Midterm

Question 1

A firm’s __________ is its long-term purpose that defines both what it aspires to be in the long run and what it wants to avoid in the meantime.

Answer 1

Mission

Question 2

High quality objectives are those that are…

Answer 2

Tightly connected to elements of a firm’s mission and are relatively easy to measure and track over time.

Question 3

When a firm is able to create more economic value than rival firms it is said to have a…

Answer 3

Competitive advantage

Question 4

T/F Corporate level strategies are actions firms take to gain competitive advantages in a single market or industry.

Answer 4

False

Question 5

Which type of ratios focus on the ability of a firm to meet its short-term financial obligations?

Answer 5

Liquidity ratios

Question 6

T/F Firms with strategies that are unlikely to be a source of competitive advantage will rarely provide the same career opportunities as firms with strategies that do generate such advantages.

Answer 6

True

Question 7

If TechnoGeek and VarsityBlue compete in the same market for the same customer and TechnoGeek generates $900 of economic value each time it sells a product or service while VarsityBlue generates $400 of economic value each time it sells a product or service, TechnoGeek has an _______________ of $500.

Answer 7

Economic value

Question 8

The two types of measures of competitive advantage include…

Answer 8

Accounting measures and economic measures

Question 9

Using ratio analysis, a firm earns ___________ when its performance is greater than the industry average.

Answer 9

Above average accounting performance

Question 10

The ________ consists of broad trends in the context in which a firm operates that can have an impact on a firm’s strategic choices.

Answer 10

General environment

Question 11

All of the following are elements of the general environment except

Answer 11

Industrial trends

Question 12

In a perfectly competitive industry,

Answer 12

It is not very costly for firms to enter or exit the industry.

Question 13

In the S-C-P Model, __________ refers to the strategies that firms in an industry implement.

Answer 13

Conduct

Question 14

T/F In general, technological change creates opportunities, but not threats.

Answer 14

False

Question 15

Hickory Divine is one of the leading manufacturers in the hardwood furniture industry. Hickory Divine has many small competitors, none of which controls a significant portion of the industry. Hickory, like most of the furniture manufacturers, sells its products to a broad variety of small furniture stores throughout the country, none of which represents a large percentage of Hickory’s sales. When purchasing the products it uses for manufacturing its furniture, Hickory is able to choose from many suppliers since the wood it uses is an undifferentiated commodity, and Hickory is able to easily switch to any supplier that has the best price and delivery times. While growth in the hardwood furniture industry has historically been in the double digits, the industry growth rate has slowed considerably into the single digits, to approximately 5% in recent years; consumers have been purchasing less expensive furniture made of composite wood that is considerably less expensive than hardwood furniture but that looks and functions very similarly once it is painted.

The threat of suppliers in the hardwood furniture can best be described as…

Answer 15

Low because there are a large number of suppliers selling an undifferentiated product.

Question 16

Hickory Divine is one of the leading manufacturers in the hardwood furniture industry. Hickory Divine has many small competitors, none of which controls a significant portion of the industry. Hickory, like most of the furniture manufacturers, sells its products to a broad variety of small furniture stores throughout the country, none of which represents a large percentage of Hickory’s sales. When purchasing the products it uses for manufacturing its furniture, Hickory is able to choose from many suppliers since the wood it uses is an undifferentiated commodity, and Hickory is able to easily switch to any supplier that has the best price and delivery times. While growth in the hardwood furniture industry has historically been in the double digits, the industry growth rate has slowed considerably into the single digits, to approximately 5% in recent years; consumers have been purchasing less expensive furniture made of composite wood that is considerably less expensive than hardwood furniture but that looks and functions very similarly once it is painted.

In this example, composite wood furniture would be an example of a…

Answer 16

Substitute

Question 17

Hickory Divine is one of the leading manufacturers in the hardwood furniture industry. Hickory Divine has many small competitors, none of which controls a significant portion of the industry. Hickory, like most of the furniture manufacturers, sells its products to a broad variety of small furniture stores throughout the country, none of which represents a large percentage of Hickory’s sales. When purchasing the products it uses for manufacturing its furniture, Hickory is able to choose from many suppliers since the wood it uses is an undifferentiated commodity, and Hickory is able to easily switch to any supplier that has the best price and delivery times. While growth in the hardwood furniture industry has historically been in the double digits, the industry growth rate has slowed considerably into the single digits, to approximately 5% in recent years; consumers have been purchasing less expensive furniture made of composite wood that is considerably less expensive than hardwood furniture but that looks and functions very similarly once it is painted.

If Hickory Divine were to open its own chain of furniture stores, this would be an example of…

Answer 17

Forward vertical integration

Question 18

Hickory Divine is one of the leading manufacturers in the hardwood furniture industry. Hickory Divine has many small competitors, none of which controls a significant portion of the industry. Hickory, like most of the furniture manufacturers, sells its products to a broad variety of small furniture stores throughout the country, none of which represents a large percentage of Hickory’s sales. When purchasing the products it uses for manufacturing its furniture, Hickory is able to choose from many suppliers since the wood it uses is an undifferentiated commodity, and Hickory is able to easily switch to any supplier that has the best price and delivery times. While growth in the hardwood furniture industry has historically been in the double digits, the industry growth rate has slowed considerably into the single digits, to approximately 5% in recent years; consumers have been purchasing less expensive furniture made of composite wood that is considerably less expensive than hardwood furniture but that looks and functions very similarly once it is painted.

Based on the above description, the hardwood furniture industry can best be described as a __________ industry.

Answer 18

Fragmented

Question 19

Hickory Divine is one of the leading manufacturers in the hardwood furniture industry. Hickory Divine has many small competitors, none of which controls a significant portion of the industry. Hickory, like most of the furniture manufacturers, sells its products to a broad variety of small furniture stores throughout the country, none of which represents a large percentage of Hickory’s sales. When purchasing the products it uses for manufacturing its furniture, Hickory is able to choose from many suppliers since the wood it uses is an undifferentiated commodity, and Hickory is able to easily switch to any supplier that has the best price and delivery times. While growth in the hardwood furniture industry has historically been in the double digits, the industry growth rate has slowed considerably into the single digits, to approximately 5% in recent years; consumers have been purchasing less expensive furniture made of composite wood that is considerably less expensive than hardwood furniture but that looks and functions very similarly once it is painted.

The level of direct competition in the hardwood furniture industry can best be described as…

Answer 19

High because of the numerous firms in the industry and the slowing growth rate.

Question 20

__________ in the RBV are defined as the tangible and intangible assets that a firm controls that it can use to conceive and implement its strategies.

Answer 20

Resources

Question 21

__________ are a subset of a firm’s resources and are defined as tangible and intangible assets that enable a firm to take full advantage of other resources it controls.

Answer 21

Capabilities

Question 22

__________ implies that for a given business activity, some firms may be more skilled in accomplishing this activity than other firms.

Answer 22

Resource heterogeneity

Question 23

The set of business activities in which a firm engages to develop, produce, and market its products or services is known as its __________.

Answer 23

Value chain

Question 24

Most firms have a resource base that is composed primarily of resources and capabilities that are _______.

Answer 24

Valuable but not rare.

Question 25

ESPN's development of an extensive offering of X-Games coverage that is unmatched by any other sports outlet is an example of which element of the VRIO framework?

Answer 25

Rarity

Question 26

Resources and capabilities, such as interpersonal relations among managers and a firm's culture, that may be costly to imitate because they are beyond the ability of firms to systematically manage and influence are referred to as...

Answer 26

Socially complex

Question 27

Southwest Airlines' strong internal culture that helps ensure that employees act in ways consistent with the company's strategy is an example of an...

Answer 27

Informal management control.

Question 28

If a resource or capability is valuable and rare but not costly to imitate, exploiting this resource will generate a...

Answer 28

Temporary competitive advantage.

Question 29

When tacit cooperation has the effect of reducing supply and increasing prices, it is known as...

Answer 29

Tacit collusion

Question 30

Actions that firms take to gain competitive advantage in a single market or industry are known as...

Answer 30

Business-level strategies

Question 31

In order to create a cost advantage, the cost of acquiring low-cost productive inputs must be _________ the cost savings generated by these factors.

Answer 31

Less than

Question 32

Choices which firms make about the kinds of products and services they will sell that impact their relative cost position are known as...

Answer 32

Policy choices

Question 33

_________ are said to exist when the increase in firm size (measured in terms of volume of production) are associated with lower costs (measured in terms of average costs per unit of production).

Answer 33

Economies of scale

Question 34

As the volume of production in a firm increases, the average cost per unit decreases until some optimal volume of production is reached, after which the average costs of production begin to rise because of...

Answer 34

Diseconomies of scale

Question 35

The link between volume of production and the cost of building manufacturing operations is particularly important in industries characterized by...

Answer 35

Process manufacturing

Question 36

Which of the following is not a potential source of diseconomies of scale?

Answer 36

Learning-curve economies

Question 37

_______ focuses on the relationship between the volume of production at a given point in time and average unit costs, the ______ focuses on the relationship between the cumulative volume of production and average unit costs.

Answer 37

Economies of scale; learning curve

Question 38

Which of the following statements is accurate? 1) In general, economies of scale are relatively easy-to-duplicate bases of cost leadership, but diseconomies of scale are not. 2) In general, neither economies of scale or diseconomies of scale are relatively easy-to-duplicate bases of cost leadership. 3) In general, both economies of scale and diseconomies of scale are relatively easy-to-duplicate bases of cost leadership. 4) In general, diseconomies of scale are relatively easy-to-duplicate bases of cost leadership, but economies of scale are not.

Answer 38

In general, both economies of scale and diseconomies of scale are relatively easy-to-duplicate bases of cost leadership.

Question 39

When managers committed to an incorrect course of action increase their commitment to this action even as its limitations become manifest, this is known as...

Answer 39

Escalation of commitment

Question 40

______ is a business strategy whereby firms attempt to gain a competitive advantage by increasing the perceived value of their products or services relative to the perceived value of other firms' products or services.

Answer 40

Product differentiation

Question 41

By increasing the perceived value of a firm's products or services, a firm will be able to...

Answer 41

Charge a higher price than it would otherwise be able to do.

Question 42

The most obvious way that firms can try to differentiate their products is by...

Answer 42

Altering the features of the products they sell.

Question 43

A firm's ______ is really no more than a socially complex relationship between a firm and its customers and can serve as a basis for product differentiation.

Answer 43

Reputation

Question 44

In the bicycle industry, the feel of high-end bicycles when they are ridden is important. As a serious rider becomes accustomed to a particular bicycle, it is very difficult for that rider to switch to an alternative supplier. This is an example of product differentiation through...

Answer 44

Product customization

Question 45

______ can be a source of product differentiation when a single set of customers purchases several of a firm's products.

Answer 45

Product mix

Question 46

Product differentiation is ultimately an expression of the ______ of individuals and groups within firms and is limited only by the ______ that exist, or that can be created, in a particular industry.

Answer 46

Creativity; opportunities

Question 47

Which of the following statements regarding the impact of product differentiation on the threat of new entry is accurate? 1) Product differentiation helps reduce the threat of new entry by forcing potential new entrants to absorb costs associated with overcoming incumbent firms' product-differentiation advantages. 2) Product differentiation has no impact on the threat of new entry. 3) It is not possible to determine the impact of product differentiation on the threat of new entry. 4) Product differentiation increases the threat of new entry by allowing potential new entrants to avoid costs associated with overcoming incumbent firms' product-differentiation advantages.

Answer 47

Product differentiation helps reduce the threat of new entry by forcing potential new entrants to absorb costs associated with overcoming incumbent firms' product-differentiation advantages.

Question 48

Which of the following bases of product differentiation is usually costly to duplicate?

Answer 48

Product mix

Question 49

Product features, by themselves, are...

Answer 49

usually not a source of sustained competitive advantage, but they can be a source of a temporary competitive advantage.

Question 50

Vertical integration is a type of ______.

Answer 50

Corporate strategy

Question 51

When Apple, Inc. opened retail stores to sell its computers and iPods, this was an example of...

Answer 51

Forward vertical integration

Question 52

A ______ is any investment in an exchange that has significantly more value in the current exchange than alternative exchanges.

Answer 52

Transaction-specific investment

Question 53

The essence of the ______ to vertical integration is that if a firm possesses valuable, rare, and costly-to-imitate resources in a business activity, is should vertically integrate into that activity otherwise it should not vertically integrate into that activity.

Answer 53

Firm capability explanation

Question 54

______ refers to how costly it is for a firm to alter its strategic and organizational decisions.

Answer 54

Flexibility

Question 55

A ______ approach to vertical integration suggests that rather than vertically integrating into a business activity whose value is highly uncertain firms should not vertically integrate and instead should form a strategic alliance to manage this exchange.

Answer 55

Flexibility-based

Question 56

From a CEO's perspective, coordinating functional specialists to implement a vertical integration strategy almost always involves...

Answer 56

Conflict resolution

Question 57

______ are payments to employees in a firm's stock.

Answer 57

Stock grants

Question 58

The ______ logic suggests that compensation that has a fixed and known downside risk and significant upside potential is important for firms implementing vertical integration strategies.

Answer 58

Flexibility

Question 59

If Digipics were to begin manufacturing lenses for the cameras they assembled, this would be an example of ______.

Answer 59

Backward vertical integration