9. _____ precisely indicates how much of a firm's sales is converted into profits.
1. In the context of SWOT analysis, which of the following best exemplifies a firm's
internal weakness?
Decline in the firm's market share
2. Which of the following statements accurately brings out the difference between
economies of scale and learning effects?
While there are no diseconomies to learning, there are diseconomies to scale.
3. Home Smart Inc. is a chain of supermarkets that sells its products at higher
prices than its competitors. Yet, the supermarket chain has a large customer
base due to its wide product portfolio and superior customer service. Which of
the following generic business strategies has Home Smart adopted in this
scenario?
Differentiation
4. When evaluating the sustainability of a firm's competitive advantage, which of
the following statements is NOT true?
If managed effectively, existing core competencies can help sustain the competitive
advantage indefinitely.
5. To help a firm achieve a competitive advantage, each distinct activity performed
in the value chain needs to:
contribute to the firm's strategic position as either low-cost leader or differentiator
6. Even without differentiation parity, a firm pursuing a cost-leadership strategy
can still gain a competitive advantage as long as its:
economic value creation exceeds that of its competitors.
7. Amazon.com's ability to provide the largest selection of items online, combined
with superior IT systems and customer service, can be referred to as its _____.
core competency
8. Both BioThink Inc. and GD Pharma Inc. have discovered similar vaccines to
prevent cancer. While GD Pharma's vaccine sells at $100 per unit, BioThink
sells its vaccine at $90 per unit. This price differentiation has mainly been
attributed to the companies' capital decisions. While BioThink used its retained
earnings to develop the vaccine, GD Pharma borrowed funds from banks to
develop the vaccine. Thus, GD Pharma pays a higher interest on its capital,
which makes it necessary to price its vaccine higher. Thus, the key driver for
BioThink's competitive advantage is:
low-cost input factors.
Return on revenue
10. A firm incurs $400 to manufacture a television. In the market, customers are
willing to pay a maximum of $600 for the television priced at $500. The
difference of $200 ($600 minus $400) is the _____.
economic value created
11. Which of the following is an advantage of applying the economic value creation
perspective to assess a firm's performance?
In economic value perspective, analysts not only consider historical costs, but also
opportunity costs.
12. Photohome is a file hosting service that allows users to store up to 5GB of data
with no restrictions or charges. However, users have to pay a fee for advanced
features on the cloud storage system and additional storage space. Which of the
following business models does this best illustrate?
Freemium
13. Although True Ion Inc. and One Electro Inc. operate in the same consumer
electronic industry, True Ion Inc. has better sales and brand equity. This is
attributed to True Ion Inc.'s commitment to innovation. The company has
adequate financial and human capital to invest in research and development, an
area where One Electro Inc. lacks. In this scenario, which of the following
critical assumptions of the resource-based view of a firm has been illustrated?
Resource heterogeneity
14. During the process of formulating an effective business model, a firm's managers
should first:
transform their strategy of how to compete into a blueprint of actions and initiatives.
15. According to the five forces model, which of the following is viewed as a major
risk to a business pursuing a cost-leadership strategy?
Innovation that allows competitors to emerge with more economical replacements
16. As a result of _____, a critical assumption in the resource-based model of a firm,
the resource differences that exist between firms are difficult to replicate.
resource immobility
17. A firm's learning curve is steeper than that of its competitor. What does this
imply?
The firm is at an advantage when compared to its competitor.
18. KitchenThings Inc. is a company that manufactures plastic kitchenware. It
operates at an output level that allows it to keep its unit cost per output to the
lowest in the industry. This in turn allows KitchenThings to be the price leader.
Other competing companies cannot operate at the same level due to a lack of
consumer demand for their products. This puts them at a competitive
disadvantage. In this scenario, the cost driver behind KitchenThings's strategic
position is _____.
Economies of scale
19. While Aros Inc. incurs a cost of $20 for a pair of shoes, Shoes Cult Inc., its
competitor, manufactures a pair of shoes at $22. Both the companies are able to
sell their shoes for a maximum of $30 per pair. Which of the following
statements is NOT true in this scenario?
Shoes Cult has a competitive advantage over Aros.
20. True Sync Inc. is a software company, which has built and acquired numerous
assets over the years. According to the resource-based view of a firm, which of
the following assets of True Sync Inc. will best enable it to gain and sustain a
competitive advantage?
The expertise acquired by the employees in the company
21. _____ are barriers to imitation that prevent rivals from competing away the
advantage a firm may enjoy.
isolating mechanisms
22. Evia Cycles Inc. incurs $400 to manufacture a bicycle, and the maximum price
customers are willing to pay is $550 per unit. Archer Cycles Inc., its competitor,
incurs $450 to manufacture a similar bicycle, and customers are willing to pay a
maximum price of $620 for it. What does this indicate?
Archer Cycles has created a greater economic value than Evia Cycles.
23. In the fiscal year 2012, BlackBerry's Cost of goods sold (COGS)/Revenue ratio
was higher than that of its competitor, Apple. This implies that BlackBerry
needs to work toward:
driving down its costs.
24. Due to resource immobility, a critical assumption in the resource-based model of
a firm, the:
resource differences between firms last for a long time.
25. Which of the following statements is true of accounting data?
Accounting data are historical data and thus backward-looking.
26. A cost-leader is protected from the threat of new entrants primarily due to its:
Economies of scale
27. Which of the following is NOT a limitation of the economic value creation
framework?
The framework fails to provide the foundation that will help firms decide between cost-
leadership or differentiation strategies.
28. In the context of the resource-based model of competitive advantage, if a
successful firm exhibits resource immobility it means that the:
firm will have a sustained competitive advantage because of its unique resources.
29. The top management at BioTrue Pharma Inc. through rigorous testing ensures
that the company develops and sells drugs that are free of harmful side-effects.
Also, the company ensures that the chemical waste generated in the
manufacturing process is kept to a bare minimum and is disposed of according
to the regulations of the Environmental Protection Agency. The management
assesses its overall performance based on these dimensions. Thus, the managers
at Bio True Pharma are applying the _____ approach to measure firm
performance.
triple bottom line
30. In the _____ business model, the initial product is often sold at a loss or given
away for free in order to drive demand for complementary goods.
razor-razor-blade
31. Even though many valuable, rare, and inimitable resources were generated at
Xerox's Palo Alto Research Center (PARC), the management at Xerox's
headquarters failed to gain a competitive advantage by exploiting the
breakthroughs in computing software and hardware. What is the most likely
implication of this example?
A firm must be effectively organized to capture value.
32. A firm experiences diseconomies of scale when it:
produces at an output level beyond the minimum efficient scale.
33. True Vibgyor Inc. sells its e-book readers at the cost price of $15 each. However,
the company makes its profits when users have to download or buy books online.
Which of the following business models is True Vibgyor implementing?
Razor-razor-blade
34. The perfectly competitive industry structure differs from the resource-based
model in its view that:
all firms have access to the same resources.
35. In the context of SWOT analysis, a firm can develop an offensive strategic option
primarily by:
using its internal strengths to exploit external opportunities.
36. Due to path dependence:
strategic decisions have long-term consequences.
37. _____ indicates how fast a firm is collecting the credit amount extended by a
firm to its customers.
Receivables turnover
38. Which of the following is a drawback of the SWOT analysis?
A problem with this framework is that a strength can also be a weakness, and that an
opportunity can also simultaneously be a threat
39. Both Myoco Electronics Inc. and Electra Series Inc. have achieved cost parity in
the television market. To gain and sustain a competitive advantage against
Electra Series, Myoco Electronics should:
create greater perceived economic value than Electra Series.
40. Which of the following resources is a firm's resource stock?
Reputation for quality
41. Which of the following statements is NOT true of competitive advantage?
Competitive advantage is an absolute measure.
42. Which of the following statements accurately describes a firm's resource stock?
Resource stocks are a firm's current level of intangible resources.
43. Which of the following is NOT an accurate expression of the economic value
created per unit of a product sold?
The difference between the price charged and the firm's cost
44. Which of the following statements is true of the balanced scorecard?
It attempts to provide a holistic perspective on firm performance.
45. Return on risk capital primarily includes:
stock price appreciation plus dividends received over a specific period.
46. When a firm combines experience based learning and process innovation, the
firm:
jumps to a steeper learning curve.
47. _____ describes a process in which the options one faces in a current situation
are limited by decisions made in the past.
Path dependence
48. As the cumulative output in a firm increases, managers learn how to optimize
the production process and improve workers' performance through repetition.
This drives down the per-unit cost. Which of the following phenomena is best
described here?
Learning effects
49. A firm's resources and capabilities are costly to imitate. This is because rival
companies do not clearly understand the relationship between the resources and
capabilities controlled by the firm. In this case, the firm's competitive advantage
is protected against imitation by _____.
causal ambiguity
50. With regard to the VRIO framework, Crocs Shoes was unable to sustain its
competitive advantage primarily because its products were:
easy to imitate.
51. After trying on a dress, a consumer assesses it to be worth a maximum of $100
and is willing to pay that amount for the dress. However, the dress was priced at
$80. What is the amount, $100, referred to as?
The value (V) the consumer attaches to the dress
52. Oviyo Inc. has been successful at differentiating itself from competitors by
claiming a premium price for its digital cameras based on superior image quality
and advanced technology. In this scenario, which of the following is the key
value driver?
Product features
53. Given the accelerated pace of technological change, in combination with
deregulation, globalization, and demographic shifts, a firm will only be
successful today if its:
internal strengths change with its external environment in a dynamic fashion.
54. Which of the following statements is true of learning curves?
Learning curves can be observed in manufacturing processes and professional services.
55. Which of the following management tools will help determine whether a firm's
resources, capabilities, and competencies are strengths or weaknesses?
VRIO framework
56. Using the _____ approach, managers audit their company's fulfillment of its
social and ecological obligations to stakeholders such as employees, customers,
suppliers, and communities as conscientiously as they track its financial
performance.
triple-bottom-line
57. True Moto Corp. (TMC) is a leading automobile company. The company has
been able to sustain its competitive advantage primarily due to its high quality
and efficient electric motors. Most of its competitors have failed to develop
similar electric motors at a reasonable price. Which of the following resource
attributes listed in the VRIO framework has helped TMC sustain its competitive
advantage?
High costs involved in imitation
58. Which of the following is a firm effect that has an impact on the competitive
advantage of a firm?
The value and the cost position of the firm relative to its competitors
59. Master's Health Club, a chain of gyms and spas, requires its customers to pay a
quarterly or an annual fee to use its services. Irrespective of whether they
frequently use the services during the payment period or not, members have to
pay in advance. Which of the following business models does this best illustrate?
Subscription-based
60. _____ describes a situation in which the cause and effect of a phenomenon are
not readily apparent
Causal ambiguity
61. In the context of the SWOT matrix, which of the following best exemplifies a
firm's internal strength?
Increase in a firm's customer loyalty
62. BodyBlush Inc. is a brand reputed for its wide variants of body wash that
introduced its range of shampoos and skin moisturizers a few years ago. Since
most of its products could be produced using the same resources and technology,
the company's cost structure lowered, while its product portfolio widened. In
this scenario, which of the following value and cost drivers is BodyBlush
applying?
Economies of scope
63. Combining economies of learning with the existing production technology allows
a firm to:
move down a given learning curve.
64. When a firm makes choices between a cost or value position to achieve
competitive advantage, it is primarily involved in _____.
strategic trade-offs
65. _____ most precisely measures how well a company leverages its fixed assets,
particularly property, plant, and equipment (PPE).
Fixed asset turnover
66. If a resource is rare or unique to a particular firm, then:
the firm will be able to maintain a competitive advantage for a long period.
67. Wear Crush Inc. is an apparel company known for its affordable clothes that
follows a cost-leadership strategy. In this scenario, Wear Crush should ideally
compare its strategic position with:
an apparel company popular among price-conscious customers.
68. A firm is said to have a competitive advantage over its rivals when it:
reaches the productivity frontier
69. A firm's business strategy will lead to a competitive advantage if it allows the
firm to:
perform different activities than its rivals.
70. Soapsuds Inc., a manufacturer of cleaning agents, supplies its products to All
Needs Inc., a supermarket chain. It demands that All Needs create more shelf
space in its stores for Soapsuds' products. However, All Needs Inc. refuses to do
this. Instead, it decides to produce its own range of cleaning agents with its own
label "All Wash." In this scenario, All Needs Inc. has exercised its bargaining
power as a buyer through _____.
backward integration
71. Which of the following is more of a value driver than a cost driver?
Superior customer service
72. Which of the following ratios best expresses inventory turnover
Cost of goods sold/Inventory
73. A defining characteristic of the pay-as-you-go business model is that the:
users pay for only the services they consume.
74. Competitors have found it extremely difficult to imitate Gene Electronics Inc.'s
valuable resources, capabilities, or competencies. This is primarily because the
source for the company's success has been unclear. The competitors are
 uncertain if Gene Electronics Inc.'s success is due to its strong leadership, the
skills of its research and development team, or the timing of the company' s
product introductions. Gene Electronics Inc. has been protected from losing its
competitive advantage as a result of _____.
causal ambiguity
75. How does causal ambiguity act as an isolating mechanism for organizations?
It makes it difficult for the competitors to understand why a company has been so
successful.
76. Bass Watches Inc. initially spent eight man-hours to assemble a wrist watch. But
as the production doubled, the number of hours spent on assembling a watch
reduced by 20 percent. This increase in productivity reduced the company's cost
per unit. What is this phenomenon referred to as?
Learning-curve effect
77. A _____ primarily details the goal-directed actions managers take in their quest
for competitive advantage when competing in a single product market.
business-level strategy
78. Which of the following frameworks used to measure competitive advantage
relies on both an internal and an external view of a firm?
The balanced scorecard model
79. Body Sync Inc. is a chain of gyms. It offers a fitness package that allows its
members to use the gym facilities for 12 months by paying only for 10 months.
Included in the package are two health check-ups and a gym kit. These add-ons
by themselves are not very valuable, but as a package they can enhance the
perceived value of the service offerings. In this case, Body Sync's primary value
driver is:
availability of complements.
80. _____ describes a firm's ability to create, deploy, modify, reconfigure, upgrade,
or leverage its resources over time in its quest for competitive advantage.
Dynamic capability
81. Which of the following is an advantage of the balanced scorecard?
It allows managers to translate a firm's vision into measureable operational goals.
82. From an investors' or shareholders' perspective, the measure of competitive
advantage that matters most is the _____.
return on risk capital
83. GlamorRace is a cosmetic brand that pursues a cost-leader strategy. Which of
the following statements is true of the cosmetic brand?
It appeals to the price-conscious buyers.
84. Which of the following is NOT a condition that can help a firm sustain its
competitive advantage?
When past decisions act as constraints for the current dynamic capabilities
85. When Jean Cult Inc. was operating at the minimum efficient scale of 10,000-
12,000 units per month, the firm's cost per unit was $20. However, when the
output level was increased beyond 12,000 units, the cost per unit increased to
$22. This increase was attributed to the wear-and-tear of the machinery, and
complexities of managing and coordinating. What is this phenomenon known
as?
Diseconomies of scale
86. In order to achieve a competitive advantage, a firm should be able to:
increase the difference between the value created and the cost to produce it.
87. The productivity frontier provides a theoretical reflection of the possible best
practices at any given time. Why is this an important tool for managers?
Strategic positions are not fixed, and firms have to refine their positions over time.
88. _____ is best described as the process of manufacturing a large variety of tailor-
made products or services at a relatively low unit cost.
Mass customization
89. It is difficult even for Apple's managers to pinpoint the underlying cause of the
company's phenomenal success. The term that best applies to this difficulty is
known as _____.
causal ambiguity
90. In the freemium business model, the:
users are not charged for the basic features of a product or service, but the user must pay
for premium advanced features or add-ons.
91. A watch-making company has priced one of its wrist watches at $210. Most of its
competitors sell similar watches at $180. Selling anything less than $150 would
result in a loss for the company. However, the absolute maximum a customer is
willing to pay for it is $170. In this scenario, what is the reservation price of the
wrist watch?
$170
92. The cost of capital to create a product is a fixed cost because it is:
unaffected by consumer demand
93. Rosa Apparels Inc. outsources its production to contract manufacturers located
in underdeveloped nations where unskilled labor is available in plenty for very
low wages. This has helped the apparel brand become a price leader in the
industry. Which of the following is the key driver behind Rosa Apparel's
strategic position?
Low-cost input factors
94. Janet is a 23-year-old employee at DR Products Inc. As a millennial, she will
tend to:
expect her company to be socially responsible.
95. Talk Age Inc., a telecommunication company, had been drastically losing its
market share due to tough competition in the industry. The management hired a
reputed consulting firm to advise the company. The experts from the consulting
firm pointed out that the company primarily lost out on its competitive
advantage due to its tedious internal policies and procedures. These ineffective
policies and procedures made the company operations, marketing, and after
sales service inefficient. Talk Age Inc. can best solve its problem by working on
its _____.
support activities
96. How did McDonald's leverage internal strengths in brand name and consistency
to minimize the external threat of easy-to-prepare grocery items?
By launching a McDonald's line of frozen foods in grocery stores
97. Value drivers contribute to a firm's competitive advantage only if:
the increase in value creation exceeds the increase in costs.
98. Which of the following statements accurately describes a firm's resource flow?
It is the firm's level of investments to maintain or build a resource.
99. When a firm operates at an output level of 9,000 units, the per-unit cost is $5.
When the production is between 10,000-12,000 units, the per-unit cost is $4. At a
production level of 13,000 units, the production cost is again $5 per unit. At
14,000 units and above, the production cost increases further. At what output
level does the firm experience economies of scale?
11,000 units
100. An integration strategy differs from a low-cost strategy in that:
the intent of an integration strategy is not to be the absolute lowest-cost provider because
an integrator must also increase perceived value.
101. A few efficient and strong firms in the laptop industry have remained and
emerged successful from the shakeout stage. Which of the following stages of the
industry life cycle will they move to next?
Maturity stage
102. Which of the following reasons led to the launch of Procter & Gamble's
"Connect + Develop," a web-based interface that connects the company's
internal-innovation capability with the distributed knowledge in the global
community?
The company was no longer able to generate adequate growth through closed innovation.
103. _____ is best described as moving one or more internal value chain activities
outside the firm's boundaries to other firms in the industry value chain.
Strategic outsourcing
104. Win Goods Inc. is a large multinational conglomerate. As a single business unit,
the company's stock price is estimated to be $200. However, by adding the actual
market stock prices of each of its individual business units, the stock price of the
company as one unit would be $300. What is Win Goods experiencing in this
scenario?
Diversification discount
105. When the market for photo film negatives declined with the arrival of digital
cameras, Momento Films Inc., a manufacturer of film negatives, bought out
most of its rivals that were planning to exit. This allowed the company to get rid
of all the excess capacity and acquire a monopolistic market power in the
declining industry. Which of the following strategies has Momento Films
adopted in this scenario?
Consolidated strategy
106. Process innovation is more important than product innovation during the
growth stage because:
a standard, in terms of engineering features and design choices, has been set across the
industry.
107. Which of the following is true of a disruptive innovation?
It targets existing markets.
108. Which of the following is an advantage of non-equity alliances?
They are flexible and easy to initiate and terminate.
109. In the context of the long tail phenomenon, what does the short head represent?
It represents products that appeal to the largest segment of the market with homogenous
tastes.
110. The 3D television division of a large consumer electronics company has been
recognized as a question mark. The company's LCD television division has been
categorized under dogs. Which of the following statements will hold well in this
scenario?
The 3D television division operates in a high-growth market, whereas the LCD television
division operates in a low-growth market.
111. In the U.S., the time period for the right to exclude others from the use of a
patented technology is _____ from the filing date of a patent application.
20 years
112. While the personal computer industry is flooded and growing with laptops and
tablets, John recently bought a desktop, his first personal computer. He realized
that a computer at home would be helpful for his children for their school
projects, and he could use it to maintain the simple accounts of his plumbing
business. Which of the following customer segments does John best represent?
Laggards
113. How does a conglomerate benefit from following an unrelated diversification
strategy?
The conglomerate can overcome institutional weaknesses, such as a lack of capital
markets, in emerging economies.
114. In the market for used cars, which of the following is a reason behind the
crowding out of desirable cars by lemons or inferior ones?
Information asymmetry
115. How was Wikipedia able to outperform both Encyclopedia Britannica and
Microsoft Encarta?
By allowing any person, expert or novice, to generate and edit content
116. Which of the following is an example of an internal transaction cost?
The cost of maintaining a production unit
117. Which of the following statements accurately describes social entrepreneurs?
Social entrepreneurs are those who consider financial, ecological, and social metrics to
evaluate their firm's performance.
118. Which of the following is an advantage of joint ventures?
They create strong ties, trust, and commitment between the partners.
119. As a research scholar, Richard had built a helicam as part of his project. The
helicam could capture aerial images. Realizing the potential use of this product
in movie production and military and rescue operations, he started a new
venture where he could customize these helicams to fit the specific needs of the
buyers and sell them. Richard can be best described as a(n) _____.
entrepreneur
120. The _____ is a strategic management framework that proposes that critical
resources and capabilities frequently are embedded in strategic alliances that
span firm boundaries.
relational view of competitive advantage
121. Which of the following firms is most prone to experiencing a diversification
discount?
A company that pursues unrelated diversification
122. When large, incumbent firms buy startup companies, the transaction is
generally described as a(n) _____.
acquisition
123. Sara can be categorized under the late majority customer segment. Which of the
following behaviors is she most likely to exhibit?
She will prefer to buy from well-established brands rather than unknown new ventures.
124. When does a merger between companies typically occur?
When two firms of comparable size join to form a combined entity
125. By introducing Vscan, a small, wireless ultrasound device, GE Healthcare
(General Electric) was primarily trying to:
invade the healthcare market from the bottom up.
126. The demand for video recorders has drastically reduced, and there are only a
few consumer electronics companies selling them at extremely low prices. Also,
the current buyers of video recorders are mainly categorized under laggards.
Which of the following stages of the industry life cycle is the video recorder
industry in currently?
Decline stage
127. Which of the following stakeholders of a company would most likely be
responsible for formulating a corporate strategy?
The chief executive officer
128. Which of the following statements is true of explicit knowledge?
Explicit knowledge is shared in non-equity alliance firms.
129. In Eli Lilly's Office of Alliance Management, the _____ is a senior, corporate-
level executive responsible for high-level support and oversight.
alliance champion
130. When TrueHeal Pharma Inc. released a new drug to treat insomnia, its chemical
composition was disclosed at the back of the drug's cover. However, any
attempts by competitors to copy the chemical composition would result in
infringement of TrueHeal Pharma's intellectual property rights. Thus, the drug
is protected by a _____.
patent
131. In Eli Lilly's Office of Alliance Management, who is responsible for providing
alliance training and development?
The alliance manager
132. Which of the following is an example of an external transaction cost?
The cost of searching for a contract manufacturer
133. A _____ is best described as a form of intellectual property that gives the
inventor exclusive rights to benefit from commercializing a technology for a
specified time period in exchange for public disclosure of the underlying idea.
patent
134. Galaxi Products Inc. is a U.S.-based consumer electronics company. It owns
smaller firms in Japan and Taiwan where most of its cell phone technology is
developed and manufactured before being released worldwide. Which of the
following alternatives to integration does this best illustrate?
Parent-subsidiary relationship
135. To position itself more strongly after the 2001 bursting of the Internet and tech
stock bubble, Cisco Systems embarked on a(n) _____.
acquisitions-led growth strategy
136. In which of the following stages of the industry life cycle is a standard first
established?
Growth stage
137. Dow Corning is a company owned by Dow Chemical and Corning. This is most
likely an example of a(n) _____.
joint venture
138. Which of the following is true of acquisitions?
Acquisitions can be friendly or hostile.
139. When executives of a firm consider business opportunities only where they can
leverage their existing competencies and resources, it can be concluded that the
firm is using _____.
related-constrained diversification
140. When does a firm fall into the large competitive chasm between early adopters
and early majority?
When it fails to successfully launch a mass-market version of its product
141. Which of the following is a disadvantage of equity alliances?
They can entail significant investments.
142. Which of the following is stated by the long tail phenomenon?
Almost 80 percent of sales in a given product category come from only 20 percent of the
offerings in that category.
143. Which of the following statements is true of firms pursuing a closed innovation?
Firms in the closed innovation model are extremely protective of their intellectual
property.
144. Diversification premium is a situation in which:
the stock price of related-diversification firms is valued at greater than the sum of their
individual business units.
145. Which of the following is a drawback of Wikipedia's business model?
The user-generated content may be unreliable and unauthoritative.
146. ElectraSync Inc., a large consumer electronics company, has divided each
product in its portfolio into a separate strategic business unit (SBU). The
desktop SBU has been experiencing drastic decline in its cash flow, and its
market share has also reduced to an insignificant 10 percent. This has been
attributed to the low-growth in the desktop market after the arrival of tablet
computers and laptops. In the context of the Boston Consulting Group (BCG)
growth-share matrix, the desktop SBU will be categorized under:
dogs.
147. Which of the following corporate strategies did ExxonMobil pursue by acquiring
XTO Energy, a natural gas company?
Related diversification strategy
148. In the Boston Consulting Group (BCG) growth-share matrix, strategic business
units categorized under dogs:
hold a small market share in a low-growth market.
149. What did Microsoft do to gain a foothold in the online search and advertising
market dominated by Google?
It entered into a strategic alliance with Yahoo.
150. Which of the following statements accurately brings out the difference between
closed innovation and open innovation?
While open innovation focuses on building an effective business model to commercialize
R&D, closed innovation focuses on being first to market.
151. A _____ is best described as an approach to strategic decision making that
breaks down a larger investment decision into a set of smaller decisions that are
staged sequentially over time.
real-options perspective
152. _____ are best described as contractual alliances in which the participants
regularly exchange codified knowledge.
Licensing agreements
153. The partnership between Toyota and Tesla Motors, in which Toyota has made a
$50 million investment in the California startup company to learn new
knowledge and gain a window into new technology, is an example of a(n) _____.
equity alliance
154. In 1990, Roche, a Swiss pharmaceutical company, initially invested $2.1 billion
to purchase a controlling interest in the biotech startup Genentech. In 2009,
after witnessing the success of Genentech's drug discovery and development
projects, Roche spent $47 billion to purchase the remaining minority interest in
Genentech, making it a wholly owned subsidiary. In terms of strategic alliances,
this scenario best indicates _____.
the real-options perspective
155. While the industry for e-book readers is in its growth stage, the industry for
landline telephones is in the decline stage of the industry life cycle. Which of the
following can be inferred from this?
The number of competitors in the e-book reader industry will be larger when compared to
the landline telephone industry.
156. Which of the following is a feature of the shakeout phase of the industry life
cycle?
Competitive intensity within the industry increases.
157. Which of the following statements is true of strategic alliances?
They are most beneficial when they join together resources and knowledge in a
combination that obeys the VRIO principles.
158. Today, many companies use PeopleSoft and EDS to avoid maintaining a human
resource management system. By doing this, these firms are:
engaging in strategic outsourcing.
159. How do firms benefit from vertical integration?
Vertical integration allows firms to increase operational efficiencies through improved
coordination of adjacent value chain activities.
160. Which of the following firms is least integrated?
A firm that buys all the required raw materials from multiple external vendors
161. Which of the following statements is true of internal transaction costs?
Internal transaction costs tend to increase with organizational size and complexity.
162. Which alliance type is the Renault-Nissan alliance, where Nissan owns 15
percent of Renault, and Renault owns 44.4 percent in Nissan?
Equity alliance
163. How does Kraft Foods benefit from its hostile takeover of Cadbury PLC in
2010?
It has access to convenience stores and a new distribution channel.
164. PepsiCo operates in many countries and sells a wide variety of aerated drinks,
other beverages, different types of chips, and Quaker Oats goods to achieve
continuous growth. From this data, we can conclude that PepsiCo has been
involved in _____.
product-market diversification
165. When a firm pursues a maintain strategy, it:
continues to support marketing efforts even if the demand for the product is declining.
166. Which of the following statements is true of transaction costs?
Transaction costs are necessary to explain and predict the boundaries of a firm.
167. Strategic business units that have a relatively low market share but have the
potential to grow are best categorized under _____ in the Boston Consulting
Group (BCG) growth-share matrix.
question marks
168. _____ is best described as a firm's ownership of its production of needed inputs
or of the channels by which it distributes its outputs.
Vertical integration
169. Bill is in an interview for a sales job that requires no experience. He is trying to
portray himself as a highly enthusiastic, energetic person with high-level
communication and interpersonal skills. The interviewer is convinced that Bill
should be hired as a sales person in the company. However, in his resume, Bill
had not mentioned his previous work experience as he was fired from that job on
the account of using illegal drugs. Which of the following does this scenario best
illustrate?
Information asymmetry
170. In Eli Lilly's Office of Alliance Management, the alliance champion is primarily
responsible for:
making sure that an alliance fits within the firm's existing alliance portfolio and corporate-
level strategy.
171. Which of the following best illustrates site specificity?
Equipment necessary for mining bauxite and aluminum smelting
172. Which of the following statements is true of taper integration?
It exposes in-house suppliers and distributors to market competition to make performance
comparisons possible.
173. _____ is best described as a situation in which one party is more informed than
another, because of the possession of private information.
Information asymmetry
174. How did Apple plan to attack Amazon's stronghold in the e-reader market?
It orchestrated a web of strategic alliances with major publishing houses.
175. With regard to New United Motor Manufacturing, Inc. (NUMMI), why did
General Motors (GM) enter into a strategic alliance with Toyota?
To learn the lean manufacturing system pioneered by Toyota
176. Investments in specialized assets tend to incur high opportunity costs because
the:
threat of one of the partners pursuing his or her self-interest is high.
177. How can a firm pursuing a diversification strategy enhance its overall corporate
performance by leveraging financial economies?
By using internal capital markets as a source of value creation
178. WJ Group Inc., a large multinational conglomerate, had begun to experience
declining revenues over the years. The top management at the headquarters of
the company decided that it was important for the company to avoid deviating
from its core competencies. Thus, a few of the company's key businesses like
energy, telecommunications, and automobiles were centralized, giving the top
management more control over them. Also, relatively newer businesses like
beverages and food processing were divested. In this scenario, WJ Group is
involved in:
Restructuring
179. The _____ business model is best described as one in which companies can
obtain a large part of their revenues by selling a small number of units from
among almost unlimited choices
long tail
180. In the context of industrial growth, which of the following statements is true of
standards?
As the size of a market expands, a standard signals the market's agreement on a common
set of engineering features and design choices.
181. It is important for a firm to win over the early majority section of the market to
ensure the commercial success of an innovation because they:
enter into the market in large numbers, creating a herding effect.
182. Which of the following best illustrates forward vertical integration?
A firm that manufactured and sold car engines to major automobile companies launches
its own line of cars.
183. A factor favoring the success of disruptive innovation is that:
incumbent firms are slow to change.
184. Disney became the world's leading media company to a large extent by pursuing
a corporate strategy of _____.
related-linked diversification
185. Red Empire Inc., a large multinational company owned by two partners, is
active in the petroleum, capital market, chemicals, steel, beverages, hospitality,
airlines, education, automobiles, and consumer electronics industries. The
company has multiple brands and a large product portfolio under its banner.
Which of the following terms would best describe this company?
A conglomerate
186. Divina Pharma Inc. and MF Electronics Inc. have together invested and created
a new organization, FirstHealth Inc., to focus on developing diagnostic devices.
Through this new firm, both companies are attempting to combine their core
competencies to innovate and reduce their risks associated with transaction-
specific investments. However, the new organization operates independent of
 Divina Pharma and MF Electronics. Which of the following alternatives to
integration does this scenario best illustrate?
A joint venture
187. The strategic objective of businesses during the shakeout phase of the industry
life cycle will primarily be to:
survive by drawing on "deep pockets."
188. A _____ is best defined as a company that combines two or more strategic
business units under one overarching corporation and follows an unrelated
diversification strategy.
conglomerate
189. A(n) _____ is best used to depict the transformation of raw materials into
finished goods and services along distinct vertical stages.
industry value chain
190. Which of the following statements is NOT true about innovation?
Innovation has to be high-tech in order to be a potent competitive weapon
191. The four-step innovation process ends with:
imitation
192. Large companies, such as AT&T, IBM, and GE, have been shifting their
knowledge landscape from closed innovation to open innovation because of the:
increasing supply and mobility of skilled workers.
193. Silver Weave Inc., an apparel company, operates through a business model in
which individuals can buy the rights to set up Silver Weave stores and sell the
company's merchandise in return for a lump sum fee at the beginning of the
contract and a percentage of revenues every month. The owners of the stores
have to stock the collection approved from the company's headquarters and also
maintain consistent customer service as expected in its flagship store. Which of
the following alternatives to integration does this best illustrate?
Franchising
194. G. Lafley at Procter & Gamble (P&G), had implemented an open-innovation
model, which had greatly benefitted the company. In the light of this
information, we can conclude that A. G. Lafley is a(n):
intrapreneur
195. A firm follows a(n) _____ when less than 70 percent of its revenues come from a
single business and there are few, if any, linkages among its businesses.
unrelated diversification strategy
196. Which of the following statements is true of the early majority section of
consumers?
They weigh the benefits and costs carefully when adopting a new product.
197. Which of the following statements is true of a disruptive innovation?
It invades the market from the bottom up, by first capturing the low end.
198. Why did Yahoo enter into a strategic alliance with Microsoft?
To overcome its competitive disadvantage in comparison to Google
199. Hitoro Inc. developed a superior touchscreen technology for tablet computers
that enabled multiple users to operate the screen at the same time. The
technology was leased to Revox Inc., a consumer electronics company, for five
years. Which of the following alternatives to integration does this best illustrate?
Licensing
200. How did the recent horizontal integration in the U.S. airline industry provide
benefits to the surviving carriers?
By lowering competitive intensity in the industry overall
201. _____ is best described as an integrative management field that combines
analysis, formulation, and implementation in the quest for competitive
advantage.
Strategic Management
202. _____ is best described as a set of goal-directed actions a firm takes to gain and
sustain superior performance relative to competitors.
Strategy
203. How has Apple been able to sustain its competitive advantage in the smartphone
industry?
by regularly introducing incremental improvements in its products
204. The pace of innovation has slowed in the 21st century.
False
205. The best way for a firm to keep its proprietary technologies, recipes, or formulas
secret is to obtain a patent.
False
206. For ideas and inventions to be innovative, they must first be commercialized.
True
207. Innovation and strategic entrepreneurship can only occur within new businesses.
False
208. Social entrepreneurs forego the pursuit of profits to achieve social and
environmental goals.
False
209. Process innovation typically overtakes product innovation in importance during
the shakeout stage of the industry life cycle.
True
210. According to the crossing-the-chasm framework, the biggest chasm between
customer segments is between early adopters and the mass market made up of
the early majority and the late majority.
True
211. Innovation that targets new markets with existing technologies is known as
disruptive innovation.
False
212. Pipeline businesses are typically better than platform businesses at
incorporating user feedback and taking advantage of network effects
False
213. Network effects always lead to a virtuous cycle in which an increasing number of
customers improves the quality of a product or service, thereby attracting more
customers and continuing the cycle.
False
214. Which of the following accurately describes how Netflix used innovation to gain
a competitive advantage?v
Netflix applied big data analytics to its user preferences to provide highly personalized
viewing recommendations
215. The typical four-step innovation process begins with
the presentation of an idea as findings derived from basic research
216. What is an invention?
the transformation of an idea into a new product or process
217. When ReGen Pharmaceuticals released a new drug to treat insomnia, its
chemical composition was disclosed at the back of the drug's cover. However,
any attempts by competitors to copy the chemical composition would result in
infringement of ReGen Pharmaceuticals intellectual property rights. Thus, the
drug is protected by a
patent.
218. In the United States, the time period for the right to exclude others from the use
of a patented technology is ________ from the filing date of a patent application.
219. 20 years
220. As a research scholar, Denise had built a helicam as part of her project. The
helicam could capture aerial images. Realizing the potential use of this product
in movie production and military and rescue operations, she started a new
venture where she could customize these helicams to fit the specific needs of the
buyers and sell them. Denise can be best described as a(n)
entrepreneur.
221. G. Lafley at Procter & Gamble (P&G) had implemented an open-innovation
model, which had greatly benefitted the company. In the light of this
information, we can conclude that A. G. Lafley is a(n)
intrapreneur.
222. Which of the following is a competitive benefit experienced by the first mover
firm in an industry?
by regularly introducing incremental improvements in its products
223. The four-step innovation process ends with
imitation.
224. Lillypad Toys is a manufacturer of educational toys for children. Six months
ago, the company's research and development division came up with an idea for
a unique touchscreen device that can be used to introduce children to a number
of foreign languages. Three months ago, the company produced a working
prototype, and last month the company successfully launched its new device on
the commercial market. What should Lillypad's managers prepare for next?
increased competition from imitators
225. As the inventor of hypertension medication, OneSure Pharmaceuticals (OSP)
Inc. was able to reap the benefits of economies of scale due to a large consumer
demand for the drug. Even when competitors later developed similar drugs after
the expiry of OSP's patents, regular users did not want to switch because they
were concerned about possible side effects. Which of the following benefits does
this scenario best illustrate?
first-mover advantages
226. Edna Gomez is the founder of the restaurant chain Good and Green. She
ensures that the products in her stores are ethically and responsibly sourced.
Most products are therefore 100 percent organic and all packaging is
manufactured from recycled material. Also, her company sources ingredients
from farms within 100 miles from her locations. Edna's belief is that her
restaurants should be able to support the community at large. Which of the
following terms best describes Edna Gomez?
social entrepreneur
227. Which of the following scenarios would be characteristic of an entrepreneur?
Rachel implemented a new and more efficient way to produce pottery.
228. Which of the following is an example of social entrepreneurship? The committee
approved the new formula for an all-purpose cleaner because it
cleaned as well as other cleaners and used organic ingredients.
229. Dominic is the founder of an innovative "impromptu catering" business that
provides elegant, healthy party food and decorations on less than 24 hours'
notice. The company has grown by over 150 percent in the past year. Dominic
credits some of the company's success to studying the strategies of prominent
social entrepreneurs, such as Wikipedia's Jimmy Wales. What can Dominic do
to exemplify the social entrepreneurship model?
Provide free weekly catered meals for the homeless.
230. The strategic objective of a first mover during the introduction stage of the
industry life cycle is to
pursue a harvest strategy.
231. Which of the following lists the stages of the industry life cycle in the correct
order?
introduction, growth, shakeout, maturity, and decline
232. A new product often has a high price when it is launched because of a
large investment in designing a product while producing small quantities.
233. CordKing Electronics has entered a stage in which the demand for their
innovative fax machines has declined. Now most customers are buying
replacement parts or buying their second fax machine from the firm. What stage
in the industry life cycle does this scenario describe?
shakeout stage
234. In the decline stage, which of the following strategies involves a reduction of
investments in product support?
harvest strategy
235. Assume that the market for print book publishing has entered the maturity
stage. Which of the following would most likely exist during this stage?
a few large publishers
236. The leading producer of cell phone backup batteries, Jumpstart, has achieved
great success because they produce high-quality battery backups that are not too
expensive. Even so, another company that produces lower-quality batteries at
the same price has also achieved some success, but not as much as Jumpstart.
Also, in general, the price of backup batteries has declined because of economies
of scale and learning. In addition, Jumpstart has added complementary assets,
such as a carrying case. Considering all of these factors, the backup battery
industry is most likely in the
growth stage
237. In the context of industrial growth, which of the following statements is true of
standards?
As the size of a market expands, a standard signals the market's agreement on a common
set of engineering features and design choices.
238. In which of the following stages of the industry life cycle is a standard first
established?
growth stage
239. Which of the following is a feature of the growth stage of the industry life cycle?
The consumer demand increases.
240. While cell phones with holographic keyboards are currently in the introduction
stage of the industry life cycle, tablet computers are in the growth stage. In the
context of this scenario, which of the following statements is true?
While the industry for cell phones with holographic keyboards will focus more on product
innovation, the tablet industry will focus more on process innovation.
241. Which of the following statements accurately brings out the distinction between
the introduction and growth stages of the industry life cycle?
There is more strategic variety in the growth stage when compared to the introduction
stage.
242. The key objective for firms during the growth phase is to
stake out a strong strategic position not easily imitated by rivals.
243. Which of the following is a feature of the shakeout phase of the industry life
cycle?
Competitive intensity within the industry increases.
244. To be successful and to survive the shakeout stage of the industry life cycle, a
firm should
gain economies of scale
245. In developed economies, the electric car industry is in the introduction stage, and
the industry for MP3 players is in the shakeout phase. What does this imply?
The industry for electric cars will focus more on product innovation, whereas in the MP3
player industry, the focus will be on process innovation.
246. Why is the phase after the growth stage of the industry life cycle referred to as
the shakeout stage?
The weaker firms are forced out of the industry in this stage.
247. Potomac Industries is a manufacturer of high-definition televisions. The industry
has gone through a period of rapid growth and expansion, and has started to
experience a decline in the rate of growth. Several smaller firms have been
bought out by larger competitors, and competition for market share is
intensifying. Which of the following strategies is most likely to give Potomac a
competitive advantage?
Implement process innovations that lower per-unit costs.
248. Which of the following is a feature of the maturity stage of the industry life
cycle?
The market reaches its maximum size
249. While the domestic airline industry is in the maturity stage of the industry life
cycle, the internet-enabled appliance industry is in its growth stage. Which of the
following can be inferred from the given data?
While the domestic airline industry is in the maturity stage of the industry life cycle, the
internet-enabled appliance industry is in its growth stage. Which of the following can be
inferred from the given data?
250. Which of the conditions prevail when an industry is at the end of its life cycle?
The level of process innovation reaches its maximum as firms attempt to lower cost.
251. The demand for flip phones has drastically reduced, and there are only a few
consumer electronics companies selling them at extremely low prices. Also, the
current buyers of flip phones are mainly categorized under laggards. Which of
the following stages of the industry life cycle is the flip phone industry in
currently?
decline stage
252. Although Mountaintop Electronics still sells its DVD players, a product in its
decline stage, the investments made by the company on improving or marketing
the product are very low. The company has allocated the least amount of human
and financial capital to this department. Which of the following strategies has
Mountaintop Electronics adopted in this scenario?
harvest strategy
253. When the market for standalone Global Positioning System (GPS) devices
declined with the arrival of GPS-enabled mobile phones, Magnet Inc., a
manufacturer of GPS devices, bought out most of its rivals that were planning to
exit. This allowed the company to get rid of all the excess capacity and acquire a
monopolistic market power in the declining industry. Which of the following
strategies has Magnet adopted in this scenario?
consolidation strategy
254. When a firm pursues a maintain strategy, it
continues to support marketing efforts even if the demand for the product is declining
255. On which of the following tenets is the crossing-the-chasm framework, suggested
by Geoffrey Moore, based?
Each stage of the industry life cycle is dominated by a different customer group.
256. Which of the following customer segments as described in the chasm framework
make up the mass market
the early and late majority together
257. The customers entering the market in the growth stage are primarily
early adopters.
258. Which of the following statements accurately brings out the difference between
technology enthusiasts and early adopters?
Unlike technology enthusiasts, early adopters' demand is fueled more by intuition and
vision rather than technology concerns.
259. Which of the following statements is true of the early majority section of
consumers?
They weigh the benefits and costs carefully when adopting a new product
260. It is important for a firm to win over the early majority section of the market to
ensure the commercial success of an innovation because they
enter into the market in large numbers, creating a herding effect.
261. When does a firm fall into the large competitive chasm between early adopters
and early majority?
when it fails to successfully launch a mass-market version of its product
262. At the time when Ellen decided to purchase a tablet computer, the product had
just become accessible to the mass market. She did not purchase the tablet until
after she was convinced that the benefits it would offer her would far exceed its
price. Also, she waited for her friends to try the product and popular gadget
television shows to endorse it. Which of the following customer segments does
Ellen best represent?
early majority
263. Ira can be categorized under the late majority customer segment. Which of the
following behaviors is he most likely to exhibit?
He will prefer to buy from well-established brands rather than unknown new ventures.
264. Marble Inc. is a new firm that entered the smartwatch industry during the
growth stage of the industry life cycle. It managed to become one of the top-three
smartwatch manufacturers during the shakeout stage due to its low-cost
structure. What features should Marble emphasize in its product marketing to
ensure it successfully crosses the chasm into the maturity stage?
ease of use
265. While the personal computer industry is flooded and growing with laptops and
tablets, Malik recently bought a desktop, his first personal computer. He
realized that a computer at home would be helpful for his children for their
school projects, and he could use it to maintain the simple accounts of his
plumbing business. Which of the following customer segments does Ivan best
represent?
laggards
266. Which of the following is a drawback of using the industry life cycle as a
framework to guide strategic choice?
The framework does not explain everything about changes in industries.
267. Foot Friendly is a manufacturer of athletic shoes. It has released an improved
version of its premier running shoe in markets in which the company already
operates. Which of the following types of innovations does this scenario best
illustrate?
incremental innovation
268. In a radical innovation, a firm targets
new markets by using new technologies.
269. A firm's resistance to changes in the status quo is referred to as
organizational inertia.
270. Incumbent firms favor incremental innovation over radical innovation because
radical innovation will disturb the existing power distribution within the firms.
271. Why is it easier for new entrants to get involved in radical innovations when
compared to incumbent firms?
Unlike incumbent firms, new entrants do not have formal organizational structures and
processes.
272. When firms innovate by leveraging existing technologies into new markets, they
are said to be involved in
architectural innovations.
273. DigitalHealth Electronics Inc. is a company that builds diagnostic devices. It was
the first company to develop a compact MRI scanner by reconfiguring the
components of the MRI technology. This smaller and user-friendly version of the
huge MRI scanner created demand from small hospitals, nursing homes, and
private practice doctors who were earlier dependent on the scanning machines
in large hospitals. Which of the following types of innovations does this scenario
best illustrate?
architectural innovation
274. ) A(n) ________ leverages new technologies to attack existing markets.
disruptive innovation
275. As a start-up company, DigiWrist entered the low end of the highly competitive
smartwatch industry with its low-cost smartwatches. Initially, the company was
able to sell its inferior technology due to its low prices. Over the years, however,
its rate of technology improvements increased above the industry standards.
This helped the company to create a strong strategic position for its
smartwatches in the high-end segment and claim a premium price. Which of the
following types of innovation does this scenario best illustrate?
disruptive innovation
276. When Japanese carmakers entered the existing U.S. automobile market by first
offering small fuel-efficient cars, and then leveraging their low-cost and high-
quality advantages into high-end luxury segments, they were engaging in
disruptive innovation.
277. Streaming video services replacing brick-and-mortar video rental stores would
be an example of a(n)
disruptive innovation.
278. Which of the following businesses is most likely to disrupt an existing industry?
Closer Connex developed an earphone that receives emails and text messages and
converts them to voice messages. The first models had poor reception, but they rapidly
improved over time.
279. A factor favoring the success of disruptive innovation is that
incumbent firms are slow to change.
Myra operates an industrial test kitchen in which local growers bring their produce to
local chefs, who use the kitchen to try new recipes and determine which produce to buy.
286. Which of the following business models in the landscaping industry is likely to
scale most efficiently?
a company that allows users of its website to schedule appointments with landscapers who
specialize in the exact service required
287. GoodGear is a mobile platform that matches independent fashion designers with
consumers who want a personalized wardrobe. Which of the following initiatives
would best allow GoodGear to fine-tune its offerings to better meet the needs of
its consumers?
allowing users to provide feedback to producers on the style and fit of clothing

280. Intel's Celeron chip and Atom chip are initiatives to
guard the company against disruptive innovation by protecting the low end of the market.
281. General Electric (GE) disrupted itself in the healthcare industry by
introducing inexpensive and smaller diagnostic devices in developing countries.
288. Which of the following businesses is most susceptible to negative network
effects?
Pics Match is a social media platform where users upload photos to the site and are
matched with other users who have taken similar photos

282. Which of the following most accurately describes a difference between

incremental innovation and radical innovation?
Incremental innovation builds on an established knowledge base; radical innovation uses
an entirely different knowledge base

283. Canon was able to redesign the copying machine so that it didn't need
professional service—reliability was built directly into the machine, and the user
could replace parts, such as the cartridge. What Xerox had not envisioned was
the possibility that the components of the copying machine could be put together
in an altogether different way that was more user-friendly. This example
describes
architectural innovation.

284. Sunshine Technologies introduced a tablet that could run completely on solar
energy and was less expensive than competitors' tablets. On the downside, it
required more frequent charging than the competition's tablets. However, the
technology of the Sunshine tablet improved rapidly, thereby improving its
recharge frequency. This example describes
disruptive innovation

285. Which of the following scenarios best exemplifies a platform business?

Which of the following stages of the strategic management process involves an evaluation of a firm's external and
internal environments?
A. strategy analysis
B. strategy implementation
C. strategy formulation
D. strategy control

In _____, a firm frames a guiding policy to address the competitive challenge.

A. strategy control
B. strategy implementation
C. strategy formulation
D. strategy analysis

Through _____, a firm puts its guiding policy into practice by employing a set of coherent actions.
A. strategy control
B. strategy implementation
C. strategy formulation
D. strategy analysis

A firm that achieves superior performance relative to other firms in the same industry or the industry average has
a(n)
A. competitive advantage.
B. balanced scorecard.
C. power position.
D. equity leverage.

Patterson Foods Inc. was the first company to start selling energy bars in its country—a product that gained
popularity among diverse groups. Soon, other companies started to sell their own brands of energy bars, thereby
giving Patterson Foods ample competition. In response, Patterson Foods decided to limit its variety of energy bars to
only four. However, it ensured that these four varieties were low in calories and low in cost. With this innovation,
Patterson Foods Inc. consistently outperformed its competitors for ten years. In this scenario, Patterson Foods Inc.
maintained a _____ through its innovative strategy.
A. balanced scorecar
B. fiduciary responsibility
C. consistent power position
D. sustainable competitive advantage

Which of the following scenarios illustrates a firm that has a sustainable competitive advantage?
A. Jamison Inc. generated revenue of $300,000 this financial year, which is close to the industrial revenue average of
$320,000.
B. CR Inc. almost doubled its sales to 9,000 units this year compared to its previous year's sales of 5,000 units, though the
industry average is 10,000 units.
C. Zhang Corp. was able to hold its market share of 68 percent in the social networking industry for more than three years.
D. Peak Inc. was able to outperform its competitors with its new production system, in terms of revenue, for a brief period of
four months.

If SA Pharmaceuticals obtains an 18 percent return on invested capital, which of the following will help determine if it
has a competitive advantage over other pharmaceutical companies?
A. comparing the return to the return on invested capital obtained by other firms in the industry
B. assessing the value based on the shareholders' expectations of return on their capital
C. evaluating the liquidity ratios for other pharmaceutical companies
D. comparing the value to the history of the firm's return of investment over a number of years

Underperformance relative to other firms in the same industry or the industry average results in a(n) _____ for a firm.
A. sustainable competitive advantage
B. increased power distance
C. diseconomies of scope
D. competitive disadvantage

The Scoop, Ltd. is a magazine publishing company whose average return on invested capital is approximately 5
percent. Because magazine publishing is a declining industry, the industry average has been negative (-5 percent) for
the last few years. In this scenario, The Scoop Ltd. has a
A. competitive advantage.
B. balanced scorecard.
C. competitive disadvantage.
D. power position.

Rapida Inc. and Click Inc. are two companies that have been manufacturing typewriters for almost 30 years. Due to
the reduced demand for typewriters today, both companies' average return on invested capital is approximately -5
percent. The current industry average is 2 percent. In this scenario, Rapida Inc. and Click Inc. most likely have
A. competitive advantage over other firms in their industry.
B. competitive parity with each other.
C. strategic alliance with each other.
D. economies of scope instead of economies of scale.

The average cost of production for a bottle of vitamin water in the industry is $4 while its average price is $7. StoreAll
Inc. manufactures the same product for $3 per bottle and sells it for $7 per bottle. Which of the following statements is
most likely true of StoreAll Inc. in this scenario?
A. It has a competitive advantage in the industry.
B. It has a competitive disadvantage in the industry.
C. It has competitive parity with other firms in the industry.
D. It has formed a strategic alliance with other firms in the industry.

A firm is said to gain a competitive advantage when it can

A. exceed its own previous performances.
B. provide products similar to its competitors, but at lower prices.
C. perform at the same level as that of its competitors.
D. minimize the difference between value creation and cost.

FindFor Inc. is an e-commerce retail firm that sells a variety of merchandise online. Through services like cash on
delivery, easy return, and online tracking, the company has created more customer value than its competitors (brick-
and-mortar businesses) at the same price. Also, the company's costs are substantially low due to minimal investment in
operation and administration. In this scenario, FindFor Inc. has most likely been able to provide superior value and
cost control through
A. strategic parity.
B. strategic profiling.
C. strategic liquidation.
D. strategic positioning.

A firm always has a competitive disadvantage when its return on invested capital is
A. below the industry average.
B. 2 percent or lower in a declining industry.
C. about the same as its closest competitor.
D. declining steadily over two or more years.

Silver Screen Cinemas Inc. and Digi Now Inc. are two companies that own and run movie theaters in malls and other
commercial areas. While Silver Screen Cinemas Inc. pursues a cost-leadership strategy, Digi Now Inc. adopts a
differentiation strategy. Which of the following statements is most likely true of this scenario?
A. Silver Screen Cinemas will charge a premium price for its customers, while Digi Now will implement everyday low
pricing.
B. Digi Now and Silver Screen Cinemas will not be direct competitors to each other, and their customer segments will overlap
very little.
C. Digi Now will keep its customer service at an acceptable level, while Silver Screen Cinemas will provide superior
customer service.
D. Silver Screen Cinemas and Digi Now will use a similar approach to create value for customers by attempting to offer
everything to everybody.

For a firm that operates in an industry where competition is high, which of the following practices will result in
inferior performance?
A. choosing a distinct but different strategic position in the industry
B. working toward increasing the difference between value creation and cost
C. trying to be everything to everybody by combining different competitive strategies
D. focusing on creating value for customers rather than destroying rivals

If a company wants to gain a competitive advantage in a highly competitive industry, it should ideally
A. execute an integrated cost-leadership and differentiation position.
B. copy the strategies of other firms through competitive benchmarking.
C. provide goods or services similar to its competitors at higher prices.
D. stake out a unique position within the industry.

Jake's Taxi Service is a new entrant to the taxi industry. It has achieved success by staking out a unique position in the
industry. How did Jake's Taxi Service mostly likely achieve this position?
A. providing long-distance cab fares at a higher rate than competitors; servicing a larger area than competitors
B. providing long-distance cab fares at a lower rate than competitors; servicing a smaller area than competitors
C. providing long-distance cab fares at a higher rate than competitors; servicing the same area as competitors
D. providing long-distance cab fares at a lower rate than competitors; servicing the same area as competitors

Pink Couture Inc. and Pink Blush Inc. are two companies in the apparel industry. While Pink Couture Inc. focuses on
providing unique product features and superior customer service, Pink Blush Inc. focuses on low prices and minimal
customer service. Both companies have been able to gain a competitive advantage. This is most likely because the
companies have
A. executed integrated strategies.
B. entered into a cartel arrangement.
C. pursued distinct strategic positions.
D. engaged in direct imitation and substitution.

Which of the following is an implication of all firms in an industry pursuing a low-cost position through application of
competitive benchmarking?
A. No firm would face direct competition from others in the industry; hence, profit potential would be high.
B. Each firm would be catering to a different customer segment.
C. The firms would eventually have no resources to invest in product and process improvements.
D. Each firm would be in a better position to gain a competitive advantage.

Which of the following statements should ideally reflect a firm's strategy for competitive advantage?
A. Our strategy is to win at any cost.
B. We will be number one in the industry.
C. Our aim is to create superior customer value while controlling costs.
D. We want to be the market leader by replicating our competitor's strategy.

Which of the following statements about strategy is not true?

A. Grandiose statements of desire, on their own, are not strategy.
B. Strategy is as much about deciding what not to do, as it is about deciding what to do.
C. Strategy is about creating superior value, while containing the cost to create it.
D. Operational effectiveness and competitive benchmarking should be treated as strategy.

Industry effects describe the underlying _____ structure of the industry.

A. demographic
B. economic
C. psychographic
D. ethnographic

Which of the following statements accurately describes firm effects?

A. They attribute firm performance to the industry in which the firm competes.
B. They attribute firm performance to the actions managers take within a chosen industry.
C. They refer to the value-creation potential of a large, diversified enterprise.
D. They refer to the external circumstances surrounding all the firms in an industry.

Which of the following forces tends to be more important in determining a firm's performance?
A. the underlying economic structure
B. the entry barriers in the industry
C. the actions of managers within the firm
D. the number and size of other firms in the industry

A company wants to determine how industry effects have affected its profitability. Which of the following elements
should the company focus on?
A. the barriers to entry and exit within the industry
B. the pricing method opted by the managers to face competition within the industry
C. the brand strategy the managers adopt to establish the firm in the industry
D. the strategic position the firm pursues within the industry
 Which of the following forces is most closely related to industry effects within the automobile industry?
A. the actions taken to improve employee productivity within a firm
B. the human resource strategy managers adopt to acquire the best talent from the industry
C. the types of products and the services offered within the industry
D. the decisions made within a firm regarding pricing of a product in the market

_____ are incidents that describe highly improbable but highly impactful events.
A. Miracle events
B. Wild card events
C. Black swan events
D. Fat tail risk events

Due to several black swan events in the past, the

A. shareholders of public companies have become more confident in investing their resources in businesses.
B. need for corporate governance and transparency has reduced within various industries.
C. nations around the globe have explicitly appreciated and accepted capitalism as an economic system.
D. implicit trust relationship between the corporate world and society at large has deteriorated.

The past black swan events in the United States demonstrate that
A. managerial actions can affect the economic well-being of large numbers of people around the globe.
B. decisions and strategies implemented within a firm will only affect the firm and not the entire industry.
C. corporate governance is unnecessary as firms are becoming socially responsible.
D. industry effects are more important than firm effects in determining firm performance.

Javier, a retired CEO, invests capital in a start-up company that creates budgeting software. He mentors the
entrepreneur and the employees of the company because he wants the company to perform well and survive in the
market. Thus, Javier is the start-up company's
A. headhunter.
B. category captain.
C. employee.
D. stakeholder.

Organic Food Inc., a multinational company, relies on its media partner Radio Plus to regularly advertise its offers,
sales, and new products. Radio Plus is invested in this relationship because it generates most of its revenue from
advertising Organic Food's products. In this scenario, Radio Plus is Organic Food Inc.'s
A. stockholder.
B. workforce.
C. internal stakeholder.
D. external stakeholder.

Rachel owns a large portion of GM Cube Inc.'s stocks. However, she is not employed by the company. In this scenario,
Rachel is the company's
A. external stakeholder.
B. internal stakeholder.
C. creditor.
D. Customer

________ precisely indicates how much of a firm's sales is converted into profits.
A) Break-even price
B) Return on revenue
C) Inventory turnover
D) Working capital turnover

Which of the following equations best expresses return on revenue?

A) Net profits/Revenue
B) Sales/Revenue
C) Revenue - Gross profits
D) Revenue - Cost

True Machine Inc. and One Electrona Inc. are two competing consumer electronics
companies. While True Machine's COGS/Revenue is 66%, One Electrona's is 74%.
What do you infer from this financial data?
A) One Electrona has a competitive advantage over True Machine.
B) One Electrona is more efficient than True Machine by eight percentage points.
C) True Machine's profit margin is higher than that of One Electrona.
D) True Machine should focus more on driving down costs, while increasing revenues, and One Electrona should focus more on
increasing its fixed asset turnover.

From an investors' or shareholders' perspective, the measure of competitive advantage

that matters most is the ________.
A) consumer surplus
B) inventory turnover
C) economic value created
D) return on risk capital

A high percentage of R&D/Revenue ratio indicates a(n):

A) strong focus on marketing and sales to promote products and services.
B) strong focus on innovation to improve current products and services.
C) negligent investment toward research and development.
D) inefficiency in the management to focus on new products.

________ is best described as a measure of how effectively capital is being used by a

firm to generate revenue.
A) Revenue per employee
B) Risk capital
C) Return on revenue
D) Working capital turnover

The working capital turnover of Tesva Systems Corp. is 6.0. What does this financial data suggest?
A) For every $6.00 Tesva Systems puts to work, the company realizes a sales of $1.00.
B) For every dollar Tesva Systems puts to work, the company realizes $6.00 of sales.
C) For every dollar Tesva Systems puts to work, the company realizes $6.00 in loss.
D) For every $6.00 Tesva Systems puts to work, the company incurs a cost of $1.00.

The working capital of a small home-based business is $200,000. The revenues

generated account to $600,000, and the profits incurred are $300,000. What would be
the company's working capital turnover?
A) 2, that is, $600,000/$300,000
B) 3, that is, $600,000/$200,000
C) $300,000, that is, $600,000 - $300,000
D) $100,000, that is, $300,000 - $200,000

The fixed asset turnover of a company is 8.3. What do you infer from this?
A) The cost of capital invested on fixed assets is 8.3% of the total profit.
B) Every dollar spent on the company's fixed assets generates $8.30 of revenue.
C) The return on fixed assets will break even in 8.3 years.
D) 8.3% of the company's revenue is invested in fixed assets.

________ most precisely measures how well a company leverages its fixed assets,
particularly property, plant, and equipment (PPE).
A) Working capital turnover
B) Fixed asset turnover
C) Capital leverage ratio
D) Fixed assets to equity ratio

Which of the following best expresses fixed asset turnover?

A) Fixed assets/Total return to shareholders
B) Fixed assets/Current liabilities
C) Current assets/Fixed assets
D) Revenue/Fixed assets

Which of the following ratios best expresses inventory turnover?

A) Cost of goods sold/Inventory
B) Inventory/Working capital
C) Inventory/Per unit cost of production
D) Annul profits/Inventory

________ indicates how fast a firm is collecting the credit amount extended by a firm
to its customers.
A) Payables turnover
B) Assets turnover
C) Receivables turnover
D) Inventory turnover

Return on risk capital primarily includes:

A) account receivables plus account payables.
B) economic value created by a firm plus reservation price.
C) consumer surplus plus firm profit.
D) stock price appreciation plus dividends received over a specific period.

Which of the following is NOT true of risk capital?

A) Risk capital invested in a firm can be legally recovered if the firm goes bankrupt.
B) Return on risk capital includes stock price appreciation plus dividends received
over a specific period.
C) A person who provides capital to a firm gets equity shares in return.
D) From the shareholders' perspective, the measure of competitive advantage is
primarily based on return on their risk capital.

________ indicates how much a firm benefits from interest-free loans extended by its
suppliers and creditors.
A) Inventory turnover
B) Payables turnover
C) Assets turnover
D) Receivables turnover

The payable turnover for Apple and BlackBerry (as of fiscal year 2012) was 7.4 and 24.8 respectively. From this data we
can conclude that:
A) BlackBerry can extend its payment periods, while Apple is required to pay its creditors more quickly.
B) BlackBerry has a clear advantage over Apple as its credits are paid much faster than that of Apple.
C) BlackBerry has taken a longer time to pay its creditors as compared to Apple.
D) Apple has been more efficient than Blackberry in paying creditors and generating
interest-free loans from suppliers.

The receivables turnover of GD Products Inc. is 13.6 and that of its competitor, AP Goods Inc., is 6.0. What does this
financial data primarily imply?
A) GD Products is less efficient than AP Goods in collecting accounts receivables.
B) AP Goods has a larger value gap as compared to GD Products.
C) AP Goods pays its creditors more quickly as compared to GD Products.
D) GD Products collects accounts receivables faster than what AP Goods does.

In the fiscal year 2012, BlackBerry's Cost of goods sold (COGS)/Revenue ratio was higher than that of its competitor,
Apple. This implies that BlackBerry needs to work toward:
A) increasing its fixed costs and decreasing its variable costs.
B) lowering its inventory turnover.
C) driving down its costs.
D) reducing its return on revenue.

Which of the following statements is true of accounting data?

A) Accounting data are historical data and thus backward-looking.
B) Accounting data consider off-balance sheet items, such as pension obligations of
a firm.
C) Accounting data do not have to be adjusted in any manner to compare companies
with different capital structures.
D) Accounting data focus mainly on intangible assets, rather than tangible assets.

Which of the following competitively important assets is typically excluded from a

firm's balance sheet?
A) Accounts payable
B) Customer experience
C) Land and building
D) Patents

________ are the legal owners of public companies.

A) Employees
B) Creditors
C) Shareholders
D) Category captains

Which of the following is an external performance metric?

A) Total return to shareholders
B) Inventory turnover
C) Return on revenue
D) Fixed assets turnover

A firm has 30 million shares outstanding, and each share is traded at $100. Also, each
shareholder gets a dividend of $2000 annually. In this case, the market capitalization is
________.
A) $200,000, that is, $2000 × $100
B) 30,000 shares, that is, 30 million shares/$100
C) $3 billion, that is, 30 million shares × $100
D) 20:1, that is, $2000/$100

The market capitalization of a public company is $5 billion. Each share of the company
is traded at $200. What do you infer from this financial data?
A) The firm's total return to shareholder is $5 billion.
B) The firm's economic value created is $5 billion.
C) The firm's number of outstanding shares is 25 million.
D) The firm pays an annual dividend of 10 percent.

Which of the following expressions accurately describes market cap?

A) It is the difference between a firm's account receivables and account payables.

B) It is the ratio of a firm's equity finance and its debt finance.
C) It is the product of the number of outstanding shares and the share price.
D) It is the difference between the book value and the market value of a firm's
assets.

Which of the following is a disadvantage of measuring firm performance through total

return to shareholders and firm market capitalization?
A) These tools fail to indicate how the stock market views all available public
information about a firm's expected future performance.
B) Market volatility makes it difficult to assess firm performance through these
measures, particularly in the short term.
C) These tools measure competitive advantage in absolute terms rather than relative
terms.
D) Only the book value of the share prices is taken into account when applying these
measures, and not the market value.

Unlike the financial ratios based on accounting data, total return to shareholders is:
A) an external performance metric.
B) backward-looking and historic in nature.
C) an absolute measure of competitive advantage.
D) unaffected by market volatility or macroeconomic factors.

________ is best described as the difference between a buyer's willingness to pay for a
product or service and a firm's total cost to produce it.
A) Break-even point
B) Economic value created
C) Consumer surplus
D) Cost of capital

A firm incurs $400 to manufacture a television. In the market, customers are willing to
pay a maximum of $600 for the television priced at $500. The difference of $200 ($600
minus $400) is the ________.
A) economic value created
B) consumer surplus
C) total return to shareholders
D) customer lifetime value

Both Vibrant Phones Inc. and Oryxo Inc. incur a cost of $200 to manufacture a single
unit of a cell phone. However, Vibrant Phones creates more economic value than what Oryxo does. What does this imply?
A) Oryxo has a competitive advantage over Vibrant Phones.
B) Vibrant Phones sells its products at a better price than Oryxo.
C) Oryxo's offering has greater total perceived consumer benefits than Vibrant
Phones' offering.
D) Vibrant Phones and Oryxo have achieved a competitive parity.

A firm incurs $100 to manufacture an office table. It fixes the market price of the table
as $250, and discounts the price to $200. However, the maximum a person is willing to pay for it is $180. What is the
amount of total perceived consumer benefits in this scenario?
A) $200
B) $100
C) $250
D) $180

________ denotes the dollar amount a consumer would attach to a good or service.
A) Utility
B) Value
C) Economic contribution
D) Consumer surplus

The difference between the price charged for a product and the cost to manufacture it is
referred to as the ________.
A) producer surplus
B) consumer surplus
C) break-even price
D) reservation price

The value a consumer attaches to a product or service is captured in the:

A) consumer's maximum willingness to pay for it.
B) difference between the price charged for it and the cost to produce it.
C) expenses incurred by the firm in manufacturing it.
D) least price a consumer is willing to pay for it.

After trying on a dress, a consumer assesses it to be worth a maximum of $100 and is

willing to pay that amount for the dress. However, the dress was priced at $80. What is
the amount, $100, referred to as?
A) The firm's cost (C) in manufacturing the dress
B) The value (V) the consumer attaches to the dress
C) The producer surplus
D) The consumer surplus

How does a firm capture its producer surplus for a good or service?
A) As profit per unit sold B) As cost per unit sold
C) As market price per share D) As earnings per share

Gina paid $900 for a camera that she thought was worth $1100 for all the features
included in it. For the consumer electronics firm selling the camera, however, the cost
of producing the camera was only $350. What is the consumer surplus in this scenario?
A) $900 B) $200 C) $550 D) $1100

Economic value creation is best expressed as ________.

A) producer surplus minus consumer surplus
B) consumer surplus plus firm profit
C) producer surplus plus firm profit
D) consumer surplus minus cost of production

Osion Electronics Inc. incurs a cost of $350 to produce one unit of a cell phone. The
company's management has priced the product at $600 in the market. Considering the
technological advancement of the cell phone, customers perceive its value to be around
$800. What is the economic value created in this scenario?
A) $800
B) $350
C) $200
D) $450
D

In an economic context, strategy for producers is primarily about:

A) capturing the economic value created as much as possible.
B) lowering producer surplus and increasing consumer surplus.
C) distributing the economic value created equally between consumers and themselves.
D) reducing the difference between consumer's willingness to pay for a product and
the cost to produce it.

Which of the following is NOT an accurate expression of the economic value created
per unit of a product sold?
A) The difference between the price charged and the firm's cost
B) The sum of consumer surplus and firm profit
C) The difference between consumer's reservation price and firm's cost
D) The sum of consumer surplus and producer surplus

By selling a laptop at $1000 for which consumers are willing to pay up to $1200, a
consumer electronics firm makes a profit of $400 per unit. In this scenario, the amount
$600, that is ($1200 - $1000) + $400, is the ________.
A) opportunity cost
B) consumer surplus
C) economic value created
D) reservation price

Competitive advantage goes to the firm that achieves the:

A) largest economic value created.
B) highest payable turnover.
C) lowest producer surplus.
D) highest Cost of goods sold/Revenue ratio.

In order to achieve a competitive advantage, a firm should be able to:

A) keep its producer surplus low.
B) increase the difference between consumer surplus and its profits.
C) increase its payable turnover.
D) increase the difference between the value created and the cost to produce it.

________ are best described as the value of the best forgone alternative use of the resources employed.
A) Social costs
B) Switching costs
C) Opportunity costs
D) Variable costs

Samantha is a recent fashion graduate. She started her own apparel store with an
investment of $300,000. In the first year she made a profit of $60,000. If she had taken
up a job as a fashion editor for a magazine, she would have earned $50,000 as salary per year. Also, she could have
invested her capital, $300,000, in treasury bonds and
earned an interest of $12,000. Thus, the amount $62,000 ($50,000 + $12,000) would be
Samantha's ________.
A) social cost
B) reservation price
C) opportunity cost
D) break-even price

Andrew invested $200,000 in the shares of a company. At the end of a year, he had earned $7,000 as dividends on his
shares along with a $1,000 appreciation in the overall
value of his shares. However, if Andrew had invested the same amount on an asset, like gold, the appreciation in its value
would have earned him $10,000 at the end of the year. In this scenario, which of the following is Andrew's opportunity
cost?
A) $10,000
B) $200,000
C) $2,000
D) $7,000

When GD Inc. declared a dividend of $20,000,000, its market value increased from $8
billion to $8.5 billion. However, it lost a chance to reinvest $20,000,000 in the research
and development of a new product which would have earned a profit of $200 million. Thus, this $200 million is referred to
as GD Inc.'s ________.
A) producer surplus
B) social cost
C) opportunity cost
D) consumer surplus

Which of the following is an advantage of applying the economic value creation

perspective to assess a firm's performance?
A) It is the most efficient tool for assessing corporate-level competitive advantage of
highly diversified companies with large product portfolios.
B) In economic value perspective, analysts not only consider historical costs, but
also opportunity costs.
C) Arriving at the economic value created is easy because determining the value of a
good in the eyes of consumers is a simple task.
D) When the need for "hard numbers" arises, managers and analysts rely on
economic value creation perspective to measure competitive advantage.

Which of the following is NOT a limitation of the economic value creation framework?
A) The framework cannot be effectively applied for assessing corporate-level
performance of diversified conglomerates.
B) The framework falls short when managers are called upon to operationalize
competitive advantage.
C) The framework fails to provide the foundation that will help firms decide
between cost-leadership or differentiation strategies.
D) The framework is not as effective as accounting profitability or shareholder value
creation when the need for "hard numbers" arises.

When using the balanced scorecard approach to assess a firm's performance, which of
the following is NOT a key question that managers need to answer?
A) How do shareholders view us?
B) What core competencies do we need?
C) How do we reduce the economic value created?
D) How do customers view us?

Which of the following statements is true of the balanced scorecard?

A) Its primary focus is to base a firm's strategic goals entirely on external
performance dimensions.
B) It is one of the traditional approaches of measuring firm performance.
C) It attempts to provide a holistic perspective on firm performance.
D) It is a more or less a one-dimensional metric of measuring competitive
advantages of a firm.

Which of the following is an advantage of the balanced scorecard?

A) The balanced scorecard is independent of the skills of the managers responsible
for its implementation.
B) Its implementation is a one-time effort and does not require continuous tracking
of metrics or updating of strategic objectives.
C) It is a tool for both strategic formulation and strategic implementation.
D) It allows managers to translate a firm's vision into measurable operational goals.

Which of the following is NOT an advantage of the balanced scorecard approach to

assess firm performance?
A) It helps managers to implement feedback and organizational learning in order to
modify and adapt strategic goals when indicated.
B) It provides a concise report that tracks chosen metrics and measures and
compares them to target values.
C) It allows managers to communicate and link the strategic vision to responsible
parties within an organization.
D) It is a tool which can be effectively used by managers for both strategic
implementation and strategic formulation.

Which of the following approaches to assess competitive advantage is based on the

view that noneconomic factors can have a significant impact on a firm's financial performance?
A) The balanced scorecard
B) The triple-bottom-line approach
C) The accounting profitability approach
D) The economic value creation framework

Which of the following statements is true of the triple bottom line?

A) Its primary focus is to base a firm's strategic goals entirely on external
performance dimensions.
B) According to this approach, achieving positive results in any one of the
dimensions, economic, social, and ecological, can lead to a sustainable strategy.
C) Three dimensions, economic, social, and ecological, make up the triple bottom
line.
D) It is more or less a one-dimensional metric of measuring competitive advantage
of a firm.

The top management at BioTrue Pharma Inc. through rigorous testing ensures that the
company develops and sells drugs that are free of harmful side-effects. Also, the
company ensures that the chemical waste generated in the manufacturing process is
kept to a bare minimum and is disposed of according to the regulations of the
Environmental Protection Agency. The management assesses its overall performance
based on these dimensions. Thus, the managers at Bio True Pharma are applying the
________ approach to measure firm performance.
A) accounting profitability
B) triple bottom line
C) economic value creation
D) shareholder value creation

Using the ________ approach, managers audit their company's fulfillment of its social
and ecological obligations to stakeholders such as employees, customers, suppliers, and
communities as conscientiously as they track its financial performance.
A) accounting profitability
B) shareholder value creation
C) triple-bottom-line
D) economic value creation

The translation of strategy into action primarily takes place in a firm's ________.
A) mission statement
B) business model
C) code of conduct
D) executive summary
CODE ThuHa

1. Economic value creation is best expressed as

A. producer surplus minus onsumer surplus.
B. consumer surplus minus cost of production.
C. consumer surplus plus firm profit.
D. producer surplus plus firm profit.

2. Conosion Electronics Inc. in purita cost of $350 to produce one unit of a cell phone. The technony's management has
price cost of $350 to produce one unit ft. Considering the $800, ological advancement priced the product at 5600 in the
markealue to be around $800. What is the economic value created in this scenario?
A. $200 B. $350
C. $450 D. $800

3. By selling a laptop at $1,000 for which consumers are willing to pay up to $1,200, $600, mer electronics firm makes a
prich 05400 per art. In this scenario, the amount $600, that is ($1200-$1000) + $400, is the
A. opportunity cost. B. economic value created.
C. reservation price. D. consumer surplus.

4. Which of the following is NOT an accurate expression of the economic value created per unit of a product sold?
A. the sum of consumer surplus and producer surplus
B. the difference between consumer's reservation price and firm's cost
C. the difference between the price charged and the firm's cost
D. the sum of consumer surplus and firm profit

5. In order to achieve a competitive advantage, a firm should be able to

A. increase its payable turnover.
B. keep its producer surplus low.
C. increase the difference between the value created and the cost to produce it.
D. increase the difference between consumer surplus and its profits.

6. Genevieve is a recent fashion graduate. She started her own apparel store with an investment of $300,000. In the first
year she made a profit of $60,000. If she had taken up a job as a fashion editor for a magazine, she would have earned
$50,000 as salary per year. Also, she could have invested her capital, $300,000, in treasury bonds and earned an interest of
$12,000. Thus, the amount $62,000 ($50,000 + $12,000) would be Genevieve's
A. social cost. B. break-even price.
C. reservation price. D. opportunity cost.

7. The tenet behind the triple-bottom-line is that

A. a firm should solely focus on increasing the economic value created to/for its customers.
B. a firm's primary objective should be increasing the total returns to its shareholders.
C. a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy.
D. a firm's return on revenue can be broken down into three ratios: COGS/Revenue, R&D/Revenue, and SG&A/Revenue

8. The top management at Parallela Pharma Inc., through rigorous testing, ensures that company kept any ensures that
and sells drugs that are free of harmful sifacturing proces the generated in the to the regulation Environmental Protection
and is disposed of according to the overall performance on these direction Agency. management as its me are applying the
approach to measure firm performance.
A. economic value creation
B. shareholder value creation
C. triple-bottom-line
D. accounting profitability

9. In the ___ business model, the initial product is often sold at a loss or given away for free in order to drive demand for
complementary goods.
A. subscription-based
B. razor-razor-blade
C. pay-as-you-go
D. direct sales

10. A defining characteristic of the subscription-based business model is that the

A. user pays for only the services he or she consumes.
B. user pays for access to a prested or she see whether he or she uses it during the payment term or not.
C. basic features of a product or service are provided free of charge, but the user must pay for premium services such as advanced
features or add-ons.
D. initial product is often sold at a loss or given away for free in order to drive demand for complementary goods.

11. While cell phones with holographic keyboards are currently in the introduction stage of the industry life cycle, tablet
computers are in the growth stage. In the context of this scenario, which of the following statements is true?
A. The industry for cell phones with holographic keyboards will face greater competition
B. While the industry for cell phones with holographic keyboards will focus on product innovation, the tablet industry will focus
on process innovation.
C. While the industry for cell phones with holographic keyboards can reap the benefits of economies of scale, the tablet industry
will experience no such benefits.
D. The industry for cell phones with holographic keyboards will face price competition, whereas, in the tablet industry, the mode
of competition will be non-price.

12. Which of the following is a feature of the shakeout phase of the industry life cycle?
A. There is rapid industry growth during this stage.
B. Market demand in this stage primarily consists of first-time adopters.
C. Competitive intensity within the industry increases.
D. The mode of competition shifts from price to non-price in this stage.

13. On which of the following tenets is the crossing-the-chasm framework, suggested by Geoffrey Moore, based?
A. The number and size of competitors remain constant throughout the industry life cycle.
B. Each stage of the industry life cycle is dominated by a different customer group.
C. Industries tend to follow an unpredictable industry life cycle. D. The supply and demand sides of the market remain constant
irrespective of the phase of the industry life cycle.

14. SyncTouch Inc. is a manufacturer of cell phones. It has released an improvised version of its smartphone in markets in
which pecompany already operates. Which of the following types of innovations does this scenario best illustrate?
A. radical innovation
B. incremental innovation
C. architectural innovation
D. disruptive innovation

15. A firm's resistance to changes in the status quo is referred to as

A. organizational inertia.
B. organizational liquidity.
C. organizational parity.
D. organizational efficacy.

16. Incumbent firms favor incremental innovation over radical innovation because
A. radical innovation will disturb the existing power distribution within the firms.
B. their business decisions are independent of the other parties in their innovation ecosyeemay
C. incumbent firms do not have formal organizational structures and processes like the way new entrants do.
D. incremental innovations help firms sustain a permanent competitive advantage, whereas radical innovations only help gain a
temporary advantage.

17. Resource and capability analysis is designed to:

A. ascertain the internal marketplace of non-distinct divisions of the company.
B. ascertain which of a company's resources and capabilities are competitively valuable.
C. stimulate demand for a product.
D. stimulate economic growth for companies within the industry.

18. In doing SWOT analysis and trying to identify a company's market opportunities which of the following is NOT an
example of a potential market opportunity that a company may have?
A. Expanding into new geographic markets
B. Openings to win market share away from rivals
C. Serving additional customer groups or market segments
D. Growing buyer preferences for substitutes for the industry's product

19. As the inventor of hypertension medication, OneSure Pharmaceuticals (OSP) Inc. was able to reap the benefits of
economies of scale due to a large consumer demand for the drug. Even when competitors later developed similar drugs
after the expiry of OSP's patents, regular users did not want to switch because they were concerned about possible side
effects. Which of the following benefits does this scenario best illustrate?
A. first-mover advantages B. social benefits
C. network effects D. fringe benefits

20. Which of the following statements accurately describes social entrepreneurs?

A. Social entrepreneurs are individuals who invest in start-up businesses in order to earn huge returns.
B. Social entrepreneurs are individuals who rely primarily on social networking sites to generate revenues.
C. Social entrepreneurs are employees within organizations who are responsible for carrying out lean production.
D. Social entrepreneurs are those who consider financial, ecological, and social metrics to evaluate their firm's performance.

21. When the market for photo film negatives declined with the arrival of digital cameras, Momento Films Inc., a
manufacturer of film negatives, bought out most of its cipals that were planning to exit. This allowed the company to get
rid of all the excess capacity and acquire adopt This allowed the company toning industry. Which of the following
strategies has Momento Films adopted in this scenario?
A. harvest strategy
B. maintain strategy
C. consolidated strategy
D. differentiation strategy

22. At the time when Kevin decided to purchase a tablet computer, the product had just become accessible to the desided
to purchase a tablet computblet only after he was completely convinced that the market. He purchased the tund far exceed
its price. Also, he waited for his friends to try the product and popular gadget television shows to endorse it. Which of the
following customer segments does Kevin best represent?
A. laggards
B. technology enthusiasts
C. early adopters
D. early majority

23. Why is it easier for new entrants to involve in radical innovations when compared to incumbent firms?
A. Unlike incumbent firms, new entrants do not have to face the high entry barriers, initially.
B. New entrants are embedded in an innovation ecosystem, while incumbent firms are not. C. Unlike incumbent firms, new
entrants do not have formal organizational structures and processes.
D. Incumbent firms do not have the advantages of network effects that new entrants have.

24. DigitalHealth Electronics Inc. is a company that builds diagnostic devices. It was the first company to develop a
compact MRI scanner by reconfiguring the components of the MRI technology. This smaller and user-friendly version of
the huge MRI scanner created demand from small hospitals, nursing homes, and private practice doctors who were earlier
dependent on the scanning machines in large hospitals. Which of the following types of innovations does this scenario best
illustrate?
A. disruptive innovation
B. incremental innovation
C. radical innovation
D. architectural innovation

25. ElectraSync Inc., a large consumer electronics company, has divided each product in its portfolio into a separate
strategic business unit (SBU). The desktop SBU has been experiencing drastic decline in its cash flow, and its market share
has also reduced to an insignificant 10 percent. This has been attributed to the low growth in the desktop market after the
arrival of tablet computers and laptops. In the context of the Boston Consulting Group (BCG) growth-share matrix, the
desktop SBU will be categorized under
A. stars.
B. question marks.
C. dogs.
D. cash cows.

26. ___are strategic business units that compete in a low-growth market but hole
considerable market share.
A. Dogs
B. Question marks
C. Cash cows
D. Stars

27. A strategy of performance ___ will be most beneficial for a firm to enhance its overall corporate
A. unrelated level of diversification
B. single-business level of diversification C. dominant-business level of diversification
D. related-linked diversification
28. In the top-down strategic planning approach, all strategic intelligence and decision-making responsibilities rest
primarily on the
A. chief executive officer.
B. functional managers.
C. external stakeholders.
D. general manager.

29. SooGood Inc. produces a dip that goes extremely well with Crunchy Potato Chips Inc. SooGood Inc., therefore, is a
A. complementor
B. direct competitor of Crunchy.
C. indirect competitor
D. shareholder

30. Which of the following is a macroeconomic factor that can affect a firm's strategy?
A. power of buyers
B. power of suppliers
C. levels of employment
D. threat of substitutes
CODE Htrang
1. A high percentage of R&D/Revenue ratio indicates a(n)
A strong focus on innovation to improve current products and services.
B. inefficiency in the management to focus on new products.
C. strong focus on marketing and sales to promote products and services
D. negligent investment toward research and development. 295%
2. In 2014, Apple had a return on revenue of 29.3 percent, and Microsoft had a return Revenue and on revenue of 32
percent. Even so, Apple had a higher return on invested capital than Microsoft. Why did this happen?
A. Apple had a higher cost structure than Microsoft.
B. Apple spent more on research and development and marketing and sales than Microsoft.
C. Apple was able to charge much higher margin for its products and services than a Microsoft.
D. Apple had a much higher selling, general, and administrative expense than Microsoft.
3. The value a consumer attaches to a product or service is captured in the
A. least price a consumer is willing to pay for it.
B. consumer's maximum willingness to pay for it.
C. expenses incurred by the firm in manufacturing it.
D. difference between the price charged for it and the cost to produce it.
4. After trying on a dress, a consumer assesses it to be worth a maximum of $100 and is willing to pay that amount for the
dress. However, the dress was priced at $80, What is the
A. amount, $100, referred to as? the producer surplus
B. the firm's cost in manufacturing the dress the consumer surplus
D. the value the consumer attaches to the dress
5. Nicki paid $900 for a camera that she thought was worth $1,100 for all the features included in it. For the consumer
electronics firm selling the camera, however, the cost of producing the camera was only $350. What is the consumer
surplus in this scenario?
A. $900 B. $1,100
C. $550 D. $200
6. ___are best described as the value of the best forgone alternative use of the resources employed
A. Opportunity costs B/Variable costs
C. Social costs D. Switching costs
7. Andrew invested $200,000 in the shares of a company. At the end of a year, he had earned $7,000 as dividends on his
shares along with a $1,000 appreciation in the overall value of his shares. However, if Andrew had invested the same
amount on an asset, like gold, the appreciation in its value would have earned him $10,000 at the end of the year. In this
scenario, which of the following is Andrew's opportunity cost?
A. $2,000 B. $7,000
C.$10,000 D. $200,000

8. Which of the following frameworks used to measure competitive advantage relies on both an internal and an external
view of a firm?
A the economic value creation model
B. the accounting profitability model
C. the shareholder value creation model
D. the balanced-scorecard model

9. Which of the following statements is true of the triple-bottom-line?

A. It is more or less a one-dimensional metric of measuring the competitive advantage of a firm.
B According to this approach, achieving positive results in any one of the dimensions, economic, social, and ecological, can lead
to a sustainable strategy.
C. Three dimensions, economic, social, and ecological, make up the triple-bottom-line.
D. Its primary focus is to base a firm's strategic goals entirely on external performance dimensions.

10. The translation of strategy into action primarily takes place in a firm's
A. mission statement. B. executive summary.
C. business model. D. code of conduct.

11. is a business model in which the manufacturer sets a fixed price on a product, but the retailer is free to set its own
price.
A Agency B. Freemium
C. Bundling D. Wholesale

12. Georgia Ray is the founder of the departmental stores chain, Ether Inc. She ensures that the products in her stores are
ethically and responsibly sourced. Most products are therefore 100 percent organic and manufactured from recycled
material. Also, her company purchases handicrafts from nonprofit organizations supporting the aged. Georgia's belief is
that her company should be able to support the community at large. Which of the following terms best describes Georgia
Ray?
A. headhunter
B. category captain
C. social entrepreneur
D. trade creditor

13. What is strategic entrepreneurship?

A. the pursuit of an innovation that uses concepts from the triple-bottom-line approach
B. the pursuit of an innovation that uses concepts from strategic management
C. the pursuit of an innovation that benefits the ecosystem
D. the pursuit of an innovation that benefits society

14. Which of the following is a feature of the growth stage of the industry life cycle?
A. The consumer demand increases.
B. The prices of goods begin to rise.
C. The basis of competition moves away from process innovation.
D. The number of competitors decreases.

15. Which of the following best illustrates process innovation as opposed to product innovation?
A. a consumer electronics company developing a new generation of tablet computers
B. an automobile company using computer-aided design in its production
C. a consumer electronics company launching 3-D televisions
D. an automobile company commercializing electric carsi

16. Decision firelating to "what stages of the industry value chain to participate in"
firm's
A. level of diversification.
B. geographic scope.
C. vertical integration.
D. absorptive capacity.

17. The most efficient way to overcome the principal-agent problem in a firm is to
A increase the level of vertical integration within the firm. B. provide stock options to managers.
C. downsize the existing workforce.
D. organize economic activities

18. When approaching a bank ithin the firme borrower has better knowledge than the Sender about his or her and for
loan, the lower the dealing. What is this situation referred to as?
A principal-agent problem
B. information asymmetry
C. experience-curve effect
D. learning-curve effect

19. A powerful tool for sizing up the company's competitive assets and determining whether they can provide the
foundation necessary for competitive success in the marketplace is termed:
A. resource and capability analysis.
B. SWOT.
C. competitive analysis.
D. value chain analysis.

20. Which of the following scenarios best illustrates bundling?

A. Fresh Seeds Inc. sells seed packages, in which a person can buy a package of three types of seeds at a discounted price
compared to buying the seeds individually.
B. Cumulus Media Inc. sells its cloud computing network by having customers pay for the service as they use it.
C. Sharp Cable Inc. sells its basic TV channels for free but charges high prices for any channels that customers add on later.
D. Clean Brush Inc. sells its electric toothbrushes for a low cost, but charges a high price for replacement brushes.

21. In the Boston Consulting Group (BCG) growth-share matrix, strategic business units categorized under dogs
A. compete in a low-growth market but hold considerable market share.
B. hold a high market share in a fast-growing market.
C compete in a high-growth market but have low and unstable earnings.
D. hold a small market share in a low-growth market.
22. True Vibgyor Inc. sells its e-book readers at the cost price of $15 each. However, the company makes its profits when
users have to download or buy books online. Which of the following business models is True Vibgyor implementing?
A. subscription-based
B. razor-razor-blade
C. pay-as-you-go
D. direct sales

23. Which of the following business models has been traditionally used by the magazine and newspaper industry?
A subscription-based B. razor-razor-blade
C. pay-as-you-go D. direct sales

24. Tangible resources include:

A. human assets and intellectual capital, which can include the talent of the work force and the creativity and innovativeness of
certain personnel.
B. reputational assets, with can include the company’s reputation for quality, service, and reliability as well as their reputation for
fair dealings with suppliers
C. relationships such as alliances that provide access to technologies, specialized know-how or geographic market.
D. technological assets such as patents, copyrights, and innovation technologiese.

25. A defining characteristic of the pay ayrieu-go business model is that the
A. user pays for only the services or consumes.
B. user pays for access to a virodhe or she cons whether he or she uses it during the payment
C. basic features of a product or service are provided free of charge, but the user must pay for premium services such as advanced
features or add-ons term or not.
D. initial product is often sdvanced features or add-ony for free in order to drive demand for

26. Which of the following accurately describes how Netflix used innovation to gain competitive advantage?
A. Netflix moved from content development to upgrading its data analytics to provide faster online streaming.
B. Netflix applied big data analytics to its user preferences to provide highly personalized viewing recommendations.
C. Netflix moved from online streaming to online DVD rentals via the Internet.
D. Netflix applied first mover advantages to lock up talent needed to produce original content for DVD rentals and online
streaming.

27. The typical four-step innovation process begins with

A. the modification and recombination of an existing product or process.
B. the presentation of an idea as findings derived from basic research.
C. the commercialization of an invention by entrepreneurs.
D. a competitor's attempt to imitate an innovation.

28. When TrueHeal Pharma Inc. released a new drug to treat insomnia, its chemical composition was disclosed at the back
of the drug's cover. However, any attempts by competitors to copy the chemical composition would result in infringement
of TrueHeal Pharma's intellectual property rights. Thus, the drug is protected by a
A promissory bill. B. patent.
C. franchise. D. royalty.

29. Which of the following statements is NOT true about innovation?

A. Innovation as a competitive weapon can simultaneously create and destroy value.
B. Successful innovation allows a firm to extract temporary monopoly profits.
C. Innovation has to be high-tech in order to be a potent competitive weapon.
D. Process innovations are made possible through advances such as the Internet.

30. Which of the following is a competitive benefit experienced by the first mover firm in an industry?
A. The first mover will be able to achieve a less steep learning curve.
B. The first mover will be able to reduce the switching costs.
C. The first mover will not have to patent its products or technology
D. The first mover will able to reduce costs through economies of scale.