goldman Sachs’ stock prior to the announcement, avoiding a multimillion-dollar loss. 87) Short Answer

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The razor–razor blade business model offers the initial product at a loss or is given away at cost. The firm makes its money on the replacement part/service needed for the primary product. Gillette, the razor blade company, gave away its razors and sold the replacement cartridges for a relatively high prices. The razor–razor blade model is found in many business applications today. For example, HP charges little for its laser printers but high prices for its replacement toner cartridges. 88) B

If a hostile takeover attempt is successful, the new owner is likely to replace the old management and board of directors so as to manage the company in a way that creates more value for shareholders. In some instances, the new owner breaks up the company and sells off its pieces. In either case, because a firm’s existing executives face the threat of losing their jobs and their reputations in the face of a sustained competitive disadvantage, the market for corporate control is a credible governance mechanism. 89) Short Answer

To align incentives between shareholders and management, the board may grant stock options as part of the compensation package. This mechanism is based on agency theory and gives the recipient the right, but not the obligation, to buy a company’s stock at a predetermined price sometime in the future. If the company’s share price rises above the negotiated strike price, which is often the price on the day when compensation is negotiated, the executive stands to reap significant gains. 90) B

Information asymmetry can breed on-the-job consumption, perquisites, and excessive compensation. Although use of company funds for golf outings, resort retreats, professional sporting events, or elegant dinners and other entertainment is an everyday manifestation of onthe-job consumption, other forms are more extreme. Such uses of company funds, in effect, mean that shareholders pay for those items and activities. 91) C

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Shareholders’ interests may not be uniform. The goals of some shareholders, including institutional investors, such as retirement funds and governmental bodies, are generally the enterprise’s long-term viability and profitable growth. Long-term viability and profitable growth should allow consistent dividend payments and result in stock appreciation over time. In contrast, other shareholders, such as hedge funds, have different goals, such as profiting from short-term movements of stock prices. These so-called activist investors often demand changes in a firm’s strategy, such as spinning out certain divisions or splitting up companies into parts to enhance overall performance. Votes at shareholder meetings, generally in proportion to the amount of ownership, determine whose representatives are appointed to the board of directors. 92) Short Answer

In the principal–agent relationship, moral hazard describes the principal’s difficulty in ascertaining whether the agent has really put forth a best effort. In this situation, the agent is able to do the work but may decide not to do so. For example, company scientists at a biotechnology company may decide to work on their own research project, hoping to eventually start their own firm, rather than on the project they were assigned. 93) D

Selling most of its items from a vast inventory of specialty products, Howloween World is leveraging the long tail. Amazon, Netflix, Spotify, and other businesses have also leveraged the long-tail concept. Amazon, for instance, achieves higher sales from books in the long tail than it sells in the short head. 94) B

To anchor future managers in professional values and to move management closer to a truly professional status, a group of Harvard Business School students developed an MBA oath. 95) A

Traditionally, 80 percent of sales in a given product category (such as music, books, and movies) come from blockbusters in the short head of the distribution curve, which represents only 20 percent of the offerings in a category. 96) A

In general, moral hazard describes a situation in which information asymmetry increases one party’s incentive to take undue risks or shirk responsibilities because the costs accrue to the other party. 97) B

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The accounting scandals of the early 2000s and the global financial crisis of 2008 got so out of hand because the enterprises involved did not practice effective corporate governance. 98) A

Larry is an inside director. Inside directors are generally part of the company’s senior management team, such as the chief financial officer (CFO) and the chief operating officer (COO). They are appointed by shareholders to provide the board with necessary information pertaining to the company’s internal workings and performance. 99) TRUE

Business models evolve dynamically, and we can see many combinations and permutations. Sometimes business models are tweaked to respond to disruptions in the market, efforts that can conflict with fair trade practices and may even prompt government intervention. 100)

A In general, adverse selection occurs when information asymmetry increases the likelihood of selecting inferior alternatives. In principal-agent relationships, adverse selection describes a situation in which agents misrepresent their ability to do the job. 101)

D This scenario reflects principal–agent problems. This problem can arise whenever principals delegate decision making and control over resources to agents, with the expectation that they will act in the principals’ best interest. The conflict arises if the agents pursue their own personal interests, which can be at odds with the principals’ goals. 102)

B Globex’s board of directors most likely has a minority number of inside directors, and it evaluates the firm’s strategic initiatives. The board of director’s functions include: Selecting, evaluating, and compensating the CEO. The CEO reports to the board. If the CEO loses the board’s confidence, the board may fire that person. Overseeing the company’s CEO succession plan. Providing guidance to the CEO in the selection, evaluation, and compensation of other senior executives. Reviewing, monitoring, evaluating, and approving any significant strategic initiatives and corporate actions such as large acquisitions. Conducting a thorough risk assessment and proposing options to mitigate risk. Ensuring that the firm’s audited financial statements represent a true and accurate picture of the firm. Ensuring the firm’s compliance with laws and regulations.

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103)

FALSE To overcome principal-agent problems, firms put several governance mechanisms in place, such as the board of directors. 104)

A In general, moral hazard describes a situation in which information asymmetry increases one party’s incentive to take undue risks or shirk responsibilities because the costs accrue to the other party. For example, bailing out homeowners from their mortgage obligations or bailing out banks from the consequences of undue risk-taking in lending are examples of moral hazard. The costs of default are rolled over to society. Knowing that there is a high probability of being bailed out (“too big to fail”) increases moral hazard. In this scenario, any profits remain private, while losses become public. 105)

B In this scenario, West State Utilities uses the pay-as-you go business model. In the pay-as-you-go business model, users pay for only the services they consume. The pay-as-you go model is most widely used by utilities providing power and water and cell phone service plans but is gaining momentum in other areas such as rental cars and cloud computing. 106)

C Managers, executives, and board members tend to have access to private information concerning important company developments to which outsiders, especially investors, are not privy. Often this informational advantage is based on timing—insiders are the first to learn about important developments before the information is released to the public. 107)

C Law and ethics are not synonymous. This distinction is important and not always understood by the general public. Staying within the law is a minimum acceptable standard. A note of caution is therefore in order: A manager’s actions can be completely legal, but ethically questionable. For example, consider the actions of mortgage loan officers who—being incentivized by commissions—persuaded unsuspecting consumers to sign up for exotic mortgages, such as option ARMs (adjustable-rate mortgages). These mortgages offer borrowers the choice to pay less than the required interest, which is then added to the principal while the interest rate can adjust upward. Such arrangements may be legal, but they are unethical, especially if there are indications that the borrower might be unable to repay the mortgage once the interest rate moves up. 108)

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Employees take cues from their environment on how to act. For this reason, ethical leadership is critical, and strategic leaders set the tone for the ethical climate within an organization. This is one of the reasons the HP board removed then-CEO Mark Hurd in 2010 even without proof of illegal behavior or violation of the company’s sexual-harassment policy. The forced resignation was prompted by a lawsuit filed by a woman who worked for HP as an independent contractor and who alleged that Hurd had sexually harassed her. This example shows that CEOs of Fortune 500 companies are under constant public scrutiny and must adhere to the highest ethical standards. If they do not, then they cannot rationally expect their employees to behave ethically. Unethical behavior can quickly destroy a CEO’s reputation, which is one of the most important assets that a CEO possesses. 109)

B Threadless uses the crowdsourcing technique by allowing customers to perform tasks that are normally performed by employees. 110)

D To avoid being taken over against their consent, some firms put in place a poison pill, which is a defensive provision that kicks in if a buyer reaches a certain level of share ownership without top management approval. 111)

C Corporate governance is about checks and balances and about asking the tough questions at the right time. The accounting scandals of the early 2000s and the global financial crisis of 2008 got so out of hand partly because the enterprises involved did not practice effective corporate governance. 112)

D The long-tail concept is a business-model innovation in which companies can obtain a large(r) part of their revenues by selling a small number of units from among almost unlimited choices. 113)

A Because business decisions are not made in a vacuum but are embedded within a societal context that expects ethical behavior; managers can improve their decision making by considering whether they would feel comfortable explaining and defending the decision in public. 114)

Short Answer

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Because business decisions are not made in a vacuum but are embedded within a societal context that expects ethical behavior, managers can improve their decision making by also considering: When facing an ethical dilemma, a manager can ask whether the intended course of action falls within the acceptable norms of professional behavior as outlined in the organization’s code of conduct and defined by the profession at large. The manager should imagine whether they would feel comfortable explaining and defending the decision in public. How would the media report the business decision if it were to become public? How would the company’s stakeholders feel about it? 115)

C Law and ethics are not synonymous. This distinction is important. Staying within the law is a minimum acceptable standard. 116)

B Such behavior can be best described as opportunism by agents and can be stopped by implementing performance incentives and strict control mechanisms. The managerial implication of agency theory relates to the management functions of organization and control: The firm needs to design work tasks, incentives, and employment contracts and other control mechanisms in ways that minimize opportunism by agents. 117)

D Some people believe that unethical behavior is limited to a few “bad apples” in organizations. However, research indicates it is not just the few “bad apples” but entire organizations that can create a climate in which unethical, even illegal behavior is tolerated. While there clearly are some people with unethical or even criminal inclinations, in general one’s ethical decisionmaking capacity depends very much on the organizational context. Research shows that if people work in organizations that expect and value ethical behavior, then they are more likely to act ethically. The opposite is also true. Enron’s stated key values included respect and integrity, and its mission statement proclaimed that all business dealings should be open and fair. Yet, the ethos at Enron was all about creating an inflated share price at any cost, and its employees observed and followed the behavior set by their leaders. 118)

TRUE Outside directors are not employees of the firm. They frequently are senior executives from other firms or full-time professionals who are appointed to a board and serve on several boards simultaneously. Given their independence, they are more likely to watch out for the interests of shareholders. 119)

Short Answer

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Some people believe that unethical behavior is limited to a few “bad apples” in organizations. According to agency theory, it’s the “bad agents” who act opportunistically, and principals need to be on guard against bad actors. However, research indicates it is not just the few “bad apples” but entire organizations that can create a climate in which unethical, even illegal behavior is tolerated. While there clearly are some people with unethical or even criminal inclinations, in general, one’s ethical decision-making capacity depends very much on the organizational context. Research shows that if people work in organizations that expect and value ethical behavior, then they are more likely to act ethically. The opposite is also true. Enron’s stated key values included respect and integrity, and its mission statement proclaimed that all business dealings should be open and fair. Yet the ethos at Enron was all about creating an inflated share price at any cost, and its employees observed and followed the behavior set by their leaders. 120)

Short Answer If a hostile takeover attempt is successful, the new owner is likely to replace the old management and board of directors so as to manage the company in a way that creates more value for shareholders. In some instances, the new owner breaks up the company and sells its pieces. In either case, because a firm’s existing executives face the threat of losing their jobs and their reputations in the face of sustained competitive disadvantage, the market for corporate control is a credible governance mechanism. 121)

A The board is elected by the shareholders to represent their interests. All directors have a fiduciary responsibility—a legal duty to act solely in another party’s interests—toward the shareholders because of the trust placed in them. 122)

D This is an example of a moral hazard in the context of a principal–agent problem. In the principal–agent relationship, moral hazard describes the principal’s difficulty in ascertaining whether the agent has really put forth a best effort. 123)

A Ghada is mostly likely appointed to the board because she is likely to provide the board with valuable inside information. Without this valuable inside information, the board would not be able to effectively monitor the firm. 124)

TRUE

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D In the agency business model, the producer relies on an agent or retailer to sell the product at a predetermined percentage commission.

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