Business Strategy Exam 3
d. Board members
a. Miracle events
b. Black swan events
c. Wild card events
d. Fat tail risk events
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
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.
a. Strategy analysis
b. Strategy implementation
c. Strategy formulation
d. Strategy control
a. equity leverage
b. balanced scorecard
c. power position
d. competitive advantage
a. economic responsibilities
b. ethical responsibilities
c. philanthropic responsibilities
d. legal responsibilities
a. Supply chain management
b. Integrated technology management
c. Strategic management
d. Inventory management
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
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.
b. strategic partners
c. direct competitors
a. Monopolistic competition
d. Perfect competition
a. high fixed costs.
b. low employee turnover.
c. larger output.
d. high capital risks.
a. VRIO framework
b. SWOT analysis
c. BCG matrix
d. PESTEL framework
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.
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.
a. political trends
b. demographic trends
c. ecological trends
d. economic trends
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.
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.
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.
a. primary activity
b. support activity
c. resource flow
d. immobile asset
value chain model
dynamic capabilities perspective
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.
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.
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.
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.
UberSelect or UberPlus
A regional plane service called UberAIR
A lunch-delivery service called UberEATS
A bicycle courier service called UberRUSH
Developing a fleet of driverless cars
Technically Uber is still operating at a loss.
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.
Fixed rate pricing
The ability to reject drivers with poor ratings
Direct billing to a preloaded credit card
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
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.
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.
Economies of scale
Superior customer service
Minimum efficient scale
Maximum output capacity
Optimum sustainable yield
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.
superior customer service.
economies of scale.
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.
focused differentiation strategy
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.
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
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.
unrelated diversification strategy
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.
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.
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
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.
existing markets by using new technologies.
new markets by using existing technologies.
new markets by using new technologies.
existing markets by using existing technologies.
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.
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.
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
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.
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.
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
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.
selecting the best possible partner
choosing an appropriate governance mechanism
designing the alliance
creating resource combinations that obey the VRIO criteria
borrow via a contractual agreement.
pursue internal development.
enter into a licensing agreement.
consider an outright acquisition.
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
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.
differences in climates and time zones.
the absence of a trading bloc.
the lack of connective ethnic and social networks.
– 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.
Liability of foreignness
Related and supporting industries
– 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
Falling trade barriers
Advanced communication technology
Reductions in transportation costs
Increasing local tariffs
To gain access to a larger market
To gain access to low-cost input factors
To dominate domestic markets
To develop new competencies
– 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.
– 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.
– 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
Corporate social responsibility
Stakeholder impact analysis
The law of legal personality
The separation of ownership and control
Limited liability for investors
Transferability of investor ownership
– 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
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.
– 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
– 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
Board of directors
Market for corporate control
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