Question 1

Michael Porter has argued that _____ and _____ are two basic strategies for creating value and attaining a competitive advantage in an industry.

Accepted Answer

According to Michael Porter, the two basic strategies for creating value and attaining a competitive advantage in an industry are low cost and differentiation. Low cost strategy aims to offer a product or service at a lower cost than competitors while differentiation strategy aims to offer a unique and superior product or service that is valued by customers. These strategies can be pursued independently or in combination, depending on the company's goals and the competitive dynamics of the industry.

Question 2

_____ imply that when a firm already has significant value built into its product offering,increasing value by a relatively small amount requires significant additional costs.

Accepted Answer

Diminishing returns refer to the point at which the marginal cost of producing an additional unit of a good or service exceeds the marginal benefit gained. In the context of the question, it implies that increasing the value of a product that already has significant value would require significant additional costs, which may not necessarily result in equal gains in value. This is because the firm may be experiencing diminishing returns, where the additional costs may not lead to a proportional increase in value. Therefore, B) Diminishing returns is the best choice.

Question 3

Which of the following is an example of a support activity in a firm's value chain?

Accepted Answer

The answer of Which of the following is an example...

Question 4

Economies that arise from performing a value creation activity in the optimal place for that activity are referred to as:

Accepted Answer

Location economies refer to cost savings that arise from performing a value creation activity in the optimal place for that activity. This includes advantages such as access to cheaper materials, lower taxes, and skilled labor. Option A describes cost savings that come from the optimal allocation of inputs, while option B describes cost savings from producing at a larger scale. Option D is not a commonly used term for describing cost savings in international business.

Question 5

Which of the following is an example of a primary activity in a firm's value chain?

Accepted Answer

Research and development (R&D) is concerned with the design of products and production processes. Although we think of R&D as being associated with the design of physical products and production processes in manufacturing enterprises, many service companies also undertake R&D.

Question 6

The percentage increase in net profits over time measures:

Accepted Answer

The percentage increase in net profits over time measures profit growth, which evaluates the financial success of a company over a period of time. It indicates how much the company has grown in terms of profitability and can be used to evaluate the effectiveness of the company's management decisions.

Question 7

The basic strategy paradigm suggests that to maximize its profitability,a firm should do all of the following,except:

Accepted Answer

The basic strategy paradigm suggests that a firm should choose a position on the efficiency frontier that is viable, configure its internal operations to support that position, and make sure the right organization structure is in place to execute the strategy. However, it does not suggest that all positions on the efficiency frontier are viable, as some may not have enough demand or be too costly to implement. Therefore, option A is incorrect.

Question 8

Global expansion allows firms to achieve all of the following,except:

Accepted Answer

Global expansion does not necessarily mean standardizing product offering, marketing strategy, and business strategy in all national conditions. In fact, adapting to local conditions is often necessary for success in international markets.

Question 9

A firm focusing on _____ will benefit by basing each value creation activity it performs at that location where economic,political,and cultural conditions,including relative factor costs,are most conducive to the performance of that activity.

Accepted Answer

A firm focusing on core competency will benefit by optimizing value creation activities in locations where conditions are most favorable, leveraging its strengths and maximizing efficiency and effectiveness.

Question 10

_____ can be defined as the rate of return that the firm makes on its invested capital,which is calculated by dividing the net profits of the firm by total invested capital.

Accepted Answer

Profitability is the best choice as it specifically refers to the rate of return that the firm makes on its invested capital. Performance, cash flow, and efficiency are all important metrics to evaluate a firm, but they do not directly measure the rate of return on invested capital.

Question 11

The price a firm charges for a good or service is typically less than the value placed on that good or service by the customer.This is because:

Accepted Answer

The customer captures some of the value as consumer surplus, which is the difference between the price they pay and the price they are willing to pay for the good or service. This is because the firm wants to attract more customers and create a competitive advantage by offering value to the customers. Option A is incorrect because disposable income is not necessarily related to market demands. Option C is incorrect because regulatory mechanisms may prevent overcharging, but they do not necessarily dictate prices. Option D is incorrect because psychological pricing tactics may influence perception of prices, but they do not necessarily result in prices lower than customer value.

Question 12

A consumer surplus can be best described as:

Accepted Answer

Consumer surplus refers to the difference between how much a consumer is willing to pay for a product and the actual price they pay. In other words, it is the value that the consumer receives for the money they spend. Option A, B, and D do not accurately describe consumer surplus.

Question 13

A strategy that focuses on increasing the attractiveness of a product is referred to as a(n):

Accepted Answer

A differentiation strategy aims to make a product more attractive and unique in the eyes of customers, often by adding features, design elements or marketing campaigns that differentiate it from competitors. This can lead to higher prices and greater customer loyalty.

Question 14

_____ activities are basically concerned with creating the product,marketing and delivering the product to buyers,and providing support and after-sales service.

Accepted Answer

Primary activities are the core activities of a business, which include creating the product, marketing and delivering the product to buyers, and providing support and after-sales service. These activities are directly related to the creation and delivery of the product or service and are essential for the success of the business.

Question 15

The _____ function creates value by ensuring the company has the right mix of people to perform activities effectively.

Accepted Answer

The human resources function is responsible for managing an organization's employees and ensuring that the company has the right mix of people to perform activities effectively. This includes recruiting, hiring, training, and developing employees, as well as managing compensation and benefits programs. The other options, information systems, company infrastructure, and logistics, are important parts of a company's operations, but they do not specifically address the management of employees.

Question 16

The _____ shows all of the different positions a firm can adopt with regard to adding value to the product and low cost assuming the firm's internal operations are configured efficiently to support a particular position.

Accepted Answer

The efficiency frontier shows the different positions a firm can adopt with regard to adding value to the product and low cost, given that the firm's internal operations are configured efficiently to support a particular position. It represents the frontier of best practices in the industry, and any position that lies inside the efficiency frontier is considered inefficient, while any position that lies outside the efficiency frontier is considered unattainable. Therefore, the efficiency frontier is the best choice to represent the different strategic options available to a firm.

Question 17

The marketing and sales functions of a firm can help to create value through all of the following ways,except:

Accepted Answer

Creating goods and services is not a way in which marketing and sales create value, as this is typically the responsibility of product development or operations functions. The remaining options, including brand positioning, advertising, and communicating consumer needs to R&D, are all ways in which marketing and sales can help create value for a firm.

Question 18

The value of a product to an average consumer is V; and the average price that the firm can charge a consumer for that product is P.Here,V - P can be termed as:

Accepted Answer

V - P represents the difference between the value that a consumer places on a product and the price they actually pay. This is known as consumer surplus, which is the benefit that the consumer receives from purchasing the product at a lower price than they are willing to pay. Therefore, option A is the correct choice. Option B is incorrect because producer surplus is the difference between the price of a product and the cost of production. Option C and D are incorrect because they do not accurately describe the concept of V - P.

Question 19

Which of the following statements is not true?

Accepted Answer

This statement is not true because the price a firm charges for a good or service should not be more than the value the customer places on that good or service. If the price is higher than the value perceived by the customer, they may choose not to purchase the product, leading to lower sales for the firm. Thus, it is important for a firm to price its products reasonably to match the perceived value by the customer.

Question 20

_____ activities of the value chain provide inputs that allow the primary activities to occur.

Accepted Answer

The support activities of the value chain, such as procurement, technology development, human resource management, and infrastructure, provide inputs and resources that enable the primary activities (inbound logistics, operations, outbound logistics, marketing and sales, and service) to occur. Without support activities, the primary activities cannot function effectively. Therefore, it can be concluded that support activities are complementary to the primary activities.

Quiz 12: The Strategy of International Business

Michael Porter has argued that _ and _ are two basic strategies for creating value and attaining a competitive advantage in an industry.