WPC 480 Quizzes | Questions, Answers and Rationales

WPC 480 Quizzes | Questions, Answers and Rationales Ch. 1: Upper management at Softstep Inc., a manufacturer of insoles for shoes, wants to work on improving the product lines it already has without taking on other c ...

WPC 480 Quizzes | Questions, Answers and Rationales Ch. 1: Upper management at Softstep Inc., a manufacturer of insoles for shoes, wants to work on improving the product lines it already has without taking on other challenges at this time. Which of the following vision statements reflects that goal? A. Softstep Inc. wants to provide the best benefits for employees in the insole industry. B. Softstep Inc. wants to be the best manufacturer of insoles in the industry. C. Softstep Inc. wants to adapt their insoles to the changing demands of consumers. D. Softstep Inc. wants to always satisfy the consumers who purchase insoles. Because it of its goals, Softstep would choose a product-oriented vision statement, which focuses employees on improving existing products and services without consideration of underlying customer or employee problems to be solved. Ch 1: Silver Screen Cinemas Inc. and Digi Now Inc. are two companies that own and run movie theaters in malls and other commercial areas. While Silver Screen Cinemas Inc. pursues a cost-leadership strategy, Digi Now Inc. adopts a differentiation strategy. Which of the following statements is most likely true of this scenario? A. Digi Now and Silver Screen Cinemas will not be direct competitors to each other, and their customer segments will overlap very little. B. Silver Screen Cinemas will charge a premium price for its customers, while Digi Now will implement everyday low pricing. C. Digi Now will keep its customer service at an acceptable level, while Silver Screen Cinemas will provide superior customer service. D. Silver Screen Cinemas and Digi Now will use a similar approach to create value for customers by attempting to offer everything to everybody. Although these companies are in the same industry, their customer segments will most likely overlap very little, and they will not be direct competitors. That is because each firm has chosen a distinct but different strategic position; both can win if they have a distinct and well-executed competitive strategy. Ch 1: A firm that achieves superior performance relative to other firms in the same industry or the industry average has a(n) A. competitive advantage. B. equity leverage. C. balanced scorecard. D. power position. A firm that achieves superior performance relative to other competitors in the same industry or the industry average has a competitive advantage. Ch. 1: Which of the following is an element of good strategy? A. an approach that underestimates the competition B. a guiding policy to address employee satisfaction C. a summary of the firm's history within its industry D. a set of coherent actions to implement the firm's guiding policy A good strategy consists of a diagnosis of the competitive challenge, a guiding policy to address the competitive challenge, and a set of coherent actions to implement the firm's guiding policy. Ch. 1: Which of the following statements should ideally reflect a firm's strategy for competitive advantage? A. Our aim is to create superior customer value while controlling costs. B. We will be number one in the industry. C. Our strategy is to win at any cost. D. We want to be the market leader by replicating our competitor's strategy. The statement that should ideally reflect a firm's strategy for competitive advantage is "Our aim is to create superior customer value while controlling costs." Strategy is about creating superior value, while containing the cost to create it. Grandiose statements are not strategy; they provide little managerial guidance and frequently fail to address the economic fundamentals. Ch. 5: From an investors' or shareholders' perspective, the measure of competitive advantage that matters most is the A. economic value created. B. consumer surplus. C. inventory turnover. D. return on risk capital. From the shareholders' perspective, the measure of competitive advantage that matters most is the return on their risk capital, which is the money they provide in return for an equity share, money that they cannot recover if the firm goes bankrupt. Ch. 5: ________ is best described as a measure of how effectively capital is being used by a firm to generate revenue. A. Working capital turnover B. Revenue per employee C. Risk capital D. Return on revenue A component of return on invested capital is working capital turnover, which is a measure of how effectively capital is being used by a firm to generate revenue. Ch 5: Serena paid $900 for a camera that she thought was worth $1100 for all the features included in it. For the consumer electronics firm selling the camera, however, the cost of producing the camera was only $350. What is the consumer surplus in this scenario? A. $900 B. $200 C. $1,100 D. $550 Consumer surplus is the difference between the value a consumer attaches to a good or service (V), and what he or she pays for it (P), or (V - P), that is, $1100 - $900 = $200. Ch. 5: ________ is best described as the difference between a buyer's willingness to pay for a product or service and a firm's total cost to produce it. A. Economic value created B. Cost of capital C. Consumer surplus D. Break-even point Economic value created is the difference between a buyer's willingness to pay for a product or service and the firm's total cost to produce it. It is April 2018 and Mark is a novice investor who wants to decide between purchasing shares in EagleCorp or Myna Bird Inc. In fiscal year 2017, EagleCorp's return on invested capital (ROIC) was 15 percent, and its cost of capital was 12 percent. During the same period, Myna Bird Inc.'s ROIC was 22 percent and its cost of capital was 25 percent. What does this information tell Mark? A. Both Myna Bird Inc. and EagleCorp are likely to create value. B. Neither Myna Bird Inc. nor EagleCorp are likely to create value. C. Myna Bird Inc. is more likely to create value while EagleCorp is more likely to destroy value. D. EagleCorp is more likely to create value while Myna Bird Inc. is more likely to destroy value. As a rule of thumb, if a firm's ROIC is greater than its cost of capital, it generates value; if it is less than the cost of capital, the firm destroys value. Since EagleCorp's ROIC was greater than its cost of capital, the company is more likely to create value. Myna Bird Inc., on the other hand, had a cost of capital that exceeded its ROIC, and was thus more likely to destroy value. Mark would be wise to invest his money in EagleCorp. CH. 6 When wireless service providers offer free or discounted mobile phones for subscriptions to their wireless voice and data service, the perceived value of the service offering increases. In this case, the value driver would be A. learning-curve effects. B. economies of scale. C. availability of complements. D. experience-curve effects. Complements add value to a product or service when they are consumed in tandem. Finding complements, therefore, is an important task for managers in their quest to enhance the value of their offerings. CH. 6: What must a cost-leadership strategy accomplish to be successful? A. It must increase the firm's cost above that of its competitors while offering adequate value. B. It must reduce the firm's cost below that of its competitors while offering superior value. C. It must increase the firm's cost above that of its competitors while offering superior value. D. It must reduce the firm's cost below that of its competitors while offering adequate value. The goal of a cost-leadership strategy is to reduce the firm's cost below that of its competitors while offering adequate value. The cost leader, as the name implies, focuses its attention and resources on reducing the cost to manufacture a product or deliver service in order to offer lower prices to its customers. CH. 6: Product features, customer service, and complements are all examples of important A. cost drivers. B. cost curves. C. value curves. D. value drivers. Product features, customer service, and complements are all examples of important value drivers. CH. 6: Starfish Sodas has successfully achieved a competitive advantage in the soft drink industry as a differentiator. Which of the following scenarios would undermine Starfish's position? A. Starfish's customers start to consider soda a commodity. B. Starfish introduces a new biodegradable bottle that raises cost and perceived value. C. Starfish improves the recipe for its most popular soda without increasing the price. D. Starfish's product has not established an acceptable standard of quality. The viability of a differentiation strategy is severely undermined when the focus of competition shifts to price rather than value-creating features. This can happen when differentiated products become commoditized, and an acceptable standard of quality has emerged across rival firms. CH. 6: Nendry is the owner of a firm that produces sports drinks. Since there are a number of firms in the industry competing on cost, Nendry has decided to pursue a differentiation strategy. In this case, she should A. focus on adding unique features to her product that customers will value. B. concentrate on improving process technologies to achieve economies of scale. C. enforce strict budget controls at all levels of the organization. D. devote all resources to reducing the value gap. The focus of competition in a differentiation strategy tends to be on unique product features, service, and new product launches, or on marketing and promotion rather than price. A differentiator would focus research and development on product features or packaging in order to add uniqueness. CH. 3: The primary objective of Porter's five forces model is to A. reduce the gap between the value of a firm's product and its cost of production. B. understand valuable, rare, and hard-to-imitate resources. C. understand the profit potential of industries. D. break down a firm's value chain activities into primary and support. Michael Porter developed the highly influential five forces model to help managers understand the profit potential of different industries and how they can position their respective firms to gain and sustain competitive advantage. CH. 3: Which of the following statements is true about strategic groups? A. Companies within the same strategic group are complementors to each other. B. It is not possible to have two different strategic groups within the same industry. C. Profitability varies between different strategic groups. D. Rivalry within the same strategic group tends to be lower than rivalry between different strategic groups. Some strategic groups tend to be more profitable than others. This difference implies that firm performance is determined not only by the industry to which the firm belongs, but also by its strategic group membership. CH. 3: Which of the following features about a buyer indicates that the buyer has high bargaining power? A. when the buyer cannot purchase specific products from other sellers B. when the buyer operates in an industry where products are undifferentiated C. when the buyer faces high switching costs D. when the buyer cannot credibly threaten to backwardly integrate into the industry The power of buyers is high when the industry's products are standardized or undifferentiated commodities. CH. 3: In the aircraft manufacturing industry, at least for large commercial jets, Boeing and Airbus are the only competitors. There is not a significant threat of entry because A. there is no credible threat of retaliation from the incumbents. B. entering the aircraft manufacturing industry means violating government policies. C. there is expected to be a huge return on investment within this industry. D. entering the aircraft manufacturing industry requires huge capital investments. There is not a significant threat of entry because entering the aircraft manufacturing industry requires huge capital investments. CH. 3: Which of the following statements with regard to industry structures is true? A. Having a large number of competitors generally equates to higher industry profitability. B. Having few but large competitors increases the threat of strong competitive forces such as supplier or buyer power. C. They are stable over time, not dynamic. D. A consolidated industry tends to be more profitable than a fragmented one. Since a consolidated industry tends to be more profitable than a fragmented one, firms have a tendency to change the industry structure in their favor, making it more consolidated through (horizontal) mergers and acquisitions. CH. 4: In the context of SWOT analysis, which of the following best exemplifies a firm's internal weakness? A. increased competition in the industry where the firm operates B. irregularity in the raw materials supply throughout the industry C. decline in the firm's market share D. fall in the purchasing power of the firm's customers In the context of SWOT analysis, decline in a firm's market share best exemplifies a firm's internal weakness. Strengths and weaknesses are internal to an organization, whereas opportunities and threats are external to the organization. CH. 4: Given the accelerated pace of technological change, in combination with deregulation, globalization, and demographic shifts, a firm will be successful today only if its A. internal strengths change with its external environment in a dynamic fashion. B. resource advantage is not causally ambiguous or socially complex. C. resource advantage is maintained for a short period of time. D. competitive advantage is derived from static resource or market advantages. CH. 4: Superlative Productions spent 10 million dollars to buy the rights to a best-selling novel. The company then prepared for production by hiring a screenwriter to adapt the novel, casting the main roles, renting cameras and other equipment, and scouting locations in southern Arizona. Which of the following pairs of resources are both intangible? A. money spent to buy rights to the novel; screenwriter's experience adapting novels B. best-selling novel; locations in southern Arizona C. money spent to buy rights to the novel; locations in southern Arizona D. best-selling novel; screenwriter's experience adapting novels CH. 4: Amazon.com's network of distribution centers allow it to drastically reduce its delivery times compared to other online retailers. These distribution centers are examples of Amazon's A. capabilities. B. intangible resources. C. tangible resources. D. core competency. CH. 4: Iceberg Storage, a leading hard drive manufacturer, recently filed for bankruptcy. While most of Iceberg's competitors were shifting away from physical data storage devices toward online cloud storage services, Iceberg invested most of its retained earnings in the effort to improve its hard drives. Once the hard-drive market drastically declined, Iceberg Storage was unable to capitalize on the new technology. Which of the following does this scenario best illustrate? A. social complexity B. causal ambiguity C. knowledge diffusion D. path dependence CH 2: The distribution department at Golden Grains Wheat Company has decided to adopt the FIFO (first in, first out) method of inventory to dispatch its bags of wheat. Which of the following strategies does this scenario best illustrate? A. master strategy B. business strategy C. functional strategy D. corporate strategy The distribution department of Golden Grains has decided to implement a functional strategy. Within each strategic business unit are various business functions: accounting, finance, human resources, product development, operations, manufacturing, marketing, and customer service. Each functional manager is responsible for decisions and actions within a single functional area. CH 2: Understanding the Resource Allocation Process (RAP) will have large effects on shaping a firm's realized strategy. Which of the following is an example of such an allocation of resources? A. Merck's voluntary withdrawal of Vioxx from the market B. Teach For America's mission statement C. Starbucks' launch of iced drinks D. Intel's rule to "maximize margin-per-wafer-start" By changing the tasks the resources in the firm were working on at the middle and lower levels, Intel's decision to set up guidelines for production priorities yielded an emergent strategic shift into microprocessors and out of DRAM (dynamic random-access memory) chips. Intel was able to pursue a strategic transformation due to the way it set up its resource allocation process. In a sense, Intel was using functional-level managers to drive business and corporate strategies in a bottom-up fashion. CH 2: In the top-down strategic planning approach, all strategic intelligence and decision-making responsibilities rest primarily on the A. general manager. B. external stakeholders. C. chief executive officer. D. functional managers. Top-down strategic planning is a rational, top-down process through which executives attempt to program future success. In this approach, all strategic intelligence and decision-making responsibilities are concentrated in the office of the CEO. CH 2: What is the strategic management process? A. The CEO decides who the product managers will be for a company. B. Strategic leaders design a method to formulate and implement strategy. C. Strategic leaders focus on creating a vision that reflects the company's strategy. D. The CEO defines the main problems facing a company. The strategic management process is a method put in place by strategic leaders to formulate and implement a strategy. CH 2: Strategic thinking is different from strategic planning in that A. strategic thinking is regimented and confining, whereas strategic planning is more flexible. B. strategic thinking includes all types of information sources while strategic planning does not. C. strategic thinking can create an illusion of control, whereas strategic planning avoids this. D. strategic thinking relies more on hard data than strategic planning. Critics of top-down and scenario planning argue that strategic planning is not the same as strategic thinking. According to them, in order to be successful, a strategy should be based on an inspiring vision and not on hard data alone. They advise that managers should focus on all types of information sources, including soft sources that can generate new insights, such as personal experience or the experience of front-line employees. CH. 8: To be successful and to survive the shakeout stage of the industry life cycle, a firm should A. focus on product innovation rather than process innovation. B. gain economies of scale. C. charge higher prices than its competitors. D. shift from price to non-price competition. Key success factors during the shakeout stage are the manufacturing and process engineering capabilities that can be used to drive costs down. Generally, the larger firms enjoying economies of scale are the ones that survived the shakeout phase as the industry consolidated and most excess capacity was removed. CH. 8: A new product often has a high price when it is launched because of a A. large investment in designing a product while producing small quantities. B. large investment in designing a product while producing large quantities. C. large investment in marketing a product while producing large quantities. D. large investment in marketing a product while producing small quantities. A new product often has a high price when it is launched because of a large investment in designing a product while producing small quantities. CH. 8: The customers entering the market in the growth stage are primarily A. late majority. B. early adopters. C. technology enthusiasts. D. laggards. The customers entering the market in the growth stage are early adopters. They make up roughly 13.5 percent of the total market potential. CH. 8: The key objective for firms during the growth phase is to A. pursue a harvest strategy. B. reduce their network effects. C. stake out a strong strategic position not easily imitated by rivals. D. invest as many resources as possible in product innovations. The key objective for firms during the growth phase is to stake out a strong strategic position not easily imitated by rivals. CH. 8: Ira can be categorized under the late majority customer segment. Which of the following behaviors is he most likely to exhibit? A. He will be confident in her ability to master any new technology. B. He will prefer to buy from well-established brands rather than unknown new ventures. C. He will buy beta versions of new products and technology. D. He will not rely on endorsements by the early majority or early adopters. Ira is most likely to buy from well-established brands rather than unknown new ventures. The late majority prefers to buy from well-established firms with a strong brand image rather than from unknown new ventures. CH 9: Medequip Inc. is a large firm involved in the highly competitive market of high-tech medical equipment. In this market, smaller firms that focus on research are