Deck 5: Business-Level Strategy

Question 1

 Which of the following barriers to entry occurs when a buyer's willingness to pay for a product increases as the number of other buyers for the industry's product increases?

A) Supply-side economies of scale
B) Restrictive government policy
C) Demand-side benefits of scale
D) Customer switching costs

Answer 1

C

Question 2

 Which of the following is one of the fundamental questions a manager must answer in developing a business-level strategy?

A) Who do we serve?
B) Who are our competitors?
C) What are our objectives?
D) Where should we do business?

Answer 2

A

Question 3

 Supply-side economies of scale arise

A) when a buyer's willingness to pay for a product increases.
B) when the demand for a firm's product keeps fluctuating.
C) when the number of buyers for a firm's product decreases.
D) when a firm manufactures products or services in high volumes.

Answer 3

D

Question 4

 Which of the following belongs to the primary activities of a firm's value chain?

A) Technological development
B) Human resource management
C) Firm infrastructure
D) Marketing and sales

Question 5

 Which of the following statements is a drawback of Porter's 5-Forces Model?

A) It cannot be used to evaluate the structural components of an industry.
B) This tool is particularly not useful in helping managers decide where to focus.
C) Evaluating the attractiveness of industries and developing business-level strategy is seldom possible.
D) The 5-Forces Model typically looks at an industry at one point in time.

Question 6

 Many people in large cities are starting to use Uber to find rides. The taxi industry in these cities is facing

A) the bargaining power of suppliers.
B) the bargaining power of customers.
C) rivalry among existing competitors.
D) the threat of substitutes.

Question 7

 Which of the following is the best example of a barrier to entry created by a firm's incumbency advantages?

A) A company with superior technology when compared to its competitors
B) A company that engages in extensive advertising to gain consumer loyalty
C) A company that is marked by overcrowded distribution channels
D) A company that manufactures its products in high volumes

Question 8

 A cosmetics company owns a patent for a particular kind of shampoo, which is a bestseller in the market. It enables the firm to extract a high level of discretion over product pricing. The patent for the shampoo is an example of a firm's _____ resource.

A) tangible
B) human
C) natural
D) intangible

Question 9

 Rivalry among existing competitors is higher when

A) fixed costs are low and marginal costs are high.
B) exit barriers are low.
C) industry growth is slow.
D) the product is not perishable.

Question 10

 Toyota's unique philosophy, processes, and organizational culture

A) are tangible resources.
B) are human resources.
C) make up its value chain.
D) are intangible resources.

Question 11

 Which of the following statements is true about Porter's 5-Forces Model?

A) The level of threat of entry from competition is generally the same across all industries.
B) Every industry and market is different in terms of who maintains the power in the buyer-supplier relationship.
C) The buyer or customer has no power to force down prices in an industry.
D) Not all companies face the threat of substitutes.

Question 12

 _____ analysis separates a firm into its various activities to better understand total costs in the system and potential sources of firm differentiation.

A) SWOT
B) Value chain
C) Stakeholder
D) Trend

Question 13

 For which of the following companies is human resources the primary resource?

A) Morgan & Morgan Law Firm
B) Daisy Hill Puppy Farm
C) The Gold and Diamond Supply Store
D) Marathon Oil Corporation

Question 14

 The most recognizable resources that a firm uses to manufacture its products, such as the firm's plant and equipment, are categorized as _____ resources.

A) tangible
B) human
C) intangible
D) natural

Question 15

 XYZ Company is a low-cost provider. XYZ is most susceptible to

A) the bargaining power of suppliers.
B) the threat of substitutes.  
C) new innovations from rival competitors.
D) the bargaining power of customers.

Question 16

 Which of the following belongs to the support activities of a firm's value chain?

A) Marketing
B) Procurement
C) Logistics
D) Service

Question 17

 John signed a two-year contract with Z-Gadget to get a subsidized price on his new iPhone. He had Z-Gadget's service for only six months when he became dissatisfied and wanted to cancel the contract. However, he did not do so because of high cancellation fees as well as new activation fees with another service. Which of the following characteristics of a powerful supplier group does Z-Gadget have with respect to its contract with John?

A) The supplier industry is more concentrated than the industry to which it sells.
B) Industry participants face switching costs in changing suppliers.
C) Suppliers offer differentiated products.
D) No substitutes exist for what the supplier group provides.

Question 18

 Sara, a manager at DEM Company, is examining all of the activities the firm performs and determining how they interact to form a source of competitive advantage. Sara is using

A) Porter's 5-Forces Model.
B) SWOT analysis.
C) SWAT analysis.
D) value chain analysis.

Question 19

 Primary activities of a firm's value chain refers to

A) the activities completed to improve a firm's product and the processes used to manufacture it.
B) the activities involved with recruiting, hiring, training, developing, and compensating all personnel.
C) the activities such as general management, planning, finance, accounting, legal support, and governmental relations.
D) the activities involved in the physical creation of a product and its sale and transfer to the buyer.

Question 20

 In conducting its SWOT analysis, a baseball team notes that most of its players are among the best in the world and that its coach was a distinguished major-league player. To which part of the SWOT analysis is this information pertinent?

A) Strengths
B) Weaknesses
C) Opportunities
D) Threats

Question 21

 The 5-Forces Model is one of the most important tools for evaluating the attractiveness of industries.

Question 22

 Gary, a manager at ABC Company, is evaluating the firm's internal strengths and weaknesses as well as the opportunities and threats that are evident in the firm's external environment. Gary is using

A) Porter's 5-Forces Model.
B) SWOT analysis.
C) SWAT analysis.
D) value chain analysis.

Question 23

 Managers must view the firm's value chain in the context of a larger value system that includes the value chains of suppliers and distribution channels.

Question 24

 Inside CHS Company, there is a culture of frugality, discipline, and efficiency. The firm pays its employees a competitive wage, but there are no perks. CHS Company is likely using a

A) differentiation strategy.
B) cost leadership strategy.
C) differentiated focus strategy.
D) stuck in the middle strategy.

Question 25

 In a focus strategy, a firm seeks to be unique in its industry along a dimension or a group of dimensions that are valued by consumers.

Question 26

 The idea that a firm is a collection of resources is often referred to as the resource-based view of the firm.

Question 27

 Describe the three strategies of competitive advantage.

Question 28

 CB Company lowered its price temporarily, then tried to differentiate its product, then tried to appeal to a niche group. CB company is

A) using a focus strategy.
B) using a cost leadership strategy.
C) using a generic strategy.
D) stuck in the middle.

Question 29

 First-mover advantage occurs when a firm is first to offer desirable products or services that secure customer loyalty.

Question 30

 Briefly describe the 5-Forces Model.

Question 31

 A buyer industry will tend to have less power relative to the supplier industry when the buyer purchases in very large volumes.

Question 32

 Which of the following refers to the cost savings achieved when the large volume of a product manufactured by a firm enables it to reduce per-unit cost?

A) Economies of scale
B) Return on equity
C) Demand-side benefits scale
D) Tangible resources

Question 33

 Which of the following statements best describes competitive advantage?

A) It refers to the pressure a supplier or buyer can exert on a company.
B) It is the advantage that occurs when a firm offers products to all customers at higher prices.
C) It derives from a firm's ability to create value for its customers that exceeds the cost of producing the product or service.
D) It is the capability to identify and react to changes in the external environment and to mobilize internal resources to deal with those changes.

Question 34

 A substitute could be a competitor's product or some other product that satisfies the same consumer need.

Question 35

 Which of the following is an example of a weakness in an organization's SWOT analysis?

A) Competitors with highly skilled employees
B) Money spent on machineries with updated technology
C) Overdependence on a particular supplier for core materials
D) The increasing number of competitors

Question 36

 Which of the following is one of the generic strategies through which a manager can create a firm's competitive advantage?

A) Global strategy
B) Market-entry strategy
C) Transnational strategy
D) Differentiation strategy

Question 37

 Define value chain analysis. Discuss the two types of activities in a firm's value chain.

Question 38

 Inside Patagonia, Inc., there is a culture that encourages innovation and risk taking. Employees are encouraged to experiment with products and fabrics to produce better designs. In addition, Patagonia encourages employees to leave work early to surf or rock-climb. Patagonia is likely using a

A) differentiation strategy.
B) cost leadership strategy.
C) low-cost focus strategy.
D) stuck in the middle strategy.

Question 39

 Outline the features of SWOT analysis.

Question 40

 What are the tangible and intangible resources of an organization? Give examples.