Midterm Flashcards
A firm’s __________ is its long-term purpose that defines both what it aspires to be in the long run and what it wants to avoid in the meantime.
Mission
High quality objectives are those that are…
Tightly connected to elements of a firm’s mission and are relatively easy to measure and track over time.
When a firm is able to create more economic value than rival firms it is said to have a…
Competitive advantage
T/F Corporate level strategies are actions firms take to gain competitive advantages in a single market or industry.
False
Which type of ratios focus on the ability of a firm to meet its short-term financial obligations?
Liquidity ratios
T/F Firms with strategies that are unlikely to be a source of competitive advantage will rarely provide the same career opportunities as firms with strategies that do generate such advantages.
True
If TechnoGeek and VarsityBlue compete in the same market for the same customer and TechnoGeek generates $900 of economic value each time it sells a product or service while VarsityBlue generates $400 of economic value each time it sells a product or service, TechnoGeek has an _______________ of $500.
Economic value
The two types of measures of competitive advantage include…
Accounting measures and economic measures
Using ratio analysis, a firm earns ___________ when its performance is greater than the industry average.
Above average accounting performance
The ________ consists of broad trends in the context in which a firm operates that can have an impact on a firm’s strategic choices.
General environment
All of the following are elements of the general environment except
Industrial trends
In a perfectly competitive industry,
It is not very costly for firms to enter or exit the industry.
In the S-C-P Model, __________ refers to the strategies that firms in an industry implement.
Conduct
T/F In general, technological change creates opportunities, but not threats.
False
Hickory Divine is one of the leading manufacturers in the hardwood furniture industry. Hickory Divine has many small competitors, none of which controls a significant portion of the industry. Hickory, like most of the furniture manufacturers, sells its products to a broad variety of small furniture stores throughout the country, none of which represents a large percentage of Hickory’s sales. When purchasing the products it uses for manufacturing its furniture, Hickory is able to choose from many suppliers since the wood it uses is an undifferentiated commodity, and Hickory is able to easily switch to any supplier that has the best price and delivery times. While growth in the hardwood furniture industry has historically been in the double digits, the industry growth rate has slowed considerably into the single digits, to approximately 5% in recent years; consumers have been purchasing less expensive furniture made of composite wood that is considerably less expensive than hardwood furniture but that looks and functions very similarly once it is painted.
The threat of suppliers in the hardwood furniture can best be described as…
Low because there are a large number of suppliers selling an undifferentiated product.
Hickory Divine is one of the leading manufacturers in the hardwood furniture industry. Hickory Divine has many small competitors, none of which controls a significant portion of the industry. Hickory, like most of the furniture manufacturers, sells its products to a broad variety of small furniture stores throughout the country, none of which represents a large percentage of Hickory’s sales. When purchasing the products it uses for manufacturing its furniture, Hickory is able to choose from many suppliers since the wood it uses is an undifferentiated commodity, and Hickory is able to easily switch to any supplier that has the best price and delivery times. While growth in the hardwood furniture industry has historically been in the double digits, the industry growth rate has slowed considerably into the single digits, to approximately 5% in recent years; consumers have been purchasing less expensive furniture made of composite wood that is considerably less expensive than hardwood furniture but that looks and functions very similarly once it is painted.
In this example, composite wood furniture would be an example of a…
Substitute
Hickory Divine is one of the leading manufacturers in the hardwood furniture industry. Hickory Divine has many small competitors, none of which controls a significant portion of the industry. Hickory, like most of the furniture manufacturers, sells its products to a broad variety of small furniture stores throughout the country, none of which represents a large percentage of Hickory’s sales. When purchasing the products it uses for manufacturing its furniture, Hickory is able to choose from many suppliers since the wood it uses is an undifferentiated commodity, and Hickory is able to easily switch to any supplier that has the best price and delivery times. While growth in the hardwood furniture industry has historically been in the double digits, the industry growth rate has slowed considerably into the single digits, to approximately 5% in recent years; consumers have been purchasing less expensive furniture made of composite wood that is considerably less expensive than hardwood furniture but that looks and functions very similarly once it is painted.
If Hickory Divine were to open its own chain of furniture stores, this would be an example of…
Forward vertical integration
Hickory Divine is one of the leading manufacturers in the hardwood furniture industry. Hickory Divine has many small competitors, none of which controls a significant portion of the industry. Hickory, like most of the furniture manufacturers, sells its products to a broad variety of small furniture stores throughout the country, none of which represents a large percentage of Hickory’s sales. When purchasing the products it uses for manufacturing its furniture, Hickory is able to choose from many suppliers since the wood it uses is an undifferentiated commodity, and Hickory is able to easily switch to any supplier that has the best price and delivery times. While growth in the hardwood furniture industry has historically been in the double digits, the industry growth rate has slowed considerably into the single digits, to approximately 5% in recent years; consumers have been purchasing less expensive furniture made of composite wood that is considerably less expensive than hardwood furniture but that looks and functions very similarly once it is painted.
Based on the above description, the hardwood furniture industry can best be described as a __________ industry.
Fragmented
Hickory Divine is one of the leading manufacturers in the hardwood furniture industry. Hickory Divine has many small competitors, none of which controls a significant portion of the industry. Hickory, like most of the furniture manufacturers, sells its products to a broad variety of small furniture stores throughout the country, none of which represents a large percentage of Hickory’s sales. When purchasing the products it uses for manufacturing its furniture, Hickory is able to choose from many suppliers since the wood it uses is an undifferentiated commodity, and Hickory is able to easily switch to any supplier that has the best price and delivery times. While growth in the hardwood furniture industry has historically been in the double digits, the industry growth rate has slowed considerably into the single digits, to approximately 5% in recent years; consumers have been purchasing less expensive furniture made of composite wood that is considerably less expensive than hardwood furniture but that looks and functions very similarly once it is painted.
The level of direct competition in the hardwood furniture industry can best be described as…
High because of the numerous firms in the industry and the slowing growth rate.
__________ in the RBV are defined as the tangible and intangible assets that a firm controls that it can use to conceive and implement its strategies.
Resources
__________ are a subset of a firm’s resources and are defined as tangible and intangible assets that enable a firm to take full advantage of other resources it controls.
Capabilities
__________ implies that for a given business activity, some firms may be more skilled in accomplishing this activity than other firms.
Resource heterogeneity
The set of business activities in which a firm engages to develop, produce, and market its products or services is known as its __________.
Value chain
Most firms have a resource base that is composed primarily of resources and capabilities that are _______.
Valuable but not rare.
ESPN’s development of an extensive offering of X-Games coverage that is unmatched by any other sports outlet is an example of which element of the VRIO framework?
Rarity
Resources and capabilities, such as interpersonal relations among managers and a firm’s culture, that may be costly to imitate because they are beyond the ability of firms to systematically manage and influence are referred to as…
Socially complex
Southwest Airlines’ strong internal culture that helps ensure that employees act in ways consistent with the company’s strategy is an example of an…
Informal management control.
If a resource or capability is valuable and rare but not costly to imitate, exploiting this resource will generate a…
Temporary competitive advantage.
When tacit cooperation has the effect of reducing supply and increasing prices, it is known as…
Tacit collusion
Actions that firms take to gain competitive advantage in a single market or industry are known as…
Business-level strategies
In order to create a cost advantage, the cost of acquiring low-cost productive inputs must be _________ the cost savings generated by these factors.
Less than
Choices which firms make about the kinds of products and services they will sell that impact their relative cost position are known as…
Policy choices
_________ are said to exist when the increase in firm size (measured in terms of volume of production) are associated with lower costs (measured in terms of average costs per unit of production).
Economies of scale
As the volume of production in a firm increases, the average cost per unit decreases until some optimal volume of production is reached, after which the average costs of production begin to rise because of…
Diseconomies of scale
The link between volume of production and the cost of building manufacturing operations is particularly important in industries characterized by…
Process manufacturing
Which of the following is not a potential source of diseconomies of scale?
Learning-curve economies
_______ focuses on the relationship between the volume of production at a given point in time and average unit costs, the ______ focuses on the relationship between the cumulative volume of production and average unit costs.
Economies of scale; learning curve
Which of the following statements is accurate?
1) In general, economies of scale are relatively easy-to-duplicate bases of cost leadership, but diseconomies of scale are not.
2) In general, neither economies of scale or diseconomies of scale are relatively easy-to-duplicate bases of cost leadership.
3) In general, both economies of scale and diseconomies of scale are relatively easy-to-duplicate bases of cost leadership.
4) In general, diseconomies of scale are relatively easy-to-duplicate bases of cost leadership, but economies of scale are not.
In general, both economies of scale and diseconomies of scale are relatively easy-to-duplicate bases of cost leadership.
When managers committed to an incorrect course of action increase their commitment to this action even as its limitations become manifest, this is known as…
Escalation of commitment
______ is a business strategy whereby firms attempt to gain a competitive advantage by increasing the perceived value of their products or services relative to the perceived value of other firms’ products or services.
Product differentiation
By increasing the perceived value of a firm’s products or services, a firm will be able to…
Charge a higher price than it would otherwise be able to do.
The most obvious way that firms can try to differentiate their products is by…
Altering the features of the products they sell.
A firm’s ______ is really no more than a socially complex relationship between a firm and its customers and can serve as a basis for product differentiation.
Reputation
In the bicycle industry, the feel of high-end bicycles when they are ridden is important. As a serious rider becomes accustomed to a particular bicycle, it is very difficult for that rider to switch to an alternative supplier. This is an example of product differentiation through…
Product customization
______ can be a source of product differentiation when a single set of customers purchases several of a firm’s products.
Product mix
Product differentiation is ultimately an expression of the ______ of individuals and groups within firms and is limited only by the ______ that exist, or that can be created, in a particular industry.
Creativity; opportunities
Which of the following statements regarding the impact of product differentiation on the threat of new entry is accurate?
1) Product differentiation helps reduce the threat of new entry by forcing potential new entrants to absorb costs associated with overcoming incumbent firms’ product-differentiation advantages.
2) Product differentiation has no impact on the threat of new entry.
3) It is not possible to determine the impact of product differentiation on the threat of new entry.
4) Product differentiation increases the threat of new entry by allowing potential new entrants to avoid costs associated with overcoming incumbent firms’ product-differentiation advantages.
Product differentiation helps reduce the threat of new entry by forcing potential new entrants to absorb costs associated with overcoming incumbent firms’ product-differentiation advantages.
Which of the following bases of product differentiation is usually costly to duplicate?
Product mix
Product features, by themselves, are…
usually not a source of sustained competitive advantage, but they can be a source of a temporary competitive advantage.
Vertical integration is a type of ______.
Corporate strategy
When Apple, Inc. opened retail stores to sell its computers and iPods, this was an example of…
Forward vertical integration
A ______ is any investment in an exchange that has significantly more value in the current exchange than alternative exchanges.
Transaction-specific investment
The essence of the ______ to vertical integration is that if a firm possesses valuable, rare, and costly-to-imitate resources in a business activity, is should vertically integrate into that activity otherwise it should not vertically integrate into that activity.
Firm capability explanation
______ refers to how costly it is for a firm to alter its strategic and organizational decisions.
Flexibility
A ______ approach to vertical integration suggests that rather than vertically integrating into a business activity whose value is highly uncertain firms should not vertically integrate and instead should form a strategic alliance to manage this exchange.
Flexibility-based
From a CEO’s perspective, coordinating functional specialists to implement a vertical integration strategy almost always involves…
Conflict resolution
______ are payments to employees in a firm’s stock.
Stock grants
The ______ logic suggests that compensation that has a fixed and known downside risk and significant upside potential is important for firms implementing vertical integration strategies.
Flexibility
If Digipics were to begin manufacturing lenses for the cameras they assembled, this would be an example of ______.
Backward vertical integration
