Learning curve-cost advantages are restricted solely to manufacturing and the
advantage associated only with the manufacturing business function.
Answer:
Liquidity ratios are ratios that focus on the firm’s ability to meet its short-term financial
obligations.
Answer:
More recent work contradicts the argument about being “stuck in the middle” and
suggests that firms that are successful in both cost leadership and product differentiation
often can expect to gain a sustained competitive advantage.
Answer:
Studying a firm’s value chain forces us to think about firm resources in an aggregated
way.
Answer:
A firm with a high ratio between value added and sales has brought many of the
value-creating activities associated with its business inside its boundaries, consistent
with a high level of vertical integration.
Answer:
If bidding and target firms are strategically related, then the economic value of these
two firms combined is greater than their economic value as separate entities.
Answer:
Government upheaval and the attendant risks to international firms are facts of life in
some countries.
Answer:
Shared activities, risk reduction, tax advantages, and employee compensation as bases
for corporate diversification are usually relatively easy to duplicate.
Answer:
A firm’s dominant logic is a common way of thinking about strategy across different
businesses.
Answer:
In many ways, the transnational structure is similar to the centralized hub.
Answer:
Even when a particular source of cost advantage is rare, it must be costly to imitate in
order to be a source of sustained competitive advantage.
Answer:
Sources of cost advantage that are unlikely to be rare include learning-curve economies,
differential low-cost access to productive inputs and technological software.
Answer:
Explicit collusion exists when firms directly communicate with each other to coordinate
their levels of production or their prices and is legal in most countries.
Answer:
In zero-based budgeting, each project has to stand on its own merits each year by being
included among the important projects that a firm can afford to fund and no project
receives funding for the future simply because it received funding in the past.
Answer:
The ability to learn from operations can be helped if managers perceive that there is too
much to be learned.
Answer:
In the structure-conduct-performance model, the term “structure” refers to industry
structure, which can be measured by such factors as the number of competitors in an
industry.
Answer:
First movers that invest only in technology usually obtain sustained competitive
advantages, even if they do not tie up strategically valuable resources in an industry
before their full value is widely understood.
Answer:
Diseconomies of scale exist in an industry when a firm’s costs fall as a function of that
firm’s volume of production.
Answer:
Cost leadership and product differentiation are so widely recognized that they are often
called generic business strategies.
Answer:
When tacit cooperation has the effect of reducing supply and increasing prices, it is
known as tacit collusion.
Answer:
Emergent strategies are theories of how to gain competitive advantage in an industry
that emerge over time or that have been radically reshaped once they are initially
implemented.
Answer:
The correlation between economic and accounting measures of competitive advantage
is generally low.
Answer:
Flexibility refers to how costly it is for a firm to alter its strategic and organizational
decisions.
Answer:
Understanding a firm’s general environment can help the firm identify some of the
threats and opportunities it faces.
Answer:
In general, imitation can occur in one of two ways: direct duplication or substitution.
Answer:
In the short-run, firms can gain some advantages by cheating their alliance partners but
research suggests that cheating does not pay in the long run.
Answer:
In an equity alliance, cooperating firms supplement contracts with equity holdings and
alliance partners.
Answer:
In order for the basis of an international strategy to attract new customers, those
products or services must address the needs, wants, and preferences of customers in
foreign markets at least as well as, if not better than, alternatives.
Answer:
Objectives are the specific measurable targets a firm can use to evaluate the extent to
which it is realizing its mission.
Answer:
A firm’s general environment consists of broad trends in the context within which the
firm operates that can have an impact on the firm’s strategic choices.
Answer:
A firm engages in backward vertical integration when it incorporates more stages of the
value chain within its boundaries and those stages bring it closer to gaining access to
raw materials.
Answer:
Different physical standards are more challenging than differences in tastes for firms
looking to sell their products or services outside the domestic market.
Answer:
In 1970, institutions owned ________ percent of the equity traded in the United States
and by 2005 they owned ________ percent of the equity traded in the United States.
A) 32; 59
B) 62; 32
C) 48; 62
D) 32; 38
Answer:
The advantages that come to firms that make important strategic and technological
decisions early in the development of an industry are known as ________ advantages.
A) first-mover
B) competitive
C) comparative
D) emerging
Answer:
Which of the following is an example of formal management controls?
A) a firm’s culture
B) the willingness of employees to monitor each other
C) budgeting and reporting activities
D) managerial motivation
Answer:
Resources and capabilities that are valuable, rare, and costly to imitate are best
described as
A) distinctive competencies.
B) entry barriers.
C) complementary resources and capabilities.
D) sustainable distinctive competencies.
Answer:
The ability to develop detailed local knowledge of nondomestic markets may require
firms to have management teams with a great deal of ________ experience.
A) foreign
B) technical
C) corporate
D) functional
Answer:
A ________ exists when firms are committed to engage in several related
product-differentiation strategies simultaneously.
A) policy of substitution
B) policy of extrapolation
C) policy of exploration
D) policy of experimentation
Answer:
The difference between the current market price of a target firm’s shares and the price a
potential acquirer offers to pay for those shares is known as an
A) acquisition premium.
B) acquisition discount.
C) acquisition margin.
D) acquisition price.
Answer:
Strategic alliances fall within the ________ governance option for firms pursuing
international strategies.
A) corporate
B) market
C) intermediate market
D) hierarchical
Answer:
Which of the following is a limitation of the reputational control of cheating in a
strategic alliance?
A) Subtle cheating in an alliance is likely to become public knowledge.
B) Even if one firm is clearly cheating in an alliance, the other firm may not be
sufficiently tied into a network of firms to make this information public.
C) The effect of a tarnished reputation forecloses future opportunities for a firm and it
helps reduce the current losses of the firm that was cheated.
D) The reputation of the firm that was impacted by the cheating may be impacted as
significantly as the firm that committed the cheating.
Answer:
Exporting is a form of
A) intermediate market governance.
B) hierarchical governance.
C) vertical governance.
D) market governance.
Answer:
The Bates Company has been producing tools for over fifty years. In that time the
company has been acknowledged as a producer of high quality tools at a reasonable
price. Bates’ competitive prices can be attributed to three factors. First, the company
recognized early in its development that tools made from specific blends of various
types of metal were less costly to produce and had superior performance compared to
traditional metals. Accordingly, Bates made investments in developing tools made for
specialty metals long before other competitors and has made a series of investments
over its operating history that have put it far ahead of its competitors in terms of
product development. Industry analysts believe that based on these investments it
would be difficult and extremely costly, if it were even possible, for rivals to catch up
with Bates. Second, in recognizing the importance of certain metals, Bates was able to
sign long-term contracts with suppliers of the metals that have provided Bates with a
lasting cost advantage. Finally, Bates maintains its cost advantages by using a thorough
budgeting and reporting system that allows it to closely control costs, and these systems
are supported by a frugal company culture and financial incentives that reward
employees for finding ways to save money throughout the company. The reward system
Bates uses to encourage employees to find ways to reduce costs is an example of a(n)
A) sustained distinctive competence.
B) informal management control.
C) formal reporting structure.
D) compensation policy.
Answer:
In general, the ________ tangible the resources and capabilities that are to be brought to
a strategy alliance, the ________ costly it will be to estimate their value before an
alliance is created, and the ________ likely it is that adverse selection will occur.
A) more; more; more
B) less; more; less
C) less; more; more
D) more; more; less
Answer:
Research suggests that ________ are the type of alliance where existence of
transaction-specific investments often leads to holdup problems.
A) licensing agreements
B) equity alliances
C) joint ventures
D) distribution agreements
Answer:
Choices which firms make about the kinds of products and services they will sell that
impact their relative cost position are known as
A) technological hardware.
B) policy choices.
C) technological software.
D) corporate level strategies.
Answer:
If Digipics were to begin selling the cameras it assembled directly to customers through
a website operated by the company, this would be an example of
A) backward vertical integration.
B) a strategic alliance.
C) forward vertical integration.
D) opportunism.
Answer:
Sematech is a producer of computer chips. To gain an advantage over other computer
chip makers, Sematech focuses on reducing its costs below all of its competitors and
has aligned its value chain accordingly. Recently, several of Sematech’s competitors
have begun to reduce the company’s competitive advantage. In response to this threat,
Sematech has decided to add production capacity in an effort to lower costs. By
increasing production volume in an effort to reduce costs, Sematech is pursuing which
sources of cost advantage?
A) size differences and diseconomies of scale
B) differential access to productive inputs
C) size differences and economies of scale
D) technological advantages
Answer:
Compensation that focuses on groups of employees such as cash bonuses and stock
grants are best suited for ________ explanations of vertical integration.
A) flexibility-based
B) capabilities-based
C) strategically-based
D) opportunism-based
Answer:
A firm’s ability to learn is known as its
A) competitive position.
B) competitive advantage.
C) distinctive competence.
D) absorptive capacity.
Answer:
Which of the following bases of product differentiation attempts to create the
perception that a firm’s products or services are unusually valuable by focusing on links
within and between firms?
A) reputation
B) product complexity
C) consumer marketing
D) product mix
Answer:
SpandoCorp is a diversified firm that makes industrial, military and consumer products
from Spandex. SpandoCorp manages each of the businesses that it operates in as a
separate division and treats each as a true profit-and-loss center. In this organization,
Grace McKenna is responsible for deciding which set of businesses SpandoCorp will
operate in and for encouraging behavior that is consistent with this strategy, Wells
Tucker provides information to McKenna about the internal and external environments
that she uses in her decision making, and Kelly Rae is one of the individuals who is
responsible for evaluating the firm’s decision making to ensure that it is consistent with
the interests of equity holders.
If SpandoCorp decides to use the method of allocating capital where each project
receives funding on its merit and not because it received funding the previous year, it is
using
A) zero-based budgeting.
B) corporate budgeting.
C) centralized budgeting
D) coordinated budgeting.
Answer:
________ occurs when partners in an alliance possess high-quality resources and
capabilities of significant value in an alliance but fail to make those resources and
capabilities available to alliance partners.
A) Moral hazard
B) Adverse selection
C) Holdup
D) Explicit collusion
Answer:
If an individual is considering purchasing a Toyota Camry or a Ferrari and decides that
it is worth paying the extra money for the prestige that is associated with the Ferrari, the
additional money the customer is willing to pay for the prestige is known as a(n)
A) altruistic price.
B) hedonic price.
C) fair market value.
D) margin price.
Answer:
A firm’s ________ is a measure of its competitive advantage calculated using
information from a firm’s published profit and loss and balance sheet statements.
A) economic performance
B) accounting performance
C) strategic performance
D) sustainable performance
Answer:
________ are substitutes for exploiting economies of scope in diversification.
A) Tax havens
B) Tax shelters
C) Tax freedom
D) Strategic alliances
Answer:
When eBay acquired Baaze.com, an Indian auction firm, in order to enter the Indian
online auction market, this was an example of a ________ merger.
A) product extension
B) market extension
C) conglomerate
D) vertical
Answer:
When considering the impact of product differentiation on the threat of rivalry, product
differentiation
A) reduces the threat of rivalry to zero.
B) increases the threat of rivalry by forcing each firm in an industry to compete directly
with one another instead of allowing them to carve out their own unique product niche.
C) has no impact on the threat of rivalry.
D) reduces the threat of rivalry because each firm in an industry attempts to carve out
its own unique product niche.
Answer:
________ is (are) a maneuver in which a target firm’s management purchases any of the
target firm’s stock owned by a bidder and does so for a price that is greater than the
current market value of that stock.
A) Standstill agreements
B) Poison pills
C) Shark repellents
D) Greenmail
Answer:
If a diversified firm had three businesses and these companies shared a common
marketing and service operation, as well as common technology and development, this
would be an example of which type of economy of scope?
A) core competencies
B) shared activities
C) risk reduction
D) multipoint competition
Answer:
In 2012, there were approximately ________ acquisitions or mergers in the United
States.
A) 8,000
B) 10,000
C) 12,000
D) 14,000
Answer:
Cost-leadership firms are typically characterized by very ________ cost-control
systems.
A) tight
B) flexible
C) loose
D) decentralized
Answer:
Firms that seek to balance the need for local responsiveness and international
integration will typically choose ________.
A) centralized federations
B) transnational structures
C) decentralized federations
D) matrix structures
Answer:
When tacit cooperation has the effect of reducing supply and increasing prices, it is
known as
A) monopolistic competition.
B) explicit collusion.
C) competitive parity.
D) tacit collusion.
Answer:
Which of the following statements regarding the resource-based view is accurate?
A) Competitively valuable resources and capabilities are controlled only by a firm’s
general managers.
B) Only lower level employees need to accept the responsibility of creating, nurturing
and exploiting resources and capabilities that can generate competitive advantages for a
firm.
C) Employees should define their jobs in functional terms instead of in competitive and
economic terms.
D) Competitive advantage is too important to remain the sole property of senior
management.
Answer:
If there are no vertical, horizontal, product extension, or market extension links between
firms, the FTC defines the merger or acquisition activity between firms as a ________
merger.
A) conglomerate
B) vertical
C) horizontal
D) product extension
Answer:
Fed Ex entered their market with a well-defined mission and objectives, making
strategic choices and implementing those strategies. This is an example of which type
of strategy?
A) intended
B) economic
C) emergent
D) visionary
Answer:
Identify two forms of imitation and describe four sources of costly imitation.
Answer:
Define the three fundamental forms of cheating in strategic alliances and discuss the
short- and long-term implications of cheating in a strategic alliance.
Answer:
Define the term “strategy,” discuss the set of assumptions and hypotheses that a strategy
is based on and discuss what makes a good strategy.
Answer:
Discuss the opportunism-based explanation of vertical integration value creation and
identify when, under this explanation, firms should vertically integrate. In your answer
be sure to clearly define opportunism and the role that transaction-specific investments
play in the opportunism-based explanation.
Answer:
Identify the three broad categories of product differentiation and identify two bases of
differentiation under each category.
Answer:
Discuss the questions underlying the VRIO framework and use these questions to
differentiate between a simple distinctive competence and a sustained distinctive
competence.
Answer:
What is the local responsiveness/international integration trade-off that firms face when
they go into international markets?
Answer:
Define the nature of competitive dynamics and identify three reasons why a firm might
not respond to another firm’s competitive advantage.
Answer:
Differentiate between business level and corporate level strategies and give examples of
each.
Answer:
Discuss when firms go it alone and identify three conditions under which alliances will
be preferred to going it alone and when going it alone is not an attractive substitute for
an alliance.
Answer:
Discuss the role of division general managers in an M-form organization and compare
and contrast this role with that of senior executives in U-form organizations.
Answer:
Describe the role of product differentiation and how product differentiation helps firms
take advantage of opportunities in fragmented industries, in emerging industries, in
mature industries and in declining industries.
Answer:
Discuss the firm capabilities-based explanation of how vertical integration can create
value. In your discussion identify the two broad implications of this approach and
when, under this approach, firms should engage in vertical integration.
Answer:
Identify two approaches to estimating a firm’s competitive advantages and discuss the
strengths and weaknesses of each.
Answer:
Define strategy implementation and discuss three specific organizational policies and
practices that are particularly important in implementing a strategy.
Answer:
Identify the conditions under which a strategic alliance can be rare and discuss the role
that complementary resources can play in the rarity of strategic alliances.
Answer:
Define vertical integration and differentiate between forward vertical integration and
backward vertical integration.
Answer:
Define the concept of economies of scope, discuss when they are valuable and identify
and differentiate between four of the eight potential economies of scope a diversified
firm might try to exploit.
Answer:
Discuss the role of accounting measures of divisional performance, identify three
different standards of comparison that can be used when evaluating the accounting
performance of a division along with the strengths and weaknesses of each standard,
and describe the potential weaknesses of accounting measures of divisional
performance.
Answer:
Identify the four questions represented in the VRIO framework that one must ask about
a resource or capability to determine its competitive potential.
Answer: