University of Southern California



MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) ________ is best described as a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors.

A) Strategy B) Competency management

C) Behavior modification D) Credo

2) Which of the following stages of the strategic management process involves an evaluation of a firm's external and internal environments?

A) strategy formulation B) strategy analysis

C) strategy control D) strategy implementation

3) If SA Pharmaceuticals obtains an 18 percent return on invested capital, which of the following will help determine if it has a competitive advantage over other pharmaceutical companies?

A) evaluating the liquidity ratios for other pharmaceutical companies

B) comparing the return to the return on invested capital obtained by other firms in the industry

C) comparing the value to the history of the firm's return of investment over a number of years

D) assessing the value based on the shareholders' expectations of return on their capital

4) 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.

5) Which of the following statements about strategy is not true?

A) Grandiose statements of desire, on their own, are not strategy.

B) Strategy is about creating superior value, while containing the cost to create it.

C) Strategy is as much about deciding what not to do, as it is about deciding what to do.

D) Operational effectiveness and competitive benchmarking should be treated as strategy.

6) Van Dyke's Fashion Inc., a company that manufactures clothing, incurs higher costs because of its refusal to build factories in countries where child labor is prevalent. This reflects Van Dyke's Fashion's ________ responsibility.

A) demographic B) ethical C) legal D) economic

7) Which of the following is an accurate statement about the relationship between firm effects and industry effects?

A) Firm effects deal with a manager's actions; industry effects deal with external circumstances.

B) Firm effects deal with a manager's actions; industry effects deal with internal circumstances.

C) Firm effects deal with the action of competitors; industry effects deal with external circumstances.

D) Firm effects deal with the action of competitors; industry effects deal with internal circumstances.

8) The government of Filvia has mandated that the standard minimum wage in the country be increased to $8,000 per year. This has ensured that all firms in the country pay their employees at least $8,000 per year, which has brought about a higher standard of living for the people of Filvia. Which of the following factors in a firm's general environment does this mandate best indicate?

A) legal factors B) ecological factors

C) technological factors D) sociocultural factors

9) Which of the following do the sociocultural forces in a firm's external environment best represent?

A) the interest rates prevalent in an economy

B) the rate of employee attrition within the firm

C) the laws protecting small enterprises in a nation

D) the family size of the firm's target market

10) In the ________ developed by Michael Porter, competition is not defined narrowly as a firm's closest competitors but rather more broadly to include other factors in an industry like buyers, suppliers, potential new entry of other firms, and the threat of substitutes.

A) VRIO framework B) PESTEL framework

C) value chain analysis D) five forces model

11) The telecom industry in the country of New Taria is an industry characterized by the presence of strong network effects, high brand loyalty, high economies of scale, and proprietary technology among incumbent firms. Thus, in the telecom industry, the

A) bargaining power of buyers is most likely low.

B) entry barriers are most likely nonexistent.

C) threat of new entrants is most likely low.

D) threat of substitutes is most likely high.

12) The relative bargaining power of suppliers is high when

A) incumbent firms face low supplier switching costs.

B) incumbent firms can credibly threaten to backward integrate into the industry.

C) suppliers depend heavily on the industry for a large portion of their revenues.

D) suppliers provide products that are differentiated.

13) In which of the following industry competitive structures do selling firms have the lowest pricing power?

A) oligopoly B) monopolistic competition

C) perfect competition D) monopoly

14) Fadia Ammunition Inc., a firm controlled and managed by the government of Fadia, is the only company that has the license to produce defense arms in the country. Which of the following industry competitive structures does this best illustrate?

A) monopoly B) perfect competition

C) oligopoly D) monopolistic competition

15) Competitive rivalry based solely on ________ is destructive to firms as it transfers most of the value created in the industry to the customers.

A) new product releases B) product differentiation

C) price-cutting D) promotional campaigns

16) Which of the following firms will most likely not be a complementor to a firm that manufactures computers?

A) a company that manufactures portable external disks

B) a company that manufactures its own brand of desktops and laptops

C) a company that develops application software

D) a company that develops operating software

17) Which of the following is likely to happen due to horizontal mergers between competitors such as Delta and Northwest airlines?

A) The structure of the industry will change from consolidated to one that is fragmented.

B) The threat of strong competitive forces such as supplier power will increase.

C) The overall industry profitability will increase.

D) The industry will face excess capacity in the future.

18) Companies in the same strategic group are ________ to each other.

A) shareholders B) direct competitors

C) strategic partners D) complementors

19) Dandelions Max is a consumer electronics company. It has acquired an edge over its competitors through its ability to provide breakthrough technology at the lowest price in the market. This advantage of Dandelions Max best exemplifies a

A) capital gain. B) markup.

C) core competency. D) resource flow.

20) Which of the following statements accurately brings out the difference between tangible and intangible resources?

A) Tangible assets are difficult to imitate, whereas intangible assets can be easily replicated.

B) Tangible resources take a longer time to build, whereas intangible assets can be built comparatively easily.

C) Tangible resources contribute to a company's competitive advantage, whereas intangible resources fail to do the same.

D) Tangible assets can be bought on the open market, whereas intangible assets cannot be easily purchased.

21) Coral Think Inc. is a new company in the publishing industry. It has raised sufficient capital from multiple sources. It is planning to use its capital to purchase certain assets. Which of the following assets will be the most difficult for Coral Think Inc. to acquire using its capital?

A) inventory B) land and building

C) brand name D) tools and equipment

22) How are the critical assumptions of the resource-based model of a firm fundamentally different from the way in which a firm is viewed in the perfectly competitive industry structure?

A) In the resource-based model, resources are freely available and mobile, whereas in the perfectly competitive industry structure, resources are highly immobile.

B) In perfect competition, all firms have access to the same capabilities, whereas in the resource-based model, resource differences exist between firms in the same industry.

C) In the resource-based model, only physical assets of a firm are considered as resources, whereas in perfect competition, a firm's capabilities and competencies are also considered as resources.

D) In perfect competition, it is extremely difficult to replicate the resource bundles of a firm, whereas in the resource-based model, it is extremely easy to imitate them.

23) Otion Inc. is a relatively new firm in the consumer electronics industry. The company's primary objective is to become the market leader in less than 5 years, for which it has to gain and sustain a competitive advantage. In the context of the VRIO framework, which of the following resources should Otion Inc. primarily focus on to achieve its objective?

A) quality standards, which are common and mandatory throughout the industry

B) component parts that are sourced from competitors' suppliers

C) inexpensive unskilled labor that is easily accessible by all companies

D) production systems that reduce costs by 30 percent below the current industry standards

24) VRD Systems Inc. took many decades to build its core competencies, and these competencies were based primarily on the decisions made by the company's top management in the past. This process is called

A) causal dependence. B) path dependence.

C) path immobility. D) dependence complexity.

25) According to the VRIO framework, a firm can gain a competitive advantage if it has resources that are ________ and captured by an organized firm.

A) varied, rare, costly to imitate B) valuable, refined, costly to introduce

C) varied, refined, costly to introduce D) valuable, rare, costly to imitate

26) A ________ primarily details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market.

A) code of ethics B) functional-level strategy

C) mission statement D) business-level strategy

27) Bargain Styles Inc. is an apparel company that caters to the highly price-conscious customers. Through its simple apparel designs, acceptable quality levels, and minimal customer service, the company has been able to sell its merchandise at the lowest prices in the industry. Which of the following generic business strategies is Bargain Styles applying?

A) niche marketing B) cost-leadership

C) differentiation D) product diversification

28) Organic Eats is a restaurant that caters to the needs of a small percentage of highly health-conscious consumers. It has an all-organic, vegan menu. Since there are very few restaurants that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Organic Eats is following a

A) product diversification strategy. B) liquidation strategy.

C) focused differentiation strategy. D) mass market strategy.

29) How did Marriott use economies of scope to achieve greater economic value than its competitors

A) Marriott lowered its cost structure by sharing its production assets over a several types of hotels, which increased its menu and thus its differentiated appeal.

B) Marriott increases in cost per hotel unit as number of customers increases.

C) Marriott lowered its cost structure by focusing its production assets on one type of hotel, which increased its menu and thus its differentiated appeal.

D) Marriott decreases in cost per hotel unit as number of customers increases.

30) How was Netflix able to outperform both Hulu and Amazon?

A) by expanding from content streaming to theatrical releases and cable content

B) by focusing its resources on producing high-quality content for content streaming

C) by focusing its resources on buying classic blockbusters movies

D) by expanding its content streaming to include foreign markets

31) Which of the following statements is not true about innovation?

A) Process innovations are made possible through advances such as the Internet.

B) Innovation as a competitive weapon can simultaneously create and destroy value.

C) Innovation has to be high-tech in order to be a potent competitive weapon.

D) Successful innovation allows a firm to extract temporary monopoly profits.

32) Digital photography replacing film photography would be an example of a

A) regressive innovation. B) architectural innovation.

C) radical innovation. D) disruptive innovation.

33) First movers often have several competitive benefits including

A) experience effects. B) incremental effects.

C) network effects. D) shakeout effects.

34) ________ 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.

A) Corporate acquisitions B) Strategic alliances

C) Embargos D) Cartel agreements

35) A strategy of ________ will be most beneficial for a firm to enhance its overall corporate performance.

A) unrelated level of diversification

B) related-linked diversification

C) single-business level of diversification

D) dominant-business level of diversification

36) The success of the Pixar-Disney strategic alliance demonstrated that

A) it was easier for the alliance partners to reduce the value gap created.

B) the two entities' complementary assets matched.

C) Disney was in desperate need of Pixar's graphic display systems.

D) the companies were effectively managing an unrelated diversification strategy.

37) It is necessary for government authorities such as the Federal Trade Commission (FTC) and/or the European Commission to approve any large horizontal integration activity because

A) the surviving firms will need to be protected against the increasing bargaining power of the suppliers.

B) the surviving firms will need protection against the relaxed entry barriers.

C) the horizontal integration activity has the potential to reduce competitive intensity in an industry.

D) the horizontal integration activity changes the industry structure from oligopolistic to monopolistically competitive.

38) When North Autos Inc. wanted to sell its cars in the country of Balvia, it lacked access to distribution channels and marketing expertise in the country. Thus, North Autos had to enter into a strategic alliance with a local automobile company to get access to the foreign partner's well-established distribution channels. Which of the following reasons for entering into a strategic alliance is best illustrated in this scenario

A) accessing critical complementary assets

B) reducing differentiation of product and service offerings

C) increasing competitive intensity

D) procuring additional capital investments

39) Supply, distribution, and licensing contractual agreements between firms, which result in vertical strategic alliances, are all examples of

A) cartel arrangements. B) equity alliances.

C) non-equity alliances. D) joint ventures.

40) How has the administrative and political distance between Canada, Mexico, and the United States been reduced?

A) by reducing their linguistic differences

B) by establishing the North American Free Trade Agreement (NAFTA)

C) by adopting similar national cultures

D) by lowering the disparities between their per capita incomes

41) Octa Autos Inc. wants to globally expand its market. It intends to ensure that its mode of foreign entry allows it to have strong control over its operations and protect its intellectual property, though it may mean investing a significant amount of capital and other resources. In this scenario, which of the following foreign entry modes would best suit Octa Autos Inc.?

A) acquisition B) licensing

C) franchise agreement D) exporting

42) Wave Motors Inc., a Kempa-based automobile company, has entered into a partnership with Sphere Autos Inc., headquartered in United Cadvia. The parent companies, together, have established a stand-alone firm called Genuine Autos Inc. This arrangement best exemplifies

A) partnership. B) proprietorship.

C) non-equity alliance. D) joint venture.

43) A mortgage-loan officer persuades unsuspecting consumers to sign up for exotic mortgages, such as "option ARMs." These mortgages offer borrowers the choice to pay less than the required interest, which is then added to the principal while the interest rate can adjust upward. Because of this setup, many borrowers are unable to repay the mortgage once the interest rates go up. Which of the following phrases best describes this scenario

A) legal and ethical B) neither legal nor ethical

C) ethical but not legal D) legal but not ethical

44) Janis is the CEO of a firm. She has an opportunity to increase the competitive advantage of her company but is not sure if accepting the opportunity is ethical. Which of the following questions would help her decide if accepting the opportunity is ethical?

A) How much profit would be made if she decided to accept the opportunity?

B) What are the chances that her decision to accept the opportunity will be made public?

C) How would the media report her decision to accept the opportunity if it were to become public?

D) How long lasting would the competitive advantage be if she decided to accept the opportunity?

45) Australia would be a very conducive place to build another Disneyland partially because it has year round good weather and the population speaks English.

46) The utilitarian ethical approach might argue that Google should go and stay in China even with the required censorship, as it provides a high quality source of information for a very large number of people.

47) WalMart initially entered China as a direct foreign investment.

48) Disney showed its cultural sensitivity by allowing wine to be served at Euro-Disney when it first opened.

49) WalMart’s competitor, Carrefour, learned a great deal about China by entering the Taiwan market in 1989, when there were severe limitations on foreign retailers operating in China.

50) can be easily integrated into the existing business model of a Chinese SME at a fraction of the cost of developing an online presence in-house.

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