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QUIZ 1 Strategic Management Indian Institute of Management, Kozhikode Date: 11th February 2013 Strategic Management Duration: 20 Minutes Instructions to Candidates a. It is a closed book and closed notes examination. You are not allowed to carry any notes and cases for this examination. b. You are requested to desist from carrying any form of electronic devices to the examination except hand held calculators. No other form of device is allowed c. You are requested to kindly return the question paper, case along with your answer scripts after the examination. d. There is only one most appropriate response among the multiple choices. 1/3 mark is deducted for every wrong response 1. Above-average returns are a. Higher profits than the firm earned last year b. Higher profits than the industry averaged over the last years c. Profits in excess of what an investor expects to earn from a historical pattern of performance of the firm d. Profits in excess of what an investor expects to earn from other investments with a similar level of risk e. None of the above 2. The CEO of Ridgeway, Inc., realizes that the company’s survival depends on developing and acquiring knowledge. Which of the following actions by the CEO would be most consistent with this need? a. Ensuring that all current unique knowledge of the firm is protected by patents b. Planning extensive employee training and recruiting programs c. Investing in sophisticated databases in relevant knowledge areas d. Establishing a system of organizational intelligence gathering e. None of the above 3. Which of the following can be used as a criteria for strategic positioning by firms a. Total Quality Management b. Outsourcing c. Benchmarking d. Access e. All of the above 4. Blood banks are highly dependent on donors. In the terminology of industry analysis, which statement of donors is accurate? a. Blood donors are suppliers and are powerful due to the critical nature of what they provide to the blood bank b. Blood donors are suppliers and are powerful due to their concentration relative to the blood bank c. Blood donors are buyers and are not due to low switching costs needed to change to alternative inputs d. Blood donors are buyers and are powerful due to the volume of blood needed e. All of the above 5. The existence of high exit barriers such as ownership of specialized assets (e.g., large aircraft) in the airline industry indicates that a) Customers are relatively weak because of the high switching costs created by frequent flyer programs. b) The industry is moving towards differentiation of services c) The competitive rivalry in the industry is severe d) The economic segment of the external environment has shifted, but airlines strategies have not changed. e) None of the above 6. A manufacturer of washing machines has expanded its plant and has created excess capacity, just as the general economy has taken a downturn. The company is likely to a. Raise prices on washing machines to offset lost sales b. Be vulnerable to new entrants to an attractive market c. Suffer from intense rivalry from international manufacturers d. Offer rebates and incentives for customers who purchase washing machines e. None of the above 7. According to Mintzberg, emergent strategy stems from: a. Plan b. Ploy c. Pattern d. None of the above e. All of the above 8. In a perfectly competitive industry (as per economics), it is possible to a. Earn above average returns in the long run b. For a firm to take a cost leadership position in the long run c. For a firm to differentiate itself in the long run d. Earn normal returns in the long run e. None of the above 9. The large expenditures on advertising by firms such as Procter & Gamble and ColgatePalmolive is an example of what kind of barrier to entry? a. Capital requirements b. Economies of scale c. Product differentiation d. All of the above e. None of the above 10. 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 firm 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 suppliers 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 moderate because of economies of scale d. The cost of the marble will be expensive because of the high strategic stakes involved e. None of the above 11. Rivalry between Dell, Hewlett-Packard, and other computer manufacturers is intense in part because a. Low geographic saturation of the market b. High differentiation among competing products c. Low threat of supplier forward integration d. Lack of differentiation among competing products e. None of the above 12. Circuit Corp. is a manufacturer of a broad range of consumer electronics products. These consumer products are all highly profitable. The firm also manufactures a low-cost component which is an essential differentiating feature for most of their consumer products. The costs to manufacture this component have risen sharply in recent months. Internal cost accounting estimates now indicate the company is breaking even on the manufacture of this component. Which of the following is most likely? a. Circuit will likely continue to manufacture the component, even at a loss, due to low supplier power b. Circuit will likely continue to manufacture the component, even at a loss due to high strategic stakes c. Circuit will likely discontinue manufacture the component due to low strategic stakes d. Circuit will likely discontinue manufacture the component due to high supplier stakes e. None of the above 13. When rival firms compete aggressively by trying to attract competitors’ customers, this might be an indication of a. An industry with low exit barriers b. An increasing economies of scale c. Slow industry growth d. High bargaining power among buyers e. None of the above 14. Which of the following is NOT required for a firm to achieve strategic competitiveness and earn above-average returns from its core competencies? a. Core competencies must be acquired b. Core competencies must be bundled c. Core competencies must be internationalized d. Core Competencies must be leveraged e. All of the above 15. The owner of a store retailing fine quality fabrics for home-sewers bewails the fact that few young women know how to do fine tailoring, much less simple dressmaking. Many potential customers are unable to appreciate the premium quality of the fabrics available and are deterred by the high prices, as well as the complexity of fine sewing. In the past, the store had a strong demand for fabrics, large classes for women learning the fine points of sewing, and a reputation for excellent service and technical advice. Now the store is earning lower-thanaverage returns. This case is an example of a. The hazard of competitors being able to imitate a firm’s core competency b. The need for firms to stick to their core competencies through temporary downturns in market demand c. The lack of intangible resources undermining the core competencies of the firm d. Core competencies that have become core rigidities e. All of the above