Strategic Management Exam 3 Practice

Flashcard maker : Lily Taylor
Which of the following statements is true of the growth stage in the industry life cycle?
A. The objective of firms during this stage is to pursue a harvest strategy.
B. The prices begin to fall during this stage when compared to the introduction stage.
C. The type of buyers during this stage consists of the late majority.
D. The basis of competition tends to move away from process innovations toward product innovations.
Most of’s revenues are generated from a few popular electronic devices like notebook computers and MP3 players. Yet, the company offers a wide product portfolio that includes kitchen appliances, televisions, and watches. Low-cost virtual shelf space and nominal inventory investments allow the online retailer to increase perceived customer value by offering them unlimited choices under the same platform. This, in turn, allows the company to increase its revenues by selling smaller quantities of more products. Which of the following business models does this scenario best illustrate?
A. Pay-as-you-go business model
B. Subscription-based business model
C. Razor-razor-blade business model
D. Long tail business model
In the third step of the innovation process, a(n):
A. new idea is expressed as findings derived from basic research.
B. new idea is presented in terms of abstract concepts.
C. invention is imitated by competitors.
D. invention is commercialized by entrepreneurs.
Which of the following statements about patents is NOT true?
A. A patent is a form of intellectual property.
B. A patent over a product translates into a permanent monopoly position.
C. A patent can be obtained when an invention is useful, novel, and non-obvious.
D. A patent can be enforced in court.
In a typical industry life cycle, an industry immediately moves to the _____ after the introduction stage.
A. shakeout stage
B. growth stage
C. maturity stage
D. decline stage
Which of the following statements is typically true of early adopters?
A. They appreciate new technology that can add value to their personal and professional lives.
B. They enjoy using beta versions of products and providing free suggestions to companies.
C. They make up the mass market together with the technology enthusiasts.
D. They enter the market in the maturity stage of the industry life cycle.
_____ is best described as the process by which people undertake economic risk to innovate—to create new products, processes, and sometimes new organizations.
A. Entrepreneurship
B. Headhunting
C. Crowdsourcing
D. Cannibalization
While the industry for tablet computers is in the growth stage, the laptop industry is in its shakeout stage. What does this imply?
A. While the market demand for tablets will be high, the demand for laptops will be limited.
B. The number of competitors entering the laptop industry will be more than those entering the tablet computers industry.
C. The tablet industry is ahead of the laptop industry in the industry life cycle.
D. While competition for the tablet industry is primarily based on price, it is not so for the tablet industry.
_____ is best described as the process of transformation of an idea into a new product or process, or the modification and recombination of existing ones.
A. Lean manufacturing
B. Bootstrapping
C. Direct imitation
D. Invention
In developed countries, the industry for flash drives is in the maturity stage, and the industry for floppy disks is in the decline stage. What does this imply?
A. The number of new entrants in the floppy disks industry will be more when compared to the industry for flash drives.
B. While the flash drive industry has reached its maximum market size, the market size for floppy disks is small and contracting.
C. While the buyers of floppy disks can be categorized under early majority, the customers of flash drives can be categorized under late majority.
D. The industry structure for floppy disks is that of perfect competition, whereas the industry structure for flash drives is monopolistically competitive.
According to the crossing-the-chasm framework, a firm’s transition between the different parts of the industry life cycle is difficult because:
A. the number and size of competitors change throughout the industry life cycle.
B. the firm tends to follow a predictable industry life cycle
C. there are frequent changes in the supply and demand sides of the market throughout the industry life cycle.
D. there is a big gulf separating the early adopters from customer segments that make up the mass market.
Relive Electronics Inc. follows a business model in which the performance of the company is not only based on how much profits were generated, but also on how the community in general benefited from its operations. Thus, the company under its “Plant a Life” campaign promises to plant a tree with every customer purchase. Which of the following terms best describes the business model of Relive Electronics?
A. Social entrepreneurship
B. Crowdsourcing
C. Offshoring
D. Corporate intrapreneurship
Arnold is a marketing and sales employee at Vibgyor Foods Inc. He has invented a new way to process and pack the company’s food products that would avoid the usage of chemical preservatives. Which of the following terms best describes Arnold?
A. A category captain
B. A franchised dealer
C. An intrapreneur
D. A venture capitalist
If a pharmaceutical company develops a first-of-its-kind vaccine to prevent HIV AIDS and thus creates a whole new market for the product (non-infected civilians), it would be a(n):
A. radical innovation.
B. disruptive innovation.
C. architectural innovation.
D. incremental innovation.
Which of the following is a disadvantage faced by first movers in an industry?
A. They cannot benefit from learning and experience curve effects like the late entrants.
B. They will have to find distribution channels and complementary assets.
C. They will have no access to intellectual properties such as critical patents.
D. They cannot benefit much from network effects.
Which of the following best illustrates human-asset specificity?
A. Training employees on how to operate a customized furnace
B. Instructing employees about how to operate a standard MRI scanner
C. Investing on drilling equipment to drill through any commercial metal
D. Using standard casting machines in industrial manufacturing
A disadvantage associated with obtaining goods and services externally includes:
A. low-powered incentives for an individual to work as an entrepreneur for the firm.
B. non-trivial search costs to be borne by the firm.
C. high administrative costs due to increased bureaucracy.
D. creation of economies of scope for the firm.
Bright Goods Inc., a large multinational conglomerate, has hired an external consultant to process and audit its payroll. This allows the company to focus on manufacturing and marketing activities rather than developing and maintaining its own human resource management systems. Which of the following alternatives to vertical integration has Bright Goods adopted?
A. Backward integration
B. Crowdsourcing
C. Forward integration
D. Strategic outsourcing
The executives of BlueWind Products Inc., a large conglomerate, are making decisions on the stages of the industry value chain the firm must participate in, the range of products and services it should offer, and the global markets it should compete in. What are the executives primarily determining?
A. The firm’s chain of command
B. The absorptive capacity of the firm
C. The boundaries of the firm
D. The firm’s economies of scale
_____ is best described as the changes in an industry value chain that involve moving ownership of activities upstream to the originating (inputs) point of the value chain.
A. Backward vertical integration
B. Disruptive innovation
C. Corporate divestiture
D. Reverse engineering
Which of the following best illustrates a dominant-business firm?
A. Million Products Inc. is a company whose multiple strategic business units contribute equally to the total corporate revenue.
B. BC Goods Inc. is a firm that derives 50 percent of its revenues from its steel unit and another 50 percent from its automobile businesses.
C. Siova Inc. is a luxury brand that derives 90 percent of its revenues from its apparel line and 10 percent of its revenues from its premium furniture business unit.
D. Sova Autos Inc. is a company whose revenues solely come from selling automobiles.
A large conglomerate is deciding on the range of new products and services it can offer to its customers to further expand its operations. This decision determines the firm’s:
A. geographic scope.
B. level of diversification.
C. horizontal integration.
D. vertical integration.
When MoonStar Products Inc. planned to start its operations in United Cadvia, an emerging nation, it realized that it will have to set up its own distribution channels. This would be a risky and an expensive strategic move. The company had an option of hiring a small supply chain management company, Gold Logistics Inc., to reach its ultimate customers. However, this would require Gold Logistics to make huge investments, which would be of no use to it if MoonStar decided to exit the market. Thus, to gain Gold Logistics’s confidence, MoonStar purchased 40 percent of the stock of Gold Logistics. What does this scenario best illustrate?
A. Licensing
B. Venture Capitalism
C. Franchising
D. Equity alliance
_____ are best described as all the internal and external costs associated with an economic exchange, whether it takes place within the boundaries of a firm or in markets.
A. Opportunity costs
B. Break-even costs
C. Transaction costs
D. Fixed costs
The rationale behind related diversification is to:
A. limit learning-curve and experience-curve effects.
B. benefit from economies of scale and scope.
C. avoid sharing resources and competencies across different business lines.
D. obtain only 10 percent of the revenues from the primary business activities.
North Carolina National Bank (NCNB) used its unique core competency of identifying, appraising, and integrating acquisition targets to be rebranded as Bank of America, one of the largest banks in the United States. This is an example of a firm:
A. building new core competencies to protect new market position.
B. redeploying and recombining existing core competencies to compete in markets of the future.
C. building new core competencies to create and compete in markets of the future.
D. leveraging existing core competencies to improve current market position.
Which of the following is an example of internal transaction costs?
A. The costs linked to outsourcing payroll maintenance
B. The costs associated with negotiating prices with a business consultancy
C. The costs associated with searching for suitable manufacturer contracts
D. The costs pertaining to setting up a shop floor
Which of the following best illustrates backward vertical integration?
A. A chocolate manufacturing company setting up its own cocoa plantations
B. A supplier of plastic bottles launching his or her own brand of sparkling water
C. An apparel company launching its line of premium wrist watches
D. A shoe brand outsourcing its production unit to manufacturers in less developed nations
A financial advisor has heard from a relative of GD Chemical Inc.’s CEO that the company is planning to shut its operations in Europe next year. The financial advisor realizes that this decision may cause a decline in the value of the company’s shares and decides to sell them off. A buyer, unaware of the company’s future plans, sees this as a potential opportunity and invests in the company. What does this scenario best illustrate?
A. Network effects
B. Information asymmetries
C. Experience-curve effects
D. Principal-agent problems
The starting point of the build-borrow-or-buy framework is management’s:
A. comparison of the internal transaction costs against the external transaction costs.
B. evaluation of the firm’s existing internal resources to check if they are relevant.
C. evaluation of the alliance partners’ compatibility and commitment.
D. identification of a strategic resource gap that will impede future growth.
The reasons firms enter strategic alliances include all of the following EXCEPT _____.
A. learning new capabilities
B. accessing critical complementary assets
C. reducing the value gap created
D. lowering costs
_____ is best described as the process of merging with a competitor at the same stage of the value chain.
A. Forward integration
B. Backward integration
C. Taper integration
D. Horizontal integration
Which of the following statements is true of the real-options perspective?
A. The approach involves making large investments at the end of a project, irrespective of whether the project is successful or not.
B. The approach fails to provide the incumbent firm a hedge against uncertainty.
C. The approach obligates the incumbent firm to make continued investments when demanded by its partner.
D. The approach allows the incumbent firm to obtain additional information at predetermined stages.
Which of the following best illustrates horizontal integration?
A. B9 Electronics Inc. acquires its competitor, Virtue Electronics Inc., to gain access to its core competencies.
B. Skin Love Inc. sets up its own retail stores to directly sell its products, rather than selling them through large departmental stores.
C. Polka Couture Inc. outsources its production to contract manufacturers in labor-intensive countries.
D. Ignited Autos Inc. sets up its own component part manufacturing units to have strong control over production.
A strategic alliance has the potential to help a firm gain and sustain a competitive advantage when it joins together resources and knowledge that are:
A. inexpensive to acquire.
B. difficult to imitate.
C. common in the industry.
D. less differentiated.
A _____ describes the process of joining of two independent companies with their consent to form a combined entity on a permanent basis.
A. merger
B. cartel
C. takeover
D. joint venture
Which of the following is one of the primary reasons behind the merger between adidas and Reebok?
A. To reduce the levels of differentiation
B. To overcome a competitive disadvantage
C. To gain the advantages of vertical integration
D. To gain competitive advantage
What happens in the third phase of alliance management?
A. The incumbent firm designs the alliance
B. The alliance partners choose an appropriate governance mechanism
C. The firm initiating the alliance selects its partner
D. The alliance partners make relation-specific investments
Which of the following is an example of explicit knowledge?
A. The decision-making capability that is intrinsic to an employee
B. The findings of a research published in a scientific journal
C. The creative ability of a manager to recognize potential business opportunities
D. The entrepreneurial skills of a manager
The management at Torque Autos Inc. and RedWing Automobiles Inc. realized that by combining the two entities the stakeholders of both the companies would benefit. Their core competencies would act as complementary assets to each other. Consequently, RedWing Automobiles joined together with Torque Autos to form a combined entity called TorqueWing Autos Inc. Which form of strategic alliance does this scenario best illustrate?
A. A hostile takeover
B. A merger
C. A franchisee arrangement
D. A cartel
The local real estate companies in a city have joined together and arranged a “Property Fair.” The expenses of the event will be shared equally by the sponsors. Though many companies compete against each other, they have joined together because the medium will help the companies market themselves through a dedicated forum at an extremely low cost. This arrangement is best referred to as:
A. bootstrapping.
B. a cartel.
C. merging.
D. co-opetition.
To secure a strong strategic position in fast-growing emerging markets, which of the following corporate strategies did Kraft Foods primarily pursue by acquiring Cadbury?
A. Focused differentiation
B. Unrelated diversification
C. Strategic outsourcing
D. Horizontal integration
When a target firm does not want to be acquired, the acquisition is considered a _____.
A. cartel arrangement
B. hostile takeover
C. strategic commitment
D. joint venture
In order to address the problem of poor performance in its internal movie creation efforts, Disney:
A. acquired Pixar, Marvel Entertainment, and Lucasfilm.
B. divested a few of its non-core businesses.
C. outsourced its computer-animated movies to Marvel Entertainment.
D. purchased the graphic display systems developed by Pixar.
A non-equity alliance is the most common type of strategic alliance because:
A. it is least flexible.
B. it is based on partial ownership.
C. it is easy to initiate and terminate.
D. it produces the strongest ties between alliance partners.
Which of the following is one of the reasons that firms make acquisitions?
A. To shift the industry structure from oligopoly to perfect competition
B. To move up a learning curve
C. To standardize their product and service offerings and reduce the levels of differentiation
D. To gain access to a new capability or competency
Which of the following best illustrates a strategic alliance?
A. Saturn Pharma Inc. teaming up with a research company to invent and market breakthrough vaccines
B. The electronics subsidiary unit of East Goods Inc. deploying a few of its human resources to the automobile subsidiary of the company
C. Serene Apparel Inc. taking over one of its fabric suppliers in a less developed nation
D. GD Group Inc., a large conglomerate, taking over a startup company against its will
GreyWing Products Inc., a large conglomerate, took over a small startup company that had made some breakthrough innovations in the field of telecommunications. This purchase would help GreyWing Products to gain access to the startup company’s superior technology and human capital. This transaction is an example of a(n):
A. joint venture.
B. affiliate leadership.
C. cartel.
D. acquisition.
_____ is best described as a form of self-delusion in which managers convince themselves of their superior skills in the face of clear evidence to the contrary.
A. Self-efficacy
B. Self-actualization
C. Managerial myopia
D. Managerial hubris

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