Business Strategy Exam 3 – Flashcards
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Which of the following is an example of a firm's external stakeholder? a. Employees b. Customers c. Shareholders d. Board members
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customers
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_____ are incidents that describe highly improbable but high impact events. a. Miracle events b. Black swan events c. Wild card events d. Fat tail risk events
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black swan events
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Which of the following forces tends to be more important in determining a firm's performance? a. The underlying economic structure b. The number and size of other firms in the industry c. The entry barriers in the industry d. The actions of managers within the firm
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the actions of managers within the firm
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According to stakeholder theory, a strategist's primary job is to: a. limit the participation of external stakeholders—customers and suppliers—in value creation. b. isolate the firm's internal stakeholders from its external stakeholders. c. focus solely on maximizing shareholder wealth. d. understand the complex web of exchange relationships among different stakeholders.
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understand the complex web of exchange relationships among different stakeholders
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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 implementation c. Strategy formulation d. Strategy control
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strategy analysis
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A firm that achieves superior performance relative to other firms in the same industry or the industry average has a(n) _____. a. equity leverage b. balanced scorecard c. power position d. competitive advantage
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competitive advantage
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In the pyramid of corporate social responsibility, _____ are the foundational building block. a. economic responsibilities b. ethical responsibilities c. philanthropic responsibilities d. legal responsibilities
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economic responsibilities
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_____ is best described as an integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage. a. Supply chain management b. Integrated technology management c. Strategic management d. Inventory management
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strategic management
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Industry effects describe the underlying _____ structure of the industry. a. demographic b. psychographic c. ethnographic d. economic
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economic
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Which of the following statements about strategy is NOT true? a. Strategy is as much about deciding what not to do, as it is about deciding what to do. b. Strategy is about creating superior value, while containing the cost to create it. c. Grandiose statements are not strategy. d. Operational effectiveness and competitive benchmarking should be treated as strategy
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operational effectiveness and competitive benchmarking should be treated as strategy
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The primary objective of Porter's five forces model is to: a. replace a firm's competitive advantage with competitive parity. b. understand the profit potential of different industries. c. reduce the gap between the value of a firm's product and its cost of production. d. break down a firm's value chain activities into primary and support.
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understand the profit potential of different industries
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Companies in the same strategic group are _____ to each other. a. complements b. strategic partners c. direct competitors d. shareholders
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direct competitors
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In which of the following industry competitive structures do selling firms have the lowest pricing power? a. Monopolistic competition b. Monopoly c. Oligopoly d. Perfect competition
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perfect competition
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Economies of scale are cost advantages that accrue for firms with: a. high fixed costs. b. low employee turnover. c. larger output. d. high capital risks.
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larger output
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The _____ allows the scanning, monitoring, and evaluating of changes and trends in a firm's macro environment. a. VRIO framework b. SWOT analysis c. BCG matrix d. PESTEL framework
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PESTEL framework
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When applying the five forces model, the first step should ideally be: a. drawing a strategic group map. b. identify the underlying drivers of each force. c. assessing the overall industry structure. d. defining the relevant industry.
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defining the relevant industry
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A company is best described as a _____ 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. competitor stakeholder complementor strategic equivalent
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complementor
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The relative bargaining power of suppliers is high when: a. suppliers provide products that are differentiated. b. incumbent firms face low supplier switching costs. c. incumbent firms can credibly threaten to backward integrate into the industry. d. suppliers depend heavily on the industry for a large portion of their revenues.
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suppliers provide products that are differentiated
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In a firm's external environment, _____ primarily capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class. a. political trends b. demographic trends c. ecological trends d. economic trends
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demographic trends
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Industry convergence is a process whereby: a. firms within the same industry start to satisfy different customer needs. b. formerly unrelated industries begin to satisfy the same customer need. c. excess capacity within an industry is reduced through horizontal mergers. d. firms within an industry start to target a narrow market segment.
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formerly unrelated industries begin to satisfy the same customer need
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Which of the following statements accurately describes a firm's resource stock? a. Resource stocks are a firm's level of resources that are common to competitors. b. Resource stocks are a firm's future estimate of both tangible and intangible resources. c. Resource stocks are a firm's current level of intangible resources. d. Resource stocks are a firm's level of investments to maintain or build a resource.
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resource stocks are a firm's current level of intangible resources.
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To make SWOT analysis an effective management tool, a strategist must first: a. distinguish a firm's resources, competencies, and capabilities from each other. b. separate a firm's primary activities from support activities. c. analyze the pros and cons of strategic options. d. conduct a thorough analysis of a firm's internal and external environments.
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conduct a thorough analysis of a firm's internal and external environments.
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According to value chain analysis, a firm's after-sales service will be referred to as its _____. a. primary activity b. support activity c. resource flow d. immobile asset
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primary activity
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According to the _____, competitive advantage is the outflow of a firm's ability to modify and leverage its resource base in a way that enables it to gain and sustain competitive advantage in a constantly changing environment. value chain model expectancy theory dynamic capabilities perspective moderator hypothesis
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dynamic capabilities perspective
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_____ describes a process in which the options one faces in a current situation are limited by decisions made in the past. Social complexity Path dependence Cannibalization Causal ambiguity
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path dependence
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Creating resources that meet the VRIO criteria is strategically important to a firm because it: a. helps the firm curb its resource heterogeneity and resource immobility. b. facilitates greater knowledge diffusion in the industry. c. leads to competitive parity within the industry. d. helps the firm to gain and sustain a competitive advantage.
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helps the firm to gain and sustain a competitive advantage
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If a resource is common: a. it will result in greater resource immobility. b. competitive advantage will persist with one firm for a long period of time. c. it will result in perfect competition. d. competitive parity will cease to exist.
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it will result in perfect competition
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As a result of _____, a critical assumption in the resource-based model of a firm, the resource differences that exist between firms are difficult to replicate. resource perishability resource equality resource homogeneity resource immobility
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resource immobility
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_____ are best described as unique strengths, embedded deep within a firm, that 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. Resource leverages Capital gains Core competencies Equity reserves
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core competencies
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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? machinery copyrights brand equity patents
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machinery
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What is the average number of hours worked per week by the majority of Uber drivers? 1-15 hours 16-34 hours 35-49 hours 50+ hours
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1-15 hours
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Which of the following is NOT one of the complaints that has been lodged against Uber? a. The company does not screen its drivers and lets anyone with a working vehicle drive. b. The company ignores local regulations and operates without obtaining permission. c. The company actively poaches drivers from other ride-sharing services. d. The company charges exorbitant surge prices during peak demand times.
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the company does not screen its drivers and lets anyone with a working vehicle drive
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Which of the following is NOT one of the benefits received by Uber drivers? a. Health benefits and other perks like retirement, disability pay, and vacation leave. b. GPS service connected with an App that shows where regions with high demand are located. c. Flexible hours with higher median hourly earnings. d. Assistance with car loan financing to purchase a suitable vehicle.
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health benefits and other perks like retirement, disability pay, and vacation leave
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What was the first service launched by Uber? UberBlack UberX UberPOOL UberSelect or UberPlus
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UberBlack
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Which of the following is NOT one of the new services Uber is currently experimenting with? A regional plane service called UberAIR A lunch-delivery service called UberEATS A bicycle courier service called UberRUSH Developing a fleet of driverless cars
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a regional plane service called UberAIR
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What is Uber's net profitability? Technically Uber is still operating at a loss. $500 million $51 billion $100 million
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technically Uber is still operating at a loss
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Why does Uber believe it should not be subject to the same rules and regulations as traditional taxi cab companies? a. Uber is not officially in the taxi business; it's main product is a software platform. b. Uber operates at such a small scale that the traditional rules would be overly burdensome. c. Uber rides are ordered in advance instead of hailed on the street. d. Uber drivers own their own vehicles.
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Uber is not officially in the taxi business; it's main product is a software platform
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Which of the following is NOT one of the benefits Uber offers to its riders? Fixed rate pricing The ability to reject drivers with poor ratings Direct billing to a preloaded credit card
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fixed rate pricing
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Which of the following is one of the unexpected benefits resulting from the introduction of Uber services? a. A real estate resurgence in dense urban locations due to increased ease of mobility b. An increase in the number of traditional taxi cabs on the streets as cab companies expand to compete more effectively c. Decreased rate of traffic congestion due to increased use of transportation services d. Decreased profitability for public transportation services due to increased competition
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a real estate resurgence in dense urban locations due to increased ease of mobility
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Uber drivers tend to be less educated than traditional taxi drivers and chaffeurs. True False
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false
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In a focused cost-leadership strategy, a firm: a. caters to the segment of the market that is least cost-sensitive. 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. focuses on reducing the economic value created to drive down costs.
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delivers low-cost products and services to a specific, narrow part of the market
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A company that uses a differentiation strategy can achieve a competitive advantage as long as its: a. economic value created is greater than that of its competitors. b. value gap is lower than that of its competitors. c. strategic position is below the productivity frontier. d. products and services create a lower consumer surplus than that of its competitors.
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economic value created is greater than that of its competitors
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Which of the following is more of a value driver than a cost driver? Experience-curve effects Economies of scale Learning-curve effects Superior customer service
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superior customer service
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_____ 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. Break-even output Minimum efficient scale Maximum output capacity Optimum sustainable yield
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minimum efficient scale
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Which of the following statements accurately brings out the difference between economies of scale and learning effects? a. While there are no diseconomies to learning, there are diseconomies to scale. b. Economies of scale occur over time, whereas learning effects are captured at one point in time. c. Firms experience economies of scale when output increases, and learning effects when output decreases. d. Economies of scale reduce cost per unit, learning effects increase cost per unit.
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While there are no diseconomies to learning, there are diseconomies to scale
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A cost-leader is protected from the threat of new entrants primarily due to its: superior customer service. luxury goods. economies of scale. premium pricing.
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economies of scale
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A differentiator is least likely to be threatened by increases in input prices due to powerful suppliers when the: a. new product features added raise costs but not the perceived value in the minds of consumers. b. differentiator is able to significantly reduce the value gap. c. source of a competitor's differential appeal is tangible rather than intangible. d. differentiator is able to create a significant difference between perceived value and current market prices.
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differentiator is able to create a significant difference between perceived value and current market prices
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In a successful _____, the trade-offs between differentiation and low cost are reconciled. integration strategy focused differentiation strategy liquidation strategy divestment strategy
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integration strategy
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_____ is best described as the process of manufacturing a large variety of tailor-made products or services at a relatively low unit cost. Just-in-time manufacturing Mass customization Unit-cost production Product diversification
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Mass customization
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The productivity frontier function is concave, and it captures the: a. negative correlation between economies of scale and economies of scope. b. output level a firm must operate at to achieve the break-even point. c. trade-off between value creation and production cost. d. inverse relationship between experience effects and learning effects.
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trade-off between value creation and production cost
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Which of the following is an example of an internal transaction cost? The cost of searching for a contract manufacturer The cost of signing a contract with a supplier The cost of buying raw materials The cost of maintaining a production unit
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the cost of maintaining a production unit
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A primary advantage of organizing economic activity within firms is the: a. ability to coordinate highly complex tasks to allow for specialized division of labor. b. low administrative costs because of reduced bureaucracy. c. eradication of the principal-agent problem. d. high-powered incentive to work as salaried employees for an existing firm.
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ability to coordinate highly complex tasks to allow for specialized division of labor
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_____ is best described as a situation in which one party is more informed than another, because of the possession of private information. Information governance Information asymmetry Information deregulation Information piracy
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information asymmetry
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_____ 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. Embargos Cartel agreements Strategic alliances Corporate acquisitions
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strategic alliances
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Each stage of the vertical value chain typically represents a distinct _____ in which a number of different firms are competing. industry functional department economy customer segment
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industry
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_____ are best described as unique assets with high opportunity costs that have significantly more value in their intended use than in their next-best use. Cost drivers Value drivers Liquid assets Specialized assets
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Specialized assets
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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. related-constrained strategy unrelated diversification strategy differentiation strategy dominant-business strategy
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unrelated diversification strategy
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Companies that pursue related diversification are able to create a diversification premium because they: a. are able to leverage time compression economies. b. can operate beyond the minimum efficient scale. c. are able to increase value due to economies of scope. d. can reduce the value gap created by its products.
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are able to increase value due to economies of scope
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In the Boston Consulting Group (BCG) growth-share matrix, strategic business units categorized under dogs: a. compete in a low-growth market but hold considerable market share. b. hold a high market share in a fast-growing market. c. compete in a high-growth market but have low and unstable earnings. d. hold a small market share in a low-growth market.
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hold a small market share in a low-growth market
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An organization that is organized according to strategic business units (SBUs) and also along organizational structures is most likely using a _____ structure. functional multidivisional matrix simple
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matrix
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In which of the following stages of the industry life cycle is a standard first established? Maturity stage Growth stage Shakeout stage Introduction stage
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growth stage
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Which of the following statements is true of a disruptive innovation? a. It begins as a low-cost solution to a new problem. b. It initially performs better than the existing technology. c. It involves leveraging existing technologies in new markets. d. it invades the market from the bottom up, by first capturing the low end
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it invades the market from the bottom up, by first capturing the low end
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Large companies have been shifting their knowledge landscape from closed innovation to open innovation because of the: a. decreasing capability of external suppliers and vendors. b. lack of availability of venture capital. c. increasing need to internally control research and development. d. increasing supply and mobility of skilled workers.
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increasing supply and mobility of skilled workers
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In a radical innovation, a firm targets: existing markets by using new technologies. new markets by using existing technologies. new markets by using new technologies. existing markets by using existing technologies.
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new markets by using new technologies
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The typical four-step innovation process begins with: a. the modification and recombination of an existing product or process. b. the presentation of an idea as findings derived from basic research. c. the commercialization of an invention by entrepreneurs. d. a competitor's attempt to imitate an innovation.
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the presentation of an idea as findings derived from basic research
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Why is the phase after the growth stage of the industry life cycle referred to as the shakeout stage? a. The barriers to entry increase during this stage. b. The firms in the industry yield the highest profits during this phase. c. Rivalry among competitors decreases in this stage. d. The weaker firms are forced out of the industry in this stage.
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the weaker firms are forced out of the industry in this stage
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In the context of the long tail phenomenon, what does the short head represent? a. Products that appeal to the largest segment of the market with homogenous tastes b. Products that are manufactured from minimal input resources c. Products that contribute only 20 percent to a firm's total revenue d. Products that online retailers offer in order to increase their product portfolio and not their revenues
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products that appeal to the largest segment of the market with homogenous tastes
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_____ is best described as the commercialization of any new product, process, or the modification and recombination of existing ones. Invention Mass customization Innovation Intrapreneurship
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innovation
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What is the basic tenet of the crossing-the-chasm framework? a. The number and size of competitors remain constant throughout the industry life cycle. b. Industries tend to follow an unpredictable industry life cycle. c. The supply and demand sides of the market remain constant across all stages of the industry life cycle. d. Each stage of the industry life cycle is dominated by a different customer group.
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each stage of the industry life cycle is dominated by a different customer group
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Generally, as the level of _________ innovation declines, the level of _________ innovation increases. product; process incremental; drastic process; procedural efficient; inefficient
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product; process
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A drawback involved in using cross-border strategic alliances to enter new foreign markets is that: a. the foreign firm will need to make larger investments when compared to entering the new market on its own. b. some of the firm's proprietary know-how may be appropriated by the foreign partner. c. all potential business risks in the new market will have to be faced alone by the foreign firm. d. the shareholder value of the foreign partner will decline drastically.
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some of the firm's proprietary know-how may be appropriated by the foreign partner
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When a standalone organization is created and owned by two or more parent companies together, the strategic alliance is referred to as a(n) _____. non-equity alliance equity alliance proprietorship joint venture
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joint venture
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When does a merger between companies typically occur? a. When two firms of comparable size join to form a combined entity b. When large, incumbent firms buy startup companies c, When a target firm does not want to be acquired d. When two or more firms enter a temporary vertical strategic alliance
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when two firms of comparable size join to form a combined entity
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Which of the following is an advantage of equity alliances when compared to non-equity alliances? a. They are more flexible and easy to initiate and terminate. b. They require smaller capital investments. c. They produce stronger ties between partners. d. They are based on contracts rather than ownership.
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they produce stronger ties between partners
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The process of alliance management begins with _____. selecting the best possible partner choosing an appropriate governance mechanism designing the alliance creating resource combinations that obey the VRIO criteria
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selecting the best possible partner
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When a firm does not have the resource required for pursuing a growth strategy, and if the resource in question is not easily tradable, the implication for the strategist is most likely to: borrow via a contractual agreement. pursue internal development. enter into a licensing agreement. consider an outright acquisition.
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consider an outright acquisition
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Which of the following is NOT a reason why firms enter alliances? To replace competitive advantage with competitive parity To strengthen competitive position To enter new markets, either in terms of geography or products and services To learn new capabilities
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to replace competitive advantage with competitive parity
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Supply, distribution, and licensing contractual agreements between firms, which result in vertical strategic alliances, are all examples of _____. cartel arrangements joint ventures equity alliances non-equity alliances
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non-equity alliances
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Which of the following is a result of horizontal integration? The industry structure becomes less consolidated. There is a reduction of excess capacity in the market. The industry structure becomes potentially less profitable. There is an increase in rivalry among existing firms.
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there is a reduction of excess capacity in the market
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A _____ is best described as a voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services. proprietorship cooperative strategic alliance leveraged buyout
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strategic alliance
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Under the CAGE distance framework, the administrative and political distance between two countries primarily increases with: differences in climates and time zones. physical remoteness. the absence of a trading bloc. the lack of connective ethnic and social networks.
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the absence of a trading bloc
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A(n) _____ arises out of the combination of high pressure for local responsiveness and high pressure for cost reductions. transnational strategy multidomestic strategy international strategy global-standardization strategy
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transnational strategy
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A trend observed during the globalization 3.0 stage involves: - countries around the globe becoming more self-sufficient and independent. - multinational companies organizing as global-collaboration networks. - privately-owned firms getting nationalized. - world's market economies becoming less integrated.
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multinational companies organizing as global-collaboration networks
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Which of the following modes of entering a foreign market allows for the lowest level of control? Greenfield ventures Exporting Joint ventures Acquisitions
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Exporting
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____________ refer(s) to the additional costs of doing business in an unfamiliar cultural and economic environment. Liability of foreignness International strategy Location economies National culture
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Liability of foreignness
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The four aspects of Porter's model of national competitive advantage include all of the following EXCEPT: Factor conditions Economic institutions Related and supporting industries Competitive intensity
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economic institutions
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Which of the following statements best describes local responsiveness? - The process of producing goods in one country and selling them in another - The belief that consumer needs and preferences throughout the world are converging and becoming increasingly homogenous - The additional costs of doing business in an unfamiliar culture and economic environment - The need to tailor product and service offerings to fit native consumer preferences and host-country requirements
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the need to tailor product and service offerings to fit native consumer preferences and host-country requirements
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Which one of the following does NOT contribute to the rapid development of globalization? Falling trade barriers Advanced communication technology Reductions in transportation costs Increasing local tariffs
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increasing local tariffs
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Which one of the following is NOT a reason firms expand abroad? To gain access to a larger market To gain access to low-cost input factors To dominate domestic markets To develop new competencies
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To dominate domestic markets
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Which of the following is a benefit of a multinational enterprise (MNE) pursuing a global-standardization strategy? - The firm customizes products and services to better suit local requirements. - The firm reaps significant economies of scale and location economies. - The firm follows a differentiation strategy at the business level. - The firm has all its key business functions located in the home country.
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the firm reaps significant economies of scale and location economies
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Which of the following is a characteristic of a public stock company? - Shareholders who provide risk capital are liable for all losses incurred by the company. - Investor ownership cannot be transferred easily between investors. - Legal personality allows a firm's continuation beyond the founder or the founder's family. - In publicly traded companies, professional managers are the legal owners of the company.
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legal personality allows a firm's continuation beyond the founder or the founder's family
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According to Michael Porter, which of the following is a problem with many publicly traded companies? - Shareholders of publicly traded companies do not have a legitimate claim on profits. - Many publicly traded companies have defined value creation too narrowly in terms of financial performance. - There is no transferability of stock ownership in publicly traded companies. - The legal owners of publicly traded companies also make management decisions for the company
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many publicly traded companies have defined value creation too narrowly in terms of financial performance
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_____ is a mechanism to direct and control an enterprise in order to ensure that it pursues its strategic goals successfully and legally. Corporate social responsibility Stakeholder impact analysis Corporate governance Shareholder capitalism
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corporate governance
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Which of the following is the source of the principal-agent problem in publicly traded companies? The law of legal personality The separation of ownership and control Limited liability for investors Transferability of investor ownership
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the separation of ownership and control
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The board of directors of a public stock company consists of: - managers appointed by the owners of a company to run its day-to-day operations. - individuals who formally represent the firm's shareholders and oversee the work of executives. - the legal owners of a publicly traded company that was purchased in a leveraged buyout. - senior managers who directly report to the CEO of the firm
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individuals who formally represent the firm's shareholders and oversee the work of executives
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Outside directors are more likely to watch out for the interests of shareholders of their firm because: they are more likely to benefit from using inside information to trade stocks. they do not have the safety of serving on the boards of other firms. they are part-time employees of the firm. they have more independence than inside directors.
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they have more independence than inside directors
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Which of the following best explains why a board of directors may grant stock options as part of a compensation package? - To reduce the transferability of stocks between stockholders - To bring about a separation of CEO/chair duality - To align incentives between shareholders and management - To change the liability of shareholders from limited to unlimited
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to align incentives between shareholders and management
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Which of the following is a major issue at the forefront of CEO compensation in recent years? - A comparison of the performance of the organization before and after the CEO's tenure - The performance of the CEO as an employee versus the performance as a board member - The absolute size of the CEO pay package compared with the pay of the average employee - A comparison of the compensation of senior management hired during and before the CEO's tenure
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the absolute size of the CEO pay package compared with the pay of the average employee
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Which of the following is an important external corporate-governance mechanism? Shareholder capitalism Board of directors Executive compensation Market for corporate control
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market for corporate control
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The Securities and Exchange Commission (SEC) makes all financial reports filed by public companies available electronically via the _____ database. GAAP JASON EDGAR PARMER
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EDGAR
