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11
30) The idea that the more any given resource is applied to production, the lower the marginal
gain in output, until a point is reached where the additional inputs produce no additional output,
is referred to as:
A) the point of no return.
B) the law of diminishing returns.
C) supply and demand.
D) inelasticity.
E) virtual economics.
AACSB: Application of Knowledge
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
31) Which of the following statements about network economics is not true?
A) eBay is an example of a business model that is based on the principle of network economics.
B) The law of diminishing returns does not always apply to every situation.
C) From a network economics perspective, the value of a community of people grows as the
number of participants in the community increases.
D) Information technology can be strategically useful from a network economics perspective.
E) In network economics, the marginal cost of adding new members to the network is higher
than the marginal gain.
AACSB: Application of Knowledge
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
32) In network economics, the value of a commercial software vendor's software products:
A) increases as more people use them.
B) decreases as more people use them.
C) increases due to higher marginal gain in output.
D) decreases according to the law of diminishing returns.
E) is unrelated to the number of people that use them.
AACSB: Application of Knowledge
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
12
33) A virtual company:
A) is also known as a virtual organization.
B) uses Internet technology to maintain a virtual storefront.
C) uses Internet technology to maintain a networked community of users.
D) provides entirely Internet-driven services, or virtual products.
E) is an example of the law of diminishing returns.
AACSB: Application of Knowledge
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
34) The emergence of software as a web service has acted as a disruptive technology for:
A) traditional key-word search engines.
B) telecommunications providers.
C) PC manufacturers.
D) local Internet service providers.
E) traditional boxed software companies.
AACSB: Application of Knowledge
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
35) Which of the following is not an advantage for new companies entering the marketplace?
A) They can implement new systems and equipment.
B) They are not locked into an existing brand image.
C) They are more highly motivated.
D) They can establish new relationships with suppliers.
E) They can often hire younger, less expensive workers.
AACSB: Analytical Thinking
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
13
36) All of the following have been disruptive technologies except:
A) the PageRank algorithm.
B) the flash drive.
C) minicomputers.
D) the iPod.
E) the automobile.
AACSB: Analytical Thinking
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
37) A firm can be said to have competitive advantage when it has access to resources that others
do not.
AACSB: Application of Knowledge
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
38) The power of customers is one of the competitive forces that affect an organization's ability
to compete.
AACSB: Application of Knowledge
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
39) In a transparent marketplace, there is high product differentiation.
AACSB: Application of Knowledge
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
40) Studies show that less than one-quarter of a business firm's profits can be explained by
alignment of IT with business.
AACSB: Information Technology
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
14
41) Product differentiation is one of the four basic competitive strategies.
AACSB: Application of Knowledge
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
42) Strong linkages to customers and suppliers decrease switching costs.
AACSB: Application of Knowledge
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
43) The effect of the Internet has been to increase a company's bargaining power vis-à-vis its
suppliers.
AACSB: Application of Knowledge
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
44) The Internet has intensified competitive rivalry.
AACSB: Application of Knowledge
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
45) In the value chain model, primary activities are those that are most directly related to the
production and distribution of the firm's products and services.
AACSB: Information Technology
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
15
46) The value chain model classifies all company activities as either primary or support.
AACSB: Information Technology
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
47) When the output of some units can be used as inputs to other units, synergies develop, which
can lower cost and generate profits.
AACSB: Application of Knowledge
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
48) The law of diminishing returns does not apply to traditional products.
AACSB: Application of Knowledge
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
49) The more people that use Microsoft Office software and related products, the lower its value.
AACSB: Analytical Thinking
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
50) The inventors of a disruptive technology typically benefit the most from the technology; and
it is rare that fast followers catch up quickly.
AACSB: Application of Knowledge
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
16
51) A value web is a collection of independent firms that use information technology to
coordinate their value chains to collectively produce a product or service for a market.
AACSB: Application of Knowledge
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
52) The activities that measure the performance of your business processes against strict
standards are called best practices.
AACSB: Application of Knowledge
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
17
53) Value chain analysis is useful at the business level to highlight specific activities in a
business where information systems are most likely to have a strategic impact. Discuss this
model, identify the activities, and describe how the model can be applied to the concept of
information technology.
AACSB: Analytical Thinking; Information Technology; Written and Oral Communication
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
18
54) Select a popular product or company that you are familiar with, such as Apple's iPad. Apply
Porter's competitive forces model to that product and/or company. Which of the four generic
strategies is the company using?
AACSB: Analytical Thinking; Written and Oral Communication
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
55) Research has shown that the more successfully a firm can align its IT with its business goals,
the more profitable it will be. What practical steps should a firm use in aligning IT with its
goals?
AACSB: Application of Knowledge; Information Technology; Written and Oral
Communication
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
19
56) You are advising the owner of Smalltown Computer, a new, local computer repair store that
also builds custom computers to order. What competitive strategies would you advise Smalltown
Computer to take? Which ones will it have difficulty exercising?
AACSB: Application of Knowledge; Information Technology; Written and Oral
Communication
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
57) You are consulting with the owner of Better Bodies, a national chain of gyms. How could the
use of information systems help them exert each of the four generic strategies in achieving
competitive advantage?
AACSB: Application of Knowledge; Information Technology; Written and Oral
Communication
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
58) How is Internet technology useful from a network economics perspective? Give examples.
AACSB: Analytical Thinking; Information Technology; Written and Oral Communication
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
20
59) Why has the Internet made competitive rivalry more intense?
AACSB: Application of Knowledge; Information Technology; Written and Oral
Communication
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
60) Why are disruptive technologies "tricky"? Provide examples.
AACSB: Application of Knowledge; Information Technology; Written and Oral
Communication
LO: 3.1: How do Porter's competitive forces model, the value chain model, synergies, core
competencies, and network-based strategies help companies use information systems for
competitive advantage?
61) Final assembly of iPhones occurs in which of the following countries?
A) United States
B) South Korea
C) China
D) Germany
E) Japan
AACSB: Application of Knowledge
LO: 3.2: How do information systems help businesses compete globally?
