Business Strategy Exam 3

customers
Which of the following is an example of a firm’s external stakeholder?

a. Employees
b. Customers
c. Shareholders
d. Board members

black swan events
_____ 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

the actions of managers within the firm
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

understand the complex web of exchange relationships among different stakeholders
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.

strategy analysis
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

competitive advantage
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

economic responsibilities
In the pyramid of corporate social responsibility, _____ are the foundational building block.

a. economic responsibilities
b. ethical responsibilities
c. philanthropic responsibilities
d. legal responsibilities

strategic management
_____ 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

economic
Industry effects describe the underlying _____ structure of the industry.

a. demographic
b. psychographic
c. ethnographic
d. economic

operational effectiveness and competitive benchmarking should be treated as strategy
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

understand the profit potential of different industries
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.

direct competitors
Companies in the same strategic group are _____ to each other.

a. complements
b. strategic partners
c. direct competitors
d. shareholders

perfect competition
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

larger output
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.

PESTEL framework
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

defining the relevant industry
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.

complementor
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

suppliers provide products that are differentiated
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.

demographic trends
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

formerly unrelated industries begin to satisfy the same customer need
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.

resource stocks are a firm’s current level of intangible resources.
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.

conduct a thorough analysis of a firm’s internal and external environments.
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.

primary activity
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

dynamic capabilities perspective
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

path dependence
_____ 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

helps the firm to gain and sustain a competitive advantage
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.

it will result in perfect competition
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.

resource immobility
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

core competencies
_____ 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

machinery
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

1-15 hours
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

the company does not screen its drivers and lets anyone with a working vehicle drive
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.

health benefits and other perks like retirement, disability pay, and vacation leave
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.

UberBlack
What was the first service launched by Uber?
UberBlack
UberX
UberPOOL
UberSelect or UberPlus
a regional plane service called UberAIR
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

technically Uber is still operating at a loss
What is Uber’s net profitability?

Technically Uber is still operating at a loss.
$500 million
$51 billion
$100 million

Uber is not officially in the taxi business; it’s main product is a software platform
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.
fixed rate pricing
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

a real estate resurgence in dense urban locations due to increased ease of mobility
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

false
Uber drivers tend to be less educated than traditional taxi drivers and chaffeurs.

True
False

delivers low-cost products and services to a specific, narrow part of the market
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.

economic value created is greater than that of its competitors
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.

superior customer service
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

minimum efficient scale
_____ 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

While there are no diseconomies to learning, there are diseconomies to scale
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.

economies of scale
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.

differentiator is able to create a significant difference between perceived value and current market prices
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.

integration strategy
In a successful _____, the trade-offs between differentiation and low cost are reconciled.

integration strategy
focused differentiation strategy
liquidation strategy
divestment strategy

Mass customization
_____ 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

trade-off between value creation and production cost
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.

the cost of maintaining a production unit
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

ability to coordinate highly complex tasks to allow for specialized division of labor
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.

information asymmetry
_____ 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

strategic alliances
_____ 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

industry
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

Specialized assets
_____ 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

unrelated diversification strategy
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

are able to increase value due to economies of scope
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.

hold a small market share in a low-growth market
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.

matrix
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

growth stage
In which of the following stages of the industry life cycle is a standard first established?

Maturity stage
Growth stage
Shakeout stage
Introduction stage

it invades the market from the bottom up, by first capturing the low end
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

increasing supply and mobility of skilled workers
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.

new markets by using new technologies
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.

the presentation of an idea as findings derived from basic research
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.

the weaker firms are forced out of the industry in this stage
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.

products that appeal to the largest segment of the market with homogenous tastes
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

innovation
_____ is best described as the commercialization of any new product, process, or the modification and recombination of existing ones.

Invention
Mass customization
Innovation
Intrapreneurship

each stage of the industry life cycle is dominated by a different customer group
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.

product; process
Generally, as the level of _________ innovation declines, the level of _________ innovation increases.

product; process
incremental; drastic
process; procedural
efficient; inefficient

some of the firm’s proprietary know-how may be appropriated by the foreign partner
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.

joint venture
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

when two firms of comparable size join to form a combined entity
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

they produce stronger ties between partners
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.

selecting the best possible partner
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

consider an outright acquisition
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.

to replace competitive advantage with competitive parity
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

non-equity alliances
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

there is a reduction of excess capacity in the market
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.

strategic alliance
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

the absence of a trading bloc
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.

transnational strategy
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

multinational companies organizing as global-collaboration networks
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.

Exporting
Which of the following modes of entering a foreign market allows for the lowest level of control?

Greenfield ventures
Exporting
Joint ventures
Acquisitions

Liability of foreignness
____________ 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

economic institutions
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

the need to tailor product and service offerings to fit native consumer preferences and host-country requirements
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

increasing local tariffs
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

To dominate domestic markets
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

the firm reaps significant economies of scale and location economies
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.

legal personality allows a firm’s continuation beyond the founder or the founder’s family
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.

many publicly traded companies have defined value creation too narrowly in terms of financial performance
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

corporate governance
_____ 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

the separation of ownership and control
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

individuals who formally represent the firm’s shareholders and oversee the work of executives
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

they have more independence than inside directors
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.

to align incentives between shareholders and management
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

the absolute size of the CEO pay package compared with the pay of the average employee
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

market for corporate control
Which of the following is an important external corporate-governance mechanism?

Shareholder capitalism
Board of directors
Executive compensation
Market for corporate control

EDGAR
The Securities and Exchange Commission (SEC) makes all financial reports filed by public companies available electronically via the _____ database.

GAAP
JASON
EDGAR
PARMER