Archive for June 2020

The German multimedia conglomerate Bertelsmann operates in more than 60 countries throughout the world and owns many regional leaders in their specific product categories, including Random House Publishing in the United States. Bertelsmann operates its more than 500 regional media divisions as more or less autonomous profit-and-loss centers. but attempts to share best practices across units; global learning and human resource strategies for executives are coordinated at the network level. Bertelsmann is an example of following a(n)

The German multimedia conglomerate Bertelsmann operates in more than 60 countries throughout the world and owns many regional leaders in their specific product categories, including Random House Publishing in the United States. Bertelsmann operates its more than 500 regional media divisions as more or less autonomous profit-and-loss centers. but attempts to share best practices across units; global learning and human resource strategies for executives are coordinated at the network level. Bertelsmann is an example of following a(n)



A. multidomestic strategy.


B. international strategy.


C. global-standardization strategy.


D. transnational strategy.


Answer: transnational strategy

Which of the following is a primary reason why firms pursue a global strategy?

Which of the following is a primary reason why firms pursue a global strategy?



A. to improve their reputation


B. to enhance their competitive advantage


C. to expand their research capabilities


D. to gain more political influence


Answer: to enhance their competitive advantage

Which of the following globalization strategies requires managers working in multinational enterprises (MNEs) to remember to think globally, but act locally?

Which of the following globalization strategies requires managers working in multinational enterprises (MNEs) to remember to think globally, but act locally?



A. international strategy


B. global-standardization strategy


C. transnational strategy


D. focused-differentiation strategy


Answer: transnational strategy

Which of the following products are generally manufactured by multinational enterprises (MNEs) pursuing a global-standardization strategy?

Which of the following products are generally manufactured by multinational enterprises (MNEs) pursuing a global-standardization strategy?



A. products with a high value-to-weight ratios like luxury goods


B. commodity products like computer hardware


C. consumer products related to national and/or religious identity like food


D. products that carry country-specific quality associations like wine


Answer: commodity products like computer hardware

Fragra Inc., a company that manufactures and sells premium perfumes, is pursuing an international strategy. SaveMart Inc., a supermarket chain, follows a multidomestic strategy. Which of the following statements is most likely true of this scenario?

Fragra Inc., a company that manufactures and sells premium perfumes, is pursuing an international strategy. SaveMart Inc., a supermarket chain, follows a multidomestic strategy. Which of the following statements is most likely true of this scenario?



A. Fragra Inc. will sell the same products and services in both domestic and foreign markets, whereas SaveMarket Inc. will customize its product offerings to suit local requirements.


B. Fragra Inc. will pursue a differentiation strategy at the business level, whereas SaveMarket Inc. will pursue a cost-leadership strategy at the business level.


C. Fragra Inc. will be better protected from exchange rate fluctuations when compared to SaveMarket Inc.


D. Fragra Inc. will not be able to leverage its home-based core competencies in foreign markets as much as SaveMarket Inc.


Answer: Fragra Inc. will sell the same products and services in both domestic and foreign markets, whereas SaveMarket Inc. will customize its product offerings to suit local requirements.

Multinational enterprises (MNEs) like Harley-Davidson, Rolex, and Starbucks are said to be following an international strategy because

Multinational enterprises (MNEs) like Harley-Davidson, Rolex, and Starbucks are said to be following an international strategy because



A. they pursue a cost-leadership strategy in their respective industries.


B. they are highly responsive to the local needs and preferences of customers in the host countries.


C. they offer the same products or services in all their stores throughout the world.


D. they attempt to combine benefits of localization and standardization strategies simultaneously.


Answer: they offer the same products or services in all their stores throughout the world

Lucar Steels Inc. has decided to enter into a foreign market by setting up its own production facilities and distribution channels from scratch. This will allow it to have strong control over all of its business activities. What is the foreign entry mode most likely opted by Lucar Steels Inc.?

Lucar Steels Inc. has decided to enter into a foreign market by setting up its own production facilities and distribution channels from scratch. This will allow it to have strong control over all of its business activities. What is the foreign entry mode most likely opted by Lucar Steels Inc.?



A. greenfield operation


B. export


C. joint venture


D. acquisition


Answer: greenfield operation

Emirates, Etihad Airlines, and Qatar Airways are a threat to U.S. legacy carriers because they offer

Emirates, Etihad Airlines, and Qatar Airways are a threat to U.S. legacy carriers because they offer



A. higher quality for lower costs for international routes.


B. higher quality for similar costs for U.S domestic routes.


C. similar quality for lower costs for international routes.


D. similar quality for lower costs for U.S domestic routes.


Answer: higher quality for lower costs for international routes

As a result of globalization, the

As a result of globalization, the



A. economies around the world are becoming more independent.


B. cultural distance between countries is increasing.


C. cost of doing business around the world is increasing.


D. world's market economies are becoming more integrated.


Answer: world's market economies are becoming more integrated

Why did incumbent pharmaceutical firms enter into hundreds of strategic alliances with biotech start-ups?

Why did incumbent pharmaceutical firms enter into hundreds of strategic alliances with biotech start-ups?



A. to pursue an unrelated-options perspective without disrupting existing market economics


B. to make small-scale investments in ventures poised to disrupt existing market economics


C. to invest their excess cash flow in the superior technology of the biotech start-ups


D. to share their continuously updated research technology with the biotech start-ups


Answer: to make small-scale investments in ventures poised to disrupt existing market economics

The success of the Pixar-Disney strategic alliance demonstrated that

The success of the Pixar-Disney strategic alliance demonstrated that



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


B. the two entities' complementary assets matched.


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


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


Answer: the two entities' complementary assets matched

Which of the following statements is true of internal transaction costs?

Which of the following statements is true of internal transaction costs?



A. Internal transaction costs arise when companies transact in the open market.


B. When the internal costs involved in pursuing an activity in-house are more than the costs of transacting, then the concerned firm should vertically integrate.


C. Internal transaction costs tend to increase with organizational size and complexity.


D. It is beneficial to "buy" goods or services rather than "make" when internal transaction costs are low.


Answer: Internal transaction costs tend to increase with organizational size and complexity.

Dollar Shave Club is an e-commerce start-up that delivers razors by mail. By doing this, Dollar Shave Club is using a(n) _____ to disrupt an existing market.

Dollar Shave Club is an e-commerce start-up that delivers razors by mail. By doing this, Dollar Shave Club is using a(n) _____ to disrupt an existing market.



A. innovation ecosystem


B. architectural innovation


C. business model innovation


D. incremental innovation


Answer: business model innovation

Georgia Ray is the founder of the departmental stores chain, Ether Inc. She ensures that the products in her stores are ethically and responsibly sourced. Most products are therefore 100 percent organic and manufactured from recycled material. Also, her company purchases handicrafts from nonprofit organizations supporting the aged. Georgia's belief is that her company should be able to support the community at large. Which of the following terms best describes Georgia Ray?

Georgia Ray is the founder of the departmental stores chain, Ether Inc. She ensures that the products in her stores are ethically and responsibly sourced. Most products are therefore 100 percent organic and manufactured from recycled material. Also, her company purchases handicrafts from nonprofit organizations supporting the aged. Georgia's belief is that her company should be able to support the community at large. Which of the following terms best describes Georgia Ray?



A. headhunter


B. category captain


C. social entrepreneur


D. trade creditor


Answer: social entrepreneur

Susan is a strategist for the firm, DigiVision Inc., which produces high-quality HD movie cameras. This company needs a specific material for a new camera they are developing, which is manufactured in large quantities by a competitor called Tech Resources Inc. However, this material is difficult to trade for. Because of this, which of the following is most likely the best strategy for Susan to suggest?

Susan is a strategist for the firm, DigiVision Inc., which produces high-quality HD movie cameras. This company needs a specific material for a new camera they are developing, which is manufactured in large quantities by a competitor called Tech Resources Inc. However, this material is difficult to trade for. Because of this, which of the following is most likely the best strategy for Susan to suggest?



A. DigiVision should acquire Tech Resources.


B. DigiVision should form a short-term agreement with Tech Resources.


C. DigiVision should form a long-term agreement with Tech Resources.


D. DigiVision should enter into co-opetition with Tech Resources.


Answer: DigiVision should acquire Tech Resources.

Which of the following is an example of explicit knowledge?

Which of the following is an example of explicit knowledge?



A. knowing how to create surveys


B. a research skill


C. knowing how to assemble semiconductors


D. a research summary


Answer: a research summary

A consumer electronics company is in the process of evaluating whether it should pursue an internal development strategy or an external growth strategy. To make this decision, the management needs to assess whether the company's internal resources are superior to those of competitors in the targeted area. Which of the following strategic management models would be most useful in this assessment?

A consumer electronics company is in the process of evaluating whether it should pursue an internal development strategy or an external growth strategy. To make this decision, the management needs to assess whether the company's internal resources are superior to those of competitors in the targeted area. Which of the following strategic management models would be most useful in this assessment?



A. the core competence matrix


B. the Boston Consulting Group (BCG) matrix


C. the transaction-cost economics model


D. the VRIO framework


Answer: the Boston Consulting Group (BCG) matrix

Partner compatibility and partner commitment are necessary conditions for successful alliance formation. Partner compatibility captures

Partner compatibility and partner commitment are necessary conditions for successful alliance formation. Partner compatibility captures



A. aspects of cultural fit between different firms in an alliance.


B. features of the financial health of the different alliance partners.


C. the readiness to accept short-term sacrifices to ensure long-term awards.


D. the willingness to make available necessary resources.


Answer: aspects of cultural fit between different firms in an alliance.

A(n) _____ occurs when firms enter into a partnership based on contractual agreements, which results in vertical strategic alliances that connect different parts of the industry value chain.

A(n) _____ occurs when firms enter into a partnership based on contractual agreements, which results in vertical strategic alliances that connect different parts of the industry value chain.



A. equity alliance


B. joint venture


C. non-equity alliance


D. greenfield venture


Answer: non-equity alliance

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?

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. increasing competitive intensity


B. accessing critical complementary assets


C. procuring additional capital investments


D. reducing differentiation of product and service offerings


Answer: accessing critical complementary assets

Which of the following is not a reason why firms enter alliances?

Which of the following is not a reason why firms enter alliances?



A. to replace competitive advantage with competitive parity


B. to strengthen competitive position


C. to enter new markets, either in terms of geography or products and services


D. to learn new capabilities


Answer: to replace competitive advantage with competitive parity

The _____ is a strategic management framework that proposes that critical resources and capabilities frequently are embedded in strategic alliances that span firm boundaries.

The _____ is a strategic management framework that proposes that critical resources and capabilities frequently are embedded in strategic alliances that span firm boundaries.



A. real-options perspective


B. stakeholder strategy


C. relational view of competitive advantage


D. non-differentiation strategy


Answer: relational view of competitive advantage

A consumer electronics company is in the process of evaluating whether it should pursue an internal development strategy or an external growth strategy. To make this decision, the management needs to assess whether the company's internal resources are superior to those of competitors in the targeted area. Which of the following strategic management models would be most useful in this assessment?

A consumer electronics company is in the process of evaluating whether it should pursue an internal development strategy or an external growth strategy. To make this decision, the management needs to assess whether the company's internal resources are superior to those of competitors in the targeted area. Which of the following strategic management models would be most useful in this assessment?



A. the core competence matrix


B. the Boston Consulting Group (BCG) matrix


C. the transaction-cost economics model


D. the VRIO framework


Answer: the VRIO framework

Comfort Shoes Inc. and InStep Shoes Inc., two competing shoe brands, entered into a strategic alliance to study and acquire each other competencies. Comfort Shoes entered the strategic alliance to acquire the production system pioneered by InStep Shoes. Similarly, InStep Shoes agreed to the strategic alliance to study the designing process of Comfort Shoes. However, Comfort Shoes was more successful and faster than InStep Shoes in accomplishing its alliance goal. What does this scenario best illustrate?

Comfort Shoes Inc. and InStep Shoes Inc., two competing shoe brands, entered into a strategic alliance to study and acquire each other competencies. Comfort Shoes entered the strategic alliance to acquire the production system pioneered by InStep Shoes. Similarly, InStep Shoes agreed to the strategic alliance to study the designing process of Comfort Shoes. However, Comfort Shoes was more successful and faster than InStep Shoes in accomplishing its alliance goal. What does this scenario best illustrate?


A. network effects
B. economies of scope
C. learning races
D. time compression diseconomies


Answer: learning races

Vibgyor Inc., a manufacturer of smartphones, has entered into a 15-year partnership with a software company to develop sophisticated operating systems and innovative mobile applications for its cell phones. This would mean that both the companies will have to mutually share their resources, knowledge, and capabilities to develop a superior product. What is the relationship between Vibgyor and the software company best referred to as in this scenario?

Vibgyor Inc., a manufacturer of smartphones, has entered into a 15-year partnership with a software company to develop sophisticated operating systems and innovative mobile applications for its cell phones. This would mean that both the companies will have to mutually share their resources, knowledge, and capabilities to develop a superior product. What is the relationship between Vibgyor and the software company best referred to as in this scenario?


A. an acquisition
B. a strategic alliance
C. a leveraged buyout
D. a proprietorship


Answer: a strategic alliance

Neon Electronics Inc. sourced touch screens required for its tablet computers, cell phones, and televisions from a manufacturer in China. But the demand for such components was high globally, and the supplier could not meet the quality standards of Neon Electronics. Thus, Neon Electronics decided to set up its own unit to develop and manufacture the required touch screens. What does this scenario best illustrate?

Neon Electronics Inc. sourced touch screens required for its tablet computers, cell phones, and televisions from a manufacturer in China. But the demand for such components was high globally, and the supplier could not meet the quality standards of Neon Electronics. Thus, Neon Electronics decided to set up its own unit to develop and manufacture the required touch screens. What does this scenario best illustrate?


A. crowdsourcing
B. new product development
C. backward vertical integration
D. conglomerate diversification


Answer: backward vertical integration

Which of the following firms is least integrated?

Which of the following firms is least integrated?


A. a firm that enters a joint venture with another company to develop a new technology
B. a firm that owns production subsidiaries across the globe
C. a firm that makes equity investments in its supplier's company
D. a firm that buys all the required raw materials from multiple external vendors


Answer: a firm that buys all the required raw materials from multiple external vendors

Managers in a firm hired to improve the firm's profitability and ultimately the shareholders' value will add to the overall costs if they pursue their own self-interests. What does this best illustrate?

Managers in a firm hired to improve the firm's profitability and ultimately the shareholders' value will add to the overall costs if they pursue their own self-interests. What does this best illustrate?


A. diseconomies of scale
B. principal-agent problem
C. experience-curve effects
D. information asymmetries


Answer: principal-agent problem

Which of the following is a competitive benefit experienced by the first mover firm in an industry?

Which of the following is a competitive benefit experienced by the first mover firm in an industry?


A. The first mover will be able to achieve a less steep learning curve.
B. The first mover will be able to reduce the switching costs.
C. The first mover will not have to patent its products or technology.
D. The first mover will be able to reduce costs through economies of scale.


Answer: The first mover will be able to reduce costs through economies of scale.

The typical four-step innovation process begins with

The typical four-step innovation process begins with



A. the modification and recombination of an existing product or process.
B. the presentation of an idea as findings derived from basic research.
C. the commercialization of an invention by entrepreneurs.
D. a competitor's attempt to imitate an innovation.


Answer: the presentation of an idea as findings derived from basic research.

Luxura Inc. is a large cosmetics company that made an initial small investment in a start-up company, GreenDream, that was developing an organic face lotion. This gave Luxura controlling interests in the start-up company. However, GreenDream soon began to have financial difficulties because of principal-agent problems. As a result, Luxura did not invest in the next stage of development and pulled out of the company. This approach to strategic alliance is referred to as a

Luxura Inc. is a large cosmetics company that made an initial small investment in a start-up company, GreenDream, that was developing an organic face lotion. This gave Luxura controlling interests in the start-up company. However, GreenDream soon began to have financial difficulties because of principal-agent problems. As a result, Luxura did not invest in the next stage of development and pulled out of the company. This approach to strategic alliance is referred to as a


A. break-even analysis.
B. partial joint venture.
C. credible commitment.
D. real-options perspective.


Answer: real-options perspective

Which quadrant in the core competence-market matrix is the hardest to pursue?

Which quadrant in the core competence-market matrix is the hardest to pursue?




A. building new core competencies to protect and extend current market position
B. building new core competencies to create and compete in markets of the future
C. leveraging core competencies to improve current market position
D. redeploying and recombining core competencies to compete in markets of the future


Answer: building new core competencies to create and compete in markets of the future

BestDrive Inc. is a large automobile company. The company's petrol cars strategic business unit (SBU) has been recognized as a cash cow, and its hybrid electric cars SBU has been categorized under stars. Which of the following can be inferred from this scenario?

BestDrive Inc. is a large automobile company. The company's petrol cars strategic business unit (SBU) has been recognized as a cash cow, and its hybrid electric cars SBU has been categorized under stars. Which of the following can be inferred from this scenario?


A. The petrol cars SBU operates in a low-growth market, whereas the hybrid electric cars SBU operates in a high-growth market.
B. The petrol cars SBU will have a relatively low market share in its industry, whereas the hybrid electric cars SBU will have the least market share in its industry.
C. The strategic recommendation for the hybrid electric cars SBU will be to harvest it, whereas for the petrol cars SBU, the company should just maintain it.
D. The petrol cars SBU is more important than the hybrid electric cars SBU in terms of future growth for the company.


Answer: The petrol cars SBU operates in a low-growth market, whereas the hybrid electric cars SBU operates in a high-growth market.

Which of the following lists the stages of the industry life cycle in the correct order?

Which of the following lists the stages of the industry life cycle in the correct order?


A. introduction, growth, shakeout, maturity, and decline
B. introduction, shakeout, growth, maturity, and decline
C. introduction, growth, maturity, shakeout, and decline
D. introduction, shakeout, maturity, growth, and decline


Answer: introduction, growth, shakeout, maturity, and decline

The increasing availability of external options to commercialize ideas that were previously shelved is one of the factors that led to the shift from the

The increasing availability of external options to commercialize ideas that were previously shelved is one of the factors that led to the shift from the


A. maturity stage to the shakeout stage.
B. shakeout stage to the maturity stage.
C. open innovation to closed innovation.
D. closed innovation to open innovation.


Answer: closed innovation to open innovation.

Which of the following statements is not true about innovation?

Which of the following statements is not true about innovation?


A. Innovation as a competitive weapon can simultaneously create and destroy value.
B. Successful innovation allows a firm to extract temporary monopoly profits.
C. Innovation has to be high-tech in order to be a potent competitive weapon.
D. Process innovations are made possible through advances such as the Internet.


Answer: Innovation has to be high-tech in order to be a potent competitive weapon.

As a research scholar, Ricardo had built a helicam as part of his project. The helicam could capture aerial images. Realizing the potential use of this product in movie production and military and rescue operations, he started a new venture where he could customize these helicams to fit the specific needs of the buyers and sell them. Ricardo can be best described as a(n)

As a research scholar, Ricardo had built a helicam as part of his project. The helicam could capture aerial images. Realizing the potential use of this product in movie production and military and rescue operations, he started a new venture where he could customize these helicams to fit the specific needs of the buyers and sell them. Ricardo can be best described as a(n)


A. entrepreneur.
B. category captain.
C. franchisor.
D. early adopter.


Answer: entrepreneur

The managers at Movo Automobile Inc. want to diversify their business by acquiring a consumer electronics company. This acquisition would mean increased job security, higher compensation, and greater decision-making authority for the managers. The managers correlate this acquisition to greater power for them rather than to the appreciation in shareholder value. In this scenario, this acquisition by Movo Automobile is most likely a result of

The managers at Movo Automobile Inc. want to diversify their business by acquiring a consumer electronics company. This acquisition would mean increased job security, higher compensation, and greater decision-making authority for the managers. The managers correlate this acquisition to greater power for them rather than to the appreciation in shareholder value. In this scenario, this acquisition by Movo Automobile is most likely a result of



A. time compression diseconomies.


B. experience-curve effects.


C. principal-agent problems.


D. resource ambiguity.


Answer: principal-agent problems

Which of the following scenarios best illustrates horizontal integration?

Which of the following scenarios best illustrates horizontal integration?



A. Regal Autos Inc. enters into a licensing contract with a distributor in a new international market.


B. Regal Autos Inc. acquires a component parts manufacturer who previously supplied to Regal Autos' competitor.


C. Regal Autos Inc. sets up its own distribution channel and retail stores.


D. Regal Autos Inc. joins with Marcus Motors Inc., one of its direct competitors.


Answer: Regal Autos Inc. joins with Marcus Motors Inc., one of its direct competitors.

The Mansion Hotel Group purchased Red Brick Hotels for an estimated value of $120 billion. All the hotels previously owned by Red Brick Hotels are now managed by the Mansion Hotel Group and are known as Mansion hotels. What does this scenario best illustrate?

The Mansion Hotel Group purchased Red Brick Hotels for an estimated value of $120 billion. All the hotels previously owned by Red Brick Hotels are now managed by the Mansion Hotel Group and are known as Mansion hotels. What does this scenario best illustrate?



A. a merger


B. a joint venture


C. an acquisition


D. an equity alliance


Answer: an acquisition

BestDrive Inc. is a large automobile company. The company's petrol cars strategic business unit (SBU) has been recognized as a cash cow, and its hybrid electric cars SBU has been categorized under stars. Which of the following can be inferred from this scenario?

BestDrive Inc. is a large automobile company. The company's petrol cars strategic business unit (SBU) has been recognized as a cash cow, and its hybrid electric cars SBU has been categorized under stars. Which of the following can be inferred from this scenario?



A. The petrol cars SBU operates in a low-growth market, whereas the hybrid electric cars SBU operates in a high-growth market.


B. The petrol cars SBU will have a relatively low market share in its industry, whereas the hybrid electric cars SBU will have the least market share in its industry.


C. The strategic recommendation for the hybrid electric cars SBU will be to harvest it, whereas for the petrol cars SBU, the company should just maintain it.


D. The petrol cars SBU is more important than the hybrid electric cars SBU in terms of future growth for the company.


Answer: The petrol cars SBU operates in a low-growth market, whereas the hybrid electric cars SBU operates in a high-growth market.

Diversification premium is a situation in which

Diversification premium is a situation in which



A. customers have to pay premium prices on products manufactured by firms pursuing unrelated diversification due to the lack of economies of scope.


B. the overall value creation of highly diversified firms is more than the sum of the value created by individual business units.


C. the stock price of related-diversification firms is valued at greater than the sum of their individual business units.


D. shareholders are benefitted from the market capitalization of a highly diversified firm because of its economies of scale.


Answer: the stock price of related-diversification firms is valued at greater than the sum of their individual business units.

Today, many companies use PeopleSoft and EDS to avoid maintaining a human resource management system. By doing this, these firms are

Today, many companies use PeopleSoft and EDS to avoid maintaining a human resource management system. By doing this, these firms are



A. engaging in strategic outsourcing.


B. increasing their level of vertical integration.


C. offshoring their core activities.


D. engaging in unrelated diversification.


Answer: offshoring their core activities.

A primary advantage of organizing economic activity within firms is the

A primary advantage of organizing economic activity within firms is the



A. ability to coordinate highly complex tasks to allow for specialized division of labor.


B. low administrative costs because of reduced bureaucracy.


C. eradication of the principal-agent problem.


D. high-powered incentive to work as salaried employees for an existing firm.


Answer: ability to coordinate highly complex tasks to allow for specialized division of labor.

Amazon.com has decided to enter the college bookstore market. The goal of "Amazon Campus" is to offer co-branded university-specific web sites that offer textbooks and paraphernalia, such as logo sweaters and baseball hats. This development shows Amazon's relentless pursuit of

Amazon.com has decided to enter the college bookstore market. The goal of "Amazon Campus" is to offer co-branded university-specific web sites that offer textbooks and paraphernalia, such as logo sweaters and baseball hats. This development shows Amazon's relentless pursuit of



A. geographic diversification.


B. product diversification.


C. vertical integration.


D. horizontal integration.


Answer: product diversification

SyncTouch Inc. is a manufacturer of cell phones. It has released an improvised version of its smartphone in markets in which the company already operates. Which of the following types of innovations does this scenario best illustrate?

SyncTouch Inc. is a manufacturer of cell phones. It has released an improvised version of its smartphone in markets in which the company already operates. Which of the following types of innovations does this scenario best illustrate?



A. radical innovation


B. incremental innovation


C. architectural innovation


D. disruptive innovation


Answer: incremental innovation

Although TechnoWare Electronics Inc. still sells its VCR players, a product in its decline stage, the investments made by the company on improving or marketing the product are very low. The company has allocated the least amount of human and financial capital to this department. Which of the following strategies has TechnoWare Electronics adopted in this scenario?

Although TechnoWare Electronics Inc. still sells its VCR players, a product in its decline stage, the investments made by the company on improving or marketing the product are very low. The company has allocated the least amount of human and financial capital to this department. Which of the following strategies has TechnoWare Electronics adopted in this scenario?



A. harvest strategy


B. maintain strategy


C. consolidation strategy


D. differentiation strategy


Answer: harvest strategy

A few efficient and strong firms in the laptop industry have remained and emerged successful from the shakeout stage. Which of the following stages of the industry life cycle will they move to next?

A few efficient and strong firms in the laptop industry have remained and emerged successful from the shakeout stage. Which of the following stages of the industry life cycle will they move to next?



A. growth stage


B. introduction stage


C. maturity stage


D. decline stage


Answer: maturity stage

Which of the following best illustrates a process innovation as opposed to product innovation?

Which of the following best illustrates a process innovation as opposed to product innovation?



A. a consumer electronics company developing a new generation of tablet computers


B. an automobile company using computer-aided design in its production


C. a consumer electronics company launching 3-D televisions


D. an automobile company commercializing electric cars


Answer: an automobile company using computer-aided design in its production

NextDoor is an instant messaging application for smartphones. New smartphone users find it easier to connect with friends and relatives through this mobile app when compared to other similar instant messaging applications. Hence, it has the largest user base in the industry. Thus, NextDoor app's value has increased primarily due to its

NextDoor is an instant messaging application for smartphones. New smartphone users find it easier to connect with friends and relatives through this mobile app when compared to other similar instant messaging applications. Hence, it has the largest user base in the industry. Thus, NextDoor app's value has increased primarily due to its



A. learning curve effects.


B. economies of scale.


C. economies of scope.


D. network effects.


Answer: network effects

After Jeff Bezos read about how the Internet was growing by 2,000 percent a month, he set out to use the Internet as a new distribution channel and founded Amazon, which is now the world's largest online retailer. This is clearly an example of a(n)

After Jeff Bezos read about how the Internet was growing by 2,000 percent a month, he set out to use the Internet as a new distribution channel and founded Amazon, which is now the world's largest online retailer. This is clearly an example of a(n)



A. firm that uses closed innovation.


B. entrepreneur who commercialized invention into an innovation.


C. business that entered the industry during its maturity stage.


D. exception to the long tail business model.


Answer: entrepreneur who commercialized invention into an innovation

As the inventor of hypertension medication, OneSure Pharmaceuticals (OSP) Inc. was able to reap the benefits of economies of scale due to a large consumer demand for the drug. Even when competitors later developed similar drugs after the expiry of OSP's patents, regular users did not want to switch because they were concerned about possible side effects. Which of the following benefits does this scenario best illustrate?

As the inventor of hypertension medication, OneSure Pharmaceuticals (OSP) Inc. was able to reap the benefits of economies of scale due to a large consumer demand for the drug. Even when competitors later developed similar drugs after the expiry of OSP's patents, regular users did not want to switch because they were concerned about possible side effects. Which of the following benefits does this scenario best illustrate?



A. first-mover advantages


B. social benefits


C. network externalities


D. fringe benefits


Answer: first-mover advantages

An intrapreneur is described as a person who

An intrapreneur is described as a person who



A. restricts changes within an organization.


B. innovates within existing companies.


C. introduces new products or services by starting his or her own ventures.


D. invests funds in the ideas of another person in the same organization.


Answer: innovates within existing companies

A _____ is best described as a form of intellectual property that gives the inventor exclusive rights to benefit from commercializing a technology for a specified time period in exchange for public disclosure of the underlying idea.

A _____ is best described as a form of intellectual property that gives the inventor exclusive rights to benefit from commercializing a technology for a specified time period in exchange for public disclosure of the underlying idea.



A. patent


B. promissory note


C. franchise


D. royalty


Answer: patent

To initiate a strategic move that allows a firm to open up new and uncontested market space through value innovation, managers must address four key questions when formulating a blue ocean business strategy. These questions focus on

To initiate a strategic move that allows a firm to open up new and uncontested market space through value innovation, managers must address four key questions when formulating a blue ocean business strategy. These questions focus on



A. increasing cost and maintaining perceived customer benefits.


B. lowering cost and maintaining perceived customer benefits.


C. lowering cost and increasing perceived customer benefits.


D. increasing cost and increasing perceived customer benefits.


Answer: lowering cost and increasing perceived customer benefits.

How does availability of complements act as a value driver?

How does availability of complements act as a value driver?



A. Complements add value to a product by offering an inferior substitute to it.


B. Complements add value to a product by competing with it.


C. Complements add value to a product when they imitate it.


D. Complements add value to a product when they are consumed in tandem with it.


Answer: complements add value to a product when they are consumed in tandem with it

Which of the following statements accurately brings out the difference between economies of scale and economies of scope?

Which of the following statements accurately brings out the difference between economies of scale and economies of scope?



A. Economies of scale refer to the decreases in per-unit cost with decreases in output, whereas economies of scope refer to the increases in per-unit cost with increases in output.


B. Economies of scale result in decreasing returns to scale, and economies of scope result in constant returns to scale.


C. Economies of scope are the savings that come from producing two or more outputs from the same resources, whereas economies of scale are decreases in per-unit cost with increases in output.


D. Economies of scope are realized when a firm operates at the minimum efficient scale, whereas economies of scale are realized when the firm operates beyond the minimum efficient scale.


Answer: Economies of scope are the savings that come from producing two or more outputs from the same resources, whereas economies of scale are decreases in per-unit cost with increases in output.

In the multiplex industry, Vibrant Movies Inc. is an upscale multiplex that focuses on superior customer experience. The firm charges premium prices for its movie tickets and services. Global Cine Inc., in contrast, charges the lowest price in the industry with its no-frills approach. In between these two segments is True Movies Inc., which offers a customer experience comparable to that of Vibrant Movies at a price almost as low as that of Global Cine. What strategy is True Movies pursuing in this scenario?

In the multiplex industry, Vibrant Movies Inc. is an upscale multiplex that focuses on superior customer experience. The firm charges premium prices for its movie tickets and services. Global Cine Inc., in contrast, charges the lowest price in the industry with its no-frills approach. In between these two segments is True Movies Inc., which offers a customer experience comparable to that of Vibrant Movies at a price almost as low as that of Global Cine. What strategy is True Movies pursuing in this scenario?



A. liquidation strategy


B. product diversification strategy


C. market penetration strategy


D. blue ocean strategy


Answer: blue ocean strategy

Allure is a cosmetic brand that pursues a cost-leader strategy. Which of the following statements is true of the cosmetic brand?

Allure is a cosmetic brand that pursues a cost-leader strategy. Which of the following statements is true of the cosmetic brand?



A. It appeals to the price-conscious buyers.


B. Its primary value driver is product uniqueness.


C. It charges a premium price for its products.


D. It directly competes against luxury cosmetic brands that charge premium prices.


Answer: it appeals to the price-conscious buyers

At a certain output level, the per-unit cost incurred by a firm to manufacture a product was $60. Once the cumulative output doubled, the cost per unit reduced to $54. All other factors remaining constant, the firm has been able to achieve a(n)

At a certain output level, the per-unit cost incurred by a firm to manufacture a product was $60. Once the cumulative output doubled, the cost per unit reduced to $54. All other factors remaining constant, the firm has been able to achieve a(n)



A. 80 percent learning curve.


B. 90 percent learning curve.


C. 60 percent learning curve.


D. 54 percent learning curve.


Answer: 90 percent learning curve

Diseconomies of scale refer to

Diseconomies of scale refer to



A. decreases in cost as profit increases.


B. increases in cost as output increases.


C. increases in economic value as per-unit cost decreases.


D. decreases in profit when consumer demand decreases.


Answer: increases in cost as output increases

____ is best described as the output range needed to bring down the cost per unit as much as possible, allowing a firm to stake out the lowest-cost position that is achievable through economies of scale.

____ is best described as the output range needed to bring down the cost per unit as much as possible, allowing a firm to stake out the lowest-cost position that is achievable through economies of scale.



A. Minimum efficient scale


B. Break-even output


C. Maximum output capacity


D. Optimum sustainable yield


Answer: minimum efficient scale

Evia Cycles Inc. incurs $400 to manufacture a bicycle, and the maximum price customers are willing to pay is $550 per unit. Archer Cycles Inc., its competitor, incurs $450 to manufacture a similar bicycle, and customers are willing to pay a maximum price of $620 for it. What does this indicate?

Evia Cycles Inc. incurs $400 to manufacture a bicycle, and the maximum price customers are willing to pay is $550 per unit. Archer Cycles Inc., its competitor, incurs $450 to manufacture a similar bicycle, and customers are willing to pay a maximum price of $620 for it. What does this indicate?



A. Both Evia Cycles and Archer Cycles have achieved differentiation parity.


B. Evia Cycles has a competitive advantage over Archer Cycles.


C. Archer Cycles has created a greater economic value than Evia Cycles.


D. Both Evia Cycles and Archer Cycles have achieved cost parity.


Answer: Archer Cycles has created a greater economic value than Evia Cycles.

Body Sync Inc. is a chain of gyms. It offers a fitness package that allows its members to use the gym facilities for 12 months by paying only for 10 months. Included in the package are two health checkups and a gym kit. These add-ons by themselves are not very valuable, but as a package they can enhance the perceived value of the service offerings. In this case, Body Sync's primary value driver is

Body Sync Inc. is a chain of gyms. It offers a fitness package that allows its members to use the gym facilities for 12 months by paying only for 10 months. Included in the package are two health checkups and a gym kit. These add-ons by themselves are not very valuable, but as a package they can enhance the perceived value of the service offerings. In this case, Body Sync's primary value driver is



A. economies of scale.


B. learning-curve effects.


C. availability of complements.


D. experience-curve effects.


Answer: availability of complements

In a focused cost-leadership strategy, a firm

In a focused cost-leadership strategy, a firm



A. caters to the segment of the market that is least cost-sensitive.


B. provides high-priced products for many different segments of the mass market.


C. delivers low-cost products and services to a specific, narrow part of the market.


D. focuses on reducing the economic value created to drive down costs.


Answer: delivers low-cost products and services to a specific, narrow part of the market.

Wear Crush Inc. is an apparel company known for its affordable clothes that follows a cost-leadership strategy. In this scenario, Wear Crush should ideally compare its strategic position with

Wear Crush Inc. is an apparel company known for its affordable clothes that follows a cost-leadership strategy. In this scenario, Wear Crush should ideally compare its strategic position with



A. a company that sells wristwatches at affordable prices.


B. a luxury apparel company that sells designer clothes.


C. an apparel company popular among price-conscious customers.


D. an online company that sells customized pet clothing.


Answer: an apparel company popular among price-conscious customers.

Jenny liked a pair of sapphire earrings and thought they would cost around $1,700. She was surprised to find that the price of the earrings was only $1,500. She decided to buy the earrings. This scenario describes

Jenny liked a pair of sapphire earrings and thought they would cost around $1,700. She was surprised to find that the price of the earrings was only $1,500. She decided to buy the earrings. This scenario describes



A. consumer surplus.


B. producer surplus.


C. consumer profit.


D. producer profit.


Answer: consumer surplus

Pilot Games Inc. allows users to play the trial versions of its games without any charge. However, users have to purchase the games to access the upgraded version of the games with advanced features. Which of the following business models is Pilot Games using in this scenario?

Pilot Games Inc. allows users to play the trial versions of its games without any charge. However, users have to purchase the games to access the upgraded version of the games with advanced features. Which of the following business models is Pilot Games using in this scenario?



A. freemium


B. subscription-based


C. pay-as-you-go


D. razor-razor-blade


Answer: freemium

Mia has purchased an Internet package for three months, in which she can use 30 mbps Internet speed. However, for the service, she needs to pay a fee of $50 in advance irrespective of whether she uses the Internet during the service period or not. This arrangement best illustrates the _____ strategy.

Mia has purchased an Internet package for three months, in which she can use 30 mbps Internet speed. However, for the service, she needs to pay a fee of $50 in advance irrespective of whether she uses the Internet during the service period or not. This arrangement best illustrates the _____ strategy.



A. razor-razor-blade


B. subscription-based


C. pay-as-you-go


D. freemium


Answer: subscription-based

Janet is the CEO of Far Sight Inc., which uses a triple-bottom-line approach. As a result, Janet will tend to

Janet is the CEO of Far Sight Inc., which uses a triple-bottom-line approach. As a result, Janet will tend to



A. view superior financial performance as the sole objective of her firm.


B. expect her company to be socially responsible.


C. use fossil fuels to run her company's production plants.


D. ignore the ecological dimension for her company.


Answer: expect her company to be socially responsible

How does a sustainable strategy typically help a firm?

How does a sustainable strategy typically help a firm?



A. It helps the firm focus solely on its financial goals.


B. It reduces the need for corporate social responsibility within the firm.


C. It facilitates the firm in effectively isolating its external stakeholders.


D. It helps the firm achieve positive results along the social and ecological dimensions.


Answer: it helps the firm achieve positive results along the social and ecological dimensions

When using the balanced-scorecard approach to assess a firm's performance, which of the following is not a key question that managers need to answer?

When using the balanced-scorecard approach to assess a firm's performance, which of the following is not a key question that managers need to answer?



A. How do customers view us?


B. How do we reduce the economic value created?


C. What core competencies do we need?


D. How do shareholders view us?


Answer: how do we reduce the economic value created

Competitive advantage goes to the firm that achieves the

Competitive advantage goes to the firm that achieves the



A. largest economic value created.


B. lowest producer surplus.


C. highest payable turnover.


D. highest Cost of goods sold/Revenue ratio.


Answer: largest economic value created

The value a consumer attaches to a product or service is captured in the

The value a consumer attaches to a product or service is captured in the



A. least price a consumer is willing to pay for it.


B. consumer's maximum willingness to pay for it.


C. expenses incurred by the firm in manufacturing it.


D. difference between the price charged for it and the cost to produce it.


Answer: consumer's maximum willingness to pay for it

In 2014, Apple turned over its inventory more than 53 times. In stark contrast, Microsoft turned over its inventory only about 10 times during the year. Which of the following best explains this difference?

In 2014, Apple turned over its inventory more than 53 times. In stark contrast, Microsoft turned over its inventory only about 10 times during the year. Which of the following best explains this difference?



A. Apple had a more effective management of its global supply chain than Microsoft.


B. Microsoft had a stronger demand for its tablet computer than Apple did for its tablet computer.


C. Apple operated its own production facilities and therefore had lower production costs than Microsoft.


D. Microsoft had production facilities in countries with lower production costs than Apple


Answer: Apple had a more effective management of its global supply chain than Microsoft.

A high percentage of R&D/Revenue ratio indicates a(n)

A high percentage of R&D/Revenue ratio indicates a(n)



A. strong focus on innovation to improve current products and services.


B. inefficiency in the management to focus on new products.


C. strong focus on marketing and sales to promote products and services.


D. negligent investment toward research and development.


Answer: strong focus on innovation to improve current products and services.

Clean Rinse Shampoo has been the leader of hair-cleaning products for about 40 years. However, this company relied too long on its competency without refining or upgrading its product. As a result, other shampoo companies that began to offer organic shampoo gained a competitive advantage over Clean Rinse. This case is an example of

Clean Rinse Shampoo has been the leader of hair-cleaning products for about 40 years. However, this company relied too long on its competency without refining or upgrading its product. As a result, other shampoo companies that began to offer organic shampoo gained a competitive advantage over Clean Rinse. This case is an example of



A. resource flow.


B. dynamic capabilities.


C. core rigidity.


D. value chain.


Answer: core rigidity

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

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, refined, costly to introduce


B. valuable, refined, costly to introduce


C. valuable, rare, costly to imitate


D. varied, rare, costly to imitate


Answer: valuable, rare, costly to imitate

Which of the following accurately summarizes the difference between the resources and capabilities of a firm?

Which of the following accurately summarizes the difference between the resources and capabilities of a firm?



A. Resources are tangible; capabilities are tangible and intangible.


B. Resources are intangible; capabilities are tangible.


C. Resources are tangible and intangible; capabilities are intangible.


D. Resources are tangible; capabilities are intangible.


Answer: resources are tangible and intangible; capabilities are intangible.

Onyxo Inc., a consumer electronics company, is the leading manufacturer of LCD televisions. LCD technology has been its core competency and the company holds 80 percent shares in that market. However, Onyxo Inc.'s competitors have now moved on to advanced technologies like LED and 3-D televisions. According to the dynamic capabilities perspective, what should Onyxo Inc. do?

Onyxo Inc., a consumer electronics company, is the leading manufacturer of LCD televisions. LCD technology has been its core competency and the company holds 80 percent shares in that market. However, Onyxo Inc.'s competitors have now moved on to advanced technologies like LED and 3-D televisions. According to the dynamic capabilities perspective, what should Onyxo Inc. do?



A. Onyxo Inc. should start working on LED and 3-D television technologies to adapt its core competency to suit the external environment.


B. Onyxo Inc. should stick to its existing core competency, that is LCD technology, as it is the best in that segment.


C. Onyxo Inc. should take proactive steps to reduce the causal ambiguity and socially complexity of its core competency.


D. Onyxo Inc. should work on enhancing the mobility of its core competency.


Answer: Onyxo Inc. should start working on LED and 3-D television technologies to adapt its core competency to suit the external environment.

The "Gold Crisps" potato wafers manufactured by True Foods Inc. have been the highest selling wafers in the market. Though the market for wafers is flooded with competitors, True Foods Inc. has been able to maintain its market position for a long time. This is mainly attributed to the unique taste of the wafers that comes from the unique natural flavoring used by the company. This competency of True Foods Inc. will be considered as a(n) _____ resource in the VRIO framework.

The "Gold Crisps" potato wafers manufactured by True Foods Inc. have been the highest selling wafers in the market. Though the market for wafers is flooded with competitors, True Foods Inc. has been able to maintain its market position for a long time. This is mainly attributed to the unique taste of the wafers that comes from the unique natural flavoring used by the company. This competency of True Foods Inc. will be considered as a(n) _____ resource in the VRIO framework.



A. inexhaustible


B. rare


C. intangible


D. virtual


Answer: rare

In the context of the resource-based model of competitive advantage, which of the following scenarios best exemplifies resource immobility?

In the context of the resource-based model of competitive advantage, which of the following scenarios best exemplifies resource immobility?



A. AP Corp. has earned a good reputation among its shareholders by investing more in tangible assets over intangible assets.


B. Two Triangle Inc. has lost its market share because its resources are not mobile, that is rigid, inflexible, and static.


C. Blue Elixir Corp. has been able to gain a competitive advantage because of its ability to efficiently move its resources from one manufacturing unit to another.


D. True 3 Inc. has been able to outperform its competitors because the uniqueness of its resources is difficult to replicate.


Answer: True 3 Inc. has been able to outperform its competitors because the uniqueness of its resources is difficult to replicate.

Although True Ion Inc. and One Electro Inc. operate in the same consumer electronic industry, True Ion Inc. has better sales and brand equity. This is attributed to True Ion Inc.'s commitment to innovation. The company has adequate financial and human capital to invest in research and development, an area in which One Electro Inc. lacks. In this scenario, which of the following critical assumptions of the resource-based view of a firm has been illustrated?

Although True Ion Inc. and One Electro Inc. operate in the same consumer electronic industry, True Ion Inc. has better sales and brand equity. This is attributed to True Ion Inc.'s commitment to innovation. The company has adequate financial and human capital to invest in research and development, an area in which One Electro Inc. lacks. In this scenario, which of the following critical assumptions of the resource-based view of a firm has been illustrated?



A. resource equality


B. resource heterogeneity


C. resource mobility


D. resource maturity


Answer: resource heterogeneity

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?

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. tools and equipment


C. land and building


D. brand name


Answer: brand name

Why do companies use strategic group models?

Why do companies use strategic group models?



A. to reveal product differences between firms in the same industry


B. to reveal potential areas of industry convergence between firms in different industries


C. to reveal common threads between firms in different industries


D. to reveal performance differences between clusters of firms in the same industry


Answer: to reveal performance differences between clusters of firms in the same industry

A new company named Far Reach Inc. entered the radio retail business. In response, two incumbent radio retailers, Smooth Waves and Clear Signal, lowered the cost of their travel alarm radios and long-distance radios. Also, they spent more money to improve these radios. By doing this, Smooth Waves and Clear Signal

A new company named Far Reach Inc. entered the radio retail business. In response, two incumbent radio retailers, Smooth Waves and Clear Signal, lowered the cost of their travel alarm radios and long-distance radios. Also, they spent more money to improve these radios. By doing this, Smooth Waves and Clear Signal



A. decreased industry exit barriers.


B. increased industry exit barriers.


C. decreased industry profit potential.


D. increased industry profit potential.


Answer: decreased industry profit potential.

How is a firm's task environment different from its general environment?

How is a firm's task environment different from its general environment?



A. Managers have some influence over external factors in the task environment; they have little direct effect over external forces in the general environment.


B. Managers have no direct effect over external factors in the task environment; they have some influence over external forces in the general environment.


C. Managers have no direct effect over external factors in the task environment; they have influence over all external forces in the general environment.


D. Managers have influence over all external factors in the task environment; they have no direct effect over external forces in the general environment.


Answer: Managers have some influence over external factors in the task environment; they have little direct effect over external forces in the general environment.

The final step in industry analysis is to

The final step in industry analysis is to



A. draw a strategic-group map.


B. identify the underlying drivers of the five forces.


C. identify the key players in each of the five forces.


D. define the relevant industry.


Answer: draw a strategic group map

A fragmented industry is made into a consolidated industry through

A fragmented industry is made into a consolidated industry through



A. governmental deregulation.


B. globalization.


C. technological innovation and new legislation.


D. horizontal mergers and acquisitions.


Answer: horizontal mergers and acquisitions

When is the rivalry among existing competitors in an industry likely to be more intense?

When is the rivalry among existing competitors in an industry likely to be more intense?



A. when the industry growth rate is high


B. when firms make strategic commitments to compete in an industry


C. when firms engage in non-price competition as opposed to price-cutting


D. when the industry has low exit barriers


Answer: when firms make strategic commitments to compete in an industry

In Rozinia Republic, the federal government owns and manages all the nuclear power plants. This is because the business would not be profitable if there was more than one supplier in the nuclear power industry. Which of the following industry competitive structures does the scenario best illustrate?

In Rozinia Republic, the federal government owns and manages all the nuclear power plants. This is because the business would not be profitable if there was more than one supplier in the nuclear power industry. Which of the following industry competitive structures does the scenario best illustrate?



A. monopolistic competition


B. oligopoly


C. natural monopoly


D. perfect competition


Answer: natural monopoly

Why do firms operating in a monopolistically competitive industry have the power to raise the prices of their products or services?

Why do firms operating in a monopolistically competitive industry have the power to raise the prices of their products or services?



A. The competition in the industry is insignificant.


B. The number of buyers in the industry is small.


C. The firms can differentiate their product offerings.


D. The entry barriers in the industry are extremely high.


Answer: The entry barriers in the industry are extremely high.

Beans Inc. operates in a perfectly competitive agricultural industry. Classica Apparel Inc., in contrast, operates in a monopolistically competitive industry. Keeping this information in mind, which of the following statements is true?

Beans Inc. operates in a perfectly competitive agricultural industry. Classica Apparel Inc., in contrast, operates in a monopolistically competitive industry. Keeping this information in mind, which of the following statements is true?



A. Beans Inc. will face competition from many sellers, whereas Classica Apparel Inc. will be the only seller in the market.


B. While Classica Apparel Inc. will have the power to set the prices for its products, Beans Inc. will have little or no ability to do so.


C. Beans Inc. will have many buyers for its products, whereas Classica Apparel Inc. will have very few buyers for its products.


D. While Beans Inc. will communicate the degree of product differentiation through advertising, Classica Apparel Inc. will need no advertising.


Answer: While Classica Apparel Inc. will have the power to set the prices for its products, Beans Inc. will have little or no ability to do so.

Curve Inc. is a software development firm based in California. It strives to provide highly differentiated software at cheaper prices when compared to its competitors. Which of the following organizational designs should Curve Inc. implement to ensure the maximum success of its business strategies?

Curve Inc. is a software development firm based in California. It strives to provide highly differentiated software at cheaper prices when compared to its competitors. Which of the following organizational designs should Curve Inc. implement to ensure the maximum success of its business strategies?



A. organic


B. simple


C. ambidextrous


D. mechanistic


Answer: ambidextrous

Which of the following features about a buyer indicates that the buyer has high bargaining power?

Which of the following features about a buyer indicates that the buyer has high bargaining power?



A. when the buyer cannot credibly threaten to backwardly integrate into the industry


B. when the buyer cannot purchase specific products from other sellers


C. when the buyer faces high switching costs


D. when the buyer operates in an industry where products are undifferentiated


Answer: when the buyer operate in an industry where products are undifferentiated

In which of the following situations is a company that exists in the telecommunications industry most likely to face the highest threat of entry?

In which of the following situations is a company that exists in the telecommunications industry most likely to face the highest threat of entry?



A. if the company is able to put up a credible threat of retaliation


B. if the capital requirements in the industry are high


C. if the customer switching costs in the industry are high


D. if the industry has recently become deregulated


Answer: if the industry had recently become deregulated

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

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. threat of substitutes is most likely high.


B. threat of new entrants is most likely low.


C. bargaining power of buyers is most likely high.


D. entry barriers are most likely nonexistent.


Answer: threat of new entrants is most likely low

The primary objective of Porter's five forces model is to

The primary objective of Porter's five forces model is to



A. replace a firm's competitive advantage with competitive parity.


B. understand the profit potential of different industries.


C. reduce the gap between the value of a firm's product and its cost of production.


D. break down a firm's value chain activities into primary and support.


Answer: understand the profit potential of different industries

Which of the following is an implication of low interest rates?

Which of the following is an implication of low interest rates?



A. Cost of capital for firms will be high.


B. Firms will invest less in future growth.


C. Economic growth rate will fall.


D. Consumer demand will increase.


Answer: consumer demand will increase

Which of the following factors best contributes to the U.S. automotive industry being characterized by high entry barriers?

Which of the following factors best contributes to the U.S. automotive industry being characterized by high entry barriers?



A. New auto companies create electric cars powered by simpler motors and gearboxes.


B. New entrants in the automotive industry expect that incumbents will not or cannot retaliate.


C. Car manufacturers require large-scale production in order to be cost-competitive.


D. Few industrial products are as easy to build as cars powered by internal combustion engines.


Answer: car manufacturers require large-scale production in order to be cost-competitive

A company uses the planned emergence approach in the development of its strategies. Which of the following is an implication of this?

A company uses the planned emergence approach in the development of its strategies. Which of the following is an implication of this?



A. The employees will be isolated from the process of setting the company's vision and mission.


B. The lower-level employees will be restricted to the tasks involved in strategic implementation.


C. The company's organizational structure and systems will be designed to support bottom-up strategic initiatives.


D. The top management will create a strategy that is based on hard data alone, rather than an inspiring vision.


Answer: the company's organizational structure and systems will be designed to support bottom-up strategic initiatives

The production head at the canned juice unit of True Candy Inc. would frequently stay back after office hours and experiment with new organic hard candy flavors even though this was part of the new product development team's job. As a result of these experiments, he came up with two new flavors of organic hard candy, raspberry-apricot and strawberry-apple. After rigorous test marketing, which proved that the market would accept the new candy, the product variants were successfully launched. Which of the following strategies does this scenario best illustrate?

The production head at the canned juice unit of True Candy Inc. would frequently stay back after office hours and experiment with new organic hard candy flavors even though this was part of the new product development team's job. As a result of these experiments, he came up with two new flavors of organic hard candy, raspberry-apricot and strawberry-apple. After rigorous test marketing, which proved that the market would accept the new candy, the product variants were successfully launched. Which of the following strategies does this scenario best illustrate?



A. intended strategy


B. emergent strategy


C. unrealized strategy


D. tactical strategy


Answer: emergent strategy

An intended strategy is best described as

An intended strategy is best described as



A. a combination of top-down strategic intentions and bottom-up emergent strategy.


B. any unplanned strategic initiative undertaken by mid-level employees of their own volition.


C. the outcome of a rational and structured, top-down strategic plan.


D. a strategy developed at the lower levels of management to tackle unpredictable events.


Answer: the outcome of a rational and structure, top-down strategic plan

A traditional top-down strategic planning process typically begins with

A traditional top-down strategic planning process typically begins with



A. employees at the operational level identifying problems within an organization.


B. functional managers formulating functional strategies for their respective departments.


C. strategic leaders adjusting a company's vision and mission based on environmental analysis.


D. employees who have close contact with customers taking autonomous actions.


Answer: strategic leaders adjusting a company's vision and mission based on environmental analysis.

The production department at Coral Cements that is a subsidiary of the large conglomerate Five East Corp. has decided to adopt the FIFO (first in, first out) method of inventory to dispatch its cement bags. Which of the following strategies does this scenario best illustrate?

The production department at Coral Cements that is a subsidiary of the large conglomerate Five East Corp. has decided to adopt the FIFO (first in, first out) method of inventory to dispatch its cement bags. Which of the following strategies does this scenario best illustrate?



A. functional strategy


B. corporate strategy


C. master strategy


D. business strategy


Answer: functional strategy

Which of the following best illustrates a strategic business unit (SBU)?

Which of the following best illustrates a strategic business unit (SBU)?



A. The human resource department of a large company that is responsible for hiring employees for all its divisional branches


B. The consumer electronics division of a large company that also manufactures automobiles, apparel, and processed food


C. The product development team at the headquarters of a fast-food chain


D. The market segment which can be categorized between the income levels $10,000 and $25,000


Answer: The consumer electronics division of a large company that also manufactures automobiles, apparel, and processed food

Due to political instability in the country of United Mapa, the strategic leaders at the headquarters of FT Supplies Inc. have decided to divest the company's business from the foreign market in United Mapa. This decision would be applicable to all the business units of FT Supplies Inc. operating in United Mapa. Thus, this is a

Due to political instability in the country of United Mapa, the strategic leaders at the headquarters of FT Supplies Inc. have decided to divest the company's business from the foreign market in United Mapa. This decision would be applicable to all the business units of FT Supplies Inc. operating in United Mapa. Thus, this is a



A. business strategy.


B. divisional strategy.


C. functional strategy.


D. corporate strategy.


Answer: corporate strategy

True West Products Inc. (TWP) is a company that sells a wide range of products. It has decided to enter the markets of emerging nations like China and Brazil. This means that the cars, consumer electronics, and services such as hotels included under the TWP banner would be made available in these nations. Which of the following strategies does this scenario best illustrate?

True West Products Inc. (TWP) is a company that sells a wide range of products. It has decided to enter the markets of emerging nations like China and Brazil. This means that the cars, consumer electronics, and services such as hotels included under the TWP banner would be made available in these nations. Which of the following strategies does this scenario best illustrate?



A. corporate strategy
B. functional strategy
C. business strategy
D. divisional strategy


Answer: corporate strategy

Corporate executives at LikeReal, Inc. decide to compete in the remote model airplane industry by making the largest model planes available. By doing this, they completed part of their

Corporate executives at LikeReal, Inc. decide to compete in the remote model airplane industry by making the largest model planes available. By doing this, they completed part of their



A. implementation strategy.
B. corporate strategy.
C. functional strategy.
D. business strategy.


Answer: business strategy

Which of the following summarizes the difference between corporate strategy and business strategy?

Which of the following summarizes the difference between corporate strategy and business strategy?



A. Corporate strategy deals with how to compete; business strategy deals with where to compete.
B. Corporate strategy deals with when to compete; business strategy deals with how to compete.
C. Corporate strategy deals with how to compete; business strategy deals with when to compete.
D. Corporate strategy deals with where to compete; business strategy deals with how to compete.


Answer: Corporate strategy deals with where to compete; business strategy deals with how to compete.

Organizational values help individuals make choices that are

Organizational values help individuals make choices that are



A. legal but unethical.
B. both illegal and effective.
C. both ethical and effective in advancing a company's goals.
D. ethical but ineffective in achieving long-term success.


Answer: both ethical and effective in advancing a company's goals.

Which of the following is a customer-oriented vision?

Which of the following is a customer-oriented vision?



A. to be the most progressive insurance company
B. to be the best automobile company in the world
C. to enable people throughout the globe to identify their capabilities
D. to manufacture innovative products through continuous learning


Answer: to enable people throughout the globe to identify their capabilities

Why is it better for firms to keep their vision statements customer-oriented rather than product-oriented?

Why is it better for firms to keep their vision statements customer-oriented rather than product-oriented?



A. Customer-oriented visions tend to have a more short-range view of changing environments.
B. Customer-oriented visions tend to have a more myopic view of changing environments.
C. Customer-oriented visions tend to be more flexible when adapting to changing environments.
D.Customer-oriented visions tend to be more stable when dealing with changing environments.


Answer: Customer-oriented visions tend to be more flexible when adapting to changing environments.

What is the strategic management process?

What is the strategic management process?



A. The CEO decides who the product managers will be for a company.
B. The CEO defined the main problems facing a company.
C. Strategic leaders design a method to formulate and implement strategy.
D. Strategic leaders focus on creating a vision that reflects the company's strategy.


Answer: Strategic leaders design a method to formulate and implement strategy.

Free Winds, Inc. is a company that manufactures a variety of generators that run on wind power. The company wants to ensure that wind technology replaces all forms of exhaustible energy sources in the near future. Which of the following statements will make an accurate vision for Free Winds?

Free Winds, Inc. is a company that manufactures a variety of generators that run on wind power. The company wants to ensure that wind technology replaces all forms of exhaustible energy sources in the near future. Which of the following statements will make an accurate vision for Free Winds?



A. We make products that run on wind energy.
B. All nations around the globe should have access to a sustainable energy source.
C. The company aims to make working fun and pleasurable for its employees.
D. We provide energy-efficient sources and services by investing in research and innovation.


Answer: All nations around the globe should have access to a sustainable energy source.

While creating its AFI strategy framework, the Kowalski Candy Company decided what markets the firm should compete in. By doing this, what type of strategy did the company devise?

While creating its AFI strategy framework, the Kowalski Candy Company decided what markets the firm should compete in. By doing this, what type of strategy did the company devise?



A. business strategy
B. corporate strategy
C. global strategy
D. ethical strategy


Answer: corporate strategy

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

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



A. Firm effects deal with the action of competitors; industry effects deal with internal circumstances.
B. Firm effects deal with a manager's actions; industry effects deal with external circumstances.
C. Firm effects deal with a manager's actions; industry effects deal with internal circumstances.
D. Firm effects deal with the action of competitors; industry effects deal with external circumstances.


Answer: B. Firm effects deal with a manager's actions; industry effects deal with external circumstances.

Which of the following statements is true of the social responsibilities of a business?

Which of the following statements is true of the social responsibilities of a business?



A. A firm's ethical responsibilities go beyond its legal responsibilities.
B. Shareholders mandatorily require a firm to perform its ethical and philanthropic responsibilities.
C. Ethical responsibilities are the foundational building block of a firm's social responsibility.
D. Legal responsibilities are often subsumed under the idea of corporate citizenship, reflecting the notion of voluntarily giving back to society.


Answer: A firm's ethical responsibilities go beyond its legal responsibilities.

Which of the following would be considered a weak stakeholder strategy?

Which of the following would be considered a weak stakeholder strategy?



A. putting shareholder interests above the interests of other stakeholders
B. addressing the concerns of all stakeholders, including employees
C. always using fair and ethical practices to satisfy stakeholders
D. ensuring that the primary stakeholders achieve their objectives


Answer: putting shareholder interests above the interests of other stakeholders

A core tenet of stakeholder strategy is that a

A core tenet of stakeholder strategy is that a



A. firm should isolate its internal stakeholders from its external stakeholders.
B. single-minded focus on shareholders alone exposes a firm to undue risks that can threaten the very survival of the enterprise.
C. multifaceted exchange relationship with internal and external stakeholders can lead to a firm's competitive disadvantage.
D. firm should work toward competitive parity rather than gaining and sustaining a competitive advantage.


Answer: single-minded focus on shareholders alone exposes a firm to undue risks that can threaten the very survival of the enterprise.

Which of the following factors most effectively contributed to the success of Threadless in comparison to other companies with T-shirt designs, including American Eagle, Old Navy, and Urban Outfitters?

Which of the following factors most effectively contributed to the success of Threadless in comparison to other companies with T-shirt designs, including American Eagle, Old Navy, and Urban Outfitters?



A. its reliance on crowdsourcing
B. its point-to-point business model
C. its hub-and-spoke system
D. its shorter distances


Answer: its reliance on crowdsourcing

Which of the following statements should ideally reflect a firm's strategy for competitive advantage?

Which of the following statements should ideally reflect a firm's strategy for competitive advantage?



A. Our strategy is to win at any cost.
B. We will be number one in the industry.
C. Our aim is to create superior customer value while controlling costs.
D. We want to be the market leader by replicating our competitor's strategy.


Answer: Our aim is to create superior customer value while controlling costs.

If a company wants to gain a competitive advantage in a highly competitive industry, it should ideally

If a company wants to gain a competitive advantage in a highly competitive industry, it should ideally



A. execute an integrated cost-leadership and differentiation position.
B. copy the strategies of other firms through competitive benchmarking.
C. provide goods or services similar to its competitors at higher prices.
D. stake out a unique position within the industry.


Answer: stake out a unique position within the industry.

For a firm that operates in an industry where competition is high, which of the following practices will result in inferior performance?

For a firm that operates in an industry where competition is high, which of the following practices will result in inferior performance?



A. choosing a distinct but different strategic position in the industry
B. working toward increasing the difference between value creation and cost
C. trying to be everything to everybody by combining different competitive strategies
D. focusing on creating value for customers rather than destroying rivals


Answer: trying to be everything to everybody by combining different competitive strategies

The Scoop, Ltd. is a magazine publishing company whose average return on invested capital is approximately 5 percent. Because magazine publishing is a declining industry, the industry average has been negative (-5 percent) for the last few years. In this scenario, The Scoop Ltd. has a

The Scoop, Ltd. is a magazine publishing company whose average return on invested capital is approximately 5 percent. Because magazine publishing is a declining industry, the industry average has been negative (-5 percent) for the last few years. In this scenario, The Scoop Ltd. has a



A. competitive advantage.
B. balanced scorecard.
C. competitive disadvantage.
D. power position.


Answer: competitive advantage

Patterson Foods Inc. was the first company to start selling energy bars in its country—a product that gained popularity among diverse groups. Soon, other companies started to sell their own brands of energy bars, thereby giving Patterson Foods ample competition. In response, Patterson Foods decided to limit its variety of energy bars to only four. However, it ensured that these four varieties were low in calories and low in cost. With this innovation, Patterson Foods Inc. consistently outperformed its competitors for ten years. In this scenario, Patterson Foods Inc. maintained a _____ through its innovative strategy.

Patterson Foods Inc. was the first company to start selling energy bars in its country—a product that gained popularity among diverse groups. Soon, other companies started to sell their own brands of energy bars, thereby giving Patterson Foods ample competition. In response, Patterson Foods decided to limit its variety of energy bars to only four. However, it ensured that these four varieties were low in calories and low in cost. With this innovation, Patterson Foods Inc. consistently outperformed its competitors for ten years. In this scenario, Patterson Foods Inc. maintained a _____ through its innovative strategy.



A. balanced scorecard
B. fiduciary responsibility
C. consistent power position
D. sustainable competitive advantage


Answer: sustainable competitive advantage

Kelly is the chief marketing officer of Boyd Pharmaceuticals. She is meeting with Trent, the chief financial officer to decide on the company's marketing communications budget. They pore over the sales reports and other financial records and determine the amount of resources they can spare for marketing communications, after resources have been allocated to other functions, such as R&D, logistics, etc. What method did Kelly and Trent use to arrive at the marketing communications budget?

Kelly is the chief marketing officer of Boyd Pharmaceuticals. She is meeting with Trent, the chief financial officer to decide on the company's marketing communications budget. They pore over the sales reports and other financial records and determine the amount of resources they can spare for marketing communications, after resources have been allocated to other functions, such as R&D, logistics, etc. What method did Kelly and Trent use to arrive at the marketing communications budget?



A) objective-and-task method
B) affordable method
C) competitive-parity method
D) activity-based method
E) percentage-of-sales method


Answer: B

Kelly is the chief marketing officer of Boyd Pharmaceuticals. She is meeting with Trent, the chief financial officer to decide on the company's marketing communications budget. After extensive discussions, they decide that the size of the budget will be calculated as a fraction of the overall turnover. What method did Kelly and Trent use to arrive at the marketing communications budget?

Kelly is the chief marketing officer of Boyd Pharmaceuticals. She is meeting with Trent, the chief financial officer to decide on the company's marketing communications budget. After extensive discussions, they decide that the size of the budget will be calculated as a fraction of the overall turnover. What method did Kelly and Trent use to arrive at the marketing communications budget?



A) affordable method
B) objective-and-task method
C) competitive-parity method
D) activity-based method
E) percentage-of-sales method


Answer: E

Which of the following is a characteristic of the affordable method of establishing a marketing communications budget?

Which of the following is a characteristic of the affordable method of establishing a marketing communications budget?



A) fixed annual budget
B) suitable for long-range planning
C) priority given to role of promotion as an investment
D) calculated to reflect what the company can spare for marketing communications
E) based on the immediate impact of promotion on sales volume


Answer: D

Personal influence in marketing communications carries great weight when ________.

Personal influence in marketing communications carries great weight when ________.



A) the product being marketed is a convenience item
B) the purchase of the product is considered to be safe and risk-free
C) the product suggests something about the user's status or taste
D) the product being marketed is purchased on a frequent basis
E) the product or service in questions is used without being recommended by others


Answer: C

Which of the following is a form of earned media for marketing communication messages?

Which of the following is a form of earned media for marketing communication messages?



A) experts providing product reviews
B) celebrities endorsing products
C) social network discussions about products
D) company salespeople contacting target buyers
E) sponsored advertisements promoting products


Answer: C

Top Gear is an award-winning British television series about motor vehicles, mainly cars. It is presented by a set of hosts who test drive new cars and provide reviews on the cars' performance, their prices, and other factors. Which of the following personal communications channels is Top Gear closest to in description?

Top Gear is an award-winning British television series about motor vehicles, mainly cars. It is presented by a set of hosts who test drive new cars and provide reviews on the cars' performance, their prices, and other factors. Which of the following personal communications channels is Top Gear closest to in description?



A) expert channel
B) formal channel
C) social channel
D) sponsored channel
E) advocate channel


Answer: A

Which of the following marketing communications principles implies that communicators can use their good image to reduce some negative feelings toward a brand but in the process might lose some esteem with the audience?

Which of the following marketing communications principles implies that communicators can use their good image to reduce some negative feelings toward a brand but in the process might lose some esteem with the audience?



A) principle of closure
B) principle of duality
C) principle of delegation
D) principle of congruity
E) principle of neutrality


Answer: D

Which of the following ads depict an informational appeal?

Which of the following ads depict an informational appeal?



A) Thompson Water Seal can withstand intense rain, snow, and heat
B) The California Milk Processor Board ran the successful "Got Milk?" ad to boost declining sales
C) VW advertised to active, youthful people with its famed "Drivers Wanted" campaign
D) Pringles advertised "Once You Pop, the Fun Don't Stop" for years
E) KFC has marketed its fast-food products under the slogan, "Finger Lickin' Good"


Answer: A

Which of the following ads depict a transformational appeal?

Which of the following ads depict a transformational appeal?



A) Thompson Water Seal can withstand intense rain, snow, and heat
B) DIRECTV offers better HD options than cable or other satellite operators
C) NBA phenomenon LeBron James pitching Nike, Sprite, and McDonald's
D) Pringles advertised "Once You Pop, the Fun Don't Stop" for years
E) Excedrin stops the toughest headache pain


Answer: D

Creative strategies refer to _______.

Creative strategies refer to _______.



A) the way marketers translate their messages into a specific communication
B) the amount of creative content in a communications message
C) the degree of innovation involved in the marketing of a product
D) the novelty of a marketing communication
E) the type of medium used to deliver a marketing communication


Answer: A

One of the possible objectives of marketing communications is helping consumers evaluate a brand's perceived ability to meet a currently relevant need. Which of the following relevant brand needs is most likely emphasized by an advertisement for a luxury car?

One of the possible objectives of marketing communications is helping consumers evaluate a brand's perceived ability to meet a currently relevant need. Which of the following relevant brand needs is most likely emphasized by an advertisement for a luxury car?



A) problem removal
B) sensory gratification
C) normal depletion
D) intellectual stimulation
E) problem avoidance


Answer: B

One of the possible objectives of marketing communications is helping consumers evaluate a brand's perceived ability to meet a currently relevant need. Which of the following relevant brand needs is emphasized by an advertisement for dish-washing gloves?

One of the possible objectives of marketing communications is helping consumers evaluate a brand's perceived ability to meet a currently relevant need. Which of the following relevant brand needs is emphasized by an advertisement for dish-washing gloves?



A) social approval
B) intellectual stimulation
C) problem removal
D) normal depletion
E) sensory gratification


Answer: C
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