Global Business Policies Concepts Test Answer Key

1. Generally, the weaker the competitive forces in an industry, the higher the profit potential of the industry. a. True b. False 2. When firms analyze the external environment, they typically have complete and unambiguous data. a. True b. False 3. Firms can directly control the segments of the general environment. a. True b. False 4. Interpersonal relationships, trust, friendships, and a firm’s reputation are all examples of complex social phenomena that make capabilities easy to imitate. a. True b. False 5. Costly-to-imitate capabilities are those which other firms cannot easily develop because they have no strategic equivalent. a. True b. False 6. Understanding how to leverage the firm’s unique bundle of resources and capabilities is a key outcome decision makers seek when analyzing the internal organization. a. True b. False 7. A risk of the differentiation strategy is that the firm’s means of differentiation may eventually not provide value for which customers are willing to pay. a. True b. False 8. An english professor spends her summers writing low-brow romance novels that sell directly to paperback. She writes under a fictional name because she is embarrassed to admit to her colleagues and students how she earns the extra money for foreign vacations. a. True b. False 9. Human resources and other support functions are not value-creating activities in the value chain; only primary value chain activities create value. a. True b. False 10. Effective use of the generic business strategies allows the firm to favorably position itself related to the five forces. a. True b. False 11. To provide a sustainable competitive advantage, a capability must satisfy all of the following criteria EXCEPT a. Be without good substitutes b. Be valuable to customers c. Be technologically innovative d. Be hard for competing firms to duplicate 12. Intel and ADM seem to be the only two providers of microprocessors to PC makers. Which of the following statements is most likely to be true? a. The price of the microprocessor will be low because of the bargaining power of the buyer b. The price of the microprocessor will be high because of the bargaining power of the buyer c. The price of the microprocessor will be moderate because of economies of scale d. The price of the microprocessor will be high because of the bargaining power of the supplier 13. Industry analysis is a tool used to: a. Understand the firm’s core competence b. Analyze the industry’s attractiveness by looking at its structure c. Identify the firm’s functional strategy d. Understand the parts of the firm’s activities that create value and those that do not 14. ACME Corp. is a leading provider of radios to the commercial market. Its products all rely on printed circuit-board technology. ACME has protected its market leadership with continued advancements in this technology, which it patents. A competitor has developed a radio for this market with equal performance but uses a software-based technology instead of circuit boards. ACME’s technology leadership fails which capability test? a. The substitutability test b. It fails all three of these tests c. The rareness test d. The value test 15. All of the following are tangible resources EXCEPT a. Cash b. Distribution centers c. A firm’s reputation d. Production equipment 16. In 2013 Pets and Vets Partners (PVP), a Philadelphia PA veterinary practice, added PetMedication weight loss and rehabilitation facility that included the most advanced orthopedic rehabilitation equipment within 80 miles. Pets and Vets also added new highly trained staff to run the Spa. By opening the Spa, PVP seeks: a. Competitive parity b. Economies of scale c. Cost leadership d. Competitive advantage 17. The threat of new entrants is increased if: a. Access to distribution channels is hard to gain b. Product differentiation in the industry is low c. Capital requirements in the industry are high d. Economies of scale in the industry are high 18. For strategic positioning, firms do things differently or do different things. Strategic positioning can be based on all of the following except: a. Variety of a company’s products or services b. Operational effectiveness c. Customer’s accessibility d. Customer’s need 19. New entrants to an industry are more likely when a. Economies of scale in the industry are high b. Product differentiation in the industry is low c. It is difficult to gain access to distribution channels d. Capital requirements in the industry are high 20. Two basic assumptions of the resource-based view (RBV) are: 1) resource bundles are ___________ across firms, and 2) resources ___________ move easily across firms. a. Different, do b. Different, do not c. The same, do d. The same, do not 21. Customer loyalty programs such as airlines frequent-flyer miles are an attempt to: a. Increase customers’ switching costs. b. Develop a cost advantage independent of scale 23. A financial management firm has existed for more than 70 years. Some of its original clients’ grandchildren are now clients of the firm themselves. The partners and staff of the firm have spent most or all of their careers with the firm. Many have even married into each other’s families. This firm has capabilities that would be costly to imitate because of its: a. Causally ambiguous core competencies b. Access to large amounts of financial capital c. common historical conditions d. Social complexity 24. A certain marble quarry provides a unique type of marble that is richly colored and strikingly veined. It has been used for churches and public buildings throughout the world. The architect of a new headquarters for a prestigious Fortune 500 firms has specified the use of this marble, and this marble only, for this project. Which of the following statements is most likely to be true? a. The cost of the marble will be expensive because of the bargaining power of the supplier b. The cost of the marble will be moderate because of the bargaining power of the buyer c. The cost of the marble will be expensive because of the high strategic stakes involved d. The cost of the marble will be moderate because of economies of scale 25. A general environmental analysis can be expected to produce all of the following EXCEPT: a. Objective answers b. Recognition of environmental trends c. Identification of organizational threats d. Identification of organizational opportunities 26. Which of the following statements is TRUE about the changes in industry structure? a. Industry structure cannot be changed at all over time b. As an industry matures and rivalry intensifies over time, industry profitability increases c. The availability of complementary producers increases the threat of substitutes d. The expiration of a patent may cause a high rate of firm entries into the industry 27. Which of the following, identified in an analysis of the general environment, is an opportunity for an entrepreneur who wishes to open a business providing “Fitness for Life” physical conditioning services (strength, balance, and flexibility training) in a city of 100,000 people? a. The average education level of the population in his community is low b. A chiropractor and two independent physical therapists are loathed in his community c. The average age of the population in his community is high d. The level of unemployment in his community is high 28. Several months ago, a restaurant “Cuisine” developed a new appetizer that is a hit with customers. Many customers go to the restaurant just for the appetizer, and it was at the center of a recent highly positive review by a food critic. Preparation involves common ingredients and average culinary skills but requires a very high oven temperature. Several competing restaurants have since added their own version of the appetizer to their menus. Which criterion for assessing capabilities/core competencies is now being met by Cuisine? a. The restaurants has the capability to develop something that is costly to imitate b. All of these criteria are met c. The restaurant has the capability to develop something that is valuable d. The restaurant has the capability to develop something that is rare 29. DWK Foods has developed a line of cookies and candies sweetened exclusively with organic honey. Although DWK is selling some of the products over the Internet, in order to gain economies of scale the products must be sold in retail outlets. The main barrier to entry DWK is likely to encounter here is a. Cost disadvantage independent of scale b. Access to distribution channels c. Consumers’ switching costs d. Government licensing and permits 30. Economies of scale refers to the fact that as the a. Quantity of product produced in a given time period increases, the cost of manufacturing each unit remains constant b. Quantity of product produced in a given time period decreases, the cost of manufacturing each unit decreases c. Quantity of product produced in a given time period increases, the cost of manufacturing each unit increases d. Quantity of product produced in a given time period increases, the cost of manufacturing each unit decreases 31. _______ are the source of a firm’s _______, which are the source of the firm’s _______. a. Capabilities; resources; core competencies b. Resources; capabilities; core competencies c. Core competencies; resources; competitive advantage d. capabilities ; resources; above-average returns 32. An analysis of society’s attitudes and values would be conducted when studying the general environment a. Sociocultural b. Economic c. Demographic d. Global 33. The differentiation strategy can be effective in controlling the power of rivalry with existing competitors in an industry because a. The differentiation strategy benefits from rivalry because it forces the firm to innovate b. Customers of non differentiated products are sensitive to price increases c. Customers are loyal to brands that are differentiated in meaningful ways d. Customers will seek out the lowest-cost product 34. The analysis of the activity map of a successful company such as Southwest Airlines emphasizes how a. Understanding of the profit pool in an industry indicated to companies where above-average returns can be earned b. The organizational culture of Southwest Airlines is the key to the success of the organization c. It is hard for rivals to match a configuration of integrated activities than to imitate a single activity d. The primary and support activities of a successful company capture value all along the value chain 35. Before the firm decides what products to offer and what benefits and features they will have, the firm must decide all the following questions EXCEPT a. What needs the firm should satisfy b. What core competencies are needed to satisfy customer needs c. When the customer’s needs should be satisfied d. Who the firm should serve 36. A cost leadership strategy provides goods or services with features that are: a. Acceptable b. Unique c. Mediocre d. substandard 37. The products or services that are differentiated from others have qualities that are a. Valued by the typical industry customer b. Perceived by the customer to add value for which they will pay a premium c. Perceived as standardized by the customer d. Seen as classic attributes rather than passing fads 38. Blind taste-tests have shown that the taste of premium-priced vodkas and inexpensive vodkas are indistinguishable even to regular drinkers to vodka. But the sales of premium vodkas are thriving. This is an example of a. The danger counterfeiting holds for firms pursuing the differentiation strategy b. The risk of product imitation by competitors c. The perception of perceived prestige and status as a means of differentiating a product d. The importance of high-quality raw materials when using the differentiation strategy 39. The differentiation strategy can be effective in controlling the power of rivalry with existing competitors in an industry because a. Customers have low switching costs b. Substitute products are lower quality c. Customers develop brand loyalty d. A differentiating firm can always raise prices. 40. Business-level (generic) strategies detail commitments and actions taken to provide value to customers and gain competitive advantage by exploiting core competencies in a. Specific product markets b. Particular geographic locations c. Primary value chain activities d. The macro environment 41. A firm successfully implementing a differentiation strategy would expect a. Customers to perceive the product as standard b. Customers to be sensitive to price increases c. To have high levels of power over suppliers d. To charge premium prices 42. The use of differentiation strategy would be expected to be LEAST effective in which of the following markets? a. Commodity goods b. Popular music c. Motion pictures d. Writing instruments 43. All of the following are considered generic business-level strategies EXCEPT a. Focused differentiation b. Product diversification c. Cost leadership d. Integrated cost leadership/differentiation 44. All of the following are ways that a good or service can be differentiated EXCEPT a. Engineering design and performance b. Responsive customer service c. Perceived prestige and status d. Economies of scale efficient operations 45. The Monteleone Company pays large fees to a highly recognizable, prestigious individual to be the spokesperson for the company’s products, luxury private jets. Monteleone is probably following the a. Focused differentiation strategy b. Focused cost leadership strategy c. Total quality strategy d. Integrated cost leadership/differentiation strategy 46. When selecting a business-level (generic) strategy, the firm must determine all of the following EXCEPT a. What are the customer’s needs? b. How will the customer’s needs be satisfied? c. Why should these customer’s needs be satisfied? d. Who is the customer? 47. A firm’s core strategy is its _______ strategy. a. Corporate-level b. International-level c. Business-level (generic) d. Pricing 48. Business-level (generic) strategies are concerned specifically with a. Creating differences between the firm’s position and its competitors b. Selecting the industries in which the firm will compete c. How functional areas will be organized within the firm d. How a business with multiple physical locations will operate one of those locations 49. A river barge company can offer cheaper, although slower, per pound transportation of products to companies when compared with transportation by air, truck, or trail. The river barge company should first target customers whose companies use a. Either of the focus strategies b. The integrated cost leadership/differentiation strategy c. Any of the strategies except the focused differentiation strategy d. The cost leadership strategy 50. When implementing a focus strategy, the firm seeks to a. Move into the global market b. Serve the specialized needs of a market segment c. Offer products that are both differentiated and low cost d. Target the typical customer in an industry