Version 1 1
Student name:__________
1) What is strategy? How does strategy relate to a firm’s profitability?
2) What is the difference between profitability and profit growth?
3) How can a firm increase its profitability?
4) Discuss the efficiency frontier. How does strategic positioning relate to the efficiency
frontier?
Version 1 2
5) Consider the firm in terms of a value chain. What is the difference between primary
activities and support activities? Provide examples of each.
6) How can the marketing and sales functions of a firm create value?
7) Describe the benefits of global expansion for firms.
8) Discuss the creation of a global web of value creation activities.
Version 1 3
9) What are learning effects? When are learning effects most significant?
10) How can firms successfully leverage the skills developed at the subsidiary level?
11) What are the two types of competitive pressures that firms competing in the global
marketplace face? How do firms respond to these pressures?
12) Discuss how a firm’s marketing strategies may have to address differences in distribution
channels in other countries.
Version 1 4
13) Consider a transnational strategy. Why would a firm choose this strategic alternative?
What are the disadvantages of this strategy?
14) Discuss the evolution of strategy. How does cost become important in the long term?
15) _____ is measured by the percentage increase in net profits over time.
A) Profit growth
B) Value
C) Profitability
D) Operational economy
16) The amount of value a firm creates is measured by the
Version 1 5
A) economies of scale they are able to achieve.
B) difference between its costs of production and the value that consumers perceive in
its products.
C) profitability the firm achieves.
D) difference between its costs of production and the price that it charges for its
products.
17) The _____ all of the different positions that a firm can adopt with regard to adding value
to the product and low cost assuming that its internal operations are configured efficiently to
support a particular position.
A) economies of scale are
B) diminishing returns imply
C) efficiency frontier shows
D) value creation scale shows
18) The strategy, operations, and organization of a firm must all be consistent with each other
if the firm is to _____ and achieve superior profitability.
A) exploit core competencies
B) attain a comparative advantage
C) experience a learning curve
D) attain a competitive advantage
19) _____ include the design, creation, and delivery of a product.
Version 1 6
A) Primary activities
B) Core competencies
C) Support activities
D) Universal needs
20) Research and development, production, marketing and sales, and customer service are all
examples of
A) core competencies.
B) primary activities.
C) value creation.
D) secondary activities.
21) Top management should be viewed as part of the firm’s
A) primary activities.
B) experience curve.
C) infrastructure.
D) universal strategy.
22) _____ can be defined as the rate of return that the firm makes on its invested capital,
which is calculated by dividing the net profits of the firm by total invested capital.
A) Profitability
B) Performance
C) Cash flow
D) Efficiency
Version 1 7
23) The percentage increase in net profits over time measures
A) capital return.
B) profitability.
C) market growth.
D) profit growth.
24) Which of the following statements is true?
A) The way to increase the profitability of a firm is to create a greater number of
products.
B) The amount of value a firm creates is measured by the difference between its costs of
production and the value that consumers perceive in its products.
C) The more value customers place on a firm’s products, the lower the price the firm is
able to charge for those products.
D) The price a firm charges for a good or service is typically more than the value the
customer places on that good or service.
25) The price a firm charges for a good or service is typically less than the value placed on
that good or service by the customer. This is because
A) the customer’s disposable income is significantly higher than what the market
demands.
B) the customer captures some of that value in the form of a consumer surplus.
C) regulatory mechanisms ensure that the customer is not overcharged for
products/services.
D) marketers implement psychological pricing tactics to ensure that customers perceive
the prices to be low.
Version 1 8
26) The value of a product to an average consumer is V; and the average price that the firm
can charge a consumer for that product is P. Here, V – P can be termed as
A) consumer surplus per unit.
B) producer surplus per unit.
C) profit growth.
D) profit per unit sold.
27) A consumer surplus can be best described as
A) what the consumer has “left over” after a purchase.
B) how much extra a consumer has to pay for a product.
C) value for the money.
D) the premium charged for a quality product.
28) A strategy that focuses on increasing the attractiveness of a product is referred to as
A) a differentiation strategy.
B) a low-cost strategy.
C) an effectiveness strategy.
D) an efficiency strategy.
29) The efficiency frontier has a convex shape because of
A) consumer surplus.
B) diminishing returns.
C) profitability.
D) differentiation strategy.
Version 1 9
30) _____ imply that when a firm already has significant value built into its product offering,
increasing value by a relatively small amount requires significant additional costs.
A) Efficiency matrixes
B) Diminishing returns
C) Cost plus curves
D) Strategy convex curves
31) The basic strategy paradigm suggests that to maximize its profitability, a firm should do
which of the following?
A) Choose, according to strategy, any position on the efficiency frontier as all positions
are viable.
B) Pick a position on the efficiency frontier that is viable in the sense that there is a low
product demand anticipated.
C) Configure its external operations so that they support the position of diminishing
returns.
D) Make sure that the right organization structure is in place to execute its strategy.
32) _____ activities are basically concerned with creating the product, marketing and
delivering the product to buyers, and providing support and after-sales service.
A) Support
B) Subordinate
C) Ancillary
D) Primary
33) Which of the following is an example of a primary activity in a firm’s value chain?
Version 1 10
A) information systems
B) research and development
C) logistics
D) human relations
34) Which of the following is an example of a support activity in a firm’s value chain?
A) research and development
B) customer service
C) human resources
D) marketing and sales
35) _____ activities of the value chain provide inputs that allow the primary activities to
occur.
A) Complementary
B) Basic
C) Core
D) Support
36) Michael Porter argues that
A) those firms that create superior value will achieve superior profitability.
B) standardization of product is a basic strategy for attaining a competitive advantage in
an industry.
C) it is necessary for a firm to have the lowest cost structure or create the most valuable
product.
D) it is important that the gap between value and the cost of production be smaller than
that of competitors.
Version 1 11
37) The term ________ refers to skills within the firm that competitors cannot easily match
or imitate and that may exist in the firm’s value creation activities.
A) experience curves
B) core competence
C) economies of scale
D) learning effects
38) Location economies are the economies that arise from performing a _____ activity in the
optimal location for that activity.
A) universal need
B) core competence
C) value creation
D) localization strategy
39) The _____ refers to systematic reductions in production costs that have been observed to
occur over the life of a product.
A) economies of scale
B) value creation
C) location economies
D) experience curve
40) Global expansion offers companies the opportunity to generate greater profits than
companies that focus strictly on
Version 1 12
A) value creation.
B) economies of scale.
C) location economies.
D) the domestic market.
41) _____ enable a firm to reduce the costs of value creation and/or to create perceived value
in such a way that premium pricing is possible.
A) Core competencies
B) Global standardization strategies
C) Operations
D) Location economies
42) Economies that arise from performing a value creation activity in the optimal location are
known as
A) international strategies.
B) location economies.
C) localization strategies.
D) economies of scale.
43) Cost savings that come from learning by doing are known as
A) learning curves.
B) economies of scale.
C) learning effects.
D) experience curves.
Version 1 13
44) Learning effects tend to be
A) the same regardless of whether a task is simple or complex.
B) more significant when a technologically simple task is repeated.
C) less significant when a technologically complex task is repeated.
D) more significant when a technologically complex task is repeated.
45) _____ allows a firm to reduce its cost of creating value and increase its profitability.
A) Moving down the experience curve
B) Moving up the experience curve
C) Moving down the learning effect curve
D) Moving up the learning effect curve
46) A firm benefits by basing each value creation activity it performs at that location where
economic, political, and cultural conditions, including relative factor costs, are most conducive to
the performance of that activity. Firms that pursue such a strategy can realize
A) differentiation.
B) location economies.
C) vertical integration.
D) horizontal integration.
47) Economies that arise from performing a value creation activity in the optimal place for
that activity are referred to as
Version 1 14
A) factor economies.
B) production economies.
C) location economies.
D) value creation economies.
48) When companies disperse different stages of the value chain to those locations around the
world where perceived value is maximized or where the costs of value creation are minimized,
companies create
A) a differentiated organization.
B) a location economy curve.
C) economies of scale.
D) a global web of value creation activities.
49) Lenovo’s ThinkPad laptop computers are designed in the United States; the case,
keyboard, and hard drive are made in Thailand; the display screen and memory in South Korea;
the built-in wireless card in Malaysia; and the microprocessor in the United States. In each case,
these components are manufactured and sourced from the optimal location given current factor
costs. In this example, Lenovo has
A) vertical integration advantages.
B) a global web of value creation activities.
C) learning effects.
D) high local responsiveness.
50) _____ refer(s) to systematic reductions in production costs that have been observed to
occur over the life of a product.
Version 1 15
A) Experience curve
B) Economies of scale
C) Location economies
D) Production possibility
51) It has been observed that a product’s production costs decline by some quantity about
each time cumulative output
A) increases by 25 percent.
B) quadruples.
C) doubles.
D) triples.
52) When individuals gain knowledge of the most efficient ways to perform particular tasks,
they are saving costs through
A) location economies.
B) value creation effects.
C) experience curve effects.
D) learning effects.
53) Learning effects
A) tend to be less significant when a technologically complex task is repeated.
B) will be less significant in an assembly process involving 1,000 complex steps than in
one of only 100 simple steps.
C) typically disappear after a while, despite the complexity of the task.
D) are more significant after two or three years of the introduction of a new process.
54) It has been suggested that learning effects are important only during the start-up period of
a new process and that they cease after two or three years. Any decline in the experience curve
after such a point is due to
A) reduction in fixed costs.
B) higher depreciation costs.
C) economies of scale.
D) obsolescence.
55) Economies of scale arise from which of the following sources?
A) increasing fixed costs by limiting them to small volumes
B) serving domestic and international markets from the same production facilities
C) serving only domestic markets
D) bargaining with distributors to drive up the product costs
56) Which of the following is one of the two types of competitive pressure that affects the
ability of multinational enterprises to compete in the global marketplace?
A) pressure for cost increases
B) pressure for local responsiveness
C) pressure for value creation
D) pressure for increased profitability
57) A multinational enterprise doing business in Nigeria decided to change the labeling on its
product to conform to local customs and preferences. What type of competitive pressure did this
company experience?